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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for use of the Commission only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-12
Kinder Morgan, Inc.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box)
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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4) Date Filed:
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[KINDER MORGAN LOGO]
500 Dallas, Suite 1000
Houston, Texas 77002
April 4, 2001
To our stockholders:
You are cordially invited to attend the annual meeting of our stockholders
to be held at the Doubletree Hotel at Allen Center, 400 Dallas Street, Houston,
Texas on May 8, 2001, at 10:00 a.m. local time. The meeting has been called by
our Board of Directors.
The accompanying proxy statement describes the matters to be presented for
approval at the annual meeting. In summary, the agenda of the meeting will
include the election of Class II Directors, the consideration of a proposal that
relates to our 1992 Stock Option Plan for Non-Employee Directors and the
ratification of our auditors.
Representation of your shares at the meeting is very important. We urge
each stockholder, whether or not you plan to attend the meeting, to promptly
vote by proxy. If you attend the meeting, you may, if you wish, revoke your
proxy and vote in person.
You may notice that the format of this proxy statement is different from
others you may have seen. The Securities and Exchange Commission is encouraging
companies to write documents for investors in plain English, and we support this
effort. We hope that this format will help make the attached proxy statement
easier to understand.
Sincerely,
/s/ RICHARD D. KINDER
Richard D. Kinder,
Chairman and Chief Executive Officer
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[KINDER MORGAN LOGO]
500 Dallas, Suite 1000
Houston, Texas 77002
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 8, 2001
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To our stockholders:
We, the Board of Directors of Kinder Morgan, Inc., give notice that the
annual meeting of our stockholders will be held at the Doubletree Hotel at Allen
Center, 400 Dallas Street, Houston, Texas, on Tuesday, May 8, 2001, beginning at
10:00 a.m. local time. At the meeting, the holders of our common stock will act
on the following matters:
(1) election of three Class II Directors to hold office for a
three-year term in accordance with the terms of our Restated Articles of
Incorporation and By-Laws;
(2) a proposal to amend and restate our 1992 Stock Option Plan for Non-
Employee Directors;
(3) a proposal to ratify and approve the selection of
PricewaterhouseCoopers LLP as our auditors for 2001; and
(4) any and all other business that may properly come before the annual
meeting or any adjournment or adjournments thereof.
We are sending this proxy statement to our stockholders on April 4, 2001.
We have set the close of business on March 14, 2001 as the record date for
determining stockholders entitled to receive notice of and to vote at the annual
meeting. A list of all stockholders entitled to vote is on file at our principal
offices at 500 Dallas, Suite 1000, Houston, Texas 77002, and will be available
for inspection by any stockholder during the meeting.
If you cannot attend the meeting, you may vote over the telephone or the
Internet as instructed on the enclosed proxy card or by mailing the proxy card
in the enclosed postage-prepaid envelope. Any stockholder attending the meeting
may vote in person, even though he or she has already voted by proxy.
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IF YOU PLAN TO ATTEND:
Please note that space limitations make it necessary to limit attendance to
stockholders and one guest. Admission to the meeting will be on a first-come,
first-served basis. Registration will begin at 9:00 a.m. and seating will begin
at 9:30 a.m. Each stockholder may be asked to present valid picture
identification, such as a driver's license or passport. Stockholders holding
stock in brokerage accounts will need to bring a copy of a brokerage statement
reflecting stock ownership as of the record date. Cameras, recording devices and
other electronic devices will not be permitted at the meeting.
By order of the Board of Directors,
/s/ RICHARD D. KINDER
Richard D. Kinder,
Chairman and Chief Executive Officer
April 4, 2001
Houston, Texas
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[KINDER MORGAN LOGO]
500 Dallas, Suite 1000
Houston, Texas 77002
TABLE OF CONTENTS
PAGE
----
ABOUT THE MEETING........................................... 1
Who sent me this proxy statement?......................... 1
Why did I receive this proxy statement and proxy card?.... 1
What does it mean if I receive more than one proxy
card?.................................................. 2
What is the purpose of the annual meeting?................ 2
Who is entitled to vote at the annual meeting?............ 2
What are the voting rights of stockholders?............... 2
Who can attend the annual meeting?........................ 2
What constitutes a quorum?................................ 2
How do I vote?............................................ 3
Can I vote by telephone or electronically?................ 3
Can I change my vote after I return my proxy card?........ 3
What are the recommendations of our Board of Directors?... 3
What vote is required to approve each item?............... 4
Do I have any dissenters' rights?......................... 4
Where can I find the voting results of the meeting?....... 4
How can I find more information about Kinder Morgan?...... 4
COMMON STOCK OWNERSHIP...................................... 5
Who are the largest owners of our common stock?........... 5
How much common stock do our directors and executive
officers own?.......................................... 5
Have our directors, officers and the ten-percent
stockholders complied with Section 16(a) of the
Exchange Act?.......................................... 7
Certain Relationships and Related Transactions............ 7
EXECUTIVE COMPENSATION...................................... 8
Summary Compensation Table................................ 9
Option Grants in Fiscal 2000.............................. 10
Option Exercises and Values for Fiscal 2000............... 10
Executive Compensation Plans for Our Subsidiaries......... 11
How are our directors compensated?........................ 13
Report of our Compensation Committee...................... 13
Compensation Committee Interlocks and Insider
Participation.......................................... 15
Employment Agreement...................................... 15
Comparison of Five-year Cumulative Total Return........... 17
Comparison of Cumulative Total Return with Our Current
Management............................................. 18
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PAGE
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ITEM 1 -- ELECTION OF DIRECTORS............................. 19
ITEM 2 -- PROPOSAL TO AMEND AND RESTATE OUR 1992 STOCK
OPTION PLAN FOR NON-EMPLOYEE DIRECTORS.................... 23
ITEM 3 -- PROPOSAL TO RATIFY AND APPROVE THE SELECTION OF
PRICEWATERHOUSECOOPERS LLP AS OUR INDEPENDENT AUDITORS.... 27
OTHER MATTERS............................................... 27
ADDITIONAL INFORMATION...................................... 27
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[KINDER MORGAN LOGO]
500 Dallas, Suite 1000
Houston, Texas 77002
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PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
MAY 8, 2001
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This proxy statement contains information related to the annual meeting of
our stockholders to be held on Tuesday, May 8, 2001, beginning at 10:00 a.m.
local time, at the Doubletree Hotel at Allen Center, 400 Dallas Street, Houston,
Texas, and at any postponements or adjournments thereof.
ABOUT THE MEETING
WHO SENT ME THIS PROXY STATEMENT?
Our Board of Directors sent you this proxy statement and proxy card. We
will pay for the solicitation. In addition to this solicitation by mail, proxies
may be solicited by our directors, officers and other employees by telephone,
Internet, telegraph, telefax or telex, in person or otherwise. These people will
not receive any additional compensation for assisting in the solicitation. We
may also request brokerage firms, nominees, custodians and fiduciaries to
forward proxy materials to the beneficial owners of our shares. We will
reimburse those people and our transfer agent for their reasonable out-of-pocket
expenses in forwarding such material. We have also retained Corporate Investor
Communications, Inc. to perform the broker nominee search and to distribute
proxy materials to banks, brokers, nominees and intermediaries. We will pay to
third parties approximately $8,000, plus out-of-pocket expenses, for all of
these services.
WHY DID I RECEIVE THIS PROXY STATEMENT AND PROXY CARD?
You received this proxy statement and proxy card from us because you owned
our common stock as of March 14, 2001. We refer to this date as the record date.
This proxy statement contains important information for you to consider when
deciding whether to vote for the election of directors, the proposals of our
Board of Directors relating to our employee benefit plans and ratifying the
selection of our independent auditors. Please read this proxy statement
carefully.
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WHAT DOES IT MEAN IF I RECEIVE MORE THAN ONE PROXY CARD?
It means that you have multiple accounts at the transfer agent and/or with
stockbrokers. Please sign and return all proxy cards to ensure that all your
shares are voted.
WHAT IS THE PURPOSE OF THE ANNUAL MEETING?
At the annual meeting, our stockholders will act upon the matters outlined
in the notice of annual meeting on the cover page of this proxy statement,
including the election of directors, the consideration of a proposal of our
Board of Directors related to our 1992 Stock Option Plan for Non-Employee
Directors and the ratification of the selection of our independent auditors. In
addition, our management will report on our performance during fiscal 2000 and
respond to questions from stockholders.
WHO IS ENTITLED TO VOTE AT THE ANNUAL MEETING?
All stockholders who owned our common stock at the close of business on the
record date, March 14, 2001, are entitled to receive notice of the annual
meeting and to vote the shares of common stock that they held on that date at
the meeting, or any postponements or adjournments of the meeting.
WHAT ARE THE VOTING RIGHTS OF STOCKHOLDERS?
Each outstanding share of our common stock will be entitled to one vote on
all matters to be considered.
WHO CAN ATTEND THE ANNUAL MEETING?
All stockholders as of the record date, or their duly appointed proxies,
may attend the meeting, and each may be accompanied by one guest. Seating,
however, is limited. Admission to the meeting will be on a first-come,
first-served basis. Registration will begin at 9:15 a.m. and seating will begin
at 9:30 a.m. Each stockholder may be asked to present valid picture
identification, such as a driver's license or passport. Cameras, recording
devices and other electronic devices will not be permitted at the meeting.
Please note that if you hold your shares in street name (that is, through a
broker or other nominee), you will need to bring a copy of a brokerage statement
reflecting your stock ownership as of the record date and check in at the
registration desk at the meeting.
WHAT CONSTITUTES A QUORUM?
The presence at the meeting, in person or by proxy, of the holders of a
majority of the shares of our common stock outstanding on the record date will
constitute a quorum. The presence of a quorum will permit us to conduct the
proposed business at the annual meeting. As of March 14, 2001, the record date,
approximately 115,147,450 shares of our common stock were issued and
outstanding.
Your common stock will be counted as present at the meeting if you:
- are present at the meeting; or
- have properly submitted a proxy card or voted over the telephone or the
Internet.
Proxies received but marked as abstentions and broker non-votes will be included
in the number of shares considered to be present at the meeting.
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HOW DO I VOTE?
