UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )

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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

 

 

By order of the Board of Directors,

 

Janis L. Harwell

Senior Vice President, General Counsel and Corporate Secretary

 

Everett, Washington

April 11, 2008

 

TABLE OF CONTENTS

 

Intermec, Inc.
6001 36th Avenue West
Everett, Washington 98203-1264
425.348.2600

 

PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
MAY 23, 2008

 

 

We have made these materials available to you on the Internet or, upon your request, have delivered printed copies of these materials to you by mail because our Board of Directors, which we refer to as our “Board,” is soliciting your proxy to vote your shares at the Annual Meeting of Stockholders, (the “Annual Meeting” or “2008 Annual Meeting”) to be held at 10:00 a.m., Pacific time, on May 23, 2008, at our headquarters, 6001 36th Avenue West, Everett, Washington 98203-1264. This proxy statement provides information that we are required to provide you under the rules of the Securities and Exchange Commission (“SEC”) to assist you in voting your shares.

 

 

On January 1, 2006, we changed our name to Intermec, Inc. and our ticker symbol on the New York Stock Exchange (“NYSE”) to “IN.” Before 2006, we were named “UNOVA, Inc.” The change in our name did not affect your ownership of shares in the company. If your ownership of our stock is evidenced by certificates bearing the name “UNOVA, Inc.,” you own Intermec, Inc. shares. Throughout this proxy statement, we refer to the company as Intermec, including for periods prior to the name change, or as the “Company.”

 

 

As permitted by the new rules recently adopted by the SEC, we have elected to provide access to this proxy statement and our 2007 Report to Stockholders over the Internet. Accordingly, we sent a Notice of Internet Availability of Proxy Materials (the “Notice of Internet Availability”) to our stockholders of record and beneficial owners, which contained instructions on how to access this proxy statement and our 2007 Report to Stockholders and how to vote.

 

Intermec expects to mail the Notice of Internet Availability to stockholders on or about April 11, 2008. If you receive a Notice of Internet Availability, you will not receive a printed copy of the proxy materials, unless you specifically request this. If you would like to receive a printed copy of our proxy materials, you should follow the instructions for requesting such materials included in the Notice of Internet Availability.

 

Most stockholders can elect to view future proxy materials via email instead of receiving paper copies in the mail. Please see the information included in the Notice of Internet Availability. If you choose to receive future proxy materials by email, you will receive an email next year with instructions containing a link to our proxy materials and a link to the proxy voting website. Your election to receive proxy materials by email will remain in effect until you terminate it.

 

 

The 2007 Annual Report on Form 10-K (including exhibits), as amended, which we refer to as our “Form 10-K,” is available at the following website http://www.intermec.com/about_us/investor_relations/ compliance/index.aspx. Stockholders may request a free copy of our Form 10-K by contacting Investor Relations at the address provided

under the caption “Corporate Governance — Availability of Information and Communications with the Board.” We will furnish any exhibit to our Form 10-K if specifically requested.

 

 

(1) The election of eight directors, each for a one-year term expiring at the annual meeting of stockholders to be held in 2009 (the “2009 Annual Meeting”) or until their successors are elected and qualified;

 

(2) An advisory management proposal to ratify the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for 2008;

 

(3) Approval of the Intermec, Inc. 2008 Employee Stock Purchase Plan; and

 

(4) Approval of the Intermec, Inc. 2008 Omnibus Incentive Plan.

 

We will also consider any other business that is properly brought before the Annual Meeting.

 

 

Our Board recommends that you vote for each of the director nominees and for the management proposals to ratify the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for 2008, to approve the Intermec, Inc. 2008 Employee Stock Purchase Plan, and to approve the Intermec, Inc. 2008 Omnibus Incentive Plan.

 

 

Intermec’s only class of stock outstanding is common stock, par value $.01 per share (“common stock”). Each share of common stock outstanding as of the close of business Eastern time on the record date, March 24, 2008, is entitled to one vote on all items of business at the Annual Meeting. You may vote all shares you owned as of the close of business Eastern time on the record date, which may be (1) shares held directly in your name as the stockholder of record or (2) shares held for you as beneficial owner through a broker, trustee or other nominee, such as a bank, including shares purchased through our Employee Stock Purchase Plan. On the record date, there were 61,490,337 shares of common stock outstanding and entitled to vote. There were 11,344 stockholders of record on the record date and approximately 23,856 beneficial owners. The last sale price of the common stock for that date, as reported in The Wall Street Journal, was $23.11.

 

 

Most stockholders hold their shares through a broker, trustee or other nominee (such as a bank) rather than directly in their own names. As summarized below, there are some distinctions between shares held of record and those owned beneficially.

 

Stockholder of Record.  If your shares are registered directly in your name with our transfer agent, Mellon Investor Services, you are considered to be, with respect to those shares, a stockholder of record, and the Notice of Internet Availability has been sent, and, if specifically requested, printed copies of these proxy materials will be sent, directly to you by Intermec. You may have certificates for those shares, or they may be registered in book-entry form. As the stockholder of record, you have the right to grant your voting proxy directly to our proxy holders or to vote in person at the meeting. We have provided instructions on voting and granting your voting proxy in the Notice of Internet Availability, and if specifically requested, we will also send a printed proxy card for your use.

 

Beneficial Owner.  If your shares are held in a brokerage account or by a trustee or other nominee, you are considered to be the beneficial owner of shares held in street name, and these proxy materials are being forwarded to you together with a voting instruction form by the broker, trustee or nominee, or an agent hired by the broker, trustee or nominee. As a beneficial owner, you have the right to direct your broker, trustee or nominee on how to vote, and you are also invited to attend the Annual Meeting. You will be asked to show

some evidence of your ownership (for example, on a brokerage statement) to be admitted to the Annual Meeting.

 

Because a beneficial owner is not the stockholder of record, you may not vote these shares directly at the meeting unless you obtain a “legal proxy” from the broker, trustee or nominee that holds your shares, giving you the right to vote the shares at the meeting. Your broker, trustee or nominee has enclosed or provided voting instructions for you to use in directing the broker, trustee or nominee on how to vote your shares.

 

 

We will provide a ballot to anyone who requests one at the meeting. Shares held in your name as the stockholder of record may be voted on that ballot. Shares held beneficially in street name may be voted on a ballot only if you bring a legal proxy from the broker, trustee or nominee that holds your shares giving you the right to vote the shares. Even if you plan to attend the Annual Meeting, we recommend that you also submit your proxy or voting instruction form as described below so that your vote will be counted if you later decide not to attend the meeting.

 

 

Whether you hold shares directly as a stockholder of record or beneficially in street name, you may direct how your shares are voted without attending the meeting. If you are a stockholder of record, you may vote by submitting a proxy. If you hold shares beneficially in street name, you may vote by submitting voting instructions to your broker, trustee or nominee. For directions on how to vote, please refer to the instructions below and those on the Notice of Internet Availability, proxy card or voting instruction form provided.

 

By Internet.  Stockholders of record may submit proxies over the Internet by following the instructions on the Notice of Internet Availability or, if printed copies of the proxy materials were requested, the instructions on the printed proxy card. Most beneficial stockholders may vote by accessing the website specified on the voting instruction forms provided by their brokers, trustees or nominees. Please check the voting instruction form for Internet voting availability.

 

By Telephone.  Stockholders of record may submit proxies using any touch-tone telephone from within the United States by following the instructions on the Notice of Internet Availability or, if printed copies of the proxy materials were requested, the instructions on the printed proxy card. Most beneficial owners may vote using any touch-tone telephone from within the United States by calling the number specified on the voting instruction forms provided by their brokers, trustees or nominees.

 

By Mail.  Stockholders of record may submit proxies by mail by requesting printed proxy cards and completing, signing and dating the printed proxy cards and mailing them in the accompanying pre-addressed envelopes. Beneficial owners may vote by completing, signing and dating the voting instruction forms provided and mailing them in the accompanying pre-addressed envelopes.

 

Intermec is incorporated under Delaware law, which specifically permits electronically transmitted proxies, provided that each such proxy contains or is submitted with information from which the inspector of election can determine that such proxy was authorized by the stockholder. (Delaware General Corporation Law, Section 212(c).) The electronic voting procedures provided for the Annual Meeting are designed to authenticate each stockholder by use of a Control Number, to allow stockholders to vote their shares, and to confirm that their instructions have been properly recorded.

 

 

If you are a stockholder of record and have submitted a proxy, you can change your vote by attending the Annual Meeting and voting in person. Attendance at the Annual Meeting will not cause your previously granted proxy to be revoked unless you vote again. You may also revoke your proxy at any time before it is voted by sending a written notice of revocation or by submitting a signed proxy card bearing a later date, in either case to Intermec, Inc., c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. Broadridge must receive any such revocation of proxy by 5:00 p.m., Eastern time, on May 22, 2008, for it to be effective. If

you vote by telephone or on the Internet and wish to change your vote, you should call the toll-free number or go to the Internet site, as may be applicable in the case of your earlier vote, and follow the directions for changing your vote. Broadridge’s telephone and Internet voting sites will close at 11:59 p.m., Eastern time, on May 22, 2008.

 

For shares held beneficially, you may change your vote by submitting new voting instructions to your broker, trustee or nominee as permitted by the voting instruction form. If you have obtained a legal proxy from your broker, trustee or nominee giving you the right to vote your shares, you can change your vote by attending the meeting and voting in person.

 

 

A majority of the shares outstanding at the record date must be present at the meeting in order to hold the meeting and conduct business. Shares are counted as “present” at the meeting if the stockholder attends the meeting or is represented at the meeting by a duly authorized proxy.

 

 

In the election of directors, which is Proposal 1, you may vote for all of the director nominees or you may withhold your vote with respect to one or more of the director nominees. Our Certificate of Incorporation provides that directors will be elected by a majority of the votes cast at the meeting.

 

For Proposal 2, which is management’s proposal that stockholders express their advisory opinion as to whether they ratify the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for 2008, you may vote for or against Proposal 2, or you may abstain. Our Certificate of Incorporation provides that approval of Proposal 2 requires the affirmative vote of a majority of the votes cast at the meeting. An abstention has the same effect as a vote against the proposal.

 

For Proposal 3, which is management’s proposal that stockholders approve the Intermec, Inc. 2008 Employee Stock Purchase Plan, you may vote for or against Proposal 3, or you may abstain. Our Certificate of Incorporation provides that approval of Proposal 3 requires the affirmative vote of a majority of the votes cast at the meeting. An abstention has the same effect as a vote against the proposal.

 

For Proposal 4, which is management’s proposal that stockholders approve the Intermec, Inc. 2008 Omnibus Incentive Plan, you may vote for or against Proposal 4, or you may abstain. Our Certificate of Incorporation provides that approval of Proposal 4 requires the affirmative vote of a majority of the votes cast at the meeting. An abstention has the same effect as a vote against the proposal.

 

If you provide specific instructions (mark boxes) with regard to certain proposals, your shares will be voted as you instruct. If you sign and return your proxy card or voting instruction form or otherwise submit your vote by proxy without giving specific instructions, your shares will be voted in accordance with the recommendations of the Board (i.e., for all of the Board’s nominees and for the management proposals). The proxy holders will vote in their discretion on any other matters that properly come before the meeting.

 

If you are a stockholder of record and do not submit your vote by proxy or vote in person at the Annual Meeting, your shares will not be voted. However, if you hold shares beneficially in street name, the result may be different. If you do not return the voting instruction form, your broker, trustee or nominee may vote your shares in certain circumstances and on certain proposals. The NYSE rules permit brokers to vote their clients’ shares in their own discretion on the election of directors if their clients have not given instructions as to how they want their shares voted. The NYSE also considers a proposal such as Proposal 2 to be routine and would permit brokers to vote on Proposal 2 in their discretion if they have not received instructions from their clients. The NYSE would consider Proposal 3 and Proposal 4 to not be routine and therefore “non-discretionary,” meaning that brokers who hold shares for the accounts of their clients and have not received instructions from their clients would not vote their clients’ shares on either of these proposals. When a broker votes a client’s shares on some but not all of the proposals at a meeting, the missing votes are referred to as “broker non-votes.” Those shares will be included in determining the presence of a quorum at the meeting, but are not considered “present” for purposes of voting on non-discretionary matters.

 

Other than the four proposals described in this proxy statement, we are not aware of any other business to be acted upon at the Annual Meeting. If you grant a proxy, the persons named as proxy holders, Patrick J. Byrne, Lanny H. Michael and Janis L. Harwell, will have the discretion to vote your shares on any additional matters properly presented for a vote at the meeting. If for any unforeseen reason any of our director nominees is not available as a candidate for re-election as a director, the proxy holders will vote your proxy for such other candidate or candidates as may be nominated by the Board.

 

 

Broadridge Financial Solutions, Inc. will act as inspector of elections and tabulate the votes cast at the meeting.

 

 

It means you have multiple accounts with the transfer agent and/or with brokers and banks. Please submit each Intermec proxy and/or voting instruction form you receive.

 

 

Intermec is making this solicitation and will pay the entire cost of preparing, printing, mailing and distributing the Notice of Internet Availability to stockholders of record and beneficial owners and printed proxy materials to those who specifically request them, as well as the cost associated with soliciting votes. If you choose to access the proxy materials and/or vote over the Internet, you are responsible for Internet access charges you may incur. If you choose to vote by telephone, you are responsible for telephone charges you may incur. In addition to posting the proxy materials on the Internet and mailing the Notice of Internet Availability and, if specifically requested, printed copies of these proxy materials, the solicitation of proxies may be made in person, by telephone or by electronic communication by our directors, officers and other employees, who will not receive any additional compensation for such activities. We have retained Georgeson Shareholder Communications, Inc. (“Georgeson”) to assist us in the distribution of proxy materials and the solicitation of votes. We will pay Georgeson a fee of $7,000 plus customary costs and expenses for these services. We will also reimburse brokerage firms, banks, and other custodians, nominees and fiduciaries for their reasonable out-of-pocket expenses in forwarding proxy and solicitation materials to the beneficial owners of our common stock.

 

 

We expect to announce preliminary voting results at the Annual Meeting and publish final results in our quarterly report on Form 10-Q for the second quarter of 2008. You can access that Form 10-Q, and all of our other reports filed with the SEC, at our website, http://www.intermec.com/InvestorRelations/, or at the SEC’s website, www.sec.gov.

 

 

The list of stockholders of record as of the record date will be available at the Annual Meeting. It will also be available ten days prior to the Annual Meeting, between the hours of 9 a.m. and 4 p.m., Pacific time, Monday through Friday, at the offices of the Corporate Secretary, 6001 36th Avenue West, Everett, Washington 98203-1264. Any holder of our common stock may examine the list for any purpose germane to the Annual Meeting.

 

 

There are two different procedures by which stockholders may submit proposals for action at our annual meetings of stockholders. The first procedure is provided by the SEC’s rules and the second by our By-Laws.

SEC Rule 14a-8 permits stockholders to submit proposals they would like to have included in our proxy statement and proxy card. In order for such proposals to be considered for our 2009 Annual Meeting, our Corporate Secretary must receive them no later than December 12, 2008.

 

Section 2.7 of our By-Laws permits stockholders of record to propose business to be considered at an annual meeting without being included in the proxy statement and proxy card. Such business must be a proper matter for stockholder action and the stockholder proposing it must comply with the applicable notice provisions of our By-Laws. For the 2009 Annual Meeting, notice must be delivered to our Corporate Secretary no earlier than January 23, 2009 and no later than February 22, 2009 (if, however, the date of the 2009 Annual Meeting is more than 30 days before or more than 60 days after the first anniversary of the 2008 Annual Meeting, then notice must be delivered not earlier than 120 days before the 2009 Annual Meeting and not later than 90 days before the 2009 Annual Meeting or ten days following the day on which public announcement of the date of the 2009 Annual Meeting is first made).

 

Proposals should be sent to our Corporate Secretary at 6001 36th Avenue West, Everett, WA 98203-1264. You may obtain a copy of the By-Law provisions regarding these requirements by writing to the Corporate Secretary at that address.

 

YOUR VOTE IS IMPORTANT

 

Whether or not you plan to attend the 2008 Annual Meeting, please promptly vote your shares on the Internet, by telephone or by completing, signing and dating your voting instruction form and returning it by mail (if you are a beneficial owner) or request a printed proxy card and complete, sign, date and return it by mail (if you are a stockholder of record).

 

We have established a Corporate Governance section on our website, which can be accessed at http://www.intermec.com/about_us/investor_relations/compliance/corporate_governance.aspx (our “Corporate Governance Webpage”). The charters of the Board’s standing committees, the Standards of Independence, the Corporate Governance Guidelines and the Standards of Conduct that apply to all directors, officers and other employees are posted there. We intend to disclose on our Corporate Governance Webpage any amendment to the Standards of Conduct and any waiver of the Standards related to executive officers or directors. This proxy statement and the 2007 Report to Stockholders (which includes our Form 10-K) are also available on our website, indicated above. Stockholders may obtain free printed copies of these materials by contacting Investor Relations as follows:

 

 

Stockholders or other interested parties who wish to communicate with any individual director, including the Chairman of the Board, our Board as a group, or a specified committee or group of directors, such as our independent directors, can do so by sending written communications by mail or courier, in care of the Corporate Secretary at the street address above, or by e-mail to Board@intermec.com. All correspondence should indicate to whom it is addressed.

 

Our annual meeting provides an opportunity for stockholders to ask questions or otherwise communicate directly with members of our Board on matters relevant to our Company. All directors are expected to attend our annual meetings of stockholders, as stated in the Charter of the Governance and Nominating Committee. Eight of our directors attended the annual meeting of stockholders held in 2007 (the “2007 Annual Meeting”). While all of our directors who were then members of the Board planned to attend the 2007 Annual Meeting, Mr. Shaffer was unable to do so.

 

Our Board currently has eight members. The size of the Board was reduced to its current number over the course of 2007, when one of our directors, Stephen E. Frank, did not stand for re-election at the 2007 Annual Meeting, and another of our directors, Claire W. Gargalli, retired as of December 31, 2007. One of our independent, non-management directors, Allen J. Lauer, became Chairman of the Board in 2007 when Larry D. Brady stepped down as Chairman, Chief Executive Officer and President in July 2007. At that time, Patrick J. Byrne became our Chief Executive Officer, President and a member of the Board. The Board has three standing committees, which are the Audit and Compliance Committee, the Compensation Committee, and the Governance and Nominating Committee.

 

With the exception of Patrick J. Byrne, our Board consists of non-management directors. The Board has adopted Standards of Independence, which are posted on our Corporate Governance Webpage, to help determine whether any of our non-management directors has a material relationship with the Company. After considering relevant facts and circumstances, the Board determined that all of our non-management directors who served during 2007, Stephen E. Frank, Claire W. Gargalli, Gregory K. Hinckley, Lydia H. Kennard, Allen J. Lauer, Stephen P. Reynolds, Steven B. Sample, Oren G. Shaffer and Larry D. Yost, are independent within the meaning of SEC regulations, the NYSE standards for director independence and our Standards of Independence, and have either no relationship with the Company (other than being a director and/or stockholder) or only immaterial relationships with the Company that fell within the Standards of Independence. The Board generally considered all relationships between the Company and the directors and the other companies for which they or their applicable family members are directors or employees, including some that are not required to be disclosed in this proxy statement as related person transactions. We transact business with some of such other companies, in amounts that fall within the permissible limits of our Standards of Independence. Mr. Byrne is not an independent director because he also is President and Chief Executive Officer of the Company.

 

The Board has determined that the standing committees consist entirely of independent directors. The Board also has determined that our Audit and Compliance Committee members meet the particular SEC and NYSE requirements applicable to audit committee membership.

 

Our Board met nine times during 2007, including three meetings by telephone. Materials for our Board and committee meetings are sent in advance to the appropriate participants. If a director cannot attend a meeting, he or she generally communicates any comments or questions through the relevant chair. All of our incumbent directors attended more than 75% of the aggregate number of Board meetings and meetings of committees of the Board on which that director served during 2007. In addition to executive sessions scheduled as part of regularly scheduled Board meetings, our independent directors met five times in 2007. Before Mr. Lauer became our non-executive Chairman and Chair of the Governance and Nominating Committee, pursuant to Board designation all of these meetings were chaired by Ms. Gargalli, the former Chair of that committee, who was also an independent director. These meetings are now chaired by Mr. Lauer.

