8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of

The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported)

January 13, 2005

GOOGLE INC.

(Exact name of registrant as specified in its charter)

Delaware	0-50726	77-0493581
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

1600 Amphitheatre Parkway

Mountain View, CA 94043

(Address of principal executive offices, including zip code)

(650) 623-4000

(Registrant’s telephone number, including area code)

Not Applicable

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 8.01 Other Events.

The Division of Enforcement of the Securities and Exchange Commission (the “SEC”) has confirmed that it will not proceed with any enforcement action against Google Inc. (“Google”) with respect to the Playboy Magazine article.

In addition, Google has settled regulatory matters relating to its stock option practices without financial penalty being imposed upon Google.

The Securities and Exchange Commission

On January 13, 2005, Google reached an agreement with the SEC regarding the previously disclosed informal investigation by the SEC concerning certain stock options issued to Google’s employees and consultants from 2002 to 2004. In anticipation of cease-and-desist proceedings pursuant to Section 8A of the Securities Act of 1933 (“Securities Act”) against Google and its General Counsel, David C. Drummond, Google and its General Counsel submitted an Offer of Settlement to the SEC, which the SEC has accepted and which resolves all of the SEC’s concerns arising from its inquiry into Google’s stock option practices. Pursuant to the Offer of Settlement, Google and its General Counsel consented to, without admitting or denying the findings in the Order, the entry of an Order by the SEC pursuant to Section 8A of the Securities Act that Google and its General Counsel cease and desist from committing or causing any violations of Sections 5(a) and 5(c) of the Securities Act.

The Order and the Offer of Settlement with the SEC referenced above are furnished with this report as Exhibits 99.1 and 99.2, respectively.

California Corporations Commissioner

On January 13, 2005, Google reached an agreement with the California Corporations Commissioner (the “California Commissioner”) regarding the previously disclosed inquiry by the California Commissioner concerning certain stock options issued to Google’s employees and consultants from 2002 to 2004. The California Commissioner proposed, and Google has consented to, the entry of a Consent Order made pursuant to Section 25110 of the California Corporations Code that resolves all of the California Commissioner’s concerns arising from its inquiry into Google’s stock option practices. Pursuant to the Consent Order, Google was ordered and Google agreed, without admitting or denying the findings in the Consent Order, to desist and refrain from the further offer or sale in the State of California of securities, unless and until qualification has been made under the law, or unless Google is otherwise exempt from qualification.

The Consent Order with the California Commissioner referenced above is furnished with this report as Exhibit 99.3.

Item 9.01 Financial Statements and Exhibits.

(c) Exhibits.

Exhibit	Description
99.1	Order Instituting Cease-and-Desist Proceedings, Making Findings, and Imposing a Cease-and-Desist Order Pursuant to Section 8A of the Securities Act of 1933 dated January 13, 2005.
99.2	Offer of Settlement of Google Inc. and David C. Drummond dated January 13, 2005.
99.3	Consent Order (For violations of section 25110 of the California Corporations Code) dated January 13, 2005.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	GOOGLE INC.
Date: January 13, 2005	/s/    Eric Schmidt
	Eric Schmidt Chairman of the Executive Committee and Chief Executive Officer

Exhibit Index

Exhibit	Description
99.1	Order Instituting Cease-and-Desist Proceedings, Making Findings, and Imposing a Cease-and-Desist Order Pursuant to Section 8A of the Securities Act of 1933 dated January 13, 2005.
99.2	Offer of Settlement of Google Inc. and David C. Drummond dated January 13, 2005.
99.3	Consent Order (For violations of section 25110 of the California Corporations Code) dated January 13, 2005.

EX-99.1

Exhibit 99.1

UNITED STATES OF AMERICA

Before the

SECURITIES AND EXCHANGE COMMISSION

SECURITIES ACT OF 1933

Release No.

ADMINISTRATIVE PROCEEDING

File No.

