17. Compensatory Unit Awards and Option Plans

Effective as of July 1, 2010, we established the AllianceBernstein 2010 Long Term Incentive Plan (“2010 Plan”), as amended, which was adopted by Holding Unitholders at a special meeting of Holding Unitholders held on June 30, 2010. Since the 2010 Plan was adopted, the following forms of awards have been available for grant to employees and Eligible Directors: (i) restricted Holding Units or phantom restricted Holding Units (a “phantom” award is a contractual right to receive Holding Units at a later date or upon a specified event); (ii) options to buy Holding Units; and (iii) other Holding Unit-based awards (including, without limitation, Holding Unit appreciation rights and performance awards). The purpose of the 2010 Plan is to promote the interest of AllianceBernstein 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 AllianceBernstein, and (iv) aligning the interests of such officers, employees and directors with those of Holding Unitholders. The 2010 Plan will expire on June 30, 2020, and no awards under the 2010 Plan will be made after that date. Under the 2010 Plan, the number of newly-issued Holding Units with respect to which awards may be granted is 30.0 million. The 2010 Plan also permits us to award an additional 30.0 million Holding Units if we acquire the Holding Units on the open market or through private purchases. As of December 31, 2011, we had granted 13.2 million Holding Unit awards, net of forfeitures, under the 2010 Plan. As of December 31, 2011, 27.0 million newly-issued Holding Units and 19.8 million repurchased Holding Units were available for grant.

The 2010 Plan was amended by the Board in May 2011, expanding the universe of persons eligible to receive awards under the 2010 Plan to include any member of the Board who is a former executive or former employee of an affiliate of Holding. For purposes of this amendment, “affiliate” includes any company or other entity that directly, or indirectly through one or more intermediaries, controls, is controlled by or is under common control with, AllianceBernstein.

The 2010 Plan was further amended by the Compensation Committee of the Board (“Compensation Committee”) in December 2011, clarifying that, where duly authorized by the Compensation Committee or the Board, continued vesting of Awards after a Termination (as those terms are defined in the 2010 Plan or the applicable award agreement) in circumstances where such continued vesting is conditioned on compliance with (A) one or more restrictive covenants, and/or (B) a standard of conduct regarding appropriate consideration of risk set forth in the applicable award agreement, shall count towards satisfying the minimum vesting requirement set forth in Section 6(b)(i) of the 2010 Plan.

In 1997, we established the 1997 Long Term Incentive Plan (“1997 Plan”), under which options to buy Holding Units, restricted Holding Units and phantom restricted Holding Units, performance awards, and other Holding Unit-based awards were available for grant to key employees and independent directors of the General Partner for terms established at the time of grant (generally 10 years). Options granted to employees are generally exercisable at a rate of 20% of the Holding Units subject to such options on each of the first five anniversary dates of the date of grant (except for certain options awarded under the Special Option Program, which are described below); options granted to independent directors are generally exercisable at a rate of 33.3% of the Holding Units subject to such options on each of the first three anniversary dates of the date of grant. Restricted Holding Units awarded to independent directors of the General Partner vest on the third anniversary of the grant date or immediately upon a director's resignation. Restricted Holding Units awarded to our CEO (as described below under “Restricted Holding Unit Awards”) vest 20% on each of the first five anniversary dates of the grant date. Restricted Holding Units awarded under the Incentive Compensation Program vest 25% on December 1st of the subsequent four years. The 1997 Plan expired on July 26, 2010.

In 1993, we established the 1993 Unit Option Plan (“1993 Plan”), under which options to buy Holding Units were granted to key employees and independent directors of the General Partner for terms of up to 10 years. Each option has an exercise price of not less than the fair market value of Holding Units on the date of grant. Options are exercisable at a rate of 20% of the Holding Units subject to such options on each of the first five anniversary dates of the date of grant. No options or other awards have been granted under the 1993 Plan since it expired in 2003.

