SHARE CAPITAL, OPTION PLANS AND SHARE-BASED PAYMENTS

Share Capital

Our authorized share capital includes an unlimited number of Common Shares and an unlimited number of preference shares. No preference shares have been issued.

Treasury Stock

During the three and nine months ended March 31, 2012, we did not purchase any of our Common Shares.

During the three and nine months ended March 31, 2011, we repurchased nil and 264,834 of our Common Shares, respectively, in the amount of $12.5 million, for potential future reissuance under our Long Term Incentive Plans (LTIP).

As of March 31, 2012, we have not reissued any Common Shares from treasury (June 30, 2011—nil).

Share-Based Payments

Total share-based compensation cost for the periods indicated below is detailed as follows:



	Three Months Ended March 31,				Nine Months Ended March 31,
	2012		2011		2012		2011
Stock options	$	1,428	$	939	$	3,200	$	2,719
Deferred stock units (Directors)	177		128		306		234
Restricted stock units	93		—		93		—
Restricted stock awards (legacy Vignette employees)	7		31		27		106
Performance stock units (LTIP 3, LTIP 4 and LTIP 5)	3,460		1,997		9,780		5,372
Total share-based compensation expense	$	5,165	$	3,095	$	13,406	$	8,431

Summary of Outstanding Stock Options

As of March 31, 2012, options to purchase an aggregate of 2,002,776 Common Shares were outstanding and 792,795 Common Shares were available for issuance under our stock option plans. Our stock options generally vest over four years and expire between seven and ten years from the date of the grant. The exercise price of the options we grant is set at an amount that is not less than the closing price of our Common Shares on the NASDAQ on the trading day immediately preceding the applicable grant date.

A summary of option activity under our stock option plans for the nine months ended March 31, 2012 is as follows:



	Options		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (years)	Aggregate Intrinsic Value ($’000s)
Outstanding at June 30, 2011	2,277,733		$	24.51
Granted	562,000		58.28
Exercised	(811,931	)	20.63
Forfeited or expired	(25,026	)	39.23
Outstanding at March 31, 2012	2,002,776		$	35.37	3.77	$	51,650
Exercisable at March 31, 2012	1,122,651		$	22.73	2.22	$	43,141

We estimate the fair value of stock options using the Black-Scholes option pricing model, consistent with the provisions of ASC Topic 718, “Compensation—Stock Compensation” (ASC Topic 718), and SEC Staff Accounting Bulletin No. 107. The option-pricing models require input of subjective assumptions including the estimated life of the option and the expected volatility of the underlying stock over the estimated life of the option. We use historical volatility as a basis for projecting the expected volatility of the underlying stock and estimate the expected life of our stock options based upon historical data.

We believe that the valuation technique and the approach utilized to develop the underlying assumptions are appropriate in calculating the fair value of our stock option grants. Estimates of fair value are not intended, however, to predict actual future events or the value ultimately realized by employees who receive equity awards.

For the periods indicated, the following weighted-average fair value of options and weighted-average assumptions used were as follows:



	Three Months Ended March 31,						Nine Months Ended March 31,
	2012			2011			2012			2011
Weighted–average fair value of options granted	$	22.38		$	19.82		$	21.20		$	17.02
Weighted-average assumptions used:
Expected volatility	42		%	40		%	42		%	40		%
Risk–free interest rate	0.67		%	2.00		%	0.70		%	1.60		%
Expected dividend yield	—		%	—		%	—		%	—		%
Expected life (in years)	4.97			4.30			4.81			4.30
Forfeiture rate (based on historical rates)	5		%	5		%	5		%	5		%

As of March 31, 2012, the total compensation cost related to the unvested stock awards not yet recognized was $12.6 million, which will be recognized over a weighted average period of approximately 3 years.

No cash was used by us to settle equity instruments granted under share-based compensation arrangements.

We have not capitalized any share-based compensation costs as part of the cost of an asset in any of the periods presented.

For the three and nine months ended March 31, 2012, cash in the amount of $6.5 million and $16.7 million, respectively, was received as the result of the exercise of options granted under share-based payment arrangements. The tax benefit realized by us during the three and nine months ended March 31, 2012 from the exercise of options eligible for a tax deduction was $2.9 million and $3.7 million, respectively.