If you complete and properly sign the accompanying proxy card and return it
to us, it will be voted as you direct. If you are a registered stockholder and
attend the meeting, you may deliver your completed proxy card in person. Street
name stockholders who wish to vote at the meeting will need to obtain a proxy
form from the institution that holds their shares. Even if you plan to attend
the annual meeting, your plans may change, so it is a good idea to complete,
sign and return your proxy card or vote by Internet or telephone in advance of
the meeting.
CAN I VOTE BY TELEPHONE OR ELECTRONICALLY?
If you are a registered stockholder (that is, if you hold your stock in
certificate form), you may vote by telephone or through the Internet by
following the instructions included with your proxy card.
If your shares are held in street name, please check your proxy card or
contact your broker or nominee to determine whether you will be able to vote by
telephone or electronically.
The deadline for voting by telephone or electronically is 11:59 p.m.
(Eastern Daylight Savings Time) on May 7, 2001.
CAN I CHANGE MY VOTE AFTER I RETURN MY PROXY CARD?
Yes. Even after you have submitted your proxy card, you may change your
vote at any time before the proxy is exercised by filing with our Secretary
either a notice of revocation or a duly executed proxy bearing a later date. The
powers of the proxy holders will be suspended if you attend the annual meeting
in person and so request, although attendance at the meeting will not by itself
revoke a previously granted proxy.
WHAT ARE THE RECOMMENDATIONS OF OUR BOARD OF DIRECTORS?
Unless you give other instructions on your proxy card, the persons named as
proxy holders on the proxy card will vote in accordance with the recommendations
of the Board of Directors. Our Board of Directors' recommendations are set forth
together with the description of each item in this proxy statement. In summary,
our Board of Directors recommends a vote:
- for the election of the nominated slate of directors (see page 19);
- for the proposal to amend and restate our 1992 Stock Option Plan for Non-
Employee Directors (see page 23);
- for the proposal to ratify and approve the selection of
PricewaterhouseCoopers LLP as our auditors for 2001 (see page 27).
With respect to any other matter that properly comes before the meeting,
the proxy holders will vote as recommended by the Board of Directors or, if no
recommendation is given, in their own discretion.
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WHAT VOTE IS REQUIRED TO APPROVE EACH ITEM?
Election of Directors. The affirmative vote of a plurality of the votes
cast at the meeting is required for the election of directors. A properly
executed proxy marked "WITHHOLD AUTHORITY" with respect to the election of one
or more directors will not be voted with respect to the director or directors
indicated, although it will be counted for purposes of determining whether there
is a quorum. Accordingly, a "WITHHOLD AUTHORITY" vote will have the effect of a
negative vote.
Other Items. For each other item, the affirmative vote of the holders of
a majority of the shares represented in person or by proxy and entitled to vote
on the item will be required for approval. A properly executed proxy marked
"ABSTAIN" with respect to any such matter will not be voted, although it will be
counted for purposes of determining whether there is a quorum. Accordingly, an
abstention will have the effect of a negative vote.
If you hold your shares in "street name" through a broker or other nominee,
your broker or nominee may not be permitted to exercise voting discretion with
respect to some of the matters to be acted upon. Thus, if you do not give your
broker or nominee specific instructions, your shares may not be voted on those
matters and will not be counted in determining the number of shares necessary
for approval. Shares represented by such "broker non-votes" will, however, be
counted in determining whether there is a quorum.
DO I HAVE ANY DISSENTERS' RIGHTS?
No. Under the laws of the State of Kansas, dissenters' rights are not
available to our stockholders with respect to matters to be voted on at the
annual meeting.
WHERE CAN I FIND THE VOTING RESULTS OF THE MEETING?
The preliminary voting results will be announced at the meeting. The final
results will be published in our quarterly report on Form 10-Q for the second
quarter of fiscal 2001.
HOW CAN I FIND MORE INFORMATION ABOUT KINDER MORGAN, INC.?
We file annual, quarterly and special reports and other information with
the Securities and Exchange Commission. You may read and copy any of these
documents at the Commission's public reference room at 450 Fifth Street, N.W.,
Washington, D.C. 20549. (Please call the Commission at 1-800-SEC-0330 for
further information on the public reference room.) You may also read and copy
any of these documents at either of the following Regional Offices of the
Commission: New York Regional Office, Seven World Trade Center, Suite 1300, New
York, New York 10048 and Chicago Regional Office, Northwest Atrium Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of the material
may be obtained by mail at prescribed rates from the Public Reference Section of
the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549. We are listed on the New York Stock Exchange. Reports and other
information concerning us may be inspected at the offices of the New York Stock
Exchange, 20 Broad Street, Washington, D.C. 10005. Our filings also are
available to the public at the Commission's web site at http://www.sec.gov. You
may also request a copy of
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our filings by contacting our Secretary, c/o Kinder Morgan, Inc., 500 Dallas,
Suite 1000, Houston, Texas 77002.
COMMON STOCK OWNERSHIP
WHO ARE THE LARGEST OWNERS OF OUR COMMON STOCK?
Except as set forth below, we know of no single person or group that was
the beneficial owner of more than 5% of our common stock during 2000.
Information set forth in the table with respect to beneficial ownership of our
common stock has been obtained from filings with the Securities and Exchange
Commission made by the named beneficial owners. Beneficial ownership for the
purposes of the foregoing table is defined by Rule 13d-3 under the Exchange Act.
Under that rule, a person is generally considered to be the beneficial owner of
a security if he or she has or shares the power to vote or direct the voting
thereof or to dispose or direct the disposition thereof or has the right to
acquire either of those powers within sixty days.
SHARES
BENEFICIALLY PERCENTAGE
BENEFICIAL OWNER OWNED OF CLASS
---------------- ------------ ----------
Richard D. Kinder........................................... 23,989,992(1) 20.9%
FMR Corp.................................................... 10,228,571(2) 8.9%
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(1) The aggregate number of shares beneficially owned by Mr. Kinder does not
include: (a) 463,683 shares held by a Kinder family charitable foundation, a
charitable not-for-profit corporation, or (b) 2,500 shares held by Nancy G.
Kinder, Mr. Kinder's wife. Mr. Kinder disclaims any and all beneficial or
pecuniary interest in these shares. The address for Mr. Kinder is 500
Dallas, Suite 1000, Houston, Texas 77002.
(2) Taken from a Schedule 13G/A filed by FMR Corp. on February 14, 2001.
Includes 4,004,904 shares as to which FMR Corp. has the sole power to vote
or to direct to vote. FMR Corp.'s address is 82 Devonshire Street, Boston,
Massachusetts 02109.
HOW MUCH COMMON STOCK DO OUR DIRECTORS AND EXECUTIVE OFFICERS OWN?
The following table shows the amount of our common stock beneficially owned
(unless otherwise indicated) by our directors, our executive officers named in
the Summary Compensation Table, and our directors and executive officers as a
group. Except as otherwise indicated, all information is as of March 1, 2001.
None of our officers or directors
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is a party adverse to us or our subsidiaries nor do they have material interest
adverse to us or our subsidiaries.
AGGREGATE NUMBER
OF SHARES ACQUIRABLE WITHIN PER CENT OF SHARES
NAME BENEFICIALLY OWNED 60 DAYS OUTSTANDING
---- ------------------ ----------------- ------------------
Richard D. Kinder............................ 23,989,992(1) -- 20.9%
William V. Morgan............................ 4,500,000(2) -- 3.9%
Fayez Sarofim................................ 2,216,018(3) -- 1.9%
Ted A. Gardner............................... 231,159(4) 12,500 *
Edward H. Austin............................. 205,380(5) 35,000 *
Edward Randall, III.......................... 109,500 33,500 *
Charles W. Battey............................ 37,447 30,500 *
William J. Hybl.............................. 10,968(6) 30,500 *
H. A. True, III.............................. 5,000 21,500 *
Stewart A. Bliss............................. 4,675 35,000 *
Michael C. Morgan............................ 20,000(7) 182,800 *
David G. Dehaemers, Jr. ..................... 10,000(8) 187,500 *
William V. Allison........................... 10,000(8) 75,000 *
Joseph Listengart............................ 10,000(8) 39,050 *
All current directors and executive officers
as a group (16 persons).................... 31,381,987(9) 778,000 27.8%
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* Less than 1%
(1) The aggregate number of shares beneficially owned by Mr. Kinder does not
include: (a) 463,683 shares held by a Kinder family charitable foundation, a
charitable not-for-profit corporation, or (b) 2,500 shares held by Nancy G.
Kinder, Mr. Kinder's wife. Mr. Kinder disclaims any and all beneficial or
pecuniary interest in these shares.
(2) Mr. William V. Morgan may be deemed to own the 4,500,000 shares and thereby
shares in the voting and disposition power with Morgan Associates, Inc.
Includes 1,000,000 shares with respect to which Morgan Associates, Inc.
wrote a costless collar that expires in August 2003.
(3) As reported to us on March 12, 2001, Mr. Sarofim may be deemed to be the
beneficial owner of 2,216,018 shares of our common stock. Of these shares,
Mr. Sarofim has sole voting and dispositive powers with respect to 1,500,000
shares which are owned of record and beneficially by him, and may be deemed
to have shared voting and dispositive power as to 716,018 shares of our
common stock. Of the securities which are not subject to sole voting and
dispositive powers, 491,576 shares are held in investment advisory accounts
managed by Fayez Sarofim & Co. for numerous clients, 160,251 shares are held
by Sarofim International Management Company for its own account, 26,800
shares are held in investment advisory accounts managed by Sarofim
International Management Company, and 4,000 shares are held in investment
advisory accounts managed by Sarofim Trust Co. Fayez Sarofim & Co. is an
Investment Adviser registered under the Investment Advisers Act of 1940, of
which Mr. Sarofim is Chairman of the Board, President, and, through a
holding company, majority shareholder. Sarofim International Management
Company is a wholly-owned subsidiary of Fayez Sarofim & Co., and Sarofim
Trust Co. is a wholly-owned subsidiary of Sarofim International Management
Company. Additionally, 33,391 shares are held in trusts of which Mr. Sarofim
is trustee, as to which he shares voting and dispositive powers but has no
beneficial interest.
(4) Includes 125,000 shares with respect to which Mr. Gardner wrote a costless
collar that expires in March 2002.
