SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant
Check the appropriate box:
Definitive proxy statement
HORMEL FOODS CORPORATION
(Name of Registrant as Specified in its Charter)
L. D. GORDEN - DIRECTOR OF TAXES
(Name of Person Filing Proxy Statement)
(1) Title of each class of securities to which transaction applies:
Not Applicable
(2) Aggregate number of securities to which transaction applies:
Not Applicable
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
Not Applicable
(4) Proposed maximum aggregate value of transaction:
Not Applicable
HORMEL FOODS CORPORATION
AUSTIN, MINNESOTA
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To The Stockholders:
Notice is hereby given that the Annual Meeting of Stockholders of
Hormel Foods Corporation, a Delaware corporation, will be held in the
Richard L. Knowlton Auditorium of the Austin High School, Austin,
Minnesota, on Tuesday, January 27, 1998, at 8:00 p.m. for the following
purposes:
1. To elect a board of 15 directors for the ensuing year.
2. To vote on approval of the Company's Operators' Share Incentive
Compensation Plan to enable certain compensation paid under the Plan
to qualify as deductible performance-based compensation under Section
162(m) of the Internal Revenue Code.
3. To vote on approval of the Company's Long-Term Incentive Plan to
enable compensation paid under the Plan to qualify as deductible
performance-based compensation under Section 162(m) of the Internal
Revenue Code.
4. To vote on ratification of appointment, by the Board of Directors,
of Ernst & Young as independent auditors for the fiscal year which
will end October 31, 1998.
5. To transact such other business as may properly come before the
meeting.
The Board of Directors has fixed December 1, 1997, at the close of
business, as the record date for the determination of stockholders
entitled to notice of, and to vote at, the Annual Meeting.
By order of the Board of Directors
T. J. LEAKE
Secretary
December 30, 199
HORMEL FOODS CORPORATION
1 HORMEL PLACE
AUSTIN, MINNESOTA 55912
PROXY STATEMENT
The enclosed proxy is solicited by the Board of Directors of the
Company for use at the Annual Meeting of Stockholders to be held on
January 27, 1998. The shares represented by the enclosed proxy will be
voted in accordance with the stockholder's directions if the proxy is
duly executed and returned prior to the meeting. If no directions are
specified, the shares will be voted for the election of directors
recommended by the Board of Directors, for the approval of the Company's
Operators' Share Incentive Compensation Plan, for the approval of the
Company's Long-Term Incentive Plan, and for the appointment of Ernst &
Young as independent auditors for the next fiscal year. Any person
giving a proxy may revoke it at any time before it is exercised by
contacting the Secretary of the Company.
The expenses of soliciting proxies will be paid by the Company. If it
appears necessary or advisable, proxies may be solicited at Company
expense personally, or by telephone or telecopy, by directors, officers
and other employees who will not receive additional compensation. The
Company will also reimburse brokerage firms, and other custodians,
nominees and fiduciaries, for their reasonable out-of-pocket expenses in
sending proxy materials to beneficial owners. Your cooperation in
promptly signing and returning the enclosed proxy will help to avoid
additional expense.
The Company had 75,776,510 shares of Common Stock outstanding as of
December 1, 1997. Each share of stock is entitled to one vote. The
Company has no other class of shares outstanding. Only common
stockholders of record at the close of business as of December 1, 1997,
are entitled to notice of, and to vote at, the Annual Meeting of
Stockholders. A majority of the outstanding shares will constitute a
quorum at the meeting. Abstentions and broker nonvotes are counted for
purposes of determining the presence or absence of a quorum for the
transaction of business. Shares represented by abstentions are counted
in the same manner as shares submitted with a "withheld" or "no" vote in
tabulations of the votes cast on proposals presented to stockholders,
whereas shares represented by broker nonvotes are deemed not present,
and therefore, not counted for purposes of determining whether a
proposal has been approved. This proxy statement and form of proxy are
being mailed to stockholders on or about December 30, 1997.
STOCKHOLDER PROPOSALS FOR 1999 ANNUAL MEETING
Any stockholder intending to present a proposal at the Annual Meeting
of Stockholders to be held in 1999 must arrange to have the proposal
delivered to the Company not later than September 1, 1998, in order to
have the proposal considered for inclusion in the proxy statement and
the form of proxy for that meeting.
Additionally, the Company's Bylaw 5 provides certain requirements
which must be met in order for a stockholder to bring any business or
nominations for election as Directors for consideration at the annual
meeting of stockholders, whether or not the business or nomination is
requested to be included in the proxy statement and proxy. Those
requirements include a written notice to the Secretary of the Company to
be received at the Company's principal executive offices at least ninety
(90) days before the date that is one year after the prior year's annual
meeting. For business or nominations intended to be brought to the
Annual Meeting of Stockholders to be held in 1999, that date is October
29, 1998.
ELECTION OF DIRECTORS
It is intended that the persons named as proxies in the enclosed proxy
will vote for the election of the 15 nominees named below to hold office
as directors until the next Annual Meeting of Stockholders and until
their successors are elected and qualify. In the event any of such
nominees should become unavailable for any reason, which the Board of
Directors does not anticipate, it is intended that the proxies will vote
for the election of such substitute persons, if any, as shall be
designated by the Board of Directors. Directors are elected by a
plurality of the votes cast. The fifteen candidates receiving the
highest number of votes will be elected.
NOMINEES FOR DIRECTORS
Principal Year
Occupation First
and Five Year Became a
Name Age Business Experience Director
JOHN W. ALLEN, Ph.D. 67 Professor and Director of the Food Industry
Alliance, 1989
Michigan State University
JOHN R. BLOCK 62 President, Food Distributors International; Farming
1997
Partnership with father and son; Former United States
Secretary of Agriculture
ERIC A. BROWN* 51 Group Vice President Prepared Foods Group since
1997; 1997
Senior Vice President, Meat Products 1993 to 1997;
Vice President, Grocery Products 1987 to 1993
JAMES W. COLE* 63 Group Vice President, Foodservice Group 1990
WILLIAM S. DAVILA 65 President Emeritus of The Vons Companies,
Inc. 1993
DAVID N. DICKSON* 54 Group Vice President, International and
Corporate 1990
Development
E. PETER GILLETTE, JR. 63 President, Piper Trust Company since 1995;
1996
Commissioner of Minnesota's Department of Trade
and Economic Development from 1991 to 1995;
Former Vice Chairman, Norwest Corporation
LUELLA G. GOLDBERG 60 Trustee Emerita, Wellesley College; Director,
Minnesota 1993
Orchestral Association; Chair, Board of Trustees, University
of Minnesota Foundation; Member, Board of Overseers,
University of Minnesota Carlson School of Management;
Acting President, Wellesley College, July 1, 1993 to
October 1, 1993; Trustee, Wellesley College, 1978 to 1996;
Chair, Board of Trustees, Wellesley College, 1985 to 1993
DON J. HODAPP* 59 Executive Vice President and Chief Financial Officer
1986
JOEL W. JOHNSON* 54 Chairman, President and Chief Executive
Officer 1991
since 1995; President and Chief Executive Officer, 1993
to 1995; President and Chief Operating Officer, 1993;
President, 1992 to 1993
GERALDINE M. JOSEPH 74 Chair, Advisory Committee, Hubert H.
Humphrey Institute 1974-1978
of Public Affairs; Director, Minnesota International
Center; Senior Fellow Emerita, Hubert H. Humphrey 1981
Institute of Public Affairs; Director, German Marshall
Fund of the U.S., 1989 to 1997; Former United States
Ambassador to the Netherlands
STANLEY E. KERBER* 60 Group Vice President, Meat Products Group
1990
JOSEPH T. MALLOF 46 President, North American Consumer
Products, S.C. 1997
Johnson & Son, Inc. 1997 to present; Executive Vice
President, North American Consumer Products, S.C.
Johnson & Son, Inc. 1995-1997; Vice President and
General Manager, Laundry and Paper Products, Japan,
Procter & Gamble, Inc. 1991-1995
GARY J. RAY* 51 Executive Vice President of Operations 1990
ROBERT R. WALLER, M.D. 60 Professor of Ophthalmology, Mayo
Medical School; 1993
President and Chief Executive Officer, Mayo Foundation;
Executive Committee Chair, Board of Trustees,
Mayo Foundation; Chair, Mayo Foundation
for Medical Education and Research
*Messrs. Brown, Cole, Dickson, Hodapp, Johnson, Kerber, and Ray are
members of the Executive Committee of the Board of Directors.
Dr. Allen is a member of the Board of Directors of Alliance
Associates, Inc., Coldwater, Michigan, and Brooks Beverage Management,
Inc., Holland, Michigan.
Mr. Block is a member of the Board of Directors of Deere & Company,
Moline, Illinois, and Archer-Daniels-Midland Company, Decatur, Illinois.
Mr. Davila is a member of the Board of Directors of Wells Fargo Bank,
San Francisco, California, and Pacific Gas and Electric, San Francisco,
California.
Mrs. Goldberg is a member of the Board of Directors of Reliastar
Financial Corporation, TCF Financial Corporation, and Piper Funds
Complex, all of Minneapolis, Minnesota, and of Communications Systems,
Inc., Hector, Minnesota.
Mr. Johnson is a member of the Board of Directors of Meredith
Corporation, Des Moines, Iowa, and Ecolab Inc., St. Paul, Minnesota.
No family relationship exists between any of the nominees for director
of the Company.
COMPENSATION OF DIRECTORS
Directors who are not employees of the Company receive a retainer of
$23,000 and $1,200 for attendance at each Board Meeting. In addition, a
fee of $1,000 is paid for attendance at committee meetings. The
Chairpersons of the Audit, Compensation, and Nominating Committees each
receive an additional $2,000 per year. Additionally, each February 1,
each nonemployee director receives a grant of 1,000 options with an
exercise price equal to the fair market value of one share of Common
Stock on the date of grant, and an award of $5,000 worth of Restricted
Shares. Directors who are employees of the Company receive $100 for each
Board Meeting they attend, which has remained unchanged since 1934.
COMMITTEES OF THE BOARD OF DIRECTORS AND MEETINGS
The Board of Directors met seven times during the last fiscal year.
Six of these meetings were regular, scheduled meetings, and one was a
special meeting.
The Company has Audit, Personnel, Compensation, Nominating, and
Employee Benefits Committees of the Board of Directors.
The Audit Committee members are Mrs. Joseph, Chairperson, Dr. Allen,
Mr. Davila, and Mr. Block. The Committee met three times during the last
fiscal year. The Audit Committee reviews the arrangement and scope of
the audit, reviews the activities and recommendations of the Company's
internal auditors, considers comments by the independent accountants
with respect to the adequacy of internal control procedures and the
consideration given or the corrective action taken by management,
reviews internal accounting procedures and controls with the Company's
financial and accounting staff and reviews nonaudit services provided by
the Company's independent accountants.
The Company has a Personnel Committee consisting of Mr. Johnson,
Chairperson, Dr. Allen, Mr. Mallof, and Dr. Waller. This Committee
deals, among other things, with matters of management positions and the
succession of management. The Committee met once during the last fiscal
year.
The Company has a Compensation Committee consisting of Mr. Davila,
Chairperson, Mr. Gillette, and Mr. Mallof. The primary function of this
Committee is to establish compensation arrangements for all officers of
the Company and other senior management personnel. The Committee met
four times during the last fiscal year.
The Company has a Nominating Committee, consisting of Dr. Waller,
Chairperson, Mr. Block, Mrs. Goldberg, Mr. Johnson, and Mrs. Joseph.
