Enterprise Products Partners L.P.

SEC Filings

10-Q
GULFTERRA ENERGY PARTNERS L P filed this Form 10-Q on 08/09/2004
Entire Document
 
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     Any Series F1 convertible units for which a conversion notice has not been
delivered prior to the merger closing date, or termination of the merger, will
expire upon the closing, or termination, of the merger with Enterprise. Any
Series F2 convertible units outstanding at the merger date will be converted
into rights to receive Enterprise common units, subject to the restrictions
governing the Series F units. The number of Enterprise common units and the
price per unit at conversion will be adjusted based on the 1.81 exchange ratio.
 
  Option Plans
 
     During the quarter ended June 30, 2004, we granted 4,962 restricted units
at a fair value per unit of $38.31 and 8,000 unit options with a grant price of
$38.31 to non-employee directors of our Board of Directors under our Director
Plan. We accounted for the restricted units in accordance with SFAS No. 123.
Under SFAS No. 123, the fair value of these issuances is reflected as deferred
compensation and is amortized to compensation expense over the period of
service, which we have estimated to be one year. The unit options issued have
been accounted for in accordance with APB No. 25. As these options were issued
at market value, under the provisions of APB No. 25, no entries were made at the
issuance date.
 
     Total unamortized deferred compensation as of June 30, 2004 and December
31, 2003, was approximately $1.2 million and $1.5 million. Deferred compensation
is reflected as a reduction of partners' capital and is allocated 1 percent to
our general partner and 99 percent to our limited partners.
 
     Net proceeds from unit options exercised during the quarter and six months
ended June 30, 2004, were approximately $0.3 million and $4.9 million. Net
proceeds from unit options exercised during the quarter and six months ended
June 30, 2003, were $0.5 million.
 
     At the close of the merger, any outstanding restricted units issued to (1)
employees of El Paso Field Services who will become employees of Enterprise or
(2) non-employee directors of our general partner's Board of Directors who will
be a member of the Board of Directors of the merged company will convert to
Enterprise common units with the same terms, except that the number of
Enterprise common units will be adjusted based on the 1.81 exchange ratio. Any
outstanding restricted units issued to employees of El Paso Field Services who
will not be employees of Enterprise or to non-employee directors of our general
partner's Board of Directors who will not be a member of the Board of Directors
of the merged company will vest on the merger date and be exchanged for
Enterprise common units at the 1.81 exchange ratio.
 
  Unit Option Buyout
 
     Under the merger agreement with Enterprise, we are obligated to repurchase,
at reasonable prices, before the effective time of the merger, all outstanding
employee and director unit options that have not been exercised or otherwise
canceled. Approximately 1,000,000 common unit options were outstanding at June
30, 2004, held by 28 current and former employees and directors. Since we do not
have the right under our option plan to force our option holders to sell their
options, we were required to negotiate a separate option purchase agreement
individually with each option holder. The governance and compensation committee
of our general partner's board of directors engaged an independent financial
advisor to assist in the determination of the appropriate repurchase prices for
the outstanding options. Subsequent to June 30, 2004, we entered into option
purchase agreements with all the option holders under which we have agreed to
purchase for cash and/or common units, and the option holders have agreed to
sell, any options that remain outstanding on the merger closing date for a
negotiated price. Each option purchase agreement permits the option holder to
exercise any or all of his or her options at any time and from time to time
prior to the merger closing. Based on information provided by the financial
advisor engaged by the governance and compensation committee, we estimate the
value, in the aggregate, of the outstanding options to be repurchased is
approximately $13 million.
 
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