
	STOCK-BASED COMPENSATION

The Company has stock-based compensation plans under which incentive equity awards such as non-qualified stock options, rights to purchase shares of common stock, restricted stock, restricted stock units ("RSUs"), performance restricted stock units and performance share units ("PSUs") may be issued to employees, consultants and directors of Realogy.

Consistent with the 2015 long-term incentive equity awards, the 2016 awards include a mix of PSUs, RSUs (performance restricted stock units for the CEO and direct reports) and options.

The 2016 PSUs are incentives that reward grantees based upon the Company's financial performance over a three-year performance period ending December 31, 2018. There are two PSU awards: one is based upon the total stockholder return of Realogy's common stock relative to the total stockholder return of the SPDR S&P Homebuilders Index ("XHB") (the "RTSR award"), and the other is based upon the achievement of cumulative free cash flow goals. The number of shares that may be issued under the PSU is variable and based upon the extent to which the performance goals are achieved over the performance period (with a range of payout from 0% to 175% of target for the RTSR award and 0% to 200% of target for the achievement of cumulative free cash flow award). The shares earned will be distributed in early 2019.

The RSUs vest over three years, with 33.33% vesting on each anniversary of the grant date. Time-vesting of the 2016 performance RSUs for the CEO and direct reports is subject to achievement of a minimum EBITDA performance goal for 2016.

The stock options have a maximum term of ten years and vest over four years, with 25% vesting on each anniversary date of the grant date. The options have an exercise price equal to the closing sale price of the Company's common stock on the date of grant.

The options, RSUs and the PSUs based upon RTSR included in the 2016 long-term incentive plan were granted in February 2016. The performance RSUs and the PSUs based upon achievement of cumulative free cash flow aggregating 0.4 million shares subject to those awards at target were also awarded in February 2016, but the grant was subject to approval of the Amended and Restated Long-Term Incentive Plan at the 2016 Annual Meeting of Stockholders held on May 4, 2016 (the "Amended and Restated 2012 LTIP"). The stockholders approved the Amended and Restated 2012 LTIP at the May 4, 2016 Annual Meeting and we will accordingly treat May 4, 2016 as the grant date for these awards and expense those awards from that date over the balance of the vesting or performance period.

The fair value of RSUs and PSUs without a market condition is equal to the closing sale price of the Company's common stock on the date of grant. The fair value of the RTSR PSU award was estimated on the date of grant using the Monte Carlo Simulation method utilizing the following assumptions. Expected volatility was based on historical volatilities of the Company and select comparable companies.



	2016 RTSR PSU
Grant date fair value	$	28.15
Expected volatility	28.1		%
Volatility of XHB	19.4		%
Correlation coefficient	0.58
Risk-free interest rate	0.9		%
Dividend yield	—

A summary of RSU activity for the three months ended March 31, 2016 is presented below (number of shares in millions):



	Restricted Stock Units		Weighted Average Grant Date Fair Value
Unvested at January 1, 2016	1.02		$	46.36
Granted	0.77		32.65
Vested (a)	(0.33	)	46.84
Forfeited	—		—
Unvested at March 31, 2016	1.46		$	39.04

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(a)	The total fair value of RSUs which vested during the three months ended March 31, 2016 was $15 million.

A summary of PSU activity for the three months ended March 31, 2016 is presented below (number of shares in millions):



	Performance Share Units (a)		Weighted Average Grant Date Fair Value
Unvested at January 1, 2016	0.86		$	44.97
Granted	0.21		28.15
Vested (b)	(0.03	)	46.47
Forfeited	—		—
Unvested at March 31, 2016	1.04		$	41.51

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(a)	The PSU amounts in the table are shown at the target amount of the award.


(b)	The total fair value of PSUs which vested during the three months ended March 31, 2016 was $1 million.

The fair value of the options was estimated on the date of grant using the Black-Scholes option-pricing model. Expected volatility was based on historical volatilities of the Company and select comparable companies. The expected term of the options granted represents the period of time that options are expected to be outstanding and is based on the simplified method. The risk-free interest rate was based on the U.S. Treasury yield curve in effect at the time of the grant, which corresponds to the expected term of the options.



	2016 Options
Grant date fair value	$	10.97
Expected volatility	31.7		%
Expected term (years)	6.25
Risk-free interest rate	1.3		%
Dividend yield	—

A summary of stock option unit activity for the three months ended March 31, 2016 is presented below (number of shares in millions):



	Options		Weighted Average Exercise Price
Outstanding at January 1, 2016	3.15		$	31.42
Granted	0.30		32.63
Exercised	(0.01	)	20.77
Forfeited/Expired	(0.01	)	32.28
Outstanding at March 31, 2016 (a)	3.43		$	31.55

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(a)	Options outstanding at March 31, 2016 have an intrinsic value of $31 million and have a weighted average remaining contractual life of 6.7 years.

Stock-Based Compensation Expense

As of March 31, 2016, based on current performance achievement expectations, there was $59 million of unrecognized compensation cost related to incentive equity awards under the plans which will be recorded in future periods as compensation expense over a remaining weighted average period of approximately 1.3 years. The Company recorded stock-based compensation expense related to the incentive equity awards of $12 million and $11 million for the three months ended March 31, 2016 and 2015, respectively.