ServiceMagic 2010 Annual Report Download - page 98

Table of Contents
IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 12—EARNINGS PER SHARE (Continued)
NOTE 13—STOCK-BASED COMPENSATION
IAC currently has two active plans under which awards have been granted, which cover stock options to acquire shares of IAC common
stock, RSUs, PSUs and restricted stock, as well as provide for the future grant of these and other equity awards. These plans are: the IAC 2008
Stock and Annual Incentive Plan (the "2008 Plan") and the IAC 2005 Stock and Annual Incentive Plan (the "2005 Plan"). Under the 2008 Plan,
the Company was originally authorized to grant stock options, RSUs, PSUs, restricted stock and other equity based awards for up to 20.0 million
shares of IAC common stock. Under the 2005 Plan, the Company was originally authorized to grant stock options, RSUs, PSUs, restricted stock
and other equity based awards for up to 20.0 million shares of IAC common stock, adjusted to reflect IAC's one-for-two reverse stock split in
August 2008. The active plans described above authorize the Company to grant awards to its employees, officers, directors and consultants. At
December 31, 2010, there were 12.7 million shares available for grant under the Company's stock-based compensation plans.
The plans described above have a stated term of ten years and provide that the exercise price of stock options granted will not be less than
the market price of the Company's common stock on the grant date. The plans do not specify grant dates or vesting schedules as those
determinations have been delegated to the Compensation and Human Resources Committee of IAC's Board of Directors (the "Committee").
Each grant agreement reflects the vesting schedule for that particular grant as determined by the Committee. Broad-based stock option awards to
date have generally vested in equal annual installments over a four-year period and RSU awards to date have generally vested in equal annual
installments over a five-year period, in each case, from the grant date. PSU awards to date generally cliff vest at the end of a two to three-year
period from the date of grant. In addition to equity awards outstanding under the two active plans described above, stock options and other equity
awards outstanding under terminated plans and plans assumed in acquisitions are reflected in the information set forth below.
The amount of stock-based compensation expense recognized in the consolidated statement of operations is reduced by estimated
forfeitures, as the expense recorded is based on awards that are ultimately expected to vest. The forfeiture rate is estimated at the grant date
based on historical experience and revised, if necessary, in subsequent periods if actual forfeitures differ from the estimated rate.
In connection with the Spin-Off, the majority of outstanding share-based compensation instruments of the Company were modified.
Accordingly, on August 20, 2008, the Company recorded a one-time charge of $31.5 million of which $15.1 million was included in continuing
operations and $16.5 million
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38.0 million shares, respectively, related to potentially dilutive securities were excluded from the calculation of diluted
earnings per share because their inclusion would have been anti-dilutive.
(c) If the effect is dilutive, weighted average common shares outstanding include the incremental shares that would be issued
upon the assumed exercise of stock options and warrants, vesting of RSUs and PSUs and the conversion of the Ask Zero
Coupon Convertible Subordinated Notes due June 1, 2008 (the "Convertible Notes"). For the year ended December 31,
2008, approximately 39.9 million shares related to potentially dilutive securities were excluded from the calculation of
diluted earnings per share because their inclusion would have been anti-dilutive. During the second quarter of 2008 all
outstanding Convertible Notes were fully converted.