In the Matter of
	GOOGLE, INC. and DAVID C. DRUMMOND,	ORDER INSTITUTING CEASE-AND-DESIST PROCEEDINGS, MAKING FINDINGS, AND IMPOSING A CEASE-AND-DESIST ORDER PURSUANT TO SECTION 8A OF THE SECURITIES ACT OF 1933
Respondents.

I.

The Securities and Exchange Commission (“Commission”) deems it appropriate that cease-and-desist proceedings be, and hereby are, instituted pursuant to Section 8A of the Securities Act of 1933 (“Securities Act”), against respondents Google, Inc. (“Google”) and David C. Drummond (“Drummond”) (collectively “Respondents”).

II.

In anticipation of the institution of these proceedings, Google and Drummond have submitted an Offer of Settlement (“Offer”) which the Commission has determined to accept. Solely for the purpose of these proceedings and any other proceedings brought by or on behalf of the Commission, or to which the Commission is a party, and without admitting or denying the findings herein, except as to the Commission’s jurisdiction over them and the subject matter of these proceedings, which are admitted, Respondents consent to the entry of this Order Instituting Cease-and-Desist Proceedings, Making Findings, and Imposing a Cease-and-Desist Order Pursuant to Section 8A of the Securities Act of 1933 (“Order”), as set forth below.

III.

On the basis of this Order and Respondents’ Offer, the Commission finds that:

A. Summary

1. Google, a Silicon Valley search engine technology company, issued over $80 million worth of stock options to the company’s employees and consultants from 2002 to 2004 without registering the offering and without providing financial information required to be disclosed under the federal securities laws. As a result, Google employees and other persons accepted Google securities as part of their compensation without certain detailed financial information about the company. By issuing the options without registering the offering and without the legally required disclosures, Google violated the securities registration provisions of Section 5 of the Securities Act. As described below, Google’s General Counsel, David C. Drummond, caused Google to violate these provisions.

B. Respondents

2. Google, Inc. is a Delaware corporation with its principal executive offices located in Mountain View, California. Founded in 1998, Google is an Internet search engine technology provider. On April 29, 2004, Google filed a registration statement for an initial public offering of securities with the Commission, which became effective on August 19, 2004. The company’s common stock is registered with the Commission pursuant to Section 12(g) of the Exchange Act, and is quoted on the Nasdaq Stock Market.

3. David C. Drummond, age 41, resides in San Jose, California. Drummond is Google’s General Counsel, Vice President of Corporate Development and Secretary. He is an attorney licensed to practice law in the State of California.

C. Facts

Legal Background

4. Under Section 5 of the Securities Act of 1933, a company cannot offer or sell securities to the public without first registering the offering with the Commission or having a valid exemption from registration. Registration ensures that potential investors will have detailed information about the issuer’s finances and business, and allows the Commission to review the company’s disclosures.

5. Rule 701 promulgated under the Securities Act provides an exemption from registration for certain issuers offering and selling stock options (or other securities) to employees and consultants under compensatory benefit plans. However, Rule 701 requires (among other things) that any company issuing more than $5 million in stock options over a 12-month period provide detailed financial statements and other disclosures to the option recipients. The Rule allows privately-held companies to compensate their employees with securities without incurring the obligations of public registration and reporting, while ensuring that essential information is provided to employees.

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Google’s Failure To Comply With Rule 701

6. Since its inception, Google has granted stock options to its employees and consultants as a form of compensation. Under Google’s stock option plans, Google’s Board of Directors granted the company’s employees and consultants options to buy a certain number of Google unregistered shares at an exercise price set by Google’s Board. Although the stock options were not registered, Google relied on Rule 701 of the Securities Act to exempt those securities from the registration requirements of the federal securities laws.

7. In September 2002, Google became aware that its continued issuance of stock option grants might reach levels requiring financial disclosures under Rule 701. Google temporarily stopped issuing stock grants. In contrast to its chief competitors, Google was a private company, and did not have to report its financial results and other significant business information to the public in filings with the Commission. Google viewed the public disclosure of its detailed financial information as strategically disadvantageous, as Drummond recognized, and the company was concerned that providing option recipients with the financial disclosures required by Rule 701 could result in the disclosure of this information to the public at large and, significantly, to Google’s competitors.

