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EXHIBIT 4.2    
  

 
  AMENDMENT NO. 1
  
    TO
  
    RIGHTS AGREEMENT    
  

        This Amendment No. 1 to Rights Agreement (this "Amendment") is dated as of March 26, 2002 by and between FIBERSTARS, INC., a California
corporation (the "Company"), and MELLON INVESTOR SERVICES LLC, a New Jersey limited liability company, as Rights Agent (the "Rights Agent"), with reference to the following: 

        A.    The
Company and the Rights Agent entered into that certain Rights Agreement dated as of September 20, 2001 (the "Agreement") in order to implement a shareholder
rights plan as more fully described therein. 

        B.    The
Company desires to amend the Agreement in certain respects in order to permit Trigran Investments LP (or any of its affiliates) to purchase additional shares of
Common Stock of the Company without triggering the occurrence of the Distribution Date (as defined in the Agreement). 

        C.    Under
the Agreement, the Company and the Rights Agent may amend the Agreement, at any time prior to the Distribution Date, which has yet to occur. 

        NOW,
THEREFORE, pursuant to Section 27 of the Agreement, the Company and the Rights Agent hereby amend, effective upon the date hereof, the definition of the term "Acquiring
Person" set forth in Section 1(a) of the Agreement such that Section 1(a)(ii) of the
Agreement shall read in its entirety as follows: 

        "(ii) the
term Acquiring Person shall not mean: 

        (A)  the
Company; 

        (B)  any
Subsidiary (as such term is hereinafter defined) of the Company; 

        (C)  any
employee benefit plan of the Company or any of its Subsidiaries; 

        (D)  any
entity holding securities of the Company organized, appointed or established by the Company or any of its Subsidiaries for or pursuant to the terms of any such plan; 

        (E)  any
underwriter acting in good faith in a firm commitment underwriting of an offering of the Company's securities pursuant to arrangements with the Company that have
been approved by the Board (however, the exception provided by this clause (E) shall no longer be
available in the event that any such underwriter is otherwise an Acquiring Person on or after the date which is forty (40) days after the date of initial acquisition of the Company's securities
by such underwriter in connection with such offering); 

        (F)  Advanced
Lighting Technologies, Inc. (referred to collectively with its Affiliates and Associates as "ADLT"), so long as ADLT is not the Beneficial Owner of a
percentage of the outstanding shares of Common Stock that is greater (by more than one percent (1%) of the outstanding shares of Common Stock) than (1) the percentage of the outstanding shares
of Common Stock as to which ADLT has Beneficial Ownership on the date hereof or (2) such lesser percentage as to which ADLT has Beneficial Ownership following any transfer or exercise of
securities Beneficially Owned by ADLT, or the expiration or cancellation of any securities Beneficially Owned by ADLT, after the date hereof (except that this clause (F)  shall pertain only until
such time as ADLT has Beneficial Ownership of less than fifteen percent (15%) of the outstanding shares of Common Stock); or 

        (G)  Trigran
Investments LP, an Illinois limited partnership (referred to collectively with their Affiliates and Associates as "Trigran"), so long as Trigran is not the
Beneficial Owner of a percentage of the outstanding shares of Common Stock that is greater (by more than one percent (1%) of the outstanding shares of Common Stock) than (1) the percentage of
the 

outstanding shares of Common Stock represented by the sum of (x) the shares as to which Trigran has Beneficial Ownership immediately prior to the "Closing" (as that term is defined in that
certain Common Stock and Warrant Purchase Agreement, dated March, 2002, entered into by the Company and each of the "Investors" named therein, the "Purchase Agreement"), plus (y) the shares as
to which Trigran obtains Beneficial Ownership, pursuant to the transactions described in the Purchase Agreement, or (2) such lesser percentage as to which Trigran has Beneficial Ownership
following any disposal of Common Stock by Trigran after such Closing (except that this clause (G) shall pertain only until such time as Trigran
has Beneficial Ownership of less than fifteen percent (15%) of the outstanding shares of Common Stock); and" 

        This
Amendment may be executed in any number of counterparts, each which shall be deemed an original, and all of this together shall constitute one instrument. This Amendment shall be
deemed to be a contract made under the laws of the State of the Company's jurisdiction of incorporation and for all purposes shall be governed by and construed in accordance with the laws of such
state applicable to contracts to be made and to be performed entirely within such state; provided, however, that all provisions regarding the rights,
duties and obligations of the Rights Agent under the Agreement, as amended by this Amendment, shall continue to be governed by and construed in accordance with the laws of the State of New York
applicable to contracts made and to be performed entirely within such State. Except as specifically amended by this Amendment, all other terms and conditions of the Agreement shall remain in full
force and effect and are hereby ratified and confirmed. 

[signature
page to follow] 

        IN
WITNESS WHEREOF, this Amendment is executed as of the date first written above. 

	 	 	FIBERSTARS, INC.
	

 	
 	

 	

 
	 	 	By:	/s/  ROBERT G. CONNORS      

	 	 	Name:	Robert G. Connors
	 	 	Title:	Chief Financial Officer
	

 	
 	

 	

 
	 	 	MELLON INVESTOR SERVICES LLC
	

 	
 	

 	

 
	 	 	By:	/s/  WILLIAM A. DOUGHERTY      

	 	 	Name:	William A. Dougherty
	 	 	Title:	Assistant Vice President
	

 	
 	

 	

 

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EXHIBIT 4.2

AMENDMENT NO. 1 TO RIGHTS AGREEMENTExhibit 10.5

OVERSTOCK.COM, INC.

2002 STOCK OPTION PLAN

 

 

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)           “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) 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.

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

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

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

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

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

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

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

(l)            “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 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.

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

(n)           “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

 

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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.

(o)           “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.

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

(q)           “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.

(r)            “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.

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

(t)            “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.

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

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

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

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

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

 

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

(aa)         “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.

(bb)         “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.

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

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

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

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

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

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 60,000,000 Shares plus an annual increase to be added on
the first day of the Company’s fiscal year beginning in 2003, equal to the
lesser of (i) 15,000,000 shares, (ii) 3% of the outstanding shares on such
date or (iii) a lesser amount determined by the Board.  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.

 

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(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;

(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;

 

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(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.

(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.

 

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(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, 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 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.

 

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(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;

(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

 

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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 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

 

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(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 (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, 

 

-10-

 

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 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

 

-11-

 

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.

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.

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.

 

-12-

 

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 [Title] 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.

C.            Method of Payment.

 

-2-

 

                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.

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

 

-3-

 

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:  [Title]

 

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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