Table of Contents
 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.  20549
 
F O R M   10-Q
 
þ     QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 19 34
 
For the quarterly period ended March 31, 2011
 
or
 
o     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from _____to_____
 
Commission file number: 001-35081
KINDER MORGAN, INC.
(Exact name of registrant as specified in its charter)
 
Delaware
  
80-0682103
(State or other jurisdiction of
incorporation or organization)
  
(I.R.S. Employer
Identification No.)

500 Dallas Street, Suite 1000, Houston, Texas 77002
(Address of principal executive offices)(zip code)
Registrant’s telephone number, including area code: 713-369-9000
 
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 o No þ
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes o No o
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Securities Exchange Act of 1934.  Large accelerated filer o Accelerated filer o Non-accelerated filer þ Smaller reporting company o
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act of 1934).  Yes o No þ
 

As of April 29, 2011, the registrant had the following number of shares of common stock outstanding:
 
Class A common stock
596,102,672
Class B common stock
100,000,000
Class C common stock
2,462,927
Class P common stock
110,897,328


 
 
 
Kinder Morgan, Inc. Form 10-Q




KINDER MORGAN, INC. AND SUBSIDIARIES
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2
 
Kinder Morgan, Inc. Form 10-Q
Table of Contents
 
PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements.

KINDER MORGAN, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In Millions Except Per Share Amounts)
(Unaudited)

   
Three Months Ended
March 31,
 
   
2011
   
2010
 
Revenues
           
Natural gas sales
  $ 806.0     $ 1,017.5  
Services
    784.4       738.5  
Product sales and other
    417.7       401.6  
Total Revenues
    2,008.1       2,157.6  
                 
Operating Costs, Expenses and Other
               
Gas purchases and other costs of sales
    815.7       1,016.6  
Operations and maintenance
    309.5       454.5  
Depreciation, depletion and amortization
    256.1       282.3  
General and administrative
    180.4       115.7  
Taxes, other than income taxes
    48.7       45.4  
Other expense (income)
    0.7       (1.3 )
Total Operating Costs, Expenses and Other
    1,611.1       1,913.2  
                 
Operating Income
    397.0       244.4  
                 
Other Income (Expense)
               
Earnings (loss) from equity investments
    68.4       (374.2 )
Amortization of excess cost of equity investments
    (1.5 )     (1.4 )
Interest expense
    (174.1 )     (156.2 )
Interest income
    5.4       5.6  
Other, net
    1.7       6.6  
Total Other Income (Expense)
    (100.1 )     (519.6 )
                 
Income (Loss) from Continuing Operations Before Income Taxes
    296.9       (275.2 )
                 
Income Tax (Expense) Benefit
    (95.9 )     95.5  
                 
Income (Loss) from Continuing Operations
    201.0       (179.7 )
                 
Loss from Discontinued Operations, net of tax                                                                                               
    -       (0.2 )
                 
Net Income (Loss)
    201.0       (179.9 )
                 
Net (Income) Loss Attributable to Noncontrolling Interests
    (46.0 )     19.0  
                 
Net Income (Loss) Attributable to Kinder Morgan, Inc.
  $ 155.0     $ (160.9 )
                 
Basic Earnings Per Common Share
               
Class P Shares
  $ 0.12          
Class A Shares
  $ 0.12          
Basic Weighted Average Number of Share Outstanding
               
Class P Shares
    110.6          
Class A Shares
    596.4          
Diluted Earnings Per Common Share
               
Class P Shares
  $ 0.12          
Class A Shares
  $ 0.12          
Diluted Weighted Average Number of Shares
               
Class P Shares
    110.6          
Class A Shares
    596.4          
Dividends Per Common Share Declared
  $ 0.14          

The accompanying notes are an integral part of these consolidated financial statements.

 
3
 
Kinder Morgan, Inc. Form 10-Q
 
KINDER MORGAN, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in Millions, Except Share and Per Share Amounts)

   
March 31,
2011
   
December 31,
2010
 
   
(Unaudited)
       
ASSETS
           
Current assets
           
Cash and cash equivalents–Kinder Morgan Kansas, Inc.
  $ 11.1     $ 373.3  
Cash and cash equivalents–KMP
    178.4       129.1  
Restricted deposits
    41.4       90.5  
Accounts, notes and interest receivable, net
    843.8       971.4  
Inventories
    93.0       92.0  
Gas in underground storage
    27.4       2.2  
Fair value of derivative contracts
    35.2       24.0  
Other current assets
    58.5       104.4  
Total current assets
    1,288.8       1,786.9  
                 
Property, plant and equipment, net
    17,133.7       17,070.7  
Investments
    4,310.4       4,291.1  
Notes receivable
    117.9       115.0  
Goodwill
    4,826.8       4,830.9  
Other intangibles, net
    325.1       339.2  
Fair value of derivative contracts
    224.6       301.7  
Deferred charges and other assets
    179.2       172.6  
Total Assets
  $ 28,406.5     $ 28,908.1  
                 
LIABILITIES AND STOCKHOLDERS’ EQUITY
               
Current liabilities
               
Current portion of debt–Kinder Morgan Kansas, Inc.
  $ 368.0     $ 750.9  
Current portion of debt–KMP
    1,333.2       1,262.4  
Cash book overdrafts
    37.1       34.3  
Accounts payable
    601.1       647.5  
Accrued interest
    124.8       310.4  
Accrued taxes
    141.0       44.7  
Deferred revenues
    103.8       96.7  
Fair value of derivative contracts
    380.5       281.5  
Accrued other current liabilities
    307.5       215.7  
Total current liabilities
    3,397.0       3,644.1  
                 
Long-term liabilities and deferred credits
               
Long-term debt
               
Outstanding–Kinder Morgan Kansas, Inc.
    2,777.7       2,779.2  
Outstanding–KMP
    10,415.6       10,277.4  
Preferred interest in general partner of KMP
    100.0       100.0  
Value of interest rate swaps
    573.5       656.3  
Total long-term debt
    13,866.8       13,812.9  
Deferred income taxes
    2,054.3       2,092.7  
Fair value of derivative contracts
    282.3       172.2  
Other long-term liabilities and deferred credits
    592.3       647.2  
Total long-term liabilities and deferred credits
    16,795.7       16,725.0  
                 
Total Liabilities
    20,192.7       20,369.1  
                 
Commitments and contingencies (Notes 4 and 11)
               
Stockholders’ Equity
               
Class P shares, $0.01 par value, 2,000,000,000 shares authorized, 110,897,328 shares issued and outstanding
    1.1       -  
Class A shares, $0.01 par value, 707,000,000 shares authorized, 596,102,672 shares issued and outstanding
    6.0       -  
Class B shares, $0.01 par value, 100,000,000 shares authorized, 100,000,000 shares issued and outstanding
    1.0       -  
Class C shares, $0.01 par value, 2,462,927 shares authorized, 2,462,927 shares issued and outstanding
    -       -  
Preferred stock, $0.01 par value, 10,000,000 shares authorized, none outstanding
    -       -  
Additional paid-in capital
    3,397.7       -  
Retained earnings
    84.4       -  
Members’ capital (Note 5)
    -       3,575.6  
Accumulated other comprehensive loss
    (192.0 )     (136.5 )
Total Kinder Morgan, Inc.’s stockholders’ equity
    3,298.2       3,439.1  
Noncontrolling interests
    4,915.6       5,099.9  
Total Stockholders’ Equity
    8,213.8       8,539.0  
Total Liabilities and Stockholders’ Equity
  $ 28,406.5     $ 28,908.1  

The accompanying notes are an integral part of these consolidated financial statements.

 
4
 
Kinder Morgan, Inc. Form 10-Q
 
KINDER MORGAN, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Millions)
(Unaudited)

   
Three Months Ended
March 31,
 
   
2011
   
2010
 
Cash Flows From Operating Activities
           
Net income (loss)
  $ 201.0     $ (179.9 )
Adjustments to reconcile net income (loss) to net cash provided by operating activities
               
Loss from discontinued operations, net of tax
    -       0.2  
Depreciation, depletion and amortization
    256.1       282.3  
Deferred income taxes
    5.1       (156.6 )
Amortization of excess cost of equity investments
    1.5       1.4  
Earnings (loss) from equity investments
    (68.4 )     374.2  
Distributions from equity investments
    64.8       49.8  
Changes in components of working capital
               
Accounts receivable
    99.4       53.3  
Inventories
    -       (7.5 )
Other current assets
    49.8       36.2  
Accounts payable
    (39.8 )     (8.3 )
Accrued interest
    (185.6 )     (167.8 )
Accrued taxes
    92.6       77.3  
Accrued liabilities
    77.4       (41.3 )
Rate reparations, refunds and other litigation reserve adjustments
    (63.0 )     158.0  
Other, net
    (12.3 )     (32.4 )
Cash flows provided by continuing operations
    478.6       438.9  
Net cash flows used in discontinued operations
    (0.1 )     (0.2 )
Net Cash Provided by Operating Activities
    478.5       438.7  
                 
Cash Flows From Investing Activities
               
Acquisitions of assets and investments
    (65.9 )     (226.3 )
Capital expenditures
    (269.9 )     (223.8 )
Deconsolidation of variable interest entity
    -       (17.5 )
Sale or casualty of property, plant and equipment, and other net assets net of removal costs
    0.9       13.4  
Net proceeds from margin and restricted deposits
    46.7       18.0  
Contributions to investments
    (22.6 )     (136.0 )
Distributions from equity investments in excess of cumulative earnings
    83.6       73.9  
Net Cash Used in Investing Activities
    (227.2 )     (498.3 )
                 
Cash Flows From Financing Activities
               
Issuance of debt–Kinder Morgan Kansas, Inc.
    802.1       232.5  
Payment of debt–Kinder Morgan Kansas, Inc.
    (1,187.1 )     (290.9 )
Issuance of debt–KMP
    2,522.7       957.0  
Payment of debt–KMP
    (2,304.6 )     (524.0 )
Debt issue costs
    (8.2 )     (0.8 )
Increase in cash book overdrafts
    2.9       11.5  
Cash dividends
    (245.8 )     (150.0 )
Contributions from noncontrolling interests
    81.2       -  
Distributions to noncontrolling interests
    (229.1 )     (200.8 )
Other, net
    (0.8 )     -  
Net Cash (Used in) Provided by Financing Activities
    (566.7 )     34.5  
                 
Effect of Exchange Rate Changes on Cash and Cash Equivalents
    2.5       (3.4 )
                 
Net decrease in Cash and Cash Equivalents
    (312.9 )     (28.5 )
Cash and Cash Equivalents, beginning of period
    502.4       165.6  
Cash and Cash Equivalents, end of period
  $ 189.5     $ 137.1  
                 
Noncash Investing and Financing Activities
               
Assets acquired by the assumption or incurrence of liabilities
  $ -     $ 10.5  
Assets acquired by contributions from noncontrolling interests
  $ -     $ 81.7  
Contribution of net assets to investments
  $ 7.9     $ -  
Supplemental Disclosures of Cash Flow Information
               
Cash paid during the period for interest (net of capitalized interest)
  $ 324.9     $ 286.9  
Net cash paid during the period for income taxes
  $ 1.3     $ 2.2  

The accompanying notes are an integral part of these consolidated financial statements.

 
5
 
Kinder Morgan, Inc. Form 10-Q
 
Table of Contents
 
KINDER MORGAN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1.  General
 
Organization
 
On February 10, 2011, we converted from a Delaware limited liability company to a Delaware corporation and we changed our name from Kinder Morgan Holdco LLC to Kinder Morgan, Inc. Our subsidiary formerly known as Kinder Morgan, Inc. was renamed Kinder Morgan Kansas, Inc., and is referred to in these financial statements for all periods as Kinder Morgan Kansas, Inc.  On February 16, 2011, we completed the initial public offering of our common stock (the offering).  All of the common stock that was sold in the offering was sold by our existing investors consisting of funds advised by or affiliated with Goldman Sachs & Co., Highstar Capital LP, The Carlyle Group and Riverstone Holdings LLC. No members of management sold shares in the offering and we did not receive any proceeds from the offering.  Our common stock trades on the New York Stock Exchange under the symbol “KMI.” For additional information on the offering, see Note 5 “Stockholders’ Equity—Initial Public Offering.”
 
We own the general partner and approximately 11% of the limited partner interests of Kinder Morgan Energy Partners, L.P., referred to in this report as KMP.  KMP is a publicly traded pipeline limited partnership whose limited partner units are traded on the New York Stock Exchange under the ticker symbol “KMP.”  Primarily through KMP, we operate or own an interest in approximately 38,000 miles of pipelines and approximately 180 terminals.  These pipelines transport natural gas, gasoline, crude oil, carbon dioxide and other products, and these terminals store petroleum products, chemicals and handle bulk materials like coal and petroleum coke. Unless the context requires otherwise, references to “we,” “us,” “our,” or the “Company” are intended to mean Kinder Morgan, Inc. and our consolidated subsidiaries including Kinder Morgan Kansas, Inc.
 
Kinder Morgan Management, LLC, referred to in this report as “KMR,” is a publicly traded Delaware limited liability company. Kinder Morgan G.P., Inc., the general partner of KMP and a wholly owned subsidiary of ours, owns all of KMR’s voting shares. KMR, pursuant to a delegation of control agreement, has been delegated, to the fullest extent permitted under Delaware law, all of Kinder Morgan G.P., Inc.’s power and authority to manage and control the business and affairs of KMP, subject to Kinder Morgan G.P., Inc.’s right to approve certain transactions.
 
On May 30, 2007, we acquired Kinder Morgan Kansas, Inc. through a wholly owned subsidiary.  See Note 2 of our consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2010 (2010 Form 10-K). This transaction is referred to in this report as “the Going Private transaction.” Effective with the closing of the Going Private transaction, all of our assets and liabilities were recorded at their estimated fair market values based on an allocation of the aggregate purchase price paid in the Going Private transaction.
 
Basis of Presentation
 
We have prepared our accompanying unaudited consolidated financial statements under the rules and regulations of the United States Securities and Exchange Commission. These rules and regulations conform to the accounting principles contained in the Financial Accounting Standards Board’s Accounting Standards Codification, the single source of generally accepted accounting principles in the United States of America and referred to in this report as the Codification. Under such rules and regulations, we have condensed or omitted certain information and notes normally included in financial statements prepared in conformity with the Codification. We believe, however, that our disclosures are adequate to make the information presented not misleading.
 
In addition, our consolidated financial statements reflect normal adjustments, and also recurring adjustments that are, in the opinion of our management, necessary for a fair statement of our financial results for the interim periods, and certain amounts from prior periods have been reclassified to conform to the current presentation. Interim results are not necessarily indicative of results for a full year; accordingly, you should read these consolidated financial statements in conjunction with our consolidated financial statements and related notes included in our 2010 Form 10-K.
 
Our accounting records are maintained in United States dollars, and all references to dollars are United States dollars, except where stated otherwise. Canadian dollars are designated as C$. Our consolidated financial statements include our accounts of Kinder Morgan, Inc. and our majority-owned subsidiaries as well as those of KMP and KMR.  Investments in jointly owned operations in which we hold a 50% or less interest (other than KMP and KMR, because we have the ability to exercise significant control over their operating and financial policies) are accounted for under the equity method. All significant intercompany transactions and balances have been eliminated.
 

 
6
 
Kinder Morgan, Inc. Form 10-Q

 
Notwithstanding the consolidation of KMP and its subsidiaries into our financial statements, we are not liable for, and our assets are not available to satisfy, the obligations of KMP and/or its subsidiaries and vice versa, except as discussed in the following paragraph. Responsibility for payments of obligations reflected in our or KMP’s financial statements is a legal determination based on the entity that incurs the liability.
 
In conjunction with KMP’s acquisition of certain natural gas pipelines from us, we agreed to indemnify KMP with respect to approximately $733.5 million of its debt. We would be obligated to perform under this indemnity only if KMP’s assets were unable to satisfy its obligations.
 
Earnings per Share
 
Earnings per share is calculated using the two-class method. For accounting purposes, both our Class P and our Class A shares are considered common stock, and our Class B and Class C shares are considered participating securities.  The Class A shares, Class B shares and Class C shares are owned by the investors as defined in Note 5 “Stockholders’ Equity.” The computation of earnings per share is calculated by first reducing income by dividends declared in the current period for each class of stock and by the contractual amount of dividends that must be paid for the current period. Then, the remaining undistributed earnings or excess distributions over earnings, if any, are allocated to the extent that each security shares in earnings, which for the investor retained stock is in direct proportion to the maximum number of shares of common stock into which it can convert. The total earnings allocated to each class of stock is determined by adding together the amount allocated for dividends and the amount allocated for a participation feature.  For the basic per share computations, the total net income attributable to each class of common stock is divided by the weighted average shares of each class of common stock outstanding during the period.
 
For the diluted per share computations, total net income attributable to each class of common stock is divided by the adjusted weighted average shares outstanding during the period, including all dilutive potential shares. This includes the Class P shares into which the investor retained stock is convertible.  Thus, the number of Class P shares on a fully-converted basis is the same before and after any conversion of our investor retained stock. Each time one Class P share is issued upon conversion of investor retained stock, the number of Class P shares goes up by one, and the number of Class P shares into which the investor retained stock is convertible goes down by one. Accordingly, there is no difference between basic and diluted earnings per share because the conversion of Class A, Class B, and Class C shares into Class P shares does not impact the number of Class P shares on a fully-converted basis. As no securities are convertible into Class A shares, the basic and diluted earnings per share computations for Class A shares are the same.
 
The following table sets forth the computation of basic and diluted earnings per share for the period from February 11, 2011 (the date of our initial public offering) through March 31, 2011 (in millions, except per share amounts):
 
Net income available to shareholders
  $ 84.4  
         
Numerator for basis and diluted earnings per share
       
Allocation of net income amongst share classes
       
Net income allocable to Class P shares
  $ 13.2  
Net income allocable to Class A shares
    71.2  
Net income allocable to Class B shares(a)
    -  
Net income allocable to Class C shares(a)
    -  
Net income available to shareholders
  $ 84.4  
         
Denominator
       
Basic and diluted weighted average number of shares(b)
       
Weighted average Class P shares outstanding
    110.6  
Weighted average Class A shares outstanding
    596.4  
         
Basic and diluted net income per share
       
Class P shares
  $ 0.12  
Class A shares
  $ 0.12  
____________
(a)
As of March 31, 2011 our Class B and C shares were not entitled to participate in our earnings, losses or distributions in accordance with terms of our shareholder agreement as necessary performance conditions have not been satisfied.  As a result, no earnings were allocated to the Class B and C shares in our determination of basic and diluted earnings per share.
(b)
The weighted average shares outstanding calculation is based on the actual days in which the shares were outstanding for the period from February 11, 2011 to March 31, 2011.


 
7
 
Kinder Morgan, Inc. Form 10-Q

 
2.  Investments, Acquisitions, Joint Ventures and Divestitures
 
Investments
 
NGPL PipeCo LLC Investment Impairment Charge
 
On November 19, 2009, the Federal Energy Regulatory Commission (“FERC”) initiated an investigation, pursuant to Section 5 of the Natural Gas Act, into the justness and reasonableness of the transportation and storage rates as well as the fuel and natural gas lost percentages of NGPL PipeCo LLC’s subsidiary, Natural Gas Pipeline Company of America LLC, referred to as “NGPL.”  NGPL reached a settlement in principal with the FERC on April 22, 2010.  On June 11, 2010, NGPL filed an offer of settlement, which was approved without modification by the FERC on July 29, 2010.  The order approving the settlement has become final and nonappealable. The settlement resolved all issues in the proceeding. The settlement provided that NGPL reduce its fuel and gas lost and unaccounted for, or “GL&U,” retention factors as of July 1, 2010.  The settlement further provided a timeline for additional prospective fuel and GL&U reductions and prospective reductions in the maximum recourse reservation rates that it bills firm transportation and storage shippers.
 
The events discussed above caused us to reconsider the carrying value of our investment in NGPL PipeCo LLC as of March 31, 2010. A current fair value of an investment that is less than its carrying amount may indicate a loss in value of the investment. The fair value represents the price that would be received to sell the investment in an orderly transaction between market participants. We determined the fair value of our investment in NGPL PipeCo LLC by taking the total fair value of NGPL PipeCo LLC (calculated as discussed below) deducting the fair value of the joint venture debt and multiplying by our 20% ownership interest. We calculated the total fair value of NGPL PipeCo LLC from the present value of the expected future after-tax cash flows of the reporting unit, inclusive of a terminal value, which implies a market multiple of approximately 9.5 times EBITDA (earnings before interest, income taxes, depreciation and amortization) discounted at a rate of 7.4%. The result of our analysis showed that the fair value of our investment in NGPL PipeCo LLC was less than our carrying value. For the quarter ended March 31, 2010, we recognized a $430.0 million, pre-tax, non-cash impairment charge included in the caption “Earnings (loss) from equity investments” in our accompanying consolidated statement of income.
 
Equity Method Investment Financial Information on NGPL PipeCo LLC.
 
   
Three Months Ended
March 31,
 
   
2011
   
2010
 
   
(In millions)
 
Revenues
  $ 212.3     $ 235.6  
Gross profit
  $ 187.9     $ 208.2  
Net income (loss)
  $ 36.7     $ (763.6 )
Net income (loss) attributable to us (a)
  $ 7.3     $ (419.6 )
_____________
(a) 2010 amount includes a non-cash investment impairment charge of $430.0 million as discussed above.
 
Acquisitions
 
Watco Companies, LLC
 
On January 3, 2011, KMP purchased 50,000 Class A preferred shares of Watco Companies, LLC for $50.0 million in cash in a private transaction. In connection with its purchase of these preferred shares, the most senior equity security of Watco, KMP entered into a limited liability company agreement with Watco that provides KMP certain priority and participating cash distribution and liquidation rights. Pursuant to the agreement, KMP receives priority, cumulative cash distributions from the preferred shares at a rate of 3.25% per quarter, and it participates partially in additional profit distributions at a rate equal to 0.5%. The preferred shares have no conversion features and hold no voting powers, but do provide KMP certain approval rights, including the right to appoint one of the members to Watco’s Board of Managers. As of December 31, 2010, KMP placed its $50.0 million investment in a cash escrow account and this balance was included within “Restricted Deposits” on our accompanying consolidated balance sheet. As of March 31, 2011, KMP’s $50.0 million investment is included within “Investments” on our accompanying consolidated balance sheet. The acquired investment complemented KMP’s existing rail transload operations. KMP accounts for this investment under the equity method of accounting, and we include it in our Terminals–KMP business segment.
 

 
8
 
Kinder Morgan, Inc. Form 10-Q

 
Watco Companies, LLC is a privately owned, Pittsburg, Kansas based transportation company that was formed in 1983. It is the largest privately held short line railroad company in the United States, operating 22 short line railroads on approximately 3,500 miles of leased and owned track. It also operates transload/intermodal and mechanical services divisions. KMP’s investment provides capital to Watco for further expansion of specific projects, complements KMP’s existing terminal network, provides its customers more transportation services for many of the commodities that it currently handles, and offers it the opportunity to share in additional growth opportunities through new projects.
 
Pro Forma Information
 
Pro forma consolidated income statement information that gives effect to all of the acquisitions we have made and all of the joint ventures we have entered into since January 1, 2010 as if they had occurred as of January 1, 2010 is not presented because it would not be materially different from the information presented in our accompanying consolidated statements of income.
 
Joint Ventures
 
Deeprock North, LLC
 
On February 17, 2011, KMP’s subsidiary Kinder Morgan Cushing LLC and Mecuria Energy Trading, Inc. entered into formal agreements for a crude oil storage joint venture located in Cushing, Oklahoma. On this date, KMP contributed $15.9 million for a 50% ownership interest in an existing crude oil tank farm that has storage capacity of one million barrels, and it expects to invest an additional $8.8 million for the construction of three new storage tanks that will provide incremental storage capacity of 750,000 barrels. The new tanks are expected to be in service by the end of the third quarter of 2011. The joint venture is named Deeprock North, LLC. Deeprock Energy owns a 12.02% member interest in Deeprock North, LLC and will remain construction manager and operator of the joint venture. Mecuria owns the remaining 37.98% member interest and will remain the anchor tenant for the joint venture’s crude oil capacity for the next five years with an option to extend. In addition, KMP entered into a development agreement with Deeprock Energy that gives it an option to participate in future expansions on Deeprock’s remaining 254 acres of undeveloped land.
 
KMP accounts for its investment under the equity method of accounting, and its investment and pro rata share of Deeprock North LLC’s operating results are included as part of the Terminals–KMP business segment. As of March 31, 2011, KMP’s net equity investment in Deeprock North, LLC totaled $16.0 million and is included within “Investments” on our accompanying consolidated balance sheet. In April 2011, KMP contributed an additional $2.1 million to Deeprock North as partial funding for its ongoing tankage and truck rack expansion projects.
 
Megafleet Towing Co., Inc. Assets
 
On February 9, 2011, KMP sold a marine vessel to Kirby Inland Marine, L.P., and additionally, KMP and Kirby formed a joint venture named Greens Bayou Fleeting, LLC. Pursuant to the joint venture agreement, KMP sold its ownership interest in the boat fleeting business it acquired from Megafleet Towing Co., Inc. in April 2009 to the joint venture for $4.1 million in cash and a 49% ownership interest in the joint venture. Kirby then made cash contributions to the joint venture in exchange for the remaining 51% ownership interest. Related to the above transactions, KMP recorded a loss of $5.5 million ($4.1 million after tax) in the fourth quarter of 2010 to write down the carrying value of the net assets to be sold to their estimated fair values as of December 31, 2010. In the first quarter of 2011, after final reconciliation and measurement of all of the net assets sold, KMP recognized a combined $2.2 million increase in income from the sale of these net assets, primarily consisting of a $1.9 million reduction in income tax expense, which is included within the caption “Income Tax (Expense) Benefit” in the accompanying consolidated statement of income for the three months ended March 31, 2011. Additionally, the sale of KMP’s ownership interest resulted in a $10.5 million non-cash reduction in goodwill (see Note 3), and was a transaction with a related party (see Note 9). Information about KMP’s acquisition of assets from Megafleet Towing Co., Inc. is described more fully in Note 3 to our consolidated financial statements included in our 2010 Form 10-K.
 
Acquisitions Subsequent to March 31, 2011
 
KinderHawk Field Services LLC
 
On May 5, 2011, KMP entered into a definitive agreement with Petrohawk Energy Corporation (Petrohawk) to acquire Petrohawk’s 50% interest in KinderHawk Field Services LLC (KinderHawk) and a 25% interest in Petrohawk’s natural gas gathering and treating services provider in the Eagle Ford Shale of South Texas for $855 million in cash and the assumption of $65 million in debt. Upon closing, which is expected in the third quarter of 2011, KMP will own 100% of

 
9
 
Kinder Morgan, Inc. Form 10-Q

 
KinderHawk, the largest natural gas gathering and midstream business in the Haynesville Shale. We will recognize a pre-tax, non-cash write down of the carrying value of KMP's KinderHawk investment, which is expected to be less than $200 million upon the closing of this transaction and will result in a less than $17 million after-tax, non-cash reduction to net income attributable to Kinder Morgan, Inc.
 
Divestitures Subsequent to March 31, 2011
 
River Consulting, LLC and Devco USA L.L.C.
 
Effective April 1, 2011, KMP sold 51% ownership interests in two separate wholly-owned subsidiaries to two separate buyers, both Oklahoma limited liability companies, for an aggregate consideration of $5.1 million, consisting of a $4.1 million note receivable and $1.0 million in cash. Following the sale, KMP continues to own 49% membership interests in both River Consulting LLC, a Louisiana limited liability company engaged in the business of providing engineering, consulting and management services, and Devco USA L.L.C., an Oklahoma limited liability company engaged in the business of processing, handling and marketing sulfur, and selling related pouring equipment. KMP now accounts for its retained investments under the equity method of accounting. At the time of the sale, the combined carrying value of the net assets (and members’ capital on a 100% basis) of both entities totaled approximately $7.5 million and consisted mostly of trade receivables and technology-based assets. The sale of 51% of each of these two subsidiaries will not have a material impact on our results of operations or our cash flows.
 
3.  Intangibles
 
Goodwill
 
We evaluate goodwill for impairment on May 31 of each year. For this purpose, we have six reporting units as follows: (i) Products Pipelines–KMP (excluding associated terminals); (ii) Products Pipelines Terminals–KMP (evaluated separately from Products Pipelines–KMP for goodwill purposes); (iii) Natural Gas Pipelines–KMP; (iv) CO 2 –KMP; (v) Terminals–KMP; and (vi) Kinder Morgan Canada–KMP. There were no impairment charges resulting from our May 31, 2010 impairment testing, and no event indicating an impairment has occurred subsequent to that date.
 
The fair value of each reporting unit was determined from the present value of the expected future cash flows from the applicable reporting unit (inclusive of a terminal value calculated using market multiples between six and ten times cash flows) discounted at a rate of 9.0%. The value of each reporting unit was determined on a stand-alone basis from the perspective of a market participant and represented the price that would be received to sell the unit as a whole in an orderly transaction between market participants at the measurement date.
 
Changes in the gross amounts of our goodwill and accumulated impairment losses for the three months ended March 31, 2011 are summarized as follows (in millions):
 
   
Products
Pipelines–
KMP
   
Natural Gas
Pipelines–
KMP
   
CO 2 –KMP
   
Terminals–
KMP
   
Kinder
Morgan
Canada–
KMP
   
Total
 
Historical Goodwill
  $ 2,116.5     $ 3,488.0     $ 1,521.7     $ 1,488.6     $ 626.5     $ 9,241.3  
Accumulated impairment losses.
    (1,266.5 )     (2,090.2 )     -       (676.6 )     (377.1 )     (4,410.4 )
Balance as of December 31, 2010
    850.0       1,397.8       1,521.7       812.0       249.4       4,830.9  
Acquisitions
    -       -       -       -       -       -  
Disposals(a)
    -       -       -       (10.5 )     -       (10.5 )
Currency translation adjustments
    -       -       -       -       6.4       6.4  
Balance as of March 31, 2011
  $ 850.0     $ 1,397.8     $ 1,521.7     $ 801.5     $ 255.8     $ 4,826.8  
__________
(a)
First quarter 2011 disposal related to the sale of KMP’s ownership interest in the boat fleeting business it acquired from Megafleet Towing Co., Inc. in April 2009 (discussed further in Note 2.)

In addition, we identify any premium or excess cost we pay over our proportionate share of the underlying fair value of net assets acquired and accounted for as investments under the equity method of accounting. This premium or excess cost is referred to as equity method goodwill and is also not subject to amortization but rather to impairment testing. For all investments we own containing equity method goodwill, no event or change in circumstances that may have a significant adverse effect on the fair value of our equity investments has occurred during the first three months of 2011. As of   March 31, 2011 and December 31, 2010, we reported $286.9 million and $283.0 million, respectively, in equity method goodwill within the caption “Investments” in our accompanying consolidated balance sheets. The increase in the
 
 
10
 
Kinder Morgan, Inc. Form 10-Q

equity method goodwill since December 31, 2010 was due to measurement period adjustments related to the acquisition of a 50% ownership interest in KinderHawk Field Services LLC in May 2010.
 

Other Intangibles
 
Excluding goodwill, our other intangible assets include customer relationships, contracts and agreements, technology-based assets and lease value. These intangible assets have definite lives and are reported separately as “Other intangibles, net” in our accompanying consolidated balance sheets. Following is information related to our intangible assets subject to amortization (in millions):
 
   
March 31,
2011
   
December 31,
2010
 
Customer relationships, contracts and agreements
           
Gross carrying amount
  $ 423.7     $ 424.7  
Accumulated amortization
    (110.7 )     (99.9 )
Net carrying amount
    313.0       324.8  
                 
Technology-based assets, lease value and other
               
Gross carrying amount
    14.1       16.3  
Accumulated amortization
    (2.0 )     (1.9 )
Net carrying amount
    12.1       14.4  
                 
Total other intangibles, net
  $ 325.1     $ 339.2  

We amortize the costs of our intangible assets to expense in a systematic and rational manner over their estimated useful lives. Among the factors we weigh, depending on the nature of the asset, are the effects of obsolescence, new technology, and competition. For the three months ended March 31, 2011 and 2010, the amortization expense on our intangibles totaled $10.9 million and $12.4 million, respectively. As of March 31, 2011, the weighted average amortization period for our intangible assets was approximately 11.3 years, and our estimated amortization expense for these assets for each of the next five fiscal years (2012 – 2016) is approximately $37.7 million, $33.8 million, $30.7 million, $27.9 million and $25.0 million, respectively.
 
4.  Debt
 
We classify our debt based on the contractual maturity dates of the underlying debt instruments. We defer costs associated with debt issuance over the applicable term. These costs are then amortized as interest expense in our consolidated statements of income.
 
Kinder Morgan Kansas, Inc.’s debt balances included in our accompanying consolidated balance sheets (including both short-term and long-term amounts, the preferred interest in the general partner of KMP and purchase accounting adjustments on the carrying value of our debt and KMP’s debt, but excluding the value of interest rate swap agreements) as of March 31, 2011 and December 31, 2010 was $3,245.7 million and $3,630.1 million (including the $750.0 million of 5.35% Kinder Morgan Finance Company LLC’s senior notes paid on January 5, 2011), respectively. These balances included net unamortized purchase accounting adjustments, increasing the debt balances by $36.9 million and $37.5 million at March 31, 2011 and December 31, 2010, respectively.  The weighted average interest rate on all of Kinder Morgan Kansas, Inc. and its subsidiaries’ (excluding KMP and its subsidiaries’) borrowings was approximately 4.91% during the first quarter of 2011 and 4.95% during the first quarter of 2010. KMP’s debt balances included in our accompanying consolidated balance sheets (including both short-term and long-term amounts and excluding the value of interest rate swap agreements) as of  March 31, 2011 and December 31, 2010 was $11,748.8 million and $11,539.8 million, respectively. The weighted average interest rate on all of KMP’s and its subsidiaries’ borrowings was approximately 4.44% during the first quarter of 2011 and approximately 4.32% during the first quarter of 2010.
 
As of March 31, 2011, Kinder Morgan Kansas, Inc.’s short-term debt was $368.0 million, which consisted of (i) $365.0 million of borrowings under its credit facility and (ii) a $3.0 million current portion of purchase accounting adjustments on our carrying value of KMP’s debt. As of March 31, 2011, KMP’s short-term debt balances included in our accompanying consolidated balance sheets was $1,333.2 million, which consisted of (i) $500.0 million in principal amount of KMP’s 9.00% senior notes due February 1, 2019, that may be repurchased by KMP on February 1, 2012 pursuant to certain repurchase provisions contained in the bond indenture; (ii) $450.0 million in principal amount of KMP’s 7.125% senior notes due March 15, 2012 (including discount, KMP’s carrying amount of the notes was $449.8
 
 
11
 
Kinder Morgan, Inc. Form 10-Q

million as of March 31, 2011); (iii) $343.0 million of KMP’s commercial paper borrowings; (iv) $23.7 million in principal amount of tax-exempt bonds that mature on April 1, 2024, that are due on demand pursuant to certain standby purchase agreement provisions contained in the bond indenture (KMP’s subsidiary Kinder Morgan Operating L.P. “B” is the obligor on the bonds); (v) a $9.4 million portion of a 5.40% long-term note payable (KMP’s subsidiaries Kinder Morgan Operating L.P. “A” and Kinder Morgan Canada Company are the obligors on the note); and (vi) a $7.3 million portion of 5.23% long-term senior notes (KMP’s subsidiary Kinder Morgan Texas Pipeline, L.P. is the obligor on the notes).
 
Credit Facilities
 
   
March 31, 2011
 
December 31, 2010
   
Short-term
notes
payable
 
Weighted
average
interest rate
 
Short-term
notes
payable
 
Weighted
average
interest rate
   
(Dollars in millions)
Kinder Morgan Kansas, Inc. – Secured debt (a)
  $ 365.0       1.39 %   $ -       - %
KMP – Commercial paper(b)
  $ 343.0       0.35 %   $ 522.1       0.67 %
____________
(a)
The average short-term debt outstanding (and related weighted average interest rate) was $403.8 million (1.55%) during the three months ended March 31, 2011.
  
(b)
The average short-term debt outstanding (and related weighted average interest rate) was $450.4 million (0.55%) during the three months ended March 31, 2011.

As of March 31, 2011, the amount available for borrowing under the Kinder Morgan Kansas, Inc. $1.0 billion six-year senior secured credit facility was reduced by a combined amount of $405.6 million consisting of $365.0 million in borrowings under the credit facility and $40.6 million in four letters of credit required under provisions of our property and casualty, workers’ compensation and general liability insurance policies.
 
KMP’s $2.0 billion three-year, senior unsecured revolving credit facility expires June 23, 2013 and can be amended to allow for borrowings of up to $2.3 billion.  The credit facility is with a syndicate of financial institutions, and the facility permits KMP to obtain bids for fixed rate loans from members of the lending syndicate.  Wells Fargo Bank, National Association is the administrative agent, and borrowings under the credit facility can be used for KMP’s general partnership purposes and as a backup for its $2.0 billion commercial paper program.  There were no borrowings under the credit facility as of March 31, 2011 or as of December 31, 2010.
 
As of March 31, 2011, the amount available for borrowing under KMP’s credit facility was reduced by   a combined amount of $579.8 million, consisting of $343.0 million of commercial paper borrowings and $236.8 million of letters of credit consisting of: (i) a $100.0 million letter of credit that supports certain proceedings with the California Public Utilities Commission involving refined products tariff charges on the intrastate common carrier operations of KMP’s Pacific operations’ pipelines in the state of California; (ii) a combined $87.9 million in three letters of credit that support tax-exempt bonds; (iii) a $16.2 million letter of credit that supports debt securities issued by the Express pipeline system; (iv) a $16.1 million letter of credit that supports KMP’s indemnification obligations on the Series D note borrowings of Cortez Capital Corporation; and (v) a combined $16.6 million in other letters of credit supporting other obligations of KMP and its subsidiaries.
 
KMP’s Commercial Paper Program
 
KMP’s commercial paper program provides for the issuance of $2.0 billion of commercial paper.  KMP’s $2.0 billion unsecured three-year bank credit facility supports its commercial paper program, and borrowings under KMP’s commercial paper program reduce the borrowings allowed under its credit facility.  The borrowings under KMP’s commercial paper program were used principally to finance the acquisitions and capital expansions it made during 2011 and 2010.  In the near term, KMP expects that its short-term liquidity and financing needs will be met primarily through borrowings made under its commercial paper program.
 
Long-term Debt
 
Kinder Morgan Finance Company LLC
 
In January 2011, Kinder Morgan Finance Company LLC, a wholly owned subsidiary of Kinder Morgan Kansas, Inc., retired the principal amount of its 5.35% senior notes that matured on January 5, 2011 using proceeds from the December
 
 
12
 
Kinder Morgan, Inc. Form 10-Q
 
2010 issuance of $750 million in principal amount of 6.00% senior notes due January 15, 2018.
 
KMP - Senior Notes
 
On March 4, 2011, KMP completed a public offering of $1.1 billion in principal amount of senior notes in two separate series, consisting of $500 million of 3.500% notes due March 1, 2016, and $600 million of 6.375% notes due March 1, 2041.  KMP received proceeds from the issuance of the notes, after underwriting discounts and commissions, of $1,092.7 million, and it used the proceeds to reduce the borrowings under its commercial paper program.
 
In addition, on March 15, 2011, KMP paid $700 million to retire the principal amount of its 6.75% senior notes that matured on that date.  KMP used both cash on hand and borrowings under its commercial paper program to repay the maturing senior notes.
 
KMP’s Subsidiary Debt
 
Kinder Morgan Operating L.P. “A” Debt
 
Effective January 1, 2007, KMP acquired the remaining approximately 50.2% interest in the Cochin pipeline system that it did not already own.  As part of the purchase price consideration, two of KMP’s subsidiaries issued a long-term note payable to the seller having a fair value of $42.3 million. KMP valued the debt equal to the present value of amounts to be paid, determined using an annual interest rate of 5.40%. KMP’s subsidiaries Kinder Morgan Operating L.P. “A” and Kinder Morgan Canada Company are the obligors on the note, and the principal amount of the note, along with interest, is due in five annual installments of $10.0 million beginning March 31, 2008. KMP paid the fourth installment on March 31, 2011, and as of this date, the net present value of the note (representing the outstanding balance included as debt on our accompanying consolidated balance sheet) was $9.4 million. As of December 31, 2010, the net present value of the note was $19.2 million.
 
Kinder Morgan Texas Pipeline, L.P. Debt
 
KMP’s subsidiary, Kinder Morgan Texas Pipeline, L.P. is the obligor on a series of unsecured senior notes, which were assumed on August 1, 2005 when it acquired a natural gas storage facility located in Liberty County, Texas from a third party.  The notes have a fixed annual stated interest rate of 8.85%; however, KMP valued the debt equal to the present value of amounts to be paid determined using an approximate interest rate of 5.23%. The assumed principal amount, along with interest, is due in monthly installments of approximately $0.7 million, and the final payment is due January 2, 2014.  During the first quarter of 2011, KMP paid a combined principal amount of $1.8 million, and as of March 31, 2011, Kinder Morgan Texas Pipeline L.P.’s outstanding balance under the senior notes was $21.8 million. Additionally, the unsecured senior notes may be prepaid at any time in amounts of at least $1.0 million and at a price equal to the higher of par value or the present value of the remaining scheduled payments of principal and interest on the portion being prepaid. As of December 31, 2010, the outstanding balance under the notes was $23.6 million.
 
Interest Rate Swaps
 
Information on interest rate swaps is contained in Note 6, “Risk Management – Interest Rate Risk Management.”
 
Contingent Debt
 
The following contingent debt disclosures pertain to certain types of guarantees or indemnifications KMP has made and cover certain types of guarantees included within debt agreements, even if the likelihood of requiring its performance under such guarantee is remote.  Most of these agreements are with entities that are not consolidated in our financial statements; however, KMP has invested in and holds equity ownership interests in these entities.
 

 
13
 
Kinder Morgan, Inc. Form 10-Q
 
 
As of March 31, 2011, KMP’s contingent debt obligations with respect to these investments, as well as its obligations with respect to related letters of credit, are summarized below (dollars in millions):
 
Entity
 
KMP’s
Ownership
Interest
 
Investment Type
 
Total Entity
Debt
 
KMP’s
Contingent
Share   of
Entity Debt (a)
Fayetteville Express Pipeline LLC(b)
 
50%
 
Limited Liability
 
$
962.5
(c)
 
$
481.3
 
  
                       
Cortez Pipeline Company(d)
 
50%
 
General Partner
 
$
140.1
(e)
 
$
86.2
(f)
                         
Nassau County,
Florida Ocean Highway and Port Authority(g)
 
N/A
 
N/A
   
N/A
   
$
18.3
(h)
_________

(a)
Represents the portion of the entity’s debt that KMP may be responsible for if the entity cannot satisfy its obligations.
  
(b)
 
Fayetteville Express Pipeline LLC is a limited liability company and the owner of the Fayetteville Express natural gas pipeline system.  The remaining limited liability company member interest in Fayetteville Express Pipeline LLC is owned by Energy Transfer Partners, L.P.
  
(c)
Amount represents borrowings under a $1.1 billion, unsecured revolving bank credit facility that is due May 11, 2012.
  
(d)
 
Cortez Pipeline Company is a Texas general partnership that owns and operates a common carrier carbon dioxide pipeline system. The remaining general partner interests are owned by ExxonMobil Cortez Pipeline, Inc., an indirect wholly-owned subsidiary of Exxon Mobil Corporation, and Cortez Vickers Pipeline Company, an indirect subsidiary of M.E. Zuckerman Energy Investors Incorporated.
  
(e)
 
Amount consists of (i) $32.1 million aggregate principal amount of Series D notes due May 15, 2013 (interest on the Series D notes is paid annually and based on a fixed interest rate of 7.14% per annum); (ii) $100.0 million of variable rate Series E notes due December 11, 2012 (interest on the Series E notes is paid quarterly and based on an interest rate of three-month LIBOR plus a spread); and (iii) $8.0 million of outstanding borrowings under a $40.0 million committed revolving bank credit facility that is also due December 11, 2012.
  
(f)
 
KMP is severally liable for its percentage ownership share (50%) of the Cortez Pipeline Company debt ($70.1 million).  In addition, as of March 31, 2011, Shell Oil Company shares KMP’s several guaranty obligations jointly and severally for $32.1 million of Cortez’s debt balance related to the Series D notes; however, KMP is obligated to indemnify Shell for the liabilities it incurs in connection with such guaranty.  Accordingly, as of March 31, 2011, KMP has a letter of credit in the amount of $16.1 million issued by JP Morgan Chase, in order to secure its indemnification obligations to Shell for 50% of the Cortez debt balance of $32.1 million related to the Series D notes.
  
 
Further, pursuant to a Throughput and Deficiency Agreement, the partners of Cortez Pipeline Company are required to contribute capital to Cortez in the event of a cash deficiency.  The agreement contractually supports the financings of Cortez Capital Corporation, a wholly-owned subsidiary of Cortez Pipeline Company, by obligating the partners of Cortez Pipeline to fund cash deficiencies at Cortez Pipeline, including anticipated deficiencies and cash deficiencies relating to the repayment of principal and interest on the debt of Cortez Capital Corporation.  The partners’ respective parent or other companies further severally guarantee the obligations of the Cortez Pipeline owners under this agreement.
  
(g)
 
Arose from KMP’s Vopak terminal acquisition in July 2001.  Nassau County, Florida Ocean Highway and Port Authority is a political subdivision of the state of Florida.
  
(h)
 
KMP has posted a letter of credit as security for borrowings under Adjustable Demand Revenue Bonds issued by the Nassau County, Florida Ocean Highway and Port Authority.  The bonds were issued for the purpose of constructing certain port improvements located in Fernandino Beach, Nassau County, Florida.  KMP’s subsidiary, Nassau Terminals LLC, is the operator of the marine port facilities.  The bond indenture is for 30 years and allows the bonds to remain outstanding until December 1, 2020.  Principal payments on the bonds are made on the first of December each year, and corresponding reductions are made to the letter of credit.  As of March 31, 2011, this letter of credit had a face amount of $18.3 million. 

On February 25, 2011, Midcontinent Express Pipeline LLC entered into a three-year $75.0 million unsecured revolving bank credit facility that is due February 25, 2014. This credit facility replaced Midcontinent Express’ previous $175.4 million credit facility that was terminated on February 28, 2011, and on this same date, each of its two member owners, including KMP, were released from their respective debt obligations under the previous guaranty agreements.  Accordingly, KMP no longer has a contingent debt obligation with respect to Midcontinent Express Pipeline LLC. For additional information regarding Kinder Morgan Kansas, Inc.’s and KMP’s debt facilities and contingent debt agreements, see Note 8 “Debt” and Note 12 “Commitments and Contingent Liabilities” in our consolidated financial statements included in our 2010 Form 10-K.
 

 
14
 
Kinder Morgan, Inc. Form 10-Q
 
 
Kinder Morgan G.P., Inc. Preferred Shares
 
On April 20, 2011, Kinder Morgan G.P., Inc.’s board of directors declared a quarterly cash distribution on its Series A Fixed-to-Floating Rate Term Cumulative Preferred Stock of $20.825 per share payable on May 18, 2011 to shareholders of record as of April 29, 2011. On January 19, 2011, Kinder Morgan G.P., Inc.’s Board of Directors declared a quarterly cash dividend on its Series A Fixed-to-Floating Rate Term Cumulative Preferred Stock of $20.825 per share that was paid on February 18, 2011 to shareholders of record as of January 31, 2011.
 
5.  Stockholders’ Equity
 
Common Equity
 
As of March 31, 2011, our stockholders’ equity included the following shares:
 
 
March 31, 2011
Class P shares
110,897,328
Class A shares
596,102,672
Class B shares
100,000,000
Class C shares
2,462,927

For accounting purposes, both our Class P and our Class A shares are considered common stock, and our Class B and Class C shares are considered participating securities.
 
Initial Public Offering
 
In the following discussion, the Investors refer to: (i) Richard D. Kinder, our Chairman and Chief Executive Officer; (ii) investment funds advised by, or affiliated with, Goldman, Sachs & Co., Highstar Capital LP, The Carlyle Group and Riverstone Holdings LLC, which we refer to collectively as the ‘‘Sponsor Investors;’’ (iii) Fayez Sarofim, one of our directors, and investment entities affiliated with him, and an investment entity affiliated with Michael C. Morgan, another of our directors, and William V. Morgan, one of our founders; and (iv) a number of other members of our management.
 
On February 16, 2011, we completed an initial public offering of our common stock (the offering).  In connection with the offering, we converted from a Delaware limited liability company to a Delaware corporation.  Our outstanding Class A units, Class B units and Class A-1 units were converted to Class A shares, Class B shares and Class C shares, respectively.  Upon this conversion, the Sponsor Investors then converted some of their Class A shares on a one-for-one basis into our common stock sold in the offering.  No shares were sold by members of Kinder Morgan management in the offering.  All of the common stock that was sold in the offering was sold by existing investors, consisting of investment funds advised by, or affiliated with, Goldman, Sachs & Co., Highstar Capital LP, The Carlyle Group and Riverstone Holdings LLC, and we did not receive any proceeds from the offering. The class of common stock sold in the offering was our Class P common stock, which is sometimes referred to herein as our “common stock.” Our then existing investors prior to the initial public offering hold our Class A, Class B and Class C common stock, which is sometimes collectively referred to herein as our “investor retained stock.”
 
We have 707,000,000 shares outstanding on a fully converted basis. In the offering, the selling stockholders sold 109,786,590 shares, or approximately 15.5% of our outstanding shares. Upon the closing of the offering, our investor retained stock was convertible into a fixed aggregate of 597,213,410 shares of common stock, which represents 84.5% of our outstanding shares of common stock on a fully-converted basis. The number of shares of common stock into which Class A shares, Class B shares and Class C shares will convert will be determined in accordance with our certificate of incorporation.  The conversion of investor retained stock into shares of our common stock will not increase our total fully converted shares outstanding.  Initially, our Class A shares will be convertible into shares of common stock on a one-for-one basis and our Class B shares and Class C shares will not be convertible into any shares of our common stock.  Any conversion of Class B shares and Class C shares will decrease on a share for share basis the number of shares of our common stock  into which our Class A shares would be able to convert.  The terms of the Class A shares, Class B shares and Class C shares are intended to preserve substantially the same relative rights to share in the value of Kinder Morgan, Inc.’s equity that the Class A units, Class B units and Class A-1 units, respectively, had with respect to Kinder Morgan Holdco LLC’s equity.
 

 
15
 
Kinder Morgan, Inc. Form 10-Q
 
 
Kinder Morgan, Inc. Dividends
 
On February 11, 2011, our Board of Directors declared and paid a dividend to our then existing investors of $245.8 million with respect to the period for which we were not public.  This consisted of $205.0 million for the fourth quarter of 2010 and $104.8 million for the first 46 days of 2011, representing the portion of the first quarter of 2011 that we were not public, less a one time adjustment of $64.0 million in available earnings and profits reserved for the after tax cost of special bonuses (and premium pay) in an aggregate amount of approximately $100 million to certain of our non-senior employees. We expect to pay such bonuses pursuant to the shareholders’ agreement in late May of 2011. No holders of our Class B shares or Class C shares will receive such bonuses.
 
On April 20, 2011, our Board of Directors declared a prorated dividend of $0.14 per share for the first quarter of 2011, payable on May 16, 2011, to shareholders of record as of May 2, 2011. The initial dividend is prorated from February 16, 2011, the day that we closed the offering, to March 31, 2011.  Based on a full quarter, the dividend amounts to $0.29 per share ($1.16 annualized).
 
Changes in Equity
 
The following tables set forth for the respective periods (i) changes in the carrying amounts of our Stockholders’ Equity attributable to both us and our noncontrolling interests, including our comprehensive income (loss) and (ii) associated tax amounts included in the respective components of other comprehensive income (loss) (in millions):
 
   
Three Months Ended March 31, 2011
 
   
KMI
Members
   
Common
Shares(a)
   
Additional
paid-in
capital
   
Retained
earnings
   
Accumulated
other
comprehensive
loss
   
Stockholders’
equity
attributable
to KMI
   
Noncontrolling
interests
   
Total
 
Beginning Balance
  $ 3,575.6     $ -     $ -     $ -     $ (136.5 )   $ 3,439.1     $ 5,099.9     $ 8,539.0  
Reclassification of Equity
upon the offering
    (3,404.0 )     8.1       3,395.9                       -               -  
Impact from equity transactions of KMP
                    2.5                       2.5       (3.9 )     (1.4 )
A-1 and B unit amortization
    3.6                                       3.6               3.6  
Distributions
                                            -       (229.1 )     (229.1 )
Contributions
                                            -       81.2       81.2  
Cash dividends
    (245.8 )                                     (245.8 )             (245.8 )
Other
                    (0.7 )                     (0.7 )     0.1       (0.6 )
Comprehensive income
                                                               
Net Income
    70.6                       84.4               155.0       46.0       201.0  
Other comprehensive income (loss), net of tax
                                                               
Change in fair value of derivatives utilized for hedging purposes
                                    (80.5 )     (80.5 )     (120.0 )     (200.5 )
Reclassification of change in fair value of derivatives to net income
                                    13.5       13.5       24.3       37.8  
Foreign currency translation adjustments
                                    15.5       15.5       23.1       38.6  
Adjustments to pension and other postretirement benefit plan liabilities
                                    (4.0 )     (4.0 )     (6.0 )     (10.0 )
Total other comprehensive
loss
                                    (55.5 )     (55.5 )     (78.6 )     (134.1 )
Total comprehensive
income (loss)
                                            99.5       (32.6 )     66.9  
Ending Balance
  $ -     $ 8.1     $ 3,397.7     $ 84.4     $ (192.0 )   $ 3,298.2     $ 4,915.6     $ 8,213.8  
____________
(a)
Common shares include $1.1 million, $6.0 million and $1.0 million of Class P, Class A and Class B shares, respectively.


 
16
 
Kinder Morgan, Inc. Form 10-Q
 
 
   
Three Months Ended March 31, 2010
 
   
Kinder
Morgan, Inc.
   
Noncontrolling
interests
   
Total
 
                   
Beginning Balance
  $ 4,170.5     $ 4,674.6     $ 8,845.1  
Impact from equity transactions of KMP
    2.1       (3.4 )     (1.3 )
A-1 and B unit amortization
    1.9       -       1.9  
Distributions
    -       (200.8 )     (200.8 )
Contributions
    -       81.7       81.7  
Deconsolidation of variable interest entity(a)
    -       (45.9 )     (45.9 )
Cash dividends
    (150.0 )     -       (150.0 )
Other
    -       0.1       0.1  
Comprehensive income
                       
Net income (loss)
    (160.9 )     (19.0 )     (179.9 )
Other comprehensive income (loss), net of tax
                       
Change in fair value of derivatives utilized for hedging purposes
    15.6       11.3       26.9  
Reclassification of change in fair value of derivatives to net income
    4.1       21.7       25.8  
Foreign currency translation adjustments
    18.1       27.3       45.4  
Adjustments to pension and other postretirement benefit plan liabilities
    (0.8 )     (1.1 )     (1.9 )
Total other comprehensive income
    37.0       59.2       96.2  
Total comprehensive income (loss)
    (123.9 )     40.2       (83.7 )
Ending Balance
  $ 3,900.6     $ 4,546.5     $ 8,447.1  
____________
(a)
Upon the adoption of Accounting Standards Update No. 2009-17, which amended the codification’s “Consolidation” topic, on January 1, 2010, we no longer consolidate Triton Power Company LLC into our financial statements.

   
Three Months Ended March 31,
 
   
2011
   
2010
 
   
Kinder
Morgan, Inc.
   
Noncontrolling
interests
   
Total
   
Kinder
Morgan, Inc.
   
Noncontrolling
interests
   
Total
 
Tax (Expense) Benefit Included in Other Comprehensive Income:
                                   
Change in fair value of derivatives utilized for hedging purposes
  $ 48.5     $ 13.6     $ 62.1     $ (10.3 )   $ (1.2 )   $ (11.5 )
Reclassification of change in fair value of derivatives to net income
    (8.1 )     (2.8 )     (10.9 )     (2.8 )     (2.3 )     (5.1 )
Foreign currency translation adjustments
    (9.4 )     (2.6 )     (12.0 )     (12.6 )     (2.9 )     (15.5 )
Adjustments to pension and other postretirement benefit plan liabilities
    2.4       0.7       3.1       0.6       0.1       0.7  
Tax (expense) benefit included in total other comprehensive (loss) income
  $ 33.4     $ 8.9     $ 42.3     $ (25.1 )   $ (6.3 )   $ (31.4 )

Noncontrolling Interests
 
The caption “Noncontrolling interests” in our accompanying consolidated balance sheets consists of interests in the following subsidiaries (in millions):
 
   
March 31,
2011
   
December 31,
2010
 
KMP
  $ 2,957.7     $ 3,135.4  
KMR
    1,950.0       1,956.2  
Other
    7.9       8.3  
    $ 4,915.6     $ 5,099.9  

KMP
 
Noncontrolling interests in KMP represent the economic interests in this subsidiary that we do not own. At March 31, 2011, we owned, directly, and indirectly in the form of i-units corresponding to the number of shares of KMR we owned, approximately 35.0 million limited partner units of KMP. These units, which consist of 16.4 million common units, 5.3 million Class B units and 13.3 million i-units, represent approximately 11.0% of the total outstanding limited partner interests of KMP. In addition, we indirectly own all the common equity of the general partner of KMP, which holds an effective 2% combined interest in KMP and its operating partnerships. Together, at March 31, 2011, our limited partner
 

 
17
 
Kinder Morgan, Inc. Form 10-Q

 
and general partner interests represented approximately 12.8% of KMP’s total equity interests and represented an approximate 50% economic interest in KMP. This difference results from the existence of incentive distribution rights held by Kinder Morgan G.P., Inc., the general partner of KMP.
 
Contributions
 
On February 25, 2011, KMP entered into a second amended and restated equity distribution agreement with UBS Securities LLC to provide for the offer and sale of common units having an aggregate offering price of up to $1.2 billion (up from an aggregate offering price of up to $600 million under KMP’s first amended and restated agreement) from time to time through UBS, as KMP’s sales agent.  During the three months ended March 31, 2011, KMP issued 1,130,206 of its common units pursuant to this equity distribution agreement, and after commissions of $0.6 million, KMP received net proceeds of $81.2 million from the issuance of these common units.  KMP used the proceeds to reduce the borrowings under its commercial paper program.  For additional information regarding KMP’s equity distribution agreement, see Note 10 to our consolidated financial statements included in our 2010 Form 10-K.
 
The above equity issuances during the three months ended March 31, 2011 had the associated effects of increasing our (i) noncontrolling interests associated with KMP by $77.3 million, (ii) accumulated deferred income taxes by $1.4 million and (iii) additional paid-in capital by $2.5 million.
 
Distributions
 
Distributions to our noncontrolling interests consist primarily of distributions by KMP to its common unit holders.  On February 14, 2011, KMP paid a quarterly distribution of $1.13 per common unit for the fourth quarter of 2010, of which $229.0 million was paid to the public holders (included in noncontrolling interests) of KMP’s common units.
 
Subsequent Events
 
Noncontrolling Interest Contributions
 
In the first week of April 2011, KMP issued 114,690 of its common units for the settlement of sales made on or before March 31, 2011 pursuant to its equity distribution agreement.  After commissions of $0.1 million, KMP received net proceeds of $8.4 million for the issuance of these 114,690 common units, and used the proceeds to reduce the borrowings under its commercial paper program.
 
Noncontrolling Interest Distributions
 
On April 20, 2011, KMP declared a cash distribution of $1.14 per unit for the quarterly period ended March 31, 2011. The distribution will be paid on May 13, 2011, to unitholders of record as of April 29, 2011.
 
On May 13, 2011, KMR will pay a share distribution of 0.017102 shares per outstanding share (1,599,149 total shares) to shareholders of record as of April 29, 2011. This distribution was determined by dividing:
 
 
▪
$1.14, the cash amount distributed per KMP common unit
 
by
 
 
▪
$66.659, the average of KMR’s shares’ closing market prices from April 12-26, 2011, the ten consecutive trading days preceding the date on which KMR’s shares began to trade ex-dividend under the rules of the New York Stock Exchange.
 
 
6.  Risk Management
 
Certain of our business activities expose us to risks associated with unfavorable changes in the market price of natural gas, natural gas liquids and crude oil. We also have exposure to interest rate risk as a result of the issuance of our debt obligations. Pursuant to our management’s approved risk management policy, we use derivative contracts to hedge or reduce our exposure to certain of these risks.
 

 
18
 
Kinder Morgan, Inc. Form 10-Q
 
 
Energy Commodity Price Risk Management
 
We are exposed to risks associated with changes in the market price of natural gas, natural gas liquids and crude oil as a result of the forecasted purchase or sale of these products. Specifically, these risks are primarily associated with price volatility related to (i) pre-existing or anticipated physical natural gas, natural gas liquids and crude oil sales; (ii) natural gas purchases; and (iii) natural gas system use and storage. Price changes are often caused by shifts in the supply and demand for these commodities, as well as their locations.
 
Our principal use of energy commodity derivative contracts is to mitigate the risk associated with unfavorable market movements in the price of energy commodities. Our energy commodity derivative contracts act as a hedging (offset) mechanism against the volatility of energy commodity prices by allowing us to transfer this price risk to counterparties who are able and willing to bear it.
 
For derivative contracts that are designated and qualify as cash flow hedges pursuant to generally accepted accounting principles, the portion of the gain or loss on the derivative contract that is effective (as defined by generally accepted accounting principles) in offsetting the variable cash flows associated with the hedged forecasted transaction is reported as a component of other comprehensive income and reclassified into earnings in the same line item associated with the forecasted transaction and in the same period or periods during which the hedged transaction affects earnings (e.g., in “revenues” when the hedged transactions are commodity sales). The remaining gain or loss on the derivative contract in excess of the cumulative change in the present value of future cash flows of the hedged item, if any (i.e., the ineffective portion as defined by generally accepted accounting principles), is recognized in earnings during the current period. The effectiveness of hedges using an option contract may be assessed based on changes in the option’s intrinsic value with the change in the time value of the contract being excluded from the assessment of hedge effectiveness. Changes in the excluded component of the change in an option’s time value are included currently in earnings. During the three months ended March 31, 2011, we recognized a net gain of $3.7 million, related to crude oil hedges and resulting from both hedge ineffectiveness and amounts excluded from effectiveness testing. During the three months ended March 31, 2010, we recognized a net gain of $6.3 million related to crude oil and natural gas hedges, which resulted from hedge ineffectiveness and amounts excluded from effectiveness testing.
 
Additionally, during the three months ended March 31, 2011 and 2010, we reclassified losses of $13.5 million and $4.1 million, respectively, from “Accumulated other comprehensive loss” into earnings. No material amounts were reclassified into earnings as a result of the discontinuance of cash flow hedges because it was probable that the original forecasted transactions would no longer occur by the end of the originally specified time period or within an additional two-month period of time thereafter, but rather, the amounts reclassified were the result of the hedged forecasted transactions actually affecting earnings (i.e. when the forecasted sales and purchase actually occurred). The proceeds or payments resulting from the settlement of cash flow hedges are reflected in the operating section of our accompanying consolidated statement of cash flows as changes to net income and working capital.
 
The “Accumulated other comprehensive loss” balance included in our Stockholders’ Equity was $192.0 million and $136.5 million as of March 31, 2011 and December 31, 2010, respectively. These totals included “Accumulated other comprehensive loss” amounts of $160.3 million and $93.3 million of losses as of March 31, 2011 and December 31, 2010, respectively, associated with energy commodity price risk management activities. Approximately $99.0 million of the total loss amount associated with energy commodity price risk management activities and included in our Stockholder’s Equity as of March 31, 2011 is expected to be reclassified into earnings during the next twelve months (when the associated forecasted sales and purchases are also expected to occur), however, actual amounts could vary materially as a result of changes in market prices. As of March 31, 2011, the maximum length of time over which we have hedged our exposure to the variability in future cash flows associated with energy commodity price risk is through December 2015.
 
As of March 31, 2011, KMP had entered into the following outstanding commodity forward contracts to hedge its forecasted energy commodity purchases and sales:
 
   
Net open position
long/(short)
Derivatives designated as hedging contracts
       
Crude oil
    (24.9 )
million barrels
Natural gas fixed price
    (28.8 )
billion cubic feet
Natural gas basis
    (28.8 )
billion cubic feet
Derivatives not designated as hedging contracts
         
Natural gas basis
    1.7  
billion cubic feet


 
19
 
Kinder Morgan, Inc. Form 10-Q
 
 
For derivative contracts that are not designated as a hedge for accounting purposes, all realized and unrealized gains and losses are recognized in the statement of income during the current period. These types of transactions include basis spreads, basis-only positions and gas daily swap positions. KMP primarily enters into these positions to economically hedge an exposure through a relationship that does not qualify for hedge accounting. Until settlement occurs, this will result in non-cash gains or losses being reported in our operating results.
 
Interest Rate Risk Management
 
In order to maintain a cost effective capital structure, it is our policy to borrow funds using a mix of fixed rate debt and variable rate debt. We use interest rate swap agreements to manage the interest rate risk associated with the fair value of our fixed rate borrowings and to effectively convert a portion of the underlying cash flows related to our long-term fixed rate debt securities into variable rate cash flows in order to achieve our desired mix of fixed and variable rate debt.
 
Since the fair value of fixed rate debt varies inversely with changes in the market rate of interest, we enter into swap agreements to receive a fixed and pay a variable rate of interest in order to convert the interest expense associated with certain of our senior notes from fixed rates to variable rates, resulting in future cash flows that vary with the market rate of interest. These swaps, therefore, hedge against changes in the fair value of our fixed rate debt that result from market interest rate changes. For derivative contracts that are designated and qualify as a fair value hedge, the gain or loss on the derivative as well as the offsetting loss or gain on the hedged item attributable to the hedged risk are recognized in current earnings.
 
As of March 31, 2011, our subsidiaries, Kinder Morgan Kansas, Inc. and KMP, had notional principal amounts of   $725 million and $5,275 million, respectively, and as of December 31, 2010, $725 million and $4,775 million, respectively, of fixed-to-variable interest rate swap agreements, effectively converting the interest expense associated with certain senior notes from fixed rates to variable rates based on an interest rate of LIBOR plus a spread.  All of Kinder Morgan Kansas, Inc.’s and KMP’s swap agreements have termination dates that correspond to the maturity dates of the related series of senior notes and, as of March 31, 2011, the maximum length of time over which they have hedged a portion of their exposure to the variability in the value of this debt due to interest rate risk is through January 15, 2038.
 
During the three months ended March 31, 2011, KMP entered into four additional fixed-to-variable interest rate swap agreements having a combined notional principal amount of $500 million. Each agreement effectively converts a portion of the interest expense associated with KMP’s 3.50% senior notes due March 1, 2016 from a fixed rate to a variable rate based on an interest rate of LIBOR plus a spread.
 

 
20
 
Kinder Morgan, Inc. Form 10-Q
 
 
Fair Value of Derivative Contracts
 
The fair values of our current and non-current asset and liability derivative contracts are each reported separately as “Fair value of derivative contracts” on our accompanying consolidated balance sheets. The following table summarizes the fair values of our derivative contracts included on our accompanying consolidated balance sheets as of March 31, 2011 and December 31, 2010 (in millions):
 
Fair Value of Derivative Contracts
 
     
Asset derivatives
   
Liability derivatives
 
     
March 31,
2011
   
December 31,
2010
   
March 31,
2011
   
December 31,
2010
 
 
Balance sheet
location
 
Fair value
   
Fair value
 
Derivatives designated as hedging contracts
                         
Energy commodity derivative contracts
Current
  $ 19.9     $ 20.1     $ (372.4 )   $ (275.9 )
 
Non-current
    24.6       43.1       (189.9 )     (103.0 )
Subtotal
      44.5       63.2       (562.3 )     (378.9 )
                                   
Interest rate swap agreements
Current
    10.6       -       -       -  
 
Non-current
    200.0       258.6       (92.4 )     (69.2 )
Subtotal
      210.6       258.6       (92.4 )     (69.2 )
Total
      255.1       321.8       (654.7 )     (448.1 )
                                   
Derivatives not designated as hedging contracts
                                 
Energy commodity derivative contracts
Current
    4.7       3.9       (8.1 )     (5.6 )
Total
      4.7       3.9       (8.1 )     (5.6 )
Total derivatives
    $ 259.8     $ 325.7     $ (662.8 )   $ (453.7 )

The offsetting entry to adjust the carrying value of the debt securities whose fair value was being hedged is included within “Value of interest rate swaps” on our accompanying consolidated balance sheets, which also includes any unamortized portion of proceeds received from the early termination of interest rate swap agreements.  As of March 31, 2011 and December 31, 2010, this unamortized premium totaled $450.7 million and $461.9 million, respectively, and as of March 31, 2011, the weighted average amortization period for this premium was approximately 17.0 years.
 
Effect of Derivative Contracts on the Income Statement
 
The following tables summarize the impact of our derivative contracts on our accompanying consolidated statements of income for each of the three months ended March 31, 2011 and 2010 (in millions):
 
Derivatives in fair value hedging relationships
Location of gain/(loss) recognized in income on derivative
 
Amount of gain/(loss) recognized in income on derivative(a)
 
Hedged items in fair value hedging relationships
Location of gain/(loss) recognized in income on related hedged item
 
Amount of gain/(loss) recognized in income on related hedged items(a)
 
     
Three Months Ended
March 31,
       
Three Months Ended
March 31,
 
     
2011
   
2010
       
2011
   
2010
 
Interest rate swap agreements
Interest, net – income/(expense)
  $ (71.2 )   $ 66.9  
Fixed rate debt
 
Interest, net – income/(expense)
  $ 71.2     $ (66.9 )
Total
    $ (71.2 )   $ 66.9  
Total
    $ 71.2     $ (66.9 )
____________
(a)
Amounts reflect the change in the fair value of interest rate swap agreements and the change in the fair value of the associated fixed rate debt which exactly offset each other as a result of no hedge ineffectiveness.  Amounts do not reflect the impact on interest expense from the interest rate swap agreements under which we pay variable rate interest and receive fixed rate interest.


 
21
 
Kinder Morgan, Inc. Form 10-Q
 
 
Derivatives in
cash flow hedging
relationships
Amount of gain/(loss)
recognized in OCI on
derivative (effective
portion)
 
Location of
gain/(loss)
reclassified from
Accumulated OCI
into income
(effective portion)
Amount of gain/(loss)
reclassified from
Accumulated OCI
into income
(effective portion)
 
Location of
gain/(loss)
recognized in
income on
derivative
(ineffective portion
and amount
excluded from
effectiveness
testing)
Amount of gain/(loss)
recognized in income
on derivative
(ineffective portion
and amount
excluded from
effectiveness testing)
 
 
Three Months Ended
March 31,
   
Three Months Ended
March 31,
   
Three Months Ended
March 31,
 
 
2011
 
2010
   
2011
 
2010
   
2011
 
2010
 
Energy commodity derivative contracts
  $ (80.5 )   $ 15.6  
Revenues-natural gas sales
  $ 0.2     $ -  
Revenues-product sales and other
  $ 3.7     $ 5.4  
                 
Revenues-product sales and other
    (16.1 )     (4.2 )                  
                 
Gas purchases and other costs of sales
    2.4       0.1  
Gas purchases and other costs of sales
    -       0.9  
Total
  $ (80.5 )   $ 15.6  
Total
  $ (13.5 )   $ (4.1 )
Total
  $ 3.7     $ 6.3  

Derivatives in 
net investment
hedging
relationships
 
Amount of gain/(loss)
recognized in OCI on
derivative (effective
portion)
 
Location of
gain/(loss)
reclassified from
Accumulated OCI
into income
(effective portion)
 
Amount of gain/(loss)
reclassified from
Accumulated OCI
into income
(effective portion)
 
Location of
gain/(loss)
recognized in
income on
derivative
(ineffective portion
and amount
excluded from
effectiveness
testing)
 
Amount of gain/(loss)
recognized in income
on derivative
(ineffective portion
and amount
excluded from
effectiveness testing)
 
   
Three Months Ended
March 31,
     
Three Months Ended
March 31,
     
Three Months Ended
March 31,
 
   
2011
   
2010
     
2011
   
2010
     
2011
   
2010
 
Cross currency swap agreements
  $ -     $ (5.5 )
Other, net
  $ -     $ -  
Revenues
  $ -     $ -  
Total
  $ -     $ (5.5 )
Total
  $ -     $ -  
Total
  $ -     $ -  

Derivatives not designated
as hedging contracts 
 
Location of gain/(loss) recognized
in income on derivative
 
Amount of gain/(loss) recognized
in income on derivative
 
       
Three Months Ended
March 31,
 
       
2011
   
2010
 
Energy commodity derivative contracts
 
Gas purchases and other costs of sales
  $ 0.1     $ 0.7  
Total
      $ 0.1     $ 0.7  

Net Investment Hedges
 
We are exposed to foreign currency risk from our investments in businesses owned and operated outside the United States. In 2005 and 2006, Kinder Morgan Kansas, Inc. entered into various cross-currency interest rate swap transactions, which were designated as net investment hedges, in order to hedge the value of the investment in Canadian operations. Over time, as the exposure to foreign currency risk through our Canadian operations was reduced through dispositions, Kinder Morgan Kansas, Inc. began to terminate cross-currency swap agreements. The final cross-currency swap agreements were terminated during the third quarter of 2010 and there were no outstanding cross currency interest rate swaps at March 31, 2011 and December 31, 2010, respectively. In the periods with outstanding cross-currency swap agreements, the effective portion of the changes in fair value of these swap transactions was reported as a cumulative translation adjustment included in the balance sheet caption “Accumulated other comprehensive loss.”
 
Credit Risks
 
We and our subsidiary, KMP, have counterparty credit risk as a result of our use of financial derivative contracts. Our counterparties consist primarily of financial institutions, major energy companies and local distribution companies. This concentration of counterparties may impact our overall exposure to credit risk, either positively or negatively, in that the counterparties may be similarly affected by changes in economic, regulatory or other conditions.
 

 
22
 
Kinder Morgan, Inc. Form 10-Q
 
 
We maintain credit policies with regard to our counterparties that we believe minimize our overall credit risk. These policies include (i) an evaluation of potential counterparties’ financial condition (including credit ratings); (ii) collateral requirements under certain circumstances; and (iii) the use of standardized agreements which allow for netting of positive and negative exposure associated with a single counterparty. Based on our policies, exposure, credit and other reserves, our management does not anticipate a material adverse effect on our financial position, results of operations, or cash flows as a result of counterparty performance.
 
Our over-the-counter swaps and options are entered into with counterparties outside central trading organizations such as futures, options or stock exchanges.  These contracts are with a number of parties, all of which have investment grade credit ratings.  While we enter into derivative transactions principally with investment grade counterparties and actively monitor their ratings, it is nevertheless possible that from time to time losses will result from counterparty credit risk in the future.
 
The maximum potential exposure to credit losses on derivative contracts as of March 31, 2011 was (in millions):
 
   
Asset
position
 
Interest rate swap agreements
  $ 210.6  
Energy commodity derivative contracts
    49.2  
Gross exposure
    259.8  
Netting agreement impact
    (49.4 )
Net exposure
  $ 210.4  

In conjunction with the purchase of exchange-traded derivative contracts or when the market value of our derivative contracts with specific counterparties exceeds established limits, we are required to provide collateral to our counterparties, which may include posting letters of credit or placing cash in margin accounts. As of March 31, 2011 and December 31, 2010, KMP had no outstanding letters of credit supporting its hedging of energy commodity price risks associated with the sale of natural gas, natural gas liquids, and crude oil.
 
As of March 31, 2011, KMP had cash margin deposits associated with its energy commodity contract positions and over-the-counter swap partners totaling $4.4 million, and we reported this amount as “Restricted deposits” in our accompanying consolidated balance sheet.  As of December 31, 2010, KMP’s counterparties associated with its energy commodity contract positions and over-the-counter swap agreements had margin deposits with KMP totaling $2.4 million, and we reported this amount within “Accrued other liabilities” in our accompanying consolidated balance sheet.
 
KMP also has agreements with certain counterparties to its derivative contracts that contain provisions requiring it to post additional collateral upon a decrease in its credit rating. Based on contractual provisions as of March 31, 2011, we estimate that if KMP’s credit rating was downgraded, KMP would have the following additional collateral obligations (in millions):
 
Credit ratings downgraded(a)
 
Incremental
obligations
   
Cumulative 
obligations (b)
 
One notch to BBB-/Baa3
  $ -     $ 4.4  
                 
Two notches to below BBB-/Baa3 (below investment grade)
  $ 87.0     $ 91.4  
__________
(a)
If there are split ratings among the independent credit rating agencies, most counterparties use the higher credit rating to determine KMP’s incremental collateral obligations, while the remaining use the lower credit rating.  Therefore, a two notch downgrade to below BBB-/Baa3 by one agency would not trigger the entire $87.0 million incremental obligation.
  
(b)
Includes current posting at current rating.

7.  Fair Value
 
The Codification emphasizes that fair value is a market-based measurement that should be determined based on assumptions (inputs) that market participants would use in pricing an asset or liability. Inputs may be observable or unobservable, and valuation techniques used to measure fair value should maximize the use of relevant observable inputs and minimize the use of unobservable inputs. Accordingly, the Codification establishes a hierarchal disclosure framework that ranks the quality and reliability of information used to determine fair values. The hierarchy is associated with the level of pricing observability utilized in measuring fair value and defines three levels of inputs to the fair value measurement process—quoted prices are the most reliable valuation inputs, whereas model values that include inputs
 

 
23
 
Kinder Morgan, Inc. Form 10-Q
 
 
based on unobservable data are the least reliable. Each fair value measurement must be assigned to a level corresponding to the lowest level input that is significant to the fair value measurement in its entirety.
 
The three broad levels of inputs defined by the fair value hierarchy are as follows:
 
 
▪
Level 1 Inputs—quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date;
 
 
▪
Level 2 Inputs—inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. If the asset or liability has a specified (contractual) term, a Level 2 input must be observable for substantially the full term of the asset or liability; and
 
 
▪
Level 3 Inputs—unobservable inputs for the asset or liability. These unobservable inputs reflect the entity’s own assumptions about the assumptions that market participants would use in pricing the asset or liability, and are developed based on the best information available in the circumstances (which might include the reporting entity’s own data).
 
Fair Value of Derivative Contracts
 
The following two tables summarize the fair value measurements of our (i) energy commodity derivative contracts and (ii) interest rate swap agreements as of March 31, 2011 and December 31, 2010, based on the three levels established by the Codification (in millions). The fair value measurements in the tables below do not include cash margin deposits made by KMP or its counterparties, which would be reported within “Restricted deposits” and “Accrued other current liabilities,” respectively, in the accompanying consolidated balance sheets.
 
   
Asset fair value measurements using
 
   
Total
   
Quoted prices in
active markets
for identical
 assets (Level 1)
   
Significant other
observable
 inputs (Level 2)
   
Significant
unobservable
 inputs (Level 3)
 
As of March 31, 2011
                       
Energy commodity derivative contracts(a)
  $ 49.2     $ 12.8     $ 6.9     $ 29.5  
Interest rate swap agreements
  $ 210.6     $ -     $ 210.6     $ -  
                                 
As of December 31, 2010
                               
Energy commodity derivative contracts(a)
  $ 67.1     $ -     $ 23.5     $ 43.6  
Interest rate swap agreements
  $ 258.6     $ -     $ 258.6     $ -  

   
Liability fair value measurements using
 
   
Total
   
Quoted prices in 
active  markets
for identical
liabilities
(Level 1)
   
Significant other 
observable
inputs (Level 2)
   
Significant
unobservable
 inputs (Level 3)
 
As of March 31, 2011
                       
Energy commodity derivative contracts(a)
  $ (570.4 )   $ (8.7 )   $ (529.0 )   $ (32.7 )
Interest rate swap agreements
  $ (92.4 )   $ -     $ (92.4 )   $ -  
                                 
As of December 31, 2010
                               
Energy commodity derivative contracts(a)
  $ (384.5 )   $ -     $ (359.7 )   $ (24.8 )
Interest rate swap agreements
  $ (69.2 )   $ -     $ (69.2 )   $ -  
__________
(a)
Level 1 consists primarily of NYMEX natural gas futures.  Level 2 consists primarily of OTC West Texas Intermediate swaps and OTC natural gas swaps that are settled on NYMEX.  Level 3 consists primarily of natural gas basis swaps and West Texas Intermediate options.


 
24
 
Kinder Morgan, Inc. Form 10-Q
 
 
The table below provides a summary of changes in the fair value of our Level 3 energy commodity derivative contracts for each of the three months ended March 31, 2011 and 2010 (in millions):
 
Significant unobservable inputs (Level 3)
 
   
Three Months Ended
March 31,
 
   
2011
   
2010
 
Derivatives-net asset (liability)
           
Beginning of period
  $ 18.8     $ 13.0  
Transfers into Level 3
    -       -  
Transfers out of Level 3
    -       -  
Total gains or (losses)
               
Included in earnings
    0.1       -  
Included in other comprehensive income
    (22.8 )     8.6  
Purchases
    4.6       -  
Issuances
    -       -  
Sales
    -       -  
Settlements
    (3.9 )     1.0  
End of period
  $ (3.2 )   $ 22.6  
                 
The amount of total gains or losses for the period included in earnings attributable to the change in unrealized gains or losses relating to assets held at the reporting date
  $ -     $ (0.1 )

Fair Value of Financial Instruments
 
Fair value as used in the disclosure of financial instruments represents the amount at which an instrument could be exchanged in a current transaction between willing parties.  As of each reporting date, the estimated fair value of our outstanding publicly-traded debt is based upon quoted market prices, if available, and for all other debt, fair value is based upon prevailing interest rates currently available to us.  In addition, we adjust (discount) the fair value measurement of our long-term debt for the effect of credit risk.
 
The estimated fair value of our outstanding debt balance as of March 31, 2011 and December 31, 2010 (both short-term and long-term, but excluding the value of interest rate swaps) is disclosed below (in millions):
 
   
March 31, 2011
   
December 31, 2010
 
   
Carrying
value
   
Estimated
fair value
   
Carrying
value
   
Estimated
fair value
 
Total debt(a)
  $ 14,994.5     $ 15,964.6     $ 15,169.9     $ 16,129.1  
____________
(a)
The 2010 amounts include the $750.0 million of 5.35% senior notes paid on January 5, 2011.
 
8.  Reportable Segments
 
We divide our operations into six reportable business segments. These segments and their principal source of revenues are as follows:
 
 
▪
Products Pipelines–KMP— the transportation and terminaling of refined petroleum products, including gasoline, diesel fuel, jet fuel and natural gas liquids;
 
 
▪
Natural Gas Pipelines–KMP—the sale, transport, processing, treating, storage and gathering of natural gas;
 
 
▪
CO 2 –KMP—the production and sale of crude oil from fields in the Permian Basin of West Texas and the transportation and marketing of carbon dioxide used as a flooding medium for recovering crude oil from mature oil fields;
 
 
▪
Terminals–KMP—the transloading and storing of refined petroleum products and dry and liquid bulk products, including coal, petroleum coke, cement, alumina, salt and other bulk chemicals;
 

 
25
 
Kinder Morgan, Inc. Form 10-Q
 
 
 
▪
Kinder Morgan Canada–KMP—the transportation of crude oil and refined products from Alberta, Canada to marketing terminals and refineries in British Columbia, the state of Washington and the Rocky Mountains and Central regions of the United States; and
 
 
▪
NGPL PipeCo LLC— consists of our 20% interest in NGPL PipeCo LLC, the owner of Natural Gas Pipeline Company of America and certain affiliates, collectively referred to as Natural Gas Pipeline Company of America or NGPL, a major interstate natural gas pipeline and storage system, which we operate.
 
We evaluate performance principally based on each segments’ earnings before depreciation, depletion and amortization expenses (including amortization of excess cost of equity investments), which excludes general and administrative expenses, third-party debt costs and interest expense, unallocable interest income, and unallocable income tax expense.  Our reportable segments are strategic business units that offer different products and services, and they are structured based on how our chief operating decision maker organizes their operations for optimal performance and resource allocation.  Each segment is managed separately because each segment involves different products and marketing strategies.
 
Financial information by segment follows (in millions):
 
   
Three Months Ended
March 31,
 
   
2011
   
2010
 
Revenues
           
Products Pipelines–KMP
           
Revenues from external customers
  $ 225.6     $ 207.5  
Natural Gas Pipelines–KMP
               
Revenues from external customers
    1,019.4       1,236.7  
CO 2 –KMP
               
Revenues from external customers
    345.3       335.2  
Terminals–KMP
               
Revenues from external customers
    331.4       303.8  
Intersegment revenues
    0.3       0.3  
Kinder Morgan Canada–KMP
               
Revenues from external customers
    75.6       59.8  
Power(a)
               
Revenues from external customers
    -       2.8  
Other
               
NGPL PipeCo LLC fixed fee revenue(b)
    9.8       11.8  
Other revenues
    1.0       -  
Total segment revenues
    2,008.4       2,157.9  
Less: Total intersegment revenues
    (0.3 )     (0.3 )
Total consolidated revenues
  $ 2,008.1     $ 2,157.6  
  

 
26
 
Kinder Morgan, Inc. Form 10-Q

 
   
Three Months Ended
March 31,
 
   
2011
   
2010
 
Segment earnings (loss) before depreciation, depletion, amortization and amortization of excess cost of equity investments(c)
           
Products Pipelines–KMP(d)
  $ 180.4     $ 6.4  
Natural Gas Pipelines–KMP
    222.2       220.6  
CO 2 –KMP
    266.5       266.6  
Terminals–KMP
    174.2       150.5  
Kinder Morgan Canada–KMP
    47.9       45.0  
NGPL PipeCo LLC(e)
    7.3       (419.6 )
Power(a)
    -       1.2  
Total segment earnings before DD&A
    898.5       270.7  
Total segment depreciation, depletion and amortization
    (256.1 )     (282.3 )
Total segment amortization of excess cost of investments
    (1.5 )     (1.4 )
NGPL PipeCo LLC fixed fee revenue
    9.8       11.8  
Other revenues
    1.0       -  
General and administrative expenses(f)
    (180.4 )     (115.7 )
Unallocable interest and other, net of interest income(g)
    (174.8 )     (155.8 )
Unallocable income tax (expense) benefit
    (95.5 )     93.0  
Income (loss) from continuing operations
  $ 201.0     $ (179.7 )

   
March 31,
2011
   
December 31,
2010
 
Assets
           
Products Pipelines–KMP
  $ 5,650.2     $ 5,650.9  
Natural Gas Pipelines–KMP
    10,824.9       10,960.0  
CO 2 –KMP
    4,029.6       4,057.2  
Terminals–KMP
    5,106.3       5,009.3  
Kinder Morgan Canada–KMP
    1,901.3       1,870.0  
NGPL PipeCo LLC
    268.5       265.6  
Total segment assets
    27,780.8       27,813.0  
Corporate assets(h)
    625.7       1,095.1  
Total consolidated assets
  $ 28,406.5     $ 28,908.1  
____________
(a)
On October 22, 2010, we sold our Power facility located in Michigan and as a result, we no longer report Power as a business segment.
  
(b)
See Notes 9 and 11.
(c)
Includes revenues, earnings from equity investments, allocable interest income, and other, net, less operating expenses, allocable income taxes, and other expense (income).
  
(d)
2010 amount includes a $158.0 million increase in expense associated with rate case liability adjustments.
  
(e)
2010 amount includes a $430.0 million non-cash investment impairment charge (see Note 2).
  
(f)
2011 amount includes (i) a $100 million (pre-tax) increase in special bonus expense. We will pay the bonuses using the $64   million (after-tax) in available earnings and profits reserved for this purpose and not paid in dividends to our Class A shareholders (see Note 5); (ii) $11.1 million increase of expense associated with our initial public offering; and (iii) a reduction to expense for a $45.8 million Going Private transaction litigation insurance reimbursement.
  
(g)
Includes (i) interest expense and (ii) miscellaneous other income and expenses not allocated to reportable segments.
  
(h)
Includes cash and cash equivalents, margin and restricted deposits, unallocable interest receivable, prepaid assets and deferred charges, risk management assets related to the fair value of interest rate swaps and miscellaneous corporate assets (such as information technology and telecommunications equipment) not allocated to individual segments.


 
27
 
Kinder Morgan, Inc. Form 10-Q
 
 
9.  Related Party Transactions
 
Notes Receivable
 
Plantation Pipe Line Company
 
KMP has a current note receivable bearing interest at the rate of 4.72% per annum from Plantation Pipe Line Company, its 51.17%-owned equity investee. The note provides for semiannual payments of principal and interest on June 30 and December 31 each year, with a final principal payment due July 20, 2011. As of both March 31, 2011 and December 31, 2010, the outstanding note receivable balance was $82.1 million, and we included this amount within “Accounts, notes and interest receivable, net,” on our accompanying consolidated balance sheets.
 
Express US Holdings LP
 
KMP has a long-term investment in a C$113.6 million debt security issued by Express US Holdings LP (the obligor), the partnership that maintains ownership of the U.S. portion of the Express pipeline system. The debenture is denominated in Canadian dollars, due in full on January 9, 2023, bears interest at the rate of 12.0% per annum and provides for quarterly payments of interest in Canadian dollars on March 31, June 30, September 30 and December 31 each year. As of March 31, 2011 and December 31, 2010, the outstanding note receivable balance, representing the translated amount included in our consolidated financial statements in U.S. dollars, was $117.2 million and $114.2 million, respectively, and we included these amounts within “Notes receivable” on our accompanying consolidated balance sheets.
 
Other Receivables and Payables
 
As of March 31, 2011 and December 31, 2010, our related party receivables (other than the note receivables discussed above “―Note s Receivable”) totaled $15.5 million and $23.3 million, respectively. The March 31, 2011 amount included $14.4 million within “Accounts, notes and interest receivable, net” on our accompanying consolidated balance sheet primarily consisting of amounts due from (i) Plantation Pipe Line Company; (ii) the Express pipeline system; and (iii) NGPL PipeCo LLC. The December 31, 2010 receivables amount consisted of (i) $16.1 million included within “Accounts, notes and interest receivable, net” on our accompanying consolidated balance sheet and (ii) $7.2 million of natural gas imbalance receivables included within “Other current assets.”  The $16.1 million amount primarily related to accounts and interest receivables due from the Express pipeline system, the Rockies Express pipeline system and NGPL.  The related party natural gas imbalance receivables consisted of amounts due from NGPL.
 
As of March 31, 2011 and December 31, 2010, our related party payables totaled $1.7 million and $4.6 million, respectively.  The March 31, 2011 related party payable amount consisted of (i) $0.9 million included within “Accounts payable” and primarily related to amounts due to RGZ, Inc. and (ii) $0.8 million of natural gas imbalance payables included within “Accrued other current liabilities” consisting of amounts due to NGPL PipeCo LLC. The December 31, 2010 amount consisted of (i) $0.9 million included within “Accounts payable” and primarily related to amounts due to RGZ, Inc. and (ii) $3.7 million of natural gas imbalance payables included within “Accrued other current liabilities” consisting of amounts due to the Rockies Express pipeline system.
 
NGPL PipeCo LLC Fixed Fee Revenue and General and Administrative Reimbursement
 
On February 15, 2008, we entered into an Operations and Reimbursement Agreement (O&R Agreement) with Natural Gas Pipeline Company of America LLC, a wholly owned subsidiary of NGPL PipeCo LLC. The O&R Agreement provides for us to be reimbursed, at cost, for pre-approved operations and maintenance costs, and through December 31, 2010, a general and administration fixed fee charge (Fixed Fee) for services provided under the O&R Agreement.  Effective January 1, 2011, the general and administrative expenses (G&A Costs) are determined in accordance with and as required by the terms of the O&R Agreement. The Fixed Fee and the reimbursement of G&A Costs during the first quarter of 2010 and 2011, respectively, are included within the caption, “Product sales and other” in our accompanying consolidated statements of income, and totaled $9.8 million and $11.8 million for the three months ended March 31, 2011 and 2010, respectively. Also, see Note 11 “Litigation, Environmental and Other Contingencies—NGPL 2011 Budget Arbitration.”
 
Asset Divestitures
 
Mr. C. Berdon Lawrence, a non-management director on the boards of Kinder Morgan G.P., Inc. and KMR, is also Chairman Emeritus of the Board of Kirby Corporation.  On February 9, 2011, KMP sold a marine vessel to Kirby Corporation’s subsidiary Kirby Inland Marine, L.P., and additionally, KMP and Kirby Inland Marine L.P. formed a joint
 

 
28
 
Kinder Morgan, Inc. Form 10-Q
 
 
venture named Greens Bayou Fleeting, LLC.  For more information about these transactions, see Note 2.
 
Derivative Counterparties
 
One of our investors, Goldman Sachs Capital Partners and certain of its affiliates (Goldman Sachs), is considered “related parties” to us as that term is defined in the authoritative accounting literature. Goldman Sachs has acted in the past, and may act in the future, as an underwriter for equity and/or debt issuances for us, Kinder Morgan Kansas, Inc., KMP and KMR, and Goldman Sachs effectively owned 49% of the terminal assets KMP acquired from US Development Group LLC in January 2010.
 
In addition, we conduct energy commodity risk management activities in the ordinary course of implementing our risk management strategies in which the counterparty to certain of our derivative transactions is an affiliate of Goldman Sachs and in conjunction with these activities, we are a party (through one of KMP’s subsidiaries engaged in the production of crude oil) to a hedging facility with J. Aron & Company/Goldman Sachs. The hedging facility requires us to provide certain periodic information but does not require the posting of margin.  As a result of changes in the market value of our derivative positions, we have created both amounts receivable from and payable to Goldman Sachs affiliates.  The following table summarizes the fair values of our energy commodity derivative contracts that are (i) associated with commodity price risk management activities with J. Aron & Company/Goldman Sachs and (ii) included within “Fair value of derivative contracts” in our accompanying consolidated balance sheets as of March 31, 2011 and December 31, 2010 (in millions):
 
   
March 31,
2011
   
December 31,
2010
 
Derivatives - asset (liability)
           
Current assets: Fair value of derivative contracts
  $ 3.7     $ -  
Assets: Fair value of derivative contracts
  $ 3.7     $ 12.7  
Current liabilities: Fair value of derivative contracts
  $ (281.4 )   $ (221.4 )
Long-term liabilities and deferred credits: Fair value of derivative contracts
  $ (86.9 )   $ (57.5 )

For more information on our risk management activities see Note 6.
 
10.  Income Taxes
 
Income taxes from continuing operations included in our accompanying consolidated statements of income were as follows (in millions, except percentages):
 
 
Three Months Ended
March 31,
 
2011
 
2010
Income tax expense (benefit)
$
95.9
   
$
(95.5)
 
Effective tax rate
 
32.3
%
   
34.7 
%

The effective tax rate is lower than the statutory federal rate of 35% for the three months ended March 31, 2011 primarily due to (i) the net effect of consolidating KMP’s income tax provision and (ii) a dividends-received deduction from our 20% ownership interest in NGPL PipeCo LLC.  These decreases are partially offset by (i) state income taxes and (ii) adjustments recorded for the Company's uncertain tax positions.
 
The tax benefit for the three months ended March 31, 2010 is the result of a loss sustained during the period, primarily related to a NGPL PipeCo LLC investment impairment charge (see Note 2).  The effective tax rate is lower than the statutory federal rate of 35% for the three months ended March 31, 2010 due to the net effect of consolidating KMP’s income tax provision, partially offset by state income taxes and a dividends received deduction from our 20% ownership interest in NGPL PipeCo LLC.
 
11.  Litigation, Environmental and Other Contingencies
 
Below is a brief description of our ongoing material legal proceedings, including any material developments that occurred in such proceedings during the three months ended March 31, 2011. Additional information with respect to these proceedings can be found in Note 16 to our consolidated financial statements that were included in our 2010 Form 10-K. This note also contains a description of any material legal proceedings that were initiated against us during the three months ended March 31, 2011, and a description of any material events occurring subsequent to March 31, 2011 but before the filing
 

 
29
 
Kinder Morgan, Inc. Form 10-Q
 
 
of this report.
 
In this note, we refer to KMP’s subsidiary SFPP, L.P. as SFPP; KMP’s subsidiary Calnev Pipe Line LLC as Calnev; Chevron Products Company as Chevron; BP West Coast Products, LLC as BP; ConocoPhillips Company as ConocoPhillips; Tesoro Refining and Marketing Company as Tesoro; Western Refining Company, L.P. as Western Refining; ExxonMobil Oil Corporation as ExxonMobil; Valero Energy Corporation as Valero; Valero Marketing and Supply Company as Valero Marketing; Continental Airlines, Inc., Northwest Airlines, Inc., Southwest Airlines Co. and US Airways, Inc., collectively, as the Airlines; KMP’s subsidiary Kinder Morgan CO 2 Company, L.P. (the successor to Shell CO 2 Company, Ltd.) as Kinder Morgan CO 2 ; the United States Court of Appeals for the District of Columbia Circuit as the D.C. Circuit; the Federal Energy Regulatory Commission as the FERC; the California Public Utilities Commission as the CPUC; the Union Pacific Railroad Company (the successor to Southern Pacific Transportation Company) as UPRR; the Texas Commission of Environmental Quality as the TCEQ; The Premcor Refining Group, Inc. as Premcor; Port Arthur Coker Company as PACC; KMP’s subsidiary Kinder Morgan Bulk Terminals, Inc. as KMBT; KMP’s subsidiary Kinder Morgan Liquids Terminals LLC as KMLT; KMP’s subsidiary Kinder Morgan Interstate Gas Transmission LLC as KMIGT; Rockies Express Pipeline LLC as Rockies Express; and Plantation Pipe Line Company as Plantation. “OR” dockets designate complaint proceedings, and “IS” dockets designate protest proceedings.
 
Federal Energy Regulatory Commission Proceedings
 
The tariffs and rates charged by SFPP and Calnev are subject to a number of ongoing proceedings at the FERC, including the shippers’ complaints and protests regarding interstate rates on the pipeline systems listed below. In general, these complaints and protests allege the rates and tariffs charged by SFPP and Calnev are not just and reasonable. If the shippers are successful in proving their claims, they are entitled to seek reparations (which may reach up to two years prior to the filing of their complaints) or refunds of any excess rates paid, and SFPP may be required to reduce its rates going forward. These proceedings tend to be protracted, with decisions of the FERC often appealed to the federal courts.
 
The issues involved in these proceedings include, among others: (i) whether certain of KMP’s Pacific operations’ rates are “grandfathered” under the Energy Policy Act of 1992, and therefore deemed to be just and reasonable; (ii) whether “substantially changed circumstances” have occurred with respect to any grandfathered rates such that those rates could be challenged; (iii) whether indexed rate increases are justified and (iv) the appropriate level of return and income tax allowance KMP may include in its rates.
 
 
SFPP
 
Pursuant to FERC approved settlements, SFPP settled with eleven of twelve shipper litigants in May 2010 and with Chevron on March 15, 2011 a wide range of rate challenges dating back to 1992 (Historical Cases Settlements).  Settlement payments were made to Chevron in March 2011 and the following FERC dockets that were pending only as to Chevron were resolved: FERC Docket Nos. OR92-8, et al.; OR96-2, et al.; OR02-4; OR03-5; OR07-4; OR09-8 (consolidated); IS98-1; IS05-230; IS07-116; IS08-137;  IS08-302; and IS09-375.  The following appellate review proceedings that were pending before the D.C. Circuit only as to Chevron were also resolved: D.C. Circuit Case Nos. 03-1183; 06-1017 and 06-1128.  In connection with the Historical Cases Settlements, the FERC issued an order directing SFPP to pay refunds to non-litigant shippers and to collect overpaid refunds from non-litigant shippers.  The Historical Cases Settlements resolved all but two of the cases outstanding between SFPP and the twelve litigant shippers, and SFPP does not expect any material adverse impacts from the remaining two unsettled cases.
 
The Historical Cases Settlements and other legal reserves related to SFPP rate litigation resulted in a $172.0 million charge to earnings in 2010. In June 2010, KMP made settlement payments of $206.3 million to eleven of the litigant shippers.  Due to this settlement payment and the reserve KMP took at that time for potential future settlements with Chevron and the CPUC cases described below, a portion of KMP’s partnership distributions for the second quarter of 2010 (which KMP paid in August 2010) was a distribution of cash from interim capital transactions (rather than a distribution of cash from operations) and our second quarter 2010 distribution from KMP was reduced by $170.0 million. As a result, our second quarter of 2010 pre-tax earnings were reduced by $168.3 million.
 
As provided in KMP’s partnership agreement, we receive no incentive distribution on ICT Distributions; therefore, there was no practical impact to KMP’s limited partners from this ICT Distribution because (i) the expected cash distribution to the limited partners did not change; (ii) fewer dollars in the aggregate were distributed, because there was no incentive distribution paid to us related to the portion of the quarterly distribution that was an ICT Distribution; and (iii) we, in this instance, agreed to waive any resetting of the incentive distribution target levels, as would otherwise occur according to KMP’s partnership agreement.  This ICT Distribution also allowed KMP to resolve the Chevron cases and should allow it to resolve the CPUC rate cases (discussed below) without impacting its future distributions.
 

 
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Kinder Morgan, Inc. Form 10-Q
 
 
The following FERC dockets, which pertain to all protesting shippers, are currently pending:
 
 
▪
FERC Docket No. IS08-390 (West Line Rates)—Protestants: BP, ExxonMobil, ConocoPhillips, Valero Marketing, Chevron, the Airlines—Status: FERC order issued on February 17, 2011.  While the order made certain findings that were adverse to SFPP, it ruled in favor of SFPP on many significant issues.  Subsequently, SFPP made a compliance filing which estimates approximately $16.0 million in refunds. However, SFPP also filed a rehearing request on certain adverse rulings in the FERC order.  It is not possible to predict the outcome of the FERC review of the rehearing request or appellate review of this order; and
 
 
▪
FERC Docket No. IS09-437 (East Line Rates)—Protestants: BP, ExxonMobil, ConocoPhillips, Valero Marketing, Chevron, Western Refining, and Southwest Airlines—Status: Initial decision issued on February 10, 2011.  A FERC administrative law judge generally made findings adverse to SFPP, found that East Line rates should have been lower, and recommended that SFPP pay refunds for alleged over-collections.  SFPP has filed a brief with the FERC taking exception to these and other portions of the initial decision.  The FERC will review the initial decision, and while the initial decision is inconsistent with a number of the issues ruled on in FERC’s February 17, 2011 order in Docket No. IS08-390, it is not possible to predict the outcome of FERC or appellate review.
 
 
Calnev
 
On March 17, 2011, the FERC issued an order consolidating the following proceedings and setting them for hearing.  The FERC further held the hearing proceedings in abeyance to allow for settlement judge proceedings:
 
 
▪
FERC Docket Nos. OR07-7, OR07-18, OR07-19 & OR07-22 (not consolidated) (Calnev Rates)—Complainants: Tesoro, Airlines, BP, Chevron, ConocoPhillips and Valero Marketing—Status:  Before a FERC settlement judge; and
 
 
▪
FERC Docket Nos. OR09-15/OR09-20 (not consolidated) (Calnev Rates)—Complainants: Tesoro/BP—Status:  Before a FERC settlement judge.
 
The following docket is currently pending:
 
 
▪
FERC Docket No. IS09-377 (2009 Index Rate Increases)—Protestants: BP, Chevron, and Tesoro—Status:  Requests for rehearing of FERC dismissal pending before FERC.
 
 
Trailblazer Pipeline Company LLC
 
On July 7, 2010, KMP’s subsidiary Trailblazer Pipeline Company LLC refunded a total of approximately $0.7 million to natural gas shippers covering the period January 1, 2010 through May 31, 2010 as part of a settlement reached with shippers to eliminate the December 1, 2009 rate filing obligation contained in its Docket No. RP03-162 rate case settlement.  As part of the agreement with shippers, Trailblazer commenced billing reduced tariff rates as of June 1, 2010 with an additional reduction in tariff rates that took effect January 1, 2011.
 
Kinder Morgan Interstate Gas Transmission LLC Section 5 Proceeding
 
On November 18, 2010, KMP’s subsidiary KMIGT was notified by the FERC of a proceeding against it pursuant to Section 5 of the Natural Gas Act.  The proceeding set for hearing a determination of whether KMIGT’s current rates, which were approved by the FERC in KMIGT’s last transportation rate case settlement, remain just and reasonable.  The FERC made no findings in its order as to what would constitute just and reasonable rates or a reasonable return for KMIGT.  A proceeding under Section 5 of the Natural Gas Act is prospective in nature and any potential change in rates charged customers by KMIGT can only occur after the FERC has issued a final order.  Prior to that, an administrative law judge presides over an evidentiary hearing and makes an initial decision (which the FERC has directed to be issued within 47 weeks).  On March 23, 2011 the Chief Judge suspended the procedural schedule in this proceeding because all parties have reached a settlement in principle that will resolve all issues set for hearing.  The settlement, which is supported or not opposed by all parties of record, was filed with the administrative law judge on May 5, 2011 .  If accepted by the administrative law judge, the settlement is subject to approval by the FERC before any rate change is effective.
 
California Public Utilities Commission Proceedings
 
SFPP has previously reported ratemaking and complaint proceedings pending with the CPUC. The ratemaking and complaint cases generally involve challenges to rates charged by SFPP for intrastate transportation of refined petroleum products through its pipeline system in the state of California and request prospective rate adjustments and refunds with respect to tariffed and previously untariffed charges for certain pipeline transportation and related services. These matters have been consolidated and assigned to two administrative law judges.
 

 
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Kinder Morgan, Inc. Form 10-Q
 
 
On April 6, 2010, a CPUC administrative law judge issued a proposed decision in several intrastate rate cases involving SFPP and a number of its shippers. The proposed decision includes determinations on issues, such as SFPP’s entitlement to an income tax allowance and allocation of environmental expenses that KMP’s believes are contrary both to CPUC policy and precedent and to established federal regulatory policies for pipelines. Moreover, the proposed decision orders refunds relating to these issues where the underlying rates were previously deemed reasonable by the CPUC, which KMP believes to be contrary to California law. Based on KMP’s review of these CPUC proceedings, KMP estimates that its maximum exposure is approximately $220 million in reparation and refund payments and if the determinations made in the proposed decision were applied prospectively in two pending cases this could result in approximately $30 million in annual rate reductions.
 
The proposed decision is advisory in nature and can be rejected, accepted or modified by the CPUC.  SFPP filed comments on May 3, 2010 outlining what it believes to be the errors in law and fact within the proposed decision and on May 5, 2010, SFPP made oral arguments before the full CPUC.  On November 12, 2010, an alternate proposed decision was issued. The matter remains pending before the CPUC, which may act at any time at its scheduled bimonthly meetings.  Further procedural steps, including motions for rehearing and writ of review to California’s Court of Appeals, will be taken if warranted.  KMP does not expect the final resolution of this matter to have an adverse effect on its financial position, results of operations or cash flows for 2011.
 
Carbon Dioxide Litigation
 
CO 2 Claims Arbitration
 
Kinder Morgan CO 2 and Cortez Pipeline Company were among the named defendants in CO 2 Committee, Inc. v. Shell Oil Co., et al., an arbitration initiated on November 28, 2005. The arbitration arose from a dispute over a class action settlement agreement which became final on July 7, 2003 and disposed of five lawsuits formerly pending in the U.S. District Court, District of Colorado. The plaintiffs in such lawsuits primarily included overriding royalty interest owners, royalty interest owners, and small share working interest owners who alleged underpayment of royalties and other payments on carbon dioxide produced from the McElmo Dome unit.
 
The settlement imposed certain future obligations on the defendants in the underlying litigation. The plaintiffs in the arbitration alleged that, in calculating royalty and other payments, defendants used a transportation expense in excess of what is allowed by the settlement agreement, thereby causing alleged underpayments of approximately $12 million. The plaintiffs also alleged that Cortez Pipeline Company should have used certain funds to further reduce its debt, which, in turn, would have allegedly increased the value of royalty and other payments by approximately $0.5 million. On August 7, 2006, the arbitration panel issued its opinion finding that defendants did not breach the settlement agreement. On June 21, 2007, the New Mexico federal district court entered final judgment confirming the August 7, 2006 arbitration decision.
 
On October 2, 2007, the plaintiffs initiated a second arbitration (CO 2 Committee, Inc. v. Shell CO 2 Company, Ltd., aka Kinder Morgan CO 2 Company, L.P., et al.) against Cortez Pipeline Company, Kinder Morgan CO 2 and an ExxonMobil entity. The second arbitration asserts claims similar to those asserted in the first arbitration. A second arbitration panel has convened and a final hearing on the parties’ claims and defenses is expected to occur in 2011.
 
Colorado Severance Tax Assessment
 
On September 16, 2009, the Colorado Department of Revenue issued three Notices of Deficiency to Kinder Morgan CO 2 . The Notices of Deficiency assessed additional state severance tax against Kinder Morgan CO 2 with respect to carbon dioxide produced from the McElmo Dome unit for tax years 2005, 2006, and 2007. The total amount of tax assessed was $5.7 million, plus interest of $1.0 million, plus penalties of $1.7 million. Kinder Morgan CO 2 protested the Notices of Deficiency and paid the tax and interest under protest. Kinder Morgan CO 2 is now awaiting the Colorado Department of Revenue’s response to the protest.
 
Montezuma County, Colorado Property Tax Assessment
 
In November of 2009, the County Treasurer of Montezuma County, Colorado, issued to Kinder Morgan CO 2 , as operator of the McElmo Dome unit, retroactive tax bills for tax year 2008, in the amount of $2 million.  Of this amount, 37.2% is attributable to Kinder Morgan CO 2 ’s interest.  The retroactive tax bills were based on the assertion that a portion of the actual value of the carbon dioxide produced from the McElmo Dome unit was omitted from the 2008 tax roll due to an alleged over statement of transportation and other expenses used to calculate the net taxable value.   Kinder Morgan CO 2 paid the retroactive tax bills under protest and will file petitions for refunds of the taxes paid under protest and will
 

 
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Kinder Morgan, Inc. Form 10-Q
 
 
vigorously contest Montezuma County’s position.
 
Other
 
In addition to the matters listed above, audits and administrative inquiries concerning Kinder Morgan CO 2 ’s payments on carbon dioxide produced from the McElmo Dome and Bravo Dome units are currently ongoing.  These audits and inquiries involve federal agencies, the states of Colorado and New Mexico, and county taxing authorities in the state of Colorado.
 
Commercial Litigation Matters
 
Union Pacific Railroad Company Easements
 
SFPP and UPRR are engaged in a proceeding to determine the extent, if any, to which the rent payable by SFPP for the use of pipeline easements on rights-of-way held by UPRR should be adjusted pursuant to existing contractual arrangements for the ten year period beginning January 1, 2004 ( Union Pacific Railroad Company vs. Santa Fe Pacific Pipelines, Inc., SFPP, L.P., Kinder Morgan Operating L.P. “D”, Kinder Morgan G.P., Inc., et al., Superior Court of the State of California for the County of Los Angeles, filed July 28, 2004). In February 2007, a trial began to determine the amount payable for easements on UPRR rights-of-way. The trial is ongoing and is expected to conclude by the end of the second quarter of 2011, with a decision from the judge expected by the end of 2011.
 
SFPP and UPRR are also engaged in multiple disputes over the circumstances under which SFPP must pay for a relocation of its pipeline within the UPRR right-of-way and the safety standards that govern relocations.  In July 2006, a trial before a judge regarding the circumstances under which SFPP must pay for relocations concluded, and the judge determined that SFPP must pay for any relocations resulting from any legitimate business purpose of the UPRR.  SFPP appealed this decision, and in December 2008, the appellate court affirmed the decision.  In addition, UPRR contends that SFPP must comply with the more expensive American Railway Engineering and Maintenance-of-Way standards in determining when relocations are necessary and in completing relocations.  Each party is seeking declaratory relief with respect to its positions regarding the application of these standards with respect to relocations.
 
Since SFPP does not know UPRR’s plans for projects or other activities that would cause pipeline relocations, it is difficult to quantify the effects of the outcome of these cases on SFPP.  Even if SFPP is successful in advancing its positions, significant relocations for which SFPP must nonetheless bear the expense (i.e., for railroad purposes, with the standards in the federal Pipeline Safety Act applying) would have an adverse effect on our financial position, results of operations or cash flows.  These effects would be even greater in the event SFPP is unsuccessful in one or more of these litigations.
 
Severstal Sparrows Point Crane Collapse
 
On June 4, 2008, a bridge crane owned by Severstal Sparrows Point, LLC and located in Sparrows Point, Maryland collapsed while being operated by KMBT.  According to KMP’s investigation, the collapse was caused by unexpected, sudden and extreme winds.  On June 24, 2009, Severstal filed suit against KMBT in the United States District Court for the District of Maryland, cause no. WMN 09CV1668.  Severstal alleges that KMBT was contractually obligated to replace the collapsed crane and that its employees were negligent in failing to properly secure the crane prior to the collapse.  Severstal seeks unspecified damages for value of the crane and lost profits.  KMBT denies each of Severstal’s allegations.
 
JR Nicholls Tug Incident
 
On February 10, 2010, the JR Nicholls , a tugboat operated by one of KMP’s subsidiaries overturned and sank in the Houston Ship Channel.  Five employees were on board and four were rescued, treated and released from a local hospital. The fifth employee died in the incident.  The U.S. Coast Guard shut down a section of the ship channel for approximately 60 hours. Approximately 2,200 gallons of diesel fuel was released from the tugboat. Emergency response crews deployed booms and contained the product, which was substantially cleaned up.  Salvage operations were commenced and the tugboat has been recovered.  A full investigation of the incident is underway. Our subsidiary, J.R. Nicholls LLC filed a limitations action entitled In the Matter of the Complaint of J.R. Nicholls LLC as Owner of the M/V J.R. NICHOLLS For Exoneration From or Limitation of Liability, CA No. 4:10-CV-00449, U.S. District Court, S.D. Tex.  To date, three surviving crew members have filed claims in that action for personal injuries and emotional distress. On September 15, 2010, KMP’s subsidiary KM Ship Channel Services LLC, agreed to pay a civil penalty of $7,500 to the United States Coast Guard for the unintentional discharge of diesel fuel which occurred when the vessel sank.
 

 
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Kinder Morgan, Inc. Form 10-Q
 
 
The Premcor Refining Group, Inc. v. Kinder Morgan Energy Partners, L.P. and Kinder Morgan Petcoke, L.P.; Arbitration in Houston, Texas
 
On August 12, 2010, Premcor filed a demand for arbitration against KMP and its subsidiary Kinder Morgan Petcoke, L.P., collectively referred to as Kinder Morgan, asserting claims for breach of contract.  Kinder Morgan performs certain petroleum coke handling operations at the Port Arthur, Texas refinery that is the subject of the claim.  The arbitration is being administered by the American Arbitration Association in Dallas, Texas.  Premcor alleges that Kinder Morgan breached its contract with Premcor by failing to name Premcor as an additional insured and failing to indemnify Premcor for claims brought against Premcor by PACC.  PACC and Premcor are affiliated companies.  PACC brought its claims against Premcor in a previous separate arbitration seeking to recover damages allegedly suffered by PACC when a pit wall of a coker unit collapsed at a refinery owned by Premcor.  PACC obtained an arbitration award against Premcor in the amount of $50.3 million, plus post-judgment interest.  Premcor is seeking to hold Kinder Morgan liable for the award. Premcor’s claim against Kinder Morgan is based in part upon Premcor’s allegation that Kinder Morgan is responsible to the extent of Kinder Morgan’s alleged proportionate fault in causing the pit wall collapse.  Kinder Morgan denies and is vigorously defending against all claims asserted by Premcor.  The final arbitration hearing is scheduled to begin on August 29, 2011.
 
Mine Safety Matters
 
In the first quarter of 2011, KMP’s bulk terminals operations that handle coal received ten citations under the Mine Safety and Health Act of 1977 which were deemed to be significant and substantial violations of mandatory health and safety standards under section 104 of the act (one of which was under section 104(d) of the act).  To date, the aggregate of proposed assessments received in respect of all citations received under the act in 2011 is $1,117.  KMP works to promptly abate violations described in the citations. We do not believe any of such citations or the matters giving rise to such citations will have a material adverse impact on our business, financial position, results of operations or cash flows.
 
Employee Matters
 
James Lugliani vs. Kinder Morgan G.P., Inc. et al. in the Superior Court of California, Orange County
 
James Lugliani, a former Kinder Morgan employee, filed suit in January 2010 against various Kinder Morgan affiliates.  On behalf of himself and other similarly situated current and former employees, Mr. Lugliani claims that the Kinder Morgan defendants have violated the wage and hour provisions of the California Labor Code and Business & Professions Code by failing to provide meal and rest periods; failing to pay meal and rest period premiums; failing to pay all overtime wages due; failing to timely pay wages; failing to pay wages for vacation, holidays and other paid time off; and failing to keep proper payroll records.  KMP intends to vigorously defend the case.
 
Pipeline Integrity and Releases
 
From time to time, despite our best efforts, our pipelines experience leaks and ruptures.  These leaks and ruptures may cause explosions, fire and damage to the environment, damage to property and/or personal injury or death.  In connection with these incidents, we may be sued for damages caused by an alleged failure to properly mark the locations of our pipelines and/or to properly maintain our pipelines.  Depending upon the facts and circumstances of a particular incident, state and federal regulatory authorities may seek civil and/or criminal fines and penalties.
 
Barstow, California
 
The United States Department of the Navy has alleged that historic releases of methyl tertiary-butyl ether, or MTBE from Calnev’s Barstow terminal (i) have migrated underneath the Navy’s Marine Corps Logistics Base in Barstow; (ii) have impacted the Navy’s existing groundwater treatment system for unrelated groundwater contamination not alleged to have been caused by Calnev; and (iii) could affect the Barstow, California Marine Corps Logistic Base’s water supply system. Although Calnev believes that it has meritorious defenses to the Navy’s claims, it is working with the Navy to agree upon an Administrative Settlement Agreement and Order on Consent for federal Comprehensive Environmental Response, Compensation and Liability Act (referred to as CERCLA) Removal Action to reimburse the Navy for $0.5 million in past response actions.
 
Westridge Release, Burnaby, British Columbia
 
On July 24, 2007, a third-party contractor installing a sewer line for the City of Burnaby struck a crude oil pipeline segment included within KMP’s Trans Mountain pipeline system near its Westridge terminal in Burnaby, British Columbia, resulting in a release of approximately 1,400 barrels of crude oil. The release impacted the surrounding
 

 
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Kinder Morgan, Inc. Form 10-Q
 
 
neighborhood, several homes and nearby Burrard Inlet. No injuries were reported. To address the release, KMP initiated a comprehensive emergency response in collaboration with, among others, the City of Burnaby, the British Columbia Ministry of Environment, the National Energy Board (Canada), and the National Transportation Safety Board (Canada). Cleanup and environmental remediation is complete and KMP has received a British Columbia Ministry of Environment Certificate of Compliance confirming complete remediation.
 
Kinder Morgan Canada, Inc. commenced a lawsuit against the parties it believes were responsible for the third party strike, and a number of other parties have commenced related actions.  All of the outstanding litigation was settled without assignment of fault on April 8, 2011.  Kinder Morgan Canada has recovered the majority of its expended costs in responding to the third party strike.
 
On July 22, 2009, the British Columbia Ministry of Environment issued regulatory charges against the third-party contractor, the engineering consultant to the sewer line project, Kinder Morgan Canada Inc., and KMP subsidiary Trans Mountain L.P. The British Columbia Ministry of Environment claims that the parties charged caused the release of crude oil, and in doing so were in violation of various sections of the Environmental, Fisheries and Migratory Bird Act. A trial has been scheduled to commence in October 2011. KMP is of the view that the charges have been improperly laid against it, and it continues to vigorously defend against them.
 
Rockies Express Pipeline LLC Indiana Construction Incident
 
In April 2009, Randy Gardner, an employee of Sheehan Pipeline Construction Company (a third-party contractor to Rockies Express and referred to in this note as Sheehan Construction) was fatally injured during construction activities being conducted under the supervision and control of Sheehan Construction. The cause of the incident was investigated by Indiana OSHA, which issued a citation to Sheehan Construction. Rockies Express was not cited in connection with the incident.
 
In August 2010, the estate of Mr. Gardner filed a wrongful death action against Rockies Express and several other parties in the Superior Court of Marion County, Indiana, at case number 49D111008CT036870. The plaintiff alleges that the defendants were negligent in allegedly failing to provide a safe worksite, and seeks unspecified compensatory damages. Rockies Express denies that it was in any way negligent or otherwise responsible for this incident, and intends to assert contractual claims for complete indemnification for any and all costs arising from this incident, including any costs related to this lawsuit, against third parties and their insurers.
 
Litigation Relating to the “Going Private” Transaction
 
Beginning on May 29, 2006, the day after the proposal for the Going Private Transaction was announced, and in the days following, eight putative Class Action lawsuits were filed in Harris County (Houston), Texas and seven putative Class Action lawsuits were filed in Shawnee County (Topeka), Kansas against, among others, Kinder Morgan, Inc., its Board of Directors, the Special Committee of the Board of Directors, and several corporate officers.
 
The eight Harris County cases were consolidated into the Crescente v. Kinder Morgan, Inc. et al case, Cause No. 2006-33011, in the 164 th Judicial District Court, Harris County, Texas. The seven Kansas cases were consolidated into the Consol. Case No. 06 C 801; In Re Kinder Morgan, Inc. Shareholder Litigation ; in the District Court of Shawnee County, Kansas, Division 12. The Consolidated Petitions filed by the plaintiffs challenged the proposed transaction as inadequate and unfair to Kinder Morgan, Inc.’s public stockholders. They alleged that Kinder Morgan, Inc.’s Board of Directors and certain members of senior management breached their fiduciary duties and the Sponsor Investors aided and abetted the alleged breaches of fiduciary duty in entering into the merger agreement. They sought, among other things, to enjoin the merger, rescission of the merger agreement, disgorgement of any improper profits received by the defendants, and attorneys’ fees. Defendants answered the Consolidated Petitions, denying the plaintiffs’ substantive allegations and denying that the plaintiffs are entitled to relief.
 
In August, September and October 2008, the Plaintiffs in both consolidated cases voluntarily dismissed without prejudice the claims against those Kinder Morgan, Inc. directors who did not participate in the buyout (including the dismissal of the members of the special committee of the board of directors), Kinder Morgan, Inc. and Knight Acquisition, Inc. In addition, on November 19, 2008, by agreement of the parties, the Texas trial court issued an order staying all proceedings in the Texas actions until such time as a final judgment shall be issued in the Kansas actions. The effect of this stay is that the consolidated matters will proceed only in the Kansas trial court.
 

 
35
 
Kinder Morgan, Inc. Form 10-Q
 
 
On September 8, 2010, the parties entered into a $200 million settlement agreement to resolve the consolidated class action cases that were pending before the Kansas trial court.  On November 19, 2010, the settlement was approved by the Kansas trial court and in December 2010 the $200 million settlement amount was paid into an escrow account that is subject to the jurisdiction of the court. For the year ended December 31, 2010, we recognized a $200 million, pre-tax charge in the caption “General and administrative expense” in our accompanying consolidated statement of income.
 
On December 2, 2010 a Notice of Appeal of the Kansas trial court’s approval of the settlement was filed by Ernest Browne, Jr., a former owner of 185 shares of Kinder Morgan Kansas, Inc., in the Court of Appeals for the State of Kansas at Case No. 11-105562-A.  Browne filed an amended Notice of Appeal on January 7, 2011.  On March 30, 2011, Browne filed a Stipulation of Dismissal of his appeal which was entered by the Kansas Court of Appeals on March 31, 2011, ending the appeal of this matter. On April 11, 2011, the Kansas trial court entered an order noting that the settlement of these consolidated cases was now final and effective.
 
In February 2011, we entered into a $45.8 million settlement agreement with our Directors and Officers insurance policy insurers (Insurers) regarding certain coverage for the above litigation.  The Insurers made payments of $45.8 million to us in March of 2011 and we recognized a gain for that amount in the caption “General and administrative expense” in our accompanying consolidated statement of income in the first quarter of 2011.
 
NGPL 2011 Budget Arbitration
 
On April 4, 2011, Natural Gas Pipeline Company of America LLC (NGPL) acting by and through its Myria Holdings, Inc. controlled Board of Directors, filed a notice initiating arbitration against Kinder Morgan Kansas, Inc. (KMI) pursuant to the terms of the February 2008 Operations and Reimbursement Agreement (O&R Agreement). NGPL alleges that KMI, as Operator of NGPL, has breached the O&R Agreement relating to KMI’s proposed allocation of certain general and administrative expenses (G&A Costs) as determined by KMI and set forth in the Proposed 2011 Budget submitted in November 2010. The NGPL Board rejected the Proposed 2011 Budget, suggested that G&A Costs budgeted to NGPL should be considerably lower, and also questioned certain other direct costs set forth in the Proposed 2011 Budget. KMI asserts that it determined the amount of G&A Costs and direct costs budgeted to NGPL for 2011 as required by and in accordance with the terms of the O&R Agreement. We intend to vigorously defend our position and have asserted that we are entitled to complete indemnification from NGPL of our costs, fees and expenses incurred in connection with this arbitration. The parties are currently engaged in discovery. We do not anticipate that the resolution of this matter will have a material adverse impact on our business, financial position, results of operations or cash flows.
 
General
 
Although no assurance can be given, we believe that we have meritorious defenses to the actions set forth in this note and, to the extent an assessment of the matter is possible, if it is probable that a liability has been incurred and the amount of loss can be reasonably estimated, we believe that we have established an adequate reserve to cover potential liability.
 
Additionally, although it is not possible to predict the ultimate outcomes, we also believe, based on our experiences to date and the reserves we have established, that the ultimate resolution of these matters will not have a material adverse impact on our business, financial position, results of operations or distributions to limited partners. As of March 31, 2011 and December 31, 2010, we have recorded a total reserve for legal fees, transportation rate cases and other litigation liabilities in the amount of $106.0 million and $169.8 million, respectively. The reserve is primarily related to various claims from regulatory proceedings arising from KMP’s West Coast products pipeline transportation rates, and the contingent amount is based on both the circumstances of probability and reasonability of dollar estimates. The overall change in the reserve from December 31, 2010 includes a $63.0 million payment by KMP (for transportation rate settlements on KMP’s Pacific operations’ pipelines) in March 2011 that reduced the liability. We regularly assess the likelihood of adverse outcomes resulting from these claims in order to determine the adequacy of our liability provision.
 
Environmental Matters
 
The City of Los Angeles v. Kinder Morgan Liquids Terminals, LLC, Shell Oil Company, Equilon Enterprises LLC; California Superior Court, County of Los Angeles, Case No. NC041463.
 
KMLT is a defendant in a lawsuit filed in 2005 alleging claims for environmental cleanup costs at the former Los Angeles Marine Terminal in the Port of Los Angeles.  The lawsuit was stayed beginning in 2009 and remained stayed through the end of 2010.  A hearing was held on December 13, 2010 to hear the City’s motion to remove the litigation stay.  At the hearing, the judge denied the motion to lift the stay without prejudice. A full litigation stay is in effect until the next case management conference set for June 13, 2011. During the stay, the parties deemed responsible by the local
 

 
36
 
Kinder Morgan, Inc. Form 10-Q
 
 
regulatory agency have worked with that agency concerning the scope of the required cleanup and are now starting a sampling and testing program at the site. The local regulatory agency issued specific cleanup goals in early 2010, and two of those parties, including KMLT, have appealed those cleanup goals to the state agency.
 
Plaintiff’s Third Amended Complaint alleges that future environmental cleanup costs at the former terminal will exceed $10 million, and that the plaintiff’s past damages exceed $2 million.  No trial date has yet been set.
 
