def14a
UNITED STATES
SECURITIES AND EXCHANGE
COMMISSION
WASHINGTON, DC 20549
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES
EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant þ
Filed by a Party other than the
Registrant o
Check the appropriate box:
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o Preliminary
Proxy Statement
o Confidential, For Use of
the Commission Only (as permitted by
Rule 14a-6(e)(2))
þ Definitive Proxy
Statement
o Definitive Additional
Materials
o Soliciting Material Under
Rule 14a-12
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HARRIS CORPORATION
(Name of Registrant as Specified In
Its Charter)
(Name of Person(s) Filing Proxy
Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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þ
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No fee required
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Fee computed on table below per Exchange Act
Rules 14a-6(i)(4)
and 0-11.
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Title of each class of securities to which transaction applies:
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Aggregate number of securities to which transaction applies:
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Per unit price or other underlying value of transaction computed
pursuant to Exchange Act
Rule 0-11
(set forth the amount on which the filing fee is calculated and
state how it was determined):
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4)
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Proposed maximum aggregate value of transaction:
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Fee paid previously with preliminary materials:
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Check box if any part of the fee is offset as provided by
Exchange Act
Rule 0-11(a)(2)
and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its
filing.
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1)
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Amount Previously Paid:
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Form, Schedule or Registration Statement No.:
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HARRIS
CORPORATION
1025 West
NASA Boulevard
Melbourne, Florida 32919
September 17,
2010
Dear Fellow Shareholder:
You are cordially invited to attend the 2010 Annual Meeting of
Shareholders of Harris Corporation. The meeting will be held at
the Harris Customer Briefing Center located at 1025 West
NASA Boulevard in Melbourne, Florida, on Friday,
October 22, 2010, starting at 1:00 p.m., local time.
The accompanying Notice of the 2010 Annual Meeting and Proxy
Statement describe the matters to be acted on at the meeting,
which include:
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election of the seven nominees for director named in the
accompanying Proxy Statement for a one-year term;
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ratification of the appointment of our independent registered
public accounting firm for fiscal year 2011;
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approval of the Harris Corporation Annual Incentive Plan;
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re-approval of the performance measures for the Harris
Corporation 2005 Equity Incentive Plan;
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consideration of a shareholder proposal requesting approval of
an amendment to our By-Laws to require an independent chairman
of the board, if such proposal is properly presented at the
meeting; and
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such other business as may properly come before the meeting or
any adjournments or postponements thereof.
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Your Board of Directors believes that the election of its
nominees for director, the ratification of the appointment of
our independent registered public accounting firm, the approval
of the Harris Corporation Annual Incentive Plan and the
re-approval of the performance measures for the Harris
Corporation 2005 Equity Incentive Plan are in the best interests
of Harris and its shareholders. Accordingly, your Board of
Directors unanimously recommends a vote FOR the election of its
nominees for director, FOR the ratification of the appointment
of Ernst & Young LLP as Harris independent registered
public accounting firm for fiscal year 2011, FOR the approval of
the Harris Corporation Annual Incentive Plan and FOR the
re-approval of the performance measures for the Harris
Corporation 2005 Equity Incentive Plan. Your Board of Directors
believes that an amendment to our By-Laws requiring an
independent chairman of the board is unnecessary and not in the
best interests of Harris and its shareholders and accordingly
unanimously recommends a vote AGAINST such shareholder proposal.
These matters are discussed in greater detail in the
accompanying Proxy Statement.
Following the voting, I will report on our operations and future
plans. There also will be an open discussion period during which
your questions and comments will be welcome.
The attendance of shareholders at our annual meetings has been
helpful in maintaining communication and understanding. We hope
you will be able to join us. Whether or not you plan to attend,
it is important that your shares be represented and voted at the
meeting. You can ensure that your shares are represented at the
meeting by voting over the Internet, by telephone or by using a
traditional proxy card. Instructions for these convenient ways
to vote are set forth on the enclosed proxy/voting
instruction card.
Cordially,
Howard L. Lance
Chairman, President and
Chief Executive Officer
YOUR VOTE
IS IMPORTANT. PLEASE VOTE OVER THE INTERNET OR BY TELEPHONE
OR
COMPLETE, SIGN, DATE AND RETURN YOUR PROXY/VOTING INSTRUCTION
CARD.
HARRIS
CORPORATION
1025 West NASA
Boulevard
Melbourne, Florida
32919
IMPORTANT
NOTICE REGARDING THE AVAILABILITY OF PROXY
MATERIALS FOR THE SHAREHOLDER
MEETING TO BE HELD ON
OCTOBER 22, 2010:
The Proxy Statement and 2010
Annual Report to Shareholders
are available at
www.harris.com/proxy/2010
TO THE
HOLDERS OF COMMON STOCK
OF HARRIS CORPORATION:
NOTICE IS HEREBY GIVEN that the 2010 Annual Meeting of
Shareholders of Harris Corporation will be held at Harris
Corporations Customer Briefing Center located at 1025 West
NASA Boulevard, Melbourne, Florida, on Friday,
October 22, 2010, at 1:00 p.m., local time, for
the following purposes:
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to elect as directors the seven nominees named in the
accompanying proxy statement for a one-year term expiring at the
2011 Annual Meeting of Shareholders;
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2.
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to ratify the appointment by our Audit Committee of Ernst &
Young LLP as Harris independent registered public
accounting firm for fiscal year 2011;
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3.
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to approve the Harris Corporation Annual Incentive Plan;
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to re-approve the performance measures for the Harris
Corporation 2005 Equity Incentive Plan;
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5.
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to consider a shareholder proposal requesting approval of an
amendment to our By-Laws to require an independent chairman of
the board, if such proposal is properly presented at the Annual
Meeting; and
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6.
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to consider and act upon such other business as may properly
come before the Annual Meeting or any adjournments or
postponements thereof.
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The accompanying proxy statement more fully describes these
items. We have not received notice of other matters that may be
properly presented at the Annual Meeting.
Only holders of common stock of record at the close of business
on August 27, 2010 are entitled to notice of and to vote at
the Annual Meeting and any adjournments or postponements
thereof. No ticket is required for admission to the Annual
Meeting. For security purposes, however, you will be required to
present a valid, government-issued photo identification, such as
a drivers license or passport, to gain admission to the
Annual Meeting. Packages, boxes, handbags and briefcases may be
inspected.
By Order of the Board of
Directors
Scott T. Mikuen
Vice President,
Associate
General Counsel and
Secretary
Melbourne, Florida
September 17, 2010
IMPORTANT
NOTICE
Your vote is important. If you
do not expect to attend the Annual Meeting of Shareholders or if
you plan to attend but wish to vote by proxy, please vote over
the Internet or by telephone or by completing, signing, dating
and promptly mailing the enclosed proxy/voting instruction card
for which a postage-paid return envelope
is provided.
HARRIS
CORPORATION
2010 ANNUAL
MEETING OF SHAREHOLDERS
PROXY
STATEMENT
TABLE OF
CONTENTS
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Appendix A Harris Corporation Annual Incentive
Plan
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A-1
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Appendix B Harris Corporation 2005 Equity
Incentive Plan (As Amended and Restated Effective
August 27, 2010)
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B-1
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Proxy
Statement
for
2010
Annual Meeting of Shareholders
to
be held on October 22, 2010
Why am I
receiving this
proxy statement?
We are furnishing this proxy statement to you in connection with
the solicitation of proxies by the Board of Directors (the
Board) of Harris Corporation (which we refer to as
Harris, we, our or
us) and the solicitation of voting instructions by
the Harris Corporation Retirement Plan Trustee, in each case for
use at the 2010 Annual Meeting of Shareholders to be held on
October 22, 2010, and at any adjournments or postponements
thereof.
On September 17, 2010, we commenced mailing and made
available electronically to our shareholders: (1) the
notice of the 2010 Annual Meeting of Shareholders and this proxy
statement, (2) the accompanying proxy/voting instruction
card, and (3) a copy of our 2010 Annual Report to
Shareholders, which includes our Annual Report on Form 10-K for
the fiscal year ended July 2, 2010 and our audited
financial statements.
What is a
proxy?
A proxy is your legal designation of another person to vote the
shares you own. That other person is called a proxy. If you
designate someone as your proxy, the document in which you make
that designation is also called a proxy.
What is a
proxy statement?
This document is a proxy statement. It is a document that we are
required by law to provide to you when we ask you to name a
proxy to vote your shares. We encourage you to read this proxy
statement carefully.
What is the
purpose of the meeting?
The purpose of the 2010 Annual Meeting of Shareholders is to
obtain shareholder action on the matters outlined in the notice
of meeting included with this proxy statement. These matters
include: (1) election of the seven nominees for
director named in this proxy statement for a one-year term
expiring at the 2011 Annual Meeting of Shareholders;
(2) ratification of the appointment by our Audit Committee
of Ernst & Young LLP as our independent registered public
accounting firm for fiscal year 2011; (3) approval of the
Harris Corporation Annual Incentive Plan; (4) re-approval
of the performance measures for the Harris Corporation 2005
Equity Incentive Plan; and (5) consideration of a
shareholder proposal requesting approval of an amendment to our
By-Laws to require an independent chairman of the board, if such
proposal is properly presented at the 2010 Annual Meeting. This
proxy statement provides you with detailed information about
each of these matters. In addition, management will report on
our operations and future plans and respond to questions from
shareholders.
What is a record
date and
who is entitled to vote at the meeting?
A record date is a date, as of the close of business of which,
shareholders of record are entitled to notice of and to vote at
a meeting. The record date for the 2010 Annual Meeting is
August 27, 2010. The record date was established by our
Board as required under the laws of Delaware, our state of
incorporation. Thus, owners of record of shares of Harris common
stock at the close of business on August 27, 2010 are
entitled to receive notice of and to vote at the 2010 Annual
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Meeting and at any adjournments or postponements thereof.
How many shares
can be voted and
what is a quorum?
You are entitled to one vote for each share of Harris common
stock that you owned as of the close of business on
August 27, 2010, and you may vote all those shares. Only
our common stock has voting rights. On the record date, there
were 129,019,883 shares outstanding and entitled to vote at
the 2010 Annual Meeting and approximately 6,113 holders of
record.
A quorum is the minimum number of shares that must be
represented in person or by proxy in order for us to conduct the
2010 Annual Meeting. The attendance in person or by proxy of
holders of a majority of the shares of common stock entitled to
vote at the 2010 Annual Meeting, or 64,509,942 shares of
our common stock based on the record date of August 27,
2010, will constitute a quorum to hold the 2010 Annual Meeting.
If you grant your proxy over the Internet, by telephone or by
the accompanying proxy/voting instruction card, your shares will
be considered present at the 2010 Annual Meeting and counted
toward the quorum.
What different
methods can I
use to vote?
You have a choice of voting:
Over the Internet;
By telephone;
By mail; or
In person at the Annual Meeting.
Even if you plan to attend the Annual Meeting, we encourage you
to vote over the Internet, by telephone or by mail. Please
carefully read the instructions below on how to vote your
shares. Because the instructions vary depending on how you own
your shares and the method you use to vote, it is important that
you follow the instructions that apply to your particular
situation.
If you vote over the Internet or by telephone, you should not
return your proxy/voting instruction card.
What is the
difference between a record holder
and an owner
holding shares in street name?
If your shares are registered in your name, you are a
record holder. You will be a record holder if
you hold a stock certificate or if you have an account directly
with our transfer agent, BNY Mellon Shareowner Services. If your
shares are registered or held in the name of your broker or bank
or other nominee, your shares are held in street
name and you are considered the beneficial owner of
such shares.
How do I vote if
my shares are
held in my
name?
Voting
over the Internet
Voting over the Internet is easy and fast and is available
24 hours a day. Read your proxy/voting instruction card and
follow the directions. You will be able to confirm that the
system has properly recorded your vote. Your vote will be
counted immediately, and there is no need to return your
proxy/voting instruction card.
Voting by
telephone
Voting by telephone is also simple and fast and is available
24 hours a day. Call the toll-free telephone number on your
proxy/voting instruction card and listen for further directions.
To respond to the questions, you must have a touch-tone phone
and will need your proxy/voting instruction card in hand. The
telephone voting system allows you to verify that the system has
properly recorded your vote. Your vote will be counted
immediately, and there is no need to return your proxy/voting
instruction card.
Voting by
mail
If you are a shareholder of record, you can save us expense by
voting over the Internet or by telephone. Alternatively, you can
vote by mail by completing, signing, dating and mailing the
enclosed proxy/voting instruction card in the postage-paid
return envelope provided.
Voting in
person at the meeting
If you plan to attend the Annual Meeting, you can vote in
person. To vote in person at the Annual Meeting, you will need
to bring with you to the Annual Meeting a valid,
government-issued photo identification, such as a drivers
license or passport, and evidence of your share ownership.
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How do I vote if
my shares are
held in street name?
Voting
over the Internet, by telephone or by mail
If your shares are held in the name of your broker, bank or
other nominee, you have the right to direct your broker, bank or
other nominee on how to vote, and you should vote your shares
using the method directed by your broker, bank or other nominee.
In addition to voting by mail, a large number of brokerage firms
and banks are participating in Internet or telephonic voting
programs. These programs provide eligible street
name shareholders the opportunity to vote over the
Internet or by telephone. Voting forms will provide instructions
for shareholders whose brokerage firms or banks are
participating in such programs.
Voting in
person at the meeting
If your shares are held in the name of your broker, bank or
other nominee and you plan to attend the Annual Meeting and to
vote in person, you should contact your broker, bank or other
nominee to obtain a brokers proxy and bring it with you to
the Annual Meeting, together with a valid, government-issued
photo identification, such as a drivers license or
passport, and your account statement or other evidence of your
share ownership.
Can I revoke my
proxy or change my vote?
As long as your shares are registered in your name, you may
revoke your proxy or change your vote at any time before your
shares are voted at the Annual Meeting. There are several ways
you can do this:
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By sending a written notice of revocation to our Secretary at
Harris Corporation, 1025 West NASA Boulevard, Melbourne,
Florida 32919;
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By duly signing and delivering a
proxy/voting
instruction card that bears a later date;
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By subsequently voting over the Internet or by telephone as
described above; or
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By attending the Annual Meeting and voting in person by ballot.
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If your shares are held in street name, you must contact your
broker, bank or other nominee to revoke your proxy or change
your vote.
What are my
voting choices and what is the
required vote on the matters proposed?
By giving us your proxy, you authorize Harris management to vote
your shares at the 2010 Annual Meeting or at any adjournments or
postponements thereof in the manner you indicate.
Proposal 1: Election
of Directors
With respect to the proposal to elect seven nominees for
director for a one-year term expiring at the 2011 Annual Meeting
of Shareholders, you may:
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Vote For the election of a nominee for director
named in this proxy statement;
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Vote Against the election of a nominee for director
named in this proxy statement; or
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Abstain from voting for one or more of the nominees
named in this proxy statement.
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Pursuant to our By-Laws and Corporate Governance Principles, the
voting standard for the election of our directors in uncontested
elections is a majority voting standard. In contested director
elections, the plurality standard will apply. We have nominated
seven directors for election at the 2010 Annual Meeting, and
because we did not receive advance notice under our By-Laws of
any shareholder nominees for director, the 2010 election of
directors is an uncontested election. To be elected in an
uncontested election, a director nominee must receive more
For votes than Against votes.
Abstentions and any broker non-votes will have no effect on the
election of directors because only votes cast For or
Against a nominee will be counted. If an incumbent
director nominee does not receive a greater number of
For votes than Against votes, he or she
must promptly tender his or her resignation following
certification of the vote. The Corporate Governance Committee
shall make a recommendation to the Board regarding action to be
taken with respect to such offer to resign. If the Board does
not accept the resignation, the nominee will continue to serve
until the next annual meeting and until his or her successor
shall be duly elected and qualified, or until his or her prior
resignation, death or removal. For additional information
regarding the majority voting standard, see Majority
Voting for Directors on page 23.
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Proposal 2:
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Ratification
of the Appointment of Independent Registered Public Accounting
Firm
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With respect to the proposal to ratify the appointment by our
Audit Committee of Ernst & Young LLP as our
independent registered public accounting firm for fiscal year
2011, you may:
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Vote For ratification;
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Vote Against ratification; or
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Abstain from voting on the proposal.
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The affirmative vote of a majority of the shares represented at
the Annual Meeting and entitled to vote on this proposal will be
required to ratify our Audit Committees appointment of
Ernst & Young LLP as our independent registered public
accounting firm for fiscal year 2011. Abstaining from voting on
this proposal will have the effect of a vote against
ratification of the appointment of our independent registered
public accounting firm. Any broker non-votes will have no effect
on the ratification of the appointment of our independent
registered public accounting firm.
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Proposal 3:
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Approval of
the Harris Corporation Annual Incentive Plan
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With respect to the proposal to approve the Harris Corporation
Annual Incentive Plan, you may:
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Vote For approval of the plan;
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Vote Against approval of the plan; or
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Abstain from voting on the proposal.
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The affirmative vote of a majority of the shares represented at
the Annual Meeting and entitled to vote on this proposal will be
required to approve the Harris Corporation Annual Incentive
Plan. Abstaining from voting on this proposal will have the
effect of a vote against approval of the Harris Corporation
Annual Incentive Plan. Any broker non-votes will have no effect
on the approval of the Harris Corporation Annual Incentive Plan.
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Proposal 4:
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Re-approval of
the Performance Measures for the Harris Corporation 2005 Equity
Incentive Plan
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With respect to the proposal to re-approve the performance
measures for the Harris Corporation 2005 Equity Incentive Plan,
you may:
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Vote For re-approval of the plan, for purposes of
compliance with Section 162(m) of the Internal Revenue Code;
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Vote Against re-approval of the plan, for purposes
of compliance with Section 162(m) of the Internal Revenue
Code; or
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Abstain from voting on the proposal.
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The affirmative vote of a majority of the shares represented at
the Annual Meeting and entitled to vote on this proposal will be
required to re-approve the Harris Corporation 2005 Equity
Incentive Plan. Abstaining from voting on this proposal will
have the effect of a vote against re-approval of the Harris
Corporation 2005 Equity Incentive Plan. Any broker non-votes
will have no effect on the re-approval of the Harris Corporation
2005 Equity Incentive Plan.
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Proposal 5:
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Shareholder
Proposal Requesting Approval of an Amendment to our By-Laws to
Require an Independent Chairman of the Board
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With respect to the shareholder proposal requesting approval of
an amendment to our By-Laws to require an independent chairman
of the board, you may:
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Vote For approval of the amendment;
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Vote Against approval of the amendment; or
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Abstain from voting on the proposal.
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The affirmative vote of a majority of the outstanding shares of
our common stock entitled to vote as of the record date of
August 27, 2010, or 64,509,942 shares of common stock
based on 129,019,883 outstanding shares of our common stock
entitled to vote as of August 27, 2010, will be required to
approve the amendment to our
By-Laws to
require an independent chairman of the board. Abstentions and
any broker non-votes will have the effect of a vote against
approval of the amendment to our By-Laws to require an
independent chairman of the board.
4
How do I vote
shares held in
the Harris Retirement Plan?
If you are a participant in the Harris Corporation Retirement
Plan (Retirement Plan) and you own shares of Harris
common stock through the Retirement Plan, the proxy/voting
instruction card sent to you may also serve as a voting
instruction card to the trustee of the Retirement Plan for all
shares of Harris common stock you own through the Retirement
Plan. If you do not provide voting instructions for such shares,
as directed by the terms of the Retirement Plan, those shares
will be voted by the trustee in the same proportion as the
shares for which other participants have timely provided voting
instructions.
How do I vote
shares held in the Harris
Dividend Reinvestment Plan?
If you are a participant in the Harris Dividend Reinvestment
Plan (DRIP) administered by The Bank of New York
Mellon, your proxy/voting instruction card covers the Harris
common stock held in your DRIP account. The Bank of New York
Mellon, as the DRIP administrator, is the shareholder of record
of Harris common stock owned through the DRIP and will not vote
those shares unless you provide it with instructions, which you
may do over the Internet, by telephone or by mail using your
proxy/voting instruction card.
What are the
Harris Boards voting
recommendations and what happens if I
return an unmarked proxy/voting
instruction card?
If you properly execute and return your
proxy/voting
instruction card with no votes marked, your shares will be voted
as recommended by the Board. The Boards recommendations
are set forth together with the description of each item in this
proxy statement. In summary, the Board unanimously recommends a
vote:
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FOR the election of all seven of the nominees for
director named in this proxy statement for a one-year term
expiring at the 2011 Annual Meeting of Shareholders (see
Proposal 1);
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FOR the ratification of the appointment by our Audit
Committee of Ernst & Young LLP as our independent
registered public accounting firm for fiscal year 2011
(see Proposal 2);
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FOR the approval of the Harris Corporation Annual
Incentive Plan (see Proposal 3);
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FOR the re-approval of the Harris Corporation 2005 Equity
Incentive Plan, for purposes of compliance with Section 162(m)
of the Internal Revenue Code (see Proposal 4); and
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AGAINST the shareholder proposal requesting approval of
an amendment to our By-Laws to require an independent chairman
of the board (see Proposal 5).
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Could other
matters be decided
at the meeting?
At the date of this proxy statement, our Board did not know of
any matters to be raised at the Annual Meeting other than those
referred to in this proxy statement and does not intend to bring
before the Annual Meeting any matter other than the proposals
described in this proxy statement. With respect to other matters
that may properly be brought before the Annual Meeting or any
adjournments or postponements thereof, your shares will be voted
at the discretion of the proxy holders.
How will my
shares be voted if I do not
provide instructions to my broker?
It is possible for a proxy to indicate that some of the shares
represented are not being voted with respect to certain
proposals. This occurs, for example, when a broker, bank or
other nominee does not have discretion under the New York Stock
Exchange (NYSE) rules to vote on a matter without
instructions from the beneficial owner of the shares and has not
received such instructions. In these cases, non-voted shares
will not be considered present and entitled to vote with respect
to that matter, although they may be considered present and
entitled to vote for other purposes and will be counted in
determining the presence of a quorum. Under NYSE rules, brokers,
banks or other nominees have discretionary voting power to vote
without receiving voting instructions from the beneficial owner
on routine matters, but not on
non-routine matters. Under the rules of the NYSE as
currently in effect, routine matters include, among other
things, the ratification of the appointment of an independent
registered public accounting firm. The proposal to ratify the
appointment of Ernst & Young LLP as our independent
registered public accounting firm is the only proposal set forth
in this proxy statement that is considered routine
under the NYSE rules. This means that if you hold your shares
through a broker,
5
bank or other nominee, and you do not provide voting
instructions by the tenth day before the Annual Meeting, your
broker, bank or other nominee has the discretion to vote your
shares on the proposal relating to the ratification of the
appointment of Ernst & Young LLP as our independent
registered public accounting firm for fiscal year 2011. Under
the rules of the NYSE, the proposal relating to the election of
the seven nominees for director named in this proxy statement,
the proposal relating to the approval of the Harris Corporation
Annual Incentive Plan, the proposal relating to the re-approval
of the performance measures for the Harris Corporation 2005
Equity Incentive Plan and the shareholder proposal requesting
approval of an amendment to our By-Laws to require an
independent chairman of the board are not routine
and your broker, bank or other nominee will not have the
discretion to vote your shares on such proposals.
What does it mean
if I receive more
than one proxy/voting instruction card?
If you receive more than one proxy/voting instruction card, it
means you own shares in multiple accounts with brokers and/or
our transfer agent. Please vote all of these shares. We
recommend that you contact your broker and/or our transfer agent
to consolidate as many accounts as possible under the same name
and address. Our transfer agent is BNY Mellon Shareowner
Services, which may be reached by telephone at
1-888-261-6777
or over the Internet at www.bnymellon.com/shareowner/isd.
Who pays for the
solicitation of proxies?
We actively solicit proxy participation. We will bear the
cost of soliciting proxies, including the cost of preparation,
assembly, printing and mailing. In addition to this proxy
statement, we request and encourage brokers, custodians,
nominees and others to supply proxy materials to shareholders,
and, upon request, we will reimburse them for their expenses.
Our officers, directors and employees may, by letter, telephone,
electronic mail or in person, make additional requests for the
return of proxies, although we do not reimburse our own
officers, directors or employees for soliciting proxies. We also
have engaged Georgeson Inc. to assist in the solicitation of
proxies for a fee of $9,000 plus reimbursement of
out-of-pocket
expenses. We also will reimburse brokers and other custodians,
nominees and fiduciaries for forwarding proxy and solicitation
materials to our shareholders in accordance with the fee
schedule approved by the NYSE.
May I access this
years proxy statement and
annual report over the Internet?
The notice of Annual Meeting, this proxy statement and our 2010
Annual Report to Shareholders, which includes our Annual Report
on Form 10-K for the fiscal year ended July 2, 2010,
are available by accessing our website at
www.harris.com/proxy/2010.
Will there be a
webcast of the
Annual Meeting of Shareholders?
Our 2010 Annual Meeting of Shareholders will be webcast live on
October 22, 2010. You may visit the Investor Relations
section of our website at www.harris.com/investors to
access the webcast of the Annual Meeting. The webcast will
enable you to listen only. You will not be able to ask questions
or vote your shares via the webcast. A replay of the webcast
also will be available on our website through November 22,
2010. The information contained on our website is not
incorporated by reference into this proxy statement.
Who will tabulate
and oversee the vote?
Representatives of our transfer agent, BNY Mellon Shareowner
Services, will tabulate and oversee the vote.
Do I need an
admission ticket to
attend the Annual Meeting?
No ticket is required for admission to the Annual Meeting. Since
seating is limited, admission to the meeting will be on a
first-come, first-served basis. If you attend, please note that
you may be asked to present a valid, government-issued photo
identification, such as a drivers license or passport. For
the safety of attendees, all packages, boxes, handbags and
briefcases are subject to inspection.
Where can I find
the voting results
of the Annual Meeting?
We intend to announce the preliminary voting results at the
Annual Meeting and to publish final results in a current report
on Form 8-K, which we will file with the Securities and
Exchange Commission (the SEC) and make available
through the investor relations section of our website at
www.harris.com/investors within four business days of the
Annual Meeting (or if final results are not available at that
time, within four business days of the date on which final
results become available).
6
Our Restated Certificate of Incorporation provides that our
Board shall consist of not less than eight or more than thirteen
directors, the exact number of directors to be determined from
time to time by the Board. The authorized number of directors is
presently fixed at eleven. Prior to our 2008 Annual Meeting of
Shareholders, our Restated Certificate of Incorporation
classified our Board into three classes of approximately equal
size with three-year terms of office ending in different years.
At the 2008 Annual Meeting, our shareholders approved an
amendment to our Restated Certificate of Incorporation that
provides for the phased-in declassification of our Board of
Directors and the annual election of our directors commencing
with the class of directors standing for election at the 2009
Annual Meeting. As a result, the class of directors elected at
the 2009 Annual Meeting, together with the class of directors
whose three-year terms are due to expire at the 2010 Annual
Meeting, are standing for election for one-year terms expiring
at the 2011 Annual Meeting of Shareholders. The class of
directors whose three-year terms are due to expire at the 2011
Annual Meeting of Shareholders will continue to hold office
until the end of the terms for which they have been elected and
may stand for election for one-year terms thereafter. Commencing
at the 2011 Annual Meeting, all directors will be elected on an
annual basis.
This year, the terms of Ms. Kenne and Messrs. Lance,
Dattilo, Growcock, Rickard, Stoffel and Swienton expire at the
2010 Annual Meeting. Based upon the recommendation of our
Corporate Governance Committee, Ms. Kenne and
Messrs. Lance, Dattilo, Growcock, Rickard, Stoffel and
Swienton each have been nominated by the Board for a new
one-year term expiring at the 2011 Annual Meeting of
Shareholders. The current terms of our other directors also will
expire at the 2011 Annual Meeting of Shareholders. In accordance
with our Restated Certificate of Incorporation, a director holds
office until the Annual Meeting of Shareholders for the year in
which that directors term expires, and until that
directors successor is elected and qualified, subject,
however, to his or her prior death, resignation, retirement,
disqualification or removal from office. Vacancies may be filled
by the remaining directors.
Proxies will be voted for the election of each of Ms. Kenne and
Messrs. Lance, Dattilo, Growcock, Rickard, Stoffel and Swienton
to serve for a one-year term expiring at the 2011 Annual Meeting
of Shareholders, unless otherwise specified in the proxy/voting
instruction card or Internet or telephone voting instructions.
Each of the nominees has consented to stand for election. If any
nominee becomes unavailable for election, which is not currently
anticipated by us, proxies instructing a vote for that nominee
may be voted for a substitute nominee selected by our Board or,
in lieu thereof, our Board may reduce the number of directors.
None of our directors, including each of the nominees, is
related to any other director, or to any executive officer of
Harris or its subsidiaries, by blood, marriage or adoption.
Biographical summaries of the nominees and of our continuing
directors, as well as information on their experience,
qualifications, attributes and skills that our Board has
determined support their nomination and service as a director of
Harris, appear on subsequent pages, and data with respect to the
number of shares of our common stock beneficially owned by each
of them as of July 30, 2010 is set forth in the table on
page 27.
The SEC has approved changes to the NYSE rules that have the
effect of prohibiting brokers, banks or other nominees from
voting in favor or against director nominees. We, therefore,
urge you to vote your shares.
7
Howard
L. Lance, 54, is our
Chairman, President and Chief Executive Officer. Mr. Lance
joined Harris in January 2003 as President and Chief Executive
Officer and was appointed Chairman in June 2003. Prior to
joining Harris, Mr. Lance was President of NCR Corporation,
an information technology services provider, and Chief Operating
Officer of its Retail and Financial Group from July 2001 until
October 2002. Prior to joining NCR, he spent 17 years with
Emerson Electric Company, an electronic products and systems
company, where he held increasingly senior management positions
with different divisions of the company. In 1999, Mr. Lance
was named Executive Vice President with operating responsibility
for its Electronics and Telecommunications businesses. Earlier,
Mr. Lance held sales and marketing positions with the
Scott-Fetzer Company and Caterpillar, Inc.
Mr. Lance has been a member of
our Board since January 2003.
Mr. Lance also is a director of
Eastman Chemical Company (since 2005) and Stryker Corporation
(since 2009) and serves on the Board of Governors of the
Aerospace Industries Association and on the Board of Trustees of
the Manufacturers Alliance/MAPI, Inc., the Florida Council of
100 and the Florida Institute of Technology. Mr. Lance served as
a director of Harris Stratex Networks (now Aviat Networks, Inc.)
from 2007 to 2009.
Qualifications
Statement: The
Board nominated Mr. Lance as director based upon his
current role as our Chief Executive Officer and his extensive
leadership and management skills and his knowledge of our
businesses, operations, customers, capabilities and resources.
Mr. Lances service with us as well as his prior
service as a senior executive officer of large, public
companies, including more than 17 years with Emerson
Electric Company, and long-term overseas assignments, provides
him extensive knowledge of complex strategic, operational,
management, regulatory, financial, human resources and
governance issues faced by a large public company. This
experience brings our Board important knowledge, expertise and
insight related to strategic planning, supply chain, business
development, sales and marketing, international business,
corporate finance, regulatory challenges, domestic and
international mergers and acquisitions, accounting and internal
controls, enterprise risk management, human resources and talent
management, and investor relations. His engineering and finance
education and experience also have provided him with expertise
relevant to many of our businesses and our overall capital
structure and financial processes. In addition,
Mr. Lances experience serving on the boards of other
large public companies has broadened his experience and
knowledge of important corporate governance and executive
compensation matters.
Thomas
A. Dattilo, 59, is an
advisor and consultant to various private investment firms. He
served as a Senior Advisor for Cerberus Operations and Advisory
Company, LLC, a unit of Cerberus Capital Management, a private
investment firm, from June 2007 until June 2009. Prior to
joining Cerberus, Mr. Dattilo was most recently Chairman,
President and Chief Executive Officer of Cooper Tire &
Rubber Company, a company that specializes in the design,
manufacture and sale of passenger and truck tires.
He joined Cooper in January 1999 as
President and Chief Operating Officer and was Chairman,
President and Chief Executive Officer from April 2000 until
August 2006. Prior to joining Cooper, he held senior positions
with Dana Corporation. His last position with Dana was President
of its sealing products group.
Mr. Dattilo has been a member of
our Board since August 2001 and is a member of the Corporate
Governance Committee and the Management Development and
Compensation Committee.
Mr. Dattilo also is a director of
Alberto-Culver Company (since 2006). He is past Chairman of the
Rubber Manufacturers Association and past Chairman of the Board
of Trustees of the Manufacturers Alliance. Mr. Dattilo
served as a director of Cooper Tire & Rubber Company from
1999 to 2006.
Qualifications
Statement: Mr. Dattilos
prior service as a senior executive of large, publicly traded
companies, including as a former Chairman, President and Chief
Executive Officer of Cooper Tire & Rubber Company and
as an executive of a manufacturing company, provides him with
extensive knowledge of complex operational, management,
financial and governance issues faced by a large public company
with international operations. This experience brings our Board
important knowledge and expertise related to global supply chain
and distribution, mergers and acquisitions, lean manufacturing
and related initiatives, international operations, human
resources and talent management, accounting and internal
controls, and investor relations. His more recent experience as
an advisor to private investment firms also provides him with
additional experience and knowledge related to strategic
planning, capital raising, mergers and acquisitions, and
economic analysis. Based on his senior executive experience and
his service on other public company boards, Mr. Dattilo
also brings to our Board a strong understanding of public
company governance and executive compensation.
8
Terry
D. Growcock, 64, is
retired Chairman of the Board and Chief Executive Officer of The
Manitowoc Company, Inc., a diversified industrial manufacturer
of cranes and foodservice equipment and a provider of ship
building and ship repair services. He joined Manitowoc in 1994
as Executive Vice President and General Manager of Manitowoc
Ice. He became President of Manitowoc Foodservice Group in 1995
and served in that capacity until his promotion to President,
Chief Executive Officer and a member of the Board of Directors
of The Manitowoc Company, Inc. in 1998. He was named Chairman of
the Board of Directors and Chief Executive Officer of Manitowoc
in October 2002. Mr. Growcock retired as Chief Executive
Officer of Manitowoc in May 2007 and as Chairman of the Board in
December 2008.
Mr. Growcock has been a member
of our Board since August 2005 and is a member of the Business
Conduct and Corporate Responsibility Committee and the
Management Development and Compensation Committee.
Mr. Growcock also is a
director of Carlisle Companies Incorporated (since 2008) and
Harsco Corporation (since 2008) and an advisory member of the
Kelley School of Business at Indiana University.
Mr. Growcock served as a director of The Manitowoc Company,
Inc. from 1998 to 2008.
Qualifications
Statement: Mr. Growcocks
prior service as a senior executive of The Manitowoc Company,
Inc., including as former Chairman, President and Chief
Executive Officer and as an executive in several of
Manitowocs business units, provides him with extensive
knowledge of complex operational, management, financial and
governance issues faced by a large industrial manufacturing
company with international operations. This experience brings
our Board important knowledge and expertise related to domestic
and international merger and acquisition transactions, joint
ventures and strategic alliances, international sales, marketing
and operations, global procurement, lean manufacturing and
related initiatives, human resources and talent management,
global compliance, and strategic planning. He also has
experience with government projects and the government
procurement process as well as international trade.
Mr. Growcock also has gained a strong understanding of
public company governance and executive compensation through his
senior executive experience and his service on several public
company boards.
Leslie
F. Kenne, Lieutenant
General USAF (Ret.), 62, retired in September 2003 from the U.S.
Air Force, where she had most recently been Deputy Chief of
Staff for Warfighting Integration at Air Force headquarters in
Washington, D.C. Previously, she commanded the Electronic
Systems Center at Hanscom Air Force Base in Massachusetts. She
also directed a number of major procurement programs, including
the F-16 and
Joint Strike Fighter programs. Following her retirement from the
U.S. Air Force, Ms. Kenne is a private independent
consultant for various defense companies and/or agencies.
Ms. Kenne has been a member of
our Board since April 2004 and is Chairperson of the Business
Conduct and Corporate Responsibility Committee and a member
of the Corporate Governance Committee.
Ms. Kenne also is a director of Unisys Corporation (since
2006). Ms. Kenne served as a director of EDO Corporation
from 2004 to 2007.
Qualifications
Statement: Ms. Kenne
had a distinguished career in the U.S. Air Force prior to
joining our Board in 2004. Her responsibility as a senior Air
Force officer provides her with experience managing significant
operating budgets and addressing complex operational and
strategic issues and with first-hand experience on large
government projects and the government procurement process.
Ms. Kennes experience also provides her with an
appreciation for the complexities of both the U.S. Military
and the defense industry, which brings our Board important
knowledge and expertise in these areas and makes her a valuable
strategic advisor to our U.S. Government businesses. Her
experience also brings to our Board important knowledge and
expertise regarding program development, resourcing and other
aspects of managing major Department of Defense programs as well
as operation and systems engineering. Ms. Kennes
recent experience serving as a compliance monitor for large
organizations also brings to our Board an in-depth appreciation
and understanding of business conduct and compliance matters
that is particularly relevant for a U.S. Government
contractor. Ms. Kenne also has gained an understanding of
public company governance and operations through her service on
several public company boards.
9
David
B. Rickard, 63, retired
from CVS Caremark Corporation, a retail pharmacy chain and
provider of healthcare services and pharmacy benefits
management, in December 2009. Prior to his retirement,
Mr. Rickard was the Executive Vice President, Chief
Financial Officer and Chief Administrative Officer. He held this
position since joining CVS in September 1999. Prior to joining
CVS, he was Senior Vice President and Chief Financial Officer of
RJR Nabisco Holdings Corporation from March 1997 to
August 1999. Previously, he was Executive Vice President of
International Distillers and Vintners Americas.
Mr. Rickard has been a member
of our Board since October 2001 and is Chairperson of the
Audit Committee and a member of the Finance Committee.
Mr. Rickard also is a director of
Jones Lang LaSalle Incorporated (since 2007) and Dollar General
Corporation (since 2010), and chairs the Audit Committee of each
of these boards.
Qualifications
Statement: Mr. Rickards
prior service as the Chief Financial Officer and the Chief
Administrative Officer of CVS Caremark Corporation and his more
than 37 years experience in various businesses adds
important experience to our Board in terms of corporate finance,
strategic planning, banking relationships, operations, complex
information technology and other systems, acquisition evaluation
and integration, enterprise risk management, and investor
relations. His finance education and experience also have
provided him with knowledge and expertise particularly relevant
to our capital structure and related credit and finance matters.
His experience with complex financial and accounting functions,
including service as a chief financial officer for complex
organizations and as the chairman of the audit committees of two
other publicly traded companies, contributes perspectives on the
functioning of audit committees and internal control-related
matters that are beneficial to our Board and Audit Committee.
Based on this experience, our Board also has determined that
Mr. Rickard is an Audit Committee financial expert. Based
on his senior executive experience and his service on other
public company boards, Mr. Rickard also brings us an
understanding of public company governance.
Dr.
James C. Stoffel, 64, is
an Executive Partner of Trillium Group, LLC and a senior advisor
to other private equity companies. He was an executive at
Eastman Kodak Company, a film and digital imaging company, until
April 2005, having served as Senior Vice President, Chief
Technical Officer since 2000, and Director of Research and
Development, after joining the firm in 1997 as Vice President,
Director Electronic Imaging Products Research and Development.
Prior to joining Kodak, he was with Xerox Corporation for more
than 20 years, serving as Vice President of Corporate
Research and Technology, Vice President and General Manager of
the Advanced Imaging Business Unit, Vice President and Chief
Engineer, as well as other executive positions.
Dr. Stoffel has been a member
of our Board since August 2003 and is a member of the Finance
Committee and the Management Development and Compensation
Committee.
Dr. Stoffel also is a director
of Aviat Networks, Inc. (since 2007) and currently serves as
Aviats Lead Independent Director. He is a trustee of the
George Eastman House museum. He also serves on the Advisory
Board for Research and Graduate Studies at the University of
Notre Dame and is Chairman of the advisory board of ASTRI, Hong
Kong.
Qualifications
Statement: Dr. Stoffels
prior service as a senior executive of large, publicly traded,
technology-driven companies, including as a Chief Technical
Officer and Director of Research and Development at Kodak
Company, and his more than 30 years experience focused on
technology development, provide him with an extensive knowledge
of complex technical research and development projects,
management, financial and governance issues faced by a large
public company with international operations. This experience
brings our Board important knowledge and expertise related to
research and development, new product introductions, strategic
planning, manufacturing, operations, and corporate finance. He
also provides the Board with experience and perspective related
to classified programs. His more recent experience as an advisor
to private equity firms also provides him with additional
experience and knowledge related to strategic planning, capital
raising, mergers and acquisitions, and economic analysis. His
scientific and engineering education and training also have
provided him with knowledge and experience relevant to many of
our businesses. Dr. Stoffel also has gained an
understanding of public company governance and executive
compensation through his service on public company boards,
including as a lead independent director.
10
Gregory
T. Swienton, 60, is
Chairman and Chief Executive Officer of Ryder System, Inc., a
logistics and transportation services company. He joined Ryder
in June 1999 as President and Chief Operating Officer, and
was named Chief Executive Officer in November 2000 and Chairman
in May 2002. Prior to joining Ryder, he was Senior Vice
President-Growth Initiatives of Burlington Northern Santa Fe
Corporation (BNSF). He held senior positions with
BNSF and the former Burlington Northern Railroad from 1994 to
1999, and various executive and management positions with DHL
Worldwide Express from 1982 to 1994.
Mr. Swienton has been a member of
our Board since February 2000 and is Chairperson of the Finance
Committee and a member of the Audit Committee.
In addition to being a director for
Ryder System, Inc. (since 1999), he also is on the Board of
Trustees of St. Thomas University in Miami, Florida.
Qualifications
Statement: Mr. Swientons
service as a senior executive of large, publicly-traded
companies, including as Ryder System, Inc.s Chairman and
Chief Executive Officer and previously as its President and
Chief Operating Officer, and his more than 35 years
experience in large, global businesses, including long-term
overseas assignments, provides him with extensive knowledge of
complex strategic, operational, financial, management and
governance issues faced by a large, public company. This
experience brings our Board important knowledge and expertise in
terms of supply chain, logistics, domestic and international
operations, business development, corporate finance, banking,
human resources and talent management, accounting and internal
controls, safety management, enterprise risk management, complex
information technology, and investor relations. His finance
education and experience also have provided him with knowledge
and expertise particularly relevant to our capital structure and
related credit and finance matters. With more than 10 years
of service on our Board and a number of its committees,
Mr. Swienton also brings to our Board significant
institutional knowledge and perspective.
Recommendation
Regarding Proposal 1
To be elected in an uncontested election of directors, a nominee
must receive more For votes than Against
votes. Abstentions and any broker non-votes will have no effect
on the election of directors because only votes cast
For or Against a nominee will be counted.
Our Board of Directors unanimously recommends that you vote
FOR the election of each of the nominees in this
uncontested election of directors.
11
Biographical summaries of our
current directors whose terms continue to run until the 2011
Annual Meeting of Shareholders, as well as information on their
experience, qualifications, attributes and skills that our Board
has determined support their service as a director of Harris,
appear below.
Terms Expiring in
2011
Lewis
Hay III, 54, is Chairman
and Chief Executive Officer of NextEra Energy, Inc. (formerly
FPL Group, Inc.), one of the nations leading
electricity-related services companies and the largest renewable
energy generator in North America. He was elected President and
Chief Executive Officer in June 2001 and Chairman of the Board
in January 2002. Mr. Hay also is Chairman of NextEra
Energys two primary subsidiaries, Florida
Power & Light Company and NextEra Energy Resources,
LLC. Mr. Hay relinquished the title of President of NextEra
Energy in December 2006 and Chief Executive Officer of Florida
Power & Light Company in July 2008. He joined NextEra
Energy as Vice President, Finance and Chief Financial Officer in
1999 and in 2000 was appointed President of NextEra Energy
Resources LLC.
Mr. Hay has been a member of
our Board since February 2002 and is Chairperson of the
Corporate Governance Committee and a member of the Audit
Committee.
In addition to being a director of
NextEra Energy, Inc. (since 2001), Mr. Hay is a director of
Capital One Financial Corporation (since 2003) and the Institute
of Nuclear Power Operations. He is a member of the Deans
Advisory Council at Carnegie Mellon Universitys Tepper
School of Business, the Business Roundtable, and the Florida
Council of 100.
Qualifications
Statement: Mr. Hays
service as a senior executive of a large, publicly traded
company, including as NextEra Energy, Inc.s Chairman and
Chief Executive Officer and previously as its Chief Financial
Officer, and his prior experience as a chief financial officer
of another large company, as well as his nine years of
experience as a strategy consultant, provide him with extensive
knowledge of complex strategic, operational, management,
regulatory, financial and governance issues faced by a large
public company. This experience brings our Board important
knowledge and expertise related to strategic planning, capital
raising, financial planning, enterprise risk management,
accounting and internal controls, mergers and acquisitions, and
investor relations. His science and engineering education and
training also have provided him with knowledge and experience
relevant to some of our businesses. Mr. Hay also brings to
us a strong understanding of executive compensation and public
company governance as he serves on the boards of several
publicly-held companies.
Karen
Katen, 61, is a senior
advisor to Essex Woodlands Health Ventures, a healthcare-based
venture capital firm. She joined Essex Woodlands in October
2007. Ms. Katen recently was Chairman of the Pfizer
Foundation. Ms. Katen retired in March 2007 as Vice
Chairman of Pfizer Inc., a research-based, global pharmaceutical
company. Ms. Katen joined Pfizer in 1974 and held a series
of management positions including serving as President of Pfizer
Human Health, the companys principal operating group.
Ms. Katen has been a member of
our Board since December 1994 and is a member of the Business
Conduct and Corporate Responsibility Committee and the Corporate
Governance Committee.
Ms. Katen also is a director
of The Home Depot, Inc. (since 2007) and Air Liquide (since
2008) and a member of the Takeda Advisory Board. In addition,
she serves on the Catalyst Board, the RAND Corporations
Health Board of Advisors and ARMGO Pharma, Inc.s board of
directors. Ms. Katen is a trustee for the University of Chicago
and is a council member of the Booth Graduate School of Business
at the University of Chicago. Ms. Katen served as a
director of General Motors Corporation from 1997 to 2009.
Qualifications
Statement: Ms. Katens
prior service as a senior executive officer of Pfizer Inc.,
including as Vice Chairman, as President of Pfizers
principal operating group and as an executive in other
operations, provides her with extensive knowledge of complex
strategic, operational, management, regulatory, research and
development, financial and governance issues faced by a large
public company with international operations. This experience
brings our Board important knowledge and expertise related to
strategic planning, supply chain, marketing, research and
development, new product introductions, operations, human
resources, international trade, regulatory challenges,
enterprise risk management, mergers and acquisitions, and
investor relations. In addition, Ms. Katen brings our Board
a wide range of experience as a board member of some of the
largest
U.S.-based
companies, including extensive experience with governance and
compliance matters. With more than 16 years of service on
our Board and a number of its committees, Ms. Katen also
brings to our Board significant institutional knowledge and
perspective.
12
Stephen
P. Kaufman, 68, has been
a Senior Lecturer of Business Administration at the Harvard
Business School since January 2001. He is a retired Chairman and
Chief Executive Officer of Arrow Electronics, Inc., a
distributor of semiconductors, peripherals and components. He
became President and Chief Operating Officer of Arrow in 1985,
Chief Executive Officer in 1986, and Chairman in 1994. He
retired as Chief Executive Officer in June 2000 and reassumed
that position in June 2002 on an interim basis until
September 2002. Previously, Mr. Kaufman was a consultant
for McKinsey & Company for ten years.
Mr. Kaufman has been a member
of our Board since December 1999 and is Chairperson of the
Management Development and Compensation Committee and a member
of the Finance Committee.
Mr. Kaufman also is a director
of
KLA-Tencor
Corporation (since 2002) and serves on the Board of Overseers of
the Beth Israel Deaconess Hospital and WGBH Public Television.
Mr. Kaufman served as a director of Thermo Fischer
Scientific Inc. from 2007 to 2010, Freescale Semiconductor, Inc.
from July 2004 to December 2006 and again from July 2007 to
November 2009, Arrow Electronics, Inc. from 1984 to 2003 and
Polaroid Corporation from 1997 to 2001.
Qualifications
Statement: Mr. Kaufmans
prior service as a senior executive of Arrow Electronics, Inc.,
including as former Chairman and Chief Executive Officer as well
as Chief Operating Officer, together with his experience as a
strategy consultant, provides him with extensive knowledge of
complex strategic, operational, management, financial and
governance issues. This experience brings our Board important
knowledge and expertise related to strategic planning, executive
compensation, capital raising, financial planning, domestic and
international mergers and acquisitions, global procurement and
distribution, and human resources and talent management. His
more recent experience as a Senior Lecturer at the Harvard
Business School also provides him with insight on evolving
business development techniques and trends. In addition,
Mr. Kaufman brings our Board a wide range of experience,
including extensive experience in governance and executive
compensation matters, based upon more than 25 years of
service on public company boards. With more than 10 years
of service on our Board and a number of its committees,
Mr. Kaufman also brings to our Board significant
institutional knowledge and perspective.
Hansel
E. Tookes II, 62,
retired from Raytheon Company, a company engaged in defense and
government electronics, space and airborne systems, information
technology, technical services and business and special mission
aircraft, in December 2002. He joined Raytheon in September 1999
as President and Chief Operating Officer of its Raytheon
Aircraft Company subsidiary, a commercial, military and regional
aircraft manufacturing company. He was appointed Chief Executive
Officer of Raytheon Aircraft Company in January 2000 and
Chairman in August 2000. He became President of Raytheon
International in May 2001. Prior to joining Raytheon in 1999, he
served United Technologies Corporation as President of its Pratt
& Whitney Large Military Engines Group since 1996. He
joined United Technologies Corporation in 1980 and held a
variety of senior leadership positions. Mr. Tookes was a
Lieutenant Commander and pilot in the U.S. Navy and later served
as a commercial pilot with United Airlines.
Mr. Tookes has been a member of our
Board since April 2005 and is a member of the Audit Committee
and the Business Conduct and Corporate Responsibility Committee.
Mr. Tookes also is a director of
BBA Aviation plc (since 2007), Corning Incorporated (since
2001), NextEra Energy, Inc. (since 2005) and Ryder System, Inc.
(since 2002). He is also Vice Chairman of the United Negro Fund
Special Programs Corporation.
Qualifications
Statement: Mr. Tookes
prior service as a senior executive of large international
public aerospace and defense companies, including as Chief
Executive Officer, President and Chief Operating Officer of
Raytheon Aircraft Company and his prior management and
leadership positions at Pratt & Whitney, adds
important experience to our Board in terms of operations,
manufacturing, regulatory issues, performance excellence, global
compliance, business development, technology-driven business
environment, accounting and internal controls, and enterprise
risk management. He also has extensive experience on large
aerospace and defense government projects and the government
procurement process, including experience with major
U.S. Department of Defense programs, which brings our Board
important knowledge and experience in these areas and makes him
a valuable strategic advisor to our U.S. Government
businesses. His science, engineering and business education and
training also have provided him with knowledge and experience
relevant to many of our businesses. In addition, he brings to
our Board significant and broad public company governance
experience, including service on several other public company
boards and audit committees.
13
CORPORATE
GOVERNANCE AND BOARD MATTERS
Board of
Directors
Our business, property and affairs are managed under the
direction of our Board. Members of the Board are kept informed
of our business through discussions with the Chairman and
officers, by reviewing materials provided to them or requested
by them, by visiting our offices and plants and by participating
in meetings of the Board and its committees.
Corporate
Governance Principles
Our Board has long been focused on and committed to responsible
and effective corporate governance. Our Board has adopted
Corporate Governance Principles that trace their history to 1960
and that have evolved and been revised over time. Our Corporate
Governance Committee is responsible for overseeing the Corporate
Governance Principles and reporting and making recommendations
to our Board concerning corporate governance matters. Our
Corporate Governance Principles address matters including Board
composition, director independence, responsibilities of our Lead
Independent Director, selection of Board nominees, Board
membership criteria, majority voting for directors, director
compensation, mandatory retirement, meetings, executive sessions
of non-management directors, evaluation of the performance of
our Chief Executive Officer, committees, succession planning,
director responsibilities, orientation and continuing education,
and self-evaluation of the Board and Board committees. A copy of
our Corporate Governance Principles is available on the
Corporate Governance section of our website at
www.harris.com/harris/cg/.
