Groupon 2013 Annual Report Download - page 123

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GROUPON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
115
Employee Stock Purchase Plan
In December 2011, the Company established an employee stock purchase plan ("ESPP"). The ESPP allows substantially
all full-time and part-time employees to acquire shares of the Company's common stock through payroll deductions over six month
offering periods. The per share purchase price is equal to 85% of the fair value of a share of our common stock at either the
beginning of the offering period or the end of the purchase period, whichever price is lower. Purchases are limited to 15% of an
employee's salary, up to a maximum of $25,000 per calendar year. The Company is authorized to grant up to 10,000,000 shares
of common stock under its employee stock purchase plan ("ESPP"). For the year ended December 31, 2013, 774,288 shares of
common stock were issued under the ESPP. No shares of common stock were issued under the ESPP for the years ended December
31, 2012 and 2011.
Stock Options
The exercise price of stock options granted is equal to the fair value of the underlying stock on the date of grant. The
contractual term for stock options expires ten years from the grant date. Stock options generally vest over a three or four-year
period, with 25% of the awards vesting after one year and the remainder of the awards vesting on a monthly or quarterly basis
thereafter. The fair value of stock options on the date of grant is amortized on a straight-line basis over the requisite service period.
The table below summarizes the stock option activity for the year ended December 31, 2013:
Options
Weighted-
Average Exercise
Price
Weighted- Average
Remaining
Contractual Term
(in years)
Aggregate Intrinsic
Value
(in thousands) (1)
Outstanding at December 31, 2012 ............ 7,713,421 $ 1.09 7.02 $ 29,063
Exercised................................................. (4,003,544) $ 1.02
Forfeited.................................................. (332,518) $ 1.51
Expired.................................................... (22,305) $ 2.04
Outstanding at December 31, 2013 ............ 3,355,054 $ 1.11 6.04 $ 35,742
Exercisable at December 31, 2013 ............. 2,875,441 $ 0.93 5.95 $ 31,165
(1) The aggregate intrinsic value of options outstanding and exercisable represents the total pretax intrinsic value (the difference between the fair
value of the Company's stock on the last day of each period and the exercise price, multiplied by the number of options where the fair value
exceeds the exercise price) that would have been received by the option holders had all option holders exercised their options as of December 31,
2013 and 2012, respectively.
The fair value of stock options granted is estimated on the date of grant using the Black-Scholes-Merton option-pricing
model. Expected volatility is based on historical volatilities for publicly-traded options of comparable companies over the estimated
expected life of the stock options. The expected term represents the period of time the stock options are expected to be outstanding
and is based on the "simplified method." The Company used the "simplified method" due to the lack of sufficient historical exercise
data to provide a reasonable basis upon which to otherwise estimate the expected life of the stock options. The risk-free interest
rate is based on yields on U.S. Treasury STRIPS with a maturity similar to the estimated expected life of the stock options.