FORM OF TESORO LOGISTICS LP 2011 LONG-TERM INCENTIVE PLAN PHANTOM UNIT AGREEMENT
Exhibit 10.17
[Employee time-vesting award]
Pursuant to this Phantom Unit Agreement, dated as of [_______], 2011 (the “Agreement”), Tesoro
Logistics GP, LLC (the “Company”), as the general partner of Tesoro Logistics LP (the
"Partnership”), hereby grants to [___________] (the “Participant”) the following award of Phantom
Units (“Phantom Units”), pursuant and subject to the terms and conditions of this Agreement and the
Tesoro Logistics LP 2011 Long-Term Incentive Plan (the “Plan”), the terms and conditions of which
are hereby incorporated into this Agreement by reference. Each Phantom Unit shall constitute a
Phantom Unit under the terms of the Plan and is hereby granted in tandem with a corresponding DER,
as further detailed in Section 3 below. Except as otherwise expressly provided herein, all
capitalized terms used in this Agreement, but not defined, shall have the meanings provided in the
Plan.
GRANT NOTICE
Subject to the terms and conditions of this Agreement, the principal features of this Award
are as follows:
Number of Phantom Units: [________]
Grant Date: [________], 2011
Vesting of Phantom Units: One—third of the Phantom Units (rounded down to the next whole
number of units, except in the case of the final vesting date) shall vest on each of the
first, second and third anniversaries of the date of grant (the “Grant Date”), subject to
the Participant’s continued service as an Employee, Director or Consultant. In addition,
the Phantom Units shall be subject to accelerated vesting as set forth in Section 4 below.
Termination of Phantom Units: In the event of a termination of the Participant’s Service
for any reason, all Phantom Units that have not vested prior to or in connection with such
termination of Service shall thereupon automatically be forfeited by the Participant without
further action and without payment of consideration therefor.
Payment of Phantom Units: Vested Phantom Units shall be paid to the Participant in
the form of Units as set forth in Section 5 below.
DERs: Each Phantom Unit granted under this Agreement shall be issued in tandem with a corresponding
DER, which shall entitle the Participant to receive payments in an amount equal to Partnership
distributions in accordance with Section 3 of this Agreement.
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TERMS AND CONDITIONS OF PHANTOM UNITS
1. Grant. The Company hereby grants to the Participant, as of the Grant Date, an
award of [________] Phantom Units, subject to all of the terms and conditions contained in this
Agreement and the Plan.
2. Phantom Units. Subject to Section 4 below, each Phantom Unit that vests shall
represent the right to receive payment, in accordance with Section 5 below, in the form of one
Unit. Unless and until a Phantom Unit vests, the Participant will have no right to payment in
respect of any such Phantom Unit. Prior to actual payment in respect of any vested Phantom Unit,
such Phantom Unit will represent an unsecured obligation of the Partnership, payable (if at all)
only from the general assets of the Partnership.
3. Grant of Tandem DER. Each Phantom Unit granted hereunder is hereby granted in
tandem with a corresponding DER, which DER shall remain outstanding from the Grant Date until the
earlier of the payment or forfeiture of the Phantom Unit to which it corresponds. Each vested DER
shall entitle the Participant to receive payments, subject to and in accordance with this
Agreement, in an amount equal to any distributions made by the Partnership in respect of the Units
underlying the Phantom Units to which such DER relates. The Company shall establish, with respect
to each Phantom Unit, a separate DER bookkeeping account for such Phantom Unit (a “DER Account”),
which shall be credited (without interest) on the applicable distribution dates with an amount
equal to any distributions made by the Partnership during the period that such Phantom Unit remains
outstanding with respect to the Unit underlying the Phantom Unit to which such DER relates. Upon
the vesting of a Phantom Unit, the DER (and the DER Account) with respect to such vested Phantom
Unit shall also become vested. Similarly, upon the forfeiture of a Phantom Unit, the DER (and the
DER Account) with respect to such forfeited Phantom Unit shall also be forfeited. DERs shall not
entitle the Participant to any payments relating to distributions occurring after the earlier to
occur of the applicable Phantom Unit payment date or the forfeiture of the Phantom Unit underlying
such DER. The DERs and any amounts that may become distributable in respect thereof shall be
treated separately from the Phantom Units and the rights arising in connection therewith for
purposes of Section 409A of the Code (including for purposes of the designation of time and form of
payments required by Section 409A).
4. Vesting and Termination.
(a) Vesting. Subject to Section 4(c) below, the Phantom Units shall vest in such
amounts and at such times as are set forth in the Grant Notice above.
