STOCK COMPENSATION - RESTRICTED STOCK AND PERFORMANCE SHARE GRANTS

The Company’s stock incentive plans provide for the making of awards to employees based upon time-based criteria or through the achievement of performance-related objectives. The Company has issued three types of stock grant awards under these plans: restricted stock with time-based vesting, performance share grants that only vest upon the achievement of specified performance conditions, and performance share grants that include threshold, target, and maximum achievement levels based on the achievement of specific performance milestones. These awards are tied to corporate cash flow goals and the achievement of specified milestone development activities.

The following is a summary of the Company's performance share grants with performance conditions for the year ended December 31, 2014:



Performance Share Grants with Performance Conditions
Below threshold performance		—
Threshold performance		79,390
Target performance		148,728
Maximum performance		268,049

The following is a summary of the Company’s stock grant activity, both time and performance unit grants, assuming target achievement for outstanding performance grants for the following twelve month periods ended:



	December 31 2014		December 31 2013		December 31 2012
Stock Grants Outstanding Beginning of the Year at Target Achievement	265,701		688,041		744,508
New Stock Grants/Additional shares due to maximum achievement	165,996		192,348		113,643
Vested Grants	(41,694	)	(361,886	)	(170,110	)
Expired/Forfeited Grants	(152,958	)	(252,802	)	—
Stock Grants Outstanding December 31, 2014 at Target Achievement	237,045		265,701		688,041

The unamortized cost associated with nonvested stock grants and the weighted-average period over which it is expected to be recognized as of December 31, 2014 was $4,878,000 and 25 months, respectively. The fair value of restricted stock with time-based vesting features is based upon the Company’s share price on the date of grant and is expensed over the service period. Fair value of performance grants that cliff vest based on the achievement of performance conditions is based on the share price of the Company’s stock on the day of grant once the Company determines that it is probable that the award will vest. This fair value is expensed over the service period applicable to these grants. For performance grants that contain a range of shares from zero to maximum we determine, based on historic and projected results, the probability of (1) achieving the performance objective, and (2) the level of achievement. Based on this information, we determine the fair value of the award and measure the expense over the service period related to these grants. Because the ultimate vesting of all performance grants is tied to the achievement of a performance condition, we estimate whether the performance condition will be met and over what period of time. Ultimately, we adjust compensation cost according to the actual outcome of the performance condition. Under the Non-Employee Director Stock Incentive Plan, or NDSI Plan, each non-employee director receives his or her annual compensation in stock.

Beginning in the second half of 2013, the Compensation Committee of the Board conducted a compensation study prepared by an outside consultant that was completed during the first quarter of 2014. One of the outcomes of the compensation study was that the Board elected to modify selected outstanding and unvested performance share grants, or the existing performance milestone grants, and issue new milestone performance grants. The Company has assessed that it is probable that these new performance milestones will be met.

As discussed above, the performance share grant approved by the Board in March 2014, included the modification of existing performance milestone grants totaling 133,890 restricted stock units and the issuance of new performance share grants totaling 89,837 restricted stock units. The restricted stock units of the modified existing performance milestone grants have been accounted for as probable-to-probable modification since the Company has determined that achieving the existing performance milestones was probable. The unamortized total cost relating to these probable-to-probable modified performance share grants is being recognized ratably over the new requisite service period. The impact of modifying the existing performance stock grants is an annual expense of $1,109,000 over the service period. The values for the 2014 performance grants, including the new milestone grants, are fixed at threshold, target and maximum performance values, meaning that the amount of shares at vesting will vary depending on the stock price at that time. The total value for these grants at maximum performance is $5,702,000. These grants cannot be settled in cash and there are a sufficient variable number of shares in the equity compensation plans to meet the delivery requirements. Based upon the value of the award being determined at each level of performance the Company has concluded it is appropriate to classify these liability awards as a liability in other liabilities. The amount to be included in other liabilities for 2014 is $1,065,000.

The following table summarizes stock compensation costs for the Company's 1998 Stock Incentive Plan, or the Employee 1998 Plan, and NDSI Plan for the following periods:



Employee 1998 Plan:	December 31 2014		December 31 2013		December 31 2012
Expensed	$	2,645,000	$	161,000	$	5,054,000
Capitalized	95,000		294,000		392,000
	2,740,000		455,000		5,446,000
NDSI Plan	889,000		768,000		386,000
	$	3,629,000	$	1,223,000	$	5,832,000

During the fourth quarter of 2013, the Company achieved the final performance milestone for Tejon Mountain Village, which was full entitlement with all required permits resulting in 296,389 shares to vest.

During the second quarter of 2012, the Company achieved the second performance milestone for the Tejon Mountain Village project, which was to successfully defend its environmental impact report in the courts and achieve litigation free entitlement resulting in 99,207 shares to vest.

During the third quarter of 2012, we adjusted our estimates as to the achievement of performance milestones for the Centennial project. These adjustments led to a reduction in expense in 2012 costs associated with the Centennial performance milestones due to strategic decisions being made as to the methods and tactics being used to achieve entitlement approval, which will add additional time to the entitlement process.