SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
/X / Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the fiscal year ended October 31, 2002
/ / Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the transition period from to
Commission file number : 0-16567
SANDERSON FARMS, INC.
(Exact name of registrant as specified in its charter)
Mississippi 64-0615843
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
225 North 13th Avenue
Laurel, Mississippi 39440
(Address of principal executive offices) (Zip Code)
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Registrant's telephone number, including area code: (601) 649-4030 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $1.00 per share par value
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
X Yes ____ No
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K [ ].
Aggregate market value (based on the closing sales price in the NASDAQ National Market System) of the voting stock held by non-affiliates of the Registrant as of November 29, 2002: approximately $111,959,484.
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).
X Yes ____ No
Aggregate market value of the voting and non-voting common equity held
by non-affiliates of the Registrant computed by reference to the closing sales
price of the common equity in the NASDAQ National Market System on the last
business day of the Registrant's most recently completed second fiscal quarter:
$134,242,781.
Number of Shares outstanding of the Registrant's common stock as of November 30, 2002: 13,017,026 shares of common stock, $1.00 per share par value.
Portions of the Registrant's definitive proxy statement filed or to be filed in connection with its 2003 Annual Meeting of Stockholders are incorporated by reference into Part III.
INTRODUCTORY NOTE
Definitions. Except where the context indicates otherwise, the following terms have the following respective meanings when used in this Annual Report. "Registrant" and "Company" mean Sanderson Farms, Inc. and its subsidiaries and predecessor organizations. "Fiscal year" means the fiscal year ended October 31, 2002, which is the year for which this Annual Report is filed.
Presentation and Dates of Information. Except for Item 4A herein, the Item numbers and letters appearing in this Annual Report correspond with those used in Securities and Exchange Commission Form 10-K (and, to the extent that it is incorporated into Form 10-K, the letters used in the Commission's Regulation S-K) as effective on the date hereof, which specifies the information required to be included in Annual Reports to the Commission. Item 4A ("Executive Officers of the Registrant") has been included by the Registrant in accordance with General Instruction G(3) of Form 10-K and Instruction 3 of Item 401(b) of Regulation S-K. The information contained in this Annual Report is, unless indicated to be given as of a specified date or for the specified period, given as of the date of this Report, which is December 27, 2002.
PART I
Item 1. Business
(a) GENERAL DEVELOPMENT OF THE REGISTRANT'S BUSINESS
The Registrant was incorporated in Mississippi in 1955, and is a fully-integrated poultry processing company engaged in the production, processing, marketing and distribution of fresh and frozen chicken products. In addition, through its wholly-owned subsidiary, Sanderson Farms, Inc. (Foods Division), the Registrant is engaged in the processing, marketing and distribution of processed and prepared food items.
The Registrant sells ice pack, chill pack and frozen chicken, in whole, cut-up and boneless form, primarily under the Sanderson Farms(R) brand name to retailers, distributors, and casual dining operators principally in the southeastern, southwestern and western United States. During its fiscal year ended October 31, 2002 the Registrant processed 264.7 million chickens, or approximately 1.3 billion dressed pounds. According to 2002 industry statistics, the Registrant was the 7th largest processor of dressed chickens in the United States based on estimated average weekly processing.
The Registrant's chicken operations presently encompass five hatcheries, four feed mills, six processing plants and one by-products plant. The Registrant has contracts with operators of approximately 473grow-out farms that provide it with sufficient housing capacity for its current operations. The Registrant also has contracts with operators of 143 breeder farms.
The Registrant sells over 200 processed and prepared food items nationally and regionally, primarily to distributors, national food service accounts, retailers and club stores. These food items include frozen entrees, such as chicken and dumplings, lasagna, seafood gumbo, and shrimp creole and specialty products, such as corn dogs.
Since the Registrant completed the initial public offering of its common stock through the sale of 1,150,000 shares to an underwriting syndicate managed by Smith Barney, Harris Upham & Co. Incorporated and Morgan Keegan & Co. Inc. in May 1987, the Registrant has significantly expanded its operations to increase production capacity, product lines and marketing flexibility. Through 1995, this expansion included the expansion of the Registrant's Hammond, Louisiana processing facility, the construction of new waste water facilities at the Hammond, Louisiana and Collins and Hazlehurst, Mississippi processing facilities, the addition of second shifts at the Hammond, Louisiana, Laurel, Hazlehurst, and Collins, Mississippi processing facilities, expansion of freezer and production capacity at its prepared foods facility in Jackson, Mississippi, the expansion of freezer capacity at its Laurel, Mississippi, Hammond, Louisiana and Collins, Mississippi processing facilities, the addition of deboning capabilities at all of the Registrant's poultry processing facilities, and the construction and start-up of its Pike County, Mississippi production and processing facilities, including a hatchery, a feed mill, a processing plant, a waste water treatment facility and a water treatment facility. During 1997, the Registrant completed the construction and start-up of its Brazos County, Texas production and processing facilities, including a hatchery, a feed mill located in Robertson County, Texas, a processing plant, a waste water treatment facility and a water treatment facility. In addition, since 1987, the Registrant completed the expansion and renovation of the hatchery at its Hazlehurst, Mississippi production facilities, and completed the renovation and expansion of its Collins, Mississippi by-products facility, allowing for the elimination of a smaller by-products facility at the Laurel, Mississippi plant.
Capital expenditures for fiscal 2002 were funded by working capital. Effective July 31, 2002, the Registrant amended its revolving credit agreement to, among other things, increase the revolving credit available to the Registrant thereunder from $90.0 million to $100.0 million. On June 15, 1999, the Registrant entered into a Note Purchase Agreement with the Lincoln National Life Insurance Company pursuant to which the Company issued $20 million, 6.65% senior notes due July 7, 2007. The proceeds of such notes were used to pay a portion of the debt outstanding under the revolving credit agreement. The Registrant anticipates that capital expenditures for fiscal 2003 will be funded by internally generated working capital and, if needed, borrowings under the revolving credit agreement.
During fiscal 1997, the Registrant completed the start-up of its Brazos County, Texas processing facility. During October 1998, the Registrant began operating one line of its Brazos County, Texas processing facility on a double shift basis, and during fiscal 2000 completed the double shifting of the plant, which is now operating at full capacity. The Registrant currently has additional processing capacity available to it through the double shifting of the second line at its Collins, Mississippi processing facility. In addition, the Registrant continually evaluates internal and external expansion opportunities to continue its growth in poultry and/or related food products.
(b) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
Not applicable.
(c) NARRATIVE DESCRIPTION OF BUSINESS REGISTRANT'S BUSINESS
General
The Registrant is engaged in the production, processing, marketing and distribution of fresh and frozen chicken and the preparation, processing, marketing and distribution of processed and prepared food items.
The Registrant sells chill pack, ice pack and frozen chicken, both whole and cut-up, primarily under the Sanderson Farms(R) brand name to retailers, distributors and fast food operators principally in the southeastern, southwestern and western United States. During its fiscal year ended October 31, 2002, the Registrant processed approximately 264.7 million chickens, or approximately 1.3 billion dressed pounds. In addition, the Registrant purchased and further processed 14.5 million pounds of poultry products during fiscal 2002. According to 2002 industry statistics, the Registrant was the 7th largest processor of dressed chicken in the United States based on estimated average weekly processing.
The Registrant conducts its chicken operations through Sanderson Farms, Inc. (Production Division) and Sanderson Farms, Inc. (Processing Division), both of which are wholly-owned subsidiaries of Sanderson Farms, Inc. The production subsidiary, Sanderson Farms, Inc. (Production Division), which has facilities in Laurel, Collins, Hazlehurst and Pike County, Mississippi, and Bryan, Texas, is engaged in the production of chickens to the broiler stage. Sanderson Farms, Inc. (Processing Division), which has facilities in Laurel, Collins, Hazlehurst and Pike County, Mississippi, Hammond, Louisiana, and Bryan, Texas, is engaged in the processing, sale and distribution of chickens.
The Registrant conducts its processed and prepared foods business through its wholly-owned subsidiary, Sanderson Farms, Inc. (Foods Division), which has a facility in Jackson, Mississippi. The Foods Division is engaged in the processing, marketing and distribution of over 200 processed and prepared food items, which it sells nationally and regionally, principally to distributors, national food service accounts, retailers and club stores.
Products
The Registrant has the ability to produce a wide range of processed chicken products and processed and prepared food items thereby allowing it to take advantage of marketing opportunities as they arise.
Processed chicken is first saleable as an ice packed whole chicken. The Registrant adds value to its ice packed whole chickens by removing the giblets, weighing, packaging and labeling the product to specific customer requirements and cutting the product based on customer specifications. The additional processing steps of giblet removal, close tolerance weighing and cutting increase the value of the product to the customer over whole chickens by reducing customer handling and cutting labor and capital costs, reducing the shrinkage associated with cutting, and ensuring consistently sized portions.
With respect to chill pack products, additional value can be achieved by deep chilling and packaging whole chickens in bags or combinations of fresh chicken parts in various sized individual trays under the Registrant's brand name, which then may be weighed and prepriced, based on each customer's needs. The chill pack process increases the value of the product by extending shelf life, reducing customer weighing and packaging labor, and providing the customer with a wide variety of products with uniform, well designed packaging, all of which enhance the customer's ability to merchandise chicken products.
To satisfy some customers' merchandising needs, the Registrant quick freezes the chicken product, which adds value by meeting the customers' handling, storage, distribution and marketing needs and by permitting shipment of product overseas where transportation time may be as long as 25 days.
Value added products usually generate higher sale prices per pound, exhibit less finished price volatility and generally result in higher and more consistent profit margins over the long-term than non-value added product forms. Selling fresh chickens as a prepackaged brand name product has been a significant step in the development of the value added, higher margin consumer business. The Registrant evaluates daily the potential profitability of all product lines and attempts to maximize its profits on a short-term basis by making strategic changes in its product mix to meet customer demand.
The following table sets forth, for the periods indicated, the contribution, as a percentage of sales of chicken products, of value added and non-value added chicken products.
Fiscal Year Ended October 31,
1998 1999 2000 2001 2002
---- ---- ----- ---- ----
Value added 98.6% 99.2% 99.5% 99.5% 99.7%
Non-value added 1.4% .8% .5% .5 % .3%
----- ----- ----- ----- -----
Total Registrant
chicken sales 100.0% 100.0% 100.0% 100.0% 100.0%
----- ----- ----- ----- -----
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The following table sets forth, for the periods indicated, the contribution, as a percentage of net sales, of each of the Registrant's major product lines.
Fiscal Year Ended October 31,
1998 1999 2000 2001 2002
---- ---- ---- ---- ----
Registrant processed
chicken:
Value added:
Chill pack 24.4% 33.2% 36.4% 40.3% 40.6%
Fresh bulk pack 46.6 46.5 43.3 39.6 38.9
Frozen 11.6 8.0 7.5 9.2 9.2
---- ----- ----- ----- ----
Subtotal 82.6 87.7 87.2 89.1 88.7
---- ---- ---- ----- ----
Non-value added:
Ice pack 0.7 0.5 .3 .2 .2
Frozen 0.5 0.2 .1 .2 .1
----- ---- ---- ----- -----
Subtotal 1.2 .7 .4 .4 .3
----- ----- ---- ----- -----
Total Company
processed chicken 83.8 88.4 87.6 89.5 89.0
Processed and
prepared foods 16.2 11.6 12.4 10.5 11.0
---- ---- ---- ----- -----
Total 100.0% 100.0% 100.0% 100.0% 100.0%
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Sales and Marketing
The Registrant's chicken products are sold primarily to retailers (including national and regional supermarket chains and local supermarkets) and distributors located principally in the southeastern, southwestern and western United States. The Registrant also sells its chicken products to governmental agencies, fast food operators and to customers who resell the products outside of the continental United States. This wide range of customers, together with the Registrant's broad product mix, provides the Registrant with flexibility in responding to changing market conditions in its effort to maximize profits. This flexibility also assists the Registrant in its efforts to reduce its exposure to market volatility.
Sales and distribution of the Registrant's chicken products are conducted primarily by sales personnel at the Registrant's general corporate offices in Laurel, Mississippi and by customer service representatives at each of its six processing complexes and through independent food brokers. Each complex has individual on-site distribution centers and uses the Registrant's truck fleet, as well as contract carriers, for distribution of its products.
Generally, the Registrant prices much of its chicken products based upon weekly market prices reported by the United States Department of Agriculture. Consistent with the industry, the Registrant's profitability is impacted by such market prices, which may fluctuate substantially and exhibit cyclical characteristics. The Registrant adds a markup to base prices, which depends upon value added, volume, product mix and other factors. While base prices may change weekly, the Registrant's markup is generally negotiated from time to time with the Registrant's customers. The Registrant's sales are generally made on an as-ordered basis, and the Registrant maintains few long-term sales contracts with its customers.
The Registrant has used television, radio and newspaper advertising, coupon promotion, point of purchase material and other marketing techniques to develop consumer awareness of and brand recognition for its Sanderson Farms(R) products. The Registrant has achieved a high level of public awareness and acceptance of its products through television advertising featuring a celebrity as the Registrant's spokesperson. Brand awareness is an important element of the Registrant's marketing philosophy, and it intends to continue brand name merchandising of its products.
The Registrant's processed and prepared food items are sold nationally and regionally, primarily to distributors, national food service accounts, retailers and club stores. Sales of such products are handled by independent food brokers located throughout the United States, primarily in the southeast and southwest United States, and by sales personnel of the Registrant. Processed and prepared food items are distributed from the Registrant's plant in Jackson, Mississippi, through arrangements with contract carriers.
Production and Facilities
General. The Registrant is a vertically-integrated producer of fresh and frozen chicken products, controlling the production of hatching eggs, hatching, feed manufacturing, growing, processing and packaging of its product lines.
Breeding and Hatching. The Registrant maintains its own breeder flocks for the production of hatching eggs. The Registrant's breeder flocks are acquired as one-day old chicks (known as pullets or cockerels) from primary breeding companies that specialize in the production of genetically designed breeder stock. As of October 31, 2002, the Registrant maintained contracts with 31 pullet farm operators for the grow-out of pullets (growing the pullet to the point at which it is capable of egg production, which takes approximately six months). Thereafter, the mature breeder flocks are transported by Registrant's vehicles to breeder farms that are maintained, as of October 31, 2002, by 112 independent contractors under the Registrant's supervision. Eggs produced by independent contract breeders are transported to Registrant's hatcheries in Registrant's vehicles.
The Registrant owns and operates five hatcheries located in Mississippi and Texas where eggs are incubated and hatched in a process requiring 21 days. Once hatched, the day-old chicks are vaccinated against common poultry diseases and are transported by Registrant's vehicles to independent contract grow-out farms. As of October 31, 2002, the Registrant's hatcheries were capable of producing an aggregate of approximately 5.6 million chicks per week.
Grow-out. The Registrant places its chicks on 473 grow-out farms, as of October 31, 2002, located in Mississippi, Louisiana and Texas where broilers are grown to an age of approximately six to eight weeks. The farms provide the Registrant with sufficient housing capacity for its operations, and are typically family-owned farms operated under contract with the Registrant. The farm owners provide facilities, utilities and labor; the Registrant supplies the day-old chicks, feed and veterinary and technical services. The farm owner is compensated pursuant to an incentive formula designed to promote production cost efficiency.
Historically, the Registrant has been able to accommodate expansion in grow-out facilities through additional contract arrangements with independent growers.
Feed Mills. An important factor in the grow-out of chickens is the rate at which chickens convert feed into body weight. The Registrant purchases on the open market the primary feed ingredients, including corn and soybean meal, which historically have been the largest cost components of the Registrant's total feed costs. The quality and composition of the feed are critical to the conversion rate, and accordingly, the Registrant formulates and produces its own feed. As of October 31, 2002, the Registrant operated four feed mills, three of which are located in Mississippi and one in Texas. The Registrant's annual feed requirements for fiscal 2002 were (approximately) 1,735,000 tons, and it has the capacity to produce approximately 1,900,000 tons of finished feed annually under current configurations.
Feed grains are commodities subject to volatile price changes caused by weather, size of harvest, transportation and storage costs and the agricultural policies of the United States and foreign governments. On October 31, 2002, the Registrant had approximately 739,000 bushels of corn storage capacity at its feed mills, which was sufficient to store all of its weekly requirements for corn. Generally, the Registrant purchases its corn and other feed supplies at current prices from suppliers and, to a limited extent, direct from farmers. Feed grains are available from an adequate number of sources. Although the Registrant has not experienced, and does not anticipate problems in securing adequate supplies of feed grains, price fluctuations of feed grains can be expected to have a direct and material effect upon the Registrant's profitability. Although the Registrant sometimes purchases grains in forward markets, it cannot eliminate the potentially adverse effect of grain price increases.