8. By January 2003, Google was again considering granting stock options to its employees. Drummond learned that the stock option grants being considered for approval by Google’s Board might cause Google to grant more than $5 million worth of options in a 12-month period and therefore would require Google to provide option recipients with financial disclosures under Rule 701. Drummond, in consultation with outside counsel and personnel in Google’s legal department, determined that other exemptions for certain of the stock option grants permitted Google to issue the option grants without registering the securities or providing disclosures otherwise required by Rule 701. For example, Rule 506 of Regulation D of the Securities Act exempts from registration certain sales to “accredited investors” (including investors meeting a particular level of net worth or annual income). Drummond also considered the potential applicability of Section 4(2) of the Securities Act, an exemption from registration for certain private securities offerings. Finally, Drummond determined that, even if it were later determined that his analysis of the applicability of other registration exemptions was incorrect, Google could make an offer of rescission to the option holders.

9. Drummond concluded that a sufficient number of options had been issued to Google’s employees and executives who were accredited investors under Rule 506 to avoid exceeding Rule 701’s $5 million threshold, at least for the immediate future.

10. Drummond attended a January 2003 meeting of Google’s Board of Directors and advised the Board to approve a new stock option plan for employee and consultant option grants going forward. Drummond also advised that the Board issue stock option grants pursuant to that new stock option plan, which grants were to become effective when the plan became effective in

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February. Drummond did not report to the Board that issuing the new option grants might cause Google to exceed the $5 million disclosure threshold of Rule 701, and that Google would be relying on other exemptions from the registration requirements.

11. At the January 2003 meeting, Google’s Board approved the new stock option plan and the option grants pursuant to that plan, and the additional options became effective on February 7, 2003. Contrary to Drummond’s expectations, the option grants resulted in Google exceeding Rule 701’s $5 million disclosure threshold. Even excluding option grants arguably exempt from registration under Rule 506, the dollar value of options granted by Google over the prior 12-month period exceeded $5 million. Google, however, failed to provide the financial disclosures and other information mandated by Rule 701. Absent compliance with Rule 701, the options issued during this 12-month period were not exempt from registration, and Google’s securities issuance violated the registration provisions of Section 5.

12. Between February and May 2003, Google continued to issue additional stock options to its employees. By unanimous written consent, Google’s Board approved additional stock option grants on February 28, 2003, March 31, 2003, April 24, 2003, and May 9, 2003. As a result of these option grants, the value of securities issued by Google during a 12-month period was approximately $11 million, far in excess of the $5 million disclosure threshold of Rule 701, yet Google did not provide the legally required disclosures to the option recipients. Throughout this period, Google failed to monitor its stock option grant levels, and failed to determine whether the company was in compliance with Rule 701.

13. In approximately June 2003, Drummond learned that Google probably had exceeded the $5 million disclosure threshold of Rule 701. Drummond further believed that there were not likely to be enough stock option recipients who qualified as accredited investors to render the securities exempt from registration, and thus the company could not avoid the disclosure obligations of Rule 701 by relying on Rule 506.

14. Drummond believed that Google’s stock option grants might be exempt under Section 4(2) of the Securities Act, an exemption available for certain private placements of securities.

15. At a June 2003 meeting, Google’s Board of Directors adopted two new stock option plans allowing for the issuance of additional options beginning in July 2003. Drummond discussed the need for the stock option plans, but he did not advise the Board that Google’s option grants would exceed the $5 million disclosure threshold of Rule 701 or of the risk that other exemptions from registration may not apply. Based in part on Drummond’s advice, Google issued additional options in the months following the Board approval exceeding the $5 million disclosure threshold.

16. Google’s option grants did not qualify for exemption under Section 4(2). Among other things, Google offered millions of dollars worth of stock options to all of its employees without considering the financial sophistication of each employee, and did not provide its employees with the information found in a registration statement.

