Share-based compensation plans

At December 31, 2013, OEH had four share-based compensation plans plus one plan that had expired by that date, which are described below. The compensation cost that has been charged to selling, general and administrative expense for these plans was $10,388,000 for the year ended December 31, 2013 (2012 - $6,834,000; 2011 - $6,752,000). Cash received from exercised options and vested awards was $7,000 for the year ended December 31, 2013 (2012 - $3,000; 2011 - $3,000). The total compensation cost related to unexercised options and unvested share awards at December 31, 2013 to be recognized over the period January 1, 2014 to December 31, 2016, was $10,884,000 and the weighted average period over which it is expected to be recognized is 28 months. Measured from the grant date, substantially all awards of deferred shares, restricted shares and stock appreciation rights have a maximum term of three years, and substantially all awards of share options have a maximum term of ten years.

(a) 2000 and 2004 stock option plans

Under the Company’s 2000 and 2004 stock option plans, options to purchase up to 750,000 and 1,000,000 class A common shares, respectively, could be awarded to employees of OEH at fair market value at the date of grant. Options are exercisable three years after award and must be exercised ten years from the date of grant. At December 31, 2013, 23,500 class A common shares were reserved under the 2000 plan, and 453,950 class A common shares were reserved under the 2004 plan. At December 31, 2013, no shares remain available for future grants under the 2000 and 2004 plans as these have been transferred to the 2009 plan described below which became effective in 2009.

Details of share option transactions under the 2000 and 2004 stock option plans are as follows:



	Number of shares subject to options		Weighted average exercise price $	Weighted average remaining contractual life in years	Aggregate intrinsic value $’000

Outstanding — January 1, 2012	538,850		23.05
Granted	—		—
Exercised	(4,206	)	5.89
Forfeited, cancelled or expired	(57,194	)	21.09

Outstanding — December 31, 2012	477,450		23.44
Granted	—		—
Exercised	(77,294	)	5.89
Forfeited, cancelled or expired	(113,356	)	19.03

Outstanding — December 31, 2013	286,800		29.91	3.5	807

Exercisable — December 31, 2013	286,800		29.91	3.5	807

The options outstanding under the 2000 and 2004 plans at December 31, 2013 were as follows:



Exercise prices $	Outstanding at 12/31/2013	Exercisable at 12/31/2013	Remaining contractual lives	Exercise prices for outstanding options $	Exercise prices for exercisable options $

5.89	86,400	86,400	4.9	5.89	5.89
14.70	24,500	24,500	0.6	14.70	14.70
28.40	15,000	15,000	1.7	28.40	28.40
28.50	13,000	13,000	1.5	28.50	28.50
34.88	3,200	3,200	2.2	34.88	34.88
34.90	7,600	7,600	2.6	34.90	34.90
35.85	15,450	15,450	4.7	35.85	35.85
36.50	19,350	19,350	2.5	36.50	36.50
42.87	7,000	7,000	2.9	42.87	42.87
46.08	13,150	13,150	4.4	46.08	46.08
51.90	11,550	11,550	4.2	51.90	51.90
52.51	6,750	6,750	3.2	52.51	52.51
52.51	46,350	46,350	3.7	52.51	52.51
52.59	8,250	8,250	3.5	52.59	52.59
59.23	9,250	9,250	3.9	59.23	59.23

	286,800	286,800

The fair value of options which were exercised in the year to December 31, 2013 was $161,000. No options vested and no options were granted under the plans during the year ended December 31, 2013.

(b) 2007 performance share plan

Under the Company’s former 2007 performance share plan, awards of up to 500,000 class A common shares could be granted to OEH employees. The shares covered by the awards were to be issued after at least one year from the grant date upon payment of a nominal amount ($0.01 per share), subject to meeting performance criteria set forth in the awards. Awards were also granted under the plan without any specified performance criteria. When the shares were issued under the awards, the grantees were also entitled to receive a cash equivalent of the dividends, if any, which would have been paid on the shares in respect of dividend record dates occurring during the period between the award grant date and the share issue date. At December 31, 2013, no shares remain available for future grants as these have been transferred to the 2009 plan described below and the 2007 performance share plan had expired.