Processing. Once the chicks reach processing weight, they are transported to the Registrant's processing plants. These plants use modern, highly automated equipment to process and package the chickens. The Registrant's Pike County, Mississippi processing plant, which currently operates two processing lines on a double shift basis, is currently processing approximately 1,250,000 chickens per week. The Registrant's Collins, Mississippi processing plant, which is currently operating one of its two lines on a double shift basis and one line on a single shift basis, is currently processing approximately 950,000 chickens per week. The Registrant's Brazos County, Texas processing plant, which is currently operating two lines on a double shift basis, is currently processing approximately 1,250,000 chickens per week. The Registrant's Laurel and Hazlehurst, Mississippi and Hammond, Louisiana processing plants, which currently operate on a double shift basis, are currently processing approximately 1,875,000 chickens per week. The Registrant also has the capabilities to produce deboned product at six processing facilities. At October 31, 2002, these deboning facilities were operating on a double shifted basis resulting in a combined capacity to process approximately 10.8 million pounds of product per week.
Sanderson Farms, Inc. (Foods Division). The facilities of Sanderson Farms, Inc. (Foods Division) are located in Jackson, Mississippi in a plant with approximately 75,000 square feet of refrigerated manufacturing and storage space. The plant uses highly automated equipment to prepare, process and freeze food items. The Registrant could increase significantly its production of processed and prepared food items without incurring significant capital expenditures or delays.
Executive Offices; Other Facilities. The Registrant's corporate offices are located in Laurel, Mississippi. As of October 31, 2002, the Registrant operated one by-products plant, and six automotive maintenance shops which service approximately 484 Registrant over-the-road and farm vehicles. In addition, the Registrant has one child care facility located near its Collins, Mississippi processing plant, currently serving over 240 children.
Quality Control
The Registrant believes that quality control is important to its business and conducts quality control activities throughout all aspects of its operations. The Registrant believes these activities are beneficial to efficient production and in assuring its customers wholesome, high quality products.
From the corporate offices, the Director of Technical Services supervises the operation of a modern, well-equipped laboratory which, among other things, monitors sanitation at the hatcheries, quality and purity of the Registrant's feed ingredients and feed, the health of the Registrant's breeder flocks and broilers, and conducts microbiological tests of live chickens, facilities and finished products. The Registrant conducts on-site quality control activities at each of the six processing plants and the processed and prepared food plant.
Regulation
The Registrant's facilities and operations are subject to regulation by various federal and state agencies, including, but not limited to, the Federal Food and Drug Administration ("FDA"), the United States Department of Agriculture ("USDA"), the Environmental Protection Agency, the Occupational Safety and Health Administration and corresponding state agencies. The Registrant's chicken processing plants are subject to continuous on-site inspection by the USDA. The Sanderson Farms, Inc. (Foods Division) processing plant operates under the USDA's Total Quality Control Program which is a strict self-inspection plan written in cooperation with and monitored by the USDA. The FDA inspects the production of the Registrant's feed mills.
Compliance with existing regulations has not had a material adverse effect upon the Registrant's earnings or competitive position in the past and is not anticipated to have a materially adverse effect in the future. Management believes that the Registrant is in substantial compliance with existing laws and regulations relating to the operation of its facilities and does not know of any major capital expenditures necessary to comply with such statutes and regulations.
The Registrant takes extensive precautions to ensure that its flocks are healthy and that its processing plants and other facilities operate in a healthy and environmentally sound manner. Events beyond the control of the Registrant, however, such as an outbreak of disease in its flocks or the adoption by governmental agencies of more stringent regulations, could materially and adversely affect its operations.
Competition
The Registrant is subject to significant competition from regional and national firms in all markets in which it competes. Some of the Registrant's competitors have greater financial and marketing resources than the Registrant.
The primary methods of competition are price, product quality, number of products offered, brand awareness and customer service. The Registrant has emphasized product quality and brand awareness through its advertising strategy. See "Business - Sales and Marketing". Although poultry is relatively inexpensive in comparison with other meats, the Registrant competes indirectly with the producers of other meats and fish, since changes in the relative prices of these foods may alter consumer buying patterns.
Sources of Supply
During fiscal 2002, the Registrant purchased its pullets and its cockerels from two (2) major breeders. The Registrant has found the genetic cross of the breeds supplied by these companies to produce chickens most suitable to the Registrant's purposes. The Registrant has no written contracts with these breeders for the supply of breeder stock. Other sources of breeder stock are available, and the Registrant continually evaluates these sources of supply. Should breeder stock from its present suppliers not be available for any reason, the Registrant believes that it could obtain adequate breeder stock from other suppliers.
Other major raw materials used by the Registrant include feed grains, cooking ingredients and packaging materials. The Registrant purchases these materials from a number of vendors and believes that its sources of supply are adequate for its present needs. The Registrant does not anticipate any difficulty in obtaining these materials in the future.
Seasonality
The demand for the Registrant's chicken products generally is greatest during the spring and summer months and lowest during the winter months.
Trademarks
The Registrant has registered with the United States Patent and Trademark Office the trademark Sanderson Farms(R) which it uses in connection with the distribution of its premium grade chill pack products. The Registrant considers the protection of this trademark to be important to its marketing efforts due to consumer awareness of and loyalty to the Sanderson Farms(R) label. The Registrant also has registered with the United States Patent and Trademark Office seven other trademarks which are used in connection with the distribution of chicken and other products and for other competitive purposes.
The Registrant has registered with the United States Patent and Trademark Office the trademark Sanderson Farms(R) which it uses in connection with the distribution of its prepared foods, and frozen entree products, as well as in connection with the distribution of its premium grade chill pack chicken products.
The Registrant, over the years, has developed important non-public proprietary information regarding product related matters. While the Registrant has internal safeguards and procedures to protect the confidentiality of such information, it does not generally seek patent protection for its technology.
Employees and Labor Relations
As of October 31, 2002, the Registrant had 7,886 employees, including 776 salaried and 7,110 hourly employees. A collective bargaining agreement with the United Food and Commercial Workers International Union covering 646 hourly employees who work at the Registrant's processing plant in Hammond, Louisiana expires on November 30, 2004. The collective bargaining agreement has a grievance procedure and no strike-no lockout clauses that should assist in maintaining stable labor relations at the Hammond plant.
A collective bargaining agreement with the Laborers' International Union of North America, Professional Employees Local Union #693, AFL-CIO, covering 566 hourly employees who work at the Registrant's processing plant in Hazlehurst, Mississippi was negotiated and signed by the union and the Registrant effective July 15, 1995. This Agreement expired on June 30, 1999, and was renegotiated and executed on July 26, 1999, and had a expiration date of December 31, 2002. Negotiations are underway on a new agreement. This collective bargaining agreement has a grievance procedure and no strike-no lockout clauses that should assist in maintaining stable labor relations at the Hazlehurst plant.
A collective bargaining agreement with the Laborers' International Union of North America, Professional Employees Local Union #693, AFL-CIO, covering 1,143 hourly employees who work at the Registrant's processing plant in Collins, Mississippi was negotiated and signed by the union and the Registrant effective September 9, 1995, and expired on December 30, 1999. Negotiations to extend the agreement were completed and an extended agreement was reached on January 13, 2000. The extended agreement has a termination date of December 31, 2003. This collective bargaining agreement has a grievance procedure and no strike-no lockout clause that should assist in maintaining stable labor relations at the Collins plant.
On June 9, 1999, the production, maintenance and clean-up employees at the Company's Brazos County, Texas poultry processing facility voted to be represented by the United Food and Commercial Workers Union Local #408, AFL-CIO. A collective bargaining agreement was negotiated and signed on October 7, 1999, and expired on December 31, 2002. A new contract was negotiated and signed on November 13, 2002, and the new contract has an expiration date of December 31, 2005. This collective bargaining agreement has a grievance procedure and no strike-no lockout clause that should assist in maintaining stable labor relations at the Brazos County, Texas processing facility.
On May 28, 1999, truck drivers at the Company's Brazos County, Texas processing and production facilities voted to be represented in collective bargaining by the Teamsters International Local #968. Negotiations with this union were completed in December 1999, and a collective bargaining agreement effective January 1, 2000 was signed, which agreement will expire on December 31, 2002. This contract has been extended to January 27, 2003, and negotiations are underway on a new agreement.
On November 30, 2001, live haul drivers at the Company's McComb, Mississippi production division voted to be represented by United Food and Commercial Workers' Union Local #1529 AFL-CIO in collective bargaining. It is the Company's legal position that the live haul drivers are agricultural employees exempt from the National Labor Relations Act. The Company is pursing its legal position before the National Labor Relations Board and the Federal Courts.
On September 13, 2001, production, maintenance and truck driver employees at the Company's McComb, Mississippi Feed Mill facility voted to be represented in collective bargaining by United Food and Commercial Workers' Union Local #1529 AFL-CIO. A collective bargaining agreement was negotiated and signed effective July 16, 2002, and has an expiration date of June 30, 2005. This agreement includes a provision allowing re-opening of bargaining of certain financial matters on July 1, 2003 and July 1, 2004, and has a grievance procedure and no strike-no lockout clause that should assist in maintaining stable labor relations at this facility.
(d) FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND EXPORT SALES
The Registrant engages in no material foreign operations, and no material portion of its revenues was derived from customers in foreign countries.
(e) AVAILABLE INFORMATION
Our address on the world wide web is http://www.sandersonfarms.com. The information on our web site is not a part of this document. Our annual reports on Form 10-K, our quarterly reports on Form 10-Q, our current reports on Form 8-K, and all amendments to those reports are available, free of charge, through our web site as soon as reasonably practicable after they are filed with the SEC.
Item 2. Properties.
The Registrant's principal properties are as follows:
Use Location (City, State)
--- ---------------------
Poultry complex, including Laurel, Mississippi
poultry processing plant,
hatchery and feedmill
Poultry complex, including Pike County, Mississippi
poultry processing plant,
hatchery and feedmill
Poultry complex, including Hazlehurst, Mississippi
poultry processing plant,
hatchery and feedmill
Poultry complex, including Brazos and Robertson Counties, Texas
poultry processing plant,
hatchery and feedmill
Poultry processing plant Hammond, Louisiana
Poultry processing plant, Collins, Mississippi
hatchery and by-products
plant
Prepared food plant Jackson, Mississippi
Corporate general offices Laurel, Mississippi
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The Registrant owns substantially all of its major operating facilities with the following exceptions: one processing plant and feed mill complex is leased on an annual renewal basis through 2063 with an option to purchase at a nominal amount, at the end of the lease term. One processing plant complex is leased under four leases, which are renewable annually through 2061, 2063, 2075 and 2073, respectively. Certain infrastructure improvements associated with a processing plant are leased under a lease which expires in 2012 and is thereafter renewable annually through 2091. All of the foregoing leases are capital leases.
There are no material encumbrances on the major operating facilities owned by the Registrant, except that the plant of Sanderson Farms, Inc. (Foods Division) is encumbered by a mortgage which collateralizes a note with an outstanding principal balance of $957,000 on October 31, 2002, which bears interest at the rate of 5% per annum and is payable in equal annual installments through 2009. In addition, under the terms of the revolving credit agreement effective July 29, 1996, as amended, and under the $20 million long-term fixed rate loan agreements effective in February 1993 and June 1999, the Registrant may not pledge any additional assets as collateral other than fixed assets up to 15% of its tangible assets.
Management believes that the Company's facilities are suitable for its current purposes, and believes that current renovations and expansions will enhance present operations and allow for future internal growth.
Item 3. Legal Proceedings.
On April 5, 2000, thirteen individuals claiming to be former hourly employees of the Company's processing subsidiary (Sanderson Farms, Inc. (Processing Division) (the "Processing Division")) filed a lawsuit in the United States District Court for the Southern District of Texas claiming that the Processing Division violated requirements of the Fair Labor Standards Act. The Plaintiffs' lawsuit also purported to represent similarly situated workers who filed consents to be included as plaintiffs in the suit. A total of 109 individuals consented to join the lawsuit.
The lawsuit alleges that the Processing Division (1) failed to pay its hourly employees "for time spent donning and doffing sanitary and safety equipment, obtaining and sharpening knives and scissors, working in the plant and elsewhere before and after the scheduled end of the shift, cleaning safety equipment and sanitary equipment, and walktime," and (2) altered employee time records by using an automated time keeping system. Plaintiffs further claim that the Processing Division concealed the alteration of time records and seek on that account an equitable tolling of the statute of limitations beyond the three-year limitation period back to the date the automated time-keeping system was allegedly implemented.
Plaintiffs sought an unspecified amount of unpaid hourly and overtime wages plus an equal amount as liquidated damages, for present and former hourly employees who file consents to join in the lawsuit. There were 6,476 hourly workers employed at the Processing Division's plants as of October 31, 2002.
On April 24, 2001, the Court granted the Processing Division's summary judgment motion and entered a final judgment in favor of the Processing Division. Plaintiffs appealed that decision to the United States Fifth Circuit Court of Appeals. On March 7, 2002, the United States Fifth Circuit Court of Appeals affirmed the decision of the United States District Court granting the Processing Division's motion for summary judgment. The plaintiffs had 90 days from March 7, 2002 to request that the United States Supreme Court hear an appeal of this case, which time has expired.
On May 15, 2000, an employee of the Company's production subsidiary (Sanderson Farms, Inc. (Production Division) (the "Production Division")), filed suit against the Production Division in the United States District Court for the Southern District of Texas on behalf of live-haul drivers to recover an unspecified amount of overtime compensation and liquidated damages. Approximately 26 employees filed consents to join in this lawsuit.
Previously, the United States Department of Labor ("DOL") filed a similar suit against the Production Division in the United States District Court for the Southern District of Mississippi, Hattiesburg Division, on behalf of live-haul employees at the Production Division's Laurel, Mississippi facility. Both lawsuits were brought under the Fair Labor Standards Act and seek recovery of overtime compensation, together with an equal amount as liquidated damages, for live-haul employees (i.e., live-haul drivers, chicken catchers, and loader-operators) employed by the Production Division. The lawsuits assert that additional overtime compensation and liquidated damages may be owed to certain employees. The lawsuits also seek an injunction to prevent the withholding of overtime compensation to live-haul employees in the future.
On January 18, 2001, the United States District Court for the Southern District of Texas granted the Production Division's request to move the suit pending before that court to the Southern District of Mississippi, Hattiesburg Division. The Production Division later filed its motion with the United States District Court for the Southern District of Mississippi to have the two cases consolidated, which motion was granted. On February 4, 2002, the Production Division reached a settlement with the Department of Labor that fully and completely compromised and settled the claims of all live-haul employees in the Production Division, other than certain Production Division employees represented in a collective bargaining agreement in Texas. The settlement, approved by the court on March 11, 2002, and pursuant to which the Production Division paid during its second fiscal quarter (accrued during its first fiscal quarter) approximately $450,000 in back pay and interest to the involved current and former employees in the Production Division's Mississippi and Texas operations, terminates the private rights of these employees under the Fair Labor Standards Act with respect to the claims made in this suit. With respect to approximately 74 employees represented under a collective bargaining agreement in Texas, the court entered its Order Granting Joint Motion for Court Approval of Settlement on November 4, 2002. The final settlement of this matter will become effective upon a ruling by the court on the plaintiff's request for award of attorney's fees. The court is scheduled to hear arguments on the attorney's fees issue on January 7, 2003. The Production Division will pay approximately $188,000 in back pay to the Texas employees as part of the settlement, and this amount is accrued and reflected in the Company's accompanying consolidated financial statements.
Substantially similar lawsuits to those described above have been filed against other integrated poultry companies. In addition, organizing activity conducted by the representatives or affiliates of the United Food and Commercial Workers Union against the poultry industry has encouraged worker participation in these and the other lawsuits.
On September 26, 2000, three current and former contract growers filed suit against the Company in the Chancery Court of Lawrence County, Mississippi. The plaintiffs filed suit on behalf of "all Mississippi residents to whom, between, on or about November 1981 and the present, the Company induced into growing chickens for it and paid compensation under the so-called `ranking system'." Plaintiffs allege that the Company "has defrauded plaintiffs by unilaterally imposing and utilizing the so-called `ranking system' which wrongfully places each grower into a competitive posture against other growers and arbitrarily penalizes each less successful grower based upon criteria which were never revealed, explained or discussed with plaintiffs." Plaintiffs further allege that they are required to accept chicks that are genetically different and with varying degrees of healthiness, and feed of dissimilar quantity and quality. Finally, plaintiffs allege that they are ranked against each other although they possess dissimilar facilities, equipment and technology. Plaintiffs seek an unspecified amount in compensatory and punitive damages, as well as varying forms of equitable relief.
