STOCK-BASED COMPENSATION AND OTHER STOCK-BASED PAYMENTS

The Company has adopted the priceline.com Incorporated 1999 Omnibus Plan, as amended and restated effective June 4, 2008, (the "1999 Plan") as the stock compensation plan from which broad-based employee grants may be made. The 1999 Plan provides for stock-based compensation grants of up to 9,195,833 shares of priceline.com Incorporated common stock as incentives and rewards to encourage employees, officers, consultants and directors to contribute to the long-term success of the Company. As of December 31, 2011, there are 792,227 shares available to be issued under the plan.

Stock-based compensation issued under the plans generally consists of restricted stock units, performance share units, restricted stock and non-qualified stock options. Stock options are granted to employees at exercise prices equal to the fair value of the common stock at the date of grant and have a term of 10 years. Generally, stock option grants to employees vest over three years from the grant date. Restricted stock, performance share units and restricted stock units generally vest over periods from 1 to 4 years. The Company issues new shares of common stock upon the issuance of restricted stock, the exercise of stock options and the vesting of restricted stock units and performance share units.

Stock-based compensation included in personnel expenses in the Consolidated Statements of Operations was approximately $65.7 million, $68.2 million and $40.7 million for the years ended December 31, 2011, 2010 and 2009, respectively. Stock-based compensation for the years ended December 31, 2011 and 2010 includes charges amounting to $10.3 million and $13.4 million, respectively, representing the cumulative impact of adjusting the estimated probable outcome at the end of the performance period for certain outstanding unvested performance share units. Included in the stock-based compensation are approximately $1.7 million, $1.3 million, and $1.1 million for the years ended December 31, 2011, 2010, and 2009, respectively, for grants to non-employee directors. The related tax benefit for stock-based compensation is $8.1 million, $7.5 million and $4.9 million for the years ended December 31, 2011, 2010 and 2009, respectively.

The following table summarizes stock option activity during the year ended December 31, 2011:



Stock Options	Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value (000’s)

Outstanding at December 31, 2010	355,468		$	23.59	2.6	years	$	133,641
Exercised	(158,230	)	$	27.19
Expired	—		$	—
Outstanding at December 31, 2011	197,238		$	20.71	2.3	years	$	88,166

No stock options were granted during the years ended December 31, 2011, 2010 or 2009. The intrinsic value of stock options exercised was approximately $77.1 million, $74.8 million and $61.9 million for the years ended December 31, 2011, 2010 and 2009, respectively. As of December 31, 2008, all stock options were fully vested and exercisable.

The following table summarizes the activity of unvested restricted stock units ("RSUs"), performance share units and restricted stock during the years ended December 31, 2009, 2010 and 2011:



Share-Based Awards	Shares		Weighted Average Grant Date Fair Value

Unvested at December 31, 2008	1,802,150		$	74.33

Granted	353,932		$	79.63
Vested	(578,730	)	$	29.16
Performance Shares Adjustment	(56,254	)	$	119.65
Forfeited	(32,244	)	$	102.65
Unvested at December 31, 2009	1,488,854		$	90.82

Granted	179,101		$	236.66
Vested	(367,856	)	$	57.24
Performance Shares Adjustment	260,822		$	182.16
Forfeited	(30,274	)	$	120.80
Unvested at December 31, 2010	1,530,647		$	130.93

Granted	125,564		$	469.29
Vested	(858,019	)	$	113.37
Performance Shares Adjustment	73,710		$	496.34
Forfeited	(71,922	)	$	182.90
Unvested at December 31, 2011	799,980		$	231.87

The Company granted 125,564, 179,101 and 306,746 restricted shares, performance share units and restricted stock units during the years ended December 31, 2011, 2010 and 2009, respectively, with an aggregate grant-date fair value of approximately $58.9 million, $42.4 million and $25.8 million, respectively. During the years ended December 31, 2011, 2010 and 2009, respectively, 858,019, 367,856 and 578,730 shares of share-based awards vested with total grant date fair values of $97.3 million, $21.1 million and $16.9 million, respectively.

