Unum 2013 Annual Report Download - page 154

152 / UNUM 2013 ANNUAL REPORT
Notes To Consolidated Financial Statements
Note 11. Stock-Based Compensation
Description of Stock Plans
Under the stock incentive plan of 2012 (the 2012 Plan), up to 20 million shares of common stock are available for awards to our
employees, officers, consultants, and directors. Awards may be in the form of stock options, stock appreciation rights, restricted stock,
restricted stock units, performance share units, and other stock-based awards. Each full-value award, defined as any award other than a
stock option or stock appreciation right, is counted as 1.76 shares. The exercise price for stock options issued cannot be less than the fair
value of the underlying common stock as of the grant date. Stock options generally have a term of eight years after the date of grant and
vest after three years. At December 31, 2013, approximately 18.31 million shares were available for future grants under the 2012 Plan.
Under the stock incentive plan of 2007 (the 2007 Plan), which was terminated in May 2012 for purposes of any further grants, up to
35 million shares of common stock were available for awards to our employees, officers, consultants, and directors. Awards could be in
the form of stock options, stock appreciation rights, restricted stock, restricted stock units, performance share units, and other stock-based
awards. Each full-value award, defined as any award other than a stock option or stock appreciation right, is counted as 2.7 shares. Awards
granted before the termination of the 2007 Plan remain outstanding in accordance with the plan’s terms. Stock options generally have a
term of eight years after the date of grant and vest after three years.
We issue new shares of common stock for all of our stock plan vestings and exercises.
Performance Share Units (PSUs)
In February 2013, we issued approximately 0.1 million PSUs with a grant date fair value of $25.26, all of which were outstanding and
nonvested at December 31, 2013. Vesting for the PSUs occurs at the end of a three-year period and is contingent upon our achievement of
prospective company performance goals and our total shareholder return relative to a particular peer group during the three-year period.
Forfeitable dividend equivalents on PSUs are accrued in the form of additional PSUs. The weighted average grant date fair value per share
for PSU grants and dividends during 2013 was $25.26.
At December 31, 2013, we had approximately $2.1 million of unrecognized compensation cost related to PSUs that will be recognized
over a weighted average period of 2.0 years. The expense and unrecognized compensation cost assume the performance goals are
attained at 100 percent. Actual performance, including modification for relative total shareholder return, may result in 0 to 180 percent of
the PSUs ultimately being earned. Compensation expense recognized for the PSUs is adjusted quarterly based on actual performance
measure results.
We estimated the fair value on the date of initial grant for the PSUs using the Monte-Carlo simulation model. The following
assumptions were used to value the grant:
• Expected volatility of 35 percent, based on our historical daily stock prices and those for components of our peer group.
• Expected life of 3.0 years, which equals the performance period.
• Expected dividend yield of 2.17 percent, assuming continuous reinvestment of the dividends, based on the plan’s provisions.
• Risk free interest rate of 0.38 percent, based on the yield of U.S. Treasury bonds at the date of grant.