Plains All American Pipeline, L.P. (NYSE:PAA) Files An 8-K Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain OfficersItem 5.02. Departure of Directors and Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
On August20, 2018, Plains All American Pipeline, L.P. (“PAA” or the “Registrant”) and Plains GP Holdings, L.P. (collectively with PAA, “Plains”) issued a press release announcing October1, 2018 as the effective date of Greg L. Armstrong’s retirement as Chief Executive Officer (“CEO”), which retirement was previously announced on November6, 2017. Plains also announced that Willie Chiang, who currently serves as Executive Vice President and Chief Operating Officer, has been formally approved by the Board of Directors of PAA GP Holdings LLC (the “Board”) to become CEO effective upon Mr.Armstrong’s retirement. Following his retirement as CEO, Mr.Armstrong will remain on the Board as non-executive Chairman through the end of 2019.
In connection with Mr.Chiang’s transition to the CEO role, the Board also approved a special grant of 500,000 additional phantom units under PAA’s long-term incentive plan (“LTIP”) and, effective October1, 2018, an increase in Mr.Chiang’s annual salary from $400,000 to $600,000. No changes were made to the percentage targets used for Mr.Chiang’s annual bonus target (250% of base salary) or annual LTIP award (500% of base salary), although the annual target values for each such element of Mr.Chiang’s annual compensation will increase as a result of the increase in Mr.Chiang’s base salary. The special grant of phantom units under PAA’s LTIP is designed to more closely align Mr.Chiang’s total compensation as CEO with the total compensation of CEOs at peer organizations, but do so through a long term contingent equity award that will only provide incremental value to Mr.Chiang upon the satisfaction of certain performance thresholds and/or service periods. Accordingly, the phantom units under Mr.Chiang’s special grant will vest (become payable 1-for-1 in PAA common units) as follows: (1)25% will vest upon the later of October1, 2023 and the first distribution date on which PAA will have generated distributable cash flow (“DCF”) of at least $3.00 per common unit on a trailing four quarter basis, and (2)75% will vest upon the later of October1, 2023 and the first distribution date on which PAA will have generated DCF of at least $3.50 per common unit on a trailing four quarter basis, in both cases with the initial performance-related measurement period beginning January1, 2021. The phantom units include tandem distribution equivalent rights (“DERs”) that will vest (begin paying common unit equivalent distributions) as follows: (1)one-third will vest on the first distribution date on which PAA generates DCF of at least $2.50 per unit on a trailing four quarter basis, (2)one-third will vest on the first distribution date following January1, 2020 on which PAA generates DCF of at least $2.60 per unit on a trailing four quarter basis, and (3)one-third will vest on the first distribution date following January1, 2020 on which PAA generates DCF of at least $2.80 per unit on a trailing four quarter basis. Any LTIPs and/or DERs that have not vested by October1, 2025 will expire at that time. Such special grant of phantom units will also include other terms and provisions that are customarily included in LTIP awards issued by PAA to its senior executive officers, including a “double trigger” change of control provision that generally provides for 50% vesting of all unvested phantom units in the event of a change of control of PAA that results in a termination of Mr.Chiang’s employment, a material diminution in his authority, duty or responsibilities or a material reduction of his base salary.
Beginning October1, 2018, Mr.Armstrong will receive an annual retainer of $250,000 for his services as non-executive Chairman.
A copy of the press release issued on August20, 2018 is filed as Exhibit99.1 to this Current Report on Form8-K. and incorporated into this item by reference. Additional information regarding Mr.Chiang’s business experience and current compensation arrangements is included in the Registrant’s Proxy Statement for the 2018 Annual Meeting of Unitholders as filed with the SEC on April5, 2018.
Item 5.02. Amendments to Articles of Incorporation of Bylaws; Change in Fiscal Year.
On August16, 2018, the Board approved an amendment to the Third Amended and Restated Limited Liability Company Agreement of PAA GP Holdings LLC to reflect the separation of the Chairman and CEO roles. A copy of the amendment, which will be effective on October1, 2018, is filed as Exhibit3.1 to this Current Report on Form8-K and incorporated into this item by reference.
Item 5.02. Financial Statements and Exhibits.
(d) Exhibits