kmiex10_1.htm


    Exhibit
10.1

    ANNUAL
INCENTIVE PLAN

    OF

    KINDER
MORGAN, INC.

    


    


    ARTICLE
1.

    GENERAL

    


    1.1           Purpose

    


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

    


    1.2           Administration
Of The Plan

    


    Except
as otherwise provided herein, the Plan shall be administered by the Chief
Manager (as defined in the Amended and Restated Limited Liability Company
Agreement of Kinder Morgan Holdco LLC (“Holdco”), dated as of May 30, 2007, as
amended (the "LLC Agreement")) of Holdco; provided, however that if there is no
Chief Manager as a result of the occurrence of a “Management Rights Termination
Event” (as defined in the LLC Agreement), the Board of Managers (as defined in the LLC
Agreement) of Holdco (or the Compensation Committee thereof, if the Compensation
Committee has been given such authority by the Board of Managers) shall
administer the Plan and the matters contemplated under it.  As
applicable, the Chief Manager, the Board of Managers or the Compensation
Committee, as
administrator, shall be referred to herein as the "Committee."  The
Committee shall have authority, subject to the provisions of the Plan, in its
discretion, to grant awards ("Awards") under the Plan, to interpret conclusively
the provisions of the Plan, to adopt such rules and regulations for carrying out
the Plan as it may deem advisable, to decide conclusively all questions of fact
arising in the application of the Plan, and to make all other determinations
necessary or advisable for the administration of the Plan.  All
decisions and acts of the Committee shall be final and binding upon all Eligible
Employees, Plan Participants and beneficiaries.  No member of the
Committee shall be liable for any action taken, or determination made, in good
faith.

    


    1.3           Eligibility

    


    "Eligible
Employee" means any employee of the Company or its subsidiaries, except (i) an
employee who is included in a unit of employees covered by a collective
bargaining agreement unless such agreement expressly provides for eligibility
under this Plan, and (ii) a director who is not an employee of the Company or
its subsidiaries.  The Chairman and Chief Executive Officer of the
Company ("Chairman") and all employees identified by the Chairman who report
directly to the 


    
      
         


      

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

    


    1.4           Awards
Under The Plan

    


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

    


    1.5           Other
Compensation Programs

    


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

    


    ARTICLE
2.

    TERMS
AND CONDITIONS OF AWARDS

    


    2.1           Executive
Plan

    


    (a)           Establishment
Of Performance Goals And Bonus Opportunity

    


    Prior
to or within 90 days after the commencement of each Performance Year, the
Committee shall establish written Performance Goals and a Bonus Opportunity for
each Award granted to a Participant in the Executive Plan for such Performance
Year.  The Performance Goals shall be based on criteria established by
the Committee, including but not limited to one or more of the
following:

    


    (1)           Company
earnings per share;

    


    
      	
               
      

            	
              (2)

            	
              Company
      or subsidiary cash distributions to shareholders or common
      unitholders;

            


    

    


    
      	
               
      

            	
              (3)

            	
              Company
      or subsidiary earnings before interest and taxes or earnings before
      interest, taxes and corporate
charges;

            


    

    


    (4)           Company
or subsidiary net income;

    


    (5)           Company
or subsidiary revenues;

    


    (6)           Company
or subsidiary unit revenues minus unit variable costs;


    
      
         


      

      
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              (7)

            	
              Company
      or subsidiary return on capital, return on equity, return on assets, or
      return on invested capital;

            


    

    


    
      	
               
      

            	
              (8)

            	
              Company
      or subsidiary cash flow, return on assets or cash flows from operating
      activities;

            


    

    


    (9)           Company
or subsidiary capital expenditures;

    


    
      	
               
      

            	
              (10)

            	
              Company
      or subsidiary operations and maintenance expense or general and
      administrative expense;

            


    

    


    (11)           Company
or subsidiary debt-equity ratios and key profitability ratios; and

    


    (12)           Company
stock price.

    


    At
the time of establishing the Performance Goals, the Committee shall specify (i)
the formula to be used in calculating the compensation payable to a Participant
if the Performance Goals are obtained, and (ii) the individual employee or class
of employees to which the formula applies.  The Bonus Opportunity
shall be expressed as an amount of cash. The Committee may also specify a
minimum acceptable level of achievement of the relevant Performance Goals, as
well as one or more additional levels of achievement, and a formula to determine
the percentage of the Bonus Opportunity deemed to have been earned by the
Participant upon attainment of each such level of achievement, which percentage
may exceed 100%.  The Performance Goals and Bonus Opportunity relating
to any particular Award need not be the same as those relating to any other
Award, whether made at the same or a different time.  Notwithstanding
the terms of any Award, the maximum payout under this Plan to any individual for
any Performance Year shall not exceed $3,000,000.

    


    (b)           Performance
Year

    


    The
Performance Year with respect to an Executive Plan Award shall be the calendar
year within which the Performance Goals relating to that Award are to be
achieved.

    


    (c)           Earning
Of Award

    


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

    


    2.2           Non-Executive
Plan

    


    (a)           Performance
Year


    
      
         


      

      
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    The
Performance Year for the Non-Executive Plan shall be the calendar year
applicable to the Executive Plan except that, for non-exempt Eligible Employees,
the Performance Year shall be the period containing all time worked and used to
determine pay beginning November 1 of the prior calendar year and ending October
31 of the calendar year applicable for the Executive Plan.

    


    (b)           Determination
of Award

    


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

    


    2.3           Discretionary
Downward Adjustments

    


    At
any time after an Award has been granted but before the Award has been paid, the
Committee, in its sole and absolute discretion, may reduce or eliminate the
Award granted to any Participant for any reason or for no reason, including, but
without limitation, the Committee's judgment that the Performance Goals have
become an inappropriate measure of achievement, a change in the employment
status, position or duties of the Participant, unsatisfactory performance of the
Participant, or the Participant's service for less than the entire Performance
Year, for example. The reduction or elimination of an Award for a Participant
may not increase the amount of an Award to another Participant.

    


    2.4           Distributions

    


    As
soon as administratively feasible after the Committee has (i) determined the
extent to which the Bonus Opportunity relating to an Award under the Executive
Plan has been earned pursuant to Section 2.1(c), or (ii) granted an Award under
the Non-Executive Plan, such Award shall be distributed in one lump sum either
in cash or in such other form of payment (for example, equity) that the
Committee, in its discretion, may determine, provided that no such other form
shall result in a deferral of compensation to which Section 409A of the Internal
Revenue Code of 1986, as amended, applies.

    


    2.5           Change
In Control

    


    Notwithstanding
any other provision of this Plan (other than in the last sentence of this
Section 2.5) or contained in any Award granted hereunder (including any
provision for deferred payment thereof), upon the occurrence of a Change in
Control (as defined in Section 3.6), the Committee, in its discretion, may
take any action with respect to outstanding Awards that it deems appropriate,
which action may vary among Awards granted to individual
Participants.  In the event that such action is to distribute an
Award, the Award shall be distributed in a lump sum no 


    
      
         


      

      
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    later
than 30 days after the Change in Control.  If a Change in Control
occurs and, in connection with or as a result of such Change in Control, Richard
D. Kinder no longer holds or does not continue to hold the office of Chairman of
the Company, each Participant under the (i) Executive Plan shall be deemed to
have earned 100% of the Bonus Opportunities contained in any outstanding Awards
for which the determination described in Section 2.1(c) has not been made,
or, if such determination described in Section 2.1(c) has been made, the full
amount of the portion of the Bonus Opportunity which was determined to have been
earned, (ii) Non-Executive Plan shall be deemed to have earned an Award equal to
the Award most recently paid to such Participant under the Plan (or, if no
Awards have yet been paid under the Plan, an Award equal to the award paid to
such Participant for 2009 under the prior Annual Incentive Plan), and (iii) the
amount of such Bonus Opportunities or Awards under (i) or (ii), as applicable,
shall be paid promptly (and no later than 30 days after the Change in Control)
in a cash lump sum.

    


    2.6           Termination
of Employment

    


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

    


    ARTICLE
3.

    ADDITIONAL
PROVISIONS

    


    3.1           Amendments

    


    The
Board of Directors may, in its sole discretion, amend the Plan from time to time
or terminate the Plan at any time.  Any such amendment may be made
without stockholder approval unless required to satisfy any applicable laws or
securities exchange rules. Notwithstanding this or any other provision of this
Plan to the contrary, in connection with a Change in Control (a) neither the
Committee nor the Board of Directors may adjust any Award in effect immediately
prior to such Change in Control in a manner adverse to the Participant, and (b)
the Board of Directors may not amend the provisions of this Plan relating to
such Change in Control or any such Award in a manner adverse to a Participant,
in either case without the consent of the affected Participant.

    


    3.2           Withholding

    


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

    


    3.3           Non-Assignability;
Death Of Participant

    


    No
Award under the Plan shall be assignable or transferable by the holder thereof
except by will or by the laws of descent and distribution.  In the
event of the death of a Participant, any 


    
      
         


      

      
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    payments
due to such Participant shall be paid to his beneficiary designated in writing
to the Committee, or, if none has been designated, to his estate.

