NOTE 15 STOCK BASED 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.

Compensation cost for share‑based payment arrangements totaled $8.2 million, $5.7 million and $4.3 million for 2014, 2013 and 2012, respectively. As of December 31, 2014, there were a maximum of 2,434,995 shares available for future grant under our various stock plans.

Stock Options

The following tables summarize stock option activity:


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

Granted	116,500		144.26
Exercised	-		-
Forfeited	(35,450)		87.45
Expired	-		-
Stock options outstanding at December 31, 2014	1,046,490	$	72.61	7.0	$	61,986,678

Stock options exercisable at December 31, 2014	400	$	57.77	2.5	$	29,060

Remaining unvested options outstanding and expected to vest	1,024,077	$	72.33	7.0	$	60,907,525

Information related to stock options outstanding as of December 31, 2014 is summarized below:


				Weighted Average
	Number	Weighted Average		Remaining	Number
Range of Exercise Prices	Outstanding	Exercise Price		Contractual Term	Exercisable
				(In years)
$46.49 - $55.82	63,500	$	51.26	6.8	-
$57.77 - $60.33	580,400		57.95	6.3	400
$61.64 - $69.75	170,240		66.17	7.3	-
$81.80 - $110.50	128,100		99.90	8.5	-
$125.09 - $151.72	104,250		144.17	9.4	-
	1,046,490	$	71.02	7.0	400

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


	As of December 31,
	2014		2013		2012
Grant date fair value	$	48.65	$	28.04	$	19.33
Expected life of options (in years)		7.5		7.3		7.3
Risk-free interest rate		2.2%		1.8%		1.4%
Expected volatility		25.7%		22.0%		25.0%
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.

Generally, options granted vest over requisite service periods or on a graduated scale based on total shareholder returns, 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. For options that vest based on shareholder returns, the grant date fair values are calculated using a Monte-Carlo approach which simulates our stock price on the corresponding vesting dates before applying the Black Scholes model.

The balance of unamortized stock option expense as of December 31, 2014 is $12.8 million, which is expected to be recognized over a weighted‑average period of 3.0 years. Expense associated with stock options was $4.3 million, $3.5 million and $3.0 million for the years ended December 31, 2014, 2013 and 2012, respectively, which are included in General and administrative expense in the accompanying Consolidated Statements of Operations.

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.

The following table summarizes restricted stock activity:


		Weighted Average
		Grant Date
	Shares	Fair Value

Restricted stock outstanding at January 1, 2012	42,553	$	65.18
Granted	27,933		63.86
Vested	(12,553)		59.77
Restricted stock outstanding at December 31, 2012	57,933	$	65.72

Granted	77,434		79.77
Vested	(13,033)		60.15
Restricted stock outstanding at December 31, 2013	122,334	$	75.21

Granted	61,750	$	126.38
Vested	(11,394)		97.72
Restricted stock outstanding at December 31, 2014	172,690	$	92.02

The grant date fair value of the restricted stock is based on the closing sales price of our common stock on the grant date. For restricted stock awards that vest based on shareholder returns, the grant date fair values are calculated using a Monte-Carlo approach which simulates expected stock value on corresponding vesting dates and then discounts that back to the valuation date.

Recognized compensation expense of $3.9 million, $2.2 million and $1.3 million for the years ended December 31, 2014, 2013 and 2012, respectively, and are included in General and administrative expense related to restricted stock awards in the accompanying Consolidated Statements of Operations. The fair value of restricted stock that vested during 2014 was $1.7 million. The balance of unamortized restricted stock expense as of December 31, 2014 was $10.4 million, which is expected to be recognized over a weighted‑average period of 3.33 years.