iRobot 2008 Annual Report Download - page 22

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executive agreements provide that if we experience a change in control and the employment of such officer is
terminated without cause, or if such officer terminates his or her employment for certain reasons including a
substantial reduction in salary or bonus or geographic movement during the one-year period following the
change in control, then all unvested stock options held by such officer become fully-vested and immediately
exercisable and such officer is entitled to severance payments equal to 100% of his or her annual base salary
and 50% of such officer’s annual bonus, as well as certain continued health benefits. The agreements also
provide that all options granted to each officer will have their vesting accelerated by 25% upon a change in
control. It was the belief of the compensation committee that these provisions were consistent with executive
severance arrangements that are customary for public companies at our stage of development and were
necessary in order to hire and/or retain the executives.
From time to time, the Company’s executive officers enter into stock restriction agreements upon the
exercise of their option grants.
We entered into indemnification agreements with each of our executive officers and directors, providing
for indemnification against expenses and liabilities reasonably incurred in connection with their service for us
on our behalf.
On December 30, 2002, we entered into an independent contractor agreement with Dr. Rodney Brooks.
On August 8, 2008, we amended and restated this independent contractor agreement. Our independent
contractor agreement with Dr. Brooks shall continue until terminated by either party upon 60 days’ written
notice.
Tax Deductibility of Executive Compensation
In general, under Section 162(m) of the Internal Revenue Code of 1986, as amended, or the Code, we
cannot deduct, for federal income tax purposes, compensation in excess of $1,000,000 paid to certain executive
officers. This deduction limitation does not apply, however, to compensation that constitutes “qualified
performance-based compensation” within the meaning of Section 162(m) of the Code and the regulations
promulgated thereunder. We have considered the limitations on deductions imposed by Section 162(m) of the
Code and it is our present intention, for so long as it is consistent with our overall compensation objective, to
structure executive compensation to minimize application of the deduction limitations of Section 162(m) of the
Code.
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