(5) Includes 171,880 shares as to which Mr. Austin has sole voting and
dispositive power and 33,500 shares as to which Mr. Austin has shared voting
and dispositive power. Does not include 34,645 shares held in aggregate by
Mr. Austin's mother and father's estate and a trust for his spouse's
benefit.
(6) Does not include 600 shares held by Mr. Hybl's spouse.
(7) Includes 10,000 shares of restricted stock, 25% of which vests on each of
the first four anniversaries of January 17, 2001.
(8) Consists of 10,000 shares of restricted stock, 25% of which vests on each of
the first four anniversaries of January 17, 2001.
(9) Includes an additional 15,000 shares of restricted stock, 25% of which vests
on the first four anniversaries of January 17, 2001.
Unless otherwise indicated the directors and named executive officers have
sole voting and dispositive power over the shares listed above, other than
shared rights created under joint tenancy or marital property laws as between
the directors or named executive officers and their respective spouses.
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For executive officers, except as noted otherwise, the numbers include
interests in shares held in the various employee benefit plans. The column
entitled "Acquirable within 60 Days" reflects the number of shares that could be
purchased by the exercise of options available on March 1, 2001 or within 60
days thereafter under our stock option plans. The percentage listed in column
entitled "Percent of Shares Outstanding" is calculated based on 115,001,252
shares of our common stock outstanding on March 1, 2001.
HAVE OUR DIRECTORS, OFFICERS AND THE TEN-PERCENT STOCKHOLDERS COMPLIED WITH
SECTION 16(A) OF THE EXCHANGE ACT?
Based upon a review of filings with the Securities and Exchange Commission
and written representations that no other reports were required, we believe that
all of our directors and executive officers complied during fiscal 2000 with the
reporting requirements of Section 16(a) of the Exchange Act.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On October 7, 1999, each of Mr. Kinder and Morgan Associates, Inc. entered
into a governance agreement with us. Each governance agreement restricts the
acquisition of our common stock, joining a group or the execution of a voting
agreement if after the acquisition, joinder or agreement that party or the group
would own or control the voting of more than 34.9% of our outstanding common
stock in the case of Mr. Kinder or more than 15% of our outstanding common stock
in the case of Morgan Associates, Inc. The governance agreement with Morgan
Associates, Inc. has terminated according to its terms.
Mr. Kinder's governance agreement does not restrict Mr. Kinder from
proposing, supporting or participating in a transaction that offers each of our
stockholders the opportunity to dispose of all of their common stock if a
majority of our independent directors approve the transaction or we receive a
fairness opinion that the transaction is fair to our stockholders from a
financial point of view. Mr. Kinder agreed not to support or vote in favor of a
transaction such as a merger or tender offer unless the same offer is made to
all of our stockholders.
Mr. Kinder generally agreed not to sell our common stock owned by him
except in compliance with Rule 144 under the Securities Act or in a public
offering. Additionally, Mr. Kinder may sell up to 3.5% of his common stock in a
private placement as long as the other restrictions described above do not
apply. If a majority of our independent directors otherwise agree and our
stockholders have the ability to join in a sale, Mr. Kinder may sell his common
stock. This governance agreement terminates April 7, 2001, 18 months after the
date of our acquisition of Kinder Morgan (Delaware), Inc. Mr. Kinder's
governance agreement also terminates when he beneficially owns less than 10% of
our common stock.
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EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth information concerning total compensation
earned or paid to our Chief Executive Officer and our four most highly
compensated executive officers who were serving in such capacities as of
December 31, 2000, for each of the last three fiscal years. In addition, the
table includes the total compensation earned or paid to persons who formerly
served as our chief executive officer during the past fiscal year.
Please note that since our acquisition of Kinder Morgan (Delaware), Inc. on
October 7, 1999, the date Mr. Kinder became the Chief Executive Officer and
Chairman of the Board, Mr. Kinder has received an annual salary of $1. Since
October 7, 1999, Mr. Kinder has received no additional compensation from any of
our affiliates. The $150,003 of salary in 1999 reflected in the table represents
salary Mr. Kinder received from our indirectly wholly-owned subsidiary, Kinder
Morgan G.P., Inc. for his services as Chief Executive Officer and Chairman of
the Board of Kinder Morgan G.P., Inc. between January 1, 1999 and October 7,
1999.
The amounts listed in the table under the columns entitled "Salary" and
"Bonus" for Messrs. Kinder, Allison, Morgan, Dehaemers, and Listengart are
required to include compensation that they received for services rendered to us
and our subsidiaries. We must therefore include compensation that our executive
officers received for the services that they rendered during fiscal 2000 to our
indirectly wholly-owned subsidiary, Kinder Morgan G.P., Inc.
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SUMMARY COMPENSATION TABLE
LONG-TERM COMPENSATION
AWARDS
-----------------------
KMP UNITS/
ANNUAL COMPENSATION RESTRICTED KMI SHARES
------------------- STOCK UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(2) AWARDS(3) OPTIONS COMPENSATION(6)
--------------------------- ---- -------- -------- ---------- ---------- ---------------
Richard D. Kinder(1)............. 2000 $ 1 $ -- $ -- -- $ --
Director, Chairman and CEO 1999 150,003 -- -- -- 7,554
1998 200,004 -- -- -- 13,584
William V. Allison............... 2000 200,000 300,000 498,750 -- 11,466
President, 1999 192,497 250,000 -- 0/250,000 9,335
Natural Gas Pipelines 1998 99,998 200,000 -- 10,000/0 11,366
David G. Dehaemers, Jr. ......... 2000 200,000 300,000(4) 498,750 0/150,000(5) 10,920
Vice President, 1999 161,249 250,000(4) 0/250,000 7,408
Corporate Development 1998 141,247 200,000 -- -- 34,393
Michael C. Morgan................ 2000 200,000 300,000(4) 498,750 0/150,000(5) 10,836
Vice President, 1999 161,249 250,000(4) -- 0/250,000 7,408
Strategy and Investor
Relations 1998 141,247 200,000 -- -- 50,421
Joseph Listengart................ 2000 181,250 225,000 498,750 0/6,300(7) 10,798
Vice President, 1999 124,336 175,000 -- 0/175,000 5,890
General Counsel and Secretary 1998 124,007 140,436 -- 5,000/0 78,620
---------------
(1) Effective October 1, 1999, Mr. Kinder's annual salary was reduced to $1.00.
Mr. Kinder is not eligible for annual bonuses or option grants.
(2) Amounts earned in year shown and paid the following year.
(3) Represent shares of KMI stock awarded in 2001 that relate to performance in
2000. Value computed as the number of shares awarded (10,000) times the
closing price on January 17, 2001 ($49.875). Twenty five percent of the
shares vest on each of the first four anniversaries after January 17, 2001.
The holders of the restricted stock awards are eligible to vote and to
receive dividends declared on such shares.
(4) Does not include for 1999, $3,753,868, or for 2000, $7,010,000 paid to each
of Messrs. Dehaemers and Morgan under Kinder Morgan Energy Partners'
Executive Compensation Plan. The payments made in 2000 were the last
payments Messrs. Dehaemers and Morgan are to receive under Kinder Morgan
Energy Partners' Executive Compensation Plan.
(5) The 150,000 options in KMI shares were granted and became fully vested on
April 20, 2000. The options were granted to Messrs. Dehaemers and Morgan in
connection with the execution of their employment agreements.
(6) Represents contributions to the Retirement Savings Plan (a 401(k) plan), the
imputed value of group term life insurance exceeding $50,000, and
compensation attributable to taxable moving and parking expenses allowed.
For 2000, contributions to the Retirement Savings Plan, value of group-term
life insurance exceeding $50,000 and parking compensation respectively were
Messrs. Dehaemers ($10,200/$420/$300), Morgan ($10,200/$336/$300), Allison
($10,200/$966/$300) and Listengart ($10,200/$298/$300).
(7) The 2000 options were granted in 2001, but relate to performance in 2000.
The options were granted and became fully exercisable on 01/17/01 at an
exercise price of $49.875 per share.
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OPTION GRANTS IN FISCAL 2000
The table below sets forth information with respect to stock option grants
during fiscal 2000. David Dehaemers and Michael Morgan our only named executives
who received stock option grants in 2000.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
--------------------------------------------------- VALUE AT ASSUMED
NUMBER OF % OF TOTAL ANNUAL RATES OF STOCK
SECURITIES OPTIONS/SARS EXERCISE PRICE APPRECIATION FOR
UNDERLYING GRANTED TO OR BASE OPTION TERM(1)
NAME AND PRINCIPAL OPTIONS/SARS EMPLOYEES IN PRICE EXPIRATION -----------------------
POSITIONS GRANTED(#) FISCAL YEAR ($/SH) DATE 5% 10%
------------------ ------------ ------------ -------- ---------- ---------- ----------
David G. Dehaemers, Jr. .............. 150,000 12.8% $33.125 4/20/2010 $3,124,820 $7,918,980
Vice President
Corporate Development
Michael C. Morgan..................... 150,000 12.8% $33.125 4/20/2010 $3,124,820 $7,918.980
Vice President, Strategy
and Investor Relations
---------------
(1) The dollar amounts under these columns use the 5% and 10% rates of
appreciation prescribed by the Securities and Exchange Commission. The 5%
and 10% rates of appreciation would result in per share amounts of $53.96
and $85.92, respectively. We express no opinion regarding whether this level
of appreciation will be realized and expressly disclaim any representation
to that effect.
OPTION EXERCISES AND VALUES FOR FISCAL 2000
The table below sets forth information with respect to stock option
exercises during fiscal 2000 by each of our named executive officers and the
status of their options at December 31, 2000.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
NUMBER OF SECURITIES VALUE OF UNEXERCISED IN-
SHARES UNDERLYING UNEXERCISED THE-MONEY OPTIONS/SARS
NAME AND ACQUIRED ON VALUE OPTIONS/SARS AT FY-END AT FY-END(1)
PRINCIPAL POSITION EXERCISE(#) REALIZED($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
------------------ ----------- ----------- ------------------------- -------------------------
Richard D. Kinder......... -- -- --/-- --/--
Chief Executive Officer
and Chairman of the
Board
William V. Allison........ -- -- 125,000/125,000 $3,546,875/$3,546,875
President, Natural Gas
Pipeline Operations
David G. Dehaemers,
Jr. .................... -- -- 212,500/187,500 $4,632,813/$5,320,313
Vice President,
Corporation Development
Michael C. Morgan......... -- -- 212,500/187,500 $4,632,813/$5,320,313
Vice President-Strategy
and Investor Relations
Joseph Listengart......... -- -- 43,750/131,250 $1,241,406/$3,724,219
Vice President, Secretary
and General Counsel
---------------
(1) Calculated on the basis of the fair market value of the underlying shares at
year end, minus the exercise price.
