Overstock.com 2005 Annual Report Download - page 35

investors have attempted to exercise a right of rescission, and although we have never declared or paid any cash dividends on shares of
common stock that may be subject to rescission, we have recorded "interest," which may be payable on these securities if the
rescission rights are exercised, as a deemed dividend in our financial statements. If an investor does attempt to exercise a right of
rescission, the interest attributable to their securities would likely become payable in cash.
During January 2005, the Board of Directors authorized a stock repurchase program under which the Company was authorized to
repurchase up to $50.0 million of its common stock through December 31, 2007. On April 26, 2005, the Board of Directors increased
the amount of the share repurchase program to $100.0 million. Additionally, on June 14, 2005, the Board of Directors authorized an
amendment of its three-year stock repurchase program to include the repurchase of its Convertible Senior Notes.
During 2005, we entered into several purchased call options, pursuant to which we could have been required to purchase up to
1.3 million shares of its common stock at certain settlement dates during the quarter ended June 30, 2005. In connection with these
repurchase transactions; we paid approximately $47.5 million, which was recorded in shareholders' equity in the consolidated balance
sheet.
At our option, the purchased call options were settled in cash or stock, based on the market price of our common stock on the
date of the settlement. Upon settlement, we either had our capital investment returned with a premium or received shares of our
common stock, depending, respectively, on whether the market price of our common stock was above or below a pre-determined price
agreed in connection with each such transaction.
Under the share repurchase program, we repurchased approximately 665,000 shares of our common stock in open market
transactions for $24.1 million during the year ended December 31, 2005. In addition, approximately 1.0 million shares of common
stock were acquired as a result of the settlement of $41.1 million of structured stock repurchase transactions during the nine months
ended September 30, 2005. The purchased call options that did not settle in stock settled in cash totaling $7.9 million, which the
Company received in July 2005.
We have a 401(k) defined contribution plan which permits participating employees to defer up to a maximum of 25% of their
compensation, subject to limitations established by the Internal Revenue Code. Employees who have completed a half-year of service
and are 21 years of age or older are qualified to participate in the plan. The Company matches 50% of the first 6% of each participant's
contributions to the plan. Participant contributions are immediately vested. Company contributions vest based on the participant's
years of service at 20% per year over five years. The Company's matching contribution totaled $99,000, $124,000 and $261,000
during 2003, 2004 and 2005, respectively. In addition, for the 2004 and 2005 years, the board of directors approved a 2% (of salary)
profit-share contribution to all employees eligible to participate in the plan.
The Company's board of directors adopted the Amended and Restated 1999 Stock Option Plan, the 2002 Stock Option Plan and
the 2005 Equity Incentive Plan (collectively, the "Plans"), in May 1999, April 2002 and April 2005, respectively. Under these Plans,
the Board of Directors may issue incentive stock options to employees and directors of the Company and non-qualified stock options
to consultants of the Company, as well as other types of awards under the 2005 Equity Incentive Plan. Options granted under these
Plans generally expire at the end of five years and vest in accordance with a vesting schedule determined by the Company's Board of
Directors, usually over four years from the grant date. As of the initial public offering, the Amended and Restated 1999 Stock Option
Plan was terminated. Future awards will be made under the 2005 Equity Incentive Plan. As of December 31, 2005, 1,100,000 shares
were available for future grants under these Plans.
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