Note 13

Stock-Based Compensation

SpartanNash has two shareholder-approved ten-year stock incentive plans covering 2,900,000 shares of SpartanNash’s common stock: the Spartan Stores, Inc. Stock Incentive Plan of 2005 (the “2005 Plan”) and the Nash-Finch Company 2009 Incentive Award Plan (the “2009 Plan”). The 2009 Plan was assumed in connection with the merger of Spartan Stores and Nash-Finch Company, and SpartanNash Company may issue shares under the 2009 Plan, but only to associates who were not employed by Spartan Stores or its affiliates at the time of the merger. The plans provide for the granting of incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock, restricted stock units, stock awards, and other stock-based awards to directors, officers and other key associates. Shares issued, as a result of stock option exercises, will be funded with the issuance of new shares. Holders of restricted stock and stock awards are entitled to participate in cash dividends and dividend equivalents. As of January 3, 2015, 449,418 shares and 483,271 shares remained unissued under the 2005 Plan and the 2009 Plan, respectively.

Stock option awards were granted with an exercise price equal to the market value of SpartanNash common stock at the date of grant, vested and became exercisable in 25 percent increments over a four-year service period and have a maximum contractual term of ten years. Upon a “Change in Control”, as defined by the Plan, all outstanding options vest immediately. The fair value of each stock option grant was estimated on the date of grant using the Black-Scholes option-pricing model. Expected volatility was determined based upon a combination of historical volatility of SpartanNash common stock and the expected volatilities of guideline companies that are comparable to SpartanNash in most significant respects to reflect management’s best estimate of SpartanNash’s future volatility over the option term. Due to certain events that were considered unusual and/or infrequent in nature, and that resulted in significant business changes during the limited historical exercise period, management did not believe that SpartanNash’s historical exercise data provided a reasonable basis upon which to estimate the expected term of stock options. Therefore, the expected term of stock options granted was determined using the “simplified” method as described in SEC Staff Accounting Bulletins that uses the following formula: ((vesting term + original contract term)/2). The risk-free interest rate was based on the U.S. Treasury yield curve in effect at the time of grant, using U.S. constant maturities with remaining terms equal to the expected term. Expected dividend yield is based on historical dividend payments. No stock options were granted in fiscal year ended January 3, 2015, the 39 week period ended December 28, 2013 and fiscal year ended March 30, 2013.

The following table summarizes stock option activity for the three years ended January 3, 2015:

	Shares Under Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life Years		Aggregate Intrinsic Value (In thousands)
Options outstanding at March 31, 2012		703,129			18.43		5.53		1,926
Exercised		(25,050	)		8.10				210
Cancelled/Forfeited		(24,608	)		18.64
Options outstanding at March 30, 2013		653,471			18.82		4.65		1,428
Exercised		(24,976	)		9.49				298
Cancelled/Forfeited		(41,729	)		17.71
Options outstanding at December 28, 2013		586,766			19.30		4.01		2,965
Exercised		(88,152	)		12.68				869
Cancelled/Forfeited		(4,131	)		3.25
Options outstanding at January 3, 2015		494,483			20.61		3.30		2,772
Options exercisable at March 30, 2013		619,658			19.09		4.57		1,304
Options exercisable at December 28, 2013		586,766			19.30		4.01		2,965
Options exercisable at January 3, 2015		494,483		$	20.61		3.30	$	2,772
Vested and expected to vest in the future at January 3, 2015		494,483		$	20.61			$	2,772

Cash received from option exercises was $1.1 million, $0.3 million and $0.2 million during fiscal year ended January 3, 2015, the 39 week period ended December 28, 2013 and fiscal year ended March 30, 2013, respectively.

Restricted shares awarded to employees vest ratably over a four-year service period and one year for grants to the Board of Directors. Awards granted to employees prior to fiscal 2012 vest ratably over a five-year service period. Awards are subject to certain transfer restrictions and forfeiture prior to vesting. All shares fully vest upon a “Change in Control” as defined by the Plan. Compensation expense, representing the fair value of the stock at the measurement date of the award, is recognized over the required service period. On December 17, 2013, the Board of Directors approved a modification to the outstanding restricted stock awards to provide for continued vesting upon retirement. As a result, incremental expense of $4.2 million was recognized to reflect the cumulative compensation expense recognized over the required service period of each restricted shareholder.

The following table summarizes restricted stock activity for fiscal year ended January 3, 2015, the 39 week period ended December 28, 2013 and fiscal year ended March 30, 2013:

	Shares			Weighted Average Grant-Date Fair Value
Outstanding and nonvested at March 31, 2012		580,893			16.48
Granted		215,014			17.78
Vested		(217,737	)		17.47
Forfeited		(31,988	)		16.52
Outstanding and nonvested at March 30, 2013		546,182			16.59
Granted		227,207			18.07
Vested		(225,600	)		16.94
Forfeited		(28,954	)		16.94
Outstanding and nonvested at December 28, 2013		518,835		$	23.56
Granted		317,827			22.63
Vested		(219,894	)		23.56
Forfeited		(16,115	)		23.03
Outstanding and nonvested at January 3, 2015		600,653		$	23.08

The total fair value of shares vested during fiscal year ended January 3, 2015, the 39 week period ended December 28, 2013 and fiscal year ended March 30, 2013 was $4.7 million, $3.6 million and $3.9 million, respectively.

Share-based compensation expense recognized and included in “Selling, general and administrative expenses” in the Consolidated Statements of Earnings and related tax benefits were as follows:

(In thousands)	January 3, 2015			December 28, 2013			March 31, 2013
Stock options	$	-		$	14		$	196
Restricted stock		6,939			6,937			3,866
Tax benefits		(2,632	)		(2,640	)		(1,572	)
	$	4,307		$	4,311		$	2,490

As of January 3, 2015, total unrecognized compensation cost related to non-vested share-based awards granted under our stock incentive plans was $4.6 million for restricted stock. The remaining compensation costs not yet recognized are expected to be recognized over a weighted average period of 2.3 years for restricted stock. All compensation costs related to stock options have been recognized.

SpartanNash recognized tax deductions of $5.9 million, $4.1 million and $4.3 million related to the exercise of stock options and the vesting of restricted stock during fiscal year ended January 3, 2015, the 39 week period ended December 28, 2013 and fiscal year ended March 30, 2013, respectively.

SpartanNash has a stock bonus plan covering 300,000 shares of SpartanNash common stock. Under the provisions of this plan, certain officers and key associates of SpartanNash may elect to receive a portion of their annual bonus in common stock rather than cash and will be granted additional shares of common stock worth 30% of the portion of the bonus they elect to receive in stock. After the shares are issued the holder is not able to sell or otherwise transfer the shares until the end of the holding period which is currently 12 months. Compensation expense is recorded based upon the market price of the stock as of the measurement date. A total of 56,225 shares remained unissued under the plan at January 3, 2015.

SpartanNash has an associate stock purchase plan covering 200,000 shares of SpartanNash common stock. The plan provides that associates of SpartanNash and its subsidiaries may purchase shares at 95% of the fair market value. As of January 3, 2015, 43,469 shares had been issued under the plan. The associate stock purchase plan was suspended during the 39 week period ended December 28, 2013 in conjunction with the merger with Nash-Finch Company and cash balances were refunded to participants. The associate stock purchase plan was reinstated in April 2014.