10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
	SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 2, 2006
OR
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
	SECURITIES EXCHANGE ACT OF 1934

For the transition period from                       to

Commission file number:  001-13279

INTERMEC, INC.

(Exact name of registrant as specified in its charter)

Delaware	95-4647021
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)
6001 36th Avenue West, Everett, Wa	98203-1264
(Address of principal executive offices)	(Zip Code)

(425) 265-2400

(Registrant’s telephone number, including area code)

[None]

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes x    No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large accelerated filer x Accelerated filer  o Non-accelerated filer  o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o       No x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class	Outstanding at July 28, 2006
Common Stock, $0.01 par value per share	63,801,477 shares

INTERMEC, INC.
INDEX
REPORT ON FORM 10-Q
FOR THE QUARTER ENDED JULY 2, 2006

			Page Number
PART I. FINANCIAL INFORMATION			2
	ITEM 1.	Financial Statements	2
		Consolidated Statements of Operations (unaudited) Three and Six Month Periods Ended July 2, 2006, and July 3, 2005	2
		Consolidated Balance Sheets (unaudited) July 2, 2006, and December 31, 2005	3
		Consolidated Statements of Cash Flows (unaudited) For the Six Months Ended July 2, 2006, and July 3, 2005	4
		Notes to Consolidated Financial Statements (unaudited)	5
	ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16
	ITEM 3.	Quantitative and Qualitative Disclosures about Market Risk	21
	ITEM 4.	Controls and Procedures	22
PART II. OTHER INFORMATION			23
	ITEM 1.	Legal Proceedings	23
	ITEM 1A.	Risk Factors	24
	ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	24
	ITEM 4.	Submission of Matters to a Vote of Security Holders	25
	ITEM 6.	Exhibits	25
Signature			26

PART I.  FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

INTERMEC, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(amounts in thousands, except per share amounts)
(unaudited)

	Three Months Ended						Six Months Ended
	July 2,			July 3,			July 2,			July 3,
	2006			2005			2006			2005
Revenues:
Product	$	192,440		$	181,007		$	358,790		$	342,950
Service	38,997			36,452			76,478			71,004
Intellectual property settlement	—			—			23,000			—
Total Revenues	231,437			217,459			458,268			413,954
Costs and expenses:
Cost of product revenues	116,401			101,954			217,015			194,701
Cost of service revenues	21,413			21,084			44,274			41,970
Cost of intellectual property settlement	—			—			6,462			—
Selling, general and administrative	78,496			75,777			156,289			148,548
Restructuring Charge	1,135			—			2,242			—
Total costs and expenses	217,445			198,815			426,282			385,219
Operating profit from continuing operations	13,992			18,644			31,986			28,735
Gain on sale of investments	2,305			—			2,305			—
Interest income (expense), net	1,766			(1,120		)	2,910			(3,246		)
Earnings from continuing operations before income taxes	18,063			17,524			37,201			25,489
Provision for income taxes	6,767			5,669			10,835			8,222
Earnings before discontinued operations	11,296			11,855			26,366			17,267
Earnings (loss) from discontinued operations, net of tax	(940		)	213			(2,019		)	(1,719		)
Net earnings	$	10,356		$	12,068		$	24,347		$	15,548
Basic earnings (loss) per share
Continuing operations	$	0.18		$	0.19		$	0.42		$	0.28
Discontinued operations	$	(0.02	)	0.01			$	(0.03	)	(0.03		)
Net earnings per share	$	0.16		$	0.20		$	0.39		$	0.25
Diluted earnings (loss) per share
Continuing operations	$	0.18		$	0.19		$	0.41		$	0.28
Discontinued operations	$	(0.02	)	0.00			$	(0.03	)	(0.03		)
Net earnings per share	$	0.16		$	0.19		$	0.38		$	0.25
Shares used in computing basic earnings (loss) per share	63,252			61,361			63,138			61,228
Shares used in computing diluted earnings (loss) per share	64,529			62,768			64,565			62,792

See accompanying notes to consolidated financial statements.

2

INTERMEC, INC.
CONSOLIDATED BALANCE SHEETS
(amounts in thousands)
(unaudited)

	July 2,			December 31,
	2006			2005
ASSETS
Current assets:
Cash and cash equivalents	$	303,683		$	256,782
Short-term investments	19,130			—
Accounts receivable, net of allowance for doubtful accounts and sales returns of $8,943 and $8,157	162,379			180,985
Inventories	104,628			82,088
Net current deferred tax assets	51,554			100,656
Assets held for sale	8,239			8,517
Other current assets	18,275			29,468
Total Current Assets	667,888			658,496
Property, plant and equipment, net of accumulated depreciation of $105,146 and $99,032	38,778			30,820
Intangibles, net	6,794			6,871
Net deferred tax assets	182,046			137,578
Other assets	63,424			68,955
Total assets	$	958,930		$	902,720
LIABILITIES AND SHAREHOLDERS’ INVESTMENT
Current Liabilities:
Accounts payable and accrued expenses	$	155,399		$	148,731
Payroll and related expenses	30,639			31,011
Deferred revenue	44,861			38,369
Total current liabilities	230,899			218,111
Long-term deferred revenue	19,479			20,095
Long-term debt	100,000			100,000
Other long-term liabilities	89,754			88,711
Shareholders’ investment:
Common stock	632			627
Additional paid-in capital	750,362			736,224
Accumulated deficit	(220,557		)	(244,903		)
Accumulated other comprehensive loss	(11,639		)	(16,145		)
Total shareholders’ investment	518,798			475,803
Total liabilities and shareholders’ investment	$	958,930		$	902,720

See accompanying notes to consolidated financial statements.

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INTERMEC, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(amounts in thousands)
(unaudited)

	Six Months Ended
	July 2,			July 3,
	2006			2005
Cash and cash equivalents at beginning of period	$	256,782		$	217,899
Cash flows from operating activities of continuing operations:
Net earnings from continuing operations	24,347			17,267
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization	5,186			4,992
Change in prepaid pension costs, net	3,392			5,767
Deferred taxes	10,097			9,537
Stock-based compensation and other	5,125			587
Excess tax benefits from stock-based payment arrangements	(3,076		)	—
Changes in operating assets and liabilities:
Accounts receivable	18,616			5,137
Inventories	(22,540		)	(22,929		)
Other current assets	3,524			(1,168		)
Accounts payable and accrued expenses	9,770			3,951
Payroll and related expenses	94			(4,495		)
Other long-term liabilities	2,294			6,355
Other operating activities	5,557			(2,819		)
Net cash provided by operating activities of continuing operations	62,386			22,182
Cash flows from investing activities of continuing operations:
Capital expenditures	(12,304		)	(5,510		)
Purchases of investments	(19,695		)	6,051
Decrease in restricted cash	—			50,000
Proceeds from sales of investments	565			—
Other investing activities	5			190
Net cash (used in) provided by investing activities of continuing operations	(31,429		)	50,731
Cash flows from financing activities of continuing operations:
Repayment of long-term obligations	—			(100,000		)
Excess tax benefits from stock-based payment arrangements	3,076			—
Stock options exercised	4,340			7,644
Other financing activities	1,616			1,258
Net cash provided by (used in) financing activities of continuing operations	9,032			(91,098		)
Net cash provided by (used in) continuing operations	39,989			(18,185		)
Net cash used in operating activities of discontinued operations	—			(27,350		)
Net cash provided by investing activities of discontinued operations	6,912			405
Resulting increase (decrease) in cash and cash equivalents	46,901			(45,130		)
Cash and cash equivalents at end of period	$	303,683		$	172,769

See accompanying notes to consolidated financial statements.

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INTERMEC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

1.Description of the Business

Effective January 1, 2006, we changed our name from UNOVA, Inc. to Intermec, Inc. (“Intermec”). We design, develop, manufacture, integrate, sell, resell and service wired and wireless automated identification and data collection (“AIDC”) products and systems, mobile computing products and systems, wired and wireless bar code printers, label media and radio frequency identification (“RFID”) products and systems. Our products and services are used by customers within and outside of the United States to improve the productivity, quality and responsiveness of their business operations including supply chain management, enterprise resource planning and field sales and service. We grant licenses to use portions of our intellectual property portfolio, including certain patent rights essential to and/or useful in RFID and AIDC products, and receive license fees as well as ongoing royalties based on sales by licensees. Customers for our products and services operate in market segments that include manufacturing, warehousing, direct store delivery, retail, consumer packaged goods, field service, government, and transportation and logistics.

In 2005, we divested our Industrial Automation Systems (“IAS”) businesses, which comprised the Cincinnati Lamb and Landis Grinding Systems divisions. The IAS businesses are classified as discontinued operations for accounting purposes in Intermec’s consolidated financial statements and related notes.

2.Basis of Presentation

Our interim financial periods are based on a thirteen-week internal accounting calendar. In the opinion of management, the accompanying balance sheets and interim statements of operations, and statements of cash flows include all adjustments, consisting only of normal recurring items, necessary for their fair presentation in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The financial statements include the accounts of Intermec and its subsidiaries. Intercompany transactions and balances have been eliminated. Equity investments in which we exercise significant influence but do not exercise control and are not the primary beneficiary are accounted for using the equity method. Investments in which we are not able to exercise significant influence over the investee are accounted for under the cost method. Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses, and financial data included in the accompanying notes to the financial statements. Actual results and outcomes may differ from management’s estimates and assumptions.

Interim results are not necessarily indicative of results for a full year. The information included in this Form 10-Q should be read in conjunction with Management’s Discussion and Analysis and the financial statements and notes thereto included in our December 31, 2005 Form 10-K.

Certain amounts in our prior-period consolidated financial statements and notes have been reclassified to conform to the current-period presentation. The consolidated statement of cash flows for the six months ended July  3, 2005, reflects the reclassification of $50 million in restricted cash from financing activities to investing activities and $3.9 million of cash used in operating activities of discontinued operations was reclassified from operating activities of continuing operations.

3.Stock-Based Compensation

We adopted Statement of Financial Accounting Standards (SFAS) 123 (revised 2004), “Share-Based Payment” (SFAS 123(R)), using the modified prospective transition method beginning January 1, 2006. SFAS 123(R) eliminates the ability to account for share-based compensation transactions, as we formerly did, using the intrinsic value method as prescribed by Accounting Principles Board, or APB, Opinion No. 25, “Accounting for Stock Issued to Employees,” and generally requires that such transactions be accounted for using a fair-value-based method and recognized as expenses in our consolidated statements of operations.

Our consolidated financial statements for the three and six months ended July 2, 2006, reflect the impact of adopting SFAS 123(R). In accordance with the modified prospective method, the consolidated financial statements for prior periods have not been restated to reflect, and do not include, the impact of SFAS 123(R).

Stock-based compensation expense recognized in the consolidated statement of operations during the second quarter of 2006 included compensation expense for stock-based payment awards granted prior to, but not yet vested, as of December 31, 2005, based on the grant date fair value estimated in accordance with the pro forma provisions of SFAS 148 “Accounting for Stock-Based Compensation—Transition and Disclosure” (SFAS 148) and compensation expense for the stock-based payment awards granted subsequent to December 31, 2005, based on the grant date fair value estimated in accordance with SFAS 123(R). Stock-based compensation

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expense recognized in the statement of operations for the three and six months ended July 2, 2006, is based on options ultimately expected to vest, the expense has been reduced for estimated forfeitures. SFAS 123(R) requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. In the pro forma information required under SFAS 148 for the periods prior to January 1, 2006, we accounted for forfeitures as they occurred.

Accordingly, during the three and six month periods ended July 2, 2006, we recorded stock-based compensation expense for awards granted prior to, but not yet vested, as of January 1, 2006, as if the fair value method required for pro forma disclosure under SFAS 123 were in effect for expense recognition purposes, adjusted for estimated forfeitures.  For stock-based awards granted after January 1, 2006, we have recognized compensation expense based on the estimated grant date fair value method using the Black-Scholes valuation model. For these awards, we have recognized compensation expense using a straight-line amortization method. Because SFAS 123(R) requires that stock-based compensation expense be based on awards that are ultimately expected to vest, stock-based compensation for the three and six month periods ended July 2, 2006, has been reduced for estimated forfeitures. When estimating forfeitures, we consider voluntary termination behaviors as well as trends of actual option forfeitures. The impact on our results of operations of recording stock-based compensation for the three and six month periods ended July 2, 2006 was as follows (in thousands):

	Three Months		Six Months
	Ended		Ended
	July 2, 2006		July 2, 2006
Cost of revenues	$	72	$	110
Selling, general and administrative	925		2,811
	$	997	$	2,921

Prior to adopting SFAS 123(R), we presented all tax benefits resulting from the exercise of stock options as operating cash flows in the Statement of Cash Flows. SFAS 123(R) requires cash flows resulting from excess tax benefits to be classified as a part of cash flows from financing activities. Excess tax benefits are realized tax benefits from tax deductions for exercised options in excess of the deferred tax asset attributable to stock compensation costs for such options. As a result of adopting SFAS 123(R), $3.1 million of excess tax benefits for the six months ended July 2, 2006, has been classified as a source of cash from financing activities. Cash received from option exercises under all share-based payment arrangements for the six month periods ended July 2, 2006 and July 3, 2005, was $4.3 million and $7.7 million, respectively. The total income tax benefit recognized in the statement of operations for stock-based compensation costs was $0.4 million, and $1.1 million for the three and six month periods ended July 2, 2006, and $0.3 and $0.6 for the three and six month periods ended July 3, 2005.

We calculated the fair value of each option award on the date of grant using the Black-Scholes option pricing model. The following assumptions were used for each respective period:

	July 2, 2006		July 3, 2005
Risk-free interest rates	4.88	%	3.72	%
Expected lives (in years)	4.8		5.0
Expected dividend yield	0.0	%	0.0	%
Expected volatility	44.9	%	56.0	%

Our computation of expected volatility for the second quarter of 2006 is based on a combination of historical and market-based implied volatility from traded options on a group of peer stocks. Prior to 2006, our computation of expected volatility was based on historical volatility. Our computation of expected life in 2006, was determined based on historical experience of similar awards, giving consideration to the contractual terms of the stock-based awards, vesting schedules and expectations of future employee behavior. The interest rate for periods within the contractual life of the award is based on the U.S. Treasury yield curve in effect at the time of grant.

The fair value of the options granted based on the above assumptions are $12.16 and $12.89 for the three and six month periods ended July 2, 2006 and $10.26 and $10.66 for the three and six month periods ended July 3, 2005, respectively.  All grants of our options under all plans must be approved or authorized by the Compensation Committee of the Board of Directors, which consists entirely of outside directors.

The following table summarizes the pro forma effect of stock-based compensation as if the fair value method of accounting for stock compensation had been applied in periods prior to January 1, 2005.

6

	Three Months			Six Months
	Ended			Ended
	July 3, 2005			July 3, 2005
Net earnings as reported	$	12,068		$	15,548
Add: stock compensation expense recorded under the intrinsic value method, net of tax effect	584			1,068
Less: pro forma stock compensation expense computed under the fair value method, net of tax effect	(1,308		)	(2,592		)
Pro forma net earnings	$	11,344		$	14,024
Net earnings per share as reported:
Basic	$	0.20		$	0.25
Diluted	$	0.19		$	0.25
Pro forma net earnings per share:
Basic	$	0.18		$	0.23
Diluted	$	0.18		$	0.22

Our 2001, 1999 and 1997 Stock Incentive Plans and the our 2004 Omnibus Incentive Compensation Plan (the “Stock Incentive Plans,” collectively) provide for the grant of incentive awards to officers and other key employees. The numbers of shares authorized for grant under the 2004, 2001 and 1999 plans are 3,000,000, 1,000,000, and 4,500,000, respectively. No additional shares are authorized for grant under the 1997 plan, which was frozen subsequent to the approval of the 1999 Stock Incentive Plan. As of July 2, 2006, there were 536,294 options outstanding that were granted under the 1997 Plan before it was frozen.

Incentive awards may be granted in the form of stock options with or without related stock appreciation rights, restricted stock, restricted stock units and performance units. Under the Stock Incentive Plans, stock options may not be granted at an exercise price less than the market value of Intermec’s common stock on the date of grant. The Stock Incentive Plans options generally vest in equal increments over five years and expire in ten years.

The 2002 Director Stock Option and Fee Plan (“2002 DSOP”) and the 1997 Director Stock Option Plan (“1997 DSOP”, collectively “DSOPs”) provide for the grant of stock options to Intermec’s non-employee directors. The numbers of shares authorized for grant under the 2002 DSOP is 745,000. No additional shares are authorized under the 1997 DSOP. Subsequent to the grant of 255,000 options under the 1997 DSOP, it was frozen upon the approval of the 2002 DSOP. Under the 2002 DSOP, stock options are granted annually at an exercise price equal to the fair market value of Intermec’s common stock on the date of grant. The number of options granted annually to each director is fixed by the Director Plan. Such options become fully exercisable on the first anniversary of their date of grant. Additionally, there was a grant in January, 2006 to the Director’s that vested immediately. Therefore, the corresponding expense was recorded in the quarter ended April 2, 2006.

As of July 2, 2006 there were 2,470,355 shares available for grant under our Stock Incentive Plans and DSOPs. The following table summarizes changes in options outstanding and exercisable under our stock award plans:

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			Average
	Number		Exercise Price		Remaining	Intrinsic
	of Shares		Per Share		Term	Value
					(in years)	(in millions)
Stock Options
Nonvested balance at December 31, 2005	3,218,926		$	13.35
Granted	568,250		28.31
Exercised	(404,125	)	10.74
Forfeited	(26,966	)	18.97
Canceled	(5,800	)	15.19
Outstanding balance at July 2, 2006	3,350,285		16.14		6.46	$	79.1
Exercisable at July 2, 2006	2,023,157		13.54		4.98	46.9

As of July 2, 2006, there was $8.8 million of total unrecognized compensation cost related to non-vested options. That cost is expected to be recognized over a weighted average period of 3 years and 0 months.

			Weighted-
			Average
	Number		Grant Date
	of Shares		Fair Value
Restricted stock awards:
Nonvested balance at December 31, 2005	86,070		11.52
Granted	89,088		27.25
Vested	(66,802	)	9.14
Forfeited	(3,387	)	19.39
Nonvested balance at July 2, 2006	104,969		26.13

The fair value of each restricted stock award (RSA) is the market price of our stock on the date of grant. The total intrinsic value of RSA’s vested during the three and six months ended July 2, 2006, and July 3, 2005, was $1.2 and $ 1.8 million, and $ 1.2 and $ 2.6 million, respectively. As of July 2, 2006, there was $ 2.7 million of total unrecognized compensation cost related to non-vested RSA’s. That cost is expected to be recognized over a weighted average period of 1 year and 1 month.

Shared Performance Stock Awards are a form of stock award in which the number of shares ultimately received depends on our performance against specified performance targets. The performance period is January 1 through December 31 and covers a period of 3 fiscal years. At the end of the performance period, the number of shares of stock and stock awards issued will be determined by adjusting upward or downward from the target in a range between 0% and 200%. The final performance percentage on which the payout will be based, considering performance metrics established for the performance period, will be determined by the Board of Directors or a committee of the board in its sole discretion. Shares of stock will be issued following the end of the performance period. Shared Performance Stock Awards are amortized over the vesting period (generally 32 months) using the straight line method.  Total compensation expense related to performance stock awards was $ 0.8 and $ 1.5, for the three and six month periods ended July 2, 2006 and $0.3 and $0.6 for the three and six month periods ended July 3, 2005, respectively.

We administer the Employee Stock Purchase Plan under which 5.0 million shares are reserved for issuance. Employees with three months of continuous service prior to an offering period are eligible to participate in the plan. Eligible employees may elect to become participants in the plan and may contribute up to $21,250 per year through payroll deductions to purchase stock purchase rights. Participants may, at any time and for any reason, cancel their payroll deduction authorizations and have the balance in their stock purchase right account applied to the purchase of shares or have the amount refunded. The offering period begins on the first day of the quarter and ends on the last day of the quarter. The stock purchase rights are used to purchase the common stock of Intermec at 85 percent of the fair market value of a share as of the grant date applicable to the participant. We treat this expense as compensation.

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4.Inventories

Inventories comprise the following (thousands of dollars):

	July 2,		December 31,
	2006		2005
Raw materials	$	55,394	$	50,505
Work in process	739		705
Finished goods	48,495		30,878
Inventories	$	104,628	$	82,088

5.Notes Receivable

In connection with the sale of Cincinnati Lamb, we received a $12.5 million long-term note receivable secured by the assets sold, bearing interest at an annual rate of LIBOR plus three percent (8.33% as of July 2, 2006) with interest payable quarterly. Principal payments on the note are due beginning April 2007, in six semiannual installments of $1.5 million, $2.0 million, $2.0 million, $2.5 million, $2.0 million and $2.5 million. As of July 2, 2006, the estimated fair value of the note is $10.9 million, based on the estimated cash flows from the note and a risk-adjusted discount rate equal to LIBOR plus eight percent. Our consolidated balance sheet as of July 2, 2006, classifies the $10.9 million note receivable as other current assets and other assets.

As part of the sale of Landis Grinding Systems we received a $10 million two-year note at an interest rate of five percent per annum guaranteed by the buyer’s parent company. As of July 2, 2006, the estimated fair value of the note is $9.6 million, based on the estimated cash flows from the note and a risk-adjusted discount rate equal to LIBOR plus 2.25% (7.94% as of July 2, 2006). This long-term note receivable is included in other assets on our balance sheet.

6.Long-term Debt and Interest, net

Intermec has a secured long-term revolving credit facility (the “Revolving Facility”) with a maximum amount available under the Revolving Facility of $50.0 million. Net of outstanding letters of credit and limitations on availability, Intermec had borrowing capacity at July 2, 2006, of $18.1 million under the Revolving Facility. We made no borrowings under the Revolving Facility during 2006, and as of July 2, 2006, no borrowings were outstanding under this facility. As of July 2, 2006, we were in compliance with all financial covenants of this agreement.

We have $100.0 million of ten-year senior unsecured debt outstanding as of July 2, 2006. Interest payments at 7.0% are due semi-annually in March and September. Including underwriting fees, discounts and other issuance costs, the effective interest rate is 7.175%. In March 2005, we retired the $100.0 million of seven-year notes, which were entered into in March, 1998.

Interest income (expense) comprises the following (thousands of dollars):

	Three Months Ended					Six Months Ended
	July 2,		July 3,			July 2,		July 3,
	2006		2005			2006		2005
Interest income	$	3,979	$	1,351		$	7,339	$	3,153
Interest expense	2,213		2,471			4,429		6,399
Net interest income (expense)	$	1,766	$	(1,120	)	$	2,910	$	(3,246	)

We also have letter-of-credit reimbursement agreements totaling $13.2 million at July 2, 2006, compared to $25.8 million at December 31, 2005. As of July 2, 2006, $7.9 million of the agreements related to performance on contracts with current customers and vendors, and $4.1 million of the agreements related to customer contracts assumed by the purchaser of the Cincinnati Lamb operations that were sold and $1.4 million of the agreements related to customer contracts assumed by the purchaser of the Landis operations that were sold. We are indemnified by the purchaser of the Cincinnati Lamb operations on the $4.1 million of letter-of-credit agreements related to Cincinnati Lamb and the beneficiary of a backup letter-of-credit in the aggregate amount of $0.6 million issued pursuant to the terms of the sale.

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We believe it is not practicable to estimate fair values of these instruments and consider the risk of non-performance on the contracts to be remote. We are indemnified by the purchaser of the Landis operations on the $1.3 million letter-of-credit agreement to Landis.

7.Discontinued Operations

During 2005, we completed our divestiture of the IAS businesses with the sale of the Cincinnati Lamb business in the first quarter of 2005 and the sale of the Landis Grinding Systems business in the fourth quarter of 2005. The loss from discontinued operations for the three and six month periods ended July 2, 2006, include period expenses related to finalizing the sale of the Landis Grinding Systems and changes to the estimated purchase price adjustment, net of tax benefits.

The loss from discontinued operations for the three and six month periods ended July 3, 2005, includes the operating results of the Cincinnati Lamb and Landis Grinding Systems businesses as well as the loss on the sale of Cincinnati Lamb, net of related tax benefits.

8.Restructuring Costs

In March 2006, we announced our plan to close our design centers in Goteborg and Lund, Sweden. The activities currently assigned to the design centers in Sweden will be reassigned to other parts of Intermec or moved to third-party vendors to improve efficiencies and benefit from reduced cost. In addition to the anticipated cost savings, this realignment of resources is expected to increase new product development capacity. The total cost of closing the design centers in Sweden and the elimination of 65 positions in Sweden is estimated to be $4.5 million. The estimated restructuring costs include $2.8 million of employee termination expense, facility closure costs of $1.4 million non-cash, asset impairment expense of $0.1 million and other related costs of $0.2 million. During the six months ended July 2, 2006, we have already recorded restructuring charges of $2.3 million, mostly employee termination costs, in accordance with SFAS 146, “Accounting for Costs Associated with Exit or Disposal Activities” (SFAS 146), and anticipate that the majority of  the remaining unrecognized restructuring costs will be recognized over the last 2 quarters of 2006.

9.Intellectual Property Settlement

During the first quarter of 2006, we received compensation in relation to a settlement of a patent dispute regarding certain of Intermec’s intellectual property (“IP”). Intermec’s patents involved its smart battery management technology in which a portable computer incorporates a rechargeable battery that uses a processor chip to communicate data to the portable computer so that the computer can monitor and regulate battery use. The effective date of this settlement was February 27, 2006, and the terms are confidential. The operating profit from this settlement, net of attorneys fees and costs, is $16.5 million for the first quarter of 2006. IP settlement compensation of  $23.0 million is classified as revenue and $6.5 million of  related legal costs are classified as cost of intellectual property settlement in our consolidated statements of operations.

10.Provision for Income Taxes

The tax provision for the three and six month periods ended July 2, 2006, reflects an effective tax rate for continuing operations of 37.4% and 29.1% respectively, compared to a U.S. statutory rate of 35%. The tax provision was reduced by $2.2 million primarily due to the favorable conclusion of a Canadian tax audit during the first quarter of 2006.

The tax provision for the three and six month periods ended July 3, 2005 reflects an effective tax rate for continuing operations of 32.4% and 32.3% compared to a U.S. statutory rate of 35%. The reduction in the effective tax rate is primarily due to favorable foreign currency exchange variance associated with foreign tax contingency accruals.

11.Shares Used in Computing Earnings per Share

Basic earnings per share is calculated using the weighted average number of common shares outstanding and issuable for the applicable period. Diluted earnings per share is computed using basic weighted average shares plus the dilutive effect of unvested restricted stock, unvested performance stock awards and outstanding stock options using the “treasury stock” method.

	Three months Ended
	July 2,	July 3,
	2006	2005
Weighted average common shares — Basic	63,252,443	61,360,586
Dilutive effect of unvested restricted shares and stock options	1,276,159	1,407,696
Weighted average shares — Diluted	64,528,602	62,768,282

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	Six months Ended
	July 2,	July 3,
	2006	2005
Weighted average common shares — Basic	63,138,099	61,228,208
Dilutive effect of unvested restricted shares and stock options	1,427,263	1,563,680
Weighted average shares — Diluted	64,565,362	62,791,888

Our employees and directors held options to purchase 586,401 and 339,776 shares of our common stock for the three and six months ended July 2, 2006, and 136,920 and 121,710 for the three and six month periods ended July 3, 2005, respectively, that were not included in weighted average shares diluted because they were antidilutive to the diluted earnings per share computation. These options could become dilutive in future periods if the average market price of our common stock exceeds the exercise price of the outstanding options and we report net earnings.

12.Pension and Other Postretirement Benefit Plans

The information in this note represents the net periodic pension and post-retirement benefit costs and related components in accordance with SFAS 132(R). The components of net pension and postretirement periodic benefit cost (credit) for the three and six month periods ended July 2, 2006, and July 3, 2005, are as follows (thousands of dollars):

	U.S.						Non-U.S.						Other
	Defined						Defined						Postretirement
Three Months Ended July 2, 2006,	Benefit Plans						Benefit Plans						Benefit Plans
and July 3, 2005:	2006			2005			2006			2005			2006		2005
Service Cost	$	1,741		$	2,406		$	273		$	850		$	4	$	33
Interest Cost	2,988			2,520			552			1,157			66		166
Expected return on plan assets	(2,508		)	(2,506		)	(756		)	(1,034		)	—		—
Amortization and deferrals:
Transition asset	—			—			(39		)	(85		)	—		—
Actuarial loss	1,241			850			112			246			28		16
Prior service cost (benefit)	177			179			—			—			—		—
Curtailment loss (gain)	—			—			—			—			—		—
Settlement gain	—			—			—			—			—		—
Special termination benefits	675			—			—			—			—		—
Net pension and postretirement periodic benefit cost	$	4,314		$	3,449		$	142		$	1,134		$	98	$	215

							Non-U.S.						Other
	U.S. Defined						Defined						Postretirement
Six Months Ended July 2, 2006,	Benefit Plans						Benefit Plans						Benefit Plans
and July 3, 2005:	2006			2005			2006			2005			2006		2005
Service Cost	$	3,482		$	4,810		$	536		$	2,119		$	8	$	67
Interest Cost	5,976			5,040			1,083			3,705			132		1,229
Expected return on plan assets	(5,016		)	(5,012		)	(1,483		)	(3,680		)	—		—
Amortization and deferrals:
Transition asset	—			—			(77		)	(172		)	—		—
Actuarial loss	2,480			1,700			220			761			55		340
Prior service cost (benefit)	354			358			—			—			—		(598		)
Curtailment loss (gain)	—			57			—			(5,396		)	—		(12,274		)
Settlement gain	—			—			—			(332		)	—		(21,090		)
Special termination benefits	1,350			264			—			—			—		—
Net pension and postretirement periodic benefit cost	$	8,626		$	7,217		$	279		$	(2,995	)	$	195	$	(32,326	)

Effective June 30, 2006, we amended our Financial Security and Savings Program, Pension Plan, Restoration Plan and Supplemental Executive Retirement Plan (collectively, the “U.S. Defined Benefit Plans”). The effect of these amendments was to “freeze” benefit accruals under the U.S. Defined Benefit Plans and to fully vest benefits under the U.S. Defined Benefit Plans, except for the Nonqualified SERP, as of June 30, 2006, for most participants. In accordance with SFAS No. 88, “Employers’ Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits” (“SFAS 88”), the effects of these amendments require a new measurement date. The impact of the related curtailments will be reflected in our third quarter, as a result of the three month lag period utilized by us for measuring pension obligations, and the change in our ongoing expense will be realized across the balance of our measurement year.

Our pre-tax loss on the sale of Cincinnati Lamb in the first six months of 2005 takes into consideration the curtailment and settlement gains totaling $39.1 million, comprising $33.4 million relating to the postretirement benefit plans, and

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$5.7 million relating to the Non-U.S. Defined Benefit Plans. These curtailment and settlement gains comprise the pension and post-retirement obligations assumed by the buyer. In addition, the pre-tax loss on the sale of Cincinnati Lamb includes a loss of $12.9 million representing the cumulative adjustment to recognize the minimum pension liability of our Non-U.S. defined benefit plans, which prior to the sale, had been deferred in the other comprehensive loss component of shareholders’ investment in our consolidated balance sheets.

During the six months ended July 2, 2006, we contributed approximately $3.2 million to our pension and other postretirement benefit plans, comprising $1.2 million in benefits paid pertaining to unfunded U.S. defined benefit plans, $1.1 million in matching contributions to our 401(k) plan, $0.8 million in contributions to our foreign pension plans, and $0.1 million in benefits paid pertaining to our other postretirement benefits plans. We expect to contribute an additional $2.6 million to these plans during the remainder of 2006, of which $ 0.9 million relates to benefit payments on our unfunded U.S. defined benefit plans, $0.6 million in matching contributions to our 401(k) plan, $0.6 million in contributions to our foreign pension plans and $0.5 million in benefit payments pertaining to our other postretirement benefit plans.

13.Comprehensive Earnings

Our comprehensive earnings comprise the following (thousands of dollars):

	Three Months Ended
	July 2,		July 3,
	2006		2005
Net earnings	$	10,356	$	12,068
Change in equity due to foreign currency translation adjustments	2,722		(8,156		)
Change in equity due to minimum pension liability adjustment	—		—
Unrealized gain on cash flow hedges	—		79
Comprehensive earnings	$	13,078	$	3,991

	Six Months Ended
	July 2,		July 3,
	2006		2005
Net earnings	$	24,347	$	15,548
Change in equity due to foreign currency translation adjustments	3,814		(22,376		)
Change in equity due to minimum pension liability adjustment			9,144
Unrealized gain on cash flow hedges	—		79
Comprehensive earnings	$	28,161	$	2,395

Foreign currency translation adjustments for the six months ended July 3, 2005, in the above table include a credit balance cumulative translation adjustment of $8.3 million which was reclassified from OCI to net earnings as a result of the Cincinnati Lamb sale.

14.Segment Reporting

During the first quarter of 2006, we integrated the corporate expense into our Products and Service segments. Intrasegment transactions have been eliminated and there are no material intersegment transactions. It is not practicable to segregate operating profit, capital expenditures, depreciation and amortization expense or total assets into our Product and Service segments,  therefore in aggregate this information is available in our consolidated financial statements. The following table sets forth our operations by reportable segments (thousands of dollars):

	Three Months Ended
	July 2,		July 3,
	2006		2005
Revenues
Product	$	192,440	$	181,007
Service	38,997		36,452
Total revenues	$	231,437	$	217,459
Gross profit
Product	$	76,039	$	79,053
Service	17,584		15,368
Total gross profit	$	93,623	$	94,421
Operating profit from continuing operations
Total operating profit from continuing operations	$	13,992	$	18,644

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	Six Months Ended
	July 2,		July 3,
	2006		2005
Revenues
Product	$	381,790	$	342,950
Service	76,478		71,004
Total revenues	$	458,268	$	413,954
Gross profit
Product	$	158,313	$	148,219
Service	32,204		29,034
Total gross profit	$	190,517	$	177,286
Operating profit from continuing operations
Total operating profit from continuing operations	$	31,986	$	28,735

15.Related Party Transactions

Unitrin, Inc. and its subsidiaries (“Unitrin”) is a significant shareholder of Intermec, owning approximately 20% of our outstanding shares. In January 2005, Unitrin’s Life and Health Insurance segment agreed to contract with our subsidiary to develop the software for the next generation of Life and Health Insurance’s handheld computers. In the three and six month periods ended July 2, 2006, and July 3, 2005, we did not recognize any revenues from this arrangement.

16.Commitments and Contingencies

Provisions for estimated expenses related to product warranties are made at the time products are sold. These estimates are established using historical information on the nature, frequency, and average cost of warranty claims. Management actively studies trends of warranty claims and takes action to improve product quality and minimize warranty claims. The following table indicates the change in our warranty accrual included in current liabilities (thousands of dollars):

Beginning balance January 1, 2006	$	5,514
Payments	(1,830		)
Increase in liability (new warranties issued)	2,149
Ending Balance July 2, 2006	$	5,833

We have entered into a variety of agreements with third parties that include indemnification clauses, both in the ordinary course of business and in connection with our divestitures of certain product lines. These clauses require us to compensate these third parties for certain liabilities and damages incurred by them.

FASB Interpretation No. 45, “Guarantors’ Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others” requires that Intermec estimate and record the fair value of guarantees as a liability. We do not believe we have any significant exposure related to such guarantees and therefore have not recorded a liability as of July 2, 2006, or December 31, 2005. We have not made any significant indemnification payments as a result of these clauses, nor do we believe the fair value of any of these guarantees has a material effect

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on our financial position or results of operations.

We currently, and from time to time, are subject to claims and lawsuits arising in the ordinary course of business. The ultimate resolution of currently pending proceedings is not expected to have a material adverse effect on our business, financial condition, results of operations or liquidity. Nevertheless, it is possible that cash flows or results of operations could be materially affected in any particular period by the unfavorable resolution of one or more of these contingencies or by the creation of significant legal or other expenses related to such matters.

On March 10, 2005, Symbol Technologies, Inc. (“Symbol”) terminated its original equipment manufacturing (“OEM”) agreement with us to supply laser scan engines and stopped shipping laser scan engines to us. On March 10, 2005, Symbol also filed a lawsuit against us in the United States District Court for the District of Delaware seeking a declaratory judgment that its termination of the OEM agreement is lawful (the “Contract Case”). We believe that the termination of the OEM agreement by Symbol has not had a material adverse effect on our operations.

In addition, on March 11, 2005, Symbol announced that it had filed a lawsuit against us on March 10, 2005, in the United States District Court for the District of Delaware for infringement of certain of Symbol’s wireless technology patents (the “Wireless Case”). On March 23, 2005, we filed an answer to Symbol’s complaint and filed counterclaims against Symbol for infringing our wireless access, terminal and software patents. We simultaneously filed our answer to Symbol’s declaratory judgment action in the Contract Case and filed counterclaims against Symbol for breach of the OEM agreement.

On July 28, 2005, Symbol announced that it had filed a lawsuit against us in the United States District Court for the Western District of Wisconsin for infringing Symbol’s barcode decoding patents (the “Decoding Case”). On July 14, 2005, in response to a motion we filed, the Decoding Case was transferred to the United States District Court for the District of Delaware. That case was consolidated for purposes of discovery with the Wireless Case. We denied liability in the Decoding Case, and pursuant to the standstill agreement discussed below, we retained the right to file counterclaims against Symbol in the Decoding Case.

On June 30, 2005, we filed a complaint with the U.S. International Trade Commission (the “ITC”) alleging that Symbol was illegally importing products that infringe our patents that cover pocket-sized handheld computing devices, modular handheld computing devices and recharging and data exchanging cradles (the “ITC Case”). On July 29, 2005, the ITC voted to investigate our allegations against Symbol. Pursuant to the standstill agreement, discussed below, we asked the ITC to dismiss and close the investigation. On September 26, 2005, in response to our request, the Administrative Law Judge terminated the investigation. On October 12, 2005, the ITC entered a Notice Not to Review the Order terminating the investigation.

On September 1, 2005, the parties agreed that they would try to resolve their patent disputes through negotiation. To facilitate that effort, the parties entered into a standstill agreement pursuant to which they sought the court’s permission to postpone litigation activity in the cases pending in the U.S. District Court for the District of Delaware (the Contract, Wireless and Decoding Cases)  sought the ITC’s permission to dismiss the ITC action and agreed to postpone filing any new patent infringement law suits against each other.   The ITC agreed to dismiss the ITC case and the United States District Court for the District of Delaware granted the scheduling changes required to effectuate the standstill agreement of the parties.

On July 18, 2006, we issued a joint press release with Symbol announcing the settlement of the parties’ remaining pending intellectual property disputes (the “2006 Settlement Agreement”).  Under the 2006 Settlement Agreement, we and Symbol have cross-licensed certain patents, have entered into four-year covenants not to sue with respect to remaining patents, and have released patent infringement damage claims that may have existed on the settlement date or may arise before the covenants expire. We also agreed to dismiss without prejudice all claims in the Wireless Case and the Decoding Case.  The specific terms of the 2006 Settlement Agreement are confidential.

Earlier, in September 2005, we and Symbol resolved the portion of the dispute that concerned radio frequency identification (RFID). At that time, Symbol joined our Rapid Start RFID intellectual property licensing program by entering into an RFID cross-license agreement. That 2005 cross-license agreement, which is unchanged by the 2006 Settlement Agreement, gave Symbol access to our RFID IP and gave us access to Symbol’s RFID IP.

17.Recent Accounting Pronouncements

In March 2006, the Financial Accounting Standards Board (FASB) issued an exposure draft of a proposed standard that, if enacted in its current form, would make a significant change to existing rules by requiring recognition in the balance sheet of the overfunded or underfunded positions of defined benefit pension and other postretirement plans,

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along with a corresponding noncash, after-tax adjustment to stockholders’ equity. The proposed standard would be effective for year ends starting after December 15, 2006, and would require adoption on a retrospective basis. The proposed standard has not yet completed the FASB’s process for review and enactment, and therefore the final provisions of the standard and its effects on our financial statements, if and when it is issued, are not yet known.

In response to the public’s concern over the adequacy of pension plan funding, Congress has been drafting legislation to address the amount of annual contributions that companies are required to pay into their pension funds. Both the Senate and the House of Representatives have passed their own versions of a pension funding bill and those bills are currently in conference. It is expected that the conference process will produce compromises and changes in the Senate and House bills, and ultimate passage of a bill is uncertain. This uncertainty makes it difficult to quantify the potential impact to our pension funding.

In November 2005, the FASB issued Staff Position (“FSP”) FAS123(R)-3, Transition Election to Accounting for the Tax Effects of Share-Based Payment Awards. This FSP requires an entity to follow either the transition guidance for the additional-paid-in-capital pool as prescribed in SFAS No. 123(R), Share-Based Payment, or the alternative transition method as described in the FSP. An entity that adopts SFAS No. 123(R) using the modified prospective application may make a one-time election to adopt the transition method described in this FSP. An entity may take up to one year from the later of its initial adoption of SFAS No. 123(R) or the effective date of this FSP to evaluate its available transition alternatives and make its one-time election. This FSP became effective in November 2005. We continue to evaluate the impact that the adoption of this FSP could have on our financial statements.

In June 2006, the Financial Accounting Standards Board issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes (FIN 48). FIN 48 prescribes a more likely than not threshold for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. This Interpretation also provides guidance on derecognition of income tax assets and liabilities, classification of current and deferred income tax assets and liabilities, accounting for interest and penalties associated with tax positions, accounting for income taxes in interim periods, and income tax disclosures. This Interpretation is effective as of January 1, 2007. We are currently evaluating the impact of FIN 48 on our financial statements.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Special Note About Forward-Looking Statements

Forward-Looking Statements and Risk Factors

Forward-looking statements contained in this filing are subject to the safe harbor created by the Private Securities Litigation Reform Act of 1995 (alternatively: Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934) and are dependent upon a variety of important factors that could cause actual results to differ materially from those reflected in such forward-looking statements. These factors include but are not limited to Intermec’s ability to maintain or to improve the revenues and profits of its continuing operations, maintain or reduce expenses, maintain or improve operational efficiency, use its investment in research and development to generate future revenue, maintain or improve year-over-year growth in the revenues and profits of its continuing operations and the other factors described in Part I, Item 2 and Part II, Item 1A of this filing. Intermec undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, changed circumstances or any other reason after the date of this quarterly report.

Such forward-looking statements involve and are dependent upon certain risks and uncertainties. When used in this document and in documents it references, the words “anticipate,” “believe,” “will,” “intend,” “project” and “expect” and similar expressions as they relate to Intermec or its management are intended to identify such forward-looking statements.

Forward-looking statements are not guarantees of future performance. A number of factors can impact our business and determine whether Intermec can or will achieve any forward-looking statement made in this report. Any one of these factors could cause Intermec’s actual results to differ materially from those discussed in a forward-looking statement. We outline these risk factors in reports that we file with the SEC, in press releases and on our website, www.intermec.com.

Readers of this report are encouraged to review the Risk Factors portion of Part II, Item 1A of this filing which discusses the risk factors associated with our business.

Overview

Continuing Operations

Effective January 1, 2006, we changed our name from UNOVA, Inc. to Intermec, Inc. (“Intermec”). We design, develop, manufacture, integrate, sell, resell and service wired and wireless automated identification and data collection (“AIDC”) products and systems, mobile computing products and systems, wired and wireless bar code printers, label media and radio frequency identification (“RFID”) products and systems. Our products and services are used by customers within and outside of the United States to improve the productivity, quality and responsiveness of their business operations including supply chain management, enterprise resource planning and field sales and service. We grant licenses to use portions of our intellectual property portfolio, including certain patent rights essential to and/or useful in RFID and AIDC products, and receive license fees as well as ongoing royalties based on sales by licensees. Customers for our products and services operate in market segments that include manufacturing, warehousing, direct store delivery, retail, consumer packaged goods, field service, government, and transportation and logistics.

Our strategy consists of: technology leadership in the AIDC industry; expanding, strengthening and leveraging our AIDC intellectual property portfolio; expanding and strengthening our AIDC product portfolio; providing integrated AIDC solutions; partnering with global industry leaders; achieving economies of scale and scope; profitably increasing market share; and increasing the scale of the business.

