The Company provides compensation benefits to employees and non-employee directors under share-based payment arrangements. These arrangements are designed to promote the long-term growth and profitability of the Company by providing employees and non-employee directors who are or will be involved in the Company’s growth with an opportunity to acquire an ownership interest in the Company, thereby encouraging them to contribute to and participate in the success of the Company.

The Company also provides an employee stock purchase plan (“ESPP”) which allows eligible employees the opportunity to acquire shares of common stock, at a 15% discount on the fair market value as of the date of purchase through periodic payroll deductions. The ESPP is considered compensatory for federal income tax purposes. Under the ESPP, there are 5,000,000 shares of common stock authorized and reserved and, as of June 29, 2024, there are 3,112,765 shares available for purchase. The Company recorded $4.5 million, $4.2 million, and $3.7 million of stock-based compensation expense for fiscal 2024, fiscal 2023, and fiscal 2022, respectively, attributable to the ESPP.

The 2007 Option Plan allowed for the granting of awards to employees, officers, directors, consultants, and advisors of the Company or its affiliates in the form of nonqualified options. The terms and conditions of awards granted under the 2007 Option Plan were determined by the Board of Directors. The contractual term of the options is ten years. The Company no longer grants awards from this plan. Each of the employee awards under the 2007 Option Plan were divided into three equal portions. Tranche I options were subject to time vesting. Tranche II and Tranche III options were subject to both time and performance vesting based on performance criteria outlined in the 2007 Option Plan.

The following table summarizes the stock option activity for fiscal 2024 under the 2007 Option Plan.


	Number of Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value (in millions)
Outstanding as of July 1, 2023		588,155		$	19.13
Exercised		(86,553	)	$	18.74
Outstanding, vested, and exercisable as of June 29, 2024		501,602		$	19.20		1.2	$	23.5

The intrinsic value of exercised options was $4.3 million, $3.6 million, and $2.4 million for fiscal 2024, fiscal 2023, and fiscal 2022, respectively.

The 2015 Incentive Plan allows for the granting of awards to current employees, officers, directors, consultants, and advisors of the Company. The terms and conditions of awards granted under the 2015 Option Plan are determined by the Board of Directors. There are 8,850,000 shares of common stock reserved for issuance under the 2015 Incentive Plan, including non-qualified stock options and incentive stock options, stock appreciation rights, restricted shares (time-based and performance-based), restricted stock units, and other equity based or cash-based awards. As of June 29, 2024, there are 3,521,349 shares available for grant under the 2015 Incentive Plan. The contractual term of options granted under the 2015 Incentive Plan is ten years.

Shares of time-based restricted stock granted in fiscal 2024, fiscal 2023 and fiscal 2022 vest ratably over three years from the date of the grant. No stock options were granted from the 2015 Incentive Plan in fiscal 2024, fiscal 2023 or fiscal 2022. Performance-based restricted shares granted vest upon the achievement of a specified Relative Total Shareholder Return (“Relative TSR”), a market condition, at the end of a three-year performance period. Actual shares earned range from 0% to 200% of the initial grant, depending upon performance relative to the Relative TSR goal. Restricted stock units and deferred stock units granted to non-employee directors vest in full on the earlier of the first anniversary of the date of grant or the next regularly scheduled annual meeting of the stockholders of the Company.

The fair values of time-based restricted shares, restricted stock units, and deferred stock units were based on the Company’s closing stock price as of the date of grant.

The Company, with the assistance of a third-party valuation expert, estimated the fair value of performance-based restricted shares with a Relative TSR market condition granted in fiscal 2024, fiscal 2023 and fiscal 2022 using a Monte Carlo simulation with the following weighted-average assumptions:


	For the fiscal year ended June 29, 2024			For the fiscal year ended July 1, 2023			For the fiscal year ended July 2, 2022
Risk-Free Interest Rate		4.66	%		3.31	%		0.45	%
Dividend Yield		0.00	%		0.00	%		0.00	%
Expected Volatility		41.47	%		75.45	%		71.76	%
Expected Term (in years)		2.85			2.84			2.83
Fair Value of Awards Granted	$	75.25		$	68.06		$	62.34

The risk-free interest rate is based on a zero-coupon risk-free interest rate derived from the Treasury Constant Maturities yield curve at the time of grant for the expected term. The Company assumed a dividend yield of zero percent when valuing the grants under the 2015 Incentive Plan because the Company announced that it does not intend to pay dividends on its common stock. Expected volatility is based on the historical volatility of the Company for the expected term. The expected term represents the period of time from the date of grant to the end of the three-year performance period.