Board of Directors nominees are proposed by the Nominating Committee,
which will consider nominees recommended by stockholders. Stockholder
recommendations should be sent to the Secretary of the Company for
forwarding to the Nominating Committee. The Committee met six times
during the last fiscal year.
The Company has an Employee Benefits Committee, consisting of Mr.
Hodapp, Chairperson, Mr. Dickson, Mr. Gillette, and Mrs. Goldberg. The
Committee oversees the Company's benefit policies, the investment
management of pension funds, the adequacy of benefit reserves and
controls, and compliance with pertinent laws and regulations. The
Committee met three times during the last fiscal year.
PRINCIPAL SHAREHOLDERS
Information as to the persons or groups known by the Company to be
beneficial owners of more than five percent of the Company's voting
securities, as of October 25, 1997, is shown below:
Name and Address Amount Percent
Title of Class of Beneficial Owner Beneficially Owned of Class
Common Stock The Hormel Foundation (1) 32,031,361 42.27%
501 16th Avenue NE
Austin, MN 55912
(1) The Hormel Foundation holds 2,541,331 of such shares as
individual owner and 29,490,030 of such shares as trustee of various
trusts. The Hormel Foundation, as trustee, votes the shares held in
trust. The Hormel Foundation has a remainder interest in all of the
shares held in trust. The remainder interest consists of corpus and
accumulated income in various trusts which are to be distributed
when the trusts terminate upon the death of designated
beneficiaries, or upon the expiration of twenty-one years after the
death of such designated beneficiaries.
The Hormel Foundation was converted from a private to a public
foundation on December 1, 1980. The Certificate of Incorporation and
Bylaws of the Foundation provide for a Board of Directors, a
majority of whom represent nonprofit agencies to be given support by
the Foundation. Each member of the Hormel Foundation has equal
voting rights.
Members of The Hormel Foundation are: Chairman, Richard L.
Knowlton,
retired Chairman of the Board of Hormel Foods; Jerry A. Anfinson,
Certified Public Accountant, Austin; Mahlon S. Krueger, United Way
of Mower County, Inc.; Donald R. Brezicka, St. Olaf Hospital
Administrator, representing the St. Olaf Hospital Association,
Austin; Don J. Hodapp, Executive Vice President and Chief Financial
Officer of Hormel Foods; Kermit F. Hoversten, Attorney, representing
the City of Austin; William R. Hunter, retired Executive Vice
President of Hormel Foods; James G. Huntting, Jr., retired President
of Huntting Elevator Company of Austin; Joel W. Johnson, Chairman,
President and Chief Executive Officer of Hormel Foods; James R.
Mueller, Executive Director, Cedar Valley Rehabilitation Workshop,
Inc., Austin; J. Doug Myers, representing the Austin Public
Education Foundation Inc.; Raymond B. Ondov, Attorney, Austin; Mark
T. Bjorlie, Executive Director, Young Men's Christian Association,
Austin; Gary J. Ray, Executive Vice President of Hormel Foods; H. O.
Schmid, Director, Hormel Institute, Austin, representing the
University of Minnesota; Robert J. Thatcher, retired Treasurer of
Hormel Foods, representing the Austin Community Scholarship
Committee; and Ed C. Wilson, Jr., Officer in Charge, The Salvation
Army of Austin.
SECURITY OWNERSHIP OF MANAGEMENT
Information as to beneficial ownership of the Company's equity
securities by directors, nominees, and executive officers of the Company
as of October 25, 1997, is shown below:
Name of Amount Percent
Title of Class Beneficial Owner Beneficially Owned (1) of Class
Common Stock John W. Allen (2) 9,104 *
Common Stock John R. Block 360 *
Common Stock Eric A. Brown (2) (3) (5) 125,731 *
Common Stock James W. Cole (2) (5) 133,296 *
Common Stock William S. Davila (2) 11,632 *
Common Stock David N. Dickson (2) (5) 79,422 *
Common Stock E. Peter Gillette, Jr. (2) 2,710 *
Common Stock Luella G. Goldberg (2) 12,769 *
Common Stock Don J. Hodapp (2) (3) (4) (5) 226,776 *
Common Stock Joel W. Johnson (2) (4) (5) 327,882 *
Common Stock Geraldine M. Joseph (2) (3) 9,569 *
Common Stock Stanley E. Kerber (2) (3) (5) 158,953 *
Common Stock Joseph T. Mallof -0- *
Common Stock Gary J. Ray (2) (3) (4) (5) 201,813 *
Common Stock Robert R. Waller, M.D. (2) 6,120 *
Common Stock All Directors and Executive (6) 2,116,459 2.73%
Officers as a Group
(1) Except as otherwise indicated and subject to applicable
community property and similar statutes, the persons listed as
beneficial owners of the shares of the Company's Common Stock have
sole voting and investment power with respect to said shares.
Holdings are rounded to the nearest full share.
(2) The total number of shares of the Company's Common Stock
beneficially owned by the following persons includes the following
number of shares subject to immediately exercisable options: Mr.
Allen - 6,000; Mr. Brown - 95,000; Mr. Cole - 115,000; Mr. Davila -
5,000; Mr. Dickson - 65,000; Mr. Gillette - 1,000; Mrs. Goldberg -
4,000; Mr. Hodapp - 154,000; Mr. Johnson - 310,000; Mrs. Joseph -
6,000; Mr. Kerber - 95,000; Mr. Ray - 154,000; and Dr. Waller -
5,000.
(3) The total number of shares of the Company's Common Stock
beneficially owned by the following nominees for election as
directors includes the following number of shares of the Company's
Common Stock beneficially owned by members of their respective
households: Mr. Brown - 1,100; Mr. Hodapp - 19,069; Mrs. Joseph -
19; Mr. Kerber - 30,000; and Mr. Ray - 1,141.
(4) Does not include any shares owned by The Hormel
Foundation, of which Mr. Johnson, Mr. Ray, and Mr. Hodapp are
members.
(5) Shares listed as beneficially owned include, where
applicable, shares allocated to participants' accounts under the
Hormel Tax Deferred Investment Plan 401(k)A and the Company's
Founders' Fund Plan, and a pro-rata share of unallocated shares held
in the Company's Joint Earnings Profit Sharing Trust for the benefit
of participants.
(6) As of October 25, 1997, all directors and executive
officers as a group owned beneficially 1,608,000 shares subject to
immediately exercisable options. Shares listed as beneficially owned
include, where applicable, shares allocated to participants'
accounts under the Hormel Tax Deferred Investment Plan 401(k)A and
the Company's Founders Fund Plan and a pro-rata share of
unallocated shares held in the Company's Joint Earnings Profit
Sharing Trust for the benefit of participants.
* Less than one percent.
EXECUTIVE COMPENSATION
Compensation Committee Report on Executive Compensation
The Compensation Committee (the "Committee") consists exclusively of
nonemployee directors, and is responsible for setting and administering
the policies that govern the compensation of executive officers of the
Company, including the five executive officers named in this proxy
statement. The Committee also administers the Company's stock option
plans, Operators' Share Incentive Compensation Plan, and Long-Term
Incentive Plan.
Philosophy/Objectives
The Committee's objective is to attract and retain the most highly
qualified executive officers in a manner which provides incentives to
create stockholder value. This objective is accomplished by establishing
compensation which is calculated to attract and retain the best
management talent available while at the same time providing both
significant risk and opportunity for reward based on Company
performance.
Executive officer Annual Compensation as related in the Summary
Compensation Table on page 11 consists of salary and formula bonus
determined by Company earnings under the Company's Operators Share
Incentive Compensation Plan. Long Term Compensation is provided by stock
options and restricted shares which provide longer term compensation
opportunities based on increases in the value of the Companys stock,
and, subject to stockholder approval, Long Term Incentive Compensation
will be provided by the Long Term Incentive Plan discussed at page 18.
In its considerations, except as noted below, the Committee does not
assign quantitative relative weights to different factors or follow
mathematical formulae. Rather, the Committee exercises its discretion
and makes a judgment after considering the factors it deems relevant.
The Committee believes that it has set compensation at appropriate
levels which reflect each executives contribution to achieving the
Companys goals and in a manner that ties the executives earning
opportunity to the welfare of the Companys stockholders.
In the Committees view, it is in the Companys best interest to offer
compensation opportunities which enable the Company to compete with
other American industrial companies for the most effective talent
available. However, it is also the Committees view that such
opportunities should involve compensation which is significantly at
risk to the fortunes of the Company. For that reason, while total
Annual Compensation is targeted to place an executives total
compensation at the 75th percentile of the compensation reported by a
consultant retained by the Company as described below, the proportion of
formula bonus in the compensation mix will generally increase as the
executive officers responsibilities and compensation increase. In the
case of the five executive officers named in the Summary Compensation
Table, the at risk formula bonus exceeds salary for each of the
reported years.
Executive Officer Annual Compensation: Salary and Operators Share
Incentive Plan
Salary is the weekly cash payment which is assured to the executive
officer as part of the employment relationship.
The formula bonus determined by Company earnings under the Companys
Operators Share Incentive Compensation Plan, variations of which have
been used by the Company for many years, and which is now being
submitted to the stockholders for their approval in order to obtain a
tax benefit for the Company (see the section beginning on page 16), is
an amount equal to the after tax earnings per share reported by the
Company at fiscal year end on the Companys Common Stock multiplied by a
designated number of assumed shares (Operators Shares). Operators
Shares do not constitute any form of equity ownership in the Company,
and are limited to a method for calculating compensation.
The level of salary and number of Operators Shares is determined
annually in the following manner in the case of each executive officer.
Each executive officer position has been rated based on evaluation
criteria provided by Hay Consulting Group, an independent nationally
recognized management compensation firm (Consultant). The Consultant
has rated the Chief Executive Officer (CEO) position and, with input
from the CEO, has rated the major officer positions reporting directly
to the CEO, including all executive officers named in the Summary
Compensation Table. Other executive positions within the Company are
rated by a job evaluation committee currently comprising the CEO, the
Companys two Executive Vice Presidents, and the Companys Vice
President of Human Resources, utilizing the Consultant as a resource.
The ratings of each executive officer position are a measurement of
job content expressed in numerical points, measuring qualitative
attributes of the position using a methodology developed by the
Consultant. The Consultant annually assigns a range of compensation
values to those numerical ratings using Consultants data base drawn
from surveys of several hundred American companies in a variety of
industries. The Committee has determined that it is appropriate and in
the Companys best interest to set the policy guideline for Company
compensation at the 75th percentile of the range of compensation
provided by the Consultant for a given numerical rating. Once the level
of compensation is established, the appropriate amount is provided
through a combination of salary and Operators Shares. A significant
percentage of that compensation for all executive officers is provided
by awarding Operators Shares. For purposes of determining the number of
Operators Shares to be awarded, Operators Shares are valued based on a
three year average of Company earnings. The basic concept underlying
Operators Shares has been used by the Company since 1932 as a
significant component of executive compensation. Compensation from
Operators Shares exceeded salary for each executive officer named in
the Summary Compensation Table in each of the past three fiscal years.
In addition to the salary and Operators Shares described above,
Annual Compensation has in past years included a discretionary cash
bonus proposed by the CEO for a small group of executive officers which
the Committee has the authority to accept or reject, and a bonus
provided by the Committee for the CEO. This discretionary bonus has been
discontinued effective fiscal year 1996 in the expectation that, subject
to stockholder approval, it will be superceded by the Long Term
Incentive Plan described below.
Executive Officer Long-Term Compensation: Stock Option Plan and Long-
Term Incentive Plan
Acting as the Committee administering the Companys 1991 Key Employee
Stock Option and Award Plan, the Committee reviews recommendations from
the CEO for the grant of options or Restricted Shares to executive
officers (other than the CEO) and other eligible recommended employees.
