Exhibit (e) (1)
INFORMATION REGARDING THE BOARD OF DIRECTORS AND ITS COMMITTEES
The Board of Directors has established in Audit Committee,
Compensation Committee, Executive Committee, Nominating Committee and Plans
Administration Committee.
The Board of Directors met four times during the 1999 fiscal year.
All directors attended at least 75 percent of the Board of Directors meetings.
All directors attended at least 75 percent of the committee meetings for which
they were eligible.
The Executive Committee, during the intervals between meetings of
the Board of Directors, exercises all powers of the Board of Directors, except
is otherwise provided by law and the IBP Bylaws. The members of the Executive
Committee currently are Messrs. Peterson (Chairman), Bond, and Leman. The
Executive Committee met or acted by written consent ten times during 1999.
The Audit Committee selects the firm of independent public
accountants to audit the financial statements of IBP and its consolidated
Subsidiaries, subject to approval of the Board of Directors, discusses with
the independent public accountants the scope and results of their audit;
discusses with the independent public accountants, and with the management of
IBP, IBP's financial, accounting and reporting principles, policies and
practices; discusses with the independent public accountants, and with the
Controller of IBP and his staff, the adequacy of the corporation's
accounting, financial and operating controls; and reports to the Board of
Directors. The members of the Audit Committee currently are Dr. Massengale
(Chairman), Mr. Chalsty, Dr. Gramm, Mr. Jacobson, Mr. Sanem and Ms. Smith.
The Audit Committee held four meetings during 1999.
The Compensation Committee reviews and approves compensation
arrangements, including annual incentive awards, for officers of IBP. The
members of the Compensation Committee currently are Mr. Chalsty (Chairman),
Dr. Gramm, Mr. Jacobson. Dr. Massengale, Mr. Sanem and Ms. Smith. The
Compensation Committee held two meetings during 1999.
The Nominating Committee makes recommendations as to candidates
for election to the Board of Directors and their qualifications to fill board
vacancies in connection with proposed slates of nominees for directors for
whose election proxies will be solicited by the Board of Directors. The
Nominating Committee will consider properly submitted recommendations of
stockholders if the recommendation is submitted pursuant to the procedures
previously outlined. The members of the Nominating Committee currently are
Dr. Gramm (Chairperson), Mr. Chalsty, Mr. Jacobson, Dr. Massengale, Mr. Sanem
and Ms. Smith. The Nominating Committee held one meeting during 1999.
The Plans Administration Committee administers the restricted
stock and employee stock option plans of IBP. The members of the Plans
Administration Committee currently are Ms. Smith (Chairperson), Mr. Chalsty,
Dr. Gramm, Mr. Jacobson, Dr. Massengale,
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and Mr. Sanem, none of whom are eligible for selection as participants in these
plans. The Plans Administration Committee (including sub-committees) held four
meetings during 1999.
INFORMATION REGARDING DIRECTORS' COMPENSATION
Officers of IBP who are also directors do not receive any fee or
remuneration for services as members of the Board of Directors or of any
committee of the Board of Directors. Non-management directors receive a retainer
fee of $25,000 per annum, $2,500 per annum for each committee they chair and
$1,000 for each board or committee meeting that they attend. Non-management
directors also receive stock options pursuant to the IBP Directors Stock Option
Plan.
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<PAGE>
SECURITY OWNERSIIIP OF MANAGEMENT
The following table sets forth, as of February 29, 2000, beneficial
ownership of IBP Common Stock, the sole class of IBP stock, for each director of
IBP, for each person nominated as a director of IBP, for each executive officer
named in the Summary Compensation Table and for all directors and executive
officers (including those executive officers not named in the Summary
Compensation Table, if any) of IBP as a group. Unless otherwise indicated, the
persons named below have sole voting and investment power with respect to the
Common Stock shown as beneficially owned by them.
