Netgear 2012 Annual Report Download - page 94

Table of Contents NETGEAR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
granted to a 10% shareholder shall not be less than 110%
of the estimated fair value of the underlying stock on the date of grant. Options granted
under the 2006 Plan generally vest over four years , with the first tranche vesting at the end of 12 months
and the remaining shares underlying the
option vesting monthly over the remaining three years .
Stock appreciation rights may be granted under the 2006 Plan subject to the terms specified by the plan administrator, provided that the term of
any such right may not exceed ten
(10) years from the date of grant. The exercise price generally cannot be less than the fair market value of the
Company’s common stock on the date the stock appreciation right is granted.
Restricted stock awards may be granted under the 2006 Plan subject to the terms specified by the plan administrator. The period over which any
restricted award may fully vest is generally no less than three (3) years. Restricted stock awards are non-
vested stock awards that may include grants
of restricted stock or grants of restricted stock units (“RSUs”).
Restricted stock awards are independent of option grants and are generally subject to
forfeiture if employment terminates prior to the release of the restrictions. During that period, ownership of the shares cannot be transferred.
Restricted stock has the same voting rights as other common stock and is considered to be currently issued and outstanding. RSUs do not have the
voting rights of common stock, and the shares underlying the RSUs are not considered issued and outstanding. The Company expenses the cost of the
restricted stock awards, which is determined to be the fair market value of the shares at the date of grant, ratably over the period during which the
restrictions lapse.
Performance awards may be in the form of performance shares or performance units. A performance share means an award denominated in
shares of Company common stock and a performance unit means an award denominated in units having a dollar value or other currency, as
determined by the plan administrator. The plan administrator will determine the number of performance awards that will be granted and will establish
the performance goals and other conditions for payment of such performance awards. The period of measuring the achievement of performance goals
will be a minimum of twelve (12) months.
Other stock-based awards may be granted under the 2006 Plan subject to the terms specified by the plan administrator. Other stock-
based
awards may include dividend equivalents, restricted stock awards, or amounts which are equivalent to all or a portion of any federal, state, local,
domestic or foreign taxes relating to an award, and may be payable in shares, cash, other securities or any other form of property as the plan
administrator may determine.
In the event of a change in control of the Company, all awards under the 2006 Plan vest in full and all outstanding performance shares and
performance units will be paid out upon transfer.
Any shares of common stock subject to an award that is forfeited, settled in cash, expires or is otherwise settled without the issuance of shares
shall again be available for awards under the 2006 Plan. Additionally, any shares that are tendered by a participant of the 2006 Plan or retained by the
Company as full or partial payment to the Company for the purchase of an award or to satisfy tax withholding obligations in connection with an
award shall no longer again be made available for issuance under the 2006 Plan.
Employee Stock Purchase Plan
The Company sponsors an Employee Stock Purchase Plan (the “ESPP”), pursuant to which eligible employees may contribute up to 10%
of
compensation, subject to certain income limits, to purchase shares of the Company’s common stock. Employees may purchase stock semi-
annually at
a price equal to 85%
of the fair market value on the purchase date. Since the price of the shares is determined at the purchase date, the Company
recognizes expense based on the 15% discount at purchase. For the years ended December 31, 2012 , 2011 , and 2010
, ESPP compensation expense
was $371,000 , $354,000 and $236,000 , respectively. As of December 31, 2012 , 387,058 shares were reserved for future grants under the ESPP.
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