7. SHARE-BASED COMPENSATION

The fair value of each option or stock-settled share appreciation right (“SARS”) award is estimated on the grant date using a binomial-lattice option valuation model. Stock-settled SARS are economically valued the same as stock options. The binomial-lattice model takes into account variables such as volatility, dividend yield, and risk-free interest rate. In addition, the binomial-lattice model considers the contractual term of the option, the probability that the option will be exercised prior to the end of its contractual life, and the probability of termination or retirement of the option holder in computing the value of the option. The weighted average assumptions for the six months ended June 30, 2012 and 2011 are noted in the following table:


Six months ended June 30,	2012			2011
Expected life (years)		6.2			6.2
Expected volatility		41.86	%		40.0	%
Expected dividend yield		1.01	%		1.04	%
Risk-free interest rate		2.11	%		3.36	%
Weighted-average fair value per option	$	19.91		$	20.83

The expected life of options granted is derived from the output of the option valuation model and represents the period of time that options granted are expected to be outstanding. Expected volatilities are based on the combination of implied market volatility and our historical volatility. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant. As share-based compensation recognized in the consolidated statement of income is based on awards ultimately expected to vest, we incorporate the probability of pre-vesting forfeiture in determining the number of expected vested options. The forfeiture rate is based on the historical forfeiture experience and prospective actuarial analysis.

Stock Award and Incentive Plan

The 1993 Stock Award and Incentive Plan (the “1993 Plan”) provides for grants of a variety of awards, such as stock options (including incentive stock options and nonqualified stock options), non-vested stock (including performance stock), SARS (including those settled with common shares) and deferred stock awards and dividend equivalents. On April 19, 2012, our shareholders approved an amendment to the 1993 Plan to increase the shares issuable under the plan by 2,000,000 shares. At June 30, 2012, there were approximately 6,400,000 shares reserved for issuance under the 1993 Plan, inclusive of 3,600,000 shares reserved for issuance for all outstanding share-based compensation grants.

Stock options and stock-settled SARS

We have utilized the stock option component of the 1993 Plan to provide for the granting of nonqualified stock options and stock-settled SARS with an exercise price at 100% of the market price on the date of the grant. Options and stock-settled SARS are generally exercisable in installments of one-third per year commencing one year after the grant date and annually thereafter, with contract lives of generally 10 years from the grant date.

A summary of stock options and stock-settled SARS activity for the six months ended June 30, 2012 is presented below:


Options and Stock-Settled SARS Activity:	Number of Units			Weighted Average Exercise Price Per Unit		Weighted Average Remaining Contractual Life (Years)		Aggregate Intrinsic Value
Outstanding at January 1, 2012		3,305,399		$	42.71
Granted		470,809			50.33
Exercised		(580,880	)		32.96
Forfeited		(23,227	)		45.16

Outstanding at June 30, 2012		3,172,101		$	45.61		6.0	$	41.3

Exercisable at June 30, 2012		2,306,810		$	44.54		4.9	$	32.5

During the six months ended June 30, 2012, we granted 470,809 stock options. The weighted-average grant-date fair value of the stock options granted during the six months ended June 30, 2012 and 2011 was $19.91 and $20.83 per share, respectively. Total pre-tax compensation cost related to stock option and stock-settled SARS was $2.5 and $1.8 during the three months ended June 30, 2012 and 2011, respectively, and $4.6 and $3.7 during the six months ended June 30, 2012 and 2011, respectively. The total intrinsic value of stock options and stock-settled SARS exercised during the six months ended June 30, 2012 and 2011 was $14.9 and $5.7, respectively. Treasury shares and newly issued shares have been utilized for stock option and stock-settled SARS exercises. The total fair value of stock options and stock-settled SARS vested during the six months ended June 30, 2012 and 2011 was $6.5 and $6.8, respectively.

