Note 18.

Compensation Plans

We sponsor the following share-based compensation plans: incentive compensation plan, directors’ plan, employee stock purchase plan and the deferred compensation plan. The fair value of share-based awards is estimated on the date of grant based on the market price of our common stock less the impact of selling restrictions subsequent to vesting, if any, and is amortized as compensation expense over the related requisite service periods.

Total compensation cost related to share-based compensation plans was $22.6 million and $24.5 million for the three months ended February 28, 2013 and February 29, 2012, respectively. The net tax (deficiency) benefit related to share-based compensation plans recognized in additional paid-in capital was ($18.0) million and $19.7 million during the three months ended February 28, 2013 and February 29, 2012, respectively. Cash flows resulting from tax deductions in excess of the grant date fair value of share-based awards are included in cash flows from financing activities; accordingly, we reflected the excess tax benefit of $5.7 million and $29.3 million related to share-based compensation in cash flows from financing activities for the three months ended February 28, 2013 and February 29, 2012, respectively. Due to our tax year end coinciding with our fiscal year end November 30, the timing of certain deductions related to share-based compensation are impacted such that tax benefits resulting from the vesting of awards are realized in the following fiscal year. Consequently, approximately $19.6 million of the net tax deficiency recognized in additional paid-in capital during the three months ended February 28, 2013 relates to share-based compensation awards that vested during January through November 2012 and approximately $21.3 million of the net tax benefit recognized in additional paid-in capital during the three months ended February 29, 2012 relates to share-based compensation awards that vested during January through November 2011. Additionally, we expect to recognize a net tax benefit of $11.9 million related to share-based compensation awards that vested during January and February 2013 in additional paid-in capital during the three month period ending February 28, 2014.

As of February 28, 2013, we had $205.6 million of total unrecognized compensation cost related to nonvested share-based awards, which is expected to be recognized over a remaining weighted average vesting period of approximately 3.0 years.

In addition, we sponsor nonshare-based compensation plans. Nonshare-based compensation plans sponsored by us include an employee stock ownership plan, a profit sharing plan and other forms of restricted cash awards. The following are descriptions of the compensation plans sponsored by us and the activity of such plans for the three months ended February 28, 2013 and February 29, 2012:

Incentive Compensation Plan. We have an Incentive Compensation Plan (“Incentive Plan”) which allows awards in the form of incentive stock options (within the meaning of Section 422 of the Internal Revenue Code), nonqualified stock options, stock appreciation rights, restricted stock, unrestricted stock, performance awards, RSUs, dividend equivalents or other share-based awards. In connection with the merger with Leucadia, the Incentive Plans allow for awards to be issued as pertaining to shares of Leucadia, the parent company as of March 1, 2013. Activity presented below for share-based awards pertain to shares of Jefferies Group, Inc. and were converted on March 1, 2013 into awards for shares of Leucadia at the Exchange Ratio.

Restricted Stock and Restricted Stock Units

The Incentive Plan allows for grants of restricted stock awards, whereby employees are granted restricted shares of common stock subject to forfeiture. The Incentive Plan also allows for grants of restricted stock units. RSUs give a participant the right to receive fully vested shares at the end of a specified deferral period allowing a participant to hold an interest tied to common stock on a tax deferred basis. Prior to settlement, RSUs carry no voting or dividend rights associated with the stock ownership, but dividend equivalents are accrued to the extent there are dividends declared on our common stock.

Restricted stock and RSUs may be granted to new employees as “sign-on” awards, to existing employees as “retention” awards and to certain executive officers as awards for multiple years. Sign-on and retention awards are generally subject to annual ratable vesting upon a four year service requirement and are amortized as compensation expense on a straight line basis over the related four years. Restricted stock and RSUs are granted to certain senior executives with both performance and service conditions. We amortize these awards granted to senior executives over the service period as we have determined it is probable that the performance condition will be achieved.

The total compensation cost associated with restricted stock and RSUs amounted to $22.3 million and $24.3 million for the three months ended February 28, 2013 and February 29, 2012, respectively. Total compensation cost includes the amortization of sign-on, retention and senior executive awards, less forfeitures and clawbacks.

The following table details the activity of restricted stock (in thousands, except per share amounts):


	Three Months Ended February 28, 2013			Weighted Average Grant Date Fair Value
Restricted stock
Balance, beginning of period		8,058		$	17.59
Grants		1,591		$	18.25
Forfeited		(138	)	$	17.20
Fulfillment of service requirement		(999	)	$	17.69

Balance, end of period (1)		8,512		$	17.71

(1)	Represents restricted stock with a future service requirement.