Exxon Mobil Corporation v. GATX Corporation, Kinder Morgan Liquids Terminals, LLC and ST Services, Inc.
 
On April 23, 2003, Exxon Mobil Corporation filed a complaint in the Superior Court of New Jersey, Gloucester County. The lawsuit relates to environmental remediation obligations at a Paulsboro, New Jersey liquids terminal owned by ExxonMobil from the mid-1950s through November 1989, by GATX Terminals Corp. from 1989 through September 2000, and later owned by Support Terminals and Pacific Atlantic Terminals, LLC. The terminal is now owned by Plains Products, and it too is a party to the lawsuit.
 
The complaint seeks any and all damages related to remediating all environmental contamination at the terminal, and, according to the New Jersey Spill Compensation and Control Act, treble damages may be available for actual dollars incorrectly spent by the successful party in the lawsuit. The parties engaged in court ordered mediation in 2008 through 2009, which did not result in settlement. The trial judge has issued a Case Management Order and the parties are actively engaged in discovery.
 
On June 25, 2007, the New Jersey Department of Environmental Protection, the Commissioner of the New Jersey Department of Environmental Protection and the Administrator of the New Jersey Spill Compensation Fund, referred to collectively as the plaintiffs, filed a complaint against ExxonMobil Corporation and KMLT, formerly known as GATX Terminals Corporation, alleging natural resource damages related to historic contamination at the Paulsboro terminal.  The complaint was filed in Gloucester County, New Jersey.  Both ExxonMobil and KMLT filed third party complaints against Support Terminals/Plains seeking to bring Support Terminals/Plains into the case.  Support Terminals/Plains filed motions to dismiss the third party complaints, which were denied.  Support Terminals/Plains is now joined in the case, and it filed an Answer denying all claims.  The court has consolidated the two cases.  All private parties and the state participated in two mediation conferences in 2010.
 
In December 2010, KMLT and Plains Products entered into an agreement in principle with the New Jersey Department of Environmental Protection for settlement of the state’s alleged natural resource damages claim. Currently, a Consent Judgment is being finalized subject to public notice and comment and court approval. The tentative natural resource damage settlement includes a monetary award of $1.1 million and a series of remediation and restoration activities at the terminal site. KMLT and Plains Products have joint responsibility for this settlement.  Currently, KMLT and Plains Products are working on a settlement agreement that will determine each parties’ relative share of responsibility to the NJDEP under the Consent Judgment noted above. We anticipate a final Consent Judgment during second quarter 2011. The settlement with the state does not resolve the original complaint brought by Exxon Mobil. There is no trial date set.
 
Mission Valley Terminal Lawsuit
 
In August 2007, the City of San Diego, on its own behalf and purporting to act on behalf of the People of the State of California, filed a lawsuit against KMP and several affiliates seeking injunctive relief and unspecified damages allegedly resulting from hydrocarbon and MTBE impacted soils and groundwater beneath the City’s stadium property in San Diego arising from historic operations at the Mission Valley terminal facility. The case was filed in the Superior Court of California, San Diego County, case number 37-2007-00073033-CU-OR-CTL. On September 26, 2007, KMP removed the case to the United States District Court, Southern District of California, case number 07CV1883WCAB. The City disclosed in discovery that it is seeking approximately $170 million in damages for alleged lost value/lost profit from the redevelopment of the City’s property and alleged lost use of the water resources underlying the property.  Later, in 2010, the City amended its initial disclosures to add claims for restoration of the site as well as a number of other claims that increased their claim for damages to approximately $365 million.
 
According to the Court’s most recent Case Management Order of January 6, 2011, the parties must complete all fact discovery by June 24, 2011 and all expert witness discovery by August 29, 2011. A mandatory settlement conference is set for July 6, 2011 and the trial is now set for March 13, 2012. KMP has been and will continue to aggressively defend this action.  This site has been, and currently is, under the regulatory oversight and order of the California Regional Water Quality Control Board. KMP continues to be in compliance with this agency order as it conducts an extensive remediation effort at the City’s stadium property site.
 

 
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Kinder Morgan, Inc. Form 10-Q
 
 
Kinder Morgan, EPA Section 114 Information Request
 
On January 8, 2010, Kinder Morgan, Inc., on behalf of Natural Gas Pipeline Company of America LLC, Horizon Pipeline Company and Rockies Express Pipeline LLC, received a Clean Air Act Section 114 information request from the U.S. Environmental Protection Agency, Region V. This information request requires that the three affiliated companies provide the EPA with air permit and various other information related to their natural gas pipeline compressor station operations in Illinois, Indiana, and Ohio. The affiliated companies have responded to the request and believe the relevant natural gas compressor station operations are in substantial compliance with applicable air quality laws and regulations.
 
Notice of Proposed Debarment
 
In April 2011, we received Notices of Proposed Debarment from the United States Environmental Protection Agency’s Suspension and Debarment Division, referred to in this Note as the EPA SDD.  The Notices propose the debarment of Kinder Morgan Energy Partners, L.P., Kinder Morgan, Inc., Kinder Morgan G.P., Inc., and Kinder Morgan Management, LLC, along with four of KMP’s subsidiaries, from participation in future federal contracting and assistance activities.  The Notices allege that certain of the respondents’ past environmental violations indicate a lack of present responsibility warranting debarment.  Our objective is to fully comply with all applicable legal requirements and to operate our assets in accordance with our processes, procedures and compliance plans.  We are performing better than industry averages in our incident rates and in our safety performance, all of which is publicly reported on our website.  We take environmental compliance very seriously, and look forward to demonstrating our present responsibility to the EPA SDD through this administrative process and to resolving this matter in a cooperative fashion.  We do not anticipate that the resolution of this matter will have a material adverse impact on our business, financial position, results of operations or cash flows.
 
Other Environmental
 
We are subject to environmental cleanup and enforcement actions from time to time. In particular, the CERCLA generally imposes joint and several liability for cleanup and enforcement costs on current and predecessor owners and operators of a site, among others, without regard to fault or the legality of the original conduct, subject to the right of a liable party to establish a “reasonable basis” for apportionment of costs. Our operations are also subject to federal, state and local laws and regulations relating to protection of the environment. Although we believe our operations are in substantial compliance with applicable environmental law and regulations, risks of additional costs and liabilities are inherent in pipeline, terminal and carbon dioxide field and oil field operations, and there can be no assurance that we will not incur significant costs and liabilities. Moreover, it is possible that other developments, such as increasingly stringent environmental laws, regulations and enforcement policies under the terms of authority of those laws, and claims for damages to property or persons resulting from our operations, could result in substantial costs and liabilities to us.
 
We are currently involved in several governmental proceedings involving alleged violations of environmental and safety regulations. As we receive notices of non-compliance, we negotiate and settle these matters. We do not believe that these alleged violations will have a material adverse effect on our business.
 
We are also currently involved in several governmental proceedings involving groundwater and soil remediation efforts under administrative orders or related state remediation programs. We have established a reserve to address the costs associated with the cleanup.
 
In addition, we are involved with and have been identified as a potentially responsible party in several federal and state superfund sites. Environmental reserves have been established for those sites where our contribution is probable and reasonably estimable. In addition, we are from time to time involved in civil proceedings relating to damages alleged to have occurred as a result of accidental leaks or spills of refined petroleum products, natural gas liquids, natural gas and carbon dioxide. See “—Pipeline Integrity and Releases” above for additional information with respect to ruptures and leaks from our pipelines.
 
General
 
Although it is not possible to predict the ultimate outcomes, we believe that the resolution of the environmental matters set forth in this note will not have a material adverse effect on our business, financial position, results of operations or cash flows. However, we are not able to reasonably estimate when the eventual settlements of these claims will occur and changing circumstances could cause these matters to have a material adverse impact. As of March 31, 2011, we have accrued an environmental reserve of $79.3 million, and we believe that these pending environmental matters will not have a material adverse impact on our business, cash flows, financial position or results of operations. In
 

 
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Kinder Morgan, Inc. Form 10-Q
 
 
addition, as of March 31, 2011, we have recorded a receivable of $7.4 million for expected cost recoveries that have been deemed probable. As of December 31, 2010, our environmental reserve totaled $79.8 million and our estimated receivable for environmental cost recoveries totaled $8.6 million. Additionally, many factors may change in the future affecting our reserve estimates, such as (i) regulatory changes, (ii) groundwater and land use near our sites and (iii) changes in cleanup technology.
 
Other
 
We are a defendant in various lawsuits arising from the day-to-day operations of our businesses. Although no assurance can be given, we believe, based on our experiences to date and taking into account established reserves, that the ultimate resolution of such items will not have a material adverse impact on our business, financial position, results of operations or cash flows.
 
12.  Regulatory Matters
 
Natural Gas Pipeline Expansion Filings
 
Kinder Morgan Interstate Gas Transmission Pipeline – Franklin to Hastings Expansion Project
 
KMIGT has filed a prior notice request to expand and replace certain mainline pipeline facilities to create up to 10,000 dekatherms per day of firm transportation capacity to serve an ethanol plant located near Aurora, Nebraska.  The estimated cost of the proposed facilities is $18.6 million.  The project was constructed and went into service on April 14, 2011.
 
Trailblazer Pipeline - Order Rejecting Tariff Record and Denying Waiver
 
On April 28, 2011, the FERC issued an Order Rejecting Tariff Record and Denying Waiver in Trailblazer Pipeline Company LLC’s annual fuel tracker filing at Docket No. RP11-1939-000.  The order requires Trailblazer to make a compliance filing for its annual Expansion Fuel Adjustment Percentage (EFAP) pursuant to its tariff.  In the past two annual tracker filings, Trailblazer received authorization by the FERC to defer collection of its fuel deferred account until a future period by granting a waiver of various fuel tracker provisions.  In its most recent annual filing, Trailblazer again asked for tariff waivers that would defer the collection of its fuel deferred account to a future period, which the FERC denied.  The effect of the FERC denying Trailblazer’s request for the tariff waivers is that Trailblazer must file a revised EFAP that reflects a fuel rate that is required for Trailblazer to collect both its current and deferred fuel costs from shippers.  Certain shippers under their interpretation of their contracts have claimed that they are not required to contribute fuel in-kind in excess of fuel caps contained in their respective negotiated rate agreements.  If the shippers are successful, Trailblazer will be at risk for the recovery of a portion of its fuel costs.  We do not expect this matter to have a material adverse impact on our business, financial position, results of operations or cash flows.
 
Products Pipelines and Natural Gas Pipelines Regulatory Proceedings
 
For information on our pipeline regulatory proceedings, see Note 11 “Litigation, Environmental and Other Contingencies—Federal Energy Regulatory Commission Proceedings” and “—California Public Utilities Commission Proceedings.”
 
13. Recent Accounting Pronouncements
 
Accounting Standards Updates
 
None of the Accounting Standards Updates that we adopted and that became effective January 1, 2011 had a material impact on our consolidated financial statements.
 

 
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Kinder Morgan, Inc. Form 10-Q

 
14.  Reconciliation of Significant Asset Balances
 
The following is a reconciliation between KMP’s significant asset balances as reported in KMP’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2011 and our consolidated asset balances as shown on our accompanying consolidated balance sheets (in millions):
 
   
March 31,
2011
   
December 31,
2010
 
Property, plant and equipment, net–KMP
  $ 14,695.5     $ 14,603.9  
Purchase accounting adjustments associated with our investment in KMP
    2,412.2       2,445.2  
Property, plant and equipment, net–Kinder Morgan Kansas, Inc.
    26.0       21.6  
Property, plant and equipment, net
  $ 17,133.7     $ 17,070.7  
 
Investments–KMP
  $ 3,903.0     $ 3,886.0  
Purchase accounting adjustments associated with our investment in KMP
    138.3       139.3  
Investments–Kinder Morgan Kansas, Inc.
    269.1       265.8  
Investments
  $ 4,310.4     $ 4,291.1  
 
Goodwill–KMP
  $ 1,229.4     $ 1,233.6  
Purchase accounting adjustments associated with our investment in KMP
    3,597.4       3,597.3  
Goodwill
  $ 4,826.8     $ 4,830.9  


 
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Kinder Morgan, Inc. Form 10-Q

 
Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations.
 
General and Basis of Presentation
 
The following information should be read in conjunction with (i) our accompanying interim consolidated financial statements and related notes (included elsewhere in this report) and (ii) our consolidated financial statements, related notes and management’s discussion and analysis of financial condition and results of operations included in our Annual Report on Form 10-K for the year ended December 31, 2010 (2010 Form 10-K). Unless the context requires otherwise, references to “we,” “us,” “our,” “KMI” or the “Company” are intended to mean Kinder Morgan, Inc. and our consolidated subsidiaries including Kinder Morgan Kansas, Inc.
 
On February 16, 2011, we completed a $3.3 billion initial public offering of 109,786,590 shares of our common stock, which included the underwriters’ option to purchase an additional 14,319,990 shares.  All of the common stock that was sold in the offering was sold by our existing investors consisting of funds advised by or affiliated with Goldman Sachs & Co., Highstar Capital LP, The Carlyle Group and Riverstone Holdings LLC. No members of management sold shares in the offering and we did not receive any proceeds from the offering. The class of common stock sold in the offering was our Class P common stock, which is sometimes referred to herein as our “common stock.” Our then existing investors prior to the initial public offering hold our Class A, Class B and Class C common stock, which is sometimes collectively referred to herein as our “investor retained stock.” Our common stock now trades on the New York Stock Exchange under the symbol “KMI.” For additional information on our first quarter equity transactions, see Note 5 “Stockholders’ Equity” to our consolidated financial statements included elsewhere in this report.
 
Our assets that generate cash for the payment of dividends and for other purposes consist primarily of our ownership of the general partner interest in Kinder Morgan Energy Partners, L.P. (KMP), approximately 11% of the limited partner interests of KMP and a 20% interest in NGPL PipeCo LLC. Approximately 98.6% of the distributions we received from our subsidiaries for the three months ended March 31, 2011 were attributable to KMP.
 
Our business model, through our ownership and operation of energy related assets and through our ownership of the general partner of KMP and Kinder Morgan Management, LLC’s (KMR) management of KMP’s operations, is built to support two principal components:
 
 
▪
helping customers by providing energy, bulk commodity and liquids products transportation, storage and distribution; and
 
 
▪
creating long-term value for our stockholders.
 
To achieve these objectives, we focus on providing fee-based services to customers from a business portfolio consisting of energy-related pipelines, bulk and liquids terminal facilities, and carbon dioxide and petroleum reserves.
 
As an energy infrastructure owner and operator in multiple facets of the United States’ and Canada’s various energy businesses and markets, we examine a number of variables and factors on a routine basis to evaluate our current performance and our prospects for the future. Many of our operations are regulated by various U.S. and Canadian regulatory bodies and a portion of our business portfolio (including our Kinder Morgan Canada–KMP business segment, the Canadian portion of the Cochin Pipeline, and bulk and liquids terminal facilities located in Canada) uses the local Canadian dollar as the functional currency for its Canadian operations and enters into foreign currency-based transactions, both of which affect segment results due to the inherent variability in U.S.: Canadian dollar exchange rates. To help understand our reported operating results, all of the following references to “foreign currency effects” or similar terms in this section represent our estimates of the changes in financial results, in U.S. dollars, resulting from fluctuations in the relative value of the Canadian dollar to the U.S. dollar. The references are made to facilitate period-to-period comparisons of business performance and may not be comparable to similarly titled measures used by other registrants.
 
The profitability of our refined petroleum products pipeline transportation business is generally driven by the volume of refined petroleum products that we transport and the prices we receive for our services. Transportation volume levels are primarily driven by the demand for the refined petroleum products being shipped or stored. Demand for refined petroleum products tends to track in large measure demographic and economic growth, and with the exception of periods of time with very high product prices or recessionary conditions, demand tends to be relatively stable. Because of that, we seek to own refined petroleum products pipelines located in, or that transport to, stable or growing markets and population centers. The prices for shipping are generally based on regulated tariffs that are adjusted annually based on changes in the U.S. Producer Price Index.
 

 
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With respect to our interstate natural gas pipelines and related storage facilities, the revenues from these assets are primarily received under contracts with terms that are fixed for various and extended periods of time. To the extent practicable and economically feasible in light of our strategic plans and other factors, we generally attempt to mitigate risk of reduced volumes and prices by negotiating contracts with longer terms, with higher per-unit pricing and for a greater percentage of our available capacity. These long-term contracts are typically structured with a fixed-fee reserving the right to transport natural gas and specify that we receive the majority of our fee for making the capacity available, whether or not the customer actually chooses to utilize the capacity. Similarly, in the Texas Intrastate Pipeline business, we have long-term transport and sales requirements with minimum volume payment obligations which secure approximately 75% of our sales and transport margins in that business.  Therefore, where we have long-term contracts, we are not exposed to short-term changes in commodity supply or demand. However, as contracts expire, we do have exposure to the longer term trends in supply and demand for natural gas. As of December 31, 2010, the remaining average contract life of KMP’s natural gas transportation contracts (including its intrastate pipelines) was approximately nine years.
 
The CO 2 sales and transportation business, like the natural gas pipelines business, has primarily fixed-fee contracts with minimum volume requirements, which as of December 31, 2010, had a remaining average contract life of 4.7 years. On a volume-weighted basis, approximately 76% of KMP’s contractual volumes are based on a fixed fee, and 24% fluctuates with the price of oil. In the long-term, our success in this business is driven by the demand for carbon dioxide. However, short-term changes in the demand for carbon dioxide typically do not have a significant impact on us due to the required minimum sales volumes under many of our contracts. In the CO 2 –KMP business segment’s oil and gas producing activities, we monitor the amount of capital we expend in relation to the amount of production that we expect to add. In that regard, our production during any period is an important measure. In addition, the revenues we receive from our crude oil, natural gas liquids and carbon dioxide sales are affected by the prices we realize from the sale of these products. Over the long-term, we will tend to receive prices that are dictated by the demand and overall market price for these products. In the shorter term, however, market prices are likely not indicative of the revenues we will receive due to our risk management, or hedging, program, in which the prices to be realized for certain of our future sales quantities are fixed, capped or bracketed through the use of financial derivative contracts, particularly for crude oil. KMP’s realized weighted average crude oil price per barrel, with all hedges allocated to oil, was $68.78 per barrel in the first quarter of 2011, and $60.50 per barrel in the first quarter of 2010.  Had KMP not used energy derivative contracts to transfer commodity price risk, its crude oil sales prices would have averaged $90.76 per barrel in the first quarter of 2011, and $76.42 per barrel in the first quarter of 2010.
 
The factors impacting the Terminals–KMP business segment generally differ depending on whether the terminal is a liquids or bulk terminal, and in the case of a bulk terminal, the type of product being handled or stored. As with our refined petroleum products pipeline transportation business, the revenues from our bulk terminals business are generally driven by the volumes we handle and/or store, as well as the prices we receive for our services, which in turn are driven by the demand for the products being shipped or stored. While we handle and store a large variety of products in our bulk terminals, the primary products are coal, petroleum coke, and steel. For the most part, we have contracts for this business that have minimum volume guarantees and are volume based above the minimums. Because these contracts are volume based above the minimums, our profitability from the bulk business can be sensitive to economic conditions. Our liquids terminals business generally has longer-term contracts that require the customer to pay regardless of whether they use the capacity. Thus, similar to our natural gas pipeline business, our liquids terminals business is less sensitive to short-term changes in supply and demand. Therefore, the extent to which changes in these variables affect our terminals business in the near term is a function of the length of the underlying service contracts (which is typically approximately three to four years), the extent to which revenues under the contracts are a function of the amount of product stored or transported, and the extent to which such contracts expire during any given period of time. To the extent practicable and economically feasible in light of our strategic plans and other factors, we generally attempt to mitigate the risk of reduced volumes and pricing by negotiating contracts with longer terms, with higher per-unit pricing and for a greater percentage of our available capacity. In addition, weather-related factors such as hurricanes, floods and droughts may impact our facilities and access to them and, thus, the profitability of certain terminals for limited periods of time or, in relatively rare cases of severe damage to facilities, for longer periods.
 
In our discussions of the operating results of individual businesses that follow (see” —Results of Operations” below), we generally identify the important fluctuations between periods that are attributable to acquisitions and dispositions separately from those that are attributable to businesses owned in both periods. Continuing its history of making accretive acquisitions and economically advantageous expansions of existing businesses, in the full year 2010, KMP invested approximately $2.5 billion for both strategic business acquisitions and expansions of existing assets, and in the first quarter of 2011, it invested an additional $65.9 million.  KMP’s capital investments have helped it to achieve compound annual growth rates in cash distributions to its limited partners of 4.8%, 8.1%, and 7.0%, respectively, for the one-year,
 

 
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three-year, and five-year periods ended December 31, 2010.
 
Thus, KMP’s ability to increase distributions to us and other investors will, to some extent, be a function of its ability to successfully complete acquisitions and expansions. We believe KMP will continue to have opportunities for expansion of its facilities in many markets, and it has budgeted approximately $1.4 billion for its 2011 capital expansion program, including small acquisitions and investment contributions. Based on our historical record and because there is continued demand for energy infrastructure in the areas we serve, we expect to continue to have such opportunities in the future, although the level of such opportunities is difficult to predict.
 
KMP’s ability to make accretive acquisitions is a function of the availability of suitable acquisition candidates at the right cost, and includes factors over which we have limited or no control. Thus, we have no way to determine the number or size of accretive acquisition candidates in the future, or whether we will complete the acquisition of any such candidates.
 
In addition, KMP’s ability to make accretive acquisitions or expand its assets is impacted by its ability to maintain adequate liquidity and to raise the necessary capital needed to fund such acquisitions. As a master limited partnership, KMP distributes all of its available cash and it accesses capital markets to fund acquisitions and asset expansions. Historically, KMP has succeeded in raising necessary capital in order to fund its acquisitions and expansions, and although we cannot predict future changes in the overall equity and debt capital markets (in terms of tightening or loosening of credit), we believe that KMP’s stable cash flows, its investment grade credit rating, and its historical record of successfully accessing both equity and debt funding sources should allow it to continue to execute its current investment, distribution and acquisition strategies, as well as refinance maturing debt when required. For a further discussion of our liquidity, including KMP’s public debt and equity offerings in the first quarter of 2011; please see “—Financial Condition” below.
 
Dividend Policy
 
Our dividend policy set forth in our shareholders agreement provides, subject to applicable law, that we will pay quarterly cash dividends on all classes of our capital stock equal to the cash we receive from our subsidiaries and other sources less any cash disbursements and reserves established by a majority vote of our board of directors, including for general and administrative expenses, interest and cash taxes. The division of our dividends among our classes of capital stock will be in accordance with our charter. Our board of directors may declare dividends by a majority vote in accordance with our dividend policy pursuant to our bylaws. This policy reflects our judgment that our stockholders would be better served if we distributed to them a substantial portion of our cash. As a result, we may not retain a sufficient amount of cash to fund our operations or to finance unanticipated capital expenditures or growth opportunities, including acquisitions.
 
As presented in the table at the end of this section, for the three months ended March 31, 2011, we had cash available to pay distributions of $251.1 million. In 2011, we expect to have cash available to pay dividends of $820 million and we expect to pay quarterly dividends of $0.29 per share (or $1.16 per share on an annualized basis) on our common stock . As discussed below, our dividend for the first quarter of 2011 (payable on May 16, 2011) was prorated for the time we have been public. Dividends on our investor retained stock generally will be paid at the same time as dividends on our common stock and will be based on the aggregate number of shares of common stock into which our investor retained stock is convertible on the record date for the applicable dividend.
 
The portion of our dividends payable on the three classes of our investor retained stock may vary among those classes, but the variations will not affect the dividends we pay on our common stock since the total number of shares of common stock into which our outstanding investor retained stock can convert in the aggregate was fixed on the closing of our initial public offering on February 16, 2011. As of March 31, 2011, investor retained stock was convertible into a fixed aggregate of 596,102,672 shares of our common stock, which represent 84.3% of our common stock on a fully-converted basis. Subsequent to our initial public offering, any conversion of our investor retained stock into our common stock reduces on a one for one basis the number of common shares into which our investor retained stock can convert such that the number of shares on a fully converted basis is the same before and after the conversion of our investor retained stock.
 
Our board of directors may amend, revoke or suspend our dividend policy at any time and for any reason, which would require a supermajority board approval while the Sponsor Investors, consisting of investment funds advised by, or affiliated with, Goldman, Sachs & Co., Highstar Capital LP, The Carlyle Group and Riverstone Holdings LLC, maintain prescribed ownership thresholds. During that time, supermajority approval would also be required to declare and pay any dividends that are not in accordance with our dividend policy. There is nothing in our dividend policy or our governing documents that prohibits us from borrowing to pay dividends. The actual amount of dividends to be paid on our capital
 

 
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stock will depend on many factors, including our financial condition and results of operations, liquidity requirements, market opportunities, our capital requirements, legal, regulatory and contractual constraints, tax laws and other factors. Distributions we receive from KMP are our most significant source of our cash available to pay dividends (including the value of additional KMR shares we receive on the approximately 13 million shares we own). We intend periodically to sell the KMR shares we receive as distributions to generate cash.
 
On February 11, 2011, our board of directors declared and paid a dividend to our then existing investors of $245.8 million with respect to the period for which we were not public.  This consisted of $205.0 million for the fourth quarter of 2010 and $104.8 million for the first 46 days of 2011, representing the portion of the first quarter of 2011 that we were not public, less a one time adjustment of $64.0 million in available earnings and profits reserved for the after tax cost of special cash bonuses (and premium pay) in an aggregate amount of approximately $100 million to certain of our non-senior employees. We expect to pay such bonuses pursuant to the shareholders’ agreement in late May of 2011. No holders of our Class B shares or Class C shares will receive such bonuses.
 
On April 20, 2011, our board of directors declared a prorated dividend of $0.14 per share for the first quarter of 2011, payable on May 16, 2011, to shareholders of record as of May 2, 2011. The initial dividend was prorated from February 16, 2011, the day that we closed the offering, to March 31, 2011.  Based on a full quarter, the dividend amounts to $0.29 per share ($1.16 annualized).
 
Cash Available to Pay Dividends
(In millions)

   
Three Months Ended
March 31,
 
   
2011
   
2010
 
KMP distributions to us
           
From ownership of general partner interest(a)
  $ 284.7     $ 251.4  
On KMP units owned by us(b)
    24.5       22.8  
On KMR shares owned by us(c)
    14.8       12.8  
Total KMP distributions to us
    324.0       287.0  
NGPL PipeCo LLC’s distributions to us
    4.4       16.4  
                 
Total distributions received
    328.4       303.4  
General and administrative expenses and sustaining capital expenditures
    (2.1 )     (0.3 )
Interest expense
    (75.2 )     (74.0 )
                 
Cash available to pay dividends before cash taxes
    251.1       229.1  
Cash taxes
    -       0.9  
                 
Cash available to pay dividends
  $ 251.1     $ 230.0  
____________
(a)
Based on (i)  KMP distributions of $1.13 and $1.05 per common unit paid in the first quarter of 2011 and 2010, respectively (versus the $1.14 and $1.07 per common unit declared for the first quarter of 2011 and 2010, respectively), (ii) 316.2  million and 298.2 million aggregate common units, Class B units and i-units outstanding as of January 31, 2011 and January 29, 2010, respectively and, (iii) with respect to the 7.9 million common units issued during 2010 that were deemed by us to be issued in connection with financing a portion of the acquisition of KMP’s interests in the KinderHawk joint venture, we as general partner have waived receipt of its related incentive distributions from the second quarter 2010 through 2011.
  
(b)
Based on 21.7 million KMP units owned by us multiplied by the KMP per unit distribution paid, as outlined in footnote (a) above.
  
(c)
Assumes that we sold approximately 0.2 million KMR shares that we received as distributions in the first quarter in both 2011 and 2010, at the price used to calculate the number of KMR shares received in the quarterly distributions. We did not sell any KMR shares in the first quarter 2011 or 2010. We intend periodically to sell the KMR shares we receive as distributions to generate cash.


 
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Reconciliation of Cash Available to Pay Dividends to Income from Continuing Operations
(In millions)

   
Three Months Ended
March 31,
 
   
2011
   
2010
 
             
Income (loss) from continuing operations(a)
  $ 201.0     $ (179.7 )
Depreciation, depletion and amortization(a)
    256.1       282.3  
Amortization of excess cost of equity investments(a)
    1.5       1.4  
(Earnings) loss from equity investments(a)
    (68.4 )     374.2  
Distributions from equity investments
    64.8       49.8  
Distributions from equity investments in excess of cumulative earnings
    83.6       73.9  
KMP certain items(b)
    87.8       153.4  
KMI purchase accounting(c)
    (3.6 )     (12.9 )
Difference between cash and book taxes
    93.1       (97.1 )
Difference between cash and book interest expense for KMI
    (33.5 )     (35.4 )
Sustaining capital expenditures(d)
    (36.0 )     (32.9 )
KMP declared distribution on its limited partner units owned by the public(e)
    (323.7 )     (284.2 )
Other(f)
    (71.6 )     (62.8 )
                 
Cash available to pay dividends
  $ 251.1     $ 230.0  
____________
(a)
Consists of the corresponding line items in our consolidated statements of income included elsewhere in this report.
  
(b)
Consists of items such as hedge ineffectiveness, legal and environmental reserves, gain/loss on sale, insurance proceeds from casualty losses, and asset disposition expenses. First quarter of 2011 also includes KMP’s portion ($87.1 million) of a $100 million special bonus expense for non-senior employees, which KMP is required to recognize in accordance with generally accepted accounting principles. However, KMP has no obligation, nor does it expect to pay any amounts in respect to such bonuses. The cost of the $100 million special bonus to non-senior employees will not be borne by our Class P shareholders.  We will pay for the $100 million of special bonuses, which includes the amounts allocated to KMP, using $64 million (after-tax) in available earnings and profits reserved for this purpose and not paid in dividends to our Class A shareholders. KMP adds back these certain items in its calculation of distributable cash flow used to determine its distribution.
  
(c)
Consists of non-cash purchase accounting adjustments related to the Going Private Transaction primarily associated with non-cash income recognized from the revaluation of KMP’s crude hedges.
  
(d)
We define sustaining capital expenditures as capital expenditures that do not expand the capacity of an asset.
  
(e)
Declared distribution multiplied by limited partner units outstanding on the applicable record date less units owned by us. Includes distributions on KMR shares. KMP must generate the cash to cover the distributions on the KMR shares, but those distributions are paid in additional shares and KMP retains the cash. We do not have access to that cash.
  
(f)
Consists of timing differences between earnings and cash (for example, a lag between when earnings are recognized and distributions are paid, including distributions to us by KMP), the elimination of any earnings from our formerly owned Power segment, KMI certain items, including KMI’s portion ($12.9 million) of the special bonus described in footnote (b) above, and KMP’s cash flow in excess of its distributions.

 
Critical Accounting Policies and Estimates
 
Accounting standards require information in financial statements about the risks and uncertainties inherent in significant estimates, and the application of generally accepted accounting principles in the United States involves the exercise of varying degrees of judgment. Certain amounts included in or affecting our consolidated financial statements and related disclosures must be estimated, requiring us to make certain assumptions with respect to values or conditions that cannot be known with certainty at the time our financial statements are prepared. These estimates and assumptions affect the amounts we report for our assets and liabilities, our revenues and expenses during the reporting period, and our disclosure of contingent assets and liabilities at the date of our financial statements. We routinely evaluate these estimates, utilizing historical experience, consultation with experts and other methods we consider reasonable in the particular circumstances. Nevertheless, actual results may differ significantly from our estimates, and any effects on our business, financial position or results of operations resulting from revisions to these estimates are recorded in the period in which the facts that give rise to the revisions become known.
 

 
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Further information about us and information regarding our accounting policies and estimates that we consider to be “critical” can be found in our 2010 Form 10-K.  There have not been any significant changes in these policies and estimates during the three months ended March 31, 2011.  Furthermore, with regard to our goodwill impairment testing, there has been no change during the three months ended March 31, 2011 indicating that the implied fair value of each of our reporting units (including its inherent goodwill) is less than the carrying value of its net assets.
 
Impact of the Purchase Method of Accounting on Segment Earnings (Loss)
 
On May 30, 2007, we acquired Kinder Morgan Kansas, Inc. through a wholly owned subsidiary.  See Note 2 of our consolidated financial statements in our 2010 Form 10-K. This transaction is referred to in this report as “the Going Private transaction.” Effective with the closing of the Going Private transaction, all of our assets and liabilities were recorded at their estimated fair market values based on an allocation of the aggregate purchase price paid in the Going Private transaction.
 
The impacts of the purchase method of accounting on segment earnings (loss) before depreciation, depletion and amortization (EBDA) relate primarily to the revaluation of the accumulated other comprehensive income related to derivatives accounted for as hedges in the CO 2 –KMP and Natural Gas Pipelines–KMP segments. Where there is an impact to segment EBDA from the Going Private Transaction, the impact is described in the individual business segment discussions, which follow. The effects on EBDA expense result from changes in the carrying values of certain tangible and intangible assets to their estimated fair values as of May 30, 2007. This revaluation results in changes to depreciation, depletion and amortization expense in periods subsequent to May 30, 2007. The purchase accounting effects on “Unallocable interest and other, net” result principally from the revaluation of certain debt instruments to their estimated fair values as of May 30, 2007, resulting in changes to interest expense in subsequent periods.
 
Results of Operations
 
Consolidated
 
   
Three Months Ended
March 31,
       
   
2011
   
2010
   
Earnings
increase/(decrease)
 
   
(In millions, except percentages)
 
Segment earnings (loss) before depreciation, depletion and amortization expense and amortization of excess cost of equity investments(a)
                       
Products Pipelines – KMP(b)
  $ 180.4     $ 6.4     $ 174.0       2,719 %
Natural Gas Pipelines – KMP(c)
    222.2       220.6       1.6       1 %
CO 2 – KMP(d)
    266.5       266.6       (0.1 )     - %
Terminals – KMP(e)
    174.2       150.5       23.7       16 %
Kinder Morgan Canada – KMP
    47.9       45.0       2.9       6 %
NGPL PipeCo LLC(f)
    7.3       (419.6 )     426.9       102 %
Power(g)
    -       1.2       (1.2 )     n/a  
Segment earnings before depreciation, depletion and amortization expense and amortization of excess cost of equity investments
    898.5       270.7       627.8       232 %
                                 
Depreciation, depletion and amortization expense
    (256.1 )     (282.3 )     26.2       9 %
Amortization of excess cost of equity investments
    (1.5 )     (1.4 )     (0.1 )     (7 )
NGPL PipeCo LLC fixed fee revenue(h)
    9.8       11.8       (2.0 )     (17 ) %
Other revenues
    1.0       -       1.0       n/a  
General and administrative expense(i)
    (180.4 )     (115.7 )     (64.7 )     (56 ) %
Unallocable interest and other, net(j)
    (174.8 )     (155.8 )     (19.0 )     (12 ) %
Income (loss) from continuing operations before income taxes
    296.5       (272.7 )     569.2       209 %
Unallocable income tax (expense) benefit(a)
    (95.5 )     93.0       (188.5 )     (203 ) %
Income (loss) from continuing operations
    201.0       (179.7 )     380.7       212 %
Loss from discontinued operations, net of tax
    -       (0.2 )     0.2       n/a  
Net income (loss)
    201.0       (179.9 )     380.9       212 %
Net (income) loss attributable to noncontrolling interests
    (46.0 )     19.0       (65.0 )     (342 ) %
Net income (loss) attributable to Kinder Morgan, Inc.
  $ 155.0     $ (160.9 )   $ 315.9       196 %
____________
(a)
Includes revenues, earnings from equity investments, allocable interest income and other, net, less operating expenses, allocable income taxes, and other expense (income).  Operating expenses include natural gas purchases and other costs of sales, operations


 
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and maintenance expenses, and taxes, other than income taxes. Segment earnings include KMP’s allocable income tax expense of $0.4 million and income tax benefit of $2.5 million for the three months ended March 31, 2011 and 2010, respectively.
  
(b)
2011 amount includes a $0.2 million increase in income from unrealized foreign currency gains on long-term debt transactions. Also, 2011 amount includes a $0.1 million decrease in earnings related to assets sold which had been revalued as part of the Going Private Transaction and recorded in the application of the purchase method of accounting. 2010 amount includes a $158.0 million increase in expense associated with rate case liability adjustments and a $0.5 million increase in income resulting from unrealized foreign currency gains on long-term debt transactions.
  
(c)
2011 amount includes a $0.4 million decrease in segment earnings related to assets sold, which had been revalued as part of the Going Private transaction and recorded in the application of the purchase method of accounting. 2010 amount includes a $0.9 million unrealized gain on derivative contracts used to hedge forecasted natural gas sales, and a $0.4 million increase in income from certain measurement period adjustments related to the October 1, 2009 natural gas treating business acquisition.
  
(d)
2011 and 2010 amounts include increases in income of $3.7 million and $5.4 million, respectively, from unrealized gains on derivative contracts used to hedge forecasted crude oil sales. Also, 2011 and 2010 amounts include increases in segment earnings resulting from valuation adjustments of $4.5 million and $13.4 million, respectively, primarily related to derivative contracts in place at the time of the Going Private transaction and recorded in the application of the purchase method of accounting.
  
(e)
2011 amount includes (i) a $4.5 million decrease in expense (reflecting tax savings) related to non-cash compensation expense allocated to KMP from KMI (KMP does not have any obligation, nor does it expect to pay any amounts related to this expense); (ii) a $2.2 million increase in income from adjustments associated with the sale of the ownership interest in the boat fleeting business KMP acquired from Megafleet Towing Co., Inc. in April 2009; (iii) a $2.0 million increase in expense from casualty insurance deductibles and the write-off of assets related to casualty losses; and (iv) a $0.6 million increase in expense associated with the settlement of a litigation matter at the Carteret, New Jersey liquids terminal. Also, 2011 amount includes a $0.2 million decrease in segment earnings related to assets sold, which had been revalued as part of the Going Private transaction and recorded in the application of the purchase method of accounting. 2010 amount includes a $0.4 million increase in expense related to storm and flood clean-up and repair activities.
  
(f)
2010 amount includes a non-cash investment impairment charge of $430.0 million; see Note 2 to our consolidated financial statements included elsewhere in this report.
  
(g)
On October 22, 2010, we sold our Power facility located in Michigan and as a result, we no longer report Power as a business segment.
  
(h)
See Notes 9 and 11 to our consolidated financial statements included elsewhere in this report.
  
(i)
Includes unallocated litigation and environmental expenses.  2011 amount includes (i) a $100 million (pre-tax) increase in a special bonus expense for non-senior employees. The cost of this bonus will not be borne by our Class P shareholders. KMI will pay for these bonuses, which includes the amounts allocated to KMP, using $64 million (after-tax) in available earnings and profits reserved for this purpose and not paid in dividends to KMI’s Class A shareholders; (ii) a $0.5 million increase in expense for certain asset and business acquisition costs; (iii) $11.1 million increase of expense associated with our initial public offering; and (iv) a reduction to expense for a $45.8 million Going Private transaction litigation insurance reimbursement.  2010 amount includes (i) a $1.6 million increase in legal expense associated with items disclosed in these footnotes such as legal settlements and pipeline failures; (ii) a $1.4 million increase in expense for certain asset and business acquisition costs; and (iii) a $0.3 million decrease in expense related to capitalized overhead costs associated with the 2008 hurricane season.
  
(j)
2011 and 2010 amounts include increases in imputed interest expense of $0.2 million and $0.4 million, respectively, related to the January 1, 2007 Cochin Pipeline acquisition.

Net income   attributable to Kinder Morgan, Inc.’s stockholders totaled $155.0 million in the first quarter of 2011 as compared to a $160.9 million loss in the first quarter of 2010.  Our total revenues for the comparative periods were $2,008.1 million and $2,157.6 million, respectively.
 
For the comparable first quarter periods, total segment EBDA increased $627.8 million (232%) in 2011; however, this overall increase in earnings included an increase of $579.6 million from the effect of the certain items described in the footnotes to the table above (which combined to increase total segment EBDA by $11.8 million in the first quarter of 2011 and to decrease total segment EBDA by $567.8 million in the first quarter of 2010). The two primary items described in the footnotes to the table above contributing to the $567.8 million decrease in total segment EBDA for 2010 were (i) a $430 million (pre-tax) non-cash impairment charge of our investment in NGPL PipeCo LLC and (ii) a $158 million (pre-tax) expense associated with the Products Pipeline–KMP rate case liability adjustment. The remaining $48.2 million (6%) increase in quarterly segment EBDA resulted from better performance from all five of KMP’s reportable business segments, mainly due to increases attributable to the Terminals - KMP, Products Pipelines - KMP, and CO 2 - KMP business segments.
 

 
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Products Pipelines–KMP
 
   
Three Months Ended
March 31,
       
   
2011
   
2010
   
increase/(decrease)
 
   
(In millions, except operating statistics and percentages)
 
Revenues
  $ 225.6     $ 207.5     $ 18.1       9 %
Operating expenses(a)
    (52.3 )     (208.9 )     156.6       75 %
Other expense(b)
    -       -       -       -  
Earnings from equity investments
    7.1       4.5       2.6       58 %
Interest income and Other, net(c)
    1.3       2.6       (1.3 )     (50 ) %
Income tax (expense) benefit
    (1.3 )     0.7       (2.0 )     (286 ) %
Earnings before depreciation, depletion and amortization expense and amortization of excess cost of equity investments
  $ 180.4     $ 6.4     $ 174.0       2,719 %
                                 
Gasoline (MMBbl)(d)
    95.9       93.8       2.1       2 %
Diesel fuel (MMBbl)
    36.6       32.8       3.8       12 %
Jet fuel (MMBbl)
    25.6       24.8       0.8       3 %
Total refined product volumes (MMBbl)
    158.1       151.4       6.7       4 %
Natural gas liquids (MMBbl)
    6.6       5.9       0.7       12 %
Total delivery volumes (MMBbl)(e)
    164.7       157.3       7.4       5 %
Ethanol (MMBbl)(f)
    7.3       7.2       0.1       1 %
____________
(a)
2010 amount includes a $158.0 million increase in expense associated with rate case liability adjustments.
  
(b)
2011 amount includes a $0.1 million decrease in earnings related to assets sold which had been revalued as part of the Going Private Transaction and recorded in the application of the purchase method of accounting.
  
(c)
2011 and 2010 amounts include increases in income of $0.2 million and $0.5 million, respectively, resulting from unrealized foreign currency gains on long-term debt transactions.
  
(d)
Volumes include ethanol pipeline volumes.
  
(e)
Includes Pacific, Plantation, Calnev, Central Florida, Cochin and Cypress pipeline volumes.
  
(f)
Represents total ethanol volumes, including ethanol pipeline volumes included in gasoline volumes above.

For the comparable first quarter periods, the certain items related to the Products Pipelines - KMP business segment and described in the footnotes to the table above accounted for a $157.6 million increase in earnings before depreciation, depletion and amortization expenses in 2011 versus 2010 (combining to increase EBDA by $0.1 million in the first quarter of 2011 and to decrease EBDA by $157.5 million in the first quarter of 2010). Following is information related to the increases and decreases in the segment’s (i) remaining $16.4 million (10%) increase in earnings before depreciation, depletion and amortization; and (ii) $18.1 million (9%) increase in operating revenues:
 
Three months ended March 31, 2011 versus Three months ended March 31, 2010

   
EBDA
increase/(decrease)
   
Revenues
increase/(decrease)
 
   
(In millions, except percentages)
 
Cochin Pipeline
  $ 7.0       80 %   $ 9.7       94 %
Pacific operations
    4.3       6 %     2.1       2 %
Southeast Terminals
    2.7       17 %     4.0       18 %
Plantation Pipeline
    2.5       24 %     n/a       n/a  
West Coast Terminals
    2.0       11 %     3.0       13 %
Calnev Pipeline
    (1.8 )     (12 ) %     (1.2 )     (7 ) %
All others (including eliminations)
    (0.3 )     (1 ) %     0.5       2 %
Total Products Pipelines - KMP
  $ 16.4       10 %   $ 18.1       9 %

The primary increases and decreases in the Products Pipelines - KMP business segment’s earnings before depreciation, depletion and amortization expenses in the first quarter of 2011 compared to the first quarter of 2010 were attributable to the following:
 
 
▪
a $7.0 million (80%) increase in earnings from the Cochin natural gas liquids pipeline system.  The increase was chiefly due to a $9.7 million (94%) increase in operating revenues, driven by an overall 77% increase in throughput volumes . The increase in delivery volume in the first quarter of 2011 was system-wide—West leg
 

 
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(U.S.) volumes increased due to a higher demand for liquids products related to colder winter weather, and East leg (Canadian) volumes increased due to both an additional shipper and to the exercise of a certain shipper incentive tariff offered in the first quarter of 2011 ;
 
 
▪
a $4.3 million (6%) increase in earnings from the Pacific operations—consisting of a $2.1 million (2%) increase from higher operating revenues and a $2.3 million (9%) increase due to lower combined operating expenses. The increase in revenues was driven by a $3.3 million (12%) increase in fee-based terminal revenues, mainly attributable to a 5% increase in ethanol handling volumes that were due in part to mandated increases in ethanol blending rates in California since the beginning of 2010. The increase in earnings due to lower operating expenses was largely due to incremental product gains of $1.7 million;
 
 
▪
a $2.7 million (17%) increase in earnings from the Southeast terminal operations—due primarily to higher product inventory gains relative to the first quarter of 2010;
 
 
▪
a $2.5 million (24%) increase in earnings from KMP’s 51%-owned Plantation Pipe Line Company—due to higher net income earned by Plantation in the first quarter of 2011. The increase in Plantation’s earnings was largely associated with both an absence of an expense from the write-off of an uncollectible receivable in the first quarter of 2010, and higher transportation revenues associated with an 18% increase in product delivery volumes;
 
 
▪
a $2.0 million (11%) increase in earnings from the West Coast terminal operations—mainly due to higher revenues at the combined Carson/Los Angeles Harbor terminal resulting from the completion of various terminal expansion projects that increased liquids tank capacity since the end of the first quarter of 2010; and
 
 
▪
a $1.8 million (12%) decrease in earnings from the Calnev Pipeline—mainly due to a $1.2 million (7%) drop in revenues largely associated with a 14% decrease in ethanol handling volumes relative to the first quarter of 2010. The decrease in volumes was due both to lower deliveries to the Las Vegas market, and to ethanol blending services offered by a competing terminal.
 
Natural Gas Pipelines–KMP
 
   
Three Months Ended
March 31,
       
   
2011
   
2010
   
increase/(decrease)
 
   
(In millions, except operating statistics and percentages)
 
Revenues(a)
  $ 1,019.4     $ 1,236.7     $ (217.3 )     (18 ) %
Operating expenses(b)
    (843.7 )     (1,051.5 )     207.8       20 %
Other expense(c)
    (0.4 )     -       (0.4 )     n/a  
Earnings from equity investments
    47.1       33.8       13.3       39 %
Interest income and Other, net
    1.1       2.2       (1.1 )     (50 ) %
Income tax expense
    (1.3 )     (0.6 )     (0.7 )     (117 ) %
Earnings before depreciation, depletion and amortization
expense and amortization of excess cost of equity investments
  $ 222.2     $ 220.6     $ 1.6       1 %
                                 
Natural gas transport volumes (Bcf)(d)                                                                          
    694.4       632.3       62.1       10 %
Natural gas sales volumes (Bcf)(e)                                                                          
    191.2       189.0       2.2       1 %
____________
(a)
2010 amount includes a $0.4 million increase in revenues from certain measurement period adjustments related to KMP’s October 1, 2009 natural gas treating business acquisition.
  
(b)
2010 amount includes unrealized gains of $0.9 million on derivative contracts used to hedge forecasted natural gas sales.
  
(c)
2011 amount represents decrease in segment earnings related to assets sold, which had been revalued as part of the Going Private transaction and recorded in the application of the purchase method of accounting.
  
(d)
Includes Kinder Morgan Interstate Gas Transmission LLC, Trailblazer Pipeline Company LLC, TransColorado Gas Transmission Company LLC, Rockies Express Pipeline LLC, Midcontinent Express Pipeline LLC, Kinder Morgan Louisiana Pipeline LLC and Texas intrastate natural gas pipeline group, and for 2011 only, Fayetteville Express Pipeline LLC pipeline volumes.
  
(e)
Represents Texas intrastate natural gas pipeline group volumes.

For the comparable first quarter periods, the certain items related to the Natural Gas Pipelines - KMP business segment and described in the footnotes to the table above accounted for both a $1.7 million decrease in earnings before depreciation, depletion and amortization expenses and a $0.4 million decrease in revenues in 2011 versus 2010.  Following is information related to the increases and decreases in the segment’s remaining (i) $3.3 million (2%) increase
 

 
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in earnings before depreciation, depletion and amortization; and (ii) $216.9 million (18%) decrease in operating revenues:
 
Three months ended March 31, 2011 versus Three months ended March 31, 2010

   
EBDA
increase/(decrease)
   
Revenues
increase/(decrease)
 
   
(In millions, except percentages)
 
KinderHawk Field Services(a)
  $ 9.7       n/a     $ n/a       n/a  
Midcontinent Express Pipeline(a)
    4.8       87 %     n/a       n/a  
Casper and Douglas Natural Gas Processing
    2.8       57 %     1.6       5 %
Texas Intrastate Natural Gas Pipeline Group
    2.6       3 %     (210.7 )     (19 ) %
Kinder Morgan Interstate Gas Transmission
    (10.6 )     (34 ) %     (7.1 )     (18 ) %
Rockies Express Pipeline(a)
    (2.3 )     (11 ) %     n/a       n/a  
Trailblazer Pipeline
    (2.0 )     (16 ) %     (0.1 )     (1 ) %
All others (including eliminations)
    (1.7 )     (4 ) %     (0.6 )     (1 ) %
Total Natural Gas Pipelines - KMP
  $ 3.3       2 %   $ (216.9 )     (18 ) %
____________
(a)
 
Equity investments.  KMP records earnings under the equity method of accounting, but it receives distributions in amounts essentially equal to equity earnings plus depreciation and amortization expenses less sustaining capital expenditures.

The overall increase in the Natural Gas Pipelines - KMP segment’s earnings before depreciation, depletion and amortization expenses in the first quarter of 2011 compared to the first quarter of 2010 was due primarily to the following:
 
 
▪
incremental equity earnings from KMP’s 50%-owned KinderHawk Field Services LLC, which KMP acquired on May 21, 2010;
 
 
▪
incremental equity earnings from KMP’s 50%-owned Midcontinent Express natural gas pipeline system, due primarily to the June 2010 completion of two natural gas compression projects that increased the system’s Zone 1 transportation capacity from 1.5 billion to 1.8 billion cubic feet per day, and Zone 2 capacity from 1.0 billion to 1.2 billion cubic feet per day;
 
 
▪
an increase of $2.8 million (57%) from the Casper Douglas gas processing operations, primarily attributable to higher natural gas processing spreads;
 
 
▪
an increase of $2.6 million (3%) from the Texas intrastate natural gas pipeline group, due largely to higher sales and storage margins;
 
 
▪
a decrease of $10.6 million (34%) from the Kinder Morgan Interstate Gas Transmission pipeline system, driven by a $4.2 million decrease from lower pipeline net fuel recoveries, and a $4.0 million decrease from lower natural gas transportation and storage services.  Both decreases in earnings were due in part to a 9% drop in system-wide transportation volumes in the first quarter of 2011, due mainly to a negative impact on long-haul deliveries resulting from unfavorable basis differentials;
 
 
▪
a decrease of $2.3 million (11%) from KMP’s 50%-owned Rockies Express pipeline system, reflecting lower net income earned by Rockies Express Pipeline LLC.  The decrease in Rockies Express’s earnings was largely due to (i) higher interest expense associated with the securing of permanent financing for its pipeline construction costs (Rockies Express Pipeline LLC issued $1.7 billion aggregate principal amount of fixed rate senior notes in a private offering in March 2010); and (ii) higher expenses associated with the write-off of certain transportation fuel recovery receivables pursuant to a contractual agreement; and
 
 
▪
a decrease of $2.0 million (16%) from the Trailblazer pipeline system, mainly attributable to unfavorable cashouts on operating balancing agreements, and partly attributable to both lower base rates as a result of rate case settlements made since the end of the first quarter of 2010, and lower backhaul transportation services relative to the first quarter of 2010.
 
The overall changes in both segment revenues and segment operating expenses (which include natural gas costs of sales) in the comparable three month periods of 2011 and 2010 primarily relate to the natural gas purchase and sale activities of the Texas intrastate natural gas pipeline group, with the variances from period-to-period in both revenues and operating expenses mainly due to corresponding changes in the intrastate group’s average prices and volumes for natural gas purchased and sold.  KMP’s intrastate group both purchases and sells significant volumes of natural gas, which is
 

 
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often stored and/or transported on its pipelines, and because the group generally sells natural gas in the same price environment in which it is purchased, the increases and decreases in its gas sales revenues are largely offset by corresponding increases and decreases in its gas purchase costs.  In the comparable first quarter periods of 2011 and 2010, the Texas intrastate natural gas pipeline group accounted for 88% and 90%, respectively, of the segment’s revenues, and 94% and 96%, respectively, of the segment’s operating expenses.
 
CO 2 –KMP
 
   
Three Months Ended
March 31,
       
   
2011
   
2010
   
increase/(decrease)
 
   
(In millions, except operating statistics and percentages)
 
Revenues(a)
  $ 345.3     $ 335.2     $ 10.1       3 %
Operating expenses
    (83.6 )     (79.1 )     (4.5 )     (6 ) %
Earnings from equity investments
    5.8       6.5       (0.7 )     (11 ) %
Other, net
    0.1       -       0.1       n/a  
Income tax (expense) benefit
    (1.1 )     4.0       (5.1 )     (128 ) %
Earnings before depreciation, depletion and amortization
expense and amortization of excess cost of equity investments
  $ 266.5     $ 266.6     $ (0.1 )     - %
                                 
Southwest Colorado carbon dioxide production (gross)(Bcf/d)(b)
    1.3       1.3       -       - %
Southwest Colorado carbon dioxide production (net)(Bcf/d)(b)
    0.5       0.5       -       - %
SACROC oil production (gross)(MBbl/d)(c)
    28.9       30.0       (1.1 )     (4 ) %
SACROC oil production (net)(MBbl/d)(d)
    24.1       25.0       (0.9 )     (4 ) %
Yates oil production (gross)(MBbl/d)(c)
    21.9       25.6       (3.7 )     (14 ) %
Yates oil production (net)(MBbl/d)(d)
    9.7       11.4       (1.7 )     (15 ) %
Katz oil production (gross)(MBbl/d)(c)
    0.2       0.3       (0.1 )     (33 ) %
Katz oil production (net)(MBbl/d)(d)
    0.2       0.3       (0.1 )     (33 ) %
Natural gas liquids sales volumes (net)(MBbl/d)(d)
    8.3       9.7       (1.4 )     (14 ) %
Realized weighted average oil price per Bbl(e)(f)
  $ 68.78     $ 60.50     $ 8.28       14 %
Realized weighted average natural gas liquids price per Bbl(f)(g)
  $ 60.93     $ 55.06     $ 5.87       11 %
____________
(a)
2011 and 2010 amounts include unrealized gains of $3.7 million and $5.4 million, respectively, on derivative contracts used to hedge forecasted crude oil sales. Also, 2011 and 2010 amounts include increases in segment earnings resulting from valuation adjustments of $4.5 million and $13.4 million, respectively, primarily related to derivative contracts in place at the time of the Going Private transaction and recorded in the application of the purchase method of accounting.
  
(b)
Includes McElmo Dome and Doe Canyon sales volumes.
  
(c)
Represents 100% of the production from the field.  KMP owns an approximately 97% working interest in the SACROC unit and an approximately 50% working interest in the Yates unit.
  
(d)
Net to KMP, after royalties and outside working interests.
  
(e)
Includes all of KMP’s crude oil production properties.
  
(f)
Hedge gains/losses for crude oil and natural gas liquids are included with crude oil.
  
(g)
Includes production attributable to leasehold ownership and production attributable to KMP’s ownership in processing plants and third party processing agreements.

The CO 2 –KMP segment’s primary businesses involve the production, marketing and transportation of both carbon dioxide (commonly called CO 2 ) and crude oil, and the production and marketing of natural gas and natural gas liquids. We refer to the segment’s two primary businesses as its Oil and Gas Producing Activities and Sales and Transportation Activities.
 
For the comparable first quarter periods, the certain items related to unrealized gains and valuation adjustments on the derivative contracts described in footnote (a) to the table above increased revenues and earnings before depreciation, depletion and amortization by $8.2 million in the first quarter of 2011 and by $18.8 million in the first quarter of 2010.  The quarter-to-quarter decrease in the certain items accounted for a $10.6 million decrease for the first quarter of 2011 in both segment revenues and segment earnings before depreciation, depletion and amortization expenses when compared to the first quarter of 2010. For each of the segment’s two primary businesses, following is information related to the increases and decreases, in the comparable three month periods of 2011 and 2010, in the segment’s remaining (i) $10.5
 

 
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million (4%) increase in earnings before depreciation, depletion and amortization; and (ii) $20.7 million (7%) increase in operating revenues:
 
Three months ended March 31, 2011 versus Three months ended March 31, 2010
 
   
EBDA
increase/(decrease)
   
Revenues
increase/(decrease)
 
   
(In millions, except percentages)
 
Oil and Gas Producing Activities
  $ 5.3       3 %   $ 11.9       5 %
Sales and Transportation Activities
    5.2       8 %     13.9       19 %
Intrasegment eliminations
    -       -       (5.1 )     (41 ) %
Total CO 2 - KMP
  $ 10.5       4 %   $ 20.7       7 %

The $5.3 million (3%) increase in earnings in the first quarter of 2011 from the segment’s oil and gas producing activities, which include the operations associated with KMP’s ownership interests in oil-producing fields and natural gas processing plants, was due to the following:
 
 
▪
an increase of $11.9 million (5%) due to higher operating revenues, driven by an $11.2 million (6%) increase in crude oil sales revenues.  The overall increase in sales revenues was due to higher average realizations for U.S. crude oil (from an average realization of $60.50 per barrel in the first quarter of 2010 compared with $68.78 per barrel in the first quarter of 2011), and was partially offset by a decrease in crude oil sales volumes of 7% (due to a year-over-year decline in production); and
 
 
▪
a decrease of $6.6 million (9%) due to higher combined operating expenses, driven by a $7.0 million (14%) increase in operating and maintenance expenses resulting from higher carbon dioxide supply expenses, primarily due to initiating carbon dioxide injections into the Katz field, and from higher prices charged by the industry’s material and service providers (for items such as outside services, maintenance, and well workover services), which impacted rig costs, other materials and services, and capital and exploratory costs.
 
The overall $5.2 million (8%) quarter-to-quarter increase in earnings from the segment’s sales and transportation activities in 2011 compared to 2010 was mainly due to the following:
 
 
▪
an increase of $13.9 million (19%) due to higher combined operating revenues, driven by a $13.0 million (26%) increase in carbon dioxide sales revenues.  Average carbon dioxide sales price increased 25% in the first quarter of 2011 (from $1.00 per thousand cubic feet in first quarter 2010 to $1.25 per thousand cubic feet in first quarter 2011), due largely to the fact that a portion of the carbon dioxide sales contracts are indexed to oil prices which have increased relative to the first quarter of last year;
 
 
▪
a decrease of $5.1 million (127%) due to higher income tax expenses, due primarily to decreases in expense in the first quarter of 2010 due to favorable Texas margin tax liability adjustments related to the expensing of previously capitalized carbon dioxide costs; and
 
 
▪
a decrease of $2.9 million (21%) due to higher operating expenses, associated mainly with both higher carbon dioxide supply expenses, and higher labor expenses that resulted from a decrease in the amount of labor capitalized to construction projects when compared to the first quarter of last year.
 

 
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Terminals–KMP
 
   
Three Months Ended
March 31,
       
   
2011
   
2010
   
increase/(decrease)
 
   
(In millions, except operating statistics and percentages)
 
Revenues
  $ 331.7     $ 304.1     $ 27.6       9 %
Operating expenses(a)
    (167.2 )     (155.9 )     (11.3 )     (7 ) %
Other income(b)
    (0.1 )     1.3       (1.4 )     (108 ) %
Earnings from equity investments
    2.1       0.2       1.9       950 %
Other, net
    0.7       0.9       (0.2 )     (22 ) %
Income tax benefit (expense)(c)
    7.0       (0.1 )     7.1       n/m  
Earnings before depreciation, depletion and amortization
expense and amortization of excess cost of equity investments
  $ 174.2     $ 150.5     $ 23.7       16 %
                                 
Bulk transload tonnage (MMtons)(d)
    23.7       21.4       2.3       11 %
Ethanol (MMBbl)
    15.7       15.5       0.2       1 %
Liquids leaseable capacity (MMBbl)
    58.8       57.9       0.9       2 %
Liquids utilization %
    94.4 %     96.4 %     (2.0 ) %     (2 ) %
__________
n/m – not meaningful

(a)
2011 amount includes (i) a combined $1.5 million increase in expense at the Carteret, New Jersey liquids terminal, associated with fire damage and repair activities, and the settlement of a certain litigation matter; (ii) a $0.7 million increase in expense associated with the sale of the ownership interest in the boat fleeting business KMP acquired from Megafleet Towing Co., Inc. in April 2009; and (iii) a $0.1 million increase in expense associated with the write-off of assets related to casualty losses. 2010 amount includes a $0.4 million increase in expense related to storm and flood clean-up and repair activities.
  
(b)
2011 amount includes both a $1.0 million gain from adjustments associated with the sale of the ownership interest in the boat fleeting business KMP acquired from Megafleet Towing Co., Inc. in April 2009, and a $1.0 million loss from the write-off of assets related to casualty losses. Also, 2011 amount includes a $0.2 million decrease in segment earnings related to assets sold, which had been revalued as part of the Going Private transaction and recorded in the application of the purchase method of accounting.
  
(c)
2011 amount includes a $4.5 million decrease in expense (reflecting tax savings) related to non-cash compensation expense allocated to KMP from us (KMP does not have any obligation, nor does it expect to pay any amounts related to this expense), and a $1.9 million decrease in expense (reflecting tax savings) related to the net decrease in income from the sale of the ownership interest in the boat fleeting business described in both footnotes (a) and (b) and in Note 3 to our 2010 Form 10-K.
  
(d)
Volumes for acquired terminals are included for both periods.

The Terminals–KMP business segment includes the operations of the petroleum, chemical and other liquids terminal facilities (other than those included in the Products Pipelines–KMP segment), and all of the coal, petroleum coke, fertilizer, steel, ores and other dry-bulk material services facilities.   KMP groups the bulk and liquids terminal operations into regions based on geographic location and/or primary operating function.  This structure allows the management to organize and evaluate segment performance and to help make operating decisions and allocate resources.
 
For the comparable first quarter periods, the certain items related to the Terminals–KMP business segment and described in the footnotes to the table above accounted for a $4.3 million increase in earnings before depreciation, depletion and amortization expenses in 2011 versus 2010 (combining to increase EBDA by $3.9 million in the first quarter of 2011 and to decrease EBDA by $0.4 million in the first quarter of 2010).
 
In addition, in both 2011 and 2010, KMP acquired certain terminal assets and businesses in order to gain access to new markets or to complement and/or enlarge the existing terminal operations, and combined, these acquired operations contributed incremental earnings before depreciation, depletion and amortization of $4.0 million, revenues of $4.5 million, operating expenses of $2.2 million, and equity earnings of $1.7 million in the first quarter of 2011.  All of the incremental amounts listed above represent the earnings, revenues and expenses from acquired terminals’ operations during the additional months of ownership in the first quarter of 2011, and do not include increases or decreases during the same months KMP owned the assets in 2010.  For more information about the terminal assets and operations KMP acquired in the first quarter of 2011, see Note 2 “Investments, Acquisitions, Joint Ventures and Divestitures—Acquisitions” to our consolidated financial statements included elsewhere in this report.  For more information about the 2010 Terminal acquisitions, see Note 3 “Acquisitions and Divestitures—Acquisitions from Unrelated Entities” to our consolidated financial statements included in our 2010 Form 10-K.
 

 
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Following is information, for the comparable three month periods of 2011 and 2010, related to the segment’s remaining (i) $15.4 million (10%) increase in earnings before depreciation, depletion and amortization; and (ii) $23.1 million (8%) increase in operating revenues.  These changes represent increases and decreases in terminal results at various locations for all terminal operations owned during identical periods in both 2011 and 2010.
 
Three months ended March 31, 2011 versus Three months ended March 31, 2010
 
   
EBDA
increase/(decrease)
   
Revenues
increase/(decrease)
 
   
(In millions, except percentages)
 
Gulf Liquids
  $ 9.0       25 %   $ 10.0       21 %
Southeast
    2.9       26 %     2.0       8 %
Ethanol
    2.3       34 %     1.5       14 %
Mid-Atlantic
    2.1       19 %     4.8       19 %
All others (including intrasegment eliminations and unallocated income tax expenses)
    (0.9 )     (1 ) %     4.8       2 %
Total Terminals - KMP
  $ 15.4       10 %   $ 23.1       8 %

The earnings increase from the Gulf Liquids terminals was driven by higher liquids revenues, mainly due to new and renewed customer agreements at higher rates.  Including all terminals, KMP increased the liquids terminals’ leasable capacity by 0.9 million barrels (1.6%) since the end of the first quarter last year, via both terminal acquisitions and completed terminal expansion projects.
 
The increase in earnings before depreciation, depletion and amortization from the Southeast region terminals was driven by a $2.0 million increase in earnings from the Shipyard River Terminal, located in Charleston, South Carolina.  Shipyard’s earnings increase was driven by a $1.7 million increase in operating revenues, due mostly to higher cement revenue, increased salt handling, and higher storage fees.
 
The increase in earnings from the Ethanol terminals includes (i) incremental earnings of $0.7 million from the unit train terminal facility located in Richmond, California, which began operations in March 2010; and (ii) incremental earnings of $1.4 million from the ethanol handling train terminals KMP acquired from US Development Group LLC in January 2010 (the operating results for each of these facilities are not included in the incremental amounts from acquired operations described above).
 
The overall increase in earnings from the terminals included in the Mid-Atlantic region was driven by a $3.3 million increase from the Pier IX terminal, located in Newport News, Virginia.  Its earnings increase was driven by higher shipments of coal consistent with the ongoing domestic economic recovery and with growth in the export market due to greater foreign demand for U.S. metallurgical coal.  Coal transload volumes at Pier IX increased 75% in the first quarter of 2011, and for all terminals combined, coal volumes increased 23%, when compared to the first quarter of 2010.
 
Kinder Morgan Canada–KMP
 
   
Three Months Ended
March 31,
       
   
2011
   
2010
   
increase/(decrease)
 
   
(In millions, except operating statistics and percentages)
 
Revenues
  $ 75.6     $ 59.8     $ 15.8       26 %
Operating expenses
    (26.4 )     (19.5 )     (6.9 )     (35 ) %
Earnings from equity investments
    (1.0 )     0.4       (1.4 )     (350 ) %
Interest income and Other, net
    3.4       5.8       (2.4 )     (41 ) %
Income tax expense
    (3.7 )     (1.5 )     (2.2 )     (147 ) %
Earnings before depreciation, depletion and amortization expense and amortization of excess cost of equity investments
  $ 47.9     $ 45.0     $ 2.9       6 %
                                 
Transport volumes (MMBbl)(a)
    26.7       23.8       2.9       12 %
____________
(a)
Represents Trans Mountain pipeline system volumes.

The Kinder Morgan Canada - KMP business segment includes the operations of the Trans Mountain, and Jet Fuel pipeline systems, and the one-third ownership interest in the Express crude oil pipeline system.  For each of the segment’s three primary businesses, following is information related to the increases and decreases, in the comparable three month
 

 
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periods of 2011 and 2010, in the segment’s (i) $2.9 million (6%) increase in earnings before depreciation, depletion and amortization and (ii) $15.8 million (26%) increase in operating revenues:
 
Three months ended March 31, 2011 versus Three months ended March 31, 2010
 
   
EBDA
increase/(decrease)
   
Revenues
increase/(decrease)
 
   
(In millions, except percentages)
 
Trans Mountain Pipeline
  $ 4.5       11 %   $ 15.7       27 %
Express Pipeline
    (1.3 )     (32 ) %     n/a       n/a  
Jet Fuel Pipeline
    (0.3 )     (23 ) %     0.1       5 %
Total Kinder Morgan Canada - KMP
  $ 2.9       6 %   $ 15.8       26 %

The overall increase in Trans Mountain’s earnings before depreciation, depletion and amortization in the first quarter of 2011 compared to the first quarter of 2010 was driven by higher revenues, primarily due to favorable impacts from a negotiated pipeline toll settlement agreement, which became effective on January 1, 2011.  Trans Mountain also reported an overall 12% increase in pipeline throughput volumes, benefitting mostly from higher volumes on its Puget Sound pipeline system, which delivers Canadian crude oil from Trans Mountain’s mainline pipeline at Abbotsford, British Columbia to refineries located in Washington State.
 

The decrease in earnings from the investment in the Express pipeline system related primarily to lower equity earnings as a result of lower net income earned by Express in the first quarter of 2011.   Foreign currency effects—primarily reflecting noncash losses on balance sheet remeasurement—decreased Express’ net income in the first quarter of 2011, compared with the first quarter of 2010.
 
NGPL PipeCo LLC
 
   
Three Months Ended
March 31,
     
   
2011
   
2010
   
increase/(decrease)
   
(In millions, except percentages)
Earnings (loss) from equity investments(a)
  $ 7.3     $ (419.6 )   $ 426.9       102 %
____________
(a)
2010 amount includes a non-cash investment impairment charge of $430.0 million; see Note 2 to our consolidated financial statements included elsewhere in this report.

The first quarter 2010 includes a non-cash impairment charge of $430.0 million. Following is information related to the decrease in NGPL PipeCo LLC’s net income, and other measurements, at the 100% ownership level, which when multiplied by our 20% ownership interest, equals the remaining decrease of $3.1 million (30%) in our equity earnings for the first quarter of 2011, when compared to the first quarter of 2010.
 
For the first quarter of 2011, NGPL PipeCo LLC’s net income before impairment charges decreased by $15.6 million (30%) from $52.3 million for 2010 to $36.7 million for 2011. Results for 2011, relative to 2010, were negatively impacted by a $20.3 million reduction in gross margin (which is total revenues less gas purchases and other costs of sales), primarily attributable to reduced net fuel collections resulting, in part, from the settlement of Natural Gas Pipeline Company of America LLC’s Section 5 rate proceeding that became effective in the third quarter of 2010 (see Note 2 to our consolidated financial statements included elsewhere in this report). The reduced gross margin contributed to a $9.2 million reduction to NGPL's income tax expense between the comparable periods.

 
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Other
 
   
Three Months Ended
March 31,
       
   
2011
   
2010
   
increase/(decrease)
 
   
(In millions, except percentages)
 
KMI general and administrative expense(a)(b)
  $ (8.8 )   $ 14.6     $ (23.4 )     (160 ) %
KMP general and administrative expense(c)
    189.2       101.1       88.1       87 %
Consolidated general and administrative expense
  $ 180.4     $ 115.7     $ 64.7       56 %
                                 
KMI interest expense, net of interest income
  $ 42.0     $ 39.1     $ 2.9       7 %
KMP interest expense, net of interest income(d)
    126.7       111.5       15.2       14 %
Other, net(e)
    6.1       5.2       0.9       17 %
Unallocable interest expense and other, net
  $ 174.8     $ 155.8     $ 19.0       12 %
                                 
KMR noncontrolling interests
  $ 9.2     $ (3.8 )   $ 13.0       342 %
KMP noncontrolling interests
    37.0       (15.1 )     52.1       345 %
Other noncontrolling interests
    (0.2 )     (0.1 )     (0.1 )     (100 ) %
Net income (loss) attributable to noncontrolling interests
  $ 46.0     $ (19.0 )   $ 65.0       342 %
____________

(a)
2011 amount includes (i) $45.8 million reduction to expense for a Going Private transaction litigation insurance reimbursement; (ii) $11.1 million of expense associated with our initial public offering; and (iii) KMI’s portion ($12.9 million) of a $100 million special bonus to non-senior employees. The cost of this bonus will not be borne by KMI’s Class P shareholders. KMI will pay for the $100 million of special bonuses, which includes the amounts allocated to KMP, using $64 million (after-tax) in available earnings and profits reserved for this purpose and not paid in dividends to KMI’s Class A shareholders. See also footnote (c) below.
 
(b)
For the first quarter of 2011 and 2010, the NGPL PipeCo LLC general and administrative reimbursement of $9.8 million and fixed fee revenues of $11.8 million, respectively, have been recorded to the “Product sales and other” caption in our accompanying consolidated statements of income with the offsetting expenses primarily recorded to the “General and administrative” expense caption in our accompanying consolidated statements of income. Also, see Notes 9 and 11 to our consolidated financial statements included elsewhere in this report.
  
(c)
Includes such items as salaries and employee-related expenses, payroll taxes, insurance, office supplies and rentals, unallocated litigation and environmental expenses, and shared corporate services.  First quarter 2011 amount includes (i) an increase in expense of $87.1 million allocated from us to KMP which KMP is required to recognize in accordance with generally accepted accounting principles (however, KMP has no obligation, nor does KMP expect to pay any amounts related to this expense) related to a special bonus expense discussed in footnote (a) above and (ii) a $0.5 million increase in expense for certain KMP business and acquisition costs. First quarter 2010 amount includes (i) a $1.6 million increase in KMP legal expense associated with items disclosed in these footnotes such as legal settlements and pipeline failures; (ii) a $1.4 million increase in expense for certain KMP asset and business acquisition costs; and (iii) a $0.3 million decrease in expense related to KMP capitalized overhead costs associated with the 2008 hurricane season.
  
(d)
First quarter 2011 and 2010 amounts include increases in imputed interest expense of $0.2 million and $0.4 million, respectively, related to KMP’s January 1, 2007 Cochin Pipeline acquisition.
  
(e)
“Other, net” primarily represents an offset to noncontrolling interests and interest income shown above and included in segment earnings.

Items not attributable to any segment include general and administrative expenses, unallocable interest income and income tax expense, interest expense, and net income attributable to noncontrolling interests. Our general and administrative expenses include such items as salaries and employee-related expenses, payroll taxes, insurance, office supplies and rentals, unallocated litigation and environmental expenses, and shared corporate services—including accounting, information technology, human resources and legal services.
 
For the comparable first quarter periods, the certain items described in (a) to the table above decreased KMI’s general and administrative expenses by $21.8 million. The remaining $1.6 million decrease (11%) is primarily due to a decrease in corporate legal expenses.
 
For the comparable first quarter periods, the certain items described in footnote (c) to the table above increased KMP’s general and administrative expenses by $84.9 million when compared with 2010. The remaining $3.2 million (3%) quarter-to-quarter increase in expense includes increases and decreases in various KMP operational expenses, including (i) higher KMP employee benefit and payroll tax expenses, due mainly to cost inflation increases on work-based health and insurance benefits, higher wage rates and a larger year-over-year labor force; (ii) higher KMP labor expenses, primarily due to a larger year-over-year labor force; and (iii) lower overall KMP corporate insurance expenses, due
 

 
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primarily to higher premium taxes and higher captive insurance adjustments recorded in the first quarter of 2010.
 
In the table above, we report our unallocable interest expense as “net,” meaning that we have subtracted unallocated interest income and capitalized interest from our total interest expense to arrive at one interest amount, and after taking into effect the certain items described in footnote (d) to the table above, the combined unallocable interest expense, net of interest income, increased $18.3 million (12%) in the first quarter of 2011 when compared to the first quarter of 2010. The increase in interest expense was primarily due to higher average KMP debt balances in 2011, and partly due to a small increase in KMP’s weighted average interest rate, when compared to the first quarter last year (from 4.32% during the first quarter of 2010 to 4.44% during the first quarter of 2011).  KMP’s average borrowings for the first quarter of 2011 increased 8% from the comparable prior year period, largely due to the capital expenditures, business acquisitions, and joint venture contributions KMP has made since the end of the first quarter of 2010. The increase in KMI interest expense was primarily due to a 9% increase in average borrowings between the comparable periods, primarily due to the $200 million Going Private litigation settlement in the fourth quarter of 2010.
 
As of March 31, 2011, approximately 34% of Kinder Morgan Kansas, Inc.’s and 49% of KMP’s debt balances of $3,245.7 million and $11,748.8 million, respectively, (excluding the value of interest rate swap agreements) were subject to variable interest rates—either as short-term or long-term variable rate debt obligations or as long-term fixed-rate debt converted to variable rates through the use of interest rate swaps.  For more information on our interest rate swaps, see Note 6 “Risk Management—Interest Rate Risk Management” to our consolidated financial statements included elsewhere in this report.
 
Net income attributable to noncontrolling interests, which represents the allocation of our consolidated net income attributable to all outstanding ownership interests in our consolidated subsidiaries (primarily KMP) which are not held by us, increased $65 million (342%) for the first quarter of 2011 as compared to the first quarter of 2010. The increase is primarily due to a 2010 reduction in net income from our consolidated subsidiaries primarily relating to KMP’s $158 million (pre-tax) expense associated with rate case liability adjustments.
 
Income Taxes
 
Our total tax expense from continuing operations for the three months ended March 31, 2011 was approximately $95.9 million, as compared to a tax benefit of $95.5 million for the same period in 2010.  The $191.4 million increase in tax expense is due primarily to (i) the tax impact of significantly higher pretax earnings in 2011 (primarily due to a $430 million (pre-tax) impairment of our investment in NGPL PipeCo LLC recorded in the first quarter of 2010) and (ii) adjustments recorded for the Company’s uncertain tax positions.  These increases were partially offset by a greater net effect in Q1 of 2011 of consolidating KMP’s income tax provision.  Our effective tax rate for the three months ended March 31, 2011 was 32.3% from continuing operations as compared to 34.7% for the same period in 2010.
 
Financial Condition
 
General
 
As of March 31, 2011, we believe our balance sheet and liquidity positions remained strong.  Our combined cash and cash equivalents on hand at March 31, 2011 was $189.5 million. We believe that we and our subsidiaries and investments, including KMP, have liquidity and access to financial resources sufficient to meet future requirements for working capital, debt repayment and capital expenditures associated with existing and future expansion projects, along with payment of our dividends and KMP’s distributions.
 
The primary cash requirements for us and our subsidiaries, in addition to normal operating expenses, are for debt service, sustaining capital expenditures (defined as capital expenditures which do not increase the capacity of an asset), expansion capital expenditures, KMP’s quarterly distributions to its public common unitholders and our quarterly dividends to our shareholders. Our cash requirements continue to be met through cash from our operations, KMP’s borrowings under its senior unsecured revolving bank credit facility, KMP’s issuance of long-term notes or additional common units, or the proceeds from purchases of additional KMP’s i-units by KMR with the proceeds from issuances of additional KMR shares, borrowings under Kinder Morgan Kansas, Inc.’s secured revolving bank credit facility and Kinder Morgan Kansas, Inc.’s issuance of long-term senior notes.
 
Credit Ratings and Capital Market Liquidity
 
As part of KMP's financial strategy, it tries to maintain an investment-grade credit rating, which involves, among other things, the issuance of additional KMP limited partner units in connection with its acquisitions and expansion
 

 
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activities in order to maintain acceptable financial ratios. The major debt rating agencies routinely evaluate KMP’s outstanding debt, and its cost of borrowing can increase or decrease depending on these debt ratings.   Currently, KMP’s long-term corporate debt credit rating is BBB (stable), Baa2 (stable) and BBB (stable), at Standard & Poor’s Ratings Services, Moody’s Investors Service, Inc. and Fitch Inc., respectively.
 
On February 22, 2011, Moody’s revised its outlook on KMP’s long-term credit rating to stable from negative, affirmed its long-term credit rating at Baa2, and upgraded its short-term credit rating to Prime-2 from Prime-3.  The rating agency’s revisions reflected its expectations that KMP’s outstanding debt balance and overall capital structure should improve over the next year due largely to higher expected cash flows associated with both completed construction on the Rockies Express, Midcontinent Express, Fayetteville Express and Kinder Morgan Louisiana natural gas pipeline systems, and the businesses and investments KMP acquired during 2010.  For additional information about KMP’s 2010 capital expenditures, acquisition expenditures, and investment contributions, see “Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources” in our 2010 Form 10-K.
 
As a result of this upward revision to KMP’s short-term credit rating, it currently has broader access to the commercial paper market that was not available prior to this rating change, and therefore, KMP expects that its short-term liquidity needs will be met primarily through borrowings under its commercial paper program.  Nevertheless, KMP’s ability to satisfy its financing requirements or fund planned capital expenditures will depend upon its future operating performance, which will be affected by prevailing economic conditions in the energy and terminals industries and other financial and business factors, some of which are beyond its control.
 
Additionally, some of KMP’s customers are experiencing, or may experience in the future, severe financial problems that have had or may have a significant impact on their creditworthiness.  These financial problems may arise from current global economic conditions, changes in commodity prices or otherwise.  KMP has been and is working to implement, to the extent allowable under applicable contracts, tariffs and regulations, prepayments and other security requirements, such as letters of credit, to enhance its credit position relating to amounts owed from these customers.  KMP cannot provide assurance that one or more of its current or future financially distressed customers will not default on their obligations to it or that such a default or defaults will not have a material adverse effect on its business, financial position, future results of operations, or future cash flows; however, KMP believes it has provided adequate allowance for such customers.
 
Short-term Liquidity
 
Our principal sources of short-term liquidity are Kinder Morgan Kansas, Inc.’s revolving bank credit facility, KMP’s revolving bank credit facility and cash provided by operations. The facilities can be used for the respective entity’s general corporate or partnership purposes, and KMP’s facility can be used as a backup for its $2.0 billion short-term commercial paper program. KMP’s facility can be amended to allow for borrowings up to $2.3 billion. We provide for additional liquidity by maintaining a sizable amount of excess borrowing capacity related to our bank credit facilities (discussed following). Additionally, we have consistently generated strong cash flow from operations.  In the first quarters of 2011 and 2010, we generated $478.5 million and $438.7 million, respectively, of cash from operating activities (the period-to-period increase is discussed below in “—Operating Activities”).
 
The following represents the revolving credit facilities that were available to Kinder Morgan Kansas, Inc. and its subsidiary, KMP, short-term debt outstanding under the credit facilities, including commercial paper borrowings, and available borrowing capacity under the facilities after deducting (i) outstanding letters of credit and (ii) outstanding borrowings under Kinder Morgan Kansas, Inc.’s credit facility and KMP’s commercial paper program.
 
   
At March 31, 2011
 
   
Short-term
debt
outstanding
   
Available
borrowing
capacity
 
   
(In millions)
 
Credit Facilities
           
Kinder Morgan Kansas, Inc.
           
$1.0 billion, six-year secured revolver, due May 2013
  $ 365.0     $ 594.4  
  
               
KMP
               
$2.0 billion, three-year unsecured revolver, due June 2013
  $ 343.0     $ 1,420.2  


 
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Our combined balance of short-term debt as of March 31, 2011 was $1,701.2 million, primarily consisting of (i) $365.0 million in outstanding borrowings under Kinder Morgan Kansas, Inc.’s senior secured credit facility; (ii) $500.0 million in principal amount of KMP’s 9.00% senior notes that mature February 1, 2019 but that KMP may be required to repurchase on February 1, 2012, pursuant to certain repurchase provisions contained in the bond indenture; (iii) $450.0 million in principal amount of KMP’s 7.125% senior notes that mature March 15, 2012 and (iv) $343.0 million of commercial paper under KMP’s bank credit facility.   As of December 31, 2010, our combined outstanding short-term debt was $2,013.3 million. We, and KMP, intend to refinance our current short-term debt through a combination of long-term debt, equity and bank credit facility borrowings, and for KMP, additional commercial paper borrowings.  Additionally, KMP could replace maturing commercial paper and current maturities of long-term debt with additional bank credit facility borrowings.
 
We had working capital deficits (current assets minus current liabilities) of $2,108.2 million as of March 31, 2011 and $1,857.2 million as of December 31, 2010. The unfavorable change from year-end 2010 was primarily due to (i) an increase in accrued other current liabilities in the first quarter of 2011, driven by a $100 million (pre-tax) special bonus expense and (ii) a $98.4 million decrease in the net asset value of KMP’s derivative contracts used to hedge energy commodity cash flows. The cost of the $100 million special bonus to non-senior employees will not be borne by our Class P shareholders. We will pay for these bonuses using the $64 million (after-tax) in available earnings and profits reserved for this purpose and not paid in dividends to our Class A shareholders. Generally, our working capital balance varies due to factors such as the timing of scheduled debt payments, timing differences in the collection and payment of receivables and payables, the change in fair value of our derivative contracts and changes in cash and cash equivalent balances as a result of debt or equity issuances (discussed below in “—Long-term Financing”).  As a result, our working capital balance could return to a surplus in future periods.  A working capital deficit is not unusual for us or for other companies similar in size and scope to us, and we believe that our working capital deficit does not indicate a lack of liquidity as we continue to maintain adequate current assets and committed lines of credit to satisfy current liabilities and maturing obligations when they come due.
 
Long-term Financing
 
From time to time, Kinder Morgan Kansas, Inc. or KMP issues long-term debt securities, often referred to as senior notes.  All of the senior notes of Kinder Morgan Kansas, Inc. or KMP issued to date, other than those issued by KMP’s subsidiaries and its operating partnerships, generally have very similar terms, except for interest rates, maturity dates and prepayment premiums.  All of these outstanding senior notes are unsecured obligations that rank equally with all of the other senior debt obligations; however, a modest amount of secured debt has been incurred by some of KMP’s operating partnerships and subsidiaries.  Our and KMP’s fixed rate senior notes provide that we may redeem the notes at any time at a price equal to 100% of the principal amount of the notes plus accrued interest to the redemption date plus a make-whole premium.  For additional information on debt related transactions in the first quarter of 2011, including issuances of senior notes, see Note 4 “Debt” to our consolidated financial statements included elsewhere in this report.
 
As of March 31, 2011 and December 31, 2010, the balances of Kinder Morgan Kansas, Inc. and its subsidiaries’ (excluding KMP and its subsidiaries’) long-term debt, including the current portion, purchase accounting adjustments on the carrying value of our debt and KMP’s debt and the preferred interest in the general partner of KMP, but excluding the value of interest rate swaps was $2,880.7 million and $3,630.1 million, respectively. These balances included net unamortized purchase accounting adjustments, increasing the debt balances by $36.9 million and $37.5 million at March 31, 2011 and December 31, 2010, respectively. As of March 31, 2011 and December 31, 2010, the balances included in our accompanying consolidated balance sheets of the various series of KMP and its subsidiaries’ various long-term borrowings, including the current portion and excluding the value of interest rate swaps, was $11,405.8 million and $11,017.7 million, respectively. For additional information regarding our and our subsidiaries’ debt securities, including KMP and its subsidiaries, see Note 8 “Debt” to our consolidated financial statements included in our 2010 Form 10-K.
 
We and our subsidiaries, including KMP, are subject, however, to conditions in the equity and debt markets and there can be no assurance we will be able or willing to access the public or private markets for equity and/or long-term senior notes in the future.  If we were unable or unwilling to access the equity markets, we would be required to either restrict expansion capital expenditures and/or potential future acquisitions or pursue debt financing alternatives, some of which could involve higher costs or negatively affect our or our subsidiaries’ credit ratings.  Furthermore, our subsidiaries’ ability to access the public and private debt markets is affected by their respective credit ratings.  See “—Credit Ratings and Capital Market Liquidity” above for a discussion of KMP’s credit ratings.
 

 
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Capital Expenditures
 
Our sustaining capital expenditures—defined as capital expenditures which do not increase the capacity of an asset—totaled $36.0 million in the first three months of 2011 compared to $32.9 million for the first three months of 2010. These sustaining expenditure amounts include $0.6 million and less than $0.1 million in the first three months of 2011 and 2010, respectively, for KMP’s proportionate share of sustaining capital expenditures of (i) Rockies Express Pipeline LLC; (ii) Midcontinent Express Pipeline LLC; (iii) KinderHawk Field Services LLC; (iv) Cypress Interstate Pipeline LLC; and (v) Fayetteville Express Pipeline LLC. Additionally, our forecasted expenditures for the remaining nine months of 2011 for sustaining capital expenditures are approximately $187.6 million, including approximately $6.7 million for KMP’s proportionate shares of Rockies Express, Midcontinent Express, KinderHawk, Cypress and Fayetteville Express.
 
Generally, we fund our sustaining capital expenditures with existing cash or from cash flows from operations. In addition to utilizing cash generated from their own operations, both Rockies Express and Midcontinent Express can each fund their own cash requirements for expansion capital expenditures through borrowings under their own credit facilities, issuing their own long-term notes, or with proceeds from contributions received from their member owners. Similarly, KinderHawk Field Services and Fayetteville Express can each fund their own cash requirements for expansion capital expenditures with cash generated from their own operations, through borrowings under their own credit facilities, or with proceeds from contributions received from their two member owners. KMP has no contingent debt obligation with respect to Rockies Express Pipeline LLC, Midcontinent Express Pipeline LLC, or KinderHawk Field Services LLC; however, KMP guarantees 50% of Fayetteville Express Pipeline LLC’s bank credit facility borrowings. For information on KMP’s contingent debt obligations, see Note 4 “Debt—Contingent Debt” to our consolidated financial statements included elsewhere in this report.
 
All of our capital expenditures, with the exception of sustaining capital expenditures, are considered by us as discretionary. Our discretionary capital expenditures for the first three months of 2011 and 2010 totaled $234.5 million and $190.9 million, respectively. The increase in discretionary expenditures from first quarter 2010 was primarily due to higher investment undertaken in the first quarter of 2011 to expand and improve the CO 2 –KMP and Terminals–KMP business segments. Generally, KMP funds its discretionary capital expenditures, and its investment contributions through borrowings under its bank credit facility or its commercial paper program. To the extent these sources of funding are not sufficient, KMP generally funds additional amounts through the issuance of long-term notes or common units for cash.
 
Cash Flows
 
The following table summarizes our net cash flows from operating, investing and financing activities for each period presented.
 
   
Three Months Ended
March 31,
       
   
2011
   
2010
   
increase/
(decrease)
 
   
(In millions)
 
Net cash provided by (used in):
                 
Operating activities
  $ 478.5     $ 438.7     $ 39.8  
Investing activities
    (227.2 )     (498.3 )     271.1  
Financing activities
    (566.7 )     34.5       (601.2 )
                         
Effect of exchange rate changes on cash
    2.5       (3.4 )     5.9  
                         
Net decrease in cash and cash equivalents
  $ (312.9 )   $ (28.5 )   $ (284.4 )

Operating Activities
 
The net increase of $39.8 million (9%) in cash provided by operating activities in the three months ended March 31, 2011 compared to the respective 2010 period was primarily attributable to:
 
 
▪
a $151.9 million increase in cash inflows relative to net changes in working capital items, primarily due to (i) a $118.7 million increase in cash from net changes in accrued other current liabilities, driven by a $100 million (pre-tax) increase in a special bonus expense discussed below; (ii) a $22.4 million increase in cash from the collection and payment of trade and related party receivables and payables (including collections and payments on natural gas transportation and exchange imbalance receivables and payables), due primarily to the timing of invoices received from customers and paid to vendors and suppliers; (iii) a $15.3 million increase in cash from
 

 
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net changes in accrued tax liabilities, driven by lower net settlements of property tax liabilities in the first quarter of 2011; and (iv) a $38.0 million decrease in cash due to higher interest payments (net of interest collections) in the first quarter of 2011, primarily due to higher average borrowings relative to the first quarter a year ago;
 
 
 
The cost of the $100 million special bonus to non-senior employees will not be borne by our Class P shareholders.  We will pay for these bonuses, which include the amounts allocated to KMP, using $64 million (after-tax) in available earnings and profits reserved for this purpose and not paid in dividends to our Class A shareholders.
 
 
▪
a $15.0 million increase in cash from higher distributions of earnings from equity investees (distributions of capital are discussed below in “—Investing Activities”).  The increase was chiefly due to incremental distributions of $9.5 million received from KMP’s 50%-owned KinderHawk Field Services LLC (acquired in May 2010), and $4.0 million received from KMP’s 49%-owned Greens Bayou Fleeting, LLC (formed in February 2011);
 
 
▪
a $84.3 million decrease in cash from overall lower net income after adjusting for non-cash items, including (i) a $430.0 million pre-tax impairment charge on our investment in NGPL PipeCo LLC in the first quarter of 2010; (ii) a $158.0 million expense in the first quarter of 2010 resulting from rate case liability adjustments and (iii) a $161.7 million increase in cash from a net changes in deferred income tax liabilities.  The quarter-to-quarter changes in net income in 2011 versus 2010 are discussed above in “—Results of Operations” (including all of the certain items disclosed in the associated table footnotes); and
 
 
▪
a $63.0 million decrease in cash attributable to payments made in March 2011 for transportation rate settlements, refunds and reparations pursuant to certain legal settlements reached on the KMP Pacific operations’ refined products pipelines.
 
Investing Activities
 
The net decrease in cash used in investing activities in the three months ended March 31, 2011 compared to the respective 2010 period was primarily attributable to:
 
 
▪
a $160.4 million increase in cash due to lower acquisitions of assets and investments in the first quarter of 2011.  The increase was driven by the $50.0 million KMP paid in January 2011 for its preferred equity interest in Watco Companies, LLC (discussed further in Note 2 to our consolidated financial statements included elsewhere in this report), versus the $115.7 million in cash KMP paid to acquire three unit train ethanol handling terminals from US Development Group LLC in January 2010, and the $97.0 million KMP paid to acquire certain terminal assets from Slay Industries in March 2010;
 
 
▪
a $113.4 million increase in cash used due to lower contributions to equity investees in the first quarter of 2011.  In the first quarter of 2011, KMP’s capital contributions totaled $22.2 million.  KMP’s contributions included payments of $14.4 million to its 50%-owned Eagle Ford Gathering LLC.  The joint venture used the contributions as partial funding for natural gas gathering infrastructure expansions.  In the first quarter of 2010, KMP contributed an aggregate amount of $135.6 million, including $130.5 million to Rockies Express Pipeline LLC;
 
 
▪
a $28.7 million increase in cash due to lower period-to-period payments for margin and restricted deposits associated with energy commodity cash flow hedging activities in the first three months of 2011;
 
 
▪
a $46.1 million decrease in cash due to higher capital expenditures, as described above in “—Capital Expenditures;” and
 
 
▪
a $9.7 million increase in cash due to higher capital distributions (distributions in excess of cumulative earnings) received in the first quarter of 2011. We recognized $83.6 million of capital distributions in the first quarter of 2011 compared to $73.9 million for the respective 2010 period. In addition to increased capital distributions from its other equity investments, in the first quarter of 2011, KMP received distributions of $7.0 million from KinderHawk Field Services LLC, and distributions of $4.2 million from its 50%-owned Fayetteville Express Pipeline LLC (which began firm contract natural gas transportation to customers on January 1, 2011).  KMP’s period-to-period incremental capital distributions of $21.8 million were partially offset by a $12.1 million decrease in capital distributions received from our equity investment in NGPL PipeCo LLC in the first quarter of 2011. Current accounting practice requires us to classify and report cumulative cash distributions in excess of
 

 
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cumulative equity earnings as a return of capital; however, this change in classification does not impact our cash available for distribution.
 
Financing Activities
 
The net decrease in cash provided by financing activities in the three months ended March 31, 2011 compared to the respective 2010 period was primarily attributable to:
 
 
▪
a $548.9 million decrease in cash from overall debt financing activities—which include issuances and payments of debt and debt issuance costs.  The overall decrease in cash was primarily due to (i) a $750.0 million principal payment on senior notes of Kinder Morgan Finance Company LLC, an indirect wholly owned subsidiary of KMI, that matured in the first quarter of 2011; (ii) a $375.0 million decrease from lower net borrowings under KMP’s bank credit facility (due in part to its short-term credit rating upgrade in February 2011, KMP made no short-term borrowings under its bank credit facility in the first quarter of 2011 but instead made borrowings under its commercial paper program); (iii) a $244.1 million decrease due to KMP’s higher net commercial paper repayments; (iv) a $423.4 million increase in cash due to higher net borrowings under our bank credit facility; and (v) a combined $392.7 million increase in cash from KMP both issuing and repaying its senior notes.  For additional information regarding debt offerings and repayments during the first quarter of 2011 see Note 4 “Debt” to our consolidated financial statements included elsewhere in this report;
 
 
▪
a $95.8 million increase in cash used to pay dividends;
 
 
▪
a $28.3 million increase in cash used for noncontrolling interest distributions, primarily due to an increase in KMP’s cash distributions to its common unit owners.
 
 
▪
a $81.2 million increase in cash provided by noncontrolling interest contributions primarily reflecting the proceeds received by KMP, after commissions and underwriting expenses, from the sales of additional KMP common units in the first quarter of 2011 (discussed in Note 5 “Stockholders’ Equity—Noncontrolling Interests—KMP—Contributions” to our consolidated financial statements included elsewhere in this report).
 
Kinder Morgan Energy Partners, L.P.
 
At March 31, 2011, we owned, directly, and indirectly in the form of i-units corresponding to the number of shares of KMR we owned, approximately 35.0 million limited partner units of KMP. These units, which consist of 16.4 million common units, 5.3 million Class B units and 13.3 million i-units, represent approximately 11.0% of the total outstanding limited partner interests of KMP. In addition, we indirectly own all the common equity of the general partner of KMP, which holds an effective 2% combined interest in KMP and its operating partnerships. Together, at March 31, 2011, our limited partner and general partner interests represented approximately 12.8% of KMP’s total equity interests and represented an approximate 50% economic interest in KMP. This difference results from the existence of incentive distribution rights held by Kinder Morgan G.P., Inc., the general partner of KMP.
 
KMP’s partnership agreement requires that it distribute 100% of “Available Cash,” as defined in its partnership agreement, to its partners within 45 days following the end of each calendar quarter in accordance with their respective percentage interests. Our 2010 Form 10-K contains additional information concerning KMP’s partnership distributions, including the definition of “Available Cash,” the manner in which its total distributions are divided between Kinder Morgan G.P., Inc., as the general partner of KMP, and KMP’s limited partners, and the form of distributions to all of its partners, including its noncontrolling interests.
 
On February 14, 2011, KMP paid a quarterly distribution of $1.13 per common unit for the fourth quarter of 2010, of which $229.0 million was paid to the public holders (included in noncontrolling interests) of KMP’s common units. This distribution was 8% greater than the $1.05 distribution per unit KMP paid in February 2010 for the fourth quarter of 2009.
 
On April 20, 2011, KMP declared a cash distribution of $1.14 per unit for the first quarter of 2011 (an annualized rate of $4.56 per unit). This distribution was 7% higher than the $1.07 per unit distribution KMP made for the first quarter of 2010.
 
In November 2010, KMP announced that it expected to declare cash distributions of $4.60 per unit for 2011, a 4.5% increase over its cash distributions of $4.40 per unit for 2010. Although the majority of the cash generated by KMP’s assets is fee based and is not sensitive to commodity prices, the CO 2 –KMP business segment is exposed to commodity price risk related to the price volatility of crude oil and natural gas liquids, and while KMP hedges the majority of its
 

 
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crude oil production, it does have exposure on its unhedged volumes, the majority of which are natural gas liquids volumes.
 
KMP’s expected growth in distributions in 2011 assumes an average West Texas Intermediate (WTI) crude oil price of approximately $89 per barrel (with some minor adjustments for timing, quality and location differences) in 2011, and based on the actual prices it has received through the date of this report and the forward price curve for WTI (adjusted for the same factors used in KMP’s 2011 budget), KMP currently expects the average price of WTI crude oil will be over $100 per barrel in 2011. For 2011, KMP expects that every $1 change in the average WTI crude oil price per barrel will impact the CO 2 –KMP segment’s cash flows by approximately $5.0 million (or less than 0.2% of KMP’s combined business segments’ anticipated earnings before depreciation, depletion and amortization expenses). This sensitivity to the average WTI price is very similar to what KMP experienced in 2010.
 
Off Balance Sheet Arrangements
 
Except as set forth with respect to contingent debt agreements with Midcontinent Express Pipeline LLC under “—Contingent Debt” in Note 4 “Debt” to our consolidated financial statements included elsewhere in this report, there have been no material changes in our obligations with respect to other entities that are not consolidated in our financial statements that would affect the disclosures presented as of December 31, 2010 in our 2010 Form 10-K.
 
Recent Accounting Pronouncements
 
Refer to Note 13, “Recent Accounting Pronouncements” to our consolidated financial statements included elsewhere in this report for information concerning recent accounting pronouncements.
 
Information Regarding Forward-Looking Statements
 
This report includes forward-looking statements. These forward-looking statements are identified as any statement that does not relate strictly to historical or current facts. They use words such as “anticipate,” “believe,” “intend,” “plan,” “projection,” “forecast,” “strategy,” “position,” “continue,” “estimate,” “expect,” “may,” or the negative of those terms or other variations of them or comparable terminology. In particular, statements, express or implied, concerning future actions, conditions or events, future operating results or the ability to generate sales, income or cash flow, or to service debt or to pay dividends are forward-looking statements. Forward-looking statements are not guarantees of performance. They involve risks, uncertainties and assumptions. Future actions, conditions or events and future results of operations may differ materially from those expressed in these forward-looking statements. Many of the factors that will determine these results are beyond our ability to control or predict. Specific factors that could cause actual results to differ from those in the forward-looking statements include:
 
 
•
price trends and overall demand for natural gas liquids, refined petroleum products, oil, carbon dioxide, natural gas, electricity, coal, steel and other bulk materials and chemicals in North America;
 
 
•
economic activity, weather, alternative energy sources, conservation and technological advances that may affect price trends and demand;
 
 
•
changes in tariff rates charged by NGPL or those of KMP’s pipeline subsidiaries implemented by the Federal Energy Regulatory Commission, California Public Utilities Commission, Canada’s National Energy Board or another regulatory agency ;
 
 
•
our ability to acquire new businesses and assets and integrate those operations into our existing operations, as well as our ability to expand our facilities;
 
 
•
difficulties or delays experienced by railroads, barges, trucks, ships or pipelines in delivering products to or from KMP’s terminals or pipelines;
 
 
•
our ability to successfully identify and close acquisitions and make cost-saving changes in operations;
 
 
•
shut-downs or cutbacks at major refineries, petrochemical or chemical plants, ports, utilities, military bases or other businesses that use our services or provide services or products to us;
 
 
•
changes in crude oil and natural gas production from exploration and production areas that we or KMP serve, such as the Permian Basin area of West Texas, the U.S. Rocky Mountains, areas of shale gas formation and the Alberta oil sands ;
 

 
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•
changes in laws or regulations, third-party relations and approvals, and decisions of courts, regulators and governmental bodies that may adversely affect our business or ability to compete;
 
 
•
changes in accounting pronouncements that impact the measurement of our results of operations, the timing of when such measurements are to be made and recorded, and the disclosures surrounding these activities;
 
 
•
our ability to offer and sell equity securities, and KMP’s ability to offer and sell equity securities and debt securities or obtain debt financing in sufficient amounts to implement that portion of our or KMP’s business plans that contemplates growth through acquisitions of operating businesses and assets and expansions of facilities ;
 
 
•
our indebtedness, which could make us vulnerable to general adverse economic and industry conditions, limit our ability to borrow additional funds and/or place us at competitive disadvantages compared to our competitors that have less debt or have other adverse consequences;
 
 
•
interruptions of electric power supply to our facilities due to natural disasters, power shortages, strikes, riots, terrorism, war or other causes;
 
 
•
our ability to obtain insurance coverage without significant levels of self-retention of risk;
 
 
•
acts of nature, accidents, sabotage, terrorism or other similar acts causing damage greater than our insurance coverage limits;
 
 
•
capital and credit markets conditions, inflation and interest rates;
 
 
•
the political and economic stability of the oil producing nations of the world;
 
 
•
national, international, regional and local economic, competitive and regulatory conditions and developments;
 
 
•
our ability to achieve cost savings and revenue growth;
 
 
•
foreign exchange fluctuations;
 
 
•
the timing and extent of changes in commodity prices for oil, natural gas, electricity and certain agricultural products;
 
 
•
the extent of KMP’s success in discovering, developing and producing oil and gas reserves, including the risks inherent in exploration and development drilling, well completion and other development activities;
 
 
•
engineering and mechanical or technological difficulties that KMP may experience with operational equipment, in well completions and workovers, and in drilling new wells;
 
 
•
the uncertainty inherent in estimating future oil and natural gas production or reserves that KMP may experience;
 
 
•
the ability to complete expansion projects on time and on budget;
 
 
•
the timing and success of KMP’s and our business development efforts; and
 
 
•
unfavorable results of litigation and the fruition of contingencies referred to in Note 11 to our consolidated financial statements included elsewhere in this report.
 
The foregoing list should not be construed to be exhaustive. We believe the forward-looking statements in this report are reasonable. However, there is no assurance that any of the actions, events or results of the forward-looking statements will occur, or if any of them do, what impact they will have on our results of operations or financial condition. Because of these uncertainties, you should not put undue reliance on any forward-looking statements.
 
See Part I, Item 1A “Risk Factors” of our 2010 Form 10-K for a more detailed description of these and other factors that may affect the forward-looking statements. When considering forward-looking statements, one should keep in mind the risk factors described in our 2010 Form 10-K. The risk factors could cause our actual results to differ materially from those contained in any forward-looking statement. We disclaim any obligation, other than as required by applicable law, to update the above list or to announce publicly the result of any revisions to any of the forward-looking statements to reflect future events or developments.
 

 
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Item 3.  Quantitative and Qualitative Disclosures About Market Risk.
 
There have been no material changes in market risk exposures that would affect the quantitative and qualitative disclosures presented as of December 31, 2010, in Item 7A of our 2010 Form 10-K. For more information on our risk management activities, see Note 6, “Risk Management” to our consolidated financial statements included elsewhere in this report.
 
 
Item 4.  Controls and Procedures
 
As of March 31, 2011, our management, including our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives. Based upon and as of the date of the evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that the design and operation of our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed in the reports we file and submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported as and when required, and is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. There has been no change in our internal control over financial reporting during the quarter ended March 31, 2011 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
 

 
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PART II.  OTHER INFORMATION
 
Item 1.  Legal Proceedings
 
See Part I, Item 1, Note 11 to our consolidated financial statements entitled “Litigation, Environmental and Other Contingencies,” which is incorporated in this item by reference.
 
 
Item 1A. Risk Factors.
 
There have been no material changes in or additions to the risk factors disclosed in Part I, Item 1A “Risk Factors” in our 2010 Form 10-K.
 
 
Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds.
 
None.
 
 
Item 3.  Defaults Upon Senior Securities.
 
None.
 
 
Item 4.  (Removed and Reserved)
 
 
Item 5.  Other Information.
 
None.
 
Item 6.  Exhibits.
 
 
3.1
 — 
Certificate of Incorporation of Kinder Morgan, Inc.
 
 
3.2
 — 
Bylaws of Kinder Morgan, Inc.
 
 
4.1
 — 
Form of certificate representing Class P common shares of Kinder Morgan, Inc (filed as Exhibit 4.1 to Kinder Morgan, Inc. Registration Statement on Form S-1, filed on January 18, 2011, and incorporated herein by reference).
 
 
4.2
 — 
Form of Shareholders Agreement among Kinder Morgan, Inc. and certain holders of common stock.
 
 
4.3
 — 
Certain instruments with respect to the long-term debt of Kinder Morgan, Inc. and its consolidated subsidiaries that relate to debt that does not exceed 10% of the total assets of Kinder Morgan, Inc. and its consolidated subsidiaries are omitted pursuant to Item 601(b) (4) (iii) (A) of Regulation S-K, 17 C.F.R. sec.229.601. Kinder Morgan, Inc. hereby agrees to furnish supplementally to the Securities and Exchange Commission a copy of each such instrument upon request.
 
 
10.1
 — 
Kinder Morgan, Inc. Stock Incentive Plan.
 
 
10.2
 — 
Form of Restricted Stock Agreement.
 
 
10.3
 — 
Kinder Morgan, Inc. Stock Compensation Plan for Non-Employee Directors.
 
 
10.4
 — 
Form of Non-Employee Director Stock Compensation Agreement.
 
 
10.5
 — 
Kinder Morgan, Inc. Employees Stock Purchase Plan.
 


 
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10.6
 — 
Kinder Morgan, Inc. Annual Incentive Plan.
 
 
10.7
 — 
Severance Agreement with C. Park Shaper.
 
 
10.8
 — 
Severance Agreement with Steven J. Kean.
 
 
10.9
 — 
Severance Agreement with Kimberly A. Dang.
 
 
10.10
 — 
Severance Agreement with Joseph Listengart.
 
 
31.1
 — 
Certification by CEO pursuant to Rule 13a-14 or 15d-14 of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
 
 
31.2
 — 
Certification by CFO pursuant to Rule 13a-14 or 15d-14 of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
 
 
32.1
 — 
Certification by CEO pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
 
32.2
 — 
Certification by CFO pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

 
67
 
Kinder Morgan, Inc. Form 10-Q
 
Table of Contents
 
SIGNATURE
 
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, INC.
  
   
Registrant
    
Date: May 6, 2011
     
By:
 
/s/ Kimberly A. Dang
           
Kimberly A. Dang
Vice President and Chief Financial Officer
(principal financial and accounting officer)

 
 
68
 

 
Exhibit 3.1
 

CERTIFICATE OF INCORPORATION
 
OF
 
KINDER MORGAN, INC.
 
The undersigned, acting as an incorporator of a corporation (hereinafter called the “ Company ”) under the General Corporation Law of the State of Delaware (“ DGCL ”), hereby adopts the following Certificate of Incorporation for the Company:
 
FIRST:   The name of the Company is Kinder Morgan, Inc.
 
SECOND:   The registered office of the Company in the State of Delaware is located at Corporation Service Company, 2711 Centerville Road, Suite 400, Wilmington, DE 19808, County of New Castle. The name of the registered agent of the Company at such address is Corporation Service Company.
 
THIRD:   The purpose for which the Company is organized is to engage in any and all lawful act and activity for which corporations may be organized under the DGCL.  The Company will have perpetual existence.
 
FOURTH:
 
A.   Authorized Shares
 
The total number of shares of capital stock which the Company shall have authority to issue is 2,819,462,927 shares, of which 10,000,000 shares shall be preferred stock, par value $0.01 per share (the “ Preferred Stock ”), and 2,809,462,927 shares shall be common stock, par value $0.01 per share (the “ Common Stock ”), consisting of:
 
(1)   2,000,000,000 shares of Class P Common Stock (the “ Class P Common Stock ”);
 
(2)   707,000,000 shares of Class A Convertible Common Stock (the “ Class A Common Stock ”), which shall be divided into nine (9) different series (each, a “ Class A Series ”), as follows:
 
(a)   143,074,656 shares of Class A Common Stock shall be designated as Series A-1 Stock (the “ Series A-1 Stock ”);
 
(b)   35,390,780 shares of Class A Common Stock shall be designated as Series A-2 Stock (the “ Series A-2 Stock ”);
 
(c)   112,870,410 shares of Class A Common Stock shall be designated as Series A-3 Stock (the “ Series A-3 Stock ”);
 
(d)   78,821,388 shares of Class A Common Stock shall be designated as Series A-4 Stock (the “ Series A-4 Stock ”);
 

 
1
 

(e) 78,821,388 shares of Class A Common Stock shall be designated as Series A-5 Stock (the “ Series A-5 Stock ”);
 
(f)   216,538,834 shares of Class A Common Stock shall be designated as Series A-6 Stock (the “ Series A-6 Stock ”);
 
(g)   5,761,863 shares of Class A Common Stock shall be designated as Series A-7 Stock (the “ Series A-7 Stock ”);
 
(h)   31,178,252 shares of Class A Common Stock shall be designated as Series A-8 Stock (the “ Series A-8 Stock ”); and
 
(i)   4,542,429 shares of Class A Common Stock shall be designated as Series A-9 Stock (the “ Series A-9 Stock ”).
 
(3)   100,000,000 shares of Class B Convertible Common Stock (the “ Class B Common Stock ”), which shall be divided into nine (9) different series (each, a “ Class B Series ”), as follows:
 
(a)   20,236,868 shares of Class B Common Stock shall be designated as Series B-1 Stock (the “ Series B-1 Stock ”);
 
(b)   5,005,768 shares of Class B Common Stock shall be designated as Series B-2 Stock (the “ Series B-2 Stock ”);
 
(c)   15,964,697 shares of Class B Common Stock shall be designated as Series B-3 Stock (the “ Series B-3 Stock ”);
 
(d)   11,148,711 shares of Class B Common Stock shall be designated as Series B-4 Stock (the “ Series B-4 Stock ”);
 
(e)   11,148,711 shares of Class B Common Stock shall be designated as Series B-5 Stock (the “ Series B-5 Stock ”);
 
(f)   30,627,841 shares of Class B Common Stock shall be designated as Series B-6 Stock (the “ Series B-6 Stock ”);
 
(g)   814,974 shares of Class B Common Stock shall be designated as Series B-7 Stock (the “ Series B-7 Stock ”);
 
(h)   4,409,937 shares of Class B Common Stock shall be designated as Series B-8 Stock (the “ Series B-8 Stock ”); and
 
(i)   642,493 shares of Class B Common Stock shall be designated as Series B-9 Stock (the “ Series B-9 Stock ”).
 

 
2
 

Each Class B Series will be deemed to correspond to the Class A Series and the Class C Series designated by the same number, such that the Series B-1 Stock will be deemed to correspond to the Series A-1 Stock and the Series C-1 Stock, and each subsequently-numbered Class B Series will be deemed to correspond to the Class A Series and the Class C Series bearing the corresponding number.
 
(4)   2,462,927 shares of Class C Convertible Common Stock (the “ Class C Common Stock ”), which shall be divided into nine (9) different series (each, a “ Class C Series ”), as follows:
 
(a)   498,419 shares of Class C Common Stock shall be designated as Series C-1 Stock (the “ Series C-1 Stock ”);
 
(b)   123,288 shares of Class C Common Stock shall be designated as Series C-2 Stock (the “ Series C-2 Stock ”);
 
(c)   393,199 shares of Class C Common Stock shall be designated as Series C-3 Stock (the “ Series C-3 Stock ”);
 
(d)   274,585 shares of Class C Common Stock shall be designated as Series C-4 Stock (the “ Series C-4 Stock ”);
 
(e)   274,585 shares of Class C Common Stock shall be designated as Series C-5 Stock (the “ Series C-5 Stock ”);
 
(f)   754,341 shares of Class C Common Stock shall be designated as Series C-6 Stock (the “ Series C-6 Stock ”);
 
(g)   20,072 shares of Class C Common Stock shall be designated as Series C-7 Stock (the “ Series C-7 Stock ”);
 
(h)   108,614 shares of Class C Common Stock shall be designated as Series C-8 Stock (the “ Series C-8 Stock ”); and
 
(i)   15,824 shares of Class C Common Stock shall be designated as Series C-9 Stock (the “ Series C-9 Stock ”).
 
Each Class C Series will be deemed to correspond to the Class A Series and the Class B Series designated by the same number, such that the Series C-1 Stock will be deemed to correspond to the Series A-1 Stock and the Series B-1 Stock, and each subsequently-numbered Class C Series will be deemed to correspond to the Class A Series and the Class B Series bearing the corresponding number.
 
Certain capitalized terms used in this Certificate of Incorporation are defined in Section B of this Article Fourth .  The shares of Common Stock shall have the rights, preferences and limitations set forth in Sections C , D , E and F of this Article Fourth .  Except as otherwise set forth in Section D.2(a)(x) of this Article Fourth , references to the holders of shares of Common
 

 
3
 

Stock shall mean the holders of shares of Common Stock as reflected on the books of the Company as of a specific date.
 
Shares of Preferred Stock may be issued from time to time in one or more series of any number of shares as may be determined from time to time by the board of directors, provided that the aggregate number of shares issued and not cancelled of any and all such series shall not exceed the total number of shares of Preferred Stock authorized by this Certificate of Incorporation.  Each series of Preferred Stock shall be distinctly designated.  All shares of a series of Preferred Stock shall be alike in every particular, except that shares of any one series issued at different times may differ as to the dates from which dividends thereon shall be cumulative.  The voting powers, if any, of each such series and the preferences and relative, participating, optional and other special rights of each such series and the qualifications, limitations and restrictions thereof, if any, may differ from those of any and all other series at any time outstanding; and the board of directors is hereby expressly granted authority to fix, in the resolution or resolutions providing for the issue of a particular series of Preferred Stock, the voting powers, if any, of each such series and the designations, preferences and relative, participating, optional and other special rights of each such series and the qualifications, limitations and restrictions thereof to the full extent now or hereafter permitted by this Certificate of Incorporation and the laws of the State of Delaware.
 
B.   Certain Definitions
 
As used in this Article Fourth and elsewhere in this Certificate of Incorporation, the following terms shall have the following meanings:
 
“ 10%-20% Automatic Conversion Percentage ” shall mean, for any Class B Series, as of the time of determination thereof, with respect to any conversion of shares of such Class B Series referenced in Section D.2(b)(ii) of this Article Fourth , the number (expressed as a percentage) equal to the sum of (i) 10% and (ii) the product of (a) 10% and (b) a fraction (no greater than one (1)), the numerator of which is the amount, if any, by which Total Value for the Related Series (determined, for this purpose, by taking into account the Class P Shares received upon such conversion of shares of such Class B Series) would exceed 200% of the Aggregate Base Amount for the Related Series, and the denominator of which is 200% of the Aggregate Base Amount for the Related Series.
 
“ 10%-20% Distribution Percentage ” shall mean, for any Series, as of the time of determination thereof, with respect to any Distribution referenced in Section C.2( e ) , C.3(e) or C.4(e) of this Article Fourth to the holders of shares of such Series, the number (expressed as a percentage) equal to the sum of (i) 10% and (ii) the product of (a) 10% and (b) a fraction (no greater than one (1)), the numerator of which is the amount, if any, by which the Total Value for such Series exceeds 200% of the Aggregate Base Amount for such Series, and the denominator of which is 200% of the Aggregate Base Amount for such Series.
 
“ 10%-20% Mandatory Conversion Percentage ” shall mean, for any Class B Series, as of the Mandatory Conversion Date, the number (expressed as a percentage) equal to the sum of (i) 10% and (ii) the product of (a) 10% and (b) a fraction (no greater than one (1)), the numerator of
 

 
4
 

which is the amount, if any, by which the sum of (x) the Total Value for the Related Series, (y) the amounts, if any, described in clauses (i) through (iv) of the definition of Class A Maximum Amount and (z) the amounts, if any, described in clauses (i) through (iv) of the definition of Class B Maximum Amount (which sum of the values described in clauses (x), (y) and (z) shall not exceed the lesser of (A) 400% of the Aggregate Base Amount for the Related Series and (B) the Aggregate Amount with respect to the Related Series) would exceed 200% of the Aggregate Base Amount for the Related Series, and the denominator of which is 200% of the Aggregate Base Amount for the Related Series; provided , however, that if the sum of the values contained in clauses (x), (y) and (z) above is less than 200% of the Aggregate Base Amount for the Related Series, the 10%-20% Mandatory Conversion Percentage shall be zero.
 
“ 100% Threshold ” shall mean, for any Series, the Series A Total Value being equal to 100% of the Base Amount for the Class A Series included in such Series.
 
“ 150% Threshold ” shall mean, for any Series, the Total Value being equal to 150% of the Aggregate Base Amount for such Series.
 
“ 200% Threshold ” shall mean, for any Series, the Total Value being equal to 200% of the Aggregate Base Amount for such Series.
 
“ 400% Threshold ” shall mean, for any Series, the Total Value being equal to 400% of the Aggregate Base Amount for such Series.
 
“ Affiliate ” of any Person shall mean any other Person that directly or indirectly, through one or more intermediaries, Controls, is Controlled by, or is under common Control with, such first Person.
 
“ Aggregate Amount ” shall mean, with respect to any particular Series, an amount equal to the sum of the Mandatory Conversion Date Value and the Total Value, in each case for such Series.
 
“ Aggregate Base Amount ” shall mean, with respect to any particular Series, the sum of (x) the Base Amount for such Class A Series and (y) the Notional Base Amount for the corresponding Class C Series.
 
“ All Cash Sale ” shall have the meaning set forth in Section D.2(a)(i) of this Article Fourth .
 
“ All Cash Tender Offer ” shall have the meaning set forth in Section D.2(a)(i) of this Article Fourth .
 
“ Annual Class B Priority Dividend Period ” shall mean any of the following: (i) the period including the first, second, third and fourth calendar quarters during the Class B Priority Dividend Period, (ii) the period including the fifth, sixth, seventh and eighth calendar quarters during the Class B Priority Dividend Period, (iii) the period including the ninth, tenth, eleventh and twelfth calendar quarters during the Class B Priority Dividend Period or (iv) the period including the thirteenth, fourteenth, fifteenth and sixteenth calendar quarters during the Class B Priority Dividend Period.
 

 
5
 

“ Annual Class B Priority Dividend Shortfall ” shall mean an amount, if any, equal to (x) the Annual Maximum Class B Priority Dividend Amount for the immediately preceding Annual Class B Priority Dividend Period less (y) the aggregate amount of Distributions received by all Class B Shareholders pursuant to Section C.3(a) of this Article Fourth during such immediately preceding Annual Class B Priority Dividend Period; provided, that if the Annual Class B Priority Dividend Shortfall is greater than zero for two Annual Class B Priority Dividend Periods, then the amount of the Annual Class B Priority Dividend Shortfall shall equal zero for each subsequent Annual Class B Priority Dividend Period, if any.
 
“ Annual Maximum Class B Priority Dividend Amount ” shall mean, (i) with respect to the first Annual Class B Priority Dividend Period, $50,000,000 and (ii) with respect to the second, third and fourth Annual Class B Priority Dividend Periods, an amount equal to (A) $50,000,000 plus (B) the lesser of (x) the Annual Class B Priority Dividend Shortfall or (y) the actual amount of Distributions received by all Class B Shareholders pursuant to Section C.3(a) of this Article Fourth for the first calendar quarter of the Annual Class B Priority Dividend Period with respect to which the Annual Maximum Class B Priority Dividend Amount is being calculated.
 
“ Appraisal Procedure ” shall require that, with respect to any dispute that this Article Fourth provides will be the subject of the Appraisal Procedure, each of the two designated parties to such dispute selects one (1) independent, nationally recognized investment banking firm within four (4) calendar days after delivery of the applicable notice of objection, such that two (2) independent, nationally recognized investment banking firms are selected.  If such firms shall agree upon the determination that is the subject of such dispute, such determination shall be final, binding and conclusive with respect to the subject of such dispute.  If within five (5) calendar days after appointment of the two (2) independent, nationally recognized investment banking firms, such firms are unable to agree upon the determination that is the subject of the dispute, a third independent, nationally recognized investment banking firm shall be chosen within four (4) calendar days thereafter by the mutual consent of such first two investment banking firms or, if such first two investment banking firms fail to agree upon the appointment of a third investment banking firm, such appointment shall be made by the American Arbitration Association, or any organization successor thereto.  The written determination of such third independent, nationally recognized investment banking firm so appointed and chosen shall be given within five (5) calendar days after its appointment, and shall be final, binding and conclusive with respect to the subject of such dispute.  If a designated party to the Appraisal Procedure does not deliver a notice of its selection of an independent, nationally recognized investment banking firm by the applicable deadline, such party shall have waived its right of selection and shall be bound by the determination of the independent, nationally recognized investment banking firm selected by the other designated party.  The costs of conducting the dispute resolution contemplated by the Appraisal Procedure, including the fees of all appointed independent, nationally recognized investment banking firms, shall be borne by the Company.  Each of the deadlines provided for in the Appraisal Procedure may be extended by mutual agreement of the parties to such Appraisal Procedure.  For the avoidance of doubt, GS shall not be considered an independent investment banking firm, and GS and its Affiliates may not be appointed pursuant to the foregoing procedure as the independent, nationally recognized investment banking firm for any party.
 

 
6
 

“ Base Amount ” shall mean, for any Class A Series, the dollar amount specified below for such series:
 
Series A-1
$1,601,620,180
Series A-2
$396,174,908
Series A-3
$1,263,504,879
Series A-4
$882,350,016
Series A-5
$882,350,016
Series A-6
$2,424,000,000
Series A-7
$64,500,000
Series A-8
$349,018,612
Series A-9
$50,849,302
 
“ Base Distribution Percentage ” shall mean, for any Class A Series, the percentage set forth below for such series:
 
Series A-1
20.2369%
Series A-2
5.0058%
Series A-3
15.9647%
Series A-4
11.1487%
Series A-5
11.1487%
Series A-6
30.6278%
Series A-7
0.8150%
Series A-8
4.4099%
Series A-9
0.6425%
 
“ Business Day ” shall mean a day except a Saturday, a Sunday or other day on which banks in New York, New York or Houston, Texas are authorized or required by law to be closed.
 
“ Carlyle ” shall mean (i) Carlyle Partners IV Knight, L.P. and CP IV Coinvestment, L.P., (ii) any investment funds or other entities sponsored, managed or owned directly or indirectly by Carlyle Investment Management L.L.C. or its Affiliates collectively d/b/a “The Carlyle Group” or “Carlyle”, or otherwise under common control with the entities listed in clause (i) or their successors (by merger, consolidation, acquisition of substantially all assets or similar transaction) or with any entity then included in clause (ii), to which any entity previously included in the definition of Carlyle transferred, directly or indirectly (including through a series of transfers), Class A Shares after the Initial Public Offering or Related Shares after a Mandatory Conversion Date, and (iii) any successors (by merger, consolidation, acquisition of substantially all assets or similar transaction) of the foregoing.  For the avoidance of doubt, “Carlyle” shall be deemed not to include (A) Riverstone or any portfolio companies of any of the entities contained in clauses (i), (ii) or (iii) or (B) any entity that is not a party to the Shareholders Agreement.
 
“ Change of Control ” shall mean any merger, amalgamation, consolidation or other business combination or similar transaction or series of transactions involving the Company  pursuant to which all of the Class P Shares issued and outstanding immediately prior to the consummation of such transaction or transactions would be exchanged for cash, securities or other property.
 

 
7
 

“ Change of Control Determinations ” shall have the meaning set forth in Section D.1(e)(ii) of this Article Fourth .
 
“ Change of Control Mandatory Acceleration Date ” shall mean the date on which a Change of Control occurs.
 
“ Change of Control Notice ” shall have the meaning set forth in Section D.1(e)(ii) of this Article Fourth .
 
“ Change of Control Objection Notice ” shall have the meaning set forth in Section D.1(e)(iii) of this Article Fourth .
 
“ Class A Common Stock ” shall have the meaning set forth in Section A.2 of this Article Fourth .
 
“ Class A Conversion Amount ” shall mean, with respect to shares of a Class A Series held by a given holder prior to the applicable Voluntary Conversion of shares of such Class A Series (other than shares of Series A-9 Stock) or a conversion of shares of Series A-9 Stock resulting from such Voluntary Conversion, the product of (i) the aggregate number of Class A Shares of such Class A Series held by all holders of such Class A Series immediately prior to such conversion, (ii) a fraction, the numerator of which is the number of Class P Shares to be issued to all holders of shares of the Related Series pursuant to or resulting from such conversion of shares of such Class A Series and the denominator of which is the Total Number of Conversion Shares for the Related Series (immediately prior to the applicable conversion) and (iii) a fraction, the numerator of which is the number of Class P Shares to be issued to such given holder pursuant to or resulting from such conversion of shares of such Class A Series and the denominator of which is the aggregate number of Class P Shares to be issued to all Class A Shareholders of such Class A Series pursuant to or resulting from such conversion of shares of such Class A Series.
 
