Harris Teeter 2012 Annual Report Download - page 111

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PROPOSAL 2
APPROVAL OF THE
HARRIS TEETER SUPERMARKETS, INC. 2013 CASH INCENTIVE PLAN
Effective October 3, 2012, the Board of Directors established the Harris Teeter Supermarkets, Inc. 2013 Cash
Incentive Plan (referred to in this Proposal 2 as the “Plan”). The Plan replaces the Company’s prior Cash Incentive
Plan effective October 2, 2006. The Plan provides a non-exclusive framework that can satisfy the standards of
Section 162(m) of the United States Internal Revenue Code of 1986, as amended (the “Code”). Under the Plan,
the Compensation Committee will designate performance measures and a bonus formula with respect to a
performance period for each Plan participant. Utilizing those criteria and other factors that the Compensation
Committee determines appropriate, the Compensation Committee uses the Plan to provide incentive compensation
based upon the Company’s level of achievement of financial criteria during the performance period. The Board
of Directors believes that the Plan benefits shareholders because it creates a strong incentive for executives to
achieve increasing levels of financial performance that are appropriate for the Company. Shareholders are being
asked to approve the Plan to fulfill one of the requirements to qualify the amounts paid pursuant to the Plan for
a United States federal income tax deduction.
The Board believes that it is in the best interests of the Company and its shareholders to provide for a
shareholder-approved plan under which bonuses paid to its executive officers can qualify for deductibility by the
Company for federal income tax purposes. Accordingly, the Company has structured the Plan in a manner such
that payments under it can satisfy the requirements for “performance-based” compensation within the meaning of
Section 162(m) of the Code. In general, Section 162(m) of the Code places a limit on the deductibility for federal
income tax purposes of the compensation paid to the NEOs who were employed by the Company on the last day
of its taxable year. Under Section 162(m), compensation paid to such persons in excess of $1 million in a taxable
year is not generally deductible. However, compensation that qualifies as “performance-based” as determined under
Section 162(m) does not count against the $1 million limitation. One of the requirements of “performance-based”
compensation for purposes of Section 162(m) of the Code is that the material terms of the performance goals under
which compensation may be paid must be disclosed to and approved by the Company’s shareholders. For purposes
of Section 162(m) the material terms include (i) the employees eligible to receive compensation, (ii) a description
of the business criteria on which the performance goals are based and (iii) the maximum amount of compensation
that can be paid to an employee under the performance goals. Each of these aspects of the Plan is discussed below,
and shareholder approval of the Plan will be deemed to constitute approval of each of these aspects of the Plan
for purposes of the approval requirements of Section 162(m) of the Code.
The following constitutes a brief discussion of the material features of the Plan, and is qualified in its entirety
by reference to a copy of the Plan which is attached as Appendix A to this Proxy Statement.
Administration
The Compensation Committee has complete authority to: (i) select from the eligible participants the individuals
to whom awards under the Plan may from time to time be paid, (ii) determine the performance periods and
performance goals upon which payment of awards under the Plan will be based, and (iii) make any other
determination and take any other action that the Compensation Committee deems necessary or desirable to discharge
its duties under the Plan. The Compensation Committee will have the responsibility for general administration and
interpretation of the Plan, except to the extent inconsistent with Section 162(m) of the Code. The Compensation
Committee may delegate its administrative tasks to the Company’s employees or others as it deems appropriate.
Participation and Eligibility
Each of the Company’s employees who is considered an “executive officer” within the meaning of the
Securities Exchange Act of 1934, as amended, is eligible to participate in the Plan. The Company’s non-employee
directors are not entitled to participate in the Plan. Currently, the Company’s four current NEOs are the only persons
eligible to participate in the Plan.
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