Share-Based and Other Deferred Compensation

LP Units

Class A

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 Class A LP Units. The Class A LP Units are exchangeable into Class A Shares of the Company on a one-for-one basis once vested.

The unvested Class A LP Units vested ratably on December 31, 2011, 2012 and 2013 so long as the equity holder remained employed with Evercore Partners Inc., Evercore LP or their affiliates on such dates. The Class A LP Units were all fully vested as of December 31, 2013. The Company expensed the fair value of the awards, prospectively, over the service period. Expense related to the amortization of these Class A LP Units was $20,063 and $20,971 for the years ended December 31, 2013 and 2012, respectively.

Acquisition-related

Equities business - In conjunction with the acquisition of the operating businesses of ISI, the Company issued Evercore LP interests which will be treated as compensation going forward, including 710 vested Class E LP Units and an allocation of the value, attributed to post-combination service, of 710 Class E LP Units that were unvested and will vest ratably on October 31, 2015, 2016 and 2017 and become exchangeable once vested, subject to continued employment with the Company. The units will become exchangeable into Class A common shares of the Company subject to certain liquidated damages and continued employment provisions.

The Company also issued 538 vested and 540 unvested Class G LP Interests, which will vest ratably on February 15, 2016, 2017 and 2018, and 2,044 vested and 2,051 unvested Class H LP Interests, which will vest ratably on February 15, 2018, 2019 and 2020. The Company’s vested Class G and Class H LP Interests will become exchangeable into Class A common shares of the Company subject to the achievement of certain performance targets. The Company’s vested Class G Interests will become exchangeable in February 2016, 2017 and 2018 if certain earnings before interest and taxes (“EBIT”) margin thresholds are achieved for the calendar year preceding the date the interests become exchangeable. The Company’s vested Class H Interests will become exchangeable February 2018, 2019 and 2020 if certain average EBIT and EBIT margin thresholds are achieved for the three calendar years preceding the date the interests become exchangeable.

As of December 31, 2014, the Company determined that the achievement of the above performance thresholds associated with the Class G and H Interests was not probable. Accordingly, no expense was recorded for the year ended December 31, 2014 for the Class G and H Interests.

The following tables summarize activity related to the Acquisition-related Awards for the Company's equities business during the year ended December 31, 2014. In these tables, awards whose performance conditions have not yet been achieved are reflected as unvested:



	Class E LP Units
	Number of Units		Grant Date Weighted Average Fair Value
Unvested Balance at January 1, 2014	—		$	—
Granted	1,174		60,012
Modified	(1	)	(35		)
Forfeited	—		—
Vested/Performance Achieved	—		—
Unvested Balance at December 31, 2014	1,173		$	59,977



	Class G LP Interests					Class H LP Interests
	Number of Interests		Grant Date Weighted Average Fair Value			Number of Interests		Grant Date Weighted Average Fair Value
Unvested Balance at January 1, 2014	—		$	—		—		$	—
Granted	1,078		55,792			4,095		212,005
Modified	(1	)	(54		)	(4	)	(204		)
Forfeited	—		—			—		—
Vested/Performance Achieved	—		—			—		—
Unvested Balance at December 31, 2014	1,077		$	55,738		4,091		$	211,801

Compensation expense related to Acquisition-related Awards for the Company's equities business was $3,399 for the year ended December 31, 2014. As of December 31, 2014, the total compensation cost not yet recognized related to these Acquisition-related Awards, including awards which are subject to performance conditions, was $316,456. The weighted-average period over which this compensation cost is expected to be recognized is 49 months.

Other Acquisition Related

Lexicon - During 2011, in connection with the acquisition of The Lexicon Partnership LLP ("Lexicon"), 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 $5,255 and $1,626, respectively, for the year ended December 31, 2014, $10,960 and $3,937, respectively, for the year ended December 31, 2013, and $18,749 and $7,216, respectively, for the year ended December 31, 2012.

The following table summarizes activity related to Lexicon Acquisition-related Awards during the year ended December 31, 2014:



	Lexicon Acquisition-related Awards
	Number of Shares		Grant Date Weighted Average Fair Value
Unvested Balance at January 1, 2014	1,127		$	26,164
Granted	13		726
Modified	—		—
Forfeited	—		—
Vested	(680	)	(16,242		)
Unvested Balance at December 31, 2014	460		$	10,648

As of December 31, 2014, the total compensation cost related to unvested Acquisition-related Awards and deferred cash consideration not yet recognized was $1,572. The weighted-average period over which this compensation cost is expected to be recognized is 6 months.

In addition, certain Lexicon employees received deferred compensation of $1,892, which vests over two years. Compensation expense related to these awards was $211 and $875 for the years ended December 31, 2013 and 2012, respectively.

In February 2015, the Company agreed to release the transfer restrictions on £3,190 in deferred cash consideration paid and 531 shares granted in connection with the acquisition of Lexicon, in each case which vested on June 30, 2014 and would otherwise become freely transferable on June 30, 2015.