“ Class A Maximum Amount ” shall mean, with respect to a particular Class A Series, an amount equal to the excess of (x) the sum of the amounts, if any, in clauses (i) through (v) below, over (y) the Class C Maximum Amount for the corresponding Class C Series:
 
(i)           100% of the amount, if any, by which
 
(A)           the lesser of (1) the sum of 100% of the Base Amount for such Class A Series and the aggregate amount of Class B Priority Distributions paid in respect of shares of the corresponding Class B Series, and (2) the Aggregate Amount with respect to the Related Series exceeds
 
(B)           the Total Value with respect to the Related Series;
 
(ii)           100% of the amount, if any, by which
 
(A)           the lesser of (1) the sum of 150% of the Aggregate Base Amount for the Related Series and the aggregate amount of Class B Priority Distributions paid in respect of

 
8
 

shares of the corresponding Class B Series, and (2) the Aggregate Amount with respect to the Related Series exceeds
 
(B)           the greater of (1) the sum of 100% of the Base Amount for such Class A Series and the aggregate amount of Class B Priority Distributions paid in respect of shares of the corresponding Class B Series and (2) the Total Value with respect to the Related Series;
 
(iii)           95% of the amount, if any, by which
 
(A)           the lesser of (1) 200% of the Aggregate Base Amount for the Related Series and (2) the Aggregate Amount with respect to the Related Series exceeds
 
(B)           the greater of (1) the sum of 150% of the Aggregate Base Amount for the Related Series and the First Catch-Up Amount for the corresponding Class B Series, and (2) the Total Value with respect to the Related Series;
 
(iv)           an amount equal to the excess, if any, of (A) (x) the lesser of (1) 400% of the Aggregate Base Amount for the Related Series and (2) the Aggregate Amount with respect to the Related Series minus (y) the greater of (1) the sum of 200% of the Aggregate Base Amount for the Related Series and the Second Catch-Up Amount for the corresponding Class B Series and (2) the Total Value with respect to the Related Series over (B) the amount, if any, described in clause (iv) of the definition of Class B Maximum Amount; and
 
(v)           80% of the amount, if any, by which
 
(A)           the Aggregate Amount with respect to the Related Series exceeds
 
(B)           the greater of (1) 400% of the Aggregate Base Amount for the Related Series and (2) the Total Value with respect to the Related Series.
 
“ Class A Percentage ” shall mean, with respect to a particular Class A Series, a number (expressed as a percentage) equal to the quotient obtained by dividing (x) the Base Amount for such Class A Series by (y) the Aggregate Base Amount for such Class A Series and the corresponding Class C Series.
 
“ Class A Series ” shall have the meaning set forth in Section A.2 of this Article Fourth .
 
“ Class A Shareholder ” shall mean a holder of Class A Shares.
 
“ Class A Shares ” shall mean the shares of Class A Common Stock.
 
“ Class B Common Stock ” shall have the meaning set forth in Section A.3 of this Article Fourth .
 
“ Class B Conversion Amount ” shall mean, with respect to shares of a Class B Series held by a given holder prior to the conversion in question, the product of (i) the number of shares of such Class B Series held by such holder immediately prior to such conversion, and (ii) a fraction, the
 

 
9
 

numerator of which is the number of Class P Shares to be issued to all holders of shares of such Class B Series pursuant to conversion of shares of such Class B Series and the denominator of which is the Total Number of Conversion Shares with respect to the Related Series (immediately prior to the applicable conversion).
 
“ Class B Fraction ” shall mean, with respect to a holder of shares of a Class B Series, at the time of determination thereof, a fraction, the numerator of which is the number of shares of such Class B Series held by such holder and the denominator of which is the total number of shares of such Class B Series (in each case, immediately prior to the applicable conversion) issued and outstanding at such time of determination.
 
“ Class B Maximum Amount ” shall mean, with respect to a particular Class B Series, an amount equal to the sum of:
 
(i)           100% of the amount, if any, by which
 
(A)           the lesser of (1) the sum of 150% of the Aggregate Base Amount for the Related Series and the First Catch-Up Amount for such Class B Series, and (2) the Aggregate Amount with respect to the Related Series exceeds
 
(B)           the greater of (1) the sum of 150% of the Aggregate Base Amount for the Related Series and the aggregate amount of Class B Priority Distributions received in respect of shares of such Class B Series, and (2) the Total Value with respect to the Related Series;
 
(ii)           5% of the amount, if any, by which
 
(A)           the lesser of (1) 200% of the Aggregate Base Amount for the Related Series and (2) the Aggregate Amount with respect to the Related Series exceeds
 
(B)           the greater of (1) the sum of 150% of the Aggregate Base Amount for the Related Series and the First Catch-Up Amount for such Class B Series, and (2) the Total Value with respect to the Related Series;
 
(iii)           100% of the amount, if any, by which
 
(A)           the lesser of (1) the sum of 200% of the Aggregate Base Amount for the Related Series and the Second Catch-Up Amount for such Class B Series and (2) the Aggregate Amount with respect to the Related Series exceeds
 
(B)           the greater of (1) 200% of the Aggregate Base Amount for the Related Series and (2) the Total Value with respect to the Related Series;
 
(iv)           an amount, if any, such that the sum of the Series B Total Value and the amounts, if any, described in clauses (i) through (iii) of this definition and this clause (iv) equals the product of (A) the excess of, if any, (1) the sum of the Total Value for the Related Series and the amounts, if any, described in clauses (i) through (iv) of the definition of Class A Maximum

 
10
 

Amount, clauses (i) through (iii) of this definition and this clause (iv) (which sum shall not exceed the lesser of (x) 400% of the Aggregate Base Amount for the Related Series and (y) the Aggregate Amount with respect to the Related Series) over (2) the Aggregate Base Amount for the Related Series and (B) the 10%-20% Mandatory Conversion Percentage; and
 
(v)           20% of the amount, if any, by which
 
(A)           the Aggregate Amount with respect to the Related Series exceeds
 
(B)           the greater of (1) 400% of the Aggregate Base Amount for the Related Series and (2) the Total Value with respect to the Related Series.
 
“ Class B Priority Distributions ” shall mean, as of the date of determination, any Distributions received in respect of Class B Shares pursuant to Section C.3(a) of this Article Fourth .  For the avoidance of doubt, any Class B Priority Distribution shall be, and shall be treated as, a Distribution for all purposes under this Article Fourth .
 
“ Class B Priority Dividend Period ” shall mean the period of sixteen (16) consecutive calendar quarters beginning with the calendar quarter in which the first quarterly dividend is declared after the Initial Public Offering.
 
“ Class B Series ” shall have the meaning set forth in Section A.3 of this Article Fourth .
 
“ Class B Shareholder ” shall mean a holder of Class B Shares.
 
“ Class B Shares ” shall mean the shares of Class B Common Stock.
 
“ Class C Common Stock ” shall have the meaning set forth in Section A.4 of this Article Fourth .
 
“ Class C Conversion Amount ” shall mean, with respect to shares of a Class C Series held by a given holder prior to the conversion in question, the product of (i) the number of shares of such Class C Series held by such holder immediately prior to such conversion, and (ii) a fraction, the numerator of which is the number of Class P Shares to be issued to all holders of shares of such Class C Series pursuant to such conversion of shares of such Class C Series and the denominator of which is the Total Number of Conversion Shares with respect to the Related Series (immediately prior to the applicable conversion).
 
“ Class C Fraction ” shall mean, with respect to a holder of shares of a Class C Series, at the time of determination thereof, a fraction, the numerator of which is the number of shares of such Class C Series held by such holder and the denominator of which is the total number of shares of such Class C Series (in each case, immediately prior to the applicable conversion) issued and outstanding at such date.
 
“ Class C Maximum Amount ” shall mean, with respect to a particular Class C Series, an amount equal to the product of (x) the Class C Percentage for such Class C Series and (y) the sum of the amounts, if any, described in clauses (ii) through (v) of the definition of Class A Maximum Amount for the corresponding Class A Series.
 

 
11
 

“ Class C Percentage ” shall mean, with respect to a particular Class C Series, a number (expressed as a percentage) equal to the quotient obtained by dividing (x) the Notional Base Amount for such Class C Series by (y) the Aggregate Base Amount for such Class C Series and the corresponding Class A Series.
 
“ Class C Series ” shall have the meaning set forth in Section A.4 of this Article Fourth .
 
“ Class C Shareholder ” shall mean a holder of Class C Shares.
 
“ Class C Shares ” shall mean the shares of Class C Common Stock.
 
“ Class P Common Stock ” shall have the meaning set forth in Section A.1 of this Article Fourth .
 
“ Class P Distribution Percentage ” shall mean, as of the time of determination thereof, the number (expressed as a percentage) equal to the quotient obtained by dividing (i) the total number of Class P Shares then outstanding, by (ii) the sum of (x) the total number of Class P Shares then outstanding and (y) the sum of the Total Number of Conversion Shares for all Series in the aggregate.
 
“ Class P Shareholder ” shall mean a holder of Class P Shares.
 
“ Class P Shares ” shall mean the shares of Class P Common Stock.
 
“ Classes A / B / C Distribution Percentage ” shall mean, as of the time of determination thereof, the number (expressed as a percentage) equal to (i) 100% (1) minus (ii) the Class P Distribution Percentage.
 
“ Common Stock ” shall have the meaning set forth in Section A of this Article Fourth .
 
“ Company ” shall have the meaning set forth in the preamble to this Certificate of Incorporation.
 
“ Control ” shall mean the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through ownership of voting securities, by contract or otherwise.  For purposes of determining whether any Person is an Affiliate of any Investor Shareholder, a Person that either (x) holds less than one-third (1/3) of the voting power of a second Person or (y) is entitled to designate less than one-third (1/3) of the members of the board of directors (or similar governing body) of a second Person shall not be deemed to Control such second Person solely as a result of such ownership or designation rights.
 
“ Conversion Instructions ” shall have the meaning set forth in Section D.2(a)(ii) of this Article Fourth .
 
“ Conversion Notice ” shall have the meaning set forth in Section D.2(a)(i) of this Article Fourth .
 
“ Conversion Share Minimum Threshold ” shall mean, for any Series, a Total Number of Conversion Shares that equals one-half of one percent (.5%) of the aggregate number of Class P Shares initially listed for such Series in the definition of “Total Number of Conversion Shares”
 

 
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(which, for the avoidance of doubt, shall be the maximum number of Class P Shares that may be issued upon conversion of Class A Shares, Class B Shares and Class C Shares of such Series prior to the conversion of any Class A Shares into Class P Shares); provided , that for purposes of this definition any adjustments to the Total Number of Conversion Shares in respect of such Series pursuant to Section F.1 of this Article Fourth shall be applied to the aggregate number of Class P Shares so initially listed.
 
“ Converting Holder ” shall have the meaning set forth in Section D.2(a)(i) of this Article Fourth .
 
“ DGCL ” shall have the meaning set forth in the preamble to this Certificate of Incorporation.
 
“ Directed Opportunity ” shall have the meaning set forth in Article Eleventh .
 
“ Disinterested Director ” shall have the meaning set forth in Section C of Article Ninth .
 
“ Distribution ” shall mean any distribution made to holders of shares of Common Stock, whether in cash, property or securities and whether by dividend, Liquidation or otherwise; provided , however, that the term “ Distribution ” shall not be deemed to include a stock split or a dividend to the extent payable in additional Class P Shares.  Whenever a Distribution provided for in this Article Fourth is payable in property other than cash, the value of such Distribution shall be deemed to be the Fair Market Value of such property.  For purposes of this Article Fourth , a Distribution shall be considered paid on the date on which such Distribution is paid by the Company to the Class P Shareholders and prior to the closing or consummation of any All Cash Sale, Non-Cash Sale, Investor Distribution, All Cash Tender Offer or Non-Cash Tender Offer that occurs on the same date as such payment.
 
“ Excess Class P Share Notice ” shall have the meaning set forth in Section D.2(a)(viii) of this Article Fourth .
 
“ Excess Class P Shares ” shall have the meaning set forth in Section D.2(a)(viii) of this Article Fourth .
 
“ Fair Market Value ”  shall mean:
 
(i)           with respect to any security or other non-cash property (in each case, other than a security that is publicly traded), the fair market value of such security or other non-cash property as determined by the Company, which determination shall be final, binding and conclusive unless a notice of objection is delivered in accordance with the last paragraph of this definition (or unless a Change of Control Objection Notice is delivered in accordance with Section D.1(e) of this Article Fourth ); and
 
(ii) with respect to any security that is publicly traded and (A) is distributed pursuant to a Distribution, the Fair Market Value of such security shall be the VWAP of such security over the ten (10) trading days ending on the close of business on the trading day immediately preceding the date of such Distribution, (B) constitutes consideration in a Change of Control, the Fair Market Value of such security shall be the VWAP of such security over the ten (10) trading days ending on the close of business on the trading day immediately preceding the date of
 

 
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consummation of the Change of Control or (C) constitutes consideration in either a Non-Cash Sale or a Non-Cash Tender Offer, the Fair Market Value of such security shall be the VWAP of such security over the ten (10) trading days ending on the close of business on the trading day immediately preceding the date of the delivery of a Conversion Notice with respect to the Voluntary Conversion implemented to effect such Non-Cash Sale or Non-Cash Tender Offer.
 
In the case of the Company’s determination of Fair Market Value of Illiquid Consideration as set forth in its written notice to the Converting Holder and the Class B Shareholders pursuant to Section D.2(a)(ii) of this Article Fourth , the Converting Holder and/or the Class B Shareholders representing a majority of the Class B Shares then issued and outstanding may give to the Company a notice of objection in writing to such determination prior to the close of business on the first (1st) Business Day following receipt of such Company written notice.  If the Converting Holder and the Class B Shareholders representing a majority of the Class B Shares then issued and outstanding are unable to agree upon the Fair Market Value of such Illiquid Consideration within two (2) calendar days after delivery of such notice of objection to the Company, then (i) the Converting Holder and (ii) the Class B Shareholders representing a majority of the Class B Shares then issued and outstanding shall each select one (1) independent, nationally recognized appraiser having experience in the valuation of illiquid assets, within four (4) calendar days after delivery of such notice of objection, such that two (2) independent, nationally recognized appraisers are selected.  If such firms shall agree upon the Fair Market Value of such Illiquid Consideration, such determination shall be final, binding and conclusive.  If within five (5) calendar days after appointment of the two appraisers, they are unable to agree upon the Fair Market Value of such Illiquid Consideration, a third independent, nationally recognized appraiser having experience in the valuation of illiquid assets shall be chosen within four (4) calendar days thereafter by the mutual consent of such first two appraisers or, if such first two appraisers fail to agree upon the appointment of a third appraiser, such appointment shall be made by the American Arbitration Association, or any organization successor thereto.  The written determination of the Fair Market Value of such Illiquid Consideration by the third appraiser so appointed and chosen shall be given within five (5) calendar days after its appointment, and shall be final, binding and conclusive.  If a party to the appraisal procedure does not select an appraiser by the applicable deadline, such party shall have waived its right of selection and shall be bound by the determination of the appraiser selected by the other party.  The costs of conducting such dispute resolution, including the fees of all appointed appraisers, shall be borne by the Company.  Each of the deadlines provided for in the above procedure may be extended by mutual agreement of the parties to such procedure.  For the avoidance of doubt, GS shall not be considered an independent appraiser, and GS and its Affiliates may not be appointed pursuant to the foregoing procedure as the independent, nationally recognized appraiser for any party.
 
 
“ Final Conversion Date ” shall mean (i) if the requisite Class A Shareholders or the requisite Class B Shareholders do not deliver a Mandatory Conversion Date Objection Notice pursuant to Section D.1(a) of this Article Fourth , the Business Day immediately following the day on which the Company delivers the Mandatory Conversion Date Notice pursuant to Section D.1(a) of this Article Fourth , (ii) if the requisite Class A Shareholders and/or the requisite Class B Shareholders deliver a Mandatory Conversion Date Objection Notice pursuant to Section D.1(a) of this Article Fourth but the relevant parties reach agreement on the Mandatory Conversion
 

 
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Date Determinations as contemplated by Section D.1(a) of this Article Fourth within two (2) calendar days after delivery of such Mandatory Conversion Date Objection Notice, the Business Day immediately following such agreement by such relevant parties and (iii) if the requisite Class A Shareholders and/or the requisite Class B Shareholders deliver a Mandatory Conversion Date Objection Notice pursuant to Section D.1(a) of this Article Fourth and clause (ii) above does not apply, the Business Day on which the Mandatory Conversion Date Determinations are finally determined pursuant to the Appraisal Procedure.
 
“ Final Mandatory Conversion Date ” shall mean May 31, 2015.
 
“ Final Mandatory Conversion Date Calculation Period ” shall mean the period covering each of the trading days during the regular director and officer blackout period for the Company’s first quarterly periodic report for the 2015 calendar year.
 
“ First Catch-Up Amount ” shall mean, with respect to a particular Class B Series, an amount equal to the product of 0.02631579 and the Aggregate Base Amount with respect to the Related Series.
 
“ First Catch-Up Threshold ” shall mean, with respect to a particular Series, the Series B Total Value being equal to the First Catch-Up Amount.
 
“ Fund Indemnitors ” shall have the meaning set forth in Section F.2 of Article Ninth .
 
“ Governmental Entity ” shall mean any court, administrative agency, regulatory body, commission or other governmental authority, board, bureau or instrumentality, domestic or foreign and any subdivision thereof.
 
“ GS ” shall mean (i) GS Capital Partners V Fund, L.P., a Delaware limited partnership; GS Capital Partners V Institutional, L.P., a Delaware limited partnership; GS Capital Partners VI Fund, L.P., a Delaware limited partnership; GS Capital Partners VI Parallel, L.P., a Delaware limited partnership; Goldman Sachs KMI Investors, L.P., a Delaware limited partnership; GSCP KMI Investors, L.P., a Delaware limited partnership; GSCP KMI Investors Offshore, L.P., a Cayman Islands exempted limited partnership; GS Global Infrastructure Partners I, L.P., a Delaware limited partnership; GS Institutional Infrastructure Partners I, L.P., a Delaware limited partnership; GSCP V Offshore Knight Holdings, L.P., a Delaware limited partnership, GSCP V Germany Knight Holdings, L.P., a Delaware limited partnership; GSCP VI Offshore Knight Holdings, L.P., a Delaware limited partnership; GSCP VI Germany Knight Holdings, L.P., a Delaware limited partnership; and GS Infrastructure Knight Holdings, L.P., a Delaware limited partnership, (ii) any investment funds or other entities sponsored, managed or owned directly or indirectly by the Merchant Banking Division of Goldman, Sachs & Co., or otherwise under common control with the entities listed in clause (i) or their successors (by merger, consolidation, acquisition of substantially all assets or similar transaction) or with any entity then included in clause (ii), to which any of the entities previously included in the definition of “GS” transferred, directly or indirectly (including through a series of transfers), Class A Shares after the Initial Public Offering or Related Shares after a Mandatory Conversion Date, and (iii) any successors (by merger, consolidation, acquisition of substantially all assets or similar transaction)
 

 
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of the foregoing.  For the avoidance of doubt, “GS” shall be deemed not to include (A) any portfolio companies of any of the entities contained in clauses (i), (ii) or (iii) or (B) any entity that is not a party to the Shareholders Agreement.
 
“ Highstar ” shall mean (i) Highstar II Knight Acquisition Sub, L.P., Highstar III Knight Acquisition Sub, L.P., Highstar Knight Partners, L.P. and Highstar KMI Blocker LLC, (ii) any investment funds or other entities sponsored, managed or owned directly or indirectly by Highstar Capital LP or one of its controlled Affiliates, or otherwise under common control with the entities listed in clause (i) or their successors (by merger, consolidation, acquisition of substantially all assets or similar transaction) or with any entity then included in clause (ii), to which any entity previously included in the definition of “Highstar” transferred, directly or indirectly (including through a series of transfers), Class A Shares after the Initial Public Offering or Related Shares after a Mandatory Conversion Date, and (iii) any successors (by merger, consolidation, acquisition of substantially all assets or similar transaction) of the foregoing.  For the avoidance of doubt, “Highstar” shall be deemed not to include (A) any portfolio companies of any of the entities contained in clauses (i), (ii) or (iii) or (B) any entity that is not a party to the Shareholders Agreement.
 
“ Illiquid Consideration ” shall have the meaning set forth in Section D.2(a)(i) of this Article Fourth .
 
“ Incentive Pool Threshold ” shall mean an amount equal to $64,000,000.
 
“ Independent Counsel ” shall have the meaning set forth in Section C of Article Ninth .
 
“ Initial Public Offering ” shall mean the closing of the initial public offering of Class P Shares of the Company.
 
“ Investor Distribution ” shall mean (i) a bona fide distribution of Class P Shares by an Investor Shareholder entity (including through intermediate entities) to its investors or partners; provided that a meaningful amount of such distribution shall be received by such investors or partners who are bona fide non-Affiliate investors or partners, (ii) a bona fide donative transfer of Class P Shares by any holder of shares of Series A-6 Stock to the Kinder Foundation (as defined in the Shareholders Agreement) or (iii) a bona fide donative transfer of Class P Shares by any holder of shares of Series A-7 Stock or Series A-8 Stock to a foundation or similar entity established by such holder for the purpose of serving charitable goals or to any other charitable foundation or organization, including any organization described in Section 501(c)(3) of the Internal Revenue Code of 1986, as amended, or any similar provision of state, local or foreign law.  For the avoidance of doubt, as of the date hereof GS Capital Partners V Fund, L.P. and GS Capital Partners VI Fund, L.P. have a meaningful amount of interests owned by bona fide non-Affiliate investors or partners.
 
“ Investor Distribution Per Share Value ” shall mean, with respect to an Investor Distribution, the VWAP of one (1) Class P Share over the ten (10) trading days ending on the close of business on the trading day immediately preceding the delivery of a Conversion Notice by a Class A
 

 
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Shareholder pursuant to Section D.2(a) of this Article Fourth with respect to such Investor Distribution.
 
“ Investor Distribution Value ” shall mean the product of (i) the number of Class P Shares Transferred or transferred by a Class A Shareholder pursuant to an Investor Distribution, and (ii) the Investor Distribution Per Share Value for such Investor Distribution.
 
“ Investor Party ” shall have the meaning set forth in Article Eleventh .
 
“ Investor Shareholder ” shall mean each of GS, Highstar, Carlyle and Riverstone.
 
“ Liquidation ” shall mean any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company; provided, that neither the consolidation nor merger of the Company into or with any other entity, nor the sale or transfer by the Company of all or any part of its assets, nor the reduction of the capital stock of the Company, shall be deemed a Liquidation.
 
“ Mandatory Conversion Date ” shall mean, with respect to shares of a Series, the earlier to occur of (i) the Change of Control Mandatory Acceleration Date, (ii) the Minimum Threshold Mandatory Conversion Date with respect to such Series, (iii) the Final Mandatory Conversion Date or (iv) the Specified Accelerated Conversion Date with respect to such Series.
 
“ Mandatory Conversion Date Determinations ” shall have the meaning set forth in Section D.1(a) of this Article Fourth .
 
“ Mandatory Conversion Date Notice ” shall have the meaning set forth in Section D.1(a) of this Article Fourth .
 
“ Mandatory Conversion Date Objection Notice ” shall have the meaning set forth in Section D.1(a) of this Article Fourth .
 
“ Mandatory Conversion Date Per Share Value ” shall mean:
 
(i) with respect to the Change of Control Mandatory Acceleration Date, the sum of (A) the per share cash consideration in respect of the Class P Shares in the Change of Control and (B) the Fair Market Value (measured as of the close of business on the trading day immediately preceding the date of the consummation of the Change of Control) of the per share non-cash consideration in respect of Class P Shares in the Change of Control;
 
(ii) with respect to a Minimum Threshold Mandatory Conversion Date, (A) the weighted average per share Net Sale Proceeds set forth in the Conversion Notice pursuant to Section D.2(a) of this Article Fourth for the related voluntary conversion that causes the occurrence of the Minimum Threshold Mandatory Conversion Date or (B) the Investor Distribution Per Share Value set forth in the Conversion Notice pursuant to Section D.2(a) of this Article Fourth for the related voluntary conversion that causes the occurrence of the Minimum Threshold Mandatory Conversion Date;

 
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(iii) with respect to the Final Mandatory Conversion Date, the VWAP of one (1) Class P Share over the Final Mandatory Conversion Date Calculation Period;
 
(iv) with respect to the Specified Accelerated Conversion Date, the VWAP of one (1) Class P Share over the thirty (30) consecutive day period through and including the second (2nd) trading day immediately prior to a Specified Accelerated Conversion Date (or such other period as may be agreed by the holders of shares of the applicable Class A Series and corresponding Class B Series in accordance with the approval thresholds described in the definition of “Specified Accelerated Conversion Date” and specified in the written notice of such holders delivered to the Company at least one (1) Business Day immediately prior to the Specified Accelerated Conversion Date).
 
“ Mandatory Conversion Date Value ” shall mean, with respect to a Series, the product of (i) the Total Number of Conversion Shares with respect to such Series immediately prior to the Mandatory Conversion Date and (ii) the Mandatory Conversion Date Per Share Value.
 
“ Maximum Class B Priority Distributions ” shall mean, as of the date of determination, the product of (x) $12,500,000 and (y) the number of calendar quarters that have elapsed (counting the calendar quarter to which the current Distribution relates as having elapsed for this purpose) from and including the calendar quarter in which the first quarterly dividend is paid after the Initial Public Offering; provided , that the aggregate amount of Distributions received in respect of Class B Shares pursuant to Section C.3(a) of this Article Fourth shall not exceed (i) $200,000,000 during  the Class B Priority Dividend Period or (ii) the Annual Maximum Class B Priority Dividend Amount with respect to an Annual Class B Priority Dividend Period.
 
“ Minimum Threshold Mandatory Conversion Date ” shall mean the date on which the Total Number of Conversion Shares for a Series falls below the Conversion Share Minimum Threshold for such Series.
 
“ Net Sale Proceeds ” with respect to Class P Shares shall mean the net proceeds (net of discounts and commissions, but not other expenses) received on the Transfer of the applicable Class P Shares.  In the case of any non-cash consideration received on the Transfer of such applicable Class P Shares, the Net Sale Proceeds shall be based upon the Fair Market Value of such non-cash consideration (net of discounts and commissions, but not other expenses).
 
“ Non-Cash Change of Control ” shall mean a Change of Control that does not constitute a merger, amalgamation, consolidation or other business combination or similar transaction or series of transactions involving the Company pursuant to which all of the Class P Shares issued and outstanding immediately prior to the consummation of such transaction or transactions would be exchanged for cash.
 
“ Non-Cash Conversion Instructions ” shall have the meaning set forth in Section D.2(a)(ii) of this Article Fourth.
 
“ Non-Cash Sale ” shall have the meaning set forth in Section D.2(a)(i) of this Article Fourth .
 

 
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“ Non-Cash Tender Offer ” shall have the meaning set forth in Section D.2(a)(i) of this Article Fourth .
 
“ Notional Base Amount ” shall mean, for any Class C Series, the dollar amount specified below for such series:
 
Series C-1
$5,579,453.42
Series C-2
$1,380,127.12
Series C-3
$4,401,584.54
Series C-4
$3,073,781.71
Series C-5
$3,073,781.71
Series C-6
$8,444,321.11
Series C-7
$224,694.19
Series C-8
$1,215,851.99
Series C-9
$177,140.20
 
 
“ Periodic Sales Pre-Clearance Period ” shall have the meaning set forth in Section D.2(a)(ii)(C) of this Article Fourth .
 
“ Periodic Sales Pre-Clearance Request ” shall mean a written request delivered by a holder of shares of a Class A Series (the “ Requesting Holder ”) to the Company and the Transfer Agent pursuant to Section D.2(a)(ii)(C) of this Article Fourth , which request shall set forth (i) such Requesting Holder’s proposed Pre-Cleared Prices and (ii) with respect to each Pre-Cleared Price, the proposed corresponding maximum number of Class P Shares to be Transferred or transferred pursuant to an Investor Distribution by holders of shares of such Requesting Holder’s Class A Series in connection with Voluntary Conversions of Class A Shares of such Class A Series pursuant to Section D.2(a) of this Article Fourth during the applicable Periodic Sales Pre-Clearance Period (with respect to each Pre-Cleared Price, each a “ Pre-Cleared Number of Shares ”); provided , that a Pre-Cleared Number of Shares corresponding to a Pre-Cleared Price shall be limited to a number of Class P Shares such that the Transfer or Investor Distribution by holders of Class A Shares of such Requesting Holder’s Class A Series of a number of shares equal to such Pre-Cleared Number of Shares pursuant to Section D.2(a) of this Article Fourth at the weighted average per share Net Sales Proceeds or the Investor Distribution Per Share Value equal to the highest amount of such Pre-Cleared Price would (assuming the Transfer or Investor Distribution of the Pre-Cleared Number of Shares corresponding to such Pre-Cleared Price) not, as of the date of determination, cause the Total Number of Conversion Shares for the Related Series to fall below the Conversion Share Minimum Threshold for the Related Series (after taking into account the number of Class P Shares into which the corresponding Class B Series would be entitled to convert in accordance with Section D.2(b) of this Article Fourth and the number of Class P Shares into which the corresponding Class C Series would be entitled to convert in accordance with Section D.2(d) of this Article Fourth , in each case as a result of such Transfer or Investor Distribution).
 

 
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“ Person ” shall mean any individual, corporation, company, firm, partnership, joint venture, limited liability company, estate, trust, business association, organization, Governmental Entity or other entity.
 
“ Pre-Clearance Objection ” shall have the meaning set forth in Section D.2(a)(ii)(C) of this Article Fourth .
 
“ Pre-Cleared Number of Shares ” shall have the meaning given such term in the definition of Periodic Sales Pre-Clearance Request.
 
“ Pre-Cleared Prices ” shall mean various ranges (as specified in the applicable Periodic Sales Pre-Clearance Request) of weighted average Investor Distribution Per Share Value and per share Net Sale Proceeds for all Investor Distributions and Transfers (considered as a group) pursuant to Section D.2(a) of this Article Fourth during a Periodic Sales Pre-Clearance Period, in such increments as proposed in the applicable Periodic Sales Pre-Clearance Request.  Each such proposed range (e.g., $5.01-$6.00 inclusive, or $4.51-$5.00 inclusive) shall be referred to as a Pre-Cleared Price.
 
“ Pre-Incorporation Distribution Amount ” shall mean, for any Class A Series, the dollar amount specified below for such series:
 
Series A-1
$303,498,072
Series A-2
$77,577,870
Series A-3
$233,421,964
Series A-4
$163,006,790
Series A-5
$163,006,790
Series A-6
$413,475,850
Series A-7
$11,002,142
Series A-8
$59,534,145
Series A-9
$8,673,663
   
“ Preferred Stock ” shall have the meaning set forth in Section A of this Article Fourth .
 
 
“ Referential Class A Series ” shall have the meaning given such term in Section D.2(a)(vi) of this Article Fourth .
 
 
“ Referential Conversion Percentage ” shall have the meaning given such term in Section D.2(a)(vi) of this Article Fourth .
 
 
“ Referential Per Share Value ” shall have the meaning given such term in Section D.2(a)(vi) of this Article Fourth .
 
 
“ Related Series ” shall mean, with respect to a particular Class A Series, Class B Series or Class C Series, the Series that includes such Class A Series, Class B Series and Class C Series.
 

 
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“ Related Shares ” shall mean Class P Shares received by a Class A Shareholder upon conversion of such holder’s Class A Shares as the result of the occurrence of a Mandatory Conversion Date for the Related Series.
 
 
“ Replicated Change of Control ” shall have the meaning given such term in Section 3.6(h) of the Shareholders Agreement.
 
 
“ Requesting Holder ” shall have the meaning given such term in the definition of Periodic Sales Pre-Clearance Request.
 
 
“ Riverstone ” shall mean (i) Carlyle/Riverstone Knight Investment Partnership, L.P., C/R Knight Partners, L.P., C/R Energy III Knight Non-U.S. Partnership, L.P.; Carlyle Energy Coinvestment III, L.P. and Riverstone Energy Coinvestment III, L.P., (ii) any investment funds or other entities sponsored, managed or owned directly or indirectly by Riverstone Holdings, LLC or one of its controlled Affiliates or otherwise under common control with the entities listed in clause (i) or their successors (by merger, consolidation, acquisition of substantially all assets or similar transaction) or with any entity then included in clause (ii), to which any entity previously included in the definition of “Riverstone” transferred, directly or indirectly (including through a series of transfers), Class A Shares after the Initial Public Offering or Related Shares after a Mandatory Conversion Date, and (iii) any successors (by merger, consolidation, acquisition of substantially all assets or similar transaction) of the foregoing.  For the avoidance of doubt, “Riverstone” shall be deemed not to include (A) Carlyle or any portfolio companies of any of the entities contained in clauses (i), (ii) or (iii) or (B) any entity that is not a party to the Shareholders Agreement.
 
 
“ Second Catch-Up Amount ” shall mean, with respect to a particular Class B Series, an amount equal to the product of 0.05902849 and the Aggregate Base Amount with respect to the Related Series.
 
 
“ Second Catch-Up Threshold ” shall mean, with respect to a particular Series, the Series B Total Value being equal to the sum of (a) the Second Catch-Up Amount and (b) the product of 5% and the Aggregate Base Amount for such Series.
 
 
“ Securities Act ” shall mean the Securities Act of 1933, as amended, supplemented or restated from time to time and any successor to such statute, and the rules and regulations promulgated thereunder.
 
“ Series ” means, as applicable, a Class A Series, a Class B Series and a Class C Series bearing the same number ( e.g. , Series A-1 Stock, Series B-1 Stock and Series C-1 Stock).
 
 
“ Series A Distribution Percentage ” shall mean, as of the time of determination thereof, with respect to a particular Class A Series, the number (expressed as a percentage) equal to the product of: (i) the Classes A/B/C Distribution Percentage, (ii) the quotient obtained by dividing (A) the Total Number of Conversion Shares for the Related Series, by (B) the sum of the Total Number of Conversion Shares for all Series in the aggregate and (iii) the Class A Percentage for such Class A Series.
 

 
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“ Series A Total Value ” shall mean, as applicable:
 
(i)           with respect to any particular Class A Series (other than the Series A-9 Stock), as of the time of determination thereof, the sum of (a) the amount of all Distributions paid in cash and the Fair Market Value of all Distributions paid in property other than cash that previously were paid (other than the Pre-Incorporation Distribution Amount) or are paid concurrently on shares of such Class A Series pursuant to Section C.2 of this Article Fourth (including, in the case of the Series A-6 Stock, any amounts of cash or non-cash Distributions not paid to holders as a result of the application of Section C.2(g) of this Article Fourth ), (b) the amount of all Net Sale Proceeds that previously were received or are received concurrently by the Converting Holder in connection with the Transfer of Class P Shares into which shares of such Class A Series have been converted pursuant to a Voluntary Conversion, (c) the amount of all Investor Distribution Value that previously was received or is received concurrently on the Investor Distribution of Class P Shares into which shares of such Class A Series have been converted pursuant to a Voluntary Conversion, (d) the Pre-Incorporation Distribution Amount with respect to such Class A Series and (e) the Series C Total Value for the corresponding Class C Series; and
 
(ii)           with respect to Series A-9 Stock, as of the time of determination thereof, the sum of (a) the amount of all Distributions paid in cash and the Fair Market Value of all Distributions paid in property other than cash that previously were paid (other than the Pre-Incorporation Distribution Amount) or are paid concurrently on shares of Series A-9 Stock pursuant to Section C.2 of this Article Fourth ; (b) with respect to each prior Transfer or Investor Distribution of Class P Shares that resulted in an automatic conversion of shares of Series A-9 Stock pursuant to Section D.2(c) of this Article Fourth , the product of (x) the applicable Referential Per Share Value for such Transfer or Investor Distribution, and (y) the number of Class P Shares that were received by the holders of shares of Series A-9 Stock as a result of such automatic conversion; and (c) with respect to a concurrent Transfer or Investor Distribution of Class P Shares that results in the automatic conversion of shares of Series A-9 Stock pursuant to Section D.2(c) of this Article Fourth , the product of (x) the applicable Referential Per Share Value for such concurrent Transfer or Investor Distribution, and (y) the number of Class P Shares that are to be received by the holders of shares of Series A-9 Stock as a result of such automatic conversion; (d) the Pre-Incorporation Distribution Amount with respect to such Series A-9 Stock; and (e) the Series C Total Value for the Series C-9 Stock.
 
“ Series A-1 Stock ” shall have the meaning set forth in Section A.2 of this Article Fourth .
 
“ Series A-2 Stock ” shall have the meaning set forth in Section A.2 of this Article Fourth .
 
“ Series A-3 Stock ” shall have the meaning set forth in Section A.2 of this Article Fourth .
 
“ Series A-4 Stock ” shall have the meaning set forth in Section A.2 of this Article Fourth .
 
“ Series A-5 Stock ” shall have the meaning set forth in Section A.2 of this Article Fourth .
 
“ Series A-6 Stock ” shall have the meaning set forth in Section A.2 of this Article Fourth .
 

 
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“ Series A-7 Stock ” shall have the meaning set forth in Section A.2 of this Article Fourth .
 
“ Series A-8 Stock ” shall have the meaning set forth in Section A.2 of this Article Fourth .
 
“ Series A-9 Stock ” shall have the meaning set forth in Section A.2 of this Article Fourth .
 
“ Series A-9 Stock Conversion Percentage ” shall mean a quotient, expressed as a percentage, obtained by dividing (A) the aggregate number of Class P Shares issued to holders of shares of Series A-9 Stock as of the date of the notice delivered pursuant to Section D.2(a)(vi) of this Article Fourth by (B) the Total Number of Conversion Shares set forth opposite the Series A-9 Stock in the second sentence of the definition of “Total Number of Conversion Shares,” (taking into account any adjustments to the Total Number of Conversion Shares in respect of the Series A-9 Stock pursuant to Section F.1 of this Article Fourth ).
 
“ Series B Total Value ” shall mean, as applicable:
 
(i)           with respect to any particular Class B Series (other than the Series B-9 Stock), as of the time of determination thereof, the sum of (a) the amount of all Distributions paid in cash and the Fair Market Value of all Distributions paid in property other than cash that previously were paid or are paid concurrently on such Class B Series pursuant to Section C.3 of this Article Fourth and (b) in a case where shares of such Class B Series previously were converted into Class P Shares due to a Voluntary Conversion by a holder of the corresponding Class A Series, an amount equal to the product of the number of Class P Shares received by holders of shares of such Class B Series in such conversion and (1) the weighted average per share Net Sale Proceeds received by the holder of such Class A Series on the Transfer of the Class P Shares received upon such Voluntary Conversion as set forth in the related Conversion Notice or Conversion Instructions, as applicable, or (2) the Investor Distribution Per Share Value in connection with an Investor Distribution of the Class P Shares received upon such Voluntary Conversion as set forth in the related Conversion Notice or Conversion Instructions, as applicable; and
 
(ii)           with respect to Series B-9 Stock, as of the time of determination thereof, the sum of (a) the amount of all Distributions paid in cash and the Fair Market Value of all Distributions paid in property other than cash that previously were paid or are paid concurrently on such Series B-9 Stock pursuant to Section C.3 of this Article Fourth and (b) in a case where shares of Series B-9 Stock were previously converted into Class P Shares due to an automatic conversion of shares of Series A-9 Stock pursuant to Section D.2(c) of this Article Fourth , an amount equal to the product of the number of Class P Shares received by holders of shares of Series B-9 Stock in each such conversion and the applicable Referential Per Share Value for the applicable previous Transfer or Investor Distribution of Class P Shares that resulted in such automatic conversion of shares of Series A-9 Stock pursuant to Section D.2(c) of this Article Fourth .
 
“ Series B-1 Stock ” shall have the meaning set forth in Section A.3 of this Article Fourth .
 
“ Series B-2 Stock ” shall have the meaning set forth in Section A.3 of this Article Fourth .
 

 
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“ Series B-3 Stock ” shall have the meaning set forth in Section A.3 of this Article Fourth .
 
“ Series B-4 Stock ” shall have the meaning set forth in Section A.3 of this Article Fourth .
 
“ Series B-5 Stock ” shall have the meaning set forth in Section A.3 of this Article Fourth .
 
“ Series B-6 Stock ” shall have the meaning set forth in Section A.3 of this Article Fourth .
 
“ Series B-7 Stock ” shall have the meaning set forth in Section A.3 of this Article Fourth .
 
“ Series B-8 Stock ” shall have the meaning set forth in Section A.3 of this Article Fourth .
 
“ Series B-9 Stock ” shall have the meaning set forth in Section A.3 of this Article Fourth .
 
“ Series C Distribution Percentage ” shall mean, as of the time of determination thereof, with respect to a particular Class C Series, the number (expressed as a percentage) equal to the product of: (i) the Classes A/B/C Distribution Percentage, (ii) the quotient obtained by dividing (A) the Total Number of Conversion Shares for the Related Series, by (B) the sum of the Total Number of Conversion Shares for all Series in the aggregate and (iii) the Class C Percentage for such Class C Series.
 
“ Series C Total Value ” shall mean, with respect to any particular Class C Series, as of the time of determination thereof, the sum of (a) the amount of all Distributions paid in cash and the Fair Market Value of all Distributions paid in property other than cash that previously were paid or are paid concurrently on such Class C Series pursuant to Section C.4 of this Article Fourth ; (b) in each case where shares of such Class C Series previously were converted into Class P Shares due to a Voluntary Conversion by a holder of the corresponding Class A Series, an amount equal to the product of the number of Class P Shares received by holders of shares of such Class C Series in each such conversion and (1) the weighted average per share Net Sale Proceeds received by the holder of such Class A Series on the Transfer of the Class P Shares received upon the applicable Voluntary Conversion as set forth in the related Conversion Notice or Conversion Instructions, as applicable, or (2) the Investor Distribution Per Share Value in connection with an Investor Distribution of the Class P Shares received upon the applicable Voluntary Conversion as set forth in the related Conversion Notice or Conversion Instructions, as applicable; and (c) in each case where shares of Class C Series are concurrently being converted into Class P Shares due to a Voluntary Conversion by a holder of the corresponding Class A Series, an amount equal to the product of the number of Class P Shares received by holders of shares of such Class C Series in such conversion and (1) the weighted average per share Net Sale Proceeds received by the holder of such Class A Series on the Transfer of the Class P Shares received upon such Voluntary Conversion as set forth in the related Conversion Notice or Conversion Instructions, as applicable, or (2) the Investor Distribution Per Share Value in connection with an Investor Distribution of the Class P Shares received upon such Voluntary Conversion as set forth in the related Conversion Notice or Conversion Instructions, as applicable, as the case may be.
 
“ Series C-1 Stock ” shall have the meaning set forth in Section A.4 of this Article Fourth .
 
“ Series C-2 Stock ” shall have the meaning set forth in Section A.4 of this Article Fourth .
 

 
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“ Series C-3 Stock ” shall have the meaning set forth in Section A.4 of this Article Fourth .
 
“ Series C-4 Stock ” shall have the meaning set forth in Section A.4 of this Article Fourth .
 
“ Series C-5 Stock ” shall have the meaning set forth in Section A.4 of this Article Fourth .
 
“ Series C-6 Stock ” shall have the meaning set forth in Section A.4 of this Article Fourth .
 
“ Series C-7 Stock ” shall have the meaning set forth in Section A.4 of this Article Fourth .
 
“ Series C-8 Stock ” shall have the meaning set forth in Section A.4 of this Article Fourth .
 
“ Series C-9 Stock ” shall have the meaning set forth in Section A.4 of this Article Fourth .
 
“ Shareholders Agreement ” shall mean the Shareholders Agreement dated as of February 10, 2011, among the Company and the holders of shares of Common Stock specified therein, as may be amended from time to time in accordance therewith.
 
“ Specified Accelerated Conversion Date ” shall mean, for any Series, the date (which shall be a Business Day) selected by the holders of shares of such Class A Series and Class B Series representing two-thirds of the Class A Shares then issued and outstanding for such Class A Series and two-thirds of the Class B Shares then issued and outstanding for such Class B Series, respectively, to be the Mandatory Conversion Date for purposes of Section D.1 of this Article Fourth , as set forth in the written notice of such holders delivered to the Company at least one (1) Business Day immediately prior to such selected date; provided , that in no event shall there be a Specified Accelerated Conversion Date in respect of the Series A-6 Stock prior to the earlier of (x) the time that a Specified Accelerated Conversion Date has occurred (or is occurring concurrently) in respect of at least two (2) of the following clauses: (i) Series A-1 Stock and/or Series A-2 Stock, (ii) Series A-3 Stock, (iii) Series A-4 Stock and (iv) Series A-5 Stock or (y) the time that all Class A Shares have been voluntarily converted in accordance with Section D.2(a) of this Article Fourth in respect of the following: (i) Series A-1 Stock, (ii) Series A-2 Stock, (iii) Series A-3 Stock, (iv) Series A-4 Stock and (v) Series A-5 Stock.
 
 
“ Subject Class A Shares ” shall have the meaning set forth in Section D.2(a)(x) of this Article Fourth .
 
 
“ Subject Class P Shares ” shall have the meaning set forth in Section D.2(a)(x) of this Article Fourth .
 
 
“ Subject Distribution ” shall have the meaning set forth in Section D.2(a)(x) of this Article Fourth .
 
“ Tender Offer Consideration Event ” shall have the meaning set forth in Section D.2(a)(v) of this Article Fourth .
 
“ Total Number of Conversion Shares ” shall mean, as of the time of determination thereof, and subject to increase pursuant to Section  D.2(a)(viii) of this Article Fourth , the aggregate number
 

 
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of Class P Shares that may be issued upon conversion in full of all shares of a particular Series that are outstanding as of such date.  The Total Number of Conversion Shares for each Series initially shall be the number set forth below and shall be reduced by the cumulative number of Class P Shares that are issued upon conversion of any shares of such Series in accordance with the provisions of Section D of this Article Fourth :
 
Series A-1, B-1, C-1
143,074,656 shares
Series A-2, B-2, C-2
35,390,780 shares
Series A-3, B-3, C-3
112,870,410 shares
Series A-4, B-4, C-4
78,821,388 shares
Series A-5, B-5, C-5
78,821,388 shares
Series A-6, B-6, C-6
216,538,834 shares
Series A-7, B-7, C-7
5,761,863 shares
Series A-8, B-8, C-8
31,178,252 shares
Series A-9, B-9, C-9
4,542,429 shares
   
“ Total Value ” shall mean, with respect to any particular Series, as of the time of determination thereof, the sum of the Series A Total Value and the Series B Total Value, in each case with respect to such Series.
 
“ Transfer ” shall mean, as a verb, to sell for value in public or private transactions, including, without limitation, by selling in underwritten or other public offerings, by engaging in privately -negotiated or open market sales, or in any tender offer, and, as a noun, shall have a correlative meaning.
 
“ Transfer Agent ” shall mean ComputerShare Trust Co. or any successor thereto or any other transfer agent approved by the board of directors of the Company.
 
“ Voluntary Conversion ” shall mean a conversion of Class A Shares into Class P Shares pursuant to Section D.2(a) of this Article Fourth prior to the Mandatory Conversion Date.
 
“ VWAP ” shall mean the volume weighted average price, calculated to the nearest one-hundredth of one cent ($0.0001), of the applicable security on the primary national securities exchange on which such security is listed for trading (based on “regular way” trading on such primary exchange only, as reported by Bloomberg L.P. or, if not reported thereby, by another authoritative source mutually agreed by the parties).
 
C.   Distributions
 
1.   Distributions on Common Stock
 
When and if declared by the board of directors of the Company out of assets legally available therefor, and subject to any prior rights of Preferred Stock, the Class P Shareholders shall be entitled to receive, as a class, the percentage of any Distribution equal to the Class P Distribution Percentage as of the record date for such Distribution.  The amount of any such Distribution to be received by the Class P Shareholders shall be distributed ratably, among the Class P Shareholders as of the record date for such Distribution, on a per share basis.
 

 
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When and if declared by the board of directors of the Company out of assets legally available therefor, and subject to any prior rights of Preferred Stock, the Class A Shareholders, Class B Shareholders and Class C Shareholders shall be entitled to receive, collectively, the percentage of any Distribution equal to the Classes A/B/C Distribution Percentage as of the record date for such Distribution, which shall be distributed to the Class A Shareholders, Class B Shareholders and Class C Shareholders as set forth in Sections C.2 , C.3 and C.4 of this Article Fourth .
 
2.   Class A Common Stock
 
Holders of shares of each Class A Series shall be entitled to receive the portion of any Distribution determined in accordance with paragraphs (a) through (f) of this Section C.2 , beginning with paragraph (a); provided , that holders of shares of Series A-6 Stock shall also be subject to paragraph (g).  For example, if a Distribution would result in the payment of amounts to a Class A Shareholder under both paragraph (c) and (d) of this Section C.2 , then such Class A Shareholder shall first receive any Distributions payable under paragraph (c) and shall next receive any Distributions payable under paragraph (d).
 
(a)   Unless and until the 100% Threshold has been satisfied for the Related Series, the holders of shares of such Class A Series shall be entitled to receive, as a series, the percentage of such Distribution equal to the sum of (x) the Series A Distribution Percentage for such Class A Series and (y) the Series C Distribution Percentage for the corresponding Class C Series, in each case as of the record date for such Distribution; provided , however , that holders of shares of such Class A Series shall not receive any Distributions under this Section C.2(a) during the Class B Priority Dividend Period until the holders of shares of the corresponding Class B Series shall have received a cumulative amount of Distributions during the Class B Priority Dividend Period equal to the product of (i) the Maximum Class B Priority Distributions and (ii) the Base Distribution Percentage for such Class A Series.  The amount of such Distribution, if any, to be received by the holders of shares of such Class A Series pursuant to this paragraph (a) shall be distributed ratably, among such holders as of the record date for such Distribution, on a per share basis.
 
(b)   Once the 100% Threshold has been satisfied for the Related Series (and unless and until the 150% Threshold has been satisfied for the Related Series), the holders of shares of such Class A Series shall be entitled to receive, as a series, the percentage of such Distribution (to the extent, if any, not previously distributed) equal to the Series A Distribution Percentage for such Class A Series as of the record date for such Distribution; provided , however , that holders of shares of such Class A Series shall not receive any Distributions under this Section C.2(b) during the Class B Priority Dividend Period until the holders of shares of the corresponding Class B Series shall have received a cumulative amount of Distributions during the Class B Priority Dividend Period equal to the product of (i) the Maximum Class B Priority Distributions and (ii) the Base Distribution Percentage for such Class A Series.  The amount of such
 

 
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Distribution, if any, to be received by the holders of shares of such Class A Series pursuant to this paragraph (b) shall be distributed ratably, among such holders as of the record date for such Distribution, on a per share basis.
 
(c)   Once the 150% Threshold has been satisfied for the Related Series (and unless and until the Series A Total Value for the Related Series equals or exceeds 150% of the Aggregate Base Amount for the Related Series), the holders of shares of such Class A Series shall be entitled to receive, as a series, the percentage of such Distribution (to the extent, if any, not previously distributed) equal to the Series A Distribution Percentage for such Class A Series as of the record date for such Distribution.  The amount of such Distribution, if any, to be received by the holders of shares of such Class A Series pursuant to this paragraph (c) shall be distributed ratably, among such holders as of the record date for such Distribution, on a per share basis.  Once the Series A Total Value for the Related Series equals or exceeds 150% of the Aggregate Base Amount for the Related Series, the holders of shares of such Class A Series shall not be entitled to receive any portion of any further Distribution, to the extent such Distribution would cause the Series A Total Value for the Related Series to exceed 150% of the Aggregate Base Amount for the Related Series, until the First Catch-Up Threshold for the corresponding Class B Series has been satisfied.
 
(d)   Once the Series A Total Value for the Related Series equals or exceeds 150% of the Aggregate Base Amount for the Related Series and the First Catch-Up Threshold has been satisfied for the corresponding Class B Series (and unless and until the 200% Threshold has been satisfied for the Related Series), the holders of shares of such Class A Series shall be entitled to receive, as a series, the percentage of such Distribution (to the extent, if any, not previously distributed) equal to 95% of the Series A Distribution Percentage for such Class A Series as of the record date for such Distribution.  The amount of such Distribution to be received by the holders of shares of such Class A Series pursuant to this paragraph (d) shall be distributed ratably, among such holders as of the record date for such Distribution, on a per share basis.  Once the 200% Threshold has been satisfied for the Related Series, the holders of shares of such Class A Series shall not be entitled to receive any portion of any further Distribution, to the extent such Distribution would cause the Total Value for the Related Series to exceed 200% of the Aggregate Base Amount for the Related Series, until the Second Catch-Up Threshold for the corresponding Class B Series has been satisfied.
 
(e)   Once the 200% Threshold has been satisfied for the Related Series, and the Second Catch-Up Threshold has been satisfied for the corresponding Class B Series (and unless and until the 400% Threshold has been satisfied for the Related Series), the holders of shares of such Class A Series shall be entitled to receive, as a series, the portion of such Distribution (to the extent, if any, not previously distributed) equal to the excess of (i) the product of the amount of such Distribution and the Series A Distribution Percentage for such Class A Series as
 

 
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of the record date for such Distribution over (ii) the amount of such Distribution to which the holders of shares of the corresponding Class B Series are entitled pursuant to Section C.3(e)(i) of this Article Fourth .  The amount of such Distribution to be received by the holders of shares of such Class A Series pursuant to this paragraph (e) shall be distributed ratably, among such holders as of the record date for such Distribution, on a per share basis.
 
(f)   Once the 400% Threshold has been satisfied for the Related Series, the holders of shares of such Class A Series shall be entitled to receive, as a series, the percentage of such Distribution (to the extent, if any, not previously distributed) equal to 80% of the Series A Distribution Percentage for such Class A Series as of the record date for such Distribution.  The amount of such Distribution to be received by the holders of shares of such Class A Series pursuant to this paragraph (f) shall be distributed ratably, among such holders as of the record date for such Distribution, on a per share basis.
 
(g)   Notwithstanding the other provisions of this Section C.2 , the holders of shares of Series A-6 Stock shall not be entitled to receive any Distributions unless and until the aggregate amount of Distributions payable in cash and the Fair Market Value of all distributions payable in property other than cash that would be received by such holders pursuant to this Section C.2 (but for this paragraph (g)) equals or exceeds the Incentive Pool Threshold.
 
3.   Class B Common Stock
 
Holders of shares of each Class B Series shall be entitled to receive the portion of any Distribution determined in accordance with paragraphs (a) through (f) of this Section C.3 , beginning with paragraph (a).  For example, if a Distribution would result in the payment of amounts to a Class B Shareholder under both paragraph (c) and (d) of this Section C.3 , then such Class B Shareholder shall first receive any Distributions payable under paragraph (c) and shall next receive any Distributions payable under paragraph (d).
 
(a)   Unless and until the 150% Threshold has been satisfied for the Related Series, if such Distribution is paid during the Class B Priority Dividend Period, the holders of shares of such Class B Series shall be entitled to receive, as a series, the percentage of such Distribution equal to the sum of (x) the Series A Distribution Percentage for such Class A Series and (y) the Series C Distribution Percentage for such Class C Series, each as of the record date for such Distribution; provided , however , that the amount of Distributions that the holders of shares of such Class B Series shall be entitled to receive pursuant to this Section C.3(a) during the Class B Priority Dividend Period, when aggregated with all Class B Priority Distributions previously received by holders of shares of such  Class B Series, shall not exceed a cumulative amount equal to the product of (i) the Maximum Class B Priority Distributions and (ii) the Base Distribution Percentage for such Class A Series.  The amount of such Distribution to be received by the holders of shares of such Class B Series pursuant to this paragraph
 

 
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(a) shall be distributed ratably, among such holders as of the record date for such Distribution, on a per share basis.  Once the 150% Threshold has been satisfied for the Related Series, the holders of shares of such Class B Series shall not be entitled to receive any portion of any further Distribution until the Series A Total Value for the Related Series equals or exceeds 150% of the Aggregate Base Amount for the Related Series.
 
(b)   Once the Series A Total Value for the Related Series equals or exceeds 150% of the Aggregate Base Amount for the Related Series, but the First Catch-Up Threshold has not been satisfied for such Class B Series, the holders of shares of such Class B Series shall be entitled to receive, as a series, the percentage of such Distribution (to the extent, if any, not previously distributed) equal to the sum of (x) the Series A Distribution Percentage for such Class A Series and (y) the Series C Distribution Percentage for such Class C Series, each as of the record date for such Distribution until the First Catch-Up Threshold has been satisfied for such Class B Series.  The amount of such Distribution to be received by the holders of shares of such Class B Series pursuant to this paragraph (b) shall be distributed ratably, among such holders as of the record date for such Distribution, on a per share basis.
 
(c)   Once the 150% Threshold has been satisfied for the Related Series and the First Catch-Up Threshold has been satisfied for such Class B Series (and unless and until the 200% Threshold has been satisfied for the Related Series), the holders of shares of such Class B Series shall be entitled to receive, as a series, the percentage of such Distribution (to the extent, if any, not previously distributed) equal to 5% of the sum of (x) the Series A Distribution Percentage for such Class A Series and (y) the Series C Distribution Percentage for such Class C Series, each as of the record date for such Distribution.  The amount of such Distribution to be received by the holders of shares of such Class B Series pursuant to this paragraph (c) shall be distributed ratably, among such holders as of the record date for such Distribution, on a per share basis.
 
(d)   Once the 200% Threshold has been satisfied for the Related Series, but the Second Catch-Up Threshold has not been satisfied for such Class B Series, the holders of shares of such Class B Series shall be entitled to receive, as a series, the percentage of such Distribution (to the extent, if any, not previously distributed) equal to the sum of (x) the Series A Distribution Percentage for such Class A Series and (y) the Series C Distribution Percentage for such Class C Series, each as of the record date for such Distribution until the Second Catch-Up Threshold has been satisfied for such Class B Series.  The amount of such Distribution to be received by the holders of shares of such Class B Series pursuant to this paragraph (d) shall be distributed ratably, among such holders as of the record date for such Distribution, on a per share basis.
 
(e)   Once the 200% Threshold has been satisfied for the Related Series and the Second Catch-Up Threshold has been satisfied for such Class B Series
 

 
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  (and unless and until the 400% Threshold has been satisfied for the Related Series), the holders of shares of such Class B Series shall be entitled to receive, asa series, a percentage of such Distribution (to the extent, if any, not previously distributed) such that the Series B Total Value equals the sum of (i) the product of (A) the excess of the Total Value for the Related Series over the Aggregate Base Amount for the Related Series and (B) the 10%-20% Distribution Percentage and (C) the Class A Percentage, as of the record date for such Distribution and (ii) the product of (A) the excess of the Total Value for the Related Series over the Aggregate Base Amount for the Related Series and (B) the 10%-20% Distribution Percentage and (C) the Class C Percentage, as of the record date for such Distribution.  The amount of such Distribution to be received by the holders of shares of such Class B Series pursuant to this paragraph (e) shall be distributed ratably, among such holders as of the record date for such Distribution, on a per share basis.
 
(f)   Once the 400% Threshold has been satisfied for the Related Series, the holders of shares of such Class B Series shall be entitled to receive, as a series, the percentage of such Distribution (to the extent, if any, not previously distributed) that equals 20% of the sum of (x) the Series A Distribution Percentage with respect to such Class A Series and (y) the Series C Distribution Percentage with respect to such Class C Series, each as of the record date for such Distribution.  The amount of such Distribution to be received by the holders of shares of such Class B Series pursuant to this paragraph (f) shall be distributed ratably, among such holders as of the record date for such Distribution, on a per share basis.
 
4.   Class C Common Stock
 
Holders of shares of each Class C Series shall be entitled to receive the portion of any Distribution determined in accordance with paragraphs (a) through (f) of this Section C.4 , beginning with paragraph (a).  For example, if a Distribution would result in the payment of amounts to a Class C Shareholder under both paragraph (c) and (d) of this Section C.4 , then such Class C Shareholder shall first receive any Distributions payable under paragraph (c) and shall next receive any Distributions payable under paragraph (d).
 
(a)   Unless and until the 100% Threshold has been satisfied for the Related Series, the holders of shares of such Class C Series shall not be entitled to receive any Distributions.
 
         (b)   Once the 100% Threshold has been satisfied for the Related Series (and unless and until the 150% Threshold has been satisfied for the Related Series), the holders of shares of such Class C Series shall be entitled to receive, as a series, the percentage of such Distribution (to the extent, if any, not previously distributed) equal to the Series C Distribution Percentage for such Class C Series as of the record date for such Distribution; provided, however, that holders of shares of such Class C Series shall not receive any Distributions under this
 

 
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  Section C.4(b) during the Class B Priority Dividend Period until the holders of shares of the corresponding Class B Series shall have received a cumulative amount of Distributions during the Class B Priority Dividend Period equal to the product of (i) the Maximum Class B Priority Distributions and (ii) the Base Distribution Percentage for the corresponding Class A Series.  The amount of such Distribution, if any, to be received by the holders of shares of such Class C Series pursuant to this paragraph (b) shall be distributed ratably, among such holders as of the record date for such Distribution, on a per share basis.
 
(c)   Once the 150% Threshold has been satisfied for the Related Series (and unless and until the Series A Total Value for the Related Series equals or exceeds 150% of the Aggregate Base Amount for the Related Series), the holders of shares of such Class C Series shall be entitled to receive, as a series, the percentage of such Distribution (to the extent, if any, not previously distributed) equal to the Series C Distribution Percentage for such Class C Series as of the record date for such Distribution.  The amount of such Distribution, if any, to be received by the holders of shares of such Class C Series pursuant to this paragraph (c) shall be distributed ratably, among such holders as of the record date for such Distribution, on a per share basis.  Once the Series A Total Value for the Related Series equals or exceeds 150% of the Aggregate Base Amount for the Related Series, the holders of shares of such Class C Series shall not be entitled to receive any portion of any further Distribution, to the extent such Distribution would cause the Series A Total Value for the Related Series to exceed 150% of the Aggregate Base Amount for the Related Series, until the First Catch-Up Threshold for the corresponding Class B Series has been satisfied.
 
(d)   Once the Series A Total Value for the Related Series equals or exceeds 150% of the Aggregate Base Amount for the Related Series and the First Catch-Up Threshold has been satisfied for the corresponding Class B Series (and unless and until the 200% Threshold has been satisfied for the Related Series), the holders of shares of such Class C Series shall be entitled to receive, as a series, the percentage of such Distribution (to the extent, if any, not previously distributed) equal to 95% of the Series C Distribution Percentage for such Class C Series as of the record date for such Distribution.  The amount of such Distribution to be received by the holders of shares of such Class C Series pursuant to this paragraph (d) shall be distributed ratably, among such holders as of the record date for such Distribution, on a per share basis.  Once the 200% Threshold has been satisfied for the Related Series, the holders of shares of such Class C Series shall not be entitled to receive any portion of any further Distribution, to the extent such Distribution would cause the Total Value for the Related Series to exceed 200% of the Aggregate Base Amount for the Related Series, until the Second Catch-Up Threshold for the corresponding Class B Series has been satisfied.
 
(e)   Once the 200% Threshold has been satisfied for the Related Series, and the Second Catch-Up Threshold has been satisfied for the corresponding Class B Series (and unless and until the 400% Threshold has been satisfied for the
 

 
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Related Series), the holders of shares of such Class C Series shall be entitled to receive, as a series, the portion of such Distribution (to the extent, if any, not previously distributed) equal to the excess of (i) the product of the amount of such Distribution and the Series C Distribution Percentage for such Class C Series as of the record date for such Distribution over (ii) the amount of such Distribution to which the holders of shares of the corresponding Class B Series are entitled pursuant to Section  C.3(e)(ii) of this Article Fourth .  The amount of such Distribution to be received by the holders of shares of such Class C Series pursuant to this paragraph (e) shall be distributed ratably, among such holders as of the record date for such Distribution, on a per share basis.
 
(f)   Once the 400% Threshold has been satisfied for the Related Series, the holders of shares of such Class C Series shall be entitled to receive, as a series, the percentage of such Distribution (to the extent, if any, not previously distributed) equal to 80% of the Series C Distribution Percentage for such Class C Series as of the record date for such Distribution.  The amount of such Distribution to be received by the holders of shares of such Class C Series pursuant to this paragraph (f) shall be distributed ratably, among such holders as of the record date for such Distribution, on a per share basis.
 
5.   For clarity, a Distribution can cause an applicable threshold described above in Section C.2 , Section C.3 or Section C.4 of this Article Fourth to be met and/or exceeded, and the use of the term “satisfied” in such Sections does not require a Distribution to cause an applicable threshold only to be exactly met (in contrast to possibly also being exceeded) in order for such threshold to have been satisfied.
 
D.   Conversion of Class A Common Stock, Class B Common Stock and Class C Common Stock
 
1.   Mandatory Conversion of Class A Common Stock, Class B Common Stock and Class C Common Stock
 
(a)   Determinations of Mandatory Conversion Date Values .  As soon as practicable following the close of business on a Mandatory Conversion Date (other than a Change of Control Mandatory Acceleration Date), the Company shall (i) determine the Mandatory Conversion Date Per Share Value and the Mandatory Conversion Date Value with respect to each applicable Series and (ii) provide written notice (the “ Mandatory Conversion Date Notice ”) to all holders of shares of each applicable Series of such determinations and such other determinations as required by Section D.1 of this Article Fourth (collectively the “ Mandatory Conversion Date Determinations ”), together with all information relevant to such determinations.  The Mandatory Conversion Date Determinations as set forth in the Mandatory Conversion Date Notice shall be made by the Company and shall be final, binding and conclusive unless a notice of objection is delivered in accordance with the immediately following sentence.  The holders of (A) a majority of the shares then issued and outstanding of one or more Class A
 

 
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  Series and/or (B) Class B Shares representing a majority of the Class B Shares then issued and outstanding may deliver a notice of objection in writing to the Company (a “ Mandatory Conversion Date Objection Notice ”) to the Mandatory Conversion Date Determinations as set forth in the Mandatory Conversion Date Notice prior to the close of business on the first (1st) Business Day following receipt of the Mandatory Conversion Date Notice; provided , however , that if such Mandatory Conversion Date is only in respect of one or more, but not all, Series, the reference in (A) above shall only be to holders of a majority of the Class A Shares then issued and outstanding of such applicable Class A Series.  If (x) the holders of a majority of the shares then issued and outstanding of each Class A Series (other than the Class A Series in respect of Series A-9 Stock), determined as if the shares of Series A-1 Stock and Series A-2 Stock constituted a single Class A Series, and (y) the Class B Shareholders representing a majority of the Class B Shares then issued and outstanding are unable to agree upon such Mandatory Conversion Date Determinations within two (2) calendar days after delivery of such Mandatory Conversion Date Objection Notice (or such longer period as may be agreed by such Class A Shareholders and such Class B Shareholders), then (1) the Investor Shareholders representing a majority of the Class A Shares then held by the Investor Shareholders and (2) the Class B Shareholders representing a majority of the Class B Shares then issued and outstanding, as the two designated parties with respect to the dispute, shall enter into the Appraisal Procedure; provided , however , that if such Mandatory Conversion Date is only in respect of one or more, but not all, Series, the reference in (x) above shall only be to holders of a majority of the Class A Shares then issued and outstanding of such applicable Class A Series, and the reference in (1) above shall be to holders of a majority of the Class A Shares then issued and outstanding of such applicable Class A Series.
 
(b)   Mandatory Conversion of Class A Shares .  As of the close of business on the Final Conversion Date, the shares of each applicable Class A Series shall automatically convert, without further action on the part of the holders thereof, into a number of Class P Shares equal to the quotient obtained by dividing (i) the Class A Maximum Amount for such Class A Series by (ii) the Mandatory Conversion Date Per Share Value. For clarification, no Class A Shares of a particular Series will remain outstanding after the occurrence of the Final Conversion Date for the Related Series.  The Class P Shares received by holders of Class A Shares in a Series pursuant to the conversion in this Section D.1(b) shall be issued ratably, among such Class A Shareholders on a per share basis.
 
(c)   Mandatory Conversion of Class B Shares .  As of the close of business on the Final Conversion Date, the shares of each applicable Class B Series shall automatically convert, without further action on the part of the holders thereof, into a number of Class P Shares equal to the quotient obtained by dividing (i) the Class B Maximum Amount for such Class B Series by (ii) the Mandatory Conversion Date Per Share Value.  For clarification, no Class B Shares of a particular Series will remain outstanding after the occurrence of the
 

 
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  Final Conversion Date for the Related Series. The Class P Shares received by holders of Class B Shares in a Series pursuant to the conversion in this Section D.1(c) shall be issued ratably, among such Class B Shareholders on a per share basis.
 
(d)   Mandatory Conversion of Class C Shares .  As of the close of business on the Final Conversion Date, the shares of each applicable Class C Series shall automatically convert, without further action on the part of the holders thereof, into a number of Class P Shares equal to the quotient obtained by dividing (i) the Class C Maximum Amount for such Class C Series by (ii) the Mandatory Conversion Date Per Share Value.  For clarification, no Class C Shares of a particular Series will remain outstanding after the occurrence of the Final Conversion Date for the Related Series.  The Class P Shares received by holders of Class C Shares in a Series pursuant to the conversion in this Section D.1(d) shall be issued ratably, among such Class C Shareholders on a per share basis.
 
(e)   Change of Control Mandatory Acceleration Date .
 
(i)   Except as provided in Section D.1(e)(iv) of this Article Fourth , the unanimous vote of all holders of Common Stock shall be required to approve a Change of Control unless the Company ensures that, as a condition precedent to the consummation of a Change of Control, (A) all holders of shares of each Series, subject to clause (C) below, receive in such Change of Control the same cash and/or non-cash consideration in respect of such holders’ Class P Shares to be received upon conversion of such holders’ Class A Shares, Class B Shares and Class C Shares pursuant to this Section D.1(e) as all other Class P Shareholders, (B) all holders of shares, as such, of each Series are otherwise treated in an identical manner, and participate on the same basis, in such Change of Control as Class P Shareholders on the basis of the Total Number of Conversion Shares for such Series and (C) in the event that the Class P Shareholders have the opportunity to elect the form of consideration to be received in such Change of Control, the Class A Shareholders of each Series have an equivalent opportunity to so elect and the election of the Class A Shareholders of an applicable Series that represent a majority of the issued and outstanding Class A Shares of the Related Series shall apply to all Class A Shares, Class B Shares and Class C Shares in the Related Series (and if the Company so ensures, then the unanimity requirement stated above shall no longer apply and in lieu thereof the regular approval requirement that would otherwise be applicable shall apply instead).
 
(ii)   Except as provided in Section D.1(e)(iv) of this Article Fourth , immediately prior to the consummation of such Change of Control (unless a Change of Control Objection Notice is delivered
 

 
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pursuant to Section D.1(e)(iii) of this Article Fourth , in which case immediately following the final determination of the Change of Control Determinations in accordance with Section D.1(e)(iii) of this Article Fourth ), (A) the shares of each applicable Class A Series shall automatically convert, without further action on the part of the holders thereof, into a number of Class P Shares equal to the quotient obtained by dividing (x) the Class A Maximum Amount for such Class A Series by (y) the Mandatory Conversion Date Per Share Value, (B) the shares of each applicable Class B Series shall automatically convert, without further action on the part of the holders thereof, into a number of Class P Shares equal to the quotient obtained by dividing (x) the Class B Maximum Amount for such Class B Series by (y) the Mandatory Conversion Date Per Share Value and (C) the shares of each applicable Class C Series shall automatically convert, without further action on the part of the holders thereof, into a number of Class P Shares equal to the quotient obtained by dividing (x) the Class C Maximum Amount for such Class C Series by (y) the Mandatory Conversion Date Per Share Value; provided , that the Company shall ensure that, as a condition precedent to such automatic conversions and the consummation of such Change of Control, such Change of Control is structured to enable the Company to provide advance written notice (the “ Change of Control Notice ”) in accordance with Section D.1(e)(iii) of this Article Fourth to all holders of shares of each applicable Series of the determinations required by this paragraph (e)(ii) (the “ Change of Control Determinations ”), together with all information relevant to such determinations.  The Class P Shares received by holders of Class A Shares in a Series pursuant to the conversion in this Section D.1(e)(ii) shall be issued ratably, among such Class A Shareholders on a per share basis.  The Class P Shares received by holders of Class B Shares in a Series pursuant to the conversion in this Section D.1(e)(ii) shall be issued ratably, among such Class B Shareholders on a per share basis.  The Class P Shares received by holders of Class C Shares in a Series pursuant to the conversion in this Section D.1(e)(ii) shall be issued ratably, among such Class C Shareholders on a per share basis.
 
(iii)   The Change of Control Notice shall be delivered by the Company no later than 9:00 p.m., New York City time, on the trading day immediately preceding the date of the consummation of such Change of Control (which consummation shall not take place prior to 9:00 a.m., New York City time, on such date of consummation), and the Change of Control Determinations set forth in the Change of Control Notice shall be final, binding and conclusive unless the holders of (A) a majority of the shares then issued and outstanding of one or more Class A Series (other than the Class A Series in respect of Series A-9 Stock), for which purposes the Class A Series in respect of Series A-1 Stock and the Class A Series in respect of Series A-2 Stock shall be considered as a single Class A Series,
 

 
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and/or (B) Class B Shares representing a majority of the Class B Shares then issued and outstanding deliver a notice of objection in writing to the Company (a “ Change of Control Objection Notice ”) to the Change of Control Determinations set forth in the Change of Control Notice prior to 8:00 a.m., New York City time, on the date of the consummation of the Change of Control.  If a Change of Control Objection Notice is delivered in accordance with the preceding sentence and the holders described in clauses (A) and (B) of the preceding sentence are unable to agree upon such Change of Control Determinations within two (2) calendar days after delivery of such Change of Control Objection Notice (or such longer period as may be agreed by such Class A Shareholders and such Class B Shareholders), then (1) the Investor Shareholders representing a majority of the Class A Shares then held by the Investor Shareholders and (2) the Class B Shareholders representing a majority of the Class B Shares then issued and outstanding, as the two designated parties to the dispute, shall enter into the Appraisal Procedure.
 
 
(iv)   If, in addition to any other approvals required by this Certificate of Incorporation, the bylaws of the Company or applicable law, the requisite Class A Shareholders, Class B Shareholders and Class C Shareholders approve a Replicated Change of Control pursuant to Section 3.6(h)(i) of the Shareholders Agreement, the Class A Shares, Class B Shares and Class C Shares shall receive the consideration provided for such shares in such Replicated Change of Control and Sections D.1(e)(i) , (e)(ii) and (e)(iii) of this Article Fourth shall not apply with respect to such Replicated Change of Control; provided , that if, pursuant to Section 3.6(h)(i)(A) of the Shareholders Agreement, the requisite Class A Shareholders and Class B Shareholders approve a Replicated Change of Control and the requisite Class C Shareholders do not approve such Replicated Change of Control, the Class A Shares and the Class B Shares shall receive the consideration provided for the Class A Shares and the Class B Shares, respectively, in such Replicated Change of Control and Sections D.1(e)(i) , (e)(ii) and (e)(iii) of this Article Fourth shall not apply to the Class A Shares and Class B Shares with respect to such Replicated Change of Control, and Sections D.1(e)(i) , (e)(ii) and (e)(iii) of this Article Fourth shall apply to the Class C Shares unless the requisite Class C Shareholders elect to receive the consideration proposed in such Non-Cash Change of Control pursuant to Section 3.6(h)(i)(B) of the Shareholders Agreement, in which case the Class C Shares shall receive the consideration provided for the Class C Shares in such Non-Cash Change of Control and Sections D.1(e)(i) , (e)(ii) and (e)(iii) of this Article Fourth shall not apply to the Class C Shares with respect to such Non-Cash Change of Control; provided , further , that, regardless of whether or not the requisite Class B Shareholders and/or Class C Shareholders have approved a Replicated Change of Control pursuant to Section 3.6(h)(i) of the Shareholders Agreement, the requisite Class A
 

 
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Shareholders may elect to have Sections D.1(e)(i) , (e)(ii) and (e)(iii) of this Article Fourth apply to all Class A Shares, Class B Shares and Class C Shares with respect to such Non Cash Change of Control pursuant to Section 3.6(h)(ii) of the Shareholders Agreement.
 
(f)   Maximum Number of Conversion Shares .  For the avoidance of doubt, in no event shall the aggregate number of shares of a Series convert into a number of Class P Shares greater than the Total Number of Conversion Shares remaining for such Series as of (1) the Final Conversion Date, in the case of a Mandatory Conversion Date (other than a Change of Control Mandatory Acceleration Date) or (2) immediately prior to the consummation of the Change of Control, in the case of a Change of Control Mandatory Acceleration Date.
 
(g)   Pending Distributions .  In the event that a Final Conversion Date or a Change of Control Mandatory Acceleration Date occurs after the record date of a Distribution but prior to the payment of such Distribution, the automatic conversions contemplated in Sections D.1(b) , D.1(c) and D.1(d) of this Article Fourth , or D.1(e)(ii) of this Article Fourth , as applicable, and the calculations relating to such conversions, shall not occur until the Business Day immediately following the payment date of such Distribution.  For clarification, (i) none of the Final Mandatory Conversion Date Calculation Period, the Mandatory Conversion Date Value or the Mandatory Conversion Date Per Share Value relating to such Final Conversion Date or Change of Control Mandatory Acceleration Date shall be adjusted and (ii) such Distribution shall be reflected in the calculations of the Class A Maximum Amount, the Class B Maximum Amount and the Class C Maximum Amount (through such Distribution being reflected in the calculations of Series A Total Value, Series B Total Value and Series C Total Value).
 
2.   Voluntary Conversion of Class A Common Stock and Related Automatic Conversion of Class B Common Stock and Class C Common Stock Prior to Mandatory Conversion Date.
 
(a)   Voluntary Conversion of Class A Shares .  Prior to the Mandatory Conversion Date, a holder of shares of a Class A Series (other than Series A-9 Stock) shall be entitled, at any time and from time to time, to voluntarily convert each such share into a number of Class P Shares as determined below, subject to the following requirements:
 
(i)   Such holder (the “ Converting Holder ”) shall have provided written notice (each, a “ Conversion Notice ”) to the Company and the Transfer Agent indicating that such Converting Holder is converting shares of such Class A Series into the number of Class P Shares specified in the Conversion Notice in order to, as specified in such Conversion Notice, (x) other than pursuant to a tender offer, effect the Transfer of all such Class P Shares to be received upon such conversion (1) solely for cash (an “ All Cash Sale ”), which All Cash Sale must be executed (though
 

 
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  not closed), prior to or concurrently with the delivery of the Conversion Notice to the Company and the Transfer Agent or (2) other than solely for cash (a “ Non-Cash Sale ”), which Non-Cash Sale must be executed (though not closed), or be subject to a definitive agreement entered into, prior to or concurrently with the delivery of the Conversion Notice to the Company and the Transfer Agent, (y) tender all of such Class P Shares to be received upon such conversion into a tender offer that must be outstanding at the time of the delivery of the Conversion Notice to the Company and the Transfer Agent and (1) involves all cash consideration (an “ All Cash Tender Offer ”) or (2) does not involve all cash consideration (a “ Non-Cash Tender Offer ”), or (z) distribute or transfer all Class P Shares to be received upon such conversion pursuant to an Investor Distribution.  Such Conversion Notice shall set forth (A) the number of Class P Shares being Transferred (or transferred pursuant to an Investor Distribution), (B) in the case of an All Cash Sale, a Non-Cash Sale, an All Cash Tender Offer or a Non-Cash Tender Offer, the aggregate Net Sale Proceeds, and the weighted average per share Net Sale Proceeds with respect to the applicable Transfer (together with such supporting documentation as is reasonable under the circumstances regarding the calculation of aggregate and weighted average per share Net Sale Proceeds, including to enable the Company to determine the Fair Market Value of any non-cash consideration other than publicly traded securities (“ Illiquid Consideration ”)) and (C) in the case of an Investor Distribution, the Investor Distribution Per Share Value with respect to such Investor Distribution.
 
(ii)   Subject to Section D.2(a)(ii)(A) of this Article Fourth , in the case of an All Cash Sale, All Cash Tender Offer, Investor Distribution, Non-Cash Sale or Non-Cash Tender Offer (in the case of a Non-Cash Sale or a Non-Cash Tender Offer, in each case not involving Illiquid Consideration), no later than one (1) Business Day following receipt of a Conversion Notice, the Company shall provide written instructions to the Transfer Agent and the Converting Holder confirming the number of Class P Shares to be issued upon such Voluntary Conversion and the number of shares of the applicable Class A Series to be converted (the “ Conversion Instructions ”), and in the event of any discrepancy between the Conversion Notice and the Conversion Instructions, the Conversion Instructions shall control.  In the case of a Non-Cash Sale or a Non-Cash Tender Offer, in each case involving Illiquid Consideration, the Company shall provide, as promptly as practicable following the delivery of a Conversion Notice (and supporting documentation described in Section D.2(a)(i) of this Article Fourth ) to the Company and the Transfer Agent (but in no event later than five (5) Business Days following such delivery), written notice to the Converting Holder and the Class B Shareholders setting forth the Company’s determination of Fair Market Value of such Illiquid Consideration.  No later than one (1) Business Day after the Fair
 

 
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  Market Value of such Illiquid Consideration (and the corresponding calculation of Net Sale Proceeds) is finally determined in accordance with the definition of “Fair Market Value”, the Company shall provide written instructions (the “ Non-Cash Conversion Instructions ”) to the Transfer Agent and the Converting Holder confirming the number of Class P Shares to be issued pursuant to the Conversion Notice and the number of shares of the applicable Class A Series to be converted.  In the event of a discrepancy between the Conversion Notice and the Non-Cash Conversion Instructions, the Non-Cash Conversion Instructions shall control.
 
(A)   Notwithstanding anything to the contrary contained herein, the first sentence of Section D.2(a)(ii) shall not apply to any All Cash Sale, All Cash Tender Offer, Investor Distribution, Non-Cash Sale or Non-Cash Tender Offer (in the case of a Non-Cash Sale or a Non-Cash Tender Offer, in each case not involving Illiquid Consideration), and the conversions and issuances contemplated by clause (x) of Section D.2(a)(iii) of this Article Fourth shall occur immediately and automatically upon the delivery of the Conversion Notice (and supporting documentation described in Section D.2(a)(i) of this Article Fourth ) by the Converting Holder to the Transfer Agent and the Company, so long as such Conversion Notice in respect of such All Cash Sale, All Cash Tender Offer, Investor Distribution, Non-Cash Sale or Non-Cash Tender Offer, as applicable, (1) was delivered by the Converting Holder pursuant to Section D.2(a)(i) of this Article Fourth during a Periodic Sales Pre-Clearance Period for the applicable Class A Series (as determined pursuant to Section D.2(a)(ii)(C) of this Article Fourth ), (2) sets forth the weighted average of the Investor Distribution Per Share Value and per share Net Sale Proceeds for all All Cash Sales, All Cash Tender Offers, Investor Distributions, Non-Cash Sales or Non-Cash Tender Offers, as applicable, by such Converting Holder and all other holders of shares of the same Class A Series pursuant to Section D.2(a) of this Article Fourth during such Periodic Sales Pre-Clearance Period, such that the weighted average of the Investor Distribution Per Share Value and per share Net Sale Proceeds for all Investor Distributions and Transfers (considered as a group) by such Converting Holder and all other holders of shares of the same Class A Series pursuant to Section D.2(a) of this Article Fourth during such Periodic Sales Pre-Clearance Period (taking into account such current All Cash Sales, All Cash Tender Offers, Investor Distributions, Non-Cash Sales or Non-Cash Tender Offers, as applicable) falls within a Pre-Cleared Price, (3) sets forth a number of Class P Shares being Transferred (or transferred pursuant to an Investor Distribution) in connection with all such All Cash Sales, All Cash Tender Offers, Investor
 

 
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Distributions, Non-Cash Sales or Non-Cash Tender Offers, as applicable, such that the aggregate number of Class P Shares Transferred (or transferred pursuant to an Investor Distribution) by such Converting Holder and all other holders of shares of the same Class A Series pursuant to Section D.2(a) of this Article Fourth during such Periodic Sales Pre-Clearance Period (taking into account such current All Cash Sales, All Cash Tender Offers, Investor Distributions, Non-Cash Sales or Non-Cash Tender Offers, as applicable) does not exceed the Pre-Cleared Number of Shares corresponding to such Pre-Cleared Price, (4) sets forth the weighted average of the Investor Distribution Per Share Value and per share Net Sale Proceeds for such All Cash Sale, All Cash Tender Offer, Investor Distribution, Non-Cash Sale or Non-Cash Tender Offer, as applicable, by such Converting Holder, (5) sets forth the number of Class P Shares being Transferred (or transferred pursuant to an Investor Distribution) by such Converting Holder in connection with such All Cash Sale, All Cash Tender Offer, Investor Distribution, Non-Cash Sale or Non-Cash Tender Offer, as applicable, and (6) contains a certification by the Converting Holder that the requirements of clauses (1), (2) and (3) above are satisfied.
 
(B)   With respect to any Conversion Notice delivered pursuant to Section D.2(a)(ii)(A) , the Converting Holder shall be permitted, at any time prior to the closing or consummation of the related Transfer or Investor Distribution, to amend such Conversion Notice to update the aggregate, and/or the weighted average per share Net Sale Proceeds or the Investor Distribution Per Share Value, as applicable, set forth therein, and/or any instructions of a ministerial or de minimis nature (which, for the avoidance of doubt, shall not include updates to the number of Class P Shares to be Transferred (or transferred pursuant to an Investor Distribution) pursuant to such Conversion Notice, any reduction to the number of Class P Shares ultimately Transferred or transferred pursuant to an Investor Distribution, as applicable, being governed by Section D.2(a)(v) of this Article Fourth ), and such Conversion Notice, as amended, shall be deemed to be such Converting Holder’s “Conversion Notice” for purposes of Sections D.2(a)(v)-(xi) , D.2(b) and D.2(d) of this Article Fourth ; provided , that such Converting Holder shall not be permitted to amend such Conversion Notice pursuant to the foregoing if such Conversion Notice, as amended, would not meet the requirements set forth in clauses (2) and (3) of Section D.2(a)(ii)(A) of this Article Fourth .
 
(C)   A holder of shares of a Class A Series may, at any time and from time to time, deliver to the Company and the
 

 
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Transfer Agent a Periodic Sales Pre-Clearance Request, which shall be effective from and after the deemed certification of such Periodic Sales Pre-Clearance Request until the earliest of (w) the deemed certification of a subsequent Periodic Sales Pre-Clearance Request of such holder (or any other holder within the same Class A Series), (x) the next payment date by the Company of a Distribution, (y) the subsequent delivery of a Conversion Notice pursuant to Section D.2(a)(ii)(A) of this Article Fourth that does not meet the requirements set forth in clauses (2) and (3) of such Section and (z) the delivery of an Excess Class P Share Notice pursuant to Section D.2(a)(viii) (a “ Periodic Sales Pre-Clearance Period ”).  If the Company either (I) notifies the Transfer Agent and the Requesting Holders that it does not object to such Periodic Sales Pre-Clearance Request or (II) does not deliver a notice of objection in writing to the Transfer Agent and the Requesting Holder by the close of business on the second (2nd) Business Day following the Requesting Holder’s delivery of a Periodic Sales Pre-Clearance Request to the Company and the Transfer Agent, which written objection must set forth with reasonable specificity the Company’s objections to such Periodic Sales Pre-Clearance Request (a “ Pre-Clearance Objection ”), then such Periodic Sales Pre-Clearance Request shall be deemed to have been duly certified by the Company for all purposes under this Article Fourth for the applicable Class A Series.  If the Company does deliver to the Transfer Agent and the Requesting Holder a Pre-Clearance Objection by the close of business on the second (2nd) Business Day following the Requesting Holder’s delivery of a Periodic Sales Pre-Clearance Request, each of the Company and the Requesting Holder shall use reasonable best efforts to reach an agreement on Pre-Cleared Prices (and a corresponding Pre-Cleared Number of Shares for each Pre-Cleared Price) by the close of business on the second (2nd) Business Day following the Company’s delivery of such Pre-Clearance Objection.  If the Requesting Holder and the Company are able to reach an agreement on Pre-Cleared Prices (and a corresponding Pre-Cleared Number of Shares for each Pre-Cleared Price), the Company shall immediately notify the Transfer Agent of such agreement, and the Periodic Sales Pre-Clearance Request (as adjusted for such agreed Pre-Cleared Prices and corresponding Pre-Cleared Number of Shares for each Pre-Cleared Price) shall be deemed to have been duly certified by the Company for all purposes under this Article Fourth for the applicable Class A Series.  If the Requesting Holder and the Company fail to reach an agreement on a Pre-Cleared Number of Shares and Pre-Cleared Price by the close of business on the second (2nd) Business Day following the Company’s
 

 
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delivery of such Pre-Clearance Objection (or such longer period as the Requesting Holder and the Company shall agree), then the Requesting Holder and the Company, as the two designated parties to the dispute, shall enter into the Appraisal Procedure, and the Periodic Sales Pre-Clearance Request (as adjusted for the final determinations pursuant to the Appraisal Procedure) shall be deemed to have been duly certified by the Company for all purposes under this Article Fourth for the applicable Class A Series when Pre-Cleared Prices (and a corresponding Pre-Cleared Number of Shares for each Pre-Cleared Price) are finally determined pursuant to the Appraisal Procedure.  Notwithstanding anything to the contrary contained herein, the Company shall only deliver a Pre-Clearance Objection to assert that the Pre-Clearance Request violates the proviso contained at the end of the definition of “Periodic Sales Pre-Clearance Request;” and such Pre-Clearance Objection shall be limited to correcting such corresponding Pre-Cleared Number of Shares so that such Transfer or Investor Distribution would not cause the Total Number of Conversion Shares for the applicable Series to fall below the Conversion Share Minimum Threshold for such Series.
 
(iii)   (x) Immediately and automatically upon the delivery of the Conversion Notice (and supporting documentation described in Section D.2(a)(i) of this Article Fourth ) or Conversion Instructions, as applicable, to the Transfer Agent and the Company (other than in the case of a Non-Cash Sale or a Non-Cash Tender Offer, in each case involving Illiquid Consideration), the issuance of Class P Shares (subject to Section D.2(a)(ix) of this Article Fourth , free of any restrictive legends or stop orders) in conversion of shares of the applicable Class A Series shall occur as specified in such Conversion Notice or Conversion Instructions, as applicable and (y) in the case of a Non-Cash Sale or a Non-Cash Tender Offer, in each case involving Illiquid Consideration, immediately and automatically upon the delivery of the Non-Cash Conversion Instructions by the Company to the Transfer Agent, the issuance of Class P Shares (subject to Section D.2(a)(ix) of this Article Fourth , free of any restrictive legends or stop orders) in conversion of shares of the applicable Class A Series shall occur as specified in such Non-Cash Conversion Instructions.
 
(iv)   Subject to the provisions of Section D.2(a)(viii) of this Article Fourth , in no event shall any holder of any Class A Series engage in an All Cash Sale, Non-Cash Sale, All Cash Tender Offer, Non-Cash Tender Offer, or Investor Distribution pursuant to this Section D.2(a) to the extent that such All Cash Sale, Non-Cash Sale, All Cash Tender Offer, Non-Cash Tender Offer, or Investor Distribution would result in the number of Class P Shares issued upon the conversion of shares of such Class A Series pursuant to the applicable Conversion Notice (and after
 

 
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giving effect to the concurrent conversions by other holders of shares of the same Class A Series) exceeding the Total Number of Conversion Shares remaining for the Related Series after taking into account the number of Class P Shares into which the corresponding Class B Series is entitled to convert in accordance with Section D.2(b) of this Article Fourth (without taking into account the limitation set forth in the final sentence of such Section D.2(b) ) and the number of Class P Shares into which the corresponding Class C Series is entitled to convert in accordance with Section D.2(d) of this Article Fourth (without taking into account the limitation set forth in the final sentence of such Section D.2(d) ), in each case as a result of the conversion of such Class A Series in connection with such Transfer or Investor Distribution, as applicable.
 
(v)   If a Voluntary Conversion occurs in connection with an All Cash Sale, a Non-Cash Sale or Investor Distribution, but such All Cash Sale, Non-Cash Sale or Investor Distribution is not closed or consummated in full (and in accordance with the terms set forth in the applicable Conversion Notice) within five (5) Business Days (or such longer period as may be agreed by the applicable Converting Holder and the Company) following such Voluntary Conversion occurring pursuant to Section D.2(a)(iii) of this Article Fourth , then the applicable Converting Holder shall, within one (1) Business Day thereafter, so notify the Transfer Agent and the Company in writing, and any Class P Shares issued in such Voluntary Conversion and with respect to which such All Cash Sale, Non-Cash Sale or Investor Distribution is not closed or consummated shall immediately and automatically convert into a number of Class A Shares of the applicable Class A Series as is necessary to cause the number of Class A Shares outstanding in such Class A Series to be equal to the number that would have been outstanding if the applicable Conversion Notice had initially set forth only such number of Class P Shares with respect to which such All Cash Sale, Non-Cash Sale or Investor Distribution did close or consummate.  If a Voluntary Conversion occurs in connection with an All Cash Tender Offer or a Non-Cash Tender Offer, but such All Cash Tender Offer or Non-Cash Tender Offer is terminated or expires without the acceptance of all of the applicable Class P Shares having been effected (taking into account shares tendered via notice of guaranteed delivery as of the time of acceptance (if any), subject to pro-ration), including as a result of pro-ration in the event of any offer for less than all shares (or if there occurs any withdrawal of tendered Class P Shares by the Converting Holder), then the applicable Converting Holder shall, within one (1) Business Day thereafter, so notify the Transfer Agent and the Company in writing and the Class P Shares issued in such Voluntary Conversion that were not so accepted or that were withdrawn shall immediately and automatically convert into a number of Class A Shares of the applicable Class A Series as is necessary to cause the number of Class A Shares outstanding in such Class A Series to be
 

 
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equal to the number that would have been outstanding if the applicable Conversion Notice had initially set forth only such number of Class P Shares with respect to which such All Cash Tender Offer or a Non-Cash Tender Offer did close or consummate.   In the event of any modification of the consideration to be paid in an All Cash Tender Offer or a Non-Cash Tender Offer (each, a “ Tender Offer Consideration Event ”), the applicable Converting Holder shall, within one (1) Business Day thereafter, so notify the Transfer Agent and the Company in writing, which notification shall update the information set forth in such Converting Holder’s Conversion Notice, as applicable, and shall be deemed to be such Converting Holder’s “Conversion Notice” for purposes of Sections D.2(a)(vi)-(xi) , Section D.2(b) and Section D.2(d) of this Article Fourth , and if the requirement set forth in Section D.2(a)(ii) of this Article Fourth relating to the delivery of Conversion Instructions applied to such All Cash Tender Offer or a Non-Cash Tender Offer, the Company shall deliver to the Transfer Agent and such Converting Holder updated Conversion Instructions (or, if applicable, Non-Cash Conversion Instructions), which shall be deemed to be the Company’s “Conversion Instructions” (or “Non-Cash Conversion Instructions”) for purposes of Sections D.2(a)(vi)-(xi) , Section D.2(b) and Section D.2(d) of this Article Fourth ; provided , that in the event that the closing or consummation of such All Cash Tender Offer or Non-Cash Tender Offer following such Tender Offer Consideration Event would result in the Total Number of Conversion Shares remaining for the applicable Series falling below the Conversion Share Minimum Threshold for the applicable Series (after taking into account the number of Class P Shares into which the corresponding Class B Series is entitled to convert in accordance with Section D.2(b) of this Article Fourth (without taking into account the limitation set forth in the final sentence of such Section D.2(b) ) and the number of Class P Shares into which the corresponding Class C Series is entitled to convert in accordance with Section D.2(d) of this Article Fourth (without taking into account the limitation set forth in the final sentence of such Section D.2(d) ), in each case as a result of such closing or consummation), such Tender Offer Consideration Event shall be deemed a termination of such All Cash Tender Offer or Non-Cash Tender Offer for purposes of this Section D.2(a)(v) .
 
(vi)   Within one (1) Business Day following the closing or completion of any All Cash Sale, Non-Cash Sale, All Cash Tender Offer, Non-Cash Tender Offer or Investor Distribution to which any Voluntary Conversion relates, the applicable Converting Holder shall so notify the Company in writing, which notice shall certify that such closing or completion occurred in accordance with the terms of the applicable Conversion Notice.  Within one (1) Business Day following the receipt of such notice, the Company shall provide written instructions to the Transfer Agent (with a copy to all holders of Class A Shares, Class B Shares and
 

 
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Class C Shares) confirming, as a result of such Voluntary Conversion, if applicable,
 
(A)   the number of shares of the corresponding Class A Series that are being converted into the number of Class P Shares set forth in such Conversion Notice pursuant to Section D.2(a) of this Article Fourth ,
 
(B)   the number of Class P Shares being issued upon conversion of shares of the corresponding Class B Series pursuant to Section D.2(b) of this Article Fourth ,
 
(C)   the number of shares of the corresponding Class B Series that are being converted into such number of Class P Shares pursuant to Section D.2(b) of this Article Fourth ,
 
(D)   the number of Class P Shares being issued upon conversion of shares of the corresponding Class C Series pursuant to Section D.2(d) of this Article Fourth,
 
(E)   the number of shares of the corresponding Class C Series that are being converted into such number of Class P Shares pursuant to Section D.2(d) of this Article Fourth,
 
(F)   the number of Class P Shares being issued upon conversion of shares of the Series A-9 Stock pursuant to Section D.2(c)(i) of this Article Fourth ,
 
(G)   the number of shares of the Series A-9 Stock that are being converted into such number of Class P Shares pursuant to Section D.2(c)(i) of this Article Fourth ,
 
(H)   the number of Class P Shares being issued upon conversion of the shares of the Series B-9 Stock pursuant to Section D.2(c)(ii) of this Article Fourth as a result of the conversion of shares of the Series A-9 Stock pursuant to Section D.2(c)(i) of this Article Fourt h,
 
(I)   the number of shares of the Series B-9 Stock that are being converted into such number of Class P Shares pursuant to Section D.2(c)(ii) of this Article Fourth as a result of the conversion of shares of the Series A-9 Stock pursuant to Section D.2(c)(i) of this Article Fourth ,
 
(J)   the number of shares of Class P Shares being issued upon conversion of the shares of the Series C-9 Stock pursuant to Section D.2(c)(iii) of this Article Fourth as a result of the
 

 
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conversion of shares of the Series A-9 Stock pursuant to Section D.2(c)(i) of this Article Fourth , and
 
(K)   the number of shares of the Series C-9 Stock that are being converted into such number of Class P Shares pursuant to Section D.2(c)(iii) of this Article Fourth as a result of the conversion of shares of the Series A-9 Stock pursuant to Section D.2(c)(i) of this Article Fourth .
 
Such written instructions to the Transfer Agent shall also set forth (i) the total number of Class P Shares that were issued to the holders of shares of the applicable Class A Series (the “ Referential Class A Series ”) pursuant to the applicable Conversion Notice, (ii) the weighted average per share Net Sale Proceeds or the Investor Distribution Per Share Value, as applicable, for the Transfer or Investor Distribution to which such Voluntary Conversion relates, as set forth in the applicable Conversion Notice (the “ Referential Per Share Value ”), (iii) the quotient, expressed as a percentage (the “ Referential Conversion Percentage ”), obtained by dividing (x) the aggregate number of Class P Shares issued to holders of shares of the Referential Class A Series by reason of such Voluntary Conversion and any prior Voluntary Conversions by (y) the Total Number of Conversion Shares set forth opposite the Referential Class A Series in the second sentence of the definition of “Total Number of Conversion Shares,” (taking into account any adjustments to the Total Number of Conversion Shares in respect of such Referential Class A Series pursuant to Section F.1 of this Article Fourth ) and (iv) the Series A-9 Stock Conversion Percentage.
 
Immediately and automatically upon the close of business on the Business Day immediately following the date of delivery of such written instructions to the Transfer Agent and the holders of Class A Shares, Class B Shares and Class C Shares, the conversion of such shares of Series A-9 Stock, Class B Shares and/or Class C Shares, as applicable, into Class P Shares shall occur as specified in such instructions, unless a notice of objection is delivered in accordance with the immediately following sentence.  The Converting Holder and/or the Class B Shareholders representing a majority of the Class B Shares then issued and outstanding may object in writing to the determinations set forth in such written instructions of the Company prior to the close of business on the first (1st) Business Day following receipt of such written instructions of the Company.  In such case, if (x) the Converting Holder, (y) the Company and (z) the Class B Shareholders representing a majority of the Class B Shares then issued and outstanding are unable to agree upon such determinations within two (2) calendar days after delivery of such notice of objection (or such longer period as they shall mutually agree), then (1) the Converting Holder and (2) the Class B Shareholders representing a
 

 
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majority of the Class B Shares then issued and outstanding, as the two designated parties to the dispute, shall enter into the Appraisal Procedure.  In the event that a notice of objection is so delivered, the conversion of such shares of Series A-9 Stock, Class B Shares and/or Class C Shares, as applicable, into Class P Shares shall occur upon the close of business on the Business Day immediately following the date on which the matters in dispute are finally determined in accordance with this Section D.2(a)(vi) .
 
(vii)   The number of shares of the applicable Class A Series of a particular holder that will be converted into the number of Class P Shares being Transferred or transferred pursuant to an Investor Distribution, by such holder in accordance with this Section D.2(a) , will be the number equal to the Class A Conversion Amount applicable to such holder.
 
(viii)   If the Company determines in good faith that, notwithstanding the provisions of Section D.2(a)(iv) of this Article Fourth , a conversion by a Converting Holder pursuant to Section D.2(a)(ii)(A) of this Article Fourth results in the number of Class P Shares issued upon the conversion of shares of a Class A Series pursuant to a particular Conversion Notice (after giving effect to the concurrent conversions by other holders of shares of the same Class A Series) exceeding the Total Number of Conversion Shares remaining for such Class A Series after taking into account the number of Class P Shares into which the corresponding Class B Series is entitled to convert in accordance with Section D.2(b) of this Article Fourth (without taking into account the limitation set forth in the final sentence of such Section D.2(b) ) and the number of Class P Shares into which the corresponding Class C Series is entitled to convert in accordance with Section D.2(d) of this Article Fourth (without taking into account the limitation set forth in the final sentence of such Section D.2(d) ) (such excess number of Class P Shares being referred to herein as the “ Excess Class P Shares ”), then no later than one (1) Business Day following receipt of the Conversion Notice for the applicable conversion, the Company shall provide written notice of such determination to the Transfer Agent and the applicable Converting Holder, setting forth the Company’s calculation of the number of Excess Class P Shares (an “ Excess Class P Share Notice ”); provided , that delivery of such Excess Class P Share Notice shall not prohibit or delay the conversion of Class A Shares, or the issuance of the full number of Class P Shares, as set forth in the Conversion Notice that is the subject of such Excess Class P Share Notice.  The determination by the Company of the number of Excess Class P Shares, as set forth in the Excess Class P Share Notice, shall be final, binding and conclusive unless a notice of objection is delivered in accordance with the immediately following sentence.  The Converting Holder may object in writing to such determination prior to the close of business on the first (1st) Business Day following receipt of the Excess Class P Share Notice.  If the Converting Holder and the Company
 

 
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are unable to agree upon such determination within two (2) calendar days after delivery of such notice of objection (or such longer period as they shall mutually agree), then (1) the Converting Holder and (2) the Company, as the two designated parties to the dispute, shall enter into the Appraisal Procedure.  In the event that a notice of objection is so delivered, the number of Excess Class P Shares, if any, shall be as are finally determined in accordance with this Section D.2(a)(viii) .  Following any final determination as to the number of Excess Class P Shares, (A) the Converting Holder shall, as promptly as reasonably practicable and in no event later than the fifth (5th) Business Day following such final determination, Transfer to the Company the number of Class P Shares equal to such number of Excess Class P Shares, free and clear of any security interests, liens or similar encumbrances, (B) immediately upon receipt by the Company of such number of Class P Shares from the Converting Holder as replacement for the Excess Class P Shares in accordance with clause (A), the Total Number of Conversion Shares for the applicable Series shall be deemed to be increased by such number of Excess Class P Shares and (C) such number of Class P Shares shall be issued as additional shares pursuant to the conversion of the applicable shares of the Class B Series and/or Class C Series so that the Class P Shares issued upon such conversions pursuant to Section D.2(b) and Section D.2(d) of this Article Fourth shall not be reduced on account of the limitations set forth in the final sentence of such Section D.2(b) or the final sentence of such Section D.2(d) , respectively.
 
(ix)   Each Conversion Notice shall be accompanied by a certification of the applicable Converting Holder, in a form reasonably satisfactory to the Company and the Transfer Agent, that the Transfer or Investor Distribution, as applicable, being effected in connection with such Conversion Notice is being effected pursuant to a registered offering or in accordance with an exemption from the registration requirements of the Securities Act.
 
 
(x)   Except as otherwise expressly provided in this Section D.2(a)(x) , any Voluntary Conversion that occurs pursuant to this Section D.2(a) in connection with an All Cash Sale, Non-Cash Sale, Investor Distribution, All Cash Tender Offer or Non-Cash Tender Offer shall be deemed for all purposes under this Charter (including (A) the automatic conversion of any Class B Shares, Class C Shares or Series A-9 Stock resulting from such Voluntary Conversion, (B) determining the holders of record of Common Stock (including with respect to the class and number held), as of any applicable record date and (C) all other calculations under this Article Fourth (other than for purposes of measuring compliance with Section D.2(a)(iv) of this Article Fourth and the requirements set forth in clauses (2) and (3) of Section D.2(a)(ii)(A) of this Article Fourth )) to have been effected immediately prior to the closing
 

 
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or consummation of such All Cash Sale, Non-Cash Sale, Investor Distribution, All Cash Tender Offer or Non-Cash Tender Offer.  For the avoidance of doubt, (1) if any Class P Shares are converted into shares of an applicable Class A Series pursuant to Section D.2(a)(v) of this Article Fourth , for all purposes under this Charter the applicable shares of such Class A Series shall be treated as if the initial conversion of the applicable shares of such Class A Series into the applicable Class P Shares had not occurred and (2) if any Class P Shares are issued in accordance with Section D.2(a)(iii) of this Article Fourth to a Converting Holder in conversion of Class A Shares on or prior to the record date of a Distribution, and the closing or consummation of the applicable All Cash Sale, Non-Cash Sale, Investor Distribution, All Cash Tender Offer or Non-Cash Tender Offer occurs subsequent to the record date of such Distribution (such Class P Shares, the “ Subject Class P Shares ,” such Class A Shares, the “ Subject Class A Shares ” and such Distribution, the “ Subject Distribution ”), then the following shall be deemed to have occurred by operation of this Section D.2(a)(x) : (1) such Subject Class A Shares shall be outstanding as of the record date of such Subject Distribution and such Subject Class P Shares shall not be outstanding as of such record date, (2) such Converting Holder shall, for all purposes under this Article Fourth , be the record holder of such Subject Class A Shares as of the record date of such Subject Distribution and shall not be the record holder of any Subject Class P Shares as of such record date (as there will not be a record holder of such Subject Class P Shares because such Subject Class P Shares will not be outstanding as of such record date), and (3) the Company shall solely pay the Subject Distribution in respect of such Subject Class A Shares and shall not pay any portion of such Subject Distribution in respect of such Subject Class P Shares.  The Transfer Agent shall at all times be instructed by the Company to act in a manner consistent with this Section D.2(a) of Article Fourth , including Section D.2(a)(ii)(A) , (B) and (C) and Section D.2(a)(iii) of this Article Fourth and this Section D.2(a)(x).
 
(xi)   Notwithstanding the foregoing requirements of this Section D.2(a) , Section D.1 and Section D.2(c) of this Article Fourth , as applicable, shall govern the conversion of any shares of Series A-9 Stock into Class P Shares and holders of shares of Series A-9 Stock shall not be permitted to exercise any voluntary conversions pursuant to this Section D.2(a) .
 
(b)   Automatic Conversion of Class B Shares Resulting from Conversion of Class A Shares .  If immediately following a Voluntary Conversion of shares of a Class A Series (other than Series A-9 Stock) and the closing or consummation of the related Transfer(s) or Investor Distribution(s) of Class P Shares pursuant to Section D.2(a) of this Article Fourth or an automatic conversion of shares of Series A-9 Stock pursuant to Section D.2(c) of this Article
 

 
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Fourth , the Series A Total Value for the Related Series exceeds 150% of the Aggregate Base Amount for the Related Series, then a number of shares of the corresponding Class B Series held by each holder that equals the Class B Conversion Amount shall automatically convert in accordance with Section D.2(a)(vi) of this Article Fourth into a number of Class P Shares determined as follows:
 
(i)   If the Series A Total Value for the Related Series exceeds 150% of the Aggregate Base Amount for the Related Series, but the 200% Threshold for the Related Series has not been exceeded, in each case after giving effect to such Voluntary Conversion and the closing or consummation of the related Transfer(s) or Investor Distribution(s) and the automatic conversion of shares of the corresponding Class C Series pursuant to Section D.2(d) of this Article Fourth (and determined, for this purpose, by taking into account the automatic conversion of shares of such Class B Series pursuant to this Section D.2(b) resulting from such Voluntary Conversion and the closing or consummation of the related Transfer(s) or Investor Distribution(s)), then each holder of shares of such Class B Series shall receive, upon conversion of such Class B Conversion Amount, a number of Class P Shares equal to the product of:
 
(A)   such holder’s Class B Fraction, and
 
(B)   the quotient obtained by dividing
 
(I)   the amount, if any, by which (1) ((x ÷ 0.95) – x) exceeds (2) the Series B Total Value for such Class B Series, where “ x ” equals the amount, if any, by which the Series A Total Value for the Related Series exceeds the Aggregate Base Amount for the Related Series, in each case determined after giving effect to such Voluntary Conversion and the closing or consummation of the related Transfer(s) or Investor Distribution(s) of Class P Shares and the automatic conversion of shares of such Class C Series pursuant to Section D.2(d) , but before giving effect to the conversion of shares of such Class B Series pursuant to this Section D.2(b) resulting from such Voluntary Conversion and the closing or consummation of the related Transfer(s) or Investor Distribution(s), by
 
(II)   the weighted average per share Net Sale Proceeds or the Investor Distribution Per Share Value of Class P Shares Transferred or transferred pursuant to an Investor Distribution in connection with such Voluntary Conversion, as set forth in the applicable Conversion Notice;
 

 
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(ii)   If Section D.2(b)(i) of this Article Fourth does not apply and the 200% Threshold for the Related Series has been exceeded but the 400% Threshold with respect to the Related Series has not been exceeded (and the Series A Total Value for the Related Series equals or exceeds 195% of the Aggregate Base Amount for the Related Series), in each case after giving effect to such Voluntary Conversion and the closing or consummation of the related Transfer(s) or Investor Distribution(s) of Class P Shares and the automatic conversion of shares of the corresponding Class C Series pursuant to Section D.2(d) (and determined, for this purpose, by taking into account the automatic conversion of shares of the corresponding Class B Series pursuant to this Section D.2(b) resulting from such Voluntary Conversion and the closing or consummation of the related Transfer(s) or Investor Distribution(s)), then such holder of such Class B Series shall receive, upon conversion of such Class B Conversion Amount, a number of Class P Shares equal to the product of:
 
(A)   such holder’s Class B Fraction, and
 
(B)   the quotient obtained by dividing:
 
(I)   an amount, if any, such that the Series B Total Value (determined, for this purpose, by taking into account the automatic conversion of shares of such Class B Series pursuant to this Section D.2(b) and the automatic conversion of shares of such Class C Series pursuant to Section D.2(d) , in each case resulting from such Voluntary Conversion and the closing or consummation of the related Transfer(s) or Investor Distribution(s)) equals the product of (i) the excess, if any, of the Total Value for the Related Series (determined, for this purpose, by taking into account the automatic conversion of shares of such Class B Series pursuant to this Section D.2(b) and the automatic conversion of shares of such Class C Series pursuant to Section D.2(d) , in each case resulting from such Voluntary Conversion and the closing or consummation of the related Transfer(s) or Investor Distribution(s)), over the Aggregate Base Amount for the Related Series and (ii) the 10%-20% Automatic Conversion Percentage, by
 
(II)   the weighted average per share Net Sale Proceeds or the Investor Distribution Per Share Value of Class P Shares Transferred or transferred pursuant to an Investor Distribution in connection with such Voluntary Conversion, as set forth in the applicable Conversion Notice; and
 

 
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(iii)   If Section D.2(b)(i) and Section D.2(b)(ii) of this Article Fourth do not apply and the 400% Threshold for the Related Series has been exceeded, after giving effect to such Voluntary Conversion and related Transfer(s) or Investor Distribution(s) and the automatic conversion of shares of the corresponding Class C Series pursuant to Section D.2(d) (and determined, for this purpose, by taking into account the automatic conversion of shares of the corresponding Class B Series pursuant to this Section D.2(b) resulting from such Voluntary Conversion and related Transfer(s) or Investor Distribution(s)), then such holder of shares of such Class B Series shall receive, upon conversion of such Class B Conversion Amount, a number of Class P Shares equal to the product of:
 
(A)   such holder’s Class B Fraction, and
 
(B)   the quotient obtained by dividing:
 
(I)   the amount, if any, by which (1) ((x ÷ 0.80) – x) exceeds (2) the Series B Total Value for the Related Series, where “ x ” equals the amount, if any, by which the Series A Total Value for the Related Series exceeds the Aggregate Base Amount for the Related Series, in each case determined after giving effect to such Voluntary Conversion and the closing or consummation of the related Transfer(s) or Investor Distribution(s) of Class P Shares and the automatic conversion of shares of such Class C Series pursuant to Section D.2(d) , but before giving effect to the automatic conversion of shares of such Class B Series pursuant to this Section D.2(b) resulting from such Voluntary Conversion and the closing or consummation of the related Transfer(s) or Investor Distribution(s), by
 
(II) the weighted average per share Net Sale Proceeds or the Investor Distribution Per Share Value of Class P Shares Transferred or transferred pursuant to an Investor Distribution in connection with such Voluntary Conversion, as set forth in the applicable Conversion Notice.
 
Notwithstanding the other provisions of this Section D.2(b) , in no event shall shares of such Class B Series convert into a greater number of Class P Shares than the Total Number of Conversion Shares remaining for the Related Series as of the relevant time, which relevant time, for the avoidance of doubt, shall in all cases be measured following (i) the Voluntary Conversion and the closing or consummation of the related Transfer(s) or Investor Distribution(s) and (ii) the automatic conversion of shares of corresponding Class C Series pursuant to
 

 
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Section D.2(d) , in each case giving rise to the automatic conversion of shares of such Class B Series pursuant to this Section D.2(b) .
 
(c)   Automatic Conversion of Series A-9 Stock, Series B-9 Stock and Series C-9 Stock .
 
(i)   If immediately following a Voluntary Conversion of shares of a Class A Series (other than Series A-9 Stock) and the closing or consummation of the related Transfer(s) or Investor Distribution(s) of Class P Shares pursuant to Section D.2(a) of this Article Fourth , the Referential Conversion Percentage exceeds the Series A-9 Stock Conversion Percentage, then a number of shares of Series A-9 Stock equal to the Class A Conversion Amount for the Series A-9 Stock shall automatically convert into Class P Shares in accordance with Section D.2(a)(vi) of this Article Fourth , without further action on the part of the holders thereof, (A) so that the Series A-9 Stock Conversion Percentage (determined for this purpose after giving effect to such automatic conversion of Series A-9 Stock) equals the Referential Conversion Percentage or (B) if the conversion of the Series A-9 Stock at such time in the entirety would nonetheless result in the Series A-9 Stock Conversion Percentage (determined for this purpose after giving effect to such conversion of Series A-9 Stock at such time in its entirety) being less than the Referential Conversion Percentage, until the Series A-9 Stock is converted in the entirety.
 
(ii)   If immediately following a Voluntary Conversion of shares of a Class A Series (other than Series A-9 Stock) and the closing or consummation of the related Transfer(s) or Investor Distribution(s) of Class P Shares pursuant to Section D.2(a) of this Article Fourth , shares of Series A-9 Stock automatically convert pursuant to Section D.2(c) of this Article Fourth , then a number of shares of Series B-9 Stock equal to the Class B Conversion Amount for the Series B-9 Stock shall automatically convert into Class P Shares in accordance with Section D.2(b) of this Article Fourth , without further action on the part of the holders thereof.
 
(iii)   If immediately following a Voluntary Conversion of shares of a Class A Series (other than Series A-9 Stock) and the closing or consummation of the related Transfer(s) or Investor Distribution(s) of Class P Shares pursuant to Section D.2(a) of this Article Fourth , shares of Series A-9 Stock automatically convert pursuant to Section D.2(c) of this Article Fourth , then a number of shares of Series C-9 Stock equal to the Class C Conversion Amount for the Series C-9 Stock shall automatically convert into Class P Shares in accordance with Section D.2(d) of this Article Fourth , without further action on the part of the holders thereof.
 
(iv)   Notwithstanding any other provision of this Section D.2(c)
 

 
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of this Article Fourth , in no event shall shares of Series A-9 Stock, in the aggregate, convert into a Total Number of Conversion Shares of the Related Series greater than the maximum number of Class P Shares that may be received upon such conversion after taking into account the amount of the Total Number of Conversion Shares of the Related Series to which the holders of shares of Series B-9 Stock are then entitled pursuant to Section D.2(c)(ii) of this Article Fourth as a result of the automatic conversion of Series A-9 Stock pursuant to this Section D.2(c)(i) and the amount of the Total Number of Conversion Shares of the Related Series to which the holders of shares of Series C-9 Stock are then entitled pursuant to Section D.2(c)(iii) of this Article Fourth as a result of the automatic conversion of Series A-9 Stock pursuant to this Section D.2(c)(i) .
 
(d)   Automatic Conversion of Class C Shares .
 
(i)   If immediately following a Voluntary Conversion of shares of a Class A Series and the closing or consummation of the related Transfer(s) or Investor Distribution(s) of Class P Shares, the 100% Threshold for the Related Series has been exceeded, after giving effect to such Voluntary Conversion and the closing or consummation of the related Transfer(s) or Investor Distribution(s), then a number of shares of the corresponding Class C Series held by each holder that equals the Class C Conversion Amount shall convert in accordance with Section D.2(a)(vi) of this Article Fourth , without further action on the part of the holders thereof, into a number of Class P Shares equal to the product of:
 
(A)   such holder’s Class C Fraction; and
 
(B)   the amount equal to ((x ÷ y) – x), where (A) “x” equals the number of Class P Shares received by the holder of shares of such Class A Series in such Voluntary Conversion; provided, that if the 100% Threshold for the Related Series would not have been exceeded but for such Voluntary Conversion, “x” shall equal a number of Class P Shares equal to the quotient obtained by dividing (1) the amount by which Series A Total Value (excluding clause (e) of the definition of Series A Total Value) for the Related Series exceeds 100% of the Base Amount for the Related Series by (2) the weighted average per share Net Sale Proceeds or the Investor Distribution Per Share Value of Class P Shares Transferred or transferred pursuant to an Investor Distribution in connection with such Voluntary Conversion, as set forth in the applicable Conversion Notice, and (B) “y” equals the Class A Percentage for such Class A Series.
 
(ii)   Notwithstanding the other provisions of this Section D.2(d) , in no event shall shares of such Class C Series convert into
 

 
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a greater number of Class P Shares than the Total Number of Conversion Shares remaining for the Related Series as of the relevant time, which relevant time, for the avoidance of doubt, shall in all cases be measured following the Voluntary Conversion and the closing or consummation of the related Transfer(s) or Investor Distribution(s) giving rise to the automatic conversion of shares of such Class C Series pursuant to this Section D.2(d) .
 
3.   Acceleration of Conversion of Class B Common Stock and Class C Common Stock
 
(a)   If a holder of Class B Shares or Class C Shares (in such holder’s capacity as such) has incurred a Related Tax Liability pursuant to a Tax Event (or will incur a Related Tax Liability pursuant to a Tax Event, which Related Tax Liability is expected to be payable in cash within seventy five (75) days after delivery of the Accelerated Conversion Notice) (such holder, the “ Affected Class B/C Holder ”), and the sum of the amount of such Related Tax Liability and the aggregate amount of all Related Tax Liabilities that have been  previously incurred by such Affected Class B/C Holder exceeds the aggregate amount of all Series B Total Value and Series C Total Value received in respect of all of the Class B Shares and Class C Shares then or theretofore owned by such Affected Class B/C Holder (such excess amount, the “ Excess Amount ” and, together with the Aggregate Gross-Up Amount, the “ Grossed-Up Excess Amount ”), then, subject to Section 7.16(b) of the Shareholders Agreement, such Affected Class B/C Holder shall be entitled to deliver to the Company and the holders of Class A Shares, Class B Shares and Class C Shares a notice of acceleration of conversion of its Class B Shares and/or Class C Shares (an “ Accelerated Conversion Notice ”) that (i) certifies that such Tax Event has occurred within fifteen (15) Business Days prior to the delivery of such Accelerated Conversion Notice or is expected to occur within seventy five (75) days after delivery of such Accelerated Conversion Notice, (ii) sets forth the amount of such Related Tax Liability, such Excess Amount, the Aggregate Gross-Up Amount, the Grossed-Up Excess Amount and the calculation of such amounts in reasonable detail (which amounts and calculations, to the extent based on estimates of the tax or interest amounts comprising the Related Tax Liability, shall be updated for all purposes of this Section D.3 to reflect the actual amounts as such information becomes available), (iii) certifies that such Affected Class B/C Holder intends to convert its Class B Shares and/or Class C Shares (as determined by such Affected Class B/C Holder, subject to Section D.3(b)(iii) of this Article Fourth ) in the manner and to the extent described in paragraph (b) of this Section D.3 and to sell a number of Class P Shares equal to the number of Class P Shares, if any, received pursuant to this Section D.3 of this Article Fourth , and (iv) sets forth such Affected Class B/C Holder’s irrevocable agreement to sell a number of Class P Shares equal to the number of Class P Shares, if any, received pursuant to this Section D.3 of this Article Fourth as described above.  An Affected Class B/C Holder that delivers an Accelerated Conversion Notice shall deliver to the Company any information
 

 
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within its possession or reasonably available that is relevant to the determinations required to be made by the Company under Section D.3(b)(i)(B) of this Article Fourth .  Solely for purposes of calculating the Excess Amount under this Section D.3(a) and the Series Applicable Amounts under Section D.3(b)(i)(B) in connection with a Tax Event, the aggregate amount of all Series B Total Value and Series C Total Value of a Series received by the applicable Affected Class B/C Holder shall be (1) increased by (i) the Remaining Amount, if any, in respect of such Series, relating to any prior Acceleration Conversion Notice delivered by such Affected Class B/C Holder and (ii) the Remaining Loan Amount, if any, in respect of such Series, relating to any Cash Loan previously made to such Affected Class B/C Holder pursuant to Section 7.16(h) of the Shareholders Agreement, and (2) decreased by an amount, if any, equal to the product of the Assumed Tax Rate and the aggregate amount of Distributions, to the extent taxable, received by such Affected Class B/C Holder in respect of such holder’s Class B Shares and/or Class C Shares of such Series.  For purposes of determining the rights under this Section D.3 of an Affected Class B/C Holder that is a Permitted Transferee or that has transferred Class B Shares or Class C Shares to a Permitted Transferee, the rights of such Affected Class B/C Holder shall not exceed the rights that such holder would have, determined as if (i) such holder, any prior holders of the Class B Shares and/or Class C Shares held by such holder, and all Permitted Transferees of such holder and prior holders were treated as one holder of Class B Shares or Class C Shares, and (ii) such collective holder had incurred a Related Tax Liability with respect to all Class B Shares and/or Class C Shares then or theretofore deemed held by such collective holder, in the same manner as the Related Tax Liability actually was or is expected to be incurred by such Affected Class B/C Holder, as set forth in the Final Accelerated Conversion Calculation Notice.
 
(b)   If an Affected Class B/C Holder delivers an Accelerated Conversion Notice, then:
 
(i)   Within two (2) Business Days following the delivery of such Accelerated Conversion Notice, the Company shall deliver to the holders of shares of each Class A Series, Class B Series and Class C Series a notice (an “ Accelerated Conversion Calculation Notice ”) that:
 
(A)   confirms that the Series B Total Value and/or Series C Total Value set forth in such Affected Class B/C Holder’s Accelerated Conversion Notice is accurate or sets forth the amounts of Series B Total Value and/or Series C Total Value that the Company determines has been received by such Affected Class B/C Holder (for this purpose, taking into account the adjustments set forth in the penultimate sentence of Section D.3(a) ),
 
(B)   sets forth, for each Series and to the best of the knowledge of the Company, based on the information concerning
 

 
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such Affected Class B/C Holder’s Related Tax Liability supplied by such Affected Class B/C Holder or otherwise reasonably available to the Company, (1) the sum of the amount of such Related Tax Liability and the aggregate amount of all Related Tax Liabilities that have been previously incurred by such Affected Class B/C Holder in respect of Class B Shares and/or Class C Shares of such Series (each, a “ Series Related Amount ”), (2) the aggregate amount of all Series B Total Value and Series C Total Value received in respect of all of the Class B Shares and Class C Shares of such Series then or theretofore owned by such Affected Class B/C Holder (for this purpose, taking into account the adjustments set forth in the penultimate sentence of Section D.3(a) ) (each, a “ Series Total Value Amount ”)), (3) the amount, if any, by which the Series Related Amount exceeds the Series Total Value Amount (the “ Series Applicable Amount ”), and (4) the Series Gross-Up Amount, and
 
(C)   sets forth, with respect to each Series, the quotient obtained by dividing (1) the sum of (x) the Series Applicable Amount and (y) the Series Gross-Up Amount for such Series by (2) the Accelerated Conversion Date Per Share Value, which quotient shall, subject to Section D.3(b)(iii) of this Article Fourth , represent the maximum number of Class P Shares, if any, to be issued upon conversion of shares of the corresponding Class B Series and/or corresponding Class C Series to the Affected Class B/C Holder pursuant to such Accelerated Conversion Notice.
 
(ii)    Within three (3) Business Days following the delivery of such Accelerated Conversion Calculation Notice (the “ Review Period ”), the Class A Representative shall notify the Company and such Affected Class B/C Holder in writing if it disagrees with such Accelerated Conversion Calculation Notice or any calculation or component thereof (the “ Notice of Disagreement ”).  The Notice of Disagreement shall set forth in reasonable detail the basis for such disagreement.  If no Notice of Disagreement is so delivered prior to the expiration of the Review Period, then the Accelerated Conversion Calculation Notice shall be deemed to have been accepted by the holders of Class A Common Stock and shall be binding and conclusive.  During the five (5) days immediately following the delivery of the Notice of Disagreement (the “ Consultation Period ”), the Affected Class B/C Holder and the Class A Representative shall seek in good faith to resolve any differences that they may have with respect to the matters specified in the Notice of Disagreement.  If, at the end of the Consultation Period, the Affected Class B/C Holder and the Class A Representative have been unable to resolve any differences that they may have with respect to the matters specified in the Notice of Disagreement, the Affected Class B/C Holder and the Class A Representative shall
 

 
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submit all matters that remain in dispute with respect to the Notice of Disagreement (along with a copy of the Accelerated Conversion Calculation Notice marked to indicate those line items that are not in dispute) to the Independent Accountant.  The Independent Accountant, acting as an expert and not as an arbitrator, shall be jointly instructed by the Company, the Affected Class B/C Holder and the Class A Representative to, within five (5) days after such Independent Accountant’s selection, make a final determination with respect to each matter that remains in dispute with respect to the Notice of Disagreement, which determination shall be binding and conclusive.  The Accelerated Conversion Calculation Notice that is binding and conclusive, as determined either by the failure to deliver a Notice of Disagreement to the Company and the Affected Class B/C Holder prior to the expiration of the Review Period, through the agreement of the Affected Class B/C Holder and the Class A Representative or by the Independent Accountant pursuant to this Section D.3(b)(ii) , is referred to as the “ Final Accelerated Conversion Calculation Notice .”  The costs of conducting the dispute resolution contemplated by this Section D.3(b)(ii) , including the fees of the Independent Accountant, shall be borne by the Company.
 