Our strategy is focused on customers in certain vertical markets, including: retailers; consumer goods manufacturers; industrial goods manufacturers; transportation and logistics providers; and government agencies.

Our strategy is also focused on certain application markets, including: warehouse and distribution center operations; retail store operations; retail store management; in-transit visibility; field service; manufacturing operations; direct store delivery; and RFID supply chain.

Discontinued Operations

In 2005, we divested our Industrial Automation Systems (IAS) businesses, which comprised the Cincinnati Lamb and Landis Grinding Systems divisions. The IAS businesses are classified as discontinued operations for accounting purposes in Intermec’s consolidated financial statements and related notes. The IAS businesses are producers of manufacturing products and services, including integrated manufacturing systems, machining systems, stand-alone machine tools and precision grinding and abrasives operations primarily serving the global aerospace, automotive, off-road vehicle and diesel engine industries as well as the industrial components, heavy equipment and general job shop markets.

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Results of Operations

The following discussion compares our results of operations for the three and six months periods ended July 2, 2006, and July 3, 2005. Results from continuing operations include the operations of Intermec Technology and Corporate expenses. The operating results of the IAS business are classified as discontinued operations. Results of operations were as follows (millions of dollars):

	Three Months Ended						Six Months Ended
	July 2,			July 3,			July 2,			July 3,
	2006			2005			2006			2005
Revenues:
Product and Service Revenues	$	231.4		$	217.5		$	435.3		$	414.0
Intellectual property settlements	—			—			23.0			—
Total Revenues	231.4			217.5			458.3			414.0
Costs and Expenses:
Cost of product and service revenues	137.8			123.1			261.3			236.7
Cost of intellectual property settlements	—			—			6.5			—
Selling, general and administrative	78.5			75.8			156.3			148.6
Restructuring charge	1.1			—			2.2			—
Total Costs and Expenses	217.4			198.9			426.3			385.3
Operating Profit from
Continuing Operations	14.0			18.6			32.0			28.7
Gain on sale of investments	2.3			—			2.3			—
Interest, net	1.8			(1.1		)	2.9			(3.2		)
Earnings from Continuing
Operations before Income Taxes	18.1			17.5			37.2			25.5
Provision for Income Taxes	6.8			5.6			10.8			8.2
Earnings from Continuing
Operations, net of tax	11.3			11.9			26.4			17.3
Earnings (Loss) from Discontinued
Operations, net of tax	(0.9		)	0.2			(2.0		)	(1.7		)
Net Earnings	$	10.4		$	12.1		$	24.4		$	15.6

Revenues

Revenues by category and as a percentage of related revenues from continuing operations for the three and six month periods ended July 2, 2006, and July 3, 2005, were as follows (millions of dollars):

	Three Months Ended
	July 2, 2006				July 3, 2005
			Percent of				Percent of				Percent
	Amount		Revenues		Amount		Revenues		Change		Change
Revenues:
Product	$	192.4	83.1	%	$	181.0	83.2	%	$	11.4	6.3	%
Service	39.0		16.9	%	36.5		16.8	%	2.5		7.0	%
Intellectual Property Settlement	—		—	%	—		—	%	—
Total Revenues	$	231.4	100.0	%	$	217.5	100.0	%	$	13.9	6.4	%

Quarterly revenue growth of 6.4% was primarily attributable to Systems and Solutions revenue growth of 9.1% compared to the prior year period. Product revenues for the three months ended July 2, 2006, increased 6.3% compared with the

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corresponding prior-year period as a result of the strong Systems and Solutions revenue growth partially offset by the 2.8% decrease for Printer/Media products. Service revenue increased 7.0% over the corresponding prior-year period principally from an increase in professional services and the technical engineering services for government contracts, as a result of AIT III. Geographically, products and service revenue in North America rose 7.8% over the corresponding prior-year period, Europe, Middle East and Africa increased 3.2%, and the rest of the world increased 8.8%

	Six Months Ended
	July 2, 2006				July 3, 2005
			Percent of				Percent of				Percent
	Amount		Revenues		Amount		Revenues		Change		Change
Revenues:
Product	$	358.8	78.3	%	$	343.0	82.9	%	$	15.8	4.6	%
Service	76.5		16.7	%	71.0		17.1	%	5.5		7.7	%
Intellectual Property Settlement	23.0		5.0	%	—		—	%	23.0		100.0	%
Total Revenues	$	458.3	100.0	%	$	414.0	100.0	%	$	44.3	10.7	%

The six month revenue growth of 10.7% was primarily attributable to the intellectual property settlement of $23.0 million and Systems and Solutions revenue growth of 8.3% compared to the prior year period. Product revenues for the six months ended July 2, 2006, increased 4.6% compared with the corresponding prior-year period as a result of the strong Systems and Solutions revenue growth partially offset by the 6.3% decrease for Printer/Media products. Service revenue increased 7.7% over the corresponding prior-year period principally from an increase in professional services and the technical engineering services for government contracts, as a result of AIT III. Geographically, products and service revenue in North America rose 12.9% over the corresponding prior-year period, offsetting decreases of 6.8% in Europe, Middle East and Africa, the rest of the world increased 0.1%.

Our operating results for the six months ended July 2, 2006, include $23.0 million of revenue and $16.5 million of operating profit from compensation related to a settlement regarding certain of the our intellectual property (“IP Settlement”). This represents the last of the laptop computer manufacturers to settle with us regarding battery power-management patents.

Gross Profit

Gross profit and gross margin by revenue category for the three and six month periods ended July 2, 2006, and July 3, 2005, were as follows (millions of dollars):

	Three Months Ended
	July 2, 2006				July 3, 2005
	Gross		Gross		Gross		Gross
	Profit		Margin		Profit		Margin
Product	$	76.0	39.5	%	$	79.0	43.6	%
Service	17.6		45.1	%	15.4		42.2	%
Intellectual Property Settlement	—		—	%	—		—
Total Gross Profit and Gross Margin	$	93.6	40.4	%	$	94.4	43.4	%

The total gross profit for the three months ended July 2, 2006 decreased $0.8 million compared to the corresponding prior-year period.  Product gross margin for the quarter ended July 2, 2006 decreased 4.1 percentage points. The reduction in product gross margin is due to an increase in mix of lower margin enterprise business, the mix in the various sales regions, and lower margins in printer/media.  The lower margins in printer/media were driven by a change in printer mix to more portable printers, higher freight costs and an increase in media raw materials.

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	Six Months Ended
	July 2, 2006				July 3, 2005
	Gross		Gross		Gross		Gross
	Profit		Margin		Profit		Margin
Product	$	141.8	39.5	%	$	148.3	43.2	%
Service	32.2		42.1	%	29.0		40.8	%
Intellectual Property Settlement	16.5		71.9	%	—		—
Total Gross Profit and Gross Margin	$	190.5	41.6	%	$	177.3	42.8	%

Gross profit for the six months ended July 2, 2006, includes $16.5 million from compensation related to the IP settlement.  The total gross profit for the six months ended July 2, 2006, increased $13.2 million, or 7.4% compared to the corresponding prior-year period. The increase in gross profit primarily results from the $16.5 million in gross profit from the intellectual property settlement partially offset by the reduction in product related gross profit. Product gross margin for the quarter ended July 2, 2006, decreased by 3.7%. The reduction in product gross margin is due to the an increase in mix of lower margin enterprise business, the mix in the various sales regions, and lower margins in printer/media.  The lower margins in printer/media were driven by a change in printer mix to more portable printers, higher freight costs and an increase in media raw materials.

Selling, General and Administrative

The total selling, general and administrative (“SG&A”) expenses were $78.5 million and $156.3 million for the three and six months ended July 2, 2006, respectively, compared with SG&A expenses of $75.8 million and $148.6 million for the corresponding prior-year period.  The $2.7 million increase in our SG&A expense for the second quarter 2006 compared to the prior year period is primarily attributable to $1.6 million of incremental investment in research and development activities and $0.9 million in stock option expense recognized as a result of the adoption SFAS 123(R). Our R&D expense as a percentage of product and service revenues was 7.7% for the quarter ended July 2, 2006, compared with 7.4% for the corresponding prior-year period.

The $7.7 million increase in SG&A for the six months ended July 2, 2006, reflects incremental R&D investment of  $4.0 million and $2.8 million of incremental expense related to stock options and the employee stock purchase plan related to the adoption of SFAS No. 123(R), Share-Based Payment.

Restructuring Charge

In March 2006, we announced our plan to close design centers in Goteborg and Lund, Sweden. The activities currently assigned to the design centers in Sweden will be reassigned to other parts of Intermec or moved to third-party vendors to improve efficiencies and benefit from reduced cost. In addition to anticipated cost savings, this realignment of resources is expected to result in a significant increase in new product development capacity. The total cost of closing the design centers in Sweden and the elimination of approximately 65 positions in Sweden is estimated to be approximately $4.5 million. Estimated restructuring costs include employee severance, facility closure and other exit costs. We recorded a restructuring charge of $1.1 million and $2.3 million for employee termination costs for the three and six months ended July 2, 2006. We anticipate the majority of the remaining restructuring costs will be recognized over the remainder of 2006. Intermec estimates that the savings from these restructuring activities will begin in the fourth quarter of 2006, and reach its estimated annual pre-tax savings of $8 million by the first quarter of 2007.

Operating Profit

Our operating profit from continuing operations for the three months ended July 2, 2006 decreased $4.7 million compared to the corresponding prior year period. Gross profit from the increase in product and service revenue was offset by lower gross margins for related revenue.

Operating profit for the six months ended July 2, 2006 increased $3.3 million, or 11.3%, compared with the corresponding prior-year period. The $16.5 million of operating profit from the IP settlement in the first quarter of 2006 was partially offset by a $7.7 million increase in SG&A expense and the $2.3 million of restructuring charges related to the closure of the Swedish design centers.

Interest, Net

Net interest income was $1.8 million and $2.9 million for the three and six months ended July 2, 2006, respectively, compared to interest expense of $1.1 million and $3.2 million for the corresponding prior-year period. The improvement in net interest reflects the reduction in the outstanding debt balance, the increase in average cash, cash equivalent and short-term

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investment balances as well as higher investment returns.

Provision for Income Taxes

The tax provision for the three and six month periods ended July 2, 2006, reflects an effective tax rate for continuing operations of 37.4% and 29.1%, respectively, compared to a U.S. statutory rate of 35%. The tax provision was primarily reduced by $2.2 million due to the favorable conclusion of a Canadian tax audit in the first quarter of 2006.

The tax provision for the three and six months ended July 3, 2005, reflects an effective tax rate for continuing operations of 32.4% and 32.3%, respectively compared to a U.S. statutory rate of 35%. The reduction in the effective tax rate is primarily due to favorable foreign currency exchange variance associated with foreign tax contingency accruals.

Loss from Discontinued Operations

During 2005, we completed our divestiture of the IAS businesses with the sale of the Cincinnati Lamb business in the first quarter of 2005, and the sale of the Landis Grinding Systems business in the fourth quarter of 2005. The loss from discontinued operations for the three and six months ended July 2, 2006, include period expenses related to finalizing the sale of the Landis Grinding Systems and changes to the closing balance sheets and estimated purchase price adjustments, net of tax benefits.

The operating loss from discontinued operations for the three and six months ended July 3, 2005, includes the operating results of the Cincinnati Lamb and Landis Grinding Systems businesses as well as the loss on the sale of Cincinnati Lamb, net of related tax benefits.

Liquidity and Capital Resources

Our cash, cash equivalents and short-term investments as of July 2, 2006, totaled $322.8 million. Operating activities of continuing operations for the first six months of 2006 provided $62.4 million of cash flow, primarily due to the $24.3 million from net earnings, which includes the IP Settlement, in March 2006, and $18.6 million from the net reduction of the accounts receivable balance. Investing activities of continuing operations for the first six months of 2006 used $31.4 million primarily for the purchase of short-term investments totaling $19.7 million and $12.3 million of capital expenditures. Financing activities of continuing operations reflect the $4.3 million of proceeds from exercising stock option and of other related stock awards during the first six months of 2006.

On August 7, 2006, we entered into a share repurchase agreement under Rule 10b5-1 of the Securities Exchange of 1934 to facilitate the repurchase of our common stock pursuant to our previously announced share repurchase authorization by our Board of Directors. The authorization from our Board of Directors allows us to repurchase up to $100 million in shares of our common stock which we initiated on August 7, 2006.

Effective June 30, 2006, we amended our Financial Security and Savings Program, Pension Plan, Restoration Plan and Supplemental Executive Retirement Plan (collectively, the “U.S. Defined Benefit Plans”). The effect of these amendments was to “freeze” benefit accruals under the U.S. Defined Benefit Plans and to fully vest benefits under the U.S. Defined Benefit Plans, except for the Nonqualified SERP, as of June 30, 2006, for most participants. We anticipate that the expense of the U.S. Defined Benefit Plans will significantly decline. We estimate the net annual reduction in retirement benefit expense to approximate $7 million. In an effort to align our compensation structure, benefit plans and programs with trends typical of our industry, we have implemented new compensation programs which offset a significant portion of the expected reduction in retirement benefit expense for the second half of 2006 and offset a proportionately smaller portion of such expense reduction in 2007.

Net of outstanding letters of credit and limitations on minimum availability, we had borrowing capacity at July 2, 2006, of $18.2 million under the Revolving Facility. We made no borrowings under the Revolving Facility during the first six months of 2006, and as of July 2, 2006, no borrowings were outstanding under the Revolving Facility. As of July 2, 2006, we were in compliance with the financial covenants of each of these agreements.

The key terms of the Revolving Facility are as follows:

·Our obligation under the Revolving Facility are secured by substantially all the U.S. assets of Intermec and our U.S. subsidiaries and a pledge of 65% of the stock of certain of our foreign subsidiaries.

·Borrowings under the Revolving Facility bear interest at a variable rate equal to (at our option) (i) LIBOR plus an applicable margin ranging from 1.5% to 2.5% based on consolidated leverage, or (ii) the greater of the federal funds rate plus 0.50% or the Bank’s prime rate, plus an applicable margin ranging from 0.5% to 1.5% based on consolidated leverage.

·The Revolving Facility places certain restrictions on the ability of Intermec and our subsidiaries to consolidate or merge, make acquisitions, create liens, incur additional indebtedness or dispose of assets.

·Financial covenants include a Consolidated Leverage test, a Consolidated Interest Coverage test and a Consolidated Net Worth test, each as defined in the agreement.

We have $100.0 million of ten-year senior unsecured debt outstanding as of July 2, 2006. Interest payments at 7.0% are due semi-annually in March and September with the principal balance due March, 2008. Including underwriting fees, discounts and other issuance costs, the effective interest rate is 7.175%.

Management believes that cash and cash equivalents on hand, combined with projected cash flow from operations, assets held for sale and available borrowings under our Revolving Facility will be sufficient to fund our  operations, research and

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development efforts, anticipated capital expenditures, liabilities, commitments, and other capital requirements, for at least the next twelve months.

Contractual Obligations

Our contractual commitments as of July 2, 2006, have not changed materially from those disclosed in Item 7 of our annual report on Form 10-K for the year ended December 31, 2005.

Critical Accounting Policies

“Management’s Discussion and Analysis of Financial Condition and Results of Operations” discusses our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported amounts of revenues and expenses. Actual amounts could differ from those estimates under different assumptions or conditions. Management’s beliefs regarding significant accounting policies have not changed significantly from those disclosed in Item 7 of our annual report on Form 10-K for the year ended December 31, 2005.

Our consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported amounts of revenues and expenses. Actual amounts could differ from those estimates under different assumptions or conditions. Significant estimates and assumptions were used to determine the provisions for uncollectible accounts receivable, excess and obsolete inventory, tax valuation allowances, recoverability of intangible assets, warranty costs, retiree medical and pension obligations, estimated net realizable value of assets held for sale and litigation loss contingencies. Despite these inherent limitations, management believes that Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) and the financial statements and related footnotes provide a meaningful and fair perspective of Intermec. Management’s beliefs regarding significant accounting policies have not changed significantly from those disclosed in Item 7 of our annual report on Form 10-K for the year ended December 31, 2005.

New Accounting Pronouncements

In March 2006, the Financial Accounting Standards Board (FASB) issued an exposure draft of a proposed standard that, if enacted in its current form, would make a significant change to existing rules by requiring recognition in the balance sheet of the overfunded or underfunded positions of defined benefit pension and other postretirement plans, along with a corresponding noncash, after-tax adjustment to stockholders’ equity. The proposed standard would be effective at year-end 2006 and would require adoption on a retrospective basis. The proposed standard has not yet completed the FASB’s process for review and enactment, and therefore the final provisions of the standard and its effects on our financial statements, if and when it is issued, are not yet known.

In response to the public’s concern over the adequacy of pension plan funding, Congress has been drafting legislation to address the amount of annual contributions that companies are required to pay into their pension funds. Both the Senate and the House of Representatives have passed their own versions of a pension funding bill and those bills are currently in conference. It is expected that the conference process will produce compromises and changes in the Senate and House bills, and ultimate passage of a bill is uncertain. This uncertainty makes it difficult to quantify the potential impact to our pension funding. Generally, the Senate and House bills, as drafted, would accelerate the required amount of our annual pension plan contributions, which may have a material impact on our cash flows for a few years beginning in 2008. Absent other changes, the subsequent annual funding requirements would be expected to decline in recognition of the accelerated contributions.

In November 2005, the FASB issued Staff Position (“FSP”) FAS123(R)-3, Transition Election to Accounting for the Tax Effects of Share-Based Payment Awards. This FSP requires an entity to follow either the transition guidance for the additional-paid-in-capital pool as prescribed in SFAS No. 123(R), Share-Based Payment, or the alternative transition method as described in the FSP. An entity that adopts SFAS No. 123(R) using the modified prospective application may make a one-time election to adopt the transition method described in this FSP. An entity may take up to one year from the later of its initial adoption of SFAS No. 123(R) or the effective date of this FSP to evaluate its available transition alternatives and make its one-time election. This FSP became effective in November 2005. We continue to evaluate the impact that the adoption of this FSP could have on our financial statements.

In June 2006, the Financial Accounting Standards Board issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes (FIN 48). FIN 48 prescribes a more likely than not threshold for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. This Interpretation also provides guidance on derecognition of income tax assets and liabilities, classification of current and deferred income tax assets and liabilities, accounting for interest and penalties associated with tax positions, accounting for income taxes in interim periods, and income tax disclosures. This Interpretation is effective as of January 1, 2007. We are currently evaluating the impact of FIN 48 on our financial statements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to interest rate risk primarily from its short-term and long-term borrowings and to foreign exchange rate risk with respect to its foreign operations and from foreign currency transactions.

Due to our global operations, our cash flows and earnings are exposed to foreign exchange rate fluctuations. When appropriate, we may attempt to limit our exposure to changing foreign exchange rates by entering into short-term foreign currency exchange contracts. As of July 2, 2006, we held short-term contracts for the purpose of hedging foreign currency cash flows with an aggregate notional amount of $229.8 million.

Except as noted in the preceding paragraph, as of July 2, 2006, there have been no material changes in information provided in Item 7A of our annual report on Form 10-K for the year ended December 31, 2005, which contains a complete discussion

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of our material exposures to interest rate and foreign exchange rate risks.

ITEM 4. CONTROLS AND PROCEDURES

We maintain disclosure controls and procedures, which are designed to ensure that information required to be disclosed in the reports we file or submit under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including the Chief Executive Officer, or CEO, and Chief Financial Officer, or CFO, as appropriate to allow timely decisions regarding required disclosure.

Under the supervision and with the participation our management, including the CEO and CFO, an evaluation was performed on the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this quarterly report. Based on that evaluation, our management, including the CEO and CFO, concluded that our disclosure controls and procedures were effective as of July 2, 2006.

An evaluation was also performed under the supervision and with the participation of our management, including the CEO and CFO, of any change in our internal controls over financial reporting that occurred during the last six months and that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting. That evaluation did not identify any change in our internal controls over financial reporting that occurred during the latest fiscal quarter and that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We currently, and from time to time, are subject to claims and lawsuits arising in the ordinary course of business. The ultimate resolution of currently pending proceedings is not expected to have a material adverse effect on our business, financial condition, results of operations or liquidity. Nevertheless, it is possible that cash flows or results of operations could be materially affected in any particular period by the unfavorable resolution of one or more of these contingencies or by the creation of significant legal or other expenses related to such matters.

On March 10, 2005, Symbol Technologies, Inc. (“Symbol”) terminated its original equipment manufacturing (“OEM”) agreement with us to supply laser scan engines and stopped shipping laser scan engines to us. On March 10, 2005, Symbol also filed a lawsuit against us in the United States District Court for the District of Delaware seeking a declaratory judgment that its termination of the OEM agreement is lawful (the “Contract Case”). We believe that the termination of the OEM agreement by Symbol has not had a material adverse effect on our operations.

In addition, on March 11, 2005, Symbol announced that it had filed a lawsuit against us on March 10, 2005, in the United States District Court for the District of Delaware for infringement of certain of Symbol’s wireless technology patents (the “Wireless Case”). On March 23, 2005, we filed an answer to Symbol’s complaint and filed counterclaims against Symbol for infringing our wireless access, terminal and software patents. We simultaneously filed our answer to Symbol’s declaratory judgment action in the Contract Case and filed counterclaims against Symbol for breach of the OEM agreement.

On July 28, 2005, Symbol announced that it had filed a lawsuit against us in the United States District Court for the Western District of Wisconsin for infringing Symbol’s barcode decoding patents (the “Decoding Case”). On July 14, 2005, in response to a motion we filed, the Decoding Case was transferred to the United States District Court for the District of Delaware. That case was consolidated for purposes of discovery with the Wireless Case. We denied liability in the Decoding Case, and pursuant to the standstill agreement discussed below, we retained the right to file counterclaims against Symbol in the Decoding Case.

On June 30, 2005, we filed a complaint with the U.S. International Trade Commission (the “ITC”) alleging that Symbol was illegally importing products that infringe our patents that cover pocket-sized handheld computing devices, modular handheld computing devices and recharging and data exchanging cradles (the “ITC Case”). On July 29, 2005, the ITC voted to investigate our allegations against Symbol. Pursuant to the standstill agreement, discussed below, we asked the ITC to dismiss and close the investigation. On September 26, 2005, in response to our request, the Administrative Law Judge terminated the investigation. On October 12, 2005, the ITC entered a Notice Not to Review the Order terminating the investigation.

On September 1, 2005, the parties agreed that they would try to resolve their patent disputes through negotiation. To facilitate that effort, the parties entered into a standstill agreement pursuant to which they sought the court’s permission to postpone litigation activity in the cases pending in the U.S. District Court for the District of Delaware (the Contract, Wireless and Decoding Cases) until December 1, 2005, sought the ITC’s permission to dismiss the ITC action and agreed to postpone filing any new patent infringement law suits against each other until March 1, 2006.

The standstill agreement’s only exception to the agreed ban on new lawsuits until March 1, 2006, allowed us to file counterclaims against Symbol in the Decoding Case and to file a case in the United States District Court for the District of Delaware alleging infringement by Symbol of the patents asserted by us in the ITC case. According to the standstill agreement these permitted counterclaims and new actions had to have been filed no sooner than December 1, 2005, and no later than December 9, 2005. The parties also agreed not to pursue or seek temporary restraining orders, preliminary injunctions or ITC exclusion orders against each other for a period of two years.

The ITC agreed to dismiss the ITC case and the United States District Court for the District of Delaware granted the scheduling changes required to effectuate the standstill agreement of the parties.  Between December of 2005 and May 2006, the parties agreed to provide additional time for settlement discussions by extending the schedule set forth in the standstill agreement, with the approval of the United States District Court for the District of Delaware.

With respect to the Contract Case, the parties agreed that Symbol would dismiss without prejudice its declaratory judgment complaint and that we would dismiss without prejudice the breach of contract and patent infringement counterclaims.  If the parties had been unable to reach the settlement described below, each party would have had the right to refile those claims and counterclaims in the same court.

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On July 18, 2006, we issued a joint press release with Symbol announcing the settlement of the parties’ remaining pending intellectual property disputes (the “2006 Settlement Agreement”).  Under the 2006 Settlement Agreement, we and Symbol have cross-licensed certain patents, have entered into four-year covenants not to sue with respect to remaining patents, and have released patent infringement damage claims that may have existed on the settlement date or may arise before the covenants expire. We also agreed to dismiss without prejudice all claims in the Wireless Case and the Decoding Case.  The specific terms of the 2006 Settlement Agreement are confidential.

Earlier, in September 2005, we and Symbol resolved the portion of the dispute that concerned radio frequency identification (RFID). At that time, Symbol joined our Rapid Start RFID intellectual property licensing program by entering into an RFID cross-license agreement. That 2005 cross-license agreement, which is unchanged by the 2006 Settlement Agreement, gave Symbol access to our RFID IP and gave us access to Symbol’s RFID IP.

ITEM 1A. RISK FACTORS

Readers of this Report are encouraged to review the discussion of Forward Looking Statements and Risk Factors appearing in this report at Part I, “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

In addition to the other information set forth in this Report, you should carefully consider the factors discussed in Part II, “Item 1A. Risk Factors” in our Report on Form 10-Q for the period ended April 2, 2006, which could materially affect our business, financial condition or future results. The risks described in our Report on Form 10-Q for the period ended April 2, 2006 are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

The risk factor included in the Report on Form 10-Q for the period ended April 2, 2006 under the caption “Unfavorable results in pending patent lawsuits could have a material adverse impact on our business” is no longer applicable.  The litigation described in that risk factor has been resolved as described in this Report in Part II, “Item 1. Legal Proceedings.”

The risk factor included in the Report on Form 10-Q for the period ended April 2, 2006 under the caption “Patent litigation expense may materially impact or increase the volatility of our financial results” is restated in its entirety as follows.

•Patent litigation costs may materially impact or increase the volatility of our financial results. We currently, and from time to time, are involved in litigation regarding our patents and other intellectual property.  Since litigation over patents involves complex technical and economic issues, these cases can be quite expensive to prosecute or defend and it is very difficult to predict the amount or the timing of costs associated with such litigation. We generally include such costs in Selling, General and Administrative (SG&A) expense and record those expenses as they are incurred. In some periods, patent litigation expense could be a significant percentage of SG&A expense and could exhibit large fluctuations from prior periods, increasing the volatility of our SG&A expense and potentially impacting our earnings per share. In appropriate circumstances, we capitalize such costs as intangible assets.  In those situations, the expenses would be capitalized currently and amortized in future periods, affecting future reported earnings.  Also, cash payments of such costs would adversely affect our cash flow and cash positions in periods when the payments are made. In any event, there is no assurance that patent litigation will generate royalty revenue for us but, when it does, recognition of that revenue and related current period legal expenses may materially impact our results of operations, positively or negatively, increasing the volatility of our results of operations.

ITEM 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

(c)Issuer Purchases of Equity Securities

				(c) Total Number of	(d) Maximum Number of
	(a) Total			Shares Purchased as	Shares (or Approximate
	Number of	(b) Average		Part of Publicly	Dollar Value) that May
	Shares	Price Paid		Announced Plans or	Yet Be Purchased Under
	Purchased	per Share		Programs	the Plans or Programs
January 1 to January 29, 2006	—	—		—	—
January 30 to February 26 , 2006	5,858	$	30.21	—	—
February 27 to April 2, 2006	—	—		—	—
April 3 to April 30, 2006	411	26.71		—	—
May 1 to May 28, 2006	10,415	25.75		—	—
May 29 to July 2, 2006	411	23.17		—	—
Total	17,095	$	27.24	—	—

The purchased shares indicated in the above table were surrendered to us to pay the exercise price in connection with the exercise of employee stock options and to satisfy tax withholding obligations in connection with the vesting of restricted stock.

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Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

The Company’s Annual Meeting of Stockholders was held on May 17, 2006.

At the Annual meeting, Gregory K. Hinckley, Steven B. Sample, Oren G. Shaffer and Larry D. Yost were elected directors for three-year terms expiring on the date of the annual meeting in 2009.  The voting results are set forth below.  The directors whose terms continued after the Annual Meeting are Larry D. Brady, Stephen E. Frank, Claire W. Gargalli, Lydia H. Kennard, Allen J. Lauer, and Stephen P. Reynolds.  However, because Proposal 2 was approved by the stockholders as described below, each director must stand for election at the 2007 Annual Meeting, whether or not previously scheduled to do so.

Nominee	For	Withheld
Gregory K. Hinckley	55,326,406	640,976
Steven B. Sample	55,350,460	616,922
Oren G. Shaffer	55,290,588	676,794
Larry D. Yost	55,679,750	287,632

Proposal 2, a management proposal to approve amendments to Article X of the Company’s Certificate of Incorporation which (a) end the present three-year staggered terms of directors and instead provide for the annual election of directors, (b) eliminate the requirement that stockholder removal of a director may only be for cause, and (c) eliminate supermajority voting provisions for the removal of directors and for the amendment of these provisions, received the votes of more than 80% of Company shares outstanding.

	Number of Votes
For	55,567,461
Against	352,869
Abstain	47,052
Broker non-votes	0

ITEM 6. EXHIBITS

10.1	Amended and restated 2004 Omnibus Incentive Compensation Plan
10.2	Amendment to the UNOVA, Inc. Restoration Plan
10.3	Amendment to the UNOVA, Inc. Supplemental Executive Retirement Plan
10.4	Form of Intermec Deferred Compensation Plan
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated as of August 9, 2006.
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated as of August 9, 2006.
32.1	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, dated as of August 9, 2006.
32.2	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, dated as of August 9, 2006.

ITEMS 3 and 5 are not applicable and have been omitted.

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Intermec, Inc.
(Registrant)
By	/s/ Fredric B. Anderson
	Fredric B. Anderson
	Vice President and Controller
	(Acting Chief Financial Officer)
	August 9, 2006

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EX-10.1

Exhibit 10.1

UNOVA, INC.

2004 OMNIBUS INCENTIVE COMPENSATION PLAN

Approved May 6, 2004

Restated to reflect Amendment No. 1 as of May 16, 2006

UNOVA, INC.
2004 OMNIBUS INCENTIVE COMPENSATION PLAN

TABLE OF CONTENTS

		Page
Section 1.	Purposes; Definitions	3
Section 2.	Administration	6
Section 3.	Share Authorization	7
Section 4.	Eligibility	8
Section 5.	Stock Options	9
Section 6.	Stock Appreciation Rights	10
Section 7.	Restricted Stock and Restricted Stock Units	12
Section 8.	Performance Units/Performance Shares	13
Section 9.	Cash-Based and Other Stock-Based Awards	14
Section 10.	Performance Measures	15
Section 11.	Covered Employee Annual Incentive Awards	16
Section 12.	Term, Amendment and Termination	16
Section 13.	Change of Control Provisions	17
Section 14.	Unfunded Status of Plan	19
Section 15.	Uncertificated Shares	19
Section 16.	Withholding	19
Section 17.	General Provisions	19
Section 18.	Effective Date of Plan	21

2

SECTION 1.         Purpose; Definitions

The purpose of the Plan is to give the Company a competitive advantage in attracting, retaining and motivating officers and other employees and to provide the Company and its Subsidiaries with a stock plan providing incentives directly linked to the profitability of the Company’s businesses and increases in shareholder value.

For purposes of the Plan, the following terms are defined as set forth below:

“Affiliate” shall have the meaning ascribed to such term in Rule 12b-2 of the General Rules and Regulations of the Exchange Act.

“Award” means, individually or collectively, a grant under this Plan of Stock Appreciation Rights, Stock Options, Restricted Stock, Restricted Stock Units, Performance Shares, Performance Units, Covered Employee Annual Incentive Awards, Cash-Based Awards and Other Stock-Based Awards.

“Award Agreement” means either (i) a written agreement entered into by the Company and an Eligible Individual setting forth the terms and provisions applicable to an Award granted under this Plan, or (ii) a written statement issued by the Company to an Eligible Individual describing the terms and provisions of such Award.

“Board” means the Board of Directors of the Company.

“Cash-Based Award” means an Award granted to an Eligible Individual as described in Section 9.

“Change of Control” has the meaning set forth in Section 13(b).

“Code” means the Internal Revenue Code of 1986, as amended from time to time, and any successor thereto.

“Commission” means the Securities and Exchange Commission, or any successor agency.

“Committee” means the Committee referred to in Section 2.

“Company” means UNOVA, Inc., a Delaware corporation.

“Covered Employee” means an Eligible Individual who is a “covered employee,” as defined in Code Section 162(m) and the regulations promulgated under Code Section 162(m), or any successor statute.

“Covered Employee Annual Incentive Award”means an Award granted to a Covered Employee as described in Section 10.

“Disability” means permanent and total disability as determined for purposes of the Company’s Long Term Disability Plan for the staff of the Company’s corporate headquarters.

“Early Retirement” means retirement from employment with the Company, a Subsidiary, or Affiliate in circumstances in which the employee would be entitled to receive retirement benefits under the pension plan of the Company, a Subsidiary, or an Affiliate under which such employee is covered.

“Eligible Individuals” means officers or other employees of the Company or any of its Subsidiaries and Affiliates and prospective employees who have accepted offers of employment from the Company, a

3

Subsidiary, or an Affiliate who are or will be responsible for or contribute to the management, growth or profitability of the business of the Company, its Subsidiaries, or Affiliates.

“Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time, and any successor thereto.

“Fair Market Value” or “FMV” means , as of any given date, the average of the highest and lowest per share sales prices reported for a Share during normal business hours on the New York Stock Exchange (“NYSE”) for such date, , if traded thereon, or, if not traded thereon, on a national securities exchange, if traded thereon, or, if not traded thereon, the average of the high and low or closing bid and asked prices reported on another reporting system that provides such information on the applicable date, the preceding trading day, the next succeeding trading day, or an average of trading days, as determined by the Committee in its discretion. In the event Shares are not publicly traded at the time a determination of their value is required to be made hereunder, the determination of their Fair Market Value shall be made by the Committee in such manner as it deems appropriate. Such definition(s) of FMV shall be specified in each Award Agreement and may differ depending on whether FMV is in reference to the grant, exercise, vesting, settlement, or payout of an Award.

“Freestanding SAR” means a SAR that is granted independently of any Stock Options, as described in Section 6.

“Incentive Stock Option” or “ISO” means an Option to purchase Shares granted under Section 5 to an Eligible Individual and that is designated as an Incentive Stock Option and that is intended to meet the requirements of Code Section 422, or any successor provision.

“Non-Qualified Stock Option” or “NQSO” means an Option that is not intended to meet the requirements of Code Section 422, or that otherwise does not meet such requirements.

“Normal Retirement” means retirement from active employment with the Company or a Subsidiary or an Affiliate as provided for in such entity’s retirement or pension plan, as applicable.

“Other Stock-Based Award”means an equity-based or equity-related Award not otherwise described by the terms of this Plan, granted pursuant to Section 9.

“Performance Measures”means measures as described in Section 10 on which Qualified Performance-Based Awards are based and which are approved by the Company’s shareholders pursuant to this Plan in order to qualify as Qualified Performance-Based Awards.

“Performance Period”means the period of time during which the Performance Measures must be met in order to determine the degree of payout and/or vesting with respect to an Award.

“Performance Share”means an Award granted to an Eligible Individual, as described in Section 8.

“Performance Unit”means an Award granted to an Eligible Individual, as described in Section 8.

“Period of Restriction” means the period when Restricted Stock or Restricted Stock Units are subject to a substantial risk of forfeiture (based on the passage of time, the achievement of Performance Measures, or upon the occurrence of other events as determined by the Committee, in its discretion), as provided in Section 7.

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“Plan” means the UNOVA, Inc. 2004 Omnibus Incentive Compensation Plan, as set forth herein and as hereinafter amended from time to time.

“Plan Year” means the Company’s fiscal year, which begins January 1 and ends December 31.

“Qualified Performance-Based Award” means an Award designated as such by the Committee at the time of grant, based upon a determination that (i) the recipient is or may be a “covered employee” within the meaning of Section 162(m)(3) of the Code in the year in which the Company would expect to be able to claim a tax deduction with respect to such Award and (ii) the Committee wishes such Award to qualify for the Section 162(m) Exemption.

“Restricted Stock”means an Award granted under Section 7.

“Restricted Stock Unit” or “RSU” means an Award granted pursuant to Section 7, except no Shares are actually awarded on the date of grant.

“Retirement” means Normal or Early Retirement.

“Rule 16b-3” means Rule 16b-3 as promulgated by the Commission under Section 16(b) of the Exchange Act, as amended from time to time.

“Section 162(m) Exemption” means the exemption from the limitation on deductibility imposed by Section 162(m) of the Code that is set forth in Section 162(m)(4)(C) of the Code.

“Share” means a share of common stock, par value $.01 per share, of the Company.

“Stock Appreciation Right” means an Award granted under Section 6.

“Stock Option” means an Award granted under Section 5.

“Subsidiary”means any corporation or other entity, whether domestic or foreign, in which the Company has or obtains, directly or indirectly, a proprietary interest of more than fifty percent (50%) by reason of stock ownership or otherwise.

“Tandem SAR” means a SAR that is granted in connection with a related Stock Option pursuant to Section 6 herein, the exercise of which shall require forfeiture of the right to purchase a Share under the related Stock Option (and when a Share is purchased under the Stock Option, the Tandem SAR shall similarly be canceled).

“Termination of Employment” means the termination of the Eligible Individual’s employment with the Company and any of its Subsidiaries or Affiliates.  An Eligible Individual employed by a Subsidiary or Affiliate shall also be deemed to incur a Termination of Employment if the Subsidiary or Affiliate ceases to be such a Subsidiary or Affiliate, and the Eligible Individual does not immediately thereafter become an employee of the Company or another Subsidiary or Affiliate.  Temporary absences from employment because of illness, vacation or leave of absence and transfers among the Company and its Subsidiaries or Affiliates shall not be considered Terminations of Employment.  If so determined by the Committee, an Eligible Individual shall be deemed not to have incurred a Termination of Employment if the Eligible Individual enters into a contract with the Company, a Subsidiary, or an Affiliate providing for the rendering by the Eligible Individual of consulting services to the Company or such Subsidiary or Affiliate on terms approved by the Committee; however, Termination of Employment of the Eligible Individual shall occur when such contract ceases to be in effect.

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In addition, certain other terms used herein have definitions given to them in the first place in which they are used.

SECTION 2.         Administration

The Plan shall be administered by the Compensation, Governance and Nominating Committee or such other committee of the Board as the Board may from time to time designate (the “Committee”), which shall be composed of not less than two independent directors, and shall be appointed by and serve at the pleasure of the Board.

The Committee shall have plenary authority to grant Awards pursuant to the terms of the Plan to Eligible Individuals.

Among other things, the Committee shall have the authority, subject to its power to delegate its authority as described below and subject to the other terms of the Plan:

(a)To select the Eligible Individuals to whom Awards may from time to time be granted;

(b)To determine the number of Shares or other amount to be covered by each Award granted hereunder;

(c)To determine the terms and conditions of any Award granted hereunder, any vesting condition, restriction or limitation (which may be related to the performance of the Eligible Individual, the Company, any Subsidiary, or Affiliate, or any business unit of the Company, Subsidiary or Affiliate) and any vesting acceleration or forfeiture waiver regarding any Award and the Shares relating thereto, based on such factors as the Committee shall determine;

(d)To modify, amend or adjust the terms and conditions of any Award, at any time or from time to time, including but not limited to Performance Measures; provided, however, that the Committee may not increase the amount payable with respect to a Qualified Performance-Based Award or waive or alter the Performance Measures associated therewith or cause such Qualified Performance-Based Award to vest earlier than permitted;

(e)To determine to what extent and under what circumstances Shares and other amounts payable with respect to an Award shall be deferred; and

(f)To determine under what circumstances an Award may be settled in cash or Shares.

The Committee shall have the authority to adopt, alter and repeal such administrative rules, guidelines and practices governing the Plan as it shall from time to time deem advisable, to interpret the terms and provisions of the Plan and any Award issued under the Plan (and any Award Agreement relating thereto) and to otherwise supervise the administration of the Plan.

The Committee may act only by a majority of its members then in office, except that the Committee may, except to the extent prohibited by applicable law or regulation or the applicable rules of a stock exchange, allocate all or any portion of its responsibilities and powers to any one or more of its members and may delegate all or any part of its responsibilities and powers to any person or persons selected by it; provided, however, that no such delegation may be made that would cause any Award or transaction to become subject to (or lose an exemption under) the short-swing profit recovery provisions of Section 16(b) of the Exchange Act or cause an Award designated as a Qualified Performance-Based Award not to qualify for, or to cease to qualify for, the Section 162(m) Exemption.  Any such allocation or delegation may be revoked by the Committee at any time.

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Any determination made by the Committee or pursuant to delegated authority pursuant to the provisions of the Plan with respect to any Award shall be made in the sole discretion of the Committee or such delegate at the time of the grant of the Award or, unless in contravention of any express term of the Plan, at any time thereafter.  All decisions made by the Committee or any appropriately delegated officer pursuant to the provisions of the Plan shall be final and binding on all persons, including the Company and Eligible Individuals.

Any authority granted to the Committee may also be exercised by the full Board, except to the extent that the grant or exercise of such authority would cause any Award or transaction to become subject to (or lose an exemption under) the short-swing profit recovery provisions of Section 16(b) of the Exchange Act or cause an Award designated as a Qualified Performance-Based Award not to qualify for, or to cease to qualify for, the Section 162(m) Exemption.  To the extent that any permitted action taken by the Board conflicts with action taken by the Committee, the Board action shall control.

SECTION 3.         Share Authorization

(a)Shares Subject to the Plan.  The maximum number of Shares that may be issued to Eligible Individuals and their beneficiaries under the Plan shall be three million (3,000,000) Shares.  Shares issued under the Plan may be authorized and unissued Shares or may be treasury Shares.

(b)Incentive Stock Option Limit.  Subject to the limit set forth in Section 3(a) on the number of Shares that may be issued in the aggregate under the Plan, the maximum number of Shares that may be issued pursuant to ISOs shall be two million (2,000,000).

(c)Share Usage.  Shares covered by an Award shall only be counted as used to the extent they are actually issued.  Any Shares related to Awards which terminate by expiration, forfeiture, cancellation, or otherwise without the issuance of such Shares, are settled in cash in lieu of Shares, or are exchanged with the Committee’s permission, prior to the issuance of Shares, for Awards not involving Shares, shall be available again for grant under the Plan.  Moreover, if the option price of any Stock Option granted under the Plan or the tax withholding requirements with respect to any Award granted under the Plan are satisfied by tendering Shares to the Company (by either actual delivery or by attestation), or if a SAR is exercised, only the number of Shares issued, net of the Shares tendered, if any, will be deemed delivered for purposes of determining the maximum number of Shares available for delivery under the Plan.  The maximum number of Shares available for issuance under the Plan shall not be reduced to reflect any dividends or dividend equivalents that are reinvested into additional Shares or credited as additional Restricted Stock, Restricted Stock Units, Performance Shares, or Stock-Based Awards.

(d)Annual Award Limits. Unless and until the Committee determines that an Award to a Covered Employee shall not be designed to qualify as Qualified Performance-Based Award, the following limits (each an “Annual Award Limit,” and, collectively, “Annual Award Limits”) shall apply to grants of such Awards under the Plan:

(i)Options: The maximum aggregate number of Shares subject to Options granted in any one Plan Year to any one Eligible Individual shall be seven hundred fifty thousand (750,000).

(ii)SARs:  The maximum number of Shares subject to Stock Appreciation Rights granted in any one Plan Year to any one Eligible Individual shall be seven hundred fifty thousand (750,000).

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(iii)Restricted Stock or Restricted Stock Units:  The maximum aggregate grant with respect to Awards of Restricted Stock or Restricted Stock Units in any one Plan Year to any one Eligible Individual shall be two hundred fifty thousand (250,000).

(iv)Performance Units or Performance Shares:  The maximum aggregate Award of Performance Units or Performance Shares that an Eligible Individual may receive in any one Plan Year shall be two hundred fifty thousand (250,000) Shares, or equal to the value of two hundred fifty thousand (250,000) Shares determined as of the date of vesting or payout, as applicable.