 

In 2007, our Board had three standing committees: the Audit and Compliance Committee, the Compensation Committee and the Governance and Nominating Committee. Independent directors other than committee Chairs are generally expected to serve on two committees.

The following table shows our current directors’ memberships on the committees of the Board during 2007. Prior to the expiration of Mr. Frank’s term as a director in May 2007, Mr. Frank served as a member of our Compensation Committee and our Governance and Nominating Committee. In addition, prior to July 19, 2007, Ms. Gargalli served as the Chair of our Governance and Nominating Committee.

 

 

 

 

Audit and Compliance Committee.  The Audit and Compliance Committee (“Audit Committee”) consists of four independent directors. The current members are Mr. Shaffer (Chair), Mr. Hinckley, Mr. Reynolds and Dr. Sample. Mr. Lauer served as the Chair of the Audit Committee until July 19, 2007, when he was appointed non-executive Chairman of the Board and Chair of the Governance and Nominating Committee. On that date, Mr. Shaffer assumed the role of Chair of the Audit Committee. The Board has determined that, under the rules of the SEC and the NYSE, all of the members of the Audit Committee are independent and financially literate. The Board has also determined that Mr. Hinckley and Mr. Shaffer each meet the SEC criteria for “audit committee financial expert.” The Committee’s authority and responsibilities are set forth in a charter adopted by the Board and reviewed annually. That charter is available on our Corporate Governance Webpage.

 

The Audit Committee, which met 12 times in 2007, evaluates the performance and independence of our independent registered public accounting firm, which reports directly to the Audit Committee, and has the responsibility to retain or to terminate the independent registered public accounting firm as our independent auditors. The Audit Committee reviews and discusses with the independent auditors and with management our annual audited consolidated financial statements and quarterly financial statements, the effects of regulatory and accounting initiatives and any significant financial reporting issues and judgments made in connection with the preparation of the Company’s financial statements. The Audit Committee also reviews and discusses with the independent auditors, internal auditors and management the adequacy of our system of internal controls and procedures. Additionally, the Audit Committee discusses with the independent auditors and management our internal audit department’s responsibilities, budget and staffing as well as any recommended changes to the internal audit scope and plan. The Audit Committee’s policy is that all audit and non-audit services to be performed by our independent auditors must be approved in advance. The Audit Committee reviews with management and discusses proposed earnings releases.

 

The Audit Committee reviews management’s implementation and enforcement of compliance with our Standards of Conduct. The Audit Committee also considers other possible conflicts of interest situations brought to its attention and makes appropriate recommendations concerning these situations. In addition, it oversees management’s compliance with our Related Person Transactions Policy, as described in “Certain Relationships and Related Persons Transactions — Policies, Procedures and Practices.”

 

The report of the Audit Committee appears under the caption “Report of the Audit and Compliance Committee.”

 

Compensation Committee.  The Compensation Committee consists of four independent directors. They currently are Mr. Yost (Chair), Mr. Hinckley, Ms. Kennard, and Mr. Shaffer. Mr. Frank also served as a member the Compensation Committee prior to the expiration of his term as director in May 2007. The Committee met nine times in 2007. The Board has determined that all of the members of the Committee are

independent, non-employee, outside directors within the meanings of SEC regulations, the NYSE listing standards, and the Internal Revenue Code of 1986, as amended (the (“Code”). The Committee’s authority and responsibilities are set forth in a charter adopted by the Board of Directors and reviewed annually. That charter is available on our Corporate Governance Webpage.

 

The Compensation Committee recommends to the Board policies for executive compensation and approves the remuneration of all corporate officers, including our Chief Executive Officer (“CEO”). It oversees the administration of the employee equity and cash incentive plans, cash bonus plans, Employee Stock Purchase Plan, and certain other compensation and retirement arrangements.

 

The Compensation Committee acts on elements of executive officer compensation at various times during the year. Shortly before the end of each year, the Committee comprehensively reviews the total compensation of each executive officer and relevant peer group comparisons with the Committee’s outside compensation consultant. Decisions on executive officer salaries for the following year are made during the same meeting. In the first quarter of each year, the Committee determines Management Incentive Compensation Plan (“MICP”) payments based on performance achieved during the preceding year. The MICP is our annual cash bonus program for executive officers and other employees. In the same quarter, the Committee sets the performance metrics for the current year’s MICP. The Committee considers stock option grants at the time of the annual stockholder meeting, during the second quarter of the year. Other equity incentive awards for executive officers and other employees generally have been made during the second quarter but, beginning in 2008, are being made in the first quarter of the year.

 

The Compensation Committee considered findings by Hewitt Associates, which served as its outside compensation consultant prior to May 2007, in determining 2007 compensation levels for the executive officers. In May 2007 the Committee retained Frederic W. Cook & Co., Inc. (“FWC”) to serve as its outside compensation consultant to advise it on various aspects of executive compensation. Specifically, FWC attended several scheduled Committee meetings and provided to the Committee relevant market data, information on compensation trends and advice on compensation levels for the executive officers for 2008 as well as Mr. Byrne’s compensation for 2007. FWC has also assisted the Committee with a review of the terms of its equity incentive plans and assisted the Governance and Nominating Committee with a benchmarking review for non-employee director compensation. FWC has not performed any services on behalf of management, but works with management with the express permission of the Committee. Each year, FWC presents to the Compensation Committee a total compensation analysis for each executive officer based on market data provided by FWC at the Committee’s direction. This is the Compensation Committee’s frame of reference for the executive officer compensation decisions it will make in the following year. Based on this data, FWC makes recommendations to the Committee regarding CEO compensation. The CEO, with the assistance of the Vice President of Human Resources, provides recommendations to the Committee for the executive officers (excluding the CEO) also based on the data provided by FWC.

 

The Compensation Committee’s charter allows it to delegate its authority to subcommittees. In addition, the Compensation Committee has delegated to our CEO the authority to make certain equity grants to employees that are not executive officers; see “Compensation Discussion and Analysis — Equity Granting Practices” below.

 

Governance and Nominating Committee.  The Governance and Nominating Committee (“Governance Committee”) consists of four independent directors. The members of this committee currently are Mr. Lauer (Chair), Mr. Kennard, Mr. Reynolds and Dr. Sample. Ms. Gargalli served as the Chair of this committee until July 2007, at which time Mr. Lauer became the Chair of this committee. Mr. Frank was also a member of this committee prior to the expiration of his term as a director in May 2007. The Governance Committee met eight times in 2007. The Board has determined that, under the corporate governance rules of the NYSE, all of the members of the Governance Committee are independent. The Committee’s authority and responsibilities are set forth in a charter adopted by the Board and reviewed annually. That charter is available on our Corporate Governance Webpage.

 

The Governance Committee reviews and recommends to the Board practices and procedures relating to corporate governance, including the evaluation and recommendation of criteria for membership on the Board

and the composition and structure of the Board and its committees. The Governance Committee also reviews succession plans related to the Chief Executive Officer and recommends to the Board the compensation of directors for Board and committee service each year.

 

The Governance Committee evaluates the size of the Board and considers the qualifications of persons recommended for election to fill vacancies that may occur in the Board from time to time. The Governance Committee also evaluates the qualifications of persons recommended by the stockholders for election to the Board, as disclosed under “Consideration of Director Nominees.”

 

The Governance Committee annually assesses the size, composition and needs of the Board and whether any vacancies on the Board are expected due to retirement or otherwise. In the event that vacancies are anticipated or otherwise occur, the Governance Committee consults with the full Board. The Board may decide either to fill the vacancy or to reduce the size of the Board to eliminate the vacancy. The Board may retain a professional search firm to assist with the identification and evaluation of candidates to fill any vacancy.

 

The Governance Committee has adopted general criteria for nomination to the Board. These general criteria describe the traits, abilities and experience that, at a minimum, the Governance Committee considers in selecting candidates to recommend for nomination to the Board. The following is a summary of these criteria:

 

 

In addition, the Governance Committee considers specific qualities needed to fill a particular vacancy, such as financial expertise and literacy for potential members of the Audit Committee, and other characteristics desired to achieve a balance of knowledge, experience and capability on the Board.

 

The Governance Committee will consider candidates recommended by stockholders if they meet the criteria referred to above. Recommendations may be sent to the Governance Committee in care of the Corporate Secretary at the address set out on the first page of this proxy statement. They must include the following:

 

 

 

Any stockholder recommendation of a candidate for election at the 2009 Annual Meeting must be received no later than December 12, 2008, in order for the Governance Committee to consider it.

 

Section 2.7 of our By-Laws establishes an alternative procedure for stockholders of record to nominate persons for election to our Board at an annual meeting. The By-Laws do not provide for such nominations to be included in our proxy statement and proxy card. A stockholder who intends to make a nomination at the annual meeting must give timely notice in writing to the Corporate Secretary as set out in our By-Laws. For nominations to be made at the 2009 Annual Meeting, notice must be delivered to the Corporate Secretary at the address set out on the first page of this proxy statement no earlier than January 17, 2009 and no later than February 16, 2009.

 

Directors who were members of our Compensation Committee in 2007 are Mr. Frank (until May 15, 2007), Mr. Hinckley, Ms. Kennard, Mr. Shaffer and Mr. Yost. During 2007, there were no compensation committee interlocks or other relationships to be reported under this item.

 

The Company’s compensation program for non-employee directors for 2007 consists of an annual retainer paid in stock, meeting fees paid in cash (unless the director elects to be paid in stock), and stock options. Directors may also elect to defer retainers and cash fees. Directors who are employees of the Company do not participate in the compensation program for non-employee directors.

 

Our directors have been compensated under the 2002 Plan, which was approved by our stockholders at our annual meeting of stockholders held in 2002. The 2002 Plan, as amended effective November 13, 2007, is listed as an exhibit to our Form 10-K. If our stockholders approve the 2008 Plan at the Annual Meeting, directors will be compensated under the 2008 Plan. See “Proposal 4 — Approval of the Intermec, Inc. 2008 Omnibus Incentive Plan” below for a description of the 2008 Plan.

 

Retainers.  Directors receive an annual retainer for Board service. The non-executive Chairman of the Board and each director who serves as Chair of a Board committee also receive an additional annual retainer. Retainer fees are denominated in cash and paid in shares of Intermec common stock after the end of the quarter in which earned, except that the retainer fee for the Chairman of the Board is paid in the form of deferred stock units, subject to a mandatory deferral period. The number of shares or deferred stock units is determined based on the average market price of Intermec common stock for the preceding quarter. In 2007, the annual retainer for Board service was $30,000. The annual retainer for a non-executive director serving as Chairman of the Board is $150,000 for the 12-month period ending June 30, 2008 and will be $120,000 for each 12-month period thereafter. The annual retainers for service as Chair of the Audit Committee, Compensation Committee, and Governance Committee were $10,000, $8,000 and $8,000, respectively, except that the Chairman of the Board, when acting in the capacity of the Chair of the Governance Committee, will not receive any additional chair retainer.

 

Meeting Fees.  Directors receive fees for attendance at Board and committee meetings. The meeting attendance fees are denominated in cash and paid, at the election of the director, in cash or shares of Intermec common stock after the end of the quarter in which earned. The number of shares is determined based on the average market price of Intermec common stock for the preceding quarter. In 2007 each director received a fee of $2,000 for each meeting of the Board and for each physical meeting of a committee of the Board that the director attended, and an attendance fee of $1,000 for each telephonic meeting of a committee of the Board in which the director participated.

Deferred Compensation.  Directors may defer all or part of their retainers into a deferred stock account under the 2002 Plan, and may defer all or part of their meeting attendance fees into deferred cash or stock accounts under that plan. Each director’s deferred stock account is credited with a number of deferred stock units determined based on the dollar amount deferred divided by the average market price of Intermec common stock for the preceding quarter. The cash account is credited with the amount of cash deferred. Credits to the deferred stock and cash accounts are made on the first business day following the end of each quarter. Cash accounts accrue interest at a rate equal to the prime rate. If the Company paid regular cash dividends on the common stock, the directors’ stock accounts would be credited with additional share units based on the fair market value of the common stock on the dividend payment date. Transfers between the stock account and the cash account are not permitted. Payment of deferred amounts begins in the January following the year in which a director leaves the Board. Directors may elect in advance to receive deferred amounts as a lump sum or in two to 15 substantially equal annual installments. The Company’s Director Deferred Compensation Plan, which will become effective as of the date of the Annual Meeting if our stockholders approve the 2008 Plan at that meeting, is intended to be a continuation of the deferral components of the 2002 Plan. The Director Deferred Compensation Plan will be effective with respect to all amounts under the 2002 Plan deferred on or after January 1, 2005 that remain unpaid as of the date of the Annual Meeting.

 

Stock Options.  For 2005 to 2007, on the first business day following January 1 of each year, each director automatically received a grant of an option to purchase 10,000 shares of common stock with an exercise price equal to the fair market value on the date of grant under the 2002 Plan. Any director who joined the Board at any subsequent time of the year received a pro-rata portion of the annual grant, based on the length of his or her Board service that year. Beginning in 2007, the annual grant vests and becomes exercisable in four equal installments at the beginning of each fiscal quarter, beginning with the date of grant. If a director resigns from the Board, then all unvested options held by such director are forfeited. If a director dies or becomes permanently disabled while serving on the Board, or if the director retires pursuant to the policy for mandatory retirement of directors, or there is a change of control of the company (as defined in the 2002 Plan) then all unvested options held by such director become vested and exercisable in full. Beginning in 2006, annual options granted to directors have a fixed term of ten years, which term is not affected by the retirement or other departure of a director from the Board.

 

Our directors were compensated in 2007 only as described above and do not participate in any Intermec pension or other benefit plans. We pay or reimburse directors for lodging, travel and other expenses incurred for the purpose of attending meetings of the Board and its committees.

 

The following table sets forth information regarding the compensation for each of the Company’s non-employee directors during 2007.

 

 

 

 

 

The following table sets forth for each director the number of shares of Intermec common stock or deferred stock units received with respect to the director’s annual retainer shown in column (b) above, and the grant date fair value of such shares computed in accordance with FAS 123R. In addition to the annual retainer of $30,000 paid to each director, the following directors received additional Chair retainers: Mr. Lauer received $150,000 for his services as non-executive Chairman prorated for the portion of the year he served in that position; Mr. Lauer and Mr. Shaffer each received $10,000 for their services as Chair of the Audit Committee for the portion of the year they served in those roles; Mr. Yost received $8,000 for his services as Chair of the Compensation Committee; and Ms. Gargalli received $8,000 for her services as Chair of the Governance Committee for the portion of the year she served in that role. The following table details these Chair retainers individually. Mr. Hinckley, Ms. Kennard and Mr. Reynolds received their retainers in the form of shares of Intermec common stock. Mr. Frank, Ms. Gargalli, Mr. Lauer, Dr. Sample, Mr. Shaffer and Mr. Yost elected to receive their retainers in the form of deferred stock units. Fractional shares are paid or settled in cash. The average market price of Intermec common stock for each quarter of 2007 is set forth in note (d), below.

 

 

 

 

 

 

 

 

2008 Director Compensation

 

In 2007, our Governance Committee undertook a review of compensation for non-employee directors. It was assisted in this review by its outside compensation consultant, FWC, which provided advice and perspective regarding peer group practices (using the same companies that were used to benchmark 2008 executive compensation) and broader market trends. As a result of this review, that committee recommended and the Board of Directors adopted the revised Director Compensation Program (the “2008 Program”) described below, which with respect to equity awards is subject to stockholder approval of the 2008 Plan.

 

Under the 2008 Program, the annual retainer has been increased to $40,000, and will be paid in cash unless the director elects to receive the retainer in the form of Intermec common stock or defers the retainer into a deferred cash or stock account under the Director Deferred Compensation Plan. The annual retainer for a non-executive director serving as Chairman of the Board remains at $150,000 for the 12-month period ending June 30, 2008 and $120,000 for each 12-month period thereafter, and will be paid in the form of deferred stock units subject to a mandatory deferral period. The annual retainers for service as Chair of the Audit Committee, Compensation Committee, and Governance Committee are increased to $15,000, $10,000 and $10,000, respectively. The attendance fee for each meeting of the Board and for each physical meeting of a committee of the Board that the director attends remains at $2,000, and the amount paid for each telephonic meeting of a committee of the Board in which the director participates has been increased to $2,000.

 

Under the 2008 Program, the prior stock option grant of 10,000 shares has been replaced by a combination of stock options and restricted deferred stock units. Each director will automatically receive at the Annual Meeting and at each annual meeting of stockholders thereafter a grant of a stock option to purchase shares of Intermec common stock with a Black-Scholes value of $80,000 and a grant of restricted deferred stock units with a value of $80,000, based on the fair market value of Intermec common stock on the date of

grant. Any director who joined the Board at any subsequent time of the year will receive pro rata portions of the annual stock option grant and the annual restricted deferred stock unit grant, roughly based on the time remaining until the next annual meeting. For 2008 only, immediately after the Annual Meeting, each director will also receive a stock option grant and a restricted deferred stock unit award for a pro rata portion of the value of the annual stock option grant and restricted deferred stock unit grant made on the same date, based on the time between January 1, 2008 and the date of the Annual Meeting. These pro rata grants are being made to directors to make up for the equity award that would have been granted on January 1, 2008 under the prior director compensation program, and will vest on December 31, 2008. Annual option grants generally will vest and become exercisable in four equal installments on the first business day of each fiscal quarter, beginning on the date of grant, and generally will expire seven years from the date of grant. Restricted deferred stock unit grants become fully vested at the following annual meeting, provided a director continues to serve on the Board during that period. In the event of a director’s termination of service prior to vesting, all restricted deferred stock units are automatically forfeited to the Company. All restricted deferred stock unit grants to directors under the 2008 Program will automatically be deferred into and subject to the Director Deferred Compensation Plan.

 

In July 2004, we adopted stock ownership guidelines for directors. The guidelines suggest that directors retain from the compensation paid to them by us a total of Intermec common stock and derivatives of our common stock equal in value (calculated at the current market price) to five times the current annual retainer fee under the 2002 Plan, or $150,000 based on 2007 compensation levels; the amount would be $200,000 based on 2008 compensation levels. The guidelines also suggest that a new director should accumulate this amount within five years from the commencement of service on the Board.

 

The Board, pursuant to our By-Laws, has set the current number of directors at eight. Each director is subject to election at each annual meeting of stockholders. Accordingly, if elected, each director would serve a one-year term expiring at the 2009 Annual Meeting or until their successors are elected and qualified. Our Certificate of Incorporation provides that the directors will be elected by a majority of the votes cast at the meeting. Our Board has a policy of mandatory retirement from the Board at the annual meeting following a director’s 72nd birthday.

 

The following information provides the age, business experience and Board committee membership as of March 24, 2008, of the nominees for election. All nominees have consented to being named as such in this proxy statement and have agreed to serve if elected. If, as a result of circumstances not presently known, any of such nominees declines or is unable to serve as a director, proxies will be voted for the election of such other person as the Board may select, or the number of authorized directors may be reduced.

 

RECOMMENDATION

 

The Board of Directors unanimously recommends that you

vote FOR the election of each of the following nominees:

 

PATRICK J. BYRNE, age 47.  Mr. Byrne is Chief Executive Officer and President of Intermec. Prior to joining Intermec in these capacities in 2007, Mr. Byrne served as a Senior Vice President and President of the Electronic Measurement Group of Agilent Technologies Inc., a bio-analytical and electronic measurement company, from February 2005 to March 2007. Prior to assuming that position, Mr. Byrne served as Vice President and General Manager for Agilent’s Electronic Products and Solutions Group’s Wireless Business Unit from September 2001 to February 2005. He served as Vice President for Agilent’s Electronic Products and Solutions Group’s Product Generation Units from 1999 to 2001. He currently serves on the Board of Samuel Ginn College of Engineering at Auburn University.

GREGORY K. HINCKLEY, age 61.  Mr. Hinckley is President and director of Mentor Graphics Corporation, a provider of electronic design automation software and systems, and has served in that capacity since 1999. He joined Mentor Graphics as Executive Vice President, Chief Operating Officer and Chief Financial Officer in 1997. Prior to that, he served as Chief Financial Officer of two other publicly traded companies. He joined the Board of Intermec in 2004, and is a member of the Audit Committee and the Compensation Committee. He also serves on the board of Arc Soft Inc. and is an Advisory Director of Portland State University, Engineering School.

 

LYDIA H. KENNARD, age 53.  From 1999 to 2003 and again from October 2005 through January 2007, Ms. Kennard served as Executive Director of Los Angeles World Airports, a system of airports comprising Los Angeles International, Ontario International, Palmdale Regional and Van Nuys General Aviation Airports. She served as Deputy Executive for Design and Construction for Los Angeles World Airports from 1994 to 1999. She has been a director of Intermec since 2003, and is a member of the Compensation Committee and the Governance Committee. Ms. Kennard is a director of URS Corp., AMB Property Corporation, IndyMac Bank, the UniHealth Foundation, the California Air Resources Board and Polytechnic School, and a trustee for the University of Southern California and RAND Corporation.

 

ALLEN J. LAUER, age 70.  Mr. Lauer is Chairman of the Board of Varian, Inc., a supplier of scientific instruments and vacuum technologies, and has served in that capacity since 2002. He served as Chief Executive Officer of Varian from 1999 until his retirement from that position on December 31, 2003, and as President from 1999 until 2002. Prior to that, he was Executive Vice President of Varian Associates, Inc., from which the capital stock of Varian, Inc. was distributed to shareholders in 1999. He has been a director of Intermec since 2003, and has served as the non-executive Chair of the Board and the Chair of the Governance Committee since July 2007. Until July 2007, Mr. Lauer served as the Chair of the Audit Committee. He is also a director of Immunicon Corporation.

 

STEPHEN P. REYNOLDS, age 60.  Mr. Reynolds is Chairman of the Board, President and Chief Executive Officer of Puget Energy, Inc. and of its wholly owned utility subsidiary, Puget Sound Energy, Inc. He became Chairman of the Board in 2005, having held the positions of President and Chief Executive Officer since 2002. Prior to joining Puget Energy, Mr. Reynolds was President and Chief Executive Officer of Reynolds Energy International, an energy advisory firm, from 1997 to 2001, and prior to that was President and Chief Executive Officer of Pacific Gas Transmission Company. Mr. Reynolds has been a director of Intermec since 2005 and serves on the Audit Committee and the Governance Committee. He also serves on the boards of the Edison Electric Institute, the American Gas Association, the ArtsFund and the 5th Avenue Theatre, both of Seattle, the Nature Conservancy of Washington, the Washington Roundtable and Green Diamond Resources Company.

 

STEVEN B. SAMPLE, age 67.  Dr. Sample is President of the University of Southern California and has held that position since 1991. He has been a director of Intermec since 1997, and is a member of the Audit Committee and the Governance Committee. From 1982 to 1991, Dr. Sample was President of the State University of New York at Buffalo. He is a director of the Wm. Wrigley Jr. Company, the Santa Catalina Island Company, the AMCAP Fund, Inc. and the American Mutual Fund, Inc. Dr. Sample is also founding Chairman of the Association of Pacific Rim Universities, a trustee of the University of Southern California and of the Regenstreif Medical Foundation, and past Chairman and current member of the Association of American Universities.

 

OREN G. SHAFFER, age 65.  Mr. Shaffer is the Retired Vice Chairman and Chief Financial Officer of Qwest Communications International Inc., where he served in that capacity from 2002 to 2007. He has been a director of Intermec since 2005, and has served as the Chair of the Audit Committee since July 2007. Mr. Shaffer has been a member of the Audit Committee and the Compensation Committee since 2005. From 2000 to 2002, Mr. Shaffer was President and Chief Operating Officer of Sorrento Networks, which develops intelligent optical networking solutions for telecommunications applications. He also serves on the boards of Belgacom S.A. and Terex Corporation.

 

LARRY D. YOST, age 70.  Mr. Yost is the Retired Chairman of the Board and Chief Executive Officer of ArvinMeritor, Inc., a global supplier of a broad range of integrated systems, modules and components to the

motor vehicle industry. He served in those positions from 2000 to August 2004. He has been a director of Intermec since 2002, and is Chair of the Compensation Committee. From 1997 until the 2000 merger of Arvin, Inc. and Meritor Automotive, Inc., Mr. Yost was Chairman and Chief Executive Officer of Meritor, a supplier of automotive components and systems. He is the Lead Director of Kennametal, Inc. and a director of Milacron Inc. and Actuant Corporation.

 

The following tables set forth the number of shares of common stock beneficially owned, directly or indirectly, by the parties that reported beneficial ownership of more than 5% of our outstanding common stock, as indicated in the applicable Schedule 13D or Schedule 13G, and by each director, each executive officer named in the Summary Compensation Table included in this proxy statement (the “named executive officers” or “NEOs”), and all of our directors and executive officers as a group, as of March 24, 2008, unless otherwise noted.

 

The number and percentage of shares beneficially owned is determined in accordance with Rule 13d-3 of the Securities Exchange Act of 1934 (the “Exchange Act”) and is not necessarily indicative of beneficial ownership for any other purpose. Shares of common stock that a person has a right to acquire within 60 days of March 24, 2008, or, with respect to 5% beneficial owners, as calculated in the applicable Schedule 13D/G, are deemed outstanding for purposes of computing the percentage ownership of that person, but are not deemed outstanding for purposes of computing the percentage ownership of any other person, except with respect to the percentage ownership of all directors and executive officers as a group, if applicable.

 

 

 

 

The following table sets forth information regarding the beneficial ownership of our common stock as of March 24, 2008 for each of our directors, each of our named executive officers and all of our directors and executive officers as a group. Except as otherwise indicated, and except to the extent that any transfers of shares of Restricted Stock and of Restricted Stock Units are prohibited prior to the satisfaction of the terms of the award, each director and named executive officer either has sole investment and voting power with respect to the securities shown or shares investment and/or voting power with that individual’s spouse.

 

 

 

 

 

 

 

 

 

 

 

 

Section 16(a) of the Exchange Act requires that our executive officers, directors and persons who own more than 10% of a registered class of our equity securities file reports of ownership and changes in ownership with the SEC and the NYSE. SEC regulations also require us to identify in this proxy statement any person subject to this requirement who failed to file any such report on a timely basis.

Based on our review of the reports we have received and written representations that no other reports were required for 2007, we believe that all Section 16(a) reporting requirements applicable to our executive officers, directors and persons who own more than 10% of a registered class of our equity securities in 2007 were satisfied in a timely fashion.

 

Policies, Procedures and Practices

 

In March 2007, our Board of Directors adopted a written policy and procedure (the “Procedure”) for the Audit Committee’s review and approval or ratification of transactions with a related person that must be disclosed under the SEC’s disclosure rule for related person transactions (Item 404(a) of Regulation S-K). Under the Procedure, our directors, officers and employees are required to promptly report related person transactions to our General Counsel. There are special processes for transactions involving the General Counsel or a member of the Audit Committee so that these matters are addressed by disinterested persons.

 

The Procedure requires that a list of related person transactions be compiled and reviewed regularly, and that our directors and officers report any related person transactions that are not on the list. We also regularly review our accounts payable and accounts receivable data to determine whether there are any previously unreported related person transactions. The Procedure requires us to evaluate our controls and procedures for reporting related person transactions and make changes as appropriate.

 

A transaction covered by the Procedure and identified before being entered into generally must be submitted to the Audit Committee for approval before the transaction is consummated. Otherwise, the transaction must be revocable in the event it is not approved or ratified by the Audit Committee at its next regular or special meeting. There are categories of transactions that are deemed to be pre-approved, generally because they are under $120,000 in value or are not required to be disclosed pursuant to SEC rules. These latter transactions are disclosed to the Audit Committee at least annually. Previously approved or ratified related person transactions that remain ongoing also are to be reviewed at least annually. In deciding whether to approve or ratify a related person transaction, the Audit Committee considers a number of factors to determine whether the transaction is in the best interests of the Company, including, among others, the purpose and potential benefit of the transaction to us, the extent of the related person’s interest in the transaction and the terms of the transaction in relation to doing such a transaction with an unrelated third party.

 

The Board of Directors has adopted a written charter for the Audit Committee (the “Audit Charter”). The Audit Charter is available on our Corporate Governance Webpage, as specified in “Corporate Governance — Availability of Information and Communications with the Board.”

 

In accordance with the provisions of our charter, we have (i) reviewed and discussed the Company’s audited consolidated financial statements for the year ended December 31, 2007, with management, (ii) discussed with the Company’s independent registered public accounting firm, Deloitte & Touche LLP, the matters required to be discussed by Statement on Auditing Standards No. 61 (“Codification of Statements on Auditing Standards, AU § 380”), as modified or supplemented, (iii) received the written disclosures and the letter from Deloitte required by Independence Standards Board Standard No. 1 “Independence Discussions with Audit Committees,” as modified or supplemented, and (iv) discussed with Deloitte its independence from the Company.

 

As part of our responsibilities under our charter, we reviewed with the Company’s General Counsel whether there were any legal matters that have had or are likely to have a material impact on the Company’s financial statements. We also reviewed the Company’s compliance with the Intermec Standards of Conduct.

 

In addition, we met with Deloitte prior to the filing of each of the Company’s quarterly reports on Form 10-Q to discuss the results of its review of the financial information included in those reports.

Management has represented to the Committee, and Deloitte has confirmed, that the Company’s audited consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States.

 

In performing our oversight function, we relied on advice and information received in our discussions with the Company’s management, internal auditors and Deloitte. This advice and information was obtained at 12 Committee meetings held in person or telephonically during the year, during which we engaged both management and Deloitte in discussions. During five of these meetings, we met separately with the Company’s internal auditors and then with Deloitte. Based on the review and discussions referred to above, we recommended to the Board of Directors that the Company’s audited consolidated financial statements for the year ended December 31, 2007, be included in the Company’s Form 10-K.

