Filed by Google Inc.
Pursuant to Rule 433 under the Securities Act of 1933
Registration Statement on Form S-3: No. 333-140828
GOOGLE TRANSFERABLE STOCK OPTIONS PROGRAM
QUESTIONS AND ANSWERS
REVISED AS OF FEBRUARY 21, 2007
THIS DOCUMENT CONTAINS QUESTIONS AND ANSWERS REGARDING GOOGLES PROPOSED TRANSFERABLE STOCK OPTION PROGRAM. THE QUESTIONS AND ANSWERS ARE BASED ON OUR CURRENT PLANNED STRUCTURE OF THE PROGRAM, WHICH MAY CHANGE. GOOGLE MAY MODIFY THIS PROGRAM AND, IF IT LAUNCHES, TERMINATE THIS PROGRAM AT ANY TIME IN ITS SOLE DISCRETION.
GENERAL PROGRAM QUESTIONS
What are Google Transferable Stock Options (TSOs)?
Google TSOs are Google employee nonqualified stock options that, once vested, may be transferred (sold) to financial institutions through an online auction. Under our current stock option program, Google employees have a choice of either (1) exercising their vested stock options and then selling or holding the stock, or (2) continuing to hold the options to purchase shares at a later date. The TSO program offers a third alternative: selling vested stock options to financial institutions.
How do these new stock options compare to regular stock options?
Traditional stock options are not transferable (except in limited circumstances at death) they are only exercisable. TSOs can either be exercised like traditional options, or they can be transferred (sold). TSOs will be governed by the terms of Googles 2004 Stock Plan and the relevant option agreements, which will be amended as described below.
Why did Google create this program?
We want to permit Google employees to capture the time value of their options. Because the current option program does not allow the sale of employee stock options, employees are able to realize value from the options only by exercising them and then selling the stock at a price higher than the exercise price. With this program, employees will be able to realize not only the intrinsic value (the difference between grant price and market price for Google stock), but also the time value of their options. Financial institutions such as banks may be willing to pay a premium above the intrinsic value for many options because of the time value.
What is time value?
Time value is the value of the right to continue holding an option for potentially greater gains at a later date.
Who can participate in this program?
Only active Google employees who are not part of the Executive Management Group (EMG) can participate in this program.
Which options are eligible? (Revised 2/20/07)
Only vested nonqualified stock options granted since Google went public (post-IPO) are eligible for this program.
Does the TSO program apply to Incentive Stock Options (ISOs)? (New 2/20/07)
No, the TSO program applies only to non-qualified stock options (NSOs). We have granted only NSOs since our IPO.
How many post-IPO options are still outstanding?
As can be derived from Googles financial statements, as of September 30, 2006 there were approximately 6.6 million vested and unvested options outstanding that were granted since Googles IPO.
Why did you exclude EMG?
We believe that this position reflects the interests of our shareholders at this point. We feel that our current compensatory programs provide adequate incentives for our Executive Management Group.
Why arent options granted before Google went public (pre-IPO) eligible?
We believe it is fair to exclude options granted before Google went public from eligibility since the purpose of the TSO program is not to create value for options that are already significantly in the money. Realistically, even if we allowed pre-IPO options in the TSO program, bidders would be willing to pay little, if any, premium beyond the existing intrinsic value for the rights to those options. For that matter, there are many post-IPO options for which investors may pay little, if any, premium.
Are refresher option awards eligible to be sold in the TSO program? (New 2/20/07)
Yes, so long as they were issued after Googles IPO to non-EMG employees.
Can employees participate in the program after their employment with Google is terminated?
Once employment is terminated, an employee will no longer be eligible to participate in the TSO program, even if their options are still exercisable under the traditional program.
Are employees required to participate in the program?
Participation in the TSO program is completely voluntary and employees may decide to participate or not to participate at any time.
Can employees sell some of their options and exercise others?
