9. EQUITY-BASED COMPENSATION

Partnership Units

Prior to the Company's restructuring and IPO, the Parent's ownership structure was comprised of common partners (principally outside investors) holding units and employees holding units, which collectively represented the partnership interests in the Parent and evidence of the right to receive distributions and allocations of net profit and losses as defined in the Parent Limited Partnership Agreement. The common partners contributed capital to the Parent and are not subject to vesting. Units granted to Managing Directors upon joining the Company and as part of annual incentive compensation generally vested based on service over five to eight years. Certain non-Managing Director employees were granted units as part of their incentive arrangements and these units generally vest based on service ratably over four years. In connection with the Company's restructuring and IPO, substantially all of the partner equity subject to vesting had been accelerated. Units granted to non-Managing Director employees were not accelerated in connection with the Company's restructuring and IPO and continue to vest based on the original terms of the grant.

In connection with the reorganization and IPO, Group LP issued Class A partnership units to Moelis & Company and to certain existing holders of Old Holdings. Following the reorganization, a Group LP Class A partnership unit (not held by Moelis & Company or its subsidiaries) is exchangeable into one share of Moelis & Company Class A common stock and represents the Company's noncontrolling interests. As of September 30, 2014, partners held 38,993,858 Group LP partnership units, 730,207 of which were unvested and will continue to vest over their service life.

For the three months ended September 30, 2014 and 2013, the Company recognized compensation expenses of $886 and $10,891, respectively in relation to vesting of units. For the nine months ended September 30, 2014 and 2013, the Company recognized compensation expenses of $100,835 and $34,810, respectively in relation to vesting of units. As of September 30, 2014, there was $10,434 of unrecognized compensation expense related to unvested Class A partnership units. The Company expects to recognize the unrecognized compensation expense at September 30, 2014, over a weighted-average period of 3.0 years, using the graded vesting method.

2014 Omnibus Incentive Plan

In connection with the IPO, the Company adopted the Moelis & Company 2014 Omnibus Incentive Plan (the "Plan") to provide additional incentives to selected officers, employees, Managing Directors, non-employee directors, independent contractors, partners and consultants. The Plan provides for the issuance of incentive stock options ("ISOs"), nonqualified stock options, stock appreciation rights ("SARs"), restricted stock, RSUs, stock bonuses, other stock-based awards and cash awards.

Restricted Stock and Restricted Stock Units (RSUs)

Pursuant to the Plan and in connection with the Company's IPO, annual compensation process and ongoing hiring process, the Company has issued 2,477,272 shares of restricted stock and RSUs in 2014 which generally vest over a service life of four to five years. For the three and nine months ended September 30, 2014, the Company recognized expenses of $4,509 and $7,835, respectively related to these awards.

The following table summarizes activity related to restricted stock and RSUs for the nine months ended September 30, 2014.

	Restricted Stock & RSUs

	Number of Shares			Weighted Average Grant Date Fair Value
Unvested Balance at January 1, 2014		—		$	—
Granted		2,477,272			26.08
Forfeited		(56,642	)		25.00
Vested		(9,190	)		28.02


Unvested Balance at September 30, 2014		2,411,440		$	26.10

As of September 30, 2014, the total compensation expense related to unvested restricted stock and RSUs not yet recognized was $46,499. The Company assumes a forfeiture rate of 3% annually based on expected turnover and periodically reassesses this rate. The weighted-average period over which this compensation expense is expected to be recognized at September 30, 2014 is 3.2 years.

Stock Options

Pursuant to the Plan and in connection with the IPO, the Company issued 3,501,881 stock options in 2014 which vest over a five-year period. The Company estimates the fair value of stock option awards using the Black-Scholes valuation model with the following assumptions:

	Nine Months Ended September 30, 2014

Expected life (in years)		6
Weighted-average risk free interest rate		1.91	%
Expected volatility		35	%
Dividend yield		2.72	%
Weighted-average fair value at grant date	$	6.70

The following table summarizes activity related to stock options for the nine months ended September 30, 2014.

	Stock Options Outstanding

	Number Outstanding			Weighted-Average Exercise Price Per Share
Outstanding at January 1, 2014		—		$	—
Grants		3,501,881			25.00
Exercises		—			25.00
Forfeiture or expirations		(130,975	)		25.00


Outstanding at September 30, 2014		3,370,906		$	25.00

For the three and nine months ended September 30, 2014, the Company recognized expenses of $1,094 and $2,046, respectively related to these stock options. As of September 30, 2014, the total compensation expense related to unvested stock options not yet recognized was $17,165. The Company assumes a forfeiture rate of 3% annually based on expected turnover and periodically reassesses this rate. This compensation expense is expected to be recognized over a weighted-average period of 4.1 years.