The Company maintains two stock incentive plans (the 2006 Stock Incentive Plan and the 2006 Non-employee Director Equity Plan) that have been approved by its shareholders. These plans authorize the granting of option rights, stock appreciation rights (SARs), performance-restricted shares, performance shares, performance units, restricted shares, and restricted stock units (RSUs).

Stock-based compensation expense, which includes awards settled in shares and in cash and is recognized as a component of selling, general, and administrative (SG&A) expenses, was $7.3 million, $5.7 million, and $11.1 million in 2021, 2020, and 2019, respectively. The Company derives a tax deduction measured by the excess of the market value over the grant price at the date stock-based awards vest or are exercised. The Company recognized $0.9 million, $0.5 million, and $2.1 million of tax benefits in 2021, 2020, and 2019, respectively, relating to the issuance of common stock for the exercise/vesting of equity awards.

SARs. The Company grants SARs to certain employees. Upon exercise of vested SARs, the participant will receive a number of shares of common stock equal to the spread (the difference between the market price of the Company’s common shares at the time of exercise and the strike price established on the grant date) divided by the common share price. The strike price of the SARs is equal to the market value of the Company’s common shares on the day of the grant. The number of SARs available to be issued is established by plans approved by the shareholders. The vesting period and the life of the SARs are established at the time of grant. The exercise of the SARs is generally satisfied by the issuance of treasury shares. SARs vest in equal installments annually over three years. SARs expire in seven years.


(Shares in thousands)	Number of SARs	Weighted- average Exercise Price Per Share		Aggregate Intrinsic Value (thousands)		Weighted- average Remaining Term (Years)
Outstanding at December 31, 2020	254	$	46.18
Granted	53	68.82
Exercised	(44)	41.02
Cancelled	(3)	54.61
Outstanding at December 31, 2021	260	51.55		$	10,487	4.0
Vested and expected to vest as of December 31, 2021	260	51.55		10,487		4.0
Exercisable at December 31, 2021	160	45.41		7,277		3.1


(Shares in thousands)	Number of SARs	Weighted- average Grant Date Fair Value
Nonvested as of December 31, 2020	106	$	15.46
Granted	53	20.66
Vested	(55)	15.80
Cancelled	(4)	16.53
Nonvested as of December 31, 2021	100	$	17.97

As of December 31, 2021, $1.1 million of expense with respect to non-vested SARs has yet to be recognized as expense over a weighted-average period of approximately 20 months. The total fair value of shares vested during 2021, 2020, and 2019 was $0.8 million, $1.5 million, and $1.9 million, respectively.

The weighted-average grant date fair value for 2021, 2020, and 2019 was $20.66, $13.67, and $17.76, respectively. The fair value will be amortized to compensation cost on a straight-line basis over the vesting period of three years, or earlier if the employee is retirement eligible and continued vesting is approved by the Board of Directors as defined in the Plan. Stock-based compensation expense relating to SARs was $0.9 million in each of the last three years.

The risk-free rate of return was based on U.S. Treasury yields with a maturity equal to the expected life of the award. The dividend yield was based on the Company's historical dividend rate and stock price. The expected volatility of stock was derived by referring to changes in the Company's historical common stock prices over a time-frame similar to the expected life of the award. In addition to considering the vesting period and contractual term of the award for the expected life assumption, the Company analyzes actual historical exercise experience for previously granted awards.

Restricted Stock Units (RSUs) - Employees. The Company may grant RSUs to employees of the Company. These units constitute an agreement to deliver shares of common stock to the participant at the end of the vesting period, which is defined at the date of the grant, and are forfeited should the holder’s employment terminate during the restriction period. The fair market value of the RSUs is determined on the date of the grant and is amortized over the vesting period. The vesting period is typically three years unless the recipient is retirement eligible and continued vesting is approved by the Board of Directors.

The fair value of RSUs settled in stock is based on the closing stock price on the date of grant. The weighted-average grant date fair value for 2021, 2020, and 2019 was $68.62, $51.55, and $58.33, respectively. Cash-settled RSUs are accounted for as liability-based compensation awards and adjusted based on the closing price of Materion’s common stock over the vesting period of three years.

Stock-based compensation expense relating to stock-settled RSUs was $3.5 million in 2021, $2.7 million in 2020, and $2.2 million in 2019. The unamortized compensation cost on the outstanding RSUs was $4.6 million as of December 31, 2021 and is expected to be recognized over a weighted-average period of 23 months. The total fair value of shares that vested during 2021 was $2.0 million, compared to $1.2 million in both 2020 and 2019.


(Shares in thousands)	Number of Shares	Weighted- average Grant Date Fair Value
Outstanding at December 31, 2020	161	$	53.50
Granted	59	68.62
Vested	(40)	51.14
Forfeited	(18)	56.85
Outstanding at December 31, 2021	162	$	59.23

RSUs - Non-Employee Directors. In 2021, 2020, and 2019, 9,904, 15,976, and 11,048 RSUs, with a one year vesting period, were granted to certain non-employee members of the Board of Directors. The weighted-average grant date fair value of these RSUs was $75.77, $48.42, and $68.79 in 2021, 2020, and 2019, respectively. The Company recognized $0.8 million of expense related to these awards in 2021, compared to $0.7 million of expense in both 2020, and 2019. At December 31, 2021, $0.3 million of expense with respect to non-vested RSU awards granted to the Board of Directors has yet to be recognized and will be amortized into expense over a weighted-average period of approximately four months.

Long-term Incentive Plans. Under the long-term incentive compensation plans, executive officers and selected other employees receive restricted stock unit awards based upon the Company’s performance over the defined period, typically three years. Total units earned for grants made in 2021, 2020, and 2019, may vary between 0% and 200% of the units granted based on the attainment of performance targets during the related three-year period. All grants will be settled in Materion common shares and are equity classified. Vesting of performance-based awards is contingent upon the attainment of threshold performance objectives.


(Shares in thousands)	Number of Shares	Weighted- average Grant Date Fair Value
Outstanding at December 31, 2020	126	$	63.61
Granted	41	83.78
Vested	(43)	50.35
Forfeited	(5)	69.00
Outstanding at December 31, 2021	119	$	70.77

Compensation expense is based upon the performance projections for the plan period of three years, the percentage of requisite service rendered, and the fair market value of the Company’s common shares on the date of grant. The offset to the compensation expense for the portion of the award to be settled in shares is recorded within shareholders’ equity and was $2.2 million for 2021, $2.0 million for 2020, and $3.3 million for 2019.

Directors' Deferred Compensation. Non-employee directors may defer all or part of their compensation into the Company’s common stock. The fair value of the deferred shares is determined at the share acquisition date and is recorded within shareholders’ equity. At December 31, 2021, shareholders’ equity included 0.1 million shares related to this plan.