Harris Teeter 2012 Annual Report Download - page 102

to limitations under the plan and Code Section 409A. A participant may elect up to ten (10) 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 Flexible Deferral Plan 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 Flexible Deferral Plan, and participants in the Flexible Deferral Plan 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. The sale of
A&E did not constitute a triggering event under the Change-in-Control and Severance Agreement 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. Because the Change-in-Control and Severance Agreement for Mr. Jackson was not in effect as
of the last day of Fiscal 2012, Mr. Jackson would not have been entitled to any additional benefits assuming a
triggering event occurred at such time. Accordingly, certain of the discussions below in “Potential Payments Upon
Termination of Employment or Change in Control” related to NEOs exclude any hypothetical payments with respect
to Mr. Jackson and, where appropriate, include a discussion of actual benefits to which Mr. Jackson became entitled
in connection with his severance. Actual payments pursuant to those benefits are disclosed in the Summary
Compensation Table for Fiscal 2012 and other tabular disclosure above. Additionally, as described above, accrued
SERP benefits of participants who were A&E employees, including Mr. Jackson, were frozen as of November 7,
2011, however those employees, including Mr. Jackson, remain participants in the SERP.
34