Overstock.com 2009 Annual Report Download - page 138

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Table of Contents
Overstock.com, Inc.
Notes to Consolidated Financial Statements (Continued)
20. STOCK BASED AWARDS (Continued)
Company adopted SAB No. 110 effective January 1, 2008 and will continue to use the simplified method in developing the expected term used for its
valuation of stock-based compensation.
Expected Dividend: The Company has not paid any dividends and does not anticipate paying dividends in the foreseeable future.
Risk-Free Interest Rate: The Company bases the risk-free interest rate used on the implied yield currently available on U.S. Treasury zero-coupon
issues with remaining term equivalent to the expected term of the options.
Estimated Pre-vesting Forfeitures: When estimating forfeitures, the Company considers voluntary and involuntary termination behavior.
Stock Option Activity
The Company's board of directors adopted the 2002 Stock Option Plan and the 2005 Equity Incentive Plan (collectively, the "Plans"), in 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. Options granted under these Plans generally expire at the end of five or ten 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 April 2005 the 2002
Stock Option Plan was terminated (except with regard to outstanding options). Future shares will be granted under the 2005 Equity Incentive Plan. As of
December 31, 2009, 1.2 million shares of stock based awards are available for future grants under the 2005 Equity Incentive Plan. The Company settles stock
option exercises with newly issued common shares. The following is a summary of stock option activity (in thousands, except per share data):
2007 2008 2009
Shares
Weighted
Average
Exercise
Price Shares
Weighted
Average
Exercise
Price Shares
Weighted
Average
Exercise
Price
Outstanding—beginning of year 1,011 $ 18.97 1,161 $ 20.48 974 $ 21.27
Granted at fair value 762 18.14 11 14.14 — —
Exercised (354) 8.81 (112) 12.96 (2) 15.82
Expired/forfeited (258) 23.65 (86) 20.45 (251) 24.12
Outstanding—end of year 1,161 20.48 974 21.27 721 20.29
Options exercisable at year-end 408 22.36 609 23.18 543 21.17
F-43