0001047469-03-002563.txt : 20030124 0001047469-03-002563.hdr.sgml : 20030124 20030124165719 ACCESSION NUMBER: 0001047469-03-002563 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 17 CONFORMED PERIOD OF REPORT: 20021026 FILED AS OF DATE: 20030124 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HORMEL FOODS CORP /DE/ CENTRAL INDEX KEY: 0000048465 STANDARD INDUSTRIAL CLASSIFICATION: MEAT PACKING PLANTS [2011] IRS NUMBER: 410319970 STATE OF INCORPORATION: DE FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-02402 FILM NUMBER: 03524491 BUSINESS ADDRESS: STREET 1: 1 HORMEL PL CITY: AUSTIN STATE: MN ZIP: 55912-3680 BUSINESS PHONE: 5074375737 MAIL ADDRESS: STREET 1: 1 HORMEL PLACE CITY: AUSTIN STATE: MN ZIP: 55912-3680 FORMER COMPANY: FORMER CONFORMED NAME: HORMEL GEO A & CO DATE OF NAME CHANGE: 19920703 10-K 1 a2100452z10-k.htm FORM 10-K
QuickLinks -- Click here to rapidly navigate through this document

ANNUAL REPORT ON FORM 10-K

HORMEL FOODS CORPORATION

OCTOBER 26, 2002

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year Ended OCTOBER 26, 2002 Commission File No. 1-2402

HORMEL FOODS CORPORATION (Exact name of registrant as specified in its charter)
DELAWARE (State or other Jurisdiction of Incorporation or organization)	41-0319970 (I.R.S. Employer Identification No.)
1 HORMEL PLACE AUSTIN, MINNESOTA (Address of principal executive offices)	55912-3680 (Zip Code)
Registrant's telephone number, including area code (507) 437-5611
Securities registered pursuant to Section 12 (b) of the Act:

COMMON STOCK, PAR VALUE $.0586 PER SHARE
Title of Each Class

NEW YORK STOCK EXCHANGE
Name of Each Exchange
On Which Registered

Securities registered pursuant to Section 12 (g) of the Act:

NONE
(Title of Class)

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendments to this Form 10-K. (X)

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes X No

The aggregate market value of the voting stock held by non-affiliates of the registrant as of April 26, 2002 (the last business day of the registrant's most recently completed second fiscal quarter), was $1,845,340,119, based on the closing price of $24.99 per share on that date.

As of December 2, 2002, the number of shares outstanding of each of the Corporation's classes of common stock was as follows:

Common Stock, $.0586 Par Value - 138,424,274 shares
Common Stock Non-Voting, $.01 Par Value - 0 shares

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Annual Stockholders' Report for the year ended October 26, 2002, are incorporated by reference into Part I and Part II Items 5-9, and included as a separate section in the electronic filing to the SEC.

Portions of the Proxy Statement for the Annual Meeting of the Stockholders to be held January 28, 2003, are incorporated by reference into Part III, Items 10-13.

PART I

Item 1. BUSINESS

(a) General Development of Business

Hormel Foods Corporation, a Delaware corporation, was founded by George A. Hormel in 1891 in Austin, Minnesota, as George A. Hormel & Company. The Company started as a processor of meat and food products and continues in this line of business. The Company name was changed to Hormel Foods Corporation on January 31, 1995. The Company is primarily engaged in the production of a variety of meat and food products and the marketing of those products throughout the United States. Although pork and turkey remain the major raw materials for Hormel products, the Company has emphasized for several years the manufacture and distribution of branded, consumer packaged items rather than the commodity fresh meat business. In recent years, the Company's emphasis on branded products has led to the introduction and growth of ethnic product lines, such as Chi-Chi's and Herdez (Mexican), House of Tsang (Asian), Marrakesh Express and Peloponnese (Mediterranean), Carapelli Olive Oil (Italian), and Patak's (Indian).

Fiscal 2002 was the first full year of operations for the Company's Jennie-O Turkey Store (JOTS) turkey business. The JOTS operation was created as a result of merging the Company's existing Jennie-O Foods, Inc. and The Turkey Store Company, which was acquired in the second quarter of fiscal 2001. The Turkey Store Company was a turkey processing business headquartered in Barron, Wisconsin. The merged JOTS operation is currently the largest turkey processor in the world. JOTS markets its turkey products through its own sales force and independent brokers.

The Company strengthened its presence in the nutritionally enhanced food products market with the second quarter fiscal 2001 acquisition of Diamond Crystal Brands Nutritional Products, formerly headquartered in Savannah, Georgia. The Company currently operates as one of the largest companies in the U.S. nutritionally enhanced food products market.

During the fourth quarter of fiscal year 2001, the Company exited the food processing equipment business by selling its wholly owned subsidiary, Algona Fabrication and Equipment Co. (AFECO) in Algona, Iowa.

Internationally, the Company markets its products through Hormel Foods International Corporation (HFIC), a wholly owned subsidiary. HFIC has a presence in the international marketplace through joint ventures and placement of personnel in strategic foreign locations such as China, Spain, and the Philippines. HFIC also has a global presence with minority positions in food companies in Spain (Campofrio Alimentacion S.A., 15% holding) and the Philippines (Purefoods-Hormel, 40% holding).

The Company has not been involved in any bankruptcy, receivership or similar proceedings during its history. Substantially all of the assets of the Company have been acquired in the ordinary course of business. Financial resources and anticipated funds from operations are considered adequate to meet normal operating cash requirements.

The Company had no significant change in the type of products produced or services rendered, nor in the markets or methods of distribution since the beginning of the fiscal year.

(b) Industry Segment

The Company's business is reported in four segments: Refrigerated Foods, Grocery Products, Jennie-O Turkey Store, and All Other. The contributions of each segment to net sales to unaffiliated customers and operating profit, and the presentation of certain other financial information by segment are reported in Note K of the Notes to Consolidated Financial Statements and in the Management's

Discussion and Analysis of the Annual Stockholder's Report for the year ended October 26, 2002, incorporated herein by reference.

(c) Description of Business

Products and Distribution

The principal products of the Company are meat and food products, which are sold fresh, frozen, cured, smoked, cooked and canned. The percentages of total revenues contributed by classes of similar products for the last three fiscal years of the Company are as follows:

	Year Ended
	October 26, 2002		October 27, 2001		October 28, 2000
Perishable meat	53.0	%	54.7	%	51.9	%
Nonperishable meat	19.8		21.0		27.2
Poultry	22.6		20.3		17.5
Other	4.6		4.0		3.4

	100.0	%	100.0	%	100.0	%

Reporting of revenues from external customers is based on similarity of products, as the same or similar products are sold across multiple distribution channels such as retail, foodservice or international. To more precisely reflect the sales of each category, some reclassification of products has occurred from the October 28, 2000, percentages presented above. This reclassification caused a shift in revenues from the Nonperishable meat to the Perishable meat category. Revenues reported are based on financial information used to produce the Company's general-purpose financial statements.

Perishable meat includes fresh meats, sausages, hams, wieners and bacon. Nonperishable meat includes canned luncheon meats, shelf stable microwaveable entrees, stews, chilies, hash, meat spreads and other items that do not require refrigeration as well as frozen processed products. The Poultry category is composed primarily of JOTS products. The Other category primarily consists of nutritionally enhanced food products, food packaging (casings for dry sausage), industrial gelatin products, and food manufacturing equipment. The food manufacturing equipment business was sold in fiscal 2001. The Poultry and Other categories have increased over the past two years primarily because of The Turkey Store and Diamond Crystal Brands Nutritional Products acquisitions in the second quarter of fiscal 2001.

No new product in fiscal 2002 required a material investment of Company assets.

Domestically, the Company sells its products in all 50 states. Hormel products are sold through Company sales personnel, operating in assigned territories coordinated from district sales offices located in most of the larger U.S. cities, as well as independent brokers and distributors. As of October 26, 2002, the Company had approximately 600 sales personnel engaged in selling its products. Distribution of products to customers is by common carrier.

Through HFIC, the Company markets its products in various locations throughout the world. Some of the larger markets include Australia, Canada, China, England, Japan, Mexico and Micronesia. The

distribution of export sales to customers is by common carrier, while the China operations own and operate their own delivery system. The Company, through HFIC, has licensed companies to manufacture various Hormel products internationally on a royalty basis, with the primary licensee being Tulip International of Denmark.

Raw Materials

The Company has, for the past several years, been concentrating on processed branded products for consumers with year-round demand to minimize the seasonal variation experienced with commodity type products. Pork continues to be the primary raw material for Company products. Although hog producers are moving toward larger, more efficient year-round confinement operations and supply contracts are becoming increasingly prevalent in the industry, there is still a seasonal variation in the supply of fresh pork materials. The expanding line of processed items has reduced but not eliminated the sensitivity of Company results to raw material supply and price fluctuations.

Livestock slaughtered by the Company is purchased by Company buyers and commission dealers at sale barns and terminal markets or under long-term supply contracts at locations principally in Minnesota, Illinois, Iowa, Nebraska, Colorado and South Dakota. The cost of livestock and the utilization of the Company's facilities are affected by both the level and the methods of pork production in the United States. The hog production industry has been rapidly moving to very large, vertically integrated, year-round confinement operations operating under long-term supply agreements. This has resulted in fewer hogs being available on the spot cash market, which decreases the supply of hogs on the open market and can severely diminish the utilization of slaughter facilities and increase the cost of the raw materials they produce. The Company, along with others in the industry, uses long-term supply contracts to manage the effects of this trend and to assure a stable supply of raw materials while minimizing extreme fluctuations in costs over the long-term. This may result in costs for live hogs that are either higher or lower than the spot cash market depending on the relationship of the cash spot market to contract prices. Contract costs are fully reflected in the Company's reported financial results. In fiscal 2002, the Company purchased 75 percent of its hogs under long-term supply contracts.

In fiscal 2002, JOTS raised approximately 53 percent of the turkeys needed to meet its raw material requirements for whole bird and processed turkey products. Turkeys not sourced within the Company are contracted with independent turkey growers. JOTS' turkey-raising farms are located throughout Minnesota and Wisconsin.

Production costs in raising turkeys are subject to fluctuations in grain prices, particularly corn. In the fourth quarter of fiscal 2002, the Company began hedging its corn needs by purchasing corn futures contracts. The corn futures contracts offset the fluctuation in the Company's future direct corn purchases.

Manufacturing

The Company has plants in Austin, Minnesota; Fremont, Nebraska; Beijing, China; and Rochelle, Illinois (Rochelle converted to a 100 percent further processing facility effective January 6, 2003) that slaughter livestock for processing. Quality Pork Processors of Dallas, Texas, operates the slaughter facility at Austin under a custom slaughter arrangement.

Facilities that produce manufactured items are located in Algona, Iowa; Aurora, Illinois; Austin, Minnesota; Beloit, Wisconsin; Ft. Dodge, Iowa; Fremont, Nebraska; Houston, Texas; Knoxville, Iowa; Osceola, Iowa; Quakertown, Pennsylvania; Rochelle, Illinois; Stockton, California; Tucker, Georgia; Wichita, Kansas; Beijing, China; and Shanghai, China. Several companies perform custom manufacturing for Hormel, including Owatonna Canning Company, Owatonna, Minnesota; Lakeside Packing Company, Manitowoc, Wisconsin; Criders, Stilmore, Georgia; Tony Downs, St. James, Minnesota; and Pierre Foods of Claremont, North Carolina. Power Logistics, Inc., based in St. Charles, Illinois, operates distribution centers for the Company in Dayton, Ohio, and Osceola, Iowa.

The Company's turkey slaughter and processing operations are located in Barron, Wisconsin; Faribault, Minnesota; Marshall, Minnesota; Melrose, Minnesota; Montevideo, Minnesota; Pelican Rapids, Minnesota; and Willmar, Minnesota.

Patents and Trademarks

There are numerous patents and trademarks that are important to the Company's business. The Company holds five foreign and 40 U.S. issued patents. Some of the trademarks are registered and some are not. In recognition of the importance of these assets, the Company created a subsidiary, Hormel Foods, LLC, in 1998 to create, own, maintain and protect most of the Company's trademarks and patents. Some of the more significant owned or licensed trademarks used in the Company's segments are:

HORMEL, ALWAYS TENDER, AMERICAN CLASSICS, AUSTIN BLUES, BLACK LABEL, CARAPELLI, CHI-CHI'S, CURE 81, CUREMASTER, DAN'S PRIZE, DI LUSSO, DINTY MOORE, DUBUQUE, EL TORITO, FAST 'N EASY, HERB-OX, HERDEZ, HOMELAND, HOUSE OF TSANG, JENNIE-O TURKEY STORE, KID'S KITCHEN, LAYOUT, LITTLE SIZZLERS, MARRAKESH EXPRESS, MARY KITCHEN, OLD SMOKEHOUSE, PATAK'S, PELOPONNESE, PILLOW PACK, QUICK MEAL, RANGE BRAND, ROSA GRANDE, SANDWICH MAKER, SPAM, STAGG, THICK & EASY and WRANGLERS.

Customers and Backlog Orders

During fiscal year 2002, no customer accounted for more than 10 percent of total Company sales. The five largest customers in each segment make up approximately the following percentage of segment sales: 38 percent of Grocery Products, 39 percent of Refrigerated Foods, 33 percent of JOTS and 23 percent of All Other. The Company believes the loss of any single customer would not have a material adverse effect on the Company's business. Backlog orders are not significant due to the perishable nature of a large portion of the products and orders are accepted and shipped on a current basis.

Competition

The production and sale of meat and food products in the United States and internationally are highly competitive. The Company competes with manufacturers of pork and turkey products, as well as national and regional producers of other meat and protein sources, such as beef, chicken and fish. The Company believes that its largest domestic competitors for its Refrigerated Foods segment in 2002 were Tyson Foods, Smithfield Foods and ConAgra Foods; for its Grocery Products segment, ConAgra Foods, Dial Corp. and Campbell Soup Co.; and for JOTS, ConAgra Foods and Cargill, Inc.

All Hormel segments compete on the basis of price, product quality, brand identification and customer service. Through aggressive marketing and strong quality assurance programs, the Company's strategy is to provide higher quality products that possess strong brand recognition, which would then support higher value perceptions from customers.

The Company competes using this same strategy in international markets around the world.

Research and Development

Research and development continues to be a vital part of the Company's strategy to extend existing brands and expand into new branded items. The expenditures for research and development for fiscal 2002, 2001 and 2000, respectively, were $12,097,000, $11,478,000 and $9,592,000. There are 40 professional employees engaged in full time research, 18 in the area of improving existing products and 22 in developing new products.

Employees

As of October 26, 2002, the Company had over 15,500 active employees.

(d) Executive Officers of the Registrant

Name	Age	Current Office and Previous Five Years Experience	Dates	Year First Elected Officer
Joel W. Johnson	59	Chairman of the Board, President and Chief Executive Officer	12/08/95 to Present	1991
Michael J. McCoy	55	Executive Vice President and Chief Financial Officer	10/29/01 to Present	1996
		Senior Vice President and Chief Financial Officer	05/01/00 to 10/28/01
		Vice President and Controller	04/27/98 to 04/30/00
		Vice President and Treasurer	01/27/97 to 04/26/98
		Treasurer	01/01/96 to 01/26/97
Gary J. Ray	56	Executive Vice President Refrigerated Foods	11/01/99 to Present	1988
		Executive Vice President Operations	07/27/92 to 10/31/99
Eric A. Brown	56	Group Vice President Prepared Foods	12/02/96 to Present	1987
Steven G. Binder	45	Group Vice President Foodservice	10/30/00 to Present	1998
		Vice President Foodservice	11/02/98 to 10/29/00
		Director Foodservice Sales	12/30/96 to 11/01/98
Richard A. Bross	51	Group Vice President Hormel/President Hormel Foods International Corporation	10/29/01 to Present	1995
		Vice President Hormel/President Hormel Foods International Corporation	11/01/99 to 10/28/01
		Vice President Grocery Products	01/30/95 to 10/31/99

Jeffrey M. Ettinger	44	Group Vice President Hormel/President and Chief Operating Officer Jennie-O Turkey Store	10/29/01 to Present	1998
		Vice President Hormel/President and Chief Operating Officer Jennie-O Turkey Store	04/30/01 to 10/28/01
		Vice President Hormel/President and Chief Executive Officer Jennie-O Foods	01/31/00 to 04/29/01
		Vice President Hormel/Jennie-O Foods	11/01/99 to 01/30/00
		Treasurer	04/27/98 to 10/31/99
		Assistant Treasurer	11/24/97 to 04/26/98
		Special Assignment	09/08/97 to 11/23/97
		Grocery Products Product Manager	04/10/95 to 09/07/97
Ronald W. Fielding	49	Group Vice President Meat Products	11/01/99 to Present	1997
		Vice President Hormel/President Hormel Foods International Corporation	01/27/97 to 10/31/99
		President Hormel Foods International Corporation	01/01/96 to 01/26/97
James A. Jorgenson	58	Senior Vice President Corporate Staff	11/01/99 to Present	1990
		Vice President Human Resources	12/30/91 to 10/31/99
Mahlon C. Schneider	63	Senior Vice President External Affairs and General Counsel	11/01/99 to Present	1990
		Vice President and General Counsel	11/19/90 to 10/31/99
Thomas R. Day	44	Vice President Foodservice Sales	10/30/00 to Present	2000
		Director Foodservice Sales	11/02/98 to 10/29/00
		Director Dubuque Foods Incorporated Foodservice Sales and Marketing	03/07/94 to 11/01/98
Forrest D. Dryden	59	Vice President Research and Development	01/26/87 to Present	1987
Jody H. Feragen	46	Vice President and Treasurer	10/29/01 to Present	2000
		Treasurer	10/30/00 to 10/28/01
		Assistant Treasurer, National Computer Systems in Eden Prairie, Minnesota, a data collection and software company	12/01/95 to 10/30/00
Dennis B. Goettsch	49	Vice President Foodservice Marketing	10/30/00 to Present	2000
		Director Foodservice Marketing	10/01/90 to 10/29/00
Daniel A. Hartzog	51	Vice President Meat Products Sales	10/30/00 to Present	2000
		Director of Meat Products Business Development	07/03/00 to 10/29/00
		Meat Products Regional Sales Manager	09/19/88 to 07/02/00
Kurt F. Mueller	46	Vice President Fresh Pork Sales and Marketing	11/01/99 to Present	1999
		Director Fresh Pork Sales and Marketing	02/03/97 to 10/31/99
		Manager Logistics and Customer Service Refrigerated Products	03/06/95 to 02/02/97
Gary C. Paxton	57	Vice President Prepared Foods Operations	11/01/99 to Present	1992
		Vice President Manufacturing	01/27/92 to 10/31/99

Larry J. Pfeil	53	Vice President Engineering	11/01/99 to Present	1999
		Director of Engineering	01/04/99 to 10/31/99
		Corporate Manager Engineering	01/13/97 to 01/03/99
		Corporate Manager Plant Engineering	12/27/93 to 01/12/97
Douglas R. Reetz	48	Vice President Grocery Products Sales	11/01/99 to Present	1999
		Director Grocery Products Sales and Business Development	09/15/97 to 10/31/99
		Director Grocery Products Sales	01/04/93 to 09/14/97
James N. Sheehan	47	Vice President and Controller	05/01/00 to Present	1999
		Treasurer	11/01/99 to 04/30/00
		President Hormel Financial Services Corporation	09/21/98 to 10/31/99
		Corporate Manager Credit/Claims Hormel Financial Services Corporation	07/28/97 to 09/20/98
		Corporate Manager Credit/Claims	09/02/96 to 07/27/97
William F. Snyder	45	Vice President Refrigerated Foods Operations	11/01/99 to Present	1999
		Director Fresh Pork Operations	09/27/99 to 10/31/99
		Fremont Plant Manager	12/25/95 to 09/26/99
Joe C. Swedberg	47	Vice President Meat Products Marketing	11/01/99 to Present	1999
		Director Meat Products Marketing	01/04/93 to 10/31/99
Larry L. Vorpahl	39	Vice President Grocery Products Marketing	11/01/99 to Present	1999
		Director Grocery Products Marketing	09/30/96 to 10/31/99
James W. Cavanaugh	53	Corporate Secretary and Senior Attorney	01/29/01 to Present	2001
		Assistant Secretary and Senior Attorney	01/29/90 to 01/28/01

No family relationship exists among the executive officers.

Executive officers are elected annually by the Board of Directors at the first meeting following the Annual Meeting of Stockholders. Vacancies may be filled and additional officers elected at any regular or special meeting.

Item 2. PROPERTIES

Location				Approximate Floor Space (Square Feet) Unless Noted	Owned or Leased	Lease Expiration Date
*Hormel Foods Corporation*
	Slaughtering and Processing Plants
		Austin, Minnesota
			Slaughter	217,000	Owned
			Processing	1,075,000	Owned
		Fremont, Nebraska		655,000	Owned
	Processing Plants
		Algona, Iowa		153,000	Owned
		Aurora, Illinois		141,000	Owned
		Beloit, Wisconsin		339,000	Owned
		Ft. Dodge, Iowa		17,000	Owned
		Houston, Texas		93,000	Owned
		Knoxville, Iowa		130,000	Owned
		Osceola, Iowa		334,000	Owned
		Quakertown, Pennsylvania		13,000	Owned
		Rochelle, Illinois		440,000	Owned
		Stockton, California		139,000	Owned
		Tucker, Georgia		259,000	Owned
		Wichita, Kansas		80,000	Owned
	Warehouse/Distribution Centers
		Austin, Minnesota-Annex		83,000	Owned
		Dayton, Ohio		140,000	Owned
		Eldridge, Iowa		280,000	Leased	October, 2005
		Osceola, Iowa		233,000	Owned
		Stockton, California		232,000	Leased	July, 2004
		Tucker, Georgia		96,000	Leased	October, 2004
	Research and Development Center
		Austin, Minnesota		59,000	Owned
	Corporate Offices
		Austin, Minnesota		203,000	Owned
*Dan's Prize, Inc.*
		Browerville, Minnesota-Plant		52,000	Owned
		Long Prairie, Minnesota-Plant		80,000	Owned
*Jennie-O Turkey Store, Inc.*
	Plants
		Barron, Wisconsin		372,000	Owned
		Faribault, Minnesota		169,000	Owned
		Marshall, Minnesota		142,000	Owned
		Melrose, Minnesota		124,000	Owned

		Montevideo, Minnesota	85,000	Owned
		Pelican Rapids, Minnesota	223,000	Owned
		Willmar, Minnesota-Airport Plant	334,000	Owned
		Willmar, Minnesota-Benson Ave.	79,000	Owned
	Feed Mills
		Atwater, Minnesota	19,000	Owned
		Barron, Wisconsin	26,000	Owned
		Dawson, Minnesota	37,000	Owned
		Faribault, Minnesota	21,000	Owned
		Henning, Minnesota	5,000	Owned
		Northfield, Minnesota	17,000	Owned
		Perham, Minnesota	26,000	Owned
		Swanville, Minnesota	29,000	Owned
	Other
		Barron, Wisconsin-Hatchery	37,000	Owned
		Detroit Lakes, Minnesota-Hatchery	24,000	Owned
		Henning, Minnesota-Hatchery	22,000	Owned
		Melrose, Minnesota-Warehouse	10,000	Owned
		Turkey Farms	*14,600	Owned
		Willmar, Minnesota-Gorton Ave. Warehouse	6,000	Owned
		Willmar, Minnesota-Pacific Ave. Warehouse	19,000	Owned
*Vista International Packaging, Inc.*
		Kenosha, Wisconsin-Plant	61,000	Owned
		Kenosha, Wisconsin-Warehouse	80,000	Leased	April, 2004
*Mountain Prairie, LLC*
		Las Animas, Colorado-Hog Confinement Buildings	707,000	66.7% Owned
*Beijing Hormel Foods Co. Ltd.*
		Beijing, China-Plant	68,000	76.4% Owned
*Shanghai Hormel Foods Co. Ltd.*
		Shanghai, China-Plant	38,000	77.2% Owned

*Acres

Many of these properties are not exclusive to any one of the Company's segments and a few of the properties are utilized in all four segments of the Company. The Company has renovation or building projects in progress at Austin, Minnesota; Fremont, Nebraska; Rochelle, Illinois; Osceola, Iowa; and at various JOTS locations. The Company believes its operating facilities are well maintained and suitable for current production volumes and all volumes anticipated in the foreseeable future.

Item 3. LEGAL PROCEEDINGS

The Company knows of no pending material legal proceedings.

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

No matters were submitted to shareholders during the fourth quarter of the 2002 fiscal year.

PART II

Item 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS

The high and low closing price of the Company's Common Stock and the dividends per share declared for each fiscal quarter of 2002 and 2001, respectively, are shown below:

2002	High		Low		Dividend
Fourth Quarter	$	24.95	$	20.95	$	.0975
Third Quarter		24.99		20.50		.0975
Second Quarter		28.03		24.99		.0975
First Quarter		27.14		23.12		.0975

2001	High		Low		Dividend
Fourth Quarter	$	26.39	$	21.73	$	.0925
Third Quarter		25.25		19.52		.0925
Second Quarter		21.50		18.51		.0925
First Quarter		19.13		16.75		.0925

Additional information about dividends, principal market of trade and number of stockholders on page 41 of the Annual Stockholders' Report for the year ended October 26, 2002, is incorporated herein by reference. The Company's Common Stock has been listed on the New York Stock Exchange since January 16, 1990.

Item 6. SELECTED FINANCIAL DATA

Selected Financial Data for the five years ended October 26, 2002, on page 18 of the Annual Stockholders' Report for the year ended October 26, 2002, is incorporated herein by reference.

Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

Management's Discussion and Analysis of Financial Condition and Results of Operations on pages 19 through 26 of the Annual Stockholders' Report for the year ended October 26, 2002, is incorporated herein by reference.

Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Information on the Company's exposure to market risk is included in the Management's Discussion and Analysis of Financial Condition and Results of Operations on page 27 of the Annual Stockholders' Report for the year ended October 26, 2002, is incorporated herein by reference.

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Consolidated Financial Statements, including unaudited quarterly data, on pages 28 through 39 and the Report of Independent Auditors on page 39 of the Annual Stockholders' Report for the year ended October 26, 2002, are incorporated herein by reference.

Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE

None.

PART III

Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Information under "Election of Directors", contained on pages 4 and 5 of the definitive proxy statement for the Annual Meeting of Stockholders to be held January 28, 2003, is incorporated herein by reference.

Information concerning Executive Officers is set forth in Item 1(d) of Part I pursuant to Instruction 3, Paragraph (b) of Item 401 of Regulation S-K.

Item 11. EXECUTIVE COMPENSATION

Information for the year ended October 26, 2002, under "Executive Compensation" on pages 12 through 18 and "Compensation of Directors" on page 6 of the definitive proxy statement for the Annual Meeting of Stockholders to be held January 28, 2003, is incorporated herein by reference.

Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS

Ownership of securities of the Company by certain beneficial owners and management for the year ended October 26, 2002, as set forth on pages 10 and 11 and information under "Equity Compensation Plan Information" on page 18 of the definitive proxy statement for the Annual Meeting of Stockholders to be held January 28, 2003, is incorporated herein by reference.

Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Information under "Other Information Relating to Directors, Nominees, and Executive Officers" for the year ended October 26, 2002, as set forth on page 20 of the definitive proxy statement for the Annual Meeting of Stockholders to be held January 28, 2003, is incorporated herein by reference.

Item 14. CONTROLS AND PROCEDURES

Within 90 days prior to the filing date of this Annual Report on Form 10-K, the Company performed an evaluation under the supervision and with the participation of the Company's management, including its Chairman, President and Chief Executive Officer ("CEO") and Executive Vice President and Chief Financial Officer ("CFO"), of its "disclosure controls and procedures" (as defined in Securities Exchange Act of 1934 Rules 13a-14(c) and 15d-14(c)). The Company's disclosure controls and procedures are designed to ensure that the Company, including its consolidated subsidiaries, is able to record, process, summarize and report financial data within the time periods specified in Securities and Exchange Commission rules and forms. As a result of this evaluation, the Company's CEO and CFO have concluded that the Company's disclosure controls and procedures were effective for their intended purposes.

There were no significant changes in the Company's internal controls or in other factors that could significantly affect internal controls subsequent to the date of their most recent evaluation.

PART IV

Item 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a)

(1) and (2) The response to this portion of Item 15 is submitted as a separate section of this report.

(3): List of Exhibits—The response to this portion of Item 15 is submitted as a separate section of this report.

(b)

The following reports on Form 8-K were filed during the fourth quarter:

Form 8-K was filed on July 29, 2002, announcing the election of Susan Marvin, President of Marvin Windows and Doors, to the Company's Board of Directors.

Form 8-K was filed on August 2, 2002, reporting that the Company filed with the Securities and Exchange Commission ("SEC") original sworn statements of the Company's Chief Executive Officer and Chief Financial Officer as required by the SEC's Order 4-460 issued on June 27, 2002.

Form 8-K was filed on October 9, 2002, announcing that the Company's Board of Directors has authorized the repurchase of up to 10 million shares of its common stock.

(c)

The response to this portion of Item 15 is submitted as a separate section of this report.

(d)

The response to this portion of Item 15 is submitted as a separate section of this report.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

HORMEL FOODS CORPORATION

By /s/ Joel W. Johnson	January 22, 2003

Joel W. Johnson, Chairman of the Board,	Date
President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. Each person whose signature to this report on Form 10-K appears below hereby constitutes and appoints each of Michael J. McCoy, Jody H. Feragen and Mark P. Kalvoda as his or her true and lawful attorney-in-fact and agent, with full power of substitution, to sign on his or her behalf individually and in the capacity stated below and to perform any acts necessary to be done in order to file the Annual Report on Form 10-K and all amendments to this report on Form 10-K, and any and all instruments or documents filed as part of or in connection with this report on Form 10-K or the amendments hereto, and each of the undersigned does hereby ratify and confirm all that said attorney-in-fact and agent, or his substitutes, shall do or cause to be done by virtue hereof.

/s/ Joel W. Johnson Joel W. Johnson	1/22/03 Date	Chairman of the Board, President, Chief Executive Officer and Director (Principal Executive Officer)
/s/ Michael J. McCoy Michael J. McCoy	1/22/03 Date	Executive Vice President, Chief Financial Officer and Director (Principal Financial and Accounting Officer)
/s/ Gary J. Ray* Gary J. Ray	1/22/03 Date	Executive Vice President Refrigerated Foods and Director
/s/ Eric A. Brown* Eric A. Brown	1/22/03 Date	Group Vice President Prepared Foods and Director
/s/ John W. Allen* John W. Allen	1/22/03 Date	Director

/s/ John R. Block* John R. Block	1/22/03 Date	Director
/s/ William S. Davila* William S. Davila	1/22/03 Date	Director
/s/ E. Peter Gillette Jr.* E. Peter Gillette Jr.	1/22/03 Date	Director
/s/ Luella G. Goldberg* Luella G. Goldberg	1/22/03 Date	Director
/s/ Susan I. Marvin* Susan I. Marvin	1/22/03 Date	Director
/s/ Dakota A. Pippins* Dakota A. Pippins	1/22/03 Date	Director
/s/ John G. Turner* John G. Turner	1/22/03 Date	Director
/s/ Dr. Robert R. Waller* Dr. Robert R. Waller	1/22/03 Date	Director
* /s/ Michael J. McCoy Michael J. McCoy, as Attorney-In-Fact	1/22/03 Date

Certification Required Under Section 302 of the Sarbanes-Oxley Act of 2002

I, Joel W. Johnson, Chairman, President and Chief Executive Officer of Hormel Foods Corporation, certify that:

(1)

I have reviewed this annual report on Form 10-K of Hormel Foods Corporation;

(2)

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

(3)

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

(4)

The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

•: designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which the annual report is being prepared;
•: evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and
•: presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

(5)

The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons fulfilling the equivalent functions):

•: all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and
•: any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and

(6): The registrant's other certifying officer and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.


Dated:		January 22, 2003		Signed:	/s/ Joel W. Johnson Joel W. Johnson Chairman, President and Chief Executive Officer

Certification Required Under Section 302 of the Sarbanes-Oxley Act of 2002

I, Michael J. McCoy, Executive Vice President and Chief Financial Officer of Hormel Foods Corporation, certify that:

(1)

I have reviewed this annual report on Form 10-K of Hormel Foods Corporation;

(2)

(3)

(4)

•: designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which the annual report is being prepared;
•: evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and
•: presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

(5)

•: all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and
•: any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and

(6): The registrant's other certifying officer and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.


Dated:		January 22, 2003		Signed:	/s/ Michael J. McCoy Michael J. McCoy Executive Vice President and Chief Financial Officer

F-1

ANNUAL REPORT ON FORM 10-K

ITEM 15 (a) (1), (2), AND (3) AND ITEM 15 (c) AND (d)

LIST OF FINANCIAL STATEMENTS

FINANCIAL STATEMENT SCHEDULE

LIST OF EXHIBITS

YEAR ENDED OCTOBER 26, 2002

HORMEL FOODS CORPORATION

Austin, Minnesota

F-2

Item 15(a) (1), (2) and (3) and Item 15 (c) and (d)

LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
HORMEL FOODS CORPORATION

FINANCIAL STATEMENTS

The following consolidated financial statements of Hormel Foods Corporation included in the Annual Stockholders' Report for the Registrant to its stockholders for the year ended October 26, 2002, are incorporated herein by reference in Item 8 of Part II of this report:

Consolidated Statements of Financial Position—October 26, 2002, and October 27, 2001.

Consolidated Statements of Operations—Years Ended October 26, 2002, October 27, 2001 and October 28, 2000.

Consolidated Statements of Changes in Shareholders' Investment—Years Ended October 26, 2002, October 27, 2001, and October 28, 2000.

Consolidated Statements of Cash Flows—Years Ended October 26, 2002, October 27, 2001, and October 28, 2000.

Notes to Financial Statements—October 26, 2002.

Report of Independent Auditors

FINANCIAL STATEMENT SCHEDULES

The following consolidated financial statement schedule of Hormel Foods Corporation required pursuant to Item 15(d) is submitted herewith:

Schedule II—Valuation and Qualifying Accounts and Reserves...F-3

All other schedules for which provision is made in the applicable accounting regulation of the Securities and Exchange Commission are not required under the related instructions or are inapplicable, and therefore have been omitted.

FINANCIAL STATEMENTS AND SCHEDULES OMITTED

Condensed parent company financial statements of the registrant are omitted pursuant to Rule 5-04(c) of Article 5 of Regulation S-X.

F-3

SCHEDULE II—VALUATION AND QUALIFYING ACCOUNTS AND RESERVES

HORMEL FINANCIAL SERVICES CORPORATION

(Dollars in Thousands)

COLUMN A		COLUMN B		COLUMN C					COLUMN D			COLUMN E
					Additions
Classification		Balance at Beginning of Period		(1) Charged to Costs and Expenses		(2) Charged to Other Accounts- Describe			Deductions- Describe			Balance at End of Period
Valuation reserve deduction from assets account:
Fiscal year ended October 26, 2002
	Allowance for doubtful accounts receivable	$	1,393	$	1,638	$	0		$ $	1,674 (36	(1) ) (2)	$	1,393
Fiscal year ended October 27, 2001
	Allowance for doubtful accounts receivable	$	1,273	$	1,041	$	120	(3)	$ $	1,112 (71	(1) ) (2)	$	1,393
Fiscal year ended October 28, 2000
	Allowance for doubtful accounts receivable	$	1,273	$	1,809	$	-0-		$ $	1,994 (185	(1) ) (2)	$	1,273

Note (1) - Uncollectible accounts written off.

Note (2) - Recoveries on accounts previously written off.

Note (3) - Increase in the reserve due to the inclusion of The Turkey Store Company accounts receivable.

LIST OF EXHIBITS

HORMEL FOODS CORPORATION

Number		Description of Document
2.1	*	Agreement and Plan of Merger and Plan of Reorganization dated January 22, 2001, by and among Hormel, Badger Acquisition Corporation, Jerome Foods, Inc. and Jerome K. Jerome. (Incorporated by reference to Hormel's Current Report on Form 8-K dated March 9, 2001, File No. 001-02402.)
3.1	*	Certificate of Incorporation as amended to date. (Incorporated by reference to Exhibit 3A-1 to Hormel's Annual Report on Form 10-K/A for the fiscal year ended October 28, 2000, File No. 001-02402.)
3.2	*	Bylaws as amended to date. (Incorporated by reference to Exhibit 3.2 to Hormel's Amendment No. 3 to Registration Statement on Form S-4, dated November 29, 2001, File No. 333-68498.)
4.1	*	Indenture dated as of June 1, 2001, between Hormel and U.S. Bank Trust National Association, as Trustee relating to certain outstanding debt securities. (Incorporated by reference to Exhibit 4.1 to Hormel's Registration Statement on Form S-4 dated, August 28, 2001, File No. 333-68498.)
4.2	*	Supplemental Indenture No. 1 dated as of June 4, 2001, to Indenture dated as of June 1, 2001, between Hormel and U.S. Bank Trust National Association, as Trustee, relating to certain outstanding debt securities. (Incorporated by reference to Exhibit 4.2 to Hormel's Registration Statement on Form S-4 dated August 28, 2001, File No. 333-68498.)
4.3	*	Letter of Representations dated June 5, 2001, among Hormel, U.S. Bank Trust National Association, as Trustee, and The Depository Trust Company relating to certain outstanding debt securities of Hormel. (Incorporated by reference to Exhibit 4.3 to Hormel's Registration Statement on Form S-4 dated August 28, 2001, File No. 333-68498.)
4.4	*	Pursuant to Item 601 (b)(4)(iii) of Regulation S-K, copies of instruments defining the rights of holders of certain long-term debt are not filed. Hormel agrees to furnish copies thereof to the Securities and Exchange Commission upon request.
10.1	*	U.S. $150,000,000 Credit Agreement, dated as of October 25, 2001, between Hormel, the banks identified on the signature pages thereof, and Citicorp U.S.A. Inc., as Administrative Agent. (Incorporated by Reference to Exhibit 10.1 to Hormel's Current Report on Form 8-K dated November 6, 2001.)
10.2	*	Hormel Foods Corporation Operators' Shares Incentive Compensation Plan. (Incorporated by Reference to Appendix A to Hormel's definitive Proxy Statement filed on December 30, 1997, File No. 001-02402.)
10.3	**	Hormel Foods Corporation Supplemental Executive Retirement Plan (2002 Restatement.)
10.4	*	Hormel Foods Corporation 2000 Stock Incentive Plan. (Incorporated by Reference to Exhibit A to Hormel's definitive Proxy Statement filed on December 30, 1999, File No. 001-02402.)
10.5	*	Hormel Foods Corporation Long-Term Incentive Plan. (Incorporated by Reference to Appendix B to Hormel's definitive Proxy Statement filed on December 30, 1997, File No. 001-02402.)
10.6	**	Hormel Foods Corporation Supplemental Retirement Benefits Plan for the Benefit of Joel W. Johnson (1999 Restatement.)
10.7	**	Hormel Foods Corporation Executive Deferred Income Plan II (2002 Restatement.)
10.8	**	Form of Indemnification Agreement for Directors and Officers.

11.1	*	Statement re computation of per share earnings. (Incorporated by reference to Consolidated Statements of Operations and Note A of the Notes to Consolidated Financial Statements set forth in Exhibit 13.1 to the Annual Report to Stockholders for fiscal year ended October 26, 2002, dated October 26, 2002, File No. 001-02402.)
13.1	**	Pages 18 through 41 of the Annual Report to Stockholders for fiscal year ended October 26, 2002.
21.1	**	Subsidiaries of the Registrant.
23.1	**	Consent of Independent Auditors.
24.1	**	Power of Attorney.
99.1	**	Cautionary Statement Regarding Forward-Looking Statements and Risk Factors.
99.2	**	Certification Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
99.3	**	Certification Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

*: Document has previously been filed with the Securities and Exchange Commission and is incorporated herein by reference.
**: These Exhibits transmitted via EDGAR.

QuickLinks

PART I

Item 1. BUSINESS

Item 2. PROPERTIES

Item 3. LEGAL PROCEEDINGS

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

PART II

Item 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS

Item 6. SELECTED FINANCIAL DATA

Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

PART III

Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Item 11. EXECUTIVE COMPENSATION

Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Item 14. CONTROLS AND PROCEDURES

PART IV

Item 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8–K

SIGNATURES
Certification Required Under Section 302 of the Sarbanes-Oxley Act of 2002
Certification Required Under Section 302 of the Sarbanes-Oxley Act of 2002

Item 15(a) (1), (2) and (3) and Item 15 (c) and (d)

SCHEDULE II—VALUATION AND QUALIFYING ACCOUNTS AND RESERVES HORMEL FINANCIAL SERVICES CORPORATION (Dollars in Thousands)
LIST OF EXHIBITS HORMEL FOODS CORPORATION
EX-10.3 3 a2100452zex-10_3.htm EXHIBIT 10.3

EXHIBIT 10.3

HORMEL FOODS CORPORATION

SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

(2002 Restatement)

First Effective January 1, 1976

As Amended and Restated Effective October 26, 2002

HORMEL

SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

(2002 Restatement)

TABLE OF CONTENTS

SECTION 1.	INTRODUCTION

	1.1.	Amendment and Restatement
	1.2.	Unfunded Obligation

SECTION 2.	PLAN NAME

SECTION 3.	PARTICIPANTS

	3.1.	General Rule
	3.2.	Specific Exclusion

SECTION 4.	BENEFIT FOR PARTICIPANTS

	4.1.	General Amount Rule
	4.2.	Special Amount Rule
	4.3.	Form of Benefit
	4.4.	Forfeiture of Benefits

SECTION 5.	BENEFIT FOR BENEFICIARIES

	5.1.	General Amount Rule
	5.2.	Special Amount Rule
	5.3.	Form of Benefit

SECTION 6.	COMMUTATION TO LUMP SUM

	6.1.	General Rule
	6.2.	Executive Committee Members
	6.3.	Complete Payment

SECTION 7.	FUNDING

	7.1.	Funding
	7.2.	Hedging Investments
	7.3.	Consensual Creditor

SECTION 8.	GENERAL MATTERS

	8.1.	Amendment and Termination
	8.2.	ERISA Administrator
	8.3.	Limited Benefits
	8.4.	Spendthrift Provision
	8.5.	Service of Process
	8.6.	Plan Year
	8.7.	§ 162(m) Deferral

SECTION 9.	CLAIMS PROCEDURES

	9.1.	Determinations
	9.2.	Rules and Regulations
	9.3.	Method of Executing Instruments
	9.4.	Claims Procedure
		9.4.1.	Original Claim
		9.4.2.	Claims Review Procedure
		9.4.3.	General Rules
		9.4.4.	Deadline to File Claim
		9.4.5.	Exhaustion of Administrative Remedies
		9.4.6.	Deadline to File Legal Action
		9.4.7.	Knowledge of Fact by Participant Imputed to Beneficiary
	9.5.	Information Furnished by Participants

SECTION 10.	RULES OF CONSTRUCTION

	10.1.	Defined Terms
	10.2.	ERISA Status
	10.3.	IRC Status
	10.4.	Effect on Other Plans
	10.5.	Disqualification
	10.6.	Rules of Document Construction
	10.7.	References to Laws
	10.8.	Effect on Employment
	10.9.	Choice of Law

HORMEL
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
(2002 Restatement)

SECTION 1

INTRODUCTION

1.1. Amendment and Restatement. Hormel Foods Corporation, a Delaware corporation, (hereinafter the “Principal Sponsor”) heretofore, effective January 1, 1976, established a nonqualified plan of deferred compensation which is now known as the “Hormel Supplemental Executive Retirement Plan” (the “SERP”) and reserved to itself the right to amend the SERP from time to time. The Principal Sponsor has heretofore amended the SERP on various occasions. By adoption of this amended and restated document entitled “Hormel Supplemental Executive Retirement Plan (2002 Restatement),” the Principal Sponsor hereby further amends and restates the SERP in its entirety as applied to all persons who are Participants as of October 26, 2002 (and actively employed at some time on or after that date) and all persons who become Participants after that date.

1.2. Unfunded Obligation. The obligation of the Principal Sponsor to make payments under this SERP constitutes only the unsecured (but legally enforceable) promise of the Principal Sponsor to make such payments. The Participant shall have no lien, prior claim or other security interest in any property of the Principal Sponsor. If a fund is established by the Principal Sponsor in connection with this SERP, the property therein shall remain the sole and exclusive property of the Principal Sponsor. The Principal Sponsor will pay the cost of this SERP out of its general assets.

SECTION 2

PLAN NAME

This employee benefit plan shall be referred to as the “Hormel Supplemental Executive Retirement Plan” (the “SERP”). This document, as distinguished from the plan maintained pursuant to this document, shall be referred to as the “Hormel Supplemental Executive Retirement Plan (2002 Restatement)” (the “SERP document”).

SECTION 3

PARTICIPANTS

3.1. General Rule. The individuals eligible to participate in and receive benefits under this SERP (i.e., to be “Participants” under this SERP) are those individuals who are, on or after November 1, 1988, employees of the Principal Sponsor who are, on or after November 1, 1988, participants in the tax qualified, defined benefit, pension plan now known as the Hormel Foods Corporation Salaried Employees’ Pension Plan (the “Pension Plan”) and who are, on or after January 1, 1976, actively employed by the Principal Sponsor. Any employee who has become a Participant in the SERP shall continue as a Participant until all benefits due under the SERP have been paid (or forfeited) without regard to whether he continues as a participant in the Pension Plan or an active employee.

