Summary
Enterprise Products Partners L.P. (EPD) filed an 8-K on February 26, 2008, detailing the formation of Enterprise Unit L.P. (Enterprise LP) on February 20, 2008. This new entity serves as an incentive arrangement for certain employees of EPCO Inc., including some of EPD's named executive officers, through "profits interest" awards in Enterprise LP. EPCO Holdings, Inc. contributed $18,000,000 to Enterprise LP and became the Class A limited partner. Certain EPCO employees received Class B limited partner interests without capital contribution, which are designed to provide long-term incentive compensation tied to the appreciation of EPD Units and Enterprise GP Holdings (EPE Units).
Key Highlights
- 1EPD established Enterprise Unit L.P. (Enterprise LP) on February 20, 2008, to incentivize certain employees.
- 2EPCO Holdings contributed $18 million as the Class A limited partner in Enterprise LP.
- 3Certain EPCO employees, including named executive officers, received Class B "profits interest" in Enterprise LP without capital contribution.
- 4These profits interests are linked to the appreciation of Enterprise Products Partners (EPD) Units and Enterprise GP Holdings (EPE) Units.
- 5Enterprise LP is structured to distribute cash flow and liquidation proceeds, prioritizing the Class A partner's preferred return before distributing remaining value to Class B partners.
- 6The Class B interests are subject to forfeiture if employment terminates before February 20, 2014, with standard exceptions.
- 7A portion of the fair value of these awards will be recognized as a non-cash expense by EPD.
Frequently Asked Questions
Enterprise LP was formed to serve as a long-term incentive compensation arrangement for certain employees of EPCO Inc., including named executive officers of EPD. It allows these employees to benefit from the appreciation in value of Enterprise Products Partners (EPD) Units and Enterprise GP Holdings (EPE) Units.
EPCO Holdings, Inc. is the Class A limited partner, having contributed $18 million. Certain EPCO employees, including EPD's named executive officers, are Class B limited partners who received profits interests without making a capital contribution. These Class B interests are designed as incentive compensation.
Quarterly cash distributions received by Enterprise LP from EPD and Enterprise GP Holdings are first distributed to the Class A partner (EPCO Holdings) until it receives an amount equal to its defined Class A preferred return. Any remaining distributions are then distributed to the Class B limited partners. Upon liquidation or sale of units, a similar priority applies: Class A receives its capital base plus accrued preferred return, and Class B receives any remaining value.
Yes, the Class B limited partner interests are subject to forfeiture if the participating employee's employment with EPCO and its affiliates terminates before February 20, 2014. Customary exceptions for death, disability, and certain retirements apply. Forfeiture risk also lapses upon certain change of control events.