On May 22, 2007, our stockholders adopted a Long-Term Incentive Plan (as amended, “LTIP”) which provided an additional 5.0 million shares that could be granted in the form of stock options, stock appreciation rights, restricted stock awards, performance units, and performance awards. Under the LTIP, the exercise price of shares granted may not be less than 100% of the fair market value at the date of the grant.

On May 24, 2016, our stockholders adopted the 2016 Long-Term Incentive Plan (“2016 Plan”) which provides for approximately 13.4 million shares, comprised of 5.1 million new shares provided for under the 2016 Plan, approximately 0.6 million shares that were available for issuance under the previous LTIP that are now authorized

for issuance under the 2016 Plan, approximately 3.9 million shares that were approved by the stockholders on May 15, 2018, and an additional 3.8 million shares that were approved by the stockholders on May 12, 2020.

Under the 2016 Plan, shares can be granted in the form of stock options, stock appreciation rights, restricted stock awards, performance awards, dividend equivalent rights, and other awards. Under the 2016 Plan, the exercise price of shares granted may not be less than 100% of the fair market value at the date of the grant. The 2016 Plan is administered by the Compensation Committee of the Board of Directors or such other committee of the Board of Directors as is designated by the Board of Directors (the “Committee”). Membership on the Committee is limited to independent directors. The Committee may delegate certain duties to one or more officers of the Company as provided in the 2016 Plan. The Committee determines the persons to whom awards are to be made, determines the type, size and terms of awards, interprets the 2016 Plan, establishes and revises rules and regulations relating to the 2016 Plan and makes any other determinations that it believes necessary for the administration of the 2016 Plan.

The following weighted average assumptions were used to determine the fair value of the stock options granted on the original grant date for expense recognition purposes for options granted during the years ended December 31, 2023, 2022, and 2021 using a Black Scholes-Merton Model:


	2023			2022			2021

Directors and SLT1:
Expected dividend yield	$	0.32		$	0.25		$	0.25
Expected volatility	37.89		%	36.07		%	35.78		%
Risk-free interest rate	4.39		%	2.31		%	0.51		%
Expected life (in years)	4.0			4.0			4.0
Employees:
Expected dividend yield	$	0.32		$	0.25		$	0.25
Expected volatility	38.25		%	37.49		%	38.67		%
Risk-free interest rate	4.41		%	2.35		%	0.32		%
Expected life (in years)	3.0			3.0			3.0
1 Senior Leadership Team ("SLT") consists of officers and key members of management.

The expected term of the options is based on evaluations of historical and expected future employee exercise behavior. The risk-free interest rate is based on the U.S. Treasury rates at the date of grant with maturity dates approximately equal to the expected life at the grant date. Volatility is based on historical volatility of our stock over time periods equal to the expected life at grant date.


		Weighted Average	Weighted
Range of	Number	Remaining	Average
Exercise	of	Contractual	Exercise		Intrinsic
Prices	Shares	Life	Price		Value
					(in thousands)
$13.95 - 27.58	1,340,919	4.23	$	24.46	$	66,278
$28.28 - 37.07	478,793	6.54	31.04		20,509
$37.09 - 69.62	204,713	7.30	48.00		5,291
Total	2,024,425	5.09	$	28.39	$	92,078

A summary of option activity under the plans is as follows:


		Weighted Average Exercise
Options	Shares	Price

Outstanding at December 31, 2022	4,560,520	$	30.14
Granted	329,173	61.14
Exercised	(1,142,640)	29.10
Forfeited or Expired	(127,468)	34.80
Outstanding at December 31, 2023	3,619,585	$	33.09
Exercisable at December 31, 2023	2,024,425	$	28.39

The total pre-tax compensation cost related to unvested stock options not yet recognized as of December 31, 2023 is $8.3 million and is expected to be recognized over a weighted-average period of 1.1 years.