Employees are free to exercise their options or sell the options (or not) in any mix they choose.
Will employees get a better price if they sell options through Googles TSO program than if they exercised and immediately sold their options?
Generally yes. The TSO auction system allows a sale to occur under the TSO program only if the winning bidder offers a price equal to or greater than the intrinsic in-the-money value. Although there is no guarantee that the bidding financial institutions will pay a premium for an in-the-money option, historical market data suggests that they typically do. However, this will not be true in all cases in the TSO program. For example, for options that are very much in or out of the money (i.e., where the market price of Google common stock is much greater or much less than the grant price of the option), the time value could be so low as to be outweighed by the transaction costs of the TSO program. In addition, options with a remaining term of less than six months cannot be sold in the TSO program because, upon transfer, the remaining life is rounded down to zero.
Can you give me an example of what employee stock options would be worth under this program? (Revised 2/20/07)
To get an idea of what bidders might offer Google employees for options with two-year lives at given strike prices, you can refer to what the market is paying for publicly traded 2-year call options today.
For example, as of the close of trading on December 11th, 2006, two-year public market options with a "strike price" (also called "grant price") of $500 were trading at approximately $105 each. Since Googles stock price closed at approximately $484 on that day, these options were "underwater"meaning they had no intrinsic value. In other words, the entire $105 was attributed to the time value of the options. On the same date, two-year public market options with a strike price of $300 were trading at approximately $225 each. This means that the market was willing to pay not only the $184 for the value realizable by exercising and selling today, but also a $41 premium for the time value.
Another way to get an idea of what bidders might offer in the TSO program is to perform an option-pricing model analysis. For example, the Black-Scholes-Merton option pricing model is a widely-used model which you may find to be a reasonable proxy for public market option prices. However, the Black-Scholes-Merton model takes into account many variables, including the risk-free interest rate and volatility of the stock, which can make the calculation complex. You can find Black-Scholes calculators by searching online.
We caution employees not to place undue reliance on the value of publicly-traded options or any option-pricing model when attempting to determine the value of their options under the TSO program. Although Googles TSO program is intended to mirror the public market, it will not be as efficient because there will be fewer market participants and slightly higher transaction costs. In addition, the market price for options is highly volatile and may fluctuate drastically. We make no representations as to what fair value should be. Also, Google employees should be aware that as options become more in or out of the money (i.e., as the market price of Google common stock gets further from the grant price of the option), the time value of the option decreases and therefore the TSO program becomes less valuable. The only way to know for certain how much your options will be worth is to wait until the program has launched and see what the bidders are willing to pay.
Will this program be available in all countries?
We intend to make this program available to employees in all countries where Google grants options except in places where, due to local legal and/or tax implications, it would not benefit employees or the program would be impractical. While we do believe that we will be able to offer the TSO program in most countries where we grant options, we are still working through local legal and regulatory requirements in each country so that we can implement this program in as many places as possible. We will provide employees in each country with updated specifics between now and April.
When can employees start using this program?
We plan to launch the TSO program when the Q2 trading window opens in April 2007. Google employees will be able to log in to create and view their TSO account through an online system that Morgan Stanley has created for Google shortly before the program launches.
What is the beta test launch of the TSO program about? (New 2/20/07)
We are planning a beta test launch of the TSO program to occur at the end of February 2007. The test launch will include up to 20 employees, who were selected based on their involvement with the TSO program and ability to participate in the TSO beta launch. Each beta participant will be allowed to sell no more than 5 TSOs during the trial period. During the beta launch, Morgan Stanley will be the sole bidder. The purpose of the beta
launch is to test the TSO system on a limited basis to help ensure a more successful company-wide launch, currently planned for April.