AMOUNT AND
NATURE
OF PERCENT
BENEFICIAL OF
OWNERSHIP CLASS
NAME OR BENEFICIAL OWNER -- POSITION WITH IBP (#)(1) (%)(2)
--------------------------------------------- ---------- -------
Richard L. Bond--Director and Executive Officer....... 106,210 *
John S. Chaisty--Director............................. 6,800 *
R. Randolph Devening--Executive Officer............... 0 *
Wendy L. Gramm--Director.............................. 4,300 *
Craig J. Hart--Executive Officer...................... 24,467 *
John J. Jacobson, Jr.--Director...................... 12,400 *
Eugene D. Leman--Director and Executive Officer....... 152,817 *
Martin A. Massengale--Director........................ 1,875 *
Robert L. Peterson--Director and Executive Officer.... 725,002 *
Michael L. Sanem--Director............................ 60,400 *
Larry Shipley--Executive Officer...................... 59,524 *
JoAnn R. Smith--Director.............................. 5,900 *
All Directors and Executive Officers as a
Group (12 Persons).................................... 1,159,695 1.09%
----------------------
(1) This number includes stock options granted pursuant to the IBP 1987
Stock Option Plan, the IBP 1993 Stock Option Plan, the 1996 Stock
Option Plan and the IBP Directors Stock Option Plan, and which are
exercisable as of February 29, 2000, or within 60 days thereafter: Mr.
Bond 97,860; Mr. Chalsty 4,300; Dr. Gramm 4,300; Mr. Hart 20,376; Mr.
Jacobson 400; Mr. Leman 85,600; Dr. Massengale 800; Mr. Peterson
258,000; Mr. Sanem 400; Mr. Shipley 37,424; and Ms. Smith 2,100.
(2) Individually, the executive officers, directors and nominees for director
beneficially own less than 1% of IBP's Common Stock.
JOINT REPORT OF THE COMPENSATION
AND PLANS ADMINISTRATION COMMITTEES
COMPENSATION AND PLANS ADMINISTRATION COMMITTEES
The Compensation Committee of the Board of Directors is comprised
entirely of disinterested and outside directors. The Committee is responsible
for establishing the levels of compensation (except stock option grants and
long-term stock awards) for the executive officers of the Company. The Committee
annually evaluates IBP's performance and compensation paid to its executive
officers.
3
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The Plans Administration Committee reviews and approves the grant of
stock options and awards of restricted stock pursuant to IBP's stock option and
long-term stock plans for the Company's officers and employees. This Committee
is comprised entirely of disinterested and outside directors.
COMMITTEES' REPORT ON EXECUTIVE COMPENSATION
BASE SALARY
The annual compensation of executive officers of IBP includes a base
salary, coupled with a cash bonus which is calculated in accordance with an
established formula based on the operating income of IBP. The Compensation
Committee from time to time uses outside consultants and published compensation
survey data to review competitive rates of pay, to establish salary ranges and
to set target base salary levels for officers. The amount of the employee's base
salary is a function of the employee's officer position, or grade level, and
individual performance. The employee's individual performance is measured
against expectations related to budgetary performance or operating income
results and operating performance standards.
BONUS PAYMENTS
The annual compensation of employees participating in IBP's
officers' bonus program, including executive officers, is dependent on overall
corporate performance. The dollar amount of the bonus pool from which bonuses
are paid is established as a percent of operating income as adjusted for
non-operating expenses such as pushdown accounting. Target bonuses are based on
the percent of increase or decrease in such operating income from the prior
year.
STOCK OPTION GRANTS AND RESTRICTED STOCK AWARDS
IBP has stock option plans for all of its management employees and a
long-term stock plan for its officers, including executive officers. The purpose
of the plans is to assist in securing and retaining employees of ability by
making it possible to offer them an incentive, in the form of a proprietary
interest in IBP, to join or continue in the service of IBP and to increase their
efforts on its behalf.
Levels for both stock option grants and restricted stock awards are
established by the Plans Administration Committee on the basis of an employee's
officer position or grade level. Stock options are typically granted for terms
of ten years and normally become exercisable in increments beginning after the
second and continuing through the fifth year of the stock option term. The
restricted stock awards are made subject to continued employment, generally for
five years.
CORPORATE PERFORMANCE
In evaluating corporate performance to establish compensation for
fiscal year 1999, the Compensation Committee considered the fact that operating
income for 1998 for bonus purposes was up 65% from 1997 and net earnings per
diluted share were up to $2.03 in 1998
4
<PAGE>
from $1.25 in 1997. The Compensation Committee established a standard salary
increase budget of 3%, for fiscal year 1999 for officers. The budget percentage
was based on the standard percentage increase for all management employees of
the Company. Individual salary increases were determined for all management
employees, including executive officers, based on each individual's
contributions to operating unit and corporate performance.
COMPENSATION OF CHIEF EXECUTIVE OFFICER
The Chairman and Chief Executive Officer's salary and
performance-based bonus for 1999 were established by the Compensation Committee
in December of 1994. Mr. Peterson's base salary remained at $1,000,000. His
performance-based bonus for 1999 was established at 1.627% (pursuant to the five
year formula approved by stockholders at the 1995 Annual Meeting) of the first
$100,000,000 of operating income, after adjustments and consistent with the
bonus calculations for management generally, and 1% of any operating income that
exceeded $100,000,000. These actions were based on the 1993 changes to Section
162(m) of the Internal Revenue Code which require that any compensation over
$1,000,000 be performance-based (or meet other exceptions provided by the
Section) to be deductible by the Company. The salary and performance-based bonus
were determined pursuant to the changes to Section 162(m) and in order to retain
Mr. Peterson as Chairman and Chief Executive Officer. The bonus method was
designed to incentivize Mr. Peterson with a performance-based bonus that was
competitive with the industry and also allows the Company to take a deduction
for federal income tax purposes.
John S. Chalsty Wendy L. Gramm John J. Jacobson, Jr.
Martin A. Massengale Michael L. Sanen JoAnn R. Smith
5
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER
PARTICIPATION IN COMPENSATION DECISIONS
The members of the Compensation Committee are Mr. Chalsty
(Chairman), Dr. Gramm, Mr. Jacobson, Dr. Massengale, Mr. Sanem and Ms. Smith.
AUDIT COMMITTEE REPORT
The audit committee has reviewed and discussed the audited financial
statements with the Company's management. In addition, the audit committee has
communicated with the Company's independent auditors, PricewaterhouseCoopers LLP
("PwC"), in regards to those matters required by SAS 61 (as may be modified or
supplemented), has received the written disclosures and the letter from PwC
required by Independence Standards Board Standard No. 1 (as may be modified or
supplemented), and has discussed with PwC the independence of PwC. Based on the
above mentioned review and discussion, the audit committee recommended to the
Board of Directors that the audited financials be included in the Company's
Annual Report on Form 10K.
The audit committee has adopted a charter, a copy of which is
attached as Appendix 1. The members of the audit committee have been determined
to be independent pursuant to the New York Stock Exchange Rules
303.01(a)(B)(2)(a) and (3).
Martin A. Massengale Wendy L. Gramm Michael L. Sanen
John S. Chalsty John J. Jacobson, Jr. JoAnn R. Smith
6
<PAGE>
SUMMARY COMPENSATION TABLE (1)
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
------------------------------------------------------ ---------------------------
OTHER RESTRICTED SECURITIES
ANNUAL STOCK UNDERLYING ALL OTHER
NAME AND PRINCIPAL COMPENSATION AWARDS OPTIONS COMPENSATION
POSITION YEAR SALARY ($) BONUS($) ($)(2) ($)(3) (#) ($)(4)
------------------- ---- ---------- -------- ------------ ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Robert L. Peterson 1999 1,000,000 6,316,914 51,125 304,878
Chairman and 1998 1,000,000 4,568,006 57,566 30,000 160,486
Chief Executive Officer 1997 1,000,000 2,805,501 70,445 1,448,125 30,000 91,943
Richard L. Bond 1999 555,317 853,740 174,099
President and 1998 516,667 550,800 21,000 30,243
Chief Operating Officer 1997 469,167 288,345 70,000 35,900 19,262
Eugene D. Leman 1999 349,849 520,200 133,661
Chief Executive Officer, 1998 325,500 346,800 12,000 19,096
Fresh Meats 1997 301,000 195,279 50,000 17,000 12,391
Larry Shipley 1999 282,292 383,240 35,736
Chief Financial Officer 1998 289,150 260,000 12,000 16,942
1997 144,667 148,411 140,000 16,000 5,955
Craig J. Hart 1999 99,936 103,180 21,131
Vice President 1998 92,083 70,000 3,120 5,403
and Controller 1997 87,833 41,400 75,000 3,120 3,617
R. Randolph Devening(5) 1999 728,000 728,000 10,000 35,999
President & Chief 1998 700,000 1,217,650 35,700
Executive Officer, 1997 471,154 624,279 25,053
Foodbrands America, Inc.
</TABLE>
----------------------
(1) No other types of compensation required to be reported in the table were
paid or were payable to any of the named executive officers and,
therefore, the column which the SEC regulations created to report
"Long-Term Incentive Plan Payouts" has been deleted from the table. IBP
has not granted any SARs pursuant to the IBP 1993 Stock Option Plan and
1996 Stock Option Plan and has therefore removed SARs from the columns of
this table and reported only options.
(2) Except for Mr. Peterson, the perquisites and other personal benefits
provided to the executive officers do not exceed the threshold established
by the SEC and are not reported in the table. The other annual
compensation reported for Mr. Peterson consists of perquisites provided by
the Company. For the perquisites reported in 1999, $32,865 of this amount
is attributable to Company automobile expenses and $10,520 is attributable
to Mr. Peterson's personal use of Company aircraft.
(3) Restricted stock was granted to certain officers pursuant to the IBP
Officer Long-Term Stock Plan. The shares vest five years from the date of
grant contingent upon continued employment with IBP. Early vesting may
occur pursuant to the Plan's provisions due to events such as death or
total disability. The value of the shares on the date of grant is listed
for the named executive officers in the Summary Compensation Table. Under
certain past grants, and certain future grants to executive officers, the
Company is obligated to pay the executive officer's mandatory minimum
Federal tax withholding and Medicare tax portion of the Federal Insurance
Contribution Act upon vesting and receipt
7
<PAGE>
of the shares. Dividends paid on the restricted stock are used to purchase
additional shares of restricted stock pursuant to the provisions of the
Plan. These additional shares are then credited to an officer's award. The
number of shares of restricted Common Stock in each named officer's
account pursuant to the IBP Officer Long-Term Stock Plan on December 25,
1999, and the aggregate fair market value of the shares based upon a
fiscal year-end closing- price of $ 17.8125 per share, were as follows:
Mr. Peterson--100,930 shared valued at $1,796,034; Mr. Bond--16,267 shares
valued at $289, 756; Mr. Lemati--20,923 shares valued at $372,691; Mr.
Shipley--23,155 shares valued at $412,448; and Mr. Hart--4,916 shares
valued at $87,566.
(4) All Other Compensation includes 1997 and 1998 profit sharing
contributions made by the Company into the named officer's account in
the IBP Retirement Income Plan ("RIP") and the matching contributions
made by the Company in 1999. The matching contribution attributable to
each named officer for 1999 is as Mr. Peterson--$48,750; Mr.
Bond--$16,871; Mr. Leman--$10,629; Mr. Shipley--$0; and Mr. Hart--$3,041.
The profit sharing and employer matching amounts contributed by
Foodbrands America, Inc. ("Foodbrands") into Mr. Devening's 401(k)
account in 1999, and which are attributable to IBP, equaled $6,245.
All Other Compensation also reports life insurance premiums paid by the
Company for the named officer. The amount of insurance premiums paid
by the Company for each named officer in 1999, and any cash surrender
value the named officer is entitled to under a policy, is as follows:
Mr. Peterson--$256,128; Mr. Bond--$157,228; Mr. Leman--$123,032; Mr.
Shipley--$35,736; and Mr. Hart--$18,090. Foodbrands paid $29,754 in life
insurance premiums for Mr. Devening in 1999 which is attributable to
IBP.
(5) Mr. Devening is the President and Chief Executive Officer of Foodbrands
America, Inc. ("Foodbrands"), a subsidiary of IBP. The acquisition of
Foodbrands was completed on May 7, 1997, and IBP has not reported any
of Mr. Devening's compensation for the period prior to IBP acquiring
Foodbrands. Mr. Devening's compensation shown for 1997 are those
amounts attributable to the period in which IBP owned Foodbrands.
EMPLOYMENT CONTRACTS
Except for Mr. Peterson, IBP has employment agreements with all
of its executive officers, including Messrs. Bond, Leman, Shipley and Hart.
Each agreement is for a term of five years, Messrs. Bond's and Leman's
commenced March 1, 1997; Mr. Shipley's commenced August 18, 1997 and Mr.
Hart's commenced December 22, 1995. Each provides for a one year non-compete
obligation from the employee following the termination of employment with
IBP. The agreements provide for, among other things, a minimum base salary
and participation in IBP employee benefit plans including specifically stock
options and the IBP Officer Long-Term Stock Plan as an incentive to an
employee's long term commitment to IBP. For the four IBP executive officers
named in the Summary Compensation Table who currently have employment
contracts, the minimum base salaries are: Mr. Bond--$500,000; Mr.
Leman--$315,000; Mr. Shipley--$250,000; and Mr. Hart--$85,000. While the
agreements terminate by their terms after five years, either party to an
agreement has the right to terminate it, subject to the non-compete
obligation, upon one year's notice,
8
<PAGE>
IBP does not have termination or change of control plans or
contracts with any of its employees, except as provided for in the IBP 1987
Stock Option Plan, the IBP 1993 Stock Option Plan, the 1996 Stock Option Plan,
the IBP Officer Long-Term Stock Plan and the 1996 Officer Long-Term Stock Plan.
Mr. Devening's agreement commenced on August 2, 1994 and was amended
on December 31, 1996. The minimum base salary for Mr. Devening is $700,000, and
in addition Mr. Devening is entitled to an annual bonus based on Foodbrands
obtaining target goals for earnings before interest and taxes ("EBIT"). Mr.
Devening's agreement also contains a non-compete obligation in which Mr.
Devening agrees not to compete for a period of twenty-four (24) months after
termination, and in return lie will receive a payment of $1 million dollars
distributed over such twenty-four month period. In addition, Mr. Devening's
employment agreement and a stay bonus agreement call for Foodbrands to make
certain payments to Mr. Devening due to the change of control which occurred
upon IBP's acquisition of Foodbrands.
9
<PAGE>
OPTION GRANTS TABLE
OPTION GRANTS IN 1999(1)
<TABLE>
<CAPTION>
INDIVIDUAL GRANT POTENTIAL REALIZABLE
---------------------------------------------------------------------- VALUE AT ASSUMED
NUMBER OF PERCENT OF ANNUAL RATES
SECURITIES TOTAL OPTIONS EXERCISE OF STOCK PRICE
UNDERLYING GRANTED TO OR BASE APPRECIATION FOR
OPTIONS EMPLOYEES IN PRICE EXPIRATION OPTION TERM
NAME GRANTED(#)(2) FISCAL YEAR(%) ($/SHARE) DATE (10 YEARS)
---- ------------- -------------- -------- ---------- --------------------
5%($) 10%($)
<S> <C> <C> <C> <C> <C> <C>
Robert L. Peterson.....
Richard L. Bond........
Eugene D. Leman........
Larry Shipley..........
Craig J. Hart..........
R. Randolph Devening. 10,000 1.54% 19.6250 3/23/09 123,421 312,772
</TABLE>
-------------------------
(1) All options were granted pursuant to the 1996 Stock Option Plan. IBP has
not granted any SARs pursuant to the 1996 Stock Option Plan, and has
therefore removed SARs from the title and columns of this table and has
reported only options. IBP did not have an annual grant of options in
fiscal year 1999. Mr. Devening received an initial option grant when
Foodbrands America, Inc. was made a participant in IBP's option plans in
1999.
(2) The options are granted for terms of ten years and become exercisable in
increments beginning after the second and continuing through the fifth
year of the option term. All options are priced it the fair market value
of the IBP Common Stock on the effective date of the grant.
