25. Share-based payments

Share-based payments consisted of the following compensation costs recognized in selling, general and administrative expenses:



Year ended December 31,		2015		2014		2013
Stock option compensation expense	$	4,001	$	3,710	$	4,504
Share unit expense		5,673		5,864		2,460
Employee share purchase plan -
employer contributions		1,332		1,272		1,302
	$	11,006	$	10,846	$	8,266

Stock option plan

The Company has a stock option plan that provides for the award of stock options to selected employees, directors and officers of the Company.

Stock options are granted with an exercise price equal to the fair market value of the Company‘s common shares at the grant date, with vesting periods ranging from immediate to five years and terms not exceeding 10 years. At December 31, 2015, there were 1,874,798 (December 31, 2014: 2,665,618) shares authorized and available for grants of options under the stock option plan.

25. Share-based payments (continued)

Stock option activity for the years ended December 31, 2015, 2014 and 2013 is presented below:



					Weighted
				Weighted	average
	Common			average	remaining			Aggregate
	shares under			exercise	contractual			intrinsic
	option	price			life (in years)	value
Outstanding, December 31, 2012	3,540,497		$	20.27
Granted	884,500			21.34
Exercised	(427,972)			14.37			$	2,894
Forfeited	(236,351)			21.88
Expired	(11,100)			23.58

Outstanding, December 31, 2013	3,749,574			21.09
Granted	837,364			23.60
Exercised	(663,152)			18.28			$	4,304
Forfeited	(25,995)			23.26

Outstanding, December 31, 2014	3,897,791			22.09
Granted	880,706			25.50
Exercised	(1,412,535)			21.11			$	9,426
Forfeited	(89,884)			23.10

Outstanding, December 31, 2015	3,276,078		$	23.40	6.9		$	4,246

Exercisable, December 31, 2015	1,800,512		$	22.46	5.4		$	3,601

The options outstanding at December 31, 2015 expire on dates ranging to August 12, 2025. The WA share price of options exercised during the year ended December 31, 2015 was $27.78 (2014: $24.77; 2013: $21.13). The WA grant date fair value of options granted during the year ended December 31, 2015 was $5.39 per option (2014: $5.35; 2013: $5.65).

The fair value of the stock option grants was estimated on the date of the grant using the Black-Scholes option pricing model with the following assumptions:



	2015	2014	2013
Risk free interest rate	1.8%	1.8%	0.9%
Expected dividend yield	2.18%	2.31%	2.31%
Expected lives of the stock options	5 years	5 years	5 years
Expected volatility	26.4%	29.3%	35.2%

25. Share-based payments (continued)

Risk free interest rate is the US Treasury Department five year treasury yield curve rate on the date of the grant. Expected dividend yield assumes a continuation of the most recent quarterly dividend payments. Expected life of options is based on the age of the options on the exercise date over the past five years. Expected volatility is based on the historical common share price volatility over the past five years.

The compensation expense arising from option grants is amortized over the relevant vesting periods of the underlying options. As at December 31, 2015, the unrecognized stock-based compensation cost related to the non-vested stock options was $3,661,000, which is expected to be recognized over a weighted average period of 2.5 years. Cash received from stock-based award exercises for the year ended December 31, 2015 was $29,816,000 (2014: $12,121,000; 2013: $6,152,000). The actual tax benefit realized for the tax deductions from option exercise of the share based payment arrangements totaled $1,150,000, $476,000, and $197,000 respectively, for the years ended December 31, 2015, 2014, and 2013.

Share unit plans

During the year ended December 31, 2015, the Company granted share units under two new performance share unit (“PSU”) plans, a senior executive PSU plan and an employee PSU plan. The two new plans have identical terms and conditions, with the exception of clauses under the senior executive PSU plan that address the treatment of recipients’ PSUs in the event of a change of control of the Company.

Under the plans, the number of PSUs that vest is conditional upon specified market and non-market vesting conditions being met. The market vesting condition is based on the relative performance of the Company’s share price in comparison to the performance of a pre-determined portfolio of other companies’ share prices. The non-market vesting conditions are based on the achievement of specific performance measures and can result in participants earning between 0% and 200% of the target number of PSUs granted.

Both new plans entitle the grant recipient to a payment equal to the dividend-adjusted number of PSUs vested multiplied by the VWAP of the Company’s common shares reported by the New York Stock Exchange for the twenty days prior to vest date. Unlike the Company’s other share unit plans, the two new PSU plans give the Company the option of settling in either cash or equity, with equity-settlement subject to stockholder approval. Stockholder approval for equity-settlement of the new PSUs had not been sought out or obtained as at December 31, 2015. As such, the Company has determined that there is a present obligation to settle in cash, and has accounted for the two new PSU plans as cash-settled share-based payment transactions.

25. Share-based payments (continued)

Share unit activity for the years ended December 31, 2015, 2014 and 2013 is presented below:



	Performance share units			Restricted share units			Deferred share units
			WA grant			WA grant			WA grant
			date fair			date fair			date fair
	Number		value	Number		value	Number		value
Outstanding, December 31, 2012	-	$	-	-	$	-	-	$	-
Granted	78,831		21.99	278,771		21.78	19,624		21.99
Forfeited	(2,604)		22.01	(6,847)		22.01	-		-

Outstanding, December 31, 2013	76,227		21.99	271,924		21.78	19,624		21.99
Granted	186,554		23.82	237,645		22.86	22,665		22.66
Vested and settled	(3,702)		22.22	(65,293)		22.01	-		-
Forfeited	(20,506)		22.38	(40,689)		22.32	-		-

Outstanding, December 31, 2014	238,573		23.38	403,587		22.32	42,289		22.33
Granted	218,699		24.57	20,528		26.38	29,072		26.07
Vested and settled	(6,870)		22.22	(28,887)		22.53	(13,365)		22.34
Forfeited	(28,817)		23.23	(62,274)		21.56	-		-

Outstanding, December 31, 2015	421,585	$	24.03	332,954	$	22.70	57,996	$	24.21

PSUs are subject to market vesting conditions and their fair value at grant date was estimated using a binomial model with the following assumptions:



			2015
Risk free interest rate			1.3%
Expected dividend yield			2.17%
Expected lives of the PSUs			3 years
Expected volatility			29.4%
Average expected volatility of comparable companies			32.8%

Restricted share units (“RSUs”) and deferred share units (“DSUs”) are not subject to market vesting conditions. RSU and DSU fair values are estimated using the 20-day volume weighted average price of the Company’s common shares listed on the New York Stock Exchange. DSUs are granted under the DSU plan to members of the Board of Directors.

The total market value of share units vested and released during the year ended December 31, 2015 was $1,253,000 (2014: $1,578,000; 2013: no shares vested and released). As at December 31, 2015, the Company had a total share unit liability of $11,836,000 (December 31, 2014: $7,433,000) in respect of share units under the PSU, RSU, and DSU plans described herein.

The compensation expense arising from share unit grants is amortized over the relevant vesting periods of the underlying units.

25. Share-based payments (continued)

As at December 31, 2015, the unrecognized share unit expenses related to unvested share units was $8,642,000, which is expected to be recognized over a weighted average period of 1.9 years.

Employee share purchase plan

The Company has an employee share purchase plan that allows all employees that have completed one year of service to contribute funds to purchase common shares at the current market value at the time of share purchase. Employees may contribute up to 4% of their salary. The Company will match between 50% and 100% of the employee‘s contributions, depending on the employee‘s length of service with the Company.