Share-Based Employee Compensation

3 Months Ended

Feb. 29, 2012

Share-Based Employee Compensation [Abstract]

Share-Based Employee Compensation

Note G – Share-Based Employee Compensation

The OMNOVA Solutions' Second Amended and Restated 1999 Equity and Performance Incentive Plan (the "Plan") permits the Company to grant to officers, key employees and non-employee directors of the Company, incentives directly linked to the price of OMNOVA Solutions' common stock. The Plan authorizes up to an aggregate of 6.6 million shares of Company stock for awards of options to purchase shares of OMNOVA Solutions' common stock, performance stock and performance units, restricted stock, deferred stock or appreciation rights. Shares used may be either newly issued shares or treasury shares or both. All options granted under the Plan have been granted at exercise prices equal to the market value of the Company's common stock on the grant date. Additionally, the Plan provides that the term of any stock option granted under the Plan may not exceed 10 years. As of February 29, 2012, approximately 0.2 million shares of Company common stock remained available for grants under the Plan.

The Company estimates the fair value of each option award using a Black-Scholes based option valuation model. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods within the contractual life of the option. The expected volatility is based on a blend of the Company's peer group in the industry in which it does business and the Company's historical volatility. The expected term of options granted is estimated considering the vesting periods and historical trends within the Company's equity plans and represents the period of time that options granted are expected to be outstanding. Estimates of fair value are not intended to predict actual future events or the value ultimately realized by employees who receive equity awards.

During the first three months of 2012, no stock options were issued, 500 stock options expired or were forfeited and no stock options were exercised.

Restricted stock grants consist of the Company's common stock. The Company's Board of Directors has set a three-year vesting period for most of the outstanding restricted shares. The fair value of each restricted share grant is equal to the market price of the Company's common stock at the grant date. Expense relating to restricted shares is amortized ratably over the vesting period.

During the first three months of 2012, 265,800 restricted shares were issued, 6,442 restricted shares vested and 1,650 shares were forfeited.

Compensation expense for all share-based payments, included in general and administrative expense, was $0.5 million and $0.4 million during the first three months of 2012 and 2011, respectively.

As of February 29, 2012, there was $3.7 million of unrecognized compensation cost related to non-vested share-based compensation arrangements.