The total intrinsic value of options exercised during the years ended December 31, 2023, 2022, and 2021 was $39.0 million, $16.0 million, and $22.6 million, respectively. The cash received from options exercised during the year ended December 31, 2023, 2022, and 2021 was $33.3 million, $23.1 million, and $21.1 million, respectively. The impact of these cash receipts is included in financing activities in the accompanying consolidated statements of cash flows.

The fair value of restricted stock awards is based on the fair market value of AAON common stock on the respective grant dates, reduced for the present value of dividends. At December 31, 2023, unrecognized compensation cost related to unvested restricted stock awards was approximately $4.6 million which is expected to be recognized over a weighted average period of 1.3 years.

A summary of the unvested restricted stock awards is as follows:


		Weighted Average Grant Date
Restricted stock	Shares	Fair Value

Unvested at December 31, 2022	217,168	$	33.34
Granted	75,499	59.67
Vested	(99,309)	32.76
Forfeited	(6,274)	39.64
Unvested at December 31, 2023	187,084	$	44.07

We have awarded performance restricted stock units ("PSUs") to certain officers and employees under our 2016 Plan. Unlike our restricted stock awards, these PSUs are not considered legally outstanding and do not accrue dividends during the vesting period. These PSUs vest based on the level of achievement with respect to the Company's total shareholder return ("TSR") benchmarked against similar companies included in the capital goods sector of the S&P Smallcap 600 Index. The TSR measurement period is three years. At the end of the measurement period, each award will be converted into AAON common stock at 0% to 200% of the PSUs held, depending on overall TSR as compared to the S&P SmallCap 600 Index benchmark companies.

The total pre-tax compensation cost related to unvested PSUs not yet recognized as of December 31, 2023 is $4.3 million and is expected to be recognized over a weighted average period of approximately 1.5 years.

The following weighted average assumptions were used to determine the fair value of the PSUs granted on the original grant date for expense recognition purposes for PSUs granted during the years ended December 31, 2023 and 2022, using a Monte Carlo Model:

The expected term of the PSUs is based on their remaining performance period. The risk-free interest rate is based on the U.S. Treasury rates at the date of grant with maturity dates approximately equal to the expected life at the grant date. Volatility is based on historical volatility of our stock over time periods equal to the expected life at grant date.


	Shares	Weighted Average Grant Date Fair Value
Unvested at December 31, 2022	93,982	$	36.62
Granted	58,130	84.42
Vested	—	—
Forfeited	—	—
Unvested at December 31, 20231, 2	152,112	$	54.88
1 Consists of 22,222 PSUs cliff vesting December 31, 2023, 71,760 PSUs cliff vesting December 31, 2025, and 58,130 PSUs cliff vesting December 31, 2026.
2 The 22,222 PSUs cliff vesting December 31, 2023 were approved by the Compensation Committee and issued to holders in February 2024.

Subject to the MIPA Agreement (Note 4), the Company granted awards to key employees of BASX ("Key Employee Awards"). Unlike our restricted stock awards under the 2016 Plan, the Key Employee Awards are not considered legally outstanding and do not accrue dividends during the vesting period. The potential future issuance of the Key Employee Awards is contingent upon BASX meeting certain post-closing earn-out milestones during each of the years ending 2021, 2022, and 2023 as defined by the MIPA Agreement and continued employment with the Company. At the end of the earn-out period, ending December 31, 2023, each eligible Key Employee Award will vest and be converted into AAON common stock. The fair value of Key Employee Awards was based on the fair market value of AAON common stock on the grant date. All pre-tax compensation cost has been recognized as of December 31, 2023.


	2023		2022		2021
Grant date fair value of awards during the period:	(in thousands)
Options	$	5,259	$	6,522	$	7,010
PSUs	4,907		2,275		1,622
Restricted stock	4,505		3,671		2,517
Key employee awards	—		—		1,572
Total	$	14,671	$	12,468	$	12,721


	2023		2022		2021
Share-based compensation expense:	(in thousands)
Options	$	8,810	$	8,585	$	8,724
PSUs	2,561		958		525
Restricted stock	3,977		3,105		2,519
Key employee awards	1,036		1,052		44
Total	$	16,384	$	13,700	$	11,812