The compensation cost that has been charged against income for the Company’s 2015 Incentive Plan was $36.0 million for fiscal 2024, $34.4 million for fiscal 2023, and $27.6 million for fiscal 2022, and it is included within operating expenses in the consolidated statement of operations. The total income tax benefit recognized in the consolidated statements of operations was $9.7 million in fiscal 2024, $9.3 million in fiscal 2023, and $7.4 million in fiscal 2022. Total unrecognized compensation cost for all awards under the 2015 Incentive Plan is $45.0 million as of June 29, 2024. This cost is expected to be recognized over a weighted-average period of 1.7 years.

The following table summarizes the stock option activity for fiscal 2024 under the 2015 Incentive Plan.


	Number of Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value (in millions)
Outstanding as of July 1, 2023		662,557		$	27.62
Exercised		(19,133	)	$	31.24
Outstanding, vested, and exercisable as of June 29, 2024		643,424		$	27.51		2.7	$	24.8

The intrinsic value of exercised options was $0.6 million, $1.8 million, and $0.8 million for fiscal 2024, fiscal 2023 and fiscal 2022, respectively.

The following table summarizes the changes in nonvested restricted shares and restricted stock units for fiscal 2024 under the 2015 Incentive Plan.


	Shares			Weighted Average Grant Date Fair Value
Nonvested as of July 1, 2023		1,652,129		$	46.76
Granted		677,041		$	64.38
Performance shares adjustment		87,197		$	47.55
Vested		(960,864	)	$	42.42
Forfeited		(48,971	)	$	55.03
Nonvested as of June 29, 2024		1,406,532		$	57.95

The total fair value of shares vested was $60.2 million, $32.0 million, and $21.7 million for fiscal 2024, fiscal 2023, and fiscal 2022, respectively.

In connection with the Core-Mark acquisition, the Company assumed the outstanding stock-based compensation awards from Core-Mark’s 2019 Long-Term Incentive Plan. Time-based restricted stock units ("RSU") held by Core-Mark employees were converted to Company RSUs based on the prescribed ratio in the merger agreement. Each performance-based restricted stock unit (“PSU”) of Core-Mark was converted into a Company RSU based the on pro-rata actual level of performance for the applicable performance metrics. The Company RSUs granted as a result of the conversion are subject to the same terms and conditions, such as vesting schedule and termination related vesting provisions, as the Core-Mark awards were subject to prior to their conversion. As a result, on September 1, 2021, the Company granted 614,056 RSUs with a grant date fair value of $49.55 per share. The total $30.4 million grant date fair value was bifurcated with $9.2 million recognized as pre-combination vesting within the purchase price as consideration transferred.

Awards under the Core-Mark 2019 Long-Term Incentive Plan fully vested in fiscal 2024. The compensation cost that has been charged against income for the Core-Mark 2019 Long-Term Incentive Plan was $1.4 million for fiscal 2024, $4.8 million for fiscal 2023, and $12.7 million for fiscal 2022, and it is included within operating expenses in the consolidated statement of operations.

The following table summarizes the changes in nonvested RSUs for fiscal 2024 under the Core-Mark 2019 Long-Term Incentive Plan.


	Shares			Weighted Average Grant Date Fair Value
Nonvested as of July 1, 2023		73,582		$	49.55
Vested		(72,442	)	$	49.55
Forfeited		(1,140	)	$	49.55
Nonvested as of June 29, 2024		-		$	-

The total fair value of shares vested was $5.0 million, $9.6 million, and $14.3 million for fiscal 2024, fiscal 2023, and fiscal 2022, respectively.