(b) Accelerated Vesting. Subject to Section 4(c) below, the Phantom Units shall vest
in full upon the occurrence of any of the following events: (i) a termination of the
Participant’s Service by the Company or the Partnership other than for Cause, (ii) a
termination of the Participant’s Service by reason of the Participant’s death or Disability,
(iii) a termination of the Participant’s Service by the Participant for Good Reason where
the event constituting Good Reason occurs within the six-month period immediately following
a Change in Control, or (iv) prior to a Change in Control, a termination of the
Participant’s Service by the Company or the Partnership other than for Cause or the
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Participant’s Disability, or by the Participant for Good Reason, in either case where
the Participant demonstrates that such termination by the Company or the Partnership, or the
action constituting Good Reason was at the request of the third party effecting a Change in
Control or otherwise occurred in connection with such Change in Control.
(c) Forfeiture. Notwithstanding the foregoing, in the event of a termination of the
Participant’s Service for any reason, all Phantom Units that have not vested prior to or in
connection with such termination of Service shall thereupon automatically be forfeited by
the Participant without further action and without payment of consideration therefor. No
portion of the Phantom Units which has not become vested at the date of the Participant’s
termination of Service shall thereafter become vested.
(d) Payment. Vested Phantom Units shall be subject to the payment provisions set forth
in Section 5 below.
(e) Definition of “Good Reason”. For purposes of this Agreement, “Good Reason” shall
mean the occurrence of one or more of the following actions by the Company without the
Participant’s consent: (1) a material reduction in duties and responsibilities held by the
Participant prior to the Change in Control, in each case except in connection with a
termination of the Participant’s Service for Cause; (2) a material reduction by the Company
in the Participant’s salary or guideline (target) bonus, or (3) a material change in the
geographic location at which the Participant must perform services for the Company;
provided, however, that no termination of Service by the Participant shall constitute a
termination for Good Reason unless and until (a) the Participant has first provided the
Company with written notice specifically identifying the acts or omissions constituting the
grounds for “Good Reason” within 30 days after the Participant has or should reasonably be
expected to have had knowledge of the occurrence thereof, (b) the Company has not cured such
acts or omissions within 30 days of its actual receipt of such notice, and (c) the effective
date of the Participant’s termination for Good Reason occurs no later than 90 days after the
initial existence of the facts or circumstances constituting Good Reason.
5. Payment of Phantom Units and DERs.
(a) Phantom Units. Unpaid, vested Phantom Units shall be paid to the Participant in
the form of Units in a lump-sum as soon as reasonably practical, but not later than 45 days,
following the date on which such Phantom Units vest. Payments of any Phantom Units that
vest in accordance herewith shall be made to the Participant (or in the event of the
Participant’s death, to the Participant’s estate) in whole Units in accordance with this
Section 5.
(b) DERs. Unpaid, vested DERs shall be paid to the Participant as follows: as soon
as reasonably practical, but not later than 45 days, following the date on which a Phantom
Unit and related DER vests, the Participant shall be paid an amount in cash equal to the
amount then credited to the DER Account maintained with respect to such Phantom Unit.
(c) Potential Six-Month Delay. Notwithstanding anything to the contrary in
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this Agreement, no amounts payable under this Agreement shall be paid to the
Participant prior to the expiration of the 6-month period following his “separation from
service” (within the meaning of Treasury Regulation Section 1.409A-1(h)) (a “Separation from
Service”) to the extent that the Company determines that paying such amounts prior to the
expiration of such 6-month period would result in a prohibited distribution under Section
409A(a)(2)(B)(i) of the Code. If the payment of any such amounts is delayed as a result of
the previous sentence, then on the first business day following the end of the applicable
6-month period (or such earlier date upon which such amounts can be paid under Section 409A
of the Code without resulting in a prohibited distribution, including as a result of the
Participant’s death), such amounts shall be paid to the Participant.
6. Tax Withholding. The Company and/or its Affiliates shall have the authority and
the right to deduct or withhold, or to require the Participant to remit to the Company and/or its
Affiliates, an amount sufficient to satisfy all applicable federal, state and local taxes
(including the Participant’s employment tax obligations) required by law to be withheld with
respect to any taxable event arising in connection with the Phantom Units and the DERs. In
satisfaction of the foregoing requirement, unless otherwise determined by the Committee, the
Company and/or its Affiliates shall withhold Units otherwise issuable in respect of such Phantom
Units having a fair market value equal to the sums required to be withheld. In the event that
Units that would otherwise be issued in payment of the Phantom Units are used to satisfy such
withholding obligations, the number of Units which shall be so withheld shall be limited to the
number of Units which have a fair market value (which, in the case of a broker-assisted
transaction, shall be determined by the Committee, consistent with applicable provisions of the
Code) on the date of withholding equal to the aggregate amount of such liabilities based on the
minimum statutory withholding rates for federal, state, local and foreign income tax and payroll
tax purposes that are applicable to such supplemental taxable income.
