1997 Incentive Bonus Plan - Smithfield Foods Inc. and John O. Nielson
SMITHFIELD FOODS, INC.
1997 INCENTIVE BONUS PLAN
(Applicable to John O. Nielson as President and
Chief Operating Officer of the Company)
1. Purpose. Smithfield Foods, Inc. hereby establishes an Incentive
Bonus Plan (the "Plan") applicable to John O. Nielson, as President and Chief
Operating Officer of the Company ("Executive"). The Company intends to provide
the Executive with incentive bonuses that are related to and measured by the
Company's performance under a program intended to meet the requirements of Code
section 162(m) and regulations thereunder. The Plan was adopted by the
Committee and ratified by the Board on May 24, 1996, and is subject to approval
of the Company's stockholders. The Plan is effective as of April 29, 1996.
2. Definitions. As used in the Plan, the following terms have the
meanings indicated.
(a) "Auditor" means the independent public accounting firm then
employed by the Company to prepare the Company's financial statements.
(b) "Beneficiary" means the person or persons designated by the
Executive in a writing filed with the Company to receive his Bonus Payment upon
his death.
(c) "Board" means the board of directors of the Company.
(d) "Bonus Base" means the consolidated net income of the
Company and its subsidiaries prepared in accordance with generally accepted
accounting principles before (i) Bonus Payments to Executive, (ii) accounting
for minority ownership interests in subsidiaries, (iii) incentive payments due
officers based on income approved by the Board, and (iv) applicable federal and
state income taxes.
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(e) "Bonus Payment" means the amount due the Executive under the
Bonus Plan, as computed by the Company, and certified by the Committee.
(f) "Cause" means (i) continued neglect by Executive of his
employment duties (as reasonably determined by the Company's Board of Directors)
after delivery of written notice thereof to Executive specifying with
particularity the duties Executive has neglected, (ii) willful misconduct in
connection with the performance of Executive's duties, including by way of
example but without limitation, intentional misappropriation of funds or
property of the Company or any of its subsidiaries, or securing or attempting to
secure personally any profit in connection with any transaction entered into on
behalf of the Company or any of its subsidiaries, (iii) conduct by Executive
that would result in material injury to the reputation of the Company or any of
its subsidiaries (whether publicly known or unknown), including by way of
example but without limitation, pleading guilty to or conviction of a felony
involving moral turpitude, or (iv) certification by a physician that Executive
is unable to regularly perform his duties hereunder by reason of Executive's
addiction to alcohol or a controlled substance.
(g) "Code" means the Internal Revenue Code of 1986, as amended,
and regulations thereunder.
(h) "Committee" means two or more directors appointed by the
Board who are "outside directors" within the meaning of section 162(m) of the
Internal Revenue Code. The Committee may be a duly appointed sub-committee of
the Compensation Committee.
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(i) "Company" means Smithfield Foods, Inc., a Delaware
corporation.
(j) "Disabled" means, in general, the inability to perform the
services for which the Executive was employed. The Committee shall determine
whether a Disability exists and such determination shall be conclusive.
(k) "Executive" means John O. Nielson.
3. Incentive Bonuses.
(a) Subject to subsection 3(c) below, Executive shall be entitled
to receive as a Bonus Payment with respect to the fiscal year beginning April
29, 1996, and each fiscal year thereafter, and until the Plan is terminated by
the Company, an amount in cash equal to one percent (1.0%) of the Bonus Base for
such year.
(b) The Committee may before the first day of each fiscal year
beginning on or after April 29, 1996, establish such other threshold and
percentage requirements for receipt of a Bonus Payment as the Committee shall
deem appropriate.
(c) Notwithstanding the provisions of subsections 3(a) and (b)
above, the Committee expressly reserves the right to reduce or eliminate
entirely any Bonus Payment if the Committee determines in its sole discretion
that it is in the best interests of the Company to do so. Such determination
shall be conclusive and binding.
