Note 2. Stock-Based Compensation

The Company has a 2001 Stock Award and Incentive Plan (the "Plan"), which provides for grants of incentive and non-qualified stock options, restricted stock, stock appreciation rights, stock awards or performance unit awards. The Plan is administered by the Compensation Committee of the Board of Directors. Stock options granted under the Plan generally have a ten year term. The exercise price for stock options are at prices at or above the fair market value of the common stock on the date of the grant, and each award of stock options will vest ratably over a specified period, generally three years.

Stock-based compensation expense is recognized in the consolidated financial statements for stock options based on the grant date fair value.

Net income for years ended 2012, 2011 and 2010 include $2.0 million, $2.7 million and $2.0 million pre-tax compensation costs, respectively, related to stock option expense as a component of marketing and administrative expenses. All stock option expense is recognized in the consolidated statements of operations. The related tax benefit included in the statement of income on the non-qualified stock options was $0.8 million, $1.1 million and $0.8 million for 2012, 2011 and 2010, respectively.

The benefits of tax deductions in excess of the tax benefit from compensation costs that were recognized or would have been recognized are classified as financing inflows on the consolidated statement of cash flows.

Stock Options

The fair value of options granted is estimated on the date of grant using the Black-Scholes valuation model. Compensation expense is recognized only for those options expected to vest, with forfeitures estimated at the date of grant based on the Company's historical experience and future expectations. The forfeiture rate assumption used for the period ended December 31, 2012 was 7.31%.

The weighted average grant date fair value for stock options granted during the years ended December 31, 2012, 2011 and 2010 was $10.74, $11.03 and $8.16, respectively. The weighted average grant date fair value for stock options vested during 2012, 2011 and 2010 was $8.57, $7.58 and $8.50, respectively. The total intrinsic value of stock options exercised during the years ended December 31, 2012, 2011 and 2010 was $3.3 million, $1.7 million and $0.5 million, respectively.

The fair value for stock awards was estimated at the date of grant using the Black-Scholes option valuation model with the following weighted average assumptions for the years ended December 31, 2012, 2011 and 2010:

	2012			2011			2010
Expected life (years)		6.9			6.3			6.3
Interest rate		1.36	%		2.46	%		2.92	%
Volatility		31.26	%		30.93	%		28.80	%
Expected dividend yield		0.31	%		0.31	%		0.41	%

The expected term of the options represents the estimated period of time until exercise and is based on historical experience of similar awards, based upon contractual terms, vesting schedules, and expectations of future employee behavior. The expected stock-price volatility is based upon the historical and implied volatility of the Company's stock. The interest rate is based upon the implied yield on U.S. Treasury bills with an equivalent remaining term. Estimated dividend yield is based upon historical dividends paid by the Company.

MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table summarizes stock option activity for the year ended December 31, 2012:

	Shares			Weighted Average Exercise Price Per Share	Weighted Average Remaining Contractual Life (Years)		Aggregate Intrinsic Value (in thousands)
Balance December 31, 2011	1,573,974		$	27.10
Granted	222,250			32.04
Exercised	(330,158	)		25.15
Canceled	(70,546	)		27.76
Balance December 31, 2012	1,395,520		$	28.31	5.93	$	16,201

Exercisable, December 31, 2012	1,068,434		$	27.44	5.11	$	13,337

The aggregate intrinsic value above is calculated before applicable income taxes, based on the Company's closing stock price of $39.92 as of the last business day of the period ended December 31, 2012 had all options been exercised on that date. The weighted average intrinsic value of the options exercised during 2012, 2011 and 2010 was $10.11, $7.15 and $8.03 per share, respectively. As of December 31, 2012, total unrecognized stock-based compensation expense related to non-vested stock options was approximately $1.5 million, which is expected to be recognized over a weighted average period of approximately three years.

The Company issues new shares of common stock upon the exercise of stock options.

Non-vested stock option activity for the year ended December 31, 2012 is as follows:

	Shares			Weighted Average Exercise Price Per Share
Non-vested options outstanding at December 31, 2011	454,634		$	27.14
Options granted	222,250			32.04
Options vested	(311,152	)		25.98
Options forfeited …	(38,646	)		30.63
Non-vested options outstanding at December 31, 2012	327,086		$	31.17

The following table summarizes additional information concerning options outstanding at December 31, 2012:

Options Outstanding									Options Exercisable
Range of Exercise Prices					Number Outstanding at 12/31/12	Weighted Average Remaining Contractual Term (Years)	Weighted Average Exercise Price		Number Exercisable at 12/31/12	Weighted Average Exercise Price
$	19.855	-	$	24.753	413,026	3.5	$	22.14	376,530	$	21.90
$	26.257	-	$	29.665	153,718	2.1	$	27.08	148,706	$	27.08
$	30.097	-	$	34.657	828,776	6.3	$	31.61	543,198	$	31.37
$	19.855	-	$	34.657	1,395,520	4.0	$	28.31	1,068,434	$	27.44

Restricted Stock

The Company has granted key employees rights to receive shares of the Company's common stock under the Company's 2001 Stock Award and Incentive Plan (the "Plan"). The rights will be deferred for a specified number of years of service, subject to restrictions on transfer and other conditions. Compensation expense for these shares is recognized over the vesting period. The Company granted 123,446 shares, 136,978 shares and 156,640 shares for the periods ended December 31, 2012, 2011 and 2010, respectively. The fair value was determined based on the market value of unrestricted shares. As of December 31, 2012, there was unrecognized stock-based compensation related to restricted stock of $2.7 million, which will be recognized over approximately the next three years. The compensation expense amortized with respect to all units was approximately $3.4 million, $4.6 million and $3.8 million for the periods ended December 31, 2012, 2011 and 2010, respectively. In addition, the Company recorded reversals of $-- million, $0.1 million and $0.1 million for periods ended December 31, 2012, 2011 and 2010, respectively, related to restricted stock forfeitures. Such costs and reversals are included in marketing and administrative expenses. There were 102,424 restricted stock shares that vested for the year ended December 31, 2012.

MINERALS TECHNOLOGIES INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table summarizes the restricted stock activity for the Plan:

	Shares			Weighted Average Grant Date Fair Value
Unvested balance at December 31, 2011	252,024		$	27.21
Granted	123,446		$	32.04
Vested	(102,424	)	$	25.90
Canceled	(89,386	)	$	27.08
Unvested balance at December 31, 2012	183,660		$	31.25