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17. For the twelve months ended December 31, 2003, Google issued approximately $49 million worth of stock options. Pursuant to the stock option plans adopted in June 2003, Google issued an additional $33 million worth of options in the first four months of 2004, prior to the company’s filing of a registration statement for its initial public offering. None of these option grants were accompanied by the disclosures required by Rule 701.

18. On August 4, 2004, Google filed a Form S-1 with the Commission to register a rescission offer for the stock option grants and the purchase of shares upon the exercise of options made between September 2001 and June 2004 to Google’s employees and consultants. The Form S-1 was declared effective on November 24, 2004. However, the rescission offer does not cure a violation of Section 5.

D. Legal Conclusion

19. Section 5(a) of the Securities Act prohibits the use of any means or instruments of transportation or communication in interstate commerce or of the mails to sell a security unless a registration statement is in effect as to such security. Section 5(c) of the Securities Act prohibits the use of any means or instruments of transportation or communication in interstate commerce or of the mails to offer to sell or offer to buy a security unless a registration statement has been filed as to such security.

20. Google offered to sell and sold its securities without a registration statement filed or in effect and without a valid exemption from registration. As a result of the conduct described above, Google violated, and Drummond caused Google to violate, Sections 5(a) and 5(c) of the Securities Act. The Commission previously has charged attorneys for causing Section 5 violations. See, e.g., In the matter of John L. Milling, Esq., Securities Act Rel. No. 33-8189 (Feb. 3, 2003).

E. Cooperation

21. In determining to accept Google and Drummond’s offer of settlement, the Commission took into account their cooperation during the Commission staff’s investigation.

IV.

In view of the foregoing, the Commission deems it appropriate to impose the sanctions agreed to in Respondents’ Offer.

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Accordingly, it is hereby ORDERED, pursuant to Section 8A of the Securities Act, that Respondents Google and Drummond cease and desist from committing or causing any violations and any future violations of Sections 5(a) and 5(c) of the Securities Act.

By the Commission.

/s/    Jonathan G. Katz

Jonathan G. Katz

Secretary

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EX-99.2

Exhibit 99.2

UNITED STATES OF AMERICA

Before the

SECURITIES AND EXCHANGE COMMISSION

ADMINISTRATIVE PROCEEDING

File No.

In the Matter of
	GOOGLE, INC. and
	DAVID C. DRUMMOND,	OFFER OF SETTLEMENT
		OF GOOGLE, INC. AND
Respondents.		DAVID C. DRUMMOND

I.

Google, Inc. (“Google”) and David C. Drummond (“Drummond”) (collectively “Respondents”), pursuant to Rule 240(a) of the Rules of Practice of the Securities and Exchange Commission (“Commission”) [17 C.F.R. § 201.240(a)], submit this Offer of Settlement (“Offer”) in anticipation of cease-and-desist proceedings to be instituted against them by the Commission, pursuant to Section 8A of the Securities Act of 1933 (“Securities Act”).

II.

This Offer is submitted solely for the purpose of settling these proceedings, with the express understanding that it will not be used in any way in these or any other proceedings, unless the Offer is accepted by the Commission. If the Offer is not accepted by the Commission, the Offer is withdrawn without prejudice to Respondents and shall not become a part of the record in these or any other proceedings, except for the waiver expressed in Section V with respect to Rule 240(c)(5) of the Commission’s Rules of Practice [17 C.F.R. § 201.240(c)(5)].

III.

On the basis of the foregoing, the Respondents hereby:

A. Summary

1. Google, a Silicon Valley search engine technology company, issued over $80 million worth of stock options to the company’s employees and consultants from 2002 to 2004 without registering the offering and without providing financial information required to be disclosed under the federal securities laws. As a result, Google employees and other persons

accepted Google securities as part of their compensation without certain detailed financial information about the company. By issuing the options without registering the offering and without the legally required disclosures, Google violated the securities registration provisions of Section 5 of the Securities Act. As described below, Google’s General Counsel, David C. Drummond, caused Google to violate these provisions.

