As of February 25, 2017, Supervalu has stock options, restricted stock awards, restricted stock units and performance share units (collectively referred to as “stock-based awards”) outstanding under the 2012 Stock Plan and 2007 Stock Plan. Supervalu’s 2012 Stock Plan, which was amended and restated in fiscal 2015 and further amended in fiscal 2017 (as amended, the “2012 Stock Plan”), is the only plan under which stock-based awards may be granted to employees. The 2012 Stock Plan provides that the Board of Directors or the Leadership Development and Compensation Committee of the Board (the “Compensation Committee”) may determine at the time of grant whether each stock-based award granted will be a non-qualified or incentive stock-based award under the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”). The terms of each stock-based award will be determined by the Board of Directors or the Compensation Committee. Generally, stock-based awards granted from fiscal 2006 to fiscal 2012 generally have a term of seven years, and starting in fiscal 2013 stock-based awards granted generally have a term of ten years.

At the discretion of the Board of Directors or the Compensation Committee, Supervalu has granted stock options to purchase common stock at an exercise price not less than 100 percent of the fair market value of Supervalu’s common stock on the date of grant, restricted stock awards, restricted stock units and performance share units (“PSUs”) to executive officers and other key salaried employees. Stock options have also been granted to Supervalu’s non-employee directors. All recently issued stock options, restricted stock awards, restricted stock units and PSUs vest either pro rata over three years or cliff vest after three years. The restrictions on the restricted stock awards and restricted stock units generally lapse between one and five years from the date of grant. The performance metrics of PSUs are determined at the discretion of the Board of Directors or Compensation Committee.

As of February 25, 2017, there were 27 shares available for future issuance of stock-based awards under the 2012 Stock Plan. Common stock has been delivered out of treasury stock or newly issued shares upon the exercise or vesting of stock-based awards. The provisions of future stock-based awards may change at the discretion of the Board of Directors or the Compensation Committee.

Stock Options

Stock options granted, exercised and outstanding consisted of the following:



	Shares Under Option (In thousands)		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (In years)	Aggregate Intrinsic Value (In thousands)
Outstanding, February 22, 2014	23,335		$	14.87	5.41	$	15,982
Granted	5,022		7.54
Exercised	(1,944	)	3.71
Canceled and forfeited	(5,533	)	30.68
Outstanding, February 28, 2015	20,880		$	9.98	6.55	$	61,073
Granted	5,531		7.44
Exercised	(1,723	)	5.84
Canceled and forfeited	(3,336	)	24.94
Outstanding, February 27, 2016	21,352		$	7.37	5.93	$	6,827
Granted	960		5.64
Exercised	(1,745	)	3.65
Canceled and forfeited	(4,982	)	9.73
Outstanding, February 25, 2017	15,585		$	6.92	5.99	$	2,161
Vested and expected to vest in the future as of February 25, 2017	15,152		$	6.95	5.92	$	2,161
Exercisable as of February 25, 2017	11,313		$	6.97	5.17	$	2,161

For Supervalu’s annual grant made in the first quarter of fiscal 2017, 2016 and 2015, Supervalu granted 1, 4 and 5, respectively, of non-qualified stock options to certain employees under the 2012 Stock Plan with a weighted average grant date fair value of $2.67, $3.67 and $3.28 per share, respectively. These stock options vest over a period of three years, and were awarded as part of a broad-based employee incentive initiative designed to retain and motivate employees across Supervalu.

In fiscal 2016, Supervalu’s Board of Directors granted 2 stock options to Supervalu’s Chief Executive Officer. The stock options have a grant date fair value of $2.08 per share and vest over three years.

Supervalu used the Black Scholes option pricing model to estimate the fair value of the options at grant date based upon the following assumptions:



	2017		2016		2015
Dividend yield	—	%	—	%	—	%
Volatility rate	54.2	%	49.0 – 56.5%		50.8 – 53.2%
Risk-free interest rate	1.3	%	1.2 – 1.4%		1.2 – 1.6%
Expected option life	5.0 years		4.0 years		4.0 – 5.0 years

Restricted Stock

Restricted stock awards and restricted stock unit activity consisted of the following:



	Restricted Stock Units (In thousands)		Restricted Stock Awards (In thousands)		Weighted Average Grant Date Fair Value⁽¹⁾
Outstanding, February 22, 2014	—		937		9.09
Granted	2,274		18		7.11
Lapsed	(133	)	(417	)	6.54
Canceled and forfeited	(90	)	(2	)	6.09
Outstanding, February 28, 2015	2,051		536		11.02
Granted	65		2,339		8.74
Lapsed	(742	)	(456	)	6.82
Canceled and forfeited	(125	)	(239	)	8.79
Outstanding, February 27, 2016	1,249		2,180		$	8.68
Granted	4,575		11		5.64
Lapsed	(834	)	(756	)	8.59
Canceled and forfeited	(1,333	)	(550	)	8.79
Outstanding, February 25, 2017	3,657		885		$	8.64

(1) Weighted average grant date fair value is only used for restricted stock awards.

In fiscal 2017 and 2015, Supervalu granted restricted stock units that vest over a three-year period from the date of the grant. In fiscal 2016, Supervalu granted restricted stock awards that vest over a three-year period from the date of grant. The fair value of restricted stock awards and restricted stock units is based on the closing price of Supervalu’s common stock on the date of grant.

Performance Share Units

In fiscal 2017, Supervalu granted 1 PSUs to certain employees under the 2012 Stock Plan. The PSUs have a fiscal 2017-2019 performance period and settle in shares of Supervalu’s stock. Supervalu used the Monte Carlo method to estimate the fair value of the PSUs at grant date based upon the following assumptions:



	2017
Dividend yield	—	%
Volatility rate	41.3	%
Risk-free interest rate	0.9	%
Expected PSU life	2.8 years

Performance share unit activity consisted of the following:



	Performance Share Units (In thousands)		Weighted Average Grant Date Fair Value
Outstanding, February 27, 2016	—		$	—
Granted	1,410		6.65
Lapsed	—		—
Canceled and forfeited	(204	)	6.65
Outstanding, February 25, 2017	1,206		$	6.65

Stock-Based Compensation Expense

The components of pre-tax stock-based compensation expense are included primarily in Selling and administrative expenses in the Consolidated Statements of Operations. The expense recognized and related tax benefits were as follows:



	2017			2016			2015
Stock-based compensation	$	18		$	22		$	20
Income tax benefits	(7		)	(9		)	(8		)
Stock-based compensation, net of tax	$	11		$	13		$	12

Supervalu realized excess tax shortfalls of $1, $1 and $1 on the exercise of stock-based awards in fiscal 2017, 2016 and 2015, respectively.

Unrecognized Stock-Based Compensation Expense

As of February 25, 2017, there was $25 of unrecognized compensation expense related to unvested stock-based awards granted under Supervalu’s stock plans. The expense is expected to be recognized over a weighted average remaining vesting period of approximately two years.