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 Shares. The total number of Class A Shares which may be issued under the 2006 Plan is 20,000 and the Company intends to use newly-issued Class A Shares to satisfy any awards under the 2006 Plan. Class A Shares underlying any award granted under the 2006 Plan that expire, terminate or are canceled or satisfied for any reason without being settled in stock again become available for awards under the 2006 Plan. During the second quarter of 2013, the Company's stockholders approved the amended and restated 2006 Evercore Partners Inc. Stock Incentive Plan. The amended and restated plan, among other things, authorizes an additional 5,000 shares of the Company's Class A Shares. The total shares available to be granted in the future under the 2006 Plan were 5,392 and 7,323 as of December 31, 2014 and 2013, 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 Shares, on all unvested RSU grants awarded in conjunction with annual bonuses as well as new hire awards granted after April 2012. The dividend equivalents have the same vesting and delivery terms as the underlying RSU award.

The Company had 224 RSUs which were fully vested but not delivered as of December 31, 2014.

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 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 $3,683, $3,804 and $4,210 for the years ended December 31, 2014, 2013 and 2012, respectively. As of December 31, 2014, the total compensation cost related to the deferred compensation program not yet recognized was $949. The weighted-average period over which this compensation cost is expected to be recognized is 3 months.

Long-term Incentive Plan

During the third quarter of 2013, the Board of Directors of the Company approved the Long-term Incentive Plan, which provides for incentive compensation awards to Advisory Senior Managing Directors, excluding executive officers of the Company, who exceed defined benchmark results over a four-year performance period beginning January 1, 2013. These awards will be paid, in cash or Class A Shares, at the Company's discretion, in the two years following the performance period, to Senior Managing Directors employed by the Company at the time of payment. These awards are subject to retirement eligibility requirements. The Company periodically assesses the probability of the benchmarks being achieved and expenses the probable payout over the requisite service period of the award. The compensation expense related to these awards was $5,700 and $1,584 for the years ended December 31, 2014 and 2013, respectively.

Equity Grants

2014 Equity Grants. During 2014, pursuant to the 2006 Plan, the Company granted employees 2,071 RSUs that are Service-based Awards. Service-based Awards granted during 2014 had grant date fair values of $46.59 to $58.67 per share. During 2014, 3,245 Service-based Awards vested and 158 Service-based Awards were forfeited. Compensation expense related to Service-based Awards was $90,597 for the year ended December 31, 2014.

The following table summarizes activity related to Service-based Awards during the year ended December 31, 2014:



	Service-based Awards
	Number of Shares		Grant Date Weighted Average Fair Value
Unvested Balance at January 1, 2014	6,680		$	181,602
Granted	2,071		111,766
Modified	—		—
Forfeited	(158	)	(5,596		)
Vested	(3,245	)	(79,140		)
Unvested Balance at December 31, 2014	5,348		$	208,632

As of December 31, 2014, the total compensation cost related to unvested Service-based Awards, excluding Acquisition-related Awards, not yet recognized was $121,771. 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 13 months.

2013 Equity Grants. During 2013, pursuant to the 2006 Plan, the Company granted employees 2,398 RSUs that are Service-based Awards. Service-based Awards granted during 2013 had grant date fair values of $26.60 to $55.24 per share. During 2013, 2,188 Service-based Awards vested and 60 Service-based Awards were forfeited. Compensation expense related to Service-based Awards, excluding compensation expense related to the amortization of LP Units, was $79,678 for the year ended December 31, 2013.

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.

Other

Periodically, the Company provides new and existing employees with cash payments in the form of loans and/or other cash awards which are subject to ratable vesting terms with service requirements ranging from one to five years. Generally, the terms of these awards include a requirement of either full or partial repayment of these awards based on the terms of their employment agreements with the Company. In circumstances where the employee meets the Company's minimum credit standards, the Company amortizes these awards to compensation expense over the relevant service period which is generally the period they are subject to forfeiture. Compensation expense related to these awards was $13,851 and $7,433 for the years ended December 31, 2014 and 2013, respectively. The remaining unamortized amount of these awards was $23,869 as of December 31, 2014.

During the fourth quarter of 2013, the Board of Directors of the Company agreed to release the transfer restrictions associated with 1,267 Class A LP Units and 610 Restricted Class A Shares held by certain employees of the Company.

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, 2014, 2013 and 2012 was $34,375, $29,497 and $26,773, respectively.

During the first quarter of 2015, as part of the 2014 bonus awards, the Company granted to certain employees approximately 2,200 unvested RSUs pursuant to the 2006 Plan. These awards will generally vest over four years. In addition, during the first quarter of 2015, the Company granted approximately $7,400 of deferred cash to certain employees, a portion of which is subject to claw-back provisions.

The Company granted separation benefits to certain employees, resulting in expense included in Employee Compensation and Benefits of approximately $5,671, $4,834 and $7,273 for the years ended December 31, 2014, 2013 and 2012, respectively. In conjunction with these arrangements, the Company distributed cash payments of $3,415, $3,314 and $5,135 for the years ended December 31, 2014, 2013 and 2012, respectively. The Company also granted separation benefits to certain employees, resulting in expense included in Special Charges of approximately $3,372 for the year ended December 31, 2014. In conjunction with these arrangements, the Company distributed cash payments of $238 for the year ended December 31, 2014. See Note 5 for further information.