The Company is vigorously defending and will continue to vigorously defend this action. On November 22, 2002, the Court denied the Company's motions to compel arbitration, challenging the jurisdiction of the Chancery Court of Lawrence County, Mississippi, and seeking to have the case dismissed pursuant to rule 5(c) of the Mississippi Rules of Civil Procedure. The Company then filed its motion for interlocutory appeal on these issues with the Mississippi State Supreme Court. On December 6, 2003, the Mississippi State Supreme Court agreed to hear this motion and stayed the action in the Chancery Court pending disposition of this motion. This matter is pending. As with the wage and hour and donning and doffing lawsuits discussed above, substantially similar lawsuits have been filed against other integrated poultry companies.
On August 2, 2002, three contract egg producers filed suit against the
Company in the Chancery Court of Jefferson Davis County, Mississippi. The
Plaintiffs filed suit on behalf of "all Mississippi residents who, between June
1993 and the present, [the Company] fraudulently and negligently induced into
housing, feeding and providing water for [the Company's] breeder flocks and
gathering, grading, packaging and storing the hatch eggs generated by said
flocks and who have been compensated under the payment method established by the
[Company]." Plaintiffs alleged that the Company "has defrauded Plaintiffs by
unilaterally imposing and utilizing a method of payment which wrongfully and
arbitrarily penalizes each grower based upon criteria which are under the
control of the [Company] and which were never revealed, explained or discussed
with each Plaintiff." Plaintiffs allege that they were required to accept
breeder hens and roosters which are genetically different, with varying degrees
of healthiness, and feed of dissimilar quantity and quality. Plaintiffs further
allege contamination of and damage to their real property. Plaintiffs alleged
that they were "fraudulently and negligently induced into housing, feeding and
providing water for the Company's breeder flocks and gathering, grading,
packaging and storing the hatch eggs produced from said flocks" for the Company.
Plaintiffs seek unspecified amount of compensatory and punitive damages, as well
as various forms of equitable relief. The Company will vigorously defend this
lawsuit.
On July 25, 2002, a current contract grower and her husband filed suit against the Company and Farmers State Bank, N.A. in the District Court of Milam County, Texas. The Plaintiffs alleged "a conspiracy to defraud Plaintiffs in connection with [the Company's] promotion of a get-rich-quick scheme portrayed to Plaintiffs as a good investment for Plaintiff's future." The Plaintiffs further alleged that the Company and Farmers State Bank "conspired to defraud Plaintiffs by convincing them to purchase farm land, execute loan documents for the construction of chicken barns, and then forcing them to sign contracts of adhesion that made Plaintiffs the domestic servants of the defendants." The Plaintiffs further alleged that the Company and Farmers State Bank violated the Texas Deceptive Trade Practices-Consumer Protection Act. Plaintiffs seek an unspecified amount in compensatory damages, treble damages, attorney's fees, pre- and post-judgement interest and all costs of court. The Plaintiffs also seek a Permanent Injunction enjoining the Farmers State Bank from foreclosing on or otherwise taking possession or control of Plaintiff's real estate and the improvements thereon and other equitable relief. On August 8, 2002, the court heard arguments on the Plaintiff's motion for permanent injunction and on the Company's motion to stay the proceeding with respect to its pending arbitration of the matter as required by the Egg Producers Contract entered into by and between one of the Plaintiffs and the Company. On August 19, 2002, the court granted the Company's motion to compel arbitration in this case with respect to the Company and its grower pursuant to the arbitration provision of the contract. The case before the District Court of Milam County, Texas will be stayed pending arbitration between the Company and its grower. No arbitration date has been set. The Company will vigorously defend this matter.
The Company is also a party to lawsuits against various vitamin and methionine suppliers arising out of alleged price fixing activities by the defendants. For more information about these lawsuits, please see the section of this Report entitled "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations--Results of Operations."
The Company is also involved in various claims and litigation incidental to its business. Although the outcome of the matters referred to in the preceding sentence cannot be determined with certainty, management, upon the advice of counsel, is of the opinion that the final outcome should not have a material effect on the Company's consolidated results of operation or financial position.
Item 4. Submission of Matters to
a Vote of Security Holders.
No matters were submitted to a vote of the Registrant's security holders, through the solicitation of proxies or otherwise, during the fourth quarter of the Fiscal Year.
Item 4A. Executive Officers of the Registrant.
Executive
Name Age Office Officer Since
Joe F. Sanderson, Jr. 56 Chairman of the Board, 1984 (1)
President and
Chief Executive
Officer
D. Michael Cockrell 45 Treasurer and Chief 1993 (2)
Financial Officer,
Board Member
James A. Grimes 54 Secretary and 1993 (3)
Chief Accounting Officer
Lampkin Butts 51 Vice President - Sales, 1996 (4)
Board Member
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(1) Joe F. Sanderson, Jr. has served as President and Chief Executive Officer of the Registrant since November 1, 1989, and as Chairman of the Board since January 8, 1998. From January 1984, to November 1989, Mr. Sanderson served as Vice-President, Processing and Marketing of the Registrant.
(2) D. Michael Cockrell became Treasurer and Chief Financial Officer of the Registrant effective November 1, 1993, and was elected to the Board of Directors on February 19, 1998. Prior to that time, for more than five years, Mr. Cockrell was a member and shareholder of the Jackson, Mississippi law firm of Wise Carter Child & Caraway, Professional Association.
(3) James A. Grimes became Secretary of the Registrant effective November 1, 1993. Mr. Grimes also serves as Chief Accounting Officer, which position he has held since 1985.
(4) Lampkin Butts became Vice President - Sales of the Registrant effective November 1, 1996, and was elected to the Board of Directors on February 19, 1998. Prior to that time, Mr. Butts served the Registrant in various capacities since 1973.
Executive officers of the Company serve at the pleasure of the Board of Directors. There are no understandings or agreements relating to any person's service or prospective service as an executive officer of the Registrant.
PART II
Item 5. Market for the Registrant's Common
Equity and Related Stockholder Matters.
The Company's common stock is traded on the NASDAQ National Market System under the symbol SAFM. The number of stockholders as of November 30, 2002, was 2,240.
The following table shows quarterly cash dividends and quarterly high and low prices for the common stock for the past two fiscal years. National Market System quotations are based on actual sales prices.
Stock Price
Fiscal Year 2002 High Low Dividends
------------------------------------------------------------------------------
First Quarter $22.14 $13.55 $.10
Second Quarter $27.49 $20.93 $.10
Third Quarter $27.50 $18.20 $.10
Fourth Quarter $20.62 $15.83 $.10
Stock Price
Fiscal Year 2001 High Low Dividends
------------------------------------------------------------------------------
First Quarter $10.44 $ 6.75 $.05
Second Quarter $11.50 $ 7.62 $.05
Third Quarter $13.89 $10.62 $.05
Fourth Quarter $14.26 $11.25 $.05
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On December 16, 2002 the closing sales price for the common stock was $20.39 per share.
Item 6. Selected Financial Data.
Year Ended October 31
2002 2001 2000 1999 1998
----- ---- ---- ---- ----
(In thousands, except per share data)
Net sales $743,665 $706,002 $605,911 $559,031 $521,394
Operating income (loss) 49,977 51,094 (588) 23,008 31,822
Net income (loss) 28,840 27,784 (5,571) 10,546 15,256
Basic and diluted earnings (loss)
per share) 2.18 2.04 (.41) .75 1.06
Diluted earnings (loss) per share 2.15 2.04 (.41) .75 1.06
Working capital 68,452 76,969 71,334 67,272 59,665
Total assets 280,510 288,971 281,856 283,510 265,671
Long-term debt, less
current maturities 49,969 77,212 107,491 104,651 95,695
Stockholders' equity 155,891 144,339 120,015 130,844 129,482
Cash dividends declared
per share $ .40 $ .20 $ .20 $ .20 $ .20
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QUARTERLY FINANCIAL DATA
Fiscal Year 2002
First Second Third Fourth
Quarter Quarter Quarter Quarter
-------- -------- -------- -------
(In thousands, except per share data)
(Unaudited)
Net sales $164,527 $175,413 $202,694 $201,031
Operating income 9,497 13,382 15,910 11,188
Net income 5,295 7,708 9,285 6,552
Basic earnings per share $ .39 $ .59 $ .71 $ .50
Diluted earnings
per share $ .39 $ .58 $ .70 $ .49
Fiscal Year 2001
First Second Third Fourth
Quarter Quarter Quarter Quarter
-------- -------- -------- -------
(In thousands, except per share data)
(Unaudited)
Net sales $152,081 $163,583 $183,692 $206,646
Operating income 2,339 10,068 16,668 22,019
Net income 384 5,018 9,559 12,823
Basic and diluted earnings
per share $ .03 $ .37 $ .70 $ .94
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Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations.
CAUTIONARY STATEMENT REGARDING RISKS AND UNCERTAINTIES THAT MAY AFFECT FUTURE PERFORMANCE
This Annual Report contains certain forward-looking statements about the business, financial condition and prospects of the Company. The actual performance of the Company could differ materially from that indicated by the forward-looking statements because of various risks and uncertainties, including, without limitation, changes in the market price for the Company's finished products and for feed grains, both of which may fluctuate substantially and exhibit cyclical characteristics typically associated with commodity markets, as described below; changes in competition and economic conditions; various inventory risks due to changes in market conditions; changes in governmental rules and regulations applicable to the Company and the poultry industry; and other risks described below. These risks and uncertainties cannot be controlled by the Company. When used in this Annual Report, the words "believes," "estimates," "plans," "expects," "should," "outlook," "anticipates," and similar expressions as they relate to the Company or its management are intended to identify forward-looking statements.
GENERAL
The Company's poultry operations are integrated through its control of all functions relative to the production of its chicken products, including hatching egg production, hatching, feed manufacturing, raising chickens to marketable age ("grow-out"), processing and marketing. Consistent with the poultry industry, the Company's profitability is substantially impacted by the market price for its finished products and feed grains, both of which may fluctuate substantially and exhibit cyclical characteristics typically associated with commodity markets. Other costs, excluding feed grains, related to the profitability of the Company's poultry operations, including hatching egg production, hatching, growing, and processing cost, are responsive to efficient cost containment programs and management practices. Over the past three fiscal years, these other production costs have averaged approximately 65.6% of the Company's total production costs.
The Company believes that value-added products are subject to less price volatility and generate higher, more consistent profit margin than whole chickens ice packed and shipped in bulk form. To reduce its exposure to market cyclicality that has historically characterized commodity chicken market prices, the Company has increasingly concentrated on the production and marketing of value-added product lines with emphasis on product quality, customer service, and brand recognition. The Company adds value to its poultry products by performing one or more processing steps beyond the stage where the whole chicken is first saleable as a finished product, such as cutting, deep chilling, packaging and labeling the product. The Company believes that one of its major strengths is its ability to change its product mix to meet customer demands.
The Company's processed and prepared foods product line includes approximately 200 institutional and consumer packaged food items that it sells nationally, primarily to distributors, food service establishments and retailers. A majority of the prepared food items are made to the specifications of food service users.
Poultry prices per pound, as measured by the Georgia dock price, fluctuated during the three years ended October 31, 2002 as follows:
1st 2nd 3rd 4th
Quarter Quarter Quarter Quarter
Fiscal 2002
High $.6500* $.6300 $.6425 $.6425
Low $.6275 $.6250* $.6250* $.6275
Fiscal 2001
High $.6150* $.6200 $.6250 $.6650*
Low $.6150* $.6175 $.6450 $.6500
Fiscal 2000
High $.5850 $.5800 $.5975 $.6200*
Low $.5800 $.5725* $.5725 $.6000
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*Year High/Low
Fiscal 2001 as compared to fiscal 2000 brought significant increases in the average sales price of whole birds, wings and leg quarters with only modest decreases in market prices for boneless breast meat. In addition, the average cost of feed grains, while higher than the fiscal 2000 average, remained at relatively favorable levels during fiscal 2001. The overall favorable market conditions during fiscal 2001 were enhanced by the ongoing improvements to the Company's operations and marketing changes implemented over the past several years. During fiscal 2002, the Company continued to see improvements in the Company's sales program and operating performance. These improvements, however, were offset by overall lower prices for poultry products and higher grain prices during fiscal 2002 as compared to fiscal 2001.
Results of Operations
Fiscal 2002 Compared to Fiscal 2001
For the fiscal year ended October 31, 2002, net sales were $743.7 million, a 5.3% increase compared with net sales of $ 706.0 million for the prior year. Net sales of poultry products increased $24.2 million or 3.8%. This increase in the net sales of poultry products resulted from an increase in the pounds of poultry product sold of 10.9%, which was partially offset by a decrease in the average sales price of poultry products of 6.3%. The increase in the pounds of poultry products sold during fiscal 2002 as compared to fiscal 2001 resulted from an increase in the average live weight of chickens produced of 8.2%. Overall market prices for poultry products were significantly lower during fiscal 2002 as compared to fiscal 2001 as leg quarters, wings and breast tenders were 23.9%, 33.1% and 19.1% lower, respectively. The softness in leg quarter prices resulted from the Russian embargo of United States poultry meat on March 10, 2002. Shipments to Russia resumed during the fourth quarter of fiscal 2002. However, these shipments resumed only on a limited basis, and it may be some time before volumes return to previous levels. As a result leg quarter prices will remain under pressure in the near term. Net sales of prepared food products increased $13.0 million or 16.9% during fiscal 2002 as compared to fiscal 2001. The increase reflects an increase in the pounds of prepared food products sold of 12.0% and an increase in the average sales price of prepared food products sold of 4.4%.
Cost of sales during fiscal 2002 increased $36.5 million or 5.8% as compared to fiscal 2001, which is net of $5.0 million in awards received from lawsuits against vitamin and methionine vendors. The Registrant is a party to lawsuits against various vitamin and methionine suppliers arising out of alleged price fixing activities by the defendants. During fiscal 2002 and through December 26, 2002, the Registrant recognized $5.0 million as partial settlement of these lawsuits with various defendants. Settlement discussions are ongoing with the remaining defendants, and, based on prior settlement discussions and the results thereof and developments that have occurred subsequent to October 31, 2002, management believes it is likely that material settlement payments will be made to the Company by certain defendants during fiscal 2003.
Cost of sales of poultry products during the same period increased $24.1 million or 4.3%. The increase in cost of sales of poultry products reflects a decrease in the average cost of sales per pound of poultry products of 5.9% as the Company benefitted from improved operating performance, lower energy costs and the awards mentioned above. Cash market prices for corn and soy meal during fiscal 2002 as compared to fiscal 2001 increased 9.0%, and decreased 0.9%, respectively. However, during the fourth quarter of fiscal 2002 as compared to the fourth quarter of fiscal 2001 the cash market prices for corn and soy meal increased 25.4% and 4.9%, respectively. The Company expects corn and soy meal prices to be higher during fiscal 2003 than during fiscal 2002. Cost of sales of prepared food products during fiscal 2002 as compared to fiscal 2001 increased $12.4 million or 19.0% due to an increase in pounds of prepared food products sold of 12.0%, an increase in the cost of raw materials and a change in the mix of products sold.
Selling, general and administration expenses for fiscal 2002 increased $2.3 million compared to fiscal 2001. This increase was primarily due to expenses associated with the Company's employee incentive plan, an increase in allowance for doubtful accounts and increased contributions to the Company's Employee Stock Ownership Plan.
The Company's operating income during fiscal 2002 as compared to fiscal 2001 was approximately the same despite the challenging market environment the poultry industry experienced during fiscal 2002. The Company's operating income for fiscal 2002 was approximately $50.0 million as compared to operating income during fiscal 2001 of $51.1 million. The fiscal 2002 operating income reflects improved plant efficiency and live grow-out performance and the $5.0 million in awards from the lawsuits against vitamin and methionine suppliers. Excluding these awards, the Company's operating income for fiscal 2002 was $45.0 million.
As in fiscal 2001, the Company continued to decrease its outstanding debt during fiscal 2002. The Company decreased its debt during fiscal 2002 by $27.2 million, which, along with lower interest rates, resulted in significantly lower interest expense. Interest expense for fiscal 2002 was $3.7 million as compared to $6.8 million for fiscal 2001, a decrease of $3.1 million or 45.6%. The Company expects interest expense to be lower during the first quarter of fiscal 2003 as compared to the first quarter of fiscal 2002.
The Company's effective tax rates for fiscal 2002 and fiscal 2001 were 38.0% and 37.9%, respectively.
