Stock-based compensation awards have been granted under the Community Health Systems, Inc. Amended and Restated 2009 Stock Option and Award Plan, which was most recently amended and restated as of March 22, 2023 and most recently approved by the Company’s stockholders at the annual meeting of stockholders held on May 9, 2023 (the “2009 Plan”).

The 2009 Plan provides for the grant of incentive stock options intended to qualify under Section 422 of the Internal Revenue Code and for the grant of stock options which do not so qualify, stock appreciation rights, restricted stock, restricted stock units (“RSUs”), performance-based shares or units and other share awards. Persons eligible to receive grants under the 2009 Plan include the Company’s directors, officers, employees and consultants. To date, all options granted under the 2009 Plan have been “nonqualified” stock options for tax purposes. Generally, these options vest in one-third increments on each of the first three anniversaries of the option grant date and expire on the tenth anniversary of the option grant date. The exercise price of all options granted under the 2009 Plan is equal to the fair value of the Company’s common stock on the option grant date. At December 31, 2024, 3,867,118 shares of unissued common stock were reserved for future grants under the 2009 Plan.

The following table reflects the impact of total compensation expense related to stock-based equity plans on the reported operating results for the respective periods (in millions):


	Year Ended December 31,
	2024			2023			2022
Effect on (loss) income before income taxes	$	(17	)	$	(22	)	$	(20	)
Effect on net (loss) income	$	(13	)	$	(17	)	$	(15	)

At December 31, 2024, $19 million of unrecognized stock-based compensation expense related to outstanding unvested stock options, restricted stock and RSUs (the terms of which are summarized below) was expected to be recognized over a weighted-average period of 19 months. Of that amount, $3 million related to outstanding unvested stock options was expected to be recognized over a weighted-average period of 18 months and $16 million related to outstanding unvested restricted stock and RSUs was expected to be recognized over a weighted-average period of 19 months. There were no modifications to awards during the years ended December 31, 2024, 2023 and 2022.

The fair value of stock options was estimated using the Black Scholes option pricing model with the following assumptions and weighted-average fair values during the years ended December 31, 2024, 2023 and 2022:


	Year Ended December 31,
	2024			2023		2022
Expected volatility		90.1	%	87.3%		84.3% - 87.5%
Expected dividends		—			—		—
Expected term	6 years			6 years		3 - 6 years
Risk-free interest rate	4.3%			4.2%		1.5% - 1.6%

In determining the expected term, the Company examined concentrations of option holdings and historical patterns of option exercises and forfeitures, as well as forward-looking factors, in an effort to determine if there were any discernible employee populations. From this analysis, in determining the expected term for the years ended December 31, 2024 and 2023, the Company identified one population, consisting of persons receiving grants of stock options. Additionally, in determining the expected term for the year ended December 31, 2022, two populations were identified, one consisting of certain senior executives who have since retired as executive officers, and the other consisting of substantially all other recipients. The computation of expected term was performed using the simplified method for all stock options granted in the periods presented. The simplified method was used as a result of the Company determining that historical exercise data does not provide a reasonable basis for the expected term of its grants, due primarily to the limited number of stock option exercises that have occurred.

The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of the grant. The pre-vesting forfeiture rate is based on historical rates and forward-looking factors for each population identified. The Company adjusts the estimated forfeiture rate to its actual experience.

The expected volatility rate was estimated based on historical volatility. In determining expected volatility, the Company also reviewed the market-based implied volatility of actively traded options of its common stock and determined that historical volatility utilized to estimate the expected volatility rate did not differ significantly from the implied volatility.

Options outstanding and exercisable under the 2009 Plan as of December 31, 2024, and changes during each of the years in the three-year period prior to December 31, 2024, were as follows (in millions, except share and per share data):


	Shares			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term	Aggregate Intrinsic Value as of December 31, 2024
Outstanding at December 31, 2021		2,301,753		$	6.77
Granted		760,000			10.18
Exercised		(56,500	)		4.97
Forfeited and cancelled		(173,502	)		13.41
Outstanding at December 31, 2022		2,831,751			7.32
Granted		814,000			6.15
Exercised		(15,001	)		4.95
Forfeited and cancelled		—			—
Outstanding at December 31, 2023		3,630,750			7.07
Granted		901,000			2.87
Exercised		—			—
Forfeited and cancelled		(41,000	)		4.97
Outstanding at December 31, 2024		4,490,750		$	6.24	6.9 years	$	—
Exercisable at December 31, 2024		3,618,738		$	6.81	6.4 years	$	—

The weighted-average grant date fair value of stock options granted during the years ended December 31, 2024, 2023 and 2022, was $2.19, $4.61 and $7.25, respectively. The aggregate intrinsic value (calculated as the number of in-the-money stock options multiplied by the difference between the Company’s closing stock price on the last trading day of the reporting period ($2.99) and the exercise price of the respective stock options) in the table above represents the amount that would have been received by the option holders had all option holders exercised their options on December 31, 2024. This amount changes based on the market value of the Company’s common stock. There were no stock option exercises during the year ended December 31, 2024. The aggregate intrinsic value of options exercised during the years ended December 31, 2023 and 2022 was less than $1 million for both years. The aggregate intrinsic value of options vested and expected to vest approximates that of the outstanding options.