(v)Cash-Based Awards:  The maximum aggregate amount awarded or credited with respect to Cash-Based Awards to any one Participant in any one Plan Year may not exceed the greater of one hundred thousand (100,000) Shares or the value of one hundred thousand (100,000) Shares determined as of the date of vesting or payout, as applicable.

(vi)Other Stock-Based Awards:  The maximum aggregate grant with respect to Other Stock-Based Awards pursuant to Section 9 in any one Plan Year to any one Eligible Individual shall be one hundred thousand (100,000) Shares.

(vii)Covered Employee Annual Incentive Awards:  The maximum aggregate amount awarded or credited in any one Plan Year with respect to a Covered Employee Annual Incentive Award shall be determined in accordance with Section 11.

(e)Adjustments in Authorized Shares.  In the event of any corporate event or transaction (including, but not limited to, a change in the stock of the Company or the capitalization of the Company) such as a merger, consolidation, reorganization, recapitalization, separation, stock dividend, stock split, reverse stock split, split up, spin-off, or other distribution of stock or property of the Company, combination of Shares, exchange of Shares, dividend in kind, or other like change in capital structure or distribution (other than normal cash dividends) to shareholders of the Company, or any similar corporate event or transaction, the Committee, in its sole discretion, in order to prevent dilution or enlargement of Eligible Individuals’ rights under the Plan, shall substitute or adjust, as applicable, the number and kind of Shares that may be issued under the Plan or under particular forms of Awards, the number and kind of Shares subject to outstanding Awards, the option price or grant price applicable to outstanding Awards, the Annual Award Limits, and other value determinations applicable to outstanding Awards.

The Committee, in its sole discretion, may also make appropriate adjustments in the terms of Awards under the Plan to reflect or related to such changes or distributions and to modify any other terms of outstanding Awards, including modifications of Performance Measures and changes in the length of Performance Periods. The determination of the Committee as to the foregoing adjustments, if any, shall be conclusive and binding on Eligible Individuals under the Plan.

SECTION 4.         Eligibility

Awards may be granted under the Plan to Eligible Individuals.  No grant shall be made under this Plan to a director who is not an officer or a salaried employee of the Company or its Subsidiaries and Affiliates.  Subject to the provisions of the Plan, the Committee may, from time to time, select from all Eligible Individuals, those to whom Awards shall be granted and shall determine, in its sole discretion, the nature of, any and all terms permissible by law, and the amount of each Award.

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SECTION 5.         STOCK OPTIONS

(a)Grant of Stock Options.  Subject to the terms and provisions of the Plan, Stock Options may be granted to Eligible Individuals in such number, and upon such terms, and at any time and from time to time as shall be determined by the Committee, in its sole discretion; provided, however, that ISOs may be granted only to eligible employees of the Company or of any corporate Subsidiary or Affiliate (as permitted by Section 422 of the Code and the regulations thereunder).

(b)Award Agreement.  Each Stock Option grant shall be evidenced by an Award Agreement that shall specify the option price, the maximum term of the Stock Option, the number of Shares to which the Option pertains, the conditions upon which an Option shall become vested and exercisable, and such other provisions as the Committee shall determine which are not inconsistent with the terms of the Plan. The Award Agreement also shall specify whether the Stock Option is intended to be an ISO or a NQSO.

(c)Option Price.  The option price for each grant of a Stock Option under this Plan shall be as determined by the Committee and shall be specified in the Award Agreement.  The option price shall be based on not less than one hundred percent (100%) of the FMV of the Shares on the date of grant.

(d)Term.  Each Stock Option shall expire at such time as the Committee shall determine at the time of grant; provided, however, that no Stock Option shall be exercisable later than the tenth (10th) anniversary date of its grant. Notwithstanding the foregoing, for Stock Options granted to Eligible Individuals that are employed by the Company, a Subsidiary or an Affiliate outside the United States, the Committee has the authority to grant Stock Options that have a term greater than ten (10) years.

(e)Exercise of Stock Options.  Stock Options granted under this Section 5 shall be exercisable at such times and be subject to such restrictions and conditions as the Committee shall in each instance approve, which terms and restrictions need not be the same for each grant or for each Eligible Individual.

(f)Payment.  Stock Options granted under this Section 5 shall be exercised by the delivery of a notice of exercise to the Company or an agent designated by the Company in a form specified or accepted by the Committee, or by complying with any alternative procedures which may be authorized by the Committee, setting forth the number of Shares with respect to which the Option is to be exercised, accompanied by full payment for the Shares.

(g)Restrictions on Share Transferability.  The Committee may impose such restrictions on any Shares acquired pursuant to the exercise of a Stock Option granted under this Section 5 as it may deem advisable, including, without limitation, minimum holding period requirements, restrictions under applicable federal securities laws, under the requirements of any stock exchange or market upon which such Shares are then listed and/or traded, or under any blue sky or state securities laws applicable to such Shares.

(h)Termination of Employment.  Each Eligible Individual’s Award Agreement shall set forth the extent to which the Eligible Individual or his or her personal representative shall have the right to exercise the Stock Option following termination of the Eligible Individual’s employment or provision of services to the Company, its Affiliates, its Subsidiaries, as the case may be. Such provisions shall be determined in the sole discretion of the Committee, shall be included in the Award Agreement entered into with each Eligible Individual, need not be uniform among all Stock Options issued pursuant to this Section 5, and may reflect distinctions based on the reasons for termination.

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(i)Transferability of Options.

(a)Incentive Stock Options. No ISO granted under the Plan may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution. Further, all ISOs granted to an Eligible Individual under this Section 5 shall be exercisable during his or her lifetime only by such Eligible Individual.

(b)Nonqualified Stock Options. Except as otherwise provided in an Eligible Individual’s Award Agreement or otherwise determined at any time by the Committee, no NQSO granted under this Section 5 may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution; provided, however, that the Board or Committee may permit further transferability, on a general or a specific basis, and may impose conditions and limitations on any permitted transferability.  Further, except as otherwise provided in an Eligible Individual’s Award Agreement or otherwise determined at any time by the Committee, or unless the Board or Committee decides to permit further transferability, all NQSOs granted to an Eligible Individual under this Section 5 shall be exercisable during his or her lifetime only by such Eligible Individual.  With respect to those NQSOs, if any, that are permitted to be transferred to another person, references in the Plan to exercise or payment of the Option Price by the Eligible Individual shall be deemed to include, as determined by the Committee, the Eligible Individual’s permitted transferee.

(j)Notification of Disqualifying Disposition.  If any Eligible Individual shall make any disposition of Shares issued pursuant to the exercise of an ISO under the circumstances described in Section 421(b) of the Code (relating to certain disqualifying dispositions), such Eligible Individual shall notify the Company of such disposition within ten (10) days thereof.

(k)Substituting SARs.  Only in the event the Company is not accounting for equity compensation under APB Opinion No. 25, the Committee may substitute, without receiving Eligible Individual permission, SARs paid only in Stock for outstanding Stock Options; provided, however, that the terms of such SARs are the same as the terms for the Stock Options and the aggregate difference between the Fair Market Value of the underlying Shares and the grant price of the SARs is equivalent to the aggregate difference between the Fair Market Value of the underlying Shares and the Option Price of the Stock Options.

SECTION 6.         Stock Appreciation Rights

(a)Grant of SARS.  Subject to the terms and conditions of the Plan, SARS may be granted to Eligible Individuals at any time and from time to time as shall be determined by the Committee.  The Committee may grant Freestanding SARS, Tandem SARs, or any combination of these forms of SARs.

Subject to the terms and conditions of the Plan, the Committee shall have complete discretion in determining the number of SARs granted to each Eligible Individual and, consistent with the provisions of the Plan, in determining the terms and conditions pertaining to such SARs.

The grant price for each grant of a Freestanding SAR shall be determined by the Committee and shall be specified in the Award Agreement. The grant price may include (but not be limited to) a grant price based on one hundred percent (100%) of the FMV of the Shares on the date of grant, a grant price that is set at a premium to the FMV of the Shares on the date of grant, or is indexed to the FMV of the Shares on the date of grant, with the index determined by the Committee, in its discretion. The grant price of Tandem SARs shall be equal to the option price of the related Stock Option.

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(b)Award Agreement.  Each SAR Award shall be evidenced by an Award Agreement that shall specify the grant price, the term of the SAR, and such other provisions as the Committee shall determine.

(c)Term of SAR.  The term of a SAR granted under the Plan shall be determined by the Committee, in its sole discretion, and except as determined otherwise by the Committee and specified in the Award Agreement, no SAR shall be exercisable later than the tenth (10th) anniversary date of its grant. Notwithstanding the foregoing, for SARs granted to Eligible Individuals outside the United States, the Committee has the authority to grant SARs that have a term greater than ten (10) years.

(d)Exercise of Freestanding SARs.  Freestanding SARs may be exercised upon whatever terms and conditions the Committee, in its sole discretion, imposes.

(e)Exercise of Tandem SARs.  Tandem SARs may be exercised for all or part of the Shares subject to the related Stock Option upon the surrender of the right to exercise the equivalent portion of the related Stock Option. A Tandem SAR may be exercised only with respect to the Shares for which its related Stock Option is then exercisable.

Notwithstanding any other provision of this Plan to the contrary, with respect to a Tandem SAR granted in connection with an ISO (i) the Tandem SAR will expire no later than the expiration of the underlying ISO; (ii) the value of the payout with respect to the Tandem SAR may be for no more than one hundred percent (100%) of the excess of the Fair Market Value of the Shares subject to the underlying ISO at the time the Tandem SAR is exercised over the option price of the underlying ISO; and (iii) the Tandem SAR may be exercised only when the Fair Market Value of the Shares subject to the ISO exceeds the option price of the ISO.

(f)Payment of SAR Amount.  Upon the exercise of a SAR, an Eligible Individual shall be entitled to receive payment from the Company in an amount determined by multiplying:

(i)The excess of the Fair Market Value of a Share on the date of exercise over the grant price; by

(ii)The number of Shares with respect to which the SAR is exercised.

At the discretion of the Committee, the payment upon SAR exercise may be in cash, Shares, or any combination thereof, or in any other manner approved by the Committee in its sole discretion. The Committee’s determination regarding the form of SAR payout shall be set forth in the Award Agreement pertaining to the grant of the SAR.

(g)Termination of Employment. Each Award Agreement shall set forth the extent to which the Eligible Individual shall have the right to exercise the SAR following termination of the Eligible Individual’s employment with or provision of services to the Company, its Affiliates, and/or its Subsidiaries, as the case may be. Such provisions shall be determined in the sole discretion of the Committee, shall be included in the Award Agreement entered into with Eligible Individuals, need not be uniform among all SARs issued pursuant to the Plan, and may reflect distinctions based on the reasons for termination.

(h)Nontransferability of SARs.  Except as otherwise provided in an Award Agreement or otherwise at any time by the Committee, no SAR granted under the Plan may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution. Further, except as otherwise provided in an Award Agreement or otherwise at any time by the Committee, all SARs granted to an Eligible Individual under the Plan shall be exercisable

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during his or her lifetime only by such Eligible Individual.  With respect to those SARs, if any, that are permitted to be transferred to another person, references in the Plan to exercise of the SAR by the Eligible Individual or payment of any amount to the Eligible Individual shall be deemed to include, as determined by the Committee, the Eligible Individual’s permitted transferee.

(i)Other Restrictions.  The Committee shall impose such other conditions and/or restrictions on any Shares received upon exercise of a SAR granted pursuant to the Plan as it may deem advisable or desirable. These restrictions may include, but shall not be limited to, a requirement that the Eligible Individual hold the Shares received upon exercise of a SAR for a specified period of time.

SECTION 7.         Restricted Stock and Restricted Stock Units

(a)Grant of Restricted Stock or Restricted Stock Units. Subject to the terms and provisions of the Plan, the Committee, at any time and from time to time, may grant Shares of Restricted Stock and/or Restricted Stock Units to Eligible Individuals in such amounts as the Committee shall determine. Restricted Stock Units shall be similar to Restricted Stock except that no Shares are actually awarded to the Eligible Individual on the date of grant.

(b)Restricted Stock or Restricted Stock Unit Agreement.  Each Restricted Stock and/or Restricted Stock Unit grant shall be evidenced by an Award Agreement that shall specify the Period(s) of Restriction, the number of Shares of Restricted Stock or the number of Restricted Stock Units granted, and such other provisions as the Committee shall determine.

(c)Transferability. Except as provided in this Plan or an Award Agreement, the Shares of Restricted Stock and/or Restricted Stock Units granted herein may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated until the end of the applicable Period of Restriction established by the Committee and specified in the Award Agreement (and in the case of Restricted Stock Units until the date of delivery or other payment), or upon earlier satisfaction of any other conditions, as specified by the Committee, in its sole discretion, and set forth in the Award Agreement or otherwise at any time by the Committee. All rights with respect to the Restricted Stock and/or Restricted Stock Units granted to an Eligible Individual under the Plan shall be available during his or her lifetime only to such Eligible Individual, except as otherwise provided in an Award Agreement or at any time by the Committee.

(d)Other Restrictions. The Committee shall impose such other conditions and/or restrictions on any Shares of Restricted Stock or Restricted Stock Units granted pursuant to the Plan as it may deem advisable including, without limitation, a requirement that Eligible Individuals pay a stipulated purchase price for each Share of Restricted Stock or each Restricted Stock Unit, restrictions based upon the achievement of specific performance goals, time-based restrictions on vesting following the attainment of the performance goals, time-based restrictions, and/or restrictions under applicable laws or under the requirements of any stock exchange or market upon which such Shares are listed or traded, or holding requirements or sale restrictions placed on the Shares by the Company upon vesting of such Restricted Stock or Restricted Stock Units.

To the extent deemed appropriate by the Committee, the Company may retain any certificates representing Shares of Restricted Stock in the Company’s possession until such time as all conditions and/or restrictions applicable to such Shares have been satisfied or lapse.

Notwithstanding the foregoing, but subject to the provisions of Section 8 hereof, no Award in the form of Restricted Stock or RSUs, the vesting of which is conditioned only upon the continued service of the Eligible Individual, shall vest earlier than the first, second and third anniversaries of the date of grant

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thereof, on each of which dates a maximum of one-third of the Shares subject to the Award may vest, and no award in the form of Restricted Stock or RSUs, the vesting of which is conditioned upon the attainment of a specified Performance Goal or Goals, shall vest earlier than the first anniversary of the date of grant thereof.

SECTION 8.         Performance Units/Performance Shares

(a)Grant of Performance Units/Performance Shares.  Subject to the terms and provisions of the Plan, the Committee, at any time and from time to time, may grant Performance Units and/or Performance Shares to Eligible Individuals in such amounts and upon such terms as the Committee shall determine.

(b)Value of Performance Units/Performance Shares.  Each Performance Unit shall have an initial value that is established by the Committee at the time of grant. Each Performance Share shall have an initial value equal to the Fair Market Value of a Share on the date of grant. The Committee shall set Performance Measures in its discretion which, depending on the extent to which they are met, will determine the value and/or number of Performance Units/Performance Shares that will be paid out to the Eligible Individual.

(c)Earning of Performance Units/Performance Shares.  Subject to the terms of this Plan, after the applicable Performance Period has ended, the holder of Performance Units/Performance Shares shall be entitled to receive a payout of the value and number of Performance Units/Performance Shares earned by the Eligible Individual over the Performance Period, to be determined as a function of the extent to which the corresponding Performance Measures have been achieved.

(d)Form and Timing of Payment of Performance Units/Performance Shares.  Payment of earned Performance Units/Performance Shares shall be as determined by the Committee and as evidenced in the Award Agreement. Subject to the terms of the Plan, the Committee, in its sole discretion, may pay earned Performance Units/Performance Shares in the form of cash or in Shares (or in a combination thereof) equal to the value of the earned Performance Units/Performance Shares at the close of the applicable Performance Period, or as soon as practicable after the end of the Performance Period. Any Shares may be granted subject to any restrictions deemed appropriate by the Committee. The determination of the Committee with respect to the form of payout of such Awards shall be set forth in the Award Agreement pertaining to the grant of the Award.

(e)Termination of Employment.  Each Award Agreement shall set forth the extent to which the Eligible Individual shall have the right to retain Performance Units and/or Performance Shares following termination of the Eligible Individual’s employment with or provision of services to the Company, its Affiliates, and/or its Subsidiaries, as the case may be. Such provisions shall be determined in the sole discretion of the Committee, shall be included in the Award Agreement entered into with each Eligible Individual, need not be uniform among all Awards of Performance Units or Performance Shares issued pursuant to the Plan, and may reflect distinctions based on the reasons for termination.

(f)Nontransferability.  Except as otherwise provided in an Eligible Individual’s Award Agreement or otherwise at any time by the Committee, Performance Units/Performance Shares may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution. Further, except as otherwise provided in an Eligible Individual’s Award Agreement or otherwise at any time by the Committee, an Eligible Individual’s rights under the Plan shall be exercisable during his or her lifetime only by such Eligible Individual.

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SECTION 9.         Cash-Based Awards and Other Stock-Based Awards

(a)Other Stock-Based Awards.  The Committee may grant other types of equity-based or equity-related Awards not otherwise described by the terms of this Plan (including the grant or offer for sale of unrestricted Shares) in such amounts and subject to such terms and conditions, as the Committee shall determine. Such Awards may involve the transfer of actual Shares to Eligible Individuals, or payment in cash or otherwise of amounts based on the value of Shares and may include, without limitation, Awards designed to comply with or take advantage of the applicable local laws of jurisdictions other than the United States.

Except with respect to a maximum of five percent (5%) of the Shares authorized in Section 3(d)(vi), any Awards of Other Stock-Based Awards which vest on the basis of the Eligible Individual’s continued employment with or provision of service to the Company shall not provide for vesting which is any more rapid than annual pro rata vesting over a three (3) year period and any Awards of Other Stock-Based Awards which vest upon the attainment of Performance Measures shall provide for a performance period of at least twelve (12) months.

(b)Grant of Cash-Based Awards.  Subject to the terms and provisions of the Plan, the Committee, at any time and from time to time, may grant Cash-Based Awards to Eligible Individuals in such amounts and upon such terms, including the achievement of specific Performance Measures, as the Committee may determine.

(c)Value of Cash-Based and Other Stock-Based Awards.  Each Cash-Based Award shall specify a payment amount or payment range as determined by the Committee. Each Other Stock-Based Award shall be expressed in terms of Shares or units based on Shares, as determined by the Committee. The Committee may establish performance goals in its discretion. If the Committee exercises its discretion to establish performance goals, the number and/or value of Cash-Based Awards or Other Stock-Based Awards that will be paid out to the Eligible Individual will depend on the extent to which the Performance Measures are met.

(d) Payment of Cash-Based Awards and Other Stock-Based Awards.  Payment, if any, with respect to a Cash-Based Award or an Other Stock-Based Award shall be made in accordance with the terms of the Award, in cash or Shares, or any combination thereof, as the Committee determines.

(e)Termination of Employment.  The Committee shall determine the extent to which the Eligible Individual shall have the right to receive Cash-Based Awards or Other Stock-Based Awards following termination of the Eligible Individual’s employment with or provision of services to the Company, its Affiliates, and/or its Subsidiaries, as the case may be. Such provisions shall be determined in the sole discretion of the Committee, such provisions may be included in an Award Agreement entered into with each Eligible Individual, but need not be uniform among all Awards of Cash-Based Awards or Other Stock-Based Awards issued pursuant to the Plan, and may reflect distinctions based on the reasons for termination.

(f)Nontransferability.  Except as otherwise determined by the Committee, neither Cash-Based Awards nor Other Stock-Based Awards may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution. Further, except as otherwise provided by the Committee, an Eligible Individual’s rights under the Plan, if exercisable, shall be exercisable during his or her lifetime only by such Eligible Individual. With respect to those Cash-Based Awards or Other Stock-Based Awards, if any, that are permitted to be transferred to another person, references in the Plan to exercise or payment of such Awards by or to the Eligible

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Individual shall be deemed to include, as determined by the Committee, the Eligible Individual’s permitted transferee.

SECTION 10.       Performance Measures

(a)Performance Measures.  Unless and until the Committee proposes for shareholder vote and the shareholders approve a change in the general Performance Measures set forth in this Section 10, the Performance Measures upon which the payment or vesting of an Award to a Covered Employee (other than a Covered Employee Annual Incentive Award awarded or credited pursuant to Section 11) that is intended to qualify as Qualified Performance-Based Award shall be limited to the following Performance Measures:

(i)Net earnings or net income (before or after taxes);

(ii)Earnings per share (basic or fully diluted);

(iii)Net sales growth or bookings growth;

(iv)Net operating profit;

(v)Return measures (including, but not limited to, return on assets, capital, net capital utilized, equity, or sales);

(vi)Cash flow (including, but not limited to, operating cash flow, free cash flow, and cash flow return on capital);

(vii)Earnings before or after taxes, interest, depreciation, and/or amortization;

(viii)Gross or operating profit;

(ix)Productivity ratios;

(x)Efficiency ratios;

(xi)Share price (including, but not limited to, growth measures and total shareholder return);

(xii)Expense targets;

(xiii)Margins;

(xiv)Operating efficiency;

(xv)Capital efficiency;

(xvi)Strategic targets;

(xvii)Economic profit;

(xviii)Customer satisfaction;

(xix)Working capital targets;

(xx)Cash value added (“CVA”); and

(xxi)Economic value added (“EVA®”).

Any Performance Measure(s) may be used to measure the performance of the Company, Subsidiary, and/or Affiliate as a whole or any business unit of the Company, Subsidiary, and/or Affiliate or any combination thereof, as the Committee may deem appropriate, or any of the above Performance Measures as compared to the performance of a group of comparator companies, or published or special index that the Committee, in its sole discretion, deems appropriate. The Committee also has the authority to provide for accelerated vesting of any Award based on the achievement of Performance Measures pursuant to the Performance Measures specified in this Section 10.

