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 Nine Months
	Ended September 30,				Ended September 30,
	2011		2010		2011		2010
Restricted common unit awards	$	11.9	$	9.6	$	35.4	$	23.3
Unit option awards		0.7		1.0		2.4		2.4
Other (1)		0.2		27.9		--		32.6
Total compensation expense	$	12.8	$	38.5	$	37.8	$	58.3

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

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 September 30, 2011, EPCO's significant long-term incentive plans applicable to us were the Enterprise Products 1998 Long-Term Incentive Plan (“1998 Plan”) and the Amended and Restated 2008 Enterprise Products Long-Term Incentive Plan (“2008 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 September 30, 2011, a total of 1,488,906 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 September 30, 2011, a total of 4,737,750 additional common units could be issued.

In connection with the Duncan Merger, the 2010 Duncan Energy Partners L.P. Long-Term Incentive Plan (“2010 Plan”) was terminated. The 2010 Plan provided for awards to employees, directors or consultants providing services to Duncan Energy Partners. Awards under the 2010 Plan were granted in the form of restricted common units. There were no awards outstanding under the 2010 Plan at September 6, 2011 (i.e., immediately prior to the Duncan Merger). See Note 1 for information regarding the Duncan Merger.

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 are denominated in our common units and, prior to the Duncan Merger, 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 periods 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)		1,381,530		$	43.63
Vested		(886,508	)	$	31.46
Forfeited		(129,899	)	$	33.51
Restricted common units at September 30, 2011		3,926,737		$	34.15

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 September 6, 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 $60.3 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 interests (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 Nine Months
	Ended September 30,				Ended September 30,
	2011		2010		2011		2010
Cash distributions paid to restricted common unit holders	$	2.4	$	2.0	$	7.2	$	5.8
Total intrinsic value of restricted common unit awards vesting during period	$	2.3	$	0.6	$	37.5	$	12.0

For the EPCO group of companies, the unrecognized compensation cost associated with restricted common unit awards was an aggregate $61.3 million at September 30, 2011, of which our allocated share of the cost is currently estimated to be $57.9 million. We expect to recognize our share of the unrecognized compensation cost for these awards over a weighted-average period of 1.9 years.

Unit Option Awards

EPCO's long-term incentive plans provide for the issuance of non-qualified incentive options. These unit option awards are denominated in our common units. When issued, the exercise price of each unit option award may be no less than the market price of our common units 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 our common units, 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 our common units 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:

	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 September 30, 2011		3,753,420	$	28.08		2.9	$	6.7
Options exercisable at September 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 September 30, 2011 if all outstanding options awarded were exercised. Option awards outstanding at September 30, 2011 include 712,280 awards that vested during the first nine months of 2011. Of the remaining outstanding option awards at September 30, 2011, 736,000, 1,520,140 and 785,000 will vest in 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 Ended September 30, 2010		For the Nine Months Ended September 30, 2010
Total intrinsic value of unit option awards exercised during period	$	7.5	$	9.7
Cash received from EPCO in connection with the exercise of unit option awards		5.0		6.6
Unit option-related reimbursements to EPCO		7.5		9.7

For the EPCO group of companies, the unrecognized compensation cost associated with unit option awards was an aggregate $4.4 million at September 30, 2011, of which our allocated share of the cost is currently estimated to be $3.9 million. We expect to recognize our share of the unrecognized compensation cost for these awards over a weighted-average period of 1.7 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 our common units over the grant date fair value of the award. UARs are accounted for as liability awards.

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

UARs at December 31, 2010	170,104
Vested	(17,776	)
Settled or forfeited	(45,000	)
UARs at September 30, 2011	107,328

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

At September 30, 2011, 107,328 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 September 30, 2011 and $0.2 million for the three months ended September 30, 2010. For the nine months ended September 30, 2011 and 2010, equity-based compensation associated with UARs was a credit of $0.6 million and an expense of $0.5 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 nine months ended September 30, 2010 includes $27.5 million and $31.3 million, respectively, of expense associated with these limited partnership interests.