(iii)   For each Series, solely in the event that the Class A Shareholders of such Series do not make a Cash Loan Election pursuant to Section 7.16(h) of the Shareholders Agreement, subject to Section 7.16(b) of the Shareholders Agreement, within five (5) Business Days following the date on which the Final Accelerated Conversion Calculation Notice becomes binding and conclusive, a number of shares of the corresponding Class B Series held by such Affected Class B/C Holder that is equal to the Class B Conversion Amount for such Class B Series and/or a number of shares of the corresponding Class C Series held by such Affected Class B/C Holder that is equal to the Class C Conversion Amount for such Class C Series shall convert, without further action by such holder (the date of such conversion, the “ Accelerated Conversion Date ”), into the lesser of:
 
(A)   the number of Class P Shares determined for such Class B Series and/or Class C Series under Section D.3(b)(i)(C) of this Article Fourth as set forth in the Final Accelerated Conversion Calculation Notice, and
 
(B)   the number of Class P Shares that such Affected Class B/C Holder would receive in conversion of its shares of such Class B Series and/or such Class C Series pursuant to Section D.1 of this Article Fourth (for the avoidance of doubt, taking into account Section D.3(d) of this Article Fourth with respect to any
 

 
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prior accelerated conversion under this Section D.3 ) were (x) the Final Mandatory Conversion Date deemed to occur on the date immediately preceding the Accelerated Conversion Date and (y) the Mandatory Conversion Date Per Share Value deemed to be equal to the VWAP of one share of Class P Common Stock during the ten (10) trading days ending on the close of business on the trading day immediately preceding the Accelerated Conversion Date.
 
For purposes of this Section D.3(b)(iii) , the Class B Conversion Amount for a Class B Series, and the Class C Conversion Amount for a Class C Series, as the case may be, shall be calculated as though (x) all holders of shares of such Class B Series or Class C Series were converting shares of such Class B Series or Class C Series and (y) the number of Class P Shares to be issued to such Affected Class B/C Holder pursuant to the conversion of his, her or its shares of such Class B Series or Class C Series represented such Affected Class B/C Holder’s pro rata portion of the Class P Shares to be issued to all such holders of shares of such Class B Series or Class C Series.
 
In the event that such Affected Class B/C Holder holds both Class B Shares and Class C Shares of such Series, the portion of the Class P Shares issuable pursuant to this Section D.3(b)(iii) that are attributed to the conversion of such Class B Shares and the portion of Class P Shares issuable pursuant to this Section D.3(b)(iii) that are attributed to the conversion of such Class C Shares may be determined by such Affected Class B/C Holder as set forth in the applicable Accelerated Conversion Notice; provided, that in no event shall such determination result in the number of Class P Shares attributed to the conversion of such Class B Shares or Class C Shares, as applicable, being greater than the number of Class P Shares attributable to such Class B Shares or Class C Shares, respectively, in the calculation described in paragraph (B) immediately above.
 
(c)   For each Series, solely in the event that the Class A Shareholders of such Series do not make a Cash Loan Election pursuant to Section 7.16(h) of the Shareholders Agreement, subject to Section 7.16(b) of the Shareholders Agreement, within five (5) Business Days following the date on which the Final Accelerated Conversion Calculation Notice becomes binding and conclusive, the Company shall cause such Affected Class B/C Holder to receive the number of Class P Shares to which such holder is entitled in conversion of its shares of the corresponding Class B Series and/or corresponding Class C Series pursuant to Section D.3(b)(iii) of this Article Fourth .
 
(d)   For each Series, for purposes of determining the rights of the holders of Class A Shares, Class B Shares and Class C Shares of such Series
 

 

 
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under this Article Fourth in respect of any Distribution, Voluntary Conversion or Mandatory Conversion Date related to such Series occurring after the date an Affected Class B/C Holder delivers such Accelerated Conversion Notice:
 
(i)   the accelerated conversion of such Affected Class B/C Holder’s Class B Shares and/or Class C Shares under this Section D.3 pursuant to such Accelerated Conversion Notice shall be treated as if it had not occurred in calculating Series B Total Value, Series C Total Value, Mandatory Conversion Date Value and the number of Class B Shares and/or Class C Shares of such Series held by each holder of Class B Shares and/or Class C Shares of such Series, but shall subsequently be treated as occurring (and, for the avoidance of doubt, shall be included in such calculations) to the extent that reductions are made pursuant to Section D.3(d)(ii) of this Article Fourth ;
 
(ii)   the amount of any Distributions that otherwise subsequently would be made to such Affected Class B/C Holder (or his or her heirs, executors, administrators, testamentary Transferees, legatees or beneficiaries, or Permitted Transferees (with respect to Class B Shares and/or Class C Shares of such Series subsequently Transferred, directly or indirectly, to such Permitted Transferees)) with respect to such holder’s shares of a Class B Series and/or Class C Series (as applicable), and the number of Class P Shares that otherwise subsequently would be issued to such Affected Class B/C Holder (or his or her heirs, executors, administrators, testamentary Transferees, legatees or beneficiaries, or Permitted Transferees (with respect to Class B Shares and/or Class C Shares of such Series subsequently Transferred, directly or indirectly, to such Permitted Transferees)) upon conversion of such holder’s shares of such Class B Series and/or Class C Series (as applicable) pursuant to Section D.1 or D.2 of this Article Fourth , shall be reduced (including, if applicable, to zero), without duplication, until the aggregate of the amount of such Distributions and the value of such Class P Shares (determined pursuant to, and as of the date otherwise issuable under, Section D.1 , D.2(b) , D.2(c) or D.2(d) of this Article Fourth , as applicable) that, but for this clause (ii), would have been paid or issued to such Affected Class B/C Holder (collectively, the “ Credited Amount ”) is equal to the product of (x) the aggregate number of Class P Shares received by such Affected Class B/C Holder upon conversion of shares of such Class B Series and/or Class C Series (as applicable) under this Section D.3 pursuant to any Accelerated Conversion Notice(s) delivered by such Affected Class B/C Holder and (y) the weighted average of the applicable Accelerated Conversion Date Per Share Value(s) associated with the issuance(s) of such Class P Shares (the “ Acceleration Amount ,” and the amount, if any, by which the Acceleration Amount exceeds the Credited Amount, as
 

 
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calculated from time to time, the “ Remaining Amount ”); and
 
(iii)   For each Series, the amount of any Distributions that otherwise would have been made to such Affected Class B/C Holder with respect to such holder’s shares of such Class B Series and/or Class C Series (as applicable) but for clause (ii) immediately above shall be made to the holders of Class A Shares of the corresponding Class A Series.  Any such Distribution shall be distributed ratably among the holders of Class A Shares of such Class A Series as of the record date for such Distribution, on a per share basis.
 
With respect to each Series for which there has been an accelerated conversion pursuant to this Section D.3 , immediately following such time that there is no Remaining Amount that exceeds zero, the Class B Shares and/or Class C Shares of such Series (as applicable) shall automatically recapitalize in a manner that causes the relative percentage of Class B Shares and/or Class C Shares (as applicable) of such Series held by each holder of Class B Shares and/or Class C Shares (as applicable) of such Series to be as if such accelerated conversion had not occurred.
 
(e)   If the Excess Amount is a positive amount with respect to a Series, the “ Series Gross-Up Amount ” for such Series shall equal the quotient obtained by dividing (i) the product of (I) the sum of (x) the excess, if any, of (1) the Applicable Value, in the aggregate, of the Class P Shares received upon conversion of Class B Shares and Class C Shares of such Series and owned by such Affected Class B/C Holder as of the date such holder delivers an Accelerated Conversion Notice, over (2) such holder’s tax basis (as determined for U.S. federal income tax purposes) in such Class P Shares and (y) the excess, if any, of (1) the product of (A) the number of Class P Shares that such Affected Class B/C Holder would otherwise receive pursuant to Section D.3(c) of this Article Fourth in respect of Class B Shares and Class C Shares of such Series, determined without regard to the application of this Section D.3(e) and assuming for this purpose that the Class A Shareholders of such Series did not make a Cash Loan Election pursuant to Section 7.16(h) of the Shareholders Agreement, and (B) the Accelerated Conversion Date Per Share Value, over (2) the tax basis (as determined for U.S. federal income tax purposes) that such Affected Class B/C Holder would have in such Class P Shares and (II) the Assumed Tax Rate for such Affected Class B/C Holder by (ii) an amount, expressed as a percentage, equal to one hundred percent (100%) minus the Assumed Tax Rate for such Affected Class B/C Holder.  The “ Aggregate Gross-Up Amount ” shall equal the aggregate amount of the Series Gross-Up Amount for all Series.
 
(f)   For purposes of this Section D.3 :
 
(i)   “ Accelerated Conversion Date Per Share Value ” shall mean, with respect to an accelerated conversion pursuant to this
 

 
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Section D.3 , the VWAP of one Class P Share during the ten (10) trading days ending on the close of business on the trading day immediately preceding the delivery of the applicable Accelerated Conversion Notice.
 
(ii)   “ Applicable Value ” shall mean, with respect to the Class P Shares, if any, received by the applicable Affected Class B/C Holder pursuant to Section D.2(b) , D.2(c) or D.2(d) of this Article Fourth , the product of such number of shares and the applicable per share value described in Section D.2(b) of this Article Fourth .
 
(iii)   “ Assumed Tax Rate ” shall mean, (x) if the Affected Class B/C Holder is an individual resident of Texas, an entity treated as a disregarded entity or a grantor trust for U.S. federal income tax purposes each of the owners of which is an individual resident of Texas, or any other entity that is a direct or indirect Permitted Transferee of an individual resident of Texas that is or was a holder of Class B Shares and/or Class C Shares (but solely with respect to Class B Shares and/or Class C Shares transferred, directly or indirectly, by such holder to such Permitted Transferee), the highest combined marginal effective U.S. federal, state and local Income Tax rate (exclusive of interest, penalties or additions to tax) prescribed for an individual resident of Houston, Texas applicable to the character of the income realized by such holder, and (y) if the Affected Class B/C Holder is an individual resident of a jurisdiction other than Texas, an entity treated as a disregarded entity or a grantor trust for U.S. federal income tax purposes each of the owners of which is an individual resident of a jurisdiction other than Texas, or any other entity that is a direct or indirect Permitted Transferee of an individual resident of a jurisdiction other than Texas that is or was a holder of Class B Shares and/or Class C Shares (but solely with respect to Class B Shares and/or Class C Shares transferred, directly or indirectly, by such holder to such Permitted Transferee), the highest combined marginal effective U.S. federal, state and local Income Tax rate (exclusive of interest, penalties or additions to tax) prescribed for an individual resident of New York, New York applicable to the character of the income realized by such holder, in each case taking into account the deductibility of state and local Income Taxes as applicable at the time for U.S. federal income tax purposes to the extent such state and local Income Taxes are actually deductible by such Affected Class B/C Holder.  References in this definition to Class B Shares or Class C Shares shall include the limited liability company units in exchange for which such shares were issued.
 
(iv)   “ Class A Representative ” shall mean GS Capital Partners V Fund, L.P., or such other Person as is designated in writing from time to time by the holders of a majority of the voting power of the Class A Common Stock then held by the Investor Shareholders.
 

 
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(v)   “ Income Tax ” shall mean any Tax imposed on or measuredby net income, which shall include, for the avoidance of doubt, any Tax imposed by Section 1411 of the Code (or any successor provision).
 
(vi)   “ Incorporation ” shall mean the conversion of Kinder Morgan Holdco LLC from a Delaware limited liability company to Kinder Morgan, Inc., a Delaware corporation, pursuant to Section 265 of the DGCL and Section 18-216 of the Delaware Limited Liability Company Act.
 
(vii)   “ Independent Accountant ” shall mean (x) Grant Thornton LLP or, if such firm is unable or unwilling to act, such other independent certified public accounting firm mutually acceptable to a majority of the voting power of all issued and outstanding Class B Shares, a majority of the voting power of all issued and outstanding Class C Shares and the Class A Representative or (y) if such Persons are unable to agree upon such firm within three (3) days after the end of the Consultation Period, then, within an additional three (3) days, a majority of the voting power of all issued and outstanding Class B Shares and a majority of the voting power of all issued and outstanding Class C Shares, on the one hand, and the Class A Representative, on the other, shall each select one such independent certified public accounting firm and those two independent certified public accounting firms shall, within three (3) days after such independent certified public accounting firms have been selected, select a third such independent certified public accounting firm, in which event “ Independent Accountant ” shall mean such third firm.
 
(viii)   “ Related Tax Liability ” shall mean any liability of a holder of Class B Shares or Class C Shares for Income Tax due in cash or paid in cash (or that reduces a refund of Income Taxes otherwise receivable in cash) with respect to such holder’s Class B Shares or Class C Shares by reason of the occurrence of one or more transactions or events that are deemed, for applicable Income Tax purposes, to have the result of the receipt of property by some shareholders and an increase in the proportionate interests of such holder of Class B Shares or Class C Shares, as applicable, in the assets or earnings and profits of the Company; provided that, for the avoidance of doubt, Related Tax Liability shall not include Income Tax, if any, incurred (I) by reason of the Incorporation, (II) in respect of the sale, transfer or other disposition of shares of Common Stock (other than a disposition by virtue of the conversion of Class B Shares or Class C Shares into Class P Shares where the provision immediately preceding this proviso is otherwise applicable), (III) in respect of the actual payment of Distributions in cash or property by the Company to such holders of Class B Shares or Class C Shares with respect to such holder’s Class B Shares or Class C Shares or (IV) by reason of any transactions pursuant to the last sentence of Section D.3(d) , including any
 

 
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recapitalizations, contributions to capital or other actions for the purpose of implementing the last sentence of Section D.3(d) ; provided , further that such Income Tax shall be determined on a “with and without” basis, and taking into account (i) the deductibility of state and local Income Taxes as applicable at the time for U.S. federal income tax purposes to the extent such state and local Income Taxes are actually deductible by the taxpayer and (ii) the deductibility of U.S. federal Income Taxes as applicable at the time for state and local Income Tax purposes to the extent such U.S. federal Income Taxes are actually deductible by the taxpayer.
 
(ix)   “ Tax ” shall mean any federal, state, local or foreign tax, and any interest, penalty or addition to tax incurred thereon or in connection therewith.
 
(x)   “ Tax Event ” shall mean any of (w) a “determination” within the meaning of Section 1313(a) of the Internal Revenue Code of 1986, as amended, (x) a settlement with a taxing authority with respect to which the taxpayer has no right to appeal, (y) a payment of Tax where the taxpayer retains the right to sue for a refund of such Tax, and (z) a payment of Tax pursuant to an originally filed or amended Income Tax return; provided that, in the case of clause (x), (y) or (z), Section 7.16(a) of the Shareholders Agreement has not been breached by the taxpayer.
 
(xi)   All other capitalized terms that are used in this Section D.3 but not defined in this Article Fourth shall have the meaning assigned to such terms in the Shareholders Agreement.
 
4.   No fractional Class P Shares will be issued as a result of any conversion of Class A Shares, Class B Shares or Class C Shares.  In lieu of any fractional share otherwise issuable in respect of any conversion pursuant to this Article Fourth , the Company shall pay an amount in cash equal to the same fraction of the closing price of the Class P Shares determined as of the trading day immediately preceding the effective date of such conversion.
 
5.   Any Class A Shares, Class B Shares or Class C Shares that are converted or otherwise acquired by the Company shall cease to be outstanding and shall not be reissued, and the board of directors shall take all necessary action such that all such shares shall be retired and eliminated from the shares which the Company shall be authorized to issue other than (i) Class B Shares acquired by the Company and transferred to the Class B Trust (as defined in the Shareholders Agreement) pursuant to Section 3.8(b)(iv) of the Shareholders Agreement and (ii) Class A Shares converted into Class P Shares that are automatically converted back into Class A Shares pursuant to Section D.2(a)(v) of this Article Fourth .
 

 

 
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E.   Voting
 
1.   Class P Common Stock
 
Except as otherwise required by applicable law or as otherwise set forth herein, each Class P Shareholder shall be entitled to one (1) vote for each Class P Share standing in its name on the books of the Company and shall vote together (a) with the Class A Shareholders, Class B Shareholders and Class C Shareholders as a single class with respect to the election of directors and (b) with the Class A Shareholders as a single class on all other matters to be voted on by the Company’s stockholders.
 
2.   Class A Common Stock
 
Except as otherwise required by applicable law or as otherwise set forth herein, each Class A Shareholder shall be entitled to a number of votes per Class A Share standing in its name on the books of the Company equal to the quotient obtained by dividing (a) the Total Number of Conversion Shares with respect to the applicable Series (as of the time of determination) by (b) the total number of shares of such Class A Series issued and outstanding (as of the time of determination) and shall vote together (x) with the Class P Shareholders, Class B Shareholders and Class C Shareholders as a single class with respect to the election of directors and (y) with the Class P Shareholders as a single class on all other matters to be voted on by the Company’s stockholders.
 
3.   Class B Common Stock
 
Except as otherwise   required by applicable law or as otherwise set forth herein, Class B Shareholders are not entitled to any voting rights and their approval shall not be required for the taking of any corporate action; provided that with respect to the election of directors only, each Class B Shareholder shall be entitled to one-tenth of one vote (1/10) for each Class B Share standing in its name on the books of the Company and shall vote together with the Class P Shareholders, Class A Shareholders and Class C Shareholders as a single class.
 
4.   Class C Common Stock
 
Except as otherwise required by applicable law or as otherwise set forth herein, Class C Shareholders are not entitled to any voting rights and their approval shall not be required for the taking of any corporate action; provided that with respect to the election of directors only, each Class C Shareholder shall be entitled to one-tenth of one vote (1/10) for each Class C Share standing in its name on the books of the Company and shall vote together with the Class P Shareholders, Class A Shareholders and Class B Shareholders as a single class.
 
5.   Class Voting Rights as to Amendments
 
In addition to any rights that the holders of Common Stock may have pursuant to applicable law, the bylaws of this Company or as otherwise set forth herein, (i) any amendment or change (including through the adoption of any inconsistent provision(s)) to Article Fourth or Article Eleventh of this Certificate of Incorporation shall require the affirmative vote of the
 

 
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following: (A) the holders of at least a majority of the voting power of all issued and outstanding shares, if any, of Series A-1 Stock and Series A-2 Stock, voting together as a class, (B) the holders of at least a majority of the voting power of all issued and outstanding shares, if any, of Series A-3 Stock, voting as a class, (C) the holders of at least a majority of the voting power of all issued and outstanding shares, if any, of Series A-4 Stock, voting as a class, (D) the holders of at least a majority of the voting power of all issued and outstanding shares, if any, of Series A-5 Stock, voting as a class, and (E) the holders of at least a majority of the voting power of all issued and outstanding shares, if any, of Series A-6 Stock, voting as a class; (ii) any amendment or change (including through the adoption of any inconsistent provision(s)) to any provisions of this Certificate of Incorporation other than Article Fourth or Article Eleventh shall require the affirmative vote of holders of at least seventy-five percent (75%) of the voting power of all issued and outstanding Class A Shares, if any; (iii) any amendment or change (including through the adoption of any inconsistent provision(s)) to any provision of this Certificate of Incorporation that amends, alters, repeals, impairs or modifies the rights of a particular class of Common Stock shall require the affirmative vote of holders of at least a majority of the voting power of all issued and outstanding shares of such class of Common Stock, if any; and (iv) any amendment or change (including through the adoption of any inconsistent provision(s)) to any provision of this Certificate of Incorporation that modifies the rights of a particular series of a class of Common Stock in a manner adversely and differently from other series of the same class of Common Stock shall require the affirmative vote of holders of at least a majority of the voting power of all issued and outstanding shares of such series of Common Stock, if any.
 
6.   No Actions Without Meeting
 
Any vote or similar action required or permitted to be taken by the holders of Class P Shares of the Company must be effected at a duly called annual or special meeting of holders of shares of Common Stock of the Company entitled to vote or take similar action with respect to a particular corporate action, including the election of directors, and may not be effected by any consent in writing by such holders of shares of Common Stock.  The holders of Class A Shares, Class B Shares and Class C Shares may, in addition to taking action at a meeting, effect any action required or permitted to be taken by the holders of Class A Shares, Class B Shares or Class C Shares, or any one or more of such classes, as applicable, by consent in writing by the holders of such Class A Shares, Class B Shares or Class C Shares, as applicable.
 
F.   Anti-Dilution
 
1.   Certain Adjustments
 
With respect to each Series, for so long as any Class A Shares, Class B Shares or Class C Shares of such Series remain outstanding, the Total Number of Conversion Shares shall be subject to adjustment from time to time as follows:
 
(a)   Stock Splits, Subdivisions, Combinations or Share Dividends .  If the Company shall (i) split or subdivide the outstanding Class P Shares into a greater number of Class P Shares, (ii) reverse-split or combine the outstanding
 

 
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Class P Shares into a smaller number of Class P Shares, or (iii) dividend or distribute additional Class P Shares to existing Class P Shareholders, the Total Number of Conversion Shares in respect of each Series in effect as of the effective date of such split, subdivision, reverse-split, combination or share dividend shall be adjusted to the number obtained by multiplying the Total Number of Conversion Shares in respect of such Series in effect immediately prior to such effective date of such split, subdivision, reverse-split, combination or share dividend giving rise to this adjustment by a fraction (x) the numerator of which shall be the number of Class P Shares outstanding immediately after, and solely as a result of, such split, subdivision, reverse-split, combination or share dividend and (y) the denominator of which shall be the number of Class P Shares outstanding at the time of the effective date of such split, subdivision, reverse-split, combination or share dividend, prior to giving effect to such event.  No dividends or distributions on Class A Shares, Class B Shares or Class C Shares shall be payable in Class P Shares.
 
(b)   Reclassifications .  In the event of any reclassification of Class P Shares (other than a Change of Control), the right of the holders of shares of any Series to receive (in the aggregate) Class P Shares equal to the Total Number of Conversion Shares in respect of such Series upon conversion of Class A Shares, Class B Shares and Class C Shares of such Series shall be appropriately adjusted to fully reflect the number of shares of stock or other securities or property (including cash) which the Total Number of Conversion Shares in respect of such Series (as of the time of such reclassification) would have been entitled to receive upon consummation of such reclassification had the Total Number of Conversion Shares been issued and outstanding as of the time thereof.
 
(c)   Other Events .  If any event occurs as to which the provisions of Sections F.1(a) or F.1(b) of this Article Fourth are not strictly applicable or, if strictly applicable, would not, in the good faith judgment of the board of directors, fairly and adequately protect the conversion rights of the Class A Shares, Class B Shares and Class C Shares in accordance with the essential intent and principles of such provisions, then the board of directors shall make such adjustments in the Total Number of Conversion Shares for each Series, as applicable, in accordance with such essential intent and principles, as shall be reasonably necessary, in the good faith opinion of the board of directors, to protect such conversion rights as aforesaid.
 
(d)   Miscellaneous .  Any adjustments pursuant to the provisions of this Section F.1 of this Article Fourth shall be made successively whenever an event referred to herein shall occur.  In the event that the Company shall propose to take any action of the type described in the provisions of this Section F.1 of this Article Fourth , the Company shall give notice to all holders of shares of each applicable Series, which notice shall specify the approximate date on which such action is to take place.  Such notice shall also set forth the facts with respect thereto as shall be reasonably necessary to indicate the effect on the Total Number
 

 
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of Conversion Shares in respect of each applicable Series.  In the case of any action which would require the fixing of a record date, such notice shall be given at least ten (10) calendar days prior to the date so fixed, and in case of all other action, such notice shall be given at least fifteen (15) calendar days prior to the taking of such proposed action.  In addition, promptly following the time as of which the Total Number of Conversion Shares is adjusted as provided in this Section F.1 of this Article Fourth , the Company shall provide written notice thereof to the Transfer Agent and all holders of shares of each applicable Series, which notice shall show in reasonable detail the facts requiring such adjustment and the Total Number of Conversion Shares in respect of each applicable Series after such adjustment.  All calculations of numbers of shares under the provisions of this Section F.1 of this Article Fourth shall be made to the nearest one-hundredth (1/100th) of a share.
 
(e)   Proceedings Prior to Any Action Requiring Adjustment .  As a condition precedent to the taking of any action which would require an adjustment pursuant to the foregoing provisions of this Section F.1 of this Article Fourth , the Company shall take any action which may be necessary, including obtaining regulatory, national securities exchange or stockholder approvals or exemptions, in order that the Company may thereafter validly and legally issue as fully paid and nonassessable all shares or other securities or property (including cash) that the Class A Shareholders, Class B Shareholders and Class C Shareholders are entitled to receive upon conversion of Class A Shares, Class B Shares and Class C Shares.
 
2.   Certain Other Actions
 
The Company shall not (except in accordance with, and to the extent permitted by, Section 3.8(g) of the Shareholders Agreement) without first obtaining the prior written approval of the following: (A) holders of at least a majority of the voting power of all issued and outstanding shares, if any, of Series A-1 Stock and Series A-2 Stock, voting together as a class, (B) holders of at least a majority of the voting power of all issued and outstanding shares, if any, of Series A-3 Stock, voting as a class, (C) holders of at least a majority of the voting power of all issued and outstanding shares, if any, of Series A-4 Stock, voting as a class, (D) holders of at least a majority of the voting power of all issued and outstanding shares, if any, of Series A-5 Stock, voting as a class, and (E) holders of at least a majority of the voting power of all issued and outstanding shares, if any, of Series A-6 Stock, voting as a class, to authorize, cause or effect (i) any increase in the authorized number of Class A Shares, Class B Shares or Class C Shares, (ii) any issuance, reissuance or reallocation, of any additional Class A Shares, Class B Shares or Class C Shares, including without limitation as dividends on existing Class A Shares, Class B Shares or Class C Shares, or of any warrants, options or other rights to acquire Class A Shares, Class B Shares or Class C Shares, (iii) any split, subdivision, reverse-split or combination of existing Class A Shares, Class B Shares or Class C Shares or (iv) any authorization, or issuance of any shares of any additional class or series of Common Stock; provided , that (except in accordance with, and to the extent permitted by, Section 3.8(g) of the Shareholders Agreement) (1) any authorization or issuance of any Class B Shares shall also require the prior written
 

 
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approval of holders of at least a majority of the voting power of all issued and outstanding Class B Shares and (2) any authorization or issuance of any Class C Shares shall also require the prior written approval of holders of at least a majority of the voting power of all issued and outstanding Class C Shares.
 
G.   Reservation
 
The Company shall at all times reserve and keep available out of its authorized and unissued Class P Shares, solely for issuance upon the conversion of Class A Shares, Class B Shares and Class C Shares as herein provided, free from any preemptive or other similar rights, such number of Class P Shares as shall from time to time be issuable upon the conversion of all the Class A Shares, Class B Shares and Class C Shares then outstanding.  All Class P Shares delivered upon conversion of Class A Shares, Class B Shares or Class C Shares in accordance with this Article Fourth shall be duly authorized, validly issued, fully paid and non-assessable, free and clear of all liens, claims, security interests and other encumbrances.
 
H.   Payment of Transfer Taxes
 
The Company shall pay all stock transfer, documentary, and stamp taxes relating to the conversion of Class A Shares, Class B Shares or Class C Shares, including, for the avoidance of doubt, the issuance or delivery of Class P Shares to the Converting Holder upon the conversion of Class A Shares, Class B Shares or Class C Shares pursuant to Section D of this Article Fourth .
 
I.   Delivery of Notices to the Company or the Transfer Agent; Receipt of Notices
 
Whenever this Article Fourth requires notice, written notice or instructions by Class A Shareholders, Class B Shareholders or Class C Shareholders to be given to the Company, such notice or instructions shall be given by email to an officer of the Company at each of the email addresses provided by the Company to the Class A Shareholders, Class B Shareholders and Class C Shareholders in connection therewith.  Whenever this Article Fourth requires notice, written notice or instructions by Class A Shareholders, Class B Shareholders or Class C Shareholders, or by the Company, to be given to the Transfer Agent, such notice or instructions shall be given by email to the Transfer Agent at the email address provided by the Transfer Agent to the Class A Shareholders, Class B Shareholders and Class C Shareholders and the Company in connection therewith.  Any other notices or written notices to be delivered to the Company under this Certificate of Incorporation shall be addressed to an officer of the Company at the Company’s principal place of business.  Any notices or instructions given by email shall be considered received on the same day if sent to the email addresses provided by the Company or the Transfer Agent, as applicable, prior to 4:00 p.m. (Central Prevailing Time) on a Business Day, and if not, shall be considered received on the recipient’s next Business Day; provided , that Change of Control Notices and Change of Control Objection Notices shall be delivered in accordance with Section D.1(e)(iii) of this Article Fourth .
 

 
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J.   Delivery of Notices to Stockholders; Receipt of Notices
 
Whenever this Certificate of Incorporation requires notice, written notice or instructions to be given to any Class A Shareholders, Class B Shareholders or Class C Shareholders, such notice or instructions shall be given by email to the email address(es) provided by the applicable Class A Shareholder, Class B Shareholder or Class C Shareholder to the Company in connection therewith.  Any notices or instructions given by email shall be considered received on the same day if sent to the email address(es) provided by the applicable Class A Shareholder, Class B Shareholder or Class C Shareholder prior to 4:00 p.m. (Central Prevailing Time) on a Business Day, and if not, shall be considered received on the recipient’s next Business Day; provided , that Change of Control Notices and Change of Control Objection Notices shall be delivered in accordance with Section D.1(e)(iii) of this Article Fourth .
 
FIFTH:   The name and mailing address of the incorporator of the Company is Brandy L. Treadway, c/o Weil, Gotshal & Manges LLP, 200 Crescent Court, Suite 300, Dallas, Texas 75201.
 
SIXTH:   The number of directors constituting the initial board of directors is thirteen (13) and may be adjusted as provided in the bylaws of the Company.  The names and mailing addresses of the individuals who are to serve as directors until the first annual meeting of stockholders or until their successors are elected and qualified are Richard D. Kinder, C. Park Shaper, Steven J. Kean, Henry Cornell, Michael Miller, Michael C. Morgan, Kenneth A. Pontarelli, Fayez Sarofim, John Stokes, R. Baran Tekkora and Glenn A. Youngkin, 500 Dallas Street, Suite 1000, Houston, Texas 77002.
 
SEVENTH:   Directors of the Company need not be elected by written ballot unless the bylaws of the Company otherwise provide.
 
EIGHTH:   In furtherance of, and not in limitation of, the powers conferred by statute, the board of directors of the Company is expressly authorized to adopt, amend, and repeal the bylaws of the Company or adopt new bylaws without any action on the part of the stockholders, in each case subject to the requirements and procedures, if any, set forth in the bylaws of the Company; provided that any bylaw adopted or amended by the board of directors, and any powers thereby conferred, may be amended, altered or repealed by the stockholders.  Any amendment or repeal of the bylaws of the Company (or adoption of new bylaws) by action of the stockholders must be approved by the vote of shares representing at least 66⅔% of the voting power of all shares entitled to vote for the election of directors.
 
NINTH:   Indemnification.
 
A.   The Company shall indemnify any individual who was, is, or is threatened to be made a party to a proceeding (as hereinafter defined) by reason of the fact that he or she (a) is or was a director or officer of the Company or (b) while a director or officer of the Company, is or was serving at the request of the Company as a director, officer, partner, manager, venturer, proprietor, trustee, employee, agent, or similar function of another foreign or domestic corporation, partnership, joint venture, limited liability company, sole proprietorship, trust,
 

 
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employee benefit plan, or other enterprise, at any time during which this Certificate of Incorporation is in effect (whether or not such individual continues to serve in such capacity at the time any indemnification or advancement of expenses pursuant hereto is sought or at the time any proceeding relating thereto exists or is brought), and whether the basis of such proceeding is alleged action in an official capacity as a director or officer, or in such other capacity while serving as an a director or officer, to the fullest extent permitted under the DGCL, as the same exists or may hereafter be amended or modified from time to time (but, in the case of any such amendment or modification, only to the extent that such amendment or modification permits the Company to provide greater indemnification rights than said law permitted the Company to provide prior to such amendment or modification) against all expense, liability and loss (including attorney’s fees, judgments, fines, ERISA excise taxes or penalties and amounts paid in settlement) incurred or suffered by such individual in connection therewith.  Such indemnification shall continue as to an individual who has ceased to be a director or officer and shall inure to the benefit of his or her heirs, executors and administrators.
 
B.   The indemnification permitted by this Article Ninth shall be a contract right and as such shall run from the Company (and any successor of the Company by operation of law or otherwise) to the benefit of any director or officer who is elected and accepts the position of director or officer of the Company or elects to continue to serve as a director or officer of the Company while this Article Ninth is in effect.  Any repeal or amendment of this Article Ninth shall be prospective only and shall not limit the rights of any such director or officer or the obligations of the Company with respect to any claim arising from or related to the services of such director or officer in any of the foregoing capacities prior to any such repeal or amendment to this Article Ninth .
 
C.   To obtain indemnification under this Certificate of Incorporation, a claimant shall submit to the Company a written request, including therein or therewith such documentation and information as is reasonably available to the claimant and is reasonably necessary to determine whether and to what extent the claimant is entitled to indemnification.  Upon written request by a claimant for indemnification, a determination, if required by applicable law, with respect to the claimant’s entitlement thereto shall be made as follows:  (1) if requested by the claimant, by Independent Counsel (as hereinafter defined), or (2) if no request is made by the claimant for a determination by Independent Counsel, (i) by the board of directors by a majority vote of a quorum of the board of directors consisting of Disinterested Directors (as hereinafter defined) or by a committee of Disinterested Directors appointed by a majority vote of the board of directors, or (ii) if a quorum of the board of directors consisting of Disinterested Directors or a committee of Disinterested Directors is not obtainable or, even if obtainable, such quorum or committee of Disinterested Directors so directs, by Independent Counsel in a written opinion to the board of directors, a copy of which shall be delivered to the claimant, or (iii) if a quorum of Disinterested Directors or a committee of Disinterested Directors so directs, by a majority vote of the stockholders of the Company.  In the event the determination of entitlement to indemnification is to be made by Independent Counsel, the Independent Counsel shall be selected by the claimant (subject to the consent of the board of directors by a majority vote, not to be unreasonably withheld or delayed) unless the claimant shall request that such selection be made by the board of directors by a majority vote.  If it is so determined that the claimant is entitled to indemnification, payment to the claimant shall be made within ten (10) calendar days after such
 

 
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determination.  A “ Disinterested Director ” means a director of the Company who is not and was not a party to the matter in respect of which indemnification is sought by the claimant.  An “ Independent Counsel ” means a law firm, a member of a law firm, or an independent practitioner, that is experienced in matters of corporation law and shall include any individual who, under the applicable standards of professional conduct then prevailing, would not have a conflict of interest in representing either the Company or the claimant in an action to determine the claimant’s rights under this Certificate of Incorporation.
 
D.   A claimant shall have the right to be paid by the Company expenses (including attorney’s fees) incurred in defending any such proceeding in advance of its final disposition to the maximum extent permitted under the DGCL, as the same exists or may hereafter be amended or modified, only to the extent that such amendment or modification permits the Company to provide greater rights to advancement of expenses than said law permitted the Company to provide prior to such amendment or modification, upon receipt of any undertaking by or on behalf of such director or officer to repay such amount if it shall ultimately be determined that such director or officer is not entitled to be indemnified by the Company against such expenses as authorized by this Article Ninth , if such undertaking is required by the DGCL.  Such advances shall be paid by the Company within twenty (20) calendar days after the receipt by the Company of a statement or statements from the claimant requesting such advance or advances from time to time (including such undertaking if required by the DGCL), and shall not require any action by the board of directors.  The board of directors, by majority vote, may authorize the Company's counsel to represent such director or officer in any such proceeding, whether or not the Company is a party to such proceeding.
 
E.   If a claim for indemnification is not paid in full by the Company within sixty (60) calendar days after a written claim has been received by the Company, or if a claim for advancement of expenses is not paid in full by the Company within twenty (20) calendar days after a written claim has been received by the Company, the claimant may at any time thereafter bring suit against the Company to recover the unpaid amount of the claim, and if successful in whole or in part, the claimant shall also be entitled to be paid the expenses of prosecuting such claim to the fullest extent permitted by law.  In any such suit:
 
(1)   It shall be a defense to any such action that such indemnification or advancement of costs of defense are not permitted under the DGCL, but the burden of proving such defense shall be on the Company.
 
(2)   The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the individual did not act in good faith and in a manner which he or she reasonably believed to be in or not opposed to the best interests of the Company, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his or her conduct was unlawful.
 
(3)   Neither the failure of the Company (including its board of directors or any committee thereof, Independent Counsel, or stockholders) to have made its determination prior to the commencement of such action that indemnification of the claimant is permissible in the
 

 
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circumstances nor an actual determination by the Company (including its board of directors or any committee thereof, Independent Counsel, or stockholders) that such indemnification is not permissible shall be a defense to the action or create a presumption that such indemnification is not permissible.
 
(4)   If a determination shall have been made pursuant to Section C of this Article Ninth that the indemnitee is entitled to indemnification, the Company shall be bound by such determination in any judicial proceeding commenced pursuant to this Section E .  To the fullest extent permitted by law, the Company shall be precluded from asserting in any judicial proceeding commenced pursuant to this Section E that the procedures and presumptions of this Certificate of Incorporation are not valid, binding and enforceable and shall stipulate in such proceeding that the Company is bound by all the provisions of this Certificate of Incorporation.
 
F.   Non-Exclusive Remedy.
 
(1)   The rights conferred under this Article Ninth shall not be exclusive of any other right that any individual may have or hereafter acquire under any statute, bylaw, resolution of stockholders or directors, agreement, or otherwise and shall continue as to an individual who has ceased to be a director, officer, employee or agent, as applicable, and shall inure to the benefit of his or her heirs, executors, administrators, and personal representatives.
 
(2)   With respect to any indemnification obligations of the Company conferred under this Article Ninth , the Company hereby acknowledges and agrees (i) that it is the indemnitor of first resort with respect to all indemnification obligations of the Company pursuant to Section A of this Article Ninth (i.e., its obligations to an applicable indemnitee are primary and any obligation of the Investor Shareholders and their Affiliates (collectively, the “ Fund Indemnitors ”) to advance expenses or to provide indemnification and/or insurance for the same expenses or liabilities incurred by such indemnitee are secondary) and (ii) that it irrevocably waives, relinquishes and releases the Fund Indemnitors from any and all claims against the Fund Indemnitors for contribution, subrogation or any other recovery of any kind in respect thereof to the fullest extent permitted by law.
 
G.   The Company may additionally indemnify or provide advancement of expenses to any employee or agent of the Company or any other person to the fullest extent permitted by law.
 
H.   As used in this Article Ninth , the term “proceeding” means any threatened, pending, or completed action, suit, or proceeding, whether civil, criminal, administrative, arbitrative, or investigative, any appeal in such an action, suit, or proceeding, and any inquiry or investigation that could lead to such an action, suit, or proceeding.
 
I.   The Company may adopt bylaws or enter into agreements with such individuals for the purpose of providing for indemnification and/or the advancement of expenses as provided in this Article Ninth .
 
J.   The Company shall have power to purchase and maintain insurance on behalf of any individual who is or was a director, officer, employee or agent of the Company, or is or was serving at the request of the Company as a director, officer, partner, manager, venturer,
 

 
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proprietor, trustee, employee, agent, or similar function of another foreign or domestic corporation, partnership, joint venture, limited liability company, sole proprietorship, trust, employee benefit plan, or other enterprise, against any liability asserted against such individual and incurred by such individual in any such capacity, or arising out of such individual’s status as such, whether or not the Company would have the power to indemnify such individual against such liability under the provisions of this Article Ninth or otherwise.  To the extent that the Company maintains any policy or policies providing for such insurance, each indemnitee to which rights to indemnification have been granted in this Article Ninth in its capacity as a director or officer, shall be covered by such policy or policies in accordance with its or their terms to the maximum extent of the coverage thereunder for any such indemnitee.
 
TENTH:   A director of the Company shall not be personally liable to the Company or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (a) for any breach of the director’s duty of loyalty to the Company or its stockholders, (b) for acts or omissions not in good faith or that involve intentional misconduct or knowing violation of law, (c) under Section 174 of the DGCL, or (d) for any transaction from which the director derived an improper personal benefit.  Neither amendment nor repeal of this Article Tenth nor the adoption of any provision of this Certificate of Incorporation inconsistent with this Article Tenth shall eliminate or reduce the effect of this Article Tenth in respect of any matter occurring, or any cause of action, suit or claim that, but for this Article Tenth , would accrue or arise, prior to such amendment, repeal or adoption of any inconsistent provision.  In addition to the circumstances in which a director of the Company is not personally liable as set forth in the foregoing provisions of this Article Tenth , a director shall not be liable to the Company or its stockholders to such further extent as permitted by any law hereafter enacted, including without limitation any subsequent amendment to the DGCL.
 
ELEVENTH :  To the fullest extent permitted by applicable law, the Company, on behalf of itself and its wholly-owned subsidiaries, renounces any interest or expectancy of the Company and its wholly-owned subsidiaries in, or in being offered an opportunity to participate in, business opportunities (including, without limitation, any business activities or lines of business that are the same as or similar to those pursued by, or competitive with, the Company or any of its subsidiaries or any dealings with customers or clients of the Company or any of its subsidiaries) that are from time to time presented to an Investor Shareholder (or any director nominated by such Investor Shareholder) while such Investor Shareholder is a holder of Class A Shares or Related Shares, or any of its managers, officers, directors, agents, stockholders, members, partners, Affiliates and subsidiaries (other than the Company and its wholly-owned subsidiaries) (each, an “ Investor Party ”), even if the opportunity is one that the Company or its wholly-owned subsidiaries might reasonably be deemed to have pursued or had the ability or desire to pursue if granted the opportunity to do so, and each such Investor Party (and any director nominated by such Investor Party) shall have no duty to communicate or offer such business opportunity to the Company or any of its wholly-owned subsidiaries and, to the fullest extent permitted by applicable law, shall not be liable to the Company or any of its wholly-owned subsidiaries for breach of any fiduciary or other duty, as a director or otherwise, by reason of the fact that such Investor Party pursues or acquires such business opportunity, directs such business opportunity to another Person or fails to present such business opportunity, or information regarding such business opportunity, to the Company or its wholly-owned
 

 
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subsidiaries.  Notwithstanding the foregoing, an Investor Party who is a director of the Company or one of its wholly-owned subsidiaries and who is offered a business opportunity solely in such capacity (a “ Directed Opportunity ”) shall be obligated to communicate such Directed Opportunity to the Company, provided, however , that all of the protections of this Article Eleventh shall otherwise apply to the Investor Party with respect to such Directed Opportunity, including, without limitation, the ability of the Investor Party to pursue, or acquire such Directed Opportunity or direct such Directed Opportunity to another Person; provided , further , that the provisions of this Article Eleventh shall in no way limit any confidentiality obligations of a director existing under applicable law.  For clarification, neither the Company nor any or its Subsidiaries renounces or waives its ability to pursue, compete for, acquire or otherwise undertake any opportunity, and the Company and its Subsidiaries may do so, whether or not such opportunity is presented or offered to them or to any other Person, including those mentioned above.
 
Neither the alteration, amendment or repeal of this Article Eleventh , nor the adoption of any provision(s) of this Certificate of Incorporation inconsistent with this Article Eleventh shall eliminate or reduce the effect of this Article Eleventh in respect of any matter occurring, or any cause of action, suit or claim that, but for this Article Eleventh , would accrue or arise, prior to such alteration, amendment, repeal or adoption.
 

 
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The undersigned, for the purpose of forming the Company under the laws of the State of Delaware, does make, file, and record this Certificate of Incorporation and does certify that this is the act and deed of the undersigned and that the facts stated herein are true and, accordingly, hereunto sets its hand on this 10th day of February, 2011.
 
 
       
By:
 
/s/ Brandy L. Treadway
       
Name:
 
Brandy L. Treadway
 
INCORPORATOR
 

 
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Exhibit 3.2

BYLAWS
 
OF
 
KINDER MORGAN, INC.
(a Delaware Corporation)

 
 
 


TABLE OF CONTENTS
 
Page
 
ARTICLE I
 
Offices
 
1
 
 
1.1
 
Registered Office and Agent
 
1
 
 
1.2
 
Other Offices
 
1
 
ARTICLE II
 
Meetings of Stockholders
 
1
 
 
2.1
 
Annual Meeting
 
1
 
 
2.2
 
Special Meeting
 
1
 
 
2.3
 
Place of Meetings
 
1
 
 
2.4
 
Notice
 
2
 
 
2.5
 
Voting List
 
2
 
 
2.6
 
Quorum
 
2
 
 
2.7
 
Required Vote; Withdrawal of Quorum
 
2
 
 
2.8
 
Method of Voting; Proxies
 
2
 
 
2.9
 
Record Date
 
3
 
 
2.10
 
Conduct of Meeting
 
3
 
 
2.11
 
Inspectors
 
3
 
 
2.12
 
Advance Notice of Stockholder Nominations and Proposals
 
3
 
 
2.13
 
No Actions Without Meeting
 
5
 
ARTICLE III
 
Directors
 
6
 
 
3.1
 
Management
 
6
 
 
3.2
 
Number; Qualification; Election; Term
 
6
 
 
3.3
 
Change in Number
 
6
 
 
3.4
 
Removal
 
6
 
 
3.5
 
Vacancies
 
6
 
 
3.6
 
Meetings of Directors
 
6
 
 
3.7
 
First Meeting
 
7
 
 
3.8
 
Election of Officers
 
7
 
 
3.9
 
Regular Meetings
 
7
 
 
3.10
 
Special Meetings
 
7
 
 
3.11
 
Notice
 
7
 
 
3.12
 
Quorum; Majority Vote
 
7
 
 
3.13
 
Procedure
 
12
 
 
3.14
 
Presumption of Assent
 
12
 

 
 
 
TABLE OF CONTENTS
(continued)
 
Page
 
 
3.15
 
Compensation
 
13
 
 
3.16
 
Action Without Meeting
 
13
 
ARTICLE IV
 
Committees
 
13
 
 
4.1
 
Designation
 
13
 
 
4.2
 
Number; Qualification; Term
 
13
 
 
4.3
 
Authority
 
13
 
 
4.4
 
Committee Changes
 
13
 
 
4.5
 
Alternate Members of Committees
 
13
 
 
4.6
 
Regular Meetings
 
13
 
 
4.7
 
Special Meetings
 
13
 
 
4.8
 
Quorum; Majority Vote
 
14
 
 
4.9
 
Minutes
 
14
 
 
4.10
 
Compensation
 
14
 
 
4.11
 
Responsibility
 
14
 
ARTICLE V
 
Notice
 
14
 
 
5.1
 
Method
 
14
 
 
5.2
 
Waiver
 
15
 
ARTICLE VI
 
Officers
 
15
 
 
6.1
 
Number; Titles; Term of Office
 
15
 
 
6.2
 
Removal
 
15
 
 
6.3
 
Vacancies
 
15
 
 
6.4
 
Authority
 
15
 
 
6.5
 
Compensation
 
15
 
 
6.6
 
Chairman of the Board
 
15
 
 
6.7
 
Chief Executive Officer
 
16
 
 
6.8
 
Chief Financial Officer
 
16
 
 
6.9
 
President
 
16
 
 
6.10
 
Chief Operating Officer
 
16
 
 
6.11
 
Vice Presidents
 
16
 
 
6.12
 
Treasurer
 
17
 
 
6.13
 
Assistant Treasurers
 
17
 
 
6.14
 
Secretary
 
17
 
 
6.15
 
Assistant Secretaries
 
17
 

 
 
 
TABLE OF CONTENTS
(continued)
 
Page

ARTICLE VII
 
Certificates and Stockholders
 
17
 
 
7.1
 
Certificates for Shares
 
17
 
 
7.2
 
Replacement of Lost or Destroyed Certificates
 
18
 
 
7.3
 
Transfer of Shares
 
18
 
 
7.4
 
Registered Stockholders
 
18
 
 
7.5
 
Regulations
 
18
 
 
7.6
 
Legends
 
18
 
ARTICLE VIII
 
Indemnification
 
18
 
 
8.1
 
Indemnification of Directors and Officers
 
18
 
 
8.2
 
Contract Rights
 
19
 
 
8.3
 
Request for Indemnification
 
19
 
 
8.4
 
Advancement of Expenses
 
19
 
 
8.5
 
Judicial Proceedings
 
20
 
 
8.6
 
Non-Exclusive Right
 
20
 
 
8.7
 
Indemnification of Others
 
21
 
 
8.8
 
Proceedings
 
21
 
 
8.9
 
Other Agreements
 
21
 
 
8.10
 
Insurance
 
21
 
ARTICLE IX
 
Miscellaneous Provisions
 
21
 
 
9.1
 
Dividends
 
21
 
 
9.2
 
Reserves
 
21
 
 
9.3
 
Books and Records
 
22
 
 
9.4
 
Fiscal Year
 
22
 
 
9.5
 
Seal
 
22
 
 
9.6
 
Resignations
 
22
 
 
9.7
 
Securities of Other Corporations
 
22
 
 
9.8
 
Telephone Meetings
 
22
 
 
9.9
 
Invalid Provisions
 
22
 
 
9.10
 
Mortgages, etc..
 
22
 
 
9.11
 
Headings
 
22
 
 
9.12
 
References
 
22
 
 
9.13
 
Amendments
 
23
 
ARTICLE X
 
Definitions
 
23
 

 
 
 
 
 


BYLAWS
 
OF
 
KINDER MORGAN, INC.
(a Delaware Corporation)
 
PREAMBLE
 
These Bylaws (“ Bylaws ”) are subject to, and governed by, the General Corporation Law of the State of Delaware (the “ DGCL ”) and the certificate of incorporation of Kinder Morgan, Inc., a Delaware corporation (the  “ Company ”).  In the event of a direct conflict between the provisions of these Bylaws and the mandatory provisions of the DGCL or the provisions of the certificate of incorporation of the Company (as amended from time to time, the “ Charter ”), such provisions of the DGCL or the Charter, as the case may be, shall control.
 
ARTICLE I
Offices
 
1.1   Registered Office and Agent .  The registered office and registered agent of the Company shall be as designated from time to time by the appropriate filing by the Company in the office of the Secretary of State of the State of Delaware.
 
1.2   Other Offices .  The Company may also have offices at such other places, both within and without the State of Delaware, as the board of directors, by a Majority Vote, may from time to time determine or as the business of the Company may require.
 
ARTICLE II
Meetings of Stockholders
 
2.1   Annual Meeting .  An annual meeting of stockholders of the Company shall be held each calendar year on such date and at such time as shall be designated from time to time by a Majority Vote of the board of directors and stated in the notice of the meeting.  At such meeting, the stockholders shall elect directors and transact such other business as may properly be brought before the meeting.
 
2.2   Special Meeting .  A special meeting of the stockholders may be called at any time by the Chairman of the Board, the Chief Executive Officer, the President, or the board of directors by a Majority Vote, and shall be called by the Chairman of the Board, Chief Executive Officer or President at the request in writing of the stockholders of record of not less than ten percent (10%) of all voting power entitled to vote at such meeting.  A special meeting shall be held on such date and at such time as shall be designated by the Person(s) calling the meeting and stated in the notice of the meeting.  Only such business shall be transacted at a special meeting as may be stated or indicated in the notice of such meeting.
 
2.3   Place of Meetings .  An annual meeting of stockholders may be held at any place within or without the State of Delaware designated by a Majority Vote of the board of directors.  A special meeting of stockholders may be held at any place within or without the State of Delaware designated in the notice of the meeting by a Majority Vote of the board of directors.  Meetings of stockholders shall be held at the principal office of the Company unless another place is designated for meetings in the notice of the meeting or in the manner provided herein.
 

 
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2.4   Notice .  Notice stating the place, day, and time of each meeting of the stockholders and, in case of a special meeting, the purpose or purposes for which the special meeting is called shall be given not less than ten (10) nor more than sixty (60) days before the date of the meeting, by or at the direction of the President, the Secretary, or the officer or Person(s) calling the meeting, to each stockholder of record entitled to vote at such meeting.  If such notice is to be sent by mail, it shall be directed to such stockholder at his address as it appears on the records of the Company.  Without limiting the manner by which notice otherwise may be given effectively to stockholders, notice of meetings may be given to stockholders by means of electronic transmission in accordance with applicable law.
 
2.5   Voting List .  At least ten (10) days before each meeting of stockholders, the Secretary or other officer of the Company who has charge of the Company’s stock ledger, either directly or through another officer appointed by him or through a transfer agent appointed by a Majority Vote of the board of directors, shall prepare a complete list of stockholders entitled to vote thereat, arranged in alphabetical order and showing the address of each stockholder and number of shares registered in the name of each stockholder.  For a period of ten days prior to such meeting, such list shall be kept on file at the principal place of business of the Company and shall be open to examination by any stockholder during ordinary business hours.  Such list shall be produced at such meeting and kept at the meeting at all times during such meeting and may be inspected by any stockholder who is present.
 
2.6   Quorum .  The holders of shares representing a majority of the voting power of the outstanding shares entitled to vote, present in person or by proxy, shall constitute a quorum at any meeting of stockholders, except as otherwise provided by law, the Charter, or these Bylaws.  If a quorum shall not be present, in person or by proxy, at any meeting of stockholders, the stockholders entitled to vote thereat who are present, in person or by proxy, or, if no stockholder entitled to vote is present, any officer of the Company, may adjourn the meeting from time to time, without notice other than announcement at the meeting (unless the board of directors, by a Majority Vote, after such adjournment, fixes a new record date for the adjourned meeting), until a quorum shall be present, in person or by proxy.  At any adjourned meeting at which a quorum shall be present, in person or by proxy, any business may be transacted that may have been transacted at the original meeting had a quorum been present; provided, however, that if the adjournment is for more than 30 days or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the adjourned meeting.
 
2.7   Required Vote; Withdrawal of Quorum .  After a quorum is present at any meeting, the affirmative vote of the holders of shares representing at least a majority of the voting power of the outstanding shares entitled to vote who are present, in person or by proxy, shall decide any question brought before such meeting, unless the question is one on which, by express provision of statute, the Charter, or these Bylaws, a different vote is required, in which case such express provision shall govern and control the decision of such question.  The stockholders present at a duly constituted meeting may continue to transact business until adjournment, notwithstanding the withdrawal of enough stockholders to leave less than a quorum.
 
2.8   Method of Voting; Proxies .  Each outstanding share having voting power shall be entitled to the number of votes specified in the Charter.  Elections of directors need not be by written ballot.  Stockholders shall have no right to cumulate votes in the elections of directors.  At any meeting of stockholders, every stockholder having the right to vote may vote either in person or by a proxy executed in the manner provided by law by the stockholder or by his duly authorized attorney in fact.  Each such proxy shall be filed with the Secretary of the Company before or at the time of the meeting.  No proxy shall be valid after three (3) years from the date of its execution,
 

 
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unless otherwise provided in the proxy.  If no date is stated in a proxy, such proxy shall be presumed, only for purposes of determining whether three (3) years have passed since its execution, to have been executed on the date it was delivered to or filed with the Secretary of the Company.  Each proxy shall be revocable unless expressly provided therein to be irrevocable and coupled with an interest sufficient in law to support an irrevocable power or unless otherwise made irrevocable by law.
 
2.9   Record Date .  For the purpose of determining stockholders entitled to notice of or to vote at any meeting of stockholders, or any adjournment thereof, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion, or exchange of stock or for the purpose of any other lawful action, the board of directors may, by a Majority Vote, fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the board of directors for any such determination of stockholders, such date in any case to be not more than sixty (60) days and not less than ten (10) days prior to such meeting nor more than sixty (60) days prior to any other action.  If no record date is fixed:
 
(a)   The record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given.
 
(b)   The record date for determining stockholders for any other purpose shall be at the close of business on the day on which the board of directors adopts the resolution relating thereto.
 
(c)   A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided , however , that the board of directors may fix a new record date for the adjourned meeting.
 
2.10   Conduct of Meeting .  The Chairman of the Board, if such office has been filled, and, if not or if the Chairman of the Board is absent or otherwise unable to act, the Chief Executive Officer, shall preside at all meetings of stockholders and may adopt rules and regulations for the conduct of the meeting.  The Secretary shall keep the records of each meeting of stockholders.  In the absence or inability to act of any such officer, such officer’s duties shall be performed by the officer given the authority to act for such absent or non-acting officer under these Bylaws or by some person appointed at the meeting by a majority of the directors present at such meeting.
 
2.11   Inspectors .  To the fullest extent required by law, the corporation shall, in advance of any meeting of stockholders, by a Majority Vote, appoint one (1) or more inspectors to act at such meeting or any adjournment thereof.  If any of the inspectors so appointed shall fail to appear or act or if inspectors shall not have been appointed, the chairman of the meeting shall appoint one or more inspectors.  Each inspector, before entering upon the discharge of his duties, shall take and sign an oath faithfully to execute the duties of inspector at such meeting with strict impartiality and according to the best of his ability.  The inspectors shall determine the number of shares of capital stock of the Company outstanding and the voting power of each, the number of shares represented at the meeting, the existence of a quorum, and the validity and effect of proxies and shall receive votes, ballots, or consents, hear and determine all challenges and questions arising in connection with the right to vote, count and tabulate all votes, ballots, or consents, determine the results, and do such acts as are proper to conduct the election or vote with fairness to all stockholders.  The inspectors shall make a report in writing of any challenge, request, or matter determined by them and shall execute a certificate of any fact found by them.  No director or candidate for the office of director shall act as an inspector of an election of directors.  Inspectors need not be stockholders.
 

 
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2.12   Advance Notice of Stockholder Nominations and Proposals .
 
(a)   Timely Notice .  At a meeting of the stockholders, only such nominations of persons for the election of directors and such other business shall be conducted as shall have been properly brought before the meeting.  To be properly brought before an annual meeting, nominations or such other business must be:  (i) specified in the Company’s notice of meeting, (ii) otherwise properly brought before the meeting by or at the direction of the board of directors, by a Majority Vote, or any committee thereof, or (iii) otherwise properly brought before an annual meeting by a stockholder who is a stockholder of record of the Company at the time such notice of meeting is given, who is entitled to vote at the meeting and who complies with the procedures set forth in this Section 2.12 .  To be properly brought before a special meeting, nominations or such other business must be specified in the Company’s notice of meeting.  In addition, any proposal of business (other than the nomination of persons for election to the board of directors) must be a proper matter for stockholder action.  For business (including, but not limited to, director nominations) to be properly brought before an annual meeting by a stockholder, the stockholder or stockholders of record intending to propose the business (the “ Proposing Stockholder ”) must have given timely notice thereof pursuant to this Section 2.12(a) , and either Section 2.12(b) or Section 2.12(c) below, as applicable, in writing to the Secretary of the Company even if such matter is already the subject of (1) any notice to the stockholders from the board of directors or (2) any press release of the Company reported by a national news service or filed by the Company with the Securities and Exchange Commission (a “ Public Disclosure ”).  To be timely, a Proposing Stockholder’s notice must be addressed to the Secretary of the Company and delivered to or mailed and received at the principal place of business of the Company not later than the close of business on the 90 th day, nor earlier than the close of business on the one hundred twentieth (120 th ) day in advance of the anniversary of the previous year’s annual meeting; provided , however , that with respect to the Company’s first annual meeting or in the event that the date of the annual meeting is advanced by more than thirty (30) days or delayed by more than seventy (70) days from such anniversary date, notice by the Proposing Stockholder to be timely must be so delivered not later than the close of business on the later of the ninetieth (90 th ) day prior to such annual meeting or the tenth (10 th ) day following the day on which public announcement of the date of such meeting is first made.  In no event shall the Public Disclosure of an adjournment or postponement of an annual meeting commence a new notice time period (or extend any notice time period).
 
(b)   Stockholder Nominations . For the nomination of any person or persons for election to the board of directors, a Proposing Stockholder’s notice to the Secretary of the Company shall set forth (i) the name, age, business address and residence address of each nominee proposed in such notice, (ii) the principal occupation or employment of each such nominee, (iii) the number, class and series of shares of capital stock of the Company which are owned of record and beneficially by each such nominee (if any), (iv) such other information concerning each such nominee as would be required to be disclosed in a proxy statement soliciting proxies for the election of such nominee as a director in an election contest (even if an election contest is not involved), or that is otherwise required to be disclosed, under the rules of the Securities and Exchange Commission, (v) the consent of the nominee to being named in the proxy statement as a nominee and to serving as a director if elected, and (vi) as to the Proposing Stockholder:  (A) the name and address of the Proposing Stockholder as they appear on the  Company’s books and of the beneficial owner, if any, on whose behalf the nomination is being made, (B) the number, class and series of shares of the Company which are owned by the Proposing Stockholder (beneficially and of record) and owned by the beneficial owner, if any, on whose behalf the nomination is being made, as of the date of the Proposing Stockholder’s notice, and a representation that the Proposing Stockholder will notify the Company in writing of the number, class and series of such shares owned of record and beneficially as of the record date for the meeting promptly following the later of the record date or the date notice of the record date is first publicly disclosed, (C) a description of any agreement,
 

 
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arrangement or understanding with respect to such nomination between or among the Proposing Stockholder and any of its affiliates or associates, and any others (including their names) acting in concert with any of the foregoing, and a representation that the Proposing Stockholder will notify the Company in writing of any such agreement, arrangement or understanding in effect as of the record date for the meeting promptly following the later of the record date or the date notice of the record date is first publicly disclosed, (D) a description of any agreement, arrangement or understanding (including any derivative or short positions, profit interests, options, hedging transactions, and borrowed or loaned shares) that has been entered into as of the date of the Proposing Stockholder’s notice by, or on behalf of, the Proposing Stockholder or any of its affiliates or associates, the effect or intent of which is to mitigate loss to, manage risk or benefit of share price changes for, or increase or decrease the voting power of the Proposing Stockholder or any of its affiliates or associates with respect to shares of stock of the Company, and a representation that the Proposing Stockholder will notify the Company in writing of any such agreement, arrangement or understanding in effect as of the record date for the meeting promptly following the later of the record date or the date notice of the record date is first publicly disclosed, (E) a representation that the Proposing Stockholder is a holder of record of shares of the Company entitled to vote at the meeting and intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice, and (F) a representation whether the Proposing Stockholder intends to deliver a proxy statement and/or form of proxy to holders of a majority of the total voting power and/or otherwise to solicit proxies from stockholders in support of the nomination. The Company may require any proposed nominee to furnish such other information as it may reasonably require to determine the eligibility of such proposed nominee to serve as an independent director of the Company or that could be material to a reasonable stockholder’s understanding of the independence, or lack thereof, of such nominee.  No nominee of a stockholder (or stockholders) who has (or have) failed to comply with the requirements of this Section 2.12(b) shall be eligible to serve as a director of the Company.
 
(c)   Other Stockholder Proposals .  For all business other than director nominations, a Proposing Stockholder’s notice to the Secretary of the Company shall set forth as to each matter the Proposing Stockholder proposes to bring before the annual meeting:  (i) a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting, (ii) any other information relating to such stockholder and beneficial owner, if any, on whose behalf the proposal is being made, required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for the proposal and pursuant to and in accordance with Section 14(a) of the Exchange Act and (iii) the information required by Section 2.12(b)(vi) above.
 
(d)   Effect of Noncompliance . Notwithstanding anything in these Bylaws to the contrary:  (i) no business shall be conducted at any annual meeting except in accordance with the procedures set forth in this Section 2.12 , and (ii) unless otherwise required by law, if a Proposing Stockholder intending to propose business at an annual meeting pursuant to this Section 2.12 does not provide the additional information required under the representations in Sections 2.12(b)(vi)(B) , (C) and (D) to the Company promptly following the later of the record date or the date notice of the record date is first publicly disclosed, or the Proposing Stockholder (or a qualified representative of the Proposing Stockholder) does not appear at the meeting to present the proposed business, such business shall not be transacted, notwithstanding that proxies in respect of such business may have been received by the Company. The requirements of this Section 2.12 are included to provide the Company notice of a stockholder’s intention to bring business before an annual meeting and shall in no event be construed as imposing upon any stockholder the requirement to seek approval from the Company as a condition precedent to bringing any such business before an annual meeting.
 
2.13   No Actions Without Meeting .  Any vote or similar action required or permitted to be taken by the holders of Class P Shares of the Company
 

 
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must be effected at a duly called annual or special meeting of holders of shares of common stock of the Company entitled to vote or take similar action with respect to a particular corporate action, including the election of directors, and may not be effected by any consent in writing by such holders of shares of common stock.  The holders of Class A Shares, Class B Shares and Class C Shares may, in addition to taking action at a meeting, effect any action required or permitted to be taken by the holders of Class A Shares, Class B Shares or Class C Shares, as applicable, by consent in writing by the holders of such Class A Shares, Class B Shares or Class C Shares, as applicable
 
ARTICLE III
Directors
 
3.1   Management .  The business and property of the Company shall be managed by the board of directors.  Subject to the restrictions imposed by law, the Charter, or these Bylaws, the board of directors may exercise all the powers of the Company.
 
3.2   Number; Qualification; Election; Term .
 
(a)   The number of directors shall initially be thirteen (13) and may be increased in accordance with Section 3.3 of the Shareholders Agreement or decreased in accordance with Section 3.1(a) of the Shareholders Agreement.  After the termination of Section 3.1 of the Shareholders Agreement with respect to all Shareholders, the number of directors shall be determined by resolution of a majority of the board of directors.
 
(b)   Except as otherwise required by law, the Charter or these Bylaws, the directors shall be elected at an annual meeting of stockholders at which a quorum is present; provided , that a special meeting may be called for the purpose of electing directors in accordance with Section 3.1(d) of the Shareholders Agreement.  Directors shall be elected by a plurality of the votes of the shares present in person or represented by proxy and entitled to vote on the election of directors.  Each director so chosen shall hold office until the first annual meeting of stockholders held after his election and until his successor is elected and qualified or, if earlier, until his death, resignation, or removal from office.  None of the directors need be a stockholder of the Company or a resident of the State of Delaware.  Each director must have attained the age of majority.
 
3.3   Change in Number .  No decrease in the number of directors constituting the entire board of directors shall have the effect of shortening the term of any incumbent director .
 
3.4   Removal .  Except as otherwise provided in the Charter or these Bylaws, at any meeting of stockholders called expressly for that purpose, any director or the entire board of directors may be removed, with or without cause, by a vote of the holders of shares representing a majority of the Total Voting Power.
 
3.5   Vacancies .  Vacancies on the board of directors, however resulting, may be filled by the affirmative vote of a majority of the directors then in office, even if less than a quorum, or by the sole remaining director, and each director so chosen shall hold office until the first annual meeting of stockholders held after his election and until his successor is elected and qualified or, if earlier, until his death, resignation, or removal from office.  However, at any time prior to the termination of Section 3.1 of the Shareholders Agreement with respect to all Shareholders, such vacancies shall be filled only with nominees chosen to fill such vacancies in accordance with the provisions of the Shareholders Agreement.
 

 
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3.6   Meetings of Directors .  The directors may hold their meetings and may have an office and keep the books of the Company, except as otherwise provided by law, in such place or places within or without the State of Delaware as the board of directors, by a Majority Vote, may from time to time determine or as shall be specified in the notice of such meeting or duly executed waiver of notice of such meeting.
 
3.7   First Meeting .  Each newly-elected board of directors may hold its first meeting for the purpose of organization and the transaction of business, if a quorum is present, immediately after and at the same place as the annual meeting of stockholders, and no notice of such meeting shall be necessary.
 
3.8   Election of Officers .  At the first meeting of the board of directors after each annual meeting of stockholders at which a quorum shall be present, the board of directors shall elect the officers (other than the Chief Executive Officer) of the Company.  The Chief Executive Officer theretofore serving shall be automatically reelected at such meeting without any necessary vote, subject to the provisions of Section 3.12(B)(1) .  New officers also may be elected and any vacancies filled at any meeting of the board of directors.
 
3.9   Regular Meetings .  Regular meetings of the board of directors shall be held at such times and places as shall be designated from time to time by resolution of the board of directors by a Majority Vote.  Notice of such regular meetings shall not be required.
 
3.10   Special Meetings .  Special meetings of the board of directors shall be held whenever called by the Chairman of the Board, the Chief Executive Officer, or the President, or by at least two (2) directors, acting jointly.
 
3.11   Notice .  The Secretary shall give notice of each special meeting to each director at least 24 hours before the meeting.  Notice of any such meeting need not be given to any director who shall, either before or after the meeting, submit a signed waiver of notice or who shall attend such meeting without protesting, prior to or at its commencement, the lack of notice to him.  Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the board of directors need be specified in the notice or waiver of notice of such meeting.
 
3.12   Quorum; Majority Vote .  At all meetings of the board of directors, a majority of the directors fixed in the manner provided in these Bylaws shall constitute a quorum for the transaction of business.  If at any meeting of the board of directors there be less than a quorum present, a majority of those present or any director solely present may adjourn the meeting from time to time without further notice to the fullest extent permitted by law.  The affirmative vote of a majority of the directors present at a meeting at which a quorum is in attendance shall be the act of the board of directors subject to the following exceptions:  (A) the number otherwise required if the act of a greater number is required by law, the Charter, or these Bylaws; (B) the following actions shall require approval of the number of directors constituting a majority of all directors plus one (1):  (1) termination of the Chief Executive Officer other than for “cause” (or other than for “Cause,” if the Chief Executive Officer is Kinder) and any selection of a replacement for a terminated Chief Executive Officer and (2) any determination as to the value of non-cash dividends; (C) the determination of certain “black-out periods” shall be determined in accordance with the definition of “Blackout Period” in the Shareholders Agreement; (D) the decisions to seek injunctive relief pursuant to the last paragraph of Section 3.6(f) of the Shareholders Agreement shall be determined in accordance with the last paragraph of Section 3.6(f) of the Shareholders Agreement; (E) the decisions with respect to the distribution of property in the Class B Trust (as defined in the Shareholders Agreement) contemplated by Section 3.8(g)
 

 
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of the Shareholders Agreement shall be determined in accordance with Section 3.8(g) of the Shareholders Agreement; (F) the provision of a written notice by the board of directors pursuant to clause (c) or (f) of the definition of “Cause” in the Shareholders Agreement with respect to Kinder and clause (c), (d) , (g) or (h) of the definition of “Cause” in the Shareholders Agreement with respect to any person other than Kinder shall be determined in accordance with such definition in the Shareholders Agreement; (G) except as provided specifically otherwise in these Bylaws, including the final paragraph of this Section 3.12 , any matter brought before the board of directors shall be decided by, and any determination, action or approval of the board of directors shall require, a Supermajority Board Vote so long as the Investor Shareholders have the right to choose at least five (5) nominees to the board of directors pursuant to Section 3.1(b) of the Shareholders Agreement, it being understood that at all times from and after such time as Kinder ceases to be chief executive officer of any of the Company, KMGP or KMR, any action by the Company or any of its Subsidiaries in its capacity as a shareholder, member or partner of KMGP related to the determination of the identity of board members (or similar governing body) of KMGP (including removal and filling vacancies) shall constitute matters to be determined by the board of directors and require a Majority Vote; provided , that the immediately foregoing clause (beginning with “it being understood”) shall not be interpreted to prevent or prohibit such matters from being determined by the board of directors at any time by a Majority Vote; and (H) so long as the Investor Shareholders have the right to choose at least five (5) nominees to the board of directors pursuant to Section 3.1(b) of the Shareholders Agreement, any of the following with respect to the Company and each of its Subsidiaries (other than KMP, KMP’s operating partnerships, KMR or any of their respective Subsidiaries, or KMGP (solely to the extent that KMGP (x) is acting in its capacity as a holder of shares of KMR or in its capacity as General Partner pursuant to Section 1.4 of the Delegation of Control Agreement to approve any action taken by KMR, or (y) is acting in its capacity as the general partner of KMP or any of its operating partnerships to approve any matter on behalf of KMP or any of its operating partnerships (and not to the extent acting in another capacity, such as acting to amend or waive a right or obligation of KMGP (or of its direct or indirect parent entities) under any organizational document of KMP or its operating partnerships)), or KMGP Services, to the extent it is taking action related to carrying out the terms of the Employee Services Agreement, in each case unless specifically provided for herein) (it being understood that the dollar thresholds below shall apply to the Company and such Subsidiaries in the aggregate), in each case, shall constitute matters that are required to be brought before the board of directors and require a Supermajority Board Vote:
 
(a)   (i) Commencement of a voluntary case, proceeding or other action (x) under any existing or future law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization or relief of debtors, seeking to have an order for relief entered with respect to the Company or any such Subsidiary, or seeking to adjudicate the Company or any such Subsidiary as bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, winding-up, liquidation, dissolution, composition or other relief with respect to the Company or any such Subsidiary or the Company’s or any such Subsidiary’s debts, or (y) seeking appointment of a receiver, trustee, custodian or other similar official for the Company or any such Subsidiary or for all or any substantial part of the Company’s or any such Subsidiary’s assets, or (ii) making a general assignment for the benefit of the Company’s or any such Subsidiary’s creditors;
 
(b)   Commencement of any termination, plan of liquidation or dissolution or winding-up of the business and affairs of the Company or any such Subsidiary or consent to or entry into an agreement or arrangement related to any of the foregoing;
 
(c)   Commencement, settlement or compromise of any litigation, proceeding or investigation with a cost or expected value (for any individual matter or group of related matters) of more than $50 million or payment, discharge, settlement or satisfaction of any claims, liabilities or obligations (other than obligations under contracts relating to the operation of the business of the Company and its
 

 
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Subsidiaries) in excess of $50 million (for any individual matter or group of related matters), other than the payment, discharge, settlement or satisfaction thereof in the ordinary course of business consistent with past practice;
 
(d)   (i) Any changes to the dividend policy of the Company adopted by the board of directors (the “ Dividend Policy ”) and (ii) except with respect to distributions pursuant to the Dividend Policy, declaration, setting aside for payment or payment of any dividend on, or any other distribution (including dividend or distributions of Securities or other non-cash distributions of property) in respect of, any of the Company’s shares of capital stock or otherwise making any payments to the Company’s stockholders in their capacity as such (including payments in non-cash property or Securities);
 
(e)   (i) Any amendment to or waiver or modification of any material terms of any charter, bylaws or other similar governance document of the Company or any of its Subsidiaries or controlled Affiliates (other than controlled Affiliates of KMR or KMP), including any committee charters and any corporate governance or other similar board or committee policies, or any material terms of any security issued by the Company or any of its Subsidiaries or controlled Affiliates (other than (x) changes relating to wholly-owned Subsidiaries that do not (A) reduce the Company’s ultimate control of over such Subsidiaries, (B) reduce the board of directors’ rights pursuant to this Section 3.12 and (C) have any negative effect on the Investor Shareholders, including their rights under these Bylaws, the Charter or the Shareholders Agreement or (y) any security issued by controlled Affiliates of KMR or KMP), or (ii) otherwise make any material change to the governance structure of the Company or any of its Subsidiaries or controlled Affiliates that are not required by law or rule of the national stock exchange on which the Class P Shares are then listed (other than (x) changes relating to wholly-owned Subsidiaries that do not (A) reduce the Company’s ultimate control of over such Subsidiaries, (B) reduce the board of directors’ rights pursuant to this Section 3.12 , or (C) have any negative effect on the Investor Shareholders, including their rights under these Bylaws, the Charter or the Shareholders Agreement or (y) to the governance structure of controlled Affiliates of KMR or KMP);
 
(f)   (i) Adoption of the Company’s annual budget (the “ Annual Budget ”) and (ii) except as contemplated by the Annual Budget, entry into any new lines of business or engaging in transactions outside the normal lines of business of the Company or any such Subsidiary, in each case, that, in the aggregate, are expected to generate revenue in any year in excess of $50 million or to incur costs in any year in excess of $50 million;
 
(g)   Except as specifically contemplated as part of the Annual Budget:
 
(i)   Buy or sell, or commit to buy or sell, any properties or assets with values greater than $50 million in the aggregate during any Fiscal Year (as hereinafter defined), except pursuant to commodity or hedging instructions in the ordinary course of business;
 
(ii)   Approve, adopt, enter into or effect (and in the case of contracts, amend, alter or cancel), any projects, mergers, contracts (other than contracts entered into or cancelled in the ordinary course of business), consolidations, recapitalizations, reorganizations, acquisitions, divestitures, joint ventures or alliances, or any agreements or commitments relating thereto, involving a value in excess of $50 million in the aggregate in any Fiscal Year;
 
(iii)   In any Fiscal Year, make binding bids to effect acquisitions (x) with an aggregate purchase price (including the assumption of liabilities) in excess of $50 million or (y) to acquire entities reasonably expected to generate cash flow in excess of $50 million in the aggregate in any Fiscal Year;
 

 
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(iv)   Make capital expenditures in excess of $50 million in the aggregate during any Fiscal Year;
 
(v)   Enter into leases with aggregate payment obligations in excess of $25 million annually or $50 million during the term of such leases;
 
(vi)   Incur or assume any Indebtedness or otherwise become obligated with respect to any such Indebtedness, other than amounts not in excess of $50 million in the aggregate outstanding at any given time;
 
(vii)   Mortgage or otherwise encumber or subject to any lien, any properties or assets in excess of $50 million in the aggregate at any given time;
 
(viii)   Make, sell or otherwise dispose of any investments in other companies in excess of $50 million in the aggregate in any Fiscal Year;
 
(ix)   Issue or sell any equity interest of the Company or any of its Subsidiaries or any other Securities of the Company or any of its Subsidiaries or rights convertible into, exchangeable or exercisable for, or evidencing the right to subscribe for, or any warrants or options to acquire, any such shares, interests, voting securities or convertible securities or split, combine, subdivide, reclassify or redeem, purchase or otherwise acquire, or propose to redeem or purchase or otherwise acquire, any shares of its stock or beneficial interests, or any other Securities of the Company or any of its Subsidiaries (except issuances or sales of the purchase obligation described in, and purchases pursuant to, the purchase provisions contained in Annex B to the limited liability company agreement of KMR and, with regard to the Company, (i) upon conversion as provided in Article Fourth of the Charter, (ii) the distribution of Class B Shares (or Class P Shares received in connection with the conversion of such Class B Shares) held by the Class B Trust (as defined in the Shareholders Agreement) in accordance with Section 3.8(g) of the Shareholders Agreement or (iii) pursuant to a benefit or compensation plan approved by a Supermajority Board Vote);
 
(x)   Make loans or advances of money or assets of the Company or any such Subsidiary if such loans and advances aggregate greater than $25 million in the aggregate at any given time, except for (i) loans between the Company and any of its wholly-owned Subsidiaries or between wholly-owned Subsidiaries of the Company and (ii) mandatory advancement of expenses required by indemnification obligations of the Company pursuant to the Charter, these Bylaws or the Shareholders Agreement; or
 
(xi)   Knowingly take any action that violates any instrument of Indebtedness or any other material agreement.
 
(h)   Enter into transactions with any Affiliates (other than the Company or entities which are Affiliates solely because the Company has a direct or indirect interest therein (it being understood that neither KMR, KMP, nor their respective Subsidiaries shall constitute such an entity)), executive officers or directors of the Company or any Subsidiary, or any Management Shareholder, or any of their respective Affiliates (other than the Company or entities which are Affiliates solely because the Company has a direct or indirect interest therein (it being understood that neither KMR, KMP, nor their respective Subsidiaries shall constitute such an entity)), or with entities in which any such Person has a financial stake other than through their ownership in the Company (and other than a stake representing less than 2% of any class of equity securities of any publicly traded company); provided , however , that this provision will not restrict transactions in the day-to-day ordinary course of business
 

 
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with KMGP, KMP or KMR or their respective Subsidiaries or controlled Affiliates that are not the types of actions that otherwise require approval by a Supermajority Board Vote pursuant to any of the enumerated items in Section 3.12(H)(a)-(n) ; provided , further , that this provision will not apply to the selection of underwriters in accordance with Section 5.1(g) of the Shareholders Agreement; it being understood that this subsection (h) shall not be read to imply that an action otherwise subject to a Supermajority Board Vote pursuant to any of the enumerated items in Section 3.12(H)(a)-(n) is not so subject;
 
(i)   Increase the employee compensation of any Management Shareholder or provide additional equity or profits related benefits to a Management Shareholder, including pursuant to compensatory cash payments made pursuant to Section 3.6(j) of the Shareholders Agreement; provided , that decisions with respect to the distribution of property in the Class B Trust (as defined in the Shareholders Agreement) contemplated by Section 3.8(g) of the Shareholders Agreement shall be determined in accordance with Section 3.8(g) of the Shareholders Agreement and shall not require a Supermajority Board Vote; provided , further , that approval pursuant to this provision shall be in addition to, and not in lieu of, any other approvals for the compensation of the Chief Executive Officer required pursuant to applicable stock exchange requirements;
 
(j)   Make material changes to or waive the material terms of any agreement or transaction the entry into which required or would have required a Supermajority Board Vote pursuant to this Section 3.12 ;
 
(k)   Take, or permit any of its Subsidiaries (which, for clarification, does not include KMR when acting as a holder of KMP i-units or KMGP (solely to the extent that KMGP (x) is acting in its capacity as a holder of shares of KMR or in its capacity as General Partner pursuant to Section 1.4 of the Delegation of Control Agreement to approve any action taken by KMR, or (y) is acting in its capacity as the general partner of KMP to approve any matter on behalf of KMP (and not to the extent acting in another capacity, such as acting to amend or waive a right or obligation of KMGP (or of its direct or indirect parent entities) under any organizational document of KMP)) or KMGP Services, to the extent it is taking action related to carrying out the terms of the Employee Services Agreement) to take, any action in its capacity as shareholder, member or partner of any Subsidiary or Affiliate, in each case, that is publicly traded (including KMP and KMR); provided , that this Section 3.12 shall not impose any board of directors voting requirement with respect to (i) the determination of the identity of the board members (or similar governing body) of KMR or, except as specifically set forth in Section 3.12(G) , of KMGP or (ii) for the avoidance of doubt, any actions required by Section 3.6(g) of the Shareholders Agreement;
 
(l)   Enter into any agreement or the taking of any action (i) that would by its terms purport to restrict or could reasonably be expected to restrict the ability of the Company or any of its Subsidiaries or its controlled Affiliates (other than controlled Affiliates of KMR or KMP) to make distributions, (ii) with the intent of negatively affecting or impairing any right that the board of directors and/or the stockholders have pursuant to these Bylaws, the Charter or the Shareholders Agreement or (iii) that by its terms purports to prohibit or could reasonably be expected to prohibit, or that imposes or could reasonably be expected to impose material penalties in the event of, the exercise of a right that the board of directors and/or the stockholders have pursuant to these Bylaws, the Charter or the Shareholders Agreement, but excluding in the case of this clause (iii) customary change of control provisions or similar provisions that are typical in agreements of the relevant nature;
 
(m)   Adopt, or, if adopted, modify or waive a shareholder rights plan of the  Company; or
 

 
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(n)   Authorize any of, commit, agree or propose to take any of, consent to or vote in favor of any of, publicly announce an intention to, or otherwise effect, in each case directly or indirectly, any actions that would constitute any of the foregoing, including with respect to any of the Company’s Subsidiaries or its Affiliates (other than KMP, KMP’s operating partnerships, KMR or any of their respective Subsidiaries or controlled Affiliates, or KMGP (solely to the extent that KMGP (x) is acting in its capacity as a holder of shares of KMR or in its capacity as General Partner pursuant to Section 1.4 of the Delegation of Control Agreement to approve any action taken by KMR, or (y) is acting in its capacity as the general partner of KMP or any of its operating partnerships to approve any matter on behalf of KMP or any of its operating partnerships (and not to the extent acting in another capacity, such as acting to amend or waive a right or obligation of KMGP (or of its direct or indirect parent entities) under any organizational document of KMP or its operating partnerships)) or KMGP Services, to the extent it is taking action relating to carrying out the terms of the Employee Services Agreement), except as specifically provided for in this Section 3.12 ).
 
Notwithstanding any other provision of this Section 3.12 , no Majority Vote or Supermajority Board Vote shall be required for any matter approved by a committee of the board of directors if such committee’s charter provides such committee with exclusive authority with respect to such matter.
 
Notwithstanding anything to the contrary contained herein, but in no way limiting the provisions of Section 3.12(H)(k) , it is expressly agreed that nothing in these Bylaws shall require a Supermajority Board Vote (or any other board of director action) in order for any member of management or other representative of the Company who is serving as an executive officer or a director (or in any similar capacity) for an entity with publicly traded Securities (other than the Company) to make decisions as he or she sees fit in such capacity or, if serving as an executive officer or a director (or in any similar capacity) for an entity that is a general partner or the delegate of a general partner of any entity that has publicly traded Securities (other than the Company), to make decisions as such an officer or a director (or in such similar capacity), when acting in such capacity, as he or she believes is required on behalf of such publicly traded entity; provided , that nothing in this paragraph shall be construed to limit the fiduciary duties owed to the Company and its Subsidiaries by any such member of management or other representative of the Company when acting in any capacity on behalf of the Company or any of its Subsidiaries.
 
For the avoidance of doubt, nothing in these Bylaws shall require a Supermajority Board Vote for the following actions:  (i) the filing of any current or periodic reports or any reports related to the beneficial ownership of securities required under the Exchange Act to be filed by the Company or KMI, or (ii) any action expressly required to be approved solely by independent members of the board of directors, or a committee composed thereof, pursuant to the Exchange Act or applicable stock exchange requirements when the number of independent directors then serving on the board of directors or such committee is less than the number of directors required to effect a Supermajority Board Vote.
 
3.13   Procedure .  At meetings of the board of directors, business shall be transacted in such order as from time to time the board of directors may determine by a Majority Vote.  The Chairman of the Board, if such office has been filled, and, if not or if the Chairman of the Board is absent or otherwise unable to act, the President shall preside at all meetings of the board of directors.  In the absence or inability to act of either such officer, a chairman shall be chosen by the board of directors by the affirmative vote of a majority of the directors present.  The Secretary of the Company shall act as the secretary of each meeting of the board of directors unless the board of directors appoints another person to act as secretary of the meeting by a Majority Vote.  The board of directors shall keep regular minutes of its proceedings which shall be placed in the minute books of the Company.
 

 
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3.14   Presumption of Assent .  A director of the Company who is present at the meeting of the board of directors at which action on any corporate matter is taken shall be presumed to have assented to the action unless his dissent shall be entered in the minutes of the meeting or unless he shall file his written dissent to such action with the person acting as secretary of the meeting before the adjournment thereof or shall forward any dissent by certified or registered mail to the Secretary of the Company immediately after the adjournment of the meeting.  Such right to dissent shall not apply to a director who voted in favor of such action.
 
3.15   Compensation .  The board of directors, by a Majority Vote, shall have the authority to fix the compensation, including fees and reimbursement of expenses, paid to directors for attendance at regular or special meetings of the board of directors or any committee thereof; provided , however , that nothing contained in these Bylaws shall be construed to preclude any director from serving the Company in any other capacity or receiving compensation therefor.
 
3.16   Action Without Meeting .  Any action required or permitted to be taken at any meeting of the board of directors, or of any committee thereof, may be taken without a meeting, if prior to such action a written consent thereto is signed by all members of the board of directors, or of such committee as the case may be, and such written consent is filed with the minutes of proceedings of the board of directors or committee thereof.
 
ARTICLE IV
Committees
 
4.1   Designation .  The board of directors may, by resolution, designate one (1) or more committees.  The board of directors, by resolution, shall designate and appoint an audit committee, a compensation committee (the “ Compensation Committee ”) and a corporate governance and nominating committee (the “ Governance/Nominating Committee ”) and may designate and appoint one (1) or more other committees under such names and for such purpose or function as may be deemed appropriate.
 
4.2   Number; Qualification; Term .  Each committee shall consist of one (1) or more directors appointed by resolution adopted by the board of directors in accordance with the Shareholders Agreement.  The number of committee members may be increased or decreased from time to time by resolution adopted by the board of directors in accordance with the Shareholders Agreement.
 
4.3   Authority .  Each committee, to the extent expressly provided in the resolution establishing such committee, shall have and may exercise all of the authority of the board of directors in the management of the business and property of the Company, except to the extent expressly restricted by law, the Charter, or these Bylaws (including any provisions under Section 3.12 requiring matters to be brought before the board of directors, or requiring a Supermajority Board Vote or a Majority Vote).
 
4.4   Committee Changes .  Subject to the terms of the Shareholders Agreement, the board of directors, by a Majority Vote, shall have the power at any time to fill vacancies in, to change the membership of, and to discharge any committee.
 
4.5   Alternate Members of Committees .  Subject to the terms of the Shareholders Agreement and the charter of any committee, the board of directors, by a Majority Vote, may designate one (1) or more directors as alternate members of any
 

 
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committee.  Any such alternate member may replace any absent or disqualified member at any meeting of the committee.  If no alternate committee members have been so appointed to a committee or each such alternate committee member is absent or disqualified, the member or members of such committee present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the board of directors to act at the meeting in the place of any such absent or disqualified member.
 
4.6   Regular Meetings .  Regular meetings of any committee may be held without notice at such time and place as may be designated from time to time by the committee and communicated to all members thereof.
 
4.7   Special Meetings .  Special meetings of any committee may be held whenever called by any committee member.  The committee member calling any special meeting shall cause notice of such special meeting, including therein the time and place of such special meeting, to be given to each committee member at least twenty-four (24) hours before such special meeting.  Neither the business to be transacted at, nor the purpose of, any special meeting of any committee need be specified in the notice or waiver of notice of any special meeting.
 
4.8   Quorum; Majority Vote .  At meetings of any committee, a majority of the number of members designated by the board of directors shall constitute a quorum for the transaction of business.  To the fullest extent permitted by law, if a quorum is not present at a meeting of any committee, a majority of the members present may adjourn the meeting from time to time, without notice other than an announcement at the meeting, until a quorum is present.  The affirmative vote of a majority of the members present at any meeting at which a quorum is in attendance shall be the act of a committee, unless the act of a greater number is required by law, the Charter, or these Bylaws; provided , that all determinations by the Governance/Nominating Committee with respect to nominations, designations and appointments to the board of directors and committees of the board of directors shall require unanimous approval until the Investor Shareholders are no longer entitled to nominate at least three (3) directors to the board of directors pursuant to Section 3.1(b) of the Shareholders Agreement.
 
4.9   Minutes .  Each committee shall cause minutes of its proceedings to be prepared and shall report the same to the board of directors upon the request of the board of directors.  The minutes of the proceedings of each committee shall be delivered to the Secretary of the Company for placement in the minute books of the Company.
 
4.10   Compensation .  Committee members may, by resolution adopted by a Majority Vote of the board of directors, be allowed a fixed sum and expenses of attendance, if any, for attending any committee meetings or a stated salary or other compensation.
 
4.11   Responsibility .  The designation of any committee and the delegation of authority to it shall not operate to relieve the board of directors or any director of any responsibility imposed upon it or such director by law.
 
ARTICLE V
Notice
 
5.1   Method .  Whenever by statute, the Charter, or these Bylaws, notice is required to be given to any committee member, director, or stockholder and no provision is made as to how such notice shall be given, personal notice shall not be required and any such notice may be given (a) in writing, by mail, postage prepaid, addressed to such committee member,
 

 
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director, or stockholder at his address as it appears on the books or (in the case of a stockholder) the stock transfer records of the Company, or (b) by any other method permitted by law (including, without limitation, by overnight courier service, telegram, telex, or facsimile or other form of electronic transmission, provided such other form of electronic transmission creates a record that may be retained, retrieved, and reviewed by the recipient thereof, may be directly reproduced in paper form by such recipient, and such recipient has consented to the delivery of notice by such method).  Notices or instructions relating to conversion of Class A Shares, Class B Shares or Class C Shares into Class P Shares in accordance with the Charter shall be given by email to the email addresses provided by the notice recipient in connection therewith.  Any notice required or permitted to be given by mail shall be deemed to be delivered and given at the time when the same is deposited in the United States mail as aforesaid.  Any notice required or permitted to be given by overnight courier service shall be deemed to be delivered and given at the time delivered to such service with all charges prepaid and addressed as aforesaid.  Any notice required or permitted to be given by telegram, telex, or facsimile shall be deemed to be delivered and given at the time transmitted with all charges prepaid and addressed as aforesaid.
 
5.2   Waiver .  Whenever any notice is required to be given to any stockholder, director, or committee member of the Company by statute, the Charter, or these Bylaws, a waiver thereof in writing signed by the Person or Persons entitled to such notice, whether before or after the time stated therein, shall be equivalent to the giving of such notice.  Attendance of a stockholder, director, or committee member at a meeting shall constitute a waiver of notice of such meeting, so long as such stockholder, director or committee member does not object to the transaction of any business on the ground that the meeting is not lawfully called or convened.
 
ARTICLE VI
Officers
 
6.1   Number; Titles; Term of Office .  The officers of the Company shall be a Chief Executive Officer, a President, a Chief Financial Officer, a Chief Operating Officer, a Secretary, and, if elected by the board of directors, a Chairman of the Board, and such other officers as the board of directors may from time to time elect or appoint, including one or more Vice Presidents (with each Vice President to be elected or appointed and to have such descriptive title, if any, as the board of directors shall determine by a Majority Vote), and a Treasurer.  Subject to Section 3.12(B)(1) in the case of the Chief Executive Officer and Section 3.8 , each officer shall be appointed or elected by the board of directors and shall hold office until his successor shall have been duly elected and shall have qualified, until his death, or until he shall resign or shall have been removed in the manner hereinafter provided.  Any two (2) or more offices may be held by the same person.  None of the officers need be a stockholder or a resident of the State of Delaware or, except in the case of the Chairman of the Board, a director of the Company.
 
6.2   Removal .  Subject to Section 3.12(B)(1) , any officer or agent elected or appointed by the board of directors (other than the Chief Executive Officer), may be removed by the board of directors by a Majority Vote with or without cause at any time.  The board of directors, by a Majority Vote, may remove the Chief Executive Officer for cause (or Cause, if the Chief Executive Officer is Kinder) at any time.  The board of directors, by the approval of the number of directors constituting a majority of all directors plus one, may remove the Chief Executive Officer other than for cause (or other than for Cause if the Chief Executive Officer is Kinder) pursuant to Section 3.12(B)(1) .  This Section 6.2 shall be without prejudice to the contract rights, if any, of the person so removed.  Election or appointment of an officer or agent shall not of itself create contract rights except pursuant to Article VIII .
 

 
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6.3   Vacancies .  Any vacancy occurring in any office of the Company (by death, resignation, removal, or otherwise) may be filled by the board of directors, subject to Section 3.12(B)(1) in the case of the Chief Executive Officer.
 
6.4   Authority .  Officers shall have such authority and perform such duties in the management of the Company as are provided in these Bylaws or as may be determined by resolution (including by a Majority Vote where these Bylaws so provide) of the board of directors not inconsistent with these Bylaws.
 
6.5   Compensation .  The compensation, if any, of officers and agents shall be fixed from time to time by the board of directors, by a Majority Vote (except to the extent a Supermajority Board Vote is required pursuant to Section 3.12(H)(i) ), or by the Compensation Committee (except to the extent a Supermajority Board Vote is required pursuant to Section 3.12(H)(i) and, with respect to the compensation of the Chief Executive Officer, such other approvals are required pursuant to applicable stock exchange requirements).
 
6.6   Chairman of the Board .  The Chairman of the Board, if one is elected by the board of directors, shall have such powers and duties as may be prescribed by the board of directors.  Such officer shall preside at all meetings of the stockholders and of the board of directors.  Such officer may sign all certificates for shares of stock of the Company.
 
6.7   Chief Executive Officer .  The Chief Executive Officer shall have general supervision, management, direction and control of the business and affairs of the Company and shall see that all orders and resolutions of the board of directors are carried into effect.  The Chief Executive Officer shall be authorized to execute promissory notes, bonds, mortgages, leases and other contracts requiring a seal, under the seal of the Company, except where required or permitted by law to be otherwise executed and except where the execution thereof shall be expressly delegated by the board of directors by a Majority Vote to some other officer or agent of the Company.  In the absence of the Chairman of the Board, the Chief Executive Officer shall preside at all meetings of the stockholders and of the board of directors.  The Chief Executive Officer shall have the general powers and duties of management usually vested in the office of chief executive officer of a corporation and shall perform such other duties and possess such other authority and powers as the board of directors may from time to time prescribe.
 
6.8   Chief Financial Officer .  The Chief Financial Officer shall have general financial supervision, management, direction and control of the business and affairs of the Company and shall see that all financial orders and resolutions of the board of directors are carried into effect.  The Chief Financial Officer shall be authorized to execute promissory notes, bonds, mortgages, leases and other contracts requiring a seal, under the seal of the Company, except where required or permitted by law to be otherwise executed and except where the execution thereof shall be expressly delegated by the board of directors by a Majority Vote to some other officer or agent of the Company.  The Chief Financial Officer shall have the general financial powers and duties of management usually vested in the office of chief financial officer of a corporation and shall perform such other duties and possess such other authority and powers as the board of directors, the Chief Executive Officer, or the Chairman of the Board may from time to time prescribe.
 
6.9   President .  The President shall have the general powers and duties of management usually vested in the office of president of a corporation (in circumstances where such corporation also maintains the office of chief executive officer) and shall perform such other duties and possess such other authority and powers as the board of directors, the Chief Executive Officer, or the Chairman of the Board may from time to time prescribe.
 

 
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6.10   Chief Operating Officer .  The Chief Operating Officer shall have the general powers and duties of management usually vested in the office of chief operating officer of a corporation (including general supervision of the day-to-day operations of the Company) and shall perform such other duties and possess such other authority and powers as the board of directors, the Chief Executive Officer, or the Chairman of the Board may from time to time prescribe.
 
6.11   Vice Presidents .  Each Vice President shall have such powers and duties as may be assigned to him by the board of directors (by a Majority Vote), the Chairman of the Board, the Chief Executive Officer, the Chief Financial Officer, the Chief Operating Officer, the President, and (in order of their seniority as determined by the board of directors (by a Majority Vote) or, in the absence of such determination, as determined by the length of time they have held the office of Vice President) shall exercise the powers of the Chief Executive Officer or the President during that officer’s absence or inability to act.  As between the Company and third parties, any action taken by a Vice President in the performance of the duties of the Chief Executive Officer or the President shall be conclusive evidence of the absence or inability to act of the Chief Executive Officer or the President at the time such action was taken.
 
6.12   Treasurer .  The Treasurer shall have custody of the Company’s funds and Securities, shall keep full and accurate account of receipts and disbursements, shall deposit all monies and valuable effects in the name and to the credit of the Company in such depository or depositories as may be designated by the board of directors by a Majority Vote, and shall perform such other duties as may be prescribed by the board of directors (by a Majority Vote), the Chairman of the Board, the Chief Executive Officer, the Chief Financial Officer, the Chief Operating Officer or the President.
 
6.13   Assistant Treasurers .  Each Assistant Treasurer shall have such powers and duties as may be assigned to him by the board of directors (by a Majority Vote), the Chairman of the Board, the Chief Executive Officer, the Chief Financial Officer, the Chief Operating Officer or the President.  The Assistant Treasurers (in the order of their seniority as determined by the board of directors by a Majority Vote or, in the absence of such a determination, as determined by the length of time they have held the office of Assistant Treasurer) shall exercise the powers of the Treasurer during such officer’s absence or inability to act.
 
6.14   Secretary .  Except as otherwise provided in these Bylaws, the Secretary shall keep the minutes of all meetings of the board of directors and of the stockholders in books provided for that purpose, and he shall attend to the giving and service of all notices.  He may sign with the Chairman of the Board, the Chief Executive Officer, the President, the Chief Operating Officer, the Chief Financial Officer or a Vice President, in the name of the Company, all contracts of the Company and affix the seal of the Company thereto.  He may sign with the Chairman of the Board, the President or a Vice President all certificates for shares of stock of the Company, and he shall have charge of the certificate books, transfer books, and stock papers as the board of directors by a Majority Vote may direct, all of which shall at all reasonable times be open to inspection by any director upon application at the office of the Company during ordinary business hours.  He shall in general perform all duties incident to the office of the Secretary, subject to the control of the board of directors, the Chairman of the Board, the Chief Executive Officer and the President.
 
6.15   Assistant Secretaries .  Each Assistant Secretary shall have such powers and duties as may be assigned to him by the board of directors (by a Majority Vote), the Chairman of the Board, the Chief Executive Officer, the Chief Operating Officer or the President.  The Assistant Secretaries (in the order of their seniority as determined by the board of directors by a Majority Vote or, in the absence of such a determination, as determined by the length of
 

 
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time they have held the office of Assistant Secretary) shall exercise the powers of the Secretary during that officer’s absence or inability to act.
 
ARTICLE VII
Certificates and Stockholders
 
7.1   Certificates for Shares .  Shares of stock in the Company shall be uncertificated and shall not be represented by certificates, except to the extent as may be required by applicable law or as may otherwise be authorized by the board of directors.  In the event shares of stock are represented by certificates, such certificates shall be registered upon the books of the Company and signed by the Chairman of the Board or the President or a Vice President and also by the Secretary or an Assistant Secretary or by the Treasurer or an Assistant Treasurer.  Any and all signatures on the certificate may be a facsimile and may be sealed with the seal of the Company or a facsimile thereof; provided , however , that no such seal of the Company shall be required thereon.  If any officer, transfer agent, or registrar who has signed, or whose facsimile signature has been placed upon, a certificate has ceased to be such officer, transfer agent, or registrar whether because of death, resignation or otherwise before such certificate is issued by the Company, such certificate may nevertheless be issued and delivered by the Company with the same effect as if the person who signed such certificate or whose facsimile signature has been placed upon such certificate had not ceased to be an officer, transfer agent, or registrar at the date of issue.  All certificates for shares of stock shall be consecutively numbered and shall be entered in the books of the Company as they are issued and shall exhibit the holder’s name and the number of shares.
 
7.2   Replacement of Lost or Destroyed Certificates .  The board of directors may, by a Majority Vote, direct a new certificate or certificates to be issued in place of a certificate or certificates theretofore issued by the Company and alleged to have been lost or destroyed, upon the making of an affidavit of that fact by the Person claiming the certificate or certificates representing shares to be lost or destroyed.  When authorizing such issue of a new certificate or certificates, the board of directors may, by a Majority Vote, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost or destroyed certificate or certificates, or his legal representative, to advertise the same in such manner as it shall require and/or to give the Company a bond with a surety or sureties satisfactory to the Company in such sum as it may direct as indemnity against any claim, or expense resulting from a claim, that may be made against the Company in respect of the certificate or certificates alleged to have been lost or destroyed.
 
7.3   Transfer of Shares .  Shares of stock of the Company shall be transferable only on the books of the Company by the holders thereof in person or by their duly authorized attorneys or legal representatives.  If the shares of stock are represented by certificates, then upon surrender to the Company or the transfer agent of the Company of a certificate representing shares duly endorsed or accompanied by proper evidence of succession, assignment, or authority to transfer, the Company or its transfer agent shall issue a new certificate to the Person entitled thereto, cancel the old certificate, and record the transaction upon its books.
 
7.4   Registered Stockholders .  The Company shall be entitled to treat the holder of record of any share or shares of stock as the holder in fact thereof and, accordingly, shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other Person, whether or not it shall have express or other notice thereof, except as otherwise provided by law.
 

 
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7.5 Regulations .  The board of directors shall have the power and authority, by a Majority Vote, to make all such rules and regulations as it may deem expedient concerning the issue, transfer, and registration or the replacement of certificates for shares of stock of the Company.
 
7.6 Legends .  The board of directors shall have the power and authority, by a Majority Vote, to provide that certificates representing shares of stock bear such legends as the board of directors deems necessary to assure that the Company does not become liable for violations of federal or state securities laws or other applicable law.
 
ARTICLE VIII
Indemnification
 
8.1   Indemnification of Directors and Officers .  The Company shall indemnify any person who was, is, or is threatened to be made a party to a proceeding (as hereinafter defined) by reason of the fact that he or she (a) is or was a director or officer of the Company or (b) while a director or officer of the Company, is or was serving at the request of the Company as a director, officer, partner, manager, venturer, proprietor, trustee, employee, agent, or similar function of another foreign or domestic corporation, partnership, joint venture, limited liability company, sole proprietorship, trust, employee benefit plan, or other enterprise, at any time during which these Bylaws are in effect (whether or not such person continues to serve in such capacity at the time any indemnification or advancement of expenses pursuant hereto is sought or at the time any proceeding relating thereto exists or is brought), and whether the basis of such proceeding is alleged action in an official capacity as a director or officer, or in such other capacity while serving as an a director or officer, to the fullest extent permitted under the DGCL, as the same exists or may hereafter be amended or modified from time to time (but, in the case of any such amendment or modification, only to the extent that such amendment or modification permits the Company to provide greater indemnification rights than said law permitted the Company to provide prior to such amendment or modification) against all expense, liability and loss (including attorney’s fees, judgments, fines, ERISA excise taxes or penalties and amounts paid in settlement) incurred or suffered by such person in connection therewith.  Such indemnification shall continue as to a person who has ceased to be a director or officer and shall inure to the benefit of his or her heirs, executors and administrators.
 
8.2   Contract Rights .  The indemnification permitted by this Article VIII shall be a contract right and as such shall run from the Company (and any successor of the Company by operation of law or otherwise) to the benefit of any director or officer who is elected and accepts the position of director or officer of the Company or elects to continue to serve as a director or officer of the Company while this Article VIII is in effect.  Any repeal or amendment of this Article VIII shall be prospective only and shall not limit the rights of any such director or officer or the obligations of the Company with respect to any claim arising from or related to the services of such director or officer in any of the foregoing capacities prior to any such repeal or amendment to this Article VIII .
 
8.3   Request for Indemnification .  To obtain indemnification under these  Bylaws, a claimant shall submit to the Company a written request, including therein or therewith such documentation and information as is reasonably available to the claimant and is reasonably necessary to determine whether and to what extent the claimant is entitled to indemnification.  Upon written request by a claimant for indemnification, a determination, if required by applicable law, with respect to the claimant’s entitlement thereto shall be made as follows:  (a) if requested by the claimant, by Independent Counsel (as hereinafter defined), or (b) if no request is made by the claimant for a determination by Independent Counsel, (i) by the board of directors by a majority
 

 
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vote of a quorum of the board of directors consisting of Disinterested Directors (as hereinafter defined) or by a committee of Disinterested Directors appointed by a Majority Vote of the board of directors, or (ii) if a quorum of the board of directors consisting of Disinterested Directors or a committee of Disinterested Directors is not obtainable or, even if obtainable, such quorum or committee of Disinterested Directors so directs, by Independent Counsel in a written opinion to the board of directors, a copy of which shall be delivered to the claimant, or (iii) if a quorum of Disinterested Directors or a committee of Disinterested Directors so directs, by a majority vote of the stockholders of the Company.  In the event the determination of entitlement to indemnification is to be made by Independent Counsel, the Independent Counsel shall be selected by the  claimant (subject to the consent of the board of directors by a Majority Vote, not to be unreasonably withheld or delayed) unless the claimant shall request that such selection be made by the board of directors by a Majority Vote.  If it is so determined that the claimant is entitled to indemnification, payment to the claimant shall be made within ten (10) days after such determination.  A “ Disinterested Director ” means a director of the Company who is not and was not a party to the matter in respect of which indemnification is sought by the claimant.  An “ Independent Counsel ” means a law firm, a member of a law firm, or an independent practitioner, that is experienced in matters of corporation law and shall be a person who, under the applicable standards of professional conduct then prevailing, would not have a conflict of interest in representing either the Company or the claimant in an action to determine the claimant’s rights under these Bylaws.
 
8.4   Advancement of Expenses .  A claimant shall have the right to be paid by the Company expenses (including attorney’s fees) incurred in defending any such proceeding in advance of its final disposition to the maximum extent permitted under the DGCL, as the same exists or may hereafter be amended or modified, only to the extent that such amendment or modification permits the Company to provide greater rights to advancement of expenses than said law permitted the Company to provide prior to such amendment or modification, upon receipt of any undertaking by or on behalf of such director or officer to repay such amount if it shall ultimately be determined that such director or officer is not entitled to be indemnified by the Company against such expenses as authorized by this Article VIII , if such undertaking is required by the DGCL.  Such advances shall be paid by the Company within twenty (20) calendar days after the receipt by the Company of a statement or statements from the claimant requesting such advance or advances from time to time (including such undertaking if required by the DGCL), and shall not require any action by the board of directors.  The board of directors, by Majority Vote, may authorize the  Company’s counsel to represent such director or officer in any such proceeding, whether or not the Company is a party to such proceeding.
 
8.5   Judicial Proceedings .  If a claim for indemnification is not paid in full by the Company within sixty (60) days after a written claim has been received by the Company, or if a claim for advancement of expenses is not paid in full by the Company within twenty (20) days after a written claim has been received by the Company, the claimant may at any time thereafter bring suit against the Company to recover the unpaid amount of the claim, and if successful in whole or in part, the claimant shall also be entitled to be paid the expenses of prosecuting such claim to the fullest extent permitted by law.  In any such suit:
 
(a)   It shall be a defense to any such action that such indemnification or advancement of costs of defense are not permitted under the DGCL, but the burden of proving such defense shall be on the Company.
 
(b)   The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he or she reasonably believed to be in or
 

 
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not opposed to the best interests of the Company, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his or her conduct was unlawful.
 
(c)   Neither the failure of the Company (including its board of directors or any committee thereof, Independent Counsel, or stockholders) to have made its determination prior to the commencement of such action that indemnification of the claimant is permissible in the circumstances nor an actual determination by the Company (including its board of directors or any committee thereof, Independent Counsel, or stockholders) that such indemnification is not permissible shall be a defense to the action or create a presumption that such indemnification is not permissible.
 
(d)   If a determination shall have been made pursuant to Section 8.3 that the indemnitee is entitled to indemnification, the Company shall be bound by such determination in any judicial proceeding commenced pursuant to this Section 8.5 .  To the fullest extent permitted by law, the Company shall be precluded from asserting in any judicial proceeding commenced pursuant to this Section 8.5 that the procedures and presumptions of these Bylaws are not valid, binding and enforceable and shall stipulate in such proceeding that the Company is bound by all the provisions of these Bylaws.
 
8.6   Non-Exclusive Right .
 
(a)   The rights conferred under this Article VIII shall not be exclusive of any other right that any person may have or hereafter acquire under any statute, bylaw, resolution of stockholders or directors, agreement, or otherwise and shall continue as to a person who has ceased to be a director, officer, employee or agent, as applicable, and shall inure to the benefit of his or her heirs, executors, administrators, and personal representatives.
 
(b)   With respect to any indemnification obligations of the Company conferred under this Article VIII , the Company hereby acknowledges and agrees (i) that it is the indemnitor of first resort with respect to all indemnification obligations of the Company pursuant to Section 8.1 (i.e., its obligations to an applicable indemnitee are primary and any obligation of the Investor Shareholders and their Affiliates (collectively, the “ Fund Indemnitors ”) to advance expenses or to provide indemnification and/or insurance for the same expenses or liabilities incurred by such indemnitee are secondary) and (ii) that it irrevocably waives, relinquishes and releases the Fund Indemnitors from any and all claims against the Fund Indemnitors for contribution, subrogation or any other recovery of any kind in respect thereof to the fullest extent permitted by law.
 
8.7   Indemnification of Others .  The Company may additionally indemnify and/or provide advancement of expenses to any employee or agent of the Company or any other person to the fullest extent permitted by law.
 
8.8   Proceedings .  As used in this Article VIII , the term “proceeding” means any threatened, pending, or completed action, suit, or proceeding, whether civil, criminal, administrative, arbitrative, or investigative, any appeal in such an action, suit, or proceeding, and any inquiry or investigation that could lead to such an action, suit, or proceeding.
 
8.9   Other Agreements .  The Company may adopt bylaws or enter into agreements with such persons for the purpose of providing for indemnification and/or the advancement of expenses as provided in this Article VIII .
 
8.10   Insurance .  The Company shall have power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Company, or is or was serving at the request of the Company as a director, officer, partner,
 

 
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manager, venturer, proprietor, trustee, employee, agent, or similar function of another foreign or domestic corporation, partnership, joint venture, limited liability company, sole proprietorship, trust, employee benefit plan, or other enterprise, against any liability asserted against such person and incurred by such person in any such capacity, or arising out of such person’s status as such, whether or not the Company would have the power to indemnify such person against such liability under the provisions of this Article VIII or otherwise.  To the extent that the Company maintains any policy or policies providing such insurance, each indemnitee to which rights to indemnification have been granted in this Article VIII in its capacity as a director or an officer, shall be covered by such policy or policies in accordance with its or their terms to the maximum extent of the coverage thereunder for any such indemnitee.
 
ARTICLE IX
Miscellaneous Provisions
 
9.1   Dividends .  Subject to provisions of law and the Charter, dividends may be declared by the board of directors at any regular or special meeting and may be paid in cash, in property, or in shares of stock of the Company. Such declaration and payment shall be at the discretion of the board of directors; provided , that, if there shall be in effect at the time of such declaration a dividend policy duly adopted by the board of directors, such declaration and payment shall be in accordance with such dividend policy and shall only require a Majority Vote.  Notwithstanding the foregoing, the declaration and distribution of any dividends may not be in contravention of the DGCL.
 
9.2   Reserves .  There may be created by the board of directors, by a Majority Vote, out of funds of the Company legally available therefor such reserve or reserves as the board of directors, by a Majority Vote, from time to time, in its discretion, considers proper to provide for contingencies, to equalize dividends, or to repair or maintain any property of the Company, or for such other purpose as the board of directors shall consider beneficial to the Company, and may modify or abolish any such reserve in the manner in which it was created.
 
9.3   Books and Records .  The Company shall keep correct and complete books and records of account, shall keep minutes of the proceedings of its stockholders and board of directors and shall keep at its registered office or principal place of business, or at the office of its transfer agent or registrar, a record of its stockholders, giving the names and addresses of all stockholders and the number and class (and series, if any) of the shares held by each.
 
9.4   Fiscal Year .  The fiscal year of the Company (the “ Fiscal Year ”) shall be the calendar year unless changed by the board of directors by a Majority Vote.
 
9.5   Seal .  The seal of the Company shall be such as from time to time may be approved by the board of directors by a Majority Vote.
 
9.6   Resignations .  Any director, committee member, or officer may resign by so stating at any meeting of the board of directors or by giving written notice (or by electronic transmission) to the board of directors, the Chairman of the Board, the Chief Executive Officer, the President, or the Secretary.  Such resignation shall take effect at the time specified therein or, if no time is specified therein, immediately upon its receipt.  Unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective.
 
9.7   Securities of Other Corporations .  Except to the extent inconsistent with, or requiring any approvals under, any provision of these Bylaws, including Section 3.12 , the Chairman of the Board, the Chief Executive Officer, the President, or any Vice President of the Company shall have the power and authority to transfer, endorse for transfer,
 

 
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vote, consent, or take any other action in respect of any Securities of another issuer that may be held or owned by the Company and to make, execute, and deliver any waiver, proxy, or consent in respect of any such Securities, if and only to the extent that such actions are of a ministerial and customary nature taken in the ordinary course of business of the Company.
 
9.8 Telephone Meetings .  Stockholders (acting for themselves or through a proxy), members of the board of directors, and members of a committee of the board of directors may participate in and hold a meeting of such stockholders, board of directors, or committee by means of a telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to this Section 9.8 shall constitute presence in person at such meeting, except where a person participates in the meeting for the express purpose of objecting to the transaction of any business on the ground that the meeting is not lawfully called or convened.
 
9.9   Invalid Provisions .  If any part of these Bylaws shall be held invalid or inoperative for any reason, the remaining parts, so far as it is possible and reasonable, shall remain valid and operative.
 
9.10   Mortgages, etc .  In respect of any deed, deed of trust, mortgage, or other instrument executed by the Company through its duly authorized officer or officers, the attestation to such execution by the Secretary of the Company shall not be necessary to constitute such deed, deed of trust, mortgage, or other instrument a valid and binding obligation against the Company unless the resolutions, if any, of the board of directors authorizing such execution expressly state that such attestation is necessary.
 
9.11   Headings .  The headings used in these Bylaws have been inserted for administrative convenience only and do not constitute matter to be construed in interpretation.
 
9.12   References .  Whenever herein the singular number is used, the same shall include the plural where appropriate, and words of any gender should include each other gender where appropriate.  Whenever the words “included,” “includes,” or “including” are used in these Bylaws, they shall be deemed to be followed by the words “without limitation.”
 
9.13 Amendments .  Except as may be otherwise provided in the Charter and subject to Section 3.12 (with respect to any action by the board of directors), these Bylaws may be altered, amended, or repealed or new Bylaws may be adopted by the stockholders holding shares representing two-thirds of Total Voting Power or by the board of directors at any regular meeting of the stockholders or the board of directors or at any special meeting of the stockholders or the board of directors if notice of such alteration, amendment, repeal, or adoption of new Bylaws be contained in the notice of such special meeting.  Notwithstanding the foregoing, any adoption, alteration, amendment or repeal of any Bylaw by the board of directors shall require the approval of (i) a majority of the directors chosen for nomination by Kinder pursuant to the Shareholders Agreement (if any), (ii) a majority of the directors chosen for nomination by the Investor Shareholders (if any), (iii) in the case of an alteration, amendment or repeal of Article III , Section 6.2 , Section 9.7 , or Section 9.13 , two-thirds of the directors chosen for nomination by the Investor Shareholders (if any) and (iv) in the case of an alteration, amendment or repeal of any provision of these Bylaws that would treat any Investor Shareholder adversely, the director(s) chosen for nomination by such affected Investor Shareholder (if any); provided , that the approval requirements in clauses (i)-(iv) shall not apply to any action of the board of directors to amend the Bylaws to the extent necessary to comply with the adoption of Rule 14a-11 or other proxy access rules enacted by the Securities and Exchange Commission after the date hereof.
 

 
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ARTICLE X
Definitions
 
Capitalized terms used and not otherwise defined in these Bylaws shall have the meaning given or referenced below:
 
“ Affiliate ” of any Person means any other Person that directly or indirectly, through one or more intermediaries, Controls, is Controlled by, or is under common Control with, such first Person.
 
“ Carlyle ” means (i) Carlyle Partners IV Knight, L.P. and CP IV Coinvestment, L.P., (ii) any investment funds or other entities sponsored, managed or owned directly or indirectly by Carlyle Investment Management L.L.C. or its affiliates collectively d/b/a “The Carlyle Group” or “Carlyle”, or otherwise under common control with the entities listed in clause (i) or their successors (by merger, consolidation, acquisition of substantially all assets or similar transaction) or with any entity then included in clause (ii), to which any entity previously included in the definition of “Carlyle” transferred, directly or indirectly (including through a series of transfers), Class A Shares after the IPO or Related Shares after a Mandatory Conversion Date, and (iii) any successors (by merger, consolidation, acquisition of substantially all assets or similar transaction) of the foregoing.  For the avoidance of doubt, “Carlyle” shall be deemed not to include (A) Riverstone or any portfolio companies of any of the entities contained in clauses (i), (ii) or (iii) or (B) any entity that is not a party to the Shareholders Agreement.
 
“ Cause ” means any of the following:
 
(a)  
Kinder’s conviction of, or plea of nolo contendere to, any crime or offense constituting a felony under applicable law, other than any motor vehicle violations for which no custodial penalty is imposed;
 
(b)  
Kinder’s commission of fraud or embezzlement against the Company or any of its Subsidiaries;
 
(c)  
Kinder’s willful and material breach of the Bylaws, the Charter or the Shareholders Agreement, including, without limitation, by willfully causing the Company or any of its Subsidiaries or Affiliates to take any material action prohibited under these Bylaws, the Charter or the Shareholders Agreement and failing to cure such breach, if curable, within thirty (30) calendar days following written notice thereof, specifically identifying such willful and material breach, having been delivered by a majority of the members of the board of directors to Kinder;
 
(d)  
a judicial determination that Kinder has breached his fiduciary duties;
 
(e)  
Kinder’s failure to perform the duties and responsibilities of his office as his primary business activity, provided, that, subject to Section 3.6(f) of the Shareholders Agreement, so long as it does not materially interfere with his duties, nothing herein shall preclude Kinder from accepting appointment to or continuing to serve on any board of directors or as trustee of any business corporation or any charitable organization, from engaging in charitable and community activities, from delivering lectures and fulfilling speaking engagements, or from directing and managing his personal investments and those of his family; or
 
(f)  
Kinder’s material breach of the provisions of Section 3.6(f) of the Shareholders Agreement that, if curable, is not cured within thirty (30) calendar days after notice
 

 
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of such breach is delivered to Kinder by a majority of the members of the board of directors.
 
Action or inaction by Kinder shall not be considered “willful” unless done or omitted by him in bad faith or with actual knowledge that his action or inaction was in breach of these Bylaws, the Charter or the Shareholders Agreement as applicable, and shall not include failure to act by reason of total or partial incapacity due to physical or mental illness.
 
“ Class A Shares ” means the shares of Class A common stock of the Company.
 
“ Class B Shares ” means the shares of Class B common stock of the Company.
 
“ Class C Shares ” means the shares of Class C common stock of the Company.
 
“ Class P Shares ” means the shares of Class P common stock of the Company.
 
“ Control ” means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through ownership of voting securities, by contract or otherwise.
 
“ Delegation of Control Agreement ” means the Delegation of Control Agreement dated as of May 18, 2001, as amended, among KMGP, KMR, KMP and KMP’s five operating partnerships.
 
“ Employee Services Agreement ” means the Employee Services Agreement dated as of January 1, 2001, among KMGP Services Company, Inc., KMGP and KMP, as in effect of the date hereof (and not including any amendments or waivers).
 
“ Exchange Act ” means the Securities Exchange Act of 1934, as amended, supplemented or restated from time to time and any successor to such statute, and the rules and regulations promulgated thereunder.
 
“ GAAP ” means United States generally accepted accounting principles.
 
“ Governmental Entity ” means any court, administrative agency, regulatory body, commission or other governmental authority, board, bureau or instrumentality, domestic or foreign and any subdivision thereof.
 
“ GS ” means (i) GS Capital Partners V Fund, L.P., a Delaware limited partnership; GS Capital Partners V Institutional, L.P., a Delaware limited partnership; GS Capital Partners VI Fund, L.P., a Delaware limited partnership; GS Capital Partners VI Parallel, L.P., a Delaware limited partnership; Goldman Sachs KMI Investors, L.P., a Delaware limited partnership; GSCP KMI Investors, L.P., a Delaware limited partnership; GSCP KMI Investors Offshore, L.P., a Cayman Islands exempted limited partnership; GS Global Infrastructure Partners I, L.P., a Delaware limited partnership; GS Institutional Infrastructure Partners I, L.P., a Delaware limited partnership; GSCP V Offshore Knight Holdings, L.P., a Delaware limited partnership; GSCP V Germany Knight Holdings, L.P., a Delaware limited partnership; GSCP VI Offshore Knight Holdings, L.P., a Delaware limited partnership; GSCP VI Germany Knight Holdings, L.P., a Delaware limited partnership; and GS Infrastructure Knight Holdings, L.P., a Delaware limited partnership, (ii) any investment funds or other entities sponsored, managed or owned directly or indirectly by the Merchant Banking Division of Goldman, Sachs & Co., or otherwise under common control with the entities listed in clause (i) or their successors (by merger, consolidation, acquisition of substantially all assets or similar transaction) or with any entity then included in clause (ii), to which any
 

 
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of the entities previously included in the definition of “GS” transferred, directly or indirectly (including through a series of transfers), Class A Shares after the IPO or Related Shares after a Mandatory Conversion Date, and (iii) any successors (by merger, consolidation, acquisition of substantially all assets or similar transaction) of the foregoing; provided , that for purposes of calculating the Total Voting Power held or owned by GS, such calculation shall not include any Class P Shares (other than Related Shares) beneficially owned by any direct or indirect Subsidiary of Goldman, Sachs & Co. contained in clauses (ii) or (iii), if such direct or indirect Subsidiary of Goldman, Sachs & Co. is not sponsored, managed or owned directly or indirectly by the Merchant Banking Division of Goldman, Sachs & Co., by a successor to the operations of the Merchant Banking Division of Goldman, Sachs & Co., or by any other entity in the business of sponsoring, managing or owning directly or indirectly private equity investments vehicles or investments.  For the avoidance of doubt, “GS” shall be deemed not to include (A) any portfolio companies of any of the entities contained in clauses (i), (ii) or (iii) or (B) any entity that is not a party to the Shareholders Agreement.
 
“ Highstar ” means (i) Highstar II Knight Acquisition Sub, L.P., Highstar III Knight Acquisition Sub, L.P., Highstar Knight Partners, L.P. and Highstar KMI Blocker LLC, (ii) any investment funds or other entities sponsored, managed or owned directly or indirectly by Highstar Capital LP or one of its controlled Affiliates, or otherwise under common control with the entities listed in clause (i) or their successors (by merger, consolidation, acquisition of substantially all assets or similar transaction) or with any entity then included in clause (ii), to which any entity previously included in the definition of “Highstar” transferred, directly or indirectly (including through a series of transfers), Class A Shares after the IPO or Related Shares after a Mandatory Conversion Date, and (iii) any successors (by merger, consolidation, acquisition of substantially all assets or similar transaction) of the foregoing.  For the avoidance of doubt, “Highstar” shall be deemed not to include (A) any portfolio companies of any of the entities contained in clauses (i), (ii) or (iii) or (B) any entity that is not a party to the Shareholders Agreement.
 
“ Indebtedness ” means, with respect to any Person, (i) indebtedness of such Person for borrowed money, (ii) other indebtedness of such Person evidenced by notes, bonds or debentures, (iii) capitalized leases classified as indebtedness of such Person under GAAP, (iv) all indebtedness created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property), (v) any obligation of such Person for the deferred purchase price of property or services (other than trade payables and other current liabilities), (vi) any Indebtedness of another Person referred to in clauses (i) through (v) above guaranteed directly or indirectly, jointly or severally, in any manner by such Person, (vii) any Indebtedness referred to in clauses (i) through (v) above secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any lien or encumbrance on property (including, without limitation, accounts and contract rights) owned by such Person, even though such Person has not assumed or become liable for the payment of such Indebtedness, and (viii) the maximum amount of all direct or contingent obligations of such Person with respect to letters of credit, bankers’ acceptances, bank guaranties, surety bonds or similar facilities or instruments.  Notwithstanding anything to the contrary herein, the Indebtedness of the Company and its Subsidiaries shall not include (a) any indebtedness or obligation owed by the Company to any wholly-owned Subsidiary, by any other wholly-owned  Subsidiary to the Company, or between any wholly-owned Subsidiaries, or (b) any guarantee by the Company or any wholly-owned Subsidiary of any indebtedness or obligation described in clause (a) of this sentence.
 
“ Investor Shareholder ” means each of GS, Highstar, Carlyle and Riverstone.
 
“ IPO ” means the initial offering of Class P Shares to the public.
 

 
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“ Kinder ” means Richard D. Kinder.
 
“ KMGP ” means Kinder Morgan G.P., Inc., a Delaware corporation.
 
“ KMGP Services ” means KMGP Services Company, Inc., a Delaware corporation.
 
“ KMI ” means Kinder Morgan Kansas, Inc., a Kansas corporation, and if the name of Kinder Morgan Kansas, Inc. is changed, “KMI” shall mean such corporation.
 
“ KMP ” means Kinder Morgan Energy Partners, L.P., a Delaware limited partnership.
 
“ KMR ” means Kinder Morgan Management, LLC, a Delaware limited liability company.
 
“ Majority Vote ” means (i) the affirmative vote of a majority of the directors present at a meeting at which a quorum is in attendance, or (ii) any action taken by all members of the board of directors pursuant to Section 3.16 .
 
