The 2022 Equity and Cash Incentive Plan (“2022 ECIP”) authorizes us to issue stock options, stock appreciation rights, restricted stock awards, performance-based awards and cash awards to officers and key employees. The 2022 ECIP authorizes us to issue up to 2,651,472 shares of common stock, and expires on June 15, 2032, after which time no further awards may be made. As of December 31, 2023, 2,492,005 shares were available for future grants under the 2022 ECIP, which includes anticipated future adjustments to shares for performance-based awards that have been previously granted.

The 2016 Directors Stock Unit Plan (“2016 Director’s Plan”) authorizes us to issue stock units to non-employee directors and expires on July 8, 2026. The 2016 Director’s Plan authorizes us to issue up to 250,000 shares of common stock, which includes all shares that have been issued under the 2016 Director’s Plan. As of December 31, 2023, 132,351 shares were available for future grants under the 2016 Director’s Plan.

The 2020 Inducement Award Plan (“2020 Inducement Plan”) authorizes us to issue stock options, stock appreciation rights, restricted stock awards and stock units to key employees and expires on December 14, 2030, after which time no further awards may be made. The 2020 Inducement Plan authorizes us to issue up to 19,000 shares of common stock. As of December 31, 2023, 8,903 shares were available for future grants under the 2020 Inducement Plan.

The following table presents stock option activity for the year ended December 31, 2023:


	Number of shares (thousands)			Weighted-average exercise price		Weighted-average remaining contractual term (years)		Aggregate intrinsic value (millions)
Option shares outstanding, December 31, 2022		33.9		$	47.35
Option shares exercised		(27.7	)	$	47.01
Option shares outstanding, December 31, 2023		6.2		$	48.86		0.4	$	0.3
Option shares exercisable, vested and expected to vest, December 31, 2023		6.2		$	48.86		0.4	$	0.3

We have reserved sufficient authorized shares to allow us to issue new shares upon exercise of all outstanding options. Options generally become exercisable in three years and expire 10 years from the date of grant. When options are exercised, we may issue new shares, use treasury shares (if available), acquire shares held by investors, or a combination of these alternatives in order to satisfy the option exercises.

The following table presents information related to stock option exercises:


	2023		2022		2021
Total intrinsic value of stock options exercised	$	1.3	$	1.3	$	4.1
Cash proceeds received from stock options exercised		0.2		1.8		2.5
Tax deduction realized from stock options exercised		0.3		0.1		0.4

The fair value of option grants was estimated on the date of grant using the Black-Scholes option pricing model. There have been no option grants since 2014.

We also grant non-vested stock awards in the form of Restricted Stock Units (“RSUs”), Performance Stock Units (“PSUs”) and Restricted Stock Awards ("RSAs"). A summary of the 2023 activity related to the RSUs, PSUs and RSAs is as follows:


	Non-Vested Stock Awards
	RSUs						PSUs						RSAs
	Number of shares (thousands)			Weighted- average fair value at grant date			Number of shares (thousands)			Weighted- average fair value at grant date			Number of shares (thousands)			Weighted- average fair value at grant date
December 31, 2022		112.1		$	86.66			306.4		$	99.38			50.7		$	78.05
Granted		180.5			73.61			101.1			98.06			-			-
Performance adjustments		-			-			(80.3	)		(101.96	)		-			-
Vested		(76.0	)		(86.36	)		-			-			(50.6	)		(78.05	)
Forfeited		(11.2	)		(81.83	)		(18.7	)		(96.62	)		(0.1	)		(77.22	)
December 31, 2023		205.4		$	75.56			308.5		$	98.44			-		$	-

RSUs entitle the recipient to a specified number of shares of AWI’s common stock provided the prescribed service period is fulfilled. PSUs entitle the recipient to a specified number of shares of AWI’s common stock provided the prescribed service period is fulfilled and the defined financial targets are achieved at the end of the performance period. Upon vesting, final adjustments based upon financial achievements are reflected as performance adjustments in the table above. RSUs and PSUs generally have vesting periods of three years at the grant date. RSUs and PSUs earn dividends during the vesting period that are subject to forfeiture if the awards do not vest.

In connection with the acquisition of Arktura in 2020, we issued RSAs to the former owners of Arktura as of the acquisition date that had an original vesting period of five years from the grant date and earn dividends during the vesting period, subject to the former owners’ continued employment. These awards to sellers were not issued under the 2020 Inducement Plan. In the fourth quarter of 2023, we accelerated the vesting of all outstanding awards due to a mutually agreed upon separation of service of the former owners of Arktura, resulting in no outstanding RSAs as of December 31, 2023.

Also in connection with the acquisition of Arktura, we issued RSAs under the 2020 Inducement Plan to key employees as of the acquisition date, which had a vesting period of three years from the grant date and earned dividends during the vesting period, which were subject to forfeiture if the awards did not vest. Upon forfeiture, the key employee awards transferred to the former owners of

Arktura. During the vesting period, 2,089 RSAs forfeited by key employees were transferred to the former owners of Arktura. All awards vested during the fourth quarter of 2023, resulting in none outstanding as of December 31, 2023.

RSUs, PSUs and RSAs with non-market based performance conditions are measured at fair value based on the closing price of our stock on the date of grant. In 2023 and 2022, we granted 48,073 and 57,439 PSUs, respectively, with market-based performance conditions that are valued through the use of a Monte Carlo simulation. The weighted average assumptions for PSUs measured at fair value through the use of a Monte Carlo simulation are presented in the table below.


	2023			2022

Weighted-average grant date fair value of market-based PSUs granted (dollars per award)	$	121.69		$	104.92
Assumptions
Risk-free rate of return		4.5	%		1.8	%
Expected volatility		38.7	%		37.0	%
Expected term (in years)		3.1			3.1
Expected dividend yield		0.0	%		0.0	%

The risk-free rate of return was determined based on the implied yield available on zero coupon U.S. Treasury bills at the time of grant with a remaining term equal to the expected term of the PSUs. The expected volatility was based on historical volatility of our stock price commensurate with the expected term of the PSUs. The expected term represented the performance period for the underlying award. The expected dividend yield was assumed to be zero under the assumption that dividends distributed during the performance period are reinvested in AWI’s common stock.

As of December 31, 2023 and 2022, there were 53,938 and 80,890 RSUs, respectively, outstanding under the 2016 Directors Stock Unit Plan not reflected in the non-vested stock awards table above. In 2023 and 2022, we granted 13,086 and 13,467 RSUs, respectively, to non-employee directors. These awards generally have a vesting period of one year, and as of December 31, 2023 and 2022, 40,852 and 67,423 shares, respectively, were vested but not yet delivered. The awards are generally payable upon vesting or the director’s deferral election. These awards earn dividends during the vesting period that are subject to forfeiture if the underlying award does not vest.

We recognize share-based compensation expense on a straight-line basis over the vesting period. Share-based compensation cost was $18.8 million ($14.1 million net of tax benefit) in 2023, $14.3 million ($10.8 million net of tax benefit) in 2022, and $11.3 million ($8.5 million net of tax benefit) in 2021.

As of December 31, 2023, there was $21.0 million of total unrecognized compensation cost related to non-vested share-based compensation arrangements which is expected to be recognized over a weighted-average period of 2.0 years.