iRobot 2007 Annual Report Download - page 112

stock under modified vesting requirements. The 2001 Plan is administered by a Committee of the Board of
Directors. Options granted to employees under the 2001 Plan may be designated as 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 $0.1 million,
$0.1 million, $0.2 million and $0.3 million was expensed in fiscal years, 2007, 2006, 2005 and 2004, respectively.
The remaining balance of $14,000 will be expensed in 2008. 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 “Nonstatutory” 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 39, 2007, there were 1,170,440 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 7 or 10 years from the date of grant or, if earlier,
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 Global 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.
Effective January 1, 2006, the Company adopted the provisions of SFAS No. 123(R), in accounting for stock
options used subsequent to this date. Prior to January 1, 2006, the Company utilized the provisions of APB No. 25
and related interpretations in accounting for options granted.
78
iROBOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)