 

The Audit and Compliance Committee

 

Oren G. Shaffer, Chair

Gregory K. Hinckley

Stephen P. Reynolds

Steven B. Sample

 

The aggregate fees we paid to Deloitte & Touche LLP, the member firm of Deloitte Touche Tohmatsu and their respective affiliates, for the years ended December 31, 2007 and 2006 were as follows (amounts in thousands):

 

 

 

 

The Audit Committee’s policy is that all audit and non-audit services to be performed by our independent registered public accounting firm must be approved in advance. The policy permits the Audit Committee to delegate pre-approval authority (except with respect to services related to internal controls) to one or more of its members and requires any member who pre-approves services pursuant to that authority to report the decision to the full Committee no later than its next scheduled meeting. The Audit Committee has delegated such authority to its Chair.

 

The Audit Committee has reappointed the firm of Deloitte & Touche LLP to serve as our independent registered public accounting firm for 2008. Deloitte has served as our independent auditors since we became a

public company in 1997, is familiar with our business and operations and has offices in most of the countries in which we conduct business. In making this appointment, the Audit Committee considered whether the provision of the services other than the services described under “Audit Fees” and “Audit-Related Fees” is compatible with maintaining the independence of Deloitte, and has concluded that the provision of such services is compatible with maintaining their independence.

 

As a matter of good corporate governance, the Audit Committee has determined to submit its selection of the independent registered public accounting firm to our stockholders for ratification. In the event that this selection of Deloitte is not ratified by a majority of the shares present or represented at the Annual Meeting and entitled to vote on the matter, the Audit Committee will review its future selection of an independent registered public accounting firm.

 

Representatives of Deloitte are expected to be present at our Annual Meeting. They will have the opportunity to make a statement if they desire to do so and are expected to be available to respond to appropriate questions.

 

RECOMMENDATION

 

The Board of Directors unanimously recommends that you vote FOR Proposal 2.

 

COMPENSATION DISCUSSION AND ANALYSIS

 

Executive Summary

 

This Compensation Discussion and Analysis describes the compensation policies and decisions of the Compensation Committee (the “Committee”) with respect to Intermec’s executive officers, including the named executive officers who are shown in the Summary Compensation Table below.

 

Objectives.  The focus of our executive compensation program is to motivate and reward performance that maximizes short-term and long-term stockholder value. The design and operation of the program reflect the following objectives:

 

 

Elements of Compensation.  The main components of our executive compensation program are base salary and variable annual and long-term incentives that are designed to emphasize at-risk, performance-based compensation.

 

 

Determining Executive Compensation

 

The Compensation Committee is responsible for establishing our executive officer compensation philosophy and related policies and practices, and sets all executive officer compensation. The Committee receives recommendations from the CEO with respect to compensation of the other executive officers, and receives support from the Vice President of Human Resources in discharging its duties and responsibilities. The Committee works with outside compensation consultants for advice and perspective on various aspects of executive compensation. For more information about the role and processes of the Committee, see “Corporate Governance — Board Committees, Compensation Committee” above.

 

In 2007, the Committee reviewed tally sheets for each of our executive officers, showing (i) the estimated value of each element of the executive officer’s current, long-term, deferred and post-retirement compensation, including base and incentive, cash and equity compensation, and (ii) the estimated total value of the executive officer’s compensation. The Committee used the information in the tally sheets together with peer group data and information about individual contribution to assess the reasonableness of each executive officer’s total direct compensation, each element of that compensation and the mix of compensation elements. The Committee intends to continue to use information presented in this general format in its decision-making processes.

 

Competitiveness of the Executive Compensation Program

 

Benchmarking.  We use peer group benchmarking data as a reference point to assess the competitiveness of each executive officer’s at-target total direct compensation. In selecting peer technology companies for executive compensation benchmarking purposes, the Committee found that there are too few comparable companies in the automated identification and data collection (“AIDC”) market to provide a broad sample for comparisons. Therefore the Committee also included non-AIDC technology firms of similar size and scale and with similar business and financial characteristics. For 2007, as for 2006, the Committee used two peer groups selected by its outside compensation consultant, Hewitt Associates, because neither group alone provided an adequate pool of comparable executive positions for comparison purposes. One group, consisting of 24 selected companies (the “Direct Peer Group”), provided a significant pool of CEO and Chief Financial Officer (“CFO”) data for comparison purposes. The other group, consisting of 48 companies from the Radford Technology survey (the “Survey Peer Group”), increased the CEO and CFO pool and allowed the Committee to match our other executive officer positions with more precision. Twelve of the Direct Peer Group companies were also in the Survey Peer Group, and of the sixty total companies included in the two surveys, eight were competitors in the AIDC market. The companies in the two peer groups were substantially the same for 2007 as for 2006.

 

The criteria used to select companies for the Direct Peer Group and the Survey Peer Group were the same in that the companies included were in technology industries and had annual sales similar to ours, falling within a range in which Intermec’s annual revenue is the midpoint. A peer company also had a market capitalization and enterprise value (i.e., market capitalization plus the book value of debt less cash) similar to Intermec’s.

 

In May 2007, the Committee retained Frederic W. Cook & Co., Inc. as its outside compensation consultant. FWC recommended and the Committee approved a peer group comprised of 16 publicly traded office electronics and computer storage and peripheral companies listed below. As of the most recent fiscal year-end, our market capitalization was at the 59^th percentile of this group. We believe these companies are broadly comparable to us in terms of labor and capital market competition, revenues, profit margins and market capitalization value. This peer group was used by FWC to advise the Committee on Mr. Byrne’s compensation package in 2007, and 2008 compensation for Mr. Byrne and the other executive officers. FWC

will review this peer group regularly and make adjustments as necessary to ensure that the peer group continues to be relevant. The companies included in the peer group were:

 

 

Market Position.  We benchmark each executive officer’s total direct compensation (base salary and annual and long-term incentives at the target level) relative to approximately the 50th percentile for total direct compensation among peer group companies. The Committee does not set executive compensation solely by reference to peer group data, but exercises its judgment in determining appropriate compensation, giving consideration to the Company’s overall performance, the executive’s particular position and scope of responsibility within our Company, the executive’s performance, and the total direct compensation mix.

 

The Committee’s policies are consistently applied among all of our executive officers, including the CEO. Our CEO’s compensation is reviewed in the context of the higher market position of compensation for CEOs generally. The Committee believes that the CEO position merits a higher level of compensation relative to other named executive officers both because of its critical role in the strategy and performance of the business and because of the need to attract and retain talented executives to fill this role.

 

Components of the Executive Compensation Program

 

Total Direct Compensation Mix.  The Committee’s decisions about compensation for the named executive officers are intended to emphasize performance-based compensation. A majority of the total direct compensation of our executive officers is at-risk, performance-based compensation. For example, for our current named executive officers as a group (other than Mr. Byrne), the percentage of their aggregate 2007 target total direct compensation that was at-risk at the time it was initially approved was 69.1%; base salaries comprised the other 30.9%. We define the at-risk components (and their respective percentages) of 2007 target total direct compensation to include: the 2007 target annual cash incentive (18.4%); and the long-term incentive awards made in 2007 (50.7%), consisting of the fair value of the stock options and the grant date value of the target number of performance shares units (“PSUs”). These percentages were calculated by dividing (i) the total at-risk compensation amount by (ii) target total direct compensation, which includes the at-risk compensation plus base salaries. This combination of elements of total direct compensation when approved by the Committee was consistent with practices among the peer group companies. Mr. Byrne’s compensation is discussed under “Named Executive Officer Compensation” below.

 

Base Salary.  Base salaries are a primary executive retention and recruitment tool. The Committee believes that it is essential to offer some form of non-contingent compensation to attract and retain qualified executives. In keeping with past practice, salaries for 2007 were determined in November of 2006, with the increase becoming effective for each named executive officer on the anniversary of his or her date of hire or most recent promotion. For 2008, salaries were determined in November 2007 for the following year, with the increase becoming effective for each executive on January 1.

 

Generally, the Committee targets base salary for named executive officers performing “at expectation” to be at approximately the 50th percentile of compensation paid to similar officers in our peer group companies. The Committee believes that outstanding performers can be paid above median, and truly exceptional performers can be paid well above median.

 

Although peer benchmarking establishes the median for total compensation, whether a named executive officer’s base salary is at, above or below that median for similar executive positions in the peer groups is based in part on a subjective assessment of the officer’s individual performance. The Committee assesses the performance of the CEO, and discusses with the CEO his assessment of the individual performance of the other named executive officers. Generally, these assessments consider such factors as the officer’s contribution (in his or her area of responsibility) to business initiatives intended to deliver financial or strategic value to the

Company’s performance goals, or an officer’s strategic leadership toward these goals, or whether an officer has assumed a greater scope of responsibility than counterparts at peer companies. No specific weight is given to any one objective or performance factor. The Committee’s approval of salary levels reflects an overall assessment of how well each named executive officer performed his or her job. Regardless of any subjective assessment of individual performance, Company performance generally has been the overriding factor in setting base salaries.

 

Base salary decisions with respect to individual named executive officers are discussed under “Named Executive Officer Compensation” below.

 

Annual Cash Incentive Program.  The Management Incentive Compensation Plan is an annual cash bonus program designed to motivate participants to achieve short-term business and financial goals. The participants in the MICP include the named executive officers, other officers and specified management employees. All participants are assigned individual target opportunities for MICP payments that for our named executive officers range from 50% to 100% of their annual salaries. Consequently, increases or decreases in a participant’s base salary affect his or her MICP opportunity. Participants can earn from 0% to 150% of their target payout, based on the Company’s financial performance.

 

The MICP performance goals for the past three years have been (1) earnings before tax from continuing operations (“EBT”), which has represented 70% of the overall goal, and (2) average net capital utilized as a percentage of sales, which has represented 30% of the overall goal. Net capital utilized (“NCU”) is defined as equity plus debt and retirement obligations, less cash, cash equivalents and short-term investments. Average NCU (“ANCU”) is the average of the 12 month-end balances of NCU during the year. ANCU as a percentage of revenue is a non-GAAP measure that supplements traditional accounting measures to evaluate our effectiveness at managing capital deployed and generate liquidity as revenue fluctuates. The Committee and management believe that these goals are appropriate measures of performance in the operation of the business. They provide evidence of efficient growth in our earnings and are closely linked to the creation of stockholder value. When set, the specific annual targets are intended to be achievable if the business performs in a manner consistent with its plans.

