Exhibit 10.3
Regency GP LLC
Long-Term Incentive Plan
Grant of Phantom Units
with DERs

         
Grantee:
       
 
       
 
       
Grant Date:
       
 
 
 
   

1.   Grant of Phantom Units with DERs. Regency GP LLC (the “Company”) hereby
grants to you ___ Phantom Units (subject to adjustment as provided in Attachment
A) under the Regency GP LLC Long-Term Incentive Plan (the “Plan”) on the terms
and conditions set forth in this agreement (the “Agreement”) and in the Plan.
Each Phantom Unit includes a tandem distribution equivalent right (“DER”), as
defined in Paragraph 2 below. In the event of any conflict between the terms of
this Agreement and the Plan, which is incorporated herein by reference as a part
of this Agreement, the terms of the Plan shall control. Capitalized terms used
in this Agreement but not defined herein shall have the meanings ascribed to
such terms in the Plan, unless the context requires otherwise.   2.   Vesting.
Subject to Paragraph 3 below, if and to the extent the Performance Goal set
forth on Attachment A hereto is achieved, effective on the last day of the
Performance Period the Phantom Units shall vest in accordance with the Vested
Percentage as set forth on Attachment A. If the Performance Goal is not
achieved, the Phantom Units automatically shall be forfeited without payment
effective on the last day of the Performance Period.       The Company shall
establish, with respect to each Phantom Unit, a bookkeeping account (a “DER
Account”) to which it shall credit (without interest) an amount equal to any
cash distributions made by the Partnership with respect to a Common Unit during
the Performance Period — a DER. Upon the vesting of a Phantom Unit, the DER
Account with respect to such vested Phantom Unit shall also become vested.
Similarly, upon the forfeiture of a Phantom Unit, the DER Account with respect
to such forfeited Phantom Unit shall also be forfeited.   3.   Events Occurring
Prior to the End of the Performance Period.

  (a)   Death or Disability. If, prior to the end of the Performance Period,
your employment with the Company terminates as a result of your death or a
disability that entitles you to benefits under the Company’s long-term
disability plan (“Disability”), then, if and to the extent the Performance Goal
is achieved for the Performance Period, a “prorata portion” of the Vested
Percentage of your Phantom Units and DER Accounts that would have become vested
had your

 

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      employment continued through the end of the Performance Period will become
vested on the last day of the Performance Period. The “prorata portion” shall be
a fraction, the numerator of which is the number of days in the Performance
Period that have elapsed as of the date of your death or Disability, and the
denominator of which is the total number of days in the Performance Period.    
(b)   Other Terminations. If, prior to the end of the Performance Period, your
employment with the Company terminates for any reason other than as provided in
Paragraph 3(a) above or Paragraph 3(d) below, all of your Phantom Units and DER
Accounts automatically shall be forfeited without payment upon such termination.
    (c)   Change of Control. Except as otherwise provided in Paragraph 3(d)
below, upon and following a Change of Control prior to the end of the
Performance Period, your Phantom Units and DER Accounts will remain outstanding
and will only vest as otherwise set forth in this Agreement.     (d)   Change of
Control Termination. Notwithstanding Paragraph 3(c) above, if, upon or within
12 months following a Change of Control and prior to the end of the Performance
Period, your employment with the Company is terminated by the Company without
“Cause” (as defined below) or you resign for “Good Reason” (as defined below)
(such termination or resignation, a “Change of Control Termination”), then,
notwithstanding anything in the Plan to the contrary, all of your Phantom Units
and DER Accounts automatically shall become vested at the Maximum Vested
Percentage level as provided in Attachment A.

    For purposes of this Agreement:

  (i)   “employment with the Company” means being an Employee, Consultant or a
Director of the Company or any of its Affiliates and a change of status between
being an Employee, Consultant or Director or between being an Employee,
Consultant or a Director of the Company and/or any of its Affiliate(s) shall not
constitute a termination of “employment with the Company”;     (ii)   “Cause”
means the Company (which, for purposes of this definition, shall include the
Company and any of its Affiliates) having “Cause” to terminate your employment
with the Company, as defined in any employment or similar agreement between you
and the Company; provided that, in the absence of an agreement containing such a
definition, the Company shall have “Cause” to terminate your employment with the
Company upon (A) your willful failure to substantially perform your duties
(other than any such failure resulting from your Disability) which is not
remedied within thirty (30) days after receipt of written notice from the
Company specifying such failure, (B) your willful failure to carry out, or
comply with, in any material respect, any lawful and reasonable directive of the
Board, which is not remedied within thirty (30) days after

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      receipt of written notice from the Company specifying such failure,
(C) your commission at any time of any act or omission that results in, or may
reasonably be expected to result in, a conviction, plea of no contest, plea of
nolo contendere, or imposition of unadjudicated probation for any felony or
crime involving moral turpitude, (D) your unlawful use (including being under
the influence) or possession of illegal drugs on the Company’s premises or while
performing your duties and responsibilities, or (E) your commission at any time
of any act of fraud, embezzlement, misappropriation, material misconduct, or
breach of fiduciary duty against the Company (or any predecessor thereto or
successor thereof); and     (iii)   “Good Reason” means a material reduction in
your annual base salary or target bonus following a Change of Control; provided,
however, that, notwithstanding the foregoing, you may not resign for Good Reason
unless you have provided the Company with 30 days prior written notice of your
intent to resign for Good Reason and the Company has not remedied such reduction
within such 30-day period.

