EQUITY-BASED COMPENSATION

2011 Long Term Incentive Plan

We have granted phantom unit and performance phantom unit awards to certain employees, officers, and directors of our general partner pursuant to the CSI Compressco LP Amended and Restated 2011 Long Term Incentive Plan. Awards of phantom units generally vest over a three year period. Awards of performance phantom units cliff vest at the end of a performance period and are settled based on achievement of related performance measures over the performance period. Each of the phantom unit and performance phantom unit awards includes distribution equivalent rights that enable the recipient to receive additional units equal in value to the accumulated cash distributions made on the units subject to the award from the date of grant. Accumulated distributions associated with each underlying unit are payable upon settlement of the related phantom unit award (and are forfeited if the related award is forfeited). Phantom units are notional units that entitle the grantee to receive a common unit upon the vesting of the award.

During the year ended December 31, 2017, we granted to certain officers and employees an aggregate of 290,190 phantom unit and performance phantom unit awards, having an average market value (equal to the closing price of the common units on the dates of grant) of $8.40 per unit, or an aggregate market value of $2.4 million. During the year ended December 31, 2016, we granted to certain officers and employees 396,692 phantom and performance phantom unit awards, having an average market value (equal to the closing price of the common units on the dates of grant) of $8.38 per unit, or an aggregate market value of $3.3 million. During the year ended December 31, 2015, we granted to certain officers and employees 180,136 restricted common unit awards, having an average market value (equal to the closing price of the common units on the dates of grant) of $20.35 per unit, or an aggregate market value of $3.9 million. The fair value of awards vesting during 2017, 2016, and 2015 was approximately $2.8 million, $1.5 million, and $1.1 million, respectively. The fair value of awards is amortized straight-line over the vesting period. Adjustments to the amortized expense related to performance phantom units may be recognized prior to vesting depending on the expected achievement of the performance target.

The following is a summary of unit activity for the year ended December 31, 2017:



	Units		Weighted Average Grant Date Fair Value Per Unit
	(In Thousands)
Nonvested units outstanding at December 31, 2016⁽¹⁾	609		$	13.41
Units granted	290		8.40
Exercised/released	(173	)	16.11
Cancelled/forfeited	(257	)	13.17
Nonvested units outstanding at December 31, 2017⁽²⁾	469		$	9.31


(1)	This number excludes 289,830 performance-based phantom units, which represents the maximum number of common units that would be issued if the maximum level of performance under the awards is achieved.


(2)	This number excludes an additional 176,159 performance-based phantom units, which, when combined with the 18,226 granted, (net of 2017 forfeitures), represents the maximum number of common units that would be issued if the maximum level of performance under the awards is achieved. The number of units actually issued under the awards may range from zero to 352,318.

Total estimated unrecognized equity-based compensation expense from unvested units as of December 31, 2017, was approximately $2.2 million and is expected to be recognized over a weighted average period of approximately 1.7 years. The amount recognized in 2017, 2016, and 2015 was approximately $1.2 million, $3.0 million, and $2.2 million, respectively, and included in selling, general, and administrative expense.