The Company offers certain employees the ability to purchase common shares of the Company and/or receive common stock options under its Amended and Restated Stock Incentive Plan (the “Plan”) that was approved by the stockholders. In connection with the IPO, the Company’s Board of Directors approved the Omnibus Incentive Plan. As of December 31, 2022, the Company is authorized to grant 83.0 million shares related to employee stock options, of which 36.0 million shares remain available for grant as of December 31, 2022. Shares granted are not transferrable, except upon the employee’s death, repurchase by the Company, or with the Company’s consent.

The Omnibus Incentive Plan provides for the grant of stock options, restricted stock awards, restricted stock units ("RSUs"), performance-based awards, and other awards. Stock options expire 10 years after the date of grant and forfeiture of awards is recognized as it occurs. The stock options granted under the Plan generally consist of: (i) stock options that vest in four equal annual installments, subject to the employee’s continued service until the applicable vesting date (the “Base Options”), and (ii) stock options that vest if CD&R realizes a certain return on its investment, subject to the employee’s continuous employment through such date and beyond, in certain grants (the “Upside Options”).

Base Options. Compensation cost for Base Options is recognized on a straight-line basis generally over the requisite vesting period of four years. The fair value of each Base Option was estimated on the date of grant using the Black-Scholes option pricing model. Expected volatilities are based on the historical equity volatility of comparable publicly traded companies. The expected term of Base Options is calculated via the simplified method and reflects the midpoint between the vesting date and the end of the contractual term, as our historical share option exercise experience does not provide a reasonable basis upon which to estimate the expected term. The risk-free rates utilized for periods throughout the contractual life of Base Options are based on U.S. Treasury security yields at the time of grant.

The assumptions used for the Black-Scholes option pricing model to determine the fair value of Base Options granted are as follows:


	December 31,
	2022		2021		2020
Risk-free interest rate	1.94% -4.18%		0.75% - 1.58%		0.43% - 1.68%
Expected dividends	$	—	$	—	$	—
Expected volatility	48.66% -64.29%		58.95% - 63.33%		59.39% - 63.47%
Expected term (in years)	6.25		6.25		6.25

The Company’s outstanding Base Options consisted of the following (shares in thousands):


	Shares			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value (in thousands)
Stock options outstanding as of January 1, 2022		17,201		$	4.26
Granted		995			22.80
Exercised		(6,776	)		1.70
Forfeited		(782	)		10.62
Stock options outstanding as of December 31, 2022		10,638		$	7.15		6.6	$	109,236
Expected to vest as of December 31, 2022		4,293		$	12.04		7.9	$	29,284
Exercisable as of December 31, 2022		6,345		$	3.85		5.9	$	79,952

The weighted-average grant-date fair value of Base Options granted during the year ended December 31, 2022, 2021, and 2020 was $13.83, $13.10, and $2.70, respectively, per option. The total intrinsic value of Base Options exercised for the years ended December 31, 2022, 2021, and 2020 was $140.8 million, $196.3 million, and $8.2 million, respectively. During the years ended December 31, 2022 and 2021, the Company recognized $9.5 million and $8.1 million, respectively, of stock-based compensation expense related to Base Options. During the year ended December 31, 2020, the total stock-based compensation expense related to Base Options was $6.5 million, of which $0.2 million is recorded in income (loss) from discontinued operations in the consolidated statements of operations.

As of December 31, 2022, the Company had $23.4 million of total unrecognized compensation cost related to non-vested Base Options, which is expected to be recognized over a weighted-average period of approximately three years.

Additionally, the Company recognized $2.6 million of expense related to stock options that vested upon the completion of the IPO in April 2021, which are included in general and administrative expenses in the statements of operations.

Upside Options. Upside Options vest if CD&R realizes a certain return on its investment, subject to the employee’s continuous employment through such date and beyond, in certain grants. During the year ended December 31, 2020, the Company did not recognize any stock-based compensation expense related to Upside Options as achievement of the underlying performance condition was not probable. During the year ended December 31, 2021, the Company recognized $8.5 million of stock-based compensation expense as a result of the satisfaction of a performance condition associated with Upside options. During the year ended December 31, 2022, the Company recognized $1.7 million of stock-based compensation expense related to Upside Options. The fair value of Upside Options was estimated on the date of grant using the Monte Carlo simulation model.

The Company’s outstanding Upside Options consisted of the following (shares in thousands):


	Shares			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value (in thousands)
Stock options outstanding as of January 1, 2022		14,428		$	6.21
Exercised		(5,147	)		4.35
Forfeited		(114	)		14.80
Stock options outstanding as of December 31, 2022		9,167		$	7.16		5.9	$	85,160
Expected to vest as of December 31, 2022		2,335		$	11.38		7.5	$	13,072
Exercisable as of December 31, 2022		6,832		$	5.71		5.4	$	72,088

The weighted-average grant-date fair value of Upside Options granted during the years ended December 31, 2021 and 2020 was $1.72 and $1.58, respectively, per option. No Upside Options were granted in 2022. As of December 31, 2022, the Company had $3.2 million of total unrecognized compensation cost related to non-vested Upside Options, which is expected to be recognized over a weighted-average period of approximately two years.