B. Respondents

2. Google, Inc. is a Delaware corporation with its principal executive offices located in Mountain View, California. Founded in 1998, Google is an Internet search engine technology provider. On April 29, 2004, Google filed a registration statement for an initial public offering of securities with the Commission, which became effective on August 19, 2004. The company’s common stock is registered with the Commission pursuant to Section 12(g) of the Exchange Act, and is quoted on the Nasdaq Stock Market.

3. David C. Drummond, age 41, resides in San Jose, California. Drummond is Google’s General Counsel, Vice President of Corporate Development and Secretary. He is an attorney licensed to practice law in the State of California.

C. Facts

Legal Background

4. Under Section 5 of the Securities Act of 1933, a company cannot offer or sell securities to the public without first registering the offering with the Commission or having a valid exemption from registration. Registration ensures that potential investors will have detailed information about the issuer’s finances and business, and allows the Commission to review the company’s disclosures.

5. Rule 701 promulgated under the Securities Act provides an exemption from registration for certain issuers offering and selling stock options (or other securities) to employees and consultants under compensatory benefit plans. However, Rule 701 requires (among other things) that any company issuing more than $5 million in stock options over a 12-month period provide detailed financial statements and other disclosures to the option recipients. The Rule allows privately-held companies to compensate their employees with securities without incurring the obligations of public registration and reporting, while ensuring that essential information is provided to employees.

Google’s Failure To Comply With Rule 701

6. Since its inception, Google has granted stock options to its employees and consultants as a form of compensation. Under Google’s stock option plans, Google’s Board of Directors granted the company’s employees and consultants options to buy a certain number of

2

Google unregistered shares at an exercise price set by Google’s Board. Although the stock options were not registered, Google relied on Rule 701 of the Securities Act to exempt those securities from the registration requirements of the federal securities laws.

7. In September 2002, Google became aware that its continued issuance of stock option grants might reach levels requiring financial disclosures under Rule 701. Google temporarily stopped issuing stock grants. In contrast to its chief competitors, Google was a private company, and did not have to report its financial results and other significant business information to the public in filings with the Commission. Google viewed the public disclosure of its detailed financial information as strategically disadvantageous, as Drummond recognized, and the company was concerned that providing option recipients with the financial disclosures required by Rule 701 could result in the disclosure of this information to the public at large and, significantly, to Google’s competitors.

8. By January 2003, Google was again considering granting stock options to its employees. Drummond learned that the stock option grants being considered for approval by Google’s Board might cause Google to grant more than $5 million worth of options in a 12-month period and therefore would require Google to provide option recipients with financial disclosures under Rule 701. Drummond, in consultation with outside counsel and personnel in Google’s legal department, determined that other exemptions for certain of the stock option grants permitted Google to issue the option grants without registering the securities or providing disclosures otherwise required by Rule 701. For example, Rule 506 of Regulation D of the Securities Act exempts from registration certain sales to “accredited investors” (including investors meeting a particular level of net worth or annual income). Drummond also considered the potential applicability of Section 4(2) of the Securities Act, an exemption from registration for certain private securities offerings. Finally, Drummond determined that, even if it were later determined that his analysis of the applicability of other registration exemptions was incorrect, Google could make an offer of rescission to the option holders.

9. Drummond concluded that a sufficient number of options had been issued to Google’s employees and executives who were accredited investors under Rule 506 to avoid exceeding Rule 701’s $5 million threshold, at least for the immediate future.

10. Drummond attended a January 2003 meeting of Google’s Board of Directors and advised the Board to approve a new stock option plan for employee and consultant option grants going forward. Drummond also advised that the Board issue stock option grants pursuant to that new stock option plan, which grants were to become effective when the plan became effective in February. Drummond did not report to the Board that issuing the new option grants might cause Google to exceed the $5 million disclosure threshold of Rule 701, and that Google would be relying on other exemptions from the registration requirements.

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11. At the January 2003 meeting, Google’s Board approved the new stock option plan and the option grants pursuant to that plan, and the additional options became effective on February 7, 2003. Contrary to Drummond’s expectations, the option grants resulted in Google exceeding Rule 701’s $5 million disclosure threshold. Even excluding option grants arguably exempt from registration under Rule 506, the dollar value of options granted by Google over the prior 12-month period exceeded $5 million. Google, however, failed to provide the financial disclosures and other information mandated by Rule 701. Absent compliance with Rule 701, the options issued during this 12-month period were not exempt from registration, and Google’s securities issuance violated the registration provisions of Section 5.

