-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, A8Z74sveTR1qC/Hg5OfHK2x/WrrryqqF0UvQTGtRLNwK69z6GalFNcI1mCJ//Saq s28BuxEJCU9O3a5ZGMLUow== 0000052477-97-000003.txt : 19970329 0000052477-97-000003.hdr.sgml : 19970329 ACCESSION NUMBER: 0000052477-97-000003 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 10 CONFORMED PERIOD OF REPORT: 19961228 FILED AS OF DATE: 19970328 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: IBP INC CENTRAL INDEX KEY: 0000052477 STANDARD INDUSTRIAL CLASSIFICATION: MEAT PACKING PLANTS [2011] IRS NUMBER: 420838666 STATE OF INCORPORATION: DE FISCAL YEAR END: 1227 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-06085 FILM NUMBER: 97567452 BUSINESS ADDRESS: STREET 1: IBP AVE STREET 2: P O BOX 515 CITY: DAKOTA CITY STATE: NE ZIP: 68731 BUSINESS PHONE: 4024942061 MAIL ADDRESS: STREET 1: IBP AVE STREET 2: P O BOX 515 CITY: DAKOTA CITY STATE: NE ZIP: 68731 FORMER COMPANY: FORMER CONFORMED NAME: IOWA BEEF PROCESSORS INC /PRED/ DATE OF NAME CHANGE: 19821109 FORMER COMPANY: FORMER CONFORMED NAME: IOWA BEEF PACKERS INC DATE OF NAME CHANGE: 19701130 10-K 1 FORM 10-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION FORM 10 - K Washington, D.C. 20549 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED] For the fiscal year ended December 28, 1996 ______________________________ IBP, inc. DELAWARE CORPORATION 42-0838666 (State of Incorporation) (Employer Identification Number) IBP AVENUE POST OFFICE BOX 515 DAKOTA CITY, NE 68731 (Address) (Zip Code) Telephone Number: (402) 494-2061 _________________________________________________ Securities registered pursuant to section 12(g) of Act: Common Stock Registered with the New York Stock Exchange and the Pacific Stock Exchange. Registrant has filed all reports required to be filed by Section 13 or 15(d) of the Security Exchange Act of 1934 during the preceding 12 months, and has been subject to such filing requirements for the past 90 days. Disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is contained in definitive Proxy Statement incorporated by reference in Part III of this Form 10-K. The aggregate market value of the registrant's common stock held by non-affiliates (91,808,349 shares) based on the New York Stock Exchange average bid and ask price on March 24, 1997, was approximately $2.24 billion. As of March 24, 1997, the registrant had outstanding 92,067,635 shares of its common stock. DOCUMENTS INCORPORATED BY REFERENCE Portions of the registrant's 1996 Annual Report to Stockholders (the "Annual Report") are incorporated by reference in Parts I, II and IV of this Report. Portions of the registrant's definitive Proxy Statement dated March 24, 1997, (the "Proxy Statement") are incorporated by reference in Part III of this Report. Other documents incorporated by reference in this Report are listed in the Exhibit Index on page 13. -1- PART I ITEMS 1 AND 2. BUSINESS AND PROPERTIES General IBP, inc., ("IBP") a Delaware corporation, principally produces fresh beef and pork products. IBP's primary products include boxed beef and fresh pork which are marketed mainly in the United States to grocery chains, meat distributors, wholesalers, retailers, restaurant and hotel chains, and processors who produce cured and smoked products, such as bacon, ham, luncheon meats and sausage items. IBP also produces inedible allied products, such as hides and other items used to manufacture products such as leather, animal feed and pharmaceuticals, and edible allied products, which include variety meat items. IBP operates an extensive sales network to service its customers with regional sales and service centers in the United States (including an independently-owned contractor in Los Angeles that is licensed to use IBP trademarks) as well as service centers in foreign countries. The mailing address of IBP's corporate headquarters is IBP Avenue, Post Office Box 515, Dakota City, Nebraska 68731-0515; its telephone number is (402) 494-2061. All references to "IBP" include IBP, inc. and its subsidiaries. IBP operates 12 fed beef carcass production facilities in eight cattle-producing states and Canada, which reduce live cattle to dressed carcass form. Eight of these locations include processing facilities which conduct fabricating operations to produce boxed beef. IBP also operates four cow boning facilities in Iowa, Nebraska and Texas, which reduce cows and bulls to dressed carcass form and boneless meat product. Fed beef consists primarily of young steers and heifers specifically raised for beef consumption. Cows and bulls processed by IBP are primarily breeding or dairy stock which have been culled for various reasons. IBP operates seven pork facilities in Indiana, Iowa and Nebraska that include carcass production and processing of fresh pork products employing a production process similar to that employed in its beef operation. On March 25, 1997, IBP entered into an Agreement and Plan of Merger (the "Merger Agreement") among the company, IBP Sub, Inc. - a Delaware corporation and a wholly-owned subsidiary of IBP (the "Purchaser"), and FoodBrands America, Inc., a Delaware corporation ("Foodbrand"), providing for the acquisition of Foodbrand by IBP. Pursuant to the Merger Agreement, and subject to the terms and conditions therein, the Purchaser will commence a tender offer (the "Tender Offer") for any and all outstanding shares of common stock, par value $.01 per share, of Foodbrand (the "Common Stock") at a price of $23.40 per share net to the seller in cash. Upon consummation of the Tender Offer, the Merger Agreement contemplates that the Purchaser will be merged with and into Foodbrand (the "Merger"), with Foodbrand being the surviving corporation and becoming a wholly-owned subsidiary of IBP. At the effective time of the Merger, each outstanding share of Common Stock (other than shares held by IBP, Foodbrand or their respective subsidiaries and other than shares the holders of which -2- have validly perfected their dissenters rights under Delaware law) shall be cancelled and become the right to receive $23.40 per share in cash. Concurrently with the execution and delivery of the Merger Agreement, Joseph Littlejohn & Levy, L.P., a Delaware limited partnership, and Joseph Littlejohn & Levy Fund II, L.P., a Delaware limited partnership (together, "JLL"), entered into a Tender Agreement dated as of March 25, 1997 (the "JLL Tender Agreement") among JLL, IBP and the Purchaser whereby JLL has agreed to tender all of their shares of Common Stock in the Tender Offer. Concurrently with the execution and delivery of the Merger Agreement, The Airlie Group, L.P., a Delaware limited partnership ("Airlie"), entered into a Tender Agreement dated as of March 25, 1997 (the "Airlie Tender Agreement") among Airlie, IBP and the Purchaser whereby Airlie has agreed to tender a number of shares which, when taken together with the number of shares of Common Stock (i) beneficially owned by IBP or its subsidiaries and (ii) which IBP or its affiliates have the right to acquire from JLL pursuant to the JLL Tender Agreement, would cause IBP or its affiliates to beneficially own 49.9% of the aggregate voting power represented by the issued and outstanding capital stock of Foodbrand. In addition, each of JLL and Airlie has granted to the Purchaser an option to purchase shares of Common Stock upon certain circumstances, and each of JLL and Airlie has agreed to vote in favor of the Merger Agreement, the Merger and the transactions contemplated therein and to oppose any other acquisition proposal and to vote against any such acquisition proposal. The following table reflects the approximate percentages of revenues during the last three fiscal years from IBP's principal product categories, all of which are within one industry segment: 1996 1995 1994 ---- ---- ---- Processed Beef Products 62% 64% 66% Beef Carcasses (1) 4 5 4 Processed Pork Products 20 17 17 Beef And Pork Allied Products 14 14 13 --- --- --- 100% 100% 100% === === === (1) Represents beef carcasses sold to third parties that are not used in IBP's processing operation. History of IBP's Business IBP was first incorporated in 1960. It began operations in 1961 with a single fed beef carcass production facility located near Denison, Iowa, in what was then the nation's major cattle-producing region. IBP grew in the Northern and Central Plains states over the following nine years and added beef plants in Dakota City, Nebraska; Emporia, Kansas; Luverne, Minnesota; and West Point, Nebraska. IBP expanded into the Southern Plains in 1975, when it built its Amarillo, Texas, facility near the large commercial feedlot operations of that region. In 1976, it moved into the Pacific Northwest through the acquisition and -3- expansion of plants in Pasco, Washington, and Boise, Idaho. Company expansion continued in 1980 with construction of a facility in Finney County, Kansas, and in 1983 with the purchase and expansion of a plant in Joslin, Illinois. In 1990, IBP opened its Lexington, Nebraska, fed beef plant and in 1994 IBP purchased Lakeside Farm Industries, Ltd. ("Lakeside"), an agribusiness company with a fed beef plant in Brooks, Alberta, Canada, IBP's first plant outside of the United States. IBP began its cow boning operations in 1995 by acquiring facilities in Tama, Iowa; Gibbon, Nebraska; and Sealy, Texas. In 1996, IBP acquired its fourth cow boning facility in Palestine, Texas. The plants will supplement IBP's expansion into hamburger patty production. IBP began pork operations in 1982 when it purchased, expanded and commenced operation of a pork facility in Storm Lake, Iowa. Additional pork facilities were added in 1986 in Louisa County, and Council Bluffs, Iowa; in 1987 in Madison, Nebraska; in 1989 in Perry, Iowa; in 1990 in Waterloo, Iowa; and in 1993 in Logansport, Indiana. In 1994 IBP constructed ham processing facilities at its Council Bluffs, Iowa, and Madison, Nebraska, locations. The ham facilities are operated by the Consumer Products Division. In 1995, IBP's newly formed Allied Group entered into a joint venture with Sand Livestock Systems, Inc. of Columbus, Nebraska, and China's Shandong Province to develop a fully integrated pork production operation in China. Plans tentatively call for the joint venture to begin production in 1998. In 1994, the Consumer Products Division purchased Prepared Foods, Inc. from International Multifoods, Inc. Prepared Foods, Inc. is a wholly-owned subsidiary of IBP with a plant in Santa Teresa, New Mexico. In 1995 the Consumer Products Division purchased and renovated a facility in Columbia, South Carolina, for processing fresh meat into value-added, consumer-ready items. The Santa Teresa, New Mexico, plant, the Columbia, South Carolina, plant and the cooked meats facility connected to the Waterloo, Iowa, pork facility process fresh meat into value-added, consumer-ready items. In August 1981, when it was acquired by Occidental Petroleum Corporation ("Occidental"), IBP was a publicly-held corporation that was listed on the New York Stock Exchange (the "NYSE"). From August 1981 to October 1987, IBP was a wholly-owned subsidiary of Occidental. In October 1987, IBP sold 49.5% of its common stock and was again listed on the NYSE. On September 4, 1991, Occidental offered all of its shares of IBP Common Stock to its stockholders and certain standby underwriters in an underwritten rights offering. As a result of this transaction, Occidental no longer owns any shares of IBP Common Stock. -4- Operations Cattle and Hog Supplies IBP does not currently raise cattle or hogs in the United States. IBP's Canadian subsidiary, Lakeside, has cattle feeding facilities, other agricultural divisions and a beef carcass production and boxed beef processing facility. In 1996, Lakeside's feedlots provided approximately 19% of that facility's live cattle needs. IBP's main supply of live cattle and hogs is purchased by IBP buyers who are trained to select high quality animals that are candidates for higher yields. IBP's buyers purchase cattle and hogs on a daily basis, generally a few days before the animals are required for production, and live animals are generally held in IBP's holding pens for only a few hours. Production Process IBP's fed beef carcass production facilities reduce live fed cattle to dressed carcass form and process allied products, and its processing facilities conduct fabricating operations to produce boxed beef. IBP's fed carcass and beef processing facilities operated in 1996 at approximately 85% and 88%, respectively, of their production capacities. IBP's cow boning facilities produce beef trimmings and boneless cuts of beef that are sold to customers who produce hamburger, sausage and deli meats. IBP's cow boning facilities operated in 1996 at approximately 70% of their production capacity. IBP's pork facilities produce fresh boxed pork for shipment to retailers and also produce pork bellies, hams and boneless picnic meat for shipment to customers who further process the pork into bacon, cooked hams, luncheon meats and sausage items. In 1996, IBP's pork plants operated at approximately 68% of their production capacity. Throughout production, edible beef, cow boning and pork allied products, such as variety meat items, are segregated and prepared for shipment or further refinement. Inedible beef, cow boning and pork products derived from processing operations are used in the manufacture of leather, animal feed, gelatin, pharmaceuticals and cosmetics. Eight of IBP's fed beef and cow boning plants include hide treatment facilities. The majority of the hides from IBP's other fed beef and cow boning plants are transported to these facilities, which include brine curing operations and, in four locations, chrome hide tanneries. The chrome tanning process produces a semifinished product that is shipped to leather good manufacturers worldwide. Brine-cured hides are sold to other tanneries. IBP is the largest chrome tanner of cattle hides in the United States. -5- Consumer Products Division Management believes that significant opportunities exist for the sale of value-added, consumer-ready products as consumer acceptance of such products grows and packaging technology improves. Currently, the Consumer Products Division produces cooked meats for food service customers and other consumer-ready products. The Consumer Products Division is continually exploring the potential for additional consumer-ready products. Facilities The corporate headquarters of IBP are located primarily in Dakota City, Nebraska, with some facilities in Dakota Dunes, South Dakota. IBP has recently begun construction of a new corporate headquarters in Dakota Dunes, South Dakota that is expected to be completed in the Fall of 1997. IBP believes that its plants are among the most modern in the world and strives to maintain and enhance its facilities. Generally, plants and additions are designed and constructed by IBP's personnel. IBP considers its existing plants and equipment to be in excellent condition. IBP's capital spending for 1997 is expected to be in the range of $200 million, which includes expenditures for environmental compliance activities. Its principal plants as of December 28, 1996, are described below. Beef IBP's eleven United States fed beef carcass production facilities are located in the states of Idaho, Illinois, Iowa, Kansas, Minnesota, Nebraska, Texas and Washington. IBP's twelfth fed beef carcass production facility is in Alberta, Canada. At these locations, eight have processing facilities, eight have hide treatment or tanning operations, five have cold storage freezer operations and one has a tallow refining plant. IBP's cow boning facilities are located in Iowa, Nebraska and Texas. Pork IBP's seven pork carcass production and seven processing facilities are located in the states of Indiana, Iowa and Nebraska. At these locations, four have cold storage freezer operations and two have skinning operations. Consumer Products IBP's cooked meats facilities are in Iowa, New Mexico and South Carolina. IBP's two ham processing facilities are located next to pork facilities in Iowa and Nebraska. Sales and Distribution IBP's customers include domestic and international grocery chains, meat distributors, wholesalers, retailers, restaurant and hotel chains, and meat processors who produce cured and smoked products, such as bacon, ham, luncheon meat and sausage items. Most sales are made pursuant to daily orders as opposed to long-term supply contracts. In each of the past three years, IBP's -6- largest beef customer accounted for less than 5% of its annual beef gross sales, and its largest pork customer accounted for less than 7% of its annual pork gross sales. For the same periods, IBP's largest customer for beef and pork combined accounted for less than 5% of its annual gross product sales. Most IBP products are shipped by trucks, generally from plants located closest to the purchaser, although other plants may supplement such deliveries, depending upon prevailing supplies and product demand. IBP sells to international customers through foreign and domestic sales offices. In fiscal 1996, export sales accounted for approximately 13% of IBP's net sales, which compares to approximately 14% in fiscal 1995 and 13% in fiscal 1994. Some allied products are sold as commodities in bulk, while other items are trimmed, boxed and frozen by IBP. Cattle hides are sold for both domestic and international use. Uncured and brine-cured hides are sold to tanneries for further processing. Chrome-tanned hides are sold to tanneries and directly to further processors of leather. Competition The industry in which IBP operates is highly competitive and characterized by very small margins. IBP considers its principal competition to come from domestic producers of fresh beef and pork products although IBP also competes with other suppliers of protein, including other red meats, poultry, seafood, grain, dairy products, eggs, soya and other protein products. Competition exists both in the purchase of live cattle and hogs and in the sale of beef and pork products. The principal competitive element in both buying and selling is price. Failure to accurately assess the quality of cattle and hogs can result in (i) the payment of an excessive price if the livestock yields less than expected or (ii) the failure to bid a price sufficiently high to purchase high quality livestock. To effectively compete in the purchase of cattle, a cattle buyer must be able to accurately judge the yield and quality of the cattle to establish a fair price to the producer. As part of IBP's cattle buying process, each cattle buyer prepares an estimate by lot of the yield and quality of the cattle purchased. IBP's information systems prepare a report on each lot that compares the actual yield and quality to the buyer's initial estimate. This enables IBP to monitor the quality of various cattle producers and to measure the skill of its cattle buyers, which are critical factors in determining IBP's success and competitiveness. IBP's hog buyers generally purchase hogs based upon an average daily bid price. The average daily bid price is adjusted for each producer by tracking the producer's yield and quality results. From the results of the producer's prior sales, IBP is able to generate a discount or a premium which adjusts the average daily bid for that individual producer. IBP believes -7- this purchasing system is one of the most advanced and accurate methods for establishing fair prices in the industry. In addition to price, product quality, product mix, location and service are important competitive elements in the sale of fresh beef and pork products. IBP is the largest producer of fresh beef and pork products in the United States. IBP believes that its two largest beef competitors in 1996 were ConAgra, Inc. ("ConAgra") and Excel Corporation, a subsidiary of Cargill, Inc. It believes that its largest pork competitors in 1996 were Smithfield, ConAgra and Hormel. Employees As of December 28, 1996, IBP had approximately 34,000 employees. Whenever possible, production employees are recruited locally and trained by IBP for specific tasks. IBP considers its relations with its employees at its plants to be good. Approximately 10,000 hourly employees at seven of IBP's 28 production facilities are represented by labor organizations. The labor contracts applicable to these plants expire as follows: Contract Expiration Plant Union Date - --------------------- ------------- -------------------- Amarillo, Texas Teamsters (1) April 1998 Pasco, Washington Teamsters (1) May 1999 Tama, Iowa Teamsters (1) January 2001 Dakota City, Nebraska UFCW(2) August 1999 Joslin, Illinois UFCW(2) December 2000 Perry, Iowa UFCW(2) April 1999 Waterloo, Iowa UFCW(2) September 1998 _________________ (1) Teamsters local unions affiliated with The International Brotherhood of Teamsters, Chauffeurs, Warehousemen, and Helpers of America. -7- (2) United Food and Commercial Workers, International Union, AFL-CIO. Regulatory Matters IBP's operations are subject to the constant inspection and regulation of the United States Department of Agriculture (the "USDA"), including (i) regulations of the USDA's Packers and Stockyards Administration, (ii) continuous in-plant inspection of -8- IBP's production facilities (along with each live animal, each carcass and all edible products) by USDA employees to ensure compliance with USDA standards and (iii) grading of beef carcasses by USDA employees. IBP is subject to federal, state and local laws and regulations governing environmental protection, which require significant expenditures to maintain compliance. IBP believes that it is in substantial compliance with such laws and regulations. IBP is not aware of any violations of, or pending changes in, such laws and regulations that are likely to result in material penalties or material increases in compliance costs. IBP incurred $4 million in capital expenditures for environmental control facilities in fiscal 1996 and anticipates capital expenditures of approximately $22 million for such facilities in fiscal 1997. EXECUTIVE OFFICERS OF THE REGISTRANT Age at Positions With IBP and January 27, Five-Year Employment Name 1997 History - ------------------------ ---------- ----------------------------- Richard L. Bond 49 President -- Fresh Meats since 1995; 1994-1995 Executive Vice President -- Beef; 1989-1994 Group Vice President -- Beef Sales and Marketing; 1982-1989 Vice President -- Boxed Beef Sales and Marketing Kenneth W. Browning, Jr. 47 Executive Vice President since 1996; 1989-1996 Senior Vice President --Hide Division; 1982-1989 Vice President -- Hides Lonnie O. Grigsby 57 Executive Vice President and General Counsel since 1995; Secretary since 1985; 1988-1995 Executive Vice President -- Finance & Administration; General Counsel 1985-1990 and since 1993; 1987-1988 Senior Vice President; 1985-1987 Vice President Craig J. Hart 41 Vice President -- Controller since 1995; 1993-1995 Assistant Vice President, Controller; 1990-1993 Controller -9- David C. Layhee 52 President -- Consumer Products since 1995; 1994- 1995 Executive Vice President -- Design Products; 1989-1994 Group Vice President -- Design Products; 1983-1989 Group Vice President -- Sales & Marketing Eugene D. Leman 54 President -- Allied Group since 1995; Director since 1989; 1986-1995 Executive Vice President -- Pork Division; 1981-1986 Group Vice President -- Pork Division James V. Lochner 44 Executive Vice President -- Technical Services/ Engineering since 1995; 1993-1995 Senior Vice President -- Technical Services; 1989-1993 Vice President -- Technical Services; 1986-1989 Assistant Vice President Quality Control -- Beef; 1984-1986 Director -- Quality Control Charles F. Mostek 49 Executive Vice President -- Fresh Meats Sales and Marketing since 1995; 1989- 1995 Vice President -- Beef Sales; 1985-1989 Vice President -- Slaughter Division Sales; 1981-1985 Assistant Vice President -- Carcass Grading and Administration Robert L. Peterson 64 Chairman of the Board of Directors since 1981; Chief Executive Officer since 1980; Director since 1976; 1979-1995 President Kenneth L. Rose 52 Executive Vice President -- Operations Services since 1995; 1989-1995 Senior Vice President -- Logistics Services; 1982-1989 Vice President -- Transportation -10- Jerry S. Scott 51 Executive Vice President -- Fresh Meats Operations since 1995; 1986-1995 Vice President -- Pork Operations Larry Shipley 41 Executive Vice President -- Corporate Development since 1995; 1995 Senior Vice President -- Corporate Development; 1994-1995 Assistant to the Chairman; 1989-1994 Assistant to the President. ITEM 3. LEGAL PROCEEDINGS Incorporated by reference from the Annual Report, page 19, section entitled "Notes to Consolidated Financial Statements," at note "J. Commitments and Contingencies." ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of IBP's security holders during the fourth quarter of 1996. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS Incorporated by reference from Annual Report, page 13, section entitled "Consolidated Statements of Changes in Stockholders' Equity"; from page 19, section entitled "Notes to Consolidated Financial Statements," at note "K. Quarterly Financial Data (Unaudited)"; and from page 21, section entitled "Stockholders and Market Data." The Annual Report is an exhibit to this Form 10-K. ITEM 6. SELECTED FINANCIAL DATA Incorporated by reference from Annual Report, page 22, section entitled "Selected Financial Data." ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Incorporated by reference from the Annual Report, pages 20-21, section entitled "Management's Discussion and Analysis." -11- ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Incorporated by reference from the Annual Report, pages 9-23, sections entitled "Consolidated Financial Statements," "Notes to Consolidated Financial Statements" and "Report of Independent Accountants." ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Incorporated by reference from the Proxy Statement, page 11, section entitled "INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS." PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Incorporated by reference from the Proxy Statement, pages 2-4, section entitled "ELECTION OF DIRECTORS" and reference is also made to the information regarding executive officers set forth in "EXECUTIVE OFFICERS OF THE REGISTRANT" in Part I of this report. ITEM 11. EXECUTIVE COMPENSATION Incorporated by reference from the Proxy Statement, pages 7-10, section entitled "SUMMARY COMPENSATION TABLE"; "OPTION GRANTS TABLE," "AGGREGATED OPTION EXERCISES AND YEAR-END OPTION VALUE TABLE," "PERFORMANCE GRAPH," and from pages 4-5, section entitled "ELECTION OF DIRECTORS," subsection "Information Regarding Director's Compensation." ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Incorporated by reference from the Proxy Statement, pages 2 and 5, sections entitled "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS" and "SECURITY OWNERSHIP OF MANAGEMENT." ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Incorporated by reference from the Proxy Statement, pages 4-5, sections entitled "ELECTION OF DIRECTORS," subsection "Information Regarding the Board of Directors and its Committees" and from page 7, section entitled "COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION DECISIONS." PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K -12- (a) Documents filed as part of this report. The following financial information is incorporated by reference from the Annual Report, as identified below, or is found in this report. 1. Consolidated Financial Statements Location --------------------------------- --------------------- Report of Independent Accountants Annual Report, page 23 and pages 17 and 18 of this report Consolidated Statements of Earnings Annual Report, page 9 Consolidated Balance Sheets Annual Report, pages 10-11 Consolidated Statements of Cash Flows Annual Report, page 12 Consolidated Statements of Changes Annual Report, page in Stockholders' Equity 13 Notes to Consolidated Financial Annual Report, pages Statements 14-19 2. Financial Statement Schedule ---------------------------- Reports of Independent Accountants on Financial Statement Schedules Schedule II Valuation and Qualifying Accounts and Reserves All other schedules are omitted because they are not applicable or not required. 3. Exhibits -------- 2.1 Agreement and Plan of Merger, dated as of March 25, 1997, among IBP, IBP Sub, Inc. and Foodbrands America, Inc. 2.2 Tender Agreement dated as of March 25, 1997 among IBP, IBP Sub, Inc., Joseph Littlejohn & Levy, L.P. and Joseph Littlejohn & Levy Fund II, L.P. 2.3 Tender Agreement dated as of March 25, 1997 among IBP, IBP Sub, Inc. and The Airlie Group, L.P. 3.1 Restated Certificate of Incorporation of IBP. 3.2 Restated By-laws of IBP. 10.5* IBP's 1987 Stock Option Plan (filed as Exhibit No. 28(a) to IBP's Registration Statement on Form S-8, dated January 5, 1988, File No. 33-19441) (Executive Compensation Plan). -13- 10.5.1* Form of Stock Option Agreement (10/1/87) (filed as Exhibit No. 28(b) to IBP's Registration Statement on Form S-8, dated January 5, 1988, File No. 33-19441). 10.5.2* Form of Stock Option Agreement (12/31/87) (filed as Exhibit No. 28(c) to IBP's Registration Statement on Form S-8, dated January 5, 1988, File No. 33-19441). 10.5.3* IBP Officer Long-Term Stock Plan (filed as Exhibit No. 10.5.3 to the Annual Report on Form 10-K of IBP for the fiscal year ended December 25, 1993, File No. 1-6085). 10.5.4* IBP Directors Stock Option Plan (filed as Exhibit No. 10.5.4 to the Annual Report on Form 10-K of IBP for the fiscal year ended December 25, 1993, File No. 1-6085). 10.5.5* IBP 1993 Stock Option Plan (filed as Exhibit No. 10.5.5 to the Annual Report on Form 10-K of IBP for the fiscal year ended December 25, 1993, File No. 1-6085). 10.5.6 1996 Officer Long-Term Stock Plan. 10.5.7 1996 Stock Option Plan. 10.14* Form of IBP's Indemnification Agreement with officers and directors (filed as Exhibit No. 10.18 to IBP's Registration Statement on Form S-1, dated August 19, 1987, File No. 1-6085). 10.21* Credit Agreement (Revolving/Term Credit Facility) dated as of December 21, 1995, between IBP, inc. and various lenders with First Bank National Association as Administrative Agent and Bank of America National Trust and Savings Association as Co-Agent. 10.23* Intercompany Agreement, dated as of September 4, 1991, between IBP and Occidental Petroleum Corporation (filed as Exhibit No. 10.23 to the Annual Report on Form 10-K of IBP for the fiscal year ended December 28, 1991, File No. 1-6085). 10.24 Employment Agreement, effective as of December 22, 1995, between IBP and Jerry S. Scott. 10.25* Employment Agreement, effective as of March 1, 1995, between IBP and Richard L. Bond. 10.26* Employment Agreement, effective as of March 1, 1995, between IBP and Eugene D. Leman. 10.27* Employment Agreement, effective as of March 1, 1995, between IBP and David C. Layhee. -14- 10.28* Text of Retirement Income Plan of IBP, inc. (As Amended and Restated Effective as of January 1, 1992), as amended. (Executive Compensation Plan) (filed as Exhibit No. 10.28 to the Annual Report on Form 10-K of IBP for the fiscal year ended December 26, 1992, File No. 1-6085). 10.29* Employment Agreement, effective January 1, 1993, between IBP and Dale Tinstman (filed as Exhibit No. 10.29 to the Annual Report on Form 10-K of IBP for the fiscal year ended December 25, 1993, File No. 1-6085). 11. Statement regarding computation of earnings per share. 13. 1996 Annual Report to Stockholders. 16.* Letter regarding change in certifying accountant. 21. Subsidiaries of IBP, inc. as of December 28, 1996. 22.* Matters submitted to vote of security holders (filed as Item 4 to the Quarterly Report on Form 10-Q for the 26 weeks ended June 29, 1996, File No. 1-6085). 23.1 Consent of Independent Public Accountants (Coopers & Lybrand L.L.P.). 23.2 Consent of Independent Public Accountants (Price Waterhouse LLP). 99.1 Press release of IBP dated March 26, 1997. __________________ * Incorporated herein by reference (b) Reports on Form 8-K Not Applicable. (c) Other Matters With the exception of the information expressly referenced and thereby incorporated in ITEMS 3, 5, 6, 7 and 8, the Annual Report is not to be deemed "filed" with the Securities and Exchange Commission or otherwise subject to the liabilities of Section 18 of the Securities and Exchange Act of 1934. For the purpose of complying with the amendments to the rules governing Form S-8 (effective July 13, 1990) under the Securities Act of 1933, IBP hereby undertakes as follows, which undertaking shall be incorporated by reference into IBP's Registration Statement on Form S-8 No. 33-19441 (filed January 5, 1988): Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of IBP pursuant to the foregoing -15- provisions, or otherwise, IBP has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by IBP of expenses incurred or paid by a director, officer or controlling person of IBP in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, IBP will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. -16- REPORT OF INDEPENDENT ACCOUNTANTS --------------------------------- To the Board of Directors and Stockholders of IBP, inc. Our report on the consolidated financial statements of IBP, inc. has been incorporated by reference in this Form 10-K from page 23 of the 1996 Annual Report to Stockholders of IBP, inc. In connection with our audits of such financial statements, we have also audited the related financial statement schedule as of December 28, 1996 and December 30, 1995 and for the years then ended listed in Item 14(a)2 of this Form 10-K. In our opinion, the financial statement schedule referred to above, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information required to be included therein. COOPERS & LYBRAND L.L.P. Omaha, Nebraska January 24, 1997 -17a- REPORT OF INDEPENDENT ACCOUNTANTS --------------------------------- FINANCIAL STATEMENT SCHEDULE ---------------------------- To the Board of Directors of IBP, inc. Our audits of the consolidated financial statements referred to in our report dated February 3, 1995 appearing on page 23 of the 1994 Annual Report to Stockholders of IBP, inc. (which report and consolidated financial statements are incorporated by reference in this Annual Report on Form 10-K) also included an audit of the Financial Statement Schedule at December 31, 1994 and for the fiscal year then ended listed in item 14(a)2 of this Annual Report on Form 10-K. In our opinion, this Financial Statement Schedule presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. PRICE WATERHOUSE LLP Chicago, Illinois February 3, 1995 -17b- IBP, inc. AND SUBSIDIARIES SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES Fiscal Years 1994, 1995 and 1996 (In thousands) Allowance for Doubtful Accounts ------------ Balance, December 25, 1993 $4,198 Amounts charged to costs and expenses 4,852 Recoveries of amounts previously written off 89 Write-off of uncollectible accounts (552) Other 810 ----- Balance, December 31, 1994 9,397 Amounts charged to costs and expenses 478 Recoveries of amounts previously written off 106 Write-off of uncollectible accounts (508) Other 21 ----- Balance, December 30, 1995 9,494 Amounts charged to costs and expenses 379 Recoveries of amounts previously written off 115 Write-off of uncollectible accounts (112) Other (3) ----- Balance, December 28, 1996 $9,873 ===== -18- SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereto duly authorized. IBP, inc. By: /s/ Robert L. Peterson ------------------------ Robert L. Peterson Chairman of the Board and Chief Executive Officer Date: 03/27/97 --------------- Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated. Signature Title Date - ------------------------- ------------------------ --------- /s/ Robert L. Peterson Chairman of the Board 03/27/97 - ---------------------- and Chief Executive --------- Robert L. Peterson Officer (principal executive officer) /s/ Larry Shipley Executive Vice 03/27/97 - ---------------------- President - Corporate --------- Larry Shipley Development (principal financial officer) /s/ Craig J. Hart Vice President and 03/27/97 - ---------------------- Controller --------- Craig J. Hart /s/ Richard L. Bond Director 03/27/97 - ---------------------- --------- Richard L. Bond /s/ John S. Chalsty Director 03/24/97 - ---------------------- --------- John S. Chalsty /s/ Wendy L. Gramm Director 03/24/97 - ---------------------- --------- Wendy L. Gramm -19- Signature Title Date - ------------------------ ----------------- -------- /s/ David C. Layhee Director 03/27/97 - ------------------------ --------- David C. Layhee /s/ Eugene D. Leman Director 03/27/97 - ------------------------ --------- Eugene D. Leman /s/ Martin A. Massengale Director 03/22/97 - ------------------------ --------- Martin A. Massengale /s/ JoAnn R. Smith Director 03/21/97 - ------------------------ --------- JoAnn R. Smith /s/ Dale C. Tinstman Director 03/21/97 - ------------------------ --------- Dale C. Tinstman -20- EX-27 2
5 1,000 YEAR DEC-28-1996 DEC-28-1996 94,164 169,476 510,654 9,873 299,700 1,110,585 1,513,716 697,510 2,174,495 604,131 260,008 0 0 4,750 1,198,905 2,174,495 12,538,753 12,538,753 12,095,550 12,095,550 120,295 0 3,373 319,535 120,800 198,735 0 0 0 198,735 2.06 2.06
EX-11 3 Exhibit 11 IBP, inc. and SUBSIDIARIES COMPUTATION OF EARNINGS PER SHARE YEARS ENDED DECEMBER 28, 1996 (52 WEEKS), DECEMBER 30, 1995 (52 WEEKS) AND DECEMBER 31, 1994 (53 WEEKS) (In thousands except per share data) 1996 1995 1994 ---- ---- ---- FINANCIAL STATEMENT COMPUTATIONS: Earnings before extraordinary item $198,735 $280,112 $182,289 Extraordinary item - (22,189) - ------- ------- ------- Net earnings $198,735 $257,923 $182,289 ======= ======= ======= PRIMARY EARNINGS PER SHARE: Shares used in this computation: Weighted average shares outstanding 94,688 94,745 94,870 Dilutive effect of shares under employee stock plans 1,944 1,926 1,293 ------ ------ ------ Common and common equivalent shares 96,632 96,671 96,163 ====== ====== ====== Primary earnings per share: Earnings before extraordinary item $2.06 $2.90 $1.90 Extraordinary item - (.23) - ---- ---- ---- Net earnings $2.06 $2.67 $1.90 ==== ==== ==== FULLY-DILUTED EARNINGS PER SHARE: Shares used in this computation: Weighted average shares outstanding 94,688 94,745 94,870 Dilutive effect of shares under employee stock plans 2,002 2,274 1,496 ------ ------ ------ Common and common equivalent shares 96,690 97,019 96,366 ====== ====== ====== Fully-diluted earnings per share: Earnings before extraordinary item $2.06 $2.89 $1.89 Extraordinary item - (.23) - ---- ---- ---- Net earnings $2.06 $2.66 $1.89 ==== ==== ==== EX-13 4 Selected Financial Data (in thousands except per share data) Fiscal Year Ended December December December December December 28, 30, 31, 25, 26, 1996 1995 1994(1) 1993 1992 OPERATIONS: Net sales $12,538,753 $12,667,562 $12,075,427 $11,671,397 $11,128,405 Gross profit 443,203 604,068 460,109 258,666 236,791 Selling, general and administrative expense 120,295 123,972 112,772 84,197 76,349 Earnings from operations 322,908 480,096 347,337 174,469 160,442 Interest expense, net (3,373) (20,784) (38,448) (43,212) (51,826) Earnings before income taxes, extraordinary item and accounting change 319,535 459,312 308,889 131,257 108,616 Income taxes 120,800 179,200 126,600 53,800 45,000 Extraordinary loss (2) - (22,189) - - - Accounting change (3) - - - 12,626 - Net earnings 198,735 257,923 182,289 90,083 63,616 PER SHARE DATA: Earnings per share: Earnings before extraordinary item and accounting change $2.06 $2.90 $1.90 $ .81 $ .67 Extraordinary loss - (.23) - - - Accounting change - - - .13 - Net earnings 2.06 2.67 1.90 .94 .67 Dividends per share .10 .10 .10 .10 .15 FINANCIAL CONDITION: Working capital $ 506,454 $ 427,241 $ 359,238 $ 336,668 $ 329,727 Total assets 2,174,495 2,027,601 1,865,463 1,538,907 1,499,427 Long-term obligations 260,008 260,752 361,760 460,723 510,900 Stockholders' equity 1,203,655 1,022,939 780,494 612,796 534,077 (1) 53-week year. (2) Extraordinary loss on early extinguishment of debt. (3) Cumulative effect of change in accounting for income taxes. IBP, inc. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands except share and per share data) December 28, December 30, 1996 1995 ASSETS ----------- ----------- CURRENT ASSETS: Cash and cash equivalents $ 94,164 $ 116,277 Marketable securities 169,476 63,851 Accounts receivable, less allowance for doubtful accounts of $9,873 and $9,494 500,781 529,796 Inventories (Note B) 299,700 303,711 Deferred income tax benefits (Note E) 42,364 51,482 Prepaid expenses 4,100 3,773 --------- --------- TOTAL CURRENT ASSETS 1,110,585 1,068,890 PROPERTY, PLANT AND EQUIPMENT, at cost (Note F): Land and land improvements 99,765 95,217 Buildings and stockyards 385,328 374,988 Equipment 860,712 802,466 --------- --------- 1,345,805 1,272,671 Less accumulated depreciation (697,510) (632,666) --------- --------- 648,295 640,005 Construction in progress 167,911 86,854 --------- --------- 816,206 726,859 OTHER ASSETS: Goodwill, net of accumulated amortization of $121,644 and $113,301 206,587 208,434 Other 41,117 23,418 --------- --------- 247,704 231,852 --------- --------- $2,174,495 $2,027,601 LIABILITIES AND STOCKHOLDERS' EQUITY ========= ========= CURRENT LIABILITIES: Accounts payable and accrued expenses (Note D) $ 509,520 $ 548,934 Federal and state income taxes 83,484 81,817 Deferred income taxes (Note E) 8,115 7,916 Other 3,012 2,982 --------- --------- TOTAL CURRENT LIABILITIES 604,131 641,649 LONG-TERM OBLIGATIONS (Notes C and F) 260,008 260,752 DEFERRED CREDITS AND OTHER LIABILITIES: Deferred income taxes (Note E) 68,026 69,079 Other 38,675 33,182 --------- --------- 106,701 102,261 COMMITMENTS AND CONTINGENCIES (Note J) STOCKHOLDERS' EQUITY (Note G): Preferred stock, 25,000,000 shares authorized; none issued Common stock, $.05 par value per share; authorized 200,000,000 shares; issued 95,000,000 shares 4,750 4,750 Additional paid-in capital 427,456 432,726 Retained earnings 779,199 589,936 Currency translation adjustments (32) 116 Treasury stock at cost, 372,780 and 253,252 shares (7,718) (4,589) --------- --------- TOTAL STOCKHOLDERS' EQUITY 1,203,655 1,022,939 --------- --------- $2,174,495 $2,027,601 ========= ========= See notes to consolidated financial statements. -1- IBP, inc. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS (In thousands except per share data) 53 Weeks 52 Weeks Ended Ended December 28, December 30, December 31, 1996 1995 1994 ----------- ----------- ----------- Net sales (Note A) $12,538,753 $12,667,562 $12,075,427 Cost of products sold 12,095,550 12,063,494 11,615,318 ---------- ---------- ---------- Gross profit 443,203 604,068 460,109 Selling, general and administrative expense 120,295 123,972 112,772 ---------- ---------- ---------- Earnings from operations 322,908 480,096 347,337 Interest: Incurred (19,536) (38,551) (45,124) Capitalized 6,813 9,039 3,957 Income 9,350 8,728 2,719 ---------- ---------- ---------- (3,373) (20,784) (38,448) ---------- ---------- ---------- Earnings before income taxes and extraordinary item 319,535 459,312 308,889 Income taxes (Note E) 120,800 179,200 126,600 ---------- ---------- ---------- Earnings before extraordinary item 198,735 280,112 182,289 Extraordinary loss on early extinguishment of debt, less applicable taxes (Note F) - (22,189) - ---------- ---------- ---------- Net earnings $ 198,735 $ 257,923 $ 182,289 ========== ========== ========== Earnings per share: Earnings before extraordinary item $2.06 $2.90 $1.90 Extraordinary item - (.23) - ---- ---- ---- Net earnings $2.06 $2.67 $1.90 ==== ==== ==== See notes to consolidated financial statements. -2- IBP, inc. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (In thousands except per share data) Common Stock Additional Currency Par Paid-In Retained Translation Treasury Shares Value Capital Earnings Adjustments Stock Balances, ------ ------ --------- -------- ----------- -------- December 25, 1993 47,500 $2,375 $441,959 $168,695 $ - $ (233) Net earnings 182,289 Dividends declared, $.10 per share (9,492) Treasury shares purchased (8,928) Treasury shares delivered under employee stock plans (2,392) 7,295 Foreign currency translation adjustments (1,074) Balances, ------ ----- ------- ------- ----- ----- December 31, 1994 47,500 2,375 439,567 341,492 (1,074) (1,866) Net earnings 257,923 Dividends declared, $.10 per share (9,479) Additional shares issued in two- for-one stock split effected in the form of a stock dividend (Note G) 47,500 2,375 (2,375) Treasury shares purchased (13,441) Treasury shares delivered under employee stock plans (4,466) 10,718 Foreign currency translation adjustments 1,190 Balances, ------ ----- ------- ------- ----- ----- December 30, 1995 95,000 4,750 432,726 589,936 116 (4,589) Net earnings 198,735 Dividends declared, $.10 per share (9,472) Treasury shares purchased (15,405) Treasury shares delivered under employee stock plans (5,270) 12,276 Foreign currency translation adjustments (148) Balances, ------ ----- ------- ------- ------ ------ December 28, 1996 95,000 $4,750 $427,456 $779,199 $ (32) $(7,718) ====== ===== ======= ======= ====== ====== See notes to consolidated financial statements. -3- IBP, inc. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) 53 Weeks 52 Weeks Ended Ended Dec. 28, Dec. 30, Dec. 31, 1996 1995 1994 ----------- ----------- ---------- Inflows (outflows) CASH FLOWS FROM OPERATING ACTIVITIES: Net earnings $198,735 $ 257,923 $ 182,289 Adjustments to reconcile net earnings to cash flows from operations: Depreciation and amortization 82,690 92,539 63,443 Deferred income tax provision (benefit) 7,500 (11,600) (16,800) Extraordinary loss on extinguishment of debt - 22,189 - Net changes in: Accounts payable and accrued liabilities (57,976) 60,943 143,997 Accounts receivable 28,950 (14,336) (32,811) Inventories 3,912 (58,705) (6,179) Other adjustments, net 4,167 2,127 4,962 --------- -------- -------- 69,243 93,157 156,612 Net cash flows provided by --------- -------- -------- operating activities 267,978 351,080 338,901 --------- -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of marketable securities (1,043,180) (576,167) (156,307) Proceeds from disposals of marketable securities 922,051 588,591 80,000 Capital expenditures (170,664) (160,626) (83,868) Payment for stock of new subsidiaries, net of cash acquired - - (51,973) Other investing activities, net 1,944 2,188 860 Net cash flows used in investing --------- -------- -------- activities (289,849) (146,014) (211,288) --------- -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Net change in borrowings under revolving credit agreements (200,000) 250,000 (25,661) Proceeds from issuance of long-term debt 197,878 - - Net change in checks in process of clearance 22,520 (18,135) 82,333 Dividends paid (9,473) (9,484) (9,495) Principal payments on long-term obligations (615) (350,761) (111,766) Premiums paid on early retirement of debt - (35,420) - Other financing activities, net (10,626) (9,767) (3,991) Net cash flows used in financing --------- -------- -------- activities (316) (173,567) (68,580) Effect of exchange rate on cash and --------- -------- -------- cash equivalents 74 549 - Net change in cash and cash --------- -------- -------- equivalents (22,113) 32,048 59,033 Cash and cash equivalents at beginning of year 116,277 84,229 25,196 Cash and cash equivalents at end --------- -------- -------- of year $ 94,164 $ 116,277 $ 84,229 ========= ======== ======== See notes to consolidated financial statements. -4- IBP, inc. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 28, 1996 (52 weeks), DECEMBER 30, 1995 (52 weeks) AND DECEMBER 31, 1994 (53 weeks) A. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: ORGANIZATION AND BASIS OF PRESENTATION - In 1981, IBP, inc. (IBP) became a wholly-owned subsidiary of Occidental Petroleum Corporation (Occidental) through a reorganization and plan of merger. The accompanying financial statements include the assets, liabilities and stockholders' equity of IBP, after giving effect to the allocation of Occidental's acquisition cost to the net assets acquired, as determined under the purchase method of accounting. Occidental no longer controls IBP nor has any person acquired control of IBP. NATURE OF OPERATIONS AND INDUSTRY SEGMENT INFORMATION - IBP's operations relate to the meat packing industry and primarily involve cattle and hog slaughter, beef and pork fabrication and related allied product processing activities. The company also produces precooked meats for the retail and food service industries. IBP's customers include food retailers, distributors, wholesalers, restaurant and hotel chains, other food processors and leather makers, as well as manufacturers of pharmaceuticals and animal feeds. Management considers its operations to comprise one industry segment. PRINCIPLES OF CONSOLIDATION - All subsidiaries are wholly-owned and are consolidated in the accompanying financial statements. All material intercompany balances, transactions and profits have been eliminated. MANAGEMENT'S USE OF ESTIMATES - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. FISCAL YEAR - IBP's fiscal year ends on the last Saturday of the calendar year. EXPORT SALES - In 1996, 1995 and 1994, net export sales, principally to customers in Asia and also to destinations in Canada, Mexico and Europe, amounted to $1.7 billion, $1.8 billion and $1.5 billion, respectively. STATEMENT OF CASH FLOWS - For purposes of the statement of cash flows, management considers all highly liquid debt instruments purchased with original maturities of three months or less to be cash equivalents. Such investments are carried at cost, which approximates fair value. DERIVATIVE FINANCIAL INSTRUMENTS - To manage interest rate and currency exposures, the company uses interest rate swaps and currency forward contracts. IBP specifically designates interest rate swaps as hedges of debt instruments and recognizes interest differentials as adjustments to interest expense in the period they occur. Gains and losses related to foreign currency hedges of firmly committed transactions are deferred and are recognized in income when the hedged transaction occurs. -5- MARKETABLE SECURITIES - These securities are classified as available for sale, are highly liquid and are purchased and sold on a short-term basis as part of IBP's management of working capital. Such securities consist of auction market preferred stock, which management does not intend to hold more than one year, and tax-exempt securities and commercial paper with maturities of less than one year. Marketable securities are carried at cost, which approximates fair value. INVENTORIES - Inventories are valued on the basis of the lower of first-in, first-out cost or market. PROPERTY, PLANT AND EQUIPMENT - Depreciation is provided for property, plant and equipment on the straight-line method over the estimated useful lives of the respective classes of assets as follows: Land improvements..................8 to 20 years Buildings and stockyards..........10 to 40 years Equipment..........................3 to 12 years Management adjusted its estimate of salvage value for most fixed assets during 1995 to better reflect actual experience. This adjustment increased cost of products sold by approximately $18 million. Leasehold improvements, included in the equipment class, are amortized over the life of the lease or the life of the asset, whichever is shorter. CAPITAL LEASES - Lease arrangements entered into by IBP that constitute capital lease obligations are capitalized at the present value of future lease payments. The values assigned to leased assets are included in property, plant and equipment and accounted for accordingly. Amortization of leased assets is included in depreciation and amortization expense. The capital lease obligations are amortized over the lease terms as payments are made. ENVIRONMENTAL LIABILITIES - Environmental expenditures are accrued, except to the extent costs can be capitalized, based on estimates of known environmental remediation exposures. Such accruals are made even if some uncertainties exist over the ultimate cost of the remediation processes. GOODWILL - Goodwill is amortized on a straight-line basis over periods ranging from 15 years to 40 years. Management reviews goodwill as well as other long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. FOREIGN CURRENCY TRANSLATION - The translation of foreign currency into U.S. dollars is performed for balance sheet accounts using the current exchange rate in effect at the balance sheet date and for revenue and expense accounts using the average exchange rate during the period. The gains or losses resulting from translation are included in stockholders' equity. Exchange adjustments resulting from foreign currency transactions, which were not material in any of the years presented, are generally recognized in net earnings. -6- EARNINGS PER SHARE - Earnings per share for the years 1996, 1995 and 1994 were calculated using average common and common equivalent shares of 96,632,000, 96,671,000 and 96,163,000, respectively. RECLASSIFICATIONS - Certain reclassifications have been made to prior financial statements to conform to the current year presentation. B. INVENTORIES: Inventories are comprised of the following: December 28, December 30, 1996 1995 ----------- ----------- (In thousands) Held for sale: Beef products $169,068 $185,500 Pork products 39,913 34,788 Other 8,460 8,478 ------- ------- 217,441 228,766 Livestock 28,345 25,355 Supplies 53,914 49,590 ------- ------- $299,700 $303,711 ======= ======= C. CREDIT ARRANGEMENTS: At December 28, 1996, IBP had in place a $500,000,000 multi-year credit agreement (the Multi-Year Facility). From time to time, IBP also may use uncommitted lines of credit for some or all of its short- term borrowing needs. The Multi-Year Facility is a revolving facility with a maturity date of December 20, 2000, which may be extended for one-year increments annually during the revolving period with consent of the banks involved. Facility fees can vary from .085 to .200 of 1% on the total amount of the facility. Total outstanding borrowings of $50,000,000 at December 28, 1996 under the Multi-Year Facility have been classified as long-term in the consolidated balance sheet. The company intends to refinance this amount on a long-term basis at a later date. The interest rate at December 28, 1996 on these borrowings was 5.5%. During fiscal 1996, the maximum amount of borrowings under all of IBP's credit arrangements, including any amounts considered long-term, was $250,000,000. Average borrowings under IBP's credit arrangements and the weighted average interest rate during fiscal 1996 were $68,288,000 and 5.7%. The comparable 1995 figures were $13,327,000 in average borrowings and an average interest rate of 6.1%. -7- D. ACCOUNTS PAYABLE AND ACCRUED EXPENSES: Accounts payable and accrued expenses are comprised of the following: December 28, December 30, 1996 1995 ----------- ----------- (In thousands) Accounts payable, principally trade creditors $181,161 $210,157 ------- ------- Checks in process of clearance 118,624 96,114 ------- ------- Accrued expenses: Employee compensation 76,034 95,102 Employee benefits 55,509 56,122 Other 78,192 91,439 ------- ------- 209,735 242,663 ------- ------- $509,520 $548,934 ======= ======= E. INCOME TAXES: Income tax expense consists of the following: 1996 1995 1994 ------- ------- ------- (In thousands) Current: Federal $100,775 $173,600 $135,550 State 8,275 12,100 7,275 Foreign 4,250 5,100 575 ------- ------- ------- 113,300 190,800 143,400 ------- ------- ------- Deferred: Federal 6,575 (10,375) (15,350) State 550 (850) (1,300) Foreign 375 (375) (150) ------- ------- ------- 7,500 (11,600) (16,800) ------- ------- ------- $120,800 $179,200 $126,600 ======= ======= ======= Total income tax expense varies from the amount which would be provided by applying the U.S. federal income tax rate to earnings before income taxes. The major reasons for this difference (expressed as a percentage of pre-tax earnings) are as follows: 1996 1995 1994 ---- ---- ---- Federal income tax rate 35.0% 35.0% 35.0% State income taxes, net of federal benefit 1.7 1.8 1.5 Goodwill amortization 0.8 0.7 0.9 Foreign Sales Corporation benefits (0.5) (0.4) (0.4) Targeted jobs credits - - (0.3) Income tax contingencies 0.8 2.1 4.6 Other, net - (0.2) (0.3) ---- ---- ---- 37.8% 39.0% 41.0% ==== ==== ==== -8- The Internal Revenue Service (IRS) has proposed certain income tax adjustments which are being contested by the company involving the years 1989, 1990, and 1991. The IRS is currently examining the years 1992 and 1993. In management's opinion, adequate provisions for income taxes have been made for all years. Deferred income tax liabilities and assets were comprised of: December 28, December 30, 1996 1995 ---------- ----------- (In thousands) Deferred tax liabilities: Fixed assets basis differences $ 81,428 $ 80,928 Farm accounting basis differences 8,115 8,062 ------- ------- 89,543 88,990 ------- ------- Deferred tax assets: Nondeductible accrued liabilities (50,796) (56,927) State tax credit carryforwards (13,897) (11,949) Bad debt and claims reserves (3,890) (3,846) Safe harbor leases (708) (1,640) Federal and state operating loss carryforwards (7) (8) Other (372) (1,064) ------- ------- Gross deferred tax assets (69,670) (75,434) Valuation allowance 13,904 11,957 ------- ------- Net deferred tax assets (55,766) (63,477) ------- ------- $ 33,777 $ 25,513 ======= ======= The net $1.9 million increase in the valuation allowance for deferred tax assets is the result of a net increase in state tax credit carryforwards. No benefit has been recognized for these state tax credit carryforwards, which expire primarily in the years 2004 through 2008. F. LONG-TERM OBLIGATIONS: Long-term obligations are summarized as follows: December 28, December 30, 1996 1995 ----------- ----------- (In thousands) 6 1/8% Senior Notes due 2006 $100,000 $ - 7 1/8% Senior Subordinated Debentures due 2026 100,000 - Multi-Year Facility 50,000 250,000 Present value of minimum capital lease obligations 9,610 9,900 Other 1,044 1,467 ------- ------- 260,654 261,367 Less amounts due within one year 646 615 ------- ------- $260,008 $260,752 ======= ======= -9- In the fourth quarter of 1995, IBP began a process of refinancing its long-term debt. On December 15, 1995, IBP prepaid its $275 million principal amount of 9.82% Senior Notes due 2000 and its $75 million principal amount of 10.39% Senior Subordinated Debentures due 2002. The prepayments were funded with available cash and $250 million borrowed under available credit facilities. This amount was classified as long-term at December 30, 1995, due to IBP's ability and intent to refinance this amount on a long-term basis. Net prepayment premiums and the accelerated amortization of unamortized deferred financing costs totaled $36.4 million, before applicable income tax benefit of $14.2 million, which has been accounted for as a net extraordinary loss of $22.2 million in 1995. In January 1996, IBP completed its public offerings of $100 million principal amount of 6 1/8% Senior Notes due 2006 and $100 million principal amount of 7 1/8% Senior Subordinated Debentures due 2026. These offerings were part of a total shelf registration of $500 million. Proceeds from the offerings were used to reduce borrowings under the Multi-Year Facility to $50 million. This amount was classified as long-term at December 28, 1996, due to IBP's ability and intent to refinance this amount on a long-term basis. IBP's loan agreements contain certain restrictive covenants which, among other things, (1) require the maintenance of a minimum debt service coverage ratio; and (2) provide for a maximum funded debt ratio. Aggregate maturities of long-term obligations for each of the five fiscal years subsequent to 1996 are $646,000; $622,000; $834,000; $50,355,000 and $375,000. Substantially all of the leased assets under capital leases can be purchased by IBP for nominal consideration at the end of the lease terms. Leased assets, which are included with owned property in the consolidated balance sheets, totaled $5.4 million at December 28, 1996, and $6.5 million at December 30, 1995, net of accumulated depreciation. The company leases various facilities and equipment under noncancelable operating lease arrangements. Future minimum payments under noncancelable operating leases with lease terms in excess of one year at December 28, 1996 totaled $49,500,000. These operating leases expire at various dates through the year 2015. G. CAPITAL STOCK AND STOCK PLANS: Preferred Stock: The Board of Directors is authorized to issue up to 25,000,000 shares of preferred stock at such time or times, in such series, with such designations, preferences or other special rights as it may determine. Stock Split: On December 18, 1995, the company's Board of Directors authorized a two-for-one stock split effected in the form of a 100% stock dividend and was distributed on January 19, 1996 to shareholders of record on December 28, 1995. -10- Officer Long-Term Stock Plans: IBP has officer long-term stock plans which provide for awards to key employees of IBP which, subject to certain restrictions, will vest generally after five years resulting in the delivery of shares of common stock. Initial awards effective in 1992 were granted in 1993, totaling approximately 1,110,000 shares at $8.06 per share. Additional awards totaling approximately 320,000 shares have been granted through 1996 at an average cost of $20.50 per share. The plans allow for a maximum of 2,400,000 shares of common stock to be delivered; at December 28, 1996, there were approximately 1,010,000 shares available for future awards. The company recognized compensation expense for these plans totaling $3.0 million, $2.2 million and $2.4 million, respectively, in 1996, 1995 and 1994. Stock Option Plans: IBP has stock option plans under which incentive and non-qualified stock options may be granted to key employees and directors of IBP and its subsidiaries. As of December 28, 1996, the plans provide for the delivery of up to 8,476,000 shares of common stock upon exercise of options granted at no less than the fair market value of the shares on the date of grant. The options may be granted for terms up to but not exceeding ten years and are generally fully vested after five years from the date granted. At December 28, 1996 and December 30, 1995, there were 3,926,000 and 867,000 options, respectively, reserved for future grants. The company has adopted the disclosure-only provisions of Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation." Accordingly, no compensation cost has been recognized for the stock option plans. Had compensation cost for IBP's stock option plans been determined based on the fair value at the grant date for awards in 1995 and 1996 consistent with the provisions of SFAS No. 123, IBP's net earnings and earnings per share would have been reduced to the pro forma amounts indicated below: 1996 1995 ------- ------- Net earnings - as reported $198,735 $257,923 Net earnings - pro forma 196,518 256,407 Earnings per share - as reported 2.06 2.67 Earnings per share - pro forma 2.03 2.65 The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions for options granted in 1995 and 1996: 1996 1995 ---------------------- ---------------------- Officers Non-officers Officers Non-officers --------- ------------ --------- ------------ Expected option life 6.4 years 5.5 years 6.4 years 5.5 years Expected annual volatility 29.7% 29.7% 29.7% 29.7% Risk-free interest rate 6.54% 6.46% 5.56% 5.51% Dividend yield .44% .44% .44% .44% -11- The status of stock options under the plans is summarized as follows: Number of Weighted Average Options Shares Price Per Share Exercisable --------- ---------------- ----------- Balance at December 25, 1993 3,557,672 $10.56 Granted 1,049,900 16.78 Exercised (468,936) 7.49 Forfeited (284,560) 10.43 Balance at --------- ----- December 31, 1994 3,854,076 11.47 1,489,924 Granted 1,526,097 24.55 Exercised (466,626) 8.49 Forfeited (329,952) 13.88 Balance at --------- ----- December 30, 1995 4,583,595 14.93 1,256,358 Granted 675,388 24.25 Exercised (464,362) 10.04 Forfeited (244,693) 19.88 Balance at --------- ----- December 28, 1996 4,549,928 $16.09 1,721,044 ========= ===== The following table summarizes information about stock options outstanding at December 28, 1996: Number Weighted Average Range of Outstanding Remaining Weighted Average Exercisable prices At 12/28/96 Contractual Life Exercise Price - ------------------ ----------- ---------------- ---------------- $ 6 to 15 2,247,085 5.0 Years $ 9.68 16 to 25 2,191,724 8.7 Years 21.99 26 to 35 111,119 9.1 Years 28.10 - --------------------------------------------------------------------- $ 6 to 35 4,549,928 6.9 Years $16.09 Number Range of Exercisable Weighted Average Exercisable prices At 12/28/96 Exercise Price - ------------------ ----------- ---------------- $ 6 to 15 1,504,751 $ 8.54 16 to 25 215,933 16.48 26 to 35 360 31.38 - --------------------------------------------------- $ 6 to 35 1,721,044 $ 9.54 Share Delivery Restrictions: Shares of common stock to be delivered for approximately 1,600,000 options under the stock option plans must come from previously issued shares. All other shares of stock to be delivered pursuant to the stock option plans and the officer long-term stock plans may alternatively come from previously authorized but unissued common stock. -12- H. SUPPLEMENTAL CASH FLOW INFORMATION: Supplemental information on cash payments is presented as follows: 1996 1995 1994 ------- ------- ------ (In thousands) Interest, net of amounts capitalized $ 2,045 $ 34,040 $39,527 Income taxes 108,625 192,028 68,491 I. FINANCIAL INSTRUMENTS: Interest and Currency Rate Derivatives: The company's policy is to manage interest cost using a mix of fixed and variable rate debt. To manage this mix in a cost effective manner, the company enters into interest rate swaps in which the company agrees to exchange, at specified intervals, the difference between fixed and variable interest amounts calculated by reference to an agreed-upon notional principal amount. These interest rate swaps effectively convert a portion of the company's fixed-rate debt to variable-rate debt. The notional amounts of these swap agreements were $100 million at year-end 1996 and zero at year-end 1995. The notional amounts of these and other derivative instruments do not represent assets or liabilities of the company but, rather, are the basis for the settlements under the contract terms. The company enters into foreign currency forward exchange contracts to hedge its sales denominated in foreign currencies. At December 28, 1996, the company's Canadian subsidiary had outstanding forward contracts to sell US$5.0 million through January 1997. At December 30, 1995, outstanding contracts to sell US dollars totaled $5.5 million. The company's Canadian subsidiary also enters into currency futures contracts to hedge its exposure on live cattle purchase commitments in foreign currencies. At December 28, 1996, the company had outstanding contracts to buy CDN$22.6 million through June 1997. Similar outstanding contracts at year-end 1995 totaled CDN$14.9 million. There were no material realized or unrealized gains or losses for any derivative financial instruments in any of the fiscal years presented. The company monitors the risk of default by its financial instrument counterparties, all of which are major financial institutions, and does not anticipate nonperformance. -13- Fair Value of Financial Instruments: The following methods and assumptions are used in estimating the fair value of each class of the company's financial instruments at December 28, 1996: For cash and cash equivalents, marketable securities, accounts receivable and accounts payable, the carrying amount is a reasonable estimate of fair value because of the short-term nature of these instruments. For securities included in other assets, fair value is based upon quoted market prices for these or similar securities. The carrying amount approximates fair value for these securities. For long-term debt, fair value was determined using valuation techniques that considered cash flows discounted at current market rates and management's best estimate for instruments without quoted market prices. At year-end 1996, the carrying value exceeded the fair value by $9.3 million. At year-end 1995, the carrying value approximated the fair value. For derivatives, the fair value was estimated using termination cash values. At year-end 1996, interest rate swap agreement values would represent an obligation of $5.8 million. The market impact of this obligation is offset by the opposite market impact on the related long-term debt. The fair value of foreign currency derivatives at December 28, 1996 would represent an obligation of $0.2 million and at December 30, 1995 would represent an asset of $0.2 million. J. COMMITMENTS AND CONTINGENCIES: IBP is involved in numerous disputes incident to the ordinary course of its business. In the opinion of management, any liability for which provision has not been made relative to the various lawsuits, claims and administrative proceedings pending against IBP, including that described below, will not have a material adverse effect on its consolidated results of operations, financial position or liquidity. A $15,004,000 jury verdict was returned against IBP in November 1994 in an Iowa State District Court. The plaintiff, a former IBP employee, sued the company and another former employee in February 1993 for slander and breach of fiduciary duty regarding his treatment as a workers' compensation claimant. The jury determined that the plaintiff sustained $4,000 in actual damages, and awarded him $15,000,000 punitive damages, all of which was provided for by the company in 1994. Although the District Court reduced punitive damages to $100,000, on appeal the Iowa Supreme Court ordered IBP to pay $2,000,000 in punitive damages. The company is seeking a rehearing by the Iowa Supreme Court and possible review by the United States Supreme Court. The company reduced its $15,000,000 reserve for this case to $100,000 in the fourth quarter 1996. -14- K. QUARTERLY FINANCIAL DATA (UNAUDITED): Quarterly results are summarized as follows: (In thousands except per share data) First Second Third Fourth 1996 Quarter Quarter Quarter Quarter Annual - ---- --------- --------- --------- --------- ---------- Net sales $3,084,722 $3,260,268 $3,175,940 $3,017,823 $12,538,753 Gross profit 117,900 175,587 94,472 55,244 443,203 Net earnings 53,027 86,988 40,467 18,253 198,735 Earnings per share .55 .90 .42 .19 2.06 Dividends per share .025 .025 .025 .025 .10 Market price: High 27 1/8 28 7/8 27 5/8 26 1/2 Low 23 1/4 23 3/8 22 3/4 23 1/8 1995 - ---- Net sales $3,006,663 $3,209,140 $3,290,644 $3,161,115 $12,667,562 Gross profit 117,848 182,209 178,165 125,846 604,068 Earnings before extraordinary item 51,815 85,844 85,412 57,041 280,112 Net earnings 51,815 85,844 85,412 34,852 257,923 Earnings per share: Earnings before extraordinary item .54 .89 .88 .59 2.90 Net earnings .54 .89 .88 .36 2.67 Dividends per share .025 .025 .025 .025 .10 Market price: High 16 5/8 21 3/4 26 11/16 33 5/16 Low 14 9/16 15 15/16 21 5/8 22 1/16 -15- REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Stockholders of IBP, inc. We have audited the accompanying consolidated balance sheets of IBP, inc. and subsidiaries as of December 28, 1996 and December 30, 1995, and the related consolidated statements of earnings, changes in stockholders' equity, and cash flows for the years then ended. These financial statements are the responsibility of the company's management. Our responsibility is to express an opinion on these financial statements based on our audits. The financial statements of IBP, inc. and subsidiaries for the year ended December 31, 1994 were audited by other auditors, whose report, dated February 3, 1995 expressed an unqualified opinion on those statements. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of IBP, inc. and subsidiaries as of December 28, 1996 and December 30, 1995, and the consolidated results of their operations and their cash flows for the years then ended, in conformity with generally accepted accounting principles. COOPERS & LYBRAND L.L.P. Omaha, Nebraska January 24, 1997 MANAGEMENT'S REPORT ON FINANCIAL INFORMATION The management of IBP, inc. is responsible for the integrity of the financial data reported by IBP and its subsidiaries. Fulfilling this responsibility requires the preparation and presentation of consolidated financial statements in accordance with generally accepted accounting principles. Management uses internal accounting controls, corporate-wide policies and procedures, estimates and judgments in order that such state- ments reflect fairly the consolidated financial position, results of operations and cash flows of IBP. MANAGEMENT'S DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS IBP achieved solid results with an earnings performance in 1996 that was the second highest in the company's history. However, a combination of tight livestock supplies and reduced export sales in the second half of 1996 put significant pressure on operating margins, creating a difficult comparison to the record financial results attained in 1995. Earnings from operations as a percentage of net sales measured 2.6% in 1996 versus 3.8% in 1995. The Fresh Meats division experienced reduced capacity utilization levels, especially in its pork operations, thereby increasing per unit costs and reducing margins. Cow boning operating earnings improved in 1996 over 1995, while the Consumer Products division experienced less favorable results in 1996 compared to 1995. Recent industry reports on cattle inventories and placements into feedlots show positive numbers of available market-ready cattle until late in 1997, when supplies are expected to tighten moderately. Market analysts are predicting the opposite situation for hog supplies, expecting that supplies will remain tight for most of 1997 but increase later this year and into 1998. Management expects pork margins to remain under pressure until hog numbers improve and/or processing capacity is reduced. While IBP's pork operations have been adversely affected by the tight hog supplies and a substantial expansion of pork industry processing capacity, management believes that favorable global market dynamics, which include a strong consumer preference for pork protein, growing income levels among emerging nations and the low cost producer status of the U.S. industry from producer to processor, will bring long-term success for the company's pork operations. The matters discussed herein contain forward-looking statements that involve risks and uncertainties including risk of changing market conditions with regard to livestock supplies and demand for the company's products, domestic and international regulatory risks, competitive and other risks over which IBP has little or no control. Consequently, future results may differ from management's expectations. Moreover, past financial performance should not be considered a reliable indicator of future performance. -1- COMPARISON OF 1996 to 1995 SALES Net sales in 1996 were 1.0% below the record level achieved in 1995. A decrease in pounds of beef and pork products sold in IBP's core fresh meats operations in 1996 versus 1995 as well as a decrease in the average price of beef products sold were the primary factors in the lower 1996 net sales. These factors were partially offset by an increase in the average price of pork products sold and a full year of cow boning operations in 1996 (nine months in 1995 for the three plants purchased in 1995 and no prior year sales for the Palestine plant purchased in the second quarter 1996). IBP's net export sales in 1996 were 8% lower than in 1995. An outbreak of E. Coli, a bacterial illness, in Japan, the company's most significant export market, caused a food safety scare among Japanese consumers. This problem significantly reduced IBP exports to the Pacific Rim during the second half of 1996, even though the source of the illnesses appeared to be non-meat related. Management expects that shipments to Japan will return to more normal levels as these concerns subside. Exports accounted for 13.4% of consolidated net sales in 1996 compared to 14.4% in 1995. COST OF PRODUCTS SOLD A 1% increase in 1996 cost of products sold from 1995 was due primarily to a full year of operations in 1996 for three cow boning plants purchased in 1995 versus nine months in the prior year. Meanwhile, 1996 livestock costs in the company's core beef and pork operations decreased from 1995. A lower average price paid for live cattle and fewer pounds of beef products sold were partially offset by the effect of a higher average price paid for live hogs. Livestock costs comprised 88% of total cost of products sold in 1996 and 1995. The cost of products sold in 1996 was reduced $13 million (after bonus impact) by reduction of a workers' compensation lawsuit reserve due to favorable developments in the fourth quarter 1996 (more fully described in Note J to the consolidated financial statements). In addition, 1995 cost of products sold included $18 million (after bonus impact) for a second quarter adjustment to salvage value for most fixed assets to better reflect actual experience. SELLING, GENERAL AND ADMINISTRATIVE EXPENSE Reduced incentive compensation based upon lower 1996 operating earnings was the most significant factor in the 3% decrease in 1996 expense from 1995. Administrative costs were higher in 1996 as a result of higher personnel-related costs to support the company's expanding operations. Selling expense also increased in 1996 over 1995 due principally to higher international selling costs as the company added foreign service centers in Korea and Taiwan. -2- INTEREST EXPENSE Net interest expense in 1996 fell 84% from the year earlier. These reductions resulted in part from a lower effective interest rate due to the refinancing of substantially all of IBP's long-term obligations at lower rates early in 1996. Additionally, 1996 borrowings averaged almost $100 million less than in 1995 due to continued strong operating cash flows. INCOME TAXES The lower 1996 income tax provision compared to 1995 resulted primarily from the decrease in pre-tax earnings. COMPARISON OF 1995 TO 1994 SALES The 4.9% increase in net sales from 1994 was attributable primarily to the additions of its Canadian subsidiary, Lakeside Farm Industries, Ltd. (Lakeside), purchased in October 1994, and three beef cow boning plants acquired in 1995. Net sales from fresh beef and pork operations, excluding Lakeside and the beef boning plants, were down slightly from the previous year due mainly to a reduction in pounds of pork products sold. Net export sales in 1995 totaled $1.8 billion or 14.4% of total net sales as compared to $1.5 billion and a 12.8% share of total net sales in 1994. An overall increase in pounds of products sold, especially of higher-value red meat products to Asian markets, was the chief factor in the export sales increase. Exports to the Far East, IBP's most significant export market, have risen in part due to increased demand, lowered import restrictions, favorable currency exchange rates and the development of additional markets. COST OF PRODUCTS SOLD The Lakeside and beef boning plants acquisitions were the chief reason for the 3.9% increase in cost of products sold in 1995 compared to 1994. The company's fresh meats division, exclusive of new operations, experienced a higher average cost of livestock in 1995 which was offset somewhat by a decrease in pounds of products sold from 1994. Management adjusted the estimated salvage value for most fixed assets in the second quarter 1995 to better reflect actual experience, which increased plant costs by approximately $18 million. SELLING, GENERAL AND ADMINISTRATIVE EXPENSE The principal components of the 9.9% increase in 1995 selling, general and administrative expense versus 1994 were higher accruals for earnings-based incentive compensation, incremental selling and administrative expense associated with new operations and increased export-related selling expense. -3- INTEREST EXPENSE IBP's 1995 net interest expense decreased 45.9% from 1994 due to several factors. Average outstanding borrowings were 21.0% less in 1995 than in 1994 due to strong operating cash flows and debt reductions in the second half of 1994. In addition, an increase in capital spending caused 1995 capitalized interest to increase $5.1 million (128.4%) over 1994. Finally, a surplus of cash over and above IBP's working capital needs, especially in the second half of 1995, brought about a $6.0 million (221.0%) increase in interest income. INCOME TAXES The higher 1995 income tax provision over 1994 was due primarily to the increase in pre-tax earnings. LIQUIDITY AND CAPITAL RESOURCES The meat processing industry is characterized by significant working capital requirements. This is due largely to statutory provisions that generally provide for immediate payment for livestock, while it takes IBP on average about one week to turn its product inventories and two weeks to convert its trade receivables to cash. These factors, combined with fluctuations in production levels, selling prices and prices paid for livestock, can impact cash requirements substantially on a day-to-day basis. To provide cash for its working capital requirements, the company's credit facility (more fully described in Note C to the consolidated financial statements) provides IBP with same-day access to an aggregate of $500 million in potential borrowings. The unused portion of the credit line was $450 million at December 28, 1996 and was unchanged at the end of January 1997. Although IBP has significant working capital requirements, its accounts receivable and inventories are highly liquid, characterized by rapid turnover. The following are key indicators relating to IBP's working capital and asset-based liquidity: December 28, December 30, 1996 1995 ----------- ----------- Working capital (in thousands) $506,454 $427,241 Current ratio 1.8:1 1.7:1 Quick ratio 1.3:1 1.1:1 Number of days' sales in accounts receivable 14.0 14.3 Inventory turnover 40.3 42.0 The company's financial position has continued to strengthen as a result of significant operating cash flows and long-term debt reductions. -4- Capital expenditures in 1996 totaled $171 million compared to $161 million in 1995. Current year additions included construction of a processing facility at the company's Brooks, Alberta, Canada, beef plant, which began production in the first quarter 1997, purchase of a cow processing facility in Palestine, Texas, conversion of a facility in Columbia, South Carolina, for cooked meats production (also a first quarter 1997 start up) and expansions and/or improvements of box handling facilities at some of the company's major beef complexes. Management's estimate of 1997 capital spending is in the range of $200 million, which the company expects to fund from operating cash flows and available debt facilities. YEAR 2000 Management has made an assessment of the capability of its computer-based systems to properly handle dates of January 1, 2000 and beyond. Management does not expect that costs incurred to address this issue will be material. STOCKHOLDERS AND MARKET DATA IBP's common shares were held by approximately 6,700 stockholders of record at year-end 1996. The common stock is listed on the New York and Pacific Stock Exchanges. -5- EX-21 5 EXHIBIT 21 SUBSIDIARIES OF IBP, inc. December 28, 1996 IBP Foreign Sales Corporation IBP Hog Markets, Inc.* IBP International, Inc. IBP International, Inc. Asia** IBP International, Inc. Europe** IBP of Wisconsin, inc. IBP Service Center Corp. Lakeside Farm Industries Ltd. Lakeside Packers Ltd. *** PBX, inc. Prepared Foods, Inc. Rural Energy Systems, Inc. Southern Beef Processors, Inc. Supreme Processed Foods, Inc. Texas Transfer, Inc. _______________________ * Also doing business as Heinold Hog Market ** Stock is 100% owned by IBP International, Inc. *** Stock is 100% owned by Lakeside Farm Industries Ltd. EX-23 6 EXHIBIT 23.1 CONSENT OF INDEPENDENT ACCOUNTANTS ---------------------------------- We consent to the incorporation by reference in the registration statements of IBP, inc. on Form S-3 (File No. 33-64459) and on Form S-8 (File No. 33-19441) of our report dated January 24, 1997, on our audits of the consolidated financial statements and financial statement schedule of IBP, inc. as of December 28, 1996 and December 30, 1995 and for the years ended December 28, 1996 and December 30, 1995, which report is incorporated by reference in this Annual Report on Form 10-K. COOPERS & LYBRAND L.L.P. Omaha, Nebraska March 27, 1997 EXHIBIT 23.2 CONSENT OF INDEPENDENT ACCOUNTANTS ---------------------------------- We hereby consent to the incorporation by reference in the Registration Statement on Form S-8 (Nos. 33-19441 and 1-6085) relating to the IBP 1987 and 1993 Stock Option Plans of our report dated February 3, 1995 appearing on page 23 of the 1994 Annual Report to Stockholders which is incorporated by reference in this Annual Report on Form 10-K. We also consent to the incorporation by reference of our report on the Financial Statement Schedule, which appears on page 12 of this Annual Report on Form 10-K. PRICE WATERHOUSE LLP Chicago, Illinois March 27, 1997 EX-2 7 Exhibit 2.1 AGREEMENT AND PLAN OF MERGER by and among FOODBRANDS AMERICA, INC. AND IBP, inc. AND IBP SUB, INC. Dated as of March 25, 1997 TABLE OF CONTENTS Page ARTICLE I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1 1.1 The Offer . . . . . . . . . . . . . . . . . . . . . . . . .1 1.2 Company Action. . . . . . . . . . . . . . . . . . . . . . .4 1.3 Board of Directors of the Company . . . . . . . . . . . . .5 ARTICLE II THE MERGER. . . . . . . . . . . . . . . . . . . . . . . . .6 2.1 The Merger. . . . . . . . . . . . . . . . . . . . . . . . .6 2.2 Effect of Merger. . . . . . . . . . . . . . . . . . . . . .7 (a)Name of Surviving Corporation. . . . . . . . . . . . . .7 (b)Certificate of Incorporation . . . . . . . . . . . . . .7 (c) Bylaws. . . . . . . . . . . . . . . . . . . . . . . . .7 (d)Corporate Organization . . . . . . . . . . . . . . . . .7 (e)Directors and Officers . . . . . . . . . . . . . . . . .8 (f)Closing. . . . . . . . . . . . . . . . . . . . . . . . .8 (g)Filing of Certificate of Merger; Effective Date and Effective Time . . . . . . . . . .8 2.3 Conversion of Shares. . . . . . . . . . . . . . . . . . . .8 2.4 Dissenters' Rights. . . . . . . . . . . . . . . . . . . . .9 2.5 Payment for Shares; Surrender of Certificates . . . . . . .9 2.6 Stock Options . . . . . . . . . . . . . . . . . . . . . . 11 2.7 Lost Certificates . . . . . . . . . . . . . . . . . . . . 12 2.8 Closing of Company Transfer Books . . . . . . . . . . . . 12 2.9 Further Assurances. . . . . . . . . . . . . . . . . . . . 12 ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY . . . . . . 13 3.1 Organization of the Company . . . . . . . . . . . . . . . 13 3.2 Authorization . . . . . . . . . . . . . . . . . . . . . . 13 3.3 Capitalization of the Company . . . . . . . . . . . . . . 14 3.4 Subsidiaries of the Company . . . . . . . . . . . . . . . 15 3.5 Undisclosed Liabilities . . . . . . . . . . . . . . . . . 16 3.6 Absence of Certain Changes or Events. . . . . . . . . . . 16 3.7 Title to Assets, Etc. . . . . . . . . . . . . . . . . . . 18 3.8 Condition of Tangible Assets. . . . . . . . . . . . . . . 18 3.9 Contracts and Commitments . . . . . . . . . . . . . . . . 19 3.10 No Conflict or Violation; Third Party Consents. . . . . . 20 3.11 Consents and Approvals. . . . . . . . . . . . . . . . . . 20 3.12 Compliance with Law . . . . . . . . . . . . . . . . . . . 20 3.13 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . 21 3.14 No Other Agreements to Sell the Company . . . . . . . . . 21 3.15 Intellectual Property . . . . . . . . . . . . . . . . . . 21 3.16 Employee Benefit Plans. . . . . . . . . . . . . . . . . . 22 3.17 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . 23 3.18 SEC Documents . . . . . . . . . . . . . . . . . . . . . . 24 3.19 Environmental Matters . . . . . . . . . . . . . . . . . . 25 3.20 Proxy Statement; Information Statement. . . . . . . . . . 27 3.22 Vote Required . . . . . . . . . . . . . . . . . . . . . . 28 3.23 Opinion of Financial Advisor. . . . . . . . . . . . . . . 28 ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE PARENT AND THE PURCHASER . . . . . . . . . . . . . . . . . . . . . . 28 4.1 Organization. . . . . . . . . . . . . . . . . . . . . . . 28 4.2 Authorization . . . . . . . . . . . . . . . . . . . . . . 29 4.3 Consents and Approvals. . . . . . . . . . . . . . . . . . 29 4.4 No Conflict or Violation; Third Party Consents. . . . . . 29 4.5 No Brokers. . . . . . . . . . . . . . . . . . . . . . . . 30 4.6 Proxy Statement; Information Statement. . . . . . . . . . 30 4.7 Share Ownership . . . . . . . . . . . . . . . . . . . . . 31 4.8 Financing . . . . . . . . . . . . . . . . . . . . . . . . 31 ARTICLE V ACTIONS BY THE COMPANY, THE PARENT AND THE PURCHASER PRIOR TO THE EFFECTIVE DATE . . . . . . 31 5.1 Maintenance of Business . . . . . . . . . . . . . . . . . 31 5.2 Certain Prohibited Transactions . . . . . . . . . . . . . 31 5.3 Investigation by the Parent and the Purchaser . . . . . . 34 5.4 Consents and Reasonable Best Efforts. . . . . . . . . . . 35 5.5 Notification of Certain Matters.. . . . . . . . . . . . . 36 5.6 Stockholders' Meeting; Board Recommendations; Proxy Material . . . . . . . . . . . . . . . . . . . . . 36 5.7 Information Statement . . . . . . . . . . . . . . . . . . 38 ARTICLE VI CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . . 41 6.1 Conditions to Each Party's Obligation to Effect the Merger . . . . . . . . . . . . . . . . . . . . . . . 41 6.2 Conditions to Obligation of the Parent to Effect the Merger . . . . . . . . . . . . . . . . . . . . . . . 42 ARTICLE VII ADDITIONAL COVENANTS OF THE COMPANY, THE PARENT AND THE PURCHASER . . . . . . . . . . . . . . . . . . . . 42 7.1 Employee Benefits . . . . . . . . . . . . . . . . . . . . 42 7.2 Officers' and Directors' Insurance; Indemnification. . . . . . . . . . . . . . . . . . . . . 43 7.3 Transition Agreements . . . . . . . . . . . . . . . . . . 44 7.4 Restructuring of Transaction. . . . . . . . . . . . . . . 45 ARTICLE VIII MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . 45 8.1 Termination . . . . . . . . . . . . . . . . . . . . . . . 45 8.2 Effect of Termination . . . . . . . . . . . . . . . . . . 46 8.3 No Survival of Representations, Warranties and Covenants. . . . . . . . . . . . . . . . . . . . . . 46 8.4 Assignment. . . . . . . . . . . . . . . . . . . . . . . . 47 8.5 Notices . . . . . . . . . . . . . . . . . . . . . . . . . 47 8.6 Choice of Law . . . . . . . . . . . . . . . . . . . . . . 49 8.7 Entire Agreement; Amendments and Waivers. . . . . . . . . 49 8.8 Schedules . . . . . . . . . . . . . . . . . . . . . . . . 49 8.9 No Third Party Beneficiary. . . . . . . . . . . . . . . . 50 8.10 Counterparts. . . . . . . . . . . . . . . . . . . . . . . 50 8.11 Invalidity. . . . . . . . . . . . . . . . . . . . . . . . 50 8.12 Headings. . . . . . . . . . . . . . . . . . . . . . . . . 50 8.13 Publicity . . . . . . . . . . . . . . . . . . . . . . . . 50 Annex A Exhibits Exhibit "A" Tender Agreements Exhibit "B" Charter Amendment DEFINITIONS The following terms are defined in the Sections indicated and shall have the meanings ascribed to them therein unless the context clearly indicates otherwise. Defined in Term Section "Acquisition Proposal" . . . . . . . . . . . . . . . . . . . . . . . . .5.8 "Antitrust Improvements Act" . . . . . . . . . . . . . . . . . . . 3.11 "Assets" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.7 "Business Day" . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8.5 "CERCLA" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.19(a) "CERCLIS". . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.19(c) "Certificate of Amendment" . . . . . . . . . . . . . . . . . . . . . 3.2(c) "Certificate of Merger" . . . . . . . . . . . . . . . . . . . . . 2.2(g) "Charter Amendment". . . . . . . . . . . . . . . . . . . . . . . . . 3.2(c) "Closing" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2(f) "Code" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.16 "Common Stock" . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3(a) "Company Disclosure Letter". . . . . . . . . . . . . . . . . . . . . . .3.3 "Company Permits". . . . . . . . . . . . . . . . . . . . . . . 3.12 "Company SEC Documents" . . . . . . . . . . . . . . . . . . . . . 3.18 "Confidentiality Agreement". . . . . . . . . . . . . . . . . . . . . . .8.7 "Constituent Corporations" . . . . . . . . . . . . . . . . . . . . 2.1 "Delaware Law" . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1 "Disbursing Agent" . . . . . . . . . . . . . . . . . . . . . . . . 2.5 "Dissenters' Shares" . . . . . . . . . . . . . . . . . . . . . . . 2.4 "Effective Date" . . . . . . . . . . . . . . . . . . . . . . . . . 2.2(g) "Effective Time" . . . . . . . . . . . . . . . . . . . . . . . . . 2.2(g) "Employment Agreements". . . . . . . . . . . . . . . . . . . . . . . 7.1(a) "Encumbrances" . . . . . . . . . . . . . . . . . . . . . . . . . . 3.7 "Environmental Laws" . . . . . . . . . . . . . . . . . . . . . . . 3.19(a) "ERISA" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.16 "Exchange Act" . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1 "Expenses" . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.10(c) "Financial Statements" . . . . . . . . . . . . . . . . . . . . . . 3.5 "FINDS". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.19(c) "Governmental Entity". . . . . . . . . . . . . . . . . . . . . . . . . 3.11 "Hazardous Material" . . . . . . . . . . . . . . . . . . . . . . . 3.19(b) "Indemnified Parties" . . . . . . . . . . . . . . . . . . . . . . 7.2(a) "Information Statement". . . . . . . . . . . . . . . . . . . . . . . . .5.7 "Intellectual Property". . . . . . . . . . . . . . . . . . . . . 3.15 "Investment Banker". . . . . . . . . . . . . . . . . . . . . . . . 4.5 "JLL". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Recitals "Licenses" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.15 "Material Adverse Change". . . . . . . . . . . . . . . . . . . . . . . .3.1 "Material Adverse Effect". . . . . . . . . . . . . . . . . . . . . . . .3.1 "Merger" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1 "Merger Consideration" . . . . . . . . . . . . . . . . . . . . . . . 2.3(a) "Minimum Condition". . . . . . . . . . . . . . . . . . . . . . . . .Annex A "Morgan Stanley" . . . . . . . . . . . . . . . . . . . . . . . . . 3.13 "NOLs" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.17 "Notice of a Superior Proposal". . . . . . . . . . . . . . . . . . . . .5.8 "Offer". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1(a) "Offer Documents". . . . . . . . . . . . . . . . . . . . . . . . . . .1.(b) "Offer to Purchase". . . . . . . . . . . . . . . . . . . . . . . . 1.1(a) "OSHA" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.19(a) "Option Settlement Amount" . . . . . . . . . . . . . . . . . . . . 2.6 "Parent Companies" . . . . . . . . . . . . . . . . . . . . . . . . . . .5.6 "Patents". . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.15 "Pension Plans". . . . . . . . . . . . . . . . . . . . . . . . . . 3.16 "Personnel" . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.6(b) "Plans". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.16 "Preferred Stock". . . . . . . . . . . . . . . . . . . . . . . . . 3.3 "Proxy Statement". . . . . . . . . . . . . . . . . . . . . . . . . 5.6(c) "RCRA" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.19(a) "SEC" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1(b) "Shares" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1(a) "Share Price" . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3(a) "Special Meeting". . . . . . . . . . . . . . . . . . . . . . . . . 5.6(a) "Stock Option Plans" . . . . . . . . . . . . . . . . . . . . . . . 2.6 "Subsidiary" or "Subsidiaries" . . . . . . . . . . . . . . . . . . 3.4 "Superior Proposal". . . . . . . . . . . . . . . . . . . . . . . . . . .5.8 "Surviving Corporation" . . . . . . . . . . . . . . . . . . . . . 2.1 "Takeover Proposal". . . . . . . . . . . . . . . . . . . . . . . 5.10(c) "Tender Agreements". . . . . . . . . . . . . . . . . . . . . . . Recitals "Termination Fee". . . . . . . . . . . . . . . . . . . . . . . . . .5.10(b) "Trademarks" . . . . . . . . . . . . . . . . . . . . . . . . . . 3.15 "Transition Agreements". . . . . . . . . . . . . . . . . . . . . . 7.3 "Warrant Agreement". . . . . . . . . . . . . . . . . . . . . . . . . . .3.3 "Welfare Plans" . . . . . . . . . . . . . . . . . . . . . . . . . 