(b)Evaluation of Performance. The Committee may provide in any such Award that any evaluation of performance may include or exclude any of the following events that occurs during a Performance Period: (i) asset write-downs, (ii) litigation or claim judgments or settlements, (iii) the effect of changes in tax laws, accounting principles, or other laws or provisions affecting reported results, (iv) any reorganization and restructuring programs, (v) extraordinary nonrecurring items as described in Accounting Principles Board Opinion No. 30 and/or in Management’s Discussion and Analysis of Financial Condition and Results of Operations appearing in the Company’s annual report to

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shareholders for the applicable year, (vi) acquisitions or divestitures, (vii) foreign exchange gains and losses, and (viii) gains and losses on asset sales. To the extent such inclusions or exclusions affect Awards to Covered Employees, they shall be prescribed in a form that meets the requirements of the Section 162(m) Exemption.

(c)Adjustment of Qualified Performance-Based Awards.  Awards that are designed to qualify as Qualified Performance-Based Awards, and that are held by Covered Employees, may not be increased. The Committee shall retain the discretion to reduce such Awards, either on a formula or discretionary basis or any combination, as the Committee determines.

(d)Committee Discretion.  In the event that applicable tax and/or securities laws or stock exchange listing requirements change to permit Committee discretion to alter the governing Performance Measures without obtaining shareholder approval of such changes, the Committee shall have sole discretion to make such changes without obtaining shareholder approval. In addition, in the event that the Committee determines that it is advisable to grant Awards that shall not qualify as Qualified Performance-Based Award, the Committee may make such grants without satisfying the requirements of Code Section 162(m) and may base vesting on Performance Measures other than those set forth in Section 10(a).

SECTION 11.       Covered Employee Annual Incentive Awards

(a)Establishment of Incentive Pool.  The Committee may designate Covered Employees who are eligible to receive a monetary payment in any Plan Year based on a percentage of an incentive pool equal to the greater of (i) ten percent (10%) of the Company’s gross profit for the Plan Year, (ii) ten percent (10%) of the Company’s consolidated operating earnings for the Plan Year, (iii) ten percent (10%) of the Company’s operating cash flow for the Plan Year, and (d) ten percent (10%) of the Company’s net income for the Plan Year.  The Committee shall allocate an incentive pool percentage to each designated Covered Employee for each Plan Year.  In no event may the incentive pool percentage for any one Covered Employee exceed twenty-five percent (25%) of the total pool for the Plan Year.  The sum of the incentive pool percentages for all Covered Employees cannot exceed one hundred percent (100%) of the total pool for the Plan Year.

(b)Determination of Covered Employees’ Portions.  As soon as possible after the determination of the incentive pool for a Plan Year, the Committee shall calculate each Covered Employee’s allocated portion of the incentive pool based upon the percentage established at the beginning of the Plan Year. Each Covered Employee’s incentive award then shall be determined by the Committee based on the Covered Employee’s allocated portion of the incentive pool subject to adjustment in the sole discretion of the Committee. In no event may the portion of the incentive pool allocated to a Covered Employee be increased in any way, including as a result of the reduction of any other Covered Employee’s allocated portion. The Committee shall retain the discretion to reduce such Awards.

SECTION 12.       Term, Amendment and Termination

(a)Term.  The Plan will terminate on the tenth anniversary of the effective date of the Plan, as provided in Section 18.  Under the Plan, Awards outstanding as of such date shall not be affected or impaired by the termination of the Plan.

(b)Amendment, Modification, Suspension, and Termination.  Subject to Section 12(d), the Committee may, at any time and from time to time, alter, amend, modify, suspend, or terminate the Plan and any Award Agreement in whole or in part; provided, however, that, without the prior approval of the Company’s shareholders and except as provided in Sections 3(d) and 5(k), Stock Options or SARs issued under the Plan will not be repriced, replaced, or regranted through cancellation, or by lowering

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the option price of a previously granted Stock Option or the grant price of a previously granted SAR, and no amendment of the Plan shall be made without shareholder approval if shareholder approval is required by law, regulation, or stock exchange rule.

(c)Adjustment of Awards Upon the Occurrence of Certain Unusual or Nonrecurring Events.  The Committee may make adjustments in the terms and conditions of, and the criteria included in, Awards in recognition of unusual or nonrecurring events (including, without limitation, the events described in Section 3(e) hereof) affecting the Company or the financial conditions of the Company or of changes in applicable laws, regulations, or accounting principles, whenever the Committee determines that such adjustments are appropriate in order to prevent unintended dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan. The determination of the Committee as to the foregoing adjustments, if any, shall be conclusive and binding on Eligible Individuals under the Plan.

(d)Awards Previously Granted.  Notwithstanding any other provision of the Plan to the contrary, no termination, amendment, suspension, or modification of the Plan or an Award Agreement shall adversely affect in any material way any Award previously granted under the Plan, without the written consent of the Eligible Individual holding such Award.

SECTION 13.       Change of Control Provisions

(a)Impact of Event.  Notwithstanding any other provision of the Plan to the contrary, in the event of a Change of Control:

(i)Any Stock Options and SARs outstanding as of the date such Change of Control is determined to have occurred, and which are not then exercisable and vested, shall become fully exercisable and vested to the full extent of the original grant.

(ii)The restrictions and deferral limitations applicable to any Restricted Stock or RSU shall lapse, and such Restricted Stock or RSU shall become free of all restrictions and become fully vested and transferable to the full extent of the original grant.

(iii)The incentive pool used to determine Covered Employee Annual Incentive Awards shall be based on the gross profit, consolidated operating earnings, operating cash flow or net income of the Plan Year immediately preceding the year of the Change of Control, or such other method of payment as may be determined by the Committee at the time of the Award or thereafter but prior to the Change of Control;

(iv)The target payout opportunities attainable under all outstanding Awards of Restricted Stock or Restricted Stock Units whose restrictions are based on performance criteria, Performance Units, and Performance Shares, shall be deemed to have been fully earned based on targeted performance being attained as of the effective date of the Change of Control;

(v)The vesting of all Awards denominated in Shares shall be accelerated as of the effective date of the Change of Control, and shall be paid out to Eligible Individuals within thirty (30) days following the effective date of the Change of Control. The Committee has the authority to pay all or any portion of the value of the Shares in cash;

(vi)Awards denominated in cash shall be paid to Eligible Individuals in cash within thirty (30) days following the effective date of the Change of Control;

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(vii)Upon a Change of Control, unless otherwise specifically provided in a written agreement entered into between the Eligible Individual and the Company, the Committee shall pay out all Cash-Based and Other Stock-Based Awards; and

(viii)The Committee may also make additional adjustments and/or settlements of outstanding Awards as it deems appropriate and consistent with the Plan’s purposes.

(b)Definition of Change of Control.  For purposes of the Plan, a “Change of Control” shall mean the happening of any of the following events:

(i)An acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a “Person”) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 30% or more of either (a) the then outstanding Shares of the Company (the “Outstanding Company Shares”) or (b) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the “Outstanding Company Voting Securities”); excluding, however, the following:  (w) any acquisition directly from the Company, other than an acquisition by virtue of the exercise of a conversion privilege unless the security being so converted was itself acquired directly from the Company, (x) any acquisition by the Company, (y) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any entity controlled by the Company, or (z) any acquisition pursuant to a transaction which complies with clauses (1), (2) and (3) of subsection (iii) of this Section 13(b); or

(ii)Individuals who, as of the effective date of the Plan, constitute the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board; provided, however, that any individual who becomes a member of the Board subsequent to such effective date of the Plan, whose election, or nomination for election by the Company’s shareholders, was approved by a vote of at least a majority of directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board; but, provided further, that any such individual whose initial assumption of office occurs as a result of either an actual or threatened election contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board shall not be so considered as a member of the Incumbent Board; or

(iii)The approval by the shareholders of the Company of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company (“Business Combination”) or if consummation of such Business Combination is subject, at the time of such approval by shareholders, to the consent of any government or governmental agency, obtaining of such consent (either explicitly or implicitly by consummation); excluding, however, such a Business Combination pursuant to which (1) all or substantially all of the individuals and entities who are the beneficial owners, respectively, of the Outstanding Company Shares and Outstanding Company Voting Securities immediately prior to such Business Combination will beneficially own, directly or indirectly, more than 60% of, respectively, the outstanding Shares, and the combined voting power of the outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination, of the

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Outstanding Company Shares and Outstanding Company Voting Securities, as the case may be, (2) no Person (other than any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company or such corporation resulting from such Business Combination) will beneficially own, directly or indirectly, 30% or more of, respectively, the outstanding Shares of the corporation resulting from such Business Combination or the combined voting power of the outstanding voting securities of such corporation entitled to vote generally in the election of directors except to the extent that such ownership existed with respect to the Company prior to the Business Combination and (3) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination will have been members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or

(iv)The approval by the shareholders of the Company of a complete liquidation or dissolution of the Company.

SECTION 14.       Unfunded Status of Plan

It is presently intended that the Plan constitute an “unfunded” plan for incentive and deferred compensation.  The Committee may authorize the creation of trusts or other arrangements to meet the obligations created under the Plan to deliver Shares or make payments; provided, however, that unless the Committee otherwise determines, the existence of such trusts or other arrangements is consistent with the “unfunded” status of the Plan.

SECTION 15.       Uncertificated Shares

To the extent that the Plan provides for issuance of certificates to reflect the transfer of Shares, the transfer of such Shares may be effected on a noncertificated basis, to the extent not prohibited by applicable law or the rules of any stock exchange on which Shares are listed.

SECTION 16.       Withholding

(a)Tax Withholding.  The Company shall have the power and the right to deduct or withhold, or require an Eligible Individual to remit to the Company, the minimum statutory amount to satisfy federal, state, and local taxes, domestic or foreign, required by law or regulation to be withheld with respect to any taxable event arising as a result of this Plan.

(b)Share Withholding.  With respect to withholding required upon the exercise of Options or SARs, upon the lapse of restrictions on Restricted Stock and Restricted Stock Units, or upon the achievement of Performance Measures related to Performance Shares, or any other taxable event arising as a result of an Award granted hereunder, Eligible Individuals may elect, subject to the approval of the Committee, to satisfy the withholding requirement, in whole or in part, by having the Company withhold Shares having a Fair Market Value on the date the tax is to be determined equal to the minimum statutory total tax that could be imposed on the transaction. All such elections shall be irrevocable, made in writing, and signed by the Eligible Individual, and shall be subject to any restrictions or limitations that the Committee, in its sole discretion, deems appropriate.

SECTION 17.       General Provisions

(a)The Committee may require each person purchasing or receiving Shares pursuant to an Award to represent to and agree with the Company in writing that such person is acquiring the Shares without a view to the distribution thereof.  The certificates or book-entry registration for such Shares may include any legend which the Committee deems appropriate to reflect any restrictions on transfer.

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(b)Notwithstanding any other provision of the Plan or agreements made pursuant thereto, the Company shall not be required to issue or deliver any Shares under the Plan prior to fulfillment of all of the following conditions:

(i)Listing or approval for listing upon notice of issuance, of such Shares on the New York Stock Exchange, Inc., or such other securities exchange as may at the time be the principal market for the Shares;

(ii)Any registration or other qualification of such Shares under any state or federal law or regulation, or the maintaining in effect of any such registration or other qualification which the Committee shall, in its absolute discretion upon the advice of counsel, deem necessary or advisable; and

(iii)Obtaining any other consent, approval, or permit from any state or federal governmental agency which the Committee shall, in its absolute discretion after receiving the advice of counsel, determine to be necessary or advisable.

(c)Nothing contained in the Plan shall prevent the Company or any Subsidiary from adopting other or additional compensation arrangements for its employees.

(d)The Plan shall not constitute a contract of employment, and neither adoption of the Plan nor the grant of an Award shall confer upon any employee any right to continued employment, nor shall it interfere in any way with the right of the Company or any Subsidiary to terminate the employment of any employee at any time.

(e)The Committee shall establish such procedures as it deems appropriate for an Eligible Individual to designate a beneficiary to whom any amounts payable in the event of the Eligible Individual’s death are to be paid or by whom any rights of the Eligible Individual, after the Eligible Individual’s death, may be exercised.

(f)In the case of a grant of an Award to any employee of a Subsidiary of the Company, the Company may, if the Committee so directs, issue or transfer the Shares, if any, covered by the Award to the Subsidiary, for such lawful consideration as the Committee may specify, upon the condition or understanding that the Subsidiary will transfer the Shares to the employee in accordance with the terms of the Award specified by the Committee pursuant to the provisions of the Plan.  All Shares underlying Awards that are forfeited or canceled shall revert to the Company.

(g)The Plan and all Awards made and actions taken thereunder shall be governed by and construed in accordance with the laws of the State of Delaware, without reference to principles of conflict of laws.

(h)Each person who is or shall have been a member of the Board, or a Committee appointed by the Board, or an officer of the company to whom authority was delegated in accordance with Section 2 shall be indemnified and held harmless by the Company against and from any loss, cost, liability, or expense that may be imposed upon or reasonably incurred by him or her in connection with or resulting from any claim, action, suit, or proceeding to which he or she may be a party or in which he or she may be involved by reason of any action taken or any failure to act under the Plan and against and from any and all amounts paid by him or her in settlement thereof, with the Company’s approval, or paid by him or her in satisfaction of any judgment in any such action, suit, or proceeding against him or her, provided he or she shall give the Company an opportunity, at its own expense, to handle and defend the same before he or she undertakes to handle and defend it on his or her own behalf,

20

unless such loss, cost, liability, or expense is a result of his or her own willful misconduct or gross negligence or except as expressly provided by statute. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such persons may be entitled under the Company’s Certificate of Incorporation or By-Laws, as a matter of law, or otherwise, or any power that the Company may have to indemnify them or hold them harmless.

(i)In the event any provision of the Plan shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of the Plan, and the Plan shall be construed and enforced as if the illegal or invalid provision had not been included.

(j)Notwithstanding any provision of the Plan to the contrary, in order to comply with the laws in other countries in which the Company, its Affiliates, and/or its Subsidiaries operate or have employees, the Committee, in its sole discretion, shall have the power and authority to:

(i)Determine which Affiliates and Subsidiaries shall be covered by the Plan;

(ii)Determine which employees outside the United States are eligible to participate in the Plan;

(iii)Modify the terms and conditions of any Award granted to employees outside the United States to comply with applicable foreign laws;

(iv)Establish subplans and modify exercise procedures and other terms and procedures, to the extent such actions may be necessary or advisable. Any subplans and modifications to Plan terms and procedures established under this Section by the Committee shall be attached to this Plan document as appendices; and

(v)Take any action, before or after an Award is made, that it deems advisable to obtain approval or comply with any necessary local government regulatory exemptions or approvals.

Notwithstanding the above, the Committee may not take any actions hereunder, and no Awards shall be granted, that would violate applicable law.

SECTION 18.       Effective Date of Plan

The Plan shall be effective as of the date it is approved by the shareholders of the Company.

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EX-10.2

Exhibit 10.2

AMENDMENT
TO THE
UNOVA, INC. RESTORATION PLAN

The UNOVA, Inc. Restoration Plan (the “Plan”) is hereby amended in the following manner, in accordance with Section 11.1 of the Plan, and effective as of June 30, 2006, except where another date is provided herein.

1.Section 3.27 is hereby amended by adding the following new definition with all subsequent sections renumbered accordingly:

3.27 Rule of 70 Employee

The term Rule of 70 Employee shall have the same meaning as under Section 3.35 of the Intermec Pension Plan, except that, for purposes of this Plan, such individual must also be an Affected Employee.

2.Section 4.1 is hereby amended by adding the following new paragraph at the end thereof:

Notwithstanding the preceding sentence, any Affected Employee who, on or after July 1, 2006, commences employment with, or is re-hired by, the Company shall not be eligible to participate in the Plan.

3.Section 6.4 is hereby amended by adding the following new paragraph at the end thereof:

Notwithstanding the above, effective June 30, 2006, each Affected Employee who is actively employed on such date who is not a Rule of 70 Employee will be 100% vested in his annual retirement benefit under the Plan. 

4.  Section 6 is hereby amended by adding the following new subsection at the end thereof:

6.6Benefit Freeze for Affected Employees other than Rule of 70 Employees

Notwithstanding the above, effective July 1, 2006, no further benefits shall accrue under Section 6.1, 6.2 or 6.3 of the Plan with regard to any Affected Employee who is not a Rule of 70 Employee.

IN WITNESS WHEREOF, INTERMEC, Inc., by its duly authorized representative, has caused this Amendment to be executed in its name and on its behalf on this 29th day of June, 2006.

INTERMEC, INC.
By	/s/ Larry D. Brady
		Larry D. Brady
		President and Chief Executive Officer

EX-10.3

Exhibit 10.3

AMENDMENT
TO THE
UNOVA, INC. SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

The UNOVA, Inc. Supplemental Executive Retirement Plan (the “Plan”) is hereby amended in the following manner, in accordance with Section 11.1 of the Plan, and effective as of June 30, 2006, except where another date is provided herein.

1.Section 2.34 is hereby amended by adding the following new definition with all subsequent sections in Article II renumbered accordingly:

Section 2.34“Rule of 70 Employee” shall have the same meaning as under Section 3.35 of the Intermec Pension Plan, except that, for purposes of the Supplemental Plan, such individual must also be an Active Participant on June 30, 2006.

2.Article 3 is hereby amended by adding the following new section to the end thereof:

Section 3.3Supplemental Plan Closed to New Participants  Notwithstanding the above, any key employee who, on or after July 1, 2006,  commences employment with, is re-hired by the Company shall not be eligible to participate in the Supplemental Plan.

3.             Article IV is hereby amended by adding the following new Section 4.7.

Section 4.7             Benefit Freeze for Employees other than Rule of 70 Employees.

Notwithstanding the above, effective July 1, 2006, no further benefits shall accrue under Article IV, V, or VI of the Plan with regard to any key employee who is not a Rule of 70 Employee.

IN WITNESS WHEREOF, INTERMEC, Inc., by its duly authorized representative, has caused this Amendment to be executed in its name and on its behalf on this 29th day of June, 2006.

INTERMEC, INC.
By	/s/ Larry D. Brady
	Larry D. Brady
	President and Chief Executive Officer

EX-10.4

Exhibit 10.4

Intermec Deferred Compensation Plan

IMPORTANT NOTE

This document has not been approved by the Department of Labor, Internal Revenue Service or any other governmental entity.  An adopting Employer must determine whether the Plan is subject to the Federal securities laws and the securities laws of the various states.  An adopting Employer may not rely on this document to ensure any particular tax consequences or to ensure that the Plan is “unfunded and maintained primarily for the purpose of providing deferred compensation to a select group of management or highly compensated employees” under Title I of the Employee Retirement Income Security Act of 1974, as amended, with respect to the Employer’s particular situation.  Fidelity Investments Institutional Operations Company, Inc., its affiliates and employees cannot provide you with legal advice in connection with the execution of this document.  This document should be reviewed by the Employer’s attorney prior to execution.

April 2006

TABLE OF CONTENTS

PREAMBLE
ARTICLE 1 – GENERAL
1.1	Plan
1.2	Effective Dates
1.3	Grandfathering of Amounts Not Subject to Code Section 409A
ARTICLE 2 – DEFINITIONS
2.1	Account
2.2	Administrator
2.3	Adoption Agreement
2.4	Beneficiary
2.5	Board or Board of Directors
2.6	Bonus
2.7	Change in Control
2.8	Code
2.9	Compensation
2.10	Director
2.11	Disabled
2.12	Eligible Employee
2.13	Employer
2.14	ERISA
2.15	Identification Date
2.16	Key Employee
2.17	Participant
2.18	Plan
2.19	Plan Sponsor
2.20	Plan Year
2.21	Related Employer
2.22	Retirement
2.23	Separation from Service
2.24	Unforeseeable Emergency
2.25	Valuation Date
2.26	Years of Service
ARTICLE 3 – PARTICIPATION
3.1	Participation
3.2	Termination of Participation

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ARTICLE 4 – PARTICIPANT CONTRIBUTIONS
4.1	Deferral Agreement
4.2	Amount of Deferral
4.3	Timing of Election to Defer
4.4	Election of Payment Schedule and Form of Payment
4.5	2005 Transitional Rules
4.6	2006 Transitional Rule
ARTICLE 5 – EMPLOYER CONTRIBUTIONS
5.1	Matching Contributions
5.2	Other Contributions
ARTICLE 6 – ACCOUNTS AND CREDITS
6.1	Establishment of Account
6.2	Credits to Account
ARTICLE 7 – INVESTMENT OF CONTRIBUTIONS
7.1	Investment Options
7.2	Adjustment of Accounts
ARTICLE 8 – RIGHT TO BENEFITS
8.1	Vesting
8.2	Death
8.3	Disability
ARTICLE 9 – DISTRIBUTION OF BENEFITS
9.1	Amount of Benefits
9.2	Method and Timing of Distributions
9.3	Unforeseeable Emergency
9.4	Termination Before Retirement
9.5	Cashouts of Amounts Not Exceeding Stated Limit
9.6	Key Employees
9.7	Change in Control
9.8	Permissible Delays in Payment

ii

ARTICLE 10 – AMENDMENT AND TERMINATION
10.1	Amendment by Employer
10.2	Retroactive Amendments
10.3	Plan Termination
10.4	Distribution Upon Termination of the Plan
ARTICLE 11 – THE TRUST
11.1	Establishment of Trust
11.2	Grantor Trust
11.3	Investment of Trust Funds
ARTICLE 12 – PLAN ADMINISTRATION
12.1	Powers and Responsibilities of the Administrator
12.2	Claims and Review Procedures
12.3	Plan Administrative Costs
ARTICLE 13 – MISCELLANEOUS
13.1	Unsecured General Creditor of the Employer
13.2	Employer’s Liability
13.3	Limitation of Rights
13.4	Anti-Assignment
13.5	Facility of Payment
13.6	Notices
13.7	Tax Withholding
13.8	Indemnification
13.9	Permitted Acceleration of Payment
13.10	Governing Law

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PREAMBLE

The Plan is intended to be a “plan which is unfunded and is maintained by an employer primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees” within the meaning of Sections 201(2), 301(a)(3) and 401(a)(1) of the Employee Retirement Income Security Act of 1974, as amended, and is further intended to conform with the requirements of Internal Revenue Code Section 409A and shall be implemented and administered in a manner consistent therewith.