 

Company performance alone determines whether MICP goals are achieved and the extent to which the participants receive their MICP payments. Individual performance is not a factor. However, apart from the MICP, the Committee has discretion to award a supplemental bonus payment based on individual performance factors as it deems appropriate.

 

2007 MICP Goals and Payouts.  In March 2007, MICP target performance goals were assigned to all participants as (1) earnings before tax from continuing operations of $57.4 million and (2) ANCU as a percentage of sales of 45.6%.

 

When Mr. Byrne became CEO at approximately the midpoint of the year, he was assigned performance targets based on our updated plan for Company performance for the period July 1 through December 31, 2007 of (1) EBT of $28.9 million and (2) ANCU as a percentage of sales of 44.1%. To align the performance objectives and incentives of incumbent participants (other than Mr. Brady) with the performance objectives and incentives established for the new CEO, their performance targets were amended such that the performance components for the first half of 2007 remained the same as were expected under the original 2007 MICP performance targets and the performance components for the second half of 2007 reflected the business performance expectations underlying the targets set for Mr. Byrne. Since Mr. Brady stepped down from the position of CEO at approximately the midpoint of the year, his MICP performance targets were not adjusted for the second half of the year.

2007 MICP Goal Levels

 

 

The payout is calculated using the actual amount of base salary paid during the year, which has the effect of prorating the payout to the amount of time during the year that the individual was employed by the Company. In addition, under the 2007 MICP, the employee also was required to be employed as of the date of payment; an exception was made for Mr. Brady in connection with his retirement arrangements.

 

2008 MICP.  In the 2008 MICP, the Committee used two matrices with the following weightings: (1) operating profit relative to revenue (70%) and (2) operating profit relative to average invested capital (30%). The Committee believes that these are appropriate measures of company performance because the value of a company tends to increase when its revenue and operating profits are growing while invested capital is flat or declining. Target bonus opportunities for our named executive officers, expressed as a percentage of base salary, are the same in the 2008 MICP as they were in the 2007 MICP.

 

Long-Term Equity Incentive Programs

 

General.  The long-term equity incentive program is designed to provide a direct link between executive compensation and long-term stockholder value creation. The value of the long-term incentive opportunity granted to an executive officer in any year is divided between stock options and a three-year performance-based program paid out in the form of common stock. The number of stock options granted is calculated by applying a Black-Scholes formula to a target value. The number of performance shares at target that may be earned under the performance share program is determined by the Committee’s assessment of the overall value of the long-term incentive opportunity relative to peer company comparisons, and has been one-third the number of options granted in some years and in 2007 was one-fourth the number of options granted to our named executive officers.

 

Stock options are intended to align executives’ interests with those of stockholders, by providing an incentive to increase stock price through positive business and financial performance. The stock options only have value to the recipients if the price of the Company’s stock appreciates after the options are granted. The performance share opportunity provides an incentive to achieve particular business and performance metrics over a multi-year period.

 

In setting the value of the long-term incentive opportunity for an individual executive officer and for the executive officers as a group, the Committee considers Company performance, the long-term incentive opportunities provided by our peer group companies to their executive officers and the competitiveness of our total direct compensation for executive officers relative to total direct compensation of similar officers in our

peer group companies. The value set is the Committee’s subjective determination after considering these factors.

 

Restricted stock units are granted from time to time as retention or promotion awards.

 

Stock Option Grants.  Stock options are granted with an exercise price equal to the fair market value of the Company’s common stock on the grant date, generally vest in equal annual installments over five years and expire ten years after the date of grant. Stock options are granted as incentive stock options to the extent permitted under applicable Code rules, and the remaining options are granted as nonqualified stock options.

 

2008 Stock Option Grants.  Beginning in the second quarter of 2008, we intend to grant only non-qualified stock options that generally will vest in equal annual installments over four years. We will continue to grant stock options with an exercise price equal to the fair market value of the Company’s common stock on the grant date and that expire ten years after the date of grant.

 

Performance Share Unit Program.  The primary purpose of PSUs is to provide a competitive long-term incentive program that will reward executive officers and other participants for overall success in the Company’s financial performance. Participants receive payouts in the form of common stock at the end of the performance period, in an amount dependent on the degree to which the assigned targets were achieved.

 

The Committee establishes target awards of PSUs for each participant at the beginning of each three-year performance cycle; a new three-year performance period begins each year. The performance targets relate to Company, rather than individual, performance. In establishing the targets, the Committee takes into account its subjective assessment of the degree of difficulty in achieving the target values. The targets are intended to be achievable if the business performs in a manner which is consistent with its plans, but the achievement of the at-target value is not intended to be a certainty. Participants can earn from 0% to 200% of their target PSU award based on the Company’s performance against the assigned targets.

 

2007-2009 and Earlier PSU Programs.  The performance measures for the performance cycles beginning before 2008 were the Company’s cumulative three-year financial performance on two equally weighted metrics: return on average net capital utilized (“RANCU”) and diluted earnings per share from continuing operations (“EPS-CO”). For the performance cycles beginning in 2005 and 2006, the calculation of cumulative RANCU has and will be made only with reference to continuing operations of the Company for the relevant three-year performance period. RANCU is calculated as “operating profit from continuing operations” divided by ANCU. RANCU is a non-GAAP measure that supplements traditional accounting measures to evaluate our financial return in a given period, relative to our ANCU.

 

The Committee believes that EPS-CO and RANCU are appropriate measures of company performance since growth in EPS is direct evidence that the value of the Company to stockholders has increased and growth in RANCU demonstrates that the growth in EPS was achieved in an efficient manner with respect to invested capital. The Committee also believes that the PSU Program targets it has established are achievable but quite challenging. In fact, no payouts were made for the 2005-2007 performance cycle as the Company did not meet the minimum cumulative three-year RANCU and EPS-CO targets.

 

RANCU and EPS-CO targets for the 2006-2008 and 2007-2009 performance cycles were amended in July 2007 to align the performance objectives and incentives of incumbent participants (other than Mr. Brady) with the performance objectives and incentives established for Mr. Byrne based on our updated plan for Company performance for the periods included in each of the cycles. The amended performance targets of the 2006-2008 performance cycle were set such that performance consistent with the plan used to set the performance targets for Mr. Byrne would result in only a partial payout to incumbent participants. Since Mr. Brady ceased being CEO in July 2007, his performance targets for the 2006-2008 and 2007-2009 performance cycles were not adjusted, and no payout is expected.

 

2008 PSU Program.  The Committee has revised the PSU Program for 2008 to utilize the following two financial goals weighted as follows: EPS-CO (70%) and revenues (30%). The achievement of each goal will be separately determined as a percentage of target as of the end of each fiscal year in the three-year performance period. The total payout for the performance period will be based on the three-year average of

results under the applicable goal. The structure and terms of the PSU Program otherwise were not amended. The Committee believes that the performance measures selected for 2008, EPS-CO and revenues, are appropriate measures of Company performance because they are aligned with the Company’s desire to grow revenue and profitability. Revenue is a key indicator of the growth of our business, and EPS-CO is a key indicator of the value of the business to stockholders. The Committee also believes that the revised structure of the PSU Program is an appropriate tool to encourage and reward consistent progress toward the goals set at the inception of each 3-year performance period, because the target is the average of annual achievement levels, rather than a cumulative goal.

 

Named Executive Officer Compensation

 

Mr. Byrne, CEO.  Mr. Byrne joined the Company in July 2007. In connection with his appointment as CEO and President, the Committee approved an annual base salary of $600,000, which is at the 50^th percentile of the compensation peer group companies used by the Committee at the time of his appointment. The development of Mr. Byrne’s compensation package, including his base salary, 300,000 stock options and 83,350 performance shares, was consistent with the Committee’s understanding of market practices for recruiting a senior level executive, and took into consideration the findings and recommendations of the Committee’s outside compensation consultant.

 

Mr. Brady, former CEO.  Mr. Brady resigned as Chairman, CEO and President in July 2007 and retired from the Company in December 2007. His salary, which had been decreased for 2006 at his request to better align with the base salary of his peers in technology industries, was not increased for 2007. Mr. Brady’s base annual salary for 2007 remained at the 50^th percentile of the compensation peer group used by the Committee in 2006. In connection with his retirement in December 2007, the Committee accelerated the vesting of certain stock options held by Mr. Brady and provided that these options may be exercised for a three-year post-retirement period. Because of his retirement, all other previously vested options may be exercised by Mr. Brady through the end of the original ten-year term, in accordance with the original terms of the grants.

 

Base Salaries.  The base salaries set by the Committee for the other named executive officers reflect the peer group analysis and subjective assessment of the executive’s performance described above. Because Company performance was below expectations, most of the other named executive officers received modest salary increases for 2007. The aggregate increase in base salaries of all of the other named executive officers was approximately 3.5% over the aggregate of their 2006 base salaries.

 

Mr. Byrne’s salary was not reviewed in November 2007 because he had recently joined the Company the previous July. The aggregate increase in base salaries of all of the other named executive officers was approximately 1% over the aggregate of their 2007 base salaries. This percentage also reflects the adjustments made to normalize the effective date of all increases to January 1, 2008.

 

Annual Incentive Awards.  In February 2008, the Committee considered the extent to which we achieved the performance goals under the 2007 MICP and determined that the goals were achieved above the performance goal target for Mr. Byrne and continuing management, and above the performance goal threshold but below target for Mr. Brady.

 

All of the current named executive officers received a payment as determined by the formula of the MICP, which has been reported in the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table. Mr. Brady also received a payment pursuant to the arrangements made in connection with his retirement. Mr. Winter was not eligible to receive a payment.

 

Long-Term Equity Incentive Grants.  In 2007, our named executive officers received stock option grants and performance share unit awards for the 2007-2009 performance cycle. All of these grants and awards were made on the same date. Mr. Byrne’s grants and awards were made on the date he was employed by the Company and elected an officer by our Board. All of these grants are included in the “2007 Grants of Plan-Based Awards” table and the “Outstanding Equity Awards at 2007 Fiscal Year-End” table, both below.

In addition to these grants, the Committee made a special grant of restricted stock units to Mr. Anderson in February, 2007, to recognize his service to the Company as Acting Chief Financial Officer and to provide a retention incentive.

 

Perquisites

 

Perquisites are not a material component of any named executive officer’s compensation. The Committee eliminated a previously available allowance for estate planning at the end of the first quarter of 2007 and provided an allowance for executive officers to complete pending estate planning activities by that time.