Fiscal 2001 Compared to Fiscal 2000
The Company's net sales during fiscal 2001 were $706.0 million, an increase of $100.1million or 16.5% over fiscal 2000 net sales of $605.9 million. This increase in the Company's net sales resulted from an increase in pounds of poultry products sold of 9.6% and an increase in the average sales price of poultry products of 8.9%. The increase in the pounds of poultry products sold resulted from an increase in the number of chickens processed primarily from the expansion of the Brazos, Texas processing plant during the second half of fiscal 2000 and an increase in the average live weight of chickens processed. During fiscal 2001 the Company benefited from improved market prices for wings and leg quarters of 66.8% and 27.9%, respectively. In addition, a simple average of the Georgia Dock prices for whole birds for fiscal 2001 increased 7.3% as compared to fiscal 2000. These improvements were partially offset by lower average market prices for boneless breast meat. Net sales of prepared food products decreased $1.6 million or 2.0%, which is the net result of a decrease in the pounds of prepared food products sold of 4.5% partially offset by an increase in the average sale price of prepared food products of 2.6%.
During fiscal 2001 as compared to fiscal 2000, cost of sales increased $46.6 or 8.0%. Cost of sales of poultry products increased $47.5 million or 9.2% during fiscal 2001 as compared to fiscal 2000. The increase in the Company's cost of sales resulted from the increase in the pounds of poultry products sold of 9.6%, and to a lesser extent, increases in the average cost of feed grains. Corn and soybean meal cash market prices for fiscal 2001 as compared to fiscal 2000 increased 3.0% and 2.2%, respectively. Cost of sales of prepared food products during the fiscal year ended October 31, 2001 as compared to the fiscal year ended October 31, 2000 decreased approximately $900,000 or 1.4% as the Company eliminated less profitable prepared food sales.
Selling, general and administrative expenses for fiscal 2001 increased $1.9 million, or 7.0%, as compared to fiscal 2000. This increase resulted from contributions during fiscal 2001 to the Company's Employee Stock Ownership Plan and increased contributions to the Company's 401(k) Plan. The Company did not make contributions to the Employee Stock Ownership Plan in fiscal 2000 because of operating losses. Also, the increase reflects a charge during fiscal 2001 for the employee incentive program. These increases were partially offset by a planned reduction in the Company's advertising expenditures during fiscal 2001 as compared to fiscal 2000 and a nonrecurring bad debt expense of $1.2 million during the second quarter of fiscal 2000 resulting from the bankruptcy filing by AmeriServe Food Distribution, Inc. on February 1, 2000.
The Company's operating income for fiscal 2001 was $51.1 million as compared to an operating loss for fiscal 2000 of $600,000, an improvement of $52.5 million. The improvement in the Company's operating income reflects a continued strong performance by our prepared foods division, a significant increase in market prices for leg quarters and wings, and marketing changes the Company implemented over the past several years as well as ongoing improvements to the Company's operations.
During fiscal 2001 the Company was able to reduce its outstanding debt by approximately 31.2 million. As a result, interest expense for fiscal 2001 was $6.8 million as compared to $8.2 million for fiscal 2000, a decrease of $1.4 million most of which decrease came in the fourth fiscal quarter. During the fourth quarter of fiscal 2001 as compared to the fourth quarter of fiscal 2000 the Company's interest expense decreased $1.0 million.
The Company's effective tax rates for fiscal 2001 and fiscal 2000 were 37.9% and 37.2%, respectively.
Liquidity and Capital Resources
The Company's working capital at October 31, 2002 was $68.4 million and its current ratio was 2.2 to 1. This compares to working capital of $77.0 million and a current ratio of 2.6 to 1 as of October 31, 2001. During fiscal 2002 the Company spent approximately $19.7 million on planned capital projects and $14.6 million to repurchase 736,000 shares of its common stock under its existing stock repurchase plan.
The Company's capital budget for fiscal 2003 is approximately $19.4 million. The fiscal 2003 capital budget includes cost of renovations and changes and additions to existing processing facilities to allow better product flows and product mix for more product flexibility. The Company expects that working capital and cash flows from operations will be sufficient in fiscal 2003 to fund the anticipated capital expenditures. However, if needed, the Company has available $80.0 million under its revolving credit agreement as of October 31, 2002.
Critical Accounting Policies and Estimates
The preparation of financial statements in accordance with accounting standards generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.
Management suggests that the Company's Summary of Significant Accounting Policies, as described in Note 1 of the Notes to the Consolidated Financial Statements, be read in conjunction with this Management's Discussion and Analysis of Financial Condition and Results of Operations. The Company believes the critical accounting policies and estimates that most impact the Company's Consolidated Financial Statements are described below.
Allowance for Doubtful Accounts
In the normal course of business, the Company extends credit to its customers on a short-term basis. Although credit risks associated with our customers are considered minimal, the Company routinely reviews its accounts receivable balances and makes provisions for probable doubtful accounts. In circumstances where management is aware of a specific customer's inability to meet its financial obligations to the Company, a specific reserve is recorded to reduce the receivable to the amount expected to be collected.
Inventories
Processed food and poultry inventories and inventories of feed, eggs, medication and packaging supplies are stated at the lower of cost (first-in, first-out method) or market. If market prices for poultry or feed grains move substantially lower, the Company would record adjustments to write down the carrying values of processed poultry and feed inventories to fair market value.
Live poultry inventories of broilers are stated at the lower of cost or market and breeders at cost less accumulated amortization. The cost associated with broiler inventories, consisting principally of chicks, feed, medicine and grower payments, are accumulated during the growing period. The cost associated with breeder inventories, consisting principally of breeder chicks, feed, medicine and grower payments are accumulated during the growing period. Capitalized breeder costs are then amortized over nine months using the straight-line method. Mortality of broilers and breeders is charged to cost of sales as incurred. High mortality from disease or extreme temperatures would result in abnormal charges to cost of sales to write-down live poultry inventories.
Long-Lived Assets
Depreciable long-lived assets are primarily comprised of buildings and machinery and equipment. Depreciation is provided by the straight-line method over the estimated useful lives, which are 19 to 39 years for buildings and 3 to 7 years for machinery and equipment. An increase or decrease in the estimated useful lives would result in changes to depreciation expense.
The Company continually reevaluates the carrying value of its long-lived assets, for events or changes in circumstances, which indicate that the carrying value may not be recoverable. As part of this reevaluation, the Company estimates the future cash flows expected to result from the use of the asset and its eventual disposal. If the sum of the expected future cash flows (undiscounted and without interest charges) is less than the carrying amount of the asset, an impairment loss is recognized to reduce the carrying value of the long-lived asset to the estimated fair value of the asset.
Accrued Self Insurance
Insurance expense for workers' compensation benefits and employee-related health
care benefits are estimated using historical experience and actuarial estimates.
Stop-loss coverage is maintained with third party insurers to limit the
Company's total exposure. Management regularly reviews the assumptions used to
recognize periodic expenses. However, actual expenses could differ significantly
from these estimates.
Income Taxes
The Company determines its effective tax rate by estimating its permanent differences resulting from differing treatment of items for financial and income tax purposes. The Company is periodically audited by taxing authorities. Any audit adjustments affecting permanent differences could have an impact on the Company's effective tax rate.
Item 7A. Quantitative and Qualitative Disclosure About Market Risk.
Market Risk
The Company is a purchaser of certain commodities, primarily corn and soybean meal. As a result, the Company's earnings are affected by changes in the price and availability of such feed ingredients. As market conditions dictate, the Company from time to time will lock-in future feed ingredient prices using forward purchase agreements with suppliers. The Company does not use such instruments for trading purposes and is not a party to any leverage derivatives.
The Company's interest expense is sensitive to changes in the general level of
U.S. interest rates. The Company maintains certain of its debt as fixed rate in
nature to mitigate the impact of fluctuations in interest rates. The fair value
of the Company's fixed rate debt approximates the carrying amount at October 31,
2002. Management believes the potential effects of near-term changes in interest
rates on the Company's fixed rate debt is not material.
The Company is a party to no other market risk sensitive instruments requiring
disclosure.
Item 8. Financial Statements and Supplementary Data.
Sanderson Farms, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
October 31
2002 2001
----------------------------
(In thousands)
Assets
Current assets:
Cash and cash equivalents $ 9,542 $ 24,175
Accounts receivable, less allowance of $663,000 in
2002 and $303,000 in 2001 1,073 40,187
Inventories 57,964 52,350
Refundable income taxes 2,764 0
Prepaid expenses 2,121 9,452
--------- ---------
Total current assets 123,464 126,164
Property, plant and equipment:
Land and buildings 134,076 130,366
Machinery and equipment 255,590 248,621
------- -------
389,666 378,987
Accumulated depreciation (233,183) (216,801)
-------- -------
156,483 162,186
Other assets 563 621
-------- ----------
Total assets $280,510 $288,971
======= =======
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable 25,258 $ 20,309
Accrued expenses 26,511 25,708
Current maturities of long-term debt 3,243 3,178
-------- ---------
Total current liabilities 55,012 49,195
Long-term debt, less current maturities 49,969 77,212
Claims payable 2,600 2,400
Deferred income taxes 17,038 15,825
Stockholders' equity:
Preferred Stock:
Series A Junior Participating Preferred Stock, $100
par value: authorized shares-500,000; none issued
Par value to be determined by the Board of Directors:
authorized shares-4,500,000; none issued
Common Stock, $1 par value: authorized shares-100,000,000;
issued and outstanding shares-13,051,026 in 2002 and
13,564,955 in 2001 13,051 13,565
Paid-in capital 0 2,945
Retained earnings 142,840 127,829
------- -------
Total stockholders' equity 155,891 144,339
------- -------
Total liabilities and stockholders' equity $280,510 $288,971
======= =======
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See accompanying notes.
Sanderson Farms, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
Years Ended October 31
2002 2001 2000
------- -------- -------
(In thousands, except per share data)
Net sales $743,665 $706,002 $605,911
Cost and expenses:
Cost of sales 663,161 626,693 580,136
Selling, general and administrative 30,527 28,215 26,363
------- ------- -------
693,688 654,908 606,499
------- ------- -------
Operating income (loss) 49,977 51,094 (588)
Other income (expense):
Interest income 185 377 213
Interest expense (3,681) (6,753) (8,195)
Other (1) 54 69
------ ------ ------
(3,497) (6,322) (7,913)
------ ------ ------
Income (loss) before income taxes and cumulative effect
of accounting change 46,480 44,772 (8,501)
Income tax expense (benefit) 17,640 16,988 (3,164)
------ ------ ------
Income (loss) before cumulative effect
of accounting change 28,840 27,784 (5,337)
====== ====== ======
Cumulative effect of accounting change (net of income
taxes of $140,000) 0 0 (234)
------ ------ ------
Net income (loss) $28,840 $27,784 $(5,571)
====== ====== ======
Basic net income (loss) per share:
Income (loss) before cumulative
effect of accounting change $ 2.18 $ 2.04 $ (.39)
Cumulative effect of accounting change 0 0 (.02)
------ ------ ------
Net income (loss) per share $ 2.18 $ 2.04 $ (.41)
====== ====== ======
Diluted net income (loss) per share:
Income (loss) before cumulative
effect of accounting change $ 2.15 $ 2.04 $ (.39)
Cumulative effect of accounting change 0 0 (.02)
------ ------ ------
Net income (loss) per share $ 2.15 $ 2.04 $ (.41)
====== ====== ======
Weighted average shares outstanding:
Basic 13,200 13,596 13,726
====== ====== ======
Diluted 13,429 13,640 13,726
====== ====== ======
|
See accompanying notes.
Sanderson Farms, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Total
Common Stock Paid-In Retained Stockholders'
Shares Amount Capital Earnings Equity
(In thousands, except shares and per share amounts)
Balance at November 1, 1999 13,932,455 $13,932 $5,835 $111,077 $130,844
Net loss for year (5,571) (5,571)
Cash dividends ($.20 per share) (2,740) (2,740)
Purchase and retirement of
common stock (299,500) (299) (2,219) (2,518)
----------------------------------------------------------
Balance at October 31, 2000 13,632,955 13,633 3,616 102,766 120,015
Net income for year 27,784 27,784
Cash dividends ($.20 per share) (2,721) (2,721)
Purchase and retirement of
common stock (68,000) (68) (671) (739)
----------------------------------------------------------
Balance at October 31, 2001 13,564,955 13,565 2,945 127,829 144,339
Net income for year 28,840 28,840
Cash dividends ($.40 per share) (5,245) (5,245)
Purchase and retirement of
common stock (736,079) (736) (5,320) (8,584) (14,640)
Issuance of common stock 222,150 222 2,375 2,597
----------------------------------------------------------
Balance at October 31, 2002 13,051,026 $13,051 $ 0 $142,840 $155,891
==========================================================
|
See accompanying notes.
SANDERSON FARMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended October 31
2002 2001 2000
----------------------------------------
(In thousands)
Operating activities
Net income (loss) $28,840 $27,784 $(5,571)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Cumulative effect of accounting change 0 0 374
Depreciation and amortization 24,710 25,722 26,432
Provision for losses on accounts receivable 360 44 1,413
Deferred income taxes 1,340 (178) 340
Change in assets and liabilities:
Accounts receivable (1,246) (3,193) (1,874)
Inventories (5,614) (2,088) (2,628)
Prepaid expenses and refundable income taxes (5,560) 2,791 (3,647)
Other assets (141) (205) 30
Accounts payable 4,949 2,802 5,002
Accrued expenses and claims payable 1,003 11,173 463
------ ------ ------
Total adjustments 19,801 36,868 25,905
------ ------ ------
Net cash provided by operating activities 48,641 64,652 20,334
Investing activities
Capital expenditures (19,704) (14,587) (16,557)
Net proceeds from sale of property and equipment 896 86 217
------ ------ ------
Net cash used in investing activities (18,808) (14,501) (16,340)
Financing activities
Net change in revolving credit (24,000) (28,000) 6,000
Principal payments on long-term debt (2,958) (2,954) (2,950)
Principal payments on capital lease obligation (220) (205) (195)
Dividends paid (5,245) (2,721) (2,740)
Purchase and retirement of common stock (14,640) (739) (2,518)
Net proceeds from common stock issued 2,597 0 0
------ ------ -----
Net cash used in financing activities (44,466) (34,619) (2,403)
------ ------ -----
Net change in cash and cash equivalents (14,633) 15,532 1,591
Cash and cash equivalents
at beginning of year 24,175 8,643 7,052
------ ------ ------
Cash and cash equivalents
at end of year 9,542 $24,175 $ 8,643
====== ====== ======
Supplemental disclosure of cash flow information:
Income taxes paid (refunded), net $18,675 $12,372 $ (67)
====== ====== ======
Interest paid $ 3,993 $ 6,920 $ 8,728
====== ====== ======
|
See accompanying notes.
Sanderson Farms, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Significant Accounting Policies
Principles of Consolidation: The consolidated financial statements include the accounts of Sanderson Farms, Inc. (the "Company") and its wholly-owned subsidiaries. All significant intercompany transactions and accounts have been eliminated in consolidation.
Business: The Company is engaged in the production, processing, marketing and distribution of fresh and frozen chicken and other prepared food items. The Company's net sales and cost of sales are significantly affected by market price fluctuations of its principal products sold and of its principal feed ingredients, corn and other grains.
The Company sells to retailers, distributors and fast food operators primarily in the southeastern, southwestern and western United States. Revenue is recognized when product is delivered to customers. Revenue on certain international sales is recognized upon transfer of title, which may occur after shipment. Management periodically performs credit evaluations of its customers' financial condition and generally does not require collateral. Shipping and handling costs are included as a component of cost of sales.
Use of Estimates: The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates.
Cash Equivalents: The Company considers all highly liquid investments with maturities of ninety days or less when purchased to be cash equivalents.
Inventories: Processed food and poultry inventories and inventories of feed, eggs, medication and packaging supplies are stated at the lower of cost (first-in, first-out method) or market.
Live poultry inventories of broilers are stated at the lower of cost or market and breeders at cost less accumulated amortization. The costs associated with breeders, including breeder chicks, feed, medicine and grower pay, are accumulated up to the production stage and amortized over nine months using the straight-line method.
Property, Plant and Equipment: Property, plant and equipment is stated at cost. Depreciation of property, plant and equipment is provided by the straight-line and units of production methods over the estimated useful lives of 19 to 39 years for buildings and 3 to 7 years for machinery and equipment.
Impairment of Long-Lived Assets: The Company continually reevaluates the carrying value of its long-lived assets for events or changes in circumstances which indicate that the carrying value may not be recoverable. As part of this reevaluation, the Company estimates the future cash flows expected to result from the use of the asset and its eventual disposal. If the sum of the expected future cash flows (undiscounted and without interest charges) is less than the carrying amount of the asset, an impairment loss is recognized through a charge to operations.