The Company has also awarded restricted stock under the 2009 Plan to employees of certain subsidiaries. With respect to time-based vesting restricted stock that has been awarded under the 2009 Plan, the restrictions on these shares have generally lapsed in one-third increments on each of the first three anniversaries of the award date. In addition, certain of the restricted stock awards granted to the Company’s senior executives have contained performance objectives required to be met in addition to any time-based vesting requirements. If the applicable performance objectives are not attained, these awards will be forfeited in their entirety. For performance-based awards, the performance objectives are measured cumulatively over a three-year period. If the applicable target performance objective is met at the end of the three-year period, then the restricted stock award subject to such performance objective will vest in full on the third anniversary of the award date. Additionally, for these performance-based awards, based on the level of achievement for the applicable performance objective within the parameters specified in the award agreement, the number of shares to be issued in connection with the vesting of the award may be adjusted to decrease or increase the number of shares specified in the original award. Notwithstanding the above-mentioned performance objectives and vesting requirements, the restrictions with respect to restricted stock granted under the 2009 Plan may lapse earlier in the event of death, disability, change in control of the Company or, other than for performance-based awards, termination of employment by the Company for any reason other than for cause of the holder of the restricted stock. On March 1, 2024, restricted stock awards subject to performance objectives granted on March 1, 2021 vested based on the Company’s cumulative performance compared to performance objectives for the 2021 through 2023 performance period, which were set prior to the date of grant. Such awards vested at 80% of the number of shares originally granted to the Company’s then executive chairman, chief executive officer and chief financial officer based on the performance objectives applicable to the then executive chairman, chief executive officer and chief financial officer, and at 100% of the number of shares originally granted to other senior executives based on the performance objectives applicable to such other senior executives. Restricted stock awards subject to performance objectives that have not yet been satisfied are not considered outstanding for purposes of determining diluted earnings per share unless the performance objectives have been satisfied on the basis of results through the end of each respective reporting period.

Restricted stock outstanding under the 2009 Plan as of December 31, 2024, and changes during each of the years in the three-year period prior to December 31, 2024, were as follows:


	Shares			Weighted- Average Grant Date Fair Value
Unvested at December 31, 2021		4,995,314		$	6.30
Granted		3,253,000			8.95
Vested		(2,561,575	)		5.70
Forfeited		(145,674	)		8.89
Unvested at December 31, 2022		5,541,065			8.53
Granted		2,746,000			6.04
Vested		(2,164,570	)		6.85
Forfeited		(68,672	)		8.16
Unvested at December 31, 2023		6,053,823			8.00
Granted		2,858,000			2.89
Vested		(2,211,906	)		8.39
Forfeited		(190,672	)		7.68
Unvested at December 31, 2024		6,509,245			5.63

RSUs have been granted to the Company’s non-management directors under the 2009 Plan. Each of the Company’s then serving non-management directors received grants under the 2009 Plan of 62,718 RSUs, 29,268 RSUs and 17,682 RSUs on March 1, 2024, 2023 and 2022, respectively. The March 2024, 2023 and 2022 grants each had a grant date fair value of approximately $180,000. In addition to the grants set forth above, on March 1, 2024 and 2023, the Chairman of the Board of Directors was awarded an additional grant of 92,334 RSUs and 43,089 RSUs, respectively, each with a grant date fair value of approximately $265,000, as additional compensation for serving as Chairman of the Board of Directors. Pursuant to the Company’s non-management director compensation program, on June 1, 2024, a new non-management director, who was elected to the Board of Directors at the Annual Meeting of the Company’s stockholders on May 7, 2024, received a grant of 62,718 RSUs (the same number of RSUs granted to the other non-management directors on March 1, 2024), which had a grant date fair value of approximately $248,000. Vesting of RSUs granted to non-management directors occurs in one-third increments on each of the first three anniversaries of the award date or upon the director’s earlier cessation of service on the Board of Directors, other than for cause. Each non-management director may elect, prior to the beginning of the calendar year in which the award is granted, to defer the receipt of shares of the Company’s common stock issuable upon vesting until either his or her (i) separation from service with the Company or (ii) attainment of an age specified in advance by the non-management director. A total of five directors elected to defer the receipt of shares of the Company’s common stock upon vesting of the RSUs granted on March 1, 2024 to a future date and the new non-management director elected to defer the receipt of shares of the Company’s common stock upon vesting of the RSUs granted on June 1, 2024 to a future date. A total of four directors elected to defer the receipt of shares of the Company’s common stock upon vesting of the RSUs granted on March 1, 2023 to a future date, and a total of three directors elected to defer the receipt of shares of the Company’s common stock upon vesting of the RSUs granted on March 1, 2022 to a future date.

RSUs outstanding under the 2009 Plan as of December 31, 2024, and changes during each of the years in the three-year period prior to December 31, 2024, were as follows:


	Shares			Weighted- Average Grant Date Fair Value
Unvested at December 31, 2021		486,598		$	6.17
Granted		176,820			9.66
Vested		(151,058	)		5.63
Forfeited		—			—
Unvested at December 31, 2022		512,360			7.54
Granted		365,037			6.15
Vested		(101,471	)		7.75
Forfeited		—			—
Unvested at December 31, 2023		775,926			6.86
Granted		907,668			2.95
Vested		(135,278	)		7.66
Forfeited		—			—
Unvested at December 31, 2024		1,548,316			4.49