    


    3.4           Non-Uniform
Determinations

    


    Determinations
by the Committee under the Plan (including, without limitation, determinations
of the persons to receive Awards; the terms and provisions of such Awards; the
relevant Performance Goals; the amount of Bonus Opportunity; and the amount of
any downward adjustment) need not be uniform and may be made by it selectively
among persons who receive, or are eligible to receive, Awards under the Plan,
whether or not such persons are similarly situated.

    


    3.5           No
Guarantee Of Employment

    


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

    


    3.6           Change
In Control

    


    


    (a)           "Change
in Control" means:

    


    (i)           after
January 1, 2010, any natural person, entity or group (within the meaning of
Section 13(d)(3) or Section 14(d)(2) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and including any group acting for the purpose of
acquiring, holding, voting or disposing of securities of an issuer within the
meaning of Rule 13d-5(b)(1) under the Exchange Act (each of the foregoing, a
"Group"))(any such natural person, entity or Group being referred to herein as a
"Person"), other than a Permitted Person (hereinafter defined), becomes the
beneficial owner (within the meaning of Rule 13d-3 under the Exchange Act),
directly or indirectly, by way of merger, amalgamation, consolidation or other
business combination, purchase, formation of a group, recapitalization,
reclassification or otherwise, of securities of the Company, Holdco or any
entity through which Holdco, directly or indirectly, owns voting securities of
the Company (an "Intermediate Entity") representing fifty percent (50%) or more
of the voting power of the Company, Holdco or such Intermediate Entity (or the
surviving or resulting entity), as the case may be, after giving effect to the
transaction;

    


    (ii)           a
sale, merger, amalgamation, consolidation or other business combination,
purchase, recapitalization, reclassification or transaction or series of related
transactions involving the Company, any Intermediate Entity or Holdco as a
result of which the voting securities of the Company, such Intermediate Entity
or Holdco, as the case may be, outstanding immediately before such transaction
or series of related transactions do not continue to represent (either by
remaining outstanding by being converted into the voting securities of the
surviving or resulting entity) at least 50% of the voting power of the Company,
such Intermediate Entity, Holdco or such surviving or resulting entity, as the
case may be, after giving effect to such transaction or series of related
transactions;


    
      
         


      

      
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    (iii)           the
sale or transfer of, or the approval by the relevant security holders of an
agreement for the sale or transfer of, all or substantially all of the assets of
the Company, of any Intermediate Entity or of Holdco, in a single transaction or
series of related transactions, in any case other than to an entity of which
more than 50% of the voting power is held by Permitted Persons; or

    


    (iv)           the
shareholders or relevant security holders of the Company, any Intermediate
Entity or Holdco approve a plan of complete liquidation of the Company, any
Intermediate Entity or Holdco, unless all of the assets of the affected entity
will be distributed in such liquidation to a Permitted Person.

    


    (b)           “Permitted
Person” means (i) with respect to Holdco, Richard D. Kinder or any Group
controlled by Richard D. Kinder (for purposes of this Plan, Richard D. Kinder
shall not be on the date of this Plan deemed to control Holdco or any investors
in Holdco), (ii) with respect to any particular Intermediate Entity, (x) Richard
D. Kinder or any Group controlled by Richard D. Kinder, (y) Holdco, if no Change
of Control has occurred with respect to Holdco, or (z) a second Intermediate
Entity through which Holdco owns voting securities of the particular
Intermediate Entity, if no Change of Control has occurred with respect to (A)
such second Intermediate Entity, (B) any third Intermediate Entity through which
Holdco owns voting securities of such second Intermediate Entity, or (C) Holdco,
and (iii) with respect to the Company, (x) Richard D. Kinder or any Group
controlled by Richard D. Kinder, (y) Holdco, if no Change of Control has
occurred with respect to Holdco, or (z) any Intermediate Entity, if no Change of
Control has occurred with respect to (A) such Intermediate Entity, (B) any other
Intermediate Entity through which Holdco owns voting securities of such
Intermediate Entity, or (C) Holdco.

    


    (c)           References
herein to any Section of or Rule under the Exchange Act include any successor
provision.

     
 

    


    3.7           Limitation
on Certain Payments

    


    Notwithstanding
any other provision of this Plan, the Company shall not make or be obligated to
make any payment hereunder which would require the approval of the majority of
the Board of Managers of Holdco under the Holdco LLC Agreement unless such
approval has been given.


    
      
         


      

      
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    3.8           Unfunded
Status Of Awards; Creation Of Trusts

    


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

    


    3.9           Effective
Date Of Plan

    


    The
Plan shall become effective on January 1, 2010.

    



    
      
         


      

      
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