Income Taxes: Deferred income taxes are accounted for using the liability method and relate principally to cash basis temporary differences and depreciation expense accounted for differently for financial and income tax purposes. Effective November 1, 1988, the Company changed from the cash to the accrual basis of accounting for its farming subsidiary. The Taxpayer Relief Act of 1997 (the "Act") provides that the taxes on the cash basis temporary differences as of that date are payable over 20 years beginning in fiscal 1998 or in full in the first fiscal year in which the Company fails to qualify as a "Family Farming Corporation." The Company will continue to qualify as a "Family Farming Corporation" provided there are no changes in ownership control, which management does not anticipate during fiscal 2003.
Stock Based Compensation: The Company accounts for stock option grants in accordance with APB Opinion No. 25, "Accounting for Stock Issued to Employees."
Earnings Per Share: Basic earnings per share is based upon the weighted average number of common shares outstanding during the year. Diluted earnings per share includes any dilutive effects of options, warrants, and convertible securities.
Fair Value of Financial Instruments: The carrying amounts for cash and temporary cash investments approximate their fair values. The carrying amounts of the Company's borrowings under its credit facilities and long-term debt also approximate the fair values based on current rates for similar debt.
Impact of Recently Issued Accounting Standards: Effective in fiscal 2001, The Company adopted FASB No. 133, "Accounting for Derivative Instruments and Hedging Activities", which required all derivatives to be recorded on the balance sheet at fair value. The adoption of this statement had no effect on the consolidated earnings and financial position of the Company.
In April 1998, the American Institute of Certified Public Accountants issued Statement of Position 98-5, "Reporting the Costs of Start-Up Activities," which requires that costs related to start-up activities be expensed as incurred. Prior to October 31, 1999, the Company capitalized its start-up costs. The Company adopted the provisions of the Statement of Position 98-5, "Reporting the Costs of Start-Up Activities," which required that costs related to start-up activities be expensed as incurred in its consolidated financial statements in the first quarter of fiscal 2000. The effect of adoption of SOP 98-5 during fiscal 2000 was to record a charge for the cumulative effect of an accounting change of $234,000 (net of income taxes of $140,000) or $.02 per basic and diluted earnings per share.
2. Inventories
Inventories consisted of the following:
October 31
2002 2001
-----------------------------
(In thousands)
Live poultry-broilers and breeders $33,392 $30,649
Feed, eggs and other 7,389 6,597
Processed poultry 8,423 5,894
Processed food 4,507 4,918
------ ------
Packaging materials 4,253 4,292
------ ------
$57,964 $52,350
====== ======
|
3. Long-term Credit Facilities and Debt
Long-term debt consisted of the following:
October 31
2002 2001
---- ----
(In thousands)
Revolving credit agreement with banks
(weighted average rate of 5.1% at
October 31, 2002) $20,000 $44,000
Term loan with an insurance company,
accruing interest at 7.49%; due in
annual principal installments of $2,850,000 2,900 5,750
Term loan with an insurance company,
accruing interest at 6.65%; due in annual
principal installments of $2,857,000,
beginning in July 2004 20,000 20,000
Note payable, accruing interest at 5%;
due in annual installments of $161,400,
including interest, maturing in 2009 957 1,065
6% Mississippi Business Investment Act
bond-capital lease obligation, due
November 1, 2012 3,055 3,275
Robertson County, Texas, Industrial
Revenue Bonds accruing interest
at a variable rate, 2.4% at October
31, 2002; with optional annual principal
installments of $900,000, due
November 1, 2005 6,300 6,300
------ ------
53,212 80,390
Less current maturities of long-term debt 3,243 3,178
------ ------
$49,969 $77,212
====== ======
|
The Company has a $100.0 million ($80.0 million available at October 31, 2002) revolving credit agreement with four banks, which extends to fiscal 2005. Borrowings are at prime or below and may be prepaid without penalty. A commitment fee of .25% is payable quarterly on the unused portion of the revolver. Covenants related to the revolving credit and the term loan agreements include requirements for maintenance of minimum consolidated net working capital, tangible net worth, debt to total capitalization and current ratio. The agreements also establish limits on dividends, assets that can be pledged and capital expenditures.
Property, plant and equipment with a carrying value of approximately $4,127,933 million is pledged as collateral to a note payable and the capital lease obligation.
The aggregate annual maturities of long-term debt at October 31, 2002 are as follows (in thousands):
Fiscal Year Amount
2003 $ 3,243
2004 6,264
2005 11,285
2006 11,306
2007 11,333
Thereafter 9,781
-------
$53,212
=======
|
4. Income Taxes
Income tax expense (benefit) consisted of the following:
Years Ended October 31
2002 2001 2000
-----------------------------
(In thousands)
Current:
Federal $14,670 $15,518 $(3,600)
State 1,630 1,450 (44)
-------------------------------
16,300 16,968 (3,644)
Deferred:
Federal 1,226 (264) 325
State 114 284 15
-------------------------------
1,340 20 340
-------------------------------
17,640 16,988 (3,304)
Less income tax expense applicable
to cumulative effect of accounting
change 0 0 140
-------------------------------
Income tax expense (benefit) applicable
to income (loss) before cumulative
effect of accounting change $17,640 $16,988 $(3,164)
===============================
|
Significant components of the Company's deferred tax assets and liabilities were as follows:
October 31,
2002 2001
-----------------------
(In thousands)
Deferred tax liabilities:
Cash basis temporary differences $2,994 $ 3,193
Property, plant and equipment 14,986 13,937
Prepaid and other assets 1,066 278
------ ------
Total deferred tax liabilities 19,046 17,408
Deferred tax assets:
Accrued expenses and accounts receivable 3,736 3,156
State net operating loss and credit carryforwards 0 282
------ ------
Total deferred tax assets 3,736 3,438
------ ------
Net deferred tax liabilities $15,310 $13,970
====== ======
Current deferred tax assets
(included in prepaid expenses) $ 1,728 $ 1,855
Long-term deferred tax liabilities 17,038 15,825
------ ------
Net deferred tax liabilities $15,310 $13,970
====== ======
|
The differences between the consolidated effective income tax rate and the federal statutory rate are as follows:
Years ended
October 31
2002 2001 2000
--------------------------
(In thousands)
Income taxes (benefit) at statutory rate $16,268 $15,670 $(3,018)
State income taxes (benefit) 1,511 1,754 (19)
State income tax credit 0 (627) 0
Increase in deferred taxes
for change in income tax rate 0 367 0
Other, net (139) (176) (267)
----------------------------
Income tax expense (benefit) $17,640 $16,988 $(3,304)
============================
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5. Employee Benefit Plans
The Company has an Employee Stock Ownership Plan ("ESOP") covering substantially all employees. Contributions to the ESOP are determined at the discretion of the Company's Board of Directors. Total contributions to the ESOP were $2,500,000 and $2,300,000 in fiscal 2002 and 2001, respectively. The Company did not make a contribution to the ESOP in fiscal 2000.
The Company has a 401(k) Plan which covers substantially all employees after six months of service. Participants in the Plan may contribute up to the maximum allowed by IRS regulations. Effective July 1, 2000, the Company matches 100% of employee contributions to the 401(k) Plan up to 3% of each employee's compensation and 50% of employee contributions between 3% and 5% of each employee's compensation. The Company's contributions to the 401(k) Plan totaled $1,463,000 in fiscal 2002, $1,411,000 in fiscal 2001 and $457,000 in fiscal 2000.
6. Stock Option Plan
The Company has elected to follow Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" and related interpretations in accounting for its employee stock options because the alternative fair value accounting provided for under FASB Statement No. 123, "Accounting for Stock-Based Compensation," requires use of option valuation models that were not developed for use in valuing employee stock options.
Under the Company's Stock Option Plan, 750,000 shares of Common Stock have been reserved for grant to key management personnel. Options granted in fiscal 2002, 2001 and 2000 have ten-year terms and vest over four years beginning one year after the date of grant.
Pro forma information regarding net income (loss) and earnings (loss) per share is required by Statement 123, and has been determined as if the Company had accounted for its employee stock options under the fair value method of that Statement. The fair value for these options was estimated at the date of grant using a Black-Scholes option pricing model with the following weighted average assumptions: risk-free interest rate of 3.5% in fiscal 2002 and 5.0% in fiscal 2001 and 6.6% in fiscal 2000; dividend yields of 2.0% for fiscal 2002 and fiscal 2001and 2.7% for fiscal 2000; volatility factors of the expected market price of the Company's Common Stock of .325 for fiscal 2002, .350 for fiscal 2001 and .302 for fiscal 2000; and a weighted-average expected life of the options of four years.
The weighted-average fair value of options granted was $4.73 in fiscal 2002, $3.24 in fiscal 2001 and $1.94 in fiscal 2000. The pro forma effect of the estimated fair value of the options granted was insignificant to the Company's net income (loss) and net income (loss) per share in fiscal 2002, 2001, and 2000.
A summary of the Company's stock option activity and related information is as follows:
Weighted-Average
Shares Exercise Price
-------------------------------
Outstanding at November 1, 1999 582,000 $12.90
Granted 141,000 7.47
Forfeited (84,000) 11.60
-------
Outstanding at October 31, 2000 639,000 11.83
Granted 71,500 11.10
Forfeited (87,500) 11.11
Outstanding at October 31, 2001 623,000 11.81
Granted 322,886 18.05
Exercised (222,150) 11.79
Forfeited (2,000) 7.47
------- -----
Outstanding at October 31, 2002 721,736 $14.41
======= =====
|
The exercise price of the options outstanding as of October 31, 2002 ranged from $7.19 to $18.55 per share. At October 31, 2002, the weighted average remaining contractual life of the options outstanding was 8 years and 305,537 options were exercisable.
In fiscal 2000, the Company granted 141,000 "phantom shares" to certain key management personnel. Upon exercise of a phantom share, the holder will receive a cash payment or an equivalent number of shares of the Company's Common Stock, at the Company's option, equal to the excess of the fair market value of the Company's Common Stock over the phantom share award value of $7.47 per share. The phantom shares have a ten-year term and vest over four years beginning one year after the date of grant. Compensation expense of $421,000 and $555,000 is included in selling, general and administrative expense in the accompanying consolidated statement of income for fiscal 2002 and fiscal 2001, respectively. No compensation expense was recognized applicable to the phantom shares in fiscal 2000 because the award value exceeded the fair market value of the Company's Common Stock.
7. Shareholder Rights Agreement
On April 22, 1999, the Company adopted a shareholder rights agreement (the "Agreement") with similar terms as the previous one. Under the terms of the Agreement a one share purchase ("right") was declared as a dividend for each share of the Company's Common Stock outstanding on May 4, 1999. The rights do not become exercisable and certificates for the rights will not be issued until ten business days after a person or group acquires or announces a tender offer for the beneficial ownership of 20% or more of the Company's Common Stock. Special rules set forth in the Agreement apply to determine beneficial ownership for members of the Sanderson family. Under these rules, such a member will not be considered to beneficially own certain shares of Common Stock, the economic benefit of which is received by any member of the Sanderson family, and certain shares of Common Stock acquired pursuant to employee benefit plans of the Company.
The exercise price of a right has been established at $75. Once exercisable, each right would entitle the holder to purchase one one-hundredth of a share of Series A Junior Participating Preferred Stock, par value $100 per share. The rights may be redeemed by the Board of Directors at $.01 per right prior to an acquisition, through open market purchases, a tender offer or otherwise, of the beneficial ownership of 20% or more of the Company's Common Stock, or by two-thirds of the Directors who are not the acquirer, or an affiliate of the acquirer prior to the acquisition of 50% or more of the Company's Common Stock by such acquirer. The rights expire on May 4, 2009.
8. Other Matters
On April 5, 2000, thirteen individuals claiming to be former hourly employees of the Company's processing subsidiary (Sanderson Farms, Inc. (Processing Division) (the "Processing Division")) filed a lawsuit in the United States District Court for the Southern District of Texas claiming that the Processing Division violated requirements of the Fair Labor Standards Act. The Plaintiffs' lawsuit also purported to represent similarly situated workers who filed consents to be included as plaintiffs in the suit. A total of 109 individuals consented to join the lawsuit.
The lawsuit alleges that the Processing Division (1) failed to pay its hourly employees "for time spent donning and doffing sanitary and safety equipment, obtaining and sharpening knives and scissors, working in the plant and elsewhere before and after the scheduled end of the shift, cleaning safety equipment and sanitary equipment, and walktime," and (2) altered employee time records by using an automated time keeping system. Plaintiffs further claim that the Processing Division concealed the alteration of time records and seek on that account an equitable tolling of the statute of limitations beyond the three-year limitation period back to the date the automated time-keeping system was allegedly implemented.
Plaintiffs sought an unspecified amount of unpaid hourly and overtime wages plus an equal amount as liquidated damages, for present and former hourly employees who file consents to join in the lawsuit. There were 6,476 hourly workers employed at the Processing Division's plants as of October 31, 2002.
On April 24, 2001, the Court granted the Processing Division's summary judgment motion and entered a final judgment in favor of the Processing Division. Plaintiffs appealed that decision to the United States Fifth Circuit Court of Appeals. On March 7, 2002, the United States Fifth Circuit Court of Appeals affirmed the decision of the United States District Court granting the Processing Division's motion for summary judgment. The plaintiffs had 90 days from March 7, 2002 to request that the United States Supreme Court hear an appeal of this case, which time has expired.
On May 15, 2000, an employee of the Company's production subsidiary (Sanderson Farms, Inc. (Production Division) (the "Production Division")), filed suit against the Production Division in the United States District Court for the Southern District of Texas on behalf of live-haul drivers to recover an unspecified amount of overtime compensation and liquidated damages. Approximately 26 employees filed consents to join in this lawsuit.
Previously, the United States Department of Labor ("DOL") filed a similar suit against the Production Division in the United States District Court for the Southern District of Mississippi, Hattiesburg Division, on behalf of live-haul employees at the Production Division's Laurel, Mississippi facility. Both lawsuits were brought under the Fair Labor Standards Act and seek recovery of overtime compensation, together with an equal amount as liquidated damages, for live-haul employees (i.e., live-haul drivers, chicken catchers, and loader-operators) employed by the Production Division. The lawsuits assert that additional overtime compensation and liquidated damages may be owed to certain employees. The lawsuits also seek an injunction to prevent the withholding of overtime compensation to live-haul employees in the future.
On January 18, 2001, the United States District Court for the Southern District of Texas granted the Production Division's request to move the suit pending before that court to the Southern District of Mississippi, Hattiesburg Division. The Production Division later filed its motion with the United States District Court for the Southern District of Mississippi to have the two cases consolidated, which motion was granted. On February 4, 2002, the Production Division reached a settlement with the Department of Labor that fully and completely compromised and settled the claims of all live-haul employees in the Production Division, other than certain Production Division employees represented in a collective bargaining agreement in Texas. The settlement, approved by the court on March 11, 2002, and pursuant to which the Production Division paid during its second fiscal quarter (accrued during its first fiscal quarter) approximately $450,000 in back pay and interest to the involved current and former employees in the Production Division's Mississippi and Texas operations, terminates the private rights of these employees under the Fair Labor Standards Act with respect to the claims made in this suit. With respect to approximately 74 employees represented under a collective bargaining agreement in Texas, the court entered its Order Granting Joint Motion for Court Approval of Settlement on November 4, 2002. The final settlement of this matter will become effective upon a ruling by the court on the plaintiff's request for award of attorney's fees. The court is scheduled to hear arguments on the attorney's fees issue on January 7, 2003. The Production Division will pay approximately $188,000 in back pay to the Texas employees as part of the settlement, and this amount is accrued and reflected in the Company's accompanying consolidated financial statements.
Substantially similar lawsuits to those described above have been filed against other integrated poultry companies. In addition, organizing activity conducted by the representatives or affiliates of the United Food and Commercial Workers Union against the poultry industry has encouraged worker participation in these and the other lawsuits.
On September 26, 2000, three current and former contract growers filed suit against the Company in the Chancery Court of Lawrence County, Mississippi. The plaintiffs filed suit on behalf of "all Mississippi residents to whom, between on or about November 1981 and the present, the Company induced into growing chickens for it and paid compensation under the so-called `ranking system'." Plaintiffs allege that the Company "has defrauded plaintiffs by unilaterally imposing and utilizing the so-called `ranking system' which wrongfully places each grower into a competitive posture against other growers and arbitrarily penalizes each less successful grower based upon criteria which were never revealed, explained or discussed with plaintiffs." Plaintiffs further allege that they are required to accept chicks that are genetically different and with varying degrees of healthiness, and feed of dissimilar quantity and quality. Finally, plaintiffs allege that they are ranked against each other although they possess dissimilar facilities, equipment and technology. Plaintiffs seek an unspecified amount in compensatory and punitive damages, as well as varying forms of equitable relief.
