Harris Teeter 2012 Annual Report Download - page 95

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Life Insurance. The Company maintains a group universal insurance plan through the Key Employee Life
Insurance Plan (the “KELIP”) which provides for life insurance coverage equal to two and one-half times an
executive’s base salary. As part of the KELIP, the Company also makes a contribution into a cash value investment
account on behalf of KELIP participants in the amount of 0%, 1.2% or 2.4% of base salary. All current NEOs are
in the 2.4% category. In addition, the Harris Teeter Supermarkets, Inc. Executive Bonus Insurance Plan (the “EBIP”)
provides the Company’s executives with a whole life insurance policy as to which the Company makes the premium
payments while the participant is employed by the Company. The premiums paid with respect to the Executive
Bonus Insurance Plan were grossed up for tax purposes. The EBIP generally requires the Company to continue
premium payments on behalf of participants until age 65 if their employment is terminated within two years
following a change in control. This provision is coordinated with the Change-in-Control and Severance Agreements
discussed below such that, in the case of a change in control, the Company will continue EBIP premium payments
for a current NEO until the later of the end of the continuation period provided under the EBIP or the Change-
in-Control and Severance Agreements.
Change-in-Control and Severance Agreements. The Company entered into Change-in-Control and Severance
Agreements with the NEOs during the Company’s fiscal year ended September 30, 2007 (“Fiscal 2007”). As
previously disclosed, at the time of his separation from the Company, the Company and Mr. Jackson mutually agreed
to terminate his Change-in-Control and Severance Agreement. Please see the discussion of the Change-in-Control
and Severance Agreements contained below in “Potential Payments Upon Termination of Employment or Change
in Control.”
Deductibility of Compensation Expenses
Section 162(m) of the Internal Revenue Code of 1986 (the “Code”) generally limits the tax deductibility by the
Company for compensation paid to the Chief Executive Officer and certain highly compensated executive officers
to $1 million per officer per year, unless it qualifies as “performance-based” compensation. To qualify as “performance-
based,” compensation payments must satisfy certain conditions, including limitations on the discretion of the
Compensation Committee in determining the amounts of such compensation. It is the Company’s current policy that,
to the extent possible, compensation paid to its executive officers be deductible under Section 162(m) of the Code.
In furtherance of this policy, the Board of Directors has adopted, and the shareholders have approved, the 2006 Cash
Incentive Plan and the 2011 Incentive Compensation Plan, and the Board of Directors has adopted the 2013 Cash
Incentive Plan being presented to shareholders for approval at this Annual Meeting. The 2013 Cash Incentive Plan,
2006 Cash Incentive Plan, 2011 Incentive Compensation Plan have each been structured in a manner such that cash
incentive payments and performance-based equity awards under each plan can satisfy the requirements for
“performance-based” compensation within the meaning of Section 162(m) of the Code.
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