EXHIBIT 10.1


 


HORMEL FOODS CORPORATION

2005 LONG-TERM INCENTIVE PLAN


 


ARTICLE I.  ESTABLISHMENT


 


On November 22,
2004, the Compensation Committee of the Board of Directors of HORMEL FOODS
CORPORATION, a Delaware corporation (the “Company”), approved and adopted an
incentive plan for executives as described herein, which plan shall be known as
the “HORMEL FOODS CORPORATION 2005 LONG-TERM INCENTIVE PLAN” (the “Plan”).  The Plan shall be effective as of October 31,
2005, subject to its approval by the stockholders of the Company, and no
payments shall be made pursuant to the Plan until after the Plan has been
approved by the stockholders of the Company.


 


ARTICLE II.  PURPOSE


 


The
purpose of the Plan is to advance the long-term interests of the Company and
its stockholders by attracting and retaining key employees, and by stimulating
the efforts of such employees to contribute to the continued success and growth
of the business of the Company.


 


ARTICLE III.  ADMINISTRATION


 


3.1        Composition
of the Committee.  The Plan shall be
administered by the Compensation Committee of the Company’s Board of Directors,
or a subcommittee thereof (the “Committee”), which shall consist of members
appointed from time to time by the Board of Directors and shall comprise not
less than such number of directors as shall be required to permit the Plan to
satisfy the requirements of Section 162(m) of the Internal Revenue Code of
1986, as amended (the “Code”).  The
Committee administering the Plan shall be composed solely of “outside directors”
within the meaning of Section 162(m) of the Code.


 


3.2        Power and
Authority of the Committee.  The
Committee shall have full power and authority, subject to all the applicable
provisions of the Plan and applicable law, to (a) establish, amend, suspend,
terminate or waive such rules and regulations and appoint such agents as it
deems necessary or advisable for the proper administration of the Plan, (b)
construe, interpret and administer the Plan and any instrument or agreement
relating to, or Award (as defined below in Section 3.4) made under, the
Plan, and (c) make all other determinations and take all other actions
necessary or advisable for the administration of the Plan.  Unless otherwise expressly provided in the
Plan, each determination made and each action taken by the Committee pursuant
to the Plan or any instrument or agreement relating to, or Award made under,
the Plan (x) shall be within the sole discretion of the Committee, (y) may be
made at any time and (z) shall


 


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be
final, binding and conclusive for all purposes on all persons, including, but
not limited to, holders of Awards, and their legal representatives and
beneficiaries, and employees of the Company or of any “Affiliate” of the
Company.  For purposes of the Plan and
any instrument or agreement relating to, or Award made under, the Plan, the
term “Affiliate” shall mean any entity that, directly or indirectly through one
or more intermediaries, is controlled by the Company and any entity in which
the Company has a significant equity interest, in each case as determined by
the Committee in its sole discretion.


 


3.3        Delegation.  The Committee may delegate its powers and
duties under the Plan to one or more officers of the Company or any Affiliate
or a committee of such officers, subject to such terms, conditions and
limitations as the Committee may establish in its sole discretion; provided,
however, that the Committee shall not delegate its power to (a) amend the Plan
as provided in Article IX hereof, or (b) make determinations regarding
Awards.


 


3.4        Qualified
Performance-Based Compensation.  An
opportunity to receive compensation pursuant to the Plan (hereinafter referred
to as an “Award(s)”) is intended to be “qualified performance-based compensation”
within the meaning of Section 162(m) of the Code.  The following requirements shall apply to all
Awards made under the Plan:


 


a.             The
right to receive payment pursuant to an Award shall be determined solely on
account of the attainment of the preestablished, objective performance goals
selected by the Committee in connection with the grant of the Award. Such goals
shall be based solely on cumulative total return to stockholders compared to
preselected peer groups as described below in Section 5.2.  While the amount of Award(s) may vary among
Participants (as defined below in Section 4.2), the goals established by
the Committee shall apply to all Participants in the same manner.


 


b.             The
performance period determined by the Committee during which the achievement of
the performance goal or goals selected by the Committee with respect to any
Award is to be measured (the “Performance Period”) is expected to be
approximately three (3) years, and shall, in no case, be less than 24 months.


 


c.             The
maximum amount which may be paid to any Participant pursuant to any Award with
respect to any Performance Period shall not exceed the fair market value of
three hundred thousand (300,000) shares of the voting common stock of the
Company, determined in the manner provided in Section 5.2 for determining “fair
market value” at the end of the Performance Period.