The Company is vigorously defending and will continue to vigorously defend this action. On November 22, 2002, the Court denied the Company's motions to compel arbitration, challenging the jurisdiction of the Chancery Court of Lawrence County, Mississippi, and seeking to have the case dismissed pursuant to rule 5(c) of the Mississippi Rules of Civil Procedure. The Company then filed its motion for interlocutory appeal on these issues with the Mississippi State Supreme Court. On December 6, 2002, the Mississippi State Supreme Court agreed to hear this motion and stayed the action in the Chancery Court pending disposition of this motion. This matter is pending. As with the wage and hour and donning and doffing lawsuits discussed above, substantially similar lawsuits have been filed against other integrated poultry companies.
On August 2, 2002, three contract egg producers filed suit against the Company
in the Chancery Court of Jefferson Davis County, Mississippi. The Plaintiffs
filed suit on behalf of "all Mississippi residents who, between June 1993 and
the present, [the Company] fraudulently and negligently induced into housing,
feeding and providing water for [the Company's] breeder flocks and gathering,
grading, packaging and storing the hatch eggs generated by said flocks and who
have been compensated under the payment method established by the [Company]."
Plaintiffs alleged that the Company "has defrauded Plaintiffs by unilaterally
imposing and utilizing a method of payment which wrongfully and arbitrarily
penalizes each grower based upon criteria which are under the control of the
[Company] and which were never revealed, explained or discussed with each
Plaintiff." Plaintiffs allege that they were required to accept breeder hens and
roosters which are genetically different, with varying degrees of healthiness,
and feed of dissimilar quantity and quality. Plaintiffs further allege
contamination of and damage to their real property. Plaintiffs alleged that they
were "fraudulently and negligently induced into housing, feeding and providing
water for the Company's breeder flocks and gathering, grading, packaging and
storing the hatch eggs produced from said flocks" for the Company. Plaintiffs
seek an unspecified amount of compensatory and punitive damages, as well as
various forms of equitable relief. The Company will vigorously defend this
lawsuit.
On July 25, 2002, a current contract grower and her husband filed suit against the Company and Farmers State Bank, N.A. in the District Court of Milam County, Texas. The Plaintiffs alleged "a conspiracy to defraud Plaintiffs in connection with [the Company's] promotion of a get-rich-quick scheme portrayed to Plaintiffs as a good investment for Plaintiff's future." The Plaintiffs further alleged that the Company and Farmers State Bank "conspired to defraud Plaintiffs by convincing them to purchase farm land, execute loan documents for the construction of chicken barns, and then forcing them to sign contracts of adhesion that made Plaintiffs the domestic servants of the defendants." The Plaintiffs further alleged that the Company and Farmers State Bank violated the Texas Deceptive Trade Practices-Consumer Protection Act. Plaintiffs seek an unspecified amount in compensatory damages, treble damages, attorney's fees, pre- and post-judgement interest and all costs of court. The Plaintiffs also seek a Permanent Injunction enjoining the Farmers State Bank from foreclosing on or otherwise taking possession or control of Plaintiff's real estate and the improvements thereon and other equitable relief. On August 8, 2002, the court heard arguments on the Plaintiff's motion for permanent injunction and on the Company's motion to stay the proceeding with respect to its pending arbitration of the matter as required by the Egg Producers Contract entered into by and between one of the Plaintiffs and the Company. On August 19, 2002, the court granted the Company's motion to compel arbitration in this case with respect to the Company and its grower pursuant to the arbitration provision of the contract. The case before the District Court of Milam County, Texas will be stayed pending arbitration between the Company and its grower. No arbitration date has been set. The Company will vigorously defend this matter.
The Company is also a party to lawsuits against various vitamin and methionine suppliers arising out of alleged price fixing activities by the defendants. For more information about these lawsuits, please see the section of this Report entitled "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations--Results of Operations."
The Company is also involved in various claims and litigation incidental to its business. Although the outcome of the matters referred to in the preceding sentence cannot be determined with certainty, management, upon the advice of counsel, is of the opinion that the final outcome should not have a material effect on the Company's consolidated results of operation or financial position.
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.
Not applicable.
PART III
Item 10. Directors and Executive
Officers of the Registrant.
As permitted by General Instruction G(3) to Form 10-K, reference is made to the information concerning the Directors of the Registrant and the nominees for election as Directors appearing in the Registrant's definitive proxy statement filed or to be filed with the Commission pursuant to Rule 14a-6(b). Such information is incorporated herein by reference to the definitive proxy statement.
Information concerning the executive officers of the Registrant is set forth in Item 4A of Part I of this Annual Report.
Item 11. Executive Compensation.
As permitted by General Instruction G(3) to Form 10-K, reference is made to the information concerning remuneration of Directors and executive officers of the Registrant appearing in the Registrant's definitive proxy statement filed or to be filed with the Commission pursuant to Rule 14a-6(b). Such information is incorporated herein by reference to the definitive proxy statement.
Item 12. Security Ownership of Certain
Beneficial Owners and Management.
As permitted by General Instruction G(3) to Form 10-K, reference is made to the information concerning beneficial ownership of the Registrant's Common Stock, which is the only class of the Registrant's voting securities, appearing in the Registrant's definitive proxy statement filed or to be filed with the Commission pursuant to Rule 14a-6(b). Such information is incorporated herein by reference to the definitive proxy statement.
The following table provides information as of October 31, 2002 with respect to compensation plans (including individual compensation arrangements) under which equity securities of the Registrant are authorized for issuance. The Registrant has no equity compensation plan not approved by security holders. The equity compensation plan reflected in the following table is the Registrant's Stock Option Plan approved by shareholders on February 28, 2002.
Plan category(1) (a) Number of securities (b) Weighted-average (c) Number of securities
to be issued upon exercise exercise price of remaining available for
of outstanding options, outstanding options, future issuance under
warrants and rights warrants and rights equity compensation plans
(excluding securities
reflected in column (a))
Equity compensation plans
approved by security holders
721,736 $14.49 437,114
Equity compensation plans not
approved by security holders
0 0 0
Total 721,736 $14.49 437,114
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(1) The table above does not include information concerning the Registrant's Phantom Stock Agreements dated April 21, 2000 with certain of its executive officers and key employees. These agreements permit the respective holders to claim a cash award from the Registrant at specified times prior to April 21, 2010, equal to a number of shares selected by the holder, but not exceeding in the aggregate the number of shares specified in the agreement, multiplied by the difference between the market value of a share of the Registrant's common stock at that time and $7.46875. The Company has the option to issue shares of its common stock in lieu of the cash payable to a phantom stock holder upon the exercise of such holder's phantom stock. Because the value of a share of phantom stock upon conversion depends on the value of the Registrant's common stock on the conversion date, the number of shares of the Registrant's common stock that would be issuable upon conversion of the outstanding phantom stock in lieu of a cash payment, should the Registrant exercise its option to issue shares in lieu of paying cash, cannot be determined. Information concerning the amount of the Registrant's phantom stock awards is contained in the Registrant's revised definitive proxy statement on Schedule 14A filed on January 28, 2002.
Item 13. Certain Relationships
and Related Transactions.
As permitted by General Instruction G(3) to Form 10-K, information, if any, required to be reported by Item 13 of Form 10-K, with respect to transactions with management and others, certain business relationships, indebtedness of management, and transactions with promoters, is set forth in the Registrant's definitive proxy statement filed or to be filed with the Commission pursuant to Rule 14a-6(b). Such information, if any, is incorporated herein by references to the definitive proxy statement.
PART IV
Item 14. Controls and Procedures.
The Company maintains disclosure controls and procedures that are
designed to ensure that information required to be disclosed in the Company's
Securities Exchange Act reports is recorded, processed, summarized and reported
within the time periods specified in the SEC's rules and forms, and that such
information is accumulated and communicated to the Company's management,
including its Chief Executive Officer and Chief Financial Officer, as
appropriate, to allow timely decisions regarding required disclosure.
During the 90-day period prior to the date of this report, an
evaluation was performed under the supervision and with the participation of our
Company's management, including the Chief Executive Officer and the Chief
Financial Officer, of the effectiveness of the design and operation of the
Company's disclosure controls and procedures. Based upon that evaluation, the
Chief Executive Officer and the Chief Financial Officer concluded that the
Company's disclosure controls and procedures were effective. Subsequent to the
date of this evaluation, there have been no significant changes in the Company's
internal controls or in other factors that could significantly affect these
controls.
Item 15. Exhibits, Financial Statement
Schedules, and Reports on Form 8-K.
(a)1. FINANCIAL STATEMENTS:
The following consolidated financial statements of the Registrant are included in Item 8:
Consolidated Balance Sheets - October 31, 2002, 2001 and 2000
Consolidated Statements of Income - Years ended October 31, 2002, 2001 and 2000 Consolidated Statements of Stockholders' Equity -Years ended October 31, |
2002, 2001 and 2000
Consolidated Statements of Cash Flows - Years ended October 31, 2002, 2001 and 2000
Notes to Consolidated Financial Statements - October 31, 2002
(a)2. FINANCIAL STATEMENT SCHEDULES:
The following consolidated financial statement schedules of the Registrant are included in Item 8:
Schedule II - Valuation and Qualifying Accounts
All other schedules are omitted as they are not applicable or the required information is set forth in the Financial Statements or notes thereto.
(a) 3. EXHIBITS:
The following exhibits are filed with this Annual Report or are incorporated herein by reference:
Exhibit
Number Description
3.1 Articles of Incorporation of the Registrant dated October 19,
1978. (Incorporated by reference to Exhibit 4.1 filed with the
registration statement on Form S-8 filed by the Registrant on
July 15, 2002, Registration No. 333-92412.)
3.2 Articles of Amendment, dated March 23, 1987, to the Articles of
Incorporation of the Registrant. (Incorporated by reference to
Exhibit 4.2 filed with the registration statement on Form S-8
filed by the Registrant on July 15, 2002, Registration No.
333-92412.)
3.3 Articles of Amendment, dated April 21, 1989, to the Articles of
Incorporation of the Registrant. (Incorporated by reference to
Exhibit 4.3 filed with the registration statement on Form S-8
filed by the Registrant on July 15, 2002, Registration No.
333-92412.)
3.4 Certificate of Designations of Series A Junior Participating
Preferred Stock of the Registrant dated April 21, 1989.
(Incorporated by reference to Exhibit 4.4 filed with the
registration statement on Form S-8 filed by the Registrant on
July 15, 2002, Registration No. 333-92412.)
3.5 Article of Amendment, dated February 20, 1992, to the Articles of
Incorporation of the Registrant. (Incorporated by reference to
Exhibit 4.5 filed with the registration statement on Form S-8
filed by the Registrant on July 15, 2002, Registration No.
333-92412.)
3.6 Article of Amendment, dated February 27, 1997, to the Articles of
Incorporation of the Registrant. (Incorporated by reference to
Exhibit 4.6 filed with the registration statement on Form S-8
filed by the Registrant on July 15, 2002, Registration No.
333-92412.)
3.7 By-Laws of the Registrant, amended and restated as of July 27,
2000. (Incorporated by reference to Exhibit 4.7 filed with the
registration statement on Form S-8 filed by the Registrant on
July 15, 2002, Registration No. 333-92412.)
10.1 Contract dated July 31, 1964 between the Registrant and the City
of Laurel, Mississippi. (Incorporated by reference to Exhibit
10-D filed with the registration statement on Form S-1 filed by
the Registrant on April 3, 1987, Registration No. 33-13141.)
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10.2 Contract Amendment dated December 1, 1970 between the Registrant
and the City of Laurel, Mississippi. (Incorporated by reference
to Exhibit 10-D-1 filed with the registration statement on Form
S-1 filed by the Registrant on April 3, 1987, Registration No.
33-13141.)
10.3 Contract Amendment dated June 11, 1985 between the Registrant and
the City of Laurel, Mississippi. (Incorporated by reference to
Exhibit 10-D-2 filed with the registration statement on Form S-1
filed by the Registrant on April 3, 1987, Registration No.
33-13141.)
10.4 Contract Amendment dated October 7, 1986 between the Registrant
and the City of Laurel, Mississippi. (Incorporated by reference
to Exhibit 10-D-3 filed with the registration statement on Form
S-1 filed by the Registrant on April 3, 1987, Registration No.
33-13141.)
10.5 Agreement dated November 1, 2001 between Sanderson Farms, Inc.
(Hammond Processing Division) and United Food and Commercial
Workers Local Union 455 affiliated with the United Food and
Commercial Workers International Union. (Incorporated by
reference to Exhibit 10c to the Registrant's Quarterly Report on
Form 10-Q for the quarter ended January 31, 2002.)
10.6 Agreement dated July 26, 1999 between Sanderson Farms, Inc.
(Hazlehurst Processing Division) and Laborers' International
Union of North America, Professional Employees Local Union #693,
AFL-CIO. (Incorporated by reference to Exhibit 10-E-6 to the
Registrant's Annual Report on Form 10-K for the year ended
October 31, 2000.)
10.7 Agreement dated January 13, 2000 between Sanderson Farms, Inc.
(Collins Processing Division) and Laborers' International Union
of North America, Professional Employees Local Union #693,
AFL-CIO. (Incorporated by reference to Exhibit 10-E-7 to the
Registrant's Annual Report on Form 10-K for the year ended
October 31, 2000.)
10.8 Agreement dated as of December 27, 1999 between Sanderson Farms,
Inc. (Brazos Production Division), Sanderson Farms, Inc. (Brazos
Processing Division) and Teamsters Local Union No. 968,
affiliated with the International Brotherhood of Teamsters.
(Incorporated by reference to Exhibit 10-E-9 to the Registrant's
Annual Report on Form 10-K for the year ended October 31, 2000.)
10.9 Agreement dated as of July 1, 2002 between Sanderson Farms, Inc.
(McComb Production Division) and United Food and Commercial
Workers, Local 1529, AFL-CIO, affiliated with United Food and
Commercial Workers International Union, AFL-CIO. (Incorporated by
reference to Exhibit 10-E-10 to the Registrant's Quarterly Report
on Form 10-Q for the quarter ended July 31, 2002.)
10.10* Agreement dated November 13, 2002 between Sanderson Farms, Inc.
(Brazos Processing Division) and the United Food and Commercial
Workers Union, Local 408, AFL-CIO, charted by the United Food and
Commercial Workers International Union, AFL-CIO, CLC.
10.11+ Employee Stock Ownership Plan and Trust Agreement of Sanderson
Farms, Inc. and Affiliates. (Incorporated by reference to Exhibit
10-I filed with the registration statement on Form S-1 filed by
the Registrant on April 3, 1987, Registration No. 33-13141.)
10.12+ Amendment One to the Employee Stock Ownership Plan and Trust
Agreement of Sanderson Farms, Inc. and Affiliates. (Incorporated
by reference to Exhibit 10-I-1 filed with Amendment No. 3 to the
registration statement on Form S-1 filed by the Registrant on May
19, 1987, Registration No. 33-13141.)
10.13+ Amendment Two to the Employee Stock Ownership Plan and Trust
Agreement of Sanderson Farms, Inc. and Affiliates. (Incorporated
by reference to Exhibit 10-I-2 to the Registrant's Annual Report
on Form 10-K for the year ended October 31, 1987.)
10.14+ Sanderson Farms, Inc. and Affiliates Stock Option Plan (Amended
and Restated as of February 28, 2002). (Incorporated by reference
to Exhibit 4.8 filed with the registration statement on Form S-8
filed by the Registrant on July 15, 2002, Registration No.
333-92412.)
10.15+ Form of Nonstatutory Stock Option Agreement. (Incorporated by
reference to Exhibit 4.9 filed with the registration statement on
Form S-8 filed by the Registrant on July 15, 2002, Registration
No. 333-92412.)
10.16+ Form of Incentive Stock Option Agreement. (Incorporated by
reference to Exhibit 4.10 filed with the registration statement
on Form S-8 filed by the Registrant on July 15, 2002,
Registration No. 333-92412.)
10.17+ Form of Alternate Stock Appreciation Rights Agreement.
(Incorporated by reference to Exhibit 4.11 filed with the
registration statement on Form S-8 filed by the Registrant on
July 15, 2002, Registration No. 333-92412.)
10.18*+ Form of Phantom Stock Agreement.
10.19*+ Sanderson Farms, Inc. Bonus Award Program effective November
1, 2001.
