iRobot 2008 Annual Report Download - page 43

Stock Options. The 2005 Plan permits the granting of (1) options to purchase our common stock
intended to qualify as incentive stock options under Section 422 of the Internal Revenue Code of 1986, as
amended (the “Code”) and (2) options that do not so qualify. Options granted under the 2005 Plan will be
non-qualified options if they fail to qualify as incentive stock options or exceed the annual limit on incentive
stock options. Non-qualified options may be granted to any persons eligible to receive incentive stock options
and to non-employee directors and key persons. The option exercise price of each option will be determined
by the compensation committee but may not be less than 100% of the fair market value of our common stock
on the date of grant. The maximum number of shares that can be granted in the form of incentive stock
options cannot exceed 10,000,000.
The term of each option will be fixed by the compensation committee and may not exceed ten years from
the date of grant. The compensation committee will determine at what time or times each option may be
exercised. Options may be made exercisable in installments and the exercisability of options may be
accelerated by the compensation committee. Options may be exercised in whole or in part with written notice
to us.
Upon exercise of options, the option exercise price must be paid in full either in cash, by certified or
bank check or other instrument acceptable to the compensation committee, or by delivery (or attestation to the
ownership) of shares of our common stock purchased by the optionee in the open market or held by the
optionee for a minimum specified period. Subject to applicable law, the exercise price may also be delivered
to us by a broker pursuant to irrevocable instructions to the broker from the optionee.
To qualify as incentive stock options, options must meet additional federal tax requirements, including a
$100,000 limit on the value of shares subject to incentive options that first become exercisable by a participant
in any one calendar year.
Stock Appreciation Rights. The compensation committee may award a stock appreciation right either as
a freestanding award or in tandem with a stock option. The exercise price of a stock appreciation right may
not be less than 100% of the fair market value of our common stock on the date of grant. The compensation
committee may award stock appreciation rights subject to such conditions and restrictions as the compensation
committee may determine, provided that (1) upon exercise of a stock appreciation right granted in tandem
with an option, the applicable portion of any related option shall be surrendered and (2) stock appreciation
rights granted in tandem with options are exercisable at such time or times and to the extent that the related
stock options are exercisable.
Restricted Stock. The compensation committee may award shares of our common stock to participants
subject to such conditions and restrictions as the compensation committee may determine. These conditions
and restrictions may include the achievement of certain performance goals and/or continued employment with
us through a specified period.
Deferred Stock Awards. The compensation committee may award phantom stock units as deferred stock
awards to participants. Deferred stock awards are ultimately payable in the form of shares of our common
stock and may be subject to such conditions and restrictions as the compensation committee may determine.
These conditions and restrictions may include the achievement of certain performance goals and/or continued
employment with us through a specified vesting period. In the compensation committee’s sole discretion and
subject to the participant’s compliance with the procedures established by the compensation committee and
requirements of Section 409A of the Code, it may permit a participant to make an advance election to receive
a portion of his or her future cash compensation otherwise due in the form of a deferred stock award.
Performance-based Awards. To ensure that certain awards granted under the 2005 Plan, including
awards of restricted stock and deferred stock, to a “Covered Employee” (as defined in the Code) qualify as
“performance-based compensation” under Section 162(m) of the Code, the 2005 Plan provides that the
compensation committee may require that the vesting of such awards be conditioned on the satisfaction of any
or all of the following performance criteria: (1) our return on equity, assets, capital or investment, (2) our pre-
tax or after-tax profit levels or that of any subsidiary, division, operating unit or business segment, or any
combination of the foregoing, (3) cash flow, funds from operations or similar measure, (4) total stockholder
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Proxy Statement