18. STOCK-BASED COMPENSATION
The Company maintains a stock option program for certain employees. Under the plan, up to 6,096,000 options may be granted for subsequent exercise in exchange for common shares. It is the Company's policy that no more than 1% of outstanding shares or 766,298 share options may be granted in any one year. Stock options have a seven-year term, vest 20% per year on each anniversary date of the grant and are exercisable at the designated common share price, which is fixed at prevailing market prices of the common shares at the date the option is granted. Toromont accrues compensation cost over the vesting period based on fair value.
A reconciliation of the outstanding options for the year ended December 31, 2012 was as follows:
Weighted Average Number of Exercise Options Price----------------------------------------------------------------------------Options outstanding, beginning of year 2,419,060 $ 15.41Granted 610,100 20.76Exercised (1) (443,920) 13.97Forfeited (20,885) 16.61----------------------------------------------------------------------------Options outstanding, end of year 2,564,355 $ 16.92--------------------------------------------------------------------------------------------------------------------------------------------------------Options exercisable, end of year 972,990 $ 15.24--------------------------------------------------------------------------------------------------------------------------------------------------------(1) The weighted average share price at date of exercise was $21.95
A reconciliation of the outstanding options for the year ended December 31, 2011 was as follows:
Weighted Average Number of Exercise Options Price----------------------------------------------------------------------------Options outstanding, beginning of year 2,144,860 $ 26.04Exercised prior to spinoff (1) (62,770) 22.99Forfeited prior to spinoff (52,060) 27.11----------------------------------------------------------------------------Options outstanding at spinoff 2,030,030 $ 26.10--------------------------------------------------------------------------------------------------------------------------------------------------------Options outstanding post spinoff 2,030,030 $ 14.72Granted subsequent to spinoff 601,975 17.10Exercised subsequent to spinoff (2) (137,385) 12.80Forfeited subsequent to spinoff (75,560) 15.12----------------------------------------------------------------------------Options outstanding, end of year 2,419,060 $ 15.41--------------------------------------------------------------------------------------------------------------------------------------------------------Options exercisable, end of year 972,605 $ 14.43--------------------------------------------------------------------------------------------------------------------------------------------------------(1) The weighted average share price at date of exercise was $31.45(2) The weighted average share price at date of exercise was $20.05
