(14) EQUITY BASED COMPENSATION

TransMontaigne GP is our general partner and manages our operations and activities. Prior to February 1, 2016, TransMontaigne GP was a wholly owned subsidiary of TransMontaigne LLC, which is a wholly owned subsidiary of NGL. TransMontaigne Services LLC, which is a wholly owned subsidiary of TransMontaigne LLC, had a long‑term incentive plan and a savings and retention program to compensate through incentive bonus awards certain employees and independent directors of our general partner who provided services with respect to the business of our general partner.

Long-term incentive plan. On February 26, 2016, the board of our general partner approved, subject to the approval of our unitholders, the TLP Management Services LLC 2016 long-term incentive plan and the TLP Management Services LLC savings and retention program (discussed further below) which constitutes a program under, and is subject to, the 2016 long-term incentive plan, which replaced the TransMontaigne Services LLC long-term incentive plan and the TransMontaigne Services savings and retention program. TLP Management Services LLC is a wholly owned indirect subsidiary of ArcLight. On July 12, 2016, we held a special meeting of unitholders at which time the 2016 long-term incentive plan was approved by our unitholders.

The 2016 long-term incentive plan operates in a manner similar to the TransMontaigne Services LLC long-term incentive plan used previously. The 2016 long-term incentive plan reserves 750,000 common units to be granted as awards under the plan, with such amount subject to adjustment as provided for under the terms of the plan if there is a change in our common units, such as a unit split or other reorganization. The common units authorized to be granted under the 2016 long-term incentive plan are registered pursuant to a registration statement on Form S-8.

The 2016 long‑term incentive plan is administered by the compensation committee of the board of directors of our general partner and is primarily used for grants of restricted phantom units to the independent directors of our general partner. The grants to the independent directors of our general partner have historically vested and were payable annually in equal tranches over a four-year period, subject to accelerated vesting upon a change in control of TransMontaigne GP. Ownership in the awards is subject to forfeiture until the vesting date, but recipients have distribution and voting rights from the date of the grant.

In connection with the ArcLight acquisition of our general partner, effective February 1, 2016, all of the restricted phantom units previously granted to the independent directors vested and were satisfied via the delivery of our common units.

TransMontaigne GP had historically acquired outstanding common units on the open market under a purchase program for purposes of delivering vested units to the independent directors of our general partner. The purchase program concluded with its final purchase of 667 units on the program’s scheduled termination date of April 1, 2015. Future grants of restricted phantom units under the 2016 long‑term incentive plan are expected to be settled by us through the issuance of common units pursuant to our registration statement on Form S-8.

Activity under the long-term incentive plan for the nine months ended September 30, 2016 is as follows:


	Restricted	NYSE
	phantom	closing
	units	price
Restricted phantom units outstanding at December 31, 2015	15,750
Vesting on February 1, 2016	(15,750)	$	30.41
Restricted phantom units outstanding at September 30, 2016	—

Generally accepted accounting principles require us to measure the cost of board member services received in exchange for an award of equity instruments based on the grant‑date fair value of the award. That cost is recognized over the vesting period on a straight line basis during which a board member is required to provide services in exchange for the award with the costs being accelerated upon the occurrence of accelerated vesting events, such as a change in control of our general partner. In connection with the ArcLight acquisition of our general partner, effective February 1, 2016, 15,750 restricted phantom units previously granted to the independent directors vested and were satisfied via the delivery of our common units. For awards to the independent directors of our general partner, equity‑based compensation of approximately $520,000 and $70,000 is included in direct general and administrative expenses for the nine months ended September 30, 2016 and 2015, respectively

Savings and retention program. On February 26, 2016, the board of our general partner unanimously approved the new TLP Management Services LLC savings and retention program, subject to the approval of our unitholders, for employees who provide services with respect to our business. This plan is intended to constitute a program under, and be subject to, the TLP Management Services LLC 2016 long-term incentive plan described above. On July 12, 2016, we held a special meeting of unitholders at which time our unitholders approved the 2016 long-term incentive plan and savings and retention program. The new savings and retention program was used for incentive bonus awards in March 2016 and is intended to be used for future awards to employees. The new savings and retention program operates in a manner substantially similar to the TransMontaigne Services LLC savings and retention program used previously.

