Google's 2009 option exchange excluded its own top three executives

The record

Google Inc. commenced a stock option exchange program on 3 February 2009, filed with the SEC as a Schedule TO-I tender offer statement. The Offer to Exchange itself states that Google offered its employees, including eligible officers, the opportunity to exchange outstanding options granted under its 2004 Stock Plan before 3 February 2009 that carried an exercise price above the Nasdaq closing price on 6 March 2009. The filing index shows the offer was preceded by four written-communication filings in January 2009 and followed by seven amendments before it expired at 6:00 a.m. Pacific time on 9 March 2009, the last amendment filed 10 March 2009 according to Google's EDGAR filing history. Every eligible option was exchanged one-for-one for a new option carrying the same remaining term but a new exercise price and a vesting schedule extended twelve months past each original vesting date.

What the documents establish

The Offer to Exchange names its own eligibility scope precisely: every officer and employee of Google or an eligible subsidiary who continued employment through the expiration date could participate, other than Chief Executive Officer Eric Schmidt and founders Larry Page and Sergey Brin, and other than non-employee members of the board, whom the filing states were 'not eligible to participate.' The document also discloses that Google had adopted SFAS 123(R), which 'requires the measurement and recognition of compensation expense for all share-based payment awards,' so the exchange was not expense-free; it substituted one compensation-expense calculation for another rather than eliminating the accounting charge. The filing index corroborates the mechanical timeline, written communications in late January, the formal offer on 3 February, and a string of amendments into March, which a reader should not compress into a single announcement date.

The operating read

Editorially, a founder evaluating a repricing or exchange offer should treat 'who is eligible' as a defined term inside the filing, not an assumption: Google's own senior-most executives and outside directors were carved out here, a structure common to option exchanges precisely because repricing insiders draws separate scrutiny. The accounting language is a second checkpoint: an exchange offer restructures, rather than removes, the stock-based compensation expense a company must recognize under the applicable accounting standard, a distinction that matters for anyone reading a company's stated rationale for an exchange.

What to check before you decide

Before treating any option exchange as a template, check these points against the specific filing.

• Which officers, directors or grant dates does the filing's own eligibility definition exclude?
• What exchange ratio and new exercise price does the offer specify, and against what reference price?
• What does the filing's accounting-consequences section say about the resulting compensation expense?

This account describes only what Google's own 2009 filing discloses; it should not be read as a description of every company's option exchange terms.