Note 5. 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 Year Ended December 31,
	2012		2011		2010
Restricted common unit awards	$	57.0	$	47.5	$	31.5
Unit option awards		1.3		3.1		3.4
Other (1)		1.7		0.3		35.5
Total compensation expense	$	60.0	$	50.9	$	70.4

(1) Primarily consists of unit appreciation rights ("UARs"), phantom units and similar awards. Also, the amounts presented for 2010 include $31.3 million of compensation expense for 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 December 31, 2012, 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 1998 Plan through December 31, 2012, a total of 852,974 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 2008 Plan through December 31, 2012, a total of 5,167,075 additional common units could be issued.

The 2006 Plan provided for awards of our common units (formerly of TEPPCO units) and other rights to our non-employee directors and to employees of EPCO and its affiliates providing services to us. There were a small number of unit options and restricted units remaining outstanding under the 2006 Plan at December 31, 2012. There are no plans to issue additional awards under the 2006 Plan.

Restricted Common Unit Awards

Restricted common unit awards allow recipients to acquire our common units (at no cost to the recipient apart from service or other conditions) once a defined vesting period expires, subject to customary forfeiture provisions. For awards granted prior to 2010, the restrictions on such awards generally lapse four years from the date of grant. Beginning in 2010, new restricted common unit awards generally vest at a rate of 25% per year beginning one year after the grant date. 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 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:

				Weighted-
				Average Grant
	Number of			Date Fair Value
	Units			per Unit (1)
Enterprise restricted common unit awards:
Restricted common units at December 31, 2009		2,720,882		$	27.70
Granted (2,5)		1,393,925		$	32.60
Vested (5)		(383,628	)	$	25.51
Forfeited		(169,565	)	$	29.87
Restricted common units at December 31, 2010		3,561,614		$	29.78
Granted (3,6)		1,414,630		$	43.66
Vested (6)		(924,108	)	$	31.54
Forfeited		(183,920	)	$	34.27
Restricted common units at December 31, 2011		3,868,216		$	34.22
Granted (4,7)		1,588,738		$	51.96
Vested (7)		(1,316,603	)	$	34.80
Forfeited		(246,865	)	$	40.43
Restricted common units at December 31, 2012		3,893,486		$	40.87

Duncan Energy Partners restricted common unit awards:
Restricted common units at December 31, 2009		--		$	--
Granted (5,8)		6,348		$	25.26
Vested (5)		(6,348	)	$	25.26
Restricted common units at December 31, 2010		--		$	--
Granted (6,9)		3,666		$	32.56
Vested (6)		(3,666	)	$	32.56
Restricted common units at September 6, 2011		--		$	--

Holdings restricted common unit awards:
Restricted common units at December 31, 2009		--		$	--
Granted (5,10)		3,424		$	41.47
Vested (5)		(3,424	)	$	41.47
Restricted common units at November 21, 2010		--		$	--

(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 during 2010 was $45.4 million based on grant date market prices of our common units ranging from $32.00 to $43.18 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 during 2011 was $61.8 million based on a grant date market price of our common units ranging from $40.54 to $44.67 per unit. An estimated annual forfeiture rate of 4.6% was applied to these awards. (4) The aggregate grant date fair value of restricted common unit awards issued during 2012 was $82.5 million based on a grant date market price of our common units ranging from $51.92 to $53.54 per unit. An estimated annual forfeiture rate of 3.25% was applied to these awards. (5) Includes awards granted to the independent directors of the boards of directors of EPGP, DEP GP and Holdings GP as part of their annual compensation for 2010. A total of 6,960, 6,348 and 3,424 restricted common unit awards were issued in February 2010 to the independent directors of EPGP, DEP GP and Holdings GP, respectively, which immediately vested upon issuance. (6) Includes awards granted to the independent directors of the boards of directors of Enterprise GP and DEP GP as part of their annual compensation for 2011. A total of 10,230 and 3,666 restricted common unit awards were issued in February 2011 to the independent directors of Enterprise GP and DEP GP, respectively, which immediately vested upon issuance. (7) Includes awards granted to the independent directors of the board of directors of Enterprise GP as part of their annual compensation for 2012. A total of 10,038 restricted common unit awards were issued in February 2012 to the independent directors of Enterprise GP, which immediately vested upon issuance. (8) The aggregate grant date fair value of restricted common unit awards issued during 2010 denominated in Duncan Energy Partners' common units was $0.2 million based on a grant date market price of Duncan Energy Partners' common units of $25.26 per unit. (9) The aggregate grant date fair value of restricted common unit awards issued during 2011 denominated in Duncan Energy Partners' common units was $0.1 million based on a grant date market price of Duncan Energy Partners' common units of $32.56 per unit. (10) The aggregate grant date fair value of restricted common unit awards issued during 2010 denominated in Holdings' units was $0.1 million based on a grant date market price of Holdings' units of $41.47 per unit.

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 limited partners (post-Holdings Merger) and cash distributions paid to noncontrolling interests (pre-Holdings Merger) as presented on our Statements of Consolidated Cash Flows.

The following table presents supplemental information regarding our restricted common unit awards for the periods presented:

	For Year Ended December 31,
	2012		2011		2010
Cash distributions paid to restricted common unit holders	$	10.5	$	9.6	$	8.0
Total intrinsic value of our restricted common unit awards that vested during period	$	67.0	$	39.1	$	13.9

For the EPCO group of companies, the unrecognized compensation cost associated with restricted common unit awards was an aggregate $58.4 million at December 31, 2012, of which our allocated share of the cost is currently estimated to be $54.2 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, option awards have a vesting period of four years from the date of grant and expire at the end of the calendar year following the year of vesting (e.g., an option vesting on May 29, 2011 will expire on December 31, 2012). However, unit option awards only become exercisable at certain times during the calendar year following the year in which they vest (typically the months of February, May, August and November).

