KMP Non-Employee Directors Common Unit Compensation Plan




Exhibit 10.2


KINDER MORGAN ENERGY PARTNERS, L.P.

COMMON UNIT COMPENSATION PLAN

FOR NON-EMPLOYEE DIRECTORS

(Effective as of January 18, 2005)





     1.    Purpose
of the Plan.  Kinder Morgan Energy Partners, L.P. (the
"Partnership"), as a limited partnership, has a general partner rather than a
board of directors. Through the operation of its limited partnership agreement and the
Delegation of Control Agreement among the Partnership, Kinder Morgan G.P., Inc. (the
"General Partner"), Kinder Morgan Management, LLC (the "Company") and
others, the board of directors of the Company (the "Board") functions as the
board of the Partnership. The Kinder Morgan Energy Partners, L.P. Common Unit Compensation
Plan for Non-Employee Directors (the "Plan") is intended to promote the
interests of the Partnership and its unitholders by aligning the compensation of the
non-employee members of the Board with unitholders' interests. Because the success of the
Company is dependent on its operation and management of the Partnership and its resulting
performance, the Plan is also expected to align the compensation of the non-employee
members of the Board with the interests of the Company's shareholders.



     2.    Compensation Committee.  The
Plan shall be administered by the Compensation Committee of the Board (the
"Committee"), which shall be constituted so as to permit the Plan to comply with
Rule 16b-3 promulgated by the Securities and Exchange Commission under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). Subject to the provisions
of the Plan, the Committee shall be authorized to interpret the Plan, to establish, amend
and rescind such rules and regulations as it deems necessary for the proper administration
of the Plan, and to make all other determinations necessary or advisable for its
administration. The Committee may correct any defect or supply any omission or reconcile
any inconsistency in the Plan in the manner and to the extent it shall deem desirable to
carry it into effect. The interpretation by the Committee of the Plan shall be conclusive
upon all participants.



     3.    Eligible
Participants.  Only directors of the Company who are not salaried employees
of the Company or of an affiliate of the Company (each, a "Non-Employee
Director") are eligible to participate in the Plan.



     4.    Units
Subject to the Plan.  The aggregate number of the Partnership's common units
representing limited partner interests ("Common Units") which may be issued
under the Plan shall not exceed 100,000, subject to adjustment as provided in Paragraph 7.
Common Units issued under the Plan shall be authorized and unissued Common Units. The
Partnership shall register with the Securities and Exchange Commission the issuance of the
Common Units subject to the Plan.



     5.    Awards.  The
compensation to be paid to Non-Employee Directors is fixed by the Board, generally
annually. That compensation is expected to include an annual retainer payable in cash. It
also may include other cash compensation ("Cash Compensation") that may be used
as provided in this Plan. In lieu of receiving such Cash Compensation in cash, a
Non-Employee Director may elect to receive such Cash Compensation in the form of Common
Units as provided herein. Such election shall be evidenced by an agreement (the
"Common Unit 


 






Compensation Agreement") between the Partnership and
such Non-Employee Director, which agreement shall contain the terms and conditions of such
award. Such election shall be made generally at or around the first Board meeting in
January of each calendar year and will be effective for the entire calendar year. A
Non-Employee Director shall make a new election each calendar year.


     6.    Number of Common Units to be Issued.  The
number of Common Units to be issued to a Non-Employee Director electing to receive his or
her Cash Compensation in the form of Common Units shall equal the Cash Compensation
awarded, divided by the closing price of the Common Units on the New York Stock Exchange
on the day the Cash Compensation is awarded (such price, the "Fair Market
Value"), rounded down to the nearest fifty (50) Common Units. The Common Units shall
be issuable as specified in the Common Unit Compensation Agreement. A Non-Employee
Director electing to receive his or her Cash Compensation in the form of Common Units
shall receive cash (the "Cash Payment") equal to the difference between (i) the
Cash Compensation awarded to such Non-Employee Director and (ii) the number of Common
Units to be issued to such Non-Employee Director multiplied by the Fair Market Value of a
Common Unit. For illustrative purposes only, if a Non-Employee Director elected to receive
an award of Cash Compensation of $100,000 in the form of Common Units, and the Fair Market
Value of the Common Units was $44.50, the Non-Employee Director would receive 2,200 Common
Units ($100,000/$44.50 = 2,247.19 Common Units, rounded down to the nearest 50 Common
Units) and a Cash Payment of $2,100 ($100,000 - (2,200 X $44.50)). The Cash Payment shall
be payable in four equal installments on the March 31, June 30, September 30 and December
31 of the calendar year in which such Cash Compensation is awarded.



     7.    Adjustment.  In
the event of a merger, reorganization, consolidation, recapitalization, separation,
liquidation, unit dividend, unit split or other change in the structure of the Partnership
affecting the Common Units, such adjustment shall be made in the number of Common Units
available under the Plan, as may be determined to be appropriate and equitable by the
Board, in its sole discretion, to prevent dilution or enlargement of rights.



