Long-term Incentive Compensation Plans

We maintain an unfunded, non-qualified incentive compensation program known as the AllianceBernstein Incentive Compensation Award Program (“Incentive Compensation Program”), under which annual awards may be granted to eligible employees. See Note 2, "Summary of Significant Accounting Policies – Long-Term Incentive Compensation Plans" for a discussion of the award provisions.

Under the Incentive Compensation Program, we made awards in 2018, 2017 and 2016 aggregating $183.3 million, $168.2 million and $157.8 million, respectively. The amounts charged to employee compensation and benefits for the years ended December 31, 2018, 2017 and 2016 were $161.0 million, $172.8 million and $153.8 million, respectively.

Effective as of September 30, 2017, we established the AB 2017 Long Term Incentive Plan (“2017 Plan”), which was adopted at a special meeting of AB Holding Unitholders held on September 29, 2017. The following forms of awards may be granted to employees and Eligible Directors under the 2017 Plan: (i) restricted AB Holding Units or phantom restricted AB Holding Units (a “phantom” award is a contractual right to receive AB Holding Units at a later date or upon a specified event); (ii) options to buy AB Holding Units; and (iii) other AB Holding Unit-based awards (including, without limitation, AB Holding Unit appreciation rights and performance awards). The purpose of the 2017 Plan is to promote the interest of AB by: (i) attracting and retaining talented officers, employees and directors, (ii) motivating such officers, employees and directors by means of performance-related incentives to achieve longer-range business and operational goals, (iii) enabling such officers, employees and directors to participate in the long-term growth and financial success of AB, and (iv) aligning the interests of such officers, employees and directors with those of AB Holding Unitholders. The 2017 Plan will expire on September 30, 2027, and no awards under the 2017 Plan will be made after that date. Under the 2017 Plan, the aggregate number of AB Holding Units with respect to which awards may be granted is 60 million, including no more than 30 million newly-issued AB Holding Units.

As of December 31, 2018, no options to buy AB Holding Units had been granted and 14,352,740 AB Holding Units, net of withholding tax requirements, were subject to other AB Holding Unit awards made under the 2017 Plan or the AllianceBernstein 2010 Long Term Incentive Plan, as amended, an equity compensation plan with similar terms that was canceled on September 30, 2017. AB Holding Unit-based awards (including options) in respect of 45,647,260 AB Holding Units were available for grant under the 2017 Plan as of December 31, 2018.

Option Awards

We did not grant any options to buy AB Holding Units during 2018 or 2017. Historically, options granted to employees generally were exercisable at a rate of 20% of the AB Holding Units subject to such options on each of the first five anniversary dates of the date of grant; options granted to Eligible Directors generally were exercisable at a rate of 33.3% of the AB Holding Units subject to such options on each of the first three anniversary dates of the date of grant. During 2016, we granted 54,546 options to Eligible Directors with a grant date value of $2.75, determined using the Black-Scholes option valuation model with the following assumptions:



	2016
Risk-free interest rate	1.3	%
Expected cash distribution yield	7.1	%
Historical volatility factor	31.0	%
Expected term	6.0 years

The risk-free interest rate is based on the U.S. Treasury Bond yield for the appropriate expected term. The expected cash distribution yield is based on the average of our distribution yield over the past four quarters. The historical volatility factor represents our historical Unit price over the same period as our expected term. Due to a lack of sufficient historical data, we have chosen to use the simplified method to calculate the expected term of options.

The option-related activity in our equity compensation plans during 2018 is as follows:



	Options to Buy AB Holding Units		Weighted Average Exercise Price Per Option		Weighted Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value
Outstanding as of December 31, 2017	3,082,470		$	52.37	1.2
Granted	—		—
Exercised	(889,119	)	18.66
Forfeited	—		—
Expired	(1,522,108	)	85.09
Outstanding as of December 31, 2018	671,243		22.83		1.6	$	3.0
Exercisable as of December 31, 2018	634,877		22.84		1.5	2.8
Vested or expected to vest as of December 31, 2018	671,243		22.83		1.6	3.0

The total intrinsic value of options exercised during 2018, 2017 and 2016 was $8.9 million, $8.3 million and $2.1 million, respectively.

Under the fair value method, compensation expense is measured at the grant date based on the estimated fair value of the options awarded (determined using the Black-Scholes option valuation model) and is recognized over the required service period. We recorded no compensation expense related to option grants in 2018 and 2017 as no options were granted. We recorded compensation expense relating to option grants of $0.2 million in 2016. As of December 31, 2018, there was no compensation expense related to unvested option grants not yet recognized in the consolidated statement of income.

