All non-cash compensation awards granted have varying vesting schedules and are issued at prices equal to the assessed fair market value at the time of issuance, as discussed below. Details of awards of Class B-1 units of the operating company, Delayed Exchange Class B units, phantom Delayed Exchange Class B units, options to purchase shares of Class A common stock, and shares of Class A common stock awarded for the years ended December 31, 2021 and 2020, are as follows:


	For the Years Ended December 31,
	2021				2020
	Amount		Fair Value1		Amount		Fair Value1
Class B-1 Units2		1,456,753	$	2.41		2,092,879	$	3.98
Delayed Exchange Class B Units3		810,857	$	4.68		620,543	$	5.95
Deferred Compensation Phantom Delayed Exchange Class B Units4		—	$	—		188,283	$	4.67
Options to Purchase Shares of Class A Common Stock5		—	$	—		146,804	$	2.03
Restricted Shares of Class A Common Stock6		17,706	$	4.67		16,806	$	4.74

Represents the weighted average grant date estimated fair value per share, unit, or option.

Represents Class B-1 units issued under the 2007 Equity Incentive Plan (as defined below). These Class B-1 units are entitled to receive dividends for the duration of the holder’s employment, and upon the end of employment are exchanged for shares of Class A common stock in an amount based upon the appreciation in price of the Class A common stock from the date of grant to the date of exchange. Of the units issued during the year ended December 31, 2021, 1,400,305 units vest on the fifth anniversary of the grant date, 38,462 units vest ratably over four years, and 17,986 units vested immediately. Of the units issued during the year ended December 31, 2020, 2,032,879 units vest on the fifth anniversary of the grant date and 60,000 units vest ratably over four years. Amounts reflected include the impact of a modification as of May 1, 2020, which resulted in the cancellation of 166,804 Class B-1 Units.

Represents Class B units issued under the 2006 Equity Incentive Plan (as defined below). These units vest immediately upon grant, but may not be exchanged pursuant to the Amended and Restated Operating Agreement of the operating company until the seventh anniversary of the date of grant. These units are also not entitled to any benefits under the Tax Receivable Agreement between the Company and members of the operating company.

Represents phantom Delayed Exchange Class B units issued under the 2006 Equity Incentive Plan and pursuant to the Bonus Plan (as defined below). These phantom units vest ratably over four years, but may not be exchanged pursuant to the Amended and Restated Operating Agreement of the operating company until seven years after the date they vest. These units are also not entitled to any benefits under the Tax Receivable Agreement between the Company and members of the operating company.

Represents options to purchase shares of Class A common stock issued under the 2007 Equity Incentive Plan. These options become exercisable five years from the date of grant. Amounts reflected include the impact of a modification as of May 1, 2020, which resulted in the issuance of 146,804 options to purchase shares of Class A common stock.

Represents shares of Class A common stock issued under the 2007 Equity Incentive Plan. Of the shares issued during the year ended December 31, 2021, 12,353 shares vest immediately and 5,353 shares vest ratably over four years. The 16,806 shares issued during the year ended December 31, 2020, vest ratably over four years. These shares are restricted and may not be sold until the seventh anniversary of the date of grant. Amounts reflected include the impact of a modification as of May 1, 2020, which resulted in the issuance of 16,806 restricted shares of Class A common stock.

As part of the Company's year-end bonus structure, certain employee members may elect to have all or part of year-end cash compensation paid in the form of cash, or equity issued pursuant to Pzena Investment Management, LLC Amended and Restated 2006 Equity Incentive Plan (“the 2006 Equity Incentive Plan”). For the year ended December 31, 2021, $6.8 million of cash compensation was elected to be paid in the form of equity, which was issued and vested immediately on January 1, 2021. Details of these awards issued on January 1, 2022 are as follows:


	January 1,
	2022
	Amount		Fair Value1
Delayed Exchange Class B Units2		1,084,675	$	6.16
Restricted Shares of Class A Common Stock3		17,057	$	6.16

Represents the weighted average grant date estimated fair value per share, unit, or option as of December 31, 2021.

Represents Class B units issued under the 2006 Equity Incentive Plan. These units vest immediately upon grant, but may not be exchanged pursuant to the Amended and Restated Operating Agreement of the operating company until the seventh anniversary of the date of grant. These units are also not entitled to any benefits under the Tax Receivable Agreement between the Company and members of the operating company.

