Equity Based Compensation
|3 Months Ended|
Mar. 31, 2022
|Share-based Payment Arrangement [Abstract]|
|Equity Based Compensation||
Restricted Stock Units
Pursuant to the terms of the A&R MLTIP, there are two types of equity based compensation granted to employees, henceforth referred to as Replacement Restricted Stock Units (“Replacement RSUs”) and Earnout Right Restricted Stock Units (“Earnout Right RSUs”). The issuance of the Replacement RSUs and Earnout Right RSUs by
pre-transactionownership to employees under the A&R MLTIP will be funded by the exchange of current Class A Common Stock and Class A LLC Units held by the unitholders of FoA Equity prior to the closing of the Business Combination. Therefore, the shares issued to employees under the A&R MLTIP will not result in incremental share ownership in the Company, and the total compensation costs associated with the vesting of the Replacement RSUs and Earnout Right RSUs will be directly allocated to the noncontrolling interest and, with respect to Blocker GP, to FoA in proportion to their sharing percentages of exchanged units.
Additionally, pursuant to the terms of the 2021 Omnibus Incentive Plan, the Company granted equity based compensation to certain employees and
non-employeeboard of directors members, henceforth referred to as
Non-LTIPRestricted Stock Units
Non-LTIPRSUs will be settled with issuance of shares of Class A Common Stock of FoA to the participant and a respective count of Class A LLC units of FoA Equity to FoA.
Each type of RSUs is classified as equity and FoA accounts for the RSUs following the fair value method. Each type of RSUs’ fair values is fixed on the grant date and not remeasured unless the award is subsequently modified.
Pursuant to the terms of the A&R MLTIP executed on October 28, 2020, the Company granted each employee who held Phantom Units in FoA Equity and remained employed as of the Replacement RSU grant date, April 1, 2021, in consideration for the cancellation of their Phantom Units, Replacement RSUs that will vest into shares of Class A Common Stock.
Following the terms of the A&R MLTIP, 25% of the Replacement RSUs vested on the Replacement RSU grant date, and the remaining 75% vest in equal installments on each of the first three anniversaries of the Closing of the Business Combination, subject to each holder’s continued employment.
Earnout Right RSUs
In addition to the Replacement RSUs, participants in the A&R MLTIP are entitled to receive additional Earnout Right RSUs depending on whether the Company achieves certain market-based conditions. The market-based vesting conditions have been factored into the grant date fair value measurement of the Earnout Right RSUs using a Monte Carlo simulation. The assumptions used in the Monte Carlo simulation model included a volatility rate of 60%, risk free rate of 1.14% and a weighted average expected term of 1.06 years for the first tranche of Earnout Right RSUs and 1.52 years for the second tranche of Earnout Right RSUs.
Earnout Right RSUs have the same service-based vesting conditions listed above for the Replacement RSUs along with market-based vesting conditions. The first tranche of Earnout Right RSUs vest upon satisfaction of the service-based vesting conditions and if, at any time during the six years following the Closing, the VWAP of FoA’s Class A Common Stock is greater than or equal to $12.50 for any
The second tranche of Earnout Right RSUs vest upon satisfaction of the service-based vesting conditions and if, at any time during thesix years
following the Closing, the VWAP of FoA’s Class A Common Stock is greater than or equal to $15.00
Pursuant to the terms of the 2021 Omnibus Incentive Plan executed on November 18, 2021, the Company granted
Non-LTIPRSUs to employees and
non-employeeboard of directors members. The RSUs granted have various grant dates and vesting schedules.
All vesting is subject to each holder’s continued employment and are subject to forfeiture if the participant leaves the company for reasons other than those permitted under the plan.
Employee Stock Purchase Plan
On January 1, 2022, FoA opened an initial offering period for our Employee Stock Purchase Plan (the “ESPP”) for the benefit of Company employees. Participation in the ESPP is voluntary and is open to any Company employee who satisfies the eligibility requirements under the ESPP other than the Company’s “officers” (as defined in Rule 16a-1 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). The ESPP allows for shares of the Company’s Class A Common Stock to be purchased on behalf of participants, using funds contributed by participants through payroll deductions. Participants can contribute up to the lesser of 15% of the participant’s Base Earnings (as defined in the ESPP) or $50,000 per participant in any calendar year. The ESPP includes a matching component pursuant to which participating employees will be eligible to receive a grant of restricted stock units (“Match RSUs”) pursuant to and in accordance with the Company’s 2021 Omnibus Incentive Plan. The number of Match RSUs to be granted to participants with respect to each offering period will equal to 20% of the shares purchased by participants under the ESPP with respect to such offering period. The Company recorded $0.1 million in expense associated with the ESPP within salaries, benefits and related expenses on the Condensed Consolidated Statement of Operations (Unaudited) for the Successor three months ended March 31 2022.
summary of the each classification of RSU activity for the periods indicated is presented below in thousands, except for share information:
On March 15, 2022, there was a good leaver event that resulted in 722,398 RSUs being vested. There are
thatare scheduled to vest from April
on the first anniversary of the Business Combination (April 1, 2022
). Equity based compensation expense for the Replacement RSUs totaled $15.3
million and $0
for the Successorthree
months ended March31
and the Predecessor period from January1
, respectively. Unrecognized equity based compensation expense for the Replacement RSUs totaled $51.9
million as of
No Earnout Right RSUs are scheduled to vest from April 1, 2022 to December 31, 2022. Equity based compensation expense for the Earnout Right RSUs totaled $2.2 million and $0 for the Successor three months ended March 31, 2022 and the Predecessor period from January 1, 2021 to March 31, 2021, respectively. Unrecognized equity based compensation expense for the Earnout Right RSUs totaled $4.0 million as of March 31, 2022.
219,987 of the
Non-LTIPRSUs are scheduled to vest from April 1, 2022 to December 31, 2022. Equity based compensation expense for the
Non-LTIPRSUs totaled $0.4 million and $0 for the Successor three months ended March 31, 2022 and the Predecessor period from January 1, 2021 to March 31, 2021, respectively. Unrecognized equity based compensation expense for the
Non-LTIPRSUs totaled $1.8 million
as ofMarch 31, 2022.
On January 1, 2015, the Company established an LTIP to compensate key employees. Any distributions are based on distributions received by equity holders of the Company in excess of the contributed equity capital, plus a designated return on contributed equity capital (the “Hurdle”).
The Phantom Units were accounted for as a profit-sharing arrangement, as they did not represent a substantive form of equity and were not indexed to the price of UFG common units.
In connection with the Closing of the Business Combination, which occurred on April 1, 2021, the holders of Phantom Units (1,077 units outstanding) received
one-timelump sum cash payments totaling $24.0 million as it relates to the achievement of the Hurdle being met under the original terms of the Plan.
The cash payment of $24.0 million related to prior services provided solely for the benefit of the Company and not for ongoing services to be provided in the future that would benefit the post-combination entity. Given that the payment was triggered by the distributions made in connection with the successful closing of the Business Combination, the payment of $24.0 million was considered to have been incurred “on the line.” The balance of the Company’s obligation under the Plan was replaced by the issuance of Replacement RSUs and Earnout Right RSUs described above as governed by the A&R MLTIP.
The entire disclosure for share-based payment arrangement.
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef