IN » Topics » Post-Employment Compensation and Benefits

This excerpt taken from the IN DEF 14A filed Apr 17, 2009.
Post-Employment Compensation and Benefits
 
Deferred Compensation Plan.  All of our named executive officers are eligible to participate in the Intermec Deferred Compensation Plan, which is intended to restore benefits not available to the participant under our 401(k) Plan due to the limitations imposed on that plan by the Internal Revenue Code of 1986, as amended (the “Code”). Mr. Faerber became eligible to participate in 2009 and, pursuant to the terms of this plan, a Company matching contribution measured by reference to his 2008 salary was made in 2009. Additional information regarding the Deferred Compensation Plan is shown under “2008 Nonqualified Deferred Compensation”.
 
Defined Benefit Plans.  In 2006, we amended our post-employment benefit plans with the effect of freezing benefit accruals for most participants. The plans that we froze were the Intermec Pension Plan (the “IPP”), a tax-qualified defined benefit plan, and our Restoration Plan (the “Restoration Plan”) and our Supplemental Executive Retirement Plan (the “SERP”), both nonqualified defined benefit plans. The rules


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used to decide whether the benefit freeze applied to a named executive officer were the same rules used to decide whether the benefit freeze applied to other employees. When these plans were frozen, further accruals ceased for most employees as of June 30, 2006.
 
Ms. Harwell and Mr. Wills are in the group of employees whose IPP, Restoration Plan and SERP benefits were frozen. Mr. Byrne and Mr. Faerber are not eligible, and Mr. Michael was not eligible, to participate in the IPP, Restoration Plan or SERP because they joined the Company after June 30, 2006.
 
Further details regarding the IPP and Restoration Plan, including the estimated value of the retirement benefits for Ms. Harwell and Mr. Wills, who are the only named executive officers who have accrued a benefit under these plans, are found in this proxy statement under the section entitled “2008 Pension Benefits”. The change in the actuarial pension value from 2007 to 2008, and from 2006 to 2007, are presented in the “Change in Pension Value and Nonqualified Deferred Compensation Earnings” column of the Summary Compensation Table.
 
Post-Termination Change of Control Benefits.  In January 2009 the Company adopted a Change of Control Severance Plan (the “COC Plan”) and an Executive Change of Control Policy for the 2008 Omnibus Incentive Plan (the “COC Policy”) to replace then-existing change of control programs. The COC Plan and COC Policy were developed during 2008 in consultation with FWC, which assisted the Committee in evaluating the terms and potential benefits under the existing change of control arrangements. The Committee considered whether those arrangements reflected current best practices among peer group companies and other public companies.
 
The COC Plan and COC Policy modified the previous change of control benefits for our executive officers in ways that the Board, the Committee and management believe are in the best interests of the Company and its stockholders. Details of the benefits available under the COC Plan and the COC Policy, as compared to those available under the prior arrangements they replaced, are described in “Potential Payments Upon Termination or Change of Control — Change of Control Severance Plan.”
 
The principle changes implemented in the COC Plan and COC Policy are:
 
  •  Elimination of “single-trigger” benefits, under which participants receive benefits upon a change of control even if their employment continues with the Company or a successor company, including single-trigger acceleration of vesting of equity awards and a modified single-trigger severance benefit for the chief executive officer. Under the COC Plan and the COC policy, benefits generally are payable only if there is both a change of control and within a two-year period the participant is terminated by the Company without cause or the participant leaves for good reason (known as “double-trigger” benefits).
 
  •  A definition of “change of control” that is more restrictive than under the prior arrangements.
 
  •  A modified excise tax gross-up for participants in the COC Plan that is designed to neutralize the disparate impact on executives with varying tenures with the Company of excise taxes on “parachute payments” imposed under Section 4999 of the Code. The gross-up payment will be made only if the total value of all “parachute payments” to the individual exceeds 110% of the individual’s “safe harbor” amount. With the assistance of FWC, the Committee and the Board considered an analysis of the potential costs to the Company, and the potential benefits and tax costs to the covered executives, of providing the modified gross-up. According to an analysis provided by FWC , a majority of our peer group companies provide some form of gross up benefit.
 
  •  A requirement that executives who participate in the COC Plan, including eligibility for the modified excise tax gross-up, to agree to amend all their outstanding options to provide for double-trigger vesting upon a change of control, which they have done.
 
  •  A claw-back provision that terminates benefits and requires repayment of benefits if the participant breaches confidentiality, non-competition and other covenants protecting the interests of the company.


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  •  Replacing individual change of control agreements with a change of control plan, which provides the Committee greater flexibility to make changes in such benefits in the future.
 
We believe it is in the Company’s and our stockholders’ interests to maintain a competitive plan that provides these benefits, to promote the alignment of management’s interests with those of shareholders in evaluating potential change of control transactions by minimizing the distraction that may be caused by personal uncertainties for the executives. We also believe that the changes we have made in adopting the COC Plan can be expected to reduce the benefits that would be paid upon occurrence of the change of control alone, without a related termination of employment, and to protect the Company in other ways. As part of implementing the COC Plan, the current covered executives have agreed to replace single trigger vesting with double trigger vesting on their stock options and restricted stock units in exchange for participation in the COC Plan with its modified tax gross-up.
 
The tables under “Potential Payments Upon Termination or Change of Control - Estimated Potential Incremental Payments Upon Termination or Change of Control as of December 31, 2008” present the estimated incremental benefits under the COC Plan and COC Policy for the current named executive officers. The benefits these executives would have received under the prior arrangements are summarized under the table for each executive, respectively. These results are specific to the assumptions made as of December 31, 2008, and will be different at other points in time. The majority of the potential benefits, and the related costs of change of control benefits, would be paid and incurred only if both a change of control occurs and we terminate the executive’s employment within two years of the change of control without cause, or the executive terminates his or her employment for good reason. Whether or not excise taxes will apply to the executive’s benefits, and consequently result in a modified gross-up benefit paid by the Company after the change of control and termination, depends on many variables, including the application of complex tax regulations.
 
Post-Termination Severance Benefits.  The Company maintains severance plans to provide benefits following certain terminations of employment. The severance plans were initially adopted in 2007. In 2009, the severance plans were amended to conform to the change of control definition and other provisions of the COC Plan. The severance plans require a qualifying termination of employment. Benefits payable under the COC Plan and the severance plans are coordinated to avoid any duplication. The severance plans do not require us to retain the executives or to pay them any specified level of compensation or benefits, and we have certain rights to modify them without the consent of the executives. The severance plans were initially developed based on benchmarking data provided by an outside consultant, Mercer Human Resources Consulting. The Committee believes the amended plans are competitive with those of peer companies, and that they serve to diminish the distraction of personal uncertainties in periods of change.
 
The “Potential Payments Upon Termination or Change of Control” section, provides additional information regarding the COC Plan and severance plans that would provide compensation and benefits to named executive officers on termination of employment.
 
This excerpt taken from the IN DEF 14A filed Apr 11, 2008.
Post-Employment Compensation and Benefits
 
Before 2006, we were a diversified enterprise with multiple lines of business, including industrial businesses. At that time, our post-retirement programs were more typical of our predecessor industrial companies than technology companies. As we implemented our plans to become a single line of business enterprise, the Committee decided to align our executive compensation programs with those of peer companies in technology industries. As a result, in 2006, the Committee approved amendments to our post-employment benefit plans that had the effect of freezing benefit accruals under the then-current plans for most participants. The rules used to decide whether the benefit freeze applied to a named executive officer were the same rules used to decide whether the benefit freeze applied to other employees.
 
Defined Benefit Plans.  Certain of our named executive officers are eligible to participate in the Intermec Pension Plan (the “IPP”), a tax-qualified defined benefit plan, and in our Restoration Plan (the “Restoration Plan”) and our Supplemental Executive Retirement Plan (the “SERP”), both nonqualified defined benefit plans. Prior to changes in the Company’s structure discussed above, these retirement plans were considered to be an appropriate part of a competitive compensation for the kind of large, diversified industrial business we were at that time. The Restoration Plan and the SERP were designed to supplement the benefit provided to executives under the IPP, such that our executives were provided with a competitive retirement package and did not receive lower percentages of replacement income during retirement than other employees due to certain limitations imposed by the Internal Revenue Code on the IPP and on the Intermec Financial Security and Savings Program (the “FSSP”), which is one of our 401(k) plans.
 
However, due to changes in the Company’s structure and in the competitive market place, these plans were frozen (and further accruals ceased) for most employees as of June 30, 2006. In lieu of continued benefit accruals by affected employees under the IPP, Restoration Plan and SERP, the Company established a new 401(k) plan (the “401(k) Plan”) that offers a company matching contribution greater than was available under the FSSP. Neither the freeze nor the increased matching contribution under the new 401(k) Plan applies to those employees who were already participating in the plans and whose age and years of service as of June 30, 2006, when added together, equaled or exceeded 70 (the “Rule of 70”). Those employees who satisfied the Rule of 70 and wish to accrue additional benefits under the IPP are required to make certain employee contributions to the FSSP.
 
Of the Company’s named executive officers, Mr. Cohen is included in the group of employees who satisfied the Rule of 70, and so continues to accrue additional benefits under the IPP, Restoration Plan and SERP. Mr. Brady and Mr. Winter also met the Rule of 70 test but they stopped accruing benefits under the IPP, Restoration Plan and SERP when they left the Company in 2007. Mr. Anderson and Ms. Harwell are in the group of employees whose IPP, Restoration Plan and SERP benefits were frozen, except that Mr. Anderson


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was not eligible to participate in the SERP. Mr. Byrne and Mr. Michael are not eligible to participate in the IPP, Restoration Plan or SERP because they joined the Company after June 30, 2006.
 
Further details regarding the IPP, Restoration Plan and SERP, including the estimated value of the retirement benefits for each of the Company’s named executive officers, are found in this proxy statement under the section entitled “2007 Pension Benefits,” below. The change in the actuarial pension value from 2006 to 2007 is presented in the “Change in Pension Value” column of the “Summary Compensation Table.”
 
Deferred Compensation Plan.  Two of our named executive officers, Mr. Anderson and Ms. Harwell, are eligible to participate in the Intermec Deferred Compensation Plan, which is intended to restore benefits not available to the executive under the Company’s 401(k) Plan due to Internal Revenue Service limitations imposed on that plan. Mr. Byrne and Mr. Michael were not eligible until 2008. Mr. Brady and Mr. Winter were not, and Mr. Cohen is not eligible to participate in the Deferred Compensation Plan. Additional information regarding the Deferred Compensation Plan is shown under “2007 Nonqualified Deferred Compensation,” below.
 
Post-Termination Benefits.  The Company provides change of control employment agreements to its named executive officers and also maintains severance plans to provide benefits following certain terminations of employment. The change of control employment agreements were substantially amended in 2006 and the severance plans were adopted in 2007. Technical amendments also were made to these agreements and plans in 2007 to conform the change of control definition to the definition used other of our plans and to conform to new tax rules regarding deferred compensation. The agreements established in 2006 reduced the overall package of benefits as compared with prior change of control employment agreements. The severance plans require a qualifying termination of employment. Benefits payable under the change of control employment agreements and the severance plans are coordinated to avoid any duplication. The change of control employment agreements and the severance plans do not require us to retain the executives or to pay them any specified level of compensation or benefits, and we have certain rights to modify them without the consent of the executives.
 
The 2006 amendments to the change of control employment agreements and the severance plans were developed based on benchmarking data provided by an outside consultant, Mercer Human Resources Consulting. The Committee believes the amended agreements and plans are competitive with those of peer companies and that they serve to diminish the distraction of personal uncertainties in periods of change. The “Potential Payments Upon Termination or Change of Control” section, below, provides additional information regarding the change of control agreements and severance plans that would provide compensation and benefits to named executive officers on termination of employment.
 
This excerpt taken from the IN DEF 14A filed Apr 10, 2007.

POST-EMPLOYMENT COMPENSATION AND BENEFITS

As we implemented our plans to become a single line of business enterprise, the Committee decided to align our executive compensation programs with those of peer companies in the technology sector. At that time, our post-retirement programs were more typical of our predecessor industrial companies than technology companies. As a result, in 2006, the Committee approved amendments to our post-employment benefit plans that had the effect of freezing benefit accruals under then-current plans for most participants. The rules used to decide whether the benefit freeze applied to an executive officer were the same rules used to decide whether the benefit freeze applied to other employees.

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