ARTICLE 1 – GENERAL

1.1Plan. The Plan will be referred to by the name specified in the Adoption Agreement.

1.2Effective Dates.

(a)Original Effective Date. The Original Effective Date is the date as of which the Plan was initially adopted.

(b)Amendment Effective Date. The Amendment Effective Date is the date specified in the Adoption Agreement as of which the Plan is amended and restated.

(c)Special Effective Date. A Special Effective Date may apply to any given provision if so specified in Appendix C of the Adoption Agreement. A Special Effective Date will control over the Original Effective Date or Amendment Effective Date, whichever is applicable, with respect to such provision of the Plan.

1.3Grandfathering of Amounts Not Subject to Code Section 409A

If the Plan Sponsor has elected to treat amounts deferred before January 1, 2005 that are earned and vested on December 31, 2004 as subject to the provisions of the Plan as in effect on December 31, 2004, such grandfathered amounts will be separately accounted for and administered in accordance with the terms of the Plan as in effect on such date, except as otherwise provided in this Plan document. A summary of the grandfathered provisions is set forth in Appendix B of the Adoption Agreement.

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ARTICLE 2 – DEFINITIONS

Pronouns used in the Plan are in the masculine gender but include the feminine gender unless the context clearly indicates otherwise. Wherever used herein, the following terms have the meanings set forth below, unless a different meaning is clearly required by the context:

2.1“Account” means an account established for the purpose of recording amounts credited on behalf of a Participant and any income, expenses, gains, losses or distributions included thereon. The Account shall be a bookkeeping entry only and shall be utilized solely as a device for the measurement and determination of the amounts to be paid to a Participant pursuant to the Plan.

2.2“Administrator” means the person or persons designated by the Employer in Section 1.05 of the Adoption Agreement to be responsible for the administration of the Plan. If no Administrator is designated in the Adoption Agreement, the Administrator is the Employer.

2.3“Adoption Agreement” means the agreement adopted by the Plan Sponsor that establishes the Plan.

2.4“Beneficiary” means the persons, trusts, estates or other entitities entitled under Section 8.2 to receive benefits under the Plan upon the death of a Participant.

2.5“Board” or “Board of Directors” means the Board of Directors of the Plan Sponsor.

2.6“Bonus” means an amount of incentive remuneration payable by the Employer to a Participant.

2.7“Change in Control” means the occurrence of an event involving the Employer that is described in Section 9.7.

2.8“Code” means the Internal Revenue Code of 1986, as amended.

2.9“Compensation” means the total cash and non-cash remuneration provided to Participant by the Employer for professional services rendered during a Plan Year, whether or not includible in the gross income of the Participant for Federal income tax purposes, including bonuses but excluding reimbursements or other expense allowances, fringe benefits (cash and non-cash), moving expenses, deferred compensation and welfare benefits. Alternatively, Compensation has the meaning specified in Section 3.01b of the Adoption Agreement. In the case of a Director,

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Compensation means the total of (1) the fees paid to the Director for attendance at meetings of the Board or meetings of the Board’s committees, and (2) the annual retainer fee paid to the Director for service on the Board or committee(s) of the Board, including the Board retainer, committee chair and member retainers and any other form of retainer paid to a Director for service on the Board.

2.10“Director” means a non-employee member of the Board who has been designated by the Employer as eligible to participate in the Plan.

2.11“Disabled”  means a determination by the Administrator that the Participant is either (1) unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, or (2) is, by reason of any medically determinable physical or mental impairment which can be expected to result in death or last for a continuous period of not less than twelve months, receiving income replacement benefits for a period of not less than three months under an accident and health plan covering employees of the Employer. A Participant will be considered Disabled if he is determined to be totally disabled by the Social Security Administration.

2.12“Eligible Employee” means an employee of the Employer who is determined by the Administrator to be a member of a select group of management or highly compensated employees within the meaning of Sections 201(2), 301(a)(3) and 401(a)(1) of ERISA and who satisfies the requirements in Section 2.01 of the Adoption Agreement.

2.13“Employer” means the Plan Sponsor and any other entity which is authorized by the Plan Sponsor to participate in and, in fact, does adopt the Plan.

2.14“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

2.15“Identification Date” means the date as of which Key Employees are determined which is specified in Section 1.06 of the Adoption Agreement.

2.16“Key Employee” means a ‘specified employee’ within the meaning of Section 409A(a)(2)(B)(i) of the Code who satisfies the conditions set forth in Section 9.6.

2.17“Participant” means an Eligible Employee or Director who commences participation in the Plan in accordance with Article 3.

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2.18“Plan” means the unfunded plan of deferred compensation set forth herein, including the Adoption Agreement and any trust agreement, as adopted by the Employer and as amended from time to time.

2.19“Plan Sponsor” means the entity specified in the Adoption Agreement.

2.20“Plan Year” means the period specified in the Adoption Agreement.

2.21“Related Employer” means the Employer and (a) any corporation that is a member of a controlled group of corporations as defined in Section 414(b) of the Code that includes the Employer and (b) any trade or business that is under common control as defined in Section 414(c) of the Code that includes the Employer.

2.22“Retirement” has the meaning specified in 6.01f of the Adoption Agreement.

2.23“Separation from Service” means the date that the Participant dies, retires or otherwise has a termination of employment with respect to all entities comprising the Related Employer. A Separation from Service does not occur if the Participant is on military leave, sick leave or other bona fide leave of absence if the period of leave does not exceed six months or such longer period during which the Participant’s right to re-employment is provided by statute or contract. If the period of leave exceeds six months and the Participant’s right to re-employment is not provided either by statute or contract, a Separation from Service will be deemed to have occurred on the first day following the six-month period.

2.24“Unforeseeable Emergency” means a severe financial hardship of the Participant resulting from an illness or accident of the Participant, the Participant’s spouse, or the Participant’s dependent (as defined in Code Section 152(a)); loss of the Participant’s property due to casualty; or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant.

2.25“Valuation Date” means each business day of the Plan Year and such other date(s) as designated by the Employer.

2.26“Years of Service” means each one year period for which the Participant receives service credit in accordance with the provisions of Section 7.01d of the Adoption Agreement.

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ARTICLE 3 – PARTICIPATION

3.1Participation. The Participants in the Plan shall be those Directors and those “management” or “highly compensated” employees of the Employer within the meaning of Sections 201(2), 301(a)(3) and 401(a)(1) of ERISA who satisfy the requirements of Section 2.01 of the Adoption Agreement.

3.2Termination of Participation. The Administrator may terminate a Participant’s participation in the Plan but any such termination at the direction of the Administrator shall not take effect until the first day of the next Plan Year.

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ARTICLE 4 – PARTICIPANT CONTRIBUTIONS

4.1Deferral Agreement. Each Eligible Employee and Director may elect to defer his Compensation within the meaning of Section 3.01 of the Adoption Agreement by executing in writing or electronically, a deferral agreement in accordance with rules and procedures established by the Administrator and the provisions of this Article 4.

A new deferral agreement must be timely executed for each Plan Year during which the Eligible Employee or Director desires to defer Compensation. An Eligible Employee or Director who does not timely execute a deferral agreement shall be deemed to have elected zero deferrals of Compensation for such Plan Year.

If an Eligible Employee or Director fails to have an executed deferral agreement in effect for a Plan Year during which an Employer contribution pursuant to Article 5 is made on his behalf, the Eligible Employee or Director will be deemed to have elected to receive a lump sum distribution upon Separation from Service.

A deferral agreement may be changed or revoked during the period specified by the Administrator. Except as provided in Section 9.3 or in Section 4.01c of the Adoption Agreement, a deferral agreement becomes irrevocable at the close of the specified period.

4.2Amount of Deferral. An Eligible Employee or Director may elect to defer Compensation in any amount permitted by Section 4.01a of the Adoption Agreement.

4.3Timing of Election to Defer. Each Eligible Employee or Director who desires to defer Compensation otherwise payable during a Plan Year must execute a deferral agreement within the period preceding the Plan Year specified by the Administrator. Each Eligible Employee who desires to defer Compensation that is a Bonus must execute a deferral agreement within the period preceding the Plan Year during which the Bonus is earned that is specified by the Administrator, except that if the Bonus can be treated as performance based compensation as described in Code Section 409A(a)(4)(B)(iii), the deferral agreement may be executed within the period specified by the Administrator, which period, in no event, shall end after the date which is six months prior to the end of the period during which the Bonus is earned.

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Except as otherwise provided below, an employee who is classified or designated as an Eligible Employee during a Plan Year or a Director who is designated as eligible to participate during a Plan Year may elect to defer Compensation otherwise payable during the remainder of such Plan Year in accordance with the rules of this Section 4.3 by executing a deferral agreement within the thirty (30) day period beginning on the date the employee is classified or designated as an Eligible Employee or the date the Director is designated as eligible, whichever is applicable, if permitted by Section 2.01 of the Adoption Agreement. If Compensation is based on a specified performance period that begins before the Eligible Employee or Director executes his deferral agreement, the election will be deemed to apply to the portion of such Compensation equal to the total amount of Compensation for the performance period multiplied by the ratio of the number of days remaining in the performance period after the election over the total number of days in the performance period. The rules of this paragraph shall not apply if the Eligible Employee or Director has ever participated or is participating in a “Plan” within the meaning of Prop. Reg. Sec. 1.409A-1(c) sponsored by the Employer.

4.4Election of Payment Schedule and Form of Payment.

At the time an Eligible Employee or Director completes a deferral agreement, the Eligible Employee or Director must elect a distribution event (which includes a specified time) and a form of payment for the Compensation subject to the deferral agreement from among the options the Administrator has made available for this purpose and which are specified in 6.01b of the Adoption Agreement.

4.52005 Transitional Rules

If elected by the Employer in Section 13.01 of the Adoption Agreement, one or more of the following transitional rules set forth in Notice 2005-1 shall apply during calendar year 2005. Each transitional rule that applies during calendar year 2005 will be implemented in accordance with rules and procedures established by the Administrator.

(a)New Payment Elections.

A Participant may make new payment elections with respect to amounts subject to Code Section 409A provided the elections are made no later than December 31, 2005. The new payment elections may apply to amounts deferred before the date of the election and can be made without regard to Code Sections 409A(a)(3) and (4) and any inconsistent provisions in the Plan to the contrary. A Participant who fails to make a new payment election in accordance with this Section 4.5(a) with respect any

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amount subject to Code Section 409A for which a valid payment election was not made in accordance with the Plan and the requirements of Code Section 409A will be deemed to have made the default elections provided in Section 13.01a of the Adoption Agreement.

If the Employer elects not to permit new payment elections in accordance with this Section 4.5(a), the default elections specified in Section 13.01a of the Adoption Agreement will apply to all amounts subject to Code Section 409A that were deferred prior to December 31, 2005 for which a valid payment election was not made in accordance with the Plan and the requirements of Code Section 409A.

(b)Elections to terminate participation or cancel an outstanding election.

A Participant may elect to terminate participation or cancel a deferral election with respect to amounts subject to Code Section 409A. An election made pursuant to this Section 4.5(b) may apply:  (i) to all or part of calendar year 2005; (ii) to elective and/or nonelective deferred compensation under the Plan; (iii) to all or any portion of the Plan; and/or (iv) to one or more outstanding deferral elections with regard to amounts subject to Code Section 409A. An election made pursuant to this Section 4.5(b) includes a termination or cancellation that results in a lower amount of deferral for the period without a complete elimination of deferrals. Any election made pursuant to this Section 4.5(b) may be made without regard to Code Sections 409A(a)(2), (3) and (4) and any inconsistent provisions in the Plan to the contrary.

(c)Prospective Deferral Elections.

A Participant may make a deferral election with respect to Compensation that has not yet been paid or become payable at the time of the election, provided the election is made no later than March 15, 2005. The prospective deferral election may be made without regard to Code Section 409A(a)(4) and any inconsistent provisions in the Plan to the contrary.

4.62006 Transitional Rule

If elected by the Employer in accordance with Section 13.02 of the Adoption Agreement, the following transitional rule will apply during calendar year 2006. The rule will be implemented in accordance with rules and procedures established by the Administrator.

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A Participant may make new payment elections with respect to amounts subject to Code Section 409A provided: (1) the elections are made no later than December 31, 2006 and, (2) a Participant cannot in 2006 change payment elections with respect to payments that would otherwise have become payable in 2006 or cause payments to be made in 2006.

A Participant who fails to make a new payment election in accordance with amount subject to Code Section 409A for which a valid payment election was not made in accordance with the Plan and the requirements of Code Section 409A will be deemed to have made the default elections provided in Section 13.01a of the Adoption Agreement.

If the Employer elects not to permit new payment elections in accordance with this Section 4.6, the default elections in Section 13.01a of the Adoption Agreement will apply to all amounts subject to Code Section 409A for which a valid payment election was not made in accordance with the Plan and the requirements of Code Section 409A.

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ARTICLE 5 – EMPLOYER CONTRIBUTIONS

5.1Matching Contributions. If elected by the Employer in Section 5.01a of the Adoption Agreement, the Employer will credit the Participant’s Account with a matching contribution determined in accordance with the formula specified in Section 5.01a of the Adoption Agreement. The matching contribution will be credited to the Participant’s Account at the time specified in Section 5.01a(iii) of the Adoption Agreement.

5.2Other Contributions. If elected by the Employer in Section 5.01b of the Adoption Agreement, the Employer will credit the Participant’s Account with a contribution determined in accordance with the formula or method specified in Section 5.01b of the Adoption Agreement. The contribution will be credited to the Participant’s Account at the time specified in Section 5.01b(iii) of the Adoption Agreement.

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ARTICLE 6 – ACCOUNTS AND CREDITS

6.1Establishment of Account. For accounting and computational purposes only, the Administrator will establish and maintain an Account for each Participant which will reflect the credits made pursuant to Section 6.2 along with the earnings, expenses, gains and losses allocated thereto, attributable to the hypothetical investments made with the amounts in the Participant’s Account as provided in Article 7. The Administrator will establish and maintain such other records and accounts, as it decides in its discretion to be reasonably required or appropriate to discharge its duties under the Plan.

6.2Credits to Account. A Participant’s Account will be credited for each Plan Year with the amount of his elective deferrals under Section 4.1 at the time the amount subject to the deferral election would otherwise have been payable to the Participant and the amount of Employer contributions made on his behalf under Article 5. Such amounts will be credited to the Participant’s Account at the times specified, respectively, in Sections 5.01a(iii) and 5.01b(iii) of the Adoption Agreement.

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ARTICLE 7 – INVESTMENT OF CONTRIBUTIONS

7.1Investment Options. The amount in a Participant’s Account shall be treated as invested in the investment options designated for this purpose by the Administrator and set forth in Appendix A to the Adoption Agreement.

7.2Adjustment of Accounts. The amount in a Participant’s Account shall be adjusted for hypothetical investment earnings, expenses, gains or losses in an amount equal to the earnings, expenses, gains or losses attributable to the investment options selected by the party designated in Section 9.01 of the Adoption Agreement from among the investment options provided in Section 7.1. If permitted by Section 9.01 of the Adoption Agreement, a Participant may, in accordance with rules and procedures established by the Administrator, select the investments from among the options provided in Section 7.1 to be used for the purpose of calculating future hypothetical investment adjustments to the Participant’s Account or to future credits to the Account under Section 6.2 effective as the Valuation Date coincident with or next following notice to the Administrator. The Account of each Participant shall be adjusted as of each Valuation Date to reflect: (a) the hypothetical earnings, expenses, gains and losses described above; (b) amounts credited pursuant to Section 6.2; and (c) distributions or withdrawals. In addition, the Account of each Participant may be adjusted for its allocable share of the hypothetical costs and expenses associated with the maintenance of the hypothetical investments provided in Section 7.1.

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ARTICLE 8 – RIGHT TO BENEFITS

8.1Vesting. A Participant, at all times, has the 100% nonforfeitable interest in the amounts credited to his Account attributable to his elective deferrals made in accordance with Section 4.1.

A Participant’s right to the amounts credited to his Account attributable to Employer contributions made in accordance with Article 5 shall be determined in accordance with the relevant schedule specified in Section 7.01 of the Adoption Agreement

8.2Death. The balance or remaining balance credited to a Participant’s vested Account shall be paid to his Beneficiary at the time specified in Section 6.01a of the Adoption Agreement in a single lump sum payment following the date of death, unless additional forms of payment have been made available for this purpose in Section 6.01b of the Adoption Agreement and the Participant has made a valid election (or valid elections) of a form of payment in accordance with the provisions of Article 4. If additional forms have been made available, payment to the Beneficiary shall be made at the time specified in Section 6.01a of the Adoption Agreement in the form elected by the Participant in accordance with the provisions of Article 4. If multiple Beneficiaries have been designated, each Beneficiary shall receive payment of his specified portion of the Account at the time specified in Section 6.01a of the Adoption Agreement in the form elected by the Participant.

A Participant may designate a Beneficiary or Beneficiaries, or change any prior designation of Beneficiary or Beneficiaries in accordance with rules and procedures established by the Administrator.

A copy of the death notice or other sufficient documentation must be filed with and approved by the Administrator. If upon the death of the Participant there is, in the opinion of the Administrator, no designated Beneficiary for part or all of the Participant’s vested Account, such amount will be paid to his estate (such estate shall be deemed to be the Beneficiary for purposes of the Plan) in a single lump sum payment

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8.3Disability. The balance or remaining balance credited to a Participant’s vested Account shall be paid to the Participant at the time specified in Section 6.01a of the Adoption Agreement in a single lump sum cash payment following the date a Participant incurs a Disability as defined in Section 2.11, unless additional forms of payment have been made available for this purpose in Section 6.01b of the Adoption Agreement and the Participant has made a valid election of a different form of payment. If additional forms have been made available, payment shall be made at the time specified in Section 6.01a of the Adoption Agreement and in the form elected by the Participant in accordance with the provisions of Article 4. The Administrator, in its sole discretion, shall determine whether a Participant has experienced a disability for purposes of this Section 8.3.

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ARTICLE 9 – DISTRIBUTION OF BENEFITS

9.1Amount of Benefits. The vested amount credited to a Participant’s Account as determined under Articles 6, 7 and 8 shall determine and constitute the basis for the value of benefits payable to the Participant under the Plan.

9.2Method and Timing of Distributions. Except as otherwise provided in this Article 9, distributions under the Plan shall be made in accordance with the elections made by the Participant under Article 4. Distributions following a payment event shall commence at the time specified in Section 6.01a of the Adoption Agreement. If permitted by Section 6.01g of the Adoption Agreement, a Participant may elect, at least twelve months before a scheduled distribution event, to delay the payment date for a minimum period of sixty months from the originally scheduled date of payment. The re-deferral election must be made in accordance with procedures and rules established by the Administrator. The Participant may, at the same time the date of payment is deferred, change the form of payment but such change in the form of payment may not effect an acceleration of payment in violation of Section 409A of the Code.

9.3Unforeseeable Emergency. A Participant may request a distribution due to an Unforeseeable Emergency if the Employer has elected to permit Unforeseeable Emergency withdrawals under Section 8.01a of the Adoption Agreement. The request must be in writing and must be submitted to the Administrator along with evidence that the circumstances constitute an Unforeseeable Emergency. The Administrator has the discretion to require whatever evidence it deems necessary to determine whether a distribution is warranted. Whether a Participant has incurred an Unforeseeable Emergency will be determined by the Administrator on the basis of the relevant facts and circumstances in its sole discretion, but, in no event, will an Unforeseeable Emergency be deemed to exist if the hardship can be relieved:  (a) through reimbursement or compensation by insurance or otherwise, (b) by liquidation of the Participant’s assets to the extent such liquidation would not itself cause severe financial hardship, or (c) by cessation of deferrals under the Plan. A distribution due to an Unforeseeable Emergency must be limited to the amount reasonably necessary to satisfy the emergency need and may include any amounts necessary to pay any federal, state or local income tax penalties reasonably anticipated to result from the distribution. The distribution will be made in the form of a single lump sum cash payment. If permitted by Section 8.01b of the Adoption Agreement, a Participant’s deferral elections for the remainder of the Plan Year will be cancelled upon a withdrawal due to Unforeseeable Emergency.

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9.4Termination Before Retirement. If the Employer has elected a Separation from Service override in accordance with Section 6.01d of the Adoption Agreement, the following provisions apply. A Participant who experiences a Separation from Service before Retirement for any reason other than death shall receive the vested amount credited to his Account at the time specified in Section 6.01a of the Adoption Agreement in a single lump sum payment following such termination or cessation of service regardless of whether the Participant had made different elections of time or form of payment as to the vested amounts credited to his Account or whether the Participant was receiving installment payouts at the time of such termination.

9.5Cashouts Of Amounts Not Exceeding Stated Limit. If the vested amount credited to the Participant’s Account does not exceed the limit established for this purpose by the Employer in Section 6.01e of the Adoption Agreement at the time he separates from service with the Employer for any reason, the Employer shall distribute such amount to the Participant at the time specified in Section 6.01a of the Adoption Agreement in a single lump sum cash payment following such termination regardless of whether the Participant had made different elections of time or form of payment as to the vested amount credited to his Account or whether the Participant was receiving installments at the time of such termination. A Participant’s Account, for purposes of this Section 9.5, shall include any amounts described in Section 1.3.

9.6Key Employees. In no event shall a distribution made to a Key Employee from his Account occur before the date which is six months after the date of his Separation from Service with the Employer. For purposes of this Section 9.6, a Key Employee means an employee of an Employer any of whose stock is publicly traded on an established securities market or otherwise who satisfies the requirements of Section 416(i)(1)(A)(i), (ii) or (iii), of the Code, determined without regard to Section 416(i)(5) of the Code, at any time during the twelve-month period ending on the Identification Date. An employee who is determined to be a Key Employee on an Identification Date shall be treated as a Key Employee for purposes of the six-month delay in distributions set forth in this Section 9.6 for the twelve-month period beginning on the first day of the fourth month following the Identification Date. Whether any stock of the Employer is traded on an established securities market or otherwise is determined on the date a Participant experiences a Separation from Service. Installment distributions to a Key Employee that are delayed due to the application of the requirements of this Section 9.6 shall commence as of the earliest date permitted by Code Section 409A.

