In 2014, the Company adopted an equity-settled, share-based compensation plan under which the Company received services from certain employees, which were ultimately settled by EE Holdings. The plan required all share-based payments to certain members of the Company’s executive team to be recognized as expense in the consolidated financial statements based on their grant date fair values. The fair value of the employee services received was measured by reference to the estimated fair value of the compensation plan at the grant date as calculated using a Black-Scholes model. The total amount expensed was recognized over the vesting period, which was the period over which all of the specified vesting conditions were to be satisfied. The plan was terminated in 2020, and because all remaining awards had vested when canceled, there was no consolidated financial statement impact.

In 2019 and 2020, KFMC entered into agreements with certain executives of the Company. Under the agreements, the executives were permitted to acquire units amounting to up to $13 million in the Company’s limited partner with cash from promissory notes provided by Kaiser. One executive also had the option, upon the completion of a liquidity event, to acquire additional units in the limited partner at the same price as the initial equity purchase or make other investments as permitted by KFMC. No compensation expense would be recognized in relation to this option until the completion of a liquidity event in which substantially all of the Company’s assets or limited partner interests were transferred as determined by KFMC, at which time any resulting compensation cost would be expensed immediately. In connection with the IPO, this agreement was terminated.

In April 2022, Excelerate adopted the Excelerate Long-Term Incentive Plan (the “LTI Plan”). The LTI Plan was adopted to promote and closely align the interests of Excelerate's employees, officers, non-employee directors and other service providers and its stockholders by providing stock-based compensation and other performance-based compensation. The LTI Plan allows for the grant of up to 10.8 million shares, stock options, stock appreciation rights, alone or in conjunction with other awards; restricted stock and restricted stock units; incentive bonuses, which may be paid in cash, stock or a combination thereof; and other stock-based awards. The share pool will be increased on January 1st of each calendar year beginning in 2023 by a number of shares equal to 4% of the outstanding shares of Class A Common Stock on the preceding December 31st. The LTI Plan is administered by the Compensation Committee of the Company’s board of directors.

The Company’s stock option and restricted stock unit awards both qualify as equity awards and are amortized into “Selling, general and administrative expense” and “Cost of revenue and vessel operating expenses” on the consolidated statements of income on a straight-line basis. Stock options were granted to certain employees of Excelerate and vest over five years and expire ten years from the date of grant. The Company also issued restricted stock units to directors that vest ratably over either one or three years.

For the year ended December 31, 2022, the Company recognized $1.0 million in long-term incentive compensation expense for both its stock options and restricted stock unit awards.

The fair value of stock options is estimated on the date of the grant using a Black-Scholes valuation model, which requires management to make assumptions regarding the risk-free interest rates, expected dividend yields and the expected volatility of the Company’s stock calculated based on a period of time generally commensurate with the expected term of the award, the fair value of Excelerate’s common stock on the grant date, including the expected term of the award. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant. The expected dividend yield is based on the expected dividend payout as a portion of total share value. Expected volatility is based on the median of the historical volatility of fifteen of the Company’s peers over the expected life of the granted options. The Company uses estimates of forfeitures to estimate the expected term of the options granted. The reversal of any expense due to forfeitures is accounted for as they occur.


	2022
Risk-free interest rate		2.7	%
Expected dividend yield		0.4	%
Expected volatility		58.5	%
Expected term	6.5 years

The following table summarizes stock option activity for the year ended December 31, 2022 and provides information for outstanding and exercisable options as of December 31, 2022:


	Number of Options		Weighted Average Exercise Price
			(per share)
Outstanding at January 1, 2022		—	$	—
Granted		338,935		24.00
Exercised		—		—
Forfeited or expired		15,912		24.00
Outstanding at December 31, 2022		323,023	$	24.00
Exercisable at December 31, 2022		—	$	—

The fair value of the options granted in 2022 was $4.6 million. As of December 31, 2022, the Company had $3.7 million in unrecognized compensation costs related to its stock options that it expects to recognize over a weighted average period of 4.3 years.

The following table summarizes restricted stock unit activity for the year ended December 31, 2022 and provides information for unvested shares as of December 31, 2022:


	Number of Shares		Weighted Average Fair Value
			(per share)
Unvested at January 1, 2022		—	$	—
Granted		37,754		23.61
Vested		—		—
Forfeited		—		—
Unvested at December 31, 2022		37,754	$	23.61

The fair value of the awards granted in 2022 was $0.9 million. As of December 31, 2022, the Company had $0.6 million in unrecognized compensation costs related to its restricted stock unit awards that it expects to recognize over a weighted average period of 1.8 years.