STOCK COMPENSATION

Stock Plans

2016 Stock Plan

On April 21, 2016, the Company’s stockholders approved the Owens Corning 2016 Stock Plan (the “2016 Stock Plan”) which authorizes grants of stock options, stock appreciation rights, restricted stock awards, restricted stock units, bonus stock awards and performance stock awards. At June 30, 2018, the number of shares remaining available under the 2016 Stock Plan for all stock awards was 2.5 million.

Stock Options

The Company did not grant any stock options during the six months ended June 30, 2018. The Company calculates a weighted-average grant-date fair value using a Black-Scholes valuation model for options granted. Compensation expense for options is measured based on the fair market value of the option on the date of grant, and is recognized on a straight-line basis over a four-year vesting period. In general, the exercise price of each option awarded was equal to the market price of the Company’s common stock on the date of grant, and an option’s maximum term is 10 years.

During the six months ended June 30, 2018, the Company recognized expense of less than $1 million related to the Company's stock options. The Company did not recognize any stock option expense during the three months ended June 30, 2018. During both the three and six months ended June 30, 2017, the Company recognized expense of less than $1 million and $1 million, respectively, related to the Company's stock options. As of June 30, 2018, there was no unrecognized compensation cost related to stock options. The total aggregate intrinsic value of options outstanding as of June 30, 2018 was $13 million.

The following table summarizes the Company’s stock option activity:



	Six Months Ended June 30, 2018
	Number of Options		Weighted- Average Exercise Price
Beginning Balance	518,725		$	37.17
Exercised	(33,750	)	36.91
Forfeited	(750	)	37.65
Ending Balance	484,225		$	37.19

The following table summarizes information about the Company’s options outstanding and exercisable:



	Options Outstanding				Options Exercisable
	Options Outstanding	Weighted-Average			Number Exercisable at June 30, 2018	Weighted-Average
Range of Exercise Prices	Options Outstanding	Remaining Contractual Life	Exercise Price		Number Exercisable at June 30, 2018	Remaining Contractual Life	Exercise Price
$13.89 - $42.16	484,225	4.51	$	37.19	484,225	4.51	$	37.19

Restricted Stock Awards and Restricted Stock Units

The Company has granted restricted stock awards and restricted stock units (collectively referred to as “restricted stock”) as a part of its long-term incentive plan. Compensation expense for restricted stock is measured based on the market price of the stock at date of grant and is recognized on a straight-line basis over the vesting period, which is typically three or four years. The Stock Plan allows alternate vesting schedules for death, disability, and retirement.

During the three and six months ended June 30, 2018, the Company recognized expense of $5 million and $11 million, respectively, related to the Company's restricted stock. During the three and six months ended June 30, 2017, the Company recognized expense of $5 million and $10 million, respectively, related to the Company's restricted stock. As of June 30, 2018, there was $43 million of total unrecognized compensation cost related to restricted stock. That cost is expected to be recognized over a weighted-average period of 2.77 years. The total fair value of shares vested during the six months ended June 30, 2018 and 2017 was $22 million and $18 million, respectively.

The following table summarizes the Company’s restricted stock activity:



	Six Months Ended June 30, 2018
	Number of Shares/Units		Weighted-Average Grant-Date Fair Value
Beginning Balance	1,752,136		$	42.40
Granted	278,785		91.49
Vested	(515,280	)	41.81
Forfeited	(57,088	)	48.32
Ending Balance	1,458,553		$	51.59

Performance Stock Awards and Performance Stock Units

The Company has granted performance stock awards and performance stock units (collectively referred to as “PSUs”) as a part of its long-term incentive plan. All outstanding performance grants will fully settle in stock. The amount of stock ultimately distributed from all performance shares is contingent on meeting internal company-based metrics or an external-based stock performance metric.

In the six months ended June 30, 2018, the Company granted both internal company-based and external-based metric PSUs.

Internal based metrics

The internal company-based metrics are based on various Company metrics and typically vest over a three-year period. The amount of stock distributed will vary from 0% to 300% of PSUs awarded depending on each award's design and performance versus the internal Company-based metrics.

The initial fair value for all internal Company-based metric PSUs assumes that the performance goals will be achieved and is based on the grant date stock price. This assumption is monitored quarterly and if it becomes probable that such goals will not be achieved or will be exceeded, compensation expense recognized will be adjusted and previous surplus compensation expense recognized will be reversed or additional expense will be recognized. The expected term represents the period from the grant date to the end of the vesting period. Pro-rata vesting may be utilized in the case of death, disability or approved retirement and awards if earned will be paid at the end of the vesting period.

External-based metrics

The external-based metrics vest after a three-year period. Outstanding grants are based on the Company's total stockholder return relative to the performance of the companies constituting the former S&P Building & Construction Industry Index or Dow Jones Construction and Materials Index. The amount of stock distributed will vary from 0% to 200% of PSUs awarded depending on the relative stockholder return performance.

The Company estimated the fair value of the external-based metric performance stock grants using a Monte Carlo simulation. The external-based metric performance stock granted in 2018 uses various assumptions that include expected volatility of 24.6%, and a risk free interest rate of 2.2%, both of which were based on an expected term of 2.92 years. Expected volatility was based on a benchmark study of our peers. The risk-free interest rate was based on zero coupon U.S. Treasury bills at the time of grant. The expected term represents the period from the grant date to the end of the three-year performance period. Compensation expense for external-based metric PSUs is measured based on the grant date fair value and is recognized on a straight-line basis over the vesting period. Pro-rata vesting may be utilized in the case of death, disability or approved retirement, and awards if earned will be paid at the end of the three-year period.

During the three and six months ended June 30, 2018, the Company recognized expense of $6 million and $9 million, respectively, related to the Company's PSUs. During the three and six months ended June 30, 2017, the Company recognized expense of $3 million and $8 million, respectively, related to the Company's PSUs. As of June 30, 2018, there was $23 million of total unrecognized compensation cost related to PSUs. That cost is expected to be recognized over a weighted-average period of 1.79 years.

The following table summarizes the Company’s PSU activity:



	Six Months Ended June 30, 2018
	Number of PSUs		Weighted-Average Grant-Date Fair Value
Beginning Balance	451,148		$	53.96
Granted	171,725		94.14
Forfeited	(48,396	)	54.30
Ending Balance	574,477		$	69.55

Employee Stock Purchase Plan

On April 18, 2013, the Company’s stockholders approved the Owens Corning Employee Stock Purchase Plan (ESPP). The ESPP is a tax-qualified plan under Section 423 of the Internal Revenue Code. The purchase price of shares purchased under the ESPP is equal to 85% of the lower of the fair market value of shares of Owens Corning common stock at the beginning or ending of the offering period, which is a six-month period ending on May 31 and November 30 of each year. At the approval date, 2.0 million shares were available for purchase under the ESPP. As of June 30, 2018, 0.8 million shares remain available for purchase.

During the three and six months ended June 30, 2018, the Company recognized expense of $1 million and $2 million, respectively, related to the Company's ESPP. During the three and six months ended June 30, 2017, the Company recognized expense of $1 million and $2 million, respectively, related to the Company's ESPP. As of June 30, 2018, there was $1.6 million of total unrecognized compensation cost related to the ESPP.