9.7Change in Control. If the Employer has elected to permit distributions upon a Change in Control, the following provisions shall apply. A

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distribution made upon a Change in Control will be made at the time specified in Section 6.01a of the Adoption Agreement in the form elected by the Participant in accordance with the procedures described in Article 4. A Change in Control will occur upon a change in the ownership of the Plan Sponsor, a change in the effective control of the Plan Sponsor or a change in the ownership of a substantial portion of the assets of the Plan Sponsor. The Plan Sponsor, for this purpose, includes any corporation identified in this Section 9.7.

If a Participant continues to make deferrals in accordance with Article 4 after he has received a distribution due to a Change in Control, the residual amount payable to the Participant shall be paid at the time and in the form specified in the elections he makes in accordance with Article 4 or upon his Death or Disability as provided in Article 8.

Whether a Change in Control has occurred will be determined by the Administrator in accordance with the rules and definitions set forth in this Section 9.7. A distribution to the Participant will be treated as occurring upon a Change in Control if the Plan Sponsor terminates the Plan and distributes the Participant’s benefits within twelve months of a Change in Control as provided in Section 10.3.

a)Relevant Corporations. To constitute a Change in Control for purposes of the Plan, the event must relate to (i) the corporation for whom the Participant is performing services at the time of the Change in Control, (ii) the corporation that is liable for the payment of the Participant’s benefits under the Plan (or all corporations liable if more than one corporation is liable), or (iii) a corporation that is a majority shareholder of a corporation identified in (i) or (ii), or any corporation in a chain of corporations in which each corporation is a majority corporation of another corporation in the chain, ending in a corporation identified in (i) or (ii). A majority shareholder is defined as a shareholder owning more than fifty percent (50%) of the total fair market value and voting power of such corporation.

b)Stock Ownership. Code Section 318(a) applies for purposes of determining stock ownership. Stock underlying a vested option is considered owned by the individual who owns the vested option (and the stock underlying an unvested option is not considered owned by the individual who holds the unvested option). If, however, a vested option is exercisable for stock that is not substantially vested (as defined by Treasury Regulation Section 1.83-3(b) and (j)) the stock underlying the option is not treated as owned by the individual who holds the option. Mutual and cooperative corporations are treated as having stock for purposes of this Section 9.7.

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c)Change in the Ownership of a Corporation. A change in the ownership of a corporation occurs on the date that any one person or more than one person acting as a group, acquires ownership of stock of the corporation that, together with stock held by such person or group, constitutes more than fifty percent (50%) of the total fair market value or total voting power of the stock of such corporation. If any one person or more than one person acting as a proxy is considered to own more than fifty percent (50%) of the total fair market value or total voting power of the stock of a corporation, the acquisition of additional stock by the same person or persons is not considered to cause a change in the ownership of the corporation (or to cause a change in the effective control of the corporation as discussed below in Section 9.7(d)). An increase in the percentage of stock owned by any one person, or persons acting as a group, as a result of a transaction in which the corporation acquires its stock in exchange for property will be treated as an acquisition of stock. Section 9.7(c) applies only when there is a transfer of stock of a corporation (or issuance of stock of a corporation) and stock in such corporation remains outstanding after the transaction. For purposes of this Section 9.7(c), persons will not be considered to be acting as a group solely because they purchase or own stock of the same corporation at the same time or as a result of a public offering. Persons will, however, be considered to be acting as a group if they are owners of a corporation that enters into a merger, consolidation, purchase or acquisition of stock, or similar business transaction with the corporation. If a person, including an entity, owns stock in both corporations that enter into a merger, consolidation, purchase or acquisition of stock, or similar transaction, such shareholder is considered to be acting as a group with other shareholders in a corporation prior to the transaction giving rise to the change and not with respect to the ownership interest in the other corporation.

d)Change in the effective control of a corporation. A change in the effective control of a corporation occurs on the date that either (i) any one person, or more than one person acting as a group, acquires (or has acquired during the twelve month period ending on the date of the most recent acquisition by such person or persons) ownership of stock of the corporation possessing thirty-five (35%) or more of the total voting power of the stock of such corporation, or (ii) a majority of members of the corporation’s board of directors is replaced during any twelve month period by directors whose appointment or election is not endorsed by a majority of the members of the corporation’s board of directors prior to the date of the appointment or election, provided that for purposes of this paragraph (ii), the term corporation refers solely to the relevant corporation identified in Section 9.7(a) for which no other corporation is a majority shareholder for purposes of

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Section 9.7(a). In the absence of an event described in Section 9.7(d)(i) or (ii), a change in the effective control of a corporation will not have occurred. A change  in effective control may also occur in any transaction in which either of the two corporations involved in the transaction has a change in the ownership of such corporation as described in Section 9.7(c) or a change in the ownership of a substantial portion of the assets of such corporation as described in Section 9.7(e). If any one person, or more than one person acting as a group, is considered to effectively control a corporation within the meaning of this Section 9.7(d), the acquisition of additional control of the corporation by the same person or persons is not considered to cause a change in the effective control of the corporation or to cause a change in the ownership of the corporation within the meaning of Section 9.7(c). For purposes of this Section 9.7(d), persons will or will not be considered to be acting as a group in accordance with rules similar to those set forth in Section 9.7(c) with the following exception. If a person, including an entity, owns stock in both corporations that enter into a merger, consolidation, purchase or acquisition of stock, or similar transaction, such shareholder is considered to be acting as a group with other shareholders in a corporation only with respect to the ownership in that corporation prior to the transaction giving rise to the change and not with respect to the ownership interest in the other corporation.

e)Change in the ownership of a substantial portion of a corporation’s assets. A change in the ownership of a substantial portion of a corporation’s assets occurs on the date that any one person, or more than one person acting as a group (as determined in accordance with rules similar to those set forth in Section 9.7(d)), acquires (or has acquired during the twelve month period ending on the date of the most recent acquisition by such person or persons) assets from the corporation that have a total gross fair market value equal to or more than forty percent (40%) of the total gross fair market value of all of the assets of the corporation immediately prior to such acquisition or acquisitions. For this purpose, gross fair market value means the value of the assets of the corporation of the value of the assets being disposed of determined without regard to any liabilities associated with such assets. There is no Change in Control event under this Section 9.7(e) when there is a transfer to an entity that is controlled by the shareholders of the transferring corporation immediately after the transfer. A transfer of assets by a corporation is not treated as a change in ownership of such assets if the assets are transferred to (i) a shareholder of the corporation (immediately before the asset transfer) in exchange for or with respect to its stock, (ii) an entity, fifty percent (50%) or more of the total value or voting power of which is owned, directly or indirectly, by the corporation, (iii) a person, or more than one person acting as a

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group, that owns, directly or indirectly, fifty percent (50%) or more of the total value or voting power of all the outstanding stock of the corporation, or (iv) an entity, at least fifty (50%) of the total value or voting power of which is owned, directly or indirectly, by a person described in Section 9.7(e)(iii). For purposes of the foregoing, and except as otherwise provided, a person’s status is determined immediately after the transfer of assets.

9.8Permissible Delays in Payment. Distributions may be delayed beyond the date payment would otherwise occur in accordance with the provisions of Articles 8 and 9 in any of the following circumstances. The Employer may delay payment if it reasonably anticipates that its deduction with respect to such payment would be limited or eliminated by the application of Section 162(m) of the Code. Payment must be made at the earliest date at which the Employer reasonably anticipates that the deduction of the payment amount will not be eliminated or limited by Section 162(m) of the Code or the calendar year in which the Participant Separates from Service. The Employer may also delay payment if it reasonably anticipates that the payment will violate a term of a loan agreement or other similar contract to which the Employer is a party and such violation will cause material harm to the Employer. Payment must be made at the earliest date on which the Employer reasonably anticipates that the making of the payment will not cause a violation or the violation will no longer cause material harm to the Employer. Payment cannot be delayed if the facts and circumstances indicate that the Employer entered into the loan agreement or similar contract not for legitimate business reasons but to avoid the restrictions on deferral elections and subsequent deferral elections under Section 409A of the Code. The Employer may also delay payment if it reasonably anticipates that the making of the payment will violate Federal Securities Laws or other applicable laws provided payment is made at the earliest date on which the Employer reasonably anticipates that the making of the payment will not cause such violation. The Employer also reserves the right to delay payment upon such other events and conditions as the Secretary of the Treasury may prescribe in generally applicable guidance published in the Internal Revenue Bulletin.

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ARTICLE 10 – AMENDMENT AND TERMINATION

10.1Amendment by Employer. The Plan Sponsor reserves the right to amend the Plan (for itself and each Employer) through action of its Board of Directors. An amendment must be in writing and executed by an officer authorized to take such action. Each amendment shall be effective when approved by the Board in its resolution. No amendment can directly or indirectly deprive any current or former Participant or Beneficiary of all or any portion of his Account which had accrued prior to the amendment.

10.2Retroactive Amendments. An amendment made by the Plan Sponsor in accordance with Section 10.1 may be made effective on a date prior to the first day of the Plan Year in which it is adopted if such amendment is necessary or appropriate to enable the Plan to satisfy the applicable requirements of the Code or ERISA or to conform the Plan to any change in federal law or to any regulations or ruling thereunder. Any retroactive amendment by the Plan Sponsor shall be subject to the provisions of Section 10.1.

10.3Plan Termination. If so elected by the Employer in 11.01 of the Adoption Agreement, the Employer reserves the right to terminate the Plan and distribute all amounts credited to all Participant Accounts within the 30 days preceding or the twelve months following a Change in Control as determined in accordance with the rules set forth in Section 9.7. For this purpose, the Plan will be treated as terminated only if all substantially similar arrangements sponsored by the Employer are terminated so that all participants under the Plan and all similar arrangements are required to receive all amounts deferred under the terminated arrangements within twelve months of the date of termination of the arrangements. In addition, the Employer reserves the right to terminate the Plan within twelve months of a corporate dissolution taxed under Section 331 of the Code or with the approval of a bankruptcy court pursuant to United States Code Section 503(b)(1)(A) provided that amounts deferred under the Plan are included in the gross incomes of Participants in the latest of (1) the calendar year in which the termination occurs, (2) the calendar year in which the amount is no longer subject to a substantial risk of forfeiture, or (3) the first calendar year in which payment is administratively practicable. The Employer retains the discretion to terminate the Plan if (1) all arrangements sponsored by the Employer that would be aggregated with any terminated arrangement under Prop. Reg. Section 1.409A-1(c) are terminated, (2) no payments other than payments that would be payable under the terms of the arrangements if the termination had not occurred are made within twelve months of the termination of the arrangements, (3) all payments are made within twenty-four months of the termination of the arrangements, (4) the Employer does not adopt a new arrangement that would be aggregated with any terminated arrangement under Prop. Reg.

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Section 1.409A-1(c) at any time within the five year period following the date of termination of the arrangement. The Employer also reserves the right to terminate the Plan under such conditions and events as may be prescribed by the Secretary of the Treasury in generally applicable guidance published in the Internal Revenue Bulletin.

10.4Distribution Upon Termination of the Plan. Except as provided in Section 10.3, the Plan may not be terminated before the date on which all amounts credited to all Participant Accounts have been distributed in accordance with Articles 8 and 9.

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ARTICLE 11 – THE TRUST

11.1Establishment of Trust. The Plan Sponsor may but is not required to establish a trust to hold amounts which the Plan Sponsor may contribute from time to time to correspond to some or all amounts credited to Participants under Section 6.2. If the Plan Sponsor elects to establish a trust in accordance with Section 10.01 of the Adoption Agreement, the provisions of Sections 11.2 and 11.3 shall become operative.

11.2Grantor Trust. Any trust established by the Plan Sponsor shall be between the Plan Sponsor and a trustee pursuant to a separate written agreement under which assets are held, administered and managed, subject to the claims of the Plan Sponsor’s creditors in the event of the Plan Sponsor’s insolvency, until paid to the Participant and/or his Beneficiaries specified in the Plan. The trust is intended to be treated as a grantor trust under the Code, and the establishment of the trust shall not cause the Participant to realize current income on amounts contributed thereto. The Plan Sponsor must notify the trustee in the event of a lawsuit, bankruptcy or insolvency.

11.3Investment of Trust Funds. Any amounts contributed to the trust by the Plan Sponsor shall be invested by the trustee in accordance with the provisions of the trust and the instructions of the Administrator. Trust investments need not reflect the hypothetical investments selected by Participants under Section 7.1 for the purpose of adjusting Accounts and the earnings or investment results of the trust shall not affect the hypothetical investment adjustments to Participant Accounts under the Plan.

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ARTICLE 12 – PLAN ADMINISTRATION

12.1Powers and Responsibilities of the Administrator. The Administrator has the full power and the full responsibility to administer the Plan in all of its details, subject, however, to the applicable requirements of ERISA. The Administrator’s powers and responsibilities include, but are not limited to, the following:

(a)To make and enforce such rules and regulations as it deems necessary or proper for the efficient administration of the Plan;

(b)To interpret the Plan, its interpretation thereof in good faith to be final and conclusive on all persons claiming benefits under the Plan;

(c)To decide all questions concerning the Plan and the eligibility of any person to participate in the Plan;

(d)To administer the claims and review procedures specified in Section 12.2;

(e)To compute the amount of benefits which will be payable to any Participant, former Participant or Beneficiary in accordance with the provisions of the Plan;

(f)To determine the person or persons to whom such benefits will be paid;

(g)To authorize the payment of benefits;

(h)To comply with the reporting and disclosure requirements of Part 1 of Subtitle B of Title I of ERISA;

(i)To appoint such agents, counsel, accountants, and consultants as may be required to assist in administering the Plan;

(j)By written instrument, to allocate and delegate its responsibilities, including the formation of an Administrative Committee to administer the Plan.

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12.2Claims and Review Procedures.

(a)Claims Procedure. If any person believes he is being denied any rights or benefits under the Plan, such person may file a claim in writing with the Administrator. If any such claim is wholly or partially denied, the Administrator will notify such person of its decision in writing. Such notification will contain (i) specific reasons for the denial, (ii) specific reference to pertinent Plan provisions, (iii) a description of any additional material or information necessary for such person to perfect such claim and an explanation of why such material or information is necessary, and (iv) information as to the steps to be taken if the person wishes to submit a request for review. Such notification will be given within 90 days after the claim is received by the Administrator (or within 180 days, if special circumstances require an extension of time for processing the claim, and if written notice of such extension and circumstances is given to such person within the initial 90-day period). If such notification is not given within such period, the claim will be considered denied as of the last day of such period and such person may request a review of his claim.

(b)Review Procedure. Within 60 days after the date on which a person receives a written notification of denial of claim (or, if written notification is not provided, within 60 days of the date denial is considered to have occurred), such person (or his duly authorized representative) may (i) file a written request with the Administrator for a review of his denied claim and of pertinent documents and (ii) submit written issues and comments to the Administrator. The Administrator will notify such person of its decision in writing. Such notification will be written in a manner calculated to be understood by such person and will contain specific reasons for the decision as well as specific references to pertinent Plan provisions. The decision on review will be made within 60 days after the request for review is received by the Administrator (or within 120 days, if special circumstances require an extension of time for processing the request, such as an election by the Administrator to hold a hearing, and if written notice of such extension and circumstances is given to such person within the initial 60-day period). If the decision on review is not made within such period, the claim will be considered denied.

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12.3Plan Administrative Costs. All reasonable costs and expenses (including legal, accounting, and employee communication fees) incurred by the Administrator in administering the Plan shall be paid by the Employer.

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ARTICLE 13 – MISCELLANEOUS

13.1Unsecured General Creditor of the Employer. Participants and their Beneficiaries, heirs, successors and assigns shall have no legal or equitable rights, interests or claims in any property or assets of the Employer. For purposes of the payment of benefits under the Plan, any and all of the Employer’s assets shall be, and shall remain, the general, unpledged, unrestricted assets of the Employer. Each Employer’s obligation under the Plan shall be merely that of an unfunded and unsecured promise to pay money in the future.

13.2Employer’s Liability. Each Employer’s liability for the payment of benefits under the Plan shall be defined only by the Plan and by the deferral agreements entered into between a Participant and the Employer. An Employer shall have no obligation or liability to a Participant under the Plan except as provided by the Plan and a deferral agreement or agreements. An Employer shall have no liability to Participants employed by other Employers.

13.3Limitation of Rights. Neither the establishment of the Plan, nor any amendment thereof, nor the creation of any fund or account, nor the payment of any benefits, will be construed as giving to the Participant or any other person any legal or equitable right against the Employer or Administrator, except as provided herein; and in no event will the terms of employment or service of the Participant be modified or in any way affected hereby.

13.4Anti-Assignment. None of the benefits or rights of a Participant or any Beneficiary of a Participant shall be subject to the claim of any creditor. In particular, to the fullest extent permitted by law, all such benefits and rights shall be free from attachment, garnishment, or any other legal or equitable process available to any creditor of the Participant and his or her Beneficiary. Neither the Participant nor his or her Beneficiary shall have the right to alienate, anticipate, commute, pledge, encumber, or assign any of the payments which he or she may expect to receive, contingently or otherwise, under the Plan, except the right to designate a Beneficiary to receive death benefits provided hereunder.

13.5Facility of Payment. If the Administrator determines, on the basis of medical reports or other evidence satisfactory to the Administrator, that the recipient of any benefit payments under the Plan is incapable of handling his affairs by reason of minority, illness, infirmity or other incapacity, the Administrator may direct the Employer to disburse such payments to a person or institution designated by a court which has jurisdiction over such recipient or a person or institution otherwise having the legal authority under State law for the care and control of such recipient. The receipt by such person or institution of any such payments therefore, and any such payment to the extent thereof, shall

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discharge the liability of the Employer for the payment of benefits hereunder to such recipient.

13.6Notices. Any notice or other communication in connection with the Plan shall be deemed delivered in writing if addressed as provided below and if either actually delivered at said address or, in the case or a letter, 5 business days shall have elapsed after the same shall have been deposited in the United States mails, first-class postage prepaid and registered or certified:

(a)If it is sent to the Employer or Administrator, it will be at the address specified by the Employer; or

(b)In each case at such address as the addressee shall have specified by written notice delivered in accordance with the foregoing to the addressor’s then effective notice address.

13.7Tax Withholding. The Employer shall have the right to deduct from all payments or deferrals made under the Plan any tax required by law to be withheld. If the Employer concludes that tax is owing with respect to any deferral or payment hereunder, the Employer shall withhold such amounts from any payments due the Participant, as permitted by law, or otherwise make appropriate arrangements with the Participant or his Beneficiary for satisfaction of such obligation. Tax, for purposes of this Section 13.7 means any federal, state, local or any other governmental income tax, employment or payroll tax, excise tax, or any other tax or assessment owing with respect to amounts deferred, any earnings thereon, and any payments made to Participants under the Plan.

13.8Indemnification. Each Employer shall indemnify and hold harmless each employee, officer, or director of an Employer to whom is delegated duties, responsibilities, and authority with respect to the Plan against all claims, liabilities, fines and penalties, and all expenses reasonably incurred by or imposed upon him (including but not limited to reasonable attorney fees) which arise as a result of his actions or failure to act in connection with the operation and administration of the Plan to the extent lawfully allowable and to the extent that such claim, liability, fine, penalty, or expense is not paid for by liability insurance purchased or paid for by an Employer. Notwithstanding the foregoing, an Employer shall not indemnify any person for any such amount incurred through any settlement or compromise of any action unless the Employer consents in writing to such settlement or compromise.

13.9Permitted Acceleration of Payment. The Plan may permit acceleration of the time or schedule of any payment or amount scheduled to be paid pursuant to a payment under the Plan as provided in Section 10.3 and this Section 13.9. The Plan may permit acceleration of payment (1) to an individual other than the Participant as may be necessary to fulfill a domestic relations order within the meaning of Section 414(p)(1)(B) of the Code, (2) to

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comply with a certificate of divestiture as defined  in Section 1043(b)(2) of the Code, (3) to pay the Federal Insurance Contributions Act (FICA) tax imposed under Sections 3101, 3121(a) and 3121(v)(2) of the Code on compensation deferred under the Plan, (4) to pay the income tax under Section 3401 of the Code or the corresponding withholding provisions of the applicable state, local or foreign tax laws as a result of the payment of any FICA tax described in (3) and to pay the additional income tax at source on wages attributable to the pyramiding Section 3401 of the Code, wages and taxes, and (5) to pay the amount required to be included in gross income as a result of the failure of the Plan to comply with the requirements of Section 409A of the Code. The total payment under (3) or (4) shall, in no event, exceed the aggregate of the FICA tax and the income tax withholding related to such FICA tax. The total payment under (5) shall, in no event, exceed the amount required to be included in income as a result of the failure to comply with requirements of Section 409A of the Code.

13.10Governing Law. The Plan will be construed, administered and enforced according to ERISA, and to the extent not preempted thereby, the laws of the State specified by the Employer in Section 12.01 of the Adoption Agreement.

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EX-31.1

Exhibit 31.1

CERTIFICATION

I, Larry D. Brady, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Intermec, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

August 9, 2006

/s/ Larry D. Brady

Larry D. Brady

Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Fredric B. Anderson, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Intermec, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

August 9, 2006

/s/ Fredric B. Anderson

Fredric B. Anderson

Vice President and Controller

(Acting Chief Financial Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
(SUBSECTIONS (a) AND (b) OF SECTION 1350,
CHAPTER 63 OF TITLE 18, UNITED STATES CODE)

In connection with the Quarterly Report on Form 10-Q of Intermec, Inc. (the “Company”) for the period ended July 2, 2006, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Larry D. Brady, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. 1350, that:

(1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Larry D. Brady

Larry D. Brady

Chief Executive Officer

August 9, 2006

EX-32.2

Exhibit 32.2

CERTIFICATION
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
(SUBSECTIONS (a) AND (b) OF SECTION 1350,
CHAPTER 63 OF TITLE 18, UNITED STATES CODE)

In connection with the Quarterly Report on Form 10-Q of Intermec, Inc. (the “Company”) for the period ended July 2, 2006, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Fredric B. Anderson, Vice President and Controller, acting Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. 1350, that:

(1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Fredric B. Anderson

Fredric B. Anderson

Vice President and Controller

(Acting Chief Financial Officer)

August  9, 2006