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. New shares are issued on exercise of options. The Equity Plan provides for grants of options, stock appreciation rights, restricted stock, other stock‑based awards and market‑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 costs for share‑based payment arrangements totaled $9.4 million, $9.8 million and $8.2 million, of which $2.6 million, $2.5 and $0 were capitalized for 2016, 2015, and 2014, respectively. As of December 31, 2016, there were a maximum of 2,147,468 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, 2014	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

Granted	117,000	$	134.24
Exercised	—		—
Forfeited	(77,450)		103.84
Expired	—		—
Stock options outstanding at December 31, 2015	1,086,040	$	77.11

Granted	162,100	$	109.42
Exercised	(3,000)		60.33
Forfeited	(68,500)		122.93
Expired	—		—
Stock options outstanding at December 31, 2016	1,176,640	$	78.87	5.57	$	44,769,359

Stock options exercisable at December 31, 2016	609,740	$	57.89	3.92	$	34,271,449

Stock options vested and expected to vest	1,163,260	$	78.46	5.54	$	44,676,851

Information related to stock options outstanding as of December 31, 2016 is summarized below:


								Weighted Average
								Remaining
					Number	Weighted Average		Contractual Term	Number
Range of Exercise Prices					Outstanding	Exercise Price		(In years)	Exercisable
$	46.49	—	$	55.82	47,500	$	52.87	4.5	47,500
$	57.77	—	$	60.33	565,000		57.93	3.9	529,500
$	61.64	—	$	69.75	164,240		66.31	5.2	32,740
$	81.80	—	$	110.50	128,400		97.87	7.0	—
$	112.64	—	$	151.72	271,500		125.61	8.7	—
					1,176,640	$	78.87	5.57	609,740

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,
	2016			2015			2014
Grant date fair value	$	36.55		$	44.45		$	48.65
Expected life of options (in years)		7.4			7.5			7.5
Risk-free interest rate		1.8	%		2.0	%		2.2	%
Expected volatility		33.1	%		26.1	%		25.7	%
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, 2016 is $10.3 million, which is expected to be recognized over a weighted‑average period of 3.4 years. Net of amounts capitalized relating to our developments, $2.9 million, $2.6 million and $4.3 million for the years ended December 31, 2016, 2015 and 2014, respectively, of expense associated with stock options 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 on the date of our annual meeting of shareholders, or June 1st of the award year, whichever is earlier.

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, 2014	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

Granted	81,581	$	121.81
Vested	(7,546)		147.56
Forfeited	(4,169)		101.33
Restricted stock outstanding at December 31, 2015	242,556	$	100.15

Granted	136,198	$	67.80
Vested	(37,670)		83.47
Forfeited	(51,972)		90.14
Restricted stock outstanding at December 31, 2016	289,112	$	88.88

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 our stock price on the corresponding vesting dates before applying the Black-Scholes model.

Net of amounts capitalized relating to our developments, we recognized compensation expense of $4.5 million, $4.7 million and $3.9 million for the years ended December 31, 2016, 2015 and 2014, respectively, 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 2016 was $3.9 million. The balance of unamortized restricted stock expense as of December 31, 2016 was $13.7 million, which is expected to be recognized over a weighted‑average period of 3.05 years.