Our 2004 Equity Incentive Plan (the “2004 Plan”) authorizes the granting of options to purchase shares of Class B common stock, RSUs and other stock- based awards to our employees, consultants, officers and directors. In December 2012, we modified the 2004 Plan to increase the number of shares of Class B common stock authorized thereunder to 26,473,282 . Our 2013 Equity Incentive Plan (the “ 2013 Plan ” and, together with the 2004 Plan, the “ Plans ” ), which was a successor to our 2004 Plan, authorizes the granting of options to purchase shares of our Class A common stock, RSUs and other stock-based awards to our employees, consultants, officers and directors. Options granted under the Plans may be incentive or nonstatutory stock options. Incentive stock options may only be granted to employees. The term of each option is stated in the award agreement, but shall be no more than ten years from the date of grant. The board of directors determines the period over which options and RSUs become vested. Currently, the vesting period for our options and RSUs is typically four years.
A summary of the option activity under the Plans during the year ended December 31, 2014 is presented below:
The stock options are exercisable at a price equal to the market value of the underlying shares of common stock on the date of the grant. For periods prior to the IPO this value was determined by our board of directors. After the IPO, this value was determined by reference to the closing price of our Class A common stock on the New York Stock Exchange on the date of grant. There were no options granted in 2014. The weighted-average grant date fair value of stock options granted in 2013 and 2012 was $10.78 and $4.65 , respectively. The total fair value of options vested during 2014 , 2013 and 2012 was $15.0 million , $11.6 million , and $3.8 million , respectively. The total intrinsic value of options exercised during 2014 , 2013 and 2012 was $258.0 million , $199.3 million and $6.9 million , respectively.
We grant RSU awards to our employees, officers and non-employee directors under the provisions of the 2013 Plan. The fair value of an RSU is
determined by using the closing price of our Class A common stock as reported on the New York Stock Exchange on the date of grant. An RSU award entitles the holder to receive shares of the Company’s Class A common stock as the award vests, which is generally based on length of service. The Company's non-vested RSUs do not have nonforfeitable rights to dividends or dividend equivalents.
The following provides a summary of our RSU activity during the year ended December 31, 2014 :
The weighted-average grant date fair value of RSUs granted in 2014 and 2013 was $80.05 and $64.04 , respectively. There were no RSUs granted in 2012. The total fair value of RSUs vested during 2014 was $12.0 million . There were no RSUs vested in 2013 or 2012.
Stock-based compensation expense is amortized on the straight-line method over the vesting period. As of December 31, 2014 , total unrecognized compensation expense, adjusted for estimated forfeitures, related to stock
Options Outstanding
Shares
Weighted Average Exercise Price Per
Share Weighted-Average Remaining Contractual Term Aggregate Intrinsic Value
(in years) (in thousands)
Balances at December 31, 2013 12,236,400 $ 7.64
Options exercised (3,517,325 ) 4.59
Options canceled (364 ) 41.47
Options forfeited (202,832 ) 13.48
Balances at December 31, 2014 8,515,879 $ 8.76 6.98 $ 647,192
Vested and expected to vest at December 31, 2014 8,375,047 $ 8.69 6.97 $ 637,119
Exercisable at December 31, 2014 4,955,507 $ 6.87 6.42 $ 385,997 Number of Shares Underlying Outstanding RSUs Weighted-Average Grant-Date Fair Value
per RSU
Non-Vested outstanding at December 31, 2013 574,350 $ 64.06
RSUs granted 2,495,002 80.05
RSUs vested (152,208 ) 63.56
RSUs forfeited (98,483 ) 77.56
options and non-vested RSUs was approximately $197.2 million which is expected to be recognized over a period of 3.2 years . The summary of shares available for issuance for equity based awards (including stock options and RSUs) are as follows:
Valuation Assumptions
All stock-based payments to employees are measured based on the grant date fair value of the awards and recognized in the consolidated statements of operations over the period during which the employee is required to perform services in exchange for the award (generally the four year vesting period of the award). We estimate the fair value of RSUs granted by using the closing price of our Class A common stock as reported on the New York Stock Exchange on the date of grant.
We estimate the fair value of stock options granted using the Black-Scholes option-valuation model. For the year ended December 31, 2014, there were no options granted. For the years ended December 31, 2013 and 2012 , the fair value of options was estimated using the Black-Scholes option pricing model with the following assumptions:
The weighted-average, risk-free interest rate is based on the rate for a U.S. Treasury zero coupon issue with a term that approximates the expected life of the option grant at the date closest to the option grant date. The expected term represents the period that our stock-based awards are expected to be outstanding. The expected term assumptions were determined based on actual experience adjusted for expected employee exercise behavior.
For periods prior to our IPO, there was no active external or internal market for our common shares. We lacked sufficient historical volatility of our share price, and accordingly, we based our volatility on an estimate of similar entities whose share prices are publicly available. We have not paid and do not expect to pay dividends. The estimation of stock awards that will ultimately vest requires judgment, and to the extent actual results or updated estimates differ from our current estimates, such amounts will be recorded as a cumulative adjustment in the period the estimates are revised. We consider many factors when estimating expected forfeitures, including the types of awards, employee class and historical experience. Forfeitures were estimated at the time of grant and revised if necessary in subsequent periods if actual forfeitures differed from those estimates. Actual results, and future changes in estimates, may differ substantially from our current estimates.
80
Shares Available for Grant Balance at December 31, 2013 5,313,281 Authorized 3,109,934 Granted (2,495,002 ) Canceled 364 Forfeited 301,315 Balance at December 31, 2014 6,229,892
Year Ended December 31,
2013 2012
Risk-free interest rates 1.11% 0.69%
Expected term 5 years 5 years
Expected dividends None None