3.2. Specific Exclusion. Notwithstanding anything apparently to the contrary in this SERP or in any written communication, summary, resolution or document or oral communication, no individual shall be a Participant in this SERP, develop benefits under this SERP or be entitled to receive benefits under this SERP (either for himself or his survivors) unless such individual is a member of a select group of management or highly compensated employees (as that expression is used in ERISA). If a court of competent jurisdiction, any representative of the U.S. Department of Labor or any other governmental, regulatory or similar body makes any direct or indirect, formal or informal, determination that an individual is not a member of a select group of management or highly compensated employees (as that expression is used in ERISA), such individual shall not be (and shall not have ever been) a Participant in this SERP at any time. If any person not so defined has been erroneously treated as a Participant in this SERP, upon discovery of such error such person’s erroneous participation shall immediately terminate ab initio and upon demand such person shall be obligated to reimburse the Principal Sponsor for all amounts erroneously paid to him or her.

SECTION 4

BENEFIT FOR PARTICIPANTS

4.1. General Amount Rule. This SERP shall pay to Participants the excess, if any, of the amount, if any, determined in “(a)” below over the amount, if any, determined in “(b)” below.

(a) There shall be determined the amount which would have been payable to the Participant under the formula and rules of the Pension Plan (as the Pension Plan exists on the date as of which such amount is determined) but determined:

(i) without regard to the benefit limitations under section 415 of the Code; and

(ii) without regard to the compensation limitation of section 401(a)(17) of the Code; and

(iii) in the case of a Participant who is both an officer and a member of the Executive Committee on or after December 13, 1989 and who retires on an early retirement pension under the Pension Plan and after completing thirty (30) years of participation in the Pension Plan, as if there were no reduction in benefits for early commencement; and

(iv) in the case of a Participant who is both an officer and a member of the Executive Committee on or after May 22, 1989, as if the thirty-five (35) years of Benefit Service maximum did not apply; and

(v) including, when it would otherwise have been paid, income deferred under any nonqualified, unfunded, elective deferred compensation plan maintained by the Principal Sponsor; and

(vi) including, once earned, each long term incentive plan award; provided, however, that if the long term incentive plan award is earned with respect to a period longer than one (1) year, the long term incentive plan award will be included as if it had been earned and received ratably over the period with respect to which it was earned; and

(vii) including, when awarded, the fair market value of stock awarded under all restricted stock plans as compensation for pension accrual purposes.

(b) There shall be determined the amount actually payable to the Participant from the Pension Plan.

4.2. Special Amount Rule. In the case of any Participant who either:

(a) had annual earnings in excess of Seventy-Five Thousand Dollars ($75,000) from the Principal Sponsor as of December 31, 1989, and had attained age fifty-five (55) years as of October 28, 1989, or

(b) had annual earnings in excess of One Hundred Thousand Dollars ($100,000) from the Principal Sponsor as of December 31, 1989, and had attained age fifty (50) years as of October 28, 1989,

the amount determined under Section 4.1(a) above shall be determined under the formula and rules of the Pension Plan as it existed on October 28, 1989 (disregarding any subsequent amendments but taking into account the Participant’s subsequent compensation and service) but only if the resulting amount would be greater than the amount determined under Section 4.1(a).

4.3. Form of Benefit. Except as provided in Section 6 below, this benefit (minus the withholding, payroll and other taxes which must be deducted therefrom) shall be paid to the Participant directly from the general assets of the Principal Sponsor in the same manner, at the same time, for the same duration and in the same form as if such benefit had been paid directly from the Pension Plan. All elections and optional forms of settlement in effect and all other rules governing the payment of benefits under the Pension Plan shall, to the extent practicable, also be given effect under this SERP.

4.4. Forfeiture of Benefits. All unpaid benefits payable under this SERP to or with respect to a Participant, shall be permanently forfeited upon the determination by the Compensation Committee of the Board of Directors of the Principal Sponsor that the Participant, either before or after termination of employment:

(a) engaged in a felonious or fraudulent conduct resulting in material harm to the Principal Sponsor or an affiliate; or

(b) made an unauthorized disclosure to a competitor of any material confidential information, trade information, or trade secrets of the Principal Sponsor or an affiliate; or

(c) provided the Principal Sponsor or an affiliate with materially false reports concerning his or her business interests or employment; or

(d) made materially false representations which are relied upon by the Principal Sponsor or an affiliate in furnishing information to shareholders, auditors, or any regulatory or governmental body; or

(e) maintained an undisclosed, unauthorized and material conflict of interest in the discharge of the duties owed by the Participant to the Principal Sponsor or an affiliate; or

(f) engaged in reckless or grossly negligent activity toward the Principal Sponsor or an affiliate which is admitted or judicially proven and which results in significant harm to the Principal Sponsor or an affiliate; or

(g) engaged during his or her employment or during a period of two (2) years after the termination of his or her employment in any employment or self–employment with a competitor of the Principal Sponsor or an affiliate within the geographical area which is then served by the Principal Sponsor or an affiliate.

Any dispute arising under or with respect to this Section shall be subject to the claims procedure set forth in Section 9.

SECTION 5

BENEFIT FOR BENEFICIARIES

5.1. General Amount Rule. This SERP shall pay to the surviving spouse or other joint or contingent annuitant or beneficiary of a Participant the excess, if any, of the amount, if any, determined in “(a)” below over the amount, if any, determined in “(b)” below.

(a) There shall be determined the amount which would have been payable with respect to the Participant under the formula and rules of the Pension Plan (as the Pension Plan exists on the date as of which such amount is determined) but determined:

(i) without regard to the benefit limitations of section 415 of the Code; and

(ii) without regard to the compensation limitation of section 401(a)(17) of the Code; and

(iii) in the case of a Participant who is both an officer and a member of the Executive Committee on or after December 13, 1989 and who dies after the earliest date he could have retired on an early retirement pension under the Pension Plan (without regard to whether he has or has not retired) and after completing at least thirty (30) years of participation in the Pension Plan, as if there were no reduction in benefits for early commencement; and

(v) including, when it would otherwise have been paid, income deferred under any nonqualified, unfunded, elective deferred compensation plan maintained by the Principal Sponsor; and

(vi) including, once earned, each long term incentive plan award; provided, however, that if the long term incentive plan award is

earned with respect to a period longer than one (1) year, the long term incentive plan award will be included as if it had been earned and received ratably over the period with respect to which it was earned; and

(vii) including, when awarded, the fair market value of stock awarded under all restricted stock plans as compensation for pension accrual purposes.

(b) There shall be determined the amount actually payable with respect to the Participant from the Pension Plan.

5.2. Special Amount Rule. In the case of any Participant who either:

(a) had annual earnings in excess of Seventy-Five Thousand Dollars ($75,000) from the Principal Sponsor as of December 31, 1989, and had attained age fifty-five (55) years as of October 28, 1989, or

(b) had annual earnings in excess of One Hundred Thousand Dollars ($100,000) from the Principal Sponsor as of December 31, 1989, and had attained age fifty (50) years as of October 28, 1989,

the amount determined under Section 5.1(a) above shall be determined under the formula and rules of the Pension Plan as it existed on October 28, 1989 (disregarding any subsequent amendments but taking into account the Participant’s subsequent compensation and service) but only if the resulting amount would be greater than the amount determined under Section 5.1(a).

5.3. Form of Benefit. Except as provided in Section 6 below, this benefit (minus the withholding, payroll and other taxes which must be deducted therefrom) shall be paid to such person directly from the general assets of the Principal Sponsor in the same manner, at the same time, for the same duration and in the same form as if such benefit had been paid directly from the Pension Plan. All elections and optional forms of settlement in effect and all other rules governing the payment of benefits under the Pension Plan shall, to the extent practicable, also be given effect under this SERP.

SECTION 6

COMMUTATION TO LUMP SUM

6.1. General Rule. Notwithstanding anything apparently to the contrary in Sections 4 or 5 above, at the election of the Compensation Committee of the Principal Sponsor, and for the purpose of minimizing payroll or other taxes due on benefits payable under this SERP, the

Compensation Committee may (without the consent of the Participant, joint or contingent annuitant or beneficiary) commute the value of benefits payable under this SERP to or with respect to a Participant at the time of the retirement, quit, discharge, death or other termination of employment of the Participant to an actuarially equivalent benefit payable in fifteen (15) annual installments (with no life contingencies). The commuted benefit shall be calculated by reference to interest and mortality factors then in effect under the Pension Plan. Any installments remaining unpaid at the death of the recipient shall be paid to the estate of the recipient. If the Compensation Committee elects to commute the SERP benefits payable to or with respect to a Participant, the Compensation Committee shall cause the Participant or other person to whom such benefits are payable to be notified of that commutation and the number of annual installments which the Compensation Committee has determined shall be paid.

6.2. Executive Committee Members. Notwithstanding anything apparently to the contrary in Sections 4 or 5 above, a Participant who is both an officer and a member of the Executive Committee on or after May 22, 1989 may make an irrevocable written election that all benefits payable to, and all benefit payable with respect to, the Participant under the SERP shall, without any further elections, consents or notices, be commuted to and paid in an actuarially equivalent single lump sum cash payment within the thirty (30) days following the earliest date on which such benefits could otherwise be payable under the SERP. The single lump sum shall be calculated by reference to interest and mortality factors in effect under the Pension Plan at the time of payment. Such election shall not be effective, however, unless it is made and filed with the Chairperson of the Compensation Committee (or the Chairperson’s delegee) within fifteen (15) days after the latest of: (i) the date the Participant first becomes a Participant under this SERP, (ii) the date the Participant is notified in writing of his participation in this SERP, (iii) the date the Participant is notified in writing of the opportunity to make this election, or (iv) May 22, 1989.

6.3. Complete Payment. The payment of a lump sum to a Participant under the foregoing provisions of this Section 6 shall completely extinguish all other payments that may be due under this SERP to any other person.

SECTION 7

FUNDING

7.1. Funding. The obligation of the Principal Sponsor to make payments under this SERP constitutes only the unsecured (but legally enforceable) promise of the Principal Sponsor to make such payments. The Participant shall have no lien, prior claim or other security interest in any property of the Principal Sponsor. If a fund is established by the Principal Sponsor in connection with this SERP, the property therein shall remain the sole and exclusive property of the Principal Sponsor. The Principal Sponsor will pay the cost of this SERP out of its general assets.

7.2. Hedging Investments. If the Principal Sponsor elects to finance all or a portion of its costs in connection with this SERP through the purchase of life insurance or other investments, each Participant agrees, as a condition of participation in this SERP, to cooperate with the Principal Sponsor in the purchase of such investment to any extent reasonably required by the Principal Sponsor and relinquishes any claim he may have either for himself or any beneficiary to the proceeds of any such investment or any other rights or interests in such investment. If a Participant fails or refuses to cooperate, then notwithstanding any other provision of this SERP the Principal Sponsor may immediately and irrevocably terminate and forfeit all benefits payable to or with respect to the Participant under this SERP.

7.3. Consensual Creditor. Neither the Principal Sponsor’s officers nor any member of its Board of Directors in any way secures or guarantees the payment of any benefit or amount which may become due and payable hereunder to or with respect to the Participants. The Participants entitled at any time to payments hereunder shall look solely to the assets of the Principal Sponsor for such payments as an unsecured, general creditor. After benefits shall have been paid to or with respect to a Participant and such payment purports to cover in full the benefit hereunder, the Participant shall have no further right or interest in the other assets of the Principal Sponsor in connection with this SERP. Neither the Principal Sponsor nor any of its officers nor any member of its Board of Directors shall be under any liability or responsibility for failure to effect any of the objectives or purposes of this SERP by reason of the insolvency of the Principal Sponsor.

SECTION 8

GENERAL MATTERS

8.1. Amendment and Termination. The Board of Directors of the Principal Sponsor may unilaterally amend this SERP document prospectively, retroactively or both, at any time and for any reason deemed sufficient by it without notice to any person affected by this SERP and may likewise terminate the benefits of this SERP both with regard to persons expecting to receive benefits in the future and persons already receiving benefits at the time of such action; provided, however, that such amendment or termination shall not be effective with respect to a Participant who was both an officer and a member of the Executive Committee on or after May 22, 1989 without the written consent of such Participant. The Compensation Committee may act for the Board of Directors to amend this SERP document.

8.2. ERISA Administrator. The Principal Sponsor shall be the plan administrator of this SERP.

8.3. Limited Benefits. This SERP shall not provide any benefits with respect to any defined contribution plan. This SERP shall not alter, enlarge or diminish any person’s employment rights or rights or obligations under the Pension Plan.

8.4. Spendthrift Provision. No Participant, surviving spouse, joint or contingent annuitant or beneficiary shall have the power to transmit, assign, alienate, dispose of, pledge or encumber any benefit payable under this SERP before its actual payment to such person. the Principal Sponsor shall not recognize any such effort to convey any interest under this SERP. No benefit payable under this SERP shall be subject to attachment, garnishment, execution following judgment or other legal process before actual payment to such person.

8.5. Service of Process. In the absence of any designation to the contrary by the Principal Sponsor, the Secretary of the Principal Sponsor is designated as the appropriate and exclusive agent for the receipt of service of process directed to the SERP in any legal proceeding, including arbitration, involving the SERP.

8.6. Plan Year. The plan year for this SERP shall be the fiscal period of fifty–two (52) or fifty–three (53) weeks ending on the last Saturday in October of each year.

8.7. § 162(m) Deferral. If the Principal Sponsor determines that delaying the time the initial payments are made or commenced would increase the probability that such payments would be fully deductible for federal or state income tax purposes, the Principal Sponsor may unilaterally delay the time of the making or commencement of payments for up to twelve (12) months after the date such payments would other wise be payable.

SECTION 9

CLAIMS PROCEDURES

9.1. Determinations. The Compensation Committee shall make such determinations as may be required from time to time in the administration of the SERP. The Compensation Committee shall have the sole discretion, authority and responsibility to interpret and construe the SERP and the plan document and to determine all factual and legal questions under the SERP, including but not limited to the entitlement of employees, Participants and beneficiaries and the amounts of their respective interests. Benefits under the SERP will be paid only if the Compensation Committee decides in its discretion that an employee, Participant or Beneficiary is entitled to them. All interested parties may act and rely upon all information reported to them hereunder and need not inquire into the accuracy thereof, nor be charged with any notice to the contrary.

9.2. Rules and Regulations. Any rule not in conflict or at variance with the provisions hereof may be adopted by the Compensation Committee.

9.3. Method of Executing Instruments. Information to be supplied or written notices to be made or consents to be given by the Principal Sponsor or an affiliate or the Compensation Committee pursuant to any provision of this SERP may be signed in the name of the Principal

Sponsor or an affiliate by any officer or by any employee who has been authorized to make such certification or to give such notices or consents or by any Compensation Committee member.

9.4. Claims Procedure. Until modified by the Compensation Committee, the claims procedure set forth in this Section shall be the claims procedure for the resolution of disputes and disposition of claims arising under the SERP. An application for a distribution or benefits under Section 4 or Section 5 shall be considered as a claim for the purposes of this Section.

9.4.1. Original Claim. Any employee, former employee, or beneficiary of such employee or former employee may, if the employee, former employee or beneficiary so desires, file with the Compensation Committee a written claim for benefits under the SERP. Within ninety (90) days after the filing of such a claim, the Compensation Committee shall notify the claimant in writing whether the claim is upheld or denied in whole or in part or shall furnish the claimant a written notice describing specific special circumstances requiring a specified amount of additional time (but not more than one hundred eighty days from the date the claim was filed) to reach a decision on the claim. If the claim is denied in whole or in part, the Compensation Committee shall state in writing:

(a) the specific reasons for the denial,

(b) the specific references to the pertinent provisions of this SERP on which the denial is based,

(c) a description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why such material or information is necessary, and

(d) an explanation of the claims review procedure set forth in this Section.

9.4.2. Claims Review Procedure. Within sixty (60) days after receipt of notice that the claim has been denied in whole or in part, the claimant may file with the Compensation Committee a written request for a review and may, in conjunction therewith, submit written issues and comments. Within sixty (60) days after the filing of such a request for review, the Compensation Committee shall notify the claimant in writing whether, upon review, the claim was upheld or denied in whole or in part or shall furnish the claimant a written notice describing specific special circumstances requiring a specified amount of additional time (but not more than one hundred twenty days from the date the request for review was filed) to reach a decision on the request for review.

9.4.3. General Rules.

(a) No inquiry or question shall be deemed to be a claim or a request for a review of a denied claim unless made in accordance with the claims procedure. The Compensation Committee may require that any claim for

benefits and any request for a review of a denied claim be filed on forms to be furnished by the Compensation Committee upon request.

(b) All decisions on claims and on requests for a review of denied claims shall be made by the Compensation Committee unless delegated.

(c) The Compensation Committee may, in its discretion, hold one or more hearings on a claim or a request for a review of a denied claim.

(d) Claimants may be represented by a lawyer or other representative at their own expense, but the Compensation Committee reserves the right to require the claimant to furnish written authorization. A claimant’s representative shall be entitled to copies of all notices given to the claimant.

(e) The decision of the Compensation Committee on a claim and on a request for a review of a denied claim shall be served on the claimant in writing. If a decision or notice is not received by a claimant within the time specified, the claim or request for a review of a denied claim shall be deemed to have been denied.

(f) Prior to filing a claim or a request for a review of a denied claim, the claimant or the claimant’s representative shall have a reasonable opportunity to review a copy of SERP plan document and all other pertinent documents in the possession of the Principal Sponsor and the Compensation Committee.

9.4.4. Deadline to File Claim. To be considered timely under the SERP’s claim and review procedure, a claim must be filed with the Compensation Committee within one (1) year after the claimant knew or reasonably should have known of the principal facts upon which the claim is based.

9.4.5. Exhaustion of Administrative Remedies. The exhaustion of the claim and review procedure is mandatory for resolving every claim and dispute arising under this SERP. As to such claims and disputes:

(a) no claimant shall be permitted to commence any legal action to recover Plan benefits or to enforce or clarify rights under the SERP under section 502 or section 510 of ERISA or under any other provision of law, whether or not statutory, until the claim and review procedure set forth herein have been exhausted in their entirety, and

(b) in any such legal action all explicit and all implicit determinations by the Compensation Committee (including, but not limited to, determinations as

to whether the claim, or a request for a review of a denied claim, was timely filed) shall be afforded the maximum deference permitted by law.

9.4.6. Deadline to File Legal Action. No legal action to recover SERP benefits or to enforce or clarify rights under the SERP under section 502 or section 510 of ERISA or under any other provision of law, whether or not statutory, may be brought by any claimant on any matter pertaining to this SERP unless the legal action is commenced in the proper forum before the earlier of:

(a) thirty (30) months after the claimant knew or reasonably should have known of the principal facts on which the claim is based, or

(b) six (6) months after the claimant has exhausted the claim and review procedure.

9.4.7. Knowledge of Fact by Participant Imputed to Beneficiary. Knowledge of all facts that a Participant knew or reasonably should have known shall be imputed to every claimant who is or claims to be a beneficiary of the Participant or otherwise claims to derive an entitlement by reference to the Participant for the purpose of applying the previously specified periods.

9.5. Information Furnished by Participants. Neither the Principal Sponsor nor the Compensation Committee shall be liable or responsible for any error in the computation of the benefit of a Participant resulting from any misstatement of fact made by the Participant, directly or indirectly, to the Principal Sponsor or the Compensation Committee and used by them in determining the Participant’s benefit. Neither the Principal Sponsor nor the Compensation Committee shall be obligated or required to increase the benefit of such Participant which, on discovery of the misstatement, is found to be understated as a result of such misstatement of the Participant. However, the benefit of any Participant which is overstated by reason of any such misstatement shall be reduced to the amount appropriate for the Participant in view of the truth. Any reduction of an benefit shall be retained in the SERP and used to reduce the next succeeding contribution of the Principal Sponsor to the SERP.

SECTION 10

RULES OF CONSTRUCTION

10.1. Defined Terms. Words and phrases used in this SERP with initial capital letters, which are defined in the Pension Plan documents and which are not separately defined in this SERP shall have the same meaning ascribed to them in the Pension Plan documents unless in the context in which they are used it would be clearly inappropriate to do so.

10.2. ERISA Status. This SERP is adopted with the understanding that it is an unfunded plan maintained primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees as provided in section 201(2), section 301(3) and section 401(a)(1) of ERISA. Each provision shall be interpreted and administered accordingly.

10.3. IRC Status. This SERP is intended to be a nonqualified deferred compensation arrangement. The rules of section 401(a) et. seq. of the Code shall not apply to this SERP. The rules of section 3121(v) and section 3306(r)(2) of the Code shall apply to this SERP.

10.4. Effect on Other Plans. This SERP shall not alter, enlarge or diminish any person’s employment rights or obligations or rights or obligations under the Pension Plan or any other plan. It is specifically contemplated that the Pension Plan will, from time to time, be amended and possibly terminated. All such amendments and termination shall be given effect under this SERP (it being expressly intended that except as expressly provided in Section 4.2 and Section 5.2 this SERP shall not lock in the benefit structures of the Pension Plan as they exist at the adoption of this SERP or upon the commencement of participation or commencement of benefits by any Participant).

10.5. Disqualification. Notwithstanding any other provision of this SERP or any election or designation made under the SERP, any individual who feloniously and intentionally kills a Participant shall be deemed for all purposes of this SERP and all elections and designations made under this SERP to have died before such Participant. A final judgment of conviction of felonious and intentional killing is conclusive for this purpose. In the absence of a conviction of felonious and intentional killing, the Principal Sponsor shall determine whether the killing was felonious and intentional for this purpose.

10.6. Rules of Document Construction. Whenever appropriate, words used herein in the singular may be read in the plural, or words used herein in the plural may be read in the singular; the masculine may include the feminine; and the words “hereof,” “herein” or “hereunder” or other similar compounds of the word “here” shall mean and refer to the entire SERP and not to any particular paragraph or Section of this SERP unless the context clearly indicates to the contrary. The titles given to the various Sections of this SERP are inserted for convenience of reference only and are not part of this SERP, and they shall not be considered in determining the purpose, meaning or intent of any provision hereof. If, under the rules of this SERP, an election, form or other document must be filed with or received by the Principal Sponsor or other person, it must be actually received to be effective. The determination of whether or when an election, form or other document has been received by the Principal Sponsor or other person shall be made by the Principal Sponsor on the basis of what documents are acknowledged by the Principal Sponsor or other person to be in its actual possession without regard to any “mailbox rule” of similar rule of evidence. The absence of a document in the Principal Sponsor’s or other person’s records and files shall be conclusive and binding proof that the document was not received. Notwithstanding any thing apparently to the contrary contained in this SERP document, the SERP document shall be construed and administered to prevent the duplication of

benefits provided under this SERP and any other qualified or nonqualified plan maintained in whole or in part by the Principal Sponsor.

10.7. References to Laws. Any reference in this SERP to a statute or regulation shall be considered also to mean and refer to any subsequent amendment or replacement of that statute or regulation.

10.8. Effect on Employment. Neither the terms of this SERP nor the benefits hereunder nor the continuance thereof shall be a term of the employment of any employee. The Principal Sponsor shall not be obliged to continue the SERP. The terms of this SERP shall not give any employee the right to be retained in the employment of the Principal Sponsor.

10.9. Choice of Law. This instrument has been executed and delivered in the State of Minnesota and has been drawn in conformity to the laws of that State and shall, except to the extent that federal law is controlling, be construed and enforced in accordance with the laws of the State of Minnesota.

EX-10.6 4 a2100452zex-10_6.htm EXHIBIT 10.6

EXHIBIT 10.6

HORMEL FOODS CORPORATION

SUPPLEMENTAL RETIREMENT BENEFITS PLAN

FOR THE BENEFIT OF JOEL W. JOHNSON

(1999 Restatement)

First Established on September 18, 1995

and
As Amended and Restated Effective October 1, 1999

HORMEL FOODS CORPORATION
SUPPLEMENTAL RETIREMENT BENEFITS PLAN
FOR THE BENEFIT OF JOEL W. JOHNSON
(1999 Restatement)

TABLE OF CONTENTS

SECTION 1.	DEFINITIONS

SECTION 2.	BENEFITS PAYABLE

	2.1.	Benefit for the Employee
		2.1.1. Amount of Benefit
		2.1.2. Form of Benefit
		2.1.3. Election of Lump Sum Payment
	2.2.	Code § 162(m) Delay
	2.3.	Benefit for Survivors
		2.3.1. Amount of Benefit
		2.3.2. Form of Benefit
		2.3.3. Commutation

SECTION 3.	FUNDING

	3.1.	Unfunded Obligation
	3.2.	Hedging Investments
	3.3.	Consensual Creditor

SECTION 4.	GENERAL MATTERS

	4.1.	Amendments and Termination
	4.2.	ERISA Administrator
	4.3.	Service of Process
	4.4.	Limited Benefits
	4.5.	Spendthrift Provision
	4.6.	Administrative Determinations
	4.7.	Rules and Regulations
	4.8.	Certifications
	4.9.	Errors in Computations

SECTION 5.	FORFEITURE OF BENEFITS

SECTION 6.	CLAIMS PROCEDURE

	6.1.	Original Claim
	6.2.	Claims Review Procedure
	6.3.	General Rules

SECTION 7.	CONSTRUCTION

	7.1.	ERISA Status
	7.2.	IRC Status
	7.3.	Effect on Other Plans
	7.4.	Document Construction
	7.5.	References to Laws
	7.6.	Effect on Employment
	7.7.	Choice of Law

SIGNATURE

HORMEL FOODS CORPORATION
SUPPLEMENTAL RETIREMENT BENEFITS PLAN
FOR THE BENEFIT OF JOEL W. JOHNSON
(1999 Restatement)

Hormel Foods Corporation, a Delaware corporation, heretofore established an unfunded, supplemental, nonqualified plan of deferred compensation (the “SERP”) for the benefit of Joel W. Johnson, the President and Chief Executive Officer of Hormel Foods Corporation. Hormel Foods Corporation has reserved the power to amend the SERP from time to time. Hormel Foods Corporation now desires to exercise that power of amendment by the adoption of this restatement of the SERP effective October 1, 1999.

SECTION 1

DEFINITIONS

The term “Deemed Service” shall mean a number of years of service to be credited under this SERP (and subject to all the conditions of this SERP) based on the date of the Employee’s Termination of Employment or death as if the years had in fact been served with Employer according to the following table:

If the Employee’s Termination of Employment or death occurs:	DEATH For the purpose of computing the benefit (if any) under § 2.3 and §7.3, his Deemed Service shall be:	INVOLUNTARY If his Termination of Employment is an Involuntary Termination, for the purpose of computing the benefit(if any) under § 2.1 and § 7.3, his Deemed Service shall be:	VOLUNTARY If his Termination of Employment is a Voluntary Termination, for the purpose of computing the benefit (if any) under § 2.1 and § 7.3, his Deemed Service shall be:
Before 7/14/2003	14 years	14 years	0 years
After 7/13/2003 but before 7/14/2004	14 years	14 years	14 years
After 7/13/2004 but before 7/14/2005	17 years	17 years	17 years
After 7/13/2005	24 years	24 years	24 years

The term “Employee” shall mean and refer to Joel W. Johnson, a resident of the state of Minnesota.

The term “Employer” shall mean and refer to HORMEL FOODS CORPORATION, a Delaware corporation.

The term “Excess Plan” shall mean and refer to the nonqualified pension benefit plan known as the HORMEL FOODS CORPORATION SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN, as it exists from time to time.

The term “Involuntary Termination” shall mean any Termination of Employment that is required by the Employer.

The term “Other Plan Benefits” shall mean the benefits paid or payable to or with respect to the Employee from other qualified and nonqualified retirement plans of prior employers to the extent that the Employer determines that such other benefits are attributable to employer (rather than Employee) contributions. To the extent that such other benefit is paid or payable in a form or at a time other than the form and time that the benefit is payable under this SERP, the Employer in its discretion shall, applying factors, methods and assumptions determined by it to be consistent with those then in effect under the Pension Plan, convert that other benefit to a form and time that is consistent with the form and time of benefit payable under this SERP.

The term “Pension Plan” shall mean and refer to the tax-qualified defined benefit pension plan known as the HORMEL FOODS CORPORATION SALARIED EMPLOYEES’ PENSION PLAN, as it exists from time to time.

The term “SERP” shall mean and refer to the unfunded, supplemental, nonqualified, plan of deferred compensation for the benefit of Employee established and maintained under this document and, when the context so requires, shall refer to this document as it may be amended from time to time.

The term “Voluntary Termination” shall mean any Termination of Employment that is not an Involuntary Termination.

Words and phrases used in this SERP with initial capital letters, which are defined in the Pension Plan documents and which are not separately defined in this SERP, shall have the same meaning ascribed to them in the Pension Plan documents.

This SERP supersedes and replaces all prior agreements, if any, between the Employer and the Employee regarding the matters specified herein. This restatement of the SERP supersedes and replaces the prior SERP which was adopted on September 18, 1995.

SECTION 2

BENEFITS PAYABLE

2.1. Benefit for the Employee.

2.1.1. Amount of Benefit. Upon the Employee’s Termination of Employment with the Employer, the Employer shall pay to the Employee the excess, if any, of:

(a) the amount that would have been payable to the Employee under the Pension Plan and the Excess Plan if such benefit had been determined:

(i)		without regard to the benefit limitations under section 415 of the Code, and

(ii)		without regard to the compensation limitation of section 401(a)(17) of the Code, and

(iii)		assuming that the Employee’s actual Benefit Service and Vesting Service were each respectively increased by the amount of the Employee’s Deemed Service; over

(b) the amount actually paid from the Pension Plan and the Excess Plan and as Other Plan Benefits.

2.1.2. Form of Benefit. Unless a lump sum form of payment has been elected pursuant to Section 2.1.3, this benefit (minus the withholding, payroll and other taxes which must be deducted therefrom) shall be defined as a benefit payable to the Employee in the same manner, at the same time, for the same duration and in the same form as if such benefit had been paid directly from the Pension Plan. For this purpose, all elections and optional forms of settlement in effect and all other rules governing the payment of benefits under the Pension Plan shall, to the extent practicable, be given effect under this SERP so that the Employee would receive from a combination of the Pension Plan, the Excess Plan and this SERP the same benefit (minus the withholding, payroll and other taxes which must be deducted therefrom) which would have been received under the Pension Plan if this benefit and the Excess Plan benefit had been paid from the Pension Plan.

2.1.3. Election of Lump Sum Payment. At any time and from time to time, the Employee may file with the Employer an election to receive any benefit due to the Employee under this SERP either in the form prescribed in Section 2.1.2 or in an actuarially equivalent single lump sum cash payment within the thirty (30) days following the earliest date on which such benefit would otherwise be payable under Section 2.1. The single lump sum shall be calculated by reference to interest and mortality factors then in effect under the Excess Plan. Each such election shall supercede all prior elections. Notwithstanding the foregoing, any election shall be disregarded as if it had never been filed (and any prior effective election shall be given effect) unless the election:

(a) was filed with the Employer at least one (1) year before the Termination of Employment, and

(b) was filed with the Employer at least one (1) year after any other prior election was filed with the Employer.

Each such election shall be made in writing upon forms furnished by the Employer and shall conform to such other procedural and substantive rules as the Employer shall establish.

If the Employee shall have effectively elected the single lump sum form of payment and dies after Termination of Employment but before the single lump sum is paid, that single lump sum shall be paid to the personal representative of the Employee’s estate. If the Employee has had a Termination of Employment and dies before the receipt of annuity benefits which should have been paid under the terms of this SERP between his Termination of Employment and his death, such annuity benefits shall be payable to the personal representative of the Employee’s estate.

2.2. Code § 162(m) Delay. If the Employer determines that delaying the time when the initial payments are to be made or commenced to the Employee would increase the probability that such payments would be fully deductible for federal or state income tax purposes, the Employer may unilaterally delay the time for the making or commencement of payments for not more than twelve (12) months after the date such payments would otherwise be payable.

2.3. Benefit for Survivors.

2.3.1. Amount of Benefit. Upon the death of the Employee, the Employer shall pay to the surviving spouse or other joint or contingent annuitant or beneficiary of the Employee the excess, if any, of:

(a) the amount that would have been payable to the surviving spouse or other joint or contingent annuitant or beneficiary under the Pension Plan and the Excess Plan if such benefit had been determined:

(i)		without regard to the benefit limitations under section 415 of the Code, and

(ii)		without regard to the compensation limitation of section 401(a)(17) of the Code, and

(iii)		assuming that the Employee’s actual Benefit Service and Vesting Service were each respectively increased by the amount of the Employee’s Deemed Service; over

(b) the amount actually paid from the Pension Plan and the Excess Plan and as Other Plan Benefits.

No benefit shall be due under this SERP to any surviving spouse or other joint or contingent annuitant or beneficiary of the Employee if a single lump sum has been paid (or is payable) to the Employee or the personal representative of the Employee’s estate pursuant to Section 2.1.

2.3.2. Form of Benefit. This benefit (minus the withholding, payroll and other taxes which must be deducted therefrom) shall be defined as a benefit payable to the surviving spouse or other joint or contingent annuitant or beneficiary in the same manner, at the same time, for the same duration and in the same form as if such benefit had been paid directly from the Pension Plan. For this purpose, all elections and optional forms of settlement in effect and all other rules governing the payment of benefits under the Pension Plan shall, to the extent practicable, be given effect under this SERP so that the surviving spouse or other joint or contingent annuitant or beneficiary would receive from a combination of the Pension Plan, the Excess Plan and this SERP the same benefit (minus the withholding, payroll and other taxes which must be deducted therefrom) which would have been received under the Pension Plan if this benefit and the Excess Plan benefit had been paid from the Pension Plan.

2.3.3. Commutation. Notwithstanding the foregoing, the benefit described in Section 2.3.1 shall, without any further elections, consents or notices, be commuted to and paid in an actuarially equivalent single lump sum cash payment within the thirty (30) days following the earliest date on which such benefit would otherwise be payable under Section 2.3. The single lump sum shall be calculated by reference to interest and mortality factors then in effect under the Excess Plan.

SECTION 3

FUNDING

3.1. Unfunded Obligation. The obligation of the Employer to make payments under this SERP constitutes only the unsecured (but legally enforceable) promise of the Employer to make such payments. The Employee shall have no lien, prior claim or other security interest in any property of any Employer. If a fund is established by the Employer in connection with this SERP, the property therein shall remain the sole and exclusive property of the Employer. The Employer will pay the cost of this SERP out of its general assets.

3.2. Hedging Investments. If the Employer elects to finance all or a portion of its costs in connection with this SERP through the purchase of life insurance or other investments, the Employee agrees, as a condition of participation in this SERP, to cooperate with the Employer in the purchase of such investment to any extent reasonably required by the Employer and relinquishes any claim he may have either for himself or any beneficiary to the proceeds of any such investment or any other rights or interests in such investment. If the Employee fails or refuses to cooperate, then notwithstanding any other provision of this SERP the Employer may immediately and irrevocably terminate and forfeit all benefits payable to or with respect to the Employee under this SERP.

3.3. Consensual Creditor. Neither the Employer’s officers nor any member of its Board in any way secures or guarantees the payment of any benefit or amount which may become due and

payable hereunder to or with respect to the Employee. The Employee entitled at any time to payments hereunder shall look solely to the assets of the Employer for such payments as an unsecured, general creditor. After benefits shall have been paid to or with respect to the Employee and such payment purports to cover in full the benefit hereunder, the Employee shall have no further right or interest in the other assets of the Employer in connection with this SERP. Neither the Employer nor any of its officers nor any member of its Boards of Directors shall be under any liability or responsibility for failure to effect any of the objectives or purposes of this SERP by reason of the insolvency of the Employer.

SECTION 4

GENERAL MATTERS

4.1. Amendments and Termination. This SERP may be amended by action of the Employer’s Board of Directors without the consent of the Employee in whole or in part, from time to time and at any time; provided, however, that no amendment (including termination) of this SERP shall be effective as to the Employee to the extent the amendment would have the effect of diminishing the benefits payable to or with respect to the Employee under this SERP (whether benefits earned in the past or to be earned in the future) or the procedural rights of the Employee under this SERP unless the Employee has consented to such amendment in writing.

4.2. ERISA Administrator. The Employer shall be the plan administrator of this SERP.

4.3. Service of Process. In the absence of any designation to the contrary by the Employer, the Secretary of the Employer is designated as the appropriate and exclusive agent for the receipt of service of process in any legal proceeding, including arbitration, involving this SERP.

4.4. Limited Benefits. This SERP shall not provide any benefits determined with respect to any defined contribution plan.

4.5. Spendthrift Provision. Neither the Employee nor any other person shall have the power to transmit, assign, alienate, dispose of, pledge or encumber any benefit payable under this SERP before its actual payment to such person. The Employer shall not recognize any such effort to convey any interest under this SERP. No benefit payable under this SERP shall be subject to attachment, garnishment, execution following judgment or other legal process before actual payment to such person. This section shall not prevent the Employer from observing the terms of a qualified domestic relations order as provided in section 206(d) of ERISA.

4.6. Administrative Determinations. The Employer shall make such determinations as may be required from time to time in the administration of this SERP. The Employer shall have the discretionary authority and responsibility to interpret and construe this SERP and to determine all factual and legal questions under this SERP, including but not limited to the

entitlement of the Employee to a benefit, and the amounts of their respective interests. Each interested party may act and rely upon all information reported to them hereunder and need not inquire into the accuracy thereof, nor be charged with any notice to the contrary.

4.7. Rules and Regulations. Any rule not in conflict or at variance with the provisions hereof may be adopted by the Employer.

4.8. Certifications. Information to be supplied or written notices to be made or consents to be given by the Employer pursuant to any provision of this SERP may be signed in the name of the Employer by any officer who has been authorized to make such certification or to give such notices or consents.

4.9. Errors in Computations. The Employer shall not be liable or responsible for any error in the computation of any benefit payable to or with respect to the Employee resulting from any misstatement of fact made by the Employee or by or on behalf of any survivor to whom such benefit shall be payable, directly or indirectly, to the Employer, and used by the Employer in determining the benefit. The Employer shall not be obligated or required to increase the benefit payable to or with respect to the Employee which, on discovery of the misstatement, is found to be understated as a result of such misstatement of the Employee. However, the benefit of the Employee which is overstated by reason of any such misstatement shall be reduced to the amount appropriate in view of the truth (and to recover any prior overpayment).

SECTION 5

FORFEITURE OF BENEFITS

All unpaid benefits under this SERP, shall be permanently forfeited upon the determination by the Board of the Employer that the Employee, either before or after Termination of Employment:

(a) engaged in a criminal or fraudulent conduct resulting in harm to the Employer or an affiliate of the Employer; or

(b) divulged any confidential information or trade secrets of the Employer or an affiliate of the Employer; or

(c) provided the Employer or an affiliate of the Employer with false reports concerning his business interests or employment; or

(d) made false representations which are relied upon by the Employer or an affiliate of the Employer in furnishing information to an affiliate, partner, auditor or any regulatory or governmental agency; or

(e) maintained an undisclosed, unauthorized conflict of interest in the discharge of the duties owed by him to the Employer or an affiliate of the Employer; or

(f) engaged in reckless or grossly negligent activity toward the Employer or an affiliate of the Employer which is admitted or judicially proven and which results in harm to the Employer or an affiliate of the Employer; or

(g) engaged during his employment or within two (2) years after his Termination of Employment in any employment or self-employment with a competitor of the Employer within the geographical area which is then served by the Employer.

SECTION 6

CLAIMS PROCEDURE

The claims procedure set forth in this section shall be the exclusive procedure for the disposition of claims for benefits arising under this SERP. Without limiting the generality of the following, an application for benefits and any objection to a forfeiture shall be processed as a claim for the purposes of this section.

6.1. Original Claim. Any person may, if he so desires, file with the Board of the Employer a written claim for benefits under this SERP. Within ninety (90) days after the filing of such a claim, the Board shall notify the claimant in writing whether the claim is upheld or denied in whole or in part or shall furnish the claimant a written notice describing specific special circumstances requiring a specified amount of additional time (but not more than one hundred eighty days from the date the claim was filed) to reach a decision on the claim. If the claim is denied in whole or in part, the Board shall state in writing:

(a) the specific reasons for the denial;

(b) the specific references to the pertinent provisions of this SERP on which the denial is based;

(c) a description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why such material or information is necessary; and

(d) an explanation of the claims review procedure set forth in this section.

6.2. Claims Review Procedure. Within sixty (60) days after receipt of notice that the claim has been denied in whole or in part, the claimant may file with the Board a written request

for a review and may, in conjunction therewith, submit written issues and comments. Within sixty (60) days after the filing of such a request for review, the Board shall notify the claimant in writing whether, upon review, the claim was upheld or denied in whole or in part or shall furnish the claimant a written notice describing specific special circumstances requiring a specified amount of additional time (but not more than one hundred twenty days from the date the request for review was filed) to reach a decision on the request for review.

6.3. General Rules.

(a) No inquiry or question shall be deemed to be a claim or a request for a review of a denied claim unless made in accordance with the claims procedure. The Board may require that any claim for benefits and any request for a review of a denied claim be filed on forms to be furnished by the Board upon request.

(b) All decision on claims and on requests for a review of denied claims shall be made by the Board.

(d) Claimants may be represented by a lawyer or other representative (at their own expense), but the Board reserves the right to require the claimant to furnish written authorization. A claimant’s representative shall be entitled to receive copies of notices sent to the claimant.

(e) The decision of the Board on a claim and on a request for a review of a denied claim shall be served on the claimant in writing. If a decision or notice is not received by a claimant within the time specified, the claim or request for a review of a denied claim shall be deemed to have been denied.

(f) Prior to filing a claim or a request for a review of a denied claim, the claimant or the claimant’s representative shall have a reasonable opportunity to review a copy of this SERP and all other pertinent documents in the possession of the Employer.

(g) The Board may permanently or temporarily delegate all or a portion of its authority and responsibility under this Section 6 to a committee or individual.

SECTION 7

CONSTRUCTION

7.1. ERISA Status. This SERP is adopted with the understanding that it is an unfunded plan maintained primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees as provided in section 201(2), section 301(3) and section 401(a)(1) of ERISA. Each provision shall be interpreted and administered accordingly.

7.2. IRC Status. This SERP is intended to be a nonqualified deferred compensation arrangement. The rules of section 401(a) et. seq. of the Code shall not apply to this SERP. The rules of section 3121(v)(2) and section 3306(r)(2) of the Code shall apply to this SERP.

7.3. Effect on Other Plans. This SERP shall not alter, enlarge or diminish any person’s employment rights or obligations or rights or obligations under the Pension Plan, the Excess Plan or any other plan. It is specifically contemplated that the Pension Plan and the Excess Plan will, from time to time, be amended and possibly terminated. All such amendments and termination shall be given effect under this SERP (it being expressly intended that this SERP shall not lock in the benefit structures of the Pension Plan or the Excess Plan as they exist at the execution of this SERP or upon the commencement of participation, or commencement of benefits by the Employee).

(a) Survivor Income Benefits. Notwithstanding the foregoing, for the purposes of the Hormel Survivor Income Plan for Executives, the Employee shall be considered a retiree upon his Termination of Employment:

(i)		at or after he attains age sixty (60) years, or

(ii)		at any earlier age if his Termination of Employment is an Involuntary Termination.

(b) Retiree Health Benefits. Notwithstanding the foregoing, for the purposes of receiving whatever retiree health benefits, if any, are then provided generally to employees of the Employer then retiring who have years of service equal to the Employee’s Benefit Service (including Deemed Service) under this SERP, the Employee:

(i)		shall be deemed to have Benefit Service that includes the Deemed Service at his Termination of Employment, and

(ii)		shall be considered a retiree upon his Termination of Employment:

(A) at or after he attains age sixty (60) years, or

(B) at any earlier age if his Termination of Employment is an Involuntary Termination.

The Employer shall provide such retiree medical benefits: (i) under the regular health programs of the Employer to the extent that the Employer determines that such benefits can be conferred without adverse effect on the regulatory or tax treatment intended for those plans and programs, or (ii) under other arrangements selected by the Employer which, in the judgment of the Employer, provide comparable benefits. The Employer shall also pay to the Employee an amount equal to the tax–affected cost of the Employee’s share of any premium for retiree medical benefits.

(c) Survivor Health Benefits. Notwithstanding the foregoing, for the purposes of receiving whatever health benefits, if any, are then provided generally to the surviving spouse and dependents of an employee who has years of service equal to the Employee’s Benefit Service (including Deemed Service) under this SERP, the Employee shall be deemed to have Benefit Service that includes the Deemed Service at his death.

The Employer shall provide such surviving spouse and dependent medical benefits: (i) under the regular health programs of the Employer to the extent that the Employer determines that such benefits can be conferred without adverse effect on the regulatory or tax treatment intended for those plans and programs, or (ii) under other arrangements selected by the Employer which, in the judgment of the Employer, provide comparable benefits. The Employer shall also pay to the surviving spouse or dependent an amount equal to the tax–affected cost of the surviving spouse’s or dependent’s share of any premium for medical benefits.

7.4. Document Construction. Whenever appropriate, words used herein in the singular may be read in the plural, or words used herein in the plural may be read in the singular; the masculine may include the feminine; and the words “hereof,” “herein” or “hereunder” or other similar compounds of the word “here” shall mean and refer to the entire SERP and not to any particular paragraph or Section of this SERP unless the context clearly indicates to the contrary. The titles given to the various Sections of this SERP are inserted for convenience of reference only and are not part of this SERP, and they shall not be considered in determining the purpose, meaning or intent of any provision hereof.

7.5. References to Laws. Any reference in this SERP to a statute or regulation shall be considered also to mean and refer to any subsequent amendment or replacement of that statute or regulation.

