Chegg 2013 Annual Report Download - page 139

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CHEGG, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
During 2013 and 2011 we granted 110,886 and 12,000 option awards to consultants, respectively. No option
awards were granted to consultants in 2012. Total stock-based compensation expense for consultants was
$0.9 million, $0.2 million and $0.4 million for the years ending December 31, 2013, 2012 and 2011, respectively.
There was no capitalized stock-based compensation as of December 31, 2013, 2012 and 2011.
Restricted Stock Units
In 2013, we granted 473,569 RSUs to certain advisory board members and officers and employees at a
weighted-average grant-date fair value of $12.50 per share. RSUs granted before our IPO vest upon the
satisfaction of both a time-based service component and a performance condition. We expect the performance
condition to be satisfied on March 15, 2014. In addition, we granted RSUs to certain executives at the time of our
IPO, under the Designated IPO Equity Incentive Program. Stock-based compensation expense of $16.4 million
was recorded for the RSUs upon the completion of our IPO. In 2013, 130,390 RSUs were cancelled due to the
termination of certain employees and an officer, or were withheld related to net share settlement of RSUs. At
December 31, 2013, 1,479,898 of the RSUs remained outstanding at a weighted average fair value of $10.01 per
share. As of December 31, 2013, we had a total of approximately $2.4 million of unrecognized compensation
costs for which the service condition has not yet been satisfied, respectively. The unrecognized compensation
cost is expected to be recognized over the remaining weighted average period of nine months. We estimate that
an aggregate of approximately 1.3 million shares underlying these RSUs will vest and settle on March 15, 2014.
These shares have not been included in our shares outstanding in our consolidated balance sheet as of
December 31, 2013.
Acquisition-Related Stock Awards
In connection with acquisitions in 2011, we issued 3,493,637 shares of common stock to former employees
of the acquired businesses, of which 2,197,323 shares were vested at the respective dates of acquisition and the
remaining 1,296,314 shares vested over periods ranging from 18 months to two years, based on the employees’
continuing employment. These shares were fully vested as of December 31, 2013.
In addition, certain former Zinch employees had the right to sell those shares and options that were vested as
of the date of acquisition back to the Company at a fixed price of $12.00 per share less the exercise price of a
respective option. As a result, we recorded approximately $1.8 million of compensation expense for the fair
value of the put right upon the completion of the acquisition.
In addition, within 90 days following the termination of employment of certain former employees related to
these acquisitions, the employees will have the option to sell any vested shares back to us at a fixed price of
$11.94 per share. The vested portion of the 319,812 restricted shares has been classified as a liability on the
consolidated balance sheets, as our obligation to purchase the shares from the employees is outside our control.
During 2013, 2012 and 2011, we recorded compensation expense of approximately $0.5 million, $1.1 million,
and $1.1 million, respectively, due to the vesting of the restricted stock and a resulting liability of approximately
$1.5 million and $1.1 million, as of December 31, 2013 and 2012, respectively, related to the employees’ option
to sell the vested shares back to the Company.
During 2011 and 2010, we also assumed certain outstanding common stock options in exchange for 447,837
and 247,724 options to purchase our common shares, respectively. For these options, we primarily assumed the
terms of the acquired company’s stock option plans, and thus each option shall continue to have and be subject to
the same terms and conditions as were in effect immediately prior to the respective acquisition. As part of the
acquisition agreements, 340,264 of these stock options were immediately vested at the acquisition dates, and the
remaining 355,297 stock options will vest over a weighted-average period of 1.7 years as of December 31, 2011.
As of December 31, 2013 and 2012, the remaining unvested stock options will vest over a weighted-average
period of seven months and ten months, respectively.
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