AGGREGATED OPTION EXERCISES AND YEAR-END OPTION VALUES TABLE
AGGREGATED OPTION EXERCISES IN 1999
AND 1999 YEAR-END OPTION VALUES (1)
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISABLE
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SHARES OPTIONS AT 1999 YEAR-END(#) AT 1999 YEAR-END($)
ACQUIRED ON VALUE -------------------------- ---------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ----------- ----------- ------------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
Robert L. Peterson....... 258,000 72,000 892,500 37,500
Richard L. Bond.......... 90,880 56,140 190,685 34,250
Eugene D. Leman(2)....... 4,000 62,250 82,600 31,400 318,000 19,000
Larry Shipley(2)......... 2,100 33,863 35,504 29,576 34,800 18,840
Craig J. Hart(2)......... 148 2,544 20,376 8,000 64,203 3,900
R. Randolph Devening...... 10,000
</TABLE>
------------------
(1) IBP has not granted any SARs pursuant to the IBP 1993 Stock Option Plan
and 1996 Stock Option Plan, and has therefore removed SARs from the title
and columns of this table and has reported only options granted.
(2) The shares acquired on exercise by Mr. Leman, Mr. Shipley and Mr. Hart
were held by them. For the value realized, IBP has reported the
product of tile number of shares
10
<PAGE>
exercised times the difference between the closing price of IBP Common
Stock on the date of exercise and the option exercise price.
11
<PAGE>
PERFORMANCE GRAPH
The following performance graph compares the registrants to stock
performance over the past five years against the performance of both in equity
interest index and a peer group index that cover the same five year period.
IBP, INC
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
IBP, INC, S&P 500 INDEX AND S&P 400 INDEX(1)
--------------------------------------------------------------------------------
[GRAPH OMITTED]
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998 1999
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
IBP, inc............. $ 100.00 $ 167.78 $ 159.29 $ 139.01 $ 193.55 $ 120.47
S&P 500................. 100.00 122.96 154.29 198.38 256.63 309.10
S&P 400................. 100.00 119.20 140.47 167.30 189.74 230.90
</TABLE>
-----------------
(1) Assumes $100 invested on December 30, 1994 in IBP, inc. Common Stock, the
S&P 500 Index, and the S&P 400 Index. Each of the three measures of
cumulative total return assumes reinvestment of dividends.
12
<PAGE>
APPROVAL OF MATTERS BEING SUBMITTED TO VOTE OF STOCKHOLDERS
The Board of Directors is proposing that the stockholders approve at
the 2000 annual meeting the performance-based bonus of the Chairman and Chief
Executive Officer; the President and Chief Operating Officer; and the Chief
Executive Officer of Foodbrands America, Inc. ("Bonus Plan"). Such approval is
necessary to satisfy the requirements of Section 162(m) of the Internal Revenue
Code to ensure deductibility by the Company of compensation that exceeds one
million dollars for purposes of federal corporate income tax.
- PERFORMANCE-BASED BONUS OF THE CHAIRMAN OF THE BOARD AND THE
CHIEF EXECUTIVE OFFICER; THE PRESIDENT anD CHIEF OPERATING OFFICER;
AND THE CHIEF EXECUTIVE OFFICER OF FOODBRANDS AMERICA, INC.
The purpose of the Bonus Plan is to provide compensation to the
Chairman and Chief Executive Officer; the President and Chief Operating
Officer; and the Chief Executive Officer of Foodbrands America, Inc. that is
competitive with the industry and that, at the same time, ensures deductibility
for purposes of Section 162(m) of the Internal Revenue Code. Section 162(m)
requires that any compensation over one million dollars be performance-based (or
meet other exceptions provided by the Section) and be approved by stockholders
to be deductible. If the Bonus Plan is not approved by stockholders, any
compensation that exceeds one million dollars is not deductible.
The Compensation Committee of the Board of Directors has set the
following bonus formulas for the Chairman and Chief Executive Officer; the
President and Chief Operating Officer; and the Chief Executive Officer of
Foodbrands America, Inc. for fiscal year 2000 (this bonus formula is subject to
stockholder approval):
CHAIRMAN AND CHIEF EXECUTIVE OFFICER -- the bonus formula for the
Chairman and Chief Executive Officer for fiscal year 2000 shall be calculated by
taking the percentage used to calculate the Chairman and Chief Executive's bonus
for the first one hundred million of operating earnings from the prior year
(1.627 percent in fiscal 1999), times one plus the percent of average salary
increase for IBP management for the bonus year expressed in decimal form, the
product of which gives the "Derived Percentage". The annual bonus for the
Chairman and Chief Executive Officer will be the Derived Percentage of the first
one hundred million of earnings in 2000 plus one percent of any excess over one
hundred million dollars. Earnings from (operations for purposes of management
bonuses are calculated prior to the effects of pushdown accounting and other
non-recurring items;
PRESIDENT AND CHIEF OPERATING OFFICER -- The bonus formula for the
President and Chief Operating Officer tot fiscal year 2000 shall be calculated
by taking .2 percent of operating earnings of the Company for fiscal year 2000.