Director
Independence
The NYSE listing standards and our Corporate Governance
Principles require us to have a board of directors with at least
a majority of independent directors. Our Board has, and has had
for many years, a substantial majority of independent directors.
Our Board has adopted Director Independence Standards to assist
in the evaluation of the independence of each of our directors.
A copy of our Director Independence Standards is available on
the Corporate Governance section of our website at
www.harris.com/harris/cg/.
For a director to be considered independent, our Board must
affirmatively determine that a director does not have any direct
or indirect material relationship with us, other than as a
director, that will impair the directors independence. A
director will not be considered independent if, within the
preceding three years:
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the director was an employee, or an immediate family member of
the director was employed as an executive officer, of Harris; or
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the director, or an immediate family member of the director,
received more than $120,000 during any twelve-month period in
direct compensation from Harris, other than director and
committee fees and pension or other forms of deferred
compensation for prior service (provided that such compensation
is not contingent in any way on continued service with Harris);
except that compensation received by an immediate family member
of the director for services as a non-executive employee of
Harris need not be considered in determining independence under
this test; or
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the director was affiliated with or employed by, or an immediate
family member of the director was affiliated with or employed in
a professional capacity by, a present or former internal or
external auditor of Harris; or
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the director, or an immediate family member of the director, was
employed as an executive officer of another company where any of
Harris present executives serve or served on that
companys compensation committee; or
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the director was an executive officer of or employed by another
company (other than a charitable organization), or an immediate
family member of the director was employed as an executive
officer of such company, that makes payments to, or receives
payments from, Harris for property or services in an amount
which, in any single fiscal year, exceeds the greater of
$1 million or 2% of such other companys consolidated
gross revenues.
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Our Board has determined that the following relationships will
not be considered to be material relationships that would impair
a directors independence:
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if a director of Harris is an executive officer or an employee,
or an immediate family member of a director of Harris is an
executive officer, of another company that makes payments to, or
receives payments from, Harris for property or services in an
amount which, in any single fiscal year, does not exceed the
greater of (a) $1 million or (b) 2% of the
consolidated gross annual revenues of such other company, as
applicable; or
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if a director of Harris or an immediate family member of a
director of Harris is an executive officer of another company
which is indebted to Harris, or to which Harris is indebted, and
the total amount of either companys indebtedness is less
than 2% of the consolidated assets of the company wherein the
director or immediate family member serves as an executive
officer; or
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if a director of Harris is an executive officer of another
company in which Harris owns a common stock interest, and the
amount of the common stock interest is less than 5% of the total
shareholders equity of such other company; or
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if a director of Harris, or the spouse of a director of Harris,
serves as a director, officer or trustee of a charitable
organization, and within the preceding three years, Harris
discretionary contributions to the organization in any single
fiscal year are less than the greater of
(a) $1 million or (b) 2% of that
organizations gross annual revenues; or
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the ownership of Harris shares by a director or a
directors immediate family members.
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Pursuant to our Corporate Governance Principles, the Board
undertook its annual review of director independence in August
2010, which included a review of the responses of the directors
to questions regarding each directors commercial,
industrial, banking, consulting, legal, accounting, charitable
and family relationships, and discussions with the directors and
nominees. Based upon the NYSE listing standards and our Director
Independence Standards, our Board has affirmatively determined
in its business judgment that all of our directors (including
each nominee for election), with the exception of
Mr. Lance, our Chairman, President and Chief Executive
Officer, are independent and have no direct or indirect material
relationship with Harris, other than as a director, that will
impair the directors independence.
Related Person
Transaction Policy
In August 2007, our Board approved a written policy and
procedures for the review, approval and ratification of
transactions among Harris and our directors, executive officers
and their related interests. This policy supplements the
conflicts of interest policies set forth in our Standards of
Business Conduct and our Directors Standards of Business
Conduct and our other internal procedures. Under the policy, all
related person transactions (as defined in the policy) are to be
reviewed by the Corporate Governance Committee. The Corporate
Governance Committee may approve or ratify related person
transactions if, in its business judgment, it determines that
the transaction is in, or is not inconsistent with, the best
interests of Harris and its shareholders. This may include
situations where we provide or receive products or services to
or from related persons on an arms-length basis on terms
comparable to those provided to or received from unrelated third
parties. Any director who participates in or is the subject of
an existing or potential related person transaction may not
participate in the approval or ratification decision-making
process of the Corporate Governance Committee.
Under the policy, and consistent with SEC regulations, a related
person transaction is any transaction, arrangement or
relationship in which Harris was, is or will be a participant,
where the amount involved exceeds $120,000 and in which a
related person had, has or will have a direct or indirect
material interest. A related person includes any of our
directors, nominees for director or executive officers, any
person who is known to be the beneficial owner of more than 5%
of any class of our common stock, an immediate family member of
any person described above and any firm, corporation or other
entity controlled by any person described above. The policy
requires each director and executive officer annually to
complete a questionnaire to identify their related interests and
persons, and to notify us of changes in that
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information. Before entering into a proposed related person
transaction, the related person or involved business area of
Harris is requested to notify our Secretary of the facts and
circumstances of the potential transaction. If the Secretary
determines the proposed transaction is a related person
transaction, it shall be submitted to the Corporate Governance
Committee for review and consideration. A related person
transaction entered into without the Corporate Governance
Committees prior approval will not violate this policy or
be unenforceable, so long as the transaction is brought to the
Corporate Governance Committee promptly after it is entered into
or after it becomes apparent that the transaction is covered by
this policy and is ratified by the Corporate Governance
Committee.
Based on its holdings reported on a Schedule 13G/A filed
with the SEC, Blackrock, Inc. beneficially owned more than five
percent of our common stock as of July 30, 2010. Blackrock,
Inc. and certain of its affiliates provided asset management
services in fiscal 2010 for our Retirement Plan for which
participants paid or will pay approximately $212,640.
Board Leadership
Structure and
Lead Independent Director
Board Leadership Structure. Our Boards
leadership is currently structured as follows: a combined
Chairman of the Board and Chief Executive Officer; a Lead
Independent Director with well-defined duties that support the
Boards oversight responsibilities; a robust committee
structure comprised solely of independent directors; and an
engaged and independent Board that conducts candid and
constructive discussions and deliberations. The Board believes
that its current leadership structure provides independent board
leadership and oversight while also benefiting from having
Mr. Lance, our Chief Executive Officer, serve as Chairman
of the Board. Mr. Lances employment agreement
provides that if the Board removes or fails to re-elect
Mr. Lance as Chairman of the Board or Chief Executive
Officer, he shall be entitled to treat such failure as
termination of his employment for good reason and
would be entitled to a severance payment as described in the
Potential Payments Upon Termination or a Change in
Control section of this proxy statement beginning on
page 58. Our independent directors believe that
Mr. Lances in-depth knowledge of our businesses and
its challenges, as well as his extensive understanding of our
day-to-day operations and his ability to provide insight and
direction on important strategic initiatives, make him well
positioned to chair regular Board meetings and to bring key
business and stakeholder issues to the Boards attention.
The independence of our Board, together with the Lead
Independent Director structure, the ability of independent
directors to participate in the agenda-setting process,
regularly scheduled executive sessions of independent directors
and the directors access to management provide appropriate
opportunities for oversight, discussion and evaluation of
Harris decisions and direction. Our Board also believes it
is fundamentally wrong to permanently and inflexibly separate or
combine the positions of Chairman of the Board and Chief
Executive Officer. Our Board believes that its members possess
considerable experience and unique knowledge of the challenges
and opportunities Harris faces, and therefore, are in the best
position to evaluate the needs of Harris and how best to
organize the capabilities of our directors and senior management
to meet those needs.
Lead Independent Director. In 2003, we created the
position of Presiding Independent Director, which
included the functions of chairing the executive sessions of
independent directors and acting as a liaison between our
Chairman and independent directors. In 2009, we changed the
title of our Presiding Independent Director to Lead
Independent Director and more formally defined the
enumerated duties of the Lead Independent Director position. Our
independent directors designate one of our independent Board
members to serve as Lead Independent Director, which position is
rotated annually among the chairpersons of each of our standing
committees. The duties and authority of the Lead Independent
Director include: presiding at all meetings of our Board at
which our Chairman is not present, including executive sessions
of the independent directors; serving as liaison between our
Chairman and our independent directors; in consultation with the
Chairman, approving the information sent to our Board and the
meeting agendas for our Board; in consultation with the
Chairman, approving meeting schedules to assure there is
sufficient time for discussion of all agenda items; to call
meetings of our independent directors; and, if requested by
major shareholders, to ensure that he or she is available, when
appropriate, for consultation and direct communication
consistent with our policies regarding shareholder
communications. The designation
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of a Lead Independent Director is not intended to inhibit
communications among the directors or between any of them and
the Chairman. For additional information regarding the duties of
our Lead Independent Director, see our Corporate Governance
Principles and the discussion beginning on page 82.
The position of Lead Independent Director is currently held by
Ms. Leslie F. Kenne.
Board Meetings
and Attendance
General. In fiscal 2010, our Board held six regular
meetings and one special meeting, and the standing committees of
our Board met a total of 20 times. Each director attended at
least 75% of the meetings of the Board and of those committees
of which he or she was a member. All of the directors taken
together attended an average of 97% of such meetings of the
Board and committees on which they serve.
Attendance at Annual Meetings of Shareholders. We
typically schedule a Board meeting in conjunction with our
Annual Meeting of Shareholders. In the absence of unavoidable
conflict, all Board members are expected to attend the Annual
Meeting of Shareholders. All eleven of our Board members
attended the 2009 Annual Meeting of Shareholders.
Executive
Sessions of Independent Directors
Our Board and its committees meet throughout the year on a set
schedule and also hold special meetings and may act by written
consent from time to time as appropriate. Executive sessions of
independent directors are provided for in the agenda for each
regularly scheduled Board meeting. Our Lead Independent Director
chairs these executive sessions of independent directors.
Board Committees
and Committee Charters
Currently our Board has five standing committees to assist in
the discharge of its responsibilities. These committees are the
Audit Committee, the Business Conduct and Corporate
Responsibility Committee, the Corporate Governance Committee,
the Finance Committee, and the Management Development and
Compensation Committee. The committees regularly report their
activities and actions to the full Board, generally at the next
Board meeting following the committee meeting. Our Board has
adopted a written charter for each committee, copies of which
are available on the Corporate Governance section of our website
at www.harris.com/harris/cg/. The charter of each of the
Audit Committee, Corporate Governance Committee and Management
Development and Compensation Committee complies with the NYSE
corporate governance requirements. There are no NYSE
requirements with respect to the charters of the Business
Conduct and Corporate Responsibility Committee or the Finance
Committee. Copies of all such charters and our Corporate
Governance Principles also are available to shareholders free of
charge upon written request to our Secretary at Harris
Corporation, 1025 West NASA Boulevard, Melbourne, Florida
32919. The principal functions of each committee are summarized
below.
Audit
Committee
The Audit Committee assists our Board in fulfilling its
responsibilities to oversee, among other things:
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The integrity of our financial statements;
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Our compliance with relevant legal and regulatory requirements;
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Our independent registered public accounting firms
qualifications and independence; and
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The performance of our independent registered public accounting
firm and our internal audit function.
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The purposes and responsibilities of the Audit Committee also
include:
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Directly appointing, compensating, retaining, terminating and
overseeing the work of our independent registered public
accounting firm;
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Pre-approving, or adopting appropriate procedures to
pre-approve, all audit services, internal control-related
services and non-audit services to be provided by our
independent registered public accounting firm;
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Reviewing and discussing with our independent registered public
accounting firm and our management any major issues regarding
accounting principles and financial statement presentations,
including any significant changes in the selection or
application of accounting principles, and major issues
concerning the adequacy of our internal controls and any special
audit steps adopted in light of any material control
deficiencies, and the effect of regulatory and
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accounting initiatives as well as off-balance sheet structures
on our financial statements;
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Reviewing and discussing the process by which our management
assesses and manages exposure to risk, including key credit
risks, liquidity risks, market risks, financial risks and
operational risks;
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Reviewing and discussing our earnings press releases, including
the use of pro forma or adjusted non-GAAP results,
and the types of financial information and guidance provided by
us; and
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Reviewing and discussing with our independent registered public
accounting firm and our management quarterly and
year-end
operating results, reviewing our interim financial statements
prior to their inclusion in our Quarterly Reports on
Form 10-Q, and recommending to our Board the inclusion of
our annual financial statements in our Annual Reports on
Form 10-K.
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Our Board has determined in its business judgment that each
member of the Audit Committee is independent within the meaning
of the NYSE listing standards, the Sarbanes-Oxley Act of 2002
and related SEC rules and our Director Independence Standards.
Our Board also has determined in its business judgment that each
of the members of the Audit Committee satisfies the
financial literacy requirements of the NYSE and has
accounting or related financial management expertise
and that David B. Rickard, Chairperson of the Audit
Committee, satisfies the audit committee financial
expert criteria, as that term is defined by regulation of
the SEC, and is independent of Harris.
The Audit Committee held eight meetings during our fiscal year
2010, including meeting regularly with Ernst & Young
LLP and our internal auditors, both privately and with
management present.
Business Conduct
and Corporate Responsibility Committee
The purposes and responsibilities of the Business Conduct and
Corporate Responsibility Committee include:
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Oversight of our business conduct program and compliance with
sound ethical business practices and legal requirements in
connection with our business;
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Oversight of our policies, procedures and programs with respect
to environmental, health and safety matters;
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Reviewing our support of charitable, civic, educational and
philanthropic contributions and activities; and
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Reviewing and acting on, as appropriate, strategic issues and
trends relating to corporate citizenship and responsibility,
including social, political and public policy issues that may
have an impact on our operations, financial performance or
public image.
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The Business Conduct and Corporate Responsibility Committee held
one meeting during our fiscal year 2010.
Corporate
Governance Committee
The purposes and responsibilities of the Corporate Governance
Committee include:
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Identifying individuals believed to be qualified to become Board
members consistent with criteria approved by our Board, and
recommending nominees to stand for election at annual meetings
of shareholders or to fill vacancies;
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Adopting a policy and procedure for consideration of candidates
recommended by our shareholders;
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Developing, implementing and overseeing our Corporate Governance
Principles;
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Developing, reviewing and recommending director compensation,
perquisites and benefit plans;
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Recommending standing committees of our Board and committee
assignments;
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Reviewing the functions of committees of our Board and
recommending changes as deemed appropriate;
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In consultation with the Chairman and Lead Independent Director,
setting meeting schedules for our Board and recommending meeting
schedules for the Boards committees;
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Reviewing and approving related person transactions in
accordance with relevant policies;
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Reviewing and making recommendations to the Board regarding
shareholder proposals; and
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Facilitating our Boards evaluation of its effectiveness.
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For additional information regarding the role of the Corporate
Governance Committee and our director compensation process and
procedures, including the role of compensation consultants
relating to director compensation, see the Director
Compensation and Benefits section of this proxy statement
beginning on page 23.
Our Board has determined in its business judgment that each
member of the Corporate Governance Committee is independent
under the rules of the NYSE and our Director Independence
Standards. The Corporate Governance Committee held four meetings
during our fiscal year 2010.
Finance
Committee
The Finance Committee is authorized to review periodically our
financial position, capital structure, working capital, capital
transactions, debt ratings, and bank and lender relationships,
and the financial and investment aspects of our benefit plans.
The Finance Committee also reviews our dividend policy, capital
asset plan and capital expenditures, and share repurchase policy
and makes recommendations to our Board relating to such plan or
policies. Our Board has determined in its business judgment that
each member of the Finance Committee is independent under the
rules of the NYSE and our Director Independence Standards. The
Finance Committee held two meetings during our fiscal year 2010.
Management
Development and Compensation Committee
The purposes and responsibilities of the Management Development
and Compensation Committee include:
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Reviewing and evaluating plans for our management training and
development and organizational structure, and recommending to
our Board for its approval individuals for election as executive
officers and other corporate officers;
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Overseeing and reviewing our overall compensation philosophy and
establishing the compensation, perquisites and other benefits of
our officers and management;
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Reviewing and approving corporate goals and objectives relevant
to the compensation of our Chief Executive Officer, evaluating
his performance in light of those goals, and together with all
independent directors of our Board, determining and approving
our Chief Executive Officers annual salary, cash and
equity incentives and other benefits based on this evaluation;
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Reviewing and approving the use and the terms of employment,
separation, severance and change in control agreements and any
special arrangements in the event of termination of employment,
death or retirement of a corporate officer (together, in the
case of our Chief Executive Officer, with all independent
directors of our Board);
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Administering our equity-based compensation plans;
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Reviewing and discussing the Compensation Discussion and
Analysis section of this proxy statement with our
management and making a recommendation to the Board on the
inclusion of the Compensation Discussion and
Analysis section in this proxy statement; and
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Having the authority to retain and terminate compensation
consultants, including the authority to approve such
consultants fees and other retention terms.
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The Management Development and Compensation Committee has
delegated to the Chairman and Chief Executive Officer the
authority to make equity grants to employees who are not
executive officers. The Management Development and Compensation
Committee sets an annual maximum number of shares and options
that may be granted by the Chairman and Chief Executive Officer
and annually reviews these awards.
For additional information regarding the role of the Management
Development and Compensation Committee and our executive
compensation process and procedures, including the role of
executive officers and compensation consultants in recommending
the amount or form of executive compensation, see the
Compensation Discussion and Analysis section of this
proxy statement beginning on page 29.
Our Board has determined in its business judgment that each
member of the Management Development and Compensation Committee
is independent under the rules of the NYSE and our Director
Independence Standards. The Management Development and
Compensation Committee held five meetings during our fiscal year
2010.
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The Boards
Role in Risk Oversight
The responsibility for the
day-to-day
management of risk lies with our management and our management
continually monitors the material risks facing Harris, including
strategic risk, financial risk, operational risk, and legal and
compliance risk. We have in place an enterprise risk management
(ERM) process that, among other things, is designed
to identify material risks across Harris with input from each
business unit and function. Under this ERM process, which is
coordinated through a cross-functional management committee,
various material business risks are regularly identified,
assessed and prioritized. The top risks to Harris, and any
mitigation plans associated with those risks are reported to our
Board. In addition, in order to ensure dissemination of
information about identified risks to management and throughout
Harris, our management ERM committee regularly reports to our
senior executives. The ERM process has been reviewed by our
Board and is the subject of oversight and regular review by our
Audit Committee. Harris also manages risk through numerous
controls and processes embedded in our operations and such
controls and processes are reviewed from time to time with the
Board and/or
the relevant committees.
Risk considerations also are raised in the context of a range of
matters that are reported by management to our Board or one of
its committees for review. For example, elements of risk are
discussed by the full Board in presentations concerning
Company-wide and business unit annual operating plans, merger
and acquisition opportunities, market environment updates and
other strategic discussions. Elements of risk related to
financial reporting, internal audit, auditor independence and
related areas of accounting, law and regulation are reviewed by
our Audit Committee. Elements of risks related to various
aspects of U.S. and international regulatory compliance,
business conduct, social responsibility, environmental matters
and export/import controls are reviewed by our Business Conduct
and Corporate Responsibility Committee. Elements of risk related
to governance issues are reviewed by our Corporate Governance
Committee. Elements of risk related to liquidity, financial
arrangements, capital structure and our ability to access the
capital markets are reviewed by our Finance Committee. The
Finance Committee also reviews risks related to our retirement
plans and their related investments. Elements of risk related to
compensation policies and practices and talent management and
succession planning are reviewed by our Management Development
and Compensation Committee. Each committee also regularly
reports to the full Board.
The current committee members for each of the five standing
committees of our Board of Directors are as follows, with the
chairperson listed first:
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Management
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Business Conduct and
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Development
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Audit
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Corporate Responsibility
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Corporate Governance
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Finance
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and Compensation
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David B. Rickard
Lewis Hay III
Gregory T. Swienton
Hansel E. Tookes II
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Leslie F. Kenne
Terry D. Growcock
Karen Katen
Hansel E. Tookes II
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Lewis Hay III
Thomas A. Dattilo
Karen Katen
Leslie F. Kenne
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Gregory T. Swienton
Stephen P. Kaufman
David B. Rickard
Dr. James C. Stoffel
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Stephen P. Kaufman
Thomas A. Dattilo
Terry D. Growcock
Dr. James C. Stoffel
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Director
Retirement
It is our policy that a director will retire from our Board
effective at the end of the month in which he or she reaches age
72. In the event that a directors 72nd birthday falls
within twelve months of the Annual Meeting at which such
director would stand for
re-election,
such director shall not stand for
re-election.
A director also is expected to tender automatically his or her
resignation in the event of retirement or other significant
change in status from the employment position held when last
elected or appointed to our Board, and our Board then will
determine whether such directors continued Board
membership is in the best interest of Harris and our
shareholders, free from conflicts of interest and otherwise
appropriate.
Communications
with Members of our
Board of Directors
General. Shareholders and other interested persons
who wish to communicate with a member or members of our
Board, including the Lead Independent Director, the chairperson
of any standing committee of the Board or the
independent directors as a group, may do so by sending an
e-mail
message to the intended recipient or recipients
c/o Corporate
Secretary at corporate.secretary@harris.com. Shareholders
and
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others also may write to the intended recipient or recipients,
c/o Corporate Secretary, Harris Corporation, 1025 West NASA
Boulevard, Melbourne, Florida 32919. Our Secretary will review
each such communication and if it is related to the duties and
responsibilities of our Board and its committees, it will be
forwarded to the appropriate recipient or recipients. Our Board
has instructed our Secretary not to forward communications the
Secretary deems unduly hostile, threatening, illegal or
similarly inappropriate (such as surveys, spam, junk mail,
resumes, service or product inquiries or complaints,
solicitations or advertisements). Our Secretary will
periodically provide our Board a summary of all communications
received that were not forwarded to the intended recipient or
recipients (other than surveys, spam, junk mail, resumes,
service or product inquiries, complaints, solicitations or
advertisements), and will make those communications available to
any director upon request. The Lead Independent Director or
other director in receipt of a communication for which he or she
was the intended recipient will determine whether it will be
sent to our full Board or a committee. If a communication
is determined to be a complaint or concern pertaining to
accounting, internal control or auditing matters, it will be
handled in accordance with the procedures discussed below under
Accounting, Internal Control or Auditing Matters.
Accounting, Internal Control or Auditing
Matters. Our Audit Committee has established procedures
for the receipt, retention and treatment of complaints and
concerns regarding accounting, internal control or auditing
matters. Any of our employees may communicate concerns about any
of these matters to such employees supervisor, manager or
business standards advisor, or to the Vice President, Internal
Audit and Compliance or the Director of Business Conduct or
certain other individuals, or on a confidential and anonymous
basis by way of
e-mail or
our toll-free hotline numbers listed on our website and in our
Standards of Business Conduct. Other persons with such
complaints or concerns may contact our Vice President, Internal
Audit and Compliance or Director of Business Conduct at
1025 West NASA Boulevard, Melbourne, Florida 32919. Upon
receipt of a complaint or concern, a determination will be made
whether it pertains to accounting, internal control or auditing
matters and if it does, it will be handled in accordance with
the procedures established by the Audit Committee.
Standards of Business Conduct
All Harris employees, including the Chief Executive Officer,
Chief Financial Officer, Principal Accounting Officer and other
senior financial officers, are required to abide by the Harris
Standards of Business Conduct, originally adopted in 1987, to
help ensure that our business is conducted in a consistently
ethical and legal manner. All directors are required to abide by
our Directors Standards of Business Conduct. These
standards of business conduct form the foundation of a
comprehensive business conduct program that includes compliance
with all laws, corporate policies and procedures, an open
relationship among employees that contributes to good business
conduct, and an abiding belief that we should conduct all
business dealings with integrity, honesty and responsibility.
Our business conduct policies cover many topics, including
employment issues, confidentiality, environmental, health and
safety, insider trading, corporate opportunities, antitrust,
export control, boycotts, government contracts, international
business practices, entertainment and gifts, and use of company
assets. Employees are required to report any conduct they
believe in good faith to be a violation of any of our business
conduct policies.
Our Standards of Business Conduct and our Directors
Standards of Business Conduct are posted on our website at
www.harris.com/business-conduct
and also are available free of charge by written request to our
Director of Business Conduct, Harris Corporation, 1025 West
NASA Boulevard, Melbourne, Florida 32919. Any amendment to, or
waiver from, our Standards of Business Conduct which is required
to be disclosed to shareholders will be posted on our website
within four business days following such amendment or
waiver.
Director Nomination Process and Criteria,
and Board Diversity
Our Board is responsible for approving nominees to stand for
election as directors. The Corporate Governance Committee
assists the Board in this process and identifies individuals it
believes to be qualified to become Board members and recommends
nominees.
21
It is a long-standing policy of our Board to consider director
nominees recommended by shareholders. A shareholder who wishes
to recommend a nominee for the Corporate Governance
Committees consideration must include at least the
following information about the proposed nominee: the proposed
nominees name, age, business or residence address,
principal occupation or employment, and the written consent of
the nominee to be named in the proxy statement as a nominee and
to serve as a director if elected. The required information
should be sent to our Secretary at 1025 West NASA
Boulevard, Melbourne, Florida 32919. The Secretary will forward
properly submitted shareholder-recommended nominations to the
Chairperson of the Corporate Governance Committee for
consideration at a future Corporate Governance Committee
meeting. Individuals recommended by shareholders in accordance
with these procedures will be evaluated and considered by the
Corporate Governance Committee in the same manner as it
evaluates other proposed nominees.
In addition to recommending nominees for consideration to the
Corporate Governance Committee, shareholders also may directly
propose nominees for consideration at an annual meeting of our
shareholders. The requirements and procedures to be followed by
shareholders for directly nominating directors are discussed on
page 84 under Shareholder Proposals for the 2011
Annual Meeting of Shareholders.
The Corporate Governance Committee also has a process for
considering, reviewing and evaluating incumbent directors up for
re-election.
Pursuant to this process, prior to the annual meeting of
shareholders at which an individual directors term will
expire, such director meets with our Chairman to discuss
participation on our Board and its committees and other relevant
matters. Such director also is requested to discuss any concerns
or issues regarding continued membership on our Board with the
Chairperson of the Corporate Governance Committee. In addition,
the Corporate Governance Committee reviews such directors
tenure, experience, contributions, other directorships,
attendance record, any changes in employment status and other
information it deems helpful in considering and evaluating the
director for nomination.
Our Corporate Governance Principles contain Board membership
criteria that apply to nominees for a position on our Board. Our
Board, based upon the recommendation of the Corporate Governance
Committee (which recommendation will be based on the criteria
set forth below, regardless of whether the nominee is
recommended by shareholders or is identified by the Corporate
Governance Committee or otherwise), will select new nominees
considering the following criteria:
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Demonstrated ability and sound judgment that usually will be
based on broad experience;
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Personal qualities and characteristics, accomplishments and
reputation in the business community, professional integrity,
educational background, business experience and related
experience;
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Willingness to objectively appraise management performance;
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Current knowledge and contacts in the businesses in which we
participate and in our industry or other industries relevant to
our businesses, giving due consideration to potential conflicts
of interest;
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Ability and willingness to commit adequate time to Board and
committee matters, including attendance at Board, committee and
annual shareholder meetings;
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Compatibility of the individuals skills and personality
with those of other directors and potential directors in
building a Board that is effective, collegial and responsive to
the needs of Harris and the interests of our shareholders; and
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Diversity of viewpoints, background, experience and similar
demographics.
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Our Board values diversity as a factor in selecting nominees to
serve on the Board. Although there is no specific policy on
diversity, the Corporate Governance Committee considers the
Board membership criteria in selecting nominees for directors,
including diversity of viewpoints, background, experience
and similar demographics. Such considerations may include
personal characteristics, functional background, executive or
professional experience, and international experience. As a
general matter the Board considers diversity in the context of
the Board as a whole and takes into account the personal
characteristics and experience of current and prospective
directors to
22
facilitate Board deliberations and decisions that reflect a
broad range of perspectives.
Our Corporate Governance Committee has as a general matter
retained a third-party search firm to assist in identifying and
evaluating potential nominees, and all of our current
independent directors have been identified using this process.
Majority Voting
for Directors
Pursuant to our By-Laws and Corporate Governance Principles, the
voting standard applicable for the election of our directors in
uncontested elections is a majority voting standard. An
uncontested election for directors is an election where the
number of properly nominated directors does not exceed the
number of director positions to be filled. In contested director
elections, the plurality standard will apply, which means the
nominees receiving the greatest numbers of votes will be elected
to serve as directors.
To be elected in an uncontested election under the majority
voting standard, a director nominee must receive more
For votes than Against votes.
Abstentions and broker non-votes will have no effect in an
uncontested election of directors since only votes cast
For or Against a nominee will be
counted. If an incumbent director nominee does not receive a
greater number of For votes than Against
votes, he or she must promptly tender his or her resignation
following certification of the vote. The Corporate Governance
Committee shall consider the resignation offer and shall
recommend to our Board the action to be taken. Our Board shall
take action within 90 days following certification of the
vote, unless such action would cause us to fail to comply with
NYSE independence or other legal requirements, in which event
our Board shall take action as promptly as practicable while
continuing to meet such requirements. Our Board also will
promptly publicly disclose its decision and the reasons
therefor. If our Board does not accept the resignation, the
nominee will continue to serve until the next annual meeting for
the year in which his or her term expires and until his or her
successor shall be duly elected and qualified, or until his or
her prior resignation, death or removal. If our Board accepts
the resignation, then our Board, in its sole discretion, may
fill any resulting vacancy or may chose not to fill the vacancy
and to decrease the size of our Board.
The election of directors at the 2010 Annual Meeting of
Shareholders is an uncontested election and thus the majority
voting standard applies.
Our Board compensation program is intended to attract and retain
directors with demonstrated ability, integrity, judgment and
experience to fulfill their responsibility to oversee management
and to develop and oversee the implementation of strategies
aimed at creating sustainable long-term value for our
shareholders. The program also is intended to recognize the time
commitments and liability associated with serving on the board
of a public company.
The form and amount of director compensation is periodically
reviewed and assessed by the Corporate Governance Committee. The
Corporate Governance Committee reviews broad survey data
concerning director compensation practices, levels and trends
for companies comparable to us in revenue, businesses and
complexity, which data is requested by or on behalf of the
Corporate Governance Committee from compensation consultants,
including Towers Watson & Co. Changes to director
compensation, if any, are recommended by the Corporate
Governance Committee to our Board for action. Employee directors
are not separately compensated for service as a director.
Retainer and
Attendance Fees
Directors who are not employees of Harris currently receive the
following fees, as applicable, for their services on our Board:
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$55,000 basic annual cash retainer, payable on a quarterly basis;
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$10,000 annual cash retainer, payable on a quarterly basis, for
service as Chairperson of the Audit Committee;
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$5,000 annual cash retainer, payable on a quarterly basis, for
service as the Chairperson of each standing committee of our
Board other than the Audit Committee;
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$2,000 attendance fee for each meeting or telephonic meeting of
our Board; and
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$2,000 attendance fee for each meeting or telephonic meeting of
each standing committee of our Board and for attendance at any
other event for or on our behalf.
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The cash retainer payable for a quarter is pro-rated, based upon
period of service, if a director does not serve on the Board for
the entire quarter.
23
Equity Awards and
Deferred Compensation
Under the Harris Corporation 2005 Directors Deferred
Compensation Plan, as amended (the Directors
Deferred Compensation Plan), on January 1,
April 1, July 1 and October 1 of each year, we
currently credit each non-employee directors account with
a number of Harris stock equivalent units having a fair market
value equal to $26,500 (for an annual rate of $106,000), which
amount may be changed from time to time by our Board.
In addition, under the Directors Deferred Compensation
Plan, prior to the commencement of a calendar year, each
non-employee director may make an irrevocable election to defer
all or a portion of his or her cash compensation for the
subsequent year or years. The Directors Deferred
Compensation Plan replaced the 1997 Directors Deferred
Compensation and Annual Stock Unit Award Plan (the 1997
Directors Plan). Effective December 31, 2004 no
further deferrals of director compensation were permitted and no
further annual awards were made under the 1997 Directors
Plan.
Amounts deferred at the election of a non-employee director
under such plans are invested in investment alternatives that
mirror those available under our Retirement Plan or in Harris
stock equivalent units based upon the fair market value of
Harris common stock on the date of deferral. Such Harris stock
equivalent units are equivalent in value to shares of our common
stock. A non-employee director may not transfer or reallocate
amounts deferred into other investments into Harris stock
equivalent units. Amounts credited in Harris stock equivalent
units may be reallocated into any other investment alternatives
provided director minimum stock ownership guidelines are
satisfied. Deferred amounts and investment earnings on such
amounts are payable in cash following the non-employee
directors resignation, retirement or death. Each Harris
stock equivalent unit is credited with dividend equivalents
equal to the dividends paid on our common stock, which are
deemed reinvested in additional Harris stock equivalent units on
the dividend payment date.
A non-employee director may elect to receive deferred amounts
either in a cash lump sum on a date certain within five years
after his or her resignation or retirement, or in annual
substantially equal cash installments over a designated number
of years beginning on a date certain within five years after a
directors resignation or retirement, provided that all
amounts are fully paid within ten years after resignation or
retirement.
Within 90 days of a change in control and to the extent
permitted by Section 409A of the Internal Revenue Code,
each non-employee director (or former non-employee director)
will receive a lump sum cash payment equal to the then-remaining
balance in his or her deferred accounts.
Amounts credited to directors accounts in the director
deferred compensation plans may be partially or fully funded by
a grantor trust, also known as a rabbi trust.
Following a change in control, we are required to fund such
rabbi trust in an amount equal to the amounts
credited to the directors accounts. In all cases, the
assets in such trust are subject to the claims of our creditors,
and directors are treated as our unsecured general creditors.
Reimbursement,
Insurance and Charitable
Gift Matching
We reimburse each non-employee director for travel and
out-of-pocket expenses incurred in
connection with attendance at Board and committee meetings and
other meetings on our behalf and for the costs and expenses of
attending director education programs. Spouses or guests are
invited occasionally to accompany directors to Board-related
events, for which we pay or reimburse travel and related
expenses. In addition, we provide each non-employee director
with accidental death and dismemberment insurance in the amount
of up to $200,000 and business travel insurance of up to an
additional $200,000 in the event that he or she is involved in
an accident while traveling on business relating to our affairs.
We pay the premiums for such insurance, and the total aggregate
premiums for coverage for all non-employee directors during
fiscal 2010 was $238. We also provide liability insurance
coverage for all of our directors and officers.
Non-employee directors may participate in the Harris Foundation
charitable gift matching program available to all employees,
where the Harris Foundation matches contributions to eligible
post-secondary educational institutions and charitable
organizations up to an annual maximum of $10,000 per
employee or director.
24
Fiscal 2010
Compensation of Non-Employee Directors
The following table sets forth information regarding
compensation paid to each of our non-employee directors for
fiscal 2010. We currently do not have a non-equity incentive
plan or pension plan for directors.
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Change in
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Pension Value
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and
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Nonqualified
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Fees Earned
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Deferred
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or Paid in
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Stock
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Option
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Compensation
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All Other
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Cash
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Awards
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Awards
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Earnings
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Compensation
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Total
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Name
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$(1)
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$(2)
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$(3)
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$(4)
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$(5)
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$
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Thomas A. Dattilo
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$
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87,000
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$
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106,000
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$
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0
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$
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0
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$
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0
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$
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193,000
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Terry D. Growcock
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$
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81,000
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$
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106,000
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$
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0
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$
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0
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$
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9,971
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$
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196,971
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Lewis Hay III
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$
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98,000
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$
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106,000
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$
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0
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$
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0
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$
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10,000
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$
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214,000
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Karen Katen
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$
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75,000
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$
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106,000
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$
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0
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$
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0
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$
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0
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$
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181,000
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Stephen P. Kaufman
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$
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88,000
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$
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106,000
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$
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0
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$
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0
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$
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10,000
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$
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204,000
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Leslie F. Kenne
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$
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84,000
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$
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106,000
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$
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0
|
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$
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0
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$
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0
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$
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190,000
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David B. Rickard
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$
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97,000
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$
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106,000
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$
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0
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$
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0
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$
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0
|
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$
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203,000
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Dr. James C. Stoffel
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$
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81,000
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$
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106,000
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$
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0
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$
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0
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$
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1,000
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$
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188,000
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Gregory T. Swienton
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$
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94,000
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$
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106,000
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$
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0
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$
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0
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$
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10,000
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$
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210,000
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Hansel E. Tookes II
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$
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87,000
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$
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106,000
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$
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0
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$
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0
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$
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0
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$
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193,000
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(1)
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Amounts shown in the Fees
Earned or Paid in Cash column reflect total cash
compensation paid to each director in respect of fiscal 2010 for
Board and committee retainers and meeting fees and include
amounts that may have been deferred at the directors
election and credited to accounts in our Directors
Deferred Compensation Plan.
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(2)
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Amounts shown under the Stock
Awards column reflect the aggregate grant date fair value
computed in accordance with the Financial Accounting Standards
Boards Accounting Standards Codification Topic 718,
Compensation Stock Compensation (ASC
718), for fiscal 2010 with respect to the Harris stock
equivalent units awarded to each director during fiscal 2010 and
credited to each such directors account under the
Directors Deferred Compensation Plan as described above.
Under ASC 718, the fair value of these stock awards is
determined as of the grant date using the closing market price
of Harris common stock on the date of grant. On October 1,
2009, January 1, 2010, April 1, 2010 and July 1,
2010, each non-employee directors account under the
Directors Deferred Compensation Plan was credited with
Harris stock equivalent units having a grant date fair value of
$26,500. These amounts reflect our accounting for these stock
equivalent unit awards and do not correspond to the actual
values that may be realized by the directors.
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As of July 2, 2010, our
non-employee directors had the following aggregate number of
Harris stock equivalent units accumulated in their deferred
accounts for all years of service as a director, from deferrals
of cash compensation and awards of Harris stock equivalent
units, including additional Harris stock equivalent units
credited as a result of dividend equivalents earned with respect
to such Harris stock equivalent units: Thomas A.
Dattilo 25,966 units; Terry D.
Growcock 12,636 units; Lewis
Hay III 42,549 units; Karen
Katen 63,065 units; Stephen P.
Kaufman 24,303 units; Leslie F.
Kenne 13,923 units; David B.
Rickard 38,774 units; Dr. James C.
Stoffel 16,191 units; Gregory T.
Swienton 51,404 units; and Hansel E.
Tookes II 12,908 units.
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(3)
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The use of stock options as an
element of compensation for our directors was discontinued in
December 2004. Options previously awarded to our
non-employee directors are nonqualified for tax purposes. Such
options were priced using the closing market price of our stock
on the date of grant. All such options became fully vested in
accordance with their terms on or prior to October 22,
2007. Options granted to non-employee directors expire no later
than ten years after the date of grant.
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As of July 2, 2010, the
following directors held the following aggregate number of
outstanding stock options: Thomas A. Dattilo 5,285;
Lewis Hay III 16,912; Karen Katen
21,140; Stephen P. Kaufman 5,285; Leslie F.
Kenne 8,456; David B. Rickard 16,912;
and Dr. James C. Stoffel 12,684.
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(4)
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There were no above-market or
preferential earnings in our director deferred compensation
plans.
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(5)
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As noted above, non-employee
directors may participate in our charitable gift matching
program up to an annual limit of $10,000 per director.
While our directors participate on the same basis as our
employees, SEC rules require that the amount of a
directors participation in a charitable matching program
be disclosed. The amounts shown for Messrs. Growcock, Hay,
Kaufman, Stoffel and Swienton represent the amount of charitable
gift matching payments made during fiscal 2010.
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25
Stock Ownership
Guidelines for
Non-Employee
Directors
To further align the interests of members of our Board and
shareholders, our Board has previously approved stock ownership
guidelines for our non-employee directors. In August 2008, on
the recommendation of the Corporate Governance Committee, the
Board increased the stock ownership guidelines from four times
the basic annual cash retainer to five times the basic annual
cash retainer. As a result, our directors are expected to own,
within five years after election or appointment to our Board,
Harris stock or stock equivalents having a minimum value of
$275,000 (based upon the current $55,000 basic annual cash
retainer). As of September 17, 2010, all of our
non-employee directors met the stock ownership guidelines.
Indemnification
We have entered into indemnification agreements with each of our
directors and Board-elected officers, including the executive
officers named in the Summary Compensation Table on
page 46. These agreements require us to indemnify these
directors and officers with respect to their activities as a
director, officer or employee of Harris, or when serving at our
request as a director, officer or trustee of another
corporation, trust or other enterprise, against expenses
(including attorneys fees, judgments, fines and amounts
paid in settlement) actually and reasonably incurred by them in
any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative to
which they are, or are threatened to be made, parties as a
result of their service to us.
Under the indemnification agreements, each director or officer
will continue to be indemnified with respect to suits or
proceedings arising from his or her service to us, even after
ceasing to occupy a position as an officer, director, employee
or agent of Harris.
OUR LARGEST
SHAREHOLDERS
The rules of the SEC require disclosure regarding any persons
known to us to be a beneficial owner of more than five percent
of our common stock. The following table sets forth as of
July 30, 2010 the beneficial ownership of our common stock
by each person who has reported to the SEC beneficial ownership
of more than five percent of our common stock, based on the
reports filed by these persons.
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Amount and
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Name and Address of
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Nature of
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Percent
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Beneficial Owner
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Beneficial Ownership
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of Class
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Blackrock, Inc.
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13,461,666
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(1)
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10.37%
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(1)
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40 East 52nd Street
New York, NY 10022
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(1) |
Beneficial and percentage ownership information is based on
information contained in Amendment No. 1 to
Schedule 13G filed with the SEC on May 10, 2010 by
Blackrock, Inc. The schedule indicates that as of April 30,
2010, Blackrock, Inc. had sole voting power over
13,461,666 shares, shared voting power over 0 shares,
sole dispositive power over 13,461,666 shares, and shared
dispositive power over 0 shares.
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26
SHARES HELD BY
OUR DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the beneficial ownership of
shares and equivalent units of our common stock, as of
July 30, 2010, by (a) each director, including the
nominees for election at the 2010 Annual Meeting, (b) our
Chief Executive Officer and each other named executive officer,
and (c) all of our directors and executive officers as a
group. Except as otherwise noted, the named individual had sole
voting and investment power with respect to the securities. As
of July 30, 2010, no individual director, nominee for
director or named executive officer beneficially owned 1% or
more of our common stock. As of July 30, 2010, our
directors and executive officers, as a group, beneficially owned
1.80% of our common stock.
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Shares Beneficially Owned
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Shares
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Total
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Under
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Shares
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Stock
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Shares
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Exercisable
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Beneficially
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Equivalent
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Name
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Owned(1)
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Options(2)
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Owned(3)
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Units(4)
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DIRECTORS:
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Thomas A. Dattilo
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0
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5,285
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5,285
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25,966
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Terry D. Growcock
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1,021
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0
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1,021
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12,636
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Lewis Hay III
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0
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16,912
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16,912
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42,549
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Karen Katen
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10,000
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21,140
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31,140
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63,065
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Stephen P. Kaufman
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4,000
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5,285
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9,285
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24,303
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Leslie F. Kenne
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0
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8,456
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8,456
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13,923
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Howard L. Lance(5)*
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367,391
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639,804
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1,007,195
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6,675
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David B. Rickard
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0
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16,912
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16,912
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38,774
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James C. Stoffel
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0
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12,684
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12,684
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16,191
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Gregory T. Swienton
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0
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0
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0
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51,404
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Hansel E. Tookes II
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1,000
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0
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1,000
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12,908
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NAMED EXECUTIVE OFFICERS:
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Robert K. Henry(5)
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62,921
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176,439
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239,360
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0
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Gary L. McArthur(5)
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83,276
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135,327
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218,603
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2,746
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Dana A. Mehnert(5)
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46,320
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53,069
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99,389
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1,251
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Daniel R. Pearson(5)
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70,011
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95,764
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165,775
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0
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All Directors and Executive Officers, as a group (19 persons)(6)
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803,847
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1,511,459
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2,315,306
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313,495
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*
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Also a named executive officer.
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(1)
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Includes shares over which the
person or members of his or her immediate family hold or share
voting and/or investment power and excludes shares listed under
the columns Shares Under Exercisable Options and
Stock Equivalent Units. For named executive
officers, includes shares owned through our Retirement Plan.
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(2)
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Includes shares underlying options
granted by us that are exercisable as of July 30, 2010, and
shares underlying options that become exercisable within
60 days thereafter.
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(3)
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Represents the total of shares
listed under the columns Shares Owned and
Shares Under Exercisable Options.
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(4)
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For the non-employee directors,
this column represents stock equivalent units credited under our
1997 Directors Plan and our Directors Deferred
Compensation Plan discussed above under Director
Compensation and Benefits. Stock equivalent units deferred
under our 1997 Directors Plan and Directors Deferred
Compensation Plan are settled in cash following a
directors resignation, retirement or death, may not be
voted and may be reallocated into other investment alternatives
as discussed above under Director Compensation and
Benefits. For the named executive officers, this column
includes amounts deferred in the form of stock equivalent units
under our Supplemental Executive Retirement Plan
(SERP), which are settled in cash following, or
under certain circumstances prior to, retirement. Stock
equivalent units deferred under the SERP may not be voted and
may be reallocated into other investment alternatives. Amounts
in this column are not included in the Total Shares
Beneficially Owned column.
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(5)
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The shares reported as beneficially
owned by Mr. Lance and other named executive officers
include performance shares and restricted shares for which the
performance or restriction period had not expired and as to
which the named individuals have sole voting power but no
investment power, as follows: Mr. Lance 149,600
performance shares; Mr. Henry 9,800 performance
shares; Mr. McArthur 32,300 performance shares
and 16,000 restricted shares; Mr. Mehnert 20,850
performance shares and 12,000 restricted shares; and
Mr. Pearson 26,100 performance shares and
14,000 restricted shares.
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(6)
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The shares reported as beneficially
owned by all directors and executive officers, as a group,
include 363,900 performance shares and restricted shares
awarded to the executive officers for which the performance or
restriction period had not expired and as to which the executive
officers have sole voting power but no investment power. No
directors or executive officers have pledged any shares of our
common stock.
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27
The following Report of the Audit Committee does not
constitute soliciting material and the Report should not be
deemed filed or incorporated by reference into any other
previous or future filings by Harris under the Securities Act of
1933, as amended, or the Securities Exchange Act of 1934, as
amended, except to the extent Harris specifically incorporates
this Report by reference therein.
The role of the Audit Committee is, among other things, to
assist the Board in its oversight of:
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The integrity of the financial statements of Harris;
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Harris compliance with applicable related legal and
regulatory requirements;
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The independence and qualifications of Harris independent
registered public accounting firm; and
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The performance of Harris independent registered public
accounting firm and internal audit function.
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The Board has determined that, in its business judgment, all
members of the Audit Committee are independent within the
meaning of the listing standards of the NYSE, the
Sarbanes-Oxley
Act of 2002 and related rules of the SEC and Harris
Director Independence Standards.
Harris management is responsible for the preparation,
presentation and integrity of Harris financial statements
and the effectiveness of Harris system of internal control
over financial reporting and disclosure controls and procedures.
Management and the Internal Audit department are responsible for
maintaining and evaluating appropriate accounting and financial
reporting practices and internal controls and procedures
designed to ensure compliance with accounting standards and
applicable laws and regulations. Our independent registered
public accounting firm for fiscal 2010, Ernst & Young LLP
(E&Y), is responsible for auditing the
consolidated financial statements and expressing an opinion as
to whether such financial statements are presented fairly, in
all material respects, in conformity with accounting principles
generally accepted in the United States. E&Y also is
responsible for auditing the effectiveness of Harris
internal control over financial reporting. Representatives of
E&Y attended all regularly scheduled meetings of the Audit
Committee during fiscal 2010. The Audit Committee has met and
held discussions with management, the head of Internal Audit and
E&Y. The Audit Committee discussed with the internal
auditors and E&Y the overall scope of, and plans for, their
respective audits and the identification of audit risks. The
Audit Committee also met with E&Y, the head of Internal
Audit, the Principal Accounting Officer and the Chief Financial
Officer, with and without management present, to discuss the
results of its examinations, the reasonableness of significant
judgments, the evaluations of Harris internal control over
financial reporting and the overall quality of Harris
financial reporting. Management has represented to the Audit
Committee that Harris consolidated financial statements
were prepared in accordance with U.S. generally accepted
accounting principles.
In the performance of its oversight function, the Audit
Committee has:
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Reviewed and discussed with management and E&Y Harris
internal control over financial reporting, including a review of
managements report on its assessment and E&Ys
audit of the effectiveness of Harris internal control over
financial reporting and any significant deficiencies or material
weaknesses;
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Considered, reviewed and discussed the audited financial
statements with management and E&Y, including a discussion
of the quality of the accounting principles, the reasonableness
thereof, significant adjustments, if any, and the clarity of
disclosures in the financial statements, as well as critical
accounting policies and other financial accounting and reporting
principles and practices;
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Discussed with E&Y the matters required to be discussed by
Statement on Auditing Standards No. 61, as amended (AICPA,
Professional Standards, Vol. 1 AU
section 380), as adopted by the Public Company Accounting
Oversight Board in Rule 3200T;
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Received, reviewed and discussed the written disclosures and the
letter from E&Y required by applicable requirements of the
Public Company Accounting Oversight Board regarding
E&Ys communications with the Audit Committee
concerning independence,
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28
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and discussed E&Ys independence with E&Y;
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Reviewed the services provided by E&Y other than its audit
services and considered whether the provision of such other
services by E&Y is compatible with maintaining its
independence, discussed with E&Y its independence, and
concluded that E&Y is independent from Harris and its
management; and
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Reviewed the contents of SEC-required certification statements
from the Chief Executive Officer and Chief Financial Officer and
also discussed and reviewed the process and internal controls
for providing reasonable assurances that the financial
statements included in the Harris Annual Report on
Form 10-K
for the fiscal year ended July 2, 2010 are true in all
important respects, and that the report contains all appropriate
material information of which they are aware.
|
In reliance upon the reports, reviews and discussions described
in this Report, the Audit Committee has recommended to the
Board, and the Board has approved, that the audited financial
statements be included in Harris Annual Report on
Form 10-K
for the fiscal year ended July 2, 2010, for filing with the
SEC. The Audit Committee also has appointed, and has requested
shareholder ratification of, the appointment of E&Y as
Harris independent registered public accounting firm for
the fiscal year ending July 1, 2011.
Submitted on August 27, 2010 by the Audit Committee of
the Board of Directors.
David
B. Rickard, Chairperson
Lewis Hay III
Gregory T. Swienton
Hansel E. Tookes II
EXECUTIVE
COMPENSATION
Compensation
Discussion and Analysis
Overview
The Compensation Discussion and Analysis section of our proxy
statement is intended to help our shareholders understand our
overall executive compensation program, objectives, framework
and elements and to discuss and analyze the basis for the
compensation paid with respect to fiscal 2010 to Howard
L. Lance, our Chairman, President and Chief Executive
Officer (CEO), Gary L. McArthur, our Chief
Financial Officer, and Messrs. Henry, Mehnert and Pearson, our
three other most highly compensated executive officers for
fiscal 2010 (our named executive officers), detailed
in the Summary Compensation Table on page 46 and in the
other tables and narrative discussion that follow.
Overall
Philosophy and Objectives of Our
Compensation Program
Harris is an international communications and information
technology company serving government and commercial markets in
more than 150 countries. We are dedicated to developing
best-in-class assured
communications®
products, systems and services for global markets, including RF
communications, government communications and broadcast
communications. In fiscal 2010 our annual revenue was
approximately $5.2 billion and we have more than
15,800 employees. Our common stock is listed on the New
York Stock Exchange.
