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Exhibit 4.07  

 
 

VERSANT CORPORATION
  
    1996 DIRECTORS STOCK OPTION PLAN    
  

        As Adopted May 21, 1996

As Amended June 5, 1997, June 14, 2001 and April 18, 2002 

1.    Purpose.  

        This 1996 Directors Stock Option Plan (this "Plan") is established to provide equity incentives for nonemployee
members of the Board of Directors of Versant Corporation (the "Company"), who are described in Section 6.1 below, by granting such persons
options to purchase shares of stock of the Company. 

2.    Adoption and Stockholder Approval.  

        After this Plan is adopted by the Board of Directors of the Company (the "Board"), this Plan will become effective
on the time and date (the "Effective Date") on which the registration statement filed by the Company with the Securities and Exchange Commission
("SEC") under the Securities Act of 1933, as amended (the "Securities Act"), to register the initial
public offering of the Company's Common Stock is declared effective by the SEC; provided, however, that if the Effective Date does not occur on or
before December 31, 1996, this Plan and any Options granted hereunder will terminate. This Plan shall be approved by the stockholders of the Company, consistent with applicable laws, within
twelve (12) months after the date this Plan is adopted by the Board. Options ("Options") may be
granted under this Plan after the Effective Date provided that, in the event that stockholder approval is not obtained within the time period provided herein, this Plan, and all Options granted
hereunder, shall terminate. No Option that is issued as a result of any increase in the number of shares authorized to be issued under this Plan shall be exercised prior to the time such increase has
been approved by the stockholders of the Company and all such Options granted pursuant to such increase shall similarly terminate if such stockholder approval is not obtained. So long as the Company
is subject to Section 16(b) of the Securities Exchange Act of 1934, as amended, (the "Exchange Act") the Company will comply with the
requirements of Rule 16b-3 with respect to stockholder approval. 

3.    Types of Options and Shares.  

        Options granted under this Plan shall be non-qualified stock options ("NQSOs"). The shares of stock
that may be purchased upon exercise of Options granted under this Plan (the "Shares") are shares of the Common Stock of the Company. 

4.    Number of Shares.  

        The maximum number of Shares that may be issued pursuant to Options granted under this Plan (the "Maximum Number")
is 275,000 Shares, subject to adjustment as provided in this Plan. If any Option is terminated for any reason without being exercised in whole or in part, the Shares thereby released from such Option
shall be available for purchase under other Options subsequently granted under this Plan. At all times during the term of this Plan, the Company shall reserve and keep available such number of Shares
as shall be required to satisfy the requirements of outstanding Options granted under this Plan; provided, however that if the aggregate number of
Shares subject to outstanding Options granted under this Plan plus the aggregate number of Shares previously issued by the Company pursuant to the exercise of Options granted under this Plan equals or
exceeds the Maximum Number of Shares, then notwithstanding anything herein to the contrary, no further Options 

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may be granted under this Plan until the Maximum Number is increased or the aggregate number of Shares subject to outstanding Options granted under this Plan plus the aggregate number of Shares
previously issued by the Company pursuant to the exercise of Options granted under this Plan is less than the Maximum Number. 

5.    Administration.  

        This Plan shall be administered by the Board or by a committee of not less than two members of the Board appointed to administer this Plan (the  "Committee"). As used in this Plan, references to the Committee shall mean either such Committee or the Board if no Committee has been established. The
interpretation by the Committee of any of the provisions of this Plan or any Option granted under this
Plan shall be final and binding upon the Company and all persons having an interest in any Option or any Shares purchased pursuant to an Option. 

6.    Eligibility and Award Formula.  

        6.1  Eligibility. Options shall be granted only to directors of the Company who are not employees of the Company or any
Parent, Subsidiary or Affiliate of the Company, as those terms are defined in Section 18 below (each such person referred to as an  "Optionee"). 

        6.2  Initial Grant. Each Optionee who on or after the Effective Date is or becomes a member of the Board will automatically be
granted an Option for 20,000 Shares (the "Initial Grant") on the later of the Effective Date or the date such Optionee first becomes a member of the
Board. 

        6.3  Succeeding Grants. On each anniversary of an Initial Grant, if the Optionee then is still a member of the Board and has
served continuously as a member of the Board since the date of the Optionee's Initial Grant, the Optionee will automatically be granted an Option for 10,000 Shares (a  "Succeeding Grant").

7.    Terms and Conditions of Options.  

        Subject to the following and to Section 6 above: 

        7.1  Form of Option Grant. Each Option granted under this Plan shall be evidenced by a written Stock Option Grant
("Grant") in such form (which need not be the same for each Optionee) as the Committee shall from time to time approve, which Grant shall comply with
and be subject to the terms and conditions of this Plan. 

        7.2  Vesting.    The date an Optionee receives an Initial Grant or a Succeeding Grant is referred to in this Plan
as the "Start Date" for such Option. 

        (a)  Initial Grants. Each Initial Grant will vest as to fifty percent (50%) of the Shares upon each of the first two
successive anniversaries of the Start Date for such Initial Grant, so long as the Optionee continuously remains a director or a consultant of the Company. 

        (b)  Succeeding Grants. Each Succeeding Grant will vest as to fifty percent (50%) of the Shares on each of the first two
successive anniversaries of the Start Date for such Succeeding Grant, so long as the Optionee continuously remains a director or a consultant of the Company. 

        7.3  Exercise Price. The exercise price of an Option shall be the Fair Market Value (as defined in Section 18.4) of the
Shares, at the time that the Option is granted. 

        7.4  Termination of Option. Except as provided below in this Section, each Option shall expire ten (10) years after its
Start Date (the "Expiration Date"). The Option shall cease to vest and unvested Options shall expire when the Optionee ceases to be a member of the
Board or a consultant of the Company. The date on which the Optionee ceases to be a member of the Board or a consultant of the 

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Company shall be referred to as the "Termination Date". An Option may be exercised after the Termination Date only as set forth below: 

        (a)  Termination Generally. If the Optionee ceases to be a member of the Board or consultant of the Company for any reason
except death or disability, then each vested Option (as defined in Section 7.2 of this Plan) then held by such Optionee may be exercised by the Optionee within seven (7) months after the
Termination Date, but in no event later than the Expiration Date. 

        (b)  Death or Disability. If the Optionee ceases to be a member of the Board or consultant of the Company because of the death
of the Optionee or the disability of the Optionee within the meaning of Section 22(e)(3) of the Internal Revenue Code of 1986, as amended (the  "Code"), then each vested Option (as defined in
Section 7.2 of this Plan) then held by such Optionee may be exercised by the Optionee (or the
Optionee's legal representative) within twelve (12) months after the Termination Date, but in no event later than the Expiration Date. 

8.    Exercise of Options.  

        8.1  Exercise Period. Subject to the provisions of Section 8.5 of the Plan, Options shall be exercisable immediately
(subject to repurchase pursuant to Section 10 of the Plan). 

        8.2  Notice. Options may be exercised only by delivery to the Company of an exercise agreement in a form approved by the
Committee stating the number of Shares being purchased, the restrictions imposed on the Shares and such representations and agreements regarding the Optionee's investment intent and access to
information as may be required by the Company to comply with applicable securities laws, together with payment in full of the exercise price for the number of Shares being purchased. 

