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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Years ended December 31, 2005 and 2004 (in thousands of dollars, except per share amounts)
18. SHARE OPTION PLAN:
The Company established a share option plan in the year of its initial public offering. All employees of the Company and its affiliates are eligible to be granted options under the option plan. The plan provides that the number of shares reserved for issuance pursuant to stock options granted to any one person under the plan and all other share compensation arrangements cannot exceed 5 % of the outstanding common shares of the Company. 5,007,164 common shares of the Company have been reserved for issuance upon exercise of options granted under this plan, representing approximately 7% of the outstanding common shares of the Company.
In 2005, 384,482 (2004-450,800) options were granted to eligible employees, 312,436 (2004-280,400) options were exercised and 155,484 (2004-244,500) options were forfeited, resulting in 1,248,462 (2004-1,331,900) options remaining outstanding under the share option plan. Options granted in 2005 have strike prices in the range of $29.636 to $31.113. Options granted in 2004 had strike prices in the range of $22.403 to $26.447.
The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions used for grants in 2005: dividend yield of 2.5 percent; expected volatility of 25 percent; risk-free interest rate of 4 percent and expected life of seven years.
The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions used for grants in 2004: dividend yield of 2.5 percent; expected volatility of 25 percent; risk-free interest rate of 3.910 percent and expected life of five years.
Options granted will expire in 2011, 2012 and 2013.
Share options:
|
|
|
|
| For the years ended |
2005
|
2004
|
|
|
|
Number of
options
|
Weighted
average
exercise
price
|
Number of
options
|
Weighted
average
exercise
price
|
|
| Outstanding, beginning of year |
1,331,900
|
$ 13.937
|
1,406,000
|
$ 10.608
|
| Granted |
384,482
|
29.660
|
450,800
|
22.590
|
| Forfeited |
(155,484)
|
16.140
|
(244,500)
|
12.309
|
| Exercised |
(312,436)
|
13.270
|
(280,400)
|
10.553
|
|
| Outstanding, end of year |
1,248,462
|
$ 18.980
|
1,331,900
|
$ 13.937
|
|
193,932 options were fully vested and exercisable at strike prices in the range of $10.529 to $26.45 at December 31, 2005. During 2005, the Company recognized compensation cost of $2,023 (2004 - $1,424) in respect of its share option plan.
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