Harris Teeter 2011 Annual Report Download - page 100

Incentive Bonus and to supplement the benefits under the tax-qualified retirement plans to the extent that such
benefits are curtailed by the application of certain limits imposed by the Code (e.g., Code Section 402(g) and Code
Section 414 limitations). During Fiscal 2011, eligible employees were permitted to defer up to 50% of their base
salary and up to 90% of their Incentive Bonus payment in the FDP. Cash compensation is eligible for deferral unless
prohibited under Code Section 409A, subject to plan limits. Plan participants may choose deemed investments in
the FDP that represent choices that span a variety of diversified asset classes. No contributions may be used to
purchase the Common Stock. Participants make an election for each year’s deferral election regarding the timing
of plan distributions, subject to limitations under the plan and Code Section 409A. A participant may elect up to
five (5) in-service accounts and one (1) retirement account for payment of deferral contributions, subject to plan
limitations. Each in-service account will be paid in accordance with the respective election in lump-sum or
installments and in the year elected, subject to restrictions imposed by Code Section 409A. The FDP also allows
for an in-service withdrawal for an unforeseeable emergency based on facts and circumstances that meet Internal
Revenue Service and plan guidelines. The Company uses a non-qualified trust to purchase and hold the assets to
satisfy the Company’s obligation under the FDP, and participants in the FDP are general creditors of the Company
in the event the Company becomes insolvent.
Potential Payments Upon Termination of Employment or Change in Control
After reviewing market trends, including information prepared by a consultant, the Company entered into
Change-in-Control and Severance Agreements with the NEOs during Fiscal 2007. The Company determined to
enter into the Change-in-Control and Severance Agreements with the NEOs because the Company believed that
these agreements would ensure that the NEOs were incentivized to achieve the greatest possible return for the
Company’s shareholders, including through a potential change in control transaction, irrespective of a loss of their
own position in connection with such a transaction. During Fiscal 2007 the Compensation Committee was presented
data that a majority of public companies surveyed by the compensation consultant entered into similar agreements
with their executives. A second goal of the Compensation Committee in entering into the Change-in-Control and
Severance Agreements was to aid in the retention of the Company’s NEOs and to give them protections and benefits
similar to executives at other companies. The Compensation Committee also considered the cost to the Company
of replacing the NEOs in the event of a change in control. The Compensation Committee and the Company believed
it was important for the Change-in-Control and Severance Agreements to contain provisions which would prohibit
the NEOs from competing against the Company or soliciting the Company’s employees or clients following their
termination, other than following a change in control. These provisions protect the Company from any such actions
by tying the benefits the NEO would receive upon such termination of employment, to the continued adherence
to the agreement.
The Compensation Committee considered the information contained in the study and asked the consultant to
provide a recommendation concerning the terms of such change in control and severance agreements provided by
such companies. The consultant recommended that the Company enter into agreements with the NEOs on terms
substantially similar to those contained in the executed agreements. Based on the consultant’s recommendations
and the data contained in the consultant’s study the Compensation Committee determined that the terms of the
Change-in-Control and Severance Agreements were appropriate for the NEOs. The Compensation Committee
presented those terms to the NEOs, and the NEOs accepted the terms as presented.
The Change-in-Control and Severance Agreements are effective until the termination of the NEO’s
employment with the Company, or until terminated by written agreement between the Company and the NEO.
Mr. Jackson’s employment with the Company ended upon the sale of A&E in November 2011, subsequent
to the end of Fiscal 2011. The sale of A&E did not constitute a triggering event under the Change-in-Control and
SeveranceAgreement with Mr. Jackson. In connection with the sale, however, the Company and Mr. Jackson entered
into a written agreement terminating the Change-in-Control and Severance Agreement applicable to Mr. Jackson
as of the closing date of the sale, November 7, 2011, pursuant to which written agreement Mr. Jackson waived
any right to receive benefits under such agreement. However, in accordance with Securities and Exchange
Commission requirements, the remainder of the discussions below in “Potential Payments Upon Termination of
Employment or Change in Control” include hypothetical payments with respect to Mr. Jackson.
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