        8.3  Payment. Payment for the Shares purchased upon exercise of an Option may be made (a) in cash or by check;
(b) by surrender of shares of Common Stock of the Company that have been owned by the Optionee for more than six (6) months (and which have been paid for within the meaning of SEC
Rule 144 and, if such shares were purchased from the Company by use of a promissory note, such note has been fully paid with respect to such shares) or were obtained by the Optionee in the open
public market, having a Fair Market Value equal to the exercise price of the Option; (c) by waiver of compensation due or accrued to the Optionee for services rendered; (d) provided that
a public market for the Company's stock exists, through a "same day sale" commitment from the Optionee and a broker-dealer that is a member of the National Association of Securities Dealers (an  "NASD
Dealer") whereby the Optionee irrevocably elects to exercise the Option and to sell a portion of the Shares so purchased to pay for the exercise
price and whereby the NASD Dealer irrevocably commits upon receipt of such Shares to forward the exercise price directly to the Company; (e) provided that a public market for the Company's
stock exists, through a "margin" commitment from the Optionee and an NASD Dealer whereby the Optionee irrevocably elects to exercise the Option and to pledge the Shares so purchased to the NASD Dealer
in a margin account as security for a loan from the NASD Dealer in the amount of the exercise price, and whereby the NASD Dealer irrevocably commits upon receipt of such Shares to forward the exercise
price directly to the Company; or (f) by any combination of the foregoing. 

        8.4  Withholding Taxes. Prior to issuance of the Shares upon exercise of an Option, the Optionee shall pay or make adequate
provision for any federal or state withholding obligations of the Company, if applicable. 

        8.5  Limitations on Exercise. Notwithstanding the exercise periods set forth in the Grant, exercise of an Option shall always
be subject to the following limitations: 

        (a)  An
Option shall not be exercisable until such time as this Plan (or, in the case of Options granted pursuant to an amendment increasing the number of shares that may be
issued pursuant 

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to this Plan, such amendment) has been approved by the stockholders of the Company in accordance with Section 16 hereof. 

        (b)  An
Option shall not be exercisable unless such exercise is in compliance with the Securities Act and all applicable state securities laws, as they are in effect on the
date of exercise. 

        (c)  The
Committee may specify a reasonable minimum number of Shares that may be purchased upon any exercise of an Option, provided that such minimum number will not prevent
the Optionee from exercising the full number of Shares as to which the Option is then exercisable. 

9.    Nontransferability of Options.  

        During the lifetime of the Optionee, an Option shall be exercisable only by the Optionee or by the Optionee's guardian or legal representative, unless otherwise
permitted by the Committee. No Option may be sold, pledged, assigned, hypothecated, transferred or disposed of in any manner other than by will or by the laws of descent and distribution. 

10.  Restrictions on Shares.  

        The Company shall reserve to itself and/or its assignee(s) in the Grant a right to repurchase all unvested Shares held by an Optionee if the Optionee ceases to be
a member of the Board or a consultant of the Company. The Company shall exercise such repurchase right within ninety (90) days after the Optionee's Termination Date for cash at the Optionee's
original exercise price. 

11.  Privileges of Stock Ownership.  

        No Optionee shall have any of the rights of a stockholder with respect to any Shares subject to an Option until the Option has been validly exercised. No
adjustment shall be made for dividends or distributions or other rights for which the record date is prior to the date of exercise, except as provided in this Plan. The Company shall provide to each
Optionee a copy of the annual financial statements of the Company, at such time after the close of each fiscal year of the Company as they are released by the Company to its stockholders. 

12.  Adjustment of Option Shares.  

        In the event that the number of outstanding shares of Common Stock of the Company is changed by a stock dividend, stock split, reverse stock split, combination,
reclassification or similar change in the capital structure of the Company without consideration, the number of Shares available under this Plan and the number of Shares subject to outstanding Options
and the exercise price per share of such outstanding Options shall be proportionately adjusted, subject to any required action by the Board or stockholders of the Company and compliance with
applicable securities laws; provided, however, that no
fractional shares shall be issued upon exercise of any Option and any resulting fractions of a Share shall be rounded up to the nearest whole Share. 

13.  No Obligation to Continue as Director.  

        Nothing in this Plan or any Option granted under this Plan shall confer on any Optionee any right to continue as a director of the Company. 

14.  Compliance With Laws.  

        The grant of Options and the issuance of Shares upon exercise of any Options shall be subject to and conditioned upon compliance with all applicable requirements
of law, including without limitation compliance with the Securities Act, compliance with all other applicable state securities laws and compliance with the requirements of any stock exchange or
national market system on which the 

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Shares may be listed. The Company shall be under no obligation to register the Shares with the SEC or to effect compliance with the registration or qualification requirement of any state securities
laws, stock exchange or national market system. 

15.  Assumption or Replacement of Options by Successor.  

        In the event of (a) a dissolution or liquidation of the Company, (b) a merger or consolidation in which the Company is not the surviving corporation
(other than a merger or consolidation with a wholly-owned subsidiary, a reincorporation of the Company in a different jurisdiction, or other transaction
in which there is no substantial change in the stockholders of the Company or their relative stock holdings and the Options granted under this Plan are assumed or replaced by the successor
corporation, which assumption will be binding on all Optionees), (c) a merger in which the Company is the surviving corporation but after which the stockholders of the Company (other than any
stockholder which merges (or which owns or controls another corporation which merges) with the Company in such merger) own less than 50% of the shares or other equity interests in the Company,
(d) the sale of substantially all of the assets of the Company, or (e) the acquisition, sale or transfer of a majority of the outstanding shares of the Company by tender offer or similar
transaction, the vesting of all options granted pursuant to this Plan will accelerate and the options will become exercisable in full prior to the consummation of such event at such times and on such
conditions as the Committee determines, and if such options are not exercised prior to the consummation of the corporate transaction, they shall terminate in accordance with the provisions of this
Plan. 

16.  Amendment or Termination of Plan.  

        The Committee may at any time terminate or amend this Plan (but may not terminate or amend the terms of any outstanding option without the consent of the
Optionee); provided, however, that the Committee shall not, without the approval of the stockholders of the Company, increase the total number of Shares
available under this Plan (except by operation of the provisions of Sections 4 and 12 above) or change the class of persons eligible to receive Options. Further, the provisions in Sections 6 and 7 of
this Plan shall not be amended more than once every six (6) months, other than to comport with changes in the Code, the Employee Retirement Income Security Act or the rules thereunder. In any
case, no amendment of this Plan may adversely affect any then outstanding Options or any unexercised portions thereof without the written consent of the Optionee. 

17.  Term of Plan.  

        Options may be granted pursuant to this Plan from time to time within a period of ten (10) years from the date this Plan is adopted by the Board. 

18.  Certain Definitions.  

        As used in this Plan, the following terms shall have the following meanings: 

      18.1  "Parent" means any corporation (other than the Company) in an unbroken chain of corporations ending with the Company if,
at the time of the granting of the Option, each of such corporations other than the Company owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the
other corporations in such chain. 

      18.2  "Subsidiary" means any corporation (other than the Company) in an unbroken chain of corporations beginning with the
Company if, at the time of granting of the Option, each of the corporations other than the last corporation in the unbroken chain owns stock possessing 50% or more of the total combined voting power
of all classes of stock in one of the other corporations in such chain. 

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      18.3  "Affiliate" means any corporation that directly, or indirectly through one or more intermediaries, controls or is
controlled by, or is under common control with, another corporation, where "control"
(including the terms "controlled by" and "under common control with") means the possession, direct or indirect, of the power to cause the direction of the management and policies of the corporation,
whether through the ownership of voting securities, by contract or otherwise. 

