iRobot 2008 Annual Report Download - page 44

return, (5) changes in the market price of our common stock, (6) sales or market share or (7) earnings per
share. The compensation committee will select the particular performance criteria within 90 days following the
commencement of a performance cycle.
Tax Withholding. Participants in the 2005 Plan are responsible for the payment of any federal, state or
local taxes that we are required by law to withhold upon any option exercise or vesting of other awards.
Subject to approval by the compensation committee, participants may elect to have the minimum tax
withholding obligations satisfied either by cash payment, by authorizing us to withhold part of a cash payment
to be made in satisfaction of an award under the 2005 Plan, by authorizing us to withhold shares of our
common stock to be issued pursuant to an option exercise or other award, or by transferring to us shares our
common stock having a value equal to the amount of such taxes.
Change in Control Provisions. The 2005 Plan provides that upon consummation of an Acquisition (as
defined in the 2005 Plan), our board of directors and the board of directors of the surviving or acquiring entity
shall, as to outstanding awards under the 2005 Plan, make appropriate provisions for the continuation or
assumption of such awards.
Amendments and Termination. Our board of directors may at any time amend or discontinue the 2005
Plan and the compensation committee may at any time amend or cancel any outstanding award for the purpose
of satisfying changes in the law or for any other lawful purpose. However, no such action may adversely affect
any rights under any outstanding award without the holder’s consent. Any amendments that materially change
the terms of the 2005 Plan, including any amendments that increase the number of shares reserved for issuance
under the 2005 Plan, expand the types of awards available, materially expand the eligibility to participate in,
or materially extend the term of, the 2005 Plan, or materially change the method of determining the fair
market value of our common stock, will be subject to approval by stockholders. Amendments shall also be
subject to approval by stockholders if and to the extent determined by the compensation committee to be
required by the Code to preserve the qualified status of incentive options or to ensure that compensation
earned under the 2005 Plan qualifies as performance-based compensation under Section 162(m) of the Code.
In addition, except in connection with a reorganization or other similar change in our capital stock or a merger
or other transaction, the compensation committee may not reduce the exercise price of an outstanding stock
option or stock appreciation right or effect repricing of an outstanding stock option or stock appreciation right
through cancellation and re-grant. Notwithstanding the foregoing, if the proposed Option Exchange Program
and related amendment to the 2005 Plan are approved, the compensation committee will be authorized to
implement the Option Exchange Program described in this proxy statement.
Tax Aspects Under the Code. The following is a summary of the principal U.S. federal income tax
consequences of certain transactions under the 2005 Plan. It does not describe all federal tax consequences
under the 2005 Plan, nor does it describe state or local tax consequences.
Incentive Options. No taxable income is generally realized by the optionee upon the grant or exercise of
an incentive stock option. If shares of our common stock issued to an optionee pursuant to the exercise of an
incentive option are sold or transferred after two years from the date of grant and after one year from the date
of exercise, then (1) upon sale of such shares, any amount realized in excess of the option price (the amount
paid for the shares) will be taxed to the optionee as a long-term capital gain, and any loss sustained will be a
long-term capital loss, and (2) there will be no deduction for us for federal income tax purposes. The exercise
of an incentive option will give rise to an item of tax preference that may result in alternative minimum tax
liability for the optionee.
If shares of our common stock acquired upon the exercise of an incentive option are disposed of prior to
the expiration of the two-year and one-year holding periods described above (a “disqualifying disposition”),
generally (1) the optionee will realize ordinary income in the year of disposition in an amount equal to the
excess (if any) of the fair market value of the shares of our common stock at exercise, and (2) we will be
entitled to deduct such amount. Special rules will apply where all or a portion of the exercise price of the
incentive option is paid by tendering shares of our common stock.
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