The following table details the activity of restricted stock units (in thousands, except per share amounts):


	Three Months Ended February 28, 2013						Weighted Average Grant Date Fair Value
	Future Service Required			No Future Service Required			Future Service Required		No Future Service Required
Restricted stock units
Balance, beginning of period		9,216			16,656		$	18.67	$	12.79
Grants		—			83	(1)	$	—	$	15.78
Distribution of underlying shares		—			(7,711	)	$	—	$	18.01
Fulfillment of service requirement		(2,837	)		2,837		$	25.54	$	25.54

Balance, end of period		6,379			11,865		$	15.60	$	12.46

(1)	Includes approximately 83,000 dividend equivalents declared on RSUs during the three months ended February 28, 2013. The weighted average grant date fair value of these dividend equivalents was approximately $15.78.

The aggregate fair value of restricted stock and RSUs granted with a service requirement that vested during the three months ended February 28, 2013 and February 29, 2012 was $72.6 million and $11.5 million, respectively. In addition, we granted restricted stock and restricted stock units with no future service requirements (excluding dividend equivalents) with an aggregate fair value of $7.7 million during the three months ended February 29, 2012. We did not grant restricted stock and restricted stock units with no future service requirements (excluding dividend equivalents) during the three months ended February 28, 2013.

Directors’ Plan. We have a Directors’ Stock Compensation Plan (“Directors’ Plan”) which provides for an annual grant to each nonemployee director of $100,000 of restricted stock or deferred shares (which are similar to restricted stock units). These grants are made automatically on the date directors are elected or reelected at our annual shareholders’ meeting. These grants legally vest three years after the date of grant and are expensed in the year of grant.

Additionally, the Directors’ Plan permits each nonemployee director to elect to be paid annual retainer fees, meeting fees and fees for service as chairman of a Board committee in the form of cash, deferred cash or deferred shares. If deferred cash is elected, interest is credited to such deferred cash at the prime interest rate in effect at the date of each annual meeting of stockholders. If deferred shares are elected, dividend equivalents equal to dividends declared and paid on our common stock are credited to a director’s account and reinvested as additional deferred shares. The cost related to this plan, included within Other expenses on the Consolidated Statements of Earnings, was $174,000 and $174,000 for the three months ended February 28, 2013 and February 29, 2012, respectively.

As a result of the merger, this plan was adopted by the Board of Leucadia and the Directors of Jefferies Group LLC are entitled to receive shares of Leucadia.

Employee Stock Purchase Plan. We also have an Employee Stock Purchase Plan (“ESPP”) which we consider noncompensatory effective January 1, 2007. The ESPP permits all regular full time employees and employees who work part time over 20 hours per week to purchase shares of common stock of Jefferies Group, Inc. at a discount. Annual employee contributions are limited to $21,250, are voluntary and made through payroll deduction. The stock purchase price is equal to 95% of the closing price of common stock on the last day of the applicable session (monthly). Upon the merger with Leucadia as of March 1, 2013, the ESPP was amended so that the shares underlying the ESPP are common stock of Leucadia.

Deferred Compensation Plan. We also have a Deferred Compensation Plan, which was established in 2001. Eligible employees are able to defer compensation on a pre-tax basis by investing in common stock at a discount (“DCP shares”), or by allocating among any combination of the investment funds available under the Deferred Compensation Plan. As of the merger with Leucadia on March 1, 2013, the Deferred Compensation Plan was amended and compensation deferred into DCP shares are shares of Leucadia. We often invest directly, as a principal, in such investment alternatives related to our obligations to perform under the Deferred Compensation Plan. The compensation deferred by our employees is expensed in the period earned. The change in fair value of the specified other alternative investments are recognized in Principal transactions and changes in the corresponding deferral compensation liability are reflected as Compensation and benefits expense in our Consolidated Statements of Earnings.

Additionally, we recognize compensation cost related to the discount provided to employees in electing to defer compensation in DCP shares. This compensation cost was approximately $72,000 and $40,000 for the three months ended February 28, 2013 and February 29, 2012, respectively. As of February 28, 2013, there were approximately 1,301,000 shares issuable under the DCP Plan.

Employee Stock Ownership Plan. We have an Employee Stock Ownership Plan (“ESOP”) which was established in 1988. We made no contributions to the ESOP and no compensation costs related to the ESOP were incurred during the three months ended February 28, 2013 and February 29, 2012.

Profit Sharing Plan. We have a profit sharing plan, covering substantially all employees, which includes a salary reduction feature designed to qualify under Section 401(k) of the Internal Revenue Code. The compensation cost related to this plan was $2.6 million and $3.0 million for the three months ended February 28, 2013 and February 29, 2012, respectively.

Restricted Cash Awards. We provide compensation to new and existing employees in the form of loans and/or other cash awards which are subject to ratable vesting terms with service requirements ranging from one to ten years, with an approximate average term of two years. We amortize these awards to compensation expense over the relevant service period. The compensation cost associated with these awards amounted to $44.7 million and $36.6 million for the three months ended February 28, 2013 and February 29, 2012, respectively. At February 28, 2013 and November 30, 2012, the remaining unamortized amount of these awards was $271.8 million and $198.9 million, respectively and is included within Other assets on the Consolidated Statements of Financial Condition.