10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

x  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended January 27, 2013

or

o  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission File Number: 1-2402

HORMEL FOODS CORPORATION

(Exact name of registrant as specified in its charter)

Delaware	41-0319970
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

1 Hormel Place Austin, Minnesota	55912-3680
(Address of principal executive offices)	(Zip Code)

(507) 437-5611

(Registrant’s telephone number, including area code)

None

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

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  x YES  o NO

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

Large accelerated filer x	Accelerated filer o
Non-accelerated filer o	Smaller reporting company o
(Do not check if a smaller reporting company)

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

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

Class	Outstanding at March 3, 2013
Common Stock	$.0293 par value	264,871,113
Common Stock Non-Voting	$.01 par value	-0-

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION
Item 1.	Financial Statements
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION — January 27, 2013 and October 28, 2012
CONSOLIDATED STATEMENTS OF OPERATIONS — Three Months Ended January 27, 2013 and January 29, 2012
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME — Three Months Ended January 27, 2013 and January 29, 2012
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ INVESTMENT — Twelve Months Ended October 28, 2012 and Three Months Ended January 27, 2013
CONSOLIDATED STATEMENTS OF CASH FLOWS — Three Months Ended January 27, 2013 and January 29, 2012
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations
CRITICAL ACCOUNTING POLICIES
RESULTS OF OPERATIONS
Overview
Consolidated Results
Segment Results
Related Party Transactions
LIQUIDITY AND CAPITAL RESOURCES
FORWARD-LOOKING STATEMENTS
Item 3.		Quantitative and Qualitative Disclosures About Market Risk
Item 4.		Controls and Procedures
PART II - OTHER INFORMATION
Item 1.		Legal Proceedings
Item 1A.		Risk Factors
Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds
Item 6.		Exhibits
SIGNATURES

2

PART I — FINANCIAL INFORMATION

Item 1.  Financial Statements

HORMEL FOODS CORPORATION

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

(in thousands, except share and per share amounts)

	January 27,			October 28,
	2013			2012
	(Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	887,677		$	682,388
Short-term marketable securities	—			77,387
Accounts receivable	466,536			507,041
Inventories	953,682			950,521
Income taxes receivable	—			16,460
Deferred income taxes	70,402			68,560
Prepaid expenses	13,276			12,772
Other current assets	8,272			5,555
TOTAL CURRENT ASSETS	2,399,845			2,320,684
DEFERRED INCOME TAXES	141,233			144,245
GOODWILL	630,875			630,875
OTHER INTANGIBLES	120,882			123,072
PENSION ASSETS	49			49
INVESTMENTS IN AND RECEIVABLES FROM AFFILIATES	280,886			286,537
OTHER ASSETS	132,866			134,024
PROPERTY, PLANT AND EQUIPMENT
Land	56,506			56,258
Buildings	771,628			767,876
Equipment	1,452,593			1,435,630
Construction in progress	75,422			82,254
	2,356,149			2,342,018
Less allowance for depreciation	(1,439,955		)	(1,417,538		)
	916,194			924,480
TOTAL ASSETS	$	4,622,830		$	4,563,966

See Notes to Consolidated Financial Statements

3

HORMEL FOODS CORPORATION

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

(in thousands, except share and per share amounts)

	January 27,			October 28,
	2013			2012
	(Unaudited)
LIABILITIES AND SHAREHOLDERS’ INVESTMENT
CURRENT LIABILITIES
Accounts payable	$	324,367		$	385,877
Accrued expenses	58,027			49,792
Accrued workers compensation	35,623			33,543
Accrued marketing expenses	98,334			78,712
Employee related expenses	138,077			193,463
Taxes payable	35,082			4,864
Interest and dividends payable	47,876			40,049
TOTAL CURRENT LIABILITIES	737,386			786,300
PENSION AND POST-RETIREMENT BENEFITS	613,009			615,428
LONG-TERM DEBT—less current maturities	250,000			250,000
OTHER LONG-TERM LIABILITIES	88,483			87,313
SHAREHOLDERS’ INVESTMENT
Preferred stock, par value $.01 a share—authorized 160,000,000 shares; issued—none
Common stock, non-voting, par value $.01 a share—authorized 400,000,000 shares; issued—none
Common stock, par value $.0293 a share—authorized 800,000,000 shares; issued 264,680,489 shares January 27, 2013 issued 263,044,280 shares October 28, 2012	7,755			7,707
Additional paid-in capital	23,494			—
Accumulated other comprehensive loss	(324,458		)	(323,569		)
Retained earnings	3,220,347			3,135,317
HORMEL FOODS CORPORATION SHAREHOLDERS’ INVESTMENT	2,927,138			2,819,455
NONCONTROLLING INTEREST	6,814			5,470
TOTAL SHAREHOLDERS’ INVESTMENT	2,933,952			2,824,925
TOTAL LIABILITIES AND SHAREHOLDERS’ INVESTMENT	$	4,622,830		$	4,563,966

See Notes to Consolidated Financial Statements

4

HORMEL FOODS CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

(Unaudited)

	Three Months Ended
	January 27, 2013			January 29, 2012
Net sales	$	2,116,241		$	2,039,439
Cost of products sold	1,772,048			1,702,030
GROSS PROFIT	344,193			337,409
Selling, general and administrative	155,831			152,477
Equity in earnings of affiliates	9,843			11,001
OPERATING INCOME	198,205			195,933
Other income and expense:
Interest and investment income	1,810			1,590
Interest expense	(3,094		)	(3,214		)
EARNINGS BEFORE INCOME TAXES	196,921			194,309
Provision for income taxes	65,876			64,976
NET EARNINGS	131,045			129,333
Less: Net earnings attributable to noncontrolling interest	1,329			938
NET EARNINGS ATTRIBUTABLE TO HORMEL FOODS CORPORATION	$	129,716		$	128,395
NET EARNINGS PER SHARE:
BASIC	$	0.49		$	0.49
DILUTED	$	0.48		$	0.48
WEIGHTED-AVERAGE SHARES OUTSTANDING:
BASIC	263,944			263,946
DILUTED	269,140			269,608
DIVIDENDS DECLARED PER SHARE:	$	0.17		$	0.15

See Notes to Consolidated Financial Statements

5

HORMEL FOODS CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

(Unaudited)

	Three Months Ended
	January 27, 2013			January 29, 2012
NET EARNINGS	$	131,045		$	129,333
Other comprehensive income (loss), net of tax:
Foreign currency translation	384			593
Pension and other benefits	5,554			881
Deferred hedging	(6,812		)	(11,291		)
TOTAL OTHER COMPREHENSIVE LOSS	(874		)	(9,817		)
COMPREHENSIVE INCOME	130,171			119,516
Less: Comprehensive income attributable to noncontrolling interest	1,344			974
COMPREHENSIVE INCOME ATTRIBUTABLE TO HORMEL FOODS CORPORATION	$	128,827		$	118,542

See Notes to Consolidated Financial Statements

6

HORMEL FOODS CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ INVESTMENT

(in thousands, except per share amounts)

(Unaudited)

	Hormel Foods Corporation Shareholders
	Common Stock			Treasury Stock			Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Non- controlling Interest			Total Shareholders’ Investment
Balance at October 30, 2011	$	7,734		$	—		$	—		$	2,824,331		$	(175,483	)	$	3,234		$	2,659,816
Net earnings										500,050						4,911			504,961
Other comprehensive (loss) income													(148,086		)	51			(148,035		)
Purchases of common stock				(61,366		)													(61,366		)
Stock-based compensation expense							16,710												16,710
Exercise of stock options/nonvested shares	36			(295		)	13,576												13,317
Shares retired	(63		)	61,661			(30,286		)	(31,312		)							—
Proceeds from noncontrolling interest																774			774
Distribution to noncontrolling interest																(3,500		)	(3,500		)
Declared cash dividends — $.60 per share										(157,752		)							(157,752		)
Balance at October 28, 2012	$	7,707		$	—		$	—		$	3,135,317		$	(323,569	)	$	5,470		$	2,824,925
Net earnings										129,716						1,329			131,045
Other comprehensive (loss) income													(889		)	15			(874		)
Stock-based compensation expense							5,576												5,576
Exercise of stock options/nonvested shares	48						17,918												17,966
Declared cash dividends — $.17 per share										(44,686		)							(44,686		)
Balance at January 27, 2013	$	7,755		$	—		$	23,494		$	3,220,347		$	(324,458	)	$	6,814		$	2,933,952

See Notes to Consolidated Financial Statements

7

HORMEL FOODS CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(Unaudited)

	Three Months Ended
	January 27, 2013			January 29, 2012
OPERATING ACTIVITIES
Net earnings	$	131,045		$	129,333
Adjustments to reconcile to net cash provided by operating activities:
Depreciation	27,655			28,389
Amortization of intangibles	2,189			2,426
Equity in earnings of affiliates, net of dividends	156			159
Provision for deferred income taxes	(2,395		)	(201		)
Gain on property/equipment sales and plant facilities	(234		)	(178		)
Non-cash investment activities	(1,142		)	(1,039		)
Stock-based compensation expense	5,576			6,240
Excess tax benefit from stock-based compensation	(13,261		)	(1,929		)
Changes in operating assets and liabilities, net of acquisitions:
Decrease in accounts receivable	40,505			38,605
(Increase) decrease in inventories	(3,161		)	2,995
Decrease in prepaid expenses and other current assets	2,318			3,067
Increase in pension and post-retirement benefits	6,511			4,460
Decrease in accounts payable and accrued expenses	(53,949		)	(60,167		)
NET CASH PROVIDED BY OPERATING ACTIVITIES	141,813			152,160
INVESTING ACTIVITIES
Sale of trading securities	77,558			—
Acquisitions of businesses/intangibles	—			(168		)
Purchases of property/equipment	(22,053		)	(30,458		)
Proceeds from sales of property/equipment	2,919			1,055
Decrease in investments, equity in affiliates, and other assets	7,919			998
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES	66,343			(28,573		)
FINANCING ACTIVITIES
Dividends paid on common stock	(39,438		)	(33,600		)
Share repurchase	—			(11,117		)
Proceeds from exercise of stock options	23,222			3,885
Excess tax benefit from stock-based compensation	13,261			1,929
NET CASH USED IN FINANCING ACTIVITIES	(2,955		)	(38,903		)
EFFECT OF EXCHANGE RATE CHANGES ON CASH	88			804
INCREASE IN CASH AND CASH EQUIVALENTS	205,289			85,488
Cash and cash equivalents at beginning of year	682,388			463,130
CASH AND CASH EQUIVALENTS AT END OF QUARTER	$	887,677		$	548,618

See Notes to Consolidated Financial Statements

8

HORMEL FOODS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE A                GENERAL

Basis of Presentation

The accompanying unaudited consolidated financial statements of Hormel Foods Corporation (the Company) have been prepared in accordance with generally accepted accounting principles for interim financial information, and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X.  Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.  In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included.  Operating results for the interim period are not necessarily indicative of the results that may be expected for the full year.  The balance sheet at October 28, 2012, has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.  For further information, refer to the consolidated financial statements and footnotes included in the Company’s Annual Report on Form 10-K for the fiscal year ended October 28, 2012.

Certain reclassifications of previously reported amounts have been made to conform to the current year presentation.  The reclassifications had no impact on net earnings as previously reported.

Investments

The Company maintains a rabbi trust to fund certain supplemental executive retirement plans and deferred income plans, which is included in other assets on the Consolidated Statements of Financial Position.  The securities held by the trust are classified as trading securities.  Therefore, unrealized gains and losses associated with these investments are included in the Company’s earnings.  Securities held by the trust generated a gain of $1.5 million for the quarter ended January 27, 2013, compared to a gain of $1.3 million for the quarter ended January 29, 2012.  The majority of this portfolio is held in fixed return investments to reduce the exposure to volatility in equity markets.

During fiscal 2012 and 2013, the Company also held securities as part of an investment portfolio, which are classified as short-term marketable securities on the Consolidated Statements of Financial Position.  These investments are also trading securities.  Therefore, unrealized gains and losses are included in the Company’s earnings.  The Company recorded a gain of $0.2 million related to these investments for the quarter ended January 27, 2013, compared to a gain of $0.3 million for the quarter ended January 29, 2012.  These securities were liquidated in the first quarter of fiscal 2013.

Supplemental Cash Flow Information

Non-cash investment activities presented on the Consolidated Statements of Cash Flows generally consist of unrealized gains or losses on the Company’s rabbi trust and other investments, amortization of affordable housing investments, and amortization of bond financing costs.  The noted investments are included in other assets or short-term marketable securities on the Consolidated Statements of Financial Position.  Changes in the value of these investments are included in the Company’s net earnings and are presented in the Consolidated Statements of Operations as either interest and investment income or interest expense, as appropriate.

Guarantees

The Company enters into various agreements guaranteeing specified obligations of affiliated parties.  The Company’s guarantees either terminate in one year or remain in place until such time as the Company revokes the agreement.  The Company currently provides a revocable standby letter of credit for $5.6 million to guarantee obligations that may arise under worker compensation claims of an affiliated party.  This potential obligation is not reflected in the Company’s Consolidated Statements of Financial Position.

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New Accounting Pronouncements

In June 2011, the Financial Accounting Standards Board (FASB) updated the guidance within Accounting Standards Codification (ASC) 220, Comprehensive Income.  The update eliminates the option for companies to report other comprehensive income and its related components in the Statement of Changes in Stockholders’ Equity.  Instead, companies have the option to present total comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous Statement of Comprehensive Income or in two separate but consecutive statements.  The updated guidance is to be applied retrospectively, and is effective for fiscal years, and interim periods within those years, beginning after December 15, 2011, with early adoption permitted.  The Company early adopted the provisions of this accounting standard during the fourth quarter of fiscal 2012, and adoption did not have a material impact on the consolidated financial statements, as it relates to presentation only.

In February 2013, the FASB further updated the guidance within ASC 220, Comprehensive Income.  The update requires companies to report, in one place, information about reclassifications out of accumulated other comprehensive income (AOCI) and changes in AOCI balances.  For significant items reclassified out of AOCI to net income in their entirety in the same reporting period, reporting is required about the effect of the reclassifications on the respective line items in the statement where net income is presented. For items that are not reclassified to net income in their entirety in the same reporting period, a cross reference to other disclosures currently required under United States Generally Accepted Accounting Principles is required.  The above information must be presented in one place, either parenthetically on the face of the financial statements by income statement line item, or in a note.  The updated guidance is to be applied prospectively, and is effective for fiscal years, and interim periods within those years, beginning after December 15, 2012, with early adoption permitted.  The Company intends to adopt the new provisions of this accounting standard at the beginning of fiscal year 2014, and adoption is not expected to have a material impact on the consolidated financial statements as it relates to presentation and disclosure only.

In December 2011, the FASB updated the guidance within ASC 210, Balance Sheet.  The update enhances disclosures related to the offsetting of certain assets and liabilities to enable users of financial statements to understand the effect of those arrangements on financial position.  The updated guidance is effective for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods.  The Company will adopt the new provisions of this accounting standard at the beginning of fiscal year 2014, and adoption is not expected to have a material impact on the consolidated financial statements.

NOTE B                ACQUISITIONS

On January 31, 2013, subsequent to the end of the first quarter, the Company acquired the United States based  Skippy®  peanut butter business from Conopco, Inc. (doing business as Unilever United States Inc.), of Englewood Cliffs, N.J. for a preliminary purchase price of $663.1 million in cash.  This acquisition includes the Little Rock, Arkansas manufacturing facility and all sales worldwide, except sales in China.  The Company expects to close the acquisition of the China based Skippy® peanut butter business by the end of fiscal year 2013 for an additional investment of approximately $42.0 million.  The purchase price is preliminary pending final working capital adjustments, and was funded by the Company with existing cash on hand generated from operations and liquidating marketable securities.

Skippy® is a well-established brand that allows the Company to expand its presence in the center of the store with a non-meat protein product and reinforces the Company’s balanced product portfolio.  The acquisition also provides the opportunity to strengthen the Company’s global presence and complements the international sales strategy for the SPAM family of products.

Operating results for this acquisition will be included in the Company’s Consolidated Statements of Operations from the date of acquisition (i.e. beginning in the second quarter) and will primarily be reflected in the Grocery Products and All Other reporting segments.

The acquisition will be accounted for as a business combination using the acquisition method.  The Company is currently in the process of estimating the acquisition date fair values of the assets acquired and liabilities

10

assumed, using independent appraisals and other analyses.  Therefore, a preliminary allocation of the purchase price to the acquired assets, liabilities, and goodwill will be performed during the second quarter of fiscal 2013.

NOTE CSTOCK-BASED COMPENSATION

The Company issues stock options and nonvested shares as part of its stock incentive 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.  Options typically vest over periods ranging from six months to four years and expire ten years after the date of the grant.  The Company recognizes stock-based compensation expense ratably over the shorter of the requisite service period or vesting period.  The fair value of stock-based compensation granted to retirement-eligible individuals is expensed at the time of grant.

A reconciliation of the number of options outstanding and exercisable (in thousands) as of January 27, 2013, and changes during the quarter then ended, is as follows:

	Shares	Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term	Aggregate Intrinsic Value (in thousands)
Outstanding at October 28, 2012	20,454	$	19.67
Granted	1,617	30.98
Exercised	2,878	15.15
Forfeitures	13	28.10
Outstanding at January 27, 2013	19,180	$	21.29	6.0 years	$	262,364
Exercisable at January 27, 2013	13,044	$	18.61	4.8 years	$	218,293

The weighted-average grant date fair value of stock options granted and the total intrinsic value of options exercised (in thousands) during the first quarter of fiscal years 2013 and 2012, is as follows:

	Three Months Ended
	January 27, 2013		January 29, 2012
Weighted-average grant date fair value	$	5.10	$	5.75
Intrinsic value of exercised options	$	46,520	$	5,829

The fair value of each option award is calculated on the date of grant using the Black-Scholes valuation model utilizing the following weighted-average assumptions:

	Three Months Ended
	January 27, 2013	January 29, 2012
Risk-Free Interest Rate	1.3%	1.9%
Dividend Yield	2.2%	2.0%
Stock Price Volatility	20.0%	21.0%
Expected Option Life	8 years	8 years

As part of the annual valuation process, the Company reassesses the appropriateness of the inputs used in the valuation models.  The Company establishes the risk-free interest rate using stripped U.S. Treasury yields as of the grant date where the remaining term is approximately the expected life of the option.  The dividend yield is set based on the dividend rate approved by the Company’s Board of Directors and the stock price on the grant date.  The expected volatility assumption is set based primarily on historical volatility.  As a reasonableness test, implied volatility from exchange traded options is also examined to validate the volatility range obtained from the historical analysis.  The expected life assumption is set based on an analysis of past exercise behavior by

11

option holders.  In performing the valuations for option grants, the Company has not stratified option holders as exercise behavior has historically been consistent across all employee and non-employee director groups.

The Company’s nonvested shares granted on or before September 26, 2010, vest after five years or upon retirement.  Nonvested shares granted after September 26, 2010, vest after one year.  There were no changes to the balance of nonvested shares during the first quarter, with 139 thousand shares outstanding at a weighted-average fair value of $21.47 as of January 27, 2013.

No shares vested during the first quarter of fiscal year 2013, while the fair value of shares vested in the first quarter of 2012 was $0.7 million.

Stock-based compensation expense, along with the related income tax benefit, for the first quarter of fiscal years 2013 and 2012 is presented in the table below.

	Three Months Ended
(in thousands)	January 27, 2013		January 29, 2012
Stock-based compensation expense recognized	$	5,576	$	6,240
Less: Income tax benefit recognized	2,108		2,366
After-tax stock-based compensation expense	$	3,468	$	3,874

At January 27, 2013, there was $13.9 million of total unrecognized compensation expense from stock-based compensation arrangements granted under the plans.  This compensation is expected to be recognized over a weighted-average period of approximately 4.3 years.  During the quarter ended January 27, 2013, cash received from stock option exercises was $23.2 million compared to $3.9 million for the quarter ended January 29, 2012.  The total tax benefit to be realized for tax deductions from these option exercises for the quarter ended January 27, 2013, was $17.6 million compared to $2.2 million in the comparable quarter of fiscal 2012.

Shares issued for option exercises and nonvested shares may be either authorized but unissued shares, or shares of treasury stock acquired in the open market or otherwise.

NOTE DGOODWILL AND INTANGIBLE ASSETS

The carrying amounts of goodwill for the quarter ended January 27, 2013, are presented in the table below.  There were no changes to these carrying amounts during the first quarter.

(in thousands)	Grocery Products		Refrigerated Foods		JOTS		Specialty Foods		All Other		Total
Balance as of January 27, 2013	$	123,316	$	96,643	$	203,214	$	207,028	$	674	$	630,875

The gross carrying amount and accumulated amortization for definite-lived intangible assets are presented in the table below.

	January 27, 2013					October 28, 2012
(in thousands)	Gross Carrying Amount		Accumulated Amortization			Gross Carrying Amount		Accumulated Amortization
Customer lists/relationships	$	22,148	$	(15,271	)	$	22,148	$	(14,684	)
Proprietary software & technology	22,000		(17,932		)	22,000		(17,319		)
Formulas & recipes	17,854		(12,220		)	17,854		(11,686		)
Distribution network	4,120		(3,850		)	4,120		(3,783		)
Other intangibles	9,466		(7,292		)	9,466		(6,903		)
Total	$	75,588	$	(56,565	)	$	75,588	$	(54,375	)

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Amortization expense was $2.2 million for the quarter ended January 27, 2013, compared to $2.4 million for the quarter ended January 29, 2012.

Estimated annual amortization expense (in thousands) for the five fiscal years after October 28, 2012, is as follows:

Fiscal Year	Estimated Amortization Expense
2013	$	7,768
2014	6,372
2015	3,192
2016	1,023
2017	636

The carrying amounts for indefinite-lived intangible assets are presented in the table below.

(in thousands)	January 27, 2013		October 28, 2012
Brands/tradenames/trademarks	$	93,875	$	93,875
Other intangibles	7,984		7,984
Total	$	101,859	$	101,859

NOTE EINVESTMENTS IN AND RECEIVABLES FROM AFFILIATES

The Company accounts for its majority-owned operations under the consolidation method.  Investments in which the Company owns a minority interest, and for which there are no other indicators of control, are accounted for under the equity or cost method.  These investments, along with any related receivables from affiliates, are included in the Consolidated Statements of Financial Position as investments in and receivables from affiliates.

Investments in and receivables from affiliates consists of the following:

			January 27,		October 28,
(in thousands)	Segment	% Owned	2013		2012
MegaMex Foods, LLC	Grocery Products	50%	$	196,562	$	205,315
Foreign Joint Ventures	All Other	Various (26-50%)	84,324		81,222
Total			$	280,886	$	286,537

Equity in earnings of affiliates consists of the following:

		Three Months Ended
(in thousands)	Segment		January 27, 2013		January 29, 2012
MegaMex Foods, LLC	Grocery Products		$	7,037	$	8,624
Foreign Joint Ventures	All Other		2,806		2,377
Total			$	9,843	$	11,001

The Company recognized a basis difference of $21.3 million associated with the formation of MegaMex Foods, LLC, which is being amortized through equity in earnings of affiliates.

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NOTE FEARNINGS PER SHARE DATA

The reported net earnings attributable to the Company were used when computing basic and diluted earnings per share.  The following table sets forth the shares used as the denominator for those computations:

	Three Months Ended
(in thousands)	January 27, 2013	January 29, 2012
Basic weighted-average shares outstanding	263,944	263,946
Dilutive potential common shares	5,196	5,662
Diluted weighted-average shares outstanding	269,140	269,608

For the three months ended January 27, 2013, and January 29, 2012, a total of 1.0 million and 1.1 million weighted- average stock options, respectively, were not included in the computation of dilutive potential common shares since their inclusion would have had an antidilutive effect on earnings per share.

NOTE GACCUMULATED OTHER COMPREHENSIVE LOSS

The components of accumulated other comprehensive loss, net of tax, are as follows:

(in thousands)	January 27, 2013			October 28, 2012
Foreign currency translation	$	12,784		$	12,415
Pension & other benefits	(339,911		)	(345,465		)
Deferred gain on hedging	2,669			9,481
Accumulated other comprehensive loss	$	(324,458	)	$	(323,569	)

NOTE HINVENTORIES

Principal components of inventories are:

(in thousands)	January 27, 2013		October 28, 2012
Finished products	$	513,734	$	494,298
Raw materials and work-in-process	268,421		267,877
Materials and supplies	171,527		188,346
Total	$	953,682	$	950,521

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NOTE I DERIVATIVES AND HEDGING

The Company uses hedging programs to manage price risk associated with commodity purchases.  These programs utilize futures contracts and swaps to manage the Company’s exposure to price fluctuations in the commodities markets.  The Company has determined that its programs which are designated as hedges are highly effective in offsetting the changes in fair value or cash flows generated by the items hedged.

Cash Flow Hedges:  The Company currently utilizes corn futures to offset the price fluctuation in the Company’s future direct grain purchases, and has historically entered into various swaps to hedge the purchases of grain and natural gas at certain plant locations.  The financial instruments are designated and accounted for as cash flow hedges, and the Company measures the effectiveness of the hedges on a regular basis.  Effective gains or losses related to these cash flow hedges are reported in accumulated other comprehensive loss (AOCL) and reclassified into earnings, through cost of products sold, in the period or periods in which the hedged transactions affect earnings.  Any gains or losses related to hedge ineffectiveness are recognized in the current period cost of products sold.  The Company typically does not hedge its grain or natural gas exposure beyond the next two upcoming fiscal years.  As of January 27, 2013, and October 28, 2012, the Company had the following outstanding commodity futures contracts that were entered into to hedge forecasted purchases:

	Volume
Commodity	January 27, 2013	October 28, 2012
Corn	12.9 million bushels	12.0 million bushels

As of January 27, 2013, the Company has included in AOCL, hedging gains of $4.3 million (before tax) relating to these positions, compared to gains of $15.2 million (before tax) as of October 28, 2012.  The Company expects to recognize the majority of these gains over the next 12 months.

Fair Value Hedges:  The Company utilizes futures to minimize the price risk assumed when forward priced contracts are offered to the Company’s commodity suppliers.  The intent of the program is to make the forward priced commodities cost nearly the same as cash market purchases at the date of delivery.  The futures contracts are designated and accounted for as fair value hedges, and the Company measures the effectiveness of the hedges on a regular basis.  Changes in the fair value of the futures contracts, along with the gain or loss on the hedged purchase commitment, are marked-to-market through earnings and are recorded on the Consolidated Statements of Financial Position as a current asset and liability, respectively.  Effective gains or losses related to these fair value hedges are recognized through cost of products sold in the period or periods in which the hedged transactions affect earnings.  Any gains or losses related to hedge ineffectiveness are recognized in the current period cost of products sold.  As of January 27, 2013, and October 28, 2012, the Company had the following outstanding commodity futures contracts designated as fair value hedges:

	Volume
Commodity	January 27, 2013	October 28, 2012
Corn	6.9 million bushels	8.0 million bushels
Lean hogs	0.8 million cwt	0.9 million cwt

Other Derivatives:  During fiscal years 2013 and 2012, the Company has held certain futures to manage the Company’s exposure to fluctuations in commodity markets.  The Company has not applied hedge accounting to these positions.  As of January 27, 2013, and October 28, 2012, the Company had the following outstanding futures related to other programs:

	Volume
Commodity	January 27, 2013	October 28, 2012
Soybean Meal	0.1 million tons	—

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Fair Values:  The fair values of the Company’s derivative instruments (in thousands) as of January 27, 2013, and October 28, 2012, were as follows:

	Location on
	Consolidated	Fair Value (1)
	Statement of Financial	January 27,			October 28,
	Position	2013			2012
Asset Derivatives:
Derivatives Designated as Hedges:
Commodity contracts	Other current assets	$	(11,022	)	$	7,483
Derivatives Not Designated as Hedges:
Commodity contracts	Other current assets	(1,088		)	—
Total Asset Derivatives		$	(12,110	)	$	7,483

(1)  Amounts represent the gross fair value of derivative assets and liabilities.  The Company nets the derivative assets and liabilities for each of its hedging programs, including cash collateral, when a master netting arrangement exists between the Company and the counterparty to the derivative contract.  The amount or timing of cash collateral balances may impact the classification of the derivative in the Consolidated Statement of Financial Position.   See Note J - Fair Value Measurements for a discussion of these net amounts as reported in the Consolidated Statements of Financial Position.

Derivative Gains and Losses:  Gains or losses (before tax, in thousands) related to the Company’s derivative instruments for the first quarter ended January 27, 2013, and January 29, 2012, were as follows:

	Gain/(Loss) Recognized in AOCL (Effective Portion) (1)						Location on	Gain/(Loss) Reclassified from AOCL into Earnings (Effective Portion) (1)				Gain/(Loss) Recognized in Earnings (Ineffective Portion) (2) (3)
	Three Months Ended						Consolidated	Three Months Ended				Three Months Ended
Cash Flow Hedges:	January 27, 2013			January 29, 2012			Statement of Operations	January 27, 2013		January 29, 2012		January 27, 2013		January 29, 2012
Commodity contracts	$	(4,091	)	$	(7,242	)	Cost of products sold	$	6,830	$	10,890	$	166	$	—

	Location on	Gain/(Loss) Recognized in Earnings (Effective Portion) (4)					Gain/(Loss) Recognized in Earnings (Ineffective Portion) (2) (5)
	Consolidated	Three Months Ended					Three Months Ended
Fair Value Hedges:	Statement of Operations	January 27, 2013			January 29, 2012		January 27, 2013			January 29, 2012
Commodity contracts	Cost of products sold	$	(1,086	)	$	2,654	$	(30	)	$	(89	)

	Location on	Gain/(Loss) Recognized in Earnings
	Consolidated	Three Months Ended
Derivatives Not Designated as Hedges:	Statement of Operations	January 27, 2013			January 29, 2012
Commodity contracts	Cost of products sold	$	(1,084	)	$	(40	)

(1)Amounts represent gains or losses in AOCL before tax.  See the Consolidated Statements of Comprehensive Income for the after tax impact of these gains or losses on net earnings.

(2)There were no gains or losses excluded from the assessment of hedge effectiveness during the quarter.

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(3)There were no gains or losses resulting from the discontinuance of cash flow hedges during the quarter. 

(4)Amounts represent losses on commodity contracts designated as fair value hedges that were closed during the quarter, which were offset by a corresponding gain on the underlying hedged purchase commitment.  Additional gains or losses related to changes in the fair value of open commodity contracts, along with the offsetting gain or loss on the hedged purchase commitment, are also marked-to market through earnings with no impact on a net basis.

(5)There were no gains or losses recognized as a result of a hedged firm commitment no longer qualifying as a fair value hedge during the quarter.

NOTE JFAIR VALUE MEASUREMENTS

Pursuant to the provisions of ASC 820, Fair Value Measurements and Disclosures, the Company measures certain assets and liabilities at fair value or discloses the fair value of certain assets and liabilities recorded at cost in the consolidated financial statements.  Fair value is calculated as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price).  ASC 820 establishes a fair value hierarchy which requires assets and liabilities measured at fair value to be categorized into one of three levels based on the inputs used in the valuation.  Assets and liabilities are classified in their entirety based on the lowest level of input significant to the fair value measurement.  The three levels are defined as follows:

Level 1:  Observable inputs based on quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2:  Observable inputs, other than those included in Level 1, based on quoted prices for similar assets and liabilities in active markets, or quoted prices for identical assets and liabilities in inactive markets.

Level 3:  Unobservable inputs that reflect an entity’s own assumptions about what inputs a market participant would use in pricing the asset or liability based on the best information available in the circumstances.

The Company’s financial assets and liabilities that are measured at fair value on a recurring basis as of January 27, 2013, and October 28, 2012, and their level within the fair value hierarchy, are presented in the tables below.

	Fair Value Measurements at January 27, 2013
(in thousands)	Fair Value at January 27, 2013		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets at Fair Value:
Cash equivalents (1)	$	706,853	$	706,853	$	—	$	—
Other trading securities (2)	111,168		37,157		74,011		—
Commodity derivatives (3)	6,211		6,211		—		—
Total Assets at Fair Value	$	824,232	$	750,221	$	74,011	$	—
Liabilities at Fair Value:
Deferred compensation (2)	$	48,480	$	17,986	$	30,494	$	—
Total Liabilities at Fair Value	$	48,480	$	17,986	$	30,494	$	—

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	Fair Value Measurements at October 28, 2012
(in thousands)	Fair Value at October 28, 2012		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets at Fair Value:
Cash equivalents (1)	$	483,441	$	483,441	$	—	$	—
Short-term marketable securities (4)	77,387		2,349		75,038		—
Other trading securities (2)	109,676		36,305		73,371		—
Commodity derivatives (3)	3,884		3,884		—		—
Total Assets at Fair Value	$	674,388	$	525,979	$	148,409	$	—
Liabilities at Fair Value:
Deferred compensation (2)	$	47,953	$	16,866	$	31,087	$	—
Total Liabilities at Fair Value	$	47,953	$	16,866	$	31,087	$	—

The following methods and assumptions were used to estimate the fair value of the financial assets and liabilities above:

(1)The Company’s cash equivalents consist of money market funds rated AAA.  As these investments have a maturity date of three months or less, the carrying value approximates fair value.

(2)The Company holds trading securities as part of a rabbi trust to fund certain supplemental executive retirement plans and deferred income plans.  The rabbi trust is included in other assets on the Consolidated Statements of Financial Position and is valued based on the underlying fair value of each fund held by the trust.  A majority of the funds held related to the supplemental executive retirement plans have been invested in fixed income funds managed by a third party.  The declared rate on these funds is set based on a formula using the yield of the general account investment portfolio that supports the fund, adjusted for expenses and other charges.  The rate is guaranteed for one year at issue, and may be reset annually on the policy anniversary, subject to a guaranteed minimum rate.  As the value is based on adjusted market rates, and the fixed rate is only reset on an annual basis, these funds are classified as Level 2.  The remaining funds held are also managed by a third party, and include equity securities, money market accounts, bond funds, or other portfolios for which there is an active quoted market.  Therefore these securities are classified as Level 1.  The related deferred compensation liabilities are included in other long-term liabilities on the Consolidated Statements of Financial Position and are valued based on the underlying investment selections held in each participant’s account.  Investment options generally mirror those funds held by the rabbi trust, for which there is an active quoted market.  Therefore these investment balances are classified as Level 1.  The Company also offers a fixed rate investment option to participants.  The rate earned on these investments is adjusted annually based on a specified percentage of the United States Internal Revenue Service ( I.R.S.) Applicable Federal Rates in effect and therefore these balances are classified as Level 2.

(3)The Company’s commodity derivatives represent futures contracts used in its hedging or other programs to offset price fluctuations associated with purchases of corn and soybean meal, and to minimize the price risk assumed when forward priced contracts are offered to the Company’s commodity suppliers.  The Company’s futures contracts for corn and soybean meal are traded on the Chicago Board of Trade, while futures contracts for lean hogs are traded on the Chicago Mercantile Exchange.  These are active markets with quoted prices available and therefore these contracts are classified as Level 1.  All derivatives are reviewed for potential credit risk and risk of nonperformance.  The Company nets the derivative assets and liabilities for each of its hedging programs, including cash collateral, when a master netting arrangement exists between the Company and the counterparty to the derivative contract.  The net balance for each program is included in other current assets or accounts payable, as appropriate, in the Consolidated Statements of Financial Position.  As of January 27, 2013, the Company has recognized the right to reclaim cash collateral of $25.3 million from, and the obligation to return cash collateral of $7.0 million to, various counterparties.  As of October 28, 2012, the Company had recognized the right to reclaim cash collateral of $27.5 million from, and the obligation to return cash collateral of $31.1 million to, various counterparties.

(4)During fiscal 2012 and 2013, the Company held trading securities as part of a portfolio maintained to generate investment income and to provide cash for operations of the Company, if necessary.  The

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portfolio is managed by a third party who is responsible for daily trading activities, and all assets within the portfolio are highly liquid.  The cash, U.S. government securities, and highly rated money market funds held by the portfolio are classified as Level 1.  The investment portfolio also included corporate bonds, international government securities, commercial paper, agency securities, mortgage-backed securities, and other asset-backed securities for which there is an active, quoted market.  Market prices are obtained from a variety of industry standard providers, large financial institutions, and other third-party sources to calculate a representative daily market value, and therefore, these securities are classified as Level 2.  These securities were liquidated in the first quarter of fiscal 2013.

The Company’s financial assets and liabilities also include cash, accounts receivable, accounts payable, and other liabilities, for which carrying value approximates fair value.  The Company does not carry its long-term debt at fair value in its Consolidated Statements of Financial Position.  Based on borrowing rates available to the Company for long-term financing with similar terms and average maturities, the fair value of long-term debt, utilizing discounted cash flows (Level 2), was $277.5 million as of January 27, 2013, and $283.6 million as of October 28, 2012.

In accordance with the provisions of ASC 820, the Company also measures certain nonfinancial assets and liabilities at fair value that are recognized or disclosed on a nonrecurring basis (e.g. goodwill, intangible assets, and property, plant and equipment).  During the first quarter ended January 27, 2013, and January 29, 2012, there were no remeasurements of assets or liabilities at fair value on a nonrecurring basis subsequent to their initial recognition.

NOTE KPENSION AND OTHER POST-RETIREMENT BENEFITS

Net periodic benefit cost for pension and other post-retirement benefit plans consists of the following:

	Pension Benefits						Post-retirement Benefits
	Three Months Ended						Three Months Ended
(in thousands)	January 27, 2013			January 29, 2012			January 27, 2013			January 29, 2012
Service cost	$	7,745		$	5,856		$	612		$	556
Interest cost	11,922			12,284			3,694			4,438
Expected return on plan assets	(18,286		)	(17,127		)	—			—
Amortization of prior service cost	(1,270		)	(1,270		)	(265		)	913
Recognized actuarial loss (gain)	8,505			5,032			1,913			(1		)
Net periodic cost	$	8,616		$	4,775		$	5,954		$	5,906

NOTE LINCOME TAXES

The amount of unrecognized tax benefits, including interest and penalties, at January 27, 2013, recorded in other long-term liabilities was $31.2 million, of which $21.0 million would impact the Company’s effective tax rate if recognized.  The Company includes accrued interest and penalties related to uncertain tax positions in income tax expense, with $0.2 million included in expense in the first quarter of fiscal 2013.  The amount of accrued interest and penalties at January 27, 2013, associated with unrecognized tax benefits was $8.5 million.

The Company is regularly audited by federal and state taxing authorities.  During fiscal year 2012, the I.R.S. concluded its examination of the Company’s consolidated federal income tax returns for the fiscal years through 2009, and opened its examination for fiscal years 2010 and 2011.  The Company is in various stages of audit by several state taxing authorities on a variety of fiscal years, as far back as 2006.  While it is reasonably possible that one or more of these audits may be completed within the next 12 months and that the related unrecognized tax benefits may change, based on the status of the examinations it is not possible to reasonably estimate the effect of any amount of such change to previously recorded uncertain tax positions.

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NOTE MSEGMENT REPORTING

The Company develops, processes, and distributes a wide array of food products in a variety of markets.  The Company reports its results in the following five segments: Grocery Products, Refrigerated Foods, Jennie-O Turkey Store, Specialty Foods, and All Other.

The Grocery Products segment consists primarily of the processing, marketing, and sale of shelf-stable food products sold predominantly in the retail market.  This segment also includes the results from the Company’s MegaMex joint venture.

The Refrigerated Foods segment includes the Hormel Refrigerated operating segment and the Affiliated Business Units.  This segment consists primarily of the processing, marketing, and sale of branded and unbranded pork and beef products for retail, foodservice, and fresh product customers.  The Affiliated Business Units include the Farmer John, Burke Corporation, Dan’s Prize, Saag’s Products, Inc., and Precept Foods businesses.  Precept Foods, LLC, is a 50.01 percent owned joint venture.

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

The Specialty Foods segment includes the Diamond Crystal Brands, Century Foods International, and Hormel Specialty Products operating segments.  This segment consists of the packaging and sale of various sugar and sugar substitute products, salt and pepper products, liquid portion products, dessert mixes, ready-to-drink products, sports nutrition products, gelatin products, and private label canned meats to retail and foodservice customers.  This segment also includes the processing, marketing, and sale of nutritional food products and supplements to hospitals, nursing homes, and other marketers of nutritional products.

The All Other segment includes the Hormel Foods International operating segment, which manufactures, markets, and sells Company products internationally.  This segment also includes the results from the Company’s international joint ventures and miscellaneous corporate sales.

Intersegment sales are recorded at prices that approximate cost and are eliminated in the Consolidated Statements of Operations.  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.  Equity in earnings of affiliates is included in segment operating profit; however, earnings attributable to the Company’s noncontrolling interests are excluded.  These items are included below as net interest and investment expense (income), general corporate expense, and noncontrolling interest when reconciling to earnings before income taxes.

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Sales and operating profits for each of the Company’s reportable segments and reconciliation to earnings before income taxes are set forth below.  The Company is an integrated enterprise, characterized by substantial intersegment cooperation, cost allocations, and sharing of assets.  Therefore, the Company does not represent that these segments, if operated independently, would report the operating profit and other financial information shown below.

	Three Months Ended
(in thousands)	January 27, 2013			January 29, 2012
Sales to Unaffiliated Customers
Grocery Products	$	334,140		$	269,479
Refrigerated Foods	1,063,401			1,083,525
Jennie-O Turkey Store	390,334			377,371
Specialty Foods	233,845			218,024
All Other	94,521			91,040
Total	$	2,116,241		$	2,039,439
Intersegment Sales
Grocery Products	$	—		$	—
Refrigerated Foods	2,443			2,413
Jennie-O Turkey Store	30,421			30,135
Specialty Foods	31			41
All Other	—			—
Total	$	32,895		$	32,589
Intersegment elimination	(32,895		)	(32,589		)
Total	$	—		$	—
Net Sales
Grocery Products	$	334,140		$	269,479
Refrigerated Foods	1,065,844			1,085,938
Jennie-O Turkey Store	420,755			407,506
Specialty Foods	233,876			218,065
All Other	94,521			91,040
Intersegment elimination	(32,895		)	(32,589		)
Total	$	2,116,241		$	2,039,439
Segment Operating Profit
Grocery Products	$	49,913		$	44,093
Refrigerated Foods	53,790			53,749
Jennie-O Turkey Store	58,945			76,762
Specialty Foods	23,761			16,647
All Other	17,111			12,471
Total segment operating profit	$	203,520		$	203,722
Net interest and investment expense (income)	1,284			1,624
General corporate expense	6,644			8,727
Noncontrolling interest	1,329			938
Earnings before income taxes	$	196,921		$	194,309

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Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

CRITICAL ACCOUNTING POLICIES

There have been no material changes in the Company’s Critical Accounting Policies, as disclosed in its Annual Report on Form 10-K for the fiscal year ended October 28, 2012.

RESULTS OF OPERATIONS

Overview

The Company is a processor of branded and unbranded food products for retail, foodservice, and fresh product customers.  It operates in five reportable segments as described in Note M in the Notes to Consolidated Financial Statements in this Quarterly Report on Form 10-Q.

The Company reported net earnings per diluted share of $0.48 for the first quarter of fiscal 2013, even with $0.48 per diluted share in the first quarter of fiscal 2012.  Significant factors impacting the quarter were:

·Grocery Products profits were positively impacted by strong sales of core product lines.

·Refrigerated Foods segment profit was even with last year due to poor pork operating margins and weaker live production results.

·Jennie-O Turkey Store segment profit declined due to significantly higher grain costs and lower commodity meat prices.

·The All Other segment delivered a solid quarter driven by strong export sales and improved profitability by the China operations.

·Profitability increased for Specialty Foods as all three operating segments reported improved results.

Consolidated Results

Net earnings attributable to the Company for the first quarter of fiscal 2013 increased 1.0 percent to $129.7 million from $128.4 million in the same quarter of fiscal 2012.  Diluted earnings per share for the quarter remained at $0.48, even with the first quarter of last year.

Net sales for the first quarter of fiscal 2013 increased 3.8 percent to a record $2.12 billion from $2.04 billion in the first quarter of fiscal 2012, as four out of the five reporting segments of the Company experienced sales growth over the prior year first quarter.  Tonnage increased 1.6 percent to 1.24 billion lbs. for the first quarter compared to 1.22 billion lbs. in the same quarter of last year, primarily reflecting planned reductions in harvest levels for the Refrigerated Foods segment.  The Grocery Products segment saw growth in sales of core items including the SPAM family of products, Hormel Compleats microwave meals, and the MegaMex portfolio of Mexican foods.  Top-line results for Grocery Products were further enhanced by the inclusion of sales of Don Miguel Foods Corp. products (additional product lines within the MegaMex joint venture), as the Company’s retail sales force assumed responsibility for these sales beginning in the third quarter of fiscal 2012.  These sales contributed an incremental $54.5 million of net sales and 25.0 million lbs. to the top-line results for the quarter.  Value-added sales growth for Jennie-O Turkey Store and improved sales for Specialty Foods were key drivers of the increase for the first quarter, as well as gains reported by the retail and foodservice business units within Refrigerated Foods.  Export sales were also particularly strong for the Company’s International business.

Gross profit for the first quarter of fiscal 2013 was $344.2 million compared to $337.4 million for the first quarter last year.  Gross profit as a percentage of net sales decreased to 16.3 percent for the first quarter of fiscal 2013 from 16.5 percent in the same quarter of fiscal 2012.   Strong results by the Specialty Foods, Grocery Products, and All Other segments offset weaker margins by the Jennie-O Turkey Store segment.  Lower raw material costs for the Specialty Foods and Grocery Products segments and strong exports for the All Other  segment drove the strong margins.  Gross profits in the Refrigerated Foods segment were hindered by poor pork processing margins.  Higher grain costs and weaker commodity turkey prices caused the weaker margins for the Jennie-O Turkey Store segment.

The Company anticipates continued growth in the Grocery Products, Specialty Foods and All Other  segments.  Although the Refrigerated Foods segment is presently facing challenges in live hog production operations,

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improvements have recently been seen in pork operating margins.  Year-over-year comparisons for the Jennie-O Turkey Store segment will continue to be difficult versus the strong margin results in fiscal 2012.  The Company expects the Skippy® acquisition to be accretive to margins in fiscal 2013, but the benefit to operating profits in the second quarter will be offset by one-time transaction and transition costs related to the acquisition.

Selling, general and administrative expenses for the first quarter of fiscal 2013 were $155.8 million compared to $152.5 million in the prior year.  Selling, general and administrative expenses as a percentage of net sales remained relatively flat at 7.4 percent compared to 7.5 percent in the first quarter of fiscal 2012.  Advertising, legal, and compensation related expenses all increased in the first quarter of fiscal 2013 as compared to the prior year.  These items offset a reduction in research and development and information technology expenses.  The Company expects selling, general and administrative expenses to be between 7.0 percent and 7.5 percent for the full year in fiscal 2013.

Equity in earnings of affiliates was $9.8 million for the first quarter of fiscal 2013 compared to $11.0 million in the first quarter last year.  Lower results from the Company’s 50 percent owned MegaMex joint venture drove the decrease for fiscal 2013 compared to the prior year.  The Company’s 40 percent owned Philippine joint venture, Purefoods-Hormel Company, reported improved results which offset overall declines for the Company’s other international joint ventures.

The effective tax rate for the first quarter of fiscal 2013 was 33.5 percent compared to 33.4 percent for the comparable period of fiscal 2012.  The Company expects a full-year effective tax rate between 33.5 and 34.5 percent for fiscal 2013.

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Segment Results

Net sales and operating profits for each of the Company’s reportable segments are set forth below.  The Company is an integrated enterprise, characterized by substantial intersegment cooperation, cost allocations, and sharing of assets.  Therefore, the Company does not represent that these segments, if operated independently, would report the operating profit and other financial information shown below.  Additional segment financial information can be found in Note M of the Notes to Consolidated Financial Statements in this Quarterly Report on Form 10-Q.

	Three Months Ended
(in thousands)	January 27,  2013		January 29  2012		% Change
Net Sales
Grocery Products	$	334,140	$	269,479	24.0
Refrigerated Foods	1,063,401		1,083,525		(1.9	)
Jennie-O Turkey Store	390,334		377,371		3.4
Specialty Foods	233,845		218,024		7.3
All Other	94,521		91,040		3.8
Total	$	2,116,241	$	2,039,439	3.8
Segment Operating Profit
Grocery Products	$	49,913	$	44,093	13.2
Refrigerated Foods	53,790		53,749		0.1
Jennie-O Turkey Store	58,945		76,762		(23.2	)
Specialty Foods	23,761		16,647		42.7
All Other	17,111		12,471		37.2
Total segment operating profit	$	203,520	$	203,722	(0.1	)
Net interest and investment expense (income)	1,284		1,624		(20.9	)
General corporate expense	6,644		8,727		(23.9	)
Noncontrolling interest	1,329		938		41.7
Earnings before income taxes	$	196,921	$	194,309	1.3

Grocery Products

The Grocery Products segment consists primarily of the processing, marketing, and sale of shelf-stable food products sold predominantly in the retail market.  This segment also includes the results from the Company’s MegaMex joint venture.

Grocery Products net sales and tonnage increased 24.0 percent and 20.0 percent, respectively, for the first quarter of fiscal 2013 compared to the same period in fiscal 2012.  The comparative results reflect the addition of Don Miguel Foods Corp. sales (additional product lines within the MegaMex joint venture) as the Company’s retail sales force assumed responsibility for these sales beginning in the third quarter of fiscal 2012.  These sales contributed an incremental $54.5 million of net sales and 25.0 million lbs. to the top-line results for the quarter.

The positive performance of Grocery Products in the first quarter was driven by increased sales of the SPAM family of products, Hormel chili, and Mary Kitchen hash, which more than offset declines in categories such as Hormel chunk meats and Dinty Moore canned products.  Sales of the Hormel Compleats line of microwave meals also improved for the quarter driven by the introduction of new cheesy pasta meals.

Segment profit for Grocery Products increased 13.2 percent for the first quarter compared to the prior year results.  Profit results for the first quarter benefitted from the volume increases in core products noted above, such as the SPAM family of products and Hormel chili.  Lower pork and beef input costs versus the same period in fiscal 2012 also improved profit results for this segment.

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The Company expects further topline growth in the second quarter of the year as the introduction of new items continues to drive results.  Commodity cost trends remain a concern.  Additional pricing actions may be pursued, as necessary, during the remainder of fiscal 2013.  The second quarter will include the addition of Skippy® sales, but the benefit of that business will be offset with expenses and fees related to the transaction.  The benefits of this acquisition should be fully realized in fiscal 2014.

Refrigerated Foods

The Refrigerated Foods segment includes the Hormel Refrigerated operating segment and the Affiliated Business Units.  This segment consists primarily of the processing, marketing, and sale of branded and unbranded pork and beef products for retail, foodservice, and fresh product customers.  The Affiliated Business Units include the Farmer John, Burke Corporation, Dan’s Prize, Saag’s Products, Inc., and Precept Foods businesses.  Precept Foods, LLC, is a 50.01 percent owned joint venture.

Net sales for the Refrigerated Foods segment decreased 1.9 percent and tonnage decreased 2.3 percent for the first quarter of fiscal 2013, compared to the first quarter of fiscal 2012.  Sales declines in the quarter were primarily attributable to a planned reduction of harvest levels which resulted in reduced commodity fresh pork sales.  However, gains in several value-added product categories during the first quarter partially offset the decline in fresh pork sales.

On the retail side, sales growth within the Meat Products business unit was strong for Hormel® Cure 81® boneless premium hams, Hormel party trays, and Hormel Natural Choice deli meats.  Within the Foodservice business unit, sales of Hormel Natural Choice deli meats experienced notable growth and the launch of new Hormel fire braised meats is off to a strong start.

Segment profit for Refrigerated Foods increased 0.1 percent for the first quarter compared to the prior year.  Improved results of value-added products and profits from the Affiliated Business Units were able to offset weaker pork operating margins and increased costs in live production operations.  Although soft industry pork processing margins were expected during the quarter, actuals were even lower than the Company anticipated.

Looking forward, the Company expects continued solid performance from its value-added product lines within Refrigerated Foods.  Pork operating margins were soft in the first quarter of fiscal 2013, but are expected to gradually improve.  The impact of high grain costs on the Company’s live production division and grain-based procurement contracts may negatively impact margins as the year progresses.

Jennie-O Turkey Store

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

JOTS net sales increased 3.4 percent while tonnage decreased 0.1 percent for the first quarter of fiscal 2013, compared to the first quarter of fiscal 2012.  The top-line growth was primarily driven by increased sales of value-added product lines.  Sales of Jennie-O Turkey Store fresh tray pack items, turkey franks, and turkey bacon were particularly strong, as this segment continues to benefit from the “Make the Switch” advertising campaign.  Although harvest levels were reduced during the quarter to balance turkey meat supplies, most of this reduction was offset by heavier bird weights.

Segment profit for JOTS decreased 23.2 percent for the first quarter of fiscal 2013.  As anticipated, strong sales of value-added products did not offset the significantly higher grain costs and weaker commodity turkey prices experienced throughout the quarter.

The industry has demonstrated some production constraint recently, but commodity inventory levels remain higher than last year, unfavorably impacting pricing.  Higher grain costs and lower turkey commodity meat prices will continue to hinder margins at JOTS in the near term, but the Company expects results to improve moving into the latter half of the year.  In addition, the planned reduction in harvest levels and strategic pricing should help mitigate those headwinds going forward.

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Specialty Foods

The Specialty Foods segment includes the Diamond Crystal Brands (DCB), Century Foods International (CFI), and Hormel Specialty Products (HSP) operating segments.  This segment consists of the packaging and sale of various sugar and sugar substitute products, salt and pepper products, liquid portion products, dessert mixes, ready-to-drink products, sports nutrition products, gelatin products, and private label canned meats to retail and foodservice customers.  This segment also includes the processing, marketing, and sale of nutritional food products and supplements to hospitals, nursing homes, and other marketers of nutritional products.

Specialty Foods net sales and tonnage increased 7.3 percent and 0.9 percent, respectively, compared to the same quarter of fiscal 2012.  Sales growth at CFI drove the top-line increases for the quarter, led by strong sales of nutritional and ready-to-drink items.  Sales gains were also noted for HSP on sales of canned meats and savory ingredients.  For DCB, stronger sales of Hormel Health Labs (HHL) products were unable to offset declines in sugar, sugar substitutes, liquid portions, and blended items.

Segment profit for Specialty Foods increased 42.7 percent compared to the prior year first quarter.  The results were driven by gains in all three operating segments, with HSP and CFI leading the way.  Past pricing actions and lower raw material costs aided in the increase for HSP.  Strong bottom-line results for CFI were driven by efforts to diversify the customer base, overall operational efficiencies, and a favorable product mix.  In addition, past pricing actions led to margin improvements in HHL.

Looking forward in fiscal 2013, the Company anticipates continued growth for Specialty Foods as strong sales results are expected to continue.  Additionally, operational efficiencies throughout the business will provide an ongoing benefit.

All Other

The All Other segment includes the Hormel Foods International (HFI) operating segment, which manufactures, markets, and sells Company products internationally.  This segment also includes the results from the Company’s international joint ventures and miscellaneous corporate sales.

All Other net sales increased 3.8 percent for the first quarter of fiscal 2013 compared to the same quarter of fiscal 2012.  Strong pork exports along with increased sales of STAGG chili and Hormel party trays were able to offset softer exports of the SPAM family of products.  Segment profit also improved in the first quarter of fiscal 2013, increasing 37.2 percent compared to prior year results.  The improved bottom-line results were primarily attributable to strong exports of fresh pork and improved profitability of the Company’s China operations.  Improved earnings from the Company’s Philippine joint venture, Purefoods-Hormel Company, also contributed to the strong results for the quarter.  Looking ahead, higher SPAM sales are expected.  The addition of worldwide Skippy® sales, except sales in China, will begin in the second quarter, but will be offset with expenses and fees related to the transaction.  The benefits of this acquisition are expected during the latter half of the year.

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.  Equity in earnings of affiliates is included in segment operating profit; however, earnings attributable to the Company’s noncontrolling interests are excluded.  These items are included in the segment table for the purpose of reconciling segment results to earnings before income taxes.

Net interest and investment expense (income) for the first quarter of fiscal 2013 was a net expense of $1.3 million, compared to a net expense of $1.6 million in the first quarter of fiscal 2012.  The decrease was primarily due to higher returns on the Company’s rabbi trust for supplemental executive retirement plans and deferred income plans.  Interest expense was $3.1 million for the first quarter compared to $3.2 million in the first quarter of fiscal 2012.  The Company anticipates that interest expense will approximate $12.0 to $14.0 million for fiscal 2013.

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General corporate expense for the first quarter of fiscal 2013 was $6.6 million compared to $8.7 million for the comparable period of fiscal 2012.  Several factors affected general corporate expense which, in aggregate, resulted in lower expenses.  No single factor was material in relationship to the total expenses incurred in the first quarter.

Net earnings attributable to the Company’s noncontrolling interests were $1.3 million for the first quarter of fiscal 2013, compared to $0.9 million in the first quarter of fiscal 2012.  The change reflects increases in performance from both the Company’s Precept Foods business and China operations compared to the prior year.

Related Party Transactions

There has been no material change in the information regarding Related Party Transactions that was disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended October 28, 2012.

LIQUIDITY AND CAPITAL RESOURCES

Cash and cash equivalents were $887.7 million at the end of the first quarter of fiscal year 2013 compared to $548.6 million at the end of the comparable fiscal 2012 period.

Cash provided by operating activities was $141.8 million in the first quarter of fiscal 2013 compared to $152.2 million in the same period of fiscal 2012.  Increased earnings and favorable overall changes in working capital balances were offset by the excess tax benefit related to the Company’s stock option plan (offset in financing activities).

Cash provided by investing activities was $66.3 million in the first quarter of fiscal 2013 compared to cash used in investing activities of $28.6 million in the comparable quarter of fiscal 2012.  In anticipation of the second quarter acquisition of the United States based Skippy® peanut butter business from Unilever United States Inc., the Company liquidated its marketable securities portfolio at the end of the first quarter, which generated $77.6 million in cash.  Additionally, capital expenditures decreased $8.4 million in the first quarter of fiscal 2013 compared to the prior year.  The Company currently estimates its fiscal 2013 capital expenditures will be approximately $130.0 to $140.0 million.

Cash used in financing activities was $3.0 million in the first quarter of fiscal 2013 compared to $38.9 million in the same period of fiscal 2012.  Proceeds generated from the Company’s stock option plan exercises increased $19.3 million in the first quarter of fiscal 2013 compared to the prior year.  The Company also did not repurchase any of its common stock in the first quarter of fiscal 2013, compared to an $11.1 million outflow for repurchases in the same period of the prior year.  For additional information pertaining to the Company’s share repurchase plans or programs, see Part II, Item 2 “Unregistered Sales of Equity Securities and Use of Proceeds.”

Cash dividends paid to the Company’s shareholders continue to be an ongoing financing activity for the Company.  Dividends paid in the first quarter of fiscal 2013 were $39.4 million compared to $33.6 million in the comparable period of fiscal 2012.  For fiscal 2013, the annual dividend rate has been increased to $0.68 per share, representing the 47th consecutive annual dividend increase.  The Company has paid dividends for 338 consecutive quarters and expects to continue doing so.

The Company is required, by certain covenants in its debt agreements, to maintain specified levels of financial ratios and financial position.  At the end of the first quarter of fiscal 2013, the Company was in compliance with all of these debt covenants.

Cash flows from operating activities continue to provide the Company with its principal source of liquidity.  The Company does not anticipate a significant risk to cash flows from this source in the foreseeable future because the Company operates in a relatively stable industry and has strong brands across many product lines.

On January 31, 2013, subsequent to the end of the first quarter, the Company acquired the United States based  Skippy® peanut butter business from Unilever United States Inc., of Englewood Cliffs, N.J. for a preliminary purchase price of $663.1 million in cash, plus related expenses.  The transaction was funded with existing cash on

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hand generated from operations and from liquidating marketable securities.  The Company has historically maintained a very strong cash position, and believes that its ongoing ability to generate cash flows from operations, as well as its available credit facility and borrowing capacity, still leave it well positioned to take advantage of other strategic investment opportunities that may arise during fiscal 2013.

Continuing to maximize the value returned to shareholders through dividend payments also remains a priority for the Company in fiscal 2013.  Additional share repurchase activity and capital spending to enhance and expand current operations is also expected to continue throughout the year.

Contractual Obligations and Commercial Commitments

The Company records income taxes in accordance with the provisions of ASC 740, Income Taxes.  The Company is unable to determine its contractual obligations by year related to this pronouncement, as the ultimate amount or timing of settlement of its reserves for income taxes cannot be reasonably estimated.  The total liability for unrecognized tax benefits, including interest and penalties, at January 27, 2013, was $31.2 million.

On January 2, 2013, Hormel Foods Corporation (the Company) entered into a definitive agreement to acquire the Skippy® peanut butter business from Conopco, Inc. (doing business as Unilever United States Inc.), of Englewood Cliffs, N.J.   As noted above, the Company closed the acquisition of the United States based portion of that business on January 31, 2013, for a preliminary purchase price of $663.1 million.   The Company intends to close the acquisition of the China based portion of that business by the end of fiscal year 2013 for an additional investment of approximately $42.0 million, subject to working capital adjustments.  There have been no other material changes to the information regarding the Company’s future contractual financial obligations that was disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended October 28, 2012.

Off-Balance Sheet Arrangements

As of January 27, 2013 and October 28, 2012, the Company had $43.9 million of standby letters of credit issued on its behalf.  The standby letters of credit are primarily related to the Company’s self-insured workers’ compensation programs.  However, that amount also includes a revocable $5.6 million standby letter of credit for obligations of an affiliated party that may arise under workers’ compensation claims.  Letters of credit are not reflected in the Company’s Consolidated Statements of Financial Position.

FORWARD-LOOKING STATEMENTS

This report contains “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.

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 Quarterly Report on Form 10-Q, the Company’s Annual Report to Stockholders, other filings by the Company with the Securities and Exchange Commission (the Commission), the Company’s press releases, and 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 discussion of risk factors in Part II, Item 1A of this Quarterly Report on Form 10-Q contains certain cautionary statements regarding the Company’s business, which should be considered by investors and others.  Such risk factors should be considered in conjunction with any

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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.

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Item 3.  Quantitative and Qualitative Disclosures About Market Risk

Hog Markets:  The Company’s earnings are affected by fluctuations in the live hog market.  To minimize the impact on earnings, and to ensure a steady supply of quality hogs, the Company has entered into contracts with producers for the purchase of hogs at formula-based prices over periods of up to 10 years.  Purchased hogs under contract accounted for 97 percent and 98 percent of the total hogs purchased by the Company during the first quarter of fiscal 2013 and 2012, respectively.  The majority of these contracts use market-based formulas based on hog futures, hog primal values, or industry reported hog markets.  Under normal, long-term market conditions, changes in the cash hog market are offset by proportional changes in primal values.  Therefore, a hypothetical 10 percent change in the cash hog market would have had an immaterial effect on the Company’s results of operations.

Certain procurement contracts allow for future hog deliveries (firm commitments) to be forward priced.  The Company generally hedges these firm commitments by using hog futures contracts.  These futures contracts are designated and accounted for as fair value hedges.  The change in the market value of such futures contracts is highly effective at offsetting changes in price movements of the hedged item, and the Company evaluates the effectiveness of the contracts on a regular basis.  Changes in the fair value of the futures contracts, along with the gain or loss on the firm commitment, are marked-to-market through earnings and are recorded on the Consolidated Statements of Financial Position as a current asset and liability, respectively.  The fair value of the Company’s open futures contracts as of January 27, 2013, was $(0.7) million compared to $(2.3) million as of October 28, 2012.

The Company measures its market risk exposure on its hog futures contracts using a sensitivity analysis, which considers a hypothetical 10 percent change in market prices.  A 10 percent increase in market prices would have negatively impacted the fair value of the Company’s January 27, 2013, open contracts by $7.5 million, which in turn would lower the Company’s future cost of purchased hogs by a similar amount.

Turkey and Hog Production Costs:  The Company raises or contracts for live turkeys and hogs to meet some of its raw material supply requirements.  Production costs in raising turkeys and hogs are subject primarily to fluctuations in feed prices, and to a lesser extent, fuel costs.  Under normal, long-term market conditions, changes in the cost to produce turkeys and hogs are offset by proportional changes in their respective markets.

To reduce the Company’s exposure to changes in grain prices, the Company utilizes a hedge program to offset the fluctuation in the Company’s future direct grain purchases.  This program currently utilizes corn futures, and these contracts are accounted for under cash flow hedge accounting.  The open contracts are reported at their fair value with an unrealized gain of $2.2 million, before tax, on the Consolidated Statements of Financial Position as of January 27, 2013, compared to an unrealized gain of $9.5 million, before tax, as of October 28, 2012.

The Company measures its market risk exposure on its grain futures contracts using a sensitivity analysis, which considers a hypothetical 10 percent change in the market prices for grain.  A 10 percent decrease in the market price for grain would have negatively impacted the fair value of the Company’s January 27, 2013, open grain contracts by $9.5 million, which in turn would lower the Company’s future cost on purchased grain by a similar amount.

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 $5.4 million.  The fair value of the Company’s long-term debt was estimated using discounted future cash flows based on the Company’s incremental borrowing rate for similar types of borrowing arrangements.

Investments:  The Company holds trading securities as part of a rabbi trust to fund certain supplemental executive retirement plans and deferred income plans.  As of January 27, 2013, the balance of these securities totaled $111.2 million.  A majority of these securities represent fixed income funds.  The Company is subject to market risk due to fluctuations in the value of the remaining investments, as unrealized gains and losses associated with these securities are included in the Company’s net earnings on a mark-to-market basis.  A 10 percent decline in the value of the investments not held in fixed income funds would have a direct negative

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impact to the Company’s pretax earnings of approximately $3.7 million, while a 10 percent increase in value would have a positive impact of the same amount.

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

Item 4.  Controls and Procedures

(a)Disclosure Controls and Procedures.

As of the end of the period covered by this report (the Evaluation Date), the Company carried out an evaluation, under the supervision and with the participation of management, including the Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the design and operation of its disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended (the Exchange Act)).  In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.  Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that, as of the Evaluation Date, the Company’s disclosure controls and procedures were effective to provide reasonable assurance that information the Company is required to disclose in reports it files or submits under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in Commission rules and forms, and that such information is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

(b)Internal Controls.

During the first quarter of fiscal year 2013, there has been no change in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1.  Legal Proceedings

The Company is a party to various legal proceedings related to the on-going operation of its business, including claims both by and against the Company.  At any time, such proceedings typically involve claims related to product liability, contract disputes, wage and hour laws, employment practices, or other actions brought by employees, consumers, competitors, or suppliers.  The Company establishes accruals for its potential exposure, as appropriate, for claims against the Company when losses become probable and reasonably estimable.  However, future developments or settlements are uncertain and may require the Company to change such accruals as proceedings progress.  Resolution of any currently known matters, either individually or in the aggregate, is not expected to have a material effect on the Company’s financial condition, results of operations, or liquidity.

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Item 1A.  Risk Factors

The Company’s operations are subject to the general risks of the food industry.

The food products manufacturing industry is subject to the risks posed by:

·food spoilage;

·food contamination caused by disease-producing organism or pathogens, such as Listeria monocytogenes, Salmonella, and pathogenic E coli.;

·food allergens;

·nutritional and health-related concerns;

·federal, state, and local food processing controls;

·disruption to operations if government inspectors are unavailable due to furloughs;

·consumer product liability claims;

·product tampering; and

·the possible unavailability and/or expense of liability insurance.

The pathogens which may cause food contamination are found generally in livestock and in the environment and thus may be present in our products as a result of food processing.  These pathogens also can be introduced to our products as a result of improper handling by customers or consumers.  We do not have control over handling procedures once our products have been shipped for distribution.  If one or more of these risks were to materialize, the Company’s brand and business reputation could be negatively impacted.  In addition, revenues could decrease, costs of doing business could increase, and the Company’s operating results could be adversely affected.

Deterioration of economic conditions could harm the Company’s business.

The Company’s business may be adversely affected by changes in national or global economic conditions, including inflation, interest rates, availability of capital markets, energy availability and costs (including fuel surcharges), and the effects of governmental initiatives to manage economic conditions.  Decreases in consumer spending rates and shifts in consumer product preferences could also negatively impact the Company.

The recent volatility in financial markets and the deterioration of national and global economic conditions could impact the Company’s operations as follows:

·The financial stability of our customers and suppliers may be compromised, which could result in additional bad debts for the Company or non-performance by suppliers; and

·The value of our investments in debt and equity securities may decline, including most significantly the Company’s trading securities held as part of a rabbi trust to fund supplemental executive retirement plans and deferred income plans, and the Company’s assets held in pension plans.

The Company also utilizes hedging programs to reduce its exposure to various commodity market risks, which qualify for hedge accounting for financial reporting purposes.  Volatile fluctuations in market conditions could cause these instruments to become ineffective, which could require any gains or losses associated with these instruments to be reported in the Company’s earnings each period.  These instruments may also limit the Company’s ability to benefit from market gains if commodity prices become more favorable than those that have been secured under the Company’s hedging programs.

Additionally, if a high pathogenic disease outbreak developed in the United States, it may negatively impact the national economy, demand for Company products, and/or the Company’s workforce availability, and the Company’s financial results could suffer.  The Company has developed contingency plans to address infectious disease scenarios and the potential impact on its operations, and will continue to update these plans as necessary.  There can be no assurance given, however, that these plans will be effective in eliminating the negative effects of any such diseases on the Company’s operating results.

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Fluctuations in commodity prices of pork, poultry, and feed ingredients could harm the Company’s earnings.

The Company’s results of operations and financial condition are largely dependent upon the cost and supply of pork, poultry, and feed grains as well as the selling prices for many of our products, which are determined by constantly changing market forces of supply and demand.

The live hog industry has evolved to very large, vertically integrated, operations operating under long-term supply agreements. This has resulted in fewer hogs being available on the cash spot market.  Additionally, overall hog production in the U.S. has declined.  The decrease in the supply of hogs could diminish the utilization of harvest and production facilities and increase the cost of the raw materials they produce.  Consequently, the Company uses long-term supply contracts based on market-based formulas or the cost of production to ensure 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.  Market-based pricing on certain product lines, and lead time required to implement pricing adjustments, may prevent all or part of these cost increases from being recovered, and these higher costs could adversely affect our short-term financial results.

Jennie-O Turkey Store raises turkeys and also contracts with turkey growers to meet its raw material requirements for whole birds and processed turkey products.  Additionally, the Company owns various hog raising facilities that supplement its supply of raw materials.  Results in these operations 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 feed prices by forward buying, using futures contracts, and pursuing pricing advances.  However, these strategies may not be adequate to overcome sustained increases in market prices due to alternate uses for feed grains or other changes in these market conditions.

International trade barriers and other restrictions could result in less foreign demand and increased domestic supply of proteins which could lower prices.

Outbreaks of disease among livestock and poultry flocks could harm the Company’s revenues and operating margins.

The Company is subject to risks associated with the outbreak of disease in pork and beef livestock, and poultry flocks, including Bovine Spongiform Encephalopathy (BSE), pneumo-virus, Porcine Circovirus 2 (PCV2), Porcine Reproduction & Respiratory Syndrome (PRRS), Foot-and-Mouth Disease (FMD), and Avian Influenza.  The outbreak of disease could adversely affect the Company’s supply of raw materials, increase the cost of production, and reduce operating margins.  Additionally, the outbreak of disease may hinder the Company’s ability to market and sell products both domestically and internationally.  The Company has developed business continuity plans for various disease scenarios and will continue to update these plans as necessary.  There can be no assurance given, however, that these plans will be effective in eliminating the negative effects of any such diseases on the Company’s operating results.

Market demand for the Company’s products may fluctuate.

The Company faces competition from producers of alternative meats and protein sources, including pork, beef, turkey, chicken, and fish.  The bases on which the Company competes include:

·price;

·product quality;

·brand identification;

·breadth of product line; and

·customer service.

Demand for the Company’s products is also affected by competitors’ promotional spending, the effectiveness of the Company’s advertising and marketing programs, and consumer perceptions.  The Company may be unable to compete successfully on any or all of these bases in the future.

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The Company’s operations are subject to the general risks associated with acquisitions.

The Company has made several acquisitions in recent years, most recently the acquisition of the Skippy® peanut butter business, and regularly reviews opportunities for strategic growth through acquisitions.  Potential risks associated with acquisitions include the inability to integrate new operations successfully, the diversion of management’s attention from other business concerns, the potential loss of key employees and customers of the acquired companies, the possible assumption of unknown liabilities, potential disputes with the sellers, potential impairment charges if purchase assumptions are not achieved or market conditions decline, and the inherent risks in entering markets or lines of business in which the Company has limited or no prior experience.  Any or all of these risks could impact the Company’s financial results and business reputation.  In addition, acquisitions outside the United States may present unique challenges and increase the Company’s exposure to the risks associated with foreign operations.

The Company’s operations are subject to the general risks of litigation.

The Company is involved on an ongoing basis in litigation arising in the ordinary course of business.  Trends in litigation may include class actions involving employees, consumers, competitors, suppliers, shareholders, or injured persons, and claims relating to product liability, contract disputes, intellectual property, advertising, and labeling, wage and hour laws, employment practices, or environmental matters.  Litigation trends and the outcome of litigation cannot be predicted with certainty and adverse litigation trends and outcomes could adversely affect the Company’s financial results.

The Company is subject to the loss of a material contract.

The Company is a party to several supply, distribution, contract packaging, and other material contracts.  The loss of a material contract could adversely affect the Company’s financial results.

Government regulation, present and future, exposes the Company to potential sanctions and compliance costs that could adversely affect the Company’s business.

The Company’s operations are subject to extensive regulation by the U.S. Department of Homeland Security, the U.S. Department of Agriculture, the U.S. Food and Drug Administration, federal and state taxing authorities, and other state and local authorities that oversee workforce immigration laws, tax regulations, animal welfare, food safety standards, and the processing, packaging, storage, distribution, advertising, and labeling of the Company’s products.  The Company’s manufacturing facilities and products are subject to constant inspection by federal, state, and local authorities.  Claims or enforcement proceedings could be brought against the Company in the future.  The availability of government inspectors due to a government furlough could also cause disruption to the Company’s manufacturing facilities.  Additionally, the Company is subject to new or modified laws, regulations, and accounting standards.  The Company’s failure or inability to comply with such requirements could subject the Company to civil remedies, including fines, injunctions, recalls, or seizures, as well as potential criminal sanctions.

The Company is subject to stringent environmental regulation and potentially subject to environmental litigation, proceedings, and investigations.

The Company’s past and present business operations and ownership and operation of real property are subject to 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 the ability to comply with any modifications to these laws and regulations, is material to the Company’s business.  New matters or sites may be identified in the future that will require additional investigation, assessment, or expenditures.  In addition, some of the Company’s facilities have been in operation for many years and, over time, the Company 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 the Company’s present or former properties or manufacturing facilities and/or waste disposal sites could require the Company 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 the Company’s financial results.

34

The Company’s foreign operations pose additional risks to the Company’s business.

The Company operates its business and markets its products internationally.  The Company’s 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, compliance with applicable U.S. laws, including the Foreign Corrupt Practices Act, 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 adversely affect the Company’s financial results.

Deterioration of labor relations or increases in labor costs could harm the Company’s business.

The Company has approximately 19,600 employees worldwide, of which approximately 5,700 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 the Company’s facilities that results in work slowdowns or stoppages could harm the Company’s financial results.  Union contracts at the Company’s facilities in Eldridge, Iowa and Lathrop, California will expire during fiscal 2013, covering a combined total of approximately 150 employees.  Negotiations at these two facilities have not yet been initiated.

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities in the First Quarter of Fiscal 2013

Period	Total Number of Shares Purchased(1)	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(2)	Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs(2)
October 29, 2012 – December 2, 2012	—	$	—	—	1,190,200
December 3, 2012 – December 30, 2012	—	—		—	1,190,200
December 31, 2012 – January 27, 2013	26	35.26		—	1,190,200
Total	26	$	35.26	—

(1)The 26 shares repurchased during the first quarter, other than through publicly announced plans or programs, represent purchases for a Company employee award program.

(2)On May 26, 2010, the Company announced that its Board of Directors had authorized the Company to repurchase up to 5,000,000 shares of common stock with no expiration date.  On November 22, 2010, the Board of Directors authorized a two-for-one split of the Company’s common stock.  As part of the resolution to approve that stock split, the number of shares remaining to be repurchased was adjusted proportionately.  The stock split was approved by shareholders and was subsequently effected on February 1, 2011.  All numbers in the table above reflect the impact of this stock split.

On January 31, 2013, the Company announced that its Board of Directors had authorized the repurchase of up to an additional 10,000,000 shares of its common stock with no expiration date.  The repurchase program was authorized at a meeting of the Company’s Board of Directors on January 29, 2013.  The Company’s prior share repurchase program authorized in fiscal 2010 will be fully utilized prior to commencing purchases under this new authorization.

35

Item 6.Exhibits

2.1	Asset Purchase Agreement between Conopco, Inc. and Hormel Foods Corporation, dated as of January 2, 2013 (Exhibits identified in the agreement have been omitted pursuant to Item 601(b)(2) of Regulation S-K and will be furnished to the Commission upon request.)
31.1	Certification Required Under Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification Required Under Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Labels Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

36

SIGNATURES

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

	HORMEL FOODS CORPORATION
	(Registrant)
Date: March 8, 2013	By	/s/ JODY H. FERAGEN
		JODY H. FERAGEN
		Executive Vice President, Chief Financial Officer,
		and Director
		(Principal Financial Officer)
Date: March 8, 2013	By	/s/ JAMES N. SHEEHAN
		JAMES N. SHEEHAN
		Vice President and Controller
		(Principal Accounting Officer)

37

EX-2.1

EXHIBIT 2.1

EXECUTION COPY

ASSET PURCHASE AGREEMENT

between

CONOPCO, INC.

and

HORMEL FOODS CORPORATION

Dated as of January 2, 2013

TABLE OF CONTENTS

	Page
ARTICLE I
Purchase and Sale of Transferred Assets
SECTION 1.01. Purchase and Sale	6
SECTION 1.02. Transferred Assets and Excluded Assets	7
SECTION 1.03. Consents to Certain Assignments	12
SECTION 1.04. Assumption of Liabilities	13
SECTION 1.05. Excluded Technology License	16
SECTION 1.06. Manufacturing Agreement	16
ARTICLE II
Closing and Post-Closing Purchase Price Adjustment
SECTION 2.01. Closing	16
SECTION 2.02. Transactions To Be Effected at the Closings	17
SECTION 2.03. Post-Closing Purchase Price Adjustment	20
SECTION 2.04. Further Assurances	23
ARTICLE III
Representations and Warranties of Seller
SECTION 3.01. Organization and Standing	23
SECTION 3.02. Authority; Execution and Delivery; Enforceability	23
SECTION 3.03. No Conflicts or Violations; No Consents or Approvals Required	24
SECTION 3.04. Financial Information	25
SECTION 3.05. Assets Other than Real Property Interests	25
SECTION 3.06. Real Property	26
SECTION 3.07. Intellectual Property	26
SECTION 3.08. Contracts	28
SECTION 3.09. Permits	30
SECTION 3.10. Taxes	30
SECTION 3.11. Proceedings	32
SECTION 3.12. Seller Benefit Plans; Employment Matters	32
SECTION 3.13. Absence of Changes or Events	34
SECTION 3.14. Compliance with Applicable Laws	34
SECTION 3.15. Inventory	35
SECTION 3.16. Recalls	35

i

	Page
SECTION 3.17. Suppliers and Customers	35
SECTION 3.18. Sufficiency of Transferred Assets	36
ARTICLE IV
Representations and Warranties of Purchaser
SECTION 4.01. Organization and Standing	36
SECTION 4.02. Authority; Execution and Delivery; Enforceability	36
SECTION 4.03. No Conflicts or Violations; No Consents or Approvals Required	37
SECTION 4.04. Proceedings	38
SECTION 4.05. Availability of Funds; Solvency	38
ARTICLE V
Covenants
SECTION 5.01. Covenants Relating to Conduct of the Business	38
SECTION 5.02. Access to Information	40
SECTION 5.03. Confidentiality	40
SECTION 5.04. Best Efforts	41
SECTION 5.05. Non Competition	42
SECTION 5.06. Brokers or Finders	43
SECTION 5.07. No Shop	43
SECTION 5.08. Shandong Peanut	43
SECTION 5.09. Certain PRC Purchaser Matters	44
ARTICLE VI
Employment Matters
SECTION 6.01. Business Employees	44
SECTION 6.02. Continuation of Employment	44
SECTION 6.03. Credited Service	45
SECTION 6.04. Continuation of Benefits	45
SECTION 6.05. Severance	46
SECTION 6.06. Tax-Qualified Savings/401(k) Plan	46
SECTION 6.07. Tax-Qualified Pension Plan	47
SECTION 6.08. Certain Welfare Benefits Matters	47
SECTION 6.09. Cafeteria Plan	48
SECTION 6.10. Bonus Plan	49
SECTION 6.11. Accrued Vacation	49
SECTION 6.12. WARN Act	50

ii

	Page
SECTION 6.13. China Business Employees and China Dispatched Employees	50
SECTION 6.14. Liabilities	52
SECTION 6.15. Administration	53
SECTION 6.16. No Third-Party Beneficiaries	53
ARTICLE VII
Conditions to Closings
SECTION 7.01. Conditions to Each Party’s Global Obligation	53
SECTION 7.02. Additional Conditions to Global Obligation of Purchaser	53
SECTION 7.03. Additional Conditions to Global Obligation of Seller	54
SECTION 7.04. Conditions to China Closing	55
SECTION 7.05. Frustration of Closing Conditions	56
ARTICLE VIII
Termination; Effect of Termination
SECTION 8.01. Termination	56
SECTION 8.02. Effect of Termination	57
ARTICLE IX
Indemnification
SECTION 9.01. Indemnification by Seller	57
SECTION 9.02. Indemnification by Purchaser	58
SECTION 9.03. Indemnification Procedures	59
SECTION 9.04. Limitations on Indemnification	60
SECTION 9.05. Additional Environmental Procedures Limitations	63
SECTION 9.06. Calculation of Indemnity Payments	64
SECTION 9.07. Tax Treatment of Indemnification	64
ARTICLE X
Tax Matters
SECTION 10.01. Tax Matters	64
SECTION 10.02. Transfer Taxes	65

iii

	Page
ARTICLE XI
Additional Agreements
SECTION 11.01. Publicity	66
SECTION 11.02. No Use of Certain Names	66
SECTION 11.03. Support Services	66
SECTION 11.04. Post-Closing Information	67
SECTION 11.05. Books and Records	67
SECTION 11.06. Bulk Transfer Laws	67
SECTION 11.07. Refunds and Remittances	67
ARTICLE XII
Miscellaneous
SECTION 12.01. Assignment	68
SECTION 12.02. No Third-Party Beneficiaries	68
SECTION 12.03. Expenses	68
SECTION 12.04. Notices	69
SECTION 12.05. Headings; Certain Definitions	70
SECTION 12.06. Counterparts	73
SECTION 12.07. Integrated Contract; Exhibits and Schedules	73
SECTION 12.08. Severability; Enforcement	74
SECTION 12.09. Governing Law	74
SECTION 12.10. Jurisdiction	74
SECTION 12.11. Service of Process	75
SECTION 12.12. Waiver of Jury Trial	75
SECTION 12.13. Amendments	75
SECTION 12.14. Specific Enforcement	75

iv

EXHIBITS
China Purchase Agreement	A
China Land Transfer Agreement	B
China Property Transfer Agreement	C
Patent License	D
Transitional Trademark License	E
Excluded Technology License	F
Manufacturing Agreement	G
Assignment Agreement	H
Tri-Party Agreement	I
Transitional Services Agreement	J

v

GLOSSARY OF DEFINED TERMS

	Location of
Definition	Defined Terms
Acquisition	Section 12.05(b)
Active Employee	Section 6.02
Additional Trademarks	Section 1.02(a)(v)
Adjusted China Purchase Price	Section 2.03(c)
Adjusted Global Purchase Price	Section 2.03(c)
affiliate	Section 12.05(b)
Agency	Section 6.01
Agreement	Preamble
Ancillary Agreements	Section 3.02
Anticorruption Laws	Section 3.14(a)
Applicable Law	Section 12.05(b)
Assignment Agreement	Section 6.13(a)
Assumed Environmental Liability	Section 12.05(b)
Assumed Liabilities	Section 1.04(a)
Branch	Section 1.06
Brand	Recitals
Business	Section 12.05(b)
Business Contracts	Section 3.08(b)
business day	Section 12.05(b)
Business Employee	Section 6.01
Business Material Adverse Effect	Section 12.05(b)
Canada Tax	Section 3.10(a)
Canada Transferred Assets	Section 3.10(a)
China Acquisition	Section 1.01(a)
China Agreements	Recitals
China Assumed Liabilities	Section 12.05(b)
China Business	Section 12.05(b)
China Business Employee	Section 6.01
China Business Transfer Tax	Section 3.10(a)
China Closing	Section 2.01(b)
China Closing Date	Section 2.01(b)
China Closing Date Payment	Section 2.02(d)(i)
China Closing Inventory	Section 2.03(a)
China Dispatched Employees	Section 6.01
China Facility	Section 1.02(a)(i)
China Final Purchase Price	Section 2.03(c)
China Land Transfer Agreement	Recitals
China Property Transfer Agreement	Recitals

1

	Location of
Definition	Defined Terms
China Purchase Agreement	Recitals
China Purchase Price	Section 1.01(a)
China Target Inventory	Section 2.03(c)
China Tax	Section 3.10(a)
China Transfer Time	Section 6.13(a)
China Transferred Assets	Section 12.05(b)
China Transferred Dispatched Employee	Section 6.13(c)
China Transferred Employee	Section 6.13(b)
China Transferred Intellectual Property	Section 12.05(b)
Claims	Section 1.02(a)(ix)
Closing	Section 12.05(b)
Closing Date	Section 12.05(b)
COBRA	Section 6.08(b)
Code	Section 3.10(a)
Competing Activities	Section 5.05(a)
Confidentiality Agreement	Section 5.03(a)
Consent	Section 1.03(a)
Contracts	Section 1.02(a)(viii)
CRA	Section 2.02(a)(ix)
DOJ	Section 5.04(b)
$	Section 12.05(b)
Environmental Laws	Section 3.14(d)
Environmental Liability	Section 12.05(b)
Environmental Permits	Section 3.14(d)
Equipment	Section 1.02(a)(iii)
ERISA	Section 12.05(b)
Exchange Act	Section 12.05(b)
Excluded Assets	Section 1.02(b)
Excluded Taxes	Section 3.10(a)
Excluded Technology License	Section 1.05
Final Purchase Price	Section 2.03(c)
FTC	Section 5.04(b)
Fundamental Representations	Section 9.04(a)
Global Acquisition	Section 1.01(a)
Global Assumed Liabilities	Section 12.05(b)
Global Business	Section 12.05(b)
Global Closing	Section 2.01(a)
Global Closing Date	Section 2.01(a)
Global Closing Inventory	Section 2.03(a)
Global Closing Date Payment	Section 2.02(c)(i)
Global Final Purchase Price	Section 2.03(c)

2

	Location of
Definition	Defined Terms
Global Purchase Price	Section 1.01(a)
Global Target Inventory	Section 2.03(c)
Global Transferred Assets	Section 12.05(b)
Governmental Entity	Section 3.03
GST	Section 3.10(a)
Hazardous Materials	Section 12.05(b)
HIPAA	Section 6.08(b)
HSR Act	Section 3.03
HST	Section 3.10(a)
Inactive Employee	Section 6.02
including	Section 12.05(b)
Income Taxes	Section 3.10(a)
Indemnified Party	Section 9.03(a)
Indemnifying Party	Section 9.03(a)
Independent Expert	Section 2.03(b)(ii)
Intellectual Property	Section 12.05(b)
Inventory	Section 1.02(a)(ii)
Inventory Principles	Section 2.03(a)
IRS	Section 9.07
Judgment	Section 3.03
knowledge of Seller	Section 12.05(b)
Liens	Section 3.05(a)
Little Rock Facility	Section 1.02(a)(i)
Losses	Section 9.01
Louisville Facility	Section 12.05(b)
Management Accounts	Section 3.04
Manufacturing Agreement	Section 1.06
Names	Section 11.02
Notice of Objection	Section 2.03(b)(i)
Outside Date	Section 8.01(a)(iv)
Owned Property	Section 3.06(a)
Patent License	Section 1.02(a)(iv)
Permits	Section 1.02(a)(vii)
Permitted Liens	Section 3.06(b)
person	Section 12.05(b)
Post-Closing Tax Period	Section 3.10(a)
PRC Purchaser	Recitals
PRC Seller	Recitals
Pre-Closing Tax Period	Section 3.10(a)
Proceeding	Section 1.03(a)
Product Claims	Section 1.04(a)(ii)

3

	Location of
Definition	Defined Terms
Products	Section 12.05(b)
Property Taxes	Section 3.10(a)
Purchase Price	Section 1.01(a)
Purchaser	Preamble
Purchaser Indemnitees	Section 9.01
Purchaser Material Adverse Effect	Section 4.01
Purchaser Welfare Plans	Section 6.08(a)
Purchaser’s Accountants	Section 2.03(b)(i)
Purchaser’s Cafeteria Plan	Section 6.09
Purchaser’s 401(k) Plan	Section 6.06(a)
QST	Section 3.10(a)
Recoverable Transfer Tax Schedule	Section 10.02(b)(ii)
Recoverable Transfer Taxes	Section 3.10(a)
Registered Business Intellectual Property	Section 3.07(a)
Release	Section 12.05(b)
Remedial Action	Section 9.05
Repurposing	Section 5.09
Restricted Country	Section 3.14(c)
Restricted Period	Section 5.05(a)
Restricted Person	Section 3.14(c)
Retained Environmental Liability	Section 12.05(b)
Retained Liabilities	Section 1.04(b)
Retained Product Claims	Section 1.04(a)(ii)
Retained Receivables	Section 1.02(b)(iii)
Seller	Preamble
Seller Affiliates	Recitals
Seller Benefit Plan	Section 12.05(b)
Seller’s Cafeteria Plan	Section 6.09
Seller Disclosure Schedule	Article III
Seller Indemnitees	Section 9.02
Seller’s 401(k) Plan	Section 6.06(a)
Seller’s Pension Plan	Section 6.07
Service Agreement	Section 6.01
Statement	Section 2.03(a)
Straddle Period	Section 3.10(a)
subsidiary	Section 12.05(b)
Tax	Section 3.10(a)
Tax Return	Section 3.10(a)
Taxes	Section 3.10(a)
Taxing Authority	Section 3.10(a)
Technology	Section 1.02(a)(vi)

4

	Location of
Definition	Defined Terms
Third Party Claim	Section 9.03(a)
Transfer Taxes	Section 3.10(a)
Transfer Time	Section 6.02
Transferred Assets	Section 1.02(a)
Transferred Contracts	Section 1.02(a)(viii)
Transferred Equipment	Section 1.02(a)(iii)
Transferred Intellectual Property	Section 1.02(a)(iv)
Transferred Inventory	Section 1.02(a)(ii)
Transferred Permits	Section 1.02(a)(vii)
Transferred Real Property	Section 1.02(a)(i)
Transferred Technology	Section 1.02(a)(vi)
Transition Bonus	Section 6.04(b)
Transitional Services Agreement	Section 11.03
Transitional Trademark License	Section 1.02(a)(iv)
Tri-Party Agreement	Section 6.13(b)
U.S. Business Employee	Section 6.01
U.S. Purchaser	Section 1.01(b)
U.S. Transferred Employee	Section 6.02
WARN Act	Section 6.12
Workers’ Compensation Event	Section 6.08(c)

5

ASSET PURCHASE AGREEMENT

ASSET PURCHASE AGREEMENT dated as of January 2, 2013 (this “Agreement”), between CONOPCO, INC., a New York corporation (“Seller”), and HORMEL FOODS CORPORATION, a Delaware corporation (“Purchaser”).

