FORM OF PHANTOM UNIT AGREEMENT
Exhibit 10.3
FORM OF
THIS PHANTOM UNIT AGREEMENT (this “Agreement”) is by and between Magellan GP, LLC (the “Company”) and the individual identified on the last page hereof (the “Participant”).
| 1. | Grant of Phantom Units. The Company hereby grants to the Participant effective January 3, 2005 (the “Effective Date”), subject to the terms and conditions of the Magellan Midstream Partners Long-Term Incentive Plan, as amended and restated (the “Plan”) and this Agreement, the right to be eligible to receive a target grant of «Grant» Phantom Units of Magellan Midstream Partners, L.P. (the “Partnership”). The number of Units received at the end of the Restricted Period will be determined based on Performance Criteria (as defined herein), employment status at that time and any other relevant provisions of the Plan. These Units are referred to in this Agreement as “Phantom Units” during the Restricted Period. Until the Phantom Units vest and are paid, the Participant shall have no rights as a unitholder of the Partnership with respect to the Phantom Units. |
| 2. | Incorporation of Plan. The Plan is hereby incorporated herein by reference and all capitalized terms used herein but not defined herein shall have the meaning set forth in the Plan. The Participant acknowledges receipt of a copy of the Plan and hereby accepts the Phantom Units subject to all the terms and provisions of the Plan. |
| 3. | Compensation Committee of the Board Decisions and Interpretations. The Participant hereby agrees to accept as binding, conclusive and final all decisions and interpretations of the Compensation Committee of the Board (the “Committee”) of the Company upon any questions arising under the Plan and this Agreement. |
| 4. | Restricted Period of Phantom Units. The Restricted Period established by the Committee with respect to Units awarded per the terms of this Agreement ends the earlier of December 31, 2007 or the date your employment with the Company or its Affiliates is terminated, whether voluntarily or involuntarily (other than due to Cause), if such termination is within two years following a Change of Control as set forth in the Plan. |
| 5. | Payment of Phantom Units. To be eligible to receive payment of the Phantom Units at the end of the Restricted Period, the Participant must be employed by the Company or its Affiliates at the end of the Restricted Period, or must have terminated employment during the Restricted Period due to Retirement, Death, or Disability. The Company will deliver to the Participant, or the Participant’s legal representative, as soon as practicable after Performance Metrics have been approved by the Committee, the value of the Phantom Units in such form or forms as the Company shall determine, including cash or Units equal in value to the number of Phantom Units less the number of Phantom Units required to cover minimum tax withholding requirements. The number of Phantom Units required to cover minimum tax withholding will be based on the closing price of the Units at the end of the Restricted Period. |
| 6. | Termination of Employment Due to Retirement, Death or Disability. In the event a Participant’s employment with the Company and its Affiliates terminates prior to the end of the Restricted Period due to Retirement, Death or Disability, the initial Target Grant will be prorated based upon the Participant’s months of employment between January 1, 2005 and December 31, 2007. Such prorated amount will continue to be restricted and subject to the terms of this Agreement until the end of the Restricted Period. All units in excess of the prorated amount shall be forfeited. |
| 7. | Performance Criteria. |
| a. | Performance Metrics |
Based on 2007 Distributable Cash Flow per Unit(1) at certain Threshold, Target and Stretch levels as determined by the Compensation Committee.
(1) Proforma cash flow reflecting the full year impact of any payout projects completed and becoming operational during 2007.
| 8. | Determination of Payout Level |
| (i) | The number of Units awarded will be determined based on performance relative to Performance Metrics as follows: |
| Below Threshold |
No payout |
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| Target Achieved |
100% of units are paid out |
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| Stretch Achieved |
200% of units paid out |
The payout for results between threshold, target and stretch will be interpolated.
| (ii) | The number of Units awarded will be subject to an increase or reduction of up to 10% based upon personal performance. |
| (iv) | The number of Units awarded will also be subject to an additional increase or reduction of up to 10% based upon environmental performance of the Partnership during the three-year period beginning January 1, 2005. The Committee’s qualitative assessment of the Company’s compliance with the System Integrity Plan will be an important factor in determining an environmental performance adjustment, if any. |
| 9. | Other Provisions. |
| a. | The Participant understands and agrees that payments under this Agreement shall not be used for, or in the determination of, any other payment or benefit under any continuing agreement, plan, policy, practice or arrangement providing for the making of any payment or the provision of any benefits to or for the Participant or the Participant’s beneficiaries or representatives, including, without limitation, any employment agreement, any change of control severance protection plan or any employee benefit plan as defined in Section 3(3) of ERISA, including, but not limited to qualified and non-qualified retirement plans. |
| b. | Except as otherwise provided herein, and in the Plan documents, in the event that the Participant’s employment with the Company and its Affiliates terminates prior to the vesting of the Phantom Units granted under this Agreement, such Phantom Units shall be forfeited. |
| c. | The Participant acknowledges that this award and similar awards are made on a selective basis and are, therefore, to be kept confidential. |
| d. | Neither the Phantom Units, nor the Participant’s interest in the Phantom Units, may be sold, assigned, transferred, pledged or otherwise disposed of or encumbered at any time prior to the vesting and payment of such Phantom Units under this Agreement. |
| e. | If the Participant at any time forfeits any or all of the Phantom Units pursuant to this Agreement, the Participant agrees that all of the Participant’s rights to and interest in the Phantom Units shall terminate upon forfeiture without payment of consideration. |
| f. | The Committee shall make determination as to whether an event has occurred resulting in the forfeiture of the Phantom Units, in accordance with this Agreement, and all determinations of the Committee shall be final and conclusive. |
| g. | With respect to the right to receive payment of the Phantom Units under this Agreement, nothing contained herein shall give the Participant any rights that are greater than those of a general creditor of the Company. |
| 10. | Notices. All notices to the Company required hereunder shall be in writing and delivered by hand or by mail, addressed to Magellan Midstream Partners, L.P., One Xxxxxxxx Center, Mail Drop 28-4, Xxxxx, Xxxxxxxx 00000, Attention: Compensation Department. Notices shall become effective upon their receipt by the Company if delivered in the forgoing manner. |
| Magellan GP, LLC | ||
| By: |
| |
| Xxx X. Xxxxxxxxxx | ||
| President and Chief Executive Officer | ||
| Magellan GP, LLC | ||
Participant:
I hereby accept the terms and conditions of this Phantom Unit Agreement:
«Name»
Dated this day of , 200 .
