Netgear 2013 Annual Report Download - page 101

Table of Contents NETGEAR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
In April 2003, the Company adopted the 2003 Stock Plan (the “2003 Plan”).
The 2003 Plan provides for the granting of stock options to employees
and consultants of the Company. Options granted under the 2003 Plan may be either ISOs or NSOs. 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. 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. During the
second quarter of 2013, the Company's 2003 Stock Plan expired and the remaining unissued 62,791 reserved shares were retired accordingly.
Options under the 2003 Plan may be granted for periods of up to ten years
, provided, however, that (i) the exercise price of an ISO and NSO shall
not be less than the estimated fair value of the underlying stock 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 underlying stock on the date of grant. To date, options granted 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
. 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. Upon the adoption of the
2006 Plan, the Company reserved 2,500,000
shares of common stock for issuance under the 2006 Plan. In June 2008, the Company adopted
amendments to the 2006 Plan which increased the number of shares of the Company’
s common stock that may be issued under the 2006 plan by an
additional 2,500,000 shares. In July 2010, the Company adopted amendments to the 2006 Plan which increased the number of shares of the Company’
s
common stock that may be issued under the 2006 plan by an additional 1,500,000
shares. In June 2012, the Company adopted amendments to the 2006
Plan which increased the number of shares of the Company’s common stock that may be issued under the 2006 plan by an additional 3,000,000
shares.
In addition, RSUs granted under the 2006 Plan on or after June 6, 2012 are counted against shares authorized under the plan as 1.58
shares of common
stock for each share subject to such award. As of December 31, 2013 , 1,366,297 shares were reserved for future grants under the 2006 Plan.
Options granted under the 2006 Plan may be either ISOs or NSOs. 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, provided, however, that (i) the exercise price of an ISO and NSO shall not be less than the estimated fair value of the underlying stock 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
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.
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