Will there be periods when Google employees cannot sell their options in the TSO program? (Revised 2/20/07)
Yes. The TSO program will be available during regular trading hours for the Nasdaq Stock Market only when Googles trading window is open. In addition, Google may suspend the TSO program from time to time for a variety of reasons, including for maintenance and other technical reasons, and for periods when Google believes that it is in possession of material, non-public information until the information is no longer material or the second business day after the information has been made public. Google employees will likely not be given advance notice of these shutdowns. When the TSO program is not active, Google employees may not sell their options under the TSO program, even under a 10b5-1 plan. See also "Does the TSO program affect an employees ability to exercise options and sell the underlying shares in the traditional way?" below.
What is material, non-public information?
Information is material if a reasonable investor would consider it important in making a decision to buy, sell or hold Google securities, such as a large acquisition or commercial deal. Information is nonpublic until it has been widely disseminated to the public market and the public has had a chance to absorb and evaluate it. Google employees may refer to Googles Policy Against Insider Trading for more information on what constitutes material, non-public information.
Why will the TSO program be shut down when Google is in possession of material, non-public information?
The registration statement Google is filing with the Securities and Exchange Commission (SEC) to permit the TSO program to operate may not be used when Google is in possession of material, non-public information. Therefore, the TSO program must be suspended when Google is in possession of material, non-public information. In practice, this means that Google employees will not be able to sell options using the TSO program in these periods.
If the TSO program is shut down during a period in which Googles trading window would otherwise be open, does this mean that Google is in possession of material, non-public information? (New 2/20/07)
Not necessarily. Google may shut down the TSO program for a variety of reasons, including for maintenance and other technical reasons. You should not infer anything if Google shuts down the TSO program.
Does the TSO program affect an employees ability to exercise options and sell the underlying shares in the traditional way? (Revised 2/20/07)
Not generally. However, consistent with Googles current Policy Against Insider Trading, Google may from time to time black out one or more Google employees from selling shares (including shares issued upon exercise of options) if Google determines that these individuals are in possession of material, non-public information. Although there is no policy that all Google employees will be blacked out from selling shares during periods when the TSO program has been shut down, Google may impose blackouts on some or all Google employees in these cases. If Google were to do this, it would be to help ensure that sales of Google stock by Google employees do not violate insider-trading laws and Googles Policy Against Insider Trading. This restriction does not apply to sales of shares under a Rule 10b5-1 trading plan (but it does apply to sales of TSOs under a Rule 10b5-1 trading plan).
A previous version of these questions and answers stated that Google would shut down the ability for Google employees to trade Google stock whenever the TSO program was shut down. What changed? (New 2/20/07)
As we previously stated, the TSO program is a new program subject to change. We have reevaluated and modified this aspect of the program.
Who will buy the options?
Pre-qualified institutional investors will be bidding on all options that Google employees put up for auction.
Can employees sell options outside of Googles TSO auction process?
No, employees may not sell options outside of the TSO program.
Can a Google employee make a gift or a donation of his or her TSOs? (New 2/20/07)
No. Just as with traditional options, no gifts or donations are allowed.
What are the tax consequences when employees sell TSOs?
In the US, when employees sell TSOs, the amount they receive will be treated as compensation income to them in the year that they sell the TSOs. This income is of the same character as the income they would have received if they had exercised their options and immediately sold the underlying shares rather than sold their options through this new program. Google will withhold the same type of taxes on the compensation income they earn from the sale of TSOs as it would have if they had exercised their options and immediately sold the underlying shares rather than sold their options. The discussion above does not constitute tax advice, nor does it address any tax consequences
arising under the laws of any state, local or foreign jurisdiction. Also, tax laws may change, possibly retroactively, so you should consult your tax advisor.
