STOCK-BASED COMPENSATION

The Company grants stock-based compensation awards to certain senior management, employees and directors including non-qualified stock options, restricted stock units ("RSUs"), performance restricted stock units ("PRSUs") and performance share units ("PSUs").

The Company's stockholders approved the 2018 Long-Term Incentive Plan (the "2018 Plan") at the 2018 Annual Meeting of Stockholders held on May 2, 2018. Upon approval of the 2018 Plan, the 2012 Amended and Restated Long-Term Incentive Plan, as amended (the "2012 Plan") was terminated, no future awards were permitted to be granted under the 2012 Plan, and any shares available for future issuance under the 2012 Plan were canceled. Under the 2018 Plan, 6 million shares were authorized for issuance plus any shares that expire or are forfeited under the 2012 Plan after March 1, 2018. As of December 31, 2018, there are approximately 5 million shares available for future grants.

Each of the 2012 and 2018 Plan includes a retirement provision for equity grants which provide for continued vesting of awards once an employee has attained the age of 65 years, or 55 years of age or older plus at least ten years of tenure with the Company, provided they have been employed or provided services to the Company for one year following the date of grant or start of the performance period.

A summary of activity for the year ended December 31, 2018 is presented below (number of shares in millions):



	Restricted Stock Units			Weighted Average Grant Date Fair Value		Performance Share Units (a)			Weighted Average Grant Date Fair Value		Options (e)			Weighted Average Exercise Price
Outstanding at January 1, 2018	2.0			$	31.71	1.8			$	33.16	3.6			$	31.75
Granted	1.5			25.39		0.5			25.11		0.4			25.35
Distributed/Exercised	(0.9	)	(b)	33.67		(0.4	)	(c)	42.14		—			—
Forfeited/Expired	(0.1	)		27.80		(0.1	)		27.99		(0.2	)		38.28
Outstanding at December 31, 2018	2.5			$	27.32	1.8			$	28.13	3.8		(d)	$	30.92

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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 RSUs which were distributed during the year ended December 31, 2018 was $30 million.

(c)

The total fair value of PSUs which were distributed during the year ended December 31, 2018 was $15 million, which includes the distribution of PSUs awarded in 2015 subject to performance over the three-year performance period ended December 31, 2017, at a fair value of $9 million. Amounts distributed do not include 0.2 million PSUs awarded in 2016 subject to achievement against performance over the three-year period ended and vested December 31, 2018, at a fair value of $5 million and at a weighted average grant date fair value of $34.00. These PSUs were distributed in early 2019.


(d)	Options outstanding at December 31, 2018 have an intrinsic value of zero and have a weighted average remaining contractual life of 5.3 years.

(e)The following table summarizes information regarding exercisable stock options as of December 31, 2018:



Range of Exercise Prices	Options Vested	Weighted Average Exercise Price		Aggregate Intrinsic Value		Weighted Average Remaining Contractual Life
$15.00 to $50.00	2.6	$	28.82	$	—	4.1 years
$50.01 and above	0.1	$	137.50	$	—	1.9 years

Awards granted annually include a mix of RSUs (PRSUs for the CEO and direct reports in 2017 and 2016), options and PSUs.

The RSUs and PRSUs vest over three years, with 33.33% vesting on each anniversary of the grant date. The fair value of RSUs and PRSUs are equal to the closing sale price of the Company's common stock on the date of grant. Time-vesting of the PRSUs granted to the CEO and direct reports in 2017 and 2016 was subject to achievement of a minimum EBITDA performance goal during the year that the award was granted.

The PSUs are incentives that reward grantees based upon the Company's financial performance over a three-year performance period which begins January 1st of the grant year and ends on December 31st of the third year following the grant year. 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 each PSU award 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 during the first quarter after the end of the performance period. The fair value of 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 PSU RTSR awards was estimated on the date of grant using the Monte Carlo Simulation method utilizing the following assumptions:



	2018 RTSR PSU			2017 RTSR PSU			2016 RTSR PSU
Weighted average grant date fair value	$	25.45		$	27.98		$	27.99
Weighted average expected volatility (a)	29.8		%	29.0		%	28.1		%
Weighted average volatility of XHB	17.9		%	18.4		%	19.4		%
Weighted average correlation coefficient	0.44			0.53			0.58
Weighted average risk-free interest rate	2.6		%	1.5		%	0.9		%
Weighted average dividend yield	—			—			—

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(a)	Expected volatility is based on historical volatilities of the Company and select comparable companies.

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 fair value of the options was estimated on the date of grant using the Black-Scholes option-pricing model utilizing the following assumptions:



	2018 Options			2017 Options			2016 Options
Weighted average grant date fair value	$	7.12		$	8.61		$	10.81
Weighted average expected volatility (a)	28.5		%	30.7		%	31.7		%
Weighted average expected term (years) (b)	6.25			6.25			6.25
Weighted average risk-free interest rate (c)	2.7		%	2.0		%	1.3		%
Weighted average dividend yield	1.4		%	1.2		%	0.1		%

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(a)	Expected volatility was based on historical volatilities of the Company and select comparable companies.


(b)	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.


(c)	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.

Stock-Based Compensation Expense

As of December 31, 2018, based on current performance achievement expectations, there was $42 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 1.9 years. The Company recorded stock-based compensation expense related to the incentive equity awards of $40 million, $52 million and $57 million for the years ended December 31, 2018, 2017 and 2016, respectively.