There were no option grants in fiscal year 1997. The Committees
determination of option grants in past years reflected in the Summary
Compensation Table took into consideration the executive officers past
grants, compensation level, contributions to the Company during the last
completed fiscal year, and potential for contributions in the future.
(No Restricted Shares were awarded during fiscal year 1997.)
Options are granted at the market price of the Company stock at date
of grant, and provide compensation to the optionee only to the extent
the market price of the stock increases between the date of grant and
the date the option is exercised. Options are intended to provide long
term compensation tied specifically to increases in the price of the
Companys stock.
The total number of options granted in each year, which may vary from
year to year, bears a general relationship to the total number of
options authorized by the Companys stockholders divided by the number
of years in the term of the Plan under which the options are awarded.
While options are generally awarded based on the influence an executive
position is considered by the Committee to have on stockholder value,
the number of options awarded may vary up or down from prior year awards
based on the level of an individual executive officers contribution to
the Company in a particular year, based on the recommendation of the
CEO.
Effective from November 1, 1996, and subject to the approval of the
Companys stockholders at this Annual Meeting, Company executive
officers will be eligible to participate in a new cash incentive plan,
the Hormel Foods Corporation Long-Term Incentive Plan. (See the
description of the Long-Term Incentive Plan beginning on page 18). This
Plan is designed to provide a small group of key employees selected by
the Committee with an incentive to maximize stockholder value. In
selecting participants, and the amount of cash incentive which can be
earned by each participant, the Committee takes into account the nature
of the services rendered by the employee, his or her present and
potential contributions to the success of the Company and such other
factors as the Committee deems relevant.
Under the Long-Term Incentive Plan the Committee sets specific
performance goals, which are based on cumulative total return to
stockholders. Performance of the goals is expected to be measured over
three years, but in no case less than 24 months, and is expected to be
ranked against a peer group of companies selected by the Committee. The
first awards under this Plan were made for an approximately three year
performance period commencing November 1, 1996, and ending on the tenth
day on which shares are traded on the New York Stock Exchange following
October 30, 1999. At the end of the performance period, payment will be
made for attainment of the specified goals based on the increase or
decrease in market value of the Company stock, together with dividends
deemed reinvested, during the performance period ranked against the peer
group companies. These goals are described in more detail in the
description of the Long-Term Incentive Plan, under the heading Award
Formula, Business Criteria beginning on page 18.
Chief Executive Officer Compensation
The cash compensation of the CEO is established by the Committee in
generally the same way as cash compensation is determined for other
executive officers, and the Committee employs generally the same
criteria for option grants and Restricted Share awards as apply to other
executive officers, taking into consideration the CEO's responsibility
for the total enterprise. Based on information received from Hay
Consulting Group, rating Mr. Johnson's position and comparing his annual
cash compensation to cash compensation received by individuals in other
companies in similar positions, the Committee awarded Mr. Johnson a
salary increase of $1,000 per week and an increase of 25,000 Operators'
Shares in fiscal year 1997. The Committee did not grant Mr. Johnson any
stock options or award Mr. Johnson any Restricted Shares in fiscal year
1997. While the salary component of Mr. Johnson's fiscal year 1997 cash
compensation was predetermined for the year, the Operators Shares
formula bonus, comprising more than half of his fiscal year 1997 cash
compensation, was determined by the Companys net earnings per share for
fiscal year 1997 as explained under the heading Executive Officer
Annual Compensation: Salary and Operators Share Incentive Plan on the
preceding page. In addition to salary and formula bonus under the
Operators Share Incentive Compensation Plan, as described above, Mr.
Johnson will participate in the Company's Long-Term Incentive Plan,
contingent on stockholder approval of that Plan. The Committee has
granted Mr. Johnson an award as set out in the Long-Term Incentive Plan
Awards Table at page 13 for the three-year performance period, subject
to adjustment between zero and 300% depending on attainment of
performance goals. The amount of this award appropriately reflects, in
the Committee's judgement, Mr. Johnson's responsibility for the
enterprise. Mr. Johnson's long-term compensation under the Stock Option
Plan and Long-Term Incentive Plan, if any, will depend on the Company's
stock price relative to the exercise price of each option granted, and
on the attainment by the Company of the performance goals specified for
the Long-Term Incentive Plan performance period for which the award was
made.
Deductibility of Compensation Under Internal Revenue Code Section 162(m)
Section 162(m) of the Internal Revenue Code, adopted in 1993, imposes
a $1 million cap, subject to certain exceptions, on the deductibility to
a company of compensation paid to the five executive officers named in
such company's proxy statement. The stockholders voted at the 1997
Annual Meeting of Stockholders to amend and approve the Company's 1991
Key Employee Stock Option and Award Plan to enable options granted under
that Plan to qualify as deductible performance based compensation under
Section 162(m), so that any compensation realized from the exercise of
stock options would not be affected by Section 162(m). Additionally,
cash compensation voluntarily deferred by the executive officers named
in this proxy statement under the Company's Deferred Compensation Plans
is not subject to the Section 162(m) cap until the year paid. Thus,
compensation paid this fiscal year subject to the Section 162(m) cap is
not expected to exceed $1 million for any named executive officer.
Therefore the Committee believes that the Company will not be subject to
any Section 162(m) limitations on the deductibility of compensation paid
to the Company's named executive officers for fiscal year 1997.
The Board of Directors, acting pursuant to a recommendation by the
Committee, is submitting to stockholders for approval the Company's
Operators' Share Incentive Compensation Plan and the Company's new Long-
Term Incentive Plan for the purpose of qualifying those plans under
Section 162(m). Upon such stockholder approval, the Committee believes
that compensation paid pursuant to those two Plans will be deductible,
except for Dividend Equivalents paid under the Operators' Share Plan
(which may not be deductible in full for any named executive officer in
a given year). Additionally, the Committee continues to consider other
steps which might be in the Company's best interest to comply with
Section 162(m), while reserving the right to award future compensation
which would not comply with the Section 162(m) requirements for
nondeductibility if the Committee concluded that this was in the
Company's best interests.
THE COMPENSATION COMMITTEE
William S. Davila
E. Peter Gillette, Jr.
Joseph T. Mallof
SUMMARY COMPENSATION TABLE
The following table sets forth the cash and noncash compensation for
each of the last three fiscal years earned by or awarded to the Chief
Executive Officer and the four other most highly compensated executive
officers of the Company:
Long Term Compensation
Annual Compensation Awards Payouts
Other
Annual Restricted Securities
Compen- Stock Underlying LTIP All Other
Salary Bonus sation Award(s) Options/ Payouts
Compensa-
Name and Principal Position Year ($)(1) ($)(2)(7) ($)(3) ($) SARs
(#)(4) ($)tion ($)(5)(6)
Joel W. Johnson 1997 418,000 550,550 - 0 -0- 0
19,464
Chairman, President and 1996 370,500 374,400 -0
100,000 0 16,546
Chief Executive Officer 1995 344,600 618,100 - 0
40,000 0 17,332
Don J. Hodapp 1997 261,300 343,200 - 0 -0- 0
12,427
Executive Vice President, and 1996 238,900 249,600 - 0
50,000 0 10,878
Chief Financial Officer 1995 233,800 406,450 - 0 22,000
0 11,920
Gary J. Ray 1997 211,100 300,300 - 0 -0- 0 10,542
Executive Vice President 1996 197,300 218,400 - 0 50,000
0 9,388
1995 192,200 359,350 - 0 22,000 0 10,224
Stanley E. Kerber 1997 181,700 264,550 - 0 -0- 0
8,795
Group Vice President 1996 177,400 192,400 - 0 25,000
0 8,262
1995 176,600 282,600 - 0 15,000 0 9,214
James W. Cole 1997 196,400 228,800 - 0 -0- 0
9,476
Group Vice President 1996 186,000 166,400 - 0 25,000
0 8,698
1995 176,600 310,069 - 0 15,000 0 9,214
All Executive Officers (8) 1997 3,569,280
All Other Employees (8) 1997 1,159,730
(1) Includes director fee payments of $100 per meeting attended for
each officer named in the table.
(2) Includes payments under the Company's Operators' Share Incentive
Compensation Plan as well as annual discretionary bonuses. No
discretionary bonuses were paid in 1997. The amounts shown in the
Table include those amounts voluntarily deferred by the named
individuals under the Company's Deferred Compensation Plans, which
permit participants to voluntarily defer receipt of all or part of
the payments currently due to the participant under the Operators'
Share Incentive Compensation Plan.
(3) There was no Other Annual Compensation exceeding the lesser of
$50,000 or 10% of total Annual Compensation in each of the years
shown.
(4) No SARs were awarded in 1995, 1996, or 1997.
(5) The amount shown includes Company Joint Earnings Profit Sharing
distributions which may be authorized by the Board of Directors in
its discretion based on Company profits. The total amount of Company
distributions declared available to all participants by the Board is
allocated in the same proportion as each person's base weekly wage
bears to the total base wage for all eligible persons. Payments to
the executive officers named in the Table are calculated using the
same proportional formula as is used for all eligible employees.
Joint Earnings Profit Sharing distributions were for Mr. Johnson
$18,614 in 1997, $15,696 in 1996, and $16,482 in 1995; for Mr.
Hodapp $11,577 in 1997, $10,028 in 1996, and $11,070 in 1995; for
Mr. Ray $9,307 in 1997, $8,284 in 1996, and $9,102 in 1995; for Mr.
Kerber $7,945 in 1997, $7,412 in 1996, and $8,364 in 1995; and for
Mr. Cole $8,626 in 1997, $7,848 in 1996, and $8,364 in 1995. "All
Other Compensation" also includes Company matching payments of up to
$200.00 under the Company's Founders' Fund Plan and up to $650.00
under the Hormel Tax Deferred Investment Plan A. Both of these
matching payments, in the same amount, are available to all other
eligible employees. Company matching payments were for Mr. Johnson
$200 and $650 in 1997, $200 and $650 in 1996, and $200 and $650 in
1995; for Mr. Hodapp $200 and $650 in 1997, $200 and $650 in 1996,
and $200 and $650 in 1995; for Mr. Ray $200 and $650 in 1997, $200
and $650 in 1996, and $200 and $650 in 1995; for Mr. Kerber $200 and
$650 in 1997, $200 and $650 in 1996, and $200 and $650 in 1995; and
for Mr. Cole $200 and $650 in 1997, $200 and $650 in 1996, and $200
and $650 in 1995. For Mr. Ray "All Other Compensation' includes
Company contributions to a disability insurance program which is
available to all other eligible employees with benefits proportional
to Annual Compensation. Mr. Ray received contributions of $385 in
1997, $254 in 1996, and $272 in 1995.
(6) None of the named executive officers held any Restricted Stock at
year end.
(7) The number of Operators' Shares held in 1997, which determined the
bonus for that year, was 385,000 for Mr. Johnson, 240,000 for Mr.
Hodapp, 210,000 for Mr. Ray, 185,000 for Mr. Kerber, 160,000 for Mr.
Cole, 2,496,000 for All Executive Officers, and 811,000 for All
Other Employees.
(8) The listed information regarding All Executive Officers and All
Other Employees is being provided this year because stockholder
approval is requested for the Company's Operators; Share Incentive
Compensation Plan, as explained under New Plan Benefits at page 20.
STOCK OPTIONS TABLE
The following tables summarize option grants and exercises during 1997
to or by the Chief Executive Officer or the executive officers named in
the Summary Compensation Table above, and the values of options granted
during 1997 and held by such persons at the end of 1997.
