STOCK-BASED EMPLOYEE COMPENSATION

Stock-based compensation expense included in personnel expenses in the Unaudited Consolidated Statements of Operations was approximately $34.6 million and $17.6 million for the three months ended September 30, 2013 and 2012, respectively, and $91.0 million and $51.7 million for the nine months ended September 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 employee stock options assumed in the acquisition of KAYAK was determined using the Black-Scholes model 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 nine months ended September 30, 2013:



Share-Based Awards	Shares			Weighted Average Grant Date Fair Value
Unvested at December 31, 2012	540,128		$	389.21
Granted	154,001		$	710.65
Vested	(256,021	)	$	240.30
Performance Share Units Adjustment	15,391		$	659.39
Forfeited	(10,372	)	$	555.36
Unvested at September 30, 2013	443,127		$	592.46

As of September 30, 2013, there was $132.2 million of total future compensation cost related to unvested share-based awards to be recognized over a weighted-average period of 1.6 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. During the three months ended September 30, 2013, the Company made broad-based grants of 1,371 restricted stock units that generally vest after three years. These share-based awards had a total grant date fair value of $1.3 million based on a weighted average grant date fair value per share of $969.89.

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 September 30, 2013, the estimated number of probable shares to be issued is a total of 103,277 shares. If the maximum performance thresholds are met at the end of the performance period, a maximum number of 226,124 total shares could be issued. If the minimum performance thresholds are not met, 40,581 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 September 30, 2013, there were 58,120 unvested 2012 performance share units outstanding, net of performance share units that were forfeited or vested since the grant date. As of September 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 77,943 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 September 30, 2013, there were 73,045 unvested 2011 performance share units outstanding, net of performance share units that were forfeited or vested since the grant date. As of September 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 149,701 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 employee stock options assumed in the acquisition of KAYAK (refer to disclosure below on assumed employee stock options), during the nine months ended September 30, 2013, stock options were exercised for 59,005 shares of common stock with a weighted average exercise price per share of $19.22. As of September 30, 2013, the aggregate number of stock options outstanding and exercisable (excluding employee stock options assumed in the acquisition of KAYAK) was 11,996 shares, with a weighted average exercise price per share of $22.67 and a weighted average remaining term of 1.3 years.

The following table summarizes for the second and third quarters of 2013 stock option activity for vested and unvested employee stock options assumed in the acquisition of KAYAK:



Assumed Employee 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
Exercised	(44,204	)	$	288.48
Forfeited	(11,023	)	$	463.23
Balance, September 30, 2013	153,055		$	350.74	$	101,048	7.3
Vested and exercisable as of September 30, 2013	85,583		$	257.74	$	64,462	6.7
Vested and exercisable as of September 30, 2013 and expected to vest thereafter, net of estimated forfeitures	149,438		$	347.46	$	99,150	7.3

The total intrinsic value of employee stock options assumed in the acquisition of KAYAK that were exercised during the periods of May 22 through June 30, 2013 and the three months ended September 30, 2013 was $197.5 million and $29.0 million, respectively.

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

At May 21, 2013, there were unvested employee stock options assumed in the acquisition of KAYAK for 131,463 shares of common stock with a fair value of $57.4 million and a weighted average fair value per share of $443.92. During the second and third quarters of 2013, assumed unvested employee stock options vested for 15,923 shares and 34,835 shares of common stock with a fair value of $7.6 million and $15.4 million, respectively.

The following assumptions were used for the three months ended June 30, 2013 to determine the fair value of the assumed options:



	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 second and third quarters of 2013, the Company recorded stock-based compensation expense of $11.0 million and $12.0 million, respectively, for the KAYAK unvested assumed employee stock options. As of September 30, 2013, there was $27.3 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.