Note 3. Equity-based Awards

An allocated portion of the fair value of EPCO's equity-based awards is charged to us under the ASA. The following table summarizes the expense we recognized in connection with equity-based awards for the periods presented:

	For the Three Months				For the Six Months
	Ended June 30,				Ended June 30,
	2011		2010		2011			2010
Restricted unit awards	$	12.1	$	7.9	$	23.5		$	13.7
Unit option awards		0.8		0.7		1.7			1.4
Other (1)		0.3		2.5		(0.2	)		4.7
Total compensation expense	$	13.2	$	11.1	$	25.0		$	19.8

(1) Primarily consists of unit appreciation rights (“UARs”), phantom units and similar awards. Also, the amounts presented for 2010 consist of awards related to limited partnership interests in the Employee Partnerships.

The fair value of equity-classified awards (e.g., restricted common unit and unit option awards) is amortized to earnings over the requisite service or vesting period. Compensation expense for liability-classified awards (e.g., UARs and phantom units) is recognized over the requisite service or vesting period based on the fair value of the award remeasured at each reporting period. Liability-classified awards are settled in cash upon vesting.

At June 30, 2011, EPCO's significant long-term incentive plans applicable to us were the Enterprise Products 1998 Long-Term Incentive Plan (“1998 Plan”), the Amended and Restated 2008 Enterprise Products Long-Term Incentive Plan (“2008 Plan”) and the 2010 Duncan Energy Partners L.P. Long-Term Incentive Plan (“2010 Plan”). In addition, there were unvested awards outstanding under an inactive plan, the Enterprise Products 2006 TPP Long-Term Incentive Plan (“2006 Plan”).

The 1998 Plan provides for awards of our common units and other rights to our non-employee directors and to employees of EPCO and its affiliates providing services to us. Awards under the 1998 Plan may be granted in the form of unit options, restricted common units, phantom units and distribution equivalent rights (“DERs”). Up to 7,000,000 of our common units may be issued as awards under the 1998 Plan. After giving effect to awards granted under the plan through June 30, 2011, a total of 1,475,190 additional common units could be issued.

The 2008 Plan provides for awards of our common units and other rights to our non-employee directors and to consultants and employees of EPCO and its affiliates providing services to us. Awards under the 2008 Plan may be granted in the form of unit options, restricted common units, phantom units, UARs and DERs. Up to 10,000,000 of our common units may be issued as awards under the 2008 Plan. After giving effect to awards granted under the plan through June 30, 2011, a total of 4,706,877 additional common units could be issued.

The 2010 Plan provides for awards to employees, directors or consultants providing services to Duncan Energy Partners. Awards under the 2010 Plan may be granted in the form of options to purchase Duncan Energy Partners' common units, restricted common units, UARs, phantom units and DERs. Up to 500,000 of Duncan Energy Partners' common units may be issued as awards under the 2010 Plan. After giving effect to awards granted under the plan through June 30, 2011, a total of 489,986 additional common units could be issued. The Duncan Merger Agreement contains restrictions on the issuance of additional awards under the 2010 Plan. See Note 1 for information regarding the proposed merger of Duncan Energy Partners with a subsidiary of Enterprise.

Restricted Common Unit Awards

Restricted common unit awards allow recipients to acquire (at no cost to the recipient apart from service or other conditions) limited partner units once a defined vesting period expires, subject to customary forfeiture provisions. Restricted common unit awards may be denominated in our common units or those of Duncan Energy Partners depending on the issuer of the award. Restricted common unit awards issued prior to 2010 generally cliff vest four years from the date of grant. Beginning with awards issued in 2010, restricted common unit awards are typically subject to graded vesting provisions in which one-fourth of each award vests on the first, second, third and fourth anniversaries of the date of grant. As used in the context of EPCO's long-term incentive plans, the term “restricted common unit” represents a time-vested unit. Such awards are non-vested until the required service period expires. Restricted common units are included in the number of common units presented on our Unaudited Condensed Consolidated Balance Sheets.