For the three and nine months ended March 31, 2011, cash in the amount of $4.4 million and $8.3 million, respectively, was received as the result of the exercise of options granted under share-based payment arrangements. The tax benefit realized by us during the three and nine months ended March 31, 2011 from the exercise of options eligible for a tax deduction was $1.3 million and $2.4 million, respectively.

Deferred Stock Units (DSUs), Performance Stock Units (PSUs) and Restricted Stock Units (RSUs)

During the three and nine months ended March 31, 2012, we granted 2,066 and 9,089 deferred stock units (DSUs), respectively, to certain nonemployee directors (DSUs granted during the three and nine months ended March 31, 2011—1,548 and 6,426). The DSUs were issued under the Company’s Deferred Share Unit Plan that came into effect on February 2, 2010 and will vest at the Company’s next annual general meeting following the granting of the DSUs.

On February 3, 2012, we granted 219,721 Performance Stock Units (PSUs) under LTIP 5. We did not grant any PSUs under LTIP 4 or LTIP 3 during the three and nine months ended March 31, 2012 and 2011, respectively. Awards achieved under the LTIP 3, LTIP 4 and LTIP 5 will be settled over the performance periods ending June 30, 2012, June 30, 2013 and June 30, 2014, respectively.

On February 3, 2012, we granted 33,333 Restricted Stock Units (RSUs) to the President and Chief Executive Officer, in accordance with his employment agreement, effective as of January 2, 2012. The RSUs will vest in 3 equal amounts of 11,111 RSUs over 3 years.

Restricted Stock Awards (RSAs)

On July 21, 2009, we granted, as part of our acquisition of Vignette, 574,767 Open Text restricted stock awards (RSAs) to certain legacy Vignette employees and directors as replacement for similar restricted stock awards held by these employees and directors when they were employed by Vignette. These awards were valued at $13.33 per RSA on July 21, 2009 and a portion was allocated to the purchase price of Vignette. The remaining portion is amortized, as part of share-based compensation expense, over the vesting period of these awards.

Long-Term Incentive Plans

On September 10, 2007, our Board of Directors approved the implementation of an incentive plan called the “Open Text Corporation Long-Term Incentive Plan” (LTIP). The LTIP is a rolling three-year program whereby we make a series of annual grants, each of which covers the respective performance period, to certain of our employees, and which vests upon the employee and/or the Company meeting pre-determined performance and market-based criteria.

Grants made in Fiscal 2008 under the LTIP (LTIP 1) took effect in Fiscal 2008, starting on July 1, 2007. Awards under LTIP 1 have been settled in cash in the aggregate amount of $14.4 million as of the first quarter of Fiscal 2011.

Grants made in Fiscal 2009 under the LTIP (LTIP 2) took effect in Fiscal 2009 starting on July 1, 2008. Awards under LTIP 2 are equal to 100% of the target. Awards under LTIP 2 have been settled in cash in the aggregate amount of $10.7 million as of the first quarter of Fiscal 2012.

Grants made in Fiscal 2010 under the LTIP (LTIP 3) took effect in Fiscal 2010 starting on July 1, 2009. Awards under LTIP 3 may be equal to 50%, 100% or 150% of the target. We expect to settle LTIP 3 awards in stock.

Grants made in Fiscal 2011 under the LTIP (LTIP 4) took effect in Fiscal 2011 starting on July 1, 2010. Awards under LTIP 4 may be equal to 50%, 100% or 150% of the target. We expect to settle LTIP 4 awards in stock.

Grants made in Fiscal 2012 under the LTIP (LTIP 5) took effect in Fiscal 2012 starting on February 3, 2012. Awards under LTIP 5 will be interpolated between 0% and 150% of the target. We expect to settle LTIP 5 awards in stock.

PSUs granted under the LTIP equity plans (LTIP 3, 4 and 5) have been measured at fair value as of the effective date, consistent with ASC Topic 718, and will be charged to share-based compensation expense over the remaining life of the plan. During the three and nine months ended March 31, 2012, $3.5 million and $9.8 million, respectively, has been charged to share-based compensation expense on account of the LTIP equity plans (three and nine months ended March 31, 2011—$2.0 million and $5.4 million, respectively).

Employee Share Purchase Plan (ESPP)

During the three and nine months ended March 31, 2012, cash in the amount of approximately $0.6 million and $1.6 million, respectively, was received from employees that will be used to purchase Common Shares in future periods (three and nine months ended March 31, 2011—$0.5 million and $1.1 million, respectively).