UNIT-BASED COMPENSATION

2006 LTIP

We sponsor the 2006 Long-Term Incentive Plan (the 2006 LTIP) under which NuStar GP Holdings may award up to 2,000,000 NSH units to our employees, consultants and directors who perform services for us or our affiliates. Awards under the 2006 LTIP can include NSH unit options, performance units, distribution equivalent rights (DERs), restricted units, phantom units, unit grants and unit appreciation rights. As of December 31, 2016, a total of 1,453,477 NSH units remained available to be awarded under the 2006 LTIP. Effective on the date of the Employee Transfer and the Assignment Agreement, we retain the expense associated with awards granted under the 2006 LTIP to our employees, whereas these expenses were previously reimbursed by NuStar Energy.

Unit Options. On November 16, 2007, we granted 324,100 NSH unit options at $31.55, which was our only grant of options under the 2006 LTIP. These options expired seven years after the grant date and vested in annual one-third increments beginning on November 16, 2010. The number of NSH unit options exercised during the year ended December 31, 2014 was 289,100. The total intrinsic value of the unit options exercised during the year ended December 31, 2014 was $2.8 million. There were no NSH unit options outstanding and exercisable as of December 31, 2016 and 2015.

The fair value of each NSH unit option grant was estimated using the Black-Scholes option-pricing model on the grant date. The expected life of NSH unit options granted was the period of time from the grant date to the date of expected exercise or other expected settlement. Expected volatility for NSH unit options was based on closing prices of NSH common units for periods corresponding to the life of options granted. Expected distribution yield was based on annualized distributions at the grant date for NSH unit options. The risk-free interest rate used was the implied yield currently available from the U.S. Treasury zero-coupon issues with a remaining term equal to the expected life of the options at the grant date for NSH unit options.

Restricted Units. What we refer to as “restricted units” are considered phantom units as they represent the right to receive our common units upon vesting. The following table summarizes information related to outstanding NSH restricted units awarded under the 2006 LTIP:



	Restricted Unit Grants to Employees		Restricted Unit Grants to Non- Employee Directors		Total		Weighted- Average Grant-Date Fair Value Per Unit
Balance as of January 1, 2014	39,204		21,194		60,398		$	28.83
Granted	16,895		8,911		25,806		$	34.22
Vested	(12,264	)	(9,680	)	(21,944	)	$	29.22
Forfeited	(4,745	)	—		(4,745	)	$	27.46
Balance as of December 31, 2014	39,090		20,425		59,515		$	31.13
Granted	26,240		12,814		39,054		$	23.80
Vested	(11,403	)	(10,086	)	(21,489	)	$	30.80
Balance as of December 31, 2015	53,927		23,153		77,080		$	27.51
Granted	32,456		12,126		44,582		$	25.42
Vested	(15,251	)	(11,637	)	(26,888	)	$	28.23
Balance as of December 31, 2016	71,132		23,642		94,774		$	26.32

The outstanding restricted units granted to domestic employees are equity-classified awards and generally vest over 5 years, beginning one year after the grant date. The outstanding restricted units granted to non-employee directors (NEDs) are equity-classified awards that vest over 3 years, beginning one year after the grant date. The fair value of these awards is measured at the grant date.

The following table presents supplemental information regarding our restricted unit awards:



	Year Ended December 31,
	2016			2015			2014
	(Thousands of Dollars, Except Unit Data)
DERs paid to restricted unitholders	$	(167	)	$	(129	)	$	(118	)
Fair value of restricted units that vested during the period	$	700		$	379		$	742
Units issued for settlement of awards vested, net of employee tax withholding requirements	21,200			17,272			256,996

Unrecognized compensation cost related to our equity-classified awards totaled $2.4 million as of December 31, 2016, which we expect to recognize over a weighted-average period of 3.6 years.

2000 LTIP

Prior to the Employee Transfer, we sponsored the Long-Term Incentive Plan (the 2000 LTIP), under which NuStar GP, LLC could award up to 3,250,000 NS common units, and NuStar Energy reimbursed NuStar GP, LLC for all employee costs, including unit-based compensation costs. Awards under the 2000 LTIP could include NS unit options, restricted units, performance units, DERs and contractual rights to receive common units.

On March 1, 2016, in conjunction with the Employee Transfer, we transferred to NuStar Services Co all outstanding awards under the 2000 LTIP, which represented 730,288 units, and removed the obligation related to these unit-based awards from our consolidated balance sheet. Included in this number are 77,014 performance units. However, of the performance units transferred, only 35,373 were considered granted for accounting purposes, as the performance measure for the remaining tranches had not yet been set.

The following table summarizes information about awards we granted under the 2000 LTIP, prior to the Employee Transfer:



		Awards Granted
		Year Ended December 31,
	Vesting	2016	2015	2014
2000 LTIP:
Performance units	(a)	47,646	29,633	28,841
Restricted units	1/5 per year	—	250,563	208,714
Restricted units (grants to non-employee directors of NuStar GP, LLC)	1/3 per year	—	7,553	7,009


(a)	Performance units vest 1/3 per year if certain performance measures are met, as defined in the award agreements.

As of December 31, 2015, we had accrued $3.8 million for the outstanding awards of NS performance units and restricted units in “Accrued compensation expense” on our consolidated balance sheet.

The following table summarizes information pertaining to long-term incentive plan compensation expenses:



	Year Ended December 31,
	2016		2015		2014
	(Thousands of Dollars)
Long-term incentive plan compensation expense charged to NuStar Energy	$	490	$	6,397	$	10,934
Expenses resulting from NuStar GP Holdings awards	$	661	$	239	$	129