7.6. Effect on Employment. Neither the terms of this SERP nor the benefits hereunder nor the continuance thereof shall be a term of the employment of the Employee. The terms of this SERP shall not give the Employee the right to be retained in the employment of the Employer.

7.7. Choice of Law. This instrument has been executed and delivered in the State of Minnesota and has been drawn in conformity to the laws of that State and shall, except to the extent that federal law is controlling, be construed and enforced in accordance with the laws of the State of Minnesota.

THIS SERP DOCUMENT, Having been previously approved by the Board of Directors of the Employer, is hereby executed on behalf of the Employer and is hereby agreed to by the Employee this 27^th day of March, 2000.

HORMEL FOODS CORPORATION


By	/s/ WILLIAM S. DAVILA

	Its	Board Compensation

		Committee Member

EX-10.7 5 a2100452zex-10_7.htm EXHIBIT 10.7

EXHIBIT 10.7

HORMEL FOODS CORPORATION

EXECUTIVE DEFERRED INCOME PLAN II (2002 RESTATEMENT)

Master Plan Document

Effective November 1, 2002

TABLE OF CONTENTS

ARTICLE 1		Definitions

ARTICLE 2		Selection, Enrollment, Eligibility

2.1		Selection by Committee
2.2		Enrollment Requirements
2.3		Eligibility; Commencement of Participation
2.4		Termination of Participation and/or Deferrals

ARTICLE 3		Deferral Commitments/Discretionary Contribution Amounts/Profit Sharing Amounts/Restricted Stock Amounts/Stock Option Gain Amounts/Vesting/Crediting/Taxes

3.1		Minimum Deferrals
3.2		Maximum Deferral
3.3		Election to Defer; Effect of Election Form
3.4		Withholding and Crediting of Annual Deferral Amounts
3.5		Annual Discretionary Contribution Amount
3.6		Annual Profit Sharing Amount
3.7		Annual Restricted Stock Amount
3.8		Annual Stock Option Gain Amount
3.9		Vesting
3.10		Crediting/Debiting of Account Balances
3.11		FICA and Other Taxes

ARTICLE 4		Deduction Limitation

4.1		Deduction Limitation on Benefit Payments

ARTICLE 5		In-Service Distribution; Unforeseeable Financial Emergencies; Withdrawal Election

5.1		In-Service Distribution
5.2		Other Benefits Take Precedence Over In-Service Distributions
5.3		Withdrawal Payout/Suspensions for Unforeseeable Financial Emergencies
5.4		Withdrawal Election

ARTICLE 6		Change In Control Benefit

6.1		Change in Control Benefit
6.2		Payment of Change in Control Benefit

ARTICLE 7		Retirement Benefit

7.1		Retirement Benefit
7.2		Payment of Retirement Benefit

ARTICLE 8		Termination Benefit

8.1		Termination Benefit
8.2		Payment of Termination Benefit

ARTICLE 9		Disability Waiver and Benefit

9.1		Disability Waiver
9.2		Continued Eligibility; Disability Benefit

ARTICLE 10		Survivor Benefit

10.1		Survivor Benefit
10.2		Payment of Survivor Benefit

ARTICLE 11		Forfeiture of Benefits

11.1		Forfeiture of Benefits

ARTICLE 12		Beneficiary Designation

12.1		Right to Designate
12.2		Failure of Designation
12.3		Disclaimers by Beneficiaries
12.4		Definitions
12.5		Special Rules
12.6		No Spousal Rights
12.7		Death Prior to Full Distribution
12.8		Discharge of Obligations

ARTICLE 13		Leave of Absence

13.1		Paid Leave of Absence
13.2		Unpaid Leave of Absence

ARTICLE 14		Termination, Amendment or Modification

14.1		Termination
14.2		Amendment
14.3		Plan Agreement
14.4		Effect of Payment

ARTICLE 15		Administration

15.1		Committee Duties
15.2		Administration Upon Change In Control
15.3		Agents
15.4		Binding Effect of Decisions
15.5		Indemnity of Committee
15.6		Employer Information

ARTICLE 16		Other Benefits and Agreements

16.1		Coordination with Other Benefits

ARTICLE 17		Claims Procedures

17.1		Presentation of Claim
17.2		Notification of Decision
17.3		Review of a Denied Claim
17.4		Decision on Review
17.5		Legal Action

ARTICLE 18		Trust

18.1		Establishment of the Trust
18.2		Interrelationship of the Plan and the Trust
18.3		Distributions From the Trust

ARTICLE 19		Miscellaneous

19.1		Status of Plan
19.2		Unsecured General Creditor
19.3		Employer’s Liability
19.4		Nonassignability
19.5		Not a Contract of Employment
19.6		Furnishing Information
19.7		Terms
19.8		Captions
19.9		Governing Law
19.10		Notice
19.11		Successors
19.12		Spouse’s Interest
19.13		Validity
19.14		Incompetent

iii

19.15		Court Order
19.16		Distribution in the Event of Taxation
19.17		Insurance
19.18		Legal Fees To Enforce Rights After Change in Control

HORMEL FOODS CORPORATION

EXECUTIVE DEFERRED INCOME PLAN II

(2002 Restatement)

Effective November 1, 2002

Purpose

The purpose of this Plan is to provide specified benefits to a select group of management or highly compensated Employees who contribute materially to the continued growth, development and future business success of Hormel Foods Corporation, a Delaware corporation, and its Affiliates and/or subsidiaries, if any, that sponsor this Plan. This Plan shall be administered and construed so that it is unfunded for tax purposes and for purposes of Title I of ERISA.

ARTICLE 1

Definitions

For the purposes of this Plan, unless otherwise clearly apparent from the context, the following phrases or terms shall have the following indicated meanings:

1.1 “Account Balance” shall mean, with respect to a Participant, a credit on the records of the Employer equal to the sum of (i) the Deferral Account balance, (ii) the Discretionary Contribution Account balance, (iii) the Profit Sharing Account balance, (iv) the Restricted Stock Account balance, and (v) the Stock Option Gain Account balance. The Account Balance, and each other specified account balance, shall be a bookkeeping entry only and shall be utilized solely as a device for the measurement and determination of the amounts to be paid to a Participant, or his or her designated Beneficiary, pursuant to this Plan.

1.2 “Affiliate” shall mean a business entity which is affiliated in ownership with the Principal Sponsor or an Employer and is recognized as an Affiliate by the Principal Sponsor for the purposes of this Plan.

1.3 “Annual Deferral Amount” shall mean that portion of a Participant’s Base Annual Salary, Bonus, LTIP Amounts and Operator Share Dividends that a Participant defers in accordance with Article 3 for any one Plan Year. In the event of a Participant’s Retirement, Disability (if deferrals cease in accordance with Section 9.1), death or a Termination of Employment prior to the end of a Plan Year, such year’s Annual Deferral Amount shall be the actual amount withheld prior to such event.

1.4 “Annual Discretionary Contribution Amount” shall mean, for any one Plan Year, the amount determined in accordance with Section 3.5.

1.5 “Annual Installment Method” shall be an annual installment payment over the number of years selected by the Participant in accordance with this Plan, calculated as follows: (i) for the first annual installment, the portion of the Participant’s vested Account Balance that has been automatically allocated to the Hormel Foods Corporation Stock Unit Measurement Fund shall be calculated as of the close of business on or around the Participant’s Benefit Distribution Date, as determined by the Committee in its sole discretion, and (ii) for remaining annual installments, the

portion of the Participant’s vested Account Balance that has been automatically allocated to the Hormel Foods Corporation Stock Unit Measurement Fund shall be calculated on every applicable anniversary of the Participant’s Benefit Distribution Date. Each annual installment shall be calculated by multiplying this balance by a fraction, the numerator of which is one and the denominator of which is the remaining number of annual payments due the Participant. By way of example, if the Participant elects a ten (10) year Annual Installment Method, the first payment shall be 1/10 of the portion of the Participant’s vested Account Balance that has been automatically allocated to the Hormel Foods Corporation Stock Unit Measurement Fund, calculated as described in this definition. The following year, the payment shall be 1/9 of the portion of the Participant’s vested Account Balance that has been automatically allocated to the Hormel Foods Corporation Stock Unit Measurement Fund, calculated as described in this definition. Shares of Stock that shall be distributable from the Stock Option Gain Account and the Restricted Stock Account shall be distributable in shares of actual Stock in the same manner previously described. However, the Committee may, in its sole discretion, (i) adjust the annual installments in order to distribute whole shares of actual Stock and/or (ii) accelerate the distribution of such actual shares of Stock by payment of a lump sum.

1.6 “Annual Profit Sharing Amount” for any one Plan Year shall be the amount determined in accordance with Section 3.6.

1.7 “Annual Restricted Stock Amount” shall mean, with respect to a Participant for any one Plan Year, the number of shares of Restricted Stock deferred in accordance with Section 3.7 of this Plan, calculated using the closing price of Stock at the end of the business day closest to the date such Restricted Stock would otherwise vest, but for the election to defer. In the event of a Participant’s Retirement, Disability (if deferrals cease in accordance with Section 9.1), death or a Termination of Employment prior to the end of a Plan Year, such year’s Annual Restricted Stock Amount shall be the actual amount withheld prior to such event.

1.8 “Annual Stock Option Gain Amount” shall mean, with respect to a Participant for any one Plan Year, the portion of Qualifying Gains deferred with respect to an Eligible Stock Option exercise, in accordance with Section 3.8 of this Plan. In the event of a Participant’s Retirement, Disability (if deferrals cease in accordance with Section 9.1), death or a Termination of Employment prior to the end of a Plan Year, such year’s Annual Stock Option Gain Amount shall be the actual amount withheld prior to such event.

1.9 “Base Annual Salary” shall mean the annual cash compensation relating to services performed during any calendar year, excluding operator share dividends, bonuses, commissions, overtime, fringe benefits, stock options, relocation expenses, incentive payments, non-monetary awards, director fees and other fees, and automobile and other allowances paid to a Participant for employment services rendered (whether or not such allowances are included in the Employee’s gross income). Base Annual Salary shall be calculated before reduction for compensation voluntarily deferred or contributed by the Participant pursuant to all qualified or non–qualified plans of any Employer and shall be calculated to include amounts not otherwise included in the Participant’s gross income under Code Sections 125, 402(e)(3), 402(h), or 403(b) pursuant to plans established by any Employer; provided, however, that all such amounts will be included in

compensation only to the extent that had there been no such plan, the amount would have been payable in cash to the Employee.

1.10 “Beneficiary” shall mean one or more persons, trusts, estates or other entities, designated in accordance with Article 12, that are entitled to receive benefits under this Plan upon the death of a Participant.

1.11 “Beneficiary Designation Form” shall mean the form established from time to time by the Committee that a Participant completes, signs and returns to the Committee to designate one or more Beneficiaries.

1.12 “Benefit Distribution Date” shall mean the date selected, in advance, by a Participant which triggers distribution of such Participant’s Account Balance. A Participant may elect to have his or her Benefit Distribution Date triggered upon the occurrence of any one of the following:

(a) The date on which the Participant Retires or experiences a Termination of Employment; or

(b) The January 1 immediately following the date on which the Participant Retires or experiences a Termination of Employment; or

(c) The later of (i) the date on which the Participant Retires or experiences a Termination of Employment or (ii) the Participant’s attainment of an age specified by the Participant (which cannot be later than age 65); or

(d) The January 1 immediately following the later of (i) the date on which the Participant Retires or experiences a Termination of Employment or (ii) the Participant’s attainment of an age specified by the Participant (which cannot be later than age 65).

1.13 “Board” shall mean the board of directors of the Principal Sponsor.

1.14 “Bonus” shall mean any compensation, in addition to Base Annual Salary, LTIP Amounts and Operator Share Dividends, payable to a Participant during a Plan Year, under the Hormel Foods Corporation Operator Share Incentive Compensation Plan or any other bonus and cash incentive plans, excluding stock options.

1.15 “Change in Control” shall mean any of the following events or transactions:

(a) A change in control of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), whether or not the Principal Sponsor is then subject to such reporting requirement.

(b) The public announcement (which, for purposes of this definition, shall include, without limitation, a report filed pursuant to Section 13(d) of the Exchange Act) by the Principal Sponsor or any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) that such person has become the “beneficial owner” (as defined in Rule 13d-3 promulgated under the Exchange Act), directly or indirectly, of securities of the Principal Sponsor:

(i) Representing twenty percent (20%) or more of the combined voting power of the Principal Sponsor’s then outstanding securities unless the transaction resulting in such ownership has been approved in advance by the “Continuing Directors” (as hereinafter defined), or

(ii) Representing more than fifty percent (50%) of the combined voting power of the Principal Sponsor’s then outstanding securities (regardless of any approval by the Continuing Directors).

Provided, however, that notwithstanding the foregoing, no Change in Control shall be deemed to have occurred by reason of the ownership of twenty percent (20%) or more of the total voting capital stock of the Principal Sponsor then issued and outstanding by:

(iii) The Principal Sponsor, any subsidiary of the Principal Sponsor or any employee benefit plan of the Principal Sponsor or of any subsidiary of the Principal Sponsor or any entity holding shares of the Stock organized, appointed or established for, or pursuant to the terms of, any such plan (any such person or entity described in this clause is referred to herein as a “Principal Sponsor Entity”), or

(iv) The Hormel Foundation.

(c) The announcement of a tender offer by any person or entity (other than a Principal Sponsor Entity) for twenty percent (20%) or more of the Principal Sponsor’s voting capital stock then issued and outstanding, which tender offer has not been approved by the Board, a majority of the members of which are the Continuing Directors, and recommended to the stockholders of the Principal Sponsor.

(d) The Continuing Directors cease to constitute a majority of the Principal Sponsor’s Board of Directors.

(e) The stockholders of the Principal Sponsor approve:

(i) Any consolidation or merger of the Principal Sponsor in which the Principal Sponsor is not the continuing or surviving Principal Sponsor or pursuant to which shares of Principal Sponsor stock would be converted to cash, securities or other property, other than a merger of the Principal Sponsor in which the stockholders immediately prior to the merger have the same proportionate ownership of stock of the surviving Principal Sponsor immediately after the merger; or

(ii) Any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all of the assets of the Principal Sponsor; or

(iii) Any plan of liquidation or dissolution of the Principal Sponsor.

For purposes of this definition:

(i) “Continuing Director” shall mean any person who is a member of the Board of Directors of the Principal Sponsor, while such person is a member of the Board of Directors, who is not an “Acquiring Person” (as defined below) or an “Affiliate” or “Associate” (each term as defined below) of an Acquiring Person, or a

representative of an Acquiring Person or of any such Affiliate or Associate, and who

a) was a member of the Board of Directors on the date of this Plan as first written above or

b) subsequently becomes a member of the Board of Directors,

if such person’s initial nomination for election or initial election to the Board of Directors is recommended or approved by a majority of the Continuing Directors.

(ii) “Acquiring Person” shall mean any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) who or which, together with all Affiliates and Associates of such person, is the “beneficial owner” (as defined in Rule 13(d)-3 promulgated under the Exchange Act), directly or indirectly, of securities of the Principal Sponsor representing twenty percent (20%) or more of the combined voting power of the Principal Sponsor’s then outstanding securities, but shall not include the Hormel Foundation or any Principal Sponsor Entity.

(iii) “Affiliate” and “Associate” shall have their respective meanings ascribed to such terms in Rule 12b-2 promulgated under the Exchange Act.

1.16 “Change in Control Benefit” shall have the meaning set forth in Article 6.

1.17 “Claimant” shall have the meaning set forth in Section 17.1.

1.18 “Code” shall mean the Internal Revenue Code of 1986, as it may be amended from time to time.

1.19 “Committee” shall mean the committee described in Article 15.

1.20 “Crediting Rate” shall mean, for each Plan Year, an interest rate that is 120% of the applicable federal long-term rate, as determined by the Compensation Committee of the Board, in its sole discretion, and communicated to Participants, prior to the beginning of each Plan Year.

1.21 “Deduction Limitation” shall mean the limitation on a benefit that may otherwise be distributable pursuant to the provisions of this Plan, as set forth in Article 4.

1.22 “Deferral Account” shall mean (i) the sum of all of a Participant’s Annual Deferral Amounts, plus (ii) amounts credited in accordance with all the applicable crediting and debiting provisions of this Plan that relate to the Participant’s Deferral Account, less (iii) all distributions made to the Participant or his or her Beneficiary pursuant to this Plan that relate to his or her Deferral Account.

1.23 “Disability” or “Disabled” shall mean a determination that a Participant is disabled made by either (i) the carrier of any individual or group disability insurance policy, sponsored by the Participant’s Employer, or (ii) the Social Security Administration. Upon request by the Employer, the Participant must submit proof of the carrier’s or Social Security Administration’s determination.

1.24 “Disability Benefit” shall mean the benefit set forth in Article 9.

1.25 “Discretionary Contribution Account” shall mean (i) the sum of the Participant’s Annual Discretionary Contribution Amounts, plus (ii) amounts credited or debited in accordance with all

the applicable crediting and debiting provisions of this Plan that relate to the Participant’s Discretionary Contribution Account, less (iii) all distributions made to the Participant or his or her Beneficiary pursuant to this Plan that relate to the Participant’s Discretionary Contribution Account.

1.26 “Election Form” shall mean the form established from time to time by the Committee that a Participant completes, signs and returns to the Committee to make an election under the Plan.

1.27 “Eligible Stock Option” shall mean one or more non-qualified stock option(s) selected by the Committee in its sole discretion and exercisable under a plan or arrangement of Hormel Foods Corporation or any Employer permitting a Participant under this Plan to defer gain with respect to such option.

1.28 “Employee” shall mean a person who is an employee of any Employer.

1.29 “Employer(s)” shall mean the Principal Sponsor and/or any of its Affiliates and/or subsidiaries (now in existence or hereafter formed or acquired) that have been selected by the Board to participate in the Plan and have adopted the Plan as a sponsor.

1.30 “ERISA” shall mean the Employee Retirement Income Security Act of 1974, as it may be amended from time to time.

1.31 “In-Service Distribution” shall mean the distribution set forth in Section 5.1.

1.32 “Installment Method” shall mean a series of payments, payable either monthly or annually, over the number of years selected by the Participant. The portion of the Participant’s vested Account Balance that has been automatically allocated to the Hormel Foods Corporation Stock Unit Fund shall be payable pursuant to an Annual Installment Method over the number of years selected by the Participant in accordance with this Plan. The Participant’s vested Account Balance, excluding the portion that has been automatically allocated to the Hormel Foods Corporation Stock Unit Fund, shall be payable pursuant to a Monthly Installment Method over the number of years selected by the Participant in accordance with this Plan.

1.33 “LTIP Amounts” shall mean any compensation payable to a Participant as an Employee under any Employer’s long-term incentive plan or any other long-term incentive arrangement designated by the Committee which is eligible for deferral in accordance with Article 3, and includes payments made under the Hormel Foods Corporation Long Term Incentive Plan.

1.34 “Monthly Installment Method” shall be a monthly installment payment over the number of years selected by the Participant in accordance with this Plan, calculated as follows: (i) for the first monthly installment, the Participant’s vested Account Balance, excluding the portion of the Account Balance attributable to the Restricted Stock Account and the Stock Option Gain Account, shall be calculated as of the close of business on or around the Participant’s Benefit Distribution Date, as determined by the Committee in its sole discretion, and (ii) for remaining monthly installments, the Participant’s vested Account Balance, excluding the portion of the Account Balance attributable to the Restricted Stock Account and the Stock Option Gain Account, shall be calculated as of the close of business on or around on the last business day of the preceding month, as determined by the Committee in its sole discretion. Each monthly installment shall be calculated by multiplying this balance by a fraction, the numerator of which

is one and the denominator of which is the remaining number of monthly payments due the Participant. By way of example, if the Participant elects a ten (10) year Monthly Installment Method, the first payment shall be 1/120 of the Participant’s vested Account Balance, excluding the portion of the Account Balance attributable to the Restricted Stock Account and the Stock Option Gain Account, calculated as described in this definition. The following month, the payment shall be 1/119 of the Participant’s vested Account Balance, excluding the portion of the Account Balance attributable to the Restricted Stock Account and the Stock Option Gain Account, calculated as described in this definition.

1.35 “Operator Share Dividends” shall mean any quarterly dividends payable to a Participant in cash during a Plan Year under the Hormel Foods Corporation Operator Share Incentive Compensation Plan.

1.36 “Participant” shall mean any Employee (i) who is selected to participate in the Plan, (ii) who elects to participate in the Plan, (iii) who signs a Plan Agreement and an Election Form, (iv) whose signed Plan Agreement and Election Form are accepted by the Committee, (v) who commences participation in the Plan, and (vi) whose Plan Agreement has not terminated. A spouse or former spouse of a Participant shall not be treated as a Participant in the Plan or have an account balance under the Plan, even if he or she has an interest in the Participant’s benefits under the Plan as a result of applicable law or property settlements resulting from legal separation or divorce.

1.37 “Plan” shall mean the Hormel Foods Corporation Executive Deferred Income Plan II (2002 Restatement), which shall be evidenced by this instrument and by each Plan Agreement, as they may be amended from time to time.

1.38 “Plan Agreement” shall mean a written agreement, as may be amended from time to time, which is entered into by and between an Employer and a Participant. Each Plan Agreement executed by a Participant and the Participant’s Employer shall provide for the entire benefit to which such Participant is entitled under the Plan; should there be more than one Plan Agreement, the Plan Agreement bearing the latest date of acceptance by the Employer shall supersede all previous Plan Agreements in their entirety and shall govern such entitlement. The terms of any Plan Agreement may be different for any Participant, and any Plan Agreement may provide additional benefits not set forth in the Plan or limit the benefits otherwise provided under the Plan; provided, however, that any such additional benefits or benefit limitations must be agreed to by both the Employer and the Participant.

1.39 “Plan Year” shall mean a period beginning on January 1 of each year and continuing through December 31 of such year.

1.40 “Principal Sponsor” shall mean Hormel Foods Corporation, a Delaware corporation, and any successor to all or substantially all of the Hormel Foods Corporation’s assets or business.

1.41 “Profit Sharing Account” shall mean (i) the sum of all of a Participant’s Annual Profit Sharing Amounts, plus (ii) amounts credited in accordance with all the applicable crediting and debiting provisions of this Plan that relate to the Participant’s Profit Sharing Account, less (iii) all distributions made to the Participant or his or her Beneficiary pursuant to this Plan that relate to the Participant’s Profit Sharing Account.

1.42 “Profit Sharing Plan” shall mean the Hormel Foods Corporation Joint Earnings Profit Sharing Trust Plan.

1.43 “Qualifying Gain” shall mean the incremental value inuring to a Participant upon the exercise of an Eligible Stock Option, using a Stock-for-Stock payment method, during any Plan Year. For purposes of this section, the phrase “Stock-for-Stock payment method” shall, in all events, be limited to the Participant’s delivery of a properly executed statement in which he or she attests to ownership of the number of shares required to exercise the Eligible Stock Option, rather than actual delivery of such shares. Such incremental value shall be deliverable to the Participant in the form of additional shares of Stock and shall be computed as follows: (i) the total fair market value of the shares of Stock held/acquired as a result of the exercise of an Eligible Stock Option using a Stock-for-Stock payment method, minus (ii) the total exercise price. For example, assume a Participant elects to exercise an Eligible Stock Option to purchase 1,000 shares of Stock at an exercise price of $20 per share (i.e., a total exercise price of $20,000), when the Stock has a current fair market value of $25 per share (i.e., a total current fair market value of $25,000) and elects to defer one hundred (100) percent of the Qualifying Gain (i.e., $5,000). Using the Stock-for-Stock payment method, the Participant would deliver a properly executed statement attesting to ownership of 800 shares of Stock (worth $20,000 at exercise) to exercise the Eligible Stock Option and would receive, in return, 800 shares of Stock (worth $20,000 at exercise) plus a Qualifying Gain, in the form of an unfunded and unsecured promise by the Principal Sponsor for 200 additional shares of Stock in the future (worth $5,000 at exercise). The number of additional shares of Stock deliverable to the Participant in the future as a result of the Qualifying Gain shall be fixed and determined as of the date of the exercise of the Eligible Stock Option using the closing price of the Stock as of the end of the business day closest to the date of such exercise.

1.44 “Restricted Stock” shall mean rights to receive unvested shares of restricted stock selected by the Committee in its sole discretion and awarded to the Participant under any Hormel Foods Corporation stock incentive plan.

1.45 “Restricted Stock Account” shall mean the aggregate value, measured on any given date, of (i) the number of shares of Restricted Stock deferred by a Participant as a result of all Annual Restricted Stock Amounts, plus (ii) the number of additional shares credited as a result of the deemed reinvestment of dividends in accordance with all of the applicable crediting provisions of the Hormel Foods Corporation Stock Unit Measurement Fund that relate to the Participant’s Restricted Stock Account, less (iii) the number of shares of Restricted Stock previously distributed to the Participant or his or her Beneficiary pursuant to this Plan, subject in each case to any adjustments to the number of such shares determined by the Committee with respect to the Hormel Foods Corporation Stock Unit Measurement Fund pursuant to Section 3.10. This portion of the Participant’s Account Balance shall only be distributable in actual shares of Stock.

1.46 “Retirement”, “Retire(s)” or “Retired” shall mean, with respect to an Employee, severance from employment from all Employers on or after the earlier of the attainment of age sixty-five (65) or (b) age fifty-five (55) with fifteen (15) Years of Service for any reason other than a leave of absence, death or Disability.

1.47 “Retirement Benefit” shall mean the benefit set forth in Article 7.

1.48 “Stock” shall mean Hormel Foods Corporation common stock, $0.01 par value, or any other equity securities of the Principal Sponsor designated by the Committee.

1.49 “Stock Option Gain Account” shall mean the aggregate value, measured on any given date, of (i) the number of shares of Stock deferred by a Participant as a result of all Annual Stock Option Gain Amounts, plus (ii) the number of additional shares credited as a result of the deemed reinvestment of dividends in accordance with all of the applicable crediting provisions of the Hormel Foods Corporation Stock Unit Measurement Fund that relate to the Participant’s Stock Option Gain Account, less (iii) the number of such shares of Stock previously distributed to the Participant or his or her Beneficiary pursuant to this Plan, subject in each case to any adjustments to the number of such shares determined by the Committee with respect to the Hormel Foods Corporation Stock Unit Measurement Fund pursuant to Section 3.10. This portion of the Participant’s Account Balance shall only be distributable in actual shares of Stock.

1.50 “Survivor Benefit” shall mean the benefit set forth in Article 10.

1.51 “Termination Benefit” shall mean the benefit set forth in Article 8.

1.52 “Termination of Employment” shall mean the severing of employment with all Employers, voluntarily or involuntarily, for any reason other than Retirement, Disability, death or an authorized leave of absence. A transfer of employment with an Employer to employment with an Affiliate of an Employer shall not constitute a Termination of Employment. If an Employer who is an Affiliate (i.e., not the Principal Sponsor) ceases to be an Affiliate because of a sale of substantially all the stock or assets of that Employer, then Participants who are employed by that Employer and who cease to be employed by that Employer in connection with the sale of substantially all the stock or assets of that Employer shall be deemed to have thereby had a Termination of Employment for the purposes of commencing distributions from this Plan.

1.53 “Trust” shall mean one or more trusts established pursuant to that certain Master Trust Agreement, dated as of , 2002 between the Principal Sponsor and the trustee named therein, as amended from time to time.

1.54 “Unforeseeable Financial Emergency” shall mean an unanticipated emergency that is caused by an event beyond the control of the Participant that would result in severe financial hardship to the Participant resulting from (i) a sudden and unexpected illness or accident of the Participant or a dependent of the Participant, (ii) a loss of the Participant’s property due to casualty, or (iii) such other extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant, all as determined in the sole discretion of the Committee.

1.55 “Years of Service” shall mean the total number of full years in which a Participant has been employed by one or more Employers. For purposes of this definition, a year of employment shall be a 365 day period (or 366 day period in the case of a leap year) that, for the first year of employment, commences on the Employee’s date of hiring and that, for any subsequent year, commences on an anniversary of that hiring date. The Committee shall make a determination as to whether any partial year of employment shall be counted as a Year of Service.

ARTICLE 2

Selection, Enrollment, Eligibility

2.1 Selection by Committee. Participation in the Plan shall be limited to a select group of management and highly compensated Employees of the Employer, as determined by the Committee in its sole discretion. From that group, the Committee shall select, in its sole discretion, Employees to participate in the Plan.

2.2 Enrollment Requirements. As a condition to participation, each selected Employee shall complete, execute and return to the Committee a Plan Agreement and an Election Form, within thirty (30) days after he or she is selected to participate in the Plan. In addition, the Committee shall establish from time to time such other enrollment requirements as it determines in its sole discretion are necessary.

2.3 Eligibility; Commencement of Participation. Provided an Employee selected to participate in the Plan has met all enrollment requirements set forth in this Plan and required by the Committee, including returning all required documents to the Committee within the specified time period, that Employee shall commence participation in the Plan on the first day of the month following the month in which the Employee completes all enrollment requirements. If an Employee fails to meet all such requirements within the period required, in accordance with Section 2.2, that Employee shall not be eligible to participate in the Plan until the first day of the Plan Year following the delivery to and acceptance by the Committee of the required documents.

2.4 Termination of Participation and/or Deferrals. If the Committee determines in good faith that a Participant no longer qualifies as a member of a select group of management or highly compensated employees, as membership in such group is determined in accordance with Sections 201(2), 301(a)(3) and 401(a)(1) of ERISA, the Committee shall have the right, in its sole discretion, to (i) terminate any deferral election the Participant has made for the remainder of the Plan Year in which the Participant’s membership status changes, (ii) prevent the Participant from making future deferral elections and/or (iii) immediately distribute the Participant’s then vested Account Balance as a Termination Benefit and terminate the Participant’s participation in the Plan.

ARTICLE 3
Deferral Commitments/Discretionary Contribution Amounts/Profit Sharing Amounts/Restricted
Stock Amounts/Stock Option Gain Amounts/Vesting/Crediting/Taxes

3.1 Minimum Deferrals.

(a) Base Annual Salary, Bonus, LTIP Amounts and Operator Share Dividends. For each Plan Year, a Participant may elect to defer, as his or her Annual Deferral Amount, Base Annual Salary, Bonus, LTIP Amounts and/or Operator Share Dividends in the following minimum amounts for each deferral elected:

Deferral	Minimum Amount
Base Annual Salary	$	0
Bonus	$	2,000
LTIP Amounts	$	2,000
Operator Share Dividends	$	0

If an election is made for less than the stated minimum amounts, or if no election is made, the amount deferred shall be zero.

(b) Annual Restricted Stock Amount. For each grant of Restricted Stock, a Participant may elect to defer, as his or her Annual Restricted Stock Amount, Restricted Stock in the following minimum amount:

Deferral	Minimum Amount
Restricted Stock	$	5,000

If an election is made for less than the stated minimum amounts, or if no election is made, the amount deferred shall be zero.

(c) Annual Stock Option Gain Amount. For each Eligible Stock Option, a Participant may elect to defer, as his or her Annual Stock Option Gain Amount, the following minimum Amount of Qualifying Gain with respect to exercise of the Eligible Stock Option:

Deferral	Minimum Amount
Qualifying Gain	$	0

If no election is made, the amount deferred shall be zero.

(d) Short Plan Year. Notwithstanding the foregoing, if a Participant first becomes a Participant after the first day of a Plan Year, the minimum Annual Deferral Amount shall be an amount equal to the minimum set forth above, multiplied by a fraction, the numerator of which is the number of complete months remaining in the Plan Year and the denominator of which is 12.

3.2 Maximum Deferral.

(a) Base Annual Salary, Bonus, LTIP Amounts and Operator Share Dividends. For each Plan Year, a Participant may elect to defer, as his or her Annual Deferral Amount, Base Annual Salary, Bonus, LTIP Amounts and/or Operator Share Dividends up to the following maximum percentages for each deferral elected:

Deferral	Maximum Amount
Base Annual Salary	40	%
Bonus	100	%
LTIP Amounts	100	%
Operator Share Dividends	40	%

(b) Annual Restricted Stock Amount. For each Plan Year, a Participant may elect to defer, as his or her Annual Restricted Stock Amount, Restricted Stock in the following maximum percentage:

Deferral		Maximum Amount
Restricted Stock		100	%

(c) Annual Stock Option Gain Amount. For each Eligible Stock Option, a Participant may elect to defer, as his or her Annual Stock Option Gain Amount, Qualifying Gain up to the following maximum percentage with respect to exercise of the Eligible Stock Option:

Deferral		Maximum Amount
Qualifying Gain		100	%

Annual Stock Option Gain Amounts may also be limited by other terms or conditions set forth in the stock option plan or agreement under which such options are granted.

(d) Short Plan Year. Notwithstanding the foregoing, if a Participant first becomes a Participant after the first day of a Plan Year, the maximum Annual Deferral Amount (i) with respect to Base Annual Salary shall be limited to the amount of compensation not yet earned by the Participant as of the date the Participant submits a Plan Agreement and Election Form to the Committee for acceptance, and (ii) with respect to Bonus, LTIP Amounts and Operator Share Dividends shall be limited to those amounts deemed eligible for deferral, in the sole discretion of the Committee.

3.3 Election to Defer; Effect of Election Form.

(a) First Plan Year. In connection with a Participant’s commencement of participation in the Plan, the Participant shall make an irrevocable deferral election for the Plan Year in which the Participant commences participation in the Plan, along with such other elections as the Committee deems necessary or desirable under the Plan. For these elections to be valid, the Election Form must be completed and signed by the Participant, timely delivered to the Committee (in accordance with Section 2.2 above) and accepted by the Committee.

(b) Subsequent Plan Years. For each succeeding Plan Year, an irrevocable deferral election for that Plan Year, and such other elections as the Committee deems necessary or desirable under the Plan, shall be made by timely delivering a new Election Form to the Committee, in accordance with its rules and procedures, before the first day of the Plan Year for which the election is made. If no such Election Form is timely delivered for a Plan Year, the Annual Deferral Amount shall be zero for that Plan Year.

(c) Restricted Stock Deferral. For an election to defer Restricted Stock to be valid: (i) a separate irrevocable Election Form must be completed and signed by the Participant, with respect to such Restricted Stock; and (ii) such Election Form must be timely delivered to the Committee and accepted by the Committee at least six (6) months prior to the date

such Restricted Stock vests under the terms of the Hormel Foods Corporation stock incentive plan.

(d) Stock Option Gain Deferral.

(i) For an election to defer gain upon the exercise of an Eligible Stock Option exercise to be valid: (i) a separate Election Form must be completed and signed by the Participant with respect to the Eligible Stock Option; (ii) such election must be irrevocable; (iii) the executed Election Form must be timely delivered to the Committee or its designee at least six (6) months prior to the date the Participant elects to exercise the Eligible Stock Option; (iv) the Participant must agree not to exercise the Eligible Stock Option prior to six (6) months from the date the executed, irrevocable Election Form is submitted to the Committee or its designee; (v) the Eligible Stock Option must be exercised using the “Stock-for-Stock payment method”; and (vi) the Stock constructively delivered by the Participant to exercise the Eligible Stock Option must have been owned by the Participant during the entire six (6) month period prior to its delivery and/or otherwise qualify the Eligible Stock Option for favorable accounting treatment, as determined in the sole discretion of the Committee.

(ii) Notwithstanding any other provision of this Plan to the contrary, (i) an Eligible Stock Option may be exercised prior to the end of the six (6) month period following the date on which the executed Election Form is delivered to the Committee or its designee, and (ii) the resulting Qualifying Gain will not be deferred into this Plan, if (a) a Change in Control occurs, or (b) the Participant Retires, dies while an Employee, or experiences a Termination of Employment, and the Eligible Stock Option would otherwise expire prior to the end of the six (6) month period following the date on which the executed Election Form was delivered to the Committee or its designee.

3.4 Withholding and Crediting of Annual Deferral Amounts. For each Plan Year, the Base Annual Salary portion of the Annual Deferral Amount shall be withheld from each regularly scheduled Base Annual Salary payroll in equal amounts, as adjusted from time to time for increases and decreases in Base Annual Salary. The Bonus, LTIP Amounts and Operator Share Dividends shall be withheld at the time the Bonus, LTIP Amounts or Operator Share Dividends are or otherwise would be paid to the Participant, whether or not this occurs during the Plan Year itself. Annual Deferral Amounts shall be credited to a Participant’s Deferral Account at the time such amounts would otherwise have been paid to the Participant.

3.5 Annual Discretionary Contribution Amount.

(a) For each Plan Year, an Employer may be required to credit amounts to a Participant’s Discretionary Contribution Account in accordance with employment or other agreements entered into between the Participant and the Employer. Such amounts shall be credited on the date or dates prescribed by such agreements.

(b) For each Plan Year, an Employer, in its sole discretion, may, but is not required to, credit any amount it desires to any Participant’s Discretionary Contribution Account under this

Plan, which amount shall be for that Participant the Annual Discretionary Contribution Amount for that Plan Year. The amount so credited to a Participant may be smaller or larger than the amount credited to any other Participant, and the amount credited to any Participant for a Plan Year may be zero, even though one or more other Participants receive an Annual Discretionary Contribution Amount for that Plan Year. The Annual Discretionary Contribution Amount described in this Section 3.5(b), if any, shall be credited as of the last day of the Plan Year. If a Participant is not employed by an Employer as of the last day of a Plan Year other than by reason of his or her Retirement or death while employed, the Annual Discretionary Contribution Amount for that Plan Year shall be zero.

3.6 Annual Profit Sharing Amount. A Participant’s Annual Profit Sharing Amount shall be equal to the difference between (i) the contributions that would have been allocated to the Participant’s “account” under the Profit Sharing Plan for the Plan Year, pursuant to the terms of the Profit Sharing Plan in effect for such year, without giving effect to the limitations imposed on the Profit Sharing Plan by Sections 415 and 401(a)(17) of the Code; and (ii) the amount of the contributions actually allocated to the Participant’s “account” under the Profit Sharing Plan for the Plan Year. The amount so credited to a Participant under this Plan shall be for that Participant the Annual Profit Sharing Amount for that Plan Year and shall be credited to the Participant’s Profit Sharing Account on a date or dates to be determined by the Committee, in its sole discretion. If a Participant is not employed by an Employer as of the last day of a Plan Year, the Annual Profit Sharing Amount for such Plan Year shall be zero.

3.7 Annual Restricted Stock Amount. Subject to any terms and conditions imposed by the Committee, Participants may elect to defer, under the Plan, Restricted Stock, which amount shall be for that Participant the Annual Restricted Stock Amount for that Plan Year. The portion of any Restricted Stock deferred shall, at the time the Restricted Stock would otherwise vest under the terms of the Hormel Foods Corporation stock incentive plan, but for the election to defer, be reflected on the books of the Principal Sponsor as an unfunded, unsecured promise to deliver to the Participant a specific number of actual shares of Stock in the future.

3.8 Annual Stock Option Gain Amount. Subject to any terms and conditions imposed by the Committee, Participants may elect to defer, under the Plan, all or some portion of Qualifying Gains attributable to an Eligible Stock Option exercise, which amount shall be for that Participant the Annual Stock Option Gain Amount for that Plan Year. The portion of any Qualifying Gains shall be reflected on the books of the Principal Sponsor as an unfunded, unsecured promise to deliver to the Participant a specific number of actual shares of Stock in the future. Such shares of Stock would otherwise have been delivered to the Participant, pursuant to the Eligible Stock Option exercise, but for the Participant’s election to defer.

3.9 Vesting.

(a) A Participant shall at all times be 100% vested in his or her Deferral Account, Restricted Stock Account, Stock Option Gain Account and Profit Sharing Account.

(b) A Participant shall be vested in his or her Discretionary Contribution Account in accordance with the vesting schedule(s) set forth in his or her Plan Agreement,

employment agreement or any other agreement entered into between the Participant and his or her Employer. If not addressed in such agreements, a Participant shall vest in his or her Discretionary Contribution Account in accordance with the schedule declared by the Committee in its sole discretion.

3.10 Crediting/Debiting of Account Balances. In accordance with, and subject to, the rules and procedures that are established from time to time by the Committee, in its sole discretion, amounts shall be credited or debited to a Participant’s Account Balance in accordance with the following rules:

(a) Measurement Funds. Subject to the restrictions found in Section 3.10(d) below, the Participant may elect one or more of the measurement funds selected by the Committee, in its sole discretion, which are based on certain mutual funds (the “Measurement Funds”), for the purpose of crediting or debiting additional amounts to his or her Account Balance. As necessary, the Committee may, in its sole discretion, discontinue, substitute or add a Measurement Fund. Each such action will take effect as of the first day of the first calendar quarter that begins at least thirty (30) days after the day on which the Committee gives Participants advance written notice of such change.

(b) Election of Measurement Funds. Subject to the restrictions found in Section 3.10(d) below, a Participant, in connection with his or her initial deferral election in accordance with Section 3.3(a) above, shall elect, on the Election Form, one or more Measurement Fund(s) (as described in Section 3.10(a) above) to be used to determine the amounts to be credited or debited to his or her Account Balance. If a Participant does not elect any of the Measurement Funds as described in the previous sentence, the Participant’s Account Balance shall automatically be allocated into the lowest-risk Measurement Fund, as determined by the Committee, in its sole discretion. Subject to the restrictions found in Section 3.10(d) below, the Participant may (but is not required to) elect, by submitting an Election Form to the Committee that is accepted by the Committee, to add or delete one or more Measurement Fund(s) to be used to determine the amounts to be credited or debited to his or her Account Balance, or to change the portion of his or her Account Balance allocated to each previously or newly elected Measurement Fund. If an election is made in accordance with the previous sentence, it shall apply as of the first business day deemed reasonably practicable by the Committee, in its sole discretion, and shall continue thereafter for each subsequent day in which the Participant participates in the Plan, unless changed in accordance with the previous sentence.

(c) Declared Rate Measurement Fund. Subject to the restrictions found in Section 3.10(d) below, a Participant may allocate or re-allocate any portion of his or her Account Balance, excluding the portion of the Account Balance attributable to the Restricted Stock Account and the Stock Option Gain Account, to the Declared Rate Measurement Fund, at any time. The rate of interest credited on amounts allocated to the Declared Rate Measurement Fund shall be the Crediting Rate and such interest shall be credited and compounded on a daily basis to a Participant’s Account Balance.

(d) Hormel Foods Corporation Stock Unit Measurement Fund.

(i) A Participant’s Restricted Stock Account and Stock Option Gain Account will be automatically allocated to the Hormel Foods Corporation Stock Unit Measurement Fund. Participants may not select any other Measurement Fund to be used to determine the amounts to be credited or debited to their Restricted Stock Account or Stock Option Gain Account. Furthermore, no other portion of the Participant’s Account Balance can be either initially allocated or re-allocated to the Hormel Foods Corporation Stock Unit Measurement Fund.

(ii) If a Participant elects to receive his or her Retirement Benefit and/or Survivor Benefit in installments, the portion of such Participant’s Account Balance that has been automatically allocated to the Hormel Foods Corporation Stock Unit Measurement Fund shall be distributed pursuant to an Annual Installment Method over the number of years selected by the Participant.

(iii) Any stock dividends, cash dividends or other non-cash dividends that would have been payable on the Stock credited to a Participant’s Account Balance shall be credited to the Participant’s Account Balance in the form of additional shares of Stock and shall automatically and irrevocably be deemed to be re-invested in the Hormel Foods Corporation Stock Unit Measurement Fund until such amounts are distributed to the Participant. The number of shares credited to the Participant for a particular stock dividend shall be equal to (a) the number of shares of Stock credited to the Participant’s Account Balance as of the payment date for such dividend in respect of each share of Stock, multiplied by (b) the number of additional shares of Stock actually paid as a dividend in respect of each share of Stock. The number of shares credited to the Participant for a particular cash dividend or other non-cash dividend shall be equal to (a) the number of shares of Stock credited to the Participant’s Account Balance as of the payment date for such dividend in respect of each share of Stock, multiplied by (b) the fair market value of the dividend, divided by (c) the “fair market value” of the Stock on the payment date for such dividend.

(iv) The number of shares of Stock credited to the Participant’s Account Balance may be adjusted by the Committee, in its sole discretion, to prevent dilution or enlargement of Participants’ rights with respect to the portion of his or her Account Balance allocated to the Hormel Foods Corporation Stock Unit Measurement Fund, in the event of any reorganization, reclassification, stock split, or other unusual corporate transaction or event which affects the value of the Stock, provided that any such adjustment shall be made taking into account any crediting of shares of Stock to the Participant under Section 3.10.

(v) For purposes of this Section 3.10(d), the fair market value of the Stock shall be determined by the Committee in its sole discretion.

(e) Proportionate Allocation. In making any election described in Section 3.10(b) above, the Participant shall specify on the Election Form, in increments of one percent (1%), the

percentage of his or her Account Balance to be allocated to a Measurement Fund (as if the Participant was making an investment in that Measurement Fund with that portion of his or her Account Balance).

(f) Crediting or Debiting Method. The performance of each elected Measurement Fund (either positive or negative) will be determined by the Committee, in its reasonable discretion, based on the performance of the Measurement Funds themselves. A Participant’s Account Balance shall be credited or debited on a daily basis based on the performance of each Measurement Fund selected by the Participant, such performance being determined by the Committee in its sole discretion.