3.16 AGREEMENT AND PLAN OF MERGER This Agreement and Plan of Merger, dated as of March 25, 1997 (the "Agreement") is by and among Foodbrands America, Inc., a Delaware corporation (the "Company"), IBP, inc., a Delaware corporation (the "Parent"), and IBP Sub, Inc., a Delaware corporation and a wholly-owned subsidiary of the Parent (the "Purchaser"). W I T N E S S E T H : WHEREAS, the respective Boards of Directors of the Parent, Purchaser and the Company have each approved the acquisition of the Company by the Parent upon the terms and subject to the conditions set forth in this Agreement; WHEREAS, to induce the Parent and the Purchaser to enter into this Agreement, each of Joseph Littlejohn & Levy Fund, L.P., Joseph Littlejohn & Levy Fund II, L.P. (collectively, "JLL") and The Airlie Group L.P. are concurrently entering into a Tender Agreement with the Parent and the Purchaser in the form attached hereto as Exhibit A (each a "Tender Agreement" and collectively, the "Tender Agreements"), each of which Tender Agreements have been approved by the Board of Directors of the Company; and WHEREAS, the Parent, the Purchaser and the Company desire to make certain representations, warranties, covenants and agreements in connection with the March 28, 1997 Offer and the Merger (each as hereafter defined) and also to prescribe certain conditions to the Offer and the Merger. NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements herein contained, and intending to be legally bound hereby, the Parent, the Purchaser and the Company hereby agree as follows: ARTICLE I THE TENDER OFFER 1.1 The Offer. (a) In accordance with the provisions of this Agreement and provided that nothing shall have occurred which would result in a failure of any of the conditions set forth in Annex A, attached hereto and made a part hereof, as promptly as practicable, and in no event later than the fifth (5th) business day following the date hereof, the Parent shall cause the Purchaser to, and the Purchaser shall commence (within the meaning of Rule 14d-2 under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), a tender offer (as it may be amended from time to time as permitted hereunder, the "Offer") for all of the issued and outstanding shares (the "Shares") of the Common Stock (defined hereafter) at a price of Twenty Three Dollars and Forty Cents ($23.40) per share net to the seller in cash, without interest thereon (such price or such higher price per share as may be paid in the Offer, being referred to herein as the "Share Price"), which Offer, and the obligation of the Purchaser to accept payment and pay for Shares tendered pursuant to the Offer, shall be in accordance with the terms of this Agreement, subject to the conditions set forth in Annex A hereto. The Purchaser shall, subject only to the satisfaction or waiver of the conditions set forth on Annex A hereto, accept for payment and pay for all Shares validly tendered and not withdrawn pursuant to the Offer as soon as practicable after the expiration of the Offer. The Offer shall be made by means of an offer to purchase (the "Offer to Purchase") containing the terms set forth in this Agreement, the Minimum Condition (as defined in Annex A hereto) and the other conditions set forth in Annex A hereto. Notwithstanding the foregoing, the Purchaser expressly reserves the right to increase the price per Share payable in the Offer and make any other changes to the terms or conditions of the Offer (or waive in whole or in part, at the sole discretion of the Purchaser any of such conditions), provided, however, that the Purchaser will not, without the prior written consent of the Company (such consent to be authorized by the Board of Directors of the Company), (i) waive the Minimum Condition, (ii) subject to clause (z) of the proviso in the immediately following sentence, extend the Offer if all of the Offer conditions are satisfied or waived, (iii) decrease the Share Price, change the form of consideration payable in the Offer or decrease the number of Shares sought, (iv) impose additional conditions to the Offer, (v) waive the condition described in clause (x) of Annex A hereto or (vi) amend the conditions of the Offer or any other term of the Offer in any manner adverse to the holders of Shares (other than insignificant changes or amendments or other than to waive any condition). The initial expiration date of the Offer shall be 20 business days following commencement of the Offer (such date and time, as may be extended in accordance with the terms hereof, is referred to as the "Expiration Date"); provided, however, and notwithstanding anything in the foregoing to the contrary, it is understood and agreed that the Purchaser may, from time to time, in its sole discretion extend the Expiration Date, but not beyond September 24, 1997, without the consent of the Company (x) if any of the conditions to the Offer have not been satisfied, for the minimum period of time necessary to satisfy such condition; (y) for any period required by any order, decree or ruling of, or any rule, regulation, interpretation or position of, any Governmental Entity (as hereafter defined) applicable to the Offer; or (z) for a period of not more than five business days beyond the latest expiration date that would otherwise be permitted under clause (x) or (y) of this sentence solely for the purpose of obtaining valid tenders (which are not withdrawn) of 90% of the Shares. A record holder who validly tenders, and does not withdraw, pursuant to the Offer at least 500,000 shares of Common Stock which such holder beneficially owns, may receive, upon acceptance of such shares by the Purchaser pursuant to the Offer, payment therefor by wire transfer of immediately available funds to an account in the United States designated in writing by such holder at the time such shares are tendered pursuant to the Offer. (b) As soon as practicable on the date the Offer is commenced, the Parent and the Purchaser shall file with the United States Securities and Exchange Commission (the "SEC") a Tender Offer Statement on Schedule 14D-1 with respect to the Offer (together with all amendments and supplements thereto and including the exhibits thereto, the "Schedule 14D-1"). The Schedule 14D-1 will include, as exhibits, the Offer to Purchase and a form of letter of transmittal and summary advertisement (collectively, together with any amendments and supplements thereto, the "Offer Documents"). The Offer Documents will comply as to form in all material respects with the provisions of applicable federal securities laws and, on the date filed with the SEC and on the date first published, sent or given to the Company's stockholders, shall not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading, except that no representation is made by the Parent or the Purchaser with respect to information furnished by the Company for inclusion or incorporation by reference in the Offer Documents. The information supplied in writing by the Company for inclusion or incorporation by reference in the Offer Documents and by the Parent or the Purchaser for inclusion or incorporation by reference in the Schedule 14D-9 (as hereinafter defined) will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. Each of the Parent and the Purchaser will take all steps necessary to cause the Offer Documents to be filed with the SEC and to be disseminated to holders of the Shares, in each case as and to the extent required by applicable federal securities laws. Each of the Parent and the Purchaser, on the one hand, and the Company, on the other hand, will promptly correct any information provided by it for use in the Offer Documents if and to the extent that it shall have become false and misleading in any material respect and the Purchaser will take all steps necessary to cause the Offer Documents as so corrected to be filed with the SEC and to be disseminated to holders of the Shares, in each case as and to the extent required by applicable federal securities laws. The Company and its counsel shall be given the opportunity to review the Schedule 14D-1 before it is filed with the SEC. In addition, the Parent and the Purchaser will provide the Company and its counsel in writing with any comments, whether written or oral, the Parent, the Purchaser or their counsel may receive from time to time from the SEC or its staff with respect to the Offer Documents promptly after the receipt of such comments. 1.2 Company Action. (a) The Company hereby approves of and consents to the Offer and represents that its Board of Directors has duly adopted resolutions approving the Offer, the Merger, this Agreement, the Tender Agreements and the acquisition of shares of Common Stock pursuant thereto, has determined that the Merger is advisable and that the terms of the Offer and the Merger are fair to, and in the best interests of, the Company's stockholders and has resolved to recommend acceptance of the Offer and approval of the Merger by the stockholders of the Company. The Company hereby consents to the inclusion in the Offer Documents of the recommendation of the Board of Directors of the Company described in this Section 1.2(a), subject to the right of the Board of Directors of the Company to withdraw or modify its approval or recommendation of the Offer in accordance with Section 5.7(b) hereof. (b) Concurrently with the commencement of the Offer, the Company shall file with the SEC a Solicitation/Recommendation Statement on Schedule 14D-9 (together with all amendments and supplements thereto and including the exhibits thereto, the "Schedule 14D-9") which shall, subject to the right of the Board of Directors of the Company to withdraw or modify its approval or recommendation of the Offer in accordance with Section 5.7(b) hereof, contain the recommendation referred to in Section 1.2(a) hereof. The Schedule 14D-9 will comply in all material respects with the provisions of applicable federal securities laws and, on the date filed with the SEC and on the date first published, sent or given to the Company's stockholders, shall not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading, except that no representation is made by the Company with respect to information furnished by the Parent or the Purchaser for inclusion or incorporation by reference in the Schedule 14D-9. The Company further agrees to take all steps necessary to cause the Schedule 14D-9 to be filed with the SEC and to be disseminated to holders of the Shares, in each case as and to the extent required by applicable federal securities laws. Each of the Company, on the one hand, and the Parent and the Purchaser, on the other hand, agrees promptly to correct any information provided by it for use in the Schedule 14D-9 if and to the extent that it shall have become false and misleading in any material respect and the Company further agrees to take all steps necessary to cause the Schedule 14D-9 as so corrected to be filed with the SEC and to be disseminated to holders of the Shares, in each case as and to the extent required by applicable federal securities laws. The Parent and its counsel shall be given the opportunity to review the Schedule 14D-9 before it is filed with the SEC. In addition, the Company agrees to provide the Parent, the Purchaser and their counsel with any comments, whether written or oral, that the Company or its counsel may receive from time to time from the SEC or its staff with respect to the Schedule 14D-9 promptly after the receipt of such comments or other communications. The Company has been advised by each of its directors that as of the date hereof each such person intends to tender all of the shares of Common Stock owned by such person pursuant to the Offer. (c) In connection with the Offer, the Company will promptly furnish or cause to be furnished to the Purchaser mailing labels, security position listings and any available listing or computer file containing the names and addresses of all record holders of the Shares as of a recent date, and shall furnish the Purchaser with such additional information (including, but not limited to, updated lists of holders of the Shares and their addresses, mailing labels and lists of security positions) and assistance as the Purchaser or its agents may reasonably request in communicating the Offer to the record and beneficial holders of the Shares. Except for such steps as are necessary to disseminate the Offer Documents, the Parent and the Purchaser shall hold in confidence the information contained in any of such labels and lists and the additional information referred to in the preceding sentence, will use such information only in connection with the Offer and the Merger, and, if this Agreement is terminated, will upon request of the Company deliver or cause to be delivered to the Company all copies of such information then in its possession or the possession of its agents or representatives. 1.3 Board of Directors of the Company. (a) Promptly upon the purchase of and payment for any Shares by the Parent or any of its subsidiaries which represents at least a majority of the outstanding Shares (on a fully diluted basis), the Parent shall be entitled to designate such number of directors, rounded up to the next whole number, on the Board of Directors of the Company as is equal to the product of the total number of directors on such Board (giving effect to the directors designated by the Parent pursuant to this sentence) multiplied by the percentage that the number of Shares so accepted for payment bears to the total number of Shares then outstanding. In furtherance thereof, the Company shall, upon request of the Purchaser, use its best efforts promptly either to increase the size of its Board of Directors or secure the resignations of such number of its incumbent directors, or both, as is necessary to enable the Parent's designees to be so elected to the Company's Board, and shall take all actions available to the Company to cause the Parent's designees to be so elected. At such time, the Company shall also cause persons designated by the Parent to constitute at least the same percentage (rounded up to the next whole number) as is on the Company's Board of Directors of (i) each committee of the Company's Board of Directors, (ii) each board of directors (or similar body) of each Subsidiary (as defined hereafter) of the Company, and (iii) each committee (or similar body) of each such board. Notwithstanding the foregoing, until the Effective Time (as defined hereafter), the Company shall use all reasonable efforts to have at least two members of the Board of Directors who are neither officers of the Parent or designees, stockholders or affiliates of the Parent. Subject to receipt by the Company from the Parent or the Purchaser of the information referred to in the penultimate sentence of this Section 1.3(a), the Company shall promptly take all actions required pursuant to Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder in order to fulfill its obligations under this Section 1.3(a), including mailing to stockholders the information required by such Section 14(f) and Rule 14f-1 as is necessary to enable the Parent's designees to be elected to the Company's Board of Directors. The Parent or the Purchaser will supply the Company any information with respect to either of them and their nominees, officers, directors and affiliates required by such Section 14(f) and Rule 14f-1. The provisions of this Section 1.3(a) are in addition to and shall not limit any rights which the Purchaser, the Parent or any of their affiliates may have as a holder or beneficial owner of Shares as a matter of law with respect to the election of directors or otherwise. (b) From and after the time, if any, that the Parent's designees constitute a majority of the Company's Board of Directors and prior to the Effective Date (as hereinafter defined), any amendment of this Agreement by the Company, any termination of this Agreement by the Company, any extension of time for performance of any of the obligations of the Parent or the Purchaser hereunder, any waiver of any condition to the Company's obligations hereunder or any of the Company's rights hereunder or action to amend or otherwise modify the Company's Amended and Restated Certificate of Incorporation or Amended and Restated By-Laws may be effected only by the action of a majority of the directors of the Company then in office who were not officers of the Parent or designees, stockholders or affiliates of the Parent, which action shall be deemed to constitute the action of any committee specifically designated by the Board of Directors to approve the actions and transactions contemplated hereby and the full Board of Directors; provided, that if there shall be no such directors, such actions may be effected by majority vote of the entire Board of Directors of the Company. ARTICLE II THE MERGER 2.1 The Merger. At the Effective Time, the Purchaser shall be merged with and into the Company (the "Merger") upon the terms and subject to the conditions hereinafter set forth as permitted by and in accordance with the provisions of Section 251 (or other applicable provision) of the General Corporation Law of the State of Delaware (the "Delaware Law"). The Company and the Purchaser are sometimes referred to herein as the "Constituent Corporations." The Company shall be the surviving corporation following the effectiveness of the Merger (sometimes referred to herein as the "Surviving Corporation"). Notwithstanding anything to the contrary herein, at the election of the Parent, any direct or indirect wholly-owned subsidiary of the Parent may be substituted for the Purchaser as a Constituent Corporation in the Merger; provided, however, that such substitution shall not impede or delay the consummation of the transactions contemplated by this Agreement. In such event, the parties agree to execute an appropriate amendment to this Agreement, in form and substance reasonably satisfactory to the Parent and the Company, in order to reflect such substitution. 2.2 Effect of Merger. The parties agree to the following provisions with respect to the Merger: (a) Name of Surviving Corporation. The name of the Surviving Corporation from and after the Effective Date shall be "Foodbrands America, Inc." (b) Certificate of Incorporation. The Certificate of Incorporation of the Purchaser as in effect immediately prior to the Effective Date shall from and after the Effective Date be the Certificate of Incorporation of the Surviving Corporation until changed or amended in accordance with the provisions of applicable law. (c) Bylaws. The Bylaws of the Purchaser as in effect immediately prior to the Effective Date shall from and after the Effective Date be and continue to be the Bylaws of the Surviving Corporation until changed or amended as provided therein or the Certificate of Incorporation of the Surviving Corporation or in accordance with the provisions of applicable law. (d) Corporate Organization. The separate corporate existence of the Purchaser shall cease at the Effective Time. All the rights, privileges, immunities and franchises, of a public as well as a private nature, and all property, real, personal and mixed, of each of the Constituent Corporations, and all debts due on whatever account to each of them, including subscriptions for stock and other choses in action belonging to each of them, shall be taken and deemed to be transferred to and vested in the Surviving Corporation in accordance with Delaware Law without further act or deed. The title to any real estate, or any interest therein, vested in either of the Constituent Corporations shall not revert or be in any way impaired by reason of Merger. The Surviving Corporation shall thenceforth be responsible for all the liabilities and obligations of each of the Constituent Corporations, with the effect set forth in the Delaware Law. Any claim, action or proceeding existing or pending by or against any of the Constituent Corporations may be prosecuted as if the Merger had not taken place, or the Surviving Corporation may be substituted in its place. The Surviving Corporation shall have all the rights, privileges, immunities and powers and shall be subject to all the duties and liabilities of a corporation organized under the Delaware Law, and neither the rights of creditors nor any liens upon the property of the Purchaser or the Company shall be impaired by the Merger. (e) Directors and Officers. The directors of the Purchaser immediately prior to the Effective Time will be the initial directors of the Surviving Corporation, and the officers of the Company immediately prior to the Effective Time will be the initial officers of the Surviving Corporation, in each case until the earlier of their resignation or removal or until their successors are elected or appointed and qualified. (f) Closing. The Merger shall be consummated and the closing of this Agreement (the "Closing") shall take place at the offices of Sidley & Austin, One First National Plaza, Chicago, Illinois 60603, or at such other place as the parties may mutually agree, no later than the second business day (the "Closing Date") after the satisfaction or waiver of the conditions to the obligations of the parties hereto set forth in Article VI hereof. (g) Filing of Certificate of Merger; Effective Date and Effective Time. On the Closing Date (or such other date as the Parent and the Company may agree) the Parent, the Purchaser and the Company shall cause a certificate of merger or, if applicable, a certificate of ownership and merger (the "Certificate of Merger") to be executed and filed with the Secretary of State of the State of Delaware as provided in the Delaware Law. The Merger shall become effective on the date and time at which the Certificate of Merger shall have been duly filed with the Secretary of State of the State of Delaware or at such other time as the Parent, the Purchaser and the Company shall agree should be specified in the Certificate of Merger (the date and time the Merger becomes effective being referred to herein respectively as the "Effective Date" and the "Effective Time"). 2.3 Conversion of Shares. By virtue of the Merger and without any action on the part of the Parent, the Purchaser or any stockholder of the Company, as of the Effective Time pursuant to this Agreement: (a) Each share of common stock, $.01 par value per share, of the Company (the "Common Stock") then issued and outstanding immediately prior to the Effective Time (other than shares of Common Stock held by the Company as treasury stock or by any wholly-owned subsidiary of the Company or owned by the Parent, the Purchaser or any other subsidiaries of the Parent and other than the Dissenters' Shares (as defined in Section 2.4)) shall be cancelled and converted into and become the right to receive, upon surrender of the certificate representing such share an amount in cash, without interest thereon, equal to the Share Price (the "Merger Consideration"); (b) Each outstanding share of Common Stock held by the Company as a treasury share or by any wholly-owned subsidiary of the Company and any shares of Common Stock owned by the Parent, the Purchaser or any other subsidiary of the Parent shall be cancelled and retired and cease to exist and no consideration shall be delivered in exchange therefor; and (c) Each share of common stock, $.01 par value per share, of the Purchaser then issued and outstanding shall be converted into one fully paid and nonassessable share of common stock, par value $.01 per share, of the Surviving Corporation. 2.4 Dissenters' Rights. Each outstanding share of Common Stock held by stockholders who shall have properly exercised and perfected appraisal rights with respect thereto under Section 262 of the Delaware Law ("Dissenters' Shares") shall not be cancelled and converted into the right to receive the Merger Consideration in cash, without interest, pursuant to the Merger, but shall be entitled to receive payment of the appraised value of such Dissenters' Shares in accordance with provisions of such Section 262, except that any Dissenters' Shares held by a stockholder who fails to perfect or withdraws his or her demand for appraisal of such Dissenters' Shares or loses his or her right to such payment shall be cancelled and converted, as of the Effective Time, into the right to receive the Merger Consideration. The Company will give the Parent prompt written notice of any demands received by the Company for appraisals of shares of Common Stock. The Company shall not, except with the prior written consent of the Parent, make any payment with respect to any demands for appraisal or offer to settle or settle any such demands. 2.5 Payment for Shares; Surrender of Certificates. In order that the cash payments provided for by Sections 2.3(a) and 2.6 hereof may be made, the Parent shall cause Purchaser to deliver to a bank or trust company designated by the Parent prior to the Effective Time (herein referred to as the "Disbursing Agent"), at or prior to the Effective Time, in trust for the benefit of the holders of Common Stock and persons entitled to any portion of the Option Settlement Amount (as defined in Section 2.6), cash, in immediately available funds, in an aggregate amount necessary to pay the Merger Consideration pursuant to Section 2.3(a) (determined as though there are no Dissenters' Shares), plus the Option Settlement Amount. As soon as practicable after the Effective Time, the Parent shall cause the Disbursing Agent to mail (and to make available for collection by hand) to each record holder of an outstanding certificate or certificates which immediately prior to the Effective Time represented shares of Common Stock, a form letter of transmittal (which shall specify that delivery shall be effected, and risk of loss and title to the certificates shall pass, only upon actual delivery of the certificates to the Disbursing Agent and shall be in a form and have such other provisions as the Parent may reasonably specify) and instructions for use in effecting the surrender of such certificate or certificates for payment therefor. Such letter of transmittal and instructions shall request that each such record holder shall surrender such holder's certificate or certificates to the Disbursing Agent promptly following the Effective Date. Upon surrender of a certificate formerly representing shares of Common Stock, together with a letter of transmittal duly completed and validly executed in accordance with the instructions thereto, and such other documents as may be reasonably required pursuant to such instructions, the Disbursing Agent shall promptly pay to the persons entitled thereto the amount to which such persons are entitled. No interest will be paid or accrued on the cash payable upon the surrender of any certificate or certificates (it being understood that any interest earned on funds made available to the Disbursing Agent pursuant to this Agreement shall be turned over to the Parent). If payment is to be made to a person other than the person in whose name the certificate so surrendered is registered, it shall be a condition of payment that such certificate shall be properly endorsed or otherwise in proper form for transfer and that the person requesting such payment shall pay any transfer or other taxes required by reason of the delivery of such payment to a person other than the registered holder of such certificate or establish to the satisfaction of the Parent that any such taxes have been paid or are not applicable. Until surrendered as contemplated by this Section 2.5, each certificate (other than certificates representing Dissenters' Shares and certificates representing any shares of Common Stock owned by the Parent or any subsidiaries of the Parent, the Company or any wholly-owned subsidiary of the Company) shall be deemed at any time after the Effective Date to represent only the right to receive upon such surrender the amount of cash, without interest, into which the shares of Common Stock theretofore represented by such certificate shall have been converted pursuant to Section 2.3(a). Notwithstanding the foregoing, none of the Disbursing Agent, the Surviving Corporation or any party hereto shall be liable to a former stockholder of the Company for any cash or interest delivered to a public official as is required pursuant to applicable abandoned property, escheat or similar laws. After six months after the Effective Date, any remaining funds, including any interest or other income thereon, held by the Disbursing Agent pursuant to this Section shall be released from trust and shall be paid by the Disbursing Agent to the Surviving Corporation. Thereafter, holders of shares of Common Stock shall look only to the Parent or the Surviving Corporation (subject to the terms of this Agreement and abandoned property, escheat and other similar laws) as general creditors thereof with respect to the Merger Consideration, without any interest thereon, that may be payable per share of Common Stock upon due surrender of the certificates held by them. The Parent or the Disbursing Agent shall be entitled to deduct and withhold from the consideration otherwise payable pursuant to this Agreement to any holder of shares of Common Stock such amounts as the Parent or the Disbursing Agent is required to deduct and withhold with respect to the making of such payment under the Code (as hereinafter defined) or under any provision of state, local or foreign tax law. To the extent that amounts are so withheld by the Parent or the Disbursing Agent, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the holder of the shares of Common Stock in respect of which such deduction and withholding was made by the Parent or the Disbursing Agent. 2.6 Stock Options. Immediately prior to the Effective Time, subject to obtaining any consent which may be necessary from the holder of the outstanding options, the Company shall cancel and settle, by cash payment to the holders thereof (the "Option Settlement Amount"), all the outstanding options to purchase shares of Common Stock (whether or not such options are currently exercisable or vested) which have heretofore been granted under the following stock plans and agreements of the Company: (i) Foodbrands America, Inc. 1992 Stock Incentive Plan, as amended, (ii) Foodbrands America, Inc. Associate Stock Purchase Plan, (iii) Foodbrands America, Inc. Nonqualified Associate Stock Purchase Plan, (iv) Deferred Stock Compensation Plan for the non-employee directors of Foodbrands, and (v) the 25,000 options issued to certain directors of the Company pursuant to option agreements dated April 27, 1995. (Such plans and agreements are referred to herein collectively as the "Stock Option Plans.") Except as otherwise provided pursuant to the terms of the Stock Option Plans in clauses (ii) and (iii) above, such Option Settlement Amount with respect to each cancelled option shall be in an amount equal to the excess, if any, of the Merger Consideration over the per share exercise price of such cancelled option, multiplied by the number of shares of Common Stock into which such cancelled option would be exercisable, less any amounts that the Company is required to withhold and pay over to any federal and state, local or other tax authorities under applicable law with respect to such Option Settlement Amount. The remaining proceeds, if any, will be paid to the option holder in cash. Such cash settlement shall constitute full performance of the Company's obligations under the Stock Option Plans and any related stock option agreements. Except as otherwise agreed to by the parties, the Stock Option Plans shall terminate before or as of the Effective Time. 2.7 Lost Certificates. If any certificate representing Common Stock shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming such certificate to be lost, stolen or destroyed and, if required by the Surviving Corporation, the posting by such person of a bond, in such reasonable amount as the Surviving Corporation may direct, as indemnity against any claim that may be made against it with respect to such certificate, the Disbursing Agent will pay in exchange for such lost, stolen or destroyed certificate the Merger Consideration multiplied by the number of shares of Common Stock represented by such certificate, to which the holder thereof is entitled pursuant to this Article II. 2.8 Closing of Company Transfer Books. At the Effective Time, the stock transfer books of the Company shall be closed, and no transfer of shares of Common Stock shall thereafter be made. If, after the Effective Time, share certificates are presented to the Surviving Corporation, the Disbursing Agent or the Parent, they shall be cancelled and exchanged for the Merger Consideration as provided in this Article II. 2.9 Further Assurances. If at any time the Surviving Corporation shall consider or be advised that any further assignments or assurances are necessary or desirable to vest in the Surviving Corporation, according to the terms hereof, the title of any property or rights of the Company or the Purchaser, the last acting officers and directors of the Company or the Purchaser, as the case may be, or the corresponding officers and directors of the Surviving Corporation shall and will execute and make all such proper assignments and assurances and do all things necessary or proper to vest title in such property or rights in the Surviving Corporation, and otherwise to carry out the purposes of this Agreement. ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY The Company hereby represents and warrants to the Parent and the Purchaser as follows: 3.1 Organization of the Company. The Company is duly organized, validly existing and in good standing under the laws of the State of Delaware, has full corporate power and authority to conduct its business as it is presently being conducted and to own and lease its properties and assets. Each of the direct and indirect Subsidiaries of the Company is duly organized, validly existing and in good standing under the laws of its respective state of incorporation, has full corporate power and authority to conduct its business as it is presently being conducted and to own, operate and lease its properties and assets. Each of the Company and its Subsidiaries is duly qualified to do business as a foreign corporation and is in good standing in each jurisdiction in which (i) such qualification is necessary under the applicable law as a result of its conduct of its business or ownership of assets or properties held under lease, and (ii) where the failure to be so qualified would have a Material Adverse Effect (as defined below) on the Company. "Material Adverse Change" or "Material Adverse Effect" means, when used with respect to the Parent or the Company, as the case may be, any change or effect, either individually or in the aggregate, that is or can reasonably be expected to be materially adverse to the business, assets, liabilities, properties, condition (financial or otherwise) or results of operations of the Parent and its subsidiaries taken as a whole, or the Company and its Subsidiaries taken as a whole, as the case may be. 3.2 Authorization. (a) The Company has all necessary corporate power and authority to enter into this Agreement and will at the Closing have taken all necessary corporate action, including stockholder consent or approval (if necessary), to consummate the transactions contemplated hereby and to perform its obligations hereunder. The execution and delivery of this Agreement by the Company and the performance of its obligations hereunder have been duly and validly authorized by the Board of Directors of the Company and, other than the approval and adoption of this Agreement by the requisite vote of the Company's stockholders, no other corporate proceedings on the part of the Company are necessary, and this Agreement has been duly executed and delivered by the Company and (assuming the valid authorization, execution and delivery of this Agreement by the Parent and the Purchaser) constitutes a valid and binding obligation of the Company enforceable against it in accordance with its terms, except as such enforceability may be limited by (i) bankruptcy, insolvency, reorganization, moratorium or other similar laws, now or hereafter in effect, relating to or limiting creditors' rights generally and (ii) general principles of equity (whether considered in an action in equity or at law) which provide, among other things, that the remedy of specific performance and injunctive and other forms of equity relief are subject to equitable defenses and the discretion of the court before which any proceedings therefor may be brought. (b) The Board of Directors of the Company has duly and validly approved and taken all corporate action required to be taken by the Board of Directors for the approval and confirmation of the transactions contemplated by this Agreement and the Tender Agreements, including, without limitation, all actions necessary to render the provisions of Section 203 of the Delaware Law inapplicable to transactions contemplated by this Agreement or the Tender Agreements. No Oklahoma takeover statute or similar statute or regulation applies or purports to apply to the Parent, the Purchaser, the Merger, this Agreement, the Tender Agreements or any of the transactions contemplated by this Agreement or the Tender Agreements in connection with the transactions contemplated by this Agreement or the Tender Agreements. (c) The Board of Directors of the Company has duly and validly approved and taken all corporate actions required to be taken by the Board of Directors for the approval of the amendments to the Amended and Restated Certificate of Incorporation of the Company (which amendments are attached as Exhibit B hereto) (the "Charter Amendment"). The stockholders of the Company have duly and validly approved the Charter Amendment. Subject to (i) the provisions of the Exchange Act relating to the distribution of an information statement to the stockholders of the Company and (ii) the filing of a certificate of amendment ("Certificate of Amendment") with the Secretary of State of the State of Delaware, no further action is required to make effective the Charter Amendment. The execution and delivery of the Tender Agreements, the tender of shares of Common Stock pursuant to the Offer and the grant of the options contemplated by the Tender Agreements do not conflict with Article Fifth of the Amended and Restated Certificate of Incorporation of the Company, and upon the effectiveness of the Charter Amendment neither the purchase of shares of Common Stock pursuant to the Offer nor the exercise of any such options under the Tender Agreement will violate the Amended and Restated Certificate of Incorporation of the Company. 3.3 Capitalization of the Company. The Company has an authorized capital stock of 20,000,000 shares of Common Stock and 4,000,000 shares of preferred stock, par value $.01 per share (the "Preferred Stock"). As of the date hereof, 12,465,107 shares of Common Stock and no shares of Preferred Stock were issued and outstanding. Such issued shares of Common Stock are duly authorized, validly issued and are fully paid and nonassessable and are not subject to preemptive rights. As of the date hereof, there are no treasury shares, and there are no outstanding stock appreciation rights. There are no outstanding contractual obligations of the Company or any of its Subsidiaries to repurchase, redeem or otherwise acquire any outstanding shares of capital stock of the Company or any of its Subsidiaries. Except as set forth on Schedule 3.3 of the letter from the Company to the Parent dated the date hereof which relates to this Agreement and is designated therein as the Company Disclosure Letter (the "Company Disclosure Letter") and except for the outstanding options and warrants to purchase 1,762,752 shares of Common Stock granted under the Company's Stock Option Plans and the Warrant Agreement dated October 31, 1991 among the Company and certain banks (the "Warrant Agreement"), there are no outstanding options, warrants or rights to purchase or acquire any capital stock of the Company or any securities convertible, exchangeable or exercisable for any of its capital stock, and except as set forth on Schedule 3.3 of the Company Disclosure Letter, there are no contracts, commitments, understandings, arrangements or restrictions by which the Company is bound to sell or issue any shares of its capital stock or any securities convertible, exchangeable or exercisable for any of its capital stock. As of the Effective Time, the Company will have no obligation to issue any shares of Common Stock. 3.4 Subsidiaries of the Company. Schedule 3.4 of the Company Disclosure Letter sets forth a complete and correct description of the name and jurisdiction of incorporation or formation of each of the direct and indirect subsidiaries of the Company of which the Company owns more than a 50% equity interest. Such subsidiaries are sometimes hereafter collectively referred to as the "Subsidiaries" or "Subsidiary." Except as set forth on Schedule 3.4 of the Company Disclosure Letter, all of the issued and outstanding shares of common stock or other equity interest of each Subsidiary have been duly authorized, validly issued, are fully paid and nonassessable and are owned beneficially by the Company or a Subsidiary of the Company free and clear of any liens, claims or other encumbrances or rights of third parties. There are no outstanding options, warrants or rights to purchase or acquire any capital stock of any of the Subsidiaries of the Company, and there are no contracts, commitments, understandings, arrangements or restrictions by which the Company or any Subsidiary of the Company is bound to sell or issue any shares of capital stock of such Subsidiary. Except for the Company's interest in its Subsidiaries and except as disclosed on Schedule 3.4 of the Company Disclosure Letter, neither the Company nor its Subsidiaries owns directly or indirectly any interest or investment (whether equity or debt) in, nor is the Company or any of its Subsidiaries subject to any obligation or requirement to provide for or to make any investment (in the form of a loan, capital contribution or otherwise) to or in, any corporation, partnership, joint venture, limited liability company, business, trust or entity. 3.5 Undisclosed Liabilities. Except as set forth in the Company SEC Documents (as hereafter defined) and in the audited financial statements of the Company and Subsidiaries as of and for the fiscal year ended December 28, 1996 (the "Financial Statements") listed on and attached to Schedule 3.5 of the Company Disclosure Letter neither the Company nor any of its Subsidiaries has any liabilities or obligations, either accrued, absolute, contingent or otherwise, which would be required to be reflected on a balance sheet, or in the notes thereto, prepared in accordance with generally accepted accounting principles, consistently applied, except for liabilities and obligations listed in Schedule 3.5 of the Company Disclosure Letter, or incurred in the ordinary course of business consistent with past practice since December 28, 1996, or which would not have a Material Adverse Effect on the Company. 3.6 Absence of Certain Changes or Events. Except as otherwise contemplated by this Agreement or as disclosed in any of the Company's SEC Documents or the Financial Statements, since December 28, 1996, the Company and its Subsidiaries have operated their respective businesses in the ordinary course consistent with past practices and there has not been, occurred or arisen: (a) any Material Adverse Change in the Company (other than changes which are the result of general economic changes affecting the industries or businesses in which the Company or any of its Subsidiaries operate); (b) except as required by the Transition Agreements (as hereafter defined) (i) any increase in the compensation payable or to become payable by the Company or its Subsidiaries to any of their respective officers, employees or agents (collectively, "Personnel") whose total compensation for services rendered to the Company or its Subsidiaries is currently at an annual rate of more than $75,000, except for normal periodic increases in the ordinary course of business consistent with past practice; or (ii) any new employment agreement to which the Company or any Subsidiary is a party, other than agreements entered into in the ordinary course of business, consistent with past practices which provide for an annual salary less than $75,000 and have no provisions with respect to a change of control of the Company; (c) except for the Transition Agreements (as hereafter defined) (true and complete copies of which have heretofore been furnished to the Parent), any material addition to or modification of any of the employee benefit plans, arrangements or practices affecting Personnel other than the extension of coverage to other Personnel who became eligible after December 28, 1996; (d) any sale, assignment or transfer (except for intercompany transfers or sales out of inventory in the ordinary course of business) of any asset or group of related assets of the Company or its Subsidiaries, having a fair market value in excess of $500,000; (e) any waiver of any rights of substantial value to the Company and its Subsidiaries taken as a whole, whether or not in the ordinary course of business; (f) any failure to repay any obligation of the Company or its Subsidiaries, except where such failure would not have a Material Adverse Effect on the Company; (g) any entry into or any commitment or transaction that, individually or in the aggregate, has or is reasonably likely to have, a Material Adverse Effect on the Company; (h) any change by the Company or any of its Subsidiaries in accounting methods, principles or practices, except for any such change required by reason of a concurrent change in generally accepted accounting principles; (i) any amendments or changes in the Amended and Restated Certificate of Incorporation or Amended and Restated Bylaws, as amended, of the Company; (j) any revaluation by the Company or any of its Subsidiaries of any of their respective assets, including, without limitation, write-offs of accounts receivable, other than in the ordinary course of the Company's and each of its Subsidiaries' businesses consistent with past practices; (k) any damage, destruction or loss affecting the business or assets of the Company or any Subsidiary which, individually or in the aggregate resulted in or is reasonably likely to be materially adverse to the business, assets, liabilities, properties, condition (financial or otherwise) or results of operations of the Company and its Subsidiaries taken as a whole; (l) any declaration, setting aside or payment of any dividend or other distribution with respect to any shares of capital stock of the Company, or any repurchase, redemption or other acquisition by the Company or any of its Subsidiaries of any outstanding shares of capital stock or other securities of, or other ownership interests in, the Company; or (m) any agreement by the Company or any of its Subsidiaries to do any of the foregoing or take any action which would make any representation or warranty in Article III hereof untrue or incorrect. 3.7 Title to Assets, Etc. The Company or its Subsidiaries have, or on the Effective Date will have, good and marketable title to the assets (the "Assets") reflected on the Financial Statements other than those that are leased or assets which have been acquired or disposed of as contemplated by this Agreement or in the ordinary course of business consistent with past practice since December 28, 1996, and (b) none of the Assets is subject to any mortgage, deed of trust, pledge, lien, security interest, encumbrance, claim, charge or adverse interest (collectively, "Encumbrances") of any other person or entity not reflected on the Financial Statements, except for liens incurred in the ordinary course of business consistent with past practice and except for minor liens which in the aggregate are not substantial in amount, do not materially detract from the value of the property or assets subject thereto or interfere with the present use thereof. Neither the Company nor any of its Subsidiaries has received notice of any violation of any zoning, use, occupancy, building or environmental regulation, ordinance or other law, order, regulation or requirement relating to its owned or leased real property that would have a Material Adverse Effect on the Company. 3.8 Condition of Tangible Assets. The facilities and equipment of the Company and its Subsidiaries necessary to the operations of their businesses are in good operating condition and repair except for (a) ordinary wear and tear and (b) any defect the cost of repairing which would not be material to the Company and its Subsidiaries taken as a whole. All meats (fresh and frozen), frozen pizza crusts, appetizers, sauces, soups, processed meat products, supplies, and any other inventories on hand constituting assets of the Company and its Subsidiaries are (i) in good and marketable condition and usable or saleable in the ordinary course of business (normal waste and spoilage excepted) and (ii) the Company is in compliance as to content labeling and packaging with applicable laws and regulations (including without limitation those of the U.S. Department of Agriculture and Federal Food and Drug Administration), except where the failure to be in such condition or in compliance would not have a Material Adverse Effect on the Company. 3.9 Contracts and Commitments. Except (i) as set forth on Schedule 3.9 of the Company Disclosure Letter hereto, (ii) for employee benefit plans set forth on Schedule 3.16 of the Company Disclosure Letter and (iii) contracts entered into pursuant to the terms of Section 5.2 after the date hereof, neither the Company nor any of its Subsidiaries is a party to any written or oral: (a) commitment, contract, purchase order, letter of credit or agreement, other than as described in subsections (b) or (c) below, involving any obligation or liability on the part of the Company or its Subsidiaries in excess of $250,000 and not cancelable (without liability) within sixty (60) days, except for purchases made in the ordinary course of business in amounts not substantially in excess of past practice; (b) lease of real property involving an annual expense on the part of the Company or its Subsidiaries in excess of $250,000 per year; (c) lease of personal property involving an annual expense on the part of the Company or its Subsidiaries in excess of $250,000, which lease is not cancelable (without liability) within sixty (60) days; or (d) contracts and commitments not in the ordinary course of business not otherwise described above or listed on Schedule 3.9 of the Company Disclosure Letter relating to the businesses of the Company and its Subsidiaries and materially affecting the Company's and its Subsidiaries' businesses. Except as set forth on Schedule 3.9 of the Company Disclosure Letter, neither the Company nor any of its Subsidiaries is (and to the best knowledge of the Company, no other party is) in material breach or violation of, or default under, any of the contracts, letters of credit, purchase orders, leases, commitments, licenses or permits described on Schedule 3.9 of the Company Disclosure Letter, the breach or violation of which would have a Material Adverse Effect on the Company. 3.10 No Conflict or Violation; Third Party Consents. Assuming the accuracy and completeness of the representations and warranties of the Parent and the Purchaser herein, and assuming all consents and approvals referred to in Section 3.11 hereof are obtained and except for the third party consents identified on Schedule 3.10 of the Company Disclosure Letter, the execution and delivery of this Agreement does not, and consummation of the transactions contemplated hereby will not, result in (a) a violation of or a conflict with any provision of the Amended and Restated Certificate of Incorporation or Amended and Restated Bylaws of the Company or the charter or bylaws or operating agreements of any Subsidiary, (b) a breach or default under any provision of any material contract, agreement, lease, commitment, license, franchise or permit to which the Company or any of its Subsidiaries is a party or by which the Assets are bound until such time as a "Change of Control" (as defined in that certain Indenture dated as of May 15, 1996 relating to the Company's $120,000,000 10 3/4% Senior Subordinated Notes due 2006) to occur, (c) a violation of any statute, rule, regulation, ordinance, order, judgment, writ, injunction or decree the violation of which would have a Material Adverse Effect on the Company, or (d) an imposition of any material lien, mortgage, pledge, encumbrance, claim, restriction or charge on the business of the Company or any of its Subsidiaries or on any of the Assets. 