 


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d.             Not
later than 90 days after the beginning of each Performance Period selected by
the Committee for an Award, it  shall:


 


(i)            designate
the Performance Period and all Participants for such Performance Period;


 


(ii)           designate
the Peer Group (as defined below in Section 5.2); and


 


(iii)          establish
the objective performance factors for all Participants for that Performance
Period on the basis of cumulative total return to stockholders compared to
preselected peer groups.


 


e.             Following
the close of each Performance Period and prior to payment of any amount to any
Participant under the Plan, the Committee must certify in writing as to the
attainment of the performance factors upon which any payments to Participants
for that Performance Period are to be based.


 


f.             Each of
the foregoing provisions, and all of the other terms and conditions of the Plan
as it applies to any Award, shall be interpreted in such a fashion so as to
qualify all compensation paid thereunder as “qualified performance-based
compensation” within the meaning of Section 162(m) of the Code.


 


ARTICLE IV.  ELIGIBILITY AND PARTICIPATION


 


4.1        Eligibility.  The Plan is unfunded and is maintained by the
Company for a select group of management or highly compensated employees.  In order to be eligible to participate in the
Plan, an employee of the Company or of its Affiliates must be selected by the
Committee.  In determining the employees
who will participate in the Plan, the Committee may take into account the
nature of the services rendered by the respective employees, their present and
potential contributions to the success of the Company and such other factors as
the Committee, in its sole discretion, shall deem relevant.  A director of the Company or of an Affiliate
who is not also an employee of the Company or an Affiliate, and all members of
the Committee, shall not be eligible to participate in the Plan.


 


4.2        Participation.  The Committee shall determine the employees
to be granted an Award, the amount of each Award, the time or times when Awards
will be made, the period of time over which such Awards are intended to be earned,
and all other terms and conditions of each Award.  The provisions of the Awards need not be the
same with respect to any recipient of an Award (the “Participant”) or with
respect to different Participants, except that the performance goals applicable
to each Award shall be established in the same manner, as described below in Section 5.2.  The Committee’s decision to approve an Award
to an employee in any year shall not require the


 


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Committee
to approve a similar Award or any Award at all to that employee or any other
employee or person at any future date. 
The Company and the Committee shall not have any obligation for
uniformity of treatment of any person, including, but not limited to, Participants
and their legal representatives and beneficiaries and employees of the Company
or of any Affiliate.


 


4.3        Award
Agreement.  Any employee selected for
participation by the Committee shall, as a condition of participation, enter
into a written agreement with the Company setting forth the terms and
conditions of the Award (the “Award Agreement”).  A separate Award Agreement will be provided
to each Participant for each Award.


 


4.4        Employment.  In the absence of any specific agreement to
the contrary, no Award to a Participant under the Plan shall affect any right
of the Company, or of any Affiliate of the Company, to terminate, with or
without cause, the Participant’s employment with the Company or any Affiliate
at any time.  Neither the establishment
of the Plan, nor the granting of any Award hereunder, shall give any
Participant  (a) any rights to remain
employed by the Company or any Affiliate; (b) any benefits not specifically
provided for herein or in any Award granted hereunder; or, (c) any rights to
prevent the Company or any Affiliate from modifying, amending or terminating
any of its other benefit plans of any nature whatsoever.


 


ARTICLE V.  AWARDS


 


5.1        General.  The Committee shall determine the Award or
Awards to be made to each Participant, and each Award shall be subject to the terms
and conditions of the Plan and the applicable Award Agreement.  An Award shall be made solely in the form of
a statement of a dollar amount based on attaining a specified goal, subject to
an increase or reduction in such amount based on exceeding or failing to meet
the goal, as described below in Section 5.2.  Awards may be granted singly or in
combination, or in addition to, in tandem with or in substitution for any
grants or rights under any other employee or compensation plan of the Company
or of any Affiliate.  Awards may provide
that more or less than 100% of the amount stated therein may be earned upon
satisfaction of the conditions provided for therein, subject to the terms and
conditions of the Plan.  All or part of
an Award may be subject to conditions and forfeiture provisions established by
the Committee, and set forth in the Award Agreement.