12. Between February and May 2003, Google continued to issue additional stock options to its employees. By unanimous written consent, Google’s Board approved additional stock option grants on February 28, 2003, March 31, 2003, April 24, 2003, and May 9, 2003. As a result of these option grants, the value of securities issued by Google during a 12-month period was approximately $11 million, far in excess of the $5 million disclosure threshold of Rule 701, yet Google did not provide the legally required disclosures to the option recipients. Throughout this period, Google failed to monitor its stock option grant levels, and failed to determine whether the company was in compliance with Rule 701.

13. In approximately June 2003, Drummond learned that Google probably had exceeded the $5 million disclosure threshold of Rule 701. Drummond further believed that there were not likely to be enough stock option recipients who qualified as accredited investors to render the securities exempt from registration, and thus the company could not avoid the disclosure obligations of Rule 701 by relying on Rule 506.

14. Drummond believed that Google’s stock option grants might be exempt under Section 4(2) of the Securities Act, an exemption available for certain private placements of securities.

15. At a June 2003 meeting, Google’s Board of Directors adopted two new stock option plans allowing for the issuance of additional options beginning in July 2003. Drummond discussed the need for the stock option plans, but he did not advise the Board that Google’s option grants would exceed the $5 million disclosure threshold of Rule 701 or of the risk that other exemptions from registration may not apply. Based in part on Drummond’s advice, Google issued additional options in the months following the Board approval exceeding the $5 million disclosure threshold.

16. Google’s option grants did not qualify for exemption under Section 4(2). Among other things, Google offered millions of dollars worth of stock options to all of its employees without considering the financial sophistication of each employee, and did not provide its employees with the information found in a registration statement.

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17. For the twelve months ended December 31, 2003, Google issued approximately $49 million worth of stock options. Pursuant to the stock option plans adopted in June 2003, Google issued an additional $33 million worth of options in the first four months of 2004, prior to the company’s filing of a registration statement for its initial public offering. None of these option grants were accompanied by the disclosures required by Rule 701.

18. On August 4, 2004, Google filed a Form S-1 with the Commission to register a rescission offer for the stock option grants and the purchase of shares upon the exercise of options made between September 2001 and June 2004 to Google’s employees and consultants. The Form S-1 was declared effective on November 24, 2004. However, the rescission offer does not cure a violation of Section 5.

D. Legal Conclusion

19. Section 5(a) of the Securities Act prohibits the use of any means or instruments of transportation or communication in interstate commerce or of the mails to sell a security unless a registration statement is in effect as to such security. Section 5(c) of the Securities Act prohibits the use of any means or instruments of transportation or communication in interstate commerce or of the mails to offer to sell or offer to buy a security unless a registration statement has been filed as to such security.

20. Google offered to sell and sold its securities without a registration statement filed or in effect and without a valid exemption from registration. As a result of the conduct described above, Google violated, and Drummond caused Google to violate, Sections 5(a) and 5(c) of the Securities Act. The Commission previously has charged attorneys for causing Section 5 violations. See, e.g., In the matter of John L. Milling, Esq., Securities Act Rel. No. 33-8189 (Feb. 3, 2003).

E. Cooperation

21. In determining to accept Google and Drummond’s offer of settlement, the Commission took into account their cooperation during the Commission staff’s investigation.

IV.

On the basis of the foregoing, Respondents hereby consent to the entry of an Order by the Commission, pursuant to Section 8A of the Securities Act, that Respondents Google and Drummond cease and desist from committing or causing any violations and any future violations of Sections 5(a) and 5(c) of the Securities Act.

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V.

By submitting this Offer, Respondents hereby acknowledge their waiver of those rights specified in Rules 240(c)(4) and (5) [17 C.F.R. §201.240(c)(4) and (5)] of the Commission’s Rules of Practice. Respondents also hereby waive service of the Order.

