UNIT INCENTIVE PLAN

One of the two components of a management incentive compensation program adopted in 2010 (2010 Incentive Compensation Program) is the Performance Restricted Unit (PRU) plan which includes both an equity and cash component. Compensation expense relating to the equity component is recognized over a 4-year future service period. On the date of grant, the restricted units are owned by the employee, officer, or director of the Partnership, subject to a trading restriction that is in effect during the vesting period. As of December 31, 2019, total compensation expense not yet recognized related to non-vested awards was $1.6 million with a weighted average 36 months remaining to vest.

The second component of the incentive compensation program is the Long-Term Incentive Plan (LTIP), which is paid in cash. The LTIP awards contain a feature whereby the award amount is based upon the Partnership’s total shareholder return (TSR) as compared to TSR’s of a benchmark peer group of companies, measured over a rolling three-year performance period. The component based on relative TSR requires the Partnership’s projected cash payout for future performance cycles to be re-measured quarterly based upon the Partnership’s projected relative TSR ranking, using a Monte Carlo simulation model.

Directors may elect to receive all or a portion of their quarterly board compensation in the form of unrestricted units rather than cash. Such units are included in equity compensation expense. During 2019, 2018 and 2017, the Partnership granted 1,574, 1,637, and 2,213 unrestricted units, respectively, to directors in payment of their board compensation.

Total equity compensation expense was $1.2 million, $1.1 million and $1.1 million for 2019, 2018 and 2017, respectively. As of December 31, 2019, accrued liabilities included $2.5 million relating to the 2010 Incentive Compensation Program, with $662,000 of that total attributable to the cash component of the PRU and the balance of $1.8 million attributable to the LTIP. This compares with December 31, 2018, when accrued liabilities included $1.9 million relating to the 2010 Incentive Compensation Program, with $597,000 related to the cash-payout component of the PRU and the balance of $1.3 million attributable to the LTIP.

The Partnership’s 2005 Unit Incentive Plan (the 2005 Plan) authorized the granting of nonqualified equity compensation to employees, officers, and directors of the Partnership and provides a one-way linkage to the 2010 Incentive Compensation Program because it (2005 Plan) established the formal framework by which unit grants, options, etc., can be issued. The 2010 Incentive Compensation Program does not affect the existence or availability of the 2005 Unit Incentive Plan or change its terms. Upon the vesting of restricted units, grantees have the choice of tendering back units to pay for their minimum tax withholdings. A total of 1,105,815 units have been authorized for issuance under the 2005 Plan of which there are 841,861 units authorized but unissued as of December 31, 2019.

The Human Resources Committee makes awards of restricted units to certain employees, plus the officers and directors of the Partnership and its subsidiaries. The restricted unit grants vest over four years and are compensatory in nature. Restricted unit awards entitle the recipient to full distribution rights during the vesting period, and thus are considered participating securities, but are restricted from disposition and may be forfeited until the units vest.

Restricted unit activity for the three years ended December 31, 2019 was as follows:



	Units		Weighted Avg Grant Date Fair Value ($)
Outstanding December 31, 2016	35,493		59.96
Grants	20,893		66.10
Vested	(14,190	)	66.48
Forfeited	(1,550	)	65.02
Tendered back to pay tax withholding	(1,432	)	65.65
Outstanding December 31, 2017	39,214		64.62
Grants	16,605		69.98
Vested	(15,151	)	65.03
Tendered back to pay tax withholding	(1,466	)	64.59
Outstanding December 31, 2018	39,202		66.72
Grants	16,678		69.84
Vested	(17,090	)	66.33
Forfeited	(272	)	69.50
Tendered back to pay tax withholding	(1,143	)	69.75
Outstanding December 31, 2019	37,375		68.29