The fair value of a restricted common unit award is based on the market price per unit of the underlying security on the date of grant. Compensation expense is recognized based on the grant date fair value, net of an allowance for estimated forfeitures, over the requisite service or vesting period.

The following table presents information regarding restricted common unit awards for the period presented:

	Number of Units			Weighted- Average Grant Date Fair Value per Unit (1)
Enterprise restricted common unit awards:
Restricted common units at December 31, 2010		3,561,614		$	29.78
Granted (2)		1,359,230		$	43.68
Vested		(828,545	)	$	31.57
Forfeited		(75,857	)	$	32.67
Restricted common units at June 30, 2011		4,016,442		$	34.06

Duncan Energy Partners restricted common unit awards:
Restricted common units at December 31, 2010		--		$	--
Granted (3)		3,666		$	32.56
Vested (3)		(3,666	)	$	32.56
Restricted common units at June 30, 2011		--		$	--

(1) Determined by dividing the aggregate grant date fair value of awards (before an allowance for forfeitures) by the number of awards issued. (2) The aggregate grant date fair value of restricted common unit awards issued in 2011 was $59.4 million based on a grant date market price of our common units ranging from $40.54 to $43.70 per unit. An estimated annual forfeiture rate of 4.6% was applied to these awards. (3) The aggregate grant date fair value of restricted common unit awards issued in 2011 was $0.1 million based on a grant date market price of Duncan Energy Partners' common units of $32.56 per unit. These awards vested upon issuance.

Typically, each recipient is also entitled to nonforfeitable cash distributions equal to the product of the number of restricted common units outstanding for the participant and the cash distribution per unit paid by the respective issuer. Since these restricted common units are participating securities, such distributions are included in cash distributions paid to partners (post-Holdings Merger) and cash distributions paid to noncontrolling interest (pre-Holdings Merger) as presented on our Unaudited Condensed Statements of Consolidated Cash Flows.

The following table presents cash distributions paid with respect to our restricted common units and the total intrinsic value of restricted common units that vested during the periods presented:

	For the Three Months				For the Six Months
	Ended June 30,				Ended June 30,
	2011		2010		2011		2010
Cash distributions paid to restricted common unit holders	$	2.7	$	2.3	$	4.8	$	3.8
Total intrinsic value of restricted common unit awards vesting during period		20.5		10.3		35.2		11.4

For the EPCO group of companies, the unrecognized compensation cost associated with restricted common unit awards was an aggregate $73.5 million at June 30, 2011, of which our allocated share of the cost is currently estimated to be $69.4 million. We expect to recognize our share of the unrecognized compensation cost for these awards over a weighted-average period of 2.0 years.

Unit Option Awards

EPCO's long-term incentive plans provide for the issuance of non-qualified incentive options. These unit option awards may be denominated in our common units or those of Duncan Energy Partners depending on the issuer of the award. When issued, the exercise price of each unit option award may be no less than the market price of the underlying security on the date of grant. In general, these unit option awards have a vesting period of four years from the date of grant and expire five years after the date of grant.

The fair value of each unit option is estimated on the date of grant using a Black-Scholes option pricing model, which incorporates various assumptions including expected life of the option, risk-free interest rates, expected distribution yield of the underlying security, and expected unit price volatility. In general, our assumptions regarding the expected life of the options represent the period of time that the options are expected to be outstanding based on an analysis of our historical option activity. Our selection of risk-free interest rates is based on published yields for U.S. government securities with comparable terms. The unit price volatility and expected distribution yield assumptions are based on several factors, including an analysis of the underlying security's historical market price and its distribution yield over a period of time equal to the expected life of the option, respectively. Compensation expense recorded in connection with unit options is based on the grant date fair value of such awards, net of an allowance for estimated forfeitures, over the requisite service or vesting period.

