iRobot 2010 Annual Report Download - page 38

PROPOSAL 2
APPROVAL OF THE COMPANY’S SENIOR EXECUTIVE
INCENTIVE COMPENSATION PLAN, AS AMENDED AND RESTATED
On April 6, 2011, our board of directors amended and restated the Senior Executive Incentive Compen-
sation Plan (the “Incentive Plan”) so that incentive payments made under the Incentive Plan constitute
performance-based compensation and therefore not subject to the compensation cap imposed by Section 162(m)
of the Internal Revenue Code of 1986, as amended (the “Code”).
Summary of the Incentive Plan
The following description of the Incentive Plan is only a summary of certain provisions thereof and is
qualified in its entirety by reference to its full text, a copy of which attached as Appendix A to this Proxy
Statement.
Purpose
Section 162(m) of the Code generally does not allow publicly held companies to obtain tax deductions
for compensation of more than $1,000,000 paid in any fiscal year to their chief executive officer, or any of the
three most highly compensated executive officers, other than the chief financial officer (“Covered Employ-
ees”), unless such payments are “performance-based” in accordance with conditions specified under
Section 162(m) of the Code and the Treasury Regulations promulgated thereunder. One of those conditions
requires the Company to obtain stockholder approval of the material terms of the performance goals set by a
committee of outside directors. Stockholder approval must be obtained initially and every five years thereafter.
The purpose of the Incentive Plan is to establish a program of incentive compensation for Covered
Employees and other key employees of the Company and its subsidiaries that is directly related to attainment
of pre-selected performance goals of the Company. Incentive payments made to Covered Employees under the
Incentive Plan are intended to qualify as “performance-based” compensation and therefore allows the
Company to obtain federal income tax deductions for such payments, without regard to the limitations of
Section 162(m) of the Code.
Administration
The Incentive Plan is administered by the compensation committee. Each member of the compensation
committee is required to be an “outside director” (within the meaning of Section 162(m) of the Code). The
compensation committee has all the authority that may be necessary or helpful to enable it to discharge its
responsibilities with respect to the Incentive Plan, including authority to determine eligibility for participation,
establish the maximum award which may be earned by each Participant (which may be expressed in terms of
dollar amount, percentage of salary or any other measurement), establish goals for each participant, calculate
and determine each participant’s level of attainment of such goals, and calculate the incentive award for each
participant based upon such level of attainment. The compensation committee has full power and authority to
construe, interpret, and administer the Incentive Plan.
Eligibility
Any officer or other key employee of the Company and its subsidiaries selected by the compensation
committee, in its sole discretion, shall be eligible to participate in the Incentive Plan. As of January 2, 2011,
there were approximately 8 employees of the Company who could, if selected by the compensation committee,
participate in the Incentive Plan.
Incentive Awards and Performance Goals
The Incentive Plan provides that the compensation committee shall designate for each “Performance
Period” (which is the period during which performance is measured to determine the level of attainment of an
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