WHEREAS Seller, directly or indirectly through certain of its affiliates, including Unilever (China) Co., Ltd. Weifang Branch, a company organized and existing under the laws of the People’s Republic of China (“PRC Seller”) (collectively, the “Seller Affiliates”), manufactures, markets, distributes and sells the Skippy® brand (the “Brand”).  Seller wishes to sell, or procure that the Seller Affiliates sell, to Purchaser, and Purchaser wishes to purchase from Seller and the Seller Affiliates, the Transferred Assets, upon the terms and subject to the conditions of this Agreement.  In addition, Purchaser has agreed to assume from Seller and the Seller Affiliates the Assumed Liabilities, upon the terms and subject to the conditions of this Agreement;

WHEREAS concurrently with the execution and delivery of this Agreement, PRC Seller and Beijing Hormel Business Management Co., Ltd., a company organized and existing under the laws of the People’s Republic of China (“PRC Purchaser”), intend to enter into an Asset Purchase Agreement in the form attached hereto as Exhibit A (the “China Purchase Agreement”) to address certain matters related to the purchase or transfer of certain Transferred Assets located in the People’s Republic of China and related matters on the China Closing Date; and

WHEREAS on the China Closing Date (subject to Section 2.04), PRC Seller and PRC Purchaser shall enter into one or more Land Use Rights Transfer Agreements in the form attached hereto as Exhibit B (collectively, the “China Land Transfer Agreement”) and one or more Agreements for the Sale and Purchase of Property in the form attached hereto as Exhibit C (collectively, the “China Property Transfer Agreement” and, together with the China Purchase Agreement, the China Land Transfer Agreement and all corresponding deeds, bills of sale, assignments and other instruments of transfer relating thereto, the “China Agreements”) related to the transfer of the China Facility to PRC Purchaser.

NOW, THEREFORE, the parties hereby agree as follows:

ARTICLE I

Purchase and Sale of Transferred Assets

SECTION 1.01.  Purchase and Sale.  (a) Upon the terms and subject to the conditions of this Agreement, at the Global Closing and the China Closing, Seller agrees to, and agrees to cause the Seller Affiliates to, sell, transfer, assign and deliver to Purchaser, and Purchaser agrees to (and, in the case of the China Transferred Assets, agrees to cause PRC Purchaser to) purchase, acquire and accept from Seller and the Seller Affiliates, all of Seller’s and the Seller Affiliates’ right, title and interest in, to and

6

under the Global Transferred Assets (at the Global Closing) and the China Transferred Assets (at the China Closing) for (i) an aggregate purchase price of $700,000,000 (comprised of the amount set forth in Section 1.01(a) of the Seller Disclosure Schedule as attributable to the Global Transferred Assets and the China Transferred Intellectual Property (the “Global Purchase Price”) and the amount set forth in Section 1.01(a) of the Seller Disclosure Schedule as attributable to the China Transferred Assets, other than the China Transferred Intellectual Property (the “China Purchase Price” and, together with the Global Purchase Price, the “Purchase Price”)), payable as set forth in Section 2.02 and subject to adjustment as set forth in Section 2.03, and (ii) the assumption of the Global Assumed Liabilities (in the case of the Global Closing) and the China Assumed Liabilities (in the case of the China Closing).  The purchase and sale of the Global Transferred Assets and the assumption of the Global Assumed Liabilities are collectively referred to in this Agreement as the “Global Acquisition”.  The purchase and sale of the China Transferred Assets and the assumption of the China Assumed Liabilities are collectively referred to in this Agreement as the “China Acquisition”.

(b)  As soon as reasonably practicable following the date hereof, such as would not reasonably be expected to delay the expected Global Closing  or China Closing hereunder, Purchaser will designate one or more affiliates of Purchaser and of PRC Purchaser that will each be deemed a “U.S. Purchaser” and a “PRC Purchaser”, respectively, hereunder.  Each U.S. Purchaser and PRC Purchaser will be deemed included in the term “Purchaser” or “PRC Purchaser”, respectively, for all purposes hereunder (including for purposes of Article IV).  Purchaser will cause each U.S. Purchaser and PRC Purchaser (i) to duly execute and deliver all documents, agreements, and instruments required to be executed and delivered by any entity as Purchaser under this Agreement and (ii) if requested by Seller or any Governmental Entity, to execute a joinder to this Agreement.  Nothing in this Section 1.01(b) shall be deemed to relieve Purchaser from any of its obligations hereunder, and Purchaser hereby unconditionally guarantees the timely payment and performance of all obligations of Purchaser  and PRC Purchaser hereunder.

SECTION 1.02.  Transferred Assets and Excluded Assets.  (a)  The term “Transferred Assets” means all of Seller’s and the Seller Affiliates’ right, title and interest in, to and under the following assets (as they exist (i) at the time of the Global Closing, in the case of the Global Transferred Assets, and (ii) at the time of the China Closing, in the case of the China Transferred Assets), other than (A) the Excluded Assets and (B) as otherwise provided in this Section 1.02(a):

(i) (A) The real property located in Little Rock, Arkansas owned by Seller and utilized by Seller and the Seller Affiliates in the operation and conduct of the Business together with Seller’s or the applicable Seller Affiliate’s right, title and interest in and to all buildings, improvements and fixtures thereon and all other appurtenances thereto (the “Little Rock Facility”) and (B) Seller’s or the applicable Seller Affiliate’s right, title and interest in and to the land located in Weifang, China and related land use rights utilized by Seller and the Seller Affiliates in the operation and conduct of the Business, together with Seller’s or the applicable Seller Affiliate’s right, title and interest in and to all buildings,

7

improvements and fixtures thereon and all other appurtenances thereto (the “China Facility” and, together with the Little Rock Facility, the “Transferred Real Property”);

(ii) all raw materials, work in process, finished goods, supplies, parts, label film, packaging materials and other inventories (“Inventory”) owned by Seller or any of the Seller Affiliates on the Global Closing Date or the China Closing Date, as applicable, wherever located, that is used or held for use exclusively in the operation or conduct of the Business (collectively, the “Transferred Inventory”);

(iii) all other tangible personal property and interests therein, including all machinery, equipment, furniture, furnishings, molds and dies (including for labels) and vehicles (“Equipment”), owned by Seller or any of the Seller Affiliates that are located at the Transferred Real Property and all Equipment that is set forth in Section 1.02(a)(iii) of the Seller Disclosure Schedule (the “Transferred Equipment”);

(iv) (A) all patents (including all reissues, divisions, continuations and extensions, reexaminations and post-grant reviews thereof) and patent applications set forth in Section 1.02(a)(iv)(A) of the Seller Disclosure Schedule, (B) all trademarks, trademark registrations, trademark applications, service marks, trade names and domain names (including all extensions and renewals thereof) set forth in Section 1.02(a)(iv)(B) of the Seller Disclosure Schedule together with the goodwill of the Business connected with the use of, and symbolized by all of, the foregoing marks (but excluding the names and marks “Unilever”, “Conopco”, “Knorr”, “Unilever Bestfoods” and any of the Seller Affiliates (in any style or design) and any name or mark derived from or including any of the foregoing) and (C) all copyrights, copyright registrations, copyright applications, package designs, trade dress and characters and all rights to any of the foregoing owned by Seller or any of the Seller Affiliates that are used or held for use exclusively in the operation or conduct of the Business (but excluding the names and marks “Unilever”, “Conopco”, “Knorr”, “Unilever Bestfoods” and any of the Seller Affiliates (in any style or design), and any name or mark derived from or including any of the foregoing) (the items set forth in the foregoing clauses (A), (B) and (C), collectively, the “Transferred Intellectual Property”), subject to the execution and delivery on or prior to the Global Closing or the China Closing, as applicable, by Purchaser of (1) a perpetual, royalty-free license in the form attached hereto as Exhibit D (the “Patent License”) to Seller and the Seller Affiliates and (2) a  royalty-free license in the form attached hereto as Exhibit E (the “Transitional Trademark License”) to Seller and the Seller Affiliates;

(v) all trademarks, trademark registrations, trademark applications, service marks, trade names and domain names (including all extensions and renewals thereof) set forth in Section 1.02(a)(v) of the Seller Disclosure Schedule and all common law trademarks together with the goodwill of the Business connected with the use of, and symbolized by all of the foregoing marks (but

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excluding the names and marks “Unilever”, “Conopco”, “Knorr”, “Unilever Bestfoods” and any of the Seller Affiliates (in any style or design), and any name or mark derived from or including any of the foregoing) (the “Additional Trademarks”);

(vi) all trade secrets, proprietary inventions, know-how, formulae, recipes, specifications, processes, procedures, research records, records of inventions, test information, market surveys and marketing know-how, software, website code and mobile technology applications (“Technology”) owned by Seller or any of the Seller Affiliates that are related exclusively to the Products, or used or held for use exclusively in the operation or conduct of the Business (the “Transferred Technology”);

(vii) all permits, licenses, franchises, approvals or authorizations from any Governmental Entity (“Permits”) issued to Seller or any of the Seller Affiliates that are used or held for use exclusively in the operation or conduct of the Business to the extent such Permits are transferable (the “Transferred Permits”);

(viii) all written contracts, leases, subleases, licenses, indentures, agreements, commitments, statements of work and other legally binding instruments (“Contracts”) set forth in Section 3.08 of the Seller Disclosure Schedule, and all other Contracts (including any Contract for the purchase of peanuts) to which Seller or any of the Seller Affiliates is a party or by which Seller or any of the Seller Affiliates is bound to the extent arising exclusively out of the operation or conduct of the Business (other than the Seller Benefit Plans and individual agreements with Business Employees) (collectively, the “Transferred Contracts”);

(ix) all warranties, rights, claims and causes of action of Seller or any of the Seller Affiliates to the extent relating to any other Transferred Asset or any Assumed Liability, other than (A) any such items arising under insurance policies and (B) all of Seller’s or any of the Seller Affiliates’ rights to assert claims, demands, actions, suits and causes of action, whether class, individual or otherwise in nature, in law or in equity (collectively, “Claims”), including any claim, demand, action, suit or cause of action for damages, injunctive relief, declaratory relief or other relief under the antitrust laws of any foreign country or the United States or any State thereof, unfair competition, unfair practices, price discrimination, unitary pricing, consumer protection, fraud prevention or trade practice laws (in any such case, domestic or foreign), that Seller or any of the Seller Affiliates, in any capacity, ever had, now has or may or shall have in the future, whether known or unknown, relating in any way to (x) the Business’s purchase or procurement of any good, service or product or (y) Seller’s or any of the Seller Affiliates’ purchase or procurement of any good, service or product for, or on behalf of, the Business, in either case, at any time up until the Global Closing or the China Closing, as applicable, along with any and all recoveries by settlement, judgment or otherwise in connection with any such Claims;

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(x) all books of account, general, financial, accounting records and files, invoices, customers’ and suppliers’ lists, other distribution lists, billing records, records relating to each of the Transferred Intellectual Property, the Transferred Technology and the Additional Trademarks (including registration certificates and prosecution history relating to each of the foregoing), sales, advertising and promotional literature, displays, manuals and customer and supplier correspondence owned by Seller or any of the Seller Affiliates that are used or held for use exclusively in, or that arise exclusively out of, the operation or conduct of the Business, except to the extent (x) relating to the Excluded Assets or the Retained Liabilities, (y) not reasonably separable from documents or databases that do not relate exclusively to the Business or (z) required to be retained by Seller or any of the Seller Affiliates under Applicable Law (and in the case of this clause (z), copies of such materials shall be made available to Purchaser at or as promptly as practicable after the Global Closing or the China Closing, as applicable);

(xi) all prepaid expenses that are used or held for use exclusively in, or that arise exclusively out of, the operation or conduct of the Business;

(xii) all assets relating to any employee benefit plan in which any employee of Seller or any of the Seller Affiliates participates, to the extent transferred to Purchaser pursuant to Article VI hereof; and

(xiii) the goodwill of the Business.

(b)  Notwithstanding anything to the contrary contained in this Agreement, the Transferred Assets shall not include any assets or rights other than the assets specifically listed or described in Section 1.02(a) and shall expressly exclude the following assets (collectively, the “Excluded Assets”), which shall not be sold, transferred, assigned or delivered to Purchaser:

(i) all assets identified in Section 1.02(b)(i) of the Seller Disclosure Schedule;

(ii) all cash, cash equivalents or securities of Seller or any of the Seller Affiliates;

(iii) all accounts, notes receivable and similar rights to receive payments of Seller or any of the Seller Affiliates on the Global Closing Date or the China Closing Date, as applicable, arising out of the operation or conduct of the Business (the “Retained Receivables”);

(iv) all rights, Claims and causes of action of Seller or any of the Seller Affiliates relating to any other Excluded Asset or any Retained Liability, including (A) any such items arising under insurance policies, (B) all guarantees, warranties, indemnities and similar rights in favor of Seller or any of the Seller Affiliates in respect of any other Excluded Asset or any Retained Liability and (C) all Claims that Seller or any of the Seller Affiliates, in any capacity, ever had,

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now has or may or shall have in the future, whether known or unknown, relating in any way to (x) the Business’s purchase or procurement of any good, service or product or (y) Seller’s or any of the Seller Affiliates’ purchase or procurement of any good, service or product for, or on behalf of, the Business, in either case, at any time up until the Global Closing or the China Closing, as applicable, along with any and all recoveries by settlement, judgment or otherwise in connection with any such Claims;

(v) any shares of capital stock of any affiliate of Seller or any of the Seller Affiliates;

(vi) except as specifically provided in Article VI, any asset relating to any employee benefit plan in which any employees of Seller or any of the Seller Affiliates participate;

(vii) any refunds or credits, claims for refunds or credits or rights to receive refunds or credits from any Taxing Authority with respect to Excluded Taxes;

(viii) any records (including accounting records) related to Taxes paid or payable by Seller, any of the Seller Affiliates or any of their respective affiliates and all financial and Tax records relating to the Business that form part of Seller’s, any of the Seller Affiliates’ or any of their respective affiliates’ general ledger;

(ix) all records prepared in connection with the sale of the Business, including bids received from third persons and analyses relating to the Business;

(x) all rights of Seller or any of the Seller Affiliates under this Agreement and any other agreements, certificates and instruments relating to the sale of the Business (or any portion thereof) or otherwise delivered in connection with this Agreement;

(xi) the names and marks “Unilever”, “Conopco”, “Knorr”, “Unilever Bestfoods” and of any of the Seller Affiliates (in any style or design), and any name or mark derived from, similar to or including any of the foregoing;

(xii) all uniform product codes for the Products;

(xiii) any and all contracts, commitments and purchase orders between Seller or any of the Seller Affiliates, on the one hand, and any Restricted Person, on the other hand, or with or in any Restricted Country;

(xiv) all division or corporate-level services of the type currently provided to the Business by Seller, any of the Seller Affiliates or any of their respective affiliates; and

(xv) all assets owned by Bestfoods (Shandong) Co., Ltd.

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SECTION 1.03.  Consents to Certain Assignments.  (a)  Prior to the Global Closing (in the case of consents and authorizations relating to the Global Acquisition) and the China Closing (in the case of consents and authorizations relating to the China Acquisition), as applicable, Seller will provide or cause to be provided all commercially reasonable assistance to Purchaser (not including the payment of any consideration or concession of any right) reasonably requested by Purchaser to secure any consent or authorization that is required from any third party in connection with the applicable transactions contemplated hereby, including those listed in Section 3.03 of the Seller Disclosure Schedule.  Notwithstanding anything in this Agreement to the contrary, this Agreement shall not constitute an agreement to transfer or assign, directly or indirectly, any asset or any claim or right or any benefit arising under or resulting from such asset if an attempted direct or indirect assignment thereof, without the consent, approval or authorization (“Consent”) of a third party (including a Governmental Entity), would constitute a breach, default, violation or other contravention of the rights of such third party, would be ineffective with respect to any party to an agreement concerning such asset, claim or right, would violate any Applicable Law or would in any way adversely affect the rights of Seller or any of the Seller Affiliates or, upon transfer, Purchaser under such asset, claim or right.  If any direct or indirect transfer or assignment by Seller or any of the Seller Affiliates to Purchaser, or any direct or indirect acquisition or assumption by Purchaser of, any interest in, or liability, obligation or commitment under, any asset, claim or right requires the Consent of a third party as set forth above, then such transfer or assignment or assumption shall be made subject to such Consent being obtained.  Purchaser agrees that neither Seller nor any of the Seller Affiliates shall have any liability whatsoever to Purchaser arising out of or relating to the failure to obtain any such Consent that may be required in connection with the transactions contemplated by this Agreement or because of any circumstances resulting therefrom.  Purchaser further agrees that no representation, warranty or covenant of Seller herein shall be breached or deemed breached, and no condition shall be deemed not satisfied, as a result of (i) the failure to obtain any such Consent, (ii) any circumstances resulting therefrom or (iii) any suit, action or proceeding (a “Proceeding”) or investigation commenced or threatened by or on behalf of any person arising out of or relating to the failure to obtain any such Consent or any circumstances resulting therefrom.

(b)  If any such Consent is not obtained prior to the Global Closing (with respect to the Global Transferred Assets) or the China Closing (with respect to the China Transferred Assets), the Global Closing or the China Closing, as applicable, shall nonetheless take place on the terms set forth herein and, thereafter, Purchaser shall use its reasonable best efforts to secure such Consent as promptly as practicable after the Global Closing or the China Closing, as applicable, and Seller shall provide or cause to be provided all commercially reasonable assistance to Purchaser (not including the payment of any consideration or concession of any right) reasonably requested by Purchaser to secure such Consent after the Global Closing or the China Closing, as applicable, or cooperate with Purchaser (at Purchaser’s expense) in any lawful and commercially reasonable arrangement reasonably proposed by Purchaser under which (i) Purchaser shall obtain (without infringing upon the legal rights of such third party or violating any Applicable Law) the economic claims, rights and benefits (net of the amount of any related Tax costs imposed on Seller, any of the Seller Affiliates or any of their respective

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affiliates) under the asset, claim or right with respect to which the Consent has not been obtained in accordance with this Agreement and (ii) Purchaser shall assume any related economic burden (including the amount of any related Tax costs imposed on Seller, any of the Seller Affiliates or any of their respective affiliates) with respect to the asset, claim or right with respect to which the Consent has not been obtained in accordance with this Agreement.

SECTION 1.04.  Assumption of Liabilities.  (a)  Upon the terms and subject to the conditions of this Agreement, Purchaser or PRC Purchaser shall assume, effective as of the Global Closing (in the case of the Global Assumed Liabilities) and the China Closing (in the case of the China Assumed Liabilities), and shall pay, perform and discharge when due, the following obligations, liabilities and commitments of any nature, whether known or unknown, express or implied, primary or secondary, direct or indirect, liquidated, absolute, accrued, contingent or otherwise and whether due or to become due, arising out of, relating to or otherwise in respect of the Transferred Assets, the Business or the operation or conduct of the Business (collectively, the “Assumed Liabilities”):

(i) all obligations, liabilities and commitments under the Transferred Contracts and the Transferred Permits to the extent such obligations, liabilities and commitments relate to the period from and after the Global Closing Date or the China Closing Date, as applicable (other than any such obligations, liabilities and commitments to the extent resulting from any breach by Seller or any of the Seller Affiliates of its obligations under such Transferred Contracts or from any violation by Seller or any of the Seller Affiliates of such Transferred Permits prior to the Global Closing Date or the China Closing Date, as applicable);

(ii) all obligations, liabilities and commitments in respect of any and all products manufactured or sold by the Business at any time, including obligations, liabilities and commitments for refunds, adjustments, allowances, repairs, exchanges, returns and warranty, product liability, merchantability and similar claims or Proceedings relating to any such obligations, liabilities or commitments (“Product Claims”), other than Product Claims that result from (x) any and all products sold by the Business prior to the Global Closing or the China Closing, as applicable, and (y) the failure of any products manufactured prior to the Global Closing or the China Closing, as applicable, to meet the specifications for such products on the Global Closing Date or the China Closing Date, as applicable (the “Retained Product Claims”);

(iii) all Assumed Environmental Liabilities;

(iv) other than the items included in Section 1.04(a)(vi), which are assumed only to the extent provided in Article VI hereof, all obligations, liabilities and commitments (including any defense costs, third-party legal fees and similar expenses) in respect of Proceedings, pending or threatened, and claims, arising out of, relating to or otherwise in any way in respect of the Business or the operation or conduct of the Business on or after the Global Closing Date or the China Closing Date, as applicable;

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(v) all obligations, liabilities and commitments (including any defense costs, third-party legal fees and similar expenses) in respect of the matters set forth in Section 3.13  of the Seller Disclosure Schedule, whether commenced prior to or after the Global Closing or the China Closing, as applicable;

(vi) all obligations and liabilities assumed by Purchaser pursuant to Article VI hereof;

(vii) all obligations, liabilities and commitments (A) arising under or in respect of advertising commitments arising out of the operation or conduct of the Business or otherwise in respect of the Business to the extent set forth in Section 1.04(a)(vii) of the Seller Disclosure Schedule or entered into in the ordinary course of business consistent with past practice after the date hereof, and (B) for trade promotions and consumer promotions arising out of the operation or conduct of the Business or otherwise in respect of the Business to the extent set forth in Section 1.04(a)(vii) of the Seller Disclosure Schedule or entered into in the ordinary course of business consistent with past practice after the date hereof, in the case of this clause (B), in respect of any and all Products (including the Transferred Inventory) sold by Purchaser on and after the Global Closing Date or the China Closing Date, as applicable;

(viii) all liabilities, obligations and commitments of Seller or any of the Seller Affiliates to any supplier for any materials or components used or held for use exclusively in the operation or conduct of the Business (including for the purchase of peanuts), to the extent such liabilities, obligations and commitments relate to the period from and after the Global Closing Date or the China Closing Date, as applicable;

(ix) all liabilities, obligations and commitments of Seller or any of the Seller Affiliates arising out of any purchase, service or promotion order relating exclusively to the Business, including any such purchase, service or promotion order issued pursuant to any master agreement that is not a Transferred Contract, to the extent such liabilities, obligations and commitments relate to the period from and after the Global Closing Date or the China Closing Date, as applicable;

(x) Property Taxes that are the responsibility of Purchaser pursuant to Section 10.01(d);

(xi)  Transfer Taxes that are the responsibility of Purchaser pursuant to Section 10.02(b); and

(xii) all obligations, liabilities and commitments accruing, arising out of or relating to the ownership, operation or conduct of the Business or the use or ownership of the Transferred Assets on and after the Global Closing Date or the China Closing Date, as applicable.

(b)  Notwithstanding any other provision of this Agreement, neither Purchaser nor PRC Purchaser shall assume any Retained Liability, each of which shall be

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retained and paid, performed and discharged when due by Seller or the applicable Seller Affiliate.  The term “Retained Liabilities” shall mean all obligations, liabilities and commitments of any nature, whether known or unknown, express or implied, primary or secondary, direct or indirect, liquidated, absolute, accrued, contingent or otherwise and whether due or to become due, arising out of, relating to or otherwise in respect of the Transferred Assets, the Business or the operation or conduct of the Business that are not Assumed Liabilities set forth in Section 1.04(a), including the following:

(i) Excluded Taxes;

(ii) all obligations, liabilities and commitments of Seller or any of the Seller Affiliates to the extent relating to or arising out of the Excluded Assets;

(iii) all obligations and liabilities expressly retained by Seller or any of the Seller Affiliates pursuant to Article VI;

(iv) all accounts payable of Seller or any of the Seller Affiliates on the Global Closing Date or the China Closing Date, as applicable, arising out of the operation or conduct of the Business before the Global Closing Date or the China Closing Date, as applicable;

(v) all obligations, liabilities and commitments in respect of the Retained Product Claims;

(vi) all Retained Environmental Liabilities;

(vii) all obligations and liabilities retained by Seller or the Seller Affiliates pursuant to Article VI hereof;

(viii) Property Taxes that are the responsibility of Seller pursuant to Section 10.01(d); and

(ix) Transfer Taxes that are the responsibility of Seller pursuant to Section 10.02(b).

(c)  Purchaser agrees to reimburse Seller and the Seller Affiliates, dollar for dollar, in the event that any of the Business’s customers offset any cost related to the Business against accounts payable by such customer to Seller or such Seller Affiliate but only to the extent that such cost constitutes an Assumed Liability.  Seller agrees to, and to cause the Seller Affiliates to, provide notice to Purchaser of any such offset for which Seller or such Seller Affiliate is entitled to be reimbursed by Purchaser pursuant to this Section 1.04(c).  Purchaser shall pay Seller or such Seller Affiliate promptly following receipt of notice of any such offset by a customer (together with supporting documentation).

(d)  Seller agrees to reimburse Purchaser, dollar for dollar, in the event that any of the Business’s customers offset any cost related to the Business against accounts payable by such customer to Purchaser but only to the extent that such cost

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constitutes a Retained Liability.  Purchaser agrees to provide notice to Seller of any such offset for which Purchaser is entitled to be reimbursed by Seller pursuant to this Section 1.04(d).  Seller shall pay Purchaser promptly following receipt of notice of any such offset by a customer (together with supporting documentation).

(e)  From and after the Global Closing or the China Closing, as applicable, Seller shall retain the right and authority to collect for its own account all Retained Receivables and other related items that are included in the Excluded Assets and to endorse any checks or drafts received with respect to any Retained Receivables or other related items that are included in the Excluded Assets.  Purchaser shall deliver to Seller any cash or other property received directly or indirectly by it with respect to the Retained Receivables and other related items that are included in the Excluded Assets.

SECTION 1.05.  Excluded Technology License.  At the Global Closing, Seller and each applicable Seller Affiliate will execute and deliver a royalty-free, non-exclusive license (in the form attached hereto as Exhibit F) to Purchaser with respect to certain Technology owned by Seller or any of the Seller Affiliates that is used in connection with the operation or conduct of the Business on the Global Closing Date and that is not included in the Transferred Technology (the “Excluded Technology License”).

SECTION 1.06.  Manufacturing Agreement. At the China Closing, a Seller Affiliate and PRC Purchaser will enter into a manufacturing agreement (in the form attached hereto as Exhibit G) pursuant to which Purchaser, PRC Purchaser or the branch or affiliate of PRC Purchaser established in Weifang City, Shandong Province, China (the “Branch”) will manufacture for such Seller Affiliate certain products at the China Facility as set forth in such agreement (the “Manufacturing Agreement”).

ARTICLE II

Closing and Post-Closing Purchase Price Adjustment

SECTION 2.01.  Closing.

(a)  The closing of the Global Acquisition (the “Global Closing”) shall take place at the offices of Cravath, Swaine & Moore LLP, 825 Eighth Avenue, New York, New York 10019, at 10:00 a.m. New York time on the second business day following the satisfaction (or, to the extent permitted, the waiver) of the conditions set forth in Section 7.01, or, if on such day any other condition set forth in Article VII to the Global Closing has not been satisfied (or, to the extent permitted, waived by the party or parties entitled to the benefit thereof), as soon as practicable after all the conditions set forth in Article VII to the Global Closing have been satisfied (or, to the extent permitted, waived by the party or parties entitled to the benefit thereof), or at such other place, time and date as may be agreed by Seller and Purchaser.  The date on which the Global Closing occurs is referred to in this Agreement as the “Global Closing Date”.  The Global Closing shall be deemed to be effective as of the close of business in New York on the Global Closing Date.

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(b)  The closing of the China Acquisition (the “China Closing”) shall take place at the offices of Faegre Baker Daniels LLP’s Shanghai Office, Suite 2702, Park Place, 1601 Nanjing Road West, Shanghai 200040, at 10:00 a.m. Beijing time on the second business day following the satisfaction (or, to the extent permitted, the waiver by the party or parties entitled to the benefit thereof) of the conditions set forth in Section 7.04 to the China Closing.  The date on which the China Closing occurs is referred to in this Agreement as the “China Closing Date”.  The China Closing shall be deemed to be effective as of the close of business in Shanghai on the China Closing Date.

SECTION 2.02.  Transactions To Be Effected at the Closings.

(a)  Seller shall deliver or cause to be delivered to Purchaser at or prior to the Global Closing:

(i) such appropriately executed deeds (including a special warranty deed for the Little Rock Facility), bills of sale, assignments and other instruments of transfer relating to the Global Transferred Assets (other than the Transferred Intellectual Property and the Additional Trademarks);

(ii) duly executed assignments of the U.S. and Canadian trademark registrations and applications included in the Transferred Intellectual Property, in a form suitable for recording in the U.S. and Canadian Trademark Offices;

(iii) a general assignment for all other Transferred Intellectual Property that are Global Transferred Assets and the Additional Trademarks that are Global Transferred Assets (it being understood that any execution of local forms or notarization and/or legalization required for the recording of any such assignment outside of the United States may be effectuated after the Global Closing and shall, subject to Section 2.04, be the sole responsibility of Purchaser);

(iv) a certificate of Seller’s non-foreign status complying with the provisions of United States Treasury Regulation Section 1.1445-2(b);

(v) appropriately executed counterparts of the Patent License, the Transitional Trademark License and the Excluded Technology License;

(vi) an appropriately executed counterpart of the Transitional Services Agreement;

(vii) an appropriately executed certificate of a duly authorized officer of Seller as to the satisfaction of the conditions set forth in Sections 7.02(a) and (b);

(viii) evidence of termination of all UCC-1 filings, security agreements, or other Liens with respect to the Global Transferred Assets (other than Permitted Liens);

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(ix) an appropriately executed letter signed by Conestoga-Rovers & Associates (“CRA”) authorizing Purchaser to, subject to any limitations reasonably imposed by CRA, rely on that certain Phase I Environmental Site Assessment, Unilever Facility, 8201 Frazier Pike, Little Rock, Arkansas dated September 2012; and

(x) a DVD, CD ROM or similar electronic storage medium containing the documents to which Purchaser has previously been granted access in the “data room” created and maintained by Seller in connection with Purchaser’s investigation of the Business;

(it being understood in each case that such deeds, bills of sale, assignments and other instruments of transfer shall not require Seller or any of its affiliates to make any additional representations, warranties or covenants, expressed or implied, not contained in this Agreement).

(b)  Seller shall deliver or cause to be delivered to Purchaser or PRC Purchaser, at Purchaser’s option, at or prior to the China Closing:

(i) such appropriately executed deeds, bills of sale, assignments and other instruments of transfer relating to the China Transferred Assets (other than the Transferred Intellectual Property and the Additional Trademarks);

(ii) a general assignment for all other Transferred Intellectual Property that are China Transferred Assets and the Additional Trademarks that are China Transferred Assets (it being understood that any execution of local forms or notarization and/or legalization required for the recording of any such assignment outside of the United States may be effectuated after the China Closing and shall, subject to Section 2.04, be the sole responsibility of Purchaser);

(iii) a certificate complying with the provisions of United States Treasury Regulation Section 1.1445-2(c)(3) certifying that none of the China Transferred Assets constitute a “U.S. real property interest” within the meaning of Section 897(c)(1) of the Code;

(iv) an appropriately executed counterpart of the Manufacturing Agreement; and

(v) appropriately executed counterparts of the China Land Transfer Agreement and the China Property Transfer Agreement;

(it being understood in each case that such deeds, bills of sale, assignments and other instruments of transfer shall not require Seller or any of its affiliates to make any additional representations, warranties or covenants, expressed or implied, not contained in this Agreement).

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(c)  Purchaser shall deliver to Seller and the Seller Affiliates at or prior to the Global Closing:

(i) payment in an amount equal to (A) the Global Purchase Price, to be paid in U.S. dollars by wire transfer of immediately available funds to one or more accounts designated in writing by Seller (such designation to be made at least three business days prior to the Global Closing Date), plus or minus (B) an estimate, prepared by Seller and delivered to Purchaser at least three business days prior to the Global Closing Date, of any adjustment to the Global Purchase Price under Section 2.03 (the Global Purchase Price plus or minus such estimate of any adjustment under Section 2.03 being hereinafter called the “Global Closing Date Payment”);

(ii) appropriately executed counterparts to such deeds, bills of sale, assignments and other instruments of transfer, and appropriately executed assumption agreements and other instruments of assumption providing for the assumption of the Global Assumed Liabilities;

(iii) appropriately executed counterparts of the Patent License, the Transitional Trademark License and the Excluded Technology License;

(iv) an appropriately executed counterpart of the Transitional Services Agreement; and

(v) an appropriately executed certificate of a duly authorized officer of Purchaser as to the satisfaction of the conditions set forth in Sections 7.03(a) and (b);

(it being understood in each case that such deeds, bills of sale, assignments and other instruments of transfer and assumption shall not require Purchaser to make any additional representations, warranties or covenants, expressed or implied, not contained in this Agreement).

(d)  Purchaser shall deliver to Seller and the Seller Affiliates at or prior to the China Closing:

(i) payment in an amount equal to (A) the China Purchase Price, to be paid in Renminbi by wire transfer of immediately available funds to one or more accounts designated in writing by Seller (such designation to be made at least three business days prior to the China Closing Date), plus or minus (B) an estimate, prepared by Seller and delivered to Purchaser at least three business days prior to the China Closing Date, of any adjustment to the China Purchase Price under Section 2.03 (the China Purchase Price plus or minus such estimate of any adjustment under Section 2.03 being hereinafter called the “China Closing Date Payment”), which payment shall be effected by Purchaser causing PRC Purchaser (or

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an affiliate thereof specified by Purchaser) to make such payment to PRC Seller (or an affiliate thereof specified by Seller);

(ii) appropriately executed counterparts to such deeds, bills of sale, assignments and other instruments of transfer, and appropriately executed assumption agreements and other instruments of assumption providing for the assumption of the China Assumed Liabilities;

(iii) an appropriately executed counterpart of the Manufacturing Agreement; and

(iv) appropriately executed counterparts of the China Land Transfer Agreement and the China Property Transfer Agreement;

(it being understood in each case that such deeds, bills of sale, assignments and other instruments of transfer and assumption shall not require Purchaser to make any additional representations, warranties or covenants, expressed or implied, not contained in this Agreement).

SECTION 2.03.  Post-Closing Purchase Price Adjustment.  (a)  Within 60 days after the applicable Closing Date, Seller shall prepare and deliver to Purchaser a statement (the “Statement”), setting forth the book value of the Global Transferred Inventory as of the close of business in New York on the Global Closing Date (the “Global Closing Inventory”) or the China Transferred Inventory as of the close of business in Shanghai on the China Closing Date (the “China Closing Inventory”), as applicable, calculated in accordance with International Financial Reporting Standards and the principles set forth on Section 2.03 of the Seller Disclosure Schedule (the “Inventory Principles”).  Purchaser shall assist Seller and its independent auditors and other representatives in the preparation of the Statement and shall provide Seller and its independent auditors and other representatives any information reasonably requested and shall provide them access at all reasonable times to the personnel, properties, books and records of the Business for such purpose.

(b)  Objections; Resolution of Disputes.

(i) Unless Purchaser notifies Seller in writing within 15 days after Seller’s delivery of the applicable Statement of any objection to the computation of Global Closing Inventory or China Closing Inventory, as applicable, set forth therein (the “Notice of Objection”), such Statement shall become final and binding.  During such 15-day period Purchaser and its representatives shall be permitted to review the working papers of Seller relating to such Statement.  Any Notice of Objection shall specify in reasonable detail the basis for the objections set forth therein and shall include a special purpose report of  Ernst & Young (“Purchaser’s Accountants”) stating that they concur with the matters set forth in such Notice of Objection and that such Notice of Objection has been prepared in accordance with this Section 2.03.  Any Notice of Objection shall

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include only objections based on (A) mathematical errors in the computation of Global Closing Inventory or China Closing Inventory, as applicable, or (B) Global Closing Inventory or China Closing Inventory, as applicable, not having been calculated in accordance with the Inventory Principles.

(ii) If Purchaser provides the applicable Notice of Objection to Seller within such 15-day period, Purchaser and Seller shall, during the 30-day period following Seller’s receipt of such Notice of Objection, attempt in good faith to resolve Purchaser’s objections.  During such 30-day period, Seller and its independent auditors and other representatives shall be permitted to review the working papers of Purchaser and Purchaser’s Accountants relating to such Notice of Objection and the basis therefor.  If Purchaser and Seller are unable to resolve all such objections within such 30-day period, the matters remaining in dispute that were properly included in such Notice of Objection shall be submitted to KPMG (or, if such firm declines to act, to another nationally recognized public accounting firm mutually agreed upon by Purchaser and Seller in writing and, if Purchaser and Seller are unable to so agree within 10 days after the end of such 30-day period, then Purchaser and Seller shall each select such a firm and such firms shall jointly select a third nationally recognized firm to resolve the disputed matters (such selected firm being the “Independent Expert”)).  The parties shall instruct the Independent Expert to render its reasoned written decision as promptly as practicable but in no event later than 60 days after its selection.  The resolution of disputed items by the Independent Expert shall be final and binding, and the determination of the Independent Expert shall constitute an arbitral award that is final, binding and non-appealable and upon which a judgment may be entered by a court having jurisdiction over the party against which such determination is to be enforced.  The fees and expenses of the Independent Expert shall be borne equally by Purchaser and Seller.  The fees and disbursements of Purchaser’s independent auditors incurred in connection with their review of the applicable Statement and certification of any Notice of Objection shall be borne by Purchaser.  After the applicable Statement shall have become final and binding, neither party shall have any further right to make any claims against the other in respect of (i) any element of the Global Closing Inventory or the China Closing Inventory, as applicable, that Purchaser raised, or could have raised, in the applicable Notice of Objection or (ii) any payment made pursuant to Section 2.03(c).