      18.4  "Fair Market Value" means, as of any date, the value of a share of the Company's Common Stock determined as follows: 

        (a)  if
such Common Stock is then quoted on the Nasdaq National Market, its closing price on the Nasdaq National Market on the date of determination as reported in  The Wall Street Journal; 

        (b)  if
such Common Stock is publicly traded and is then listed on a national securities exchange, its closing price on the date of determination on the principal national
securities exchange on which the Common Stock is listed or admitted to trading as reported in The Wall Street Journal; 

        (c)  if
such Common Stock is publicly traded but is not quoted on the Nasdaq National Market nor listed or admitted to trading on a national securities exchange, the average
of the closing bid and asked prices on the date of determination as reported in The Wall Street Journal; or 

        (d)  in
the case of an Initial Grant made on the Effective Date, the price per share at which shares of the Company's Common Stock are initially offered for sale to the
public by the Company's underwriters in the initial public offering of the Company's Common Stock pursuant to a registration statement filed with the SEC under the Securities Act; or 

        (e)  if
none of the foregoing is applicable, by the Committee in good faith. 

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VERSANT CORPORATION 1996 DIRECTORS STOCK OPTION PLANEXHIBIT 10.5

OVERSTOCK.COM, INC.

2002 STOCK OPTION PLAN

(As amended by the Board of Directors on May 2, 2002)

 

1.             Purposes of the Plan.  The purposes of this 2002 Stock Option Plan are:

•                                          to attract and retain the best available
personnel for positions of substantial responsibility,

•                                          to provide additional incentive to
Employees, Directors and Consultants, and

•                                          to promote the success of the Company’s
business.

Options granted under the
Plan may be Incentive Stock Options or Nonstatutory Stock Options, as determined
by the Administrator at the time of grant. 
Stock Purchase Rights may also be granted under the Plan.

2.             Definitions.  As used herein, the following definitions
shall apply:

(a)           “Administrator” means the
Board or any of its Committees as shall be administering the Plan, in
accordance with Section 4 of the Plan.

(b)           “Applicable Laws” means the
requirements relating to the administration of stock option plans under U. S.
state corporate laws, U.S. federal and state securities laws, the Code, any stock
exchange or quotation system on which the Common Stock is listed or quoted and
the applicable laws of any foreign country or jurisdiction where Options or
Stock Purchase Rights are, or will be, granted under the Plan.

(c)           “Board” means the Board of
Directors of the Company.

(d)           “Cause”
means (i) an act of personal dishonesty taken by the Optionee in
connection with his or her responsibilities as a Service Provider and intended
to result in personal enrichment of the Optionee, (ii) Optionee being
convicted of a felony, (iii) a willful act by the Optionee which
constitutes gross misconduct and which is injurious to the Company, or
(iv) following delivery to the Optionee of a written demand for
performance from the Company which describes the basis for the Company’s
reasonable belief that the Optionee has not substantially performed his duties,
continued violations by the Optionee of his or her obligations to the Company
which are demonstrably willful and deliberate on the Employee’s part.

(e)           “Change in Control” means the
occurrence of any of the following events:

(i)    Any “person” (as such term is used in
Sections 13(d) and 14(d) of the Exchange Act), other than Patrick M.
Byrne, Dorothy M. Byrne or John J. Byrne Jr. or an individual or
entity that directly, or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with Patrick M.
Byrne, Dorothy M. Byrne and/or John J. Byrne Jr., becomes the
“beneficial owner” (as defined in Rule 13d-3 of the Exchange Act), 

 

 

directly or indirectly, of securities of the Company
representing fifty percent (50%) or more of the total voting power represented
by the Company’s then outstanding voting securities; or

(ii)   The consummation of the sale or disposition
by the Company of all or substantially all of the Company’s assets;

(iii)  A change in the composition of the Board
occurring within a two-year period, as a result of which fewer than a majority
of the directors are Incumbent Directors. 
“Incumbent Directors” means directors who either (A) are Directors
as of the effective date of the Plan, or (B) are elected, or nominated for
election, to the Board with the affirmative votes of at least a majority of the
Incumbent Directors at the time of such election or nomination (but will not
include an individual whose election or nomination is in connection with an
actual or threatened proxy contest relating to the election of directors to the
Company); or

(iv)  The consummation of a merger or consolidation
of the Company with any other corporation, other than a merger or consolidation
which would result in the voting securities of the Company outstanding
immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of the surviving
entity or its parent) at least fifty percent (50%) of the total voting power
represented by the voting securities of the Company or such surviving entity or
its parent outstanding immediately after such merger or consolidation.

(f)            “Code” means the Internal
Revenue Code of 1986, as amended.

(g)           “Committee” means a committee
of Directors appointed by the Board in accordance with Section 4 of the
Plan.

(h)           “Common Stock” means the
common stock of the Company.

(i)            “Company” means Overstock.com, Inc.

(j)            “Consultant” means any
natural person, including an advisor, engaged by the Company or a Parent or
Subsidiary to render services to such entity.

(k)           “Director” means a member of
the Board.

(l)            “Disability” means total and
permanent disability as defined in Section 22(e)(3) of the Code.

(m)          “Employee” means any person,
including Officers and Directors, employed by the Company or any Parent or
Subsidiary of the Company.  A Service
Provider shall not cease to be an Employee in the case of (i) any leave of
absence approved by the Company or (ii) transfers between locations of the
Company or between the Company, its Parent, any Subsidiary, or any
successor.  For purposes of Incentive
Stock Options, no such leave may exceed ninety days, unless reemployment upon
expiration of such leave is guaranteed by statute or contract.  If reemployment upon expiration of a leave
of absence approved by the Company is not so guaranteed, then three (3)
months following the 91st day of such leave any Incentive Stock
Option held by the Optionee shall cease to be treated as an Incentive Stock
Option and shall be treated for tax purposes as a 

 

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Nonstatutory Stock Option.  Neither service as a Director nor payment of a director’s fee by
the Company shall be sufficient to constitute “employment” by the Company.

(n)           “Exchange Act” means the
Securities Exchange Act of 1934, as amended.

(o)           “Fair Market Value” means, as
of any date, the value of Common Stock determined as follows:

(i)    If the Common Stock is listed on any estab­lished
stock exchange or a national market system, including without limitation the
Nasdaq National Market or The Nasdaq SmallCap Market of The Nasdaq Stock
Market, its Fair Market Value shall be the closing sales price for such stock
(or the closing bid, if no sales were reported) as quoted on such exchange or
system on the day of determination, as reported in The Wall Street Journal or
such other source as the Administrator deems reliable;

(ii)   If the Common Stock is regularly quoted by a
recognized securities dealer but selling prices are not reported, the Fair
Market Value of a Share of Common Stock shall be the mean between the high bid
and low asked prices for the Common Stock on the day of determination, as
reported in The
Wall Street Journal or such other source as the Administrator deems
reliable; or

(iii)  In the absence of an established market for
the Common Stock, the Fair Market Value shall be determined in good faith by
the Administrator.

(p)           “Incentive Stock Option” means
an Option intended to qualify as an incentive stock option within the meaning
of Section 422 of the Code and the regulations promulgated thereunder.

(q)           “Nonstatutory Stock Option”
means an Option not intended to qualify as an Incentive Stock Option.

(r)            “Notice of Grant” means a
written or electronic notice evidencing certain terms and conditions of an
individual Option or Stock Purchase Right grant.  The Notice of Grant is part of the Option Agreement.