Restricted stock awards, including restricted stock units and performance stock units are granted subject to certain restrictions. Conditions of vesting are determined at the time of grant. The fair market value of restricted stock units, both time vesting and those subject to specific performance criteria, are expensed over the period of vesting. Restricted stock units, which vest based solely upon passage of time and requisite service generally vest over the requisite period of four years. Performance stock units, which are restricted stock units that vest dependent upon attainment of various levels of performance that equal or exceed threshold levels, generally vest in their entirety at the end of the relevant performance period, generally three years. The number of shares that ultimately vest can vary from 0% to 200% of target depending on the level of achievement of the performance criteria. The fair value of restricted stock units and performance stock units are determined based on the closing market price of the Company's shares on the grant date. The value of the shares withheld to settle tax withholding obligations is dependent on the closing market price of the Company’s common stock on the trading date prior to the relevant transaction occurring.

The following table summarizes employee restricted stock award activity, including performance stock units, for the year ended December 31, 2022 (units in thousands):


	Restricted Stock Units			Weighted-Average Grant-Date Fair Value
Unvested as of January 1, 2022		1,125		$	18.41
Granted		1,320			21.89
Vested		(404	)		9.77
Forfeited		(219	)		22.49
Unvested as of December 31, 2022		1,822			22.35

For the years ended December 31, 2022, 2021, and 2020, the Company recognized $9.6 million, $4.7 million, and $0.2 million, respectively, of stock-based compensation expense related to RSUs. The weighted-average grant-date fair value of RSUs granted during the years ended December 31, 2022, 2021, and 2020 was $21.89, $23.56, and $4.49, respectively. The total fair value of RSUs vested during 2022 was $9.2 million. As of December 31, 2022, the Company had $30.1 million of total unrecognized compensation cost related to RSUs, which is expected to be recognized over a weighted-average period of approximately three years.

Certain of the Company’s agreements provide for the granting of certain stock-based instruments to third parties (the “Physician Partners Equity Awards”). The Company's Board of Directors approved 9.7 million shares to be granted as Physician Partners Equity Awards, of which 3.2 million shares remain available for grant as of December 31, 2022. The fair market value of restricted stock units, both time vesting and those subject to specific performance criteria, are expensed over the period of vesting. Restricted stock units, which vest based solely upon passage of time and requisite service generally vest over the requisite period of two years. Performance stock units, which are restricted stock units that vest dependent upon attainment of various levels of performance that equal or exceed threshold levels, generally vest in their entirety at the end of the relevant performance period, from one to four years. The number of shares that ultimately vest can vary from 0% to 125% of target depending on the level of achievement of the performance criteria. The fair value of restricted stock units and performance stock units are determined based on the closing market price of the Company's shares on the grant date. No shares are withheld to settle tax withholding obligations of the physician partners.

The following table summarizes Physician Partners Equity Awards activity, including performance stock units, for the year ended December 31, 2022 (units in thousands):


	Restricted Stock Units			Weighted-Average Grant-Date Fair Value
Unvested as of January 1, 2022		292		$	25.95
Granted		5,206			21.93
Vested		(38	)		25.95
Unvested as of December 31, 2022		5,460			22.12

For the years ended December 31, 2022 and 2021, the Company recognized $7.6 million and $0.2 million, respectively, of stock-based compensation expense related to Physician Partner Equity Awards. The weighted-average grant-date fair value of Physician Partner Equity Awards granted during the years ended December 31, 2022 and 2021 was $21.93 and $25.95, respectively. As of December 31, 2022, the Company had $113.9 million of total unrecognized compensation cost related to Physician Partner Equity Awards, which is expected to be recognized over a weighted-average period of approximately four years.

Upon the completion of the IPO, the Company issued 11.7 million shares of common stock under partner physician group equity agreements and recognized stock-based compensation expense of $268.5 million in April 2021. Various of the Company’s agreements provided for the vesting of certain stock-based instruments to third parties (physician partners) at the time of an initial public offering, or upon the occurrence of certain events deemed a “change of control” in the Company or certain of the Company's subsidiaries (“Change of Control Event”). The stock-based instruments granted to third parties were accounted for as non-employee awards for which compensation cost was recognized upon achievement of the underlying performance condition of a Change of Control Event. As the instruments were liability-classified, the amount of shares ultimately issued and related compensation cost was measured on the vesting date. A Change of Control Event is not deemed probable until consummated.