Energy Transfer 2010 Annual Report Download - page 109

Partnership to achieve 100% of its internal EBITDA budget for 2009 as well as the desire of the senior
management of the Partnership, including Mr. Warren, to improve the financial performance of the Partnership
by avoiding the compensation expense otherwise associated with these annual bonuses.
Equity Awards. Each of our 2004 Unit Plan and 2008 Incentive Plan authorizes the Compensation Committee, in
its discretion, to grant awards of restricted units, unit options and other rights related to our units upon such terms
and conditions as it may determine appropriate and in accordance with general guidelines as defined by each
such plan. The Compensation Committee determined and/or approved the terms of the unit grants awarded to our
named executive officers, including the number of Common Units subject to the unit award and the vesting
structure of those unit awards. All of the awards granted to the named executive officers under these equity
incentive plans have consisted of restricted unit awards, which have required the achievement of performance
objectives in order for the awards to become vested or restricted unit awards that are subject to vesting over a
specified time period. Upon vesting of any unit award, ETP Common Units are issued.
Commencing in 2008, all of the new unit awards granted have provided for vesting over a specified time period,
with vesting based on continued employment as of each applicable vesting date, rather than vesting based on the
satisfaction of any performance objectives. This change resulted from the Compensation Committee’s
determination that vesting based on continued employment, rather than the satisfaction of performance
objectives, was more generally prevalent with companies in the energy industry. In December 2010 and January
2011, the Compensation Committee approved grants of unit awards to Messrs. McCrea, Salinas, Mason and
Powers of 250,000 units, 20,000 units, 20,000 units and 10,000 units, respectively. All of these unit awards
provide for vesting over a five-year period at 20% per year, subject to continued employment through each
specified vesting date. These unit awards entitle the recipients of the unit awards to receive, with respect to each
ETP Common Unit subject to such award that has not either vested or been forfeited, a cash payment equal to
each cash distribution per Common Unit made by us on our Common Units promptly following each such
distribution by us to our Unitholders.
In approving the grant of such unit awards, the Compensation Committee took into account the same factors as
discussed above under the caption “-Annual Bonus,” the long-term objective of retaining such individuals as key
drivers of the Partnership’s future success, the existing level of equity ownership of such individuals and the
previous awards to such individuals of equity unit awards subject to vesting. In the case of the unit award to
Mr. McCrea, the Compensation Committee took into account the significant achievements of Mr. McCrea with
respect to the commercial development of the Tiger pipeline, the Fayetteville Express pipeline and several
intrastate natural gas pipelines that, based on the construction costs for these projects and the fees expected to be
realized from these projects pursuant to long-term customer contracts, are expected to generate attractive rates of
return for the Partnership. The magnitude of the unit award to Mr. McCrea, along with the five-year vesting of
this unit award, was also intended by the Compensation Committee to provide a significant incentive to
Mr. McCrea to remain with the Partnership and continue to develop successful commercial projects.
The issuance of Common Units pursuant to our equity incentive plans is intended to serve as a means of
incentive compensation; therefore, no consideration will be payable by the plan participants upon vesting and
issuance of the Common Units.
The unit awards under our equity incentive plans generally require the continued employment of the recipient
during the vesting period. The Compensation Committee has in the past and may in the future, but is not required
to, accelerate the vesting of unvested unit awards in the event of the termination or retirement of an executive
officer. The Compensation Committee did not accelerate the vesting of unit awards in 2010.
Affiliate Equity Awards. McReynolds Energy Partners, L.P., the general partner of which is owned and
controlled by the President of ETE’s general partner, has awarded to certain officers of ETP certain rights related
to units of ETE previously issued by ETE to such officers. These rights include the economic benefits of
ownership of these ETE units based on a five-year vesting schedule whereby the officer will vest in the ETE
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