7. Rights as Unit Holder. Neither the Participant nor any person claiming under or
through the Participant shall have any of the rights or privileges of a holder of Units in respect
of any Units that may become deliverable hereunder unless and until certificates representing such
Units shall have been issued or recorded in book entry form on the records of the Partnership or
its transfer agents or registrars, and delivered in certificate or book entry form to the
Participant or any person claiming under or through the Participant.
8. Non-Transferability. Neither the Phantom Units nor any right of the Participant
under the Phantom Units may be assigned, alienated, pledged, attached, sold or otherwise
transferred or encumbered by the Participant (or any permitted transferee) other than by will or
the laws of descent and distribution and any such purported assignment, alienation, pledge,
attachment, sale, transfer or encumbrance shall be void and unenforceable against the Company, the
Partnership or any Affiliate.
9. Distribution of Units. Unless otherwise determined by the Committee or required by
any applicable law, rule or regulation, neither the Company nor the Partnership shall deliver to
the Participant certificates evidencing Units issued pursuant to this Agreement and instead such
Units shall be recorded in the books of the Partnership (or, as applicable, its transfer agent or
equity plan administrator). All certificates for Units issued pursuant to this Agreement and all
Units issued pursuant to book entry procedures hereunder shall be subject to such stop
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transfer orders and other restrictions as the Company may deem advisable under the Plan or the
rules, regulations, and other requirements of the Securities Exchange Commission, any stock
exchange upon which such Units are then listed, and any applicable federal or state laws, and the
Company may cause a legend or legends to be inscribed on any such certificates or book entry to
make appropriate reference to such restrictions. In addition to the terms and conditions provided
herein, the Company may require that the Participant make such covenants, agreements, and
representations as the Company, in its sole discretion, deems advisable in order to comply with any
such laws, regulations, or requirements. No fractional Units shall be issued or delivered pursuant
to the Phantom Units and the Committee shall determine whether cash, other securities, or other
property shall be paid or transferred in lieu of fractional Units or whether such fractional Units
or any rights thereto shall be canceled, terminated, or otherwise eliminated.
10. Partnership Agreement. Units issued upon payment of the Phantom Units shall be
subject to the terms of the Plan and the terms of the Partnership Agreement. Upon the issuance of
Units to the Participant, the Participant shall, automatically and without further action on his or
her part, (i) be admitted to the Partnership as a Limited Partner (as defined in the Partnership
Agreement) with respect to the Units, and (ii) become bound, and be deemed to have agreed to be
bound, by the terms of the Partnership Agreement.
11. No Effect on Service. Nothing in this Agreement or in the Plan shall be construed
as giving the Participant the right to be retained in the employ or service of the Company or any
Affiliate. Furthermore, the Company and its Affiliates may at any time dismiss the Participant
from employment or consulting free from any liability or any claim under the Plan or this
Agreement, unless otherwise expressly provided in the Plan, this Agreement or other written
agreement.
12. Severablility. If any provision of this Agreement is or becomes or is deemed to
be invalid, illegal, or unenforceable in any jurisdiction, such provision shall be construed or
deemed amended to conform to the applicable law or, if it cannot be construed or deemed amended
without, in the determination of the Committee, materially altering the intent of this Agreement,
such provision shall be stricken as to such jurisdiction, and the remainder of this Agreement shall
remain in full force and effect.
13. Tax Consultation. None of the Board, the Committee, the Company nor the
Partnership has made any warranty or representation to Participant with respect to the income tax
consequences of the issuance of the Phantom Units, the DERs, the Units or the transactions
contemplated by this Agreement, and Participant represents that he is in no manner relying on such
entities or their representatives for tax advice or an assessment of such tax consequences. The
Participant understands that the Participant may suffer adverse tax consequences in connection with
the Phantom Units and DERs granted pursuant to this Agreement. The Participant represents that the
Participant has consulted with any tax consultants that the Participant deems advisable in
connection with the Phantom Units and DERs.
14. Amendments, Suspension and Termination. To the extent permitted by the Plan, this
Agreement may be wholly or partially amended or otherwise modified, suspended or terminated at any
time or from time to time by the Board or the Committee. Except as provided
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in the preceding sentence, this Agreement cannot be modified, altered or amended, except by an
agreement, in writing, signed by both the Partnership and the Participant.
