Google 2013 Annual Report Download - page 76

 GOOGLE INC.
PART II
ITEM8.Notes to Consolidated Financial Statements
Class A and Class B Common Stock
Ourboardofdirectorshasauthorizedtwoclassesofcommonstock,ClassAandClassB.AtDecember31,2013,therewere
9,000,000,000and3,000,000,000sharesauthorizedandtherewere279,325,564and56,506,728sharesoutstandingofClassA
andClassBcommonstock,$0.001parvalue.TherightsoftheholdersofClassAandClassBcommonstockareidentical,except
withrespecttovoting.EachshareofClassAcommonstockisentitledtoonevotepershare.EachshareofClassBcommonstock
isentitledto10votespershare.SharesofClassBcommonstockmaybeconvertedatanytimeattheoptionofthestockholder
andautomaticallyconvertuponsaleortransfertoClassAcommonstock.WerefertoClassAandClassBcommonstockas
commonstockthroughoutthenotestothesenancialstatements,unlessotherwisenoted.

InApril2012,ourboardofdirectorsapprovedamendmentstoourcerticateofincorporationthatwould,amongotherthings,
createanewclassofnon-votingcapitalstock(ClassCcapitalstock).Theamendmentsauthorized3billionsharesofClassC
capitalstockandalsoincreasedtheauthorizedsharesofClassAcommonstockfrom6billionto9billion.Theamendmentsare
reectedinourFourthAmendedandRestatedCerticateofIncorporation(NewCharter),theadoptionofwhichwasapprovedby
stockholdersatour2012AnnualMeetingofStockholdersheldonJune21,2012.InJanuary2014,ourboardofdirectorsconsidered
andapprovedadistributionofsharesoftheClassCcapitalstockasadividendtoourholdersofClassAandClassBcommon
stock(Dividend).TheDividendwillhavearecorddateofMarch27,2014andapaymentdateofApril2,2014.TheClassCcapital
stockwillhavenovotingrights,exceptasrequiredbyapplicablelaw.ExceptasexpresslyprovidedintheNewCharter,sharesof
ClassCcapitalstockwillhavethesamerightsandprivilegesandrankequally,shareratablyandbeidenticalinallotherrespects
tothesharesofClassAcommonstockandClassBcommonstockastoallmatters.
InaccordancewiththesettlementoflitigationinvolvingtheauthorizationtodistributetheClassCcapitalstock,wemaybe
obligatedtomakeapaymenttoholdersoftheClassCstockif,onaverage,ClassCtradesbelowClassAintherstyearfollowing
theClassCissuance,payableincash,ClassAstock,ClassCstock,oracombinationthereof,atthediscretionoftheBoardof
Directors.BecausetheClassCshareshavenotyetbeenissuedorcommencedtrading,wecannotreliablypredictwhat,ifany,
patternswillemergeovertimewithrespecttotherelativetradingpricesofClassAandClassCshares.
TheparvaluepershareofoursharesofClassAcommonstockandClassBcommonstockwillremainunchangedat$0.001per
shareaftertheDividend.OntheeectivedateoftheDividend,therewillbeatransferbetweenretainedearningsandcommon
stockandtheamounttransferredwillbeequaltothe$0.001parvalueoftheClassCcapitalstockthatisissued.Wewillgive
retroactiveeecttopriorperiodshareandpershareamountsinourconsolidatednancialstatementsfortheeectofthe
Dividend,suchthatpriorperiodsarecomparabletocurrentperiodpresentation.
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,the2012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-quali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March2009(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.
AsofDecember31,2012andDecember31,2013,therewere15,833,050and9,455,085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e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 December31,
2011 2012 2013
Risk-freeinterestrate 2.3% 1.0% 0.9%
Expectedvolatility 33% 29% 29%
Expectedlife(inyears) 5.9 5.2 5.8
Dividendyield 0 0 0
Weighted-averageestimatedfairvalueofoptionsgrantedduringtheyear $210.07 $194.27 $214.39
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