Additionally, in March 2009, the Company granted an aggregate of 47,186 restricted stock units to certain executives. The restricted stock units will be forfeited if the Company’s common stock does not achieve and maintain certain stock price thresholds during the six month period preceding the March 2012 vesting date. If during such six month period the Company’s common stock closes at or above the stock price of $97.05, $104.69, or $113.03 for twenty (20) consecutive trading days, 50%, 75% or 100%, respectively, of the RSUs will be earned pursuant to the market price requirement. Subject to certain exceptions related to a change in control and terminations other than for "cause," or on account of death or disability, the executives must also continue their service through March 3, 2012 in order to receive any shares of the Company’s common stock. The RSUs earned, if any, are payable in the Company’s common stock upon vesting. Stock-based compensation expense related to an award with a market condition is recognized over the requisite service period regardless of whether the market condition is satisfied, provided that the requisite service period has been completed. The value of the Company’s stock on the date of grant was $82.65 per share. The Company considered the "path dependent" nature of the RSUs and determined the grant date fair value by replicating the payout structure of the RSUs using a series of call options and cash-or-nothing binary call options. Cash-or-nothing binary call options provide the holder with the right to receive the strike price if the stock price exceeds the strike price as of the expiration date. The fair value calculation included the following assumptions: a 1.36% annualized risk-free interest rate, a calculated three year historical volatility of 55.95%, no dividends, and an expected term equal to the three year vesting period. The award had a total grant date fair value of $2.4 million based on a grant date fair value of $51.11 per share. The fair value of a grant subject to a market condition is generally lower than an award with only a service condition for vesting since the market condition may never be met.

As of December 31, 2011, there is $92.1 million of total future compensation cost related to unvested share-based awards to be recognized over a weighted-average period of 1.9 years.

Stock-based compensation for performance share units is recorded based on the estimated probable outcome if the Company, and with respect to certain grants, its subsidiaries, priceline.com International and Agoda, achieve certain financial goals at the end of the performance period. The actual number of shares to be issued will be determined upon completion of the performance period, assuming there is no accelerated vesting for, among other things, a termination of employment under certain circumstances, or a change in control.

2011 Performance Share Units

During the year ended December 31, 2011, stock-based awards included grants of 77,144 performance share units with a grant date fair value of $35.9 million, based on a weighted average grant date fair value of $464.79 per share. The actual number of shares will be determined upon completion of the performance period which ends December 31, 2013.

At December 31, 2011, there were 76,552 unvested performance share units outstanding, net of actual forfeitures and vesting. During the year ended December 31, 2011, the number of shares estimated as probable to be issued at the end of the performance period increased by 76,817 shares.

As of December 31, 2011, the number of shares estimated to be issued at the end of the performance period is a total of 153,369 shares. If the maximum performance thresholds are met at the end of the performance period, a maximum of 163,324 total shares could be issued.

2010 Performance Share Units

During the year ended December 31, 2010, stock-based awards included grants of 110,430 performance share units with a grant date fair value of $26.0 million, based on a weighted average grant date fair value of $235.34 per share. The actual number of shares will be determined upon completion of the performance period which ends December 31, 2012.

At December 31, 2011 and 2010, there were 93,745 and 108,702 unvested performance share units outstanding, net of actual forfeitures and vesting, respectively. During the year ended December 31, 2010, the number of shares estimated as probable to be issued at the end of the performance period increased by 154,177 shares.

As of December 31, 2011, the number of shares estimated to be issued at the end of the performance period is a total of 226,505 shares. The maximum number of total shares that could be issued at the end of the performance period is 226,505 shares.

Other Stock-based Payments

In 2010, the Company granted 5,555 RSUs with a total grant date fair value of $1.6 million to an advertising partner. Expense is amortized over the service period and is charged to offline advertising expense.