“ Management Shareholders ” means (i) any Shareholder who has served, at any time on or following the closing date of the IPO, as a member of management of the Company or any of its Subsidiaries (excluding, for this purpose, any service as a member of the board of directors) (which shall include any employee who is a holder of Class B Shares), (ii)  Nancy Kinder and (iii) any Permitted Transferees (as defined in the Shareholders Agreement) to whom any of such Shareholder’s shares of capital stock are transferred in accordance with the Shareholders Agreement; provided , however , that in no event will any Investor Shareholder or any of its Affiliates be deemed to be a Management Shareholder.
 
“ Mandatory Conversion Date ” has the meaning set forth in the Charter.
 
“ Person ” means any individual, corporation, company, firm, partnership, joint venture, limited liability company, estate, trust, business association, organization, Governmental Entity or other entity.
 
“ Related Shares ” means Class P Shares received by a holder of Class A Shares upon conversion of such holder’s Class A Shares as the result of the occurrence of a Mandatory Conversion Date for the series corresponding to such holder’s Class A Shares.
 
“ Riverstone ” means (i) Carlyle/Riverstone Knight Investment Partnership, L.P., C/R Knight Partners, L.P., C/R Energy III Knight Non-U.S. Partnership, L.P., Carlyle Energy Coinvestment III, L.P. and Riverstone Energy Coinvestment III, L.P., (ii) any investment funds or other entities sponsored, managed or owned directly or indirectly by Riverstone Holdings, LLC or one of its controlled Affiliates or otherwise under common control with the entities listed in clause (i) or their successors (by merger, consolidation, acquisition of substantially all assets or similar transaction) or with any entity then included in clause (ii), to which any entity previously included in the definition of “Riverstone” transferred, directly or indirectly (including through a series of transfers), Class A Shares after the IPO or Related Shares after a Mandatory Conversion Date, and (iii) any successors (by merger, consolidation, acquisition of substantially all assets or similar transaction) of the foregoing.  For the avoidance of doubt, “Riverstone” shall be deemed not to include (A) Carlyle or any portfolio companies of any of the entities contained in clauses (i), (ii) or (iii) or (B) any entity that is not a party to the Shareholders Agreement.
 
“ Securities ” means securities of every kind and nature, including stock, limited liability company interests, notes, bonds, evidences of indebtedness, options to acquire any of the foregoing, and other business interests of every type.
 

 
27
 

“ Shareholder ” means a holder of Voting Securities.
 
“ Shareholders Agreement ” means the Shareholders Agreement, dated as of February 10, 2011, among the Company and the holders of shares of capital stock of the Company specified therein, as amended from time to time in accordance therewith.
 
“ Subsidiary ” or “ Subsidiaries ” means, with respect to any Person, as of any date of determination, any other Person as to which such Person owns, directly or indirectly, or otherwise controls, more than 50% of the voting shares or other similar interests or is general partner or managing member of, or serves in a similar capacity for, such Person (including, in the case of the Company, KMP and KMR and their respective Subsidiaries).
 
“ Supermajority Board Vote ” means (i) the affirmative vote of at least eight (8) directors; provided, that if the size of the board of directors has been expanded in accordance with Section 3.3 of the Shareholders Agreement, the number of directors whose affirmative votes are required for a Supermajority Board Vote shall be increased by the number of director seats by which the size of the board of directors has been so expanded; provided , further , that if a number of directors abstain (in such directors’ sole discretion) or are absent from any applicable vote at a meeting at which a quorum is present such that the number of remaining directors is less than the number of directors whose affirmative votes are then required for Supermajority Board Vote, then such absent and/or abstaining directors shall be excluded from such applicable vote and a Supermajority Board Vote shall mean the unanimous vote of such non-excluded directors, in each case (and notwithstanding the final sentence of Section 3.11 ) so long as such applicable vote does not relate to any matter, purpose or business that was not specified in the Secretary’s notice of the applicable meeting of the board of directors (or an agenda delivered together with such notice) delivered pursuant to Section 3.11 , or (ii) any action taken by all members of the board of directors pursuant to Section 3.16 .
 
“ Total Voting Power ” means, as of any date of determination, the total number of votes that may be cast in the election of directors of the Company if all Voting Securities then outstanding were present and voted at a meeting held for such purpose.  The percentage of the Total Voting Power of the Company owned by any Person as of any date of determination is the percentage of the Total Voting Power of the Company that is represented by the total number of votes that may be cast in the election of directors of the Company by Voting Securities then owned of record by such Person; provided , that if a holder of Class A Shares or Related Shares owns other Class P Shares, Total Voting Power with respect to that holder shall also include any Class P Shares owned directly or indirectly by such Person with respect to which such Person has voting power.
 
“ Voting Securities ” means Class A Shares, Class B Shares, Class C Shares, Class P Shares and any other securities of the Company entitled to vote generally in the election of directors of the Company.
 

 
28
 

 
 
The undersigned, the Secretary of the Company, hereby certifies that the foregoing Bylaws were adopted by unanimous consent by the board of directors of the Company on February 10, 2011.
 
 
 
            /s/ Joseph Listengart 
           
Joseph Listengart, Secretary

Exhibit 4.2





SHAREHOLDERS AGREEMENT

dated as of

FEBRUARY 10, 2011

among

KINDER MORGAN, INC.

and

THE PERSONS SET FORTH

ON THE SIGNATURE PAGES HERETO





 
 
 
TABLE OF CONTENTS

Page
 
ARTICLE I
DEFINITIONS
1
     
 
SECTION 1.1.
DEFINITIONS
1
       
 
SECTION 1.2.
GENDER
15
       
ARTICLE II
TRANSFER RESTRICTIONS; CONVERSIONS
15
     
 
SECTION 2.1.
TRANSFER RESTRICTIONS
15
       
 
SECTION 2.2.
LIMITATION ON VOLUNTARY CONVERSIONS
17
       
 
SECTION 2.3.
ACTIONS IN CONNECTION WITH VOLUNTARY CONVERSIONS
17
       
 
SECTION 2.4.
CERTAIN AGREEMENTS IN CONNECTION WITH DISTRIBUTIONS
18
       
ARTICLE III
BOARD REPRESENTATION
18
     
 
SECTION 3.1.
NOMINEES
18
       
 
SECTION 3.2.
BOARD OBSERVER RIGHTS
22
       
 
SECTION 3.3.
INDEPENDENCE REQUIREMENTS
23
       
 
SECTION 3.4.
COMPOSITION OF CERTAIN BOARD COMMITTEES
24
       
 
SECTION 3.5.
VOTING AGREEMENT
25
       
 
SECTION 3.6.
CERTAIN AGREEMENTS
27
       
 
SECTION 3.7.
COMPANY DIVIDEND POLICY.
35
       
 
SECTION 3.8.
FORFEITURE OF CLASS B SHARES.
35
       
ARTICLE IV
TERMINATION
40
     
 
SECTION 4.1.
TERM
40
       
 
SECTION 4.2.
SURVIVAL
40
       
ARTICLE V
REGISTRATION RIGHTS
40
     
 
SECTION 5.1.
DEMAND REGISTRATION
40
       
 
SECTION 5.2.
PIGGYBACK REGISTRATION
43
       
 
SECTION 5.3.
SHELF REGISTRATION
45
       
 
SECTION 5.4.
WITHDRAWAL RIGHTS
46
       
 
SECTION 5.5.
HOLDBACK AGREEMENTS
47
       
 
SECTION 5.6.
REGISTRATION PROCEDURES
47
       
 
SECTION 5.7.
REGISTRATION EXPENSES
53

 
i
 
TABLE OF CONTENTS
(continued)

Page
 
 
SECTION 5.8.
REGISTRATION INDEMNIFICATION
53
       
 
SECTION 5.9.
CHANGE OF CONTROL OR OTHER TRANSACTIONS
55
       
 
SECTION 5.10.
MISCELLANEOUS
56
       
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
56
     
 
SECTION 6.1.
REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS
56
       
 
SECTION 6.2.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
57
       
ARTICLE VII
MISCELLANEOUS
57
     
 
SECTION 7.1.
NOTICES
57
       
 
SECTION 7.2.
INTERPRETATION
58
       
 
SECTION 7.3.
SEVERABILITY
59
       
 
SECTION 7.4.
COUNTERPARTS
59
       
 
SECTION 7.5.
ADJUSTMENTS UPON CHANGE OF CAPITALIZATION
59
       
 
SECTION 7.6.
ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES
59
       
 
SECTION 7.7.
FURTHER ASSURANCES
60
       
 
SECTION 7.8.
GOVERNING LAW; EQUITABLE REMEDIES
60
       
 
SECTION 7.9.
CONSENT TO JURISDICTION
60
       
 
SECTION 7.10.
AMENDMENTS; WAIVERS
61
       
 
SECTION 7.11.
ASSIGNMENT
61
       
 
SECTION 7.12.
INDEMNIFICATION AND EXPENSES
62
       
 
SECTION 7.13.
INFORMATION; DUTIES.
63
       
 
SECTION 7.14.
FAIR DEALING
65
       
 
SECTION 7.15.
USE OF THE COMPANY’S LOGO
65
       
 
SECTION 7.16.
TAX MATTERS
65

 


 
ii
 

SHAREHOLDERS AGREEMENT (the “ Agreement ”), dated as of February 10, 2011, among the Persons (as defined herein) identified as “ Shareholders ” on the signature pages hereto, and Kinder Morgan, Inc., a Delaware corporation (the “ Company ”).
 
WHEREAS, the Company and its Affiliates (as defined herein) intend to consummate the transactions described in the Registration Statement on Form S-1 (Registration No. 333-170773) (the “ IPO Registration Statement ”); and
 
WHEREAS, (i) the Company and certain Class A Shareholders (as defined herein) desire to address herein certain provisions regarding restrictions on Transfers (as defined herein) by certain specified Class A Shareholders (as defined herein), regarding composition of the Board (as defined herein) and regarding certain other rights, (ii) the Company, the Class A Shareholders (as defined herein), the Class B Shareholders (as defined herein) and the Class C Shareholders (as defined herein) desire to address herein certain provisions regarding restrictions on Transfers by the Class B Shareholders and the Class C Shareholders, and (iii) the parties hereto desire to address herein certain provisions regarding registration rights with respect to securities of the Company.
 
NOW, THEREFORE, in consideration of the mutual covenants and undertakings contained herein and for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:
 
ARTICLE I

DEFINITIONS

SECTION 1.1.   DEFINITIONS .  As used in this Agreement, the following terms shall have the following meanings:
 
“ Affiliate ” of any Person means any other Person that directly or indirectly, through one or more intermediaries, Controls, is Controlled by, or is under common Control with, such first Person.
 
“ Agreement ” has the meaning set forth in the preamble to this Agreement.
 
“ Applicable Seller” has the meaning set forth in Section 7.12(e)(ii) .
 
“ Applicable Transaction” has the meaning set forth in Section 7.12(e)(ii) .
 
“ Appointer ” has the meaning set forth in Section 3.5(b) .
 
“ Audit Committee ” has the meaning set forth in Section 3.4(b) .
 
“ Audit Independence Requirements ” means, for any individual serving or nominated to serve on the Board, that such individual meets the then current standards to qualify as an independent director for all purposes (including for audit committee purposes) under the Exchange Act and established by each national securities exchange on which the Class P Shares are then listed for trading.
 

 
 
 

“ Blackout Period ” means any of the following:
 
(a)           any regular quarterly “black-out” period during which all directors and executive officers of the Company are not permitted to trade under the insider trading policy of the Company then in effect;
 
(b)           in the event a KMP or KMR securities offering with anticipated offering proceeds of at least $150,000,000 is occurring, a period of seven (7) calendar days as specified in the written notice delivered by the Company to the applicable Shareholders pursuant to Section 5.1(e) or Section 5.3(d ) (or such shorter period if the Company notifies the applicable Shareholders prior to the expiration of the seven (7) calendar day period); provided , that a Blackout Period described in this clause (b) may not occur more than twice in any period of twelve (12) consecutive months; and
 
(c)           in the event that the Company notifies the applicable Shareholders  in writing pursuant to Section 5.1(e) or Section 5.3(d) that the registration would cause the disclosure of material, non-public information, the disclosure of which would be harmful to the Company and with respect to which the Company otherwise has a bona fide business purpose for preserving as confidential, a period of thirty (30) calendar days as specified in the written notice delivered by the Company to the applicable Shareholders (or such shorter period if the Company notifies the applicable Shareholders prior to the expiration of the thirty-day period); provided , that the Company’s determination of a Blackout Period pursuant to this clause (c) shall be made by a majority of the members of the entire Board; provided , however, that (i) in the event that any of the Investor Shareholders are Selling Shareholders with respect to such registration, any directors who were selected for nomination within the previous five (5) years as of the date of determination pursuant to Section 3.1 hereof by the Investor Shareholders shall abstain from such determination and be excluded for purposes of measuring a majority of the entire Board and (ii) in the event that Kinder or any of his Permitted Transferees is a Selling Shareholder with respect to such registration, any directors who were selected for nomination within the previous five (5) years as of the date of determination pursuant to Section 3.1 hereof by Kinder (or his Permitted Transferees) shall abstain from such determination and be excluded for purposes of measuring a majority of the entire Board; provided , further , that a Blackout Period described in this clause (c) may not occur more than twice in any period of twelve (12) consecutive months.
 
“ Board ” means the Board of Directors of the Company.
 
“ Business Day ” means a day except a Saturday, a Sunday or other day on which banks in New York, New York or Houston, Texas are authorized or required by law to be closed.
 
“ Bylaws ” means the bylaws of the Company, as in effect at the relevant time.
 
“ Carlyle ” means (i) Carlyle Partners IV Knight, L.P. and CP IV Coinvestment, L.P., (ii) any investment funds or other entities sponsored, managed or owned directly or indirectly by Carlyle Investment Management L.L.C. or its Affiliates collectively d/b/a “The Carlyle Group” or “Carlyle”, or otherwise under common control with the entities listed in clause (i) or their successors (by merger, consolidation, acquisition of substantially all assets or similar transaction) or with any entity then included in clause (ii), to which any entity previously
 

 
2
 

included in the definition of “Carlyle” Transferred, directly or indirectly (including through a series of Transfers), Class A Shares after the IPO or Related Shares after a Mandatory Conversion Date, and (iii) any successors (by merger, consolidation, acquisition of substantially all assets or similar transaction) of the foregoing.  For the avoidance of doubt, “Carlyle” shall be deemed not to include (A) Riverstone or any portfolio companies of any of the entities contained in clauses (i), (ii) or (iii) or (B) any entity that is not a party to this Agreement; provided , that any entity that would be within the definition of “Carlyle” but for the preceding clause (B) shall be afforded the opportunity to execute a customary joinder to this Agreement, in form and substance reasonably acceptable to the Company.
 
“ Canadian Participants ” means those persons who are residents of Canada for purposes of the Income Tax Act (Canada) and who are either (i) identified on Schedule A hereto as currently being participants in the Canadian Plan, or (ii) awarded Phantom Class B Shares (and/or earnings and/or proceeds thereof) in respect of forfeited Class B Shares in accordance with the approval procedures set forth in Section 3.8(g) .
 
“ Canadian Plan ” means (i) the employee benefit arrangement which a Subsidiary established for the Canadian Participants identified on Schedule A hereto, pursuant to which such Canadian Participants were designated phantom Class B units and/or phantom Class A-1 units of the Company’s predecessor, as set forth on Schedule A, and (ii) the employee benefit plan which the Company or one of its Subsidiaries will establish for the Canadian Participants identified on Schedule A hereto, pursuant to which such Canadian Participants will be awarded phantom Class B Shares (the “ Phantom Class B Shares ”) and/or phantom Class C Shares (the “ Phantom Class C Shares ”), respectively, that correspond to their previously designated phantom Class B units and/or phantom Class A-1 units, as applicable.  For the avoidance of doubt, the Phantom Class B Shares and the Phantom Class C Shares shall be substituted for the phantom Class B units and phantom Class A-1 units of the Company’s predecessor, as applicable, and such holders of phantom Class B units and phantom Class A-1 units shall have no rights in respect of such units after such substitution.
 
“ Canadian Plan Entity ” means a limited liability company, which will be treated as an entity disregarded from its sole owner, the Company, for U.S. federal income tax purposes, and which will hold the Class B Shares and Class C Shares (and proceeds thereof, including Class P Shares, if applicable) that correspond to the Phantom Class B Shares and Phantom Class C Shares awarded to the Canadian Participants.
 
“ Cash Change of Control ” means any merger, amalgamation, consolidation or other business combination or similar transaction or series of transactions involving the Company pursuant to which all of the Class P Shares issued and outstanding immediately prior to the consummation of such transaction or transactions would be exchanged solely for cash.
 
“ Cause ” means, with respect to Kinder, any of the following:
 
(a)           Kinder’s conviction of, or plea of nolo contendere to, any crime or offense constituting a felony under applicable law, other than any motor vehicle violations for which no custodial penalty is imposed;
 

 
3
 

(b)           Kinder’s commission of fraud or embezzlement against the Company or any of its Subsidiaries;
 
(c)           Kinder’s willful and material breach of this Agreement, the Charter or the Bylaws, including by willfully causing the Company or any of its Subsidiaries or Affiliates to take any material action prohibited under this Agreement, the Charter or the Bylaws and failing to cure such breach, if curable, within thirty (30) calendar days following written notice thereof, specifically identifying such willful and material breach, having been delivered by a majority of the members of the Board to Kinder;
 
(d)           a judicial determination that Kinder has breached his fiduciary duties;
 
(e)           Kinder’s failure to perform the duties and responsibilities of his office as his primary business activity, provided that, subject to Section 3.6(f) , so long as it does not materially interfere with his duties, nothing herein shall preclude Kinder from accepting appointment to or continuing to serve on any board of directors or as trustee of any business corporation or any charitable organization, from engaging in charitable and community activities, from delivering lectures and fulfilling speaking engagements, or from directing and managing his personal investments and those of his family; or
 
(f)           Kinder’s material breach of the provisions of Section 3.6(f)   that, if curable, is not cured within thirty (30) calendar days after notice of such breach is delivered to Kinder by a majority of the members of the Board.
 
Action or inaction by Kinder shall not be considered “willful” unless done or omitted by him in bad faith or with actual knowledge that his action or inaction was in breach of the Charter, the Bylaws or this Agreement, as applicable, and shall not include failure to act by reason of total or partial incapacity due to physical or mental illness.
 
With respect to any individual other than Kinder, “ Cause ” shall mean any of the following:
 
(a)           the employee’s conviction of, or plea of nolo contendere to, any crime or offense constituting a felony under applicable law, other than any motor vehicle violations for which no custodial penalty is imposed;
 
(b)           the employee’s commission of fraud or embezzlement against the Company or any of its Subsidiaries;
 
(c)           gross neglect by the employee of, or gross or willful misconduct by the employee in connection with the performance of, the employee’s duties to the Company and its Subsidiaries that, if curable, is not cured within thirty (30) calendar days after a written notice of such gross neglect, or gross or willful misconduct, specifically identifying the gross neglect or misconduct, is delivered by the Chief Executive Officer or a majority of the members of the Board to the employee;
 
(d)           the employee shall have willfully failed or refused to carry out the
 

 
4
 

reasonable and lawful instructions of the Chief Executive Officer or the Board (other than as a result of illness or disability) concerning duties or actions consistent with the employee’s office, or the employee’s willful failure to implement any actions consistent with the employee’s office that the Board may direct such employee to undertake, and, in each case, such failure or refusal shall have continued for a period of thirty (30) calendar days following written notice from the Chief Executive Officer or a majority of the members of the Board;
 
(e)           the employee’s failure to perform the duties and responsibilities of his or her office as his or her primary business activity, provided that, subject to Section 3.6(f) , so long as it does not materially interfere with his or her duties, nothing herein shall preclude the employee from accepting appointment to or continuing to serve on any board of directors or as trustee of any business corporation or any charitable organization, from engaging in charitable and community activities, from delivering lectures and fulfilling speaking engagements, or from directing and managing his or her personal investments and those of his or her family;
 
(f)           a judicial determination that the employee has breached his fiduciary duties;
 
(g)           the employee’s willful and material breach of this Agreement, the Charter or the Bylaws, including by willfully causing the Company or any of its Subsidiaries or Affiliates to take any material action prohibited under this Agreement, the Charter or the Bylaws that the employee failed to cure, if curable, within thirty (30) calendar days following written notice thereof, specifically identifying such willful and material breach, having been delivered by the Chief Executive Officer or by a majority of the members of the Board to the employee; or
 
(h)           the employee’s material breach of the provisions of Section 3.6(f) that, if curable, is not cured within thirty (30) calendar days after notice of such breach is delivered to the employee by the Chief Executive Officer or by a majority of the members of the Board.
 
Action or inaction by an employee (other than Kinder) shall not be considered “willful” unless done or omitted by him or her in bad faith or with actual knowledge that his action or inaction was in breach of the Charter, the Bylaws or this Agreement, as applicable, and shall not include failure to act by reason of total or partial incapacity due to physical or mental illness.
 
“ Change of Control ” means:
 
(i) the acquisition by any Person or group (within the meaning of Section 13(d)(3) or Section 14(d)(2) of the Exchange Act, or any successor provision), including any group acting for the purpose of acquiring, holding or disposing of securities (within the meaning of Rule 13d-5(b)(1) under the Exchange Act), other than any of the Permitted Holders, in a single transaction or a series of related transactions, by way of merger, amalgamation, consolidation or other business combination or purchase of beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act, or any successor provision), of more than fifty percent (50%) of the total voting power of the Company (or the surviving or resulting entity thereof) after giving effect to such transaction;
 

 
5
 

(ii) a sale, merger or similar transaction or related series of transactions (other than the IPO) involving the Company, as a result of which Persons who collectively held (either directly or indirectly) one hundred percent (100%) of the total voting power of the Company immediately prior to such transaction do not collectively hold (either directly or indirectly) more than fifty percent (50%) of the total voting power of the Company (or the surviving or resulting entity thereof) after giving effect to such transaction or related series of transactions; provided , however , that such sale, merger or similar transaction shall not constitute a Change of Control in the event that, following such sale, merger or similar transaction (a) the Persons who collectively held (either directly or indirectly) one hundred percent (100%) of the total voting power of the Company immediately prior to such transaction continue to collectively own at least thirty-five percent (35%) of the total voting power of the Company (or the surviving or resulting entity thereof), (b) no other Person or group (within the meaning of Section 13(d)(3) or Section 14(d)(2) of the Exchange Act, or any successor provision), including any group acting for the purpose of acquiring, holding or disposing of securities (within the meaning of Rule 13d-5(b)(1) under the Exchange Act) owns more than thirty-five percent (35%) of the total voting power of the Company (or the surviving or resulting entity thereof), and (c) either Kinder or Shaper is a senior executive officer of the Company (or the surviving or resulting entity thereof); or
 
(iii) the sale or transfer of all or substantially all of the assets of the Company and its Subsidiaries, taken as a whole, in a single transaction or a series of related transactions, in any case, other than to an entity of which more than fifty percent (50%) of the voting power is held (either directly or indirectly) by Permitted Holders or by Persons who held (either directly or indirectly) more than fifty percent (50%) of the total voting power of the Company immediately prior to such transaction (or in each case their Affiliates) .   For the sake of clarity, neither a spin-off of a Subsidiary of the Company nor the distribution of other assets by the Company shall constitute a Change of Control unless such actions are within the scope of this clause (iii).
 
For purposes of this definition, a portfolio company of a private equity fund whose general partner or Person exercising similar authority is an Affiliate of an Investor Shareholder shall not be deemed to be a Permitted Holder, and no securities owned by any portfolio company of a private equity fund whose general partner or Person exercising similar authority is an Affiliate of an Investor Shareholder will be deemed to be owned, directly or indirectly, by such Investor Shareholder.
 
“ Charter ” means the certificate of incorporation of the Company, as in effect at the relevant time.
 
“ Charter Change of Control ” means any merger, amalgamation, consolidation or other business combination or similar transaction or series of transactions involving the Company pursuant to which all of the Class P Shares issued and outstanding immediately prior to the consummation of such transaction or transactions would be exchanged for cash, securities or other property.
 
“ Chief Executive Officer ” means the Chief Executive Officer of the Company.
 
“ Class A Shareholders ” means the holders of Class A Shares.
 

 
6
 

“ Class A Shares ” means the shares of Class A common stock of the Company.
 
“ Class B Shareholders ” means the holders of Class B Shares.
 
“ Class B Shares ” means the shares of Class B common stock of the Company.
 
“ Class B Trust ” has the meaning set forth in Section 3.8(b)(iv) .
 
“ Class C Shareholders ” means the holders of Class C Shares.
 
“ Class C Shares ” means the shares of Class C common stock of the Company.
 
“ Class P Payment Date ” has the meaning set forth in Section 2.4(a) .
 
“ Class P Shares ” means the shares of Class P common stock of the Company.
 
“ Company ” has the meaning set forth in the preamble to this Agreement.
 
“ Compensation Committee ” has the meaning set forth in Section 3.4(c) .
 
“ Competitive Business ” has the meaning set forth in Section 3.6(f)(i) .
 
“ Control ” means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through ownership of voting securities, by contract or otherwise.
 
“ Delegation of Control Agreement ” means the Delegation of Control Agreement dated as of May 18, 2001, as amended, among KMGP, KMR, KMP and KMP’s five operating partnerships.
 
“ Demand ” has the meaning set forth in Section 5.1(a) .
 
“ Demand Registration ” has the meaning set forth in Section 5.1(a) .
 
“ Demand Shareholder ” means Kinder (and, in the event of Kinder’s death, Kinder’s heirs, executors, administrators, testamentary Transferees, legatees and beneficiaries, in each case that are or who become parties to this Agreement by executing a customary joinder to this Agreement, in form and substance reasonably acceptable to the Company, provided, that he, she or it, as applicable, is afforded the opportunity to execute such customary joinder to this Agreement) and any Investor Shareholder.
 
“ Directed Opportunity ” has the meaning set forth in Section 7.13(b) .
 
“ Eligible Investor Shareholder ” means an Investor Shareholder that owns at least a two and one-half percent (2.5%) of the Total Voting Power.
 

 
7
 

“ Exchange Act ” means the Securities Exchange Act of 1934, as amended, supplemented or restated from time to time and any successor to such statute, and the rules and regulations promulgated thereunder.
 
“ Executive Management Shareholders ” means Kinder, Shaper, Steven Kean, Richard Bradley, Jeffrey Armstrong, Joseph Listengart, Thomas Bannigan, Ian Anderson, David Kinder, James Street, Thomas Martin and Kimberly Dang.
 
“ First Catch-Up Excess Value ” has the meaning set forth in Section 3.8(e)(i) .
 
“ First Catch-Up Value Transaction ” has the meaning set forth in Section 3.8(e)(i) .
 
“ Form S-3 ” has the meaning set forth in Section 5.3(a) .
 
“ Free Writing Prospectus ” has the meaning set forth in Section 5.6(a)(iii) .
 
“ Fund Indemnitors ” has the meaning set forth in Section 7.12(d) .
 
“ Good Reason ”  with respect to any individual, shall mean any of the following, without the individual’s prior consent if (x) any event or circumstance set forth in clauses (a) through (e) below shall have occurred and the individual provides the Company with written notice thereof within a reasonable period of time (but in no event more than thirty (30) calendar days) after the individual has knowledge of the occurrence or existence of such event or circumstance, which notice shall specifically identify the event or circumstance that the individual believes constitutes Good Reason, (y) the Company fails to correct the circumstance or event so identified within thirty (30) calendar days after the receipt of such notice, and (z) the individual resigns within five (5) calendar days after the expiration of the period described in clause (y) above:
 
(a)           a material diminution in the individual’s duties and responsibilities to the Company and its Subsidiaries to a level inconsistent with those of an executive level employee;
 
(b)           a material reduction in the annual base salary of the individual or a material reduction in the aggregate welfare benefits provided to the individual (not including any reduction related to a broader compensation or benefit reduction that is not limited to the individual specifically);
 
(c)           a material reduction in the individual’s maximum annual bonus opportunity from the individual’s maximum annual bonus opportunity as in effect on the date of this Agreement;
 
(d)           the relocation by the Company of the individual’s primary place of employment with the Company or any of its Subsidiaries to a location not within a 50 mile radius of such current location; or
 
(e)           a willful and intentional breach of a material provision of this Agreement by the Company that has a material and adverse effect on the employee.
 

 
8
 

Action or inaction by the Company shall not be considered “willful” unless done or omitted by the Company in bad faith or with actual knowledge that such action or inaction is in breach of this Agreement.
 
“ Governance/Nominating Committee ” has the meaning set forth in Section 3.4(a) .
 
“ Governmental Entity ” means any court, administrative agency, regulatory body, commission or other governmental authority, board, bureau or instrumentality, domestic or foreign and any subdivision thereof.
 
“ GS ” means (i) GS Capital Partners V Fund, L.P., a Delaware limited partnership; GS Capital Partners V Institutional, L.P., a Delaware limited partnership; GS Capital Partners VI Fund, L.P., a Delaware limited partnership; GS Capital Partners VI Parallel, L.P., a Delaware limited partnership; Goldman Sachs KMI Investors, L.P., a Delaware limited partnership; GSCP KMI Investors, L.P., a Delaware limited partnership; GSCP KMI Investors Offshore, L.P., a Cayman Islands exempted limited partnership; GS Global Infrastructure Partners I, L.P., a Delaware limited partnership; GS Institutional Infrastructure Partners I, L.P., a Delaware limited partnership; GSCP V Offshore Knight Holdings, L.P., a Delaware limited partnership; GSCP V Germany Knight Holdings, L.P., a Delaware limited partnership; GSCP VI Offshore Knight Holdings, L.P., a Delaware limited partnership; GSCP VI Germany Knight Holdings, L.P., a Delaware limited partnership, and GS Infrastructure Knight Holdings, L.P., a Delaware limited partnership, (ii) any investment funds or other entities sponsored, managed or owned directly or indirectly by the Merchant Banking Division of Goldman, Sachs & Co., or otherwise under common control with the entities listed in clause (i) or their successors (by merger, consolidation, acquisition of substantially all assets or similar transaction) or with any entity then included in clause (ii), to which any of the entities previously included in the definition of “GS” Transferred, directly or indirectly (including through a series of Transfers), Class A Shares after the IPO or Related Shares after a Mandatory Conversion Date, and (iii) any successors (by merger, consolidation, acquisition of substantially all assets or similar transaction) of the foregoing; provided , that for purposes of calculating the Total Voting Power held or owned by GS, such calculation shall not include any Class P Shares (other than Related Shares) beneficially owned by any direct or indirect Subsidiary of Goldman, Sachs & Co. contained in clauses (ii) or (iii), if such direct or indirect Subsidiary of Goldman, Sachs & Co. is not sponsored, managed or owned directly or indirectly by the Merchant Banking Division of Goldman, Sachs & Co., by a successor to the operations of the Merchant Banking Division of Goldman, Sachs & Co., or by any other entity in the business of sponsoring, managing or owning directly or indirectly private equity investments vehicles or investments.  For the avoidance of doubt, “GS” shall be deemed not to include (A) any portfolio companies of any of the entities contained in clauses (i), (ii) or (iii) or (B) any entity that is not a party to this Agreement; provided , further , that any entity that would be within the definition of “GS” but for the preceding clause (B) shall be afforded the opportunity to execute a customary joinder to this Agreement, in form and substance reasonably acceptable to the Company.
 
“ Highstar ” means (i) Highstar II Knight Acquisition Sub, L.P., Highstar III Knight Acquisition Sub, L.P., Highstar Knight Partners, L.P. and Highstar KMI Blocker LLC, (ii) any investment funds or other entities sponsored, managed or owned directly or indirectly by
 

 
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Highstar Capital LP or one of its controlled Affiliates, or otherwise under common control with the entities listed in clause (i) or their successors (by merger, consolidation, acquisition of substantially all assets or similar transaction) or with any entity then included in clause (ii), to which any entity previously included in the definition of “Highstar” Transferred, directly or indirectly (including through a series of Transfers), Class A Shares after the IPO or Related Shares after a Mandatory Conversion Date, and (iii) any successors (by merger, consolidation, acquisition of substantially all assets or similar transaction) of the foregoing.  For the avoidance of doubt, “Highstar” shall be deemed not to include (A) any portfolio companies of any of the entities contained in clauses (i), (ii) or (iii) or (B) any entity that is not a party to this Agreement; provided , that any entity that would be within the definition of “Highstar” but for the preceding clause (B) shall be afforded the opportunity to execute a customary joinder to this Agreement, in form and substance reasonably acceptable to the Company.
 
“ Indemnifying Shareholders” has the meaning set forth in Section 7.12(e)(ii) .
 
“ Independence Requirements ” means, for any individual serving or nominated to serve on the Board, that such individual meets the then current standards to qualify as an independent director (other than for Audit Committee purposes) under the Exchange Act and established by each national securities exchange on which the Class P Shares are then listed for trading.
 
“ Inspectors ” has the meaning set forth in Section 5.6(a)(viii) .
 
“ Investor Party ” has the meaning set forth in Section 7.13(b) .
 
“ Investor Shareholder ” means each of GS, Highstar, Carlyle and Riverstone.
 
“ IPO ” means the initial offering of Class P Shares to the public, as described in the IPO Registration Statement.
 
“ IPO Registration Statement ” has the meaning set forth in the recitals of this Agreement.
 
“ Kinder ” means Richard D. Kinder.
 
“ Kinder Foundation ” means Kinder Foundation, and any similar or successor foundations established by Kinder for the purpose of serving charitable goals.
 
“ KMGP ” means Kinder Morgan G.P., Inc., a Delaware corporation.
 
“ KMI ” means Kinder Morgan Kansas, Inc., a Kansas corporation, and if the name of Kinder Morgan Kansas, Inc. is changed, “KMI” shall mean such corporation.
 
“ KMP ” means Kinder Morgan Energy Partners, L.P., a Delaware limited partnership.
 
“ KMP Observers ” has the meaning set forth in Section 3.6(b) .
 

 
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“ KMR ” means Kinder Morgan Management, LLC, a Delaware limited liability company.
 
“ Losses ” has the meaning set forth in Section 5.8(a) .
 
“ Mandatory Conversion Date ” has the meaning set forth in the Charter.
 
“ Merger Agreement ” has the meaning set forth in Section 7.12(a) .
 
“ Necessary Action ” means, with respect to a specified result, all stockholder actions (to the extent such actions are permitted by law and by the Charter and Bylaws and are in compliance with the Exchange Act and the requirements of any national securities exchange on which the Class P Shares are then listed) necessary to cause such result, including (i) voting or providing a proxy with respect to Voting Securities, (ii) causing the adoption of stockholders’ resolutions and amendments to the Charter and Bylaws, (iii) executing agreements and instruments, and (iv) making, or causing to be made, with any Governmental Entity, all filings, registrations or similar actions that are required to achieve such result.
 
“ New Class B Shares ” has the meaning set forth in Section 3.8(b)(iv) .
 
“ Non-Cash Change of Control ” has the meaning set forth in Section 3.6(h) .
 
“ Non-Compete Period ” means, as to each Executive Management Shareholder, the period during such Executive Management Shareholder’s employment and, to the extent applicable, the period thereafter determined in accordance with Schedule B hereof.
 
“ Observer ” means a representative of an Investor Shareholder who shall have the rights set forth in Section 3.2 of this Agreement.
 
“ Original Class B Shareholders ” means the holders of Class B Shares on the date of this Agreement.
 
“ Original Investor Shareholders ” means (i) the entities described in clause (i) of the definition of “Carlyle,” (ii) the entities described in clause (i) of “GS,” (iii) the entities described in clause (i) of “Highstar,” and (iv) the entities described in clause (i) of “Riverstone.”
 
“ Original Shareholders ” means (i) Michael Morgan, William Morgan and each of his respective Affiliates, (ii) Fayez Sarofim and his Affiliates and (iii) the employees of the Company or any of its Subsidiaries on the date of this Agreement who hold Class A Shares on the date hereof other than Kinder.
 
“ Other Demanding Sellers ” has the meaning set forth in Section 5.2(b) .
 
“ Other Proposed Sellers ” has the meaning set forth in Section 5.2(b) .
 
“ Permitted Holders ” means, at any time, (i) Kinder (or a Permitted Transferee of Kinder), (ii) a Remaining Original Shareholder (or a Permitted Transferee of such Remaining Original Shareholder) and/or (iii) any Investor Shareholder (other than, in the case of clause (ii)
 

 
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or (iii) of the definition of the applicable Investor Shareholder, any Person that is included in such definition as a “successor” if such Person is not as of the date of this Agreement (or, if such Person is not in existence as of the date of this Agreement, would not be if in existence as of the date of this Agreement), an Affiliate of the entities included in clause (i) of the definition of the applicable Investor Shareholder (if such Person is not in existence as of the date of this Agreement, determined without given effect to the applicable merger, consolidation, acquisition of substantially all assets or similar transaction by which such Person becomes such a “successor”)).
 
“ Permitted Transferee ” means with respect to any applicable Shareholder, (a) (I) a spouse, lineal descendant (whether natural or adopted), sibling or parent of such Shareholder, or a child (whether natural or adopted) of a spouse, of a former spouse, or of a sibling of such Shareholder or (II) upon such Shareholder’s death, an heir, executor, administrator, testamentary trustee, legatee or beneficiary of such Shareholder, (b) other than for Kinder, a foundation or similar entity established by such Shareholder for the purpose of serving charitable goals, controlled by the Persons named in clause (a); (c) any trust, the beneficiaries of which include only the Persons named in clause (a) or (b); and (d) any corporation, limited liability company or partnership, the stockholders, members or general or limited partners of which include only the Persons named in clause (a), (b) or (c); provided that, in the case of a Transfer to any Person named in clause (a), (b), (c) or (d), the Shareholder (or in the case of such Shareholder’s death, such Shareholder’s heir, executor, administrator, testamentary trustee, legatee or beneficiary), effecting such Transfer at all times thereafter retains control over the voting and disposition of such Shares, in the hands of such Transferee.
 
“ Person ” means any individual, corporation, company, firm, partnership, joint venture, limited liability company, estate, trust, business association, organization, Governmental Entity or other entity.
 
“ Phantom Class B Shares ” has the meaning set forth in the definition of Canadian Plan.
 
“ Phantom Class C Shares ” has the meaning set forth in the definition of Canadian Plan.
 
“ Piggyback Notice ” has the meaning set forth in Section 5.2(a) .
 
“ Piggyback Registration ” has the meaning set forth in Section 5.2(a) .
 
“ Piggyback Seller ” has the meaning set forth in Section 5.2(a) .
 
“ Prior Agreement ” means the Amended and Restated Limited Liability Company Agreement of Knight Holdco LLC, dated as of May 30, 2007, as amended.
 
“ Proceeding ” has the meaning set forth in Section 7.9 .
 
“ Proxy Holder ” has the meaning set forth in Section 3.5(b) .
 

 
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“ Records ” has the meaning set forth in Section 5.6(a)(viii) .
 
“ Registrable Amount ” means an amount of Registrable Securities having an aggregate value of at least $200,000,000   (based on the anticipated offering price (as determined in good faith by the Requesting Shareholders)).
 
“ Registrable Securities ” means any Class P Shares into which Class A Shares, Class B Shares or Class C Shares currently owned or acquired by any Shareholder has converted or may convert.  As to any particular Registrable Securities, such securities shall cease to be Registrable Securities when (x) a registration statement registering such securities under the Securities Act has been declared effective and such securities have been sold or otherwise transferred by the holder thereof pursuant to such effective registration statement or (y) such securities are sold in accordance with Rule 144.
 
“ Registration Expenses ” has the meaning set forth in Section 5.7 .
 
“ Related Shares ” means Class P Shares received by a holder of Class A Shares upon conversion of such holder’s Class A Shares as the result of the occurrence of a Mandatory Conversion Date for the series corresponding to such holder’s Class A Shares.
 
“ Relevant Holdback Shareholders ” has the meaning set forth in Section 5.1(f) .
 
“ Remaining Original Shareholders ” means the Original Shareholders other than Original Shareholders who were employees of the Company or any of its Subsidiaries on the date of this Agreement and whose employment with the Company and all of its Subsidiaries has ceased after the date of this Agreement.
 
“ Remaining Securities ” has the meaning set forth in Section 5.1(a) .
 
“ Replicated Change of Control ” has the meaning set forth in Section 3.6(h) .
 
“ Requested Information ” has the meaning set forth in Section 5.10(a) .
 
“ Requesting Shareholders ” has the meaning set forth in Section 5.1(a) .
 
“ Riverstone ” means (i) Carlyle/Riverstone Knight Investment Partnership, L.P., C/R Knight Partners, L.P., C/R Energy III Knight Non-U.S. Partnership, L.P., Carlyle Energy Coinvestment III, L.P. and Riverstone Energy Coinvestment III, L.P., (ii) any investment funds or other entities sponsored, managed or owned directly or indirectly by Riverstone Holdings, LLC or one of its controlled Affiliates or otherwise under common control with the entities listed in clause (i) or their successors (by merger, consolidation, acquisition of substantially all assets or similar transaction) or with any entity then included in clause (ii), to which any entity previously included in the definition of “Riverstone” Transferred, directly or indirectly (including through a series of Transfers), Class A Shares after the IPO or Related Shares after a Mandatory Conversion Date, and (iii) any successors (by merger, consolidation, acquisition of substantially all assets or similar transaction) of the foregoing.  For the avoidance of doubt, “Riverstone” shall be deemed not to include (A) Carlyle or any portfolio companies of any of the
 

 
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entities contained in clauses (i), (ii) or (iii) or (B) any entity that is not a party to this Agreement; provided , that any entity that would be within the definition of “Riverstone” but for the preceding clause (B) shall be afforded the opportunity to execute a customary joinder to this Agreement, in form and substance reasonably acceptable to the Company.
 
“ Rule 144 ” means Rule 144 (or any successor provision) promulgated under the Securities Act.
 
“ SEC ” means the United States Securities and Exchange Commission or any similar agency then having jurisdiction to enforce the Securities Act.
 
“ Second Catch-Up Excess Value ” has the meaning set forth in Section 3.8(e)(ii) .
 
“ Second Catch-Up Value Transaction ” has the meaning set forth in Section 3.8(e)(ii) .
 
“ Securities Act ” means the Securities Act of 1933, as amended, supplemented or restated from time to time and any successor to such statute, and the rules and regulations promulgated thereunder.
 
“ Selected Courts ” has the meaning set forth in Section 7.9 .
 
“ Selling Shareholders ” has the meaning set forth in Section 5.6(a)(i) .
 
“ Shaper ” means C. Park Shaper.
 
“ Shareholder ” means (i) the Original Investor Shareholders, (ii) any other Person identified as a Shareholder on the signature pages hereto and (iii) all other Persons who become parties hereto as Shareholders in accordance with Section 2.1(d), the definitions of “Carlyle,” “GS,” “Highstar,” or “Riverstone” and Section 2.1(c) or Section 3.8(g) ; provided , that, for clarity, any Person who acquires Class P Shares during or after the IPO shall not, solely as a result of such acquisition, become a party to this Agreement.
 
“ Shares ” means, collectively, the outstanding Class A Shares, Class B Shares, Class C Shares and Class P Shares.
 
“ Shelf Notice ” has the meaning set forth in Section 5.3(a) .
 
“ Shelf Registration Statement ” has the meaning set forth in Section 5.3(a) .
 
“ Subsidiary ” or “ Subsidiaries ” means, with respect to any Person, as of any date of determination, any other Person as to which such Person owns, directly or indirectly, or otherwise controls, more than 50% of the voting shares or other similar interests or is general partner or managing member of, or serves in a similar capacity for, such Person (including, in the case of the Company, KMP and KMR and their respective Subsidiaries).
 
“ Tender Offer ” has the meaning set forth in Section 3.6(l) .
 

 
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“ Total Voting Power ” means, as of any date of determination, the total number of votes that may be cast in the election of directors of the Company if all Voting Securities then outstanding were present and voted at a meeting held for such purpose.  The percentage of the Total Voting Power of the Company owned by any Person as of any date of determination is the percentage of the Total Voting Power of the Company that is represented by the total number of votes that may be cast in the election of directors of the Company by Voting Securities then owned of record by such Person; provided , that if a holder of Class A Shares or Related Shares owns other Class P Shares, Total Voting Power with respect to that holder shall also include any Class P Shares owned directly or indirectly by such Person with respect to which such Person has voting power.
 
“ Transfer ” means, as a noun, any voluntary or involuntary transfer, sale, pledge, assignment, hypothecation or other disposition or distribution of any interest in Shares and, as a verb, to voluntarily or involuntarily transfer, sell, pledge, assign, hypothecate or otherwise dispose of or distribute any interest in Shares.  “ Transferor ” means a Person that Transfers or proposes to Transfer; and “ Transferee ” means a Person to whom a Transfer is made or it proposed to be made.
 
“ Underwriter Amount ” has the meaning set forth in Section 5.1(f) .
 
“ Underwritten Offering ” means a sale of securities of the Company to an underwriter or underwriters for reoffering to the public.
 
“ VCOC ” means a “venture operating company” within the meaning of the U.S. Department of Labor plan assets regulations, 29 C.F.R. § 2510.3-101, or any successor thereto.
 
“ Voting Cure Period ” has the meaning set forth in Section 3.5(b) .
 
“ Voting Securities ” means Shares and any other securities of the Company entitled to vote generally in the election of directors of the Company.
 
“ WKSI ” has the meaning set forth in Section 5.3(a) .
 
SECTION 1.2.   GENDER .  For the purposes of this Agreement, the words “he,” “his” or “himself” shall be interpreted to include the masculine, feminine and corporate, other entity or trust form.

ARTICLE II

TRANSFER RESTRICTIONS; CONVERSIONS

SECTION 2.1.   TRANSFER RESTRICTIONS .

(a)           Prior to May 31, 2013, neither Kinder nor Shaper (nor any of their respective Permitted Transferees) may, directly or indirectly, Transfer Class P Shares, other than:
 
(i)           in the case of Kinder (or any Permitted Transferee of Kinder), Transfers to a Kinder Foundation, in an aggregate number of Class P Shares
 

 
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(considered cumulatively with all other Transfers by Kinder or a Permitted Transferee of Kinder under this clause (i) to any Kinder Foundation) that do not exceed 10% of the number of Shares equal to the sum of (A) the total number of Class A Shares held by Kinder and his Permitted Transferees on the date of this Agreement, minus the total number of any Class P Shares that have theretofore been issued upon conversion of the Class B Shares corresponding to such Class A Shares (i.e. the Class B Shares designated in the Charter as the “ Series B-6 Stock ”) plus (B) the total number of any Class P Shares that Kinder and his Permitted Transferees have theretofore received after the date of this Agreement from the conversion of Class B Shares held by Kinder on the date of this Agreement;
 
(ii)           in the case of Kinder (or any Permitted Transferee of Kinder), Transfers to a third party or a Kinder Foundation (in addition to those specified in clause (i) above) in an aggregate number of Class P Shares (considered cumulatively with all other such Transfers by Kinder or a Permitted Transferee of Kinder under this clause (ii)) that do not exceed 10% of the number of Shares equal to the sum of (A) the total number of Class A Shares held by Kinder and his Permitted Transferees on the date of this Agreement, minus the total number of any Class P Shares that have theretofore been issued upon conversion of the Class B Shares corresponding to such Class A Shares (i.e. the Class B Shares designated in the Charter as the “ Series B-6 Stock ”) plus (B) the total number of any Class P Shares that Kinder and his Permitted Transferees have theretofore received after the date of this Agreement from the conversion of Class B Shares held by Kinder on the date of this Agreement;
 
(iii)           in the case of Shaper (or any Permitted Transferee of Shaper), Transfers in an aggregate number of Class P Shares (considered cumulatively with all other such Transfers by Shaper or a Permitted Transferee of Shaper under this clause (iii)) that do not exceed 50% of the total number of Class A Shares held by Shaper and his Permitted Transferees on the date of this Agreement; and
 
(iv)           in the case of Kinder or Shaper (or their respective Permitted Transferees), Transfers to a Permitted Transferee of Kinder or Shaper, respectively.
 
(b)           No Class B Shareholder may Transfer (including by operation of law) any Class B Shares, other than to its Permitted Transferees.  No Class C Shareholder may Transfer (including by operation of law) any Class C Shares, other than to its Permitted Transferees.
 
(c)           Any Class A Shareholder who is an employee of the Company or any of its Subsidiaries on the date of this Agreement may not Transfer (including by operation of law) any Class A Shares, other than to its Permitted Transferees.  Any Class A Shareholder who is not an employee of the Company or any of its Subsidiaries on the date of this Agreement may not Transfer (including by operation of law) any Class A Shares, other than (i) to its Affiliates or its successors (by merger, consolidation, acquisition of substantially all assets or similar transaction) that are or who become parties to this Agreement by executing a customary joinder to this
 

 
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Agreement, in form and substance reasonably acceptable to the Company, provided , that such Affiliate or successor, as applicable, is afforded the opportunity to execute such customary joinder to this Agreement and (ii) in the event that such Class A Shareholder is an individual, to his or her Permitted Transferees.
 
(d)           Any Transfer that would be prohibited pursuant to this Section 2.1 but for the fact that the Transferee is a Permitted Transferee or an Affiliate of the Transferor, as applicable, shall be permitted only if the Permitted Transferee or Affiliate, as applicable, is a “Shareholder” for purposes of this Agreement, or, in connection with such Transfer, executes a customary joinder to this Agreement, in form and substance reasonably acceptable to the Company, in which such Permitted Transferee or Affiliate, as applicable, agrees to be a “Shareholder” for all purposes of this Agreement.
 
(e)           Notwithstanding anything in this Agreement to the contrary, the transfer restrictions set forth in Section 2.1(a) hereof shall terminate with respect to Kinder and/or Shaper and their respective Permitted Transferees, in the event of the termination of Kinder’s or Shaper’s employment, as applicable, with the Company and its Subsidiaries (but only if Kinder or Shaper, as applicable, no longer has any executive responsibilities with respect to the Company or any of its Subsidiaries).
 
SECTION 2.2.   LIMITATION ON VOLUNTARY CONVERSIONS .  No Class A Shareholder or holder of Related Shares, if any, shall Transfer any Shares during the regular director and executive officer “black out” period for the Company’s first quarterly periodic report for the 2015 calendar year; provided that Class A Shareholders may Transfer Class A Shares in accordance with Section 2.1 hereof.

SECTION 2.3.   ACTIONS IN CONNECTION WITH VOLUNTARY CONVERSIONS .

(a)           Each Class A Shareholder agrees that, in connection with any Voluntary Conversion by such Class A Shareholder, (i) such Class A Shareholder shall use reasonable best efforts to ensure that any Conversion Notice delivered by such Class A Shareholder to the Company or the Transfer Agent in connection with any Voluntary Conversion is accurate and consistent with the provisions of the Charter and (ii) the Class P Shares issued upon the delivery of a particular Conversion Notice shall be Transferred solely in accordance with such Conversion Notice (as may be amended or modified in accordance with the Charter); provided , that, the parties acknowledge that, for the avoidance of doubt, a reduction in the number of Class P Shares ultimately Transferred pursuant to such Conversion Notice shall be permitted by this clause (ii).
 
(b)           If, notwithstanding the obligations of a Class A Shareholder pursuant to Section 2.3(a)(i) , any Voluntary Conversion by such Class A Shareholder causes the existence of any Excess Class P Shares, such Class A Shareholder, as promptly as reasonably practicable and in no event later than the fifth (5th) Business Day following the final determination of such number of Excess Class P Shares in accordance with the provisions of the Charter, shall Transfer to the Company the number of Class P Shares equal to such number of Excess Class P Shares related to the Class A Shares converted by such Class A Shareholder pursuant to such Voluntary Conversion, free and clear of any security interests, liens or similar encumbrances.  This
 

 
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Section 2.3(b) shall be the sole and exclusive remedy of any Class B Shareholder, Class C Shareholder or the Company against any Class A Shareholder for any breaches of Section 2.3(a)(i) or Section D.2(a)(iv) of Article Fourth of the Charter; provided , however , that this sentence shall not be deemed to affect the remedies available to the party or parties seeking to enforce this Section 2.3(b) , with respect to breaches of this Section 2.3(b) .
 
(c)           Terms used in this Section 2.3 but not defined in this Agreement shall have the meanings given such terms in the Charter.
 
SECTION 2.4.   CERTAIN AGREEMENTS IN CONNECTION WITH DISTRIBUTIONS .

(a)           The Company hereby agrees that any distribution paid by the Company pursuant to Section C of Article Fourth of the Charter shall be paid to the holders of Class P Shares and, to the extent payable pursuant to Section C of Article Fourth of the Charter, the holders of Class A Shares, Class B Shares and Class C Shares on the same Business Day; provided , that in the event that a Transfer or Investor Distribution by a holder of Class A Shares of a Series pursuant to Section D.2(a) of the Charter is closed or consummated no more than one (1) Business Day prior to the date on which such distribution is paid to the holders of Class P Shares (the “ Class P Payment Date ”), the Company shall be permitted to pay such distribution to the holders of Class A Shares, Class B Shares and Class C Shares of such Series (to the extent such distribution is payable to such holders pursuant to Section C of Article Fourth of the Charter) up to one (1) Business Day subsequent to the Class P Payment Date, to the extent payment to such holders of Class A Shares, Class B Shares and Class C Shares on the Class P Payment Date is not reasonably practicable.
 
(b)           Each Class A Shareholder acknowledges and agrees that such Class A Shareholder shall not be entitled to any portion of a Subject Distribution pursuant to Section C of Article Fourth of the Charter in respect of any Subject Class P Shares corresponding to such Subject Distribution, and agrees that it shall not make any claim or assertion inconsistent with the foregoing; the Company acknowledges and agrees that such Class A Shareholder shall be entitled to a Subject Distribution in respect of such holder’s Subject Class A Shares pursuant to Section C of Article Fourth of the Charter (to the extent such distribution is payable to Class A Shareholders pursuant to Section C of Article Fourth of the Charter) and agrees that it shall not make any claim or assertion inconsistent with the foregoing.
 
(c)           Terms used in this Section 2.4 but not defined in this Agreement shall have the meanings given such terms in the Charter.
 
ARTICLE III

BOARD REPRESENTATION

SECTION 3.1.   NOMINEES .

(a)           The number of directors shall initially be thirteen (13) and may be increased in accordance with Section 3.3 or reduced in accordance with this Section 3.1(a) .  If
 

 
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any Investor Shareholder loses the right to choose any particular director nominee(s) pursuant to Sections 3.1(c)(v)-(vii) , then the number of directors shall be reduced by such number of nominees with respect to which such right has been lost; provided, however, that, except as provided in the immediately following sentence, the number of directors shall not be reduced to less than eleven (11).  Notwithstanding the proviso in the immediately preceding sentence, subject to Section 3.1(c)(iii) , at any time when the Investor Shareholders collectively have the right to choose less than three (3) director nominees pursuant to this Section 3.1 , the number of directors may be reduced to not less than nine (9) directors in accordance with the immediately preceding sentence if such reduction is approved by a majority of the remaining directors (excluding, for purposes of such calculation any director that would be resigning or would be removed in accordance with Section 3.1(d) as a result of the applicable loss of right).  Notwithstanding anything to the contrary contained in this Article III, at all times during the term of this Agreement when nominations are made for the Board, the Governance/Nominating Committee shall choose a number of nominees meeting the Independence Requirements (which nominees the Company shall nominate to serve on the Board) equal to (i) the total number of directors then comprising the entire Board minus (ii) the aggregate number of directors whose nomination is otherwise specifically provided for pursuant to the terms of Section 3.1(b) , Section 3.1(c) or Section 3.1(e) ; provided, that (x) at least two (2) nominees chosen by the Governance/Nominating Committee must satisfy the Audit Independence Requirements and (y) in the event that Section 3.1(c)(i) , the proviso in Section 3.1(c)(ii) , Section 3.1(c)(iii) or Section 3.1(c)(iv) become applicable, at least three (3) nominees chosen by the Governance/Nominating Committee must satisfy the Audit Independence Requirements.
 
(b)           Subject to the provisions of this Section 3.1 , the Company shall nominate the following nominees to serve on the Board:
 
(i)           five (5) nominees chosen by Kinder (one of which can be Kinder himself) for so long as Kinder is Chief Executive Officer and (together with his Permitted Transferees) owns Shares representing at least 2.5% of the Total Voting Power, which nominees shall include at least one individual who satisfies the Audit Independence Requirements;
 
(ii)           two (2) nominees chosen by GS for so long as GS owns Shares representing at least 5% of the Total Voting Power;
 
(iii)           two (2) nominees chosen by Highstar for so long as Highstar owns Shares representing at least 5% of the Total Voting Power;
 
(iv)           one (1) nominee chosen by Carlyle for so long as Carlyle is an Eligible Investor Shareholder; and
 
(v)           one (1) nominee of Riverstone for so long as Riverstone is an Eligible Investor Shareholder.
 
(c)           Subject to the provisions of this Section 3.1 , the individuals to be nominated by the Company to serve on the Board pursuant to Section 3.1(b) shall be modified following the date of this Agreement, as follows:
 

 
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(i)           if Kinder is terminated as Chief Executive Officer for Cause, then, in lieu of the provisions of Section 3.1(b)(i) , the Company shall nominate the following nominees to serve on the Board: (A) one (1) nominee chosen by Kinder, (B) one (1) nominee who will be the then-current Chief Executive Officer, (C) one (1) nominee chosen by the Governance/Nominating Committee in accordance with Section 3.1(a) , which nominee must satisfy the Audit Independence Requirements and (D) two (2) nominees chosen by the Remaining Original Shareholders who (together with their Permitted Transferees) then hold a majority of the Class A Shares and Related Shares then held by the Remaining Original Shareholders and their Permitted Transferees; provided , that if the Remaining Original Shareholders (together with their Permitted Transferees) then collectively hold Class A Shares and Related Shares in an aggregate number not at least equal to a majority of the Class A Shares held by the Original Shareholders on the date of this Agreement, then, in lieu of the provisions of this Section 3.1(c)(i)(D) , the Governance/Nominating Committee shall choose such two (2) nominees in accordance with Section 3.1(a) ; provided , further , that in the event that Kinder is terminated as Chief Executive Officer for Cause, no nominee chosen pursuant to this Section 3.1 may be Kinder;
 
(ii)           if Kinder ceases to be the Chief Executive Officer for any reason other than as described in Section 3.1(c)(i), then, in lieu of the provisions of Section 3.1(b)(i) , the Company shall nominate the following nominees to serve on the Board: (A) two (2) nominees chosen by Kinder (one of which can be Kinder himself), (B) one (1) nominee who will be the then-current Chief Executive Officer and (C) two (2) nominees (at least one of whom must satisfy the Audit Independence Requirements) chosen by the Remaining Original Shareholders who (together with their Permitted Transferees) then hold a majority of the Class A Shares and Related Shares then held by the Remaining Original Shareholders and their Permitted Transferees; provided , that if the Remaining Original Shareholders (together with their Permitted Transferees) then collectively hold Class A Shares and Related Shares in an aggregate number not at least equal to a majority of the Class A Shares held by the Original Shareholders on the date of this Agreement, then, in lieu of the provisions of this Section 3.1(c)(ii)(C) , the Governance/Nominating Committee shall choose such two (2) nominees in accordance with Section 3.1(a) ;
 
 
(iii)           if the number of directors is reduced to less than eleven (11) in accordance with Section 3.1(a) and the nomination provisions of Section 3.1(b)(i) have not been previously modified by Section 3.1(c)(i) or 3.1(c)(ii) , then (A) the nominees provided for under Section 3.1(b)(i) shall be reduced from five (5) to four (4), and, in lieu of the fifth (5 th ) nominee being chosen by Kinder pursuant to Section 3.1(b)(i) , one (1) nominee shall be chosen by the Governance/Nominating Committee in accordance with Section 3.1(a) , which nominee must satisfy the Audit Independence Requirements and (B) the requirement that one of the nominees chosen by Kinder pursuant to Section 3.1(b)(i) must satisfy the Audit Independence Requirements shall be eliminated;
 
(iv)           if Kinder (together with his Permitted Transferees) ceases to own at least 2.5% of the Total Voting Power, then notwithstanding anything to the contrary contained herein, Kinder will no longer be entitled to choose any nominee, Section
 

 
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3.1(b)(i) , Section 3.1(c)(i) , Section 3.1(c)(ii) and Section 3.1(c)(iii) shall no longer apply, and, in lieu thereof, the Company shall nominate to serve on the Board the then-current Chief Executive Officer and four (4) nominees chosen by the Governance/Nominating Committee in accordance with Section 3.1(a) (at least one of whom must satisfy the Audit Independence Requirements);
 
(v)           if GS no longer owns at least 5% of the Total Voting Power but GS continues to be an Eligible Investor Shareholder, then, in lieu of the provisions of Section 3.1(b)(ii) , GS shall be entitled to choose one (1) nominee;
 
(vi)           if Highstar no longer owns at least 5% of the Total Voting Power but Highstar continues to be an Eligible Investor Shareholder, then, in lieu of the provisions of Section 3.1(b)(iii) , Highstar shall be entitled to choose one (1) nominee; and
 
(vii)           if any Investor Shareholder ceases to be an Eligible Investor Shareholder, such Investor Shareholder shall cease to have any right to choose nominees for directors.
 
 
(d)           If any Shareholder(s) other than Kinder, pursuant to Section 3.1(c) , or Kinder, pursuant to Section 3.1(c)(iv) , loses the right to choose any nominee(s) that it theretofore was entitled to choose pursuant to Section 3.1(b) , or Section 3.1(c) , then (i) such Shareholder(s) or Kinder, as applicable, shall identify the director or directors who will leave office (if such identity is not clear due to the nature of the event that caused the loss of right pursuant to Section 3.1(c) ), (ii) such Shareholder(s) or Kinder, as applicable, shall use reasonable best efforts to cause any director who is serving on the Board that such Shareholder(s) or Kinder, as applicable, no longer has the right to nominate as a director (who will be the director identified pursuant to clause (i) above, if applicable) to immediately tender his or her unconditional resignation from the Board, with any such resignation being immediately effective without being required to be accepted by the Board, and (iii) if any director who is to resign from the Board pursuant to this Section 3.1(d) refuses or otherwise fails to tender his or her resignation in accordance with the foregoing within ten (10) calendar days of the date of the event giving rise to the loss of the right of such Shareholder(s) or Kinder, as applicable, to choose such individual for nomination to the Board pursuant to this Section 3.1 , then the Company shall call and hold a special meeting of stockholders of the Company as promptly as practicable for the purpose of removing such director and Kinder and each Investor Shareholder shall cause all Voting Securities beneficially owned by him or his Permitted Transferees, in the case of Kinder, or by it, in the case of the Investor Shareholders, to be voted in support of such removal.  If Kinder, pursuant to Section 3.1(c) (i), 3.1(c)(ii) , or 3.1(c)(iii) loses the right to choose any nominee(s) that he theretofore was entitled to choose pursuant to Section 3.1(b) or Section 3.1(c) , then any such director theretofore chosen by Kinder but with respect to whom such right has been lost pursuant to Section 3.1(c) (i), 3.1(c)(ii) , or 3.1(c)(iii) may, to the fullest extent permitted by law, continue to serve until the next election of directors, at which time the nomination of and voting for election of directors shall be in accordance with the provisions of Sections 3.1(a)-(c) .  Notwithstanding the foregoing, if Kinder is terminated as Chief Executive Officer for Cause, Kinder shall immediately resign (unconditionally) as a director and his replacement shall be selected in accordance with Sections
 

 
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3.1(a) and 3.1(c)(i) .  For the avoidance of doubt, the loss by Kinder of the right to choose any particular individual for nomination as a director shall not, by itself, preclude the Governance/Nominating Committee or any Shareholder from nominating such individual, or any Shareholder from voting in favor of such individual as a director.
 
(e)           In the event of Kinder’s death, any nominees that Kinder would be entitled to choose pursuant to Section 3.1(c)(i) , Section 3.1(c)(ii) or Section 3.1(c)(iii) shall instead be chosen by his heirs, executors, administrators, testamentary Transferees, legatees or beneficiaries who (i) are or become parties to this Agreement by executing a customary joinder to this Agreement, in form and substance reasonably acceptable to the Company, provided, that he, she or it, as applicable, is afforded the opportunity to execute such customary joinder to this Agreement and (ii) then have voting power with respect to a majority of the Total Voting Power that was held by Kinder at the time of his death; provided , that such right will terminate when Kinder’s heirs, executors, administrators, testamentary trustees, legatees and beneficiaries who are or become parties to this Agreement by executing such customary joinder to this Agreement collectively cease to have voting power with respect to Voting Securities representing at least 2.5% of the Total Voting Power.
 
(f)           Except as expressly provided otherwise in this Section 3.1 , each of Kinder (and his heirs, executors, administrators, testamentary Transferees, legatees or beneficiaries who (i) are or become parties to this Agreement by executing such customary joinder to this Agreement and (ii) then have voting power with respect to a majority of the Total Voting Power that was held by Kinder at the time of his death) and each Investor Shareholder shall have the exclusive and immediate right to select nominees to fill vacancies created by reason of death, disability, retirement, removal, failure to be elected or resignation of its respective nominees to the Board.
 
SECTION 3.2.   BOARD OBSERVER RIGHTS .

(a)           During such time as GS owns at least 2.5% of the Total Voting Power but less than 5% of the Total Voting Power, GS shall be entitled to have an Observer in addition to its one (1) remaining nominee to the Board.  During such time as Highstar owns at least 2.5% of the Total Voting Power but less than 5% of the Total Voting Power, Highstar shall be entitled to have an Observer in addition to its one (1) remaining nominee to the Board.
 
(b)           Without limiting any other rights in this Agreement, including Section 3.2(a) hereof, until such time as each Investor Shareholder ceases to own at least 1% of the Total Voting Power, the Company shall permit such Investor Shareholder to have an Observer attend each meeting of the Board and each meeting of any committee thereof; provided , that an Investor Shareholder may have more than one Observer if such Investor Shareholder delivers a written opinion of counsel to the Company providing that more than one Observer is reasonably necessary to comply with VCOC requirements applicable to such Investor Shareholder and its Affiliates.  For the avoidance of doubt, the Investor Shareholders shall be entitled to have one or more Observers pursuant to this Section 3.2(b) to the extent necessary to comply with VCOC requirements, without regard to their respective percentage ownership, provided , that if an Investor Shareholder ceases to own at least 1% of the Total Voting Power, such Investor Shareholder shall be required to deliver a written opinion of counsel to the Company stating that
 

 
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such Observer or Observers are reasonably necessary for such Investor Shareholder to comply with VCOC requirements.
 
(c)           Each Observer shall have the same rights as a director (other than voting rights), including the right to participate in all deliberations of the Board and each committee thereof.  Observers shall not be counted towards a quorum.  The Company shall send to each such Observer the notice of the time and place of such meeting in the same manner and at the same time as it shall send such notice to the directors or committee members, as the case may be.  The Company shall also provide to each such Observer copies of all notices, reports, minutes and consents at the time and in the manner as they are provided to the directors or committee members, as the case may be.
 
(d)           Notwithstanding any provision of this Section 3.2 , the Company shall have the right to exclude any Observer from access to any Board or committee meeting or portion thereof or any materials distributed to any Board or committee members in the sole discretion of a majority of the members in attendance at such Board or committee meeting (or, with respect to materials to be provided in advance of any meeting, a majority of the members of the Board or committee, as applicable).  An Observer shall recuse himself or herself from any portion of any Board or committee meeting if (i) such Observer has actual knowledge that the Investor Shareholder that selected such Observer, or one of its controlled Affiliates, is engaged in, pursuing or evaluating any business opportunity that such Observer has actual knowledge that the Company or any of its Subsidiaries is currently engaged in, pursuing or evaluating and the participation of such Observer would create a conflict of interest and (ii) such business opportunity is being discussed during such portion of such meeting (provided, that for the avoidance of doubt, no Observer shall be deemed to be in breach of his or her obligations pursuant to this sentence so long as such Observer recuses himself or herself from such portion of such meeting as promptly as practicable following the time in which it becomes reasonably apparent that such business opportunity is being discussed).  All Observers, in connection with exercising their rights under this Section 3.2 , shall be required (i) to execute and deliver to the Company a customary (for observers of public corporations) confidentiality agreement that is reasonably acceptable to such Observer and to the Company, (ii) to undergo any training required by the Company’s policies regarding FERC standards of conduct that are applicable to directors and (iii) to comply with any other regulatory requirements to the extent applicable to such Observer in his or her capacity as an Observer.
 
SECTION 3.3.   INDEPENDENCE REQUIREMENTS .  In the event that, at any point in time, the Board does not meet the standards for the majority independence requirements of any national securities exchange on which the Class P Shares are then listed for trading, then the Company shall operate under an applicable controlled company exemption to such requirement, if available.  In the event that such exemption is not available to the Company, then the Governance/Nominating Committee shall choose for nomination a number of additional directors that meet the Independence Requirements that would cause the Board to meet the standards for the applicable majority independence requirements and the number of directors shall be increased by the number of such additional director nominees chosen by the Governance/Nominating Committee.


 
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SECTION 3.4.   COMPOSITION OF CERTAIN BOARD COMMITTEES

(a)            Governance/Nominating Committee .  Until the time specified in Section 3.4(f) , (i) the nominating committee of the Board (the “ Governance/Nominating Committee ”) shall have three (3) members, which shall consist of (A) one (1) director who was chosen as a Board nominee by Kinder (which nominee may not serve as the chair of the Governance/Nominating Committee), (B) one (1) director who was chosen as a Board nominee by the Investor Shareholders and (C) an independent director who was not chosen as a Board nominee by the Investor Shareholders or Kinder, all three (3) of which shall meet the Independence Requirements from which the Company is not then exempt, by reason of operating under an applicable controlled company exemption pursuant to Section 3.3 or otherwise, and (ii) all determinations by the Governance/Nominating Committee with respect to nominations, designations and appointments to the Board and committees of the Board shall require unanimous approval.  Notwithstanding the foregoing, in the event that (x) Kinder is no longer entitled to choose any Board nominees or none of Kinder’s nominees meets the Independence Requirements when the Company is not operating under an applicable controlled company exemption pursuant to Section 3.3 or is not otherwise exempt from such requirements, the member contemplated by Section 3.4(a)(i)(A) shall be an independent director meeting the Independence Requirements who was not chosen for nomination by the Investor Shareholders or Kinder or (y) none of the Investor Shareholders’ nominees meets the Independence Requirements when the Company is not operating under an applicable controlled company exemption pursuant to Section 3.3 or is not otherwise exempt from such requirements, the member contemplated by Section 3.4(a)(i)(B) shall be an independent director meeting the Independence Requirements who was not chosen for nomination by the Investor Shareholders or Kinder.
(b)            Audit Committee .  Until the time specified in Section 3.4(f) , the audit committee of the Board (the “ Audit Committee ”) shall have three (3) members, which shall consist of (i) one (1) director who was chosen as a Board nominee by Kinder (which nominee may not serve as the chair of the Audit Committee) and (ii) two (2) independent directors who were not chosen as Board nominees by the Investor Shareholders or Kinder, all three (3) of which shall meet the Audit Independence Requirements.  Notwithstanding the foregoing, in the event that Kinder is no longer entitled to choose at least five (5) Board nominees or none of Kinder’s nominees meets the Audit Independence Requirements, the member contemplated by Section 3.4(b)(i) shall be an independent director meeting the Audit Independence Requirements who was not chosen for nomination by the Investor Shareholders or Kinder.  At least one member of the Audit Committee shall be a financial expert as defined by the SEC.
 
(c)            Compensation Committee .  Until such time specified in Section 3.4(f) , the compensation committee of the Board (the “ Compensation Committee ”) shall have five (5) members, which shall include two (2) directors who were chosen for nomination as Board nominees by the Investor Shareholders, all five (5) of which shall meet the Independence Requirements on the date of this Agreement and any other eligibility requirements mandated by applicable law or applicable national securities exchange rule (in either case from which the Company is not then exempt, by reason of operating under an applicable controlled company exemption pursuant to Section 3.3 or otherwise) as of the applicable date of determination.
 

 
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Notwithstanding the foregoing, in the event that less than two (2) of the Investor Shareholders’ nominees meet the eligibility requirements mandated by applicable law or applicable national securities exchange rule (in either case from which the Company is not then exempt, by reason of operating under an applicable controlled company exemption pursuant to Section 3.3 or otherwise), any member(s) that the Investor Shareholders are unable to nominate as contemplated by the immediately foregoing sentence shall be directors meeting the Independence Requirements and such other eligibility requirements who were not chosen for nomination by the Investor Shareholders or Kinder; provided , that if less than five (5) members of the board of directors meet the requirements of this sentence, the Compensation Committee may have fewer than (5) members but shall have no less than three (3) members; provided , further , that such reduction shall not affect any of the rights of the Investor Shareholders under this Section 3.4(c) to nominate members to the Compensation Committee that meet the Independence Requirements and such other eligibility requirements.
 
(d)            Other Committees .  Until the time specified in Section 3.4(f) , the number of members appointed to each of the other committees of the Board (other than the Audit Committee and the Governance/Nominating Committee, and, if applicable, the Compensation Committee) shall be five (5), which will include two (2) directors who were chosen as Board nominees by Investor Shareholders; provided , that the number of members appointed to a committee that consists solely of directors nominated by the Investor Shareholders may be less than five (5).  In the event that less than two (2) of the Investor Shareholders’ nominees meet the eligibility requirements mandated by applicable law or applicable national securities exchange rule (in either case from which the Company is not then exempt, by reason of operating under an applicable controlled company exemption pursuant to Section 3.3 or otherwise), any member(s) that the Investor Shareholders are unable to nominate as contemplated by the immediately foregoing sentence shall be directors meeting such eligibility requirements who were not chosen for nomination by the Investor Shareholders or Kinder; provided , that if less than five (5) members of the board of directors meet the requirements of this sentence, such committee may have fewer than (5) members but shall have no less than three (3) members; provided , further , that such reduction shall not affect any of the rights of the Investor Shareholders under this Section 3.4(d) to nominate members to other committees that meet such eligibility requirements.
 
(e)            Company Action .  Until the time specified in Section 3.4(f) , the Company agrees to use all reasonable best efforts to cause (i) each committee of the Board to be constituted as set forth in this Section 3.4 and (ii) the appointment of the nominees of Kinder and the Investor Shareholders to the committees of the Board in accordance with this Section 3.4 .
 
(f)            Termination of Special Provisions Regarding Composition of Board Committees .  The requirements set forth in Sections 3.4(a) , 3.4(b) , 3.4(c) and 3.4(d) shall terminate when (i) the Investor Shareholders collectively are no longer entitled to choose at least three (3) Board nominees or (ii) solely with respect to Kinder, Kinder is no longer entitled to choose any Board nominees.
 
SECTION 3.5.   VOTING AGREEMENT .

(a)           Each of Kinder and each of the Investor Shareholders agrees with each other that he or it, as applicable, shall take all Necessary Action within his or its power to (i)
 

 
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cause the Board to be constituted as set forth in this Article III , including by being composed of the individuals nominated as directors pursuant to Section 3.1 hereof (including appointing or removing nominees and filling any vacancies created by reason of death, disability, retirement, removal, failure to be elected or resignation of any nominee(s) with new nominee(s) designated pursuant to Section 3.1 hereof), (ii) cause all Voting Securities beneficially owned by such Person or, in the case of Kinder, Kinder and his Permitted Transferees, to be voted (A) in favor of the election of the nominees designated pursuant to Section 3.1 hereof to the Board, (B) in favor of the removal of the individuals to be removed pursuant to Section 3.1(d) and (C) against any proposal to amend or waive any provision of the Bylaws unless the Board has approved such amendment or waiver and the individuals whose consent for such amendment or waiver is required under the Bylaws has been received in writing, and (iii) ensure that the Charter and Bylaws do not, at any time, conflict in any respect with the provisions of this Agreement to the extent such provisions comply with applicable law.  The Company agrees to include in the slate of nominees recommended by the Board those individuals nominated in accordance with this Article III .  The Company, Kinder and the Investor Shareholders agree to use all reasonable best efforts to cause the election of such individuals nominated in accordance with this Article III .  To the fullest extent permitted by law, the Company agrees to use all reasonable best efforts to solicit proxies for such nominees for director from all holders of Voting Securities.
 
(b)           Solely for purposes of this Section 3.5 , and in order to secure the performance of Kinder’s and the Investor Shareholders’ obligations under this Section 3.5 , each of Kinder and the Investor Shareholders (each, an “ Appointer ”) hereby irrevocably appoints each other (to the extent qualifying as a Proxy Holder (as defined below)) the attorney-in-fact and proxy of such Appointer (with full power of substitution) to vote with respect to its and, in the case of Kinder, his Permitted Transferees’, Shares as described in this paragraph if, and only in the event that, such Appointer fails to vote with respect to its and, in the case of Kinder, his Permitted Transferees’, Shares in accordance with the terms of this Section 3.5 .  The Appointer shall have five (5) Business Days from the date of a request for such vote (the “ Voting Cure Period ”) to cure such failure.  If after the Voting Cure Period the Appointer has not cured such failure, any of Kinder or the Investor Shareholders, as the case may be, whose nominees to the Board were required to be approved or removed by the Appointer pursuant to this Section 3.5 but were not approved or removed by the Appointer, shall have, and is hereby irrevocably granted, a proxy to vote, with respect to the Appointer’s and, in the case of Kinder, his Permitted Transferees’, Shares for the purposes of electing directors as required by this Section 3.5 (such Shareholder, a “ Proxy Holder ”), and of removing from office any directors elected to the Board in lieu of the nominees of the Proxy Holder who should have been elected pursuant to this Section 3.5 , at the special or annual meeting for such election or removal of director(s).  Each of Kinder and the Investor Shareholders intends this proxy to be, and it shall be, irrevocable and coupled with an interest, and each of Kinder and the Investor Shareholders will take such further action and execute such other instruments as may be necessary to effectuate the intent of this proxy and hereby revokes any proxy previously granted by it with respect to the matters set forth in this Section 3.5 with respect to the Shares beneficially owned by such Shareholder and, in the case of Kinder, his Permitted Transferees.  Notwithstanding the foregoing, the conditional proxy granted by this Section 3.5(b) shall be deemed to be revoked upon the termination of Section 3.5 of this Agreement in accordance with its terms.
 

 
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SECTION 3.6.   CERTAIN AGREEMENTS .

(a)           Upon the reasonable request of the Investor Shareholders holding Voting Securities representing a majority of the Total Voting Power of all Voting Securities then held by the Investor Shareholders (with respect to which the Company shall not unreasonably object), the Company shall, with regard to any Subsidiaries of the Company, cause the directors nominated to the Board by the Investor Shareholders pursuant to Article III (considered as a group) to be appointed or elected to the boards or governing bodies of such Subsidiaries of the Company (other than KMGP, KMP or KMR or any of their Subsidiaries) so that the Investor Shareholders (as a group) have, as closely as is practicable, the same proportionate representation on such boards or governing bodies (or, with respect to Subsidiaries of the Company that become publicly traded after the date hereof (other than any Subsidiaries of KMR or KMP) on the seats of such boards or governing bodies for which the Company has the right to designate directors; provided , that the Investor Shareholders shall have agreed to the limitation on the ability of the Company to designate directors of such Subsidiaries) as they do on the Board.
 
(b)           The Company shall (i) permit the Board nominees chosen by the Investor Shareholders and each Observer of the Investor Shareholders permitted to attend meetings of the Board pursuant to Section 3.2 (together, the “ KMP Observers ”) to attend each meeting of the KMGP board and the KMR board and any committees thereof, (ii) send to each KMP Observer notice of the time and place of such meeting, (iii) provide to each KMP Observer copies of all notices, reports, minutes and consents at the time and in the manner as they are provided to the members of the KMGP and KMR boards and the relevant committees thereof; provided , however , that the KMGP and KMR boards, and committees thereof, shall have the right to exclude the KMP Observers from access to any board or committee meeting (or portion thereof) or any materials distributed to any board or committee members in the sole discretion of a majority of the members of such board or committee in attendance at such board or committee meeting (or, with respect to materials to be provided in advance of any meeting, a majority of the members of such board or committee, as applicable).  A KMP Observer shall recuse himself or herself from any portion of any Board or committee meeting if (i) such KMP Observer has actual knowledge that the Investor Shareholder that selected such KMP Observer, or one of its controlled Affiliates, is engaged in, pursuing or evaluating any business opportunity that such KMP Observer has actual knowledge that the Company or any of its Subsidiaries is either currently engaged in, pursuing or evaluating and the participation of such KMP Observer would create a conflict of interest and (ii) such business opportunity is being discussed during such portion of such meeting (provided, that for the avoidance of doubt, no KMP Observer shall be deemed to be in breach of his or her obligations pursuant to this sentence so long as such KMP Observer recuses himself or herself from such portion of such meeting as promptly as practicable following the time in which it becomes reasonably apparent that such business opportunity is being discussed).  All KMP Observers, in connection with exercising their rights under this Section 3.6(b) , shall be required (i) to execute and deliver to KMGP or KMR, as applicable, a customary (for observers of public corporations) confidentiality agreement that is reasonably acceptable to such KMP Observer and to KMGP or KMR, as applicable, (ii) to undergo any training required by KMP’s, KMGP’s or KMR’s policies regarding FERC standards of conduct that are applicable to KMGP or KMR directors, as applicable, and (iii) to comply with any other
 

 
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regulatory requirements to the extent applicable to such KMP Observer in his or her capacity as a KMP Observer.
 
(c)           So long as an Investor Shareholder constitutes an Eligible Investor Shareholder, the Company shall inform such Eligible Investor Shareholder promptly of any action or proposed action by the Company or any of its Affiliates (including KMP and KMR) that the Chief Executive Officer reasonably believes could impose any filing obligation, restriction or other regulatory burden ( e.g. , bank holding company registration, or public utility holding company registration) on such Eligible Investor Shareholder or its Affiliates.  In addition, neither the Company nor any of its Subsidiaries or Affiliates (other than KMP, KMP’s operating partnerships, KMR or any of their respective Subsidiaries or controlled Affiliates, or KMGP (solely to the extent that KMGP (i) is acting in its capacity as a holder of shares of KMR or in its capacity as General Partner pursuant to Section 1.4 of the Delegation of Control Agreement to approve any action taken by KMR, or  (ii) is acting in its capacity as the general partner of KMP or any of its operating partnerships to approve any matter on behalf of KMP or any of its operating partnerships (and not to the extent acting in another capacity, such as acting to amend or waive a right or obligation of KMGP (or of its direct or indirect parent entities) under any organizational document of KMP or its operating partnerships)) or KMGP Services Company, Inc. to the extent it is taking action related to carrying out the terms of the Employee Services Agreement dated as of January 1, 2001 (not including amendments or waivers), among KMGP Services Company, Inc., KMGP and KMP) will take any action (or authorize any of, commit, agree or propose to take any of, consent to or vote in favor of any action) that would impose any filing obligation, restriction or other regulatory burden ( e.g. , bank holding company registration, or public utility holding company registration) on any Eligible Investor Shareholder or its Affiliates that such Eligible Investor Shareholder reasonably determines could have a significant impact on the interests of such Eligible Investor Shareholder or its Affiliates (other than its interests as a Shareholder), without approval by such Eligible Investor Shareholder (it being understood that such limitation shall not be read to prohibit acquisitions that may prohibit future acquisitions by such Investor Shareholder or its Affiliates due to antitrust overlaps).
 
(d)           So long as an Investor Shareholder constitutes an Eligible Investor Shareholder, the Company shall keep such Eligible Investor Shareholder informed, on a current basis, of any events or changes with respect to any criminal or regulatory investigation or action involving the Company or any of its Affiliates, so that such Eligible Investor Shareholder and its Affiliates will have the opportunity to take appropriate steps to avoid or mitigate any regulatory consequences to them that might arise from such investigation or action.
 
(e)           So long as an Investor Shareholder constitutes an Eligible Investor Shareholder, the Company shall reasonably cooperate with such Eligible Investor Shareholder and its Affiliates in efforts to mitigate consequences of circumstances described in clause (c) or (d) ( i.e. , coordinating and assistance in meeting with regulators).  Each Investor Shareholder who receives any non-public information pursuant to clause (c) or (d) agrees (i) to use it only in connection with purposes related to the subject matter of clauses (c), (d) or (e), as applicable, and (ii) to maintain the disclosed information in confidence, except as required by applicable law or applicable national securities exchange rule or to the extent that such information (A) enters the public domain through no fault of such Investor Shareholder or (B) is later lawfully acquired by
 

 
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such Investor Shareholder on a non-confidential basis from sources other than the Company and its Subsidiaries.
 
(f)           Each Executive Management Shareholder agrees that he or she shall not, during the Non-Compete Period, directly or indirectly (other than on behalf of or at the request of the Company or its Subsidiaries):
 
(i)           engage in, have an interest in, or otherwise be employed by (whether as an owner, operator, partner, member, manager, employee, officer, director, consultant, advisor, or representative), provide consulting or management services to, or permit his or her name to be used in connection with the activities of, any business or organization, engaged in a business that is competitive with a business in which the Company or any of its Subsidiaries engages (a “ Competitive Business ”); provided , that ownership of less than one percent (1%) of the outstanding stock of any publicly traded corporation shall not be deemed to be a violation of this Section 3.6(f) solely by reason thereof; provided , further , that, providing investment banking or legal services to a Competitive Business as an independent consultant, independent advisor or independent representative shall not be deemed to be a violation of this Section 3.6(f) solely by reason thereof so long as providing such services is not the primary duties or business activities of such individual; provided , further , that, if the Board determines that the provisions of this Section 3.6(f)(i) should not apply to an Executive Management Shareholder (other than Kinder or Shaper) following the termination of such Executive Management Shareholder’s employment by the Company, the provisions of this Section 3.6(f)(i) shall be deemed waived with respect to such Executive Management Shareholder;
 
(ii)           solicit any Person who is or, within the prior twelve (12) months, was, or whose Affiliate is or, within the prior twelve (12) months, was a customer of the Company or any of its Subsidiaries or persuade or attempt to persuade any such Person not to be a customer of the Company or any of its Subsidiaries or to reduce the amount of business that such customer does with the Company or any of its Subsidiaries, or enter into or seek to enter into any agreement (to the extent such agreement is of a nature that is related to the business in which the Company or any of its Subsidiaries engage) with, to the Executive Management Shareholder’s knowledge, any such Person; or
 
(iii)           contact, approach or solicit for the purpose of offering employment to or hiring or retaining, or actually hire or retain any Person who is or was employed or retained by the Company or its Affiliates as an employee during the immediately preceding twelve (12) months or attempt to persuade any Person not to continue to be employed or retained by the Company or its Affiliates or to terminate his or her employment or services with the Company or its Affiliates; provided , that notwithstanding the foregoing, general solicitations of employment published in a journal, newspaper or other publication of general circulation and not specifically directed towards such employees, consultants or independent contractors shall not be deemed to constitute solicitation for purposes of this Section 3.6(f)(iii) .
 
(iv)           Notwithstanding anything to the contrary in this Section 3.6(f) , with respect to the country of Mexico, this Section 3.6(f) will only apply (and therefore
 

 
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will be limited) to activities that are competitive with the businesses in which any of the Mexican Subsidiaries of the Company engages.
 
Each Executive Management Shareholder acknowledges and agrees that: (A) the time and geographical scope of the restrictions of this Section 3.6(f) are reasonable; (B) the burden on the Executive Management Shareholder of complying with the restrictions of this Section 3.6(f) is not unreasonable; (C) the general public policy is not harmed by the restrictions of this Section 3.6(f) ; and (D) the restrictions of this Section 3.6(f) are necessary for the protection of the Company and its Subsidiaries. Each Executive Management Shareholder further acknowledges and agrees (x) the Executive Management Shareholder’s breach of the provisions of this Section 3.6(f) will cause the Company irreparable harm, which cannot be adequately compensated by money damages, (y) if the Executive Management Shareholder breaches or threatens to breach the provisions of this Section 3.6(f) and the Company (by vote of a majority of the members of the Board) seeks an injunction against the Executive Management Shareholder, there is a reasonable probability of the Company’s eventual success on the merits and (z) if the Executive Management Shareholder breaches or threatens to breach the provisions of this Section 3.6(f) and the Company (by vote of a majority of the members of the Board) seeks an injunction against the Executive Management Shareholder, a balancing of equities will be in favor of the Company.  Each Executive Management Shareholder consents and agrees that if the Executive Management Shareholder commits any such breach or threatens to commit any breach, the Company (by vote of a majority of the members of the Board) shall be entitled to temporary and permanent injunctive relief from a court of competent jurisdiction, without posting any bond or other security and without the necessity of proof of actual damage, in addition to, and not in lieu of, such other remedies as may be available to the Company for such breach, including the recovery of money damages. If any of the provisions of this Section 3.6(f) are determined to be wholly or partially unenforceable, each Executive Management Shareholder hereby agrees that this Agreement or any provision hereof may be reformed so that it is enforceable to the maximum extent permitted by law. If any of the provisions of this Section 3.6(f) are determined to be wholly or partially unenforceable in any jurisdiction, such determination shall not be a bar to or in any way diminish the Company’s right to enforce any such covenant in any other jurisdiction.
 
(g)           So long as an Investor Shareholder constitutes an Eligible Investor Shareholder, the Company shall not, and shall not cause any of its Subsidiaries to, take any action, and shall take all actions as a shareholder within its power to prevent its Subsidiaries from taking any action to cause the board of KMGP to consist of less than a majority of individuals who qualify as independent directors under the Exchange Act and the standards established by each national securities exchange upon which securities of KMP are listed for trading.
 
(h)           Except as otherwise provided in this Section 3.6(h) , the Company shall not, directly or indirectly, engage in any Charter Change of Control that does not constitute a Cash Change of Control (a “ Non-Cash Change of Control ”) without the unanimous affirmative vote of all holders of Shares unless the organizational documents and capital structure of the acquiring, surviving or resulting Person in the Non-Cash Change of Control preserve in all material respects the economic and other rights (including conversion, Transfer, distribution and
 

 
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governance rights as set forth in the Charter, the Bylaws and this Agreement) and characteristics and tax treatment, including on a relative basis, of the Investor Shareholders, the Class A Shares, the Class B Shares, the Class C Shares and the Class P Shares as they exist immediately prior to such Non-Cash Change of Control (a “ Replicated Change of Control ”) (and if such rights are so preserved, then the unanimity requirement stated above shall not apply and in lieu thereof, the regular approval requirements that would otherwise be applicable shall apply instead).
 
(i)           A determination that such Non-Cash Change of Control satisfies the requirements, set forth in paragraph (h) above, to be a Replicated Change of Control shall require approval by the following: (A) the Investor Shareholders holding Voting Securities representing a majority of the Total Voting Power then held by the Investor Shareholders that continue to hold Class A Shares, (B) Kinder (so long as Kinder (together with his Permitted Transferees) continues to hold Class A Shares), (C) the holders of Class B Shares representing a majority of the issued and outstanding Class B Shares (not to be unreasonably withheld or delayed) and (D) the holders of Class C Shares representing a majority of the issued and outstanding Class C Shares (not to be unreasonably withheld or delayed).  If the requisite Shareholders approve a Non-Cash Change of Control as a Replicated Change of Control pursuant to this Section 3.6(h)(i) , then the holders of the Class A Shares, the Class B Shares and the Class C Shares shall receive the consideration proposed in such Replicated Change of Control for the Class A Shares, the Class B Shares and the Class C Shares, as applicable, and shall not receive the consideration provided for under Section D.1(e) of Article Fourth of the Charter for a Charter Change of Control.
 
(A)           If the requisite shareholders, except for the holders of Class C Shares representing a majority of the issued and outstanding Class C Shares, approve a Non-Cash Change of Control as a Replicated Change of Control pursuant to Section 3.6(h)(i) , then the Company nevertheless may engage in such Non-Cash Change of Control and the holders of the Class A Shares and the Class B Shares shall receive the consideration proposed in the Replicated Change of Control for the Class A Shares and the Class B Shares, as applicable, and shall not receive the consideration provided for under Section D.1(e) of Article Fourth of the Charter for a Charter Change of Control, and the holders of the Class C Shares shall receive the consideration provided for the Class C Shares under Section D.1(e) of Article Fourth of the Charter for a Charter Change of Control (other than a Replicated Change of Control), provided that such Non-Cash Change of Control must be a bona fide transaction with a third party that is not an Affiliate of the Company (other than Kinder and his Affiliates (excluding any Person who is an Affiliate of Kinder solely as a result of such Person’s relationship with the Company and its Subsidiaries)) or any Investor Shareholder; provided , further , that such transaction may be with or involve KMP, KMR or their respective Subsidiaries or controlled Affiliates.
 

 
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(B)           The Company shall provide written notice to all Class C Shareholders of its intent to pursue a Non-Cash Change of Control pursuant to Section 3.6(h)(i)(A) .  If the holders of Class C Shares representing a majority of the issued and outstanding Class C Shares elect to participate in such Non-Cash Change of Control by notifying the Company in writing within ten (10) calendar days after receipt of the Company’s notice, the holders of the Class C Shares shall receive the consideration proposed in such Non-Cash Change of Control for the Class C Shares and shall not receive the consideration provided for under Section D.1(e) of Article Fourth of the Charter for a Charter Change of Control.
 
(ii)           Regardless of whether or not the holders of Class B Shares and/or the holders of Class C Shares have approved a Non-Cash Change of Control as a Replicated Change of Control pursuant to Section 3.6(h)(i) , (A) the Investor Shareholders holding Voting Securities representing a majority of the Total Voting Power then held by the Investor Shareholders that continue to hold Class A Shares and (B) Kinder (so long as Kinder (together with his Permitted Transferees) continues to hold Class A Shares), may agree in writing that such Non-Cash Change of Control shall not be subject to the requirement to be a Replicated Change of Control so long as such Non-Cash Change of Control (x) is a bona fide transaction with a third party that is not an Affiliate of the Company (other than Kinder and his Affiliates (excluding any Person who is an Affiliate of Kinder solely as a result of such Person’s relationship with the Company and its Subsidiaries)) or any Investor Shareholder; provided , further , that such transaction may be with or involve KMP, KMR or their respective Subsidiaries or controlled Affiliates and (y) provides for the holders of the Class A Shares, the Class B Shares and the Class C Shares to receive the consideration provided for under Section D.1(e) of Article Fourth of the Charter for a Charter Change of Control (other than a Replicated Change of Control).
 
(iii)           The requirements of this Section 3.6(h) shall be in addition to any other approvals required by the Charter, the Bylaws or applicable law for a Non-Cash Change of Control.
 
(i)           Kinder agrees that, from the date of this Agreement until May 31, 2015, Kinder shall notify the Eligible Investor Shareholders prior to Kinder (including his Permitted Transferees and, to the extent of his control, his Affiliates), directly or indirectly, effecting, or offering or proposing (whether publicly or otherwise) to effect, any acquisition of beneficial ownership of any securities of the Company or any of its Subsidiaries that are publicly traded in a transaction or a series of related transactions involving a value in excess of $50,000,000.
 
(j)           The Company shall make one-time compensatory cash payments in an aggregate amount of approximately $100,000,000 to certain non-executive management employees of the Company and its Subsidiaries, which one-time payments shall be in addition to the Company’s usual periodic cash compensatory payments made to employees.  The employee
 

 
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payees of such one-time payments and amount payable to each such employee payee shall be at the discretion of the Chief Executive Officer of the Company and the timing of such one-time payments shall be at the discretion of the Company’s management; provided , that such one-time payments shall be made reasonably promptly after the payment of the Company’s initial quarterly dividend following the consummation of the IPO; provided , further, that any such one-time payments to holders of Class B Shares or Class C Shares pursuant to this Section 3.6(j) shall be subject to approval by the board of directors pursuant to Section 3.12(i) of the Bylaws.
 
(k)           Without limitation to any other rights granted to the Investor Shareholders by the Company pursuant to the Charter, Bylaws, this Agreement, or pursuant to applicable law, the Company shall provide each Investor Shareholder that holds Class A Shares or Related Shares or its designated agents or representatives with the right to inspect, audit, excerpt or copy the Company’s share registry, share transfer books and other documents and information related to the ownership of the Class A Shares, the Class B Shares, the Class C Shares and the Class P Shares as such Investor Shareholder may request, including the Phantom Class B Shares and Phantom Class C Shares of the Canadian Participants as well as the Class B Shares and Class C Shares held by the Canadian Plan Entity that correspond to such Phantom Class B Shares and Phantom Class C Shares, in order to confirm ownership calculations, in each case at such times during reasonable business hours as such Investor Shareholders shall reasonably request.
 
(l)           In the event of an All Cash Tender Offer or a Non-Cash Tender Offer (each, a “ Tender Offer ”), the parties agree as follows:
 
(i)           If such Tender Offer permits delivery of shares via a notice of guaranteed delivery, each Class A Shareholder intending to tender Class P Shares received upon a Voluntary Conversion of such Class A Shareholder’s Class A Shares into such Tender Offer shall use commercially reasonable efforts (and the Company shall reasonably cooperate in such efforts) to tender such Class P Shares into such Tender Offer via a notice of guaranteed delivery; provided , that tendering via a notice of guaranteed delivery does not impair, prejudice or otherwise adversely affect such Class A Shareholder’s ability to participate in or otherwise receive the benefits of such Tender Offer.  If such Class A Shareholder does tender Class P Shares via a notice of guaranteed delivery pursuant to this Section 3.6(l)(i) , such Class A Shareholder shall issue a Conversion Notice to the Company and the Transfer Agent at a time as close as practicable to the then-current expiration time of such Tender Offer to ensure sufficient time for the conversion of such Class A Shares and the Transfer of such Class P Shares in accordance with the terms of such notice of guaranteed delivery and such Tender Offer, and, upon receipt of such Conversion Notice, the Company shall use its reasonable best efforts to ensure that such conversion and such Transfer occur in accordance with the terms of such notice of guaranteed delivery and such Tender Offer.
 
(ii)           In the event that such Tender Offer does not permit delivery of shares via a notice of guaranteed delivery, each Class A Shareholder intending to tender Class P Shares received upon a Voluntary Conversion of such Class A
 

 
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Shareholder’s Class A Shares into such Tender Offer and the Company shall use its commercially reasonable efforts to enable such Class A Shareholder to tender Class P Shares into such Tender Offer while preserving the relative economic rights (in a manner consistent with the intent and purpose of the Charter, the Bylaws and this Agreement) of the holders of Class A Shares, Class B Shares and Class C Shares to distributions and to Class P Shares (and distributions thereon) issuable upon conversion of their Class A Shares, Class B Shares and Class C Shares during the pendency of such Tender Offer.  The parties acknowledge that there may be delays (which each of the parties shall use its reasonable best efforts to cooperate in keeping as short as practicable) in calculating the amount of distributions payable to the holders of Class A Shares, Class B Shares, Class C Shares and Class P Shares pursuant to Section C of Article Fourth of the Charter (in a manner consistent with the intent and purpose of the Charter, the Bylaws and this Agreement), or the number of Class P Shares issuable upon conversion of Class A Shares, Class B Shares and Class C Shares pursuant to Section D of Article Fourth of the Charter (in a manner consistent with the intent and purpose of the Charter, the Bylaws and this Agreement), in each case during the pendency of such Tender Offer, which may result in delays (which each of the parties shall use its reasonable best efforts to cooperate in keeping as short as practicable) in the payment of such distributions or the delivery of such Class P Shares to holders of Class A Shares, Class B Shares or Class C Shares.  Without limiting the generality of the foregoing, the parties shall, to the extent necessary or appropriate to achieve the purpose and intent of this Section 3.6(l)(ii) , consider in good faith consenting to reasonable escrow mechanics (e.g., that contemplate the temporary placement of such distributions or such Class P Shares in escrow), which consents shall not be unreasonably withheld or delayed; provided , that each of the parties shall use its reasonable best efforts to cooperate in keeping any such escrow period as short as practicable; provided , further, that nothing in this Section 3.6(l)(ii) shall be interpreted to require any such Class A Shareholder to take, or refrain from taking, any action to the extent taking (or not taking) such action would impair, prejudice or otherwise adversely affect such Class A Shareholder’s ability to participate in or otherwise receive the benefits of such Tender Offer.
 
(iii)           Terms used in this Section 3.6(l) but not defined in this Agreement shall have the meanings given such terms in the Charter.
 
(m)           The Canadian Plan Entity shall be established in connection with the Company’s administration of the Canadian Plan for the Canadian Participants.  Each Phantom Class B Share shall provide for payments, if any, in gross amounts and gross value no greater than (and shall have vesting and forfeiture provisions upon termination of employment no more favorable to the Canadian Participant holding such Phantom Class B Share than), the Class B Share held by the Canadian Plan Entity to which such Phantom Class B Share corresponds (including, for the avoidance of doubt, Class P Shares, if any, received upon automatic conversion of such corresponding Class B Share); provided , that, subject to the foregoing limitations and to the extent that the Company in good faith determines is necessary or
 

 
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appropriate to mitigate any negative consequences to either the Company or holders of Phantom Class B Shares, the Company may elect to make distributions in cash in lieu of Class P Shares received in respect of the automatic conversion of Class B Shares held by the Canadian Plan Entity that would otherwise be distributable as a result of such automatic conversion.  Each Phantom Class C Share shall provide for payments, if any, in gross amounts and gross value no greater than the Class C Share held by the Canadian Plan Entity to which such Phantom Class C Share corresponds (including, for the avoidance of doubt, Class P Shares, if any, received upon automatic conversion of such corresponding Class C Share); provided , that, subject to the foregoing limitations and to the extent that the Company in good faith determines is necessary or appropriate to mitigate any negative consequences to either the Company or holders of Phantom Class C Shares, the Company may elect to make distributions in cash in lieu of Class P Shares received in respect of the automatic conversion of Class C Shares held by the Canadian Plan Entity that would otherwise be distributable as a result of such automatic conversion.  Each Phantom Class B Share and each Phantom Class C Share shall have exactly one corresponding Class B Share and Class C Share, respectively, in each case held by the Canadian Plan Entity, and the automatic conversion of any such corresponding Class B Share or Class C Share into Class P Shares shall result in the cancellation of the applicable Phantom Class B Share or Phantom Class C Share.  In the event that the Company elects to make a distribution in cash in lieu of Class P Shares pursuant to the foregoing provisos of this Section 3.6(m) , then the Company shall take all action necessary or appropriate for such Class P Shares to be immediately cancelled.  All Phantom Class B Shares and Phantom Class C Shares shall at all times be held only by the Canadian Participants.  Amendments, modifications or waivers of any provision of any organizational or other governing document of the Canadian Plan Entity or any governing or similar document of the Canadian Plan, in each case, shall require, in addition to any required approvals, the approval of (i) Kinder (so long as Kinder (together with his Permitted Transferees) owns at least 1.0% of the Total Voting Power), (ii) the Investor Shareholders holding Voting Securities representing a majority of the Total Voting Power then held by the Investor Shareholders (so long as the Investor Shareholders own at least an aggregate amount of 1.0% of the Total Voting Power), (iii) in the case of an amendment or modification that would modify the rights or obligations of any Investor Shareholder adversely, such Investor Shareholder so affected (so long as such Investor Shareholder owns any Voting Securities), (iv) in the case of an amendment or modification that would modify the rights or obligations of the holders of Class B Shares (taken as a whole) adversely as compared to the holders of other classes of Common Stock of the Company, the holders of Class B Shares holding Class B Shares representing a majority of the issued and outstanding Class B Shares and (v) in the case of an amendment or modification that would modify the rights or obligations of the holders of Class C Shares (taken as a whole) adversely as compared to the holders of other classes of Common Stock of the Company, the holders of Class C Shares holding Class C Shares representing a majority of the issued and outstanding Class C Shares.
 
SECTION 3.7.  COMPANY DIVIDEND POLICY.  Except as required by law or modified in accordance with Section 3.12 of the Bylaws, the Company shall not modify, amend, repeal or waive any provisions of, and shall comply with the terms of, the Company’s Dividend Policy set forth as Exhibit A   hereto, as adopted by the Board on the date hereof.

SECTION 3.8.  FORFEITURE OF CLASS B SHARES.

 
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(a)            No Forfeiture Upon Conversion .  Class P Shares received by a Class B Shareholder (or a Permitted Transferee of such Class B Shareholder) as a result of the conversion of such holder’s Class B Shares pursuant to the Charter shall fully vest automatically and cease to be subject to forfeiture.
 
(b)            Forfeiture Upon Termination of Employment .
 
(i)           Subject to Sections 3.8(c) , (d) and (e) , upon termination of a Class B Shareholder’s employment with the Company and its Subsidiaries due to such Class B Shareholder’s death or disability, one hundred percent (100%) of the Class B Shares held by such Class B Shareholder (or any Permitted Transferee of such Class B Shareholder (with respect to Class B Shares attributable to such Class B Shareholder)) at the time of such termination shall fully vest automatically and cease to be subject to forfeiture.  For purposes of this Agreement, “disability” with respect to any employee shall be determined in accordance with the Company’s employee long-term disability plan covering such employee.
 
 
(ii)           Subject to Sections 3.8(c) , (d) and (e) hereof, upon termination of a Class B Shareholder’s employment with the Company and its Subsidiaries due to such Class B Shareholder’s termination of employment for Good Reason or the termination by the Company and its Subsidiaries of such Class B Shareholder’s employment without Cause, (A) fifty percent (50%) of the Class B Shares held by such Class B Shareholder (or any Permitted Transferee of such Class B Shareholder (with respect to Class B Shares attributable to such Class B Shareholder)) at the time of such termination shall fully vest automatically and cease to be subject to forfeiture and (B) fifty percent (50%) of the Class B Shares held by such Class B Shareholder (or any Permitted Transferee of such Class B Shareholder (with respect to Class B Shares attributable to such Class B Shareholder)) at the time of such termination shall be forfeited at the time of such termination.
 
(iii)           Subject to Sections 3.8(c) , (d) and (e) hereof, upon termination of a Class B Shareholder’s employment with the Company and its Subsidiaries other than as described in Section 3.8(b)(i) or 3.8(b)(ii) hereof, one hundred percent (100%) of the Class B Shares held by such Class B Shareholder (or any Permitted Transferee of such Class B Shareholder (with respect to Class B Shares attributable to such Class B Shareholder)) shall be forfeited at the time of such termination.
 
(iv)           Subject to Section 3.8(e) , and notwithstanding Section 2.1(b) , any forfeited Class B Shares shall immediately become treasury shares of the Company and the Company shall immediately transfer such forfeited Class B Shares (the “ New Class B Shares ”) to a revocable grantor trust with an independent trustee for the benefit of existing or newly hired members of management who may receive such New Class B Shares (and earnings and proceeds thereof) in accordance with the approval procedures set forth in Section
 

 
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3.8(g) (the “ Class B Trust ”); provided , that any revocation of the Class B Trust shall require the consent of all holders of Class A Shares and Class B Shares.
 
(c)            Change of Control .  Upon the occurrence of a Change of Control, all Class B Shares shall fully vest automatically and cease to be subject to forfeiture.
 
(d)            Mandatory Conversion Date .  Upon the occurrence of a Mandatory Conversion Date for a particular series of Class A Shares, all of the corresponding Class B Shares of such series shall fully vest automatically and cease to be subject to forfeiture.  At the close of business on May 31, 2015, all Class B Shares held by each Class B Shareholder whose employment with the Company and its Subsidiaries has not terminated (or held by any Permitted Transferees of such Class B Shareholder (with respect to Class B Shares attributable to such Class B Shareholder)) shall fully vest automatically and cease to be subject to forfeiture and shall be converted into Class P Shares in accordance with Section D.1 of Article Fourth of the Charter.
 
(e)            Catch-Up Amounts After Termination of Employment .
 
(i)           If a Class B Shareholder’s employment with the Company and its Subsidiaries terminates after the Series A Total Value with respect to a series equals or exceeds 150% of the Aggregate Base Amount for such series but before the Series B Total Value has met or exceeded the First Catch-Up Threshold for the corresponding Class B Series, such Class B Shareholder (or any Permitted Transferee of such Class B Shareholder (with respect to Class B Shares attributable to such Class B Shareholder)) shall be entitled to retain all of his or her Class B Shares of such series until the transaction or event, including a mandatory conversion event or distribution, has occurred that causes the First Catch-Up Threshold to first have been met or exceeded for such Class B Series (the “ First Catch-Up Value Transaction ”); provided that, notwithstanding anything to the contrary contained herein, in the event that the First Catch-Up Threshold for such Class B Series is exceeded, (A) this Section 3.8(e)(i) shall only entitle such Class B Shareholder (together with any such Permitted Transferees (with respect to Class B Shares attributable to such Class B Shareholder)) to receive value (including Class P Shares issued upon conversion of such Class B Shares), earnings and/or proceeds equal to the amount of value (including Class P Shares issued upon conversion of such Class B Shares), earnings and/or proceeds such Class B Shareholder (together with such Permitted Transferees (with respect to Class B Shares attributable to such Class B Shareholder)) would have been entitled to receive pursuant to this Section 3.8(e)(i) if such First Catch-Up Threshold had been only exactly met and not exceeded (the amount of any such excess value relating to such holder’s Class B Shares being referred to as “ First Catch-Up Excess Value ”) and, for the avoidance of doubt, each such Class B Shareholder (and each such Permitted Transferee) hereby fully and irrevocably waives any and all right to any or all of the First Catch-Up Excess Value; and (B) the Company shall immediately distribute and/or issue, and each such Class B Shareholder (and each such Permitted Transferee) fully and irrevocably consents to the Company immediately
 

 
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distributing and/or issuing, any such First Catch-Up Excess Value to the Class B Trust.
 
(ii)           If a Class B Shareholder’s employment with the Company and its Subsidiaries terminates after the 200% Threshold with respect to a series has been reached or exceeded but before the Second Catch-Up Threshold has been reached or exceeded for the corresponding Class B Series, such Class B Shareholder (or any Permitted Transferee of such Class B Shareholder (with respect to Class B Shares attributable to such Class B Shareholder)) shall be entitled to retain all of his or her Class B Shares of such series until the transaction or event, including a mandatory conversion event or distribution, has occurred that causes the Second Catch-Up Threshold to first have been met or exceeded for such Class B Series (the “ Second Catch-Up Value Transaction ”); provided that, notwithstanding anything to the contrary contained herein, in the event that the Second Catch-Up Threshold for such Class B Series is exceeded, (A) this Section 3.8(e)(ii) shall only entitle such Class B Shareholder (together with any such Permitted Transferees (with respect to Class B Shares attributable to such Class B Shareholder)) to receive value (including Class P Shares issued upon conversion of such Class B Shares), earnings and/or proceeds equal to the amount of value (including Class P Shares issued upon conversion of such Class B Shares), earnings and/or proceeds such Class B Shareholder (together with such Permitted Transferees (with respect to Class B Shares attributable to such Class B Shareholder)) would have been entitled to receive pursuant to this Section 3.8(e)(ii) if such Second Catch-Up Threshold had been only exactly met and not exceeded (the amount of any such excess value relating to such holder’s Class B Shares being referred to as “ Second Catch-Up Excess Value ”) and, for the avoidance of doubt, each such Class B Shareholder (and each such Permitted Transferee) hereby fully and irrevocably waives any and all right to any or all of the Second Catch-Up Excess Value; and (B) the Company shall immediately distribute and/or issue, and each such Class B Shareholder (and each such Permitted Transferee) fully and irrevocably consents to the Company immediately distributing and/or issuing, any such Second Catch-Up Excess Value to the Class B Trust.
 
(iii)           Upon the First Catch-Up Value Transaction or the Second Catch-Up Value Transaction, as applicable, all Class B Shares of the applicable series held by such Class B Shareholder (or held by any Permitted Transferee of such Class B Shareholder (with respect to Class B Shares attributable to such Class B Shareholder)) shall be, to the extent such Class B Shares were otherwise required to be forfeited pursuant to Section 3.8(b) but for application of Sections 3.8(e)(i) or 3.8(e)(ii) , immediately forfeited.  Such forfeited Class B Shares shall automatically become treasury shares and the Company shall immediately transfer such forfeited New Class B Shares to the Class B Trust.  All value (including Class P Shares issued upon conversion of such Class B Shares), earnings and/or proceeds with respect to such New Class B Shares shall be paid to the Class B Trust until distributed in accordance with Section 3.8(g) .
 

 
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(iv)           Terms used in this Section 3.8(e) but not defined in this Agreement shall have the meanings given such terms in the Charter.
 
(f)           The provisions of this Section 3.8 relating to the termination of employment, including the forfeiture of all or a portion of such Class B Shareholder’s Class B Shares, shall be deemed to also apply equally to govern the termination of employment of such Canadian Participant, including the forfeiture of all or a portion of such Canadian Participant’s Phantom Class B Shares.  The provisions of this Section 3.8 relating to vesting or ceasing to be subject to forfeiture of all or a specified percentage of Class B Shares of an applicable Class B Shareholders shall be deemed, with respect to a Canadian Participant, to apply equally to govern the vesting or ceasing to be subject to forfeiture of all or such specified percentage, as applicable, of such Canadian Participant’s Phantom Class B Shares and the corresponding Class B Shares held by the Canadian Plan Entity.  Forfeiture by a Canadian Participant pursuant to this Section 3.8 (taking into account this Section 3.8(f) ) of all or a portion of his or her Phantom Class B Shares shall result in the automatic and simultaneous forfeiture of the Class B Shares held by the Canadian Plan Entity corresponding to such Phantom Class B Shares and such forfeited Class B Shares shall revert to the Company and be transferred to the Class B Trust pursuant to Section 3.8(b)(iv) .  It is acknowledged and agreed that at all times during the term of this Agreement, the sole direct owner of the Canadian Plan Entity shall be the Company, and any and all voting rights (and/or approval or consent rights under this Agreement, the Charter or the Bylaws) in respect of the Class B Shares or Class C Shares held by the Canadian Plan Entity (or in respect of Phantom Class B Shares or Phantom Class C Shares), if any, are hereby waived, and no such Class B Shares, Class C Shares, Phantom Class B Shares or Phantom Class C Shares shall be voted in respect of any matter pursuant to this Agreement, the Charter, the Bylaws or otherwise.
 
(g)           In the event that any Class B Shares are forfeited by any holder thereof pursuant to Section 3.8(b) , the then-Chief Executive Officer shall have the right to designate existing or newly hired members of management (other than Kinder or the then-Chief Executive Officer if Kinder is no longer the Chief Executive Officer) to receive any of the following property as distributions from the Class B Trust (subject to the prior written consent of a majority of the members of the Board who are then serving and who were chosen to be nominated by the Investor Shareholders, which consent may not be unreasonably withheld or delayed): New Class B Shares, dividends paid in respect of New Class B Shares, dividends paid in respect of Class P Shares issued upon conversion of New Class B Shares, Class P Shares issued upon conversion of New Class B Shares and/or any other earnings or proceeds with respect to any of the foregoing; provided , that in the event that the designated recipient of New Class B Shares is not at the time of such proposed distribution a “Shareholder” for purposes of this Agreement, as a condition precedent to such proposed distribution, such designated recipient shall be required to execute a customary joinder to this Agreement, in form and substance reasonably acceptable to the Company, in which such designated recipient agrees to be a “Shareholder” for all purposes of this Agreement.  In the event that Kinder is no longer the Chief Executive Officer, the Board (with the approval of a majority of the members of the entire Board) may permit the then-Chief Executive Officer to receive specified distributions from the Class B Trust (subject to the prior written consent of a majority of the members of the Board who are then serving and who were chosen to be nominated by the Investor Shareholders, which consent may not be unreasonably
 

 
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withheld or delayed).  The Class B Trust shall promptly distribute property to the designated recipients after the requisite approvals are obtained.  Pursuant to the terms of the Class B Trust, any New Class B Shares, Class P Shares, dividends or other earnings or proceeds that are held by the Class B Trust on May 31, 2015 shall be distributed proportionally (in accordance with the respective number of Class B Shares held by each holder) to the holders of all issued and outstanding Class B Shares on May 31, 2015.
 
(h)           Each of the Original Class B Shareholders shall timely make an election under Section 83(b) of the Internal Revenue Code of 1986, as amended, with respect to the Transfer of Class B Shares to such Original Class B Shareholder in exchange for Class B units of Kinder Morgan Holdco LLC for federal income tax purposes.
 
ARTICLE IV

TERMINATION

SECTION 4.1.   TERM .

(a)           This Agreement shall automatically terminate upon the date none of the Shareholders, together with their respective Permitted Transferees, hold any Shares.
 
(b)           If any Investor Shareholder ceases to be an Eligible Investor Shareholder, then Sections 3.1 through Section 3.5 (except for Sections 3.2(b)-(d) ) shall automatically terminate with respect to such Investor Shareholder.
 
(c)           If each Investor Shareholder ceases to be an Eligible Investor Shareholder, then Section 2.1(a) , Section 2.1(e) and Section 3.1 through Section 3.5 (except for Sections 3.2(b)-(d) ) shall automatically terminate with respect to all Shareholders.
 
(d)           If each Investor Shareholder ceases to hold any Class A Shares or Related Shares, then Article II and Article III shall automatically terminate with respect to all Shareholders.
 
SECTION 4.2.   SURVIVAL .  If this Agreement is terminated pursuant to Section 4.1(a) ,  this Agreement shall become void and of no further force and effect, except for the provisions set forth in Section 5.7 (with respect to any Registration Expenses or any other fees or expenses incurred prior to such termination that remain unpaid or unreimbursed), Section 5.8 and Article VII .

ARTICLE V

REGISTRATION RIGHTS
 
SECTION 5.1.   DEMAND REGISTRATION .

(a)           At any time after the expiration of the “lock-up” agreed to by the Investor Shareholders with the managing underwriter(s) in connection with the IPO (or if such “lock up”
 

 
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is waived by such underwriter(s), from and after such earlier date), any Shareholders that, on the date a Demand (as hereinafter defined) is made, constitute Demand Shareholders (“ Requesting Shareholders ”) shall be entitled to make a written request of the Company (a “ Demand ”) for registration under the Securities Act of an amount of Registrable Securities that, when taken together with the amounts of Registrable Securities requested to be registered under the Securities Act by such Requesting Shareholders’ Permitted Transferees, equals or is greater than the Registrable Amount (a “ Demand Registration ”); provided , that, in addition to the foregoing, in the event a Demand Shareholder holds Registrable Securities less than the Registrable Amount (such lesser amount, the “ Remaining Securities ”), such Demand Shareholder shall be entitled to make a single Demand for registration under the Securities Act of all of such Demand Shareholder’s Remaining Securities, notwithstanding any failure for such Demand to involve Registrable Securities equal to or greater than the Registrable Amount.  Thereupon the Company will, subject to the terms of this Agreement, use its reasonable best efforts to effect the registration as promptly as practicable under the Securities Act of:
 
(i)           the Registrable Securities which the Company has been so requested to register by the Requesting Shareholders for disposition in accordance with the intended method of disposition stated in such Demand;
 
(ii)           all other Registrable Securities which the Company has been requested to register pursuant to Section 5.1(b) but subject to Section 5.1(f) ; and
 
(iii)           all Class P Shares which the Company may elect to register in connection with any offering of Registrable Securities pursuant to this Section 5.1 , but subject to Section 5.1(f) ;
 
all to the extent necessary to permit the disposition (in accordance with the intended methods thereof) of the Registrable Securities and the additional Class P Shares, if any, to be so registered.
 
(b)           A Demand shall specify: (i) the approximate aggregate number of Registrable Securities requested to be registered in such Demand Registration, (ii) the intended method of disposition in connection with such Demand Registration, to the extent then known and (iii) the identity of the Requesting Shareholder (or Requesting Shareholders).  Within five (5) calendar days after receipt of a Demand, the Company shall give written notice of such Demand to all other Shareholders.  The Company shall include in the Demand Registration covered by such Demand all Registrable Securities with respect to which the Company has received a written request for inclusion therein within ten (10) calendar days after the Company’s notice required by this paragraph has been given, subject to Section 5.1(f) .  Such written request shall comply with the requirements of a Demand as set forth in this Section 5.1(b) .
 
(c)           A Demand Registration shall not be deemed to have been effected and shall not count as a Demand Registration (i) unless a registration statement with respect thereto has become effective and has remained effective for a period of at least one hundred twenty (120) calendar days (or (x) such shorter period in which all Registrable Securities included in such Demand Registration have actually been sold thereunder or (y) such longer period as counsel for the underwriters advises is required by law in connection with sales thereunder), (ii)
 

 
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if, after it has become effective, such Demand Registration becomes subject prior to one hundred twenty (120) calendar days after effectiveness to any stop order, injunction or other order or requirement of the SEC or other Governmental Entity or court for any reason or (iii) if the conditions to closing specified in the purchase agreement or underwriting agreement entered into in connection with such Demand Registration, if applicable, are not satisfied, other than by reason of any act or omission in breach of such purchase agreement or underwriting agreement, as applicable, by such Requesting Shareholders.
 
(d)           Demand Registrations shall be on such appropriate registration form of the SEC as shall be selected by the Requesting Shareholders and shall be reasonably acceptable to the Company.
 
(e)           The Company shall (A) not be obligated to effect any Demand Registration at any time that the Shelf Registration Statement is effective (subject to the Company’s performance of its obligations under this Agreement with respect to the Shelf Registration Statement) and (B) shall be entitled to postpone (upon written notice to all Demand Shareholders) the filing or the effectiveness of a registration statement for any Demand Registration if, in the Company’s good faith reasonable judgment, it is not feasible for the Company to proceed with the Demand Registration because audited or pro forma financial statements that are required by the Securities Act to be included in such registration statement are then unavailable, until such time as such financial statements are no longer unavailable, provided that the Company shall use its reasonable best efforts to complete, obtain or otherwise make available such financial statements as promptly as practicable.  In addition, the Company shall be entitled to postpone (upon written notice to all Demand Shareholders) the filing or the effectiveness of a registration statement for any Demand Registration in the event of a Blackout Period until the expiration of the applicable Blackout Period.
 
(f)           If, in connection with a Demand Registration that involves an Underwritten Offering, any managing underwriter advises the Company, in writing, that, in its reasonable opinion, the inclusion of all of the securities sought to be registered in connection with such Demand Registration would significantly adversely affect the marketability of the Registrable Securities sought to be sold pursuant thereto, then the Company shall include in such registration statement only such securities as the Company is advised by such underwriter or investment bank can be sold without such significant adverse effect (the “ Underwriter Amount ”) as follows and in the following order of priority: (i) first, up to the number of Registrable Securities requested to be included in such Demand Registration by (x) the Demand Shareholders and (y) other Shareholders holding Registrable Securities who the managing underwriter(s) of such Underwritten Offering have expressly required, in connection with such Underwritten Offering, to enter into an agreement restricting the sale or distribution of their Shares in accordance with Section 5.5 hereof (the “ Relevant Holdback Shareholders ”), which, in the opinion of the underwriter or investment bank can be sold without significantly adversely affecting the marketability of the offering, pro rata among such Demand Shareholders and Relevant Holdback Shareholders on the basis of the number of such Registrable Securities requested to be included by such Demand Shareholders and Relevant Holdback Shareholders; (ii) second, Registrable Securities duly requested to be included in such Demand Registration by other Shareholders pursuant to Section 5.1(b) other than the Relevant Holdback Shareholders,
 

 
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pro rata among such Shareholders requesting to be included in such Demand Registration, on the basis of the number of such Registrable Securities requested to be included by such Shareholders; (iii) third, Class P Shares the Company proposes to sell; and (iv) fourth, all other securities of the Company duly requested to be included in such registration statement, pro rata on the basis of the amount of such other securities requested to be included or such other method determined by the Company.
 
(g)           Any time that a Demand Registration involves an Underwritten Offering, the Requesting Shareholders and representatives of the executive officers of the Company shall jointly participate in the process of selecting the investment banker or investment bankers and managers that will serve as lead and co-managing underwriters with respect to such Underwritten Offering; provided , that, notwithstanding the foregoing, the Requesting Shareholders representing a majority of the Registrable Securities proposed to be included in the Demand shall in their sole discretion make such ultimate selection, and shall have ultimate control and discretion over what process, if any, shall be used in such selection; and provided , further , that notwithstanding anything to the contrary in this Agreement or any corporate governance policy or similar document of the Company, the Board or any committee thereof applicable to related party transactions between the Company and Affiliates of the Investor Shareholders, there shall be no restriction on the identity of such Requesting Shareholders’ selections pursuant to this Section 5.1(g) .
 
(h)           All rights of the Shareholders under this Section 5.1 shall be subject to the restrictions of Section 2.1 .
 
SECTION 5.2.   PIGGYBACK REGISTRATION .

(a)           Subject to the terms and conditions hereof, whenever the Company proposes to register any of its securities under the Securities Act (other than a registration by the Company (i) on a registration statement on Form S-4 or any successor form thereto, (ii) a registration statement on Form S-8 or any successor form thereto, (iii) on a Shelf Registration Statement or (iv) pursuant to Section 5.1 ) (a “ Piggyback Registration ”), whether for its own account or for the account of others, the Company shall give each Shareholder prompt written notice thereof (but not less than fifteen (15) Business Days prior to the filing by the Company with the SEC of any registration statement with respect thereto).  Such notice (a “ Piggyback Notice ”) shall specify, at a minimum, the number and type of securities proposed to be registered, the proposed date of filing of such registration statement with the SEC, the proposed means of distribution, the proposed managing underwriter or underwriters (if any and if known) and a good faith estimate by the Company of the proposed minimum offering price of such securities.  Upon the written request of any Shareholder (a “ Piggyback Seller ”) (which written request shall specify the number of Registrable Securities then presently intended to be disposed of by such Piggyback Seller) given within ten (10) calendar days after such Piggyback Notice is received by such Piggyback Seller, the Company, subject to the terms and conditions of this Agreement, shall use its reasonable best efforts to cause all such Registrable Securities held by Piggyback Sellers with respect to which the Company has received such written requests for inclusion to be included in such Piggyback Registration, and, to the extent the Company
 

 
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proposes to register any of its Class P Shares, on the same terms and conditions as such Class P Shares.
 
(b)           If, in connection with a Piggyback Registration, any managing underwriter advises the Company in writing that, in its reasonable opinion, the inclusion of all the securities sought to be included in such Piggyback Registration by (i) the Company, (ii) other Persons who have sought to have Class P Shares of the Company registered in such Piggyback Registration pursuant to rights to demand (other than pursuant to so-called “piggyback” or other incidental or participation registration rights) such registration (such Persons being “ Other Demanding Sellers ”), (iii) the Piggyback Sellers and (iv) any other proposed sellers of Class P Shares of the Company (such Persons being “ Other Proposed Sellers ”), as the case may be, would adversely affect the marketability of the securities sought to be sold pursuant thereto, then the Company shall include in the registration statement applicable to such Piggyback Registration only such securities as the Company is so advised by such underwriter can be sold without such an effect, as follows and in the following order of priority:
 
(i)           if the Piggyback Registration relates to an offering for the Company’s own account, then (A) first, such number of securities to be sold by the Company as the Company, in its reasonable judgment and acting in good faith and in accordance with sound financial practice, shall have determined, (B) second, Registrable Securities of Piggyback Sellers and Class P Shares sought to be registered by Other Demanding Sellers, pro rata on the basis of the number of Class P Shares proposed to be sold by such Piggyback Sellers and Other Demanding Sellers and (C) third, other Class P Shares proposed to be sold by any Other Proposed Sellers; or
 
(ii)           if the Piggyback Registration relates to an offering other than for the Company’s own account, then (A) first, such number of Class P Shares sought to be registered by each Other Demanding Seller and the Piggyback Sellers pro rata in proportion to the number of securities sought to be registered by all such Other Demanding Sellers and Piggyback Sellers and (B) second, other Class P Shares proposed to be sold by any Other Proposed Sellers or to be sold by the Company as determined by the Company.
 
