TIDEWATER INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Years ended March 31, 2010, 2009, and 2008  The company’s employee stock option, restricted stock, and phantom stock plans are long-term retention  plans that are intended to attract, retain and provide incentives for talented employees, including officers  and non-employee directors, and to align stockholder and employee interests. The company believes its  employee stock option plans are critical to its operations and productivity. The employee stock option plans  allow the company to grant, on a discretionary basis, both incentive and non-qualified stock options as well  as restricted stock. Under the company's stock option and restricted stock plans, the Compensation Committee of the Board of  Directors has the authority to grant stock options and restricted shares of the company's stock to officers  and other key employees. At March 31, 2010, 3,775,801 shares of common stock are reserved for issuance  under the plans of which 1,583,534 shares are available for future grants. Under the terms of the plans,  stock options are granted with an exercise price equal to the stock's closing fair market value on the date of  grant. The company has granted stock options to its directors and employees, including officers, over the last  several years under several different stock incentive plans. Generally, options granted vest annually over a  one to three-year vesting period measured from the date of grant. Options not previously exercised expire at  the earlier of either three months after termination of the grantee’s employment or ten years after the date of  grant. All of the stock options are classified as equity awards.  The company uses the Black-Scholes option-pricing model to determine the fair value of options granted  and to calculate the share-based compensation expense. The fair value and assumptions used during fiscal  2010, 2009 and 2008 are as follows: The following table sets forth a summary of stock option activity of the company for fiscal years 2010, 2009  and 2008: F-27 Weighted-average Number Exercise Price  of Shares Outstanding at March 31, 2007  $  39.13  2,462,671  Granted 57.14 293,241 Exercised 35.62 (1,297,483) Expired or cancelled/forfeited  59.95  (20,666)  Outstanding at March 31, 2008  45.67  1,437,763  Granted 35.06 545,417 Exercised 38.87 (169,506) Expired or cancelled/forfeited  55.76  (1,667)  Outstanding at March 31, 2009  43.10  1,812,007  Granted 45.75 463,305 Exercised 30.13 (62,112) Expired or cancelled/forfeited  51.96  (20,933)  Outstanding at March 31, 2010  $  43.94  2,192,267  2010 2009 2008 Weighted average fair value of stock options granted  $14.87  $10.42  $18.11  Risk-free interest rate  2.66%  2.20%  2.64%  Expected dividend yield  2.19%  2.90%  1.05%  Expected stock price volatility  38.40%  39.88%  33.39%  Expected stock option life  6.0 years  5.5 years  5.5 years  (7)  STOCK-BASED COMPENSATION AND INCENTIVE PLANS General Stock Option Plans