The overall objective of our executive compensation program is
to encourage and reward the creation of sustainable, long-term
shareholder value. The following principles provide a framework
for our executive compensation program:
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Alignment with Shareholders
Interests We believe executives
interests are more directly aligned with the interests of our
shareholders when compensation programs emphasize an appropriate
balance of both short- and long-term financial performance, are
impacted by the value of our stock and require ownership of our
stock.
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Competitiveness To attract qualified
executives, motivate performance and retain, develop and reward
executives with the abilities and skills needed to build
long-term shareholder value, we believe an executives
total compensation should be competitive and reflect the value
of such executives position in the market and within
Harris.
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Motivate Achievement of Financial Goals and Strategic
Objectives We believe an
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29
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|
effective way to reach our short- and long-term financial goals
and strategic objectives is to make a significant portion of an
executives overall compensation dependent on the
achievement of such goals and objectives and on the value of our
stock. Additionally, we believe the portion of an
executives total compensation that varies with performance
should be a function of the executives responsibilities
and ability to influence results. As an executives
responsibility increases, so should the amount of
performance-based, at-risk compensation.
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|
Reward Superior Performance We believe
that while total compensation for an executive should be both
competitive and tied to achievement of financial goals and
strategic objectives, performance that exceeds target should be
appropriately rewarded.
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Fiscal 2010
Compensation Elements
Affected by Economic Conditions
The global economic crisis that commenced in the first half of
our fiscal 2009 and continued to spread into our fiscal 2010
resulted in significant economic uncertainty for many of our
businesses. As a result of this uncertainty, our management
responded with initiatives, decisions and Company-wide actions
intended to preserve our financial and competitive position.
Such decisions included not increasing base salary levels for
virtually all of our employees, including our named executive
officers. In addition, fiscal 2010 annual incentive compensation
targets for all manager-level employees and executive officers
were also maintained at the fiscal 2009 levels. Based upon
improvements in the outlook for our business as fiscal 2010
progressed, the base salary freeze for employees, other than
senior management and executive officers, was lifted in January
2010. These decisions and actions also impacted our fiscal 2010
executive compensation process as further discussed below.
Our Executive
Compensation Process
The philosophy, objectives, elements, policies and practices of
compensation for our executive officers are set by the
Management Development and Compensation Committee of our Board
(the Compensation Committee). In approving
compensation levels, individual objectives and financial targets
for our named executive officers, the Compensation Committee
reviews the relationship between our executive compensation
program and the achievement of our financial goals and strategic
objectives, with an emphasis on creating a pay for
profitable growth environment.
The Compensation Committee has the authority to retain
compensation consultants and other advisors to assist in
fulfilling its duties and responsibilities. In recent fiscal
years, the Compensation Committee has directly retained Pearl
Meyer & Partners, an independent executive
compensation consulting firm, to provide objective analysis,
advice and information, including competitive market data, to
the Compensation Committee related to CEO compensation and the
compensation of other executive officers. Pearl
Meyer & Partners performs services at the direction
and under the supervision of the Compensation Committee and does
not provide any other services to Harris. As a result of the
business conditions and economic uncertainties noted above, at
the start of fiscal 2010, the Compensation Committee, and in the
case of Mr. Lance, the independent directors of our Board,
determined that neither our CEO nor any of our other executive
officers would receive a base salary increase or an increase in
annual cash incentive compensation targets for fiscal 2010. In
conjunction with that decision, the Committee did not engage
Pearl Meyer & Partners with respect to compensation
analysis or decisions relating to fiscal 2010 compensation for
our CEO or any of our other executive officers. The Compensation
Committee has again retained Pearl Meyer & Partners to
provide analysis, advice and information, including competitive
market data, to the Compensation Committee related to CEO
compensation and the compensation of other executive officers
for fiscal 2011.
For fiscal 2010, our management utilized the services of Hewitt
Associates LLC to provide competitive market data and executive
compensation plan analysis and advice.
The Compensation Committee considers recommendations from our
CEO in making decisions regarding our executive compensation
program and the compensation of our other executive officers. As
part of the annual compensation planning process, our CEO
recommends targets for our incentive compensation programs.
Following an annual
30
performance review process, our CEO also recommends specific
compensation for our other executive officers, including base
salary adjustments and incentive and equity awards. Our CEO also
presents to the Compensation Committee his evaluation of each
such executive officers contributions during the previous
year, including strengths and development needs, and reviews
succession plans for each of the executive positions.
After input from our CEO, as well as from Pearl
Meyer & Partners and the assessment of compensation
trends and competitive market data, the Compensation Committee
determines what changes, if any, should be made to the executive
compensation program and sets the level of compensation for our
executive officers, other than our CEO. As part of this process,
the Compensation Committee reviews each executive officers
three-year compensation history, including base salary, annual
cash incentive and equity awards and also reviews the types and
levels of other benefits such as change in control severance
agreements, retirement plans and perquisites. In the case of our
CEO, the review and final compensation decisions are made by the
independent directors of our Board, giving due consideration to
the Compensation Committees recommendations.
In setting the levels of compensation at the start of the fiscal
year, the Compensation Committee also establishes the short- and
long-term financial measures, weighting and targets for
performance-based, at-risk compensation. For our CEO, such
measures, weighting and targets are established by the
independent directors of our Board, giving due consideration to
the Compensation Committees recommendations. The specific
financial measures, weighting and targets are intended to
encourage and reward the creation of sustainable, long-term
value for our shareholders and are aligned with our
Board-approved, long-term strategic growth plan and our annual
operating plan.
At the end of each fiscal year, the independent directors of our
Board meet in executive session without the CEO present under
the leadership of the Chairperson of the Compensation Committee
to conduct a performance review of our CEO. During such review,
the directors evaluate the CEOs achievement of agreed-upon
objectives established at the start of the fiscal year, our
overall performance, the CEOs personal self-evaluation of
his effectiveness over the past fiscal year and other
accomplishments. At the end of the fiscal year, the Compensation
Committee also receives a specific compensation recommendation
from our CEO for the other executive officers, which
recommendation is based upon an assessment of each
executives performance, achievement of objectives
established at the start of the fiscal year for the executive
and his or her business unit or organization within the company,
contribution to our performance and other accomplishments.
While compensation levels may differ among our named executive
officers based upon competitive factors and the role,
responsibilities and performance of each named executive
officer, there are no material differences in our compensation
policies or the manner in which total direct compensation
opportunity is determined for any of our named executive
officers. The material elements of our executive compensation
program applicable to our named executive officers also apply to
our other executive officers.
Competitive
Considerations
Each element of our executive compensation program is addressed
in the context of competitive practices. In general, the
Compensation Committee sets total target compensation for our
CEO and other executives to approximate the 40th to 60th
percentile of our comparison group. While the Compensation
Committee reviews survey data, it uses discretion in setting an
executives compensation after considering experience,
position, tenure and contributions. For fiscal 2009, the
Compensation Committee engaged Pearl Meyer & Partners
to assess the composition of our comparison group, median pay
levels for our CEO and other executive officers, the competitive
position of the compensation for our CEO and other executive
officers and the mix and elements of such compensation. Given
the decision not to increase base salary or annual incentive
targets above fiscal 2009 levels, this analysis was not
requested by the Compensation Committee in establishing fiscal
2010 target compensation levels. The comparison group used for
our CEO and other executive officers consists of companies with
one or more of the following attributes: business operations in
the markets in which we participate; similar revenue and market
capitalization; and businesses that compete with us for
executive talent. For fiscal
31
2009, the comparison group consisted of the following
22 companies:
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|
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Agilent Technologies, Inc.
|
|
Molex Incorporated
|
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|
Alliant Techsystems Inc.
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|
NCR Corporation
|
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AMETEK, Inc.
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|
Oshkosh Corporation
|
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Amphenol Corporation
|
|
Pitney Bowes Inc.
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Applied Materials, Inc.
|
|
Precision Castparts Corp.
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Diebold, Incorporated
|
|
Rockwell Automation, Inc.
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|
DRS Technologies, Inc.
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|
Rockwell Collins, Inc.
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|
Goodrich Corporation
|
|
SAIC, Inc.
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|
ITT Corporation
|
|
Spirit Aerosystems Holdings, Inc.
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|
Juniper Networks, Inc.
|
|
Thomas & Betts Corporation
|
|
|
L-3 Communications Holdings, Inc.
|
|
Unisys Corporation
|
The Compensation Committee reviews the composition of the
comparison group used for assessing the compensation for our CEO
and other executive officers on an annual basis and makes
changes it determines are appropriate based on changes to the
attributes of each such company and whether it continues to make
its compensation data available. Pearl Meyer &
Partners, our CEO and management provide input to the
Compensation Committee as to changes to the attributes of
companies in the comparison group.
Elements of Our
Compensation Program
During fiscal 2010, the compensation program for our executive
officers consisted of the following elements:
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base salary;
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annual cash incentive opportunities;
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|
|
equity-based long-term incentives, including stock options,
performance shares, performance share units and in certain
limited instances, restricted stock;
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|
health, welfare and other personal benefits;
|
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|
|
limited perquisites; and
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|
|
change in control, severance, retirement and other
post-employment pay and benefits.
|
The Compensation Committee believes that the elements of our
executive compensation program are competitive and further our
objectives of motivating achievement of our short- and long-term
financial goals and strategic objectives, rewarding superior
performance and aligning the interests of our executives and
shareholders. We do not have a formal policy relating to the mix
among the various elements of our compensation program. However,
we believe the more responsibility an executive has, the greater
the amount of overall compensation that should be
performance-based, at-risk compensation.
32
Named Executive
Officer Fiscal 2010 Target Direct Compensation Mix
The following bar graphs set forth, for our CEO and for our
other named executive officers on average, respectively, the
percentage of fiscal 2010 total target direct compensation
represented by each major element of target direct compensation,
indicating the percentage of fiscal 2010 target direct
compensation that was at risk in the form of performance-based
awards and equity awards. Total direct compensation does not
include other benefits such as retirement benefits, severance
benefits or perquisites. The percentages are based upon the
fiscal 2010 target levels for each element at the time of
approval. A description of the valuation and how each major
element is determined is discussed below.
Base Salary and
How Base Salary is
Determined
We provide executives with a base salary for services rendered
during the year. The Compensation Committee reviews executive
base salaries on an annual basis as well as any time there is a
substantial change in an executives responsibilities or in
market conditions. The Compensation Committee generally targets
an executive officers base salary to be within ten percent
below or ten percent above the median of the market for base
salaries for comparable positions at companies in our comparison
group. However, the specific base salary for an executive also
is influenced by the executives experience, position,
changes in responsibilities, tenure and contributions,
individual performance, and by current market conditions and our
outlook.
In general, executive officers with higher levels of
responsibility have a lower percentage of their compensation
fixed as base salary and a higher percentage of their
compensation at risk. Information regarding base salaries in
fiscal 2010 is set forth in the Summary Compensation Table on
page 46 under the Salary column.
Annual Cash
Incentive Pay and How Annual
Cash Incentive Pay is Determined
Annual
Incentive Plan
Under the Harris Corporation 2005 Annual Incentive Plan, which
was approved by our shareholders in October 2005, at the start
of each fiscal year the Compensation Committee sets an annual
cash incentive compensation target for each executive officer
and recommends to the independent directors of our Board the
target to set for our CEO. The Compensation Committee and
independent directors of our Board, as applicable, also
establish specific financial performance measures and targets at
the start of each fiscal year, including the relative weighting
and thresholds, as well as individual performance objectives for
each
33
executive officer for payouts under our Annual Incentive Plan.
In certain instances, financial performance targets are adjusted
by the Compensation Committee, and in the case of Mr. Lance, the
independent directors of our Board, to take into account items
determined not to be reflective of normal, ongoing business
operations. The Compensation Committee believes the annual cash
incentive motivates our executives to focus on achieving or
exceeding the fiscal year financial performance targets and
individual objectives.
Our CEOs fiscal 2010 annual cash incentive compensation
was subject to a maximum set by the independent directors of the
Board at the start of the fiscal year based upon an earnings per
share (EPS) target. The EPS target was used to
assist in meeting the requirements of Section 162(m) of the
Internal Revenue Code. The actual amount of
Mr. Lances fiscal 2010 annual cash incentive
compensation was based upon actual performance for the year
compared with financial performance targets and individual
objectives established at the start of the fiscal year.
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Determination of Participant Incentive Compensation
Targets Annual cash incentive compensation
targets are set for our named executive officers at the
beginning of each fiscal year using the comparison group data as
a reference point where available for a comparable position, or
broad survey data. As discussed above, as a result of business
conditions, the global recession and economic uncertainties,
none of our executive officers received an increase in fiscal
2010 annual cash incentive targets from the fiscal 2009 levels.
Annual cash incentive opportunities provide executives the
potential to achieve total cash compensation above the target if
our financial performance is above target. However, there is
downside risk if our financial performance is below target.
Annual payouts can range from zero to 200 percent of target
compensation depending on our financial performance and named
executive officer performance against individual objectives.
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|
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|
Financial Performance Measures, Targets and
Weighting Annual cash incentives for fiscal 2010
were based upon Harris overall revenue and operating
income and, for operating segment executives, the applicable
business segments revenue and operating income. Each such
measure was equally weighted. As a general principle, we seek to
establish financial performance targets that are both
challenging and achievable. They are set at levels believed to
require significant effort on the part of the executives, yet
they also represent a reasonable expectation of performance
based upon the markets in which we participate.
|
For each financial performance measure, there is no payout for
performance below the threshold. For fiscal 2010, the threshold
to receive a payment for the revenue performance measure was 80%
of target performance. Based upon the economic uncertainty
discussed above, the threshold to receive a payment for the
applicable operating income performance measure was reduced by
the Compensation Committee from 80% in fiscal 2009 to 50% in
fiscal 2010. Payout calculations established at the start of
fiscal 2010 were based upon the following table:
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|
|
|
|
|
|
|
|
|
|
Operating
|
|
|
|
|
Income
|
|
Revenue
|
% of Target Financial Performance
|
|
Payout %
|
|
Payout %
|
|
Below 50%
|
|
|
0
|
%
|
|
|
0
|
%
|
50%
|
|
|
25
|
%
|
|
|
0
|
%
|
80%
|
|
|
50
|
%
|
|
|
50
|
%
|
90%
|
|
|
80
|
%
|
|
|
80
|
%
|
100%
|
|
|
100
|
%
|
|
|
100
|
%
|
110%
|
|
|
125
|
%
|
|
|
125
|
%
|
125% and above
|
|
|
200
|
%
|
|
|
200
|
%
|
34
2010
Annual Cash Incentive Awards for Named Executive
Officers
Fiscal 2010 approved financial performance measures, targets and
weighting, annual cash incentive compensation targets and actual
annual cash payouts, which also reflect an assessment of
individual objectives, for the named executive officers under
our Annual Incentive Plan were as follows:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Participants
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual
|
|
|
|
|
|
Actual
|
|
|
|
|
|
|
Incentive
|
|
|
Actual Annual
|
|
|
Payout
|
Named
|
|
|
Fiscal 2010 Financial Performance
|
|
|
Plan
|
|
|
Cash Incentive
|
|
|
as a % of
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Executive
|
|
|
Measures, Targets and
|
|
|
Compensation
|
|
|
Compensation
|
|
|
Compensation
|
Officer
|
|
|
Weighting
|
|
|
Target
|
|
|
Payment
|
|
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Target
|
Howard L. Lance
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|
|
Revenue-$5,000 million
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|
50%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Chairman, President and CEO
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|
|
Operating income-$770 million
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50%
|
|
|
$
|
1,155,000
|
|
|
|
$
|
1,690,000
|
|
|
|
|
146%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Gary L. McArthur
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Revenue-$5,000 million
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|
50%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior Vice President and Chief Financial Officer
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Operating income-$770 million
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50%
|
|
|
$
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360,000
|
|
|
|
$
|
527,000
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|
|
|
|
146%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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|
|
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|
Robert K. Henry
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Revenue-$5,000 million
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50%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive Vice President and Chief Operating Officer*
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|
|
Operating income-$770 million
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50%
|
|
|
$
|
505,000
|
|
|
|
$
|
739,000
|
|
|
|
|
146%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Dana A. Mehnert
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RF Communications
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50%
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|
|
|
|
|
|
|
|
|
|
|
|
|
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Group President, RF
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Revenue-$1,873 million
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Communications
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|
RF Communications Operating income-$502 million
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50%
|
|
|
$
|
250,000
|
|
|
|
$
|
409,000
|
|
|
|
|
164%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Daniel R. Pearson
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GCS revenue-$2,827 million
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50%
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Group President, Government Communications Systems
(GCS)*
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GCS operating income-$339 million
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50%
|
|
|
$
|
300,000
|
|
|
|
$
|
335,000
|
|
|
|
|
112%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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*
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Mr. Henry relinquished his position as Chief Operating Officer
on June 1, 2010 and retired from Harris in September 2010.
Mr. Pearson became our Executive Vice President and Chief
Operating Officer on June 1, 2010.
|
These financial performance measures and targets represent
internal measurements of performance, and, while the
calculations are based upon our financial results calculated in
accordance with generally accepted accounting principles in the
United States (GAAP), our results may be adjusted by
the Compensation Committee to take into account items determined
not to be reflective of normal, ongoing business operations. The
Compensation Committee has adopted guidelines in making specific
decisions for these purposes on which items to include or
exclude from our financial results, including that any
adjustment must be objectively measurable under GAAP.
In addition to incentives payable under our Annual Incentive
Plan, annual cash incentive opportunity also includes amounts
payable under the broad-based Performance Reward Plan which is
described on page 36. Under our Performance Reward Plan,
the target payment was 3.5% of eligible compensation if we
achieved operating income of $770 million.
For purposes of calculations under our Annual Incentive Plan and
Performance Reward Plan, the Compensation Committee adjusted
Harris fiscal 2010 operating income results to exclude
charges and expenses related to acquisitions. In addition, the
Compensation Committee adjusted Harris fiscal 2010 revenue
results to also exclude the revenue from acquisitions completed
during fiscal 2010.
Mr. Mehnerts operating income performance measure
target for our RF Communications segment was adjusted by the
Compensation Committee to exclude charges and expenses related
to the acquisition of the Public Safety and Professional
Communications business from Tyco Electronics.
Mr. Pearsons financial performance measure targets
for our Government Communications Systems segment were adjusted
by the Compensation Committee to exclude charges and expenses
related to acquisitions and to exclude the revenue from
acquisitions completed during fiscal 2010.
35
Results and adjusted fiscal 2010 financial performance measure
results and targets were as follows:
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Adjusted Financial Performance
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Financial Performance Measures
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GAAP Results
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Measure Results
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Target
|
Revenue
|
|
|
$
|
5,206 million
|
|
|
|
$
|
5,170 million
|
|
|
|
$
|
5,000 million
|
|
Operating Income
|
|
|
$
|
913 million
|
|
|
|
$
|
937 million
|
|
|
|
$
|
770 million
|
|
RF Communications Revenue
|
|
|
$
|
2,067 million
|
|
|
|
$
|
2,067 million
|
|
|
|
$
|
1,873 million
|
|
RF Communications Operating Income
|
|
|
$
|
707 million
|
|
|
|
$
|
726 million
|
|
|
|
$
|
502 million
|
|
Government Communications Systems Revenue
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|
|
$
|
2,688 million
|
|
|
|
$
|
2,721 million
|
|
|
|
$
|
2,827 million
|
|
Government Communications Systems Operating Income
|
|
|
$
|
337 million
|
|
|
|
$
|
366 million
|
|
|
|
$
|
339 million
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual incentive payouts under our Annual Incentive Plan for the
named executive officers were subject to an upward or downward
adjustment. For fiscal 2010, annual incentive payouts under our
Annual Incentive Plan for the named executive officers, as
calculated based upon the financial performance measures
adjusted results, were adjusted from 0 to 5% higher. The
adjustments made were approved by the Compensation Committee
based upon an assessment of individual performance versus the
pre-established individual objectives.
The annual cash incentive payouts under our Annual Incentive
Plan in respect of fiscal 2010 are also set forth in the note to
the Non-Equity Incentive Plan Compensation column of
the Summary Compensation Table on page 46.
Broad-based
Profit Sharing Plans
We maintain broad-based annual cash incentive plans, available
to most of our U.S.-based employees who have at least one year
of service on the last day of our fiscal year. Our executive
officers participate in our broad-based Performance Reward
Plan. Under this plan, if we are profitable, we will make
a cash payment equal to a minimum of 2% up to a maximum of 6% of
an employees eligible compensation. The actual payment is
based upon our performance against financial targets. For fiscal
2010, the target payout was 3.5% of an employees eligible
compensation if we achieved operating income of
$770 million. For amounts of an employees eligible
compensation above the social security wage base, the payment is
increased up to an additional 5.7% of such eligible compensation
above the social security wage base. Based upon the operating
income results, as adjusted by the Compensation Committee in the
same manner as discussed above regarding our Annual Incentive
Plan, the maximum payout of 6.0% of eligible compensation plus
an additional 5.7% of eligible compensation above the social
security wage base was approved for fiscal 2010 under our
Performance Reward Plan. Participants may elect to defer either
half or all of the payment into the Retirement Plan or our SERP.
The amounts earned by our named executive officers under our
Performance Reward Plan in respect of fiscal 2010 are set forth
in the note to the Non-Equity Incentive Plan
Compensation column of the Summary Compensation Table on
page 46.
36
Long-Term
Compensation
Equity Incentives
and How Long-Term
Compensation is
Determined
We provide long-term incentives through a combination of stock
options and performance share awards. The long-term compensation
elements of our executive compensation program are designed to
motivate our executives to focus on achievement of our long-term
financial goals and strategic objectives. The Compensation
Committee awards different types of equity compensation because
it believes that each type rewards shareholder value creation in
a different way. Although the value of all forms of equity-based
compensation is directly impacted by both increases and
decreases in the price of our common stock, performance share
grants motivate our executives to achieve our multi-year
financial and operating goals because the number of shares
ultimately earned depends upon the level of our performance over
a three-year period. Under such grants, each new fiscal year
begins a new three-year performance cycle for which the
Compensation Committee establishes financial performance targets
and award targets. Stock option grants motivate our executives
to increase shareholder value because the options only have
value to the extent the price of our common stock on the date of
exercise exceeds the stock price on the grant date, and thus
compensation is realized only if our stock price increases over
the term of the award. Equity awards also are intended to retain
executives, encourage share ownership and maintain a direct link
between our executive compensation program and the value and
appreciation in value of our stock.
Equity
Compensation Mix
In determining the appropriate mix of equity compensation
elements, the Compensation Committee considers the mix of such
elements at competitors and our comparison group, the retention
value of each element and other factors important to us,
including tax and accounting treatment, and the recommendation
of the Compensation Committees independent compensation
consultant. The total value of long-term compensation for our
executive officers is typically set by reference to a multiple
of such executive officers base salaries, which
equity-based multiple is assessed using our comparison group.
For fiscal 2010, the Compensation Committee targeted that
approximately 50% of the value of long-term equity incentive
opportunity at the time of award would be allocated as stock
options and 50% of the value would be allocated as performance
shares. This was the same target mix that was approved by the
Compensation Committee for fiscal 2009
long-term
equity compensation. However, at the start of fiscal 2010, in
anticipation of Mr. Henrys possible retirement, the
Compensation Committee determined to allocate 100% of
Mr. Henrys
long-term
equity compensation in the form of stock options. The number of
stock options and performance shares awarded to the named
executive officers in fiscal 2010 was determined based upon the
60-day
average closing market price of our common stock prior to the
grant date, which was $29.85 per share. This average price
compares to the actual closing market price on the grant date of
$35.04 per share, which serves as the basis for the calculation
of amounts presented for 2010 in the Stock Awards and Options
Awards columns of the Summary Compensation Table on page 46.
Stock
Options
Stock options granted to our named executive officers and other
employees during fiscal 2010 were made pursuant to our Harris
Corporation 2005 Equity Incentive Plan, which was approved by
our shareholders in October 2005. Stock option grants made in
fiscal 2010 have the following terms:
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|
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An exercise price equal to or greater than the closing price of
our stock on the date of grant;
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|
|
|
|
|
Vest in equal installments of
one-third on
the first anniversary of the grant date, an additional
one-third on
the second anniversary and the final
one-third on
the third anniversary;
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|
|
|
Expire 10 years from the grant date; and
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|
|
|
Vesting accelerates upon a change in control or other events as
discussed below.
|
A listing of the stock options granted to our named executive
officers in fiscal 2010 and information relating to the terms
and conditions of such stock options appears in the Grants of
Plan-Based Awards in Fiscal 2010 Table on page 49 and the
related notes. For additional information relating to the terms
and conditions of stock options, see the notes to the
Outstanding Equity Awards at 2010 Fiscal Year End Table on
page 51.
Without the approval of a majority of the votes cast at a
meeting of our shareholders, stock options granted by us may not
be repriced, replaced, regranted
37
through cancellation or modified by us, other than in connection
with a change in our capitalization, including spin-offs, if the
effect thereof would be to reduce the exercise price of such
stock options.
Performance
Share Awards
Financial performance measures for performance shares granted in
fiscal 2010 covering the three-year performance period of fiscal
2010 through fiscal 2012 include the achievement of targets,
weighted equally, for three-year cumulative operating income for
the fiscal
2010-2012
period and average annual return on invested capital. The
Compensation Committee also reviews our performance over the
three-year period compared with the Standard and Poors 500
index and may adjust the payout based on this review of our
relative performance. The actual performance share award payout
with respect to fiscal 2010 grants can range from 0% to 200% of
the target number of performance shares or units. The
Compensation Committee believes that the focus on operating
income and return on invested capital financial performance
measures should improve earnings and capital management over the
long term and that such measures motivate financial performance
that management can influence directly. For additional
information relating to the terms and conditions of performance
shares, see the notes to the Grants of Plan-Based Awards in
Fiscal 2010 Table on page 49 and the notes to the
Outstanding Equity Awards at 2010 Fiscal Year End Table on
page 51.
For fiscal 2010, the Compensation Committee, and with respect to
Mr. Lance, the independent directors of our Board, approved
the grant of performance shares to our named executive officers
for the three-year performance period covering fiscal years 2010
through 2012 as set forth in the Grants of Plan-Based Awards in
Fiscal 2010 Table on page 49 and related notes.
In August 2010, the Compensation Committee, and for
Mr. Lance, the independent directors of our Board,
determined the payout of performance shares for the three-year
performance period covering fiscal years 2008 through 2010.
Financial performance measures for awards made in fiscal 2008
for the fiscal
2008-2010
performance period were three-year cumulative Earnings Before
Interest and Taxes (EBIT) and average return on
invested capital for each fiscal year of such period. Such
measures were equally weighted. In determining the performance
share award payouts for the fiscal
2008-2010
performance period, the financial performance targets and our
actual results were adjusted by the Compensation Committee, and
in the case of Mr. Lance, the independent directors of our
Board. The fiscal 2010 EBIT target was adjusted to exclude the
financial impact of Harris Stratex Networks, our former
majority-owned publicly-traded subsidiary that was spun-off on
May 27, 2009, and to include acquisition related income
based upon Harris management forecasts for the acquired
businesses. The results were adjusted in substantially the same
manner as the adjustments under our Annual Incentive Plan for
our financial results for the fiscal years in the fiscal
2008-2010
performance cycle, except that the results were adjusted to
eliminate 50% of the fiscal 2009 goodwill impairment charge for
our Broadcast Communications segment. These adjustments were
made in accordance with the same guidelines for annual cash
incentive compensation awards adopted by the Compensation
Committee as discussed above. As adjusted, the three-year
cumulative EBIT financial performance measure result on which
performance was measured for purposes of the fiscal 2010
performance share payout was $2.375 billion, or approximately
99% of the $2.389 billion adjusted target. Also, as adjusted,
the average return on invested capital financial measure result
on which performance was measured for purposes of the fiscal
2010 performance share payout was 19.2%, which was higher than
the 13.0% target set at the start of fiscal 2008. Our average
EBIT growth and return on invested capital performance
approximated the
67th and
71st percentile
compared to the Standard and Poors 500 and Midcap 400
indices. The Compensation Committee determined that such results
warranted a payout at 125% of target. See the Option Exercises
and Stock Vested in Fiscal 2010 Table on page 53 and
related notes for additional information regarding these payouts
for our named executive officers.
Restricted
Stock
As part of long-term incentive compensation, the Compensation
Committee also may grant shares of restricted stock primarily to
facilitate retention and succession planning and as a mechanism
to replace the value of equity awards that may have been
forfeited as a result of leaving a former employer. The
restrictions typically expire at the end of a three year period.
The restrictions provide that the shares may not be sold or
otherwise transferred, and the shares will be immediately
38
forfeited in the event of the recipients termination of
employment for any reason other than death, disability or
retirement; provided that for restricted shares granted after
June 28, 2008 the Compensation Committee may determine
otherwise in its discretion in the event of involuntary
termination for other than misconduct. In fiscal 2010, the
Compensation Committee approved the grant of restricted shares
to Messrs. Mehnert and Pearson primarily for retention
purposes. For further information related to restricted stock
granted to our named executive officers in fiscal 2010, see the
Grants of Plan-Based Awards in Fiscal 2010 Table on page 49
and Outstanding Equity Awards at 2010 Fiscal Year End Table on
page 51 and related notes.
Recovery of
Executive Compensation
(Clawback)
Our executive compensation program permits us to recover all or
a portion of any performance-based compensation if our financial
statements are restated as a result of errors, omissions or
fraud. The amount which may be recovered shall be the amount by
which the affected compensation exceeded the amount that would
have been payable had the financial statements been initially
filed as restated, or any greater or lesser amount that the
Compensation Committee or our Board shall determine. In no case
shall the amount to be recovered by us be less than the amount
required to be repaid or recovered as a matter of law. Recovery
of such amounts by us would be in addition to any actions
imposed by law, enforcement agencies, regulators or other
authorities.
Treatment of
Incentive Awards Upon
Change in
Control
Under our Annual Incentive Plan and equity incentive plans, upon
a change in control and irrespective of employment status:
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|
|
|
|
Annual incentive awards are fully earned to be paid out promptly
following the change in control or, in certain instances
following the end of the fiscal year, in each case at not less
than the target level;
|
|
|
|
All options immediately vest and become exercisable;
|
|
|
|
All performance shares and performance share units are deemed
fully earned and fully vested immediately and are to be paid out
at the end of the applicable performance period at not less than
the target level, subject to accelerated pay-out or forfeiture
in certain circumstances;
|
|
|
|
All restricted shares immediately vest; and
|
|
|
|
|
|
All restricted stock units immediately vest and will be paid as
soon as practicable but no later than 60 days following the
change in control, or in certain events, promptly following the
expiration of the initial restriction period.
|
Information regarding severance payments and obligations to
named executive officers for termination of employment following
a change in control is set forth below in the Change in
Control Severance Agreements section of this Compensation
Discussion and Analysis and the Potential Payments Upon
Termination or a Change in Control section of this proxy
statement beginning on page 58.
Post-Employment
Compensation
Severance
Arrangements
As a general matter, most of our employees are employees
at-will and only a limited number of our executive
officers have contracts requiring us to pay amounts to them upon
termination of employment. Mr. Lances employment and
payments upon termination of employment are governed by an
employment letter agreement discussed below. While
Messrs. McArthur, Henry, Mehnert and Pearson do not have
severance agreements, we have a long-standing practice of
providing severance compensation for terminating an
executives employment other than for cause. The specific
amount may be based upon the relevant circumstances, including
the reason for termination, length of employment and other
factors.
We also have a severance plan for all full-time,
U.S.-based
employees who are terminated as a result of a
reduction-in-force.
Amounts payable under this plan are based upon length of service.
Employment
Agreement with our CEO
We are party to a letter agreement with Mr. Lance that
provides for his continued employment as our CEO and President
and his continued service as a director and as Chairman of the
Board. The agreement provides for certain benefits in the event
Mr. Lances employment is terminated by us without
cause or by Mr. Lance
39
for good reason (as defined in the agreement).
Obligations in the event of a termination following a change in
control will be governed by Mr. Lances change in
control severance agreement. The Compensation Committee and the
independent directors of our Board approved
Mr. Lances employment agreement in the belief that
such agreement assists in retaining Mr. Lances valued
service. In addition, Mr. Lances agreement also binds
Mr. Lance to certain non-compete and non-solicitation
undertakings which are valuable to us.
Change
in Control Severance Agreements
Each of our Board-elected corporate officers, including the
named executive officers, is party to a change in control
severance agreement with us. We believe that such agreements
align the interests of our officers and shareholders during the
period of an actual or rumored change in control and also are
necessary in some cases to attract and retain executives. Under
these agreements, our officers are provided with severance
benefits in the event the officers employment is
terminated without cause, or by the officer for
good reason, within two years following a change in
control. These agreements are designed so that benefits are
provided only if there is both a change in control and a
termination of employment, a double-trigger. Such
severance benefits are designed to preserve the focus and
productivity of our officers, avoid disruption and prevent
attrition during a period of uncertainty. These agreements also
are believed to facilitate the objectiveness of an
executives assessment of a potential transaction that may
be in our shareholders best interests notwithstanding the
potential negative impact of a transaction on an
executives future employment.
If triggered, the lump-sum severance benefit payable under the
change in control severance agreement equals the sum of:
(a) the executives unpaid base salary through the
date of termination, a pro-rated annual bonus (as determined
under the change in control severance agreement), any unpaid
accrued vacation pay and, to the extent permitted under
Section 409A of the Internal Revenue Code, any other
benefits or awards which have been earned or become payable
pursuant to the terms of any compensation plan but which have
not been paid to the executive; and (b) a multiple of one
to three times the executives highest annual rate of base
salary during the 12-month period prior to the date of
termination plus a multiple of one to three times the greatest
of the executives highest annual bonus in the three fiscal
years prior to the change in control, the executives
target bonus for the year during which the change in control
occurs or the executives target bonus for the year in
which the executives employment is terminated. Payment
multiples are three times salary and bonus for
Messrs. Lance and Henry, which for Mr. Lance was
agreed upon in his employment letter agreement, and two times
salary and bonus for Messrs. McArthur, Mehnert and Pearson.
The change in control severance agreements entered into by our
executive officers prior to April 22, 2010, including the
change in control severance agreement with each of our named
executive officers, also provide for a tax gross-up payment to
the executive in the event that payment of any severance
benefits is subject to excise taxes imposed by the IRS on
parachute payments under Section 4999 of the
Internal Revenue Code. All other applicable taxes remain the
responsibility of the officer.
The Compensation Committee annually reviews the terms of the
change in control severance agreements and potential
compensation and payouts resulting from a potential change in
control in light of competitive practices and market trends. In
April 2010, our Compensation Committee determined that any new
or materially modified change in control severance agreements
entered into with executive officers will not provide for any
tax gross-ups of excise taxes. The Compensation Committee has
determined, in its business judgment, that the substantive terms
of these severance agreements are competitive and reasonable.
A description of the material terms of the change in control
severance agreements and Mr. Lances employment letter
agreement, as well as a summary of potential payments upon
termination or a change in control for our named executive
officers, is set forth in the Potential Payments Upon
Termination or a Change in Control section of this proxy
statement beginning on page 58.
Retirement
Programs
Retirement
Plan
We maintain a Retirement Plan, which is a tax-qualified, defined
contribution retirement plan available to most of our
U.S.-based
employees. Subject to applicable Internal Revenue Code limits,
employees may generally contribute up to 25% of eligible
compensation, with named executive officers
40
and other highly compensated employees limited to contributing
12% of eligible compensation. After one year (or, in certain
cases, six months) of service we will make a matching
contribution of up to 6% of eligible compensation. In addition,
employees generally may contribute into the Retirement Plan up
to 100% of cash payments made under our Performance Reward Plan,
subject to Internal Revenue Code limits.
Supplemental
Executive Retirement Plan
To the extent contributions to our Retirement Plan are limited
by the Internal Revenue Code, certain of our salaried employees,
including the named executive officers, are eligible to
participate in our nonqualified SERP. In addition, the
Compensation Committee may, in its discretion, provide for the
deferral of other compensation under our SERP, including equity
awards.
The value of our contributions to our named executive officers
under our Retirement Plan and SERP are set forth in the Summary
Compensation Table on page 46 under the All Other
Compensation column and related notes. Additional
information regarding our SERP and credits to accounts under our
SERP are set forth in the Nonqualified Deferred
Compensation section of this proxy statement beginning on
page 55.
Supplemental
Pension Plan for Mr. Lance
In October 2006, we entered into an agreement to provide
Mr. Lance with a defined retirement benefit. The
Compensation Committee and independent directors of the Board
determined in their business judgment to provide a supplemental
retirement benefit to Mr. Lance because of the stage of his
career during which he joined us and because he did not have a
retirement benefit believed to be competitive with those of
other chief executive officers. In December 2008, the
Compensation Committee and independent directors of our Board
approved changes to Mr. Lances supplemental pension
plan to comply with Section 409A of the Internal Revenue
Code and certain clarifying and other changes. The intent of the
plan is to provide sufficient funds so that
Mr. Lances annual retirement benefit in the
aggregate, including our presumed level of additional
contributions to our Retirement Plan and SERP and benefits under
the Social Security Act and retirement benefits from prior
employment, equals 50% of his final annual base salary and
annual cash incentive target at retirement following
age 60. The terms of Mr. Lances supplemental
pension plan are believed to be competitive and result in a
retirement benefit consistent with those provided to chief
executive officers of our comparison group. Additional
information regarding Mr. Lances supplemental pension
plan is set forth in the Pension Benefits in Fiscal 2010 Table
and related discussion on page 54.
Health, Welfare
and Other Benefits
We maintain health and welfare benefit programs for our
U.S.-based
employees, including medical and prescription coverage, dental
and vision programs, short-term disability insurance, group life
insurance, supplemental life insurance and dependent life
insurance as well as customary vacation, leave of absence and
other similar policies. Our executive officers are eligible to
participate in these programs on the same basis as our other
salaried employees. We also offer a long-term disability plan to
all U.S.-based employees. The plan is self-insured and funded
through employee contributions. The plan provides a benefit of
60% of eligible compensation before offsets for Social Security
and other company or government provided disability benefits.
Eligible compensation for the purposes of the long-term
disability plan is currently limited to $245,000 per year. For
employees with eligible compensation in excess of $245,000, we
provide an additional long-term disability benefit of 50% of
eligible compensation above $245,000 up to $800,000, for a
maximum annual additional disability benefit of up to $277,500.
We provide Mr. Lance a life insurance benefit at two and
one-half times eligible compensation, subject to a limit of
$10 million in coverage.
Perquisites
In fiscal 2010 and recent years we have provided a limited
number of perquisites to our Board-elected officers, including
our named executive officers. Such perquisites consisted of the
following: reimbursement of the costs of tax preparation and
financial planning services; annual physical examinations;
reimbursement of the costs of the initiation fees and ongoing
dues in one approved social or country club; and personal
use of company-owned aircraft for the CEO, and in very limited
instances as approved by the CEO, other executives.
The Compensation Committee annually reviews the types and values
of the perquisites provided to
41
our Board-elected officers. Based upon an assessment of
competitive trends, at the end of fiscal 2010 management
recommended, and the Compensation Committee approved, the
elimination of the reimbursement of costs of tax preparation and
financial planning services, and reimbursement of the costs of
the initiation fees and ongoing dues for an approved social or
country club, such change to be effective July 3, 2010, the
start of our fiscal 2011.
During fiscal 2010, we also revised our executive officer
compensation policies such that we will no longer provide tax
reimbursement or
gross-up
payments with respect to any perquisites provided to executive
officers. Tax
gross-up
payments made pursuant to a plan, policy or arrangement
applicable to a broad base of management employees, such as a
relocation or tax equalization policy, are not affected by such
revision to our executive officer compensation policies.
In consideration of the time demands on our CEO and to minimize
and more effectively utilize his travel time, the Compensation
Committee has authorized the personal use of the company
aircraft by our CEO and his family when traveling with him. Such
personal usage is subject to limits on the number of hours for
personal usage which are set by the Compensation Committee and
reviewed annually. Personal use of aircraft includes travel
undertaken by our CEO to participate in outside board meetings,
which is considered personal use under SEC rules, but which we
view as having a useful business purpose. For fiscal 2010,
Mr. Lances personal use of company aircraft was below
the guidelines set by the Compensation Committee. In addition,
our CEO is responsible for paying the tax on income imputed to
him for personal use of the aircraft.
Perquisites provided in fiscal 2010 represent a small portion of
the total compensation of each named executive officer. The
dollar values ascribed to these perquisites are set forth in the
Summary Compensation Table on page 46 under the All
Other Compensation column and related notes.
Policies Relating
to Our Common Stock
Stock
Ownership Guidelines
To further promote ownership of shares by management and to more
closely align management and shareholder interests, the
Compensation Committee has established stock ownership
guidelines for our Board-elected officers. Executives are
expected to own Harris stock having a minimum value, denominated
as a multiple of their annual base salaries, which can be
accumulated over a five-year period from the date of hire or
promotion into a covered position. The Compensation Committee
annually reviews the stock ownership guidelines, including
reviewing the stock ownership guidelines of our comparison group.
The current stock ownership guidelines, are as follows:
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CEO five times base salary;
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Senior Corporate Officers, Group and Division Presidents
(including the other named executive officers) three
times base salary; and
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Other corporate officers two times base salary.
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Shares that count toward the stock ownership guidelines include
shares owned outright or jointly by the executive, shares owned
in our Retirement Plan, share equivalents represented by amounts
deferred in the Harris stock fund account of our SERP, and
restricted stock and restricted stock unit awards (on an
after-tax basis). Stock options and unearned performance shares
and performance share units do not count for the purpose of
measuring compliance with the ownership guidelines. Executives
age 62 or older are not subject to the guidelines. An
annual review is conducted by the Compensation Committee to
assess compliance with the guidelines. As of September 17,
2010, the named executive officers met their applicable
ownership guidelines, or were on track to achieve their
ownership guidelines within the applicable compliance timeframe.
Our
Equity-Based Compensation Award Practices
As described above, the annual grant cycle for executive officer
stock option grants and other equity awards typically occurs at
the same time as decisions relating to salary increases and
other annual cash incentive awards. This occurs at the start of
each fiscal year, typically in late August, following the
release of our financial results for the preceding fiscal year
and the completion of the audit of our financial statements. The
dates for the meetings at which such grants are typically made
are set well in advance of such meetings, typically one year or
more. For the past several years, the annual equity grant date
for our eligible employees
42
has occurred on the same date as the grant to executive
officers. The Compensation Committee may also make grants of
equity awards to executive officers at other times during the
year due to special circumstances, such as new hires or
promotions. We have not repriced options and if our stock price
declined after the grant date, we have not replaced options. The
exercise price of stock options is the closing market price of
our common stock on the date of grant or, if the grant is made
on a weekend or holiday, the closing market price of our common
stock on the prior business day. Our Compensation Committee or
Board also has the discretion to set the exercise price of stock
options higher than the closing market price of our common stock
on the date of grant.
In June 2007, the Compensation Committee approved a formal
policy on equity grant practices. The policy re-affirmed many of
our equity grant practices and also provides that the grant date
of equity awards made outside of the annual grant cycle, whether
for promotions, recognition or for new hires, shall be the first
trading day of the month following the promotion, recognition or
hire date, provided if such trading day is during a quiet
period under our insider trading policy, the grant will be
made on the first trading day following the end of such period.
We do not time equity grants to take advantage of information,
either positive or negative, about Harris that has not been
publicly disclosed.
As permitted by the terms of our 2005 Equity Incentive Plan, our
Board has delegated to our Chairman, President and CEO the
authority to make equity grants under our 2005 Equity Incentive
Plan to employees who are not executive officers. Such grants
are subject to our equity grant policy. The maximum number of
shares that can be awarded pursuant to this delegation is set by
the Compensation Committee, which reviews these awards annually.
Insider
Trading Policy and Policy Against Hedging
Our insider trading policy prohibits directors, employees and
certain of their family members from purchasing or selling any
type of security, whether issued by us or another company, while
such person is aware of material non-public information relating
to the issuer of the security or from providing such material
non-public information to any person who may trade while aware
of such information. This policy also prohibits directors and
employees from engaging in short sales with respect to our
securities, or entering into puts, calls or other
derivative transactions with respect to our
securities. We also have procedures that require trades by
directors and executive officers to be pre-cleared by
appropriate Harris personnel.
Tax and
Accounting Considerations
Tax
Deductibility of Executive Compensation
Section 162(m) of the Internal Revenue Code of 1986, as
amended (the Internal Revenue Code), generally
prohibits a public company from deducting compensation paid in
any year to any named executive officer in excess of
$1 million. Certain compensation is specifically exempt
from the deduction limit to the extent it is
performance-based. In evaluating whether to
structure executive compensation components as performance-based
and thus, tax deductible, the Compensation Committee considers
the net cost to us, and its ability to effectively administer
executive compensation in the long-term interest of
shareholders. Stock option grants and performance share or
performance share unit awards made to executive officers under
our equity incentive plans, and cash payments under our Annual
Incentive Plan and Performance Reward Plan, are structured
generally to be fully deductible under Section 162(m). The
Compensation Committee believes, however, that it is important
to preserve flexibility in administering compensation programs
in a manner designed to promote corporate goals. Accordingly,
the Compensation Committee from time to time has approved
elements of compensation that were consistent with the
objectives of our executive compensation program, but that may
not be fully deductible. For example, grants of restricted stock
or restricted stock units are not performance-based under
Section 162(m) and, in certain instances, deductibility of
such compensation may be limited. Additionally, in fiscal 2010 a
small portion of Mr. Lances base salary was
non-deductible.
Nonqualified
Deferred Compensation
Section 409A of the Internal Revenue Code requires that
nonqualified deferred compensation be deferred and
paid under plans or arrangements that satisfy the requirements
of the law with respect to the timing of deferral elections,
timing of payments and certain other matters. If such
requirements are not complied with, amounts that are deferred
under compensation arrangements will
43
be currently includable in income and subject to an excise tax.
In general, it is our intention to design and administer our
compensation and benefits plans and arrangements for all of our
employees so that they are either exempt from, or satisfy the
requirements of, Section 409A. We believe we are currently
operating such plans in compliance with Section 409A.
Accounting
for Share-Based Compensation
Before we grant share-based compensation awards, we consider the
accounting impact of the award as structured and other scenarios
in order to analyze the expected impact of the award.
MANAGEMENT
DEVELOPMENT AND
COMPENSATION COMMITTEE REPORT
The following Report of the Management Development and
Compensation Committee does not constitute soliciting material
and the Report should not be deemed filed or incorporated by
reference into any other previous or future filings by Harris
under the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended, except to the extent that
Harris specifically incorporates this Report by reference
therein.
The Compensation Committee has reviewed and discussed with
management the Compensation Discussion and Analysis
section of this proxy statement. Based on its review and
discussion, the Compensation Committee has recommended to the
Board, and the Board has approved, that this Compensation
Discussion and Analysis be included in this proxy statement for
the 2010 Annual Meeting of Shareholders and incorporated by
reference in Harris Annual Report on
Form 10-K
for the fiscal year ended July 2, 2010.
Submitted on September 14, 2010 by the Management
Development and Compensation Committee of the Board of
Directors.
Stephen P. Kaufman, Chairperson
Thomas A. Dattilo
Terry D. Growcock
Dr. James C. Stoffel
RELATIONSHIP
BETWEEN COMPENSATION
PLANS AND RISK
In 2010, in response to the heightened focus on risk in
incentive plans, management and the Compensation Committee, with
the assistance of Hewitt Associates LLC, conducted a
comprehensive review of our compensation programs, policies and
practices, including executive compensation and major
broad-based compensation programs in which salaried and hourly
employees at various levels of our organization participate. The
goal of this review was to assess whether any of our
compensation programs, policies or practices, either
individually or in the aggregate, would encourage executives or
employees to undertake unnecessary or excessive risks that were
reasonably likely to have a material adverse impact on Harris.
We reviewed our variable pay, sales commission plans and other
compensation plans and considered the number of participants in
each plan, the participants level within the organization,
the target and maximum payment potential and the performance
criteria under each plan, and the type of plan. Management and
the Compensation Committee also applied a risk assessment to
those plans that were identified as having the potential to
deliver a material amount of compensation, which for fiscal 2010
were the annual and long-term incentive plans that are described
in the Compensation Discussion and Analysis section
of this proxy statement. Management and the Compensation
Committee concluded that our executive compensation strategy,
programs, policies and practices do not pose material risk due
to a variety of mitigating factors. These factors include:
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An emphasis on long-term compensation that utilizes a balanced
portfolio of compensation elements, such as cash and equity and
delivers rewards based on sustained performance over time;
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The Compensation Committees power to set short- and
long-term performance objectives for our incentive plans, which
we believe are appropriately correlated with shareholder value
and which use multiple financial metrics to measure performance;
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Our performance share awards focus on cumulative EBIT or
operating income and return on invested capital over overlapping
three-year award periods. This creates a
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44
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focus on driving sustained performance over multiple award
periods, which mitigates the potential for executives to take
excessive risks to drive one-time, short-term performance spikes
in any one award period;
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The use of equity awards with vesting periods to foster
retention and align our executives interests with those of
our shareholders;
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Capping the potential payouts under both short- and long-term
incentive plans to eliminate the potential for any windfalls;
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A clawback policy that allows us to recover all or a
portion of any performance-based compensation if our financial
statements are restated as a result of errors, omissions or
fraud;
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Share ownership guidelines; and
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A broad array of competitive health and welfare benefit programs
that offer employees and executives an opportunity to build
meaningful retirement assets and benefit protections throughout
their career.
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As a result of this review, both management and the Compensation
Committee concluded that our compensation plans, programs,
policies and practices are not reasonably likely to have a
material adverse effect on Harris.
45
SUMMARY
COMPENSATION TABLE
The following table summarizes the compensation paid to, or
accrued on behalf of, our named executive officers for the
fiscal years ended July 2, 2010, July 3, 2009 and
June 27, 2008. The named executive officers are our CEO,
our Chief Financial Officer, and our three other most highly
compensated executive officers based upon their total
compensation as reflected in the table below for the fiscal year
ended July 2, 2010 (not including amounts, if any, in the
Change in Pension Value and Nonqualified Deferred
Compensation Earnings column).
