The Company has granted nonstatutory stock options to certain key employees under the Stock Incentive Plans. The Stock Incentive Plans are administered by the Compensation Committee of the Board of Directors. Stock options are generally non-qualified and are at exercise prices not less than 100% of the average per share fair market value on the date of grant. Stock-based compensation awards granted under the Company’s stock incentive plans are generally subject to a vesting period from the date of the grant ranging from 1 - 3 years. Currently outstanding options expire on various dates through November 2028.

On May 9, 2018, the Company’s stockholders approved the W. R. Grace & Co. 2018 Stock Incentive Plan. Under this new plan, stock options have a 10 year life. The Company began issuing stock-based compensation awards from this plan in the second half of 2018. The Company’s annual grant made in February 2018 was issued under the previous plan in which options have a 5 year life.

Previously outstanding stock-based compensation awards granted under equity compensation programs prior to the Separation and held by certain executives and employees were adjusted in 2016 to reflect the impact of the Separation on these awards. To preserve the aggregate intrinsic value of awards held prior to the Separation, as measured immediately before and immediately after the Separation, each holder of stock-based compensation awards generally received an adjusted award consisting of either (i) both a stock-based compensation award denominated in Company equity as it existed subsequent to the Separation and a stock-based compensation award denominated in GCP equity or (ii) solely a stock-based compensation award denominated in Company equity. In the Separation, the determination as to which type of adjustment applied to a holder’s previously outstanding award was based upon the date on which the award was originally granted under the equity compensation programs prior to the Separation. The adjustment of the original awards resulted in $0.6 million of incremental compensation cost in 2016.

The following table sets forth information relating to such options during 2018, 2017, and 2016.



Stock Option Activity	Number Of Shares		Average Exercise Price		Weighted- Average Grant Date Fair Value
Balance, December 31, 2015	2,320,687		$	71.01
Options exercised	(745,938	)	36.97
Options forfeited	(9,458	)	73.40
Options terminated	(2,426	)	67.06
Options granted	377,920		68.32		$	12.90
Balance, December 31, 2016	1,940,785		66.83
Options exercised	(386,300	)	45.21
Options forfeited	(34,545	)	72.97
Options terminated	(23,320	)	75.60
Options granted	316,830		71.37		13.00
Balance, December 31, 2017	1,813,450		72.04
Options exercised	(243,502	)	61.92
Options forfeited	(90,862	)	69.82
Options terminated	(33,481	)	75.07
Options granted	428,190		67.36		12.30
Balance, December 31, 2018	1,873,795		72.34

The following is a summary of nonvested option activity for the year ended December 31, 2018.



Stock Option Activity	Number Of Shares		Weighted- Average Grant Date Fair Value
Nonvested options outstanding at beginning of year	719,027		$	15.47
Granted	428,190		12.30
Vested	(358,511	)	18.14
Forfeited	(124,343	)	14.99
Nonvested options outstanding at end of year	664,363		12.88

As of December 31, 2018, the intrinsic value (the difference between the exercise price and the market price) for options outstanding was immaterial. The total intrinsic value of all options exercised during the years ended December 31, 2018, 2017 and 2016 was $1.6 million, $10.3 million and $25.9 million, respectively. A summary of our stock options outstanding and exercisable at December 31, 2018, follows:



Exercise Price Range	Number Outstanding	Number Exercisable	Outstanding Weighted- Average Remaining Contractual Life (Years)	Exercisable Weighted- Average Exercise Price
$60 - $70	710,321	226,938	3.23	68.27
$70 - $80	1,139,369	958,389	1.46	75.72
$80 - $90	24,105	24,105	0.16	80.76
	1,873,795	1,209,432

At December 31, 2018, the weighted-average remaining contractual term of all options outstanding and exercisable was 2.11 years.

Options Granted For the years ended December 31, 2018, 2017 and 2016, the Company recognized non-cash stock-based compensation expense with respect to stock option grants of $5.8 million, $4.3 million and $6.0 million, respectively, which is included in “selling, general and administrative expenses” in the Consolidated Statements of Operations. The actual tax benefit realized from stock options exercised totaled $2.2 million, $7.4 million, and $11.2 million for the years ended December 31, 2018, 2017 and 2016, respectively.

The Company values options using the Black-Scholes option-pricing model, which was developed for use in estimating the fair value of traded options. The risk-free rate is based on the U.S. Treasury yield curve published as of the grant date, with maturities approximating the expected term of the options. The expected term of the options is estimated using the simplified method as allowed by ASC 718-20, whereby the average between the vesting period and contractual term is used. For options granted prior to 2018, the expected volatility was estimated using both actual stock volatility and the volatility of an industry peer group. The Company believes its actual stock volatility was not representative of future volatility during the time it was in Chapter 11. For options granted in 2018, Grace actual stock volatility was used. The following summarizes the weighted average assumptions used for estimating the fair value of stock options granted during 2018, 2017 and 2016, respectively.



	2018	2017	2016
Expected volatility	22.9% - 24.4%	23.8% - 25.1%	26.2% - 27.5%
Weighted average expected volatility	23.7%	24.8%	26.6%
Expected term	3.00 - 6.50 years	3.00 - 4.00 years	3.00 - 4.00 years
Risk-free rate	2.55%	1.66%	1.01%
Dividend yield	1.4%	1.2%	1.0%

Total unrecognized stock-based compensation expense at December 31, 2018, was $1.8 million, and the weighted-average period over which this expense will be recognized is 0.8 of a year.

Restricted Stock and Performance Based Units During 2018 the Company granted 86,698 RSUs and 93,216 PBUs under the Company’s Long-term Incentive Plan (“LTIP”). During 2017 the Company granted 57,600 RSUs and 115,158 PBUs under the LTIP. During 2016 the Company granted 77,358 RSUs and 124,952 PBUs under the LTIP. During 2018, 2017, and 2016, awards covering 44,279, 16,395, and 15,197 shares were forfeited, respectively. The PBUs cliff vest after the completion of the performance periods ending December 31, 2020, 2019, and 2018, and have a weighted average grant date fair value of $67.39, $71.37 and $68.50, respectively. The RSUs vest in three equal annual installments and have a weighted average grant date fair value of $67.54, $71.37, and $68.90, respectively. Vesting for all awards is subject to continued employment through the payment date (subject to certain exceptions for retirement, death or disability, change in control scenarios, and in the discretion of the Compensation Committee).

The Company anticipates that approximately 64% of the awards granted in 2018 will be settled in common stock and approximately 36% will be settled in cash, assuming full vesting. The Company anticipates that approximately 65% of the awards granted in 2017 will be settled in common stock and approximately 35% will be settled in cash, assuming full vesting. The Company anticipates that approximately 67% of the awards granted in 2016 will be settled in common stock and approximately 33% will be settled in cash, assuming full vesting.

PBUs and RSUs are recorded at fair value at the date of grant. The common stock settled portion is considered an equity award with the payout being valued based on the Company’s stock price on the grant date. The cash settled portion of the award is considered a liability award with payout being remeasured each reporting period based on the Company’s current stock price. PBU equity and cash awards are remeasured each reporting period based on the expected payout of the award, which may range from 0% to 200% of the targets for such awards; therefore, these portions of the awards are subject to volatility until the payout is finally determined at the end of the performance period. During 2018, 2017, and 2016, the Company recognized $13.2 million, $10.3 million, and $8.6 million in compensation expense for these awards. As of December 31, 2018, $9.5 million of total unrecognized compensation expense related to the awards is expected to be recognized over the remaining weighted-average service period of 1.5 years.