(g) No Actual Investment. Notwithstanding any other provision of this Plan that may be interpreted to the contrary, the Measurement Funds are to be used for measurement purposes only, and a Participant’s election of any such Measurement Fund, the allocation to his or her Account Balance thereto, the calculation of additional amounts and the crediting or debiting of such amounts to a Participant’s Account Balance shall not be considered or construed in any manner as an actual investment of his or her Account Balance in any such Measurement Fund. In the event that the Principal Sponsor or the Trustee (as that term is defined in the Trust), in its own discretion, decides to invest funds in any or all of the investments on which the Measurement Funds are based, no Participant shall have any rights in or to such investments themselves. Without limiting the foregoing, a Participant’s Account Balance shall at all times be a bookkeeping entry only and shall not represent any investment made on his or her behalf by the Principal Sponsor or the Trust; the Participant shall at all times remain an unsecured creditor of the Principal Sponsor.

3.11 FICA and Other Taxes.

(a) Annual Deferral Amounts. For each Plan Year in which an Annual Deferral Amount is being withheld from a Participant, the Participant’s Employer(s) shall withhold from that portion of the Participant’s Base Annual Salary, Bonus, LTIP Amounts and/or Operator Share Dividends that are not being deferred, in a manner determined by the Employer(s), the Participant’s share of FICA and other employment taxes on such Annual Deferral Amount. If necessary, the Committee may reduce the Annual Deferral Amount in order to comply with this Section 3.11.

(b) Annual Profit Sharing Amount. When the Participant’s Employer(s) credits an Annual Profit Sharing Amount to a Participant’s Profit Sharing Account, the Participant’s Employer(s) shall withhold from the Participant’s Base Annual Salary, Bonus, LTIP Amounts and/or Operator Share Dividends that are not deferred, in a manner determined by the Employer(s), the Participant’s share of FICA and other employment taxes. If necessary, the Committee may reduce the vested portion of the Participant’s Profit Sharing Account in order to comply with this Section 11.

(c) Discretionary Contribution Account. When a Participant becomes vested in a portion of his or her Discretionary Contribution Account, the Participant’s Employer(s) shall withhold from the Participant’s Base Annual Salary, Bonus, LTIP Amounts and/or

Operator Share Dividends that are not deferred, in a manner determined by the Employer(s), the Participant’s share of FICA and other employment taxes. If necessary, the Committee may reduce the vested portion of the Participant’s Discretionary Contribution Account in order to comply with this Section 3.11.

(d) Annual Restricted Stock Amounts and Annual Stock Option Gain Amounts. For each Plan Year in which an Annual Restricted Stock Amount or Annual Stock Option Gain Amount is being first withheld from a Participant, the Participant’s Employer(s) shall withhold from that portion of the Participant’s Base Annual Salary, Bonus, LTIP Amounts, Operator Share Dividends, Restricted Stock and Qualifying Gains that are not being deferred, in a manner determined by the Employer(s), the Participant’s share of FICA and other employment taxes on such Annual Stock Option Gain Amount or Annual Restricted Stock Amount. If necessary, the Committee may reduce the Annual Stock Option Gain Amount or the Annual Restricted Stock Amount in order to comply with this Section 3.11.

(e) Distributions. The Participant’s Employer(s), or the trustee of the Trust, shall withhold from any payments made to a Participant under this Plan all federal, state and local income, employment and other taxes required to be withheld by the Employer(s), or the trustee of the Trust, in connection with such payments, in amounts and in a manner to be determined in the sole discretion of the Employer(s) and the trustee of the Trust.

ARTICLE 4

Deduction Limitation

4.1 Deduction Limitation on Benefit Payments. If an Employer determines in good faith prior to a Change in Control that there is a reasonable likelihood that any compensation paid to a Participant for a taxable year of the Employer would not be deductible by the Employer solely by reason of the limitation under Code Section 162(m), then to the extent deemed necessary by the Employer to ensure that the entire amount of any distribution to the Participant pursuant to this Plan prior to the Change in Control is deductible, the Employer may defer all or any portion of a distribution under this Plan. Any amounts deferred pursuant to this limitation shall continue to be credited/debited with additional amounts in accordance with Section 3.10 above, even if such amount is being paid out in installments. The amounts so deferred and amounts credited thereon shall be distributed to the Participant or his or her Beneficiary (in the event of the Participant’s death) at the earliest possible date, as determined by the Employer in good faith, on which the deductibility of compensation paid or payable to the Participant for the taxable year of the Employer during which the distribution is made will not be limited by Section 162(m), or if earlier, the effective date of a Change in Control. Notwithstanding anything to the contrary in this Plan, the Deduction Limitation shall not apply to any distributions made after a Change in Control.

ARTICLE 5

In-Service Distribution; Unforeseeable Financial Emergencies;

Withdrawal Election

5.1 In-Service Distribution. In connection with each election to defer an Annual Deferral Amount, a Participant may irrevocably elect to receive an In-Service Distribution from the Plan with respect to all or a portion of (i) the Annual Deferral Amount, (ii) the Annual Discretionary Contribution Amount, and (iii) the Annual Profit Sharing Amount. The In-Service Distribution shall be a lump sum payment in an amount that is equal to the portion of the Annual Deferral Amount, the vested portion of the Annual Discretionary Contribution Amount and the vested portion of the Annual Profit Sharing Amount that the Participant elected to have distributed as an In-Service Distribution, plus amounts credited or debited in the manner provided in Section 3.10 above on that amount, calculated as of the close of business on or around the date on which the In-Service Distribution becomes payable, as determined by the Committee in its sole discretion. Subject to the other terms and conditions of this Plan, each In-Service Distribution elected shall be paid out during a sixty (60) day period commencing immediately after the first day of any Plan Year designated by the Participant. The Plan Year designated by the Participant must be at least three Plan Years after the end of the Plan Year in which the Annual Deferral Amount is actually deferred, or the vested portion of the Annual Discretionary Contribution Amount or Annual Profit Sharing Amount is actually contributed. By way of example, if an In-Service Distribution is elected for Annual Deferral Amounts that are deferred in the Plan Year commencing January 1, 2003, the In-Service Distribution would become payable during a sixty (60) day period commencing January 1, 2007. Notwithstanding the language set forth above, the Committee shall, in its sole discretion, adjust the amount distributable as an In-Service Distribution if any portion of the Annual Discretionary Contribution Amount or Annual Profit Sharing Amount is unvested on the In-Service Distribution Date. A Participant may elect to change to an allowable alternative payout date in accordance with this Section 5.1 by submitting a new Election Form to the Committee, subject to the following:

a. A Participant may only elect to change an In-Service Distribution Date one time;

b. Such Election Form must be submitted to and accepted by the Committee in its sole discretion at least thirteen (13) months prior to both the Participant’s existing In-Service Distribution date and the Participant’s revised In-Service Distribution date;

c. The Participant’s revised In-Service Distribution Date must be later than the Participant’s existing In-Service Distribution Date; and

d. The revised In-Service Distribution date must be at least three Plan Years after the end of the Plan Year in which the Annual Deferral Amount was originally deferred or the vested portion of the Annual Discretionary Contribution Amount or Annual Profit Sharing Amount was originally contributed.

5.2 Other Benefits Take Precedence Over In-Service Distributions. Should an event occur that triggers a benefit under Article 6, 7, 8, 9 or 10, any Annual Deferral Amount, plus amounts credited or debited thereon, that is subject to an In-Service Distribution election under Section 5.1

shall not be paid in accordance with Section 5.1 but shall be paid in accordance with the other applicable Article.

5.3 Withdrawal Payout/Suspensions for Unforeseeable Financial Emergencies. If the Participant experiences an Unforeseeable Financial Emergency, the Participant may petition the Committee (i) to suspend deferrals of Base Annual Salary, Bonus, LTIP Amounts, Operator Share Dividends, Restricted Stock and Qualifying Gains required to be made by such Participant, to the extent deemed necessary by the Committee to satisfy the Unforeseeable Financial Emergency, or (ii) to suspend deferrals of Base Annual Salary, Bonus, LTIP Amounts, Operator Share Dividends, Restricted Stock and Qualifying Gains required to be made by such Participant, to the extent deemed necessary by the Committee to satisfy the Unforeseeable Financial Emergency, and receive a partial or full payout from the Plan. The payout shall not exceed the lesser of the Participant’s vested Account Balance, excluding the portion of the Account Balance attributable to the Restricted Stock Account and the Stock Option Gain Account, calculated as if such Participant were receiving a Termination Benefit, or the amount reasonably needed to satisfy the Unforeseeable Financial Emergency. A Participant may not receive a payout from the Plan to the extent that the Unforeseeable Financial Emergency is or may be relieved (i) through reimbursement or compensation by insurance or otherwise, (ii) by liquidation of the Participant’s assets, to the extent the liquidation of such assets would not itself cause severe financial hardship or (iii) by suspension of deferrals under this Plan.

If the Committee, in its sole discretion, approves a Participant’s petition for suspension, the Participant’s deferrals under this Plan shall be suspended as of the date of such approval. If the Committee, in its sole discretion, approves a Participant’s petition for suspension and payout, the Participant’s deferrals under this Plan shall be suspended as of the date of such approval and the Participant shall receive a payout from the Plan within sixty (60) days of the date of such approval.

5.4 Withdrawal Election. A Participant (or, after a Participant’s death, his or her Beneficiary) may elect, at any time, to withdraw all or a portion of his or her vested Account Balance, excluding the portion of the Account Balance attributable to the Restricted Stock Account and the Stock Option Gain Account. For purposes of this Section 5.4, the value of a Participant’s vested Account Balance shall be calculated as of the close of business on or around the date on which receipt of the Participant’s election is acknowledged by the Committee, as determined by the Committee in its sole discretion, less a withdrawal penalty equal to 10% of the amount withdrawn (the net amount shall be referred to as the “Withdrawal Amount”). This election can be made at any time, before or after Retirement, Termination of Employment, death or Disability, and whether or not the Participant (or Beneficiary) is in the process of being paid pursuant to an installment payment schedule. The Participant (or his or her Beneficiary) shall make this election by giving the Committee advance written notice of the election in a form determined from time to time by the Committee. The Participant (or his or her Beneficiary) shall be paid the Withdrawal Amount within sixty (60) days of his or her election. Once the Withdrawal Amount is paid, the Participant’s participation in the Plan shall be suspended for the remainder of the Plan Year in which the withdrawal is elected and for one (1) full Plan Year thereafter (the “Suspension Period”). During the Suspension Period, the Participant will continue to be eligible for the benefits provided in Articles 5, 6, 7, 8, 9 or 10 in accordance with the provisions of those

Articles, and any previously elected deferrals of Restricted Stock and Qualifying Gains will continue to be withheld. However, the portion of such Participant’s Annual Deferral Amount which is attributable to Base Annual Salary, Bonus, LTIP Amounts and/or Operator Share Dividends shall not be withheld during the Suspension Period, and the Participant shall not be allowed to make any deferral elections during the Suspension Period.

ARTICLE 6

Change in Control Benefit

6.1 Change in Control Benefit. The Participant will receive a Change in Control Benefit, which shall be equal to the Participant’s vested Account Balance, calculated as of the close of business on or around the date of the Change in Control, as selected by the Committee in its sole discretion, if (i) the Participant has elected to receive a Change in Control Benefit, as set forth in Section 6.2 below, and (ii) if a Change in Control occurs prior to the Participant’s Termination of Employment, Retirement, death or Disability.

6.2 Payment of Change in Control Benefit. A Participant, in connection with his or her commencement of participation in the Plan, shall elect on an Election Form whether to (i) receive a Change in Control Benefit, or (ii) have his or her Account Balance remain in the Plan upon the occurrence of a Change in Control and to have his or her Account Balance remain subject to the terms and conditions of the Plan. The Participant may change his or her election by submitting a new Election Form to the Committee, provided that any such Election Form is submitted at least thirteen (13) months prior to the Change in Control and is accepted by the Committee in its sole discretion. The Election Form most recently accepted by the Committee shall govern the payout of the Change in Control Benefit. If a Participant does not make any election with respect to the payment of the Change in Control Benefit, then such Participant’s Account Balance shall remain in the Plan upon a Change in Control and shall be subject to the terms and conditions of the Plan. The Change in Control Benefit, if any, shall be paid to the Participant in a lump sum no later than sixty (60) days after a Change in Control.

ARTICLE 7

Retirement Benefit

7.1 Retirement Benefit. A Participant who Retires shall receive, as a Retirement Benefit, his or her vested Account Balance, calculated as of the close of business on or around the occurrence of the Participant’s Benefit Distribution Date, as determined by the Committee in its sole discretion.

7.2 Payment of Retirement Benefit. A Participant, in connection with his or her commencement of participation in the Plan, shall elect on an Election Form to receive the Retirement Benefit in a lump sum or pursuant to an Installment Method of two to twenty years (24 to 240 months) and shall select a Benefit Distribution Date. The Participant may change his or her election to an allowable alternative Benefit Distribution Date and/or allowable alternative form of payment by submitting a new Election Form to the Committee, provided that any such Election Form is submitted to and accepted by the Committee in its sole discretion at least one (1) year prior to the Participant’s Retirement. The Election Form most recently accepted by the Committee that has

been on file at least one (1) year before Retirement shall govern the payout of the Retirement Benefit. If a Participant does not make any election with respect to the payment of the Retirement Benefit, then such benefit shall be payable in a lump sum on the January 1 immediately following the Participant’s Retirement. The lump sum payment shall be made, or installment payments shall commence, no later than sixty (60) days after the Participant’s Benefit Distribution Date. Remaining monthly installments, if any, shall be paid no later than fifteen (15) days after the last business day of the preceding month. Remaining annual installments, if any, shall be paid no later than sixty (60) days after each anniversary of Participant’s Benefit Distribution Date.

ARTICLE 8

Termination Benefit

8.1 Termination Benefit. A Participant who experiences a Termination of Employment shall receive a Termination Benefit, which shall be equal to the Participant’s vested Account Balance, calculated as of the close of business on or around the occurrence of the Participant’s Benefit Distribution Date, as determined by the Committee in its sole discretion.

8.2 Payment of Termination Benefit. A Participant, in connection with his or her commencement of participation in the Plan, shall select a Benefit Distribution Date. The Termination Benefit shall be paid to the Participant in a lump sum payment no later than sixty (60) days after the Participant’s Benefit Distribution Date. The Participant may change his or her election to an allowable alternative Benefit Distribution Date by submitting a new Election Form to the Committee, provided that any such Election Form is submitted to and accepted by the Committee in its sole discretion at least one (1) year prior to the Participant’s Termination of Employment. The Election Form most recently accepted by the Committee that has been on file at least one (1) year before Termination of Employment shall govern the payout of the Termination Benefit. If a Participant does not make any election with respect to the payment of the Termination Benefit, then such benefit shall be payable in a lump sum on the January 1 immediately following the Participant’s Termination of Employment.

ARTICLE 9

Disability Waiver and Benefit

9.1 Disability Waiver.

(a) Waiver of Deferral. A Participant who is determined to be suffering from a Disability shall continue to be eligible for the benefits provided in Articles 5, 6, 7, 8 or 10 in accordance with the provisions of those Articles, and any previously elected deferrals of Restricted Stock and Qualifying Gains shall continue to be withheld during such Disability in accordance with Section 3.3. However, such Disabled Participant shall be excused from fulfilling that portion of the Annual Deferral Amount commitment that would otherwise have been withheld from a Participant’s Base Annual Salary, Bonus, LTIP Amounts and/or Operator Share Dividends during the remainder of the Plan Year in

which the Participant first suffers the Disability. During the period of Disability, the Participant shall not be allowed to make any additional deferral elections.

(b) Deferral Following Disability. If a Participant returns to employment with an Employer after a Disability ceases, the Participant may elect to defer an Annual Deferral Amount, Annual Restricted Stock Amount and Annual Stock Option Gain Amount for the Plan Year following his or her return to employment and for every Plan Year thereafter while a Participant in the Plan; provided such deferral elections are otherwise allowed and an Election Form is delivered to and accepted by the Committee for each such election in accordance with Section 3.3 above.

9.2 Continued Eligibility; Disability Benefit.

(a) Continued Eligibility. A Participant suffering a Disability shall, for benefit purposes under this Plan, continue to be considered to be employed and shall be eligible for the benefits provided for in Articles 5, 6, 7, 8 or 10 in accordance with the provisions of those Articles. Notwithstanding the above, the Committee shall have the right to, in its sole and absolute discretion and for purposes of this Plan only, deem the Participant’s employment to have terminated at any time after such Participant is determined to be suffering a Disability.

(b) Deemed Termination of Employment. If, in the Committee’s discretion, the Disabled Participant’s employment has terminated, and such Participant is not otherwise eligible to Retire, the Participant shall be deemed to have experienced a Termination of Employment for purposes of this Plan and will receive a Disability Benefit. The Disability Benefit shall be equal to his or her vested Account Balance, calculated as of the close of business on or around the Disabled Participant’s Benefit Distribution Date, as selected by the Participant in accordance with Article 8 and as determined by the Committee, in its sole discretion. The Participant shall receive his or her Disability Benefit in a lump sum payment no later than sixty (60) days after his or her Benefit Distribution Date.

(c) Deemed Retirement. If, in the Committee’s discretion, the Disabled Participant’s employment has terminated, and such Participant is otherwise eligible to Retire, the Participant shall be deemed to have Retired and will receive a Disability Benefit. The Disability Benefit shall be equal to his or her vested Account Balance, calculated as of the close of business on or around the Participant’s Benefit Distribution Date, as selected by the Participant in accordance with Article 7 and as determined by the Committee in its sole discretion. The Participant shall receive his or her Disability Benefit in the same form in which such Participant elected to receive his or her Retirement Benefit. The lump sum payment shall be made, or installment payments shall commence, no later than sixty (60) days after the Disabled Participant’s Benefit Distribution Date. Remaining monthly installments, if any, shall be paid no later than fifteen (15) days after the last business day of the preceding month. Remaining annual installments, if any, shall be paid no later than sixty (60) days after each anniversary of Participant’s Benefit Distribution Date.

ARTICLE 10

Survivor Benefit

10.1 Survivor Benefit. The Participant’s Beneficiary(ies) shall receive a Survivor Benefit upon the Participant’s death which will be equal to (i) the Participant’s vested Account Balance, calculated as of the close of business on or around the date of the Participant’s death, as selected by the Committee in its sole discretion, if the Participant dies prior to his or her Retirement, Termination of Employment or Disability, or (ii) the Participant’s unpaid Retirement Benefit or Disability Benefit, calculated as of the close of business on or around the date of the Participant’s death, as selected by the Committee in its sole discretion, if the Participant dies before his or her Retirement Benefit or Disability Benefit is paid in full.

10.2 Payment of Survivor Benefit. A Participant, in connection with his or her commencement of participation in the Plan, shall elect on an Election Form to have the Survivor Benefit paid to his or her Beneficiary(ies) in a lump sum or pursuant to an Installment Method of two to twenty years (24 to 240 months). If a Participant does not make any election with respect to the payment of the Survivor Benefit, then such benefit shall be payable in a lump sum. The lump sum payment shall be made, or installment payments shall commence, no later than sixty (60) days after the date on which the Committee is provided with proof that is satisfactory to the Committee of the Participant’s death. Remaining monthly installments, if any, shall be paid no later than fifteen (15) days after the last business day of the preceding month. Remaining annual installments, if any, shall be paid no later than sixty (60) days after each anniversary of Participant’s Benefit Distribution Date.

ARTICLE 11

Forfeiture of Benefits

11.1 Forfeiture of Benefits. Notwithstanding any provision in this Plan or a Participant’s Plan Agreement to the contrary, a Participant’s Account Balance shall not be credited or debited in the manner provided in Section 3.10 and no distribution shall be made to a Participant while a Participant engages in the following:

(a) Intentional conduct resulting in material harm to Hormel or an Affiliate; or

(b) In any employment or self-employment with a competitor of Hormel or an Affiliate within the geographical area which is then served by Hormel or an Affiliate during the Participant’s employment or during a period of two (2) years after the termination of the Participant’s employment.

Any dispute arising under or with respect to this Section 11.1 shall be subject to the claims procedure set forth in Article 17.

ARTICLE 12

Beneficiary Designation

12.1 Right to Designate. Each Participant may designate, upon forms to be furnished by and filed with the Committee, one or more primary Beneficiaries or contingent Beneficiaries to receive all or a specified part of such Participant’s Account Balance in the event of such Participant’s death. The Participant may change or revoke any such designation from time to time without notice to or consent from any Beneficiary. No such designation, change or revocation shall be effective unless executed by the Participant and received by the Committee during the Participant’s lifetime.

12.2 Failure of Designation. If a Participant:

(a) Fails to designate a Beneficiary,

(b) Designates a Beneficiary and thereafter revokes such designation without naming another Beneficiary, or

such Participant’s Account Balance, or the part thereof as to which such Participant’s designation fails, as the case may be, shall be payable to the first class of the following classes of automatic Beneficiaries with a member surviving the Participant and (except in the case of surviving issue) in equal shares if there is more than one member in such class surviving the Participant:

Participant’s surviving spouse

Participant’s surviving issue per stirpes and not per capita

Participant’s surviving parents

Participant’s surviving brothers and sisters

Representative of Participant’s estate.

12.3 Disclaimers by Beneficiaries. A Beneficiary entitled to a distribution of all or a portion of a deceased Participant’s Account Balance may disclaim an interest therein subject to the following requirements. To be eligible to disclaim, a Beneficiary must be a natural person, must not have received a distribution of all or any portion of the Account Balance at the time such disclaimer is executed and delivered, and must have attained at least age twenty-one (21) years as of the date of the Participant’s death. Any disclaimer must be in writing and must be executed personally by the Beneficiary before a notary public. A disclaimer shall state that the Beneficiary’s entire interest in the undistributed Account Balance is disclaimed or shall specify what portion thereof is disclaimed. To be effective, duplicate original executed copies of the disclaimer must be both executed and actually delivered to the Committee after the date of the Participant’s death but not later than forty-five (45) days after the date of the Participant’s death. A disclaimer shall be irrevocable when delivered to the Committee. A disclaimer shall be considered to be delivered to the Committee only when actually received by the Committee. The Committee shall be the sole judge of the content, interpretation and validity of a purported disclaimer. Upon the filing of

a valid disclaimer, the Beneficiary shall be considered not to have survived the Participant as to the interest disclaimed. A disclaimer by a Beneficiary shall not be considered to be a transfer of an interest in violation of the provisions in Section 19.4 and shall not be considered to be an assignment or alienation of benefits in violation of federal law prohibiting the assignment or alienation of benefits under this Plan. No other form of attempted disclaimer shall be recognized by the Committee.

12.4 Definitions. When used herein and, unless the Participant has otherwise specified in the Participant’s Beneficiary Designation Form, when used in a Beneficiary designation, “issue” means all persons who are lineal descendants of the person whose issue are referred to, including legally adopted descendants and their descendants but not including illegitimate descendants and their descendants; “child” means an issue of the first generation; “per stirpes” means in equal shares among living children of the person whose issue are referred to and the issue (taken collectively) of each deceased child of such person, with such issue taking by right of representation of such deceased child; and “survive” and “surviving” mean living after the death of the Participant.

12.5 Special Rules. Unless the Participant has otherwise specified in the Participant’s Beneficiary Designation Form, the following rules shall apply:

(a) If there is not sufficient evidence that a Beneficiary was living at the time of the death of the Participant, it shall be deemed that the Beneficiary was not living at the time of the death of the Participant.

(b) The automatic Beneficiaries specified in Section 12.2 and the Beneficiaries designated by the Participant shall become fixed at the time of the Participant’s death so that, if a Beneficiary survives a Participant but dies before receipt of the payment due such Beneficiary hereunder, such payment shall be payable to the representative of such Beneficiary’s estate.

(c) If the Participant designates as a Beneficiary the person who is the Participant’s spouse on the date of the designation, either by name or by relationship, or both, the dissolution, annulment or other legal termination of the marriage between the Participant and such person shall automatically revoke such designation. (The foregoing shall not prevent the Participant from designating a former spouse as a Beneficiary on the Beneficiary Designation Form executed by the Participant and received by the Committee after the date of the legal termination of the marriage between the Participant and such former spouse, and during the Participant’s lifetime.)

(d) Any designation of a nonspouse Beneficiary by name that is accompanied by a description of relationship to the Participant shall be given effect without regard to whether the relationship to the Participant exists either then or at the Participant’s death.

(e) Any designation of a Beneficiary only by statement of relationship to the Participant shall be effective only to designate the person or persons standing in such relationship to the Participant at the Participant’s death.

A Beneficiary designation is permanently void if it either is executed or is filed by a Participant who, at the time of such execution or filing, is then a minor under the law of the state of the Participant’s legal residence. The Committee shall be the sole judge of the content, interpretation and validity of a purported Beneficiary designation.

12.6 No Spousal Rights. No spouse or surviving spouse of a Participant and no person designated to be a Beneficiary shall have any rights to or interest in the benefits accumulated under this Plan including, but not limited to, the right to be the sole Beneficiary or to consent to the designation of Beneficiaries (or the changing of designated Beneficiaries) by the Participant.

12.7 Death Prior to Full Distribution. If, at the death of the Participant, any payment to the Participant was due or otherwise pending but not actually paid, the amount of such payment shall be included in the Account Balance which is payable to the Beneficiary (and shall not be paid to the Participant’s estate).

12.8 Discharge of Obligations. The payment of benefits under the Plan to a Beneficiary shall fully and completely discharge all Employers and the Committee from all further obligations under this Plan with respect to the Participant, and that Participant’s Plan Agreement shall terminate upon such full payment of benefits.

ARTICLE 13

Leave of Absence

13.1 Paid Leave of Absence. If a Participant is authorized by the Participant’s Employer to take a paid leave of absence from the employment of the Employer, (i) the Participant shall continue to be considered eligible for the benefits provided in Articles 5, 6, 7, 8, 9 or 10 in accordance with the provisions of those Articles, and (ii) the Annual Deferral Amount and any previously elected deferrals of Restricted Stock and Qualifying Gains shall continue to be withheld during such paid leave of absence in accordance with Section 3.3.

13.2 Unpaid Leave of Absence. If a Participant is authorized by the Participant’s Employer to take an unpaid leave of absence from the employment of the Employer, such Participant shall continue to be eligible for the benefits provided in Articles 5, 6, 7, 8, 9 or 10 in accordance with the provisions of those Articles, and any previously elected deferrals of Restricted Stock and Qualifying Gains shall continue to be withheld during such unpaid leave of absence in accordance with Section 3.3. However, the Participant shall be excused from fulfilling that portion of the Annual Deferral Amount commitment that would otherwise have been withheld from such Participant’s Base Annual Salary, Bonus, LTIP Amounts and/or Operator Share Dividends during the remainder of the Plan Year in which the unpaid leave of absence is taken. During the unpaid leave of absence, the Participant shall not be allowed to make any additional deferral elections. However, if the Participant returns to employment, the Participant may elect to defer an Annual Deferral Amount, Annual Restricted Stock Amount and Annual Stock Option Gain Amount for the Plan Year following his or her return to employment and for every Plan Year thereafter while a Participant in the Plan.

ARTICLE 14

Termination, Amendment or Modification

14.1 Termination. Although each Employer anticipates that it will continue the Plan for an indefinite period of time, there is no guarantee that any Employer will continue to sponsor the Plan in the future. Accordingly, each Employer reserves the right to discontinue its sponsorship of the Plan at any time with respect to any or all of its participating Employees, by action of its board of directors; provided, however, the Board shall have the sole authority to terminate the Plan at any time. Upon the termination of the Plan with respect to any Employer, the Plan Agreements of the affected Participants who are employed by that Employer shall terminate and their vested Account Balances shall be determined (i) as if they had experienced a Termination of Employment on the date of Plan termination; or (ii) if Plan termination occurs after the date upon which a Participant was eligible to Retire, then with respect to that Participant as if he or she had Retired on the date of Plan termination. Such benefits shall be paid to the Participants as follows: (i) prior to a Change in Control, if the Plan is terminated with respect to all of its Participants, an Employer shall have the right, in its sole discretion, and notwithstanding any elections made by the Participant, to pay such benefits in a lump sum or pursuant to an Installment Method of up to 15 years, with amounts credited and debited during the installment period as provided herein; or (ii) prior to a Change in Control, if the Plan is terminated with respect to less than all of its Participants, an Employer shall be required to pay such benefits in a lump sum; or (iii) after a Change in Control, if the Plan is terminated with respect to some or all of its Participants, the Employer shall be required to pay such benefits in a lump sum. The termination of the Plan shall not adversely affect any Participant or Beneficiary who has become entitled to the payment of any benefits under the Plan as of the date of termination; provided however, that the Employer shall have the right to accelerate installment payments without a premium or prepayment penalty by paying the vested Account Balance in a lump sum or pursuant to an Installment Method using fewer months or years, as the case may be (provided that the present value of all payments that will have been received by a Participant at any given point of time under the different payment schedule shall equal or exceed the present value of all payments that would have been received at that point in time under the original payment schedule).

14.2 Amendment. The Executive Committee of the Principal Sponsor and/or the Compensation Committee of the Board may, at any time, amend or modify the Plan in whole or in part; provided, however, that: (i) no amendment or modification shall be effective to decrease or restrict the value of a Participant’s vested Account Balance in existence at the time the amendment or modification is made, calculated as if the Participant had experienced a Termination of Employment as of the effective date of the amendment or modification or, if the amendment or modification occurs after the date upon which the Participant was eligible to Retire, the Participant had Retired as of the effective date of the amendment or modification, (ii) only the Compensation Committee of the Board shall have the authority to amend or modify any provision of this Plan which affects the Crediting Rate, (iii) no amendment or modification of Section 19.18 shall be effective without the written consent of at least eighty percent (80%) of the Participants determined as of the date of such amendment or modification, and (iv) no amendment or modification of this Section 14.2 or Section 15.2 of the Plan shall be effective. Notwithstanding anything to the contrary contained in this Section 14.2, in the event the

Compensation Committee of the Board determines, in its sole discretion, that any amendment to this Plan or other action by the Executive Committee presents a substantial possibility of a conflict of interest or self-dealing by the officers of the Principal Sponsor, the Compensation Committee of the Board shall assume exclusive authority over that action or amendment. The amendment or modification of the Plan shall not affect any Participant or Beneficiary who has become entitled to the payment of benefits under the Plan as of the date of the amendment or modification; provided, however, that an Employer shall have the right to accelerate installment payments by paying the vested Account Balance in a lump sum or pursuant to an Installment Method using fewer months or years, as the case may be (provided that the present value of all payments that will have been received by a Participant at any given point of time under the different payment schedule shall equal or exceed the present value of all payments that would have been received at that point in time under the original payment schedule).

14.3 Plan Agreement. Despite the provisions of Sections 14.1 and 14.2 above, if a Participant’s Plan Agreement contains benefits or limitations that are not in this Plan document, the Employer may only amend or terminate such provisions with the written consent of the Participant.

14.4 Effect of Payment. The full payment of the Participant’s vested Account Balance under Articles 5, 6, 7, 8, 9 or 10 of the Plan shall completely discharge all obligations to a Participant and his or her designated Beneficiaries under this Plan and the Participant’s Plan Agreement shall terminate.

ARTICLE 15

Administration

15.1 Committee Duties. Except as otherwise provided in this Article 15, this Plan shall be administered by the Executive Committee of the Principal Sponsor or such committee as the Executive Committee shall appoint. Members of the Committee may be Participants under this Plan. The Committee shall also have the discretion and authority to (i) make, amend, interpret, and enforce all appropriate rules and regulations for the administration of this Plan and (ii) decide or resolve any and all questions including interpretations of this Plan, as may arise in connection with the Plan. Any individual serving on the Committee who is a Participant shall not vote or act on any matter relating solely to himself or herself or to any individual superior to himself or herself in the organization. When making a determination or calculation, the Committee shall be entitled to rely on information furnished by a Participant or the Principal Sponsor. In the event the Compensation Committee of the Board determines, in its sole discretion, that any amendment to this Plan or other action by the Executive Committee presents a substantial possibility of a conflict of interest or self-dealing by the officers of the Principal Sponsor, the Compensation Committee of the Board shall assume exclusive authority over that action or amendment.

15.2 Administration Upon Change In Control. For purposes of this Plan, the Committee shall be the “Administrator” at all times prior to the occurrence of a Change in Control. Within one hundred and twenty (120) days following a Change in Control, an independent third party “Administrator” may be selected by the individual who, immediately prior to the Change in Control, was the Principal Sponsor’s Chief Executive Officer or, if not so identified, the

Principal Sponsor’s highest ranking officer (the “Ex-CEO”), and approved by the Trustee. The Committee, as constituted prior to the Change in Control, shall continue to be the Administrator until the earlier of (i) the date on which such independent third party is selected and approved, or (ii) the expiration of the one hundred and twenty (120) day period following the Change in Control. If an independent third party is not selected within one hundred and twenty (120) days of such Change in Control, the Committee, as described in Section 15.1 above, shall be the Administrator. The Administrator shall have the discretionary power to determine all questions arising in connection with the administration of the Plan and the interpretation of the Plan and Trust including, but not limited to benefit entitlement determinations; provided, however, upon and after the occurrence of a Change in Control, the Administrator shall have no power to direct the investment of Plan or Trust assets or select any investment manager or custodial firm for the Plan or Trust. Upon and after the occurrence of a Change in Control, the Principal Sponsor must: (1) pay all reasonable administrative expenses and fees of the Administrator; (2) indemnify the Administrator against any costs, expenses and liabilities including, without limitation, attorney’s fees and expenses arising in connection with the performance of the Administrator hereunder, except with respect to matters resulting from the gross negligence or willful misconduct of the Administrator or its employees or agents; and (3) supply full and timely information to the Administrator on all matters relating to the Plan, the Trust, the Participants and their Beneficiaries, the Account Balances of the Participants, the date and circumstances of the Retirement, Disability, death or Termination of Employment of the Participants, and such other pertinent information as the Administrator may reasonably require. Upon and after a Change in Control, the Administrator may be terminated (and a replacement appointed) by the Trustee only with the approval of the Ex-CEO. Upon and after a Change in Control, the Administrator may not be terminated by the Principal Sponsor.

15.3 Agents. In the administration of this Plan, the Committee may, from time to time, employ agents and delegate to them such administrative duties as it sees fit (including acting through a duly appointed representative) and may from time to time consult with counsel who may be counsel to any Employer.

15.4 Binding Effect of Decisions. The decision or action of the Administrator with respect to any question arising out of or in connection with the administration, interpretation and application of the Plan and the rules and regulations promulgated hereunder shall be final and conclusive and binding upon all persons having any interest in the Plan.

15.5 Indemnity of Committee. All Employers shall indemnify and hold harmless the members of the Committee, any Employee to whom the duties of the Committee may be delegated, and the Administrator against any and all claims, losses, damages, expenses or liabilities arising from any action or failure to act with respect to this Plan, except in the case of willful misconduct by the Committee, any of its members, any such Employee or the Administrator.

15.6 Employer Information. To enable the Committee and/or Administrator to perform its functions, the Principal Sponsor and each Employer shall supply full and timely information to the Committee and/or Administrator, as the case may be, on all matters relating to the compensation of its Participants, the date and circumstances of the Retirement, Disability, death

or Termination of Employment of its Participants, and such other pertinent information as the Committee or Administrator may reasonably require.

ARTICLE 16

Other Benefits and Agreements

16.1 Coordination with Other Benefits. The benefits provided for a Participant and Participant’s Beneficiary under the Plan are in addition to any other benefits available to such Participant under any other plan or program for employees of the Participant’s Employer. The Plan shall supplement and shall not supersede, modify or amend any other such plan or program except as may otherwise be expressly provided.

ARTICLE 17

Claims Procedures

17.1 Presentation of Claim. Any Participant or Beneficiary of a deceased Participant (such Participant or Beneficiary being referred to below as a “Claimant”) may deliver to the Committee a written claim for a determination with respect to the amounts distributable to such Claimant from the Plan. If such a claim relates to the contents of a notice received by the Claimant, the claim must be made within sixty (60) days after such notice was received by the Claimant. All other claims must be made within 180 days of the date on which the event that caused the claim to arise occurred. The claim must state with particularity the determination desired by the Claimant.

17.2 Notification of Decision. The Committee shall consider a Claimant’s claim within a reasonable time, but no later than ninety (90) days after receiving the claim. If the Committee determines that special circumstances require an extension of time for processing the claim, written notice of the extension shall be furnished to the Claimant prior to the termination of the initial ninety (90) day period. In no event shall such extension exceed a period of ninety (90) days from the end of the initial period. The extension notice shall indicate the special circumstances requiring an extension of time and the date by which the Committee expects to render the benefit determination. The Committee shall notify the Claimant in writing:

(a) that the Claimant’s requested determination has been made, and that the claim has been allowed in full; or

(b) that the Committee has reached a conclusion contrary, in whole or in part, to the Claimant’s requested determination, and such notice must set forth in a manner calculated to be understood by the Claimant:

(i) the specific reason(s) for the denial of the claim, or any part of it;

(ii) specific reference(s) to pertinent provisions of the Plan upon which such denial was based;

(iii) a description of any additional material or information necessary for the Claimant to perfect the claim, and an explanation of why such material or information is necessary;

(iv) an explanation of the claim review procedure set forth in Section 17.3 below; and

(v) a statement of the Claimant’s right to bring a civil action under ERISA Section 502(a) following an adverse benefit determination on review.

17.3 Review of a Denied Claim. On or before sixty (60) days after receiving a notice from the Committee that a claim has been denied, in whole or in part, a Claimant (or the Claimant’s duly authorized representative) may file with the Committee a written request for a review of the denial of the claim. The Claimant (or the Claimant’s duly authorized representative):

(a) may, upon request and free of charge, have reasonable access to, and copies of, all documents, records and other information relevant to the claim for benefits;

(b) may submit written comments or other documents; and/or

17.4 Decision on Review. The Committee shall render its decision on review promptly, and no later than sixty (60) days after the Committee receives the Claimant’s written request for a review of the denial of the claim. If the Committee determines that special circumstances require an extension of time for processing the claim, written notice of the extension shall be furnished to the Claimant prior to the termination of the initial sixty (60) day period. In no event shall such extension exceed a period of sixty (60) days from the end of the initial period. The extension notice shall indicate the special circumstances requiring an extension of time and the date by which the Committee expects to render the benefit determination. In rendering its decision, the Committee shall take into account all comments, documents, records and other information submitted by the Claimant relating to the claim, without regard to whether such information was submitted or considered in the initial benefit determination. The decision must be written in a manner calculated to be understood by the Claimant, and it must contain:

(a) specific reasons for the decision;

(b) specific reference(s) to the pertinent Plan provisions upon which the decision was based;

(c) a statement that the Claimant is entitled to receive, upon request and free of charge, reasonable access to and copies of, all documents, records and other information relevant (as defined in applicable ERISA regulations) to the Claimant’s claim for benefits; and

(d) a statement of the Claimant’s right to bring a civil action under ERISA Section 502(a).

17.5 Legal Action. A Claimant’s compliance with the foregoing provisions of this Article 17 is a mandatory prerequisite to a Claimant’s right to commence any legal action with respect to any claim for benefits under this Plan.

ARTICLE 18

Trust

18.1 Establishment of the Trust. In order to provide assets from which to fulfill the obligations of the Participants and their beneficiaries under the Plan, the Principal Sponsor may establish a Trust by a trust agreement with a third party, the trustee, to which each Employer may, in its discretion, contribute cash or other property, including securities issued by the Principal Sponsor, to provide for the benefit payments under the Plan.

18.2 Interrelationship of the Plan and the Trust. The provisions of the Plan and the Plan Agreement shall govern the rights of a Participant to receive distributions pursuant to the Plan. The provisions of the Trust shall govern the rights of the Employers, Participants and the creditors of the Employers to the assets transferred to the Trust. Each Employer shall at all times remain liable to carry out its obligations under the Plan.

18.3 Distributions From the Trust. Each Employer’s obligations under the Plan may be satisfied with Trust assets distributed pursuant to the terms of the Trust, and any such distribution shall reduce the Employer’s obligations under this Plan.

ARTICLE 19

Miscellaneous

19.1 Status of Plan. The Plan is intended to be a plan that is not qualified within the meaning of Code Section 401(a) and that “is unfunded and is maintained by an employer primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees” within the meaning of ERISA Sections 201(2), 301(a)(3) and 401(a)(1). The Plan shall be administered and interpreted to the extent possible in a manner consistent with that intent.

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

19.3 Employer’s Liability. An Employer’s liability for the payment of benefits shall be defined only by the Plan and the Plan Agreement, as entered into between the Employer and a Participant. An Employer shall have no obligation to a Participant under the Plan except as expressly provided in the Plan and his or her Plan Agreement.

19.4 Nonassignability. Neither a Participant nor any other person shall have any right to commute, sell, assign, transfer, pledge, anticipate, mortgage or otherwise encumber, transfer, hypothecate, alienate or convey in advance of actual receipt, the amounts, if any, payable hereunder, or any part thereof, which are, and all rights to which are expressly declared to be, unassignable and non-transferable. No part of the amounts payable shall, prior to actual payment, be subject to seizure, attachment, garnishment or sequestration for the payment of any debts, judgments,

alimony or separate maintenance owed by a Participant or any other person, be transferable by operation of law in the event of a Participant’s or any other person’s bankruptcy or insolvency or be transferable to a spouse as a result of a property settlement or otherwise.

19.5 Not a Contract of Employment. The terms and conditions of this Plan shall not be deemed to constitute a contract of employment between any Employer and the Participant. Such employment is hereby acknowledged to be an “at will” employment relationship that can be terminated at any time for any reason, or no reason, with or without cause, and with or without notice, unless expressly provided in a written employment agreement. Nothing in this Plan shall be deemed to give a Participant the right to be retained in the service of any Employer as an Employee or to interfere with the right of any Employer to discipline or discharge the Participant at any time.

19.6 Furnishing Information. A Participant or his or her Beneficiary will cooperate with the Committee by furnishing any and all information requested by the Committee and take such other actions as may be requested in order to facilitate the administration of the Plan and the payments of benefits hereunder, including but not limited to taking such physical examinations as the Committee may deem necessary.

19.7 Terms. Whenever any words are used herein in the masculine, they shall be construed as though they were in the feminine in all cases where they would so apply; and whenever any words are used herein in the singular or in the plural, they shall be construed as though they were used in the plural or the singular, as the case may be, in all cases where they would so apply.

19.8 Captions. The captions of the articles, sections and paragraphs of this Plan are for convenience only and shall not control or affect the meaning or construction of any of its provisions.

19.9 Governing Law. Subject to ERISA, the provisions of this Plan shall be construed and interpreted according to the internal laws of the State of Minnesota without regard to its conflicts of laws principles.

19.10 Notice. Any notice or filing required or permitted to be given to the Committee under this Plan shall be sufficient if in writing and hand-delivered, or sent by registered or certified mail, to the address below:

Hormel Foods Corporation

Attn: Corporate Secretary

1 Hormel Place

Austin, MN 55912

Such notice shall be deemed given as of the date of delivery or, if delivery is made by mail, as of the date shown on the postmark on the receipt for registration or certification.

Any notice or filing required or permitted to be given to a Participant under this Plan shall be sufficient if in writing and hand-delivered, or sent by mail, to the last known address of the Participant.

19.11 Successors. The provisions of this Plan shall bind and inure to the benefit of the Participant’s Employer and its successors and assigns and the Participant and the Participant’s designated Beneficiaries.

19.12 Spouse’s Interest. The interest in the benefits hereunder of a spouse of a Participant who has predeceased the Participant shall automatically pass to the Participant and shall not be transferable by such spouse in any manner, including but not limited to such spouse’s will, nor shall such interest pass under the laws of intestate succession.

19.13 Validity. In case any provision of this Plan shall be illegal or invalid for any reason, said illegality or invalidity shall not affect the remaining parts hereof, but this Plan shall be construed and enforced as if such illegal or invalid provision had never been inserted herein.

19.14 Incompetent. If the Committee determines in its discretion that a benefit under this Plan is to be paid to a minor, a person declared incompetent or to a person incapable of handling the disposition of that person’s property, the Committee may direct payment of such benefit to the guardian, legal representative or person having the care and custody of such minor, incompetent or incapable person. The Committee may require proof of minority, incompetence, incapacity or guardianship, as it may deem appropriate prior to distribution of the benefit. Any payment of a benefit shall be a payment for the account of the Participant and the Participant’s Beneficiary, as the case may be, and shall be a complete discharge of any liability under the Plan for such payment amount.

19.15 Court Order. The Committee is authorized to make any payments directed by court order in any action in which the Plan or the Committee has been named as a party. In addition, if a court determines that a spouse or former spouse of a Participant has an interest in the Participant’s benefits under the Plan in connection with a property settlement or otherwise, the Committee, in its sole discretion, shall have the right, notwithstanding any election made by a Participant, to immediately distribute the spouse’s or former spouse’s interest in the Participant’s benefits under the Plan to that spouse or former spouse.

19.16 Distribution in the Event of Taxation.

(a) In General. If, for any reason, all or any portion of a Participant’s benefits under this Plan becomes taxable to the Participant prior to receipt, a Participant may petition the Committee before a Change in Control, or the trustee of the Trust after a Change in Control, for a distribution of that portion of his or her benefit that has become taxable. Upon the grant of such a petition, which grant shall not be unreasonably withheld (and, after a Change in Control, shall be granted), a Participant’s Employer shall distribute to the Participant immediately available funds in an amount equal to the taxable portion of his or her benefit (which amount shall not exceed a Participant’s unpaid vested Account Balance under the Plan). If the petition is granted, the tax liability distribution shall be made within 90 days of the date when the Participant’s petition is granted. Such a distribution shall affect and reduce the benefits to be paid under this Plan.

(b) Trust. If the Trust terminates in accordance with its terms and benefits are distributed from the Trust to a Participant in accordance therewith, the Participant’s benefits under this Plan shall be reduced to the extent of such distributions.

19.17 Insurance. The Employers, on their own behalf or on behalf of the trustee of the Trust, and, in their sole discretion, may apply for and procure insurance on the life of the Participant, in such amounts and in such forms as the Trust may choose. The Employers or the trustee of the Trust, as the case may be, shall be the sole owner and beneficiary of any such insurance. The Participant shall have no interest whatsoever in any such policy or policies, and at the request of the Employers shall submit to medical examinations and supply such information and execute such documents as may be required by the insurance company or companies to whom the Employers have applied for insurance.

19.18 Legal Fees To Enforce Rights After Change in Control. The Principal Sponsor and each Employer is aware that upon the occurrence of a Change in Control, the Board or the board of directors of a Participant’s Employer (which might then be composed of new members) or a shareholder of the Principal Sponsor or the Participant’s Employer, or of any successor corporation might then cause or attempt to cause the Principal Sponsor, the Participant’s Employer or such successor to refuse to comply with its obligations under the Plan and might cause or attempt to cause the Principal Sponsor or the Participant’s Employer to institute, or may institute, litigation seeking to deny Participants the benefits intended under the Plan. In these circumstances, the purpose of the Plan could be frustrated. Accordingly, if, following a Change in Control, it should appear to any Participant that the Principal Sponsor, the Participant’s Employer or any successor corporation has failed to comply with any of its obligations under the Plan or any agreement thereunder or, if the Principal Sponsor, such Employer or any other person takes any action to declare the Plan void or unenforceable or institutes any litigation or other legal action designed to deny, diminish or to recover from any Participant the benefits intended to be provided, then the Principal Sponsor and the Participant’s Employer irrevocably authorize such Participant to retain counsel of his or her choice at the expense of the Principal Sponsor and the Participant’s Employer (who shall be jointly and severally liable) to represent such Participant in connection with the initiation or defense of any litigation or other legal action, whether by or against the Principal Sponsor, the Participant’s Employer or any director, officer, shareholder or other person affiliated with the Principal Sponsor, the Participant’s Employer or any successor thereto in any jurisdiction.

IN WITNESS WHEREOF, the Principal Sponsor has signed this Plan document as of November 25, 2002.

	“Principal Sponsor”
	Hormel Foods Corporation, a Delaware corporation


	By:	/s/ MICHAEL J. McCOY
	Title:	Executive Vice President and Chief
		Financial Officer

EX-10.8 6 a2100452zex-10_8.htm EXHIBIT 10.8

EXHIBIT 10.8

FORM OF INDEMNIFICATION AGREEMENT FOR DIRECTORS AND OFFICERS

AGREEMENT

This Agreement, made and entered into this day of , (“Agreement”), by and between Hormel Foods Corporation, a Delaware corporation (“Company”), and (“Indemnitee”):

WHEREAS, highly competent persons have become more reluctant to serve publicly-held corporations as directors or in other capacities unless they are provided with adequate protection through insurance or adequate indemnification against inordinate risks of claims and actions against them arising out of their service to and activities on behalf of the corporation; and

WHEREAS, the Board of Directors of the Company (the “Board”) has determined that, in order to attract and retain qualified individuals, the Company will attempt to maintain on an ongoing basis, at its sole expense, liability insurance to protect persons serving the Company and its subsidiaries from certain liabilities. Although the furnishing of such insurance has been a customary and widespread practice among United States-based corporations and other business enterprises, the Company believes that, given current market conditions and trends, such insurance may be available to it in the future only at higher premiums and with more exclusions. At the same time, directors, officers, and other persons in service to corporations or business enterprises are being increasingly subjected to expensive and time-consuming litigation relating to, among other things, matters that traditionally would have been brought only against the Company or business enterprise itself; and

WHEREAS, the uncertainties relating to such insurance and to indemnification have increased the difficulty of attracting and retaining such persons; and

WHEREAS, the Board has determined that the increased difficulty in attracting and retaining such persons is detrimental to the best interests of the Company’s stockholders and that the Company should act to assure such persons that there will be increased certainty of such protection in the future; and

WHEREAS, it is reasonable, prudent and necessary for the Company contractually to obligate itself to indemnify, and to advance expenses on behalf of, such persons to the fullest extent permitted by applicable law so that they will serve or continue to serve the Company free from undue concern that they will not be so indemnified; and

WHEREAS, this Agreement is a supplement to and in furtherance of the By-laws of the Company and any resolutions adopted pursuant thereto, and shall not be

deemed a substitute therefore, nor to diminish or abrogate any rights of Indemnitee thereunder; and

WHEREAS, each of Section 145 of the General Corporation Law of the State of Delaware and the By-laws is nonexclusive, and therefore contemplates that contracts may be entered into with respect to indemnification of directors, officers and employees; and

WHEREAS, Indemnitee is willing to serve, continue to serve and to take on additional service for or on behalf of the Company on the condition that he be so indemnified;

NOW, THEREFORE, in consideration of the premises and the covenants contained herein, the Company and Indemnitee do hereby covenant and agree as follows:

Section 1. Services by Indemnitee. Indemnitee agrees to serve as a director or officer of the Company, and/or at the request of the Company, as a director or officer of another Enterprise. Indemnitee may at any time and for any reason resign from such position (subject to any other contractual obligation or any obligation imposed by operation of law), in which event the Company shall have no obligation under this Agreement to continue Indemnitee in such position. This Agreement shall not be deemed an employment contract between the Company (or any of its subsidiaries) and Indemnitee. Indemnitee specifically acknowledges that Indemnitee’s employment with the Company (or any of its subsidiaries), if any, is at will, and that Indemnitee may be discharged at any time for any reason, with or without cause, except as may be otherwise provided in any written employment contract between Indemnitee and the Company (or any of its subsidiaries), other applicable formal severance policies duly adopted by the Board, or, with respect to service as a director or officer of the Company, by the Company’s Certificate of Incorporation, the Company’s By-laws, and the General Corporation Law of the State of Delaware. The foregoing notwithstanding, this Agreement shall continue in force after Indemnitee has ceased to serve as an officer or director of the Company.

Section 2. Indemnification - General. The Company shall indemnify, and advance Expenses (as hereinafter defined) to, Indemnitee (a) as provided in this Agreement and (b) (subject to the provisions of this Agreement) to the fullest extent permitted by applicable law in effect on the date hereof and as such law may be amended from time to time. The rights of Indemnitee provided under the preceding sentence shall include, but shall not be limited to, the rights set forth in the other Sections of this Agreement.

Section 3. Proceedings Other Than Proceedings by or in the Right of the Company. Subject to the provisions of this Agreement, Indemnitee shall be entitled to the rights of indemnification provided in this Section 3 if, by reason of his Corporate Status (as hereinafter defined), he is, or is threatened to be made, a party to or a participant in any Proceeding (as hereinafter defined), other than a Proceeding by or in the right of the

Company. Pursuant to this Section 3 and subject to the provisions of this Agreement, Indemnitee shall be indemnified against all Expenses, judgments, penalties, fines and amounts paid in settlement actually and reasonably incurred by him or on his behalf in connection with such Proceeding or any claim, issue or matter therein, if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Company and, with respect to any criminal Proceeding, had no reasonable cause to believe his conduct was unlawful.

Section 4. Proceedings by or in the Right of the Company. Indemnitee shall be entitled to the rights of indemnification provided in this Section 4 but subject to the provisions of this Agreement if, by reason of his Corporate Status, he is, or is threatened to be made, a party to or a participant in any Proceeding brought by or in the right of the Company to procure a judgment in its favor. Pursuant to this Section but subject to the provisions of this Agreement, Indemnitee shall be indemnified against all Expenses actually and reasonably incurred by him or on his behalf in connection with such Proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Company; provided, however, that, if applicable law so provides, no indemnification against such Expenses shall be made in respect of any claim, issue or matter in such Proceeding as to which Indemnitee shall have been adjudged to be liable to the Company unless and to the extent that the Court of Chancery of the State of Delaware, or the court in which such Proceeding shall have been brought or is pending, shall determine that such indemnification may be made.

Section 5. Indemnification for Expenses of a Party Who is Wholly or Partly Successful. Notwithstanding any other provision of this Agreement, to the extent that Indemnitee is, by reason of his Corporate Status, a party to (or a participant in) and is successful, on the merits or otherwise, in defense of any Proceeding (including dismissal without prejudice), he shall be indemnified to the maximum extent permitted by law against all Expenses actually and reasonably incurred by him or on his behalf in connection therewith. If Indemnitee is not wholly successful in defense of such Proceeding but is successful, on the merits or otherwise, as to one or more but less than all claims, issues or matters in such Proceeding, the Company shall indemnify Indemnitee against all Expenses actually and reasonably incurred by him or on his behalf in connection with each successfully resolved claim, issue or matter. For purposes of this Section and without limitation, the termination of any claim, issue or matter in such a Proceeding by dismissal, with or without prejudice, shall be deemed to be a successful result as to such claim, issue or matter.

Section 6. Indemnification for Expenses of a Witness. Notwithstanding any other provision of this Agreement, to the extent that Indemnitee is, by reason of his Corporate Status, a witness in any Proceeding to which Indemnitee is not a party, he shall be indemnified against all Expenses actually and reasonably incurred by him or on his behalf in connection therewith.

Section 7. Advancement of Expenses. Notwithstanding any provision of this Agreement to the contrary, the Company shall advance all reasonable Expenses incurred by or on behalf of Indemnitee in connection with any Proceeding in which Indemnitee is involved by reason of Indemnitee’s Corporate Status within ten days after the receipt by the Company of a statement or statements from Indemnitee requesting such advance or advances from time to time, whether prior to or after final disposition of such Proceeding. Such statement or statements shall reasonably evidence the Expenses incurred by Indemnitee and shall include or be preceded or accompanied by an undertaking by or on behalf of Indemnitee to repay any Expenses advanced if it shall ultimately be determined that Indemnitee is not entitled to be indemnified against such Expenses. Any advances and undertakings to repay pursuant to this Section 7 shall be unsecured and interest free.

Section 8. Procedure for Determination of Entitlement to Indemnification.

(a) To obtain indemnification under this Agreement, Indemnitee shall submit to the Company a written request (to be delivered in accordance with Section 21 hereof to the Secretary of the Company), including therein or therewith such documentation and information as is reasonably available to Indemnitee and is reasonably necessary to determine whether and to what extent Indemnitee is entitled to indemnification. The Secretary of the Company shall, promptly upon receipt of such a request for indemnification, advise the Board in writing that Indemnitee has requested indemnification.

(b) Upon written request by Indemnitee for indemnification pursuant to Section 8(a) hereof, a determination, if required by applicable law, with respect to Indemnitee’s entitlement thereto shall be made in the specific case: (i) if a Change in Control (as hereinafter defined) shall have occurred, by Independent Counsel (as hereinafter defined) in a written opinion to the Board of Directors, a copy of which shall be delivered to Indemnitee; or (ii) if a Change in Control shall not have occurred, (A) by a majority vote of the Disinterested Directors (as hereinafter defined), even though less than a quorum of the Board, or (B) if there are no such Disinterested Directors or, if such Disinterested Directors so direct, by Independent Counsel in a written opinion to the Board, a copy of which shall be delivered to Indemnitee; and, if it is so determined that Indemnitee is entitled to indemnification, payment to Indemnitee shall be made within ten (10) days after such determination. Indemnitee shall cooperate with the person, persons or entity making such determination with respect to Indemnitee’s entitlement to indemnification, including providing to such person, persons or entity upon reasonable advance request any documentation or information which is not privileged or otherwise protected from disclosure and which is reasonably available to Indemnitee and reasonably necessary to such determination. Any costs or expenses (including attorneys’ fees and disbursements) incurred by Indemnitee in so cooperating with the person, persons or entity making such determination shall be borne by the Company (irrespective of the determination as to Indemnitee’s entitlement to indemnification) and the Company hereby indemnifies and agrees to hold Indemnitee harmless therefrom.

(c) In the event the determination of entitlement to indemnification is to be made by Independent Counsel pursuant to Section 8(b) hereof, the Independent Counsel shall be selected as provided in this Section 8(c). If a Change in Control shall not have occurred, the Independent Counsel shall be selected by the Disinterested Directors or, if there are no such Disinterested Directors, by the Board of Directors, and the Company shall give written notice to Indemnitee advising him of the identity of the Independent Counsel so selected. If a Change in Control shall have occurred, the Independent Counsel shall be selected by Indemnitee (unless Indemnitee shall request that such selection be made by the Board of Directors, in which event the preceding sentence shall apply), and Indemnitee shall give written notice to the Company advising it of the identity of the Independent Counsel so selected. In either event, Indemnitee or the Company, as the case may be, may, within 10 days after such written notice of selection shall have been given, deliver to the Company or to Indemnitee, as the case may be, a written objection to such selection; provided, however, that such objection may be asserted only on the ground that the Independent Counsel so selected does not meet the requirements of “Independent Counsel” as defined in Section 17 of this Agreement, and the objection shall set forth with particularity the factual basis of such assertion. Absent a proper and timely objection, the person so selected shall act as Independent Counsel. If such written objection is so made and substantiated, the Independent Counsel so selected may not serve as Independent Counsel unless and until such objection is withdrawn or a court has determined that such objection is without merit. If, within 20 days after submission by Indemnitee of a written request for indemnification pursuant to Section 8(a) hereof, no Independent Counsel shall have been selected and not objected to, either the Company or Indemnitee may petition the Court of Chancery of the State of Delaware or other court of competent jurisdiction for resolution of any objection which shall have been made by the Company or Indemnitee to the other’s selection of Independent Counsel and/or for the appointment as Independent Counsel of a person selected by the Court or by such other person as the Court shall designate, and the person with respect to whom all objections are so resolved or the person so appointed shall act as Independent Counsel under Section 8(b) hereof. Upon the due commencement of any judicial proceeding or arbitration pursuant to Section 10(a) of this Agreement, Independent Counsel shall be discharged and relieved of any further responsibility in such capacity (subject to the applicable standards of professional conduct then prevailing).

(d) The Company shall not be required to obtain the consent of the Indemnitee to the settlement of any Proceeding which the Company has undertaken to defend if the Company assumes full and sole responsibility for such settlement and the settlement grants the Indemnitee a complete and unqualified release in respect of the potential liability. The Company shall not be liable for any amount paid by the Indemnitee in settlement of any Proceeding that is not defended by the Company, unless the Company has consented to such settlement, which consent shall not be unreasonably withheld.

Section 9. Presumptions and Effect of Certain Proceedings.

(a) In making a determination with respect to entitlement to indemnification hereunder, the person or persons or entity making such determination shall presume that Indemnitee is entitled to indemnification under this Agreement if Indemnitee has submitted a request for indemnification in accordance with Section 8(a) of this Agreement, and the Company shall have the burden of proof to overcome that presumption in connection with the making by any person, persons or entity of any determination contrary to that presumption.

(b) If the person or persons empowered or selected under Section 8 of this Agreement to determine whether Indemnitee is entitled to indemnification shall not have made a determination within sixty (60) days after receipt by the Company of the request therefor, the requisite determination of entitlement to indemnification shall be deemed to have been made and Indemnitee shall be entitled to such indemnification, absent (i) a misstatement by Indemnitee of a material fact, or an omission of a material fact necessary to make Indemnitee’s statement not materially misleading, in connection with the request for indemnification, or (ii) a prohibition of such indemnification under applicable law; provided, however, that such 60-day period may be extended for a reasonable time, not to exceed an additional thirty (30) days, if the person or persons making the determination with respect to entitlement to indemnification in good faith requires such additional time for the obtaining or evaluating of documentation and/or information relating thereto; and provided, further, that the foregoing provisions of this Section 9(b) shall not apply if the determination of entitlement to indemnification is to be made by Independent Counsel pursuant to Section 8(b) of this Agreement.

(c) The termination of any Proceeding or of any claim, issue or matter therein, by judgment, order, settlement or conviction, or upon a plea of nolo contendere or its equivalent, shall not (except as otherwise expressly provided in this Agreement) of itself adversely affect the right of Indemnitee to indemnification or create a presumption that Indemnitee did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Company or, with respect to any criminal Proceeding, that Indemnitee had reasonable cause to believe that his conduct was unlawful.

(d) Reliance as Safe Harbor. For purposes of any determination of Good Faith, Indemnitee shall be deemed to have acted in Good Faith if Indemnitee’s action is based on the records or books of account of the Enterprise, including financial statements, or on information supplied to Indemnitee by the officers of the Enterprise in the course of their duties, or on the advice of legal counsel for the Enterprise or on information or records given or reports made to the Enterprise by an independent certified public accountant or by an appraiser or other expert selected with the reasonable care by the Enterprise. The provisions of this Section 9(d) shall not be deemed to be exclusive or

to limit in any way the other circumstances in which the Indemnitee may be deemed to have met the applicable standard of conduct set forth in this Agreement.

(e) Actions of Others. The knowledge and/or actions, or failure to act, of any director, officer, agent or employee of the Enterprise shall not be imputed to Indemnitee for purposes of determining the right to indemnification under this Agreement.

Section 10. Remedies of Indemnitee.

(a) In the event that (i) advancement of Expenses is not timely made pursuant to Section 7 of this Agreement, (ii) no determination of entitlement to indemnification shall have been made pursuant to Section 8(b) of this Agreement within 90 days after receipt by the Company of the request for indemnification, (iii) payment of indemnification is not made pursuant to Section 5, 6, the last sentence of Section 8(b) or the last sentence of Section 17(h) of this Agreement within ten (10) days after receipt by the Company of a written request therefor, or (iv) payment of indemnification pursuant to Section 3 or 4 of this Agreement is not made within ten (10) days after a determination has been made that Indemnitee is entitled to indemnification, Indemnitee shall be entitled to an adjudication by the Court of Chancery of the State of Delaware of his entitlement to such indemnification or advancement of Expenses. Alternatively, in accordance with this Section 10, Indemnitee, at his option, may seek an award in arbitration to be conducted by a single arbitrator pursuant to the Commercial Arbitration Rules of the American Arbitration Association. Indemnitee shall commence such proceeding seeking an adjudication or an award in arbitration within 180 days following the date on which Indemnitee first has the right to commence such proceeding pursuant to this Section 10(a); provided, however, that the foregoing clause shall not apply in respect of a proceeding brought by Indemnitee to enforce his rights under Section 5 of this Agreement. The Company shall not oppose Indemnitee’s right to seek any such adjudication or award in arbitration.

(b) If a determination shall have been made pursuant to Section 8(b) of this Agreement that Indemnitee is entitled to indemnification, the Company shall be bound by such determination in any judicial proceeding or arbitration, commenced pursuant to this Section 10, absent (i) a misstatement by Indemnitee of a material fact, or an omission of a material fact necessary to make Indemnitee’s statement not materially misleading, in connection with the request for indemnification, or (ii) a prohibition of such indemnification under applicable law.

(c) In the event that Indemnitee, pursuant to this Section 10, seeks a judicial adjudication of or an award in arbitration to enforce his rights under, or to recover damages for breach of, this Agreement, Indemnitee shall be entitled to recover from the Company, and shall be indemnified by the Company against, any and all expenses (of the types described in the definition of Expenses in Section 17 of this

Agreement) actually and reasonably incurred by him in such judicial adjudication or arbitration, but only if (and only to the extent) he prevails therein. If it shall be determined in said judicial adjudication or arbitration that Indemnitee is entitled to receive part but not all of the indemnification or advancement of Expenses sought, the expenses incurred by Indemnitee in connection with such judicial adjudication or arbitration shall be appropriately prorated.

(d) The Company shall be precluded from asserting in any judicial proceeding or arbitration commenced pursuant to this Section 10 that the procedures and presumptions of this Agreement are not valid, binding and enforceable and shall stipulate in any such court or before any such arbitrator that the Company is bound by all the provisions of this Agreement.

Section 11. Non-Exclusivity; Survival of Rights; Insurance; Subrogation.

(a) The rights of indemnification and to receive advancement of Expenses as provided by this Agreement shall not be deemed exclusive of any other rights to which Indemnitee may at any time be entitled under applicable law, the Company’s Certificate of Incorporation, the Company’s By-laws, any other agreement, a vote of stockholders or a resolution of directors, or otherwise. No amendment, alteration or repeal of this Agreement or of any provision hereof shall limit or restrict any right of Indemnitee under this Agreement in respect of any action taken or omitted by such Indemnitee in his Corporate Status prior to such amendment, alteration or repeal. To the extent that a change in the General Corporation Law of the State of Delaware, whether by statute or judicial decision, permits greater indemnification or advancement of Expenses than would be afforded currently under the Company’s By-laws and this Agreement, it is the intent of the parties hereto that Indemnitee shall enjoy by this Agreement the greater benefits so afforded by such change. No right or remedy herein conferred is intended to be exclusive of any other right or remedy, and every other right and remedy shall be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other right or remedy.

(b) To the extent that the Company maintains an insurance policy or policies providing liability insurance for directors, officers, employees, or agents of the Company or of any other Enterprise, Indemnitee shall be covered by such policy or policies in accordance with its or their terms to the maximum extent of the coverage available for any such director, officer, employee or agent under such policy or policies.

(c) In the event of any payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who shall execute all papers required and take all action necessary to secure

such rights, including execution of such documents as are necessary to enable the Company to bring suit to enforce such rights.

(d) The Company shall not be liable under this Agreement to make any payment of amounts otherwise indemnifiable (or for which advancement is provided hereunder) hereunder if and to the extent that Indemnitee has otherwise actually received such payment under any insurance policy, contract, agreement or otherwise.

(e) The Company’s obligation to indemnify or advance Expenses hereunder to Indemnitee who is or was serving at the request of the Company as a director, officer, employee or agent of any other Enterprise shall be reduced by any amount Indemnitee has actually received as indemnification or advancement of expenses from such other Enterprise.

Section 12. Duration of Agreement. This Agreement shall continue until and terminate upon the later of: (a) 10 years after the date that Indemnitee shall have ceased to serve as a director or officer of the Company or of any other Enterprise which Indemnitee served at the request of the Company pursuant to this Agreement; or (b) the final termination of any Proceeding then pending in respect of which Indemnitee is granted rights of indemnification or advancement of Expenses hereunder and of any proceeding commenced by Indemnitee pursuant to Section 10 of this Agreement relating thereto. This Agreement shall be binding upon the Company and its successors and assigns and shall inure to the benefit of Indemnitee and his heirs, executors and administrators.

Section 13. Severability. If any provision or provisions of this Agreement shall be held to be invalid, illegal or unenforceable for any reason whatsoever: (a) the validity, legality and enforceability of the remaining provisions of this Agreement (including without limitation, each portion of any Section of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby and shall remain enforceable to the fullest extent permitted by law; (b) such provision or provisions shall be deemed reformed to the extent necessary to conform to applicable law and to give the maximum effect to the intent of the parties hereto; and (c) to the fullest extent possible, the provisions of this Agreement (including, without limitation, each portion of any Section of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested thereby.

Section 14. Exception to Right of Indemnification or Advancement of Expenses. Notwithstanding any other provision of this Agreement, but subject to Section 10(d) hereof, Indemnitee shall not be entitled to indemnification or advancement of Expenses under this Agreement with respect to any Proceeding brought by Indemnitee, or any claim therein, unless the bringing of such Proceeding or making of such claim shall have been approved by the Board of Directors.

Section 15. Identical Counterparts. This Agreement may be executed in one or more counterparts, each of which shall for all purposes be deemed to be an original but all of which together shall constitute one and the same Agreement. Only one such counterpart signed by the party against whom enforceability is sought needs to be produced to evidence the existence of this Agreement.

Section 16. Headings. The headings of the paragraphs of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction thereof.

Section 17. Definitions. For purposes of this Agreement:

(a) “Change in Control” means a change in control of the Company occurring after the Effective Date of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A (or in response to any similar item on any similar schedule or form) promulgated under the Securities Exchange Act of 1934 (the “Act”), whether or not the Company is then subject to such reporting requirement; provided, however, that, without limitation, such a Change in Control shall be deemed to have occurred if after the Effective Date (i) any “person” (as such term is used in Sections 13(d) and 14(d) of the Act) other than (a) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or (b) a corporation owned directly or indirectly by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Act), directly or indirectly, of securities of the Company representing 50% or more of the combined voting power of the Company’s then outstanding securities without the prior approval of at least two-thirds of the members of the Board in office immediately prior to such person attaining such percentage interest; (ii) there occurs a proxy contest, or the Company is a party to a merger, consolidation, sale of assets, plan of liquidation or other reorganization not approved by at least two-thirds of the members of the Board then in office, as a consequence of which members of the Board in office immediately prior to such transaction or event constitute less than a majority of the Board thereafter; or (iii) during any period of two consecutive years, other than as a result of an event described in clause (a)(ii) of this Section 17, individuals who at the beginning of such period constituted the Board (including for this purpose any new director whose election or nomination for election by the Company’s stockholders was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of such period) cease for any reason to constitute at least a majority of the Board.

(b) “Corporate Status” describes the status of a person who is or was a director, officer, employee or agent of the Company or of any other Enterprise.

(c) “Disinterested Director” means a director of the Company who is not and was not a party to the Proceeding in respect of which indemnification is sought by Indemnitee.

(d) “Effective Date” means the date first written above.

(e) “Enterprise” shall mean: (i) the Company and/or any entity in which the Company has an equity interest exceeding five percent (5%); (ii) an employee welfare or benefit plan of the Company and/or of any entity in which the Company has an equity interest exceeding five percent (5%); and/or (iii) any other corporation, entity, partnership, joint venture, trust, employee welfare or benefit plan or other enterprise of which Indemnitee is or was serving at the express written request of the Company (by the Company’s Chief Executive Officer or, in respect of its Chief Executive Officer, by its Executive Vice President) as provided for in this Agreement as a director, officer, employee, agent or fiduciary, except that if the Enterprise is a for profit business in which the Company does not have an equity interest exceeding five percent (5%) then the Indemitee’s service must have been approved by the Executive Committee of the Board of Directors of the Company.

(f) “Expenses” shall include all reasonable attorneys’ fees, retainers, court costs, transcript costs, fees of experts, witness fees, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees, and all other disbursements or expenses of the types customarily incurred in connection with prosecuting, defending, preparing to prosecute or defend, investigating, being or preparing to be a witness in, or otherwise participating in, a Proceeding.

(g) “Good Faith” shall mean Indemnitee having acted in good faith and in a manner Indemnitee reasonably believed to be in or not opposed to the best interests of the Company, and, with respect to any criminal Proceeding, having had no reasonable cause to believe Indemnitee’s conduct was unlawful.

(h) “Independent Counsel” means a law firm, or a member of a law firm, that is among (or is a member of a law firm that is among) the twenty largest law firms in Minneapolis or St. Paul, Minnesota and that is experienced in matters of corporation law and neither presently is, nor in the past five years has been, retained to represent: (i) the Company or Indemnitee in any matter material to either such party (other than with respect to matters concerning the Indemnitee under this Agreement, or of other indemnitees under similar indemnification agreements), or (ii) any other party to the Proceeding giving rise to a claim for indemnification hereunder. Notwithstanding the foregoing, the term “Independent Counsel” shall not include any person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing either the Company or Indemnitee in an action to determine Indemnitee’s rights under this Agreement. The Company agrees to pay the reasonable fees and expenses of the Independent Counsel referred to above and to fully indemnify such

counsel against any and all Expenses, claims, liabilities and damages arising out of or relating to this Agreement or its engagement pursuant hereto.

(i) “Proceeding” includes any threatened, pending or completed action, suit, arbitration, alternate dispute resolution mechanism, investigation, inquiry, administrative hearing or any other actual, threatened or completed proceeding, whether brought by or in the right of the Company or otherwise, including any counterclaims therein, and whether civil, criminal, administrative or investigative, in which Indemnitee was, is or will be involved as a party or otherwise, by reason of the fact that Indemnitee is or was a director or officer of the Company, by reason of any action taken by him or of any inaction on his part while acting as director or officer of the Company, or by reason of the fact that he is or was serving at the request of the Company as a director, officer, employee or agent of another Enterprise, in each case whether or not he is acting or serving in any such capacity at the time any liability or expense is incurred for which indemnification or advancement of expenses can be provided under this Agreement; except one initiated by a Indemnitee pursuant to Section 10 of this Agreement to enforce his rights under this Agreement.

(j) References to “fines” shall include any excise tax assessed with respect to any employee welfare or benefit plan; references to “serving at the request of the Company” shall include any service as a director, officer, employee or agent of the Company which imposes duties on, or involves services by, such director, officer, employee or agent with respect to an employee welfare or benefit plan, other than as participants or beneficiaries; and a person who acted in good faith and in the manner he reasonably believed to be in the interests of the participants and beneficiaries of an employee welfare or benefit plan shall be deemed to have acted in manner “not opposed to the best interest of the Company” as referred to in this Agreement.

Section 18. Enforcement.

(a) The Company expressly confirms and agrees that it has entered into this Agreement and assumed the obligations imposed on it hereby in order to induce Indemnitee to serve as a director or officer of the Company, and the Company acknowledges that Indemnitee is relying upon this Agreement in serving as a director or officer of the Company.

(b) This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and understandings, oral, written and implied, between the parties hereto with respect to the subject matter hereof.

Section 19. Modification and Waiver. No supplement, modification or amendment of this Agreement shall be binding unless executed in writing by both of the parties hereto. No waiver of any of the provisions of this Agreement shall be deemed or

shall constitute a waiver of any other provisions hereof (whether or not similar) nor shall such waiver constitute a continuing waiver.

Section 20. Notice by Indemnitee. Indemnitee agrees promptly to notify the Company in writing upon being served with any summons, citation, subpoena, complaint, indictment, information or other document relating to any Proceeding or matter which may be subject to indemnification or advancement of Expenses covered hereunder. The failure of Indemnitee to so notify the Company shall not relieve the Company of any obligation which it may have to the Indemnitee under this Agreement or otherwise, except to the extent the Company is materially prejudiced by such failure.

Section 21. Notices. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given if (i) delivered by hand and receipted for by the party to whom said notice or other communication shall have been directed, or (ii) mailed by certified or registered mail with postage prepaid, on the third business day after the date on which it is so mailed:

(a) If to Indemnitee, to:

(b) If to the Company, to:

Hormel Foods Corporation
1 Hormel Place
Austin, Minnesota 55912-3680
Attention: Secretary
Fax: 507-437-5135

or to such other address as may have been furnished to Indemnitee by the Company or to the Company by Indemnitee, as the case may be.

Section 22. Contribution. To the fullest extent permissible under applicable law, if the indemnification provided for in this Agreement is unavailable to Indemnitee for any reason whatsoever, the Company, in lieu of indemnifying Indemnitee, shall contribute to the amount incurred by Indemnitee, whether for judgments, fines, penalties, excise taxes, amounts paid or to be paid in settlement and/or for Expenses, in connection with any claim relating to an indemnifiable event under this Agreement, in such proportion as is deemed fair and reasonable in light of all of the circumstances of such Proceeding in order to reflect (i) the relative benefits received by the Company and Indemnitee as a result of the event(s) and/or transaction(s) giving cause to such Proceeding; and/or (ii) the relative fault of the Company (and its directors, officers,

employees and agents) and Indemnitee in connection with such event(s) and/or transaction(s).

Section 23. Governing Law; Submission to Jurisdiction; Appointment of Agent for Service of Process. This Agreement and the legal relations among the parties shall be governed by, and construed and enforced in accordance with, the laws of the State of Delaware, without regard to its conflict of laws rules. Except with respect to any arbitration commenced by Indemnitee pursuant to Section 10(a) of this Agreement, the Company and Indemnitee hereby irrevocably and unconditionally (i) agree that any action or proceeding arising out of or in connection with this Agreement shall be brought only in the Chancery Court of the State of Delaware (the “Delaware Court”), and not in any other state or federal court in the United States of America or any court in any other country, (ii) consent to submit to the exclusive jurisdiction of the Delaware Court for purposes of any action or proceeding arising out of or in connection with this Agreement, (iii) appoint, to the extent such party is not a resident of the State of Delaware, irrevocably RL&F Service Corp., One Rodney Square, 10th Floor, 10th and King Streets, Wilmington, Delaware 19801 as its agent in the State of Delaware as such party’s agent for acceptance of legal process in connection with any such action or proceeding against such party with the same legal force and validity as if served upon such party personally within the State of Delaware, (iv) waive any objection to the laying of venue of any such action or proceeding in the Delaware Court, and (v) waive, and agree not to plead or to make, any claim that any such action or proceeding brought in the Delaware Court has been brought in an improper or otherwise inconvenient forum.

Section 24. Miscellaneous. Use of the masculine pronoun shall be deemed to include usage of the feminine pronoun where appropriate.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day and year first above written.

	HORMEL FOODS CORPORATION

	By:
	Name:
	Title:



	Indemnitee:

EX-13.1 7 a2100452zex-13_1.htm EXHIBIT 13.1

EXHIBIT 13.1

SELECTED PAGES OF 2002 ANNUAL REPORT TO STOCKHOLDERS

Selected Financial Data

(In Thousands, Except Per Share Amounts)	2002			2001			2000			1999			1998*

Operations
Net Sales **	$	3,910,314		$	3,885,244		$	3,473,849		$	3,157,915		$	3,081,075
Net Earnings	189,322			182,441			170,217			163,438			139,291
Percent of Sales	4.84		%	4.70		%	4.90		%	5.18		%	4.52		%
Wage Costs	668,420			617,693			528,746			503,890			498,973
Total Taxes (Excluding Payroll Tax)	118,671			114,589			105,537			100,381			89,816
Depreciation and Amortization	83,238			90,193			65,886			64,656			60,273

Financial Position
Working Capital	$	552,059		$	463,078		$	368,484		$	414,736		$	449,714
Properties (Net)	652,678			679,930			541,549			505,624			486,907
Total Assets	2,220,196			2,162,698			1,641,940			1,685,585			1,555,892
Long-term Debt
Less Current Maturities	409,648			462,407			145,928			184,723			204,874
Shareholders’ Investment	1,115,255			995,881			873,877			841,142			813,315

Per Share of Common Stock
Net Earnings—Basic	1.36			1.32			1.21			1.12			0.93
Net Earnings—Diluted	1.35			1.30			1.20			1.11			0.93
Dividends	0.39			0.37			0.35			0.33			0.32
Shareholders’ Investment	8.06			7.18			6.31			5.89			5.53

*53 Weeks

**Adjusted for estimated impact of EITF 00-14 and 00-25

Per share figures have been restated to give effect for the two-for-one stock split which was approved by the shareholders at the Annual Meeting on January 25, 2000.

Management's Discussion and Analysis of Financial Condition

and Results of Operations (In Thousands of Dollars, Except Per Share Amounts)

Critical Accounting Policies

Hormel Foods discussion and analysis of its financial condition and results of operations are based upon the company’s consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires the company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. The company evaluates, on an on-going basis, its estimates for reasonableness as change occurs in its business environment. The company bases its estimates on experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Critical accounting policies are defined as those that are reflective of significant judgments and uncertainties, and potentially result in materially different results under different assumptions and conditions. Hormel Foods believes its critical accounting policies are limited to those described below:

Inventory valuation: The company values its pork inventories at USDA market prices. When the carcasses are disassembled and transferred from primal processing to various manufacturing departments, the USDA market price, as adjusted by the company for product specifications and further processing, becomes the basis for calculating inventory values. In addition, substantially all inventoriable expenses, packaging and supplies are valued by the LIFO method.

Turkey raw materials are represented by the deboned meat quantities realized at the end of the boning lines. The company values these raw materials using a concept referred to as the “meat cost pool.” The meat cost pool is determined by combining the cost to grow turkeys with processing costs, less any net sales revenue from by-products created from the processing and not used in producing company products. The company has developed a series of ratios using historical data and current market conditions (which themselves involve estimates and judgement determinations by the company) to allocate the meat cost pool to each meat component. In addition, substantially all inventoriable expenses, meat, packaging and supplies are valued by the LIFO method.

Accrued promotional expenses: Accrued promotional expenses are unpaid liabilities for customer promotional programs in process or completed as of the end of the fiscal year. There are two components to these liabilities: promotional contractual accruals and voluntary performance accruals. Promotional programs are based on contracts with customers for defined performance and voluntary promotions funded through customer purchases. Promotional contract accruals are based on a review of the outstanding contracts on which performance has taken place, but the promotional payments relating to such contracts remain unpaid as of the end of the fiscal year. Voluntary performance accruals are based on the historical spend rates by product line. Significant estimates used to determine these liabilities include the level of customer performance and the historical spend rate versus contracted rates.

Employee benefit plans: The company incurs expenses relating to employee benefits such as noncontributory defined benefit pension plans and postretirement health care benefits. In accounting for these employment costs, management must make a variety of assumptions and estimates including mortality rates, discount rates, overall company compensation increases, expected return on plan assets, and health care cost trend rates. The company considers historical data as well as current facts and circumstances when determining these estimates. The company uses third-party specialists to assist management in the determination of these estimates and the calculation of certain employee benefit expenses.

Results of Operations

Overview

The company is a processor of branded and unbranded food products for the retail, foodservice and fresh customer markets. We operate in the following four segments:

Segment 60; Business Conducted

Grocery Products Primarily processing, marketing and sale of shelf-stable food products sold predominately in the retail market.

Refrigerated Foods Primarily processing, marketing and sale of branded and unbranded pork products for the retail, foodservice and fresh customer markets. This segment also includes processing, marketing and sale of nutritionally enhanced food products sold to hospitals, nursing homes and other health facilities. This segment includes the Meat Products and Foodservice business units and the Hormel HealthLabs operating segment.

Jennie-O Turkey Store Primarily processing, marketing and sale of branded and unbranded turkey products for the retail, foodservice and fresh customer markets.

All Other & #160; This segment consists of a variety of smaller, dissimilar business units and miscellaneous corporate sales. These businesses produce, market and sell beef products, food packaging (i.e., casings for dry sausage) and food equipment (sold in fiscal 2001) and manufacture, market and sell company products internationally. This segment includes the operating segments: Dan’s Prize, Inc., Vista International Packaging, Inc., AFECO (sold in fiscal 2001) and Hormel Foods International.

Fiscal Years 2002 and 2001

Fiscal 2002 provided a challenging year for the company particularly since March when a Russian ban on poultry imports, combined with an overall increase in U.S. protein slaughter levels, caused an oversupply of protein inventory in the marketplace. The oversupply of proteins caused pricing pressure on the company’s turkey and pork businesses. However, the company’s continued focus on expanding and growing its value-added, branded product lines, while lessening its percentage of commodity items, reduced the impact the oversupply had on the company’s results.

Consolidated Results

Net Earnings: Net earnings for the fourth quarter of fiscal 2002 were $67,970, a decrease of 1.2 percent compared to earnings of $68,803 for the same period last year. Diluted earnings per share were $.49 and were consistent with the same period last year. Statement of Financial Accounting Standards No. 142 (SFAS 142), adopted by the company effective with the beginning of fiscal 2002, which eliminated the amortization of goodwill and other indefinite-lived assets, would have increased fiscal 2001 fourth quarter net earnings $4,612 or $.03 per diluted share (for more information see Note D “Goodwill and Intangible Assets”).

Net earnings for the year increased 3.8 percent to $189,322 from $182,441 in fiscal 2001. Diluted earnings per share for the same period increased to $1.35 from $1.30 in the prior year. If the company would have applied the guidance of SFAS 142 in fiscal year 2001, net earnings for that period would have increased $12,681 or $.09 per diluted share.

Sales: Net sales for the fourth quarter decreased to $1,038,895 from $1,055,228 in 2001, a decrease of 1.5 percent. Net sales for the twelve months in fiscal 2002 were essentially flat compared to the prior year with 2002 net sales of $3,910,314 compared to $3,885,244 last year. Fiscal year 2001 net sales reflect the reclassification of certain expenses, which were a result of the company’s adoption of guidance from EITF 00-14 and 00-25 in the first quarter of fiscal 2002.

Tonnage volume for the current quarter increased 1.7 percent to 877,469 from 862,556 last year. Tonnage volume for the year increased 1.5 percent to 3,313,010 from 3,263,184 in the prior year.

The flat to lower net sales for the quarter and year compared to the increases in quarter and year tonnage volume illustrates the pricing pressure that arose in fiscal 2002.

Gross Profit: Gross profits were $265,734 and $962,853 for the quarter and year, respectively, compared to $265,319 and $895,907 last year. As a percent of net sales, gross profit increased 0.5 and 1.5 percent for the quarter and year, respectively. Gross profit as a percent of net sales continued to improve as the company maintained its strategy of rolling out additional branded product lines and expanded upon its existing value-added lines. The positive increase in margins also reflected the benefits of a decrease in the cash hog market over last year. However, the benefits of the lower cash market were largely offset by the higher prices paid under the company’s hog procurement contracts.

The company expects gross profit, as a percent of net sales, to increase slightly as protein market conditions improve gradually in future periods. Gross profit should also be enhanced as the company continues to move toward a higher percentage of value-added products; however, increases in certain business costs, the most significant of which will be higher retiree medical costs, will suppress much of these enhancements.

Selling and Delivery: Selling and delivery expenses for the fourth quarter and year were $133,352 and $558,354, respectively, compared to $125,435 and $505,500 last year. As a percent of net sales, selling and delivery expenses were 12.8 and 14.3 percent for the quarter and year, respectively, compared to 11.9 and 13.0 percent in 2001. Increased media and advertising spending in fiscal 2002 contributed significantly to the increase in selling and delivery expense in both the quarter and year comparisons. Selling and delivery expenses also increased over the prior year due to the company’s increased tonnage volume. This had an even larger impact on selling and delivery expense as a percent of net sales because the higher sales tonnage did not translate into higher sales dollars due to the pricing pressures discussed earlier. The company expects these expenses to remain around 14.3 percent of net sales in future periods.

Administrative and General: Administrative and general expenses were $24,421 and $93,990 for the quarter and year, respectively, compared to $26,504 and $90,101 ($22,675 and $76,991—adjusted for SFAS 142) last year. As a percent of net sales, administrative and general expenses for the quarter and year were 2.4 percent compared to 2.5 and 2.3 percent (2.1 and 2.0 percent—adjusted for SFAS 142) for the quarter and year, respectively, in fiscal 2001. The higher twelve-month administrative and general expense was partially due to increased spending on information technology, including higher consulting and internal staffing costs. Higher levels of bad debt that occurred primarily in the first half of the current fiscal year also contributed to the increased full year administrative and general expense.

Research and development expenses for the quarter and year increased to $3,021 and $12,097, respectively, from $2,931 and $11,478 in 2001. Research and development is an integral part of the company’s strategy to extend existing brands and expand its offering of new branded items for the consumer market. Hormel Foods, LLC has responsibility for a majority of the company’s intangible assets. The company expects research and development expenses will continue to increase at a moderate pace in future periods.

Recent stock market results have lowered the historical returns on the company’s pension plan assets. As a result, the company reduced its discount rate and expected rate of return for its calculation of fiscal 2003 pension plan expenses. These rate changes along with the amortization of additional actuarial losses will increase the amount of pension expense that will be recognized in future periods. As a result, the company expects administrative and general expenses, as a percent of sales, to increase to approximately 2.7 percent in fiscal 2003.

Equity in Earnings of Affiliates: Equity in earnings of affiliates was $1,967 and $7,741 for the quarter and year, respectively, compared to $1,480 and $3,498 last year. The twelve-month increase in this earnings line was due to the improved performance of the company’s 49.0 percent owned joint venture, Carapelli USA, LLC. Also performing favorably was the company’s 40.0 percent owned Philippine joint venture, Purefoods-Hormel Company. The company expects both of these entities to continue to improve their operating results in fiscal year 2003. The total equity in earnings of affiliates may decrease in future periods due to the discontinuation of equity-method accounting for the company’s 15.2 percent owned investment in Campofrio Alimentacion, S.A. (Campofrio), effective during the third quarter of fiscal 2002.

In conformity with generally accepted accounting principles, the company accounts for its majority-owned China and Australian operations under the consolidation method. Other international investments, such as Campofrio, Purefoods-Hormel, and Hormel Alimentos, in which the company owns a minority interest, are accounted for under the equity or cost method. These international investments, along with investments in and receivables from other affiliates, are included in the balance sheet line item “investments in and receivables from affiliates.” The composition of this line item at October 26, 2002, was as follows:

Country	Investments/Receivables
United States	$	35,350
Spain	57,563
Philippines	28,712
Mexico	4,930
Costa Rica	667
Total	$	127,222

Income Taxes: The company’s effective tax rate for the quarter and year was 34.9 and 35.6 percent compared to 36.3 and 36.0 percent in fiscal 2001. The effective tax rate decreased compared to the prior year due to the elimination of certain permanent tax and financial differences related to intangible assets resulting from the adoption of SFAS 142. The company expects the effective tax rate to increase in fiscal 2003 to a range of 35.8 to 36.3 percent.

Segment Results

Segmented sales and operating profits for each of the company’s segments is set forth below. Additional segment financial information can be found in Note K of the Notes to Consolidated Financial Statements.