(c)           In connection with any Underwritten Offering under this Section 5.2 for the Company’s account, the Company shall not be required to include the Registrable Securities of a Shareholder in the Underwritten Offering unless such Shareholder accepts the terms of the underwriting as agreed upon in good faith between the Company and the underwriters selected by the Company.
 
(d)           If, at any time after giving written notice of its intention to register any of its securities as set forth in this Section 5.2 and prior to the time the registration statement filed in connection with such Piggyback Registration is declared effective, the Company shall determine for any reason not to register such securities, the Company may, at its election, give written notice of such determination to each Piggyback Seller within five (5) calendar days thereof and thereupon shall be relieved of its obligation to register any Registrable Securities in connection with such particular withdrawn or abandoned Piggyback Registration (but not from its obligation to pay the Registration Expenses in connection therewith as provided herein); provided , that
 

 
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Demand Shareholders may continue the registration as a Demand Registration pursuant to the terms of Section 5.1 .
 
(e)           All rights of the Shareholders under this Section 5.2 shall be subject to the restrictions of Section 2.1 .
 
SECTION 5.3.   SHELF REGISTRATION .

(a)           Subject to Section 5.3(d) , and further subject to the availability of a Registration Statement on Form S-3 or any successor form thereto (“ Form S-3 ”) to the Company, any of the Demand Shareholders may by written notice delivered to the Company (the “ Shelf Notice ”) require the Company to file as soon as practicable (but no later than sixty (60) calendar days after the date the Shelf Notice is delivered), and to use reasonable best efforts to cause to be declared effective by the SEC as soon as practicable after such filing date, a Form S-3 providing for an offering to be made on a continuous basis pursuant to Rule 415 under the Securities Act relating to the offer and sale, from time to time, of the Registrable Securities owned by such Demand Shareholders (or any of their Permitted Transferees), as the case may be, and any other Shareholder who elects to participate therein as provided in Section 5.3(b) in accordance with the plan and method of distribution set forth in the prospectus included in such Form S-3 (the “ Shelf Registration Statement ”).  To the extent the Company is a well-known seasoned issuer (as defined in Rule 405 under the Securities Act) (a “ WKSI ”), the Company shall file the Shelf Registration Statement in the form of an automatic shelf registration statement (as defined in Rule 405 under the Securities Act) or any successor form thereto.  The Company shall use its reasonable best efforts to remain a WKSI (and not become an ineligible issuer (as defined in Rule 405 under the Securities Act)) during the period described in Section 5.3(c) .
 
(b)           Within five (5) Business Days after receipt of a Shelf Notice pursuant to Section 5.3(a) , the Company will deliver written notice thereof to each Shareholder.  Each other Shareholder may elect to participate with respect to its Registrable Securities in the Shelf Registration Statement by delivering to the Company a written request to so participate within ten (10) calendar days after the Shelf Notice is received by any such Shareholder.
 
(c)           Subject to Section 5.3(d) , the Company will use reasonable best efforts to keep the Shelf Registration Statement continuously effective (including by filing any necessary post-effective amendments to such Shelf Registration Statement or new Shelf Registration Statements) until the earlier of (i) the date on which all Registrable Securities covered by the Shelf Registration Statement have been sold thereunder in accordance with the plan and method of distribution disclosed in the prospectus included in the Shelf Registration Statement, or otherwise cease to be Registrable Securities or (ii) the date on which the Investor Shareholders in the aggregate no longer hold Registrable Securities that represent at least 1.0% of the Total Voting Power.
 
(d)           Notwithstanding anything to the contrary contained in this Agreement, the Company shall be entitled, from time to time, by providing written notice to the Shareholders who elected to participate in the Shelf Registration Statement, to require such Shareholders to suspend the use of the prospectus for sales of Registrable Securities under the Shelf Registration Statement during any Blackout Period.  After the expiration of any Blackout Period and without
 

 
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any further request from a Shareholder, the Company shall immediately notify all such Shareholders and, to the extent necessary, shall as promptly as reasonably practicable prepare a post-effective amendment or supplement to the Shelf Registration Statement or the prospectus, or any document incorporated therein by reference, or file any other required document so that, as thereafter delivered to purchasers of the Registrable Securities included therein, the prospectus will not include an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading.
 
(e)           All rights of the Shareholders under this Section 5.3 shall be subject to the restrictions of Section 2.1 .
 
(f)           Each Demand Shareholder shall be entitled to demand such number of Shelf Registrations as shall be necessary to sell all of his or its Registrable Securities pursuant to this Section 5.3 .
 
(g)           If at any time a Demand Shareholder elects to effect an Underwritten Offering pursuant to any Shelf Registration Statement, it shall advise the Company to such effect and the Company shall notify the other Shareholders who are participating in such Shelf Registration Statement of such election to the extent practicable.  To the extent such notice is practicable, each such Shareholder who elects, by delivering to the Company a written request to participate in such Underwritten Offering within the timeframe specified in the notice received by such Shareholder, shall be permitted to do so, subject to the same requirements and other provisions (including the priority provisions set forth in Section 5.1(f) ) as would be applicable to a Demand Registration, and Section 5.1(g) shall be applicable to such Underwritten Offering as if it were a Demand Registration.
 
SECTION 5.4.   WITHDRAWAL RIGHTS .  Any Shareholder having notified or directed the Company to include any or all of its Registrable Securities in a registration statement under the Securities Act shall have the right to withdraw any such notice or direction with respect to any or all of the Registrable Securities designated by it for registration by giving written notice to such effect to the Company prior to the effective date of such registration statement.  In the event of any such withdrawal, the Company shall not include such Registrable Securities in the applicable registration and such Registrable Securities shall continue to be Registrable Securities for all purposes of this Agreement.  No such withdrawal shall affect the obligations of the Company with respect to the Registrable Securities not so withdrawn; provided , however , that in the case of a Demand Registration, if such withdrawal shall reduce the number of Registrable Securities sought to be included in such registration below the Registrable Amount, then the Company shall as promptly as practicable give each Shareholder seeking to register Registrable Securities notice to such effect and, within ten (10) calendar days following the mailing of such notice, such Shareholders still seeking registration shall, by written notice to the Company, elect to register additional Registrable Securities, when taken together with elections to register Registrable Securities by their Permitted Transferees, to satisfy the Registrable Amount or elect that such registration statement not be filed or, if theretofore filed, be withdrawn.  During such ten (10) day period, the Company shall not file such registration statement if not theretofore filed or, if such registration statement has been theretofore filed, the Company shall not seek, and shall

 
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use commercially reasonable efforts to prevent, the effectiveness thereof.  If a Requesting Shareholder with respect to a particular Demand Registration (or a Demand Shareholder who has elected to effect an Underwritten Offering pursuant to the Shelf Registration Statement) withdraws its notification or direction to the Company to include its Registrable Securities in a registration statement in accordance with this Section 5.4 (but only if such withdrawal is in respect of all of the Registrable Securities designated by such Shareholder for such registration), in a case where such Shareholder made the applicable Demand or applicable election to effect an Underwritten Offering pursuant to the Shelf Registration Statement without having the good faith intention to complete a sale of its Registrable Securities pursuant to such Demand Registration or Underwritten Offering (assuming that market conditions would remain consistent, at the time of the completion of such Demand Registration or Underwritten Offering, with the conditions that existed at the time such Demand or election was made), such Shareholder shall be required to promptly reimburse the Company for all reasonable and documented expenses incurred by the Company in connection with preparing for such registration of such Shareholder’s Registrable Securities pursuant to such Demand Registration or preparing for such Underwritten Offering pursuant to such election, as applicable.
 
SECTION 5.5.   HOLDBACK AGREEMENTS .  Each of the Company and the Shareholders agrees to enter into separate, reasonable agreements restricting (to the extent not inconsistent with applicable law) the public sale or distribution (including sales pursuant to Rule 144) of equity securities of the Company to the extent customarily required by underwriting agreements in connection with underwritten offerings (if reasonably requested by the managing underwriter of such Underwritten Offering of Shares); provided , that this Section 5.5 shall only be applicable in respect of Underwritten Offerings of Shares involving anticipated gross proceeds of at least $500 million.  Notwithstanding anything to the contrary, none of the provisions of this Agreement shall in any way limit any of the Investor Shareholders or any of their Affiliates from engaging in any brokerage, investment advisory, financial advisory, anti-raid advisory, principaling, merger advisory, financing, asset management, trading, market making, arbitrage, investment activity and other similar activities conducted in the ordinary course of their business.

SECTION 5.6.   REGISTRATION PROCEDURES .

(a)           If and whenever the Company is required to use reasonable best efforts to effect the registration of any Registrable Securities under the Securities Act as provided in Section 5.1 , Section 5.2 and Section 5.3 the Company shall as expeditiously as reasonably possible:
 
(i)           prepare and file with the SEC a registration statement to effect such registration and thereafter use reasonable best efforts to cause such registration statement to become and remain effective pursuant to the terms of this Agreement; provided , however , that the Company may discontinue any registration of its securities which are not Registrable Securities at any time prior to the effective date of the registration statement relating thereto; provided , further that within a reasonable time before filing such registration statement or any amendments thereto (including prospectuses or supplements thereto), the Company will furnish to the counsel selected
 

 
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by the Shareholders which are including Registrable Securities in such registration (“ Selling Shareholders ”) copies of all such documents proposed to be filed, which documents will be subject to the review and comment of such counsel, and such review and comment to be conducted with reasonable promptness and the Company shall not file any such documents to which the Selling Shareholders (representing a majority of the Registrable Securities included in such registration) object, in writing, on a timely basis, based on any disclosure included therein that relates to such Selling Shareholders;
 
(ii)           prepare and file with the SEC such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective and to comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such registration statement, in each case in accordance with the terms of this Article V ;
 
(iii)           furnish to each Selling Shareholder and each underwriter, if any, of the securities being sold by such Selling Shareholder such number of conformed copies of such registration statement and of each amendment and supplement thereto (in each case including all exhibits), such number of copies of the prospectus contained in such registration statement (including each preliminary prospectus and any summary prospectus) and each free writing prospectus (as defined in Rule 405 of the Securities Act) (a “ Free Writing Prospectus ”) utilized in connection therewith and any other prospectus filed under Rule 424 under the Securities Act, in conformity with the requirements of the Securities Act, and such other documents as such Selling Shareholder and underwriter, if any, may reasonably request in order to facilitate the public sale or other disposition of the Registrable Securities owned by such Selling Shareholder;
 
(iv)           use reasonable best efforts to register or qualify such Registrable Securities covered by such registration statement under such other securities laws or blue sky laws of such jurisdictions as any Selling Shareholder and any underwriter of the securities being sold by such Selling Shareholder shall reasonably request, and take any other action which may be reasonably necessary or advisable to enable such Selling Shareholder and underwriter to consummate the disposition in such jurisdictions of the Registrable Securities owned by such Selling Shareholder, except that the Company shall not for any such purpose be required to (A) qualify generally to do business as a foreign corporation in any jurisdiction wherein it would not but for the requirements of this clause (iv) be obligated to be so qualified, (B) subject itself to taxation in any such jurisdiction or (C) file a general consent to service of process in any such jurisdiction;
 
(v)           use reasonable best efforts to cause such Registrable Securities to be listed on each securities exchange on which similar securities issued by the Company are then listed and, if no such securities are so listed, use commercially reasonable efforts to cause such Registrable Securities to be listed on the New York Stock Exchange, the American Stock Exchange or the NASDAQ Stock Market;
 
(vi)           use reasonable best efforts to cause such Registrable Securities covered by such registration statement to be registered with or approved by such other
 

 
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governmental agencies or authorities as may be necessary to enable the Selling Shareholder(s) thereof to consummate the disposition of such Registrable Securities;
 
(vii)           in connection with an Underwritten Offering, obtain for each Selling Shareholder and underwriter:
 
(A)           an opinion of counsel for the Company, covering the matters customarily covered in opinions requested in underwritten offerings and such other matters as may be reasonably requested by such Selling Shareholder and underwriters, and
 
(B)           a “comfort” letter (or, in the case of any such Person which does not satisfy the conditions for receipt of a “comfort” letter specified in Statement on Auditing Standards No. 72, an “agreed upon procedures” letter) signed by the independent public accountants who have certified the Company’s financial statements included in such registration statement;
 
(viii)           promptly make available for inspection by any Selling Shareholder, any underwriter participating in any disposition pursuant to any registration statement, and any attorney, accountant or other agent or representative retained by any such Selling Shareholder or underwriter (collectively, the “ Inspectors ”), all financial and other records, pertinent corporate documents and properties of the Company (collectively, the “ Records ”), as shall be reasonably necessary to enable them to exercise their due diligence responsibility, and cause the Company’s officers, directors and employees to (x) supply all information requested by any such Inspector in connection with such registration statement and (y) be reasonably available for due diligence discussions and sessions (taking into account the Company’s business needs); provided , however , that, the disclosure of such Records may be subject to the execution by such Selling Shareholder or other Inspector of a customary confidentiality agreement in a form which is reasonably satisfactory to the Company;
 
(ix)           promptly notify in writing each Selling Shareholder and the underwriters, if any, of the following events:
 
(A)           the filing of the registration statement, any amendment thereto, the prospectus or any prospectus supplement related thereto or post-effective amendment to the registration statement or any Free Writing Prospectus utilized in connection therewith, and, with respect to the registration statement or any post-effective amendment thereto, when the same has become effective;
 
(B)           any request by the SEC or any other Government Entity for amendments or supplements to the registration statement or the prospectus or for additional information;
 
(C)           the issuance by the SEC or any other Government Entity of any stop order suspending the effectiveness of the registration statement or the initiation of any proceedings by any Person for that purpose; and
 

 
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(D)           the receipt by the Company of any notification with respect to the suspension of the qualification of any Registrable Securities for sale under the securities or blue sky laws of any jurisdiction or the initiation or threat of any proceeding for such purpose;
 
(x)           notify in writing each Selling Shareholder, at any time when a prospectus relating thereto is required to be delivered under the Securities Act, upon discovery that, or upon the happening of any event as a result of which, the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading, and, at the request of any Selling Shareholder, promptly prepare and furnish to such seller a reasonable number of copies of a supplement to or an amendment of such prospectus as may be necessary so that, as thereafter delivered to the purchasers of such Registrable Securities, such prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading;
 
(xi)           use reasonable best efforts to prevent, and obtain the withdrawal of, any order suspending the effectiveness of such registration statement;
 
(xii)           otherwise use reasonable best efforts to comply with all applicable rules and regulations of the SEC, and make available to Selling Shareholders, as soon as reasonably practicable, an earnings statement of the Company covering the period of at least twelve (12) months, but not more than eighteen (18) months, beginning with the first day of the Company’s first full quarter after the effective date of such registration statement, which earnings statement shall satisfy the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder;
 
(xiii)           use its reasonable best efforts to assist Selling Shareholders who made a request to the Company to provide for a third party “market maker” for the Class P Shares;
 
(xiv)           cooperate with the Selling Shareholders and the managing underwriter to facilitate the timely preparation and delivery of certificates (which shall not bear any restrictive legends unless required under applicable law) representing securities sold under any registration statement, and enable such securities to be in such denominations and registered in such names as the managing underwriter or such Selling Shareholders may request and keep available and make available to the Company’s transfer agent prior to the effectiveness of such registration statement a supply of such certificates; and
 
(xv)           in the case of an Underwritten Offering, cause the appropriate officers of the Company to use reasonable best efforts to facilitate all offerings, including with respect to preparing marketing and offering materials, preparing, making presentations at, and otherwise participating in any “road shows” (domestic and foreign) and analysts and rating agencies calls and meetings, as the case may be, and other information meetings and customary marketing activities organized by the underwriters,
 

 
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and otherwise using their reasonable best efforts to cooperate as reasonably requested by the Selling Shareholders and the underwriters in the offering, marketing or selling of the Registrable Securities; provided , that in the case of an Underwritten Offering involving anticipated gross proceeds of at least $500 million (as determined in good faith by the Requesting Shareholders (or the Demand Shareholders who have elected to effect an Underwritten Offering pursuant to the Shelf Registration Statement)), the reference to “the appropriate officers” shall be deemed to include the Chief Executive Officer and the President of the Company.
 
The Company may require each Selling Shareholder and each underwriter, if any, to furnish the Company in writing such information regarding each Selling Shareholder or underwriter and the distribution of such Registrable Securities as the Company may from time to time reasonably request to complete or amend the information required by such registration statement.
 
(b)           Without limiting any of the foregoing, in the event that the offering of Registrable Securities is to be made by or through an underwriter, the Company, if requested by the underwriter, shall enter into an underwriting agreement with a managing underwriter or underwriters in connection with such offering containing representations, warranties, indemnities and agreements customarily included (but not inconsistent with the covenants and agreements of the Company contained herein) by an issuer of common stock in such underwriting agreements.
 
(c)           Each Selling Shareholder agrees that upon receipt of any written notice from the Company of the happening of any event of the kind described in Section 5.6(a)(x) , such Selling Shareholder shall forthwith discontinue such Selling Shareholder’s disposition of Registrable Securities pursuant to the applicable registration statement and prospectus relating thereto until such Selling Shareholder’s receipt of the copies of the supplemented or amended prospectus contemplated by Section 5.6(a)(x) and, if so directed by the Company, deliver to the Company, at the Company’s expense, all copies, other than permanent file copies, then in such Selling Shareholder’s possession of the prospectus current at the time of receipt of such notice relating to such Registrable Securities.  In the event the Company shall give such notice, any applicable one hundred twenty (120) day period during which such registration statement must remain effective pursuant to this Agreement shall be extended by the number of days during the period from the date of giving of a written notice regarding the happening of an event of the kind described in Section 5.6(a)(x) to the date when all such Selling Shareholders shall receive such a supplemented or amended prospectus and such prospectus shall have been filed with the SEC.
 
(d)           With a view to making available to the holders of Registrable Securities the benefits of Rule 144 under the Securities Act and any other rule or regulation of the SEC that may at any time permit a holder to sell securities of the Company to the public without registration or pursuant to a registration on Form S-3 (or any successor form), the Company shall:
 
(i)           make and keep public information available, as those terms are understood and defined in Rule 144 under the Securities Act;
 

 
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(ii)           use reasonable best efforts to file with the SEC in a timely manner all reports and other documents required of the Company under the Exchange Act, at any time after the Company has become subject to such reporting requirements; and
 
(iii)           furnish to any holder so long as the holder owns Registrable Securities, promptly upon request, a written statement by the Company as to its compliance with the reporting requirements of Rule 144 under the Securities Act and of the Exchange Act, a copy of the most recent annual or quarterly report of the Company, and such other reports and documents so filed or furnished by the Company as such holder may request in connection with the sale of Registrable Securities without registration.
 
(e)           The Company shall use its reasonable best efforts to take all action necessary or appropriate upon the request of any Investor Shareholder to ensure that Class A Shareholders are, from and after the date hereof, able to convert their Class A Shares into Class P Shares in a timely manner in order to permit the timely Transfer of such Class P Shares (to the extent Class P Shares could otherwise then be Transferred if they were already outstanding), as contemplated by the Charter, and shall not take or cause to be taken (including through the Company’s transfer agent) any action inconsistent with the foregoing.  Without limiting the generality of the foregoing, the Company shall comply with all applicable securities or other laws in connection with the foregoing, and take all reasonable action necessary or appropriate to restructure the Shares at the request of the Investor Shareholders holding a majority of the Total Voting Power held by the Investor Shareholders at such time in the event that any applicable law adversely affects the ability of Class A Shareholders to convert Class A Shares into Class P Shares in a timely manner in order to permit the timely Transfer of such Class P Shares (to the extent Class P Shares could otherwise then be Transferred if they were already outstanding), as contemplated by the Charter; provided , that in such event, the Company shall not be required to take any action pursuant to this Section 5.6(e) that would result in the failure following such restructuring to preserve in all material respects the economic and other rights (including conversion, Transfer, distribution, and governance rights as set forth in the Charter, the Bylaws and this Agreement) and characteristics and tax treatment, including on a relative basis, of the Investor Shareholders, the Class A Shares, the Class B Shares, the Class C Shares and the Class P Shares, as they exist immediately prior to such restructuring.
 
(f)           The Company shall prepare and shall use its best efforts to obtain and keep in force such governmental and/or regulatory permits or other authorizations as may be required by law in order to enable the Company lawfully to issue and deliver such number of Class P Shares as shall from time to time be sufficient to effect the conversion of all Class A Shares, Class B Shares and Class C Shares then outstanding.  The Company shall use its reasonable best efforts to (i) procure, at its sole expense, the listing of the Class P Shares issuable upon conversion of the Class A Shares, Class B Shares or Class C Shares at any time, subject to issuance or notice of issuance, on the New York Stock Exchange and (ii) maintain such listing of such Class P Shares at all times after issuance.
 

 
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SECTION 5.7.   REGISTRATION EXPENSES .

All expenses incident to the Company’s performance of, or compliance with, its obligations under this Agreement, including all registration and filing fees, all fees and expenses of compliance with securities and “blue sky” laws, all fees and expenses associated with filings required to be made with the NASD (including, if applicable, the fees and expenses of any “qualified independent underwriter” as such term is defined in Schedule E of the By-Laws of the NASD), all fees and expenses of compliance with securities and “blue sky” laws, all printing (including expenses of printing certificates for the Registrable Securities in a form eligible for deposit with the Depository Trust Company and of printing prospectuses if the printing of prospectuses is requested by a holder of Registrable Securities) and copying expenses, all messenger and delivery expenses, all fees and expenses of the Company’s independent certified public accountants and counsel (including with respect to “comfort” letters and opinions) and fees and expenses of one firm of counsel to the Shareholders selling in such registration (which firm shall be selected by the Shareholders selling in such registration that hold a majority of the Registrable Securities included in such registration) (collectively, the “ Registration Expenses ”) shall be borne by the Company, regardless of whether a registration is effected.  The Company will pay its internal expenses (including all salaries and expenses of its officers and employees performing legal or accounting duties, the expense of any annual audit and the expense of any liability insurance) and the expenses and fees for listing the securities to be registered on each securities exchange and included in each established over-the-counter market on which similar securities issued by the Company are then listed or traded.  Each Selling Shareholder shall pay its portion of all underwriting discounts and commissions and transfer taxes, if any, relating to the sale of such Selling Shareholder’s Registrable Securities pursuant to any registration.
 
SECTION 5.8.   REGISTRATION INDEMNIFICATION .

(a)            By the Company .  The Company agrees to indemnify and hold harmless, to the fullest extent permitted by law, each Selling Shareholder and its Affiliates and their respective officers, directors, employees, managers, partners and agents and each Person who controls (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act) such Selling Shareholder or such other indemnified Person from and against all losses, claims, damages, liabilities and expenses (including reasonable expenses of investigation and reasonable attorneys’ fees and expenses) (collectively, the “ Losses ”) caused by, resulting from or relating to (i) violations of any applicable securities law by the Company in connection with any registration or offering undertaken pursuant to the terms of this Article V (except to the extent any such violations were caused by actions or inactions of such Selling Shareholder in such registration or offering) or (ii) any untrue statement (or alleged untrue statement) of a material fact contained in any registration statement, prospectus or preliminary prospectus or Free Writing Prospectus or any amendment or supplement thereto or any omission (or alleged omission) of a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, except insofar as the same are caused by any information furnished in writing to the Company by such Selling Shareholder expressly for use therein.  In connection with an Underwritten Offering and without limiting any of the Company’s other obligations under this Agreement, the Company shall also indemnify such underwriters to the extent customarily provided.  Reimbursements payable
 

 
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pursuant to the indemnification contemplated by this Section 5.8(a) will be made by periodic payments during the course of any investigation or defense, as and when bills are received or expenses incurred.
 
(b)            By the Selling Shareholders .  In connection with any registration statement in which a Shareholder is participating, each such Selling Shareholder will furnish to the Company in writing information regarding such Selling Shareholder’s ownership of Registrable Securities and its intended method of distribution thereof and, to the extent permitted by law, shall, severally and not jointly, indemnify the Company, its Affiliates and their respective directors, officers, employees and agents and each Person who controls (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act) the Company or such other indemnified Person against all Losses caused by any untrue statement of material fact contained in the registration statement, prospectus or preliminary prospectus or Free Writing Prospectus or any amendment or supplement thereto or any omission of a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, but only to the extent that such untrue statement or omission is caused by and contained in such information so furnished in writing by such Selling Shareholder expressly for use therein; provided , however , that each Selling Shareholder’s obligation to indemnify the Company hereunder shall, to the extent more than one (1) Selling Shareholder is subject to the same indemnification obligation, be apportioned between each Selling Shareholder based upon the net amount received by each Selling Shareholder from the sale of Registrable Securities, as compared to the total net amount received by all of the Selling Shareholders of Registrable Securities sold pursuant to such registration statement.  Notwithstanding the foregoing, no Selling Shareholder shall be liable to the Company for amounts in excess of the lesser of (i) such apportionment and (ii) the net amount received by such holder in the offering giving rise to such liability.
 
(c)            Notice .  Any Person entitled to indemnification hereunder shall give prompt written notice to the indemnifying party of any claim with respect to which it seeks indemnification; provided , however , the failure to give such notice shall not release the indemnifying party from its obligation, except to the extent that the indemnifying party has been actually and materially prejudiced by such failure to provide such notice on a timely basis.
 
(d)            Defense of Actions .  In any case in which any such action is brought against any indemnified party, and it notifies an indemnifying party of the commencement thereof, the indemnifying party will be entitled to participate therein, and, to the extent that it may wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel reasonably satisfactory to such indemnified party, and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party will not (so long as it shall continue to have the right to defend, contest, litigate and settle the matter in question in accordance with this paragraph) be liable to such indemnified party hereunder for any legal or other expense subsequently incurred by such indemnified party in connection with the defense thereof other than reasonable costs of investigation, supervision and monitoring (unless (i) such indemnified party reasonably objects to such assumption on the grounds that there may be defenses available to it which are different from or in addition to the defenses available to such indemnifying party or (ii) the indemnifying
 

 
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party shall have failed within a reasonable period of time to assume such defense and the indemnified party is or is reasonably likely to be prejudiced by such delay, in either event the indemnified party shall be promptly reimbursed by the indemnifying party for the expenses incurred in connection with retaining separate legal counsel).  An indemnifying party shall not be liable for any settlement of an action or claim effected without its consent (such consent not to be unreasonably withheld).  The indemnifying party shall lose its right to defend, contest, litigate and settle a matter if it shall fail to diligently contest such matter (except to the extent settled in accordance with the next following sentence).  No matter shall be settled by an indemnifying party without the consent of the indemnified party (which consent shall not be unreasonably withheld, it being understood that the indemnified party shall not be deemed to be unreasonable in withholding its consent if the proposed settlement (i) does not include an unconditional release of such indemnified party from all liability on any claims that are the subject matter of such action or claim, (ii) includes any statement as to, or any admission of, fault, culpability or a failure to act by or on behalf of an indemnified party, or (iii) imposes any obligation on the indemnified party).
 
(e)            Survival .  The indemnification provided for under this Agreement shall remain in full force and effect regardless of any investigation made by or on behalf of the indemnified Person and will survive the Transfer of the Registrable Securities and the termination of this Agreement.
 
(f)            Contribution .  If recovery is not available under the foregoing indemnification provisions for any reason or reasons other than as specified therein, any Person who would otherwise be entitled to indemnification by the terms thereof shall nevertheless be entitled to contribution with respect to any Losses with respect to which such Person would be entitled to such indemnification but for such reason or reasons.  In determining the amount of contribution to which the respective Persons are entitled, there shall be considered the Persons’ relative knowledge and access to information concerning the matter with respect to which the claim was asserted, the opportunity to correct and prevent any statement or omission, and other equitable considerations appropriate under the circumstances.  It is hereby agreed that it would not necessarily be equitable if the amount of such contribution were determined by pro rata or per capita allocation.  No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not found guilty of such fraudulent misrepresentation.  Notwithstanding the foregoing, no Selling Shareholder or Transferee thereof shall be required to make a contribution in excess of the net amount received by such holder from its sale of Registrable Securities in connection with the offering that gave rise to the contribution obligation.
 
(g)            IPO .  The provisions of paragraphs (a) through (f) of this Section 5.8 shall apply in all respects to the IPO, mutatis mutandis .
 
SECTION 5.9.   CHANGE OF CONTROL OR OTHER TRANSACTIONS .

(a)           The Company shall not, directly or indirectly, effect a merger, amalgamation, consolidation, business combination, change of control or reorganization event or similar transaction or series of transactions of the Company in which the Company shall not be the surviving entity unless the proposed surviving entity shall, prior to effecting such transaction,
 

 
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agree in writing to assume the obligations of the Company under this Article V , and for that purpose references hereunder to “Registrable Securities” shall be appropriately and equitably adjusted (to the reasonable satisfaction of the Demand Shareholders); provided , however , that the provisions of this Section 5.9 shall not apply in the event of a Cash Change of Control.
 
(b)           If requested by the Demand Shareholders, the proposed surviving entity referred to in Section 5.9(a) above shall further evidence such surviving entity’s obligations under this Section 5.9 by executing and delivering to the Shareholders a written agreement to such effect in form and substance reasonably satisfactory to the Demand Shareholders.
 
SECTION 5.10.    MISCELLANEOUS .

(a)            Request for Information .  Not less than fifteen (15) Business Days before the expected filing date of each registration statement pursuant to this Agreement, the Company shall notify in writing each Shareholder who has timely provided the requisite notice hereunder entitling the Shareholder to register Registrable Securities in such registration statement, and provide copies, of the information, documents and instruments from such Shareholder that the Company or any underwriter reasonably requests in connection with such registration statement, including, but not limited to a questionnaire, custody agreement, power of attorney, lock-up letter and underwriting agreement (in each case in customary form and substance) (the “ Requested Information ”).  If the Company has not received, on or before the second day before the expected filing date, the Requested Information from such Shareholder, the Company may file the Registration Statement without including Registrable Securities of such Shareholder.  The failure to so include in any registration statement the Registrable Securities of a Shareholder (with regard to that registration statement) shall not in and of itself result in any liability on the part of the Company to such Shareholder.
 
(b)            No Inconsistent Agreements; Grant of Future Registration Rights .   The Company will not hereafter enter into any agreement with respect to its securities which is inconsistent with or violates the rights granted to the holders of Registrable Securities in this Agreement. The Company shall not grant any shelf, demand, piggyback or incidental registration rights that are pari passu or senior to the rights granted to the Shareholders hereunder to any other Person without the prior written consent of (i) Shareholders holding a majority of the Registrable Securities held by all Shareholders and (ii) Investor Shareholders holding a majority of the Registrable Securities held by all Investor Shareholders so long as the Investor Shareholders in the aggregate hold Registrable Securities representing at least 1.0% of the Total Voting Power.
 
ARTICLE VI

REPRESENTATIONS AND WARRANTIES

SECTION 6.1.   REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS .  Each Shareholder severally, and not jointly, represents and warrants to the Company and to each other Shareholder that (a) such Shareholder is duly authorized to execute, deliver and perform this Agreement; (b) this Agreement has been duly executed by such Shareholder or his, her or its attorney-in-fact on behalf of such Shareholder and is a valid and

 
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binding agreement of such Shareholder, enforceable against such Shareholder in accordance with its terms; (c) the execution, delivery and performance by such Shareholder of this Agreement does not violate or conflict with or result in a breach of or constitute (or with notice or lapse of time or both constitute) a default under any agreement to which such Shareholder is a party or, if applicable, the organizational documents of such Shareholder; (d) such Shareholder has good and marketable title to the Shares owned by such Shareholder as of the date hereof free and clear of any pledge, lien, security interest, charge, claim, equity or encumbrance of any kind, other than pursuant to this Agreement and the Charter; and (e) such Shareholder is not a party to any agreement, contract or other arrangement to Transfer any of its Shares and, except for sales of Class P Shares pursuant to, and to the extent provided in, the IPO Registration Statement, has no present plan or intention to Transfer any of its Shares.
 
SECTION 6.2.   REPRESENTATIONS AND WARRANTIES OF THE COMPANY .  The Company represents and warrants to the Shareholders that (a) the Company is duly authorized to execute, deliver and perform this Agreement; (b) this Agreement has been duly authorized, executed and delivered by the Company and is a valid and binding agreement of the Company, enforceable against the Company in accordance with its terms; and (c) the execution, delivery and performance by the Company of this Agreement does not violate or conflict with or result in a breach by the Company of or constitute (or with notice or lapse of time or both constitute) a default by the Company under its Charter or Bylaws, any existing applicable law, rule, regulation, judgment, order, or decree of any Governmental Entity exercising any statutory or regulatory authority of any of the foregoing, domestic or foreign, having jurisdiction over the Company or any of its Subsidiaries or any of their respective properties or assets, or any agreement or instrument to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries or any of their respective properties or assets may be bound.

ARTICLE VII

MISCELLANEOUS

SECTION 7.1.   NOTICES .  All notices, requests, consents and other communications hereunder to any party shall be deemed to be sufficient if contained in a written instrument and shall be deemed given (i) when delivered in person (with written confirmation of receipt), (ii) when sent by facsimile (with written confirmation of transmission) or (iii) one (1) Business Day following the day sent by nationally recognized overnight courier (with written confirmation of receipt), and in each case addressed to such party at the address or facsimile number set forth below or such other address or facsimile number as may hereafter be designated in writing by such party to the other parties

(a)           If to the Company, to:
 
               Kinder Morgan, Inc.
               500 Dallas Street, Suite 1000
               Houston, Texas 77002
               Attention: General Counsel
               Facsimile No: (713) 369-9410
 

 

 
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(b)           If to any of the Investor Shareholders, to:
 
               the address, email and facsimile set forth in the records of the Company.

               With a copy (which shall not constitute notice) to:

               Wachtell, Lipton, Rosen & Katz
               51 W. 52nd Street
               New York, New York 10019
               Attention: Igor Kirman, Esq.
               Facsimile No.: (212) 403-2000
               Email: ikirman@wlrk.com

(c)           If to any of the other Shareholders, to the address and facsimile set forth in the records of the Company for such Shareholder.
 
(d)           Each Shareholder consents to notices or instructions relating to any conversion of Class A Shares, Class B Shares or Class C Shares into Class P Shares in accordance with the Charter being given by email to the email addresses provided by the notice recipient in connection therewith.
 
SECTION 7.2.   INTERPRETATION .

(a)           The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.  Whenever the words “included”, “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation.”  Whenever an action, consent or determination of the Investor Shareholders, as a group, is contemplated by this Agreement, unless otherwise specified in this Agreement, such action, consent or determination shall require the approval of Investor Shareholders holding Voting Securities representing a majority of the Total Voting Power of all Voting Securities then held by the Investor Shareholders.  Whenever an action, consent or determination of a particular Investor Shareholder is contemplated by this Agreement, unless otherwise specified in this Agreement, such action, consent or determination shall require the approval of the Shareholders within the definition of such particular Investor Shareholder who hold Voting Securities representing a majority of the Total Voting Power of all Voting Securities then held by such Investor Shareholder.
 
(b)           The parties hereto acknowledge (i) that as a material condition and inducement to the Shareholders entering into this Agreement, the Shareholders have approved the conversion of Kinder Morgan Holdco LLC into Kinder Morgan, Inc., and the Company’s adoption of the Charter and the Bylaws and that the Shareholders would not have entered into this Agreement without the terms and conditions of (including the rights, and obligations in favor, of the Shareholders set forth in) the Charter and the Bylaws, respectively, (ii) that as a material condition and inducement to the Shareholders approving such conversion and the adoption of the Charter and the Bylaws, the parties agreed to enter into this Agreement on the
 

 
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terms and conditions set forth herein, and that the Shareholders would not have approved such conversion and the adoption of the Charter and the Bylaws without such agreement to enter into this Agreement on the terms and conditions (including the rights, and obligations in favor, of the Shareholders) as specifically set forth herein, and (iii) that the foregoing clauses (i) and (ii) are material terms of this Agreement.  The parties hereto further acknowledge that each of the Charter and the Bylaws may be amended in accordance with their terms after the date of this Agreement and that this Section 7.2 shall in no way prevent the Company from effecting any such amendments.
 
SECTION 7.3.   SEVERABILITY .  The provisions of this Agreement shall be deemed severable and the invalidity or unenforceability of any provision shall not affect the validity or enforceability of the other provisions hereof.  If any provision of this Agreement, or the application thereof to any Person or any circumstance, is found to be invalid or unenforceable in any jurisdiction, (a) a suitable and equitable provision shall be substituted therefor in order to carry out, so far as may be valid and enforceable, the intent and purpose of such invalid or unenforceable provision and (b) the remainder of this Agreement and the application of such provision to other Persons or circumstances shall not be affected by such invalidity or unenforceability, nor shall such invalidity or unenforceability affect the validity or enforceability of such provision, or the application thereof, in any other jurisdiction.

SECTION 7.4.   COUNTERPARTS .  This Agreement may be executed in two or more counterparts, each of which shall be deemed an original and all of which shall, taken together, be considered one and the same agreement, it being understood that all parties need not sign the same counterpart.

SECTION 7.5.   ADJUSTMENTS UPON CHANGE OF CAPITALIZATION .  If, and as often as, there is any change in the outstanding Class A Shares, Class B Shares, Class C Shares or Class P Shares, as applicable, by reason of stock dividends, splits, reverse splits, spin-offs, split-ups, reclassifications, reorganizations, recapitalizations, combinations or exchanges of shares and the like (other than as contemplated by Article Fourth (except for Section F of such Article ) of the Charter), appropriate adjustment shall be made in the provisions contained in Section 2.1(a) so as to fairly and equitably preserve, as far as practicable, the rights and obligations set forth therein that continue to be applicable on the date of such change.  In furtherance and not in limitation of the foregoing, references to numbers of Shares shall be adjusted as appropriate to reflect any of the adjustments referred to above in this Section 7.5 .  For clarification, this Section 7.5 shall not apply to a Non-Cash Change of Control, with respect to which Section 3.6(h) shall apply.

SECTION 7.6.   ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES .  This Agreement (a) constitutes the entire agreement and supersedes all other prior agreements, both written and oral, among the parties with respect to the subject matter hereof and (b) is not intended to confer upon any Person, other than the parties hereto, except as provided in Section 3.1(e) , Section 5.8(a) , Section 5.8(b) and Section 7.12(e) , any rights or remedies hereunder.   Section 3.1 and Section 3.5 of this Agreement are not for the benefit of, and shall not be enforceable by, the Remaining Original Shareholders.

 
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SECTION 7.7.   FURTHER ASSURANCES .  Each party shall execute, deliver, acknowledge and file such other documents and take such further actions as may be reasonably requested from time to time by the other parties hereto to give effect to and carry out the transactions contemplated herein.

SECTION 7.8.   GOVERNING LAW; EQUITABLE REMEDIES .  THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE (WITHOUT GIVING EFFECT TO CONFLICT OF LAWS PRINCIPLES THEREOF).  The parties hereto agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with its specific terms or was otherwise breached.  It is accordingly agreed that the parties hereto shall be entitled to an injunction or injunctions and other equitable remedies to prevent breaches of this Agreement and to enforce specifically the terms and provisions hereof in any of the Selected Courts, this being in addition to any other remedy to which they are entitled at law or in equity.  Any requirements for the securing or posting of any bond with respect to such remedy are hereby waived by each of the parties hereto.  Each party further agrees that, in the event of any action for an injunction or other equitable remedy in respect of such breach or enforcement of specific performance, it will not assert the defense that a remedy at law would be adequate.

SECTION 7.9.   CONSENT TO JURISDICTION .  With respect to any suit, action or proceeding (“ Proceeding ”) arising out of or relating to this Agreement or any transaction contemplated hereby each of the parties hereto hereby irrevocably (i) submits to the exclusive jurisdiction of the United States District Court for the Southern District of New York or the Court of Chancery located in the State of Delaware, County of New Castle (the “ Selected Courts ”) and waives any objection to venue being laid in the Selected Courts whether based on the grounds of forum non conveniens or otherwise and hereby agrees not to commence any such Proceeding other than before one of the Selected Courts; provided , however , that a party may commence any Proceeding in a court other than a Selected Court solely for the purpose of enforcing an order or judgment issued by one of the Selected Courts; (ii) consents to service of process in any Proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, or by recognized international express carrier or delivery service, to the Company or the Shareholders at their respective addresses referred to in Section 7.1 hereof; provided , however , that nothing herein shall affect the right of any party hereto to serve process in any other manner permitted by law; and (iii) TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW THAT CANNOT BE WAIVED, WAIVES, AND COVENANTS THAT IT WILL NOT ASSERT (WHETHER AS PLAINTIFF, DEFENDANT OR OTHERWISE) ANY RIGHT TO TRIAL BY JURY IN ANY ACTION ARISING IN WHOLE OR IN PART UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE CONTEMPLATED TRANSACTIONS, WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE, AND AGREES THAT ANY OF THEM MAY FILE A COPY OF THIS PARAGRAPH WITH ANY COURT AS WRITTEN EVIDENCE OF THE KNOWING, VOLUNTARY AND BARGAINED-FOR AGREEMENT AMONG THE PARTIES TO IRREVOCABLY WAIVE ITS RIGHT TO TRIAL BY JURY.  ANY PROCEEDING WHATSOEVER BETWEEN THEM RELATING TO THIS AGREEMENT OR ANY OF

 
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THE CONTEMPLATED TRANSACTIONS WILL INSTEAD BE TRIED IN A COURT OF COMPETENT JURISDICTION BY A JUDGE SITTING WITHOUT A JURY .
 
SECTION 7.10.   AMENDMENTS; WAIVERS .

(a)           No provision of this Agreement may be amended or modified unless such amendment or modification is in writing and signed by (i) in the case of an amendment or modification that would modify the rights or obligations of the Company, the Company and (ii) (x) (A) Kinder (so long as Kinder (together with his Permitted Transferees) owns at least 1.0% of the Total Voting Power), (B) the Investor Shareholders holding Voting Securities representing a majority of the Total Voting Power then held by the Investor Shareholders (so long as the Investor Shareholders own at least an aggregate amount of 1.0% of the Total Voting Power), (C) in the case of an amendment or modification with respect to Articles II , III or IV or this Section 7.10 , the Investor Shareholders holding Voting Securities representing at least two-thirds of the Total Voting Power then held by the Investor Shareholders (so long as the Investor Shareholders own at least an aggregate amount of 1.0% of the Total Voting Power), (D) in the case of an amendment or modification that would modify the rights or obligations of any Investor Shareholder adversely, such Investor Shareholder so affected (so long as such Investor Shareholder owns any Voting Securities), (E) the holders of Voting Securities representing a majority of the Total Voting Power then held by the Remaining Original Shareholders (so long as (1) the Remaining Original Shareholders hold a majority of the Total Voting Power held by the Original Shareholders on the date of this Agreement and (2) the applicable amendment or modification would modify the rights or obligations of the Remaining Original Shareholders (taken as a whole) adversely and differently from other Shareholders of the same class or classes), (F) in the case of an amendment or modification that would modify the rights or obligations of the holders of Class B Shares (taken as a whole) adversely as compared to the holders of other classes of Common Stock of the Company, the holders of Class B Shares holding Class B Shares representing a majority of the issued and outstanding Class B Shares, and (G) in the case of an amendment or modification that would modify the rights or obligations of the holders of Class C Shares (taken as a whole) adversely as compared to the holders of other classes of Common Stock of the Company, the holders of Class C Shares holding Class C Shares representing a majority of the issued and outstanding Class C Shares or (y) if no parties meet the conditions set forth in clauses (A), (B), (C), (D), (E), (F) or (G) of clause (x) above, then the Shareholders representing a majority of the Total Voting Power then held by Shareholders who are party to this Agreement.
 
(b)           No failure or delay by any party in exercising any right, power or privilege hereunder shall operate as waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege; provided , that any party may waive (in whole or in part) any of its rights under this Agreement; provided , further, that any such waiver shall only be valid if set forth in an instrument in writing signed by the party to be bound thereby.  The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law.
 
SECTION 7.11.   ASSIGNMENT .  Neither this Agreement nor any of the rights or obligations hereunder shall be assigned by any of the parties hereto without the prior written

 
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consent of the other parties.  Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of and be enforceable by the parties and their respective successors and assigns.
 
SECTION 7.12.   INDEMNIFICATION AND EXPENSES .

(a)           To the extent not previously paid pursuant to Section 4.12(e) of the Prior Agreement, the Company shall (and each of the Shareholders shall take all actions in its capacity as a shareholder necessary to) cause KMI to promptly pay or reimburse each Shareholder for any and all out-of-pocket fees and expenses (including the fees and expenses of legal counsel, accountants, financial advisors and other consultants or advisors) incurred by such Shareholder or its Affiliates (i) as of or prior to the date hereof in connection with the Agreement and Plan of Merger dated as of August 28, 2006 among KMI, Knight Acquisition Co. and the Company (the “ Merger Agreement ”) and the transactions contemplated thereby and (ii) as of, prior to or after the date hereof in connection with any shareholder litigation in connection with the Merger Agreement or the transactions contemplated thereby, including any amounts paid as damages or in settlement thereof.  Any fees and expenses for which any Shareholder is entitled to payment or reimbursement pursuant to clause (ii) of the preceding sentence shall be paid or reimbursed promptly after such fees or expenses are incurred by such Shareholder and notice thereof is provided to the Company.
 
(b)           From and after the date hereof, all reasonable fees and expenses of each Investor Shareholder (with respect to all periods prior to such Investor Shareholder ceasing to hold Class A Shares or Related Shares) and their counsel related to the administration of, and their rights and obligations under, the Charter, Bylaws and this Agreement shall be borne by the Company, provided , that such fees and expenses must be approved in advance by the Company (such approval not to be unreasonably withheld or delayed).
 
(c)           All  fees and expenses (including legal and other advisory fees and expenses) of the Investor Shareholders and their Affiliates incident to the IPO, including with respect to the evaluation, preparation, negotiation, structuring (tax, accounting, legal or otherwise), implementation and consummation thereof, and with respect to previously contemplated potential structures for an initial public offering of Knight Holdco LLC (or Subsidiaries or parent companies of Knight Holdco LLC) pursuant to the Prior Agreement, shall be borne by the Company, and shall be paid or reimbursed promptly after presentation of an invoice.  For the avoidance of doubt, the Company shall not be responsible for any underwriting discounts or commissions or for fees and expenses of any Investor Shareholder or its Affiliates in their capacity as an underwriter of the IPO pursuant to this Section 7.12(c) .
 
(d)           With respect to any indemnification obligations of the Company pursuant to Section 5.8 and Section 7.12 of this Agreement, the Company hereby acknowledges and agrees (i) that it is the indemnitor of first resort with respect to all indemnification obligations of the Company pursuant to Section 5.8 and Section 7.12 of this Agreement ( i.e. , its obligations to an applicable indemnitee are primary and any obligation of the Investor Shareholders and their Affiliates (collectively, the “ Fund Indemnitors ”) to advance expenses or to provide indemnification and/or insurance for the same expenses or liabilities incurred by such indemnitee are secondary) and (ii) that it irrevocably waives, relinquishes and releases the Fund Indemnitors
 

 
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from any and all claims against the Fund Indemnitors for contribution, subrogation or any other recovery of any kind in respect thereof.  For clarification, this Section 7.12(d) shall have no impact on the Selling Shareholders’ indemnification obligations under Section 5.8(b) of this Agreement or the parties’ respective contribution obligations as set forth under Section 5.8(f) , and the Company is not waiving, relinquishing or releasing any claims against the Selling Shareholders that may arise under Section 5.8(b) or, with respect to the parties’ respective contribution obligations, Section 5.8(f) .
 
(e)           (i)           Each Person that is included within the definition of a particular Investor Shareholder acknowledges and agrees that it shall be jointly and severally liable for all obligations of any Class A Shareholder under Section 2.3(b) of this Agreement (arising in respect of such Investor Shareholder’s Class A Series) if such Class A Shareholder also is within the definition of such particular Investor Shareholder.
 
(ii)           In the event that any Person (the “ Applicable Seller ”) included within the definition of a particular Investor Shareholder converts any Class A Shares in order to Transfer Class P Shares at a time when all other holders of Class A Shares of such Investor Shareholder’s Class A Series are not converting the same pro rata share of their Class A Shares in order to Transfer Class P Shares (such conversion and Transfer by the Applicable Seller, the “ Applicable Transaction ”), each Person that is included within the definition of such Investor Shareholder (the “ Indemnifying Shareholders ”) agrees to, jointly and severally, indemnify and hold harmless, to the fullest extent permitted by law, each of the Company, and its officers, directors, employees and agents, the holders of Class B Shares in such series and the holders of Class C Shares in such series from and against all Losses caused by, resulting from or relating to any lawsuit, claim, litigation or proceeding in which the indemnified party is included, brought by one or more investors or partners in any Person that is included within such definition of such particular Investor Shareholder, alleging a Loss based on the non-pro rata nature of the Applicable Transaction; provided , that this Section 7.12(e) shall be the sole and exclusive remedy of the indemnified parties with respect to any such Losses caused by, resulting from or relating to any such lawsuit, claim, litigation or proceeding.
 
SECTION 7.13.   INFORMATION; DUTIES .

(a)           The Company and the Shareholders agree that, notwithstanding anything to the contrary in any other agreement or at law or in equity, when any of the Shareholders (in their capacity as Shareholders) takes any action under this Agreement to give or withhold its consent in its capacity as a Shareholder, such Person shall, to the fullest extent permitted by law, have no duty to consider the interests of the Company or the other Shareholders or any other shareholders of the Company and may act exclusively in its and its Affiliates’ own interests; provided , however , that the foregoing shall in no way affect the obligations of the parties to comply with the provisions of this Agreement.
 
(b)           To the fullest extent permitted by applicable law, the Company, on behalf of itself and its wholly-owned Subsidiaries, hereby renounces any interest or expectancy of the
 

 
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Company and its wholly-owned Subsidiaries in, or in being offered an opportunity to participate in, business opportunities (including any business activities or lines of business that are the same as or similar to those pursued by, or competitive with, the Company or any of its Subsidiaries or any dealings with customers or clients of the Company or any of its Subsidiaries) that are from time to time presented to an Investor Shareholder (or any director nominated by such Investor Shareholder) while such Investor Shareholder is a holder of Class A Shares or Related Shares, or any of its managers, officers, directors, agents, stockholders, members, partners, Affiliates and Subsidiaries (other than the Company and its wholly-owned Subsidiaries) (each, an “ Investor Party ”), even if the opportunity is one that the Company or its wholly-owned Subsidiaries might reasonably be deemed to have pursued or had the ability or desire to pursue if granted the opportunity to do so, and each such Investor Party (and any director nominated by such Investor Party) shall have no duty to communicate or offer such business opportunity to the Company or any of its wholly-owned Subsidiaries and, to the fullest extent permitted by applicable law, shall not be liable to the Company or any of its wholly-owned Subsidiaries for breach of any fiduciary or other duty, as a director or otherwise, by reason of the fact that such Investor Party  pursues or acquires such business opportunity, directs such business opportunity to another Person or fails to present such business opportunity, or information regarding such business opportunity, to the Company or its wholly-owned Subsidiaries.  Notwithstanding the foregoing, an Investor Party who is a director of the Company or one of its wholly-owned Subsidiaries and who is offered a business opportunity solely in such capacity (a “ Directed Opportunity ”) shall be obligated to communicate such Directed Opportunity to the Company, provided , however , that all of the protections of this Section 7.13(b) shall otherwise apply to the Investor Party with respect to such Directed Opportunity, including the ability of the Investor Party to pursue or acquire such Directed Opportunity or to direct such Directed Opportunity to another Person; provided , further , that the provisions of this Section 7.13(b) shall in no way limit any confidentiality obligations of a director existing under applicable law.  For clarification, neither the Company nor any or its Subsidiaries renounces or waives its ability to pursue, compete for, acquire or otherwise undertake any opportunity, and the Company and its Subsidiaries may do so, whether or not such opportunity is presented or offered to them or to any other Person, including those mentioned above.
 
(c)           Without limiting the foregoing, each director nominated by an Investor Shareholder shall recuse himself or herself from any portion of any Board or committee meeting if (i) such director has actual knowledge that the Investor Shareholder that nominated such director, or one of its controlled Affiliates, is engaged in, pursuing or evaluating any business opportunity that such director has actual knowledge that the Company or any of its Subsidiaries is either currently engaged in, pursuing or evaluating and the participation of such director would create a conflict of interest and (ii) such business opportunity is being discussed during such portion of such meeting (provided, that for the avoidance of doubt, no such director shall be deemed to be in breach of his or her obligations pursuant to this sentence so long as such director recuses himself or herself from such portion of such meeting as promptly as practicable following the time in which it becomes reasonably apparent that such business opportunity is being discussed).
 
(d)           The Company shall not adopt any governance document, including any committee charters and any corporate governance or other similar board or committee policies,
 

 
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inconsistent with the provisions of this Section 7.13 .
 
SECTION 7.14.    FAIR DEALING .  Neither the Company nor Kinder, on the one hand, or the Investor Shareholders, on the other hand, shall take, or cause to be taken, any action with an intent of depriving the other side of any of the benefits of or impairing any of the other side’s rights under the Charter, the Bylaws or this Agreement.

SECTION 7.15.   USE OF THE COMPANY’S LOGO .  The Company hereby is deemed to grant the Investor Shareholders permission to use the Company’s name and logo in the Investor Shareholders’ marketing materials in which the Company’s name and logo appear.

SECTION 7.16.   TAX MATTERS .

(a)           Each holder of Class B Shares and Class C Shares hereby agrees that, unless and until there is no Substantial Authority Opinion rendered in the then current calendar year by the deadline specified in Section 7.16(e)(ii) (or there is no Substantial Authority Opinion rendered in a prior calendar year that the rendering nationally recognized law firm or accounting firm has confirmed in the then current calendar year by the deadline specified in Section 7.16(e)(ii) can be relied upon by the Class B Shareholders and Class C Shareholders for the then current calendar year) (the absence of such Substantial Authority Opinion (or confirmation) by the deadline specified in Section 7.16(e)(ii) , an “ Opinion Event ”), and except (i) subsequent to a settlement or resolution of a Related Tax Liability asserted in a Tax Proceeding of another Affected Class B/C Holder with respect to which such other Affected Class B/C Holder has no right to appeal (but only if such other Affected Class B/C Holder did not breach this Section 7.16(a) or the penultimate sentence of Section 7.16(c) and only to the extent consistent with such settlement or resolution), (ii) subject to the penultimate sentence of Section 7.16(c) , in settlement or resolution of a Related Tax Liability of such holder asserted in a Tax Proceeding and subsequent thereto or (iii) subsequent to the payment by another Affected Class B/C Holder of a Related Tax Liability in connection with a Tax Event (other than a payment of Tax where the taxpayer retains the right to sue for a refund of such Tax) (but only if such other Affected Class B/C Holder did not breach this Section 7.16(a) or the penultimate sentence of Section 7.16(c) and only to the extent consistent with such other Affected Class B/C Holder’s position with respect to such Related Tax Liability in connection with such Tax Event), such holder shall not take the position during such calendar year, for Income Tax purposes, including on any Income Tax return or in connection with a Tax Proceeding, that any Income Taxes are due or payable (or reduce a refund of Income Taxes otherwise receivable) with respect to such holder’s Class B Shares or Class C Shares by reason of the occurrence of one or more transactions or events that are deemed, for applicable Income Tax purposes, to have the result of the receipt of property by some shareholders and an increase in the proportionate interests of such holder of Class B Shares or Class C Shares, as applicable, in the assets or earnings and profits of the Company (such Income Tax, a “ Specified Income Tax ” and such position, an “ Adverse Position ”); provided , that notwithstanding an Opinion Event, unless an exception set forth in clause (i), (ii) or (iii) above applies, such holder of Class B Shares or Class C Shares shall not take an Adverse Position during such calendar year (q) without providing, following such Opinion Event, at least 14 days prior written notice to the Class A Representative, in order to provide an opportunity for the Class A Representative to obtain a Substantial Authority
 

 
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Opinion within 14 days from the receipt of such notice (provided, however, that the failure to provide such notice shall not constitute a breach of this Section 7.16(a) unless the Company shall have breached its obligation to give notice of such Opinion Event under Section 7.16(e) and the Class A Representative demonstrates that it could have obtained a Substantial Authority Opinion prior to the taking of such Adverse Position had such notice been duly and timely provided) and (r) absent a Substantial Authority Opinion having been rendered by the 14-day deadline described in clause (q), in a manner inconsistent with any Alternative Authority Opinion delivered by the Class A Representative to such Affected Class B/C Holder by such deadline.
 
(b)           An Affected Class B/C Holder shall not be entitled to an Accelerated Conversion or a Cash Loan with respect to a Related Tax Liability following a breach by such Affected Class B/C Holder of Section 7.16(a) (other than a breach by such Affected Class B/C Holder of Section 7.16(a) by reason of a breach by any Affected Class B/C Holder of the penultimate sentence in Section 7.16(c) ).  For clarity, without limiting any other remedies available to the parties with respect to breaches of this Section 7.16 , no breach by an Affected Class B/C Holder of any other provision of this Section 7.16 will deprive such holder from receiving an acceleration under Section D.3 of Article Fourth of the Charter.
 
(c)           In the event a Tax Proceeding is commenced with respect to a Related Tax Liability of a holder of Class B Shares or Class C Shares or such a holder receives a notice described in Section 7.16(m)(ix)(C) , such holder shall promptly deliver notice of such event to the CEO (or if such holder is the CEO, another senior officer of the Company) and to the Class A Representative.  Such holder thereafter shall use commercially reasonable efforts to (i) keep the CEO (or such other senior officer of the Company) and the Class A Representative apprised of substantive developments relating to any such Tax Proceeding (to the extent relating to such Related Tax Liability), and (ii) consult in good faith with the Class A Representative concerning the conduct of such Tax Proceeding to the extent  relating to such Related Tax Liability (including with respect to any written materials to be furnished to the applicable tax authority with respect to such Related Tax Liability in such Tax Proceeding).  In the conduct of any such Tax Proceeding, such holder of Class B Shares or Class C Shares shall act in good faith in settling, compromising or otherwise resolving (including with respect to the decision of whether or not to settle, compromise or otherwise resolve) such Tax Proceeding with a view to the merits and as if such holder were the sole party in interest.  The Company shall pay and/or reimburse a holder of Class B Shares or Class C Shares for an amount equal in the aggregate to the quotient obtained by dividing (x) the reasonable and documented out-of-pocket expenses incurred by such holder in connection with a Tax Proceeding (to the extent such Tax Proceeding relates to such Related Tax Liability or a Recast Tax Liability) by (y) an amount, expressed as a percentage, equal to one hundred percent (100%) minus the Earned Income Tax Rate for such holder (it being understood that such amount will be taxable compensation to the recipient).
 
(d)           Without in any way limiting Section 7.16(a) , in the event that a holder of Class B Shares or Class C Shares intends to file an Income Tax return reflecting a Specified Income Tax (in accordance with Section 7.16(a) ) and either (x) a Substantial Authority Opinion has been rendered in a calendar year by the deadline specified in Section 7.16(e)(ii) or within the 14-day period specified in clause (q) of the first proviso of Section 7.16(a) or (y) following an Opinion Event, an Alternative Authority Opinion has been delivered within the 14-day period
 

 
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specified in clause (r) of the first proviso of Section 7.16(a) , such holder shall (i) at least 30 days prior to filing such Income Tax return (the “ Specified Income Tax Return Filing Date ”), provide notice of such intention to the Class A Representative and a schedule setting forth in reasonable detail the calculation of the Specified Income Tax reflected on such Income Tax return to the Class A Representative for its review and comment, (ii) consult in good faith with the Class A Representative concerning the calculation of such Specified Income Tax before filing such Income Tax return and (iii) consider in good faith all comments received from the Class A Representative at least 15 days prior to the Specified Income Tax Return Filing Date with respect to the calculation of such Specified Income Tax.
 
(e)           The Company shall, at the Company’s sole expense, use commercially reasonable efforts to obtain a Substantial Authority Opinion that is rendered to or for the benefit of the Class B Shareholders and Class C Shareholders each calendar year commencing with the calendar year during which the Incorporation occurs prior to March 1st of each such calendar year (or, in the case of the calendar year during which the Incorporation occurs, within 30 days following the Incorporation).  In the event that a Substantial Authority Opinion has not been so rendered by March 1st of a calendar year (or, in the case of the calendar year during which the Incorporation occurs, within 30 days following the Incorporation), (i) on March 1st of such calendar year (or, in the case of the calendar year during which the Incorporation occurs, on the 30th day following the Incorporation) (or, if such date is not a Business Day, the next succeeding Business Day) the Company shall give the Class A Representative written notice that a Substantial Authority Opinion has not been rendered and (ii) the Class A Representative shall have 30 days from the date of receipt of such notice in which it may obtain a Substantial Authority Opinion.
 
(f)           (i)           Notwithstanding anything to the contrary contained herein, if, on or after the earliest to occur of the Mandatory Conversion Date with respect to the applicable Series and the date on which no Class A Shares remain outstanding with respect to the applicable Series (the date on which such earliest event occurs, the “ Specified Date ”), (x) the Remaining Loan Amount of any Cash Loan issued to an Affected Class B/C Holder by holders of Class A Shares of the applicable Series pursuant to Section 7.16(h) is greater than zero or (y) the Remaining Amount in respect of any accelerated conversion of shares of the applicable Series of any Affected Class B/C Holder pursuant to Section D.3 of Article Fourth of the Charter is greater than zero, then the holders of Class A Shares of the applicable Series on the Specified Date (the “ Specified Class A Holders ”) shall be entitled to a pro rata portion of all Tax Benefits of such Affected Class B/C Holder (net of Taxes incurred by reason of  the realization of such Tax Benefits by such Affected Class B/C Holder), pro rata based on (and not in excess of) the aggregate amount of Remaining Loan Amounts and Remaining Amounts in respect of such applicable Series related to such Affected Class B/C Holder, relative to the aggregate amount of Remaining Loan Amounts and Remaining Amounts in respect of each other Series related to such Affected Class B/C Holder.  Such Affected Class B/C Holder shall promptly pay (or cause to be promptly paid) in cash to such Specified Class A Holders such pro rata portion of such Tax Benefits.
 
(ii)           If, on a given date on which (A) the Remaining Loan Amount of
 

 
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any Cash Loan (if any) with respect to a Series is greater than zero and/or the Remaining Amount in respect of any Accelerated Conversion (if any) with respect to a Series is greater than zero and (B) the Deemed Conversion Value (as defined below) with respect to such Series is less than one hundred ten percent (110%) of the sum of any such Remaining Loan Amount and Remaining Amount with respect to such Series, then, from and after such date, until such time as the Deemed Conversion Value equals or exceeds one hundred ten percent (110%) of the sum of such Remaining Loan Amount and Remaining Amount, such Affected Class B/C Holder shall, at the expense of the holders of Class A Shares of each applicable Series, (A) cooperate with, and shall use commercially reasonable efforts to take all steps reasonably requested by such holders of Class A Shares who are or were Investor Shareholders to realize such Tax Benefits (including, for the avoidance of doubt, filing an amended tax return, filing a tax refund claim, commencing and prosecution of a Tax Proceeding, providing access to books and records and furnishing relevant tax information), provided that such Affected Class B/C Holder shall not be required to take any position unless such holders of Class A Shares provide an opinion of a nationally recognized law firm or accounting firm that is rendered to or for the benefit of such Affected Class B/C Holder and on which such Affected Class B/C Holder is permitted to rely to the effect that there is a reasonable basis in law and fact for such position, (B) keep such holders of Class A Shares apprised of substantive developments relating to any such Tax Proceeding, (C) consult in good faith with such holders of Class A Shares concerning the conduct of such Tax Proceeding (to the extent relating to such Tax Benefits) before taking any significant action in such Tax Proceeding, (D) provide such holders of Class A Shares with a copy of, and opportunity to comment on, any written materials to be furnished to the applicable tax authority with respect to such Tax Benefits at least ten (10) days prior to the time such materials are furnished to such tax authority, (E) reasonably consider all comments from such holders of Class A Shares (subject to the proviso set forth in clause (A)), (F) allow the Class A Representative to participate in such Tax Proceeding (to the extent relating to such Tax Benefits) and (G) not settle any such Tax Proceeding (to the extent relating to such Tax Benefits) without the prior consent of such holders of Class A Shares (which consent shall not be unreasonably withheld, conditioned or delayed).  The holders of such Class A Shares shall use commercially reasonable efforts to preserve the privacy of such Affected Class B/C Holder in connection with realizing such Tax Benefits (including, as may be appropriate under the circumstances, by using third-party advisors) and such Affected Class B/C Holder shall be entitled to redact information irrelevant to such Tax Benefits in the tax documentation furnished to such holders of Class A Shares to preserve privacy.
 
(g)           The Company and each of the holders of Class B Shares or Class C Shares shall, and shall cause their respective Affiliates, officers, employees, agents and representatives to reasonably cooperate with the Class A Representative and/or the holders of Class A Shares with respect to matters relating to Related Tax Liabilities, Tax Benefits and Recast Tax Liabilities.  Without limiting the foregoing, the Company and each Affected Class B/C Holder shall furnish to the Class A Representative and the Independent Accountant such work papers and other documents and information, to the extent such work papers, documents and information directly pertain to an Accelerated Conversion Notice or an Accelerated Conversion Calculation Notice, as the Class A Representative or the Independent Accountant may
 

 
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reasonably request; provided that an Affected Class B/C Holder shall be entitled to redact information irrelevant to Related Tax Liabilities in the tax documentation furnished to the Class A Representative and the Independent Accountant to preserve privacy.  The Company and each of the holders of Class B Shares or Class C Shares shall preserve and keep, or caused to be preserved and kept, all tax returns and supporting documentation (and any other records relating thereto) relating to any Related Tax Liabilities, Tax Benefits and Recast Tax Liabilities in its possession for the applicable statute of limitations.
 
(h)           (i)  Notwithstanding anything to the contrary contained herein, in the event that an Affected Class B/C Holder delivers an Accelerated Conversion Notice pursuant to Section D.3 of Article Fourth of the Charter and would otherwise be entitled, pursuant to Section D.3(b)(iii) and Section D.3(c) of Article Fourth of the Charter, to an accelerated conversion of its Class B Shares and/or Class C Shares of a Series and related issuance of Class P Shares (an “ Accelerated Conversion ”), the holders of Class A Shares of such Series may elect, pursuant to a written notice delivered to the Company and such Affected Class B/C Holder within four (4) Business Days following the date on which the Final Accelerated Conversion Calculation Notice becomes binding and conclusive pursuant to Section D.3 of Article Fourth of the Charter (such election, a “ Cash Loan Election ”), to make a non-interest bearing loan, which loan shall be fully nonrecourse, in an amount equal to such Series’ portion of the Grossed Up Excess Amount for such Series in cash to such Affected Class B/C Holder (each, a “ Cash Loan ”, each Affected Class B/C Holder to which a Cash Loan is made, the “ Borrower ” under such Cash Loan, and the holders of Class A Shares that make such Cash Loan, the “ Lenders ” under such Cash Loan), subject the terms and conditions of this Section 7.16(h) and in lieu of any Accelerated Conversion being made to such Affected Class B/C Holder with respect to such Series.  Such Series’ portion of such Grossed-Up Excess Amount shall be the sum of the Series Applicable Amount and the Series Gross-Up Amount in respect of such Series (as finally determined pursuant to Section D.3 of Article Fourth of the Charter, but with the Series Gross-Up Amount calculated without regard to clause (y) of Section D.3(e) of Article Fourth of the Charter), subject to a maximum cap equal to the product of (x) the number of Class P Shares determined in Section D.3(b)(iii)(B) with respect to such Series and (y) the Mandatory Conversion Date Per Share Value determined in Section D.3(b)(iii)(B) (“ Cash Loan Amount ”).  Each applicable Affected Class B/C Holder hereby acknowledges and agrees that with respect to any Cash Loan it shall, prior to the funding of such Cash Loan, execute customary documentation for such Cash Loan, including customary documents for the purpose of establishing a security interest in favor of the Lenders in such holder’s Class B Shares and Class C Shares of the applicable Series and the proceeds thereof, that is consistent with the terms of this Section 7.16 and paragraph (ii) immediately below (collectively, the “ Loan Documentation ”); provided that such Affected Class B/C Holder shall not be required to execute any such customary documentation and the holders of Class A Shares of such Series shall not be entitled to make a Cash Loan Election, in each case if the Class A Representative and such Affected Class B/C Holder shall not have agreed, prior to the making of the Cash Loan Election, to such customary documentation; provided, further, however, that forms of Loan Documentation that shall have, on or after the date hereof, been provided by the Class A Representative and consented to by the holders of Class B Shares and Class C Shares
 

 
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representing a majority of the Total Voting Power then held by the holders of Class B Shares and Class C Shares (taken as a whole), such consent not to be unreasonably withheld, conditioned or delayed, shall be deemed to be “customary documentation” agreed to by such Affected Class B/C Holder for purposes of this Section 7.16(h)(i) .  Subject to execution of the Loan Documentation, the holders of Class A Shares of the applicable Series shall fund the applicable Cash Loan Amount to the applicable Borrower, and pay to the applicable Borrower the amount described in Section 7.16(h)(iii)(A) , in each case no later than five (5) days following the delivery of the applicable Cash Loan Election.  The Lenders shall use commercially reasonable efforts to deliver to the Company and the applicable Borrower a Substantial Authority Recast Opinion with respect to the Cash Loan made to such Borrower at the time such Cash Loan is made (which opinion, for the avoidance of doubt, shall be obtained at the expense of the Lenders).  If the Company shall have received such Substantial Authority Recast Opinion at such time, the Company shall be obligated to treat the Cash Loan as indebtedness for U.S. federal income tax purposes (other than in connection with a good faith settlement by the Company of a tax proceeding of the Company in respect of the treatment by the Company of the Cash Loan as indebtedness for U.S. federal income tax purposes), provided that, for clarity, if the Company shall not have received such Substantial Authority Recast Opinion at such time, the Company shall not be so obligated.
 
(ii)           Without limiting the other provisions of this Section 7.16 , including Section 7.16(f) , each Cash Loan shall be due and payable on June 30, 2015, subject to mandatory prepayment as described this Section 7.16(h)(ii) .  Each Class B Shareholder and each Class C Shareholder hereby acknowledges and agrees that at any time when the Remaining Loan Amount of any Cash Loan is greater than zero, the following amounts shall, pursuant to the security arrangement referred to in paragraph (i) above, be repaid to the Lenders and accordingly applied toward the then outstanding balance of such Cash Loan:  (I) any Distribution made in respect of the Borrower’s shares held as security for the Cash Loan, net of an amount equal to the product of the Assumed Tax Rate and the amount of such Distribution (which amount shall be remitted to the Borrower) and (II) any After-Tax Sale Proceeds received from the sale of Class P Shares issued upon conversion of the Borrower’s shares held as security for the Cash Loan, which the Borrower, pursuant to the Loan Documentation, shall irrevocably authorize the Lenders to sell for cash on its behalf as soon as reasonably practicable following the issuance thereof. Within the later of five (5) days of receipt by such Lenders of written notice from the Borrower setting forth the Borrower’s tax basis (as determined for U.S. federal income tax purposes) in such Class P Shares or one (1) Business Day following the closing of such sale, such Lenders shall (x) notify such Borrower in writing, which notice shall certify that such sale occurred and set forth the aggregate amount of proceeds of such sale and (y) remit to such Borrower an amount equal the amount described in clause (B) of the definition of After-Tax Sale Proceeds.  The “ After-Tax Sale Proceeds ” from a sale of Class P Shares shall equal the excess of (A) the Net Sale Proceeds from such sale over (B) the product of (i) the Assumed Tax Rate and (ii) the excess of (x) the Net Sale Proceeds of such sale over (y) such Borrower’s tax basis (as determined for U.S. federal income tax purposes) in such Class P Shares.
 

 
70
 

(iii)           (A)           Simultaneously with the funding of any Cash Loan to a Borrower, the applicable Lenders shall pay to such Borrower in cash an amount equal to the quotient obtained by dividing (x) the product of (I) the amount, if any, includible in such Borrower’s income for U.S. federal income tax purposes due to the receipt of such Cash Loan pursuant to Section 7872 of the Code (the “ Imputed Income ”) and (II) the Earned Income Tax Rate for such Borrower by (y) an amount, expressed as a percentage, equal to one hundred percent (100%) minus the Earned Income Tax Rate for such Borrower.

(B)           In the event that any Remaining Loan Amount of a Cash Loan issued to a Borrower is discharged or cancelled for Income Tax purposes, the applicable Lenders of such Cash Loan shall, within ten (10) days of such discharge or cancellation, pay to such Borrower in cash an amount equal to the quotient obtained by dividing (x) the product of (I) the Remaining Loan Amount includible in such Borrower’s income for U.S. federal income tax purposes due to such discharge or cancellation and (II) the Earned Income Tax Rate for such Borrower by (y) an amount, expressed as a percentage, equal to one hundred percent (100%) minus the Earned Income Tax Rate for such Borrower, in each case assuming that any income attributable to the discharge or cancellation of such Cash Loan is ordinary in character.

(C)           The applicable Lenders of any Cash Loan issued to a Borrower shall indemnify such Borrower, on a fully grossed-up basis, for Income Taxes due (including in the form of withholding taxes) and the employee portion of employment Taxes due from such Borrower resulting from such Cash Loan not being respected as indebtedness for Income Tax purposes (“ Recast Tax Liability ”); provided that such Recast Tax Liability shall be determined on a “with and without” basis, and taking into account (i) the deductibility of state and local Income Taxes as applicable at the time for U.S. federal income tax purposes to the extent such state and local Income Taxes are actually deductible by the taxpayer and (ii) the deductibility of U.S. federal Income Taxes as applicable at the time for state and local Income Tax purposes to the extent such U.S. federal Income Taxes are actually deductible by the taxpayer.

(D)           Each holder of Class B Shares and Class C Shares hereby agrees (and upon becoming a Borrower of a Cash Loan shall reaffirm in writing to the applicable Lenders such agreement) not to take the position on any Tax return or in connection with a Tax Proceeding, that any Recast Tax Liability is due with respect any Cash Loan; provided that a Borrower of a Cash Loan shall not be prohibited by the foregoing from taking such position on any Tax return or in connection with a Tax Proceeding, subject to Section 7.16(h)(iii)(E) and (F) , if (I) such Borrower has received from the Company an IRS Form W-2 treating such Cash Loan as compensation for U.S. federal income tax purposes or (II) (x) no Substantial Authority Recast Opinion with respect to such Cash Loan exists, (y) at least 60 days prior to taking such position, such Borrower provides the applicable Lenders with advance written notice of the absence of such Substantial Authority

 
71
 

Recast Opinion and such Borrower’s intent to take such position and (z) the applicable Lenders fail to obtain a Substantial Authority Recast Opinion with respect to such Cash Loan within 30 days of receipt of such notice.

(E)           In the event a Tax Proceeding is commenced with respect to a Recast Tax Liability of a Borrower, such Borrower shall promptly deliver notice of such event to the applicable Lenders of the Cash Loan.  Such Borrower thereafter shall (i) keep such Lenders apprised of substantive developments relating to any such Tax Proceeding (to the extent relating to such Recast Tax Liability), (ii) consult in good faith with such Lenders concerning the conduct of such Tax Proceeding before taking any significant action in such Tax Proceeding (in each case to the extent relating to such Recast Tax Liability), (iii) provide such Lenders with a copy of, and opportunity to comment on, any written materials to be furnished to the applicable tax authority with respect to such Tax Proceeding (to the extent relating to such Recast Tax Liability) at least ten (10) days prior to the time such materials are furnished to such tax authority, (iv) reasonably consider all comments from such Lenders, (v) allow the Class A Representative to participate in such Tax Proceeding (to the extent relating to such Recast Tax Liability) and (vi) not settle or resolve such Tax Proceeding (to the extent relating to such Recast Tax Liability) without the prior written consent of the applicable Lenders (not to be unreasonably withheld, conditioned or delayed).

(F)           Without in any way limiting Section 7.16(h)(iii)(D) , in the event a Borrower intends to file an Income Tax return reflecting a Recast Tax Liability (in accordance with Section 7.16(h)(iii)(D) ), such Borrower shall, at least 30 days prior to filing such Income Tax return (the “ Filing Date ”), provide notice to the applicable Lenders of the amount of the Recast Tax Liability to be reported on such Income Tax return and a schedule setting forth in reasonable detail the calculation thereof.  In the event that the applicable Lenders reasonably object to the calculation of such Recast Tax Liability in such proposed Income Tax return at least 15 days prior to the Filing Date of such Income Tax return, the Borrower and such Lenders shall seek in good faith to resolve such dispute.  In the event such Borrower and Lenders are unable to resolve such dispute at least 10 days prior to the Filing Date of such Income Tax return, such dispute shall be resolved by the Independent Accountant prior to the Filing Date of such Income Tax return, and such Borrower shall revise such Income Tax return (or shall cause such Income Tax return to be revised) to reflect the resolution by the Independent Accountant.  The costs of conducting the dispute resolution contemplated by this Section 7.16(h)(iii)(F) , including the fees of the Independent Accountant, shall be paid by such Lenders.

(G)           The applicable Lenders shall be entitled to any refund or credit of Recast Tax Liability (net of Taxes incurred by reason of the realization of such refund or credit by such Borrower) and any Imputed Income Tax Benefits.  The Borrower shall promptly pay (or cause to be promptly paid) to such Lenders the amount of any such refund or credit realized by such Borrower (net of Taxes

 
72
 

imposed on the realization of such refund or credit by such Borrower) and any Imputed Income Tax Benefits.  At the expense of such Lenders, the Borrower shall cooperate with, and shall take all steps reasonably requested by such Lenders to realize such refund or credit and any Imputed Income Tax Benefits (including, for the absence of doubt, filing an amended tax return, filing a tax refund claim, commencing and prosecution of a Tax Proceeding, providing access to books and records and furnishing relevant tax information), provided that (i) such Borrower shall not be required to take any position unless such Lenders provide an opinion of a nationally recognized law firm or accounting firm that is rendered to or for the benefit of such Borrower and on which such Borrower is permitted to rely that there is a reasonable basis in law and fact for such position, and (ii) with respect to any Imputed Tax Benefits, such Lenders indemnify such Borrower, on a fully grossed up basis, for Taxes incurred by reason of the disallowance of any Imputed Income Tax Benefits so claimed and paid over to such Lenders under this Section 7.16(h)(iii)(G) .

(i)           Notwithstanding Section 3.8 , in the event that (i) the Affected Class B/C Holder in respect of any Accelerated Conversion with a Remaining Amount greater than zero or (ii) the Affected Class B/C Holder that is the Borrower under any Cash Loan with a Remaining Loan Amount greater than zero, would be required to forfeit any or all of its Class B Shares of the applicable Series pursuant to Section 3.8(b) (taking into account Section 3.8(e)(i) and Section 3.8(e)(ii) ), such Affected Class B/C Holder shall retain all of his or her Class B Shares of such Series until the transaction or event, including a mandatory conversion event or distribution, has occurred that causes the Remaining Amount or Remaining Loan Amount, respectively, to equal zero.  Upon such transaction or event, all Class B Shares of the applicable Series held by such Affected Class B/C Holder shall be, to the extent such Class B Shares were otherwise required to be forfeited pursuant to Section 3.8 but for the application of this Section 7.16(i) , immediately forfeited.  Such forfeited Class B Shares shall automatically become treasury shares and the Company shall immediately transfer such forfeited New Class B Shares to the Class B Trust.  All value (including Class P Shares issued upon conversion of such Class B Shares), earnings and/or proceeds with respect to such New Class B Shares shall be paid to the Class B Trust until distributed in accordance with Section 3.8(g) .  For the avoidance of doubt, with respect to any and all value (including Class P Shares issued upon conversion of such Class B Shares), earnings and/or proceeds in excess of the amount of value (including Class P Shares issued upon conversion of such Class B Shares), earnings and/or proceeds required pursuant to Section 7.16(h)(ii) to cause the Remaining Amount or Remaining Loan Amount, respectively, to equal zero, the Company shall immediately distribute and/or issue, and each such Affected Class B/C Holder hereby fully and irrevocably consents to the Company immediately distributing and/or issuing, any such excess to the Class B Trust.
 
(j)           Within one (1) Business Day following the closing of the sale by any Affected Class B/C Holder that has received an Accelerated Conversion of the number of Class P Shares that such holder agreed to sell in an Accelerated Conversion Notice, such holder shall so notify the Class A Representative in writing, which notice shall certify that such sale occurred.  In the event that an Affected Class B/C Holder is accelerated or advanced value pursuant to an Accelerated Conversion or a Cash Loan, but does not actually pay in cash the
 

 
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Related Tax Liability (or reduce a refund of Income Taxes otherwise receivable in cash by the Related Tax Liability) giving rise to such Accelerated Conversion or Cash Loan, such Affected Class B/C Holder shall, within 30 days following the date that it is determined that such Related Tax Liability was not so paid (or offset), (i) if such Affected Class B/C Holder has a Remaining Amount with respect to such Accelerated Conversion, such Affected Class B/C Holder shall return to the Company, for the benefit of the holders of the Class A Shares, Class B Shares and Class C Shares of the same Series (which the parties agree shall be applied with a view towards, to the extent possible and without affecting the obligations of such Affected Class B/C Holder under this Section 7.16(j) , placing such holders in the same economic position (with respect to the relative economic rights of holders of Class A Shares, Class B Shares and Class C Shares of such Series) as if such Accelerated Conversion had not occurred), an amount of cash, a number of Class P Shares, or a combination thereof, having an aggregate value (in the case of Class P Shares, based on the VWAP of one share of Class P Common Stock during the ten (10) trading days ending on the close of business on the trading day immediately preceding the date of such determination) equal to such Remaining Amount with respect to such Accelerated Conversion and (ii) if such Affected Class B/C Holder has a Remaining Loan Amount with respect to such Cash Loan, such Cash Loan shall become a recourse obligation of such Affected Class B/C Holder that is due and payable in full, and such Affected Class B/C Holder shall repay such Cash Loan in full, within 30 days following the date of such determination.
 
(k)           Notwithstanding anything to the contrary contained herein, no (i) Affected Class B/C Holder in respect of any Accelerated Conversion with a Remaining Amount greater than zero or (ii) Affected Class B/C Holder that is the Borrower under any Cash Loan with a Remaining Loan Amount greater than zero, may Transfer (including by operation of law, other than by reason of the death of such holder) any Class B Shares or Class C Shares of the applicable Series, in each case except for a Transfer of Class B Shares and/or Class C Shares of such Series (“ Affected Shares ”) to a Permitted Transferee to the extent that (1) such Transfer is otherwise permitted by and in accordance with Article II of this Agreement and (2) such Permitted Transferee acknowledges that such Affected Shares are burdened by and subject to such Remaining Amount or Remaining Loan Amount, as applicable, and agrees to be bound by the provisions this Section 7.16 and Section D.3 of Article Fourth of the Charter relating to the reduction and recoupment (by the holders of the applicable shares of such Series) of such Remaining Amount or Remaining Loan Amount, as applicable, to the same extent as the applicable Affected Class B/C Holder, and that such Affected Shares shall be treated for all purposes under such provisions as though such Affected Shares were still held by such Affected Class B/C Holder.
 
(l)           Each Class B Shareholder and Class C Shareholder agrees to take such actions as shall be reasonably requested by the Company for the purpose of implementing the last sentence of Section D.3(d) of Article Fourth of the Charter, including a contribution to the capital of a portion of the Class B Shares or Class C Shares, as applicable, held by such holder.
 
(m)           For purposes of this Section 7.16 :
 
(i)           “ Alternative Authority Opinion ” shall mean an opinion (A) rendered by a nationally recognized law firm or accounting firm to or for the benefit of
 

 
74
 

the Class B Shareholders and Class C Shareholders and on which such Class B Shareholders and Class C Shareholders are permitted to rely, (B) that concludes, on the basis of the facts, representations and assumptions set forth therein (which are consistent with the requirements of Treas. Reg. § 1.6664-4(c) or any successor provision that sets forth the requirements for an opinion that may be relied upon in good faith to avoid the incurrence of accuracy-related penalties under the Code), that Substantial Authority exists for a position with respect to the reporting or the manner of calculating the amount of dividend income that a holder of Class B Shares or Class C Shares of a Series will be required to include in such holder’s gross income pursuant to Section 305(b)(2) of the Code and (C) with respect to which the Class B Shareholders and Class C Shareholders have not been notified that such opinion can no longer be relied upon as of the close of the taxable year in respect of which such position is taken by such Class B Shareholder or Class C Shareholder or the date of filing of a tax return that reflects such position for such taxable year;
 
(ii)           “ Code ” shall mean the Internal Revenue Code of 1986, as amended;
 
(iii)           “ Deemed Conversion Value ” shall mean, with respect to each Series, an amount equal to the product of (i) the number of Class P Shares that the applicable Affected Class B/C Holder would receive in conversion of its shares of such Class B Series and/or such Class C Series pursuant to Section D.1 of Article Fourth of the Charter (for the avoidance of doubt, taking into account Section D.3(d) of Article Fourth of the Charter with respect to any prior accelerated conversion under Section D.3 of Article Fourth of the Charter) were (x) the Final Mandatory Conversion Date deemed to occur on the date immediately preceding the date of determination and (y) the Mandatory Conversion Date Per Share Value deemed to be equal to the VWAP of one share of Class P Common Stock during the ten (10) trading days ending on the close of business on the trading day immediately preceding the date of determination (the “ Deemed Conversion Per Share Value ”) and (ii) the Deemed Conversion Per Share Value.
 
(iv)           “ Earned Income Tax Rate ” with respect to any Person shall mean the sum of (x) the Assumed Tax Rate for such Person and (y) the rate attributable to the employee portion of any employment Tax;
 
(v)           “ Imputed Income Tax Benefit ” shall mean any item of loss, deduction, credit or any other tax item relating to (or arising from any event giving rise to) Imputed Income with respect to a Cash Loan that decreases Taxes paid or payable by the applicable Borrower (other than any item taken into account in the computation of an Assumed Tax Rate, including any deduction of state and local Income Taxes for U.S. federal Income Tax purposes); provided that any item described in the foregoing shall constitute a Tax Benefit only if and when such item has been actually realized in cash or such item decreases Taxes otherwise payable in cash (in each case, as determined on a “with and without” basis);
 
(vi)           the “ Loan Repayment Amount ” with respect to any Cash Loan shall mean the aggregate of the net amount of Distributions paid to the Lenders of such
 

 
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Cash Loan pursuant to Section 7.16(h)(ii)(A) and the net proceeds of the sale of any Class P Shares received by such Lenders pursuant to Section 7.16(h)(ii)(B) , as calculated from time to time;
 
(vii)           the “ Remaining Loan Amount ” with respect to any Cash Loan shall mean the amount, if any, by which the applicable Cash Loan Amount exceeds the related Loan Repayment Amount and any amount of Tax Benefits remitted to the Lenders of such Cash Loan by the Borrower with respect to such Remaining Loan Amount, as calculated from time to time;
 
(viii)           “ Substantial Authority ” shall have the meaning assigned to such term in Section 6662(d)(2)(B) of the Code and Treas. Reg. § 1.6662-4(d) or any successor provisions that set forth the standard to avoid the incurrence of accuracy-related penalties under the Code;
 
(ix)           “ Substantial Authority Opinion ” shall mean an opinion (A) rendered by a nationally recognized law firm or accounting firm to or for the benefit of the Class B Shareholders and Class C Shareholders and on which such Class B Shareholders and Class C Shareholders are permitted to rely, (B) that concludes, on the basis of the facts, representations and assumptions set forth therein (which are consistent with the requirements of Treas. Reg. § 1.6664-4(c) or any successor provision that sets forth the requirements for an opinion that may be relied upon in good faith to avoid the incurrence of accuracy-related penalties under the Code), that Substantial Authority exists for the position that a holder of Class B Shares or Class C Shares of a Series will not be required to include in such holder’s gross income an amount of dividend income pursuant to Section 305(b)(2) of the Code by reason of a distribution of cash or other property to the holders of shares of such Series, and (C) with respect to which the Class B Shareholders and Class C Shareholders have not been notified that such opinion can no longer be relied upon as of the close of the taxable year in respect of which such position is taken by such Class B Shareholder or Class C Shareholder or the date of filing of a tax return that reflects such position for such taxable year;
 
(x)           “ Substantial Authority Recast Opinion ” shall mean, with respect to a Cash Loan, an opinion (A) rendered by a nationally recognized law firm or accounting firm to or for the benefit of the Company and the Borrower of such Cash Loan and on which the Company and such Borrower are permitted to rely, (B) that concludes, on the basis of the facts, representations and assumptions set forth therein (which are consistent with the requirements of Treas. Reg. § 1.6664-4(c) or any successor provision that sets forth the requirements for an opinion that may be relied upon in good faith to avoid the incurrence of accuracy-related penalties under the Code), that Substantial Authority exists for the position that such Cash Loan should be respected as indebtedness for U.S. federal income tax purposes and (C) with respect to which the Company or such Borrower has not been notified that such opinion can no longer be relied upon;
 
(xi)           “ Tax Benefit ” shall mean (A) any refund of a Related Tax Liability, (B) any item of loss, deduction, credit or any other tax item relating to (or arising from any event giving rise to) a Related Tax Liability that decreases Taxes paid or
 

 
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payable (other than any item taken into account in the computation of a Related Tax Liability, including any deduction of state and local Income Taxes for U.S. federal Income Tax purposes), and (C) any interest or penalty rebate relating thereto; provided that any item described in clause (A), (B) or (C) shall constitute a Tax Benefit only if and when such item has been actually realized in cash or such item decreases Taxes otherwise payable in cash (in each case, as determined on a “with and without” basis);
 
(xii)           “Tax Proceeding” shall mean any audit or examination of a federal, state, local or foreign Income Tax return of a holder or former holder of Class B Shares or Class C Shares, or any administrative or judicial proceeding relating to such Income Tax or such Income Tax return; and
 
(xiii)           all other capitalized terms that are used but not defined in this Section 7.16 shall have the meaning assigned to such terms in the Charter.
 

[ The Remainder of this Page Is Intentionally Left Blank. ]



 
 
 
 
 
 
 
 
 
 
 
 

 


______________________
 

 
77
 

IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed and delivered, all as of the date first set forth above.

KINDER MORGAN INC:
 

 

 
[SHAREHOLDERS:]
 

 

 

 
 
 

SCHEDULE A
 

CANADIAN PARTICIPANTS


Name
 
Phantom Class B Units
Phantom Class A-1 Units
Ian Anderson
 
39,570,273
181,406
Hugh Harden
 
3,957,027
0
Bill Henderson
 
4,946,284
163,636
Scott Stoness
 
2,473,140
0


 
2
 


SCHEDULE   B

 
NON-COMPETE PERIODS

The Non-Compete Period for the period after an Executive Management Shareholder’s employment with the Company and its Subsidiaries shall be as set forth in the table below; provided , that the Non-Compete Period following an Executive Management Shareholder’s termination of employment shall be zero if an Executive Management Shareholder’s employment with the Company and its Subsidiaries terminates after May 31, 2015.  If an Executive Management Shareholder’s employment terminates on or prior to May 31, 2015, then such Executive Management Shareholder shall have the applicable Non-Compete Period for the period after such Executive Management Shareholder’s employment as set forth in the table below, which may extend past May 31, 2015.
 
Employee
 
Non-Compete Period
 
 
 
Cause
 
Voluntary termination of employment by employee without Good Reason
 
●     Termination of employment by employee due to disability, retirement or Good Reason
●     Termination of employment by Company without Cause
 
 
Richard D. Kinder
 
2 years
 
2 years
 
2 years
 
Park Shaper
 
 
2 years
 
2 years
 
2 years
 
Steven Kean
 
 
2 years
 
2 years
 
1 year
 


 
3
 


Richard Bradley
 
 
2 years
 
2 years
 
1 year
 
Jeffrey Armstrong
 
 
2 years
 
2 years
 
1 year
 
Joseph Listengart
 
 
2 years
 
2 years
 
1 year
 
Thomas Bannigan
 
 
2 years
 
2 years
 
1 year
 
Ian Anderson
 
 
2 years
 
2 years
 
1 year
 
David Kinder
 
 
2 years
 
2 years
 
1 year
 
James Street
 
 
2 years
 
2 years
 
1 year
 
Thomas Martin
 
 
2 years
 
1 year
 
1 year
 
Kimberly Dang
 
 
2 years
 
1 year
 
1 year
 

 

 
4
 


 
EXHIBIT A
 
DIVIDEND POLICY
 
(See Attached)
 

 
5
 


Exhibit 10.1

KINDER MORGAN, INC.
 
2011 STOCK INCENTIVE PLAN
 
 
 
1.   PURPOSE OF THE PLAN . The purpose of the 2011 Stock Incentive Plan (the “Plan”) of Kinder Morgan, Inc., a Delaware corporation (the “Company”), is to provide incentive for future endeavors and to advance the interests of the Company and its stockholders by encouraging ownership of the shares of Class P common stock of the Company, $0.01 par value (“Stock”), by its Employees (as defined below) and Consultants (as defined below) and to enable the Company to compete effectively with other enterprises for the services of such new employees and consultants as may be needed for the continued improvement of the Company’s business, through the grant of (a) options to purchase Stock (“Options”), (b) shares of Stock that are subject to restrictions set forth in the Plan or any individual award agreement (“Restricted Stock” or a “Restricted Stock Award”), (c) Stock Appreciation Rights (as defined below), (d) hypothetical shares of Stock (a “Restricted Stock Unit”, and collectively with a Restricted Stock Award, a “Restricted Award”), (e) Performance Compensation Awards (as defined below) and (f) Other Stock Based-Awards (as described in Section 10) (such Options, Restricted Awards, Stock Appreciation Rights, Performance Compensation Awards and Other Stock-Based Awards, collectively, the “Awards”).
 
2.   PARTICIPANTS .
 
(a)   Awards may be granted under the Plan to any Employees and Consultants of the Company and its Affiliates (as defined below, including Affiliates that become such after adoption of the Plan) as shall be determined by the Committee (each, a “Grantee”); provided, however, that Incentive Stock Options may be granted only to Employees, and no Awards may be granted to any person if such grant would cause the Plan to cease to be an “employee benefit plan” as defined in Rule 405 of Regulation C promulgated under the Securities Act.
 
(b)   A Consultant shall not be eligible for the grant of an Award if, at the time of grant, a Form S-8 Registration Statement under the Securities Act (“Form S-8”) is not available to register either the offer or the sale of the Company’s securities to such Consultant because of the nature of the services that the Consultant is providing to the Company (i.e., capital raising), or because the Consultant is not a natural person, or as otherwise provided by the rules governing the use of Form S-8, unless the Company determines both (i) that such grant (A) shall be registered in another manner under the Securities Act ( e.g. , on a Form S-3 Registration Statement) or (B) does not require registration under the Securities Act in order to comply with the requirements of the Securities Act, if applicable, and (ii) that such grant complies with the securities laws of all other relevant jurisdictions.
 
3.   EFFECTIVE DATE; TERM OF THE PLAN . The Plan is effective (the “Effective Date”) as of January 1, 2011, subject to the approval of the Plan by the Company's stockholders within twelve months before or after the Effective Date.  If the Plan is not so approved by the Company's stockholders, (a) the Plan shall not be effective, and (b) any grants of Awards under the Plan shall immediately expire and be of no force and effect.  No Awards may be exercised or paid prior to the approval of the Plan by the Company's stockholders.  No Awards may be
 

 
 
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granted under the Plan after the tenth anniversary of the Effective Date or the tenth anniversary of the date on which the Plan is approved by the Company's stockholders, whichever is earlier.  The Plan shall remain in effect until all Awards granted under the Plan have been satisfied or expired.
 
4.   DEFINITIONS.
 
(a)   “Affiliate” means any entity in which the Company has a direct or indirect ownership interest selected by the Committee; provided, that, for purposes of the definitions of "Change in Control" and "Permitted Holders," "Affiliate" means, with respect to any Person, any other Person that directly or indirectly controls, is controlled by or is under common control with, the Person in question.  As used in this definition of "Affiliate," referred to in the last proviso of the preceding sentence, the term "control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through ownership of voting securities, by contract or otherwise.
 
(b)   “Award” means any right granted under the Plan, including an Option, a Restricted Stock Award, a Restricted Stock Unit, a Performance Compensation Award, a Stock Appreciation Right, and Other Stock Based-Award.
 
(c)   “Award Agreement” means a written agreement between the Company and a Grantee evidencing the terms and conditions of an individual Award grant.  Each Award Agreement shall be subject to the terms and conditions of the Plan.
 
(d)   “Board” means the Board of Directors of the Company.
 
(e)   “Change in Control” means:
 
(i)   the acquisition by any Person or group (within the meaning of Section 13(d)(3) or Section 14(d)(2) of the Exchange Act, or any successor provision), including any group acting for the purpose of acquiring, holding or disposing of securities (within the meaning of Rule 13d-5(b)(1) under the Exchange Act), other than any of the Permitted Holders, in a single transaction or a series of related transactions, by way of merger, amalgamation, consolidation or other business combination or purchase of beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act, or any successor provision), of more than 50% of the total voting power of the Company (or the surviving or resulting entity thereof) after giving effect to such transaction;
 
(ii)   a sale, merger or similar transaction or related series of transactions involving the Company, as a result of which the Permitted Holders do not collectively hold (either directly or indirectly) more than 50% of the voting power of the Company (or the surviving or resulting entity thereof) after giving effect to such transaction or related series of transactions; provided, however, that such sale, merger or similar transaction shall not constitute a Change in Control in the event that, following such sale, merger or similar transaction (a) the Permitted Holders continue to collectively own at least 35% of the voting power of the Company (or the surviving or resulting entity thereof), (b) no other Person or group (within the meaning of Section 13(d)(3) or Section 14(d)(2) of the Exchange Act, or any successor provision), including any group acting for
 

 
 
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the purpose of acquiring, holding or disposing of securities (within the meaning of Rule 13d-5(b)(1) under the Exchange Act) owns more than 35% of the voting power of the Company (or the surviving or resulting entity thereof), and (c) either Richard D. Kinder or C. Park Shaper is a senior executive officer of the Company (or the surviving or resulting entity thereof);
 
(iii)   the sale or transfer of all or substantially all of the assets of the Company and its subsidiaries, taken as a whole, in a single transaction or a series of related transactions, in any case, other than to an entity of which more than 50% of the voting power is held (either directly or indirectly) by one or more Permitted Holders or by Persons who held (either directly or indirectly) more than 50% of the voting power of the Company immediately prior to such transaction (or in each case their Affiliates);
 
(iv)   during any period of two consecutive years following the closing of the IPO, individuals who at the beginning of such period constitute the Board, and any new director whose election by the Board or nomination for election by the Company's stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason other than normal retirement, death or disability to constitute at least a majority of the Board then in office; or
 
(v)   the stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company's assets (or any transaction having a similar effect).
 
(f)   “Change in Control Value” means, with respect to a Change in Control, (i) the per share price offered to stockholders of the Company in any merger, consolidation, reorganization, sale of assets or dissolution transaction, (ii) the price per share offered to stockholders of the Company in any tender offer, exchange offer or sale or other disposition of outstanding voting stock of the Company, or (iii) if such Change in Control occurs other than as described in clause (i) or clause (ii), the Fair Market Value per share of the shares into which Awards are exercisable, as determined by the Committee, whichever is applicable.  In the event that the consideration offered to stockholders of the Company consists of anything other than cash, the Committee shall determine the fair cash equivalent of the portion of the consideration offered which is other than cash.
 
(g)   “Code” means the Internal Revenue Code of 1986, as it may be amended from time to time.
 
(h)   “Committee” means the Board or the Compensation Committee, as administrator of the Plan.
 
(i)   “Compensation Committee” means a committee of one or more members of the Board appointed by the Board to administer the Plan in accordance with Section 6(c).
 
(j)   “Company” means Kinder Morgan, Inc., a Delaware corporation.
 

 
 
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(k)   “Consultant” means any individual, including an advisor engaged by the Company or an Affiliate to render consulting or advisory services and who is compensated for such services or who provides bona fide services to the Company or an Affiliate pursuant to a written agreement; provided that such individual is a natural person and such services are not in connection with the offer or sale of securities in a capital raising transaction and do not directly or indirectly promote or maintain a market for the Company’s securities.
 
(l)   “Covered Employee” has the same meaning as set forth in Code Section 162(m)(3).
 
(m)   “Date of Grant” means the date on which the Committee adopts a resolution, or takes other appropriate action, expressly granting an Award to a Grantee that specifies the key terms and conditions of the Award and from which the Grantee begins to benefit from or be adversely affected by subsequent changes in the Fair Market Value of the Stock or, if a later date is set forth in such resolution, then such date as is set forth in such resolution.  In no event shall a Date of Grant be a date prior to the date of any such action by the Committee.
 
(n)   “Director” means a member of the Board.
 
(o)   “Employee” means any individual employed by the Company or an Affiliate.  Notwithstanding the foregoing, for purposes of granting an Incentive Stock Option, an individual is not an Employee unless he or she is an employee of a Parent Corporation or Subsidiary Corporation.
 
(p)   “Entity” means a corporation, limited liability company, venture, partnership (general or limited), trust, unincorporated organization, cooperative, association or other entity.
 
(q)   “Exchange Act” means the Securities Exchange Act of 1934, as amended.
 
(r)   “Fair Market Value” means, as of any date, the value of the Stock as determined below.  The Fair Market Value on any date on which the Stock is registered under Section 12 of the Exchange Act and listed on any national securities exchange shall be the closing price of a share of Stock on any national securities exchange on such date (if such national securities exchange is not open for trading on such date, then the closing price per share of Stock on such national securities exchange on the next preceding day on which the national securities exchange was open for trading), and thereafter (i) if the Stock is admitted to quotation on the over the counter market or any interdealer quotation system, the Fair Market Value on any given date shall not be less than the average of the highest bid and lowest asked prices of the Stock reported for such date or, if no bid and asked prices were reported for such date, for the last day preceding such date for which such prices were reported, or (ii) in the absence of an established market for the Stock, the Fair Market Value determined in good faith by the Committee and such determination shall be conclusive and binding on all persons.  Notwithstanding the foregoing, the determination of fair market value in all cases shall be in accordance with the requirements set forth under Code Section 409A and the regulations thereunder.
 
(s)   “Form S-8” has the meaning set forth in Section 2(b).
 
(t)   “Free Standing Rights” has the meaning set forth in Section 9(a).
 

 
 
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(u)   “Grantee” means a person to whom an Award is granted pursuant to the Plan or, if applicable, such other person who holds an outstanding Award.
 
(v)   “ Incentive Stock Option ” means an Option that is designated by the Committee as an incentive stock option as described in Code Section 422 and otherwise meets the requirements set forth in the Plan.
 
(w)   “IPO” means the initial underwritten public offering of Stock for cash pursuant to a registration statement filed under the Securities Act reasonably promptly after approval of the Plan by the Company's stockholders.
 
(x)   “ Negative Discretion ” means the discretion authorized by the Plan to be applied by the Committee to eliminate or reduce the size of a Performance Compensation Award in accordance with Section 13(d)(iv) of the Plan.
 
(y)   “Non-Employee Director” means a Director who is a “non-employee director” within the meaning of Rule 16b-3.
 
(z)   “ Nonqualified Stock Option ” means an Option that is not designated by the Committee as an Incentive Stock Option.
 
(aa)   “Officer” means a person who is an officer of the Company within the meaning of Section 16 of the Exchange Act and the rules and regulations promulgated thereunder.
 
(bb)   “Option” means an Incentive Stock Option or a Nonqualified Stock Option granted pursuant to the Plan.
 
(cc)   “Option Agreement” means a written agreement between the Company and an Optionholder evidencing the terms and conditions of an individual Option grant.  Each Option Agreement shall be subject to the terms and conditions of the Plan and need not be identical.
 
(dd)   “Optionholder” means a Grantee to whom an Option is granted pursuant to the Plan or, if applicable, such other person who holds an outstanding Option.
 
(ee)   “Outside Director” means a Director who is an “outside director” within the meaning of Code Section 162(m) and Treasury Regulations Section 1.162-27(e)(3) or any successor to such statute and regulation.
 
(ff)   “Parent Corporation” means a "parent corporation" of the Company within the meaning of Code Section 424(e).
 
(gg)   “Performance Compensation Award ” means any Award designated by the Committee as a Performance Compensation Award pursuant to Section 13 of the Plan.
 
(hh)   “ Performance Criteria ” means the criterion or criteria that the Committee shall select for purposes of establishing the Performance Goal(s) for a Performance Period with respect to any Performance Compensation Award under the Plan.  The Performance Criteria that will be used to establish the Performance Goal(s) shall be based on the attainment of specific
 

 
 
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levels of performance of the Company (or Affiliate, division or operational unit of the Company) and shall be limited to the following:
 
(i)   the price of a share of Stock or of the equities of a subsidiary or business unit designated by the Committee;
 
(ii)   the earnings per share of Stock of the Company or earnings per share of a subsidiary or business unit designated by the Committee;
 
(iii)   the total stockholder or unitholder value of the Company or a subsidiary or business unit designated by the Committee;
 
(iv)   dividends or distributions of the Company or a subsidiary or business unit designated by the Committee;
 
(v)   revenues of the Company or a subsidiary or business unit designated by the Committee;
 
(vi)   debt/equity, interest coverage, or indebtedness/earnings before or after interest, taxes, depreciation and amortization ratios of the Company or a subsidiary or business unit designated by the Committee;
 
(vii)   cash coverage ratio of the Company or a subsidiary or business unit designated by the Committee;
 
(viii)   net income (before or after taxes) of the Company or a subsidiary or business unit designated by the Committee;
 
(ix)   cash flow or cash flow return on investment of the Company or a subsidiary or business unit designated by the Committee;
 
(x)   earnings before or after interest, taxes, depreciation, and/or amortization of the Company or a subsidiary or business unit designated by the Committee;
 
(xi)   economic value added of the Company or a subsidiary or business unit designated by the Committee; or
 
(xii)   return on stockholders' or unitholders' equity achieved by the Company or a subsidiary or business unit designated by the Committee.
 
Any one or more of the Performance Criteria may be used on an absolute or relative basis to measure the performance of the Company and/or an Affiliate as a whole or any business unit of the Company and/or an Affiliate or any combination thereof, as the Committee may deem appropriate, or any of the above Performance Criteria as compared to the performance of a group of comparable companies, or published or special index that the Committee, in its sole discretion, deems appropriate.  The Committee also has the authority to provide for accelerated vesting of any Award based on the achievement of Performance Goals pursuant to the Performance Criteria specified in this paragraph.  To the extent required under Code Section
 

 
 
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162(m), the Committee shall, within the first 90 days of a Performance Period (or, if longer or shorter, within the maximum period allowed under Code Section 162(m)), define in an objective fashion the manner of calculating the Performance Criteria it selects to use for such Performance Period.  In the event that applicable tax and/or securities laws change to permit Committee discretion to alter the governing Performance Criteria without obtaining stockholder approval of such changes, the Committee shall have sole discretion to make such changes without obtaining stockholder approval.
 
(ii)   “Performance Formula ” means, for a Performance Period, one or more objective formulas applied against the relevant Performance Goal to determine, with regard to the Performance Compensation Award of a particular Grantee, whether all, some portion but less than all, or none of the Performance Compensation Award has been earned for the Performance Period.
 
(jj)   “Performance Goals ” means, for a Performance Period, one or more goals established by the Committee for the Performance Period based upon the Performance Criteria.  The Committee is authorized, in its sole and absolute discretion, to adjust or modify the calculation of a Performance Goal for such Performance Period (provided, that if an Award is intended to constitute "performance based compensation" under Code Section 162(m), such adjustment or modification may be made only to the extent permitted under Code Section 162(m)) in order to prevent the dilution or enlargement of the rights of Grantees based on the following events:
 
(i)   asset write-downs;
 
(ii)   litigation or claim judgments or settlements;
 
(iii)   the effect of changes in tax laws, accounting principles, or other laws or regulatory rules affecting reported results;
 
(iv)   any reorganization and restructuring programs;
 
(v)   extraordinary nonrecurring items as described in Accounting Principles Board Opinion No. 30 (or any successor or pronouncement thereto) and/or in management’s discussion and analysis of financial condition and results of operations appearing in the Company’s annual report to stockholders for the applicable year;
 
(vi)   acquisitions or divestitures;
 
(vii)   any other specific unusual or nonrecurring events, or objectively determinable category thereof;
 
(viii)   foreign exchange gains and losses; and
 
(ix)   a change in the Company’s fiscal year.
 
(kk)   “Performance Period ” means one or more periods of time as the Committee may select, over which the attainment of one or more Performance Goals will be measured for the
 

 
 
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purpose of determining a Grantee’s right to and the payment of a Performance Compensation Award.
 
(ll)   “Permitted Holders ” means, at any time, Richard D. Kinder and investment funds advised by, or affiliated with, Goldman, Sachs & Co., Highstar Capital LP, The Carlyle Group and Riverstone Holdings LLC.
 
(mm)   “Person ” means a natural person or an entity.
 
(nn)   “Plan” means this Kinder Morgan, Inc. 2011 Stock Incentive Plan.
 
(oo)   “Related Stock Appreciation Rights” has the meaning set forth in Section 9(a).
 
(pp)   “Restricted Award” means any Award granted pursuant to Section 8(a).
 
(qq)   “Restricted Period” has the meaning set forth in Section 8(a).
 
(rr)   “Rule 16b-3” means Rule 16b-3 promulgated under the Exchange Act or any successor to Rule 16b-3, as in effect from time to time.
 
(ss)   “SAR Amount” has the meaning set forth in Section 9(k).
 
(tt)   “SAR exercise price” has the meaning set forth in Section 9(a).
 
(uu)   “Securities Act” means the Securities Act of 1933, as amended.
 
(vv)   “Share for Share Exchange ” has the meaning set forth in Section 7(g).
 
(ww)   “Stock” means shares of Class P common stock of the Company, $0.01 par value.
 
(xx)   “Stock Appreciation Right” means any Award granted pursuant to Section 9.
 
(yy)   “Subsidiary Corporation” means a "subsidiary corporation" of the Company within the meaning of Code Section 424(f).
 
5.   STOCK SUBJECT TO THE PLAN .
 
(a)   Subject to the provisions of Section 11, the aggregate number of shares of Stock for which Awards may be granted under the Plan shall not exceed 15,000,000, any or all of which may be issued pursuant to Incentive Stock Options; provided, that, if, on or prior to the termination of the Plan, any Option granted under the Plan shall have expired or terminated for any reason without having been exercised in full or any shares of Restricted Stock shall have been forfeited, or any other Awards for which Stock is deliverable are so forfeited, such unpurchased or forfeited shares of Stock covered thereby shall again become available for the grant of Awards under the Plan.  The exercise of a Stock Appreciation Right for cash or the payment of any Award in cash shall not count against the aggregate plan limit described above.  Notwithstanding anything to the contrary contained herein:  (i) shares of Stock surrendered or withheld in payment of the exercise price of an Option shall count against the aggregate plan limit described above; and (ii) shares of Stock withheld by the Company to satisfy any tax
 

 
 
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withholding obligation shall count against the aggregate plan limit described above.  No fractional shares of Stock may be issued hereunder.
 
(b)   The Stock to be delivered pursuant to an Award shall be made available, at the discretion of the Committee, either from authorized but previously unissued shares of Stock or from Stock reacquired by the Company, including Stock purchased in the open market, and Stock held in the treasury of the Company.
 
6.   ADMINISTRATION OF THE PLAN .
 
(a)   The Plan shall be administered by the Board unless and until the Board delegates administration to a Compensation Committee, as provided in Section 6(c).
 
(b)   The Board shall have the power and authority: (i) to construe and interpret the Plan and apply its provisions; (ii) to promulgate, amend, and rescind rules and regulations relating to the administration of the Plan; (iii) to authorize any person to execute, on behalf of the Company, any instrument required to carry out the purposes of the Plan; (iv) to delegate its authority to one or more Officers of the Company with respect to awards that do not involve Covered Employees or “insiders” within the meaning of Section 16 of the Exchange Act; (v) to determine when Awards are to be granted under the Plan and the applicable Date of Grant; (vi) from time to time to select, subject to the limitations set forth in this Plan, those Grantees to whom Awards shall be granted and to make any such grants; (vii) to determine the number of shares of Stock to be made subject to each Award; (viii) to prescribe the terms and conditions of each Award, including, without limitation, the exercise price and medium of payment, vesting provisions and right of repurchase provisions, and to specify the provisions of the Award Agreement relating to such grant or sale; (ix) to amend any outstanding Awards, including for the purpose of modifying the time or manner of vesting, or the term of any outstanding Award; (x) to determine the duration and purpose of leaves of absences which may be granted to a Grantee without constituting termination of his or her employment for purposes of the Plan, which periods shall be no shorter than the periods generally applicable to Employees under the Company’s employment policies; (xi) to make decisions with respect to outstanding Awards that may become necessary upon a change in corporate control or an event that triggers anti-dilution adjustments; and (xii) to exercise discretion to make any and all other determinations which it determines to be necessary or advisable for administration of the Plan.  The Board also may modify the purchase price or the exercise price of any outstanding Award, provided that if the modification effects a repricing, stockholder approval shall be required before the repricing is effective.
 
(c)   The Compensation Committee.
 
(i)           The Board may delegate administration of the Plan to a Compensation Committee of one or more members of the Board.  If administration is delegated to a Compensation Committee, the Compensation Committee shall have, in connection with the administration of the Plan, the powers theretofore possessed by the Board as described in Section 6(b), including the power to delegate to a subcommittee any of the administrative powers the Compensation Committee is authorized to exercise, subject, however, to such resolutions, not inconsistent with the provisions of the Plan, as may be
 

 
 
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adopted from time to time by the Board.  The Board may abolish the Compensation Committee at any time and revest in the Board the administration of the Plan.  The members of the Compensation Committee shall be appointed by and serve at the pleasure of the Board.  From time to time, the Board may increase or decrease the size of the Compensation Committee, add additional members to, remove members (with or without cause) from, appoint new members in substitution therefor, and fill vacancies, however caused, in the Compensation Committee.  The Compensation Committee shall act pursuant to a vote of the majority of its members or, in the case of a committee comprised of only two members, the unanimous consent of its members, whether present or not, or by the written consent of the majority of its members and minutes shall be kept of all of its meetings and copies thereof shall be provided to the Board.  Subject to the limitations prescribed by the Plan and the Board, the Compensation Committee may establish and follow such rules and regulations for the conduct of its business as it may determine to be advisable.
 
(ii)           At such time as the Stock is required to be registered under Section 12 of the Exchange Act, the Board shall have discretion to determine whether or not it intends to comply with the exemption requirements of Rule 16b-3 and/or Code Section 162(m), if applicable.  If the Board intends to satisfy such exemption requirements, with respect to Awards to any Covered Employee and with respect to any insider subject to Section 16 of the Exchange Act, the Compensation Committee shall be a compensation committee of the Board that at all times consists solely of two or more Non-Employee Directors who are also Outside Directors.  Within the scope of such authority, the Board or the Compensation Committee may (A) delegate to a committee of one or more members of the Board who are not Outside Directors the authority to grant Awards to eligible persons who are either (x) not then Covered Employees and are not expected to be Covered Employees at the time of recognition of income resulting from such Award or (y) not persons with respect to whom the Company wishes to comply with Code Section 162(m) or (B) delegate to a committee of one or more members of the Board who are not Non-Employee Directors the authority to grant Awards to eligible persons who are not then subject to Section 16 of the Exchange Act.  Nothing herein shall create an inference that an Option is not validly granted under the Plan in the event Awards are granted under the Plan by a compensation committee of the Board that does not at all times consist solely of two or more Non-Employee Directors who are also Outside Directors.
 
(d)   The interpretation and construction of any provision of the Plan or of any Award granted under it by the Committee shall be final, conclusive and binding upon all parties, including the Company, its stockholders and Directors, and the executives and employees of the Company and its Affiliates.  No member of the Committee shall be liable to the Company, any stockholder, any Grantee or any employee of the Company or its Affiliates for any action or determination made in good faith with respect to the Plan or any Award granted under it.  No member of the Committee may vote on any Award to be granted to him or her.
 
(e)   The expenses of administering the Plan shall be borne by the Company.
 

 
 
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7.   OPTIONS .
 
(a)   An Option granted under the Plan may be either an Incentive Stock Option or a Nonqualified Stock Option; provided, however, that no Incentive Stock Option shall be granted to any individual who is not an employee of the Company, a Parent Corporation or Subsidiary Corporation.  Each Option shall be in such form and shall contain such terms and conditions as the Committee shall deem appropriate.  Notwithstanding anything herein to the contrary, it is the intention of the Company that all Options granted hereunder shall comply with the provisions and requirements of Code Section 409A to the extent applicable.  The provisions of separate Options need not be identical.
 
(b)   The exercise price per share of each Option shall be not less than 100% of the Fair Market Value of a share of Stock on the date the Option is granted.  Notwithstanding the foregoing, an Option may be granted with an exercise price lower than that set forth in the preceding sentence if such Option is granted pursuant to an assumption or substitution for another option in a manner satisfying the provisions of Code Section 424(a).  No Option shall include any feature for the deferral of compensation other than the deferral of recognition of income until the exercise of the Option.
 
(c)   The exercise price of any outstanding Options shall not be reduced during the term of such Options except by reason of an adjustment pursuant to Section 11 hereof (and any such reduction shall be in accordance with Code Section 409A), nor shall the Committee cancel outstanding Options and reissue new Options at a lower exercise price in substitution for the canceled Options.
 
(d)   The expiration date of an Option granted under the Plan shall be as determined by the Committee at the time of grant, provided that each such Option shall expire not more than ten years after the date the Option is granted.
 
(e)   Each Option shall become exercisable in whole or in part or in installments at such time or times as the Committee may prescribe at the time the Option is granted and specify in the Option Agreement.
 
(f)   Notwithstanding any contrary provision contained herein, unless otherwise expressly provided in the Option Agreement, any Option granted hereunder shall become immediately vested in full upon the occurrence of a Change in Control of the Company.
 
(g)   The exercise price of an Option shall be paid, to the extent permitted by applicable statutes and regulations, either (i) in cash or by certified or bank check, or (ii) in the discretion of the Committee, upon such terms as the Committee shall approve: (A) by delivery to the Company of other shares of Stock, duly endorsed for transfer to the Company, with a Fair Market Value on the date of delivery equal to the exercise price (or portion thereof) due for the number of shares of Stock being acquired, or by means of attestation whereby the Grantee identifies for delivery specific shares of Stock that have a Fair Market Value on the date of attestation equal to the exercise price (or portion thereof) and receives a number of shares of Stock equal to the difference between the number of shares of Stock thereby purchased and the number of identified attestation shares of Stock (a “Share for Share Exchange”); (B) by a
 

 
 
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“cashless” exercise program established with a broker; (C) by reduction in the number of shares of Stock otherwise deliverable upon exercise of such Option with a Fair Market Value equal to the aggregate exercise price at the time of exercise; or (D) in any other form of legal consideration that may be acceptable to the Committee.  Notwithstanding the foregoing, during any period for which the Stock is publicly traded (i.e., the Stock is listed on any established stock exchange or a national market system) an exercise by an executive officer that involves or may involve a direct or indirect extension of credit or arrangement of an extension of credit by the Company, directly or indirectly, in violation of Section 402(a) of the Sarbanes-Oxley Act (codified as Section 13(k) of the Exchange Act) shall be prohibited with respect to any Award under this Plan.
 
(h)   A Nonqualified Stock Option may, in the sole discretion of the Committee, be transferable to a permitted transferee upon written approval by the Committee to the extent provided in the Option Agreement.  A permitted transferee includes: (i) a transfer by gift or domestic relations order to a member of the Optionholder’s immediate family (child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law, including adoptive relationships), any person sharing the Optionholder’s household (other than a tenant or employee), a trust in which these persons have more than 50% of the beneficial interest, a foundation in which these persons (or the Optionholder) control the management of assets, and any other entity in which these persons (or the Optionholder) own more than 50% of the voting interests; (ii) third parties designated by the Committee in connection with a program established and approved by the Committee pursuant to which Grantees may receive a cash payment or other consideration in consideration for the transfer of such Option; and (iii) such other transferees as may be permitted by the Committee in its sole discretion.  If the Option does not provide for transferability, then the Option shall not be transferable except by will or by the laws of descent and distribution and shall be exercisable during the lifetime of the Optionholder only by the Optionholder.  Notwithstanding the foregoing, the Optionholder may, by delivering written notice to the Company, in a form satisfactory to the Company, designate a third party who, in the event of the death of the Optionholder, shall thereafter be entitled to exercise the Option.
 
(i)   No Optionholder shall have any rights to distributions or other rights of a common stockholder with respect to Stock subject to an Option prior to the purchase of such Stock upon exercise of the Option.
 
(j)   Each individual Option Agreement shall describe the effect of the Optionholder's termination of employment or service with the Company or an Affiliate on the exercisability of the Options held by the Optionholder, provided that no Option shall remain exercisable beyond the expiration of the original term of the Option.  Notwithstanding the foregoing, the Committee may, at any time prior to any termination of such employment or service, determine in its sole discretion that the exercise of any Option after termination of such employment or other relationship with the Company shall be subject to satisfaction of the conditions precedent that the Optionholder refrain from engaging, directly or indirectly, in any activity which is competitive with any activity of the Company or any of its Affiliates thereof and from otherwise acting, either prior to or after termination of such employment or other relationship, in any manner inimical or in any way contrary to the best interests of the Company and that the Optionholder
 

 
 
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furnish to the Company such information with respect to the satisfaction of the foregoing condition precedent as the Committee shall reasonably request.
 
(k)   An Optionholder under the Plan may make written designation of a beneficiary on forms prescribed by and filed with the Secretary of the Company. Such beneficiary, or if no such designation of any beneficiary has been made, the legal representative of such Optionholder or such other person entitled thereto as determined by a court of competent jurisdiction, may exercise, in accordance with and subject to the provisions of this Section 7, any unterminated and unexpired Option granted to such Optionholder to the same extent that the Optionholder himself or herself could have exercised such Option were he alive or able; provided, however, that no Option granted under the Plan shall be exercisable for more shares of Stock than the Optionholder could have purchased thereunder on the date his or her employment by, or other relationship with, the Company and its Affiliates was terminated.
 
(l)   Notwithstanding anything to the contrary in this Section 7, Incentive Stock Options shall be subject to the following requirements:
 
(i)   If an Incentive Stock Option is granted to a Grantee who owns stock representing more than ten percent of the voting power of all classes of stock of the Company or of a Parent Corporation or Subsidiary Corporation, the Option shall expire not more than five years after the date the Option is granted and the exercise price shall be not less than 110% of the Fair Market Value of a share of Stock on the date the Option is granted.
 
(ii)   An Incentive Stock Option shall not be transferable except by will or by the laws of descent and distribution and shall be exercisable during the lifetime of the Optionholder only by the Optionholder.
 
(iii)   To the extent the aggregate Fair Market Value (determined as of the date the Option is granted) of Stock for which Incentive Stock Options are exercisable for the first time by any Grantee during any calendar year (under all plans of the Company, a Parent Corporation or a Subsidiary Corporation) exceeds $100,000, such Incentive Stock Options shall be treated as Nonqualified Stock Options.
 
(m)   Notwithstanding anything to the contrary in this Section 7, if an Option is granted to an Employee with respect to whom Stock does not constitute "service recipient stock” (as defined in Treasury Regulation Section 1.409A-1(b)(5)(iii)), the Option shall comply with Code Section 409A to the extent applicable.
 
8.   RESTRICTED AWARDS .
 
(a)   A Restricted Award is an Award of Stock (“Restricted Stock”) or hypothetical shares of Stock (“Restricted Stock Units”) having a value equal to the Fair Market Value of an identical number of shares of Stock, which may, but need not, provide that such Restricted Award will be subject to forfeiture and may not be sold, assigned, transferred or otherwise disposed of, pledged or hypothecated as collateral for a loan or as security for the performance of any obligation or for any other purpose for such period (the “Restricted Period”) as the
 

 
 
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Committee shall determine.  In the discretion of the Committee, a Restricted Award may be granted as a Performance Compensation Award under Section 13.
 
(b)   Each Grantee granted Restricted Stock shall execute and deliver to the Company an Award Agreement with respect to the Restricted Stock setting forth the restrictions and other terms and conditions applicable to such Restricted Stock.  If the Committee determines that the Restricted Stock shall be held by the Company or in escrow rather than delivered to the Grantee pending the release of the applicable restrictions, the Committee may require the Grantee to additionally execute and deliver to the Company (i) an escrow agreement satisfactory to the Committee, if applicable and (ii) the appropriate blank stock power with respect to the Restricted Stock covered by such agreement.  If a Grantee shall fail to execute an agreement evidencing an Award of Restricted Stock and, if applicable, an escrow agreement and stock power, the Award shall be null and void.  Subject to the restrictions set forth in the Award Agreement, the Grantee generally shall have the rights and privileges of a Class P common stockholder as to such Restricted Stock, including the right to vote such Restricted Stock.  At the discretion of the Committee, cash dividends and Stock dividends with respect to the Restricted Stock may be either currently paid to the Grantee or withheld by the Company for the Grantee’s account, and interest may be credited on the amount of the cash dividends withheld at a rate and subject to such terms as determined by the Committee.  The cash dividends or Stock dividends so withheld by the Committee and attributable to any particular share of Stock (and earnings thereon, if applicable) shall be distributed to the Grantee in cash or, at the discretion of the Committee, in Stock having a Fair Market Value equal to the amount of such dividends, if applicable, upon the release of restrictions on such Stock and, if such Stock is forfeited, the Grantee shall have no right to such dividends.
 
(c)   The terms and conditions of a grant of Restricted Stock Units shall be reflected in a written Award Agreement.  No Stock shall be issued at the time a Restricted Stock Unit is granted, and the Company will not be required to set aside a fund for the payment of any such Award.  At the discretion of the Committee, each Restricted Stock Unit (representing one share of Stock) may be credited with cash distributions and Stock dividends paid by the Company in respect of one share of Stock (“ Dividend Equivalents ”).  At the discretion of the Committee, Dividend Equivalents may be either currently paid to the Grantee or withheld by the Company for the Grantee’s account, and interest may be credited on the amount of cash Dividend Equivalents withheld at a rate and subject to such terms as determined by the Committee.  Dividend Equivalents credited to a Grantee’s account and attributable to any particular Restricted Stock Unit (and earnings thereon, if applicable) shall be distributed in cash or, at the discretion of the Committee, in Stock having a Fair Market Value equal to the amount of such Dividend Equivalents and earnings, if applicable, to the Grantee upon settlement of such Restricted Stock Unit and, if such Restricted Stock Unit is forfeited, the Grantee shall have no right to such Dividend Equivalents.
 
(d)   Restricted Stock awarded to a Grantee shall be subject to the following restrictions until the expiration of the Restricted Period, and to such other terms and conditions as may be set forth in the applicable Award Agreement:  (A) if an escrow arrangement is used, the Grantee shall not be entitled to delivery of the Stock certificate; (B) the Stock shall be subject to the restrictions on transferability set forth in the Award Agreement; (C) the Stock shall be subject to forfeiture to the extent provided in the applicable Award Agreement; and (D) to the
 

 
 
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extent such shares of Stock are forfeited, the Stock certificates shall be returned to the Company, and all rights of the Grantee to such shares of Stock and as a stockholder with respect to such shares of Stock shall terminate without further obligation on the part of the Company.
 
(e)   Restricted Stock Units awarded to any Grantee shall be subject to (A) forfeiture until the expiration of the Restricted Period, and satisfaction of any applicable Performance Goals during such period, to the extent provided in the applicable Award Agreement, and to the extent such Restricted Stock Units are forfeited, all rights of the Grantee to such Restricted Stock Units shall terminate without further obligation on the part of the Company and (B) such other terms and conditions as may be set forth in the applicable Award Agreement.
 
