NOTE 15 STOCK BASED PLANS

Incentive Stock Plans

On November 9, 2010 (the "Effective Date"), HHC adopted The Howard Hughes Corporation 2010 Equity Incentive Plan (the "Equity Plan"). Pursuant to the Equity Plan, 3,698,050 shares of HHC common stock were reserved for issuance. The Equity Plan provides for grants of options, stock appreciation rights, restricted stock, other stock-based awards and performance-based compensation (collectively, "the Awards"). Directors, employees and consultants of HHC and its subsidiaries and affiliates are eligible for awards.

The Equity Plan is administered by the Compensation Committee of the Board of Directors ("Committee"). Option grant amounts are awarded by the Committee. Generally, options granted vest over requisite service periods, expire ten years after the grant date and generally do not become exercisable until their restrictions on exercise lapses after the five-year anniversary of the grant date. In May 2013, certain key employees were granted restricted stock and stock options whereby half vest after four years of service and the remaining half vest on a graduated scale based on total shareholder return in 2017. Compensation cost for share-based payment arrangements totaled $5.7 million and $4.3 million for 2013 and 2012, respectively.

As of December 31, 2013, there were a maximum of 2,577,795 shares available for future grant under our various stock plans.

Stock Options

The following tables summarize stock option activity:

			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value

					(In years)
Stock options outstanding at January 1, 2012	712,640		$	57.72
Granted	200,000			64.19
Exercised	—			—
Forfeited	(50,700	)		58.62
Expired	—			—


Stock options outstanding at December 31, 2012	861,940		$	59.17




Granted	132,100			99.38
Exercised	—			—
Forfeited	(28,600	)		62.40
Expired	—			—


Stock options outstanding at December 31, 2013	965,440		$	64.57		7.8	$	53,607,886




Stock options exercisable at December 31, 2013	400			57.77		3.5		24,932




Remaining unvested options outstanding and expected to vest	936,680		$	64.48		7.8	$	52,101,542

Information related to stock options outstanding as of December 31, 2013 is summarized below:

Range of Exercise Prices		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term

				(In years)
$46.49 – 55.82	64,500	$	51.19		7.8	—
$57.77 – 60.33	597,400		57.98		7.3	—
$61.64 – 69.75	175,440		66.26		8.2	—
$81.80 – 110.50	128,100		99.77		9.5	—


	965,440	$	64.57		7.8	—

The fair value on the grant date and the significant assumptions used in the Black-Scholes option-pricing model are as follows:

	2013

	Weighted Average			Range
Grant date fair value	$	28.04		$	18.12 – $36.55
Expected life of options (in years)		7.34			7.0 – 7.5
Risk-free interest rate		1.8	%		1.26% – 2.30	%
Expected volatility		22	%		18% – 26	%
Expected annual dividend per share		—			—

The computation of the expected volatility assumption used in the Black-Scholes calculations is based on the median asset volatility of comparable companies as of each of the grant dates.

The balance of unamortized stock option expense as of December 31, 2013 is $12.4 million, which is expected to be recognized over a weighted-average period of 3.1 years. Expense associated with stock options for the year ended December 31, 2013, which is included in general and administrative expense in the accompanying Consolidated Statements of Operations, totaled $3.5 million.

Restricted Stock

Restricted stock awards issued under the Equity Plan provide that shares awarded may not be sold or otherwise transferred until restrictions have lapsed as established by the Committee. In addition to the granting of restricted stock to certain members of management, we award restricted stock to our non-employee directors as part of their annual retainer. The management awards vest over five years, and the restriction on the non-employee director shares lapse in June of each year. Generally, upon termination of employment or directorship, restricted stock units and restricted shares which have not vested are forfeited. For the year ended December 31, 2013, recognized compensation expense of $2.2 million is included in general and administrative expense related to restricted stock awards. The fair value of restricted stock that vested during 2013 was $1.4 million. The balance of unamortized restricted stock expense as of December 31, 2013 was $6.5 million, which is expected to be recognized over a weighted-average period of 3.48 years.

The following table summarizes restricted stock activity:

			Weighted Average Grant Date Fair Value

Restricted stock outstanding at January 1, 2012	42,553		$	65.18
Granted	27,933			63.86
Vested	(12,553	)		59.77
Cancelled	—			—


Restricted stock outstanding at December 31, 2012	57,933		$	65.72




Granted	77,434		$	79.77
Vested	(13,033	)		60.15
Cancelled	—			—


Restricted stock outstanding at December 31, 2013	122,334		$	75.21