STOCK-BASED EMPLOYEE COMPENSATION

Stock-based compensation expense included in personnel expenses in the Unaudited Consolidated Statements of Operations was approximately $34.7 million and $17.6 million for the three months ended June 30, 2013 and 2012, respectively, and $56.4 million and $34.1 million for the six months ended June 30, 2013 and 2012, respectively.

The cost of stock-based transactions is recognized in the financial statements based upon fair value. The fair value of performance share units and restricted stock units is determined based on the number of units or shares, as applicable, granted and the quoted price of the Company's common stock as of the grant date. Stock-based compensation related to performance share units reflects the estimated probable outcome at the end of the performance period. The fair value of the unvested employee stock options assumed in the acquisition of KAYAK, which relates to post-combination service, was determined using the Black-Scholes model and the market value of the Company's common stock at the merger date. The fair value of the vested employee stock options assumed in the acquisition of KAYAK, which relates to pre-combination service, was determined based on the fair value of the option calculated as the difference between the exercise price of the underlying award and the market value of the Company's common stock at the merger date. Fair value is recognized as expense on a straight line basis, net of estimated forfeitures, over the employee requisite service period.

Restricted Stock Units and Performance Share Units

The following table summarizes the activity of unvested restricted stock units and performance share units ("Share-Based Awards") during the six months ended June 30, 2013:



Share-Based Awards	Shares		Weighted Average Grant Date Fair Value
Unvested at December 31, 2012	540,128		$	389.21
Granted	152,630		$	708.32
Vested	(254,548	)	$	239.15
Performance Share Units Adjustment	12,949		$	670.17
Forfeited	(9,143	)	$	526.24
Unvested at June 30, 2013	442,016		$	591.22

As of June 30, 2013, there was $153.6 million of total future compensation cost related to unvested share-based awards to be recognized over a weighted-average period of 1.8 years.

During the three months ended March 31, 2013, the Company made broad-based grants of 43,431 restricted stock units that generally vest after three years. These share-based awards had a total grant date fair value of $30.2 million based on a weighted average grant date fair value per share of $695.62. During the three months ended June 30, 2013, the Company made broad-based grants of 4,334 restricted stock units that generally vest after three years. These share-based awards had a total grant date fair value of $3.5 million based on a weighted average grant date fair value per share of $801.43.

In addition, during the three months ended March 31, 2013, the Company granted 92,615 performance share units to certain executives. The performance share units had a total grant date fair value of $64.4 million based upon a weighted average grant date fair value per share of $695.62. During the three months ended June 30, 2013, the Company granted 12,250 performance share units to certain executives which had a total grant date fair value of $10.0 million based upon a weighted average grant date fair value per share of $816.45. The performance share units are payable in shares of the Company's common stock upon vesting. Subject to certain exceptions for terminations related to a change in control and terminations other than for "cause," for "good reason" or on account of death or disability, recipients of these performance share units must continue their service through the three year requisite service period in order to receive any shares. Stock-based compensation related to performance share units reflects the estimated probable outcome at the end of the performance period. The actual number of shares to be issued on the vesting date will be determined upon completion of the performance period which ends December 31, 2015, assuming there is no accelerated vesting for, among other things, a termination of employment under certain circumstances, or a change in control. As of June 30, 2013, the estimated number of probable shares to be issued is a total of 104,301 shares. If the maximum performance thresholds are met at the end of the performance period, a maximum number of 229,097 total shares could be issued. If the minimum performance thresholds are not met, 40,689 shares would be issued at the end of the performance period.

2012 Performance Share Units

During the year ended December 31, 2012, the Company granted 60,365 performance share units with a grant date fair value of $39.0 million, based on a weighted average grant date fair value per share of $645.86. The actual number of shares to be issued will be determined upon completion of the performance period which ends December 31, 2014.

At June 30, 2013, there were 58,120 unvested 2012 performance share units outstanding, net of actual forfeitures and vesting. As of June 30, 2013, the number of shares estimated to be issued pursuant to these performance share units at the end of the performance period is a total of 76,136 shares. If the maximum thresholds are met at the end of the performance period, a maximum of 116,240 total shares could be issued pursuant to these performance share units. If the minimum performance thresholds are not met, 36,366 shares would be issued at the end of the performance period.

2011 Performance Share Units

During the year ended December 31, 2011, the Company granted 77,144 performance share units with a grant date fair value of $35.9 million, based on a weighted average grant date fair value per share of $464.79. The actual number of shares to be issued will be determined upon completion of the performance period which ends December 31, 2013.

At June 30, 2013, there were 73,045 unvested 2011 performance share units outstanding, net of actual forfeitures and vesting. As of June 30, 2013, the number of shares estimated to be issued pursuant to these performance share units at the end of the performance period is a total of 149,112 shares. If the maximum performance thresholds are met at the end of the performance period, a maximum of 156,310 total shares could be issued pursuant to these performance share units. If the minimum performance thresholds are not met, 18,697 shares would be issued at the end of the performance period.

Stock Options

Excluding stock options assumed in the acquisition of KAYAK (refer to disclosure below on assumed options), during the six months ended June 30, 2013, stock options were exercised for 53,975 shares of common stock with a weighted average exercise price per share of $18.84. As of June 30, 2013, the aggregate number of stock options outstanding and exercisable (excluding stock options assumed in the acquisition of KAYAK) was 17,026 shares, with a weighted average exercise price per share of $22.57 and a weighted average remaining term of 1.4 years.

The following table summarizes for the three months ended June 30, 2013 stock option activity for vested and unvested employee stock options assumed in the acquisition of KAYAK:



Assumed Stock Options	Number of Shares		Weighted Average Exercise Price		Aggregate Intrinsic Value(000's)		Weighted Average Remaining Contractual Term (in years)
Balance, May 21, 2013	540,179		$	260.96	$	314,133	6.8
Exercised	(329,687	)	$	207.93
Forfeited	(2,210	)	$	395.99
Balance, June 30, 2013	208,282		$	343.47	$	100,641	7.5

Vested and exercisable as of June 30, 2013	94,990		$	217.30	$	57,884	6.1
Vested and exercisable as of June 30, 2013 and expected to vest thereafter, net of estimated forfeitures	202,905		$	340.14	$	98,719	7.4

The total intrinsic value of KAYAK assumed employee stock options exercised for the period May 22 through June 30, 2013 was $197.5 million.

At May 21, 2013, there were 408,716 shares of KAYAK vested assumed employee stock options with a fair value of $260.9 million. The fair value of these KAYAK vested assumed employee stock options was included in the purchase price allocation, with a corresponding offset to additional paid in capital.

At May 21, 2013, there were 131,463 shares of KAYAK unvested assumed employee stock options. The fair value of these KAYAK unvested assumed employee stock options was $57.4 million, with a weighted average fair value per share of $443.92. The fair value of the KAYAK assumed employee stock options that vested during the three months ended June 30, 2013 was $7.6 million.

The following assumptions were used to determine fair value:



	Weighted Average		Range
Risk-free interest rate	0.23	%	0.11% - 0.63%
Expected volatility	32	%	25% - 39%
Expected life (in years)	2.2		9 months - 4 years
Dividend yield	—	%	—	%

For the three months ended June 30, 2013, the Company recorded stock-based compensation expense of $11.0 million for the KAYAK unvested assumed employee stock options. As of June 30, 2013, there was $44.0 million of total future compensation cost related to these KAYAK unvested assumed employee stock options to be recognized over a weighted-average period of 2.1 years.