Equity Based Employee Benefit Plans

Staples offers its associates share ownership through certain equity-based employee compensation and benefit plans. In connection with these plans, Staples recognized $61 million, $63 million and $64 million of compensation expense for 2016, 2015 and 2014, respectively, of which approximately $4 million related to discontinued operations for each year. The total income tax benefit related to stock-based compensation was $21 million, $20 million, $18 million for 2016, 2015 and 2014, respectively. As of January 28, 2017, Staples had $66 million of unamortized stock compensation expense associated with its equity-based plans, which will be expensed over a weighted-average period of 1.5 years.

Stock Award Plan

Under the 2014 Stock Incentive Plan, the Company may grant restricted stock and restricted stock units (collectively, “Restricted Shares”) and non-qualified stock options to associates. Prior to June 2014, Restricted Shares and non-qualified stock options were granted under the Company's Amended and Restated 2004 Stock Incentive Plan. Shares issued pursuant to restricted stock awards are restricted in that they are not transferable until they vest. Shares underlying awards of restricted stock units are not issued until the units vest. Non-qualified stock options cannot be exercised until they vest. For stock awards with service conditions only, vesting occurs over different periods, depending on the terms of the individual award, but expenses relating to these awards are recognized on a straight line basis over the applicable vesting period. For awards that include performance conditions, the Company recognizes compensation expense during the performance period to the extent achievement of the performance condition is deemed probable relative to targeted performance. A change in the Company's estimate of the probable outcome of a performance condition is accounted for in the period of the change by recording a cumulative catch-up adjustment.

Performance Shares

In April 2013, March 2014, March 2015 and April 2016, the Company entered into long-term performance share agreements with certain executives. Each arrangement covers a three year performance period. Payout under these arrangements may range from 25% to 200% of target for each performance metric, depending on actual performance. Any award earned based on performance achieved may be increased or decreased by 25% if the Company's cumulative total shareholder return ("TSR") over the three year performance period is in the top or bottom one-third of the S&P 500 TSR, respectively. Shares earned, if any, will be issued on a fully-vested basis at the conclusion of the three-year performance period only if the grantee is still actively employed by or serving as a consultant to the Company at that time, with certain exceptions for retirement, death, disability, and termination without cause.

For the arrangements entered into in April 2016, vesting is based on cumulative performance over a three year period comprising fiscal years 2016 to 2018, and is 50% based on achieving certain operating income growth targets and 50% based on achieving certain return on net assets percentage targets. As of January 28, 2017, the aggregate target number of shares for this award is 0.9 million, net of forfeitures, with a grant-date fair value of $9 million.

For the arrangements entered into in April of 2013 and March of 2014 and March of 2015, vesting for these awards is based on performance achieved in each fiscal year, with performance targets established at the beginning of each year, and is 50% based on satisfaction of certain sales growth metrics and 50% based on achievement of certain return on net assets percentage targets.

For each performance period completed as of the end of 2016, the table below shows the target number of shares, the aggregate grant-date fair value, and the percentage of target shares earned based on the extent to which the performance targets were achieved, subject to adjustment based on TSR at the end of the three year performance period.



Performance period	Award date	Target number of shares (millions)	Grant date fair value (millions)	% of target shares earned
2016	March 2015	0.4	$3	50%
2016	March 2014	0.5	$4	50%
2015	March 2015	0.5	$7	78.4%
	March 2014	0.5	$9
	April 2013	0.5	$8
2014	March 2014	0.6	$7	87.3%
2014	April 2013	0.5	$6	87.3%

The three year performance period related to the March 2014 award was complete as of the end of 2016. The shares earned related to this award are expected to be issued in March 2017, and the amount earned based on performance will be reduced by 25% based on the results of the TSR multiplier.

Upon completion of the three-year performance period related to the April 2013 award, in April 2016, the Company issued a total of 0.8 million shares on a fully vested basis, which reflects a 25% reduction related to the TSR multiplier.

Restricted Shares

The following table summarizes activity related to Restricted Shares in 2016:



	Restricted Shares (1)
	Number of Shares (in millions)		Weighted-Average Grant Date Fair Value Per Share
January 30, 2016	7		$	13.84
Granted	7		8.18
Vested	(3	)	13.41
Canceled	(2	)	11.78
January 28, 2017	9		$	10.04


(1)	Excludes shares issuable under outstanding performance awards

The weighted-average grant date fair values per share of Restricted Shares granted during 2016, 2015 and 2014 were $8.18, $14.68 and $11.73, respectively. The total market value of Restricted Shares vested during 2016, 2015 and 2014 was $37 million, $74 million and $54 million, respectively.

Stock Options

The Company did not grant any stock options during 2014, 2015 or 2016. Information with respect to stock options granted in 2012 and prior is as follows (shares in millions):



	Number of Shares		Weighted-Average Exercise Price Per Share		Weighted-Average Remaining Contractual Term in Years	Aggregate Intrinsic Value (1) (in millions)
Outstanding at January 30, 2016	20		$	20.36
Granted	—		—
Exercised	—		—
Canceled	(4	)	20.76
Expired	(2	)	24.52
Outstanding at January 28, 2017	14		$	19.67	2.32	$0


(1)	The intrinsic value of the non-qualified stock options is the amount by which the market value of the underlying stock exceeds the exercise price of an option.

There were no options exercised in 2016 and the total intrinsic value of options exercised in 2015 and 2014 was $1 million and $1 million, respectively. All options are fully vested as of January 28, 2017.

Employee Stock Purchase Plan

Staples offers its associates the opportunity for share ownership pursuant to the Amended and Restated Employee Stock Purchase Plan. U.S. and International associates are able to purchase shares of Staples common stock at 85% of the market price of the common stock at the end of the offering period through payroll deductions in an amount not to exceed 10% of an employee’s annual base compensation. During 2016 and 2015, the Company issued 4 million and 3 million shares, respectively, pursuant to this plan.

Shares Available for Issuance

At January 28, 2017, 64 million shares of common stock were reserved for issuance under Staples' 2014 Plan, 2004 Plan, 401(k) Plan and employee stock purchase plan.