STOCK-BASED COMPENSATION

The Company has adopted the priceline.com Incorporated 1999 Omnibus Plan, as amended and restated effective June 6, 2013, (the "1999 Plan") as the stock compensation plan from which broad-based employee grants may be made. As of December 31, 2013, there were 2,807,340 shares of common stock available for future grant under our 1999 Plan. In addition, in connection with the acquisition of KAYAK in May 2013, the Company assumed the KAYAK Software Corporation 2012 Equity Incentive Plan (the "KAYAK Plan"). As of December 31, 2013, there were 31,946 shares of common stock available for future grant under the KAYAK Plan.

Stock-based compensation issued under the plans generally consists of restricted stock units, performance share units and stock options. The cost of share-based transactions is recognized in the financial statements based upon fair value. Fair value is recognized as expense on a straight line basis, net of estimated forfeitures, over the employee's requisite service period. The fair value of restricted stock units and performance share units is determined based on the number of shares or units, 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 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. Stock options granted to employees have a term of 10 years. Restricted stock units, performance share units and restricted stock generally vest over periods from 1 to 4 years. The Company issues new shares of common stock upon the issuance of restricted stock, the exercise of stock options and the vesting of restricted stock units and performance share units.

Stock-based compensation included in personnel expenses in the Consolidated Statements of Operations was approximately $140.5 million, $71.6 million and $65.7 million for the years ended December 31, 2013, 2012 and 2011, respectively. Stock-based compensation for the years ended December 31, 2013, 2012 and 2011 includes charges amounting to $24.1 million, $0.9 million and $10.3 million, respectively, representing the cumulative impact of adjusting the estimated probable outcome at the end of the performance period for outstanding unvested performance share units. Included in the stock-based compensation are approximately $2.1 million, $1.8 million, and $1.7 million for the years ended December 31, 2013, 2012, and 2011, respectively, for grants to non-employee directors. The related tax benefit for stock-based compensation is $18.5 million, $7.6 million and $8.1 million for the years ended December 31, 2013, 2012 and 2011, respectively.

Restricted Stock Units and Performance Share Units

The following table summarizes the activity of unvested restricted stock units ("RSUs") and performance share units during the years ended December 31, 2011, 2012 and 2013:



Share-Based Awards	Shares		Weighted Average Grant Date Fair Value

Unvested at December 31, 2010	1,530,647			$	130.93

Granted	125,564			$	469.29
Vested	(858,019	)		$	113.37
Performance Shares Adjustment	73,710			$	496.34
Forfeited	(71,922	)		$	182.90
Unvested at December 31, 2011	799,980			$	231.87

Granted	95,062			$	643.12
Vested	(353,819	)		$	108.31
Performance Shares Adjustment	6,649			$	532.26
Forfeited	(7,744	)		$	444.18
Unvested at December 31, 2012	540,128			$	389.21

Granted	162,341			$	730.47
Vested	(258,198	)		$	242.63
Performance Shares Adjustment	101,490			$	681.13
Forfeited	(11,442	)		$	579.71
Unvested at December 31, 2013	534,319			$	615.10

RSUs and performance share units granted by the Company during the years ended December 31, 2013, 2012 and 2011 had aggregate grant date fair values of approximately $118.6 million, $61.1 million and $58.9 million, respectively. Share-based awards that vested during the years ended December 31, 2013, 2012, and 2011 had grant date fair values of $62.6 million, $38.3 million and $97.3 million, respectively.

As of December 31, 2013, there is $154.1 million of total future compensation cost related to unvested share-based awards to be recognized over a weighted-average period of 1.4 years.

During the year ended December 31, 2013, stock based awards included grants of 104,865 performance share units to executives and certain other employees. The performance share units had a total grant date fair value of $74.4 million based upon the weighted-average grant date fair value per share of $709.74. The performance share units are payable in shares of the Company's common stock upon vesting. Stock-based compensation for performance share units is recorded based on the estimated probable outcome if the Company, and with respect to certain grants, the businesses of its subsidiaries, achieve certain financial goals 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. At December 31, 2013, there were 103,162 unvested 2013 performance share units outstanding, net of performance share units that were forfeited or vested since the grant date. As of December 31, 2013, the number of shares estimated to be issued pursuant to these performance shares units is a total of 170,046 shares. If the maximum performance thresholds are met at the end of the performance period, a maximum of 225,894 total shares could be issued. If the minimum performance thresholds are not met, 40,466 shares would be issued at the end of the performance period.

2012 Performance Share Units

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

At December 31, 2013, there were 58,004 unvested 2012 performance share units outstanding, net of performance share units that were forfeited or vested since the grant date. As of December 31, 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 97,204 shares. If the maximum performance thresholds are met at the end of the performance period, a maximum of 116,008 total shares could be issued pursuant to these performance share units. If the minimum performance thresholds are not met, 36,250 shares would be issued at the end of the performance period.

2011 Performance Share Units

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

At December 31, 2013, there were 72,830 unvested 2011 performance share units outstanding, net of performance share units that were forfeited or vested since the grant date. As of December 31, 2013, the total number of shares to be issued pursuant to these performance shares units on the March 4, 2014 vesting date is 149,345 shares.

Stock Options - Other than Stock Options Assumed in the Acquisition of KAYAK

The disclosures in this section do not include employee stock options assumed in the acquisition of KAYAK (described below). During the year ended December 31, 2013, stock options were exercised for 62,001 shares of common stock with a weighted average exercise price per share of $19.32. As of December 31, 2013, the aggregate number of stock options outstanding and exercisable was 9,000 shares, with a weighted average exercise price per share of $22.55, a weighted average remaining term of 1.2 years, and an aggregate intrinsic value of $10.3 million. No stock options were granted during the years ended December 31, 2013, 2012 or 2011. As of December 31, 2008, all stock options were fully vested and exercisable. The intrinsic value of stock options exercised during the years ended December 31, 2013, 2012 and 2011 was $44.9 million, $75.2 million and $77.1 million, respectively.

KAYAK Employee Stock Options Assumed in the Acquisition of KAYAK

The following table summarizes for the year ended December 31, 2013 stock option activity for the 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	(387,669	)		$	222.73
Forfeited	(23,802	)		$	478.83
Balance, December 31, 2013	128,708			$	335.83		$	106,386	6.9
Vested and exercisable as of December 31, 2013	86,340			$	261.71		$	77,765	6.2
Vested and exercisable as of December 31, 2013 and expected to vest thereafter, net of estimated forfeitures	126,428			$	332.64		$	104,905	6.9

The aggregate intrinsic value of employee stock options assumed in the acquisition of KAYAK that were exercised during the period of May 22, 2013 through December 31, 2013 was $236.9 million.

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 period of May 22, 2013 through December 31, 2013, assumed unvested employee stock options vested for 65,293 shares with a fair value of $30.9 million.

The following assumptions were used at the merger date 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 period of May 22 through December 31, 2013, the Company recorded stock-based compensation expense of $30.9 million for the KAYAK unvested assumed employee stock options. As of December 31, 2013, there was $16.6 million of total future compensation costs related to these KAYAK unvested assumed employee stock options to be recognized over a weighted-average period of 2.1 years.