The following table presents unit option activity for the period presented. As of June 30, 2011, only Enterprise has issued unit option awards.

	Number of Units		Weighted- Average Strike Price (dollars/unit)		Weighted- Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value (1)
Unit options at December 31, 2010		3,753,420	$	28.08		3.6	$	--
Unit options at June 30, 2011		3,753,420	$	28.08		3.1	$	7.3
Options exercisable at June 30, 2011 (2)		--				--	$	--

(1) Aggregate intrinsic value reflects fully vested unit options at the date indicated. There were no vested unit options outstanding at December 31, 2010. (2) We were committed to issue 3,753,420 of our common units at June 30, 2011 if all outstanding options awarded were exercised. Option awards outstanding at June 30, 2011 include 612,280 awards that vested during the first six months of 2011. Of the remaining outstanding option awards at June 30, 2011, 100,000, 736,000, 1,520,140 and 785,000 will vest in 2011, 2012, 2013, and 2014, respectively. These unit option awards become exercisable in the calendar year following the year in which they vest.

In order to fund its unit option-related obligations, EPCO may purchase common units at fair value either in the open market or directly from us. When employees exercise unit options, we reimburse EPCO for the cash difference between the strike price paid by the employee and the actual purchase price paid by EPCO for the units issued to the employee.

The following table presents supplemental information regarding our unit options during the periods presented:

	For the Three Months				For the Six Months
	Ended June 30,				Ended June 30,
	2011		2010		2011		2010
Total intrinsic value of unit option awards exercised during period	$	--	$	1.3	$	--	$	2.2
Cash received from EPCO in connection with the exercise of unit option awards		--		1.0		--		1.6
Unit option-related reimbursements to EPCO		--		1.3		--		2.2

For the EPCO group of companies, the unrecognized compensation cost associated with unit option awards was an aggregate $5.0 million at June 30, 2011, of which our allocated share of the cost is currently estimated to be $4.5 million. We expect to recognize our share of the unrecognized compensation cost for these awards over a weighted-average period of 1.9 years.

Other

Unit appreciation rights. UARs entitle the recipient to receive a cash payment on the vesting date of the award equal to the excess, if any, of the then current fair market value of the underlying security over the grant date fair value of the award. UARs are accounted for as liability awards. All of the UARs outstanding at June 30, 2011 are denominated in Enterprise common units.

The following tables present information regarding UARs for the period presented:

UARs at December 31, 2010	170,104
Vested	(10,939	)
Settled or forfeited	(45,000	)
UARs at June 30, 2011	114,165

		June 30, 2011				December 31, 2010
Accrued liability for UARs		$	0.4			$	1.0

At June 30, 2011, 114,165 UARs that had been granted under the 2006 Plan to certain employees of EPCO who work on our behalf were outstanding. These awards are subject to five-year cliff vesting requirements and are expected to settle in 2012. The grant date fair value with respect to these UARs is based on a unit price of $37.00 for our common units. If the employee resigns prior to vesting, the UARs are forfeited. Equity-based compensation expense associated with UARs was minimal for the three months ended June 30, 2011 and $0.2 million for the three months ended June 30, 2010. For the six months ended June 30, 2011 and 2010, equity-based compensation expense associated with UARs was a credit of $0.6 million and an expense of $0.3 million, respectively.

Limited partnership interests. EPCO granted its key employees who perform services on behalf of us, EPCO and other affiliated companies, limited partnership interests in the Employee Partnerships, which were privately held affiliates of EPCO. These partnerships were liquidated in August 2010. Prior to liquidation, the limited partnership interests entitled each holder to participate in the expected long-term appreciation in value of the equity securities owned by each Employee Partnership. Each Employee Partnership owned either Enterprise common units or Holdings' units or a combination of both. Equity-based compensation expense for the three and six months ended June 30, 2010 includes $1.9 million and $3.8 million, respectively, of expense associated with these limited partnership interests.