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Change in
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Pension Value
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and Nonqualified
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Non-Equity
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Deferred
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Stock
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Option
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Incentive Plan
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Compensation
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All Other
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Salary
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Bonus
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Awards
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Awards
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Compensation
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Earnings
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Compensation
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Total
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Name and Principal Position
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Year
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$ (1)
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$
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$ (2)
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$ (3)
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$ (4)
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$ (5)
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$ (6)
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$
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Howard L. Lance
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2010
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$
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1,050,000
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$
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0
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$
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2,642,016
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$
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2,830,612
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$
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2,004,492
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$
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1,787,000
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$
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393,265
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$
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10,707,385
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Chairman, President and
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2009
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$
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1,061,539
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$
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0
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$
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2,256,300
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$
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2,476,751
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$
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1,372,478
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$
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1,004,000
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$
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531,702
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$
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8,702,770
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Chief Executive Officer
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2008
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$
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972,115
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$
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0
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$
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1,789,488
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$
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2,237,992
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$
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1,422,777
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$
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807,000
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$
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556,406
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$
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7,785,778
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Gary L. McArthur
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2010
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$
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500,000
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$
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0
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$
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588,672
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$
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629,140
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$
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641,071
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$
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0
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$
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83,678
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$
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2,442,561
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Senior Vice President and
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2009
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$
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492,308
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$
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0
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$
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1,019,475
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$
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550,864
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$
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472,328
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$
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0
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$
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113,241
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$
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2,648,216
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Chief Financial Officer
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2008
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$
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388,846
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$
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0
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$
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695,610
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$
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429,748
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$
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367,347
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$
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0
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$
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128,630
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$
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2,010,181
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert K. Henry
|
|
|
|
2010
|
|
|
|
$
|
560,000
|
|
|
|
$
|
0
|
|
|
|
$
|
0
|
|
|
|
$
|
881,209
|
|
|
|
$
|
884,895
|
|
|
|
$
|
0
|
|
|
|
$
|
98,456
|
|
|
|
$
|
2,424,560
|
|
|
|
Executive Vice President and
|
|
|
|
2009
|
|
|
|
$
|
568,173
|
|
|
|
$
|
0
|
|
|
|
$
|
0
|
|
|
|
$
|
1,542,987
|
|
|
|
$
|
603,272
|
|
|
|
$
|
0
|
|
|
|
$
|
113,426
|
|
|
|
$
|
2,827,858
|
|
|
|
Chief Operating Officer*
|
|
|
|
2008
|
|
|
|
$
|
526,731
|
|
|
|
$
|
0
|
|
|
|
$
|
577,710
|
|
|
|
$
|
731,168
|
|
|
|
$
|
623,261
|
|
|
|
$
|
0
|
|
|
|
$
|
165,840
|
|
|
|
$
|
2,624,710
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dana A. Mehnert
|
|
|
|
2010
|
|
|
|
$
|
400,000
|
|
|
|
$
|
0
|
|
|
|
$
|
784,896
|
|
|
|
$
|
503,105
|
|
|
|
$
|
497,565
|
|
|
|
$
|
0
|
|
|
|
$
|
54,093
|
|
|
|
$
|
2,239,659
|
|
|
|
Group President, RF
|
|
|
|
2009
|
|
|
|
$
|
308,654
|
|
|
|
$
|
0
|
|
|
|
$
|
269,100
|
|
|
|
$
|
294,648
|
|
|
|
$
|
249,124
|
|
|
|
$
|
0
|
|
|
|
$
|
56,520
|
|
|
|
$
|
1,178,046
|
|
|
|
Communications
|
|
|
|
2008
|
|
|
|
$
|
239,127
|
|
|
|
$
|
0
|
|
|
|
$
|
309,488
|
|
|
|
$
|
167,870
|
|
|
|
$
|
248,813
|
|
|
|
$
|
0
|
|
|
|
$
|
61,389
|
|
|
|
$
|
1,026,687
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Daniel R. Pearson
|
|
|
|
2010
|
|
|
|
$
|
415,000
|
|
|
|
$
|
0
|
|
|
|
$
|
662,256
|
|
|
|
$
|
521,700
|
|
|
|
$
|
416,662
|
|
|
|
$
|
0
|
|
|
|
$
|
46,158
|
|
|
|
$
|
2,061,776
|
|
|
|
Group President, Government
|
|
|
|
2009
|
|
|
|
$
|
409,135
|
|
|
|
$
|
0
|
|
|
|
$
|
879,750
|
|
|
|
$
|
456,918
|
|
|
|
$
|
503,188
|
|
|
|
$
|
0
|
|
|
|
$
|
84,133
|
|
|
|
$
|
2,333,124
|
|
|
|
Communications Systems*
|
|
|
|
2008
|
|
|
|
$
|
323,750
|
|
|
|
$
|
0
|
|
|
|
$
|
247,590
|
|
|
|
$
|
314,850
|
|
|
|
$
|
429,027
|
|
|
|
$
|
0
|
|
|
|
$
|
76,322
|
|
|
|
$
|
1,391,539
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
|
Mr. Henry relinquished his position
as Chief Operating Officer on June 1, 2010 and retired from
Harris in September 2010. Mr. Pearson became Executive Vice
President and Chief Operating Officer on June 1, 2010.
|
|
(1)
|
|
The Salary column
reflects the base salary for each of our named executive
officers for the fiscal year. Fiscal 2010 includes
52 weeks; fiscal 2009 includes 53 weeks. The amounts
shown include any portion of base salary deferred and
contributed by the named executive officers to our Retirement
Plan or our SERP. See the Nonqualified Deferred Compensation
Table on page 57 and related notes for information
regarding contributions by the named executive officers to the
SERP.
|
|
(2)
|
|
Amounts shown under the Stock
Awards column reflect the aggregate grant date fair value
computed in accordance with ASC 718 for fiscal 2010, fiscal 2009
and fiscal 2008, respectively, with respect to performance
shares or restricted stock granted to named executive officers.
Under ASC 718, the fair value of such stock awards is determined
as of the date of grant using the closing market price of Harris
common stock on the date of grant. The amounts reported for
fiscal 2008 and fiscal 2009 do not match the amounts disclosed
in last years proxy statement, due to the new reporting
requirements adopted by the SEC, which require the new grant
date fair value methodology. The assumptions used for the
valuations are set forth in Note 14 to our audited
consolidated financial statements in our Annual Report on Form
10-K for the
respective fiscal year end. Pursuant to SEC rules, we
disregarded the estimates of forfeitures related to
service-based vesting conditions. The grant date fair value of
performance share awards included in this column is computed
based upon the probable outcome of the performance conditions as
of the grant date of such awards. See the Grants of Plan-Based
Awards in Fiscal 2010 Table on page 49 and related notes
and the Compensation Discussion and Analysis for
information with respect to stock awards made in fiscal 2010 and
the Outstanding Equity Awards at 2010 Fiscal Year End Table on
page 51 and related notes for information with respect to
stock awards made prior to fiscal 2010. Amounts reflect our
accounting for these awards and do not correspond to the actual
values that may be realized by the named executive officers.
|
|
|
|
The respective grant date fair
values of the performance share awards in fiscal 2010 with a
fiscal
2010-2012
performance period, in fiscal 2009 with a fiscal
2009-2011
performance period and in fiscal 2008 with a fiscal
2008-2010
performance period, assuming at such grant date the maximum
payment of 200% of target, are as follows:
Mr. Lance $5,284,032, $4,512,600 and
$3,578,976; Mr. McArthur $1,177,344, $1,003,950
and $683,820; Mr. Mehnert $939,072, $538,200
and $265,275; and Mr. Pearson $974,112,
$828,000 and $495,180. The grant date fair value of the
performance share award in fiscal 2008 with a fiscal
2008-2010
performance period, assuming at such grant date the maximum
payment of 200% of target, for Mr. Henry is $1,155,420. We
did not grant Mr. Henry performance share awards in fiscal
2009 or 2010.
|
|
(3)
|
|
Amounts shown under the
Option Awards column reflect the aggregate grant
date fair value computed in accordance with ASC 718 for fiscal
2010, fiscal 2009 and fiscal 2008, respectively, with respect to
stock options granted to named executive officers. The amounts
reported for fiscal 2008 and fiscal 2009 do not match the
amounts disclosed in last years proxy statement, due to
the new reporting requirements adopted by the SEC, which require
the new grant date fair value methodology. The assumptions used
for the valuations are set forth in Note 14 to our audited
consolidated financial statements in our Annual Report on
Form 10-K
for the respective fiscal year end. Pursuant to SEC rules, we
disregarded the estimates of forfeitures related to
service-based vesting conditions. See the Grants of Plan-Based
Awards in Fiscal 2010 Table on page 49 and related notes
and the Compensation Discussion and Analysis section
of this proxy statement for information with respect to stock
options granted in fiscal 2010 and the Outstanding
|
46
|
|
|
|
|
Equity Awards at 2010 Fiscal Year
End Table on page 51 and related notes for information with
respect to stock options granted prior to fiscal 2010. Amounts
reflect our accounting for these stock option grants and do not
correspond to the actual values that may be realized by the
named executive officers.
|
|
(4)
|
|
Amounts shown under the
Non-Equity Incentive Plan Compensation column
reflect (a) cash amounts earned under our Annual Incentive
Plan for services performed in fiscal 2010, fiscal 2009 and
fiscal 2008, respectively, and (b) amounts earned under our
Performance Reward Plan in fiscal 2010, fiscal 2009 and
fiscal 2008, respectively. Payouts were determined by our
independent directors, in the case of Mr. Lance, and the
Compensation Committee, in the case of the other named executive
officers, in August 2010, August 2009 and August 2008,
respectively, and paid shortly thereafter. The amounts shown
include any portion of such payments deferred and contributed by
our named executive officers to our Retirement Plan or our SERP.
The amounts shown for fiscal 2010 are comprised of the following
amounts: Mr. Lance $1,690,000 under the Annual
Incentive Plan and $314,492 under the Performance Reward Plan;
Mr. McArthur $527,000 under the Annual
Incentive Plan and $114,071 under the Performance Reward Plan;
Mr. Henry $739,000 under the Annual Incentive
Plan and $145,895 under the Performance Reward Plan;
Mr. Mehnert $409,000 under the Annual Incentive
Plan and $88,565 under the Performance Reward Plan; and
Mr. Pearson $335,000 under the Annual Incentive
Plan and $81,662 under the Performance Reward Plan. For
additional information about our Annual Incentive Plan and
Performance Reward Plan and these payouts, see the
Compensation Discussion and Analysis section of this
proxy statement and the Grants of Plan-Based Awards in Fiscal
2010 Table on page 49 and related notes.
|
|
|
|
The amounts shown for fiscal 2009
are comprised of the following amounts:
Mr. Lance $1,225,000 under the Annual Incentive
Plan and $147,478 under the Performance Reward Plan;
Mr. McArthur $416,000 under the Annual
Incentive Plan and $56,328 under the Performance Reward Plan;
Mr. Henry $534,000 under the Annual Incentive
Plan and $69,272 under the Performance Reward Plan;
Mr. Mehnert $213,000 under the Annual Incentive
Plan and $36,124 under the Performance Reward Plan; and
Mr. Pearson $450,000 under the Annual Incentive
Plan and $53,188 under the Performance Reward Plan.
|
|
|
|
The amounts shown for fiscal 2008
are comprised of the following amounts:
Mr. Lance $1,286,000 under the Annual Incentive
Plan and $136,777 under the Performance Reward Plan;
Mr. McArthur $326,000 under the Annual
Incentive Plan and $41,347 under the Performance Reward Plan;
Mr. Henry $559,000 under the Annual Incentive
Plan and $64,261 under the Performance Reward Plan;
Mr. Mehnert $223,000 under the Annual Incentive
Plan and $25,813 under the Performance Reward Plan; and Mr.
Pearson $388,000 under the Annual Incentive Plan and
$41,027 under the Performance Reward Plan.
|
|
(5)
|
|
Represents an estimate of the
fiscal year change in the present value of Mr. Lances
accumulated benefit for fiscal 2010, fiscal 2009 and fiscal
2008, respectively, under his Supplemental Pension Plan. These
amounts were determined using interest rate and mortality rate
assumptions consistent with those used in our financial
statements. The increase in Mr. Lances change in
pension value in fiscal 2010 as compared to fiscal 2009
primarily resulted from the reduction of the applicable discount
rate used to value pension plan liabilities from 6.19% to 5.05%,
consistent with the overall decline in interest rates. No
changes were made in the method of calculating benefits under
the plan, and no additional benefits were awarded. For
additional information regarding Mr. Lances
Supplemental Pension Plan, see the Pension Benefits in Fiscal
2010 Table on page 54 and related notes and the
Compensation Discussion and Analysis section of this
proxy statement. There were no preferential or above-market
earnings on amounts of compensation deferred by our named
executive officers.
|
|
(6)
|
|
The following table describes the
components of the All Other Compensation column for
fiscal 2010:
|
Fiscal
2010 All Other Compensation Table
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company
|
|
|
Company
|
|
|
Perquisites
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contributions
|
|
|
Credits
|
|
|
and Other
|
|
|
|
|
|
|
|
|
|
|
Insurance
|
|
|
to Retirement
|
|
|
to SERP
|
|
|
Personal
|
|
|
|
|
|
|
|
|
|
|
Premiums
|
|
|
Plan
|
|
|
(nonqualified)
|
|
|
Benefits
|
|
|
|
|
|
|
|
Name
|
|
|
(a)
|
|
|
(b)
|
|
|
(c)
|
|
|
(d)
|
|
|
Total
|
|
|
|
|
Howard L. Lance
|
|
|
$
|
5,954
|
|
|
|
$
|
16,500
|
|
|
|
$
|
147,900
|
|
|
|
$
|
222,911
|
|
|
|
$
|
393,265
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gary L. McArthur
|
|
|
$
|
1,393
|
|
|
|
$
|
8,423
|
|
|
|
$
|
53,197
|
|
|
|
$
|
20,665
|
|
|
|
$
|
83,678
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert K. Henry
|
|
|
$
|
1,725
|
|
|
|
$
|
8,746
|
|
|
|
$
|
69,194
|
|
|
|
$
|
18,791
|
|
|
|
$
|
98,456
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dana A. Mehnert
|
|
|
$
|
1,053
|
|
|
|
$
|
8,308
|
|
|
|
$
|
40,232
|
|
|
|
$
|
4,500
|
|
|
|
$
|
54,093
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Daniel R. Pearson
|
|
|
$
|
1,158
|
|
|
|
$
|
8,619
|
|
|
|
$
|
36,381
|
|
|
|
$
|
0
|
|
|
|
$
|
46,158
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Amounts shown reflect the dollar
value of the premiums paid by us on life insurance for the named
executive officers under our broad-based group basic life
insurance benefit. For Mr. Lance, it also reflects the
premiums paid for his life insurance benefit which is two and
one-half times his eligible compensation. Eligible compensation
consists of annual base salary plus his then-current Annual
Incentive Plan award at target.
|
|
(b)
|
Amounts shown reflect company
contributions under our Retirement Plan, which is a
tax-qualified, defined contribution plan.
|
|
(c)
|
Amounts shown reflect company
credits to the named executive officers account under the
SERP, which is a nonqualified, defined contribution retirement
plan. For additional information regarding the SERP, see the
Nonqualified Deferred Compensation Table on page 57 and
related notes.
|
|
|
(d)
|
Perquisites and other personal
benefits provided to the named executive officers for fiscal
2010 were as follows: Mr. Lance $201,108
for personal use of company aircraft (including $91,178 for use
associated with attendance at outside board meetings), $14,425
for tax and financial counseling services, $5,277 for club
membership dues and $2,101 for an annual physical;
Mr. McArthur $4,000 for tax and financial
counseling services, $8,491 for club membership dues, $1,766 for
personal use of company aircraft and $6,408 for an annual
physical; Mr. Henry $7,000 for tax and
financial counseling services, $7,856 for club membership dues,
$2,589 for an annual physical and $1,346 for personal use of
company aircraft; and Mr. Mehnert $4,500 for
tax and financial counseling services. Commencing at the
|
47
|
|
|
start of our fiscal 2011, we will
no longer reimburse executive officers for costs of tax and
financial counseling services or for club membership dues.
|
|
|
|
The incremental cost to Harris of
personal use of the company aircraft is calculated based on the
average variable operating costs to Harris. Variable operating
costs include fuel, maintenance, weather-monitoring, on-board
catering, trip-related hangar/parking, landing/ramp fees and
other miscellaneous variable costs. The total annual variable
costs are divided by the annual number of miles the Harris
aircraft flew to derive an average variable cost per mile. This
average variable cost per mile is then multiplied by the miles
flown for personal use to derive the incremental cost. The
methodology excludes fixed costs that do not change based on
usage, such as pilots and other employees salaries,
purchase costs of the aircraft and non-trip related hangar
expenses. The taxable benefit associated with personal use of
the Harris aircraft is imputed to our named executive officers
at Standard Industry Level rates and named executive
officers do not receive any
gross-up for
payment of taxes for such imputed income.
|
|
|
As noted above, we also offer an
additional long-term disability benefit to employees with
eligible compensation in excess of $245,000. Because we
self-insure this benefit, there is no incremental cost reflected
for the named executive officers.
|
|
|
Certain Harris-related events may
include meetings and receptions with our customers, executive
management or Board attended by the named executive officer and
a spouse or guest. If the company aircraft is used and a spouse
or guest travels with the named executive officer, no amounts
are included because there is no incremental cost to Harris. We
also have Harris-purchased tickets to athletic or other events
generally for business purposes. In limited instances,
executives, including our named executive officers, may have
personal use of Harris-purchased event tickets. No amounts are
included because there is no incremental cost to Harris of such
personal use. For a discussion of perquisites and other personal
benefits provided to our named executive officers, see the
Compensation Discussion and Analysis section of this
proxy statement.
|
Salary
and Bonus as a Proportion of 2010 Total Compensation
Using the amounts shown under the Salary and
Bonus columns and the amounts shown under the
Total column in the Summary Compensation Table, the
salary and bonus of each of our named executive officers as a
proportion of their respective 2010 total compensation was as
follows: Mr. Lance-9.8%; Mr. McArthur-20.5%;
Mr. Henry-23.1%; Mr. Mehnert-17.9%; and
Mr. Pearson-20.1%.
48
GRANTS OF
PLAN-BASED AWARDS IN FISCAL 2010
The following table provides information about cash (non-equity)
and equity incentive compensation awarded to our named executive
officers in fiscal 2010, including: (1) the grant date of
equity awards; (2) the range of possible cash payouts under
our Annual Incentive Plan and Performance Reward Plan for fiscal
2010 performance; (3) the range of performance shares that
may be earned in respect of the performance share grants for the
three-year performance period covering fiscal 2010 through
fiscal 2012; (4) restricted shares granted to
Messrs. Mehnert and Pearson; (5) the number and
exercise price of stock option grants; and (6) the grant
date fair value of the grants of performance shares, restricted
stock and stock options computed under ASC 718.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other
|
|
|
All Other
|
|
|
|
|
|
Grant
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
|
Option
|
|
|
Exercise
|
|
|
Date
|
|
|
|
|
|
|
|
|
|
Estimated Possible Payouts
|
|
|
Estimated Future Payouts
|
|
|
Awards:
|
|
|
Awards:
|
|
|
or Base
|
|
|
Fair
|
|
|
|
|
|
|
|
|
|
Under Non-Equity Incentive Plan
|
|
|
Under Equity Incentive Plan
|
|
|
Number of
|
|
|
Number of
|
|
|
Price of
|
|
|
Value of
|
|
|
|
|
|
|
|
|
|
Awards (1)
|
|
|
Awards (2)
|
|
|
Shares of
|
|
|
Securities
|
|
|
Option
|
|
|
Stock and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock or
|
|
|
Underlying
|
|
|
Awards
|
|
|
Option
|
|
|
|
Type of
|
|
|
Grant
|
|
|
Threshold
|
|
|
Target
|
|
|
Maximum
|
|
|
Threshold
|
|
|
Target
|
|
|
Maximum
|
|
|
Units
|
|
|
Options
|
|
|
($/Share)
|
|
|
Awards
|
Name
|
|
|
Award
|
|
|
Date
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
(#)
|
|
|
(#)
|
|
|
(#)
|
|
|
(#) (3)
|
|
|
(#) (4)
|
|
|
(5)
|
|
|
($) (6)
|
Howard L. Lance
|
|
|
Annual Incentive Plan
|
|
|
|
|
|
|
|
$
|
144,375
|
|
|
|
$
|
1,155,000
|
|
|
|
$
|
2,310,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance Reward Plan
|
|
|
|
|
|
|
|
$
|
45,639
|
|
|
|
$
|
150,612
|
|
|
|
$
|
387,032
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance shares
|
|
|
|
8/28/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
75,400
|
|
|
|
|
150,800
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,642,016
|
|
|
|
|
Options
|
|
|
|
8/28/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
274,000
|
|
|
|
$
|
35.04
|
|
|
|
$
|
2,830,612
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gary L. McArthur
|
|
|
Annual Incentive Plan
|
|
|
|
|
|
|
|
$
|
45,000
|
|
|
|
$
|
360,000
|
|
|
|
$
|
720,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance Reward Plan
|
|
|
|
|
|
|
|
$
|
19,664
|
|
|
|
$
|
56,462
|
|
|
|
$
|
136,652
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance shares
|
|
|
|
8/28/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,800
|
|
|
|
|
33,600
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
588,672
|
|
|
|
|
Options
|
|
|
|
8/28/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
60,900
|
|
|
|
$
|
35.04
|
|
|
|
$
|
629,140
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert K. Henry
|
|
|
Annual Incentive Plan
|
|
|
|
|
|
|
|
$
|
63,125
|
|
|
|
$
|
505,000
|
|
|
|
$
|
1,010,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance Reward Plan
|
|
|
|
|
|
|
|
$
|
22,789
|
|
|
|
$
|
70,812
|
|
|
|
$
|
177,602
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options
|
|
|
|
8/28/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
85,300
|
|
|
|
$
|
35.04
|
|
|
|
$
|
881,209
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dana A. Mehnert
|
|
|
Annual Incentive Plan
|
|
|
|
|
|
|
|
$
|
31,250
|
|
|
|
$
|
250,000
|
|
|
|
$
|
500,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance Reward Plan
|
|
|
|
|
|
|
|
$
|
15,114
|
|
|
|
$
|
41,762
|
|
|
|
$
|
99,212
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance shares
|
|
|
|
8/28/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,400
|
|
|
|
|
26,800
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
469,536
|
|
|
|
|
Restricted shares
|
|
|
|
8/28/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
315,360
|
|
|
|
|
Options
|
|
|
|
8/28/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
48,700
|
|
|
|
$
|
35.04
|
|
|
|
$
|
503,105
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Daniel R. Pearson
|
|
|
Annual Incentive Plan
|
|
|
|
|
|
|
|
$
|
37,500
|
|
|
|
$
|
300,000
|
|
|
|
$
|
600,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance Reward Plan
|
|
|
|
|
|
|
|
$
|
15,964
|
|
|
|
$
|
46,312
|
|
|
|
$
|
112,667
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance shares
|
|
|
|
8/28/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,900
|
|
|
|
|
27,800
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
487,056
|
|
|
|
|
Restricted shares
|
|
|
|
8/28/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
175,200
|
|
|
|
|
Options
|
|
|
|
8/28/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50,500
|
|
|
|
$
|
35.04
|
|
|
|
$
|
521,700
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
The Estimated Possible Payouts Under Non-Equity Incentive
Plan Awards column shows the range of possible cash
payouts under our Annual Incentive Plan and our Performance
Reward Plan in respect of fiscal 2010 performance. If
performance is below threshold then no amounts will be paid.
Amounts actually earned in respect of fiscal 2010 were
determined by our independent directors, in the case of
Mr. Lance, and the Compensation Committee, in the case of
the other named executive officers, in August 2010 and paid
shortly thereafter and are reported under the Non-Equity
Incentive Plan Compensation column in the Summary
Compensation Table on page 46. For additional information
related to our Annual Incentive Plan and the Performance Reward
Plan, including performance targets, measures and weighting, see
the Compensation Discussion and Analysis section of
this proxy statement.
|
|
(2)
|
The Estimated Future Payouts Under Equity Incentive Plan
Awards column shows the range of performance shares that
may be earned in respect of performance shares granted under our
2005 Equity Incentive Plan in fiscal 2010 for the three-year
performance period covering fiscal years 2010 through 2012. The
number of shares that will be earned by each named executive
will range from 0% to a maximum of 200% of the target number of
performance shares and will be based upon the achievement of
three-year cumulative operating income for the fiscal 2010-2012
period and average annual return on invested capital against
targets. There is no threshold level for a payout of performance
shares. For additional information related to the performance
measures, targets and weighting, see the Compensation
Discussion and Analysis section of this proxy statement.
During the performance period, cash dividend equivalent payments
are paid on these performance shares in an amount equal to
dividends paid on our common stock. An executive must remain
employed with us through the last day of the performance period
to earn an award, although a pro-rata portion of the award will
be earned if employment terminates in the case of death,
disability or retirement after age 55 with ten or more
years of full-time service, or involuntary termination of the
executive other than for misconduct or cause. See the
Potential Payments Upon Termination or a Change in
Control section of this proxy statement beginning on
page 58 for the treatment of performance shares in these
situations and upon a change in control.
|
|
(3)
|
The All Other Stock Awards: Number of Shares of Stock or
Units column shows restricted shares granted to
Messrs. Mehnert and Pearson on August 28, 2009 that
will vest on August 28, 2012, provided each such named
executive officer is still employed by us on such date. Cash
dividend equivalent payments are paid in cash on these shares of
restricted stock in an amount equal to dividends paid on our
common stock. In the case of death or disability or upon a
change in control, these shares of restricted stock will
immediately vest. In the case of retirement after age 55
with ten or more years of full-time service, the number of
restricted shares, if any, that will vest shall be determined by
the Compensation Committee. In the case of involuntary
termination of employment other than for misconduct or cause,
unvested restricted shares are automatically forfeited, provided
that the Compensation Committee may determine otherwise in its
discretion.
|
49
|
|
(4)
|
The All Other Option Awards: Number of Securities
Underlying Options column shows the number of stock
options granted to our named executive officers during fiscal
2010. These options vest one-third on the first anniversary of
the grant date, an additional one-third on the second
anniversary and the final one-third on the third anniversary. In
the event of a change in control, these options will immediately
vest and become exercisable. These stock options expire no later
than ten years from the date of grant. For additional
information related to the terms and conditions of the stock
options granted by us, see the Outstanding Equity Awards at 2010
Fiscal Year End Table on page 51 and related notes.
|
|
(5)
|
The Exercise or Base Price of Option Awards column
shows the exercise price for the stock options at the time of
grant, which was the closing market price per share of Harris
common stock on Friday, August 28, 2009.
|
|
(6)
|
The Grant Date Fair Value of Stock and Option Awards
column shows the aggregate grant date fair value computed in
accordance with ASC 718 of the performance shares (at target),
shares of restricted stock and stock options granted to the
named executive officers in fiscal 2010. In accordance with SEC
rules, the amounts in this column reflect the grant date fair
value without reduction for estimates of forfeitures related to
service-based vesting conditions. The grant date fair value of
performance shares shown in this column is computed based upon
the probable outcome of the performance conditions as of the
grant date of such awards, which is at target. The grant date
fair value for performance shares and shares of restricted stock
is based on a grant price of $35.04, the closing market price
per share of Harris common stock on Friday, August 28,
2009. The assumptions used for the valuations are set forth in
Note 14 to our audited consolidated financial statements in
our Annual Report on
Form 10-K
for the fiscal year ended July 2, 2010. These amounts
reflect our accounting for these grants and do not correspond to
the actual values that may be realized by the named executive
officers.
|
50
OUTSTANDING
EQUITY AWARDS AT 2010 FISCAL YEAR END
The following table provides information regarding outstanding
unexercised stock options and unvested stock awards held by each
of our named executive officers as of July 2, 2010. Each grant
of outstanding unexercised stock options or unvested stock
awards is shown separately for each named executive officer. The
vesting schedule for each grant of outstanding unexercised stock
options is shown in the footnotes following this table.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Incentive Plan Awards:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market or
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
Plan Awards:
|
|
|
|
|
|
|
|
|
Number
|
|
|
Market
|
|
|
Number of
|
|
|
Payout Value
|
|
|
|
|
|
|
|
Number of
|
|
|
Securities
|
|
|
Number of
|
|
|
|
|
|
|
|
|
of Shares
|
|
|
Value of
|
|
|
Unearned
|
|
|
of Unearned
|
|
|
|
|
|
|
|
Securities
|
|
|
Underlying
|
|
|
Securities
|
|
|
|
|
|
|
|
|
or Units
|
|
|
Shares
|
|
|
Shares,
|
|
|
Shares, Units
|
|
|
|
|
|
|
|
Underlying
|
|
|
Unexercised
|
|
|
Underlying
|
|
|
|
|
|
|
|
|
of Stock
|
|
|
or Units
|
|
|
Units or
|
|
|
or Other
|
|
|
|
|
Option
|
|
|
Unexercised
|
|
|
Options
|
|
|
Unexercised
|
|
|
Option
|
|
|
|
|
|
That
|
|
|
of Stock
|
|
|
Other Rights
|
|
|
Rights that
|
|
|
|
|
Grant
|
|
|
Options
|
|
|
(#)
|
|
|
Unearned
|
|
|
Exercise
|
|
|
Option
|
|
|
Have Not
|
|
|
That Have
|
|
|
that Have
|
|
|
Have Not
|
|
|
|
|
Date
|
|
|
(#)
|
|
|
Unexercisable
|
|
|
Options
|
|
|
Price
|
|
|
Expiration
|
|
|
Vested
|
|
|
Not Vested
|
|
|
Not Vested
|
|
|
Vested
|
|
|
Name
|
|
(1)
|
|
|
Exercisable
|
|
|
(2)
|
|
|
(#)
|
|
|
($)
|
|
|
Date
|
|
|
(#) (3)
|
|
|
($) (4)
|
|
|
(#) (5)
|
|
|
($) (6)
|
|
|
Howard L. Lance
|
|
|
8/27/2005
8/26/2006
8/27/2007
8/23/2008
8/28/2009
|
|
|
|
84,975
163,835
121,291
91,960
0
462,061
|
|
|
0
0
40,430
91,958
274,000
406,388
|
|
|
|
|
|
$35.19
$41.46
$55.78
$48.96
$35.04
|
|
|
|
8/27/2012
8/26/2013
8/27/2014
8/23/2015
8/28/2019
|
|
|
|
|
|
|
|
|
|
87,200
150,800
238,000
|
|
|
$3,590,896
$6,209,944
$9,800,840
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gary L. McArthur
|
|
|
8/26/2005
8/25/2006
8/24/2007
8/22/2008
8/28/2009
|
|
|
|
21,140
32,767
22,831
20,453
0
97,191
|
|
|
0
0
7,610
20,452
60,900
88,962
|
|
|
|
|
|
$35.19
$41.46
$55.78
$48.96
$35.04
|
|
|
|
8/26/2012
8/25/2013
8/24/2014
8/22/2015
8/28/2019
|
|
|
|
6,000
10,000
16,000
|
|
|
$247,080
$411,800
$658,880
|
|
|
19,400
33,600
53,000
|
|
|
$ 798,892
$1,383,648
$2,182,540
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert K. Henry
|
|
|
8/25/2006
8/24/2007
8/22/2008
8/28/2009
|
|
|
|
10,278
38,845
57,290
0
106,413
|
|
|
0
12,948
57,288
85,300
155,536
|
|
|
|
|
|
$41.46
$55.78
$48.96
$35.04
|
|
|
|
8/25/2013
8/24/2014
8/22/2015
8/28/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dana A. Mehnert
|
|
|
8/26/2005
8/25/2006
8/24/2007
8/22/2008
8/28/2009
|
|
|
|
2,351
6,183
8,919
10,940
0
28,393
|
|
|
0
0
2,972
10,939
48,700
62,611
|
|
|
|
|
|
$35.19
$41.46
$55.78
$48.96
$35.04
|
|
|
|
8/26/2012
8/25/2013
8/24/2014
8/22/2015
8/28/2019
|
|
|
|
3,000
9,000
12,000
|
|
|
$123,540
$370,620
$494,160
|
|
|
10,400
26,800
37,200
|
|
|
$ 428,272
$1,103,624
$1,531,896
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Daniel R. Pearson
|
|
|
8/26/2005
8/25/2006
8/24/2007
8/22/2008
8/28/2009
|
|
|
|
13,741
17,440
16,727
16,965
0
64,873
|
|
|
0
0
5,575
16,964
50,500
73,039
|
|
|
|
|
|
$35.19
$41.46
$55.78
$48.96
$35.04
|
|
|
|
8/26/2012
8/25/2013
8/24/2014
8/22/2015
8/28/2019
|
|
|
|
9,000
5,000
14,000
|
|
|
$370,620
$205,900
$576,520
|
|
|
16,000
27,800
43,800
|
|
|
$ 658,880
$1,144,804
$1,803,684
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
All options granted are nonqualified stock options. The exercise
price at the time of grant for all stock option grants is the
closing market price of a share of our common stock on the date
of grant except that grants made to Mr. Lance by the
independent directors of the Board on 8/27/2005,
8/26/2006
and 8/23/2008 are annual grants made on a Saturday using the
closing market price on the prior business day in accordance
with the terms of our equity incentive plans and the grant made
by the independent directors of the Board on
8/27/2007 is
the annual grant made to Mr. Lance using an exercise price
higher than the closing market price on the date of grant. The
exercise price may be paid in cash and/or shares of our common
stock, or an option holder may use broker assisted
cashless exercise procedures. In the event of death while
employed, options shall immediately become fully vested and
shall be exercisable for up to twelve months following the date
of death but not later than the regularly scheduled expiration
date. In the event of disability while employed, options granted
prior to July 4, 2009 shall continue to vest in accordance
with the vesting schedule and be exercisable until the regularly
scheduled expiration date and options granted on or after
July 4, 2009 shall immediately fully vest and be
exercisable until the regularly scheduled expiration date. In
the event of retirement after age 62 with ten or more years of
full-time service, options shall continue to vest and be
exercisable until the regularly scheduled expiration date. In
the event of retirement before age 62, but after age 55 with ten
or more years of full-time service, options shall cease vesting
and options exercisable at the time of such retirement will
continue to be exercisable until the regularly scheduled
|
51
|
|
|
expiration date, but unvested
options are forfeited. In the event of termination of employment
of an option holder by us other than for misconduct or cause,
unvested options are forfeited and vested options may be
exercised until the sooner of 90 days following such
termination or the regularly scheduled expiration date. If an
option holders employment is terminated by us for
misconduct or cause all vested and unvested options are
automatically forfeited. In the event of resignation or
voluntary termination of employment by the option holder,
unvested options are automatically forfeited and vested options
that were granted prior to June 30, 2007 are automatically
forfeited and vested options that were granted on or after
June 30, 2007 may be exercised until the sooner of
30 days following such resignation or voluntary termination
or the regularly scheduled expiration date. In the event of a
change in control, outstanding options immediately vest and
become exercisable.
|
|
|
(2) |
The following table details the regular vesting schedule for all
unvested stock option grants for each named executive officer.
In general, options granted on or after August 27, 2004
expire seven years from the date of grant and options granted on
or after August 28, 2009 expire ten years from the date of
grant.
|
|
|
|
|
|
|
|
|
|
Name
|
|
Grant Date
|
|
|
Option Vesting Date
|
|
|
Number of Options
|
|
|
|
|
|
|
|
|
|
Howard L. Lance
|
|
8/27/2007
|
|
|
8/27/2010
|
|
|
40,430
|
|
|
8/23/2008
|
|
|
8/23/2010
|
|
|
45,979
|
|
|
|
|
|
8/23/2011
|
|
|
45,979
|
|
|
8/28/2009
|
|
|
8/28/2010
|
|
|
91,334
|
|
|
|
|
|
8/28/2011
|
|
|
91,333
|
|
|
|
|
|
8/28/2012
|
|
|
91,333
|
|
|
|
|
|
|
|
|
|
Gary L. McArthur
|
|
8/24/2007
|
|
|
8/24/2010
|
|
|
7,610
|
|
|
8/22/2008
|
|
|
8/22/2010
|
|
|
10,226
|
|
|
|
|
|
8/22/2011
|
|
|
10,226
|
|
|
8/28/2009
|
|
|
8/28/2010
|
|
|
20,300
|
|
|
|
|
|
8/28/2011
|
|
|
20,300
|
|
|
|
|
|
8/28/2012
|
|
|
20,300
|
|
|
|
|
|
|
|
|
|
Robert K. Henry
|
|
8/24/2007
|
|
|
8/24/2010
|
|
|
12,948
|
|
|
8/22/2008
|
|
|
8/22/2010
|
|
|
28,644
|
|
|
|
|
|
8/22/2011
|
|
|
28,644
|
|
|
8/28/2009
|
|
|
8/28/2010
|
|
|
28,434
|
|
|
|
|
|
8/28/2011
|
|
|
28,433
|
|
|
|
|
|
8/28/2012
|
|
|
28,433
|
|
|
|
|
|
|
|
|
|
Dana A. Mehnert
|
|
8/24/2007
|
|
|
8/24/2010
|
|
|
2,972
|
|
|
8/22/2008
|
|
|
8/22/2010
|
|
|
5,470
|
|
|
|
|
|
8/22/2011
|
|
|
5,469
|
|
|
8/28/2009
|
|
|
8/28/2010
|
|
|
16,234
|
|
|
|
|
|
8/28/2011
|
|
|
16,233
|
|
|
|
|
|
8/28/2012
|
|
|
16,233
|
|
|
|
|
|
|
|
|
|
Daniel R. Pearson
|
|
8/24/2007
|
|
|
8/24/2010
|
|
|
5,575
|
|
|
8/22/2008
|
|
|
8/22/2010
|
|
|
8,482
|
|
|
|
|
|
8/22/2011
|
|
|
8,482
|
|
|
8/28/2009
|
|
|
8/28/2010
|
|
|
16,834
|
|
|
|
|
|
8/28/2011
|
|
|
16,833
|
|
|
|
|
|
8/28/2012
|
|
|
16,833
|
|
|
|
|
|
|
|
|
|
|
|
(3)
|
For Messrs. McArthur, Mehnert and Pearson, these are grants
of restricted stock. We granted Mr. McArthur an award of
6,000 restricted shares on August 24, 2007, which
award vested on August 24, 2010. We granted
Mr. McArthur an award of 10,000 restricted shares on
August 22, 2008, which award vests on August 22, 2011,
provided Mr. McArthur is still employed by us on such date.
We granted Mr. Mehnert an award of 3,000 restricted shares
on August 24, 2007, which award vested on August 24, 2010.
We granted Mr. Mehnert 9,000 restricted shares on
August 28, 2009, which award vests on August 28, 2012,
provided Mr. Mehnert is still employed by us on such date.
We granted Mr. Pearson an award of 9,000 restricted shares
on August 22, 2008, which award vests on August 22,
2011, provided Mr. Pearson is still employed by us on such
date. We granted Mr. Pearson 5,000 restricted shares on
August 28, 2009, which award vests on August 28, 2012,
provided Mr. Pearson is still employed by us on such date.
During the restricted period of restricted stock, the holder may
exercise full voting rights, but may not sell, exchange, assign,
transfer, pledge or otherwise dispose of such shares. Cash
dividend equivalent payments are paid on shares of restricted
stock in an amount equal to the dividend payments on our common
stock. In the event of retirement after age 55 with ten or
more years of full-time service prior to full vesting, awards of
restricted stock granted prior to June 28, 2008 will be
pro-rated based upon the period worked during the restricted
period and awards of restricted stock granted on or after
June 28, 2008, will become vested and payable as determined
by the Compensation Committee. In the event of death or
disability prior to full vesting, awards of restricted stock
granted prior to June 30, 2007 will be pro-rated based upon
the period worked during the restricted period and awards of
restricted stock granted after June 30, 2007 will
immediately fully vest. Upon a change in control, restricted
stock will immediately vest.
|
|
(4)
|
The market value shown was determined by multiplying the number
of shares of restricted stock that have not vested by the $41.18
closing market price per share of Harris common stock on
July 2, 2010, the last trading day of our fiscal year end.
|
|
(5)
|
These are the number of performance shares granted (a) in
fiscal 2009 with a three-year performance period covering fiscal
years 2009 through 2011 and (b) granted in fiscal 2010 with
a three-year performance period covering fiscal years 2010
through 2012. Because the end of the performance period for
performance share awards granted to the named executive officers
in fiscal 2008 was July 2, 2010, the date on which these
awards became fully vested, these performance shares are not
included in this Outstanding Equity Awards at 2010 Fiscal Year
End Table but are included in the Option Exercises and Stock
Vested in Fiscal 2010 Table on page 53 under the
Stock Awards column. The number of performance
shares and related values as of July 2, 2010 represent the
maximum possible award payout, not the award that was granted at
target. We are required by SEC rules to report these amounts in
this manner if the previous fiscal years performance
exceeded the target performance. The maximum represents 200% of
the target award for such performance shares. Actual results may
cause
|
52
|
|
|
our named executive officers to
earn fewer performance shares. All performance shares granted in
fiscal 2010 and in prior fiscal years provide for the payment of
cash dividend equivalents in an amount equal to the dividend
payments on our common stock. In the event of retirement after
age 55 with ten or more years of full-time service prior to
vesting, or death or disability, awards of performance shares
will be pro-rated based upon the period worked during the
performance period, with such shares paid at the end of the
three-year performance period based upon our performance. Upon a
change in control, performance shares are deemed fully earned
and vested immediately and will be paid at the end of the
three-year performance period at not less than the target level,
subject to accelerated payout or forfeiture in certain
circumstances. For more information regarding performance
shares, see the Grants of Plan-Based Awards in Fiscal 2010 Table
on page 49 and related notes and the Compensation
Discussion and Analysis section of this proxy statement.
|
|
|
(6) |
The market value shown was determined by multiplying the number
of unearned performance shares (at maximum) by the
$41.18 closing market price per share of Harris common
stock on July 2, 2010, the last trading day of our fiscal
year end.
|
OPTION EXERCISES
AND STOCK VESTED IN FISCAL 2010
The following table provides information for each of our named
executive officers regarding (1) stock option exercises
during fiscal 2010, including the number of shares acquired upon
exercise and the value realized, and (2) the number of
shares acquired upon the vesting of stock awards during fiscal
2010.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
|
|
|
|
|
|
|
|
Number of Shares
|
|
|
|
|
|
|
Number of Shares
|
|
|
Value Realized on
|
|
|
Acquired on
|
|
|
Value Realized on
|
|
|
|
Acquired on Exercise
|
|
|
Exercise
|
|
|
Vesting
|
|
|
Vesting
|
Name
|
|
|
(#) (1)
|
|
|
($) (1)
|
|
|
(#) (2)
|
|
|
($) (2)
|
Howard L. Lance
|
|
|
|
171,587
|
|
|
|
$
|
3,589,646
|
|
|
|
|
38,250
|
|
|
|
$
|
1,575,135
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gary L. McArthur
|
|
|
|
0
|
|
|
|
$
|
0
|
|
|
|
|
7,250
|
|
|
|
$
|
298,555
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert K. Henry
|
|
|
|
56,207
|
|
|
|
$
|
672,972
|
|
|
|
|
12,250
|
|
|
|
$
|
504,455
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dana A. Mehnert
|
|
|
|
0
|
|
|
|
$
|
0
|
|
|
|
|
2,813
|
|
|
|
$
|
115,839
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Daniel R. Pearson
|
|
|
|
0
|
|
|
|
$
|
0
|
|
|
|
|
5,250
|
|
|
|
$
|
216,195
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
The value realized upon the exercise of stock options is the
number of options exercised multiplied by the difference between
the exercise price and the average selling price of the shares
of our common stock sold on the date of exercise or the closing
market price in the situation where shares were surrendered to
pay the exercise price and taxes. The value realized was
determined without considering any taxes that were owed upon
exercise. Messrs. Lance and Henry surrendered 127,745 and
47,988 shares of our common stock, respectively, to pay the
exercise price of exercised stock options and the related tax
withholding obligations.
|
|
(2)
|
The value realized on the vesting of performance shares was
determined by multiplying the number of performance shares that
vested by the $41.18 closing market price of Harris common stock
on July 2, 2010, the last trading day of our fiscal year
end. Upon the vesting and release of performance shares, shares
are surrendered to satisfy income tax withholding requirements.
The amounts shown and value realized do not give effect to the
surrender of shares to cover such tax withholding obligations.
The number of performance shares earned in fiscal 2010 was 125%
of the target number of performance shares originally granted in
fiscal 2008 and was earned based upon three-year cumulative EBIT
and average return on invested capital for the performance
period of fiscal 2008 through fiscal 2010. For additional
information with respect to the payout for performance share
awards with a performance period of fiscal 2008 through fiscal
2010, see the Compensation Discussion and Analysis
section of this proxy statement.
|
53
PENSION BENEFITS
IN FISCAL 2010
As discussed in the Compensation Discussion and
Analysis section of this proxy statement, in October 2006
we entered into a Supplemental Pension Plan for Mr. Lance and in
December 2008 our independent directors approved changes to such
plan to comply with Section 409A of the Internal Revenue
Code and certain clarifying and other changes. The following
table sets forth information about Mr. Lances
Supplemental Pension Plan, including the estimated present value
of the accumulated benefit. We do not provide any other defined
benefit plans to our U.S.-based employees or to any of our other
named executive officers.
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Number of
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Years of
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Present Value of
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Payments
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Credited
|
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Accumulated
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During Last
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Service
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Benefits
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Fiscal Year
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Name
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Plan Name
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(#)
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($) (1)
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($)
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Howard L. Lance
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Supplemental Pension Plan
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for Howard L. Lance
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7.4
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$
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4,238,000
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$
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0
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|
(Amended and Restated Effective January 1, 2009)
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(1) |
The present value of Mr. Lances accumulated
Supplemental Pension Plan benefit is estimated as of
July 2, 2010, and is based on the assumptions set forth in
the following sentences of this note (1). No pre-retirement
mortality is assumed nor is expected future salary growth
reflected. Benefits are assumed to accumulate ratably from the
October 27, 2006 effective date of the Supplemental Pension
Plan to the date Mr. Lance becomes eligible for an early
retirement benefit, which is January 5, 2013. Benefit
payments are assumed to commence at the earliest unreduced
retirement age, which is age 60. The present value of benefits
is discounted with interest only using a 5.05% discount rate for
periods before Mr. Lances age 60, and with interest
(at 5.05%) and assumed mortality for periods after
Mr. Lances age 60. The assumed mortality for all of
these calculations is the table promulgated by the IRS for
determining lump sum payments under qualified pension plans for
2009.
|
Additional
Information Related To
Mr. Lances Supplemental Pension Plan
The Supplemental Pension Plan for Mr. Lance is intended to
provide sufficient funds so that Mr. Lances annual
retirement benefit in the aggregate, including our presumed
levels of additional contributions to the Retirement Plan and
SERP, benefits under the Social Security Act and retirement
benefits from prior employment, equals 50% of his final annual
base salary and annual cash incentive target at retirement
following age 60. To reach the 50% target, the Supplemental
Pension Plan provides that if Mr. Lance retires at the date
he attains age 60 (December 15, 2015), then he will be
entitled to receive from Harris a benefit, calculated as a
single life annuity for his life, equal to 32% of the sum of his
base salary paid during the one-year period ending with the last
day he held the position of CEO of Harris, plus his annual cash
incentive (exclusive of any amounts under the Performance Reward
Plan) payable at target (such amount is referred to as his
Final Pay). Mr. Lance will become eligible for
an early retirement benefit on the date he attains age 55
and accrues ten years of credited service (which date is
January 5, 2013). If Mr. Lance retires on or after
January 5, 2013, but before he attains age 60
(December 15, 2015) then he will be entitled to receive
from Harris a benefit, calculated as a single life annuity for
his life, equal to the product of (i) 32% and (ii) his
Final Pay, with the result reduced by five-twelfths of 1% for
each month by which age 60 exceeds Mr. Lances
age as of his retirement date. If Mr. Lance retires after
the date he attains age 60 (December 15, 2015), then
he will be entitled to receive from Harris a benefit, calculated
as a single life annuity for his life, equal to the product of:
(i) 32%, reduced by two-twelfths of 1% for each month by
which Mr. Lances age as of the last day he held the
position of CEO of Harris exceeds age 60 (for example, 30%
at age 61), and (ii) his Final Pay. All benefits are
expressed as single life annuities payable at age 60 (or later
retirement date), although other actuarially equivalent annuity
forms can be elected.
If Mr. Lance (1) voluntarily terminates his employment
or is terminated for cause before January 5, 2013,
(2) dies before payment of his benefit under the
Supplemental Pension Plan actually commences, or (3) does
not comply with the non-compete and non-solicitation provisions,
then no benefits (or no further benefits, as the case may be)
will be payable under the Supplemental Pension Plan.
54
If, prior to January 5, 2013, Mr. Lances
employment is terminated by Harris without cause or
by Mr. Lance for good reason, or Mr. Lance
becomes disabled, then he will be entitled to receive from
Harris a benefit, calculated as a single life annuity for his
life, equal to his Final Pay times the product of 2.5% and his
years of credited service as of his termination (or disability
date, as applicable), with the result reduced by six-twelfths of
1% for each month by which age 57 exceeds
Mr. Lances age as of his termination date (or
disability date, as applicable). If Harris undergoes a change of
control and Mr. Lance terminates employment before
January 5, 2013 under circumstances pursuant to which he
will be paid a lump sum under his change in control severance
agreement described below under Executive Change in
Control Severance Agreements, then he will be entitled to
receive from Harris a benefit, calculated as a single life
annuity for his life, equal to his Final Pay times the product
of 2.5% and his years of credited service as of his termination
date plus two additional years of credited service, with the
result reduced by six-twelfths of 1% for each month by which
age 57 exceeds Mr. Lances age as of his
termination date. However, under no circumstances will
Mr. Lances benefit under the Supplemental Pension
Plan upon such a change in control and termination of
Mr. Lances employment exceed the benefit payable in
the case of early retirement had he attained age 55 and
accrued ten years of credited service as of the termination
date. If we undergo a change in control on or after
January 5, 2013 under circumstances pursuant to which
Mr. Lance will be paid a lump sum under his change in
control severance agreement, then Mr. Lance will not
receive any additional benefit under the Supplemental Pension
Plan as a result of the change in control and the benefit
payable to Mr. Lance under the Supplemental Pension Plan in
such event will be the benefit payable upon retirement based
upon Mr. Lances age at retirement. If Mr. Lance
receives any benefit under the Supplemental Pension Plan, then
during the period from the commencement of payment of such
benefit to the date Mr. Lance attains age 65, there
will be deducted from such benefit the amount of payments made
to Mr. Lance under any and all long-term disability plans
sponsored by us.
The Supplemental Pension Plan shall at all times be unfunded
such that the benefit payable shall be paid solely from our
general assets and/or an irrevocable rabbi trust to
be established by us, and Mr. Lance and/or his surviving
spouse shall have only the rights of a general unsecured
creditor of Harris with respect to any rights under the
Supplemental Pension Plan. On the earlier of
Mr. Lances employment termination date or the date we
undergo a change in control, we are required to establish an
irrevocable rabbi trust and contribute to the trust
cash or other liquid assets in an amount equal to the
actuarially equivalent present value of (1) the total
benefits expected to be paid to Mr. Lance and his surviving
spouse under the Supplemental Pension Plan plus (2) the
trust administration and trustee fees and expenses which the
trustee reasonably expects to incur over the life of the trust.
NONQUALIFIED
DEFERRED
COMPENSATION
Retirement
Plan
We maintain a Retirement Plan, which is a tax-qualified, 401(k)
defined contribution retirement plan available to our U.S.-based
employees. Under the Retirement Plan, participants may
contribute from 1% to 25% of eligible compensation, which
generally is base salary and annual incentive, with
contributions by named executive officers and other highly
compensated employees limited to 12% of eligible compensation.
Following one year (or, in certain cases, six months) of
service, we also match up to the first 6% of eligible
compensation that is contributed by a participant. In addition,
participants receive incentive payments under our Performance
Reward Plan in cash unless they elect to defer either half or
all of such payments to the Retirement Plan, subject to Internal
Revenue Code limitations. The Internal Revenue Code currently
caps certain contributions to a participants Retirement
Plan accounts, such as company matching contributions,
before-tax contributions, after-tax contributions and
profit-sharing contributions. The Internal Revenue Code also
caps the amount of compensation that may be considered when
determining benefits under the Retirement Plan.
Supplemental
Executive Retirement Plan
To the extent contributions to the Retirement Plan are limited
by the Internal Revenue Code, certain of our salaried employees,
including the named executive officers, are eligible to
participate
55
in our SERP, provided such participant makes the election to
participate prior to the beginning of the year. The SERP is an
unfunded, nonqualified plan intended to make up the difference
between the amount actually allocated to a participants
accounts under the Retirement Plan and the amount that, in the
absence of Internal Revenue Code limits, would have been
allocated to a participants accounts as before-tax
contributions plus company-matching contributions. In addition,
the Compensation Committee may, in its discretion, provide for
the deferral of other compensation under the SERP, including
equity awards.
Deferred compensation will be paid to a participant in January
of the calendar year following the later of the year in which
such participant reaches age 55 and the year in which such
participants employment is terminated. Participants are
required to select the form in which payment will be made,
typically a lump sum or annual payments over a three-, five-,
seven-, ten- or fifteen-year period. Deferred amounts generally
may not be withdrawn prior to their payment start date, except
to meet an unforeseeable financial emergency as
defined under Section 409A of the Internal Revenue Code or
in the event of a change in control of Harris. Payments to
key employees as defined under the Federal tax laws
are delayed at least six months after termination of employment
(although this six-month delay generally does not apply to
amounts deferred prior to 2005).
Participants in the SERP are immediately vested in contributions
they make and are fully vested in the remainder of their
accounts upon termination of employment on or after their normal
retirement date, disability or death. Participants also become
fully vested when they have provided four years of service to
us. The vesting provisions of the SERP are generally the same as
the vesting provisions of our Retirement Plan.