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EXECUTIVE COMPENSATION PLANS FOR OUR SUBSIDIARIES
As we are required to report compensation that our named executive officers
receive from our subsidiaries, most notably Kinder Morgan G.P., Inc., we are
including the following descriptions of Kinder Morgan G.P., Inc. compensation
plans, through which certain of our named executive officers receive
compensation which is included in the Summary Compensation Table on page 9. As
of October 7, 1999, neither of Messrs. Kinder or William V. Morgan receive any
compensation from Kinder Morgan G.P., Inc. or any of our other subsidiaries.
Retirement Savings Plan
Effective July 1, 1997, Kinder Morgan G.P., Inc. established the Kinder
Morgan Retirement Savings Plan, a defined contribution 401(k) plan, that permits
all full-time employees to contribute 1% to 15% of base compensation, on a
pre-tax basis, into participant accounts. This plan was subsequently amended and
merged to form the Kinder Morgan Savings Plan. In addition to a mandatory
contribution equal to 4% of base compensation per year for each plan
participant, Kinder Morgan G.P., Inc. may make discretionary contributions in
years when specific performance objectives are met. Mandatory contributions are
made each pay period on behalf of each eligible employee. Any discretionary
contributions are made during the first quarter following the performance year.
All contributions, including discretionary contributions, are in the form of our
common stock that is immediately convertible into other available investment
options at the employee's discretion. In the first quarter of 2001, an
additional 2% discretionary contribution was made to certain individual accounts
based on the achievement of 2000 financial targets. All contributions, together
with earnings thereon, are immediately vested and not subject to forfeiture.
Participants may direct the investment of their contributions into a variety of
investments. Plan assets are held and distributed pursuant to a trust agreement.
Because levels of future compensation, participant contributions and investment
yields cannot be reliably predicted over the span of time contemplated by a plan
of this nature, it is impractical to estimate the annual benefits payable at
retirement to the individuals listed in the Summary Compensation Table above.
Executive Compensation Plan
Pursuant to Kinder Morgan Energy Partners' Executive Compensation Plan,
executive officers of Kinder Morgan Energy Partners are eligible for awards
equal to a percentage of the "incentive compensation value," which is defined as
cash distributions to Kinder Morgan G.P., Inc. during the four calendar quarters
preceding the date of redemption multiplied times eight (less a participant
adjustment factor, if any). Under the plan, no eligible employee may receive a
grant in excess of 2% and total awards under the plan may not exceed 10%. In
general, participants may redeem vested awards in whole or in part from time to
time by written notice. Kinder Morgan Energy Partners has the option to pay the
participant in units (provided, however, the unitholders approve the plan prior
to issuing such units) or in cash. Kinder Morgan Energy Partners may not issue
more than 200,000 units in the aggregate under the plan. Units will not be
issued to a participant unless such units have been listed for trading on the
principal securities exchange on which the
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units are then listed. The plan terminates January 1, 2007, and any unredeemed
awards will be automatically redeemed. The board of directors of Kinder Morgan
G.P., Inc. may, however, terminate the plan before such date, and upon such
early termination, Kinder Morgan Energy Partners will redeem all unpaid grants
of compensation at an amount equal to the highest incentive compensation value,
using as the determination date any day within the previous twelve months,
multiplied by 1.5. The plan was established in July 1997, and on July 1, 1997,
the board of directors of Kinder Morgan G.P., Inc. granted awards totaling 2% of
the incentive compensation value to each of David Dehaemers and Michael Morgan.
Originally, 50% of such awards were to vest on each of January 1, 2000 and
January 1, 2002. No awards were granted during 1998 and 1999.
On January 4, 1999, the awards granted to Mr. Dehaemers and Mr. Morgan were
amended to provide for the immediate vesting and pay-out of 50% of their awards,
or 1% of the incentive compensation value. On April 20, 2000, the awards granted
to Mr. Dehaemers and Mr. Morgan were amended to provide for the immediate
vesting and pay-out of the remaining 50% of their awards, or 1% of the incentive
compensation value. The board of directors of Kinder Morgan Energy Partners'
general partner believes that accelerating the vesting and pay-out of the awards
was in its best interest because it capped the total payment the participants
were entitled to receive with respect to their awards.
Unit Option Plan
Pursuant to Kinder Morgan Energy Partners' Common Unit Option Plan, its and
its affiliates' key personnel are eligible to receive grants of options to
acquire Kinder Morgan Energy Partners' common units. The total number of units
available under the unit option plan is 250,000. None of the options granted
under this plan may be "incentive stock options" under Section 422 of the
Internal Revenue Code. If an option expires without being exercised, the number
of units covered by such option will be available for a future award. The
exercise price for an option may not be less than the fair market value of a
unit on the date of grant. Either the board of directors of Kinder Morgan Energy
Partners' general partner or a committee of that board of directors administers
the unit option plan. The unit option plan terminates on March 5, 2008.
No individual employee may be granted options for more than 10,000 units in
any year. Kinder Morgan G.P., Inc.'s board of directors or the committee will
determine the duration and vesting of the options to employees at the time of
grant. As of December 31, 2000, options for 206,800 units were granted to 99
employees of Kinder Morgan G.P., Inc. and its subsidiaries. Forty percent of
such options will vest on the first anniversary of the date of grant and twenty
percent on each anniversary, thereafter. The options expire seven years from the
date of grant. In March 1998, Mr. Listengart was granted an option to purchase
5,000 common units at an exercise price of $34.5625 per unit, and in August
1998, Mr. Allison was granted an option to purchase 10,000 common units at an
exercise price of $33.125 per unit.
The unit option plan also granted to each of Kinder Morgan G.P., Inc.'s
non-employee directors as of April 1, 1998, an option to acquire 5,000 units at
an exercise price equal to the fair market value of the units on such date. In
addition, each subsequent non-employee
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director will receive options to acquire 5,000 units on the first day of the
month following his or her election. Under this provision, as of December 31,
2000, options for 15,000 units were granted to Kinder Morgan G.P., Inc.'s three
non-employee directors. Forty percent of such options will vest on the first
anniversary of the date of grant and twenty percent on each anniversary,
thereafter. The non-employee director options will expire seven years from the
date of grant.
HOW ARE OUR DIRECTORS COMPENSATED?
Pursuant to a policy we implemented in October 1999, our directors do not
receive any cash compensation for their service on our board of directors.
Directors who are not also our employees participate in our 1992 Stock Option
Plan for Non-Employee Directors, which was amended and restated on January 17,
2001. Under this plan, each continuing director who is not one of our salaried
employees, at the discretion of our Compensation Committee, may be granted an
option to purchase an amount not to exceed 10,000 shares of our common stock
each year. Each newly-elected director who is not one of our salaried employees,
at the discretion of our Compensation Committee, may be granted an option to
purchase an amount not to exceed 20,000 shares of our common stock. Options may
be granted at not less than 100% of the fair market value of our common stock on
the date of grant, but must be at least the par value of the shares subject to
the option. Options expire 10 years from the date of grant. Options granted
pursuant to our 1992 Stock Option Plan are intended as nonqualified stock
options.
Effective January 1, 2001, we granted each director an option to purchase
10,000 shares of our common stock in return for service on our Board of
Directors in 2001. The options have an exercise price of $49.875 and will vest
on May 8, 2001 if our stockholders approve the amendment to this plan proposed
for approval at our May 8, 2001 annual meeting.
All directors are reimbursed for reasonable travel and other expenses
incurred in attending all meetings.
REPORT OF OUR COMPENSATION COMMITTEE
The Board of Directors has a standing Compensation Committee composed of
four non-management directors. Our Compensation Committee is charged with the
management and oversight of employee benefit plans approved by our Board of
Directors, employment agreements approved by our Board of Directors and the
compensation of all of our directors, officers and employees.
The Report of our Compensation Committee and the performance graphs
included elsewhere in this proxy statement do not constitute soliciting material
and should not be deemed filed or incorporated by reference into any other of
our filings under the Securities Act or the Exchange Act, except to the extent
we specifically incorporate this report or the performance graphs by reference
therein.
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Our Compensation Committee of the Board of Directors has furnished the
following report on our executive compensation for fiscal 2000.
What is our philosophy of executive officer compensation?
Annual executive compensation is principally comprised of base salary,
annual incentive cash and stock awards. It is our philosophy to pay our
executive officers a fair base salary which is generally below market. The
majority of an executive officer's compensation is allocated to the "at-risk"
portions of the annual incentives and long-term compensation. It is our
philosophy that compensation of our executive officers and other key employees
should be directly and materially tied to corporate financial performance and
aligned with stockholders. To achieve this objective, executive compensation is
weighted toward cash incentives and long-term compensation payable on the basis
of such financial and stock performance. Grants of stock options are the
principal component of long-term executive compensation.
Our executive compensation components are reviewed periodically by outside
compensation consultants. The purpose of this review is to ensure that our total
compensation package operates effectively, remains both reasonable and
competitive with the energy industry, and is generally comparable to the
compensation offered by companies of similar size and scope of our company.
Our 1994 Long-Term Incentive Plan and our 1999 Stock Option Plan give our
Compensation Committee the flexibility to recommend that our Board of Directors
grant stock options, both non-qualified and incentive, restricted stock awards,
stock appreciation rights and other stock-based awards. The plans have permitted
us to keep pace with changing developments in compensation and benefit programs,
making us competitive with those companies that offer incentives to attract and
retain employees. We currently plan to issue only non-qualified stock options
and/or restricted stock to our executive officers, unless specific circumstances
dictate otherwise.
How is our Chief Executive Officer and President compensated?
At their personal request, Mr. Kinder, our Chief Executive Officer and
Chairman, and Mr. Morgan, our President and Vice Chairman, receive $1 of base
salary per year. Additionally, Messrs. Kinder and Morgan requested they receive
no annual bonus or stock option grant. They both wish to be rewarded strictly on
the basis of stock performance which impacts their holdings of our common stock.
