Stock-Based Compensation

Under the Westlake Chemical Corporation 2013 Omnibus Incentive Plan (as amended and restated in 2017, the "2013 Plan"), all employees and non-employee directors of the Company, as well as certain individuals who have agreed to become the Company's employees, are eligible for awards. Shares of common stock may be issued as authorized in the 2013 Plan. At the discretion of the administrator of the 2013 Plan, employees and non-employee directors may be granted awards in the form of stock options, stock appreciation rights, stock awards, restricted stock units or cash awards (any of which may be a performance award). Outstanding stock option awards have a 10-year term and vest (1) ratably on an annual basis over a three-year period or (2) at the end of a five-year period. Outstanding restricted stock units vest either (1) ratably on an annual basis over a two to five-year period or (2) at the end of a six-year period. In accordance with accounting guidance related to share-based payments, stock-based compensation expense for all stock-based compensation awards is based on estimated grant-date fair value. The Company recognizes these stock-based compensation costs net of a forfeiture rate and on a straight-line basis over the requisite service period of the award for only those shares expected to vest. For the years ended December 31, 2018, 2017 and 2016, the total recognized stock-based compensation expense related to equity awards issued under the 2013 Plan was $18, $14 and $14, respectively.

Option activity and changes during the year ended December 31, 2018 were as follows:



	Options		Weighted Average Exercise Price		Weighted Average Remaining Term (Years)	Aggregate Intrinsic Value
Outstanding at December 31, 2017	1,269,601		$	41.04
Granted	173,195		107.75
Exercised	(323,182	)	28.81
Cancelled	(3,660	)	77.16
Outstanding at December 31, 2018	1,115,954		$	54.82	6.1	$	20
Exercisable at December 31, 2018	628,926		$	39.05	4.5	$	17

For options outstanding at December 31, 2018, the options had the following range of exercise prices:



Range of Prices	Options Outstanding	Weighted Average Remaining Contractual Life (Years)
$7.12 - $30.05	272,632	1.9
$40.38 - $44.42	223,589	7.1
$45.70 - $61.87	300,549	7.5
$63.98 - $68.09	112,386	5.7
$68.18 - $107.75	206,798	8.6

The aggregate intrinsic value in the table above represents the total pretax intrinsic value (the difference between the Company's closing stock price on the last trading day of the year and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on December 31, 2018. This amount changes based on the fair market value of the Company's common stock. For the years ended December 31, 2018, 2017 and 2016, the total intrinsic value of options exercised was $21, $24 and $4, respectively.

As of December 31, 2018, $5 of total unrecognized compensation cost related to stock options is expected to be recognized over a weighted-average period of 1.7 years. Income tax benefits of $4, $8 and $1 were realized from the exercise of stock options during the years ended December 31, 2018, 2017 and 2016, respectively.

The Company used the Black-Scholes option pricing model to value its options. The table below presents the weighted average value and assumptions used in determining each option's fair value. Volatility was calculated using historical trends of the Company's common stock price.



	Stock Option Grants
	Year Ended December 31,
	2018			2017			2016
Weighted average fair value	$	28.94		$	15.84		$	11.67
Risk-free interest rate	2.7		%	2.1		%	1.4		%
Expected life in years	5			5			5
Expected volatility	27.6		%	29.2		%	32.9		%
Expected dividend yield	0.7		%	1.2		%	1.6		%

The Company had no non-vested restricted stock awards as of December 31, 2018 and 2017. As of December 31, 2018, there was no unrecognized stock-based compensation expense related to non-vested restricted stock awards. The total fair value of restricted stock awards that vested during the years ended December 31, 2018, 2017 and 2016 was $0, $0 and $4, respectively.

Non-vested restricted stock units as of December 31, 2018 and changes during the year ended December 31, 2018 were as follows:



	Number of Units		Weighted Average Grant Date Fair Value
Non-vested at December 31, 2017	663,866		$	56.86
Granted	146,811		106.58
Vested	(95,449	)	65.32
Forfeited	(12,439	)	74.46
Non-vested at December 31, 2018	702,789		$	65.79

As of December 31, 2018, there was $17 of unrecognized stock-based compensation expense related to non-vested restricted stock units. This cost is expected to be recognized over a weighted-average period of 1.5 years. The total fair value of restricted stock units that vested during the years ended December 31, 2018, 2017 and 2016 was $10, $6 and $4, respectively.

Axiall Awards Assumed in the Axiall Merger

In the Axiall Merger, all outstanding Axiall restricted stock units were assumed by the Company and converted into restricted stock units in respect of the Company's common stock, with the same terms and conditions except that upon settlement the award holders will receive the greater of (1) the value of $33.00 per Axiall restricted stock unit that was converted into a restricted stock unit in respect of the Company's common stock and (2) the value of the Company's common stock. The awards are classified as liability awards for accounting purposes and are re-measured at each reporting date until they vest. The portion of the replacement award that is attributable to pre-combination service by the employee was included in the measure of consideration transferred to acquire Axiall. The remaining fair value of the replacement awards will be recognized as stock-based compensation expense over the remaining vesting period. Total stock-based compensation expense recognized related to Axiall restricted stock units that were assumed by the Company and converted into restricted stock units during the years ended December 31, 2018, 2017, and 2016 was $4, $9 and $38, respectively, of which $33 was included in transaction and integration-related costs in the consolidated statement of operations during the year ended December 31, 2016.

The Company estimates the fair value of these awards using the Company's common stock price and a pricing model to estimate the value attributable to the $33.00 minimum price per Axiall restricted stock unit converted into a restricted stock unit in respect of the Company's common stock. The table below presents the assumptions used in determining each liability classified restricted stock unit's fair value. Volatility was calculated using historical trends of the Company's common stock price.



	Liability Classified Restricted Stock Awards
	Year Ended December 31, 2018
Weighted average vesting period in years	0.3
Risk-free interest rate	2.5	%
Expected volatility	32.9	%
Expected dividend yield	1.5	%

Non-vested liability classified restricted stock awards as of December 31, 2018 and changes during the year ended December 31, 2018 were as follows:



	Number of Units		Weighted Average Fair Value
Non-vested at December 31, 2017	100,992		$	106.53
Vested	(48,845	)	116.99
Cancelled	(2,619	)	99.50
Non-vested at December 31, 2018	49,528		$	66.46

As of December 31, 2018, there was $1 of unrecognized stock-based compensation expense related to non-vested liability classified restricted stock awards. The total fair value of liability classified restricted stock awards that vested during the years ended December 31, 2018, 2017 and 2016 was $6, $11 and $3, respectively. The total fair value of liability classified restricted stock awards cancelled during the year ended December 31, 2018 was $0.

Westlake Chemical Partners LP Awards

The Company's wholly-owned subsidiary and the general partner of Westlake Partners, Westlake Chemical Partners GP LLC ("WLKP GP"), maintains a unit-based compensation plan for directors and employees of WLKP GP and Westlake Partners.

The Westlake Partners 2014 Long-term Incentive Plan ("Westlake Partners 2014 Plan") permits various types of equity awards including but not limited to grants of phantom units and restricted units. Awards granted under the Westlake Partners 2014 Plan may be settled with Westlake Partners units or in cash or a combination thereof. Compensation expense for these awards was not material to the Company's consolidated financial statements for the years ended December 31, 2018, 2017 and 2016.