(c)  Adjustment Payment.  The Global Purchase Price shall be increased by the entire amount, if any, by which the Global Closing Inventory exceeds $35,000,000 (the “Global Target Inventory”), if the Global Closing Inventory exceeds $35,100,000, and the Global Purchase Price shall be decreased by the entire amount, if any, by which the Global Closing Inventory is less than the Global Target Inventory, if the Global Closing Inventory is less than $34,900,000 (the Global Purchase Price as so increased or decreased being hereinafter called the “Adjusted Global Purchase Price”).  The China

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Purchase Price shall be increased by the entire amount, if any, by which the China Closing Inventory exceeds 20,564,280 Renminbi (the “China Target Inventory”), if the China Closing Inventory exceeds 21,187,440 Renminbi, and the China Purchase Price shall be decreased by the entire amount, if any, by which China Closing Inventory is less than the China Target Inventory, if the China Closing Inventory is less than 19,941,120 Renminbi (the China Purchase Price as so increased or decreased being hereinafter called the “Adjusted China Purchase Price”).  Within 10 days after the applicable Statement has become final and binding in accordance with Section 2.03(b), (i) if the Global Closing Date Payment or the China Closing Date Payment, as applicable, is less than the Adjusted Global Purchase Price or the Adjusted China Purchase Price, as applicable, Purchaser shall pay to Seller an amount equal to such difference, plus simple interest thereon at a rate of 5% per annum from the applicable Closing Date to the date payment is made in full, and (ii) if the Global Closing Date Payment or the China Closing Date Payment, as applicable, is greater than the Adjusted Global Purchase Price or the Adjusted China Purchase Price, as applicable, Seller shall pay to Purchaser an amount equal to such difference, plus simple interest thereon at a rate of 5% per annum from the applicable Closing Date to the date payment is made in full (the Global Closing Date Payment and the China Closing Date Payment as so increased or decreased being hereinafter called the “Global Final Purchase Price” and the “China Final Purchase Price”, respectively, and, collectively, the “Final Purchase Price”); provided that any such adjustment to the China Closing Date Payment shall be effected by Purchaser or Seller, as applicable, causing PRC Purchaser (or an affiliate thereof specified by Purchaser) or PRC Seller (or an affiliate thereof specified by Seller), as applicable, to make such payment to the other.  Any such payment hereunder shall be made by wire transfer of immediately available funds to an account designated in writing by Purchaser or Seller, as the case may be.

(d)  Post-Closing Books and Records.  Following the applicable Closing through the resolution of any adjustment to the Global Purchase Price or the China Purchase Price, as applicable, contemplated by this Section 2.03, Purchaser shall not take any action with respect to the accounting books and records of the Business on which the applicable Statement is to be based that could prevent, obstruct or otherwise affect (i) the results of the procedures set forth in this Section 2.03, including the value of the Global Closing Inventory or the China Closing Inventory, as applicable, or any other value set forth on such Statement, or (ii) the procedures set forth in this Section 2.03, including the preparation of the Statement or the resolution of any dispute regarding the Statement.  During the period of time from and after the applicable Closing Date through the resolution of any adjustment to the Global Purchase Price or the China Purchase Price, as applicable, contemplated by this Section 2.03, Purchaser shall afford to Seller and any accountants, counsel or financial advisers retained by Seller in connection with any adjustment to the Global Purchase Price or the China Purchase Price, as applicable, contemplated by this Section 2.03 reasonable access during normal business hours to all the properties, books, contracts, personnel and records of the Business relevant to the adjustment contemplated by this Section 2.03.

SECTION 2.04.  Further Assurances.

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(a)  At the applicable Closing and from time to time after such Closing and without further consideration, each party shall execute and deliver any further documents, certificates and other instruments (including the execution of local forms or notarization and/or legalization required for the recording of any assignments of applicable Transferred Intellectual Property or Additional Trademarks outside of the United States) and take such other action consistent with the terms of this Agreement, as may reasonably be requested by the other, for the purpose of effectuating the intent of this Agreement.  Should either Closing occur and Purchaser thereafter claim that one or more assets that should have constituted Global Transferred Assets or China Transferred Assets, as the case may be, were not transferred to Purchaser in accordance with the terms of this Agreement, Purchaser’s remedies shall not be limited to money damages and Purchaser shall be entitled to seek the remedy of specific performance with respect thereto.

(b)  In addition, to the extent reasonably requested by Purchaser in connection with actions contemplated by Section 5.09, the parties shall execute the China Land Transfer Agreement and the China Property Transfer Agreement prior to the China Closing Date; provided, however, that, notwithstanding the foregoing, the rights and obligations of the parties thereunder shall not take effect prior to, and shall be conditioned upon consummation of, the China Closing.  For purposes of the China Land Transfer Agreement and the China Property Transfer Agreement, the Closing Date (as such term is used therein) shall be the China Closing Date.  Purchaser hereby agrees that the China Land Transfer Agreement and the China Property Transfer Agreement (i) shall not be used to register, attempt to register or otherwise attempt to make effective prior to the China Closing the conveyances provided for therein and (ii) shall only be used in connection with the actions contemplated by Section 5.09.

ARTICLE III

Representations and Warranties of Seller

Except as set forth in the disclosure schedules (collectively, the “Seller Disclosure Schedule”) delivered by Seller to Purchaser on or prior to the date hereof and the documents attached to or incorporated by reference therein, Seller represents and warrants to Purchaser as follows:

SECTION 3.01.  Organization and Standing.  Seller is duly organized, validly existing corporation and is in good standing under the laws of the State of New York.  Each of the Seller Affiliates is duly organized and validly existing under the laws of its jurisdiction of organization.  Each of Seller and each of the Seller Affiliates has full corporate, company or partnership power (as applicable) and authority to own, lease or otherwise hold the Transferred Assets owned, leased or otherwise held by it and to conduct the Business as presently conducted by it.

SECTION 3.02.  Authority; Execution and Delivery; Enforceability.  Seller has full corporate power and authority to execute, deliver and perform this Agreement and the other agreements and instruments to be executed and delivered in

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connection with this Agreement (the “Ancillary Agreements”) to which it is, or is specified to be, a party and to consummate the transactions contemplated to be consummated by it by this Agreement and such Ancillary Agreements.  Each of the Seller Affiliates has full corporate, company or partnership power and authority to execute, deliver and perform the Ancillary Agreements to which it is, or is specified to be, a party and to consummate the transactions contemplated to be consummated by it by such Ancillary Agreements.  All corporate action required to authorize Seller’s execution, delivery and performance of this Agreement and the Ancillary Agreements to which it is, or is specified to be, a party and to authorize the consummation of the transactions contemplated to be consummated by it by this Agreement and such Ancillary Agreements has been taken.  All corporate, company or partnership action required to authorize each of the Seller Affiliates’ execution, delivery and performance of the Ancillary Agreements to which it is, or is specified to be, a party and to authorize the consummation of the transactions contemplated to be consummated by it by such Ancillary Agreements has been taken.  Seller has duly executed and delivered this Agreement and on or prior to the applicable Closing will have duly executed and delivered each Ancillary Agreement to which it is, or is specified to be, a party, and this Agreement constitutes, and each Ancillary Agreement to which it is, or is specified to be, a party will at the applicable Closing constitute, its legal, valid and binding obligation, enforceable against it in accordance with its terms subject, as to enforcement, to applicable bankruptcy, insolvency, moratorium, reorganization or similar laws affecting creditors’ rights generally and to general equitable principles.  Each of the Seller Affiliates on or prior to the applicable Closing will have duly executed and delivered each Ancillary Agreement to which it is, or is specified to be, a party, and each Ancillary Agreement to which it is, or is specified to be, a party will at the applicable Closing constitute its legal, valid and binding obligation, enforceable against it in accordance with its terms subject, as to enforcement, to applicable bankruptcy, insolvency, moratorium, reorganization or similar laws affecting creditors’ rights generally and to general equitable principles.

SECTION 3.03.  No Conflicts or Violations; No Consents or Approvals Required.  The execution and delivery by Seller of this Agreement do not, the execution and delivery by Seller and each of the Seller Affiliates of each Ancillary Agreement to which it is, or is specified to be, a party will not, and the consummation of, in the case of Seller, the transactions contemplated to be consummated by it by this Agreement and such Ancillary Agreements, or, in the case of each of the Seller Affiliates, the transactions contemplated to be consummated by it by such Ancillary Agreements, will not conflict with, or result in any breach of or constitute a default under, or result in the creation of any Lien (other than Permitted Liens or Liens caused by Purchaser) upon any of the Transferred Assets under, any provision of (i) in the case of Seller, its Certificate of Incorporation or By-laws and, in the case of each of the Seller Affiliates, its comparable organizational documents, (ii) any Contract to which Seller or any of the Seller Affiliates is a party or by which any of the Transferred Assets is bound or (iii) any judgment, order or decree (“Judgment”) or Applicable Law, other than, in the case of clauses (i), (ii) and (iii) above, any such items that would not reasonably be expected to have a material adverse effect on the Transferred Assets, taken as a whole.  No Consent of, or registration, declaration or filing with, any Federal, state, local or foreign court of competent jurisdiction, governmental agency, authority, instrumentality or regulatory

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body (a “Governmental Entity”), is required to be obtained or made by or with respect to Seller or any of the Seller Affiliates in connection with the execution, delivery and performance of this Agreement or the consummation of the Acquisition, other than (A) compliance with and filings under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”), (B) the filings and receipt, termination or expiration, as applicable, of such other approvals or waiting periods as may be required under any other applicable competition, merger control, antitrust or similar Applicable Law of any jurisdiction, (C) compliance with and filings and notifications under applicable Environmental Laws, (D) compliance with and filings under Section 13(a) of the Exchange Act, (E) those that may be required solely by reason of Purchaser’s (as opposed to any other third party’s) participation in the Acquisition and the other transactions contemplated hereby and by the Ancillary Agreements and (F) those the failure of which to obtain or make would not reasonably be expected to have a Business Material Adverse Effect.

SECTION 3.04.  Financial Information.  Section 3.04 of the Seller Disclosure Schedule sets forth (i) an unaudited Statement of Inventory at December 31, 2010, December 31, 2011 and September 30, 2012 and (ii) an unaudited Statement of Profit Before Overheads for the years ended December 31, 2010 and December 31, 2011 and for the nine months ended September 30, 2012 (such statements, the “Management Accounts”).  The Management Accounts were prepared in accordance with International Financial Reporting Standards and the historical accounting principles, practices, methodologies and policies of Seller or the applicable Seller Affiliates with respect to the Business applied on a consistent basis.  The Management Accounts present fairly, in all material respects, in accordance with such accounting principles, practices, methodologies and policies, the Inventory of the Business at December 31, 2010, December 31, 2011 and September 30, 2012 and the direct revenues and expenses of the Business for the years ended December 31, 2010 and December 31, 2011 and for the nine months ended September 30, 2012.

SECTION 3.05.  Assets Other than Real Property Interests.  (a)  Seller and the Seller Affiliates have, or as of the Global Closing Date will have, good and valid title to all Global Transferred Assets, and as of the China Closing Date will have good and valid title to the China Transferred Assets, other than those sold or otherwise disposed of since the date of this Agreement not in violation hereof, in each case free and clear of all mortgages, liens, charges, claims, security interests, options or other rights to purchase, restrictions, reservations, pledges, encroachments, easements, covenants, rights-of-way or other encumbrances of any kind (collectively, “Liens”), except (i) mechanics’, carriers’, workmen’s, repairmen’s or other like Liens arising or incurred in the ordinary course of business that secure amounts that are not yet delinquent, (ii) Liens arising under original purchase price conditional sales Contracts or equipment leases with third parties entered into in the ordinary course of business, (iii) Liens for Taxes and other governmental charges that are not due and payable or that may thereafter be paid without penalty and (iv) other imperfections of title, licenses or encumbrances, if any, which do not materially impair the continued use and operation of the assets to which they relate in the conduct of the Business as presently conducted.  The Transferred Equipment is in reasonably good repair and operating condition (subject to normal wear and tear), and is adequate and

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suitable for its present uses.  The Transferred Equipment has been maintained in the ordinary course of business consistent with past practice.  The bonded imported equipment, raw materials and inventory that are Transferred Assets are not subject to custom’s supervision, and all such equipment, raw materials and inventory can be sold and transferred to the PRC Purchaser free of import value added tax imposed by the People’s Republic of China.

(b)  This Section 3.05 does not relate to real property or interests in real property, such items being the subject of Section 3.06, or to Intellectual Property, such items being the subject of Section 3.07.

SECTION 3.06.  Real Property.  (a)  Section 3.06(a) of the Seller Disclosure Schedule sets forth a legal description of the Little Rock Facility and identifies the China Facility, which taken together constitute all real property and interests in real property (including land use rights) owned by Seller or a Seller Affiliate and used or held for use exclusively in the operation or conduct of the Business, other than any such property or interest constituting an Excluded Asset (individually, an “Owned Property”).  Neither Seller nor any Seller Affiliate leases any real property or interest in real property that is used or held for use exclusively in the operation or conduct of the Business.

(b)  Seller or a Seller Affiliate has fee title to the Little Rock Facility and valid title to the China Facility (with all buildings located thereon duly recorded on the relevant property title certificates issued by the appropriate Chinese authorities), in each case free and clear of all Liens (including licenses related to use of real property), except (i) the Liens described in clauses (i) through (iv) of Section 3.05(a), (ii) those matters set forth in Section 3.06(b) of the Seller Disclosure Schedule, (iii) easements, covenants, restrictions, rights-of-way and other similar matters, whether or not of record that do not materially impair the continued use and operation of the assets to which they relate in the conduct of the Business as presently conducted, (iv) any conditions that may be shown by a current, accurate survey or that would be apparent as part of a physical inspection of any Owned Property made prior to the applicable Closing and (v) zoning, building and other similar restrictions (the Liens described in clauses (i) through (v) above, together with any Liens set forth in Sections 3.05 and 3.06 of the Seller Disclosure Schedule, are referred to collectively as the “Permitted Liens”).  To the knowledge of Seller, as of the date of this Agreement, there are no material projects planned relating to maintenance of the structural integrity of the Owned Property.

(c)  This Section 3.06 does not relate to environmental matters, such items being the subject of Section 3.14(d).

SECTION 3.07.  Intellectual Property.  (a)   Seller or a Seller Affiliate is the owner of the Transferred Intellectual Property and the Transferred Technology free and clear of all Liens and no license fees in respect of any Transferred Intellectual Property or, other than ordinary course software license fees, Transferred Technology are paid to any party (affiliated or non-affiliated) for the use by Seller or the applicable Seller Affiliate thereof in those jurisdictions where such Transferred Intellectual Property and

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Transferred Technology is being used.  Section 3.07 of the Seller Disclosure Schedule sets forth a list of the registered (and applications for registration of) Transferred Intellectual Property (the “Registered Business Intellectual Property”).  Section 3.07 of the Seller Disclosure Schedule sets forth a list of the application numbers and the jurisdictions where the Registered Business Intellectual Property is registered or where applications have been filed.  Purchaser acknowledges and agrees that Seller does not make any representations or warranties relating to the trademark registrations and applications included in the Registered Business Intellectual Property in jurisdictions other than those set forth in Section 1.02(a)(iv)(B) of the Seller Disclosure Schedule.

(b)  Except as set forth in Sections 3.07(b), 1.02(a)(iv)(A) and 1.02(a)(iv)(B) of the Seller Disclosure Schedule, all necessary registration, maintenance, renewal, and annuity fees have been paid, and all necessary documents have been filed, in connection with the Registered Business Intellectual Property.  In connection with the Registered Business Intellectual Property, all registrations are in force and all applications for the same are pending in good standing and without any adverse action or proceedings pending or threatened by or before the Governmental Entity in which the registrations or applications are issued or filed.  The Registered Business Intellectual Property is valid and enforceable and none of the Registered Business Intellectual Property has been declared invalid or unenforceable or been limited by any court or arbitration panel.  No material claims are pending or, to the knowledge of Seller, threatened as of the date of this Agreement against Seller or any of the Seller Affiliates by any person claiming that the use of the Transferred Intellectual Property in the operation or conduct of the Business infringes, misappropriates or otherwise violates the Intellectual Property rights of any such person.  During the three year period immediately preceding the date of this Agreement, neither Seller nor any of the Seller Affiliates has received any written notice alleging that the operation or conduct of the Business infringes the Intellectual Property rights of any person.  The operation of the Business as currently conducted does not and, to the knowledge of Seller, the operation of the Business as planned to be conducted will not, infringe, misappropriate or otherwise violate the Intellectual Property rights of any person.

(c)  Except as set forth on Section 3.07(c) of the Seller Disclosure Schedule, neither Seller nor any of the Seller Affiliates has granted any license of any kind relating to any Transferred Intellectual Property or Transferred Technology, except non-exclusive licenses to end-users in the ordinary course of business.  Neither Seller nor any of the Seller Affiliates is bound by or a party to any option, license or similar Contract relating to any Intellectual Property of any other person for the use of such Intellectual Property in the conduct of the Business, except where payments under the applicable Contract are less than $50,000 per year and the Contract is (i) for non-exclusive licenses to end-users in the ordinary course of business and (ii) for so-called “shrink-wrap” and other non-customized license agreements relating to computer software licensed to Seller or the applicable Seller Affiliate in the ordinary course of business.

(d)  Other than (i) the licenses set forth in Section 3.07(c) of the Seller Disclosure Schedule, (ii) rights in connection with co-packing arrangements and (iii)

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cross-promotional rights entered into in the ordinary course of business, neither Seller nor any of the Seller Affiliates is a party to or bound by any material license, sublicense, option or other agreement relating in whole or in part to the Transferred Intellectual Property.

(e)  There are no pending proceedings initiated by Seller or any Seller Affiliate regarding infringement, misappropriation or other violation by any person of Seller’s or any Seller Affiliate’s rights to, or in connection with, the Transferred Intellectual Property or Transferred Technology.

(f)  All trade secrets of Seller and the Seller Affiliates that are included in the Transferred Technology have been maintained by Seller and the Seller Affiliates subject to secrecy safeguards in a manner substantially consistent with the manner in which Seller maintains the confidentiality of its trade secrets generally. No formulas, recipes or manufacturing processes that are owned by Seller or any Seller Affiliate that are material to the Business have been disclosed to any third person other than pursuant to a written agreement protecting the disclosure thereof.

(g)  For the avoidance of doubt, nothing in this Section 3.07 or elsewhere in this Agreement shall be construed as a representation or warranty related to the Additional Trademarks.

SECTION 3.08.  Contracts.  (a)  Except for Contracts relating to Excluded Assets, neither Seller nor any of the Seller Affiliates is a party to or bound by any Contract that is used and held for use exclusively in, or that arises exclusively out of, the operation or conduct of the Business (other than (x) any Contract that is not material in relation to the Business, taken as a whole, (y) this Agreement and the Ancillary Agreements and (z) Contracts entered into after the date of this Agreement in accordance with Section 5.01) and that is:

(i) a covenant not to compete (other than (A) pursuant to any radius restriction contained in any lease, reciprocal easement or development, construction, operating or similar agreement and (B) any such covenant contained in any agreement with a broker) that materially limits the conduct of the Business as currently conducted;

(ii) (A) a continuing Contract for the future purchase of materials, supplies, equipment, raw materials, packaging or commodities (other than (x) purchase Contracts and orders for Inventory in the ordinary course of business and (y) purchase orders for the co-packing or manufacturing of the products of the Business in the ordinary course of business), (B) a management, service, consulting or other similar Contract (other than Contracts for services in the ordinary course of business, including transportation and warehousing Contracts) or (C) an advertising Contract, in any such case which has an aggregate future liability to any person (other than Seller or any of the Seller Affiliates) in excess of $100,000 and

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is not terminable by Seller or a Seller Affiliate by notice of not more than 90 days for a cost of less than $100,000;

(iii) a Contract under which Seller or any of the Seller Affiliates has borrowed any money from, or issued any note, bond, debenture or other evidence of indebtedness to, any person (other than Seller or any of the Seller Affiliates) or any other note, bond, debenture or other evidence of indebtedness of Seller or any of the Seller Affiliates (other than in favor of Seller or any of the Seller Affiliates) in any such case which, individually, is in excess of $100,000;

(iv) a Contract under which (A) any person (other than Seller or any of the Seller Affiliates) has directly or indirectly guaranteed indebtedness, liabilities or obligations of Seller or any of the Seller Affiliates or (B) Seller or any of the Seller Affiliates has directly or indirectly guaranteed indebtedness, liabilities or obligations of any person, other than Seller or any of the Seller Affiliates (in each case other than endorsements for the purpose of collection in the ordinary course of business), in any such case which, individually, is in excess of $100,000;

(v) a material Contract granting a Lien upon any Transferred Real Property, which Lien is not a Permitted Lien;

(vi) a Contract (other than a Contract that will be terminated as of the Global Closing or the China Closing, as applicable) with (A) Seller, any of the Seller Affiliates or any of their respective affiliates or (B) any officer or director of Seller or any of the Seller Affiliates;

(vii) a lease or similar Contract with any person (other than Seller or any of the Seller Affiliates) under which Seller or any of the Seller Affiliates is a lessor or sublessor of, or makes available for use to any person (other than Seller or any of the Seller Affiliates) any portion of any premises otherwise occupied by Seller or any of the Seller Affiliates that, in either case, specifies payments in excess of $100,000 per annum;

(viii) a lease or similar Contract with any person (other than Seller or any of the Seller Affiliates) under which Seller or any of the Seller Affiliates is lessee of, or holds or uses, any machinery, equipment, vehicle or other tangible personal property owned by any person which lease or similar Contract has an aggregate future liability in excess of $100,000 and is not terminable by Seller or any of the Seller Affiliates by notice of not more than 90 days for a cost of less than $100,000; or

(ix) any other Contract that has an aggregate future liability to any person (other than Seller or any of the Seller Affiliates) in excess of $150,000 and is not terminable by Seller or any of the Seller Affiliates by

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notice of not more than 90 days for a cost of less than $150,000 (other than purchase orders, sales orders and Contracts with brokers).

(b)  Seller or the applicable Seller Affiliate has performed all material obligations required to be performed by it to date under the Transferred Contracts (the Transferred Contracts, the “Business Contracts”) and it is not in material breach or material default thereunder and, to the knowledge of Seller, no other party to any Business Contract, as of the date of this Agreement, is in material breach or material default thereunder.  Seller has delivered to Purchaser a true, correct and complete copy (redacted in certain instances) of each Transferred Contract.  All Business Contracts are valid and binding, in full force and effect and enforceable (subject, as to enforcement, to applicable bankruptcy, insolvency, moratorium, reorganization or similar laws affecting creditors’ rights generally and to general equitable principles) in accordance with their terms by Seller or the applicable Seller Affiliate, except to the extent such failures to be valid, binding, in full force and effect or enforceable would not be material to the Business.

SECTION 3.09.  Permits.  (a)  (i) Transferred Permits are validly held by Seller or a Seller Affiliate, and Seller or the applicable Seller Affiliate has complied in all material respects with the terms and conditions thereof, (ii) during the 12 months immediately preceding the date of this Agreement, neither Seller nor any of the Seller Affiliates has received written notice of any Proceeding relating to the revocation or modification of any such Transferred Permits the loss of which would reasonably be expected to materially adversely affect the Business and (iii) none of such Transferred Permits would reasonably be expected to be subject to suspension, modification, revocation or non-renewal as a result of the execution and delivery of this Agreement or the consummation of the Acquisition, except for any such suspensions, modifications, revocations or non-renewals that would not materially adversely affect the Business.

(b)  Section 3.09(a)(i) does not relate to environmental matters, such items being the subject of Section 3.14(d).

SECTION 3.10.  Taxes.  (a)  For purposes of this Agreement:

“Canada Transferred Assets” shall mean those Transferred Assets that are located in Canada or that are used by the owner thereof in connection with its operation of the Business in Canada.

“Canada Tax” shall mean any Transfer Tax that is GST, HST or QST.

“China Business Transfer Tax” shall mean a China Tax that is a Transfer Tax imposed on the transfer of real estate assets, intangible assets or goodwill (other than a China Tax that is a Transfer Tax that is a land appreciation, deed or stamp tax).

“China Tax” shall mean any Tax relating to the China Transferred Assets, the operation of the China Business or the China Agreements.

“Code” shall mean the Internal Revenue Code of 1986, as amended.

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“Excluded Taxes” shall mean all liabilities of Seller, any of the Seller Affiliates or any of their respective affiliates in respect of any Tax for any Pre-Closing Tax Period.

“GST” shall mean the Canadian Federal Goods and Services Tax imposed pursuant to Part IX of the Excise Tax Act (Canada).

“HST” shall mean the Harmonized Sales Tax imposed pursuant to Part IX of the Excise Tax Act (Canada).

“Income Tax” or “Income Taxes” shall mean (i) all income or franchise Taxes imposed on or measured by income, (ii) all other Taxes reported on a Tax Return that includes such Taxes and (iii) any interest, penalties and additions associated with the amounts described in clauses (i) and (ii) hereof.

“Pre-Closing Tax Period” shall mean any taxable period ending on or before the Global Closing Date (or, in the case of a taxable period with respect to a China Tax, the China Closing Date) and the portion ending on the applicable Closing Date of any taxable period that includes but does not end on the applicable Closing Date.

“Post-Closing Tax Period” shall mean any taxable period (or portion thereof) beginning after the Global Closing Date (or, in the case of a taxable period with respect to a China Tax, the China Closing Date).

“Property Taxes” shall mean real, personal and intangible property Taxes.

“QST” shall mean the Quebec Sales Tax imposed pursuant to the Act respecting the Quebec sales tax (Quebec).

“Recoverable Transfer Taxes” shall mean Transfer Taxes that are recoverable or creditable by Purchaser (or any of its affiliates) under Applicable Law governing the payment of such Transfer Taxes, including Canada Taxes, value added tax imposed by the People’s Republic of China and other similar recoverable or creditable Transfer Taxes in other jurisdictions.

“Straddle Period” shall mean any taxable period beginning on or prior to the Global Closing Date (or, in the case of a taxable period with respect to a China Tax, the China Closing Date) and ending after the Global Closing Date (or, in the case of a taxable period with respect to a China Tax, the China Closing Date).

“Tax” or “Taxes” shall mean all forms of taxation imposed by any Federal, state, provincial, local, foreign or other Taxing Authority, including income, franchise, property, sales, use, excise, employment, unemployment, payroll, social security, estimated, value added, ad valorem, transfer, recapture, withholding, health and other taxes of any kind, including any interest, penalties and additions thereto.

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“Taxing Authority” shall mean any Federal, state, provincial, local or foreign government, any subdivision, agency, commission or authority thereof or any quasi-governmental body exercising Tax regulatory authority.

“Tax Return” shall mean any report, return, document, declaration or other information or filing required to be supplied to any Taxing Authority with respect to Taxes, including any amendment made with respect thereto.

“Transfer Taxes” shall mean all sales (including bulk sales), use, value-added, transfer, recording, ad valorem, privilege, documentary, gross receipts, registration, conveyance, deed, land appreciation, excise, license, stamp or similar Taxes and fees arising out of, in connection with or attributable to the transactions effectuated pursuant to this Agreement.

(b)  (i) All material Tax Returns required to be filed by the Code or by applicable state, provincial, local or foreign Tax laws to the extent such Tax Returns relate to the Transferred Assets or the operation of the Business for Pre-Closing Tax Periods have been timely filed or will be timely filed, (ii) all material Taxes due with respect to the Transferred Assets or operation of the Business (whether or not shown as due on any Tax Return) have been paid in full or will be timely paid in full by the due date thereof other than those being contested in good faith by appropriate proceedings, (iii) no material claims are being asserted in writing with respect to any Taxes due on such Tax Returns with respect to the Transferred Assets or the operation of the Business, (iv) no material Liens for Taxes with respect to the Transferred Assets have been filed and (v) no claim in writing has been made by a Taxing Authority in a jurisdiction in which neither the Seller nor any Seller Affiliate currently files a Tax Return stating that the Transferred Assets or the operation of the Business is subject to Tax by such jurisdiction.

SECTION 3.11.  Proceedings.  Section 3.11 of the Seller Disclosure Schedule sets forth a list as of the date of this Agreement of each pending (as to which a complaint has been served on Seller or any Seller Affiliate) or threatened Proceeding against Seller or any of the Seller Affiliates (to which Seller has knowledge) which relates to the Business and pursuant to which a party seeks (a) more than $100,000 from Seller or the applicable Seller Affiliate or (b) injunctive relief prohibiting the consummation of the Acquisition.  Neither Seller nor any of the Seller Affiliates is a party or subject to or in default under any unsatisfied Judgment applicable to the conduct of the Business.  This Section 3.11 does not relate to Intellectual Property matters or environmental matters, such items being the subject of Sections 3.07 and 3.14(d), respectively.

SECTION 3.12.  Seller Benefit Plans; Employment Matters.  (a)   Section 3.12 of the Seller Disclosure Schedule sets forth a complete and accurate list of each material Seller Benefit Plan.  Seller has delivered or made available to Purchaser copies of (i) each Seller Benefit Plan and any amendments thereto, (ii) the most recent summary plan description and summary of material modifications for each Seller Benefit Plan for which such a summary plan description or summary of material modifications is

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required, (iii) each trust, insurance, group annuity Contract or other funding document relating to any Seller Benefit Plan and (iv) with respect to Seller’s 401(k) Plan and Seller’s Pension Plan, the most recent determination, opinion or advisory letter received from the IRS with respect to each such plan.

(b)  With respect to Seller’s 401(k) Plan, Seller’s Pension Plan and Seller’s Cafeteria Plan, (i) each such plan has been administered in accordance with its terms and is in compliance with all Applicable Law, including provisions of ERISA and the Code, except for such failures or instances of possible non-compliance that would not reasonably be expected to have a Business Material Adverse Effect, (ii) to the knowledge of Seller, no fact or circumstance exists that is reasonably likely to result in a Business Material Adverse Effect regarding the preferential tax treatment of each such plan, (iii) all material contributions or premiums relating to Business Employees required to be paid, deducted or remitted and all obligations required to be performed by the Seller or any Seller Affiliate relating to the Business Employees under the terms of each such plan or by Applicable Law have been paid, deducted, remitted or performed in a timely fashion and (iv) all material contributions relating to the Business Employees to each such plan required to be made by way of authorized payroll deduction have been properly withheld by the Seller and its affiliates and fully paid thereunder in accordance with Applicable Law.

(c)  With respect to Seller’s 401(k) Plan and Seller’s Pension Plan, (i) each such plan has received a current favorable determination (or is entitled to rely on the opinion letter of a pre-approved plan sponsor) as to its qualification and each trust has received a determination letter from the IRS that such trust is so exempt under Section 501(a) of the Code and (ii) nothing has occurred since the date of the most recent determination of such qualification and exemption that would materially adversely affect the qualified or exempt status of each such plan or trust nor will the consummation of the transactions provided for by this Agreement have any such effect.

(d)  Except as disclosed in Section 3.12(d) of the Seller Disclosure Schedule, the consummation of the transactions contemplated by this Agreement will not, either alone or in combination with another event, (i) entitle any Business Employee to any material bonus, retirement, severance pay or any other material benefit or payment or (ii) accelerate the time of payment or vesting of, or increase the amount of, any compensation due to any Business Employee.

(e)  None of the Business Employees are represented by any union or subject to any collective bargaining agreements or other agreements with any union or labor organization or employee group and, to the knowledge of Seller, there are no labor organization attempts relating to the Business Employees.

(f)  As of the date hereof, there are no material work stoppages, slowdowns, walkouts or strikes with respect to the Business Employees.

(g)  To the extent required by Applicable Law, the qualifications of each Business Employee for employment under Applicable Law have been reviewed by Seller

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or the Seller Affiliate that employs such Business Employee and a properly completed Form I-9 is on file with respect to each U.S. Business Employee.

SECTION 3.13.  Absence of Changes or Events.  Since September 30, 2012, (i) there has not been a Business Material Adverse Effect, (ii) the Business has been operated in its ordinary course of business and (iii) neither Seller nor any of the Seller Affiliates has taken any action that, if taken after the date of this Agreement, would constitute a breach of Section 5.01(a)(i) through (viii).  Purchaser acknowledges that there may be disruption to the Business as a result of the announcement by Seller of its intention to sell the Business (and that there may be further disruption to the Business as a result of the execution of this Agreement (including the identity of Purchaser) and the consummation of the transactions contemplated hereby), and Purchaser agrees that any such disruptions do not and shall not constitute a breach of this Section 3.13.

SECTION 3.14.  Compliance with Applicable Laws.  (a)  To the knowledge of Seller, the Business is in compliance in all material respects with all Applicable Laws (including the United Stated Foreign Corrupt Practices Act of 1977, as amended, or any other anticorruption or anti-bribery laws applicable to Seller or any of the Seller Affiliates (the “Anticorruption Laws”)).  This Section 3.14(a) does not relate to matters with respect to Taxes, which are the subject of Section 3.10, or to environmental matters, which are the subject of Section 3.14(d).

(b)  To the knowledge of Seller, in connection with the Business and as of the date of this Agreement, (i) there is no allegation, charge, Proceeding or investigation of or request for information from Seller or any of the Seller Affiliates by any Governmental Entity regarding any Anticorruption Laws and (ii) there is no other allegation, investigation or inquiry by any Governmental Entity regarding Seller or any of the Seller Affiliates’ actual or possible violation of such Anticorruption Laws.

(c)  To the knowledge of the Seller, in connection with the Business and as of the date of this Agreement, neither Seller, any Seller Affiliates, nor any of their respective officers, directors, employees, agents or other individuals or entities acting on behalf of Seller or any of Seller’s Affiliates (i) has conducted, directed or facilitated any business from the United States with any Restricted Person or with or in any Restricted Country, (ii) has conducted, directed or facilitated any business from outside the United States in any Restricted Country or (iii) has entered into any contract, agreement or other arrangement that would constitute a Transferred Contract to cooperate with any boycott of another country that is not sanctioned by the United States government.  For purposes of this Agreement, “Restricted Person” means any individual, entity or government agency that is identified on a list as of the date of this Agreement administered by a United States governmental entity with whom United States persons (both individuals and entities) and their foreign branches and subsidiaries are prohibited from conducting, directing or facilitating any business; and, “Restricted Country” means Iran, Syria, North Korea, Sudan, Cuba and, with respect to certain blocked parties, Slovenia, Croatia, Bosnia and Herzegovina, Serbia, Montenegro, Kosovo, Macedonia, Belarus, Burma, Ivory Coast, Iraq, Lebanon, Liberia, Libya, Somalia, Yemen and Zimbabwe.

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(d)   (i) To the knowledge of Seller, Seller and the Seller Affiliates conduct and for the three (3) years immediately preceding the date of this Agreement have conducted the Business in compliance in all material respects with all Applicable Laws relating to pollution or protection of the environment or, as it relates to exposure to hazardous or toxic materials, occupational health and safety of Business Employees (“Environmental Laws”), (ii) Seller and the Seller Affiliates possess all Permits required under Environmental Laws for the conduct of the Business as currently conducted (“Environmental Permits”) and are in compliance in all material respects with the terms and conditions thereof, (iii) there are no material Proceedings pending or threatened in writing against Seller or any of the Seller Affiliates alleging that the Business has committed a violation of or is liable under any Environmental Law, (iv) neither Seller nor any of the Seller Affiliates is a party to or in default under any Judgment pursuant to any Environmental Law that would reasonably be expected to result in a material liability to Seller with respect to the Business and (v) to the knowledge of Seller, there has been no Release or threatened Release of any Hazardous Materials at any Owned Property that would reasonably be expected to result in a material liability to Seller with respect to the Business.

SECTION 3.15.  Inventory.  On the Global Closing Date, except to the extent excluded from the Global Closing Inventory pursuant to the Inventory Principles, the Transferred Inventory corresponding to the Global Closing Date will be usable and saleable in the ordinary course of business.  On the China Closing Date, except to the extent excluded from the China Closing Inventory pursuant to the Inventory Principles, the Transferred Inventory corresponding to the China Closing Date will be usable and saleable in the ordinary course of business.

SECTION 3.16.  Recalls.  During the three years immediately preceding the date of this Agreement, there have been no recalls of any Products sold by the Business.

SECTION 3.17.  Suppliers and Customers.  Section 3.17 of the Seller Disclosure Schedule lists the 10 largest customers and suppliers of the Business (in each case, excluding any co-packers or contract manufacturers) based on revenues or billings generated during the 12 month period ended September 30, 2012 (as to customers) and expenditures during the 12 month period ended September 30, 2012 (as to suppliers).  During the 12 month period immediately preceding the date of this Agreement, neither Seller nor any of the Seller Affiliates has received, from any customer or supplier listed in Section 3.17 of the Seller Disclosure Schedule, written notice terminating (or stating the intent to terminate) such customer’s or supplier’s relationship with Seller or such Seller Affiliate.  As of the date of this Agreement, neither Seller nor any of the Seller Affiliates has agreed with any existing customer to repurchase, or issue a credit or allow a return in respect of, any Products following the Global Closing (in the case of Products relating to Global Transferred Assets) or the China Closing (in the case of Products relating to China Transferred Assets), except to the extent such Products fail to meet specifications.

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SECTION 3.18.  Sufficiency of Transferred Assets.  Except for the Excluded Assets and except as contemplated by the Ancillary Agreements, including the Transitional Services Agreement and the Excluded Technology License, and assuming that Purchaser has the ability to provide to the Business all division and corporate-level services of the type currently provided to the Business by Seller or any of the Seller Affiliates or their respective affiliates, (a) the Global Transferred Assets are sufficient to permit Purchaser to manufacture (or have manufactured) the Products and conduct the Global Business at the Little Rock Facility and the Louisville Facility immediately following the Global Closing in all material respects as such Products are being manufactured and as such Global Business is being conducted at the Little Rock Facility and the Louisville Facility, respectively, immediately prior to the Global Closing and (b) the China Transferred Assets are sufficient to permit Purchaser to manufacture the Products and conduct the China Business at the China Facility immediately following the China Closing in all material respects as such Products are being manufactured and as such China Business is being conducted at the China Facility, respectively, immediately prior to the China Closing.

ARTICLE IV

Representations and Warranties of Purchaser

Purchaser hereby represents and warrants to Seller as follows:

SECTION 4.01.  Organization and Standing.  Each of Purchaser and PRC Purchaser is duly organized and validly existing and in good standing under the laws of the jurisdiction in which it is organized and has full corporate power and authority and possesses all governmental franchises, licenses, permits, authorizations and approvals necessary to own, lease or otherwise hold its properties and assets and to carry on its business as presently conducted, other than such franchises, licenses, permits, authorizations and approvals the lack of which would not reasonably be expected to have a material adverse effect on the ability of Purchaser or PRC Purchaser, as applicable, to consummate the Acquisition or otherwise comply with the terms of this Agreement (a “Purchaser Material Adverse Effect”).

SECTION 4.02.  Authority; Execution and Delivery; Enforceability.  Purchaser has full corporate power and authority to execute, deliver and perform this Agreement and the Ancillary Agreements to which it is, or is specified to be, a party and to consummate the Acquisition and the other transactions contemplated hereby and thereby.  PRC Purchaser has full corporate power and authority to execute, deliver and, upon the China Closing, perform the Ancillary Agreements to which it is, or is specified to be, a party and, upon the China Closing, to consummate the transactions contemplated to be consummated by it by this Agreement and such Ancillary Agreements.  All corporate action required to authorize Purchaser’s execution, delivery and performance of this Agreement and the Ancillary Agreements to which it is, or is specified to be, a party and to authorize the consummation of the Acquisition and the other transactions contemplated hereby and thereby has been taken.  All corporate action required to authorize PRC Purchaser’s execution, delivery and, upon the China Closing, performance

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of the Ancillary Agreements to which it is, or is specified to be, a party and to authorize, upon the China Closing, the consummation of transactions contemplated to be consummated by it by this Agreement and such Ancillary Agreements has been taken.  Purchaser has duly executed and delivered this Agreement and on or prior to the applicable Closing will have duly executed and delivered each Ancillary Agreement to which it is, or is specified to be, a party, and this Agreement constitutes, and each Ancillary Agreement to which it is, or is specified to be, a party will at the applicable Closing constitute, its legal, valid and binding obligation, enforceable against it in accordance with its terms subject, as to enforcement, to applicable bankruptcy, insolvency, moratorium, reorganization or similar laws affecting creditors’ rights generally and to general equitable principles.  PRC Purchaser, on or prior to the applicable Closing, will have duly executed and delivered each Ancillary Agreement to which it is, or is specified to be, a party, and each Ancillary Agreement to which it is, or is specified to be, a party will at the applicable Closing constitute, its legal, valid and binding obligation, enforceable against it in accordance with its terms subject, as to enforcement, to applicable bankruptcy, insolvency, moratorium, reorganization or similar laws affecting creditors’ rights generally and to general equitable principles.

SECTION 4.03.  No Conflicts or Violations; No Consents or Approvals Required.  The execution and delivery by Purchaser of this Agreement do not, the execution and delivery by each of Purchaser and PRC Purchaser of each Ancillary Agreement to which it is, or is specified to be, a party will not, and the consummation of the Global Acquisition or the China Acquisition, as applicable, and the other transactions contemplated hereby and thereby will not, conflict with, or result in any breach of or constitute a default under, or result in the creation of any Lien upon any of the properties or assets of Purchaser or PRC Purchaser, or any of their respective subsidiaries under, any provision of (i) the organizational documents of Purchaser, PRC Purchaser or any of their respective subsidiaries, (ii) any Contract to which Purchaser, PRC Purchaser or any of their respective subsidiaries is a party or by which any of its properties or assets is bound or (iii) any Judgment or statute, law, ordinance, legally-binding rule or regulation applicable to Purchaser or PRC Purchaser or any of their respective subsidiaries, properties or assets, other than, in the case of clauses (i), (ii) and (iii) above, any such items that would not reasonably be expected to have a Purchaser Material Adverse Effect.  No Consent of, or registration, declaration or filing with, any Governmental Entity is required to be obtained or made by or with respect to Purchaser, PRC Purchaser or any of their respective subsidiaries in connection with the execution, delivery and performance of this Agreement or the Ancillary Agreements, as applicable, or the consummation of the Acquisition other than (A) compliance with and filings under the HSR Act, (B) compliance with and filings and notifications under applicable Environmental Laws, (C) compliance with and filings under Section 13(a) of the Exchange Act, (D) those that may be required solely by reason of Seller’s (as opposed to any third party’s) participation in the Acquisition and the other transactions contemplated hereby and by the Ancillary Agreements, (E) those as are necessary under Applicable Law for PRC Purchaser to be able to conduct the China Business at the China Facility in all material respects as such China Business is being conducted by PRC Seller at the China Facility immediately prior to the China Closing and (F) those the failure of which to obtain or make would not reasonably be expected to have a Purchaser Material Adverse Effect.

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SECTION 4.04.  Proceedings.  There are not any (a) outstanding Judgments against Purchaser, PRC Purchaser or any of their respective subsidiaries, (b) Proceedings pending or, to the knowledge of Purchaser, threatened against Purchaser, PRC Purchaser or any of their respective subsidiaries or (c) investigations by any Governmental Entity that are pending or threatened against Purchaser, PRC Purchaser or any of their respective subsidiaries that, in any such case, would reasonably be expected to have a Purchaser Material Adverse Effect.

SECTION 4.05.  Availability of Funds; Solvency.  (a)  Purchaser has cash available or has existing borrowing facilities which together are sufficient to enable it to consummate the Acquisition and the other transactions contemplated by this Agreement.

(b)  As of each Closing and immediately after consummating the Global Acquisition and the China Acquisition, as the case may be, and the corresponding transactions contemplated by this Agreement, Purchaser will not (i) be insolvent (either because its financial condition is such that the sum of its debts is greater than the fair value of its assets or because the present fair salable value of its assets will be less than the amount required to pay its probable liability on its debts as they become absolute and matured), (ii) have unreasonably small capital with which to engage in its business, including the Business, or (iii) have incurred or plan to incur debts beyond its ability to repay such debts as they become absolute and matured.

