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 three executive officers, six non-employee directors and approximately 220 other employees (including employees of our controlled 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. As of December 31, 2016, 2,186,028 shares remain available for future grant of awards under the 2014 Equity Plan.

Share-Based Award Activity

During the year ended December 31, 2016, the Company granted restricted stock awards (“RSAs”) under the 2014 Equity Plan to Named Executive Officers (“NEOs”) and non-employee Board of Directors (“BODs”). The RSAs granted to the NEOs were 100% vested and non-forfeitable on the grant date. The Company's non-employee BODs elected to defer up to 100% of their annual retainer fee, chairman fees and meeting fees in the form of common stock. The RSAs granted to the non-employee BODs will become fully vested on the earlier of (i) the first anniversary of the date of grant of the shares of restricted common stock or (ii) the date of the Company's 2017 Annual Meeting of Stockholders. The fair value of the RSAs granted to the NEOs and non-employee BODs were recorded as share-based compensation expense on the grant date and over the vesting period, respectively.

A summary of share-based awards activity during the year ended December 31, 2016 is as follows:



	Number of Shares (in thousands)		Weighted Average Grant Date Fair Value per Share
Nonvested, December 31, 2015	23		$	8.73
Granted	123		$	7.60
Vested	(108	)	$	7.87
Forfeited	—		$	—
Nonvested, December 31, 2016	38		$	7.51

Stock Options

Stock options granted to date, were not granted under the 2014 Equity Plan. The stock options outstanding as of December 31, 2016, generally vest and become exercisable in five substantially equal installments on each of the first five anniversaries of the grant date, and expire 10 years after the date on which they were granted. Compensation expense related to these options is expensed on a straight line basis over the five year service period. All of the stock options outstanding as of December 31, 2016 are vested or expected to vest. There were no stock options issued during the years ended December 31, 2016 and December 31, 2015.

A summary of stock option activity during the year ended December 31, 2016 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, December 31, 2015	500	$	7.49
Granted	—	—
Exercised	—	—
Forfeited	—	—
Options outstanding, December 31, 2016	500	$	7.49	7.73	$	—
Options exercisable, December 31, 2016	200	$	7.49	7.73	$	—

A summary of our unvested stock options during the year ended December 31, 2016 is as follows (shares in thousands):



	Number of Shares (in thousands)		Weighted Average Per Share Grant Date Fair Value
Unvested, December 31, 2015	400		$	2.88
Granted	—		$	—
Vested	(100	)	$	2.88
Forfeited	—		$	—
Unvested, December 31, 2016	300		$	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	%	—	%	$	—

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.

Share-Based Compensation Expense

Share-based compensation expense was approximately $1.3 million, $0.5 million and $0.1 million for the years ended December 31, 2016, 2015 and 2014 respectively. As of December 31, 2016, the estimated total remaining unamortized share-based compensation expense related to unvested restricted stock awards, net of forfeitures, was $0.1 million which is expected to be recognized over a weighted-average period of 0.4 years. As of December 31, 2016, the estimated total remaining unamortized share-based compensation expense related to stock options, net of forfeitures, was $0.8 million which is expected to be recognized over a weighted-average period of 2.8 years.