iRobot 2005 Annual Report Download - page 73

iROBOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
ISOs or Nonstatutory Stock Options. In 2004 and 2003, there were 571,405 and 40,000 options granted,
respectively, under the 2001 Plan.
During 2004, the Company issued 25,899 and 371,685 restricted shares of common stock under the 1994
Plan and 2001 Plan, respectively, all of which were outstanding at December 31, 2004. Deferred compensation
of $0.7 million was recorded in association with the issuance of these restricted shares, of which $0.2 million
and $0.3 million was expensed in 2005 and 2004, respectively. The remaining balance of $0.2 million will be
expensed in 2006 through 2007. Upon termination of the stockholder's business relationship with the
Company, per the terms of the restricted stock agreements, the Company 1) shall purchase all unvested
shares from the stockholder at the price paid for them and 2) may purchase all but not less than all of the
stockholder's vested shares at the greater of i) the price paid for them and ii) the product of the Fair Market
Value (as defined in the 2001 Plan) at the time of repurchase and the number of vested shares to be
repurchased.
Immediately upon expiration of the 1994 Plan, the Company adopted the 2004 Stock Option and
Incentive Plan (the ""2004 Plan''). Under the 2004 Plan, 1,189,423 shares of the Company's common stock
were reserved for issuance to directors, officers, employees and consultants of the Company. In addition, stock
options returned to the 1994 Plan, in accordance therewith, after November 16, 2004, as a result of the
expiration, cancellation or termination, are automatically made available for issuance under the 2004 Plan.
The aggregate number of shares that may be issued pursuant to the 2004 Plan shall not exceed
3,695,223 shares. Options may be designated and granted as either ""Incentive Stock Options'' or ""Nonstatu-
tory'' Stock Options. Eligibility for ISOs is limited to those individuals whose employment status would
qualify them for the tax treatment associated with ISOs in accordance with the Internal Revenue Code.
Effective October 10, 2005, the Company terminated the 2004 Plan and adopted the 2005 Stock Option
and Incentive Plan (the ""2005 Plan''). Under the 2005 Plan, 1,583,682 shares were reserved for issuance in
the form of incentive stock options, non-qualified stock options, stock appreciation rights, deferred stock
awards and restricted stock awards. Additionally, the 2005 Plan provides that the number of shares reserved
and available for issuance under the plan will automatically increase each January 1, beginning in 2007, by
4.5% of the outstanding number of shares of common stock on the immediately preceding December 31.
Stock options returned to the 1994 Plan, 2001 Plan, 2004 Plan and 2005 Plan, as a result of their expiration,
cancellation or termination, are automatically made available for issuance under the 2005 Plan. Eligibility for
incentive stock options is limited to those individuals whose employment status would qualify them for the tax
treatment associated with incentive stock options in accordance with the Internal Revenue Code. As of
December 31, 2005, there were 1,303,682 shares available for future grant under the 2005 Plan.
Options granted under the 1994 Stock Option Plan, the 2001 Plan, the 2004 Plan and the 2005 Plan (the
""Plans'') are subject to terms and conditions as determined by the Compensation Committee of the Board of
Directors, including vesting periods. Options granted under the Plans are exercisable in full at any time
subsequent to vesting, generally vest over periods from 0 to 5 years, and expire upon the earlier of 10 years
from the date of grant or 60 or 90 days from employee termination. The exercise price for each ISO grant is
determined by the Board of Directors of the Company to be equal to the fair value of the common stock on the
date of grant. In reaching this determination at the time of each such grant, the Board considers a broad range
of factors, including the illiquid nature of an investment in the Company's common stock, the Company's
historical financial performance, the Company's future prospects and the value of preferred stock based on
recent financing activities. Subsequent to the Company's initial public offering, the exercise price of stock
options granted is equal to the closing price on the NASDAQ National Market on the date of grant. The
exercise price of nonstatutory options may be set at a price other than the fair market value of the common
stock.
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