Potential Realizable Value at Assumed Annual
Individual Grants Rates of Stock Price Appreciation for
Option Term
Number % of Total
of Securities Options/SARs
Underlying Granted to Exercise
Options/SARs Employees in or Base Price Expiration
Name Granted (#)(1) Fiscal Year ($/Sh) Date 5% ($) 10% ($)
_____________ ____________ ____________ ___________
_________ _________
Joel W. Johnson -0- N/A N/A N/A N/A N/A
Don J. Hodapp -0- N/A N/A N/A N/A N/A
Gary J. Ray -0- N/A N/A N/A N/A N/A
Stanley E. Kerber -0- N/A N/A N/A N/A N/A
James W. Cole -0- N/A N/A N/A N/A N/A
(1) No options or SARs were granted during the fiscal year ended
October 25, 1997.
Aggregated Option/SAR Exercises in Last Fiscal Year and Fiscal Year End
Option/SAR Values (1)
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Options/SARs at Options at Fiscal
Fiscal Year End (#)(4) Year End ($)(2)(3)(4)
Shares Acquired Value Exercisable/ Exercisable/
Name on Exercise (#) Realized ($) Unexercisable Unexercisable
Joel W. Johnson 0 0 310,000/0 2,065,625/0
Don J. Hodapp 0 0 154,000/0 978,125/0
Gary J. Ray 0 0 154,000/0 978,125/0
Stanley E. Kerber 0 0 95,000/0 612,189/0
James W. Cole 0 0 115,000/0 753,439/0
(1) There are no outstanding SARs.
(2) Unrealized value of in-the-money options at year end represents the
aggregate difference between the market value at October 25, 1997
and the applicable exercise price.
(3) The differences between market value and exercise price in the case
of unrealized value accumulate over what may be, in many cases,
several years.
(4) There are no unexercisable options.
LONG-TERM INCENTIVE PLAN AWARDS TABLE
The following table summarizes awards under the Company's Long-Term
Incentive Plan during 1997 to the Chief Executive Officer or the
executive officers named in the Summary Compensation Table above, all of
which are subject to stockholder approval of the Long-Term Incentive
Plan as proposed beginning at page 18.
Long-Term Incentive Plan - Awards in Last Fiscal Year
Estimated Future Payouts under Non-Stock
Price-Based Plans
(a) (b) (c) (d) (e) (f)
Performance
Number of or Other
Shares, Units Period Until
or Other Maturation or Threshold (3) Target (4)
Maximum (5)
Name Rights ($) (1) Payout (2) ($) ($) ($)
Joel W. Johnson 1,500,000 Three years 750,000 1,500,000
4,500,000
Don J. Hodapp 750,000 Three years 375,000 750,000
2,250,000
Gary J. Ray 750,000 Three years 375,000 750,000 2,250,000
Stanley E. Kerber 500,000 Three years 250,000 500,000
1,500,000
James W. Cole 500,000 Three years 250,000 500,000
1,500,000
All Executive Officers (6) 7,430,000 Three years 3,715,000 7,430,000
22,290,000
(1) The award is denominated as the Target dollar amount listed in
column (e). Payment of the Target amount, Threshold amount, or
Maximum amount is solely dependent on the ranking of the Company's
Total Shareholder Return within a peer group at the end of the
Performance Period, as described under Proposal to Approve the
Hormel Foods Corporation Long-Term Incentive Plan appearing at page
18. Payments based on percentage ranking are described in footnotes
(3)-(5) below. Linear proration will be used to determine the
percent of award paid for percentiles other than those listed in
footnotes (3)-(5), except that in no event will any payment be made
for a ranking which does not exceed the 25th percentile.
(2) The Performance Period commences on November 1, 1996 and ends the
tenth day on which shares are traded on the New York Stock Exchange
following October 30, 1999.
(3) Payment of the Threshold amount requires the Company's Total
Shareholder Return ranking within the twenty nine company peer group
to exceed the 25th percentile. There is no payment due if the
Company's Total Shareholder Return ranking within the twenty nine
company peer group is not above the 25th percentile.
(4) Payment of the Target amount requires the Company's Total
Shareholder Return ranking within the twenty nine company peer group
to be at the 50th percentile.
(5) Payment of the Maximum amount requires the Company's Total
Shareholder Return to rank 1st among the twenty nine company peer
group.
(6) The listed information regarding All Executive Officers is being
provided this year because stockholder approval is requested for the
Company's Long-Term Incentive Plan, as explained under New Plan
Benefits at page 20. There are no employees other than Executive
Officers participating in the Company's Long-Term Incentive Plan.
PENSION PLAN
The Company maintains noncontributory defined benefit pension plans
covering substantially all employees. Pension benefits for salaried
employees are based upon the employee's highest five years of
compensation (as described below) of the last 10 calender years of
service and the employee's length of service. The Company also maintains
a supplemental executive retirement plan that provides pension benefits
calculated under the qualified defined benefit pension plan formula that
exceed the annual benefit limitation for defined benefit plans
qualifying under the Internal Revenue Code. Contingent on Mr. Johnson
remaining employed with the Company until at least July 14, 2003, a
Company-established plan will credit Mr. Johnson with deemed years of
service for purposes of determining both the amount of and eligibility
for retirement benefits under the Company's retirement plans. The
following tabulation shows the estimated aggregate annual pension
payable to an employee under the qualified defined benefit pension plan
and the supplemental executive retirement plan upon normal retirement at
the end of fiscal year 1997 at age 65 under various assumptions as to
final average annual compensation and years of service, and on the
assumptions that the retirement plans will continue in effect during
such time without change and that the employee will select a single life
annuity option. The pension benefits shown below reflect an integration
with Social Security benefits.
Average Annual
Compensation Years of Service
15 20 25 30 35 40 45
$ 250,000 $ 57,143 $ 76,190 $ 95,238 $ 114,286
$ 133,333 $ 152,381 $ 171,429
$ 500,000 $ 117,143 $ 156,190 $ 195,238
$ 234,286 $ 273,333 $ 312,381 $
351,429
$ 750,000 $ 177,143 $ 236,190 $ 295,238
$ 354,286 $ 413,333 $ 472,381 $
531,429
$ 1,000,000 $ 237,143 $ 316,190 $ 395,238
$ 474,286 $ 553,333 $ 632,381 $
711,429
$ 1,250,000 $ 297,143 $ 396,190 $ 495,238
$ 594,286 $ 693,333 $ 792,381 $
891,429
$ 1,500,000 $ 357,143 $ 476,190 $ 595,238
$ 714,286 $ 833,333 $ 952,381 $
1,071,429
$ 1,750,000 $ 417,143 $ 556,190 $ 695,238
$ 834,286 $ 973,333 $ 1,112,381 $
1,251,429
$ 2,000,000 $ 477,143 $ 636,190 $ 795,238
$ 954,286 $ 1,113,333 $ 1,272,381 $
1,431,429
The compensation for the purpose of determining the pension benefits
consists of Annual Compensation, Restricted Stock Awards, and LTIP
Payouts. The years of credited service for individuals listed in the
Summary Compensation Table are: 6 years for Mr. Johnson; 31 years for
Mr. Hodapp; 29 years for Mr. Ray; 42 years for Mr. Kerber; and 34 years
for Mr. Cole.
COMPARATIVE STOCK PERFORMANCE
The following graph compares the cumulative total shareholder return
on the Company's Common Stock during the five fiscal years preceding
October 25, 1997, with the Standard & Poor's 500 Stock Index and the
Standard & Poors Food Group Index (assuming the investment of $100 in
each vehicle on October 31, 1992, and the reinvestment of all dividends
during such period).
Comparison of Five Year Cumulative Total Return
Among Hormel Foods Corporation, S & P 500 Index, and S & P Food Group
Index
(Insert Chart)
OTHER INFORMATION RELATING TO DIRECTORS, NOMINEES,
AND EXECUTIVE OFFICERS
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER
PARTICIPATION
Persons serving as members of the Compensation Committee during fiscal
year 1997 were William S. Davila, Ray V. Rose, and E. Peter Gillette,
Jr. None of such persons was an officer or employee of the Company or
any of its subsidiaries during fiscal 1997, was formerly an officer of
the Company or any of its subsidiaries or had any other relationship
with the Company or any of its subsidiaries requiring disclosure under
the applicable rules of the SEC.
RELATED PARTY TRANSACTIONS
During fiscal year 1997 the Company purchased 14,355 hogs in ordinary
course of business (approximately 2/10 of one percent of the Companys
total hog purchases) from Block Farms, a partnership owned by Mr. John
R. Block and members of his immediate family, at the same prices paid by
the Company to its other hog suppliers.
SECTION 16(a) BENEFICIAL OWNERSHIP COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors, certain officers, and any persons holding more than
10 percent of the Company's Common Stock to report their initial
ownership of the Company's Common Stock and any subsequent changes in
that ownership to the Securities and Exchange Commission and the New
York Stock Exchange. Specific due dates for these reports have been
established, and the Company is required to disclose in this proxy
statement any failure to file by those dates during 1997.
In making these disclosures, the Company has relied on the
representations of its directors and officers and copies of the reports
that they have filed with the Commission.
Based on those representations and reports, the Hormel Foundation
inadvertently made two late Form 4 filings covering two transactions by
a broker who purchased portfolios of stock for the Hormel Foundation's
account containing 1,698 shares and 583 shares of the Company's Common
Stock without the Hormel Foundation's prior knowledge or direction as to
the content of the portfolios.
PROPOSAL TO APPROVE THE HORMEL FOODS CORPORATION
OPERATORS' SHARE INCENTIVE COMPENSATION PLAN
The Board of Directors is proposing for stockholder approval the
Hormel Foods Corporation Operators' Share Incentive Compensation Plan
(the "Plan"). Certain of the principal features of the Plan are
described below. The full text of the Plan is annexed as Appendix A and
incorporated herein by reference. Subject to the approval of
stockholders requested herein, the Plan will be effective as of October
26, 1997. The Company is seeking stockholder approval of the Plan to
qualify portions of the compensation paid under the Plan as "qualified
performance based compensation" as defined in Section 162(m) of the
Code. Stockholders are urged to read the Plan in its entirety before
casting their votes.
Background
Since 1932, the Company has used a performance-based incentive
compensation plan for management level employees which pays an annual
cash incentive based on Company after-tax earnings per share of Common
Stock in place of a portion of salary or a bonus. The rights to receive
this compensation have since the inception of the practice been referred
to as "Operators" Shares. Most of the Bonus compensation listed under
Annual Compensation for the five executive officers named in the Summary
Compensation Table at page 11, including all of such Bonus compensation
for 1997, was paid on account of Operators' Shares.
Recently, the Board of Directors has revised certain provisions of
this Plan and determined to bring this Plan, as revised, to the
Company's stockholders for approval in order to qualify portions of the
compensation paid under the Plan as "qualified performance-based
compensation" for purposes of Section 162(m) of the Code to protect the
Company's ability to deduct such compensation for tax purposes. The
principal revisions involve limiting the number of Operators' Shares
which any employee can hold at any one time to a maximum of two million,
and placing administration of the Plan entirely in the hands of the
Compensation Committee of the Board of Directors (the "Committee").
However, the purpose of the Plan is to continue the tradition of
directly tying a significant portion of the compensation of the
Company's executives to the after-tax earnings per share of the Company.