3.11 Consents and Approvals. Except where such consent, approval or authorization, declaration, filing or registration is not material to the Company and its Subsidiaries taken as a whole or would not materially impair the ability of the Company to perform its obligation hereunder, no consent, approval or authorization of, or declaration, filing or registration with, any foreign, federal, state or local governmental or regulatory authority (each a "Governmental Entity") is required to be made or obtained by the Company in connection with the execution, delivery and performance of this Agreement by the Company and the consummation by the Company of the transactions contemplated hereby, other than (i) the filings required under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "Antitrust Improvements Act"), (ii) the filing of the Certificate of Merger with the Secretary of State of Delaware, and (iii) filings made in compliance with any applicable provisions of the Exchange Act. 3.12 Compliance with Law. The Company and its Subsidiaries hold, and at all required times have held, all permits, licenses, variances, exemptions, orders and approvals of all Governmental Entities necessary for the lawful conduct of their respective businesses as currently being conducted (the "Company Permits"), except for failures to hold such permits, licenses, variances, exemptions, orders and approvals which have not had, and will not have a Material Adverse Effect on the Company. The Company and its Subsidiaries are, and at all times have been, in compliance with the terms of the Company Permits, except where the failure so to comply would not have, a Material Adverse Effect on the Company. The Company and its Subsidiaries are in compliance with all applicable laws, statutes, ordinances and regulations of any Governmental Entity, except where the failure to comply would not have a Material Adverse Effect on the Company. The Company (or its Subsidiaries) has not received any written notice to the effect that, or otherwise been advised that, it is not in compliance with any of such statutes, regulations and orders, ordinances or other laws where the failure to comply would have a Material Adverse Effect on the Company, and, assuming the accuracy and completeness of the representations and warranties of the Parent and the Purchaser herein, the Company has no reason to anticipate that any presently existing circumstances are likely to result in violations of any such regulations which would have a Material Adverse Effect on the Company. No investigation or review by any Governmental Entity with respect to the Company or any of its Subsidiaries is pending or, to the knowledge of the Company, threatened, nor, to the knowledge of the Company, has any Governmental Entity indicated an intention to conduct the same, other than, in each case, those which will not have a Material Adverse Effect on the Company. 3.13 Brokers. Other than the arrangement between the Company and Morgan Stanley & Co. Incorporated ("Morgan Stanley"), neither the Company nor any affiliates of the Company has entered into or will enter into any agreement, arrangement or understanding with any person or firm which will result in the obligation of the Parent or any affiliate of the Parent or the Company to pay any finder's fee, brokerage commission or similar payment in connection with the transactions contemplated hereby. The parties hereby acknowledge the written arrangement (a copy of which has been delivered to the Parent) with respect to this transaction between the Company and Morgan Stanley, with respect to which all fees due to Morgan Stanley will be paid by the Company. 3.14 No Other Agreements to Sell the Company. Except as contained in this Agreement, the Company has no legal obligation, absolute or contingent, to any other person or firm to sell the Common Stock or the stock of any of its Subsidiaries, to sell substantially all of the assets of the Company or to effect any merger, consolidation or other reorganization of the Company or to enter into any negotiations or agreement with respect thereto. 3.15 Intellectual Property. (a) For purposes of this Agreement, "Intellectual Property" means (i) all United States and foreign copyrights, whether registered or unregistered, and pending applications to register the same, and all copyrightable works, including, without limitation, software; (ii) all United States, state and foreign trademarks, service marks and trade names (including all assumed or fictitious names under which the Company or any Subsidiary is conducting the business, whether registered or unregistered, and pending applications to register the foregoing ("Trademarks"); (iii) all United States and foreign patents, patent applications, continuations, continuations-in-part, divisions, reissues, patent disclosures, inventions (whether or not patentable or reduced to practice) or improvements thereto ("Patents"); (iv) all confidential ideas, know-how, methods, formulae, trade secrets, processes, reports, data, customer lists, business plans, or other proprietary information; (v) all agreements, commitments, contracts, understandings, licenses, sublicenses, assignments and indemnities which relate or pertain to any of the intellectual property identified in subsections (i) through (iv) above or to disclosure or use of ideas or third parties ("Licenses"). All Trademarks, Patents and Licenses of the Company and its Subsidiaries which are material to the operation of the business of the Company and its Subsidiaries taken as a whole , are listed on Schedule 3.15 of the Company Disclosure Letter. The Company owns or has the right to use all Intellectual Property required to permit the conduct of the Company's or any Subsidiary's business in the ordinary course. To the best knowledge of the Company, the Company's and its Subsidiaries' use of their Intellectual Property are not infringing upon or otherwise violating the rights of any third party in or to such Intellectual Property, and no proceedings have been instituted against or claims received by the Company or any Subsidiary that are presently outstanding alleging that the Company's (or any Subsidiary's) use of it Intellectual Property infringe upon or otherwise violate any right of a third party in or to such Intellectual Property. 3.16 Employee Benefit Plans. Schedule 3.16 of the Company Disclosure Letter contains a complete list of "employee welfare benefit plans" (as that term is defined in Section 3(1) of the Employee Retirement Income Security Act of 1974 ("ERISA") in which employees of the Company and its Subsidiaries participate (which plans, as applied to such active and former employees are hereinafter referred to as "Welfare Plans"). Schedule 3.16 of the Company Disclosure Letter also contains a complete list of "employee pension benefit plans" (as that term is defined in Section 3(2) of ERISA), including any "multi-employer plans" (as that term is defined in Section 3(37) of ERISA) in which such employees of the Company and its Subsidiaries participate (which plans as applied to such employees are hereinafter referred to as "Pension Plans"). The Welfare Plans and Pension Plans are hereinafter collectively referred to as the "Plans." Each of the Plans is in compliance with the provisions of all applicable laws, rules and regulations, which shall include by example and not by limitation ERISA and the Internal Revenue Code of 1986, as amended (the "Code"). None of the Pension Plans have incurred any "accumulated funding deficiency" (as defined in Section 412(a) of the Code). The Company and its Subsidiaries have not incurred any liability to the Pension Benefit Guaranty Corporation under Sections 4062, 4063 or 4064 of ERISA which has not been paid with respect to any of the Plans or any withdrawal liability under Title IV of ERISA with respect to any of the Pension Plans. 3.17 Tax Matters. The Company, any predecessor of the Company and all members of any affiliated group of corporations of which the Company or any such predecessor corporation is or has been a member, have duly filed all tax returns and reports required to be filed by them, including all federal, state, local and foreign income tax returns and reports, and have timely paid all taxes shown as due on such returns and reports (except where failures to file such returns and reports or failures to pay such taxes would not have a Material Adverse Effect on the Company, any predecessor of the Company or any such member). All such returns and reports required to have been filed are complete and accurate in all material respects. The Company has made adequate provision, in conformity with GAAP, for the payment of all taxes of the Company or such Subsidiary, as the case may be, existing as of the Effective Date for all periods ending on or prior to the date of the Balance Sheet. Except as reflected on Schedule 3.17 of the Company Disclosure Letter, the consolidated federal income tax returns of the Company (and any predecessor of the Company) have been examined by the Internal Revenue Service. Except as set forth on Schedule 3.17 of the Company Disclosure Letter neither the Company, any predecessor of the Company, nor any Subsidiary (i) has waived any statute of limitations, (ii) has filed a statement under Section 341(f) of the Code, or (iii) is a party to any tax sharing agreement. Except as set forth on Schedule 3.17 of the Company Disclosure Letter, (i) the state income tax returns of the Company, any predecessor of the Company and all Subsidiaries and the federal income tax returns of all Subsidiaries have been examined by the appropriate taxing authority, (ii) there is no action, suit, investigation, audit, claim or assessment pending or proposed or threatened in writing with respect to taxes of the Company, any predecessor of the Company or any Subsidiary, (iii) there are no liens for taxes upon the assets of the Company or any Subsidiary except liens relating to current taxes not yet due, (iv) all taxes which the Company or any predecessor of the Company or any Subsidiary are required by law to withhold or collect for payment have been duly withheld and collected, and have been paid or accrued, reserved against and entered on the books of the Company (except where failures to withhold and collect and to pay or accrue, reserve against or enter on the books of the Company would not have a Material Adverse Effect on the Company, any predecessor of the Company or any Subsidiary), (v) none of the Company, any predecessor of the Company or any Subsidiary has been a member of any group of corporations filing tax returns on a consolidated, combined, unitary or similar basis other than each such group of which it is currently a member, and (vi) as a result of a change in accounting method for a tax period beginning on or before the Effective Date, none of the Company or any Subsidiary will be required to include any adjustment under Section 481(c) of the Code (or any corresponding provision of state or local tax law) in taxable income for any tax period beginning on or after the Effective Date. Except as may be limited as a result of the transactions contemplated by this Agreement, the "regular" and "alternative minimum tax" net operating loss carryforwards of the Company and the Subsidiaries for each of the taxable years ended prior to the date of this Agreement (collectively, the "NOLs") are set forth (for each year) on Schedule 3.17 of the Company Disclosure Letter and are each available to the Company (or the applicable Subsidiary) for a period of fifteen taxable years from the end of the taxable year in which the applicable NOL was incurred. Except as may be limited as a result of the transactions contemplated by this Agreement and except as set forth on Schedule 3.17 of the Company Disclosure Letter, none of the NOLs constitute separate return limitation year ("SRLY") losses immediately prior to the Effective Date, none of the NOLs will be limited immediately prior to the Effective Date by Section 382 or 384 of the Code and regulations thereunder, and none of the NOLs constitutes "dual consolidated losses" immediately prior to the Effective Date (as defined in Section 1503 of the Code and the regulations thereunder). No transaction contemplated by this Agreement is subject to withholding under Section 1445 of the Code (relating to "FIRPTA"). For purposes of this Agreement, "tax" (and, with a correlative meaning, "taxes") shall mean (i) any federal, state, local or foreign net income, gross income, gross receipts, windfall profit, severance, property, production, sales, use, license, excise, franchise, employment, payroll, withholding, alternative or add-on minimum, ad valorem, value-added, transfer stamp, or environmental tax, or any other tax, custom, duty, governmental fee or other like assessment or charge of any kind whatsoever, together with any interest or penalty, addition to tax or additional amount imposed by any governmental authority; and (ii) any liability of the Company or any Subsidiary for the payment of amounts with respect to payments of a type described in clause (i) as a result of being a member of an affiliated group, or as a result of any obligation of the Company or any Subsidiary under any tax sharing arrangement or tax indemnity arrangement. 3.18 SEC Documents. The Company has filed all required reports, proxy statements, forms and other documents with the SEC since January 2, 1994 (the "Company SEC Documents"). As of their respective dates, and giving effect to any amendments thereto, (a) the Company SEC Documents, including, without limitation, any financial statements and schedules contained therein, complied in all material respects with the requirements of the Securities Act of 1933, as amended (the "Securities Act"), or the Exchange Act, as the case may be, and the applicable rules and regulations of the SEC promulgated thereunder, and (b) none of the Company SEC Documents contained any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading. The financial statements of the Company included in the Company SEC Documents as at the dates thereof complied as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto, were prepared in accordance with generally accepted accounting principles applied on a consistent basis during the periods involved (except as may be indicated therein or in the notes thereto) and fairly present in all material respects the consolidated financial position of the Company and its consolidated Subsidiaries as at the dates thereof and the consolidated results of their operations and changes in financial position for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments and to any other adjustments described therein). 3.19 Environmental Matters. (a) Except as set forth in Schedule 3.19 of the Company Disclosure Letter, the Company and each of its Subsidiaries have complied with all applicable foreign, federal, state and local laws, statutes, regulations, codes or ordinances enacted, adopted, issued or promulgated by any Governmental Entity relating to or addressing the environment, health or safety as in effect at the relevant time, including the Comprehensive Environmental Response, Compensation and Liability Act, any amendments thereto, any successor statute and any regulations promulgated thereunder ("CERCLA"), the Occupational Safety and Health Act, any amendments thereto, any successor statute and any regulations promulgated thereunder ("OSHA") and the Resource Conservation and Recovery Act, any amendments thereto, any successor statute and any applicable regulations promulgated thereunder ("RCRA"), and any state equivalent ("Environmental Laws"), except for such failures to so comply that would not have a Material Adverse Effect on the Company. (b) Except as set forth on Schedule 3.19 of the Company Disclosure Letter, or where the failure to do so would not have a Material Adverse Effect on the Company, (i) any handling, transportation, storage, treatment or usage of Hazardous Material that has occurred on any tract of real property owned by the Company or a Subsidiary during the period of such ownership or real property covered by any real property lease to which the Company or a Subsidiary is a party during the term of such lease, has been in compliance with all applicable Environmental Laws, (ii) no leak, spill, release, discharge, emission or disposal of any Hazardous Material has occurred on any such tract during the period of such ownership or term of such lease pertinent to each such tract which would subject the property to remedial action under any Environmental Laws, (iii) each such tract is in substantial compliance with applicable Environmental Laws, and (iv) each underground storage tank located on any such tract, has been registered, maintained and operated during the Company's or a Subsidiary's ownership or operation of such tank in accordance with all applicable Environmental Laws. Schedule 3.19 of the Company Disclosure Letter, lists all reports, studies and tests in the possession of the Company or a Subsidiary relating to the presence or suspected presence of any Hazardous Material on any such tract in violation of any Environmental Law or relating to the existence of any underground storage tank thereon and the Company and each Subsidiary agree that they will, promptly following the Company's or a Subsidiary's receipt thereof, furnish to the Parent all such reports, studies and tests hereafter obtained by the Company or a Subsidiary on or prior to the Closing Date. "Hazardous Material" means asbestos, petroleum (including without limitation, oil, used oil, waste oil, gasoline, diesel and petroleum based fuels), petroleum products and by-products, petroleum wastes, petroleum contaminated soils, and any substance, material or waste which is regulated as "hazardous", "toxic" or under any other similar designation under any Environmental Law. Such term includes, without limitation, (i) any material, substance or waste defined as a "hazardous waste" pursuant to Section 1004 of the RCRA, (ii) any material, substance or waste defined as a "hazardous substance" pursuant to Section 101 of CERCLA or (iii) any material, substance or waste defined as a "regulated sub- stance" pursuant to Subchapter IX of the Solid Waste Disposal Act (42 U.S.C. Section 6991, et seq.). (c) Except as disclosed on Schedule 3.19 of the Company Disclosure Letter, or where the failure to do so would not have a Material Adverse Effect on the Company, (i) Hazardous Materials have not been generated, used, treated, handled or stored on, or transported to or from, or released or disposed on or from any tract of real property owned by the Company during the period of such ownership or any real property covered by any real property lease to which the Company is a party during the term of such lease in violation of any Environmental Law ; (ii) the Company has disposed of all wastes, including those wastes containing Hazardous Materials, in compliance with all applicable Environmental Laws; (iii) there are no past unresolved, pending or, to the knowledge of the Company or the Subsidiaries, threatened, actions against the Company relating to compliance with Environmental Laws or asserting damages or injury to natural resources, wildlife or the environment; (iv) no such tract or, to the knowledge of the Company or the Subsidiaries, any property adjoining such tract, is listed or proposed for listing on the National Priorities List under CERCLA or on the Comprehensive Environmental Response, Compensation and Liability Act Information System ("CERCLIS"), the Facility Index System ("FINDS"), RCRA, Hazardous Waste Registrations Listing Report as a result of any alleged violation of any applicable Governmental Law; and (v) to the knowledge of the Company or the Subsidiaries, neither the Company nor the Subsidiaries has transported or arranged for the transportation of any Hazardous Materials to any location that is listed or proposed for listing on the National Priorities List under CERCLA or on the CERCLIS or FINDS or which is the subject of any environmental claim arising because of any alleged violation of an Environmental Law. 3.20 Proxy Statement; Information Statement. (a) None of the information supplied or to be supplied by the Company for inclusion in the Proxy Statement (as defined hereafter) (and any amendments thereof or supplements thereto), if any, will, with respect to information relating to the Company, at the time of the mailing of the Proxy Statement to the stockholders of the Company and at the time of the Special Meeting (as defined hereafter), contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The Proxy Statement will, with respect to information relating to the Company, comply as to form in all material respects with the provisions of the Exchange Act and the rules and regulations promulgated thereunder, except that no representation is made in this Section 3.20(a) by the Company with respect to the statements made in the Proxy Statement relating to the Parent or the Purchaser or their affiliates or based on information supplied by the Parent or the Purchaser for inclusion in the Proxy Statement. (b) None of the information supplied or to be supplied by the Company for inclusion in the Information Statement (as defined hereafter) (and any amendments thereof or supplements thereto), if any, will, with respect to information relating to the Company, at the time of the mailing of the Information Statement to the stockholders of the Company, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The Information Statement will, with respect to information relating to the Company, comply as to form in all material respects with the provisions of the Exchange Act and the rules and regulations promulgated thereunder, except that no representation is made in this Section 3.20(b) by the Company with respect to the statements made in the Information Statement relating to the Parent or the Purchaser or their affiliates or based on information supplied by the Parent or the Purchaser for inclusion in the Information Statement. 3.21 Certain Agreements. Except as set forth on Schedule 3.21 of the Company Disclosure Letter, neither the Company nor any of its Subsidiaries is a party to any oral or written stock option plan, stock appreciation rights plan, restricted stock plan or stock purchase plan, incentive compensation or bonus plan, employment agreement, severance or termination agreement, consulting agreement or other benefit plan or arrangement, any of the benefits of which will be increased, or the vesting of the benefits of which will be accelerated, by the occurrence of any of the transactions contemplated by this Agreement or the Tender Agreements or the value of any of the benefits of which will be calculated on the basis of any of the transactions contemplated by this Agreement or the Tender Agreements. 3.22 Vote Required. The affirmative vote of the holders of a majority of the outstanding shares of Common Stock of the Company entitled to vote with respect to the Merger is the only vote of the holders of any class or series of the Company's capital stock necessary to approve the Merger. 3.23 Opinion of Financial Advisor. The Company has received the opinion of Morgan Stanley dated as of a date which is on or prior to this Agreement substantially to the effect that, as of the date of this Agreement, the consideration to be received pursuant to the Merger Agreement by the Company's stockholders (other than the Parent or any of its affiliates) is fair to such stockholders from a financial point of view. A complete and correct signed copy of such opinion has been delivered to the Parent, and such opinion has not been withdrawn or modified as of the date hereof. ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE PARENT AND THE PURCHASER The Parent and the Purchaser hereby represent and warrant to the Company as follows: 4.1 Organization. The Parent is duly organized, validly existing and in good standing under the laws of the State of Delaware and has full corporate power and authority to conduct its business and to own and lease its properties. The Purchaser is duly organized, validly existing and in good standing under the laws of the State of Delaware and has full corporate power and authority to conduct its business and to own and lease its properties. The Purchaser has been formed for the purpose of effecting the Offer and the Merger in accordance with the terms of this Agreement. The Purchaser has not transacted, and prior to the Effective Date will not transact any business or engage in any activities other than in connection with the transactions contemplated by this Agreement. 4.2 Authorization. Each of the Parent and the Purchaser has all necessary corporate power and authority to enter into this Agreement and will at the Closing have taken all necessary corporate action to consummate the transactions contemplated hereby and to perform its obligations hereunder. The execution and delivery of this Agreement by the Parent and the Purchaser and the performance of their obligations hereunder have been duly authorized by the Board of Directors of each of the Parent and the Purchaser and no other corporate proceeding on the part of the Parent or Purchaser are necessary. This Agreement has been duly executed and delivered by each of the Parent and the Purchaser and (assuming the valid authorization, execution and delivery of this Agreement by the Company) constitutes a valid and binding obligation of the Parent and the Purchaser, enforceable against each of them in accordance with its terms, except as such enforceability may be limited by (i) bankruptcy, insolvency, reorganization, moratorium or other similar laws, now or hereafter in effect, relating to or limiting creditors' rights generally and (ii) general principles of equity (whether considered in an action in equity or at law) which provide, among other things, that the remedy of specific performance and injunctive and other forms of equitable relief are subject to equitable defenses and the discretion of the court before which any proceedings therefor may be brought. 4.3 Consents and Approvals. Except where such consent, approval or authorization, declaration, filing or registration would not have a Material Adverse Effect on the Purchaser or would not materially impair the ability of the Parent and the Purchaser to perform its obligations hereunder, no consent, approval or authorization of, or declaration, filing or registration with, any Governmental Entity is required to be made or obtained by the Parent in connection with the execution, delivery and performance by the Parent and the Purchaser of this Agreement and the consummation by the Parent and the Purchaser of the transactions contemplated hereby other than (i) the filings required under the Antitrust Improvements Act, (ii) the filing of the Certificate of Merger, and (iii) filings made in compliance with any applicable provisions of the Exchange Act. 4.4 No Conflict or Violation; Third Party Consents. Assuming the accuracy and completeness of the representations and warranties of the Company herein, and assuming all consents and approvals referred to in Section 4.3 hereof are obtained, the execution and delivery of this Agreement does not, and consummation of the transactions contemplated hereby will not, result in (a) a violation of or a conflict with any provision of the certificates of incorporation or bylaws or other organizational documents of the Parent or the Purchaser, (b) a breach or default under any provision of any material contract, agreement, lease, commitment, license, franchise or permit to which the Parent or the Purchaser is a party or by which any of their respective assets are bound, (c) a violation of any statute, rule, regulation, ordinance, order, judgment, writ, injunction or decree the violation of which would have a Material Adverse Effect on the Parent, or (d) an imposition of any material lien, mortgage, pledge, encumbrance, claim, restriction or charge on the business of the Parent or the Purchaser or any of their respective assets. 4.5 No Brokers. Other than the arrangements between the Parent and Donaldson, Lufkin & Jenrette Securities Corporation (the "Investment Banker"), neither the Parent, the Purchaser nor any affiliate of the Parent or the Purchaser has entered into or will enter into any agreement, arrangement or understanding with any person or firm which will result in the obligation of the Parent or any affiliate of the Parent to pay any finder's fee, brokerage commission or similar payment in connection with the transactions contemplated hereby. The parties hereby acknowledge the arrangement with respect to this transaction between the Parent and the Investment Banker, with respect to which all fees due to the Investment Banker will be paid by the Parent. 4.6 Proxy Statement; Information Statement. (a) None of the information supplied or to be supplied by the Parent or the Purchaser for inclusion in the Proxy Statement (including any amendments thereof or supplements thereto) will, at the time of mailing the Proxy Statement and at the time of the Special Meeting, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading, except that no representation or warranty is made by the Parent or the Purchaser with respect to statements made or incorporated by reference therein based on information supplied by the Company for inclusion or incorporation by reference therein. (b) None of the information supplied or to be supplied by the Parent or the Purchaser for inclusion in the Information Statement (including any amendments thereof or supplements thereto) will, at the time of mailing the Information Statement contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading, except that no representation or warranty is made by the Parent or the Purchaser with respect to statements made or incorporated by reference therein based on information supplied by the Company for inclusion or incorporation by reference therein. 4.7 Share Ownership. As of the date of this Agreement, the Parent and the Purchaser own 497,800 shares of Common Stock and will not acquire beneficial ownership of any additional shares of Common Stock except pursuant to this Agreement and the Tender Agreements if the result would be a Change of Control. 4.8 Financing. The Parent and the Purchaser have on the date of the execution of this Agreement and will have upon acceptance of any Shares pursuant to the Offer and at the Closing sufficient available funds (through existing credit arrangements or otherwise) to pay the Share Price or the Merger Consideration, as applicable, for all shares to be purchased or converted pursuant to Section 1.1(a), or Section 2.3(a), pay the Option Settlement Amount, pay all fees and expenses required to be paid in connection with the Merger and perform their obligations hereunder and the obligations of the Surviving Corporation and its Subsidiaries following the Effective Time. ARTICLE V ACTIONS BY THE COMPANY, THE PARENT AND THE PURCHASER PRIOR TO THE EFFECTIVE DATE The Company, the Parent and the Purchaser covenant as follows for the period from the date hereof through the Effective Date: 5.1 Maintenance of Business. The Company shall carry on, and cause its Subsidiaries to carry on, their respective businesses in the ordinary course of business consistent with past practice and use their commercially reasonable efforts to preserve the goodwill of those having business relationships with them and use their reasonable best efforts to preserve intact their current business organizations, keep available the services of their current officers and key employees and preserve their relationships with customers, suppliers and others having business dealings with them. 5.2 Certain Prohibited Transactions. Except as otherwise contemplated by this Agreement, each of the Company and its Subsidiaries shall not, without the prior written consent of the Parent (which consent shall not be unreasonably withheld or delayed) from and after the date hereof: (a) incur any additional indebtedness for borrowed money, assume, guarantee, endorse or otherwise become responsible for the obligations of any other individual, partnership, firm or corporation or make any loans or advances to any individual, partnership, firm or corporation in an amount in excess of $30,000,000; provided, however, that total indebtedness for borrowed money under the Company's Credit Agreement with Chase Manhattan Bank, as of the Effective Date, shall not exceed $251,000,000; and provided further, however, that the Company shall not be prohibited from repaying any indebtedness of the Company or its Subsidiaries prior to the Effective Date if such repayments are made without penalty; (b) enter into any capital or operating leases of equipment except in accordance with the Master Equipment Lease Agreement by and between NationBanc Leasing Corporation of North Carolina and the Company, dated October, 1995 the Master Lease Agreement by and between BancBoston Leasing, Inc. and the Company, dated June 1996, and a new lease for equipment to be installed at KPR Foods not to exceed $3,000,000; (c) except for the Charter Amendment, amend its Amended and Restated Certificate of Incorporation or Amended and Restated Bylaws or the articles or certificate of incorporation or bylaws of any of its Subsidiaries issue, deliver, sell, pledge, dispose of or otherwise encumber any shares of its capital stock, any other voting securities or equity equivalent or any securities convertible or exchangeable into, or any rights, warrants or options to acquire, any such shares, voting securities or convertible securities or equity equivalent, except for the issuance of up to 1,762,752 shares of Common Stock pursuant to the exercise of stock options to purchase shares of Common Stock under the Stock Option Plans and the Warrant which are outstanding on the date hereof; (d) mortgage, pledge or otherwise encumber any of its material properties or assets or sell, transfer (except pursuant to intercompany transfers) or otherwise dispose of any of its material properties or material assets or cancel, release or assign any indebtedness owed to it or any claims held by it, except in the ordinary course of business and consistent with past practice; (e) acquire or agree to acquire by merging or consolidating with, or by purchasing a substantial portion of the assets of or equity in, or by any other manner, any business or any corporation, partnership, limited liability company, association or other business organization or division thereof or otherwise acquire or agree to acquire any assets, in each case that are material, individually or in the aggregate, to the Company and its Subsidiaries, taken as a whole; (f) enter into, terminate or permit any renewal or extension options to expire with respect to any material contract or agreement, or make any material change in any of its leases and contracts, other than in the ordinary course of business and consistent with past practice; provided, however, the Company may (i) enter into, an amendment to the June 3, 1996 Lease Agreement with Option to Purchase between Continental Deli Foods, Inc., a subsidiary of the Company, and Thorn Apple Valley, Inc., which covers the Concordia, Missouri facility, to extend the term from May 31, 1997, to May 31, 2002, and to increase the rent to equal the purchase price payments under the promissory note provided for in such lease and to retain the option to purchase the property for a nominal amount at the end of the extended lease term, or, at the option of the Parent, exercise the option to purchase under the current agreement and (ii) enter into two new office leases in Riverside and Irvine, California, with annual rentals not to exceed $300,000 each; (g) declare, set aside or pay any dividend or distribution with respect to the capital stock of the Company or any of its Subsidiaries or directly or indirectly redeem, purchase or otherwise acquire any capital stock of the Company or any of its Subsidiaries or effect a split or reclassification of any capital stock of the Company or any of its Subsidiaries or a recapitalization of the Company or any of its Subsidiaries, except for intercompany transactions in the ordinary course of business consistent with past practice; (h) alter through merger, liquidation, reorganization, restructuring or in any other fashion the corporate structure or ownership of the Company or any of its Subsidiaries; (i) enter into or adopt or amend any existing severance plan, severance agreement or severance arrangement, any benefit plan or arrangement (including without limitation, the Stock Option Plans) or employment or consulting agreement except as required by law; (j) increase the compensation payable or to become payable to its officers or employees, except for increases in the ordinary course of business in accordance with past practices, or grant any severance or termination pay to, or enter into any employment or severance agreement with any director or officer of the Company or any of its Subsidiaries, or establish, adopt, enter into or, except as may be required to comply with applicable law, amend in any material respect or take action to enhance in any material respect or accelerate any rights or benefits under any collective bargaining, bonus, profit sharing, thrift, compensation, stock option, restricted stock, pension, retirement, deferred compensation, employment, termination, severance or other plan, agreement, trust, fund, policy or arrangement for the benefit of any director, officer or employee; (k) settle or compromise any suit, proceeding or claim or threatened suit, proceeding or claim for an amount that is more than $50,000 in the case of any individual suit provided that such settlement or compromise shall be made in the ordinary course of business in accordance with past practice, other than the Marshall fire case as to which there is an agreement in principle to settle ; (l) knowingly violate or fail to perform any material obligation or duty imposed upon it by any applicable foreign, federal, state or local law, rule, regulation, guideline, ordinance, order, judgment or decree; (m) make any tax election or change any method of accounting for tax purposes, in each case except to the extent required by law, or settle or compromise any tax liability; (n) change any of the accounting principles or practices used by it except as required by the SEC or the Financial Accounting Standards Board; (o) grant any license relating to its Intellectual Property, except as required by existing agreements of the Company, except in connection with the settlement of a protest by the Company of the use of the mark El Posado by a third party; or (p) enter into any agreement to enter a new line of business, nor will the Company expend over $10,000 to produce or provide a product in a new line of business; (q) authorize or enter into an agreement, contract, commitment or arrangement to do any of the foregoing. 5.3 Investigation by the Parent and the Purchaser. Upon reasonable advance notice, the Company shall allow the Parent and the Purchaser at their own expense, during regular business hours through the Parent's and the Purchaser's employees, agents and representatives, to make such investigation of the businesses, properties, books and records of the Company and Subsidiaries, and to conduct such examination of the condition of the Company and Subsidiaries as the Parent and the Purchaser deem necessary or advisable to familiarize themselves further with such businesses, properties books, records, condition and other matters, and to verify the representations and warranties of the Company hereunder, provided that all requests for information, to visit plants or facilities shall be directed to and coordinated with the vice-president of finance of the Company; and provided, further that the foregoing shall be subject in each case to the Confidentiality Agreement referred to in Section 8.7 hereof. 5.4 Consents and Reasonable Best Efforts. (a) The Parent, the Purchaser and the Company shall use their reasonable best efforts to make all filings required under the Antitrust Improvements Act as soon as practicable after the execution and delivery of this Agreement. (b) The Parent, the Purchaser and the Company shall, as soon as practicable, use their reasonable best efforts required (i) to obtain all waivers, consents, approvals and agreements of, and to give all notices and make all other filings with, any persons, including Governmental Entities, necessary or appropriate to authorize, approve or permit the Merger, including all necessary consents or releases from holders of options or warrants under the Stock Option Plans and to take all such other action as may be necessary to give effect to the transactions contemplated by Section 2.6, and (ii) to defend and cooperate with each other in defending any lawsuits or other legal proceedings, including appeals, whether individual or administrative and whether brought derivatively or on behalf of third parties (including Governmental Entities or officials) challenging this Agreement or the consummation of the transactions contemplated hereby. The Parent and the Purchaser will furnish to the Company, and the Company will furnish to the Parent and the Purchaser, such necessary information and reasonable assistance as the Company, or the Parent and the Purchaser, as the case may be, may request in connection with its or their preparation of all necessary filings with any third parties, including Governmental Entities. The Parent and the Purchaser will furnish to the Company, and the Company will furnish to the Parent and the Purchaser, copies of all correspondence, filings or communications (or memoranda setting forth the substance thereof) between the Parent and the Purchaser, or the Company, or any of their respective representatives, on the one hand, and any governmental agency or authority, or members of the Staff of such agency or authority, on the other hand, with respect to this Agreement, the Offer or the Merger. (c) Prior to the Effective Date, the Company and the Parent shall each use its respective commercially reasonable efforts to obtain the consent or approval of each person whose consent or approval shall be required in order to permit the Company, the Parent or the Purchaser, as the case may be, to consummate the Offer and the Merger, including, without limitation, consents or waivers from the third parties identified on Schedule 3.10 of the Company Disclosure Letter. (d) Upon the terms and subject to the conditions contained herein, each of the parties hereto covenants and agrees to use its reasonable best efforts to take, or cause to be taken, all action or do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to consummate and make effective the transactions contemplated hereby. Notwithstanding anything to the contrary contained in this Agreement, in connection with any filing or submission required or action to be taken by either the Parent or the Company to consummate the Offer, to effect the Merger and to consummate the other transactions contemplated hereby, the Company shall not, without the Parent's prior written consent, commit to any divestiture transaction and neither the Parent nor any of its affiliates shall be required to divest or hold separate or otherwise take or commit to take any action that limits its freedom of action with respect to, or its ability to retain, the Company or any of the material businesses, product lines or assets of the Parent or any of its affiliates. 5.5 Notification of Certain Matters. The Company shall give prompt- notice to the Parent and the Purchaser, and the Parent and the Purchaser shall give prompt notice to the Company, of (i) the occurrence, or failure to occur, of any event which occurrence or failure would be likely to cause any representation or warranty contained in this Agreement to be untrue or inaccurate in any material respect any time from the date hereof to the Effective Date and (ii) any material failure of the Company, the Parent or the Purchaser, as the case may be, to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it hereunder. 5.6 Stockholders' Meeting; Board Recommendations; Proxy Material. (a) If required to consummate the Merger, following the expiration of the Offer the Company shall, in accordance with applicable law and the Amended and Restated Certificate of Incorporation and the Amended and Restated Bylaws of the Company duly call, give notice of, convene and hold a special meeting of its stockholders (the "Special Meeting") as promptly as practicable for the purpose of considering and taking action upon this Agreement and the Merger and such other matters as may be appropriate at the Special Meeting. At such Special Meeting, the Parent shall vote, or cause to be voted, all of the Shares of Common Stock then owned by the Parent or Purchaser, or any of their affiliates (collectively, the "Parent Companies") in favor of this Agreement and the Merger. (b) The Board shall recommend acceptance of the Offer and approval and adoption of this Agreement and the Merger by the Company's stockholders and, to the extent required, shall use its reasonable best efforts to obtain stockholder approval of this Agreement and the Merger; provided that the Board may withdraw, modify or change such recommendation if it has reasonably determined in good faith, after consultation with outside legal counsel, that the Board is required to withdraw, modify or change such recommendation or the recommendation of the Offer to comply with the Board's fiduciary duties to the Company's stockholders under applicable law. In the event the Parent acquires at least 90% of the outstanding shares of each class of capital stock of the Company pursuant to the Offer or otherwise, the Parent, the Purchaser and the Company shall take all necessary and appropriate action to cause the Merger to become effective as soon as practicable after such acquisition, without a meeting of the stockholders of the Company, in accordance with Delaware Law. (c) If approval by the stockholders of the Company of this Agreement or the Merger is required by law, the Company shall, as soon as practicable following the termination of the Offer, prepare and file with the SEC, and the Parent and the Purchaser shall cooperate with the Company in such preparation and filing, a preliminary proxy statement relating to this Agreement and the transactions contemplated hereby and use its reasonable best efforts to furnish the information required to be included by the SEC in the Proxy Statement (as defined hereafter) and, after consultation with the Parent, to respond promptly to any comments made by the SEC with respect to the preliminary proxy statement and shall, cause a definitive proxy statement (the "Proxy Statement") to be mailed to the Company's stockholders that contains the recommendation of the Board that stockholders of the Company approve and adopt this Agreement. If applicable to the Merger, the Parent agrees to comply with the requirements of Rule 13e-3 under the Exchange Act. The Company will notify the Parent and the Purchaser of the receipt of any comments from the SEC or its staff and of any request by the SEC or its staff for amendments or supplements to the preliminary proxy statement and the Proxy Statement or for additional information and will supply the Parent and the Purchaser with copies of all correspondence between the Company or any of its representatives, on the one hand, and the SEC or its staff, on the other hand, with respect to the preliminary proxy statement and the Proxy Statement or the Merger. The Company shall give the Parent and the Purchaser and its counsel the opportunity to review the preliminary proxy statement and the Proxy Statement prior to its being filed with the SEC and shall give the Parent and the Purchaser and its counsel the opportunity to review all amendments and supplements to the preliminary proxy statement and the Proxy Statement and all responses to requests for additional information and replies to comments prior to their being filed with, or sent to, the SEC. If at any time prior to the approval of this Agreement by the Company's stockholders there shall occur any event that is required to be set forth in an amendment or supplement to the Proxy Statement, the Company will prepare and mail to its stockholders such an amendment or supplement. 5.7 Information Statement. As soon as practicable after the date of this Agreement, the Company will prepare and file with the SEC, and the Parent and the Purchaser shall cooperate with the Company in such preparation and filing, a preliminary information statement relating to the Charter Amendment and use its reasonable best efforts to furnish the information required to be included by the SEC in the Information Statement and, after consultation with the Parent, to respond promptly to any comments made by the SEC with respect to the preliminary information statement and shall use its reasonable best efforts to cause a definitive information statement (the "Information Statement") to be mailed to the Company's stockholders as soon as practicable. The Company will notify the Parent and the Purchaser of the receipt of any comments from the SEC or its staff and of any request by the SEC or its staff for amendments or supplements to the preliminary information statement and the Information Statement or for additional information and will supply the Parent and the Purchaser with copies of all correspondence between the Company or any of its representatives, on the one hand, and the SEC or its staff, on the other hand, with respect to the preliminary information statement and the Information Statement or the Merger. The Company shall give the Parent and the Purchaser and its counsel the opportunity to review the preliminary information statement and the Information Statement prior to its being filed with the SEC and shall give the Parent and the Purchaser and its counsel the opportunity to review all amendments and supplements to the preliminary information statement and the Information Statement and all responses to requests for additional information and replies to comments prior to their being filed with, or sent to, the SEC. The Company will cause the Certificate of Amendment to be filed with Secretary of State of Delaware the next business day after all applicable time periods for taking such actions have expired. If at any time prior to the effectiveness of the Charter Amendment there shall occur any event that is required to be set forth in an amendment or supplement to the Information Statement, the Company will prepare and mail to its stockholders such an amendment or supplement. 