Option Awards

In 2007, the Compensation Committee approved the Special Option Program, under which selected senior officers voluntarily allocate a specified portion of their annual long-term incentive compensation award to options to buy Holding Units. On January 23, 2009, the Compensation Committee granted an award of options to buy 6,534,182 Holding Units to 67 selected senior officers. The exercise price is $17.05, the closing price of Holding Units on the grant date, and the fair value is $3.51 per option.

The equity needed to fund awards under the Special Option Program was taken from the 1997 Plan (and reduced amounts available for grant under that plan accordingly). Future awards under the Special Option Program, if any, will take equity from the 2010 Plan or any successor equity compensation plan (and will reduce amounts available for grant under such plans accordingly).

Options to buy Holding Units (including grants to Eligible Directors) were granted as follows: 70,238 options were granted during 2011, 387,661 options were granted during 2010, and 6,565,302 options were granted during 2009. The weighted average fair value of options to buy Holding Units granted during 2011, 2010 and 2009 was $5.98, $6.18 and $3.52, respectively, on the date of grant, determined using the Black-Scholes option valuation model with the following assumptions:

	2011			2010			2009

Risk-free interest rate		1.9	%		2.2 – 2.3	%		1.6 – 2.1	%
Expected cash distribution yield		5.4	%		7.2 – 8.2	%		5.2 – 6.1	%
Historical volatility factor		47.3	%		46.2 – 46.6	%		40.0 – 44.6	%
Expected term	6.0 years			6.0 years			6.0 – 6.5 years

Due to a lack of sufficient historical data, we have chosen to use the simplified method to calculate the expected term of options.

The following table summarizes the activity in our option plan during 2011:

	Options to Buy Holding Units			Weighted Average Exercise Price Per Option		Weighted Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value

Outstanding as of December 31, 2010		10,217,871		$	41.24		6.9
Granted		70,238			21.75
Exercised		(86,543	)		17.05
Forfeited		(778,557	)		55.66
Expired		(428,780	)		50.59
Outstanding as of December 31, 2011		8,994,229			39.63		6.4	$	-
Exercisable as of December 31, 2011		3,316,961			36.65		5.6		-
Vested or expected to vest as of December 31, 2011		8,994,229			39.63		6.4		-

The aggregate intrinsic value as of December 31, 2011 on options outstanding, exercisable and expected to vest is negative, and is therefore presented as zero in the table above. The total intrinsic value of options exercised during 2011, 2010 and 2009 was $0.4 million, $5.6 million and zero, 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 compensation expense relating to option grants of $36.4 million (which includes $35.2 million of the one-time, non-cash deferred compensation charge), $9.1 million and $11.9 million, respectively, for the years ended December 31, 2011, 2010 and 2009. As of December 31, 2011, there was $0.9 million of compensation cost related to unvested option grants not yet recognized in the consolidated statement of income. The cost is expected to be recognized over a weighted average period of 1.3 years.

Restricted Holding Unit Awards

In 2011, 2010 and 2009, restricted Holding Units were awarded to Eligible Directors. These Holding Units give the Eligible Directors, in most instances, all the rights of other Holding Unitholders subject to such restrictions on transfer as the Board may impose. We awarded 19,313, 5,275 and 8,210 restricted Holding Units, respectively, in 2011, 2010 and 2009 with grant date fair values of $21.75, $28.46 and $18.27, respectively, per restricted Holding Unit. All of the restricted Holding Units vest on the third anniversary of grant date or immediately upon a director's resignation. We fully expensed these awards on each grant date. We recorded compensation expense relating to these awards of $0.4 million, $0.2 million and $0.1 million, respectively, for the years ended December 31, 2011, 2010 and 2009.

