
3.	STOCK-BASED EMPLOYEE COMPENSATION

2012 Long-Term Equity Incentive Plan

On July 16, 2012, the Company adopted the Del Frisco’s Restaurant Group, Inc. 2012 Long-Term Equity Incentive Plan (the “2012 Plan”), which allows the Company to grant stock options, restricted stock, restricted stock units, deferred stock units and other equity-based awards to directors, officers, key employees and other key individuals performing services for the Company. The 2012 Plan provides for granting of options to purchase shares of common stock at an exercise price not less than the fair value of the stock on the date of grant. Equity-based awards become exercisable at various periods ranging from one to four years from the date of grant. The 2012 Plan has 2,232,800 shares authorized for issuance under the plan. There were 1,304,225 shares of common stock issuable upon exercise of outstanding options and 140,074 shares of unvested restricted stock outstanding at September 8, 2015 with 663,976 shares available for future grants.

The following table details the Company’s total stock-based compensation cost during the 12 and 36 weeks ended September 8, 2015 and September 9, 2014 as well as where the costs were expensed (in thousands):


	12 Weeks Ended				36 Weeks Ended
	September 8,		September 9,		September 8,		September 9,
	2015		2014		2015		2014
Restaurant operating expenses	$	109	$	101	$	332	$	300
General and administrative costs		655		495		1,814		1,450
Total stock compensation cost	$	764	$	596	$	2,146	$	1,750

Restricted Stock

The following table summarizes restricted stock activity during the 36 week period ended September 8, 2015:



	36 Weeks Ended September 8, 2015
	Shares		Weighted average grant date fair value		Aggregate intrinsic value ($000's)
Outstanding at beginning of year		—	$	—
Granted		160,271		20.30
Vested		—		—
Forfeited		(20,197)		20.30
Outstanding at end of period		140,074	$	20.30		1,926

As of September 8, 2015, there was $2.3 million of total unrecognized compensation cost related to non-vested restricted stock. This cost is expected to be recognized over a period of approximately 3.2 years. Of the restricted shares outstanding at the end of the period, 52,618 of the 140,074 shares outstanding are subject to forfeiture if certain performance conditions are not achieved during fiscal 2015.

Stock Options

The following table summarizes stock option activity during the 36 week period ended September 8, 2015:



	36 Weeks Ended September 8, 2015
	Shares		Weighted average exercise price		Weighted average remaining contractual term		Aggregate intrinsic value ($000's)
Outstanding at beginning of year		1,429,000	$	17.45
Granted		—		—
Exercised		(10,650)		14.01
Forfeited		(114,125)		18.25
Outstanding at end of period		1,304,225	$	17.41		7.5 years		421
Options exercisable at end of period		783,725	$	16.62		7.4 years		298

A summary of the status of non-vested stock options as of September 8, 2015 and changes during the 36 weeks ended September 8, 2015 is presented below:



	36 Weeks Ended
	September 8, 2015
	Shares	Weighted average grant-date fair value
Non-vested stock options at beginning of year	974,250	$	7.08
Granted	—		—
Vested	(343,125)		6.66
Forfeited	(110,625)		7.38
Non-vested stock options at end of period	520,500	$	7.29

As of September 8, 2015, there was $3.4 million of total unrecognized compensation cost related to non-vested stock options. This cost is expected to be recognized over a period of approximately 1.6 years. No stock options were issued under the 2012 Plan during the 36 weeks ended September 8, 2015.

The following table details the values from and assumptions for the Black-Scholes option pricing model for stock options issued during the 36 weeks ended September 9, 2014:


	36 Weeks Ended
	September 9, 2014
Weighted average grant date fair value		$8.85
Weighted average risk-free interest rate		1.91%
Weighted average expected life		5.91 years
Weighted average volatility		38.00%
Expected dividend		—

The Black-Scholes option valuation model requires the input of subjective assumptions, including the expected life of the stock-based award. The assumptions above represent management’s best estimates, but these estimates involve inherent uncertainties and the application of management’s judgment. The expected term of options granted is based on a representative peer group with similar employee groups and expected behavior. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury constant maturities rate in effect at the time of grant. The Company utilized a weighted rate for expected volatility based on a representative peer group with a similar expected term of options granted. Outstanding options granted under the 2012 Plan are subject to a four year vesting period and have a ten year maximum contractual term.

In addition, the Company is required to estimate the expected forfeiture rate and only recognizes expense for those stock options expected to vest. If the actual forfeiture rate is materially different from the Company’s estimate, the share-based compensation expense could be materially different.