In November 2022, the Company established the 2022 Omnibus Equity Compensation Plan (the “2022 Equity Plan”). The 2022 Equity Plan allows for grants of stock options, stock appreciation rights, restricted shares, restricted stock units and performance-based awards. In May 2024, the 2022 Equity Plan was amended and restated to increase the common stock available for issuance under the plan by 8,100,000 shares and to extend the terms of the plan to expire on the tenth anniversary of the amended and restated plan’s effective date. As of December 31, 2024, there were 10 million shares of the Company’s common stock reserved for future issuances under the 2022 Equity Plan.

Under the 2022 Equity Plan, the Company granted restricted stock units (“RSUs”) and performance-based restricted stock units (“PRSUs”), referred to as a one-time founders award. The RSUs are subject to time-based vesting over a two-year period. The PRSUs are subject to both time and performance-based vesting based on the Company’s share price metric market condition over a two-year period.

In November 2022, in conjunction with the acquisition of RADA, the Company assumed 5.4 million stock options. In accordance with the Merger Agreement, the outstanding stock options were exchanged into options to purchase the Company’s common stock. The assumed stock options are subject to the same terms and conditions as the original awards, including time-based vesting. The options are generally exercisable for 48 months following the date of vesting.

In November 2022, in conjunction with the acquisition of RADA, the Company converted the 2022 long-term incentive (“LTI”) program from a cash-based plan to an equity plan. The conversion was treated as a liability to equity modification. Following the modification, equity awards were granted in the form of RSUs and PRSUs. The RSUs are subject to annual time-based vesting over a three-year period. The PRSUs are subject to both time and performance-based vesting based upon the achievement of three

financial metrics over a three-year period: Relative Total Shareholder Return (“rTSR”), Revenue Growth, and Return on Invested Capital (“ROIC”).

During 2023, the Company granted equity awards in the form of RSUs and PRSUs under the LTI program. The RSUs are subject to annual time-based vesting over a three-year period. The PRSUs are subject to both time and performance-based vesting based upon the achievement of three financial metrics over a three-year period: rTSR, Revenue Growth, and ROIC.

During 2024, the Company granted equity awards in the form of RSUs and PRSUs under the LTI program. The RSUs are subject to annual time-based vesting over a three-year period. The PRSUs are subject to both time and performance-based vesting based upon the achievement of three financial metrics over a three-year period: rTSR, Adjusted Diluted EPS, and ROIC.

The fair value of stock options is measured on the date of the acquisition of RADA using the Black-Scholes option pricing model. The fair value of market condition PRSUs is measured on the date of grant using the Monte Carlo Simulation Model. Expense for time-based awards is recognized on a straight-line basis over the requisite service period. Forfeitures are recognized as they occur.

In May 2024, the Company established the Employee Stock Purchase Plan (the “ESPP”). The ESPP allows eligible employees to purchase shares of the Company’s stock at 90% of the fair market value on the date of purchase. As of December 31, 2024, there were 2 million shares of the Company’s common stock reserved for future issuances under the ESPP.

Share-based compensation, which was recorded in the Consolidated Statements of Earnings within general and administrative expenses, and the related tax benefits recognized for the periods presented consists of the following:


	Year Ended December 31,
(Dollars in millions)	2024		2023		2022
Total share-based compensation expense	$	22	$	17	$	5
Tax benefits recognized from share-based compensation	6		2		1

Stock Options


	Year Ended December 31,
	2022
Expected term(1)	0.04 – 5.18 years
Expected volatility(2)	45.0	%
Risk-free interest rate(3)	3.8 – 4.7%
Expected dividend yield(4)	—	%

(1) The expected term is based upon historical experience and represents the period of time between when the options are granted and when they are expected to be exercised.

(2) The computation of expected volatility is based on a blend of historical RADA volatility and leverage-adjusted historical volatility of the Company’s publicly traded peers.

(3) The risk-free interest rate is based on the bootstrap adjusted U.S. Treasury Rate Yield Curve Rate as of the valuation date, term matched with expected life of the awards.

(4) The expected dividend yield is based on the Company’s historical experience and expectation of future dividend payouts and may be subject to changes in the future.

The weighted average valuation date fair values for options assumed during the year ended December 31, 2022 was $4.58. There were no stock options granted or assumed during the years ended December 31, 2024 and 2023.


	Number of Shares (in millions)	Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value (Dollars in millions)
Outstanding as of January 1, 2024	3.20	$	10.18	4	$	32

Exercised	(1.58)	9.96
Forfeited	(0.05)	10.29
Outstanding as of December 31, 2024	1.57	$	10.39	3	$	34
Exercisable as of December 31, 2024	1.34	$	10.37	3	$	29
Vested and expected to vest as of December 31, 2024	1.57	$	10.39	3	$	34

As of December 31, 2024, total compensation expense not yet recognized related to unvested options was approximately $1 million, which is expected to be recognized over a weighted average period of 1 year. The total intrinsic value of stock options exercised during the year ended December 31, 2024, was $26 million.


	Number of Shares (in millions)	Weighted Average Grant Date Fair Value
Unvested as of January 1, 2024	1.90	$	12.10
Granted	0.58	21.98
Vested	(1.09)	11.41
Forfeited	(0.08)	14.74
Unvested as of December 31, 2024	1.31	$	16.89

As of December 31, 2024, total compensation expense not yet recognized related to unvested RSUs was approximately $14 million, which is expected to be recognized over a weighted average period of 2 years. The fair value of RSUs that vested in 2024 was $30 million.


	Number of Shares (in millions)	Weighted Average Grant Date Fair Value
Unvested as of January 1, 2024	1.75	$	10.30
Granted	0.39	24.72
Vested	(0.56)	4.07
Forfeited	(0.07)	15.32
Unvested as of December 31, 2024	1.51	$	16.19

The Monte Carlo Model assumptions used in valuing market condition PRSUs during the periods presented are set forth in the following table:


	Year Ended December 31,
	2024			2023			2022
Grant date stock price	$	21.51		$	14.74		$	9.87
Expected volatility	36.0		%	51.2		%	40.0		%
Risk-free interest rate	4.9		%	4.0		%	4.4		%
Expected dividend yield	—		%	—		%	—		%

As of December 31, 2024, total compensation expense not yet recognized related to unvested PRSUs was approximately $11 million, which is expected to be recognized over a weighted average period of 2 years. The fair value of PRSUs that vested in 2024 was $19 million.