Earnings on amounts credited to participants accounts in
our SERP are based upon participant selections among investment
choices which mirror the investment choices available to
participants in our Retirement Plan. Participants may elect to
invest in the Harris stock fund account. Amounts invested in the
Harris stock fund account are credited with dividend equivalents
equal to the dividends paid on our common stock, which are
deemed reinvested in additional Harris stock equivalent units on
the dividend payment date. No above-market or preferential
earnings are paid or guaranteed on investment choices.
Amounts credited to participants accounts in the SERP may
be partially or fully funded by a grantor trust, also known as a
rabbi trust, but the assets in such trust are
subject to the claims of our creditors and participants are
treated as our unsecured general creditors.
56
Nonqualified
Deferred Compensation Table
The following table provides summary information with respect to
amounts credited, earnings or losses and account balances for
our named executive officers under our SERP, which, with the
exception of Mr. Lances Supplemental Pension Plan, is
our only defined contribution or other plan that provides for
the deferral of compensation to our executive officers on a
basis that is not tax-qualified.
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|
Executive
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|
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Registrant
|
|
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Aggregate
|
|
|
|
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Aggregate
|
|
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|
|
|
|
Contributions
|
|
|
|
Contributions
|
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|
|
Earnings
|
|
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|
Aggregate
|
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|
|
Balance
|
|
|
|
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|
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in Last
|
|
|
|
in Last
|
|
|
|
in Last
|
|
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|
Withdrawals/
|
|
|
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at Last
|
|
|
|
|
|
|
Fiscal Year
|
|
|
|
Fiscal Year
|
|
|
|
Fiscal Year
|
|
|
|
Distributions
|
|
|
|
Fiscal Year End
|
|
|
|
Name
|
|
|
($) (1)
|
|
|
|
($) (2)
|
|
|
|
($) (3)
|
|
|
|
($)
|
|
|
|
($) (4)
|
|
|
|
Howard L. Lance
|
|
|
$
|
370,340
|
|
|
|
$
|
120,000
|
|
|
|
$
|
453,387
|
|
|
|
$
|
0
|
|
|
|
$
|
3,901,907
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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|
Gary L. McArthur
|
|
|
$
|
148,931
|
|
|
|
$
|
46,537
|
|
|
|
$
|
94,245
|
|
|
|
$
|
0
|
|
|
|
$
|
858,959
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert K. Henry
|
|
|
$
|
183,047
|
|
|
|
$
|
56,894
|
|
|
|
$
|
1,345,532
|
|
|
|
$
|
0
|
|
|
|
$
|
4,645,940
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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|
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|
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Dana A. Mehnert
|
|
|
$
|
92,660
|
|
|
|
$
|
28,472
|
|
|
|
$
|
64,961
|
|
|
|
$
|
0
|
|
|
|
$
|
528,135
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Daniel R. Pearson
|
|
|
$
|
159,486
|
|
|
|
$
|
43,281
|
|
|
|
$
|
102,861
|
|
|
|
$
|
0
|
|
|
|
$
|
1,105,975
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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|
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|
|
(1)
|
|
The amounts in this column
represent contributions by the named executive officers to our
SERP in respect of the portion of salary or annual cash
incentive that has been deferred and credited during fiscal
2010. The portion representing deferral of base salary is
included in the Summary Compensation Table on page 46 in
the Salary column for fiscal 2010. The portion
representing deferral of annual cash incentives is the deferral
during fiscal 2010 of Annual Incentive Plan payments and
Performance Reward Plan payments in respect of fiscal 2009
performance, the amount of which is included in the Summary
Compensation Table on page 46 in the Non-Equity
Incentive Plan Compensation column for fiscal 2009. Any
contributions by the named executive officers to our SERP of
deferred Annual Incentive Plan payments and Performance Reward
Plan payments in respect of fiscal 2010 performance will be
contributions in fiscal 2011.
|
|
(2)
|
|
The amounts in this column
represent contributions by us to the SERP that were credited
during fiscal 2010. These amounts are included in the Summary
Compensation Table on page 46 in the All Other
Compensation column.
|
|
(3)
|
|
None of the earnings in this column
are included in the Summary Compensation Table on page 46
as no preferential or above-market amounts are paid on balances
in our SERP.
|
|
(4)
|
|
The amounts in this column include,
for each named executive officer, amounts reported as
compensation in the Summary Compensation Table for fiscal 2009
and fiscal 2008 as follows: Mr. Lance
$1,155,157; Mr. McArthur $306,564;
Mr. Henry $460,104;
Mr. Mehnert $155,568; and
Mr. Pearson $255,210.
|
57
POTENTIAL
PAYMENTS UPON TERMINATION OR A CHANGE IN CONTROL
This section of the proxy statement sets forth information
regarding compensation and benefits that each of the named
executive officers would receive in the event of a change in
control without termination of employment or in the event of
termination of employment under several different circumstances,
including: (1) termination by Harris for cause; (2) a
voluntary termination by the named executive officer;
(3) termination by the named executive officer for good
reason; (4) involuntary termination by Harris without
cause; (5) death; (6) disability; or
(7) termination by Harris without cause or by the named
executive officer for good reason following a change in control.
Employment
Agreement Howard L. Lance
In December 2004, our Board approved, and Harris and
Mr. Lance entered into, a letter agreement providing for
Mr. Lances continued employment as Harris CEO
and President, and his continued service as a director and
Chairman. In December 2008, the Compensation Committee and
independent directors of the Board approved changes to
Mr. Lances agreement to comply with Section 409A
of the Internal Revenue Code and certain other changes. Mr.
Lances agreement provides for an indefinite term of
employment ending on termination of Mr. Lances
employment either by Harris with or without cause,
or upon Mr. Lances resignation for good
reason (as such terms are defined in the agreement), other
resignation, death, disability or retirement.
Under Mr. Lances letter agreement, cause
generally means a material breach by Mr. Lance of his
duties and responsibilities as CEO or the conviction of, or plea
to, a felony involving willful misconduct which is materially
injurious to Harris. In addition, good reason
generally means, without Mr. Lances consent:
(a) a reduction in his annual base salary or current annual
cash incentive target award, other than a reduction also
applicable to our other senior executive officers; (b) the
removal of, or failure to elect or reelect Mr. Lance as
President or CEO or Chairman of the Board, provided, however,
that the failure to elect Mr. Lance as Chairman of the
Board shall not constitute good reason if such
failure results from any law, regulation or listing requirement
to the effect that the positions of Chairman of the Board and
CEO shall not be held by the same individual or that the
chairman of a company shall be independent, and the failure to
elect Mr. Lance as President shall not constitute good
reason if necessary for purposes of succession planning
for Mr. Lances successor; (c) the assignment to
Mr. Lance of duties or responsibilities that are materially
inconsistent with Mr. Lances position with Harris;
(d) any requirement that Mr. Lance relocate to a
location more than fifty miles from where our principal place of
business is currently located; and (e) an amendment of the
provisions of the letter agreement regarding termination by
Harris without cause or by Mr. Lance for
good reason or regarding the definition of
good reason, or termination by the Board of Mr.
Lances letter agreement without his prior written consent.
In the event Mr. Lances employment is terminated by
Harris without cause, which Harris is entitled to do upon
30 days prior written notice, or by Mr. Lance
for good reason, then, provided that Mr. Lance has executed
and delivered a release of claims against us and resignations of
all officer and director positions held with us, Mr. Lance
would be entitled to receive from Harris (i) a lump sum
cash amount, payable within sixty days following termination,
but subject generally to a six-month delay if required by
Section 409A of the Internal Revenue Code, equal to two
times the aggregate of (A) his
then-current
base salary and (B) his target cash incentive compensation
under the Annual Incentive Plan (or any successor plan) for the
fiscal year prior to the fiscal year in which his employment
terminates; (ii) his pro-rated annual cash incentive bonus
for the year of termination; (iii) without duplication, his
accrued but unpaid base salary through the date of termination,
his earned but unpaid annual cash incentive bonus under the
Annual Incentive Plan (or any successor plan) for the prior
fiscal year, reimbursement of reasonable business expenses
incurred prior to the date of termination, and other or
additional compensation benefits in accordance with the terms of
applicable Harris plans or employee benefit programs for
terminated employees; (iv) continued participation in the
medical, dental, hospitalization, short-term and long-term
disability, and group life insurance coverage plans of Harris in
which he was participating on the date of termination of his
employment until 24 months following such date of
termination (or, if earlier, until the date or dates on which he
receives comparable coverage and benefits under the plans and
programs of a subsequent
58
employer); (v) during the two-year period following
termination and notwithstanding the terms and conditions of his
stock option and restricted stock agreements, continued vesting
of his unvested restricted stock and/or stock options (but
subject to Mr. Lances continued compliance with his
non-competition and non-solicitation obligations as a condition
to such continued vesting), and as to vested stock options,
continued exercisability until the date that is three months
after the end of such two-year period (but in no event beyond
the original term of the stock options); (vi) pro-rated
vesting of his outstanding performance share awards pursuant to
Harris performance targets and resulting performance,
provided, however, that for purposes of determining the
pro-rated vesting of any such awards, Mr. Lances
employment will be deemed to have terminated as of the second
annual anniversary of the date he actually terminates
employment; and (vii) outplacement services at Harris
expense for up to one year following the date of
termination in accordance with the practices of Harris as in
effect from time to time for senior executives.
In the event Mr. Lances employment is terminated by
Harris for cause or due to Mr. Lances disability, or
upon Mr. Lances retirement, resignation other than
for good reason, or death, then Mr. Lance (or his estate or
legal representative, as appropriate) shall be entitled to
receive from Harris his accrued but unpaid base salary through
the date of termination, his earned but unpaid annual cash
incentive bonus under the Annual Incentive Plan (or any
successor plan) for the prior fiscal year, reimbursement of
reasonable business expenses incurred prior to the date of
termination, and other or additional compensation benefits, if
any, in accordance with the terms of applicable Harris plans or
employee benefit programs for terminated employees. We may, at
our option, terminate Mr. Lances employment in the
event of his disability. In the event Mr. Lances
employment is terminated as a result of his death or disability,
he (or his estate or legal representative, as appropriate) shall
also be entitled to other compensation benefits in accordance
with the terms of applicable Harris plans for employees who die
or become disabled, as appropriate.
Mr. Lance also is entitled to the benefits under his
Supplemental Pension Plan in the event Mr. Lances
employment is terminated by Harris without cause, by
Mr. Lance for good reason or as a result of disability or
eligible retirement. For additional information regarding
Mr. Lances Supplemental Pension Plan, see the
Pension Benefits in Fiscal 2010 section of this
proxy statement.
Mr. Lances agreement also provides that he may not during
his employment and for a one-year period following termination
of his employment for any reason (or a two-year period if he
received severance from Harris), without Harris prior
written consent, directly or indirectly associate with an
enterprise that competes with Harris, and, during his employment
with Harris and for a two-year period following termination of
his employment for any reason, directly or indirectly solicit
any customer or any employee of Harris to leave Harris.
In the event of a change in control of Harris, and if
Mr. Lances employment terminates under circumstances
provided under his change in control severance agreement
discussed below under Executive Change in Control
Severance Agreements, then Mr. Lance shall be
entitled to the compensation and benefits provided under such
change in control severance agreement in lieu of any
compensation or benefits receivable under his letter agreement.
Executive
Change in Control Severance
Agreements
To provide continuity of management and dedication of our
executives in the event of a threatened or actual change in
control of Harris, our Board has approved change in control
severance agreements for our Board-elected or appointed
officers. Under these agreements, our Board-elected or appointed
officers, including the named executive officers, are provided
with severance benefits in the event (a) an executive
terminates his employment for good reason within two years of a
change in control, or (b) Harris terminates the
executives employment within two years of a change in
control of Harris for any reason other than for cause (all terms
as defined in the severance agreement). Under the change in
control severance agreement entered into with our named
executive officers, the executive agrees not to voluntarily
terminate his or her employment with us during the six-month
period following a change in control.
Under the change in control severance agreements entered into
with our named executive
59
officers, a change in control generally means the
occurrence of any one of the following events:
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|
any person becomes the beneficial owner of 20% or more of the
combined voting power of our outstanding common stock;
|
|
|
|
a change in the majority of our Board not approved by two-thirds
of our incumbent directors;
|
|
|
|
the consummation of a merger, consolidation or reorganization
unless immediately following such transaction: (i) more
than 80% of the total voting power of Harris resulting from the
transaction is represented by shares that were voting securities
of Harris immediately prior to the transaction; (ii) no
person becomes the beneficial owner of 20% or more of the total
voting power of the outstanding voting securities as a result of
the transaction; and (iii) at least a majority of the
members of the board of directors of the company resulting from
the transaction were incumbent directors of Harris at the time
of the Boards approval of the execution of the initial
agreement providing for the transaction; or
|
|
|
|
our shareholders approve a plan of complete liquidation or
dissolution of Harris or the sale or disposition of all or
substantially all of our assets.
|
Also, under these agreements, good reason generally
means:
|
|
|
|
|
a reduction in the executives annual base salary or
current annual incentive target award;
|
|
|
|
the assignment of duties or responsibilities that are
inconsistent in any material adverse respect with the
executives position immediately prior to a change in
control;
|
|
|
|
a material adverse change in the executives reporting
responsibilities, titles or offices with Harris as in effect
immediately prior to a change in control;
|
|
|
|
any requirement that the executive: (i) be based more than
fifty miles from the facility where the executive was located at
the time of the change in control or (ii) travel on company
business to an extent substantially greater than the travel
obligations of the executive immediately prior to the change in
control; or
|
|
|
|
failure of Harris to continue in effect any employee benefit or
compensation plans or provide the executive with employee
benefits as in effect for the executive immediately prior to a
change in control.
|
In addition, the term cause generally means a
material breach by the executive of the duties and
responsibilities of the executives position or the
conviction of, or plea to, a felony involving willful misconduct
which is materially injurious to Harris.
If triggered, the lump-sum cash severance benefit payable under
the change in control severance agreement equals the sum of: (a)
the executives unpaid base salary through the date of
termination, a pro-rated annual bonus (as determined under the
severance agreement), any unpaid accrued vacation pay, and, to
the extent permitted under Section 409A of the Internal
Revenue Code, any other benefits or awards that have been earned
or became payable but that have not yet been paid to the
executive; and (b) from one to three times the
executives highest annual rate of base salary during the
12-month
period prior to the date of termination plus from one to
three times the greatest of the executives highest
annual bonus in the three years prior to the change in
control, the executives target bonus for the year during
which the change in control occurred or the executives
target bonus for the year in which the executives
employment is terminated. Payment amounts are three times
salary and bonus for Messrs. Lance and Henry, which for
Mr. Lance was agreed upon in his employment letter
agreement, and two times salary and bonus for Messrs. McArthur,
Mehnert and Pearson. In addition, for the two years following
the date of termination, but in no event later than age 65,
the executive receives the same level of medical, dental,
accident, disability, life insurance and any similar benefits as
are in effect on the date of termination (or the highest level
of coverage provided to active executives immediately prior to
the change in control, if more favorable). The executive also
receives reimbursement for any relocation expense related to the
pursuit of other business opportunities incurred within two
years following the date of termination, for recruitment or
placement services of up to $4,000 and for professional
financial or tax planning services of up to $5,000 per year. The
change in control severance
60
agreements with our named executive officers also provide for a
tax gross-up
payment to the executive in the event that payment of any
severance benefits is subject to excise taxes imposed under
Section 4999 of the Internal Revenue Code. In addition,
pursuant to the change in control severance agreement, we will
reimburse the executive for any legal fees and costs with
respect to any dispute arising under such
severance agreement. Not later than the date on which a
change in control occurs, Harris is required to contribute to an
irrevocable rabbi trust in cash or other liquid
assets, an amount equal to the total payments expected to be
paid under the change in control severance agreement plus the
amount of trust administrative and trustee fees reasonably
expected to be incurred. This required funding recognizes that
in certain situations payments under the change in control
severance agreement will be required to be deferred for up to
six months following the trigger event to comply with
Section 409A of the Internal Revenue Code.
In April 2010, our Compensation Committee determined that any
new or materially modified change in control severance
agreements entered into with executive officers will not provide
for any tax gross-ups of excise taxes.
Payments and
Benefits Upon
Any Termination
Our salaried employees, including the named executive officers,
are entitled to receive certain elements of compensation on a
non-discretionary basis upon termination of employment for any
reason. Subject to the exceptions noted below, these include:
(a) accrued salary and pay for unused vacation;
(b) distributions of vested plan balances under our
Retirement Plan or SERP; and (c) earned but unpaid bonuses.
For a description of the SERP and the account balances credited
to the named executive officers in the SERP as of July 2,
2010, see the Nonqualified Deferred Compensation Table on
page 57. The amounts shown in the Tables of Potential
Payments Upon Termination or Change in Control section
beginning on page 63 do not include these elements of
compensation or benefits.
Termination for
Cause
A named executive officer whose employment is terminated by
Harris for cause is not entitled to any compensation or benefits
other than those paid to all of our salaried employees upon any
termination of employment as described above. In addition, as
noted under Recovery of Executive Compensation
(Clawback) in the Compensation
Discussion and Analysis section of this proxy statement,
depending upon the circumstances giving rise to such
termination, we may be entitled to recover all or a portion of
any performance-based compensation if our financial statements
are restated as a result of errors, omissions or fraud. Annual
incentive awards, vested and unvested options, performance
shares, performance share units, restricted shares and
restricted stock units are automatically forfeited following a
termination for cause or misconduct.
Involuntary
Termination Without Cause
In the case of termination of employment other than for cause,
Messrs. McArthur, Henry, Mehnert and Pearson are not
contractually entitled to any compensation or benefits other
than those that are paid to all salaried employees upon any
termination of employment as described above. However, as
discussed in the Compensation Discussion and
Analysis section of this proxy statement, we have a
long-standing practice of providing reasonable severance
compensation for involuntary termination of an executives
employment without cause. The specific amount may be based upon
the relevant circumstances, including the reason for
termination, length of employment and other factors. Following
an involuntary termination without cause, annual incentive
awards will be paid pro-rata after the end of the relevant
fiscal year based upon the period worked during such fiscal
year. Following an involuntary termination for other than
misconduct, unvested restricted shares and restricted stock
units are automatically forfeited, provided that in the case of
unvested restricted shares or restricted stock units granted
after June 28, 2008, the Compensation Committee may
determine otherwise in its discretion. Following an involuntary
termination other than for misconduct, unvested options are
forfeited and vested options may be exercised until the sooner
of 90 days following such termination or the regularly
scheduled expiration date, and performance shares and
performance share units will be paid out pro-rata after the end
of the relevant performance period based upon the period worked
during such performance period.
Compensation and benefits payable to Mr. Lance in the case
of termination of employment other than
61
for cause are described above under the description of his
employment letter agreement.
Voluntary
Termination
A named executive officer who voluntarily terminates employment
other than due to retirement or for good reason is not entitled
to any benefits other than those that are paid to all of our
salaried employees upon any termination of employment as
described above. Annual incentive awards, unvested options,
restricted shares, restricted stock units, performance shares
and performance share units are automatically forfeited
following a voluntary termination. For options granted prior to
June 30, 2007, vested options are automatically forfeited
following a voluntary termination and, for options granted on or
after June 30, 2007, vested options may be exercised until
the sooner of 30 days following a voluntary termination or
the regularly scheduled expiration date.
Death
In the event of termination of employment as a result of death,
the beneficiaries of named executive officers are eligible for
benefits under the death benefit programs generally available to
our U.S.-based employees, including basic group life insurance
paid by Harris and supplemental group life insurance elected and
paid for by employees. Mr. Lance also has additional life
insurance coverage as discussed above in the Compensation
Discussion and Analysis section of this proxy statement.
In the event of death:
|
|
|
|
|
account balances in our Retirement Plan and SERP become fully
vested;
|
|
|
|
annual incentive awards are paid pro-rata based upon the period
worked during the fiscal year and are paid following the fiscal
year end based upon our performance;
|
|
|
|
restricted shares and restricted stock units immediately fully
vest;
|
|
|
|
performance shares and performance share units are paid to the
beneficiary pro-rata based upon the period worked during the
performance period with performance shares and performance share
units paid at the end of the three-year performance period based
upon our performance; and
|
|
|
|
options immediately fully vest and shall be exercisable by the
beneficiaries for up to 12 months following the date of
death but not later than the regularly scheduled expiration date.
|
Disability
In the event of termination of employment as a result of
disability, named executive officers are eligible for benefits
in disability programs generally available to our U.S.-based
employees. These include a long-term disability income benefit
and, in most cases, continuation of medical and life insurance
coverage applicable to active employees while disabled. In the
event of disability:
|
|
|
|
|
account balances in our Retirement Plan and SERP become fully
vested;
|
|
|
|
annual incentive awards are paid pro-rata based upon the period
worked during the fiscal year and are paid following the fiscal
year end based upon our performance;
|
|
|
|
restricted shares and restricted stock units immediately fully
vest;
|
|
|
|
performance shares and performance share units are paid pro-rata
based upon the period worked during the performance period with
performance shares and performance share units paid at the end
of the three-year performance period based upon our performance;
and
|
|
|
|
options granted prior to July 4, 2009 continue to vest in
accordance with the vesting schedule and shall be exercisable
until the regularly scheduled expiration date and options
granted on or after July 4, 2009 immediately fully vest and
shall be exercisable until the regularly scheduled expiration
date.
|
62
Retirement
As of July 2, 2010, none of our named executive officers
other than Mr. Henry was retirement-eligible except that
for purposes of our equity incentive plans, Mr. Pearson
also satisfied the retirement after age 55 with ten or more
years of full-time service requirements. In the event of
termination of employment as a result of retirement, a named
executive officer would receive retirement benefits generally
available to our salaried employees. These include the benefits
under our Retirement Plan, SERP and, in certain cases, retiree
medical, dental and vision coverage. In the event of retirement:
|
|
|
|
|
account balances in our Retirement Plan and SERP become fully
vested;
|
|
|
|
annual incentive awards are paid pro-rata based upon the period
worked during the fiscal year and are paid following the fiscal
year end based upon our performance;
|
|
|
|
after age 62 with ten or more years of full-time service,
options continue to vest in accordance with the vesting schedule
and continue to be exercisable until the regularly scheduled
expiration date;
|
|
|
|
before age 62, but after age 55 with ten or more years of
full-time service, options cease vesting and options exercisable
at the time of such retirement continue to be exercisable until
the regularly scheduled expiration date, but unvested options
are forfeited;
|
|
|
|
after age 55 with ten or more years of full-time service,
restricted shares and restricted stock units granted prior to
June 28, 2008 are paid pro-rata based upon the period
worked during the restricted period and restricted shares and
restricted stock units granted on or after June 28, 2008
will become vested and payable as determined by the Compensation
Committee; and
|
|
|
|
after age 55 with ten or more years of full-time service,
performance shares and performance share units are paid pro-rata
based upon the period worked during the performance period with
performance shares and performance share units paid at the end
of the three-year performance period based upon our performance.
|
Change in
Control
Each of our named executive officers is party to a change in
control severance agreement providing for benefits only upon
both a change in control and the subsequent termination of
employment of or by the executive in accordance with the terms
of the agreement. For additional information regarding the terms
of such agreements, see Executive Change in Control
Severance Agreements starting on page 59. In
addition, upon a change in control and irrespective of
employment status:
|
|
|
|
|
annual cash incentive awards are fully earned and paid out
promptly following the change in control or, in certain
instances following the end of the fiscal year, in each case at
not less than the target level;
|
|
|
|
all options immediately vest and become exercisable;
|
|
|
|
all restricted shares immediately vest;
|
|
|
|
all restricted stock units immediately vest and will be paid as
soon as practicable but not later than 60 days following the
change in control, or in certain events, promptly following the
expiration of the initial restriction period; and
|
|
|
|
all performance shares and performance share units are deemed
fully earned and fully vested immediately and will be paid at
the end of the three-year performance period at not less than
the target level, subject to accelerated pay-out or forfeiture
in certain circumstances.
|
Tables of
Potential Payments Upon
Termination or
Change in Control
The following tables set forth the details, on an
executive-by-executive basis, of the estimated compensation and
benefits that would be provided to each named executive officer
in the event that such executives employment with us is
terminated for any reason, including termination by us for
cause, voluntary termination, termination by the executive for
good reason, involuntary termination by us without cause, death,
retirement, disability or termination by us without cause or by
the executive for good reason following a change in control. The
tables also set forth the amount of potential payments to each
of our named executive officers in the event of a change in
control without a termination of employment. These amounts are
estimates of the amounts that would be paid to the
63
named executive officer upon such termination of employment or
change in control. The actual amounts to be paid can only be
determined at the time of a named executive officers
termination of employment or a change in control. The amounts
included in the tables are also based on the following:
|
|
|
|
|
The applicable provisions in the agreements and other
arrangements between the named executive officer and Harris,
which are summarized in the Potential Payments Upon
Termination or a Change in Control section of this proxy
statement beginning on page 58;
|
|
|
|
We have assumed that the termination event occurred effective as
of July 2, 2010, the last day of our fiscal year 2010;
|
|
|
|
We have assumed that the value of our common stock was $41.18
per share based on the closing market price on July 2,
2010, the last trading day of our fiscal year 2010, and that all
unvested options not automatically forfeited were exercised on
such day;
|
|
|
|
The designation of an event as a resignation or retirement is
dependent upon an individuals age. We have assumed that an
individual over the age of 55 and who has completed at least ten
years of full-time service has retired, and an individual who
does not satisfy these criteria has resigned;
|
|
|
|
Cash compensation includes multiples of salary and annual
incentive, and does not include paid or unpaid salary or annual
incentive compensation or cash incentives earned in respect of
fiscal 2010 because a named executive officer is entitled to
annual incentive compensation if employed on July 2, 2010;
|
|
|
|
The value of accelerated performance shares is based upon the
target number of performance shares previously granted and does
not include performance shares for the three-year performance
period ended July 2, 2010, which performance shares for
such three-year performance period are set forth in the Option
Exercises and Stock Vested in Fiscal 2010 Table on page 53
of this proxy statement;
|
|
|
|
We have not included in the tables the value of any options that
were vested prior to July 2, 2010;
|
|
|
|
We have not included in the tables any payment of the aggregate
balance shown in the Nonqualified Deferred Compensation Table on
page 57 of this proxy statement;
|
|
|
|
Health and welfare benefits are included, where applicable, at
the estimated value of continuation of this benefit;
|
|
|
|
In the event of termination by Harris without cause or by the
named executive officer for good reason following a change in
control, Other Benefits includes $4,000 for
placement services and $10,000 for financial or tax planning
services as set forth in the change in control severance
agreement and also estimates relocation assistance of $220,000;
and
|
|
|
|
Amounts shown in the Reimbursement of Excise Tax
line reflect the amount payable to the named executive officer
to offset any excise tax imposed under the Internal Revenue Code
on payments received under the change in control severance
agreement and any other taxes imposed on this additional amount.
The amount shown assumes the base amount is the
five-year average W-2 earnings for the period of 2005 through
2009. The benefit amount in excess of a named executive
officers base amount is considered an
excess parachute payment and if the parachute
payment is greater than three times the average base
amount, it is subject to an excise tax.
|
64
Howard
L. Lance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination by
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Harris without
|
|
|
|
|
|
|
|
|
|
|
|
|
Involuntary
|
|
|
|
|
|
|
|
|
Change in
|
|
|
Cause/by Executive
|
|
|
|
Termination
|
|
|
|
|
|
Termination By
|
|
|
Termination by
|
|
|
|
|
|
|
|
|
Control
|
|
|
for Good Reason
|
|
Executive Benefits and
|
|
by Harris
|
|
|
Voluntary
|
|
|
Executive for
|
|
|
Harris without
|
|
|
|
|
|
|
|
|
without
|
|
|
Following a
|
|
Payment Upon Termination
|
|
for Cause
|
|
|
Termination
|
|
|
Good Reason
|
|
|
Cause
|
|
|
Death
|
|
|
Disability
|
|
|
Termination
|
|
|
Change in Control
|
|
|
Cash Severance
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
4,410,000
|
|
|
$
|
4,410,000
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
8,220,000
|
|
Value of Accelerated or Continued Vesting of Unvested Options
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
1,121,575
|
*
|
|
$
|
1,121,575
|
*
|
|
$
|
1,682,360
|
|
|
$
|
1,682,360
|
(1)
|
|
$
|
1,682,360
|
|
|
$
|
1,682,360
|
|
Value of Accelerated or Continued Vesting of Unvested
Performance Shares
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
4,900,420
|
*
|
|
$
|
4,900,420
|
*
|
|
$
|
2,237,527
|
|
|
$
|
2,237,527
|
|
|
$
|
4,900,420
|
|
|
$
|
4,900,420
|
|
Health and Welfare Benefits
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
46,332
|
|
|
$
|
46,332
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
46,332
|
|
Other Benefits
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
4,000
|
|
|
$
|
4,000
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
234,000
|
|
Supplemental Pension Plan**
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
347,533
|
|
|
$
|
347,533
|
|
|
$
|
0
|
|
|
$
|
347,533
|
|
|
$
|
0
|
|
|
$
|
441,245
|
|
Reimbursement of
Excise Tax
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL***
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
10,482,327
|
|
|
$
|
10,482,327
|
|
|
$
|
3,919,887
|
|
|
$
|
3,919,887
|
|
|
$
|
6,582,780
|
|
|
$
|
15,083,112
|
|
|
|
*
|
Under the terms of Mr. Lances employment letter agreement,
if his employment is terminated by Harris without cause or by
Mr. Lance for good reason, stock options and performance
shares continue to vest for 24 months. The amounts shown
represents the value of such unvested options and unvested
performance shares that would vest during such 24-month period
based upon the $41.18 closing market price of our common stock
on July 2, 2010, the last trading day of our fiscal 2010.
|
**
|
The Supplemental Pension Plan benefit payments shown above are
annual amounts and are paid in monthly installments for
Mr. Lances remaining lifetime. For termination for
good reason, without cause or following a change in control,
payments commence immediately. For disability, payments commence
immediately, offset by long-term disability benefits.
|
***
|
Excludes annuity benefits payable from the Supplemental Pension
Plan.
|
Gary
L. McArthur
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination by
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Harris without
|
|
|
|
|
|
|
|
|
|
|
|
|
Involuntary
|
|
|
|
|
|
|
|
|
Change in
|
|
|
Cause/by Executive
|
|
|
|
Termination
|
|
|
|
|
|
Termination By
|
|
|
Termination by
|
|
|
|
|
|
|
|
|
Control
|
|
|
for Good Reason
|
|
Executive Benefits and
|
|
by Harris
|
|
|
Voluntary
|
|
|
Executive for
|
|
|
Harris without
|
|
|
|
|
|
|
|
|
without
|
|
|
Following a
|
|
Payment Upon Termination
|
|
for Cause
|
|
|
Termination
|
|
|
Good Reason
|
|
|
Cause
|
|
|
Death
|
|
|
Disability
|
|
|
Termination
|
|
|
Change in Control
|
|
|
Cash Severance
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
2,054,000
|
|
Value of Accelerated or Continued Vesting of Unvested Options
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
373,926
|
|
|
$
|
373,926
|
(1)
|
|
$
|
373,926
|
|
|
$
|
373,926
|
|
Value of Accelerated Unvested Restricted Shares
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
411,800
|
(2)
|
|
$
|
411,800
|
(2)
|
|
$
|
658,880
|
|
|
$
|
658,880
|
|
|
$
|
658,880
|
|
|
$
|
658,880
|
|
Value of Accelerated Unvested Performance Shares
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
498,146
|
|
|
$
|
498,146
|
|
|
$
|
498,146
|
|
|
$
|
498,146
|
|
|
$
|
1,091,270
|
|
|
$
|
1,091,270
|
|
Health and Welfare Benefits
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
38,610
|
|
Other Benefits
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
234,000
|
|
Reimbursement of
Excise Tax
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
909,946
|
|
|
$
|
909,946
|
|
|
$
|
1,530,952
|
|
|
$
|
1,530,952
|
|
|
$
|
2,124,076
|
|
|
$
|
4,450,686
|
|
65
Robert
K. Henry
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination by
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Harris without
|
|
|
|
|
|
|
Termination
|
|
|
Involuntary
|
|
|
|
|
|
|
|
|
|
|
|
Change in
|
|
|
Cause/by Executive
|
|
|
|
Termination
|
|
|
By Executive
|
|
|
Termination
|
|
|
|
|
|
|
|
|
|
|
|
Control
|
|
|
for Good Reason
|
|
Executive Benefits and
|
|
by Harris
|
|
|
for Good
|
|
|
by Harris
|
|
|
|
|
|
|
|
|
|
|
|
without
|
|
|
Following a Change
|
|
Payment Upon Termination
|
|
for Cause
|
|
|
Reason
|
|
|
without Cause
|
|
|
Death
|
|
|
Disability
|
|
|
Retirement
|
|
|
Termination
|
|
|
in Control
|
|
|
Cash Severance
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
3,897,000
|
|
Value of Accelerated or Continued Vesting of Unvested Options
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
523,742
|
|
|
$
|
523,742
|
(1)
|
|
$
|
523,742
|
|
|
$
|
523,742
|
|
|
$
|
523,742
|
|
Health and Welfare Benefits
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
27,374
|
|
Other Benefits
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
234,000
|
|
Reimbursement of Excise Tax
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
523,742
|
|
|
$
|
523,742
|
|
|
$
|
523,742
|
|
|
$
|
523,742
|
|
|
$
|
4,682,116
|
|
Dana
A. Mehnert
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination by
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Harris without
|
|
|
|
|
|
|
|
|
|
Termination
|
|
|
Involuntary
|
|
|
|
|
|
|
|
|
Change in
|
|
|
Cause/by Executive
|
|
|
|
Termination
|
|
|
|
|
|
By Executive
|
|
|
Termination
|
|
|
|
|
|
|
|
|
Control
|
|
|
for Good Reason
|
|
Executive Benefits and
|
|
by Harris
|
|
|
Voluntary
|
|
|
for Good
|
|
|
by Harris
|
|
|
|
|
|
|
|
|
without
|
|
|
Following a Change
|
|
Payment Upon Termination
|
|
for Cause
|
|
|
Termination
|
|
|
Reason
|
|
|
without Cause
|
|
|
Death
|
|
|
Disability
|
|
|
Termination
|
|
|
in Control
|
|
|
Cash Severance
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
1,618,000
|
|
Value of Accelerated or Continued Vesting of Unvested Options
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
299,018
|
|
|
$
|
299,018
|
(1)
|
|
$
|
299,018
|
|
|
$
|
299,018
|
|
Value of Accelerated Unvested Restricted Shares
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
370,620
|
(2)
|
|
$
|
370,620
|
(2)
|
|
$
|
494,160
|
|
|
$
|
494,160
|
|
|
$
|
494,160
|
|
|
$
|
494,160
|
|
Value of Accelerated Unvested Performance Shares
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
327,525
|
|
|
$
|
327,525
|
|
|
$
|
327,525
|
|
|
$
|
327,525
|
|
|
$
|
765,948
|
|
|
$
|
765,948
|
|
Health and Welfare Benefits
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
31,016
|
|
Other Benefits
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
234,000
|
|
Reimbursement of Excise Tax
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
1,126,234
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
698,145
|
|
|
$
|
698,145
|
|
|
$
|
1,120,703
|
|
|
$
|
1,120,703
|
|
|
$
|
1,559,126
|
|
|
$
|
4,568,376
|
|
Daniel
R. Pearson
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination by
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Harris without
|
|
|
|
|
|
|
|
|
|
Termination
|
|
|
Involuntary
|
|
|
|
|
|
|
|
|
|
|
|
Change in
|
|
|
Cause/by Executive
|
|
|
|
Termination
|
|
|
|
|
|
By Executive
|
|
|
Termination
|
|
|
|
|
|
|
|
|
|
|
|
Control
|
|
|
for Good Reason
|
|
Executive Benefits and
|
|
by Harris
|
|
|
Voluntary
|
|
|
for Good
|
|
|
by Harris
|
|
|
|
|
|
|
|
|
|
|
|
without
|
|
|
Following a Change
|
|
Payment Upon Termination
|
|
for Cause
|
|
|
Termination
|
|
|
Reason
|
|
|
without Cause
|
|
|
Death
|
|
|
Disability
|
|
|
Retirement
|
|
|
Termination
|
|
|
in Control
|
|
|
Cash Severance
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
1,730,000
|
|
Value of Accelerated or Continued Vesting of Unvested Options
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
310,070
|
|
|
$
|
310,070
|
(1)
|
|
$
|
0
|
|
|
$
|
310,070
|
|
|
$
|
310,070
|
|
Value of Accelerated Unvested Restricted Shares
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
576,520
|
(2)
|
|
$
|
576,520
|
(2)
|
|
$
|
576,520
|
|
|
$
|
576,520
|
|
|
$
|
576,520
|
(2)
|
|
$
|
576,520
|
|
|
$
|
576,520
|
|
Value of Accelerated Unvested Performance Shares
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
411,452
|
|
|
$
|
411,452
|
|
|
$
|
411,452
|
|
|
$
|
411,452
|
|
|
$
|
411,452
|
|
|
$
|
901,842
|
|
|
$
|
901,842
|
|
Health and Welfare Benefits
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
29,396
|
|
Other Benefits
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
234,000
|
|
Reimbursement of Excise Tax
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
987,972
|
|
|
$
|
987,972
|
|
|
$
|
1,298,042
|
|
|
$
|
1,298,042
|
|
|
$
|
987,972
|
|
|
$
|
1,788,432
|
|
|
$
|
3,781,828
|
|
|
|
|
(1)
|
|
In the event of termination of
employment as a result of disability, stock options granted
prior to July 4, 2009 continue to vest in accordance with
the vesting schedule and are exercisable until the regularly
scheduled expiration date and stock options granted on or after
July 4, 2009 immediately fully vest and shall be
exercisable until the regularly scheduled expiration date. The
amount shown represents the intrinsic value of such unvested
options that would vest during such vesting period based upon
the $41.18 closing market price of our common stock on
July 2, 2010.
|
|
(2)
|
|
Unvested restricted shares granted
after June 28, 2008 may be accelerated at the
discretion of the Compensation Committee following an
involuntary termination for other than misconduct or upon
retirement after age 55 with ten or more years of service.
The value of accelerated unvested restricted shares upon
termination by executive for good reason, retirement or for
involuntary termination by Harris without cause assumes the full
vesting of unvested restricted shares granted after
June 28, 2008.
|
66
Section 16(a) of the Securities Exchange Act of 1934, as
amended, requires our directors and executive officers, as well
as persons who own more than ten percent of our outstanding
shares of common stock, to file reports of ownership and changes
in ownership of our securities with the SEC and the NYSE. We
have procedures in place to assist our directors and executive
officers in preparing and filing these reports on a timely basis.
Based solely upon a review of the forms furnished to us, or
written representations from certain persons that no Forms 5
were required, we believe that all required forms have been
timely filed for fiscal 2010.
REGISTERED PUBLIC
ACCOUNTING FIRM
Fees Paid to
Independent Registered
Public Accounting
Firm
E&Y served as our independent registered public accounting
firm for the fiscal year ended July 2, 2010. In addition to
the engagement to audit our financial statements and internal
control over financial reporting and to review the financial
statements included in our quarterly reports on
Form 10-Q,
E&Y also was engaged by us during fiscal 2010 to perform
certain audit-related services.
The following table presents fees for professional audit
services rendered by E&Y for the audit of our annual
financial statements for the fiscal years ended July 2,
2010 and July 3, 2009 and fees for other services rendered
by E&Y during those periods.
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2010
|
|
|
Fiscal 2009
|
|
|
Audit Fees
|
|
$
|
4,002,000
|
|
|
$
|
3,972,000
|
|
Audit-Related Fees
|
|
|
75,800
|
|
|
|
38,300
|
|
Tax Fees
|
|
|
0
|
|
|
|
0
|
|
All Other Fees
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
4,077,800
|
|
|
$
|
4,010,300
|
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Audit Fees. Audit services include fees
associated with the annual audit and the audit of internal
control over financial reporting, as well as reviews of our
quarterly reports on
Form 10-Q,
SEC registration statements and other filings, accounting and
reporting consultations and statutory audits required
internationally for our subsidiaries.
Audit-Related Fees. Services within
audit-related fees include the audit of the Harris Retirement
Plan financial statements and associated filings.
Tax Fees. No tax-related services were
rendered or fees billed for the fiscal years ended July 2,
2010 and July 3, 2009.
All Other Fees. For the fiscal years ended
July 2, 2010 and July 3, 2009, no professional
services were rendered or fees billed for other services not
included within Audit Fees or Audit-Related Fees.
E&Y did not perform any professional services related to
financial information systems design and implementation for
Harris in fiscal 2010 or 2009.
The Audit Committee has determined in its business judgment that
the provision of non-audit services described above is
compatible with maintaining E&Ys independence.
In fiscal 2009, E&Y served as the independent registered
public accounting firm for Aviat Networks, Inc. (formerly known
as Harris Stratex Networks, Inc.), a publicly-traded company of
which we owned approximately 56% of the outstanding shares until
we completed the spin-off to our shareholders of our ownership
interest on May 27, 2009. The audit committee of Aviat
Networks, Inc. is responsible for reviewing and pre-approving
the scope and cost of services provided by its independent
registered public accounting firm. The fees set forth for fiscal
2009 above do not include the fees paid by Aviat Networks, Inc.
to E&Y for services rendered to Aviat Networks, Inc. for
the period its financial results were consolidated with our
results.
Pre-Approval of
Audit
and Non-Audit
Services
Under the Audit Committee Pre-Approval Policy and Procedures, as
adopted by the Audit Committee, the Audit Committee must
pre-approve all audit and non-audit services provided by our
independent registered public accounting firm in order to ensure
that the provision of such services does not impair the
firms independence. The policy utilizes a framework of
both general pre-approval
67
for certain specified services and specific pre-approval for all
other services.
At the start of each fiscal year, the Audit Committee
pre-approves the audit services, audit-related services and tax
services, if any, together with specific details regarding such
services anticipated to be required for such fiscal year
including, when available, estimated fees. The Audit Committee
reviews and, as it deems appropriate, pre-approves those
services. The Audit Committee periodically reviews the services
provided to date and actual fees against the estimates, and such
fee amounts may be updated to the extent appropriate at the
regularly scheduled meetings of the Audit Committee. Additional
pre-approval is required before actual fees for any service can
exceed the originally pre-approved amount. The Audit Committee
may also revise the list of pre-approved services and related
fees from time to time. All of the services described above
under the captions Audit Fees and
Audit-Related Fees with respect to fiscal 2010 were
pre-approved in accordance with this policy.
If we seek to engage the independent registered public
accounting firm for other services that are not considered
subject to general pre-approval as described above, then the
Audit Committee must approve such specific engagement as well as
the estimated fees. Such engagement will be presented to the
Audit Committee for pre-approval at its next regularly scheduled
meeting. If the timing of the project requires an expedited
decision, then we may ask the Chairperson of the Audit Committee
to pre-approve such engagement. Any such pre-approval by the
Chairperson is then presented to the full Audit Committee for
ratification at the next Audit Committee meeting. In any event,
pre-approval of any engagement by the Audit Committee or the
Chairperson of the Audit Committee is required before our
independent registered public accounting firm may commence any
engagement. Additional pre-approval is required before any fees
can exceed approved fees for any such specifically-approved
services.
Appointment of
Independent Registered
Public Accounting Firm for Fiscal 2011
The Audit Committee has appointed E&Y to audit our books
and accounts for the fiscal year ending July 1, 2011.
Although applicable law does not require shareholder
ratification of the appointment, our Board has decided to
ascertain the position of our shareholders on the appointment.
If our shareholders do not ratify the appointment of E&Y,
the Audit Committee will reconsider whether to retain E&Y
and may retain E&Y or hire another firm without
resubmitting the matter to shareholders for approval. We expect
that a representative of E&Y will be present at the 2010
Annual Meeting to respond to appropriate questions from
shareholders and to make a statement if he or she desires to do
so.
As provided in the Audit Committees Charter and as
discussed above, the Audit Committee is responsible for directly
appointing, retaining, terminating and overseeing our
independent registered public accounting firm. While Harris has
a very long-standing relationship with E&Y, the Audit
Committee frequently evaluates the independence and
effectiveness of the independent registered public accounting
firm and its personnel, and the cost and quality of its audit
and audit-related services. In accordance with sound corporate
governance practices and in order to ensure that the Audit
Committee and our shareholders are receiving the best and most
cost-effective audit services available, the Audit Committee
periodically considers issuing a request for proposal from
E&Y and other large nationally recognized accounting firms
with regard to our audit engagement. A determination to use a
request for proposal process could result in a firm other than
E&Y providing audit engagement services to us in later
years.
Recommendation
Regarding Proposal 2
The affirmative vote of a majority of the shares represented at
the 2010 Annual Meeting of Shareholders and entitled to vote on
this proposal will be required to ratify our Audit
Committees appointment of our independent registered
public accounting firm. Abstentions will have the effect of a
vote against ratification of the appointment of our independent
registered public accounting firm. Any broker non-votes will
have no effect on the ratification of the appointment of our
independent registered public accounting firm.
Our Board of Directors unanimously recommends that you vote
FOR ratification of the Audit Committees
appointment of E&Y as our independent registered public
accounting firm for the fiscal year ending July 1, 2011. If
not otherwise specified, proxies will be voted FOR
approval of this proposal.
68
PROPOSAL 3: APPROVAL
OF THE HARRIS CORPORATION ANNUAL INCENTIVE PLAN
At the Annual Meeting, our shareholders will be asked to approve
the Harris Corporation Annual Incentive Plan (the Annual
Incentive Plan). Upon the recommendation of our Management
Development and Compensation Committee, our Board approved the
Annual Incentive Plan on August 28, 2010, with an effective
date of July 3, 2010, subject to its approval by
shareholders.
The purpose of the Annual Incentive Plan is to promote our
growth and performance by linking a portion of the total annual
compensation for certain key employees to attainment of those
corporate
and/or
business unit objectives that are approved for each fiscal year
of Harris. The Annual Incentive Plan has the further purpose of
assisting in the attraction, retention and motivation of certain
key employees. The Annual Incentive Plan is very similar to our
predecessor plan, the Harris Corporation 2005 Annual Incentive
Plan, which was approved by our shareholders in 2005.
The Annual Incentive Plan also is designed to preserve our
ability to deduct in full, for Federal income tax purposes, the
compensation paid to certain executive officers in connection
with certain awards granted under the Annual Incentive Plan
under Section 162(m) of the Internal Revenue Code. To
enable compensation received in connection with cash awards
granted under the Annual Incentive Plan to qualify as
qualified performance-based compensation within the
meaning of Section 162(m) of the Internal Revenue Code,
Harris shareholders are being asked to approve the Annual
Incentive Plan.
Summary
of the Harris Corporation Annual Incentive Plan
The following summary of the principal features of the Annual
Incentive Plan is subject to the complete terms of the Annual
Incentive Plan, a copy of which is attached to this proxy
statement as Appendix A.
Administration. The Annual Incentive Plan will
be administered by a committee of the Board (the
Committee) appointed to administer the Annual
Incentive Plan, except that with respect to participation in the
Annual Incentive Plan by our CEO or any other executive officer
who is also a member of the Board, the Annual Incentive Plan
will be administered by the Committee together with the
independent directors of the Board. The Committee will be
composed of not fewer than three non-employee directors, each of
whom will be an independent director. Initially, the Board has
designated the Management Development and Compensation Committee
to administer the Annual Incentive Plan. The Committee may
delegate to one or more of our officers the authority to grant
awards (other than grants to an executive officer or any person
covered by Section 162(m) of the Internal Revenue Code)
under the Annual Incentive Plan. The Committee shall have the
power to interpret the Annual Incentive Plan and awards granted
thereunder, and all determinations of the Committee will be
final, conclusive and binding on all persons having an interest
in the Annual Incentive Plan or any award.
Eligibility. Awards may be granted to salaried
employees of Harris or any subsidiary or affiliate of Harris who
are selected by the Board, the Committee or our CEO. Employees
intended to receive qualified performance-based
compensation shall be designated as participants under the
Annual Incentive Plan no later than 90 calendar days after the
beginning of a fiscal year of Harris. As of August 28,
2010, we had approximately 11,700 salaried employees, including
9 executive officers, who would be eligible to receive awards
under the Annual Incentive Plan.
Participation by Executive Officers. For any
participant in the Annual Incentive Plan who is a Harris
executive officer covered by Section 162(m) of the Internal
Revenue Code:
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such participants annual incentive award payable under the
Annual Incentive Plan for a fiscal year of Harris will be based
solely on achievement of one or more of the performance
objectives established by the Committee and the Committee shall
not have the discretion to increase the amount of the award
payable under the Annual Incentive Plan but the Committee may
reduce the amount of any award so payable; and
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no annual incentive award intended to be a qualified
performance-based compensation for purposes of
Section 162(m) of the Internal Revenue Code will be payable
to that participant under the Annual Incentive Plan unless the
Committee certifies such participants performance
objectives have been
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satisfied to a particular extent and that any other material
terms and conditions to payment of an award to such participant
under the Annual Incentive Plan have been satisfied.
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Further, the maximum award payable under the Annual Incentive
Plan to any participant who is an executive officer of Harris
for any fiscal year of Harris will be $6,000,000, provided that
if a participant is not a participant for the entire fiscal
year, the maximum amount payable shall be pro-rated based on the
number of days the individual was a participant.
Awards; Performance Objectives. Participants
will have the payout of their annual incentive awards, if any,
determined on the basis of the degree of achievement of
performance objectives that will be established by the Committee
and will be stated in terms of the attainment of specified
levels of or percentage changes (as compared to a prior
measurement period) in any one or more of the performance
objectives. The Committee will, for each fiscal year, establish
the performance objectives to apply to each participant and a
formula or matrix prescribing the extent to which that
participants target annual incentive award
will be earned based upon the degree of achievement of those
performance objectives. In no event, however, will the maximum
payout to that participant exceed 200% of that target annual
incentive award. With respect to awards intended to be
qualified performance-based compensation, the
Committee will determine the target annual incentive award,
performance objectives and any related formula or matrix for
each participant not later than 90 calendar days after the
beginning of a fiscal year of Harris. Payouts will, subject to
any deferral required or permitted by the Committee, be made
after the end of the applicable fiscal year.
The provisions of the Annual Incentive Plan with respect to the
description of the potential business criteria on which the
performance objectives may be based, and measurement of, and
limitations on the use of, performance objectives are the same
as those described under Proposal 4: Re-Approval of
the Performance Measures for the Harris Corporation 2005 Equity
Incentive Plan.
The Committee may, in its sole discretion, award or increase the
amount of an annual incentive award payable to a participant
(other than an executive officer covered by Section 162(m)
of the Internal Revenue Code) even though not earned in
accordance with the performance objectives established for such
participant, or, in the event of any unusual or nonrecurring
events affecting Harris or its financial statements or changes
in applicable laws, regulations or accounting principles,
decrease the amount of an annual incentive award otherwise
payable to a participant even though earned in accordance with
the performance goals established for such participant.
Termination of Employment. Except to the
extent otherwise provided by the Committee or as provided below
under Change in Control, if a participants
employment with Harris, or any subsidiary or affiliate of
Harris, is terminated for any reason prior to the last day of a
fiscal year of Harris, then, except in the case of death,
disability, normal retirement, or an involuntary termination
without cause, the participant shall forfeit the award and shall
not be entitled to a payment of the annual incentive award. If a
participants employment is terminated during a fiscal year
of Harris due to death, disability, normal retirement or
involuntary termination without cause, the participant will be
entitled to a payment, pro-rated based on the number of days the
individual was a participant in the Annual Incentive Plan for
such fiscal year, of the annual incentive award that would have
been payable if the participant had been a participant on the
last day of the fiscal year. A leave of absence, approved by the
Committee, will not be deemed to be a termination of employment
for purposes of the Annual Incentive Plan.
