Sunoco 2012 Annual Report Download - page 128

•Unit Options. The LTIP currently permits the grant of options covering common units. No unit
options have been granted since the inception of the LTIP in 2002. However, in the future, the
Compensation Committee may grant unit options under the LTIP to employees and directors,
containing such terms as the Compensation Committee shall determine.
•Accounting and Tax Considerations. We account for the equity compensation expense of our general
partner’s employees, including the NEOs, in accordance with U.S. generally accepted accounting
principles, or GAAP, which requires us to estimate and record an expense for each equity award over the
vesting period of the award. For performance-based restricted units that are paid out in the form of
common units, the value of our common units on the date of grant is used for determining the expense,
with an adjustment for the actual performance factors achieved. Thus, the expense for performance-based
restricted units payable in units generally is not adjusted for changes in the trading price of our common
units after the date of grant. For market-based awards, the value is determined using a Monte Carlo
simulation. The expense for unit options and stock-settled restricted units is recognized ratably over the
vesting period. For cash compensation, the accounting rules require us to record it as an expense at the
time the obligation is accrued. Because we are a partnership, and our general partner is a limited liability
company, Code Section 162(m) does not apply to the compensation paid to our NEOs and, accordingly,
our general partner’s Compensation Committee did not consider its impact in determining compensation
levels for 2012. In deciding to grant long-term incentive awards of restricted units, rather than unit
options, our general partner’s Compensation Committee did consider the tax implications to us.
•Equity Grant Practices. Equity awards to employees are approved at meetings of our general partner’s
Compensation Committee. In exigent circumstances, however, such awards may be approved by
unanimous written consent of the Compensation Committee. The grant date of an equity award is the date
of the Compensation Committee meeting at which such equity award is approved. The Compensation
Committee may, in its discretion, refrain from approving grants of equity awards to employees if the
meeting at which such approval is to be considered occurs during a period in which management is in
possession of material non-public information, in which case, approval of such equity awards may be
deferred to the next Compensation Committee meeting. No grant approvals were deferred to a later
Compensation Committee meeting in 2012.
•Determination of the Amounts Awarded under the LTIP. In conjunction with the review and approval of
other elements of each NEO’s compensation, the annual LTIP awards of restricted units for 2012 were
reviewed and approved at the Compensation Committee’s January 2012 meeting and the grant date was
the date of the meeting. As appropriate, the Compensation Committee may also review and approve
specific LTIP awards to executive officers at other times during the year in connection with their hiring,
or promotion. In determining the appropriate long-term value for each executive, the Compensation
Committee reviews the level of responsibility and total compensation of each executive, and the
competitive market data presented by the compensation consultant. The Compensation Committee
approved the specific awards granted to each NEO, and also approved the aggregate pool of awards to be
granted to other key employees. In general, the target number of restricted units granted to each executive
officer under the LTIP is calculated by taking the product of such officer’s base salary and the applicable
guideline percentage for that officer, and then dividing by the average daily closing market price of our
common units during the last ten (10) trading days prior to the meeting at which the LTIP grant will be
approved. Under no circumstances may the aggregate number of units granted to a single executive
exceed the maximum applicable limit(s) under the LTIP. When approving grants to executives, including
the NEOs, the Compensation Committee may consider information provided by the Chief Executive
Officer, except with respect to the Chief Executive Officer’s own grants. The Compensation Committee
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