Energy Transfer 2012 Annual Report Download - page 128

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all unvested unit awards in the event of a change of control, as defined in the plan. Please refer to “— Compensation Tables—
Potential Payments upon a Terminated or Change of Control” for additional information.
Deferred Compensation Plan. We maintain a deferred compensation plan (“DC Plan”), which permits eligible highly compensated
employees to defer a portion of their salary and/or bonus until retirement or termination of employment or other designated
distribution. Under the DC Plan, each year eligible employees are permitted to make an irrevocable election to defer up to 50%
of their annual base salary, 50% of their quarterly non-vested unit distribution income, and/or 50% of their discretionary performance
bonus compensation to be earned for services performed during the following year. Pursuant to the DC Plan, ETP may make
annual discretionary matching contributions to participants’ accounts; however, we have not made any discretionary contributions
to participants’ accounts and currently have no plans to make any discretionary contributions to participants’ accounts. All amounts
credited under the DC Plan (other than discretionary credits) are immediately 100% vested. Participant accounts are credited with
deemed earnings (or losses) based on hypothetical investment fund choices made by the participants among available funds.
Participants may elect to have their accounts distributed in one lump sum payment or in annual installments over a period of 3 or
5 years upon retirement, and in a lump sum upon other termination. Upon a change in control (as defined in the DC Plan) of ETP,
all DC Plan accounts are immediately vested in full. However, distributions are not accelerated and, instead, are made in accordance
with the DC Plan’s normal distribution provisions unless a participant has elected to receive a change of control distribution
pursuant to his deferral agreement.
Risk Assessment Related to our Compensation Structure. We believe our compensation plans and programs for our named executive
officers, as well as our other employees, are appropriately structured and are not reasonably likely to result in material risk to the
Partnership. We believe our compensation plans and programs are structured in a manner that does not promote excessive risk-
taking that could harm our value or reward poor judgment. We also believe we have allocated our compensation among base salary
and short and long-term compensation in such a way as to not encourage excessive risk-taking. In particular, we generally do not
adjust base annual salaries for the executive officers and other employees significantly from year to year, and therefore the annual
base salary of our employees is not generally impacted by our overall financial performance or the financial performance of an
operating segment. We generally determine whether, and to what extent, our named executive officers receive a cash bonus based
on our achievement of specified financial performance objectives as well as the individual contributions of our named executive
officers to the Partnership's success. We use restricted units rather than unit options for equity awards because restricted units
retain value even in a depressed market so that employees are less likely to take unreasonable risks to get, or keep, options “in-
the-money.” Finally, the time-based vesting over five years for our long-term incentive awards ensures that our employees’ interests
align with those of our Unitholders for the long-term performance of the Partnership.
Tax and Accounting Implications of Equity-Based Compensation Arrangements
Deductibility of Executive Compensation
We are a limited partnership and not a corporation for U.S. federal income tax purposes. Therefore, we believe that the compensation
paid to the named executive officers is not subject to the deduction limitations under Section 162(m) of the Internal Revenue Code
and therefore is generally fully deductible for federal income tax purposes.
Accounting for Unit-Based Compensation
For our unit-based compensation arrangements, including equity-based awards issued to certain of our named executive officers
by an affiliate (as discussed above), we record compensation expense over the vesting period of the awards, as discussed further
in Note 7 to our consolidated financial statements.
Compensation Committee Interlocks and Insider Participation
Messrs. Grimm and Byrne served on the Compensation Committee during 2012. During 2012, none of the members of the
committee was an officer or employee of us or any of our subsidiaries or served as an officer of any company with respect to
which any of our executive officers served on such company’s board of directors. In addition, neither Mr. Grimm nor Mr. Byrne
are former employees of ours or any of our subsidiaries.
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