Change in Control. Upon the occurrence of a
Change in Control (as defined below under
Proposal 4: Re-Approval of the Performance Measures
for the Harris Corporation 2005 Equity Incentive Plan)
that qualifies as a change in control event within
the meaning of regulations adopted under Section 409A of
the Internal Revenue Code, we will pay any awards payable to
participants as promptly as practicable following the effective
date of the Change in Control but in no event later than the
earlier of (1) the 90th day following the effective date of
the Change in Control and (2) the 15th day of the third
month following the end of the fiscal year during which the
Change in Control is effective. In the event the Change in
Control does not qualify as a change in control
event under such regulations, the payment to participants
will be made no earlier than the end of the fiscal year during
which the Change in Control is effective and no later than the
15th day
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of the third month following the end of such fiscal year. A
participant who remains employed by Harris or any subsidiary or
affiliate of Harris as of the time the Change in Control is
effective shall be entitled to receive a payment notwithstanding
any subsequent termination of employment for any reason. The
payment to each participant will be an amount not less than the
target award as originally approved for the fiscal year of
Harris, notwithstanding actual results or any changes or
modifications occurring after any such Change in Control.
Termination or Amendment. The Annual Incentive
Plan will continue in effect until its termination by the Board
or the Committee. Prior to a Change in Control, the Board or the
Committee may amend, suspend or terminate the Annual Incentive
Plan from time to time, subject to any requirement for
shareholder approval imposed by applicable law or regulation,
including Section 162(m) of the Internal Revenue Code, and
the listing standards of the NYSE, except that no such amendment
or termination may be made which would alter a
participants right to receive a distribution as previously
earned.
Impact of Restatement of Financial Statements upon Previous
Awards (Clawback). If any of our
financial statements are restated as a result of errors,
omissions or fraud, the Committee may direct that we recover all
or a portion of any such award or payment made to any, all or
any class of participants with respect to any fiscal year of
Harris the financial results of which are negatively affected by
such restatement.
Summary
of U.S. Federal Income Tax Consequences
Payments made under the Annual Incentive Plan will be taxable to
the recipients when paid. As described above, we generally
intend payments under the Annual Incentive Plan to qualify as
qualified performance-based compensation under
Section 162(m) of the Internal Revenue Code. As a result,
we will generally be entitled to a U.S. Federal income tax
deduction corresponding to the amount of income recognized by
the participant.
New Plan
Benefits
Because the Annual Incentive Plan gives the Committee discretion
in establishing target annual cash incentives (subject to the
dollar limit for executive officers noted above) and the
Committee has discretion to reduce the amount of benefits that
will be payable under the Annual Incentive Plan, it is not
possible to determine the amount of the benefits that may become
payable under the Annual Incentive Plan. For fiscal year 2011,
the target annual cash incentive amounts for the named executive
officers under the Annual Incentive Plan, assuming that actual
performance against the performance objectives established by
the Committee results in an annual cash incentive at 100% of the
target cash incentive, would be as follows: Howard L. Lance:
$1,260,000; Gary L. McArthur: $395,000; Robert K. Henry:
$505,000; Dana A. Mehnert: $290,000; and Daniel R. Pearson:
$345,000. Actual cash incentive amounts could be more or less
than the target cash incentive amounts described above,
depending on the actual performance against the performance
objectives and subject to the Committees discretion to
reduce the amount of the annual cash incentive earned under the
Annual Incentive Plan. Because Mr. Henry retired in September
2010, his payout in respect of fiscal 2011 will be pro rated.
Vote
Required and Related Matters
The affirmative vote of a majority of the shares represented at
the 2010 Annual Meeting of Shareholders and entitled to vote on
this proposal will be required to approve the adoption of the
Harris Corporation Annual Incentive Plan. Abstentions will have
the effect of a vote against approval of the Annual Incentive
Plan. Any broker non-votes will have no effect on the approval
of the Harris Corporation Annual Incentive Plan. If the Annual
Incentive Plan is not so approved, no annual incentives will be
paid under the Annual Incentive Plan. However, we may otherwise
grant annual cash bonuses and in that event, these bonuses would
not qualify as qualified performance-based compensation under
Section 162(m) of the Internal Revenue Code, and
accordingly, all or a portion of such bonuses might not be
deductible by us for federal income tax purposes.
Recommendation
Regarding Proposal 3
Our Board of Directors unanimously recommends that you vote
FOR approval of the Harris Corporation Annual
Incentive Plan. If not otherwise specified, proxies will be
voted FOR approval of this proposal.
71
PROPOSAL 4: RE-APPROVAL
OF THE PERFORMANCE MEASURES FOR THE HARRIS CORPORATION 2005
EQUITY INCENTIVE PLAN
At the Annual Meeting, our shareholders will be asked to
re-approve the Harris Corporation 2005 Equity Incentive Plan (As
Amended and Restated Effective August 27, 2010) (the
2005 Equity Plan), for purposes of compliance with
Section 162(m) of the Internal Revenue Code.
Section 162(m) of the Internal Revenue Code generally
denies a corporate tax deduction for annual compensation
exceeding $1 million paid by a publicly held company to its
chief executive officer or to the three most highly compensated
executive officers (other than the chief financial officer).
However, compensation that is deemed to be qualified
performance-based compensation under Section 162(m)
of the Internal Revenue Code is generally excluded from this
limit. To qualify as qualified performance-based
compensation, Section 162(m) of the Internal Revenue
Code requires the material terms of the 2005 Equity Plan to be
approved by our shareholders once every five years.
The Harris Corporation 2005 Equity Incentive Plan was originally
adopted by our Board on August 27, 2005 and approved by our
shareholders on October 28, 2005 (the Effective
Date). It was amended by the Board on October 24,
2008 primarily to reflect changes necessary to comply with
Section 409A of the Internal Revenue Code. On
August 28, 2010, our Board approved an amendment and
restatement of the Harris Corporation 2005 Equity Incentive
Plan, as amended, which included, among other things, the
following amendments, as set forth in the 2005 Equity Plan:
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The addition of six new performance measures to serve as
additional bases for Qualified Performance-Based
Awards under the 2005 Equity Plan (namely: return on
invested capital; earnings before interest, taxes, depreciation
and amortization; margins; new product introduction; business
efficiency measures; and sustainability, including energy or
materials utilization);
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Changes in the definition of Change in Control.
Prior to the amendments, a change in control would be deemed to
occur upon, among other events or circumstances, consummation of
a merger, consolidation, share exchange or similar form of
corporate reorganization (business combination)
unless, among other things, immediately following such business
combination more than 80% of the total voting power of the
corporation resulting from such business combination eligible to
elect directors of such corporation is represented by shares
that were voting securities of Harris immediately prior to such
business combination, and such voting power is in substantially
the same proportion as the voting power of such voting
securities of Harris immediately prior to the business
combination. The amendment lowers the 80% threshold for business
combinations to 60% with respect to awards granted on or after
August 27, 2010 under the 2005 Equity Plan. Also, prior to
the amendments, a change in control would be deemed to occur
upon the approval by our shareholders of a direct or indirect
sale or other disposition of all or substantially all of the
assets of Harris and its subsidiaries, and the amendments
require the consummation (as opposed to mere shareholder
approval) of such a transaction;
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Clarification of the ability of our CEO, if also a member of our
Board, to grant awards in his or her capacity as a Board
committee comprised of one director, as permitted by our By-Laws;
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Clarification and expansion of the definition of
repricing of options and stock appreciation rights
that are subject to shareholder approval; and
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Prohibition of the payment of dividends or dividend equivalents
on unvested performance shares or performance share units.
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The amendments to the 2005 Equity Plan as described above are
effective with respect to equity awards granted on or after
August 27, 2010.
The portion of the amendment and restatement to add six new
performance measures was adopted by our Board subject to
shareholder approval. If our stockholders approve this proposal,
any performance measure related to an award or portion of an
award under the 2005 Equity Plan that is intended to
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satisfy the requirements for qualified performance-based
compensation under Section 162(m) of the Internal
Revenue Code will be based on one or more, or a combination of,
the following criteria: return on equity; diluted earnings per
share; total earnings; earnings growth; return on capital;
return on invested capital; return on assets; return on sales;
earnings before interest and taxes; earnings before interest,
taxes, depreciation and amortization; revenue; revenue growth;
gross margin; return on investment; increase in the fair market
value of shares; share price (including, but not limited to,
growth measures and total stockholder return); operating profit;
net earnings; margins; new product introduction; business
efficiency measures; sustainability, including energy or
materials utilization; cash flow (including, but not limited to,
operating cash flow and free cash flow); inventory turns;
financial return ratios; market share; earnings measures/ratios;
economic value added; balance sheet measurements (such as
receivable turnover); internal rate of return; customer
satisfaction surveys; or productivity.
Shareholders are not being asked to increase the number
of shares available for awards under the 2005 Equity Plan. If
our stockholders approve this proposal, the 2005 Equity Plan
will govern awards after the Annual Meeting. If the requisite
shareholder approval of the performance measures is not
obtained, we may continue to grant awards under the 2005 Equity
Plan under its current terms. However, certain performance-based
awards under the 2005 Equity Plan may no longer constitute
qualified performance-based compensation under
Section 162(m) of the Internal Revenue Code.
Summary
of Certain Terms of the Harris Corporation 2005 Equity Incentive
Plan
The following summary of the principal features of the 2005
Equity Plan is subject to the complete terms of the 2005 Equity
Plan, a copy of which is attached to this proxy statement as
Appendix B.
General. The purpose of the 2005 Equity Plan
is to promote our long-term growth and performance and to
increase shareholder value by providing long-term incentive
awards to employees and directors. The 2005 Equity Plan is
intended to: (i) further align the interests of employees
and directors with those of the shareholders by providing
incentive compensation opportunities which may be tied to the
performance of our common stock and by encouraging common stock
ownership by our officers, employees and directors; and
(ii) assist in the attraction, retention and motivation of
selected individuals.
Administration. The 2005 Equity Plan will be
administered by a committee of the Board (the
Committee) appointed to administer the 2005 Equity
Plan. The Committee will be composed of not fewer than three
non-employee directors, each of whom will be a
Non-Employee Director for purposes of
Section 16 of the Exchange Act and
Rule 16b-3
thereunder, an outside director within the meaning
of Section 162(m) and the regulations promulgated under the
Internal Revenue Code and an independent director as defined by
the listing standards of the NYSE. The Board has initially
designated the Management Development and Compensation Committee
to administer the 2005 Equity Plan. Subject to the provisions of
the 2005 Equity Plan, the Committee has the discretion to
determine the terms of each award and the persons to whom awards
are granted. The Committee may delegate to one or more of our
officers or to a committee of the Board consisting of one or
more directors who also serve as officers of Harris the
authority to grant awards (other than grants to any director,
executive officer or person subject to Section 162(m) of
the Internal Revenue Code) under the 2005 Equity Plan. The
Committee shall have the power to interpret the 2005 Equity Plan
and awards granted thereunder, and all determinations of the
Committee will be final, conclusive and binding on all persons
having an interest in the 2005 Equity Plan or any award.
Shares Available For Award. The number of
shares with respect to which awards may be issued or delivered
under the 2005 Equity Plan (subject to adjustment as set forth
below) is 20,000,000. Subject to adjustment as set forth below,
no more than 7,000,000 of these shares shall be available for
issuance pursuant to incentive stock options, no more than
1,000,000 shares may be issued or delivered as other
share-based awards and no more than 1,000,000 shares
may be issued or delivered to non-employee directors in respect
of deferred units. Any shares issued or delivered as a result of
full-value awards shall be counted as
1.60 shares for the purpose of the overall share limit
under the 2005 Equity Plan. Full-Value Awards
include cash-based units, deferred units, performance shares,
performance share units,
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restricted stock, restricted units and all other share-based
awards, but does not include options or stock appreciation
rights. Shares issued or delivered under the 2005 Equity Plan
may be authorized but unissued or reacquired shares of our
common stock.
Shares issued by us as substitute awards granted in connection
with the assumption of outstanding awards previously granted by
a company acquired by us, or with which we combine, do not
reduce the number of shares available for awards under the 2005
Equity Plan.
Individual Participant Limits. Subject to
adjustment as set forth below, the maximum number of shares with
respect to which options and stock appreciation rights
(SARs) may be granted to any one participant during
any fiscal year will be 1,000,000 shares. The initial
target number of shares subject to awards of performance shares,
performance share units or other Full-Value Awards intended to
qualify as performance-based compensation granted to any one
participant in any fiscal year shall not exceed
500,000 shares and in no event shall the number of shares
ultimately issued exceed 200% of the initial target number of
shares. In no event will any participant in any fiscal year
receive awards of cash-based units having an aggregate maximum
value on their respective grant dates in excess of $6,000,000.
Share Counting and Adjustments. The maximum
number of shares with respect to which awards may be granted
under the 2005 Equity Plan will be increased by the number of
shares with respect to which options or other awards were
granted under the Harris Corporation 2000 Stock Incentive Plan
and the Harris Corporation Stock Incentive Plan (collectively,
the Predecessor Plans) as of the Effective Date, but
which terminate, expire or terminate unexercised, or are
forfeited or cancelled without delivery of the shares under the
terms of either Predecessor Plan after the Effective Date.
Further, to the extent that any award granted under the 2005
Equity Plan is forfeited or otherwise terminates without
delivery of shares or terminates without having been exercised,
any shares underlying such award will again be available for
grant under the 2005 Equity Plan to the extent of such
forfeiture or termination. Shares will not be treated as having
been issued under the 2005 Equity Plan and will therefore not
reduce the number of shares available for grant to the extent an
award is settled in cash. Shares tendered to us as full or
partial payment of the exercise or purchase price of any award
or withheld by us in satisfaction of a tax withholding
obligation will not again become available under the 2005 Equity
Plan. The number of shares available under the 2005 Equity Plan
will be reduced upon the exercise of an SAR by the gross number
of shares subject to that SAR.
The number of shares authorized under the 2005 Equity Plan, the
maximum award limitations set forth in the 2005 Equity Plan, the
number of shares subject to outstanding awards and the exercise
price, base price, purchase price or option price and other
relevant provisions of the 2005 Equity Plan and outstanding
awards shall be adjusted by the Committee or the Board, in its
discretion, to reflect a change in our capitalization. Such
adjustments may include a substitution for alternative
consideration (including cash) and may be made as a result of a
recapitalization, repurchase, rights offering, reorganization,
merger, consolidation, combination, exchange of shares,
spin-off, spin-out, extraordinary cash dividends or other
distribution of assets to shareholders or other similar
corporate transaction or event.
In the event of a stock dividend, stock split, reverse stock
split, share combination or similar events, the maximum number
of shares authorized under the 2005 Equity Plan, the maximum
award limitations, the number of shares subject to outstanding
awards, the exercise price, base price, purchase or option price
and other relevant provisions of the 2005 Equity Plan and
outstanding awards will be proportionately and automatically
adjusted to reflect such event.
Prohibition of Option and SAR
Repricing. Without the prior approval of our
shareholders, options or SARs may not be repriced.
Eligibility. Awards may be granted to
employees or non-employee directors of Harris or any subsidiary
or affiliate of Harris. As of August 28, 2010, we had
approximately 15,800 employees and we had 10 non-employee
directors, all of whom would be eligible to receive awards under
the 2005 Equity Plan.
Types of Awards. Awards under the 2005 Equity
Plan may be in the form of performance shares, performance share
units, cash-based units, restricted stock, restricted units,
options, SARs, deferred units (which may only be awarded to
non-employee directors) or other share-based awards.
74
Performance Share, Performance Share Unit, and Cash-Based
Unit Awards. The Committee may grant performance
share, performance share unit, and cash-based unit awards,
subject to such forfeiture and other conditions and the
attainment of such performance measures over such periods (not
less than one year) as the Committee may determine. The
Committee may determine performance levels under which the
number of performance shares, performance share units or
cash-based units earned based on actual performance may be less
than, equal to or greater than, the number stated in the award.
To the extent earned, performance shares will be released to
participants without restriction on transfer and performance
share unit and cash-based unit awards will be settled, in the
discretion of the Committee, in cash, shares of common stock or
any combination of these. Payout of performance share units in
cash and cash-based units in common stock will be made based
upon the fair market value of the common stock, determined on
such date or over such time period as determined by the
Committee.
Performance measures may be described in terms of company-wide
objectives or, with respect to participants who are employees,
objectives that are related to the performance of the individual
participant or the subsidiary, division, business unit,
department or function with Harris in which the participant is
employed. Performance measures may be measured on an absolute or
relative basis. Relative performance may be measured by a group
of peer companies or by a financial market index.
Subject to the applicable performance share award agreement and
unless otherwise provided or determined by the Committee, during
the performance period participants may exercise full voting
rights with respect to all performance shares. Subject to the
applicable performance share unit award agreement or cash-based
unit award agreement and unless otherwise provided or determined
by the Committee, a participant will not have any rights as a
shareholder with respect to shares underlying a performance
share unit or cash-based unit until such time, if any, as such
underlying shares are actually issued to the participant.
Dividend Equivalents. No dividends or dividend
equivalents shall be paid on outstanding unvested or unearned
performance shares or performance share units. However, the
Committee may specify that a performance share or performance
share unit will accrue dividend equivalents in an amount equal
to the cash dividends or other distribution, if any, which are
paid with respect to issued and outstanding shares of common
stock during the performance period. If dividend equivalents are
included with a performance share award or performance share
unit award, the dividend equivalents will be paid in cash or
shares of common stock at the time of vesting of such
performance shares and at the time of payout of such performance
share units. Dividend equivalents will, in such case, be paid
with respect to all performance shares that have vested or
performance share units that are paid out. No dividend
equivalents will be paid on performance shares or performance
share units that are forfeited or cancelled. The Committee may
also specify that dividend equivalents will be deemed to be
reinvested in our common stock. Dividend equivalents which are
deemed reinvested in our common stock will be converted into
additional performance shares or performance share units and
payment of the performance shares or performance share units
shall include the value of such additional performance shares or
performance share units. No interest shall be paid on a dividend
equivalents or any part thereof.
Restricted Stock and Restricted Unit
Awards. Restricted stock awards are shares of
common stock subject to transfer restrictions as well as
forfeiture upon certain terminations of employment or service
prior to the end of a restricted period or other conditions
specified by the Committee in the award agreement. The Committee
may grant restricted stock and restricted unit awards subject to
such restrictions as to vesting and to such other terms as the
Committee may determine. If the restricted stock or restricted
units vest by the passage of time, such awards will be subject
to restriction for at least three years, as determined by the
Committee at the date of grant. To the extent permitted by
Section 409A of the Internal Revenue Code, the Committee
may, in its sole discretion, at the time of the grant of the
award of restricted stock or restricted units or at any time
thereafter, provide for the early vesting of such award prior to
the expiration of the restriction period. Upon expiration of the
restriction period and satisfaction of any other terms or
conditions, restricted stock will immediately become
nonforfeitable and the shares underlying such restricted stock
will be released to
75
the participant, and restricted units will become payable to a
participant. Payout of a restricted unit may be made, at the
discretion of the Committee, in shares or in cash, or in a
combination thereof. Any cash payout of a restricted unit will
be made based upon the fair market value of the common stock,
determined on such date or over such time period as determined
by the Committee. Subject to the applicable award agreement and
unless otherwise provided or determined by the Committee, during
the restriction period participants may exercise full voting
rights with respect to restricted shares and will be entitled to
receive dividend equivalents (rather than dividends) paid with
respect to those shares but will not have any rights as a
shareholder with respect to shares underlying a restricted unit
until such time, if any, as such underlying shares are actually
issued to the participant. The Committee may provide for the
payment of dividend equivalents to the participants holding
restricted units at such times as paid to shareholders generally
or at the time of vesting or other payout of the restricted unit.
Stock Options. A stock option is the right to
purchase shares of our common stock at a fixed exercise price
for a fixed period of time. The Committee may grant incentive
stock options within the meaning of Section 422 of the
Internal Revenue Code, non-qualified stock options or any
combination of these. The Committee establishes the exercise
price of options, provided that incentive and non-qualified
stock options must have an exercise price that is not less than
the fair market value of a share of our common stock on the date
of grant. The closing sale price of our common stock, as
reported on the NYSE on September 13, 2010, was
$43.61 per share. To the extent the aggregate exercise
price of the shares with respect to which incentive stock
options are exercisable for the first time by a participant
during any calendar year exceeds $100,000 (or such other amount
as determined under the Internal Revenue Code), such options
will be treated as non-qualified stock options.
The 2005 Equity Plan provides that the option exercise price may
be paid in cash or its equivalent, by tender of shares of common
stock owned by the participant having a fair market value not
less than the exercise price or, if permitted by the Committee
and to the extent permitted by applicable law, by means of a
net-exercise procedure or a broker-assisted cashless exercise.
Options will become vested and exercisable at such times and
subject to such conditions and restrictions as may be specified
by the Committee. The maximum term of an option granted under
the 2005 Equity Plan is ten years. A participant may not
exercise an option after its expiration date.
Stock Appreciation Rights. The Committee may
grant SARs either in tandem with a related option or on a
freestanding basis, independent of any option. A tandem SAR is
exercisable only at the time and only to the extent that the
related stock option is exercisable. A freestanding SAR is
exercisable at such times and subject to such terms as specified
by the Committee. The exercise price of a tandem SAR will be the
same as the exercise price of the related option, and the
exercise price of a freestanding SAR may not be less than the
fair market value on the date of grant of the number of shares
of our common stock subject to the freestanding SAR. In no event
will any SAR be exercisable any later than ten years from the
date of its grant. Upon the exercise of any SAR, the participant
is entitled to receive an amount equal to the excess of the fair
market value of the underlying shares of common stock as to
which the SAR is exercised over the aggregate exercise price for
such shares.
Upon exercise of a tandem SAR granted as to all or some of the
shares subject to that tandem SAR, the related option will be
automatically canceled to the extent of the number of shares
subject of the exercise of the tandem SAR, and such shares will
no longer be available for grant under the 2005 Equity Plan. If
the related option is exercised as to some or all of the shares
underlying such option, the related tandem SAR will
automatically be canceled to the extent of the number of shares
subject to the exercise of the option, and such shares will no
longer be available for grant under the 2005 Equity Plan. A
participant may not exercise an SAR after its expiration date.
Deferred Units. The Committee may grant
deferred unit awards to participants who are non-employee
directors upon such terms as the Committee may determine. Each
deferred unit will be credited to the applicable non-employee
directors deferred unit account. Awards in the form of
deferred units are not required to be subject to any vesting or
other restriction period.
Subject to the provisions of the applicable deferred unit award
agreement and unless otherwise
76
provided or determined by the Committee, a non-employee director
will have no rights to transfer any rights under the deferred
units and will not have any rights as a shareholder with respect
to shares underlying a deferred unit until such time, if any, as
such underlying shares are actually issued to the non-employee
director. The Committee may provide in a deferred unit award
agreement for the payment of dividend equivalents to the
non-employee director at such times as paid to shareholders
generally or at the time of payout of the deferred unit. The
Committee may grant to a non-employee director holding deferred
units the right to reallocate the deferred units to subaccounts
that are invested in investment funds other than a Harris stock
fund.
Other Share-Based Awards. The Committee may
grant, subject to the limits set forth in the 2005 Equity Plan,
awards of shares and other awards that are valued in whole or in
part by reference to, or are otherwise based on, shares
(including bonus stock, shares that are subject to restrictions
on transfer, or similar securities or rights). The Committee
may, in its sole discretion, determine the terms of any such
share-based award. Share-based awards in the form of restricted
shares or units are not required to be subject to any minimum
vesting period.
Change in Control. Unless the Committee
determines otherwise at the time of grant of a particular award,
and as set forth in the applicable award agreement, and subject
to certain limitations imposed by Section 409A of the
Internal Revenue Code, upon the occurrence of a Change in
Control (as defined below): (i) any awards
outstanding as of the date of such Change in Control that are
subject to vesting requirements and are not then vested, will
become fully vested; (ii) all then-outstanding options and
SARs will be fully vested and immediately exercisable, except
that no option or SAR will be exercisable beyond its original
expiration date; and (iii) all restrictions regarding the
restriction period and any other conditions prescribed by the
Committee with respect to grants of performance shares,
performance share units, restricted stock, restricted units or
other
share-based
awards, shall automatically lapse, expire and terminate and all
such awards will be deemed to be fully earned.
Further, within 90 days after a Change in Control (or such
other number of days as is required under Section 409A of
the Internal Revenue Code in connection with the Change in
Control), Harris must pay to each non-employee director, in a
lump sum, any deferred units that have been credited to that
non-employee directors account.
A Change in Control generally is deemed to occur if
(i) any person is or becomes the owner, directly or
indirectly, of at least 20% of Harris voting securities;
(ii) individuals who, on July 3, 2010, constituted the
Board of Directors (the Incumbent Directors) cease
for any reason to constitute at least a majority of the Board of
Directors (provided that any person who subsequently becomes a
director and is approved by a vote of at least two-thirds of the
directors then constituting the Incumbent Directors will be
considered as though such person were an Incumbent Director);
(iii) a merger, consolidation, share exchange or similar
form of corporate reorganization is consummated, unless
immediately after such transaction (a) more than 60% of the
total voting power of the company resulting therefrom is
represented by shares that were Harris voting securities
immediately prior thereto and such voting power is in
substantially the same proportion as the Harris voting
securities immediately prior to such transaction, (b) no
person becomes the owner, directly or indirectly, of 20% of the
voting securities of the corporation resulting from such
transaction, and (c) at least a majority of the members of
the board of directors of the corporation resulting from such
transaction were Incumbent Directors at the time of the
Boards approval of such transaction; (iv) the
shareholders of Harris approve a plan of complete liquidation or
dissolution of Harris; or (v) Harris consummates a sale or
other disposition of all or substantially all of the assets of
Harris.
Termination or Amendment. The 2005 Equity Plan
will continue in effect until its termination by the Committee,
except that all awards must be granted within 10 years from
the Effective Date. Until such time as a Change in Control has
occurred, the Board may, to the extent permitted by
Section 409A of the Internal Revenue Code, amend, suspend
or terminate the 2005 Equity Plan or any part thereof from time
to time, provided that no change may be made which would
adversely impair the rights of a participant who has received an
award without the consent of said participant, and provided that
if an amendment to the 2005 Equity Plan (i) would
materially increase the benefits accruing to participants under
the 2005 Equity Plan, (ii) would increase the number of
shares which may
77
be issued under the 2005 Equity Plan, (iii) would
materially modify the requirements for participation in the 2005
Equity Plan or (iv) must otherwise be approved by our
shareholders in order to comply with applicable law or the rules
of the NYSE or, if the common stock is not traded on the NYSE,
the principal national securities exchange upon which the common
stock is traded or quoted, then such amendment will be subject
to shareholder approval and will not be effective unless and
until such approval has been obtained. After a Change in
Control, the Board will no longer have the power to amend,
suspend or terminate the 2005 Equity Plan or any part thereof.
Limits on Transferability. Except as described
in the following, no award granted under the 2005 Equity Plan
may be sold, encumbered or otherwise transferred by a
participant except by will or the laws of descent and
distribution in the event of the participants death (to
the extent such award, by its terms, survives the
participants death). The Committee may, in its discretion,
expressly authorize transfer by a participant of options (other
than incentive stock options) or SARs on certain conditions.
Impact of Restatement of Financial Statements upon Previous
Awards (Clawback). If any of our
financial statements are restated as a result of errors,
omissions or fraud, the Committee may (in its sole discretion,
but acting in good faith) direct that we recover all or a
portion of any such award or payment made to any, all or any
class of participants with respect to any fiscal year of Harris
the financial results of which are negatively affected by such
restatement.
Other Terms of Awards. We will have the
authority to withhold, or to require a participant to remit to
us, prior to issuance or delivery of any shares or cash under
the 2005 Equity Plan, an amount sufficient to satisfy Federal,
state, local or foreign tax or withholding requirements
associated with any award. In addition, we may, in our sole
discretion, permit or require a participant to satisfy any tax
withholding requirements, in whole or in part, by
(i) delivering to us shares held by such participant having
a fair market value equal to the amount of the tax or
(ii) directing us to retain shares otherwise issuable or
cash otherwise to be delivered to the participant under the 2005
Equity Plan.
Summary
of U.S. Federal Income Tax Consequences
The following summary is intended only as a general guide to the
U.S. Federal income tax consequences of participation in
the 2005 Equity Plan and does not attempt to describe all
possible Federal or other tax consequences of such participation
or tax consequences based on particular circumstances.
Incentive Stock Options. A participant
recognizes no taxable income for regular income tax purposes as
a result of the grant or exercise of an incentive stock option.
Participants who do not dispose of their shares within two years
following the date the option was granted or within one year
following the exercise of the option will normally recognize a
capital gain or loss equal to the difference, if any, between
the sale price and the purchase price of the shares. In such
event, we will not be entitled to any corresponding deduction
for Federal income tax purposes. In the event of the
participants disposition of shares before both of these
holding periods have been satisfied (a disqualifying
disposition), the participant will recognize ordinary
income equal to the spread between the option exercise price and
the fair market value of the shares on the date of exercise, but
in most cases not to exceed the gain realized on the sale, if
lower. Any gain in excess of that amount will be a capital gain.
If a loss is recognized, there will be no ordinary income, and
such loss will be a capital loss. Any ordinary income recognized
by the participant upon the disqualifying disposition of the
shares generally should be deductible by us for Federal income
tax purposes, except to the extent such deduction is limited by
applicable provisions of the Internal Revenue Code.
In general, the difference between the option exercise price and
the fair market value of the shares on the date when an
incentive stock option is exercised is treated as an adjustment
in computing income that may be subject to the alternative
minimum tax, which is paid if such tax exceeds the regular tax
for the year. Special rules may apply with respect to certain
subsequent sales of the shares in a disqualifying disposition,
certain basis adjustments for purposes of computing the
alternative minimum taxable income on a subsequent sale of the
shares and certain tax credits which may arise with respect to
participants subject to the alternative minimum tax.
78
Non-qualified Stock Options. Options not
designated or qualifying as incentive stock options are
non-qualified stock options having no special tax status. A
participant generally recognizes no taxable income upon receipt
of such an option. Upon exercising a non-qualified stock option,
the participant normally recognizes ordinary income equal to the
difference between the exercise price paid and the fair market
value of the shares on the date when the option is exercised. If
the participant is an employee, such ordinary income generally
is subject to withholding of income and employment taxes. Upon
the sale of stock acquired by the exercise of a non-qualified
stock option, any gain or loss, based on the difference between
the sale price and the fair market value of the shares on the
exercise date, will be taxed as capital gain or loss. We
generally should be entitled to a tax deduction equal to the
amount of ordinary income recognized by the participant as a
result of the exercise of a non-qualified stock option, except
to the extent such deduction is limited by applicable provisions
of the Internal Revenue Code.
Stock Appreciation Rights. A participant
recognizes no taxable income upon the receipt of an SAR. Upon
the exercise of an SAR, the participant generally will recognize
ordinary income in an amount equal to the excess of the fair
market value of the underlying shares of common stock on the
exercise date over the exercise price. If the participant is an
employee, such ordinary income generally is subject to
withholding of income and employment taxes. We generally should
be entitled to a deduction equal to the amount of ordinary
income recognized by the participant in connection with the
exercise of the SAR, except to the extent such deduction is
limited by applicable provisions of the Internal Revenue Code.
Restricted Stock and Performance Share
Awards. A participant acquiring restricted stock
or performance shares generally will recognize ordinary income
equal to the excess of the fair market value of the shares on
the determination date over the price paid, if any,
for such shares. The determination date is the date
on which the participant acquires the shares unless, as will
normally be the case, the shares are subject to a substantial
risk of forfeiture and are not transferable, in which case the
determination date is the earlier of (i) the date on which
the shares become transferable or (ii) the date on which
the shares are no longer subject to a substantial risk of
forfeiture. If the determination date is after the date on which
the participant acquires the shares, the participant may elect,
pursuant to Section 83(b) of the Internal Revenue Code, to
have the date of acquisition be the determination date by filing
an election with the Internal Revenue Service no later than
30 days after the date on which the shares are acquired. If
the participant is an employee, such ordinary income generally
is subject to withholding of income and employment taxes. Upon
the sale of shares acquired pursuant to a restricted stock or
performance share award, any gain or loss, based on the
difference between the sale price and the fair market value on
the determination date, will be taxed as capital gain or loss.
We generally should be entitled to a deduction equal to the
amount of ordinary income recognized by the participant on the
determination date, except to the extent such deduction is
limited by applicable provisions of the Internal Revenue Code.
Performance Share Unit, Restricted Unit, Cash-Based Unit and
Deferred Unit Awards. A participant generally
will recognize no income upon the grant of a performance share
unit, restricted unit, cash-based unit or deferred unit award.
Upon the settlement of such awards, participants normally will
recognize ordinary income in the year of settlement in an amount
equal to the cash received and the fair market value of any
unrestricted shares of stock received. If the participant is an
employee, such ordinary income generally is subject to
withholding of income and employment taxes. Upon the sale of any
shares received, any gain or loss, based on the difference
between the sale price and the fair market value on the
determination date (as defined above under Summary of
U.S. Federal Income Tax Consequences Restricted
Stock and Performance Share Awards), will be taxed as
capital gain or loss. We generally should be entitled to a
deduction equal to the amount of ordinary income recognized by
the participant on the determination date, except to the extent
such deduction is limited by applicable provisions of the
Internal Revenue Code.
Plan
Benefits
Future benefits under the 2005 Equity Plan are not currently
determinable. Moreover, the benefits to any director, officer or
employee from future share-based awards will not increase by
reason of approval of this proposal. Whether future share-based
awards will be made will depend on action of the Committee, and
the value of any future share-based awards will ultimately
depend on the future price of our common stock, among other
factors,
79
and will be subject to such performance, vesting or other
conditions as the Committee determines from time to time. For
further information on share-based awards granted in fiscal
2010, see the Grants of Plan-Based Awards in Fiscal 2010 Table
on page 49 and the related notes.
In accordance with SEC rules, the following table lists all
options granted to the individuals and groups indicated below
since the adoption of the 2005 Equity Plan in 2005. The option
awards listed below for the covered executives are not
additional awards and include the option awards listed in the
Outstanding Equity Awards at 2010 Fiscal Year End Table on
page 51, as well as grants of options approved by the
Committee and our Board in August 2010.
|
|
|
|
|
|
|
Number of Options
|
|
|
|
Granted Since
|
|
|
|
Adoption of 2005
|
|
|
|
Equity Plan in 2005
|
|
Name of Individual or Identity of Group
|
|
(#)
|
|
|
Howard L. Lance
Chairman, President and Chief Executive Officer
|
|
|
961,874
|
|
Gary L. McArthur
Senior Vice President and Chief Financial Officer
|
|
|
210,813
|
|
Robert K. Henry
Executive Vice President and Chief Operating Officer*
|
|
|
305,578
|
|
Dana A. Mehnert
Group President, RF Communications
|
|
|
122,353
|
|
Daniel R. Pearson
Group President, Government Communications Systems*
|
|
|
164,171
|
|
All current executive officers as a group(1)
|
|
|
2,234,153
|
|
Each other person who received or is to receive five percent of
such options
|
|
|
|
|
All employees, including all current officers who are not
executive officers, as a group
|
|
|
6,860,630
|
|
|
|
|
* |
|
Mr. Henry relinquished his position as Chief Operating
Officer on June 1, 2010 and retired from Harris in
September 2010. Mr. Pearson became Executive Vice President
and Chief Operating Officer on June 1, 2010. |
|
(1) |
|
Includes the executive officers listed above. |
None of the following were granted options under the 2005 Equity
Plan: any current director of Harris, who is not an executive
officer; any nominee for election as director named in this
proxy statement who is not an executive officer; and any
associate of any such director, nominee or executive officer of
Harris.
Vote
Required and Related Matters
The affirmative vote of a majority of the shares represented at
the 2010 Annual Meeting of Shareholders and entitled to vote on
this proposal will be required to re-approve the Harris
Corporation 2005 Equity Incentive Plan. Abstentions will have
the effect of a vote against re-approval of the Harris
Corporation 2005 Equity Incentive Plan. Any broker non-votes
will have no effect on the re-approval of the Harris Corporation
2005 Equity Incentive Plan.
Recommendation
Regarding Proposal 4
Our Board of Directors unanimously recommends that you vote
FOR re-approval of the Harris Corporation 2005
Equity Incentive Plan. If not otherwise specified, proxies will
be voted FOR approval of this proposal.
80
EQUITY
COMPENSATION PLAN INFORMATION
The following table provides information as of July 2, 2010
about our common stock that may be issued, whether upon the
exercise of options, warrants and rights or otherwise, under our
existing equity compensation plans.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of securities
|
|
|
|
|
|
|
Weighted-average
|
|
|
remaining available for
|
|
|
|
Number of securities to be
|
|
|
exercise price
|
|
|
future issuance under
|
|
|
|
issued upon exercise
|
|
|
of outstanding
|
|
|
equity compensation plans
|
|
|
|
of outstanding options,
|
|
|
options,
|
|
|
(excluding securities
|
|
|
|
warrants and rights
|
|
|
warrants and rights
|
|
|
reflected in column (a))
|
|
Plan Category
|
|
(a)(2)
|
|
|
(b)(2)
|
|
|
(c)
|
|
|
Equity compensation plans approved by shareholders(1)
|
|
|
7,162,272
|
|
|
$
|
37.55
|
|
|
|
17,800,543
|
|
Equity compensation plans not approved by shareholders
|
|
|
-0-
|
|
|
|
N/A
|
|
|
|
-0-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
7,162,272
|
|
|
$
|
37.55
|
|
|
|
17,800,543
|
|
|
|
|
(1)
|
|
Consists of the Harris Corporation
Stock Incentive Plan, the Harris Corporation 2000 Stock
Incentive Plan and the Harris Corporation 2005 Equity Incentive
Plan. No additional awards may be granted under the Harris
Corporation Stock Incentive Plan or the Harris Corporation 2000
Stock Incentive Plan.
|
|
(2)
|
|
Under the Harris Corporation 2005
Equity Incentive Plan, in addition to options, we have granted
share-based compensation awards in the form of performance
shares, restricted stock, performance share units, restricted
stock units or other similar types of share awards. As of
July 2, 2010, there were 1,570,202 such awards outstanding
under that plan. The outstanding awards consisted of
(i) 1,435,439 performance share awards and restricted stock
awards, for which all 1,435,439 shares were issued and
outstanding; and (ii) 134,763 performance share unit awards
and restricted stock unit awards, for which all 134,763 were
payable in shares but for which no shares were yet issued and
outstanding. The 7,162,272 shares to be issued upon
exercise of outstanding options, warrants and rights as listed
in column (a) consisted of shares to be issued in respect
of the exercise of 7,027,509 outstanding options and in respect
of the 134,763 performance share unit awards and restricted
stock units awards payable in shares. Because there is no
exercise price associated with performance share awards or
restricted stock awards or with performance share units awards
or restricted stock unit awards, all of which are granted to
employees at no cost, such awards are not included in the
weighted average exercise price calculation in column (b).
|
PROPOSAL 5: SHAREHOLDER
PROPOSAL REQUESTING APPROVAL OF AN AMENDMENT
TO THE BY-LAWS TO
REQUIRE AN INDEPENDENT CHAIRMAN OF THE BOARD
We received the following shareholder proposal and supporting
statement on behalf of Norges Bank. According to information
provided to us, Norges Bank, whose address is P.O. Box 1179
Sentrum, 0107 Oslo, Norway, owns more than $2,000 in market
value of our common stock as of the date the proposal was
submitted to us. In accordance with the applicable proxy
statement regulations, the proposed resolution and supporting
statement, for which the Board of Directors and Harris accept no
responsibility, are set forth below.
RESOLVED: Pursuant to Section 109 of the Delaware General
Corporation Law, the shareholders hereby amend the By-Laws as
follows:
Add the following at the end of Article V, Sec. 4:
Notwithstanding any other provision of these By-Laws, the
Chairman of the Board shall be a Director who is independent
from the Company. For purposes of this By-Law,
independent has the meaning set forth in the New
York Stock Exchange (NYSE) listing standards, unless
the Companys common stock ceases to be listed on the NYSE
and is listed on another exchange, in which case such
exchanges definition of independence shall apply. If the
Board of Directors determines that a Chairman of the Board who
was independent at the time he or she was selected is no longer
independent, the Board of Directors shall select a new Chairman
of the Board who satisfies the requirements of this
By-Law
within 60 days of such determination. Compliance with this
By-Law shall be excused if no Director who qualifies as
independent is elected by the shareholders or if no Director who
is independent is willing to serve as Chairman of the Board.
This By-Law shall apply prospectively, so as not to violate any
contractual obligation of the Company in effect when this By-Law
was adopted.
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Delete the following from Article V, Sec. 5:
shall be either the Chairman of the Board
and/or
President, as the Board of Directors so designates, and he or
she
Supporting Statement. A goal of Norges Bank, the
central bank of Norway, is to safeguard long-term financial
interests through active ownership. In furtherance of that goal,
Norges Bank believes that corporate boards should be structured
to ensure independence and accountability to shareholders. The
roles of Chairman of the Board and CEO are fundamentally
different and should not be held by the same person. There
should be a clear division of the responsibilities between these
positions to ensure a balance of power and authority on the
Board. Approximately 49% of S&P 1500 companies have
separate CEO and Chairman positions.
The Board should be led by an independent Chairman. Such a
structure will put the Board in a better position to make
independent evaluations and decisions, hire management, decide a
remuneration policy that encourages performance, provide
strategic direction, and support management in taking a
long-term view in the development of business strategies. An
independently led Board is better able to oversee and give
guidance to Company executives and help prevent conflict or the
perception of conflict, and effectively strengthen the system of
checks-and-balances
within the corporate structure and thus protect shareholder
value.
An independent Chairman will be a strength to the Company when
the Board must make the necessary strategic decisions and
prioritizations to create shareholder value over time.
We therefore urge shareholders to vote FOR this proposal.
Harris Response to the Shareholder Proposal
Our Board of Directors has considered the above proposal
carefully and believes it is not in the best interests of our
shareholders. Our Board unanimously recommends that you vote
AGAINST this shareholder proposal for the reasons
that follow. If not otherwise specified, proxies will be voted
AGAINST approval of this shareholder proposal.
Our Board, of which all but one member is independent, believes
that the decision as to who should serve as Chairman and as CEO,
and whether the offices should be combined or separate, is
properly the responsibility of our Board, to be exercised from
time to time in appropriate consideration of then-existing facts
and circumstances. Our Board further believes that no single
board leadership model is universally or permanently appropriate.
Our Board believes that its members possess considerable
experience and unique knowledge of the challenges and
opportunities Harris faces, and therefore are in the best
position to evaluate the needs of Harris and how best to
organize the capabilities of our directors and senior executives
to meet those needs. Additionally, our Board already possesses
the authority to separate the positions of Chairman and CEO,
subject to existing contractual arrangements with
Mr. Lance, if it deems such action appropriate in the
future.
This shareholder proposal is structured as a binding,
prescriptive By-Law amendment that would take away our
Boards ability to evaluate and change the structure of our
Chairman and CEO positions, as and when appropriate, to best
serve the interests of Harris and our shareholders.
Our Board remains committed to maintaining strong corporate
governance and appropriate independent oversight of management.
For a number of years one of our independent directors has acted
as a Presiding Independent Director with duties that included
chairing the executive sessions of non-management directors and
acting as liaison between our Chairman and independent
directors. As a demonstration of our Boards continuing
commitment to strong corporate governance and Board
independence, our Board has evolved its leadership structure
from a Presiding Independent Director position into a Lead
Independent Director position. Our independent directors
designate one of our Board members (who must be an independent
director) to serve as Lead Independent Director, which position
is rotated annually among the Chairpersons of each of the Board
committees. The Lead Independent Director has specifically
enumerated duties and responsibilities, including
(a) presiding at all meetings of our Board at which our
Chairman is not present, including executive
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sessions of the independent directors, (b) serving as
liaison between our Chairman and our independent directors,
(c) in consultation with our Chairman, approving the
information sent to our Board and the meeting agendas for our
Board, (d) in consultation with our Chairman, approving
meeting schedules to assure that there is sufficient time for
discussion of all agenda items, (e) having the authority to
call meetings of our independent directors, and (f) if
requested by major shareholders, ensuring that he or she is
available, when appropriate, for consultation and direct
communication consistent with our policies regarding shareholder
communications. Each of our independent directors also has
direct and complete access to our Chairman.
Additionally, executive sessions of our independent directors
are scheduled at each regular meeting of our Board. Additional
executive sessions may be convened by the Lead Independent
Director at his or her discretion and will be convened if
requested by any other independent director. Any independent
director may raise any issues for discussion at an executive
session.
We believe that these policies, when combined with our other
policies and procedures, provide appropriate opportunities for
oversight, discussion and evaluation of our decisions and
direction. We also believe at this time there is clarity in
having a single voice speaking for Harris.
The structure of our Board also is consistent with standards of
good governance applied by many companies that combine the
chairman and CEO positions, including maintaining a Lead
Independent Director, as described above, and as follows:
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A substantial majority of our directors are independent.
Other than Mr. Lance, all of our directors are independent
as defined by the NYSE listing standards and our Director
Independence Standards.
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Our Board committees are comprised entirely of independent
directors. All five standing committees of our Board are
comprised solely of independent directors as defined by the NYSE
listing standards and our Director Independence Standards.
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We have established corporate governance guidelines. We
have maintained our Corporate Governance Principles since 2002,
which principles trace their history to 1960, and have evolved
and been revised from time to time since then. As required by
its charter, our Corporate Governance Committee (comprised
solely of independent directors) reviews and, if needed,
recommends revisions to, the Corporate Governance Principles at
least annually.
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Our Board remains committed to strong corporate
governance. As another reminder of our Boards
continuing commitment to strong corporate governance and Board
independence, our Board has implemented majority voting in
director elections and initiated the phase-out of our classified
Board structure, such that as of the 2011 Annual Meeting of
Shareholders, all of our directors will stand for election
annually. In addition, we are committed to maintaining good
compensation practices. Our compensation practices are reviewed
by our Management Development and Compensation Committee
(comprised solely of independent directors), as well as our
Boards independent compensation consultant, and we believe
they are in line with appropriate benchmarks.
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Our Companys performance is strong. As an example,
the five-year cumulative total return of our common stock has
exceeded the five-year cumulative total return for each of the
Standard & Poors 500 Composite Stock Index and,
the Standard & Poors 500 Information Technology
Sector Index and the Standard & Poors 500
Aerospace and Defense Index, for the five fiscal years ending
July 2, 2010. In addition, our cash flow from operations
remains strong and our debt ratings remain investment grade.
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Notwithstanding the arguments of the shareholder proponent,
there currently is not a clear consensus in the United States
that requiring an independent chairman or requiring separation
of the chairman and CEO roles is always in the best interests of
a company and its shareholders. Indeed, according to the
publicly available Spencer Stuart US Board Index 2009 (released
October 2009 and available at spencerstuart.com), only
16 percent of the S&P 500 companies had an
independent chairman in 2009.
In summary, our Board opposes this shareholder proposal not only
because it would mandate a set leadership structure regardless
of future circumstances, but also because our Board
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believes there currently is substantial and appropriate
independent oversight of management.
Our Board of Directors unanimously recommends that you vote
AGAINST this shareholder proposal.
SHAREHOLDER
PROPOSALS FOR THE 2011 ANNUAL MEETING OF SHAREHOLDERS
Pursuant to applicable requirements of the Securities Exchange
Act of 1934, as amended, in order to be considered for inclusion
in our proxy statement and form of proxy for the 2011 Annual
Meeting of Shareholders, we must receive any proposals that
shareholders wish to present no later than May 20, 2011.
Such proposals will need to be in writing and comply with SEC
regulations regarding the inclusion of shareholder proposals in
Harris-sponsored proxy materials.
In addition, our By-Laws provide that, for any shareholder
proposal or director nomination to be properly presented at the
2011 Annual Meeting of Shareholders, whether or not also
submitted for inclusion in our proxy materials, the shareholder
proposal or director nomination must comply with the
requirements set forth in our By-Laws and we must receive notice
of the matter not less than 90 nor more than 120 days prior
to October 22, 2011. Thus, to be timely, notice of a
shareholder proposal or director nomination for the 2011 Annual
Meeting of Shareholders must be received by our Secretary no
earlier than June 24, 2011 and no later than July 25,
2011. However, if the 2011 Annual Meeting of Shareholders is not
scheduled to be held within a period that commences on
September 22, 2011 and ends on November 21, 2011, and
instead, such meeting is scheduled to be held on a date outside
that period, notice of a shareholder proposal or director
nomination, to be timely, must be received by our Secretary by
the later of 90 days prior to such other meeting date or
10 days following the date such other meeting date is first
publicly announced or disclosed.
Notwithstanding the foregoing notice deadlines under our
By-Laws, in the event that the number of directors to be elected
to our Board of Directors at the 2011 Annual Meeting of
Shareholders is increased and either all of the nominees for
director at the 2011 Annual Meeting of Shareholders or the size
of the increased Board of Directors is not publicly announced or
disclosed by us by July 14, 2011, notice will be considered
timely, but only with respect to nominees for any new positions
created by such increase, if the notice is delivered to our
Secretary not later than 10 days following the first date
all of such nominees or the size of the increased Board of
Directors is publicly announced or disclosed.
Further, any proxy granted with respect to the 2011 Annual
Meeting of Shareholders will confer discretionary authority to
vote with respect to a shareholder proposal or director
nomination if notice of such proposal or nomination is not
received by our Secretary within the applicable timeframe
provided above.
Each notice of a shareholder proposal or director nomination
must contain all of the information required by our By-Laws,
including:
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whether the shareholder is providing the notice at the request
of a beneficial holder of stock in Harris;
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whether the shareholder, any beneficial holder on whose behalf
the notice is being delivered or any nominee has any agreement,
arrangement or understanding with, or has received any financial
assistance, funding or other consideration from any other person
with respect to the investment by the shareholder or such
beneficial holder in Harris or the matter the notice relates to,
and the details thereof;
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the name and address of the shareholder, any beneficial holder
on whose behalf the notice is being delivered, any nominees
listed in the notice and any persons with whom such agreement,
arrangement or understanding exists or from whom such assistance
has been obtained, each an Interested Person, or
collectively, Interested Persons;
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a description of all equity securities and debt instruments of
Harris or any of our subsidiaries beneficially owned by all
Interested Persons;
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whether and the extent to which any hedging, derivative or other
transaction is in place or has been entered into by or for the
benefit of any Interested Person with respect to Harris or our
subsidiaries, the effect or intent of which is to increase or
decrease the economic risk or voting power of such Interested
Person;
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a representation that the shareholder is a holder of record of
stock of Harris that would be entitled to vote at the meeting
and intends to appear in person or by proxy at the meeting to
propose the matter set forth in the notice;
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the information regarding each nominee required by paragraphs
(a), (e) and (f) of Item 401 of
Regulation S-K
adopted by the SEC;
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each nominees signed consent to serve as a director of
Harris if elected; and
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information as to whether each nominee is eligible for
consideration as an independent director under the relevant
standards contemplated by Item 407(a) of
Regulation S-K.
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The above is a summary of the material requirements for
shareholder proposals and director nominations set forth in our
By-Laws and we refer you to our By-Laws for more detailed
information.
A copy of our By-Laws is available on the Corporate Governance
section of our website at www.harris.com/harris/cg/. You
also may obtain a copy of our By-Laws upon written request to
our Secretary at the address below.
A nomination or proposal that does not supply adequate
information about the nominee or proposal and the shareholder
making the nomination or proposal, or that does not comply with
our By-Laws, will be disregarded. You should address all
nominations or proposals to:
Secretary
Harris Corporation
1025 West NASA Boulevard
Melbourne, Florida 32919
DISCRETIONARY
VOTING ON OTHER MATTERS
Except for the matters described in this proxy statement, our
Board of Directors is not aware of any matter that will or may
be properly presented at the 2010 Annual Meeting of
Shareholders. The deadline under our By-Laws for any shareholder
proposal not discussed in this proxy statement to be properly
presented at the 2010 Annual Meeting of Shareholders has passed.
If any other matter is properly brought before the 2010 Annual
Meeting of Shareholders, the persons named in the
proxy/voting
instruction card intend to vote the shares for which we have
received proxies in accordance with their best judgment.