Represents shares of Class A common stock issued under the 2007 Equity Incentive Plan. These shares vest immediately upon grant, but are restricted and may not be sold until the seventh anniversary of the date of grant.

Pursuant to the 2006 Equity Incentive Plan, the operating company issues Class B units, Class B-1 units, phantom Class B units, and options to purchase Class B units. The Company also issues Delayed Exchange Class B units pursuant to the 2006 Equity Incentive Plan. These Delayed Exchange Class B units may not be exchanged pursuant to the Amended and Restated Operating Agreement of the operating company until at least the seventh anniversary of the date they vest. These Delayed Exchange Class B units are also not entitled to any benefit under the Tax Receivable Agreement between the Company and current, future and past members of the operating company. The Company also issues phantom Delayed Exchange Class B units and options to purchase Delayed Exchange Class B units. Under the Pzena Investment Management, Inc. 2007 Equity Incentive Plan (“the 2007 Equity Incentive Plan”), the Company issues shares of restricted Class A common stock, Class B-1 units, options to purchase Class A common stock, and contingently vesting options to acquire shares of Class A common stock.

Under the Pzena Investment Management, LLC Amended and Restated Bonus Plan (the “Bonus Plan”), eligible employees whose compensation is in excess of certain thresholds are required to defer a portion of that excess. These deferred amounts may be invested, at the employee’s discretion, in certain investment options as designated by the Compensation Committee of the Company's Board of Directors. Amounts deferred in any calendar year reduce that year’s compensation expense and are amortized and vest ratably over a four year period commencing the following year. As of December 31, 2021 and 2020, the liability associated with deferred compensation investment accounts was $6.8 million and $5.0 million, respectively.

Pursuant to the Pzena Investment Management, Inc. Non-Employee Director Deferred Compensation Plan (the “Director Plan”), non-employee directors may elect to have all or part of the compensation otherwise payable in cash, deferred in the form of phantom shares of Class A common stock of the Company issued under the 2007 Equity Incentive Plan. Elections to defer compensation under the Director Plan are made on a year-to-year basis. Elections of deferred stock units result in the issuance of phantom shares of Class A common stock. Distributions under the Director Plan shall be made in a single distribution of shares of our Class A common stock at such time as elected by the participant when the deferral was made. Since inception of the Director Plan in 2009, the majority of the Company’s directors have elected to defer 100% of their compensation in the form of phantom shares of Class A common stock. Amounts deferred in any calendar year are amortized over the calendar year and reflected as General and Administrative Expense. During the second quarter of 2020, the Company’s Board of Directors agreed to waive compensation for the full year of 2020, which resulted in the forfeiture of 49,673 phantom shares of Class A common stock. During the fourth quarter of 2020, the Board of Directors elected to re-instate 50% of their compensation for the year of 2020. For the years ended December 31, 2021 and 2020, the directors were awarded 75,038 and 78,416 phantom shares of Class A common stock, respectively, reflecting the annual deferral of compensation and additional phantom shares issued as of each date, and in the amount of dividends and/or special dividends and distributions that are paid with respect to Class A common stock of the Company. As of December 31, 2021 and 2020, there were 597,412 and 533,444 phantom shares of Class A common stock outstanding, respectively. During the year ended December 31, 2021, the Company distributed 11,070 shares of Class A common stock under the Director Plan. There were no distributions made under the Director Plan during the year ended December 31, 2020. During the year ended December 31, 2021, the Company issued 5,074 restricted shares of Class A common stock associated with non-deferred nonemployee director compensation. These restricted shares will vest quarterly of the calendar year.

The Company uses a fair value method in recording the expense associated with the granting of Class B units, Class B-1 units, Delayed Exchange Class B units, phantom Delayed Exchange Class B units, options to purchase Class A common stock and Class B units, options to purchase Delayed Exchange Class B units, and shares of Class A common stock under the 2006 and 2007 Equity Incentive Plans; phantom Delayed Exchange Class B units under the Bonus Plan; and phantom shares of Class A common stock under the Director Plan.