Is the TSO program affected by section 409A of the Internal Revenue Code? (Revised 2/20/07)
We dont think so, but the regulations are not finalized yet. (For those of you who are not familiar with section 409A, it generally subjects certain discounted options to tax at the time of vesting, regardless of whether they are exercised or sold. Normal income taxes, an additional 20% penalty tax and other taxes can apply.) With respect to options that Google grants after the TSO program begins, there will be no section 409A tax so long as we grant the options at fair market value, which is what we do. With respect to options already outstanding at the time the TSO program begins, the existing IRS guidance under section 409A specifically permits the changes we will make to the options in connection with the TSO program without the options being deemed regrants for tax purposes, and thus the options would not be deemed discounted options subject to section 409A. More specifically, the proposed section 409A regulations permit changes to allow for transferability of certain options. Although the IRS is not yet issuing rulings under section 409A, we have been careful in structuring the TSO program to ensure that its adoption and operation will not create any section 409A issues for Google employees. The final version of the TSO program will be designed in a way so as to ensure compliance with the final regulations under section 409A (which is expected to be released in the first half of 2007).
How does the TSO program relate to the 409A election made Google employees with respect to their options? Can a Google employee sell his or her option through the TSO program with respect to which he or she made a 409A election? (New 2/20/07)
Google employees were allowed to make 409A elections with respect to certain pre-IPO options. The TSO program is available for post-IPO options only. There is no overlap between the two; a Google employee cannot sell any options through the TSO program with respect to which he or she made a 409A election.
What are the tax consequences for employees who work for a Google entity outside the U.S.?
Since TSOs are a new concept in every country, the tax implications associated with this new program are not entirely certain. We are working with outside tax counsel to identify the tax implications in every country that Google currently issues options; and in the countries where we do offer TSOs, we generally believe that the tax consequences will be similar to the tax consequences of exercising ordinary options. However, this is subject to additional regulatory review. For Google employees subject to US taxes outside of the US, Google will provide additional tax information at a later time.
Which financial institutions are participating in this program?
Morgan Stanley will serve as Googles TSO auction manager and will settle all transactions between Google employees and bidders. Smith Barney will serve as the employee stock option administrator. Google is working with multiple financial institutions to participate as bidders in the auctions.
Do I have to open a Morgan Stanley or other brokerage account?
No, you will create an online TSO account, but will not be required to open a Morgan Stanley or other brokerage account.
What if others want to participate? Are there any financial institutions that are not eligible to be a part of the auction?
Google anticipates allowing additional financial institutions to participate in the TSO program. All participants must be able to provide continuous, automated bids for all Google options in the TSO program, and must update their systems to interface with the TSO system. Admission will be at Googles sole discretion.
How are bid prices for options determined?
All participating bidders will be required to bid on all of the options offered for sale as a condition of participation in Googles TSO program so that all Google employees get the benefit of competitive pricing on their options, even if they are selling only one option. Institutional investors use their own proprietary option pricing models to determine the fair value of each option based on the options strike price, term (which will be up to two years under Googles TSO program; all options with a duration of greater than two years will be shortened to two years), market interest rates, stock price volatility, and market conditions at the moment the bid is made. We expect that bid prices will change throughout the trading day just like bid prices for shares of stock on the NASDAQ change throughout the day to reflect changing valuation assumptions.
Can an employee specify in advance the price at which they want to sell their options?
Yes. If an employee wants to sell his/her options at a certain price, the employee can submit a limit order. The option will be sold at a minimum of that price as long as one of the bidders is willing to pay at least that much for the option(s). Limits can be set to expire at the end of the trading day or at the end of a trading window. A market or limit order can be made at any time during an open trading window, although the trade cannot be effected unless the auction is open. There is no guarantee that limit orders will be filled, and, as discussed above, the TSO program may shut down from time to time without prior notice.
Can employees sell vested, "underwater" stock options in this program?
Yes, financial institutions do place value on "underwater" stock options (i.e., those with strike prices above the current market price of the stock) and we expect them to bid on underwater options. However, if an option is significantly underwater and/or the option has only a limited remaining life (e.g., if the option is sold nine years and five months after grant), the bid price may be very low or even zero.
How does the TSO program affect Rule 10b5-1 Trading Plans?
