5. STOCK-BASED COMPENSATION

Our current shareholder approved stock-based compensation plan is the 2005 Equity Incentive Plan, (as amended from time to time, “the Plan”). Under the Plan, we may issue shares of our common stock to employees, officers, directors and consultants. We have granted incentive stock options, non-qualified stock options, and performance and time-based restricted stock units. Stock options and stock appreciation rights are charged against the Plan share reserve on the basis of one share for each share granted. Other types of grants, including restricted stock units (“RSUs”), are currently charged against the Plan share reserve on the basis of 1.5 shares for each share granted. The Plan also contains other limits on the terms of incentive grants such as limits on the number that can be granted to an employee during any fiscal year. All options granted under the Plan expire within 10 years of their date of grant.

Under the Plan, we issue stock options as well as time-based and performance-based RSUs to officers. We issue time-based RSUs and stock options to other support employees. We also issue RSUs and stock options in connection with the BJ’s Gold Standard Stock Ownership Program (the “GSSOP”). The GSSOP is a long-term equity incentive program for our restaurant general managers, executive kitchen managers and restaurant field supervision. GSSOP grants are dependent on the length of each participant’s service with us and position. All GSSOP participants must remain in good standing during their service period.

The Plan permits us to set the vesting terms and exercise period for awards at our discretion. Stock options and time-based RSUs generally vest ratably over three or five years for non-GSSOP participants and either cliff vest at five years or cliff vest at 33% on the third anniversary and 67% on the fifth anniversary for GSSOP participants. Performance-based RSUs generally cliff vest on the third anniversary of the grant date in an amount from 0% to 150% of the grant quantity, dependent on the level of target achievement.

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


	For The Thirteen Weeks Ended
	April 4, 2017		March 29, 2016
Labor and benefits		$468		$403
General and administrative		$1,168		$1,147
Capitalized (1)		$66		$78

(1)

Capitalized stock-based compensation relates to our restaurant development personnel and is included in “Property and equipment, net” on the Consolidated Balance Sheets.

Stock Options

The fair value of each stock option grant issued is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions:


	For the Thirteen Weeks Ended
	April 4, 2017		March 29, 2016
Expected volatility		34.7%		35.9%
Risk free interest rate		1.9%		1.5%
Expected option life		5 years		5 years
Dividend yield		0%		0%
Fair value of options granted		$12.03		$14.37

U.S. GAAP requires us to make certain assumptions and judgments regarding the grant date fair value. These judgments include expected volatility, risk free interest rate, expected option life, and dividend yield. These estimations and judgments are determined by us using assumptions that, in many cases, are outside of our control. The changes in these variables or trends, including stock price volatility and risk free interest rate, may significantly impact the grant date fair value, resulting in a significant impact to our financial results.

The exercise price of our stock options under our stock-based compensation plan is required to equal or exceed the fair market value of the shares on the option grant date or the most recent trading day when grants take place on market holidays. The following table represents stock option activity:


	Options Outstanding				Options Exercisable

	Shares (in thousands)		Weighted Average Exercise Price		Shares (in thousands)		Weighted Average Exercise Price

Outstanding at January 3, 2017		1,227		$31.95		802		$27.73
Granted		153		35.95
Exercised		(7)		24.20
Forfeited		(3)		45.90

Outstanding at April 4, 2017		1,370		$32.40		901		$29.27

As of April 4, 2017, total unrecognized stock-based compensation expense related to non-vested stock options was $4.8 million, which is generally expected to be recognized over the next five years.

Restricted Stock Units

Time-Based Restricted Stock Units

The following table represents time-based restricted stock unit activity:


	Shares (in thousands)		Weighted Average Fair Value

Outstanding at January 3, 2017		460		$39.75
Granted		90		35.95
Vested or released		(50)		44.77
Forfeited		(12)		39.03

Outstanding at April 4, 2017		488		$38.56

The fair value of our time-based RSUs is the quoted market value of our common stock on the date of grant or the most recent trading day when grants take place on market holidays. The fair value of each time-based RSU is expensed over the vesting period (e.g., three or five years). As of April 4, 2017, total unrecognized stock-based compensation expense related to non-vested RSUs was approximately $10.3 million, which is generally expected to be recognized over the next five years.

Performance-Based Restricted Stock Units

The following table represents performance-based restricted stock unit activity:


	Shares (in thousands)		Weighted Average Fair Value

Outstanding at January 3, 2017		54		$37.87
Granted		40		35.95
Vested or released		–		–
Forfeited		(24)		32.49

Outstanding at April 4, 2017		70		$38.68

The fair value of our performance-based RSUs is the quoted market value of our common stock on the date of grant or the most recent trading day when grants take place on market holidays. The fair value of each performance-based RSU is recognized when it is probable the performance goal will be achieved. As of April 4, 2017, total unrecognized stock-based compensation expense related to non-vested performance-based RSUs was approximately $1.5 million, which is generally expected to be recognized over the next three years.