The status of the awards as of December 31, 2013 and 2012 and changes during the years then ended are presented as follows:



	Number of shares subject to awards		Weighted average exercise price $	Aggregate intrinsic value $’000

Outstanding — January 1, 2012	172,229		0.01
Granted	—		—
Vested and issued	(108,802	)	0.01
Forfeited, cancelled or expired	(63,427	)	0.01

Outstanding — December 31, 2012	—		—
Granted	—		—
Vested and issued	—		—
Forfeited, cancelled or expired	—		—

Outstanding — December 31, 2013	—		—	—

Under the Company’s 2007 stock appreciation rights plan, stock appreciation rights (“SARs”) may be awarded to eligible employees. Each award is to be settled in cash measured by the increase (if any) of the publicly-quoted price of the Company’s class A common shares between the date of the award and the third anniversary of that date, multiplied by the number of SARs granted in the individual award.

In the years ended December 31, 2013, 2012 and 2011, no SARs were awarded. The third anniversary of the date of the award of SARs in the year ended December 31, 2010 occurred during 2013 so that at December 31, 2013 there was no liability remaining.

Estimates of fair values of the awards were made using the Black-Scholes valuation model based on the following assumptions:



	2013		2012			2011
Expected share price volatility	42%		47%			51%-59%
Risk-free interest rate	0.11%		0.16		%	0.28%-0.45%
Expected annual dividends per share	$	—	$	—		$	—
Expected life of awards	8 months		11 months			1 year

(d) 2009 share award and incentive plan

The Company's 2009 share award and incentive plan became effective in June 2009 and replaced the 2000 stock option plan, 2004 stock option plan and 2007 performance share plan (the “Pre-existing Plans”). A total of 1,084,550 class A common shares plus the number of class A common shares subject to outstanding awards under the Pre-existing Plans which become available after June 2009 as a result of expirations, cancellations, forfeitures or terminations, were reserved for issuance for awards under the 2009 share award and incentive plan. In 2010, the 2009 plan was amended to increase by 4,000,000 the number of class A shares authorized for issuance under the plan, and in 2012 by another 5,000,000 class A shares.

The 2009 plan permits awards of stock options, stock appreciation rights, restricted shares, deferred shares, bonus shares and awards in lieu of obligations, dividend equivalents, other share-based awards, performance-based awards, or any combination of the foregoing. Each type of award is granted and vests based on its own terms, as determined by the Compensation Committee of the Company’s board of directors.

During 2013, the following awards were made under the 2009 plan on the following dates:

February 21, 2013:


•	share options on 31,700 class A common shares vesting on March 9, 2015 at an exercise price of $9.95 per share,


•	deferred shares without performance criteria covering 6,600 class A common shares vesting on March 9, 2015 at a purchase price of $0.01 per share, and


•	deferred shares with performance criteria and market conditions on up to 24,600 class A common shares vesting on March 9, 2015 at a purchase price of $0.01 per share.

March 15, 2013:


•	deferred shares without performance criteria covering 114,000 class A common shares vesting on March 15, 2016 at a purchase price of $0.01 per share, and


•	deferred shares with performance criteria and market conditions on up to 290,400 class A common shares vesting on March 15, 2016 at a purchase price of $0.01 per share.

April 22, 2013:


•	deferred shares without performance criteria covering 29,370 class A common shares vesting on July 22, 2013 at a purchase price of $0.01 per share.

June 10, 2013:


•	share options on 289,000 class A common shares vesting on June 10, 2016 at an exercise price of $11.74 per share, and


•	deferred shares without performance criteria covering 34,400 class A common shares vesting on June 10, 2016 at a purchase price of $0.01 per share.

June 28, 2013:


•	deferred shares without performance criteria covering 33,200 class A common shares vesting on June 28, 2016 at a purchase price of $0.01 per share,


•	restricted shares without performance criteria covering 33,200 class A common shares vesting on June 28, 2016 at a purchase price of $0.01 per share, and


•	restricted shares without performance criteria covering 12,400 class A common shares vesting on the earlier of June 28, 2014 or the day before the 2014 annual general meeting of the Company at a purchase price of $0.01 per share.

August 14, 2013:


•	deferred shares without performance criteria covering 40,000 class A common shares vesting on August 14, 2016 at a purchase price of $0.01 per share.

December 12, 2013


•	share options on 435,950 class A common shares vesting on December 12, 2016 at an exercise price of $14.51 per share.

