On January 26, 2021, the Shoals Technologies Group, Inc. 2021 Long-Term incentive Plan (the “2021 Incentive Plan”) became effective. The 2021 Incentive Plan authorized 8,768,124 new shares, subject to adjustment pursuant to the 2021 Incentive Plan.

During the period from January 26, 2021 to December 31, 2021, the Company granted 1,701,306 restricted stock units (“RSUs”) to certain employees, officers and directors of the Company. The RSUs had grant date fair values ranging from $21.50 to $34.60 per unit and generally vest ratably over either 4 years or 3 years, except for some officer and employee grants for bonuses which immediately vested or vest over 1 year. There were a limited number of awards with immediate vesting.

During the year ended December 31, 2022, the Company granted 727,001 restricted stock units (“RSUs”) to certain employees, officers and directors of the Company. The RSUs have grant date fair values ranging from $10.42 to $25.82 per unit and generally vest ratably over 3 years, except for some officer and employee grants for bonuses which immediately vested.


	Restricted Stock Units	Weighted Average Price
Outstanding, December 31, 2020	—	$	—
Granted	1,701,306	$	27.61
Forfeited	(23,738)	$	29.46
Vested	(44,724)	$	28.60
Outstanding, December 31, 2021	1,632,844	$	27.55
Granted	727,001	$	13.78
Forfeited	(63,534)	$	25.56
Vested	(559,336)	$	26.05
Outstanding, December 31, 2022	1,736,975	$	22.34

During the year ended December 31, 2022, the Company granted an aggregate of 256,305 Performance Stock Units (“PSUs”) to certain executives. The PSUs cliff vest after 3.0 years upon meeting certain revenue and gross margin targets and contain certain modifiers which could increase or decrease the ultimate number of Class A common stock issued to the executives. The PSUs were valued using the market value of the Class A common stock on the grant date ranging from $10.42 to $20.58 per PSUs. Based on results achieved in 2022 and the forecasted amounts over the remainder of the performance period, the Company expects the units to vest and the modifier to be achieved related to the revenue target.


	Performance Stock Units	Weighted Average Price
Outstanding, December 31, 2021	—	$	—
Granted	256,305	$	11.89
Vested	—	$	—
Forfeited	—	$	—

Outstanding, December 31, 2022	256,305	$	11.89

During the years ended December 31, 2022 and 2021, the Company recognized $16.1 million and $11.3 million, respectively, in equity-based compensation. As of December 31, 2022, the Company had $31.9 million of unrecognized compensation costs which is expected to be recognized over a period of 2.1 years.

The Company accounted for equity grants to employees (Class C units) as equity-based compensation. The Class C units contained vesting provisions as defined in the agreement. Vested units did not forfeit upon termination and represented a residual interest in the Company. Equity-based compensation cost was measured at the grant date fair value and was recognized on a straight-line basis over the requisite service period, including those units with graded vesting with a corresponding credit to members’ equity (deficit). However, the amount of equity-based compensation at any date was at least equal to the portion of the grant date value of the award that was vested.

In May 2020, the Company issued 11,150,000 Class C units to certain employees of the Company of which approximately 77% were vested on the grant date. The fair value of such units was determined by management with the assistance of a third party valuation firm by considering a number of factors, including comparison companies, operating and financial performance, the lack of liquidity of the units, and general and industry specific economic outlook, amongst other factors. The grant date fair value of the Class C units granted during 2020 was $0.74 per unit. In November 2020, the Company modified and accelerated the remaining vesting on the unvested Class C units. On January 26, 2021 as part of the Corporate Conversion the 11,150,000 Class C Units were converted into 9,986,025 LLC Interest in Shoals Parent.

For the year ended December 31, 2020 the Company recognized $8.3 million in equity-based compensation. At December 31, 2020, the Company had no remaining unrecognized compensation costs related to Class C units. There were no forfeitures during the year ended December 31, 2020.