ARTICLE V

Covenants

SECTION 5.01.  Covenants Relating to Conduct of the Business.  (a)  Except for matters (x) set forth in Section 5.01 of the Seller Disclosure Schedule, (y) expressly agreed to by Purchaser (which agreement shall not be unreasonably withheld or delayed) or (z) otherwise contemplated by the terms of this Agreement, from the date of this Agreement to the applicable Closing Date, Seller shall, and shall cause the Seller Affiliates to, conduct the Business in all material respects in the ordinary course of business in a manner substantially consistent with past practice and, to the extent consistent therewith, use commercially reasonable efforts to preserve the material business relationships with customers, suppliers, distributors and others with whom Seller and the Seller Affiliates deal in connection with the conduct of the Business in the ordinary course of business.  Notwithstanding the foregoing, except as otherwise provided in the Transitional Services Agreement, Purchaser acknowledges and agrees that relationships with Seller, the Seller Affiliates and certain of their respective affiliates providing services to the Business will terminate as of the applicable Closing as contemplated in Section 11.03 and that such termination shall not constitute a breach of this Agreement.  As used in this Section 5.01, the term “Business” shall mean (x) from the date of this Agreement to the Global Closing Date, the Global Business and the China Business and (y) from the Global Closing Date to the China Closing Date, the China Business.  In addition, except as set forth in Section 5.01 of the Seller Disclosure Schedule, except with respect to matters as to which Purchaser shall have no obligations, liabilities and commitments after the applicable Closing and except as otherwise

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contemplated by the terms of this Agreement, Seller shall not, and shall not cause any of the Seller Affiliates to, do any of the following in connection with the Business without the prior written consent of Purchaser (which consent shall not be unreasonably withheld or delayed):

(i) adopt or amend in any material respect any Seller Benefit Plan in a manner affecting any Business Employee or grant to any executive officer or other key employee exclusively engaged in the Business any increase in compensation or benefits, except (A) as required by Applicable Law, (B) in the ordinary course of business consistent with past practice or as required under existing agreements or Seller Benefit Plans disclosed to Purchaser or (C) as would relate to a substantial number of other similarly situated employees of Seller, the Seller Affiliates or their respective subsidiaries or affiliates; provided that the foregoing shall not restrict Seller or the Seller Affiliates from entering into or making available to newly hired employees or to employees in the context of promotions based on job performance or workplace requirements, in each case in the ordinary course of business consistent with past practice, plans, agreements, benefits and compensation arrangements that have a value that is consistent with the past practice of making compensation and benefits available to newly hired or promoted employees in similar positions;

(ii) incur or assume any liabilities, obligations or indebtedness for borrowed money exclusively of the Business or guarantee any such liabilities, obligations or indebtedness, other than in the ordinary course of business consistent with past practice;

(iii) subject any of the Transferred Assets to any Lien other than Permitted Liens of any nature whatsoever;

(iv) waive any claims or rights of material value that relate exclusively to the Business;

(v) make any change in any method of accounting or accounting practice or policy that is exclusively applicable to the Business other than those required or permitted by International Financial Reporting Standards or required by Applicable Law;

(vi) sell, lease, license or otherwise dispose of any Transferred Asset that is material to the Business, taken as a whole, except (A) Inventory and obsolete or excess Equipment sold or disposed of in the ordinary course of business, (B) any Excluded Asset described in Section 1.02(b) and (C) leases entered into in the ordinary course of business with aggregate lease payments not in excess of $100,000 per annum;

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(vii) enter into any lease of real property that relates exclusively to the Business; or

(viii) agree, whether in writing or otherwise, to do any of the foregoing.

SECTION 5.02.  Access to Information.

(a)  Seller shall, and shall cause the Seller Affiliates to, afford to Purchaser and its accountants, counsel and other representatives reasonable access, upon reasonable prior notice during normal business hours during the period prior to the Global Closing, to (i) personnel engaged exclusively in the conduct of the Global Business and (ii) properties, books, Contracts, commitments and records relating exclusively to the Global Business (other than the Excluded Assets); provided, however, that in each case such access does not unreasonably disrupt the normal operations of Seller or any of the Seller Affiliates or the Global Business and does not include any sampling, testing or other intrusive environmental investigation.

(b)  Seller shall, and shall cause the Seller Affiliates to, afford to Purchaser and its accountants, counsel and other representatives reasonable access, upon reasonable prior notice during normal business hours during the period prior to the China Closing, to (i) personnel engaged exclusively in the conduct of the China Business and (ii) properties, books, Contracts, commitments and records relating exclusively to the China Business (other than the Excluded Assets); provided, however, that in each case such access does not unreasonably disrupt the normal operations of Seller or any of the Seller Affiliates or the China Business and does not include any sampling, testing or other intrusive environmental investigation.

(c)  Nothing contained in this Section 5.02 shall obligate Seller, any of the Seller Affiliates or any of their respective affiliates to breach any duty of confidentiality owed to any person whether such duty arises contractually, statutorily or otherwise.

SECTION 5.03.  Confidentiality.

(a)  Purchaser acknowledges that the information being provided to it in connection with the Acquisition and the consummation of the other transactions contemplated by this Agreement and the Ancillary Agreements is subject to the terms of a confidentiality agreement, dated October 11, 2012, between Purchaser and Seller (the “Confidentiality Agreement”), the terms of which are incorporated herein by reference.  Effective upon, and only upon, the Global Closing, the Confidentiality Agreement shall terminate with respect to information relating solely to the Global Business (other than the Excluded Assets and the personnel engaged in the conduct of the Global Business); provided, however, that Purchaser acknowledges that any and all other information provided to it by Seller or Seller’s representatives concerning Seller, the Seller Affiliates and their respective affiliates shall remain subject to the terms and conditions of the Confidentiality Agreement after the Global Closing Date.  From and after the Global Closing, Seller will, and will cause all Seller Affiliates to, keep confidential and not disclose any and all information solely concerning the Global Business, except (i) as

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required by law, regulation or legal process, in which case Seller will provide Purchaser reasonable notice and Seller will, and will cause all Seller Affiliates, to cooperate with Purchaser’s reasonable efforts to contest and oppose such disclosure, and such disclosed information shall remain confidential for all other purposes and (ii) for information that is (or after the Global Closing Date, becomes, other than as a result of a breach of this Section 5.03(a)) generally known to the public or within the industry in which Seller and the Seller Affiliates operate.

(b)  Effective upon, and only upon, the China Closing, the Confidentiality Agreement shall terminate with respect to information relating solely to the China Business (other than the Excluded Assets and the personnel engaged in the conduct of the China Business); provided, however, that Purchaser acknowledges that any and all other information provided to it by Seller or Seller’s representatives concerning Seller, the Seller Affiliates and their respective affiliates shall remain subject to the terms and conditions of the Confidentiality Agreement after the China Closing Date.  From and after the China Closing, Seller will, and will cause all Seller Affiliates to, keep confidential and not disclose any and all information solely concerning the China Business, except (i) as required by law, regulation or legal process, in which case Seller will provide Purchaser reasonable notice and Seller will, and will cause all Seller Affiliates, to cooperate with Purchaser’s reasonable efforts to contest and oppose such disclosure, and such disclosed information shall remain confidential for all other purposes and (ii) for information that is (or after the China Closing Date, becomes, other than as a result of a breach of this Section 5.03(b)) generally known to the public or within the industry in which Seller and the Seller Affiliates operate.

SECTION 5.04.  Best Efforts.  (a)  On the terms and subject to the conditions of this Agreement, each of Seller and Purchaser shall use its best efforts to cause the Global Closing and the China Closing to occur, including taking all actions necessary to comply promptly with all legal requirements that may be imposed on it or any of its affiliates with respect to thereto.  Each of Seller and Purchaser shall not, and shall not permit any of their respective affiliates to, take any actions that would, or that could reasonably be expected to, result in any of the conditions set forth in Article VII not being satisfied.

(b)  Each of Seller and Purchaser shall as promptly as practicable, but in no event later than five (5) business days following the execution and delivery of this Agreement, (i) file or cause to be filed with the United States Federal Trade Commission (the “FTC”) and the United States Department of Justice (the “DOJ”) the notification and report form required for the transactions contemplated hereby and any supplemental information requested in connection therewith pursuant to the HSR Act and (ii) make such other filings as are necessary in other jurisdictions in order to comply with all Applicable Laws relating to competition and shall promptly provide any supplemental information requested by applicable Governmental Entities relating thereto.  Any such filing, notification and report form and supplemental information shall be in substantial compliance with the requirements of the HSR Act or such other Applicable Law.  Each of Seller and Purchaser shall furnish to the other such necessary information and reasonable assistance as the other may request in connection with its preparation of any filing or

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submission that is necessary under the HSR Act or such other Applicable Law.  Each of Seller and Purchaser shall keep each other apprised of the status of any communications with, and any inquiries or requests for additional information from, the FTC, the DOJ and any other applicable Governmental Entity and shall comply promptly with any such inquiry or request and shall promptly provide any supplemental information requested in connection with the filings made hereunder pursuant to the HSR Act or such other Applicable Law.  Any such supplemental information shall be in substantial compliance with the requirements of the HSR Act or such other Applicable Law.  Each party shall use its best efforts to obtain any clearance required under the HSR Act or such other Applicable Law for the consummation of the transactions contemplated by this Agreement and each party hereby agrees to request the early termination of applicable waiting periods.  For purposes of this Section 5.04, the “best efforts” of Purchaser shall include promptly (i) opposing any motion or action for a temporary, preliminary or permanent injunction against the Acquisition or any portion thereof and (ii) proposing, negotiating, offering to commit and effecting by consent decree, hold separate order, or otherwise, the sale, divestiture or disposition of such assets or businesses of Purchaser or, effective as of the Global Closing or the China Closing, as the case may be, such assets of the Business being transferred at such Closing, or otherwise offering to take or committing to take any action which Purchaser is capable of taking and, if the offer is accepted, taking or committing to take such action that limits Purchaser’s freedom of action with respect to, or its ability to retain, any of the businesses, services or assets of Purchaser or any of its subsidiaries or any assets of the Businesses, in order to avoid the entry of, or to effect the dissolution of, any injunction, temporary restraining order or other order in any suit or proceeding, which would have the effect of preventing or delaying the Global Closing or the China Closing beyond the Outside Date.  For the avoidance of doubt, Purchaser shall take any and all actions necessary to ensure that (x) no requirement of or waiver, consent or approval of the FTC, the DOJ, any State Attorney General or other Governmental Entity, (y) no Judgment, injunction, temporary restraining order or any other order in any Proceeding and (z) no other matter relating to any antitrust or competition law or regulation, would preclude consummation of the Acquisition by the Outside Date.

SECTION 5.05.  Non Competition.  (a)  Except as expressly provided herein, for a period of three years from and after the Global Closing Date (the “Restricted Period”), Seller shall not, and shall cause each of its affiliates not to, directly or indirectly, engage in the business of manufacturing, marketing, distributing or selling peanut butter spread products (the “Competing Activities”) anywhere in the world; provided, however, Seller and its affiliates may own or acquire, directly or indirectly, (i) the securities of any person that engages in any of the Competing Activities if Seller and its affiliates do not, directly or indirectly, own more than 20% of the aggregate outstanding equity securities of such person and (ii) any person that engages in any of the Competing Activities if such Competing Activities account for less than 20% of the consolidated annual revenues or assets of such person and remains such for the Restricted Period.

(b)  Notwithstanding anything in Section 5.05(a) to the contrary, none of Seller and any of its affiliates shall be prevented from (i) continuing to engage in, to

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conduct or to have an ownership interest in any business which it currently is engaging in or conducting or in which it currently has an ownership interest (including (A) any such business that manufactures, markets, distribute or sells peanut butter spread products and (B) from the Global Closing Date to the China Closing Date, the China Business), including (x) any reasonable extension or development of such business and (y) any geographical expansion of such business (or any reasonable extension or development thereof), (ii) engaging in, or conducting or having an ownership interest in any business that supplies goods or services primarily to Seller or its affiliates and (iii) treating the provisions of Section 5.05(a) as having terminated at the time and to the extent none of Purchaser and its subsidiaries continues to conduct in any material respect any aspect of the Business.  Notwithstanding the foregoing, during the Restricted Period, clause (i) of this Section 5.05(b) shall not be deemed to permit the marketing, distribution or sale of peanut butter spread products by Seller or any Seller Affiliate in the countries and territories set forth in Section 5.05(b) of the Seller Disclosure Schedule; provided, however, that the parties hereby acknowledge (A) that de minimis quantities of peanut butter spread products sold by Seller outside of the countries and territories set forth in Section 5.05(b) of the Seller Disclosure Schedule may be resold, marketed or distributed by third parties within any such country or territory and (B) that Seller shall not have any liability to Purchaser whatsoever in connection with or as a result of any such third party actions.

SECTION 5.06.  Brokers or Finders.  Each of Purchaser and Seller represents, as to itself and its affiliates, that no agent, broker, investment banker or other firm or person is or will be entitled to any broker’s or finder’s fee or any other commission or similar fee in connection with any of the transactions contemplated by this Agreement, except, as to Seller and its affiliates, Lazard Frères & Co. LLC, whose fees and expenses will be paid by Seller and, as to Purchaser and its affiliates, Barclays, whose fees and expenses will be paid by Purchaser.

SECTION 5.07.  No Shop.  Throughout the period that begins on the date hereof and ends upon the earlier of the China Closing and the termination of this Agreement pursuant to Section 8.01, Seller will not, and Seller will not authorize any affiliate, representative or agent of Seller to, directly or indirectly, solicit, initiate, seek or encourage any inquiry, proposal or offer from, furnish any information to or participate in any discussion or negotiation with any Person (other than Purchaser or any person on Purchaser’s behalf) regarding any acquisition of the Brand or the Transferred Assets, in whole or in part (by asset purchase, merger, tender offer, statutory share exchange, joint venture or otherwise), except sales of Inventory in the ordinary course of business of Seller.  Seller will, and Seller will cause each affiliate, representative or agent of Seller to, immediately terminate all such discussions or negotiations that may be in progress on the date hereof.

SECTION 5.08.  Shandong Peanut.  Upon the China Closing, Seller hereby agrees to cause PRC Seller to use its commercially reasonable efforts to complete the deregistration and dissolution of Bestfoods (Shandong) Co., Ltd. as soon as practicable.

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SECTION 5.09.  Certain PRC Purchaser Matters.  Without limiting Section 5.04, Purchaser shall, as promptly as practicable after the date hereof, take such actions as are necessary under Applicable Law for Purchaser, through PRC Purchaser or any other affiliate of Purchaser, to be able to conduct the China Business at the China Facility in all material respects as such China Business is being conducted by PRC Seller at the China Facility immediately prior to the China Closing.  Such actions may include causing PRC Purchaser to (a) change its business scope, total investment, registered capital, articles of association, name and related organizational items; (b) as promptly as practicable after such changes are completed, make application to establish the Branch; and (c) cause the Branch, once established, to promptly apply for and procure all licenses, permits, approvals, certifications and qualifications as are necessary under Applicable Law.

ARTICLE VI

Employment Matters

SECTION 6.01.  Business Employees.  For purposes of this Agreement, the term “Business Employee” shall refer to each employee of Seller or any of the Seller Affiliates who is employed primarily in connection with the Business and who is (a) employed at the Little Rock Facility (each individual described in this clause (a), a “U.S. Business Employee”) or (b) employed at the China Facility (each individual described in this clause (b) a “China Business Employee”); provided that the employees set forth in Section 6.01 of the Seller Disclosure Schedule shall not be Business Employees.  For purposes of this Agreement, the term “China Dispatched Employees” shall mean the workers dispatched by Weifang Municipal Weicheng District LiMin Labour Security Agency Co., Ltd. (the “Agency”) under a labor dispatch service agreement entered into by and between PRC Seller and the Agency (the “Service Agreement”).  Unless otherwise indicated, Sections 6.02 through Section 6.12 shall apply only to U.S. Business Employees, Section 6.13 shall apply only to China Business Employees and China Dispatched Employees and Sections 6.14 through 6.16 shall apply to all Business Employees and China Dispatched Employees.

SECTION 6.02.  Continuation of Employment.  No later than 10 days prior to the Global Closing Date, Purchaser or one of its affiliates shall offer employment (which shall include Purchaser’s compliance with Purchaser’s covenants set forth in this Article VI), effective as of 12:01 a.m. local time on the Global Closing Date (the “Transfer Time”), to all U.S. Business Employees who on the Global Closing Date are actively at work (each, an “Active Employee”).  For purposes of this Agreement, any U.S. Business Employee who is not actively at work on the Global Closing Date due to a short-term absence (including due to vacation, holiday, illness or injury of shorter duration than a long-term disability, jury duty or bereavement leave) in accordance with applicable policies of Seller or the applicable Seller Affiliate shall be deemed an Active Employee.  With respect to each U.S. Business Employee who is not an Active Employee (an “Inactive Employee”), no later than 12 days prior to the Global Closing Date, Seller shall provide Purchaser with a schedule of the U.S. Business Employees that Seller expects to be Inactive Employees as of the Global Closing Date and Seller shall update

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that schedule, if necessary, to reflect any changes to the list of Inactive Employees between the date the schedule is provided and the Global Closing Date as soon as practicable following the Global Closing Date, but in any event no later than 30 days following the Global Closing Date, and Purchaser or one of its affiliates shall make offers of employment (which shall include Purchaser’s compliance with Purchaser’s covenants set forth in this Article VI) to each Inactive Employee effective as of the date on which such Inactive Employee presents himself or herself to Purchaser or one of its affiliates for active employment following the Global Closing Date to the same extent, if any, as Seller or the applicable Seller Affiliate would be required to reemploy such Inactive Employee in accordance with its policies as in effect on the Global Closing Date and Applicable Law, as reasonably determined by Purchaser or one of its affiliates, provided that such return occurs within one year following the Global Closing Date.  Each U.S. Business Employee who accepts Purchaser’s or one of its affiliate’s offer of employment and who satisfactorily completes all reasonable and necessary documents in order to commence employment with Purchaser or one of its affiliates as of the Transfer Time is referred to herein as a “U.S. Transferred Employee”.  Effective as of the Transfer Time, each U.S. Transferred Employee shall cease to be an employee of Seller or any of the Seller Affiliates and shall cease to participate in any Seller Benefit Plan, except to the extent provided under the applicable Seller Benefit Plan.  In the case of any Inactive Employee who becomes a U.S. Transferred Employee within one year following the Global Closing Date, all references in this Agreement to the Transfer Time shall be deemed to be references to 12:01 a.m. local time on the date that such individual becomes a U.S. Transferred Employee.

SECTION 6.03.  Credited Service.  From and after the Transfer Time, Purchaser or one of its affiliates shall give each U.S. Transferred Employee full credit for all purposes (including for purposes of eligibility to participate, early retirement eligibility and early retirement subsidies, vesting and benefit accrual but not for benefit accrual purposes for salaried employees under Purchaser’s defined benefit pension retirement plans) under any employee benefit plans or arrangements, maintained by Purchaser and its affiliates, for the U.S. Transferred Employees’ service with Seller, the Seller Affiliates and any of their respective predecessor employers to the same extent recognized by Seller and the Seller Affiliates immediately prior to the Transfer Time.

SECTION 6.04.  Continuation of Benefits.  (a) For the two-year period immediately following the Global Closing Date, Purchaser shall, or shall cause its affiliates to, provide each U.S. Transferred Employee with (i) salary and cash bonus opportunities that in each case are no less favorable to such U.S. Transferred Employee than those in effect immediately prior to the Global Closing Date and (ii) employee benefit plans and arrangements (other than salary and cash bonus opportunities) that are substantially comparable in the aggregate to those provided to such U.S. Transferred Employee immediately prior to the Global Closing Date.

(b) Transition Bonus.  Within 30 days following each of the first and second anniversaries of the Transfer Time, Purchaser or one of its affiliates shall pay each U.S. Transferred Employee employed with the Purchaser or one of its affiliates as of each such anniversary date a lump-sum cash payment equal to the applicable amounts set

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forth in Section 6.04(b) of the Seller Disclosure Schedule, subject to any withholdings required by Applicable Law (each such payment, a “Transition Bonus”).  For the avoidance of doubt, each Transition Bonus shall be considered, to the extent provided, an “employee benefit plan or arrangement” provided to each U.S. Transferred Employee by Purchaser or one of its affiliates for purposes of satisfying Purchaser’s obligations as set forth in Section 6.04(a)(ii).

SECTION 6.05.  Severance.  Notwithstanding anything to the contrary in this Agreement, Purchaser agrees to provide each U.S. Transferred Employee whose employment is terminated by Purchaser or its affiliates during the two-year period immediately following the Global Closing Date with severance benefits that are no less favorable in the aggregate than the greater of (i) the severance benefits provided by the Seller severance plan applicable to such U.S. Transferred Employee immediately prior to the Global Closing Date and (ii) the severance benefits such U.S. Transferred Employee would be entitled to receive under the plan, program, policy, agreement or arrangements of Purchaser or its affiliates applicable to similarly situated employees immediately prior to such termination, taking into account such U.S. Transferred Employee’s length of service with Seller or the applicable Seller Affiliate as provided in Section 6.03.  Seller and Purchaser intend that the Active Employees who become U.S. Transferred Employees will have continuous and uninterrupted employment immediately before and immediately after the Global Closing.  Purchaser shall be solely responsible for, and shall indemnify and hold harmless Seller and the Seller Affiliates and each of their respective directors, officers, and employees from, all Losses that may result in respect of claims made by any U.S. Business Employees for severance or other separation benefits (including claims for wrongful dismissal, notice of termination of employment or pay in lieu of notice) arising out of, relating to or in connection with (a) Purchaser’s failure to offer employment to any U.S. Business Employee in accordance with this Agreement, (b) Purchaser’s failure to offer employment to any U.S. Business Employee on terms sufficient to avoid severance or separation benefits under Applicable Law or the applicable severance benefit plan, program, policy, agreement or arrangement of Seller and the Seller Affiliates in effect immediately prior to the Global Closing Date or (c) Purchaser’s termination of employment of any U.S. Transferred Employee on or following the Transfer Time; provided that Purchaser shall not indemnify and hold harmless Seller and the Seller Affiliates for any Losses arising out of Seller’s and the Seller Affiliates’ failure to comply with any of their material obligations under Applicable Law prior to the Transfer Time with respect to the termination of any U.S. Business Employee.

SECTION 6.06.  Tax-Qualified Savings/401(k) Plan.  (a)   No later than the Global Closing Date, Purchaser shall have in effect one or more defined contribution plans that each include a qualified cash or deferred arrangement within the meaning of Section 401(k) of the Code (collectively, “Purchaser’s 401(k) Plan”) that will provide benefits, for the two-year period immediately following the Global Closing Date consistent with Section 6.04(a)(ii).  Each U.S. Transferred Employee participating in the UNICare Savings Plan (“Seller’s 401(k) Plan”) as of the Transfer Time shall become a participant in Purchaser’s 401(k) Plan as of the Transfer Time.

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(b)  Purchaser agrees to cause Purchaser’s 401(k) Plan to allow each U.S. Transferred Employee to make a “direct rollover” to Purchaser’s 401(k) Plan of the account balances of such U.S. Transferred Employee (including promissory notes evidencing any outstanding loans) under Seller’s 401(k) Plan if such direct rollover is elected in accordance with Applicable Law by such U.S. Transferred Employee.  Following a “direct rollover” of a U.S. Transferred Employee’s account balances, Seller shall have no liability or obligation for any costs, expenses or damages that may result from any claim for any benefit alleged to be payable under Seller’s 401(k) Plan with respect to such U.S. Transferred Employee and such U.S. Transferred Employee’s beneficiaries, other than any costs, expenses or damages that may result from any claim for any benefit alleged to be payable under Seller’s 401(k) Plan arising out of the failure by Seller to administer Seller’s 401(k) Plan in compliance with Applicable Law.

SECTION 6.07.  Tax-Qualified Pension Plan.  Seller shall retain all assets and liabilities under the UNICare Retirement Plan (“Seller’s Pension Plan”) in respect of benefits accrued thereunder by U.S. Transferred Employees prior to such employee’s Transfer Time and shall make payments to such U.S. Transferred Employees with vested rights thereunder in accordance with the terms of Seller’s Pension Plan and Applicable Law.  No U.S. Transferred Employee shall accrue any benefit under such plan in respect of service with Purchaser or any of its affiliates after such employee’s Transfer Time.  No assets or liabilities of Seller’s Pension Plan shall be transferred to any retirement plan maintained by Purchaser or any of its affiliates.

SECTION 6.08.  Certain Welfare Benefits Matters.  (a)   No later than the Global Closing Date, Purchaser shall establish or cause to be established, at its own expense, benefit plans that provide life insurance, health care, dental care, accidental death and dismemberment insurance, disability and other group welfare benefits for U.S. Transferred Employees (“Purchaser Welfare Plans”).  Purchaser shall (i) waive all limitations as to preexisting conditions, exclusions and waiting periods with respect to participation and coverage requirements applicable to the participating U.S. Transferred Employees and their dependents under the Purchaser Welfare Plans to the extent waived under the applicable corresponding Seller Benefit Plan immediately prior to the Transfer Time and (ii) provide each participating U.S. Transferred Employee and his or her eligible dependents with credit for any co-payments and deductibles paid prior to the Transfer Time in the calendar year in which the Transfer Time occurs for purposes of satisfying any applicable deductible or out-of-pocket requirements under any Purchaser Welfare Plans in which such U.S. Transferred Employee participates after the Transfer Time.

(b)  Seller and the applicable Seller Affiliates shall be responsible in accordance with their respective welfare plans in effect prior to the Transfer Time for all reimbursement claims (such as medical and dental claims) for expenses incurred, and for all non-reimbursement claims (such as life insurance claims) incurred, under such plans prior to the Transfer Time by U.S. Transferred Employees and their dependents.  Purchaser shall be responsible in accordance with the applicable Purchaser Welfare Plans for all reimbursement claims (such as medical and dental claims) for expenses incurred, and for all non-reimbursement claims (such as life insurance claims) incurred, on or after

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the Transfer Time by U.S. Transferred Employees and their dependents.  For purposes of this Section 6.08(b), a claim shall be deemed to have been incurred on (i) the date of death or dismemberment in the case of claims under life insurance and accidental death and dismemberment policies or (ii) the date on which the charge or expense giving rise to such claim is incurred in the case of all other claims; provided, however, that in the event of a hospital stay that commences prior to the Transfer Time and ends at or after the Transfer Time, the cost thereof shall be apportioned between Purchaser, on the one hand, and Seller, on the other hand, with Seller responsible for that portion of the cost incurred prior to the Transfer Time and Purchaser responsible for the balance of such cost.  Effective as of the Transfer Time, Purchaser shall assume all liabilities and obligations of Seller and the Seller Affiliates incurred on or after the Transfer Time to U.S. Transferred Employees and their eligible dependents, in respect of health insurance under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”), the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) and applicable state law; provided that Seller and the Seller Affiliates shall remain obligated to provide any applicable COBRA coverage notices in respect of events occurring prior to the Transfer Time.

(c)  Seller shall be responsible for all claims for workers’ compensation benefits which are incurred prior to the Transfer Time by U.S. Transferred Employees that are payable under the terms and conditions of Seller’s or the applicable Seller Affiliate’s workers’ compensation programs.  Purchaser’s or its applicable affiliate’s workers’ compensation program(s) shall be responsible for all claims for benefits that are incurred from and after the Transfer Time by U.S. Transferred Employees that are payable under the terms and conditions of Purchaser’s or its applicable affiliate’s workers’ compensation program(s), including with respect to U.S. Transferred Employees who became eligible for workers’ compensation benefits prior to the Transfer Time.  For purposes of this Section 6.08(c), a claim for workers’ compensation benefits shall be deemed to be incurred when the event giving rise to the claim occurs (the “Workers’ Compensation Event”).  If the Workers’ Compensation Event occurs over a period both preceding and following the Transfer Time, the claim shall be the joint responsibility and liability of Seller and Purchaser and shall be equitably apportioned between Seller, on the one hand, and Purchaser, on the other hand, based upon the relative periods of time that the Workers’ Compensation Event transpired preceding and following the Transfer Time.

SECTION 6.09.  Cafeteria Plan.  Purchaser shall have in effect as of the Global Closing Date flexible spending reimbursement accounts under a cafeteria plan qualifying under Section 125 of the Code (the “Purchaser’s Cafeteria Plan”) that provide benefits to U.S. Transferred Employees that are consistent (in accordance with Section 6.04(a)(ii)) with those provided pursuant to the flexible spending reimbursement accounts under the UNICare Benefits of Choice Program (the “Seller’s Cafeteria Plan”) and Purchaser agrees to cause Purchaser’s Cafeteria Plan to accept a spin-off of the flexible spending reimbursement accounts from Seller’s Cafeteria Plan and to honor and continue through the end of the calendar year in which the Transfer Time occurs the elections made by each U.S. Transferred Employee under the Seller’s Cafeteria Plan in respect of the flexible spending reimbursement accounts that are in effect immediately prior to the

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Transfer Time.  As soon as practicable following the Transfer Time, Seller shall cause to be transferred from the Seller’s Cafeteria Plan to the Purchaser’s Cafeteria Plan the excess, if any, of the aggregate accumulated contributions to the flexible spending reimbursement accounts made during the year in which the Transfer Time occurs by U.S. Transferred Employees over the aggregate reimbursement payouts made for such year from such accounts to the U.S. Transferred Employees.  If the aggregate reimbursement payouts from the flexible spending reimbursement accounts under the Seller’s Cafeteria Plan made during the year in which the Transfer Time occurs to U.S. Transferred Employees exceed the aggregate accumulated contributions to such accounts for such year by the U.S. Transferred Employees, Purchaser shall cause such excess to be transferred to Seller as soon as practicable following the Transfer Time.  On and after the Transfer Time, Purchaser shall assume and be solely responsible for all claims by U.S. Transferred Employees under the Seller’s Cafeteria Plan, whether incurred prior to, on or after the Transfer Time, that have not been paid in full as of the Transfer Time, and following the Transfer Time Purchaser shall hold Seller and the Seller Affiliates harmless from any and all claims for reimbursement under the Seller’s Cafeteria Plan with respect to U.S. Transferred Employees that are not paid in full as of the Transfer Time.

SECTION 6.10.  Bonus Plan.  Seller or the applicable Seller Affiliate shall make a prorated annual bonus payment to each U.S. Transferred Employee who is not an Inactive Employee as of, and who remains employed through, the Global Closing Date, the amount (if any) of which shall equal the product of the applicable U.S. Transferred Employee’s annual bonus amount (as described in the next sentence) multiplied by a fraction, the numerator of which is the number of days in the calendar year during which the Global Closing Date occurs that elapse prior to the Global Closing Date, and the denominator of which is 365.  Seller may determine the annual bonus amount using any good faith methodology (which need not be the same for each U.S. Transferred Employee), including by basing such amount upon target bonus or upon actual performance.  Such prorated bonuses shall be paid no later than the date on which Seller pays annual bonuses to similarly situated other employees of Seller and its Affiliates, but in no event later than March 15 of the calendar year immediately following the calendar year during which the Global Closing occurs.  In the case of any U.S. Transferred Employee who is an Inactive Employee as of the Global Closing Date, Seller or the applicable Seller Affiliate will comply with all Applicable Law relating to the payment to such employee of a prorated bonus with respect to the period that precedes the Global Closing Date.

SECTION 6.11.  Accrued Vacation.  For purposes of determining the number of vacation days to which each U.S. Transferred Employee shall be entitled during the calendar year in which the Transfer Time occurs, Purchaser shall, or shall cause its affiliates to, assume and honor all vacation days accrued or earned but not yet taken by such U.S. Transferred Employee as of the Transfer Time.  To the extent that a U.S. Transferred Employee is entitled to be paid for any vacation days accrued or earned but not yet taken by such U.S. Transferred Employee as of the Transfer Time, Purchaser shall discharge the liability for such vacation days.  As soon as practicable following the Global Closing Date, but in any event no later than 30 days following the Global Closing

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Date, Seller shall provide Purchaser with a schedule of such accrued or earned but not yet taken vacation days.

SECTION 6.12.  WARN Act.  Purchaser agrees to provide any required notice under the Worker Adjustment and Retraining Notification Act, as amended (the “WARN Act”), and any similar state or provincial statute, and to otherwise comply with any such statute with respect to any “plant closing” or “mass layoff” (as defined in the WARN Act) or group termination or similar event affecting U.S. Business Employees (including as a result of the consummation of the transactions contemplated by this Agreement) and occurring on or after the Global Closing Date.  Purchaser shall not take any action after the Global Closing Date that would cause any termination of employment of any U.S. Business Employees by Seller or the Seller Affiliates that occurs on or before the Global Closing Date to constitute a “plant closing” or “mass layoff” or group termination under the WARN Act or any similar statute, or that would create any liability or penalty to Seller or the Seller Affiliates for any employment terminations under Applicable Law.  Seller shall notify Purchaser prior to the Global Closing of any layoffs of any U.S. Business Employees in the 90-day period prior to the Global Closing.  Purchaser shall indemnify and hold harmless Seller and the Seller Affiliates with respect to any liability under the WARN Act or similar statute arising from the actions of Purchaser on or after the Global Closing Date (including as a result of the consummation of the transactions contemplated by this Agreement).

SECTION 6.13.  China Business Employees and China Dispatched Employees. (a)   No later than the earlier of (i) 10 days following the date on which the Branch has been established and (ii) 30 days prior to the China Closing Date, (x) Purchaser or the Branch shall offer employment (which shall include Purchaser’s compliance with Purchaser’s covenants set forth in this Section 6.13), effective as of 12:01 am local time on the China Closing Date (the “China Transfer Time”), to each of the China Business Employees and (y) Purchaser or the Branch shall execute an agreement with Seller and the Agency in the form attached hereto as Exhibit H (the “Assignment Agreement”) to the effect that, effective as of the China Transfer Time, (A) Purchaser or the Branch accepts and assumes all the rights and obligations of Seller and its affiliates under the Service Agreement and (B) Seller and its affiliates are released from all their obligations under the Service Agreement.

(b)  Effective as of the China Transfer Time, each China Business Employee who signed an agreement (the “Tri-Party Agreement”) in the form attached hereto as Exhibit I (each, a “China Transferred Employee”) shall cease to be an employee of Seller or any Seller Affiliate.  Purchaser or the Branch shall enter into a new employment contract with each China Transferred Employee within 10 days following the China Transfer Time.

(c)  Upon execution of the Assignment Agreement by and among Purchaser or the Branch, Seller and the Agency, and effective as of the China Transfer Time, each China Dispatched Employee shall cease to be dispatched to Seller and each China Dispatched Employee who agrees to be dispatched to Purchaser or the Branch

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(each, a “China Transferred Dispatched Employee”) will be dispatched for the purposes of providing services to Purchaser or the Branch.

(d)  For the two-year period immediately following the China Transfer Time, Purchaser or the Branch shall provide (which may include doing so through the Agency) to each China Transferred Employee and each China Transferred Dispatched Employee terms and conditions of employment that are no less favorable, and types and amounts of compensation and benefits that are no less favorable in the aggregate, in each case, to those provided by Seller (in respect of the China Transferred Employees) and the Agency (in respect of the China Transferred Dispatched Employees) immediately prior to the China Transfer Time.

(e)  From and after the China Transfer Time, each China Transferred Employee’s years of service with Seller shall be recognized by Purchaser or the Branch, and Purchaser or the Branch shall give each China Transferred Employee full credit for all purposes (including entitlement to sick leave, annual leave, etc.), subject to Applicable Law.

(f)  Notwithstanding any other provision of this Agreement, Seller and Purchaser intend that the transactions contemplated by this Agreement should not constitute a separation or termination of any China Transferred Employee prior to the China Transfer Time or severance of employment of any China Transferred Employee or a termination of the Service Agreement, in each case, prior to or upon the occurrence of the China Transfer Time, and Seller and Purchaser intend that the China Transferred Employees and the China Transferred Dispatched Employees will have continuous and uninterrupted employment or engagement, as applicable, immediately before and immediately after the China Transfer Time.

(g)  Purchaser shall be solely responsible for, and shall indemnify and hold harmless Seller and each of its respective directors, officers, and employees from, any and all Losses that may result in respect of claims made by any China Business Employees or China Dispatched Employees for severance or other separation benefits (including claims for wrongful dismissal, notice of termination of employment, pay in lieu of notice or statutory economic compensation) or claims made by the Agency under the Service Agreement, or claims made by any China Dispatched Employee based on the de facto engagement relationship with PRC Seller, each arising out of, relating to or in connection with (i) the failure of Purchaser, any affiliate thereof or the Branch to offer employment to, or continue the employment of, any China Business Employee (A) in accordance with this Section 6.13 or (B) on terms sufficient to avoid severance or separation benefits under the applicable severance benefit plan, program, policy, agreement or arrangement of Seller in effect immediately prior to the China Transfer Time or under Applicable Law or any other legally mandated obligations, (ii) any China Transferred Employee who accepts an offer of employment from Purchaser, any affiliate thereof or the Branch but who requests for statutory severance to be paid by Seller, (iii) any termination of employment of any China Transferred Employee by Purchaser, the applicable affiliate thereof or the Branch following the China Transfer Time, (iv) the failure to enter into the Assignment Agreement by Purchaser, any affiliate thereof or the

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Branch in accordance with this Section 6.13 or the termination of the Service Agreement by Purchaser, the applicable affiliate thereof or the Branch following the China Transfer Time or (v) Seller’s Termination of the Service Agreement due to the fact that it cannot be transferred to Purchaser, any affiliate thereof or the Branch.

SECTION 6.14.  Liabilities.  Except for Losses that transfer to Purchaser or any affiliate thereof or the Branch pursuant to Applicable Law or as otherwise specifically provided in this Article VI, effective as of the Global Closing (in respect to the U.S. Business Employees) or the China Closing (in respect of China Business Employees and the China Dispatched Employees), as applicable, Seller shall retain liability and responsibility for all compensation payments, benefits and other employment related Losses that are incurred or arise out of events that occurred prior to the Global Closing that relate to the U.S. Business Employees (or any dependent or beneficiary of any U.S. Business Employee) or prior to the China Closing that relate to the China Business Employees or the China Dispatched Employees (or any dependent or beneficiary of any China Business Employee or China Dispatched Employee) and all Losses in relation to the Service Agreement that are incurred or arise out of events that occurred prior to the China Closing.  Except as specifically provided in this Agreement, effective as of the Global Closing (in respect to the U.S. Business Employees) or the China Closing (in respect of the China Business Employees and the China Dispatched Employees), as applicable, (a) Purchaser shall assume liability and responsibility for (i) all compensation payments, benefits and other employment related Losses that are incurred on or after the Global Closing that relate to any U.S. Transferred Employee (or any dependent or beneficiary of any U.S. Transferred Employee), (ii) all compensation payments, benefits and other employment related Losses that are incurred on or after the China Closing that relate to any China Transferred Employee or any China Transferred Dispatched Employee (or any dependent or beneficiary of any China Transferred Employee or China Transferred Dispatched Employee) and (iii) all compensation payments, benefits and other employment related Losses in relation to the Service Agreement that are incurred on or after the China Closing, (b) Seller and the Seller Affiliates shall have no liability with respect to any U.S. Transferred Employee or China Transferred Employee (or any dependent or beneficiary of any U.S. Transferred Employee or China Transferred Employee) that relates to such U.S. Transferred Employee’s or China Transferred Employee’s employment with Purchaser, any of its affiliates or the Branch, (c) Seller and the Seller Affiliates shall have no liability with respect to any China Transferred Dispatched Employee (or any dependent or beneficiary of any China Transferred Dispatched Employee) or the Agency that relates to such China Transferred Dispatched Employee’s dispatch arrangement with Purchaser, any affiliate thereof or the Branch and (d) except with respect to any Losses that transfer to Purchaser pursuant to Applicable Law or as otherwise specifically provided in this Article VI, none of Purchaser, its affiliates or the Branch shall have any liability or responsibility for any compensation payments, benefits and other employment related Losses that are incurred or arise out of events that occurred prior to the Global Closing that relate to the U.S. Business Employees (or any dependent or beneficiary of any U.S. Business Employee) or prior to the China Closing that relate to the China Business Employee or the China Dispatched Employees (or any dependent or beneficiary of any China Business Employee or China Dispatched Employee) or any Losses in relation to the Service

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Agreement that are incurred or arise out of events that occurred prior to the China Closing.

SECTION 6.15.  Administration.  Following the date of this Agreement, Seller and Purchaser shall reasonably cooperate in all matters reasonably necessary to effect the transactions contemplated by this Article VI, including exchanging information and data relating to workers’ compensation, employee benefits and employee benefit plan coverages, and in obtaining any governmental approvals required hereunder.

SECTION 6.16.  No Third-Party Beneficiaries.  Notwithstanding any other provision herein to the contrary, no provision of this Article VI shall (a) be construed to establish, amend or modify any benefit or compensation plan, program, agreement, contract, policy or arrangement, (b) limit the ability of Purchaser or any of its affiliates to amend, modify or terminate any benefit or compensation plan, program, agreement, contract, policy or arrangement at any time assumed, established, sponsored or maintained by any of them or (c) create any third-party beneficiary rights or obligations in any person (including for the avoidance of doubt any Business Employee and any China Dispatched Employee) other than the parties hereto or any right to employment or continued employment or to a particular term or condition of employment with Purchaser or any of its affiliates.

ARTICLE VII

Conditions to Closings

SECTION 7.01.  Conditions to Each Party’s Global Obligation.  The obligation of Purchaser to purchase and pay for the Global Transferred Assets and the obligation of Seller to, or to cause the Seller Affiliates to, sell, transfer, assign and deliver the Global Transferred Assets to Purchaser is subject to the satisfaction (or waiver by Purchaser and Seller) on or prior to the Global Closing Date of the following conditions:

(a)  Governmental Approvals.  The waiting period under the HSR Act shall have expired or been terminated.  All other material Consents of, or registrations, declarations or filings with, or expirations of waiting periods imposed by, any Governmental Entity legally required for the consummation of the Global Acquisition shall have been obtained or filed or shall have occurred.

(b)  No Injunctions or Restraints.  No Applicable Law or injunction enacted, entered, promulgated, enforced or issued by any Governmental Entity or other legal restraint or prohibition preventing the consummation of the Global Acquisition shall be in effect; provided, however, that each of the parties shall have used its best efforts (as required by Section 5.04) to prevent the occurrence or entry of any such legal restraint and to remove or appeal as promptly as possible any such legal restraint.  No Proceeding initiated by a Governmental Entity shall be pending seeking any of the same.

SECTION 7.02.  Additional Conditions to Global Obligation of Purchaser.  The obligation of Purchaser to purchase and pay for the Global Transferred Assets is

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subject to the satisfaction (or waiver by Purchaser) on or prior to the Global Closing Date of the following conditions:

(a)  Representations and Warranties.  The representations and warranties of Seller in this Agreement shall be true and correct as of the Global Closing Date as though made on the Global Closing Date, except to the extent such representations and warranties expressly relate to an earlier date (in which case such representations and warranties shall be true and correct on and as of such earlier date), in each case except for breaches as to matters that would not reasonably be expected to have a Business Material Adverse Effect.  Solely for purposes of this Section 7.02(a), any representation or warranty made by Seller in this Agreement that is qualified by materiality or Business Material Adverse Effect shall be read as if each such qualifier were not present.

(b)  Performance of Obligations of Seller.  Seller shall have performed or complied in all material respects with all obligations and covenants required by this Agreement to be performed or complied with by Seller by the time of the Global Closing.

(c)  Absence of Material Adverse Effect.  Since the date of this Agreement, there shall not have been any Business Material Adverse Effect.

(d)  Ancillary Agreements.  Each of the Patent License, the Transitional Trademark License, the Excluded Technology License and the Transitional Services Agreement shall have been executed and delivered by Seller (or the applicable Seller Affiliate) and shall remain in full force and effect.

SECTION 7.03.  Additional Conditions to Global Obligation of Seller.  The obligation of Seller to, or to cause the Seller Affiliates to, sell, transfer, assign and deliver the Global Transferred Assets is subject to the satisfaction (or waiver by Seller) on or prior to the Global Closing Date of the following conditions:

(a)  Representations and Warranties.  The representations and warranties of Purchaser in this Agreement shall be true and correct as of the Global Closing Date as though made on the Global Closing Date, except to the extent such representations and warranties expressly relate to an earlier date (in which case such representations and warranties shall be true and correct on and as of such earlier date), in each case except for breaches as to matters that would not reasonably be expected to have a Purchaser Material Adverse Effect.  Solely for purposes of this Section 7.03(a), any representation or warranty made by Purchaser in this Agreement that is qualified by materiality or Purchaser Material Adverse Effect shall be read as if each such qualifier were not present.