How are we addressing Internal Revenue Code limits on deductibility of
compensation?
Section 162(m) of the Internal Revenue Code limits the deductibility of
certain compensation for our Chief Executive Officer and our additional four
highest paid executive officers to $1,000,000 per year. If certain conditions
are met, including the removal of discretion in determining individual rewards,
compensation may be excluded from consideration of the $1,000,000 limit. Annual
compensation of our individual executive officers has historically been below
$1,000,000. The policy of our Compensation Committee to date is to establish and
maintain a compensation program which maximizes the creation of long-term
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stockholder value by recognizing and rewarding performance that increases our
value and complies with Section 162(m).
Compensation Committee
Ted A. Gardner (Chairman)
William J. Hybl
Edward Randall, III
H. A. True, III
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
None of the members of our Compensation Committee is or has been one of our
officers or employees.
EMPLOYMENT AGREEMENT
Richard D. Kinder's Employment Agreement
On October 7, 1999, we entered into an employment agreement with Mr. Kinder
pursuant to which he became our Chairman and Chief Executive Officer. His
employment agreement is for a term of three years and will be extended on each
anniversary of the October 7th merger date for an additional one-year period.
Mr. Kinder, at his initiative, accepted a salary of $1 per year to
demonstrate his belief in our long term viability. Mr. Kinder is eligible for
personnel policies and employee benefits as apply to other employees.
We may terminate Mr. Kinder's employment at any time "without cause." If we
were to terminate Mr. Kinder without cause, we would be required to provide Mr.
Kinder with the following severance benefits:
- a lump sum cash payment in an amount equal to three times the aggregate
of (x) the greater of Mr. Kinder's current base salary or $750,000 and
(y) the greater of (1) the amount of any cash incentive bonus to be paid
to Mr. Kinder pursuant to any applicable plan based on the maximum of the
current year's target or (2) Mr. Kinder's aggregate cash bonus paid with
regard to our prior fiscal year;
- continuation of medical, dental, life insurance and accidental death and
dismemberment coverages which we provide to our active employees for up
to 36 months; and
- stock options, restricted stock and other stock awards granted to Mr.
Kinder under all of our stock plans, and our subsidiaries' stock plans
will vest and become immediately exercisable and all restrictions thereon
will be removed. Mr. Kinder has no such stock options, restricted stock
or other stock awards.
If we terminate Mr. Kinder "with cause," Mr. Kinder will receive his salary
for the period to the date of his termination, but we will not be obligated to
pay any salary or other compensation for any period of time after termination
and Mr. Kinder will not be entitled to
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receive severance pay. For purposes of the employment agreement, "cause" means
the occurrence of any of the following events:
- a grand jury indictment or prosecutorial information charging Mr. Kinder
with illegal or fraudulent acts, criminal conduct or willful misconduct
whether or not relating to our activities;
- a grand jury indictment or prosecutorial information charging Mr. Kinder
with any criminal acts involving moral turpitude whether or not it has a
material adverse effect upon us;
- grossly negligent failure by Mr. Kinder to perform his duties in a manner
which he knows, or has reason to know, to be in our best interests;
- bad faith refusal by Mr. Kinder to carry out reasonable instructions of
our Board of Directors not inconsistent with the provisions of the
employment agreement; or
- material violation by Mr. Kinder of any of the terms of the employment
agreement.
If Mr. Kinder dies during the term of the employment agreement, we will pay
Mr. Kinder's estate an amount equal to the greater of his annual salary or
$750,000 as severance pay.
We may terminate Mr. Kinder if he becomes totally and permanently disabled
so as to preclude him from performing his duties. If so terminated, Mr. Kinder
will be entitled to receive:
- the amount of any insurance proceeds payable to him under disability
insurance policies, if any, then maintained for his benefit; and
- the greater of his salary or an annual amount of $750,000 through the
effective date of termination of employment.
Mr. Kinder has the right to terminate his employment at any time by
providing us at least 30-days prior written notice of termination. Following
such termination, Mr. Kinder will receive his salary for the period through the
date of termination. Mr. Kinder will also have the right to terminate the
employment agreement and to receive severance benefits if he is subject to a
"change in duties" (as defined in the employment agreement).
Mr. Kinder has agreed that, with limited exceptions, while he remains
employed by us and for a period of 12 months following the termination of his
employment with cause or his voluntary termination of employment, he will not,
directly or indirectly, own, manage, operate, join, contract or participate in
the ownership, management or control of or be employed by or be connected in any
manner with any business which is or may be competitive in any manner with us.
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COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
The following performance graph compares the performance of our common
stock to the Standard & Poor's 500 Stock Index and to the Standard & Poor's
Natural Gas Index for our last five fiscal years. The graph assumes that the
value of the investment in our common stock and each index was $100 at December
31, 1995, and that all dividends were reinvested. Total net return to our
stockholders in 2000 was 160.1%, as compared to an average return of (9.1)% for
the Standard & Poor's 500 Stock Index and of 75.5% for the Standard & Poor's
Natural Gas Index for the same period.
FIVE-YEAR CUMULATIVE TOTAL RETURN
Based on reinvestment of $100 beginning December 31, 1995
[PERFORMANCE GRAPH]
INDEXED RETURNS
YEARS ENDING
-------------------------------------------------------------------------------------------
Base
Period
Company/Index Dec95 Dec96 Dec97 Dec98 Dec99 Dec00
-------------------------------------------------------------------------------------------
KINDER MORGAN INC 100 132.90 195.79 135.03 116.55 303.17
S&P 500 INDEX 100 122.96 163.98 210.85 255.21 231.98
NATURAL GAS-500 100 132.89 156.80 172.06 204.85 359.46
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COMPARISON OF CUMULATIVE TOTAL RETURN WITH OUR CURRENT MANAGEMENT
The following performance graph compares the performance of our common
stock to the Standard & Poor's 500 Stock Index and to the Standard & Poor's
Natural Gas Index from July 8, 1999 through December 31, 2000. July 8, 1999, was
the date that the acquisition of Kinder Morgan (Delaware), Inc. was announced
and it was proposed that our current management would operate our business
following that transaction. The graph assumes that the value of the investment
in our common stock and each index was $100 at July 8, 1999, and that all
dividends were reinvested.
CUMULATIVE TOTAL RETURN WITH OUR CURRENT MANAGEMENT
Based on reinvestment of $100 beginning July 8, 1999
[PERFORMANCE GRAPH]
INDEXED RETURNS
YEARS ENDING
--------------------------------------------------------------------------------
Base
Period
Company/Index Dec98 Dec99 Dec00
--------------------------------------------------------------------------------
KINDER MORGAN INC 100 167.53 435.77
S&P 500 INDEX 100 106.03 96.38
NATURAL GAS-500 100 93.12 163.40
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ITEM 1 -- ELECTION OF DIRECTORS
DIRECTORS STANDING FOR ELECTION
Our Board of Directors is currently divided into three classes, having
three-year terms that expire in successive years. The current term of the
directors in Class II expires at the annual meeting. Our Board of Directors
proposes that the nominees listed below, all of whom are currently serving as
Class II directors, be re-elected for a new term of three years and until their
successors are duly elected and qualified.
Each of the nominees has consented to serve a three-year term. If any of
them becomes unavailable to serve as a director, our Board of Directors may
designate a substitute nominee. In that case, the persons named as proxies will
vote for the substitute nominee designated by our Board of Directors.
Class II Directors. The directors standing for election are:
CHARLES W. BATTEY Director since 1971 -- Age 69
Mr. Battey was elected to his current term as a Class II director at the
1998 annual meeting. Mr. Battey has been an independent consultant and an active
community volunteer based in Kansas City for the past 5 years. Mr. Battey is
also a Director of SIT/ KIM International Investment Associates, Inc. and
Cybersensor, Inc. Mr. Battey was Chairman of our Board from 1989 to 1996, and
our Chief Executive Officer from 1989 to 1994.
H. A. TRUE, III Director since 1991 -- Age 58
Mr. True was elected to his current term as a Class II director at the 1998
annual meeting. Mr. True has been an owner and director of the True Companies,
which are involved in energy, agriculture and financing, and based in Casper,
Wyoming for the past 5 years. Mr. True is also Vice Chairman of Midland
Financial Corporation.
FAYEZ SAROFIM Director since 1999 -- Age 72
Mr. Sarofim was appointed to our Board of Directors upon completion of our
acquisition of Kinder Morgan (Delaware), Inc. on October 7, 1999, as a designee
of Mr. Kinder in accordance with the governance agreement between Mr. Kinder and
us. Mr. Sarofim has been President and Chairman of the Board of Fayez Sarofim &
Co., an investment advisory firm, since he founded it. Mr. Sarofim is a director
of Unitron, Inc. and Argonaut Group.
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DIRECTORS CONTINUING IN OFFICE
Class I and Class III Directors.
The following Class I and Class III directors were elected at our 1998
annual meeting, our 1999 annual meeting or our special meeting of our board of
directors on September 28, 1999, for terms ending in 2001 and 2002,
respectively:
Class III
WILLIAM V. MORGAN Director since 1999 -- Age 57
Mr. Morgan was appointed to our Board of Directors upon completion of our
acquisition of Kinder Morgan (Delaware), Inc. on October 7, 1999, as a designee
of Morgan Associates, Inc., in accordance with the governance agreement entered
into between Morgan Associates, Inc. and us. Mr. Morgan is our Vice Chairman of
the Board and our President. Mr. Morgan was President and a Director of Kinder
Morgan (Delaware), Inc. since October 1996. In February 1997, he was also
elected Vice Chairman of Kinder Morgan (Delaware), Inc. In addition, Mr. Morgan
was elected as Director of Kinder Morgan G.P., Inc. in June 1994, Vice Chairman
of Kinder Morgan G.P., Inc. in February 1997 and President of Kinder Morgan
G.P., Inc. in November 1998. Mr. Morgan has held legal and management positions
in the energy industry since 1975, including the presidencies of three major
interstate natural gas companies which are now part of Enron Corp. (namely,
Florida Gas Transmission Company, Transwestern Pipeline Company and Northern
Natural Gas Company). Prior to joining Florida Gas in 1975, Mr. Morgan was
engaged in the private practice of law. Mr. Morgan is the father of Michael C.
