Director Qualification StandardsThe Board of Directors (the “Board”) of Magellan GP, LLC (the “Company”) will have at least three directors who meet the independence requirements of the New York Stock Exchange (“NYSE”). A director will not qualify as independent unless the Board affirmatively determines that the director has no material relationship with Magellan Midstream Partners, L.P. and its subsidiaries (collectively, “MMP”) either directly or as a partner, unitholder or officer of an organization that has a relationship with MMP. In addition, in affirmatively determining the independence of any director who will serve on the Board’s Compensation Committee, the Board must consider all factors specifically relevant to determining whether a director has a relationship to MMP which is material to that director’s ability to be independent from management in connection with the duties of a Compensation Committee member, including, but not limited to, the source of compensation of such director, including any consulting, advisory or other compensatory fee paid by MMP to such director and whether such director is affiliated with MMP. In order to make this determination, the Board will broadly consider all relevant facts and circumstances and will apply the following categorical standards:
A director will not be considered independent if the director is, or has been within the last three years, an employee of MMP, or if an immediate family member of a director is, or has been within the last three years, an executive officer of MMP; provided, however, that employment as an interim Chairman or Chief Executive Officer (“CEO”) or other executive officer will not disqualify a director from being considered independent following that employment.
A director who has received, or has an immediate family member who has received, during any twelve-month period within the last three years, more than $120,000 in direct compensation from MMP, other than director and committee fees and pension or other forms of deferred compensation for prior service (provided such compensation is not contingent in any way on continued service), will not be considered independent; provided, however, that the following need not be considered in determining independence under this test: (i) compensation received by a director for former service as an interim Chairman or CEO or other executive officer and (ii) compensation received by an immediate family member of a director for service as an employee (other than an executive officer) of MMP.
A director will not be considered independent if (i) the director or an immediate family member is a current partner of a firm that is MMP’s internal or external auditor; (ii) the director is a current employee of such a firm, (iii) the director has an immediate family member who is a current employee of such a firm and personally works on MMP’s audit; or (iv) the director or an immediate family member was within the last three years a partner or employee of such a firm and personally worked on MMP’s audit within that time.
A director or immediate family member who is, or has been within the last three years, employed as an executive officer of another company where any of MMP’s present executive officers at the same time serves or served on that company’s compensation committee will not be considered independent.
A director who is a current employee, or whose immediate family member is a current executive officer, of a company that has made payments to, or received payments from, MMP for property or services in an amount which, in any of the last three fiscal years, exceeds the greater of $1 million, or 2% of such other company’s consolidated gross revenues, will not be considered independent; provided, however, that charitable organizations will not be considered “companies” for purposes of this test.
Directors are expected to attend Board meetings and Committee meetings, for Committees on which they serve, and to spend the time needed and to meet as frequently as necessary to properly discharge their responsibilities. To the extent feasible, information and data important to the Board’s understanding of the business to be conducted at a Board or Committee meeting should be distributed in writing to the directors before the meeting and directors should be prepared to contribute substantively at the meeting by reviewing these materials in advance of the meeting.
Directors should advise the Chairman of the Board in advance of accepting an invitation to serve on another for-profit company board or if the principal responsibility they held when they were elected to the Board changes.
The executive officers of the Company will recommend to the Board the long-term strategic plan for MMP, major acquisitions and divestitures and major changes to MMP’s capital structure. With respect to all other matters, the Chairman of the Board will arrange the agenda for Board meetings and will report to the Board and arrange for other executives and advisors to report to the Board. Each Board member is free to suggest the inclusion of items on the agenda of any Board meetings. Each Board member is free to raise at any Board meeting subjects that are not on the agenda for that meeting. The Board will review MMP’s long-term strategic plans, including succession plans, and the principal issues that MMP will face in the future during at least one Board meeting each year.
The non-management directors will have the opportunity to meet in executive session at each regularly scheduled board meeting. The presiding director, as elected by the Board, will preside at these meetings and his name will be disclosed in MMP’s annual proxy statement.
The independent directors will meet in executive session at least annually.
Board CommitteesThe Board will at all times have an Audit Committee. The members of the Audit Committee will meet the independence and experience requirements of the NYSE rules, the Sarbanes-Oxley Act of 2002 and any other applicable statutes, rules or regulations.
Because MMP is a publicly traded limited partnership, the NYSE does not require the Board to have a Compensation Committee or Nominating and Governance Committee. Despite this exemption, the Board has chosen to have a Compensation Committee and Nominating and Governance Committee. The members of the Compensation Committee and Nominating and Governance Committee will meet the independence requirements of the NYSE rules and any other applicable statues, rules or regulations.
The Audit, Compensation and Nominating and Governance Committees have their own charters. The Board appoints committee members, including the chairman of each committee. The chairman of each committee, in consultation with the committee members and management, determines the frequency and length of the committee meetings and the agenda for each meeting consistent with any requirements set forth in the committee’s charter.
The Board may, from time to time, establish or maintain additional committees as it deems necessary or appropriate.
Director Access to Management and, as Necessary and Appropriate, Independent AdvisorsDirectors have full, free and direct access to the management of MMP for any and all matters related to MMP. The directors will use their judgment to ensure that any such contact is not disruptive to the business operations of MMP and will, to the extent not inappropriate, copy the CEO on any written communications between a director and an officer or employee of MMP. Such communications will not be directive other than as relates to routine administrative matters. In addition, the Board expects the executive officers of the Company to attend and participate at each regularly scheduled board meeting.
The Board and each Committee of the Board have the authority to hire independent legal, financial or other advisors as they may deem necessary.
Director CompensationManagement and non-independent directors of the Board receive no compensation for serving as a director. The form and amount of compensation for independent directors will be determined from time to time by the Board, after consultation with an independent compensation consultant. In making this determination, the Board will consider that directors’ independence may be jeopardized when (i) directors’ compensation exceeds what is customary, (ii) MMP makes substantial charitable contributions to organizations in which a director is affiliated, or (iii) MMP enters into consulting contracts with (or provides other indirect forms of compensation to) a director.
Director Orientation and Continuing EducationAll new directors will be oriented to MMP in a manner to be determined by the CEO. The Board will consider whether or not continuing education for all, or certain directors, may be warranted. MMP will pay reasonable expenses for a director’s participation in continuing education programs approved by the Board.
Management SuccessionThe Nominating and Governance Committee will oversee CEO selection, after consultation with the presiding CEO. The non-management directors of the Board will review the performance of the CEO on an annual basis. Additionally, the Nominating and Governance Committee will oversee succession planning in the event of an emergency or the retirement of the CEO.
Annual Performance Evaluation of the BoardThe Board will conduct an annual self-evaluation to determine whether it is functioning effectively.