	Fourth Quarter Ended								Year Ended
	October 26, 2002			October 27, 2001			% Change		October 26, 2002			October 27, 2001			% Change
Net Sales*
Grocery Products	$	231,210		$	229,925		0.6		$	787,716		$	770,271		2.3
Refrigerated Foods	515,863			549,399			(6.1	)	2,059,049			2,142,935			(3.9	)
Jennie-O Turkey Store**	253,055			242,682			4.3		881,935			787,307			12.0
All Other	38,767			33,222			16.7		181,614			184,731			(1.7	)
Total	$	1,038,895		$	1,055,228		(1.5	)	$	3,910,314		$	3,885,244		0.6

Segment Profit
Grocery Products	$	64,129		$	57,428		11.7		$	155,002		$	138,264		12.1
Refrigerated Foods	17,744			24,160			(26.6	)	76,189			81,892			(7.0	)
Jennie-O Turkey Store**	19,915			28,851			(31.0	)	68,517			66,033			3.8
All Other	6,529			6,171			5.8		24,816			17,816			39.3
Total segment operating profit	108,317			116,610			(7.1	)	324,524			304,005			6.7
Net interest and investment income	(5,560		)	(6,907		)	19.5		(24,280		)	(18,159		)	(33.7	)
General corporate income (expense)	1,611			(1,776		)	190.7		(6,274		)	(832		)	(654.1	)
Earnings before income taxes	$	104,368		$	107,927		(3.3	)	$	293,970		$	285,014		3.1

*2001 net sales are restated for EITF 00-14 and 00-25.

**The acquisition of The Turkey Store was completed in the second quarter of fiscal year 2001. Financial results for the twelve months ended October 27, 2001, only include eight months of The Turkey Store operations. The above three-month time periods are comparable.

Grocery Products: The Grocery Products segment consists primarily of processing, marketing and sale of shelf-stable food products sold predominately in the retail market.

Grocery Products fourth quarter net sales remained comparable to the previous year (showing a 0.6 percent increase) and increased 2.3 percent for the year compared to fiscal 2001. Sales tonnage volume decreased 1.0 percent for the quarter but finished the year up 2.1 percent compared to year ago results. Operating profit for Grocery Products increased 11.7 percent for the quarter and 12.1 percent for the year compared to fiscal 2001. Lower raw material costs combined with stable pricing continued to result in increased profits for this segment. The company anticipates the lower raw material prices to continue through the first half of fiscal year 2003 and then trend higher for the remainder of the year.

The Grocery Products ethnic category continued to post solid volume gains of 7.5 percent over the prior year with tonnage volume of 84,075,000 in fiscal 2002. The segment’s ethnic category is represented by products such as Chi-Chi’s and Herdez (Mexican), House of Tsang (Asian), Marrakesh Express and Peloponnese (Mediterranean) and Carapelli olive oil (Italian). The strongest performers in the ethnic category were Chi-Chi’s sauces and Carapelli olive oil which increased 3,226,000 lbs. (10.3 percent) and 1,830,000 lbs. (17.7 percent), respectively, compared to twelve month sales volumes of a year ago. The company expects the ethnic category to continue to grow for the foreseeable future based on continued marketing efforts and domestic population trends.

The late third quarter fiscal 2002 introduction of Dinty Moore Classic Bakes dinner kit casseroles also contributed to the increased tonnage volume over the prior year. This product line extension attained a solid fourth quarter sales volume of 6,401,000 lbs.

Refrigerated Foods: The Refrigerated Foods segment consists primarily of processing, marketing and sale of branded and unbranded pork products for the retail, foodservice and fresh customer markets. This segment also includes processing, marketing and sale of nutritionally enhanced food products sold to hospitals, nursing homes and other health facilities. This segment includes the Meat Products and Foodservice business units and the Hormel HealthLabs operating segment.

The Refrigerated Foods segment net sales were down 6.1 percent for the quarter and 3.9 percent for the twelve months compared to fiscal 2001 due mainly to the pricing pressures caused by the oversupply of protein inventory in the marketplace. Segment profit decreased 26.6 and 7.0 percent for the quarter and fiscal year, respectively, compared to the prior year. Sales tonnage increased 2.5 percent for the quarter and decreased 1.7 percent for the year compared to fiscal 2001 results. Slaughter levels increased 42,000 or 2.2 percent for the fourth quarter and were flat for the fiscal year compared to fiscal 2001.

Hormel’s success in enhancing its value-added product lines significantly reduced the impact of the oversupply of proteins in the marketplace. The company’s supplier hog contracts lowered the profits generated by

this segment by about $35,000 for the fourth quarter and $81,000 for the year because prices paid for contracted hogs exceeded the spot cash market. The company expects cash hog prices to remain low into the first half of fiscal 2003.

The Meat Products business unit continued to provide profit growth to the Refrigerated Foods segment as sales of value-added products increase and replace commodity products. Product lines performing particularly well with volume increases over the prior year’s fourth quarter were breakfast meats and fully cooked entrées which increased 2.2 million lbs. (10.0 percent) and 538,000 lbs. (11.5 percent), respectively.

The Foodservice business unit saw the momentum generated in the previous quarter continue through the fourth quarter as overall tonnage increased 10.5 percent over the prior year quarter results. While a portion of this growth can be attributed to soft numbers in 2001, which were the result of weak away from home meal spending due to consumers’ reactions to the September 11 terrorist attacks, the business continued to expand through accelerated growth of new initiatives. Always Tender pork grew 315,000 lbs. (23.7 percent) while Old Smokehouse Applewood smoked bacon and Austin Blues increased 351,000 lbs. (60.5 percent) and 485,000 lbs. (76.0 percent) respectively. Café h products showed progress with sales tonnage up 57,000 lbs. (69.3 percent) from the previous quarter.

The Hormel HealthLabs operating segment sales tonnage volume increased 2.3 and 73.4 percent for the quarter and year, respectively. The quarter results are comparable but the twelve month results for fiscal year 2002 were positively impacted by the acquisition and integration of Diamond Crystal Brands Nutritional Products, which was acquired late in the second quarter of fiscal 2001. Heavy fourth quarter promotional expenses offset volume gains and resulted in lower operating segment profits for the period.

Jennie-O Turkey Store: The Jennie-O Turkey Store (JOTS) segment consists primarily of processing, marketing and sale of branded and unbranded turkey products for the retail, foodservice and fresh customer markets.

JOTS net sales for the quarter and year increased 4.3 and 12.0 percent, respectively, compared to fiscal 2001 periods. Tonnage volume decreased 2.7 percent for the quarter and increased 8.3 percent for the year compared to prior year period results. Segment profit decreased 31.0 percent for the quarter and increased 3.8 percent for the year compared to fiscal 2001. Adjusted for SFAS 142 (see Note D), segment profit for the quarter and year decreased 38.3 and 8.4 percent, respectively, compared to fiscal 2001. Segment profit continues to be negatively impacted by weak commodity meat markets particularly for dark meat and whole birds. The Russian ban on poultry products contributed significantly to the reduced dark meat commodity prices that have been in existence since the second quarter of fiscal 2002. Unless additional trade barriers arise with significant poultry import countries like Russia, the company expects dark meat commodity prices will strengthen in the third quarter of fiscal 2003. The company expects whole bird prices to strengthen in the fourth quarter of fiscal 2003.

The harsh poultry commodity condition throughout much of fiscal 2002 masked some of the achievements in this segment. Net sales dollar growth in excess of tonnage growth, particularly in a year when commodity meat values decreased significantly, is evidence that strides were made in converting the sales mix to a higher proportion of value-added products. The successful integration of The Turkey Store was also apparent as JOTS ranked very high on operating efficiency, compared with its industry peers, in a recent Agrimetrics survey.

Progress made in the transition to more sales of value-added turkey products can be largely attributed to product introductions within the past two years. Products (with their corresponding 2002 revenues) such as Jennie-O Turkey Store marinated tenders ($10.0 million), Cajun fried turkey ($6.4 million) and So Easy entrées ($3.7 million) continue to gain customer acceptance and provide opportunities for growth in future periods.

All Other: This segment consists of a variety of smaller, dissimilar business units and miscellaneous corporate sales. These businesses produce, market and sell beef products, food packaging (i.e., casings for dry sausage) and food equipment and manufacture, market and sell company products internationally. The All Other segment includes the operating segments: Dan’s Prize, Inc., Vista International Packaging, Inc., AFECO and Hormel Foods International (HFI). During the fourth quarter of fiscal 2001, the company sold AFECO, its food equipment manufacturer.

All Other net sales increased 16.7 percent for the quarter and decreased 1.7 percent for the year compared to the comparable fiscal 2001 periods. Operating profit increased 5.8 and 39.3 percent for the quarter and year, respectively, compared to last year. Adjusted for SFAS 142 (see Note D), segment profit remained relatively flat (down 0.6 percent) for the fourth quarter and increased 27.9 percent for the year compared to the prior year. The small decrease in twelve-month net sales is primarily due to the sale of AFECO in the fourth quarter of fiscal 2001. Lower raw material costs for key HFI products, resulting in higher margins, offset the impact of the third quarter, fiscal 2002 discontinuation of equity-method accounting for the Campofrio investment, and contributed to the stronger twelve month segment profit results. Fourth quarter profit comparisons were also impacted by the gain recognized on the fiscal 2001 sale of AFECO.

Vista International Packaging, Inc., the company’s food packaging subsidiary, continued its strong profit gains compared to the prior year’s quarter and twelve-month periods. The increased profitability is a result of improved manufacturing efficiencies and the reduction of overhead.

Dan’s Prize, Inc., marketer and seller of beef products, achieved higher fourth quarter profits primarily because it benefited from lower raw material costs and a recovery in the away from home meal spending compared to last year which was weakened due to consumers’ reactions to the September 11 terrorist attacks.

Unallocated Income and Expenses: The company does not allocate investment income, interest expense and interest income to its segments when measuring performance. The company also retains various other income and unallocated expenses at corporate. These items are included in the segment table for the purpose of reconciling segment results to earnings before income taxes.

Net interest and investment income for the fourth quarter and year was a net expense of $5,560 and $24,280, respectively, compared to $6,907 and $18,159 for the comparable periods of fiscal 2001. The decrease in the current year’s fourth quarter expense is primarily attributable to the May 2002 retirement of the company’s $54,600 euro denominated debt. The twelve-month increase is due to higher debt levels in the first half of the current year compared to the first half of fiscal 2001.

General corporate income for the fourth quarter was $1,611 and general corporate expense for the year was $6,274 compared to quarter and year general corporate expense of $1,776 and $832, respectively, for fiscal 2001. The fourth quarter results of fiscal 2002 improved over the prior fiscal quarter due to discontinuing the amortization of certain intangible assets as a result of the adoption of SFAS 142 (see Note D). The twelve-month increase over the prior year is due to higher levels of bad debt as well as changes in expense allocation methods from the previous year. A larger portion of corporate overhead expenses, which are not directly attributable to a segment, now remain at corporate rather than being allocated to the segments.

Recent stock market results have lowered the historical returns on the company’s pension plan assets. As a result, the company reduced its discount rate and expected rate of return for its calculation of fiscal 2003 pension plan expenses. These rate changes along with the amortization of additional actuarial losses will increase the amount of pension expense that will be recognized in future periods and will negatively impact general corporate expenses.

Fiscal Years 2001 and 2000

Fiscal 2001 was another record-breaking year for Hormel Foods with net sales, tonnage volume and profits all exceeding fiscal 2000 record levels. Fiscal 2001’s successful completion of two of the company’s largest acquisitions ever, The Turkey Store Company (The Turkey Store) and Diamond Crystal Brands Nutritional Products, helped contribute to the record-breaking year. In addition to the growth from acquisitions, the company successfully continued its efforts to grow value-added, branded product lines and reduce the percentage of fresh, commodity items in its product mix.

Consolidated Results

Net earnings for the fourth quarter of fiscal 2001 were $68,803, an increase of 12.8 percent over earnings of $60,979 for the same period in fiscal 2000. Net sales for the quarter increased 10.7 percent to $1,055,228 compared to $953,642 in 2000. Tonnage volume increased 4.3 percent for the quarter compared to 2000.

Net earnings for the year increased 7.2 percent to $182,441 from $170,217 in 2000. Net sales in 2001 increased 11.8 percent to $3,885,244 from $3,473,849 in 2000. Tonnage volume for the year increased 6.2 percent compared to fiscal 2000. Excluding the acquisitions of The Turkey Store and Diamond Crystal Brands Nutritional Products, the company’s tonnage volume decreased 0.7 percent compared to the full year results of fiscal 2000.

The company’s continued emphasis on branded product sales contributed to an increase in annual gross profit as a percent of sales increasing to 23.1 percent from 23.0 percent experienced in fiscal 2000. The positive increase in margins was somewhat dampened by a 5.5 percent increase in the cash hog market over fiscal 2000. The company’s hog procurement contracts performed favorably and reduced the impact of the higher raw material price levels on operating profits.

Selling and delivery expenses for the fourth quarter and year were $125,435 and $505,500, respectively, compared to $115,690 and $470,851 in fiscal 2000. As a percent of sales, selling and delivery expenses were 11.9 and 13.0 percent for the quarter and year, respectively, compared to 12.1 and 13.6 percent in 2000. Selling and delivery expenses increased over 2000 due to increased sales volume.

Administrative and general expenses were $26,504 and $90,101 for the quarter and year, respectively, compared to $15,848 and $65,517 in fiscal 2000. As a percentage of sales, administrative and general expenses for the quarter and year were 2.5 and 2.3 percent compared to 1.7 and 1.9 percent for the same periods in 2000. The increase in 2001 is due to higher levels of research and development spending and intangible amortization relating to the 2001 acquisitions. Lower pension and insurance costs experienced in 2000 also impacted the quarter and year comparisons.

Research and development continues to be an integral part of the company’s strategy to extend existing brands and expand its offering of new branded items for the consumer market. Research and development expenses for the quarter and year were $2,931 and $11,478, respectively, compared to $2,520 and $9,592 for the same periods in 2000. The increase in fiscal 2001 can be attributed to the additional research and development expenses within the Jennie-O Turkey Store operation. Research and development expenses of Hormel Foods, LLC, which has responsibility for a majority of the company’s intangible assets, are included in administrative and general expenses.

In conformity with generally accepted accounting principles, the company accounts for its majority-owned China operations under the consolidation method. Other international investments, such as Campofrio Alimentacion, S.A., Purefoods-Hormel and Hormel Alimentos, in which the company owns a minority interest, are accounted for under the equity method. These international equity investments, along with investments in and receivables from other affiliates, are included in the balance sheet line item “investments in and receivables from affiliates.” The composition of this line item at October 27, 2001, was as follows:

Country	Investments/Receivables
United States	$	33,422
Spain	67,212
Philippines	23,645
Mexico	4,333
Costa Rica	740
Australia	453
Total	$	129,805

Equity in earnings of affiliates was $1,480 and $3,498 for the quarter and year, respectively, compared to $1,546 and $2,463 in fiscal 2000. The increase in this earnings line was due primarily to the improved performance of the Carapelli USA, LLC. This 49.0 percent owned joint venture was formed in fiscal 2000 and experienced significant start-up marketing expenses in its first year. Due to the minority ownership and the foreign origin of some of the entities, the company’s earnings from these investments may fluctuate due to foreign economies, currency fluctuations and non-controlling ownership levels.

The company’s effective tax rate for the quarter and year was 36.3 and 36.0 percent compared to 34.9 and 35.6 percent in fiscal 2000. The effective tax rate increased over 2000 due to permanent differences between tax and financial income as a result of the two large acquisitions completed during the fiscal year.

Segment Results

Segmented sales and operating profits for each of the company’s segments is set forth below.

	Fourth Quarter Ended								Year Ended
	October 27, 2001			October 28, 2000			% Change		October 27, 2001			October 28, 2000		% Change
Net Sales*
Grocery Products	$	229,925		$	215,216		6.8		$	770,271		$	757,418	1.7
Refrigerated Foods	549,399			505,095			8.8		2,142,935			1,965,905		9.0
Jennie-O Turkey Store**	242,682			180,927			34.1		787,307			560,911		40.4
All Other	33,222			52,404			(36.6	)	184,731			189,615		(2.6	)
Total	$	1,055,228		$	953,642		10.7		$	3,885,244		$	3,473,849	11.8

Segment Operating Profit
Grocery Products	$	57,428		$	50,514		13.7		$	138,264		$	142,580	(3.0	)
Refrigerated Foods	24,160			15,608			54.8		81,892			51,581		58.8
Jennie-O Turkey Store**	28,851			14,582			97.9		66,033			37,435		76.4
All Other	6,171			5,534			11.5		17,816			17,155		3.9
Total segment operating profit	116,610			86,238			35.2		304,005			248,751		22.2
Net interest and investment income	(6,907		)	(1,088		)	(534.8	)	(18,159		)	1,298		(1,499.0	)
General corporate income (expense)	(1,776		)	8,538			(120.8	)	(832		)	14,332		(105.8	)
Earnings before income taxes	$	107,927		$	93,688		15.2		$	285,014		$	264,381	7.8

*2000 and 2001 net sales are restated for EITF 00-14 and 00-25.

**The acquisition of The Turkey Store was completed in the second quarter of fiscal year 2001.

Grocery Products: The Grocery Products segment consists primarily of processing, marketing and sale of shelf-stable food products sold predominately in the retail market.

Grocery Products net sales increased 6.8 percent for the quarter and 1.7 percent for the year compared to the comparable fiscal 2000 periods. Sales tonnage volume was up 6.6 percent for the quarter but finished the year essentially flat (showing a 0.6 percent decline) compared to fiscal 2000 results. Operating profit for Grocery Products increased 13.7 percent for the quarter but experienced a 3.0 percent decrease for the year compared to fiscal 2000. Contributing to the stronger results in the fourth quarter was a pronounced move by consumers toward more at-home dining, which accelerated following the September 11, 2001, terrorist attacks.

Market share gains and successful product line extensions, particularly the Hormel chili, Chi-Chi’s salsa, Carapelli olive oil, SPAM Family of products, Mary Kitchen hash and Hormel bacon bits brands, helped this segment finish the year strongly. The solid fourth quarter sales boosted the quarter’s operating profits. Operating segment results for the full year of fiscal 2001 were below those of fiscal 2000 due to higher 2001 costs for raw materials overall, which were up 15.9 percent from fiscal 2000, and heavy Y2K purchasing in the first quarter of fiscal 2000.

Net sales by the Refrigerated Foods segment were up 8.8 percent for the quarter and 9.0 percent for the year compared to the comparable fiscal 2000 periods. Operating profit increased 54.8 and 58.8 percent for the quarter and year, respectively, compared to fiscal 2000’s comparable periods. Sales tonnage decreased 1.1 percent and increased 1.4 percent for the quarter and year, respectively, when compared to fiscal 2000. Strong increases in sales and operating profits with relatively steady volume levels illustrates the company’s progress in moving toward value-added, higher margin products in the Refrigerated Foods segment. This continuing, planned move toward value-added products continues to be the primary influence on the steady growth of operating profit in this segment. The company’s supplier hog contracts helped reduce raw material costs, resulting from higher cash market prices, by contributing about $10,000 to operating results.

The segment’s strong sales and operating profits occurred despite reductions in hog slaughtering levels, which decreased 3.1 percent for the fourth quarter and 2.0 percent for the year compared to the comparable fiscal 2000 periods. The reduced slaughtering levels were the result of a brief labor strike at the Rochelle, Illinois, plant as well as the company’s decision to discontinue the second slaughter shift at the same production facility. Discontinuing the second shift has allowed the company to expand its production of higher margin, value-added products such as bacon, hams and other refrigerated items.

The Meat Products business unit contributed significantly to the strong performance of the Refrigerated Foods segment. Sales of value-added lines such as Always Tender flavored meats, Hormel fully cooked entrées and Hormel lines of premium ham and deli products continue to experience significant gains. Recently introduced Meat Product items such as Hormel Add-Ons brand of deli wafers sliced meats and cheeses and three new poultry-based flavors of Hormel fully cooked entrées also added to the strong growth results.

The Foodservice business unit experienced a challenging second half of the year as the already softening restaurant and out-of-home dining industry was further weakened by consumers’ reactions to the September 11 terrorist attacks. Even with this slowdown and with the general economic slowdown that has affected the Foodservice business unit all year, branded product volume within the Foodservice channel remained on par with levels experienced in fiscal 2000. The Austin Blues and Always Tender product lines continued to have successful brand penetration with double-digit growth over fiscal 2000.

The Hormel HealthLabs operating segment enhanced the overall segment results with the successful integration and operation of the fiscal 2001 acquisitions of Diamond Crystal Brands Nutritional Products and Cliffdale Farms. The operating segment’s gross sales increased 362.4 percent for the quarter and 191.5 percent for the year compared to the comparable fiscal 2000 periods. Excluding the significant acquisition of Diamond Crystal Brands Nutritional Products, gross sales increased 27.4 and 21.4 percent for the quarter and year, respectively, compared to fiscal 2000.

Jennie-O Turkey Store: The Jennie-O Turkey Store segment consists primarily of processing, marketing and sale of branded and unbranded turkey products for the retail, foodservice and fresh customer markets.

Jennie-O Turkey Store net sales increased 34.1 percent for the quarter and 40.4 percent for the year compared to the comparable fiscal 2000 periods. Tonnage volume increased 23.1 and 29.3 percent for the quarter and year, respectively, compared to the comparable fiscal 2000 period results. Operating profit increased 97.9 and 76.4 percent for the quarter and year, respectively, compared to fiscal 2000. The acquisition and subsequent merger of The Turkey Store into this segment has provided a substantial increase to all segment measures. A significant portion of the increase in operating results was due to an enhanced brand portfolio, increased raw material utilization (reducing overall commodity sales) and the elimination of duplicate expenses as well as other synergies realized with the merger of the two operations. The pro forma two-year results of operations for The Turkey Store acquisition, presented in Note B of the Notes to Consolidated Financial Statements, does not reflect these synergies.

Combined tonnage volume for the Jennie-O and The Turkey Store operations was up 1.2 percent for the year compared to the combined operations in fiscal 2000. The small increase was the result of the planned discontinuation of sales that did not meet the company’s profit objectives. The shift to a higher proportion of value-added products helped enhance the segment’s operating results. The company has positioned itself to realize increased future volume growth within the combined Jennie-O Turkey Store value-added processed turkey business.

The introduction of several new value-added products in fiscal 2001 also helped this segment achieve its sales and operating results. Items such as Jennie-O marinated tenders, The Turkey Store Mexican-flavored ground turkey, Jennie-O corn dogs, Jennie-O Cajun fried rotisserie turkey and Jennie-O savory seasoned frozen turkey burgers all reached the market with positive acceptance from the consumer through repeat customer shipments.

All Other net sales decreased 36.6 percent for the quarter and 2.6 percent for the year compared to the comparable fiscal 2000 periods. Operating profit increased 11.5 percent and 3.9 percent for the quarter and year, respectively, compared to fiscal 2000. The timing of some HFI net sales and the sale of the company’s food equipment company (AFECO) negatively impacted the fiscal 2001 fourth quarter net sales results of this segment. Weaker fourth quarter operating results from HFI and Dan’s Prize, Inc., were offset by strong results from Vista International Packaging, Inc., and the gain recognized on the sale of AFECO.

HFI experienced strong tonnage growth as many of the company’s domestic brands continued to gain increased recognition and distribution in world markets. The China joint ventures led the way with volume up 34 percent for the year. However a strong U.S. dollar, impacting export sales margins and results of foreign operations, negatively impacted operating results. Profits from HFI’s Campofrio investment continues to be negatively influenced by high raw material costs in Europe.

Net interest and investment income was a net expense of $18,159 in fiscal year 2001, compared to net income of $1,298 in fiscal 2000. Comparing fourth quarter results, net interest and investment income was a net expense of $6,907 and $1,088 for fiscal 2001 and fiscal 2000, respectively. The expense increases are attributed to increased interest expense, due to higher debt levels, and reduced interest income, due to lower yields on short-term investment securities.

General corporate expense was $1,776 and $832 for the quarter and year, respectively, compared to general corporate income of $8,538 and $14,332 for fiscal 2000. The primary reason for the increased general corporate expense was higher pension and insurance costs over fiscal 2000 as well as increased corporate depreciation and amortization as a result of acquisitions.

Related Party Transactions

In the ordinary course of business, the company purchased 181 hogs (less than 0.003 percent of the company’s fiscal 2002 total hog purchases) at the same prices paid by the company to its other spot market hog suppliers, from Block Farms, a partnership partially owned by Mr. John R. Block, who serves on the company’s Board of Directors.

Certain employees of the company provide administrative services to The Hormel Foundation, which beneficially owns more than five percent of the company’s Common Stock, for which The Hormel Foundation reimburses the company for its fully allocated cost for the employee time expended.

Liquidity and Capital Resources

Selected financial ratios at the end of fiscal years 2002 and 2001 are as follows:

	2002		2001
Liquidity Ratios
Current ratio	2.3		2.1
Receivables turnover	13.4		13.4
Days sales in receivables	25.6		27.3
Inventory turnover	8.3		9.4
Days sales in inventory	43.9		43.4
Leverage Ratio
Long-term debt to equity (including current maturities)	38.0	%	50.4	%
Operating Ratios
Pretax profit to net worth	27.8	%	30.5	%
Pretax profit to total assets	13.4	%	15.0	%

Cash and cash equivalents were $309,563 at the end of fiscal year 2002 compared to $186,276 at the end of fiscal year 2001.

During fiscal 2002, cash provided by operating activities was $326,861 as compared to $320,440 last year. Cash flow from operating activities provides the company with its principal source of liquidity. The company does not anticipate a significant risk to cash flow from this source in the foreseeable future because we operate in a relatively stable industry and have strong products across several product lines.

Cash used in investing activities is down to $60,612 from $506,947 in fiscal year 2001, which included the second quarter 2001 acquisitions of The Turkey Store and Diamond Crystal Brands Nutritional Products for a total of $434,887. Reduced fixed asset expenditures also contributed to lower investment spending in fiscal year 2002. Included in the current quarter’s fixed asset expenditures was a $14.5 million payment for the Dayton, Ohio, distribution center. This facility was previously operated under a synthetic lease agreement. The company estimates its fiscal year 2003 fixed asset expenditures will increase to $80,000.

Cash used in fiscal year 2002 financing activities was $142,962 compared to cash provided by financing activities of $272,137 in 2001. Loan proceeds received in fiscal year 2001, for the purchase of The Turkey Store and Diamond Crystal Brands Nutritional Products businesses, accounted for the large difference from year to year. The company’s debt to equity ratio decreased to 38.0 percent at the end of 2002 compared to 50.4 percent from the comparable period of fiscal 2001. This was primarily due to the company’s retirement of its euro denominated debt in the third quarter of fiscal 2002.

Cash dividends paid to the company’s shareholders continues to be a significant financing activity for the company. Dividends paid in fiscal 2002 were $53,437 compared to $50,623 paid in the previous fiscal year. The company has paid dividends for 297 consecutive quarters and expects to continue doing so in the future.

During the year, the company repurchased 484,537 shares of its common stock at an average price per share of $22.21 under a repurchase plan approved in September 1998. During the fourth quarter, 297,300 shares were repurchased under the plan at an average price per share of $22.36. Total shares purchased under the 10 million share repurchase plan approved in 1998 are 9,943,228 shares. On October 2, 2002, the company announced the approval of the repurchase of up to an additional 10 million shares of its common stock.

The following table outlines the company’s future contractual financial obligations as of October 26, 2002:

	Payments Due by Periods
	Total		Less than 1 year		1-3 years		4-5 years		After 5 years
Hog and turkey commitments	$	2,473,505	$	663,134	$	933,070	$	523,873	$	353,428
Long-term debt	423,468		13,820		29,735		11,846		368,067
Leases	35,678		10,555		15,636		8,113		1,374
Total contractual cash obligations	$	2,932,651	$	687,509	$	978,441	$	543,832	$	722,869

At October 26, 2002, the company had $30,231 in standby letters of credit issued on behalf of the company. The standby letters of credit are almost entirely related to the company’s self-insured workers’ compensation programs.

The company believes its financial resources, including a three-year revolving credit facility for $150 million and anticipated funds from operations will be adequate to meet all current commitments. At the end of fiscal 2002 the company had short-term commitments to expend approximately $34,000 (not included in the above table) to complete construction in progress at various Hormel Foods and Jennie-O Turkey Store locations.

Forward-Looking Statements

This report may contain “forward-looking” information within the meaning of the federal securities laws. The “forward-looking” information may include statements concerning the company’s outlook for the future as well as other statements of beliefs, future plans, strategies or anticipated events and similar expressions concerning matters that are not historical facts. “Forward-looking” statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in, or implied by, the statements. Among the factors that may affect the operating results of the company are the following: (i) fluctuations in the cost and availability of live hogs, raw materials, such as feed grain and supplies; (ii) fluctuations in the costs of live turkey production; (iii) changes in the availability and relative costs of labor; (iv) market conditions for finished products, including the supply and pricing of alternative proteins; (v) effectiveness of advertising and marketing programs; (vi) changes in consumer purchasing behavior; (vii) the ability of the company to successfully integrate newly acquired businesses into existing operations; (viii) risks associated with leverage, including cost increases due to rising interest rates; (ix) changes in domestic or foreign regulations and laws, including changes in accounting standards, environmental laws, occupational, health and safety laws; (x) issues related to food safety, including costs resulting from product recalls, regulatory compliance and any related claims or litigation; (xi) adverse results from ongoing litigation; (xii) access to foreign markets together with foreign economic conditions, including currency fluctuations; and (xiii) the effect of, or changes in, general economic conditions. Please refer to Exhibit 99.1 attached to the company’s Annual Report on Form 10-K for fiscal year ending October 26, 2002, for further information on the company’s position regarding “forward-looking” information.

Quantitative and Qualitative Disclosure about Market Risks

Long-term Debt: A principal market risk affecting the company is the exposure to changes in interest rates on the company’s fixed-rate, long-term debt. Market risk for fixed-rate, long-term debt is estimated as the potential increase in fair value, resulting from a hypothetical 10 percent decrease in interest rates, and amounts to approximately $15,913 at October 26, 2002. The fair values of the company’s long-term debt were estimated using discounted future cash flows based on the company’s incremental borrowing rates for similar types of borrowing arrangements.

International: While the company does have international operations and operates in international markets, it considers its market risk in such activities to be immaterial.

Hog Markets: The company’s earnings are affected by fluctuations in the live hog market. To minimize the impact on earnings, the company has entered into contracts with producers for the purchase of hogs at formula-based prices over periods of up to 15 years. The contract formula is based on hog production costs. Purchased hogs under contract accounted for 75 percent and 72 percent of the total hogs purchased by the company in fiscal years 2002 and 2001, respectively. The contracts reduce volatility in hog prices and ensure a steady supply of quality hogs.

A hypothetical 10 percent change in the cash market would have impacted approximately 25 percent and 28 percent of the hogs purchased in 2002 and 2001, respectively. Under normal market conditions, a 10 percent cash market fluctuation would have a similar variation in commodity values resulting in an immaterial effect on the company’s results.

Unusual market conditions created by the Russian ban on poultry and the excess supply of protein have restrained commodity values since March 2002. During this period, the company has paid a premium above the cash market price for hogs purchased under its procurement contracts. Because of the excess supply of proteins, the company experienced a reduction in margins due to purchases under these procurement contracts.

During this period, the usual correlation of movement between the cash market price for hogs and the commodity value of pork was disrupted. Under these unusual conditions, a 10 percent decrease in the cash market price for hogs would have allowed greater margins and positively affected fourth quarter 2002 earnings after taxes by $1,850. Conversely, a 10 percent increase in the cash market would have raised the cost of the hogs without a corresponding increase in commodity values and negatively affected fourth quarter 2002 earnings after taxes by $1,850.

The company expects the current market conditions will exist throughout the first half of fiscal 2003.

Turkey Markets: The company raises or contracts on a yearly basis for live turkeys. Production costs in raising turkeys are subject to fluctuations in grain prices, particularly corn. To reduce the company’s exposure to changes in corn prices the company implemented a corn-hedging program in the fourth quarter of fiscal 2002. This program utilizes corn futures to offset the fluctuation in the company’s future direct corn purchases. These contracts are accounted for under cash flow hedge accounting, which requires they be reported at fair value. The fair value of the company’s corn futures as of October 26, 2002, was $(2,583).

The company measures its market risk exposure on its October 26, 2002, corn futures contracts using a sensitivity analysis, which considers a hypothetical 10 percent change in the market prices for corn. A 10 percent decrease in the market price for corn would negatively impact the fair value of the company’s open corn contracts by $6,846, which in turn would have lowered the company’s costs on purchased corn by a similar amount.

Responsibility for Financial Statements

The accompanying financial statements were prepared by the management of Hormel Foods Corporation which is responsible for their integrity and objectivity. These statements have been prepared in accordance with generally accepted accounting principles appropriate in the circumstances and, as such, include amounts that are based on our best estimates and judgements.

Hormel Foods Corporation has developed a system of internal controls designed to assure that the records reflect the transactions of the company and that the established policies and procedures are adhered to. This system is augmented by well-communicated written policies and procedures, a strong program of internal audit and well-qualified personnel.

These financial statements have been audited by Ernst & Young LLP, independent auditors, and their report appears on page 39. Their audit is conducted in accordance with generally accepted auditing standards and includes a review of the company’s accounting and financial controls and tests of transactions.

The Audit Committee of the Board of Directors, composed solely of outside directors, meets periodically with the independent auditors, management and the internal auditors to assure that each is carrying out its responsibilities. Both Ernst & Young LLP and our internal auditors have full and free access to the Audit Committee, with or without the presence of management, to discuss the results of their audit work and their opinions on the adequacy of internal controls and the quality of financial reporting.


Joel W. Johnson		Michael J. McCoy
Chairman of the Board, President and Chief Executive Officer		Executive Vice President and Chief Financial Officer

Consolidated Statements of Financial Position

(In Thousands)	October 26, 2002			October 27, 2001

Assets
Current Assets
Cash and cash equivalents	$	309,563		$	186,276
Accounts receivable	275,460			308,115
Inventories	355,638			355,114
Deferred income taxes	7,431			7,341
Prepaid expenses and other current assets	14,078			26,435
Total Current Assets	962,170			883,281
Deferred Income Taxes	6,583			0
Goodwill	310,072			279,225
Other Intangibles	56,224			99,453
Investments and Receivables from Affiliates	127,222			129,805
Other Assets	105,247			91,004
Property, Plant and Equipment
Land	21,709			21,967
Buildings	382,573			377,217
Equipment	852,403			837,496
Construction in progress	46,466			37,416
	1,303,151			1,274,096
Less allowance for depreciation	(650,473		)	(594,166		)
	652,678			679,930
Total Assets	$	2,220,196		$	2,162,698

Liabilities and Shareholders’ Investment
Current Liabilities
Accounts payable	$	174,070		$	171,177
Accrued expenses	34,496			40,515
Accrued marketing expenses	51,739			43,102
Employee compensation	87,897			76,258
Taxes, other than federal income taxes	19,819			16,655
Dividends payable	13,569			12,910
Federal income taxes	14,701			20,552
Current maturities of long-term debt	13,820			39,034
Total Current Liabilities	410,111			420,203
Long-term Debt—less current maturities	409,648			462,407
Accumulated Postretirement Benefit Obligation	253,078			253,607
Other Long-term Liabilities	32,104			30,140
Deferred Income Taxes	0			460
Shareholders’ Investment
Preferred stock, par value $.01 a share—authorized 80,000,000 shares; issued—none
Common stock, nonvoting, par value $.01 a share—authorized 200,000,000 shares; issued—none
Common stock, par value $.0586 a share authorized 400,000,000 shares; issued 138,411,338 shares October 26, 2002 issued 138,663,289 shares October 27, 2001	8,111			8,126
Additional paid-in capital	0			3,143
Accumulated other comprehensive loss	(32,959		)	(25,861		)
Retained earnings	1,140,103			1,010,473
Total Shareholders’ Investment	1,115,255			995,881
Total Liabilities and Shareholders’ Investment	$	2,220,196		$	2,162,698

See notes to consolidated financial statements.

Consolidated Statements of Operations

	Fiscal Year Ended
(In Thousands, Except Per Share Amounts)	October 26, 2002			October 27, 2001			October 28, 2000

Net sales	$	3,910,314		$	3,885,244		$	3,473,849
Cost of products sold	2,947,461			2,989,337			2,674,874
Gross Profit	962,853			895,907			798,975
Expenses:
Selling and delivery	558,354			505,500			470,851
Administrative and general	93,990			90,101			65,517
Total Expenses	652,344			595,601			536,368
Equity in earnings of affiliates	7,741			3,498			2,463
Operating Income	318,250			303,804			265,070
Other income and expense:
Interest and investment income	7,145			9,163			14,217
Interest expense	(31,425		)	(27,953		)	(14,906		)
Earnings Before Income Taxes	293,970			285,014			264,381
Provision for income taxes	104,648			102,573			94,164
Net Earnings	$	189,322		$	182,441		$	170,217

Net Earnings Per Share:
Basic	$	1.36		$	1.32		$	1.21
Diluted	$	1.35		$	1.30		$	1.20

Weighted Average Shares Outstanding:
Basic	138,706			138,710			140,532
Diluted	140,292			140,125			141,523

See notes to consolidated financial statements.

Consolidated Statements of Changes in Shareholders’ Investment

																	Accumulated
											Additional						Other			Total
(In Thousands,	Common Stock					Treasury Stock					Paid-In			Retained			Comprehensive			Shareholders’
Except Per Share Amounts)	Shares		Amount			Shares		Amount			Capital			Earnings			Income (Loss)			Investment

Balance at October 30, 1999	142,725		$	8,364		0		$	0		$	0		$	839,083		$	(6,305	)	$	841,142
Comprehensive income
Net earnings														170,217						170,217
Foreign currency translation																	(6,972		)	(6,972		)
Adjustment in minimum pension liability																	(7,640		)	(7,640		)
Comprehensive income																				155,605
Purchases of common stock						(4,429	)	(77,591		)										(77,591		)
Exercise of stock options						273		4,445						(696		)				3,749
Shares retired	(4,156	)	(244		)	4,156		73,146						(72,902		)				0
Cash dividends—$.35 per share														(49,028		)				(49,028		)
Balance at October 28, 2000	138,569		8,120			0		0			0			886,674			(20,917		)	873,877
Comprehensive income
Net earnings														182,441						182,441
Foreign currency translation																	(4,695		)	(4,695		)
Adjustment in minimum pension liability																	(249		)	(249		)
Comprehensive income																				177,497
Purchases of common stock						(416	)	(9,213		)										(9,213		)
Exercise of stock options	368		22			142		2,738			3,143			(848		)				5,055
Shares retired	(274	)	(16		)	274		6,475						(6,459		)				0
Cash dividends—$.37 per share														(51,335		)				(51,335		)
Balance at October 27, 2001	138,663		8,126			0		0			3,143			1,010,473			(25,861		)	995,881
Comprehensive income
Net earnings														189,322						189,322
Foreign currency translation																	3,822			3,822
Unrealized loss on available-for-sale securities																	(10,609		)	(10,609		)
Deferred loss—hedging																	(2,583		)	(2,583		)
Adjustment in minimum pension liability																	2,272			2,272
Comprehensive income																				182,224
Purchases of common stock						(484	)	$	(10,762	)										(10,762		)
Exercise of stock options	176		10			56		1,251			736			11						2,008
Shares retired	(428	)	(25		)	428		9,511			(3,879		)	(5,607		)				0
Cash dividends—$.39 per share														(54,096		)				(54,096		)
Balance at October 26, 2002	138,411		$	8,111		0		$	0		$	0		$	1,140,103		$	(32,959	)	$	1,115,255

See notes to consolidated financial statements.

Consolidated Statements of Cash Flows

	Fiscal Year Ended
(In Thousands)	October 26, 2002			October 27, 2001			October 28, 2000

Operating Activities
Net earnings	$	189,322		$	182,441		$	170,217
Adjustments to reconcile to net cash provided by operating activities:
Depreciation	82,240			74,546			59,974
Amortization of intangibles	998			15,647			5,912
Equity in earnings of affiliates	(6,799		)	(2,866		)	(476		)
Provision for deferred income taxes	3,052			(1,763		)	7,160
Loss (gain) on property/equipment sales	619			(901		)	360
Changes in operating assets and liabilities net of acquisitions:
Decrease (increase) in accounts receivable	32,655			19,234			(41,673		)
Decrease (increase) in inventories, prepaid expenses and other current assets	9,250			(21,994		)	(11,750		)
Increase (decrease) in accounts payable and accrued expenses	15,524			56,096			(38,420		)
Net cash provided by operating activities	326,861			320,440			151,304
Investing Activities
Sale of held-to-maturity securities	20,000			6,239			84,618
Purchase of held-to-maturity securities	(20,000		)	(275		)	(30,330		)
Acquisitions of businesses	(476		)	(440,036		)	0
Purchases of property/equipment	(64,465		)	(77,129		)	(100,125		)
Proceeds from sales of property/equipment	9,800			6,007			3,866
(Increase) in investments, equity in affiliates and other assets	(7,575		)	(5,102		)	(36,044		)
Dividends from affiliates	2,104			3,349			3,559
Net cash used in investing activities	(60,612		)	(506,947		)	(74,456		)
Financing Activities
Proceeds from long-term debt	3,263			367,494			4,439
Principal payments on long-term debt	(84,504		)	(40,579		)	(43,183		)
Dividends paid on common stock	(53,437		)	(50,623		)	(48,735		)
Share repurchase	(10,762		)	(9,213		)	(75,330		)
Other	2,478			5,058			(1,703		)
Net cash (used in) provided by financing activities	(142,962		)	272,137			(164,512		)
Increase (decrease) in cash and cash equivalents	123,287			85,630			(87,664		)
Cash and cash equivalents at beginning of year	186,276			100,646			188,310
Cash and cash equivalents at end of year	$	309,563		$	186,276		$	100,646

See notes to consolidated financial statements.

Notes to Consolidated Financial Statements (October 26, 2002)

note A

Summary of Significant Accounting Policies

Principles of Consolidation: The consolidated financial statements include the accounts of Hormel Foods Corporation and all of its majority-owned subsidiaries after elimination of all significant intercompany accounts, transactions and profits.

Reclassifications: Certain reclassifications of previously reported amounts have been made to conform to the current year presentation and to conform with recent accounting pronouncements and guidance. The reclassifications had no impact on net earnings as previously reported.

Use of Estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

Fiscal Year: The company’s fiscal year ends on the last Saturday in October. Fiscal years 2002, 2001 and 2000 consisted of 52 weeks.

Cash and Cash Equivalents and Short-term Marketable Securities: The company considers all investments with an original maturity of three months or less on their acquisition date to be cash equivalents. The company classifies investments with an original maturity of more than three months on their acquisition date as short-term marketable securities.

Inventories: Inventories are stated at the lower of cost or market. Livestock and the materials portion of products are valued on the first-in, first-out method with the exception of the materials portion of turkey products that are valued on the last-in, first-out method. Substantially all inventoriable expenses, packages and supplies are valued by the last-in, first-out method.

Property, Plant and Equipment: Property, plant and equipment are stated at cost. The company generally uses the straight-line method in computing depreciation. The annual provisions for depreciation have been computed principally using the following ranges of asset lives: buildings 20 to 40 years, machinery and equipment 5 to 10 years.

Software development and implementation costs are expensed until the company has determined that the software will result in probable future economic benefits, and management has committed to funding the project. Thereafter, all direct, external implementation costs and purchased software costs are capitalized and amortized using the straight-line method over the remaining estimated useful lives, not exceeding five years.

Intangibles: Goodwill and other intangibles are originally recorded at their estimated fair values at date of acquisition. Definite-lived intangibles are amortized over their estimated useful life.

Impairment of Long-lived Assets: The company reviews long-lived assets, including intangibles subject to amortization, for impairment annually or more frequently when events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If impairment indicators are present and the estimated future undiscounted cash flows are less than the carrying value of the assets and any related goodwill, the carrying value is reduced to the estimated fair value as measured by the discounted cash flows.

Foreign Currency Translation: Assets and liabilities denominated in foreign currency are translated at the current exchange rate as of the balance sheet date, and income statement amounts are translated at the average monthly exchange rate. Translation adjustments resulting from fluctuations in exchange rates are recorded as a component of accumulated other comprehensive loss in shareholders’ investment.

Accumulated Other Comprehensive Loss: The components of accumulated other comprehensive loss are as follows:

	October 26,			October 27,
(In Thousands)	2002			2001
Foreign currency translation	$	(13,086	)	$	(16,908	)
Minimum pension liability	(6,681		)	(8,953		)
Unrealized loss on available-for-sale securities	(10,609		)	0
Deferred loss—hedging	(2,583		)	0
Accumulated other comprehensive loss	$	(32,959	)	$	(25,861	)

Derivatives and Hedging Activity: The company uses commodity futures, primarily corn, to minimize its exposure to fluctuations in the commodity market. The commodity futures contracts are recorded at fair value on the balance sheet within prepaid expenses and other current assets. (See Note J.)

Equity Method Investments: The company has a number of investments in joint ventures and other entities where its voting interests are in excess of 20 percent but not greater than 50 percent. The company accounts for such investments under the equity method of accounting, and its underlying share of each investee’s equity is reported in the consolidated balance sheet as part of investments in affiliates.

At the end of the third quarter of fiscal 2002, the company began accounting for its investment in Campofrio Alimentacion, S.A. (Campofrio), a publicly traded company in Spain, using the cost method. Hormel Foods changed its accounting from the equity method and now classifies its holding in Campofrio as “available-for-sale” because its ownership level was reduced below 20 percent due to the company’s election to not participate in a Campofrio equity offering. This investment is recorded at market value with unrealized losses of $10.6 million reflected in accumulated other comprehensive loss. The only material equity method investment is a 40 percent ownership interest in a Philippines joint venture, Purefoods-Hormel Company, which has an October 26, 2002, book value of $28.7 million.

Revenue Recognition: The company conforms to Staff Accounting Bulletin No. 101 (SAB 101), “Revenue Recognition in Financial Statements.” The company recognizes revenue upon delivery to the customer.