5.8 Acquisition Proposals. From and after the date of this Agreement until the earlier of the Effective Date or the consummation of the Offer, except as provided below, the Company agrees that (a) neither the Company nor its Subsidiaries shall, and the Company shall not authorize or permit its officers, directors, employees, agents or representatives (including, without limitation, any investment banker, attorney or accountant retained by it or any of its Subsidiaries) to, initiate, solicit or knowingly encourage, directly or indirectly, any inquiries or the making or implementation of any proposal or offer (including, without limitation, any proposal or offer to its stockholders) with respect to a merger, acquisition, consolidation, tender offer, exchange offer or similar transaction involving, or any purchase of all or any significant portion of the assets or any significant portion of the equity securities (excluding any issuable pursuant to agreement existing on the date hereof) of, the Company or its Subsidiaries (any such proposal or offer, other than by the Parent or its affiliates, being hereinafter referred to as an "Acquisition Proposal") or engage in any negotiations concerning, or provide any confidential information or data to, or have any substantive discussions with, any person relating to an Acquisition Proposal, or otherwise knowingly facilitate any effort or attempt to make or implement an Acquisition Proposal; (b) it will immediately cease and cause to be terminated any existing activities, discussions or negotiations with any parties conducted heretofore with respect to any of the foregoing; and (c) it will notify the Parent immediately (but in no event later than 24 hours) if any such Acquisition Proposals are received by the Company, any such information is requested from the Company, or any such negotiations or discussions are sought to be initiated or continued with the Company. Any such notice pursuant to clause (c) of the previous sentence shall include the identity of the party making the Acquisition Proposal and the terms of such proposal. Notwithstanding the foregoing, nothing contained in this Section 5.8 shall prohibit the Board of Directors of the Company from (i) furnishing information to or entering into discussions or negotiations with, any person or entity that indicates an interest in making a Superior Proposal (as hereinafter defined), if, and only to the extent that, (A) the Board of Directors reasonably determines in good faith after consultation with outside counsel that such action is required for the Board of Directors to comply with its fiduciary duties to its stockholders under applicable law and (B) the Company keeps the Parent informed of the status and terms of any such discussions or negotiations; and (ii) to the extent applicable, complying with Rule 14d-9 and Rule 14e-2 promulgated under the Exchange Act with regard to an Acquisition Proposal. If any person or entity makes a Superior Proposal, upon receipt and determination thereof, the Company shall promptly (but in no event later than 24 hours after determination) provide written notice (a "Notice of a Superior Proposal") to the Parent of such Superior Proposal, including the identity of the parties and the terms thereof. For purposes of this Agreement, "Superior Proposal" means an unsolicited bona fide Acquisition Proposal by a third party in writing that the Board of Directors of the Company determines in its good faith reasonable judgment (based on the advice of a nationally recognized investment banking firm) provides greater aggregate value to the Company's stockholders than the transactions contemplated by this Agreement and for which any required financing is committed or which, in the good faith reasonable judgment of the Board of Directors (based on the advice of a nationally recognized investment banking firm), is reasonably capable of being financed by such third party. Nothing in this Section 5.8 shall (x) permit the Company to terminate this Agreement, (y) permit the Company to enter into any agreement with respect to an Acquisition Proposal during the term of this Agreement, or (z) affect any other obligation of any party under this Agreement. 5.9 Third Party Standstill Agreements. During the period from the date of this Agreement until the earlier of the Effective Date or termination hereof, the Company shall not terminate, amend, modify or waive any provision of any confidentiality or standstill agreement to which the Company or any of its Subsidiaries is a party (other than those involving the Parent or its affiliates). During such period, the Company agrees to enforce, to the fullest extent under applicable law, the provisions of any such agreements, including, but not limited to, injunctions to prevent any breaches of such agreements and to enforce specifically the terms and provisions thereof in any court of the United States or any state thereof having jurisdiction. 5.10 Expenses. (a) All costs and expenses incurred in connection with this Agreement, the Merger and the transactions contemplated hereby shall be paid by the party incurring such cost or expense. (b) Notwithstanding any provision in this Agreement to the contrary, the Company shall pay, or cause to be paid, in same day funds, to Parent (x) the Expenses (as hereinafter defined) in an amount up to but not to exceed $3,000,000 and (y) $9,900,000 (the "Termination Fee") under the circumstances and at the times set forth as follows: (i) if the Company or the Parent terminates this Agreement under Section 8.1(b) and after the date hereof a Takeover Proposal (as defined hereafter) shall have been made and concurrently with or within twelve months after such termination, the Company shall enter into an agreement providing for a Takeover Proposal or a Takeover Proposal shall have been consummated, the Company shall pay the Expenses and the Termination Fee concurrently with the earlier of the entering into of such agreement or the consummation of such Takeover Proposal; and (ii) if the Company or the Parent terminates this Agreement under Section 8.1(c) and after the date hereof (but on or prior to the date of termination) aTakeover Proposal shall have been made , the Company shall pay the Expenses and the Termination Fee concurrently with such termination; and (iii) if the Company or the Parent terminates this Agreement under Section 8.1(e) as a result of the occurrence of paragraphs (b) or (h) of Annex A, the Company shall pay the Expenses; and (iv) if the Company or the Parent terminates this Agreement under Section 8.1(e) as a result of clause (x) of Annex A, paragraph (b) of Annex A or the failure to attain the Minimum Condition and, after the date hereof (but on or prior to the date of termination) a Takeover Proposal shall have been made, the Company shall pay, the Expenses and the Termination Fee concurrently with such termination; and (v) if the Parent terminates this Agreement under Section 8.1(f), the Company shall pay the Expenses and the Termination Fee concurrently with such termination. (c) As used herein, (i) "Expenses" shall mean all out-of-pocket fees and expenses incurred or paid by or on behalf of the Parent or any affiliate of the Parent in connection with this Agreement and the transactions contemplated herein, including all fees and expenses of counsel, investment banking firms, accountants and consultants which are evidenced by written invoice or other supporting documentation provided by Parent; and (ii) "Takeover Proposal" shall mean any proposal or offer to the Company or its stockholders by a third party with respect to (x) a tender offer or exchange offer for 30% or more of the outstanding shares of capital stock of the Company, (y) a merger, consolidation or sale of all or substantially all of the assets of the Company, or similar transaction or (z) any liquidation or recapitalization having the foregoing effect. ARTICLE VI CONDITIONS 6.1 Conditions to Each Party's Obligation to Effect the Merger. The respective obligation of each party to effect the Merger shall be subject to the satisfaction or waiver, where permissible, prior to the Effective Time, of the following conditions: (a) If approval of this Agreement and the Merger by the holders of Common Stock is required by applicable law, this Agreement and the Merger shall have been approved by the requisite vote of such holders. (b) No injunction or any other order, decree or ruling shall have been issued by a court of competent jurisdiction or by a Governmental Entity, nor shall any statute, rule, regulation or executive order have been promulgated or enacted by any Governmental Entity, in each case that prevents the consummation of the Merger; provided, however, that each of the parties shall have used reasonable efforts to prevent the entry of any such injunction or other order, decree or ruling and to appeal promptly the same after issuance thereof. 6.2 Conditions to Obligation of the Parent to Effect the Merger. The obligations of the Parent and the Purchaser to effect the Merger shall be further subject to the satisfaction or waiver on or prior to the Effective Time of the condition that the Purchase shall have accepted for payment and paid for Shares tendered pursuant to the Offer; provided, that this condition shall be deemed satisfied if the Purchaser's failure to accept for payment and pay for such shares breaches this Agreement or violates the terms and conditions of the Offer. ARTICLE VII ADDITIONAL COVENANTS OF THE COMPANY, THE PARENT AND THE PURCHASER 7.1 Employee Benefits. (a) The Surviving Corporation and its subsidiaries will honor, and the Parent agrees to cause the Surviving Corporation and its subsidiaries to honor, all of the Company's employment, transition employment, non-compete, consulting, benefit, compensation or severance agreements (the "Employment Agreements") in accordance with their terms and, for a period of not less than twelve (12) months immediately following the Effective Date, all of the Company's written employee severance plans (or policies), in existence on the date hereof, including, without limitation, the separation pay plan for corporate officers. Schedule 7.1 of the Company Disclosure Letter hereto lists all Employment Agreements not terminable upon 30 days' written notice and which require annual payments in excess of $75,000, true and complete copies of all of which have been furnished to the Parent. (b) If any salaried employee of the Company becomes a participant in any employee benefit plan, practice or policy of the parent, the Purchaser, any of their affiliates or the Surviving Corporation, such employee shall be given credit under such plan, practice or policy for all service prior to the Effective Time with the Company, or any predecessor employer (to the extent such credit was given by the Company), and all service after the Effective Time and prior to the time such employee becomes such a participant, for purposes of eligibility and vesting and for all other purposes for which such service is either taken into account or recognized; provided, however, such service need not be credited to the extent it would result in a duplication of benefits, including, without limitation, benefit accrual service under defined benefit plans. (c) For at least twelve months following the Effective Date, the Parent shall cause the Surviving Corporation to maintain employee benefits for management and hourly employees of the Company and its Subsidiaries that are no less than the employee benefits, in the aggregate, available to similarly situated management and hourly employees of the Parent and its subsidiaries. Nothing contained herein shall be construed to obligate the Parent or any of its subsidiaries to employ, or cause the Company or its Subsidiaries from and after the Effective Date to continue to employ, any management or hourly employee of the Company or its Subsidiaries. 7.2 Officers' and Directors' Insurance; Indemnification. (a) The Company shall indemnify and hold harmless, and, after the Effective Date, the Surviving Corporation and the Parent shall indemnify and hold harmless, each present and former director and officer of the Company (the "Indemnified Parties") against any expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such Indemnified Party in connection with any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative to which such Indemnified Party was made, or threatened to be made, a party by reason of the fact that such Indemnified Party was or is a director, officer, employee or agent of the Company, or was serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture trust or other enterprise and which arises out of or pertains to any action or omission occurring prior to the Effective Date (including, without limitation, any which arise out of or relate to the transactions contemplated by this Agreement) to the full extent permitted under the Delaware Law (and the Company or the Surviving Corporation and the Parent, as the case may be, will advance expenses to each such person to the full extent so permitted); provided, that any determination required to be made with respect to whether an Indemnified Party's conduct complied with the standards set forth in the Delaware Law shall be made by independent counsel selected by such Indemnified Party and reasonably satisfactory to the Company or the Surviving Corporation and the Parent, as the case may be (which shall pay such counsel's fees and expenses). In the event any such claim, action, suit, proceeding or investigation if brought against any Indemnified Party (whether arising before or after the Effective Date), (a) the Company (or the Parent and the Surviving Corporation after the Effective Date) shall retain counsel for the Indemnified Parties reasonably satisfactory to them, (b) the Company (or the Surviving Corporation and the Parent after the Effective Date) shall pay all fees and expenses of such counsel for the Indemnified Parties promptly as statements therefor are received, and (c) the Company (or the Surviving Corporation and the Parent after the Effective Date) will use its reasonable best efforts to assist in the vigorous defense of any such matter, provided, that neither the Company, the Surviving Corporation nor the Parent shall be liable for any such settlement effected without their written consent, which consent, however, shall not be unreasonably withheld. Any Indemnified Party wishing to claim indemnification under this Section 7.2, upon learning of any such claim, action, suit, proceeding or investigation, shall notify the Company or the Surviving Corporation or the Parent thereof and shall deliver to the Company or the Surviving Corporation or the Parent an undertaking to repay any amounts advanced pursuant hereto in the event a court of competent jurisdiction shall ultimately determine, after exhaustion of all avenues of appeal, that such Indemnified Party was not entitled to indemnification under this Section. (b) For five years after the Effective Date, the Surviving Corporation and the Parent shall use their respective reasonable best efforts to provide officers' and directors' liability insurance for events occurring prior to the Effective Time covering the Indemnified Parties who are currently covered by the Company's officers' and directors' liability insurance policy (a copy of which has heretofore been delivered to the Parent) on terms no less favorable than those of such policy in terms of coverage and amounts or, if substantially similar insurance coverage is unavailable, the best available coverage; provided, however, that the Surviving Corporation shall not be required to pay a per annum amount of premiums for such officers' and directors' insurance in excess of 200 percent of the last per annum amount of premiums incurred prior to the date hereof, but in such case shall purchase as much coverage as possible for such amount. The Company represents and warrants that the last per annum amount of such premiums incurred by the Company is approximately $280,000. (c) This Section 7.2 shall survive the consummation of the Merger. Subject to the Delaware Law, the certificate of incorporation and bylaws of the Company and the Surviving Corporation shall not be amended in a manner which adversely affects the rights of the Indemnified Parties under this Section 7.2. 7.3 Transition Agreements. The Parent and the Purchaser agree that the Surviving Corporation shall maintain and shall comply with the Company's Transition Employment Agreements, as amended, and Stay Bonus Agreements, with several officers of the Company listed on Schedule 7.3 of the Company Disclosure Letter and the Employment Agreement, as amended, with R. Randolph Devening set forth on Schedule 7.3 of the Company Disclosure Letter (collectively referred to herein as the "Transition Agreements"). The Company agrees not to amend the Transition Agreements after the date hereof without first obtaining the Parent's consent. 7.4 Restructuring of Transaction. Notwithstanding any provision contained in this Agreement to the contrary, in the event that any claim, suit, proceeding or action is brought against any of the Parent, the Purchaser or the Company seeking to limit, void or enjoin any of the transactions contemplated by this Agreement, the Tender Agreements or any action taken by the Board of Directors of the Company to facilitate any transaction contemplated by this Agreement or the Tender Agreements on the basis of the transfer restriction contained in Article Fifth of the Company's Amended and Restated Certificate of Incorporation or the rules of the New York Stock Exchange, either the Parent or the Company may, at its option, upon written notice to the other parties, elect to amend this Agreement to provide for a cash merger of the Purchaser with and into the Company in lieu of the Offer upon terms and conditions which are substantially consistent with those contained in this Agreement, and all parties shall as promptly as practicable following receipt of such notice amend this Agreement. ARTICLE VIII MISCELLANEOUS 8.1 Termination. Notwithstanding anything herein to the contrary, this Agreement may be terminated and the Merger may be abandoned at any time prior to the Effective Time, whether before or after the Company has obtained stockholder approval: (a) by the mutual written consent of the Board of Directors of each of the Company and the Parent; (b) by either the Company or the Parent, if the Merger has not been consummated by the close of business on September 24, 1997, or such other date, if any, as the Company and the Parent shall agree upon; provided, however, that the right to terminate this Agreement pursuant to this Section 8.1(b) shall not be available to any party whose failure to fulfill any of its obligations contained in this Agreement has been the cause of, or resulted in, the failure of the Merger to have occurred prior to the aforesaid date; (c) by either the Company or the Parent, if the acquisition of the Company has been restructured to be a cash merger pursuant to Section 7.4 and the stockholders of the Company fail to approve and adopt this Agreement and the Merger, at the Special Meeting or any postponement or adjournment thereof; (d) by either the Company or the Parent, if any Governmental Entity shall have issued any judgment, injunction, order or decree enjoining Parent or the Company from consummating the Offer or the Merger and such judgment, injunction, order or decree shall become final and nonappealable; or (e) by the Company or the Parent if the Offer terminates or expires on account of the failure of any condition specified in Annex A without the Parent having purchased any Shares thereunder; provided, however, that the right to terminate this Agreement pursuant to this Section 8.1(e) shall not be available to any party whose failure to fulfill any of its obligations contained in this Agreement has been the cause of, or resulted in, the failure of any such condition; (f) by the Parent prior to the consummation of the Offer if (i) the Board of Directors of the Company shall not have recommended, or shall have resolved not to recommend, or shall have modified or withdrawn its recommendation of the Offer or the Merger or determination that the Offer or the Merger is fair to and in the best interest of the Company and its stockholders, or shall have resolved to do so, or (ii) the Board of Directors of the Company fails to recommend against acceptance of an Acquisition Proposal within five business days after a request by Parent or Purchaser to do so. The party desiring to terminate this Agreement pursuant to this Section 8.1 shall give written notice of such termination to the other party. 8.2 Effect of Termination. If this Agreement is terminated pursuant to Section 8.1 hereof, this Agreement shall become void and of no effect with no liability on the part of any party hereto; provided, that the agreements contained in this Section 8.2 and in Sections 5.10 and 8.3 and the second proviso of Section 5.3 hereof shall survive the termination hereof; and, provided, further, that the termination of this Agreement shall not relieve any party for liability for any willful and knowing breach of this Agreement. 8.3 No Survival of Representations, Warranties and Covenants. Except for the agreements set forth in Sections 7.1, 7.2 and 7.3 hereof, the respective representations, warranties and covenants of the Company, Parent and the Purchaser contained herein shall expire with, and be terminated and extinguished upon, consummation of the Merger, and thereafter neither the Company, Parent nor the Purchaser nor any officer, director or principal thereof shall be subject to any liability whatsoever based on any such representation, warranty or covenant. 8.4 Assignment. Neither this Agreement nor any of the rights or obligations hereunder may be assigned by the Company without the prior written consent of the Parent and the Purchaser, or by the Parent or the Purchaser without the prior written consent of the Company, except that Purchaser may assign, in its sole discretion, any of or all its rights, interests and obligations under this Agreement to the Parent or to any direct or indirect wholly-owned subsidiary of the Parent, but no such assignment shall relieve the Purchaser of any of its obligations hereunder; provided, that such assignment shall not materially impede or delay the consummation of the transactions contemplated by this Agreement. Subject to the foregoing, this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. 8.5 Notices. All notices, requests, demands and other communications hereunder to any party shall be in writing and shall be delivered or transmitted by (i) delivery in person, (ii) courier or messenger service, (iii) telegram, telex, telecopy, or similar electronic or facsimile transmission, or (iv) registered or certified United States Mail, postage prepaid and return receipt requested, in each case as follows: If to the Company, addressed to: Foodbrands America, Inc. 1601 N.W. Expressway Suite 1700 Oklahoma City, OK 73118-1495 Attn: Mr. R. Randolph Devening Chairman, President and Chief Executive Officer Facsimile No. (405) 840-2447 With copies to: McAfee & Taft A Professional Corporation Tenth Floor, Two Leadership Square 211 North Robinson Oklahoma City, Oklahoma 73102-7103 Attention: John M. Mee, Esq. W. Chris Coleman, Esq. Facsimile No. (405) 235-0439 and Skadden, Arps, Slate, Meagher & Flom LLP 919 Third Avenue New York, New York 10022-9931 Attention: Mark C. Smith, Esq. Facsimile No. (212) 735-2000 If to the Parent or the Purchaser, addressed to: IBP, inc. IBP Avenue P. O. Box 515 Dakota City, Nebraska 68731 Attention: Robert L. Peterson Facsimile No. (402) 241-2427 With a copy to: Sidley & Austin One First National Plaza Chicago, Illinois 60603 Attention: Larry A. Barden, Esq. Paul L. Choi, Esq. Facsimile No. (312) 853-7036 or to such other place and with such other copies as a party may designate as to itself by written notice to the others. All notices delivered or transmitted by any method described in clauses (i), (ii), and (iv) of this Section 8.5 shall be deemed given and effective upon receipt or refusal of receipt by the addressee, with the courier's delivery record or the return receipt being conclusive evidence of such receipt or attempted delivery. All notices delivered or transmitted by any method described in clause (iii) of this Section 8.4 shall be given and effective upon receipt of transmission, with the answerback or the facsimile or electronic confirmation of transmission being conclusive evidence of such receipt (unless the addressee promptly gives a notice to the transmitting party of the incompleteness or illegibility of the original notice); provided, however, any communication provided under clause (iii) shall be followed by a duplicate communication under either clause (i), clause (ii) or clause (iv). In any event, if receipt or refusal of receipt is on a day that is not a Business Day, then receipt shall be deemed to have occurred on the first Business Day thereafter. A "Business Day" is any day that is not a Saturday, Sunday, or state or federal legal holiday. 8.6 Choice of Law. This Agreement shall be construed, interpreted and the rights of the parties determined in accordance with the laws of the State of Delaware except with respect to matters of law concerning the internal corporate affairs of any corporate entity which is a party to or the subject of this Agreement but is not incorporated in the State of Delaware, and as to those matters the law of the jurisdiction under which the respective entity derives its powers shall govern. 8.7 Entire Agreement; Amendments and Waivers. This Agreement, together with all schedules contained in the Company Disclosure Letter and exhibits hereto and the confidentiality agreement between the Parent and the Company dated January 25, 1997 (the "Confidentiality Agreement"), constitutes the entire agreement among the parties pertaining to the subject matter hereof and supersedes all prior agreements, understandings, negotiations and discussions, whether oral or written, of the parties. To the extent any of the provisions of this Agreement or the Tender Agreements conflict with any of the provisions of the Confidentiality Agreement, the provisions of this Agreement or the Tender Agreements, as the case may be, shall control and any such provisions of the Confidentiality Agreement shall be deemed amended and superseded. No supplement, notification or waiver of this Agreement shall be binding unless executed in writing by the party or parties to be bound thereby. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provision hereof (whether or not similar), nor shall such waiver constitute a continuing waiver unless otherwise expressly provided. 8.8 Schedules. Notwithstanding anything to the contrary contained in this Agreement, the Company, the Parent and the Purchaser hereby agree that the schedules attached to the Company Disclosure Letter are made a part of this Agreement for all purposes. The parties further understand and agree that disclosure made in any schedule shall be deemed disclosure in all other schedules as if set forth therein, i.e., information set forth in one schedule shall be deemed disclosure in all schedules other than as to the matters disclosed in Schedules 3.3 and 3.10. 8.9 No Third Party Beneficiary. This Agreement is for the benefit of, and may be enforced only by, the Parent, the Purchaser and the Company and their respective assignees, and is not for the benefit of, and may not be enforced by, any third party except for Section 7.2. 8.10 Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument and shall be effective when two or more counterparts have been signed by each of the parties hereto and delivered to the other parties. 8.11 Invalidity. In the event that any one or more of the provisions contained in this Agreement or in any other instrument referred to herein, shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision of this Agreement or any other such instrument. 8.12 Headings. The headings of the Articles and Sections herein are inserted for convenience of reference only and are not intended to be a part of or to affect the meaning or interpretation of this Agreement. 8.13 Publicity. Unless required by law or the rules of any applicable securities exchange, neither party shall issue any press release or make any public statement regarding the transactions contemplated hereby, without the prior approval of the other party (which approval shall not be unreasonably withheld). IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed on their respective behalf, by their respective officers, thereunto duly authorized, as of the day and year first above written. FOODBRANDS AMERICA, INC. ("Company") By R. Randolph Devening, Chairman, President and Chief Executive Officer IBP, inc. ("Parent") By Robert L. Peterson, Chairman and Chief Executive Officer IBP Sub, Inc. (the "Purchaser") By Larry Shipley, President ANNEX A Certain Conditions Of The Offer Notwithstanding any other provision of the Agreement or the Offer, the Purchaser shall not be required to accept for payment or pay for, or may delay the acceptance for payment of or payment for, any tendered Shares, or may, in its sole discretion, at any time, terminate or amend the Offer as to any Shares not then paid for if (v) a majority of the Shares outstanding on a fully diluted basis shall not have been validly tendered pursuant to the Offer and not withdrawn prior to the expiration of the Offer (the "Minimum Condition"), (w) any waiting period under the Antitrust Improvements Act applicable to the purchase of shares of Common Stock pursuant to the Offer shall not have expired or shall not have been terminated prior to the expiration of the Offer, (x) the Certificate of Amendment shall not have been filed with the Secretary of State of the State of Delaware and the Charter Amendment shall not be in full force and effect prior to the close of business on September 24, 1997, (y) the Agreement shall have been terminated in accordance with its terms, or (z) on or after the date of the Agreement, and at or before the time of payment for any such Shares, any of the following events shall occur: (a) there shall have occurred (i) any general suspension of, or limitation on prices for, trading in securities on the New York Stock Exchange or on NASDAQ, (ii) a declaration of a banking moratorium or any suspension of payments in respect of banks in the United States, (iii) a commencement of a war, armed hostilities or other international or national calamity directly involving the armed forces of the United States, (iv) any general limitation (whether or not mandatory) by any governmental authority on the extension of credit by banks or other lending institutions, (v) in the case of any of the foregoing existing at the time of the commencement of the Offer, a material acceleration or worsening thereof, (vi) a decline of at least thirty percent (30%) in the Dow Jones Industrial Average or the Standard and Poors 500 Index from the date of this Agreement to the expiration or termination of the Offer or (vii) a change in general financial, bank or capital market conditions which materially and adversely affects the ability of financial institutions in the United States to extend credit or syndicate loans; (b) any of the representations and warranties of the Company set forth in the Agreement that are qualified as to materiality shall not be true and correct or any such representations and warranties that are not so qualified shall not be true and correct in any material respect, in each case, on the date when made and at the Expiration Date, or in the case of any representations and warranties that are made as of a different date, as of that date; or (c) the Company shall have breached or failed to comply in any material respect with any of its obligations under the Agreement and such failure continues for two (2) days after receipt by the Company of notice from the Parent specifying such failure; or (d) there shall have been instituted or pending any litigation by a Governmental Entity thereof (i) which prohibits the consummation of the transactions contemplated by the Offer or the Merger; (ii) which prohibits the Parent's or the Purchaser's ownership or operation of all or any material portion of their or the Company's business or assets, or which compels the Parent or the Purchaser to dispose of or hold separate all or any material portion of the Parent's or the Purchaser's or the Company's business or assets as a result of the transactions contemplated by the Offer or the Merger, (iii) which makes the acceptance for payment, purchase of, or payment for, some or all of the Shares illegal; (iv) which imposes material limitations on the ability of the Parent or the Purchaser to acquire or hold or to exercise effectively all rights of ownership of Shares including, without limitation, the right to vote any Shares purchased by the Purchaser or the Parent on all matters properly presented to the stockholders of the Company, or (v) which imposes any limitations on the ability of the Parent or the Purchaser, or any of their respective subsidiaries, effectively to control in any material respect the business or operations of the Company; (e) any statute, rule, regulation, order or injunction shall be enacted, promulgated, entered, enforced or deemed applicable to the Offer or the Merger or any other action shall have been taken by any United States governmental authority or court (i) which prohibits the consummation of the transactions contemplated by the Offer or the Merger; (ii) which prohibits the Parent's or the Purchaser's ownership or operation of all or any material portion of their or the Company's business or assets, or which compels the Parent or the Purchaser to dispose of or hold separate all or any material portion of the Parent's or the Purchaser's or the Company's business or assets as a result of the transactions contemplated by the Offer or the Merger, (iii) which makes the acceptance for payment, purchase of, or payment for, some or all of the Shares illegal; (iv) which imposes material limitations on the ability of the Parent or the Purchaser to acquire or hold or to exercise effectively all rights of ownership of Shares including, without limitation, the right to vote any Shares purchased by the Purchaser or the Parent on all matters properly presented to the stockholders of the Company, or (v) which imposes any limitations on the ability of the Parent or the Purchaser, or any of their respective subsidiaries, effectively to control in any material respect the business or operations of the Company; (f) Parent or the Purchaser shall have reached an agreement or understanding in writing with the Company providing for termination of the Offer or the Agreement; (g) any filing required to be made by the Company with, or any consent, approval or authorization required to be obtained prior to the Effective Time by the Company from, any Governmental Entity in connection with the execution and delivery of the Agreement by the Company or the consummation of the Offer or the transactions contemplated by the Agreement, shall not have been made or obtained; or (h) a Material Adverse Change in the Company has occurred, which, in the sole judgment of the Purchaser, regardless of the circumstances giving rise to any such conditions, makes it inadvisable to proceed with the Offer and/or with such acceptance for payment of or payment for Shares. The foregoing conditions are for the sole benefit of the Parent and the Purchaser and may be asserted by the Parent or the Purchaser regardless of the circumstances or may be waived by the Parent or Purchaser in whole or in part at any time and from time to time in its sole discretion. Exhibit 2.2 TENDER AGREEMENT TENDER AGREEMENT dated as of March 25, 1997 (this "Agreement"), among IBP, inc., a Delaware corporation (the "Parent"), IBP Sub, Inc., a Delaware corporation and a wholly owned subsidiary of the Parent ("Purchaser"), and Joseph Littlejohn & Levy, L.P., a Delaware limited partnership, and Joseph, Littlejohn & Levy Fund II, L.P., a Delaware limited partnership (together, the "Stockholder"). WHEREAS, concurrently with the execution and delivery of this Agreement the Parent, Purchaser and Foodbrands America, Inc., a Delaware corporation (the "Company"), have entered into an Agreement and Plan of Merger dated as of the date hereof (such Agreement and Plan of Merger, as amended from time to time, the "Merger Agreement"), which provides, among other things, that Purchaser shall make the Offer (as defined in the Merger Agreement) to purchase at a price of $23.40 per share, net to the sellers in cash, all of the issued and outstanding shares of the Company's Common Stock, par value $.01 per share (the "Company Common Stock"), and shall merge with and into the Company (the "Merger"), upon the terms and subject to the conditions set forth in the Merger Agreement (any term used herein without definition shall have the definition ascribed thereto in the Merger Agreement); WHEREAS, the Stockholder owns beneficially and of record shares of Company Common Stock (such shares of Company Common Stock being collectively referred to herein as the "Stockholder Shares" or individually referred to herein as the "Stockholder Share") and; WHEREAS, as a condition to the willingness of the Parent and Purchaser to enter into the Merger Agreement, and as an inducement to them to do so, the Stockholder has agreed for the benefit of the Parent and Purchaser to tender the Stockholder Shares and any other shares of Company Common Stock at any time during the term of this Agreement held by the Stockholder, pursuant to the Offer, to vote all the Stockholder Shares and any other shares of Company Common Stock owned by the Stockholder in favor of the Merger, and to grant to Purchaser an option to acquire all Stockholder Shares and all other shares of Company Common Stock owned by the Stockholder under certain circumstances, all on the terms and conditions contained in this Agreement. NOW, THEREFORE, in consideration of the representations, warranties, covenants and agreements contained in this Agreement, the parties hereby agree as follows: ARTICLE I Tender Offer and Option SECTION 1.01. Tender of Shares. (a) Within five business days of the commencement by Purchaser of the Offer, the Stockholder shall tender to the Depository designated in the Offer to Purchase (the "Offer to Purchase") distributed by Purchaser in connection with the Offer (i) a letter of transmittal with respect to the Stockholder Shares and any other shares of Company Common Stock held by the Stockholder (whether or not currently held by the Stockholder; the Stockholder Shares, together with any shares acquired by the Stockholder in any capacity after the date hereof and prior to the termination of this Agreement whether upon the exercise of options, warrants or rights, the conversion or exchange of convertible or exchangeable securities, or by means of purchase, dividend, distribution or otherwise (the "Shares"), complying with the terms of the Offer to Purchase, (ii) the certificates representing the Shares, and (iii) all other documents or instruments required to be delivered pursuant to the terms of the Offer to Purchase. (b) The Stockholder shall not, subject to applicable law, withdraw the tender effected in accordance with Section 1.01(a); provided, however, that the Stockholder may decline to tender, or may withdraw, any and all Shares owned by the Stockholder if the Purchaser amends the Offer to (w) reduce the Offer Price to less than $23.40 in cash, net to the stockholders, (x) reduce the number of shares of Company Common Stock subject to the Offer, (y) change the form of consideration payable in the Offer or (z) amend or modify any term or condition of the Offer in a manner adverse to the stockholders of the Company (other than insignificant changes or amendments or other than to waive any condition). The Stockholder shall give Purchaser at least two business days' prior notice of any withdrawal of Shares owned by the Stockholder pursuant to the immediately preceding proviso. SECTION 1.02. Option. (a) The Stockholder hereby irrevocably grants Purchaser an option (the "Option"), exercisable only upon the events and subject to the conditions set forth herein, to purchase any or all of the Shares at a purchase price per share equal to $23.40 (or such higher per share price as may be offered by Purchaser in the Offer). (b) Subject to the conditions set forth in Section 1.03 and the termination provisions of Section 6.07, Purchaser may exercise the Option in whole or in part at any time prior to the date 60 days after the expiration or termination of the Offer (such sixtieth day being herein called the "Option Expiration Date") if (x) the Stockholder fails to comply with any of its obligations under this Agreement or withdraws the tender of the Shares except under the circumstances set forth in the proviso to Section 1.01(b) (but the Option shall not limit any other right or remedy available to the Parent or Purchaser against the Stockholder for breach of this Agreement) or (y) the Offer is not consummated because of the failure to satisfy any of the conditions to the Offer set forth in Annex A to the Merger Agreement (other than as a result of any action or inaction of the Parent or Purchaser which constitutes a breach of the Merger Agreement). Upon the occurrence of any of such circumstances, Purchaser shall be entitled to exercise the Option and (subject to Section 1.03) Purchaser shall be entitled to purchase the Shares and the Stockholder shall sell the Shares to Purchaser. Purchaser shall exercise the Option by delivering written notice thereof to the Stockholder (the "Notice"), specifying the number of Shares to be purchased and the date, time and place for the closing of such purchase which date shall not be less than three business days nor more than five business days from the date the Stockholder receives the Notice and in no event shall such date be later than the Option Expiration Date. The closing of the purchase of Shares pursuant to this Section 1.02 (the "Closing") shall take place on the date, at the time and at the place specified in such notice; provided, that if at such date any of the conditions specified in Section 1.03 shall not have been satisfied (or waived), Purchaser may postpone the Closing until a date within five business days after such conditions are satisfied (but not later than the Option Expiration Date). (c) At the Closing, the Stockholder will deliver to Purchaser (in accordance with Purchaser's instructions) the certificates representing the Shares owned by the Stockholder and being purchased pursuant to Section 1.02(c), duly endorsed or accompanied by stock powers duly executed in blank. At such Closing, Purchaser shall deliver to the Stockholder, by bank wire transfer of immediately available funds, an amount equal to the number of Shares being purchased from the Stockholder as specified in the Notice multiplied by $23.40 (or such higher per share price as may be offered by Purchaser in the Offer). SECTION 1.03. Conditions to Option. The obligation of Purchaser to purchase the Shares at the Closing is subject to the following conditions: (a) all waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and the rules and regulations promulgated thereunder (the "HSR Act") applicable to such purchase shall have expired or been terminated; and (b) there shall be no preliminary or permanent injunction or other order, decree or ruling issued by any Governmental Entity, nor any statute, rule, regulation or order promulgated or enacted by any Governmental Entity prohibiting, or otherwise restraining, such purchase. SECTION 1.04. No Purchase. Purchaser may allow the Offer to expire without accepting for payment or paying for any Shares, on the terms and conditions set forth in the Offer to Purchase, and may allow the Option to expire without exercising the Option and purchasing all or any Shares pursuant to such exercise. If all Shares validly tendered and not withdrawn are not accepted for payment and paid for in accordance with the terms of the Offer to Purchase or pursuant to the exercise of the Option, they shall be returned to the Stockholder, whereupon they shall continue to be held by the Stockholder subject to the terms and conditions of this Agreement. ARTICLE II Consent and Voting The Stockholder hereby revokes any and all previous proxies granted with respect to the Shares owned by the Stockholder. By entering into this Agreement, the Stockholder hereby consents to the Merger Agreement and the transactions contemplated thereby, including the Merger. So long as the Merger Agreement is in effect, the Stockholder hereby agrees (i) to vote all Shares now or hereafter owned by such Stockholder or execute a consent and not revoke any proxy, vote or consent, in favor of the Merger Agreement, the Merger and the transactions contemplated thereby, and (ii) to oppose any Acquisition Proposal and to vote all Shares now or hereafter owned by such Stockholder, or execute a consent, against any Acquisition Proposal. ARTICLE III Representations, Warranties and Covenants of the Stockholder The Stockholder represents, warrants and covenants to the Purchaser that: SECTION 3.01. Ownership. As of the date hereof the Stockholder is the sole, true, lawful and beneficial owner of 5,515,833 Shares and that there are no restrictions on voting rights or rights of disposition pertaining to such Shares other than those specified herein or any applicable provisions of Article Fifth of the Company's Amended and Restated Certificate of Incorporation. To the extent permitted by Article Fifth of the Company's Amended and Restated Certificate of Incorporation, the Stockholder will convey good and valid title to the Shares owned by the Stockholder and being acquired pursuant to the Offer, the Merger or the exercise of the Option, as the case may be, free and clear of any and all liens, restrictions, security interests or any encumbrances whatsoever (collectively, "Liens"). None of the Shares owned by the Stockholder is subject to any voting trust or other agreement, arrangement or restriction with respect to the voting of such Shares. Until this Agreement is terminated, the Stockholder shall not, directly or indirectly, sell, exchange, encumber, pledge, assign or otherwise transfer or dispose of, or agree to or solicit any of the foregoing, or grant any right or power to any person that limits the Stockholder's sole power to vote, sell, assign, transfer, pledge, encumber or otherwise dispose of the Shares owned by the Stockholder or otherwise directs the Stockholder with respect to such Shares. SECTION 3.02. Authority and Non-Contravention. The execution, delivery and performance by the Stockholder of this Agreement and the consummation of the transactions contemplated hereby (i) are within the Stockholder's power and authority, have been duly authorized by all necessary action (including any consultation, approval or other action by or with any other person), (ii) require no action by or in respect of, or filing with, any Governmental Entity (except as may be required under the HSR Act and under the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder (the "Exchange Act")), and (iii) do not and will not contravene or constitute a default under, or give rise to a right of termination, cancellation or acceleration of any right or obligation of the Stockholder or to a loss of any benefit of the Stockholder under, any provision of applicable law or regulation or any agreement, judgment, injunction, order, decree, or other instrument binding on the Stockholder or result in the imposition of any Lien on any assets of the Stockholder. SECTION 3.03. Binding Effect. This Agreement has been duly executed and delivered by the Stockholder and is the valid and binding agreement of the Stockholder, enforceable against it in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency, moratorium or other similar laws relating to creditors' rights generally. SECTION 3.04. Total Shares. The Stockholder Shares owned by the Stockholder are the only shares of Company Common Stock beneficially owned as of the date hereof by the Stockholder and the Stockholder has no option to purchase or right to subscribe for or otherwise acquire any securities of the Company and has no other interest in or voting rights with respect to any other securities of the Company. SECTION 3.05. Finder's Fees. No investment banker, broker or finder is entitled to a commission or fee from Purchaser or the Company in respect of this Agreement based upon any arrangement or agreement made by or on behalf of the Stockholder, except as otherwise disclosed in the Merger Agreement. ARTICLE IV Representations, Warranties and Covenants of the Parent and Purchaser The Parent and Purchaser represent, warrant and covenant to the Stockholder: SECTION 4.01. Corporate Power and Authority; Noncontravention. The Parent and Purchaser have all requisite corporate power and authority to enter into this Agreement and to perform their obligations hereunder. The execution, delivery and performance by the Parent and Purchaser of this Agreement and the consummation by the Parent and Purchaser of the transactions contemplated hereby (i) have been duly authorized by all necessary corporate action on the part of the Parent and Purchaser, (ii) require no action by or in respect of, or filing with, any Governmental Entity (except as may be required under the HSR Act and under the Exchange Act, or (iii) do not and will not contravene or constitute a default under, the certificate of incorporation or by-laws of Parent or Purchaser or any provision of applicable law or regulation or any, judgment, injunction, order, decree, material agreement or other material instrument binding on the Parent or Purchaser. SECTION 4.02. Binding Effect. This Agreement has been duly executed and delivered by the Parent and Purchaser and is a valid and binding agreement of the Parent and Purchaser, enforceable against each of them in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency, moratorium or other similar laws relating to creditors' rights generally. SECTION 4.03. Acquisition for Purchaser's Account. Any Shares to be acquired upon consummation of the Offer, or upon exercise of the Option will be acquired by Purchaser for its own account and not with a view to the public distribution thereof and will not be transferred except in compliance with the Securities Act and the rules and regulations promulgated thereunder. ARTICLE V Additional Agreements SECTION 5.01. Agreements of Stockholder. The Stockholder hereby covenants and agrees that: (a) No Solicitation. The Stockholder shall not directly or indirectly (i) solicit, initiate or knowingly encourage (or authorize any person to solicit, initiate or encourage) any Acquisition Proposal, or (ii) participate in any discussion or negotiations regarding, or furnish to any other person any information with respect to, or otherwise knowingly cooperate in any way with, or participate in, facilitate or encourage any effort or attempt by any other person to do or seek the foregoing. The Stockholder shall promptly advise the Purchaser of the terms of any communications it or any of its affiliates may receive relating to any Acquisition Proposal (including, without limitation, the identify of the party making any such Acquisition Proposal). (b) Adjustment upon Changes in Capitalization or Merger. In the event of any change in the Company's capital stock by reason of stock dividends, stock splits, mergers, consolidations, recapitalization, combinations, conversions, exchanges of shares, extraordinary or liquidating dividends, or other changes in the corporate or capital structure of the Company which would have the effect of diluting or changing Purchaser's rights hereunder, the number and kind of shares or securities subject to this Agreement and the price set forth herein at which Shares may be purchased from the Stockholder pursuant to the Offer or the exercise of the Option shall be appropriately and equitably adjusted so that Purchaser shall receive pursuant to the Offer or the exercise of the Option the number and class of shares or other securities or property that Purchaser would have received in respect of the Shares purchasable pursuant to the Offer or the exercise of the Option if such purchase had occurred immediately prior to such event. ARTICLE VI Miscellaneous SECTION 6.01. Expenses. All costs and expenses incurred in connection with this Agreement shall be paid by the party incurring such cost or expense. SECTION 6.02. Further Assurances. The Parent, Purchaser and the Stockholder will execute and deliver or cause to be executed and delivered all further documents and instruments and use its reasonable best efforts to secure such consents and take all such further action as may be reasonably necessary in order to consummate the transactions contemplated hereby and by the Merger Agreement. SECTION 6.03. Additional Agreements. Subject to the terms and conditions of this Agreement, each of the parties hereto agrees to use all reasonable best efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations and which may be required under any agreements, contracts, commitments, instruments, understandings, arrangements or restrictions of any kind to which such party is a party or by which such party is governed or bound, to consummate and make effective the transactions contemplated by this Agreement. SECTION 6.04. Specific Performance. The parties acknowledge and agree that performance of their respective obligations hereunder will confer a unique benefit on the other and that a failure of performance will not be compensable by money damages. The parties therefore agree that this Tender Agreement shall be specifically enforceable and that specific enforcement and injunctive relief shall be available to the Parent, Purchaser or the Stockholder for any breach by the other party or parties of any agreement, covenant or representation hereunder. SECTION 6.05. Notices. All notices, requests, claims, demands and other communications hereunder shall be deemed to have been duly given when delivered in person, by telecopy, or by registered or certified mail (postage prepaid, return receipt requested) to such party at its address set forth on the signature page hereto. SECTION 6.06. Survival of Representations and Warranties. All representations and warranties contained in this Agreement shall survive delivery of and payment for the Shares pursuant to Section 1.02 hereof. None of the representations and warranties contained in this Agreement shall survive the acceptance for payment and payment for the Shares pursuant to the Offer. SECTION 6.07. Amendments; Termination. This Agreement may not be modified, amended, altered or supplemented, except upon the execution and delivery of a written agreement executed by the parties hereto. Notwithstanding anything herein to the contrary, this Agreement shall expire and be of no further force or effect if (i) the conditions to the Purchaser's obligations to accept for payment and pay for Shares pursuant to the Offer shall have been satisfied and the Purchaser breaches any obligation of Purchaser under the Merger Agreement to accept for payment and promptly pay for all Shares validly tendered and not withdrawn pursuant to the Offer upon expiration of the Offer or (ii) Purchaser amends the Offer to (w) reduce the Offer Price to less than $23.40 in cash, net to the sellers, (x) reduce the number of shares of Company Common Stock subject to the Offer, (y) change the form of consideration payable in the Offer or (z) amend or modify any term or condition of the Offer in a manner adverse to the stockholders of the Company (other than insignificant changes or amendments or other than to waive any condition). This Agreement will also terminate upon the earlier of (i) the close of business on September 24, or (ii) the Effective Time. SECTION 6.08. Successors and Assigns. The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns; provided, however, that Purchaser may assign its rights and obligations to another wholly-owned subsidiary of the Parent which is the assignee of Purchaser's rights under the Merger Agreement; and provided further that except as set forth in the prior clause, a party may not assign, delegate or otherwise transfer any of its rights or obligations under this Agreement without the consent of the other parties hereto and any purported assignment, delegation or transfer without such consent shall be null and void. SECTION 6.09. Governing Law. This Agreement shall be construed in accordance with and governed by the law of Delaware without giving effect to the principles of conflicts of laws thereof. SECTION 6.10. Counterparts; Effectiveness. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effects as if the signatures thereto and thereof were upon the same instrument. This Agreement shall become effective when each party hereto shall have received counterparts hereof signed by all of the other parties hereto. SECTION 6.11. Stockholder Capacity. The Stockholder signs solely in its capacity as the record holder and beneficial owner of the Shares and nothing herein shall limit or affect any actions taken by any officer, director, partner, employee or affiliate of the Stockholder in his or her capacity as an officer or director of the Company and no such actions shall be deemed a breach of this Agreement. SECTION 6.12. Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law, or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby are not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the transactions be consummated as originally contemplated to the fullest extent possible. To the extent that any provision of this Agreement and the Merger Agreement conflict, the provisions of the Merger Agreement shall control. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year first above written. IBP, inc. By: /s/ Robert L. Peterson ------------------------- Name: Robert L. Peterson Title: Chairman and Chief Executive Officer Address for Notices: IBP Avenue P.O. Box 515 Dakota City, Nebraska 68731 Attn: Lonnie Grigsby, Esq. (#141) IBP SUB, INC. By: /s/ Larry Shipley -------------------- Name: Larry Shipley Title: President Address for Notices: IBP Avenue P.O. Box 515 Dakota City, Nebraska 68731 Attn: Lonnie Grigsby, Esq. (#141) JOSEPH LITTLEJOHN & LEVY FUND, L.P. By: JLL Associates, L.P., General Partner By /s/ Paul S. Levy ------------------- Name: Paul S. Levy Title: General Partner Address for Notices: Joseph Littlejohn & Levy 450 Lexington Avenue, Suite 3350 New York, New York 10017 Attn: Paul S. Levy JOSEPH LITTLEJOHN & LEVY FUND II, L.P. By: JLL Associates, L.P., General Partner By /s/ Paul S. Levy ------------------- Name: Paul S. Levy Title: General Partner Address for Notices: Joseph Littlejohn & Levy 450 Lexington Avenue, Suite 3350 New York, New York 10017 Attn: Paul S. Levy Exhibit 2.3 TENDER AGREEMENT TENDER AGREEMENT dated as of March 25, 1997 (this "Agreement"), among IBP, inc., a Delaware corporation (the "Parent"), IBP Sub, Inc., a Delaware corporation and a wholly owned subsidiary of the Parent ("Purchaser"), and The Airlie Group, L.P. a Delaware limited partnership (the "Stockholder"). WHEREAS, concurrently with the execution and delivery of this Agreement the Parent, Purchaser and Foodbrands America, Inc., a Delaware corporation (the "Company"), have entered into an Agreement and Plan of Merger dated as of the date hereof (such Agreement and Plan of Merger, as amended from time to time, the "Merger Agreement"), which provides, among other things, that Purchaser shall make the Offer (as defined in the Merger Agreement) to purchase at a price of $23.40 per share, net to the sellers in cash, all of the issued and outstanding shares of the Company's Common Stock, par value $.01 per share (the "Company Common Stock"), and shall merge with and into the Company (the "Merger"), upon the terms and subject to the conditions set forth in the Merger Agreement (any term used herein without definition shall have the definition ascribed thereto in the Merger Agreement); WHEREAS, the Stockholder owns beneficially and of record shares of Company Common Stock (such shares of Company Common Stock being collectively referred to herein as the "Stockholder Shares") and; WHEREAS, as a condition to the willingness of the Parent and Purchaser to enter into the Merger Agreement, and as an inducement to them to do so, the Stockholder has agreed for the benefit of the Parent and Purchaser to tender the Stockholder Shares and any other shares of Company Common Stock at any time during the term of this Agreement held by the Stockholder, pursuant to the Offer, to vote all the Stockholder Shares and any other shares of Company Common Stock owned by the Stockholder in favor of the Merger, and to grant to Purchaser an option to acquire all Stockholder Shares and all other shares of Company Common Stock owned by the Stockholder under certain circumstances, all on the terms and conditions contained in this Agreement. NOW, THEREFORE, in consideration of the representations, warranties, covenants and agreements contained in this Agreement, the parties hereby agree as follows: ARTICLE I Tender Offer and Option SECTION 1.01. Tender of Shares. (a) From time to time following the commencement by Purchaser of the Offer, the Stockholder shall, if so requested in writing by Parent (the "Request"), promptly tender to the Depository designated in the Offer to Purchase (the "Offer to Purchase") distributed by Purchaser in connection with the Offer (i) a letter of transmittal with respect to such number as specified in the Request not in excess of the then applicable Maximum Share Number), of the Stockholder Shares and any other shares of Company Common Stock held by the Stockholder (whether or not currently held by the Stockholder; the Stockholder Shares, together with any shares acquired by the Stockholder in any capacity after the date hereof and prior to the termination of this Agreement whether upon the exercise of options, warrants or rights, the conversion or exchange of convertible or exchangeable securities, or by means of purchase, dividend, distribution or otherwise (the "Shares"), complying with the terms of the Offer to Purchase; provided, that the number of Shares the Stockholder shall be required to tender from time to time pursuant to a Request, when taken together with all Shares previously tendered in the Offer and not withdrawn, shall not exceed the aggregate number of Shares owned by the Stockholder beneficially and of record, at such time (ii) the certificates representing the Shares specified in the Request, and (iii) all other documents or instruments required to be delivered pursuant to the terms of the Offer to Purchase. (b) The Stockholder shall not, subject to applicable law, withdraw the tender effected in accordance with Section 1.01(a); provided, however, that the Stockholder may decline to tender, or may withdraw, any and all Shares owned by the Stockholder and tendered or requested to be tendered in excess of the Maximum Share Number or if Purchaser amends the Offer to (w) reduce the Offer Price to less than $23.40 in cash, net to the sellers, (x) reduce the number of shares of Company Common Stock subject to the Offer, (y) change the form of consideration payable in the Offer or (z) amend or modify any term or condition of the Offer in a manner adverse to the stockholders of the Company (other than insignificant changes or amendments or other than to waive any condition). The Stockholder shall give Purchaser at least two business days' prior notice of any withdrawal of Shares owned by the Stockholder pursuant to the immediately preceding proviso. SECTION 1.02. Option. (a) The Stockholder hereby irrevocably grants Purchaser an option (the "Option"), exercisable from time to time only upon the events and subject to the conditions set forth herein, to purchase such number (not in excess of the then applicable Maximum Share Number), of the Shares at a purchase price per share equal to $23.40 (or such higher per share price as may be offered by Purchaser in the Offer). (b) Subject to the conditions set forth in Section 1.03 and the termination provisions of Section 6.07, Purchaser may exercise the Option in whole or in part at any time prior to the date 60 days after the expiration or termination of the Offer (such sixtieth day being herein called the "Option Expiration Date") if (x) the Stockholder fails to comply with any of its obligations under this Agreement or withdraws the tender of the Shares except under the circumstances set forth in the proviso to Section 1.01(b) (but the Option shall not limit any other right or remedy available to the Parent or Purchaser against the Stockholder for breach of this Agreement) or (y) the Offer is not consummated because of the failure to satisfy any of the conditions to the Offer set forth in Annex A to the Merger Agreement (other than as a result of any action or inaction of the Parent or Purchaser which constitutes a breach of the Merger Agreement). Upon the occurrence of any of such circumstances, Purchaser shall be entitled to exercise the Option and (subject to Section 1.03) Purchaser shall be entitled to purchase the Shares and the Stockholder shall sell the Shares to Purchaser. Purchaser shall exercise the Option by delivering written notice thereof to the Stockholder (the "Notice"), specifying the number of Shares to be purchased and the date, time and place for the closing of such purchase which date shall not be less than three business days nor more than five business days from the date the Stockholder receives the Notice and in no event shall such date be later than the Option Expiration Date. The closing of the purchase of Shares pursuant to this Section 1.02 (the "Closing") shall take place on the date, at the time and at the place specified in such notice; provided, that if at such date any of the conditions specified in Section 1.03 shall not have been satisfied (or waived), Purchaser may postpone the Closing until a date within five business days after such conditions are satisfied (but not later than the Option Expiration Date). (c) At the Closing, the Stockholder will deliver to Purchaser (in accordance with Purchaser's instructions) the certificates representing the Shares owned by the Stockholder and being purchased pursuant to Section 1.02(c), duly endorsed or accompanied by stock powers duly executed in blank; provided, that the number of Shares the Stockholder shall be required to deliver from time to time pursuant to a Notice, when taken together with all Shares previously delivered pursuant to all Notices, shall not exceed the aggregate number of shares owned by the Stockholder beneficially and of record, at such time. At such Closing, Purchaser shall deliver to the Stockholder, by bank wire transfer of immediately available funds, an amount equal to the number of Shares being purchased from the Stockholder as specified in the Notice multiplied by $23.40 (or such higher per share price as being offered by Purchaser in the Offer). SECTION 1.03. Conditions to Option. The obligation of Purchaser to purchase the Shares at the Closing is subject to the following conditions: (a) all waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and the rules and regulations promulgated thereunder (the "HSR Act") applicable to such purchase shall have expired or been terminated; and (b) there shall be no preliminary or permanent injunction or other order, decree or ruling issued by any Governmental Entity, nor any statute, rule, regulation or order promulgated or enacted by any Governmental Entity prohibiting, or otherwise restraining, such purchase. SECTION 1.04. No Purchase. Purchaser may allow the Offer to expire without accepting for payment or paying for any Shares, on the terms and conditions set forth in the Offer to Purchase, and may allow the Option to expire without exercising the Option and purchasing all or any Shares pursuant to such exercise. If all Shares validly tendered and not withdrawn are not accepted for payment and paid for in accordance with the terms of the Offer to Purchase or pursuant to the exercise of the Option, they shall be returned to the Stockholder, whereupon they shall continue to be held by the Stockholder subject to the terms and conditions of this Agreement. SECTION 1.05. Maximum Share Number. For purposes of this Agreement, the term "Maximum Share Number" shall mean, as of any time of determination, such number of Shares that, when taken together with all shares of the Company Common Stock that Parent or any of its Affiliates (i) owns directly or indirectly, beneficially or of record, at such time of determination and (ii) has the right to acquire, at such time of determination, from Joseph Littlejohn & Levy, L.P. and Joseph Littlejohn & Levy Fund II, L.P. in accordance with the terms of the Tender Agreement dated March 25, 1997 among Parent, Purchaser and Joseph Littlejohn & Levy, L.P. and Joseph Littlejohn & Levy Fund II, L.P. pursuant to the Offer or the exercise of the Option (as defined in such Tender Agreement), would cause Parent or its Affiliates to own directly or indirectly, beneficially or of record, 49.9% of the aggregate voting power represented by the issued and outstanding capital stock of the Company. ARTICLE II Consent and Voting The Stockholder hereby revokes any and all previous proxies granted with respect to the Shares owned by the Stockholder. By entering into this Agreement, the Stockholder hereby consents to the Merger Agreement and the transactions contemplated thereby, including the Merger. So long as the Merger Agreement is in effect, the Stockholder hereby agrees (i) to vote all Shares (not to exceed the Maximum Share Number) now or hereafter owned by such Stockholder or execute a consent and not revoke any proxy, vote or consent, in favor of the Merger Agreement, the Merger and the transactions contemplated thereby, and (ii) to oppose any Acquisition Proposal and to vote all Shares (not to exceed the Maximum Share Number) now or hereafter owned by such Stockholder, or execute a consent, against any Acquisition Proposal. ARTICLE III Representations, Warranties and Covenants of the Stockholder The Stockholder represents, warrants and covenants to the Purchaser and AC that: SECTION 3.01. Ownership. As of the date hereof the Stockholder is the sole, true, lawful and beneficial owner of 827,200 Shares and that there are no restrictions on voting rights or rights of disposition pertaining to such Shares other than those specified herein or any applicable provisions of Article Fifth of the Company's Amended and Restated Certificate of Incorporation. To the extent permitted by Article Fifth of the Company's Amended and Restated Certificate of Incorporation, the Stockholder will convey good and valid title to the Shares owned by the Stockholder and being acquired pursuant to the Offer, the Merger or the exercise of the Option, as the case may be, free and clear of any and all liens, restrictions, security interests or any encumbrances whatsoever (collectively, "Liens"). None of the Shares owned by the Stockholder is subject to any voting trust or other agreement, arrangement or restriction with respect to the voting of such Shares. Until this Agreement is terminated, the Stockholder shall not, directly or indirectly, sell, exchange, encumber, pledge, assign or otherwise transfer or dispose of, or agree to or solicit any of the foregoing, or grant any right or power to any person that limits the Stockholder's sole power to vote, sell, assign, transfer, pledge, encumber or otherwise dispose of the Shares owned by the Stockholder or otherwise directs the Stockholder with respect to such Shares. SECTION 3.02. Authority and Non-Contravention. The execution, delivery and performance by the Stockholder of this Agreement and the consummation of the transactions contemplated hereby (i) are within the Stockholder's power and authority, have been duly authorized by all necessary action (including any consultation, approval or other action by or with any other person), (ii) require no action by or in respect of, or filing with, any Governmental Entity (except as may be required under the HSR Act and under the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder (the "Exchange Act")), and (iii) do not and will not contravene or constitute a default under, or give rise to a right of termination, cancellation or acceleration of any right or obligation of the Stockholder or to a loss of any benefit of the Stockholder under, any provision of applicable law or regulation or any agreement, judgment, injunction, order, decree, or other instrument binding on the Stockholder or result in the imposition of any Lien on any assets of the Stockholder. SECTION 3.03. Binding Effect. This Agreement has been duly executed and delivered by the Stockholder and is the valid and binding agreement of the Stockholder, enforceable against it in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency, moratorium or other similar laws relating to creditors' rights generally. SECTION 3.04. Total Shares. The Stockholder Shares owned by the Stockholder are the only shares of Company Common Stock beneficially owned as of the date hereof by the Stockholder and the Stockholder has no option to purchase or right to subscribe for or otherwise acquire any securities of the Company and has no other interest in or voting rights with respect to any other securities of the Company. SECTION 3.05. Finder's Fees. No investment banker, broker or finder is entitled to a commission or fee from Purchaser or the Company in respect of this Agreement based upon any arrangement or agreement made by or on behalf of the Stockholder, except as otherwise disclosed in the Merger Agreement. ARTICLE IV Representations, Warranties and Covenants of the Parent and Purchaser The Parent and Purchaser represent, warrant and covenant to the Stockholder: SECTION 4.01. Corporate Power and Authority; Noncontra- vention. The Parent and Purchaser have all requisite corporate power and authority to enter into this Agreement and to perform their obligations hereunder. The execution, delivery and performance by the Parent and Purchaser of this Agreement and the consummation by the Parent and Purchaser of the transactions contemplated hereby (i) have been duly authorized by all necessary corporate action on the part of the Parent and Purchaser, (ii) require no action by or in respect of, or filing with, any Governmental Entity (except as may be required under the HSR Act and under the Exchange Act), or (iii) do not and will not contravene or constitute a default under, the certificate of incorporation or by-laws of Parent or Purchaser or any provision of applicable law or regulation or any judgment, injunction, order, decree, material agreement or other material instrument binding on the Parent or Purchaser. SECTION 4.02. Binding Effect. This Agreement has been duly executed and delivered by the Parent and Purchaser and is a valid and binding agreement of the Parent and Purchaser, enforceable against each of them in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency, moratorium or other similar laws relating to creditors' rights generally. SECTION 4.03. Acquisition for Purchaser's Account. Any Shares to be acquired upon consummation of the Offer, or upon exercise of the Option will be acquired by Purchaser for its own account and not with a view to the public distribution thereof and will not be transferred except in compliance with the Securities Act and the rules and regulations promulgated thereunder. ARTICLE V Additional Agreements SECTION 5.01. Agreements of Stockholder. The Stockholder hereby covenants and agrees that: (a) No Solicitation. The Stockholder shall not directly or indirectly (i) solicit, initiate or knowingly encourage (or authorize any person to solicit, initiate or encourage) any Acquisition Proposal, or (ii) participate in any discussion or negotiations regarding, or furnish to any other person any information with respect to, or otherwise knowingly cooperate in any way with, or participate in, facilitate or encourage any effort or attempt by any other person to do or seek the foregoing. The Stockholder shall promptly advise the Purchaser of the terms of any communications it or any of its affiliates may receive relating to any Acquisition Proposal (including, without limitation, the identify of the party making any such Acquisition Proposal). (b) Adjustment upon Changes in Capitalization or Merger. In the event of any change in the Company's capital stock by reason of stock dividends, stock splits, mergers, consolida- tions, recapitalization, combinations, conversions, exchanges of shares, extraordinary or liquidating dividends, or other changes in the corporate or capital structure of the Company which would have the effect of diluting or changing Pur- chaser's rights hereunder, the number and kind of shares or securities subject to this Agreement and the price set forth herein at which Shares may be purchased from the Stockholder pursuant to the Offer or the exercise of the Option shall be appropriately and equitably adjusted so that Purchaser shall receive pursuant to the Offer or the exercise of the Option the number and class of shares or other securities or property that Purchaser would have received in respect of the Shares purchasable pursuant to the Offer or the exercise of the Option if such purchase had occurred immediately prior to such event. ARTICLE VI Miscellaneous SECTION 6.01. Expenses. All costs and expenses incurred in connection with this Agreement shall be paid by the party incurring such cost or expense. SECTION 6.02. Further Assurances. The Parent, Purchaser and the Stockholder will execute and deliver or cause to be executed and delivered all further documents and instruments and use its reasonable best efforts to secure such consents and take all such further action as may be reasonably necessary in order to consummate the transactions contemplated hereby and by the Merger Agreement. SECTION 6.03. Additional Agreements. Subject to the terms and conditions of this Agreement, each of the parties hereto agrees to use all reasonable best efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations and which may be required under any agreements, contracts, commitments, instruments, understandings, arrangements or restrictions of any kind to which such party is a party or by which such party is governed or bound, to consummate and make effective the transactions contemplated by this Agreement. SECTION 6.04. Specific Performance. The parties acknowledge and agree that performance of their respective obligations hereunder will confer a unique benefit on the other and that a failure of performance will not be compensable by money damages. The parties therefore agree that this Agreement shall be specifically enforceable and that specific enforcement and injunctive relief shall be available to the Parent, Purchaser or the Stockholder for any breach by the other party or parties of any agreement, covenant or representation hereunder. SECTION 6.05. Notices. All notices, requests, claims, demands and other communications hereunder shall be deemed to have been duly given when delivered in person, by telecopy, or by registered or certified mail (postage prepaid, return receipt requested) to such party at its address set forth on the signature page hereto. SECTION 6.06. Survival of Representations and Warranties. All representations and warranties contained in this Agreement shall survive delivery of and payment for the Shares pursuant to Section 1.02 hereof. None of the representations and warranties contained in this Agreement shall survive the acceptance for payment and payment for the Shares pursuant to the Offer. SECTION 6.07. Amendments; Termination. This Agreement may not be modified, amended, altered or supplemented, except upon the execution and delivery of a written agreement executed by the parties hereto. Notwithstanding anything herein to the contrary, this Agreement shall expire and be of no further force or effect if (i) the conditions to the Purchaser's obligations to accept for payment and pay for Shares pursuant to the Offer shall have been satisfied and the Purchaser breaches any obligation of Purchaser under the Merger Agreement to accept for payment and promptly pay for all Shares validly tendered and not withdrawn pursuant to the Offer upon expiration of the Offer or (ii) the Purchaser amends the Offer to (w) reduce the Offer Price to less than $23.40 in cash, net to the sellers, (x) reduce the number of shares of Company Common Stock subject to the Offer, (y) change the form of consideration payable in the Offer or (z) amend or modify any term or condition of the Offer in a manner adverse to the stockholders of the Company (other than insignificant changes or amendments or other than to waive any condition). This Agreement will also terminate upon the earlier of (i) the close of business on September 24, or (ii) the Effective Time. SECTION 6.08. Successors and Assigns. The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns; provided, however, that Purchaser may assign its rights and obligations to another wholly-owned subsidiary of the Parent which is the assignee of Purchaser's rights under the Merger Agreement; and provided further that except as set forth in the prior clause, a party may not assign, delegate or otherwise transfer any of its rights or obligations under this Agreement without the consent of the other parties hereto and any purported assignment, delegation or transfer without such consent shall be null and void. SECTION 6.09. Governing Law. This Agreement shall be construed in accordance with and governed by the law of Delaware without giving effect to the principles of conflicts of laws thereof. SECTION 6.10. Counterparts; Effectiveness. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effects as if the signatures thereto and thereof were upon the same instrument. This Agreement shall become effective when each party hereto shall have received counterparts hereof signed by all of the other parties hereto. SECTION 6.11. Stockholder Capacity. The Stockholder signs solely in its capacity as the record holder and beneficial owner of the Shares and nothing herein shall limit or affect any actions taken by any officer, director, partner, employee or affiliate of the Stockholder in his or her capacity as an officer or director of the Company and no such actions shall be deemed a breach of this Agreement. SECTION 6.12. Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law, or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby are not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the transactions be consummated as originally contemplated to the fullest extent possible. To the extent that any provision of this Agreement and the Merger Agreement conflict, the provisions of the Merger Agreement shall control. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year first above written. IBP, inc. By: /s/ Robert L. Peterson ------------------------- Name: Robert L. Peterson Title: Chairman and Chief Executive Officer Address for Notices: IBP Avenue P.O. Box 515 Dakota City, Nebraska 68731 Attn: Lonnie Grigsby, Esq. (#141) IBP SUB, INC. By: /s/ Larry Shipley -------------------- Name: Larry Shipley Title: President Address for Notices: IBP Avenue P.O. Box 515 Dakota City, Nebraska 68731 Attn: Lonnie Grigsby, Esq. (#141) THE AIRLIE GROUP, L.P. By: EBD L.P., General Partner By: TMT-FW, Inc., General Partner By: /s/ Dort A. Cameron III -------------------------- Name: Dort A. Cameron III Title: Address for Notices: 115 E. Putnam Ave. Greenwich, Connecticut 06830 Attn: Dort A. Cameron III EX-3 8 RESTATED CERTIFICATE OF INCORPORATION OF IBP, INC. The undersigned, Robert L. Peterson and Lonnie O. Grigsby, certify that they are the President and the Secretary, respectively, of IBP, inc., a corporation organized and existing under the laws of the State of Delaware (the Corporation ), and do hereby further certify as follows: 1. The name of the Corporation is IBP, inc. The name under which the Corporation was originally incorporated is Iowa Beef Packers, Inc. 2. The original Certificate of Incorporation of the Corporation was filed in the Office of the Secretary of State of Delaware on June 23, 1969. 3. The Restated Certificate of Incorporation was duly adopted by the written consent of the stockholders of the Corporation in accordance with Sections 228, 242 and 245 of the General Corporation Law of the State of Delaware. 4. The text of the Certificate of Incorporation as amended hereby is restated to read in its entirety, as follows: ARTICLE I The name of the Corporation is IBP, inc. ARTICLE II The address of the Corporation s registered office in the State of Delaware is Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware 19801, in the city of Wilmington, County of New Castle. The name of the Corporation s registered agent at such address is The Corporation Trust Company. ARTICLE III The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware. ARTICLE IV The total number of shares of all classes of stock which the Corporation shall have authority to issue is 225,000,000 shares, consisting of 200,000,000 shares of Common Stock, par value $0.05 per share (the Common Stock ), and 25,000,000 shares of Preferred Stock, par value $1.00 per share (the Preferred Stock ). The Board of Directors is hereby expressly authorized, by resolution or resolutions, to provide, out of the unissued shares of Preferred Stock, for one or more series of Preferred Stock. Except as may be required by law, the shares in any series of Preferred Stock or any shares of stock of any other class need not be identical. Before any shares of any such series are issued, the Board of Directors shall fix, and hereby is expressly empowered to fix, by resolution or resolutions (a Preferred Stock Designation ), the number of shares to be included in any series and the designation, relative powers, preferences and rights and qualifications, limitations or restrictions of the shares of such series, including, without limiting the generality of the foregoing, any or all of the following provisions of the shares thereof: (a) the designation of such series, the number of shares to constitute such series and the stated value thereof if different from the par value thereof; (b) whether the shares of such series shall have voting rights, in addition to any voting rights provided by law, and, if so, the terms of such voting rights, which may be general or limited; (c) the dividends, if any, or method of determining the dividends, if any, payable on such series, whether any such dividends shall be cumulative, and, if so, from what dates, the conditions and dates upon which such dividends shall be payable, the preference or relation which such dividends shall bear to the dividends payable on any shares of stock of any other class or any other series of Preferred Stock; (d) whether the shares of such series shall be subject to redemption by the Corporation and, if so, the times, prices and other conditions of such redemption; (e) the amount or amounts payable upon shares of such series upon, and the rights of the holders of such series in, the voluntary or involuntary liquidation, dissolution or winding up, or upon any distribution of the assets, of the Corporation; (f) whether the shares of such series shall be subject to the operation of a retirement or sinking fund and, if so, the extent to and manner in which any such retirement or sinking fund shall be applied to the purchase or redemption of the shares of such series for retirement or other corporate purposes and the terms and provisions relative to the operation thereof; (g) whether the shares of such series shall be convertible into, or exchangeable for, shares of stock of any other class or any other series of Preferred Stock or any other securities (whether or not issued by the Corporation) and, if so, the price or prices or the rate or rates of conversion or exchange and the method, if any, of adjusting the same, and other terms and conditions of conversion or exchange; (h) the limitations and restrictions, if any, to be effective while any shares of such series are outstanding upon the payment of dividends or the making of other distributions on, and upon the purchase, redemption or other acquisition by the Corporation of, the Common Stock or shares of stock of any other class or any other series of Preferred Stock or any other securities; (i) the conditions or restrictions, if any, upon the creation of indebtedness of the Corporation, or upon the issue of any additional stock, including additional shares of such series or of any other series of Preferred Stock or of any other class of stock or any other securities; and (j) any other powers, preferences and relative, participating, optional and other special rights, and any qualifications, limitations and restrictions thereof. The number of authorized shares of Preferred Stock may be increased or decreased (but not below the number of shares then outstanding) by the affirmative vote of holders of a majority of the stock of the Corporation entitled to vote, with all such holders voting as a single class. Each holder of Common Stock of the Corporation entitled to vote shall have one vote for each share thereof held. Except as may be provided by the terms of any Preferred Stock Designation or any other securities of the Corporation or by law, the Common Stock shall have the exclusive right to vote for the election of directors and for all other purposes, and holders of Preferred Stock shall not be entitled to receive notice of any meeting of stockholders at which they are not entitled to vote or consent. The Corporation shall be entitled to treat the person in whose name any share of its stock is registered as the owner thereof, for all purposes, and shall not be bound to recognize any equitable or other claim to, or interest in, such share on the part of any other person, whether or not the Corporation shall have notice thereof, except as expressly provided by applicable law. ARTICLE V Section 1. Except as otherwise provided by the terms of any Preferred Stock Designation or any other securities of the Corporation, the number of directors of the Corporation shall be fixed from time-to-time by or pursuant to the By-laws of the Corporation. The term of each director of the Corporation shall expire at the next annual meeting of stockholders following such director's election and until such director's successor shall have been elected and qualified. The election of directors need not be by written ballot. Section 2. Except as otherwise provided by the terms of any Preferred Stock Designation or any other securities of the Corporation, newly created directorships resulting from any increase in the number of directors may be filled by the affirmative vote of a majority of the Board of Directors then in office, provided that a quorum of the Board of Directors is present, or as otherwise provided in the By-laws, and any vacancies on the Board of Directors resulting from death, resignation, removal or other cause shall only be filled by the affirmative vote of a majority of the remaining directors then in office, even though less than a quorum of the Board of Directors, or by a sole remaining director, or as otherwise provided in the By-laws. ARTICLE VI In furtherance and not in limitation of the powers conferred upon it by law, the Board of Directors of the Corporation is expressly authorized (1) to adopt, repeal, alter or amend the By- laws of the Corporation by the vote of a majority of the entire Board of Directors and (2) to adopt any By-laws which the Board of Directors may deem necessary or desirable for the efficient conduct of the affairs of the Corporation, including, without limitation, provisions governing the conduct of, and the matters which may properly be brought before, meetings of the stockholders and provisions specifying the manner and extent to which prior notice shall be given of the submission of proposals to be submitted at any meeting of stockholders or of nominations for the election of directors to be held at any such meeting. ARTICLE VII Subject to the provisions of this Restated Certificate of Incorporation, the Corporation reserves the right to amend, alter or repeal any provision contained in this Restated Certificate of Incorporation, in the manner now or hereafter prescribed by statute, and all right conferred upon stockholders herein are subject to this reservation. ARTICLE VIII No director shall be personally liable to the Corporation or any of its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) pursuant to Section 174 of the Delaware General Corporation Law or (iv) for any transaction from which the director derived an improper personal benefit. Any repeal or modification of this Article VIII by the stockholders of the Corporation shall not adversely affect any right or protection of a director of the Corporation existing at the time of such repeal or modification with respect to acts or omissions occurring prior to such repeal or modification. IN WITNESS WHEREOF, IBP, inc. has caused this Restated Certificate of Incorporation to be duly executed in its corporate name this 30th day of September, 1987. IBP, inc. By: /s/ Robert L. Peterson ----------------------- Robert L. Peterson, President ATTEST By: /s/ Lonnie O. Grigsby ---------------------- Lonnie O. Grigsby, Secretary _________________________________________________________________ BY-LAWS OF IBP, inc. (Incorporated under the Laws of the State of Delaware) As amended through October 17, 1996 _________________________________________________________________ TABLE OF CONTENTS ARTICLE I Offices Section 1. Registered Office ................................................ 1 Section 2. Other Offices ............................ ........... 1 ARTICLE II Meetings of Stockholders Section 1. Place of Meeting ............................................ 1 Section 2. Annual Meetings ................................................ 1 Section 3. Special Meetings .............................................. 2 Section 4. Notice of Meetings ..................... ........................ 2 Section 5. Quorum ............................................. 3 Section 6. Adjournments ............................................. 3 Section 7. Conduct of Meeting .............................................. 3 Section 8. List of Stockholders ................................................. 4 Section 9. Voting ................................................. 5 Section 10. Inspectors ................................................. 6 ARTICLE III Board of Directors Section 1. General Powers ......................................................... 7 Section 2. Number, Qualification and Election ............................................ 7 Section 3. Notification of Nominations ..................................................... 8 Section 4. Quorum and Manner of Acting .......................................... ......... 9 Section 5. Place of Meeting ........................................................ 9 Section 6. Regular Meeting ........................................................ 10 Section 7. Special Meetings ........................................................ 10 Section 8. Notice of Meetings ........................................................ 10 Section 9. Rules and Regulations ........................................................ 10 Section 10. Participation in Meeting by Means of Communications Equipment ..................................... ... 11 Section 11. Action Without Meeting ................................................... 11 Section 12. Resignations ....................................................... 11 Section 13. Removal of Directors ....................................................... 11 Section 14. Vacancies ....................................................... 12 Section 15. Compensation ....................................................... 12 ARTICLE IV Executive and Other Committees Section 1. Executive Committee ....................................................... 13 Section 2. Other Committees ........................................................ 15 Section 3. Procedure; Meetings; Quorum ...................................................... 15 ARTICLE V Officers Section 1. Number; Term of Office ........................................................ 16 Section 2. Removal ........................................................ 17 Section 3. Resignation ........................................................ 17 Section 4. Vacancies ........................................................ 18 Section 5. Chairman of the Board ................................................... 18 Section 6. The President ...................................................... 18 Section 7. Vice-Presidents ....................................................... 18 Section 8. Treasurer ........................................................ 18 Section 9. Secretary ........................................................ 18 Section 10. Controller ........................................................ 19 Section 11. Assistant Treasurers, Secretaries and Controllers ....................................................... 19 ARTICLE VI Indemnification of Directors, Officers, Employees and Agents Section 1. Third Party Actions ....................................................... 19 Section 2. Derivative Actions ....................................................... 20 Section 3. Determination of Indemnification .............................................. .. 21 Section 4. Right of Indemnification .................................................. 21 Section 5. Advance of Expenses ....................................................... 22 Section 6. Indemnification by a Court ....................................................... 22 Section 7. Indemnification Not Exclusive ........................ .............................. 22 Section 8. Insurance ........................................................ 23 Section 9. Indemnification to Continue ..................................................... 23 Section 10. Definitions of Certain Terms ................................................... 23 ARTICLE VII Capital Stock Section 1. Certificates for Shares ....................................................... 25 Section 2. Transfer of Shares ....................................................... 25 Section 3. Addresses of Stockholders ....................................................... 26 Section 4. Lost, Destroyed and Mutilated Certificates .......................... ....... 26 Section 5. Regulations ....................................................... 27 Section 6. Fixing Date for Determination of Stockholder of Record .................................................. 27 ARTICLE VIII Seal ARTICLE IX Fiscal Year ARTICLE X Waiver of Notice ARTICLE XI Amendments ARTICLE XII Miscellaneous Section 1. Execution of Documents ...................................................... 29 Section 2. Deposits ...................................................... 29 Section 3. Checks ...................................................... 30 Section 4. Proxies in Respect of Stock or Other Securities of Other Corporations ................................................... 