Stock-Based Compensation

12 Months Ended

Dec. 31, 2020

Share-based Payment Arrangement [Abstract]

2016 Participation Plan

On May 23, 2016, the Company adopted the Pacific Architects and Engineers Incorporated 2016 Participation Plan (the “2016 Participation Plan”). The purpose of the 2016 Participation Plan was to provide incentive compensation to key employees by granting performance units (“Units”). The Units were valued on the date of grant by the compensation committee of the pre-Business Combination company. Participants in the 2016 Participation Plan were entitled to receive compensation for their Units in the event that a qualifying event occurred. In connection with the Business Combination, which was a qualifying event, the 2016 Participation Plan was terminated immediately prior to the Closing Date and, in exchange for a release of claims relating to the plan, plan participants received payments totaling approximately $17.4 million. The $17.4 million was paid out during the first quarter of 2020, and was recorded as compensation expense.

2020 Incentive Plan

Prior to the closing of the Business Combination, the Gores III Board of Directors and stockholders approved the PAE Incorporated 2020 Equity Incentive Plan (the “2020 Incentive Plan”). The 2020 Incentive Plan provides for the grant of stock options, stock appreciation rights, restricted stock units (RSUs) and other stock or cash-based awards.

Restricted Stock Units

During the year ended December 31, 2020, the Company issued 2,639,920 RSUs to certain employees out of the shares approved for issuance under the 2020 Incentive Plan. RSUs cliff vest in accordance with their respective service period or grade vest on an anniversary date, subject to the terms of the grant agreements and the 2020 Incentive Plan. Of the RSUs issued by the Company in 2020, 1,581,960 RSUs were issued to certain Company personnel pursuant to the terms of the Merger Agreement.

The Company recognized $11.9 million in share-based compensation costs related to RSUs during the year ended December 31, 2020. As of December 31, 2020 the total compensation costs related to non-vested awards not yet recognized amounted to $7.4 million. These costs will be recognized over a weighted-average period of 1.6 years. Forfeitures are recognized in compensation costs as they occur.

Activity related to RSUs during the year ended December 31, 2020 was as follows:


	As of December 31, 2020
Restricted Stock Unit	Shares	Weighted-Average Grant Date Fair Value
Balance at December 31, 2019	—	$	—
Granted	2,639,920	7.45
Vested	(34,366)	8.33
Forfeited	(44,721)	7.56
Balance at December 31, 2020	2,560,833	$	7.92

During the year ended December 31, 2020, the Company issued 631,219 performance-based restricted stock units (“PSUs”) to certain employees out of the shares approved for issuance under the 2020 Incentive Plan. These PSUs earn out over a three-year performance period, subject to the terms of the grant agreements and the 2020 Incentive Plan. The vesting of PSUs is contingent on the achievement of performance goals stated in the agreement, those being revenue growth, weighted at 50%, and EBITDA margin, weighted at 50%. Compensation costs are recognized when the performance conditions are satisfied or likely to be satisfied. The Company recognized $1.1 million in compensation costs related to PSUs during the year ended December 31, 2020. As of December 31, 2020 the total compensation costs related to non-vested awards not yet recognized amounted to $4.1 million. These costs will be recognized over weighted-average period of 2.0 years. Forfeitures are recognized in compensation costs as they occur.

Activity related to PSUs during the year ended December 31, 2020 was as follows:


	As of December 31, 2020
Performance-based Restricted Stock Unit	Shares	Weighted-Average Grant Date Fair Value
Balance at December 31, 2019	—	$	—
Granted	631,219	8.63
Vested	—	—
Forfeited	(22,082)	9.26
Balance at December 31, 2020	609,137	$	9.28