Eligibility; Awards
Under the Plan, the Committee may, no later than the ninetieth day of
any fiscal year unless otherwise determined by the Committee, award
management employees selected by the Committee the right to receive cash
compensation equal to the after-tax net earnings per share of the
Company for a fiscal year multiplied by a number designated by the
Committee. These rights are referred to as "Operators" Shares", and the
number by which the net earnings will be multiplied is referred to as
the number of Operators' Shares. The Operators' Shares are evidenced by
an Operators Certificate, but may be withdrawn from any participant
by the Committee at any time.
Administration
The Plan is administered by the Committee. The Committee has the
authority to select the individuals to whom awards are granted, to
determine the number of Operators' Shares covered by such awards and to
set the terms and conditions of such awards. The Committee has the
authority to establish rules for the administration of the Plan, and
determinations and interpretations are binding on all interested
parties.
Award Payments
Whenever a cash dividend is declared on the Company's Common Stock, a
Plan participant will be paid the amount of such per share dividend
multiplied by the number of Operators' Shares held by the participant on
the dividend record date at the same time the dividend is paid to
stockholders (Dividend Equivalent). After the end of each fiscal year
of the Company, each participant will receive a payment equal to the
number of Operators' Shares (including all Operators' Shares awarded in
prior fiscal years) held by the participant on the last day of the
fiscal year multiplied by the Company's after-tax net earnings per
share, minus all Dividend Equivalents paid to or due the participant on
account of dividends declared during such fiscal year. Payments will be
in cash, and may be made subject to approved deferred compensation
elections by eligible participants under the Company's existing
executive deferred compensation plan. Except in the case of retirement,
or as specially determined by the Committee, an employee who does not
hold an Operators' Share on the last day of a fiscal year will receive
no compensation pursuant to the Plan, except for Dividend Equivalents
previously paid or due on Operators' Shares held on dividend record
dates during such fiscal year. In the case of retirement, or as
specially determined by the Committee, the participant will receive a
prorated payment.
All Dividend Equivalents paid under the Plan will be included in
calculating a participant's income for purposes of Section 162(m) of the
Code, because such payments do not constitute "qualified performance-
based compensation" for purposes of that Section.
Restrictions on Awards and Transfers; No Right to Employment
No award granted under the Plan may be sold, assigned, transferred,
pledged, hypothecated or otherwise disposed of by the individual to whom
it is granted.
No participant may be granted any award or awards under the Plan of
more than two million Operators' Shares, in the aggregate.
The granting or vesting of an award does not create any rights in the
participant with respect to his or her continued employment with the
Company or any affiliate of the Company.
Federal Income Tax Consequences
The following is a summary of the principal federal income tax
consequences generally applicable to awards expected to be made under
the Plan. The grant of an Operators' Share is not expected to result in
any taxable income for a participant.
Upon receipt of a Dividend Equivalent payment, a participant will
recognize ordinary income in the amount of such payment. Whether the
Company will be entitled to a tax deduction for that same amount in a
year will depend, for the five executive officers named in that year's
proxy statement, upon whether any of such officers' total compensation
(excluding any "qualified performance-based compensation") exceeds $1
million. If such compensation, including all Dividend Equivalents paid
during such year to such officer, does exceed $1 million, the Company
will not be entitled to a tax deduction for such excess.
Payments received by participants under the Plan after the end of the
fiscal year determined by multiplying the number of Operators' Shares by
net earnings for such fiscal year, after deducting Dividend Equivalents
for the fiscal year, will be taxable to the participant as ordinary
income when received. Subject to the usual rules concerning reasonable
compensation, and assuming as expected that compensation paid under the
Plan (other than Dividend Equivalents) is "qualified performance-based
compensation" within the meaning of Section 162(m) of the Code, the
Company will be entitled to a tax deduction for that same amount at the
time a participant recognizes ordinary income.
Termination
The Plan has no termination date.
Amendment
The Company's Board of Directors may amend, alter or discontinue the
Plan at any time. The Committee may correct any defect, supply any
omission or reconcile any inconsistency in the Plan or any award in the
manner and to the extent it shall deem desirable to carry the Plan into
effect.
Section 162(m)
Section 162(m) generally limits to $1 million the amount that a
publicly-held corporation is allowed each year to deduct for the
compensation paid to each of the corporation's chief executive officer
and the corporation's four most highly compensated executive officers
other than the chief executive officer. However, "performance-based"
compensation is not subject to the $1 million deduction limit. In
general, to qualify as performance-based compensation, the following
requirements must be satisfied: (i) payments must be computed on the
basis of an objective, performance-based compensation standard
determined by a committee consisting solely of two or more "outside
directors", (ii) the material terms under which the compensation is to
be paid, including the business criteria upon which the performance
goals are based, and a limit on the maximum number of Operators' Shares
that may be awarded to any participant in the aggregate, are approved by
a majority of the corporation's stockholders and (iii) the committee
certifies that the applicable performance goals were satisfied before
payment of any performance-based compensation is made. The Compensation
Committee will consist solely of outside directors as defined for
purposes of Section 162(m) of the Code. Except for the payment of
Dividend Equivalents thereunder, the Plan is intended to comply with the
requirements of Section 162(m) with respect to performance-based grants
and awards paid in the future to employees whose remuneration is likely
to exceed $1 million in any year. However, there is no definitive
guidance on certain matters, and it is possible that some amounts
payable under the Plan would not qualify.
Vote Required; Board Recommendation
The affirmative vote of the holders of a majority of shares of Common
Stock, present in person or by proxy, voted at the meeting, is required
for approval of the Plan under Section 162(m) of the Code.
The Board of Directors recommends that you vote FOR this Proposal.
Properly dated and signed proxies will be so voted unless stockholders
specify otherwise.
PROPOSAL TO APPROVE THE HORMEL FOODS CORPORATION
LONG-TERM INCENTIVE PLAN
Consistent with the Compensation Committee's determination to
compensate the Company's executive officers and other key employees in a
manner designed to create incentives to maximize the achievement of
long-term goals that are consistent with increasing stockholder value,
on January 28, 1997, the Compensation Committee approved, subject to its
approval by the Company's stockholders, the Hormel Foods Corporation
Long-Term Incentive Plan (the "LTI Plan"). The LTI Plan is designed to
reward participants only if certain specific, objective, preselected
goals are achieved during the relevant performance period. The Company
is seeking stockholder approval of the LTI Plan to qualify compensation
paid under the LTI Plan as "qualified performance-based compensation,"
as defined in Section 162(m) of the Code.
The following is only a summary of certain material features of the
LTI Plan. The full text of the LTI Plan is attached hereto as Appendix B
and is hereby incorporated herein by reference. Stockholders are urged
to read the LTI Plan in its entirety before casting their votes.
Eligibility
The terms of the LTI Plan limit eligibility to receive an award
thereunder to management or highly compensated employees, as selected by
the Compensation Committee. At the present time, the Compensation
Committee intends to limit participation in the LTI Plan to officers of
the Company and/or its subsidiaries. The purpose of this limitation is
to increase the incentives, and compensation risks, for the executives
whose positions of responsibility can most affect the performance of the
Company, with the goal of aligning their personal financial interests
more closely with long-term stockholder interests. Directors of the
Company or any affiliate of the Company who are not also employees of
the Company or any affiliate are not eligible to participate in the LTI
Plan. There were approximately twenty persons employed by the Company
and its subsidiaries, as of December 30, 1997, who the Compensation
Committee believes would be currently eligible to receive awards under
the LTIPlan.
Administration
The LTI Plan is administered by the Compensation Committee ("the
Committee"). The Committee has the authority to select the individuals
to whom awards are granted, to determine the amount of such awards and
to set the terms and conditions of such awards. The Committee has the
authority to establish rules for the administration of the LTI Plan, and
determinations and interpretations are binding on all interested
parties.
Award Formula, Business Criteria
Each award under the LTI Plan will represent the right to receive a
cash payment at the time at which all conditions to pay the award have
been satisfied. Awards are payable solely in cash, and may be made
subject to approved deferred compensation elections by eligible
participants under the Company's existing executive deferred
compensation plan. For purposes of the formula calculating pension
benefits under the supplemental executive retirement plan, payments
received under the LTI Plan will be prorated over the performance period
to which the payments relate.
Awards may provide that more or less than 100% of the amount granted
thereunder may be earned upon satisfaction of the conditions provided
for them, subject to the terms and conditions of the Plan. Awards will
be made solely pursuant to a written agreement between the Company and
the participant setting forth the specific terms and conditions of the
award.
Awards may be granted for such performance periods as may be
determined by the Committee. The right to have a performance-based award
become payable in any fashion will be determined solely on account of
the attainment of one or more preestablished, objective performance
goals selected by the Committee at the time of the grant of the
performance-based award. The performance goals will be based on a
comparison of the Company's "Total Shareholder Return" to the Total
Shareholder Return of a group of peer companies selected by the
Committee. As used in the Plan, "Total Shareholder Return" means the
increase (or decrease) in fair market value (as defined in the Plan) of
a share of common stock, together with dividends deemed reinvested as
provided in the Plan, during the performance period. The percentage
ranking of the Company's Total Shareholder Return within the peer group
will determine whether no award, a fraction of the award, the full
award, or a multiple of the award is paid, based on the ranking goals
established by the Committee.
Subject to approval of the Plan by the Company's stockholders at the
1998 Annual Meeting of Stockholders, the first awards were granted for
the period commencing November 1, 1996 and ending the tenth day on which
shares are traded on the New York Stock Exchange following October 30,
1999. For such performance period, the performance goal(s) for such
awards were based upon Total Shareholder Return measured over the
performance period among a peer group of twenty-nine other companies, as
described in the Long-Term Incentive Plan Awards Table at page 13.
Restrictions on Awards and Transfers; No Right to Employment
No award granted under the LTI Plan may be sold, assigned,
transferred, pledged, hypothecated or otherwise disposed of by the
individual to whom it is granted.
The maximum amount which may be paid to any participant pursuant to
any award with respect to any performance period shall not exceed the
fair market value of three hundred thousand shares of the voting common
stock of the Company determined in the manner provided for in Section
5.2 of the LTI Plan for determining "fair market value" at the end of
the performance period.
The granting of an award does not create any rights in the participant
with respect to his or her continued employment with the Company or any
affiliate of the Company.
Federal Income Tax Consequences
The following is a summary of the principal federal income tax
consequences generally applicable to awards expected to be made under
the LTI Plan. The grant of an award is not expected to result in any
taxable income for a participant. Upon achievement of the designated
performance goals during a performance period with respect to any grant,
payment pursuant to the award will be taxable to the participant as
ordinary income. Subject to the usual rules concerning reasonable
compensation, and assuming as expected that compensation paid under the
LTI Plan is "qualified performance-based compensation" within the
meaning of Section 162(m) of the Code, the Company will be entitled to a
tax deduction for that same amount at the time a participant recognizes
ordinary income.
Termination
The LTI Plan will terminate on October 25, 2003, and no awards may be
made after that date. Unless otherwise expressly provided in the LTI
Plan or an applicable award agreement, however, any award granted prior
to October 25, 2003, may extend beyond such date.
Amendment
The Committee may amend, alter or discontinue the LTI Plan at any
time; provided that stockholder approval must be obtained for any such
action that, absent such stockholder approval, would cause any
compensation paid pursuant to any awards made pursuant to the LTI Plan
not to qualify as "qualified performance-based compensation" within the
meaning of Section 162(m) of the Code. The Committee may correct any
defect, supply any omission or reconcile any inconsistency in the LTI
Plan or any award agreement in the manner and to the extent it shall
deem desirable to carry the LTI Plan into effect. The Committee may
waive any condition of, or rights of the Company under, any outstanding
award, prospectively or retroactively, without the consent of the holder
or beneficiary of the award.