30 Section 5. By-laws Subject to Law and Restated Certificate of Incorporation of the Corporation .............................. .... 30 ARTICLE I Offices Section 1. Registered Office. The registered office of IBP, inc. (hereinafter called the "Corporation" in the State of Delaware shall be at Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware 19801, in the City of Wilmington, County of New Castle, and the registered agent in charge thereof shall be The Corporation Trust Company. Section 2. Other Offices. The Corporation may also have an office or offices, and keep the books and records of the Corporation, except as may otherwise be required by law, at such other place or places, either within or without the State of Delaware, as the Board of Directors may from time to time determine or the business of the Corporation require. ARTICLE II Meetings of Stockholders Section 1. Place of Meeting. All meetings of the stockholders of the Corporation shall be held at the office of the Corporation or at such other places, within or without the State of Delaware, as may from time to time be fixed by the Board of Directors. Section 2. Annual Meetings. The annual meeting of the stockholders of the Corporation for the election of directors and for the transaction of such other business as may properly come before the meeting shall be held on the first Wednesday in June in each year, if not a legal holiday under the laws of the place where the meeting is to be held, and, if a legal holiday, then on the next succeeding day which is not a legal holiday under the laws of such place, or on such other date and at such hour as may from time to time be fixed by the Board of Directors. Section 3. Special Meetings. Subject to the provisions of any Preferred Stock Designation (as such term is defined in the Restated Certificate of Incorporation of the Corporation), special meetings of the stockholders for any purpose or purposes may be called only by the Chairman of the Board of Directors of the Corporation or a majority of the entire Board of Directors. Only such business as is specified in the notice of any special meeting of the stockholders shall come before such meeting. Section 4. Notice of Meetings. Written notice of each meeting of the stockholders, whether annual or special, shall be given, either by personal delivery or by mail, not less than 10 nor more than 60 days before the date of the meeting to each stockholders or record entitled to notice of the meeting. If mailed, such notice shall be deemed given when deposited in the United States mail, postage prepaid, directed to the stockholder at such stockholder's address as it appears on the records of the Corporation. Each such notice shall state the place, date and hour of the meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called. Notice of any meeting of stockholders shall not be required to be given to any stockholder who shall attend such meeting in person or by proxy without protesting, prior to or at the commencement of the meeting, the lack of proper notice to such stockholder, or who shall waive notice thereof as provided in Article X of these By-laws. Notice of adjournment of a meeting of stockholders need not be given if the time and place to which it is adjourned are announced at such meeting, unless the adjournment is for more than 30 days or, after adjournment, a new record date is fixed for the adjournment meeting. Section 5. Quorum. The holders of a majority of the votes entitled to be cast by the stockholders entitled to vote, which if any vote is to be taken by classes shall mean the holders of a majority of the votes entitled to be cast by the stockholders of each such class, present in person or by proxy, shall constitute a quorum for the transaction of business at any meeting of the stockholders. Section 6. Adjournments. In the absence of a quorum, the holders of a majority of the votes entitled to be cast by the stockholders, present in person or by proxy, may adjourn the meeting from time to time. At any such adjourned meeting at which a quorum may be present, any business may be transacted which might have been transacted at the meeting as originally called. Section 7. Conduct of Meeting. At each meeting of the stockholders, the Chairman of the Board, or, in the absence of the Chairman of the Board, such person designated by the Board of Directors, shall act as chairman. At any annual meeting only such business shall be conducted as shall have been brought before the annual meeting (i) by or at the direction of the Board of Directors or (ii) by any stockholder who complies with the procedures set forth in this Section 7. For business properly to be brought by a stockholder before an annual meeting, the stockholder must have given timely notice thereof in proper written form to the Secretary of the Corporation. To be timely, a stockholder's notice must be delivered to or mailed and received at the principal executive offices of the Corporation not less than 60 days nor more than 90 days prior to the annual meeting; provided; however, that in the event that less than 40 days' notice or prior public disclosure of the date of the annual meeting is given or made to stockholders, notice by the stockholder to be timely must be received not later than the close of business on the tenth day following the day on which such notice of the date of the annual meeting was first mailed or such public disclosure was first made, whichever first occurs. To be in proper written form, a stockholder's notice to the Secretary shall set forth in writing as to each matter the stockholder proposes to bring before the annual meeting: (i) a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting; (ii) the name and address, as they appear on the Corporation's books, of the stockholder proposing such business; (iii) the class, series, if any, and number of shares of the Corporation which are owned of record by the stockholder; and (iv) any material interest of the stockholder in such business. Notwithstanding anything in the By- laws to the contrary, no business shall be conducted at an annual meeting except in accordance with the procedures set forth in this Section 7. The chairman of an annual meeting shall, if the facts warrant, determine and declare to the annual meeting that business was not properly brought before the annual meeting in accordance with the provisions of this Section 7 and, if he should so determine, he shall so declare to the annual meeting, and any such business not properly brought before the annual meeting shall not be transacted. Section 8. List of Stockholders. It shall be the duty of the Secretary or other officer of the Corporation who has charge of the stock ledger to prepare and make, at least 10 days before each meeting of the stockholders, a complete list of the stockholders entitled to vote thereat, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in such stockholder's name. Such list shall be produced and kept available at the times and places required by law. Section 9. Voting. Each stockholder of record of any class or series of stock having a preference over any class of Common Stock of the Corporation as to dividends or upon liquidation shall be entitled at each meeting of stockholders to such number of votes for each share of such stock as may be fixed in the Restated Certificate of Incorporation or pursuant to the provisions of any Preferred Stock Designation and each stockholder of record of Common Stock shall be entitled at each meeting of stockholders to one vote for each share of such stock, in each case, registered in such stockholder's name on the books of the Corporation; (1) on the date fixed pursuant to Section 6 of Article VII of these By-laws as the record date for the determination of stockholders entitled to notice of and to vote at such meeting; or (2) if no such record date shall have been so fixed, then at the close of business on the day next preceding the day on which notice of such meeting is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held, or, if action is taken by written consent without a meeting (to the extent permitted by these By-laws and the Restated Certificate of Incorporation of the Corporation) and no record date for determining stockholders entitled to express consent to corporate action in writing without a meeting shall have been fixed, the day on which the first written consent is expressed. Each shareholder entitled to vote at any meeting of stockholders may authorize not in excess of three persons to act for such stockholder by a proxy signed by such stockholder or such stockholder's attorney-in-fact. Any such proxy shall be delivered to the secretary of such meeting at or prior to the time designated for holding such meeting, but in any event not later than the time designated in the order of business for so delivering such proxies. No such proxy shall be voted or acted up after three years from its date, unless the proxy provides for a longer period. At each meeting of the stockholders, all corporate actions to be taken by vote of the stockholders shall be authorized by a majority of the votes cast by the stockholders entitled to vote thereon, present in person or represented by proxy, and where a separate vote by class is required, a majority of the votes cast by the stockholders of such class, present in person or represented by proxy, shall be the act of such class; subject, in each case, to such greater vote as may be prescribed by the Restated Certificate of Incorporation of the Corporation or by law. Unless required by law or determine by the chairman of the meeting to be advisable, the vote on any matter, including the election of directors, need not be by written ballot. In the case of a vote by written ballot, each ballot shall be signed by the stockholder voting, or by such stockholder's proxy, and shall state the number of shares voted. Section 10. Inspectors. Either the Board of Directors or, in the absence of designation of inspectors by the Board, the chairman of any meeting of stockholders may, in its or such person's discretion, appoint on e or three inspectors to act at any meeting of stockholders; provided, that no director or nominee for the office of director shall be appointed an inspector. Such inspectors shall perform such duties as shall be specified by the Board or the chairman of the meeting. Inspectors need not be stockholders. ARTICLE III Board of Directors Section 1. General Powers. The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors, which may exercise all such powers of the Corporation and do all such lawful acts and things as are not be law, by the Restated Certificate of Incorporation of the Corporation or by these By-laws directed or required to be exercised or done by the stockholders. Section 2. Number, Qualification and Election. Except as otherwise provided pursuant to provisions of any Preferred Stock Designation, the number of directors of the Corporation shall be determined from time to time by vote of a majority of the entire Board of Directors, provided that the number thereof may not be less than three. Each of the directors of the Corporation shall hold office until the next annual meeting of stockholders following such director's election and until such director's successor shall have been elected and qualified, or until his earlier death, or resignation or removal in the manner hereinafter provided. No decrease in the number of directors shall shorten the term of any incumbent director. Directors need not be stockholders of the Corporation. In any election of directors, the persons receiving a plurality of the votes case, up to the number of directors to be elected in such election, shall be deemed elected. Section 3. Notification of Nominations. Except as provided in any Preferred Stock Designation, nominations for the election of directors may be made by the Board of Directors or by any stockholder entitled to vote for the election of directors. Any stockholder entitled to vote for the election of directors at a meeting may nominate persons for election as directors by giving timely notice thereof in proper written form to the Secretary of the Corporation. To be timely, a stockholder's notice shall be delivered to or mailed and received at the principal executive offices of the Corporation not less than 60 days nor more than 90 days prior to the meeting; provided; however, that in the event that less than 40 days' notice or prior public disclosure of the date of the meeting is given or made to stockholders, notice by the stockholder to be timely must be so received not later than the close of business on the tenth day following the day on which such notice of the date of the meeting was mailed or such public disclosure was made, whichever first occurs. To be in proper written form, such stockholder's notice shall set forth in writing (i) as to each person whom the stockholder proposes to nominate for election or reelection as a director, all information relating to such person that is required to be disclosed in solicitations of proxies for election of directors, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended, including, without limitation, such person's written consent to being named in the proxy statement as a nominee and to serving as a director if elected; and (ii) as to the stockholder giving the notice (x) the name and address, as they appear on the Corporation's books, of such stockholder and (y) the class, series, if any, and number of shares of the Corporation which are owned of record by such stockholder. The Corporation may require any person proposed for nomination to furnish such other information as many reasonably be required by the Corporation to determine the eligibility of such person to serve as a director of the Corporation. At the request of the Board of Directors, any person nominated by the Board of Directors for election as a director shall furnish to the Secretary of the Corporation the information required to be set forth in a stockholder's notice of nomination which pertains to the nominee. The chairman of the meeting shall, if the facts warrant, determine and declare to the meeting that a nomination was not made in accordance with the foregoing procedure, and if he should so determine, he shall so declare to the meeting and the defective nomination shall be disregarded. Section 4. Quorum and Manner of Acting. Except as otherwise provided by these By-laws, a majority of the entire Board of Directors shall constitute a quorum for the transaction of business at any meeting of the Board, and, except as so provided, the vote of a majority of the directors present at any meeting at which a quorum is present shall be the act of the Board. In the absence of a quorum, a majority of the directors present may adjourn the meeting to another time and place, without notice other than announcement at the meeting. At any adjourned meeting at which a quorum is present, any business may be transacted which might have been transacted at the meeting as originally called. Section 5. Place of Meeting. The Board of Directors may hold its meetings at such place or places within or without the State of Delaware as the Board may from time to time determine or as shall be specified or fixed in the respective notices or waivers or notice thereof. Section 6. Regular Meetings. Regular meetings of the Board of Directors shall be held at such times and places as the Board shall from time to time by resolution determine. If any day fixed for a regular meeting shall be a legal holiday under the laws of the place where the meeting is to be held, the meeting which would otherwise to be held on that day shall be held at the same hour on the next succeeding business day. Section 7. Special Meetings. Special meetings of the Board of Directors shall be held whenever called by the Chairman of the Board or by a majority of the directors. Section 8. Notice of Meetings. Notice of regular meetings of the Board of Directors or of any adjourned meeting thereof need not be given. Notice of each special meeting of the Board shall be mailed to each directors, addressed to such director at such director's residence or usual place of business, at least two days before the day on which the meeting is to be held or shall be sent to such director at such place by telegraph or be given personally or by telephone, not later than the day before the meeting is to be held, but notice need not be given to any director who shall, either before or after the meeting, submit a signed waiver of such notice or who shall attend such meeting without protesting, prior to or at its commencement, the lack of notice to such director. Every such notice shall state the time and place but need not state the purpose of the meeting. Section 9. Rules and Regulations. The Board of Directors may adopt such rules and regulations not inconsistent with the provisions of these By-laws for the conduct of its meetings and management of the affairs of the Corporation as the Board may deem proper. In the absence of the Chairman of the Board, such person as may be designated by the Board of Directors shall preside at meetings of the Board. Section 10. Participation in Meetings by Means of Communications Equipment. Any one or more members of the Board of Directors or any committee thereof may participate in any meeting of the Board or of any such committee by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at such meeting. Section 11. Action Without Meeting. Any action required or permitted to be taken at any meeting of the Board of Directors or any committee thereof may be taken without a meeting if all of the members of the Board or of any such committee consent thereto in writing and the writing or writings are filed without the minutes of proceedings of the Board or of such committee. Section 12. Resignations. Any director of the Corporation may at any time resign by giving written notice to the Board of Directors, the Chairman of the Board, the President or the Secretary of the Corporation. Such resignation shall take effect at the time specified therein or, if the time be not specified, upon receipt thereof; and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. If the resignation of a director is effective at a future time, the Board of Directors may elect a successor prior to such effective time to take office when such resignation becomes effective. Section 13. Removal of Directors. Subject to the terms of any Preferred Stock Designation, any director may be removed at any time for cause or without cause by vote of the holders of a majority in voting interest of shares then entitled to vote in the election of directors. Any director may also be removed at any time for cause by vote of a majority of the entire Board of Directors. The vacancy in the Board caused by any such removal may be filled by the stockholders or as provided in Section 14 of Article III of these By-laws. Section 14. Vacancies. Except as otherwise provided by the terms of any Preferred Stock Designation or any other securities of the Corporation, newly created directorships resulting from any increase in the number of directors may be filled by the affirmative vote of a majority of the Board of Directors then in office, provided that a quorum of the Board of Directors is present, and any vacancies on the Board of Directors resulting from death, resignation, removal or other cause shall only be filled by the affirmative vote of a majority of the remaining directors then in office, even though less than a quorum of the Board of Directors, or by a sole remaining directors, or by the stockholders in accordance with Section 13 of this Article III or at a meeting called for that purpose in accordance with Section 3 of Article II of these By-laws. The director elected to fill a vacancy shall hold office for the unexpired term in respect of which such vacancy occurred and until his successor shall be elected and shall qualify or until his earlier death or resignation or removal in the manner provided herein. Section 15. Compensation. Each director who shall not at the time also be a salaried officer or employee of the Corporation or any of its subsidiaries (hereinafter referred to as an "outside director"), in consideration of such person serving as a director, shall be entitled to receive from the Corporation such amount per annum and such fees for attendance at meetings of the Board of Directors or of committees of the Board, or both, as the Board shall from time to time determine. In addition, each director, whether or not an outside director, shall be entitled to receive from the Corporation reimbursement for the reasonable expenses incurred by such person in connection with the performance of such person's duties as a director. Nothing contained in this Section shall preclude any director from serving the Corporation or any of its subsidiaries in any other capacity and receiving proper compensation therefor. ARTICLE V Executive and Other Committees Section 1. Executive Committee. The Board of Directors may, by resolution adopted by a majority of the entire Board, designate annually three or more of its members to constitute members or alternate members of an Executive Committee. The Board of Directors may designate one or more directors as alternate members of the Executive Committee, who may replace any absent or disqualified member at any meeting of such committee. In the absence or disqualification of a member of the Executive Committee, and in the absence of a designation by the Board of Directors of an alternate member to replace the absent or disqualified member, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any absent or disqualified member. The Executive Committee shall have and may exercise, between meetings of the Board, all the powers and authority of the Board in the management of the business and affairs of the Corporation, including, if such Committee is so empowered and authorized by resolution adopted by a majority of the entire Board, the power and authority to declare a dividend, to authorize the issuance of stock, to adopt a certificate of ownership and merger pursuant to Section 253 of the General Corporation Law of the State of Delaware and may authorize the seal of the Corporation to be affixed to all papers which may require it, except that the Executive Committee shall not have such power or authority in reference to: (a) amending the Restated Certificate of Incorporation of the Corporation; (b) adopting an agreement of merger or consolidation under Sections 251 or 252 of the General Corporation Law of the State of Delaware involving the Corporation; (c) recommending to the stockholders the sale, lease or exchange of all or substantially all of the property and assets of the Corporation; (d) recommending to the stockholders a dissolution of the Corporation or a revocation of a dissolution; (e) adopting, amending or repealing any By-law; (f) filling vacancies on the Board or on any committee of the Board, including the Executive Committee; or (g) amending or repealing any resolution of the Board which by its terms may be amended or repealed only by the Board. The Board shall have power at any time to change the membership of the Executive Committee, to fill all vacancies in it and to discharge it, either with or without cause. Section 2. Other Committees. The Board of Directors may, by resolution adopted by a majority of the entire Board, designate one or more other committees, each committee to consist of one or more of the members of this Board and each of which committee shall have such authority of the Board as may be specified in the resolution of the Board designating such committee. A majority of all the members of such committee may determine its action and fix the time and place of its meetings, unless the Board shall otherwise provide. The Board shall have power at any time to change the membership of, to fill all vacancies in and to discharge any such committee, either with or without cause. Section 3. Procedure; Meetings, Quorum. Regular meetings of the Executive Committee or any other committee of the Board of Directors, of which no notice shall be necessary, may be held at such times and places as shall be fixed by resolution adopted by a majority of the members thereof. Special meetings of the Executive Committee or any other committee of the Board shall be called at the request of any member thereof. Notice of each special meeting of the Executive Committee or any other committee of the Board shall be sent by mail, telegraph or telephone, or be delivered personally to each member thereof not later than the day before the day on which the meeting is to be held, but notice need not be given to any member who shall, either before or after the meeting, submit a signed waiver of such notice or who shall attend such meeting without protesting, prior to or at its commencement, the lack of such notice to such member. Any special meeting of the Executive Committee or any other committee of the Board shall be a legal meeting without any notice thereof having been given, if all the members thereof shall be present thereat. Notice of any adjourned meeting of any committee of the Board need not be given. The Executive Committee or any other Committee of the Board may adopt such rules and regulations not inconsistent with the provisions of law, the Restated Certificate of Incorporation of the Corporation or these By-laws for the conduct of its meetings as the Executive Committee or such other committee of the Board may deem proper. A majority of the Executive Committee or any other committee of the Board shall constitute a quorum for the transaction of business at any meeting, and the vote of a majority of the members thereof present at any meting at which a quorum is present shall be the act of such committee. The Executive Committee or any other committee of the Board of Directors shall keep written minutes of its proceedings and shall report on such proceedings to the Board. ARTICLE V Officers Section 1. Number; Term of Office. The officers of the Corporation shall be a Chairman of the Board, a President, one or more Vice-Presidents, one or more of whom may be designated as Executive, Group or Senior Vice-Presidents, a Treasurer, a Secretary, a Controller, and such other officers or agents with such titles and such duties as the Board of Directors may from time to time determine, each to have such authority, functions or duties as in these By-laws provided or as the Board may from time to time determine, and each to hold office for such term as may be prescribed by the Board and until such person s successor shall have been chosen and shall qualify, or until such person s death or resignation, or until such person s removal in the manner hereinafter provided. The Chairman of the Board shall be elected from among the directors. One person may hold the offices and perform the duties of any two or more of said officers; provided, however, that no officer shall execute, acknowledge or verify any instrument in more than one capacity if such instrument is required by law, the Restated Certificate of Incorporation of the Corporation or these By-laws to be executed, acknowledged or verified by two or more officers. The Board may from time to time authorize any officer to appoint and remove any such other officers and agents and to prescribe their powers and duties. Section 2. Removal. Any officer may be removed, either with or without cause, by the Board of Directors at any meeting thereof called for the purpose, or, except in the case of any officer elected by the Board, by any committee or superior officer upon whom such power may be conferred by the Board. Section 3. Resignation. Any officer may resign at any time by giving written notice to the Board of Directors, the Chairman of the Board, the President or the Secretary of the Corporation. Such resignation shall take effect at the time specified therein or, if the time is not specified, upon receipt thereof; and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. Section 4. Vacancies. A vacancy in any office because of death, resignation, removal or any other cause may be filled for the unexpired portion of the term in the manner prescribed in these By-laws for election to such office. Section 5. Chairman of the Board. The Chairman of the Board shall be the chief executive officer of the Corporation and as such shall have general supervision and direction of the business and affairs of the Corporation, subject to the control of the Board of Directors. The Chairman of the Board shall, if present, preside at meetings of the Board of Directors and, if present, preside at meetings of the stockholders. Section 6. The President. The President, if any, shall be the chief operating officer of the Corporation. The President shall perform such other duties as the Board may from time to time determine. Section 7. Vice-Presidents. Each Vice-President shall have such powers and duties as shall be prescribed by the Chairman of the Board or the Board of Directors. Section 8. Treasurer. The Treasurer shall perform all duties incident to the office of Treasurer and such other duties as from time to time may be assigned to the Treasurer by the Chairman of the Board or the Board of Directors. Section 9. Secretary. The Secretary shall see that all notices required to be given by the Corporation are duly given and served; the Secretary shall be custodian of the seal of the Corporation and shall affix the seal or cause it to be affixed to all certificates of stock of the Corporation (unless the seal of the Corporation on such certificates shall be a facsimile, as hereinafter provided) and to all documents, the execution of which on behalf of the Corporation under its seal is duly authorized in accordance with the provisions of these By-laws. The Secretary shall have charge of the stock ledger and also of the other books, records and papers of the Corporation and shall see that the reports, statements and other documents required by law are properly kept and filed; and shall in general perform all the duties incident to the office of Secretary and such other duties as from time to time may be assigned to such person by the Chairman of the Board or the Board of Directors. Section 10. Controller. The Controller shall perform all of the duties incident to the office of the Controller and such other duties as may from time to time be assigned to such person by the Chairman of the Board or the Board of Directors. Section 11. Assistant Treasurers, Secretaries and Controllers. The Assistant Treasurers, the Assistant Secretaries and the Assistant Controllers shall perform such duties as shall be assigned to them by the Treasurer, Secretary or Controller, respectively, or by the Chairman of the Board or the Board of Directors. ARTICLE VI Indemnification of Directors, Officers, Employees and Agents Section 1. Third Party Actions. The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation) by reason of the fact that such person is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director or officer of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which such person reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, that such person had reasonable cause to believe that his or her conduct was unlawful. Section 2. Derivative Actions. The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that such person is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses (including attorneys fees) actually and reasonably incurred by such person in connection with the defense or settlement of such action or suit if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the Corporation, except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable for negligence or misconduct in the performance of such person s duty to the Corporation unless and only to the extent that the Court of Chancery of Delaware or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery of Delaware or such other court shall deem proper. Section 3. Determination of Indemnification. Any indemnification under Section 1 or 2 of the Article VI (unless ordered by a court) shall be made by the Corporation only as authorized in the specific case upon a determination that indemnification of the director, officer, employee or agent is proper in the circumstances because such person has met the applicable standard of conduct set forth in Section 1 or 2 of this Article VI. Such determination shall be made (i) by the Board of Directors by a majority vote of a quorum consisting of directors who were not parties to such action, suit or proceeding, or (ii) if such a quorum is not obtainable, or, even if obtainable, a quorum of disinterested directors so directs, by independent legal counsel in a written opinion, or (iii) by the stockholders. Section 4. Right to Indemnification. Notwithstanding the other provisions of this Article VI, to the extent that a director, officer, employee or agent of the Corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in Section 1 or 2 of this Article VI, or in defense of any claim, issue or matter therein, such person shall be indemnified against expenses (including attorneys fees) actually and reasonably incurred by such person in connection therewith. Section 5. Advance of Expenses. Expenses incurred in defending or investigating a threatened or pending civil or criminal action, suit or proceeding may be paid by the Corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of the director, officer, employee or agent to repay such amount if it shall ultimately be determined that such person is not entitled to be indemnified by the Corporation as authorized in this Article VI. Section 6. Indemnification by a Court. Notwithstanding any contrary determination in the specific case under Section 3 of this Article VI, and notwithstanding the absence of any determination thereunder, any director, officer, employee or agent may apply to any court of competent jurisdiction in the State of Delaware for indemnification to the extent otherwise permissible under Sections 1 and 2 of this Article VI. The basis of such indemnification by a court shall be a determination by such court that indemnification of the director, officer, employee or agent is proper in the circumstances because he has met the applicable standards of conduct set forth in Section 1 or 2 of this Article VI, as the case may be. Notice of any application for indemnification pursuant to this Section 6 shall be given to the Corporation promptly upon the filing of such application. Section 7. Indemnification Not Exclusive. The indemnification and advancement of expenses provided by, or granted pursuant to, this Article VI shall not be deemed exclusive of any other rights to which any person seeking indemnification or advancement of expenses may be entitled under any law, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in such person s official capacity and as to action in another capacity while holding such office. The provisions of this Article VI shall not be deemed to preclude the indemnification of any person who is not specified in Sections 1 or 2 of this Article VI but whom the Corporation has the power or obligation to indemnify under the provisions of the General Corporation Law of the State of Delaware, or otherwise. Section 8. Insurance. The Corporation may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against such person and incurred by such person in any such capacity, or arising out of such person s status as such, whether or not the Corporation would have the power to indemnify such person against such liability under the provisions of this Article VI. Section 9. Indemnification To Continue. The indemnification and advancement of expenses provided by, or granted pursuant to, this Article VI shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such person. Section 10. Definitions of Certain Terms. For purposes of this Article VI, references to the Corporation shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, employees or agents, so that any person who is or was a director, officer, employee or agent of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or another enterprise, shall stand in the same position under the provisions of this Article VI with respect to the resulting or surviving corporation as such person would have with respect to such constituent corporation if its separate existence had continued. For purposes of this Article VI, references to other enterprises shall include employee benefit plans; references to fines shall include any excise taxes assessed on a person with a respect to an employee benefit plan; references to serving at the request of the Corporation shall include any service as a director, officer, employee or agent of the Corporation which imposes duties on, or involves services by, such director, officer, employee or agent with respect to an employee benefit plan, its participants, or beneficiaries; and a person who acted in good faith and in a manner such person reasonably believed to be in the interest of the participants and beneficiaries of any employee benefit plan shall be deemed to have acted in a manner not opposed to the best interests of the Corporation as referred to in this Article VI. ARTICLE VII Capital Stock Section 1. Certificates for Shares. Certificates representing shares of stock of each class of the Corporation, whenever authorized by the Board of Directors, shall be in such form as shall be approved by the Board. The certificates representing shares of stock of each class shall be signed by, or in the name of, the Corporation by the Chairman of the Board, the President or a Vice-President and by the Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer of the Corporation, and sealed with the seal of the Corporation, which may be a facsimile thereof. Any or all such signatures may be facsimiles if countersigned by a transfer agent or registrar. Although any officer, transfer agent or registrar whose manual or facsimile signature is affixed to such a certificate ceases to be such officer, transfer agent or registrar before such certificate has been issued, it may nevertheless be issued by the Corporation with the same effect as if such officer, transfer agent or registrar were still such at the date of its issue. The stock ledger and blank share certificates shall be kept by the Secretary or by a transfer agent or by a registrar or by any other officer or agent designated by the Board. Section 2. Transfer of Shares. Transfers of shares of stock of each class of the Corporation shall be made only on the books of the Corporation by the holder thereof, or by such holder s attorney thereunto authorized by a power of attorney duly executed and filed with the Secretary of the Corporation or a transfer agent for such stock, if any, and on surrender of the certificate or certificates for such shares properly endorsed or accompanied by a duly executed stock transfer power and the payment of all taxes thereon. The person in whose name shares stand on the books of the Corporation shall be deemed the owner thereof for all purposes as regards the Corporation; provided, however, that whenever any transfer of shares shall be made for collateral security and not absolutely, and written notice thereof shall be given to the Secretary or to such transfer agent, such fact shall be stated in the entry of the transfer. No transfer of shares shall be valid as against the Corporation, its stockholders and creditors for any purpose, except to render the transferee liable for the debts of the Corporation to the extent provided by law, until it shall have been entered in the stock records of the Corporation by an entry showing from and to whom transferred. Section 3. Addresses of Stockholders. Each stockholder shall designate to the Secretary or transfer agent of the Corporation an address at which notices of meetings and all other corporate notices may be served or mailed to such person, and, if any stockholder shall fail to designate such address, corporate notices may be served upon such person by mail directed to such person at such person s post office address, if any, as the same appears on the share record books of the Corporation or at such person s last know post office address. Section 4. Lost, Destroyed and Mutilated Certificates. The holder of any share of stock of the Corporation shall immediately notify the Corporation of any loss, theft, destruction or mutilation of the certificate therefor; the Corporation may issue to such holder a new certificate or certificates for shares, upon the surrender of the mutilated certificate or, in the case of loss, theft or destruction of the certificate, upon satisfactory proof of such loss, theft or destruction; the Board of Directors, or a committee designated thereby, or the transfer agents and registrars for the stock, may, in their discretion, require the owner of the lost, stolen or destroyed certificates, or such person s legal representative, to give the Corporation a bond in such sum and with such surety or sureties as they may direct to indemnify the Corporation and said transfer agents and registrars against any claim that may be made on account of the alleged loss, theft or destruction of any such certificate the issuance of such new certificate. Section 5. Regulations. The Board of Directors may make such additional rules and regulations as it may deem expedient concerning the issue and transfer of certificates representing shares of stock of each class of the Corporation and may make such rules and take such action as it may deem expedient concerning the issue of certificates in lieu of certificates claimed to have been lost, destroyed, stolen or mutilated. Section 6. Fixing Date for Determination of Stockholders of Record. In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or entitled to receive payment of any dividend or other distribution or allotment or any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than 60 nor less than 10 days before the date of such meeting, nor more than 60 days prior to any other action. A determination of stockholders entitled to notice of or to vote at a meeting of the stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. ARTICLE VIII Seal The Board of Directors shall provide a corporate seal, which shall be in the form of a circle and shall bear the full name of the Corporation and such other words or figures as the Board of Directors may approve and adopt. The seal may be used by causing it or a facsimile thereof to be impressed or affixed or in any other manner reproduced. ARTICLE IX Fiscal Year The fiscal year of the Corporation shall end on the last Saturday in December in each year. ARTICLE X Waiver of Notice Whenever any notice whatsoever is required to be given by these By-laws, by the Restated Certificate of Incorporation of the Corporation or by law, the person entitled thereto may, either before or after the meeting or other matter in respect of which such notice is to be given, waive such notice in writing, which writing shall be filed with or entered upon the records of the meeting or the records kept with respect to such other matter, as the case may be, and in such event such notice need not be given to such person and such waiver shall be deemed equivalent to such notice. ARTICLE XI Amendments Any By-law (other than this By-law) may be adopted, repealed, altered or amended by a majority of the entire Board of Directors at any meeting thereof, provided that such proposed action in respect thereof shall be stated in the notice of such meeting. ARTICLE XII Miscellaneous Section 1. Execution of Documents. The Board of Directors or any committee thereof shall designate the officers, employees and agents of the Corporation who shall have power to execute and deliver deeds, contracts, mortgages, bonds, debentures, notes, checks, drafts and other orders for the payment of money and other documents for and in the name of the Corporation and may authorize such officers, employees and agents to delegate such power (including authority to redelegate) by written instrument to other officers, employees or agents of the Corporation. Such delegation may be by resolution or otherwise and the authority granted shall be general or confined to specific matters, all as the Board or any such committee may determine. In the absence of such designation referred to in the first sentence of this Section, the officers of the Corporation shall have such power so referred to, to the extent incident to the normal performance of their duties. Section 2. Deposits. All funds of the Corporation not otherwise employed shall be deposited from time to time to the credit of the Corporation or otherwise as the Board of Directors or any committee thereof or any officer of the Corporation to whom power in that respect shall have been delegated by the Board or any such committee shall select. Section 3. Checks. All checks, drafts and other orders for the payment of money out of the funds of the Corporation, and all notes or other evidences of indebtedness of the Corporation, shall be signed on behalf of the Corporation in such manner as shall from time to time be determined by resolution of the Board of Directors or of any committee thereof. Section 4. Proxies in Respect of Stock or Other Securities of Other Corporations. The Board of Directors or any committee thereof shall designate the officers of the Corporation who shall have authority from time to time to appoint an agent or agents of the Corporation to exercise in the name and on behalf of the Corporation the powers and rights which the Corporation may have as the holder of stock or other securities in any other corporation, and to vote or consent in respect of such stock or securities; such designated officers may instruct the person or persons so appointed as to the manner of exercising such powers and rights; and such designated officers may execute or cause to be executed in the name and on behalf of the Corporation and under its corporate seal, or otherwise, such written proxies, powers of attorney or other instruments as they may deem necessary or proper in order that the Corporation may exercise its said powers and rights; provided, however, that in the absence of any such designation, the Chairman of the Board shall exercise the rights of the Corporation hereunder. Section 5. By-laws Subject to Law and Restated Certificate of Incorporation of the Corporation. Each provision of these By-laws is subject to any contrary provision of the Restated Certificate of Incorporation of the Corporation or of any applicable law as from time to time in effect, and to the extent any such provision is inconsistent therewith, such provision shall be superseded thereby for as long as and to the extent which it is inconsistent, but for all other purposes of these By-laws shall continue in full force and effect. * * * * * * * * * * * * EX-10 9 Exhibit 10.5.6 1996 OFFICER LONG-TERM STOCK PLAN 1. Purposes. The purposes of this 1996 Officer Long-Term Stock Plan (the "Plan") are to assist IBP and its subsidiaries (unless the context otherwise requires, the "Company") (a) in the attraction and retention of officers who have demonstrated superior ability, and (b) to provide the officers with an incentive to exert extraordinary efforts toward the achievement of increased growth and profitability in the operations of the Company in order that the value of the Company's Common Stock may appreciate accordingly. 2. Administration. The Plan shall be administered by a committee consisting of three or more members of the board of directors, all of whom shall not (either while members of the Committee or at any time within one year prior to becoming members of the Committee) be or have been eligible for selection as a person to whom awards may be made under the Plan (the "Committee"). The Committee is authorized to adopt operating rules necessary to implement and administer the Plan. The Committee shall periodically review the performance of the Plan and its rules and make any necessary revisions in such rules to assure the Plan's purposes are met. The interpretation and construction of any provision of the Plan by the Committee shall be final and conclusive. 3. Participants. The Committee shall select as participants in the Plan the officers who are in a position directly and significantly to enhance the growth and profitability of the Company's operations and whose continued employment by the Company would favorably affect such operations. 4. Awards. The Plan shall be effective when approved by the affirmative votes of the holders of a majority of the securities of the Company present, or represented, and entitled to vote at a meeting duly held in accordance with the laws of the State of Delaware. All awards made by the Committee prior to such approval are contingent upon that approval. Each participant in the Plan shall be awarded a number of Common Shares ("Deferred Stock" or "Stock") of the Company as determined by the Committee, such shares to be awarded in consideration of services to be rendered to the Company and on its behalf. Upon the making of any award, the Committee shall set by resolution its determination of the fair value in monetary terms of the services to be rendered to the Company and which serves as the employee's consideration for the award. The number of shares of Common Stock awarded as Deferred Stock shall be the result of dividing the fair value in monetary terms of the services so determined by the Closing Price of the Company's Common Stock on the date of any such award; the Closing Price being that reported for the Company's Common Stock in the New York Stock Exchange Composite Transactions Index, as published in The Wall Street Journal, or in such other national financial press or information service available from time to time over the duration of the Plan. All shares so granted are declared and taken to be fully paid shares of Stock and not liable to any 1 further call, nor shall the holders thereof be liable for any further payment therefor. All shares so awarded will be subject to the restrictions described in Section 5. No more than one million (1,000,000) shares of Stock (subject to adjustment to reflect any Stock dividend, split- up, combination of shares, reclassification, merger or consolidation) shall be awarded under the Plan, but any shares forfeited prior to the expiration of the Deferral Period as described in Section 5 shall revert to the status of shares not awarded. Shares delivered pursuant to this Plan may be Common Stock acquired by the Company on the open market and held in the treasury of the Company or previously authorized but unissued Common Stock. 