(s)           “Officer” means a person who
is an officer of the Company within the meaning of Section 16 of the
Exchange Act and the rules and regulations promulgated thereunder.

(t)            “Option” means a stock option
granted pursuant to the Plan.

(u)           “Option Agreement” means an
agreement between the Company and an Optionee evidencing the terms and
conditions of an individual Option grant. 
The Option Agreement is subject to the terms and conditions of the Plan.

(v)           “Option Exchange Program”
means a program whereby outstanding Options are surrendered in exchange for
Options with a lower exercise price.

 

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(w)          “Optioned Stock” means the
Common Stock subject to an Option or Stock Purchase Right.

(x)            “Optionee” means the holder
of an outstanding Option or Stock Purchase Right granted under the Plan.

(y)            “Parent” means a “parent
corporation,” whether now or hereafter existing, as defined in
Section 424(e) of the Code.

(z)            “Plan”
means this 2002 Stock Option Plan.

(aa)  “Restricted Stock” means shares of
Common Stock acquired pursuant to a grant of Stock Purchase Rights under
Section 11 of the Plan.

(bb) “Restricted Stock
Purchase Agreement” means a written agreement between the Company and the
Optionee evidencing the terms and restrictions applying to stock purchased
under a Stock Purchase Right.  The
Restricted Stock Purchase Agreement is subject to the terms and conditions of
the Plan and the Notice of Grant.

(cc) “Rule 16b-3”
means Rule 16b-3 of the Exchange Act or any successor to Rule 16b-3, as in effect
when discretion is being exercised with respect to the Plan.

(dd) “Section 16(b)
“ means Section 16(b) of the Exchange Act.

(ee) “Service Provider”
means an Employee, Director or Consultant.

(ff)   “Share” means a share of the Common
Stock, as adjusted in accordance with Section 13 of the Plan.

(gg) “Stock Purchase
Right” means the right to purchase Common Stock pursuant to Section
 11 of the Plan, as evidenced by a Notice of Grant.

(hh) “Subsidiary”
means a “subsidiary corporation”, whether now or hereafter existing, as defined
in Section 424(f) of the Code.

(ii)   “Voluntary Termination for Good Reason”
means the Optionee voluntarily resigns within ninety (90) days after the
occurrence of any of the following (i) without the Optionee’s express
written consent, a material reduction of the Optionee’s duties, title,
authority or responsibilities, relative to the Optionee’s duties, title,
authority or responsibilities as in effect immediately prior to such reduction,
or the assignment to Optionee of such reduced duties, title, authority or
responsibilities; provided, however, that a reduction in duties, title,
authority or responsibilities solely by virtue of the Company being acquired
and made part of a larger entity (as, for example, when the Chief Executive
Officer of the Company remains as such following a Change of Control and is not
made the Chief Executive Officer of the acquiring corporation) shall not by
itself constitute grounds for a “Voluntary Termination for Good Reason;”
(ii) a reduction by the Company in the base salary or annual incentive
bonus of the Optionee as in effect immediately prior to such reduction;
(iii) the relocation of the Optionee to a facility or a location outside
of a 35 mile radius from the present facility or location, without the
Optionee’s express written consent; or (iv) 

 

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any act or set of facts or circumstances which would,
under applicable case law or statute constitute a constructive termination of
the Optionee.

3.             Stock Subject to the Plan.  Subject to the provisions of Section 13 of
the Plan, the maximum aggregate number of Shares that may be optioned and sold
under the Plan is 18,100,183 Shares (on pre-reverse stock split basis)
plus (a) any Shares which have
been reserved but not issued under the Company’s 1999 Stock Option Plan (the
“1999 Plan”) and (b) any Shares returned to the 1999 Plan as a result of
termination of options or repurchase of Shares issued under the 1999 Plan.  The
Shares may be authorized, but unissued, or reacquired Common Stock.

If an Option or Stock Purchase Right expires or
becomes unexercisable without having been exercised in full, or is surrendered
pursuant to an Option Exchange Program, the unpurchased Shares which were
subject thereto shall become available for future grant or sale under the Plan
(unless the Plan has terminated); provided, however, that Shares that
have actually been issued under the Plan, whether upon exercise of an Option or
Right, shall not be returned to the Plan and shall not become available for
future distribution under the Plan, except that if unvested Shares are
repurchased by the Company at their original purchase price, such Shares shall
become available for future grant under the Plan.

4.             Administration of the Plan.

(a)           Procedure.

(i)    Multiple Administrative Bodies.  Different Committees with respect to
different groups of Service Providers may administer the Plan.

(ii)   Section 162(m).  To the extent that the Administrator
determines it to be desirable to qualify Options granted hereunder as
“performance-based compensation” within the meaning of Section 162(m) of
the Code, the Plan shall be administered by a Committee of two or more “outside
directors” within the meaning of Section 162(m) of the Code.

(iii)  Rule 16b-3.  To the extent desirable to qualify transactions hereunder as
exempt under Rule 16b-3, the transactions contemplated hereunder shall be
structured to satisfy the requirements for exemption under Rule 16b-3.

(iv)  Other Administration.  Other than as provided above, the Plan shall
be administered by (A) the Board or (B) a Committee, which committee shall be
constituted to satisfy Applicable Laws.

(b)           Powers of the Administrator.  Subject to the provisions of the Plan, and
in the case of a Committee, subject to the specific duties delegated by the
Board to such Committee, the Administrator shall have the authority, in its
discre­tion:

(i)    to determine the Fair Market Value;

 

5

 

(ii)   to select the Service Providers to whom
Options and Stock Purchase Rights may be granted hereunder;

(iii)  to determine the number of shares of Common
Stock to be covered by each Option and Stock Purchase Right granted hereunder;

(iv)  to approve forms of agreement for use under
the Plan;

(v)   to determine the terms and conditions, not
inconsistent with the terms of the Plan, of any Option or Stock Purchase Right
granted hereunder.  Such terms and
conditions include, but are not limited to, the exercise price, the time or
times when Options or Stock Purchase Rights may be exercised (which may be
based on performance criteria), any vesting acceleration or waiver of
forfeiture restrictions, and any restriction or limitation regarding any Option
or Stock Purchase Right or the shares of Common Stock relating thereto, based
in each case on such factors as the Administrator, in its sole discretion,
shall determine;

(vi)  to reduce the exercise price of any Option or
Stock Purchase Right to the then current Fair Market Value if the Fair Market Value
of the Common Stock covered by such Option or Stock Purchase Right shall have
declined since the date the Option or Stock Purchase Right was granted;

(vii) to institute an
Option Exchange Program;

(viii) to construe and
interpret the terms of the Plan and awards granted pursuant to the Plan;

(ix)   to prescribe, amend and rescind rules and
regulations relating to the Plan, including rules and regulations relating to
sub-plans established for the purpose of satisfying applicable foreign laws;

(x)    to modify or amend each Option or Stock
Purchase Right (subject to Section 15(c) of the Plan), including the
discretionary authority to extend the post-termination exercisability period of
Options longer than is otherwise provided for in the Plan;

(xi)   to allow Optionees to satisfy withholding tax
obligations by electing to have the Company withhold from the Shares to be
issued upon exercise of an Option or Stock Purchase Right that number of Shares
having a Fair Market Value equal to the minimum amount required to be
withheld.  The Fair Market Value of the
Shares to be withheld shall be determined on the date that the amount of tax to
be withheld is to be determined.  All
elections by an Optionee to have Shares withheld for this purpose shall be made
in such form and under such conditions as the Administrator may deem necessary
or advisable;

(xii) to authorize any
person to execute on behalf of the Company any instrument required to effect
the grant of an Option or Stock Purchase Right previously granted by the Administrator;

(xiii) to make all other
determinations deemed necessary or advisable for administering the Plan.

