STOCK-BASED COMPENSATION

Non-qualified Employee Stock Award Plan

The United Fire & Casualty Company 2008 Stock Plan (the “2008 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 employees, with 671,578 authorized shares available for future issuance at September 30, 2011. The 2008 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 2008 Stock Plan. Pursuant to the 2008 Stock Plan, the Board of Directors may, at its sole discretion, grant awards to employees of United Fire or any of its affiliated companies who are in positions of substantial responsibility with United Fire.

Option awards granted pursuant to the 2008 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 2008 Stock Plan are granted at the market value of our stock on the date of the grant. Restricted stock awards fully vest after 5 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 2008 Stock Plan is displayed in the following table:



Authorized Shares Available for Future Award Grants	Nine Months Ended September 30, 2011		Inception to Date
Beginning balance	833,495		1,900,000
Number of awards granted	(175,717	)	(1,314,947	)
Number of awards forfeited or expired	13,800		86,525
Ending balance	671,578		671,578
Number of option awards exercised	6,325		173,617
Number of unrestricted stock awards vested	730		2,485
Number of restricted stock awards vested	—		—

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 United Fire to grant restricted and unrestricted stock and non-qualified stock options to purchase shares of United Fire’s common stock to non-employee directors. At our annual stockholders’ meeting on May 18, 2011, United Fire stockholders approved an amendment to the Director Plan to increase from 150,000 to 300,000 the number of shares that may be issued under the Director Plan and to extend the life of the Director Plan from December 31, 2014 to December 31, 2020. At September 30, 2011, we had 160,009 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 and unrestricted 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	Nine Months Ended September 30, 2011		Inception to Date
Beginning balance	37,003		150,000
Additional authorization	150,000		150,000
Number of awards granted	(33,000	)	(152,000	)
Number of awards forfeited or expired	6,006		12,009
Ending balance	160,009		160,009
Number of option awards exercised	—		—

Stock-Based Compensation Expense

For each of the three-month periods ended September 30, 2011 and 2010, we recognized stock-based compensation expense of $0.4 million. For the nine-month periods ended September 30, 2011 and 2010, we recognized stock-based compensation expense of $1.4 million and $1.3 million, respectively.

As of September 30, 2011, we had $4.2 million 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 2011 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.



(In Thousands)
2011	$	445
2012	1,432
2013	996
2014	765
2015	533
2016	58
Total	$	4,229