As of June 30, 2012, there was $11.1 of total unrecognized compensation cost related to stock options and stock-settled SARS. That cost is expected to be recognized over a weighted-average period of 1.3 years as the majority of our awards vest over three years.

Total tax benefits realized from share-based awards was $5.0 and $2.1, for the six months ended June 30, 2012 and 2011, respectively. Cash received from stock options exercised was $16.3 and $5.6 for the six months ended June 30, 2012 and 2011, respectively.

Cash-settled SARS

Our 1993 Plan also provides for the granting of cash-settled SARS, which were granted during 2004 and 2005. Cash-settled SARS are liability-classified awards. Cash used to settle cash-settled SARS exercised during the three months ended June 30, 2012 and 2011 was less than $0.1 for each period. The total amount of pre-tax expense (income) recognized for cash-settled SARS was $0.6 and $(2.2) for the six months ended June 30, 2012 and 2011, respectively. The liability related to our cash-settled SARS was $1.6 at June 30, 2012 and $1.3 at December 31, 2011.

Non-vested stock, non-vested stock units and performance stock

The 1993 Plan provides for the issuance of non-vested stock, non-vested stock units and performance stock. Non-vested stock and stock units are subject to certain restrictions on ownership and transferability that lapse upon vesting. Performance stock payouts are based on the attainment of certain financial performance objectives and may vary depending on the degree to which the performance objectives are met. We did not grant any performance stock in 2012 and 2011, and there were no outstanding performance stock awards as of June 30, 2012.

A summary of non-vested stock and non-vested stock units for the six months ended June 30, 2012 is presented below:


Non-vested Stock and Stock Units:	Number of Units			Weighted Average Grant Date Fair Value Per Unit
Nonvested at January 1, 2012		180,930		$	40.40
Granted		77,822			50.79
Vested		(365	)		37.59
Forfeited		(2,130	)		46.52

Nonvested at June 30, 2012		256,257		$	43.84

During the six months ended June 30, 2012, we granted 67,139 non-vested stock units to employees and 10,683 shares of non-vested stock to nine directors, which generally vest on the third anniversary of the grant date. The weighted average fair value of the non-vested stock and non-vested stock units on the grant date was $50.79 per share which was equal to the closing market price of our stock on the date of the grant. The total amount of share-based compensation expense recognized for non-vested stock and non-vested stock units was $1.1 and $0.7 for the three months ended June 30, 2012 and 2011, respectively, and $2.0 and $1.2 for the six months ended June 30, 2012 and 2011, respectively. As of June 30, 2012, there was $4.8 of total unrecognized compensation cost related to non-vested stock and stock units. That cost is expected to be recognized over a weighted-average period of 1.9 years.

Compensation cost related to all share-based compensation arrangements capitalized in inventory as of June 30, 2012 and December 31, 2011 was approximately $0.6 and $0.3, respectively.

As of June 30, 2012 and December 31, 2011, our additional paid-in capital pool (“APIC Pool”), which represents excess tax benefits available to absorb potential future tax deficiencies, was $75.3 and $71.7, respectively.

In the second quarter of 2012, in an effort to retain key employees of the Coatings Resins business who could be impacted by the potential sale of Coating Resins, we agreed that if any such individual’s employment with Cytec is terminated as a result of a sale of Coating Resins, we would pay such employee an amount equal to the intrinsic value of any unvested options and restricted stock units based on the closing price of Cytec stock on the date of the sale. As of June 30, 2012, when we determined we had met all the criteria for discontinued operations, we determined that these certain unvested stock options and restricted stock units that had been accounted for as equity awards should be reclassified to be accounted for as liability awards. As a result, as of June 30, 2012, 183,734 shares of options and 38,401 restricted stock units, which are included as outstanding in the above tables, are being accounted for as liability awards. Accordingly, we recorded a liability of $2.9 for these awards by reclassifying $1.7 of previously recognized expense out of additional paid in capital and recognized $1.2 of additional expense in the second quarter of 2012.