Section 162(m)
Section 162(m) generally limits to $1 million the amount that a
publicly-held corporation is allowed each year to deduct for the
compensation paid to each of the corporation's chief executive officer
and the corporation's four most highly compensated executive officers
other than the chief executive officer. However, "performance-based"
compensation is not subject to the $1 million deduction limit. In
general, to qualify as performance-based compensation, the following
requirements must be satisfied: (i) payments must be computed on the
basis of an objective, performance-based compensation standard
determined by a committee consisting solely of two or more "outside
directors", (ii) the material terms under which the compensation is to
be paid, including the business criteria upon which the performance
goals are based, and a limit on the maximum amount which may be paid to
any participant pursuant to any award with respect to any performance
period, are approved by a majority of the corporation's stockholders and
(iii) the committee certifies that the applicable performance goals were
satisfied before payment of any performance-based compensation is made.
The Compensation Committee will consist solely of "outside directors" as
defined for purposes of Section 162(m) of the Code. The Plan is intended
to comply with the requirements of Section 162(m) with respect to
performance-based grants and awards paid in the future to employees
whose remuneration is likely to exceed $1 million in any year. However,
there is no definitive guidance on certain matters and it is possible
that some amounts payable under the Plan would not qualify.
Vote Required; Board Recommendation
The affirmative vote of the holders of a majority of shares of Common
Stock, present in person or by proxy, voted at the meeting, is required
for approval of the Plan under Section 162(m) of the Code.
The Board of Directors recommends that you vote FOR this Proposal.
Properly dated and signed proxies will be so voted unless stockholders
specify otherwise.
NEW PLAN BENEFITS
Regulations of the Securities and Exchange Commission call for a table
setting forth the amounts that will be received by (i) the CEO and four
other executive officers named in this proxy statement, (ii) the
Company's executive officers as a group, (iii) directors who are not
executive officers as a group, and (iv) all employees, including
officers who are not executive officers, as a group, under the two plans
being submitted to the stockholders for approval, if such amounts are
determinable. If such amounts are not determinable, which is the case
for both plans, the Company is required to set out the amounts which
would have been received for the last fiscal year if the plans had been
in effect. Directors who are not executive officers are not eligible to
receive any payment under either plan.
The amounts which would have been received for 1997 in the case of the
Operators' Share Incentive Compensation Plan are the amounts actually
paid for fiscal year 1997 under substantially the same plan. These
amounts are reflected under the Annual Compensation Bonus column of the
Summary Compensation Table at page 11 for the CEO and four other
executive officers named in the proxy statement, and that table has been
extended to provide the required information for the Company's executive
officers as a group and for all employees, including officers who are
not executive officers, as a group.
In the case of the Long-Term Incentive Plan, the Company is unable to
provide meaningful information as to amounts which would have been
received for the last fiscal year if the plan had been in effect, since
payment, if any, is entirely dependent on comparing two variables at a
future point in time. Thus, in order to provide the best information
available, the Company has extended the Long-Term Incentive Plan Awards
Table at page 13 to include all executive officers as well as the CEO
and four other executive officers named in the proxy statement. There
are presently no other participants in the plan.
APPROVAL OF APPOINTMENT OF AUDITORS
Subject to ratification by the stockholders, the Board of Directors
has appointed Ernst & Young, independent public accountants, to audit
the financial statements of the Company and its consolidated
subsidiaries for the fiscal year which will end October 31, 1998. Ernst
& Young are the present public auditors and have served as public
auditors for the Company since 1931. Representatives of the firm are
expected to be present at the meeting and will be afforded an
opportunity to make a statement, if they desire to do so and be
available to respond to appropriate questions. Management is not aware
of any direct or indirect financial interest or any other connections
Ernst & Young may have with the Company or its subsidiaries except the
usual professional status of an independent auditor.
Audit services rendered by Ernst & Young for the fiscal year ended
October 25, 1997, included the examination of the financial statements
of the Company and its subsidiaries, review of certain documents filed
by the Company with the Securities and Exchange Commission, and
examination of the financial statements of various employee benefit
plans.
The affirmative vote of the majority of the shares of Common Stock
represented at the meeting shall constitute ratification. The Board of
Directors recommends a vote FOR the proposal to approve the appointment
of Ernst & Young.
OTHER MATTERS
The management of your Company does not know of any matters to be
presented at the meeting other than those mentioned above. However, if
any other matters come before the meeting, it is intended that the
holders of the proxies will vote thereon in their discretion.
By order of the Board of Directors
T. J. LEAKE
Secretary
December 30, 199
Appendix A
HORMEL FOODS CORPORATION
OPERATORS' SHARE INCENTIVE COMPENSATION PLAN
PREAMBLE
Since 1932, the Company has used a performance-based incentive
compensation plan for management level employees known as the
"Operators" Share Plan". This is a plan whereby individuals in
management are designated to receive incentive cash compensation based
on the Company's per share after tax net earnings determined based on
average outstanding shares of Common Stock from the audited income
statement of the Company ("Net Earnings Per Share") in lieu of
additional fixed salary or bonus. The rights to receive such
compensation have been historically referred to by the Company as
operators' shares.
The intent of the "Hormel Foods Corporation Operators" Share Incentive
Compensation Plan" (the "Plan") is to continue this traditional method
of providing performance-based incentive cash compensation. The Plan
shall be effective as of October 26, 1997, subject to its approval by
the stockholders of the Company, and no payments shall be made pursuant
to the Plan until after the Plan has been approved by the stockholders
of the Company.
PLAN RULES
1. The Plan shall be administered by the Compensation Committee of the
Company's Board of Directors or such other committee of persons
ineligible to receive Operators' Shares as defined in Section 2
below, as is designated from time to time by the Board of Directors
(the "Committee"). The Committee shall be composed solely of "outside
directors" within the meaning of Section 162(m) of the Internal
Revenue Code of 1986, as amended (the "Code").
2. The Committee may from time to time award management employees
selected by the Committee the right to receive incentive cash
compensation equal to Net Earnings Per Share multiplied by a number
designated by the Committee. These rights are referred to as "Operators'
Shares". The number by which Net Earnings Per Share will
be multiplied is referred to as the number of Operators' Shares. Each
management employee who has been designated to receive Operators'
Shares is referred to as a "Recipient". The Operators' Shares are
awarded subject to the Committee's right to terminate some or all of
any Recipient's Operators' Shares at any time. Operators' Shares will
automatically terminate immediately on the date and at the time when
the Recipient ceases for any reason to be a Company employee, unless
earlier terminated by the Committee. The Committee when awarding
Operators' Shares shall consider the recommendation of the Chief
Executive Officer of the Company.
3. The award of Operators' Shares will be evidenced by a certificate
referred to as an Operators' Certificate. The Operators'
Certificate will be in such form as the Committee may approve from
time to time, and will create no independent rights other than
evidencing the award of Operators' Shares. The Operators' Certificate
is coterminous with the Operators' Shares it evidences.
4. Incentive compensation will be paid to Recipients under the Plan in
the following manner. Whenever a cash dividend is paid to
stockholders on the Company's Common Stock, the amount of the per
share dividend paid multiplied by the number of Operators' Shares
held by the Recipient on the dividend record date (Dividend
Equivalent) will be paid in cash to the Recipient on the dividend
payment date. After the end of each fiscal year of the Company, the
Net Earnings Per Share of the Company's Common Stock for such fiscal
year will be multiplied by the number of Operators' Shares held by
each Recipient on the last day of such fiscal year to determine the
total incentive compensation earned by the Recipient under the Plan.
Except in the case of retirement as noted in paragraph 5 below, or as
otherwise determined by the Committee as noted in paragraph 6 below,
no payment, other than Dividend Equivalent amounts previously paid or
due, will be made unless the Operators' Shares are held on the last
day of the fiscal year. All Dividend Equivalent amounts paid or due
on account of dividends declared during such fiscal year will be
subtracted from the total incentive compensation earned under the
Plan for such fiscal year, and the balance will be paid at a time
determined by the Committee after the last day of such fiscal year
(the Payment Date).
5. If a Recipient retires during the fiscal year, notwithstanding the
termination of the Operators' Shares on the retirement date, the
total incentive cash compensation earned by such Recipient under the
Plan for such fiscal year will be calculated as though the Operators'
Shares were held on the last day of such fiscal year, and then
prorated as of the retirement date. Dividend Equivalent amounts paid
to such Recipient on account of dividends declared during such fiscal
year will be deducted from the prorated amount.
6. Unless otherwise determined by the Committee, the award or
termination of Operators' Shares at any time during a fiscal year
shall (other than with respect to Dividend Equivalents based on a
dividend record date prior to such award or termination) be deemed to
revert to the beginning of such fiscal year. Subject to the
discretion of the Committee to make such exceptions as it believes
are in the best interest of the Company, termination of Operators'
Shares prior to the end of the fiscal year, except in the case of
retirement as noted in paragraph 5 above, will result in no incentive
cash compensation, beyond Dividend Equivalent amounts previously paid
or due, being earned under the Plan during such fiscal year.
7. In no event, including termination of Operators' Shares referred to
in paragraph 6 above, will a Recipient be required to repay to the
Company Dividend Equivalent amounts paid to such Recipient, provided
that Dividend Equivalent payments will be subtracted from the total
incentive cash compensation earned under the Plan as provided in
paragraph 4 above.
8. The Committee shall review with the Chief Executive Officer of the
Company all proposed awards of Operators' Shares, to obtain the views
of the Chief Executive Officer, provided that the Committee shall
make such awards in its sole discretion.
9. Notwithstanding paragraph 4 hereof, amounts of incentive cash
compensation unpaid but otherwise due on account of Operators' Shares
prior to the Payment Date pursuant to the Plan shall be automatically
forfeited by any Recipient who leaves the Company's employ for any
reason, including retirement, and divulges or uses confidential
information of the Company to the detriment of the Company, unless a
specific dispensation from such forfeiture is granted in writing by
the Committee.
10. In the event of a stock split or stock dividend or other similar
action affecting all of the outstanding shares of the Company's
Common Stock, there shall automatically be a proportional change in
the number of Operators' Shares previously awarded to each Recipient.
11. Payments with respect to Operators' Shares granted pursuant to the
Plan, except Dividend Equivalent payments, are intended to be
"qualified performance-based compensation within the meaning of
Section 162(m) of the Code. Accordingly, the following additional
requirements shall apply to all awards of Operators' Shares:
a. For purposes of Section 162(m) of the Code, the only employees
eligible to receive Operators' Shares shall be the employees
selected pursuant to the terms of Section 2 hereof.
b. The right to receive any payment pursuant to an award of
Operators'
Shares made hereunder, except Dividend Equivalent payments, shall be
determined solely on the basis of the Net Earnings Per Share of the
Company.
c. The performance period during which the Net Earnings Per Share
of
the Company are to be measured with respect to any award of
Operators' Shares shall be, unless otherwise changed by the
Committee, the Company's fiscal year.
d. The maximum number of Operators' Shares which may be
awarded on an
aggregate basis to any employee (i.e., to be outstanding at any one
time) shall not exceed two million Operators' Shares, provided that
in the event of a stock split or stock dividend or other similar
action affecting all of the outstanding shares of the Company's
Common Stock, there shall automatically be a proportional change in
the maximum number of Operators' Shares which may be awarded on an
aggregate basis to any employee.
e. Unless otherwise determined by the Committee, not later than 90
days after the beginning of each fiscal year of the Company, the
Committee shall designate all employees who shall receive new or
additional Operators' Shares with respect to that fiscal year, and
the number of Operators' Shares to be received by each such
employee.
f. Following the close of each fiscal year of the Company and prior to
the payment of any amount to any employee on account of Operators'
Shares, except payments of Dividend Equivalents, the Committee shall
certify in writing as to the Net Earnings Per Share of the Company
for that fiscal year, provided that the Committee may by resolution
adopt the Net Earnings Per Share certified by the Company's
independent auditors as the Net Earnings Per Share certified by the
Committee.
g. Each of the foregoing provisions, and all of the other terms and
conditions of the Plan, shall be interpreted in such a fashion so as
to qualify all compensation paid thereunder, except Dividend
Equivalent payments (or certain other payments as may be designated
from time to time by the Committee), as "qualified performance-based
compensation" within the meaning of Section 162(m) of the Code.
