Netgear 2006 Annual Report Download - page 66

Table of Contents
NETGEAR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
and consultants. The Company has reserved 750,000 shares of Common Stock plus any shares which were reserved
but not issued under the 2000 Plan as of the date of the approval of the 2003 Plan. The number of shares which were
reserved but not issued under the 2000 Plan that were transferred to the Company’s 2003 Plan were 615,290, which
when combined with the shares reserved for the Company’s 2003 Plan total 1,365,290 shares reserved under the
Company’s 2003 Plan as of the date of transfer. Any options cancelled under either the 2000 Plan or the 2003 Plan
are returned to the pool available for grant. As of December 31, 2006, 143,209 shares were reserved for future grants
under the Company’s 2003 Plan.
Options under the 2003 Plan may be granted for periods of up to ten years and at prices no less than the
estimated fair value of the common stock on the date of grant as determined by the closing sales price for such stock
as quoted on any established stock exchange or a national market system, provided, however, that (i) the exercise
price of an ISO and NSO shall not be less than the estimated fair value of the shares on the date of grant and (ii) the
exercise price of an ISO and NSO granted to a 10% shareholder shall not be less than 110% of the estimated fair
value of the shares on the date of grant. To date, options granted generally vest over four years, with the first tranche
vesting at the end of twelve months and the remaining shares underlying the option vesting monthly over the
remaining three years. In fiscal 2005, certain options granted under the 2003 Plan immediately vested and were
exercisable on the date of grant, and the shares underlying such options were subject to a resale restriction which
expires at a rate of 25% per year.
2006 Long Term Incentive Plan
In April 2006, the Company adopted the 2006 Long Term Incentive Plan (the “2006 Plan”), which was
approved by the Company’s stockholders at the 2006 Annual Meeting of Stockholders on May 23, 2006. The 2006
Plan provides for the granting of stock options, stock appreciation rights, restricted stock, performance awards and
other stock awards, to eligible directors, employees and consultants of the Company. The Company has reserved
2,500,000 shares of Common Stock for issuance under the 2006 Plan. Any options cancelled under the 2006 Plan are
returned to the pool available for grant. As of December 31, 2006, 1,458,710 shares were reserved for future grants
under the 2006 Plan.
Options granted under the 2006 Plan may be either incentive stock options or nonqualified stock options. ISOs
may be granted only to Company employees (including officers and directors who are also employees). NSOs may
be granted to Company employees, directors and consultants. Options may be granted for periods of up to ten years
and at prices no less than the estimated fair value of the common stock on the date of grant as determined by the
closing sales price for such stock as quoted on any established stock exchange or a national market system, provided,
however, that (i) the exercise price of an ISO and NSO shall not be less than the estimated fair value of the shares on
the date of grant and (ii) the exercise price of an ISO and NSO granted to a 10% shareholder shall not be less than
110% of the estimated fair value of the shares 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 twelve 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 nonvested stock awards that may include grants of restricted stock or grants of restricted
stock units. 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. Restricted stock units do not have the voting rights of common stock, and the shares
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