(D)  Warrants and Warrant Reserve (E) Options and Share Option Reserve (F) Dividends Capstone has included $7,208 of accrued common dividends and $625 of accrued preferred dividends as declared on November 12, 2013 (December 31, 2012 – $5,677 was accrued for common shares and $625 for preferred shares). Capstone paid $0.300 per common share and $1.250 per preferred share during the year endedDecember 31, 2013 (December 31, 2012 – $0.450 per common share and $1.250 per preferred share). The dividends declared were as follows: (1) Number of individual options are not in thousands. The grant-date fair value of the share options is measured based on the Black-Scholes formula. Expected volatility is estimated by considering  historic average share price volatility. The following assumptions were used to estimate the fair value of the options issued to grantees: On October 1, 2013, the date ReD was acquired, ReD option holders received301,811 of replacement options from Capstone. The Corporation's share option reserve atDecember 31, 2013 is $144. The number and weighted average exercise prices of stock options are as follows: On October 1, 2013, the date ReD was acquired, ReD warrant holders received 1,356,892 of replacement warrants from Capstone which have an exercise price of $5.19 dollars and expire March 6, 2014. The Corporation determined the fair value of the replacement warrants reserve on October 1, 2013 to be $Nil. Number of  Warrants (1) Amount Business acquisition 1,356,892 — Expiry of warrants during period — — 1,356,892 — (1) Number of individual warrants are not in thousands. Expiry date Options outstanding (1) Options exercisable (1) Exercise price September 29, 2015 39,039 39,039 $3.85 April 12, 2016 65,064 43,376 $4.54 December 15, 2016 20,820 13,880 $2.81 May 15, 2017 58,086 19,362 $4.04 183,009 115,657 $4.02 Number of  Options (1) Weighted average exercise price Business acquisition 301,811 $3.99 Exercised during the year (19,518) $2.94 Expired during the year (99,284) $4.11 Outstanding at December31, 2013 183,009 $4.04 Exercisable at December31, 2013 115,657 $4.02 The following options were outstanding and exercisable as at December 31, 2013: Risk-free interest rate 1.2% Expected annual dividend $0.30 dollars Expected life of options 3 years Expected volatility 27% For the year ended Dec 31, 2013 Dec 31, 2012 Common shares 23,358 32,302 Class B exchangeable units 975 1,462 24,333 33,764 Preferred shares (includes $173 of deferred income taxes) 3,923 4,575 2013 ANNUAL REPORT  93