Restricted AB Holding Unit Awards

In 2018, 2017 and 2016, the Board granted restricted AB Holding Unit awards to Eligible Directors. These AB Holding Units give the Eligible Directors, in most instances, all the rights of other AB Holding Unitholders, subject to such restrictions on transfer as the Board may impose. We awarded 53,720, 50,252 and 46,382 restricted AB Holding Units, respectively, in 2018, 2017 and 2016 with grant date fair values per restricted AB Holding Unit of $26.90 in 2018, $21.25 and $24.80 in 2017 and $22.64 in 2016. All of the restricted AB Holding Units vest ratably over three or four years. We fully expensed these awards on each grant date, as there is no service requirement. We recorded compensation expense relating to these awards of $1.4 million, $1.1 million and $1.1 million, respectively, for the years ended December 31, 2018, 2017 and 2016.

On April 28, 2017, the Board removed Peter S. Kraus from his position as Chairman of the Board and Chief Executive Officer ("CEO"). As part of his June 2012 employment agreement he was granted 2.7 million restricted AB Holding Units, which were scheduled to vest ratably over the employment term (January 3, 2014 through January 2, 2019). Under US GAAP, the compensation expense for the AB Holding Unit award under the June 2012 employment agreement of $33.1 million (based on the $12.17 grant date AB Holding Unit price) was being amortized on a straight-line basis over 6.5 years, beginning on the grant date. As a result of his removal we accelerated the vesting on his remaining two tranches and delivered the AB Holding Units to him in June 2017. We recorded compensation expense relating to Mr. Kraus's restricted AB Holding Unit grants of $10.2 million and $5.1 million for the years ended December 31, 2017 and 2016, respectively.

On April 28, 2017, Seth P. Bernstein was appointed President and CEO to provide services pursuant to an employment agreement, effective May 1, 2017. In connection with the commencement of his employment, Mr. Bernstein was granted restricted AB Holding Units with a grant date fair value of $3.5 million (164,706 AB Holding Units based on the $21.25 grant date AB Holding Unit price on May 16, 2017) and a four-year service requirement. Mr. Bernstein's restricted AB Holding Units vest ratably on each of the first four anniversaries of his commencement date and will be delivered to Mr. Bernstein as soon as administratively feasible after May 1, 2021, subject to accelerated vesting clauses in his employment agreement. We recorded compensation expense relating to Mr. Bernstein's restricted AB Holding Unit grants of $0.9 million and $0.6 million for the years ended December 31, 2018 and 2017, respectively.

Under the Incentive Compensation Program, we awarded 6.5 million restricted AB Holding Units in 2018 (which included 6.2 million restricted AB Holding Units in December for the 2018 year-end awards as well as 0.3 million additional restricted AB Holding Units granted earlier during the year relating to the 2017 year-end awards), 6.3 million restricted AB Holding Units in 2017 (which included 6.1 million restricted AB Holding Units in December for the 2017 year-end awards as well as 0.2 million additional restricted AB Holding Units granted earlier during the year relating to the 2016 year-end awards), and 6.1 million restricted AB Holding Units in 2016 (substantially all of which were restricted AB Holding Units granted in December for the 2016 year-end awards as well as minimal restricted AB Holding Units granted earlier during the year relating to the 2015 year-end awards). The grant date fair values per restricted AB Holding Unit ranged between $24.95 and $26.69 in 2018, $23.00 and $24.95 in 2017, and were $19.45 and $23.20 in 2016. Restricted AB Holding Units awarded under the Incentive Compensation Program generally vest in 25% increments on December 1st of each of the four years immediately following the year in which the award is granted.

We also award restricted AB Holding Units in connection with certain employment and separation agreements, as well as relocation-related performance awards, with vesting schedules ranging between two and five years. The fair value of the restricted AB Holding Units is amortized over the required service period as employee compensation expense. We awarded 2.6 million, 1.8 million and 1.0 million restricted AB Holding Units in 2018, 2017 and 2016, respectively, with grant date fair values per restricted AB Holding Unit ranging between $25.05 and $30.25 in 2018, $21.25 and $25.65 in 2017 and $18.67 and $25.34 in 2016. We recorded compensation expense relating to restricted AB Holding Unit grants in connection with certain employment and separation agreements of $32.2 million, $21.6 million and $11.2 million, respectively, for the years ended December 31, 2018, 2017 and 2016.

Changes in unvested restricted AB Holding Units during 2018 are as follows:



	AB Holding Units		Weighted Average Grant Date Fair Value per AB Holding Unit
Unvested as of December 31, 2017	19,072,910		$	23.82
Granted	9,123,321		26.64
Vested	(7,128,611	)	23.72
Forfeited	(853,231	)	24.02
Unvested as of December 31, 2018	20,214,389		25.12

The total grant date fair value of restricted AB Holding Units that vested during 2018, 2017 and 2016 was $169.1 million, $177.0 million and $159.4 million, respectively. As of December 31, 2018, the 20,214,389 unvested restricted AB Holding Units consist of 15,380,549 restricted AB Holding Units that do not have a service requirement and have been fully expensed on the grant date and 4,883,840 restricted AB Holding Units that have a service requirement and will be expensed over the required service period. As of December 31, 2018, there was $87.1 million of compensation expense related to unvested restricted AB Holding Unit awards granted and not yet recognized in the consolidated statement of income. We expect to recognize the expense over a weighted average period of 3.6 years.