(b)  Performance of Obligations of Purchaser.  Purchaser shall have performed or complied in all material respects with all obligations and covenants required by this Agreement to be performed or complied with by Purchaser by the time of the Global Closing.

(c)  Ancillary Agreements.  Each of the Patent License, the Excluded Technology License and the Transitional Services Agreement shall have been executed

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and delivered by Purchaser (or the applicable affiliate thereof) and shall remain in full force and effect.

SECTION 7.04.  Conditions to China Closing.

(a)  Conditions to Each Party’s China Obligation.  The obligation of Purchaser to cause PRC Purchaser to purchase and pay for the China Transferred Assets and the obligation of Seller to, or to cause the Seller Affiliates to, sell, transfer, assign and deliver the China Transferred Assets to PRC Purchaser is subject to the satisfaction (or waiver by Purchaser and Seller) on or prior to the China Closing Date of the following conditions:

(i) Governmental Approvals.  All material Consents of, or registrations, declarations or filings with, or expirations of waiting periods imposed by, any Governmental Entity legally required for the consummation of the China Acquisition shall have been obtained or filed or shall have occurred.

(ii) No Injunctions or Restraints.  No Applicable Law or injunction enacted, entered, promulgated, enforced or issued by any Governmental Entity or other legal restraint or prohibition preventing the consummation of the China Acquisition shall be in effect; provided, however, that each of the parties shall have used its best efforts (as required by Section 5.04) to prevent the occurrence or entry of any such legal restraint and to remove or appeal as promptly as possible any such legal restraint.  No Proceeding initiated by a Governmental Entity shall be pending seeking any of the same.

(iii) PRC Purchaser.  Purchaser, through PRC Purchaser or any other affiliate of Purchaser, shall be permitted under Applicable Law to conduct the China Business at the China Facility in all material respects as such China Business is being conducted by PRC Seller at the China Facility immediately prior to the China Closing.

(b)  Additional Condition to China Obligation of Purchaser.  The obligation of Purchaser to cause PRC Purchaser to purchase and pay for the China Transferred Assets is subject to the satisfaction (or waiver by Purchaser) on or prior to the China Closing Date of the following condition:

(i) Ancillary Agreements.  Each of the Manufacturing Agreement, the China Purchase Agreement, the China Land Transfer Agreement and the China Property Transfer Agreement shall have been executed and delivered by Seller (or the applicable Seller Affiliate) and shall remain in full force and effect.

(c)  Additional Condition to China Obligation of Seller.  The obligation of Seller to, or to cause the Seller Affiliates to, sell, transfer, assign and deliver the China

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Transferred Assets is subject to the satisfaction (or waiver by Seller) on or prior to the China Closing Date of the following condition:

(i) Ancillary Agreements.  Each of the Manufacturing Agreement, the China Purchase Agreement, the China Land Transfer Agreement and the China Property Transfer Agreement shall have been executed and delivered by Purchaser (or the applicable affiliate thereof) and shall remain in full force and effect.

SECTION 7.05.  Frustration of Closing Conditions.  Neither Purchaser nor Seller may rely on the failure of any condition set forth in this Article VII to be satisfied if such failure was caused by such party’s failure to act in good faith to cause the Global Closing or the China Closing, as applicable, to occur, as required by Section 5.04.

ARTICLE VIII

Termination; Effect of Termination

SECTION 8.01.  Termination.  (a)  Notwithstanding anything to the contrary in this Agreement, this Agreement may be terminated and the Acquisition and the other transactions contemplated by this Agreement abandoned at any time prior to the Global Closing:

(i) by mutual written consent of Seller and Purchaser;

(ii) by Seller, if any of the conditions set forth in Section 7.01 or 7.03 shall have become incapable of fulfillment by the Outside Date and shall not have been waived by Seller;

(iii) by Purchaser, if any of the conditions set forth in Section 7.01 or 7.02 shall have become incapable of fulfillment by the Outside Date and shall not have been waived by Purchaser; or

(iv) by Seller or Purchaser, if the Global Closing does not occur on or prior to April 30, 2013 (the “Outside Date”);

provided, however, that the party seeking termination pursuant to clause (ii), (iii) or (iv) is not then in material breach of any of its representations, warranties, covenants or agreements contained in this Agreement.

(b)  In the event of termination by Seller or Purchaser pursuant to this Section 8.01, written notice thereof shall forthwith be given to the other party and the transactions contemplated by this Agreement shall be terminated, without further action by any party.  If the transactions contemplated by this Agreement are terminated as provided herein:

(i) Purchaser shall, and shall cause each of its directors, officers, employees, agents, representatives and advisors to, return to Seller all documents

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and other material received from Seller or any of its affiliates relating to the transactions contemplated hereby, whether so obtained before or after the execution hereof; and

(ii) all confidential information received by Purchaser, its directors, officers, employees, agents, representatives or advisors with respect to the businesses of Seller, the Seller Affiliates and their respective affiliates (including with respect to the Business) shall be treated in accordance with the Confidentiality Agreement, which shall remain in full force and effect notwithstanding the termination of this Agreement.

SECTION 8.02.  Effect of Termination.  If this Agreement is terminated and the transactions contemplated hereby are abandoned as described in Section 8.01, this Agreement shall become null and void and of no further force and effect, except for the provisions of (i) Section 5.03 relating to the obligation of Purchaser to keep confidential certain information and data obtained by it from Seller or Seller’s representatives, (ii) Section 12.03 relating to certain expenses, (iii) Section 5.06 relating to finder’s fees and broker’s fees, (iv) Section 8.01 and this Section 8.02 and (v) Section 11.01 relating to publicity.  Nothing in this Section 8.02 shall be deemed to release any party from any liability for any breach by such party of the terms, conditions, representations, warranties, covenants and other provisions of this Agreement or to impair the right of any party to compel specific performance by any other party of its obligations under this Agreement.

ARTICLE IX

Indemnification

SECTION 9.01.  Indemnification by Seller.  Subject to the limitations set forth in Section 9.04, from and after the Global Closing or the China Closing, as applicable, Seller shall be liable for and shall indemnify, defend and hold harmless Purchaser and each of its affiliates and each of their respective officers, directors, employees, stockholders, agents and representatives (the “Purchaser Indemnitees”) from and against any and all claims, losses, damages, liabilities, obligations or expenses including reasonable third-party legal fees and expenses and all amounts paid in investigation, defense or settlement of the foregoing (collectively, “Losses”), suffered or incurred by such Purchaser Indemnitee (without duplication for any Loss for which indemnification may be provided under more than one provision of this Section 9.01) to the extent arising or resulting from any of the following:

(i) any breach (x) as of the Global Closing Date, of any representation or warranty of Seller with respect to the Global Business contained in this Agreement or any Ancillary Agreement, and (y) as of the China Closing Date, of any representation or warranty of Seller with respect to the China Business contained in this Agreement, in each case, without giving effect, solely for purposes of determining the amount of any Losses associated therewith (and not, for the avoidance of doubt, for purposes of determining if such a breach has

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occurred), to any materiality or Business Material Adverse Effect qualifier contained therein;

(ii) any breach of any covenant of Seller contained in this Agreement or any Ancillary Agreement contemplated to be performed prior to the date of such breach, provided that breaches of covenants relating to the China Business or the China Acquisition shall only be subject to indemnification following the China Closing;

(iii) any claim or Proceeding relating to or in connection with the matters set forth in Section 3.13 of the Seller Disclosure Schedule, whether commenced prior to or after the Global Closing, to the extent such Losses result primarily from the infringement of applicable Intellectual Property by Seller prior to the Global Closing and arise from (x) a final, judicially-determined, non-appealable judgment by a court of competent jurisdiction or (y) a written settlement agreement entered into by Purchaser with Seller’s prior written consent;

(iv) any Retained Liability after the Global Closing (in the case of Retained Liabilities that are retained by Seller in connection with the Global Closing) and after the China Closing (in the case of Retained Liabilities that are retained by Seller in connection with the China Closing); and

(v) any fees, expenses or other payments incurred or owed by Seller or any Seller Affiliate to any agent, broker, investment banker or other firm or person retained or employed by it in connection with the transactions contemplated by this Agreement.

SECTION 9.02.  Indemnification by Purchaser.  From and after the Global Closing or the China Closing, as applicable, Purchaser shall indemnify, defend and hold harmless Seller and each of its affiliates and each of their respective officers, directors, employees, stockholders, agents and representatives (the “Seller Indemnitees”) from and against any and all Losses suffered or incurred by such Seller Indemnitee (without duplication for any Loss for which indemnification may be provided under more than one provision of this Section 9.02) to the extent arising or resulting from any of the following:

(i) any breach as of the Global Closing Date or the China Closing Date of any representation or warranty of Purchaser contained in this Agreement or any Ancillary Agreement, without giving effect, solely for purposes of determining the amount of any Losses associated therewith (and not, for the avoidance of doubt, for purposes of determining if such a breach has occurred), to any materiality or Purchaser Material Adverse Effect qualifier contained therein;

(ii) any breach of any covenant of Purchaser contained in this Agreement or any Ancillary Agreement contemplated to be performed prior to the date of such breach, provided that breaches of covenants relating to the China Business or the China Acquisition shall only be subject to indemnification following the China Closing;

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(iii) any Assumed Liability after the Global Closing (in the case of Assumed Liabilities assumed in connection with the Global Closing) and after the China Closing (in the case of Assumed Liabilities assumed in connection with the China Closing);

(iv) any breach by Purchaser (or any affiliate thereof) of Section 2.04(b); and

(v) any fees, expenses or other payments incurred or owed by Purchaser or its affiliates to any agent, broker, investment banker or other firm or person retained or employed by it in connection with the transactions contemplated by this Agreement.

SECTION 9.03.  Indemnification Procedures.  (a)  Procedures Relating to Indemnification of Third Party Claims.  If any party (the “Indemnified Party”) receives written notice of the commencement of any action or proceeding or the assertion of any claim by a third party or the imposition of any penalty or assessment for which indemnity may be sought under Section 9.01 or 9.02 (a “Third Party Claim”), and such Indemnified Party intends to seek indemnity pursuant to this Article IX, the Indemnified Party shall promptly provide the other party (the “Indemnifying Party”) with written notice of such Third Party Claim, stating the nature, basis and the amount thereof, to the extent known, along with copies of the relevant notices and documents (including court papers) evidencing such Third Party Claim and the basis for indemnification sought and otherwise in reasonable detail; provided that the failure of the Indemnified Party to give prompt notice to the Indemnifying Party shall not affect the Indemnified Party’s right to indemnification hereunder except to the extent that the Indemnifying Party is actually prejudiced as a result of such failure.  The Indemnifying Party will have the right to assume the defense of the Indemnified Party against the Third Party Claim with counsel of its choice by written notice of such assumption delivered to the Indemnified Party within 45 days following the Indemnifying Party’s receipt of written notice of the Third Party Claim; provided that the Indemnifying Party shall not be entitled to assume the defense of a Third Party Claim that seeks the imposition of criminal penalties or other sanctions that would be reasonably expected to materially and adversely affect the Business.  So long as the Indemnifying Party has assumed the defense of the Third Party Claim in accordance herewith, (i) the Indemnifying Party shall not be liable to the Indemnified Party for any legal expenses subsequently incurred by the Indemnified Party in connection with the defense thereof, (ii) the Indemnified Party may retain separate co-counsel (not reasonably objected to by the Indemnifying Party) at its sole cost and expense and participate in the defense of the Third Party Claim, it being understood that the Indemnifying Party shall control such defense, (iii) the Indemnifying Party will not (A) admit to any wrongdoing or (B)  consent to the entry of any judgment or enter into any settlement with respect to the Third Party Claim, in each case, without the prior written consent of the Indemnified Party (such written consent will not be withheld or delayed unreasonably) and (iv) all the Indemnified Parties shall cooperate in the defense or prosecution thereof, including the retention and (upon the Indemnifying Party’s request) the provision to the Indemnifying Party of records and information that are reasonably relevant to such Third Party Claim, and making employees reasonably

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available on a mutually convenient basis to provide additional information and explanation of any material provided hereunder.  If the Indemnifying Party assumes the defense of a Third Party Claim, the Indemnified Party shall agree to any settlement, compromise or discharge of a Third Party Claim that the Indemnifying Party may recommend and that by its terms obligates the Indemnifying Party to pay the full amount of the liability in connection with such Third Party Claim, which releases the Indemnified Party completely in connection with such Third Party Claim.  Whether or not the Indemnifying Party assumes the defense of a Third Party Claim, the Indemnified Party will not file any papers, admit any liability with respect to, or consent to the entry of any Judgment or enter into any settlement with respect to or otherwise compromise or discharge the Third Party Claim without the prior written consent of the Indemnifying Party.  The parties will act in good faith to minimize Losses and mitigate damages from Third Party Claims and will act in good faith in responding to, defending against, settling or otherwise dealing with such claims.  The parties will also cooperate in any such defense and give each other reasonable access to all information relevant thereto.  For the avoidance of doubt, whether or not the Indemnifying Party has assumed the defense, such Indemnifying Party will not be obligated to indemnify the Indemnified Party hereunder for any settlement entered into or any Judgment that was consented to without the Indemnifying Party’s prior written consent.

(b)  Procedures for Non-Third Party Claims.  The Indemnified Party will promptly provide the Indemnifying Party with written notice of its discovery of any matter that does not involve a Third Party Claim being asserted against or sought to be collected from the Indemnified Party, giving rise to the claim of indemnity pursuant hereto, with such written notice stating the nature, basis and the amount thereof, to the extent known, along with copies of the relevant notices and documents (including court papers) evidencing such matter and the basis for indemnification sought and otherwise in reasonable detail; provided, that the failure of the Indemnified Party to give prompt notice to the Indemnifying Party shall not affect the Indemnified Party’s right to indemnification hereunder except to the extent that the Indemnifying Party is actually prejudiced as a result of such failure.  The Indemnifying Party will have 45 days from receipt of any such notice to give notice of dispute of the claim to the Indemnified Party.  The Indemnified Party will reasonably cooperate and assist the Indemnifying Party in determining the validity of any claim for indemnity by the Indemnified Party and in otherwise resolving such matters.  Such assistance and cooperation will include providing reasonable access to and copies of information, records and documents relating to such matters, furnishing employees to assist in the investigation, defense and resolution of such matters and providing legal and business assistance with respect to such matters.

SECTION 9.04.  Limitations on Indemnification.  (a)  Notwithstanding the foregoing provisions of this Article IX, (i) neither party shall be liable, pursuant to Section 9.01(i), 9.01(ii), 9.01(iii), 9.02(i) or 9.02(ii), as applicable, unless a claim therefor is asserted in writing within the applicable survival period, failing which such claim shall be waived and extinguished, (ii) neither party shall be liable, pursuant to Section 9.01(i) or 9.02(i) (as applicable, and other than in connection with the breach of a Fundamental Representation or in the case of fraud), for (x) any Losses suffered by any Indemnified Party unless the aggregate of all such Losses suffered by such Indemnified Party exceeds,

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on a cumulative basis, an amount equal to $14,000,000, and then only to the extent of any such excess, or (y) any individual items where the Loss relating thereto is less than $25,000 and such items shall not be aggregated for purposes of the immediately preceding clause (x), (iii) the aggregate liability of a party hereunder, pursuant to Section 9.01(i) or 9.02(i), as applicable, for Losses suffered by the Purchaser Indemnitees (other than in connection with the breach of any Fundamental Representation or in the case of fraud) or the Seller Indemnitees (other than in the case of fraud) shall in no event exceed $140,000,000, (iv) the aggregate liability of a party hereunder, pursuant to Sections 9.01(i), 9.01(ii), 9.01(iii), 9.02(i) or 9.02(ii), as applicable, for Losses suffered by the Purchaser Indemnitees or the Seller Indemnitees, as applicable, shall in no event exceed the Purchase Price and (v) neither party hereto shall be liable to the other for indirect, special, incidental, consequential or punitive damages claimed by such other party resulting from such first party’s breach of its representations, warranties or covenants hereunder (except to the extent that any such damages are awarded to a third party in a Third Party Claim).  Any Loss for which a party would otherwise be obligated to provide indemnification hereunder will be offset to the extent (but only to the extent) such Loss is reflected in an adjustment to the Global Closing Date Payment or the China Closing Date Payment, as applicable, pursuant to Section 2.03(c).  The representations, warranties, covenants and agreements contained in this Agreement and in any document delivered in connection herewith shall survive the Global Closing solely for purposes of this Article IX as follows: (i) the representations and warranties in Articles III (other than the Fundamental Representations) and IV shall survive for 18 months following the Global Closing, (ii) Fundamental Representations (other than Section 3.07(a)) shall survive until the expiration of the applicable statute of limitations, (iii) Section 3.07(a) shall survive for 5 years following the Global Closing, (iv) the covenant in Section 5.02 shall not survive the Global Closing and (v) the other covenants set forth herein shall survive the Global Closing pursuant to the terms thereof.  “Fundamental Representations” shall mean the representations and warranties set forth in Sections 3.01 (entitled “Organization and Standing”), 3.02 (entitled “Authority; Execution and Delivery; Enforceability”) and 3.03 (entitled “No Conflicts or Violations; No Consents or Approvals Required”), clause (a) of Section 3.07 (entitled “Intellectual Property”) and the first sentence of each of Sections 3.05(a) and 3.06(b).

(b)  Purchaser and Seller shall cooperate with each other with respect to resolving any claim or liability with respect to which one party is obligated to indemnify the other party hereunder, including by acting in good faith to mitigate or resolve any such claim or liability.  In the event that Purchaser or Seller shall fail to make such good faith efforts to mitigate or resolve any claim or liability, then notwithstanding anything else to the contrary contained herein, the other party shall not be required to indemnify, defend or hold harmless any person for any claims, losses, damages, liabilities, obligations or expenses that could reasonably be expected to have been avoided if Purchaser or Seller, as the case may be, had made such efforts.

(c)  Purchaser further acknowledges and agrees that, (i) other than the representations and warranties of Seller specifically contained in Article III of this Agreement, none of Seller, any of its affiliates or any other person has made any representation or warranty either expressed or implied (A) with respect to the Business,

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the Transferred Assets, the Assumed Liabilities or the transactions contemplated hereby or by the Ancillary Agreements or (B) as to the accuracy or completeness of any information regarding the Business, the Transferred Assets, the Assumed Liabilities or the transactions contemplated hereby or by the Ancillary Agreements furnished or made available to Purchaser and its representatives, (ii) Purchaser has not relied on any representation or warranty from Seller, any Seller Affiliate or any other person in determining to enter into this Agreement, except as expressly set forth in this Agreement and the Ancillary Agreements and (iii) Purchaser shall have no claim or right to indemnification pursuant to this Article IX and none of Seller, any of its affiliates or any other person shall have or be subject to any liability to Purchaser or any other person with respect to any information, documents or materials furnished by Seller, any of its affiliates or any of their respective officers, directors, employees, agents or advisors to Purchaser, including the Confidential Memorandum dated October 2012 prepared by Lazard Frères & Co. LLC and any information, documents or material made available to Purchaser and its representatives in certain “data rooms”, management presentations or any other form in expectation of the transactions contemplated hereby or by the Ancillary Agreements (it being understood that this clause (iii) does not supersede or otherwise affect the representations and warranties of Seller specifically contained in Article III of this Agreement).  Without limiting the generality of the foregoing, Purchaser acknowledges and agrees that, except as expressly set forth in this Agreement, (a) neither Seller nor any of the Seller Affiliates makes any representations or warranties relating to the maintenance, repair, condition, design, performance or marketability of any Transferred Asset, including merchantability or fitness for a particular purpose, and (b) Purchaser acknowledges and agrees that it shall obtain rights in the Transferred Assets in their present condition and state of repair, “as is” and “where is”.

(d)  Purchaser further acknowledges and agrees that, should the Global Closing occur, its sole and exclusive remedy with respect to any and all claims relating to this Agreement, the Ancillary Agreements, the Business, the Transferred Assets, the Excluded Assets, the Assumed Liabilities, the Retained Liabilities or the transactions contemplated hereby or by the Ancillary Agreements (other than (i) a claim for payment due pursuant to Section 2.03(c), (ii) claims of, or causes of action arising from, fraud, (iii) claims for injunctive or other equitable relief, solely with respect to Sections 2.04 and 5.05, (iv) claims for injunctive or other equitable relief arising under the Excluded Technology License, the Transitional Trademark License or the Patent License or (v) prior to consummation of the China Closing, claims for injunctive or other equitable relief relating to the China Acquisition or the China Business) shall be pursuant to the indemnification provisions set forth in this Article IX.  In furtherance of the foregoing, Purchaser hereby waives, from and after the Global Closing, any and all rights, claims and causes of action (other than (i) a claim for payment due pursuant to Section 2.03(c), (ii) claims of, or causes of action arising from, fraud, (iii) claims for injunctive or other equitable relief, solely with respect to Sections 2.04 and 5.05, (iv) claims for injunctive or other equitable relief arising under the Excluded Technology License, the Transitional Trademark License or the Patent License or (v) prior to consummation of the China Closing, claims for injunctive or other equitable relief relating to the China Acquisition or the China Business) Purchaser or any other Purchaser Indemnitee may have against Seller or any of its affiliates or any of their respective directors, officers and employees arising

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under or based upon this Agreement, any Ancillary Agreement, any document or certificate delivered in connection herewith, any Federal, state, provincial, local or foreign statute, law, ordinance, rule or regulation, common law or otherwise (including with respect to environmental matters generally and any matters under the Comprehensive Environmental Response, Compensation and Liability Act) (except pursuant to the indemnification provisions set forth in this Article IX).

SECTION 9.05.  Additional Environmental Procedures Limitations.  Notwithstanding any provision to the contrary, with respect to any indemnification claim by Purchaser under Section 9.01 for Losses arising under or relating to any Retained Environmental Liability or any breach of the representations and warranties contained in Section 3.14(d) or otherwise relating to any Environmental Laws, Environmental Permits or Hazardous Materials or any claim relating thereto, (a) the Seller shall have the right, but not the obligation, to manage and/or assume the control of any investigation, sampling, cleanup or other responsive or remedial action (“Remedial Action”); provided that, (i) in no case shall such Remedial Action unreasonably interfere with operations, as then currently conducted, by Purchaser at any Transferred Real Property; (ii) such Remedial Action shall be conducted by a licensed environmental consultant reasonably acceptable to Purchaser and Seller; (iii) the Seller shall provide Purchaser with a reasonable opportunity to comment on all work plans or submissions to any Governmental Entity relating to any such Remedial Action (provided that the Seller shall have the right to make all final decisions with respect to such work plans and comments); (iv) Seller shall indemnify Purchaser with respect to any Losses for physical damage to Purchaser’s property or facility or personal injury directly caused by Seller after the applicable Closing Date while accessing any Transferred Real Property for the purpose of exercising Seller’s management and/or control of the Remedial Action; and (v) the Remedial Action shall be conducted in accordance with Environmental Law and shall not result in any Judgment or legally-binding agreement with a third party that imposes any obligations or liabilities on Purchaser without Purchaser’s prior written consent, which shall not be unreasonably withheld; (b) Purchaser shall provide the Seller and its consultants with access to any Transferred Real Property that may be reasonably necessary in connection with such management and/or control, except Seller and its consultants must obtain prior written consent of Purchaser for such access, which shall not be unreasonably withheld or delayed; and (c) Purchaser shall have no right for indemnification for such Losses under Section 9.01 to extent such Losses (i) result from exceeding the minimum applicable requirements under Environmental Law (including, in the case of any Remedial Action, minimum applicable cleanup standards and the use of risk-based remedies, engineering controls and land use restrictions, as appropriate); or (ii) directly arise from any (A) contribution to or exacerbation of such Losses caused by Purchaser after the Global Closing Date (with respect to the Global Transferred Assets) or the China Closing Date (with respect to the China Transferred Assets), (B) closure of or cessation of operations, or change in use to a non-commercial or non-industrial use, at any Transferred Real Property after the Global Closing Date (with respect to the Little Rock Facility) or the China Closing Date (with respect to the China Facility) or (C) Remedial Action that is not (w) required by Applicable Law, (x) conducted in response to a Proceeding against Purchaser by a third party, (y) conducted in the normal due course of business for a legitimate business purpose or (z) reasonably necessary to protect

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human health and safety from a condition that poses an imminent and substantial danger thereto.

SECTION 9.06.  Calculation of Indemnity Payments.  The amount of any Loss for which indemnification is provided under this Article IX shall be net of any amounts actually recovered by the Indemnified Party under insurance policies with respect to such Loss (provided that an Indemnified Party shall have no affirmative obligation to seek recovery under any insurance policies).

SECTION 9.07.  Tax Treatment of Indemnification.  For all Tax purposes, Purchaser and Seller agree to treat (and shall cause each of their respective affiliates to treat) any indemnity payment under this Agreement as an adjustment to the Final Purchase Price unless (i) otherwise required by Applicable Law or (ii) a final determination by the U.S. Internal Revenue Service (the “IRS”) (which determination shall include the execution of an IRS Form 870-AD or successor form) or the applicable Taxing Authority provides otherwise.

ARTICLE X

Tax Matters

SECTION 10.01.  Tax Matters.  (a)   The parties shall determine an allocation of a portion of the total consideration among certain of the Transferred Assets in accordance with Section 10.01(a) of the Seller Disclosure Schedule.

(b)  At least five (5) days prior to the China Closing Date, Seller shall provide Purchaser with an asset valuation report on the Transferred Assets identified in the China Purchase Agreement with a detailed breakdown on each category of such Transferred Assets prepared by an asset valuation institute qualified to conduct asset valuation in the People’s Republic of China.  Any adjustments to the China Purchase Price or the China Final Purchase Price that relate to such Transferred Assets shall be allocated by the parties in accordance with such asset valuation report.  The costs and expenses for preparing such asset valuation report shall be borne equally by Purchaser and Seller.

(c)  Except as described in Section 10.01(c) of the Seller Disclosure Schedule, Seller (and its affiliates) and Purchaser (and its affiliates) agree to file all Tax Returns consistent with the final versions of (i) any allocation agreed upon by the parties pursuant to Section 10.01(a) of the Seller Disclosure Schedule and (ii) the valuation report described in Section 10.01(b).

(d)  In the case of any Straddle Period with respect to a Property Tax, (i) the amount of such Property Tax for the Pre-Closing Tax Period shall be equal to the amount of such Property Tax for the entire Straddle Period multiplied by a fraction, the numerator of which is the number of days during the Straddle Period that is in the Pre-Closing Tax Period and the denominator of which is the number of days in the entire Straddle Period, and shall be the responsibility of Seller and (ii) the amount of such

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Property Tax for the Post-Closing Tax Period shall be equal to the amount of such Property Tax for the entire Straddle Period multiplied by a fraction, the numerator of which is the number of days during the Straddle Period that is in the Post-Closing Tax Period and the denominator of which is the number of days in the entire Straddle Period, and shall be the responsibility of Purchaser.  The party that has the primary obligation to do so under Applicable Law shall file any Tax Return that is required to be filed in respect of Taxes described in this Section 10.01(d), and that party shall pay the Taxes shown on such Tax Return.  To the extent any such Taxes paid by Purchaser (or any refund of Taxes received by Purchaser) is allocable to the Pre-Closing Tax Period, or any such Taxes paid by Seller (or any refund of Taxes received by Seller) is allocable to the Post-Closing Tax Period, Purchaser or Seller (as applicable) shall pay to the other party such proportionate amount promptly after the payment of such Taxes (or the receipt of any such refund).

SECTION 10.02.  Transfer Taxes.  (a)  Seller and Purchaser shall cooperate in timely making all filings, returns, reports and forms as may be required in connection with Purchaser’s payment of Transfer Taxes.  Seller and Purchaser, as appropriate, shall execute and deliver, and Seller shall cause each of the Seller Affiliates, as appropriate, to execute and deliver, all instruments and certificates reasonably necessary to enable the other to comply with any filing requirements relating to any such Transfer Taxes.

(b)  (i) The parties shall be responsible for certain Transfer Taxes as set forth in Section 10.02(b)(i) of the Seller Disclosure Schedule.  (ii)  Notwithstanding Section 10.02(b)(i), Purchaser (and its affiliates) shall be responsible for, and shall pay to the applicable Taxing Authority or Seller, as applicable, on the applicable Closing Date (or, if later, at the time such Tax becomes due and payable under Applicable Law) any Recoverable Transfer Taxes.  At least fourteen (14) days prior to each applicable Closing Date, Seller shall provide Purchaser with a schedule (the “Recoverable Transfer Tax Schedule”), based on a good faith estimate, of each Recoverable Transfer Tax arising in connection with the applicable Closing and Seller shall make any changes to the Recoverable Transfer Tax Schedule as reasonably requested by Purchaser; provided, however, that such estimate shall not limit Purchaser’s obligations under this Section 10.02(b)(ii).  (iii) The affiliate of Purchaser that is purchasing the Canada Transferred Assets hereunder shall provide its GST/HST and, if applicable, QST registration numbers to Seller on or prior to the Global Closing.

(c)  Purchaser agrees to retain all records relating to the finances and Taxes of the Transferred Assets for all Pre-Closing Tax Periods until the expiration of the statutes of limitation (including any extensions thereof) for the taxable period or periods to which such records relate.  Purchaser and Seller agree to provide each other with such information and assistance as is reasonably necessary, including access to records and personnel, for the preparation of any Tax Returns or for the defense of any Tax claim or assessment, whether in connection with an audit or otherwise.

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ARTICLE XI

Additional Agreements

SECTION 11.01.  Publicity.  From the date of this Agreement through the Global Closing Date, no public release or announcement concerning the transactions contemplated hereby or by any Ancillary Agreement shall be issued by any party without the prior consent of the other parties (which consent shall not be unreasonably withheld or delayed), except as such release or announcement may be required by law or the rules or regulations of any United States or foreign securities exchange, in which case the party required to make the release or announcement shall allow the other party reasonable time to comment on such release or announcement in advance of such issuance; provided, however, that each of the parties may make internal announcements to their respective employees that are consistent with the parties’ prior public disclosures regarding the transactions contemplated hereby.  Seller acknowledges that Purchaser may be required to file a copy of this Agreement with the United States Securities and Exchange Commission on Form 8-K.

SECTION 11.02.  No Use of Certain Names.  Purchaser shall, and shall cause its subsidiaries and the Business to, promptly, and in any event (a) within 180 days after the Global Closing, revise print advertising, product labeling and all other information or other materials, including any internet or other electronic communications vehicles, to delete all references to the Names and (b) within 45 days after the Global Closing, change signage and stationery and otherwise discontinue use of the Names; provided, however, that (i) for a period of 180 days after the Global Closing Date, Purchaser may continue to distribute product literature relating to the Business that uses any of the Names and distribute products with labeling that uses any of the Names to the extent that such product literature and labeling exists on the Global Closing Date and (ii) for a period of up to 18 months after the Global Closing Date, Purchaser may continue to use the Uniform Product Codes for the Products to the extent such Uniform Product Codes exist on the Global Closing Date, provided that Purchaser use commercially reasonable efforts to cease such use of Uniform Product Codes as promptly as reasonably practicable.  In no event shall Purchaser, any of its subsidiaries or the Business use any of the Names after the Global Closing in any manner or for any purpose different from the use of such Names by Seller and the Seller Affiliates during the 90-day period preceding the Global Closing.  With respect to the Transferred Inventory, Purchaser may continue to sell such Transferred Inventory, notwithstanding that it bears one or more of the Names, for a reasonable time after the Global Closing or the China Closing, as applicable (in each case, not to exceed 180 days after the Global Closing or the China Closing, as applicable).  “Names” means “Unilever”, “Conopco”, “Knorr”, “Unilever Bestfoods” and the names of any Seller Affiliate and any variations and derivatives thereof and any other logos or trademarks of Seller or its affiliates not included in Section 1.02(a)(iv)(B) of the Seller Disclosure Schedule.

SECTION 11.03.  Support Services.  Purchaser acknowledges that as of the Global Closing Date, neither Seller nor any of its affiliates shall have any obligation to provide any support or other services to Purchaser relating to the Business (other than

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the China Transferred Assets), other than those services expressly required to be provided pursuant to the transitional services agreement in the form attached hereto as Exhibit J (the “Transitional Services Agreement”), which agreement shall be entered into by Seller and Purchaser as of the Global Closing Date.

SECTION 11.04.  Post-Closing Information.  Following the Global Closing, upon reasonable written notice to Purchaser, Purchaser shall afford or cause to be afforded to Seller and its affiliates and their employees, counsel, auditors and representatives reasonable access to the personnel, properties, books, Contracts, commitments and records relating to the Global Business for any reasonable business purpose, including in respect of litigation, insurance matters, financial reporting and accounting of Seller and its affiliates.  Following the China Closing, upon reasonable written notice to Purchaser, Purchaser shall afford or cause to be afforded to Seller and its affiliates and their employees, counsel, auditors and representatives reasonable access to the personnel, properties, books, Contracts, commitments and records relating to the China Business for any reasonable business purpose, including in respect of litigation, insurance matters, financial reporting and accounting of Seller and its affiliates.

SECTION 11.05.  Books and Records.  (a)  Purchaser shall retain the books and records of the Global Business existing on the Global Closing Date (and to the extent such books and records are Global Transferred Assets) in accordance with Purchaser’s standard records retention policies, as amended from time to time and, in the case of financial records, for no less than seven years after the Global Closing Date.  Purchaser shall retain the books and records of the China Business existing on the China Closing Date (and to the extent such books and records are China Transferred Assets) in accordance with Purchaser’s standard records retention policies, as amended from time to time and, in the case of financial records, for no less than seven years after the China Closing Date.

(b)  Purchaser recognizes that certain books and records may contain information relating to subsidiaries, divisions or businesses of Seller and its affiliates other than the Business and that Seller and its affiliates may retain copies thereof.

SECTION 11.06.  Bulk Transfer Laws.  Purchaser hereby waives compliance by Seller and the Seller Affiliates with the provisions of any so-called “bulk transfer laws” of any jurisdiction in connection with the Acquisition.

SECTION 11.07.  Refunds and Remittances.  After the applicable Closing, if Seller or any of its affiliates receives any refund or other amount which is a Transferred Asset or is otherwise properly due and owing to Purchaser in accordance with the terms of this Agreement, Seller promptly shall remit, or shall cause to be remitted, such amount to Purchaser at the address set forth in Section 12.04.  After the applicable Closing, if Purchaser or any of its affiliates receives any refund or other amount which is an Excluded Asset or is otherwise properly due and owing to Seller or any of its affiliates in accordance with the terms of this Agreement, Purchaser promptly shall remit, or shall cause to be remitted, such amount to Seller at the address set forth in Section 12.04.  After the applicable Closing, if Purchaser or any of its affiliates receives any refund or

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other amount which is related to claims (including workers’ compensation), litigation, insurance or other matters for which Seller is responsible hereunder, and which amount is not a Transferred Asset, or is otherwise properly due and owing to Seller in accordance with the terms of this Agreement, Purchaser promptly shall remit, or cause to be remitted, such amount to Seller at the address set forth in Section 12.04.  After the applicable Closing, if Seller or any of its affiliates receives any refund or other amount which is related to claims, litigation, insurance or other matters for which Purchaser is responsible hereunder, and which amount is not an Excluded Asset, or is otherwise properly due and owing to Purchaser in accordance with the terms of this Agreement, Seller promptly shall remit, or cause to be remitted, such amount to Purchaser at the address set forth in Section 12.04.

ARTICLE XII

Miscellaneous

SECTION 12.01.  Assignment.  Neither this Agreement nor any of the rights and obligations of the parties hereunder may be assigned or transferred by any of the parties hereto (including by operation of law in connection with a merger or consolidation of Purchaser, Seller or any Seller Affiliate) without the prior written consent of the other party hereto, except that (a) Purchaser may assign its right to purchase the Transferred Assets hereunder to any of its wholly owned subsidiaries without the prior written consent of Seller and (b) Seller may assign any rights and obligations hereunder to Unilever United States, Inc. and any of its or Seller’s affiliates (including Unilever NV, Unilever PLC and direct and indirect subsidiaries of either or both of them) without the prior written consent of Purchaser.  Notwithstanding the foregoing, each of Seller and Purchaser shall remain liable for all of their respective obligations under this Agreement.  Subject to the first sentence of this Section 12.01, this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns and no other person (other than the Seller Indemnitees and the Purchaser Indemnitees with respect to claims under Article IX) shall have any right, obligation or benefit hereunder.  Any attempted assignment or transfer in violation of this Section 12.01 shall be void.

SECTION 12.02.  No Third-Party Beneficiaries.  Except as provided in Article IX (with respect to the Seller Indemnitees and the Purchaser Indemnitees), this Agreement is for the sole benefit of the parties hereto and their permitted assigns and nothing herein expressed or implied shall give or be construed to give to any person, other than the parties hereto and such assigns, any legal or equitable rights, obligations or benefits hereunder.

SECTION 12.03.  Expenses.  Whether or not the transactions contemplated by this Agreement are consummated, except as otherwise expressly provided herein each of the parties hereto shall be responsible for the payment of its own respective costs and expenses incurred in connection with the negotiations leading up to and the performance of its respective obligations pursuant to this Agreement and the Ancillary Agreements including the fees of any attorneys, accountants, brokers or

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advisors employed or retained by or on behalf of such party.  Purchaser shall pay any filing fee required under the HSR Act and all other Applicable Laws relating to competition.

SECTION 12.04.  Notices.  All notices, requests, permissions, waivers and other communications hereunder shall be in writing and shall be deemed to have been duly given (a) three (3) business days following sending by registered or certified mail, postage prepaid, (b) when sent, if sent by facsimile; provided that the facsimile transmission is promptly confirmed by telephone, (c) when delivered, if delivered personally to the intended recipient, and (d) one (1) business day following sending by overnight delivery via a national courier service and, in each case, addressed to a party at the following address for such party:

(i)        if to Seller,

Conopco, Inc.

c/o Unilever United States, Inc.

700 Sylvan Avenue

Englewood Cliffs, NJ 07632

Attention:  General Counsel

Facsimile:  (201) 894-2727

with a copy to:

Cravath, Swaine & Moore LLP

Worldwide Plaza

825 Eighth Avenue

New York, NY 10019-7475

Attention:  Mark I. Greene, Esq.

Facsimile:  (212) 474-3700

(ii)       if to Purchaser,

Hormel Foods Corporation

One Hormel Place

Austin, MN 55912

Attention:  Fred Halvin, Vice President Corporate Development

Facsimile:  (507) 437-5108

with a copy to:

Hormel Foods Corporation

One Hormel Place

Austin, MN 55912

Attention:  Legal Department

Facsimile: (507) 437-5135

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with a copy to:

Faegre Baker Daniels LLP

2200 Wells Fargo Center

90 South 7th Street

Minneapolis, MN 55402-3901

Attention:  Andrew J. Ritten

Facsimile:  (612) 766-1600

or to such other address(es) as shall be furnished in writing by any such party to the other party hereto in accordance with the provisions of this Section 12.04.

SECTION 12.05.  Headings; Certain Definitions.  (a)  The descriptive headings of the several Articles and Sections of this Agreement and the Exhibits, Schedules and Table of Contents to this Agreement are inserted for convenience only, do not constitute a part of this Agreement and shall not affect in any way the meaning or interpretation of this Agreement.  All Exhibits and Schedules annexed hereto or referred to herein are hereby incorporated in and made a part of this Agreement as if set forth in full herein.  Any capitalized terms used in any Schedule or Exhibit but not otherwise defined therein shall have the meaning as defined in this Agreement.  All references herein to “Articles”, “Sections”, “Exhibits” or “Schedules” shall be deemed to be references to Articles or Sections hereof or Exhibits or Schedules hereto unless otherwise indicated.

(b)  For all purposes hereof:

“Acquisition” means the Global Acquisition and the China Acquisition.

“affiliate” of any party means any person or entity controlling, controlled by or under common control with such party and, in the case of Seller, shall include Unilever N.V., Unilever PLC or any entity a majority of the voting shares of which is owned directly or indirectly by Unilever N.V. or Unilever PLC or both of them together (including the Seller Affiliates).

“Applicable Law” means any statute, law, ordinance, legally-binding rule or regulation relating to the Business or the Transferred Assets that is applicable to Purchaser (or PRC Purchaser) or Seller (or any Seller Affiliate), as the case may be.

“Assumed Environmental Liability” means any liability under or pursuant to Environmental Law (“Environmental Liability”) arising from or relating to the ownership or operation of the Transferred Assets or the Business on or after the Closing Date at which such Transferred Assets were conveyed, including any liability for (i) any violation of Environmental Law with respect to the operation of the Business or any Transferred Real Property to the extent such violation first occurred after such Closing Date; (ii) any Release or threatened Release of Hazardous Materials at any Transferred Real Property or in connection with the operation of the Business, to the extent such

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Release or threatened Release occurred after such Closing Date or (iii) any offsite disposal or transportation, or arrangement for disposal or transportation, of any Hazardous Material in connection with the operation of the Business or any Transferred Real Property after such Closing Date.

“Business” means the business of manufacturing, marketing, distributing and selling the Products on a worldwide basis as such business is currently conducted by Seller and the Seller Affiliates.  References herein to (a) the “China Business” shall be to that portion of the Business corresponding to the manufacturing, marketing, distribution and sale of certain Products in the People’s Republic of China and (b) the “Global Business” shall be to the Business excluding the China Business.

“business day” shall refer to a day, other than a Saturday or a Sunday, on which commercial banks are not required or authorized to close in New York City and, in any circumstance involving the payment of money from or to a party residing in the People’s Republic of China, the People’s Republic of China.

“Business Material Adverse Effect” means a material adverse effect (i) on the financial condition or results of operations of the Business or (ii) on the ability of Seller to consummate the Acquisition.  For purposes of this Agreement, “Business Material Adverse Effect” shall exclude any change, effect, event, occurrence or state of facts to the extent relating to (A) changes in law or applicable accounting regulations or principles or interpretations thereof, (B) any outbreak or escalation of hostilities or war or any act of terrorism, (C) changes in the United States or foreign economies, financial markets or geopolitical conditions in general, (D) changes in industries relating to the Business in general and not specifically relating to the Business (including fluctuations in peanut prices), (E) the announcement by Seller of its intention to sell the Business and (F) the execution or announcement of this Agreement (including the identity of Purchaser) or any of the Ancillary Agreements and the consummation or announcement of the transactions contemplated hereby or thereby.

“China Assumed Liabilities” mean those Assumed Liabilities located in China and relating to the China Business.

“China Transferred Assets” means those Transferred Assets located in China and relating to the China Business including, for the avoidance of doubt, those trademarks, trademark registrations, trademark applications, service marks, trade names and domain names (including all extensions and renewals thereof) set forth in Section 1.02(a)(iv)(B) of the Seller Disclosure Schedule identified therein as corresponding to the People’s Republic of China (the “China Transferred Intellectual Property”).

“Closing” means the Global Closing or the China Closing, as applicable.

“Closing Date” means the Global Closing Date or the China Closing Date, as applicable.

“$” means United States dollars.

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

“Exchange Act” means the Securities Exchange Act of 1934, as amended, together with the rules and regulations promulgated thereunder.

“Global Assumed Liabilities” means all Assumed Liabilities other than the China Assumed Liabilities.

“Global Transferred Assets” means all Transferred Assets other than the China Transferred Assets.