 


5.2        Awards.  Subject to the discretion of the Committee to
reduce an Award, as provided below in Section 5.4, the payment to be made
to a Participant on account of an Award shall be determined based on total
shareholder return ranked against a peer group in the following manner:


 


(i)            The
Committee shall designate a number of companies listed on the New York Stock
Exchange or American Stock Exchange, or quoted on NASDAQ, selected


 


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by the
Committee in its sole discretion as comparable to the Company (the “Peer Group”).  With the exception of bankruptcy, in the
event any Peer Group companies are not thereafter listed on either the New York
Stock Exchange or American Stock Exchange, or quoted on NASDAQ, during the
Performance Period, such companies will drop out of the Peer Group, and the
size of the Peer Group shall be reduced accordingly.


 


(ii)           The
Committee shall determine fair market value of a share of the voting common
stock of each company in the Peer Group, and of the Company, as of the
beginning and the end of the Performance Period.  For purposes of the Plan, “fair market value”
shall be (a) the average of the closing price of a company’s voting common
stock on the New York Stock Exchange or on the American Stock Exchange on the
ten trading days designated by the Committee at the beginning and end of the
Performance Period, and (b) if the voting common stock is not listed on the New
York Stock Exchange or the American Stock Exchange but is quoted on NASDAQ, the
average of the last sale (National Market System) or the average between the
highest bid and lowest asked prices for a share of voting common stock
(National List) as quoted on NASDAQ on the ten trading days designated by the
Committee at the beginning and end of the Performance Period.


 


(iii)          Within
thirty days after the end of any Performance Period, the Committee shall
calculate the total shareholder return for each company remaining in the Peer
Group and for the Company.  For purposes
of the Plan, “total shareholder return” shall be calculated as follows for each
company in the Peer Group and for the Company. 
The fair market value of a share of voting common stock shall be
determined for each Peer Group company and the Company at the beginning of the
Performance Period (the “Beginning Value”). 
During the Performance Period each dividend paid by any Peer Group
company and the Company shall be deemed invested in that company’s voting
common stock at the closing price of such stock on the date the dividend was
paid.  At the end of the Performance
Period, the fair market value of a share of voting common stock plus the fair
market value of any additional whole or fractional share of voting common stock
deemed purchased with dividends shall be determined for each remaining Peer
Group company and the Company (the “Ending Value”).  In the event of stock splits or other
recapitalizations (excepting stock repurchases or issuances of new stock for
acquisitions), the Committee shall make such adjustment as it deems appropriate
to maintain comparability between the Beginning Value and Ending Value.  The percentage increase (or decrease) of
Ending Value compared to Beginning Value is the total shareholder return.


 


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(iv)          The Peer
Group companies and the Company will be ranked according to total shareholder
return during the Performance Period. 
The Committee will apply the Company’s ranking, in such manner as the
Committee may determine for any Performance Period, to determine what
percentage of the dollar amount specified in each Participant’s individual
Award Agreement shall be paid to such Participant, which may be the amount, a
fraction of the amount, a multiple of the amount, or nothing, provided that the
percentage shall be calculated in the same manner and using the same
performance standard for all Participants.


 


5.3        Payment of
Awards.  Payment of Awards shall be made
solely in cash and may be made, subject to any deferred compensation election
which may be permitted pursuant to the Hormel Foods Corporation Executive
Deferred Income Plan II, at such times, with such restrictions and conditions
as the Committee, in its sole discretion, may determine at the time of grant of
the Awards.


 


5.4        Discretionary
Reduction.  The Committee shall retain
sole and full discretion to reduce, in whole or in part, the amount of any cash
payment otherwise payable to any Participant under this Plan.


 


ARTICLE VI.   TERMINATION OF EMPLOYMENT


 


Each
Award Agreement shall include provisions governing the disposition of an Award
in the event of the retirement, disability, death or other termination of a
Participant’s employment with the Company or an Affiliate.


 


ARTICLE VII.  NONTRANSFERABILITY


 


Except
as otherwise determined by the Committee, no Award shall be sold, assigned,
transferred, pledged, hypothecated or otherwise disposed of during the time in
which the requirement of continued employment or attainment of performance
objectives has not been achieved.  Each
Award shall be paid during the Participant’s lifetime only to the Participant
or, if permissible under applicable law, to the Participant’s legal
representatives.


 


ARTICLE VIII.  TAXES


 


In
order to comply with all applicable federal or state income, social security,
payroll, withholding or other tax laws or regulations, the Company may take
such action, and may require a Participant to take such action, as it deems
appropriate to ensure that all applicable federal or state income, social
security, payroll, withholding or other taxes, which are the sole and absolute
responsibility of the Participant, are withheld or collected from such
Participant.


