NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The Company determines the fair value of each grant using the Black-Scholes option pricing model. The weighted-average assumptions for grants made during the years ended December 31, 2012, 2011 and 2010 are as follows: Included in the Company’s share-based compensation was expense recognized for its restricted stock, restricted share unit and performance-based restricted share unit awards of $8.3 million, $8.1 million and $7.2 million in 2012, 2011 and 2010, respectively. Changes in the Company’s restricted stock and restricted share units for the year ended December 31, 2012 were as follows: Expected dividend yield is based on the Company’s dividend rate. Expected stock volatility was determined based upon the historical volatility for the four-year-period preceding the date of grant. The risk-free interest rate was based on the yield curve in effect at the time the options were granted, using U.S. constant maturities over the expected life of the option. The expected lives of the awards represents the period of time that options granted are expected to be outstanding. Activity in the Company’s stock option plans for the year ended December 31, 2012 was as follows: The weighted-average fair value of options granted during 2012, 2011 and 2010 was $15.07, $13.36 and $9.44, respectively. The total fair value of shares vested during 2012, 2011 and 2010 was $7.3 mil- lion, $6.0 million and $4.0 million, respectively. The total intrinsic value of options exercised during 2012, 2011 and 2010 was $14.8 million, $24.9 million and $14.1 million, respectively. The total cash received from these option exercises was $18.7 million, $30.8 million and $26.4 million, respectively, and the tax benefit/ (shortfall) realized for the tax deductions from option exercises and vesting of restricted stock was $3.6 million, $6.1 million and $3.3 million, respectively. The aggregate intrinsic value of exercisable options was $15.6 million, $20.8 million and $21.0 million as of December 31, 2012, 2011 and 2010, respectively. Restricted stock and restricted share units vest at a rate of 25% after the first year, 50% after the second year, 75% after the third year and 100% after the fourth year from the date of grant and are sub- ject to forfeiture restrictions which lapse over time. The vesting of Performance-based restricted share units is determined in three years based on relative total shareholder return for Crane Co. compared to the S&P Midcap 400 Capital Goods Group, with payout potential ranging from 0% to 175% but capped at 100% if the Company’s three-year total shareholder return is negative. Option Activity Number of Shares (in 000’s) Weighted Average Exercise Price Weighted Average Remaining Life (Years) Options outstanding at January 1, 2012 3,618 $33.92 Granted 1,000 49.61 Exercised (970) 30.48 Canceled (183) 39.83 Options outstanding at December 31, 2012 3,464 $ 39.11 3.58 Options exercisable at December 31, 2012 1,261 $ 33.90 2.42 Restricted Stock and Restricted Share Unit Activity Restricted Stock and Restricted Share Units (in 000’s) Weighted Average Grant- Date Fair Value Restricted Stock and Restricted Share Units at January 1, 2012 654 $34.07 Restricted Stock vested (57) 34.00 Restricted Stock forfeited (1) 31.04 Restricted Share Units granted 116 48.28 Restricted Share Units vested (144) 30.00 Restricted Share Units forfeited (30) 39.10 Performance-based Restricted Share Units granted 118 46.72 Performance-based Restricted Share Units forfeited (4) 46.70 Restricted Stock and Restricted Share Units at December 31, 2012 652 $39.48 2012 2011 2010 Dividend yield 2.18% 2.23% 2.68% Volatility 43.09% 41.06% 40.37% Risk-free interest rate 0.79% 1.79% 2.20% Expected lives in years 4.28 4.29 4.29 60