In 2019, we adopted the 2019 Omnibus Incentive Compensation Plan (the “Plan”) which authorizes our Compensation Committee of the Board of Directors to grant stock options, stock awards, stock units, stock appreciation rights, other share-based awards, and cash awards. Awards may be granted to employees, consultants, advisors, and non-employee directors of Covetrus and our subsidiaries. Awards issued under the Plan may not have a term greater than 10 years from the date of grant and vesting is subject to the terms of specific awards made under the Plan.

At December 31, 2021, 16 million shares of our common stock were authorized under the Plan. In addition, to the extent that awards outstanding under the Plan are cancelled, forfeited, or otherwise terminated without being exercised, the number of shares underlying such awards will be available for future grant under the Plan.


	Years Ended
(In millions)	December 31, 2021		December 31, 2020		December 31, 2019
Share-based compensation expense	$	46	$	40	$	46
Tax benefit	$	2	$	8	$	6

As of December 31, 2021, there was $55 million in unrecognized compensation expense related to nonvested share-based awards, including 100% performance attainment for our PSUs, that is expected to be recognized over a weighted-average period of 1.7 years.

We granted stock options at an exercise price equal to the closing market price of our stock on the grant date. We use the Black-Scholes pricing model to determine the fair value of options granted and have elected the accrual method for recognizing compensation costs. The fair value of share-based payment awards calculated using the Black-Scholes model varies based on share price, award exercise price, stock volatility, expected term, risk free interest rate, expected dividends, and the assumptions used in determining these variables. No stock options were granted during 2021 and 2020.


(In millions, except per share data)	Number of Shares	Weighted- average Exercise Price Per Share		Weighted- average Remaining Contractual Life (Years)	Aggregate Intrinsic Value
Outstanding at beginning of year	2	$	15.58
Granted	—	—
Exercised	(1)	8.00
Forfeited	—	—
Outstanding at end of year	1	$	15.74	5.7	$	11
Exercisable at end of year	1	$	14.12	5.5	$	11

The total intrinsic value of options exercised for the years ended December 31, 2021, 2020, and 2019 was $8 million, $13 million and $15 million, respectively. Cash received from option exercises for the years ended December 31, 2021, 2020, and 2019 was $3 million, $7 million, and $4 million, respectively.

The following table provides the weighted-average grant-date fair value and related valuation assumptions for these awards granted during the year ended December 31, 2019:






Weighted-average grant-date fair value	$12.19
Valuation assumption ranges:
Expected term (years)	6.0
Risk-free interest rate	1.8	%	-	2.5%
Expected volatility	29.6	%	-	30.0%

RSAs/RSUs granted generally vest over a one-year to three-year term. We have granted RSUs to certain executive officers which vest over a three-year term. One-year term RSUs granted exclude our named executive officers and relate to retention. The following table summarizes our RSA/RSU activity under the Plan for the year ended December 31, 2021:


(In millions, except per share data)	Number of Shares	Weighted-average Grant-date Fair Value Per Share		Weighted-average Remaining Contractual Life (Years)	Aggregate Intrinsic Value
Nonvested at beginning of year	4	$	14.07
Granted	2	27.60
Vested	(2)	14.88
Forfeited	—	—
Nonvested at end of year	4	$	22.47	0.98	$	71

The weighted-average fair value at grant date of the nonvested shares granted for the years ended December 31, 2021, 2020, and 2019 were $27.60, $11.51, and $27.83, respectively. The total fair value of awards vested during the years ended December 31, 2021, 2020, and 2019 was $25 million, $17 million, and $25 million, respectively.

PSUs provide meaningful incentives for management to execute on the longer-term financial and strategic growth goals. We granted PSUs to members of our management team as well as certain key employees. Our 2020 PSU plan design included PSUs granted subject to specific performance conditions with one-year vesting performance cycles over a three-year term. Our 2021 PSU plan design grants shares subject to annual targets over a three-year period where the annual targets are set at the beginning of the three-year performance period. The 2021 PSU awards will vest at the end of the three-year performance period.

In 2019, we adopted the ESPP and approved 2 million shares for issuance under this plan. The ESPP is administered by the compensation committee.

The ESPP provides for the issuance of shares of our common stock to participating employees. At the end of each designated offering period, which occurs every six months on May 31 and November 30, employees can elect to purchase shares of our common stock with contributions up to a maximum of 15% of their base pay or eligible base pay up to the Section 423 of the Internal Revenue Code limit of $25,000, which is accumulated via payroll deductions, at an amount equal to 85% of the lower of our stock price on (i) the first day of the offering period, or (ii) the last day of the offering period. For the years ended December 31, 2021, 2020, and 2019, activity under the ESPP was not material.

In 2019, our compensation committee adopted the AIP. The AIP provides pay for performance incentive compensation to our employees, including our named executive officers, rewarding them for their contributions to us with incentive compensation based on attainment of predetermined corporate performance goals, as applicable. Compensation expense associated with the AIP for the years ended December 31, 2021, 2020 and 2019 was $11 million, $16 million, and $7 million, respectively.

Covetrus maintains a qualified 401(k) plan covering eligible employees of certain of the U.S. entities as well as certain other defined contribution plans. Matching contributions and administrative expenses related to these plans for the years ended December 31, 2021, 2020, and 2019 was $11 million, $11 million, and $9 million, respectively.