“Hazardous Materials” shall mean any petroleum or petroleum products, asbestos, polychlorinated biphenyls and hazardous or toxic substances, materials, pollutants, contaminants or wastes that are defined, listed, classified, prohibited, limited or regulated, or for which standards of conduct are established, under any Environmental Law.

“including” means including, without limitation.

“Intellectual Property” means patents (including all reissues, divisions, continuations, extensions, reexamination and post grant reviews thereof), patent applications, trademarks, trademark registrations, trademark applications, service marks, trade names, domain names, copyrights, copyright registrations, copyright applications (and all renewals and extensions of the foregoing), trade secrets, know how and all rights to the foregoing.

“knowledge of Seller” means the actual knowledge of Michael Faherty, Michael Dwyer, Ullic Young, Carina Sun, Anthony Patrigneli, William Deegan, Ying Zhang, David Schwartz, Paul Fenwick, Judy Zhu, Jia Hui-min, Cindy Jiang, Liu Yun-Long and Wang Tony, after review by the foregoing individuals of the pertinent provisions of this Agreement.

“Louisville Facility” means the facility in Louisville, Kentucky owned by Algood Food Company and utilized in the manufacture of certain Products pursuant to that Manufacturing Agreement, dated as of May 4, 2007, by and between Algood Food Company and Seller.

“person” means any individual, firm, corporation, partnership, limited liability company, trust, joint venture, Governmental Entity or other entity.

“Products” means the products represented by the SKUs for the Brand set forth in Section 12.05(b) of the Seller Disclosure Schedule and any products currently in development by the Business to be marketed under the Brand, including any such products represented by such SKUs or such products currently in development by the Business to be marketed under the Brand, to the extent reasonably accessible, that may have been developed or obtained for use by the Business within the last three years by

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Seller or any of the Seller Affiliates regardless of their use status as of the Global Closing Date or China Closing Date, as applicable.

“Release” means any release, spill, emission, leaking, pumping, pouring, dumping, emitting, emptying, escaping, injection, deposit, disposal, discharge, dispersal, leaching or migration into the environment, including the uncontrolled movement of Hazardous Materials through the ambient air, soil, subsurface water, groundwater, wetlands, lands or subsurface strata, directly or indirectly into the environment.

“Retained Environmental Liability” means any Environmental Liability arising from or relating to the ownership or operation of the Transferred Assets or the Business prior to the Closing Date at which such Transferred Assets were conveyed, including any liability for (i) any violation of applicable Environmental Law with respect to the operation of the Business or any Transferred Real Property to the extent such violation occurred prior to such Closing Date; (ii) any Release or threatened Release of Hazardous Materials at any Transferred Real Property or in connection with the operation of the Business, to the extent such Release or threatened Release occurred prior to such Closing Date or (iii) any offsite disposal or transportation, or arrangement for disposal or transportation, of any Hazardous Material by the Seller in connection with the operation of the Business or any Transferred Real Property prior to the applicable Closing Date.

“Seller Benefit Plan” means each “employee pension benefit plan” (as defined in Section 3(2) of ERISA), “employee welfare benefit plan” (as defined in Section 3(1) of ERISA) and each other plan, arrangement or policy relating to equity compensation, deferred compensation, incentive compensation, severance, fringe benefits or other employee compensation or benefits, in each case, maintained or contributed to or required to be maintained or contributed to by Seller or any of the Seller Affiliates for the benefit of any Business Employees.

“subsidiary” of any person means another person, an amount of the voting securities, other voting ownership or voting partnership interests of which is sufficient to elect at least a majority of its Board of Directors or other governing body (or, if there are no such voting interests, 50% or more of the equity interests of which) is owned directly or indirectly by such first person or by another subsidiary of such first person.

SECTION 12.06.  Counterparts.  This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement, and shall become effective when one or more counterparts have been signed by each of the parties hereto and delivered, in person or by facsimile, or by electronic image scan, receipt acknowledged, to the other party hereto.

SECTION 12.07.  Integrated Contract; Exhibits and Schedules.  This Agreement, including the Seller Disclosure Schedule (and the Introduction thereto) and Exhibits hereto, any written amendments to the foregoing satisfying the requirements of Section 12.13 hereof, the Confidentiality Agreement and the Ancillary Agreements, including the schedules, exhibits and annexes thereto, constitute the entire agreement between the parties with respect to the subject matter hereof and thereof and supersede

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any previous agreements and understandings between the parties with respect to such matters.  All Exhibits and Schedules annexed hereto or referred to herein are hereby incorporated in and made a part of this Agreement as if set forth in full herein.  Any capitalized terms used in any Schedule or Exhibit but not otherwise defined therein shall be defined as set forth in this Agreement.  There are no restrictions, promises, representations, warranties, agreements or undertakings of any party hereto with respect to the transactions contemplated by this Agreement, the Confidentiality Agreement or the Ancillary Agreements other than those set forth herein or therein or in any other document required to be executed and delivered hereunder or thereunder.  In the event of any conflict between the provisions of this Agreement (including the Seller Disclosure Schedule (and the Introduction thereto) and Exhibits hereto), on the one hand, and the provisions of the Confidentiality Agreement, the China Agreements or the other Ancillary Agreements (including the schedules and exhibits thereto), on the other hand, the provisions of this Agreement shall control.  For the avoidance of doubt, the China Agreements have been entered into solely for the purpose of addressing the various PRC filing, registration, foreign exchange and other requirements necessary to perform this Agreement as contemplated hereby and as required by Applicable Law.  Notwithstanding anything herein or therein to the contrary, all terms and conditions of this Agreement (including in respect of governing law and dispute resolution) shall govern and control all transactions and other matters described in and contemplated by the China Agreements and shall supersede in every respect the provisions set forth in the China Agreements, except to the extent any such provisions supplement and are not inconsistent with the terms and conditions of this Agreement.

SECTION 12.08.  Severability; Enforcement.  The invalidity, illegality or unenforceability of any portion hereof shall not affect the validity, force or effect of the remaining portions hereof.  If it is ever held that any restriction hereunder is too broad to permit enforcement of such restriction to its fullest extent, each party agrees that a court of competent jurisdiction may enforce such restriction to the maximum extent permitted by law, and each party hereby consents and agrees that such scope may be judicially modified accordingly in any proceeding brought to enforce such restriction.

SECTION 12.09.  Governing Law.  This Agreement and any disputes arising under or related hereto (whether for breach of contract, tortious conduct or otherwise) shall be governed and construed in accordance with the laws of the State of New York, without reference to its conflicts of law principles (other than Section 5-1401 of the General Obligations Law of the State of New York).

SECTION 12.10.  Jurisdiction.  Each party irrevocably agrees that any legal action, suit or proceeding against them arising out of or in connection with this Agreement or the transactions contemplated hereby or disputes relating hereto (whether for breach of contract, tortious conduct or otherwise) shall be brought exclusively in a Federal court sitting in the State of New York located in New York County, or, if such court does not have subject matter jurisdiction, the state courts of New York located in New York County and hereby irrevocably accepts and submits to the exclusive jurisdiction and venue of the aforesaid courts in personam, with respect to any such action, suit or proceeding.  Each of Purchaser and Seller irrevocably and unconditionally

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waives any objection to the laying of venue of any action, suit or proceeding arising out of this Agreement, any Ancillary Agreement or the transactions contemplated hereby and thereby in (i) the Supreme Court of the State of New York, New York County, or (ii) any Federal court sitting in the State of New York located in New York County, and hereby and thereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such action, suit or proceeding brought in any such court has been brought in an inconvenient forum.  This Section 12.10 shall not apply to any dispute under Section 2.03 that is required to be decided by the Independent Expert.

SECTION 12.11.  Service of Process.  Each party agrees that service of any process, summons, notice or document by U.S. registered mail to such party’s respective address set forth in Section 12.04 shall be effective service of process for any action, suit or proceeding in New York with respect to any matters for which it has submitted to jurisdiction pursuant to Section 12.10.

SECTION 12.12.  Waiver of Jury Trial.  Each party hereby waives to the fullest extent permitted by Applicable Law, any right it may have to a trial by jury in respect of any litigation directly or indirectly arising out of, under or in connection with this Agreement or the transactions contemplated hereby or disputes relating hereto.  Each party (a) certifies that no representative, agent or attorney of any other party has represented, expressly or otherwise, that such other party would not, in the event of litigation, seek to enforce the foregoing waiver and (b) acknowledges that it and the other party hereto have been induced to enter into this Agreement by, among other things, the mutual waivers and certifications in this Section 12.12.

SECTION 12.13.  Amendments.  This Agreement may be amended, modified, superseded or canceled and any of the terms, covenants, representations, warranties or conditions hereof may be waived only by an instrument in writing signed by each of the parties hereto or, in the case of a waiver, by or on behalf of the party waiving compliance.

SECTION 12.14.  Specific Enforcement.  Subject to Section 9.04(d), the parties agree that irreparable damage would occur and that the parties would not have any adequate remedy at law in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached.  It is accordingly agreed that the parties shall be entitled to seek an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement in any court of the State of New York located in New York County or any Federal court sitting in the State of New York located in New York County, this being in addition to any other remedy to which they are entitled at law or in equity.

75

IN WITNESS WHEREOF, Seller and Purchaser have duly executed this Agreement as of the date first written above.

CONOPCO, INC., as Seller,
by
	/s/ Henry Schirmer
	Name:	Henry Schirmer
	Title:	SVP Finance
HORMEL FOODS CORPORATION, as Purchaser,
by
	/s/ Jeffrey M. Ettinger
	Name:	Jeffrey M. Ettinger
	Title:	Chairman of the Board, President
		& Chief Executive Officer

EX-31.1

EXHIBIT 31.1

CERTIFICATION REQUIRED UNDER SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Jeffrey M. Ettinger, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q of Hormel Foods Corporation for the period ended January 27, 2013;

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

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

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

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

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

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

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

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

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

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

Dated: March 8, 2013	Signed:	/s/ JEFFREY M. ETTINGER
		JEFFREY M. ETTINGER
		Chairman of the Board, President, Chief Executive Officer, and Director

1

EX-31.2

EXHIBIT 31.2

CERTIFICATION REQUIRED UNDER SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Jody H. Feragen, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q of Hormel Foods Corporation for the period ended January 27, 2013;

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

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

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

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

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

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

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

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

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

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

Dated: March 8, 2013	Signed:	/s/ JODY H. FERAGEN
		JODY H. FERAGEN
		Executive Vice President, Chief Financial Officer, and Director

1

EX-32.1

EXHIBIT 32.1

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 Quarterly Report of Hormel Foods Corporation (the “Company”) on Form 10-Q for the period ended January 27, 2013, as filed with the Securities and Exchange Commission (the “Report”), the undersigned hereby 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, as amended; 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: March 8, 2013	/s/ JEFFREY M. ETTINGER
	JEFFREY M. ETTINGER
	Chairman of the Board, President, Chief Executive Officer, and Director
Dated: March 8, 2013	/s/ JODY H. FERAGEN
	JODY H. FERAGEN
	Executive Vice President, Chief Financial Officer, and Director

1

XML

INVESTMENTS IN AND RECEIVABLES FROM AFFILIATES (Details) (USD $)	3 Months Ended
	Jan. 27, 2013	Jan. 29, 2012	Oct. 28, 2012
Investments in and receivables from affiliates
Investments in and receivables from affiliates	$ 280,886,000		$ 286,537,000
Equity in earnings of affiliates	9,843,000	11,001,000
MegaMex Foods, LLC
Investments in and receivables from affiliates
Ownership percentage	50.00%
Investments in and receivables from affiliates	196,562,000		205,315,000
Equity in earnings of affiliates	7,037,000	8,624,000
Excess of investment over the underlying equity in net assets of the joint venture	21,300,000
Foreign Joint Ventures
Investments in and receivables from affiliates
Investments in and receivables from affiliates	84,324,000		81,222,000
Equity in earnings of affiliates	$ 2,806,000	$ 2,377,000
Foreign Joint Ventures | Minimum
Investments in and receivables from affiliates
Ownership percentage	26.00%
Foreign Joint Ventures | Maximum
Investments in and receivables from affiliates
Ownership percentage	50.00%

XML

INCOME TAXES (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended
	Jan. 27, 2013
INCOME TAXES
Unrecognized tax benefits including interest and penalties	$ 31.2
Portion of unrecognized tax benefit including interest and penalties, that if recognized, would impact effective tax rate	21.0
Interest and penalties related to uncertain tax positions recognized in income tax expense	0.2
Accrued interest and penalties, associated with unrecognized tax benefits	$ 8.5

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FAIR VALUE MEASUREMENTS (Details) (USD $)	3 Months Ended
	Jan. 27, 2013	Oct. 28, 2012
Methods and assumptions used to estimate the fair value of the financial assets and liabilities
Guarantee period at issue for rate of return on fixed income funds	1 year
Recognized right to reclaim cash collateral	$ 25,300,000	$ 27,500,000
Recognized obligation to return cash collateral	7,000,000	31,100,000
Fair value, long-term debt
Fair value of long-term debt (including current maturities)	277,500,000	283,600,000
Recurring basis | Fair Value
Assets at Fair Value:
Cash equivalents	706,853,000	483,441,000
Short-term marketable securities		77,387,000
Other trading securities	111,168,000	109,676,000
Commodity asset derivatives, net of the effects of master netting arrangements	6,211,000	3,884,000
Total Assets at Fair Value	824,232,000	674,388,000
Liabilities at Fair Value:
Deferred compensation	48,480,000	47,953,000
Total Liabilities at Fair Value	48,480,000	47,953,000
Recurring basis | Quoted Prices in Active Markets for Identical Assets (Level 1)
Assets at Fair Value:
Cash equivalents	706,853,000	483,441,000
Short-term marketable securities		2,349,000
Other trading securities	37,157,000	36,305,000
Commodity asset derivatives, net of the effects of master netting arrangements	6,211,000	3,884,000
Total Assets at Fair Value	750,221,000	525,979,000
Liabilities at Fair Value:
Deferred compensation	17,986,000	16,866,000
Total Liabilities at Fair Value	17,986,000	16,866,000
Recurring basis | Significant Other Observable Inputs (Level 2)
Assets at Fair Value:
Short-term marketable securities		75,038,000
Other trading securities	74,011,000	73,371,000
Total Assets at Fair Value	74,011,000	148,409,000
Liabilities at Fair Value:
Deferred compensation	30,494,000	31,087,000
Total Liabilities at Fair Value	$ 30,494,000	$ 31,087,000

XML

ACQUISITIONS (Details) (Skippy, Subsequent event, USD $) In Millions, unless otherwise specified	Jan. 31, 2013
Worldwide, except sales in China
Acquisitions
Purchase price	$ 663.1
China
Acquisitions
Additional investment	$ 42.0

XML

EARNINGS PER SHARE DATA (Tables)

3 Months Ended

Jan. 27, 2013

EARNINGS PER SHARE DATA

Schedule of denominator for the computation of basic and diluted earnings per share

	Three Months Ended
(in thousands)	January 27, 2013	January 29, 2012
Basic weighted-average shares outstanding	263,944	263,946
Dilutive potential common shares	5,196	5,662
Diluted weighted-average shares outstanding	269,140	269,608

XML

INVENTORIES (Details) (USD $) In Thousands, unless otherwise specified	Jan. 27, 2013	Oct. 28, 2012
INVENTORIES
Finished products	$ 513,734	$ 494,298
Raw materials and work-in-process	268,421	267,877
Materials and supplies	171,527	188,346
Total	$ 953,682	$ 950,521

XML

GOODWILL AND INTANGIBLE ASSETS (Details 2) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Jan. 27, 2013	Jan. 29, 2012	Oct. 28, 2012
Gross carrying amount and accumulated amortization for definite-lived intangible assets
Gross Carrying Amount	$ 75,588		$ 75,588
Accumulated Amortization	(56,565)		(54,375)
Amortization expense	2,189	2,426
Estimated Amortization Expense
2013	7,768
2014	6,372
2015	3,192
2016	1,023
2017	636
Customer lists/relationships
Gross carrying amount and accumulated amortization for definite-lived intangible assets
Gross Carrying Amount	22,148		22,148
Accumulated Amortization	(15,271)		(14,684)
Proprietary software and technology
Gross carrying amount and accumulated amortization for definite-lived intangible assets
Gross Carrying Amount	22,000		22,000
Accumulated Amortization	(17,932)		(17,319)
Formulas and recipes
Gross carrying amount and accumulated amortization for definite-lived intangible assets
Gross Carrying Amount	17,854		17,854
Accumulated Amortization	(12,220)		(11,686)
Distribution network
Gross carrying amount and accumulated amortization for definite-lived intangible assets
Gross Carrying Amount	4,120		4,120
Accumulated Amortization	(3,850)		(3,783)
Other intangibles
Gross carrying amount and accumulated amortization for definite-lived intangible assets
Gross Carrying Amount	9,466		9,466
Accumulated Amortization	$ (7,292)		$ (6,903)

XML

PENSION AND OTHER POST-RETIREMENT BENEFITS (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Jan. 27, 2013	Jan. 29, 2012
Pension Benefits
Pension and other postretirement benefits
Service cost	$ 7,745	$ 5,856
Interest cost	11,922	12,284
Expected return on plan assets	(18,286)	(17,127)
Amortization of prior service cost	(1,270)	(1,270)
Recognized actuarial loss (gain)	8,505	5,032
Net periodic cost	8,616	4,775
Post-retirement Benefits
Pension and other postretirement benefits
Service cost	612	556
Interest cost	3,694	4,438
Amortization of prior service cost	(265)	913
Recognized actuarial loss (gain)	1,913	(1)
Net periodic cost	$ 5,954	$ 5,906

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GENERAL

3 Months Ended

Jan. 27, 2013

GENERAL

GENERAL

NOTE A                GENERAL

Basis of Presentation

The accompanying unaudited consolidated financial statements of Hormel Foods Corporation (the Company) have been prepared in accordance with generally accepted accounting principles for interim financial information, and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X.  Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.  In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included.  Operating results for the interim period are not necessarily indicative of the results that may be expected for the full year.  The balance sheet at October 28, 2012, has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.  For further information, refer to the consolidated financial statements and footnotes included in the Company’s Annual Report on Form 10-K for the fiscal year ended October 28, 2012.

Certain reclassifications of previously reported amounts have been made to conform to the current year presentation.  The reclassifications had no impact on net earnings as previously reported.

Investments

The Company maintains a rabbi trust to fund certain supplemental executive retirement plans and deferred income plans, which is included in other assets on the Consolidated Statements of Financial Position.  The securities held by the trust are classified as trading securities.  Therefore, unrealized gains and losses associated with these investments are included in the Company’s earnings.  Securities held by the trust generated a gain of $1.5 million for the quarter ended January 27, 2013, compared to a gain of $1.3 million for the quarter ended January 29, 2012.  The majority of this portfolio is held in fixed return investments to reduce the exposure to volatility in equity markets.

During fiscal 2012 and 2013, the Company also held securities as part of an investment portfolio, which are classified as short-term marketable securities on the Consolidated Statements of Financial Position.  These investments are also trading securities.  Therefore, unrealized gains and losses are included in the Company’s earnings.  The Company recorded a gain of $0.2 million related to these investments for the quarter ended January 27, 2013, compared to a gain of $0.3 million for the quarter ended January 29, 2012.  These securities were liquidated in the first quarter of fiscal 2013.

Supplemental Cash Flow Information

Non-cash investment activities presented on the Consolidated Statements of Cash Flows generally consist of unrealized gains or losses on the Company’s rabbi trust and other investments, amortization of affordable housing investments, and amortization of bond financing costs.  The noted investments are included in other assets or short-term marketable securities on the Consolidated Statements of Financial Position.  Changes in the value of these investments are included in the Company’s net earnings and are presented in the Consolidated Statements of Operations as either interest and investment income or interest expense, as appropriate.

Guarantees

The Company enters into various agreements guaranteeing specified obligations of affiliated parties.  The Company’s guarantees either terminate in one year or remain in place until such time as the Company revokes the agreement.  The Company currently provides a revocable standby letter of credit for $5.6 million to guarantee obligations that may arise under worker compensation claims of an affiliated party.  This potential obligation is not reflected in the Company’s Consolidated Statements of Financial Position.

New Accounting Pronouncements

In June 2011, the Financial Accounting Standards Board (FASB) updated the guidance within Accounting Standards Codification (ASC) 220, Comprehensive Income.  The update eliminates the option for companies to report other comprehensive income and its related components in the Statement of Changes in Stockholders’ Equity.  Instead, companies have the option to present total comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous Statement of Comprehensive Income or in two separate but consecutive statements.  The updated guidance is to be applied retrospectively, and is effective for fiscal years, and interim periods within those years, beginning after December 15, 2011, with early adoption permitted.  The Company early adopted the provisions of this accounting standard during the fourth quarter of fiscal 2012, and adoption did not have a material impact on the consolidated financial statements, as it relates to presentation only.

In February 2013, the FASB further updated the guidance within ASC 220, Comprehensive Income.  The update requires companies to report, in one place, information about reclassifications out of accumulated other comprehensive income (AOCI) and changes in AOCI balances.  For significant items reclassified out of AOCI to net income in their entirety in the same reporting period, reporting is required about the effect of the reclassifications on the respective line items in the statement where net income is presented. For items that are not reclassified to net income in their entirety in the same reporting period, a cross reference to other disclosures currently required under United States Generally Accepted Accounting Principles is required.  The above information must be presented in one place, either parenthetically on the face of the financial statements by income statement line item, or in a note.  The updated guidance is to be applied prospectively, and is effective for fiscal years, and interim periods within those years, beginning after December 15, 2012, with early adoption permitted.  The Company intends to adopt the new provisions of this accounting standard at the beginning of fiscal year 2014, and adoption is not expected to have a material impact on the consolidated financial statements as it relates to presentation and disclosure only.

In December 2011, the FASB updated the guidance within ASC 210, Balance Sheet.  The update enhances disclosures related to the offsetting of certain assets and liabilities to enable users of financial statements to understand the effect of those arrangements on financial position.  The updated guidance is effective for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods.  The Company will adopt the new provisions of this accounting standard at the beginning of fiscal year 2014, and adoption is not expected to have a material impact on the consolidated financial statements.

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DERIVATIVES AND HEDGING (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended
	Jan. 27, 2013	Oct. 28, 2012
Derivatives and hedging
Maximum number of upcoming fiscal years to hedge grain or natural gas exposure	2 years
Accumulated change, pretax, in accumulated gains and losses from derivative instruments designated and qualifying as the effective portion of cash flow hedges	$ 4.3	$ 15.2
The Company expects to recognize the majority of hedging gains over this period	12 months
Corn | Cash Flow Hedges
Derivatives and hedging
Futures contracts, volume	12,900,000	12,000,000
Corn | Fair Value Hedges
Derivatives and hedging
Futures contracts, volume	6,900,000	8,000,000
Soybean meal | Derivatives not designated as hedges
Derivatives and hedging
Futures contracts, volume	100,000
Lean hogs | Fair Value Hedges
Derivatives and hedging
Futures contracts, volume	800,000	900,000

XML

FAIR VALUE MEASUREMENTS (Tables)

3 Months Ended

Jan. 27, 2013

FAIR VALUE MEASUREMENTS

Schedule of financial assets and liabilities measured at fair value on a recurring basis

	Fair Value Measurements at January 27, 2013
(in thousands)	Fair Value at January 27, 2013		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets at Fair Value:
Cash equivalents (1)	$	706,853	$	706,853	$	—	$	—
Other trading securities (2)	111,168		37,157		74,011		—
Commodity derivatives (3)	6,211		6,211		—		—
Total Assets at Fair Value	$	824,232	$	750,221	$	74,011	$	—
Liabilities at Fair Value:
Deferred compensation (2)	$	48,480	$	17,986	$	30,494	$	—
Total Liabilities at Fair Value	$	48,480	$	17,986	$	30,494	$	—

	Fair Value Measurements at October 28, 2012
(in thousands)	Fair Value at October 28, 2012		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets at Fair Value:
Cash equivalents (1)	$	483,441	$	483,441	$	—	$	—
Short-term marketable securities (4)	77,387		2,349		75,038		—
Other trading securities (2)	109,676		36,305		73,371		—
Commodity derivatives (3)	3,884		3,884		—		—
Total Assets at Fair Value	$	674,388	$	525,979	$	148,409	$	—
Liabilities at Fair Value:
Deferred compensation (2)	$	47,953	$	16,866	$	31,087	$	—
Total Liabilities at Fair Value	$	47,953	$	16,866	$	31,087	$	—

The following methods and assumptions were used to estimate the fair value of the financial assets and liabilities above:

(1) The Company’s cash equivalents consist of money market funds rated AAA.  As these investments have a maturity date of three months or less, the carrying value approximates fair value.

(2) The Company holds trading securities as part of a rabbi trust to fund certain supplemental executive retirement plans and deferred income plans.  The rabbi trust is included in other assets on the Consolidated Statements of Financial Position and is valued based on the underlying fair value of each fund held by the trust.  A majority of the funds held related to the supplemental executive retirement plans have been invested in fixed income funds managed by a third party.  The declared rate on these funds is set based on a formula using the yield of the general account investment portfolio that supports the fund, adjusted for expenses and other charges.  The rate is guaranteed for one year at issue, and may be reset annually on the policy anniversary, subject to a guaranteed minimum rate.  As the value is based on adjusted market rates, and the fixed rate is only reset on an annual basis, these funds are classified as Level 2.  The remaining funds held are also managed by a third party, and include equity securities, money market accounts, bond funds, or other portfolios for which there is an active quoted market.  Therefore these securities are classified as Level 1.  The related deferred compensation liabilities are included in other long-term liabilities on the Consolidated Statements of Financial Position and are valued based on the underlying investment selections held in each participant’s account.  Investment options generally mirror those funds held by the rabbi trust, for which there is an active quoted market.  Therefore these investment balances are classified as Level 1.  The Company also offers a fixed rate investment option to participants.  The rate earned on these investments is adjusted annually based on a specified percentage of the United States Internal Revenue Service ( I.R.S.) Applicable Federal Rates in effect and therefore these balances are classified as Level 2.

(3) The Company’s commodity derivatives represent futures contracts used in its hedging or other programs to offset price fluctuations associated with purchases of corn and soybean meal, and to minimize the price risk assumed when forward priced contracts are offered to the Company’s commodity suppliers.  The Company’s futures contracts for corn and soybean meal are traded on the Chicago Board of Trade, while futures contracts for lean hogs are traded on the Chicago Mercantile Exchange.  These are active markets with quoted prices available and therefore these contracts are classified as Level 1.  All derivatives are reviewed for potential credit risk and risk of nonperformance.  The Company nets the derivative assets and liabilities for each of its hedging programs, including cash collateral, when a master netting arrangement exists between the Company and the counterparty to the derivative contract.  The net balance for each program is included in other current assets or accounts payable, as appropriate, in the Consolidated Statements of Financial Position.  As of January 27, 2013, the Company has recognized the right to reclaim cash collateral of $25.3 million from, and the obligation to return cash collateral of $7.0 million to, various counterparties.  As of October 28, 2012, the Company had recognized the right to reclaim cash collateral of $27.5 million from, and the obligation to return cash collateral of $31.1 million to, various counterparties.

(4) During fiscal 2012 and 2013, the Company held trading securities as part of a portfolio maintained to generate investment income and to provide cash for operations of the Company, if necessary.  The portfolio is managed by a third party who is responsible for daily trading activities, and all assets within the portfolio are highly liquid.  The cash, U.S. government securities, and highly rated money market funds held by the portfolio are classified as Level 1.  The investment portfolio also included corporate bonds, international government securities, commercial paper, agency securities, mortgage-backed securities, and other asset-backed securities for which there is an active, quoted market.  Market prices are obtained from a variety of industry standard providers, large financial institutions, and other third-party sources to calculate a representative daily market value, and therefore, these securities are classified as Level 2.  These securities were liquidated in the first quarter of fiscal 2013.

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DERIVATIVES AND HEDGING (Tables)

3 Months Ended

Jan. 27, 2013

Derivatives and hedging

Schedule of fair values of derivative instruments

	Location on
	Consolidated	Fair Value (1)
	Statement of Financial	January 27,			October 28,
	Position	2013			2012
Asset Derivatives:
Derivatives Designated as Hedges:
Commodity contracts	Other current assets	$	(11,022	)	$	7,483
Derivatives Not Designated as Hedges:
Commodity contracts	Other current assets	(1,088		)	—
Total Asset Derivatives		$	(12,110	)	$	7,483

(1)  Amounts represent the gross fair value of derivative assets and liabilities.  The Company nets the derivative assets and liabilities for each of its hedging programs, including cash collateral, when a master netting arrangement exists between the Company and the counterparty to the derivative contract.  The amount or timing of cash collateral balances may impact the classification of the derivative in the Consolidated Statement of Financial Position.   See Note J - Fair Value Measurements for a discussion of these net amounts as reported in the Consolidated Statements of Financial Position.

Schedule of gains or losses (before tax) related to derivative instruments

	Gain/(Loss) Recognized in AOCL (Effective Portion) (1)						Location on	Gain/(Loss) Reclassified from AOCL into Earnings (Effective Portion) (1)				Gain/(Loss) Recognized in Earnings (Ineffective Portion) (2) (3)
	Three Months Ended						Consolidated	Three Months Ended				Three Months Ended
Cash Flow Hedges:	January 27, 2013			January 29, 2012			Statement of Operations	January 27, 2013		January 29, 2012		January 27, 2013		January 29, 2012
Commodity contracts	$	(4,091	)	$	(7,242	)	Cost of products sold	$	6,830	$	10,890	$	166	$	—

	Location on	Gain/(Loss) Recognized in Earnings (Effective Portion) (4)					Gain/(Loss) Recognized in Earnings (Ineffective Portion) (2) (5)
	Consolidated	Three Months Ended					Three Months Ended
Fair Value Hedges:	Statement of Operations	January 27, 2013			January 29, 2012		January 27, 2013			January 29, 2012
Commodity contracts	Cost of products sold	$	(1,086	)	$	2,654	$	(30	)	$	(89	)

	Location on	Gain/(Loss) Recognized in Earnings
	Consolidated	Three Months Ended
Derivatives Not Designated as Hedges:	Statement of Operations	January 27, 2013			January 29, 2012
Commodity contracts	Cost of products sold	$	(1,084	)	$	(40	)

(1) Amounts represent gains or losses in AOCL before tax.  See the Consolidated Statements of Comprehensive Income for the after tax impact of these gains or losses on net earnings.

(2) There were no gains or losses excluded from the assessment of hedge effectiveness during the quarter.

(3) There were no gains or losses resulting from the discontinuance of cash flow hedges during the quarter. 

(4) Amounts represent losses on commodity contracts designated as fair value hedges that were closed during the quarter, which were offset by a corresponding gain on the underlying hedged purchase commitment.  Additional gains or losses related to changes in the fair value of open commodity contracts, along with the offsetting gain or loss on the hedged purchase commitment, are also marked-to market through earnings with no impact on a net basis.

(5) There were no gains or losses recognized as a result of a hedged firm commitment no longer qualifying as a fair value hedge during the quarter.

Derivatives not designated as hedges

Derivatives and hedging

Schedule of outstanding commodity futures contracts

	Volume
Commodity	January 27, 2013	October 28, 2012
Soybean Meal	0.1 million tons	—

Cash Flow Hedges

Derivatives and hedging

Schedule of outstanding commodity futures contracts

	Volume
Commodity	January 27, 2013	October 28, 2012
Corn	12.9 million bushels	12.0 million bushels

Fair Value Hedges

Derivatives and hedging

Schedule of outstanding commodity futures contracts

	Volume
Commodity	January 27, 2013	October 28, 2012
Corn	6.9 million bushels	8.0 million bushels
Lean hogs	0.8 million cwt	0.9 million cwt

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DERIVATIVES AND HEDGING (Details 2) (USD $) In Thousands, unless otherwise specified	Jan. 27, 2013	Oct. 28, 2012
Derivatives fair value
Asset Derivatives, Other current assets	$ (12,110)	$ 7,483
Derivatives designated as hedges | Commodity contracts
Derivatives fair value
Asset Derivatives, Other current assets	(11,022)	7,483
Derivatives not designated as hedges | Commodity contracts
Derivatives fair value
Asset Derivatives, Other current assets	$ (1,088)

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PENSION AND OTHER POST-RETIREMENT BENEFITS (Tables)

3 Months Ended

Jan. 27, 2013

PENSION AND OTHER POST-RETIREMENT BENEFITS

Schedule of net periodic benefit cost for pension and other post-retirement benefit plans

	Pension Benefits						Post-retirement Benefits
	Three Months Ended						Three Months Ended
(in thousands)	January 27, 2013			January 29, 2012			January 27, 2013			January 29, 2012
Service cost	$	7,745		$	5,856		$	612		$	556
Interest cost	11,922			12,284			3,694			4,438
Expected return on plan assets	(18,286		)	(17,127		)	—			—
Amortization of prior service cost	(1,270		)	(1,270		)	(265		)	913
Recognized actuarial loss (gain)	8,505			5,032			1,913			(1		)
Net periodic cost	$	8,616		$	4,775		$	5,954		$	5,906

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SEGMENT REPORTING (Tables)

3 Months Ended

Jan. 27, 2013

SEGMENT REPORTING

Schedule of operating profit and other financial information

	Three Months Ended
(in thousands)	January 27, 2013			January 29, 2012
Sales to Unaffiliated Customers
Grocery Products	$	334,140		$	269,479
Refrigerated Foods	1,063,401			1,083,525
Jennie-O Turkey Store	390,334			377,371
Specialty Foods	233,845			218,024
All Other	94,521			91,040
Total	$	2,116,241		$	2,039,439
Intersegment Sales
Grocery Products	$	—		$	—
Refrigerated Foods	2,443			2,413
Jennie-O Turkey Store	30,421			30,135
Specialty Foods	31			41
All Other	—			—
Total	$	32,895		$	32,589
Intersegment elimination	(32,895		)	(32,589		)
Total	$	—		$	—
Net Sales
Grocery Products	$	334,140		$	269,479
Refrigerated Foods	1,065,844			1,085,938
Jennie-O Turkey Store	420,755			407,506
Specialty Foods	233,876			218,065
All Other	94,521			91,040
Intersegment elimination	(32,895		)	(32,589		)
Total	$	2,116,241		$	2,039,439
Segment Operating Profit
Grocery Products	$	49,913		$	44,093
Refrigerated Foods	53,790			53,749
Jennie-O Turkey Store	58,945			76,762
Specialty Foods	23,761			16,647
All Other	17,111			12,471
Total segment operating profit	$	203,520		$	203,722
Net interest and investment expense (income)	1,284			1,624
General corporate expense	6,644			8,727
Noncontrolling interest	1,329			938
Earnings before income taxes	$	196,921		$	194,309

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CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Jan. 27, 2013	Jan. 29, 2012
OPERATING ACTIVITIES
Net earnings	$ 131,045	$ 129,333
Adjustments to reconcile to net cash provided by operating activities:
Depreciation	27,655	28,389
Amortization of intangibles	2,189	2,426
Equity in earnings of affiliates, net of dividends	156	159
Provision for deferred income taxes	(2,395)	(201)
Gain on property/equipment sales and plant facilities	(234)	(178)
Non-cash investment activities	(1,142)	(1,039)
Stock-based compensation expense	5,576	6,240
Excess tax benefit from stock-based compensation	(13,261)	(1,929)
Changes in operating assets and liabilities, net of acquisitions:
Decrease in accounts receivable	40,505	38,605
(Increase) decrease in inventories	(3,161)	2,995
Decrease in prepaid expenses and other current assets	2,318	3,067
Increase in pension and post-retirement benefits	6,511	4,460
Decrease in accounts payable and accrued expenses	(53,949)	(60,167)
NET CASH PROVIDED BY OPERATING ACTIVITIES	141,813	152,160
INVESTING ACTIVITIES
Sale of trading securities	77,558
Acquisitions of businesses/intangibles		(168)
Purchases of property/equipment	(22,053)	(30,458)
Proceeds from sales of property/equipment	2,919	1,055
Decrease in investments, equity in affiliates, and other assets	7,919	998
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES	66,343	(28,573)
FINANCING ACTIVITIES
Dividends paid on common stock	(39,438)	(33,600)
Share repurchase		(11,117)
Proceeds from exercise of stock options	23,222	3,885
Excess tax benefit from stock-based compensation	13,261	1,929
NET CASH USED IN FINANCING ACTIVITIES	(2,955)	(38,903)
EFFECT OF EXCHANGE RATE CHANGES ON CASH	88	804
INCREASE IN CASH AND CASH EQUIVALENTS	205,289	85,488
Cash and cash equivalents at beginning of year	682,388	463,130
CASH AND CASH EQUIVALENTS AT END OF QUARTER	$ 887,677	$ 548,618

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GENERAL (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended
	Jan. 27, 2013	Jan. 29, 2012
Guarantees
Guarantee term	The Company's guarantees either terminate in one year or remain in place until such time as the Company revokes the agreement
Renewable standby letter of credit
Guarantees
Standby letter of credit amount to guarantee obligations that may arise under worker compensation claims of an affiliated party	$ 5.6
Rabbi trust
Investments
Gains (Losses) related to securities held	1.5	1.3
Short-term marketable securities
Investments
Gains (Losses) related to securities held	$ 0.2	$ 0.3

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EARNINGS PER SHARE DATA (Details)	3 Months Ended
	Jan. 27, 2013	Jan. 29, 2012
EARNINGS PER SHARE DATA
Basic weighted-average shares outstanding	263,944,000	263,946,000
Dilutive potential common shares	5,196,000	5,662,000
Diluted weighted-average shares outstanding	269,140,000	269,608,000
Weighted average stock options not included in the computation of dilutive potential common shares	1,000,000	1,100,000

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CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (USD $) In Thousands, unless otherwise specified	Jan. 27, 2013	Oct. 28, 2012
CURRENT ASSETS
Cash and cash equivalents	$ 887,677	$ 682,388
Short-term marketable securities		77,387
Accounts receivable	466,536	507,041
Inventories	953,682	950,521
Income taxes receivable		16,460
Deferred income taxes	70,402	68,560
Prepaid expenses	13,276	12,772
Other current assets	8,272	5,555
TOTAL CURRENT ASSETS	2,399,845	2,320,684
DEFERRED INCOME TAXES	141,233	144,245
GOODWILL	630,875	630,875
OTHER INTANGIBLES	120,882	123,072
PENSION ASSETS	49	49
INVESTMENTS IN AND RECEIVABLES FROM AFFILIATES	280,886	286,537
OTHER ASSETS	132,866	134,024
PROPERTY, PLANT AND EQUIPMENT
Land	56,506	56,258
Buildings	771,628	767,876
Equipment	1,452,593	1,435,630
Construction in progress	75,422	82,254
Property, Plant and Equipment, Gross	2,356,149	2,342,018
Less allowance for depreciation	(1,439,955)	(1,417,538)
Property, Plant and Equipment, Net	916,194	924,480
TOTAL ASSETS	4,622,830	4,563,966
CURRENT LIABILITIES
Accounts payable	324,367	385,877
Accrued expenses	58,027	49,792
Accrued workers compensation	35,623	33,543
Accrued marketing expenses	98,334	78,712
Employee related expenses	138,077	193,463
Taxes payable	35,082	4,864
Interest and dividends payable	47,876	40,049
TOTAL CURRENT LIABILITIES	737,386	786,300
PENSION AND POST-RETIREMENT BENEFITS	613,009	615,428
LONG-TERM DEBT-less current maturities	250,000	250,000
OTHER LONG-TERM LIABILITIES	88,483	87,313
SHAREHOLDERS' INVESTMENT
Preferred stock, par value $.01 a share-authorized 160,000,000 shares; issued-none
Additional paid-in capital	23,494
Accumulated other comprehensive loss	(324,458)	(323,569)
Retained earnings	3,220,347	3,135,317
HORMEL FOODS CORPORATION SHAREHOLDERS' INVESTMENT	2,927,138	2,819,455
NONCONTROLLING INTEREST	6,814	5,470
TOTAL SHAREHOLDERS' INVESTMENT	2,933,952	2,824,925
TOTAL LIABILITIES AND SHAREHOLDERS' INVESTMENT	4,622,830	4,563,966
Common stock, non-voting
SHAREHOLDERS' INVESTMENT
Common stock
Common stock
SHAREHOLDERS' INVESTMENT
Common stock	$ 7,755	$ 7,707

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DERIVATIVES AND HEDGING (Details 3) (Commodity contracts, USD $) In Thousands, unless otherwise specified	3 Months Ended
	Jan. 27, 2013	Jan. 29, 2012
Cash Flow Hedges
Derivative instruments gains or losses (before tax)
Gain/(Loss) Recognized in AOCL (Effective Portion)	$ (4,091)	$ (7,242)
Gain/(Loss) Reclassified from AOCL into Earnings (Effective Portion)	6,830	10,890
Gain/(Loss) Recognized in Earnings (Ineffective Portion)	166
Fair Value Hedges
Derivative instruments gains or losses (before tax)
Gain/(Loss) Recognized in Earnings (Effective Portion)	(1,086)	2,654
Gain/(Loss) Recognized in Earnings (Ineffective Portion)	(30)	(89)
Derivatives not designated as hedges
Derivative instruments gains or losses (before tax)
Gain/(Loss) Recognized in Earnings	$ (1,084)	$ (40)

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CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' INVESTMENT (EQUITY) (USD $) In Thousands, unless otherwise specified	Total	Common Stock	Treasury Stock	Additional Paid-in Capital	Retained Earnings	Accumulated Other Comprehensive Income (Loss)	Non-controlling Interest
Balance at Oct. 30, 2011	$ 2,659,816	$ 7,734			$ 2,824,331	$ (175,483)	$ 3,234
Increase (Decrease) in Shareholders' Equity
Net earnings	504,961				500,050		4,911
Other comprehensive (loss) income	(148,035)					(148,086)	51
Purchases of common stock	(61,366)		(61,366)
Stock-based compensation expense	16,710			16,710
Exercise of stock options/nonvested shares	13,317	36	(295)	13,576
Shares retired		(63)	61,661	(30,286)	(31,312)
Proceeds from noncontrolling interest	774						774
Distribution to noncontrolling interest	(3,500)						(3,500)
Declared cash dividends - $.17 and $.60 per share during the quarter ended January 27, 2013, and for the year ended October 28, 2012, respectively	(157,752)				(157,752)
Balance at Oct. 28, 2012	2,824,925	7,707			3,135,317	(323,569)	5,470
Increase (Decrease) in Shareholders' Equity
Net earnings	131,045				129,716		1,329
Other comprehensive (loss) income	(874)					(889)	15
Stock-based compensation expense	5,576			5,576
Exercise of stock options/nonvested shares	17,966	48		17,918
Declared cash dividends - $.17 and $.60 per share during the quarter ended January 27, 2013, and for the year ended October 28, 2012, respectively	(44,686)				(44,686)
Balance at Jan. 27, 2013	$ 2,933,952	$ 7,755		$ 23,494	$ 3,220,347	$ (324,458)	$ 6,814

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STOCK-BASED COMPENSATION (Details 2) (USD $) Share data in Thousands, except Per Share data, unless otherwise specified	3 Months Ended
	Jan. 27, 2013	Jan. 29, 2012
Stock-based compensation expense, along with the related income tax benefit
Stock based compensation expense recognized	$ 5,576,000	$ 6,240,000
Income tax benefit recognized	2,108,000	2,366,000
After-tax stock-based compensation expense	3,468,000	3,874,000
Stock-based compensation expense unrecognized	13,900,000
Period for recognition of unrecognized stock-based compensation expense	4 years 3 months 18 days
Stock options
Stock-based compensation
Cash received from stock options exercised	23,200,000	3,900,000
Tax benefit realized from stock options, aggregate	17,600,000	2,200,000
Reconciliation of Stock Options
Outstanding, at the beginning of the period (in shares)	20,454
Granted (in shares)	1,617
Exercised (in shares)	2,878
Forfeited (in shares)	13
Outstanding, at the end of the period (in shares)	19,180
Exercisable at the end of the period (in shares)	13,044
Weighted Average Exercise Price
Outstanding at the beginning of the period (in dollars per share)	$ 19.67
Granted (in dollars per share)	$ 30.98
Exercised (in dollars per share)	$ 15.15
Forfeited (in dollars per share)	$ 28.10
Outstanding at the end of the period (in dollars per share)	$ 21.29
Exercisable at end of period (in dollars per share)	$ 18.61
Weighted Average Remaining Contractual Term
Outstanding at the end of the period	6 years
Exercisable at end of period	4 years 9 months 18 days
Aggregate Intrinsic Value
Outstanding at the end of the period	262,364,000
Exercisable at end of period	218,293,000
Weighted-average grant date fair value of stock options granted, and the total intrinsic value of options exercised
Weighted-average grant date fair value (in dollars per share)	$ 5.10	$ 5.75
Intrinsic value of exercised options	46,520,000	5,829,000
Weighted-average assumptions used to calculate fair value of each ordinary option award
Risk free interest rate (as a percent)	1.30%	1.90%
Dividend yield (as a percent)	2.20%	2.00%
Stock price volatility (as a percent)	20.00%	21.00%
Expected Option Life	8 years	8 years
Nonvested shares
Weighted-average grant date fair value and total fair value of nonvested shares granted and vested
Nonvested shares outstanding	139
Weighted average grant date fair value of nonvested shares outstanding	$ 21.47
Fair value of nonvested shares vested		$ 700,000

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STOCK-BASED COMPENSATION (Tables)

3 Months Ended

Jan. 27, 2013

STOCK-BASED COMPENSATION

Schedule of reconciliation of the number of options outstanding and exercisable

	Shares	Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term	Aggregate Intrinsic Value (in thousands)
Outstanding at October 28, 2012	20,454	$	19.67
Granted	1,617	30.98
Exercised	2,878	15.15
Forfeitures	13	28.10
Outstanding at January 27, 2013	19,180	$	21.29	6.0 years	$	262,364
Exercisable at January 27, 2013	13,044	$	18.61	4.8 years	$	218,293

Schedule of weighted average grant date fair value of stock options granted, and the total intrinsic value of options exercised

	Three Months Ended
	January 27, 2013		January 29, 2012
Weighted-average grant date fair value	$	5.10	$	5.75
Intrinsic value of exercised options	$	46,520	$	5,829

Schedule of weighted-average assumptions used to calculate fair value of each option award

	Three Months Ended
	January 27, 2013	January 29, 2012
Risk-Free Interest Rate	1.3%	1.9%
Dividend Yield	2.2%	2.0%
Stock Price Volatility	20.0%	21.0%
Expected Option Life	8 years	8 years

Schedule of stock-based compensation expense, along with the related income tax benefit

	Three Months Ended
(in thousands)	January 27, 2013		January 29, 2012
Stock-based compensation expense recognized	$	5,576	$	6,240
Less: Income tax benefit recognized	2,108		2,366
After-tax stock-based compensation expense	$	3,468	$	3,874

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GOODWILL AND INTANGIBLE ASSETS (Details) (USD $) In Thousands, unless otherwise specified	Jan. 27, 2013	Oct. 28, 2012
Changes in the carrying amount of goodwill
Balance at the end of the period	$ 630,875	$ 630,875
Grocery Products
Changes in the carrying amount of goodwill
Balance at the end of the period	123,316
Refrigerated Foods
Changes in the carrying amount of goodwill
Balance at the end of the period	96,643
JOTS
Changes in the carrying amount of goodwill
Balance at the end of the period	203,214
Specialty Foods
Changes in the carrying amount of goodwill
Balance at the end of the period	207,028
All Other
Changes in the carrying amount of goodwill
Balance at the end of the period	$ 674

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INVESTMENTS IN AND RECEIVABLES FROM AFFILIATES (Tables)

3 Months Ended

Jan. 27, 2013

INVESTMENTS IN AND RECEIVABLES FROM AFFILIATES

Schedule of investments in and receivables from affiliates

			January 27,		October 28,
(in thousands)	Segment	% Owned	2013		2012
MegaMex Foods, LLC	Grocery Products	50%	$	196,562	$	205,315
Foreign Joint Ventures	All Other	Various (26-50%)	84,324		81,222
Total			$	280,886	$	286,537

Schedule of equity in earnings of affiliates

		Three Months Ended
(in thousands)	Segment		January 27, 2013		January 29, 2012
MegaMex Foods, LLC	Grocery Products		$	7,037	$	8,624
Foreign Joint Ventures	All Other		2,806		2,377
Total			$	9,843	$	11,001

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CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' INVESTMENT (Parenthetical) (USD $)	3 Months Ended		12 Months Ended
	Jan. 27, 2013	Jan. 29, 2012	Oct. 28, 2012
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' INVESTMENT
Declared cash dividends (in dollars per share)	$ 0.17	$ 0.15	$ 0.60

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CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (Parenthetical) (USD $)	Jan. 27, 2013	Oct. 28, 2012
Preferred stock, par value (in dollars per share)	$ 0.01	$ 0.01
Preferred stock, authorized shares	160,000,000	160,000,000
Preferred stock, issued shares	0	0
Common stock, non-voting
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, authorized shares	400,000,000	400,000,000
Common stock, issued shares	0	0
Common stock
Common stock, par value (in dollars per share)	$ 0.0293	$ 0.0293
Common stock, authorized shares	800,000,000	800,000,000
Common stock, issued shares	264,680,489	263,044,280

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DERIVATIVES AND HEDGING

3 Months Ended

Jan. 27, 2013

DERIVATIVES AND HEDGING

DERIVATIVES AND HEDGING

NOTE I DERIVATIVES AND HEDGING

The Company uses hedging programs to manage price risk associated with commodity purchases.  These programs utilize futures contracts and swaps to manage the Company’s exposure to price fluctuations in the commodities markets.  The Company has determined that its programs which are designated as hedges are highly effective in offsetting the changes in fair value or cash flows generated by the items hedged.