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 price volatility of our common units. In general, our assumption of expected life of the options represents 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 terms comparable to the expected life of the option. The expected distribution yield and unit price volatility assumptions are estimated based on several factors, which include an analysis of historical price volatility and distribution yield over a period of time equal to the expected life of the option. Compensation expense recorded in connection with unit option awards is 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 unit option award activity for the periods presented:

						Weighted-
				Weighted-		Average
				Average		Remaining		Aggregate
	Number of			Strike Price		Contractual		Intrinsic
	Units			(dollars/unit)		Term (in years)		Value (1)
Unit option awards at December 31, 2009		3,825,920		$	26.52
Granted (2)		785,000		$	32.26
Exercised		(857,500	)	$	24.98
Unit option awards at December 31, 2010 and 2011		3,753,420		$	28.08
Exercised		(742,280	)	$	30.77
Forfeited		(250,000	)	$	27.45
Unit option awards at December 31, 2012 (3,4)		2,761,140		$	27.41		2.0	$	13.0

(1) Aggregate intrinsic value reflects fully vested unit option awards at the date indicated. (2) Aggregate grant date fair value of these unit option awards issued during 2010 was $2.3 million based on the following assumptions: (i) a weighted-average grant date market price of our common units of $32.26 per unit; (ii) weighted-average expected life of options of 4.9 years; (iii) weighted-average risk-free interest rate of 2.5%; (iv) weighted-average expected distribution yield on our common units of 6.9%; and (v) weighted-average expected unit price volatility on our common units of 23.3%. An estimated annual forfeiture rate of 4.6% was applied to awards granted during 2010. (3) At December 31, 2012 and 2011, we were committed to issue 2,761,140 and 3,753,420, respectively, of our common units if all outstanding unit option awards were exercised. Option awards outstanding at December 31, 2012 include 676,000 awards that vested during 2012 and became exercisable beginning in February 2013. Of the remaining outstanding option awards at December 31, 2012, 1,390,140 and 695,000 will vest in 2013 and 2014, respectively. These unit option awards become exercisable in the calendar year following the year in which they vest. (4) None of the unit option awards outstanding at December 31, 2012, 2011 and 2010 were exercisable.

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 option awards during the periods presented:

	For Year Ended December 31,
	2012		2011		2010
Total intrinsic value of unit option awards exercised during period	$	14.6	$	--	$	10.6
Cash received from EPCO in connection with the exercise of unit option awards (1)	$	10.2	$	--	$	7.2
Unit option-related cash reimbursements to EPCO (1)	$	14.0	$	--	$	10.6
(1) For the year ended December 31, 2012, we classified cash receipts from EPCO and reimbursements to EPCO related to the exercise of unit options as a component of other financing activities on our Statement of Consolidated Cash Flows. For comparative purposes, amounts for 2010 have been reclassified to conform to the current year presentation. The reclassification of 2010 amounts had no effect on previously reported cash provided by financing activities for that year.

For the EPCO group of companies, the unrecognized compensation cost associated with unit option awards was an aggregate $1.0 million at December 31, 2012, of which our allocated share of the cost is currently estimated to be $0.8 million. We expect to recognize our share of the unrecognized compensation cost for these awards over a weighted-average period of 0.8 years.

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 table presents UAR activity for the periods presented:

	UARs Based on Units of
	Enterprise			Holdings			Total
UARs at December 31, 2009		142,196			90,000			232,196
Settled, forfeited or cancelled (1)		(107,092	)		(90,000	)		(197,092	)
Awards assumed by Enterprise in connection with the Holdings Merger (2)		135,000			--			135,000
UARs at December 31, 2010		170,104			--			170,104
Vested		(17,776	)		--			(17,776	)
Cancelled		(45,000	)		--			(45,000	)
UARs at December 31, 2011		107,328			--			107,328
Vested		(107,328	)		--			(107,328	)
UARs at December 31, 2012		--			--			--

(1) Prior to the Holdings Merger, the non-employee directors of DEP GP, the general partner of Duncan Energy Partners, were granted 90,000 UARs denominated in Holdings units in connection with certain letter agreements. The compensation expense and associated liability for these UARs was recognized by Enterprise since it owned DEP GP. At the effective date of the Holdings Merger in November 2010, these UARs were settled and $2.5 million in cash was paid to award recipients. (2) At the effective date of the Holdings Merger, Enterprise assumed 90,000 UARs that had been issued by Holdings GP to its non-employee directors. Since these UARs were denominated in Holdings units, they converted into 135,000 Enterprise UARs based on the 1.5:1 merger exchange ratio.

At December 31, 2012, there were no UARs outstanding. Compensation expense associated with UARs during the years ended December 31, 2012, 2011 and 2010 was an expense of $0.9 million, a benefit of $0.4 million and an expense of $3.1 million, respectively.

Employee Partnerships

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 year ended December 31, 2010 included $31.3 million of expense associated with these limited partnership interests, of which $26.8 million was recognized in connection with the liquidation of the Employee Partnerships. We used a Black-Scholes option pricing model to estimate the grant date fair value of these partnership interests. At the time of liquidation, the fair value of the limited partnership interests was estimated at $51.3 million.