VI.

Respondents understand and agree to comply with the Commission’s policy “not to permit a defendant or respondent to consent to a judgment or order that imposes a sanction while denying the allegations in the complaint or order for proceedings” (17 C.F.R. §202.5(e)). In compliance with this policy, Respondents agree: (i) not to take any action or to make or permit to be made any public statement denying, directly or indirectly, any finding in the Order or creating the impression that the Order is without factual basis; and (ii) that upon the filing of this Offer of Settlement, Respondents hereby withdraw any papers previously filed in this proceeding to the extent that they deny, directly or indirectly, any finding in the Order. If Respondents breach this agreement, the Division of Enforcement may petition the Commission to vacate the Order and restore this proceeding to its active docket. Nothing in this provision affects Respondents’: (i) testimonial obligations; or (ii) right to take legal or factual positions in litigation or other legal proceedings in which the Commission is not a party.

VII.

Consistent with the provisions of 17 C.F.R. § 202.5(f), Respondents waive any claim of Double Jeopardy based upon the settlement of this proceeding, including the imposition of any remedy or civil penalty herein.

VIII.

Respondents hereby waive any rights under the Equal Access to Justice Act, the Small Business Regulatory Enforcement Fairness Act of 1996 or any other provision of law to pursue reimbursement of attorney’s fees or other fees, expenses or costs expended by Respondents to defend against this action. For these purposes, Respondents agree that Respondents are not the prevailing parties in this action since the parties have reached a good faith settlement.

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IX.

Respondents state that they have read and understand the foregoing Offer, that this Offer is made voluntarily, and that no promises, offers, threats, or inducements of any kind or nature whatsoever have been made by the Commission or any member, officer, employee, agent, or representative of the Commission in consideration of this Offer or otherwise to induce it to submit to this Offer.

6th day of January, 2005	/s/    Eric E. Schmidt
	Eric E. Schmidt
	Chief Executive Officer
	Google Inc.

State of California

County of Santa Clara

IX.

Respondents state that they have read and understand the foregoing Offer, that this Offer is made voluntarily, and that no promises, offers, threats, or inducements of any kind or nature whatsoever have been made by the Commission or any member, officer, employee, agent, or representative of the Commission in consideration of this Offer or otherwise to induce it to submit to this Offer.

6th day of January, 2005	/s/    David C. Drummond
	David C. Drummond
	Google Inc.

State of California

County of Santa Clara

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EX-99.3

Exhibit 99.3

STATE OF CALIFORNIA

BUSINESS, TRANSPORTATION AND HOUSING AGENCY

DEPARTMENT OF CORPORATIONS

RE:	Google, Inc.
	2400 Bayshore Parkway
	Mountain View, CA

CONSENT ORDER

(For violations of section 25110 of the California Corporations Code)

Without admitting or denying the findings herein, except as to the jurisdiction of the Department of Corporations over them and the subject matter of these proceedings for the times in question, which are admitted, Respondent Google, Inc. (“Google”) consents to the entry of this Consent Order made pursuant to California Corporations Code Section 25110.

Summary

Google, a Silicon Valley search engine technology company, issued certain stock options to the company’s employees and consultants during 2003 without registering the offering and without providing financial information required to be disclosed under state securities laws. As a result, Google employees and other persons accepted Google securities as part of their compensation without certain detailed financial information about the company. By issuing the options without registering the offering and without the legally required disclosures, Google violated the securities qualification provisions of California Corporations Code Sections 25110.

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Findings

Google, Inc. is a Delaware corporation with its principal executive offices located in Mountain View, California. Founded in 1998, Google is an Internet search engine technology provider. On April 29, 2004, Google filed a registration statement for an initial public offering of securities with the Securities and Exchange Commission, which became effective on August 19, 2004.

Rule 701 promulgated under the Securities Act of 1933 provides an exemption from registration for certain issuers offering and selling stock options (or other securities) to employees and consultants under compensatory benefit plans. The terms of Rule 701 are incorporated by reference into Section 25102(o) of the California Corporations Code, which sets forth the terms of an exemption from the registration requirements of Section 25110.