Cash Flow Hedges:  The Company currently utilizes corn futures to offset the price fluctuation in the Company’s future direct grain purchases, and has historically entered into various swaps to hedge the purchases of grain and natural gas at certain plant locations.  The financial instruments are designated and accounted for as cash flow hedges, and the Company measures the effectiveness of the hedges on a regular basis.  Effective gains or losses related to these cash flow hedges are reported in accumulated other comprehensive loss (AOCL) and reclassified into earnings, through cost of products sold, in the period or periods in which the hedged transactions affect earnings.  Any gains or losses related to hedge ineffectiveness are recognized in the current period cost of products sold.  The Company typically does not hedge its grain or natural gas exposure beyond the next two upcoming fiscal years.  As of January 27, 2013, and October 28, 2012, the Company had the following outstanding commodity futures contracts that were entered into to hedge forecasted purchases:

	Volume
Commodity	January 27, 2013	October 28, 2012
Corn	12.9 million bushels	12.0 million bushels

As of January 27, 2013, the Company has included in AOCL, hedging gains of $4.3 million (before tax) relating to these positions, compared to gains of $15.2 million (before tax) as of October 28, 2012.  The Company expects to recognize the majority of these gains over the next 12 months.

Fair Value Hedges:  The Company utilizes futures to minimize the price risk assumed when forward priced contracts are offered to the Company’s commodity suppliers.  The intent of the program is to make the forward priced commodities cost nearly the same as cash market purchases at the date of delivery.  The futures contracts are designated and accounted for as fair value hedges, and the Company measures the effectiveness of the hedges on a regular basis.  Changes in the fair value of the futures contracts, along with the gain or loss on the hedged purchase commitment, are marked-to-market through earnings and are recorded on the Consolidated Statements of Financial Position as a current asset and liability, respectively.  Effective gains or losses related to these fair value hedges are recognized through cost of products sold in the period or periods in which the hedged transactions affect earnings.  Any gains or losses related to hedge ineffectiveness are recognized in the current period cost of products sold.  As of January 27, 2013, and October 28, 2012, the Company had the following outstanding commodity futures contracts designated as fair value hedges:

	Volume
Commodity	January 27, 2013	October 28, 2012
Corn	6.9 million bushels	8.0 million bushels
Lean hogs	0.8 million cwt	0.9 million cwt

Other Derivatives:  During fiscal years 2013 and 2012, the Company has held certain futures to manage the Company’s exposure to fluctuations in commodity markets.  The Company has not applied hedge accounting to these positions.  As of January 27, 2013, and October 28, 2012, the Company had the following outstanding futures related to other programs:

	Volume
Commodity	January 27, 2013	October 28, 2012
Soybean Meal	0.1 million tons	—

Fair Values:  The fair values of the Company’s derivative instruments (in thousands) as of January 27, 2013, and October 28, 2012, were as follows:

	Location on
	Consolidated	Fair Value (1)
	Statement of Financial	January 27,			October 28,
	Position	2013			2012
Asset Derivatives:
Derivatives Designated as Hedges:
Commodity contracts	Other current assets	$	(11,022	)	$	7,483
Derivatives Not Designated as Hedges:
Commodity contracts	Other current assets	(1,088		)	—
Total Asset Derivatives		$	(12,110	)	$	7,483

(1)  Amounts represent the gross fair value of derivative assets and liabilities.  The Company nets the derivative assets and liabilities for each of its hedging programs, including cash collateral, when a master netting arrangement exists between the Company and the counterparty to the derivative contract.  The amount or timing of cash collateral balances may impact the classification of the derivative in the Consolidated Statement of Financial Position.   See Note J - Fair Value Measurements for a discussion of these net amounts as reported in the Consolidated Statements of Financial Position.

Derivative Gains and Losses:  Gains or losses (before tax, in thousands) related to the Company’s derivative instruments for the first quarter ended January 27, 2013, and January 29, 2012, were as follows:

	Gain/(Loss) Recognized in AOCL (Effective Portion) (1)						Location on	Gain/(Loss) Reclassified from AOCL into Earnings (Effective Portion) (1)				Gain/(Loss) Recognized in Earnings (Ineffective Portion) (2) (3)
	Three Months Ended						Consolidated	Three Months Ended				Three Months Ended
Cash Flow Hedges:	January 27, 2013			January 29, 2012			Statement of Operations	January 27, 2013		January 29, 2012		January 27, 2013		January 29, 2012
Commodity contracts	$	(4,091	)	$	(7,242	)	Cost of products sold	$	6,830	$	10,890	$	166	$	—

	Location on	Gain/(Loss) Recognized in Earnings (Effective Portion) (4)					Gain/(Loss) Recognized in Earnings (Ineffective Portion) (2) (5)
	Consolidated	Three Months Ended					Three Months Ended
Fair Value Hedges:	Statement of Operations	January 27, 2013			January 29, 2012		January 27, 2013			January 29, 2012
Commodity contracts	Cost of products sold	$	(1,086	)	$	2,654	$	(30	)	$	(89	)

	Location on	Gain/(Loss) Recognized in Earnings
	Consolidated	Three Months Ended
Derivatives Not Designated as Hedges:	Statement of Operations	January 27, 2013			January 29, 2012
Commodity contracts	Cost of products sold	$	(1,084	)	$	(40	)

(1) Amounts represent gains or losses in AOCL before tax.  See the Consolidated Statements of Comprehensive Income for the after tax impact of these gains or losses on net earnings.

(2) There were no gains or losses excluded from the assessment of hedge effectiveness during the quarter.

(3) There were no gains or losses resulting from the discontinuance of cash flow hedges during the quarter. 

(4) Amounts represent losses on commodity contracts designated as fair value hedges that were closed during the quarter, which were offset by a corresponding gain on the underlying hedged purchase commitment.  Additional gains or losses related to changes in the fair value of open commodity contracts, along with the offsetting gain or loss on the hedged purchase commitment, are also marked-to market through earnings with no impact on a net basis.

(5) There were no gains or losses recognized as a result of a hedged firm commitment no longer qualifying as a fair value hedge during the quarter.

XML

Document and Entity Information	3 Months Ended
	Jan. 27, 2013	Mar. 03, 2013 Common Stock	Mar. 03, 2013 Common Stock Non-Voting
Entity Registrant Name	HORMEL FOODS CORP /DE/
Entity Central Index Key	0000048465
Document Type	10-Q
Document Period End Date	Jan. 27, 2013
Amendment Flag	false
Current Fiscal Year End Date	--10-27
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		264,871,113	0
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	Q1

XML

FAIR VALUE MEASUREMENTS

3 Months Ended

Jan. 27, 2013

FAIR VALUE MEASUREMENTS

FAIR VALUE MEASUREMENTS

NOTE J FAIR VALUE MEASUREMENTS

Pursuant to the provisions of ASC 820, Fair Value Measurements and Disclosures, the Company measures certain assets and liabilities at fair value or discloses the fair value of certain assets and liabilities recorded at cost in the consolidated financial statements.  Fair value is calculated as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price).  ASC 820 establishes a fair value hierarchy which requires assets and liabilities measured at fair value to be categorized into one of three levels based on the inputs used in the valuation.  Assets and liabilities are classified in their entirety based on the lowest level of input significant to the fair value measurement.  The three levels are defined as follows:

Level 1:  Observable inputs based on quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2:  Observable inputs, other than those included in Level 1, based on quoted prices for similar assets and liabilities in active markets, or quoted prices for identical assets and liabilities in inactive markets.

Level 3:  Unobservable inputs that reflect an entity’s own assumptions about what inputs a market participant would use in pricing the asset or liability based on the best information available in the circumstances.

The Company’s financial assets and liabilities that are measured at fair value on a recurring basis as of January 27, 2013, and October 28, 2012, and their level within the fair value hierarchy, are presented in the tables below.

	Fair Value Measurements at January 27, 2013
(in thousands)	Fair Value at January 27, 2013		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets at Fair Value:
Cash equivalents (1)	$	706,853	$	706,853	$	—	$	—
Other trading securities (2)	111,168		37,157		74,011		—
Commodity derivatives (3)	6,211		6,211		—		—
Total Assets at Fair Value	$	824,232	$	750,221	$	74,011	$	—
Liabilities at Fair Value:
Deferred compensation (2)	$	48,480	$	17,986	$	30,494	$	—
Total Liabilities at Fair Value	$	48,480	$	17,986	$	30,494	$	—

	Fair Value Measurements at October 28, 2012
(in thousands)	Fair Value at October 28, 2012		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets at Fair Value:
Cash equivalents (1)	$	483,441	$	483,441	$	—	$	—
Short-term marketable securities (4)	77,387		2,349		75,038		—
Other trading securities (2)	109,676		36,305		73,371		—
Commodity derivatives (3)	3,884		3,884		—		—
Total Assets at Fair Value	$	674,388	$	525,979	$	148,409	$	—
Liabilities at Fair Value:
Deferred compensation (2)	$	47,953	$	16,866	$	31,087	$	—
Total Liabilities at Fair Value	$	47,953	$	16,866	$	31,087	$	—

The following methods and assumptions were used to estimate the fair value of the financial assets and liabilities above:

(1) The Company’s cash equivalents consist of money market funds rated AAA.  As these investments have a maturity date of three months or less, the carrying value approximates fair value.

(2) The Company holds trading securities as part of a rabbi trust to fund certain supplemental executive retirement plans and deferred income plans.  The rabbi trust is included in other assets on the Consolidated Statements of Financial Position and is valued based on the underlying fair value of each fund held by the trust.  A majority of the funds held related to the supplemental executive retirement plans have been invested in fixed income funds managed by a third party.  The declared rate on these funds is set based on a formula using the yield of the general account investment portfolio that supports the fund, adjusted for expenses and other charges.  The rate is guaranteed for one year at issue, and may be reset annually on the policy anniversary, subject to a guaranteed minimum rate.  As the value is based on adjusted market rates, and the fixed rate is only reset on an annual basis, these funds are classified as Level 2.  The remaining funds held are also managed by a third party, and include equity securities, money market accounts, bond funds, or other portfolios for which there is an active quoted market.  Therefore these securities are classified as Level 1.  The related deferred compensation liabilities are included in other long-term liabilities on the Consolidated Statements of Financial Position and are valued based on the underlying investment selections held in each participant’s account.  Investment options generally mirror those funds held by the rabbi trust, for which there is an active quoted market.  Therefore these investment balances are classified as Level 1.  The Company also offers a fixed rate investment option to participants.  The rate earned on these investments is adjusted annually based on a specified percentage of the United States Internal Revenue Service ( I.R.S.) Applicable Federal Rates in effect and therefore these balances are classified as Level 2.

(3) The Company’s commodity derivatives represent futures contracts used in its hedging or other programs to offset price fluctuations associated with purchases of corn and soybean meal, and to minimize the price risk assumed when forward priced contracts are offered to the Company’s commodity suppliers.  The Company’s futures contracts for corn and soybean meal are traded on the Chicago Board of Trade, while futures contracts for lean hogs are traded on the Chicago Mercantile Exchange.  These are active markets with quoted prices available and therefore these contracts are classified as Level 1.  All derivatives are reviewed for potential credit risk and risk of nonperformance.  The Company nets the derivative assets and liabilities for each of its hedging programs, including cash collateral, when a master netting arrangement exists between the Company and the counterparty to the derivative contract.  The net balance for each program is included in other current assets or accounts payable, as appropriate, in the Consolidated Statements of Financial Position.  As of January 27, 2013, the Company has recognized the right to reclaim cash collateral of $25.3 million from, and the obligation to return cash collateral of $7.0 million to, various counterparties.  As of October 28, 2012, the Company had recognized the right to reclaim cash collateral of $27.5 million from, and the obligation to return cash collateral of $31.1 million to, various counterparties.

(4) During fiscal 2012 and 2013, the Company held trading securities as part of a portfolio maintained to generate investment income and to provide cash for operations of the Company, if necessary.  The portfolio is managed by a third party who is responsible for daily trading activities, and all assets within the portfolio are highly liquid.  The cash, U.S. government securities, and highly rated money market funds held by the portfolio are classified as Level 1.  The investment portfolio also included corporate bonds, international government securities, commercial paper, agency securities, mortgage-backed securities, and other asset-backed securities for which there is an active, quoted market.  Market prices are obtained from a variety of industry standard providers, large financial institutions, and other third-party sources to calculate a representative daily market value, and therefore, these securities are classified as Level 2.  These securities were liquidated in the first quarter of fiscal 2013.

The Company’s financial assets and liabilities also include cash, accounts receivable, accounts payable, and other liabilities, for which carrying value approximates fair value.  The Company does not carry its long-term debt at fair value in its Consolidated Statements of Financial Position.  Based on borrowing rates available to the Company for long-term financing with similar terms and average maturities, the fair value of long-term debt, utilizing discounted cash flows (Level 2), was $277.5 million as of January 27, 2013, and $283.6 million as of October 28, 2012.

In accordance with the provisions of ASC 820, the Company also measures certain nonfinancial assets and liabilities at fair value that are recognized or disclosed on a nonrecurring basis (e.g. goodwill, intangible assets, and property, plant and equipment).  During the first quarter ended January 27, 2013, and January 29, 2012, there were no remeasurements of assets or liabilities at fair value on a nonrecurring basis subsequent to their initial recognition.

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CONSOLIDATED STATEMENTS OF OPERATIONS (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended
	Jan. 27, 2013	Jan. 29, 2012
CONSOLIDATED STATEMENTS OF OPERATIONS
Net sales	$ 2,116,241	$ 2,039,439
Cost of products sold	1,772,048	1,702,030
GROSS PROFIT	344,193	337,409
Selling, general and administrative	155,831	152,477
Equity in earnings of affiliates	9,843	11,001
OPERATING INCOME	198,205	195,933
Other income and expense:
Interest and investment income	1,810	1,590
Interest expense	(3,094)	(3,214)
EARNINGS BEFORE INCOME TAXES	196,921	194,309
Provision for income taxes	65,876	64,976
NET EARNINGS	131,045	129,333
Less: Net earnings attributable to noncontrolling interest	1,329	938
NET EARNINGS ATTRIBUTABLE TO HORMEL FOODS CORPORATION	$ 129,716	$ 128,395
NET EARNINGS PER SHARE:
BASIC (in dollars per share)	$ 0.49	$ 0.49
DILUTED (in dollars per share)	$ 0.48	$ 0.48
WEIGHTED-AVERAGE SHARES OUTSTANDING:
BASIC (in shares)	263,944	263,946
DILUTED (in shares)	269,140	269,608
DIVIDENDS DECLARED PER SHARE:	$ 0.17	$ 0.15

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GOODWILL AND INTANGIBLE ASSETS

3 Months Ended

Jan. 27, 2013

GOODWILL AND INTANGIBLE ASSETS

GOODWILL AND INTANGIBLE ASSETS

NOTE D GOODWILL AND INTANGIBLE ASSETS

The carrying amounts of goodwill for the quarter ended January 27, 2013, are presented in the table below.  There were no changes to these carrying amounts during the first quarter.

(in thousands)	Grocery Products		Refrigerated Foods		JOTS		Specialty Foods		All Other		Total
Balance as of January 27, 2013	$	123,316	$	96,643	$	203,214	$	207,028	$	674	$	630,875

The gross carrying amount and accumulated amortization for definite-lived intangible assets are presented in the table below.

	January 27, 2013					October 28, 2012
(in thousands)	Gross Carrying Amount		Accumulated Amortization			Gross Carrying Amount		Accumulated Amortization
Customer lists/relationships	$	22,148	$	(15,271	)	$	22,148	$	(14,684	)
Proprietary software & technology	22,000		(17,932		)	22,000		(17,319		)
Formulas & recipes	17,854		(12,220		)	17,854		(11,686		)
Distribution network	4,120		(3,850		)	4,120		(3,783		)
Other intangibles	9,466		(7,292		)	9,466		(6,903		)
Total	$	75,588	$	(56,565	)	$	75,588	$	(54,375	)

Amortization expense was $2.2 million for the quarter ended January 27, 2013, compared to $2.4 million for the quarter ended January 29, 2012.

Estimated annual amortization expense (in thousands) for the five fiscal years after October 28, 2012, is as follows:

Fiscal Year	Estimated Amortization Expense
2013	$	7,768
2014	6,372
2015	3,192
2016	1,023
2017	636

The carrying amounts for indefinite-lived intangible assets are presented in the table below.

(in thousands)	January 27, 2013		October 28, 2012
Brands/tradenames/trademarks	$	93,875	$	93,875
Other intangibles	7,984		7,984
Total	$	101,859	$	101,859

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STOCK-BASED COMPENSATION

3 Months Ended

Jan. 27, 2013

STOCK-BASED COMPENSATION

STOCK-BASED COMPENSATION

NOTE C STOCK-BASED COMPENSATION

The Company issues stock options and nonvested shares as part of its stock incentive 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.  Options typically vest over periods ranging from six months to four years and expire ten years after the date of the grant.  The Company recognizes stock-based compensation expense ratably over the shorter of the requisite service period or vesting period.  The fair value of stock-based compensation granted to retirement-eligible individuals is expensed at the time of grant.

A reconciliation of the number of options outstanding and exercisable (in thousands) as of January 27, 2013, and changes during the quarter then ended, is as follows:

	Shares	Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term	Aggregate Intrinsic Value (in thousands)
Outstanding at October 28, 2012	20,454	$	19.67
Granted	1,617	30.98
Exercised	2,878	15.15
Forfeitures	13	28.10
Outstanding at January 27, 2013	19,180	$	21.29	6.0 years	$	262,364
Exercisable at January 27, 2013	13,044	$	18.61	4.8 years	$	218,293

The weighted-average grant date fair value of stock options granted and the total intrinsic value of options exercised (in thousands) during the first quarter of fiscal years 2013 and 2012, is as follows:

	Three Months Ended
	January 27, 2013		January 29, 2012
Weighted-average grant date fair value	$	5.10	$	5.75
Intrinsic value of exercised options	$	46,520	$	5,829

The fair value of each option award is calculated on the date of grant using the Black-Scholes valuation model utilizing the following weighted-average assumptions:

	Three Months Ended
	January 27, 2013	January 29, 2012
Risk-Free Interest Rate	1.3%	1.9%
Dividend Yield	2.2%	2.0%
Stock Price Volatility	20.0%	21.0%
Expected Option Life	8 years	8 years

As part of the annual valuation process, the Company reassesses the appropriateness of the inputs used in the valuation models.  The Company establishes the risk-free interest rate using stripped U.S. Treasury yields as of the grant date where the remaining term is approximately the expected life of the option.  The dividend yield is set based on the dividend rate approved by the Company’s Board of Directors and the stock price on the grant date.  The expected volatility assumption is set based primarily on historical volatility.  As a reasonableness test, implied volatility from exchange traded options is also examined to validate the volatility range obtained from the historical analysis.  The expected life assumption is set based on an analysis of past exercise behavior by option holders.  In performing the valuations for option grants, the Company has not stratified option holders as exercise behavior has historically been consistent across all employee and non-employee director groups.

The Company’s nonvested shares granted on or before September 26, 2010, vest after five years or upon retirement.  Nonvested shares granted after September 26, 2010, vest after one year.  There were no changes to the balance of nonvested shares during the first quarter, with 139 thousand shares outstanding at a weighted-average fair value of $21.47 as of January 27, 2013.

No shares vested during the first quarter of fiscal year 2013, while the fair value of shares vested in the first quarter of 2012 was $0.7 million.

Stock-based compensation expense, along with the related income tax benefit, for the first quarter of fiscal years 2013 and 2012 is presented in the table below.

	Three Months Ended
(in thousands)	January 27, 2013		January 29, 2012
Stock-based compensation expense recognized	$	5,576	$	6,240
Less: Income tax benefit recognized	2,108		2,366
After-tax stock-based compensation expense	$	3,468	$	3,874

At January 27, 2013, there was $13.9 million of total unrecognized compensation expense from stock-based compensation arrangements granted under the plans.  This compensation is expected to be recognized over a weighted-average period of approximately 4.3 years.  During the quarter ended January 27, 2013, cash received from stock option exercises was $23.2 million compared to $3.9 million for the quarter ended January 29, 2012.  The total tax benefit to be realized for tax deductions from these option exercises for the quarter ended January 27, 2013, was $17.6 million compared to $2.2 million in the comparable quarter of fiscal 2012.

Shares issued for option exercises and nonvested shares may be either authorized but unissued shares, or shares of treasury stock acquired in the open market or otherwise.

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GOODWILL AND INTANGIBLE ASSETS (Tables)

3 Months Ended

Jan. 27, 2013

GOODWILL AND INTANGIBLE ASSETS

Schedule of change in the carrying amount of goodwill

(in thousands)	Grocery Products		Refrigerated Foods		JOTS		Specialty Foods		All Other		Total
Balance as of January 27, 2013	$	123,316	$	96,643	$	203,214	$	207,028	$	674	$	630,875

Schedule of gross carrying amount and accumulated amortization for definite-lived intangible assets

	January 27, 2013					October 28, 2012
(in thousands)	Gross Carrying Amount		Accumulated Amortization			Gross Carrying Amount		Accumulated Amortization
Customer lists/relationships	$	22,148	$	(15,271	)	$	22,148	$	(14,684	)
Proprietary software & technology	22,000		(17,932		)	22,000		(17,319		)
Formulas & recipes	17,854		(12,220		)	17,854		(11,686		)
Distribution network	4,120		(3,850		)	4,120		(3,783		)
Other intangibles	9,466		(7,292		)	9,466		(6,903		)
Total	$	75,588	$	(56,565	)	$	75,588	$	(54,375	)

Schedule of estimated annual amortization expense

Fiscal Year	Estimated Amortization Expense
2013	$	7,768
2014	6,372
2015	3,192
2016	1,023
2017	636

Schedule of carrying amounts for indefinite-lived intangible assets

(in thousands)	January 27, 2013		October 28, 2012
Brands/tradenames/trademarks	$	93,875	$	93,875
Other intangibles	7,984		7,984
Total	$	101,859	$	101,859

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PENSION AND OTHER POST-RETIREMENT BENEFITS

3 Months Ended

Jan. 27, 2013

PENSION AND OTHER POST-RETIREMENT BENEFITS

PENSION AND OTHER POST-RETIREMENT BENEFITS

NOTE K PENSION AND OTHER POST-RETIREMENT BENEFITS

Net periodic benefit cost for pension and other post-retirement benefit plans consists of the following:

	Pension Benefits						Post-retirement Benefits
	Three Months Ended						Three Months Ended
(in thousands)	January 27, 2013			January 29, 2012			January 27, 2013			January 29, 2012
Service cost	$	7,745		$	5,856		$	612		$	556
Interest cost	11,922			12,284			3,694			4,438
Expected return on plan assets	(18,286		)	(17,127		)	—			—
Amortization of prior service cost	(1,270		)	(1,270		)	(265		)	913
Recognized actuarial loss (gain)	8,505			5,032			1,913			(1		)
Net periodic cost	$	8,616		$	4,775		$	5,954		$	5,906

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ACCUMULATED OTHER COMPREHENSIVE LOSS

3 Months Ended

Jan. 27, 2013

ACCUMULATED OTHER COMPREHENSIVE LOSS

ACCUMULATED OTHER COMPREHENSIVE LOSS

NOTE G ACCUMULATED OTHER COMPREHENSIVE LOSS

The components of accumulated other comprehensive loss, net of tax, are as follows:

(in thousands)	January 27, 2013			October 28, 2012
Foreign currency translation	$	12,784		$	12,415
Pension & other benefits	(339,911		)	(345,465		)
Deferred gain on hedging	2,669			9,481
Accumulated other comprehensive loss	$	(324,458	)	$	(323,569	)

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INVESTMENTS IN AND RECEIVABLES FROM AFFILIATES

3 Months Ended

Jan. 27, 2013

INVESTMENTS IN AND RECEIVABLES FROM AFFILIATES

INVESTMENTS IN AND RECEIVABLES FROM AFFILIATES

NOTE E INVESTMENTS IN AND RECEIVABLES FROM AFFILIATES

The Company accounts for its majority-owned operations under the consolidation method.  Investments in which the Company owns a minority interest, and for which there are no other indicators of control, are accounted for under the equity or cost method.  These investments, along with any related receivables from affiliates, are included in the Consolidated Statements of Financial Position as investments in and receivables from affiliates.

Investments in and receivables from affiliates consists of the following:

			January 27,		October 28,
(in thousands)	Segment	% Owned	2013		2012
MegaMex Foods, LLC	Grocery Products	50%	$	196,562	$	205,315
Foreign Joint Ventures	All Other	Various (26-50%)	84,324		81,222
Total			$	280,886	$	286,537

Equity in earnings of affiliates consists of the following:

		Three Months Ended
(in thousands)	Segment		January 27, 2013		January 29, 2012
MegaMex Foods, LLC	Grocery Products		$	7,037	$	8,624
Foreign Joint Ventures	All Other		2,806		2,377
Total			$	9,843	$	11,001

The Company recognized a basis difference of $21.3 million associated with the formation of MegaMex Foods, LLC, which is being amortized through equity in earnings of affiliates.

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EARNINGS PER SHARE DATA

3 Months Ended

Jan. 27, 2013

EARNINGS PER SHARE DATA

EARNINGS PER SHARE DATA

NOTE F EARNINGS PER SHARE DATA

The reported net earnings attributable to the Company were used when computing basic and diluted earnings per share.  The following table sets forth the shares used as the denominator for those computations:

	Three Months Ended
(in thousands)	January 27, 2013	January 29, 2012
Basic weighted-average shares outstanding	263,944	263,946
Dilutive potential common shares	5,196	5,662
Diluted weighted-average shares outstanding	269,140	269,608

For the three months ended January 27, 2013, and January 29, 2012, a total of 1.0 million and 1.1 million weighted- average stock options, respectively, were not included in the computation of dilutive potential common shares since their inclusion would have had an antidilutive effect on earnings per share.

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INVENTORIES

3 Months Ended

Jan. 27, 2013

INVENTORIES

INVENTORIES

NOTE H INVENTORIES

Principal components of inventories are:

(in thousands)	January 27, 2013		October 28, 2012
Finished products	$	513,734	$	494,298
Raw materials and work-in-process	268,421		267,877
Materials and supplies	171,527		188,346
Total	$	953,682	$	950,521

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STOCK-BASED COMPENSATION (Details)	3 Months Ended
	Jan. 27, 2013
Stock options
Stock-based compensation
Stock option expiration period	10 years
Stock options | Minimum
Stock-based compensation
Vesting period	6 months
Stock options | Maximum
Stock-based compensation
Vesting period	4 years
Nonvested shares
Stock-based compensation
Vesting period for nonvested shares issued on or before September 26, 2010	5 years
Vesting period for nonvested shares issued after September 26, 2010	1 year

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SEGMENT REPORTING

3 Months Ended

Jan. 27, 2013

SEGMENT REPORTING

SEGMENT REPORTING

NOTE M SEGMENT REPORTING

The Company develops, processes, and distributes a wide array of food products in a variety of markets.  The Company reports its results in the following five segments: Grocery Products, Refrigerated Foods, Jennie-O Turkey Store, Specialty Foods, and All Other.

The Grocery Products segment consists primarily of the processing, marketing, and sale of shelf-stable food products sold predominantly in the retail market.  This segment also includes the results from the Company’s MegaMex joint venture.

The Refrigerated Foods segment includes the Hormel Refrigerated operating segment and the Affiliated Business Units.  This segment consists primarily of the processing, marketing, and sale of branded and unbranded pork and beef products for retail, foodservice, and fresh product customers.  The Affiliated Business Units include the Farmer John, Burke Corporation, Dan’s Prize, Saag’s Products, Inc., and Precept Foods businesses.  Precept Foods, LLC, is a 50.01 percent owned joint venture.

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

The Specialty Foods segment includes the Diamond Crystal Brands, Century Foods International, and Hormel Specialty Products operating segments.  This segment consists of the packaging and sale of various sugar and sugar substitute products, salt and pepper products, liquid portion products, dessert mixes, ready-to-drink products, sports nutrition products, gelatin products, and private label canned meats to retail and foodservice customers.  This segment also includes the processing, marketing, and sale of nutritional food products and supplements to hospitals, nursing homes, and other marketers of nutritional products.

The All Other segment includes the Hormel Foods International operating segment, which manufactures, markets, and sells Company products internationally.  This segment also includes the results from the Company’s international joint ventures and miscellaneous corporate sales.

Intersegment sales are recorded at prices that approximate cost and are eliminated in the Consolidated Statements of Operations.  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.  Equity in earnings of affiliates is included in segment operating profit; however, earnings attributable to the Company’s noncontrolling interests are excluded.  These items are included below as net interest and investment expense (income), general corporate expense, and noncontrolling interest when reconciling to earnings before income taxes.

Sales and operating profits for each of the Company’s reportable segments and reconciliation to earnings before income taxes are set forth below.  The Company is an integrated enterprise, characterized by substantial intersegment cooperation, cost allocations, and sharing of assets.  Therefore, the Company does not represent that these segments, if operated independently, would report the operating profit and other financial information shown below.

	Three Months Ended
(in thousands)	January 27, 2013			January 29, 2012
Sales to Unaffiliated Customers
Grocery Products	$	334,140		$	269,479
Refrigerated Foods	1,063,401			1,083,525
Jennie-O Turkey Store	390,334			377,371
Specialty Foods	233,845			218,024
All Other	94,521			91,040
Total	$	2,116,241		$	2,039,439
Intersegment Sales
Grocery Products	$	—		$	—
Refrigerated Foods	2,443			2,413
Jennie-O Turkey Store	30,421			30,135
Specialty Foods	31			41
All Other	—			—
Total	$	32,895		$	32,589
Intersegment elimination	(32,895		)	(32,589		)
Total	$	—		$	—
Net Sales
Grocery Products	$	334,140		$	269,479
Refrigerated Foods	1,065,844			1,085,938
Jennie-O Turkey Store	420,755			407,506
Specialty Foods	233,876			218,065
All Other	94,521			91,040
Intersegment elimination	(32,895		)	(32,589		)
Total	$	2,116,241		$	2,039,439
Segment Operating Profit
Grocery Products	$	49,913		$	44,093
Refrigerated Foods	53,790			53,749
Jennie-O Turkey Store	58,945			76,762
Specialty Foods	23,761			16,647
All Other	17,111			12,471
Total segment operating profit	$	203,520		$	203,722
Net interest and investment expense (income)	1,284			1,624
General corporate expense	6,644			8,727
Noncontrolling interest	1,329			938
Earnings before income taxes	$	196,921		$	194,309

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ACCUMULATED OTHER COMPREHENSIVE LOSS (Tables)

3 Months Ended

Jan. 27, 2013

ACCUMULATED OTHER COMPREHENSIVE LOSS

Schedule of components of accumulated other comprehensive loss, net of tax

(in thousands)	January 27, 2013			October 28, 2012
Foreign currency translation	$	12,784		$	12,415
Pension & other benefits	(339,911		)	(345,465		)
Deferred gain on hedging	2,669			9,481
Accumulated other comprehensive loss	$	(324,458	)	$	(323,569	)

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SEGMENT REPORTING (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Jan. 27, 2013 segment	Jan. 29, 2012
SEGMENT REPORTING
Number of reportable business segments	5
Operating profit and other financial information
Sales to Unaffiliated Customers	$ 2,116,241	$ 2,039,439
Intersegment Sales	32,895	32,589
Net sales	2,116,241	2,039,439
Segment Operating Profit	203,520	203,722
Net interest and investment expense (income)	1,284	1,624
General corporate expense	6,644	8,727
Noncontrolling interest	1,329	938
EARNINGS BEFORE INCOME TAXES	196,921	194,309
Grocery Products
Operating profit and other financial information
Sales to Unaffiliated Customers	334,140	269,479
Net sales	334,140	269,479
Segment Operating Profit	49,913	44,093
Refrigerated Foods
Operating profit and other financial information
Sales to Unaffiliated Customers	1,063,401	1,083,525
Intersegment Sales	2,443	2,413
Net sales	1,065,844	1,085,938
Segment Operating Profit	53,790	53,749
Jennie-O Turkey Store
Operating profit and other financial information
Sales to Unaffiliated Customers	390,334	377,371
Intersegment Sales	30,421	30,135
Net sales	420,755	407,506
Segment Operating Profit	58,945	76,762
Specialty Foods
Operating profit and other financial information
Sales to Unaffiliated Customers	233,845	218,024
Intersegment Sales	31	41
Net sales	233,876	218,065
Segment Operating Profit	23,761	16,647
All Other
Operating profit and other financial information
Sales to Unaffiliated Customers	94,521	91,040
Net sales	94,521	91,040
Segment Operating Profit	17,111	12,471
Intersegment elimination
Operating profit and other financial information
Intersegment Sales	(32,895)	(32,589)
Net sales	$ (32,895)	$ (32,589)
Precept Foods, LLC
Operating profit and other financial information
Ownership percentage held by entity in joint venture	50.01%

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ACCUMULATED OTHER COMPREHENSIVE LOSS (Details) (USD $) In Thousands, unless otherwise specified	Jan. 27, 2013	Oct. 28, 2012
Accumulated Other Comprehensive Loss
Foreign currency translation	$ 12,784	$ 12,415
Pension & other benefits	(339,911)	(345,465)
Deferred gain on hedging	2,669	9,481
Accumulated other comprehensive loss	$ (324,458)	$ (323,569)

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Jan. 27, 2013	Jan. 29, 2012
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
NET EARNINGS	$ 131,045	$ 129,333
Other comprehensive income (loss), net of tax:
Foreign currency translation	384	593
Pension and other benefits	5,554	881
Deferred hedging	(6,812)	(11,291)
TOTAL OTHER COMPREHENSIVE LOSS	(874)	(9,817)
COMPREHENSIVE INCOME	130,171	119,516
Less: Comprehensive income attributable to noncontrolling interest	1,344	974
COMPREHENSIVE INCOME ATTRIBUTABLE TO HORMEL FOODS CORPORATION	$ 128,827	$ 118,542

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ACQUISITIONS

3 Months Ended

Jan. 27, 2013

ACQUISITIONS

ACQUISITIONS

NOTE B                ACQUISITIONS

On January 31, 2013, subsequent to the end of the first quarter, the Company acquired the United States based  Skippy®  peanut butter business from Conopco, Inc. (doing business as Unilever United States Inc.), of Englewood Cliffs, N.J. for a preliminary purchase price of $663.1 million in cash.  This acquisition includes the Little Rock, Arkansas manufacturing facility and all sales worldwide, except sales in China.  The Company expects to close the acquisition of the China based Skippy® peanut butter business by the end of fiscal year 2013 for an additional investment of approximately $42.0 million.  The purchase price is preliminary pending final working capital adjustments, and was funded by the Company with existing cash on hand generated from operations and liquidating marketable securities.

Skippy® is a well-established brand that allows the Company to expand its presence in the center of the store with a non-meat protein product and reinforces the Company’s balanced product portfolio.  The acquisition also provides the opportunity to strengthen the Company’s global presence and complements the international sales strategy for the SPAM family of products.

Operating results for this acquisition will be included in the Company’s Consolidated Statements of Operations from the date of acquisition (i.e. beginning in the second quarter) and will primarily be reflected in the Grocery Products and All Other reporting segments.

The acquisition will be accounted for as a business combination using the acquisition method.  The Company is currently in the process of estimating the acquisition date fair values of the assets acquired and liabilities assumed, using independent appraisals and other analyses.  Therefore, a preliminary allocation of the purchase price to the acquired assets, liabilities, and goodwill will be performed during the second quarter of fiscal 2013.

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INVENTORIES (Tables)

3 Months Ended

Jan. 27, 2013

INVENTORIES

Principal components of inventories

(in thousands)	January 27, 2013		October 28, 2012
Finished products	$	513,734	$	494,298
Raw materials and work-in-process	268,421		267,877
Materials and supplies	171,527		188,346
Total	$	953,682	$	950,521

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GOODWILL AND INTANGIBLE ASSETS (Details 3) (USD $) In Thousands, unless otherwise specified	Jan. 27, 2013	Oct. 28, 2012
Carrying amounts for indefinite-lived intangible assets
Carrying amounts for indefinite-lived intangible assets	$ 101,859	$ 101,859
Brand/tradename/trademarks
Carrying amounts for indefinite-lived intangible assets
Carrying amounts for indefinite-lived intangible assets	93,875	93,875
Other intangibles
Carrying amounts for indefinite-lived intangible assets
Carrying amounts for indefinite-lived intangible assets	$ 7,984	$ 7,984

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INCOME TAXES

3 Months Ended

Jan. 27, 2013

INCOME TAXES

INCOME TAXES

NOTE L INCOME TAXES

The amount of unrecognized tax benefits, including interest and penalties, at January 27, 2013, recorded in other long-term liabilities was $31.2 million, of which $21.0 million would impact the Company’s effective tax rate if recognized.  The Company includes accrued interest and penalties related to uncertain tax positions in income tax expense, with $0.2 million included in expense in the first quarter of fiscal 2013.  The amount of accrued interest and penalties at January 27, 2013, associated with unrecognized tax benefits was $8.5 million.

The Company is regularly audited by federal and state taxing authorities.  During fiscal year 2012, the I.R.S. concluded its examination of the Company’s consolidated federal income tax returns for the fiscal years through 2009, and opened its examination for fiscal years 2010 and 2011.  The Company is in various stages of audit by several state taxing authorities on a variety of fiscal years, as far back as 2006.  While it is reasonably possible that one or more of these audits may be completed within the next 12 months and that the related unrecognized tax benefits may change, based on the status of the examinations it is not possible to reasonably estimate the effect of any amount of such change to previously recorded uncertain tax positions.