9. Stock-based Awards

The Company has three equity incentive plans: the Amended and Restated 2005 Stock Plan (the “2005 Plan”), the 2008 Stock Plan (the “2008 Plan”) and the 2014 Equity Incentive Plan (the “2014 Plan”). Under the 2005 Plan, 604,093 shares of common stock were reserved for the issuance of incentive or nonqualified stock options and stock purchase rights as of December 31, 2013. Under the 2008 Plan, there were no shares available for future issuance as of December 31, 2013. In connection with the Company’s IPO in May 2014, the 2005 Plan and the 2008 Plan were terminated. Upon the registration date in May 2014, the shares reserved for issuance under the 2014 Plan include (i) shares that have been reserved but not issued pursuant to any awards granted under the 2005 Plan, plus (ii) shares subject to stock options or similar awards granted under the 2005 Plan or the 2008 Plan that, after the registration date, expire or terminate without having been exercised in full and shares issued pursuant to awards granted under the 2005 Plan or the 2008 Plan are forfeited to or repurchased by the Company. In addition, the shares available for issuance under the 2014 Plan include an annual increase on January 1 of each year equal to the least of: (i) 10,000,000 shares; (ii) 5% of the total outstanding shares of TrueCar common stock as of the last day of the previous fiscal year; or, (iii) such other amount as determined by the Company’s Board of Directors. As of December 31, 2014, the total number of shares available under the 2014 Plan is 1,123,732 shares.

Under the 2014 Plan, the Company has the ability to issue incentive stock options, nonstatutory stock options, restricted stock, restricted stock units, stock appreciation rights, performance units and performance shares. Stock options granted under the 2014 Plan must at least equal to the fair market value of the Company’s common stock on the date of grant. Stock options granted generally vest monthly over a four year period and expire ten years from the date of grant. Restricted stock units generally vest quarterly over a four to five year period.

Stock Options

A summary of the Company’s stock option activity for the year ended December 31, 2014 is as follows:


		Weighted-		Weighted-
		Average		Average	Aggregate
	Number of	Exercise		Remaining	Intrinsic
	Options	Price		Contract Life	Value (1)
				(in years)	(in millions)
Outstanding at December 31, 2013	18,363,144	$	4.89	7.17
Granted	11,076,585		15.99
Exercised	(2,751,389)		2.15
Canceled/forfeited	(1,098,464)		9.66
Outstanding at December 31, 2014	25,589,876	$	9.79	7.55	$	365.0
Vested and expected to vest at December 31, 2014	24,572,090	$	9.73	7.49	$	353.0
Exercisable at December 31, 2014	18,291,866	$	9.12	6.97	$	281.5

(1)

The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying stock option awards and the closing price of the Company's common stock of $22.90 on December 31, 2014.

At December 31, 2014 total remaining stock-based compensation expense for unvested option awards, including performance-based stock option awards, was $62.5 million, which is expected to be recognized over a weighted-average period of 2.79 years.

The weighted-average grant-date fair value per share of options granted for the years ended December 31, 2014, 2013 and 2012 was $6.32, $4.79, and $4.83, respectively. The Company recorded stock-based compensation expense for stock option awards of $27.2 million, $8.9 million, and $9.4 million, for the years ended December 31, 2014, 2013, and 2012, respectively.

The total intrinsic value of options exercised in 2014, 2013, and 2012 was $57.1 million, $0.6 million, and $2.9 million, respectively.

There were no excess tax benefits realized for the tax deductions from stock options exercised during the years ended December 31, 2014, 2013 and 2012.

From time to time, the Company grants stock options that contain performance conditions. During 2012, the Company granted certain executives stock options to purchase 166,665 shares of common stock at a weighted average exercise price of $11.51 per share. These awards contain performance conditions based on achieving certain revenue and earnings targets. During 2013, the Company granted stock options to purchase 1,765,875 shares of common stock at a weighted average exercise price was $8.85. Of the awards granted in 2013, 82,327 stock options granted vest upon achieving certain revenue and earnings targets and 1,683,548 shares which include a two-step performance and service vesting condition. The first step was based on achieving certain revenue and earnings targets, which were met at December 31, 2013. Stock options awarded vest over the 48 month requisite service period beginning on January 1, 2014. During 2014, the Company granted 2,776,114 stock options at a weighted average exercise price of $12.81, which include a two step performance and service vesting condition. The first step is based upon achieving certain revenue and earnings targets. Stock options eligible for time-based vesting are calculated based on the Company's performance against these metrics and vest over 48 months beginning February 1, 2015. Based on the achievement levels of the performance criteria, as of December 31, 2014, there are 2,241,796 outstanding stock options with a weighted average exercise price of $12.81 that are eligible for vesting over the requisite service period. Shares granted in excess of the achievement level will be forfeited and return to the 2014 Plan in the first quarter of 2015.

