 Google
Confidential and Proprietary 1 Transferable Stock Options Showing You The Money Filed by Google Inc. Pursuant to Rule 433 under the Securities Act of 1933 Registration Statement on Form S-3: No 333-142243 |
 2 Google Confidential and Proprietary About This Material 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 investors@google.com. |
 3 Google Confidential and Proprietary • Introduction and Key Takeaways • Google’s Equity Philosophy and Practices • Transferable Stock Options • Pulling it All Together Agenda |
 4 Google Confidential and Proprietary Introduction to Today’s Conversation • 8,000 Googlers have joined us since the Transferable Stock Option (TSO) program launched • We want Googlers to better understand the value of their equity and how the TSO program works • We want to provide Googlers an opportunity to ask questions about our equity practices and the TSO program WHAT TO WALK AWAY WITH… 1. Equity is a key component of Google’s compensation philosophy and a valuable part of our overall compensation package 2. Google targets the market 90 th percentile for new hire and ongoing equity grants 3. Always consider the TSO program when liquidating options. With TSOs Googlers have received over $40M in additional value over non- transferable stock options |
 5 Google Confidential and Proprietary • Introduction and Key Takeaways • Google’s Equity Philosophy and Practices Compensation Philosophy Target Market Positioning Types of Grants Vehicles We Use • Transferable Stock Options • Pulling it All Together Agenda |
 6 Google Confidential and Proprietary Google’s Compensation Philosophy Google strives to pay Googlers in ways that support three main objectives: 1. Attract and retain the world’s best talent 2. Support Google’s culture of innovation and performance with compensation programs that reward our best performers 3. Align employee interests with shareholder interests in the overall success of the company These three objectives provide the philosophical underpinning for every Google compensation program worldwide. |
 7 Google Confidential and Proprietary Google’s use of equity supports all three philosophical objectives 1. Attract and retain the world’s best talent 2. Support Google’s culture of innovation and performance 3. Align employee interests with shareholder interests in the overall success of the company • Significant new hire and annual refresh grants at all levels • Provide multi-year incentive payout COMPENSATION PHILOSOPHY ROLE OF EQUITY • Performance based grants • Supports ownership culture • Award value increases as stock price increases |
 8 Google Confidential and Proprietary Google targets very competitive positioning in every element of compensation We aim to provide a highly market competitive compensation package for each job at Google 90 th Equity 75 th Total Target Cash 75 th Base High Tech Market Percentile GOOGLE TARGET MARKET POSITIONING An annual benchmarking process ensures that our target pay levels reflect our desired market positioning. |
 9 Google Confidential and Proprietary Google makes three types of equity grants • Varies by grant •GSUs • Recognize audacious accomplishments (e.g., Founder’s Awards) Special • Target grant guidelines determined by level and location • High performers modeled to receive larger grants • Primarily Options • Refresh Googler’s equity stake in the company • Reward on-going high performance Refresher • Standard grants by level and locations • GSUs are performance vested Value • Options • GSUs • Provide a meaningful “staking” grant to new employees • Offer competitive packages to new hires New Hire Vehicles* Purpose Grant Type 1 2 3 Our grant practices result in overlapping vesting cycles and significant cascading value for Googlers. * Options / GSUs are not available in all countries due to local tax and securities regulations. |
 10 Google Confidential and Proprietary Google grants two types of equity – Google Stock Units (GSU) and Stock Options Our intent is to utilize both vehicles in every country we operate in (subject to local tax and securities laws). 1. Google Stock Units (GSUs) • GSUs are an agreement to give you a share of Google stock when the unit vests 2. Stock Options • Stock options are an agreement to let you buy a share of Google stock at a fixed price within a 10-year period, so long as the options have vested and you are a full-time employee To further enhance the value of our equity programs, Google developed the world’s first Transferable Stock Option program. |
