7.	Common shares:

The Company provides a stock option plan to key employees, officers and directors to encourage executives to acquire a meaningful equity ownership interest in the Company over a period of time and, as a result, reinforce executives’ attention on the long-term interest of the Company and its shareholders. Under the plan, options to purchase common shares of the Company may be granted to key employees, officers and directors of the Company by the Board of Directors or by the Company’s Compensation Committee. There are 557,750 options outstanding under the plan. The term of each option is 10 years and the vesting period is five years. The exercise price for options is the trading price of the common shares of the Company on The Toronto Stock Exchange on the day of the grant. The weighted average estimated fair value at the date of the grant for the options granted during 2013 was $3.82 (2012—$3.54; 2011—$2.96) per share.

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

2013

2012

2011

Risk-free interest rate

1.54%

1.52% – 1.74%

1.67% – 2.91%

Volatility factor of the future expected market price of the Company’s common shares

61.32%

56.40% – 57.20%

49.18% – 56.29%

Expected life of the options

6 years

Details of stock options are as follows:


	2013					2012
	Number			Weighted average exercise price		Number			Weighted average exercise price
Outstanding, beginning of year		742,800		$	11.80		841,900		$	11.70
Granted		41,100			6.51		67,000			6.52
Forfeited		(160,150	)		12.67		(98,100	)		14.01
Exercised		(66,000	)		5.25		(68,000	)		2.20

Outstanding, end of year		557,750		$	11.93		742,800		$	11.80

Exercisable, end of year		419,080		$	13.70		468,960		$	14.44

At December 31, 2013, the range of exercise prices, the weighted average exercise price and the weighted average remaining contractual life are as follows:


	Options outstanding						Options exercisable
Range of exercise prices	Number outstanding		Weighted average remaining contractual life (years)		Weighted average exercise price		Number exercisable		Weighted average remaining contractual life (years)		Weighted average exercise price
$5.25 - $8.45		168,650		8.12	$	5.87		47,840		7.98	$	5.61
$9.80 - $18.99		389,100		2.90	$	14.56		371,240		2.73	$	14.75

$5.25 - $18.99		557,750		4.48	$	11.93		419,080		3.32	$	13.70

Compensation expense related to stock options was $270 for the year ended December 31, 2013 (2012—$431; 2011—$501).