The fair value of awarded restricted shares of Class A common stock under the 2007 Equity Incentive Plan and phantom shares of Class A common stock under the Director Plan is determined based on the closing market price of our Class A common stock on the date of grant. The fair value of awarded Class B and Class B-1 units under the 2006 and 2007 Equity Incentive Plans are determined by reference to the market price of our Class A common stock on the date of grant, since Class B and Class B-1 units are exchangeable for shares of our Class A common stock, adjusted for the impact of award terms on the value of the award. Certain of the restricted shares of Class A common stock are not entitled to dividends or dividend equivalents while unvested. The fair value of these awards is determined based on the closing market price of our Class A common stock on the date of grant, net of the present value of the dividends using the applicable risk-free interest rate. The Delayed Exchange Class B Units have a seven years exchange limitation and are not entitled to any benefits under the tax receivable agreement. The fair value of these awards is determined based on the closing market price of our Class A common stock on the date of grant, net of the effects of these terms. The Class B-1 units are entitled to distributions for the duration of the holder’s employment and will participate in additional value to the extent there has been appreciation subsequent to the issuance of the Class B-1 unit. The fair value of these awards is determined based on the present value of expected future dividends, an option pricing model where the strike price reflects the threshold value over which appreciation is recognized, and the impact of award terms on the value of the award. The Company also issued options to purchase Delayed Exchange Class B units. The fair value of these options is determined using an option pricing model where the strike price reflects the fair value of Delayed Exchange Class B units on the date of grant. Certain of the phantom Delayed Exchange Class B units are not entitled to dividends or dividend equivalents while unvested.

The option model used in the fair value of Options to Purchase Shares of Class A Common Stock, Class B-1 units, and the Delayed Exchange Class B units is determined by using an appropriate option pricing model on the grant date. For each of the years ended December 31, 2021 and 2020, the Company issued options and units valued using the Black-Scholes option pricing model with the following weighted average assumptions:


	2021			2020
	January 1,			January 1,
Weighted Average Time Until Exercise	10 years			10 years
Expected Volatility		45	%		44	%
Risk-Free Rate		0.90	%		1.90	%
Dividend Yield		4.40	%		4.40	%

Weighted Average Time Until Exercise — The expected term is based on the Company’s historical experience and the particular terms of its option awards.

Expected Volatility — Due to the lack of sufficient historical data for the Company’s own shares, the Company based its expected volatility on a representative peer group.

Risk-Free Rate — The risk-free rate for periods within the expected term of the options is based on the interest rate of a traded zero-coupon U.S. Treasury bond with a term equal to the options’ expected term on the date of grant.

Dividend Yield — The dividend yield is based on the Company’s anticipated dividend payout over the expected term of the option awards.

The following is a summary of the Class B-1 unit activity for the two years ended December 31, 2021:


	For the Years Ended December 31,
	2021				2020
	Units Outstanding		Weighted Average Threshold Price		Units Outstanding		Weighted Average Threshold Price
Beginning Balance		5,775,952	$	8.15		3,683,073	$	8.15
Units Granted1		1,456,753		7.06		2,092,879		8.15
Units Cancelled		—		—		—		—
Units Forfeited		—		—		—		—
Units Exercised		—		—		—		—
Ending Balance		7,232,705	$	7.93		5,775,952	$	8.15

Amounts reflected include the impact of a modification as of May 1, 2020, which resulted in the cancellation of 166,804 Class B-1 units.

The weighted average grant-date fair value per Class B-1 unit issued in 2021 and 2020 was $2.41 and $3.98, respectively. During the years ended December 31, 2021 and 2020, no Class B-1 units were exercised.

