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64 COGECO CABLE INC. 2010 Consolidated Financial Statements
Under the Stock Option Plan, the following options were granted by the Corporation and are outstanding as at August 31:
2010 2009
Options
Weighted
average
exercise price Options
Weighted
average
exercise price
$ $
Outstanding, beginning of year 716,745 30.37 834,724 28.55
Granted 66,174 32.08 153,381 33.85
Exercised (17,911) 26.88 (28,785) 22.24
Forfeited / cancelled(1) (48,248) 37.08 (242,575) 27.27
Outstanding, end of year 716,760 30.16 716,745 30.37
Exercisable, end of year 507,811 28.28 432,246 27.45
(1) In fiscal 2010, the Corporation cancelled 10,398 conditional stock options (18,800 in 2009) as yearly financial objectives by the Portuguese subsidiary,
Cabovisão, were not achieved. Furthermore, on April 6, 2009, 206,180 stock options were cancelled of which 112,662 were still conditional.
At August 31, 2010, the range of exercise prices, the weighted average exercise price and the weighted average remaining contractual life of
options are as follows:
Options outstanding Options exercisable
Range of exercise prices
Numbe
r
outstanding
Weighted
average
remaining
contractual
life (years)
Weighted
average
exercise price
Numbe
r
exercisable
Weighted
average
exercise price
$ $ $
7.05 2,300 2.13 7.05 2,300 7.05
15.70 to 16.80 44,285 3.17 16.43 44,285 16.43
21.50 to 26.63 311,333 5.32 25.29 279,638 25.14
28.95 to 34.46 270,868 7.58 32.02 129,715 31.04
36.10 to 45.59 6,144 6.79 41.08 2,774 41.67
49.82 81,830 7.15 49.82 49,099 49.82
716,760 6.25 30.16 507,811 28.28
The Corporation recorded compensation expense for options granted on or after September 1, 2003. As a result, a compensation expense of
$619,000 ($1,008,000 in 2009) was recorded for the year ended August 31, 2010.
The weighted average fair value of each option granted was estimated on the grant date for purposes of determining stock-based
compensation expense using the binomial option pricing model based on the following assumptions:
2010 2009
% %
Expected dividend yield 1.49 1.40
Expected volatility 29 29
Risk-free interest rate 2.67 4.22
Expected life in years 4.8 4.0
The fair value of stock options granted for the year ended August 31, 2010 was $8.12 ($8.74 in 2009) per option.
For the purpose of compensation expense, stock-based compensation costs are amortized to expense on a straight-line basis over the vesting
period, which is three to five years.
Incentive share unit plan
Effective October 29, 2009, the Corporation established a senior executive and designated employee Incentive Share Unit Plan (“ISU Plan”).
According to the plan, senior executives and designated employees periodically receive a given number of Incentive Share Units (“ISUs”) which
entitle the participant to receive subordinate voting shares of the Corporation after three years less one day from the date of grant. During fiscal
2010, the Corporation granted 63,666 ISUs of which 9,981 ISUs were granted to COGECO Inc.’s employees. The Corporation establishes the
value of the compensation related to the ISUs granted based on the fair value of the Corporation’s subordinate voting shares at the date of
grant and a compensation expense is recognized over the vesting period, which is three years less one day. A Trust was created for the