STOCK-BASED COMPENSATION

Non-qualified Employee Stock Award Plan

The United Fire Group, Inc. Stock Plan (the "Stock Plan") authorized the issuance of restricted and unrestricted stock or stock unit 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. In May 2014, the Registrant's shareholders approved an additional 1,500,000 shares of United Fire common stock issuable at any time and from time to time pursuant to the Stock Plan, as amended. At September 30, 2014, there are 1,560,201 authorized shares remaining available for future issuance. 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. Unless the Board of Directors authorizes accelerated vesting, 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. 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 or stock unit 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.

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



Authorized Shares Available for Future Award Grants	Nine Months Ended September 30, 2014		From Inception to September 30, 2014
Beginning balance	353,649		1,900,000
Additional shares authorized	1,500,000		1,500,000
Number of awards granted	(313,948	)	(1,996,444	)
Number of awards forfeited or expired	20,500		156,645
Ending balance	1,560,201		1,560,201
Number of option awards exercised	62,531		444,299
Number of unrestricted stock awards granted	660		5,215
Number of restricted stock awards vested	—		18,576

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

The United Fire & 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 September 30, 2014, we had 87,194 authorized shares available for future issuance under the Director Plan.

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 (subject to limits set forth in the plan). 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	Nine Months Ended September 30, 2014		From Inception to September 30, 2014
Beginning balance	103,912		300,000
Number of awards granted	(16,718	)	(218,809	)
Number of awards forfeited or expired	—		6,003
Ending balance	87,194		87,194
Number of option awards exercised	1,519		4,675
Number of restricted stock awards vested	5,040		11,442

Stock-Based Compensation Expense

For the three-month periods ended September 30, 2014 and 2013, we recognized stock-based compensation expense of $500 and $618, respectively. For the nine-month periods ended September 30, 2014 and 2013, we recognized stock-based compensation expense of $1,445 and $1,436, respectively. Stock-based compensation expense is recognized over the vesting period of the stock options.

As of September 30, 2014, we had $5,871 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	$	500
2015	1,864
2016	1,439
2017	1,200
2018	778
2019	90
Total	$	5,871