 

6

 

(c)           Effect of
Administrator’s Decision.  The
Administrator’s decisions, determinations and interpretations shall be final
and binding on all Optionees and any other holders of Options or Stock Purchase
Rights.

5.             Eligibility.  Nonstatutory Stock Options and Stock
Purchase Rights may be granted to Service Providers.  Incentive Stock Options may be granted only to Employees.

6.             Limitations.

(a)           Each Option shall be designated in
the Option Agreement as either an Incentive Stock Option or a Nonstatutory
Stock Option.  However, notwithstanding
such designation, to the extent that the aggregate Fair Market Value of the
Shares with respect to which Incentive Stock Options are exercisable for the
first time by the Optionee during any calendar year (under all plans of the
Company and any Parent or Subsidiary) exceeds $100,000, such Options shall be
treated as Nonstatutory Stock Options. 
For purposes of this Section 6(a), Incentive Stock Options shall be
taken into account in the order in which they were granted.  The Fair Market Value of the Shares shall be
determined as of the time the Option with respect to such Shares is granted.

(b)         Neither the Plan nor any Option or
Stock Purchase Right shall confer upon an Optionee any right with respect to
continuing the Optionee’s relationship as a Service Provider with the Company,
nor shall they interfere in any way with the Optionee’s right or the Company’s
right to terminate such relationship at any time, with or without cause.

(c)           The following limitations shall apply
to grants of Options:

(i)    No Service Provider shall be granted, in any
fiscal year of the Company, Options to purchase more than 12,000,000 Shares (on
a pre-reverse stock split basis).

(ii)   In connection with his or her initial
service, a Service Provider may be granted Options to purchase up to an
additional 12,000,000 Shares (on a pre-reverse stock split basis), which shall
not count against the limit set forth in subsection (i) above.

(iii)  The foregoing limitations shall be adjusted
proportionately in connection with any change in the Company’s capitalization
as described in Section 13.

(iv)  If an Option is cancelled in the same fiscal
year of the Company in which it was granted (other than in connection with a
transaction described in Section 13), the cancelled Option will be counted
against the limits set forth in subsections (i) and (ii) above.  For this purpose, if the exercise price of an
Option is reduced, the transaction will be treated as a cancellation of the
Option and the grant of a new Option.

7.             Term
of Plan.  Subject to Section 19  of
the Plan, the Plan shall become effective upon its adoption by the Board.  It shall continue in effect for a term of
ten (10) years unless terminated earlier under Section 15  of the Plan.

8.             Term
of Option.  The term of each Option
shall be stated in the Option Agreement. 
In the case of an Incentive Stock Option, the term shall be ten (10)
years from the date of grant or such shorter term as may be provided in the
Option Agreement.  Moreover, in the case
of an 

 

7

 

Incentive Stock Option granted to an Optionee who, at
the time the Incentive Stock Option is granted, owns stock representing more
than ten percent (10%) of the total combined voting power of all classes of
stock of the Company or any Parent or Subsidiary, the term of the Incentive
Stock Option shall be five (5) years from the date of grant or such shorter
term as may be provided in the Option Agreement.

9.             Option Exercise Price and
Consideration.

(a)           Exercise Price.  The per share exercise price for the Shares
to be issued pursuant to exercise of an Option shall be determined by the
Administrator, subject to the following:

(i)    In the case of an Incentive Stock Option

(A)          granted to an Employee who, at the
time the Incentive Stock Option is granted, owns stock representing more than
ten percent (10%) of the voting power of all classes of stock of the Company or
any Parent or Subsidiary, the per Share exercise price shall be no less than
110% of the Fair Market Value per Share on the date of grant.

(B)           granted to any Employee other than an
Employee described in paragraph (A) immediately above, the per Share exercise
price shall be no less than 100% of the Fair Market Value per Share on the date
of grant.

(ii)   In the case of a Nonstatutory Stock Option,
the per Share exercise price shall be determined by the Administrator.  In the case of a Nonstatutory Stock Option
intended to qualify as “performance-based compensation” within the meaning of
Section 162(m) of the Code, the per Share exercise price shall be no less
than 100% of the Fair Market Value per Share on the date of grant.

(iii)  Notwithstanding the foregoing, Options may be
granted with a per Share exercise price of less than 100% of the Fair Market
Value per Share on the date of grant pursuant to a merger or other corporate
transaction.

(b)           Waiting Period and Exercise Dates.  At the time an Option is granted, the
Administrator shall fix the period within which the Option may be exercised and
shall determine any con­ditions that must be satisfied before the Option may be
exercised.

(c)           Form of Consideration.  The Administrator shall determine the
acceptable form of consideration for exercising an Option, including the method
of payment.  In the case of an Incentive
Stock Option, the Administrator shall determine the acceptable form of
consideration at the time of grant. 
Such consideration may consist entirely of:

(i)    cash;

(ii)   check;

(iii)  promissory note;

 

8

 

(iv)  other Shares which, in the case of Shares
acquired directly or indirectly from the Company, (A) have been owned by
the Optionee for more than six (6) months on the date of surrender, and
(B) have a Fair Market Value on the date of surrender equal to the
aggregate exercise price of the Shares as to which said Option shall be exercised;

(v)   consideration received by the Company under a
cashless exercise program implemented by the Company in connection with the
Plan;

(vi)  a reduction in the amount of any Company
liability to the Optionee, including any liability attributable to the
Optionee’s participation in any Company-sponsored deferred compensation program
or arrangement;

(vii) any combination of
the foregoing methods of payment; or

(viii) such other
consideration and method of payment for the issuance of Shares to the extent
permitted by Applicable Laws.

10.           Exercise of Option.

(a)           Procedure for Exercise; Rights as
a Stockholder.  Any Option granted
hereunder shall be exercisable according to the terms of the Plan and at such
times and under such conditions as determined by the Administrator and set
forth in the Option Agreement.  Unless
the Administrator provides otherwise, vesting of Options granted hereunder
shall be suspended during any unpaid leave of absence.  An Option may not be exercised for a
fraction of a Share.

An Option shall be deemed exercised when the Company
receives: (i) written or electronic notice of exercise (in accordance with
the Option Agreement) from the person entitled to exercise the Option, and
(ii) full payment for the Shares with respect to which the Option is exercised.  Full payment may consist of any
consideration and method of payment authorized by the Administrator and
permitted by the Option Agreement and the Plan.  Shares issued upon exercise of an Option shall be issued in the
name of the Optionee or, if requested by the Optionee, in the name of the
Optionee and his or her spouse.  Until
the Shares are issued (as evidenced by the appropriate entry on the books of
the Company or of a duly authorized transfer agent of the Company), no right to
vote or receive dividends or any other rights as a stockholder shall exist with
respect to the Optioned Stock, notwithstanding the exercise of the Option.  The Company shall issue (or cause to be
issued) such Shares promptly after the Option is exercised.  No adjustment will be made for a dividend or
other right for which the record date is prior to the date the Shares are
issued, except as provided in Section 13  of the Plan.

Exercising an Option in
any manner shall decrease the number of Shares thereafter available, both for
purposes of the Plan and for sale under the Option, by the number of Shares as
to which the Option is exercised.