15. Lock-Up Agreement. The Participant shall agree, if so requested by the Company or
the Partnership and any underwriter in connection with any public offering of securities of the
Partnership or any Affiliate, not to directly or indirectly offer, sell, contract to sell, sell any
option or contract to purchase, purchase any option or contract to sell, grant any option, right or
warrant for the sale of or otherwise dispose of or transfer any Units held by him or her for such
period, not to exceed one hundred eighty (180) days following the effective date of the relevant
registration statement filed under the Securities Act in connection with such public offering, as
such underwriter shall specify reasonably and in good faith. The Company or the Partnership may
impose stop-transfer instructions with respect to securities subject to the foregoing restrictions
until the end of such 180-day period. Notwithstanding the foregoing, the 180-day period may be
extended for up to such number of additional days as is deemed necessary by such underwriter or the
Company or Partnership to continue coverage by research analysts in accordance with FINRA Rule 2711
or any successor rule.
16. Conformity to Securities Laws. The Participant acknowledges that the Plan and
this Agreement are intended to conform to the extent necessary with all provisions of the
Securities Act and the Exchange Act and any and all regulations and rules promulgated by the
Securities and Exchange Commission thereunder, and all applicable state securities laws and
regulations. Notwithstanding anything herein to the contrary, the Plan shall be administered, and
the Phantom Units and DERs are granted, only in such a manner as to conform to such laws, rules and
regulations. To the extent permitted by applicable law, the Plan and this Agreement shall be
deemed amended to the extent necessary to conform to such laws, rules and regulations.
17. Code Section 409A. None of the Phantom Units, the DERs or any amounts paid
pursuant to this Agreement are intended to constitute or provide for a deferral of compensation
that is subject to Section 409A of the Code. Nevertheless, to the extent that the Committee
determines that the Phantom Units or DERs may not be exempt from (or compliant with) Section 409A
of the Code, the Committee may (but shall not be required to) amend this Agreement in a manner
intended to comply with the requirements of Section 409A of the Code or an exemption therefrom
(including amendments with retroactive effect), or take any other actions as it deems necessary or
appropriate to (a) exempt the Phantom Units or DERs from Section 409A of the Code and/or preserve
the intended tax treatment of the benefits provided with respect to the Phantom Units or DERs, or
(b) comply with the requirements of Section 409A of the Code. To the extent applicable, this
Agreement shall be interpreted in accordance with the provisions of Section 409A of the Code.
Notwithstanding anything in this Agreement to the contrary, to the extent that any payment or
benefit hereunder constitutes non-exempt “nonqualified deferred compensation” for purposes of
Section 409A of the Code, and such payment or benefit would otherwise be payable or distributable
hereunder by reason of the Participant’s termination of Service, all references to the
Participant’s termination of Service shall be construed to mean a Separation from Service, and the
Participant shall not be considered to have a termination of Service unless such termination
constitutes a Separation from Service with respect to the Participant.
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18. Adjustments; Clawback. The Participant acknowledges that the Phantom Units are
subject to modification and termination in certain events as provided in this Agreement and Section
7 of the Plan. The Participant further acknowledges that the Phantom Units, DERs and Units
issuable hereunder are subject to clawback as provided in this Section 8(o) of the Plan.
19. Successors and Assigns. The Company or the Partnership may assign any of its
rights under this Agreement to single or multiple assignees, and this Agreement shall inure to the
benefit of the successors and assigns of the Company and the Partnership. Subject to the
restrictions on transfer contained herein, this Agreement shall be binding upon the Participant and
his or her heirs, executors, administrators, successors and assigns.
20. Governing Law. The validity, construction, and effect of this Agreement and any
rules and regulations relating to this Agreement shall be determined in accordance with the laws of
the State of Delaware without regard to its conflicts of laws principles.
21. Headings. Headings are given to the sections and subsections of this Agreement
solely as a convenience to facilitate reference. Such headings shall not be deemed in any way
material or relevant to the construction or interpretation of this Agreement or any provision
hereof.
[Signature page follows]
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The Participant’s signature below indicates the Participant’s agreement with and understanding
that this award is subject to all of the terms and conditions contained in the Plan and in this
Agreement, and that, in the event that there are any inconsistencies between the terms of the Plan
and the terms of this Agreement, the terms of the Plan shall control. The Participant further
acknowledges that the Participant has read and understands the Plan and this Agreement, which
contains the specific terms and conditions of this grant of Phantom Units. The Participant hereby
agrees to accept as binding, conclusive and final all decisions or interpretations of the Committee
upon any questions arising under the Plan or this Agreement.
| TESORO LOGISTICS GP, LLC, a Delaware limited liability company |
||||
| By: | Tesoro Corporation | |||
| Its: | Sole Member | |||
| By: | ||||
| Name: | ||||
| Title: | ||||
| TESORO LOGISTICS LP, a Delaware limited partnership |
||||
| By: | Tesoro Logistics GP, LLC | |||
| Its: | General Partner | |||
| By: | ||||
| Name: | ||||
| Title: | ||||
| PARTICIPANT | ||||
| [Name] | ||||
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