However, Rule 701 requires (among other things) that any company issuing more than $5 million in stock options over a 12-month period provide detailed financial statements and other disclosures to the option recipients. The Rule allows privately-held companies to compensate their employees with securities without incurring the obligations of public registration and reporting, while ensuring that essential information is provided to employees.

Since its inception, Google has granted stock options to its employees and consultants as a form of compensation. Under Google’s stock option plans, Google’s Board of Directors granted the company’s employees and consultants options to buy a certain number of Google unqualified shares at an exercise price set by Google’s Board. Although the stock options were not qualified, Google relied on Rule 701 of the Securities Act to exempt those securities from the registration requirements of the federal securities laws (and the qualification requirements of the California securities laws as well. See California Corporations Code 25102(o).)

In September 2002, Google became aware that its continued issuance of stock option grants might reach levels requiring financial disclosures under Rule 701. Google temporarily stopped issuing stock grants. In contrast to its chief competitors, Google was a private company, and did not have to report its financial results and other significant business information to the public in filings with the Commission. Google viewed the public disclosure of its detailed financial information as

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strategically disadvantageous, and the company was concerned that providing option recipients with the financial disclosures required by Rule 701 could result in the disclosure of this information to the public at large and, significantly, to Google’s competitors.

At a January 2003 meeting, Google’s Board approved a new stock option plan and the option grants pursuant to that plan, and the additional options became effective on February 7, 2003. The option grants resulted in Google exceeding Rule 701’s $5 million disclosure threshold, thereby depriving it of any exemption from California Corporations Code Section 25110 provided by Section 25102(o). Even excluding option grants arguably exempt from qualification under other subsections, the dollar value of options granted by Google over the prior 12-month period exceeded $5 million. Google, however, failed to provide the financial disclosures and other information mandated by Rule 701. Absent compliance with Rule 701 (and California Corporations Code Section 25102(o)), the options issued during this 12-month period were not exempt from qualification with the California Department of Corporations, and Google’s securities issuance violated the qualification provisions of California Corporations Code Section 25110.

Between February and May 2003, Google continued to issue additional stock options to its employees. By unanimous written consent, Google’s Board approved additional stock option grants on February 28, 2003, March 31, 2003, April 24, 2003, and May 9, 2003. As a result of these option grants, the value of securities issued by Google during a 12-month period was approximately $11 million, substantially in excess of the $5 million disclosure threshold of Rule 701, yet Google did not provide the legally required disclosures to the option recipients. Throughout this period, Google failed to monitor its stock option grant levels, and failed to determine whether the company was in compliance with Rule 701. On June 19, 2003, Google filed an application with the Department of Corporations for qualification of the subject securities (options), which application was approved.

Based upon the foregoing findings, the California Corporations Commissioner is of the opinion that Google offered or sold securities without being qualified in violation of Corporations Code section 25110 between February and May 2003. Google neither admits nor denies the foregoing findings.

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Pursuant to section 25532 of the Corporate Securities Law of 1968, Google is hereby ordered, and Google agrees, to desist and refrain from the further offer or sale in the State of California of securities, unless and until qualification has been made under the law, or unless Google is otherwise exempt. This Order is necessary, in the public interest, for the protection of investors and consistent with the purposes, policies, and provisions of the Corporate Securities Law of 1968.

In consideration of this Consent Order, Google, Inc. waives its right to a hearing on this matter and to judicial review of this matter pursuant to California Code of Civil Procedure Section 1094.5. This Consent Order is a public document and will be posted on the web site of the Department of Corporations.

Dated: January 13, 2004

Mountain View, California

GOOGLE, INC.
By:	/s/    Eric Schmidt
	Eric Schmidt Chief Executive Officer

Dated: January 13, 2004

Los Angeles, California

WILLIAM P. WOOD
Acting California Corporations Commissioner
By:	/s/    Alan S. Weinger
	Alan S. Weinger
	Supervising Counsel
	Enforcement and Legal Services

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