12. The Board of Directors of the Company may in its sole discretion
amend, alter or discontinue the Plan at any time. The Committee may
correct any defect, supply any omission or reconcile any
inconsistency in the Plan or any award in the manner and to the
extent it shall deem desirable to carry the Plan into effect.
13. Subject to its approval by the Company's stockholders, this Plan
shall continue until terminated by the Company's Board of Directors.
Appendix B
HORMEL FOODS CORPORATION
LONG-TERM INCENTIVE PLAN
ARTICLE I. ESTABLISHMENT
On January 28, 1997, the Compensation Committee of the Board of
Directors of HORMEL FOODS CORPORATION, a Delaware corporation (the
"Company"), approved and adopted an incentive plan for executives as
described herein, which plan shall be known as the "HORMEL FOODS
CORPORATION LONG-TERM INCENTIVE PLAN" (the "Plan"). The Plan shall
be
effective as of October 28, 1996, subject to its approval by the
stockholders of the Company, and no payments shall be made pursuant to
the Plan until after the Plan has been approved by the stockholders of
the Company.
ARTICLE II. PURPOSE
The purpose of the Plan is to advance the long-term interests of the
Company and its stockholders by attracting and retaining key employees,
and by stimulating the efforts of such employees to contribute to the
continued success and growth of the business of the Company.
ARTICLE III. ADMINISTRATION
3.1 Composition of the Committee. The Plan shall be administered by the
Compensation Committee of the Company's Board of Directors, or a sub-
committee thereof (the "Committee"), which shall consist of members
appointed from time to time by the Board of Directors and shall be
comprised of not less than such number of directors as shall be
required to permit the Plan to satisfy the requirements of Section
162(m) of the Internal Revenue Code of 1986, as amended (the "Code").
The Committee administering the Plan shall be composed solely of
"outside directors" within the meaning of Section 162(m) of the Code.
3.2 Power and Authority of the Committee. The Committee shall have full
power and authority, subject to all the applicable provisions of the
Plan and applicable law, to (a) establish, amend, suspend, terminate
or waive such rules and regulations and appoint such agents as it
deems necessary or advisable for the proper administration of the
Plan, (b) construe, interpret and administer the Plan and any
instrument or agreement relating to, or Award (as defined below in
Section 3.4) made under, the Plan, and (c) make all other
determinations and take all other actions necessary or advisable for
the administration of the Plan. Unless otherwise expressly provided
in the Plan, each determination made and each action taken by the
Committee pursuant to the Plan or any instrument or agreement
relating to, or Award made under, the Plan (x) shall be within the
sole discretion of the Committee, (y) may be made at any time and (z)
shall be final, binding and conclusive for all purposes on all
persons, including, but not limited to, holders of Awards, and their
legal representatives and beneficiaries, and employees of the Company
or of any "Affiliate" of the Company. For purposes of the Plan and
any instrument or agreement relating to, or Award made under, the
Plan, the term "Affiliate" shall mean any entity that, directly or
indirectly through one or more intermediaries, is controlled by the
Company and any entity in which the Company has a significant equity
interest, in each case as determined by the Committee in its sole
discretion.
3.3 Delegation. The Committee may delegate its powers and duties under
the Plan to one or more officers of the Company or any Affiliate or a
committee of such officers, subject to such terms, conditions and
limitations as the Committee may establish in its sole discretion;
provided, however, that the Committee shall not delegate its power to
(a) amend the Plan as provided in Article IX hereof, or (b) make
determinations regarding Awards .
3.4 Qualified Performance-Based Compensation. An opportunity to receive
compensation pursuant to the Plan (hereinafter referred to as an
"Award(s)") is intended to be "qualified performance-based
compensation" within the meaning of Section 162(m) of the Code. The
following requirements shall apply to all Awards made under the plan:
a. Any Award shall be null and void and have no effect whatsoever
unless the Plan shall have been approved by the stockholders of the
Company at the Company's 1998 annual meeting of stockholders.
b. The right to receive payment pursuant to an Award shall be
determined solely on account of the attainment of the
preestablished, objective performance goals selected by the
committee in connection with the grant of the Award. Such goals
shall be based solely on cumulative total return to stockholders
compared to preselected peer groups as described below in Section
5.2. While the amount of Award(s) may vary among Participants (as
defined below in Section 4.2), the goals established by the
Committee shall apply to all Participants in the same manner.
c. The performance period determined by the Committee during which the
achievement of the performance goal or goals selected by the
Committee with respect to any Award is to be measured (the
"Performance Period") is expected to be approximately three (3)
years, and shall, in no case, be less than 24 months.
d. The maximum amount which may be paid to any Participant pursuant to
any Award with respect to any Performance Period shall not exceed
the fair market value of three hundred thousand (300,000) shares of
the voting common stock of the Company, determined in the manner
provided in Section 5.2 for determining "fair market value" at the
end of the Performance Period.
e. Not later than 90 days after the beginning of each Performance
Period selected by the Committee for an Award, it shall:
(i) designate the Performance Period and all Participants for such
Performance Period;
(ii) designate the Peer Group (as defined below in Section 5.2);
and
(iii) establish the objective performance factors for all
Participants for that Performance Period on the basis of cumulative
total return to stockholders compared to preselected peer groups.
f. Following the close of each Performance Period and prior to payment
of any amount to any Participant under the Plan, the Committee must
certify in writing as to the attainment of the performance factors
upon which any payments to Participants for that Performance Period
are to be based.
g. Each of the foregoing provisions, and all of the other terms and
conditions of the Plan as it applies to any Award, shall be
interpreted in such a fashion so as to qualify all compensation
paid thereunder as "qualified performance-based compensation"
within the meaning of Section 162(m) of the Code.
ARTICLE IV. ELIGIBILlTY AND PARTICIPATION
4.1 Eligibility. The Plan is unfunded and is maintained by the Company
for a select group of management or highly compensated employees. In
order to be eligible to participate in the Plan, an employee of the
Company or of its Affiliates must be selected by the Committee. In
determining the employees who will participate in the Plan, the
Committee may take into account the nature of the services rendered
by the respective employees, their present and potential
contributions to the success of the Company and such other factors as
the Committee, in its sole discretion, shall deem relevant. A
director of the Company or of an Affiliate who is not also an
employee of the Company or an Affiliate, and all members of the
Committee, shall not be eligible to participate in the Plan.
4.2 Participation. The Committee shall determine the employees to be
granted an Award, the amount of each Award, the time or times when
Awards will be made, the period of time over which such Awards are
intended to be earned, and all other terms and conditions of each
Award. The provisions of the Awards need not be the same with respect
to any recipient of an Award (the "Participant") or with respect to
different Participants, except that the performance goals applicable
to each Award shall be established in the same manner, as described
below in Section 5.2. The Committee's decision to approve an Award to
an employee in any year shall not require the Committee to approve a
similar Award or any Award at all to that employee or any other
employee or person at any future date. The Company and the Committee
shall not have any obligation for uniformity of treatment of any
person, including, but not limited to, Participants and their legal
representatives and beneficiaries and employees of the Company or of
any Affiliate.
4.3 Award Agreement. Any employee selected for participation by the
Committee shall, as a condition of participation, enter into a
written agreement with the Company setting forth the terms and
conditions of the Award (the "Award Agreement"). A separate Award
Agreement will be provided to each Participant for each Award.
4.4 Employment. In the absence of any specific agreement to the contrary,
no Award to a Participant under the Plan shall affect any right of
the Company, or of any Affiliate of the Company, to terminate, with
or without cause, the Participant's employment with the Company or
any Affiliate at any time. Neither the establishment of the Plan, nor
the granting of any Award hereunder, shall give any Participant (a)
any rights to remain employed by the Company or any Affiliate; (b)
any benefits not specifically provided for herein or in any Award
granted hereunder; or, (c) any rights to prevent the Company or any
Affiliate from modifying, amending or terminating any of its other
benefit plans of any nature whatsoever.
ARTICLE V. AWARDS
5.1 General. The Committee shall determine the Award or Awards to be
made
to each Participant, and each Award shall be subject to the terms and
conditions of the Plan and the applicable Award Agreement. An Award
shall be made solely in the form of a statement of a dollar amount
based on attaining a specified goal, subject to an increase or
reduction in such amount based on exceeding or failing to meet the
goal, as described below in Section 5.2. Awards may be granted singly
or in combination, or in addition to, in tandem with or in
substitution for any grants or rights under any other employee or
compensation plan of the Company or of any Affiliate. Awards may
provide that more or less than 100% of the amount stated therein may
be earned upon satisfaction of the conditions provided for therein,
subject to the terms and conditions of the Plan. All or part of an
Award may be subject to conditions and forfeiture provisions
established by the Committee, and set forth in the Award Agreement.
5.2 Awards. Subject to the discretion of the Committee to reduce an
Award, as provided below in Section 5.4, the payment to be made to a
Participant on account of an Award shall be determined based on total
shareholder return ranked against a peer group in the following
manner:
(i) The Committee shall designate a number of companies listed on
the New York Stock Exchange or American Stock Exchange, or quoted
on NASDAQ, selected by the Committee in its sole discretion as
comparable to the Company (the "Peer Group"). In the event any Peer
Group companies are not thereafter listed on either the New York
Stock Exchange or American Stock Exchange, or quoted on NASDAQ,
during the Performance Period, such companies will drop out of the
Peer Group, and the size of the Peer Group shall be reduced
accordingly.
(ii) The Committee shall determine fair market value of a share of
the voting common stock of each company in the Peer Group, and of
the Company, as of the beginning and the end of the Performance
Period. For purposes of the Plan, "fair market value" shall be (a)
the average of the closing price of a company's voting common stock
on the New York Stock Exchange or on the American Stock Exchange on
the ten trading days designated by the Committee at the beginning
and end of the Performance Period, and (b) if the voting common
stock is not listed on the New York Stock Exchange or the American
Stock Exchange but is quoted on NASDAQ, the average of the last
sale (National Market System) or the average between the highest
bid and lowest asked prices for a share of voting common stock
(National List) as quoted on NASDAQ on the ten trading days
designated by the Committee at the beginning and end of the
Performance Period.
(iii) Within thirty days after the end of any Performance Period,
the Committee shall calculate the total shareholder return for each
company remaining in the Peer Group and for the Company. For
purposes of the Plan, "total shareholder return" shall be
calculated as follows for each company in the Peer Group and for
the Company. The fair market value of a share of voting common
stock shall be determined for each Peer Group company and the
Company at the beginning of the Performance Period (the "Beginning
Value"). During the Performance Period each dividend paid by any
Peer Group company and the Company shall be deemed invested in that
company's voting common stock at the closing price of such stock on
the date the dividend was paid. At the end of the Performance
Period, the fair market value of a share of voting common stock
plus the fair market value of any additional whole or fractional
share of voting common stock deemed purchased with dividends shall
be determined for each remaining Peer Group company and the Company
(the "Ending Value"). In the event of stock splits or other
recapitalizations (excepting stock repurchases or issuances of new
stock for acquisitions), the Committee shall make such adjustment
as it deems appropriate to maintain comparability between the
Beginning Value and Ending Value. The percentage increase (or
decrease) of Ending Value compared to Beginning Value is the total
shareholder return.
