SHARE-BASED AWARDS AND OPTIONS

As of November 30, 2011, we have awards outstanding under four share-based employee compensation plans. The fair value of share-based awards is amortized as compensation expense on a straight-line basis over the vesting period.

Non-qualified stock options and restricted stock have been granted to officers, key employees and directors under the Global Payments Inc. 2000 Long-Term Incentive Plan, as amended and restated (the “2000 Plan”), the Global Payments Inc. Amended and Restated 2005 Incentive Plan (the “2005 Plan”), and an Amended and Restated 2000 Non-Employee Director Stock Option Plan (the “Director Plan”) (collectively, the “Plans”). There were no further grants made under the 2000 Plan after the 2005 Plan was effective and the Director Plan expired by its terms on February 1, 2011 so no further grants will be granted thereunder.

On September 27, 2011, we held our 2011 Annual Meeting of Shareholders (the “Annual Meeting”). At the Annual Meeting, our shareholders approved the Global Payments Inc. 2011 Incentive Plan (the “2011 Plan”), a plan that permits for grants of equity to employees, officers, directors and consultants. A total of 7.0 million shares of our common stock were reserved and made available for issuance pursuant to awards granted under the 2011 Plan. Effective with the adoption of the 2011 Plan, there will be no future grants under the 2005 Plan.

Certain executives are granted two different types of performance units under our restricted stock program. A portion of those performance units represent the right to earn 0% to 200% of a target number of shares of Global Payments stock depending upon the achievement level of certain performance measures during the grant year (“PRSUs”). The target number of PRSUs and the performance measures (at threshold, target, and maximum) are set by our Compensation Committee. PRSUs are converted to a time-based restricted stock grant only if the Company's performance during the fiscal year exceeds pre-established goals. The other portion of these performance units represent the right to earn 0% to 200% of target shares of Global Payments stock based on Global Payments' relative total shareholder return compared to peer companies over a three year performance period ("TSRs"). The target number of TSRs for each executive is set by our Compensation Committee and a monte carlo simulation is used to calculate the estimated share payout.

The following table summarizes the share-based compensation cost charged to income for (i) all stock options granted, (ii) our restricted stock program (including PRSUs and TSRs), and (iii) our employee stock purchase plan . The total income tax benefit recognized for share-based compensation in the accompanying unaudited statements of income is also presented.



	Three Months Ended				Six Months Ended
	November 30, 2011		November 30, 2010		November 30, 2011		November 30, 2010
	(in millions)
Share-based compensation cost	$	4.4	$	4.2	$	8.4	$	7.7
Income tax benefit	$	1.5	$	1.5	$	2.8	$	2.7

Stock Options

Stock options are granted at 100% of fair market value on the date of grant and have 10-year terms. Stock options granted vest one year after the date of grant in 25% increments over a four year period. The Plans provide for accelerated vesting under certain conditions. We have historically issued new shares to satisfy the exercise of options. There were no options granted under the 2005 Plan during the six months ended November 30, 2011.

The following is a summary of our stock option plans as of and for the six months ended November 30, 2011:



	Options (in thousands)		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (years)	Aggregate Intrinsic Value (in millions)
Outstanding at May 31, 2011	2,453		$	32	5.1	$	45.9
Granted	—		$	—
Forfeited	(40	)	$	40
Exercised	(49	)	$	27
Outstanding at November 30, 2011	2,364		$	33	4.6	$	23.9

Options vested and exercisable at November 30, 2011	1,979		$	32	3.9	$	23.1

The aggregate intrinsic value of stock options exercised during the six months ended November 30, 2011 and 2010 was $0.6 million and $1.5 million, respectively. As of November 30, 2011, we had $4.8 million of total unrecognized compensation cost related to unvested options which we expect to recognize over a weighted average period of 1.4 years.

The weighted average grant-date fair values of each option granted during the six months ended November 30, 2010 were $12. The fair value of each option granted was estimated on the date of grant using the Black-Scholes valuation model with the following weighted average assumptions for grants during the period:



	Six Months Ended November 30,
	2011	2010
2005 Plan
Risk-free interest rates	—	1.74	%
Expected volatility	—	31.96	%
Dividend yields	—	0.21	%
Expected lives	—	5 years

Directors Plan
Risk-free interest rates	—	1.31	%
Expected volatility	—	31.96	%
Dividend yields	—	0.21	%
Expected lives	—	5 years

The risk-free interest rate is based on the yield of a zero coupon U.S. Treasury security with a maturity equal to the expected life of the option from the date of the grant. Our assumption on expected volatility is based on our historical volatility. The dividend yield assumption is calculated using our average stock price over the preceding year and the annualized amount of our current quarterly dividend. We based our assumptions on the expected lives of the options on our analysis of the historical exercise patterns of the options and our assumption on the future exercise pattern of options.

Restricted Stock

Shares and performance units awarded under the restricted stock program of the 2000 Plan and 2005 Plan are held in escrow and released to the grantee upon the grantee’s satisfaction of conditions of the grantee’s restricted stock agreement. The grant date fair value of restricted stock awards is based on the quoted fair market value of our common stock at the award date.

Grants of restricted awards are subject to forfeiture if a grantee, among other conditions, leaves our employment prior to expiration of the restricted period. New grants of restricted awards generally vest one year after the date of grant in 25% increments over a four year period, with the exception of TSRs which vest after a three year period.

The following table summarizes the changes in non-vested restricted stock awards for the six months ended November 30, 2011.



	Share Awards		Weighted Average Grant-Date Fair Value
	(in thousands)

Non-vested at May 31, 2011	869		$	40
Granted	467		48
Vested	(316	)	40
Forfeited	(46	)	42
Non-vested at November 30, 2011	974		44

The total fair value of shares vested during the six months ended November 30, 2011 was $12.6 million. During the six months ended November 30, 2010, the weighted average grant-date fair value of shares vested was $42 and the total fair value of shares vested was $10.6 million.

We recognized compensation expense for restricted stock of $6.5 million and $6.0 million in the six months ended November 30, 2011 and 2010, respectively. As of November 30, 2011, there was $42.4 million of total unrecognized compensation cost related to unvested restricted stock awards that is expected to be recognized over a weighted average period of 3 years.

Employee Stock Purchase Plan

We have an Employee Stock Purchase Plan under which the sale of 2.4 million shares of our common stock has been authorized. Employees may designate up to the lesser of $25,000 or 20% of their annual compensation for the purchase of stock. The price for shares purchased under the plan is 85% of the market value on the last day of the quarterly purchase period. As of November 30, 2011, 1.0 million shares had been issued under this plan, with 1.4 million shares reserved for future issuance.

The weighted average grant-date fair value of each designated share purchased under this plan during the six months ended November 30, 2011 and 2010 was $7 and $6, respectively, which represents the fair value of the 15% discount.