 


ARTICLE IX.  AMENDMENT AND TERMINATION


 


9.1        Term of
Plan.  Unless the Plan shall have been
discontinued or terminated as provided in Section 10.2 hereof, the Plan
shall terminate on the last Sunday in October, 2015.  No


 


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Awards
may be granted after such termination, but termination of the Plan shall not
alter or impair any rights or obligations under any Award theretofore granted,
without the consent of the Participant or holder or beneficiary thereof, except
as otherwise provided in the Plan or the Award Agreement.


 


9.2        Amendments to
and Termination of Plan.  Except to the
extent prohibited by applicable law and unless otherwise expressly provided in
the Plan or an Award Agreement, the Committee may amend, alter, suspend,
discontinue or terminate the Plan; provided, however, that notwithstanding any
other provision of the Plan or any Award Agreement, without the approval of the
stockholders of the Company, no such amendment, alteration, suspension,
discontinuation or termination shall be made that, absent such approval would
cause any compensation paid pursuant to any Award granted pursuant to the Plan
to no longer qualify as “qualified performance-based compensation” within the
meaning of Section 162(m) of the Code.


 


9.3        Correction of
Defects, Omissions and Inconsistencies. 
Except to the extent prohibited by applicable law and unless otherwise
expressly provided in the Plan or an Award Agreement, the Committee may correct
any defect, supply any omission or reconcile any inconsistency in the Plan, any
Award or any Award Agreement in the manner and to the extent it shall deem
desirable to carry the Plan into effect.


 


ARTICLE X.  MISCELLANEOUS


 


10.1      Governing
Law.  The Plan and any Award Agreement
shall be governed by and construed in accordance with the internal laws, and
not the laws of conflicts, of the State of Delaware.


 


10.2      Severability.  If any provision of the Plan, any Award or
any Award Agreement is or becomes or is deemed to be invalid, illegal or
unenforceable in any jurisdiction or would disqualify the Plan, any Award or
any Award Agreement under any law deemed applicable by the Committee, such
provision shall be construed or deemed amended to conform to applicable laws,
or if it cannot be so construed or deemed amended without, in the determination
of the Committee, materially altering the purpose or intent of the Plan, the
Award or the Award Agreement, such provision shall be stricken as to such
jurisdiction, and the remainder of the Plan, any such Award or any such Award
Agreement shall remain in full force and effect.


 


10.3      No Trust or
Fund Created.  Neither the Plan nor any
Award or Award Agreement shall create or be construed to create a trust or
separate fund of any kind or a fiduciary relationship between the Company or any
Affiliate and a Participant or any other person.  To the extent that any person acquires a
right to receive payments from the Company or any Affiliate pursuant to an
Award, such right shall be no greater than the right of any unsecured general
creditor of the Company or of any Affiliate.


 


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10.4      Nature of
Payments.  Any and all cash payments
pursuant to any Award granted hereunder shall constitute special incentive
payments to the Participant, and, except as hereinafter provided, such payments
shall not be taken into account in computing the amount of the Participant’s
remuneration for purposes of determining the amount of any benefit payable to
or with respect to the Participant under any employee pension benefit plan or
employee welfare benefit plan (as those terms are defined in section 3 of
ERISA) or in any agreement between the Company (or any Affiliate) and the
Participant to provide similar benefits. 
However, such payments shall be taken into account as if they were
received ratably during the Performance Period with respect to which they
relate:  (i) in determining benefits
under any plan or agreement which expressly provides that they shall be taken
into account, and (ii) in determining benefits under the Hormel Foods
Corporation Supplemental Executive Retirement Plan and the Hormel Survivor
Income Plan for Executives.


 


10.5      No Illegal
Transactions.  The Plan and any Award
granted hereunder are subject to all laws and regulations of any governmental authority
which may be applicable thereto; and, notwithstanding any provision of the Plan
or any Award, Participants shall not be entitled to receive the benefit of any
Award, and the Company and any Affiliate shall not be obligated to pay any such
benefits to a Participant, if such receipt or payment of benefits would
constitute a violation by the Participant or the Company or any Affiliate of
any provision of any such law or regulation.


 


10.6      No Rights as
Stockholder.  Participants shall not have
any rights as stockholders of the Company or any Affiliate as a result of the
grant of an Award hereunder.


 


10.7      Headings.  Headings are given to the Articles and
sections of the Plan solely as a convenience to facilitate reference.  Such headings shall not be deemed in any way
material or relevant to the construction or interpretation of the Plan or any
provision thereof.


 


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