What are Performance Units and Phantom Units?

Performance Units are awards granted to executives whose vesting is contingent on the Partnership achieving specific performance targets, in this case, related to total unitholder return compared to a peer group. Phantom Units are also awards that mimic the value of common units but do not grant actual ownership until vesting; they typically vest over a set period. Both are designed to incentivize executives and align their interests with unitholders.

How will the Performance Units be settled?

Upon vesting, the Performance Units will be settled 25% in MPLX LP common units and 75% in cash. The actual number of units that vest can range from 0% to 200% of the target grant, depending on MPLX LP's performance relative to its peer group during the performance cycle.

What is the vesting schedule for the Phantom Units?

The Phantom Units vest in three approximately equal installments on February 27, 2014, February 27, 2015, and February 27, 2016.

Do these awards have any impact on common unitholders?

Yes, these awards are designed to incentivize executive performance, which is intended to drive long-term unitholder value. The settlement of Performance Units partly in common units will increase the number of outstanding units, while Phantom Unit vesting will also result in the issuance of common units, potentially diluting existing unitholders, but this is typically offset by the intended increase in company value and performance.

MPLX/MPLXP 8-K: Leadership Changes

Summary

This Form 8-K filing by MPLX LP (MPLX) on March 4, 2013, details the grant of performance units and phantom units to its named executive officers under the MPLX LP 2012 Incentive Compensation Plan. These awards, approved on February 27, 2013, are designed to incentivize and retain key leadership by tying compensation to the Partnership's future performance and unitholder returns. The grants reflect a strategic move to align executive interests with those of common unitholders, particularly through performance-based vesting and settlement mechanisms that involve both common units and cash. The Performance Units are contingent on MPLX LP's total unitholder return relative to its peer group over a defined performance cycle, with payouts ranging from 0% to 200% of the target grant. Settlement will occur 25% in common units and 75% in cash. The Phantom Units vest over three years (February 27, 2014, 2015, and 2016) and include distribution equivalent rights, settling into common units upon vesting. These awards signal management's commitment and potential future growth prospects of MPLX LP.

Key Highlights

1MPLX LP approved grants of Performance Units and Phantom Units to its named executive officers on February 27, 2013.
2The awards are made under the MPLX LP 2012 Incentive Compensation Plan.
3Performance Units are tied to MPLX LP's total unitholder return compared to a peer group, with vesting contingent on performance over a cycle.
4Performance Units vest with 25% settlement in common units and 75% in cash.
5Phantom Units vest over three years, with each unit settling into one common unit.
6Phantom Units include distribution equivalent rights, entitling recipients to cash distributions accrued during the vesting period.
7These awards aim to align executive compensation with long-term unitholder value and retention.

MPLX LP 8-K Report, Executive Changes (Mar 5, 2013)

Summary

Key Highlights

Frequently Asked Questions