4.   Payments.

  (a)   Phantom Units. Subject to Paragraph 5, as soon as reasonably practical
and not later than 15 days following the end of the Performance Period or a
Change of Control Termination, as applicable, the Company shall pay you, with
respect to each vested Phantom Unit, one Unit, unless the Committee, in its
discretion, elects to pay you an amount of cash equal to the Fair Market Value
of a Unit determined on the last day of the Performance Period or the date of
the Change of Control Termination, as applicable. If more than one Phantom Unit
vests at the same time, the Company may pay such vested Phantom Units in any
combination of Units and cash as the Company, in its discretion, elects.     (b)
  DER Accounts. Subject to Paragraph 5, as soon as reasonably practical and not
later than 15 days following the vesting of a Phantom Unit, the Company shall
pay you an amount of cash equal to the amount credited to your DER Account
maintained with respect to such Phantom Unit.

5.   Withholding of Taxes. To the extent that the vesting or payment of a
Phantom Unit or cash with respect to a DER Account results in the receipt of
compensation by you with respect to which the Company or an Affiliate has a tax
withholding obligation pursuant to applicable law, the Company or Affiliate
shall withhold from the cash and from the Units otherwise to be delivered, that
amount of cash and that number of Units having a Fair Market Value equal to the
Company’s or Affiliate’s tax withholding obligations with respect to such cash
and Unit payments, respectively. No payment of a vested Phantom Unit or a cash
distribution with respect to a DER Account shall be made pursuant to this
Agreement until the applicable tax withholding requirements with respect to such
event have been satisfied in full.

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6.   Limitations Upon Transfer. All rights under this Agreement shall belong to
you alone and may not be transferred, assigned, pledged, or hypothecated by you
in any way (whether by operation of law or otherwise), other than by will or the
laws of descent and distribution or a qualified domestic relations order and
shall not be subject to execution, attachment, or similar process. Upon any
attempt by you to transfer, assign, pledge, hypothecate, or otherwise dispose of
such rights contrary to the provisions in this Agreement or the Plan, or upon
the levy of any attachment or similar process upon such rights, such rights
shall immediately become null and void.   7.   Binding Effect. This Agreement
shall be binding upon and inure to the benefit of any successor or successors of
the Company and upon any person lawfully claiming under you.   8.   Entire
Agreement. This Agreement constitutes the entire agreement of the parties with
regard to the subject matter hereof, and contains all the covenants, promises,
representations, warranties and agreements between the parties with respect to
the Phantom Units granted hereby. Without limiting the scope of the preceding
sentence, all prior understandings and agreements, if any, among the parties
hereto relating to the subject matter hereof are hereby null and void and of no
further force and effect.   9.   Modifications. Any modification of this
Agreement shall be effective only if it is in writing and signed by both you and
an authorized individual on behalf of the Company.   10.   Governing Law. This
grant shall be governed by, and construed in accordance with, the laws of the
State of Texas, without regard to conflicts of laws principles thereof.

            Regency GP LLC
      By:           Name:   Byron R. Kelley        Title:   Chairman, President
and Chief Executive Officer     

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ATTACHMENT A
Performance Goal and Performance Vesting
          Except as otherwise provided in the Grant Agreement, the provisions of
this Attachment A to the Grant Agreement shall determine whether, and the
extent, if any, that the Phantom Units (and DER Accounts) become vested at the
end of the Performance Period.

I.   Performance Period       The Performance Period shall be the period
beginning                     , 20___ and ending                     , 20___.  
II.   Performance Goal       The vesting of your Phantom Units (and DER
Accounts) will be determined based on the comparison of (i) the TUR (as defined
below) of the Partnership’s common units for the Performance Period to (ii) the
TUR of the common units of each of the members of the Peer Group for the
Performance Period.       “TUR” or “Total Unitholder Return” shall be measured
as the sum of (i) the change (increase/decrease) in the “average price” per unit
at the end of the Performance Period compared to the “average price” at the
beginning of the Performance Period plus (ii) the cash distributions made per
unit during the Performance Period, divided by the “average price” of the unit
at the beginning of the Performance Period. The beginning and ending “average
price” per unit is the average closing price of the unit for the last 20
consecutive trading days (x) prior to the beginning of the Performance Period
and (y) of the Performance Period, respectively, adjusted to take into account
any unit splits, unit distributions or other similar events. Such determinations
and adjustments shall be made by the Committee in its discretion.   III.   Peer
Group       The Peer Group shall consist of the following companies:

     
ATLAS PIPELINE PARTNERS LP
  HOLLY ENERGY PARTNERS LP
BOARDWALK PIPELINE PARTNERS, LP
  MAGELLAN MIDSTREAM PARTNERS LP
BUCKEYE PARTNERS LP
  MARKWEST ENERGY PARTNERS LP
COPANO ENERGY, L.L.C.
  MARTIN MIDSTREAM PARTNERS LP
CROSSTEX ENERGY LP
  NUSTAR ENERGY L.P.
DCP MIDSTREAM PARTNERS, LP
  PLAINS ALL AMERICAN PIPELINE LP
EAGLE ROCK ENERGY PARTNERS LP
  QUICKSILVER GAS SERVICES LP
ENERGY TRANSFER PARTNERS, L.P.
  SUNOCO LOGISTICS PARTNERS LP
ENTERPRISE PRODUCTS PARTNERS LP
  TARGA RESOURCES PARTNERS LP

    No company shall be added to, or removed from, the Peer Group during the
Performance Period, except that a company shall be removed from the Peer Group
if, prior to the end of the Performance Period, such company ceases to maintain
publicly available

A-1

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    statements of operations prepared in accordance with GAAP. However, if a
Peer Group company is merged into or becomes acquired by another entity that
maintains such public statements, the surviving public company shall continue to
be a Peer Group company unless the Committee, in its discretion, determines
otherwise.   IV.   Determination of the Vested Percentage of the Phantom Units
(and the DER Accounts)

                                  <Threshold   Threshold   Target   Maximum
Vested Percentage   0%   50%   100%   150%
Percentile Ranking of Company’s TUR against Peer Group Members’ TURs
  <40%     40 %     50 %     75 %

    For results between Threshold and Target and Target and Maximum, the Vested
Percentage shall be determined by linear interpolation between the two
applicable standards based on the TUR results. As soon as reasonably practical
following the end of the Performance Period, but not later than 10 days
thereafter, the Committee shall determine the Performance Goal results for the
Performance Period. However, the requirement for the Committee’s determination
of Performance Goal results shall not apply in the event of a Change of Control
Termination.       Notwithstanding the foregoing, for purposes of determining
the Vested Percentage upon a Change of Control Termination occurring prior to
the end of the Performance Period, the Performance Goal shall be deemed to have
been met at the Maximum level (150%).       If the Vested Percentage as
determined in the above table is in excess of 100% (or, if a Change of Control
Termination occurs during the Performance Period), the number of Phantom Units
granted to you on the Grant Date automatically shall be increased, retroactively
effective as of the Grant Date, so that the number of Phantom Units hereby
deemed granted to you as of the Grant Date equals the product of (i) the number
of Phantom Units stated in Paragraph 1 and (ii) the Vested Percentage applicable
to you. The “additional” Phantom Units hereby credited to you retroactively
effective as of the Grant Date shall each include a tandem DER, which also shall
be deemed credited retroactively effective as of the Grant Date.   V.  
Adjustments to Performance Goal for Significant Events       If, after the
beginning of the Performance Period, there is a change in accounting standards
required by the Financial Accounting Standards Board or the occurrence of a
significant or unusual event with respect to the Partnership or a Peer Group
company, the TUR results for the Partnership or such Peer Group company, as the
case may be, may be adjusted by the Committee, in its sole discretion, as it
determines to be appropriate.

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APPENDIX A
     This Appendix A is attached to the Form of Grant of Phantom Units –
Performance Vesting between the Company and certain of its executive officers
and other employees or service providers. The form of Grant of Phantom Units –
Performance Vesting between the Company and certain of its other executive
officers varies from this Exhibit 10.2 by modifying certain provisions of
Section 3 as described below:
     1. The Form of Grant of Phantom Units between the Company and Byron R.
Kelley also provides for accelerated pro rata vesting of Mr. Kelley’s Phantom
Units and DER Accounts upon his retirement from the Company on or after
Mr. Kelley reaches age 62. The pro rata portion subject to accelerated vesting
upon Mr. Kelley’s retirement from the Company on or after he reaches age 62 will
be determined on the same basis as described in Section 3(a) of this
Exhibit 10.2 with respect to a termination due to death or disability. In
addition, if, prior to the end of a performance period, Mr. Kelley’s employment
with the Company terminates as a result of his retirement on after reaching age
65, then his Phantom Units and DER Accounts will continue to be eligible to vest
at the end of the performance period based on the performance actually achieved
during such period.
     2. The Form of Grant of Phantom Units between the Company and Dennie W.
Dixon also provides for accelerated pro rata vesting of the Phantom Units and
DER Accounts subject to the award agreement upon Mr. Dixon’s retirement from the
Company on or after reaching age 62. The pro rata portion subject to accelerated
vesting upon Mr. Dixon’s retirement will be determined on the same basis as
described in Section 3(a) of this Exhibit 10.2 with respect to a termination due
to death or disability.
Appendix A to
Exhibit 10.2