NOTE 15 ─ BENEFIT PLANS

Generally, all share-based payments to employees, which are not cash settled, including grants of unit options and phantom units, are recognized within equity in the financial statements based on their fair values on the date of the grant. Share-based payments to non-employees, which have a cash settlement option, are recognized within liabilities in the financial statements based upon their current fair market value.

A phantom unit entitles a grantee to receive a common limited partner unit upon vesting of the phantom unit. In tandem with phantom unit grants, participants may be granted a distribution equivalent right (“DER”), which is the right to receive cash per phantom unit in an amount equal to and at the same time as the cash distributions the Partnership makes on a common unit during the period the phantom unit is outstanding. The compensation committee appointed by the General Partner’s managing board (the “Compensation Committee”) determines the vesting period for phantom units.

A unit option entitles a grantee to purchase a common limited partner unit upon payment of the exercise price for the option after completion of vesting of the unit option. The exercise price of the unit option is equal to the fair market value of the common unit on the date of grant of the option. The Compensation Committee determines how the exercise price may be paid by the grantee as well as the vesting and exercise period for unit options. Unit option awards expire 10 years from the date of grant. There were no unit options outstanding as of June 30, 2013.

Long-Term Incentive Plans

The Partnership has a 2004 Long-Term Incentive Plan (“2004 LTIP”) and a 2010 Long-Term Incentive Plan (“2010 LTIP” and collectively with the 2004 LTIP, the “LTIPs”) in which officers, employees, non-employee managing board members of the General Partner, employees of the General Partner’s affiliates and consultants are eligible to participate. The LTIPs are administered by the Compensation Committee. Under the LTIPs, the Compensation Committee may make awards of either phantom units or unit options for an aggregate of 3,435,000 common units. At June 30, 2013, the Partnership had 909,012 phantom units outstanding under the Partnership’s LTIPs, with 1,482,642 phantom units and unit options available for grant. The Partnership generally issues new common units for phantom units and unit options, which have vested and have been exercised.

Partnership Phantom Units.

Through June 30, 2013, phantom units granted to employees under the LTIPs generally had vesting periods of four years. Phantom units awarded to non-employee managing board members will vest over a four year period. Awards to non-employee members of the board automatically vest upon a change of control, as defined in the LTIPs. At June 30, 2013, there were 301,226 units outstanding under the LTIPs that will vest within the following twelve months.

All phantom units outstanding under the LTIPs at June 30, 2013 include DERs granted to the participants by the Compensation Committee. The amounts paid with respect to LTIP DERs were $0.6 million and $0.6 million, during the three months ended June 30, 2013 and 2012, respectively and $1.2 million and $0.8 million, during the six months ended June 30, 2013 and 2012, respectively. These amounts were recorded as reductions of equity on the Partnership’s consolidated balance sheets.

The following table sets forth the Partnership’s LTIPs phantom unit activity for the periods indicated:



	Three Months Ended June 30,						Six Months Ended June 30,
	2013			2012			2013			2012
	Number of Units	Fair Value⁽¹⁾		Number of Units	Fair Value⁽¹⁾		Number of Units	Fair Value⁽¹⁾		Number of Units	Fair Value⁽¹⁾
Outstanding, beginning of period	1,057,083	$	33.22	390,567	$	21.41	1,053,242	$	33.21	394,489	$	21.63
Granted	36,971		38.1	693,952		34.97	43,775		37.32	698,084		34.98
Forfeited	(2,100)		32.95	(3,950)		24.66	(2,100)		32.95	(3,950)		24.66
Matured and issued⁽²⁾	(182,942)		32.65	(108,167)		11.35	(185,905)		32.59	(116,221)		13.32
Outstanding, end of period⁽³⁾⁽⁴⁾	909,012	$	33.54	972,402	$	32.19	909,012	$	33.54	972,402	$	32.19

Matured and not issued⁽⁵⁾	39,347	$	24.91	48,647	$	24.12	39,347	$	24.91	48,647	$	24.12

Non-cash compensation expense recognized (in thousands)		$	3,436		$	2,940		$	7,820		$	3,918
















(1) Fair value based upon weighted average grant date price.
(2) The intrinsic values for phantom unit awards exercised during the three months ended June 30, 2013 and 2012 were $6.6 million and $3.2 million, respectively, and $6.7 million and $3.5 million during the six months ended June 30, 2013 and 2012, respectively.
(3) The aggregate intrinsic value for phantom unit awards outstanding at June 30, 2013 and 2012 was $34.7 million and $30.3 million, respectively.
(4) There were 22,546 and 17,852 outstanding phantom unit awards at June 30, 2013 and 2012, respectively, which were classified as liabilities due to a cash option available on the related phantom unit awards.
(5) The aggregate intrinsic value for phantom unit awards vested but not issued at June 30, 2013 and 2012 was $1.5 million and $1.5 million, respectively.

At June 30, 2013, the Partnership had approximately $17.2 million of unrecognized compensation expense related to unvested phantom units outstanding under the LTIPs based upon the fair value of the awards, which is expected to be recognized over a weighted average period of 2.0 years.