(b)           Termination of Relationship as a
Service Provider.  If an Optionee
ceases to be a Service Provider, other than upon the Optionee’s death or
Disability, the Optionee may exercise his or her Option within such period of
time as is specified in the Option Agreement to the extent that the Option is
vested on the date of termination (but in no event later than the expiration of
the term of such Option as set forth in the Option Agreement).  In the absence of a specified time in the 

 

9

 

Option Agreement, the Option shall remain exercisable
for three (3) months following the Optionee’s termination.  If, on the date of termination, the Optionee
is not vested as to his or her entire Option, the Shares covered by the
unvested portion of the Option shall revert to the Plan.  If, after termination, the Optionee does not
exercise his or her Option within the time specified by the Administrator, the
Option shall terminate, and the Shares covered by such Option shall revert to
the Plan.

(c)           Disability of Optionee.  If an Optionee ceases to be a Service
Provider as a result of the Optionee’s Disability, the Optionee may exercise
his or her Option within such period of time as is specified in the Option
Agreement to the extent the Option is vested on the date of termination (but in
no event later than the expiration of the term of such Option as set forth in the
Option Agreement).  In the absence of a
specified time in the Option Agreement, the Option shall remain exercisable for
twelve (12) months following the Optionee’s termination.  If, on the date of termination, the Optionee
is not vested as to his or her entire Option, the Shares covered by the
unvested portion of the Option shall revert to the Plan.  If, after termination, the Optionee does not
exercise his or her Option within the time specified herein, the Option shall
terminate, and the Shares covered by such Option shall revert to the Plan.

(d)           Death of Optionee.  If an Optionee dies while a Service
Provider, the Option may be exercised following the Optionee’s death within
such period of time as is specified in the Option Agreement to the extent that
the Option is vested on the date of death (but in no event may the option be
exercised later than the expiration of the term of such Option as set forth in
the Option Agreement), by the Optionee’s designated beneficiary, provided such
beneficiary has been designated prior to Optionee’s death in a form acceptable
to the Administrator.  If no such
beneficiary has been designated by the Optionee, then such Option may be
exercised by the personal representative of the Optionee’s estate or by the
person(s) to whom the Option is transferred pursuant to the Optionee’s will or
in accordance with the laws of descent and distribution.  In the absence of a specified time in the
Option Agreement, the Option shall remain exercisable for twelve (12) months
following Optionee’s death.  If, at the
time of death, Optionee is not vested as to his or her entire Option, the
Shares covered by the unvested portion of the Option shall immediately revert
to the Plan.  If the Option is not so
exercised within the time specified herein, the Option shall terminate, and the
Shares covered by such Option shall revert to the Plan.

11.           Stock Purchase Rights.

(a)           Rights to Purchase.  Stock Purchase Rights may be issued either
alone, in addition to, or in tandem with other awards granted under the Plan
and/or cash awards made outside of the Plan. 
After the Administrator determines that it will offer Stock Purchase
Rights under the Plan, it shall advise the offeree in writing or
electronically, by means of a Notice of Grant, of the terms, conditions and
restrictions related to the offer, includ­ing the number of Shares that the
offeree shall be entitled to purchase, the price to be paid, and the time
within which the offeree must accept such offer.  The offer shall be accepted by execution of a Restricted Stock
Purchase Agreement in the form determined by the Administrator.

(b)           Repurchase Option.  Unless the Administrator determines
otherwise, the Restricted Stock Purchase Agreement shall grant the Company a
repurchase option exercisable upon the voluntary or involuntary termination of
the purchaser’s service with the Company for any reason 

 

10

 

(including death or Disability).  The purchase price for Shares repurchased
pursuant to the Restricted Stock Purchase Agreement shall be the original price
paid by the purchaser and may be paid by cancellation of any indebtedness of
the purchaser to the Company.  The
repurchase option shall lapse at a rate determined by the Administrator.

(c)           Other Provisions.  The Restricted Stock Purchase Agreement
shall contain such other terms, provisions and conditions not inconsistent with
the Plan as may be determined by the Administrator in its sole discretion.

(d)           Rights as a Stockholder.  Once the Stock Purchase Right is exercised,
the purchaser shall have the rights equivalent to those of a stockholder, and
shall be a stockholder when his or her purchase is entered upon the records of
the duly authorized transfer agent of the Company.  No adjustment will be made for a dividend or other right for
which the record date is prior to the date the Stock Purchase Right is
exercised, except as provided in Section 13 of the Plan.

12.           Transferability
of Options and Stock Purchase Rights. 
Unless determined otherwise by the Administrator, an Option or Stock
Purchase Right may not be sold, pledged, assigned, hypothecated, transferred,
or disposed of in any manner other than by will or by the laws of descent or
distribution and may be exercised, during the lifetime of the Optionee, only by
the Optionee.  If the Administrator
makes an Option or Stock Purchase Right transferable, such Option or Stock
Purchase Right shall contain such additional terms and conditions as the
Administrator deems appropriate.

13.           Adjustments
Upon Changes in Capitalization, Dissolution, Liquidation, Merger or Change in
Control.

(a)           Changes in Capitalization.  In the
event that any dividend or other distribution (whether in the form of cash,
Shares, other securities, or other property), recapitalization, stock split,
reverse stock split, reorganization, merger, consolidation, split-up, spin-off,
combination, repurchase, or exchange of Shares or other securities of the
Company, or other change in the corporate structure of the Company affecting
the Shares such that an adjustment is determined by the Administrator (in its
sole discretion) to be appropriate in order to prevent dilution or enlargement
of the benefits or potential benefits intended to be made available under the
Plan, then the Administrator shall, in such manner as it may deem equitable,
adjust the number and class of Shares which may be delivered under the Plan,
the number, class, and price of Shares covered by each outstanding Option and
Stock Purchase Right, and the numerical Share limits of Sections 3 and 6.

(b)           Dissolution or Liquidation.  In the event of the proposed dissolution or
liquidation of the Company, the Administrator shall notify each Optionee as
soon as practicable prior to the effective date of such proposed transaction.  The Administrator in its discretion may
provide for an Optionee to have the right to exercise his or her Option until
ten (10) days prior to such transaction as to all of the Optioned Stock covered
thereby, including Shares as to which the Option would not otherwise be
exercisable.  In addition, the
Administrator may provide that any Company repurchase option applicable to any
Shares purchased upon exercise of an Option or Stock Purchase Right shall lapse
as to all such Shares, provided the proposed dissolution or liquidation takes
place at the time and in the manner contemplated.  To the extent it has not been previously 

 

11

 

exercised, an Option or Stock Purchase Right will
terminate immediately prior to the consummation of such proposed action.

(c)           Merger
or Change in Control.  In the event
of a merger of the Company with or into another corporation, or a Change in
Control, each outstanding Option and Stock Purchase Right shall be assumed or
an equivalent option or right substituted by the successor corporation or a
Parent or Subsidiary of the successor corporation.

In the event that the successor corporation refuses to
assume or substitute for the Option or Stock Purchase Right, the Optionee shall
fully vest in and have the right to exercise the Option or Stock Purchase Right
as to all of the Optioned Stock, including Shares as to which it would not
otherwise be vested or exercisable.  If
an Option or Stock Purchase Right becomes fully vested and exercisable in lieu
of assumption or substitution in the event of a merger or sale of assets, the
Administrator shall notify the Optionee in writing or electronically that the
Option or Stock Purchase Right shall be fully vested and exercisable for a
period of fifteen (15) days from the date of such notice, and the Option or
Stock Purchase Right shall terminate upon the expiration of such period.

