21 Share-based payments

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



Three months ended March 31,		2016		2015
Stock option compensation expense	$	1,070	$	723
Share unit expense		1,272		1,017
Employee share purchase plan -
employer contributions		353		308
	$	2,695	$	2,048

21. Share-based Payments (continued)

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 option activity for the three months ended March 31, 2016, and the year ended December 31, 2015 is presented below:



					Weighted
				Weighted	average
	Common			average	remaining			Aggregate
	shares under			exercise	contractual			intrinsic
	option	price			life (in years)	value

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
Granted	1,208,121			24.07
Exercised	(145,190)			20.88			$	632
Forfeited	(47,968)			24.49

Outstanding, March 31, 2016	4,291,041		$	23.67	7.7		$	14,985

Exercisable, March 31, 2016	2,077,964		$	22.74	5.8		$	9,028

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:



	2016	2015
Risk free interest rate	1.2%	1.8%
Expected dividend yield	2.68%	2.21%
Expected lives of the stock options	5 years	5 years
Expected volatility	26.5%	25.9%

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 March 31, 2016, the unrecognized stock-based compensation cost related to the non-vested stock options was $8,107,000, which is expected to be recognized over a weighted average period of 2.9 years.

21. Share-based Payments (continued)

Share unit plans

The Company has two performance share unit (“PSU”) plans, a senior executive PSU plan and an employee PSU plan. Under the plans, the number of PSUs that vest is conditional upon specified market and non-market vesting conditions being met.

The Company also has restricted share units (“RSUs”) and deferred share units (“DSUs”) plans which 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.

Share units activity for the three months ended March 31, 2016, and the year ended December 31, 2015 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, 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
Granted	244,536		23.19	2,214		23.33	5,749		23.40
Vested and settled	(28,543)		22.20	(124,226)		22.11	-		-
Forfeited	(28,691)		22.52	(8,127)		22.58	-		-

Outstanding, March 31, 2016	608,887	$	23.85	202,815	$	23.07	63,745	$	24.14

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



	2016	2015
Risk free interest rate	1.2%	1.3%
Expected dividend yield	2.49%	2.17%
Expected lives of the PSUs	3 years	3 years
Expected volatility	29.9%	29.4%
Average expected volatility of comparable companies	37.0%	32.8%

Employee share purchase plan

The Company has an employee share purchase plan that allows all employees that have completed 60 days 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.