(f)   Upon termination of employment with or service to the Company or any of its Affiliates (including by reason of such Affiliate ceasing to be an Affiliate of the Company), during the applicable Restricted Period, Restricted Stock and Restricted Stock Units shall be forfeited; provided, that the Committee may provide, by rule or regulation or in any Award Agreement, or may determine in any individual case, that restrictions or forfeiture conditions relating to Restricted Stock or Restricted Stock Units will be waived in whole or in part in the event of terminations resulting from specified causes, and the Committee may in other cases waive in whole or in part the forfeiture restrictions of Restricted Stock or Restricted Stock Units.
 
(g)   Unless otherwise determined by the Committee or set forth in the applicable Award Agreement, upon a Change in Control of the Company, all Restricted Stock and Restricted Stock Units shall become immediately vested and all restrictions with respect thereto shall lapse, other than restrictions on transfer imposed under the federal securities laws.
 
(h)   With respect to Restricted Stock and Restricted Stock Units, the Restricted Period shall commence on the Date of Grant and end at the time or times set forth on a schedule established by the Committee in the applicable Award Agreement.
 
(i)   Upon the expiration of the Restricted Period with respect to any Restricted Stock, the restrictions set forth in this Section 8 and the applicable Award Agreement shall be of no further force or effect with respect to such Stock, except as set forth in the applicable Award Agreement.  If an escrow arrangement is used, upon such expiration, the Company shall deliver to the Grantee, or his beneficiary, without charge, the Stock certificate evidencing the Restricted Stock which has not then been forfeited and with respect to which the Restricted Period has expired (to the nearest full share of Stock) and any cash distributions or Stock dividends credited to the Grantee’s account with respect to such Restricted Stock and the interest thereon, if any.  Upon the expiration of the Restricted Period with respect to any outstanding Restricted Stock Units, the Company shall deliver to the Grantee, or his beneficiary, without charge, one share of Stock for each such outstanding Restricted Stock Unit (“V ested Unit ”) and cash equal to any Dividend Equivalents credited with respect to each such Vested Unit in accordance with Section 8(c) hereof and the interest thereon or, at the discretion of the Committee, in Stock having a Fair Market Value equal to such Dividend Equivalents’ interest thereon, if any; provided, however, that, if explicitly provided in the applicable Award Agreement, the Committee may, in its sole discretion, elect to pay cash or part cash and part Stock in lieu of delivering only Stock for Vested Units.  If a cash payment is made in lieu of delivering Stock, the amount of such payment
 

 
 
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shall be equal to the Fair Market Value of the Stock as of the date on which the Restricted Period lapsed with respect to such Vested Unit.
 
(j)   Each certificate representing Restricted Stock awarded under the Plan shall bear a legend in the form the Company deems appropriate.
 
9.   STOCK APPRECIATION RIGHTS .
 
(a)   A Stock Appreciation Right means the right pursuant to an Award granted under this Section 9 to receive an amount set forth in paragraph (e) below upon the exercise of the Award.  Stock Appreciation Rights may be granted either alone (“Free Standing Rights”) or in conjunction with all or part of any Option granted under the Plan (“Related Stock Appreciation Rights”).  The Committee shall determine the Grantee to whom, and the time or times at which, grants of Stock Appreciation Rights shall be made; the number of shares of Stock to be subject to the Stock Appreciation Right; the exercise price per share of Stock (“SAR exercise price”); and all other conditions of Stock Appreciation Rights. No Related Stock Appreciation Right may be granted for more shares of Stock than are subject to the Option to which it relates.  A Stock Appreciation Right must be granted with an SAR exercise price not less than the Fair Market Value of a share of Stock on the Date of Grant.  The number of shares of Stock subject to the Stock Appreciation Right must be fixed on the Date of Grant of the Stock Appreciation Right, and the right must not include any feature for the deferral of compensation other than the deferral of recognition of income until the exercise of the right.  The provisions of Stock Appreciation Rights need not be the same with respect to each Grantee. Stock Appreciation Rights granted under the Plan shall be subject to the following terms and conditions set forth in this Section 9 and shall contain such additional terms and conditions, not inconsistent with the terms of the Plan, as the Committee shall deem desirable, as set forth in the applicable Award Agreement.
 
(b)   The Grantee of a Stock Appreciation Right shall not have any rights with respect to such Award, unless and until such recipient has executed an Award Agreement and delivered a fully executed copy thereof to the Company. Grantees who are granted Stock Appreciation Rights shall have no rights as common stockholders of the Company with respect to the grant or exercise of such rights.
 
(c)   Free Standing Rights shall be exercisable at such time or times and subject to such terms and conditions as shall be determined by the Committee at or after grant.
 
(d)   Related Stock Appreciation Rights shall be exercisable only at such time or times and to the extent that the Options to which they relate shall be exercisable in accordance with the provisions of Section 7 above and this Section 9 of the Plan.
 
(e)   Upon exercise of a Stock Appreciation Right, the Grantee shall be entitled to receive from the Company an amount equal to the product of (i) the excess of the Fair Market Value, on the date of exercise, of one share of Stock over the SAR exercise price per share of Stock specified in such Stock Appreciation Right or its related Option, multiplied by (ii) the number of shares of Stock for which such Stock Appreciation Right is exercised.  Payment with respect to the exercise of a Stock Appreciation Right that is not subject to Code Section 409A shall be paid on the date of exercise.  Payment with respect to the exercise of a Stock
 

 
 
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Appreciation Right that is subject to Code Section 409A shall be paid at the time specified in the Award in accordance with the provisions of Section 9(k).  Payment may be made in the form of Stock (with or without restrictions as to substantial risk of forfeiture and transferability, as determined by the Committee in its sole discretion), cash or a combination thereof, as determined by the Committee.  Fractional shares of Stock resulting from the exercise of a Stock Appreciation Right pursuant to this Section 9 shall be settled in cash.
 
(f)   The exercise price of a Free Standing Right shall be determined by the Committee, but shall not be less than 100% of the Fair Market Value of one share of Stock on the Date of Grant of such Stock Appreciation Right.  A Related Stock Appreciation Right granted simultaneously with or subsequent to the grant of an Option and in conjunction therewith or in the alternative thereto shall have the same exercise price as the related Option, shall be transferable only upon the same terms and conditions as the related Option, and shall be exercisable only to the same extent as the related Option; provided, however, that a Stock Appreciation Right, by its terms, shall be exercisable only when the Fair Market Value per share of Stock subject to the Stock Appreciation Right and related Option exceeds the exercise price per share of Stock thereof and no Stock Appreciation Rights may be granted in tandem with an Option unless the Committee determines that the requirements of Section 9(a) are satisfied.
 
(g)   Upon any exercise of a Related Stock Appreciation Right, the number of shares of Stock for which the related Option shall be exercisable shall be reduced by the number of shares of Stock for which the Stock Appreciation Right shall have been exercised.  The number of shares of Stock for which a Related Stock Appreciation Right shall be exercisable shall be reduced upon any exercise of the related Option by the number of shares of Stock for which such Option shall have been exercised.
 
(h)   Unless otherwise determined by the Committee or set forth in an applicable Award Agreement, upon a Change in Control of the Company, all Stock Appreciation Rights shall become immediately vested and exercisable.
 
(i)   Stock Appreciation Rights shall be transferable only when and to the extent that an Option would be transferable under Section 7 of the Plan.
 
(j)   Each individual Award Agreement shall describe the effect of the Grantee's termination of employment or service with the Company or an Affiliate on the exercisability of the Stock Appreciation Rights held by the Grantee, provided that no Stock Appreciation Right shall remain exercisable beyond the expiration of the original term of the Stock Appreciation Right.  Notwithstanding the foregoing, the Committee may, at any time prior to any termination of such employment or service, determine in its sole discretion that the exercise of any Stock Appreciation Right after termination of such employment or other relationship with the Company shall be subject to satisfaction of the conditions precedent that the Grantee refrain from engaging, directly or indirectly, in any activity which is competitive with any activity of the Company or any of its Affiliates thereof and from otherwise acting, either prior to or after termination of such employment or other relationship, in any manner inimical or in any way contrary to the best interests of the Company and that the Grantee furnish to the Company such information with respect to the satisfaction of the foregoing condition precedent as the Committee shall reasonably request.
 

 
 
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(k)   A Stock Appreciation Right that is subject to Code Section 409A shall satisfy the requirements of this Section 9(k) and the additional conditions applicable to nonqualified deferred compensation under Code Section 409A.  The requirements herein shall apply in the event any Stock Appreciation Right under this Plan is granted with an SAR exercise price less than the Fair Market Value of the Stock underlying the Award on the date the Stock Appreciation Right is granted (regardless of whether or not such SAR exercise price is intentionally or unintentionally priced at less than Fair Market Value, or is materially modified at a time when the Fair Market Value exceeds the SAR exercise price), is granted to an Employee with respect to whom Stock does not constitute "service recipient stock” (as defined in Treasury Regulation Section 1.409A-1(b)(5)(iii)), or is otherwise determined to constitute “nonqualified deferred compensation” within the meaning of Code Section 409A.  Any such Stock Appreciation Right may provide that it is exercisable at any time permitted under the governing written instrument, but such exercise shall be limited to fixing the measurement of the amount, if any, by which the Fair Market Value of a share of Stock on the date of exercise exceeds the SAR exercise price (the “SAR Amount”).  However, once the Stock Appreciation Right is exercised, the SAR Amount may be paid only on the fixed time, payment schedule or other event specified in the governing written instrument.
 
10.   OTHER STOCK-BASED AWARDS .
 
(a)   The Committee is authorized to grant Awards to Grantee in the form of Other Stock-Based Awards, as deemed by the Committee to be consistent with the purposes of the Plan and as evidenced by an Award Agreement. Other Stock-Based Awards shall include a right or other interest granted to a Grantee under the Plan that may be denominated or payable in, valued in whole or in part by reference to, or otherwise based on or related to, Stock, including but not limited to dividend equivalents or performance units, each of which may be subject to the attainment of Performance Goals or a period of continued employment or other terms or conditions as determined by the Committee. The Committee shall determine the terms and conditions of such Other Stock-Based Awards, consistent with the terms of the Plan, at the Date of Grant or thereafter, including any Performance Goals and Performance Periods. Stock or other securities or property delivered pursuant to an Award in the nature of a purchase right granted under this Section 10 shall be purchased for such consideration, paid for at such times, by such methods, and in such forms, including, without limitation, Stock, other Awards, notes or other property, as the Committee shall determine, subject to any required corporate action.
 
(b)   Unless otherwise determined by the Committee, any Other Stock-Based Award shall become immediately vested upon a Change in Control.
 
11.   ADJUSTMENT OF AND CHANGES IN CAPITALIZATION .
 
(a)   In the event that the outstanding shares of Stock shall be changed in number or class by reason of split-ups, spin-offs, combinations, mergers, consolidations or recapitalizations, or by reason of Stock dividends, the number or class of shares of Stock which thereafter may be issued pursuant to Awards granted under the Plan, both in the aggregate and as to any individual, and the number and class of shares of Stock then subject to Awards theretofore granted and the price per share of Stock payable upon exercise of such Award shall be adjusted so as to reflect such change, all as determined by the Committee. In the event there shall be any other change in
 

 
 
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the number or kind of the outstanding shares of Stock, or of any stock or other securities or property into which such shares of Stock shall have been changed, or for which it shall have been exchanged, then if the Committee shall determine that such change equitably requires an adjustment in any outstanding Award theretofore granted or which may be granted under the Plan, such adjustment shall be made in accordance with such determination.  Any adjustments under this Section 11 shall be made in a manner which does not adversely affect the exemption provided pursuant to Rule 16b-3 or otherwise result in a violation of Code Section 409A or the disqualification of any Incentive Stock Option.  Further, with respect to Awards intended to qualify as “performance-based compensation” under Code Section 162(m), such adjustments or substitutions shall be made only to the extent that the Committee determines that such adjustments or substitutions shall be made.
 
(b)   Notice of any adjustment shall be given by the Company to each Grantee with an Award which shall have been so adjusted and such adjustment (whether or not such notice is given) shall be effective and binding for all purposes of the Plan.
 
(c)   Fractional shares of Stock resulting from any adjustment of Awards pursuant to this Section 11 may be settled in cash or otherwise as the Committee may determine.
 
(d)   Notwithstanding the above, in the event of any of the following:  (i) the Company is merged or consolidated with another corporation or entity and, in connection therewith, consideration is received by stockholders of the Company in a form other than stock or other equity interests of the surviving entity or outstanding Awards are not to be assumed upon consummation of the proposed transaction; (ii) all or substantially all of the assets of the Company are acquired by another person; (iii) the reorganization or liquidation of the Company; or (iv) the Company shall enter into a written agreement to undergo an event described in clause (i), (ii) or (iii) above, then the Committee may, in its discretion and upon at least 10 days’ advance notice to the affected persons, cancel any outstanding Awards and cause the holders thereof to be paid, in cash, stock or other property, or any combination thereof, the value of such Awards based upon the price per share of Stock received or to be received by other common stockholders of the Company in the event.  The terms of this Section 11 may be varied by the Committee in any particular Award Agreement.
 
(e)   In the event of a Change in Control, the Committee, in its discretion, may take any action with respect to outstanding Awards that it deems appropriate, which action may vary among Awards granted to individual Grantees; provided, however, that such action shall not reduce the value of an Award.  In particular, with respect to Options, the actions the Committee may take upon a Change in Control include, but are not limited to, the following:  (i) accelerating the time at which Options then outstanding may be exercised so that such Options may be exercised in full for a limited period of time on or before a specified date (before or after such Change in Control) fixed by the Committee, after which specified date all unexercised Options and all rights of Optionholders thereunder shall terminate, (ii) requiring the mandatory surrender to the Company by selected Optionholders of some or all of the outstanding Options held by such Optionholders (irrespective of whether such Options are then exercisable) as of a date, before or after such Change in Control, specified by the Committee, in which event the Committee shall thereupon cancel such Options and the Company shall pay to each such Optionholder an amount of cash per share equal to the excess, if any, of the Change in Control
 

 
 
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Value of the shares subject to such Option over the exercise price(s) under such Options for such shares, (iii) make such adjustments to Options then outstanding as the Committee deems appropriate to reflect such Change in Control (provided, however, that the Committee may determine in its sole discretion that no adjustment is necessary to Options then outstanding), or (iv) provide that the number and class of shares of Stock covered by an Option theretofore granted shall be adjusted so that such Option shall thereafter cover the number and class of shares of Stock or other securities or property (including, without limitation, cash) to which the Optionholder would have been entitled pursuant to the terms of the agreement of merger, consolidation or sale of assets and dissolution if, immediately prior to such merger, consolidation or sale of assets and dissolution, the Optionholder had been the holder of record of the number of shares of Stock then covered by such Option.  The provisions contained in this paragraph shall not terminate any rights of a Grantee to further payments pursuant to any other agreement with the Company with respect to a Change in Control.
 
12.   SECURITIES ACTS REQUIREMENTS .
 
(a)   No Option granted pursuant to the Plan shall be exercisable in whole or in part, and the Company shall not be obligated to sell any Stock subject to any such Option, if such exercise and sale or issuance would, in the opinion of counsel for the Company, violate the Securities Act or other Federal or state statutes having similar requirements, as they may be in effect at that time; and each Option shall be subject to the further requirement that, at any time that the Committee shall determine, in their respective discretion, that the listing, registration or qualification of the Stock subject to such Option under any securities exchange requirements or under any applicable law, or the consent or approval of any governmental regulatory body, is necessary or desirable as a condition of, or in connection with, the granting of such Option or the issuance of Stock thereunder, such Option may not be exercised or issued, as the case may be, in whole or in part unless such listing, registration, qualification, consent or approval shall have been effected or obtained free of any conditions not acceptable to the Committee.
 
(b)   As a condition to the issuance of any Award that may be settled in Stock under the Plan, the Committee may require the Grantee to furnish a written representation that he or she is acquiring such Award for investment and not with a view to distribution of the Stock to the public and a written agreement restricting the transferability of the Stock of such Award, and may affix a restrictive legend or legends on the face of the certificate representing such Stock. Such representation, agreement and/or legend shall be required only in cases where in the opinion of the Committee and counsel for the Company, it is necessary to enable the Company to comply with the provisions of the Securities Act or other Federal or state statutes having similar requirements, and any stockholder who gives such representation and agreement shall be released from it and the legend removed at such time as the shares of Stock to which they applied are registered or qualified pursuant to the Securities Act or other Federal or state statutes having similar requirements, or at such other time as, in the opinion of the Committee and counsel for the Company, the representation and agreement and legend cease to be necessary to enable the Company to comply with the provisions of the Securities Act or other Federal or state statutes having similar requirements.
 

 
 
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13.   PERFORMANCE-BASED COMPENSATION .
 
(a)   The Committee shall have the authority, at the time of grant of any Award described in this Plan (other than Options and Stock Appreciation Rights granted with an exercise price equal to or greater than the Fair Market Value per share of Stock on the Date of Grant), to designate such Award or a portion of such Award as a “Performance Compensation Award.”
 
(b)   The Committee will, in its sole discretion, designate within the first 90 days of a Performance Period (or, if sooner, before twenty five percent (25%) of the Performance Period has elapsed) which Grantees will be eligible to receive Performance Compensation Awards in respect of such Performance Period.  However, designation of a Grantee eligible to receive an Award hereunder for a Performance Period shall not in any manner entitle the Grantee to receive payment in respect of any Performance Compensation Award for such Performance Period.  The determination as to whether or not such Grantee becomes entitled to payment in respect of any Performance Compensation Award shall be decided solely in accordance with the provisions of this Section 13.  Moreover, designation of a Grantee eligible to receive an Award hereunder for a particular Performance Period shall not require designation of such Grantee eligible to receive an Award hereunder in any subsequent Performance Period and designation of one person as a Grantee eligible to receive an Award hereunder shall not require designation of any other person as a Grantee eligible to receive an Award hereunder in such period or in any other period.
 
(c)   With regard to a particular Performance Period, the Committee shall have full discretion to select the length of such Performance Period, the type(s) of Performance Compensation Awards to be issued, the Performance Criteria that will be used to establish the Performance Goal(s), the kind(s) and/or level(s) of the Performance Goals(s) that is (are) to apply and the Performance Formula.  Within the first 90 days of a Performance Period (or, if sooner, before twenty five percent (25%) of the Performance Period has elapsed), the Committee shall, with regard to the Performance Compensation Awards to be issued for such Performance Period, exercise its discretion with respect to each of the matters enumerated in the immediately preceding sentence of this Section 13(c) and record the same in writing.
 
(d)   Payment of Performance Compensation Awards.
 
(i)   Unless otherwise provided in the applicable Award Agreement, a Grantee must be employed by the Company or an Affiliate on the last day of a Performance Period to be eligible for payment in respect of a Performance Compensation Award for such Performance Period.
 
(ii)   A Grantee shall be eligible to receive payment in respect of a Performance Compensation Award only to the extent that:  (A) the applicable Performance Goals are achieved; and (B) the Performance Formula as applied against such Performance Goals determines that all or some portion of such Grantee’s Performance Compensation Award has been earned.
 
(iii)   Prior to the payment of any Performance Compensation Award, the Committee shall review and certify in writing whether, and to what extent, the
 

 
 
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Performance Goals have been achieved and, if so, calculate and certify in writing that amount of the Performance Compensation Awards earned based upon the Performance Formula.  The Committee shall then determine the actual size of each Grantee’s Performance Compensation Award for the Performance Period and, in so doing, may apply Negative Discretion in accordance with Section 13(d)(iv) hereof, if and when it deems appropriate.
 
(iv)   In determining the actual size of an individual Performance Compensation Award, the Committee may reduce or eliminate the amount of the Performance Compensation Award earned through the use of Negative Discretion if, in its sole judgment, such reduction or elimination is appropriate.  With respect to any Performance Compensation Award intended to constitute "performance-based compensation" under Code Section 162(m), the Committee shall not have the discretion to (A) grant or provide payment in respect of Performance Compensation Awards if the Performance Goals have not been attained; (B) increase a Performance Compensation Award above the maximum amount payable under Section 13(d)(vi) or (vii) of the Plan; or (C) cause an increase in a Grantee's Performance Compensation Award as a result of the use of Negative Discretion with respect to another Grantee's Performance Compensation Award.  In addition, if a Performance Compensation Award is based, in whole or in part, on a percentage of a Grantee's salary, base pay or other compensation, the maximum amount of the Performance Compensation Award must be fixed at the time the Performance Goals are established.  Notwithstanding the foregoing, an Award Agreement may provide that a Performance Compensation Award may be payable upon death, disability or change of ownership or control prior to the attainment of the Performance Goals, provided that any such Award will not constitute "performance-based compensation" under Code Section 162(m) to the extent the Award is actually paid prior to the attainment of the Performance Goals.
 
(v)   Performance Compensation Awards shall be paid to Grantees as soon as administratively practicable following completion of the certifications required by this Section 13.
 
(vi)   With respect to Performance Compensation Awards, Options and Stock Appreciation Rights intended to constitute "performance-based compensation" under Code Section 162(m), subject to the adjustment provisions of Section 11, notwithstanding any provision contained in this Plan to the contrary, (A) no more than 2,000,000 shares of Stock may be subject to Options granted under the Plan to any one individual during any five (5) consecutive year period, (B) no more than 2,000,000 shares of Stock may be subject to Stock Appreciation Rights granted under the Plan to any one individual during any five (5) consecutive year period, (C) no more than 1,000,000 shares of Restricted Stock may be granted under the Plan to any one individual during any five (5) consecutive year period, (D) no more than 1,000,000 shares of Stock may be subject to Restricted Stock Units granted under the Plan to any one individual during any five (5) consecutive year period, and (E) no more than 1,000,000 shares of Stock may be subject to Other Stock-Based Awards granted under the Plan to any one individual during any five (5) consecutive year period.
 

 
 
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(vii)   With respect to Restricted Stock and Restricted Stock Units that are intended to constitute "performance-based compensation" under Code Section 162(m),  the Committee has the discretion to determine whether dividends on such Restricted Stock and Dividend Equivalents on such Restricted Stock Units are intended to constitute "performance-based compensation."  If any dividends or Dividend Equivalents are so intended, such dividends or Dividend Equivalents must satisfy the requirements of Code Section 162(m) separately from the underlying Restricted Awards.  With respect to any such dividends or Dividend Equivalents, no Grantee may receive dividends on Restricted Stock or Dividend Equivalents on Restricted Stock Units in an amount greater than $600,000 per calendar year.
 
(viii)   If, after the attainment of the applicable Performance Goals, payment of a Performance Compensation Award in cash is accelerated to an earlier date, the amount paid will be discounted to reasonably reflect the time value of money.  Any Performance Compensation Award that has been deferred shall not (between the date as of which the Award is deferred and the payment date) increase (A) with respect to a Performance Compensation Award that is payable in cash, by a measuring factor for each fiscal year greater than a reasonable rate of interest set by the Committee or (B) with respect to a Performance Compensation Award that is payable in Stock, by an amount greater than the appreciation of a share of Stock from the date such Award is deferred to the payment date.
 
(ix)   With respect to any Performance Compensation Award intended to constitute "performance-based compensation" under Code Section 162(m), no amount shall be paid unless the shareholder approval requirements under Code Section 162(m) and Treasury Regulations Section 1.162-27(e)(4) or any successor to such statute and regulation have been satisfied.
 
14.   WITHHOLDING OBLIGATIONS. To the extent provided by the terms of an Award Agreement and subject to the discretion of the Committee, the Grantee may satisfy any federal, state, provincial or local tax withholding obligation relating to the exercise or acquisition of Stock under an Award by any of the following means (in addition to the Company’s right to withhold from any compensation paid to the Grantee by the Company) or by a combination of such means:  (a) tendering a cash payment; (b) authorizing the Company to withhold shares of Stock from the shares of Stock otherwise issuable to the Grantee as a result of the exercise or acquisition of Stock under the Award, provided, however, that no shares of Stock are withheld with a value exceeding the minimum amount of tax required to be withheld by law; or (c) delivering to the Company previously owned and unencumbered shares of Stock.
 
15.   AMENDMENT OF THE PLAN AND AWARDS .
 
(a)   The Board may at any time and from time to time alter, amend, suspend, or terminate the Plan in whole or in part.  However, the Board may not make any alteration or amendment which would decrease any authority granted to the Committee hereunder in contravention of Rule 16b-3 and, except as provided in Section 11 relating to adjustments upon changes in Stock and Section 15(c), no amendment shall be effective unless approved by the stockholders of the Company to the extent stockholder approval is necessary to satisfy any
 

 
 
23
 

applicable laws, rules, regulations or securities exchange listing requirements.  At the time of such amendment, the Board shall determine, upon advice from counsel, whether such amendment will be contingent on stockholder approval.  The Board may, in its sole discretion, submit any other amendment to the Plan for stockholder approval.  No Awards may be granted under the Plan while the Plan is suspended or after it is terminated, but Awards theretofore granted may extend beyond the date of Plan suspension or termination.
 
(b)   It is expressly contemplated that the Board may amend the Plan in any respect the Board deems necessary or advisable to provide eligible Employees with the maximum benefits provided or to be provided under the provisions of the Code and the regulations promulgated thereunder relating to the nonqualified deferred compensation provisions of Code Section 409A and/or to bring the Plan and/or Awards granted under it into compliance therewith.
 
(c)   Notwithstanding the foregoing, no amendment to or termination of the Plan shall affect adversely any of the rights of any Grantee, without such Grantee’s consent in writing. All changes described in this paragraph are at the sole discretion of the Board, may be made at any time, and may have a retroactive effective date.
 
(d)   The Board at any time, and from time to time, may amend the terms of any one or more Awards; provided, however, that the Board may not effect any amendment which would otherwise constitute an impairment of the rights under any Award unless (a) the Company requests the consent of the Grantee and (b) the Grantee consents in writing.
 
16.   GENERAL PROVISIONS .
 
(a)   No Employment or Other Service Rights.  Nothing in the Plan or any instrument executed or Award granted pursuant thereto shall confer upon any Grantee any right to continue to serve the Company or an Affiliate in the capacity in effect at the time the Award was granted or shall affect the right of the Company or an Affiliate to terminate (i) the employment of an Employee with or without notice and with or without cause, or (ii) the service of a Consultant pursuant to the terms of such Consultant’s agreement with the Company or an Affiliate, and any applicable provisions of the corporate law of the state in which the Company or the Affiliate is incorporated, as the case may be.
 
(b)   Code Section 409A.  If the Board (or its delegate) determines in its discretion that an Award is determined to be “nonqualified deferred compensation” subject to Code Section 409A, and that Grantee is a “specified employee” as defined in Code Section 409A(a)(2)(B)(i) and the regulations and other guidance issued thereunder, then the exercise or distribution of such Award upon a separation from service may not be made before the date which is six months after the date the Grantee separates from service with the Company or any of its Affiliates.  Notwithstanding any other provision contained herein, terms such as “termination of service,” “termination of employment” and “termination of engagement” shall mean a “separation from service” within the meaning of Code Section 409A, to the extent any exercise or distribution hereunder could be deemed “nonqualified deferred compensation” for purposes thereof.
 
(c)   Section 16.  It is the intent of the Company that the Plan satisfy, and be interpreted in a manner that satisfies, the applicable requirements of Rule 16b-3 so that Grantees
 

 
 
24
 

will be entitled to the benefit of Rule 16b-3, or any other rule promulgated under Section 16 of the Exchange Act, and will not be subject to short-swing liability under Section 16 of the Exchange Act.  Accordingly, if the operation of any provision of the Plan would conflict with the intent expressed in this Section 16(c), such provision to the extent possible shall be interpreted and/or deemed amended so as to avoid such conflict.
 
(d)   Code Section 162(m).  To the extent the Committee issues any Award that is intended to be exempt from the application of Code Section 162(m), the Committee may, without stockholder or Grantee approval, amend the Plan or the relevant Award Agreement retroactively or prospectively to the extent it determines necessary in order to comply with any subsequent clarification of Code Section 162(m) required to preserve the Company’s federal income tax deduction for compensation paid pursuant to any such Award.
 
17.   CHANGES IN LAW .  The Board may amend the Plan and any outstanding Awards granted thereunder in such respects as the Board shall, in its sole discretion, deem advisable in order to incorporate in the Plan or any such Awards any new provision or change designed to comply with or take advantage of requirements or provisions of the Code or any other statute, or Rules or Regulations of the Internal Revenue Service or any other federal or state governmental agency enacted or promulgated after the adoption of the Plan.
 
18.   CLAWBACKS .  To the extent required by applicable laws, rules, regulations or securities exchange listing requirements, the Company shall have the right, and shall take all actions necessary, to recover any amounts paid to any individual under this Plan.
 
19.   LEGAL MATTERS .
 
(a)   Every right of action by or on behalf of the Company or by any stockholder against any past, present or future member of the Board, officer or employee of the Company arising out of or in connection with this Plan shall, irrespective of the place where such action may be brought and irrespective of the place of residence of any such Grantee, cease and be barred by the expiration of three years from whichever is the later of (i) the date of the act or omission in respect of which such right of action arises, or (ii) the first date upon which there has been made generally available to stockholders an annual report of the Company and a proxy statement for the annual meeting of stockholders following the issuance of such annual report, which annual report and proxy statement alone or together set forth, for the related period, the aggregate number of shares of Stock for which Awards were granted; and any and all rights of action by any employee or executive of the Company (past, present or future) against the Company arising out of or in connection with this Plan shall, irrespective of the place where such action may be brought, cease and be barred by the expiration of three years from the date of the act or omission in respect of which such right of action arises.
 
(b)   This Plan and all determinations made and actions taken pursuant hereto shall be governed by the law of Texas, applied without giving effect to any conflicts-of-law principles, and construed accordingly.
 
20.   ELECTRONIC DELIVERY AND ACCEPTANCE .  The Company may, in its sole discretion, deliver any documents related to the Award by electronic means.  To participate in
 

 
 
25
 

the Plan, a Grantee consents to receive all applicable documentation by electronic delivery and through an on-line (and/or voice activated) system established and maintained by the Company or a third party vendor designated by the Company.
 
21.   FOREIGN EMPLOYEES .  Without the amendment of this Plan, the Board may provide for the participation in the Plan by employees who are subject to the laws of foreign countries or jurisdictions, and such participation may be on such terms and conditions different from those specified in this Plan as may be administratively necessary or necessary or desirable to foster and promote achievement of the purposes of this Plan and, in furtherance of such purposes the Board or its designee may make such modifications, amendments, procedures, subprograms and the like as may be necessary or advisable to comply with the provisions of laws of other countries or jurisdictions in which Affiliates operate or have employees.
 
 
 
 

 
 
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Exhibit 10.2

KINDER MORGAN, INC.
RESTRICTED STOCK AGREEMENT
(Time and Performance-Based)
 
This Restricted Stock Agreement ("Agreement") is made and entered into effective the ______ day of ____________, ______ ("Date of Grant"), by and between Kinder Morgan, Inc., a Delaware corporation (“Company”), and _______________ ("Employee").  The defined term “Employer” shall include, where applicable, the Company and affiliates and entities in which the Company has an ownership interest, directly or indirectly.
 
1.  
Award .      The Company hereby makes a grant of Restricted Stock subject to the terms and conditions contained herein and in the Plan (as defined below).
 
 
(a)
Stock.   Pursuant to the Kinder Morgan, Inc. 2011 Stock Incentive Plan (the "Plan"), ________ shares (the "Shares") of Class P common stock of the Company, $0.01 par value (the "Stock"), shall be issued as hereinafter provided in Employee's name subject to certain restrictions thereon.
 
 
(b)
Issuance of Shares.   The Shares shall be issued upon acceptance hereof by Employee and upon satisfaction of the conditions of this Agreement.
 
 
(c)
Plan Incorporated .   Employee acknowledges receipt of a copy of the Plan and agrees that this award of Restricted Stock shall be subject to all of the terms and conditions set forth in the Plan, including future amendments thereto, if any, pursuant to the terms thereof, which Plan is incorporated herein by reference as a part of this Agreement.
 
2.  
Restricted Stock.   Employee hereby accepts the grant of Restricted Stock when issued and agrees with respect thereto as follows:
 
 
(a)
Forfeiture Restrictions.   To the extent then subject to the Forfeiture Restrictions (as hereinafter defined), the Shares granted hereunder may not be sold, assigned, transferred, exchanged, pledged, hypothecated or encumbered by Employee, and no such sale, assignment, transfer, exchange, pledge, hypothecation or encumbrance, whether made or created by voluntary act of Employee or any agent of Employee or by operation of law, shall be recognized by, or be binding upon, or shall in any manner affect the rights of, the Company or any agent or any custodian holding certificates for the Shares.  Except as provided in (b) below, in the event that the Employee's employment with the Employer is terminated for any reason prior to the lapse of the Forfeiture Restrictions as provided in (b) below, Employee shall, for no consideration, forfeit to the Company all Shares to the extent then subject to the Forfeiture Restrictions.   The prohibition against transfer and the obligation to forfeit and surrender Restricted Stock to the Company upon termination of employment are herein referred to as "Forfeiture Restrictions."  The Shares that are subject to the Forfeiture Restrictions shall hereinafter be referred to as "Restricted Shares."

 
 
 
 
 
 
(b)
Lapse of Forfeiture Restrictions.   Except as provided below, on each anniversary of the Date of Grant set forth in the following schedule, if Employee's employment with the Employer has not terminated and at least one of the "Performance Goals" set forth below has been achieved after the Date of Grant and prior to such anniversary, the Forfeiture Restrictions shall lapse with respect to a percentage of Restricted Shares as follows:
 
Anniversary of                                                                      Percentage of
Date of Grant                                                                  Restricted Shares
 
 
 
The Performance Goals are:
 
 
 
On each anniversary set forth in the schedule above, if none of the Performance Goals has been achieved prior to such anniversary, then the Restricted Shares with respect to which the Forfeiture Restrictions would have lapsed on such anniversary upon achievement of a Performance Goal prior to that anniversary shall be forfeited immediately.
 
Upon the termination of Employee's employment with the Employer by reason of (i) death, (ii) disability that results in the Employer determining that Employee cannot perform the essential functions of his or her job, with or without a reasonable accommodation, or (iii) an involuntary termination by the Employer due to a reorganization or reduction in force for which Employee would be eligible for pay under the Kinder Morgan, Inc. Severance Plan or under another express written grant of separation pay by the Employer, the Forfeiture Restrictions on all Restricted Shares which have not previously been forfeited shall lapse.  Upon a Change in Control (as defined in the Plan), the Forfeiture Restrictions on all Restricted Shares which have not previously been forfeited shall lapse.  Notwithstanding the foregoing, if this grant of Restricted Stock is intended to constitute "qualified performance-based compensation" (as defined in Treasury Regulations Section 1.162-27(e)), upon an involuntary termination of Employee's employment by the Employer due to a reorganization or reduction in force for which Employee would be eligible for pay under the Kinder Morgan, Inc. Severance Plan or under another express written grant of separation pay by the Employer, the following rules shall apply with respect to Restricted Shares which have not previously been forfeited:
 
 
(i)
if at least one of the Performance Goals has been satisfied prior to the date of termination, the Forfeiture Restrictions shall lapse on all such Restricted Shares on the date of termination;
 
 
(ii)
if none of the Performance Goals has been satisfied prior to the date of termination, then such Restricted Shares shall remain subject to the Forfeiture

 
 
2
 

Restrictions until at least one of the Performance Goals has been satisfied, at which time the Forfeiture Restrictions shall lapse on all such Restricted Shares; provided, however, that if none of the Performance Goals has been satisfied prior to the   [maximum performance period]    anniversary of the Date of Grant, such Restricted Shares shall be forfeited on such anniversary.
 
Restricted Shares with respect to which Forfeiture Restrictions have lapsed shall cease to be subject to any Forfeiture Restrictions, and the Company, pending payment of corresponding taxes by Employee, shall provide the Employee a certificate (without the legend referenced in Section 2(d) below) representing the Shares as to which the Forfeiture Restrictions have lapsed.
 
If the employment of Employee with the Employer terminates prior to the lapse of the Forfeiture Restrictions, and there exists a dispute between Employee and the Employer or the Committee as to the satisfaction of the conditions to the lapse of the Forfeiture Restrictions or the terms and conditions of the grant, the Restricted Shares shall remain subject to the Forfeiture Restrictions until the resolution of such dispute, except that any distributions that may be payable to the holders of record of Stock as of a date during the period from termination of Employee's employment to the resolution of such dispute shall:
 
(1)           to the extent to which such distributions would have been payable to Employee on the Restricted Shares under the terms hereof, be held by the Company as part of its general funds, and shall be paid to or for the account of Employee only upon, and in the event of, a resolution of such dispute in a manner favorable to Employee, and then only with respect to such of the Restricted Shares as to which such resolution shall be so favorable, and
 
(2)           be retained by the Company in the event of a resolution of such dispute in a manner unfavorable to Employee only with respect to such of the Restricted Shares as to which such resolution shall be so unfavorable.
 
 
(c)
Dividends .  All cash dividends and Stock dividends, if any, with respect to Restricted Shares that remain subject to the Forfeiture Restrictions shall be withheld by the Company for Employee's account, without interest. Such cash dividends or Stock dividends so withheld shall be subject to forfeiture and vesting to the same degree as the Restricted Shares to which they relate and shall be paid to Employee only when the Forfeiture Restrictions on such Restricted Shares lapse, in one lump sum within thirty (30) days following the date on which the Forfeiture Restrictions lapse.  Accrued dividends that remain unpaid with respect to Restricted Shares that are forfeited shall be immediately forfeited.  No dividends will be withheld by the Company on Employee's behalf pursuant to this paragraph with respect to any Restricted Shares on or following the date on which the Forfeiture Restrictions lapse.  Notwithstanding anything herein to the contrary, Employee shall not receive payments relating to dividends on Restricted Shares in an amount greater than $____ per share per calendar year.

 
 
3
 

 
(d)
Certificates.   The Company may, in its discretion, reflect ownership of the Shares through the issuance of stock certificates, or in book-entry form, without stock certificates, on its books and records.  If the Company elects to issue certificates, one or more certificates evidencing the Restricted Shares shall be issued by the Company in Employee's name, or at the Company's option, in the name of the Company’s nominee, pursuant to which Employee shall have voting rights.  Each certificate shall bear the following legend:
 
THIS CERTIFICATE AND THE STOCK EVIDENCED HEREBY HAVE BEEN ISSUED PURSUANT TO AN AGREEMENT EFFECTIVE ________________, A COPY OF WHICH MAY BE OBTAINED BY CONTACTING KINDER MORGAN, INC.'S SECRETARY, BETWEEN KINDER MORGAN, INC. AND THE EMPLOYEE AND ARE SUBJECT TO FORFEITURE TO KINDER MORGAN, INC. UNDER CERTAIN CIRCUMSTANCES DESCRIBED IN SUCH AGREEMENT.  THE SALE, ASSIGNMENT, EXCHANGE PLEDGE, HYPOTHECATION, ENCUMBRANCE  OR OTHER TRANSFER OF THE STOCK EVIDENCED BY THIS CERTIFICATE IS PROHIBITED UNDER THE TERMS AND CONDITIONS OF SUCH AGREEMENT, AND SUCH STOCK MAY NOT BE SOLD, ASSIGNED, EXCHANGED, PLEDGED, HYPOTHECATED, ENCUMBERED OR OTHERWISE TRANSFERRED EXCEPT AS PROVIDED IN SUCH AGREEMENT.
 
The Company may cause the certificate or certificates to, upon issuance, be delivered to the Secretary of the Company or to such other depository as may be designated by the Committee for safekeeping until the forfeiture thereof occurs or the Forfeiture Restrictions applicable thereto lapse pursuant to the terms of this Agreement.  Upon request of the Committee or its designee, Employee shall deliver to the Company a stock power, endorsed in blank, relating to the Restricted Shares then subject to the Forfeiture Restrictions.  Subject to the Company’s rights under Section 3 and the other provisions of this Agreement, upon the lapse of the Forfeiture Restrictions without forfeiture, the Company shall deliver to Employee a certificate without legend evidencing the vested Restricted Shares with respect to which Forfeiture Restrictions have lapsed, and shall retain a certificate representing unvested Restricted Shares still subject to Forfeiture Restrictions.  Notwithstanding any other provisions of this Agreement, the issuance or delivery of any Stock (whether subject to restrictions or unrestricted) may be postponed for such period as may be required to comply with applicable requirements of any national securities exchange or any requirements of any law or regulation applicable to the issuance or delivery of such Stock.  The Company shall not be obligated to issue or deliver any Stock if the issuance or delivery thereof shall constitute a violation of any provision of any law or of any regulation of any governmental authority or any national securities exchange.

 
 
4
 

3.  
Withholding of Tax.   To the extent that the receipt of the Restricted Shares or the lapse of any Forfeiture Restrictions result in income to Employee for federal, state, provincial or local income tax purposes, Employee shall pay to the Employer or make arrangements satisfactory to the Committee regarding payment of any federal, state, provincial or local taxes of any kind required by law to be withheld with respect to such income.  The Committee may permit payment of such taxes to be made through the tender of cash or shares of Stock, the withholding of shares of Stock out of Stock otherwise distributable or any other arrangement satisfactory to the Committee.  The Company shall, to the extent permitted by law, have the right to withhold delivery of a Stock certificate under Section 2(d) above or to deduct any such taxes from any payment of any kind otherwise due to the Employee.  If Employee does not pay the entire amount of such taxes to the Employer within thirty (30) days after the date on which the income subject to such taxes is recognized, the Committee shall withhold from the Shares to which Employee is entitled a number of shares of Stock having an aggregate fair market value equal to the amount of such taxes remaining to be paid by Employee and shall deliver a certificate for the remaining Shares to the Employee in accordance with Section 2(d).
 
If Employee makes an election under Section 83(b) of the Internal Revenue Code of 1986, as amended ("Code"), with respect to the Restricted Shares, Employee shall promptly notify the Committee of such election.  Failure to notify the Committee of any tax election made by Employee may, in the discretion of the Committee, result in the forfeiture of the Restricted Shares.
 
4.  
Status of Shares.  Employee agrees that,   notwithstanding anything to the contrary herein, the Shares may not be sold or otherwise disposed of in any manner which would constitute a violation of any applicable federal or state securities laws.  Employee also agrees (i) that certificates shall bear the legend or legends as the Committee deems appropriate in order to assure compliance with applicable securities laws, (ii) that the Company may refuse to register the transfer of the Shares on its transfer records if such proposed transfer would in the opinion of counsel satisfactory to the Company constitute a violation of any applicable securities law and (iii) that the Company may give related instructions to its transfer agent, if any, to stop registration of the transfer of the Shares.
 
5.  
Changes in Capital Structure.   In the event that the outstanding shares of Stock or other securities of the Company shall be changed in number or class by reason of split-ups, spin-offs, combinations, mergers, consolidations or recapitalizations, or by reason of Stock dividends or other event, the number or class of securities comprising the Restricted Shares shall be appropriately and equitably adjusted in accordance with the terms of the Plan.
 

6.  
Employment Relationship.   For purposes of this Agreement, Employee shall be considered to be in the employment of the Employer as long as Employee remains an employee of the Employer, or any successor, whether a corporation or other legal entity.  Any question as to whether and when there has been a termination of such employment, and the nature or cause of such termination, shall be determined by the Committee in its sole discretion, and its determination shall be final. Nothing contained herein shall be construed as conferring upon Employee the right to continue in the employ of the Employer, nor shall anything contained

 
5
 

herein be construed or interpreted to limit the "employment at will" relationship between Employee and the Employer.
 
7.  
Non-Disclosure of Confidential Matters.   Pursuant to this Agreement and through Employee’s continued employment with the Employer, the Employer agrees to provide Employee with access to certain confidential information, intellectual property, and/or other trade secret information that belongs to the Employer (hereinafter "Confidential Information").  Employee expressly acknowledges that Employee will receive access to certain Confidential Information belonging to the Employer pursuant to this Agreement and through Employee’s continued employment with the Employer.  In consideration for the Employer’s agreement to provide Employee with access to certain Confidential Information, the Employer’s agreements as it relates to the Shares as provided herein, and other good and valuable consideration, Employee agrees not to make, at any time hereafter, including after the termination of employment for any reason, any unauthorized use, publication, or disclosure, during or subsequent to his/her employment by the Employer, of any Confidential Information generated or acquired by him/her during the course of his/her employment, except to the extent that the disclosure of Confidential Information is necessary to fulfill his/her responsibilities as an employee of the Employer.  Employee understands that Confidential Information includes information not generally known by or available to the public about or belonging to the Employer, or belonging to other companies to whom the Employer may have an obligation to maintain information in confidence, and that authorization for public disclosure may only be obtained through the Employer's written consent.  Employee also understands and agrees that the information protected by this provision includes, but is not limited to, information of a technical and a business nature such as ideas, discoveries, designs, inventions, improvements, trade secrets, know-how, manufacturing processes, product formulae, design specifications, writings and other works of authorship, computer programs, financial figures, marketing plans, customer lists and data, business plans or methods and the like, which relate in any manner to the actual or anticipated business of the Employer, or related to its actual or anticipated areas of research and development. Employee further agrees not to disclose to the Employer, nor induce any personnel of the Employer to use, any confidential information, trade secret, or confidential material belonging to others.
 
8.  
Committee's Powers.   No provision contained in this Agreement shall in any way terminate, modify or alter, or be construed or interpreted as terminating, modifying or altering, any of the powers, rights or authority vested in the Committee pursuant to the terms of the Plan, including, without limitation, the Committee's rights to make certain determinations and elections with respect to the Shares.
 
9.   
Resolution of Disputes.   As a condition of the granting of the Shares hereby, Employee and Employee's heirs, personal representatives and successors agree that any dispute or disagreement which may arise hereunder shall be determined by the Committee in its sole discretion and judgment, and that any such determi­nation and any inter­pretation by the Committee of this Agreement shall be final and shall be binding and conclusive, for all purposes, upon the Company, Employee, Employee's heirs, personal representatives and successors or any person or entity claiming through any of them.

 
 
6
 

10.  
Binding Effect.   The provisions of the Plan and the terms and conditions of this Agreement shall, in accordance with their terms, be binding upon, and inure to the benefit of, all successors of Employee, including, without limitation, Employee's estate and the executors, administrators, or trustees thereof, heirs and legatees, and any receiver, trustee in bankruptcy, or representative of creditors of Employee.  This Agreement shall be binding upon and inure to the benefit of any successors to the Company.
 
11.  
Agreement Subject to Plan.   This Agreement is sub­ject to the Plan.  The terms and provisions of the Plan (including any subsequent amend­ments thereto) are hereby incorporated herein by reference thereto.  In the event of a conflict between any term or provision contained herein and a term or provision of the Plan, the applicable terms and provisions of the Plan will govern and prevail.  All defini­tions of words and terms contained in the Plan shall be applicable to this Agreement.
 
12.  
Non-Solicitation.   Employee agrees that during his/her employment with the Employer and for a period of one (1) year after the termination of Employee’s employment relationship with the Employer, Employee will not directly or indirectly solicit, induce, recruit, encourage, or persuade any employee of the Employer to leave the Employer.
 
13.  
Non-Disparagement.   Employee agrees not to engage in any act or make any comments (written or oral), which are intended, or reasonably may be expected, to harm the business, prospects, or operations of the Employer, or to disparage the reputation of the Employer;  provided, however, that Employee shall not be held in breach of this provision should Employee be required to testify pursuant to subpoena under oath or as otherwise required by law, provided additionally that Employee testifies truthfully and that, prior to providing such testimony, Employee promptly notifies Employer that his or her testimony is being sought in sufficient time so as to permit Employer to seek to prevent or limit such testimony or otherwise seek to obtain a protective order.
 
14.  
Irreparable Harm.   The Employee acknowledges that a breach of the obligations set forth in Sections 7, 12 and 13 of this Agreement shall cause irreparable harm to the Employer and that monetary damages would be an inadequate remedy for such a breach.  The Employee agrees that the Employer shall be entitled to equitable relief by way of injunction or otherwise, as well as any other remedy available at law, if the Employee breaches or threatens to breach the provisions of this Agreement.  Further, in the event that the Employer determines in good faith that Employee has breached any of said provisions of this Agreement, the Employer shall, to the extent the Forfeiture Restrictions have not lapsed, be entitled, at its election, to immediately stop making any payments hereunder and/or to terminate the vesting of, or otherwise cancel, terminate or require to be relinquished to the Company the Shares awarded to Employee and/or to enforce the specific performance of this Agreement by Employee and/or to enjoin Employee from activities in breach of said provisions of this Agreement without having to show that there are no other adequate remedies available.

 
 
7
 

The parties stipulate and agree that the terms, covenants, commitments and agreements contained Sections 7, 12 and 13 of this Agreement are fair and reasonable in all respects, including the time period and geographical coverage, and that these restrictions are necessary for the reasonable protection of the legitimate business interests of the Employer.  If, at the time of enforcement of any of these provisions, a court holds that the restrictions stated herein are unreasonable under the circumstances then existing, the parties hereto agree that the maximum period, scope or geographical area reasonable under such circumstances will be substituted for the stated period, scope or area.  In such event, but only in such event, the parties hereto hereby specifically request a trial court or other tribunal presented with this Agreement for enforcement to reform it as to time, geographic area or scope of activities prohibited to the fullest extent allowed by law and to enforce this Agreement as so reformed.
 
15.  
Notices.   Every notice hereunder shall be in writing and shall be given by registered or certified mail or by any other method accepted by the Company or the Company's designee.  All notices to the Company shall be directed to Kinder Morgan, Inc., 500 Dallas Street, Suite 1000, Houston, Texas 77002, Attention:  Secretary, or to the Company's designee.  Any notice given by the Company to Employee directed to Employee at the address on file with the Company shall be effective to bind Employee and any other person who shall acquire rights hereunder.  The Company shall be under no obligation whatsoever to advise Employee of the existence, maturity or termination of any of Employee’s rights here­under and Employee shall be deemed to have fami­liarized himself or herself with all matters con­tained herein and in the Plan which may affect any of Employee's rights or privileges hereunder.
 
16.  
Modification and Severability.   If a court of competent jurisdiction declares that any provision of this Agreement is illegal, invalid or unenforceable, then such provision shall be modified automatically to the extent necessary to make such provision fully enforceable.  If such court does not modify any such provision as contemplated herein, but instead declares it to be wholly illegal, invalid or unenforceable, then such provision shall be severed from this Agreement, as applicable, and such declaration shall in no way affect the legality, validity and enforceability of the other provisions of this Agreement to which such declaration does not relate.  In this event, this Agreement shall be construed as if it did not contain the particular provision held to be illegal, invalid or unenforceable, the rights and obligations of the parties hereto shall be construed and enforced accordingly, and this Agreement otherwise shall remain in full force and effect.  If any provision of this Agreement is capable of two constructions, one of which would render the provision void and the other would render the provision valid, then the provision shall have the construction which renders it valid.
 
17.  
Governing Law.   This Agreement shall be governed by, and construed in accordance with, the laws of the State of Texas and applicable federal law.
 

 
 
8
 

IN WITNESS WHEREOF , the Company has caused this Agreement to be duly executed by an officer thereunto duly authorized, and Employee has executed this Agreement, all effective as of the date of first above written.
 
KINDER MORGAN, INC.
 
By:           _________________________
 
Name:      _________________________
 
Title:        _________________________
 
 
________________________________
Print Employee Name
 
    ________________________________
Employee Signature
 
        ________________________________
Employee Social Security Number

Exhibit 10.3

KINDER MORGAN, INC.
NON-EMPLOYEE DIRECTOR
STOCK COMPENSATION AGREEMENT

Stock Compensation Agreement made effective the ____ day of _____________, _______ between Kinder Morgan, Inc., a Delaware corporation (the "Company"), and NAME ("Director").

1.
Award .   The Company has made an award of Cash Compensation (as defined below), a portion of which Director is electing to receive in the form of Class P common stock of the Company, $0.01 par value ("Stock"), subject to the terms and conditions contained herein and in the Plan (as defined below).

 
(a)
Cash Compensation .   As contemplated by the Kinder Morgan, Inc. Stock Compensation Plan for Non-Employee Directors (the "Plan"), $ __________ of cash compensation which Director may elect to receive in the form of Stock (the "Cash Compensation") has been awarded to Director for the _________ calendar year.

 
(b)
Election to Receive Stock in Lieu of Cash .   In accordance with the terms of the Plan, Director hereby elects to receive $_________ of the Cash Compensation in the form of Stock.  Director shall receive _______ shares of Stock ("Shares") and $ _________ in cash (the "Cash Payment"), as calculated in accordance with the terms of the Plan.  The Shares shall be issued upon acceptance hereof by Director and certificates therefor will be delivered to Director upon satisfaction of the conditions of this Agreement.  The Cash Payment shall be paid in installments of $ _________ each on March 31, June 30, September 30 and December 31 of ________, or as soon as administratively practicable thereafter; provided that such installments shall be adjusted to include any cash dividends paid by the Company on the Shares during any period in which the Shares are subject to Forfeiture Restrictions (as hereinafter defined).

 
(c)
Plan Incorporated .   Director acknowledges receipt of a copy of the Plan and agrees that the election to receive such Cash Compensation in the form of Stock shall be subject to all of the terms and conditions set forth in the Plan, including future amendments thereto, if any, pursuant to the terms thereof, which Plan is incorporated herein by reference as a part of this Agreement.

2.
Shares .   Director hereby accepts the Shares when issued and agrees with respect thereto as follows:

 
(a)
Forfeiture Restrictions .   To the extent then subject to the Forfeiture Restrictions (as hereinafter defined), the Shares issued hereunder may not be sold, assigned, transferred, exchanged, pledged, hypothecated or encumbered by Director, and no such sale, assignment, transfer, exchange, pledge, hypothecation or encumbrance, whether made or created by voluntary act of Director or any agent of Director or

 
 
 
 

by operation of law, shall be recognized by, or be binding upon, or shall in any manner affect the rights of, the Company or any agent or any custodian holding certificates for the Shares.  Except as provided in paragraph (b) below, in the event that Director's service as a director of the Company is terminated prior to the lapse of the Forfeiture Restrictions as provided in (b) below, Director shall, for no consideration, forfeit to the Company all Shares to the extent then subject to the Forfeiture Restrictions.  The prohibition against transfer and the obligation to forfeit and surrender Shares to the Company upon such termination of service as a director are herein referred to as "Forfeiture Restrictions."

 
(b)
Lapse of Forfeiture Restrictions .  The Forfeiture Restrictions shall lapse and cease to apply to the Shares on the earlier of (i) __________________ (the "Vesting Date"), or (ii) the date of Director's death.

If Director's service as a director of the Company is terminated prior to the Vesting Date because of Director's failure to be elected as a director at a stockholders meeting at which Director is considered for election, the Forfeiture Restrictions shall lapse and cease to apply to fifty percent (50%) of the Shares, and Director shall, for no consideration, forfeit to the Company the remaining fifty percent (50%) of the Shares.

Shares with respect to which Forfeiture Restrictions have lapsed shall cease to be subject to any Forfeiture Restrictions, and the Company shall provide Director a certificate (without the legend referenced in Section 2(d) below) representing the Shares as to which the Forfeiture Restrictions have lapsed.

 
(c)
Rights as a Stockholder.   Unless otherwise provided in this Agreement, Director shall have the right to receive distributions with respect to the Shares awarded hereby, to vote such Shares, and to enjoy all other rights of a holder of Stock.

 
(d)
Certificates.   The Company may, in its discretion, reflect ownership of the Shares through the issuance of stock certificates, or in book-entry form, without stock certificates, on its books and records.  If the Company elects to issue certificates, one or more certificates evidencing the Shares shall be issued by the Company in Director's name, or at the option of the Company, in the name of a nominee of the Company, pursuant to which Director shall have voting rights and shall be entitled to receive all distributions unless and until the Shares are forfeited pursuant to the provisions of this Agreement.  Each certificate shall bear the following legend:

THIS CERTIFICATE AND THE STOCK   REPRESENTED HEREBY ARE SUBJECT TO THE TERMS AND CONDITIONS (INCLUDING FORFEITURE AND RESTRICTIONS AGAINST TRANSFER) CONTAINED IN THE KINDER MORGAN, INC. STOCK COMPENSATION PLAN FOR NON-EMPLOYEE DIRECTORS AND AN AGREEMENT ENTERED INTO

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BETWEEN THE REGISTERED OWNER AND KINDER MORGAN, INC.  A RELEASE FROM SUCH TERMS AND CONDITIONS SHALL BE OBTAINED ONLY IN ACCORDANCE WITH THE PROVISIONS OF SUCH PLAN AND AGREEMENT, A COPY OF EACH OF WHICH IS ON FILE IN THE OFFICE OF THE SECRETARY OF KINDER MORGAN, INC.

Until the Forfeiture Restrictions have lapsed, (i) Director shall not be entitled to delivery of the stock certificate, (ii) the Company shall retain custody of the stock certificate, and (iii) Director may not sell, transfer, pledge, exchange, hypothecate or otherwise dispose of the Shares.  A breach by Director of the terms and conditions of this Agreement shall cause a forfeiture of the Shares by Director.  Upon request of the Committee, Director shall deliver to the Company a stock power, endorsed in blank, relating to the Shares then subject to the Forfeiture Restrictions.  Upon the lapse of the Forfeiture Restrictions without forfeiture, the Company shall deliver to Director a certificate without legend evidencing the vested Shares with respect to which Forfeiture Restrictions have lapsed, and shall retain a certificate representing unvested Shares still subject to Forfeiture Restrictions.  Notwithstanding any other provisions of this Agreement, the issuance or delivery of any shares of Stock (whether subject to restrictions or unrestricted) may be postponed for such period as may be required to comply with applicable requirements of any national securities exchange or any requirements of any law or regulation applicable to the issuance or delivery of such units.  The Company shall not be obligated to issue or deliver any shares of Stock if the issuance or delivery thereof shall constitute a violation of any provision of any law or of any regulation of any governmental authority or any national securities exchange.

3.
Status of Shares.   Director agrees that,   notwithstanding anything to the contrary herein, the Shares may not be sold, transferred, pledged, exchanged, hypothecated or otherwise disposed of in any manner that would constitute a violation of any applicable federal or state securities laws.  Director also agrees that (i) certificates shall bear the legend or legends as the Committee deems appropriate in order to assure compliance with applicable securities laws, (ii) the Company may refuse to register the transfer of the Shares on the transfer records of the Company if such proposed transfer would in the opinion of counsel satisfactory to the Company constitute a violation of any applicable securities law, and (iii) the Company may give related instructions to its transfer agent, if any, to stop registration of the transfer of the Shares.

4.
Changes in Capital Structure .  If the outstanding shares of Stock or other securities of the Company, or both, shall at any time be changed or exchanged by declaration of a stock dividend, stock split, combination of stock, or recapitalization, the number and kind of shares of Stock shall be appropriately and equitably adjusted in accordance with the terms of the Plan.

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5.
Status as Director .  For purposes of this Agreement, Director shall be considered to be in service as a director of the Company as long as Director remains a director of the Company or any successor entity.  Any question as to whether and when there has been a termination of such service, and the cause of such termination, shall be determined by the Committee in its sole discretion, and its determination shall be final.

6.
Committee's Powers.   No provision contained in this Agreement shall in any way terminate, modify or alter, or be construed or interpreted as terminating, modifying or altering, any of the powers, rights or authority vested in the Committee pursuant to the terms of the Plan, including, without limitation, the Committee's rights to make certain determinations and elections with respect to the Shares.

7.
Binding Effect.   The provisions of the Plan and the terms and conditions of this Agreement shall, in accordance with their terms, be binding upon, and inure to the benefit of, all successors of Director, including, without limitation, Director's estate and the executors, administrators, or trustees thereof, heirs and legatees, and any receiver, trustee in bankruptcy, or representative of creditors of Director.  This Agreement shall be binding upon and inure to the benefit of any successors to the Company.

8.
Agreement Subject to Plan .  This Agreement is subject to the Plan.  The terms and provisions of the Plan (including any subsequent amendments thereto) are hereby incorporated herein by reference thereto.  In the event of a conflict between any term or provision contained herein and a term or provision of the Plan, the applicable terms and provisions of the Plan will govern and prevail.  All definitions of words and terms contained in the Plan shall be applicable to this Agreement.

9.
Governing Law.   To the extent not preempted by any laws of the United States, the Plan shall be construed, regulated, interpreted and administered according to the laws of the State of Texas.

IN WITNESS WHEREOF , the Company has caused this Agreement to be duly executed by an officer thereunto duly authorized, and Director has executed this Agreement, all effective as of the date of first above written.

 
KINDER MORGAN, INC.
  
 
 
By:
   
     
 
  
 
Name:
   
     
 
  
 
Title:
   

 
 

 
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DIRECTOR
  
 
 
By:
   
     
 
  
 
Name:
   

 
 
 
 
 

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Exhibit 10.4
KINDER MORGAN, INC.
STOCK COMPENSATION PLAN
FOR NON-EMPLOYEE DIRECTORS
 

 
1.             Purpose of the Plan.   The Kinder Morgan, Inc. Stock Compensation Plan for Non-Employee Directors (the "Plan") is intended to promote the interests of Kinder Morgan, Inc. (the "Company") and its stockholders by aligning the compensation of the non-employee members of the board of directors of the Company (the "Board") with stockholders' interests.
 
2.             Compensation Committee.   The Plan shall be administered by the Compensation Committee of the Board (the "Committee"), which shall be constituted so as to permit the Plan to comply with Rule 16b-3 promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended (the "Exchange Act").  Subject to the provisions of the Plan, the Committee shall be authorized to interpret the Plan, to establish, amend and rescind such rules and regulations as it deems necessary for the proper administration of the Plan, and to make all other determinations necessary or advisable for its administration.  The Committee may correct any defect or supply any omission or reconcile any inconsistency in the Plan in the manner and to the extent it shall deem desirable to carry it into effect.  The interpretation by the Committee of the Plan shall be conclusive upon all participants.
 
3.             Eligible Participants .  Only directors of the Company who are not salaried employees of the Company or of an affiliate of the Company (each, a "Non-Employee Director") are eligible to participate in the Plan.  Notwithstanding the foregoing, no director of the Company nominated by a Permitted Holder (as defined in Section 9) will be eligible to participate in the Plan.
 
4.             Stock Subject to the Plan .  The aggregate number of shares of Class P common stock of the Company, $0.01 par value ("Stock"), which may be issued under the Plan shall not exceed 250,000, subject to adjustment as provided in Paragraph 7.  Stock issued under the Plan shall be either authorized but previously unissued shares of Stock or shares of Stock reacquired by the Company, including shares of Stock purchased in the open market, and shares of Stock held in the treasury of the Company.  The Company shall register with the Securities and Exchange Commission the issuance of the Stock subject to the Plan.
 
5.             Awards.   The compensation to be paid to Non-Employee Directors is fixed by the Board, generally annually.  That compensation is expected to include an annual retainer payable in cash.  It also may include other cash compensation ("Cash Compensation") that may be used as provided in this Plan.  In lieu of receiving such Cash Compensation in cash, a Non-Employee Director may elect to receive any portion or all of such Cash Compensation in the form of Stock as provided herein.  Such election shall be evidenced by an agreement (the "Stock Compensation Agreement") between the Company and such Non-Employee Director, which agreement shall contain the terms and conditions of such award.  Such election shall be made generally at or around the first Board meeting in January of each calendar year and will be effective for the entire calendar year.  A Non-Employee Director may make a new election each calendar year.
 

 
 
 
 

The shares of Stock to be issued to a Non-Employee Director electing to receive any portion of his or her Cash Compensation in the form of Stock may be issued subject to certain Forfeiture Restrictions (as defined below), the terms of which shall be set forth in the Stock Compensation Agreement, provided that such Forfeiture Restrictions shall lapse no later than the end of the calendar year to which the Cash Compensation underlying the Stock relates.
 
6.             Number of Shares of Stock to be Issued .  The number of shares of Stock to be issued to a Non-Employee Director electing to receive any portion or all of his or her Cash Compensation in the form of Stock shall equal the Cash Compensation elected to be paid in the form of Stock, divided by the closing price of the Stock on the New York Stock Exchange on the day the Cash Compensation is awarded (such price, the "Fair Market Value"), rounded up to the nearest ten shares of Stock.  The Stock shall be issuable as specified in the Stock Compensation Agreement.  A Non-Employee Director electing to receive any portion or all of his or her Cash Compensation in the form of Stock shall receive cash (the "Cash Payment") equal to (i) the total Cash Compensation awarded to such Non-Employee Director, minus (ii) the number of shares of Stock to be issued to such Non-Employee Director pursuant to his or her election multiplied by the Fair Market Value of a share of Stock.  For illustrative purposes only, if a Non-Employee Director elected to receive an award of Cash Compensation of $100,000 in the form of 50% Stock and 50% cash, and the Fair Market Value of the Stock was $44.50, the Non-Employee Director would receive 1,130 shares of Stock ($50,000 ÷ $44.50 = 1,123.6 shares of Stock, rounded up to the nearest ten shares of Stock).  The Cash Payment would equal $49,715 ($100,000 – (1,130 x $44.50)).  The Cash Payment shall be payable to the Non-Employee Director in four equal installments on the March 31, June 30, September 30 and December 31 of the calendar year in which such Cash Compensation is awarded; provided that such installments shall be adjusted to include any cash dividends paid by the Company on the shares during any period in which such shares are subject to Forfeiture Restrictions.
 
7.             Adjustment .  In the event of a merger, reorganization, consolidation, recapitalization, separation, liquidation, Stock dividend, Stock split or other change in the structure of the Company affecting the Stock, such adjustment shall be made in the number of shares of Stock available under the Plan, as may be determined to be appropriate and equitable by the Board, in its sole discretion, to prevent dilution or enlargement of rights.
 
8.             Restrictions on Resale. Any Stock acquired by a Non-Employee Director under this Plan may be sold only pursuant to an effective registration statement or pursuant to an exemption from the Securities Act of 1933 ("Securities Act"), including sales pursuant to Rule 144 thereunder.  The Committee may, in its sole discretion, impose additional restrictions on disposition by a Non-Employee Director and an obligation of the Non-Employee Director to forfeit and surrender the Stock to the Company under certain circumstances ("Forfeiture Restrictions").  Such restrictions shall be set forth in the Stock Compensation Agreement.  The Company may place a legend on the certificates for such Stock evidencing these restrictions.
 
9.             Change in Control.   Upon the occurrence of a Change in Control (as defined below), the Committee may take any action with respect to Stock issued but still subject to Forfeiture Restrictions that it deems appropriate, including but not limited to causing such Forfeiture Restrictions to lapse; provided, however, that if a Change in Control occurs and, in connection with or as a result of such Change in Control, Richard D. Kinder no longer holds or
 

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does not continue to hold the office of Chairman of the Company, to the extent any shares of Stock are subject to Forfeiture Restrictions, such Forfeiture Restrictions shall lapse, and the Company shall thereupon deliver or cause to be delivered to each Non-Employee Director or legal representative the certificate or certificates for such shares of Stock, free of any legend provided in Section 8.  As used herein, the term "Change in Control" shall mean the occurrence of any of the following events:
 
(a)           the acquisition by any Person or group (within the meaning of Section 13(d)(3) or Section 14(d)(2) of the Exchange Act, or any successor provision), including any group acting for the purpose of acquiring, holding or disposing of securities (within the meaning of Rule 13d-5(b)(1) under the Exchange Act), other than any of the Permitted Holders, in a single transaction or a series of related transactions, by way of merger, amalgamation, consolidation or other business combination or purchase of beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act, or any successor provision), of more than 50% of the total voting power of the Company (or the surviving or resulting entity thereof) after giving effect to such transaction;

(b)           a sale, merger or similar transaction or related series of transactions involving the Company, as a result of which the Permitted Holders do not collectively hold (either directly or indirectly) more than 50% of the voting power of the Company (or the surviving or resulting entity thereof) after giving effect to such transaction or related series of transactions; provided, however, that such sale, merger or similar transaction shall not constitute a Change in Control in the event that, following such sale, merger or similar transaction (a) the Permitted Holders continue to collectively own at least 35% of the voting power of the Company (or the surviving or resulting entity thereof), (b) no other Person or group (within the meaning of Section 13(d)(3) or Section 14(d)(2) of the Exchange Act, or any successor provision), including any group acting for the purpose of acquiring, holding or disposing of securities (within the meaning of Rule 13d-5(b)(1) under the Exchange Act) owns more than 35% of the voting power of the Company (or the surviving or resulting entity thereof), and (c) either Richard D. Kinder or C. Park Shaper is a senior executive officer of the Company (or the surviving or resulting entity thereof);

(c)           the sale or transfer of all or substantially all of the assets of the Company and its Subsidiaries, taken as a whole, in a single transaction or a series of related transactions, in any case, other than to an entity of which more than 50% of the voting power is held (either directly or indirectly) by one or more Permitted Holders or by Persons who held (either directly or indirectly) more than 50% of the voting power of the Company immediately prior to such transaction (or in each case their Affiliates);

(d)           during any period of two consecutive years following the closing of the IPO, individuals who at the beginning of such period constitute the Board, and any new director whose election by the Board or nomination for election by the Company's stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason other than normal retirement, death or disability to constitute at least a majority of the Board then in office; or

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(e)           the stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company's assets (or any transaction having a similar effect).

For purposes of this Section, the following definitions shall apply:

"Affiliate" means, with respect to any Person, any other Person that directly or indirectly controls, is controlled by or is under common control with, the Person in question.  For purposes of the preceding sentence, the term "control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through ownership of voting securities, by contract or otherwise.

"Entity" means a corporation, limited liability company, venture, partnership (general or limited), trust, unincorporated organization, cooperative, association or other entity.

"IPO" means the initial underwritten public offering of Stock for cash pursuant to a registration statement filed under the Securities Act reasonably promptly after approval of the Plan by the Company's stockholders.

"Permitted Holders" means, at any time, Richard D. Kinder and investment funds advised by, or affiliated with, Goldman, Sachs & Co., Highstar Capital LP, The Carlyle Group and Riverstone Holdings LLC.

"Person" means a natural person or an entity.

10.             Tax Withholding. To the extent required by applicable federal, state and local law, a Non-Employee Director shall make arrangements satisfactory to the Company for the payment of any withholding tax obligations that arise in connection with the Plan.  The Company shall not be required to issue any Stock under the Plan until such obligations are satisfied.
 
11.             Effective Date .  This Plan shall be effective on the first day following the IPO.
 
12.             No Right to Continue as a Director .  Nothing contained in the Plan or any agreement hereunder will confer upon any participant in the Plan any right to continue to serve as a director of the Company or any right to receive compensation other than as fixed by the Board from time to time.
 
13.             No Stockholder Rights Conferred .  Nothing contained in the Plan or any agreement hereunder will confer upon any participant in the Plan any rights of a common stockholder of the Company unless and until a share of Stock is validly issued to such participant in accordance with the terms hereof.
 
14.             Termination, Amendment and Modification of Plan .  The Board may at any time terminate or suspend, and may at any time and from time to time and in any respect amend or modify, the Plan; provided, however, that if any applicable law or regulation or the requirements of any stock exchange on which the Stock is listed or quoted requires that any such amendment or modification must be approved by the Company's stockholders, the Board shall
 

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not make any such modification or amendment without approval of the Company's stockholders in such manner and to such degree as is required by the applicable law, regulation or stock exchange requirement.
 
15.             Code Section 409A .  The Plan and all awards granted hereunder are intended to comply with, or otherwise be exempt from, Section 409A of the Internal Revenue Code of 1986, as amended ("Section 409A"). The Plan and all awards shall be administered, interpreted, and construed in a manner consistent with Section 409A or an exemption therefrom.  Should any provision of the Plan, any award hereunder, or any other agreement or arrangement contemplated by the Plan be found not to comply with, or otherwise be exempt from, the provisions of Section 409A, such provision shall be modified and given effect (retroactively if necessary), in the sole discretion of the Committee, and without the consent of the affected Non-Employee Director, in such manner as the Committee determines to be necessary or appropriate to comply with, or to effectuate an exemption from, Section 409A.
 
16.             Governing Law .  To the extent not preempted by any laws of the United States, the Plan shall be construed, regulated, interpreted and administered according to the laws of the State of Texas.
 

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Exhibit 10.5
KINDER MORGAN, INC.
EMPLOYEES STOCK PURCHASE PLAN
 
 
1.   Introduction .  The purpose of this Employees Stock Purchase Plan is to encourage and enable eligible employees of Kinder Morgan, Inc. and its designated Subsidiaries to acquire proprietary interests in the Company (as defined below) through the ownership of Stock (as defined below) in order to establish a closer identification of their interests with those of the Company by providing them with another and more direct means of participating in its growth and earnings which, in turn, will provide motivation for participating employees to remain in the employ of and to give greater effort on behalf of their Employers (as defined below).  The Plan does not qualify as an "employee stock purchase plan" under Section 423 of the Code (as defined below); provided, however, that if the Plan subsequently satisfies the requirements under Section 423 of the Code or a successor provision, the Board (as defined below) shall have the discretion to determine whether the Plan shall be administered as an "employee stock purchase plan."
 
      The Plan consists of two sub-plans:  the Direct Purchase Plan (as described in Section 8) and the Market Purchase Plan (as described in Section 9).  For any particular Purchase Period, Eligible Employees may have the opportunity to purchase Stock under one of the sub-plans or neither sub-plan, as determined by the Board.
 
2.   Definitions .  Unless the context clearly requires a different meaning, the following words or terms, when used herein, shall have the following respective meanings:
 
        2.1   "Account" means the separate book entry account(s) maintained for each Participant under the Plan by the Plan Administrator.
 
        2.2   "Active Participant" means an Eligible Employee who enrolls in the Plan in accordance with the provisions of Section 7.1 herein and who is currently making payroll deductions for the purchase of Stock.  "Active Participant" shall also include an individual on a long-term leave of absence who has made arrangements to continue payment of contributions as described in Section 10.
 
2.3   "Board" means the Board of Directors of the Company.
 
        2.4   "Closing Price" on a particular date means the closing price of a share of Stock on the New York Stock Exchange composite tape on such date, or if no such prices are reported on that date, on the preceding day on which such prices of the Stock are so reported. If the Stock is not listed on the New York Stock Exchange at the time a determination of its Closing Price is requested to be made hereunder, then the determination of Closing Price shall be made by the ESPP Committee in such a manner as its deems appropriate.
 
2.5   "Code" means the Internal Revenue Code of 1986, as amended.
 
2.6   "Company" means Kinder Morgan, Inc., a Delaware corporation, and its successors.

 
 
 

2.7   "Date of Purchase" means, for purposes of the Direct Purchase Plan, the last trading day of the Purchase Period, on which date Stock for such Purchase Period shall be purchased.
 
2.8   "Direct Purchase Plan" means the sub-plan of this Plan as described in Section 8.
 
2.9   "Eligible Employee" means any Employee, provided, however, that the following shall not be an "Eligible Employee" for purposes of this Plan:
 
(a)   an individual whose customary employment is for less than thirty (30) hours per week;
(b)   any individual who is subject to a collective bargaining agreement unless such agreement specifically provides for participation in this Plan;
(c)   an individual whom the Company excludes from participation in the Plan for purposes of applicable securities laws; and
(d)   an individual included in a group of employees specifically identified by the Board and excluded from participation in the Plan.
 
2.10   "Employee" means an individual regularly employed by the Company or one of its Subsidiaries designated from time to time by the Board, provided, however, that any individual who is not on the Employer's payroll or who is not classified by the Employer as an employee, even if such individual is retroactively or prospectively classified as a common law employee by any state or federal governmental agency or court, shall not be an "Employee" for purposes of this Plan.
 
2.11   "Employer" means the Company and its Subsidiaries designated from time to time by the Board, as the employer of an Employee.  As used in this Plan, the term "Employer" means collectively the Company and all such Subsidiaries, unless the context requires a different meaning.
 
2.12   "Enrollment Form" means a statement signed by an Eligible Employee on a form provided by the Plan Administrator, or an election made through applicable electronic procedures, indicating the Eligible Employee elects to become a Participant and authorizing a payroll deduction for the purchase of Stock pursuant to the Plan.
 
2.13   "ESPP Committee" means the committee appointed by the Board to interpret and oversee the administration of this Plan.
 
2.14   "Inactive Participant" means an Eligible Employee who has purchased Stock pursuant to the Plan and who has an Account to which shares of Stock are credited, but who is not currently making payroll deductions for the purchase of Stock under the Plan (other than an individual on a long-term leave of absence who has made arrangements to continue payment of contributions as described in Section 10).

 
 
 
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2.15   "Initial Purchase Period" means the calendar quarter set forth in Section 5.
 
2.16   "IPO" means the initial underwritten public offering of Stock for cash pursuant to a registration statement filed under the Securities Act of 1933, as amended.
 
2.17   "Market Purchase Plan" means the sub-plan of this Plan as described in Section 9.
 
2.18   "Participant" means an Active Participant or an Inactive Participant.
 
2.19   "Plan" means this Kinder Morgan, Inc. Employees Stock Purchase Plan, as it may be amended from time to time.
 
2.20   Plan Administrator" means the Plan Administrator appointed by the ESPP Committee to administer this Plan.  The Plan Administrator shall initially be Computershare, Inc. and certain of its affiliates.
 
2.21   "Plan Supervisor" means the person(s) designated pursuant to Section 3 herein to assist Employees and/or Participants in Plan matters.
 
2.22   "Purchase Period" means the period set forth in Section 5.
 
2.23   "Purchase Price" means, for purposes of the Direct Purchase Plan, the price at which Stock shall be purchased, as set forth in Section 8.3.
 
2.24   "Stock" means shares of Class P common stock of the Company, par value $0.01.
 
2.25   "Subsidiary" means an entity in which the Company has a direct or indirect ownership interest.
 
3.   Administration of the Plan .  This Plan shall be administered by a Plan Administrator appointed from time to time by the ESPP Committee.  The Plan Administrator is vested with full authority to administer the Plan with respect to Participants' Accounts.  In addition to other powers vested in the ESPP Committee under the terms of the Plan, the ESPP Committee is vested with full authority to administer payroll deductions under the Plan, to interpret the Plan, to make, interpret, amend and rescind such equitable rules and regulations regarding this Plan as it may deem advisable, and to make all other deter­minations deemed necessary or advisable for the operation of this Plan.
 
To aid in fulfilling its responsibilities, the ESPP Committee may appoint one or more Plan Supervisors and the ESPP Committee may allocate to each person so appointed certain limited responsibilities to carry out the directives of the ESPP Committee in all phases of the operation of the Plan.  Specifically, the ESPP Committee may delegate to such agent or agents any of its responsibilities under the Plan except its responsibilities to establish the maximum and minimum

 
 
 
3
 

dollar amounts to be paid by any single Eligible Employee for the purchase of Stock during any Purchase Period, allocations of available Stock, and its authority to construe and interpret the provisions of the Plan.
 
All actions taken by the Plan Administrator, and all actions taken, and all interpretations and determinations made by the ESPP Committee and the Plan Supervisor (including determinations of fair market value) shall be final and binding upon Eligible Employees, Participants, the Company and all other interested persons.  Neither the Plan Administrator nor any member of the ESPP Committee nor the Plan Supervisor shall be personally liable for any action, determination or interpretation made in good faith with respect to the Plan, and all members of the ESPP Committee and the Plan Supervisor shall be fully protected by the Company with respect to any such action, determination or interpretation.
 
The ESPP Committee may act by a majority vote at a regular or special meeting of the ESPP Committee or by decision reduced to writing and signed by a majority of the ESPP Committee without holding a formal meeting.
 
Vacancies in the membership of the ESPP Committee arising from death, resignation or other inability to serve shall be filled by appointment by the Board.
 
The Company will pay all expenses incident to establishing and administering the Plan and purchasing or issuing shares of Stock, provided that Participants will pay all costs associated with the issuance of certificates for shares of Stock and all costs incurred in selling, disposing of, or transferring shares of Stock acquired under the Plan, including transfers to a brokerage account or a direct registration system.
 
4.   Designation of Sub-Plan .  For each Purchase Period, the Board shall designate whether Stock may be purchased under the Direct Purchase Plan, the Market Purchase Plan, or neither sub-plan.  Stock may not be purchased under both the Direct Purchase Plan and the Market Purchase Plan for the same Purchase Period.  The sub-plan designated by the Board for a Purchase Period (or the determination that no Stock may be purchased under the Plan for a Purchase Period) shall remain in effect for subsequent Purchase Periods until the Board determines otherwise.  For the Initial Purchase Period, Stock may be purchased under the Market Purchase Plan.
 
5.   Purchase Periods .  Purchases of Stock under the Plan will be implemented by Purchase Periods of calendar quarters.  Unless the Board by resolution determines otherwise, each Purchase Period shall end on the last New York Stock Exchange trading day of each calendar quarter, and the next Purchase Period shall commence on the next calendar day.  The Initial Purchase Period shall commence on the first day of the first calendar quarter following the IPO.  Participation in any Purchase Period under the Plan shall neither limit nor require participation in any other Purchase Period.  The Board may, at any time and for any reason, (i) terminate a Purchase Period, in which case all accumulated payroll deductions during such Purchase Period shall be refunded to the Participants, or (ii) determine that purchases under the Plan will be suspended for one or more calendar quarters.

 
 
 
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6.   Number of Shares of Stock Which May be Purchased .  Each Eligible Employee shall be allowed to purchase as many shares of Stock as the amount of his accrued payroll deductions at the end of any Purchase Period can purchase, based on the price at which shares of Stock are purchased for such Purchase Period under Section 8.3 or Section 9, as applicable.  The ESPP Committee may determine that no Employee shall be allowed to purchase a number of shares of Stock which permits his rights to purchase equity under all similar plans of the Company and its Subsidiaries to accrue at a rate which exceeds in any one calendar year a fixed dollar amount (which limit, if imposed, shall not exceed $50,000) of the fair market value of the Stock determined as of the date the right to purchase is granted.  Subject to the limits set forth in this paragraph, the Board may establish for any Purchase Period a maximum number of shares of Stock that a Participant may purchase.
 
7.   Participation in the Plan; Payroll Deductions .
 
7.1   An Eligible Employee may become a Participant by completing an Enrollment Form and filing it with the Plan Administrator.  The Eligible Employee will become an Active Participant and payroll deductions shall commence as soon as administratively practicable following the Eligible Employee's completion and filing of the Enrollment Form. Once an Eligible Employee has enrolled in the Plan, he will remain an Active Participant and will participate in subsequent Purchase Periods until (i) he discontinues his payroll deductions as provided below, or (ii) he ceases to be an Eligible Employee.  A Participant who has discontinued his payroll deductions will be an Inactive Participant and will not participate in subsequent Purchase Periods until he re-enrolls in the Plan in accordance with this Section.
 
7.2   Payroll deductions for an Active Participant shall be made through the end of a Purchase Period unless sooner discontinued or terminated as provided in Sections 5, 7.5, 10, or 25 herein.  Payroll deductions shall be specified in whole dollar, after-tax amounts up to a maximum per pay period as may be established by the ESPP Committee.  Such deductions shall be in uniform amounts in conformity with the Employer's payroll deduction schedule.  Except as provided in Section 10, there shall be no rights of prepayment or payment of funds to be used for the purchase of Stock pursuant to the Plan through means other than payroll deductions.
 
7.3   Payroll deductions for each Active Participant shall be made by the Employer and provided to the Plan Administrator as provided herein.
 
7.4   An Active Participant may, at any time during a Purchase Period, increase or decrease the amount of his payroll deductions under his Enrollment Form, but not to an amount greater than any maximum dollar amount determined under Section 7.2 above, by completing and filing a new Enrollment Form with the Plan Administrator.  Such change shall be prospective only and effective as soon as practicable.
 
7.5   An Active Participant may discontinue his payroll deduction at any time during a Purchase Period by filing the prescribed form with the Plan Administrator.  Such change shall be prospective only and effective as soon as practicable.  Once discontinued,

 
 
 
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payroll deductions may not be resumed during the remainder of the Purchase Period.  All amounts deducted to the date of discontinuance will be applied to the purchase of Stock at the end of the Purchase Period.  An Active Participant who has discontinued his payroll deductions (other than a Participant on a long-term leave of absence who has made arrangements to continue payment of contributions as described in Section 10) will be an Inactive Participant and will not participate in subsequent Purchase Periods until he re-enrolls in the Plan in accordance with this Section.
 
7.6   If an Eligible Employee makes a hardship withdrawal from any plan with a cash or deferred arrangement qualified under Section 401(k) of the Code (including, but not limited to, the Kinder Morgan, Inc. Savings Plan) which is sponsored, or participated in, by the Company or a Subsidiary, such Eligible Employee shall be automatically prohibited from making or electing to make payroll deductions under the Plan for a six (6) month period.  All amounts deducted prior to such date will be applied to the purchase of Stock at the end of the Purchase Period in which the hardship withdrawal occurs.  After the expiration of such six (6) month period, the Eligible Employee may re-enroll in the Plan by filing a new Enrollment Form.
 
8.   Direct Purchase Plan .
 
8.1   Number of Shares of Stock Under the Direct Purchase Plan .  Subject to adjustment in accordance with Section 16, a total of 2,500,000 shares of Stock may be sold by the Company to Eligible Employees under the Direct Purchase Plan.  The Stock that may be sold under the Direct Purchase Plan shall consist of authorized but unissued shares of Stock or previously issued shares of Stock reacquired and held by the Company, and such number of shares of Stock shall be and is hereby reserved for sale for such purpose.
 
8.2   Purchase of Stock .  For any Purchase Period under which Stock may be purchased under the Direct Purchase Plan, at the end of such Purchase Period, accrued payroll deductions made for each Participant during such Purchase Period will be applied to the purchase of Stock, including fractional shares of Stock, at the Purchase Price determined under Section 8.3.  In no event shall any right to purchase Stock under the Plan be exercised for more than the available number of shares of Stock, and, after the available shares of Stock have been purchased, any remaining balance of any amount previously collected from the Participant shall be refunded. The shares of Stock purchased by a Participant shall be allocated to the Participant's Account.  In the event the total number of shares of Stock to be purchased pursuant to all Enrollment Forms with respect to any Purchase Period exceeds the available shares of Stock pursuant to Section 8.1, the ESPP Committee reserves the right to allocate the number of shares of Stock which Participants may purchase in such manner as it deems fair and equitable, and notify each Participant of such allocation.
 
8.3   Purchase Price .  The Purchase Price per share of Stock shall be a percentage of the Closing Price on the Date of Purchase, which percentage shall be established by the Board in its discretion prior to the beginning of the Purchase Period; provided, however, that such percentage may not be less than 85% of the Closing Price on the Date of Purchase.  The

 
 
 
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percentage established by the Board for a Purchase Period shall remain in effect for subsequent Purchase Periods under the Direct Purchase Plan until the Board establishes a different percentage in accordance with the preceding sentence.  The Purchase Price per share of Stock for the first Purchase Period under which Stock may be sold under the Direct Purchase Plan shall be 100% of the Closing Price on the Date of Purchase.
 
9.   Market Purchase Plan .  For any Purchase Period under which Stock may be purchased under the Market Purchase Plan, as soon as administratively practicable on or after the last day of such Purchase Period, the Company shall remit to the Plan Administrator the aggregate payroll deductions of Active Participants for such Purchase Period.  The Plan Administrator shall purchase Stock on behalf of Active Participants in the open market at the market price at the time of purchase.  The Plan Administrator shall purchase the maximum number of Stock purchasable with the funds remitted by the Company.  Purchases may be made over a number of days to satisfy the requirements of the Market Purchase Plan.  The Stock shall be purchased on an aggregate basis rather than on a per-Participant basis.  The Stock purchased by the Plan Administrator shall be allocated to the Participants' Accounts as soon as administratively practicable after all Stock for a Purchase Period is purchased.  For purposes of allocations to Participants' Accounts, the price of shares of Stock purchased will be the weighted average price of all shares of Stock purchased by the Plan Administrator with respect to a Purchase Period.  Fractional shares may be allocated to a Participant's Account.  The Stock that the Plan Administrator may purchase for Participants under the Market Purchase Plan shall consist entirely of Stock purchased by the Plan Administrator on the open market.
 
10.   Termination of Employment; Leave of Absence .  If, prior to the last day of a Purchase Period, a Participant ceases to be an Eligible Employee or ceases to be employed by the Employer for any reason (including death, voluntary resignation, retirement or involuntary termination, with or without cause), his Enrollment Form shall be deemed to have been canceled, effective immediately .  The Participant's only right with respect to payroll deductions made but not yet used for purchases will be to receive in cash the total amount of such payroll deductions under the Plan during such Purchase Period as soon as practicable after his termination of employment or of his status as an Eligible Employee.  Within sixty (60) days after the date of termination of a Participant's employment or of his status as an Eligible Employee, the Participant may instruct the Plan Administrator to (i) transfer the shares of Stock in his or her Account to a brokerage account specified by the Participant, (ii) issue a certificate or certificates for such shares of Stock to the Participant, (iii) transfer such shares of Stock to a direct registration system through the Plan Administrator, (iv) sell such shares of Stock for the Participant, or (v) any combination of the foregoing.  If the Participant fails to instruct the Plan Administrator within such sixty (60) day period, the shares of Stock in the Participant's Account shall be transferred to a direct registration system through the Plan Administrator.  For any of such actions, the Participant will pay the Plan Administrator's fees established under the Plan.
 
If , prior to the last day of a Purchase Period, a Participant ceases to be actively employed because he commences a long-term leave of absence permitted by law or as may be approved by the Employer, then the Participant will have the right to elect either to receive in cash any accrued payroll deductions under the Plan during the Purchase Period to the date the Participant ceases to be actively employed, if administratively practicable, or to have such amount applied to the purchase of

 
 
 
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Stock for such Purchase Period.  In the absence of an election, or if it is not administratively practicable to honor a Participant's election to receive the accrued payroll deduction in cash, accrued payroll deductions will be applied to the purchase of Stock.  Subject to any applicable rules or regulations established by the Plan Administrator, the Participant shall be entitled to elect to continue to participate in the Plan until his employment terminates, provided the Participant makes the necessary arrangements with the Employer and/or the Plan Administrator to pay the requisite amounts that would, but for the leave of absence, be paid under the Plan through the Participant's payroll deductions.
 
11.   Interest .  No interest shall accrue or be paid on sums withheld from a Participant's pay for the purchase of Stock or with respect to any amount credited to a Participant's Account.
 
12.   Dividend Reinvestment .  On each date that a dividend is made on shares of Stock, the Company will pay to the Plan Administrator the total amount of dividends payable on each Participant's shares of Stock in his Account, and the Plan Administrator shall use that amount for the purchase of shares of Stock in the open market.  The price per share of Stock purchased will be the weighted average price of all shares of Stock purchased by the Plan Administrator for each aggregate order placed by the Plan Administrator.  Purchases will be made as soon as possible after the applicable distribution date, but no more than five (5) days after such date.  The shares of Stock (and fractional shares of Stock) purchased on behalf of each Participant shall be allocated to his Account as soon as administratively practicable after the date on which the Plan Administrator has purchased sufficient shares of Stock to cover purchases for all Participants and former Participants.  If purchases occur at different prices, the purchase price per share of Stock to all Participants will be based upon the average of the prices of all shares of Stock purchased.
 
A Participant may request, by notice delivered to the Plan Administrator in the method prescribed by the Plan Administrator, that dividends payable on shares of Stock in his Account be paid in cash rather than reinvested in accordance with this Section 12.  If a Participant makes such a request, dividends on shares of Stock in his Account will continue to be paid in cash until the Participant requests, by notice delivered to the Plan Administrator in the method prescribed by the Plan Administrator, that distributions payable on shares of Stock in his Account be reinvested in shares of Stock.
 
13.   Rights as Shareholder .  No Participant shall have any rights of a shareholder with respect to any shares of Stock until the shares have been purchased in accordance with Section 8 or 9 and issued by the Company, at which time the Participant will be treated as the owner of such shares.  With respect to any shares of Stock in a Participant's Account, the Plan Administrator will (i) with respect to any matter on which record holders of Stock may vote, vote such shares of Stock as directed by the Participant, and (ii) with respect to dividends on such shares of Stock, deal with such dividends as provided in Section 12.  At any time after the expiration of 180 days (or such other period as may be determined by the ESPP Committee and the Plan Administrator) after a Date of Purchase, a Participant may, subject to payment by the Participant of the Plan Administrator's fees therefor, instruct the Plan Administrator, in accordance with its policies, to (i) transfer the shares of Stock in his or her Account that were purchased on behalf of the Participant on the Date of Purchase to a brokerage account specified by the Participant, (ii) issue a certificate or certificates for such

 
 
 
8
 

shares of Stock to the Participant, (iii) transfer such shares of Stock to the Participant's account in a direct registration system through the Plan Administrator, (iv) sell such shares of Stock for the Participant or (v) any combination of the foregoing.  When the Plan Administrator takes any of the actions in clauses (i) through (v) in accordance with this paragraph, the shares of Stock involved shall be removed from the Participant's Account.
 
14.   Rights Not Transferable .  A Participant's rights to purchase Stock pursuant to this Plan may not be sold, pledged, assigned or transferred in any manner.  If this provision is violated, the right of the Participant to purchase Stock shall terminate and the only right remaining to such Participant under the Plan will be to have paid over to the person entitled thereto the amount of accrued payroll deductions then credited to such Participant and to give instructions to the Plan Administrator with respect to shares of Stock in such Participant's Account in the same manner as provided in Section 13.
 
15.   Purchase Period Limitation .  In no event shall a Participant be permitted to complete payment for shares of Stock after the expiration of the Purchase Period with respect to which such shares of Stock are purchased.
 
16.   Changes in Capitalization .
 
16.1   The existence of the Plan and the rights to purchase Stock hereunder shall not affect in any way the right or power of the Board or the Company's shareholders to make or authorize any adjustment, recapitalization, reorganization or other change in the Company's capital structure or its business, any merger or consolidation of the Company, any issue of debt or equity securities ahead of or affecting Stock or the rights thereof, the dissolution or liquidation of the Company or any sale, lease, exchange or other disposition of all or any part of its assets or business or any other corporate act or proceeding.
 
16.2   The shares of Stock subject to this Plan are shares of Stock as presently constituted, but if, and whenever, prior to the expiration of a Purchase Period, the Company shall effect a Stock dividend, Stock split, combination of Stock, recapitalization or reorganization, the number and kind of shares of Stock or other securities which are subject to this Plan, and the number of shares of Stock to be purchased, shall be appropriately and equitably adjusted so as to maintain the proportionate number of shares of Stock or other securities without changing the aggre­gate Purchase Price.
 
16.3   Except as hereinbefore expressly provided, the issuance by the Company of shares of Stock of any class or securities convertible into Stock of any class, for cash, property, labor or services, upon direct sale, upon the exercise of rights or warrants to subscribe therefor, or upon conversion of shares of Stock or obligations of the Company convertible into Stock or other securities, and in any case whether or not for fair value, shall not affect, and no adjustment by reason thereof shall be made with respect to, the number of shares of Stock to be purchased for a Purchase Period or the Purchase Price per share of Stock.

 
 
 
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17.   Application of Funds .
 
17.1   The Company will maintain payroll deduction records for each Eligible Employee who elects pursuant to the provisions of Section 7 herein to participate in a Purchase Period under the Plan on which all payroll deductions attributable to that Participant with respect to a Purchase Period will be accounted for.
 
17.2   Amounts thus accounted for will be under the control of the Company, need not be set apart from other funds of the Company, and, so long as funds in the applicable amount are provided to the Plan Administrator for each Purchase Period, may be used for any corporate purpose.  Amounts credited for employees of Subsidiaries will be remitted to the Company from time to time by such Subsidiaries.
 
17.3   In the event that any law or regulation, in the opinion of counsel for the Company, may prohibit the handling or use of all or any part of the funds in the manner contemplated by the Plan, the Company may deal with such funds in any lawful manner it may deem advisable, including the deposit of any such funds in a bank account(s) opened for Participants.
 
18.   Governmental Approvals or Consents; Amendments or Termination .  This Plan and any purchases by Participants under it are subject to any governmental approvals or consents that may be or become applicable in connection therewith.  The Board may make such changes in the Plan and its administration as may be necessary to desirable, in the opinion of the Company's counsel, to comply with the rules or regulations of any governmental authority or any national securities exchange.
 
19.   Notices .  All notices or other communications by an Employee or Participant to the Company or the Plan Administrator under or in connection with the Plan shall be deemed to have been duly given when received by the Company or the Plan Administrator in the form specified by the Company or the Plan Administrator.  Any notice given by the Company or the Plan Administrator to an Employee or Participant directed to such individual at the address on file with the Company or the Plan Administrator shall be effective to bind the Employee or Participant and any other person who shall acquire rights hereunder.
 
20.   Effective Date .  The Plan shall be effective on the first day following the IPO.
 
21.   Word Usage .  Words used in the masculine shall apply to the feminine where applicable, and wherever the context of the Plan dictates, the plural shall be read as the singular and the singular as the plural.  Unless the context otherwise requires, the words "include," "includes" and "including" when used in this Plan shall be deemed to be followed by the phrase "without limitation."
 
22.   Headings .  Headings at the beginning of paragraphs are for the convenience of reference, shall not be construed as a part of the Plan, and shall not influence its construction.
 
23.   Employment Not Guaranteed; No Other Rights .  Nothing contained in this Plan, or the granting or exercise of any right to purchase Stock, or the payment of any other benefit hereunder,

 
 
 
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shall give any Employee, Participant or any beneficiary of an Employee or Participant any right to continue employment with the Employer, or any legal or equitable right against the Employer, its directors, officers, employees or agents, the Plan Administrator, or any other persons, except as expressly provided by the Plan.
 
24.   Tax Withholding .  The Employer shall have the right to require payment by a Participant of any federal, state, provincial or local taxes which may be required to be withheld or paid in connection with a purchase hereunder.  The Employer shall, to the extent permitted by law, have the right to deduct any such taxes from any payment of any kind otherwise due to the Participant.  The Plan Administrator shall have the right to require payment by the Participant of any federal, state, provincial or local taxes which may be required to be withheld or paid in connection with any of the actions described in clauses (i)-(v) of Sections 10 or 13.
 
25.   Amendment and Termination .  The Board may at any time and for any reason terminate, withdraw, suspend, modify, or amend the Plan; provided that the Board may not make any amendment which would require the approval of the Company's shareholders to comply with any rule promulgated by the New York Stock Exchange, or any applicable laws, without approval of the shareholders of the Company. The Company shall not be obligated to any Employee, Participant or other person whatsoever to continue the Plan or the ability to purchase Stock hereunder.  Upon termination of the Plan, (i) certificates representing the number of full shares of Stock held for each Participant's benefit shall be delivered as soon as practicable to such Participant, and (ii) the cash, if any, (A) deducted from a Participant's pay but not yet expended on purchases of Stock under the Plan, or (B) relating to fractional shares of Stock, shall be paid to such Participant as soon as practicable.
 
26.   Governing Law .  The Plan and all determinations made hereunder and actions taken pursuant hereto, to the extent not otherwise governed by the laws of the United States, shall be governed by the laws of the State of Texas and construed in accordance therewith without giving effect to principles of conflicts of law.
 
27.   Severability .  The provisions of this Plan shall be severable.  If any provision is found to be unenforceable, the balance of the Plan shall remain in full force and effect.
 
28.   Foreign Employees .  Without the amendment of this Plan, the Board may provide for the participation in the Plan by employees who are subject to the laws of foreign countries or jurisdictions, and such participation may be on such terms and conditions different from those specified in this Plan as may be administratively necessary or necessary or desirable to foster and promote achievement of the purposes of this Plan and, in furtherance of such purposes the Board or its designee may make such modifications, amendments, procedures, sub-plans and the like as may be necessary or advisable to comply with the provisions of laws of other countries or jurisdictions in which participating Employers operate or have employees.
 

 
 
 
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Exhibit 10.6

ANNUAL INCENTIVE PLAN
OF
KINDER MORGAN, INC.


ARTICLE 1.
GENERAL

1.1           Purpose

The Annual Incentive Plan (the "Plan") of Kinder Morgan, Inc. (the "Company") is intended to advance the best interests of the Company and its Affiliates by providing certain employees with additional incentives through the discretionary payment of bonuses based on the performance of the Company and/or the employees relating to specified objective financial and business criteria, thereby increasing the personal stake of such employees in the continued success and growth of the Company and encouraging them to remain in the employ of the Company.  The Plan shall provide for Awards (as defined below) to executives (the "Executive Sub-Plan") and non-executives (the "Non-Executive Sub-Plan").

1.2           Definitions

(a)            “Affiliate” means any entity in which the Company has a direct or indirect ownership interest; provided, that, for purposes of the definitions of "Change in Control" and "Permitted Holders," "Affiliate" means, with respect to any Person, any other Person that directly or indirectly controls, is controlled by or is under common control with, the Person in question.  As used in this definition of "Affiliate," referred to in the last proviso of the preceding sentence, the term "control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through ownership of voting securities, by contract or otherwise.
 
(b)            “Award” means any award granted under the Plan to an Eligible Employee by the Committee subject to such terms and conditions as the Committee may establish under the terms of the Plan.
 
(c)            “Board” means the Board of Directors of the Company.
 
(d)            “Bonus Opportunity” means a cash amount established with respect to an Executive Sub-Plan Award, which will form the basis for determining the amount payable under such Award, subject to the level of achievement of the applicable Performance Goals.
 
(e)            “Change in Control” means:
 
(i)           the acquisition by any Person or group (within the meaning of Section 13(d)(3) or Section 14(d)(2) of the Exchange Act, or any successor provision), including any group acting for the purpose of acquiring, holding or disposing of securities (within the meaning of Rule 13d-5(b)(1) under the Exchange Act), other than any of the Permitted

 
 
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Holders, in a single transaction or a series of related transactions, by way of merger, amalgamation, consolidation or other business combination or purchase of beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act, or any successor provision), of more than 50% of the total voting power of the Company (or the surviving or resulting entity thereof) after giving effect to such transaction;
 
(ii)           a sale, merger or similar transaction or related series of transactions involving the Company, as a result of which the Permitted Holders do not collectively hold (either directly or indirectly) more than 50% of the voting power of the Company (or the surviving or resulting entity thereof) after giving effect to such transaction or related series of transactions; provided, however, that such sale, merger or similar transaction shall not constitute a Change in Control in the event that, following such sale, merger or similar transaction (a) the Permitted Holders continue to collectively own at least 35% of the voting power of the Company (or the surviving or resulting entity thereof), (b) no other Person or group (within the meaning of Section 13(d)(3) or Section 14(d)(2) of the Exchange Act, or any successor provision), including any group acting for the purpose of acquiring, holding or disposing of securities (within the meaning of Rule 13d-5(b)(1) under the Exchange Act) owns more than 35% of the voting power of the Company (or the surviving or resulting entity thereof), and (c) either Richard D. Kinder or C. Park Shaper is a senior executive officer of the Company (or the surviving or resulting entity thereof);
 
(iii)           the sale or transfer of all or substantially all of the assets of the Company and its subsidiaries, taken as a whole, in a single transaction or a series of related transactions, in any case, other than to an entity of which more than 50% of the voting power is held (either directly or indirectly) by one or more Permitted Holders or by Persons who held (either directly or indirectly) more than 50% of the voting power of the Company immediately prior to such transaction (or in each case their Affiliates);
 
(iv)           during any period of two consecutive years following the closing of the IPO, individuals who at the beginning of such period constitute the Board, and any new director whose election by the Board or nomination for election by the Company's stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason other than normal retirement, death or disability to constitute at least a majority of the Board then in office; or
 
(v)           the stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company's assets (or any transaction having a similar effect).
 
(f)            “Code” means the Internal Revenue Code of 1986, as amended.
 
(g)            “Committee” means the Board or the Compensation Committee, as administrator of the Plan.
 

 
 
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(h)            “Compensation Committee” means a committee of one or more members of the Board appointed by the Board to administer the Plan in accordance with Section 1.3(c).
 
(i)            “Covered Employee” has the same meaning as set forth in Code Section 162(m)(3).
 
(j)            “Eligible Employee” means any employee of the Company or its Affiliates, except (i) an employee who is included in a unit of employees covered by a collective bargaining agreement unless such agreement expressly provides for eligibility under this Plan, and (ii) a director who is not an employee of the Company or its Affiliates.
 
(k)            “Exchange Act” means the Securities Exchange Act of 1934, as amended.
 
(l)            “IPO” means the initial underwritten public offering of Stock for cash pursuant to a registration statement filed under the Securities Act reasonably promptly after approval of the Plan by the Company's stockholders.
 
(m)            “Mandatory Minimum” means the minimum amount of bonus to be paid under the Plan for each calendar year, as determined by the Committee pursuant to Section 2.7.
 
(n)            “Outside Director” means a Director who is an “outside director” within the meaning of Code Section 162(m) and Treasury Regulations Section 1.162-27(e)(3) or any successor to such statute and regulation.
 
(o)            “Participant ” means an Eligible Employee who has been granted an Award under the Plan.
 
(p)           “ Performance Criteria ” means the criterion or criteria that the Committee shall select for purposes of establishing the Performance Goal(s) for a Performance Year with respect to any Award under the Executive Sub-Plan.  The Performance Criteria that will be used to establish such Performance Goal(s) shall be based on the attainment of specific levels of performance of the Company (or Affiliate, division or operational unit of the Company) and shall be limited to the following:
 
(i)           Company earnings per share;
 
(ii)           Company or subsidiary cash distributions to stockholders or common unitholders;
 
(iii)           Company or subsidiary earnings before interest and taxes or earnings before interest, taxes and corporate charges;
 
(iv)           Company, subsidiary or business unit net income;
 
(v)           Company, subsidiary or business unit revenues;
 
(vi)           Company, subsidiary or business unit unit revenues minus unit variable costs;
 

 
 
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(vii)           Company, subsidiary or business unit return on capital, return on equity, return on assets, or return on invested capital;
 
(viii)           Company, subsidiary or business unit cash flow, return on assets or cash flows from operating activities;
 
(ix)           Company, subsidiary or business unit capital expenditures;
 
(x)           Company, subsidiary or business unit operations and maintenance expense or general and administrative expense;
 
(xi)           Company, subsidiary or business unit debt-equity ratios and key profitability ratios; and
 
(xii)           Company stock price.
 
(q)            “Performance Goals ” means, for a Performance Year, one or more goals established by the Committee for the Performance Year based upon the Performance Criteria.  The Performance Goals shall be expressed as an objective formula or standard that precludes discretion to increase the amount of compensation payable that would otherwise be due upon attainment of the goal.  The Performance Goals may be applied on an absolute basis or relative to an identified index or peer group, as specified by the Committee.  The Committee is authorized, in its sole and absolute discretion, to adjust or modify the calculation of a Performance Goal for such Performance Year (provided, that if an Award is intended to constitute Qualified Performance Based Compensation, such adjustment or modification may be made only to the extent permitted under Code Section 162(m) and the regulations thereunder) in order to prevent the dilution or enlargement of the rights of Participants based on the following events:
 
(i)           asset write-downs;
 
(ii)           litigation or claim judgments or settlements;
 
(iii)           the effect of changes in tax laws, accounting principles, or other laws or regulatory rules affecting reported results;
 
(iv)           any reorganization and restructuring programs;
 
(v)           extraordinary nonrecurring items as described in Accounting Principles Board Opinion No. 30 (or any successor or pronouncement thereto) and/or in management’s discussion and analysis of financial condition and results of operations appearing in the Company’s annual report to stockholders for the applicable year;
 
(vi)           acquisitions or divestitures;
 
(vii)           any other specific unusual or nonrecurring events, or objectively determinable category thereof;
 

 
 
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(viii)           foreign exchange gains and losses; and
 
(ix)           a change in the Company’s fiscal year.
 
(r)            “Performance Year ” means, with respect to an Executive Sub-Plan Award, the calendar year within which the Performance Goals relating to that Award are to be achieved.  With respect to a Non-Executive Sub-Plan Award, the Performance Year is the calendar year applicable to the Executive Sub-Plan except that, for non-exempt Eligible Employees, the Performance Year shall be the period containing all time worked and used to determine pay beginning with the first pay period that begins in November of the prior calendar year and ending in October of the calendar year applicable for the Executive Sub-Plan.
 
(s)            “Permitted Holders ” means, at any time, Richard D. Kinder and investment funds advised by, or affiliated with, Goldman, Sachs & Co., Highstar Capital LP, The Carlyle Group and Riverstone Holdings LLC.
 
(t)            “Person ” means a natural person or an entity.
 
(u)            “Qualified Performance Based Compensation ” has the same meaning as set forth in Treasury Regulations Section 1.162-27(e).
 
1.3           Administration Of The Plan

(a)           The Plan shall be administered by the Board unless and until the Board delegates administration to a Compensation Committee, as provided in paragraph (c).
 
(b)           The Board shall have the power and authority: (i) to construe and interpret the Plan and apply its provisions; (ii) to promulgate, amend, and rescind rules and regulations relating to the administration of the Plan; (iii) to authorize any person to execute, on behalf of the Company, any instrument required to carry out the purposes of the Plan; (iv) to delegate its authority to one or more officers of the Company with respect to awards that do not involve Covered Employees or “insiders” within the meaning of Section 16 of the Exchange Act; (v) to determine when Awards are to be granted under the Plan; (vi) from time to time to select, subject to the limitations set forth in this Plan, those Eligible Employees to whom Awards shall be granted and to make any such grants; (vii) to prescribe the terms and conditions of each Award; (viii) to amend any outstanding Awards; (ix) to determine the duration and purpose of leaves of absences which may be granted to an Eligible Employee without constituting termination of his or her employment for purposes of the Plan, which periods shall be no shorter than the periods generally applicable to employees under the Company’s employment policies; (x) to make decisions with respect to outstanding Awards that may become necessary upon a change in corporate control or an event that triggers anti-dilution adjustments; and (xi) to exercise discretion to make any and all other determinations which it determines to be necessary or advisable for administration of the Plan.
 
(c)           The Compensation Committee.
 
(i)           The Board may delegate administration of the Plan to a Compensation Committee of one or more members of the Board.  If administration is delegated to a
 

 
 
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Compensation Committee, the Compensation Committee shall have, in connection with the administration of the Plan, the powers theretofore possessed by the Board as described in paragraph (b) above, including the power to delegate to a subcommittee any of the administrative powers the Compensation Committee is authorized to exercise, subject, however, to such resolutions, not inconsistent with the provisions of the Plan, as may be adopted from time to time by the Board.  The Board may abolish the Compensation Committee at any time and revest in the Board the administration of the Plan.  The members of the Compensation Committee shall be appointed by and serve at the pleasure of the Board. From time to time, the Board may increase or decrease the size of the Compensation Committee, add additional members to, remove members (with or without cause) from, appoint new members in substitution therefor, and fill vacancies, however caused, in the Compensation Committee.  The Compensation Committee shall act pursuant to a vote of the majority of its members or, in the case of a committee comprised of only two members, the unanimous consent of its members, whether present or not, or by the written consent of the majority of its members and minutes shall be kept of all of its meetings and copies thereof shall be provided to the Board.  Subject to the limitations prescribed by the Plan and the Board, the Compensation Committee may establish and follow such rules and regulations for the conduct of its business as it may determine to be advisable.
 
(ii)           At such time as the Company is the issuer of any class of common equity securities required to be registered under Section 12 of the Exchange Act, the Board shall have discretion to determine whether or not it intends to comply with the exemption requirements of Code Section 162(m), if applicable.  If the Board intends to satisfy such exemption requirements, with respect to Awards to any Covered Employee, the Compensation Committee shall be a compensation committee of the Board that at all times consists solely of two or more Outside Directors.  Within the scope of such authority, the Board or the Compensation Committee may delegate to a committee that does not consist solely of two or more Outside Directors the authority to grant Awards to Eligible Employees who are either (x) not then Covered Employees and are not expected to be Covered Employees at the time of recognition of income resulting from such Award, or (y) not persons with respect to whom the Company wishes to grant Qualified Performance Based Compensation.
 
(d)           The interpretation and construction of any provision of the Plan or of any Award granted under it by the Committee shall be final, conclusive and binding upon all parties, including the Company, its stockholders and directors, and the executives and employees of the Company and its Affiliates.  No member of the Committee shall be liable to the Company, any stockholder, any Grantee or any employee of the Company or its Affiliates for any action or determination made in good faith with respect to the Plan or any Award granted under it.  No member of the Committee may vote on any Award to be granted to him or her.
 
1.4           Eligibility

The Chairman and Chief Executive Officer of the Company ("Chairman") and all Eligible Employees identified by the Chairman who report directly to the office of the Chairman shall be

 
 
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eligible to participate in the Executive Sub-Plan.  All other Eligible Employees shall be eligible to participate in the Non-Executive Sub-Plan.

1.5           Awards Under The Plan

The Committee shall designate the Eligible Employees, if any, to be granted Awards under the Plan.  No employee shall be a Participant or be entitled to any payment hereunder unless such employee is designated as a Participant and granted an Award by the Committee.  All Awards granted under the Plan shall be on the terms and subject to the conditions hereinafter provided.

1.6           Other Compensation Programs

The existence and terms of the Plan shall not limit the authority of the Board or the Committee in compensating employees of the Company or its Affiliates in such other forms and amounts, including compensation pursuant to any other plans as may be in effect currently or adopted in the future, as the Board or the Committee may determine from time to time.

ARTICLE 2.
TERMS AND CONDITIONS OF AWARDS

2.1           Executive Sub-Plan

(a)           Establishment Of Performance Goals And Bonus Opportunity

Prior to or within 90 days after the commencement of each Performance Year (or no later than such earlier or later date as may be the applicable deadline for the establishment of Performance Goals permitting compensation payable for such Performance Year to qualify as Qualified Performance Based Compensation), the Committee shall establish written Performance Goals and a Bonus Opportunity for each Award granted to a Participant in the Executive Sub-Plan for such Performance Year.  The Performance Goals shall be based on one or more Performance Criteria.

At the time of establishing the Performance Goals, the Committee shall specify (i) the formula, standard or method to be used in calculating the compensation payable to a Participant if the Performance Goals are obtained, and (ii) the individual employee or class of employees to which the formula, standard or method applies.  The Bonus Opportunity shall be expressed as an amount of cash. The Committee may also specify a minimum acceptable level of achievement of the relevant Performance Goals, as well as one or more additional levels of achievement, and a formula to determine the percentage of the Bonus Opportunity deemed to have been earned by the Participant upon attainment of each such level of achievement, which percentage may exceed 100%.  The Performance Goals and Bonus Opportunity relating to any particular Award need not be the same as those relating to any other Award, whether made at the same or a different time.  If an Award that is intended to constitute Qualified Performance Based Compensation is based, in whole or in part, on a percentage of a Participant's salary, base pay or other compensation, the maximum amount of

 
 
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the Award must be fixed at the time the Performance Goals are established.  Notwithstanding the terms of any Award, the maximum payout under this Plan to any individual for any Performance Year shall not exceed $3,000,000.

(b)           Earning Of Award

Promptly after the date on which the necessary information for a particular Performance Year becomes available, and prior to payment of any such Award, the Committee shall determine and shall certify in writing the extent to which the Bonus Opportunity for such Performance Year has been earned, through the achievement of the relevant Performance Goals, by each Participant for such Performance Year.

2.2           Non-Executive Sub-Plan

For each Performance Year, the Committee may grant Awards to Participants in the Non-Executive Sub-Plan.  The Awards shall be determined by the Committee, in its sole discretion, based on recommendations made by the Company's management.  Such recommendations may be based on a number of factors, or any combination of them, including, but not limited to, market data, Company performance, and the performance of individual Participants.  The Committee shall have the sole discretion to determine whether any Eligible Employee will be designated a Participant and may be granted an Award.

2.3           Discretionary Downward Adjustments

At any time after an Award has been granted but before the Award has been paid, the Committee, in its sole and absolute discretion, may reduce or eliminate the Award granted to any Participant for any reason or for no reason, including, without limitation, the Committee's judgment that the Performance Goals have become an inappropriate measure of achievement, a change in the employment status, position or duties of the Participant, unsatisfactory performance of the Participant, or the Participant's service for less than the entire Performance Year, for example.  With respect to Awards that are intended to constitute Qualified Performance Based Compensation, the reduction or elimination of an Award for a Participant may not increase the amount of an Award to another Participant.  In no event will the bonuses that are to be paid fall below the Mandatory Minimum amount described in Section 2.7.

2.4           Distributions

As soon as administratively feasible after the Committee has (i) determined and certified the extent to which the Bonus Opportunity relating to an Award under the Executive Sub-Plan has been earned pursuant to Section 2.1(b), or (ii) granted an Award under the Non-Executive Sub-Plan, such Award shall be distributed in one lump sum either in cash or in such other form of payment (for example, equity) that the Committee, in its discretion, may determine, provided that no such other form shall result in a deferral of compensation to which Code Section 409A applies.

 
 
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2.5           Change In Control

Notwithstanding any other provision of this Plan (other than in the last sentence of this Section 2.5) or contained in any Award granted hereunder (including any provision for deferred payment thereof), upon the occurrence of a Change in Control, the Committee, in its discretion, may take any action with respect to outstanding Awards that it deems appropriate, which action may vary among Awards granted to individual Participants.  In the event that such action is to distribute an Award, the Award shall be distributed in a lump sum no later than 30 days after the Change in Control.  If a Change in Control occurs and, in connection with or as a result of such Change in Control, Richard D. Kinder no longer holds or does not continue to hold the office of Chairman of the Company, (i) each Participant under the Executive Sub-Plan shall be deemed to have earned 100% of the Bonus Opportunities contained in any outstanding Awards for which the determination described in Section 2.1(b) has not been made, or, if such determination described in Section 2.1(b) has been made, the full amount of the portion of the Bonus Opportunity which was determined to have been earned, (ii) each Participant under the Non-Executive Sub-Plan shall be deemed to have earned an Award equal to the Award most recently paid to such Participant under the Plan (or, if no Awards have yet been paid under the Plan, (A) an Award equal to the most recent award paid to such Participant under any prior Annual Incentive Plan, or (B) if such Participant has not received an award under any prior Annual Incentive Plan, an Award equal to the average Award paid to all similarly situated Participants under this clause (ii)), and (iii) the amount of such Bonus Opportunities or Awards under (i) or (ii), as applicable, shall be paid promptly (and no later than 30 days after the Change in Control) in a cash lump sum.

2.6           Termination of Employment

Except in the case of a payment made in connection with a Change in Control under Section 2.5, a Participant shall forfeit all rights to a distribution of an Award if the Participant ceases to be employed by the Company or an Affiliate for any reason prior to the date the Award is distributed.  For greater certainty, the Participant ceases to be employed by the Company or an Affiliate on the later of the date on which the Participant receives written notice of termination or the last date on which the Participant provides services to the Company or Affiliate.

2.7           Approval of a Mandatory Minimum Bonus Amount to Be Paid Annually and Allocation of Forfeitures

(a)           The Committee shall meet before the end of each calendar year and shall approve a "Mandatory Minimum" amount of bonus to be paid under the Plan for such calendar year which, in the Committee's discretion, shall be expressed as either (1) a dollar amount, or (2) a percentage of the aggregate Bonus Opportunities for all Plan Participants for the year as established by the Committee in Section 2.1(a).

(b)           In the event the aggregate amount of bonus to be paid for a calendar year is tentatively determined to be less than the Mandatory Minimum due to forfeitures, forfeitures for the year equal to the difference between the Mandatory Minimum and the amount of bonus as tentatively determined to be paid shall be re-allocated to the group of Eligible

 
 
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Employees as the Committee deems appropriate; provided, however, that any re-allocation to a Participant who is a Covered Employee shall not cause the payment to such Participant for such year to exceed the amount determined under Section 2.1(a) for such Participant based on the actual level of achievement of the relevant Performance Goals for such year.

(c)           The Committee shall, at or before the approval of the Mandatory Minimum, certify that the Performance Goals as established in Section 2.1(a) were in fact satisfied.  In the event that the information is not available to certify that the Performance Goals were in fact satisfied, the Mandatory Minimum as approved by the Committee shall not include any payments to Covered Employees.

ARTICLE 3.
ADDITIONAL PROVISIONS

3.1           Amendments

The Board may, in its sole discretion, amend the Plan from time to time or terminate the Plan at any time.  Any such amendment may be made without stockholder approval unless required to satisfy any applicable laws (including but not limited to Code Section 162(m)) or securities exchange rules. Notwithstanding this or any other provision of this Plan to the contrary, in connection with a Change in Control (a) neither the Committee nor the Board may adjust any Award in effect immediately prior to such Change in Control in a manner adverse to the Participant, and (b) the Board may not amend the provisions of this Plan relating to such Change in Control or any such Award in a manner adverse to a Participant, in either case without the consent of the affected Participant.  In the event the Plan is terminated, the Plan shall remain in effect for purposes of administering the payment of Awards granted under the Plan until such payments have been completed.

3.2           Withholding

Payments under the Plan shall be net of an amount sufficient to satisfy any federal, state, local or provincial withholding tax obligations of the Company.

3.3           Non-Assignability; Death Of Participant

No Award under the Plan shall be assignable or transferable by the holder thereof except by will or by the laws of descent and distribution.  In the event of the death of a Participant, any payments due to such Participant shall be paid to his beneficiary designated in writing to the Committee, or, if none has been designated, to his estate.

3.4           Non-Uniform Determinations

Determinations by the Committee under the Plan (including, without limitation, determinations of the persons to receive Awards; the terms and provisions of such Awards; the relevant Performance Goals; the amount of Bonus Opportunity; and the amount of any downward

 
 
-10-
 

adjustment) need not be uniform and may be made by it selectively among persons who receive, or are eligible to receive, Awards under the Plan, whether or not such persons are similarly situated.

3.5           No Guarantee Of Employment

The grant of an Award under the Plan shall not constitute an assurance of continued employment for any period.

3.6           Unfunded Status Of Awards; Creation Of Trusts

The Plan is intended to constitute an "unfunded" plan.  With respect to any amounts payable to a Participant pursuant to an Award, nothing contained in the Plan (or in any documents related thereto), nor the creation or adoption of the Plan, the grant of any Award, or the taking of any other action pursuant to the Plan, shall give any such Participant any rights that are greater than those of a general creditor of the Company.  The Committee may authorize the creation of trusts or make other arrangements to meet the Company's obligations under the Plan; however, such trusts or other arrangements shall be consistent with the "unfunded" status of the Plan.

3.7           Effective Date

Subject to the approval of the Company’s stockholders, the Plan shall be effective as of January 1, 2011 .   To the extent necessary for purposes of Code Section 162(m), this Plan shall be resubmitted to stockholders for reapproval at the times prescribed by Code Section 162(m) and the regulations thereunder.

3.8           Clawbacks

To the extent required by applicable laws, rules, regulations or securities exchange listing requirements, the Company shall have the right, and shall take all actions necessary, to recover any amounts paid to any individual under this Plan.

3.9           Code Section 162(m)

It is intended that the Plan comply fully with and meet all the applicable requirements of Code Section 162(m) and the regulations thereunder with respect to Awards that are intended to constitute Qualified Performance Based Compensation.  If any provision of the Plan would disqualify the Plan or would not otherwise permit the Plan to comply with Code Section 162(m) as so intended, such provision shall be construed or deemed amended to conform to the requirements or provisions of Code Section 162(m).

3.10           Code Section 409A

The Plan and all Awards granted hereunder are intended to comply with, or otherwise be exempt from, Code Section 409A. The Plan and all awards shall be administered, interpreted, and construed in a manner consistent with Code Section 409A or an exemption therefrom.  Should any

 
 
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provision of the Plan, any award hereunder, or any other agreement or arrangement contemplated by the Plan be found not to comply with, or otherwise be exempt from, the provisions of Code Section 409A, such provision shall be modified and given effect (retroactively if necessary), in the sole discretion of the Committee, and without the consent of the Participant, in such manner as the Committee determines to be necessary or appropriate to comply with, or to effectuate an exemption from, Code Section 409A.


 
 
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Exhibit 10.7
SEVERANCE AGREEMENT
 
THIS AGREEMENT (the “ Agreement ”), is entered into as of February 10, 2011 (the “ Effective Date ”), by and between Kinder Morgan, Inc. (the “ Company ”) and Park Shaper (“ Executive ”).
 
WHEREAS, the Company considers it essential to the best interests of its shareholders to attract and retain key executive management personnel;
 
WHEREAS, the Executive and the Company had previously entered into that certain Limited Liability Company agreement (the “LLC Agreement”), pursuant to which the Executive was provided with severance benefits under a severance policy in consideration of post-employment restrictive covenants; and
 
WHEREAS, the Company is now being incorporated and the Company and the Executive wish to enter into a severance agreement to supersede any prior arrangements regarding severance and restrictive covenants contained in the LLC Agreement.
 
NOW THEREFORE, in conside ration of the premises and the mutual covenants herein contained, and intending to be legally bound, the Company and the Executive hereby agree as follows:
 
1  
Definitions.   For purposes of this Agreement, the following terms shall have the meanings set forth below:
 
(a)  
“Accrued Rights” means (i) any amounts of accrued but unpaid Annual Base Salary or unused vacation days accrued through the date of termination, (ii) any bonus earned but unpaid as of the date of termination, and (iii) any vested or accrued employee benefits to which the Executive may be entitled under the employee benefit plans of the Company, payable in accordance with the terms of each applicable plan.
 
(b)  
“ Affiliate ” of any Person means any other Person that directly or indirectly, through one or more intermediaries, Controls, is Controlled by, or is under common Control with, such first Person.
 
(c)  
“Annual Base Salary” means the Executive’s rate of regular annual base compensation (prior to any reduction (i) pursuant to a salary reduction agreement pursuant to section 401(k) or section 125 of the Code, (ii) under any plan or arrangement deferring any base salary payments, or (iii) that is the basis for termination of employment by the Executive for Good Reason under this Agreement), and shall not include (without limitation), fees, retainers, reimbursements, bonuses, incentive awards, equity grants, options or similar payments.
 
(d)  
“Board” means the Board of Directors of the Company, or its designee.
 
(e)  
“Bylaws” means the bylaws of the Company, as in effect at the relevant time.
 

 
 
 

(f)  
“Cause” means any of the following:
 
(i)  
the Executive’s conviction of, or plea of nolo contendere to, any crime  or offense constituting a felony under applicable law, other than any motor vehicle violations for which no custodial penalty is imposed;
 
(ii)  
the Executive’s commission of fraud or embezzlement against the Company or any of its Subsidiaries;
 
(iii)  
gross neglect by the Executive of, or gross or willful misconduct by the Executive in connection with the performance of, the Executive’s duties to the Company and its Subsidiaries that, if curable, is not cured within thirty (30) calendar days after a written notice of such gross neglect, or gross or willful misconduct, specifically identifying the gross neglect or misconduct, is delivered by the Chief Executive Officer or a majority of the members of the Board to the Executive;
 
(iv)  
the Executive shall have willfully failed or refused to carry out the reasonable and lawful instructions of the Chief Executive Officer or the Board (other than as a result of illness or disability) concerning duties or actions consistent with the Executive’s office, or the Executive’s willful failure to implement any actions consistent with the Executive’s office that the Board may direct such Executive to undertake, and, in each case, such failure or refusal shall have continued for a period of thirty (30) calendar days following written notice from the Chief Executive Officer or a majority of the members of the Board;
 
(v)  
the Executive’s failure to perform the duties and responsibilities of his or her office as his or her primary business activity, provided that, subject to Section 5, so long as it does not materially interfere with his or her duties, nothing herein shall preclude the Executive from accepting appointment to or continuing to serve on any board of directors or as trustee of any business corporation or any charitable organization, from engaging in charitable and community activities, from delivering lectures and fulfilling speaking engagements, or from directing and managing his or her personal investments and those of his or her family;
 
(vi)  
a judicial determination that the Executive has breached his fiduciary duties;
 
(vii)  
the Executive’s willful and material breach of the Shareholders Agreement, the Charter or the Bylaws, including willfully causing the Company or any of its Subsidiaries or Affiliates to take any material action prohibited by the Shareholders Agreement, the Charter or the Bylaws that the Executive failed to cure, if curable, within thirty (30) calendar days following written notice  thereof, specifically identifying such willful and material breach, having been delivered by the Chief
 
 
2
 

Executive Officer or by a majority of the members of the Board to the Executive; or
 
(viii)  
the Executive’s material breach of the provisions of Section 5 that, if curable, is not cured within thirty (30) calendar  days after notice of such breach is delivered to the Executive by the Chief Executive Officer or by a majority of the members of the Board.
 