MISCELLANEOUS
MATTERS
Annual Report on
Form 10-K
Our Annual Report on
Form 10-K
for our fiscal year ended July 2, 2010 has been filed with
the SEC and was mailed to our shareholders with this proxy
statement. Upon request, we will furnish to shareholders
without charge a copy of the Annual Report on
Form 10-K.
Shareholders may obtain a copy by:
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Writing to our Secretary at:
Harris Corporation
1025 West NASA Boulevard
Melbourne, Florida 32919; or
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Calling (321) 727-9100.
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A copy also is available on the Investor Relations section of
our website at
www.harris.com/ar.
Shareholder
List
A list of our shareholders of record as of the record date of
August 27, 2010 will be available for examination for any
purpose germane to the 2010 Annual Meeting of Shareholders
during normal business hours at 1025 West NASA Boulevard,
Melbourne, Florida, at least ten calendar days prior to the 2010
Annual Meeting of Shareholders and also at the 2010 Annual
Meeting of Shareholders.
By Order of the Board of Directors
Scott T. Mikuen
Vice President, Associate
General Counsel and
Secretary
Melbourne, Florida
September 17, 2010
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Appendix A
HARRIS
CORPORATION
ANNUAL INCENTIVE PLAN
(Effective as of July 3, 2010)
1. Purpose of the Plan. The purpose
of the Harris Corporation Annual Incentive Plan is to promote
the growth and performance of the Company by: (i) linking a
portion of the total annual compensation for certain key
employees to attainment of such corporate, subsidiary, division
and business unit objectives as shall be approved for each Plan
Year; and (ii) assisting in the attraction, retention and
motivation of certain key employees.
2. Definitions. Wherever the
following capitalized terms are used in the Plan, they shall
have the meanings specified below:
Affiliate means any entity that is directly
or indirectly controlled by the Company or any entity in which
the Company has a significant ownership interest, as determined
by the Committee.
Award means a right to receive an annual cash
incentive payment pursuant to the terms and conditions of the
Plan.
Board means the Board of Directors of the
Company.
Change in Control shall have the meaning set
forth in Section 13(d).
Code means the Internal Revenue Code of 1986,
as amended.
Committee means a committee of the Board
designated by the Board to administer the Plan which shall be
comprised solely of three or more Independent Directors, and
which initially shall be the Management Development and
Compensation Committee of the Board.
Company means Harris Corporation, a Delaware
corporation.
Director means a member of the Board.
Employee means any salaried employee of the
Company, any Subsidiary or any Affiliate, including any officers
or Executive Officers (whether or not a Director), who is
treated as an employee in the personnel records of the Company
or its Subsidiaries or Affiliates for the relevant period, but
shall exclude individuals who are classified by the Company, any
Subsidiary or any Affiliate as (i) leased or otherwise
employed by a third party; (ii) independent contractors; or
(iii) intermittent or temporary, in each case even if any
such classification is changed retroactively as a result of an
audit, litigation, or otherwise.
Exchange Act means the Securities Exchange
Act of 1934, as amended.
Executive Officer means a Participant the
Board has designated as an executive officer of the Company for
purposes of reporting under the Exchange Act.
Independent Director means a Director who is
not an Employee and who qualifies as (i) a
non-employee director under
Rule 16b-3(b)(3)
under the Exchange Act, (ii) an outside
director under Section 162(m) of the Code, and
(iii) an independent director under the rules
and listing standards adopted by the New York Stock Exchange or
any other exchange upon which the Companys common stock is
listed for trading.
Participant means any Employee designated by
the Board, the Committee or the Chief Executive Officer of the
Company (pursuant to a delegation under
Section 3(c)) to participate in the Plan for a Plan
Year or a portion of a Plan Year.
Performance Objectives means the performance
objectives established pursuant to the Plan for Participants.
Performance Objectives may be described in terms of Company-wide
objectives or objectives that are related to the performance of
the individual Participant or the Subsidiary, division, business
unit,
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department or function with the Company in which the Participant
is employed. Performance Objectives may be measured on an
absolute or relative basis. Relative performance may be measured
by a group of peer companies or by a financial market index. The
Committee may grant Awards subject to Performance Objectives
that are Qualified Performance-Based Awards or are not Qualified
Performance-Based Awards. Any Performance Objectives applicable
to a Qualified Performance-Based Award shall be based on one or
more, or a combination of the following criteria: return on
equity; diluted earnings per share; total earnings; earnings
growth; return on capital; return on invested capital; return on
assets; return on sales; earnings before interest and taxes;
earnings before interest, taxes, depreciation and amortization;
revenue; revenue growth; gross margin; return on investment;
increase in the fair market value of shares; share price
(including, but not limited to, growth measures and total
stockholder return); operating profit; net earnings; margins;
new product introduction; business efficiency measures;
sustainability, including energy or materials utilization; cash
flow (including, but not limited to, operating cash flow and
free cash flow); inventory turns; financial return ratios;
market share; earnings measures/ratios; economic value added;
balance sheet measurements (such as receivable turnover);
internal rate of return; customer satisfaction surveys; or
productivity. Performance Objectives applicable to Awards that
are not Qualified Performance-Based Awards shall not be limited
to the categories listed above, and with respect to such Awards
the Committee may designate any other types or categories of
Performance Objectives as it shall determine, including
categories involving individual performance and subjective
targets.
Plan means this Harris Corporation Annual
Incentive Plan, as amended from time to time.
Plan Year means a fiscal year of the Company.
Qualified Performance-Based Award means any
Award or portion of an Award that is intended to satisfy the
requirements for qualified performance-based
compensation under Section 162(m) of the Code.
Subsidiary means any entity of which the
Company owns or controls, either directly or indirectly, 50% or
more of the outstanding shares of stock normally entitled to
vote for the election of directors or of comparable equity
participation and voting power.
3. Administration of Plan.
(a) Powers of Committee; Discretion. The
Plan shall be administered by the Committee. With respect to
participation in the Plan by the Chief Executive Officer or any
other Executive Officer that is also a Director, the Plan shall
be administered by the Committee with the other Independent
Directors of the Board. Subject to the terms of the Plan, the
Committee shall have such powers and authority as may be
necessary or appropriate for the Committee to carry out its
functions as described in the Plan. The Committee shall have the
authority in its discretion to determine: (i) which
Employees shall receive Awards; (ii) the amount of the
Awards; (iii) the objectives and the other terms and
conditions of such Awards, including the Performance Objectives,
targets and other terms and conditions of an Award; and
(iv) whether Performance Objectives have been achieved.
Determinations by the Committee under the Plan, including
without limitation, determinations of the Participants, the
amount and timing of Awards and the terms and provisions of
Awards, need not be uniform and may be made selectively among
Participants and Employees who receive or are eligible to
receive Awards. The Committee shall have the full power,
discretion and authority to interpret the Plan, to establish,
amend, suspend and rescind any rules and regulations relating to
the Plan and to make all other determinations that it deems
necessary or advisable for the administration of the Plan. The
Board Committee may impose conditions with respect to an Award,
such as limiting solicitation of employees or former employees
or limiting competitive employment or other activities. The
Committee may correct any defect, supply any omission or
reconcile any inconsistency in the Plan or any Award in the
manner and to the extent it shall deem desirable to carry it
into effect. All such interpretations, rules, regulations and
determinations shall be final, conclusive and binding on all
persons (including the Company and Participants) and for all
purposes.
(b) Board Authority. If the Committee
does not exist, or for any other reason determined by the Board,
the Board may take any action under the Plan that would
otherwise be the responsibility of the Committee.
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(c) Delegation. Except to the extent
prohibited by applicable law or the listing requirements of the
New York Stock Exchange or any other exchange upon which
the Companys securities are listed for trading, the
Committee shall have the right, from time to time, to delegate
to one or more officers of the Company the authority of the
Committee to grant and determine the terms and conditions of
Awards granted under the Plan, subject to such limitations as
the Committee shall determine. In no event shall any such
delegation of authority be permitted with respect to Awards to
any Executive Officer or any person subject to
Section 162(m) of the Code. The Committee shall also be
permitted to delegate, to any appropriate officer or employee of
the Company, responsibility for performing certain ministerial
functions under the Plan. In the event that the Committees
authority is delegated to officers or employees in accordance
with the foregoing, all references in the Plan relating to the
Committee shall be interpreted in a manner consistent with the
foregoing by treating any such reference as a reference to such
officer or employee for such purpose. Any action undertaken in
accordance with the Committees delegation of authority
hereunder shall have the same force and effect as if such action
was undertaken directly by the Committee and shall be deemed for
all purposes of the Plan to have been taken by the Committee.
(d) Limitation on Liability. No member of
the Board or Committee, nor any officer or employee delegated
authority by the Committee, shall be liable for any action or
determination made in good faith by the Board, Committee or such
officer or employee with respect to the Plan or any Award.
4. Eligibility; Designation of
Participants. All Employees are eligible to be
designated by the Committee to receive Awards and become
Participants under the Plan. Participants in the Plan shall be
selected by the Committee. In selecting Employees to be
Participants and in determining the amount of an Award to be
granted under the Plan and the terms and conditions of the
Award, the Committee shall consider any and all factors that it
deems relevant or appropriate. Awards need not be uniform and
may be made selectively among Participants and Employees who
receive or are eligible to receive Awards. Employees intended to
receive Qualified Performance-Based Awards shall be designated
as Participants by the Committee not later than 90 calendar days
after the beginning of the Plan Year, and in a manner consistent
with Section 162(m) of the Code.
5. Annual Incentive Awards.
(a) In General. Each Participant in the
Plan shall be eligible to receive such Award, if any, for each
Plan Year as may be payable pursuant to the Performance
Objectives and criteria applicable for such Participant. The
Committee shall, on an annual basis, establish a target
annual incentive award for a Participant for a Plan Year,
and the maximum payout shall not exceed 200% of such target
annual incentive award.
(b) Performance Objectives. Participants
shall have the payout of their annual incentive awards, if any,
determined on the basis of the degree of achievement of
Performance Objectives which shall be established by the
Committee in writing and which Performance Objectives shall be
stated in terms of the attainment of specified levels of or
percentage changes (as compared to a prior measurement period)
in any one or more of the Performance Objectives. The Committee
shall, for each Plan Year, establish the Performance Objectives
to apply to each Participant and a formula or matrix prescribing
the extent to which such Participants annual incentive
award shall be earned based upon the degree of achievement of
such Performance Objective or Performance Objectives. The
Committee may determine that the annual incentive award payable
to any Participant shall be based upon the attainment of
Performance Objectives comparable to those specified above but
in whole or in part applied to the results of a Subsidiary,
division or business unit. With respect to Awards intended to be
a Qualified Performance-Based Award, the Committee shall
determine the target annual incentive award, Performance
Objectives and any related formula or matrix for each
Participant not later than 90 calendar days after the beginning
of the Plan Year.
(c) Transfer of Employment. A
Participants target annual incentive award or Performance
Objectives may be changed by the Committee during the Plan Year
to reflect a change in responsibilities provided that in the
case of Awards intended to be a Qualified Performance-Based
Award any such change shall be made in a manner consistent with
Section 162(m) of the Code.
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(d) Committee Adjustment. Except as
provided in Section 6 and Section 14,
the Committee may, in its sole discretion, (i) award or
increase the amount of an annual incentive award payable to a
Participant even though not earned in accordance with the
Performance Objectives established pursuant to this
Section 5, or (ii) in the event of any unusual
or nonrecurring events affecting the Company or its financial
statements or changes in applicable laws, regulations or
accounting principles, decrease the amount of an annual
incentive award otherwise payable to a Participant even though
earned in accordance with the Performance Objectives established
pursuant to this Section 5.
6. Participation by Executive Officers.
(a) Qualified Performance-Based
Awards. Notwithstanding any other provisions of
the Plan to the contrary, the following provisions shall be
applicable to participation in the Plan by Executive Officers
who are subject to Section 162(m) of the Code:
(i) Each such Participants annual incentive award
payable under the Plan for a Plan Year shall be based solely on
achievement of one or more of the Performance Objectives as
established by the Committee pursuant to Section 5
above and the Committee shall not have the discretion
provided in Section 5(d) to increase the amount of
the award payable under the Plan but it shall in all cases have
the ability to reduce the amount of any such award that would
otherwise be payable (including a reduction in such amount to
zero).
(ii) With respect to each such Participant, no annual
incentive award intended to be a Qualified Performance-Based
Award shall be payable under the Plan (including for the
avoidance of doubt, any portion of the annual incentive award
that may become payable under Section 7(b) in the
case of the Participants termination by reason of death,
disability, normal retirement or involuntary retirement without
cause) except upon written certification by the Committee that
the Performance Objectives have been satisfied to a particular
extent and that any other material terms and conditions
precedent to payment of an annual incentive award pursuant to
the Plan have been satisfied.
(b) Maximum Award. Notwithstanding any
provisions of the Plan to the contrary, the maximum annual
incentive award payable to any Participant who is an Executive
Officer for any Plan Year shall be $6,000,000; provided,
however, that if such a Participant is not a Participant for the
entire Plan Year, the maximum amount payable shall be pro-rated
based on the number of days the individual was a Participant for
the Plan Year.
7. Payment of Annual Incentive Award.
(a) Payments. Payment of any amount to be
paid to a Participant based upon the degree of attainment of the
applicable Performance Objectives shall be made in a lump sum
cash payment at such time as the Committee may in its discretion
determine. Notwithstanding the foregoing, in no event will the
payment of such amount be made earlier than the day immediately
following the end of the Plan Year or later than the
15th day
of the third month following the end of the Plan Year.
(b) Termination of Employment. Except to
the extent otherwise provided by the Committee or as provided in
Section 13, if a Participants employment with
the Company, any Subsidiary or any Affiliate, is terminated
prior to the last day of a Plan Year, then, except in the case
of termination by reason of death, disability, normal retirement
or involuntary termination without cause, the Participant shall
forfeit the Award and shall not be entitled to a payment of the
annual incentive award. If a Participants employment is
terminated during the Plan Year due to death, disability, normal
retirement or involuntary termination without cause, the
Participant shall be entitled to a pro-rated payment of the
annual incentive award that would have been payable if the
Participant had been a Participant on the last day of the Plan
Year. If a Participant is entitled to a payment of the annual
incentive award pursuant to the immediately preceding sentence,
such amount shall be prorated based on the number of days the
individual was a Participant in the Plan for such Plan Year and
shall be paid at the same time and in the same manner as such
payment would have been made if the Participant had been a
Participant on the last day of the Plan Year. For purposes of
the Plan, (i) a leave of absence, approved by the
Committee, shall not be deemed to be a termination of employment
and (ii) an
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involuntary termination with cause shall include, without
limitation, an involuntary termination for performance reasons.
8. Unfunded Plan. A
Participants interest in any Awards hereunder shall at all
times be reflected on the Companys books as a general
unsecured and unfunded obligation of the Company subject to the
terms and conditions of the Plan. The Plan shall not give any
person any right or security interest in any asset of the
Company or any fund in which any deferred payment is deemed
invested. Neither the Company, the Board, nor the Committee, nor
any officer or employee of the Company, shall be responsible for
the adequacy of the general assets of the Company to discharge
the payment of its obligations hereunder nor shall the Company
be required to reserve or set aside funds therefor.
9. Non-Alienation of Benefits; Beneficiary
Designation. All rights and benefits under the
Plan are personal to the Participant and neither the Plan nor
any right or interest of a Participant or any other person
arising under the Plan is subject to voluntary or involuntary
alienation, sale, transfer, or assignment without the
Companys consent. Subject to the foregoing, the Company
may establish such procedures as it deems necessary for a
Participant to designate one or more beneficiaries to whom any
payment the Committee determines to make would be payable in the
event of the Participants death. In the event no
beneficiary has been properly designated, the payment shall be
made to the Participants estate or by the laws of
descent and distribution.
10. Withholding for Taxes;
Offset. Notwithstanding any other provisions of
the Plan, the Company shall have the authority to withhold from
any payment made by it under the Plan such amount or amounts as
may be required for purposes of complying with any Federal,
state, local or foreign tax or withholding requirements. The
Company may, to the extent permitted by applicable law
(including Code Section 409A), offset against any payments
to be made to a Participant under the Plan any amounts owing to
the Company, its Subsidiaries or Affiliates from the Participant
for any reason.
11. No Right to Continued Employment or to
Participate. Nothing in the Plan or in the grant
of any Award shall interfere with or limit in any way the right
of the Company or any of its Subsidiaries or Affiliates to
terminate a Participants employment at any time, nor
confer upon any Participant any right to continued employment
with the Company or any of its Subsidiaries or Affiliates.
Neither the adoption of the Plan nor any action by the Company,
the Board, the Committee or any director or officer of the
Company shall be deemed to give any Employee any right to be
designated as a Participant under the Plan.
12. Non-Exclusivity of Plan. The
Plan is not intended to and shall not preclude the Board from
adopting, continuing, amending or terminating such additional
compensation arrangement as it deems desirable for Employees.
13. Change in Control.
(a) Amount of Award. Notwithstanding
anything to the contrary provided elsewhere herein, in the event
of a Change in Control of the Company, as defined in
Section 13(d), then an Award for the Plan Year
during which the Change in Control is effective shall equal an
amount not less than the target annual incentive award as
originally approved for the Plan Year, notwithstanding actual
results or any changes or modifications occurring after any such
Change in Control.
(b) Timing of Payment. Notwithstanding
anything to the contrary provided elsewhere herein, in the event
of a Change in Control of the Company, as defined in
Section 13(d), that qualifies as a change in
control event within the meaning of Treasury Regulation
§ 1.409A-3(i)(5), the Company shall pay any Awards for
the Plan Year during which the Change in Control is effective in
a lump sum as promptly as practicable following such effective
date, but in no event later than the earlier of (i) the
90th day following the effective date of the Change in Control
and (ii) the
15th day
of the third month following the end of the Plan Year during
which the Change in Control is effective. In the event of a
Change in Control of the Company, as defined in
Section 13(d), that does not qualify as a
change in control event within the meaning of
Treasury Regulation § 1.409A-3(i)(5), the Company
shall pay any Awards for the Plan Year during which the Change
in Control is effective in a lump sum at the time set forth in
Section 7(a).
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(c) Termination of Employment. A
Participant who remains employed by the Company, any Subsidiary
or Affiliate as of the time the Change in Control is effective
shall be entitled to receive the payments provided for in this
Section 13, notwithstanding any subsequent
termination of employment for any reason. In addition, if a
Participants employment is terminated prior to a Change in
Control and the Participant reasonably demonstrates that such
termination was at the request or suggestion of a third party
who has indicated an intention or taken steps reasonably
calculated to effect a Change in Control (a Third
Party), and the Change in Control involving such Third
Party actually occurs, then for purposes of this
Section 13, the Participants employment shall
be deemed to have been terminated after the Change in Control is
effective and the Participant shall be entitled to receive the
payments provided for in this Section 13.
(d) Definition. For purposes hereof, a
Change in Control shall be deemed to have
occurred if:
(i) any person (as such term is defined in
Section 3(a)(9) of the Exchange Act and as used in
Sections 13(d)(3) and 14(d)(2) of the Exchange Act) is or
becomes a beneficial owner (as defined in
Rule 13d-3
under the Exchange Act), directly or indirectly, of securities
of the Company representing 20% or more of the combined voting
power of the Companys then outstanding securities eligible
to vote for the election of the Board (the Company
Voting Securities); provided, however,
that the event described in this paragraph (i) shall not be
deemed to be a Change in Control by virtue of any of the
following acquisitions: (a) by the Company or any
Subsidiary, (b) by any employee benefit plan sponsored or
maintained by the Company or any Subsidiary, (c) by any
underwriter temporarily holding securities pursuant to an
offering of such securities, or (d) pursuant to a
Non-Control Transaction (as defined in paragraph (iii));
(ii) individuals who, on July 3, 2010, constitute the
Board (the Incumbent Directors) cease for any
reason to constitute at least a majority of the Board, provided
that any person becoming a Director subsequent to July 3,
2010, whose election or nomination for election was approved by
a vote of at least two-thirds of the Incumbent Directors who
remain on the Board (either by a specific vote or by approval of
the proxy statement of the Company in which such person is named
as a nominee for Director, without objection to such nomination)
shall also be deemed to be an Incumbent Director;
provided, however, that no individual initially
elected or nominated as a Director of the Company as a result of
an actual or threatened election contest with respect to
Directors or any other actual or threatened solicitation of
proxies or consents by or on behalf of any person other than the
Board of Directors shall be deemed to be an Incumbent Director;
(iii) there is consummated a merger, consolidation, share
exchange or similar form of corporate reorganization of the
Company or any such type of transaction involving the Company or
any of its subsidiaries that requires the approval of the
Companys stockholders (whether for such transaction or the
issuance of securities in the transaction or otherwise) (a
Business Combination), unless immediately
following such Business Combination: (a) more than 60% of
the total voting power of the corporation resulting from such
Business Combination (including, without limitation, any
corporation which directly or indirectly has beneficial
ownership of 100% of the Company Voting Securities) eligible to
elect directors of such corporation is represented by shares
that were Company Voting Securities immediately prior to such
Business Combination (either by remaining outstanding or being
converted), and such voting power is in substantially the same
proportion as the voting power of such Company Voting Securities
immediately prior to the Business Combination, (b) no
person (other than any publicly traded holding company resulting
from such Business Combination, or any employee benefit plan
sponsored or maintained by the Company (or the corporation
resulting from such Business Combination)) becomes the
beneficial owner, directly or indirectly, of 20% or more of the
total voting power of the outstanding voting securities eligible
to elect directors of the corporation resulting from such
Business Combination, and (c) at least a majority of the
members of the Board of Directors of the corporation resulting
from such Business Combination were Incumbent Directors at the
time of the Boards approval of the execution of the
initial agreement providing for such Business Combination (any
Business Combination which satisfies the foregoing conditions
specified in (a), (b) and (c) shall be deemed to be a
Non-Control Transaction);
(iv) the shareholders of the Company approve a plan of
complete liquidation or dissolution of the Company; or
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(v) the Company consummates a direct or indirect sale or
other disposition of all or substantially all of the assets of
the Company and its Subsidiaries.
Notwithstanding the foregoing, a Change in Control
of the Company shall not be deemed to occur solely because any
person acquires beneficial ownership of more than 20% of the
Company Voting Securities as a result of the acquisition of
Company Voting Securities by the Company which reduces the
number of Company Voting Securities outstanding;
provided, that if after such acquisition by the
Company such person becomes the beneficial owner of additional
Company Voting Securities that increases the percentage of
outstanding Company Voting Securities beneficially owned by such
person, a Change in Control of the Company shall
then occur.
14. Adjustment of Awards. The
Committee shall be authorized to make adjustments in the method
of calculating attainment of Performance Objectives in
recognition of unusual or nonrecurring events affecting the
Company or its financial statements or changes in applicable
laws, regulations or accounting principles; provided,
however, that in the case of a Qualified
Performance-Based Award, any such adjustments shall be made in a
manner consistent with Section 162(m) of the Code. The
Committee may not make any such adjustment to any Qualified
Performance-Based Award if such adjustment would cause
compensation pursuant to such award to cease to be
qualified performance-based compensation under
Section 162(m) of the Code. In the event the Company shall
assume outstanding employee benefit awards or the right or
obligation to make future such awards in connection with the
acquisition of another corporation or business entity, the
Committee may, in its discretion, but subject to the
requirements of Section 409A of the Code, make such
adjustments in the terms of Awards under the Plan as it shall
deem appropriate.
15. Impact of Restatement of Financial Statements
upon Previous Awards. If any of the
Companys financial statements are restated as a result of
errors, omissions, or fraud, the Committee may (in its sole
discretion, but acting in good faith) direct that the Company
recover all or a portion of any such Award or payment made to
any, all or any class of Participants with respect to any Plan
Year the financial results of which are negatively affected by
such restatement. The amount to be recovered from any
Participant shall be the amount by which the affected Award or
payment exceeded the amount that would have been payable to such
Participant had the financial statements been initially filed as
restated, or any greater or lesser amount (including, but not
limited to, the entire Award) that the Committee shall
determine. The Committee may determine to recover different
amounts from different Participants or different classes of
Participants on such basis as it shall deem appropriate. In no
event shall the amount to be recovered by the Company from a
Participant be less than the amount required to be repaid or
recovered as a matter of law. The Committee shall determine
whether the Company shall effect any such recovery (i) by
seeking repayment from the Participant, (ii) by reducing
the amount that would otherwise be payable to the Participant
under any compensatory plan, program or arrangement maintained
by the Company, a Subsidiary or any of its Affiliates,
(iii) by withholding payment of future increases in
compensation (including the payment of any discretionary bonus
amount) or grants of compensatory awards that would otherwise
have been made in accordance with the Companys otherwise
applicable compensation practices, or (iv) by any
combination of the foregoing or otherwise (subject, in each of
sub-clauses
(ii), (iii) and (iv), to applicable law, including without
limitation Section 409A of the Code, and the terms and
conditions of the applicable plan, program or arrangement). This
Section 15 shall be a non-exclusive remedy and
nothing contained in this Section 15 shall preclude
the Company from pursuing any other applicable remedies
available to it, whether in addition to, or in lieu of,
application of this Section 15.
16. Deferral.
(a) Section 162(m) Related
Deferral. Notwithstanding anything contained
herein to the contrary, if permitted under Section 409A of
the Code, in the event that all or a portion of an annual
incentive award shall be ineligible for treatment as other
performance-based compensation under Section 162(m)
of the Code, the Committee, in its sole discretion, shall have
the right, with respect to any Executive Officer who is a
covered employee under Section 162(m) of the
Code, to defer such Executive Officers receipt of payment
of his or her annual incentive award until the Executive Officer
is no longer a covered employee or until such time
as shall be determined by the Committee, provided that the
Committee may effect such a deferral only in a
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situation where the Company reasonably anticipates that it would
be prohibited a deduction under Section 162(m) of the Code
and such deferral shall be limited to the portion of the award
that reasonably is anticipated not to be deductible.
(b) Other Deferral. The Committee may, in
its discretion, permit a Participant to defer the receipt of
payment of cash that would otherwise be due to the Participant.
If any such deferral is to be permitted by the Committee, the
Committee shall establish written rules and procedures relating
to such deferral in a manner intended to comply with the
requirements of Section 409A of the Code, including,
without limitation, the time when an election to defer may be
made, the time period of the deferral and the events that would
result in payment of the deferred amount, the interest or other
earnings attributable to the deferral and the method of funding,
if any, attributable to the deferred amount.
17. Amendment or Termination. Until
such time as a Change in Control shall have
occurred, the Board or the Committee may, in its sole
discretion, amend, suspend or terminate the Plan from time to
time, subject to any requirement for shareholder approval
imposed by applicable law or regulation, including
Section 162(m) of the Code, and the listing requirements of
the New York Stock Exchange or any other exchange upon which the
Companys securities are listed. Except as provided in
Section 5(d) and Section 14, no such
termination or amendment shall alter a Participants right
to receive a distribution as previously earned, as to which the
Plan shall remain in effect following its termination until all
such amounts have been paid, except as the Company may otherwise
determine.
18. Application of Code
Section 409A. All payments made under the
Plan are intended to be exempt from (or comply with) the
requirements of Section 409A of the Code to the maximum
extent permitted. To the extent applicable, the Plan is intended
to be administered and interpreted in a manner that is
consistent with the requirements of Section 409A of the
Code. Notwithstanding the foregoing, no particular tax result
with respect to any income recognized by a Participant in
connection with the Plan is guaranteed and each Participant
shall be responsible for any taxes imposed on such Participant
in connection with the Plan.
19. Tax Penalty Avoidance. The
provisions of the Plan are not intended, and should not be
construed, to be legal, business or tax advice. The Company and
any other party having any interest herein are hereby informed
that the U.S. federal tax advice contained in this document
(if any) is not intended or written to be used, and cannot be
used, for the purpose of (i) avoiding penalties under the
Code or (ii) promoting, marketing or recommending to any
party any transaction or matter addressed herein.
20. Governing Law and
Interpretation. The validity, construction, and
effect of the Plan and any rules and regulations relating to the
Plan shall be determined in accordance with the laws of the
State of Delaware, without regard to the conflict of law
principles thereof. Unless otherwise indicated, all
Section references are to sections of the Plan.
References to any law, rule or regulation shall include all
statutory and regulatory provisions consolidating, amending,
replacing, supplementing, or interpreting such law, rule or
regulation.
21. Severability. Notwithstanding
any other provision or Section of the Plan, if any provision of
the Plan is or becomes or is deemed to be invalid, illegal or
unenforceable in any jurisdiction or as to any person or award,
or would disqualify the Plan or any award under any law deemed
applicable by the Board or the Committee, such provision shall
be construed or deemed amended to conform to the applicable laws
(but only to such extent necessary to comply with such laws), or
if it cannot be construed or deemed amended without, in the
determination of the Board or the Committee, materially altering
the intent of the Plan or award, such provision shall be
stricken as to such jurisdiction, person or award and the
remainder of the Plan and any such award shall remain in full
force and effect.
22. Effective Date. Subject to its
approval by the Companys shareholders, the Plan shall
become effective as of July 3, 2010 for the Companys
2011 fiscal year, shall replace the Harris Corporation 2005
Annual Incentive Plan, and shall remain effective until
terminated by the Board or the Committee pursuant to
Section 17, subject to any further shareholder
approvals (or reapprovals) mandated for performance-based
compensation under Section 162(m) of the Code.
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Approved and adopted by the Board of Directors this
28th day of August, 2010.
Attested:
Secretary
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Appendix B
HARRIS
CORPORATION
2005 EQUITY INCENTIVE PLAN
(As Amended and Restated Effective August 27,
2010)
1. Purpose of the Plan. The purpose
of the Harris Corporation 2005 Equity Incentive Plan is to
promote the long-term growth and performance of the Company and
to increase shareholder value by providing long-term incentive
awards to employees and directors. The Plan is intended to:
(i) further align the interests of employees and directors
with those of the shareholders by providing incentive
compensation opportunities which may be tied to the performance
of the Common Stock and by encouraging Common Stock ownership by
officers, employees, and directors; and (ii) assist in the
attraction, retention and motivation of selected individuals.
The Plan is hereby amended and restated, effective
August 27, 2010.
2. Definitions. Wherever the
following capitalized terms are used in the Plan, they shall
have the meanings specified below:
Affiliate means any entity that is directly
or indirectly controlled by the Company or any entity in which
the Company has a significant ownership interest, as determined
by the Board Committee.
Award means a Cash-Based Unit, Deferred Unit,
Option, Performance Share, Performance Unit, Restricted Stock,
Restricted Unit, Stock Appreciation Right, or other Share-Based
Award granted under the Plan.
Award Agreement means any written or
electronic agreement or other certificate, instrument, notice or
document setting forth the terms and conditions of an Award
granted to a Participant and includes any Cash-Based Unit Award
Agreement, Deferred Unit Award Agreement, Option Agreement,
Performance Share Award Agreement, Performance Unit Award
Agreement, Restricted Stock Award Agreement, Restricted Unit
Award Agreement, and Stock Appreciation Right Agreement. The
Board Committee may, but need not, require an Award Agreement to
be signed by a Participant as a precondition to receiving an
Award.
Board means the Board of Directors of the
Company.
Board Committee means a committee of the
Board designated by the Board to administer the Plan which shall
be comprised solely of three or more Independent Directors, and
which initially shall be the Management Development and
Compensation Committee of the Board.
Cash-Based Unit means an award denominated in
units, granted pursuant to Section 5.1, where each
unit is equal in value to $1.00 or such other value as is
determined by the Board Committee.
Cash-Based Unit Award Agreement shall have
the meaning set forth in Section 5.1.
Change in Control shall have the meaning set
forth in Section 11.
Code means the Internal Revenue Code of 1986,
as amended.
Common Stock means the common stock of the
Company, $1.00 par value per share, or such other class of
shares or securities as to which the Plan may be applicable
pursuant to Section 3.2.
Company means Harris Corporation, a Delaware
corporation.
Deferred Unit means an award denominated in
units, granted pursuant to Section 10.1, where each
unit is equal in value to one Share.
Deferred Units Account means a bookkeeping
account in the name of a Non-Employee Director established
pursuant to Section 10.1 to which Deferred Units are
credited.
Deferred Unit Award Agreement shall have the
meaning set forth in Section 10.1.
Director means a member of the Board.
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Dividend Equivalents means, on any record
date, the amount of cash or other distributions (but excluding
any distributions of Common Stock) equal in value to the
dividends or distribution payable on shares of Common Stock as
declared by the Board with respect to such dividend or
distribution payment date.
Employee means an employee of the Company,
any Subsidiary or any Affiliate, including any officers or
Executive Officers (whether or not a Director), who is treated
as an employee in the personnel records of the Company or its
Subsidiaries or Affiliates for the relevant period, but shall
exclude individuals who are classified by the Company, any
Subsidiary or any Affiliate as (i) leased or otherwise
employed by a third party; (ii) independent contractors; or
(iii) intermittent or temporary, in each case even if any
such classification is changed retroactively as a result of an
audit, litigation, or otherwise. Notwithstanding the foregoing,
for purposes of Awards made pursuant to
Section 12(b), the term Employee shall
also include any person who provides services to the Company,
any Subsidiary or any Affiliate that are equivalent to those
typically provided by an employee.
Exchange Act means the Securities Exchange
Act of 1934, as amended.
Executive Officer means any Participant the
Board has designated as an executive officer of the Company for
purposes of reporting under Section 16 of the Exchange Act.
Fair Market Value means, as of any particular
date, the fair market value of a Share on such date as
determined by the Board Committee. Unless otherwise determined
by the Board Committee, the fair market value of a Share shall
be the closing price per Share of the Common Stock as reported
on the New York Stock Exchange consolidated transaction
reporting system on the applicable date or, if no such closing
price is available on such date, on the preceding day upon which
such closing price is available.
Full-Value Awards means Awards that result in
the Company transferring the full value of any underlying Share
granted pursuant to an Award. Full-Value Awards will include all
Cash-Based Units, Deferred Units, Performance Shares,
Performance Units, Restricted Stock, Restricted Units, and all
other Share-Based Awards, but will not include Options or SARs.
Grant Date means the date on which the grant
of an Award is made by the Board Committee, or such later date
as the Board Committee may specify to be the effective date of
an Award.
Incentive Stock Option means an Option
intended to qualify as an incentive stock option
within the meaning of Section 422 of the Code.
Independent Director means a Director who is
not an Employee and who qualifies as (i) a
Non-Employee Director under
Rule 16b-3(b)(3)
under the Exchange Act, (ii) an outside
director under Section 162(m) of the Code, and
(iii) an Independent Director under the rules
and listing standards adopted by the New York Stock Exchange or
any other exchange upon which the Common Stock is listed for
trading.
Non-Employee Director means a Director who is
not an Employee.
Non-Qualified Stock Option means an Option
not intended to qualify as an Incentive Stock Option.
Option means an option to purchase shares of
Common Stock granted pursuant to
Section 7.1. Options granted under the
Plan may be Incentive Stock Options or Non-Qualified Stock
Options.
Option Agreement shall have the meaning set
forth in Section 7.1.
Option Price means the purchase price of each
Share underlying an Option.
Participant means any Employee or
Non-Employee Director holding an outstanding Award.
Performance Objectives means the performance
objectives established pursuant to the Plan for Participants who
have received Awards that are subject to the achievement of
performance objectives. Performance Objectives may be described
in terms of Company-wide objectives or objectives that are
related to the performance of the individual Participant or the
Subsidiary, division, business unit, department or function with
the Company in which the Participant is employed. Performance
Objectives may be measured on an absolute or relative basis.
Relative performance may be measured by a group of peer
companies or by a
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financial market index. The Board Committee may grant Awards
subject to Performance Objectives that are Qualified
Performance-Based Awards or are not Qualified Performance-Based
Awards. Any Performance Objectives applicable to a Qualified
Performance-Based Award shall be based on one or more, or a
combination of the following criteria: return on equity; diluted
earnings per share; total earnings; earnings growth; return on
capital; return on invested capital*; return on assets; return
on sales; earnings before interest and taxes; earnings before
interest, taxes, depreciation and amortization*; revenue;
revenue growth; gross margin; return on investment; increase in
the fair market value of shares; share price (including, but not
limited to, growth measures and total stockholder return);
operating profit; net earnings; margins*; new product
introduction*; business efficiency measures*; sustainability,
including energy or materials utilization*; cash flow
(including, but not limited to, operating cash flow and free
cash flow); inventory turns; financial return ratios; market
share; earnings measures/ratios; economic value added; balance
sheet measurements (such as receivable turnover); internal rate
of return; customer satisfaction surveys; or productivity.
Performance Objectives applicable to Awards that are not
Qualified Performance-Based Awards shall not be limited to the
categories listed above, and with respect to such Awards the
Board Committee may designate any other types or categories of
Performance Objectives as it shall determine, including
categories involving individual performance and subjective
targets. With respect to an Award intended to be a Qualified
Performance-Based Award, the Board Committee shall establish in
writing the Performance Objectives and any related formula or
matrix not later than ninety (90) calendar days after the
beginning of the Performance Period and otherwise shall satisfy
the applicable requirements under Section 162(m) of the
Code.
Performance Period means the period of time
(not less than one year) established by the Board Committee for
achievement of Performance Objectives under
Section 5.1.
Performance Share means an award granted
pursuant to Section 5.1 of actual Shares issued to a
Participant that is evidenced by book-entry registration or a
certificate in the name of the Participant and to be settled in
Shares.
Performance Share Award Agreement shall have
the meaning set forth in Section 5.1.
Performance Unit means an award, denominated
in units, granted pursuant to Section 5.1, where
each unit is equal in value to one Share.
Performance Unit Award Agreement shall have
the meaning set forth in Section 5.1.
Permitted Transferees shall have the meaning
set forth in Section 13.5.
Plan means this Harris Corporation 2005
Equity Incentive Plan (as amended and restated effective
August 27, 2010) and as further amended from time to
time.
Plan Effective Date shall have the meaning
set forth in Section 13.17(a).
Predecessor Plans shall mean (i) the
Harris Corporation 2000 Stock Incentive Plan (the 2000
Stock Incentive Plan), as in effect on the Plan
Effective Date, and (ii) the Harris Corporation Stock
Incentive Plan, as in effect on the effective date of the 2000
Stock Incentive Plan.
Qualified Performance-Based Award means any
Award or portion of an Award that is intended to satisfy the
requirements for qualified performance-based
compensation under Section 162(m) of the Code.
Restricted Stock means an award granted
pursuant to Section 6.1 of actual Shares issued to a
Participant that is evidenced by book-entry registration or a
certificate in the name of the Participant and to be settled in
Shares.
Restricted Stock Award Agreement shall have
the meaning set forth in Section 6.1.
Restricted Unit means an award, denominated
in units, granted pursuant to Section 6.1, where
each unit is equal in value to one Share.
Restricted Unit Award Agreement shall have
the meaning set forth in Section 6.1.
* These Performance Objectives are subject to
approval by the shareholders of the Company.
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Restriction Period means the period of time
specified in an Award Agreement during which certain
restrictions as to vesting and as to the sale or other
disposition of Restricted Stock or Restricted Units awarded
under the Plan remain in effect under Section 6.1.
If the Restriction Period will lapse by the passage of time,
each such grant or sale of Restricted Stock or Restricted Units
will be subject to a Restriction Period of not less than three
years, as determined by the Board Committee at the Grant Date,
but to the extent permitted by Section 409A of the Code,
such Restriction Period may be modified or lapse earlier in the
event of a Change in Control.
Share-Based Award means any award granted
under Section 9.
Share Change shall have the meaning set forth
in Section 3.2.
Shares means shares of Common Stock, subject
to adjustments made under Section 3.2 or by
operation of law.
Stock Appreciation Right or
SAR means the right to receive a cash payment
and/or
Shares from the Company equal in value to the excess of the Fair
Market Value of a stated number of Shares at the exercise date
over a fixed price for such Shares, which right is granted
pursuant to Section 8.1.
Stock Appreciation Right Agreement shall have
the meaning set forth in Section 8.1.
Subsidiary means any entity of which the
Company owns or controls, either directly or indirectly, 50% or
more of the outstanding shares of stock normally entitled to
vote for the election of directors or of comparable equity
participation and voting power; provided that in the case of an
Incentive Stock Option, means a subsidiary
corporation, whether now or hereafter existing as defined
in Section 424(f) of the Code.
Substitute Awards means Awards granted in
assumption of, or in substitution or exchange for, outstanding
awards previously granted by an entity acquired by the Company
or with which the Company combines. Any such assumption,
substitution or exchange shall occur in compliance with the
requirements of Section 409A of the Code (to the extent
applicable thereto), including without limitation, with respect
to Options and SARs, the requirements of Treasury Regulation
§1.409A-1(b)(5)(v)(D).
3. Shares Subject to Plan.
3.1 Shares Available for Awards.
(a) Maximum Share Limitations. Subject to
adjustment as provided in Section 3.2, the maximum
aggregate number of Shares that may be issued or delivered under
the Plan is Twenty Million (20,000,000) Shares. Any Shares
underlying Full-Value Awards that are issued or delivered under
the Plan shall be counted against the Twenty Million
(20,000,000) Share limit described above as 1.60 Shares for
every one Share issued or delivered in connection with such
Award. To the extent that a Share that was subject to an Award
that counted as 1.60 Shares against the Plan reserve
pursuant to the preceding sentence becomes again available for
grant under the Plan as set forth in Section 3.1(b),
the Plan reserve shall be credited with 1.60 Shares. In no
event shall the number of Cash-Based Units required to be
delivered to a Participant in Shares exceed the dollar value of
the maximum number of Cash-Based Units that could be earned
divided by one-half of the Fair Market Value of a Share on the
Grant Date. Subject to adjustment pursuant to
Section 3.2, no more than Seven Million (7,000,000)
Shares shall be available for issuance pursuant to Incentive
Stock Options under the Plan. Subject to adjustment pursuant to
Section 3.2, no more than One Million (1,000,000)
Shares may be issued or delivered as Share-Based Awards under
Section 9 and no more than One Million (1,000,000)
Shares may be issued or delivered to Non-Employee Directors
under Section 10. Shares to be issued or delivered
pursuant to the Plan may be authorized and unissued Shares,
treasury Shares, or any combination thereof.
(b) Forfeitures, Terminations and
Cash-Outs. In addition to the Shares authorized
in Section 3.1(a), to the extent any Shares under
the Predecessor Plans are forfeited, or any award under the
Predecessor Plans otherwise terminates without the issuance of
some or all of the Shares underlying the award to a participant
or if any option under the Predecessor Plans terminates without
having been exercised in full, the Shares underlying such award,
to the extent of any such forfeiture or termination, shall be
available for future grant
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under the Plan and credited toward the Plan limit. Further, for
the avoidance of doubt, to the extent any Cash-Based Units,
Deferred Units, Performance Shares, Performance Units,
Restricted Units, Restricted Stock, or Share-Based Awards
subject to an Award hereunder are forfeited, or any such Award
otherwise terminates without the issuance or delivery of some or
all of the Shares underlying the Award to a Participant, or if
any Option or SAR terminates without having been exercised in
full, the Shares underlying such Award, to the extent of any
such forfeiture or termination, shall again be available for
grant under the Plan. If the benefit provided by any Award
granted under the Plan is (or can only be) paid in cash, any
Shares that were (or are) covered by that Award shall again be
available for grant under the Plan.
(c) Limitations on Reissuance of
Shares. Shares that are tendered, whether by
physical delivery or by attestation, to the Company by a
Participant as full or partial payment of the exercise or
purchase price of any Award or in payment of any applicable
withholding for Federal, state, city, local, or foreign taxes
incurred in connection with the exercise or earning of any Award
under the Plan or under the Predecessor Plans will not become
available for future grants under the Plan. With respect to
Stock Appreciation Rights, when a Stock Appreciation Right is
exercised and settled in Shares, the Shares subject to such
Stock Appreciation Right shall be counted against the Shares
available for issuance under the Plan as one Share for every one
Share subject thereto, regardless of the number of Shares used
to settle the SAR upon exercise.
(d) Individual Participant
Limitations. Subject to adjustment pursuant to
Section 3.2, the maximum number of Shares with
respect to which Options and Stock Appreciation Rights may be
granted to any one Participant during any fiscal year shall be
One Million (1,000,000) Shares in the aggregate, including
grants under the Predecessor Plans. Subject to adjustment
pursuant to Section 3.2, the initial targeted number
of Shares subject to awards of Performance Shares, Performance
Units or other Full-Value Awards (that are subject to
Performance Objectives) granted to any one Participant during
any fiscal year shall not exceed Five Hundred Thousand (500,000)
Shares in the aggregate, including grants under the Predecessor
Plans, and in no event shall the number of Shares ultimately
issued to a Participant pursuant to such awards of Performance
Shares, Performance Units or other Full-Value Awards (that are
subject to Performance Objectives) exceed 200% of the initial
targeted number of Shares. In no event will any Participant in
any fiscal year receive awards of Cash-Based Units having an
aggregate maximum value as of their respective Grant Dates in
excess of $6,000,000.
(e) Substitute Awards. Any Common Stock
or Award issued by the Company through the assumption or
substitution of outstanding grants from a corporation or entity
acquired by or combined with the Company shall not reduce the
Shares available for Awards under the Plan.
3.2 Adjustments.
(a) Adjustment to Common Stock. In the
event of a stock dividend, stock split, reverse stock split,
share combination or similar events, altering the value of a
Share, or the number of Shares outstanding (each, a
Share Change), the maximum aggregate number
of Shares that may be issued and delivered under the Plan, the
maximum Award limitations set forth in the Plan, the number of
Shares subject to outstanding Awards and the exercise price,
base price, purchase price or Option Price and other relevant
provisions of the Plan and outstanding Awards shall be
proportionately and automatically adjusted as necessary to
reflect the Share Change and to preserve the value of the
Awards. Such adjustment shall be made by the Board Committee or
the Board, whose determination in that respect shall be final,
binding and conclusive. Any adjustment pursuant to this
Section 3.2(a) shall be made in compliance with the
requirements of Section 409A of the Code (to the extent
applicable thereto), including without limitation, with respect
to Options and SARs, the requirements of Treasury Regulation
§ 1.409A-1(b)(5)(v)(D).
(b) Reorganizations, Mergers,
Etc. Subject to Section 12, the
maximum aggregate number of Shares that may be issued and
delivered under the Plan, the maximum Award limitations set
forth in the Plan, the number of Shares subject to outstanding
Awards and the exercise price, base price, purchase price or
Option Price and other relevant provisions of the Plan and
outstanding Awards shall be adjusted by the Board Committee or
the Board, in its discretion to reflect a change in the
capitalization of the Company, including but not limited to, a
recapitalization, repurchase, rights offering, reorganization,
merger, consolidation, combination, exchange of shares,
spin-off, spin-out, extraordinary cash dividends, or other
distribution of
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assets to shareholders or other similar corporate transaction or
event. To the extent deemed equitable and appropriate by the
Board, subject to any required action by shareholders, in any
merger, consolidation or reorganization, liquidation, or
dissolution, any Award shall pertain to the securities or other
property which a holder of the number of Shares covered by the
Award would have been entitled to receive in connection with
such event. Moreover, in the event of any such transaction or
event, the Board, in its discretion, may provide in substitution
for any or all outstanding Awards under the Plan such
alternative consideration (including cash), if any, as it, in
good faith, may determine to be equitable in the circumstances
and may require in connection therewith the surrender of all
Awards so replaced. Any adjustment or substitution pursuant to
this Section 3.2(b) shall be made in compliance with
the requirements of Section 409A of the Code (to the extent
applicable thereto), including without limitation, with respect
to Options and SARs, the requirements of Treasury Regulation
§ 1.409A-1(b)(5)(v)(D).
4. Administration of Plan; Eligibility.
4.1 Administration by the Board and Board Committee.
(a) Powers of Board Committee;
Discretion. The Plan shall be administered by the
Board Committee. Subject to the terms of the Plan, the Board
Committee shall have such powers and authority as may be
necessary or appropriate for the Board Committee to carry out
its functions as described in the Plan. The Board Committee
shall have the authority in its discretion to determine:
(i) which individuals shall receive Awards, (ii) the
types of Awards to be made under the Plan, (iii) the number
of Shares underlying Awards or amount of cash, in the case of
Cash-Based Unit Awards, (iv) the other terms and conditions
of such Awards, including the Option Price, exercise, base or
purchase price of an Award (if any), the time or times at which
an Award will become vested, exercisable or payable, the
Performance Objectives and other terms and conditions of an
Award, and (v) whether the Performance Objectives have been
achieved. Determinations by the Board Committee under the Plan,
including, without limitation, determinations of the
Participants, the form, amount, and timing of Awards, and the
terms and provisions of Awards and the Award Agreements
evidencing Awards, need not be uniform and may be made
selectively among Participants and individuals who receive or
are eligible to receive Awards. The Board Committee shall have
the full power, discretion and authority to interpret the Plan
and the Award Agreements, to establish, amend, and rescind any
rules and regulations relating to the Plan, to prescribe the
form of any Award Agreement or instrument executed in connection
herewith, and to make all other determinations that it deems
necessary or advisable for the administration of the Plan. The
Board Committee may impose conditions with respect to an Award,
such as limiting solicitation of employees or former employees
or limiting competitive employment or other activities. The
Board Committee may correct any defect, supply any omission or
reconcile any inconsistency in the Plan or any Award or Award
Agreement in the manner and to the extent it shall deem
desirable to carry it into effect. All such interpretations,
rules, regulations and determinations shall be final, conclusive
and binding on all persons (including the Company and
Participants) and for all purposes. Notwithstanding anything in
the Plan to the contrary, the Board Committee designated by the
Board to administer the Plan may be different for purposes of
administering Awards made to Employees and Awards made to
Non-Employee Directors.
(b) Board Authority. If the Board
Committee does not exist, or for any other reason determined by
the Board, the Board may take any action under the Plan that
would otherwise be the responsibility of the Board Committee.
(c) Delegation. The Board Committee shall
have the right, from time to time, to delegate to one or more
officers of the Company the authority of the Board Committee to
grant and determine the terms and conditions of Awards granted
under the Plan, subject to the requirements of
Section 157(c) of the Delaware General Corporation Law (or
any successor provision) and such other limitations as the Board
Committee shall determine. The Board Committee may also, either
concurrently or otherwise, delegate all or any portion of such
authority to a committee of the Board consisting of or including
any one or more Directors who also serve as officers of the
Company. In no event shall any such delegation of authority be
permitted with respect to Awards to any Director, Executive
Officer or any person subject to Section 162(m) of the
Code. The Board Committee shall also be permitted to delegate,
to any appropriate officer or employee of the Company,
responsibility for performing certain ministerial functions
under the Plan. In the event that the Board
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Committees authority is delegated to officers or employees
in accordance with the foregoing, all references in the Plan
relating to the Board Committee shall be interpreted in a manner
consistent with the foregoing by treating any such reference as
a reference to such officer or employee for such purpose. Any
action undertaken in accordance with the Board Committees
delegation of authority hereunder shall have the same force and
effect as if such action was undertaken directly by the Board
Committee and shall be deemed for all purposes of the Plan to
have been taken by the Board Committee.
(d) Limitation on Liability. No member of
the Board or Board Committee nor any officer or employee
delegated authority by the Board Committee pursuant to
Section 4.1(c), shall be liable for any action or
determination made in good faith by the Board or Board Committee
or such officer or employee with respect to the Plan or any
Award.
4.2 Eligibility. All Employees and
Non-Employee Directors are eligible to be designated by the
Board Committee to receive Awards and become Participants under
the Plan; provided, however, that only Non-Employee Directors
are eligible to receive Deferred Units under Section 10
and all Non-Employee Directors are eligible to receive such
Deferred Units without regard to whether the Board Committee has
designated a Non-Employee Director as eligible to receive
Deferred Units; and provided further, that an employee of an
Affiliate shall be designated by the Board Committee as a
recipient of an Option or SAR only if Common Stock qualifies,
with respect to such recipient, as service recipient
stock within the meaning set forth in Section 409A of
the Code. In selecting Employees and Non-Employee Directors to
be Participants and in determining the type and amount of Awards
to be granted under the Plan, the Board Committee shall consider
any and all factors that it deems relevant or appropriate.
5. Performance Share Awards, Performance Unit
Awards and Cash-Based Unit Awards.