Exercise prices for Class B-1 units outstanding and exercisable as of December 31, 2021 are as follows:


	Units Outstanding				Units Exercisable
	Number Outstanding as of December 31, 2021		Weighted Average Threshold Price		Number Exercisable as of December 31, 2021		Weighted Average Threshold Price
$5.00 – $10.00		7,214,719	$	7.92		3,709,776	$	8.15
$10.00 – $15.00		17,986		11.01		17,986		11.01
$5.00 – $15.00		7,232,705	$	7.93		3,727,762	$	8.16

The following is a summary of the option activity for the two years ended December 31, 2021:


	For the Years Ended December 31,
	2021					2020
	Options Outstanding			Weighted Average Exercise Price		Options Outstanding			Weighted Average Exercise Price
Beginning Balance		6,762,389		$	8.27		6,779,677		$	8.24
Options Granted1		—			—		189,539			7.65
Options Cancelled		—			—		(8,426	)		7.58
Options Forfeited		—			—		(178,740	)		6.57
Options Exercised		(61,334	)		4.77		(19,661	)		7.58
Ending Balance		6,701,055		$	8.30		6,762,389		$	8.27

Options granted for the year ended December 31, 2020 include 189,539 options to purchase shares of Class A common stock.

The weighted average grant-date fair values per option issued in 2020 was $1.84. The 61,334 options exercised in 2021 resulted in 32,947 net Class B units issued, as a result of the redemption of 28,387 Class B units for the cashless exercise of the options. The 19,661 options exercised in 2020 resulted in 603 net Class B units issued, as a result of the redemption of 19,058 Class B units for the cashless exercise of the options. The 187,166 options to purchase Class B units that were cancelled or forfeited during 2020 were in connection with employee departures and

option expirations. During the year ended December 31, 2021, 500,000 contingently vesting options vested. During the year ended December 31, 2020, no contingently vesting options vested.

Exercise prices for options outstanding and exercisable as of December 31, 2021 are as follows:


	Options Outstanding						Options Exercisable
	Number Outstanding as of December 31, 2021		Weighted- Average Remaining Contractual Life		Weighted Average Exercise Price		Number Exercisable as of December 31, 2021		Weighted- Average Remaining Contractual Life		Weighted Average Exercise Price
$5.00 – $10.00		5,308,921		5.7	$	7.02		1,215,769		6.1	$	6.90
$10.00 – $15.00		1,392,134		1.7		13.19		522,134		0.6		12.88
$5.00 – $15.00		6,701,055		4.8	$	8.30		1,737,903		4.4	$	8.69

Phantom Delayed Exchange Class B units issued pursuant to the Bonus Plan, which vest ratably over four years, are summarized as follows:


	For the Years Ended December 31,
	2021					2020
	Phantom Units Outstanding			Weighted Average Price		Phantom Units Outstanding			Weighted Average Price
Beginning Balance		472,302		$	5.57		503,869		$	6.33
Phantom Delayed Exchange Class B Units Issued1		-			-		188,283			4.67
Vesting of Phantom Delayed Exchange Class B Units1		(201,523	)		5.97		(208,879	)		6.56
Phantom Delayed Exchange Class B Units Forfetied1		-			-		(10,971	)		6.04
Ending Balance		270,779		$	5.29		472,302		$	5.57

Represents phantom Delayed Exchange Class B units issued under the 2006 Equity Incentive Plan. These phantom units vest ratably over four years, but may not be exchanged pursuant to the Amended and Restated Operating Agreement of the operating company until seven years after the date they vest. These units are also not entitled to any benefits under the Tax Receivable Agreement between the Company and members of the operating company.

Phantom Class B units and Phantom Delayed Exchange Class B units issued pursuant to the 2006 Equity Incentive Plan, which vest ratably over 10 years and are not eligible to receive dividends or dividend equivalents until vested, are summarized as follows:


	For the Years Ended December 31,
	2021					2020
	Phantom Units Outstanding			Weighted Average Price		Phantom Units Outstanding			Weighted Average Price
Beginning Balance		3,108,154		$	4.00		3,734,050		$	4.05
Phantom Delayed Exchange Class B Units Issued		—			—		—			—
Vesting of Phantom Class B Units		(626,158	)		4.29		(625,896	)		4.29
Phantom Class B Units Forfeited		—			—		—			—
Ending Balance		2,481,996		$	3.93		3,108,154		$	4.00

As of December 31, 2021 and 2020, the Company had approximately $42.1 million and $34.8 million, respectively, in unrecorded compensation expense related to unvested awards issued pursuant to its Bonus Plan; Class B units, option grants, and phantom Class B units issued under the 2006 Equity Incentive Plan; and restricted Class A common stock issued under the 2007 Equity Incentive Plan. The Company anticipates that this unrecorded cost will amortize over the respective vesting periods of the awards.