Action or inaction by the Executive shall not be considered “willful” unless done or omitted by him or her in bad faith or with actual knowledge that his action or inaction was in breach of the Shareholders Agreement, the Charter, or the Bylaws, as applicable, and shall not include failure to act by reason of total or partial incapacity due to physical or mental illness.
 
(g)  
“Charter” means the certificate of incorporation of the Company, as in effect at the relevant time.
 
(h)  
“Code” means the Internal Revenue Code of 1986, as amended.
 
(i)  
“ Control ” means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through ownership of voting securities, by contract or otherwise.
 
(j)  
“Good Reason” means any of the following, without the Executive’s prior consent if (x) any event or circumstances set forth in clauses (i) through (v) below shall have occurred and the Executive provides the Company with written notice thereof within a reasonable period of time (but in no event more than thirty (30) calendar days) after the Executive has knowledge of the occurrence or existence of such event or circumstance, which notice shall specifically identify the event or circumstances that the Executive believes constitutes Good Reason, (y) the Company fails to correct the circumstance or event so identified within thirty (30) calendar days after the receipt of such notice, and (z) the Executive resigns within five (5) calendar days after the expiration of the period described in clause (y) above:
 
(i)  
a material diminution in the Executive’s duties and responsibilities to the Company and its Subsidiaries to a level inconsistent with those of an executive level employee;
 
(ii)  
a material reduction in the annual base salary of the Executive or a material reduction in the aggregate welfare benefits provided to the Executive (not including any reduction related to a broader compensation or benefit reduction that is not limited to the Executive specifically);
 
(iii)  
a material reduction in the Executive’s maximum annual bonus opportunity from the Executive’s maximum annual bonus opportunity as in effect on the date of this Agreement;
 

 
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(iv)  
the relocation by the Company of the Executive’s primary place of employment with the Company or any of its Subsidiaries to a location not within a 50 mile radius of such current location; or
 
(v)  
a willful and intentional breach of a material provision of the Shareholders Agreement by the Company that has a material and adverse effect on the Executive.
 
Action or inaction by the Company shall not be considered “willful” unless done or omitted by the Company in bad faith or with actual knowledge that such action or inaction is in breach of the Shareholders Agreement.
 
(k)  
“ Governmental Entity ” means any court, administrative agency, regulatory body, commission or other governmental authority, board, bureau or instrumentality, domestic or foreign and any subdivision thereof.
 
(l)  
“ Non-Compete Period ” means the period during such Executive’s employment with the Company and, to the extent applicable, the period thereafter determined in accordance with Schedule 1 hereof.
 
(m)  
“ Person ” means any individual, corporation, company, firm, partnership, joint venture, limited liability company, estate, trust, business association, organization, Governmental Entity or other entity.
 
(n)  
“ Shareholders Agreement ” means the Shareholders Agreement dated as of February 10, 2011.
 
(o)  
“ Subsidiary ” or “ Subsidiaries ” means, with respect to any Person, as of any date of determination, any other Person as to which such Person owns, directly or indirectly, or otherwise controls, more than 50% of the voting shares or other similar interests or is general partner or managing member of, or serves in a similar capacity for, such Person (including, in the case of the Company, KMP and KMR and their respective Subsidiaries).
 
Any terms not defined herein shall have the meaning ascribed to them in the Shareholders Agreement.
 
2  
Severance Benefits.
 
If the Executive’s employment hereunder is terminated by the Company without Cause, or if the Executive resigns for Good Reason, the Executive shall be entitled to receive the following (collectively, the “ Severance Benefits ”) in addition to the Accrued Rights, subject to the Executive’s continued compliance with the provisions of Section 5:
 
(a)  
continued payment of Annual Base Salary for twenty-four months following the date of the Executive’s termination (paid in accordance with the Company’s normal payroll practices as in effect on the date of such termination); and
 

 
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(b)  
reimbursement, for a period of time that terminates upon the earlier of (i) twenty-four months following the termination date or (ii) the date the Executive becomes eligible for alternative coverage with a subsequent employer, of any premiums for continued group medical, dental and vision coverage for the Executive and/or the Executive’s eligible dependents at the same coverage levels as in effect immediately prior to the Executive’s date of termination.
 
Notwithstanding the foregoing, the Company may, at its election, cease paying any amounts or providing any benefits described above upon ninety (90) days notice to the Executive.  Upon the expiration of the ninetieth (90 th ) day, the Executive shall no longer be subject to the provisions of Section 5 of this Agreement.
 
3  
Waiver and Release; Timing of Payments .
 
As condition precedents to receiving any payments under this Agreement (other than those amounts already accrued prior to the date of termination, which shall be payable on the date of termination), (a) Executive shall have executed, within twenty-one (21) days, or if required for an effective release, forty-five (45) days, following the Executive’s termination of employment, a waiver and release in substantially the form attached hereto as Exhibit A (the “ Release ”), which Release may be updated by the Company from time to time to reflect changes in law, and (b) the seven (7) day revocation period of such Release shall have expired.  Subject to Section 6 and the execution of the Release, all payments under this Section 3 shall be payable as described above; provided , that the first payment shall be made on the sixtieth (60th) day after the Executive’s termination of employment, and such first payment shall include payment of any amounts that would otherwise be due prior thereto.
 
4  
Confidentiality .
 
The Executive shall not at any time or in any manner, either directly or indirectly, make any unauthorized use or disclosure of any knowledge or information that is unpublished, confidential, or of a proprietary nature, which was generated or acquired during the course of his employment by the Company, relating to the Company’s business or to its processes or trade secrets, or to its sources of supply or customers, or to its marketing efforts or other marketing plans or contemplated marketing actions of the Company; provided, however, nothing contained herein shall be construed to prevent the Executive from using general knowledge and skill whether acquired prior to or during employment by the Company.
 
Further, the Executive specifically represents that, during the term of employment or upon leaving the Company's employment, the Executive has not and will not remove from the Company's premises, either directly or indirectly, any drawings, writing, prints, computer disks, any documents or anything containing, embodying, or disclosing any confidential or proprietary information or any of the Company's trade secrets unless express written permission is given by a member of the Company's executive management.
 
For purposes of this section, the terms “confidential information”, “proprietary information” or “trade secrets” mean any information, whether oral, written, furnished to or

 
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obtained by the Executive during the term of employment by the Company, which is neither a matter of public record nor previously published.
 
5  
Restrictive Covenants .
 
The Executive agrees that he or she shall not, during the Non-Compete Period, directly or indirectly (other than on behalf of or at the request of the Company or its Subsidiaries):
 
(a)  
engage in, have an interest in, or otherwise be employed by (whether as an owner, operator, partner, member, manager, employee, officer, director, consultant, advisor, or representative), provide consulting or management services to, or permit his or her name to be used in connection with the activities of, any business or organization, engaged in a business that is competitive with a business in which the Company or any of its Subsidiaries engages (a “ Competitive Business ”); provided , that ownership of less than one percent (1%) of the outstanding stock of any publicly traded corporation shall not be deemed to be a violation of this Section 5 solely by reason thereof; provided , further , that, providing investment banking or legal services to a Competitive Business as an independent consultant, independent advisor or independent representative shall not be deemed to be a violation of this Section 5 solely by reason thereof so long as providing such services is not the primary duties or business activities of such individual; provided , further , that, if the Board determines that the provisions of this Section 5(a) should not apply to the Executive following the termination of the Executive’s employment by the Company, the provisions of this Section 5(a) shall be deemed waived with respect to the Executive;
 
(b)  
solicit any Person who is or, within the prior twelve (12) months, was, or whose Affiliate is or, within the prior twelve (12) months, was a customer of the Company or any of its Subsidiaries or persuade or attempt to persuade any such Person not to be a customer of the Company or any of its Subsidiaries or to reduce the amount of business that such customer does with the Company or any of its Subsidiaries, or enter into or seek to enter into any agreement (to the extent such agreement is of a nature that is related to the business in which the Company or any of its Subsidiaries engage) with, to the Executive’s knowledge, any such Person; or
 
(c)  
contact, approach or solicit for the purpose of offering employment to or hiring or retaining, or actually hire or retain any Person who is or was employed or retained by the Company or its Affiliates as an employee during the immediately preceding twelve (12) months or attempt to persuade any Person not to continue to be employed or retained by the Company or its Affiliates or to terminate his or her employment or services with the Company or its Affiliates; provided , that notwithstanding the foregoing, general solicitations of employment published in a journal, newspaper or other publication of general circulation and not specifically directed towards such employees, consultants or independent contractors shall not be deemed to constitute solicitation for purposes of this Section 5(c) .
 

 
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(d)  
Notwithstanding anything to the contrary in this Section 5, with respect to the country of Mexico, this Section 5 will only apply (and therefore will be limited) to activities that are competitive with the businesses in which any of the Mexican Subsidiaries of the Company engages.
 
The Executive acknowledges and agrees that: (1) the time and geographical scope of the restrictions of this Section 5 are reasonable; (2) the burden on the Executive of complying with the restrictions of this Section 5 is not unreasonable; (3) the general public policy is not harmed by the restrictions of this Section 5; and (4) the restrictions of this Section 5 are necessary for the protection of the Company and its Subsidiaries. The Executive further acknowledges and agrees (x) the Executive’s breach of the provisions of this Section 5 will cause the Company irreparable harm, which cannot be adequately compensated by money damages, (y) if the Executive breaches or threatens to breach the provisions of this Section 5 and the Company (by vote of a majority of the members of the Board) seeks an injunction against the Executive, there is a reasonable probability of the Company’s eventual success on the merits and (z) if the Executive breaches or threatens to breach the provisions of this Section 5 and the Company (by vote of a majority of the members of the Board) seeks an injunction against the Executive, a balancing of equities will be in favor of the Company.  The Executive consents and agrees that if the Executive commits any such breach or threatens to commit any breach, the Company (by vote of a majority of the members of the Board) shall be entitled to temporary and permanent injunctive relief from a court of competent jurisdiction, without posting any bond or other security and without the necessity of proof of actual damage, in addition to, and not in lieu of, such other remedies as may be available to the Company for such breach, including the recovery of money damages. If any of the provisions of this Section 5 are determined to be wholly or partially unenforceable, the Executive hereby agrees that this Agreement or any provision hereof may be reformed so that it is enforceable to the maximum extent permitted by law.  If any of the provisions of this Section 5 are determined to be wholly or partially unenforceable in any jurisdiction, such determination shall not be a bar to or in any way diminish the Company’s right to enforce any such covenant in any other jurisdiction
 
6  
Section 409A .
 
(a)  
The intent of the parties is that payments and benefit under this Agreement comply with or be exempt from Code Section 409A and the regulations and guidance promulgated thereunder (collectively, “ Section 409A ”) and, accordingly, to the maximum extent permitted, this Agreement shall be interpreted to be in compliance therewith.  If the Executive notifies the Company that the Executive has received advice of tax counsel of a national reputation with expertise in Section 409A that any provision of this Agreement would cause the Executive to incur any additional tax or interest under Section 409A (with specificity as to the reason therefor) or the Company independently makes such determination, the Company shall, after consulting with the Executive, reform such provision to try to comply with Section 409A through good faith modifications to the minimum extent reasonably appropriate to conform with Section 409A.  To the extent that any provision hereof is modified in order to comply with or be exempt from Section 409A, such modification shall be made in good faith and shall, to the maximum extent reasonably possible, maintain the
 

 
7
 

original intent and economic benefit to the Executive and the Company of the applicable provision without violating the provisions of Section 409A.
 
(b)  
A termination of employment shall not be deemed to have occurred for purposes of this Agreement providing for the payment of any amounts or benefits that are considered nonqualified deferred compensation under Section 409A upon or following a termination of employment, unless such termination is also a “separation from service” within the meaning of Section 409A and the payment thereof prior to a “separation from service” would violate Section 409A.  As permitted by Treasury Regulation 1.409A-1(h)(1)(ii), 49% shall be substituted in lieu of 20% for the average level of bona fide services performed during the immediately preceding 36 month period in order to constitute a “separation from service”.  For purposes of any such provision of this Agreement relating to any such payments or benefits, references to a “termination,” “termination of employment” or like terms shall mean “separation from service.”  If the Executive is deemed on the date of termination to be a “specified employee” within the meaning of that term under Section 409A(a)(2)(B), then with regard to any payment or the provision of any benefit that is considered nonqualified deferred compensation under Section 409A payable on account of a “separation from service,” such payment or benefit shall be made or provided on the first business day following the date which is the earlier of (A) the expiration of the six (6) month period measured from the date of such “separation from service” of the Executive, and (B) the date of the Executive’s death (the “ Delay Period ”).  Upon the expiration of the Delay Period, all payments and benefits delayed pursuant to this Section 6 (whether they would have otherwise been payable in a single lump sum or in installments in the absence of such delay) shall be paid or reimbursed to the Executive in a lump sum, and any remaining payments and benefits due under this Agreement shall be paid or provided in accordance with the normal payment dates specified for them herein.
 
(c)  
(i) All expenses or other reimbursements as provided herein shall be payable in accordance with the Company’s policies in effect from time to time, but in any event shall be made on or prior to the last day of the taxable year following the taxable year in which such expenses were incurred by the Executive; (ii) no such reimbursement or expenses eligible for reimbursement in any taxable year shall in any way affect the expenses eligible for reimbursement in any other taxable year; provided , that this clause (ii) shall not be violated without regard to expenses reimbursed under any arrangement covered by Code Section 105(b) solely because such expenses are subject to a limit related to the period the arrangement is in effect; and (iii) the right to reimbursement or in-kind benefits shall not be subject to liquidation or exchanged for another benefit.
 
(d)  
For purposes of Section 409A, the Executive’s right to receive any installment payments pursuant to this Agreement shall be treated as a right to receive a series of separate and distinct payments.  Whenever a payment under this Agreement specifies a payment period with reference to a number of days (e.g., “payment shall be made within thirty (30) days following the date of termination”), the
 

 
8
 

actual date of payment within the specified period shall be within the sole discretion of the Company.
 
7  
Offsets for Other Severance Pay .
 
There shall be no duplication of severance pay in any manner.  Furthermore, the Severance Benefits shall be in lieu of any other payments or benefits in the nature of severance pay or benefits to which Executive may have otherwise been entitled to receive from the Company or its Subsidiaries.  If Executive has received severance pay or benefits, or is entitled to any notice or payment in lieu of notice of termination of employment required by federal, state or local law, including but not limited to the Worker Adjustment and Retraining Notification Act, the Severance Benefits to which the Executive would otherwise be entitled under this Agreement shall be reduced by the amount of any such payment or benefits; provided , that with respect to any payment made to Executive hereunder that is subject to Section 409A, if the Company seeks to set off a payment to be made to Executive hereunder which is subject to Section 409A against an amount owed by the Company to the Executive, the gross amount of such payment to be made to the Executive shall be deemed to be paid to the Executive for U.S. federal income tax purposes, as and when due under this Agreement, and the net amount of such payment (i.e., after deducting applicable withholding taxes) shall be applied against amounts owed by the Company to the Executive; provided , further , that the Company may set off a payment hereunder that is subject to Section 409A pursuant to this sentence only if the right to such set off, or such set off, would not violate Section 409A.
 
8  
Term .
 
The term of this Agreement commences on the Effective Date; and if the Executive is employed with the Company or any of its Subsidiaries on May 31, 2015, the Agreement shall terminate on May 31, 2015.  If the Executive’s employment with the Company and its Subsidiaries terminates on or prior to May 31, 2015, then the Executive shall have the applicable Non-Compete Period with respect to the Restrictive Covenants set forth in Section 5 of this Agreement for the period after the Executive’s employment as set forth in the Schedule 1 hereto, which may extend past May 31, 2015.  For the avoidance of doubt, the conditions of Section 4 of the Agreement shall continue in perpetuity.
 
9  
At Will Employment .
 
This Agreement does not alter the “employment at will” status of the Executive and shall not create a contract of guaranteed employment.
 
10  
Miscellaneous .
 
(a)  
Governing Law .  This Agreement shall be governed by and construed in accordance with the laws of the State of Texas, notwithstanding any conflict of law principles.
 
(b)  
Arbitration .  Other than injunctive relief by the Company pursuant to Sections 4 or 5 of this Agreement, any dispute, controversy, or claim among or between the parties relating to or arising from this Agreement shall be submitted to and settled
 

 
9
 

by binding confidential arbitration (“ Arbitration ”), administered by the Houston, Texas office of the American Arbitration Association (“ AAA ”), and conducted pursuant to the rules then in effect of the AAA governing employment disputes.  The Arbitration hearing shall take place in Houston, Texas unless otherwise agreed to by the parties to the Arbitration.  Such Arbitration shall be before three neutral arbitrators (the “ Panel ”) licensed to practice law in Texas and familiar with commercial disputes.  Any award rendered in any Arbitration shall be final and conclusive upon the parties to the Arbitration, and the judgment thereon may be entered in the highest court of the forum (state or federal) having jurisdiction over the issues addressed in the Arbitration.  The administration fees and expenses of the Arbitration shall be borne equally by the parties to the Arbitration, provided that each party shall pay for and bear the cost of his/her/its own experts, evidence, and attorneys’ fees, except that, in the discretion of the Panel, any award may include the cost of a party’s counsel and/or its share of the expense of Arbitration if the Panel expressly determines that an award of such costs is appropriate to the party whose position substantially prevails in such Arbitration.  To submit a matter to Arbitration, the party seeking redress shall notify in writing the party against whom such redress is sought, describe the nature of such claim, the provision of this Agreement that has been allegedly violated, and the material facts surrounding such claim.  The Panel shall render a single written decision.  The decision of the Panel shall be binding upon the parties to the Arbitration, and after the completion of such Arbitration, the parties to the Arbitration may only institute litigation regarding this Agreement for the sole purpose of enforcing the determination of the Arbitration hearing; except that the Company may seek injunctive or equitable relief as provided herein.  Notwithstanding this Section 10(b), the Company may resort to a court of equity solely for purposes of obtaining injunctive relief to enforce Sections 4 or 5.
 
(c)  
Entire Agreement .  This Agreement is contractual and not a mere recital.  This Agreement constitutes the entire contract between the Executive and the Company.  No amendment to this Agreement shall be effective unless it is in writing and signed by duly authorized representatives of both parties hereto, and each amendment to or waiver of any provision of this Agreement shall, in addition to any other required approvals, also require the prior written approval of (i) Richard D. Kinder (so long as he (together with his Permitted Transferees) owns at least 1.0% of the Total Voting Power) and (ii) the Investor Shareholders holding Voting Securities representing a majority of the Total Voting Power then held by the Investor Shareholders (so long as the Investor Shareholders own at least an aggregate amount of 1.0% of the Total Voting Power).  For the avoidance of doubt, this Section 10(c) is for benefit of, and shall be enforceable by, Richard D. Kinder and the Investor Shareholders.
 
(d)  
Successors .  This Agreement is binding upon and inures to the benefit of the heirs, personal representatives, successors and assigns of both parties hereto.
 

 
10
 

(e)  
Notices .  All notices and other communications hereunder shall be in writing and shall be given by hand-delivery to the other parties or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows:
 
 
 
To the Company:
Vice President – Human Resources
   
Kinder Morgan, Inc.
   
500 Dallas Street, Suite 1000
   
Houston, TX 77002
 
To the Executive:
To the last address set forth on the payroll records of the Company
 
 
(f)  
Withholding .  The Company may withhold from any amounts payable under this Agreement such federal, state or local income taxes as in the reasonable determination of the Company are required to be withheld pursuant to any applicable law or regulation.
 
(g)  
Severability .  The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement.
 
(h)  
Captions .  The captions of this Agreement are not part of the provisions hereof and shall have no force or effect.
 
(i)  
Counterparts.     This Agreement may be executed in one or more counterparts each of which shall be deemed an original instrument, but all of which together shall constitute but one and the same Agreement.
 
(j)  
Survivorship .  The respective rights and obligations of the parties hereunder shall survive any termination of this Agreement for any reason to the extent necessary to the intended provision of such rights and the intended performance of such obligations.
 

 
11
 

IN WITNESS WHEREOF , the parties have executed this Agreement on the date first above written.
 
 
 
 
  KINDER MORGAN, INC.  
     
 
   
 
/s/ James E. Street
 
 
James E. Street
 
Vice President, Human Resources and Administration
 
 
 
 
 
  PARK SHAPER  
     
 
   
 
/s/ Park Shaper
 
     

                                                                  
 
 

 
12
 

SCHEDULE 1
 
NON-COMPETE PERIODS
 
The Non-Compete Period for the period after the Executive’s employment with the Company and its Subsidiaries shall be as set forth in the table below:
 
Executive
Non-Compete Period
 
 
Cause
Voluntary termination of employment by Executive without Good Reason
·   Termination of employment by Executive due to disability, retirement or Good Reason
·   Termination of employment by Company without Cause
 
Park Shaper
2 years
2 years
2 years
 
 
 
 
 
 

 
13
 

EXHIBIT A
 
RELEASE
 
This RELEASE (“ Release ”) dated as of ___________, 20__ between Kinder Morgan, Inc., a Delaware corporation (the “ Company ”), and Park Shaper   (the “ Executive ”).
 
WHEREAS, the Company and the Executive previously entered into a severance agreement dated ________, 2011 (the “ Severance Agreement ”); and
 
WHEREAS, the Executive's employment with the Company has terminated effective ______ __, 20__ (“ Termination Date ”);
 
NOW, THEREFORE, in consideration of the premises and mutual agreements contained herein and in the Severance Agreement, the Company and the Executive agree as follows:
 
1.     Capitalized terms not defined herein shall have the meaning as defined under the Severance Agreement.
 
2.     In consideration of the Executive’s release under Paragraph 3 hereof, the Company shall pay to the Executive or provide benefits to the Executive as set forth in Section 2 of the Severance Agreement.
 
3.     The Executive, on his or her own behalf and on behalf of his or her spouse, personal representatives, heirs, executors, and assigns, hereby generally release and forever discharge the Company, any present or former parent, sister, Affiliate, Subsidiary or related company, and any of its and their respective offices and branches, present or former shareholders, unit holders, partners, limited partners, officers, directors, employees, agents, representatives, legal representatives, accountants, successors, predecessors and assigns (collectively, the “ Company Released Parties ”), from any and all claims, demands, and actions of any nature, whether known or unknown and whether accrued or unaccrued, and specifically including, but not limited to, those in any manner arising out of or involving any aspect of the Executive’s employment or the termination of such employment at the Company or any of the Company Released Parties, and including any rights or claims under the Age Discrimination in Employment Act of 1967 (including the Older Workers Benefit Protection Act of 1990) (together “ ADEA ”); Title VII of the Civil Rights Act of 1964; the Vocational Rehabilitation Act; the Americans with Disabilities Act of 1990; the Vietnam Era Veterans Readjustment Assistance Act; Executive Order 11246; the Civil Rights Act of 1871; the Civil Rights Act of 1991; the National Labor Relations Act; the Worker Adjustment and Retraining Notification Act; the Family and Medical Leave Act of 1993, as amended; the Equal Pay Act, as amended, the Employee Retirement Income Security Act of 1974, as amended, the Fair Labor Standards Act, as amended, the Sarbanes-Oxley Act, the anti-discrimination laws of the State of Texas; and including any and all other municipal, state, and/or federal statutory, executive order, or constitutional provisions pertaining to an employment relationship, including the Texas Commission on Human Rights Act.  This settlement, release and waiver also specifically includes, but is not limited to, all such claims in the nature of tort, statutory law, common law or contract claims, including specifically but not limited to any claim of wrongful discharge, unpaid wages, unpaid time off duty, unpaid vacation, stock or stock options, unpaid benefits, unpaid severance, intentional or negligent infliction of emotional distress, defamation, discrimination, retaliation of any kind or other claims in any manner arising out of or involving any aspect of employment or termination of the Executive’s employment. The Executive further agrees not to file a lawsuit of any kind against the Company or any of the Company Released Parties arising from the Executive’s employment at the Company or any of the Company Released Parties, or the termination thereof, or based on any other set of facts or events occurring prior to the Effective Date of this Release.  The Executive also waives and releases all rights to
 

 
14
 

share in any damages or other relief awarded in any class or collective action or in any action brought by, or as a result of a complaint filed with, any federal, state or local agency.  The Executive agrees that he cannot participate as a party or class member in, or receive any portion of any recovery in, any lawsuit or proceeding that is based on any claims or rights released by this Agreement.  The Executive understands that this Release effectively releases and waives any right he or she might have to sue the Company or any of the Company Released Parties for any claim arising out of or related to his or her employment at the Company or any of the Company Released Parties, the separation of his employment, any agreements between the Company or the Company Released Parties and the Executive, or based on any other set of facts or events occurring prior to the Effective Date of this Agreement.  This release includes any and all claims concerning attorney fees, costs, and any and all other expenses related to the claims released herein.  Provided, however, that this release and waiver shall not apply to any rights which, by law, may not be waived or to rights and claims that arise after the effective date of this Release.
 
4.     The Company and the Executive acknowledge and agree that the release contained in Paragraph 3 does not, and shall not be construed to, release or limit the scope of any existing obligation of the Company and/or any of its Subsidiaries or Affiliates (i) to fail to pay any amounts or benefits pursuant to Section 2 of the Severance Agreement or with respect to the Executive’s rights as a shareholder or equity-award holder of the Company, or (ii) to the Executive and his eligible, participating dependents or beneficiaries under any existing group welfare (excluding severance), equity, or retirement plan of the Company in which the Executive and/or such dependents are participants.
 
5.     The Executive acknowledges that Section 3 of this Release includes a waiver or any rights and claims arising under the Age Discrimination in Employment Act of 1967, as amended, and the Older Workers Benefit Protection Act.  The Executive acknowledges that the consideration that he or she is receiving in exchange for this waiver of the rights and claims specified in this Section 3 of this Release exceeds anything of value to which he or she is already entitled.  The Executive acknowledges that he or she has been provided at least 21 days (or, if applicable, 45 days) to review the Release and has been advised to review it with an attorney of his or her choice.  In the event the Executive elects to sign this Release prior to this 21 day period (or, if applicable, the 45 day period), he or she agrees that it is a knowing and voluntary waiver of his or her right to wait the full 21 days (or, if applicable, the full 45 days).  The Executive further understands that he or she has 7 days after the signing hereof to revoke it by so notifying the Company in writing, such notice to be received by the Secretary of the Company within the 7 day period.  The Executive further acknowledges that he or she has carefully read this Release, knows and understands its contents and its binding legal effect.  The Executive acknowledges that by signing this Release, he or she does so of his or her own free will and act and that it is his or her intention that he or she be legally bound by its terms.
 
It is the intention of the parties in executing this Release that this Release shall be effective as a full and final accord and satisfaction and mutual release of and from all liabilities, disputes, claims and matters covered under this Release, known or unknown, suspected or unsuspected.
 
6.     By executing this Release, the Executive acknowledges that he or she: (i) is not relying upon any statements, understandings, representations, expectations, or agreements other than those expressly set forth in the Severance Agreement and this Release; (ii) has made his own investigation of the facts and is relying solely upon his own knowledge and, if applicable, the advice of his own legal counsel; (iii) knowingly waives any claim that this Release was induced by any misrepresentation or nondisclosure and any right to rescind or avoid this Release based upon presently existing facts, known or unknown, (iv) is entering into this Release freely and voluntarily; and (v) has carefully read and understood all of the provisions of this Release.  The Company and the Executive stipulate that the Company is relying upon these representations and warranties in entering into this Release.  These representations and warranties shall survive the execution of this Release.
 

 
15
 

7.     This Release shall become effective on the seventh (7th) day following the day that this Release becomes irrevocable under Paragraph 5.  All payments due to the Executive shall be payable in accordance with Section 2 of the Severance Agreement.
 
IN WITNESS WHEREOF, the parties have executed this Release on the date first above written.
 
 
 
 
KINDER MORGAN, INC.
  
 
 
By:
   
     
 
 
Name:
   
 
Title:
   

 
 
 
PARK SHAPER
  
 
       
 
 
 

 
16
 


Exhibit 10.8
SEVERANCE AGREEMENT
 
THIS AGREEMENT (the “ Agreement ”), is entered into as of February 10, 2011 (the “ Effective Date ”), by and between Kinder Morgan, Inc. (the “ Company ”) and Steven Kean (“ Executive ”).
 
WHEREAS, the Company considers it essential to the best interests of its shareholders to attract and retain key executive management personnel;
 
WHEREAS, the Executive and the Company had previously entered into that certain Limited Liability Company agreement (the “LLC Agreement”), pursuant to which the Executive was provided with severance benefits under a severance policy in consideration of post-employment restrictive covenants; and
 
WHEREAS, the Company is now being incorporated and the Company and the Executive wish to enter into a severance agreement to supersede any prior arrangements regarding severance and restrictive covenants contained in the LLC Agreement.
 
NOW THEREFORE, in conside ration of the premises and the mutual covenants herein contained, and intending to be legally bound, the Company and the Executive hereby agree as follows:
 
1  
Definitions.   For purposes of this Agreement, the following terms shall have the meanings set forth below:
 
(a)  
“Accrued Rights” means (i) any amounts of accrued but unpaid Annual Base Salary or unused vacation days accrued through the date of termination, (ii) any bonus earned but unpaid as of the date of termination, and (iii) any vested or accrued employee benefits to which the Executive may be entitled under the employee benefit plans of the Company, payable in accordance with the terms of each applicable plan.
 
(b)  
“ Affiliate ” of any Person means any other Person that directly or indirectly, through one or more intermediaries, Controls, is Controlled by, or is under common Control with, such first Person.
 
(c)  
“Annual Base Salary” means the Executive’s rate of regular annual base compensation (prior to any reduction (i) pursuant to a salary reduction agreement pursuant to section 401(k) or section 125 of the Code, (ii) under any plan or arrangement deferring any base salary payments, or (iii) that is the basis for termination of employment by the Executive for Good Reason under this Agreement), and shall not include (without limitation), fees, retainers, reimbursements, bonuses, incentive awards, equity grants, options or similar payments.
 
(d)  
“Board” means the Board of Directors of the Company, or its designee.
 
(e)  
“Bylaws” means the bylaws of the Company, as in effect at the relevant time.
 

 
 
 

(f)  
“Cause” means any of the following:
 
(i)  
the Executive’s conviction of, or plea of nolo contendere to, any crime  or offense constituting a felony under applicable law, other than any motor vehicle violations for which no custodial penalty is imposed;
 
(ii)  
the Executive’s commission of fraud or embezzlement against the Company or any of its Subsidiaries;
 
(iii)  
gross neglect by the Executive of, or gross or willful misconduct by the Executive in connection with the performance of, the Executive’s duties to the Company and its Subsidiaries that, if curable, is not cured within thirty (30) calendar days after a written notice of such gross neglect, or gross or willful misconduct, specifically identifying the gross neglect or misconduct, is delivered by the Chief Executive Officer or a majority of the members of the Board to the Executive;
 
(iv)  
the Executive shall have willfully failed or refused to carry out the reasonable and lawful instructions of the Chief Executive Officer or the Board (other than as a result of illness or disability) concerning duties or actions consistent with the Executive’s office, or the Executive’s willful failure to implement any actions consistent with the Executive’s office that the Board may direct such Executive to undertake, and, in each case, such failure or refusal shall have continued for a period of thirty (30) calendar days following written notice from the Chief Executive Officer or a majority of the members of the Board;
 
(v)  
the Executive’s failure to perform the duties and responsibilities of his or her office as his or her primary business activity, provided that, subject to Section 5, so long as it does not materially interfere with his or her duties, nothing herein shall preclude the Executive from accepting appointment to or continuing to serve on any board of directors or as trustee of any business corporation or any charitable organization, from engaging in charitable and community activities, from delivering lectures and fulfilling speaking engagements, or from directing and managing his or her personal investments and those of his or her family;
 
(vi)  
a judicial determination that the Executive has breached his fiduciary duties;
 
(vii)  
the Executive’s willful and material breach of the Shareholders Agreement, the Charter or the Bylaws, including willfully causing the Company or any of its Subsidiaries or Affiliates to take any material action prohibited by the Shareholders Agreement, the Charter or the Bylaws that the Executive failed to cure, if curable, within thirty (30) calendar days following written notice  thereof, specifically identifying such willful and material breach, having been delivered by the Chief
 
 
2
 

Executive Officer or by a majority of the members of the Board to the Executive; or
 
(viii)  
the Executive’s material breach of the provisions of Section 5 that, if curable, is not cured within thirty (30) calendar  days after notice of such breach is delivered to the Executive by the Chief Executive Officer or by a majority of the members of the Board.
 
Action or inaction by the Executive shall not be considered “willful” unless done or omitted by him or her in bad faith or with actual knowledge that his action or inaction was in breach of the Shareholders Agreement, the Charter, or the Bylaws, as applicable, and shall not include failure to act by reason of total or partial incapacity due to physical or mental illness.
 
(g)  
“Charter” means the certificate of incorporation of the Company, as in effect at the relevant time.
 
(h)  
“Code” means the Internal Revenue Code of 1986, as amended.
 
(i)  
“ Control ” means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through ownership of voting securities, by contract or otherwise.
 
(j)  
“Good Reason” means any of the following, without the Executive’s prior consent if (x) any event or circumstances set forth in clauses (i) through (v) below shall have occurred and the Executive provides the Company with written notice thereof within a reasonable period of time (but in no event more than thirty (30) calendar days) after the Executive has knowledge of the occurrence or existence of such event or circumstance, which notice shall specifically identify the event or circumstances that the Executive believes constitutes Good Reason, (y) the Company fails to correct the circumstance or event so identified within thirty (30) calendar days after the receipt of such notice, and (z) the Executive resigns within five (5) calendar days after the expiration of the period described in clause (y) above:
 
(i)  
a material diminution in the Executive’s duties and responsibilities to the Company and its Subsidiaries to a level inconsistent with those of an executive level employee;
 
(ii)  
a material reduction in the annual base salary of the Executive or a material reduction in the aggregate welfare benefits provided to the Executive (not including any reduction related to a broader compensation or benefit reduction that is not limited to the Executive specifically);
 
(iii)  
a material reduction in the Executive’s maximum annual bonus opportunity from the Executive’s maximum annual bonus opportunity as in effect on the date of this Agreement;
 

 
3
 

(iv)  
the relocation by the Company of the Executive’s primary place of employment with the Company or any of its Subsidiaries to a location not within a 50 mile radius of such current location; or
 
(v)  
a willful and intentional breach of a material provision of the Shareholders Agreement by the Company that has a material and adverse effect on the Executive.
 
Action or inaction by the Company shall not be considered “willful” unless done or omitted by the Company in bad faith or with actual knowledge that such action or inaction is in breach of the Shareholders Agreement.
 
(k)  
“ Governmental Entity ” means any court, administrative agency, regulatory body, commission or other governmental authority, board, bureau or instrumentality, domestic or foreign and any subdivision thereof.
 
(l)  
“ Non-Compete Period ” means the period during such Executive’s employment with the Company and, to the extent applicable, the period thereafter determined in accordance with Schedule 1 hereof.
 
(m)  
“ Person ” means any individual, corporation, company, firm, partnership, joint venture, limited liability company, estate, trust, business association, organization, Governmental Entity or other entity.
 
(n)  
“ Shareholders Agreement ” means the Shareholders Agreement dated as of February 10, 2011.
 
(o)  
“ Subsidiary ” or “ Subsidiaries ” means, with respect to any Person, as of any date of determination, any other Person as to which such Person owns, directly or indirectly, or otherwise controls, more than 50% of the voting shares or other similar interests or is general partner or managing member of, or serves in a similar capacity for, such Person (including, in the case of the Company, KMP and KMR and their respective Subsidiaries).
 
Any terms not defined herein shall have the meaning ascribed to them in the Shareholders Agreement.
 
2  
Severance Benefits.
 
If the Executive’s employment hereunder is terminated by the Company without Cause, or if the Executive resigns for Good Reason, the Executive shall be entitled to receive the following (collectively, the “ Severance Benefits ”) in addition to the Accrued Rights, subject to the Executive’s continued compliance with the provisions of Section 5:
 
(a)  
continued payment of Annual Base Salary for twelve months following the date of the Executive’s termination (paid in accordance with the Company’s normal payroll practices as in effect on the date of such termination); and
 

 
4
 

(b)  
reimbursement, for a period of time that terminates upon the earlier of (i) twelve months following the termination date or (ii) the date the Executive becomes eligible for alternative coverage with a subsequent employer, of any premiums for continued group medical, dental and vision coverage for the Executive and/or the Executive’s eligible dependents at the same coverage levels as in effect immediately prior to the Executive’s date of termination.
 
Notwithstanding the foregoing, the Company may, at its election, cease paying any amounts or providing any benefits described above upon ninety (90) days notice to the Executive.  Upon the expiration of the ninetieth (90 th ) day, the Executive shall no longer be subject to the provisions of Section 5 of this Agreement.
 
3  
Waiver and Release; Timing of Payments .
 
As condition precedents to receiving any payments under this Agreement (other than those amounts already accrued prior to the date of termination, which shall be payable on the date of termination), (a) Executive shall have executed, within twenty-one (21) days, or if required for an effective release, forty-five (45) days, following the Executive’s termination of employment, a waiver and release in substantially the form attached hereto as Exhibit A (the “ Release ”), which Release may be updated by the Company from time to time to reflect changes in law, and (b) the seven (7) day revocation period of such Release shall have expired.  Subject to Section 6 and the execution of the Release, all payments under this Section 3 shall be payable as described above; provided , that the first payment shall be made on the sixtieth (60th) day after the Executive’s termination of employment, and such first payment shall include payment of any amounts that would otherwise be due prior thereto.
 
4  
Confidentiality .
 
The Executive shall not at any time or in any manner, either directly or indirectly, make any unauthorized use or disclosure of any knowledge or information that is unpublished, confidential, or of a proprietary nature, which was generated or acquired during the course of his employment by the Company, relating to the Company’s business or to its processes or trade secrets, or to its sources of supply or customers, or to its marketing efforts or other marketing plans or contemplated marketing actions of the Company; provided, however, nothing contained herein shall be construed to prevent the Executive from using general knowledge and skill whether acquired prior to or during employment by the Company.
 
Further, the Executive specifically represents that, during the term of employment or upon leaving the Company's employment, the Executive has not and will not remove from the Company's premises, either directly or indirectly, any drawings, writing, prints, computer disks, any documents or anything containing, embodying, or disclosing any confidential or proprietary information or any of the Company's trade secrets unless express written permission is given by a member of the Company's executive management.
 
For purposes of this section, the terms “confidential information”, “proprietary information” or “trade secrets” mean any information, whether oral, written, furnished to or

 
5
 

obtained by the Executive during the term of employment by the Company, which is neither a matter of public record nor previously published.
 
5  
Restrictive Covenants .
 
The Executive agrees that he or she shall not, during the Non-Compete Period, directly or indirectly (other than on behalf of or at the request of the Company or its Subsidiaries):
 
(a)  
engage in, have an interest in, or otherwise be employed by (whether as an owner, operator, partner, member, manager, employee, officer, director, consultant, advisor, or representative), provide consulting or management services to, or permit his or her name to be used in connection with the activities of, any business or organization, engaged in a business that is competitive with a business in which the Company or any of its Subsidiaries engages (a “ Competitive Business ”); provided , that ownership of less than one percent (1%) of the outstanding stock of any publicly traded corporation shall not be deemed to be a violation of this Section 5 solely by reason thereof; provided , further , that, providing investment banking or legal services to a Competitive Business as an independent consultant, independent advisor or independent representative shall not be deemed to be a violation of this Section 5 solely by reason thereof so long as providing such services is not the primary duties or business activities of such individual; provided , further , that, if the Board determines that the provisions of this Section 5(a) should not apply to the Executive following the termination of the Executive’s employment by the Company, the provisions of this Section 5(a) shall be deemed waived with respect to the Executive;
 
(b)  
solicit any Person who is or, within the prior twelve (12) months, was, or whose Affiliate is or, within the prior twelve (12) months, was a customer of the Company or any of its Subsidiaries or persuade or attempt to persuade any such Person not to be a customer of the Company or any of its Subsidiaries or to reduce the amount of business that such customer does with the Company or any of its Subsidiaries, or enter into or seek to enter into any agreement (to the extent such agreement is of a nature that is related to the business in which the Company or any of its Subsidiaries engage) with, to the Executive’s knowledge, any such Person; or
 
(c)  
contact, approach or solicit for the purpose of offering employment to or hiring or retaining, or actually hire or retain any Person who is or was employed or retained by the Company or its Affiliates as an employee during the immediately preceding twelve (12) months or attempt to persuade any Person not to continue to be employed or retained by the Company or its Affiliates or to terminate his or her employment or services with the Company or its Affiliates; provided , that notwithstanding the foregoing, general solicitations of employment published in a journal, newspaper or other publication of general circulation and not specifically directed towards such employees, consultants or independent contractors shall not be deemed to constitute solicitation for purposes of this Section 5(c) .
 

 
6
 

(d)  
Notwithstanding anything to the contrary in this Section 5, with respect to the country of Mexico, this Section 5 will only apply (and therefore will be limited) to activities that are competitive with the businesses in which any of the Mexican Subsidiaries of the Company engages.
 
The Executive acknowledges and agrees that: (1) the time and geographical scope of the restrictions of this Section 5 are reasonable; (2) the burden on the Executive of complying with the restrictions of this Section 5 is not unreasonable; (3) the general public policy is not harmed by the restrictions of this Section 5; and (4) the restrictions of this Section 5 are necessary for the protection of the Company and its Subsidiaries. The Executive further acknowledges and agrees (x) the Executive’s breach of the provisions of this Section 5 will cause the Company irreparable harm, which cannot be adequately compensated by money damages, (y) if the Executive breaches or threatens to breach the provisions of this Section 5 and the Company (by vote of a majority of the members of the Board) seeks an injunction against the Executive, there is a reasonable probability of the Company’s eventual success on the merits and (z) if the Executive breaches or threatens to breach the provisions of this Section 5 and the Company (by vote of a majority of the members of the Board) seeks an injunction against the Executive, a balancing of equities will be in favor of the Company.  The Executive consents and agrees that if the Executive commits any such breach or threatens to commit any breach, the Company (by vote of a majority of the members of the Board) shall be entitled to temporary and permanent injunctive relief from a court of competent jurisdiction, without posting any bond or other security and without the necessity of proof of actual damage, in addition to, and not in lieu of, such other remedies as may be available to the Company for such breach, including the recovery of money damages. If any of the provisions of this Section 5 are determined to be wholly or partially unenforceable, the Executive hereby agrees that this Agreement or any provision hereof may be reformed so that it is enforceable to the maximum extent permitted by law.  If any of the provisions of this Section 5 are determined to be wholly or partially unenforceable in any jurisdiction, such determination shall not be a bar to or in any way diminish the Company’s right to enforce any such covenant in any other jurisdiction
 
6  
Section 409A .
 
(a)  
The intent of the parties is that payments and benefit under this Agreement comply with or be exempt from Code Section 409A and the regulations and guidance promulgated thereunder (collectively, “ Section 409A ”) and, accordingly, to the maximum extent permitted, this Agreement shall be interpreted to be in compliance therewith.  If the Executive notifies the Company that the Executive has received advice of tax counsel of a national reputation with expertise in Section 409A that any provision of this Agreement would cause the Executive to incur any additional tax or interest under Section 409A (with specificity as to the reason therefor) or the Company independently makes such determination, the Company shall, after consulting with the Executive, reform such provision to try to comply with Section 409A through good faith modifications to the minimum extent reasonably appropriate to conform with Section 409A.  To the extent that any provision hereof is modified in order to comply with or be exempt from Section 409A, such modification shall be made in good faith and shall, to the maximum extent reasonably possible, maintain the
 

 
7
 

original intent and economic benefit to the Executive and the Company of the applicable provision without violating the provisions of Section 409A.
 
(b)  
A termination of employment shall not be deemed to have occurred for purposes of this Agreement providing for the payment of any amounts or benefits that are considered nonqualified deferred compensation under Section 409A upon or following a termination of employment, unless such termination is also a “separation from service” within the meaning of Section 409A and the payment thereof prior to a “separation from service” would violate Section 409A.  As permitted by Treasury Regulation 1.409A-1(h)(1)(ii), 49% shall be substituted in lieu of 20% for the average level of bona fide services performed during the immediately preceding 36 month period in order to constitute a “separation from service”.  For purposes of any such provision of this Agreement relating to any such payments or benefits, references to a “termination,” “termination of employment” or like terms shall mean “separation from service.”  If the Executive is deemed on the date of termination to be a “specified employee” within the meaning of that term under Section 409A(a)(2)(B), then with regard to any payment or the provision of any benefit that is considered nonqualified deferred compensation under Section 409A payable on account of a “separation from service,” such payment or benefit shall be made or provided on the first business day following the date which is the earlier of (A) the expiration of the six (6) month period measured from the date of such “separation from service” of the Executive, and (B) the date of the Executive’s death (the “ Delay Period ”).  Upon the expiration of the Delay Period, all payments and benefits delayed pursuant to this Section 6 (whether they would have otherwise been payable in a single lump sum or in installments in the absence of such delay) shall be paid or reimbursed to the Executive in a lump sum, and any remaining payments and benefits due under this Agreement shall be paid or provided in accordance with the normal payment dates specified for them herein.
 
(c)  
(i) All expenses or other reimbursements as provided herein shall be payable in accordance with the Company’s policies in effect from time to time, but in any event shall be made on or prior to the last day of the taxable year following the taxable year in which such expenses were incurred by the Executive; (ii) no such reimbursement or expenses eligible for reimbursement in any taxable year shall in any way affect the expenses eligible for reimbursement in any other taxable year; provided , that this clause (ii) shall not be violated without regard to expenses reimbursed under any arrangement covered by Code Section 105(b) solely because such expenses are subject to a limit related to the period the arrangement is in effect; and (iii) the right to reimbursement or in-kind benefits shall not be subject to liquidation or exchanged for another benefit.
 
(d)  
For purposes of Section 409A, the Executive’s right to receive any installment payments pursuant to this Agreement shall be treated as a right to receive a series of separate and distinct payments.  Whenever a payment under this Agreement specifies a payment period with reference to a number of days (e.g., “payment shall be made within thirty (30) days following the date of termination”), the
 

 
8
 

actual date of payment within the specified period shall be within the sole discretion of the Company.
 
7  
Offsets for Other Severance Pay .
 
There shall be no duplication of severance pay in any manner.  Furthermore, the Severance Benefits shall be in lieu of any other payments or benefits in the nature of severance pay or benefits to which Executive may have otherwise been entitled to receive from the Company or its Subsidiaries.  If Executive has received severance pay or benefits, or is entitled to any notice or payment in lieu of notice of termination of employment required by federal, state or local law, including but not limited to the Worker Adjustment and Retraining Notification Act, the Severance Benefits to which the Executive would otherwise be entitled under this Agreement shall be reduced by the amount of any such payment or benefits; provided , that with respect to any payment made to Executive hereunder that is subject to Section 409A, if the Company seeks to set off a payment to be made to Executive hereunder which is subject to Section 409A against an amount owed by the Company to the Executive, the gross amount of such payment to be made to the Executive shall be deemed to be paid to the Executive for U.S. federal income tax purposes, as and when due under this Agreement, and the net amount of such payment (i.e., after deducting applicable withholding taxes) shall be applied against amounts owed by the Company to the Executive; provided , further , that the Company may set off a payment hereunder that is subject to Section 409A pursuant to this sentence only if the right to such set off, or such set off, would not violate Section 409A.
 
8  
Term .
 
The term of this Agreement commences on the Effective Date; and if the Executive is employed with the Company or any of its Subsidiaries on May 31, 2015, the Agreement shall terminate on May 31, 2015.  If the Executive’s employment with the Company and its Subsidiaries terminates on or prior to May 31, 2015, then the Executive shall have the applicable Non-Compete Period with respect to the Restrictive Covenants set forth in Section 5 of this Agreement for the period after the Executive’s employment as set forth in the Schedule 1 hereto, which may extend past May 31, 2015.  For the avoidance of doubt, the conditions of Section 4 of the Agreement shall continue in perpetuity.
 
9  
At Will Employment .
 
This Agreement does not alter the “employment at will” status of the Executive and shall not create a contract of guaranteed employment.
 
10  
Miscellaneous .
 
(a)  
Governing Law .  This Agreement shall be governed by and construed in accordance with the laws of the State of Texas, notwithstanding any conflict of law principles.
 
(b)  
Arbitration .  Other than injunctive relief by the Company pursuant to Sections 4 or 5 of this Agreement, any dispute, controversy, or claim among or between the parties relating to or arising from this Agreement shall be submitted to and settled
 

 
9
 

by binding confidential arbitration (“ Arbitration ”), administered by the Houston, Texas office of the American Arbitration Association (“ AAA ”), and conducted pursuant to the rules then in effect of the AAA governing employment disputes.  The Arbitration hearing shall take place in Houston, Texas unless otherwise agreed to by the parties to the Arbitration.  Such Arbitration shall be before three neutral arbitrators (the “ Panel ”) licensed to practice law in Texas and familiar with commercial disputes.  Any award rendered in any Arbitration shall be final and conclusive upon the parties to the Arbitration, and the judgment thereon may be entered in the highest court of the forum (state or federal) having jurisdiction over the issues addressed in the Arbitration.  The administration fees and expenses of the Arbitration shall be borne equally by the parties to the Arbitration, provided that each party shall pay for and bear the cost of his/her/its own experts, evidence, and attorneys’ fees, except that, in the discretion of the Panel, any award may include the cost of a party’s counsel and/or its share of the expense of Arbitration if the Panel expressly determines that an award of such costs is appropriate to the party whose position substantially prevails in such Arbitration.  To submit a matter to Arbitration, the party seeking redress shall notify in writing the party against whom such redress is sought, describe the nature of such claim, the provision of this Agreement that has been allegedly violated, and the material facts surrounding such claim.  The Panel shall render a single written decision.  The decision of the Panel shall be binding upon the parties to the Arbitration, and after the completion of such Arbitration, the parties to the Arbitration may only institute litigation regarding this Agreement for the sole purpose of enforcing the determination of the Arbitration hearing; except that the Company may seek injunctive or equitable relief as provided herein.  Notwithstanding this Section 10(b), the Company may resort to a court of equity solely for purposes of obtaining injunctive relief to enforce Sections 4 or 5.
 
(c)  
Entire Agreement .  This Agreement is contractual and not a mere recital.  This Agreement constitutes the entire contract between the Executive and the Company.  No amendment to this Agreement shall be effective unless it is in writing and signed by duly authorized representatives of both parties hereto, and each amendment to or waiver of any provision of this Agreement shall, in addition to any other required approvals, also require the prior written approval of (i) Richard D. Kinder (so long as he (together with his Permitted Transferees) owns at least 1.0% of the Total Voting Power) and (ii) the Investor Shareholders holding Voting Securities representing a majority of the Total Voting Power then held by the Investor Shareholders (so long as the Investor Shareholders own at least an aggregate amount of 1.0% of the Total Voting Power).  For the avoidance of doubt, this Section 10(c) is for benefit of, and shall be enforceable by, Richard D. Kinder and the Investor Shareholders.
 
(d)  
Successors .  This Agreement is binding upon and inures to the benefit of the heirs, personal representatives, successors and assigns of both parties hereto.
 

 
10
 

(e)  
Notices .  All notices and other communications hereunder shall be in writing and shall be given by hand-delivery to the other parties or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows:
 
 
 
To the Company:
Vice President – Human Resources
   
Kinder Morgan, Inc.
   
500 Dallas Street, Suite 1000
   
Houston, TX 77002
 
To the Executive:
To the last address set forth on the payroll records of the Company
 
 
(f)  
Withholding .  The Company may withhold from any amounts payable under this Agreement such federal, state or local income taxes as in the reasonable determination of the Company are required to be withheld pursuant to any applicable law or regulation.
 
(g)  
Severability .  The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement.
 
(h)  
Captions .  The captions of this Agreement are not part of the provisions hereof and shall have no force or effect.
 
(i)  
Counterparts.     This Agreement may be executed in one or more counterparts each of which shall be deemed an original instrument, but all of which together shall constitute but one and the same Agreement.
 
(j)  
Survivorship .  The respective rights and obligations of the parties hereunder shall survive any termination of this Agreement for any reason to the extent necessary to the intended provision of such rights and the intended performance of such obligations.
 

 
11
 

IN WITNESS WHEREOF , the parties have executed this Agreement on the date first above written.
 
 
 
 
  KINDER MORGAN, INC.  
     
 
   
 
/s/ James E. Street
 
 
James E. Street
 
Vice President, Human Resources and Administration
 
 
 
 
 
  STEVEN KEAN  
     
 
   
 
/s/ Steven Kean
 
     

                                                                  
 
 

 
12
 

SCHEDULE 1
 
NON-COMPETE PERIODS
 
The Non-Compete Period for the period after the Executive’s employment with the Company and its Subsidiaries shall be as set forth in the table below:
 
Executive
Non-Compete Period
 
 
Cause
Voluntary termination of employment by Executive without Good Reason
·   Termination of employment by Executive due to disability, retirement or Good Reason
·   Termination of employment by Company without Cause
 
Steven Kean
2 years
2 years
1 year
 
 
 
 
 
 

 
13
 

EXHIBIT A
 
RELEASE
 
This RELEASE (“ Release ”) dated as of ___________, 20__ between Kinder Morgan, Inc., a Delaware corporation (the “ Company ”), and Steven Kean (the “ Executive ”).
 
WHEREAS, the Company and the Executive previously entered into a severance agreement dated ________, 2011 (the “ Severance Agreement ”); and
 
WHEREAS, the Executive's employment with the Company has terminated effective ______ __, 20__ (“ Termination Date ”);
 
NOW, THEREFORE, in consideration of the premises and mutual agreements contained herein and in the Severance Agreement, the Company and the Executive agree as follows:
 
1.     Capitalized terms not defined herein shall have the meaning as defined under the Severance Agreement.
 
2.     In consideration of the Executive’s release under Paragraph 3 hereof, the Company shall pay to the Executive or provide benefits to the Executive as set forth in Section 2 of the Severance Agreement.
 
3.     The Executive, on his or her own behalf and on behalf of his or her spouse, personal representatives, heirs, executors, and assigns, hereby generally release and forever discharge the Company, any present or former parent, sister, Affiliate, Subsidiary or related company, and any of its and their respective offices and branches, present or former shareholders, unit holders, partners, limited partners, officers, directors, employees, agents, representatives, legal representatives, accountants, successors, predecessors and assigns (collectively, the “ Company Released Parties ”), from any and all claims, demands, and actions of any nature, whether known or unknown and whether accrued or unaccrued, and specifically including, but not limited to, those in any manner arising out of or involving any aspect of the Executive’s employment or the termination of such employment at the Company or any of the Company Released Parties, and including any rights or claims under the Age Discrimination in Employment Act of 1967 (including the Older Workers Benefit Protection Act of 1990) (together “ ADEA ”); Title VII of the Civil Rights Act of 1964; the Vocational Rehabilitation Act; the Americans with Disabilities Act of 1990; the Vietnam Era Veterans Readjustment Assistance Act; Executive Order 11246; the Civil Rights Act of 1871; the Civil Rights Act of 1991; the National Labor Relations Act; the Worker Adjustment and Retraining Notification Act; the Family and Medical Leave Act of 1993, as amended; the Equal Pay Act, as amended, the Employee Retirement Income Security Act of 1974, as amended, the Fair Labor Standards Act, as amended, the Sarbanes-Oxley Act, the anti-discrimination laws of the State of Texas; and including any and all other municipal, state, and/or federal statutory, executive order, or constitutional provisions pertaining to an employment relationship, including the Texas Commission on Human Rights Act.  This settlement, release and waiver also specifically includes, but is not limited to, all such claims in the nature of tort, statutory law, common law or contract claims, including specifically but not limited to any claim of wrongful discharge, unpaid wages, unpaid time off duty, unpaid vacation, stock or stock options, unpaid benefits, unpaid severance, intentional or negligent infliction of emotional distress, defamation, discrimination, retaliation of any kind or other claims in any manner arising out of or involving any aspect of employment or termination of the Executive’s employment. The Executive further agrees not to file a lawsuit of any kind against the Company or any of the Company Released Parties arising from the Executive’s employment at the Company or any of the Company Released Parties, or the termination thereof, or based on any other set of facts or events occurring prior to the Effective Date of this Release.  The Executive also waives and releases all rights to
 

 
14
 

share in any damages or other relief awarded in any class or collective action or in any action brought by, or as a result of a complaint filed with, any federal, state or local agency.  The Executive agrees that he cannot participate as a party or class member in, or receive any portion of any recovery in, any lawsuit or proceeding that is based on any claims or rights released by this Agreement.  The Executive understands that this Release effectively releases and waives any right he or she might have to sue the Company or any of the Company Released Parties for any claim arising out of or related to his or her employment at the Company or any of the Company Released Parties, the separation of his employment, any agreements between the Company or the Company Released Parties and the Executive, or based on any other set of facts or events occurring prior to the Effective Date of this Agreement.  This release includes any and all claims concerning attorney fees, costs, and any and all other expenses related to the claims released herein.  Provided, however, that this release and waiver shall not apply to any rights which, by law, may not be waived or to rights and claims that arise after the effective date of this Release.
 
4.     The Company and the Executive acknowledge and agree that the release contained in Paragraph 3 does not, and shall not be construed to, release or limit the scope of any existing obligation of the Company and/or any of its Subsidiaries or Affiliates (i) to fail to pay any amounts or benefits pursuant to Section 2 of the Severance Agreement or with respect to the Executive’s rights as a shareholder or equity-award holder of the Company, or (ii) to the Executive and his eligible, participating dependents or beneficiaries under any existing group welfare (excluding severance), equity, or retirement plan of the Company in which the Executive and/or such dependents are participants.
 
5.     The Executive acknowledges that Section 3 of this Release includes a waiver or any rights and claims arising under the Age Discrimination in Employment Act of 1967, as amended, and the Older Workers Benefit Protection Act.  The Executive acknowledges that the consideration that he or she is receiving in exchange for this waiver of the rights and claims specified in this Section 3 of this Release exceeds anything of value to which he or she is already entitled.  The Executive acknowledges that he or she has been provided at least 21 days (or, if applicable, 45 days) to review the Release and has been advised to review it with an attorney of his or her choice.  In the event the Executive elects to sign this Release prior to this 21 day period (or, if applicable, the 45 day period), he or she agrees that it is a knowing and voluntary waiver of his or her right to wait the full 21 days (or, if applicable, the full 45 days).  The Executive further understands that he or she has 7 days after the signing hereof to revoke it by so notifying the Company in writing, such notice to be received by the Secretary of the Company within the 7 day period.  The Executive further acknowledges that he or she has carefully read this Release, knows and understands its contents and its binding legal effect.  The Executive acknowledges that by signing this Release, he or she does so of his or her own free will and act and that it is his or her intention that he or she be legally bound by its terms.
 
It is the intention of the parties in executing this Release that this Release shall be effective as a full and final accord and satisfaction and mutual release of and from all liabilities, disputes, claims and matters covered under this Release, known or unknown, suspected or unsuspected.
 
6.     By executing this Release, the Executive acknowledges that he or she: (i) is not relying upon any statements, understandings, representations, expectations, or agreements other than those expressly set forth in the Severance Agreement and this Release; (ii) has made his own investigation of the facts and is relying solely upon his own knowledge and, if applicable, the advice of his own legal counsel; (iii) knowingly waives any claim that this Release was induced by any misrepresentation or nondisclosure and any right to rescind or avoid this Release based upon presently existing facts, known or unknown, (iv) is entering into this Release freely and voluntarily; and (v) has carefully read and understood all of the provisions of this Release.  The Company and the Executive stipulate that the Company is relying upon these representations and warranties in entering into this Release.  These representations and warranties shall survive the execution of this Release.
 

 
15
 

7.     This Release shall become effective on the seventh (7th) day following the day that this Release becomes irrevocable under Paragraph 5.  All payments due to the Executive shall be payable in accordance with Section 2 of the Severance Agreement.
 
IN WITNESS WHEREOF, the parties have executed this Release on the date first above written.
 
 
 
 
KINDER MORGAN, INC.
  
 
 
By:
   
     
 
 
Name:
   
 
Title:
   

 
 
 
STEVEN KEAN
  
 
       
 
 
 

 
16
 


Exhibit 10.9
SEVERANCE AGREEMENT
 
THIS AGREEMENT (the “ Agreement ”), is entered into as of February 10, 2011 (the “ Effective Date ”), by and between Kinder Morgan, Inc. (the “ Company ”) and Kimberly Dang (“ Executive ”).
 
WHEREAS, the Company considers it essential to the best interests of its shareholders to attract and retain key executive management personnel;
 
WHEREAS, the Executive and the Company had previously entered into that certain Limited Liability Company agreement (the “LLC Agreement”), pursuant to which the Executive was provided with severance benefits under a severance policy in consideration of post-employment restrictive covenants; and
 
WHEREAS, the Company is now being incorporated and the Company and the Executive wish to enter into a severance agreement to supersede any prior arrangements regarding severance and restrictive covenants contained in the LLC Agreement.
 
NOW THEREFORE, in conside ration of the premises and the mutual covenants herein contained, and intending to be legally bound, the Company and the Executive hereby agree as follows:
 
1  
Definitions.   For purposes of this Agreement, the following terms shall have the meanings set forth below:
 
(a)  
“Accrued Rights” means (i) any amounts of accrued but unpaid Annual Base Salary or unused vacation days accrued through the date of termination, (ii) any bonus earned but unpaid as of the date of termination, and (iii) any vested or accrued employee benefits to which the Executive may be entitled under the employee benefit plans of the Company, payable in accordance with the terms of each applicable plan.
 
(b)  
“ Affiliate ” of any Person means any other Person that directly or indirectly, through one or more intermediaries, Controls, is Controlled by, or is under common Control with, such first Person.
 
(c)  
“Annual Base Salary” means the Executive’s rate of regular annual base compensation (prior to any reduction (i) pursuant to a salary reduction agreement pursuant to section 401(k) or section 125 of the Code, (ii) under any plan or arrangement deferring any base salary payments, or (iii) that is the basis for termination of employment by the Executive for Good Reason under this Agreement), and shall not include (without limitation), fees, retainers, reimbursements, bonuses, incentive awards, equity grants, options or similar payments.
 
(d)  
“Board” means the Board of Directors of the Company, or its designee.
 
(e)  
“Bylaws” means the bylaws of the Company, as in effect at the relevant time.
 

 
 
 

(f)  
“Cause” means any of the following:
 
(i)  
the Executive’s conviction of, or plea of nolo contendere to, any crime  or offense constituting a felony under applicable law, other than any motor vehicle violations for which no custodial penalty is imposed;
 
(ii)  
the Executive’s commission of fraud or embezzlement against the Company or any of its Subsidiaries;
 
(iii)  
gross neglect by the Executive of, or gross or willful misconduct by the Executive in connection with the performance of, the Executive’s duties to the Company and its Subsidiaries that, if curable, is not cured within thirty (30) calendar days after a written notice of such gross neglect, or gross or willful misconduct, specifically identifying the gross neglect or misconduct, is delivered by the Chief Executive Officer or a majority of the members of the Board to the Executive;
 
(iv)  
the Executive shall have willfully failed or refused to carry out the reasonable and lawful instructions of the Chief Executive Officer or the Board (other than as a result of illness or disability) concerning duties or actions consistent with the Executive’s office, or the Executive’s willful failure to implement any actions consistent with the Executive’s office that the Board may direct such Executive to undertake, and, in each case, such failure or refusal shall have continued for a period of thirty (30) calendar days following written notice from the Chief Executive Officer or a majority of the members of the Board;
 
(v)  
the Executive’s failure to perform the duties and responsibilities of his or her office as his or her primary business activity, provided that, subject to Section 5, so long as it does not materially interfere with his or her duties, nothing herein shall preclude the Executive from accepting appointment to or continuing to serve on any board of directors or as trustee of any business corporation or any charitable organization, from engaging in charitable and community activities, from delivering lectures and fulfilling speaking engagements, or from directing and managing his or her personal investments and those of his or her family;
 
(vi)  
a judicial determination that the Executive has breached his fiduciary duties;
 
(vii)  
the Executive’s willful and material breach of the Shareholders Agreement, the Charter or the Bylaws, including willfully causing the Company or any of its Subsidiaries or Affiliates to take any material action prohibited by the Shareholders Agreement, the Charter or the Bylaws that the Executive failed to cure, if curable, within thirty (30) calendar days following written notice  thereof, specifically identifying such willful and material breach, having been delivered by the Chief
 
 
2
 

Executive Officer or by a majority of the members of the Board to the Executive; or
 
(viii)  
the Executive’s material breach of the provisions of Section 5 that, if curable, is not cured within thirty (30) calendar  days after notice of such breach is delivered to the Executive by the Chief Executive Officer or by a majority of the members of the Board.
 
Action or inaction by the Executive shall not be considered “willful” unless done or omitted by him or her in bad faith or with actual knowledge that his action or inaction was in breach of the Shareholders Agreement, the Charter, or the Bylaws, as applicable, and shall not include failure to act by reason of total or partial incapacity due to physical or mental illness.
 
(g)  
“Charter” means the certificate of incorporation of the Company, as in effect at the relevant time.
 
(h)  
“Code” means the Internal Revenue Code of 1986, as amended.
 
(i)  
“ Control ” means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through ownership of voting securities, by contract or otherwise.
 
(j)  
“Good Reason” means any of the following, without the Executive’s prior consent if (x) any event or circumstances set forth in clauses (i) through (v) below shall have occurred and the Executive provides the Company with written notice thereof within a reasonable period of time (but in no event more than thirty (30) calendar days) after the Executive has knowledge of the occurrence or existence of such event or circumstance, which notice shall specifically identify the event or circumstances that the Executive believes constitutes Good Reason, (y) the Company fails to correct the circumstance or event so identified within thirty (30) calendar days after the receipt of such notice, and (z) the Executive resigns within five (5) calendar days after the expiration of the period described in clause (y) above:
 
(i)  
a material diminution in the Executive’s duties and responsibilities to the Company and its Subsidiaries to a level inconsistent with those of an executive level employee;
 
(ii)  
a material reduction in the annual base salary of the Executive or a material reduction in the aggregate welfare benefits provided to the Executive (not including any reduction related to a broader compensation or benefit reduction that is not limited to the Executive specifically);
 
(iii)  
a material reduction in the Executive’s maximum annual bonus opportunity from the Executive’s maximum annual bonus opportunity as in effect on the date of this Agreement;
 

 
3
 

(iv)  
the relocation by the Company of the Executive’s primary place of employment with the Company or any of its Subsidiaries to a location not within a 50 mile radius of such current location; or
 
(v)  
a willful and intentional breach of a material provision of the Shareholders Agreement by the Company that has a material and adverse effect on the Executive.
 
Action or inaction by the Company shall not be considered “willful” unless done or omitted by the Company in bad faith or with actual knowledge that such action or inaction is in breach of the Shareholders Agreement.
 
(k)  
“ Governmental Entity ” means any court, administrative agency, regulatory body, commission or other governmental authority, board, bureau or instrumentality, domestic or foreign and any subdivision thereof.
 
(l)  
“ Non-Compete Period ” means the period during such Executive’s employment with the Company and, to the extent applicable, the period thereafter determined in accordance with Schedule 1 hereof.
 
(m)  
“ Person ” means any individual, corporation, company, firm, partnership, joint venture, limited liability company, estate, trust, business association, organization, Governmental Entity or other entity.
 
(n)  
“ Shareholders Agreement ” means the Shareholders Agreement dated as of February 10, 2011.
 
(o)  
“ Subsidiary ” or “ Subsidiaries ” means, with respect to any Person, as of any date of determination, any other Person as to which such Person owns, directly or indirectly, or otherwise controls, more than 50% of the voting shares or other similar interests or is general partner or managing member of, or serves in a similar capacity for, such Person (including, in the case of the Company, KMP and KMR and their respective Subsidiaries).
 
Any terms not defined herein shall have the meaning ascribed to them in the Shareholders Agreement.
 
2  
Severance Benefits.
 
If the Executive’s employment hereunder is terminated by the Company without Cause, or if the Executive resigns for Good Reason, the Executive shall be entitled to receive the following (collectively, the “ Severance Benefits ”) in addition to the Accrued Rights, subject to the Executive’s continued compliance with the provisions of Section 5:
 
(a)  
continued payment of Annual Base Salary for twelve months following the date of the Executive’s termination (paid in accordance with the Company’s normal payroll practices as in effect on the date of such termination); and
 

 
4
 

(b)  
reimbursement, for a period of time that terminates upon the earlier of (i) twelve months following the termination date or (ii) the date the Executive becomes eligible for alternative coverage with a subsequent employer, of any premiums for continued group medical, dental and vision coverage for the Executive and/or the Executive’s eligible dependents at the same coverage levels as in effect immediately prior to the Executive’s date of termination.
 
Notwithstanding the foregoing, the Company may, at its election, cease paying any amounts or providing any benefits described above upon ninety (90) days notice to the Executive.  Upon the expiration of the ninetieth (90 th ) day, the Executive shall no longer be subject to the provisions of Section 5 of this Agreement.
 
3  
Waiver and Release; Timing of Payments .
 
As condition precedents to receiving any payments under this Agreement (other than those amounts already accrued prior to the date of termination, which shall be payable on the date of termination), (a) Executive shall have executed, within twenty-one (21) days, or if required for an effective release, forty-five (45) days, following the Executive’s termination of employment, a waiver and release in substantially the form attached hereto as Exhibit A (the “ Release ”), which Release may be updated by the Company from time to time to reflect changes in law, and (b) the seven (7) day revocation period of such Release shall have expired.  Subject to Section 6 and the execution of the Release, all payments under this Section 3 shall be payable as described above; provided , that the first payment shall be made on the sixtieth (60th) day after the Executive’s termination of employment, and such first payment shall include payment of any amounts that would otherwise be due prior thereto.
 
4  
Confidentiality .
 
The Executive shall not at any time or in any manner, either directly or indirectly, make any unauthorized use or disclosure of any knowledge or information that is unpublished, confidential, or of a proprietary nature, which was generated or acquired during the course of his employment by the Company, relating to the Company’s business or to its processes or trade secrets, or to its sources of supply or customers, or to its marketing efforts or other marketing plans or contemplated marketing actions of the Company; provided, however, nothing contained herein shall be construed to prevent the Executive from using general knowledge and skill whether acquired prior to or during employment by the Company.
 
Further, the Executive specifically represents that, during the term of employment or upon leaving the Company's employment, the Executive has not and will not remove from the Company's premises, either directly or indirectly, any drawings, writing, prints, computer disks, any documents or anything containing, embodying, or disclosing any confidential or proprietary information or any of the Company's trade secrets unless express written permission is given by a member of the Company's executive management.
 
For purposes of this section, the terms “confidential information”, “proprietary information” or “trade secrets” mean any information, whether oral, written, furnished to or

 
5
 

obtained by the Executive during the term of employment by the Company, which is neither a matter of public record nor previously published.
 
5  
Restrictive Covenants .
 
The Executive agrees that he or she shall not, during the Non-Compete Period, directly or indirectly (other than on behalf of or at the request of the Company or its Subsidiaries):
 
(a)  
engage in, have an interest in, or otherwise be employed by (whether as an owner, operator, partner, member, manager, employee, officer, director, consultant, advisor, or representative), provide consulting or management services to, or permit his or her name to be used in connection with the activities of, any business or organization, engaged in a business that is competitive with a business in which the Company or any of its Subsidiaries engages (a “ Competitive Business ”); provided , that ownership of less than one percent (1%) of the outstanding stock of any publicly traded corporation shall not be deemed to be a violation of this Section 5 solely by reason thereof; provided , further , that, providing investment banking or legal services to a Competitive Business as an independent consultant, independent advisor or independent representative shall not be deemed to be a violation of this Section 5 solely by reason thereof so long as providing such services is not the primary duties or business activities of such individual; provided , further , that, if the Board determines that the provisions of this Section 5(a) should not apply to the Executive following the termination of the Executive’s employment by the Company, the provisions of this Section 5(a) shall be deemed waived with respect to the Executive;
 
(b)  
solicit any Person who is or, within the prior twelve (12) months, was, or whose Affiliate is or, within the prior twelve (12) months, was a customer of the Company or any of its Subsidiaries or persuade or attempt to persuade any such Person not to be a customer of the Company or any of its Subsidiaries or to reduce the amount of business that such customer does with the Company or any of its Subsidiaries, or enter into or seek to enter into any agreement (to the extent such agreement is of a nature that is related to the business in which the Company or any of its Subsidiaries engage) with, to the Executive’s knowledge, any such Person; or
 
(c)  
contact, approach or solicit for the purpose of offering employment to or hiring or retaining, or actually hire or retain any Person who is or was employed or retained by the Company or its Affiliates as an employee during the immediately preceding twelve (12) months or attempt to persuade any Person not to continue to be employed or retained by the Company or its Affiliates or to terminate his or her employment or services with the Company or its Affiliates; provided , that notwithstanding the foregoing, general solicitations of employment published in a journal, newspaper or other publication of general circulation and not specifically directed towards such employees, consultants or independent contractors shall not be deemed to constitute solicitation for purposes of this Section 5(c) .
 

 
6
 

(d)  
Notwithstanding anything to the contrary in this Section 5, with respect to the country of Mexico, this Section 5 will only apply (and therefore will be limited) to activities that are competitive with the businesses in which any of the Mexican Subsidiaries of the Company engages.
 
The Executive acknowledges and agrees that: (1) the time and geographical scope of the restrictions of this Section 5 are reasonable; (2) the burden on the Executive of complying with the restrictions of this Section 5 is not unreasonable; (3) the general public policy is not harmed by the restrictions of this Section 5; and (4) the restrictions of this Section 5 are necessary for the protection of the Company and its Subsidiaries. The Executive further acknowledges and agrees (x) the Executive’s breach of the provisions of this Section 5 will cause the Company irreparable harm, which cannot be adequately compensated by money damages, (y) if the Executive breaches or threatens to breach the provisions of this Section 5 and the Company (by vote of a majority of the members of the Board) seeks an injunction against the Executive, there is a reasonable probability of the Company’s eventual success on the merits and (z) if the Executive breaches or threatens to breach the provisions of this Section 5 and the Company (by vote of a majority of the members of the Board) seeks an injunction against the Executive, a balancing of equities will be in favor of the Company.  The Executive consents and agrees that if the Executive commits any such breach or threatens to commit any breach, the Company (by vote of a majority of the members of the Board) shall be entitled to temporary and permanent injunctive relief from a court of competent jurisdiction, without posting any bond or other security and without the necessity of proof of actual damage, in addition to, and not in lieu of, such other remedies as may be available to the Company for such breach, including the recovery of money damages. If any of the provisions of this Section 5 are determined to be wholly or partially unenforceable, the Executive hereby agrees that this Agreement or any provision hereof may be reformed so that it is enforceable to the maximum extent permitted by law.  If any of the provisions of this Section 5 are determined to be wholly or partially unenforceable in any jurisdiction, such determination shall not be a bar to or in any way diminish the Company’s right to enforce any such covenant in any other jurisdiction
 
6  
Section 409A .
 
(a)  
The intent of the parties is that payments and benefit under this Agreement comply with or be exempt from Code Section 409A and the regulations and guidance promulgated thereunder (collectively, “ Section 409A ”) and, accordingly, to the maximum extent permitted, this Agreement shall be interpreted to be in compliance therewith.  If the Executive notifies the Company that the Executive has received advice of tax counsel of a national reputation with expertise in Section 409A that any provision of this Agreement would cause the Executive to incur any additional tax or interest under Section 409A (with specificity as to the reason therefor) or the Company independently makes such determination, the Company shall, after consulting with the Executive, reform such provision to try to comply with Section 409A through good faith modifications to the minimum extent reasonably appropriate to conform with Section 409A.  To the extent that any provision hereof is modified in order to comply with or be exempt from Section 409A, such modification shall be made in good faith and shall, to the maximum extent reasonably possible, maintain the
 

 
7
 

original intent and economic benefit to the Executive and the Company of the applicable provision without violating the provisions of Section 409A.
 
(b)  
A termination of employment shall not be deemed to have occurred for purposes of this Agreement providing for the payment of any amounts or benefits that are considered nonqualified deferred compensation under Section 409A upon or following a termination of employment, unless such termination is also a “separation from service” within the meaning of Section 409A and the payment thereof prior to a “separation from service” would violate Section 409A.  As permitted by Treasury Regulation 1.409A-1(h)(1)(ii), 49% shall be substituted in lieu of 20% for the average level of bona fide services performed during the immediately preceding 36 month period in order to constitute a “separation from service”.  For purposes of any such provision of this Agreement relating to any such payments or benefits, references to a “termination,” “termination of employment” or like terms shall mean “separation from service.”  If the Executive is deemed on the date of termination to be a “specified employee” within the meaning of that term under Section 409A(a)(2)(B), then with regard to any payment or the provision of any benefit that is considered nonqualified deferred compensation under Section 409A payable on account of a “separation from service,” such payment or benefit shall be made or provided on the first business day following the date which is the earlier of (A) the expiration of the six (6) month period measured from the date of such “separation from service” of the Executive, and (B) the date of the Executive’s death (the “ Delay Period ”).  Upon the expiration of the Delay Period, all payments and benefits delayed pursuant to this Section 6 (whether they would have otherwise been payable in a single lump sum or in installments in the absence of such delay) shall be paid or reimbursed to the Executive in a lump sum, and any remaining payments and benefits due under this Agreement shall be paid or provided in accordance with the normal payment dates specified for them herein.
 
(c)  
(i) All expenses or other reimbursements as provided herein shall be payable in accordance with the Company’s policies in effect from time to time, but in any event shall be made on or prior to the last day of the taxable year following the taxable year in which such expenses were incurred by the Executive; (ii) no such reimbursement or expenses eligible for reimbursement in any taxable year shall in any way affect the expenses eligible for reimbursement in any other taxable year; provided , that this clause (ii) shall not be violated without regard to expenses reimbursed under any arrangement covered by Code Section 105(b) solely because such expenses are subject to a limit related to the period the arrangement is in effect; and (iii) the right to reimbursement or in-kind benefits shall not be subject to liquidation or exchanged for another benefit.
 
(d)  
For purposes of Section 409A, the Executive’s right to receive any installment payments pursuant to this Agreement shall be treated as a right to receive a series of separate and distinct payments.  Whenever a payment under this Agreement specifies a payment period with reference to a number of days (e.g., “payment shall be made within thirty (30) days following the date of termination”), the
 

 
8
 

actual date of payment within the specified period shall be within the sole discretion of the Company.
 
7  
Offsets for Other Severance Pay .
 
There shall be no duplication of severance pay in any manner.  Furthermore, the Severance Benefits shall be in lieu of any other payments or benefits in the nature of severance pay or benefits to which Executive may have otherwise been entitled to receive from the Company or its Subsidiaries.  If Executive has received severance pay or benefits, or is entitled to any notice or payment in lieu of notice of termination of employment required by federal, state or local law, including but not limited to the Worker Adjustment and Retraining Notification Act, the Severance Benefits to which the Executive would otherwise be entitled under this Agreement shall be reduced by the amount of any such payment or benefits; provided , that with respect to any payment made to Executive hereunder that is subject to Section 409A, if the Company seeks to set off a payment to be made to Executive hereunder which is subject to Section 409A against an amount owed by the Company to the Executive, the gross amount of such payment to be made to the Executive shall be deemed to be paid to the Executive for U.S. federal income tax purposes, as and when due under this Agreement, and the net amount of such payment (i.e., after deducting applicable withholding taxes) shall be applied against amounts owed by the Company to the Executive; provided , further , that the Company may set off a payment hereunder that is subject to Section 409A pursuant to this sentence only if the right to such set off, or such set off, would not violate Section 409A.
 
8  
Term .
 
The term of this Agreement commences on the Effective Date; and if the Executive is employed with the Company or any of its Subsidiaries on May 31, 2015, the Agreement shall terminate on May 31, 2015.  If the Executive’s employment with the Company and its Subsidiaries terminates on or prior to May 31, 2015, then the Executive shall have the applicable Non-Compete Period with respect to the Restrictive Covenants set forth in Section 5 of this Agreement for the period after the Executive’s employment as set forth in the Schedule 1 hereto, which may extend past May 31, 2015.  For the avoidance of doubt, the conditions of Section 4 of the Agreement shall continue in perpetuity.
 
9  
At Will Employment .
 
This Agreement does not alter the “employment at will” status of the Executive and shall not create a contract of guaranteed employment.
 
10  
Miscellaneous .
 
(a)  
Governing Law .  This Agreement shall be governed by and construed in accordance with the laws of the State of Texas, notwithstanding any conflict of law principles.
 
(b)  
Arbitration .  Other than injunctive relief by the Company pursuant to Sections 4 or 5 of this Agreement, any dispute, controversy, or claim among or between the parties relating to or arising from this Agreement shall be submitted to and settled
 

 
9
 

by binding confidential arbitration (“ Arbitration ”), administered by the Houston, Texas office of the American Arbitration Association (“ AAA ”), and conducted pursuant to the rules then in effect of the AAA governing employment disputes.  The Arbitration hearing shall take place in Houston, Texas unless otherwise agreed to by the parties to the Arbitration.  Such Arbitration shall be before three neutral arbitrators (the “ Panel ”) licensed to practice law in Texas and familiar with commercial disputes.  Any award rendered in any Arbitration shall be final and conclusive upon the parties to the Arbitration, and the judgment thereon may be entered in the highest court of the forum (state or federal) having jurisdiction over the issues addressed in the Arbitration.  The administration fees and expenses of the Arbitration shall be borne equally by the parties to the Arbitration, provided that each party shall pay for and bear the cost of his/her/its own experts, evidence, and attorneys’ fees, except that, in the discretion of the Panel, any award may include the cost of a party’s counsel and/or its share of the expense of Arbitration if the Panel expressly determines that an award of such costs is appropriate to the party whose position substantially prevails in such Arbitration.  To submit a matter to Arbitration, the party seeking redress shall notify in writing the party against whom such redress is sought, describe the nature of such claim, the provision of this Agreement that has been allegedly violated, and the material facts surrounding such claim.  The Panel shall render a single written decision.  The decision of the Panel shall be binding upon the parties to the Arbitration, and after the completion of such Arbitration, the parties to the Arbitration may only institute litigation regarding this Agreement for the sole purpose of enforcing the determination of the Arbitration hearing; except that the Company may seek injunctive or equitable relief as provided herein.  Notwithstanding this Section 10(b), the Company may resort to a court of equity solely for purposes of obtaining injunctive relief to enforce Sections 4 or 5.
 
(c)  
Entire Agreement .  This Agreement is contractual and not a mere recital.  This Agreement constitutes the entire contract between the Executive and the Company.  No amendment to this Agreement shall be effective unless it is in writing and signed by duly authorized representatives of both parties hereto, and each amendment to or waiver of any provision of this Agreement shall, in addition to any other required approvals, also require the prior written approval of (i) Richard D. Kinder (so long as he (together with his Permitted Transferees) owns at least 1.0% of the Total Voting Power) and (ii) the Investor Shareholders holding Voting Securities representing a majority of the Total Voting Power then held by the Investor Shareholders (so long as the Investor Shareholders own at least an aggregate amount of 1.0% of the Total Voting Power).  For the avoidance of doubt, this Section 10(c) is for benefit of, and shall be enforceable by, Richard D. Kinder and the Investor Shareholders.
 
(d)  
Successors .  This Agreement is binding upon and inures to the benefit of the heirs, personal representatives, successors and assigns of both parties hereto.
 

 
10
 

(e)  
Notices .  All notices and other communications hereunder shall be in writing and shall be given by hand-delivery to the other parties or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows:
 
 
 
To the Company:
Vice President – Human Resources
   
Kinder Morgan, Inc.
   
500 Dallas Street, Suite 1000
   
Houston, TX 77002
 
To the Executive:
To the last address set forth on the payroll records of the Company
 
 
(f)  
Withholding .  The Company may withhold from any amounts payable under this Agreement such federal, state or local income taxes as in the reasonable determination of the Company are required to be withheld pursuant to any applicable law or regulation.
 
(g)  
Severability .  The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement.
 
(h)  
Captions .  The captions of this Agreement are not part of the provisions hereof and shall have no force or effect.
 
(i)  
Counterparts.     This Agreement may be executed in one or more counterparts each of which shall be deemed an original instrument, but all of which together shall constitute but one and the same Agreement.
 
(j)  
Survivorship .  The respective rights and obligations of the parties hereunder shall survive any termination of this Agreement for any reason to the extent necessary to the intended provision of such rights and the intended performance of such obligations.
 

 
11
 

IN WITNESS WHEREOF , the parties have executed this Agreement on the date first above written.
 
 
 
 
  KINDER MORGAN, INC.  
     
 
   
 
/s/ James E. Street
 
 
James E. Street
 
Vice President, Human Resources and Administration
 
 
 
 
 
  KIMBERLY DANG  
     
 
   
 
/s/ Kimberly Dang
 
     

                                                                  
 
 

 
12
 

SCHEDULE 1
 
NON-COMPETE PERIODS
 
The Non-Compete Period for the period after the Executive’s employment with the Company and its Subsidiaries shall be as set forth in the table below:
 
Executive
Non-Compete Period
 
 
Cause
Voluntary termination of employment by Executive without Good Reason
·   Termination of employment by Executive due to disability, retirement or Good Reason
·   Termination of employment by Company without Cause
 
Kimberly Dang    
2 years
1 year
1 year
 
 
 
 
 
 

 
13
 

EXHIBIT A
 
RELEASE
 
This RELEASE (“ Release ”) dated as of ___________, 20__ between Kinder Morgan, Inc., a Delaware corporation (the “ Company ”), and Kimberly Dang (the “ Executive ”).
 
WHEREAS, the Company and the Executive previously entered into a severance agreement dated ________, 2011 (the “ Severance Agreement ”); and
 
WHEREAS, the Executive's employment with the Company has terminated effective ______ __, 20__ (“ Termination Date ”);
 
NOW, THEREFORE, in consideration of the premises and mutual agreements contained herein and in the Severance Agreement, the Company and the Executive agree as follows:
 
1.     Capitalized terms not defined herein shall have the meaning as defined under the Severance Agreement.
 
2.     In consideration of the Executive’s release under Paragraph 3 hereof, the Company shall pay to the Executive or provide benefits to the Executive as set forth in Section 2 of the Severance Agreement.
 
3.     The Executive, on his or her own behalf and on behalf of his or her spouse, personal representatives, heirs, executors, and assigns, hereby generally release and forever discharge the Company, any present or former parent, sister, Affiliate, Subsidiary or related company, and any of its and their respective offices and branches, present or former shareholders, unit holders, partners, limited partners, officers, directors, employees, agents, representatives, legal representatives, accountants, successors, predecessors and assigns (collectively, the “ Company Released Parties ”), from any and all claims, demands, and actions of any nature, whether known or unknown and whether accrued or unaccrued, and specifically including, but not limited to, those in any manner arising out of or involving any aspect of the Executive’s employment or the termination of such employment at the Company or any of the Company Released Parties, and including any rights or claims under the Age Discrimination in Employment Act of 1967 (including the Older Workers Benefit Protection Act of 1990) (together “ ADEA ”); Title VII of the Civil Rights Act of 1964; the Vocational Rehabilitation Act; the Americans with Disabilities Act of 1990; the Vietnam Era Veterans Readjustment Assistance Act; Executive Order 11246; the Civil Rights Act of 1871; the Civil Rights Act of 1991; the National Labor Relations Act; the Worker Adjustment and Retraining Notification Act; the Family and Medical Leave Act of 1993, as amended; the Equal Pay Act, as amended, the Employee Retirement Income Security Act of 1974, as amended, the Fair Labor Standards Act, as amended, the Sarbanes-Oxley Act, the anti-discrimination laws of the State of Texas; and including any and all other municipal, state, and/or federal statutory, executive order, or constitutional provisions pertaining to an employment relationship, including the Texas Commission on Human Rights Act.  This settlement, release and waiver also specifically includes, but is not limited to, all such claims in the nature of tort, statutory law, common law or contract claims, including specifically but not limited to any claim of wrongful discharge, unpaid wages, unpaid time off duty, unpaid vacation, stock or stock options, unpaid benefits, unpaid severance, intentional or negligent infliction of emotional distress, defamation, discrimination, retaliation of any kind or other claims in any manner arising out of or involving any aspect of employment or termination of the Executive’s employment. The Executive further agrees not to file a lawsuit of any kind against the Company or any of the Company Released Parties arising from the Executive’s employment at the Company or any of the Company Released Parties, or the termination thereof, or based on any other set of facts or events occurring prior to the Effective Date of this Release.  The Executive also waives and releases all rights to
 

 
14
 

share in any damages or other relief awarded in any class or collective action or in any action brought by, or as a result of a complaint filed with, any federal, state or local agency.  The Executive agrees that she cannot participate as a party or class member in, or receive any portion of any recovery in, any lawsuit or proceeding that is based on any claims or rights released by this Agreement.  The Executive understands that this Release effectively releases and waives any right she might have to sue the Company or any of the Company Released Parties for any claim arising out of or related to his or her employment at the Company or any of the Company Released Parties, the separation of his employment, any agreements between the Company or the Company Released Parties and the Executive, or based on any other set of facts or events occurring prior to the Effective Date of this Agreement.  This release includes any and all claims concerning attorney fees, costs, and any and all other expenses related to the claims released herein.  Provided, however, that this release and waiver shall not apply to any rights which, by law, may not be waived or to rights and claims that arise after the effective date of this Release.
 
4.     The Company and the Executive acknowledge and agree that the release contained in Paragraph 3 does not, and shall not be construed to, release or limit the scope of any existing obligation of the Company and/or any of its Subsidiaries or Affiliates (i) to fail to pay any amounts or benefits pursuant to Section 2 of the Severance Agreement or with respect to the Executive’s rights as a shareholder or equity-award holder of the Company, or (ii) to the Executive and his eligible, participating dependents or beneficiaries under any existing group welfare (excluding severance), equity, or retirement plan of the Company in which the Executive and/or such dependents are participants.
 
5.     The Executive acknowledges that Section 3 of this Release includes a waiver or any rights and claims arising under the Age Discrimination in Employment Act of 1967, as amended, and the Older Workers Benefit Protection Act.  The Executive acknowledges that the consideration that she is receiving in exchange for this waiver of the rights and claims specified in this Section 3 of this Release exceeds anything of value to which she is already entitled.  The Executive acknowledges that she has been provided at least 21 days (or, if applicable, 45 days) to review the Release and has been advised to review it with an attorney of his or her choice.  In the event the Executive elects to sign this Release prior to this 21 day period (or, if applicable, the 45 day period), she agrees that it is a knowing and voluntary waiver of his or her right to wait the full 21 days (or, if applicable, the full 45 days).  The Executive further understands that she has 7 days after the signing hereof to revoke it by so notifying the Company in writing, such notice to be received by the Secretary of the Company within the 7 day period.  The Executive further acknowledges that she has carefully read this Release, knows and understands its contents and its binding legal effect.  The Executive acknowledges that by signing this Release, she does so of his or her own free will and act and that it is his or her intention that she be legally bound by its terms.
 
It is the intention of the parties in executing this Release that this Release shall be effective as a full and final accord and satisfaction and mutual release of and from all liabilities, disputes, claims and matters covered under this Release, known or unknown, suspected or unsuspected.
 
6.     By executing this Release, the Executive acknowledges that she: (i) is not relying upon any statements, understandings, representations, expectations, or agreements other than those expressly set forth in the Severance Agreement and this Release; (ii) has made his own investigation of the facts and is relying solely upon his own knowledge and, if applicable, the advice of his own legal counsel; (iii) knowingly waives any claim that this Release was induced by any misrepresentation or nondisclosure and any right to rescind or avoid this Release based upon presently existing facts, known or unknown, (iv) is entering into this Release freely and voluntarily; and (v) has carefully read and understood all of the provisions of this Release.  The Company and the Executive stipulate that the Company is relying upon these representations and warranties in entering into this Release.  These representations and warranties shall survive the execution of this Release.
 

 
15
 

7.     This Release shall become effective on the seventh (7th) day following the day that this Release becomes irrevocable under Paragraph 5.  All payments due to the Executive shall be payable in accordance with Section 2 of the Severance Agreement.
 
IN WITNESS WHEREOF, the parties have executed this Release on the date first above written.
 
 
 
 
KINDER MORGAN, INC.
  
 
 
By:
   
     
 
 
Name:
   
 
Title:
   

 
 
 
KIMBERLY DANG
  
 
       
 
 
 

 
16
 


Exhibit 10.10
SEVERANCE AGREEMENT
 
THIS AGREEMENT (the “ Agreement ”), is entered into as of February 10, 2011 (the “ Effective Date ”), by and between Kinder Morgan, Inc. (the “ Company ”) and Joseph Listengart (“ Executive ”).
 
WHEREAS, the Company considers it essential to the best interests of its shareholders to attract and retain key executive management personnel;
 
WHEREAS, the Executive and the Company had previously entered into that certain Limited Liability Company agreement (the “LLC Agreement”), pursuant to which the Executive was provided with severance benefits under a severance policy in consideration of post-employment restrictive covenants; and
 
WHEREAS, the Company is now being incorporated and the Company and the Executive wish to enter into a severance agreement to supersede any prior arrangements regarding severance and restrictive covenants contained in the LLC Agreement.
 
NOW THEREFORE, in conside ration of the premises and the mutual covenants herein contained, and intending to be legally bound, the Company and the Executive hereby agree as follows:
 
1  
Definitions.   For purposes of this Agreement, the following terms shall have the meanings set forth below:
 
(a)  
“Accrued Rights” means (i) any amounts of accrued but unpaid Annual Base Salary or unused vacation days accrued through the date of termination, (ii) any bonus earned but unpaid as of the date of termination, and (iii) any vested or accrued employee benefits to which the Executive may be entitled under the employee benefit plans of the Company, payable in accordance with the terms of each applicable plan.
 
(b)  
“ Affiliate ” of any Person means any other Person that directly or indirectly, through one or more intermediaries, Controls, is Controlled by, or is under common Control with, such first Person.
 
(c)  
“Annual Base Salary” means the Executive’s rate of regular annual base compensation (prior to any reduction (i) pursuant to a salary reduction agreement pursuant to section 401(k) or section 125 of the Code, (ii) under any plan or arrangement deferring any base salary payments, or (iii) that is the basis for termination of employment by the Executive for Good Reason under this Agreement), and shall not include (without limitation), fees, retainers, reimbursements, bonuses, incentive awards, equity grants, options or similar payments.
 
(d)  
“Board” means the Board of Directors of the Company, or its designee.
 
(e)  
“Bylaws” means the bylaws of the Company, as in effect at the relevant time.
 

 
 
 

(f)  
“Cause” means any of the following:
 
(i)  
the Executive’s conviction of, or plea of nolo contendere to, any crime  or offense constituting a felony under applicable law, other than any motor vehicle violations for which no custodial penalty is imposed;
 
(ii)  
the Executive’s commission of fraud or embezzlement against the Company or any of its Subsidiaries;
 
(iii)  
gross neglect by the Executive of, or gross or willful misconduct by the Executive in connection with the performance of, the Executive’s duties to the Company and its Subsidiaries that, if curable, is not cured within thirty (30) calendar days after a written notice of such gross neglect, or gross or willful misconduct, specifically identifying the gross neglect or misconduct, is delivered by the Chief Executive Officer or a majority of the members of the Board to the Executive;
 
(iv)  
the Executive shall have willfully failed or refused to carry out the reasonable and lawful instructions of the Chief Executive Officer or the Board (other than as a result of illness or disability) concerning duties or actions consistent with the Executive’s office, or the Executive’s willful failure to implement any actions consistent with the Executive’s office that the Board may direct such Executive to undertake, and, in each case, such failure or refusal shall have continued for a period of thirty (30) calendar days following written notice from the Chief Executive Officer or a majority of the members of the Board;
 
(v)  
the Executive’s failure to perform the duties and responsibilities of his or her office as his or her primary business activity, provided that, subject to Section 5, so long as it does not materially interfere with his or her duties, nothing herein shall preclude the Executive from accepting appointment to or continuing to serve on any board of directors or as trustee of any business corporation or any charitable organization, from engaging in charitable and community activities, from delivering lectures and fulfilling speaking engagements, or from directing and managing his or her personal investments and those of his or her family;
 
(vi)  
a judicial determination that the Executive has breached his fiduciary duties;
 
(vii)  
the Executive’s willful and material breach of the Shareholders Agreement, the Charter or the Bylaws, including willfully causing the Company or any of its Subsidiaries or Affiliates to take any material action prohibited by the Shareholders Agreement, the Charter or the Bylaws that the Executive failed to cure, if curable, within thirty (30) calendar days following written notice  thereof, specifically identifying such willful and material breach, having been delivered by the Chief
 
 
2
 

Executive Officer or by a majority of the members of the Board to the Executive; or
 
(viii)  
the Executive’s material breach of the provisions of Section 5 that, if curable, is not cured within thirty (30) calendar  days after notice of such breach is delivered to the Executive by the Chief Executive Officer or by a majority of the members of the Board.
 
Action or inaction by the Executive shall not be considered “willful” unless done or omitted by him or her in bad faith or with actual knowledge that his action or inaction was in breach of the Shareholders Agreement, the Charter, or the Bylaws, as applicable, and shall not include failure to act by reason of total or partial incapacity due to physical or mental illness.
 
(g)  
“Charter” means the certificate of incorporation of the Company, as in effect at the relevant time.
 
(h)  
“Code” means the Internal Revenue Code of 1986, as amended.
 
(i)  
“ Control ” means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through ownership of voting securities, by contract or otherwise.
 
(j)  
“Good Reason” means any of the following, without the Executive’s prior consent if (x) any event or circumstances set forth in clauses (i) through (v) below shall have occurred and the Executive provides the Company with written notice thereof within a reasonable period of time (but in no event more than thirty (30) calendar days) after the Executive has knowledge of the occurrence or existence of such event or circumstance, which notice shall specifically identify the event or circumstances that the Executive believes constitutes Good Reason, (y) the Company fails to correct the circumstance or event so identified within thirty (30) calendar days after the receipt of such notice, and (z) the Executive resigns within five (5) calendar days after the expiration of the period described in clause (y) above:
 
(i)  
a material diminution in the Executive’s duties and responsibilities to the Company and its Subsidiaries to a level inconsistent with those of an executive level employee;
 
(ii)  
a material reduction in the annual base salary of the Executive or a material reduction in the aggregate welfare benefits provided to the Executive (not including any reduction related to a broader compensation or benefit reduction that is not limited to the Executive specifically);
 
(iii)  
a material reduction in the Executive’s maximum annual bonus opportunity from the Executive’s maximum annual bonus opportunity as in effect on the date of this Agreement;
 

 
3
 

(iv)  
the relocation by the Company of the Executive’s primary place of employment with the Company or any of its Subsidiaries to a location not within a 50 mile radius of such current location; or
 
(v)  
a willful and intentional breach of a material provision of the Shareholders Agreement by the Company that has a material and adverse effect on the Executive.
 
Action or inaction by the Company shall not be considered “willful” unless done or omitted by the Company in bad faith or with actual knowledge that such action or inaction is in breach of the Shareholders Agreement.
 
(k)  
“ Governmental Entity ” means any court, administrative agency, regulatory body, commission or other governmental authority, board, bureau or instrumentality, domestic or foreign and any subdivision thereof.
 
(l)  
“ Non-Compete Period ” means the period during such Executive’s employment with the Company and, to the extent applicable, the period thereafter determined in accordance with Schedule 1 hereof.
 
(m)  
“ Person ” means any individual, corporation, company, firm, partnership, joint venture, limited liability company, estate, trust, business association, organization, Governmental Entity or other entity.
 
(n)  
“ Shareholders Agreement ” means the Shareholders Agreement dated as of February 10, 2011.
 
(o)  
“ Subsidiary ” or “ Subsidiaries ” means, with respect to any Person, as of any date of determination, any other Person as to which such Person owns, directly or indirectly, or otherwise controls, more than 50% of the voting shares or other similar interests or is general partner or managing member of, or serves in a similar capacity for, such Person (including, in the case of the Company, KMP and KMR and their respective Subsidiaries).
 
Any terms not defined herein shall have the meaning ascribed to them in the Shareholders Agreement.
 
2  
Severance Benefits.
 
If the Executive’s employment hereunder is terminated by the Company without Cause, or if the Executive resigns for Good Reason, the Executive shall be entitled to receive the following (collectively, the “ Severance Benefits ”) in addition to the Accrued Rights, subject to the Executive’s continued compliance with the provisions of Section 5:
 
(a)  
continued payment of Annual Base Salary for twelve months following the date of the Executive’s termination (paid in accordance with the Company’s normal payroll practices as in effect on the date of such termination); and
 

 
4
 

(b)  
reimbursement, for a period of time that terminates upon the earlier of (i) twelve months following the termination date or (ii) the date the Executive becomes eligible for alternative coverage with a subsequent employer, of any premiums for continued group medical, dental and vision coverage for the Executive and/or the Executive’s eligible dependents at the same coverage levels as in effect immediately prior to the Executive’s date of termination.
 
Notwithstanding the foregoing, the Company may, at its election, cease paying any amounts or providing any benefits described above upon ninety (90) days notice to the Executive.  Upon the expiration of the ninetieth (90 th ) day, the Executive shall no longer be subject to the provisions of Section 5 of this Agreement.
 
3  
Waiver and Release; Timing of Payments .
 
As condition precedents to receiving any payments under this Agreement (other than those amounts already accrued prior to the date of termination, which shall be payable on the date of termination), (a) Executive shall have executed, within twenty-one (21) days, or if required for an effective release, forty-five (45) days, following the Executive’s termination of employment, a waiver and release in substantially the form attached hereto as Exhibit A (the “ Release ”), which Release may be updated by the Company from time to time to reflect changes in law, and (b) the seven (7) day revocation period of such Release shall have expired.  Subject to Section 6 and the execution of the Release, all payments under this Section 3 shall be payable as described above; provided , that the first payment shall be made on the sixtieth (60th) day after the Executive’s termination of employment, and such first payment shall include payment of any amounts that would otherwise be due prior thereto.
 
4  
Confidentiality .
 
The Executive shall not at any time or in any manner, either directly or indirectly, make any unauthorized use or disclosure of any knowledge or information that is unpublished, confidential, or of a proprietary nature, which was generated or acquired during the course of his employment by the Company, relating to the Company’s business or to its processes or trade secrets, or to its sources of supply or customers, or to its marketing efforts or other marketing plans or contemplated marketing actions of the Company; provided, however, nothing contained herein shall be construed to prevent the Executive from using general knowledge and skill whether acquired prior to or during employment by the Company.
 
Further, the Executive specifically represents that, during the term of employment or upon leaving the Company's employment, the Executive has not and will not remove from the Company's premises, either directly or indirectly, any drawings, writing, prints, computer disks, any documents or anything containing, embodying, or disclosing any confidential or proprietary information or any of the Company's trade secrets unless express written permission is given by a member of the Company's executive management.
 
For purposes of this section, the terms “confidential information”, “proprietary information” or “trade secrets” mean any information, whether oral, written, furnished to or

 
5
 

obtained by the Executive during the term of employment by the Company, which is neither a matter of public record nor previously published.
 
5  
Restrictive Covenants .
 
The Executive agrees that he or she shall not, during the Non-Compete Period, directly or indirectly (other than on behalf of or at the request of the Company or its Subsidiaries):
 
(a)  
engage in, have an interest in, or otherwise be employed by (whether as an owner, operator, partner, member, manager, employee, officer, director, consultant, advisor, or representative), provide consulting or management services to, or permit his or her name to be used in connection with the activities of, any business or organization, engaged in a business that is competitive with a business in which the Company or any of its Subsidiaries engages (a “ Competitive Business ”); provided , that ownership of less than one percent (1%) of the outstanding stock of any publicly traded corporation shall not be deemed to be a violation of this Section 5 solely by reason thereof; provided , further , that, providing investment banking or legal services to a Competitive Business as an independent consultant, independent advisor or independent representative shall not be deemed to be a violation of this Section 5 solely by reason thereof so long as providing such services is not the primary duties or business activities of such individual; provided , further , that, if the Board determines that the provisions of this Section 5(a) should not apply to the Executive following the termination of the Executive’s employment by the Company, the provisions of this Section 5(a) shall be deemed waived with respect to the Executive;
 
(b)  
solicit any Person who is or, within the prior twelve (12) months, was, or whose Affiliate is or, within the prior twelve (12) months, was a customer of the Company or any of its Subsidiaries or persuade or attempt to persuade any such Person not to be a customer of the Company or any of its Subsidiaries or to reduce the amount of business that such customer does with the Company or any of its Subsidiaries, or enter into or seek to enter into any agreement (to the extent such agreement is of a nature that is related to the business in which the Company or any of its Subsidiaries engage) with, to the Executive’s knowledge, any such Person; or
 
(c)  
contact, approach or solicit for the purpose of offering employment to or hiring or retaining, or actually hire or retain any Person who is or was employed or retained by the Company or its Affiliates as an employee during the immediately preceding twelve (12) months or attempt to persuade any Person not to continue to be employed or retained by the Company or its Affiliates or to terminate his or her employment or services with the Company or its Affiliates; provided , that notwithstanding the foregoing, general solicitations of employment published in a journal, newspaper or other publication of general circulation and not specifically directed towards such employees, consultants or independent contractors shall not be deemed to constitute solicitation for purposes of this Section 5(c) .
 

 
6
 

(d)  
Notwithstanding anything to the contrary in this Section 5, with respect to the country of Mexico, this Section 5 will only apply (and therefore will be limited) to activities that are competitive with the businesses in which any of the Mexican Subsidiaries of the Company engages.
 
The Executive acknowledges and agrees that: (1) the time and geographical scope of the restrictions of this Section 5 are reasonable; (2) the burden on the Executive of complying with the restrictions of this Section 5 is not unreasonable; (3) the general public policy is not harmed by the restrictions of this Section 5; and (4) the restrictions of this Section 5 are necessary for the protection of the Company and its Subsidiaries. The Executive further acknowledges and agrees (x) the Executive’s breach of the provisions of this Section 5 will cause the Company irreparable harm, which cannot be adequately compensated by money damages, (y) if the Executive breaches or threatens to breach the provisions of this Section 5 and the Company (by vote of a majority of the members of the Board) seeks an injunction against the Executive, there is a reasonable probability of the Company’s eventual success on the merits and (z) if the Executive breaches or threatens to breach the provisions of this Section 5 and the Company (by vote of a majority of the members of the Board) seeks an injunction against the Executive, a balancing of equities will be in favor of the Company.  The Executive consents and agrees that if the Executive commits any such breach or threatens to commit any breach, the Company (by vote of a majority of the members of the Board) shall be entitled to temporary and permanent injunctive relief from a court of competent jurisdiction, without posting any bond or other security and without the necessity of proof of actual damage, in addition to, and not in lieu of, such other remedies as may be available to the Company for such breach, including the recovery of money damages. If any of the provisions of this Section 5 are determined to be wholly or partially unenforceable, the Executive hereby agrees that this Agreement or any provision hereof may be reformed so that it is enforceable to the maximum extent permitted by law.  If any of the provisions of this Section 5 are determined to be wholly or partially unenforceable in any jurisdiction, such determination shall not be a bar to or in any way diminish the Company’s right to enforce any such covenant in any other jurisdiction
 
6  
Section 409A .
 
(a)  
The intent of the parties is that payments and benefit under this Agreement comply with or be exempt from Code Section 409A and the regulations and guidance promulgated thereunder (collectively, “ Section 409A ”) and, accordingly, to the maximum extent permitted, this Agreement shall be interpreted to be in compliance therewith.  If the Executive notifies the Company that the Executive has received advice of tax counsel of a national reputation with expertise in Section 409A that any provision of this Agreement would cause the Executive to incur any additional tax or interest under Section 409A (with specificity as to the reason therefor) or the Company independently makes such determination, the Company shall, after consulting with the Executive, reform such provision to try to comply with Section 409A through good faith modifications to the minimum extent reasonably appropriate to conform with Section 409A.  To the extent that any provision hereof is modified in order to comply with or be exempt from Section 409A, such modification shall be made in good faith and shall, to the maximum extent reasonably possible, maintain the
 

 
7
 

original intent and economic benefit to the Executive and the Company of the applicable provision without violating the provisions of Section 409A.
 
(b)  
A termination of employment shall not be deemed to have occurred for purposes of this Agreement providing for the payment of any amounts or benefits that are considered nonqualified deferred compensation under Section 409A upon or following a termination of employment, unless such termination is also a “separation from service” within the meaning of Section 409A and the payment thereof prior to a “separation from service” would violate Section 409A.  As permitted by Treasury Regulation 1.409A-1(h)(1)(ii), 49% shall be substituted in lieu of 20% for the average level of bona fide services performed during the immediately preceding 36 month period in order to constitute a “separation from service”.  For purposes of any such provision of this Agreement relating to any such payments or benefits, references to a “termination,” “termination of employment” or like terms shall mean “separation from service.”  If the Executive is deemed on the date of termination to be a “specified employee” within the meaning of that term under Section 409A(a)(2)(B), then with regard to any payment or the provision of any benefit that is considered nonqualified deferred compensation under Section 409A payable on account of a “separation from service,” such payment or benefit shall be made or provided on the first business day following the date which is the earlier of (A) the expiration of the six (6) month period measured from the date of such “separation from service” of the Executive, and (B) the date of the Executive’s death (the “ Delay Period ”).  Upon the expiration of the Delay Period, all payments and benefits delayed pursuant to this Section 6 (whether they would have otherwise been payable in a single lump sum or in installments in the absence of such delay) shall be paid or reimbursed to the Executive in a lump sum, and any remaining payments and benefits due under this Agreement shall be paid or provided in accordance with the normal payment dates specified for them herein.
 
(c)  
(i) All expenses or other reimbursements as provided herein shall be payable in accordance with the Company’s policies in effect from time to time, but in any event shall be made on or prior to the last day of the taxable year following the taxable year in which such expenses were incurred by the Executive; (ii) no such reimbursement or expenses eligible for reimbursement in any taxable year shall in any way affect the expenses eligible for reimbursement in any other taxable year; provided , that this clause (ii) shall not be violated without regard to expenses reimbursed under any arrangement covered by Code Section 105(b) solely because such expenses are subject to a limit related to the period the arrangement is in effect; and (iii) the right to reimbursement or in-kind benefits shall not be subject to liquidation or exchanged for another benefit.
 
(d)  
For purposes of Section 409A, the Executive’s right to receive any installment payments pursuant to this Agreement shall be treated as a right to receive a series of separate and distinct payments.  Whenever a payment under this Agreement specifies a payment period with reference to a number of days (e.g., “payment shall be made within thirty (30) days following the date of termination”), the
 

 
8
 

actual date of payment within the specified period shall be within the sole discretion of the Company.
 
7  
Offsets for Other Severance Pay .
 
There shall be no duplication of severance pay in any manner.  Furthermore, the Severance Benefits shall be in lieu of any other payments or benefits in the nature of severance pay or benefits to which Executive may have otherwise been entitled to receive from the Company or its Subsidiaries.  If Executive has received severance pay or benefits, or is entitled to any notice or payment in lieu of notice of termination of employment required by federal, state or local law, including but not limited to the Worker Adjustment and Retraining Notification Act, the Severance Benefits to which the Executive would otherwise be entitled under this Agreement shall be reduced by the amount of any such payment or benefits; provided , that with respect to any payment made to Executive hereunder that is subject to Section 409A, if the Company seeks to set off a payment to be made to Executive hereunder which is subject to Section 409A against an amount owed by the Company to the Executive, the gross amount of such payment to be made to the Executive shall be deemed to be paid to the Executive for U.S. federal income tax purposes, as and when due under this Agreement, and the net amount of such payment (i.e., after deducting applicable withholding taxes) shall be applied against amounts owed by the Company to the Executive; provided , further , that the Company may set off a payment hereunder that is subject to Section 409A pursuant to this sentence only if the right to such set off, or such set off, would not violate Section 409A.
 
8  
Term .
 
The term of this Agreement commences on the Effective Date; and if the Executive is employed with the Company or any of its Subsidiaries on May 31, 2015, the Agreement shall terminate on May 31, 2015.  If the Executive’s employment with the Company and its Subsidiaries terminates on or prior to May 31, 2015, then the Executive shall have the applicable Non-Compete Period with respect to the Restrictive Covenants set forth in Section 5 of this Agreement for the period after the Executive’s employment as set forth in the Schedule 1 hereto, which may extend past May 31, 2015.  For the avoidance of doubt, the conditions of Section 4 of the Agreement shall continue in perpetuity.
 
9  
At Will Employment .
 
This Agreement does not alter the “employment at will” status of the Executive and shall not create a contract of guaranteed employment.
 
10  
Miscellaneous .
 
(a)  
Governing Law .  This Agreement shall be governed by and construed in accordance with the laws of the State of Texas, notwithstanding any conflict of law principles.
 
(b)  
Arbitration .  Other than injunctive relief by the Company pursuant to Sections 4 or 5 of this Agreement, any dispute, controversy, or claim among or between the parties relating to or arising from this Agreement shall be submitted to and settled
 

 
9
 

by binding confidential arbitration (“ Arbitration ”), administered by the Houston, Texas office of the American Arbitration Association (“ AAA ”), and conducted pursuant to the rules then in effect of the AAA governing employment disputes.  The Arbitration hearing shall take place in Houston, Texas unless otherwise agreed to by the parties to the Arbitration.  Such Arbitration shall be before three neutral arbitrators (the “ Panel ”) licensed to practice law in Texas and familiar with commercial disputes.  Any award rendered in any Arbitration shall be final and conclusive upon the parties to the Arbitration, and the judgment thereon may be entered in the highest court of the forum (state or federal) having jurisdiction over the issues addressed in the Arbitration.  The administration fees and expenses of the Arbitration shall be borne equally by the parties to the Arbitration, provided that each party shall pay for and bear the cost of his/her/its own experts, evidence, and attorneys’ fees, except that, in the discretion of the Panel, any award may include the cost of a party’s counsel and/or its share of the expense of Arbitration if the Panel expressly determines that an award of such costs is appropriate to the party whose position substantially prevails in such Arbitration.  To submit a matter to Arbitration, the party seeking redress shall notify in writing the party against whom such redress is sought, describe the nature of such claim, the provision of this Agreement that has been allegedly violated, and the material facts surrounding such claim.  The Panel shall render a single written decision.  The decision of the Panel shall be binding upon the parties to the Arbitration, and after the completion of such Arbitration, the parties to the Arbitration may only institute litigation regarding this Agreement for the sole purpose of enforcing the determination of the Arbitration hearing; except that the Company may seek injunctive or equitable relief as provided herein.  Notwithstanding this Section 10(b), the Company may resort to a court of equity solely for purposes of obtaining injunctive relief to enforce Sections 4 or 5.
 
(c)  
Entire Agreement .  This Agreement is contractual and not a mere recital.  This Agreement constitutes the entire contract between the Executive and the Company.  No amendment to this Agreement shall be effective unless it is in writing and signed by duly authorized representatives of both parties hereto, and each amendment to or waiver of any provision of this Agreement shall, in addition to any other required approvals, also require the prior written approval of (i) Richard D. Kinder (so long as he (together with his Permitted Transferees) owns at least 1.0% of the Total Voting Power) and (ii) the Investor Shareholders holding Voting Securities representing a majority of the Total Voting Power then held by the Investor Shareholders (so long as the Investor Shareholders own at least an aggregate amount of 1.0% of the Total Voting Power).  For the avoidance of doubt, this Section 10(c) is for benefit of, and shall be enforceable by, Richard D. Kinder and the Investor Shareholders.
 
(d)  
Successors .  This Agreement is binding upon and inures to the benefit of the heirs, personal representatives, successors and assigns of both parties hereto.
 

 
10
 

(e)  
Notices .  All notices and other communications hereunder shall be in writing and shall be given by hand-delivery to the other parties or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows:
 
 
 
To the Company:
Vice President – Human Resources
   
Kinder Morgan, Inc.
   
500 Dallas Street, Suite 1000
   
Houston, TX 77002
 
To the Executive:
To the last address set forth on the payroll records of the Company
 
 
(f)  
Withholding .  The Company may withhold from any amounts payable under this Agreement such federal, state or local income taxes as in the reasonable determination of the Company are required to be withheld pursuant to any applicable law or regulation.
 
(g)  
Severability .  The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement.
 
(h)  
Captions .  The captions of this Agreement are not part of the provisions hereof and shall have no force or effect.
 
(i)  
Counterparts.     This Agreement may be executed in one or more counterparts each of which shall be deemed an original instrument, but all of which together shall constitute but one and the same Agreement.
 
(j)  
Survivorship .  The respective rights and obligations of the parties hereunder shall survive any termination of this Agreement for any reason to the extent necessary to the intended provision of such rights and the intended performance of such obligations.
 

 
11
 

IN WITNESS WHEREOF , the parties have executed this Agreement on the date first above written.
 
 
 
 
  KINDER MORGAN, INC.  
     
 
   
 
/s/ James E. Street
 
 
James E. Street
 
Vice President, Human Resources and Administration
 
 
 
 
 
  JOSEPH LISTENGART  
     
 
   
 
/s/ Joseph Listengart
 
     

                                                                  
 
 

 
12
 

SCHEDULE 1
 
NON-COMPETE PERIODS
 
The Non-Compete Period for the period after the Executive’s employment with the Company and its Subsidiaries shall be as set forth in the table below:
 
Executive
Non-Compete Period
 
 
Cause
Voluntary termination of employment by Executive without Good Reason
·   Termination of employment by Executive due to disability, retirement or Good Reason
·   Termination of employment by Company without Cause
 
Joseph Listengart
2 years
2 years
1 year
 
 
 
 
 
 

 
13
 

EXHIBIT A
 
RELEASE
 
This RELEASE (“ Release ”) dated as of ___________, 20__ between Kinder Morgan, Inc., a Delaware corporation (the “ Company ”), and Joseph Listengart (the “ Executive ”).
 
WHEREAS, the Company and the Executive previously entered into a severance agreement dated ________, 2011 (the “ Severance Agreement ”); and
 
WHEREAS, the Executive's employment with the Company has terminated effective ______ __, 20__ (“ Termination Date ”);
 
NOW, THEREFORE, in consideration of the premises and mutual agreements contained herein and in the Severance Agreement, the Company and the Executive agree as follows:
 
1.     Capitalized terms not defined herein shall have the meaning as defined under the Severance Agreement.
 
2.     In consideration of the Executive’s release under Paragraph 3 hereof, the Company shall pay to the Executive or provide benefits to the Executive as set forth in Section 2 of the Severance Agreement.
 
3.     The Executive, on his or her own behalf and on behalf of his or her spouse, personal representatives, heirs, executors, and assigns, hereby generally release and forever discharge the Company, any present or former parent, sister, Affiliate, Subsidiary or related company, and any of its and their respective offices and branches, present or former shareholders, unit holders, partners, limited partners, officers, directors, employees, agents, representatives, legal representatives, accountants, successors, predecessors and assigns (collectively, the “ Company Released Parties ”), from any and all claims, demands, and actions of any nature, whether known or unknown and whether accrued or unaccrued, and specifically including, but not limited to, those in any manner arising out of or involving any aspect of the Executive’s employment or the termination of such employment at the Company or any of the Company Released Parties, and including any rights or claims under the Age Discrimination in Employment Act of 1967 (including the Older Workers Benefit Protection Act of 1990) (together “ ADEA ”); Title VII of the Civil Rights Act of 1964; the Vocational Rehabilitation Act; the Americans with Disabilities Act of 1990; the Vietnam Era Veterans Readjustment Assistance Act; Executive Order 11246; the Civil Rights Act of 1871; the Civil Rights Act of 1991; the National Labor Relations Act; the Worker Adjustment and Retraining Notification Act; the Family and Medical Leave Act of 1993, as amended; the Equal Pay Act, as amended, the Employee Retirement Income Security Act of 1974, as amended, the Fair Labor Standards Act, as amended, the Sarbanes-Oxley Act, the anti-discrimination laws of the State of Texas; and including any and all other municipal, state, and/or federal statutory, executive order, or constitutional provisions pertaining to an employment relationship, including the Texas Commission on Human Rights Act.  This settlement, release and waiver also specifically includes, but is not limited to, all such claims in the nature of tort, statutory law, common law or contract claims, including specifically but not limited to any claim of wrongful discharge, unpaid wages, unpaid time off duty, unpaid vacation, stock or stock options, unpaid benefits, unpaid severance, intentional or negligent infliction of emotional distress, defamation, discrimination, retaliation of any kind or other claims in any manner arising out of or involving any aspect of employment or termination of the Executive’s employment. The Executive further agrees not to file a lawsuit of any kind against the Company or any of the Company Released Parties arising from the Executive’s employment at the Company or any of the Company Released Parties, or the termination thereof, or based on any other set of facts or events occurring prior to the Effective Date of this Release.  The Executive also waives and releases all rights to
 

 
14
 

share in any damages or other relief awarded in any class or collective action or in any action brought by, or as a result of a complaint filed with, any federal, state or local agency.  The Executive agrees that he cannot participate as a party or class member in, or receive any portion of any recovery in, any lawsuit or proceeding that is based on any claims or rights released by this Agreement.  The Executive understands that this Release effectively releases and waives any right he or she might have to sue the Company or any of the Company Released Parties for any claim arising out of or related to his or her employment at the Company or any of the Company Released Parties, the separation of his employment, any agreements between the Company or the Company Released Parties and the Executive, or based on any other set of facts or events occurring prior to the Effective Date of this Agreement.  This release includes any and all claims concerning attorney fees, costs, and any and all other expenses related to the claims released herein.  Provided, however, that this release and waiver shall not apply to any rights which, by law, may not be waived or to rights and claims that arise after the effective date of this Release.
 
4.     The Company and the Executive acknowledge and agree that the release contained in Paragraph 3 does not, and shall not be construed to, release or limit the scope of any existing obligation of the Company and/or any of its Subsidiaries or Affiliates (i) to fail to pay any amounts or benefits pursuant to Section 2 of the Severance Agreement or with respect to the Executive’s rights as a shareholder or equity-award holder of the Company, or (ii) to the Executive and his eligible, participating dependents or beneficiaries under any existing group welfare (excluding severance), equity, or retirement plan of the Company in which the Executive and/or such dependents are participants.
 
5.     The Executive acknowledges that Section 3 of this Release includes a waiver or any rights and claims arising under the Age Discrimination in Employment Act of 1967, as amended, and the Older Workers Benefit Protection Act.  The Executive acknowledges that the consideration that he or she is receiving in exchange for this waiver of the rights and claims specified in this Section 3 of this Release exceeds anything of value to which he or she is already entitled.  The Executive acknowledges that he or she has been provided at least 21 days (or, if applicable, 45 days) to review the Release and has been advised to review it with an attorney of his or her choice.  In the event the Executive elects to sign this Release prior to this 21 day period (or, if applicable, the 45 day period), he or she agrees that it is a knowing and voluntary waiver of his or her right to wait the full 21 days (or, if applicable, the full 45 days).  The Executive further understands that he or she has 7 days after the signing hereof to revoke it by so notifying the Company in writing, such notice to be received by the Secretary of the Company within the 7 day period.  The Executive further acknowledges that he or she has carefully read this Release, knows and understands its contents and its binding legal effect.  The Executive acknowledges that by signing this Release, he or she does so of his or her own free will and act and that it is his or her intention that he or she be legally bound by its terms.
 
It is the intention of the parties in executing this Release that this Release shall be effective as a full and final accord and satisfaction and mutual release of and from all liabilities, disputes, claims and matters covered under this Release, known or unknown, suspected or unsuspected.
 
6.     By executing this Release, the Executive acknowledges that he or she: (i) is not relying upon any statements, understandings, representations, expectations, or agreements other than those expressly set forth in the Severance Agreement and this Release; (ii) has made his own investigation of the facts and is relying solely upon his own knowledge and, if applicable, the advice of his own legal counsel; (iii) knowingly waives any claim that this Release was induced by any misrepresentation or nondisclosure and any right to rescind or avoid this Release based upon presently existing facts, known or unknown, (iv) is entering into this Release freely and voluntarily; and (v) has carefully read and understood all of the provisions of this Release.  The Company and the Executive stipulate that the Company is relying upon these representations and warranties in entering into this Release.  These representations and warranties shall survive the execution of this Release.
 

 
15
 

7.     This Release shall become effective on the seventh (7th) day following the day that this Release becomes irrevocable under Paragraph 5.  All payments due to the Executive shall be payable in accordance with Section 2 of the Severance Agreement.
 
IN WITNESS WHEREOF, the parties have executed this Release on the date first above written.
 
 
 
 
KINDER MORGAN, INC.
  
 
 
By:
   
     
 
 
Name:
   
 
Title:
   

 
 
 
JOSEPH LISTENGART
  
 
       
 
 
 

 
16
 

Exhibit 31.1

KINDER MORGAN, INC.
CERTIFICATION PURSUANT TO RULE 13A-14(A) OR 15D-14(A)
OF THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

 
I, Richard D. Kinder, certify that:
  
1.
  
I have reviewed this quarterly report on Form 10-Q of Kinder Morgan, Inc.;
  
2.
  
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
  
3.
  
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
  
4.
  
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
  
  
a)
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
  
  
b)
  
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles  in the United States ;
  
  
c)
  
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
  
  
d)
  
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
  
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
  
  
a)
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
  
  
b)
  
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
  

Date:  May 6, 2011
   
 
/s/ Richard D. Kinder
 
 
Richard D. Kinder
Chairman and Chief Executive Officer
 

Exhibit 31.2

KINDER MORGAN, INC.
CERTIFICATION PURSUANT TO RULE 13A-14(A) OR 15D-14(A)
OF THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

 
I, Kimberly A. Dang, certify that:
  
1.
  
I have reviewed this quarterly report on Form 10-Q of Kinder Morgan, Inc.;
  
2.
  
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
  
3.
  
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
  
4.
  
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
  
  
a)
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
  
  
b)
  
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles  in the United States ;
  
  
c)
  
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
  
  
d)
  
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
  
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
  
  
 
a)
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
  
  
b)
  
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
  

Date:  May 6, 2011
   
 
/s/ Kimberly A. Dang
 
 
Kimberly A. Dang
Vice President and Chief Financial Officer
 

Exhibit 32.1


KINDER MORGAN, INC.
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906
OF THE
SARBANES-OXLEY ACT OF 2002



In connection with the Quarterly Report on Form 10-Q of Kinder Morgan, Inc. (the “Company”) for the quarterly period ended March 31, 2011, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, in the capacity and on the date indicated below, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)   The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)   The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

A signed original of this written statement required by Section 906 has been provided to Kinder Morgan, Inc. and will be retained by Kinder Morgan, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.


Dated:  May 6, 2011
 
/s/ Richard D. Kinder
   
Richard D. Kinder
Chairman and Chief Executive Officer

Exhibit 32.2


KINDER MORGAN, INC.
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906
OF THE
SARBANES-OXLEY ACT OF 2002



In connection with the Quarterly Report on Form 10-Q of Kinder Morgan, Inc. (the “Company”) for the quarterly period ended March 31, 2011, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, in the capacity and on the date indicated below, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)   The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)   The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

A signed original of this written statement required by Section 906 has been provided to Kinder Morgan, Inc. and will be retained by Kinder Morgan, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.


Dated:  May 6, 2011
 
/s/ Kimberly A. Dang
   
Kimberly A. Dang
Vice President and Chief Financial Officer