Exhibit 10.3

 

FORM OF

PHANTOM UNIT AGREEMENT

 

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

   

Target Achieved

 

100% of units are paid out

   

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 Williams Center, Mail Drop 28-4, Tulsa, Oklahoma 74172, Attention:
Compensation Department. Notices shall become effective upon their receipt by
the Company if delivered in the forgoing manner.

 

Magellan GP, LLC

By:

 

 

--------------------------------------------------------------------------------

Don R. Wellendorf

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  .