15.	Stock-Based Compensation Plans and Employee Benefits

Stock-Based Compensation

The Company’s equity-based award plans provide for grants to Company employees and directors of incentive and non-qualified options to purchase common shares, rights to receive the appreciation in value of common shares, awards of common shares subject to restrictions on transfer, awards of common shares issuable in the future upon satisfaction of certain conditions and rights to purchase common shares and other awards based on common shares. Under the terms of the plans, awards available for grant were 5.8 million common shares at December 31, 2016.

Stock Options

Stock options may be granted at per-share prices not less than fair market value at the date of grant and must be exercised within the maximum contractual term of 10 years thereof. Options granted under the plans generally vest over three years in one-third increments, beginning one year after the date of grant.

The fair values for option awards granted were estimated at the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions:

For the Year Ended December 31,

2016

2015

2014

Weighted-average fair value of grants

1.61

2.35

2.43

Risk-free interest rate (range) – Based upon the U.S. Treasury Strip

with a maturity date that approximates the expected term of the award

1.1%–1.5%

1.4%–1.6%

1.2%–1.4%

Dividend yield (range) – Forecasted dividend yield based on the

expected life

4.5%–5.2%

4.1%–4.3%

4.5%–4.6%

Expected life (range) – Derived by referring to actual exercise experience

4–5 years

Expected volatility (range) – Derived by using a 50/50 blend of implied

and historical changes in the Company's historical stock prices over a

time frame consistent with the expected life of the award

20.6%–22.5%

21.5%–23.4%

24.7%–28.5%

The following table reflects the stock option activity described above:

				Weighted-		Weighted- Average		Aggregate
	Number of Options (Thousands)			Average Exercise Price		Remaining Contractual Term (Years)		Intrinsic Value (Thousands)
Balance December 31, 2013		2,661		$	24.77
Granted		774			16.61
Exercised		(154	)		10.02
Forfeited		(320	)		33.40
Balance December 31, 2014		2,961			22.48
Granted		557			19.26
Exercised		(234	)		12.85
Forfeited		(472	)		36.51
Balance December 31, 2015		2,812			20.29
Granted		633			16.74
Exercised		(855	)		11.62
Forfeited		(784	)		29.46
Balance December 31, 2016		1,806		$	19.16		6.1	$	1,608

Options exercisable at December 31,
2016		1,038		$	20.49		4.5	$	1,608
2015		1,760			21.69		4.2		6,764
2014		1,922			25.75		4.0		9,077

The following table summarizes the characteristics of the options outstanding at December 31, 2016:

	Options Outstanding						Options Exercisable
Range of Exercise Prices	Outstanding at 12/31/16 (Thousands)		Weighted-Average Remaining Contractual Life (Years)		Weighted-Average Exercise Price		Exercisable at 12/31/16 (Thousands)		Weighted-Average Exercise Price
$0.00–$12.00		175		2.4	$	7.49		175	$	7.49
$12.01–$16.00		177		4.7		13.88		177		13.88
$16.01–$21.00		1,261		7.6		17.36		493		17.35
$21.01–$66.75		193		0.8		46.38		193		46.38
		1,806		6.1	$	19.16		1,038	$	20.49

The following table reflects the activity for unvested stock option awards for the year ended December 31, 2016:

	Options (Thousands)			Weighted-Average Grant Date Fair Value
Unvested at December 31, 2015		1,052		$	2.64
Granted		633			1.61
Vested		(460	)		2.93
Forfeited		(457	)		2.06
Unvested at December 31, 2016		768		$	1.97

As of December 31, 2016, total unrecognized stock option compensation cost granted under the plans was $0.8 million, which is expected to be recognized over a weighted-average 1.6-year term.

The following table summarizes the activity of employee stock option exercises that are primarily settled with newly issued common shares or with treasury shares, if available (in millions):

	For the Year Ended December 31,
	2016		2015		2014
Cash received for exercise price	$	9.9	$	2.5	$	1.5
Intrinsic value		6.0		1.2		1.1

Restricted Share Awards and Units

The Board of Directors approved grants to executives of the Company of restricted common share units (“RSUs”) of 0.5 million in 2016 and restricted common share awards (“RSAs”) of 0.2 million and 0.3 million in 2015 and 2014, respectively. The restricted stock grants generally vest in equal annual amounts over a four-year period. RSUs have the same cash dividends as other common stock. RSAs have the same cash dividend and voting rights as other common stock and are considered to be currently issued and outstanding. These grants have a weighted-average fair value at the date of grant ranging from $12.17 to $19.26, which was equal to the market value of the Company’s common shares at the date of grant. As a component of compensation to the Company’s non-employee directors, the Company issued 0.1 million common shares to the non-employee directors in each of the three years ended December 31, 2016. These grants were issued equal to the market value of the Company’s common shares at the date of grant and immediately vested upon grant.