Product shipments are supported by purchase orders received from customers that indicate the price for each product and for which collectibility from the customer is reasonably assured.

Advertising Expenses: Advertising costs are expensed when incurred. Advertising expenses include all media advertising but exclude the costs associated with coupons, samples and market research. Advertising costs for fiscal years 2002, 2001 and 2000 were $89.4 million, $ 68.5 million and $ 77.0 million, respectively.

Shipping and Handling Costs: Shipping and handling costs are recorded as selling and delivery expenses. Shipping and handling costs for fiscal years 2002, 2001 and 2000 were $267.1 million, $234.3 million and $210.2 million, respectively.

Research and Development Expenses: Research and development expenses incurred for fiscal years 2002, 2001 and 2000 were $12.1 million, $11.5 million and $9.6 million, respectively. Expenses for research and development are expensed as incurred and are included in administrative and general expenses.

Income Taxes: The company records income taxes in accordance with the liability method of accounting. Deferred taxes are recognized for the estimated taxes ultimately payable or recoverable based on enacted tax law. Changes in enacted tax rates are reflected in the tax provision as they occur.

Employee Stock Options: The company uses the intrinsic value method prescribed by Accounting Principles Board (APB) Opinion No. 25, “Accounting for Stock Issued to Employees” and related interpretations in accounting for employee stock options. Under the intrinsic value method, compensation expense is recognized only to the extent the market price of the common stock exceeds the exercise price of the stock option at the date of the grant.

Earnings Per Share: Basic earnings per share are computed using the weighted-average common shares outstanding. Diluted earnings per share are computed using the weighted-average common shares outstanding after adjusting for potential common shares from stock options. For all years presented, the reported net earnings were used when computing basic and diluted earnings per share. A reconciliation of the shares used in the computation is as follows:

(In Thousands)	2002	2001	2000
Basic weighted-average shares outstanding	138,706	138,710	140,532
Dilutive potential common shares	1,586	1,415	991
Diluted weighted-average shares outstanding	140,292	140,125	141,523

On November 22, 1999, the Hormel Foods Corporation Board of Directors authorized a two-for-one split of the company’s common stock that was approved by the shareholders at the Annual Meeting on January 25, 2000. The calculation of earnings per share in the above table and elsewhere in this Annual Report reflects the impact from this split.

Accounting Changes and Recent Accounting Pronouncements: In June 2001, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standard (SFAS) No. 143, “Accounting for Asset Retirement Obligations.” SFAS 143 addresses accounting for legal obligations associated with the retirement of long-lived assets that result from the acquisition, construction, development or the normal operations of long-lived assets, except for certain obligations of lessees. The company is currently analyzing this statement and plans to adopt its guidance beginning in fiscal year 2003. The company anticipates its adoption will not have a material impact on the company’s financial statements.

In October 2001, the FASB issued SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” which replaces SFAS No. 121, “Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of.” Though SFAS 144 retains the basic guidance of SFAS 121 regarding when and how to measure an impairment loss, it provides additional implementation guidelines. The company will adopt this statement in the first quarter of fiscal year 2003 and does not expect that its adoption will have a material impact on the company’s financial statements.

In June 2002, the FASB issued SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities.” The pronouncement rescinds the guidance of EITF 94-3, “Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in Restructuring).” SFAS 146 requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred. The pronouncement also requires that the liability be measured at fair value. The company will adopt the provisions of SFAS 146 in the first quarter of fiscal year 2003 and does not expect that its adoption will have a material impact on the company’s financial statements.

note B

Acquisitions

On February 24, 2001, the company purchased all of the issued and outstanding capital stock of Jerome Foods, Inc. (d/b/a The Turkey Store Company) through the merger of a wholly owned, special-purchase subsidiary of Hormel Foods with and into Jerome Foods. The Turkey Store Company was a turkey processing business headquartered in Barron, Wisconsin.

On April 27, 2001, the company purchased the assets of Diamond Crystal Brands Nutritional Products (Diamond Crystal). Diamond Crystal, formerly headquartered in Savannah, Georgia, produces a variety of nutritionally enhanced food products.

The Turkey Store Company and Diamond Crystal acquisitions have been recorded using the purchase method of accounting. The final allocations of these purchase prices, including reclassifications for the adoption of SFAS No. 142, are as follows:

	Turkey			Diamond
(In Thousands)	Store			Crystal
Current assets	$	90,347		$	4,425
Goodwill	179,272			48,092
Other intangibles	44,400			13,685
Other assets	694			0
Property, plant and equipment	140,903			35
Current liabilities	(32,540		)	0
Long-term deferred tax liabilities	(54,187		)	0
Purchase price including related costs	$	368,889		$	66,237

The operating results of each acquisition are included in the company’s Consolidated Statement of Operations from the dates of acquisition. Pro forma results of operations are not presented for the Diamond Crystal acquisition, as the effects of this acquisition were not material to the company. The two-year pro forma results of operations for The Turkey Store Company acquisition, assuming consummation of the purchase as of October 31, 1999, are as follows:

	Twelve Months Ended
(Unaudited)	October 27,		October 28,
(In Thousands)	2001		2000
Net sales	$	4,228,366	$	3,995,631
Net earnings	176,963		165,139
Per share data:
Basic earnings	1.28		1.18
Diluted earnings	1.26		1.17

There were no other material acquisitions in 2002, 2001 or 2000.

note C

Inventories

Principal components of inventories are:

	October 26,			October 27,
(In Thousands)	2002			2001
Finished products	$	212,868		$	217,128
Raw materials and work-in-process	106,231			102,802
Materials and supplies	69,257			68,451
LIFO reserve	(32,718		)	(33,267		)
Total	$	355,638		$	355,114

Inventoriable expenses, packages and supplies and turkey products amounting to approximately $97.7 million at October 26, 2002, and $95.8 million at October 27, 2001, are stated at cost determined by the last-in, first-out method and are $32.7 million and $33.3 million lower in the respective years than such inventories determined under the first-in, first-out method.

note D

Goodwill and Intangible Assets

In July 2001, the FASB issued SFAS No. 141, “Business Combinations,” and SFAS No. 142, “Goodwill and Other Intangible Assets.” These statements change the accounting for business combinations, goodwill and intangible assets. SFAS 141 eliminates the pooling-of-interests method of accounting for business combinations and further clarifies the criteria for recognizing intangible assets separate from goodwill. SFAS 142 provides that goodwill and other indefinite-lived intangible assets are no longer amortized but are reviewed annually (or more frequently if impairment indicators arise) for impairment. Separable intangible assets that are deemed to have a definite life will continue to be amortized over their useful lives.

The company has elected to early adopt the provisions of SFAS 141 and 142, and has discontinued the amortization of goodwill and indefinite-lived intangible assets effective with the end of fiscal year 2001. Had the provisions of SFAS 142 been in effect during the fis-cal years ended October 27, 2001 and October 28, 2000, net earnings would have increased by $12.7 million or $.09 per diluted share, and $4.6 million or $.04 per diluted share, respectively.

Carrying amounts, net of accumulated amortization, for other intangibles as of October 26, 2002 and October 27, 2001 were $56.2 million and $99.5 million, respectively, including indefinite-lived intangibles of $51.1 million and $93.1 million, respectively. The decrease in other intangibles was due to $36.8 million of reclassifications to goodwill of certain intangible assets not meeting the criteria for separate recognition under SFAS 142, purchase accounting adjustments of $5.5 million resulting from final appraisals, and $1.0 million of amortization expense. The gross carrying amount and accumulated amortization for definite-lived intangibles was $24.0 million and $18.9 million, respectively on October 26, 2002 and $24.2 million and $17.9 million, respectively on October 27, 2001.

The carrying amount, net of accumulated amortization, for goodwill as of October 26, 2002 and October 27, 2001 was $310.1 million and $279.2 million, respectively. The increase was due to reclassifications of certain intangible assets of $25.9 million ($36.8 million net of deferred taxes) noted above, purchase accounting adjustments of $5.4 million, goodwill acquired in fiscal year 2002 of $0.5 million, and net of $0.9 million goodwill allocated to a product line sold in fiscal year 2002.

During the fourth quarter of fiscal 2002, the company completed the required annual impairment tests of indefinite-lived intangible assets and goodwill with no impairment indicated.

note E

Long-term Debt and Other Borrowing Arrangements

Long-term debt consists of:

	October 26,		October 27,
(In Thousands)	2002		2001
Senior unsecured notes, with interest at 6.625%, interest due semi-annually through 2011	$	350,000	$	350,000
Medium-term unsecured notes, with interest at 7.35%, principal and interest due annually through 2006	42,857		65,238
Variable rate—revolving credit agreements	18,000		14,750
Medium-term secured notes with variable rates, principal and interest due semi-annually through 2006, secured by various equipment	5,956		8,661
Industrial revenue bonds with variable interest rates, due 2005	4,700		4,700
Promissory notes, principal and interest due annually through 2007, interest at 7.23% and 8.9%, secured by limited partnership interests in affordable housing	1,447		1,711
Medium-term unsecured note, denominated in euros, with variable interest rate, paid in 2002	0		23,847
Declining balance credit facility, denominated in euros, with variable interest rate, paid in 2002	0		16,988
Medium-term unsecured note, denominated in euros, with variable interest rate, paid in 2002	0		14,208
Other	508		1,338
	423,468		501,441
Less current maturities	13,820		39,034
Total	$	409,648	$	462,407

At October 26, 2002, current interest rates on outstanding variable rate debt ranged from 2.00% to 5.00%.

The company has various lines of credit, which have a maximum available commitment of $168.0 million. As of October 26, 2002, the company has unused lines of credit of $150.0 million which bear interest at variable rates below prime. A fixed fee is paid for the availability of these credit lines.

Aggregate annual maturities of long-term debt for the five fiscal years after October 26, 2002, are as follows :

(In Thousands)
2003	$	13,820
2004	13,240
2005	16,495
2006	11,462
2007	384

Total interest paid during fiscal 2002, 2001 and 2000 was $31.6 million, $19.2 million and $16.5 million, respectively. Based on borrowing rates currently available to the company for long-term financing with similar terms and average maturities, the fair value of long-term debt, including current maturities, utilizing discounted cash flows, is $464.1 million.

note F

Pension and Other Postretirement Health Care Benefits

The company has several noncontributory defined benefit plans and defined contribution plans covering most employees. Total costs associated with the company’s defined contribution benefit plans in 2002, 2001 and 2000 were $15.8 million, $13.6 million and $11.5 million, respectively. Benefits for defined benefit pension plans covering hourly employees are provided based on stated amounts for each year of service while plan benefits covering salaried employees are based on final average compensation. The company’s funding policy is to make annual contributions of not less than the minimum required by applicable regulations. Actuarial gains and losses and any adjustments resulting from plan amendments are deferred and amortized to expense over periods ranging from 10-14 years.

The company provides medical and life insurance benefits to certain retired employees. Eligible employees who retired prior to January 1, 1987, remain on the medical plan in effect when they retired. The medical plan for eligible employees who retired after January 1, 1987, is automatically modified to incorporate plan benefit and plan provision changes whenever they are made to the active employee plan. Employees hired after January 1, 1990, are eligible for postretirement medical coverage but must pay the full cost of the coverage. Actuarial gains and losses and any adjustments resulting from plan amendments are deferred and amortized to expense over periods ranging from 10-18 years.

The following is a reconciliation of the beginning and ending balances of the benefit obligation and the fair value of plan assets:

	Pension Benefits						Other Benefits
(In Thousands)	2002			2001			2002			2001
Change in benefit obligation:
Benefit obligation at beginning of year	$	527,041		$	500,499		$	301,373		$	281,711
Service cost	11,696			12,220			2,277			2,644
Interest cost	36,898			36,218			20,976			20,359
Plan amendment	782						41,038
Actuarial (gain) loss	(11,114		)	10,969			(10,125		)	18,234
Benefits paid	(34,264		)	(32,865		)	(24,409		)	(21,575		)
Benefit obligation at end of year	531,039			527,041			331,130			301,373
Change in plan assets:
Fair value of plan assets at beginning of year	559,005			554,782
Actual return on plan assets	(35,596		)	36,053
Employer contributions	2,099			1,035
Benefits paid	(34,264		)	(32,865		)
Fair value of plan assets at end of year	491,244			559,005
Funded status	(39,795		)	31,964			(331,130		)	(301,373		)
Unrecognized net transition liability	539			1,342
Unrecognized actuarial loss	82,974			8,809			31,969			43,503
Unrecognized prior service cost	4,734			5,110			39,358			(2,031		)
Benefit payments subsequent to measurement date	293			268			6,725			6,294
Net amount recognized	$	48,745		$	47,493		$	(253,078	)	$	(253,607	)

As of the 2002 valuation date, plan assets included common stock of the company having a market value of $81.9 million. Dividends paid during the year on shares held by the plan were $1.4 million.

Amounts recognized in the consolidated balance sheets as of October 26, 2002 and October 27, 2001, were as follows:

	Pension Benefits						Other Benefits
(In Thousands)	2002			2001			2002			2001
Prepaid benefit cost	$	96,365		$	87,860
Accrued benefit liability	(59,725		)	(57,440		)	$	(259,803	)	$	(259,901	)
Intangible asset	1,197			2,184
Accumulated other comprehensive loss	10,615			14,621
Benefit payments subsequent to measurement date	293			268			6,725			6,294
Net amount recognized	$	48,745		$	47,493		$	(253,078	)	$	(253,607	)

The projected benefit obligation, accumulated benefit obligation and fair value of plan assets for the pension plans with accumulated benefit obligation in excess of plan assets were $64.9 million, $59.7 million and $0, respectively, as of October 26, 2002 and $66.2 million, $57.4 million and $0, respectively, as of October 27, 2001.

Weighted-average assumptions for pension and other benefits were as follows:

	2002		2001		2000
Discount rate	7.00	%	7.25	%	7.50	%
Rate of future compensation increase	5.00	%	5.00	%	5.00	%
Expected long-term return on plan assets	9.50	%	9.50	%	9.50	%

For measurement purposes, an 8% annual rate of increase in the per capita cost of covered health care benefits was assumed for 2003. The rate was assumed to decrease to 5% for 2007 and remain at that level thereafter.

Net periodic cost of defined benefit plans included the following:

	Pension Benefits
(In Thousands)	2002			2001			2000
Service cost	$	11,696		$	12,220		$	10,964
Interest cost	36,898			36,218			35,455
Expected return on plan assets	(51,451		)	(51,075		)	(52,724		)
Amortization of transition obligation	803			802			803
Amortization of prior service cost	1,158			1,440			1,440
Recognized actuarial loss (gain)	1,768			875			(803		)
Net periodic cost (benefit)	$	872		$	480		$	(4,865	)

	Other Benefits
(In Thousands)	2002			2001			2000
Service cost	$	2,277		$	2,644		$	2,229
Interest cost	20,976			20,359			19,284
Amortization of prior service cost	(351		)	(351		)	(352		)
Recognized actuarial loss (gain)	1,409			1,372			56
Net periodic cost (benefit)	$	24,311		$	24,024		$	21,217

Assumed health care cost trend rates have a significant impact on the amounts reported for the health care plan. A one-percentage-point change in assumed health care cost trend rates would have the following effects:

	1-Percentage-Point
(In Thousands)	Increase		Decrease
Effect on total of service and interest cost components	$	824	$	(768	)
Effect on the postretirement benefit obligation	12,417		(11,591		)

note G

Income Taxes

The components of the provision for income taxes are as follows:

(In Thousands)	2002		2001			2000
Current:
U.S. Federal	$	91,590	$	94,381		$	78,384
State	9,798		9,579			8,226
Foreign	208		376			394
Total current	101,596		104,336			87,004
Deferred:
U.S. Federal	2,882		(1,590		)	6,464
State	170		(173		)	696
Total deferred	3,052		(1,763		)	7,160
Total provision for income taxes	$	104,648	$	102,573		$	94,164

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The change in the amount of book/tax basis difference from acquisition reflects the reclassification of amounts relating to intangible assets as disclosed in Note D. The company believes that, based upon its lengthy and consistent history of profitable operations, it is probable that the net deferred tax assets of $14.0 million will be realized on future tax returns, primarily from the generation of future taxable income. Significant components of the deferred income tax liabilities and assets are as follows:

	October 26,			October 27,
(In Thousands)	2002			2001
Deferred tax liabilities:
Tax over book depreciation	$	(35,834	)	$	(34,258	)
Prepaid pension	(35,713		)	(34,063		)
Book/tax basis difference from acquisition	(36,295		)	(59,753		)
Other, net	(33,594		)	(22,967		)
Deferred tax assets:
Vacation accrual	5,508			5,431
Insurance accruals	5,320			5,756
Deferred compensation	11,170			10,971
Postretirement benefits	93,791			98,324
Pension accrual	12,675			11,939
Supplemental pension accrual	5,013			3,745
Other, net	21,973			21,756
Net deferred tax assets	$	14,014		$	6,881

Reconciliation of the statutory federal income tax rate to the company’s effective tax rate is as follows:

	2002		2001		2000
U.S. statutory rate	35.0	%	35.0	%	35.0	%
State taxes on income, net of federal tax benefit	2.2		2.2		2.2
All other, net	(1.6	)	(1.2	)	(1.6	)
Effective tax rate	35.6	%	36.0	%	35.6	%

Total income taxes paid during fiscal 2002, 2001 and 2000 were $101.3 million, $81.9 million and $98.1 million, respectively.

note H

Commitments and Contingencies

In order to ensure a steady supply of hogs and turkeys and to keep the cost of products stable, the company has entered into contracts with producers for the purchase of hogs and turkeys at formula-based prices over periods of up to 15 years. Under these contracts, the company is committed at October 26, 2002, to purchase hogs and turkeys, assuming current price levels, as follows:

(In Thousands)
2003	$	663,134
2004	556,308
2005	376,762
2006	275,964
2007	247,909
Later years	353,428
Total	$	2,473,505

Estimated purchases under these contracts for fiscal 2002, 2001 and 2000 were $682.3 million, $828.1 million and $815.9 million, respectively.

The company has noncancelable operating lease commitments on facilities and equipment at October 26, 2002, as follows:

(In Thousands)
2003	$	10,284
2004	8,295
2005	6,716
2006	4,459
2007	3,551
Later years	1,374
Total	$	34,679

The company expensed $20.0 million, $19.7 million and $16.1 million for rent in fiscal 2002, 2001 and 2000, respectively.

The company has commitments to expend approximately $34.0 million to complete construction in progress at various locations as of October 26, 2002.

The company is involved on an ongoing basis in litigation arising in the ordinary course of business. In the opinion of management, the outcome of litigation currently pending will not materially affect the company’s results of operations, financial condition or liquidity.

note I

Stock Options

The company has stock option plans for employees and non-employee directors. The company’s policy is to grant options with the exercise price equal to the market price of the common stock on the date of grant. The company follows APB Opinion No. 25, “Accounting for Stock Issued to Employees,” and related interpretations in accounting for its employee stock options. Under APB Opinion 25, when the exercisable price of employee stock options equals the underlying stock on the date of grant, no compensation expense is recorded. Options vest over four years and expire ten years after the date of the grant.

Following is a summary of stock option activity:

			Weighted-
(In Thousands,			average
Except Per Share Data)	Shares		Option Price
Balance October 30, 1999	6,050		$	12.62
Granted	849		19.27
Exercised	(271	)	10.75
Forfeitures	(2	)	15.91
Balance October 28, 2000	6,626		13.55
Granted	1,083		17.74
Exercised	(909	)	11.13
Forfeitures	(1	)	15.91
Balance October 27, 2001	6,799		14.54
Granted	1,082		26.09
Exercised	(453	)	11.59
Forfeitures	(64	)	15.23
Balance October 26, 2002	7,364		$	16.41

Options exercisable are as follows:

		Weighted-
(In Thousands,		average
Except Per Share Data)	Shares	Option Price
October 28, 2000	5,088	$	12.26
October 27, 2001	4,623	12.99
October 26, 2002	4,833	$	13.80

Exercise prices and remaining contractual lives for options outstanding and exercisable at October 26, 2002, are as follows:

	Options Outstanding				Options Exercisable
Range of Exercise Prices	Shares	Weighted- average Remaining Contractual Life (yrs)	Weighted- average Exercise Price		Shares	Weighted- average Exercise Price
$10.25 - $14.66	3,468	2.91	$	12.40	3,466	$	12.40
15.90 - 20.32	2,817	7.14	17.63		1,367	17.34
25.99 - 26.09	1,079	9.25	26.09		—	—
Balance	7,364	5.46	$	16.41	4,833	$	13.80

Pro forma information regarding net earnings and earnings per share is required by SFAS No. 123, “Accounting for Stock-Based Compensation,” assuming the company accounted for its employee stock options using the fair value method. The fair value of options was estimated at the date of the grant using the Black-Scholes option-pricing model with the following weighted-average assumptions for 2002, 2001 and 2000, respectively; risk-free interest rate of 4.7%, 5.3% and 6.7%; a dividend yield of 1.8%, 1.8% and 2.4%; expected volatility of 25.2%, 25.3% and 24.4%; and an expected option life of seven years. The weighted-average fair value of options granted in fiscal 2002, 2001 and 2000 was $7.74, $5.52 and $5.95, respectively.

Pro forma net earnings and diluted earnings per share are as follows:

(In Thousands,
Except Per Share Data)	2002		2001		2000
Pro forma net earnings	$	185,758	$	179,480	$	168,321
Pro forma diluted earnings per share	1.32		1.28		1.19
Diluted earnings per share—as reported	1.35		1.30		1.20

The number of shares available for future grants, in thousands, was 5,986 at October 26, 2002, 7,068 at October 27, 2001 and 8,151 at October 28, 2000.

note J

Derivatives and Hedging

The company raises or contracts on a yearly basis for live turkeys. Production costs in raising turkeys are subject to fluctuations in grain prices, particularly corn. To reduce the company’s exposure to changes in corn prices, the company implemented a corn hedging program in the fourth quarter of 2002. This program utilizes corn futures to offset the fluctuation in the company’s future direct corn purchases.

The futures contracts are designated and accounted for as cash flow hedges, and the company measures the effectiveness of the hedges on a regular basis. The company has determined its hedge program to be highly effective. Effective gains or losses related to these cash flow hedges are reported as other comprehensive income (loss) and reclassified into earnings, through cost of products sold, in the period or periods in which the hedged transactions affect earnings. The company typically does not hedge its corn purchases beyond 15 months.

As of October 26, 2002, the company recorded $2.6 million in unrealized hedging losses in accumulated other comprehensive loss, which represented the fair value of the future contracts. This balance includes approximately $1.4 million in unrealized losses that are expected to be realized in earnings in 2003. No unrealized gains or losses from derivative activity were reclassified into earnings in 2002.

The company retired its euro-denominated debt in May 2002, which previously performed as an effective hedge against translation gains and losses on the company’s investment in Campofrio Alimentacion, S.A.

note K

Segment Operating Results

The company develops, processes and distributes a wide array of food products in a variety of markets. Under the criteria set forth by the accounting standard SFAS No. 131, “Disclosures about Segments of an Enterprise and Related Information,” the company reports its results in the following four segments: Grocery Products, Refrigerated Foods, Jennie-O Turkey Store and All Other.

The Grocery Products segment primarily includes the processing, marketing and sale of shelf-stable food products sold predominately in the retail market.

The Refrigerated Foods segment consists of the processing, marketing and sale of branded and unbranded pork products for the retail, foodservice and fresh customer markets. This segment also includes the manufacture, marketing and sale of nutritionally enhanced food products. This segment includes the Meat Products and Foodservice business units and the Hormel HealthLabs operating segment.

The Jennie-O Turkey Store segment primarily consists of the processing, marketing and sale of branded and unbranded turkey products for the retail, foodservice and fresh customer markets.

The All Other segment consists of a variety of smaller dissimilar business units and miscellaneous corporate sales. The activities of these businesses include the production, marketing and sale of beef products, food packaging (i.e., casings for dry sausage), food equipment (sold in fiscal 2001) and the manufacture, marketing and sale of company products internationally. This segment includes Dan’s Prize, Inc., Vista International Packaging, Inc., AFECO (sold in fiscal 2001) and Hormel Foods International.

Sales between reporting segments are recorded at prices that approximate cost. Equity in earnings of affiliates is included in segment profit, however, the company does not allocate investment income, interest expense and interest income to its segments when measuring performance. The company also retains various other income and unallocated expenses at corporate. These items are included on the following page as “Net interest and investment income” and “General corporate (expense)/income” when reconciling to earnings before income taxes. Depreciation and amortization make up some of these unallocated expenses and are shown below within “Corporate.” All assets other than cash, marketable securities, deferred taxes and other corporate assets have been identified with the segments to which they relate.

(In Thousands)	2002			2001			2000
Sales to Unaffiliated Customers
Grocery Products	$	787,716		$	770,271		$	757,418
Refrigerated Foods	2,059,049			2,142,935			1,965,905
Jennie-O Turkey Store	881,935			787,307			560,911
All Others	181,614			184,731			189,615
Total	$	3,910,314		$	3,885,244		$	3,473,849

Intersegment Sales
Grocery Products	$	71		$	80		$	105
Refrigerated Foods	3,383			2,613			2,495
Jennie-O Turkey Store	60,998			65,130			59,866
All Others	65,927			69,483			57,878
Total	130,379			137,306			120,344
Intersegment elimination	(130,379		)	(137,306		)	(120,344		)
Total	$	0		$	0		$	0

Net Sales
Grocery Products	$	787,787		$	770,351		$	757,523
Refrigerated Foods	2,062,432			2,145,548			1,968,400
Jennie-O Turkey Store	942,933			852,437			620,777
All Others	247,541			254,214			247,493
Intersegment elimination	(130,379		)	(137,306		)	(120,344		)
Total	$	3,910,314		$	3,885,244		$	3,473,849

Segment Profit
Grocery Products	$	155,002		$	138,264		$	142,580
Refrigerated Foods	76,189			81,892			51,581
Jennie-O Turkey Store	68,517			66,033			37,435
All Others	24,816			17,816			17,155
Total segment profit	$	324,524		$	304,005		$	248,751
Net interest and investment income	(24,280		)	(18,159		)	1,298
General corporate (expense)/income	(6,274		)	(832		)	14,332
Earnings before income taxes	$	293,970		$	285,014		$	264,381

Assets
Grocery Products	$	216,335		$	226,554		$	235,184
Refrigerated Foods	602,972			633,644			585,313
Jennie-O Turkey Store	709,454			748,947			318,563
All Others	181,727			180,825			189,055
Corporate	509,708			372,728			313,825
Total	$	2,220,196		$	2,162,698		$	1,641,940

Additions to Property Plant and Equipment
Grocery Products	$	4,956		$	5,591		$	9,853
Refrigerated Foods	31,271			28,371			42,623
Jennie-O Turkey Store	18,989			21,683			33,707
All Others	1,746			2,664			2,210
Corporate	7,503			18,820			11,732
Total	$	64,465		$	77,129		$	100,125

Depreciation and Amortization
Grocery Products	$	6,718		$	8,407		$	8,331
Refrigerated Foods	27,222			25,715			24,016
Jennie-O Turkey Store	30,775			34,692			15,735
All Others	3,268			3,609			3,502
Corporate	15,255			17,770			14,302
Total	$	83,238		$	90,193		$	65,886

note L

Quarterly Results of Operations (Unaudited)

The following tabulations reflect the unaudited quarterly results of operations for the years ended October 26, 2002 and October 27, 2001.

Diluted

(In Thousands,

Net

Gross

Net

Earnings

Except Per Share Data)

Sales

Profit

Earnings

Per Share

2002

First quarter

983,014

246,252

50,351

0.36

Second quarter

954,627

224,057

32,740

0.23

Third quarter

933,778

226,810

38,261

0.27

Fourth quarter

1,038,895

265,734

67,970

0.49

2001

First quarter

891,247

210,769

41,532

0.30

Second quarter

961,792

209,373

38,894

0.28

Third quarter

976,977

210,446

33,212

0.24

Fourth quarter

1,055,228

265,319

68,803

0.49

Report of Independent Auditors

To the Shareholders and Board of Directors
Hormel Foods Corporation
Austin, Minnesota

We have audited the accompanying consolidated statements of financial position of Hormel Foods Corporation as of October 26, 2002 and October 27, 2001, and the related consolidated statements of operations, changes in shareholders’ investment and cash flows for each of the three years in the period ended October 26, 2002. These financial statements are the responsibility of the company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Hormel Foods Corporation at October 26, 2002 and October 27, 2001, and the consolidated results of its operations and its cash flows for each of the three years in the period ended October 26, 2002, in conformity with accounting principles generally accepted in the United States.

As discussed in Note D to the consolidated financial statements, the company adopted Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets, in fiscal 2002.

Minneapolis, Minnesota
November 25, 2002

Officers and Directors

Joel W. Johnson*

Chairman, President and Chief Executive Officer

Director since June 1991

Michael J. McCoy*

Executive Vice President and Chief Financial Officer

Director since May 2000

Gary J. Ray*

Executive Vice President—Refrigerated Foods

Director since November 1990

Eric A. Brown*

Group Vice President—Prepared Foods

Director since January 1997

Steven G. Binder

Group Vice President—Foodservice

Richard A. Bross

Group Vice President / President

Hormel Foods International

Jeffrey M. Ettinger

Group Vice President / President and Chief Operating Officer

Jennie-O Turkey Store, Inc.

Ronald W. Fielding

Group Vice President—Meat Products

James A. Jorgenson

Senior Vice President—Corporate Staff

Mahlon C. Schneider

Senior Vice President—External Affairs and General Counsel

Thomas R. Day

Vice President—Foodservice Sales

Forrest D. Dryden, Ph.D.

Vice President—Research and Development

Jody H. Feragen

Vice President and Treasurer

Dennis B. Goettsch

Vice President—Foodservice Marketing

Daniel A. Hartzog

Vice President—Meat Products Sales

Kurt F. Mueller

Vice President—Fresh Pork Sales and Marketing

Gary C. Paxton

Vice President—Prepared Foods Operations

Larry J. Pfeil

Vice President—Engineering

Douglas R. Reetz

Vice President—Grocery Products Sales

James N. Sheehan

Vice President and Controller

William F. Snyder

Vice President—Refrigerated Foods Operations

Joseph C. Swedberg

Vice President—Meat Products Marketing

Larry L. Vorpahl

Vice President—Grocery Products Marketing

James W. Cavanaugh

Corporate Secretary

Roland G. Gentzler

Assistant Controller

Kevin C. Jones

Assistant Secretary

John W. Allen, Ph.D.*

Professor Emeritus, Food Marketing, Partnership for Food Industry Development Michigan State University

Director since October 1989

John R. Block*

Former U.S. Secretary of Agriculture President and Chief Executive Officer, Food Distributors International

Director since October 1997

William S. Davila*

President Emeritus, The Vons Companies, Inc.

Director since 1993

E. Peter Gillette, Jr.*

Senior Advisor to U.S. Trust Company

Retired President, Piper Trust Company

Director since July 1996

Luella G. Goldberg*

Trustee, University of Minnesota Foundation

Member, Board of Overseers, University of Minnesota Carlson School of Management

Trustee and Chair Emerita, Wellesley College

Past Board Chair, University of Minnesota Foundation

Director since September 1993

Susan I. Marvin*

President, Marvin Windows and Doors

Director since July 2002

Dakota A. Pippins*

Director of Urban Think Tank and Director of Planning, Vigilante Division of Leo Burnett, USA

Adjunct Assistant Professor, New York University

Director since January 2001

John G. Turner*

Chairman, Hillcrest Capital Partners

Director since March 2000

Robert R. Waller, MD*

President Emeritus, Mayo Foundation

Professor of Ophthalmology, Mayo Medical School

Director since January 1993

*Director

Shareholder Information

Independent Auditors

Ernst & Young LLP

1400 Pillsbury Center

Minneapolis, MN 55402-1491

Stock Listing

Hormel Foods Corporation’s common stock is traded on the New York Stock Exchange under the symbol HRL. There are approximately 11,600 record shareholders and another 15,500 shareholders whose shares are held in street name by brokerage firms and financial institutions.

Common Stock Data

The high and low closing price of the company’s common stock and the dividends per share declared for each fiscal quarter of 2002 and 2001, respectively, are shown below:

2002	High		Low		Dividend
First Quarter	$	27.14	$	23.12	$	.0975
Second Quarter	28.03		24.99		.0975
Third Quarter	24.99		20.50		.0975
Fourth Quarter	24.95		20.95		.0975

2001	High		Low		Dividend
First Quarter	$	19.13	$	16.75	$	.0925
Second Quarter	21.50		18.51		.0925
Third Quarter	25.25		19.52		.0925
Fourth Quarter	26.39		21.73		.0925

Transfer Agent and Registrar

Wells Fargo Bank Minnesota, N.A.

161 North Concord Exchange

P.O. Box 64854

South St. Paul, MN 55164-0854

www.shareowneronline.com

For the convenience of shareholders, a toll-free number (1-877-536-3559) can be used whenever questions arise regarding changes in registered ownership, lost or stolen certificates, address changes or other matters pertaining to the transfer of stock or shareholder records. When requesting information, shareholders must provide their tax identification number, the name(s) in which their stock is registered and their record address.

The transfer agent makes shareholder account data available to shareholders of record via the Internet. This service allows shareholders to view various account details over a secure Internet connection with the required entry of a tax identification number and a PIN number. Information is available 24 hours per day, seven days a week. If you are interested, you may call Wells Fargo Shareowner Services at 1-877-536-3559 (toll-free) or use the “contact us” feature on the web site www.shareowneronline.com and access “FIRST TIME VISITOR” to arrange for a PIN setup.

If you hold stock in more than one account, duplicate mailings of financial information may result. You can help eliminate the added expense by requesting only one copy be sent. Please supply the transfer agent with the names in which all accounts are registered and the name of the account for which you wish to receive mailings. This will not in any way affect dividend check mailings. We cannot household sort between record accounts and brokerage accounts.

Hormel Foods Corporation’s Dividend Reinvestment Plan, available to record shareholders, allows for full dividend reinvestment and voluntary cash purchases with brokerage commissions or other service fees paid by the company. Automatic debit for cash contribution is also available. This is a convenient method to have money automatically withdrawn each month from a checking or savings account and invested in your Dividend Reinvestment Plan account. To enroll in the plan or obtain additional information, contact Wells Fargo Bank Minnesota, N.A., using the address or telephone number provided with its listing in this section as company transfer agent and registrar. Access can also be made through the website.

An optional direct dividend deposit service offers shareholders a convenient method of having quarterly dividend payments electronically deposited into their personal checking or savings account. The dividend payment is made in the account each payment date, providing shareholders with immediate use of their money. For information about the service and how to participate, contact Wells Fargo Bank Minnesota, N.A., transfer agent. Access can also be made through the website.

Dividends

The declaration of dividends and all dates related to the declaration of dividends are subject to the judgment and discretion of the Board of Directors of Hormel Foods Corporation. Quarterly dividends are typically paid on the 15th of February, May, August and November. Postal delays may cause receipt dates to vary.

Reports and Publications

Copies of the company’s Form 10-K (annual report) and Form10-Q (quarterly report) to the Securities and Exchange Commission (SEC), proxy statement, all news releases and other corporate literature are available free upon request by calling (507) 437-5164 or by accessing the information on the Internet at www.hormel.com. The company’s Annual Report to Shareholders is mailed approximately one month before the Annual Meeting.

Annual Meeting

The Annual Meeting of Shareholders will be held Tuesday, January 28, 2003, in the Richard L. Knowlton Auditorium at Austin (Minn.) High School. The meeting will convene at 8:00 p.m.

Questions about Hormel Foods

Shareholder Inquiries

(507) 437-5944

Analyst/Investor Inquiries

(507) 437-5007

Media Inquiries

(507) 437-5355

Consumer Response

Inquiries regarding products of Hormel Foods Corporation should be addressed:

Consumer Response

Hormel Foods Corporation

1 Hormel Place

Austin, MN 55912-3680

or call 1-800-523-4635

Trademarks

References in italic within this report represent valuable trademarks owned or licensed by Hormel Foods Corporation or its subsidiaries.

EX-21.1 8 a2100452zex-21_1.htm EXHIBIT 21.1
QuickLinks -- Click here to rapidly navigate through this document

EXHIBIT 21.1

SUBSIDIARIES OF HORMEL FOODS CORPORATION

The Company owns the indicated percentage of the issued and outstanding stock of the following corporations:

Name of Subsidiary		Ownership Percentage
Hormel Financial Services Corporation	Minnesota	100%
Jennie-O Turkey Store, Inc.	Minnesota	100%
Hormel Foods, LLC	Minnesota	100%
Hormel Foods International Corporation	Delaware	100%
Hormel HealthLabs, Inc.	Minnesota	100%
Vista International Packaging, Inc.	Wisconsin	100%
Dan's Prize, Inc.	Minnesota	100%
Mountain Prairie, LLC	Colorado	67%
PH, Inc.	Minnesota	100%
Fort Dodge Foods, Inc.	Iowa	100%
Rochelle Foods, Inc.	Illinois	100%
Logistic Services Incorporated	Iowa	100%
Creative Contract Packaging Corp.	Illinois	100%
Dold Foods, Inc.	Kansas	100%
Stagg Foods, Inc.	California	100%
Osceola Foods, Inc.	Iowa	100%
Melting Pot Foods, Inc.,	Minnesota	100%
Park Ten Foods, Ltd.	Texas	100%
West Central Turkeys, Inc.	Minnesota	100%
Heartland Foods Co.	Minnesota	100%
JJOTS, LLC	Minnesota	100%
Beijing Hormel Foods Co. Ltd.	China	76%
Shanghai Hormel Foods Co. Ltd.	China	77%
Campoco, Inc.	Minnesota	100%
Hormel Netherlands B.V.	Netherlands	100%
Hormel Foods Australia Pty Limited	Australia	100%
Hormel Spain SRL	Spain	100%
Dubuque Foods, Inc.	Minnesota	100%
Hormel Canada, Ltd.	Canada	100%
Park Ten MN, LLC	Minnesota	100%
Park Ten TX, LLC	Minnesota	100%
Hormel Foods FSC, Inc.	Barbados	100%
Precept Foods, LLC	Delaware	51%

QuickLinks

EXHIBIT 21.1 SUBSIDIARIES OF HORMEL FOODS CORPORATION
EX-23.1 9 a2100452zex-23_1.htm EXHIBIT 23.1
QuickLinks -- Click here to rapidly navigate through this document

EXHIBIT 23.1

CONSENT OF INDEPENDENT AUDITORS

We consent to the incorporation by reference in this Annual Report (Form 10-K) of Hormel Foods Corporation of our report dated November 25, 2002, included in the 2002 Annual Report to Stockholders of Hormel Foods Corporation.

Our audits also included the financial statement schedule of Hormel Foods Corporation listed in Item 15(a). This schedule is the responsibility of the Company's management. Our responsibility is to express an opinion based on our audits. In our opinion, the financial statement schedule referred to above, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

We also consent to the incorporation by reference in Registration Statement Number 333-17327 on Form S-3 dated December 5, 1996, in Post-Effective Amendment Number 2 to Registration Statement Number 33-14614 on Form S-8 dated December 6, 1988, in Registration Statement Number 33-14615 on Form S-8 dated May 27, 1987, in Post-Effective Amendment Number 1 to Registration Statement Number 33-29053 on Form S-8 dated January 26, 1990, in Registration Statement Number 33-43246 on Form S-8 dated October 10, 1991, in Registration Statement Number 33-45408 on Form S-8 dated January 31, 1992, in Registration Statement Number 33-44178 on Form S-8 dated August 18, 2000, and in Registration Statement Number 333-68498 on Form S-4/A dated December 3, 2001, of our report dated November 25, 2002, with respect to the consolidated financial statements incorporated by reference in this Annual Report (Form 10-K), and our report included in the preceding paragraph with respect to the financial statement schedule included in this Annual Report (Form 10-K) of Hormel Foods Corporation for the year ended October 26, 2002.

		/s/ ERNST & YOUNG LLP
Minneapolis, Minnesota January 22, 2003

QuickLinks

EXHIBIT 23.1 CONSENT OF INDEPENDENT AUDITORS
EX-24.1 10 a2100452zex-24_1.htm EXHIBIT 24.1

EXHIBIT 24.1

POWER OF ATTORNEY

Each person whose signature appears below hereby constitutes and appoints each of Michael J. McCoy, Jody H. Feragen, and Mark P. Kalvoda with full power to each to act without the other, his or her true and lawful attorney-in-fact and agent with full power of substitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign the Annual Report of Form 10-K of Hormel Foods Corporation (“Hormel”) for Hormel’s fiscal year ended October 26, 2002, and any or all amendments to said Annual Report, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, and to file the same with such other authorities as necessary, granting unto each such attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that each such attorney-in-fact and agent, or his substitute, may lawfully do or cause to be done by virtue hereof.

Signature	Title	Date

/s/ JOEL W. JOHNSON	Chairman, President, Chief Executive Officer and Director (Principal Executive Officer)	November 25, 2002
Joel W. Johnson

/s/ MICHAEL J. McCOY	Executive Vice President, Chief Financial Officer and Director (Principal Financial and Accounting Officer)	November 25, 2002
Michael J. McCoy

/s/ GARY J. RAY	Executive Vice President, Refrigerated Foods and Director	November 25, 2002
Gary J. Ray	Executive Vice President, Refrigerated Foods and Director

/s/ ERIC A. BROWN	Group Vice President, Prepared Foods and Director	November 25, 2002
Eric A. Brown

/s/ JOHN W. ALLEN	Director	November 25, 2002
John W. Allen

/s/ JOHN R. BLOCK	Director	November 25, 2002
John R. Block

/s/ WILLIAM S. DAVILA	Director	November 25, 2002
William S. Davila

/s/ E. PETER GILLETTE, JR.	Director	November 25, 2002
E. Peter Gillette, Jr.

/s/ LUELLA G. GOLDBERG	Director	November 25, 2002
Luella G. Goldberg

/s/ SUSAN L. MARVIN	Director	November 25, 2002
Susan L. Marvin

/s/ DAKOTA PIPPINS	Director	November 25, 2002
Dakota A. Pippins

/s/ JOHN G. TURNER	Director	November 25, 2002
John G. Turner

/s/ ROBERT R. WALLER	Director	November 25, 2002
Dr. Robert R. Waller

EX-99.1 11 a2100452zex-99_1.htm EXHIBIT 99.1
QuickLinks -- Click here to rapidly navigate through this document

EXHIBIT 99.1

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
AND RISK FACTORS

The Private Securities Litigation Reform Act of 1995 ("the Reform Act") provides a "safe harbor" for forward-looking statements to encourage companies to provide prospective information. The Company is filing this cautionary statement in connection with the Reform Act. When used in this Annual Report on Form 10-K, the Company's Annual Report to Stockholders, in future filings by the Company with the Securities and Exchange Commission ("the Commission"), in the Company's press releases and in oral statements made by the Company's representatives, the words or phrases "should result," "believe", "intend", "plan", "are expected to," "targeted," "will continue," "will approximate," "is anticipated," "estimate," "project" or similar expressions are intended to identify forward-looking statements within the meaning of the Reform Act. Such statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical earnings and those anticipated or projected.

In connection with the "safe harbor" provisions of the Reform Act, the Company is identifying risk factors that could affect financial performance and cause the Company's actual results to differ materially from opinions or statements expressed with respect to future periods. The following discussion of risk factors contains certain cautionary statements regarding Hormel's business, which should be considered by investors and others. The following risk factors should be considered in conjunction with any discussions of operations or results by the Company or its representatives, including any forward-looking discussion, as well as comments contained in press releases, presentations to securities analysts or investors, or other communications by the Company.

In making these statements, the Company is not undertaking, and specifically declines to undertake, any obligation to address or update each or any factor in future filings or communications regarding the Company's business or results, and is not undertaking to address how any of these factors may have caused changes to discussions or information contained in previous filings or communications. Though the Company has attempted to list comprehensively these important cautionary risk factors, the Company wishes to caution investors and others that other factors may in the future prove to be important in affecting the Company's business or results of operations.

The Company cautions readers not to place undue reliance on forward-looking statements, which represent current views as of the date made. Forward looking statements are inherently at risk to any changes in the national and worldwide economic environment, which could include among other things economic conditions, political developments, currency exchange rates, interest and inflation rates, accounting standards, taxes, and laws and regulations affecting the Company and its markets.

Risk Factors

Fluctuations in commodity prices of pork, poultry and feed ingredients could harm our earnings.

Our results of operations and financial condition are largely dependent upon the cost and supply of pork, poultry and feed grain as well as the selling prices for many of our products, which are determined by constantly changing market forces of supply and demand over which we have limited or no control.

The live pork industry has been moving rapidly to very large, vertically integrated, year-round confinement operations operating under long-term supply agreements. This has resulted in fewer hogs being available on the cash spot market. The decrease in the supply of live hogs on the cash spot market could severely diminish the utilization of slaughter facilities and increase the cost of the raw

materials they produce. We, along with others in the industry, use long-term supply contracts to manage the effects of this trend and to assure a stable supply of raw materials while minimizing extreme fluctuations in costs over the long-term. This may result, in the short term, in costs for live hogs that are higher than the cash spot market depending on the relationship of the cash spot market to contract prices, and these higher costs could adversely affect our short-term financial results.

Jennie-O Turkey Store contracts with turkey growers annually to supplement the turkeys it raises to meet its raw material requirements for whole birds and processed turkey products. Jennie-O Turkey Store results are affected by the cost and supply of feed grains, which fluctuate due to climate conditions, production forecasts and supply and demand conditions at local, regional, national and worldwide levels. The Company attempts to manage some of its short-term exposure to fluctuations in corn prices by purchasing corn futures contracts.