     8.    Restrictions
on Resale.  Any Common Units acquired by a Non-Employee Director under this
Plan may only be sold pursuant to an effective registration statement or pursuant to an
exemption from the Securities Act of 1933, including sales pursuant to Rule 144
thereunder. The Committee may, in its sole discretion, impose additional restrictions on
disposition by the Non-Employee Director and an obligation of the Non-Employee Director to
forfeit and surrender the shares to the Partnership under certain circumstances
("Forfeiture Restrictions"). Such restrictions shall be set forth in the Common
Unit Compensation Agreement. The Partnership may place a legend on the certificates for
such Common Units evidencing these restrictions.



     9.    Change
in Control.  Upon the occurrence of a Change in Control (as defined below),
the Committee may take any action with respect to Common Units issued but still subject to
Forfeiture Restrictions that it deems appropriate, including but not limited to causing
such Forfeiture Restrictions to lapse; provided, however, that if a Change in Control
occurs and, in connection with or as a result of such Change in Control, Richard D. Kinder
no longer holds or does not continue to hold the office of Chairman of the Company, to the
extent any Common Units are subject to Forfeiture Restrictions, such Forfeiture
Restrictions shall lapse, and the 


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Partnership shall thereupon deliver or cause to be delivered to each
Non-Employee Director or legal representative the certificate or certificates for such
Common Units, free of any legend provided in Section 8. As used herein, the term
"Change in Control" shall mean the occurrence of any of the following events:



     (a)   any
"person," as such term is used in Section 13(d) and 14(d) of the Exchange Act
(other than Kinder Morgan, Inc., Kinder Morgan (Delaware), Inc., the General Partner or
any corporation or other entity owned, directly or indirectly, by Kinder Morgan, Inc.), is
or becomes the "beneficial owner" (as defined in Rule 13d-3 promulgated under
the Exchange Act), directly or indirectly, of fifty percent (50%) or more of the voting
stock of the General Partner or of the voting shares of the Company;



     (b)   during
any period of two consecutive years (not including any period prior to the effective date
of the Plan), individuals who at the beginning of such period constitute the Board, and
any new director elected to the Board by the General Partner during such two year period,
cease for any reason other than normal retirement, death or disability to constitute at
least a majority of the Board;



     (c)   the
General Partner ceases to be the sole general partner of the Partnership or the Company
ceases to be the delegate of the General Partner under the Delegation of Control
Agreement; 



     (d)   the
unitholders of the Partnership approve a merger or consolidation of the Partnership with
any other person, other than a merger in which the Partnership is the surviving entity; or



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



     10.    Tax
Withholding.  To the extent required by applicable federal, state and local
law, a Non-Employee Director shall make arrangements satisfactory to the Partnership for
the payment of any withholding tax obligations that arise in connection with the Plan. The
Partnership shall not be required to issue any Common Units under the Plan until such
obligations are satisfied. 



     11.    Effective
Date and Term.  This Plan shall be effective on January 18, 2005. Unless
terminated sooner pursuant to Paragraph 13, this Plan shall terminate on December 31,
2014.



     12.    No
Right to Continue as a Director.  Nothing contained in the Plan or any
agreement hereunder will confer upon any participant in the Plan any right to continue to
serve as a director of the Company or any right to receive compensation other than as
fixed by the Board from time to time. 



     13.    No
Unitholder Rights Conferred.  Nothing contained in the Plan or any agreement
hereunder will confer upon any participant in the Plan any rights of a unitholder of the 


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Partnership unless and until a Common Unit is validly issued to such
participant in accordance with the terms hereof.



     14.    Termination,
Amendment and Modification of Plan.  The Board may at any time terminate or
suspend, and may at any time and from time to time and in any respect amend or modify, the
Plan; provided, however, that if any applicable law or regulation or the requirements of
any stock exchange on which the Common Units are listed or quoted requires that any such
amendment or modification must be approved by the Partnership's unitholders, the Board
shall not make any such modification or amendment without approval of the Partnership's
unitholders in such manner and to such degree as is required by the applicable law,
regulation or stock exchange requirement.



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


 


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     IN WITNESS WHEREOF, and as
conclusive evidence of the adoption of the foregoing, the Partnership has caused this Plan
to be duly executed as of this ___ day of January, 2005.


	  	KINDER MORGAN ENERGY PARTNERS, L.P.



	  		
	  	By:	Kinder Morgan G.P., Inc.,

    its general partner



	  			
	  	  	By:	Kinder Morgan Management, LLC,

    its delegate



	  			

      	
	  	  	  	By:	  
	  	  	  	  	Name:	  
	  	  	  	  	Title:	  



  


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