 11 Google Confidential and Proprietary • Introduction and Key Takeaways • Google’s Equity Philosophy and Practices • Transferable Stock Options • Pulling it All Together Agenda |
 12 Google Confidential and Proprietary Employees & investors value options differently… Employees, accountants/shareholders and the financial markets perceive option values differently. Employees value what they can monetize. We needed a solution to allow Googlers to value options even if the “in the money” value was $0. |
 13 Google Confidential and Proprietary …so we developed a system to allow Googlers to sell options like investors Google developed an online auction with Morgan Stanley allowing employees to transfer their vested stock options in real time to other investors • Institutional investors will pay the full “fair value” today for the rights to purchase both the: • Intrinsic value of options (“in the money” value), and • Time-value of options (potential future upside) • Bidders submit streaming real-time bids through Morgan Stanley’s auction tool to all eligible stock options at all strike prices during • Normal market trading hours • Google’s open trading windows (closes 1-hour before market on last day of window) |
 14 Google Confidential and Proprietary TSOs allow Googlers to benefit from both the intrinsic and time value of an option INTRINSIC VS TIME VALUE OF OPTION $550 $500 $450 $400 $0 0 6 12 18 24 30 36 Months TSOs help the time value of an option become more tangible to Googlers. Option granted at $450 per share grant price However investors are willing to pay a premium for the 2 years of additional time-value of the option At vest, intrinsic value of option is $0 because grant price > current stock price |
 15 Google Confidential and Proprietary TSO provide value even when options are underwater IN-THE-MONEY VS. TSO VALUE OF OPTION |
 16 Google Confidential and Proprietary In 1H2008 Googlers received additional value from TSOs at a wide range of stock prices ACTUAL Q1/Q2 2008 TSO TRANSACTIONS* Options with $508.01 strike price * Reflects 847 TSO transactions from 1/1/2008 to 6/30/2008 for options with a $508.01 strike
price. In less than two years, ~12,000 TSO transactions have produced $42.7M in value for Googlers over the “in-the-money” value of their options. Exercise Price: $0 $20 $40 $60 $80 $100 $120 $140 $160 $180 $200 ($100) ($80) ($60) ($40) ($20) $0 $20 $40 $60 $80 $100 Non-TSO Value: Example – Exercise Price = Strike Price Exercise Price = $508.00 Non-TSO Value = ($0.01) TSO Value = $115.80 TSO Premium = $115.81 Example – Underwater Option Exercise Price = $455.00
Non-TSO Value = ($53.01) TSO Value = $84.20 TSO Premium = $137.21 Example – In the Money Option Exercise Price = $600.65 Non-TSO Value = $92.64 TSO Value = $179.70 TSO Premium = $87.06 $408.01 $428.01 $448.01 $468.01 $488.01 $508.01 $528.01 $548.01 $568.01 $588.01 $608.01 |
 17 Google Confidential and Proprietary The On-Line Equity Tool allows Googlers to view the value of their equity Available at go/getcomp |
 18 Google Confidential and Proprietary Additional TSO Program Information • TSOs only transfer up to two years of the remaining option life • At less than 24 months, the option truncates to 18 months • At less than 18 months, the option truncates to 12 months • At less than 12 months, the option truncates to 6 months • At less than 6 months, the option is now only eligible for traditional exercise • Which options are TSO eligible? Only those that are: • Vested • Granted after Google went public • Nonqualified Stock Options (“NSOs”) • Granted to non-EMG members |
 19 Google Confidential and Proprietary • Introduction and Key Takeaways • Google’s Equity Philosophy and Practices • Transferable Stock Options • Pulling it All Together Agenda |
 20 Google Confidential and Proprietary Pulling It All Together WHAT TO WALK AWAY WITH… 1. Equity is a key component of Google’s compensation philosophy and a valuable part of our overall compensation package 2. Google targets the market 90th percentile for new hire and on-going equity grants 3. Always consider the TSO program when liquidating options. With TSOs Googlers have received over $40M in additional value over non-transferable stock options |
 21 Google Confidential and Proprietary Any questions? |