NOTE 8 — SHARE-BASED COMPENSATION

The Company has a long-term incentive plan (the “Plan”) for its eligible employees, non-employee directors and consultants that includes both cash and share-based compensation awards. The Plan is administered by the Compensation Committee of the board of directors. The Plan allows for the issuance of stock options, stock appreciation rights, restricted stock, restricted stock units (“RSUs”), bonus stock, dividend equivalents, or other awards related to stock, and awards may be paid in cash, stock, or any combination of cash and stock, as determined by the Compensation Committee.

As of December 31, 2024, the maximum number of shares of common stock available for issuance under the Plan is 10.0 million shares and 4.3 million shares remain available for grant. Shares subject to awards granted under the Plan that are subsequently canceled, forfeited or otherwise terminated without delivery of shares are available for future grant under the Plan. The Company’s policy is to issue new shares when RSUs and performance stock units (“PSUs”) are vested.

Restricted Stock Units

An RSU is an award where each unit represents the right to receive the value of one share of our common stock at the date of vesting. RSUs are subject to service conditions, and vest ratably over approximately three years or one year for RSUs granted to employees and non-employee directors, respectively.

A summary of activity related to RSUs is as follows:

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The grant date fair value of RSUs granted during 2024, 2023 and 2022 was $5.4 million, $7.4 million and $6.1 million, respectively. The fair value of the RSUs that vested during 2024, 2023 and 2022 was $4.9 million, $2.5 million and $1.9 million, respectively, based on the closing price of the Company’s common stock on the vesting date.

As of December 31, 2024, there was $4.0 million of total unrecognized compensation costs related to unvested RSUs which is expected to be recognized over a weighted average period of 1.3 years.

Performance Share Units

A performance share unit (“PSU”) is an RSU award granted subject to performance criteria. The PSUs granted in 2024 are subject to performance criteria of total shareholder return and relative shareholder return (collectively, the “TSR PSUs”) and cash return on capital employed (the “CROCE PSUs”). The performance period for the measurement of the performance goal began on January 1, 2024 and ends on December 31, 2026. To be eligible to receive the earned PSUs, employees must be employed from the grant date through December 31, 2026. Different levels of achievement across these metrics will affect the percentage of PSUs that the employee receives upon the satisfaction of the service requirement. The percentage of PSUs received upon vesting ranges from 0% to 200%.

The TSR PSUs will account for 60% of the target PSUs granted to employees. The TSR PSUs contain both a service condition and a market condition. The grant date fair value of the TSR PSUs was determined through the use of the Monte Carlo simulation method. This method requires the use of subjective assumptions such as the price and the expected volatility of the Company’s stock and its self-determined Peer Group companies’ stock, risk-free rate of return and cross-correlations between the Company and its Peer Group companies. Expected volatilities for the Company’s and each peer company utilized in the model are estimated using a historical period consistent with the awards’ remaining performance period as of the grant date. The risk-free interest rate is based on the yield on U.S. Treasury Constant Maturity for a term consistent with the remaining performance period. The valuation model assumes dividends, if any, are immediately reinvested.

The performance criteria for PSUs granted in 2023 and 2022 relates to the evaluation of the Company’s total shareholder return (“TSR”) ranking against peer companies’ TSR over the applicable performance period and subject to service conditions through the vesting date. TSR is determined based on the change in the entity’s stock price plus dividends and distributions for the applicable performance period. These PSUs are subject to an approximate three-year performance period and service conditions through the vesting date. The performance periods for the 2023 PSU grants and the 2022 PSU grants end on December 31, 2025 and December 31, 2024, respectively. These PSUs contain both a service condition and a market condition. The grant date fair value of these PSUs was also determined through the use of the Monte Carlo simulation method.

The following table summarizes the assumptions used to calculate the grant date fair value of the PSUs described above:

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The CROCE PSUs will account for 40% of the target PSUs granted to employees in 2024. The CROCE PSUs contain both a service condition and a performance condition. The grant date fair value of the CROCE PSUs was determined using the closing stock price of the Company’s common stock on the date of grant. The cumulative compensation cost that will be recognized will be equal to the grant date fair value of the awards deemed probable of vesting multiplied by the percentage of the requisite service period that has been rendered. Unlike the TSR PSUs, if the performance condition is not satisfied, any previously recognized compensation expense is reversed.

A summary of activity related to PSUs is as follows:

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The grant date fair value of PSUs granted during 2024, 2023 and 2022 was $3.5 million, $6.3 million and $14.2 million, respectively. No PSUs vested during 2024. The fair value of the PSUs that vested during 2023 and 2022 was $0.7 million and $0.1 million, respectively, based on the closing price of the Company’s common stock on the vesting date.

As of December 31, 2024, there was $3.6 million of total unrecognized compensation costs related to unvested PSUs which is expected to be recognized over a weighted average period of 1.5 years.

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Share-Based Compensation Expense

Compensation cost for share-based payments to employees is recognized using an accelerated attribution method over the period during which the recipient is required to provide service in exchange for the award. Compensation cost is based on the fair value of the equity instrument on the date of grant. Forfeitures are estimated during the vesting period, resulting in the recognition of compensation cost only for those awards that are expected to actually vest. Estimated forfeitures are adjusted to actual forfeitures when the award vests. All RSUs and PSUs awarded are subject to forfeiture until vested and cannot be sold, transferred or otherwise disposed of during the restricted period.

The following table presents the compensation expenses included in General and administrative expenses in the Consolidated Statements of Operations (in thousands):

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