Earnings from operations for purposes of management bonuses are calculated prior
to the effects of pushdown accounting and other non-recurring items; and
CHIEF EXECUTIVE OFFICER OF FOODBRANDS AMERICA, INC.-- the bonus
formula for the Chief Executive Officer of Foodbrands America, Inc.
("Foodbrands") for fiscal year 2000 shall be: (a) 100% of his base salary for
the bonus year if Foodbrands meets its target
13
<PAGE>
consolidated earnings before interest and taxes ("Target EBIT"), (b) 125% of his
base salary if actual results exceed Target EBIT by 10% or more, (c) 150% of his
base salary if actual results exceed Target EBIT by 20% or more. Target EBIT is
the EBIT of the Foodbrands' operations for the previous year plus the last full
fiscal year EBIT of any acquired company (or any operation acquired from IBP)
that is transferred to the Foodbrands' operations on a pro rata basis (i.e. if a
facility transferred to the Foodbrands' operation has 1999 EBIT of $ 10 million
and such facility is transferred to the Foodbrands' operation at the end of the
second quarter of fiscal year 2000, $5 million will be added to Target EBIT). An
example of the bonus calculations is shown in the NEW PLANS BENEFITS below.
14
<PAGE>
NEW PLANS BENEFITS (1)
PERFORMANCE-BASED BONUS
NAME AND POSITION
-----------------
Robert L. Peterson, Chairman, & Chief Executive Officer........... $6,382,226
Richard L. Bond, President & Chief Operating Officer.............. $1,138,045
R. Randolph Devening, Chief Executive Officer,
Foodbrands America, Inc....................................... $728,000
(1) This table describes the bonus the individuals named above would have
received for 1999 under the performance-based bonus program being
submitted to stockholders for approval in 2000. Since operating earnings
and EBIT are not available for 2000, SEC rules require that the registrant
report the amount of benefits receivable as if the plan had been in effect
during the prior year. For 1999 the average salary increase for IBP
management was 4% and operating earnings for the purpose of calculating
IBP's Chairman/CEO and President/COO bonus were $569,022,597. In 1998 EBIT
for Foodbrands was $73,861,000 (the Target EBIT) and EBIT in 1999 was
$78,787,000.
(2) The performance-based bonus calculations (as proposed, and based on the
assumptions made in footnote 1) would be as follows: (i) for the
Chairman and Chief Executive Officer 1.627 (the prior year's
percentage) times 1.04 (one plus the percent of average salary increase
for management expressed in decimal form), which equals 1.692%, the
Derived Percentage. The bonus would then be 1.692% of $100,000,000
plus 1% of $469,022,597 for a total bonus of $6,382,226; (ii) for the
President and Chief Operating Officer .2% times operating earnings of
$569,022,597 for a total bonus of $1,138,045; and (iii) for the Chief
Executive Officer of Foodbrands Target EBIT would have been
$73,861,000, and actual EBIT was $78,787,000, or 6.7% more, therefore
his bonus would be 100% of his salary of $728,000 for a total bonus of
$728,000.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's executive officers and directors, and persons who beneficially own
more than ten percent of a registered class of the Company's equity securities,
to file reports of ownership and changes in ownership with the SEC and the New
York Stock Exchange. Executive officers, directors and greater than ten-percent
stockholders are required by SEC regulations to furnish the Company with copies
of all Section 16(a) forms they file.
Based solely on review of the copies of such forms furnished to the
Company, or written representations that forms were not required, the Company
believes that during the fiscal year ending December 25, 1999 there was
compliance with all Section 16(a) films requirements applicable to its executive
officers and directors.
15