4. Payment of Incentive Bonuses. The Bonus Payment will be made (i)
after the date the Company's audited financial statements have been certified by
the Auditor for the relevant fiscal year of computation and the Committee has
certified that the performance criteria have been met, and
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(ii) before the date by which the Bonus Payment must be made to be otherwise
deductible by the Company.
5. Termination of Employment. If Executive ceases to be employed, his
right to receive a Bonus Payment shall be governed by the following principles:
(a) If the termination occurs as a result of death, Disability,
termination by the Company without Cause, retirement or voluntarily by the
Executive, the Executive (or the Executive's Beneficiary in the event of death)
shall be entitled to receive an amount equal to the Bonus Payment Executive
would have received if the last day of the fiscal year coincided with the date
of Executive's termination of employment, computed based on unaudited financial
information.
(b) If the termination of employment occurs for Cause, the
Executive shall forfeit all rights to a Bonus Payment for the fiscal year in
which such termination of employment occurs.
6. Administration.
(a) The Plan shall be administered by the Compensation Committee
of the Board of Directors (the "Committee"), which shall be comprised solely of
two or more "outside directors", as that term is defined for purposes of Code
section 162(m).
(b) The Board from time to time may appoint members previously
appointed and may fill vacancies, however caused, in the Committee. Insofar as
it is necessary to satisfy the requirements of Section 16(b) of the Securities
Exchange Act of 1934, no member of the Committee shall be eligible to
participate in the Plan or in any other similar plan of the Company or any
Parent or Subsidiary of the Company.
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(c) If any member of the Committee fails to qualify as an
"outside director" or otherwise meet the requirements of this section, such
person shall immediately cease to be a member of the Committee solely for
purposes of the Plan and shall not take part in future Committee deliberations.
(d) The Committee may adopt rules and regulations for carrying
out the Plan, and the Committee may take such actions as it deems appropriate to
ensure that the Plan is administered in the best interests of the Company. The
Committee has the authority to construe and interpret the Plan, resolve any
ambiguities, and make determinations with respect to the eligibility for or
amount of any award. The interpretation, construction and administration of the
Plan by the Committee shall be final and conclusive. The Committee may consult
with counsel, who may be counsel to the Company, and shall not incur any
liability for any action taken in good faith in reliance upon the advice of
counsel.
7. Rights. Participation in the Plan and the right to receive cash
awards under the Plan shall not give Executive any proprietary interest in the
Company, any subsidiary or any of their assets. No trust fund shall be created
in connection with the Plan, and there shall be no required funding of amounts
that may become payable under the Plan. Executive shall for all purposes be a
general creditor of the Company. The interests of Executive cannot be assigned,
anticipated, sold, encumbered or pledged and shall not be subject to the claims
of his creditors. Nothing in the Plan shall confer upon Executive the right to
continue in the employ of the Company or any subsidiary or shall interfere with
or restrict in any way the right of the Company and its subsidiaries to
discharge Executive at any time for any reason whatsoever, with or without
cause.
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8. Successors. The Plan shall be binding on the Executive and his
personal representatives. If the Company becomes a party to any merger,
consolidation, reorganization or other corporate transaction, the Plan shall
remain in full force and effect as an obligation of the Company or its successor
in interest.
9. Amendment and Termination. The Board may amend or terminate the Plan
at any time as it deems appropriate; provided that (a) no amendment or
termination of the Plan after the end of a fiscal year may increase the Bonus
Payment for the fiscal year just ended, and (b) to the extent required to meet
the requirements of Code section 162(m) for performance-based compensation, any
amendment that makes a material change to the Plan must be approved by the
stockholders of the Company. The Board is specifically authorized to amend the
Plan and take such other action as necessary or appropriate to comply with Code
section 162(m) and regulations issued thereunder, and to comply with or avoid
administration of the Plan in a manner that could cause any participant to incur
liability under Section 16(b) of the Securities Exchange Act of 1934 and
regulations issued thereunder.
10. Construction. The Plan shall be construed in accordance with the
laws of the State of Delaware. The headings in this Plan have been inserted for
convenience of reference only and are to be ignored in any construction of the
provisions. If a provision of this Plan is not valid, that invalidity does not
affect other provisions.
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