Note 17 – Share-Based and Other Deferred Compensation

LP Units

At the time of the Company’s formation and IPO, collectively referred to as the reorganization (“Reorganization”), Members and certain trusts benefiting certain of their families received 13,548 vested and 9,589 unvested LP Units. The LP Units are exchangeable into Class A common stock of the Company on a one-for-one basis once vested.

The unvested partnership units vest ratably on December 31, 2011, 2012 and 2013 so long as the equity holder remains employed with Evercore Partners Inc., Evercore LP or their affiliates on such dates. The Company is expensing the fair value of the awards, prospectively, over the service period. Expense related to the amortization of these partnership units was $20,971, $22,189 and $20,060 for the years ended December 31, 2012, 2011 and 2010, respectively. As of December 31, 2012, the total compensation cost related to unvested LP Units not yet recognized was $19,350. The weighted-average period over which this compensation cost is expected to be recognized is 12 months.

Acquisition-related

During 2011, in connection with the Lexicon acquisition, the Company committed to issue 1,883 restricted Class A Shares, including dividend equivalent units, (“Acquisition-related Awards”) and deferred cash consideration. Compensation expense related to the Acquisition-related Awards and deferred cash consideration was $18,749 and $7,216, respectively, for the year ended December 31, 2012, and $6,621 and $2,455, respectively, for the year ended December 31, 2011. See Note 4 for a further discussion.

The following table summarizes activity related to Acquisition-related Awards during the year ended December 31, 2012:


	Acquisition-related Awards
	Number of Shares			Grant Date Weighted Average Fair Value
Unvested Balance at January 1, 2012		1,911		$	43,537
Granted		54			1,421
Modified		—			—
Forfeited		—			—
Vested		(246	)		(5,620	)

Unvested Balance at December 31, 2012		1,719		$	39,338

As of December 31, 2012, the total compensation cost related to unvested Acquisition-related equity Awards and deferred cash consideration not yet recognized was $23,381. The weighted-average period over which this compensation cost is expected to be recognized is 30 months.

In addition, certain Lexicon employees received deferred compensation of $1,892, which vests over two years. Compensation expense related to these awards was $875 and $413 for the years ended December 31, 2012 and 2011, respectively. As of December 31, 2012, the total compensation cost related to these unvested deferred compensation awards not yet recognized was $385. The weighted-average period over which this compensation cost is expected to be recognized is 8 months.

2006 Stock Incentive Plan

In 2006 the Company’s stockholders and board of directors adopted the Evercore Partners Inc. 2006 Stock Incentive Plan (the “2006 Plan”). The 2006 Plan permits the Company to grant to key employees, directors and consultants incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock, RSUs and other awards based on the Company’s Class A common stock. The total number of shares of Class A common stock which may be issued under the 2006 Plan is 20,000 and the Company intends to use newly-issued shares of Class A common stock to satisfy any awards under the 2006 Plan. Shares of Class A common stock underlying any award granted under the 2006 Plan that expire, terminate or are cancelled or satisfied for any reason without being settled in stock again become available for awards under the 2006 Plan. The total shares available to be granted in the future under the 2006 Plan were 4,667 and 7,434 as of December 31, 2012 and 2011, respectively.

The Company also grants dividend equivalents, in the form of unvested RSU awards, concurrently with the payment of dividends to the holders of Class A common stock, on all unvested RSU grants awarded in conjunction with annual bonuses and new hire awards. The dividend equivalents have the same vesting and delivery terms as the underlying RSU award.

IPO Event-based Awards

Pursuant to the 2006 Plan, at the time of the IPO, the Company granted to the Company’s employees 2,286 RSUs (“Event-based Awards”), which were convertible into Class A common stock on a one-for-one basis once vested. These Event-based Awards have since fully vested and, as a result, the Company recorded compensation expense equal to the value of these fully-vested awards.

In conjunction with the IPO, the Company also granted to an employee 12 IPO related Event-based awards, which remain unvested as of December 31, 2012.

During 2011, 546 Event-based Awards vested primarily in conjunction of the Company’s offering of Class A Shares resulting in an expense of $11,467 and 27 Event-based Awards were forfeited.

Deferred Cash Program

During the first quarter of 2011, the Company launched a deferred compensation program providing participants the ability to elect to receive a portion of their deferred compensation in deferred cash, which is indexed to a notional investment portfolio. The Company awarded deferred cash compensation of $3,926 and $9,153, during the first quarters of 2012 and 2011, respectively, which will vest ratably over four years and require payment upon vesting. Compensation expense related to this deferred compensation program was $4,210 and $1,938 for the years ended December 31, 2012 and 2011, respectively. As of December 31, 2012, the total compensation cost related to the deferred compensation program not yet recognized was $7,316. The weighted-average period over which this compensation cost is expected to be recognized is 28 months.