In accordance with the terms of the employment agreement among Mr. Kraus, Chairman and CEO, the General Partner, Holding and AllianceBernstein dated December 19, 2008, Mr. Kraus was granted 2,722,052 restricted Holding Units with a grant date fair value of $19.20. Subject to accelerated vesting provisions in Mr. Kraus's employment agreement, his restricted Holding Units vest ratably on each of the first five anniversaries of December 19, 2008, commencing December 19, 2009, provided, with respect to each installment, Mr. Kraus continues to be employed by AllianceBernstein on the vesting date. The agreement provides for immediate vesting upon AXA ceasing to control the management of AllianceBernstein's business or Holding ceasing to be publicly-traded and certain qualifying terminations of employment, including termination of Mr. Kraus's employment (i) by AllianceBernstein without cause, (ii) by Mr. Kraus for good reason (“good reason” generally means actions taken by AllianceBernstein resulting in a material negative change in Mr. Kraus's employment relationship, including assignment to Mr. Kraus of duties materially inconsistent with his position or a requirement that Mr. Kraus report to an officer or employee of AllianceBernstein instead of reporting directly to the Board), and (iii) due to death or disability. Mr. Kraus's service requirement included in his employment agreement was not impacted by the amendment to the employee long-term incentive compensation award program in the fourth quarter of 2011. We recorded compensation expense relating to the CEO restricted Holding Unit grant of $10.5 million for each of the years ended December 31, 2011, 2010 and 2009.

In 1993, we established the Century Club Plan, under which employees of AllianceBernstein whose primary responsibilities are to assist in the distribution of company-sponsored mutual funds and who meet certain sales targets, are eligible to receive an award of restricted Holding Units. Awards granted prior to December 2010 vested ratably over three years and subsequent awards vest ratably over four years. The service requirement for Century Club participants was impacted by the amendment to the employee long-term incentive compensation award program in the fourth quarter of 2011. We awarded 57,828, 95,531 and 46,163 restricted Holding Units in 2011, 2010 and 2009, respectively. The grant date fair values of these awards were $13.38 in 2011, $27.45 and $23.72 in 2010 and $12.17 in 2009 per Holding Unit. We recorded compensation expense relating to the Century Club Plan grants of $3.0 million (which includes $2.2 million of the one-time, non-cash deferred compensation charge), $1.2 million and $2.1 million, respectively, for the years ended December 31, 2011, 2010 and 2009.

Beginning in 2009, we awarded restricted Holding Units under the Incentive Compensation Program (seeNote 16). We awarded 11,594,207 and 8,345,805 restricted Holding Units in 2010 and 2009, respectively, with grant date fair values ranging between $23.72 and $32.06 for 2010 and $26.73 in 2009 per restricted Holding Unit.

We also award restricted Holding Units in connection with certain employment and separation agreements with vesting schedules ranging between two to five years. The fair value of the restricted Holding Units is amortized over the required service period as employee compensation expense. We awarded 1,649,973, 1,369,751 and 1,443,227 Holding Units in 2011, 2010 and 2009, respectively, with grant date fair values ranging between $16.29 and $22.71 in 2011, $23.72 and $28.37 in 2010 and $16.79 and $28.38 in 2009 per restricted Holding Unit. We recorded compensation expense relating to restricted Holding Unit grants in connection with certain employment and separation agreements of $32.9 million (which includes $15.8 million of the one-time, non-cash deferred compensation charge), $23.2 million and $8.1 million, respectively, for the years ended December 31, 2011, 2010 and 2009.

The following table summarizes the activity of unvested restricted Holding Units during 2011:

	Holding Units			Weighted Average Grant Date Fair Value per Holding Unit

Unvested as of December 31, 2010		21,326,859		$	24.37
Granted		1,741,930			20.52
Vested		(5,732,057	)		24.45
Forfeited		(1,762,541	)		24.68
Unvested as of December 31, 2011		15,574,191			23.88

The total grant date fair value of restricted Holding Units that vested during 2011, 2010 and 2009 was $140.2 million, $73.4 million and $14.7 million, respectively. As of December 31, 2011, there was $60.9 million of compensation cost related to unvested restricted Holding Unit awards granted and not yet recognized in the consolidated statement of income. The cost is expected to be recognized over a weighted average period of 2.7 years.