Ownership in the restricted phantom units under the savings and retention program is subject to forfeiture until the vesting date, but recipients have distribution equivalent rights from the date of grant that accrue additional restricted phantom units equivalent to the value of quarterly distributions paid by us on each of our outstanding common units. Recipients of restricted phantom units under the savings and retention program do not have voting rights.

The purpose of the savings and retention program is to provide for the reward and retention of participants by providing them with bonus awards that vest over future service periods. Awards under the plan generally become vested and payable as to 50% of a participant’s annual award as of the first day of the month that falls closest to the second anniversary of the grant date, and the remaining 50% as of the first day of the month that falls closest to the third anniversary of the grant date, subject to earlier vesting upon a participant’s attainment of the age and length of service thresholds, retirement, death or disability, involuntary termination without cause, or termination of a participant’s employment following a change in control of the Partnership, our general partner or TLP Management Services LLC, as specified in the plan.

A person will satisfy the age and length of service thresholds of the plan upon the attainment of the earliest of (a) age sixty, (b) age fifty five and ten years of service as an officer of TLP Management Services LLC or any of its affiliates or predecessors, or (c) age fifty and twenty years of service as an employee of TLP Management Services LLC or any of its affiliates or predecessors.

Effective April 13, 2015 and beginning with the 2015 incentive bonus award and continuing under the new savings and retention program, under the omnibus agreement we have the option to provide the reimbursement in either a cash payment or the delivery of our common units to the savings and retention program or alternatively directly to the award recipients, with the reimbursement made in accordance with the underlying vesting and payment schedule of the savings and retention program. Our reimbursement for the 2015 and 2016 incentive bonus awards is reduced for forfeitures and is increased for the value of quarterly distributions accrued under the distribution equivalent rights. We have the intent and ability to settle our reimbursement for the 2015 and 2016 incentive bonus awards in our common units, and accordingly, effective April 13, 2015, we began accounting for the 2015 incentive bonus award as an equity award. Prior to the 2015 incentive bonus award, we reimbursed our portion of the incentive bonus awards through monthly cash payments to the savings and retention program over the first year that each applicable award was granted.

For certain senior level employees, including the executive officers of our general partner, all prior grants under the TransMontaigne Services LLC savings and retention program vested upon the change in control of our general partner as a result of the ArcLight acquisition that occurred on February 1, 2016.

Given that we do not have any employees to provide corporate and support services and instead we contract for such services under the omnibus agreement, generally accepted accounting principles require us to classify the savings and retention program awards as a non-employee award and measure the cost of services received in exchange for an award of equity instruments based on the vesting‑date fair value of the award. That cost, or an estimate of that cost in the case of unvested restricted phantom units, is recognized over the period during which services are provided in exchange for the award. For the three months ended September 30, 2016 and 2015, the expense associated with the reimbursement of incentive bonus awards was approximately $0.3 million and $0.1 million, respectively. For the nine months ended September 30, 2016 and 2015, the expense associated with the reimbursement of incentive bonus awards was approximately $2.1 million and $1.2 million, respectively.

Activity related to our equity based awards granted under the savings and retention program for services performed under the omnibus agreement for the nine months ended September 30, 2016 is as follows:


			NYSE
			closing
	Vested	Unvested	price
Restricted phantom units outstanding at December 31, 2015	30,203	30,616
Vesting of units on February 1, 2016	19,372	(19,372)	$	30.41
Unit accrual for distributions paid on February 8, 2016	1,132	257	$	29.34
Grant on March 2, 2016	31,022	28,945	$	34.23
Unit accrual for distributions paid on May 9, 2016	1,415	700	$	39.28
Vesting of units on June 13, 2016	582	(582)	$	38.68
Unit accrual for distributions paid on August 8, 2016	1,370	664	$	42.18
Issuance of units on September 6, 2016	(1,643)	—	$	42.41
Restricted phantom units outstanding at September 30, 2016	83,453	41,228