Morgan, our Vice President, Strategy and Investor Relations.
STEWART A. BLISS Director since 1993 -- Age 67
Mr. Bliss was elected to his current term as a Class III director at the
1999 annual meeting. Mr. Bliss has been a Financial Consultant and Senior
Business Advisor in Denver, Colorado for the past 5 years. Mr. Bliss served as
President of the Board for the Colorado State Board of Agriculture from 1993 to
February 2001. Mr. Bliss also serves on the Governing Board for the Colorado
State University System. Mr. Bliss served as our Interim Chairman and Chief
Executive Officer from July to October of 1999.
EDWARD RANDALL, III Director since 1994 -- Age 73
Mr. Randall was elected to his current term as a Class III director at the
1999 annual meeting. Mr. Randall is a private investor. Mr. Randall is also a
director EOG Resources, Inc. and EcOutlook.com, Inc.
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Class I
RICHARD D. KINDER Director since October 1999; also from 1998 to June
1999 -- Age 56
Mr. Kinder was appointed to our Board of Directors upon completion of our
acquisition of Kinder Morgan (Delaware), Inc. on October 7, 1999, as one of his
own designees, in accordance with a governance agreement entered into between
Mr. Kinder and us. Mr. Kinder has been our Chairman of the Board of Directors
and Chief Executive Officer since October 7, 1999. In addition, Mr. Kinder has
been the Chairman of the Board of Directors and Chief Executive Officer of our
indirectly, wholly-owned subsidiary, Kinder Morgan G.P., Inc., since 1997. Mr.
Kinder was President and Chief Operating Officer of Enron Corp. from 1990 to
1996. Mr. Kinder was employed by Enron Corp. and its affiliates and predecessors
for over 16 years. Mr. Kinder is also a director of TransOcean Offshore Inc. and
Baker Hughes Incorporated.
EDWARD H. AUSTIN, JR. Director since 1994 -- Age 59
Mr. Austin has served as a partner and an Executive Vice President of
Austin, Calvert & Flavin, Inc., an investment advisory firm based in San
Antonio, Texas for the past 5 years. Austin, Calvert & Flavin, Inc. is a wholly
owned subsidiary of Waddell & Reed Financial, Inc. Mr. Austin is a director of
Advanced Extraction Technologies, Inc. and Texas Cavalcade, Inc.
WILLIAM J. HYBL Director since 1988 -- Age 58
Mr. Hybl has been the Chairman and Chief Executive Officer and Trustee of
El Pomar Foundation, a charitable foundation based in Colorado Springs, Colorado
for the past five years. Over the past 5 years, Mr. Hybl has also served as a
directory of Broadmoor Hotel, Inc., USAA, FirstBank Holding Co. of Colorado, and
Garden City Company.
TED A. GARDNER Director since 1999 -- Age 43
Mr. Gardner was appointed to our Board of Directors upon completion of our
acquisition by merger of Kinder Morgan (Delaware), Inc. entered into between Mr.
Kinder and us on October 7, 1999, as a designee of Mr. Kinder in accordance with
the governance agreement entered into between Mr. Kinder and us. Mr. Gardner has
been a Managing Partner of First Union Capital Partners and a Senior Vice
President of First Union Corporation since 1990. Mr. Gardner is a director of
Beacon Industrial Group, Xcelerate Inc., U.S. Salt Holdings, COMSYS Holdings,
Naviant, Inc., Vanteon, Inc. and Belenos, Inc. Wheat First Union and First Union
Securities, Inc., both affiliates of First Union Corporation and First Union
Capital Partners, have provided our affiliates investment banking services.
COMMITTEES
How often did our Board meet during fiscal 2000?
Our Board of Directors met eight times during fiscal 2000. Each director
attended more than 75% of the total number of meetings of the Board of Directors
and committees on which he served.
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What committees has our Board established?
Our Board of Directors has a standing Compensation Committee and Audit
Committee. As of January, 20, 2000, the Stock Option Committee is no longer a
standing committee of our Board of Directors.
As of December 31, 2000, the following members of the Board of Directors
were members of the Audit and/or Compensation Committees as indicated in the
table below.
COMPENSATION AUDIT
NAME COMMITTEE COMMITTEE
---- ------------ ---------
Edward H. Austin............................. *
Charles W. Battey............................ *
Stewart A. Bliss............................. **
Ted A. Gardner............................... **
William J. Hybl.............................. *
Richard D. Kinder............................
William V. Morgan............................
Edward Randall, III.......................... * *
Fayez Sarofim................................ *
H. A. True, III.............................. *
---------------
* Member
** Chair
Audit Committee. Our Audit Committee's functions are:
- recommending to our Board of Directors the retention or discharge of our
independent auditors;
- reviewing and approving the engagement of independent auditors to conduct
an audit of us, including the scope, extent and procedures of the audit
and the fees to be paid therefor;
- reviewing, in consultation with the independent auditors, the audit
results and the auditors' proposed opinion letter or audit report and any
related management letter;
- reviewing and approving our audited financial statements;
- consulting with our independent auditors and management, together or
separately, on the adequacy of our internal accounting controls and the
review of the results thereof;
- reviewing the independence of our independent auditors;
- supervising investigations into matters within the scope of the Audit
Committee's duties; and
- performing such other functions as may be necessary or appropriate in the
efficient discharge of the Audit Committee's duties.
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The Audit Committee met three times during fiscal 2000. Three out of the
five members of the Audit Committee are independent as defined and required by
in the New York Stock Exchange listing standards. Our Audit Committee adopted a
charter on April 20, 2000.
Compensation Committee. Our Compensation Committee is charged with the
management and oversight of employee benefit plans approved by our Board of
Directors, employment agreements approved by our Board of Directors and the
compensation of all of our directors, officers and employees. Our Compensation
Committee met four times during fiscal 2000.
RECOMMENDATION
OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE ELECTION OF
ALL THREE NOMINEES FOR CLASS II DIRECTORS.
ITEM 2 -- PROPOSAL TO AMEND AND RESTATE OUR 1992 STOCK
OPTION PLAN FOR NON-EMPLOYEE DIRECTORS
DESCRIPTION OF OUR 1992 STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS
Our Board of Directors adopted our 1992 Stock Option Plan for Non-Employee
Directors, effective January 1, 1992, for a term of 10 years, subject to
stockholder approval. Our stockholders approved the plan at our 1992 annual
meeting. Our Board of Directors adopted amendments to the plan in 1996 to:
- increase the authorized number of shares of common stock issuable
thereunder, as adjusted for a stock split in 1993, from 150,000 to
350,000;
- increase the number of options that may be granted to directors; and
- change the grant date for the options.
Our stockholders approved those amendments at the 1996 Annual Meeting. A
stock split in 1998 increased the shares issuable under our 1992 Stock Option
Plan to 525,000.
On January 20, 2000, our Board of Directors decided to submit to
stockholders the amendment and restatement of the plan at the annual meeting to
approve the following amendments:
- change the administration of our 1992 Stock Option Plan for Non-Employee
Directors to our Compensation Committee;
- increase the number of shares of common stock that may be subject to
options granted to each director after his initial election to our Board
from 3,000 to 20,000;
- increase the number of shares of common stock that may be subject to
options granted to each director on an annual basis from 3,000 to 10,000;
- rename our 1992 Stock Option Plan to reflect our corporate name change;
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- extend the term of our 1992 Stock Option Plan from December 31, 2001 to
December 31, 2009; and
- adopt certain technical amendments regarding the manner of determining
the fair market value of shares subject to options and the adjustment of
options upon certain changes in our capitalization.
Our stockholders approved these amendments at the May 9, 2000 Annual
Meeting.
The purpose of our 1992 Stock Option Plan is to permit us to remain
competitive in attracting and retaining high-caliber members on our Board. Our
Board believes the plan has been successful in this regard, but that in order to
carry out the plan's purpose it is necessary to amend the plan. Accordingly, at
its January 17, 2001 meeting, our Board of Directors decided to submit to
stockholders the amendment of the Plan at the annual meeting.
Our Board of Directors adopted amendments:
- to increase the number of shares of our common stock subject to the plan
to 1,025,000; and
- with respect to options granted on or after January 1, 2001, to allow a
director who no longer serves on our Board of Directors to exercise these
options for a period of up to one year following the date on which the
director's service on the Board terminates.
The following summary of our 1992 Stock Option Plan for Non-Employee
Directors, as amended and restated effective as of January 17, 2001, is
qualified by reference to the full text of our 1992 Option Plan for Non-Employee
Directors which is attached as Appendix A to this proxy statement.
Administration
The Stock Option Committee previously administered our 1992 Stock Option
Plan for Non-Employee Directors. The Stock Option Committee consisted of
directors who were also our employees. As amended, our 1992 Stock Option Plan is
administered by our Compensation Committee of our Board of Directors to permit
our 1992 Stock Option Plan for Non-Employee Directors to comply with Rule 16b-3
under the Exchange Act. Within 30 days after the initial election to our Board
of any person who is not a salaried employee of us, our Compensation Committee
may grant to that person an option to purchase up to 20,000 shares of common
stock. Our Compensation Committee may grant to all eligible directors an option
to purchase up to 10,000 shares of common stock. Our Compensation Committee
determines the number of shares subject to the options granted each year.
The option price, or price per share of common stock subject to an option,
may not be less than either:
- the fair market value of common stock on the date of the grant of the
option or
- the par value of the common stock.
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The fair market value generally is determined to be the closing sale price
reported in The Wall Street Journal for the New York Stock Exchange-Composite
Transactions. The options are exercisable on the date of grant and expire ten
years from the date of grant. Our Compensation Committee also determines whether
an option may be paid in cash or common stock. Options are not transferable
except by will or the laws of descent and distribution. However, our
Compensation Committee may in its discretion, upon written request by a
director, allow a director to transfer an option to a family partnership or
other estate planning arrangement or to a charity.
Our Compensation Committee is authorized to interpret our 1992 Stock Option
Plan for Non-Employee Directors and options granted under our 1992 Stock Option
Plan for Non-Employee Directors and to determine the number of shares to be
subject to options granted annually to the directors. Our Board of Directors may
amend our 1992 Stock Option Plan for Non-Employee Directors without stockholder
approval, unless such approval is required by law or stock exchange
requirements. Our Board of Directors may terminate our 1992 Stock Option Plan at
any time. No options may be granted under the plan after December 31, 2009.