The grant date fair values of these awards for the years ended December 31, 2014, 2013, and 2012 were $20.1 million, $8.8 million, and $0.8 million, respectively, as determined using a Black-Scholes option-pricing model. The Company recognizes compensation cost for stock options with performance conditions using a graded vesting model, based on the probability of the performance condition being met, net of estimated pre-vesting forfeitures.

In March 2012, the board of directors authorized the modification of stock options which accelerated vesting of stock options to purchase 726,469 shares of common stock and extended the exercise period for all vested shares, including stock options to purchase 631,333 shares of common stock previously granted to a former executive. As a result of the modification, additional stock compensation expense of $4.5 million was recognized in 2012.

Restricted Stock Awards

Activity in connection with restricted stock awards is as follows for the year ended December 31, 2014:


		Weighted-
		Average
	Number of	Grant Date
	Shares	Fair Value
Non-vested — December 31, 2013	55,555	$	3.56
Granted	—		—
Vested	(55,555)		3.56
Canceled/forfeited	—		—
Non-vested — December 31, 2014	—	$	—

The total fair value of shares of restricted stock awards vested for the years ended December 31, 2014, 2013 and 2012 was $0.8 million, $0.7 million and $3.7 million, respectively.

For the years ended December 31, 2014, 2013 and 2012, the Company recorded $0.2 million, $0.4 million, and $0.9 million, respectively, in compensation expense in connection with the vesting of shares of restricted stock awards. As of December 31, 2014, all restricted stock awards were fully vested.

Restricted Stock Units

Activity in connection with restricted stock units (“RSUs”) is as follows for the year ended December 31, 2014:


		Weighted-
		Average
	Number of	Grant Date
	Shares	Fair Value
Non-vested — December 31, 2013	—	$	—
Granted	905,767		12.35
Vested	(12,263)		21.97
Canceled/forfeited	(65,507)		10.44
Non-vested — December 31, 2014	827,997	$	12.36

The total fair value of vested restricted stock units for the year ended December 31, 2014 was $0.3 million.

For the year ended December 31, 2014, the Company recorded $2.0 million in compensation expense. At December 31, 2014, total remaining stock-based compensation expense for non-vested RSUs is $6.8 million, which is expected to be recognized over a weighted-average period of 3.00 years.

During 2014, the Company granted 720,146 RSUs with a weighted average grant date fair value of $10.04, which include a two-step performance and service vesting condition. The first step is based upon achieving certain revenue and earnings targets. RSUs eligible for time-based vesting are calculated based on the Company’s performance against these metrics and vest over 16 quarters beginning January 1, 2015. Based on the achievement levels of the performance criteria, as of December 31, 2014, there are 583,537 non-vested RSUs with a weighted average grant date fair value of $10.07 that are eligible to vest over the requisite service period. Shares granted in excess of the achievement level will be forfeited and return to the 2014 Plan in the first quarter of 2015.

Valuation Assumptions and Stock-based Compensation Cost

The fair value of stock options granted to employees is estimated on the grant date using the Black-Scholes option-pricing model. This valuation model requires the Company to make assumptions and judgments about the variables used in the calculation, including the expected term, the volatility of the Company’s common stock, risk-free interest rate, and expected dividends. The Company uses the simplified method under the SEC’s Staff Accounting Bulletin No. 107, Share-Based Payment, to calculate expected term for plain vanilla share options. For performance-based option awards and out of the money option grants, the Company determines the expected term based upon historical exercise and post-vesting cancellations, adjusted for expected future exercise behavior. The Company’s computation of volatility is based on an average of the historical volatilities of the common stock of several entities with characteristics similar to those of the Company. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods corresponding with the expected life of the option. The Company uses an expected dividend of zero, as it does not anticipate paying any dividends in the foreseeable future.

The fair value of each stock option award was estimated at the date of grant using a Black-Scholes option-pricing model with the following weighted-average assumptions:


	Year Ended
	December 31,
	2014		2013		2012
Risk-free interest rate	1.93	%	1.41	%	0.96	%
Expected term (years)	6.24		6.06		6.00
Expected volatility	58	%	61	%	60	%
Dividend yield	—		—		—

As stock-based compensation expense recognized is based on award ultimately expected to vest, the amount has been reduced for estimated forfeitures. Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Forfeitures were estimated based on the Company’s historical experience and future expectations.

The Company recorded stock-based compensation cost relating to stock options, restricted stock awards, and RSUs in the following categories on the accompanying consolidated statements of comprehensive loss (in thousands):


	Year Ended
	December 31,
	2014		2013		2012
Cost of revenue	$	454	$	141	$	122
Sales and marketing		4,743		2,561		1,571
Technology and development		5,013		1,762		1,428
General and administrative		19,123		4,882		7,199
Total stock-based compensation expense		29,333		9,346		10,320
Amount capitalized to internal software use		1,249		540		214
Total stock-based compensation cost	$	30,582	$	9,886	$	10,534