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69GOOGLE INC. |Form10-K
PART II
ITEM8.Notes to Consolidated Financial Statements
Stock Plans
We maintain the 1998 Stock Plan, the 2000 Stock Plan, the 2003 Stock Plan, the 2003 Stock Plan (No.2), the 2003 Stock Plan
(No.3), the 2004 Stock Plan, and plans assumed through acquisitions, all of which are collectively referred to as the “Stock Plans.”
Under our Stock Plans, incentive and non-qualifi ed stock options or rights to purchase common stock may be granted to eligible
participants. Options are generally granted for a term of 10 years. Under the Stock Plans, we have also issued RSUs. An RSU award
is an agreement to issue shares of our stock at the time the award vests. Except for options granted pursuant to our stock option
exchange program completed in March2009 (the Exchange), options granted and RSUs issued to participants under the Stock
Plans generally vest over four years contingent upon employment or service with us on the vesting date.
At December31, 2011 and December31, 2012, there were 21,794,492 and 15,833,050 shares of common stock reserved for
future issuance under our Stock Plans.
We estimated the fair value of each option award on the date of grant using the BSM option pricing model. Our assumptions
about stock-price volatility have been based exclusively on the implied volatilities of publicly traded options to buy our stock with
contractual terms closest to the expected life of options granted to our employees. We estimate the expected term based upon
the historical exercise behavior of our employees. The risk-free interest rate for periods within the contractual life of the award
is based on the U.S. Treasury yield curve in eff ect at the time of grant.
The following table presents the weighted-average assumptions used to estimate the fair values of the stock options granted in
the periods presented:
Year Ended December31,
2010 2011 2012
Risk-free interest rate 1.9% 2.3% 1.0%
Expected volatility 35% 33% 29%
Expected life (in years) 5.4 5.9 5.2
Dividend yield 0 0 0
Weighted-average estimated fair value of options granted during the year $216.43 $210.07 $194.27
The following table summarizes the activities for our options for the year ended December31, 2012:
Options Outstanding
Number
of Shares
Weighted-
Average
Exercise Price
Weighted-Average
Remaining Contractual
Term (in years)
Aggregate
Intrinsic Value
(in millions)(1)
Balance at December31, 2011 9,807,252 $357.92
Granted(2) 1,392,191 $580.45
Exercised (2,409,331) $305.81
Forfeited/canceled (238,717) $460.45
Balance at December31, 2012 8,551,395 $405.98 5.2 $2,516
Vested and exercisable as of December31, 2012 6,023,559 $351.44 4.1 $2,099
Vested and exercisable as of December31, 2012
andexpected to vest thereafter(3) 8,218,732 $400.72 5.2 $2,461
(1) The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the closing stock price
of $707.38 of our ClassA common stock on December31, 2012.
(2) Includes options granted in connection with the acquisition of Motorola.
(3) Options expected to vest reflect an estimated forfeiture rate.
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