For the purposes of this
subsection (c), the Option or Stock Purchase Right shall be considered assumed
if, following the merger or Change in Control, the option or right confers the
right to purchase or receive, for each Share of Optioned Stock subject to the
Option or Stock Purchase Right immediately prior to the merger or Change in
Control, the consideration (whether stock, cash, or other securities or
property) received in the merger or Change in Control by holders of Common
Stock for each Share held on the effective date of the transaction (and if
holders were offered a choice of consideration, the type of consideration
chosen by the holders of a majority of the outstanding Shares); provided,
however, that if such consideration received in the merger or Change in Control
is not solely common stock of the successor corporation or its Parent, the
Administrator may, with the consent of the successor corporation, provide for
the consideration to be received upon the exercise of the Option or Stock
Purchase Right, for each Share of Optioned Stock subject to the Option or Stock
Purchase Right, to be solely common stock of the successor corporation or its
Parent equal in fair market value to the per share consideration received by
holders of Common Stock in the merger or Change in Control.

(d)           Involuntary Termination other than
for Cause, Death or Disability or a Voluntary Termination for Good Reason,
Following a Change of Control. 
If, within eighteen (18) months following a Change of Control,
Optionee’s employment is terminated involuntarily by the Company or successor
corporation other than for Cause, death or Disability or by the Optionee by a
Voluntary Termination for Good Reason, then Optionee shall fully vest in and
have the right to exercise his or her Option as to all of the Shares subject to
each such Option including Shares as to which such Option would not otherwise
be vested or exercisable.

14.           Date
of Grant.  The date of grant of an
Option or Stock Purchase Right shall be, for all purposes, the date on which
the Administrator makes the determination granting such Option or Stock
Purchase Right, or such other later date as is determined by the
Administrator.  Notice of the
determination shall be provided to each Optionee within a reasonable time after
the date of such grant.

 

12

 

15.           Amendment and Termination of the
Plan.

(a)           Amendment and Termination.  The Board may at any time amend, alter,
suspend or terminate the Plan.

(b)           Stockholder Approval.  The Company shall obtain stockholder
approval of any Plan amendment to the extent necessary and desirable to comply
with Applicable Laws.

(c)           Effect of Amendment or Termination.  No amendment, alteration, suspension or
termination of the Plan shall impair the rights of any Optionee, unless
mutually agreed otherwise between the Optionee and the Administrator, which
agreement must be in writing and signed by the Optionee and the Company.  Termination of the Plan shall not affect the
Administrator’s ability to exercise the powers granted to it hereunder with
respect to Options granted under the Plan prior to the date of such
termination.

16.           Conditions Upon Issuance of Shares.

(a)           Legal Compliance.  Shares shall not be issued pursuant to the
exercise of an Option or Stock Purchase Right unless the exercise of such
Option or Stock Purchase Right and the issuance and delivery of such Shares
shall comply with Applicable Laws and shall be further subject to the approval
of counsel for the Company with respect to such compliance.

(b)           Investment Representations.  As a condition to the exercise of an Option
or Stock Purchase Right, the Company may require the person exercising such
Option or Stock Purchase Right to represent and warrant at the time of any such
exercise that the Shares are being purchased only for investment and without
any present intention to sell or distribute such Shares if, in the opinion of
counsel for the Company, such a representation is required.

17.           Inability
to Obtain Authority.  The inability
of the Company to obtain authority from any regulatory body having
jurisdiction, which authority is deemed by the Company’s counsel to be necessary
to the lawful issuance and sale of any Shares hereunder, shall relieve the
Company of any liability in respect of the failure to issue or sell such Shares
as to which such requisite authority shall not have been obtained.

18.           Reservation
of Shares.  The Company, during the
term of this Plan, will at all times reserve and keep available such number of
Shares as shall be sufficient to satisfy the requirements of the Plan.

19.           Stockholder
Approval.  The Plan shall be subject
to approval by the stockholders of the Company within twelve (12) months after
the date the Plan is adopted.  Such
stockholder approval shall be obtained in the manner and to the degree required
under Applicable Laws.

 

13

OVERSTOCK.COM, INC.

2002 STOCK OPTION
PLAN

STOCK OPTION AGREEMENT

 

Unless otherwise defined herein, the terms defined in the
2002 Stock Option Plan shall have the same defined meanings in this Stock
Option Agreement.

I.              NOTICE
OF STOCK OPTION GRANT

                [Optionee’s
Name and Address]

You have been granted an option to purchase Common Stock of the
Company, subject to the terms and conditions of the Plan and this Option
Agreement, as follows:

 

	
   

  	
  Grant Number

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Date of Grant

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Vesting Commencement
  Date

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Exercise Price per
  Share

  	
  $

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Total Number of Shares
  Granted

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Total Exercise Price

  	
  $

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Type of Option:

  	
   

  	
  Incentive Stock Option

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Nonstatutory Stock
  Option

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Term/Expiration Date:

  	
   

  	
   

  

 

                Vesting Schedule:

This Option shall be exercisable, in whole or in part, in accordance
with the following schedule:

[28% of the Shares subject to the
Option shall vest twelve months after the Vesting Commencement Date, and 2% of
the Shares subject to the Option shall vest each month thereafter, subject to
the Optionee continuing to be a Service Provider on such dates].

 

 

                Termination
Period:

This Option may be exercised for three months after Optionee ceases to
be a Service Provider.  Upon the death
or Disability of the Optionee, this Option may be exercised for twelve months  after Optionee ceases to be
a Service Provider.  In no event shall
this Option be exercised later than the Term/Expiration Date as provided above.

II.            AGREEMENT

A.            Grant
of Option.

                The Plan
Administrator of the Company hereby grants to the Optionee named in the Notice
of Grant attached as Part I of this Agreement (the “Optionee”) an option
(the “Option”) to purchase the number of Shares, as set forth in the Notice of
Grant, at the exercise price per share set forth in the Notice of Grant (the
“Exercise Price”), subject to the terms and conditions of the Plan, which is
incorporated herein by reference. 
Subject to Section 15(c) of
the Plan, in the event of a conflict between the terms and conditions of the
Plan and the terms and conditions of this Option Agreement, the terms and
conditions of the Plan shall prevail.

                If designated in
the Notice of Grant as an Incentive Stock Option (“ISO”), this Option is
intended to qualify as an Incentive Stock Option under Section 422 of the
Code.  However, if this Option is
intended to be an Incentive Stock Option, to the extent that it exceeds the
$100,000 rule of Code Section 422(d) it shall be treated as a Nonstatutory
Stock Option (“NSO”).

B.            Exercise
of Option.

(a)           Right
to Exercise.  This Option is
exercisable during its term in accordance with the Vesting Schedule set out in
the Notice of Grant and the applicable provisions of the Plan and this Option
Agreement.

(b)           Method
of Exercise.  This Option is
exercisable by delivery of an exercise notice, in the form attached as Exhibit
A (the “Exercise Notice”), which shall state the election to exercise the
Option, the number of Shares in respect of which the Option is being exercised
(the “Exercised Shares”), and such other representations and agreements as may
be required by the Company pursuant to the provisions of the Plan.  The Exercise Notice shall be completed by
the Optionee and delivered to Secretary
of the Company.  The Exercise
Notice shall be accompanied by payment of the aggregate Exercise Price as to
all Exercised Shares.  This Option shall
be deemed to be exercised upon receipt by the Company of such fully executed
Exercise Notice accompanied by such aggregate Exercise Price.