A 10b5-1 plan may be used to sell options through the TSO program. Google is working with Smith Barney to modify its form 10b5-1 plan to accommodate TSO sales, and will make this revised form available as soon as it is ready. Here are important points regarding 10b5-1 plans and the TSO program:
Employees currently under 10b5-1 plans who want to sell options under the TSO program must amend (or terminate) their 10b5-1 plan. The employee may amend the 10b5-1 plan only during an open trading window and at a time when the employee is not in possession of material, non-public information about Google. In addition, the changes made in an employees amendment to a 10b5-1 plan may not take effect until the later of (a) 60 days after the date of amendment and (b) two trading days after the earnings announcement occurring after the date of amendment.
Unlike 10b5-1 plans for traditional exercises and sales, TSO sales under 10b5-1 plans may take place only when the TSO program is active. As discussed above, the TSO program will be active only during Googles open trading windows and while Google is not in possession of material, non-public information. These limitations apply for all TSO trades, regardless of whether the trade is initiated by the Google employee directly or through a 10b5-1 plan. It will be impossible to know in advance when the TSO program will be active because, even though the trading windows are predictable, it is impossible to know when Google will be in possession of material, non-public information. This means that employees cannot with certainty plan for a TSO sale to occur under a 10b5-1 plan. (An employee can always exercise their options and sell the underlying shares the traditional way under a 10b5-1 plan there are no timing restrictions on that). Therefore, when entering into a 10b5-1 plan covering TSO sales, employees will need to specify what will happen if the TSO program is not active when the employee wishes to make a TSO sale; they can either (1) defer the sale until the TSO program becomes active again or (2) forego the sale that would otherwise have occurred.
Currently, the only broker that allows 10b5-1 plans for TSOs is Smith Barney.
What is the benefit of a Rule 10b5-1 Trading Plan if Google will shut down the TSO program (including trading under a 10b5-1 plan) when Google in possession of material, non-public information?
There are a couple reasons why a Google Employee may still wish to enter into a 10b5-1 Plan.
First, a 10b5-1 plan will still permit you to exercise your options and sell the underlying shares the traditional way regardless of whether Google is in its ordinary quarterly blackout periods or a special blackout period during which the TSO Program has been suspended. So:
Those employees who elect not to sell through the TSO Program will continue to enjoy the same benefits of a 10b5-1 plan as they do today.
Those employees who wish to both (1) exercise and sell their options the traditional way during blackout periods and (2) sell options under the TSO program when the TSO program is open must do so under 10b5-1 plan. (Remember that Google does not allow a Google employee under a 10b5-1 plan to sell Google securities outside of his or her plan, so 10b5-1 trading plans must contemplate all sales of Google securities during the period covered by the plan, whether through the TSO Program or exercises and sales the traditional way).
Second, as discussed above, Google will shut down the TSO program when Google is in possession of material, non-public information. However, determining whether an item is material is a difficult, fact intensive, subjective analysis that can be second-guessed in hindsight. So, Google may be in possession of information that it deems not to be material and will continue to let the TSO program operate, even though another person might determine the information is material, especially if applying hindsight. (Thats why our insider trading policy says that Google employees cannot rely on Googles determination of whether an item is material when deciding to buy or sell any Google security; the ultimate decision of whether to do so rests with each Google employee.) For this reason, a 10b5-1 plan (even if it just contemplates sales under the TSO Program when the Program is active) could be helpful to a Google employee in rebutting a claim that he or she fraudulently sold his options under the TSO Program while in possession of material non-public information.
Please keep in mind that the decision as to whether to adopt a 10b5-1 plan (or not) is a complicated one, and depends on the each individuals particular circumstances, and also on any requirements imposed by each individuals plan broker. Google cannot give any Google employee advice on whether to enter into, amend or terminate a 10b5-1 plan. We encourage you to consult your personal advisors and broker regarding the TSO program and 10b5-1 plans.