Outbreaks of disease among the turkey flocks of Jennie-O Turkey Store could harm our revenues and operating margins.

Turkey flocks are subject to losses from disease, including pneumo-virus. If the turkey flocks of Jennie-O Turkey Store were widely affected by pneumo-virus or other diseases, our supply of turkeys would decrease and costs would increase, and our business operations and financial results would suffer.

Market demand for our products may fluctuate due to competition from other producers.

We face competition from producers of other meats and protein sources, especially beef, chicken and fish. The bases on which we compete include:

•: price;
•: product quality;
•: brand identification;
•: breadth of product line; and
•: customer service.

Demand for our products also is affected by our competitors' promotional spending and the effectiveness of our advertising and marketing programs. We may be unable to compete successfully on any or all of these bases in the future.

Our operations are subject to the general risks of the food industry.

The food products manufacturing industry is subject to the risks posed by:

•: adverse changes in general economic conditions;
•: food spoilage or food contamination;
•: evolving consumer preferences and nutritional and health-related concerns;
•: federal, state and local food processing controls;
•: consumer product liability claims;
•: product tampering; and
•: the possible unavailability and/or expense of liability insurance.

If one or more of these risks were to materialize, our revenues could decrease, our costs of doing business could increase and our operating results could be harmed.

In addition, the food industry is experiencing a period of consolidation, and the success of any future acquisitions by Hormel will depend substantially on our ability to integrate newly acquired operations successfully with our existing operations. If we are unable to integrate new operations successfully, our financial results and business reputation could suffer.

Government regulation, present and future, exposes us to potential sanctions and compliance costs that could adversely affect our business.

Our operations are subject to extensive regulation by the U.S. Department of Agriculture, the U.S. Food and Drug Administration and other state and local authorities that oversee food safety standards and the processing, packaging, storage, distribution, advertising and labeling of our products. Our manufacturing facilities and products are subject to constant inspection by federal, state and local authorities. Claims or enforcement proceedings could be brought against us in the future. Additionally, we may be unable to comply with new or modified laws and regulations. Our failure to comply with applicable laws and regulations could subject us to civil remedies, including fines, injunctions, recalls or seizures, as well as potential criminal sanctions.

We are subject to stringent environmental regulation and potentially subject to environmental litigation, proceedings and investigations.

Our past and present business operations and ownership and operation of real property are subject to extensive and increasingly stringent federal, state and local environmental laws and regulations pertaining to the discharge of materials into the environment and the handling and disposition of wastes (including solid and hazardous wastes) or otherwise relating to protection of the environment. Compliance with these laws and regulations, and our ability to comply with any modifications to these laws and regulations, is material to our business. New matters or sites may be identified in the future that will require additional investigation, assessment or expenditures. In addition, some of our facilities have been in operation for many years and, over time, we and other prior operators of these facilities may have generated and disposed of wastes that now may be considered hazardous. Future discovery of contamination of property underlying or in the vicinity of our present or former properties or manufacturing facilities and/or waste disposal sites could require us to incur additional expenses. The occurrence of any of these events, the implementation of new laws and regulations, or stricter interpretation of existing laws or regulations, could adversely affect our financial condition.

Our foreign operations pose additional risks to our business.

We operate our business and market our products internationally. Our foreign operations are subject to the risks described above, as well as risks related to fluctuations in currency values, foreign currency exchange controls, compliance with foreign laws and other economic or political uncertainties. International sales are subject to risks related to general economic conditions, imposition of tariffs, quotas, trade barriers and other restrictions, enforcement of remedies in foreign jurisdictions and compliance with applicable foreign laws, and other economic and political uncertainties. All of these risks could result in increased costs or decreased revenues, which could harm our financial results.

Deterioration of labor relations or increases in labor costs could harm our business.

We have approximately 15,500 employees, of which approximately 4,200 are represented by labor unions, principally the United Food and Commercial Workers' Union. A significant increase in labor costs or a deterioration of labor relations at any of our facilities that results in work slowdowns or stoppages could harm our financial results.

QuickLinks

EXHIBIT 99.1 CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS AND RISK FACTORS
EX-99.2 12 a2100452zex-99_2.htm EXHIBIT 99.2
QuickLinks -- Click here to rapidly navigate through this document

EXHIBIT 99.2

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Hormel Foods Corporation (the "Company") on Form 10-K for the period ending October 26, 2002 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Joel W. Johnson, Chairman, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1): The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities and Exchange Act of 1934; and
(2): The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: January 22, 2003		/s/ JOEL W. JOHNSON
		JOEL W. JOHNSON Chairman, President and Chief Executive Officer

QuickLinks

EXHIBIT 99.2 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
EX-99.3 13 a2100452zex-99_3.htm EXHIBIT 99.3
QuickLinks -- Click here to rapidly navigate through this document

EXHIBIT 99.3

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Hormel Foods Corporation (the "Company") on Form 10-K for the period ending October 26, 2002 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Michael J. McCoy, Executive Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1): The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities and Exchange Act of 1934; and
(2): The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.


Dated:	January 22, 2003	/s/ MICHAEL J. McCOY
		MICHAEL J. McCOY Executive Vice President and Chief Financial Officer

QuickLinks

EXHIBIT 99.3
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
GRAPHIC 14 g809143.jpg G809143.JPG begin 644 g809143.jpg M_]C_X``02D9)1@`!`0$!(`$@``#_VP!#``@&!@<&!0@'!P<)"0@*#!0-#`L+ M#!D2$P\4'1H?'AT:'!P@)"XG("(L(QP<*#@'ACKYBU=& M[1=/ZY,A%H=>#TXL)/`*'$@C/;4LS3(YTR.=,CG3(YTR.=,CG3(YT MR.=,TI2E*4I2E*4I7XI02"5$`#B2>JH)J#;#HS3RG&G+H)DE'`LPD^-.>6]] MD>VJVNOA)R%;R;1I]M`ZG);Y5^E('[U&W=MVT.ZJ*8!8:/*)"WR/\6]7T=7[ M:90#J$7PIZ`6[6`/@W78%YVY$`AJ^\?_`,!/R4\\;>-N7X5]] MP3\E//&W+\*^^X)^2GGC;E^%??<$_)3SQMR_"OON"?DIYXVY?A7WW!/R4\\; M>-N7X5]]P3\E//&W+\*^^X)^2GGC;E^%??<$_)3SQMR_"OON" M?DIYXVY?A7WW!/R4\\;>-N7X5]]P3\E//&W+\*^^X)^2GGG;E M^%??<$_)5H7_`%3>=G^R6)=9KKMQO.1RJK?/&W+\*^^X)^2GGC;E^%??<$_)3SQMR_"OON"?DIY MXVY?A7WW!/R4\\;>-N7X5]]P3\E//&W+\*^^X)^2OER^;<&D% M:F[]@D_LBNLO6.V:'AU[SXA(SQ*.>0 M5]D^VIZE04`4D$'B".NOVE*4I2E*@.O=K%CT0E<8GRZZX]&&RK&[VN*^Z.SB M>SKK/5[UMK7:7!M.=0_M,U"MM04GRU:_H38W=]4M(N5S6;59B-_QSJ?[1U/-"3T#^8\.6:GR-<;,-F0,33T`W.>CT M5R60%J)[7E?LCA4QV>[6K9KZ?(MZ(+T&:TWXX-N+"TK0"`2%#'$9'#'75B8' M*F!RI@8T6I+#3S9Z4N("@>XU#KULDT3?$J\;9 M&8SIX^-A_P!BH=R>![P:JG5'@ZSXH6_IJXIF-CCY-+PASN4/1/?NU"['KG6N MS.Y>;WC(;::/]I;9R248_E!XI]:3CUUHG0>U&QZZ:#+"C$N:4YT_IQY*KEQ1)EIXB/_`"IYKYG[OKZ*DT#LYO&T M.ZN.EQ;,!"]Z5.=!5E1.2$Y^TL]/9TGJSJ?2VCK)H^W"':(:&L@!QY7%QT\U M*Z3ZN@=0%>]4;UQJYO1.G57EZ"_,:2ZAM:62`4A6?2)/0,X'K(JOV?".TNH' MQUKNR#P^RAM7_O%==7A(V+QH"+'<2WUJ*VP?9G_6K;L-V1?;#!NK;#K#$598TAZ/+L-U9>:<*%(.YD$'!!!((/97POP MD=/!!W++="KJ!+8'MWJF.S_:5$V@F:(=MEQ1$""XMXI*25$X`(Z^!-3BE*4I M2E*4I4&UMLLT]K&+(<7$:BW58RB>..@BL@SX3UNN$F#(3N MOQW5-.)'4I)(/Q%7ELDMCNC=#W'63T5QZX7$"+:XJ$$K>.?1``X^DL#^E!-+ M7HRP;/8OTJVBR&Y5X?47F;A:LGI/HCMX&H%KO:M?=:N+CE9@VK M/HPV5<%#^\5]\_#LJ!5?'@XO67SC=&?)W1>_$[P>4H%!8WAD)&.!WBG.K7%E&+(N4-F0$A1:>JMB6JU0K):X]MM["&(L=` M0VVD<`/]2>DGK-=RE59M^NJ(.S9R&2/&3Y+;*1UX2=\G](]M93KO6:VNWB]P M;8R"7);Z&4XYJ4!_K6ZXL9J'$9C,IW6F4);0GDD#`^`K]E2&XD5Z2\H):907 M%J/4D#)/L%81NT]=UO$VX.?;E/K?5ZU**O\`6NG6K=@=D\V;.D35HP[<7UOY M/3N#T$_Y2>^K2I2E*4I2E*^4N(42$J!(Z<'-?$B0U%C.R'UAMEI!6M:NA*0, MDGNK+&BM$/;4=>7*\OMK9LAFN2)#G05[RBH-)/,@C)ZAZQ5^7B^362;!H^UM MRI["`VIUP;D2",<`M76K&,(3DXZ<#IAAV$"^37+GJ[4\ZX7!X968Z4MI3V`J M!]$=0``[*C>M?!]1;K0]<--3I$A;""M<25NE2T@9.XH`<>PCCSJEK+:GKY?( M-JCJ2EZ8^AA"E9P"HXR<<<5J+99LG^@4B5<9LY$NX2&_$CQ*2&VT9!.,\220 M..!T59U*4I2E*5EKPA?(1M":\F3_`+2839DJWLY5D[O#J]$#X54M67L+LOG; M:7%?6C>:M[2Y2N'#(&ZG]2@>ZM:5TKM:85\M4FVW%A+\20@H<;5UC_0CI!ZC M6/M>Z.G[.]6^3MNN^(*O'P):3NJ4D'AQ'0I)X'N/6*T=LGV@HUQIS=E*2F[P M@E$I/XG)P#D<<>1SV58%*5UKC/C6NVR9\MP-QHS2G75GJ2D9-8EU7J*7J[5$ MV[R=[?D.?V;?3XM`X)0/4,=^>=:MV6:-1HW1<:,XT$W"2`_,5CCOD<$_TCAZ M\\ZFU*5FCPC+WY7JJW6="\HA1O&+');A^5*?;5+U:&P6R>=-H[4Q:,M6YA<@ MD]&\?03\5$]U:OJ![8KUYEV979:5;KLI(B-]I<.%?IWJQY7+&8N-*P5%$G4=J;6DX*3+1D=V:YH6K=.7%81"OULD+."$MRD*/'LSFO9!S2E*5 M&]:ZUM>A[(;A<5*4M9*&(Z/MO+QT#D.9ZO8#E?5NT_4^KY"_*I[D:&3Z,.,H MH;`[<<5'M.>ZNAH9G4$W5\"/IV0\S<5N#==0H@(2.*E*_E`Z0>GHK2FKUW+7 M$YS1MF=4S;VU!-[N21P0,`^(;YK(P3U`$9Z<5.++9H&G[1&MEM82Q$CHW4(' MQ)/62>)/6:Z%YUEIK3KGB[K>841W&?%+<&_Z]T9/PK@M.T'25[=2S;]0077E MG"6B[N+4>Q*L$U)"`I)!Z#PJ#:(PXJ2C>*'I3V^&0>DIX`#AU MGCVUZ$K:3HR$^67M2VT+'`A#P7CO3FO2L^J[!?\`A:;Q"F+`R4,O`K`[4]/P MKV*4KK3+A"MS)>FRV(S0^^\X$)]I-1Q[:=HF.X4+U-;2H?P/;P]HR*[=MUUI M6[NAJ!J"W/.GH;$A(4?4#@U(:&L2[0;W](=>WFY!6\VY)4AH_P!VCT$_!(J- M5I'P<+)Y/8+K>G$85*?2PV3_``MC)QZRK]-7=2H1M4T:C66C)+#:`;A%!D1% M=>^!Q3ZE#AZ\+E-C[[1/I#UCI':!6U([[4J.V^P MXEQIU`6A:>A22,@CNKDI51>$'J'S9HEBT-*P]='MU7'_`(2,*5\=P>VJ7V0Z M>3J/:/;674[T>*3+>',(X@=ZBD5L6E*_"<"L1:ZO7TAUQ>+H%;R'I*O%G^[3 MZ*/T@5'JTOX.=D\DTK<;PXD!WH]=4/=M3:DUA/;1<;C,GO.K"6F=X[N\3P"4#@,]@JY-+^#HP[; M4OZFN,AJ6X,^3PBD!KL*B#O'U#'KJK-H^B7-!ZI5;`^J1&<:2]'>4D`J0:N5`!].%)65-D?RD\4'M'L-:RTOJ.%JS3L2\P"?$ MR$Y*%?:;4."DGM!J";:-5ZCT;!M5SLDZ.RPX\IA]EQE*RM1&\DC(Z`$J!QCI M%5./"!UJ&MS_`,M*OX_)3G_-CX5[6AMLFII^HG'K_U!<73;K*%%MA:AO;J`?L-)^\>:C@9ST]%=C:- ML5@V"UVHZ:\XS+A*EIBEEPI7OY2H[W!(W<;O'/#%3*P1]);$-.E=WG-NWR4V M%/I:PMU?6$(3U(!ZS@$\2>@"KM9[:[]J);L:TDV>W*)RF.K#KG:M8_88[Z]/ M2NL=5S=)1-(Z25*F7>2IQ^7-4HGR5"C@)2M7!/`9*CT%6!QJ#:TT1J+1TME5 M^;23,WE(?0[XP.*&-[)Z<\1T\ZB^35Y;-=M(LFE;C$U(^[+V-*YX:\19\GQ#2G?$LO$FU7)DLRXZMUQ&.K((SV@U-94IB%%=DRGD,L-)*W''% M;J4I'223T"L]Z]V_2GW7;?I$>(822DW!Q.5K_P"A)X)':>/8*@&EM*:FVI7U MW_:W7@W@R9TQQ2PV#T#CQ)/'`'P%3?6&P/Z/:3E7:!>7);\-LNO-.,A`6@?: M*<$X(''!SG%4F2:N78QM.N<+4$/3=UEKDVV6KQ+!>5O*8.Z3PQU9&, M<:O;7M[&GM"7FY[VZXU&4EH_WBO11^I0K$9Z:5M?9U9/H_L_LMN4@)=3&2XZ M/YU^FKXJQW5**4K&^UK3Z=.;1[G':;W(TA0E,`=&ZOB0.P*WAW5?.PG49O>S MYN$ZLJD6MPQCDY);^T@^PE/]-6?2LN^$-=%2]>QX(/\`9PH:!C^99*B?9NU( M/!KMJ2Y?KHH>DD-1T'L.5*_9-:"I2HQM$O?T>T!>KB%;KB8RFVCG_B+]!/Q5 MGNK$]*M2TZHUOJ#3<#2>B[?)CPHK(;>>C#"W%GBHJ=X!`))X`@]IKUK7X.FH M)@\;=KO#AE1R4MI4^OOZ!GO-51J&VL6?45PMD:49341]3`?*-SQA2<$XR<<0 M>NO,K0O@VV3=BWF^K3Q6M,1I78/37\2CV5S;==I+MO2K25H?W7G49GNH/%"2 M.#8/42.)["!UFLZ=-7AX/.CT3KG*U/+;WFX1\1%"AP\:1Z2NY)`_J[*T?6;? M"2<0=369L$;Z8:E$=A64Q6%2'`/XEG`SW)^-4A4IV?:8?UAJZ)94+6F,XKQDM23T-)XJ/ MKZAVD5L^%"C6Z$S#ALH8CL(#;;:!@(2!@`5"-L-[N^GM`2+A99J(DA+S:%N$ M`K*%'!",C[62#GD#60Y,J1,D.2)3[C[[AWEN.+*E*/,D\37&E)4H)2"23@`= M=;-V:Z+CZ*TE&B!I(GOI2[-=QQ4X1]G/).<#OYU5/A*71"Y]BM*<;[3;DE?J M40E/^154/4MV;:53K#7$"UO!7DF2])Q^$GB1WG">^MG,,-18[;##:&FFTA"$ M(&$I2.``'4*QQM9NJ+QM.O#C#<:T?=):N"'Y MVZGMW4#)_5\*A>W+:([>;P[IBVO$6V$O=DE!_P!^\.D'FE)X8Y@GJ%4W5W[/ MMK^E]$:2C6D6BXN2;7?\`2%RM-MMLYF3, M:\3XQ\HW4I)]+H).<9'?5#5[NB8[LG75@99&5JN#&,=6%@Y^%7OX1E[\ETO; MK,A8"YL@NK`ZT-CYE)]E9JJ0:&LOTAUO9[64[R'Y*/&#^['I+_2#6WAP`QT5 M^TI6>O"4M@3+L-T2.*T.QEG_`*2%)_S*KS/!RNRHVK;E:RK#*@EY#8SU;K:1CX5<_@YL>+T%.>*<%RXKX\P&T#_ M`+U<%*52'A'WOR>P6JRH7A4I]4AP#^%`P,^LJ_36;ZE&SS3S>J==VJU/H*XS MCV^^D$C+:05*&1T9`QWULVWVZ%:H3<.!%9BQFQA#3*`E([A74U-=T6#3%SNJ MR`(D9;HSUJ`]$=YP*PPZXMUU;CBBI:B5*)ZR>FOBMA[-+>WI/9-;W)*=S$54 MZ03T^D"OCZDX'=62KS=9%[O4RZ2U;S\MY3RSVDYP.P='=71K:>S2Q)T]L]LT M+="72P'WN96OTSGU9QW5+*Q_MEOJ;[M+N2FEA;$/=AMD'/V/M?K*J@%:<\'6 MT.P]&3KDZDI$^5AO^9"!NY_Q%0[JHW:1>O/^T*]3TJWFC(+31_D1Z"?@G/?4 M5K17@WV$-6R[7]Q'ION"*T3_``I])7M)3_AJ]:HGPD;WXNVV>QH7Q>=5*=`Y M)&ZGXJ5[*SM4NV86/Z0;1;-#4G>:2^'W>'#<;],@^O`'?6T.JL;;6KUY\VEW MA]*]YEAWR5KEAL;IQZU!1[ZA5:`\&VR>C>KZM/\`!$:5C^M?_LJ[-179%BTY MX]92DD#O.!6%GG5O/+=<45.+45*4>LGB:^*UCI$'1.P5N<1N2& M[>Y-XCI6L%2/W2*R@XXMUQ3CBBI:B2I1.22>DUWK#;_.NH;;;CT2I33)_J4! M_K6UDZ2TVE(`T_:L#A_Z-O\`[5^_1/3G_(+5[DW\M/HGIS_D%J]R;^6N2/IN MQ1)")$:S6YEYLY0XW%0E23S!`R*S%MXO?G7:.]%0K+5N91&&.C>^VKXJQW56 M-7/X.=D\KU7<+PM!*(,;Q:#R6X@UC/:PVIK:EJ!*L9,G>X/@[NA>SN2@`@HN+@/;E"#5MTI62=N5[\[[2Y;*5;S5O;1$3RR/25^I1'= M5;5>'@WV3Q]]NUZ6C*8S"8[9/\2SDX[D_&M'U4OA!WKS?H%NVH5ARXR4H(S] MQ'IJ^(0.^LM5ZFG+2N^ZEMMJ;!S+DH9..H$C)[ADUM2_VOR_25SM49(3X^$[ M';`ZLH*0/VK#*T*;6I"TE*DG!!Z0:YH+27Y\=I9`0MU*5$]`!(%;U0E*$!"0 M`E(P`.H5$-I>LVM%:0DS0L>7O`LPT=9<(^UCDD<3W@E;JLN.8]%IL?:6>P#VG`ZZUS>5Q-`;,Y?D*2VQ;( M"D,`GB58PG/:5$9]=8L)))).3SK\%;3V9V7S!L[LL)2=UWR#=9/&W6[WQ:>##28K1/\ M2CO*^"4^VKWU)=D6'35RNKA&(D9;H!ZR!P'><"L+NN+>=6XXHJ6M14I1Z23Q M-?%;&V067S)LRM#:D[KLELRW.&,EPY'Z=T=U>%M_O?FW9[Y`A9#MQD(:('\" M?35\0D=]96KT+':W+U?H%K:SORY"&1CJWE`9K86O[;XW9A?(,5&`W;UAM(&> M"$Y`]B:Q:>FO0L-Q%HU#;;D05")*:?('6$J"L?"MT0ID>X0F)D1U+L=]`<;< M2Z,J2H=1'76*+SIUR>)+LM];RL\U*)_UKHUJ_8+9/->S MEN8M&';B^N02>G='H)_RD]]6A2E*J#PC'MS0$%O>&5W)'#'2`VX:IK8TT7=K M%B`(&ZMQ7'L:6:V(.BE9(VZ6_P`BVI3W0,)EM,OC_`$GXI-3SP:[FDQ;[:E* MPI*VY*$\P04J/P3[:ONE=:X36K=;94Y\X9C-*>6?Y4@D_M6$[E.>NETEW!\Y M>DO+>6<_>423^]=7%:D\'E4+_P`/WTQ][RD35F3E/WL)W<'K&Z!\:MNLO>$+ M>Q<-<1[6VO*+=&`4,]#CGI'].Y51;JMW.#CG5B;#S"3M3MIF$[^XZ(^$Y!=W M#C/+AO/Y> MM9[!WD5J#0V@;1H2U>30$^-E.@>42W`-]T_Z)'4/W/&H3X1%Z\CT7#M2%8/ZBBLQA"E="2?5QKL6\1Q3)0IE M!;QXLI!3@=7576NUP:M-GFW%\X:BL+?7QZDI)_TK"DR2]/G/RWE;STAQ3JSS M4HY/Q-$XX]?H[M?GA`WKS?L_3;T M+(4#R?S? M&\DQY-XI/BL#'H8&[\,5FOPB;UY;K&%:4*RBWQMY0ST..')_2$>VJ>W%8SNG M'/%3[8L8:-J=H5,./]X&>&072@A.?CWXK7RDI6@I4`I)&"".!%9)W>(*?4#CCT5(Y&W#7]_6F%;&XS#[OHI3`B%;BO5O%7P%>WI;8E?\` M4T_SQK>;(92X=Y3*W-^2[V*4DE+DEQ/8<)3^RJBFP"W^6;2T2-W(AQ'7L\B<('^< MUJVE9\\)*RD/66^H3P4E<-T^KTT?NOV57FR34R-+[0H$A]>[%DYB/G.`$KQ@ MGL"@D]QK8U*_%)"DE*@"",$'KKJ)M5N0XIQ,"*%J^TH,I!/K.*^S;H2@08C! M!&""TGC\*^HT.+"0418S+"5')2TV$@GGPKGKJOVV#*6%OPX[JP* MY!$C!LMB.UN$Y*=P8-<2;7;T24R4P8R7T_9=#*0H<,<#C/0<5VZ5X-ZT5IK4 M2RNZV2%)=/2ZIL!S_&,*^->"-C&@`[XSZ/HSGH,AW'LWJ]>V;/=(V=25PM/6 M]M:3E*U,AQ0/8I634E``I4`U;M-T?I^\.V:^MO+D-)2HI,/QB2%`$8)Z?_Y7 MD,[<=G\=&XP)+:/X40<#X5Q/;9]F\A04^PZX09 MX5R.0HKQ)=C,KR,'>;!R/92+!B04*1$C,QTJ5O*2TV$`G&,G'7@#V5^R(D>6 MCM%MD(W'[?$=3_``K82H?$ M5W$I2A(2D`)`P`!@`5$-;ZITSI-,-_4,,N)DJ4EMQ,5+N%)`/'/1P/#U&NKI M;:7I75]T\T6A+ZW?%*<*5Q=Q`2,9S[14O%K@)D(D"%&#R/LN!I.\GU'&1TUV MZ5'KIH32MY=4[<+!;WG5'*G2P$K/K4,$UY3>R+0;2PM.FXI(_B6M0]A5BI/; M+':K*T6K7;8D)!Z4QV4HSZ\#C7?KC=8:?1N/-H<3R6D$?&N*/;H448CQ([(_ MNVDI_84>MT*2"'XD=T'IWVDJS[17.VVAEM+;2$H0D82E(P`.0%?5*5^$@#)X M"L8;3M3#56OKE/:7O14+\GC$'AXM'`$>LY5WU;O@WV,LVF[WQQ&#(=3&:)'W M4#>5CL)4/\-7G2HIM'TP-7:&N-L2C>DA'CHW,.HXI]O%/]58M4E3:RE22E0. M"#TBM9[&]>HU=I=$&6]F[V]`;>"CQ=1T)<[>1[?6*LJE*4I2E*4I2E*5B_:A M>A?MH]ZEI7O-)D%AH]6ZV-P$>O=)[ZO/97L[TXYL\MDN\6>!+FRTJD*CEBHB=NVG?)ES46B_N6]"PVJ:F&/%`\M[>Z>R MI;I37>G]:,+79IP<<;`+K#B2AQO/-)ZNT9';4DJ&ZGVI:3TF^J+<+CXR8G[4 M:,GQBT^O'!)["17@KVZ:;BO,(N5KOMN0^D+;WZLFV5JT2A(@M1E/E0!'IK.,$ M'B"`@>VI/X-EEPW>KXM/241&E>KTU_NBK8U+K_3.D2&[Q=6F7RG>$=`*W".> MZG)`[3@5#OK!Z-()#-V('21&3\]3'1^N;-KB+(D6=4@HCJ2ET/-%&Z2"0.1Z M.JI+2E*4I2E*55.V[7R--:;5983N+IHFO;I2LN[= M-!N6'4*M006,6RXKRYNC@T^>)!Y!7VAVYJM].:BN.EKY'NUK>\7)9/0>*5I/ M2E0ZP?\`YQK8.AM=VK7-F3+@N!$EL`28JCZ;*C^Z3U'K]>14II2E*4I2E*4K MQM1:IM.EH29-SDA!<.XRR@;SKZ^I*$#BH]'^M<%^U#YKT+.OSC#L5;4)3Z67 MP`M"RGT4JP2`=X@=/36*X$-^[7:-";RI^4^EI.>)*E*`_IG M5R`D^+2[&W4D]0)"L@=M2RPIEM0(4#V8R>ZKVVVZ_DZ3L3% MMM;I:N=Q"O[5/VF6AP*AR42<`]7$\JJK89I-O4NLG;E/;#T2V)#Q2OB%O*/H M9YXPI7<*F/A*O1Q!T^P<&277EIYA&$@^TX]E=/P:Y!MVUK*O&JW=/L.J3;K:0E2`>#CV,J4>>,[HY8/.K2V,:$AV+1T>Z2X MK:[G-6MQ`)0TK[*!GH!&">>>RLRZC$4:GNH@I"88F/>(`Z`C?.[CNK6&R M:S.6/9;:VTM_[3(:5+4%<,J<]).?Z=T5DZ^O7-^_3G;SXWSDIY1DA[(4%YX@ M\L='JJ\]&;==.,P8UJNUB3:VD(#?C(B`MD=I3]H#_%5RV&'9&(2I=A8B-Q9R MO*"N*D!#I(`WN'#H`KU:4I2E*4I4.V@[0[9H.T%Y]27[@ZD^2PPKTG#_`!'D MD=9[AQK(-\O<_45XDW6YOE^7(5O+4>`'(`=0`X`5<^P'0*GY1U?<&L,LE3H@\0>8K'VT#0 M5PT)?51)`4["=RJ+*W<)=3_HH=8[^@UX5COMRTY=6KE:9;D:4UT+1UCK!'00 M>1K2>A-N=FOZ&8-^+=LN1]'QBCAAT]BC]@]BN';5M)4E:0I)!21D$=!%?M*4 MI2E*5T+K>K98XAEW2?'AL#[[[@2#V#/2>P54=[VW2;S<18]`6IVX3G3NHE.H M]$?S)1R[58`ZQ4LT5L]1&!^ZV.@>O`[`.OPO"$O7 MD&A&+8A6'+C)2DC/2VCTC\=RJDV'67SOM,ANK22U`;7+5ZP-U/ZE`]U:WJO- MM=DF7O9M+1!0IQV*ZB26T#)6E.=X`=>`<]U4?L(S>J3;>=H46Z^*TO:9"'F&7`[,>;5E*EC[*`>@XR2>W'(UW]A.S>7%F#5 MEWCK8P@I@,N)PH[PP7"#T#&0.>2>5=/PC['-\[6N^I0M<(Q_)5J'$-K"E*&> M60HX_P"DUZO@]W&V6S1M]D3)<>.IJ6%O+=<"=UO<&Z3GJSO56&T/5$G:/KLN M6UA]Y@8C0&4H)6I()X[HZU$D]@QRK0^R?0:M#:6+4O=-SF*#TK=.0C`]%`/7 MNC/'F36;=I]K?M.TJ^M2$*`=EKD()^\AP[P(]N.ZKSU9M=LL31XBZ6D)G7)^ M(0VEG.(J`CBM9ZBD=73G%9NL-K'(Y'967=2VZUQ-4RX&GIKEQ@)="([Q3Z3F0.`Q]KCD9`XXS6L-E6GYVF MMGEMM]RWDRCOO+:4?]UOJ*@CN!X]I-32E*4I2E?#SS4=E;SSB&VD#>4M:@$I M',D]%4YKO;U;+2AV#IG9?]/VW4UH>MEUC)?C.CB#P*3U*2>D$< MQ66=H6R*\:+<0WOM:CM*T\Q,;_P"]J-/NKW&[Y;%JY)EMD M_O7(O4-E;05KN\!*1Q),E``^-==S6&F6D%:]16E*1UF:W_WKR)NU70T`'QVI M(2\=3!+I_0#42NWA#Z6AA2;=$GW!P?9(0&D'O4<_IJN;]X06JKFE3=L9BVIL M_>;3XUS_`!*X>Q->5I?06K]J%P%QFR9'D9.'+C-4I>1R0"G] M'[-H:834N'%E/)!=D3'T)>?QUG)'#/4.`KW/I9IS\P6KWQOYJ\'4+&SO5;C# ME\G6>8J.%):W[@D;H.,_96.0]E<%BMFS33-Q-PLTJSQ));+16BX@Y22"1@K( MZA4E^EFG/S!:O?&_FI]+-.?\_M7OC?S5"[SI/9/?)2Y4MRRID+.\IR/<$LE1 MYD)6`3VXKELVFME%AD(D056+QZ,%+C\U#Q2>8WU'![14O^EFG/\`G]J]\;^: MN"7J#2<^(Y%F7BRR([HW7&G932DJ'(@G!J#/Z`V//R/'%VUHRL34A/0^N8AQP>I2E$CNJ3?2S3G_/[5[XW\U/I9IS\P6KWQOYJ?2S3GY@M7 MOC?S4^EFG/S!:O?&_FI]+-.?F"U>^-_-7XK5VFTI*E:@M0`&2?+6_FKI2-H> MCHJ-]S4]IQ_)*2L^P$U'[EMRT+`!\76$#AWG)J.=-6ULXV*W'4KC5 MSOJ'8%HX*2@C==D#L'W4_P`Q[N=::MMLA6>W,0+?&;C16$[K;38P$C_YU]== MNE*4I2OQ20I)2H`@C!!JJM9;"M/ZA6Y+M*O-$U7$AI&65GM1PQ_21ZC5&:EV M3ZOTP7')%K7*BI)_VF'_`&J,ZIOIW9'K'4:DJ:M:X<<_P#'G993W`^D>X5;=HV3Z(T#'1=-7W2/ M+?2-X)E$(9R/X6^E9]>?57CZS\(%*&E6_1L4(0!N"<^WC`_NV^KUJ_PU1D^X MS+K-=FSY+LF2ZLY/JJR:4I2E*4I2E>%>=%Z:U#DW6 MRPI*STN*:`7_`(QA7QJ$7'P?]%S5%4<3X/8Q(WA[%A7[UX#_`(-=L4O+&HI; M:.3D="S[017']6F'^9W_`'-/SUV(_@V69)'E-^GN<_%M(1^^:D-NV"Z'@D%Z M-+G$?_2:S=M M<19]%F+!1OI':X5;Q/:,57LKP=4SI"I$S5\V0^KBIQZ,%J/>5YKA^K3#_,[_ M`+FGYZ?5IA_F=_W-/ST^K3#_`#._[FGYZ?5IA_F=_P!S3\]/JTP_S._[FGYZ M?5IA_F=_W-/ST^K3#_,[_N:?GI]6F'^9W_GU:8?YG?]S3\]/JTP_S._P"YI^>GU:8?YG?]S3\]/JTP_P`S MO^YI^>GU:8?YG?\`GU:8?YG?]S3\]/JTP_S._[FGYZ? M5IA_F=_W-/ST^K3#_,[_`+FGYZ?5IA_F=_W-/SUS,>#7:4D>4:@FN#/'Q;"$ M<.\FI!;M@6B82PI]J=.Q]V1)(![D!-3BS:2T_I_C:;/"B*ZUM-`+/K5T_&O9 GI2E*4I2E*4I2E*4I2E*4I2E*4I2E*4I2E*4I2E*4I2E*4I2E*__9 ` end GRAPHIC 15 ex13-1image002.jpg EX13-1IMAGE002.JPG begin 644 ex13-1image002.jpg M_]C_X``02D9)1@`!`0$`8`!@``#__@`<4V]F='=A>:C,./ON MH:::25K<6H)2A(&223X`'NOD>0S*CMR(SS;S+B0I#C:@I*@?!!'!%>9<5F=# M>B2$!;+[:FW$GPI*A@C]C5:VR?J#I8W_``R]Q';KIU"S]/<8HW+CIY.U:?@> M?MDX*N``M"EH&]]IND:4<9*$+PM(^Z#^(?J*ZM`I7CO-=_L=U'=V[ M^WN&[;G&Z!2E*!2E*!2J_OFJ)VB-<.2;VX\[IR[)0EAQ`*A#=2D!0( M\X/*N/.>`<&II;+O;KS%$JV36);.<;V5A0!^#\'\Z# M;7,>CN?1LJ6I;2%8#JSC`&*Z*=0:>@)_TW6&HK&IS*6X\R(Y*1@<_A M2XA1XR/"O7WS5G6RV0K-;F;=;HZ8\5A.UMM.<`9R>3R22223R2:VJ"GW.I\Z M-_3M6I8&H'=@5VW+-(9/!Y`VGR0[S<[A<=1*"E"V16W\13RDLI:P$Y` M."5GDC(/NMZ+U(N$34V-4V[^7[-)BJEIMNU)U%NLVT,OR;(_!29#DAM7:KJ+U#;LY=9[:%-,J[266F$*()"&QGDX&223P/%!3UQU5JGJ/)>:M=MG MNL[RAEAAPML-I]%U0(W+Y]J"1@<'-2'1G4-W3L"5:=3NLDVY9B,-L*4]+?>2 M3O21DY&3@*.U/&,FK>KG-:?LK-R7X3[.[&J MFDKFF(ARZ-Q)4I.>PZ%8;//"EXV@\>S\?-:SW5JP#4;-IBAR6RM]$=R1Q^=2*5I'3M+R^XX1'2"I?^XD#.?//W-:##J/JEIW3\EF(AQ=SE.+"5,P<.%`/ MRY,1 M%QPQM/TC*@EAQ222E2TXY(S\UW)^F[%='U/W"S0);RD[2Z]&0M>/C<1F@WV7 MFI#0=8=0ZVKPM"@H']17NHE;>G[%ANB)5@N\^W12X%O0`L.L.#(R`%`E.>1G M.>>,5+:!2E=<+G'T=8 M)!:G3!NG2FQN^BC^R?A2@<#QZY&0:[6HKN_;V&HEN;2]=9RBW$:5_:,?W.*_ MP2#D_H/)%8]*:;&G8#G?DKFW&6KNS9CA)4\O]?"0.`/B@W+%8K?INTM6RV,! MIAH?FI:O:E'V3_[BNC2E`I2E`I2E`I2E`I2E`K5E6V%.?C/RHK;SD1?<84M. M>VK&,C[TI0;5*4H%*4H%*4H%*4H,/TK'U@F=I/U`;[0 GRAPHIC 16 ex13-1image004.jpg EX13-1IMAGE004.JPG begin 644 ex13-1image004.jpg M_]C_X``02D9)1@`!`0$`8`!@``#__@`<4V]F='=A3@9*"25*U7U5T]I=[J=LAN-8V0QO M@IG`^F01NW.[`CGCDY&..<0EGO>L>IK97TKG:8LFWVU$+#)-.<@%K7G;@<.] MS0,$8YY7C<-#U=@N%):]%::HWR^D)7WVY$2F%^[C`(P'#:TY:T]^&]R@EZKJ MH(K0^XTVFKE44\47J/JW#T:5W'X2O`+@7<#V@GCC)PJ_I[J_J6_7N04^F#4V M]G\HJ*%\LK"0=@=(7!KYPCW-S@;#@EN1G.T MYR"``@;GKO6%^?5T%F=34-6QV8Z*A;]94E@;AQ?*"8F-W.'PX'C_`&N&A[+? M-.6RNK=67]]9-/B5XEJ'.BI6-!)P7<#N*MK,.K6N#:6GF MM&R6BOGU!J2Z"[WAS2&U4K0UE+&,Y$8[-SEV2,#G``Y)L=JM-OLE`R@ME+'2 MTS"2V-@\GN?DG^U0X-.:AZ@S553JY]99K5N:R"T4\^/4VD.+I#CD9_HY'C`R M$O<^JVD+<71QW$W"H!`;!0QF5TA+L8:[AA^?Y=NVM#)&X[[V;"6'/;/<@^W6R(5,+-HJI1OE)Q@G<>Q.3G&!SCMP@@.G^I=8ZLJI;K5TE M#2V"65QA#@3,0`6AK"#@@.;ESG#DDXXX;T!<^=9-8Z(!@TA'2W>T/F+H[=5. MV24@).Y M`P".<#Y("IK*;7VLRVX-NK=* MVU[08*6.,33.QGWO/M[YX`.,8XXR93J#IZX7B"W5MNI8;E);9S(;74D>C5AP M#^<'4DZDU=GM&%T+HY8SG`'N+FG).>`#P,Y^ M`SET3J:"IHG6_75Q=!$8Q/%5M$A>`?<0X8[C`P1DNSU=K0UH:T``#``\+ZB` MB(@(B(-6Y5OVVW3UGTM35>BW=Z-+'OE?^FM\E4T7+J9>J024-HM-D9/$7--= M,^26/(]O`&`X=\.;^B/"OB(*%/TVN=TF]2]:YO-5O.9&4Q%/&<#`VL&6M\>. M>3Y6[:>E>D;4YLK[;]PJ?=OGKWF8R$G.7-/LS^]O_O*N"(/*GIJ>DA$--!'! M$WLR-@:T?\"]41`1$0$1$!$1`1$0$1$!$1`1$0$1$!$1!__0[*B(@(B("(B` %B(@__]D_ ` end GRAPHIC 17 ex13-1image006.jpg EX13-1IMAGE006.JPG begin 644 ex13-1image006.jpg M_]C_X``02D9)1@`!`0$`8`!@``#__@`<4V]F='=AZ0399Z2(2I`4M/U>K*MA&=RO';S[!.+%=)]T9>ZE5]'K)-CQ5,[EOJD8`*`,^4J_Y0=RM;;[+REI:=0X6U;5A*@=I]C[& MH5IG4MPMWP\5J+5$DONK>)"2E+92G>&PGL!W!/\`NNMHFVO6^SK7,F&3-EN? M,2"5$EM:DC*.3Q@YXP._84$CI2E`I2E`I7C:N<=ZZ/6Y!)?93N7VP.QQWSGU M"M:+U"I&9DF),?MR+-O/8CK65J5DG:DJ3D#.T=\XSSGFL+;H"[H%UMLAIEF MS=1U<1EMW*W_`%KV)43DA.U1!Y2>1S5G4H*NL?PON]J@6V6BXMM7F&XL;@L* M:0TH.#"1TSDY7GGW/XK3I[1VN+)Z MV3OCM$)''(PHA>1W^GL?`5K/1JG5^HD6,387S\)OKJ1'24L-IP1W6G<5?W![ MC!]Q70@Z5OMJL=PO%HZEN>,'?*2^MI:I#X0LK(`"DA/JXY3W/XJ9:"B6YUN7 M=[=&98CO.EMCHH2$E`2C/(`^\*]O^U,:"G6[YJ9J#IOYJ&I,%3R"E2.D7)#^ M1N!]6`DJ+F/IX(KHNR]?O:S1:4SX3,EZ%UG4H0GI,)"R`4DI*B24I[[AZCV\ M6C7S`SG'/O04SJ_6NIXMCB6,0U1'U6_$UUU+2E+4E/J*-JRG!VJ[@'G@"I%\ M/M56B'INVVV1<%O7)QO>XVEHX3N5N'.T#[QY--7R']4N*B0I>RWQ9C,20AO) M^9<4^E*T'D#TC:>Q'KJ;VBV1;3;(\2+';92TTE!"$!.<#SCSG/\`-!!M#ZVM MEPG2W7P^)=Q?+J5],!.Q+2$>#QRV:\6B=76U%FO#<5U:;I,A6Q)/Y'(/!P,_H4&O2-I%CTS%MP2$]+>2`#Y6H^?W7:I2@4I2@K?1MOF IW&Y;GH;\!FW37'927VU)$UY0'K3D#(2I"59_/8>;(I2@4I2@4I2@_]D_ ` end GRAPHIC 18 ex13-1image008.jpg EX13-1IMAGE008.JPG begin 644 ex13-1image008.jpg M_]C_X``02D9)1@`!`0$`8`!@``#__@`<4V]F='=AD)9V:'M5H9T`-6>ERDQTO M>GYGN0,;L?7VI:X\?@>#_(H_Q.4CR(&N!PT$EQQG["],@A/J%;MF1CXW^+++.DF;_]D[@[,,7D^H/0\L+SNV?7&,55M\L*FFE$`N M&2H@#W_I]:1IO^C\/^:5_P!=-7MZO&L1PGCPYEABLV1<9AM$P/)4M204E!VA M603@>*G7B*Q_U'Q+MEGT_!O5O0FYQICRFDE+A:VE/?NDG^X%-EHE"ZV:#<@G MEB9';?",YV[DA6,],]ZP+4<:#'X2:?\`0/N/MN3WU*6XWL.[J.V3X`\G_P`K M=-'?@FQ?QL?_`!IIKQ_!662T[3C.:*Z[\P_:BL^2CA=<%[76D1K.Q1[<7N5R MI"7MV[;V2I/L?U5XN:=A2M"JT6BX-*>;CH96$O`K200KKTR.WM38GY1^U9[; M]06VR\0-;RISY0VE,,]$*43M:5GL*UKAS(SO"=J1I!JP(G9+,TR2H.CORPC& M=GT]J:)FDD2^'R=*J=.$Q6V-^[RC&#G'NGVI-MVMY8NUV;M%F@./.30G:@[P=67>>I2G5ILK;[4%QQ7*#A0RI6!N(&/C/?KU&< MFA,+61PDY^D(EB5-.(LI;Z5\WPH`8SL^GM5?;>%#SJ&786IG7F&R`DL3RI.$ MG&!A&.F"/^*O;GK6]VQZ"VIFWN,39S< MTVM*%A2DONE6`1W>=(H!IB1E0K?%B*67%,,(;*U')40,9)\]J*D._,/VHK+G MZ9=<,YO?$&[VO6CML0(IA,.MA8P"L((25?F[]34N]ZRNK>L++:[8(?IKI$;> MR^@E6Y97CJ#VZ#W\TMWZR,W;76HVE0D+489<"N>N.E5O$NQ1;5=2_$C- ME-X:6F2%.KRI0<2X3YQD[>V.U3]6<.X5YMEOT_;Y*(UTAQ4*;YBB6UH!4"#W M4,J43G![8J2"_P!1S;_IU$=<)MF?"><#;O-:!6T3G*L)VC;@?4TL7[7NKF-; M3+#9(T)_EKPTV6BI:@$A1\_O25*B:SX5OMOAUHLO$)4MMDK;5^;:5*0,9P>Q MSWIB4U/G\45S+(Q'C7!_[QMY]Y6$Y9R7$?;+0V-J45?`D$]MN/A]_(^M0&=-):U^W>6[3)2UZPN)/+=! M3USVQM`R??%:=15MC$,UXCVZ7JZ3;/16V6D14N[B_'<2/BVXQM!]CWQ5EJ.' M<+GJ*+>+<;A!=@I#:"(F_>0I8/GY5!6,X/3KBGBBFUD1"+J(3=4L06+G;YC$ M)I]+KK+$=;I?[C:K*4%(QN&>OD^H40J0MQ2MNU..J^N,Y^G>BF>B &N;==!__9 ` end