Stock-based Compensation

Total stock-based compensation cost included in the Interim Consolidated Statements of Operations was $6 and $16 for the three and nine months ended September 30, 2016, respectively, and $8 and $13 for the three and nine months ended September 30, 2015, respectively. The income tax benefits related to stock-based compensation arrangements were $2 and $6 for the three and nine months ended September 30, 2016, respectively, and $3 and $5 for the three and nine months ended September 30, 2015, respectively.

Stock-based compensation expense in prior years and until separation on July 1, 2015 was allocated to Chemours based on the portion of DuPont’s incentive stock program in which Chemours employees participated. Adopted at separation, the Chemours Equity and Incentive Plan grants certain employees, independent contractors, or non-employee directors of the Company different forms of awards, including stock options, performance share units (PSUs) and restricted stock units (RSUs). The Equity and Incentive Plan has a maximum shares reserve of 13,500,000 for the grant of equity awards plus the number of shares of DuPont equity awards that converted into new Chemours equity awards. The Chemours Compensation Committee determines the long-term incentive mix, including stock options, PSUs and RSUs, and may authorize new grants annually. As of September 30, 2016, 8,537,692 shares of the Equity and Incentive Plan reserve are still available for grants. Subject to vesting conditions of the award, a retirement eligible employee retains any granted awards upon retirement provided the employee has rendered at least six months of service following the grant date.

Stock Options

During 2016, Chemours granted non-qualified options to certain of its employees, which will serially vest over a three-year period and expire 10 years from the date of grant. The expense related to stock options granted in the nine months ended September 30, 2016 was based on the weighted-average assumptions shown in the table below:



Weighted-Average Assumptions	2016 Grants
Risk-free interest rate	1.46		%
Expected term (years)	6.00
Volatility	80.90		%
Dividend yield	2.14		%
Fair value per stock option	$	3.41

The Company determined the dividend yield by dividing the expected annual dividend on the Company's stock by the option exercise price. A historical daily measurement of volatility is determined based on the average volatility of peer companies adjusted for the Company’s debt leverage. The risk-free interest rate is determined by reference to the yield on an outstanding U.S. Treasury note with a term equal to the expected life of the option granted. Expected life is determined using a simplified approach, calculated as the midpoint between the vesting period and the contractual life of the award.

The following table summarizes Chemours stock option activity for the nine months ended September 30, 2016.



	Number of Shares (in thousands)		Weighted Average Exercise Price (per share)		Weighted Average Remaining Contractual Term (years)	Aggregate Intrinsic Value (in thousands)
Outstanding, December 31, 2015	8,284		$	14.66	4.82	$	—
Granted	1,435		5.73
Exercised	(165	)	8.38
Forfeited	(342	)	15.27
Expired	(356	)	5.82
Outstanding, September 30, 2016	8,856		$	13.68	5.12	$	26,608
Exercisable, September 30, 2016	4,680		$	13.84	3.40	$	12,150

The aggregate intrinsic values in the table above represent the total pre-tax intrinsic value (the difference between the Company's closing stock price on the last trading day of September 30, 2016 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 in-the-money options at quarter end. The amount changes based on the fair market value of the Company’s stock. Total intrinsic value of options exercised for the nine months ended September 30, 2016 was insignificant.

As of September 30, 2016, $5 of total unrecognized compensation cost related to stock options is expected to be recognized over a weighted-average period of 1.80 years.

RSUs

During 2016, Chemours granted RSUs to key management employees that generally vest over a three-year period and, upon vesting, convert one-for-one to Chemours common stock. The fair value of all stock-settled RSUs is based upon the market price of the underlying common stock as of the grant date.

Non-vested awards of RSUs, both with and without a performance condition, as of September 30, 2016 are shown below.



	Number of Shares (in thousands)		Weighted Average Grant Date Fair Value (per share)
Nonvested, December 31, 2015	2,349		$	14.87
Granted	1,003		6.58
Vested	(682	)	15.39
Forfeited	(193	)	15.11
Nonvested, September 30, 2016	2,477		$	11.28

As of September 30, 2016, there was $16 of unrecognized stock-based compensation expense related to nonvested awards, which is expected to be recognized over a weighted-average period of 1.77 years.

Performance Share Units

During 2016, Chemours issued PSUs to key senior management employees which, upon vesting, convert one-for-one to Chemours’ common stock if specified performance goals, including certain market-based conditions, are met over the three year performance period specified in the grant, subject to exceptions through the respective vesting period of three years. Each grantee is granted a target award of PSUs, and may earn between 0% and 200% of the target amount depending on the Company’s performance against the performance goals. During the three and nine months ended September 30, 2016, the Company recorded stock-based compensation related to PSUs as a component of selling, general and administrative expense of approximately less than $1 and $1, respectively. There were no PSUs granted prior to 2016.

The following table provides compensation costs for stock-based compensation related to PSUs.



	Number of Share Units (in thousands)		Weighted Average Grant Date Fair Value (per share)
Nonvested, December 31, 2015	—		$	—
Granted	825		6.10
Vested	—		—
Forfeited	(22	)	6.10
Nonvested, September 30, 2016	803		$	6.10

A portion of the fair value of PSUs was estimated at the grant date based on the probability of satisfying the market-based conditions associated with the PSUs using the Monte Carlo valuation method, which assesses probabilities of various outcomes of market conditions. The other portion of the fair value of the PSUs is based on the fair market value of the Company’s stock at the grant date, regardless of whether the market-based condition is satisfied. The per unit weighted-average fair value at the date of grant for PSUs granted during the period ended September 30, 2016 was $6.10. The fair value of each PSU grant is amortized monthly into compensation expense on a straight-line basis over their respective vesting periods over 36 months. The accrual of compensation costs is based on our estimate of the final expected value of the award, and is adjusted as required for the portion based on the performance-based condition. The Company assumes that forfeitures will be minimal, and recognizes forfeitures as they occur, which results in a reduction in compensation expense. As the payout of PSUs includes dividend equivalents, no separate dividend yield assumption is required in calculating the fair value of the PSUs.