 

Beginning in 1997, the Company entered into a program under which we purchased life insurance coverage on management employees, including certain of our executive officers. The program provides a death benefit to beneficiaries of covered individuals, but the covered individual and his or her beneficiaries have no other ownership or beneficial interest in or control over the policies or policy benefits. No additional employees, including executive officers, have been added to the program since 2000. The Company paid premiums in 2007 for policies under this program related to the executive officers out of the cash value of the program.

 

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

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.

 

2007 Executive Retention

 

In March 2007, we announced Mr. Brady’s plan to retire from his position as the Company’s CEO following the Board of Director’s identification of his successor.

 

The Committee considered the extent to which the leadership transition created significant retention risk with respect to the Company’s named executive officers or other key managers and the impact that the departure of such individuals could have on the Company’s operations and its transition to new leadership. The Committee concluded that a significant retention risk existed with respect to Mr. Winter, Mr. Michael and Ms. Harwell, and that the departure of one or more these executives during the leadership transition could adversely impact the Company’s operations and could complicate the Company’s leadership transition. The Committee also concluded that it was in the best interests of the Company and its stockholders to try to reduce the retention risk by putting appropriate retention arrangements in place with respect to Mr. Winter, Mr. Michael and Ms. Harwell. The Committee sought to diminish the inevitable distraction for these individuals by virtue of personal uncertainties and risks created by the impending transition of the Company’s leadership, to encourage their full attention and dedication to the Company during that transition, and to facilitate the transition of the Company’s leadership to a new CEO. Consequently, the Committee took the following actions on March 30, 2007. With respect to Mr. Michael and Ms. Harwell, these actions are reflected

in the “2007 Grants of Plan-Based Awards” table and the “Estimated Potential Incremental Payments Upon Termination or Change of Control” table below.

 

Mr. Michael.  The Committee modified the terms applicable to the 20,000 restricted stock units granted to Mr. Michael on September 14, 2006, when he joined the Company (the “2006 Grant”). If the Company terminates Mr. Michael prior to March 1, 2009, the 2006 Grant, which otherwise vests (i.e., becomes unrestricted) on September 14, 2011, will automatically vest on the date of termination, unless the termination was for cause. In addition to the general retention purposes described above, this contingent acceleration feature is intended to encourage Mr. Michael to remain with the Company until at least March 1, 2009.

 

Ms. Harwell.  The Committee modified the terms applicable to the 20,000 restricted stock units granted to Ms. Harwell on September 8, 2004, when she joined the Company (the “2004 Grant”). The Committee also approved an additional grant to Ms. Harwell of 20,000 restricted stock units with a restriction period ending on March 1, 2009 (the “2007 Grant”). If the Company terminates Ms. Harwell prior to March 1, 2009, the 2004 Grant, which otherwise vests on September 8, 2009, and the 2007 Grant will both vest automatically on the date of termination, unless the termination was for cause. In addition to the general retention purposes described above, the Committee’s purpose was to encourage Ms. Harwell to remain with the Company until at least March 1, 2009.

 

Mr. Winter.  The Committee approved a future one-time, lump-sum cash payment of $500,000 to Mr. Winter, to encourage Mr. Winter to remain with the Company until March 1, 2008. Mr. Winter received this cash payment when he left the Company in 2007 pursuant to the terms of the retention arrangement approved by the Committee in March 2007 which provided for earlier payment in circumstances other than termination for cause or change of control.

 

In determining the details of these retention arrangements, the Committee took into account the experience of the Committee members and other members of the Board in structuring retention arrangements under the same or similar circumstances and the roles and responsibilities of the executives. The Committee also exercised its judgment about types of arrangements that were most likely to encourage these executives to remain with the Company for an appropriate period of time given the Company’s transition to new leadership.

 

Stock Ownership Guidelines

 

We adopted Executive Stock Ownership Guidelines in 2003 to ensure that our officers (including named executive officers) have a meaningful stake in the equity of the Company and to further align the interest of the officers with the long-term interest of our stockholders. The guidelines, which have been amended and clarified from time to time, require our CEO (Mr. Byrne) to retain an amount of Intermec common stock equal in value to five times his annual base salary before selling or otherwise transferring ownership of such stock. The named executive officers who are Senior Vice Presidents (Mr. Michael and Ms. Harwell) must retain an amount of Intermec common stock equal in value to three times the officer’s annual base salary. For all other named executive officers and other officers, the stock retention level is one times the officer’s annual base salary. Restricted stock and time-based restricted stock units (which have not vested) are included in the calculation to determine whether the guidelines are met, but stock options (whether vested or unvested), performance shares or other performance-based awards are not included. As of January 1, 2008, Mr. Anderson, Mr. Cohen and Ms. Harwell have met the guideline.

 

Equity Granting Practices

 

The Committee makes annual PSU and stock option awards to named executive officers at its meeting during the second quarter of the year, which coincides with our annual stockholders’ meeting. This Committee meeting also typically occurs during an “open trading window,” which is a period when our insider trading guidelines permit executive officers to engage in trading in Intermec securities. The Committee meeting date, or the next following trading day, is the effective date for the grants. PSU Awards generally have been made at the same meeting but, beginning in 2008, PSU Awards are made in the first quarter of the year. The exercise price or “strike price” is the fair market value of Intermec common stock on the date of the grant. The Committee also may approve equity awards throughout the year for newly hired executive officers or for

promotion or retention purposes. These awards are effective on the date the Committee acts or a subsequent date determined by the Committee. The exercise price is the fair market value on the date of grant.

 

When the Committee makes its annual grant of options, it also delegates to the CEO, who is also a director of the Company, the authority to make an annual grant of stock options to employees other than named executive officers. The number of shares authorized for this purpose is set by the Committee, and the grant by the CEO is made on the date the Committee meets to make grants to named executive officers. At this same meeting, the Committee delegates to the CEO the authority to grant stock options and PSUs to employees other than named executive officers, up to a specific number of shares, until the next annual meeting of stockholders. The CEO generally uses this authority to make grants of stock options to newly-hired or promoted management employees at times other than the annual stock option grants are made. These grants must be made by written action of the CEO, and are made effective the 15th day of the month (or the next following trading day, if a weekend or holiday).

 

Limits on Deductibility of Compensation

 

Section 162(m) of the Code generally limits the tax deductibility of compensation paid by a public company to its CEO and certain other highly compensated executive officers who are in office at the end of the fiscal year to $1 million per officer in the year the compensation becomes taxable to the executive. There is an exception to the limit on deductibility for performance-based compensation that meets certain requirements. We believe that all of the taxable compensation for 2007 paid to those of our named executive officers who are covered by Section 162(m) will be deductible.

 

The Committee’s policy is to provide annual incentive awards, PSUs, stock options and other compensation that are qualified and fully deductible by the Company under Section 162(m). However, in order to maintain ongoing flexibility of the Company’s compensation programs, the Committee has reserved the right to approve incentive and other compensation, such as time-vested restricted stock units, that exceeds the $1 million limitation set forth in Section 162(m) and recognizes that the loss of the tax deduction may be unavoidable under these circumstances.

 

The Compensation Committee of the Board of Directors has reviewed and discussed the Compensation Discussion and Analysis for fiscal year 2007 (“CD&A”) with management, consultants and advisors and based on such review and discussions, the Compensation Committee has recommended to the Board of Directors that the CD&A be included in this Proxy Statement for filing with the SEC.

 

The Compensation Committee

 

Larry D. Yost, Chair

Gregory K. Hinckley

Lydia H. Kennard

Oren G. Shaffer

 

The following table sets forth information regarding the compensation for each of our named executive officers for the year 2007 and, where applicable, the year 2006. Pursuant to our objectives for executive compensation, target direct compensation for our executive officers consists of approximately one-half salary and cash incentives and one-half long-term equity awards. Therefore, the information contained in the “Summary Compensation Table” should be viewed together with the “2007 Grants of Plan-Based Awards” table, which includes target levels for annual incentive awards and long-term performance share awards, to obtain the most accurate representation of short-term and the long-term incentive compensation elements and the total compensation provided to our named executive officers.

 

 

 

 

 

 

 

 

 

The Intermec Foundation

 

The Intermec Foundation (the “Foundation”) is a nonprofit, tax-exempt charitable foundation that was formed and funded in 1993 by the Company’s former parent company, Litton Industries. At the time that the Company was spun off from Western Atlas in 1997, the Foundation’s assets were approximately $17.5 million. The Foundation currently has assets of approximately $19.5 million. The Company has never contributed any assets to the Foundation. All of the Foundation’s donations have been made and all Foundation costs have been paid using Foundation assets. The Foundation’s Board of Directors is elected annually by the Company’s Board of Directors, usually at its May meeting. The Foundation’s current directors are Mr. Anderson, Mr. Cohen and Ms. Harwell.

 

The Foundation makes grants to schools (kindergarten through grade 12, or “K-12”), supports a scholarship competition for children of employees, makes a matching donation to a community service organization, and makes donations to other educational institutions and community charities or projects. In one of these programs, the Foundation makes non-discretionary contributions to tax-exempt K-12 schools and educational institutions by matching donations made by our employees and independent directors. The program requires the employee or director to make a minimum donation of $1,000 and provides for a Foundation match, per donation year, up to $5,000 for non-officer employees, $10,000 for operating company officers, and $25,000 for corporate officers and non-management directors.

 

The following table provides information regarding 2007 grants of annual and long-term awards for the named executive officers, including the range of estimated possible payouts under our annual MICP and estimated future payouts under our PSU Program (referred to in the table below as “LTIP PSU”) and the exercise price and grant date fair value of stock options. These award opportunities align executives’ interests with stockholders, by providing an incentive to increase stock price and improve the long-term financial performance of the Company.

 

 

 

 

The following table sets forth information regarding the outstanding stock option awards and unvested or unearned stock awards held by the named executive officers, as of December 31, 2007. The market value of unvested stock awards is based on the closing stock price of Intermec stock of $20.31 on December 31, 2007, the last trading day of the year. These holdings reflect the Company’s long-term incentive compensation policies, which grant stock awards and stock options based on Company performance, the quality and length of an executive’s service, and the achievement of individual and Company goals.