What is the main purpose of Deere & Company's new Change in Control Severance Program?

The main purpose is to align the interests of key executives with those of shareholders during potential change-in-control events. It incentivizes executives to objectively evaluate such transactions, even if they might personally face termination, by providing severance benefits only when both a change in control and a qualifying termination occur.

What does 'double trigger' mean in the context of this severance program?

A 'double trigger' means that severance benefits are only payable if two conditions are met: first, a 'change in control' event occurs (e.g., acquisition of a significant stake, merger, asset sale), and second, the executive experiences a 'qualifying termination' within a specified period following that change in control. A qualifying termination can be the company firing the executive without cause or the executive resigning for 'good reason'.

How does the new program differ from the previous change-in-control agreements?

The new program introduces several changes: it eliminates additional service credit for supplemental retirement, calculates severance based on the executive's target bonus for the year of termination instead of the higher of target or prior three years' average, removes a 'golden parachute' tax gross-up, and importantly, requires executives to sign a restrictive covenant and a general release of the company as a condition for receiving benefits. The latter was not a feature of the prior agreements.

Who is eligible for this severance program, and are there different benefit levels?

The program covers named executive officers (Tier 1) and certain other executives (Tier 2). There are different benefit levels based on the tier. Tier 1 executives receive a severance payout based on 3 times their base salary plus target bonus, and 3 years of welfare benefit continuation. Tier 2 executives receive 1.5 times their base salary plus target bonus, and 18 months of welfare benefit continuation.

DE 8-K: Leadership Changes

Summary

Deere & Company (DE) filed an 8-K on September 1, 2009, reporting the adoption of a new Change in Control Severance Program (the "Program") by its Compensation Committee, effective August 26, 2009. This Program replaces existing change-in-control agreements for named executive officers and other key executives. The primary purpose of the Program is to align executive interests with shareholder interests during potential change-in-control events by providing severance benefits only under a "double trigger" scenario, requiring both a change in control and a qualifying termination of employment. The company emphasizes that the new Program aims to retain key talent, ensure focus during uncertain times, and protect company value through restrictive covenants and a general release requirement.

Key Highlights

1Deere & Company adopted a new Change in Control Severance Program, replacing existing individual agreements for key executives.
2The Program operates on a "double trigger" basis, requiring both a change in control event and a subsequent qualifying termination of employment for severance benefits to be paid.
3Severance calculations include a multiple of base salary plus target bonus, pro-rata bonus, continuation of welfare benefits, and employer contributions to defined contribution plans.
4Tier 1 executives (named executive officers) receive more generous severance multiples (3x salary/bonus) and benefit continuation (3 years) compared to Tier 2 executives (1.5x salary/bonus, 18 months).
5Key changes from prior agreements include the elimination of additional service credit for supplemental retirement, calculation of severance based on target bonus (not average), removal of 'golden parachute' tax gross-ups, and a new requirement for executives to sign a restrictive covenant and release agreement.
6The definition of 'change in control' remains consistent with prior agreements, including acquisition of 30% voting stock, board majority replacement without director approval, certain mergers, or liquidation/asset sales.

DEERE & CO 8-K Report, Executive Changes (Sep 1, 2009)

Summary

Key Highlights

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