11. Stock-Based Compensation

We maintain stock-based incentive plans under which stock options, non-qualified stock options, stock appreciation rights, restricted shares, restricted share units and deferred shares may be granted to employees and consultants. Our current practice is to issue new shares, rather than treasury shares, upon stock option exercises and for restricted share grants. To date, we have only granted non-qualified stock options, restricted shares and restricted share units of common stock under these plans. Non-employee directors have received only non-qualified stock options under a non-employee director equity plan, which expired in May 2007. Currently, we do not have a plan under which non-employee directors may be granted stock options or other equity interests in the Company.

On April 2, 2015, our Board approved an amendment to our 2010 Stock Incentive Plan to increase the number of shares of common stock available for grant under the plan to 9.2 million shares from 6.8 million shares. This amendment was approved by our stockholders at our annual meeting held on May 28, 2015. This is our only active stock-based incentive plan, and approximately 2.4 million of these shares were available for grant as of December 29, 2015.

Stock options generally vest at 20% per year and expire eight to ten years from the date of grant. Restricted shares and restricted share units generally vest between three to five years from the date of grant and require that the staff member remains employed in good standing with the Company as of the vesting date. Equity awards for certain executive officers may vest earlier in the event of a change of control in which the acquirer fails to assume or continue such awards, as defined in the plan, or under certain circumstances described in such executive officers’ respective employment agreements. Since restricted shares and restricted share units provide strong retention power through economic value to our staff members even when our stock price remains flat or declines, and they also reduce our total share usage, we have generally increased the proportion of restricted shares and restricted share units versus stock option grants over the past several years.

The following table presents information related to stock-based compensation (in thousands):

	Fiscal Year
	2015		2014		2013

Labor expenses	$	5,748	$	5,245	$	4,478
Other operating costs and expenses	268		216		195
General and administrative expenses	14,037		11,356		9,462

Total stock-based compensation	20,053		16,817		14,135
Income tax benefit	7,670		6,433		5,407

Total stock-based compensation, net of taxes	$	12,383	$	10,384	$	8,728


Capitalized stock-based compensation (1)	$	272	$	216	$	177

(1)

It is our policy to capitalize the portion of stock-based compensation costs for our internal development and construction, legal, and facilities departments that relates to capitalizable activities such as the design and construction of new restaurants, remodeling existing locations, lease, intellectual property and liquor license acquisition activities and equipment installation. Capitalized stock-based compensation is included in property and equipment, net and other assets on the consolidated balance sheets.

Stock Options

The weighted average fair value at the grant date for options issued during fiscal 2015, 2014 and 2013 was $14.17, $15.48 and $10.83 per option, respectively. The fair value of options at the grant date was estimated utilizing the Black-Scholes valuation model with the following weighted average assumptions for fiscal 2015, 2014 and 2013, respectively: (a) an expected option term of 6.6 years, 6.5 years and 6.4 years, (b) expected stock price volatility of 31.3%, 32.9% and 33.5% , (c) a risk-free interest rate of 1.9%, 2.2% and 1.4%, and (d) a dividend yield on our stock of 1.4%, 1.2% and 1.3%.

The expected option term represents the estimated period of time until exercise and is based on historical experience of similar options, giving consideration to the contractual terms, vesting schedules and expectations of future employee behavior. Expected stock price volatility is based on a combination of the historical volatility of our stock and the implied volatility of actively traded options on our common stock. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant with an equivalent remaining term. The dividend yield is based on anticipated cash dividend payouts. Compensation expense is recognized only for those options expected to vest, with forfeitures estimated based on our historical experience and future expectations.

Stock option activity during fiscal 2015 was as follows:

	Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value(1)
	(In thousands)		(Per share)		(In years)	(In thousands)
Outstanding at beginning of year	4,023		$	26.34	3.7	$	97,406
Granted	311		$	48.01
Exercised	(1,230	)	$	22.77
Forfeited or cancelled	(38	)	$	24.08


Outstanding at end of year	3,066		$	30.00	3.6	$	52,416



Exercisable at end of year	1,798		$	23.91	2.5	$	41,311

(1)

Aggregate intrinsic value is calculated as the difference between our closing stock price at fiscal year end and the exercise price, multiplied by the number of in-the-money options and represents the pretax amount that would have been received by the option holders, had they all exercised their options on the fiscal year end date.

The total intrinsic value of options exercised during fiscal 2015, 2014 and 2013 was $37.0 million, $28.2 million and $40.1 million, respectively. As of December 29, 2015, total unrecognized stock-based compensation expense related to nonvested stock options was $10.0 million, which we expect to recognize over a weighted average period of approximately 2.3 years.

Restricted Shares and Restricted Share Units

Restricted share and restricted share unit activity during fiscal 2015 was as follows:

	Shares		Weighted Average Fair Value
	(In thousands)		(Per share)
Outstanding at beginning of year	1,820		$	37.12
Granted	445		$	49.70
Vested	(268	)	$	27.88
Forfeited	(106	)	$	38.45

Outstanding at end of year	1,891		$	41.31

Fair value of our restricted shares and restricted share units is based on our closing stock price on the date of grant. The weighted average fair value at the grant date for restricted shares and restricted share units issued during fiscal 2015, 2014 and 2013 was $49.70, $47.16 and $39.42, respectively. The fair value of shares that vested during fiscal 2015, 2014 and 2013 was $7.5 million, $4.5 million and $2.6 million, respectively. As of December 29, 2015, total unrecognized stock-based compensation expense related to unvested restricted shares and restricted share units was $44.6 million, which we expect to recognize over a weighted average period of approximately 2.8 years.