ACCOUNTING, INVESTOR & OTHER FINANCE QUESTIONS
Do the new stock options have any changes in their terms? (Revised 2/20/07)
When the options are sold to a bidder under the TSO program, three changes occur:
1. The remaining life is shortened to two years unless the remaining life is less than two years. If the remaining life is less than two years, then the transferable life is further reduced from two years in six-month increments (e.g., 18 months, 12 months, six months) until the remaining transferable life is zero. For example, an option with a remaining life of 23 months will, upon sale in the TSO program, have an 18-month life. If an option has a remaining life of six months or less, it may not be sold in the TSO program.
2. The forfeiture provisions related to the employees employment with Google are removed.
3. We anticipate the anti-dilution provisions will be changed to conform to market-standard provisions.
Why did you reduce the length of the option life upon transfer?
We shortened the term to adjust the time value of the transferred options so that they are, in our estimation, more closely aligned with our compensatory objectives when the option was originally granted. Because the value of the option is in part determined by its term, a shorter option term would decrease the time value that can be realized through the TSO program.
It was not Googles intent to eliminate the benefits of employees holding options altogether. Our intent was to give employee options more tangible value. The TSO program is available to employees who are willing to forgo some of the potential future value in order to get some value today.
How does the TSO program affect Googles accounting? (Revised 2/20/07)
The TSO program does not change the way we will account for options, but it does increase the cost per option that we will recognize for accounting purposes because the fair value per option on the date of grant will be greater because the expected life of the option will be longer. The longer expected life results from the fact that upon transfer, the options are modified to have a two-year remaining life (generally) from the date of sale, whereas under the non-transferable option program options expire once they are exercised. Because we expect that options will be outstanding longer, they will have a greater fair value on the date of grant which will result in more stock-based compensation for accounting purposes.
We intend to modify all existing stock options granted to employees other than EMG after our IPO to permit their sale under the TSO program. As a result of this modification, we will take a stock-based compensation charge equal to the difference between the value of the modified stock options and their value immediately prior to modification. Accordingly, and as stated in our earnings release of January 31, 2007, we expect to incur a modification charge in accordance with GAAP of approximately $90 million in the
second quarter of 2007 related to vested options as of the end of that quarter and a charge of approximately $160 million over their remaining vesting periods of up to approximately four years related to unvested options.
The market value of our stock used to compute the above forecasted modification charges was $494 per share (the closing price of our stock on January 30, 2007). The actual charge will be different to the extent the number of options outstanding at the time we launch the TSO program is different than our expectations, or to the extent the variables used to revalue these options, including the market value and volatility of our stock, are different.
How has Google historically accounted for employee stock options? (New 2/20/07)
Prior to the initial public offering, we typically granted stock options at exercise prices equal to or less than the values of the underlying stock as determined by our board of directors on the dates of option grant. For purposes of financial accounting, we applied hindsight within each year or quarter prior to our initial public offering to arrive at reassessed values for the shares underlying these options and recorded deferred stock-based compensation equal to the difference between these reassessed values and the exercise prices.
After the initial public offering, we have primarily granted options at exercise prices equal to the fair market value of the underlying stock on the dates of option grant. For options granted during the period between our initial public offering and December 31, 2005, we have recorded deferred stock-based compensation equal to any difference between the exercise prices and the fair market values of the underlying stock on the dates of grant.
Beginning January 1, 2006, (when the new stock-based compensation accounting rules became effective) we have recognized stock-based compensation for all new and unvested stock-based awards that are ultimately expected to vest as the requisite service is rendered (over the vesting period). Stock-based compensation is measured based on the fair values of all stock-based awards on the dates of grant using the Black-Scholes-Merton valuation method.
Is this program related to new accounting rules for stock options?
No, this program is not driven by accounting implications. Google is doing this to make equity compensation more efficient and understandable to employees. We expect our compensation costs per option to increase under this program to reflect the increase in expected life of each eligible option.