Shares Available
The aggregate number of shares of our common stock which may be issued
under our 1992 Stock Option Plan for Non-Employee Directors with respect to
options may not exceed 1,025,000. Our 1992 Stock Option Plan for Non-Employee
Directors provides for appropriate adjustments or other action to reflect:
- mergers;
- consolidations;
- recapitalizations;
- certain sales of assets;
- combinations of shares;
- change in control of us through share ownership or a contested election
of directors;
- changes in corporate structure;
- stock splits;
- stock dividends; or
- certain other significant changes in the common stock.
Lapsed or canceled options will not count against this limit and can be
regranted under the plan. The shares issued under the plan may be issued from
shares held in treasury or from authorized but unissued shares.
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Participation
Directors who are our full-time employees are not eligible to participate
in our 1992 Stock Option Plan for Non-Employee Directors. Thus, eight directors
will be eligible to participate.
Federal Income Tax Consequences
The Internal Revenue Code provides that a participant receiving a
nonqualified option ordinarily does not realize taxable income upon the grant of
the option. A participant does, however, realize ordinary income upon the
exercise of a nonqualified option. The amount of ordinary income realized is
equal to the amount that the fair market value of the common stock on the date
of exercise exceeds the option price. We are entitled to a federal income tax
deduction for compensation in an amount equal to the ordinary income realized by
the participant, provided that we withhold federal income tax with respect to
the amount of such compensation. When the participant sells shares acquired
pursuant to a nonqualified option, any gain or loss will be capital gain or
loss. This assumes, however, that the shares represent a capital asset in the
participant's hands, although there will be no tax consequences for us.
Additional Information
If the stockholders do not approve our 1992 Stock Option Plan for
Non-Employee Directors as amended and restated, we intend to continue to grant
options under our 1992 Stock Option Plan for Non-Employee Directors as currently
in effect or as may be amended from time to time by our Board of Directors to
the extent such amendments do not require stockholder approval.
We granted no options under the 1992 Stock Option Plan in 2000. Effective
January 2, 2001, we granted an option to purchase 10,000 shares of our stock to
each of our non-employee directors.
RECOMMENDATION
Not all of the important information about our 1992 Stock Option Plan for
Non-Employee Directors is contained in the foregoing summary. The full text of
the amended and restated plan is attached to this proxy statement as Appendix A.
You may obtain a copy of our public filings without charge by following the
instructions in the section entitled "How I can find more information about
Kinder Morgan?" on page 4 of this proxy statement.
This proposal will be approved by the favorable vote of a majority of our
outstanding shares of common stock present at the annual meeting, in person or
by proxy.
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OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE PROPOSAL TO
AMEND AND RESTATE THE 1992 STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS.
ITEM 3 -- PROPOSAL TO RATIFY AND APPROVE THE SELECTION OF PRICEWATERHOUSECOOPERS
LLP AS OUR INDEPENDENT AUDITORS
We have selected PricewaterhouseCoopers LLP as our independent auditors for
the fiscal year ending December 31, 2001. PricewaterhouseCoopers LLP has served
as our independent auditors since November 22, 1999. Prior to that, Arthur
Anderson LLP served as our independent auditors for fiscal 1999. Services
provided to us and our subsidiaries by PricewaterhouseCoopers LLP in fiscal 1999
included the examination of our consolidated financial statements, limited
reviews of quarterly reports, services related to filings with the Securities
and Exchange Commission, services in connection with consultations on various
tax, information services and business process matters.
Representatives of PricewaterhouseCoopers LLP will be present at the annual
meeting to respond to appropriate questions and to make such statements as they
may desire.
RECOMMENDATION
OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE PROPOSAL TO
RATIFY AND APPROVE OF THE SELECTION OF PRICEWATERHOUSECOOPERS LLP AS OUR
INDEPENDENT AUDITORS.
In the event stockholders do not ratify the appointment, the selection will
be reconsidered by our Audit Committee and our Board of Directors.
OTHER MATTERS
As of the date of this proxy statement, we know of no business that will be
presented for consideration at the annual meeting other than the items referred
to above. If any other matter is properly brought before the meeting for action
by stockholders, proxies in the enclosed form returned to us will be voted in
accordance with the recommendation of our Board of Directors or, in the absence
of such a recommendation, in accordance with the judgment of the proxy holder.
ADDITIONAL INFORMATION
Stockholder Proposals for the 2002 Annual Meeting
Stockholders interested in submitting a proposal for inclusion in the proxy
materials for our annual meeting of stockholders in 2002 may do so by following
the procedures prescribed in Rule l4a-8 under the Exchange Act. To be eligible
for inclusion, stockholder proposals must be received by our Corporate Secretary
no later than December 5, 2001.
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROXY STATEMENT. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU
WITH DIFFERENT INFORMATION. THIS PROXY STATEMENT IS DATED APRIL 4, 2001. YOU
SHOULD ASSUME THAT THE INFORMATION CONTAINED IN THIS PROXY STATEMENT IS ACCURATE
AS OF THAT DATE ONLY. OUR BUSINESS, FINANCIAL CONDITION, RESULTS OF OPERATIONS
AND PROSPECTS MAY HAVE CHANGED SINCE THAT DATE.
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APPENDIX A
KINDER MORGAN, INC.
AMENDED AND RESTATED 1992 STOCK OPTION PLAN
FOR NON-EMPLOYEE DIRECTORS
(EFFECTIVE JANUARY 17, 2001)
1. Purpose of the Plan: This Plan is an amendment and restatement of the
K N Energy, Inc. 1992 Stock Option Plan for Non-Employee Directors, as amended.
The purpose of the Kinder Morgan, Inc. Amended and Restated 1992 Stock Option
Plan for Non-Employee Directors (the "Plan") is to promote the interests of
Kinder Morgan, Inc., a Kansas corporation (the "Company"), and its stockholders
by increasing the potential compensation of the non-employee members of the
Company's Board of Directors (the "Board"), thereby assisting the Company in its
efforts to attract well-qualified individuals to serve as its directors and to
retain their services. Options granted under this Plan are intended to
constitute nonqualified stock options (options that do not qualify as incentive
stock options within the meaning of section 422(b) of the Internal Revenue Code
of 1986, as amended (the "Code")), and the Plan shall be construed so as to
carry out that intention.
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. The interpretation by the Committee of the Plan and of options granted
under the Plan shall be conclusive upon all participants.
3. Shares Subject to the Plan: Effective January 17, 2001, subject to
stockholder approval at the 2001 annual stockholders meeting, the aggregate
number of shares of the Company's Common Stock, $5 par value per share ("Common
Stock"), which may be issued under options granted under the Plan shall not
exceed 1,025,000, subject to adjustment as provided in Paragraph 5. In the event
that stockholder approval is not obtained, the aggregate number of shares of
Common Stock which may be issued under options granted under the Plan shall not
exceed 525,000, subject to adjustment as provided in Paragraph 5. Shares issued
under the Plan may be either authorized and unissued shares or treasury shares.
Shares subject to, but not delivered under, any option terminating or expiring
for any reason prior to exercise thereof, shall thereafter be available for
issuance upon exercise of any other option under the Plan granted on or prior to
December 31, 2009.
4. Number of Shares to be Granted Each Eligible Director:
a. Within thirty (30) days after initial election to the Board by the
Company's stockholders, the Committee shall grant to each director an
option for a number of shares equal to the number of shares authorized by
the Committee, not to exceed 20,000 shares per calendar year.
b. If an individual is elected by the Board to fill an unexpired term
or vacancy on the Board, the Committee shall, within thirty (30) days of
such election, grant to such director an option for a number of shares not
to exceed 20,000.
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c. Effective October 19, 2000, at any time, the Committee, in its
discretion, may grant to each director an option for a particular calendar
year not to exceed 10,000 shares. If such grant is made prior to the annual
stockholders meeting for the calendar year to which such grant relates,
notwithstanding Section 8 hereof, an option under such grant may not be
exercised until the first business day after the annual stockholders
meeting for such calendar year ("Vesting Date"); provided, however, that if
an individual to whom an option is granted pursuant to this paragraph is
not a director on the option's Vesting Date, such option shall immediately
expire and may not be exercised.
5. Adjustment: Appropriate adjustments in the maximum number of shares of
Common Stock issuable pursuant to the Plan, the number and the purchase price of
shares covered by outstanding options granted under the Plan and the maximum
number of shares that may be subject to each grant of options under Paragraph 4
shall be made to give effect to any stock splits, stock dividends or other
relevant changes in the capitalization of the Company occurring after the date
of adoption of the Plan and any amendments to the Plan by the Board. The
decision of the Board as to the amount and timing of any such adjustments shall
be conclusive. In the event of any merger, consolidation or other reorganization
of the Company with any other corporation or corporations in which the Company
is not the survivor, there shall be substituted for each share of Common Stock
then subject to the Plan, whether or not at the time subject to outstanding
options, the number and kind of shares of stock, or other securities into which
each outstanding share of Common Stock of the Company shall be converted by such
merger, consolidation or reorganization. In the event of any other relevant
change in the capitalization of the Company, the Board shall provide for an
equitable adjustment in the number of shares of Common Stock then subject to the
Plan, whether or not then subject to outstanding options, and the maximum number
of shares to be subject to each grant of options under Paragraph 4 shall also be
adjusted. In the event of any such adjustment, the purchase price per share
shall be proportionately adjusted as necessary.
6. Eligible Non-Employee Directors: Options shall be granted to all
elected directors of the Company who are not salaried employees of the Company.
7. Option Price: The purchase price to be paid for each share of Common
Stock deliverable upon exercise of any option shall be determined by the
Committee in its discretion at or prior to the time the option is granted, but
shall not be less than one hundred percent (100%) of the fair market value of
the Common Stock on the date the option is granted or less than the par value of
the shares subject to the option. The fair market value per share on any given
date shall be the closing price per share of Common Stock on the New York Stock
Exchange on such date.