In 2013, the Company’s Board of Directors approved and adopted the Value Sharing Equity Program (the “2013 VSEP”) and the grant of awards to certain of the Company’s executives. The final measurement date for the 2013 VSEP was December 31, 2015. These award grants are reflected as restricted stock and vest in equal annual amounts through December 31, 2018.

2016 Value Sharing Equity Program

In 2016, the Company adopted the 2016 Value Sharing Equity Program (the “2016 VSEP”), and performance awards under the VSEP were granted to certain officers. Awards under the 2016 VSEP, if earned, may result in the granting of common shares of the Company and time-vested RSUs to participants on future measurement dates based on a performance period beginning on February 9, 2016 and ending on December 31, 2018 (the “Performance Period”). As a result, in general, the total compensation available to participants under the 2016 VSEP, if any, will be fully earned only after approximately seven years (the Performance Period and the final four-year, time-based vesting period for RSUs).

The 2016 VSEP was designed to allow the Company to reward participants for contributing to its financial performance and to allow such participants to share in “Value Created” (as defined below), based upon increases in DDR’s adjusted market capitalization over an initial market capitalization, using a starting share price of $17.41 per share (the “Starting Share Price”), over pre-established periods. Participants are granted performance-based awards which, if earned, are settled 20% in DDR common shares and 80% in RSUs that are generally subject to time-based vesting requirements for a period of four years.

Pursuant to the award terms, on five specified measurement dates (occurring on February 23, 2017, June 30, 2017, December 31, 2017, June 30, 2018 and December 31, 2018), DDR will measure the “Value Created” during the period between the start of the 2016 VSEP and the applicable measurement date. Value Created is measured for each period for the performance awards as the increase in DDR’s market capitalization on the applicable measurement date (i.e., the product of DDR’s five-day trailing average share price as of each measurement date (price-only appreciation, not total shareholder return) and the number of shares outstanding as of the measurement date), as adjusted for equity issuances and/or equity repurchases, over DDR’s initial market capitalization at the start of the 2016 VSEP utilizing the Starting Share Price. The ending share price used for purposes of determining Value Created for the performance awards during any measurement period is capped at $25.35 (“Maximum Ending Share Price”). Because DDR’s initial market capitalization is based on the Starting Share Price, there are no performance awards earned until DDR’s share price exceeds $17.41.

Each participant has been assigned a “percentage share” of the Value Created for the performance awards, and the aggregate percentage share for all participants for the performance awards is 1.4909%. In addition, each participant’s aggregate total share of Value Created for the performance awards is capped at an individual maximum dollar limit. After the first measurement date, each participant may earn “performance award shares” (settled as discussed below) with an aggregate value equal to two-sixths of the participant’s percentage share of the Value Created for this award. After each of the next three measurement dates, each participant may earn performance award shares with an aggregate value equal to three-sixths, then four-sixths and then five-sixths of the participant’s percentage share of the Value Created for this award. After the final measurement date (or, if earlier, upon a change in control, as defined in the 2016 VSEP), each participant may earn performance award shares with an aggregate value equal to the participant’s full percentage share of the Value Created. In addition, for each measurement date, the number of performance award shares earned by a participant will be reduced by the number of performance award shares previously earned by the participant for prior measurement periods.

Unless otherwise determined by DDR, the DDR common shares subject to awards earned under the performance awards will generally be subject to additional service-based restrictions that are expected to lapse in 20% annual increments on (or within 60 days after) the applicable measurement date and on each of the first four anniversaries of the applicable measurement date. After vesting, RSUs will be paid in the form of one common share for each such vested RSU. The fair value of the 2016 VSEP grants was estimated on the date of grant using a Monte Carlo approach model based on the following assumptions:

	Range
Risk-free interest rate		0.8%
Weighted-average dividend yield		5.0%
Expected life	3 years
Expected volatility	17%–19%

Summary of Unvested Share Awards

The following table reflects the activity for the unvested awards pursuant to all restricted stock grants and grants pursuant to the 2013 VSEP plans for the year ended December 31, 2016:

	Awards (Thousands)			Weighted-Average Grant Date Fair Value
Unvested at December 31, 2015		742		$	17.03
Granted		462			16.31
Vested		(459	)		16.35
Forfeited		(286	)		17.40
Unvested at December 31, 2016		459		$	16.74

As of December 31, 2016, total unrecognized compensation for the restricted awards granted under the plans as summarized above was $10.9 million, which is expected to be recognized over a weighted-average 2.5-year term, which includes the performance-based and time-based vesting periods.

Deferred Compensation Plans

The Company maintains a 401(k) defined contribution plan covering substantially all of the officers and employees of the Company in accordance with the provisions of the Code. Also, for certain officers, the Company maintains the Elective Deferred Compensation Plan and DDR Corp. Equity Deferred Compensation Plan, both non-qualified plans, which permit the deferral of base salaries, commissions and annual performance-based cash bonuses or receipt of restricted shares. In addition, directors of the Company are permitted to defer all or a portion of their fees pursuant to the Directors’ Deferred Compensation Plan, a non-qualified plan. All of these plans were fully funded at December 31, 2016.