Equity Grants

2012 Equity Grants. During 2012, pursuant to the 2006 Plan, the Company granted employees 3,163 RSUs that are Service-based Awards. Service-based Awards granted during 2012 had grant date fair values of $22.62 to $29.19 per share. During 2012, 1,760 Service-based Awards vested and 256 Service-based Awards were forfeited. Compensation expense related to Service-based Awards, excluding compensation expense related to the amortization of LP Units, was $62,840 for the year ended December 31, 2012.

The following table summarizes activity related to Service-based Awards, which includes RSUs as well as LP Units, during the year ended December 31, 2012:


	Service-based Awards
	Number of Shares			Grant Date Weighted Average Fair Value
Unvested Balance at January 1, 2012		8,351		$	188,051
Granted		3,312			94,059
Modified		—			—
Forfeited		(393	)		(8,939	)
Vested		(3,298	)		(76,303	)

Unvested Balance at December 31, 2012		7,972		$	196,868

As of December 31, 2012, the total compensation cost related to unvested Service-based Awards, excluding LP Units and Acquisition-related Awards, not yet recognized was $104,967. The ultimate amount of such expense is dependent upon the actual number of Service-based Awards that vest. The Company periodically assesses the forfeiture rates used for such estimates. A change in estimated forfeiture rates would cause the aggregate amount of compensation expense recognized in future periods to differ from the estimated unrecognized compensation expense described herein. The weighted-average period over which this compensation cost is expected to be recognized is 20 months.

2011 Equity Grants. During 2011, pursuant to the 2006 Plan, the Company granted employees 2,273 RSUs that are Service-based Awards. Service-based Awards granted during 2011 had grant date fair values of $21.93 to $36.41 per share. During 2011, 1,552 Service-based Awards vested and 76 Service-based Awards were forfeited. Compensation expense related to Service-based Awards, excluding compensation expense related to the amortization of LP Units, was $47,299 for the year ended December 31, 2011.

During 2011, the Company amended the terms of a Service-based Award with respect to 97 unvested and 37 vested RSUs. Due to this amendment, $2,828 was reclassified from Additional Paid-In-Capital to Other Current Liabilities on the Consolidated Statement of Financial Condition.

2010 Equity Grants. During 2010, pursuant to the 2006 Plan, the Company granted employees 1,474 RSUs that are Service-based Awards. Service-based Awards granted during 2010 had grant date fair values of $23.31 to $35.79 per share. During 2010, 1,457 Service-based Awards vested and 32 Service-based Awards were forfeited, excluding the below agreement. Compensation expense related to Service-based Awards, excluding compensation expense related to the amortization of LP Units, was $35,347 for the year ended December 31, 2010.

In September 2010, one of the Company’s executives substantially ceased providing active service with the Company. In conjunction with this change in role, the executive agreed to release all right, title and interest to 275 unvested RSUs, with a grant date fair value of $3,226, since his service condition with the Company, as was contemplated at the time the RSUs were granted, will not be fulfilled. As a result of the executive’s significant change in role, this transaction was accounted for as a forfeiture and previously accrued compensation expense of $352, included above, related to the unvested RSUs was reversed in the third quarter of 2010.

Other

The total income tax benefit related to share-based compensation arrangements recognized in the Company’s Consolidated Statements of Operations for the years ended December 31, 2012, 2011 and 2010 was $26,773, $19,423 and $9,392, respectively.

During the first quarter of 2013, as part of the 2012 bonus awards, the Company granted to certain employees approximately 2,000 unvested RSUs pursuant to the 2006 Plan. The Company also granted the President and Chief Executive Officer of the Company 50 RSUs which will vest on the fourth anniversary of the grant, contingent that the Company’s stock price has, by the fourth anniversary of the grant, closed at or above $45.00 per share for 20 consecutive trading days. These awards will vest over four years. In addition, during the first quarter of 2013, the Company granted approximately $10,300 of deferred cash to certain employees. These awards will principally be amortized over two years and be subject to claw-back provisions if the employee were to leave during the two year period.

During 2012, the Company granted separation benefits to certain employees, resulting in expense included in Employee Compensation and Benefits of approximately $7,273 for the year ended December 31, 2012. In conjunction with these arrangements, the Company distributed cash payments of $5,135 for the year ended December 31, 2012.

During 2011, the Company modified equity-based compensation awards for four employees, primarily relating to the vesting terms of IPO related equity grants. These modifications resulted in the Company recognizing $4,261 in incremental compensation expense in 2011.