10.20 Memorandum of Agreement dated June 13, 1989, between Pike
County, Mississippi and the Registrant. (Incorporated by
reference to Exhibit 10-L filed with the Registrant's Annual
Report on Form 10-K for the year ended October 31, 1990.)
10.21 Wastewater Treatment Agreement between the City of Magnolia,
Mississippi and the Registrant dated August 19, 1991.
(Incorporated by reference to Exhibit 10-M filed with the
Registrant's Annual Report on Form 10-K for the year ended
October 31, 1991.)
10.22 Memorandum of Agreement and Purchase Option between Pike County,
Mississippi and the Registrant dated May 1991. (Incorporated by
reference to Exhibit 10-N filed with the Registrant's Annual
Report on Form 10-K for the year ended October 31, 1991.)
10.23 Lease Agreement between Pike County, Mississippi and the
Registrant dated as of November 1, 1992. (Incorporated by
reference to Exhibit 10-M filed with the Registrant's Annual
Report on Form 10-K for the year ended October 31, 1993.)
10.24 Credit Agreement dated as of July 31, 1996 among Sanderson
Farms, Inc.; Harris Trust and Savings Bank, Individually and as
Agent; SunTrust Bank, Atlanta; Deposit Guaranty National Bank;
Caisse National de Credit Agricole, Chicago Branch; and Trustmark
National Bank. (Incorporated by reference to Exhibit10-N to
Amendment No. 1 to the Quarterly Report of the Registrant for the
quarter ended July 31, 1996.)
10.25* First Amendment to Credit Agreement, dated as of October
23,1997, by and among Sanderson Farms, Inc.; Harris Trust and
Savings Bank, Individually and as Agent; SunTrust Bank; Deposit
Guaranty National Bank; Caisse Nationale De Credit Agricole,
Chicago Branch; and Trustmark National Bank.
10.26* Second Amendment to Credit Agreement, dated as of July 23 ,1998,
by and among Sanderson Farms, Inc.; Harris Trust and Savings
Bank, Individually and as Agent; SunTrust Bank; Deposit Guaranty
National Bank; Caisse Nationale De Credit Agricole, Chicago
Branch; and Trustmark National Bank.
10.27* Third Amendment to Credit Agreement, dated as of July 29, 1999,
by and among Sanderson Farms, Inc.; Harris Trust and Savings
Bank, Individually and as Agent; SunTrust Bank; First American
National Bank, D/B/A Deposit Guaranty National Bank; Caisse
Nationale De Credit Agricole, Chicago Branch; and Trustmark
National Bank.
10.28* Fourth Amendment to Credit Agreement, dated as of March 17, 2000,
by and among Sanderson Farms, Inc.; Harris Trust and Savings
Bank, Individually and as Agent; SunTrust Bank; Credit Agricole
Indosuez, Chicago Branch; and Trustmark National Bank.
10.29* Fifth Amendment to Credit Agreement, dated as of February 16,
2001, by and among Sanderson Farms, Inc.; Harris Trust and
Savings Bank, Individually and as Agent; SunTrust Bank; Credit
Agricole Indosuez, Chicago Branch; and Trustmark National Bank.
10.30 Sixth Amendment to Credit Agreement dated as of July 2, 2001, by
and among Sanderson Farms, Inc.; Harris Trust and Savings Bank,
Individually and as Agent; SunTrust Bank; AmSouth Bank; Credit
Agricole Indosuez, Chicago Branch; and Trustmark National Bank.
(Incorporated by reference to Exhibit 10d to the Quarterly Report
of the Registrant for the quarter ended January 31, 2002.)
10.31 Seventh Amendment to Credit Agreement dated as of July 29, 2002,
by and among Sanderson Farms, Inc.; Harris Trust and Savings
Bank, Individually and as Agent; SunTrust Bank; AmSouth Bank; and
Trustmark National Bank. (Incorporated by reference to
Exhibit10.1 to Amendment No. 1 to the Quarterly Report of the
Registrant for the quarter ended July 31, 2002.)
10.32 Stock Purchase Agreement dated January 3, 2002, by and between
Sanderson Farms, Inc. and the executors of the Estate of Joe
Frank Sanderson. (Incorporated by reference to Exhibit 10.1 filed
with the Registrant's Current Report on Form 8-K dated January 3,
2002.)
10.33 Stock Purchase Agreement dated January 3, 2002, by and between
Sanderson Farms, Inc. and the executors of the Estate of Dewey R.
Sanderson, Jr. (Incorporated by reference to Exhibit 10.2 filed
with the Registrant's Current Report on Form 8-K dated January 3,
2002.)
10.34 Agreement dated as of April 22, 1999 between Sanderson Farms,
Inc. and Chase Mellon Shareholder Services, L.L.C. (Incorporated
by reference to Exhibit 4.1 filed with the Registrant's current
report on Form 8-K dated April 22, 1999.)
21* List of subsidiaries of the Registrant.
23* Consent of Ernst & Young, LLP.
99.1* Certification pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.
99.2* Certification pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.
-----------
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* Filed herewith.
+Management contract or compensatory plan or arrangement.
(b) REPORTS ON FORM 8-K:
No reports on Form 8-K were filed during the fourth quarter of the Fiscal Year ended October 31, 2002.
(c) Agreements Available Upon Request by the Commission.
The Registrant's credit agreement with the banks for which Harris Trust and Savings Bank acts as agent is filed or incorporated by reference as an exhibit to this report. The Registrant is a party to various other agreements defining the rights of holders of long-term debt of the Registrant, but, of those other agreements, no single agreement authorizes securities in an amount which exceeds 10% of the total assets of the Company. Upon request of the Commission, the Registrant will furnish a copy of any such agreement to the Commission. Accordingly, such agreements are omitted as exhibits as permitted by Item 601(b)(4)(iii) of Regulation S-K.
QUALIFICATION BY REFERENCE
Information contained in this Annual Report as to the contents of any contract or other document referred to or evidencing a transaction referred to is necessarily not complete, and in each document filed as an exhibit to this Annual Report or incorporated herein by reference, all such information being qualified in its entirety by such reference.
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Sanderson Farms, Inc.
We have audited the accompanying consolidated balance sheets of Sanderson Farms, Inc. and subsidiaries as of October 31, 2002 and 2001 and the related consolidated statements of income, stockholders' equity, and cash flows for each of the three years in the period ended October 31, 2002. Our audit also included the financial statement schedule listed in the index under item 14(a).These financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes accessing 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 Sanderson Farms, Inc. and subsidiaries at October 31, 2002 and 2001, and the consolidated results of their operations and their cash flows for each of the three years in the period ended October 31, 2002, in conformity with accounting principles generally accepted in the United States. Also in our opinion the related financial statement schedule when considered in relation to the basic financial statements as a whole, presents fairly in all material respects the information set forth therein.
/s/Ernst & Young LLP
Jackson, Mississippi
December 10, 2002
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Sanderson Farms, Inc. and Subsidiaries
Valuation and Qualifying Accounts
Schedule II
-----------------------------------------------------------------------------------------------------
COL. A COL. B COL. C COL. D COL. E COL. F
-----------------------------------------------------------------------------------------------------
Balance at Charged to Charged to Balance at
Beginning Costs and Other Deductions End of
Classification of Period Expenses Accounts Describe(1) Period
-----------------------------------------------------------------------------------------------------
(In Thousands)
Year ended October 31, 2002
Deducted from accounts
receivable:
Allowance for doubtful
accounts
Totals $303 $36 $0 $663
Year ended October 31, 2001
Deducted from accounts
receivable:
Allowance for doubtful
accounts
Totals $460 $44 $201 $303
Year ended October 31, 2000
Deducted from accounts
receivable:
Allowance for doubtful
Accounts
Totals $249 $1,413 $1,202 $460
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(1) Uncollectible accounts written off, net of recoveries
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SANDERSON FARMS, INC.
/s/Joe F. Sanderson, Jr.
Chairman of the Board,
President and Chief Executive
Officer
Date: December 27, 2002
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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 as of the dates indicated.
/s/ Joe F. Sanderson, Jr. 12/27/02 /s/ John H. Baker, III 12/27/02 ------------------------- ----------------------------- Joe F. Sanderson, Jr., John H. Baker, III, |
Chairman of the Board, President Director
and Chief Executive Officer
(Principal Executive Officer)
/s/ William R. Sanderson 12/27/02 /s/ Charles W. Ritter, Jr. 12/27/02 ------------------------- ----------------------------- William R. Sanderson, Director, Charles W. Ritter, Jr., Director of Marketing Director /s/Hugh V. Sanderson . 12/27/02 /s/ Rowan H. Taylor 12/27/02 ------------------------- ----------------------------- Hugh V. Sanderson, Director, Rowan H. Taylor, Manager of Customer Relations Director /s/ Donald W. Zacharias 12/27/02 /s/ Robert Buck Sanderson 12/27/02 ------------------------- ----------------------------- Donald W. Zacharias, Robert Buck Sanderson, Director, Director Corporate Live Production Assistant /s/ Phil K. Livingston 12/27/02 /s/ Lampkin Butts 12/27/02 ------------------------- ----------------------------- Phil K. Livingston, Lampkin Butts, Director, Director Vice President - Sales /s/ D. Michael Cockrell 12/27/02 /s/James A. Grimes 12/27/02 ------------------------- ----------------------------- D. Michael Cockrell, James A. Grimes, Secretary Director, Treasurer and Chief and Chief Accounting Officer Financial Officer (Principal (Principal Accounting Officer) Financial Officer) /s/ Gail Pittman 12/27/02 ------------------------- Gail Pittman Director |
CERTIFICATION
I, Joe F. Sanderson, Jr., certify that:
1. I have reviewed this annual report on Form 10-K of Sanderson Farms, Inc.;
2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;
3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
|
committee of registrant's board of directors (or persons performing the equivalent functions):
a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this annual report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
Date: December 27, 2002
/s/ Joe F. Sanderson, Jr.
-------------------------
Joe F. Sanderson, Jr.
President, Chief Executive Officer and
Chairman of the Board (Principal
Executive Officer)
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CERTIFICATION
I, D. Michael Cockrell, certify that:
1. I have reviewed this annual report on Form 10-K of Sanderson Farms, Inc.;
2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;
3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
|
committee of registrant's board of directors (or persons performing the equivalent functions):
a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this annual report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
Date: December 27, 2002
/s/ D. Michael Cockrell
-----------------------
D. Michael Cockrell
Treasurer, Chief Financial Officer and
Director (Principal Financial Officer)
|
EXHIBIT INDEX
Exhibit
Number Description
3.1 Articles of Incorporation of the Registrant dated October 19,
1978. (Incorporated by reference to Exhibit 4.1 filed with the
registration statement on Form S-8 filed by the Registrant on
July 15, 2002, Registration No. 333-92412.)
3.2 Articles of Amendment, dated March 23, 1987, to the Articles of
Incorporation of the Registrant. (Incorporated by reference to
Exhibit 4.2 filed with the registration statement on Form S-8
filed by the Registrant on July 15, 2002, Registration No.
333-92412.)
3.3 Articles of Amendment, dated April 21, 1989, to the Articles of
Incorporation of the Registrant. (Incorporated by reference to
Exhibit 4.3 filed with the registration statement on Form S-8
filed by the Registrant on July 15, 2002, Registration No.
333-92412.)
3.4 Certificate of Designations of Series A Junior Participating
Preferred Stock of the Registrant dated April 21, 1989.
(Incorporated by reference to Exhibit 4.4 filed with the
registration statement on Form S-8 filed by the Registrant on
July 15, 2002, Registration No. 333-92412.)
3.5 Article of Amendment, dated February 20, 1992, to the Articles of
Incorporation of the Registrant. (Incorporated by reference to
Exhibit 4.5 filed with the registration statement on Form S-8
filed by the Registrant on July 15, 2002, Registration No.
333-92412.)
3.6 Article of Amendment, dated February 27, 1997, to the Articles of
Incorporation of the Registrant. (Incorporated by reference to
Exhibit 4.6 filed with the registration statement on Form S-8
filed by the Registrant on July 15, 2002, Registration No.
333-92412.)
3.7 By-Laws of the Registrant, amended and restated as of July 27,
2000. (Incorporated by reference to Exhibit 4.7 filed with the
registration statement on Form S-8 filed by the Registrant on
July 15, 2002, Registration No. 333-92412.)
10.1 Contract dated July 31, 1964 between the Registrant and the City
of Laurel, Mississippi. (Incorporated by reference to Exhibit
10-D filed with the registration statement on Form S-1 filed by
the Registrant on April 3, 1987, Registration No. 33-13141.)
|
10.2 Contract Amendment dated December 1, 1970 between the Registrant
and the City of Laurel, Mississippi. (Incorporated by reference
to Exhibit 10-D-1 filed with the registration statement on Form
S-1 filed by the Registrant on April 3, 1987, Registration No.
33-13141.)
10.3 Contract Amendment dated June 11, 1985 between the Registrant and
the City of Laurel, Mississippi. (Incorporated by reference to
Exhibit 10-D-2 filed with the registration statement on Form S-1
filed by the Registrant on April 3, 1987, Registration No.
33-13141.)
10.4 Contract Amendment dated October 7, 1986 between the Registrant
and the City of Laurel, Mississippi. (Incorporated by reference
to Exhibit 10-D-3 filed with the registration statement on Form
S-1 filed by the Registrant on April 3, 1987, Registration No.
33-13141.)
10.5 Agreement dated November 1, 2001 between Sanderson Farms, Inc.
(Hammond Processing Division) and United Food and Commercial
Workers Local Union 455 affiliated with the United Food and
Commercial Workers International Union. (Incorporated by
reference to Exhibit 10c to the Registrant's Quarterly Report on
Form 10-Q for the quarter ended January 31, 2002.)
10.6 Agreement dated July 26, 1999 between Sanderson Farms, Inc.
(Hazlehurst Processing Division) and Laborers' International
Union of North America, Professional Employees Local Union #693,
AFL-CIO. (Incorporated by reference to Exhibit 10-E-6 to the
Registrant's Annual Report on Form 10-K for the year ended
October 31, 2000.)
10.7 Agreement dated January 13, 2000 between Sanderson Farms, Inc.
(Collins Processing Division) and Laborers' International Union
of North America, Professional Employees Local Union #693,
AFL-CIO. (Incorporated by reference to Exhibit 10-E-7 to the
Registrant's Annual Report on Form 10-K for the year ended
October 31, 2000.)
10.8 Agreement dated as of December 27, 1999 between Sanderson Farms,
Inc. (Brazos Production Division), Sanderson Farms, Inc. (Brazos
Processing Division) and Teamsters Local Union No. 968,
affiliated with the International Brotherhood of Teamsters.
(Incorporated by reference to Exhibit 10-E-9 to the Registrant's
Annual Report on Form 10-K for the year ended October 31, 2000.)
10.9 Agreement dated as of July 1, 2002 between Sanderson Farms, Inc.
(McComb Production Division) and United Food and Commercial
Workers, Local 1529, AFL-CIO, affiliated with United Food and
Commercial Workers International Union, AFL-CIO. (Incorporated by
reference to Exhibit 10-E-10 to the Registrant's Quarterly Report
on Form 10-Q for the quarter ended July 31, 2002.)
10.10* Agreement dated November 13, 2002 between Sanderson Farms, Inc.
(Brazos Processing Division) and the United Food and Commercial
Workers Union, Local 408, AFL-CIO, charted by the United Food and
Commercial Workers International Union, AFL-CIO, CLC.
10.11+ Employee Stock Ownership Plan and Trust Agreement of Sanderson
Farms, Inc. and Affiliates. (Incorporated by reference to Exhibit
10-I filed with the registration statement on Form S-1 filed by
the Registrant on April 3, 1987, Registration No. 33-13141.)
10.12+ Amendment One to the Employee Stock Ownership Plan and Trust
Agreement of Sanderson Farms, Inc. and Affiliates. (Incorporated
by reference to Exhibit 10-I-1 filed with Amendment No. 3 to the
registration statement on Form S-1 filed by the Registrant on May
19, 1987, Registration No. 33-13141.)
10.13+ Amendment Two to the Employee Stock Ownership Plan and Trust
Agreement of Sanderson Farms, Inc. and Affiliates. (Incorporated
by reference to Exhibit 10-I-2 to the Registrant's Annual Report
on Form 10-K for the year ended October 31, 1987.)
10.14+ Sanderson Farms, Inc. and Affiliates Stock Option Plan (Amended
and Restated as of February 28, 2002). (Incorporated by reference
to Exhibit 4.8 filed with the registration statement on Form S-8
filed by the Registrant on July 15, 2002, Registration No.
333-92412.)
10.15+ Form of Nonstatutory Stock Option Agreement. (Incorporated by
reference to Exhibit 4.9 filed with the registration statement on
Form S-8 filed by the Registrant on July 15, 2002, Registration
No. 333-92412.)
