STOCK-BASED COMPENSATION

Non-qualified Employee Stock Award Plan

The United Fire and Casualty Company 2008 Stock Plan (the "Stock Plan") authorizes the issuance of restricted and unrestricted stock awards, stock appreciation rights, incentive stock options, and non-qualified stock options for up to 1,900,000 shares of United Fire common stock to our employees, with 40,861 authorized shares remaining available for future issuance at March 31, 2014. The Stock Plan is administered by the Board of Directors, which determines those employees who will receive awards, when awards will be granted, and the terms and conditions of the awards. The Board of Directors may also take any action it deems necessary and appropriate for the administration of the Stock Plan. Pursuant to the Stock Plan, the Board of Directors may, at its sole discretion, grant awards to our employees who are in positions of substantial responsibility with United Fire.

Options granted pursuant to the Stock Plan are granted to buy shares of United Fire's common stock at the market value of the stock on the date of grant. All outstanding option awards vest and are exercisable in installments of 20.0 percent of the number of shares covered by the option award each year from the grant date, unless the Board of Directors authorizes the acceleration of vesting. To the extent not exercised, vested option awards accumulate and are exercisable by the awardee, in whole or in part, in any subsequent year included in the option period, but not later than 10 years from the grant date. Restricted and unrestricted stock awards granted pursuant to the Stock Plan are granted at the market value of our common stock on the date of the grant. Restricted stock awards fully vest after five years from the date of issuance, unless accelerated upon the approval of the Board of Directors, at which time United Fire common stock will be issued to the awardee. All awards are generally granted free of charge to the eligible employees of United Fire as designated by the Board of Directors.

The activity in the Stock Plan is displayed in the following table:



Authorized Shares Available for Future Award Grants	Three Months Ended March 31, 2014		From Inception to March 31, 2014
Beginning balance	353,649		1,900,000
Number of awards granted	(313,288	)	(1,995,784	)
Number of awards forfeited or expired	500		136,645
Ending balance	40,861		40,861
Number of option awards exercised	26,532		408,300
Number of unrestricted stock awards granted	—		4,555
Number of restricted stock awards vested	—		18,576

Non-qualified Non-employee Director Stock Option and Restricted Stock Plan

The United Fire and Casualty Company 2005 Non-Qualified Non-Employee Director Stock Option and Restricted Stock Plan (the "Director Plan") authorizes the issuance of restricted stock awards and non-qualified stock options to purchase shares of United Fire’s common stock to non-employee directors. At March 31, 2014, we had 103,912 authorized shares available for future issuance.

The Board of Directors has the authority to determine which non-employee directors receive awards, when options and restricted stock shall be granted, the option price, the option expiration date, the date of grant, the vesting schedule of options or whether the options shall be immediately vested, the terms and conditions of options and restricted stock (other than those terms and conditions set forth in the plan) and the number of shares of common stock to be issued pursuant to an option agreement or restricted stock agreement. The Board of Directors may also take any action it deems necessary and appropriate for the administration of the Director Plan.

The activity in the Director Plan is displayed in the following table:



Authorized Shares Available for Future Award Grants	Three Months Ended March 31, 2014	From Inception to March 31, 2014
Beginning balance	103,912	300,000
Number of awards granted	—	(202,091	)
Number of awards forfeited or expired	—	6,003
Ending balance	103,912	103,912
Number of option awards exercised	—	3,156
Number of restricted stock awards vested	—	6,402

Stock-Based Compensation Expense

For the three-month periods ended March 31, 2014 and 2013, we recognized stock-based compensation expense of $437 and $411, respectively. Stock-based compensation expense is recognized over the vesting period of the stock options.

As of March 31, 2014, we had $6,439 in stock-based compensation expense that has yet to be recognized through our results of operations. We expect this compensation to be recognized over the remainder of 2014 and subsequent years according to the following table, except with respect to awards that are accelerated by the Board of Directors, in which case we will recognize any remaining compensation expense in the period in which the awards are accelerated.



2014	$	1,421
2015	1,715
2016	1,290
2017	1,144
2018	779
2019	90
Total	$	6,439