Transactions relating to share options under the 2009 plan have been as follows:



	Number of shares subject to options		Weighted average exercise price $	Weighted average remaining contractual life in years	Aggregate intrinsic value $’000

Outstanding — January 1, 2012	2,535,600		9.35
Granted	811,450		10.09
Exercised	(29,477	)	8.44
Forfeited, cancelled or expired	(364,223	)	9.55

Outstanding — December 31, 2012	2,953,350		9.54
Granted	756,650		13.26
Exercised	(236,322	)	8.77
Forfeited, cancelled or expired	(702,178	)	8.57

Outstanding — December 31, 2013	2,771,500		10.67	8.3	12,309

Exercisable — December 31, 2013	526,750		9.79	6.4	7,959

The options outstanding under the 2009 plan at December 31, 2013 were as follows:



Exercise prices $	Outstanding at 12/31/2013	Exercisable at 12/31/2013	Remaining contractual lives	Exercise prices for outstanding options $	Exercise prices for exercisable options $

8.38	76,500	76,500	5.4	8.38	8.38
7.71	5,000	5,000	5.5	7.71	7.71
8.91	98,200	98,200	5.9	8.91	8.91
9.93	5,000	5,000	6.1	9.93	9.93
8.37	117,400	117,400	6.5	8.37	8.37
11.44	224,650	224,650	6.9	11.44	11.44
11.69	251,500	—	7.4	11.69	—
8.06	520,150	—	7.9	8.06	—
9.95	31,700	—	8.2	9.95	—
8.42	283,200	—	8.5	8.42	—
11.32	401,550	—	8.9	11.32	—
9.95	31,700	—	9.1	9.95	—
11.74	289,000	—	9.4	11.74	—
14.51	435,950	—	9.9	14.51	—

	2,771,500	526,750

The fair value of option grants made in the year to December 31, 2013 was $5,048,000. The fair value of options which became exercisable in the year to December 31, 2013 was $3,938,000. The fair value of options which were exercised in the year was $1,025,000. The number of options which vested during the year was 696,850.

Transactions relating to deferred shares and restricted shares under the 2009 plan have been as follows:



	Number of shares subject to awards		Weighted average exercise price $	Aggregate intrinsic value $'000

Outstanding — January 1, 2012	485,020		0.01
Granted	1,042,900		0.01
Vested and issued	(130,134	)	0.01
Forfeited, cancelled or expired	(54,137	)	0.01

Outstanding — December 31, 2012	1,343,649		0.01
Granted	618,170		0.01
Vested and issued	(344,388	)	0.01
Forfeited, cancelled or expired	(135,604	)	0.01

Outstanding — December 31, 2013	1,481,827		0.01	17,323

At December 31, 2013, awards of deferred shares and restricted shares on 1,481,827 class A common shares were reserved under the 2009 plan. Of these awards, 800,400 deferred shares and restricted shares do not specify any performance criteria and will vest up to August 2016. The remaining awards of up to 681,427 deferred shares will vest up to March 2016 and are subject to performance and market criteria. Half of the 681,427 deferred share awards are subject to performance criteria based on OEH’s earnings before tax for the three years ending December 31, 2013, 2014 or 2015, and the other half are subject to market criteria based on OEH’s total shareholder return compared to the average total shareholder return of a specified group of other hotel and leisure companies over the period of three years.

The fair value of deferred shares and restricted shares awarded in the year to December 31, 2013 was $4,227,000. The fair value of deferred shares vested in the year to December 31, 2013 was $3,193,000.

There were no vested and unissued deferred share or restricted shares awards as of December 31, 2013.

Estimates of the fair value of the share options on the grant date using the Black-Scholes options pricing model were based on the following assumptions:



Year ended December 31,	2013	2012	2011
Expected share price volatility	50%-60%	58%-60%	56%-58%
Risk-free interest rate	1.30%-1.74%	1.03%-1.69%	0.97%-1.40%
Expected annual dividends per share	$—	$—	$—
Expected life of share options	4.5-8 years	8 years	5 years

Estimates of fair values of deferred shares and restricted shares without performance criteria on the grant date using the Black-Scholes options pricing model were based on the following assumptions:



Year ended December 31,	2013	2012	2011
Expected share price volatility	33%-51%	52%-67%	37%-82%
Risk-free interest rate	0.04%-0.67%	0.10%-0.40%	0.13%-1.20%
Expected annual dividends per share	$—	$—	$—
Expected life of awards	18 days - 3 years	2 months - 3 years	4 months - 3 years

Estimates of fair values of deferred shares with performance and market conditions were made using the Monte Carlo valuation model based on the following assumptions:



Year ended December 31,	2013	2012	2011
Expected share price volatility	52%	59%	88%
Risk-free interest rate	0.26%-0.39%	0.47%	0.97%-1.40%
Expected annual dividends per share	$—	$—	$—
Expected life of awards	2-3 years	3 years	3 years