(iv) The Peer Group companies and the Company will be ranked
according to total shareholder return during the Performance
Period. The Committee will apply the Company's ranking, in such
manner as the Committee may determine for any Performance Period,
to determine what percentage of the dollar amount specified in each
Participant's individual Award Agreement shall be paid to such
Participant, which may be the amount, a fraction of the amount, a
multiple of the amount, or nothing, provided that the percentage
shall be calculated in the same manner and using the same
performance standard for all Participants.
5.3 Payment of Awards. Payment of Awards shall be made solely in cash and
may be made, subject to any deferred compensation election which may
be permitted pursuant to the Hormel Foods Corporation Executive
Deferred Income Plan II, at such times, with such restrictions and
conditions as the Committee, in its sole discretion, may determine at
the time of grant of the Awards.
5.4 Discretionary Reduction. The Committee shall retain sole and full
discretion to reduce, in whole or in part, the amount of any cash
payment otherwise payable to any Participant under this Plan.
ARTICLE VI. TERMINATION OF EMPLOYMENT
Each Award Agreement shall include provisions governing the
disposition of an Award in the event of the retirement, disability,
death or other termination of a Participant's employment with the
Company or an Affiliate.
ARTICLE VII. NONTRANSFERABILITY
Except as otherwise determined by the Committee, no Award shall be
sold, assigned, transferred, pledged, hypothecated or otherwise disposed
of during the time in which the requirement of continued employment or
attainment of performance objectives has not been achieved. Each Award
shall be paid during the Participant's lifetime only to the Participant
or, if permissible under applicable law, to the Participant's legal
representatives.
ARTICLE VIII. TAXES
In order to comply with all applicable federal or state income, social
security, payroll, withholding or other tax laws or regulations, the
Company may take such action, and may require a Participant to take such
action, as it deems appropriate to ensure that all applicable federal or
state income, social security, payroll, withholding or other taxes,
which are the sole and absolute responsibility of the Participant, are
withheld or collected from such Participant.
ARTICLE IX. AMENDMENT AND TERMINATION
9.1 Term of Plan. Unless the Plan shall have been discontinued or
terminated as provided in Section 10.2 hereof, the Plan shall
terminate on the last Saturday in October, 2003. No Awards may be
granted after such termination, but termination of the Plan shall not
alter or impair any rights or obligations under any Award theretofore
granted, without the consent of the Participant or holder or
beneficiary thereof, except as otherwise provided in the Plan or the
Award Agreement.
9.2 Amendments to and Termination of Plan. Except to the extent
prohibited by applicable law and unless otherwise expressly provided
in the Plan or an Award Agreement, the Committee may amend, alter,
suspend, discontinue or terminate the Plan; provided, however, that
notwithstanding any other provision of the Plan or any Award
Agreement, without the approval of the stockholders of the Company,
no such amendment, alteration, suspension, discontinuation or
termination shall be made that, absent such approval would cause any
compensation paid pursuant to any Award granted pursuant to the Plan
to no longer qualify as "qualified performance-based compensation"
within the meaning of Section 162(m) of the Code.
9.3 Correction of Defects, Omissions and Inconsistencies. Except to the
extent prohibited by applicable law and unless otherwise expressly
provided in the Plan or an Award Agreement, the Committee may correct
any defect, supply any omission or reconcile any inconsistency in the
Plan, any Award or any Award Agreement in the manner and to the
extent it shall deem desirable to carry the Plan into effect.
ARTICLE X. MISCELLANEOUS
10.1 Governing Law. The Plan and any Award Agreement shall be governed
by
and construed in accordance with the internal laws, and not the laws
of conflicts, of the State of Delaware.
10.2 Severability. If any provision of the Plan, any Award or any Award
Agreement is or becomes or is deemed to be invalid, illegal or
unenforceable in any jurisdiction or would disqualify the Plan, any
Award or any Award Agreement under any law deemed applicable by the
Committee, such provision shall be construed or deemed amended to
conform to applicable laws, or if it cannot be so construed or deemed
amended without, in the determination of the Committee, materially
altering the purpose or intent of the Plan, the Award or the Award
Agreement, such provision shall be stricken as to such jurisdiction,
and the remainder of the Plan, any such Award or any such Award
Agreement shall remain in full force and effect.
10.3 No Trust or Fund Created. Neither the Plan nor any Award or Award
Agreement shall create or be construed to create a trust or separate
fund of any kind or a fiduciary relationship between the Company or
any Affiliate and a Participant or any other person. To the extent
that any person acquires a right to receive payments from the Company
or any Affiliate pursuant to an Award, such right shall be no greater
than the right of any unsecured general creditor of the Company or of
any Affiliate.
10.4 Nature of Payments. Any and all cash payments pursuant to any Award
granted hereunder shall constitute special incentive payments to the
Participant, and, except as hereinafter provided, such payments shall
not be taken into account in computing the amount of the Participants
remuneration for purposes of determining the amount of any benefit
payable to or with respect to the Participant under any employee
pension benefit plan or employee welfare benefit plan (as those terms
are defined in section 3 of ERISA) or in any agreement between the
Company (or any Affiliate) and the Participant to provide similar
benefits. However, such payments shall be taken into account as if
they were received ratably during the Performance Period with respect
to which they relate: (i) in determining benefits under any plan or
agreement which expressly provides that they shall be taken into
account, and (ii) in determining benefits under the Hormel Foods
Corporation Supplemental Executive Retirement Plan and the Hormel
Survivor Income Plan for Executives.
10.5 No Illegal Transactions. The Plan and any Award granted hereunder
are subject to all laws and regulations of any governmental authority
which may be applicable thereto; and, notwithstanding any provision
of the Plan or any Award, Participants shall not be entitled to
receive the benefit of any Award, and the Company and any Affiliate
shall not be obligated to pay any such benefits to a Participant, if
such receipt or payment of benefits would constitute a violation by
the Participant or the Company or any Affiliate of any provision of
any such law or regulation.
10.6 No Rights as Stockholder. Participants shall not have any rights as
stockholders of the Company or any Affiliate as a result of the grant
of an Award of Performance Shares hereunder.
10.7 Headings. Headings are given to the Articles and sections of the
Plan solely as a convenience to facilitate reference. Such headings
shall not be deemed in any way material or relevant to the
construction or interpretation of the Plan or any provision thereof.
HORMEL FOODS CORPORATION
1 Hormel Place
Austin, MN 55912
PROXY
This proxy is solicited on behalf of the Board of Directors.
The undersigned hereby appoints Joel W. Johnson, Don J. Hodapp,
Gary J. Ray or a majority thereof present, or if only
one be present, then that one, with full power of substitution, and
hereby authorizes them to represent and to vote as designated below all
the shares of Common Stock of Hormel Foods Corporation held of record by
the undersigned on December 1, 1997, at the Annual Meeting of
Stockholders to be held on January 27, 1998, or any adjournment thereof.
1.ELECTION OF DIRECTORS
FOR all nominees listed below
(except as marked to the contrary below)
WITHHOLD AUTHORITY
(to vote for all nominees)
John W. Allen, Ph.D., John R. Block, Eric A. Brown, James W. Cole,
William S. Davila, David N. Dickson, E. Peter Gillette, Jr., Luella G.
Goldberg, Don J. Hodapp, Joel W. Johnson, Geraldine M. Joseph, Stanley
E. Kerber, Joseph T. Mallof, Gary J. Ray, Robert R. Waller, M.D.
(INSTRUCTION: To withhold authority to vote for any individual nominee,
write that nominee's name on the space provided below.)
2. PROPOSAL TO APPROVE THE COMPANY'S OPERATORS' SHARE
INCENTIVE
COMPENSATION PLAN.
FOR AGAINST ABSTAIN
3. PROPOSAL TO APPROVE THE COMPANY'S LONG-TERM
INCENTIVE PLAN. FOR
AGAINST ABSTAIN
4. PROPOSAL TO APPROVE THE APPOINTMENT OF ERNST & YOUNG
AS THE
INDEPENDENT AUDITORS OF THE CORPORATION.
FOR AGAINST ABSTAIN
5. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE
UPON SUCH
OTHER BUSINESS AS MAY PROPERLY COME
BEFORE THE MEETING. YES NO
SHARES ____________________
This proxy when properly executed will be voted in the manner directed
herein by the undersigned stockholder. If no direction is made, the
proxy will be voted FOR Proposals 1, 2, 3 and 4.
Please sign exactly as name appears below. When shares are held by joint
tenants, both should sign. When signing as attorney,executor,
administrator, trustee or guardian,please give full title as such. If a
corporation, please sign in full corporate name by President or other
authorized officer. If a partnership, please sign in partnership
name by authorized person.
Dated January________, 1998
_________________________________________
Signature
_________________________________________
Signature if held jointly
HORMEL FOODS CORPORATION
1 Hormel Place
Austin, MN 55912
PROXY
This proxy is solicited on behalf of the Board of Directors.
The undersigned hereby appoints Joel W. Johnson, Don J. Hodapp,
Gary J. Ray or a majority thereof present, or if only
one be present, then that one, with full power of substitution, and
hereby authorizes them to represent and to vote as designated below all
the shares of Common Stock of Hormel Foods Corporation held of record by
the undersigned on December 1, 1997, at the Annual Meeting of
Stockholders to be held on January 27, 1998, or any adjournment thereof.
1.ELECTION OF DIRECTORS
FOR all nominees listed below
(except as marked to the contrary below)
WITHHOLD AUTHORITY
(to vote for all nominees)
John W. Allen, Ph.D., John R. Block, Eric A. Brown, James W. Cole,
William S. Davila, David N. Dickson, E. Peter Gillette, Jr., Luella G.
Goldberg, Don J. Hodapp, Joel W. Johnson, Geraldine M. Joseph, Stanley
E. Kerber, Joseph T. Mallof, Gary J. Ray, Robert R. Waller, M.D.
(INSTRUCTION: To withhold authority to vote for any individual nominee,
write that nominee's name on the space provided below.)
2. PROPOSAL TO APPROVE THE COMPANY'S OPERATORS' SHARE
INCENTIVE
COMPENSATION PLAN.
FOR AGAINST ABSTAIN
3. PROPOSAL TO APPROVE THE COMPANY'S LONG-TERM
INCENTIVE PLAN. FOR
AGAINST ABSTAIN
4. PROPOSAL TO APPROVE THE APPOINTMENT OF ERNST & YOUNG
AS THE
INDEPENDENT AUDITORS OF THE CORPORATION.
FOR AGAINST ABSTAIN
5. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE
UPON SUCH
OTHER BUSINESS AS MAY PROPERLY COME
BEFORE THE MEETING. YES NO
SHARES ____________________
This proxy when properly executed will be voted in the manner directed
herein by the undersigned stockholder. If no direction is made, the
proxy will be voted FOR Proposals 1, 2, 3 and 4.
Please sign exactly as name appears below. When shares are held by joint
tenants, both should sign. When signing as attorney,executor,
administrator, trustee or guardian,please give full title as such. If a
corporation, please sign in full corporate name by President or other
authorized officer. If a partnership, please sign in partnership
name by authorized person.
Dated January________, 1998
_________________________________________
Signature
_________________________________________
Signature if held jointly
