NOTE 12 - EQUITY-BASED COMPENSATION

2021 Equity Incentive Plan

On March 17, 2021, the Company's stockholders approved the PureCycle Technologies, Inc. 2021 Equity and Incentive Compensation Plan (the “Plan”).

The Plan provides for the grant of stock options, stock appreciation rights, restricted stock awards ("RSAs"), restricted stock units (“RSUs”), performance shares, performance stock units ("PSUs"), dividend equivalents, and certain other awards. In general, the amount of shares issuable under the Plan will be automatically increased on the first day of each fiscal year, beginning in 2022 and ending in 2031, by an amount equal to the lesser of (a) 3% of the shares of the Company's Common Stock outstanding on the last day of the immediately preceding fiscal year, or (b) such smaller number of shares as determined by the Company's board of directors (the "Board").

As of June 30, 2026, approximately 32.6 million shares of Common Stock were authorized for issuance under the Plan, of which approximately 23.2 million shares remain available for issuance under the Plan (assuming maximum performance with respect to the applicable performance goals related to the Plan awards issued). The Company may use authorized and unissued shares to meet share requirements from the exercise of stock options and the vesting of RSUs and PSUs.

Restricted Stock Agreements

RSUs issued pursuant to the Plan are time-based and vest over the period defined in each individual grant agreement (generally either one or four years) or upon a change of control event as defined in the Plan. The Company recognizes compensation expense for the awards equal to the fair value on the date of grant of the awards on a straight-line basis over the vesting period of such awards. The grant-date fair value of the awards is equal to the closing price of the Company’s Common Stock one day prior to the date of grant. Forfeitures are recorded in the period in which they occur. The Company has the option to repurchase all vested shares upon a stockholder’s termination of employment or service with the Company.

As of June 30, 2026, there were $14.9 million in compensation costs related to non-vested awards to be recognized over a weighted average remaining period of 2.5 years.

Stock Options

The stock options issued pursuant to the Plan are time-based and vest over the period defined in each individual grant agreement (generally three years) or upon a change of control event as defined in the Plan. All stock option grants have an exercise price equal to the fair market value of the Company's Common Stock on the date of grant and generally have a 10-year term.

The Company recognizes compensation expense for the stock option awards based on the fair value at the date of grant on a straight-line basis over the vesting period of such awards. The fair value of the stock option award is calculated on the date of grant using the Black-Scholes option-pricing model based on the following assumptions:

The expected term of the shares granted is estimated using the simplified method, which is based on the midpoint between the vesting date and the expiration of the contractual term. The simplified method is used due to the lack of sufficient historical experience for the Company. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant. The expected volatility is based on the Company’s capital structure and volatility of similar entities referred to as guideline companies. In determining similar entities, the Company considered industry, stage of life cycle, size and financial leverage. The dividend yield on the Company’s shares is assumed to be zero as the Company has not historically paid dividends on its Common Stock. The fair value of the underlying Company's Common Stock is determined using the closing stock price of the Company's Common Stock on the grant date. Forfeitures are recorded in the period in which they occur.

As of June 30, 2026, there were $2.6 million in compensation costs related to non-vested awards to be recognized over a weighted average remaining period of 5.2 years.

Performance-Based Restricted Stock Awards

The shares issued pursuant to the Performance-Based Restricted Stock Agreements vest depending on if the performance obligations are met. In general, the PSUs will be earned based on achievement of pre-established financial and/or operational performance objectives and will vest on the date the attainment of such performance objectives as determined by the Compensation Committee of the Board, subject to the participant’s continued employment with the Company. These grants allow for the right to receive a variable number of shares, between 0% and 200% of target.

The Company recognizes compensation expense for the PSUs equal to the grant-date fair value of the equity-based compensation awards on a straight-line basis over the vesting period of such awards (generally one or three years) as the Company has concluded the performance condition is probable to be met. The fair value of the awards is equal to the fair value of the Company's Common Stock one day prior to the date of grant. Forfeitures are recorded in the period in which they occur.

As of June 30, 2026, there were $2.2 million in compensation costs (based on current projected performance achievement levels) related to non-vested awards to be recognized over a weighted average remaining period of 2.3 years.

During 2026, the Company granted PSUs to certain employees that contain performance criteria based, in part, on achieving a total shareholder return (“TSR”) of the Company’s Common Stock relative to the TSR of the common stock of a pre-defined industry peer-group. The fair value of these awards is based on a Monte Carlo simulation model.