5.1 Awards. Performance Share Awards,
Performance Unit Awards and Cash-Based Unit Awards may be
granted, from time to time, to such Employees and Non-Employee
Directors as may be selected by the Board Committee. Except as
provided in Section 11 or as otherwise provided or
determined by the Board Committee, the release of such
Performance Share Awards or the payment of Cash-Based Unit
Awards, and Performance Unit Awards, as applicable, to the
Participant subject to such awards shall be contingent upon
(i) the degree of attainment of the applicable Performance
Objectives during the Performance Period as shall be determined
by the Board Committee, (ii) the expiration of the
Performance Period, and (iii) such other terms and
conditions as set forth in the applicable Award Agreement. Each
award under this Section 5.1 of Performance Shares
shall be evidenced by an Award Agreement (Performance
Share Award Agreement), each award under this
Section 5.1 of Performance Units shall be evidenced
by an Award Agreement (Performance Unit Award
Agreement), and each award under this
Section 5.1 of Cash-Based Unit Awards shall be
evidenced by an Award Agreement (Cash-Based Unit Award
Agreement), which shall specify or confirm the
applicable Performance Objectives, the Performance Period,
forfeiture conditions and such other terms and conditions as the
Board Committee shall determine. The Board Committee may
determine performance levels pursuant to which the number of
Performance Shares, Performance Units, or Cash-Based Units
earned may be less than, equal to, or greater than, the number
of Performance Shares, Performance Units, or Cash-Based Units
awarded based upon the Performance Objectives stated in the
award.
5.2 Payouts.
(a) Performance Shares. Performance
Shares that have been earned shall immediately become
nonforfeitable and the Shares underlying such award of
Performance Shares shall be released by the Company to the
Participant without restrictions on transfer. The Shares
released by the Company hereunder may, at the Companys
option, be either (i) evidenced by a certificate registered
in the name of the Participant or his or her designee; or
(ii) credited to a book-entry account for the benefit of
the Participant maintained by the Companys stock transfer
agent or its designee.
(b) Performance Units and Cash-Based
Units. Performance Units and Cash-Based Units
shall become payable to a Participant at the time or times
determined by the Board Committee and set forth in the
Performance Unit Award Agreement or the Cash-Based Unit Award
Agreement, as the case may be. Payout of a Performance Unit
Award or a Cash-Based Unit Award may be made, at the discretion
of the Board
B-7
Committee, in Shares or in cash, or in a combination thereof.
Any cash payout of a Performance Unit Award shall be made based
upon the Fair Market Value of the Common Stock, determined on
such date or over such time period as determined by the Board
Committee. Any payout of a Cash-Based Unit Award in Shares shall
be made based upon the Fair Market Value of the Common Stock,
determined on such date or over such time period as determined
by the Board Committee.
5.3 Rights as Shareholders.
(a) Performance Shares
Voting. Subject to the provisions of the
applicable Performance Share Award Agreement and unless
otherwise provided or determined by the Board Committee, during
the Performance Period Participants may exercise full voting
rights with respect to all Performance Shares granted under
Section 5.1 hereof.
(b) Performance Units and Cash-Based
Units. Subject to the provisions of the
applicable Performance Unit Award Agreement or Cash-Based Unit
Award Agreement, and unless otherwise provided or determined by
the Board Committee, Participants shall not have any rights as a
shareholder with respect to Shares underlying a Performance Unit
or Cash-Based Unit until such time, if any, as any underlying
Shares are actually issued to the Participant, which may, at the
option of the Company be either (i) evidenced by delivery
of a certificate registered in the name of the Participant or
his or her designee; or (ii) credited to a book-entry
account for the benefit of the Participant maintained by the
Companys stock transfer agent or its designee.
(c) Dividend Equivalents. No dividends or
Dividend Equivalents shall be paid on outstanding unvested or
unearned Performance Shares or Performance Units. However, the
Board Committee may specify that a Performance Share or
Performance Unit will accrue Dividend Equivalents in an amount
equal to the cash dividends or other distribution, if any, which
are paid with respect to issued and outstanding shares of Common
Stock during the Performance Period. If Dividend Equivalents are
included with a Performance Share Award or Performance Unit
Award, the Dividend Equivalents will, as determined by the Board
Committee, be paid in cash or shares of Common Stock at the time
of vesting of such Performance Shares and at the time of payout
of such Performance Units. Dividend Equivalents will, in such
case, be paid with respect to all Performance Shares that have
vested or Performance Units that are paid out. No Dividend
Equivalents will be paid on Performance Shares or Performance
Units that are forfeited or cancelled. The Board Committee may
also specify that Dividend Equivalents will be deemed to be
reinvested in Common Stock. Dividend Equivalents which are
deemed reinvested in Common Stock will be converted into
additional Performance Shares or Performance Units and payment
of the Performance Shares or Performance Units shall include the
value of such additional Performance Shares or Performance
Units. No interest shall be paid on a Dividend Equivalent or any
part thereof.
5.4 Termination of Employment or
Service. If a Participant ceases to be an
Employee or a Non-Employee Director, the number of Performance
Shares or Performance Units (and in each case, accrued Dividend
Equivalents thereon, if any) to which the Participant shall be
entitled, and the number of Cash-Based Units, if any, to which
the Participant shall be entitled, shall be determined in
accordance with the applicable Award Agreement. All remaining
Performance Shares, Performance Units or Cash-Based Units as to
which the Participant may not be entitled, as well as any
accrued Dividend Equivalents on such Performance Shares or
Performance Units, shall be forfeited, subject to such
exceptions, if any, authorized by the Board Committee.
5.5 Transfer of Employment. If a
Participant transfers employment from one business unit of the
Company or any of its Subsidiaries or Affiliates to another
business unit during a Performance Period, such Participant
shall be eligible to receive such number of Performance Shares,
Performance Units or Cash-Based Units, as well as any accrued
Dividend Equivalents, as the Board Committee may determine based
upon such factors as the Board Committee in its sole discretion
may deem appropriate.
6. Restricted Stock Awards and Restricted Unit
Awards.
6.1 Awards. Restricted Stock Awards and
Restricted Unit Awards, subject to such Restriction Period and
such other restrictions as to vesting and otherwise as the Board
Committee shall determine, may be
B-8
granted, from time to time, to such Employees and Non-Employee
Directors as may be selected by the Board Committee. To the
extent permitted by Section 409A of the Code, the Board
Committee may, in its sole discretion at the time of the grant
of the award of Restricted Stock or Restricted Units or at any
time thereafter, provide for the early vesting of such award
prior to the expiration of the Restriction Period. Each award
under this Section 6.1 of Restricted Stock shall be
evidenced by an Award Agreement (Restricted Stock Award
Agreement), and each award under this
Section 6.1 of Restricted Units shall be evidenced
by an Award Agreement (Restricted Unit Award
Agreement), which shall specify the vesting schedule,
any rights of acceleration, any forfeiture conditions, and such
other terms and conditions as the Board Committee shall
determine.
6.2 Payouts.
(a) Restricted Stock. Upon expiration of
the Restriction Period and satisfaction of any other terms or
conditions and as set forth in the Restricted Stock Award
Agreement, the Restricted Stock shall immediately become
nonforfeitable and the Shares underlying such award of
Restricted Stock shall be released by the Company to the
Participant without restrictions on transfer. The Shares
released by the Company hereunder may at the Companys
option be either (i) evidenced by a certificate registered
in the name of the Participant or his or her designee; or
(ii) credited to a book-entry account for the benefit of
the Participant maintained by the Companys stock transfer
agent or its designee.
(b) Restricted Units. Restricted Units
shall become payable to a Participant at the time or times
determined by the Board Committee and set forth in the
Restricted Unit Award Agreement. Payout of a Restricted Unit
Award may be made, at the discretion of the Board Committee, in
Shares or in cash, or in a combination thereof. Any cash payout
of a Restricted Unit shall be made based upon the Fair Market
Value of the Common Stock, determined on such date or over such
time period as determined by the Board Committee.
6.3 Rights as Shareholders.
(a) Restricted Stock. Subject to the
provisions of the applicable Restricted Stock Award Agreement
and unless otherwise provided or determined by the Board
Committee, during the Restriction Period Participants may
exercise full voting rights with respect to the Shares of
Restricted Stock granted under Section 6.1 hereof
and shall be entitled to receive Dividend Equivalents (rather
than dividends) paid with respect to those Shares.
(b) Restricted Units. Subject to the
provisions of the applicable Restricted Unit Award Agreement and
unless otherwise provided or determined by the Board Committee,
Participants shall not have any rights as a shareholder with
respect to Shares underlying a Restricted Unit until such time,
if any, as the underlying Shares are actually issued to the
Participant, which may, at the option of the Company be either
(i) evidenced by delivery of a certificate registered in
the name of the Participant or his or her designee; or
(ii) credited to a book-entry account for the benefit of
the Participant maintained by the Companys stock transfer
agent or its designee. The Board Committee may provide in a
Restricted Unit Award Agreement for the payment of Dividend
Equivalents to the Participant at such times as paid to
shareholders generally or at the time of vesting or other payout
of the Restricted Units.
6.4 Termination of Employment or
Service. If a Participant ceases to be an
Employee or a Non-Employee Director, the number of Shares of
Restricted Stock or Restricted Units subject to the award, if
any, to which the Participant shall be entitled shall be
determined in accordance with the applicable Award Agreement.
All remaining Shares underlying Restricted Stock or Restricted
Units as to which restrictions apply at the date of termination
of employment or service shall be forfeited subject to such
exceptions, if any, authorized by the Board Committee.
7. Stock Options.
7.1 Option Grants. Options may be
granted, from time to time, to such Employees and Non-Employee
Directors as may be selected by the Board Committee. The Option
Price shall be determined by the Board Committee effective on
the Grant Date; provided, however, that except in the
case of Substitute Awards, such price shall not be less than one
hundred percent (100%) of the Fair Market Value of a Share on
the Grant
B-9
Date. The number of Shares subject to each Option granted to
each Participant, the term of each Option, and any other terms
and conditions of an Option granted hereunder shall be
determined by the Board Committee, in its sole discretion,
effective on the Grant Date; provided, however, that no
Option shall be exercisable any later than ten (10) years
from the Grant Date. Each Option shall be evidenced by an Award
Agreement (Option Agreement), which shall
specify the type of Option granted, the Option Price, the term
of the Option, the number of Shares subject to the Option, the
conditions upon which the Option becomes exercisable and such
other terms and conditions as the Board Committee shall
determine.
7.2 Payment of Option Price; Cashless
Exercise. No Shares shall be issued upon exercise
of an Option until full payment of the aggregate Option Price by
the Participant. Upon exercise, the Option Price may be paid by:
(i) delivery of cash
and/or
Shares (whether actually delivered or through attestation)
having a Fair Market Value equal to the aggregate Option Price;
or (ii) if permitted by the Board Committee, by directing
the Company to retain all or a portion of the Shares otherwise
issuable to the Participant under the Plan pursuant to such
exercise having a Fair Market Value equal to the aggregate
Option Price. To the extent permitted by applicable law, if
permitted by the Board Committee, a grant may provide for the
deferred payment of the Option Price from the proceeds of sale
through a broker on the date of exercise of some or all of the
Shares to which the exercise relates. In such case, the Company
shall have received a properly executed exercise notice,
together with a copy of irrevocable instructions to a broker to
deliver promptly to the Company the amount of sale proceeds to
pay the aggregate Option Price, and, if requested, the amount of
any Federal, state, local or foreign withholding taxes. To
facilitate the foregoing, the Company may, to the extent
permitted by applicable law, enter into agreements or
coordinated procedures with one or more brokerage firms.
7.3 Rights as Shareholders. Participants
shall not have any rights as a shareholder with respect to any
Shares subject to an Option, unless and until such Shares have
been issued upon the proper exercise of such Option, which
issuance may, at the option of the Company, be either:
(i) evidenced by delivery of a certificate registered in
the name of the Participant or his or her designee; or
(ii) credited to a book-entry account for the benefit of
the Participant maintained by the Companys stock transfer
agent or its designee.
7.4 Termination of Employment or
Service. If a Participant ceases to be an
Employee or a Non-Employee Director, whether the Options granted
hereunder shall be exercisable or not and the other applicable
terms and conditions shall be determined in accordance with the
applicable Option Agreement.
7.5 Limits on Incentive Stock
Options. Notwithstanding the designation of an
Option as an Incentive Stock Option, to the extent the aggregate
Option Price of the Shares with respect to which Incentive Stock
Options are exercisable for the first time by a Participant
during any calendar year exceeds $100,000 (or such other amount
as determined under the Code), such Options shall be treated as
Non-Qualified Stock Options. Incentive Stock Options may only be
granted to Participants who meet the definition of
employees under Section 3401(c) of the Code.
7.6 Limits on Option
Repricing. Notwithstanding any provision of the
Plan to the contrary, the repricing of an Option is prohibited
without the prior approval of the Companys shareholders.
For this purpose, a repricing means any of the
following (or any other action that has the same effect as any
of the following): (i) changing the terms of an Option to
lower its Option Price other than in connection with a Share
Change or a change in the Companys capitalization (as set
forth in Section 3.2); (ii) repurchasing an
Option for cash or cancelling an Option in exchange for another
Award, in either case, at a time when its Option Price is
greater than the Fair Market Value of the underlying Shares,
unless the repurchase or cancellation and exchange occurs in
connection with a Share Change or a change in the Companys
capitalization (as set forth in Section 3.2); and
(iii) any other action treated as a repricing under
U.S. generally accepted accounting principles.
8. Stock Appreciation Rights.
8.1 SAR Grants. Stock Appreciation Rights
may be granted, from time to time, to such Employees and
Non-Employee Directors as may be selected by the Board
Committee. SARs may be granted at the discretion of the Board
Committee either: (i) in tandem with an Option; or
(ii) independent of an Option. The price from
B-10
which appreciation shall be computed shall be established by the
Board Committee at the Grant Date; provided, however,
that except in the case of Substitute Awards, such price shall
not be less than one hundred percent (100%) of the Fair Market
Value of the number of Shares subject to the SAR on the Grant
Date. In the event the SAR is granted in tandem with an Option,
the price from which appreciation shall be computed shall be the
Option Price. Each grant of a SAR shall be evidenced by an Award
Agreement (Stock Appreciation Right
Agreement), which shall specify whether the SAR is
granted in tandem with an Option, the price from which
appreciation shall be computed for the SAR, the term of the SAR,
the number of Shares subject to the SAR, the conditions upon
which the SAR vests and such other terms and conditions as the
Board Committee shall determine. In no event shall a SAR be
exercisable any later than ten (10) years from the Grant
Date.
8.2 Exercise of SARs. SARs may be
exercised upon such terms and conditions as the Board Committee
shall determine; provided, however, that SARs granted in
tandem with Options may be exercised only to the extent the
related Options are then exercisable. Upon exercise of a SAR
granted in tandem with an Option as to all or some of the Shares
subject to such SAR, the related Option shall be automatically
canceled to the extent of the number of Shares subject of the
exercise of the SAR, and such Shares shall no longer be
available for grant hereunder. If the related Option is
exercised as to some or all of the Shares underlying such
Option, the related SAR shall automatically be canceled to the
extent of the number of Shares subject to the exercise of the
Option, and such Shares shall no longer be available for grant
hereunder.
8.3 Payment upon Exercise. Upon exercise
of a SAR, the holder shall be paid, in cash
and/or
Shares as set forth in the Stock Appreciation Right Agreement,
the excess of the Fair Market Value of the number of Shares
subject to the exercise over the price for such number of
Shares, which in the case of a SAR granted in tandem with an
Option shall be the Option Price for such Shares.
8.4 Rights as Shareholders. Participants
shall not have any rights as a shareholder with respect to any
Shares subject to a SAR nor with respect to any Shares subject
to an Option granted in tandem with a SAR unless and until such
Shares have been issued upon the proper exercise of the SAR or
the related Option, which issuance may at the option of the
Company be either: (i) evidenced by delivery of a
certificate registered in the name of the Participant or his or
her designee; or (ii) credited to a book-entry account for
the benefit of the Participant maintained by the Companys
stock transfer agent or its designee.
8.5 Termination of Employment or
Service. If a Participant ceases to be an
Employee or a Non-Employee Director, whether SARs granted
hereunder shall be exercisable or not and the other terms and
conditions shall be determined in accordance with the applicable
Stock Appreciation Right Agreement.
8.6 Limits on SAR
Repricing. Notwithstanding any provision of the
Plan to the contrary, the repricing of a SAR is prohibited
without the prior approval of the Companys shareholders.
For this purpose, a repricing means any of the
following (or any other action that has the same effect as any
of the following): (i) changing the terms of a SAR to lower
the price from which appreciation shall be computed other than
in connection with a Share Change or a change in the
Companys capitalization (as set forth in
Section 3.2); (ii) repurchasing a SAR for cash
or cancelling a SAR in exchange for another Award, in either
case, at a time when the price from which appreciation shall be
computed is greater than the Fair Market Value of the underlying
Shares, unless the repurchase or cancellation and exchange
occurs in connection with a Share Change or a change in the
Companys capitalization (as set forth in
Section 3.2); and (iii) any other action
treated as a repricing under U.S. generally accepted
accounting principles.
9. Other Share-Based
Awards. Subject to the limits set forth in
Section 3.1, but notwithstanding any other provision
in the Plan, awards of Shares and other awards that are valued
in whole or in part by reference to, or are otherwise based on,
Shares (including, but not limited to, bonus stock, Shares which
are subject to restrictions on transferability, or similar
securities or rights) (Share-Based Awards),
may be made, from time to time, to such Employees and
Non-Employee Directors as may be selected by the Board
Committee. Such Share-Based Awards may be made alone or in
addition to or in connection with any other Award hereunder. The
Board Committee may, in its sole discretion, determine the terms
and conditions of any such Share-Based Award. Each such
Share-Based Award shall be evidenced by an Award Agreement which
shall specify the number of Shares subject to the Share-Based
Award, any consideration therefor, any vesting or
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performance requirements and such other terms and conditions as
the Board Committee shall determine. Share-Based Awards in the
form of restricted shares or units are not required to be
subject to any minimum vesting period.
10. Non-Employee Director Deferred Units.
10.1 Awards. This Section 10
shall not be effective unless and until the Board Committee
determines to establish a program pursuant to this section. The
Board Committee, in its discretion and upon such terms and
conditions as it may determine, subject to the provisions of
Section 13.8(b) with respect to Section 409A of the
Code, may establish one or more programs pursuant to this
Section 10. The Board Committee may, after the
effectiveness of this section, from time to time and upon such
terms and conditions as it may determine, authorize the granting
of Deferred Units to Non-Employee Directors. The Deferred Units
will constitute an agreement by the Company to deliver Shares to
the Non-Employee Director in the future in consideration of the
performance of services, but subject to the fulfillment of such
conditions as the Board Committee may specify. The Deferred
Units shall be credited to a Deferred Units Account when
granted. Except as may be provided in a Deferred Unit Award
Agreement (to the extent permitted by applicable law), the
Non-Employee Director granted Deferred Units shall have no right
to transfer any rights under the award of Deferred Units. The
Non-Employee Director granted Deferred Units shall have no
rights of ownership in the Deferred Units and shall have no
right to vote them, but the Board Committee may, at or after the
Grant Date, authorize the payment of Dividend Equivalents on the
Shares underlying the Deferred Units on either a current or
deferred or contingent basis, either in cash or additional
Shares. Each Award under this Section 10.1 of
Deferred Units shall be evidenced by an Award Agreement
(Deferred Unit Award Agreement), which shall
specify the available forms of payment, the timing of any
elections with respect to payment, the ability to reallocate the
Deferred Units to subaccounts that are invested in investment
funds other than a Harris stock fund, and such other terms and
conditions as the Board Committee shall determine.
10.2 Payments in Connection with Change in
Control. Notwithstanding anything contained in
the Plan to the contrary, within 90 days following a Change
in Control that qualifies as a change in control
event within the meaning of Treasury Regulation
§ 1.409A-3(i)(5), the Company shall pay to each
Director (or former Director), in a lump sum, the Deferred Units
in such Directors Deferred Units Account. This Paragraph
may not be amended, altered or modified following such a Change
in Control.
10.3 Termination of Service. If a
Non-Employee Director ceases to be a Director for any reason,
the Directors Deferred Units Account shall be paid to the
Director in accordance with the Deferred Unit Award Agreement.
11. Change in Control.
11.1 Definition of Change in Control. For
purposes of the Plan, a Change in Control
shall be deemed to have occurred if:
(i) any person (as such term is defined in
Section 3(a)(9) of the Exchange Act and as used in
Sections 13(d)(3) and 14(d)(2) of the Exchange Act) is or
becomes a beneficial owner (as defined in
Rule 13d-3
under the Exchange Act), directly or indirectly, of securities
of the Company representing 20% or more of the combined voting
power of the Companys then outstanding securities eligible
to vote for the election of the Board (the Company
Voting Securities); provided, however, that the
event described in this paragraph (i) shall not be deemed
to be a Change in Control by virtue of any of the following
acquisitions: (a) by the Company or any Subsidiary,
(b) by any employee benefit plan sponsored or maintained by
the Company or any Subsidiary, (c) by any underwriter
temporarily holding securities pursuant to an offering of such
securities, or (d) pursuant to a Non-Control Transaction
(as defined in paragraph (iii));
(ii) individuals who, on July 3, 2010, constitute the
Board (the Incumbent Directors) cease for any
reason to constitute at least a majority of the Board,
provided that any person becoming a director subsequent
to July 3, 2010, whose appointment, election or nomination
for election was approved by a vote of at least two-thirds of
the Incumbent Directors who remain on the Board (either by a
specific vote or by approval of the proxy statement of the
Company in which such person is named as a nominee for director,
without objection to such nomination) shall also be deemed to be
an Incumbent Director; provided, however,
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that no individual initially elected or nominated as a director
of the Company as a result of an actual or threatened election
contest with respect to directors or any other actual or
threatened solicitation of proxies or consents by or on behalf
of any person other than the Board shall be deemed to be an
Incumbent Director;
(iii) there is consummated a merger, consolidation, share
exchange or similar form of corporate reorganization of the
Company or any such type of transaction involving the Company or
any of its Subsidiaries that requires the approval of the
Companys shareholders (whether for such transaction or the
issuance of securities in the transaction or otherwise) (a
Business Combination), unless immediately
following such Business Combination: (a) more than 60% of
the total voting power of the corporation resulting from such
Business Combination (including, without limitation, any company
which directly or indirectly has beneficial ownership of 100% of
the Company Voting Securities) eligible to elect directors of
such corporation is represented by shares that were Company
Voting Securities immediately prior to such Business Combination
(either by remaining outstanding or being converted), and such
voting power is in substantially the same proportion as the
voting power of such Company Voting Securities immediately prior
to the Business Combination, (b) no person (other than any
publicly traded holding company resulting from such Business
Combination, or any employee benefit plan sponsored or
maintained by the Company (or the corporation resulting from
such Business Combination)) becomes the beneficial owner,
directly or indirectly, of 20% or more of the total voting power
of the outstanding voting securities eligible to elect directors
of the corporation resulting from such Business Combination, and
(c) at least a majority of the members of the board of
directors of the corporation resulting from such Business
Combination were Incumbent Directors at the time of the
Boards approval of the execution of the initial agreement
providing for such Business Combination (any Business
Combination which satisfies the conditions specified in (a),
(b) and (c) shall be deemed to be a
Non-Control Transaction); or
(iv) the shareholders of the Company approve a plan of
complete liquidation or dissolution of the Company; or
(v) the Company consummates a direct or indirect sale or
other disposition of all or substantially all of the assets of
the Company and its Subsidiaries.
Notwithstanding the foregoing, a Change in Control of the
Company shall not be deemed to occur solely because any person
acquires beneficial ownership of more than 20% of the Company
Voting Securities as a result of the acquisition of Company
Voting Securities by the Company which reduces the number of
Company Voting Securities outstanding; provided, that if
after such acquisition by the Company such person becomes the
beneficial owner of additional Company Voting Securities that
increases the percentage of outstanding Company Voting
Securities beneficially owned by such person, a Change in
Control of the Company shall then occur.
11.2 Acceleration of Benefits. Except and
unless the Board Committee determines otherwise at the time of
grant of a particular Award or Awards, and as set forth in the
applicable Award Agreement, upon the occurrence of a Change in
Control: (i) any Awards outstanding as of the date of such
Change in Control that are subject to vesting requirements and
that are not then vested, shall become fully vested;
(ii) all then-outstanding Options and SARs shall be fully
vested and immediately exercisable, provided that in no event
shall any Option or SAR be exercisable beyond its original
expiration date; and (iii) all restrictions regarding the
Restriction Period and all other conditions prescribed by the
Board Committee, if any, with respect to grants of Cash-Based
Unit Awards, Performance Shares, Performance Units, Restricted
Stock, Restricted Units, or Share-Based Awards, shall
automatically lapse, expire and terminate and all such awards
shall be deemed to be fully earned. Notwithstanding the
foregoing, if an Award is deferred compensation
within the meaning of Section 409A of the Code, then
notwithstanding that the Award shall be deemed to be fully
vested and earned pursuant to this Section 11.2 upon a
Change in Control, unless the Change in Control qualifies as a
change in control event within the meaning of
Treasury Regulation § 1.409A-3(i)(5), in no event
shall payment with respect to the Award be made at a time other
than the time payment would be made in the absence of the Change
in Control.
B-13
12. Amendment or Termination of Plan.
(a) Amendment or Termination of
Plan. Until such time as a Change in Control
shall have occurred, the Board may, to the extent permitted by
Section 409A of the Code, amend, suspend or terminate the
Plan or any part thereof from time to time, provided that no
change may be made which would adversely impair the rights of a
Participant who has received an Award without the consent of
said Participant; and, provided, further, that if an
amendment to the Plan (i) would materially increase the
benefits accruing to Participants under the Plan,
(ii) would increase the number of Shares which may be
issued under the Plan, (iii) would materially modify the
requirements for participation in the Plan or (iv) must
otherwise be approved by the shareholders of the Company in
order to comply with applicable law or the rules of the New York
Stock Exchange or, if the Common Stock is not traded on the New
York Stock Exchange, the principal national securities exchange
upon which the Common Stock is traded or quoted, then, such
amendment will be subject to shareholder approval and will not
be effective unless and until such approval has been obtained.
After a Change in Control, the Board shall no longer have the
power to amend, suspend or terminate the Plan or any part
thereof.
(b) Foreign Jurisdictions. In order to
facilitate the making of any grant or combination of grants
under the Plan, the Board Committee may provide for such special
terms for Awards to Participants who are foreign nationals, or
who are employed by or perform services for the Company, any
Subsidiary or any Affiliate outside of the United States of
America, as the Board Committee may consider necessary or
appropriate to accommodate differences in local law, tax policy
or custom. Moreover, the Board Committee may approve such
supplements to, or amendments, restatements or alternative
versions of, the Plan or any Award Agreement as it may consider
necessary or appropriate for such purposes without thereby
affecting the terms of the Plan as in effect for any other
purpose, provided that no such supplements, amendments,
restatements or alternative versions shall include any
provisions that are inconsistent with the terms of the Plan, as
then in effect, unless the Plan could have been amended to
eliminate such inconsistency without further approval by the
shareholders of the Company.
13. Miscellaneous.
13.1 No Right to Continued Employment or Service or to
Participate. Nothing in the Plan or in the grant
of any Award or in any Award Agreement shall interfere with or
limit in any way the right of the Company or any of its
Subsidiaries or Affiliates to terminate any Participants
employment or service with the Company or any of its
Subsidiaries or Affiliates at any time, nor confer upon any
Participant any right to continued employment or service with
the Company or any of its Subsidiaries or Affiliates. Neither
the adoption of the Plan nor any action by the Company, the
Board, Board Committee or any director or officer of the Company
shall be deemed to give any Employee or Non-Employee Director
any right to be designated as a Participant under the Plan.
13.2 Withholding for Taxes; Offset. The
Company shall have the authority to withhold, or to require a
Participant to remit to the Company, prior to issuance or
delivery of any Shares or cash hereunder, an amount sufficient
to satisfy Federal, state, local or foreign tax or withholding
requirements associated with any Award. In addition, the Company
may, in its sole discretion, permit or require a Participant to
satisfy any tax withholding requirements, in whole or in part,
by (i) delivering to the Company (whether by actual
delivery or through attestation), Shares held by such
Participant having a Fair Market Value equal to the amount of
the tax or (ii) directing the Company to retain Shares
otherwise issuable or cash otherwise to be delivered to the
Participant under the Plan. The Company may, to the extent
permitted by applicable laws (including Code Section 409A),
offset against any payments to be made to a Participant under
the Plan any amounts owing to the Company, its Subsidiaries or
Affiliates from the Participant for any reason.
13.3 Other Compensation and Benefit
Plans. Awards hereunder shall not be deemed
compensation for purposes of computing benefits under any
retirement or compensation plan of the Company or any of its
Subsidiaries or Affiliates and shall not affect any benefits
under any other benefit plan now or hereafter in effect under
which the availability or amount of benefits is related to the
level of compensation, including, without limitation, under any
pension, retirement or severance benefits plan, except to the
extent specifically provided by the terms of any such plan. The
adoption of the Plan shall not affect any other share incentive
or other compensation plans in effect for the Company or any
Affiliate or Subsidiary, nor shall the Plan preclude
B-14
the Company from establishing any other forms of share incentive
or other compensation or benefit program for Employees or
Non-Employee Directors.
13.4 Waiver of Restrictions. To the
extent permitted by Section 409A of the Code, the Board
Committee may, in its sole discretion, based on such factors as
the Board Committee may deem appropriate, waive in whole or in
part, any remaining restrictions or vesting requirements in
connection with any Award hereunder.
13.5 Limits on Transferability of Awards,
Etc. Except as permitted by this
Section 13.5, no Award granted under the Plan may be
sold, transferred, pledged, assigned, hypothecated, encumbered,
or otherwise disposed of or transferred by a Participant except
by will or the laws of descent and distribution in the event of
the Participants death (to the extent such Award by its
terms, survives the Participants death). Awards granted
under the Plan shall not be subject to execution, attachment,
change, alienation or similar process. The Board Committee may,
in its discretion, expressly authorize in an Option Agreement or
Stock Appreciation Right Agreement that all or a portion of the
Options or SARs granted to a Participant (other than Incentive
Stock Options) be on terms which permit transfer by such
Participant (i) to immediate family members of the
Participant or to a trust, partnership or limited liability
company for the benefit of such immediate family members,
(ii) pursuant to domestic relations orders referred to in
Rule 16a-12
under the Exchange Act, and (iii) to other transferees
permitted by the Board Committee in its discretion (such
transferees of a Participant are referred to as
Permitted Transferees) provided that
(A) there may be no payment of consideration (other than
release of marital rights) for any such transfer, (B) the
applicable Award Agreement shall specifically provide for
transferability in a manner consistent with this Section, and
(C) subsequent transfers of transferred Options and SARs
shall be prohibited except, without consideration for such
transfer, to the Participant or a Permitted Transferee of the
Participant. The Board Committee may, in its discretion, create
further conditions and requirements for the transfer of Options
and SARs. Following transfer, Options and SARs shall continue to
be subject to the same terms and conditions as were applicable
immediately prior to transfer; the Participant shall remain
subject to applicable tax withholding; the events of termination
of employment or service of a Participant shall continue to be
applied with respect to the Permitted Transferee; and all other
terms of the Options and SARs shall remain unchanged. All
Options and SARs granted to a Participant under the Plan shall
be exercisable during the lifetime of such Participant only by
such Participant, his agent, guardian or attorney-in-fact or by
a Permitted Transferee.
13.6 Adjustment of Awards. Subject to
Sections 7.6, 8.6 and 12, the Board Committee
shall be authorized to make adjustments in the method of
calculating attainment of Performance Objectives or in the terms
and conditions of Awards in recognition of unusual or
nonrecurring events affecting the Company or its financial
statements or changes in applicable laws, regulations or
accounting principles; provided, however, that no such
adjustment shall adversely impair the rights of any Participant
without his or her consent and that any such adjustment shall be
made in a manner consistent with Section 409A of the Code
(to the extent applicable thereto) and in the case of a
Qualified Performance-Based Award, Section 162(m) of the
Code. The Board Committee may not make any such adjustment with
respect to any Qualified Performance-Based Award if such
adjustment would cause compensation pursuant to such award to
cease to be performance-based compensation under
Section 162(m) of the Code. In the event the Company shall
assume outstanding employee benefit awards or the right or
obligation to make future such awards in connection with the
acquisition of another company or business entity, the Board
Committee may, in its discretion but subject to the requirements
of Section 409A of the Code, make such adjustments in the
terms of Awards under the Plan as it shall deem appropriate.
13.7 Consideration for Awards. Except as
otherwise required in any applicable Award Agreement or by the
terms of the Plan, Participants under the Plan shall not be
required to make any payment or provide consideration for an
Award other than the rendering of services to the Company, any
Subsidiary or any Affiliate.
13.8 Deferral.
(a) Section 162(m) Related
Deferral. Notwithstanding anything contained
herein to the contrary, if permitted under Section 409A of
the Code, in the event that any Award shall be ineligible for
treatment as
B-15
other performance based compensation under
Section 162(m) of the Code, the Board Committee, in its
sole discretion, shall have the right with respect to any
Executive Officer who is, in the year any Award hereunder
otherwise would become deductible by the Company, a
covered employee under Section 162(m) of the
Code, to defer such Executive Officers receipt of such
Award until the Executive Officer is no longer a covered
employee or until such time as shall be determined by the
Board Committee, provided that the Board Committee may effect
such a deferral only in a situation where the Board Committee
reasonably anticipates that the Company would be prohibited a
deduction under Section 162(m) of the Code and such
deferral shall be limited to the portion of the Award that
reasonably is anticipated not to be deductible. In no event
shall the provisions of this Section 13.8(a) apply
to Options or SARs.
(b) Other Deferral. Except with respect
to Options and SARs, the Board Committee may in its discretion
permit a Participant to defer the receipt of payment of cash or
delivery of Shares that would otherwise be due to the
Participant by virtue of the exercise of a right or the
satisfaction of vesting or other conditions with respect to an
Award. If any such deferral is to be permitted by the Board
Committee, the Board Committee shall establish written rules and
procedures relating to such deferral in a manner intended to
comply with the requirements of Section 409A of the Code,
including, without limitation, the time when an election to
defer may be made, the time period of the deferral and the
events that would result in payment of the deferred amount, the
interest or other earnings attributable to the deferral and the
method of funding, if any, attributable to the deferred amount.
13.9 Securities Laws. No Shares will be
issued or transferred pursuant to an Award unless and until all
then applicable requirements imposed by Federal and state
securities and other laws, rules and regulations and by any
regulatory agencies having jurisdiction, and by any exchanges
upon which the Shares may be listed, have been fully met. As a
condition precedent to the issuance of Shares pursuant to the
grant or exercise of an Award, the Company may require the
Participant to take any reasonable action to meet such
requirements. The Board Committee may impose such conditions on
any Shares issuable under the Plan as it may deem advisable,
including, without limitation, restrictions under the Securities
Act of 1933, as amended, under the requirements of any exchange
upon which such Shares of the same class are then listed, and
under any blue sky or other securities laws applicable to such
Shares. The Board Committee may also require the Participant to
represent and warrant at the time of issuance or transfer that
the Shares are being acquired only for investment purposes and
without any current intention to sell or distribute such Shares.
13.10 Impact of Restatement of Financial Statements upon
Previous Awards. If any of the Companys
financial statements are restated as a result of errors,
omissions, or fraud, the Board Committee may (in its sole
discretion, but acting in good faith) direct that the Company
recover all or a portion of any such Award or payment made to
any, all or any class of Participants with respect to any fiscal
year of the Company the financial results of which are
negatively affected by such restatement. The amount to be
recovered from any Participant shall be the amount by which the
affected Award or payment exceeded the amount that would have
been payable to such Participant had the financial statements
been initially filed as restated, or any greater or lesser
amount (including, but not limited to, the entire Award) that
the Board Committee shall determine. The Board Committee may
determine to recover different amounts from different
Participants or different classes of Participants on such basis
as it shall deem appropriate. In no event shall the amount to be
recovered by the Company from a Participant be less than the
amount required to be repaid or recovered as a matter of law.
The Board Committee shall determine whether the Company shall
effect any such recovery (i) by seeking repayment from the
Participant, (ii) by reducing the amount that would
otherwise be payable to the Participant under any compensatory
plan, program or arrangement maintained by the Company, a
Subsidiary or any of its Affiliates, (iii) by withholding
payment of future increases in compensation (including the
payment of any discretionary bonus amount) or grants of
compensatory awards that would otherwise have been made in
accordance with the Companys otherwise applicable
compensation practices, or (iv) by any combination of the
foregoing or otherwise (subject, in each of subclause (ii),
(iii) and (iv), to applicable law, including without
limitation Section 409A of the Code, and the terms and
conditions of the applicable plan, program or arrangement). This
Section 13.10 shall be a non-exclusive remedy and
nothing contained in this
Section 13.10 shall preclude the Company
from pursuing any other applicable remedies available to it,
whether in addition to, or in lieu of, application of this
Section 13.10.
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13.11 Compliance with Section 409A of the
Code. All Awards under the Plan are intended to
be exempt from (or comply with) the requirements of
Section 409A of the Code to the maximum extent permitted.
To the extent applicable, the Plan is intended to be
administered and interpreted in a manner that is consistent with
the requirements of Section 409A of the Code.
Notwithstanding the foregoing, no particular tax result for a
Participant with respect to any income recognized by the
Participant in connection with the Plan is guaranteed under the
Plan, and the Participant shall be responsible for any taxes
imposed on the Participant in connection with the Plan.
13.12 Tax Penalty Avoidance. The
provisions of the Plan are not intended, and should not be
construed, to be legal, business or tax advice. The Company,
Participants and any other party having any interest herein are
hereby informed that the U.S. Federal tax advice contained
in this document (if any) is not intended or written to be used,
and cannot be used, for the purpose of (a) avoiding
penalties under the Code or (b) promoting, marketing or
recommending to any party any transaction or matter addressed
herein.
13.13 Governing Law and
Interpretation. The validity, construction, and
effect of the Plan and any rules and regulations relating to the
Plan and any agreement governing an Award shall be determined in
accordance with the laws of the State of Delaware, without
regard to the conflict of law principles thereof. Unless
otherwise indicated, all Section references are to
sections of the Plan. References to any law, rule or regulation
shall include all statutory and regulatory provisions
consolidating, amending, replacing, supplementing, or
interpreting such law, rule or regulation.
13.14 Severability. Notwithstanding any
other provision or Section of the Plan, if any provision of the
Plan or any Award Agreement is or becomes or is deemed to be
invalid, illegal or unenforceable in any jurisdiction or as to
any person or Award, or would disqualify the Plan or any Award
Agreement under any law deemed applicable by the Board or the
Board Committee, such provision shall be construed or deemed
amended to conform to the applicable laws (but only to such
extent necessary to comply with such laws), or if it cannot be
construed or deemed amended without, in the determination of the
Board or the Board Committee, materially altering the intent of
the Plan or Award Agreement, such provision shall be stricken as
to such jurisdiction, person or Award and the remainder of the
Plan and any such Award Agreement shall remain in full force and
effect.
13.15 No Trust or
Fund Created. Neither the Plan nor any Award
shall create or be construed to create a trust or separate fund
of any kind or a fiduciary relationship between the Company or
any Subsidiary or Affiliate and a Participant or any other
person. To the extent that any person acquires a right to
receive payments from the Company or any Subsidiary or Affiliate
pursuant to an Award, such right shall be no greater than the
right of any unsecured general creditor of the Company or any
Subsidiary or Affiliate.
13.16 Waiver of Claims. Each Participant
recognizes and agrees that prior to being selected by the Board
Committee to receive an Award he or she has no right to any
benefits hereunder. Accordingly, in consideration of the
Participants receipt of any Award hereunder, he or she
expressly waives any right to contest the amount of any Award,
the terms of any Award Agreement, any determination, action or
omission hereunder or under any Award Agreement by the Board
Committee, the Company or the Board, or any amendment to the
Plan or any Award Agreement (other than an amendment to the Plan
or an Award Agreement to which his or her consent is expressly
required by the express terms of the Plan or an Award Agreement).
13.17 Effective Date and Term.
(a) Effective Date and Term of Plan. The
Plan initially became effective upon approval by the
shareholders of the Company at the 2005 Annual Meeting of
Shareholders (the Plan Effective Date) and,
the Plan as amended and restated hereby is effective on
August 27, 2010. The terms of the Plan as hereby amended
and restated shall govern Awards granted on or after
August 27, 2010. Awards granted prior to August 27,
2010 shall continue to be governed by the terms of the 2005
Equity Incentive Plan, prior to amendment and restatement. All
Awards granted under the Plan must be granted within ten
(10) years from the Plan Effective Date. Any Awards
outstanding ten (10) years after the Plan Effective Date
may be exercised within the periods prescribed under or pursuant
to the Plan.
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(b) Predecessor Plans. Upon the Plan
Effective Date, no further grants or awards were permitted under
the 2000 Stock Incentive Plan. All grants and awards under the
Predecessor Plans that remain outstanding shall be administered
and paid in accordance with the provisions of the Predecessor
Plans and the applicable award agreement.
Approved and adopted by the Board of Directors the 27th day
of August 2005 and amended and restated the 28th day of August
2010.
Attested:
Secretary
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YOUR VOTE IS IMPORTANT. PLEASE VOTE TODAY.
We encourage you to take advantage of Internet or telephone voting.
Both are available 24 hours a day, 7 days a week, and save money for Harris Corporation.
Internet and telephone voting are available through 11:59 PM (Eastern Time) on October 21,
2010.
INTERNET VOTING INSTRUCTIONS
http://www.proxyvoting.com/hrs
Go to the website address shown above and follow the simple on-screen instructions. Have
your
proxy/voting instruction card in hand when you access the website.
OR
TELEPHONE VOTING INSTRUCTIONS
1-866-540-5760
Call the toll-free telephone number shown above on any
touch-tone telephone and follow the simple recorded
instructions. Have your proxy/voting instruction card in
hand when you call.
If you vote by Internet or by
telephone, please do NOT mail back
your proxy/voting instruction card.
To vote by mail, mark, sign and date
your proxy/voting instruction card
and return it in the enclosed
postage-paid envelope.
Your Internet or telephone voting
instructions authorize the named
proxies and/or provide the Plan
Trustee with instructions to vote
your shares in the same manner as if
you marked, signed, dated and
returned your proxy/voting
instruction card.
WO#
79516
6 FOLD AND DETACH HERE
6
The Board of Directors recommends a vote FOR each nominee listed
in Proposal 1, FOR
Proposal 2, FOR Proposal 3, FOR Proposal 4 and AGAINST Proposal 5.
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Proposal 1 Election of Directors The Board
recommends a vote FOR the election as
director
of each listed nominee for a one-year
term expiring at the 2011 Annual Meeting of
Shareholders:
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FOR
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AGAINST
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ABSTAIN
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FOR
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AGAINST
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ABSTAIN
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FOR
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AGAINST
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ABSTAIN |
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01 Howard L. Lance
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o
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o
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o
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05 David B. Rickard
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o
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o
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o
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Proposal 2
Ratification of
Appointment of
Auditor - The Board
recommends a vote
FOR the
ratification of the
appointment by our
Audit Committee of
Ernst & Young LLP
as our independent
registered public
accounting firm for
fiscal year 2011.
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o
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o
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02 Thomas A. Dattilo
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o
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o
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o
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06 James C. Stoffel
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o
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o
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o
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Proposal 3
Approval of the
Harris Corporation
Annual Incentive
Plan - The Board
recommends a vote
FOR approval of
the Harris
Corporation Annual
Incentive Plan.
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o
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o
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03 Terry D. Growcock
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o
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o
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o
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07 Gregory T. Swienton
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o
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o
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o
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Proposal 4
Re-approval of the
Performance
Measures for the
Harris Corporation
2005 Equity
Incentive Plan -
The Board
recommends a vote
FOR re-approval
of the performance
measures for the
Harris Corporation
2005 Equity
Incentive Plan.
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o
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o
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04 Leslie F. Kenne
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o
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o
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Proposal 5
Shareholder
Proposal - The
Board recommends a
vote AGAINST the
shareholder
proposal requesting
approval of an
amendment to our
By-Laws to require
an independent
chairman of the
board.
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If this proxy/voting instruction card is properly
executed, the undersigneds shares will be voted in the manner
instructed herein. If no instruction is provided, the
undersigneds shares will be voted FOR the election of the
Board of Directors nominees; FOR Proposal 2; FOR Proposal 3; FOR Proposal 4; and AGAINST Proposal 5; or, if the
undersigned is a participant in the Harris Corporation
Retirement Plan, as may otherwise be provided in the Plan. In
their discretion, the proxies are authorized to vote upon such
other business as may properly come before the meeting.
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Mark Here for
Address Change
or Comments
SEE REVERSE
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NOTE: Please sign exactly as name appears hereon. Joint owners should each sign. When signing
as attorney, executor, administrator, trustee or guardian, please give full title as such.
YOUR VOTE IS IMPORTANT. PLEASE VOTE BY INTERNET OR TELEPHONE, OR MARK, SIGN, DATE AND RETURN
YOUR PROXY/VOTING INSTRUCTION CARD. If you vote by Internet or telephone, please do NOT mail back your
proxy/voting instruction card.
INTERNET VOTING INSTRUCTIONS
http://www.proxyvoting.com/hrs
Your Internet voting instructions authorize the named proxies and/or provide the Plan Trustee with
instructions to vote your shares in the same manner as if you marked, signed, dated and returned
your proxy/voting instruction card. Have your proxy/voting instruction card in hand when you access
the website. You cannot vote over the Internet after 11:59 p.m. (Eastern Time) on October 21, 2010.
TELEPHONE VOTING INSTRUCTIONS
Call 1-866-540-5760 Toll Free on a Touch-Tone Telephone ANYTIME. There is no charge to you for this
call.
Your telephone voting instructions authorize the named proxies and/or provide the Plan Trustee with
instructions to vote your shares in the same manner as if you marked, signed, dated and returned
your proxy/voting instruction card. Have your proxy/voting instruction card in hand when you call.
You cannot vote by telephone after 11:59 p.m. (Eastern Time) on October 21, 2010.
Important notice regarding Internet availability of proxy materials for the Harris Corporation 2010
Annual Meeting of Shareholders: The Proxy Statement and the 2010 Annual Report to Shareholders are
available online at http://www.harris.com/proxy/2010.
Choose MLinkSM for fast, easy and secure 24/7 online access to your future proxy
materials, investment plan statements, tax documents and more. Simply log on to Investor
ServiceDirect® at www.bnymellon.com/shareowner/isd where step-by-step instructions will
prompt you through enrollment.
6 FOLD AND DETACH HERE 6
PROXY/VOTING INSTRUCTION CARD
HARRIS CORPORATION
ANNUAL MEETING OF SHAREHOLDERS OCTOBER 22, 2010
This proxy/voting instruction card is solicited on behalf of the Board of Directors of Harris
Corporation and the Harris Corporation Retirement Plan Trustee.
You are receiving this proxy/voting instruction card because you are a registered shareholder
and/or a participant in the Harris Corporation Retirement Plan. This proxy/voting instruction card
revokes all prior proxies/voting instructions given by you. If you are voting by mail with this
proxy/voting instruction card, please mark your choices and sign and date on the reverse side
exactly as your name or names appear there. If shares are held in the name of joint holders, each
should sign. If you are signing as attorney, executor, administrator, trustee or guardian, please
give your full title as such.
If the undersigned is a registered shareholder, the undersigned hereby appoints HOWARD L. LANCE,
GARY L. McARTHUR and SCOTT T. MIKUEN, and each of them, with power to act without the others and
with full power of substitution, as proxies and attorneys-in-fact, and hereby authorizes them to
represent and vote, as instructed on the reverse side of this proxy/voting instruction card, all
the shares of Harris Corporation common stock which the undersigned is entitled to vote and, in
their discretion, to vote upon such other business as may properly come before the Annual Meeting
of Shareholders of Harris Corporation to be held on October 22, 2010 or at any adjournments or
postponements thereof, with all powers which the undersigned would possess if present at the Annual
Meeting. If this proxy/voting instruction card has been properly executed but the undersigned has
provided no voting instructions, then the undersigneds shares will be voted FOR the election of
the Board of Directors nominees; FOR Proposal 2; FOR Proposal 3; FOR Proposal 4; and
AGAINST Proposal 5.
If the undersigned is a participant in the Harris Corporation Retirement Plan, the undersigned
hereby instructs the Plan Trustee to vote, as instructed on the reverse side of this proxy/voting
instruction card, the shares allocable to the undersigneds Harris Corporation Stock Fund Account
at the Annual Meeting of Shareholders of Harris Corporation to be held on October 22, 2010 or any
adjournments or postponements thereof. If the undersigned does not provide voting instructions, the
Plan Trustee will vote such shares in the same proportion as the shares for which other
participants have timely provided voting instructions.
Address Change/Comments
(Mark the corresponding box on the reverse side)
BNY MELLON SHAREOWNER SERVICES
P.O. BOX 3550
SOUTH HACKENSACK, NJ 07606-9250
(Continued and to be marked, dated and signed, on the reverse side)
WO#
79516
Harris Corporation
STANDARD SCRIPT FOR REGISTERED SHAREHOLDER TELEPHONE VOTING for BNY MELLON
(Single # w/ company identifier embedded in control #)
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Shareholder Hears This Script |
Speech 1
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Welcome to the Telephone voting site. Enter your 11 digit control number located in the
shaded box on the proxy ballot. |
Speech 2
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To vote as the Harris Corporation Board recommends on all proposals, Press 1 now.
To vote on each proposal separately, Press 0 now. |
Speech 2A
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If the voter chooses the 1st option of Speech 2, the following will be heard.
You have voted as the Board recommended. If this is correct, Press 1. If incorrect, Press 0. |
Speech 2B
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If the voter chooses the 2nd option of Speech 2, Speech 3 will follow. |
Speech 3
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Proposal 1.01
To vote FOR, Press 1; AGAINST, Press 9; ABSTAIN, Press 0. |
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Proposal 1.02
To vote FOR, Press 1; AGAINST, Press 9; ABSTAIN, Press 0. |
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Proposal 1.03
To vote FOR, Press 1; AGAINST, Press 9; ABSTAIN, Press 0. |
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Proposal 1.04
To vote FOR, Press 1; AGAINST, Press 9; ABSTAIN, Press 0. |
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Proposal 1.05
To vote FOR, Press 1; AGAINST, Press 9; ABSTAIN, Press 0. |
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Proposal 1.06
To vote FOR, Press 1; AGAINST, Press 9; ABSTAIN, Press 0. |
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Proposal 1.07
To vote FOR, Press 1; AGAINST, Press 9; ABSTAIN, Press 0. |
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Proposal 2
To vote FOR, Press 1; AGAINST, Press 9; ABSTAIN, Press 0. |
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Proposal 3
To vote FOR, Press 1; AGAINST, Press 9; ABSTAIN, Press 0. |
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Proposal 4
To vote FOR, Press 1; AGAINST, Press 9; ABSTAIN, Press 0. |
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Proposal 5
To vote FOR, Press 1; AGAINST, Press 9; ABSTAIN, Press 0. |
Speech 4
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Your votes have been cast as follows:
Proposal 1.01- For, Against, Abstain (as applicable)
Repeat for All remaining proposals
If this is correct, Press 1; if incorrect, Press 0. |
Closing A
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If the voter chooses correct Closing A will follow:
If you would like to learn more about accessing your account information on line,
Press 1, otherwise Press 0.
If the voter chooses 1, then informational message on MLINKsm will follow.
Thank you for voting. |
Closing B
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If the voter chooses incorrect - Closing B will follow:
Your votes have been canceled. If you would like to re-vote your proxy or if you would like
to vote another proxy, Press 1 now, or Press 0 to end this call. |
Closing C
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Im sorry youre having difficulty. Please try again or mark, sign and date the proxy card
and return it in the envelope provided. |
Vote Another Card
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If you have received more than one proxy card, you must vote each card separately. If you
would like to vote another proxy, Press 1 now; to end this call, Press 0 now. |