5. Restrictions. During the Mandatory Deferral Period (as determined in the discretion of the Committee and as defined in each "Deferred Stock Award Agreement", such Mandatory Deferral Period being for a period of at least six months unless otherwise provided for in the Plan) any shares of Stock awarded pursuant to the Plan shall not be sold, assigned, pledged, hypothecated or otherwise transferred or encumbered. At the expiration of the Mandatory Deferral Period, the certificate representing those shares for which the Mandatory Deferral Period has expired shall be delivered to the participant, or his legal representative, in a number equal to such shares unless otherwise further deferred by Participant ("Elective Deferral") pursuant to Section 7 below. Unless otherwise provided in the Deferred Stock Award Agreement to be entered into between the Company and the participant, the Mandatory Deferral Period with respect to shares of Stock awarded to a participant in the Plan shall terminate at the close of business on the fifth anniversary of the Award Date, or as otherwise determined at the discretion of the Committee and as defined in each Deferred Stock Award Agreement, provided that if such participant shall cease to perform officer duties for the Company during the Mandatory Deferral Period with respect to such shares: (a) in the event he shall cease to perform such duties by reason of resignation or Company Termination, as defined below, such Deferred Stock shall be forfeited by the participant. Company Termination means in the event the Company concludes, in its sole discretion, that it is no longer in the interest of the Company to continue the participant's employment; and (b) in the event he shall cease to perform such duties for the Company by reason of death, total and permanent disability or retirement at age 65, the Mandatory Deferral Period shall terminate with respect to all of the remaining shares covered under the Deferred Stock Award. 6. Dividend Reinvestment. Amounts equal to any dividends declared during the Mandatory Deferral Period with respect to the number of shares covered by a Deferred Stock Award will be deferred and deemed to be reinvested in additional Deferred Stock. Except as set forth in the preceding sentence, the Participant shall have none of the rights of a stockholder with respect to shares of Common Stock covered by a Deferred Stock Award until the shares of Common Stock are transferred to such Participant at the expiration of the Deferral Period. 2 7. Elective Deferral. Prior to rendering service for which the shares are earned, Participant may make an irrevocable election to defer receipt of the Deferral Amount, as defined below, beyond the Mandatory Deferral Period. The Deferral Amount shall equal the number of shares of Deferred Stock the Participant would receive upon termination of the Mandatory Deferral Period multiplied by the Closing Price of IBP on the termination date, or if there was no reported sale on such date, then the Closing Price of IBP from the next preceding date on which such a sale is transacted. If an Elective Deferral is made, the Company shall credit the Deferral Amount to the Participant's account in the Retirement Income Plan of IBP, inc. 8. Tax Withholding. Any Deferred Stock Award granted hereunder shall provide as determined by the Committee for appropriate arrangements for the satisfaction by the Company and the participant of all Federal, state, local or other income, excise or employment taxes or tax withholding requirements applicable to the transfer of Common Stock pursuant to a Deferred Stock Award or other right or payment and all such additional taxes or amounts as determined by the Committee in its discretion, including without limitation, the right of the Company or any subsidiary thereof to receive transfers of shares of Common Stock or other property from the Participant or to deduct or withhold in the form of cash or shares from any transfer of payment to a Participant, in such amount or amounts deemed required or appropriate by the Committee in its discretion. 9. Modifications. The Company's board of directors shall have the power to modify or supplement the Plan in such manner as it may from time to time determine, provided that unless the holders of a majority of shares of capital stock of the Company having voting power present or represented and entitled to vote at a meeting of such holders shall have first given their approval, (a) the number of shares of Stock (except for adjustments in accordance with Section 4) which may be awarded under the Plan shall not be increased, (b) the benefits accruing to the Participants in the Plan shall not be materially increased, and (c) the requirements as to eligibility for participation in the Plan shall not be materially modified. 3 Exhibit 10.5.7 1996 STOCK OPTION PLAN 1. Purpose. The purpose of this 1996 Stock Option Plan (the "Plan") is to enhance the value of the stockholders' investment in IBP, inc. (the "Company") by encouraging key employees, upon whose performance the Company and its subsidiaries is largely dependent for the successful conduct of its operations, to acquire and retain a financial interest in the Company. In addition, the Plan is intended to enable the Company and its subsidiaries to compete effectively for and retain the services of such employees. It is intended that the incentive stock options ("ISOs") (as defined by Section 422 of the Internal Revenue Code of 1990, as amended or superseded (the "Code")), other stock options and stock appreciation rights ("SARs"), may be granted under this Plan. 2. Administration of the Plan. (a) The Plan shall be administered by a committee (the "Committee") consisting of not less than three members of the board of directors designated from time to time by the board of directors, all of whom shall not, either while members of the Committee or at any time within one year prior to becoming members of the Committee, be or have been eligible for selection as a person to whom awards may be made under the Plan. The interpretation and construction of any provision of the Plan or any option or right granted hereunder and all determinations by the Committee in each case shall be final, binding and conclusive with respect to all interested parties, unless otherwise determined by the board of directors. No member of the Committee shall be personally liable for any action, failure to act, determination, interpretation or construction made in good faith with respect to the Plan or any option or right or transaction thereunder. (b) The Committee shall have full power and authority in its discretion to take any and all action required or permitted to be taken under the Plan. Such full power and authority shall include, without limitation, the selection of participants to whom stock options or SARs may be granted pursuant to the Plan; the determination of the number of shares of Common Stock which may be covered by stock options or SARs granted to any such participant of the Plan and the purchase price thereof; the granting of options and related rights; the right to interpret and construct any provision of the Plan or any option or right granted hereunder; the making of all required or appropriate determinations under the Plan or any option or right granted hereunder; the fixing and determination of the terms, provisions, conditions and restrictions of all option instruments or agreements (and any related rights), which need not be identical, entered into or issued in connection with grants under the Plan; and the adoption, amendment and rescission of such rules related to the Plan as the Committee shall determine in its discretion, subject to the express provisions of the Plan. 1 3. Participants. Participants in the Plan shall be key employees of the Company or its subsidiaries selected as hereinafter provided. Key employees may include officers of the Company or its subsidiaries who are also directors of the Company but not directors who are not employees of the Company or its subsidiaries. Nothing contained in this Plan, nor in any option or right granted pursuant to the Plan, shall confer upon any employee any right to continue in the employ of the Company or any subsidiary nor limit in any way the right of the Company or any subsidiary to terminate his employment at any time. 4. The Stock. The shares of stock available for issuance pursuant to the grant of options (with or without related SARs) under this Plan shall consist of three million five hundred thousand (3,500,000) shares of Common Stock, par value $0.05 per share (the "Common Stock"), of the Company, subject to adjustment as provided in Section 8 hereof. The maximum number of shares with respect to which options or SARs may be granted to any employee during any one year shall not exceed 60,000. Shares may be (a) previously issued Common Stock purchased by the Company in the open market, and held in the treasury of the Company, or (b) previously authorized but unissued Common Stock. Should any option grant (or a portion thereof) be terminated, expire, or be cancelled for any reason without being exercised (e.g., by reason of the exercise of related SARs for stock or for cash), the shares subject to the portion of such option grant not so exercised shall be available for subsequent grants under this Plan. 5. Effective Date and Termination of Plan. The Plan shall be effective when approved by the affirmative votes of the holders of a majority of the securities of the Company present, or represented, and entitled to vote at a meeting duly held in accordance with the laws of the state of Delaware, but in no event later than January 31, 1997. All grants made by the Committee prior to such approval shall be contingent upon such approval. This Plan shall terminate upon the earlier of (i) 10 years from the date the Plan is adopted by the Company; or (ii) 10 years from the date the Plan is approved by Shareholders; or (iii) the date on which all shares available for issuance under the Plan have been issued pursuant to the exercise of options granted hereunder; or (iv) the determination of the board of directors that the Plan shall terminate. No options may be granted under the Plan after the termination date, provided that the options granted and outstanding on such date shall continue to have force and effect in accordance with the provisions of the instruments evidencing such options. 6. Grant, Terms, and Conditions. Options and SARs may be granted at any time and from time to time prior to the termination of the Plan to such eligible employees and on such terms and conditions as determined by the Committee. All options and SARs shall be granted under the Plan by execution of instruments in writing in the form approved by the Committee. Notwithstanding any contrary provision of this Plan other than Section 9 hereof, with respect to any ISOs granted under any plan of the Company or its subsidiaries or any parent, the aggregate fair market value (determined at the time the option is granted) of the shares with 2 respect to which such ISOs are exercisable for the first time by an optionee during any calendar year (under all such plans of the Company its subsidiaries and any parent) shall not exceed One Hundred Thousand Dollars ($100,000.00) or the maximum amount permitted under the Code. All options and SARs granted pursuant to the Plan shall be subject to the following terms and conditions and such other terms and conditions determined by the Committee which are not inconsistent therewith: (a) Price. The option exercise price per share of each option shall be determined by the Committee, provided that, except as provided below, in no instance shall such price be less than the fair market value of a share of Common Stock (as defined by subsection (j) hereof) on the effective date of the option grant. The option exercise price shall be subject to adjustment only as provided in Section 8 hereof. (b) Term of Options. Options may be granted for terms of up to but not exceeding ten (10) years from date granted. Each grant shall be subject to earlier termination as provided in subsection (f) of this Section 6. (c) Exercise of Options. Except in the event of death, retirement or disability, or as otherwise provided in this Plan, stock options granted under this Plan shall be exercisable as follows: forty percent after two years and an additional twenty percent each of the succeeding three years. (d) Alternate Exercise in Case of Hardship. In the case of options other than ISOs, in the event of the imminent expiration of the grant where the optionee is absent from the United States or is otherwise subject to a hardship which renders exercise of the grant by such optionee unreasonable or impossible prior to its expiration date, the Committee in its sole and absolute discretion may issue or cause to have issued to the optionee (in lieu of the exercise of said grant) the number of shares which represent the difference (if any) between the aggregate option exercise price and aggregate fair market value of the shares of the Common Stock with respect to which the grant is then exercisable, determined as of the date of issuance of said shares. In such event the grant shall be deemed fully exercised for all purposes hereof. (e) Notice of Exercise and Payment. To the extent options are exercisable, they shall be exercised by written notice to the Company, stating the number of shares with respect to which options are being exercised and the intended manner of payment. The date of the notice shall be the exercise date. Payment for the shares purchased shall be made in full to the company within ten (10) business days after the exercise date by check payable to the order of the Company equal to the option price for the shares being purchased, in whole shares of Common Stock of the Company owned by the optionee having a fair market value on the exercise date (as defined by subsection (j) hereof) equal to the option price for the shares being purchased, or a combination of Common Stock and check equal in the aggregate to the option price for the shares being 3 purchased. Payments of Common Stock shall be made by delivery of stock certificates properly endorsed for transfer in negotiable form. If other than the optionee, the person or persons exercising shall be required to furnish to the Company appropriate documentation that such person or persons have the full legal right and power to exercise on behalf of and for the optionee. (f) Termination of Employment. (i) Except as otherwise provided in this Plan, an optionee's options (A) are exercisable only by the optionee, (B) are exercisable only while the optionee is in the employ of the Company, and (C) if not exercisable by their terms at the time the optionee ceases to be in the employ of the Company, shall immediately expire on the date of termination of employment. (ii) Except as provided herein, an optionee's options which are exercisable by their terms at the time the optionee ceases to be in the employ of the Company must be exercised on or before the earlier of three months after the date of termination of employment or the fixed expiration date of such options after which period such options shall expire. (iii) In the event of the death of the optionee while in the employ of the Company, all of that optionee's unexercised options (whether or not then exercisable by their terms) shall become immediately exercisable by his estate for a period ending on the earlier of the fixed expiration date of such options or twelve months after the date of death, after which period such options shall expire. For purposes hereof, the estate of an optionee shall be defined to include the legal representatives thereof or any person who has acquired the right to exercise an option by reason of the death of the optionee. (iv) In the case of options other than ISOs, in the event of the termination of employment by reason of the permanent disability (as defined below) of the optionee, all of that optionee's unexercised options (whether or not then exercisable by their terms) shall become exercisable for a period ending on the earlier of the fixed expiration date of such options or twelve months from the date of termination after which period such options shall expire. For purposes hereof "permanent disability" shall be deemed to be the inability of the optionee to perform the duties of his job with the Company because of a physical or mental disability as evidenced by the opinion of a Company-approved doctor of medicine licensed to practice medicine in the United States of America. (v) In the case of options other than ISOs, in the event of the normal retirement of the optionee, all of that optionee's unexercised options (whether or not then exercisable by their terms) granted to that optionee on or before his 65th birthday shall become immediately exercisable for a period ending on the earlier of the fixed expiration date of such options or twelve months after the date of the retirement, after which period such options shall expire. Also, in the event of the normal retirement of the optionee, all of the optionee's unexercised 4 options (whether or not then exercisable by their terms) granted to the optionee after his 65th birthday and held for a period of at least twelve consecutive months of active employment with the Company after the date of grant shall become immediately exercisable for a period ending on the earlier of the fixed expiration date of such options or twelve months after the date of retirement, after which period such options shall expire. For purposes hereof, retirement shall be deemed to be "normal retirement" if the optionee is at least 65 years of age and has completed at least five consecutive years of employment with the Company at the date of retirement. (vi) In the case of ISOs, in the event of the termination of employment by reason of the permanent disability or the normal retirement of the optionee (as defined in (iv) and (v) above), each ISO then held by the optionee shall terminate on the earlier of the period ending three months after the termination of employment or the fixed expiration date of such options; provided however, that if such termination of employment occurs by reason of disability within the meaning of Section 422(c)(6) of the Code said three-month period shall be extended to twelve months. (g) Transferability of Options. Any option granted hereunder shall be transferable only by will or the laws of descent and distribution, or for non-ISO options pursuant to a Qualified Domestic Relations Order, and shall be exercisable during the lifetime of the optionee only by him. (h) Other Terms and Conditions. Options may contain such other terms, conditions, or provisions, which shall not be inconsistent with this Plan, as the Committee shall deem appropriate. (i) Tax Withholding. Any option and related SAR granted hereunder shall provide, as determined by the Committee, for appropriate arrangements for the satisfaction by the Company and the optionee of all federal, state, local or other income, excise or employment taxes or tax withholding requirements applicable to the exercise of the option or any related SAR or the later disposition of the shares of Common Stock or other property thereby acquired and all such additional taxes or amounts as determined by the Committee in its discretion, including without limitation, the right of the Company or any subsidiary thereof to receive transfers of shares of common Stock or other property from the optionee or, beginning one year after the Company becomes subject to the reporting requirements of Section 13 of the Securities Exchange Act of 1934, to deduct or withhold in the form of cash or shares from any transfer or payment to an optionee, in such amount or amount deemed required or appropriate by the Committee in its discretion. (j) Fair Market Value. The "fair market value" of a share of Common Stock on any relevant date for purposes of any provision of the Plan shall be the closing price reported for the Common Stock in the New York Stock Exchange Composite Transactions Index on such date or, if there were no reported sales on such date, then the closing price reported for the Common Stock in the New York 5 Stock Exchange Composite Index on the next preceding day on which such a sale is transacted, as published in The Wall Street Journal, or such other national financial press or service as may be available from time to time over the duration of the Plan. 7. Stock Appreciation Rights. Any options granted or to be granted under this Plan may, in the sole and absolute discretion of the Committee, include related SARs with respect to all or part of the shares of Common Stock subject to options as determined by the Committee. SARs may be granted at the time options are granted or (in the case of options other than ISOs) at a later date with respect to existing options. Optionees granted SARs may exercise the SARs by written notice to the Company, stating the number of shares with respect to which the SARs are being exercised, to the extent that said SARs are then exercisable. In the event of the exercise of SARs, the obligation of the Company in respect of the options to which the SARs related shall be discharged by payment of the SARs so exercised. (a) SAR Payment. Any SAR granted hereunder shall set forth the method of computation and form of payment of the SAR and such other terms and conditions as determined by the Committee in its discretion or as otherwise required by this Plan, provided that no SAR shall exceed the difference between one hundred percent (100%) of the then fair market value on the date of exercise of the share of Common Stock subject to the option surrendered by the optionee, and the option exercise price of such share. Without limiting the generality of the foregoing, the Committee may provide for the payment of said SAR in cash or in shares of Common Stock valued at fair market value as of the date of exercise, or in any combination thereof as determined by the Committee. (b) Other Provisions. Notwithstanding any contrary provisions hereof, (i) SARs shall be exercisable only to the extent the options to which such SARs relate are then exercisable (further subject to such additional conditions and restrictions as may be imposed by the Committee) and shall expire upon expiration of the options to which such SARs relate, and (ii) in the case of any SARs related to ISOs granted hereunder, said SARs shall be exercisable only when the then fair market value of the shares of Common Stock subject to the options (or portion thereof) surrendered by the optionee exceeds the exercise price of such options (or such portion thereof). (c) "Option." References in this Plan to the term "option" shall, unless the context requires otherwise, include an SAR. 8. Adjustment and Changes in the Common Stock. (a) In the event that the shares of Common Stock as presently constituted shall be changed into or exchanged for a different kind of share of stock or other securities of the Company or of another corporation (whether by reason of merger, consolidation, recapitalization, reclassification, split-up, combination of shares or otherwise) or if the number of such shares of stock shall be increased through the payment of a stock 6 dividend, then unless such change results in the termination of all outstanding options pursuant to the provisions of Section 9 hereof, there shall be substituted for or added to each share of stock of the Company therefore appropriated or thereafter subject or which may become subject to an option under this Plan, the number and kind of shares of stock or other securities into which each outstanding share of stock of the Company shall be so changed, or for which each such share shall be exchanged, or to which each share shall be entitled, as the case may be. Outstanding options shall also be appropriately amended as to price and other terms as may be necessary to reflect the foregoing events. In the event there shall be any other change in the number or kind of the outstanding shares of the stock of the Company of any stock or other securities into which such stock shall have been changed, or for which it shall have been exchanged, then if the Committee shall, in its sole discretion, determine that such change equitably requires an adjustment in any option theretofore granted or which may be granted under the Plan, such adjustment shall be made in accordance with such determination. Fractional shares resulting from any adjustment in options pursuant to this Section 8 shall be rounded down to the nearest whole number of shares. (b) Notwithstanding the foregoing, any and all adjustments in connection with an ISO shall comply in all respects with Sections 422 and 424 of the Code and the regulations thereunder. (c) Notice of any adjustment shall be given by the Company to each holder of an option which shall have been so adjusted, provided that such adjustment (whether or not such notice is given) shall be effective and binding for all purposes of the Plan and any instrument or agreement issued thereunder. 9. Acceleration of Options. (a) In the event that the Company enters into one or more agreements to dispose of all or substantially all of the assets of the Company or the Company's stockholders dispose of or become obligated to dispose of fifty- percent (50%) or more of the outstanding capital stock of the Company other than to the Company or a subsidiary of the Company, in either case by means of sale (whether as a result of a tender offer or otherwise), merger, reorganization or liquidation in one or a series of related transactions ("Acceleration Event"), then each option outstanding under the Plan shall become exercisable during the fifteen (15) days immediately prior to the scheduled consummation of the Acceleration Event with respect to the full number of shares of which such option has been granted. (b) In the event of the occurrence of an Acceleration Event (as defined by subsection (a) of this Section 9), any optionee who is subject to the filing requirements imposed under Section 16(a) of the Securities Exchange Act of 1934 with respect to the Company shall receive a payment of cash equal to the difference between the aggregated Fair Value of the shares of Common Stock subject to such accelerated options and the aggregate option exercise price of such shares. For this purpose, "Fair Value" shall mean the highest aggregate fair market value (as determined under Section 6(j) 7 hereof) of the subject shares of Common Stock during the 60-day period immediately preceding the date of the consummation of the Acceleration Event. Payment of said cash shall be made within 10 days after said consummation of the Acceleration Event. The foregoing payments under this subsection (b) shall be made in lieu of and in full discharge of any and all obligations of the Company in respect of all subject options and any related SARs of the optionee. Notwithstanding any of the foregoing, the provisions of this subsection (b) shall not be applicable to ISOs granted under this Plan. (c) The grant of options (or related rights) under this Plan shall in no way affect the right of the Company to adjust, reclassify, reorganize or otherwise change its capital or business structure of to merge, consolidate, dissolve, liquidate or sell or transfer all or any part of its business or assets. 10. Listing and Regulatory Requirement. No options granted pursuant to this Plan shall be exercisable if at any time, including after receipt of notice of exercise, the Committee shall determine in its discretion that the listing, registration, qualification, or acquisition of the shares of Common Stock subject to such options on any securities exchange or under any applicable law, or the consent or approval of any governmental regulatory body is necessary or desirable as a condition of, or in connection with, the granting of such option or the acquisition or issuance of shares by IBP thereunder, unless such listing, registration, qualification, acquisition, consent or approval shall have been effected or obtained free of any conditions not acceptable to the Committee. 11. Amendment of the Plan. The board of directors may from time to time amend or modify or make such changes in and additions to this Plan as it may deem desirable, without further action on the part of the stockholders of the Company; provided, however, that unless the holders of a majority of the securities of the Company present or represented and entitled to vote at a duly held meeting shall have first given their approval, then (a) the maximum number of shares of Common Stock issuable under the Plan shall not be increased (except for permissible adjustments under Section 8 hereof), (b) the benefits accruing to the participants in the Plan shall not be materially increased, and (c) the requirements as to eligibility for participation in the Plan shall not be materially modified. Subject to and without limiting the generality of the foregoing, the board of directors may amend or modify the Plan and any outstanding options under the Plan to the extent necessary to qualify any or all of such options or future options to be granted for such beneficial federal income tax treatment as may be afforded employee stock options under the Code or any amendments thereto or other statutes or regulations or rules (or any interpretations thereof by any applicable governmental agency or entity) which become effective after the effective date of the Plan (including without limitation any proposed or final Treasury regulations). 12. Stockholder Rights. An optionee shall have none of the rights of a stockholder of the Company with respect to any shares subject to any options granted hereunder until such individual shall have exercised the options and been issued share therefor. 8 13. Use of Proceeds. The proceeds received by the Company from the sale of shares pursuant to the options granted under this Plan shall be used for general corporate purposes. 9 Exhibit 10.24 EMPLOYMENT AGREEMENT PRODUCTION AND ADMINISTRATIVE This Agreement, effective the 22nd day of December, 1995(the "Effective Date"), by and between IBP, inc., a Delaware corporation (hereinafter referred to as "Employer"), and Jerry S. Scott (hereinafter referred to as "Employee"). WITNESSETH: Employer hereby agrees to employ, or agrees to continue to employ Employee, and Employee agrees to be employed upon the following terms and conditions. 1. Duties. Employee shall perform the duties of Executive Vice President-Fresh Meats Plant Operations or shall serve in such other capacity and with such other duties for Employer as Employer shall hereafter from time to time prescribe. 2. Term of Employment. The term of employment shall be for a period of five (5) years, commencing on the Effective Date of this Agreement, unless terminated prior thereto in accordance with the provisions of this Agreement. 3. Compensation. For the services to be performed hereunder, Employee shall be compensated by Employer at the rate of not less than One Hundred Fifty Thousand Dollars ($150,000.00) per year payable monthly, and in addition may receive awards under Employer's Cash Bonus Plan subject to the discretion of the senior management of Employer. Such compensation will be subject to review from time to time when salaries of other officers and managers of Employer are reviewed for consideration of increases therein. 4. Participation in Benefit Programs. Employee shall be entitled to participate in any benefit programs generally applicable to officers of Employer adopted by Employer from time to time. 5. Limitation on Outside Activities. Employee shall devote full employment energies, interest, abilities and time (except for personal investments) to the performance of obligations hereunder and shall not, without the written consent of the Chief Executive Officer of the Company, render to others any service of any kind or engage in any activity which conflicts or interferes with the performance of duties hereunder. 6. Ownership of Employee's Inventions. All ideas, inventions, and other developments or improvements conceived by Employee, alone or with others, during the term of his employment, whether or not during working hours, that are within the scope of Employer's business operations or that relate to any of Employer's work or projects, are the exclusive property of Employer. Employee agrees to assist Employer, at its expense, to obtain patents on any such patentable ideas, inventions, and other developments, and agrees to execute all documents necessary to obtain such patents in the name of Employer. 7. Termination. (a) Voluntary Termination. Employee may terminate this Agreement at any time by not less than one year's prior written notice to Employer. Employee shall not be entitled to any compensation from Employer for any period beyond Employee's actual date of termination. (b) Resignation. In the event Employee shall resign from employment at the request of employer, employer shall compensate Employee at the rate and in the manner provided in Paragraph 3 above for a period after termination equivalent to the lesser of (i) one year, or (ii) the remainder of the term of this Agreement. During the time Employee is being compensated in lieu of continued employment, the Employer shall have the right to require the Employee to perform consulting services from time to time on behalf of the Employer. Any out-of-pocket expenses associated with any such assignment shall be, upon proper documentation, reimbursed by Employer to Employee. In the event Employer compensates Employee in lieu of continued employment, all remuneration or wages earned by Employee during such period, either as an employee, independent contractor or consultant to any person, firm, or corporation other than Employer, shall be a set-off to Employer's duty of compensation to Employee. (c) Company Termination. In the event Employer shall conclude, in its sole discretion, that it is no longer in the interest of the Company to continue the employment of Employee, the Employer may terminate this Agreement, and Employer shall have no further obligation to pay compensation to Employee after the effective date of termination. (d) Incapacity. If Employee is materially incapacitated from fully performing his duties pursuant to this Agreement by reason of illness or other incapacity or by reason of any statute, law, ordinance, regulation, order, judgment or decree, Employer may terminate this Agreement by 30 days written notice to Employee, but only in the event that such incapacity shall aggregate not less than one hundred twenty (120) days during any one year. 8. Confidential Information, Trade Secrets, Limitation on Solicitation and Non-Compete Clause. (a) Employee shall receive, in addition to all regular compensation for services as described in Section 3 of this Employment Agreement, as additional consideration for signing this Employment Agreement and for agreeing to abide and be bound by the terms, provisions and restrictions of this Section 8, the following: (i) an award of such number of shares of Common Stock of Employer under the terms and conditions of the Employer's IBP Officer Long-Term Stock Plan and/or 1996 Officer Long-Term Stock Plan as shall be equal to an aggregate value of $450,000 less amounts due to restrictions on promotional grants (see Employee Award; Letter) (ii) a grant of options to purchase an aggregate of Four thousand eight hundred (4,800) shares of Common Stock of Employer under the terms and conditions of the Employer's Stock Option Plans and each year on the annual grant date for stock options an annual option grant of options to purchase shares of Common Stock of the Employer which is equal to three times (3x) the annual option level of the Employee's officer-position band option level, provided that the Employee has been on the payroll, whether as an officer or otherwise, at least six months prior to the annual grant date; and (iii) the right to receive bonus option grants, pursuant to the terms and conditions made available by the Plans Administration Committee of Employer's Board of Directors, from the employer's stock option plans, upon the Employee's exercise of any options granted to the Employee. (b) Employee recognizes that, as a result of his employment hereunder (and his employment, if any, with Employer for periods prior to the Effective Date), he has had and will continue to have access to confidential information, trade secrets, proprietary information, intellectual property, and other documents, data, and information concerning methods, processes, controls, techniques, formula, production, distribution, purchasing, financial analysis, returns and reports which is the property of and integral to the operations and success of Employer, and therefore agrees to be bound by the provisions of this Section 8, which Employee agrees and acknowledges to be reasonable and to be necessary to protect legitimate and important business interests and concerns of Employer. (c) Employee agrees that he will not divulge to any person, nor use to the detriment of Employer or any of its subsidiaries, nor use in any business or process of manufacture competitive with or similar to any business or process of manufacture of Employer or any of its subsidiaries, at any time during the term of this Agreement or thereafter, any of the Employer's trade secrets, without first obtaining the express written permission of Employer. A trade secret shall include any formula, pattern, device or compilation of information used by Employer in its business. For purposes of this Section 8, the compilation of information shall include, without limitation, the identity of customers and suppliers and information reflecting their interests, preferences, credit-worthiness, likely receptivity to solicitation for participation in various transactions and related information obtained during the course of his employment with Employer. (d) Employee agrees that at the time of leaving the employ of Employer he will deliver to Employer, and not keep or deliver to anyone else, any and all notebooks, memoranda, documents and, in general, any and all materials relating to Employer's business, or constituting Employer's property. Employee further agrees that he will not, directly or indirectly, request or advise any customers or suppliers of Employer or any of its subsidiaries to withdraw, curtail or cancel its business with Employer or any of its subsidiaries. (e) During the term of Employee's employment with the Employer and for a period of one (1) year from the termination of Employee's employment for any reason whatsoever, Employee (i) will not directly or indirectly, in the United States, own, manage, operate, control, or participate in as a partner, director, holder of more than 5% of the outstanding voting shares, principal or officer, any business in direct competition with the business of the Employer and (ii) will not accept employment or be employed by any such firm or corporation in any position where he would perform services materially similar to those which he has provided for Employer during the term hereof. (f) Employee recognizes that he possesses confidential information and trade secrets about other employees of Employer and its subsidiaries relating to their education, experience, skills, abilities, salary and benefits, and interpersonal relationships with customers and suppliers of Employer and its subsidiaries. Employee recognizes that the information he possesses about these other employees is not generally known, is of substantial value to Employer in securing and retaining customers and suppliers, and was acquired by Employee because of his business position with Employer. Employee agrees that during his employment hereunder, and for a period of three (3) years thereafter, Employee shall not, directly or indirectly, solicit or contact any employee or agent of Employer or any of its subsidiaries, with a view to inducing or encouraging such employee or agent to leave the employ of Employer or any of its subsidiaries, for the purpose of being hired by Employee, an employer affiliated with Employee, or any competitor of Employer or any of its subsidiaries. Employee agrees that he will not convey any such confidential information or trade secrets about other employees to anyone affiliated with Employee or to any competitor of Employer or any of its subsidiaries. (g) Employee acknowledges that the restrictions contained in this Section 8 are reasonable and necessary to protect Employer's interest in this agreement and that any breach thereof will result in an irreparable injury to Employer for which Employer has no adequate remedy at law. Employee therefore agrees that, in the event that Employee breaches any of the provisions contained in this Section 8, Employer shall be authorized and entitled to seek from any court of competent jurisdiction (i) a temporary restraining order, (ii) preliminary and permanent injunctive relief, (iii) an equitable accounting of all profits or benefits arising out of such breach, and (iv) direct, incidental and consequential damages arising from such breach. (h) Employer and Employee have attempted to specify a reasonable period of time, a reasonable area and reasonable restrictions to which this Section 8 shall apply. Employer and Employee agree that if a court or administrative body should subsequently determine that the terms of this Section 8 are greater than reasonably necessary to protect Employer's interest, Employer agrees to waive those terms which are found by a court or administrative body to be greater than reasonably necessary to protect Employer's interest and to request that the court or administrative body reform this Agreement specifying a reasonable period of time and such other reasonable restrictions as the court or administrative body deems necessary. (i) Employee further agrees that this Section 8 is an integral part of this agreement, and that should a court fail or refuse to enforce the restrictions contained herein in such a manner as to effectively enjoin competitive activity, the Employer shall recover from Employee, and the court shall award as damages to the Employer, the consideration provided to and elected by Employee under the terms of Section 8(a) above (or the monetary equivalent thereof), its costs and its reasonable attorney's fees. 9. Modification. This Agreement contains all the terms and conditions agreed upon by the parties hereto, and no other agreements, oral or otherwise, regarding the subject matter of this Agreement shall be deemed to exist or bind either of the parties hereto, except for a confidentiality agreement between the parties dated February 14, 1978. This Agreement cannot be modified except by a writing signed by both parties. 10. Assignment. This Agreement shall be binding upon Employee, his heirs, executors and assigns and upon Employer, its successors and assigns. 11. Applicable Law. This agreement is made and entered into in the State of South Dakota, which is also the domicile of Employee. The validity, interpretation, performance and enforcement of this agreement shall be governed by the internal laws of said State of South Dakota, without giving effect to the conflict of laws provisions thereof. IN WITNESS WHEREOF, the parties hereto have executed this Agreement effective as of the day and year first above written. IBP, inc. By /s/ Robert L. Peterson ----------------------- /s/ Jerry S. Scott ----------------------- (Employee) EX-99 10 Exhibit 99.1 IBP AGREES TO ACQUIRE FOODBRANDS Broadens IBP's Exposure to Foodservice, Value-Added Products Advances IBP's Efforts to Pursue Growth Outside Core business Dakota City, Nebraska and Oklahoma City, Oklahoma -- March 26, 1997 -- IBP inc. (NYSE: IBP) and Foodbrands America, Inc. (NYSE: FDB) today announced that they have reached an agreement for IBP to acquire Foodbrands for $23.40 per share in cash for a transaction valued at $640 million, including Foodbrands' debt. IBP said the acquisition, which increases its presence in the foodservice industry, represents a significant advancement in its strategy to diversify beyond the core fresh meat processing business and extend its product base with value-added, branded products. IBP and Foodbrands have entered into a definitive agreement and plan of merger allowing for the acquisition of the company by IBP. By 5 p.m. E.S.T., on April 1, 1997, IBP will commence a cash tender offer for all the approximately 12.47 million issued and outstanding shares of Foodbrands at $23.40 per share. Foodbrands' largest shareholders, the Joseph Littlejohn and Levy Limited Partnerships, owners of approximately 44% of Foodbrands shares, have agreed to tender all of their shares. Foodbrands' second largest shareholder, The Airlie Group, has also agreed to tender shares. Foodbrands is a leading U.S. producer, marketer and distributor of frozen and refrigerated products to the fastest-growing segment of the food industry, the away-from-home food preparation market. The leader in the pizza toppings industry, Foodbrands is also a leading provider of value-added pork based products to the foodservice industry. The company produces over 1,600 branded and custom products, including pizza toppings and crusts, burritos, frozen stuffed pastas, breaded appetizers, soups, sauces, and side dishes as well as deli meats and processed beef, poultry and pork. Foodbrands' products are designed to meet the foodservice industry's growing demand of products that offer consistent quality and flavor, require little back-of-house preparation, and improve food safety. Robert Peterson, Chairman and CEO of IBP, said, "The acquisition of Foodbrands is a major step forward in IBP's strategy to pursue growth beyond our core fresh meats business, and to diversify into foodservice and value-added products. We have been exploring ways to capitalize on the trend by Americans of spending more on food prepared outside the home than on groceries to prepare at home. Our fresh beef and pork reach supermarket cases, restaurants and foodservice companies all over the world. The addition of Foodbrands' business is a perfect complement to IBP's core processing business and will allow us to further extend our reach into restaurants and supermarket deli cases with high quality branded products." Larry Shipley, Executive Vice President, Corporate Development of IBP said, "Foodbrands has consistently proven their strength in developing, manufacturing and marketing customized product solutions to the foodservice industry, in the U.S. and Europe. Foodbrands is number one in the large and growing market for pre-made pizza toppings and crusts, and defined many of today's standard products in deli meats and appetizers. We will continue to foster Foodbrands' creativity and marketing prowess through investment and by providing them with greater access to world markets. We intend to operate Foodbrands as a largely independent business within the IBP family, and welcome its 3,300 managers and employees to our company. Our companies share many common customers, and we expect to explore ways to leverage our distribution channels to better serve the needs of a rapidly changing foodservice industry." Randy Devening, Chairman, President and CEO of Foodbrands, said, "We are very pleased to be joining IBP, and are excited about the growth and expansion possibilities that this new relationship brings Foodbrands. IBP is a $13 billion company and is highly respected in the food processing industry for the quality of their products and for their operating strength and efficiency. By becoming part of the IBP family, Foodbrands gains access to this operating expertise and to increased financial resources. We look forward to continuing our focus on strong customer relationships and capitalizing on our enhanced opportunity for growth." During the past few years Foodbrands has transformed from a broad-based food company into a focused and innovative food processing company. This was achieved through increased and targeted investments in production technology and research and development, and through an acquisition and divestiture program to refocus on the company's core foodservice customer. The transaction was unanimously approved by IBP's and Foodbrands' respective Board of Directors and is subject to regulatory approval and certain other closing conditions. Closing is expected to occur in the second calendar quarter of 1997. The acquisition will be treated as a purchase for accounting purposes. The Joseph Littlejohn and Levy Limited Partnerships and The Airlie Group have granted IBP the option to purchase their shares under certain circumstances. Foodbrands, headquartered in Oklahoma City, Oklahoma, produces, markets and distributes frozen and refrigerated products targeted to growth segments of the foodservice market. Customers include large multi-unit restaurant chains, major foodservice distributors, warehouse clubs, and grocery store delicatessens. The company employs approximately 3,300 personnel. IBP, headquartered in Dakota City, Nebraska, is the world's premier producer of red meat, marketing fresh beef, pork and related allied products around the globe. The company employs over 34,000 people. ### Contacts: At IBP, Media: Gary Mickelson (402) 241-2986 or Lisa La Magna (212) 484-7423 Investors: John Borgh or Dean Hanish (402) 241-2041/2167 At Foodbrands: Bryant Bynum (405) 879-4100 -----END PRIVACY-ENHANCED MESSAGE-----