iRobot 2011 Annual Report Download - page 33

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Executive Agreements
We have entered into executive agreements with each of our executive officers. The executive agreements
provide for severance payments equal to 50% of such officer’s annual base salary, as well as certain continued
health benefits, in the event that we terminate his or her employment other than for cause. In addition, these
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 Good Reason, as defined in the
agreement, 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 200% of his or
her current annual base salary and 200% of such officer’s target cash incentive, as well as certain continued
health benefits. There are no tax gross-ups under the executive agreements.
It is the belief of the compensation committee that these provisions are 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 our executives.
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.
Risk Oversight of Compensation Programs
The compensation committee believes that our compensation program for executive officers is not
structured to be reasonably likely to present a material adverse risk to us based on the following factors:
• Our compensation program for executive officers is designed to provide a balanced mix of cash and
equity, annual and longer-term incentives, and performance targets.
• The base salary portion of compensation is designed to provide a steady income regardless of our stock
price performance so that executives do not feel pressured to focus primarily on stock price
performance to the detriment of other important business metrics.
• Our stock option grants, restricted stock awards and restricted stock unit grants generally vest over four
years and, in the case of stock options, are only valuable if our stock price increases over time.
• Maximum payout levels for the cash incentive compensation are capped.
• Our stock ownership guidelines align the interests of our executive officers with those of our
stockholders.
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