                No
Shares shall be issued pursuant to the exercise of this Option unless such
issuance and exercise complies with Applicable Laws.  Assuming such compliance, for income tax purposes the Exercised
Shares shall be considered transferred to the Optionee on the date the Option
is exercised with respect to such Exercised Shares.

 

2

 

C.            Method of Payment.

                Payment of the
aggregate Exercise Price shall be by any of the following, or a combination
thereof, at the election of the Optionee:

1.           cash;
or

2.           check;
or

3.           consideration
received by the Company under a formal cashless exercise program implemented by
the Company in connection with the Plan; or

4.           surrender
of other Shares which (i) in the case of Shares acquired either directly
or indirectly from the Company, have been owned by the Optionee for more than
six (6) months on the date of surrender, and (ii) have a Fair Market
Value on the date of surrender equal to the aggregate Exercise Price of the
Exercised Shares.

D.            Non-Transferability
of Option.

                This Option may
not be transferred in any manner otherwise than by will or by the laws of
descent or distribution and may be exercised during the lifetime of Optionee
only by the Optionee.  The terms of the
Plan and this Option Agreement shall be binding upon the executors,
administrators, heirs, successors and assigns of the Optionee.

E.             Term
of Option.

                This Option may be
exercised only within the term set out in the Notice of Grant, and may be
exercised during such term only in accordance with the Plan and the terms of
this Option Agreement.

F.             Tax
Obligations.

(a)           Withholding
Taxes.  Optionee agrees to make
appropriate arrangements with the Company (or the Parent or Subsidiary
employing or retaining Optionee) for the satisfaction of all Federal, state, local
and foreign income and employment tax withholding requirements applicable to
the Option exercise.  Optionee
acknowledges and agrees that the Company may refuse to honor the exercise and
refuse to deliver Shares if such withholding amounts are not delivered at the
time of exercise.

(b)           Notice
of Disqualifying Disposition of ISO Shares.  If the Option granted to Optionee herein is an ISO, and if
Optionee sells or otherwise disposes of any of the Shares acquired pursuant to
the ISO on or before the later of (1) the date two years after the Date of
Grant, or (2) the date one year after the date of exercise, the Optionee
shall immediately notify the Company in writing of such disposition.  Optionee agrees that Optionee may be subject
to income tax withholding by the Company on the compensation income recognized
by the Optionee.

 

3

 

G.            Entire Agreement; Governing Law.

                The Plan is incorporated herein by reference.  The Plan and this Option Agreement
constitute the entire agreement of the parties with respect to the subject
matter hereof and supersede in their entirety all prior undertakings and
agreements of the Company and Optionee with respect to the subject matter
hereof, and may not be modified adversely to the Optionee’s interest except by
means of a writing signed by the Company and Optionee.  This agreement is governed by the internal
substantive laws, but not the choice of law rules, of Delaware.

H.            NO
GUARANTEE OF CONTINUED SERVICE.

                OPTIONEE
ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO THE VESTING
SCHEDULE HEREOF IS EARNED ONLY BY CONTINUING AS A SERVICE PROVIDER AT THE WILL
OF THE COMPANY (AND NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED AN OPTION
OR PURCHASING SHARES HEREUNDER).  OPTIONEE
FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE TRANSACTIONS
CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO NOT
CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS A SERVICE
PROVIDER FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL NOT
INTERFERE WITH OPTIONEE’S RIGHT OR THE COMPANY’S RIGHT TO TERMINATE OPTIONEE’S
RELATIONSHIP AS A SERVICE PROVIDER AT ANY TIME, WITH OR WITHOUT CAUSE.

                By
your signature and the signature of the Company’s representative below, you and
the Company agree that this Option is granted under and governed by the terms
and conditions of the Plan and this Option Agreement.  Optionee has reviewed the Plan and this Option Agreement in their
entirety, has had an opportunity to obtain the advice of counsel prior to
executing this Option Agreement and fully understands all provisions of the
Plan and Option Agreement.  Optionee
hereby agrees to accept as binding, conclusive and final all decisions or
interpretations of the Administrator upon any questions relating to the Plan
and Option Agreement.  Optionee further
agrees to notify the Company upon any change in the residence address indicated
below.

 

	
  OPTIONEE:

  	
   

  	
  OVERSTOCK.COM, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Signature

  	
   

  	
  By

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Print Name

  	
   

  	
  Title

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Residence Address

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  

 

 

4

 

EXHIBIT A

OVERSTOCK.COM, INC.

2002 STOCK OPTION PLAN

EXERCISE NOTICE

 

Overstock.com,
Inc.

2855
East Cottonwood Parkway

Suite
500

Salt
Lake City, UT 84121

Attention:  Secretary or Chief Financial Officer

 

1.             Exercise of Option.  Effective as of today, ________________, _____, the undersigned
(“Purchaser”) hereby elects to purchase ______________ shares (the “Shares”) of
the Common Stock of Overstock.com, Inc.
(the “Company”) under and pursuant to the 2002 Stock Option Plan (the
“Plan”) and the Stock Option Agreement dated, _____ (the “Option
Agreement”).  Subject to adjustment in
accordance with Section 13 of the Plan, the purchase price for the Shares shall
be $_____, as required by the Option Agreement.

2.             Delivery of Payment.  Purchaser herewith delivers to the Company the full purchase
price for the Shares.

3.             Representations of Purchaser.  Purchaser acknowledges that Purchaser has
received, read and understood the Plan and the Option Agreement and agrees to
abide by and be bound by their terms and conditions.

4.             Rights as Shareholder.  Until the issuance (as evidenced by the appropriate entry on the
books of the Company or of a duly authorized transfer agent of the Company) of
the Shares, no right to vote or receive dividends or any other rights as a
shareholder shall exist with respect to the Optioned Stock, notwithstanding the
exercise of the Option.  The Shares so
acquired shall be issued to the Optionee as soon as practicable after exercise
of the Option.  No adjustment will be
made for a dividend or other right for which the record date is prior to the
date of issuance, except as provided in Section 13 of the Plan.

5.             Tax Consultation.  Purchaser understands that Purchaser may suffer adverse tax
consequences as a result of Purchaser’s purchase or disposition of the
Shares.  Purchaser represents that
Purchaser has consulted with any tax consultants Purchaser deems advisable in
connection with the purchase or dis­position of the Shares and that Purchaser
is not relying on the Company for any tax advice.

 

 

6.             Entire
Agreement; Governing Law.  The Plan
and Option Agreement are incorporated herein by reference.  This Agreement, the Plan and the Option
Agreement constitute the entire agreement of the parties with respect to the
subject matter hereof and supersede in their entirety all prior undertakings
and agreements of the Company and Purchaser with respect to the subject matter
hereof, and may not be modified adversely to the Purchaser’s interest except by
means of a writing signed by the Company and Purchaser.  This agreement is governed by the internal
substantive laws, but not the choice of law rules, of Delaware.

 

	
  Submitted by:

  	
   

  	
  Accepted by:

  
	
   

  	
   

  	
   

  
	
  PURCHASER:

  	
   

  	
  OVERSTOCK.COM, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Signature

  	
   

  	
  By

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Print Name

  	
   

  	
  Its

  
	
   

  	
   

  	
   

  
	
  Address:

  	
   

  	
  Address:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Date Received

  

 

 

2

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