iRobot 2012 Annual Report Download - page 32

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26
or her employment for Good Reason, as defined in the agreement, following the change in control, then all unvested equity
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 are 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 annually reviews and 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 cash incentive compensation are capped.
• Our stock ownership guidelines align the interests of our executive officers with those of our
stockholders.
Compensation Consultant Independence
Pursuant to its charter, the compensation committee has the sole authority to retain, terminate, obtain advice from,
oversee and compensate its outside advisors, including its compensation consultant. We have provided appropriate funding to
the compensation committee to do so.
In 2011 in preparation for the 2012 fiscal year, the compensation committee retained PM&P as its independent
executive compensation consultant. None of our management team participated in the compensation committee's decision to
retain PM&P. PM&P reports directly to the compensation committee, and the compensation committee may replace PM&P or
hire additional consultants at any time. PM&P attends meetings of the compensation committee, as requested, and
communicates with the chairman of the compensation committee between meetings; however, the committee makes all
decisions regarding the compensation of the Company's executive officers.
PM&P provides various executive compensation services to the compensation committee with respect to our executive
officers and other key employees at the committee's request. The services PM&P provides include advising the compensation
committee on the principal aspects of the executive compensation program and evolving best practices, and providing market
information and analysis regarding the competitiveness of our program design and awards in relationship to our performance.
The compensation committee now reviews the services provided by its outside consultants and believes that PM&P is
independent in providing executive compensation consulting services. The compensation committee conducted a specific
review of its relationship with PM&P in 2012, and determined that PM&P's work for the compensation committee did not raise
any conflicts of interest, consistent with the guidance provided under the Dodd-Frank Act and by the SEC and NASDAQ. In
making this determination, the compensation committee noted that during 2012: