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Note 10 — Stock-Based Compensation (continued)
We estimated the fair value of each stock option grant on the date of grant using the following
weighted-average assumptions:
Year Ended
December 31,
2010
Five Months
Ended
December 31,
2009 2009 2008
Year Ended
July 31,
Risk-free interest rate . . . . . . . . . . . . . . . . . . . . . 2.18% 2.56% 2.26% 2.98%
Expected term (life) of options (in years). . . . . . . 5.92 6.08 6.08 6.08
Expected dividends. . . . . . . . . . . . . . . . . . . . . . . — — — —
Expected volatility . . . . . . . . . . . . . . . . . . . . . . . . 49.41% 46.9% 53.2% 54.3%
Determining the fair value of stock-based awards at their respective grant dates requires considerable
judgment, including estimating expected volatility and expected term (life). We based our expected
volatility on the historical volatility of comparable public companies over the option’s expected term.
We calculated our expected term based on the simplified method, which is the mid-point between the
weighted-average graded-vesting term of 2.16 years and the contractual term of 10 years, resulting in
6.08 years. The simplified method was chosen as a means to determine expected term as there is limited
historical option exercise experience due to our company being privately held. We derived the risk-free rate
from the average yield for the five-and seven-year zero-coupon U.S. Treasury Strips. We estimate
forfeitures at the grant date based on our historical forfeiture rate since the Plan’s inception and revise
the estimate, if necessary, in subsequent periods if actual forfeitures differ from those estimates.
The weighted-average fair value of options granted was $15.66 for the year ended December 31,
2010, $9.47 for the five months ended December 31, 2009 and $6.98 and $2.49 for the years ended
July 31, 2009 and 2008, respectively.
The following table summarizes information by grant date for the stock options that we granted during
the preceding 12 months:
Plan
Number of
Shares
Subject to
Options
Granted
Per Share
Exercise
Price of
Options
Grant Date
Per Share
Fair Value of
Our Common
Stock
Per Share
Estimated
Weighted
Average Fair
Value of
Options
February 2, 2010 . . . . . . 2001 Stock Plan 130,500 25.00 25.00 12.71
May 6, 2010 . . . . . . . . . . 2001 Stock Plan 89,000 32.23 32.23 15.29
July 21, 2010 . . . . . . . . .
2010 Equity Incentive
Plan 79,500 36.00 36.00 17.23
October 6, 2010 . . . . . . .
2010 Equity Incentive
Plan 50,000 46.15 46.15 21.51
We granted our stock options to employees on February 2, 2010 and May 6, 2010 at exercise prices
equal to the estimated fair value of the underlying common stock, as determined on a contemporaneous
basis by our board of directors with input from management and an independent valuation firm. For all
grants made following the completion our initial public offering in July 2010, we granted stock options at
exercise prices equal to the closing price of our Class A common stock on the NYSE on the date of grant.
Stock Awards
In December 2009, our board of directors awarded 257,984 shares of common stock to our Chief
Executive Officer to compensate him for past services rendered to our company. The number of shares
79
GREEN DOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)