iRobot 2005 Annual Report Download - page 36

These sales, or the market perception that the holders of a large number of shares intend to sell shares,
could reduce the market price of our common stock.
Our directors and management will exercise significant control over our company, which will limit your
ability to influence corporate matters.
Immediately following our initial public offering, our directors and executive officers and their affiliates
collectively beneficially owned approximately 52.6% of our outstanding common stock. As a result, these
stockholders, if they act together, will be able to influence our management and affairs and all matters
requiring stockholder approval, including the election of directors and approval of significant corporate
transactions. This concentration of ownership may have the effect of delaying or preventing a change in
control of our company and might negatively affect the market price of our common stock.
Provisions in our certificate of incorporation and by-laws, our shareholder rights agreement or Delaware
law might discourage, delay or prevent a change of control of our company or changes in our
management and, therefore, depress the trading price of our common stock.
Provisions of our certificate of incorporation and by-laws and Delaware law may discourage, delay or
prevent a merger, acquisition or other change in control that stockholders may consider favorable, including
transactions in which you might otherwise receive a premium for your shares of our common stock. These
provisions may also prevent or frustrate attempts by our stockholders to replace or remove our management.
These provisions include:
‚ limitations on the removal of directors;
‚ a classified board of directors so that not all members of our board are elected at one time;
‚ advance notice requirements for stockholder proposals and nominations;
‚ the inability of stockholders to act by written consent or to call special meetings;
‚ the ability of our board of directors to make, alter or repeal our by-laws; and
‚ the ability of our board of directors to designate the terms of and issue new series of preferred stock
without stockholder approval.
The affirmative vote of the holders of at least 75% of our shares of capital stock entitled to vote is
necessary to amend or repeal the above provisions of our certificate of incorporation. In addition, absent
approval of our board of directors, our by-laws may only be amended or repealed by the affirmative vote of the
holders of at least 75% of our shares of capital stock entitled to vote.
We have also adopted a shareholder rights agreement that entitles our stockholders to acquire shares of
our common stock at a price equal to 50% of the then-current market value in limited circumstances when a
third party acquires or announces its intention to acquire 15% or more of our outstanding common stock.
In addition, Section 203 of the Delaware General Corporation Law prohibits a publicly-held Delaware
corporation from engaging in a business combination with an interested stockholder, generally a person which
together with its affiliates owns, or within the last three years has owned, 15% of our voting stock, for a period
of three years after the date of the transaction in which the person became an interested stockholder, unless
the business combination is approved in a prescribed manner.
The existence of the foregoing provisions and anti-takeover measures could limit the price that investors
might be willing to pay in the future for shares of our common stock. They could also deter potential acquirers
of our company, thereby reducing the likelihood that you could receive a premium for your common stock in
an acquisition.
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