Will this affect earnings?
As discussed above, we will recognize more stock-based compensation per option than we would have otherwise for the foreseeable future after the program goes into effect.
What is the incremental expected gain to employees for currently outstanding options under this new program? (New 2/20/07)
We have not shared an estimate of what the incremental expected gain is to employees under the TSO program. However, we have announced the additional stock-based compensation we expect to incur as noted above.
What is the impact on shareholders? (Revised 2/20/07)
The TSO program increases the efficiency of our equity usage. Under the TSO program, we expect that every option that is granted will be more highly valued by employees, while at the same time the TSO program will retain the advantage of leverage that stock options offer over other forms of equity compensation. We also believe this program enhances our ability to compete effectively for the best talent in the marketplace and therefore sustain our competitive advantage.
Have you discussed this program with the SEC?
We have discussed the TSO program with the SEC, and Google will ensure the program complies with applicable securities laws and accounting rules.
What information will Google disclose publicly regarding the results of the TSO program? (New 2/20/07)
Every quarter, as part of its periodic reports it files publicly with the SEC, Google will summarize the activity of the TSO program from the prior quarter.
What will the financial institutions do with the options they purchase in the TSO program?
The financial institutions will not be allowed to further transfer the options they purchase in the TSO program to the public. We believe that the financial institutions will enter into hedging transactions with respect to the options they purchase in the TSO program. Specifically, the winning bidder in the TSO auction will likely hedge their position in the Google options by short selling Google shares, which is a typical way to hedge a position in an option. By short selling, the winning bidder offsets the exposure it has in the purchased option. The winning bidder will adjust this short position over the life of the option based on fluctuations in Googles stock price. Through this hedging process, the winning bidder expects to make a profit.
Will Google file a registration statement with the SEC in connection with the TSO program?
Yes. This registration statement will cover, among other things, the expected short-selling activities of the participating financial institutions after they have purchased TSOs. (See "What will the financial institutions do with the options they purchase in the TSO program?" above.) Google will not be a party to this short-selling activity.
What advantage do these options have over restricted stock grants?
Transferable stock options share some of the benefits of restricted stock by having immediate value at grant, but in addition have more upside potential since we typically grant options in higher amounts than we grant restricted stock. In addition, based on current tax treatment in the U.S. and most other countries where Google grants options, options generally offer better tax planning flexibility to the option holder. While taxes on GSUs are generally due at vesting, taxes on option proceeds are not generally due until the holder chooses to exercise/sell the options and claim the gain as income or capital gain, depending on the holding period after exercise.
Has anyone done this before?
No, the TSO program is the first of its kind.
Isnt this what Microsoft and Comcast did? How is this program different?
No, there are many differences between what Google is doing and what Microsoft and Comcast did. For example, Microsoft and Comcast were one-time transactions to a single bidder. In contrast, the TSO program is ongoing, and options will be sold competitively through an auction system involving multiple bidders. This program is the first of its kind.
How is this different than what Cisco tried to do?
This program is very different. Cisco proposed creating a security in an attempt to measure the market value of options issued to employees for accounting purposes. The employee options themselves were unchanged and remained non-transferable. The TSO program makes options themselves transferable for the benefit of employees.
Why did you choose Morgan Stanley?
We chose Morgan Stanley based on their industry credentials, technology capabilities, and experience in building and operating Googles auction IPO system.
Whom do I contact if I have more questions?
Please send inquiries to [omitted from external version].
Google has filed a registration statement (including a prospectus) with the SEC for the offering to which this communication relates. Before you invest, you should read the prospectus in that registration statement and other documents Google has filed with the SEC for more complete information about Google and this offering. You may get these documents for free by visiting EDGAR on the SEC Web site at www.sec.gov. Alternatively, Google will arrange to send you the prospectus if you request it by calling toll-free 1-866-468-4664 or sending an e-mail to firstname.lastname@example.org.