8. Option Period and Condition of Exercise: A director receiving an
option pursuant to the Plan may purchase the shares issuable thereunder,
commencing on the date of grant. Each option shall cease to be exercisable upon
the expiration of a period of ten (10) years from the date of grant. To the
extent an option may be exercised pursuant to the foregoing, it may be exercised
in whole at any time, or in part from time to time. An option may be exercised
by giving written notice to the Company addressed to the attention of the Senior
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Vice President of Human Resources and Administration (i) specifying the number
of shares to be purchased and accompanied by payment therefor in full in cash
or, in the sole discretion of the Committee, in full or in part, in shares of
Common Stock of the Company at their fair market value at the close of business
on the date of exercise determined in the manner consistent with Paragraph 7,
and (ii) unless the Company consents to the contrary, representing that all
shares purchased are being acquired for investment and not with a view to, or
for resale in connection with, any distribution of said shares (except in the
case of a purchase by the executors or administrators under Paragraph 10, for
distribution to the director's legal heirs, legatees or other testamentary
beneficiaries, but not for sale).
9. Options Not Transferable: No option granted under the Plan shall be
transferable otherwise than by will or the laws of descent and distribution and
shall be exercisable, during his or her lifetime, only by the director to whom
an option is granted. Except as permitted by the preceding sentence, no option
or any right thereunder shall be transferred, assigned, pledged or hypothecated
in any way (whether by operation of law or otherwise) or be subject to
execution, attachment or similar process. Upon any attempt so to transfer,
assign, pledge, hypothecate or otherwise dispose of, or be subject to execution,
attachment or similar process, any option, or of any right thereunder, contrary
to the provisions hereof, such option and all rights thereunder shall
immediately become null and void. Notwithstanding the foregoing, if a director
obtains the approval of the Committee after making a request to the Committee in
writing, a director may transfer or assign an option to a family partnership or
other estate planning arrangement, or to a charity.
10. Termination of Board Membership or Death:
a. If the membership on the Board of a director to whom an option has
been granted is terminated for any reason other than his or her death, such
option may be exercised by the terminated director at any time prior to the
end of the calendar year in which it was granted, or within three (3)
months after the termination, whichever is longer (but in no event after
the expiration of ten (10) years from the date of the grant thereof with
respect to all or any part of the number of shares remaining subject to the
option.)
b. If the membership on the Board of a director to whom an option has
been granted is terminated by reason of his or her death, such director's
option shall be exercisable by his or her estate or the person or persons
who acquire the right to exercise such option by bequest or inheritance at
any time within one (1) year after the date of death to the extent the
director was entitled to exercise the option at the time of his or her
death (but in not event after the expiration of a period of ten (10) years
from the date of grant) with respect to all or any part of the number of
shares remaining subject to the option.
c. Subject to stockholder approval at the 2001 annual stockholders
meeting, notwithstanding paragraphs a. and b., for all Options granted on
or after January 17, 2001, if the membership on the Board of a director to
whom an option has been granted is terminated for any reason, such option
may be exercised by the terminated director (or, in the case of death, by
his or her estate or the person or persons who acquire the right to
exercise such option by bequest or inheritance) at any time within
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one (1) year after the date of termination to the extent the director was
entitled to exercise the option at the time of termination (but in no event
after the expiration of a period of ten (10) years from the date of grant)
with respect to all or any part of the number of shares remaining subject
to the option.
11. Listing and Registration of Shares: Each option shall be subject to
the requirement that, if at any time the Board determines, in its discretion,
that the listing, registration or qualification of the shares to such option
upon any securities exchange or under any state or federal law, or the consent
or approval of any governmental regulatory body, is necessary or desirable as a
condition of, or in connection with, the issue or purchase of shares thereunder,
such option may not be exercised in whole or in part unless such listing,
registration, qualification, consent or approval shall have been effected or
obtained and the same shall have been free of any conditions not acceptable to
the Board. The Company may require that certificates evidencing shares issued
upon the exercise of any option bear an appropriate legend indicating that the
sale, transfer or other disposition thereof by the holder is prohibited unless
such shares have been registered under the Securities Act of 1933, as amended,
for transfer in accordance with the intended method of distribution or the
Company shall have been furnished with an opinion of counsel satisfactory to it
to the effect that such registration is not required.
12. Administration: Subject to the provisions of the Plan, the Committee
shall be authorized to interpret the Plan and the options granted under 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 or in any option in the manner and to the extent it shall deem desirable to
carry it into effect. The determinations of the Committee on the matters
referred to in this paragraph shall be conclusive on all parties.
13. Federal Income Tax Consequences: The following summary is intended
only as a general guide as to the United States federal income tax consequences
under the current law with respect to participation in the Plan, and does not
attempt to describe all possible federal or other tax consequences of such
participation. Participants should consult their own tax advisors prior to the
exercise of any option and prior to the disposition of any shares of Common
Stock acquired upon the exercise of an option.
There are no federal income tax consequences to an optionee upon the grant
of an option which does not constitute an incentive stock option ("Nonincentive
Stock Option") within the meaning of Section 422 of the Code. Generally, upon
the exercise of a Nonincentive Stock Option, the optionee will realize ordinary
income in the year of exercise, in an amount equal to the excess of the fair
market value of the shares on the date of exercise over the option price. Upon a
subsequent disposition of the shares received upon exercise of a Nonincentive
Stock Option, any difference between the amount received for the stock and the
basis of the stock (option price plus any ordinary income recognized) will be
treated as long-term or short-term capital gain or loss, depending on the
holding period of the shares. Upon an optionee's exercise of a Nonincentive
Stock Option, the Company
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will usually be entitled to claim a deduction at the same time and in the same
amount as income is recognized to the optionee.
Each optionee shall, no later than the date as of which an amount related
to an option first becomes includable in the gross income of the optionee for
federal income tax purposes, pay to the Company, or make arrangements
satisfactory to the Committee regarding payment of any federal, state, 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 Common Stock or any other arrangement satisfactory to the Committee. The
Company and its subsidiaries 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
optionee.
The Plan is not qualified under Section 401(a) of the Code. The United
States Department of Labor has not yet issued definitive regulations or other
authority regarding the applicability of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), to stock option plans such as the Plan.
Subject to the issuance or regulations or other authority to the contrary, the
Company believes the Plan is not subject to any provisions of ERISA.
14. Effective Date: This Plan was originally effective on January 1, 1992
and was amended and restated effective January 20, 2000. This Plan, as further
amended and restated, shall be effective on January 17, 2001, which is the date
on which the Board of Directors adopted this amended and restated Plan, subject
to the approval of the stockholders of the Company at the 2001 annual meeting.
Unless terminated sooner pursuant to Paragraph 17, this Plan shall terminate on
December 31, 2009.
15. No Right to Continue as a Director: Nothing contained in the Plan or
any agreement hereunder will confer upon any optionee any right to continue to
serve as a director of the Company.
16. No Stockholder Rights Conferred: Nothing contained in the Plan or any
agreement hereunder will confer upon any optionee (or any person or entity
claiming rights by or through a optionee) any rights of a stockholder of the
Company unless and until an option is validly exercised in accordance with the
terms hereof.
17. 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 to the extent
necessary and desirable to comply with the Code or any other applicable law or
regulation, including the requirements of any stock exchange on which the Common
Stock is listed or quoted, no such action of the Board shall be taken without
approval of the Company's stockholders in such manner and to such degree as is
required by the applicable law or regulation.
No suspension, termination, modification or amendment of the Plan may,
without the consent of an optionee, adversely affect his or her rights with
respect to options theretofore granted to such optionee.
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18. 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, and as conclusive evidence of the adoption of the
foregoing by the Board, Kinder Morgan, Inc. has caused these presents to be duly
executed in its name and behalf by its proper officers thereunto duly authorized
as of this 17th day of January, 2001.
KINDER MORGAN, INC.
By: /s/ JOSEPH LISTENGART
------------------------------------
Name: Joseph Listengart
------------------------------------
Title: Vice President, General
Counsel and Secretary
------------------------------------
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Please mark your votes as in this example.
The Board of Directors unanimously recommends a vote FOR each of the following
proposals:
FOR WITHHELD
1. Election of Directors
For, except vote withheld from the following nominee(s):
Nominees: 01. Charles W. Battey
02. Fayez Sarofim
03. H.A. True, III
2. A proposal to amend our 1992 Nonqualified Stock Option Plan for Non-Employee
Directors;
3. A proposal to ratify and approve the selection of PricewaterhouseCoopers LLP
as our auditors for 2001.
Check this box if you have comments or a change of address and use the back of
this card.
Check this box if you want to attend and vote at the meeting.
---------------------- ----------------------
---------------------- ----------------------
SIGNATURE(S) DATE
NOTE: Your signature should conform with your name as printed above.
Detach Proxy Card Here If You Are Voting by Mail and Return in Enclosed Envelope
--------------------------------------------------------------------------------
KINDER MORGAN, INC. - ANNUAL MEETING - May 8, 2001
KINDER MORGAN, INC. NOW OFFERS PHONE OR INTERNET VOTING
24 hours a day, 7 days a week
On a touch-tone phone call toll-free 1-877-PRX-VOTE (1-877-779-8683). You will
hear these instructions.
o Enter the last four digits from your social security number.
o Enter the control number from the box above, just below the perforation.
o You will then have two options:
OPTION 1: To vote as the Board of Directors recommends on the
proposals; or
OPTION 2: To vote on the proposals separately.
o Your vote will be repeated to you and you will be asked to confirm it.
Log onto the Internet and type http://www.eproxyvote.com/kmi
o Have your proxy card ready and follow the instructions.
o You will be able to elect to receive future mailings via the Internet.
Your electronic vote authorizes the proxies named on the reverse side of this
card to vote your shares to the same extent as if you marked, signed, dated and
returned the proxy card.
If you have voted by phone or Internet, please do not return the proxy card.
41
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF KINDER MORGAN,
INC.
The undersigned, whose signature appears on the reverse, hereby appoints RICHARD
D. KINDER and JOSEPH LISTENGART and each of them, proxies with full power of
substitution for and in the name of the undersigned to vote all the shares of
Common Stock of KINDER MORGAN, INC. which the undersigned would be entitled to
vote if personally present at the Annual Meeting of Stockholders to be held on
May 8, 2001, and at any and all adjournments thereof, on all matters that may
properly come before the meeting.
Your shares will be voted as directed on this card. If signed and no direction
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