SHARE-BASED COMPENSATION

2014 Omnibus Equity Incentive Plan (the “2014 Equity Plan”)

On October 17, 2014, the Company’s stockholders approved the Green Brick Partners, Inc. 2014 Omnibus Equity Incentive Plan (the “2014 Equity Plan”). The Board of Directors of the Company had previously approved the 2014 Equity Plan on July 8, 2014, subject to stockholder approval. The 2014 Equity Plan became effective upon the completion of the Transaction on October 27, 2014. The purpose of the 2014 Equity Plan is to provide a means for the Company to attract and retain key personnel and to provide a means whereby current and prospective directors, officers, employees, consultants and advisors can acquire and maintain an equity interest in the Company, or be paid incentive compensation, which may (but need not) be measured by reference to the value of the Company’s common stock, thereby strengthening their commitment to the welfare of the Company and aligning their interests with those of the Company’s stockholders. The 2014 Equity Plan will terminate automatically on the tenth anniversary of the date it becomes effective. No awards will be granted under the 2014 Equity Plan after that date, but awards granted prior to that date may extend beyond that date.

Under the 2014 Equity Plan, awards of stock options, including both incentive stock options and nonqualified stock options, stock appreciation rights, restricted stock and restricted stock units, other share-based awards and performance compensation awards may be granted. The maximum number of shares of the Company’s common stock that is authorized and reserved for issuance under the 2014 Equity Plan is 2,350,956 shares, subject to adjustment for certain corporate events or changes in the Company’s capital structure.

In general, the Company’s employees or those reasonably expected to become the Company's employees, consultants and directors, are eligible for awards under the 2014 Equity Plan, provided that incentive stock options may be granted only to employees. After the consummation of the Transaction and the effectiveness of the 2014 Equity Plan, the Company has four executive officers, six non-employee directors and approximately 150 other employees (including employees of our builders) who are eligible to receive awards under the 2014 Equity Plan. A written agreement between the Company and each participant will evidence the terms of each award granted under the 2014 Equity Plan.

The shares that may be issued pursuant to awards are shares of the Company’s common stock and the maximum aggregate amount of common stock which may be issued upon exercise of all awards under the 2014 Equity Plan, including incentive stock options, may not exceed 2,350,956 shares, subject to adjustment to reflect certain corporate transactions or changes in the Company’s capital structure. If any award under the 2014 Equity Plan expires or otherwise terminates, in whole or in part, without having been exercised in full, the common stock withheld from issuance under that award will become available for future issuance under the plan. If shares issued under the 2014 Equity Plan are reacquired by the Company pursuant to the terms of any forfeiture provision, those shares will become available for future awards under the plan. Awards that can only be settled in cash will not be treated as shares of common stock granted for purposes of the 2014 Equity Plan. The maximum amount that can be paid to any single participant in any one calendar year pursuant to a cash bonus award under the 2014 Equity Plan is $2,000,000. No awards were issued under the 2014 Equity Plan as of December 31, 2014.

Stock Options

In connection with the Transaction, the Company entered into a stock option agreement with our Chief Executive Officer, James R. Brickman, pursuant to which Mr. Brickman received a one-time award of stock options to purchase 500,000 shares of common stock. The stock option has a per share exercise price equal to approximately $7.49, which is based on the weighted average price of the Company’s common stock for the five trading days immediately prior to the date of grant, October 27, 2014. Subject to Mr. Brickman’s continued employment, the stock option will vest and become exercisable in five substantially equal installments on each of the first five anniversaries of the date of grant. In the event that Mr. Brickman’s employment is terminated by the Company without cause, any unvested portion of the stock option will vest and become exercisable as of the date of such termination. These stock options were not granted under the 2014 Equity Plan.

Except as otherwise directed by the Compensation Committee, the exercise price for stock options cannot be less than the fair market value of our common stock on the grant date. The options generally vest and become exercisable in five substantially equal installments on each of the first five anniversaries of the grant date. Compensation expense related to these options is expensed on a straight line basis over the five year service period. There were no stock options issued during the years ended December 31, 2013 and December 31, 2012.

The following table summarizes the share-based compensation expense incurred by the Company (in thousands):



	Years Ended December 31,
	2014			2013		2012
Stock options	$	(40	)	$	—	$	—

At December 31, 2014, the estimated total remaining unamortized share-based compensation expense, net of forfeitures, was $1.4 million which is expected to be recognized over a weighted-average period of 4.8 years.

A summary of stock option activity as of December 31, 2014, and the changes during the year ended December 31, 2014 is as follows:



	Number of Shares (in thousands)	Weighted Average Exercise Price per Share		Weighted Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value (in thousands)
Options outstanding, January 1, 2014	—	$	—
Granted	500	7.49
Exercised	—	—
Forfeited	—	—
Options outstanding, December 31, 2014	500	$	7.49	9.82	$	357
Options exercisable, December 31, 2014	—	$	—	—	$	—

A summary of our unvested stock options as of December 31, 2014, and the changes during the year ended December 31, 2014 is as follows (shares in thousands):



	Number of Shares (in thousands)	Weighted Average Per Share Grant Date Fair Value
Unvested, January 1, 2014	—	$	—
Granted	500	$	2.88
Vested	—	$	—
Forfeited	—	$	—
Unvested, December 31, 2014	500	$	2.88

Valuation of Share-Based Awards

We utilized the Black-Scholes option pricing model for estimating the grant date fair value of stock options with the following assumptions:



	Risk-Free Interest Rate		Expected Term (in years)	Weighted Average Expected Stock Price Volatility		Expected Dividend Yield		Weighted Average Per Share Grant Date Fair Value
Fiscal year 2014	1.94	%	6.5	37.2	%	—	%	$	2.88

We based the risk-free interest rates on the implied yield available on U.S. Treasury constant maturities in effect at the time of the grant with remaining terms equivalent to the respective expected terms of the stock options. Because we do not have any history of stock option exercises, we calculated the expected award term using the simplified method. We determined the expected volatility based on a combination of implied market volatilities and other factors. We have not paid any dividends since our inception and do not anticipate paying any cash dividends on our common stock in the foreseeable future.

In addition to the variables above, we are also required to estimate at the grant date the likelihood that the award will ultimately vest (the “pre-vesting forfeiture rate”), and revise the estimate, if necessary, in future periods if the actual forfeiture rate differs. We determine the forfeiture rate based on historical activity of the grantees, including the groups in which the grantees are part of, such as directors, executives and employees. We utilized a forfeiture rate of 0% during the year ended December 31, 2014.