Google Inc. to Launch Transferable Stock Option Program for its Employees

MOUNTAIN VIEW, Calif. - Google Inc. (NASDAQ: GOOG) announced today a program that will enable employees to sell vested stock options in an online auction. Under the Transferable Stock Option (TSO) program, employees will still be able to exercise their options, but will also be able to sell their options to financial institutions as an alternative.

This program represents an innovative way to compensate employees and will increase the efficiency of Google's equity compensation by increasing the per-option value of employee stock options. Google will amend the terms of eligible employee stock options to make vested options transferable. The auction will be managed by Morgan Stanley. Smith Barney will serve as the employee stock option administrator. Google is working with multiple financial institutions to participate as bidders in the auction.

The ability to sell options is not a novel concept - today people can buy and sell options to purchase Google stock and the stock of many other companies on the public markets. What is novel is that Google is extending this ability to trade options to employee stock options. If an employee chooses to sell options in the TSO program, he or she will use an internal online tool built by Morgan Stanley to sell them to the highest-bidding financial institution. The financial institutions buying the options will then likely hold them until maturity and then settle with Google.

Google's employee stock options typically have a ten-year term from the grant date. Under the TSO program, Google's employee stock options, upon transfer, will have a lifespan of the lesser of two years or up to the remaining term under the original grant.

Google expects this program will go into effect in the second quarter of 2007. Only stock options issued since Google's initial public offering will be eligible for this program, and Google's Executive Management Group may not participate in the program.

This program will not result in a change to the accounting method used for employee stock options. However, in the near term Google expects that the amount it recognizes as stock-based compensation will be greater than it would otherwise have been after the program goes into effect.

Google has discussed the TSO program with the Securities and Exchange Commission, and Google will ensure the program complies with applicable securities laws.

Click here for more information about this new program.