10.16+ Form of Incentive Stock Option Agreement. (Incorporated by
reference to Exhibit 4.10 filed with the registration statement
on Form S-8 filed by the Registrant on July 15, 2002,
Registration No. 333-92412.)
10.17+ Form of Alternate Stock Appreciation Rights Agreement.
(Incorporated by reference to Exhibit 4.11 filed with the
registration statement on Form S-8 filed by the Registrant on
July 15, 2002, Registration No. 333-92412.)
10.18*+ Form of Phantom Stock Agreement.
10.19*+ Sanderson Farms, Inc. Bonus Award Program effective November
1, 2001.
10.20 Memorandum of Agreement dated June 13, 1989, between Pike
County, Mississippi and the Registrant. (Incorporated by
reference to Exhibit 10-L filed with the Registrant's Annual
Report on Form 10-K for the year ended October 31, 1990.)
10.21 Wastewater Treatment Agreement between the City of Magnolia,
Mississippi and the Registrant dated August 19, 1991.
(Incorporated by reference to Exhibit 10-M filed with the
Registrant's Annual Report on Form 10-K for the year ended
October 31, 1991.)
10.22 Memorandum of Agreement and Purchase Option between Pike County,
Mississippi and the Registrant dated May 1991. (Incorporated by
reference to Exhibit 10-N filed with the Registrant's Annual
Report on Form 10-K for the year ended October 31, 1991.)
10.23 Lease Agreement between Pike County, Mississippi and the
Registrant dated as of November 1, 1992. (Incorporated by
reference to Exhibit 10-M filed with the Registrant's Annual
Report on Form 10-K for the year ended October 31, 1993.)
10.24 Credit Agreement dated as of July 31, 1996 among Sanderson
Farms, Inc.; Harris Trust and Savings Bank, Individually and as
Agent; SunTrust Bank, Atlanta; Deposit Guaranty National Bank;
Caisse National de Credit Agricole, Chicago Branch; and Trustmark
National Bank. (Incorporated by reference to Exhibit10-N to
Amendment No. 1 to the Quarterly Report of the Registrant for the
quarter ended July 31, 1996.)
10.25* First Amendment to Credit Agreement, dated as of October
23,1997, by and among Sanderson Farms, Inc.; Harris Trust and
Savings Bank, Individually and as Agent; SunTrust Bank; Deposit
Guaranty National Bank; Caisse Nationale De Credit Agricole,
Chicago Branch; and Trustmark National Bank.
10.26* Second Amendment to Credit Agreement, dated as of July 23 ,1998,
by and among Sanderson Farms, Inc.; Harris Trust and Savings
Bank, Individually and as Agent; SunTrust Bank; Deposit Guaranty
National Bank; Caisse Nationale De Credit Agricole, Chicago
Branch; and Trustmark National Bank.
10.27* Third Amendment to Credit Agreement, dated as of July 29, 1999,
by and among Sanderson Farms, Inc.; Harris Trust and Savings
Bank, Individually and as Agent; SunTrust Bank; First American
National Bank, D/B/A Deposit Guaranty National Bank; Caisse
Nationale De Credit Agricole, Chicago Branch; and Trustmark
National Bank.
10.28* Fourth Amendment to Credit Agreement, dated as of March 17, 2000,
by and among Sanderson Farms, Inc.; Harris Trust and Savings
Bank, Individually and as Agent; SunTrust Bank; Credit Agricole
Indosuez, Chicago Branch; and Trustmark National Bank.
10.29* Fifth Amendment to Credit Agreement, dated as of February 16,
2001, by and among Sanderson Farms, Inc.; Harris Trust and
Savings Bank, Individually and as Agent; SunTrust Bank; Credit
Agricole Indosuez, Chicago Branch; and Trustmark National Bank.
10.30 Sixth Amendment to Credit Agreement dated as of July 2, 2001, by
and among Sanderson Farms, Inc.; Harris Trust and Savings Bank,
Individually and as Agent; SunTrust Bank; AmSouth Bank; Credit
Agricole Indosuez, Chicago Branch; and Trustmark National Bank.
(Incorporated by reference to Exhibit 10d to the Quarterly Report
of the Registrant for the quarter ended January 31, 2002.)
10.31 Seventh Amendment to Credit Agreement dated as of July 29, 2002,
by and among Sanderson Farms, Inc.; Harris Trust and Savings
Bank, Individually and as Agent; SunTrust Bank; AmSouth Bank; and
Trustmark National Bank. (Incorporated by reference to
Exhibit10.1 to Amendment No. 1 to the Quarterly Report of the
Registrant for the quarter ended July 31, 2002.)
10.32 Stock Purchase Agreement dated January 3, 2002, by and between
Sanderson Farms, Inc. and the executors of the Estate of Joe
Frank Sanderson. (Incorporated by reference to Exhibit 10.1 filed
with the Registrant's Current Report on Form 8-K dated January 3,
2002.)
10.33 Stock Purchase Agreement dated January 3, 2002, by and between
Sanderson Farms, Inc. and the executors of the Estate of Dewey R.
Sanderson, Jr. (Incorporated by reference to Exhibit 10.2 filed
with the Registrant's Current Report on Form 8-K dated January 3,
2002.)
10.34 Agreement dated as of April 22, 1999 between Sanderson Farms,
Inc. and Chase Mellon Shareholder Services, L.L.C. (Incorporated
by reference to Exhibit 4.1 filed with the Registrant's current
report on Form 8-K dated April 22, 1999.)
21* List of subsidiaries of the Registrant.
23* Consent of Ernst & Young, LLP.
99.1* Certification pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.
99.2* Certification pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.
-----------
|
* Filed herewith.
+Management contract or compensatory plan or arrangement.
EXHIBIT 10.10
A G R E E M E N T
BETWEEN
SANDERSON FARMS, INC.
(BRAZOS PROCESSING DIVISION)
AND
UNITED FOOD AND COMMERCIAL WORKERS UNION, LOCAL 408, AFL-CIO
Chartered by the
UNITED FOOD AND COMMERCIAL WORKERS INTERNATIONAL UNION,
AFL-CIO, CLC
OCTOBER 25, 2002 - DECEMBER 31, 2005
TABLE OF CONTENTS
ARTICLE PAGE
1. AGREEMENT 4
2. RECOGNITION 4
3. MANAGEMENT PREROGATIVES 5
4. SHOP STEWARDS 6
5. UNION BULLETIN BOARD 7
6. NO STRIKE - NO LOCK OUT 7
7. GRIEVANCE PROCEDURE 7
STEP 1 7
STEP 2 8
STEP 3 8
8. ARBITRATION 9
9. SENIORITY 10
10. SENIORITY LIST 12
11. HOURS OF WORK 12
12. LEAVES OF ABSENCE 14
13. VACATIONS 15
14. HOLIDAYS 16
15. INSURANCE 17
16. EMPLOYEE STOCK OWNERSHIP PLAN 18
17. WAGES 18
18. MISCELLANEOUS 19
19 NO DISCRIMINATION 20
20. COMPLETE AGREEMENT AND SEPARABILITY 20
21. AUTHORIZATION FOR REPRESENTATION AND CHECK-OFF 21
22. DURATION OF AGREEMENT 21
SIGNATURES 22
APPENDIX A - WAGE RATES *
APPENDIX B - CHECK OFF AUTHORIZATION *
|
ARTICLE 1
AGREEMENT
Section 1.1. This Agreement made and entered into this 13th day of November, 2002, by and between Sanderson Farms, Inc. (Brazos Processing Division) at its Bryan, Texas processing plant (hereinafter referred to as "Employer" or "Company"), and United Food and Commercial Workers Union, Local 408, AFL-CIO, chartered by the United Food and Commercial Workers International Union, AFL-CIO, CLC (hereinafter referred to as the "Union".
WITNESSETH
Section 1.2 WHEREAS, the Company and the Union are desirous of entering into a contractual relationship covering rates of pay, hours of work and other terms and conditions of employment of employees employed within the unit of representation as hereinafter described; and Section 1.3. WHEREAS, the parties have conferred, negotiated and agreed upon the terms and conditions of employment to be applicable to the employees covered by this Agreement for the contract period as herein specified. Section 1.4. NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, the parties do hereby agree as follows:
ARTICLE 2
RECOGNITION
Section 2.1. The Employer recognizes the Union as the certified bargaining representative (NLRB Case No. 16-RC-10107) for all production and maintenance employees employed at its Bryan, Texas Poultry Processing Plant, excluding office clerical employees, guards, professional employees, and supervisors, as defined in the Act.
Section 2.2. No employee shall be required to make any written or verbal agreement that will conflict with this Agreement. No employee shall be reclassified so as to defeat the purpose of this Agreement.
ARTICLE 3
A. MANAGEMENT RIGHTS
Section 3.1
There shall remain in the Company the exclusive and unilateral right of
management of the Company's plant and facilities and the assignment and
direction of the working forces, not limited to but including the following: to
determine the number, location and type of plants it may operate; to decide the
products to be manufactured, the methods of manufacture, the materials to be
used and the continuance or discontinuance of any product mater or method of
production; to introduce new equipment, machinery or processes and to change or
eliminate existing equipment, machinery or processes; to discontinue,
temporarily or permanently, in whole or in part, conduct of its business or
operations; and to relocate its business or operations in whole or in part; to
decide the nature of materials, supplies, equipment or machinery to be used and
the price to be paid; to decide upon the sales methods and sales price of all
products; to subcontract any work performed by or for the Company; to hire the
workforce in accordance with the requirements set by management; to transfer,
promote or demote employees subject to the seniority provisions of this
Agreement; to lay off employees for economic reasons and to terminate,
discharge, suspend or otherwise relieve employee from duty for just cause; to
direct and control the workforce; to establish and enforce reasonable rules
governing employment, conduct, and working conditions; to determine the size of
the workforce; to determine the number of employee assigned to any particular
operation; to determine the workplace and to set reasonable work performance
levels; to establish, change, combine or abolish job classifications and to
determine the length of the work week; to utilize job rotation as deemed
necessary by the company; to determine work starting and stopping time, the
length of the work day, when overtime shall be worked, to require overtime; and
to determine the qualifications of employees. All other rights of Management are
also expressly retained even though not particularly enumerated above unless
they are clearly limited by the explicit language of some other provisions of
this Agreement.
It is understood that the word "unilateral right" as used herein mean that
the company shall have the unquestioned right to take such action without prior
notification or consultation with the Union, except that any such action, once
taken, may be questioned, to the extent provided in this Article or as
specifically provided elsewhere in this Agreement, through the grievance and
arbitration procedures.
Section 3.2.
If the sub-contracting of work usually performed by bargaining unit
employees or partial or complete plant relocation will have the foreseeable
effect of causing the layoff of any unit employee, the Company will give notice
to the Union and the parties will negotiate on the effects of the layoff. It is
further understood that none of the provisions of this Article shall have the
effect to reduce or waive any rights of unit employees under the Worker
Adjustment and Retraining Notification Act (WARN).
Section 3.3.
Failure of the Company to exercise rights herein reserved to it or
exercising them in a particular way shall not be deemed a waiver of said rights
of the Company's rights to exercise said rights in some other manner not in
conflict with the terms of this Agreement.
ARTICLE 4
SHOP STEWARDS
Section 4.1. The Employer recognizes the right of the Union to designate shop stewards, not to exceed twenty (20) in number who shall be assigned to serve specific areas of the plant to handle such Union business as may arise. The shop stewards shall be employees of the Company. The Union shall notify the Company in writing as to the names of the stewards and of any changes in designation of stewards.
Section 4.2. A representative of the Union shall be permitted to enter the plant at reasonable times, upon Employer's premises and plant, provided such representative shall in no way interfere with the operations of Employer's business and shall make arrangements with the Employer's manager.
Section 4.3. Upon reasonable notice from the Union, the Employer shall grant an unpaid leave of absence to stewards up to one week per year for training purposes. The Union agrees that it will not seek such leave for more than half of the stewards at any one time.
ARTICLE 5
UNION BULLETIN BOARD
Section 5.1. The Employer will provide the Union locking bulletin boards in the lunchrooms in the plant for posting of Union notices. All matters to be posted shall be submitted to the Division Manager or a designated representative for approval prior to posting, and management's decision shall be final. A Union Shop Card shall be displayed on each Union bulletin board in the plant.
ARTICLE 6
NO STRIKE - NO LOCK OUT
Section 6.1. For the duration of this Agreement, there shall be no strike, stoppages, slowdowns, picketing, sympathy strikes, or other interruption of or interference with the operations of the plant. Section 6.2. The Company shall not lock out employees for the duration of this Agreement.
Section 6.3. Neither the violation of any provisions of the Agreement, nor the commission of any act constituting an unfair labor practice, or otherwise made unlawful, shall excuse the employees, the Union, or the Company from their obligations under the provisions of this Article.
Section 6.4. An employee discharged or otherwise disciplined for violation of this Article, may seek review of such discipline through the grievance and arbitration procedures provided herein. In this event, the only question to be reviewed shall be whether or not the employee participated in the prohibited conduct.
ARTICLE 7
GRIEVANCE PROCEDURE
Section 7.1. Grievances arising under this contract are herein defined as a claim by a party to this Agreement or an employee covered by this Agreement that the Company or the Union has violated a provision of this Agreement.
STEP I
The employee shall discuss the grievance or complaint with the immediate supervisor within five (5) working days after the event giving rise thereto occurs, or within five (5) working days following the date on which the grievant had or reasonably would have had knowledge thereof. In the event the employee so requests, the appropriate steward shall be present at this step. The supervisor shall give an answer within five (5) working days after the grievance is received.
STEP 2
If there is no settlement in Step 1, the grievance may be presented by the
employee and/or shop steward within five (5) working days from the date on which
the supervisor's answer was given in Step 1. The grievance must be presented in
writing to the department superintendent and must state the following
information:
(a) name or names of employee or employees involved; (b) the
department or departments involved; (c) the date and time of
the occurrence or discovery of the grievance; (d) the facts
complained about
(e) the specific provision of this Agreement alleged to have been
violated; (failure to designate the correct provision will not
affect the merits of the grievance);
(f) the remedy requested.
The superintendent shall give the Company's answer in writing within five (5) working days after the grievance is received by the superintendent.
STEP 3
In the event the grievance is not settled in Step 2, then the grievance may be appealed in writing to the division manager or a designated representative by the Union to Step 3 within five (5) working days from the Company's answer in Step 2. The division manager or a designated representative shall give an answer in writing within five (5) working days from the date of the appeal. In the event the grievance is not settled then the aggrieved party or parties shall have the right to request arbitration.
In the event a grievance arises on behalf of the Employer, the matter shall be presented to the Union Business Agent in writing, who shall have seven (7) days from the date of submission within which to endeavor to reconcile the grievance presented and shall give an answer in writing within that time. If not settled within that time, the aggrieved party or parties shall have the right to request arbitration.
Section 7.2. Discharge grievances shall be processed initially under Step 3 of the grievance procedure. The written grievance shall be filed with the division manager within five (5) working days following the date of discharge.
Section 7.3. A failure to observe the time limit specified herein for original presentation of a grievance or presentation in any subsequent step of the grievance procedure on the part of either the grievant or the Union shall be conclusive evidence that the grievance has been settled and abandoned.
Failure on the part of the Company to comply with the time limits for delivering its answer in any step of the grievance procedure shall automatically advance the grievance to the next step of the grievance procedure.
The time limits of the grievance procedure may be extended by mutual consent of the Union and the Company.
ARTICLE 8
ARBITRATION
Section 8.1. If a party to this Agreement desires to take a grievance to arbitration, it shall within fifteen (15) calendar days after the denial of the grievance, give written notice of his intention to the other party, together with a written statement of the specific provision or provisions of this Agreement at issue.
Section 8.2. The parties shall attempt to select an impartial arbitrator. If they are unable to agree upon a choice within seven (7) calendar days after the receipt of Notice of Intent to Arbitrate, either party may request the Federal Mediation and Conciliation Service to submit a list of five (5) arbitrators, from which the arbitrator will be selected. Selection shall be made by the parties alternately striking any name from the list (the first to strike shall be the party requesting arbitration) until only one (1) name remains. The final name remaining shall be the arbitrator of the grievance.
Section 8.3. The jurisdiction and the decision of the arbitrator of the grievance shall be confined to a determination of the acts and the interpretation or application of the specific provision or provisions of this Agreement at issue. The Arbitrator shall be bound by terms and provisions of this Agreement and shall have the authority to consider only grievances representing solely an arbitration issue under this Agreement. The arbitrator shall have no authority to add to, alter, amend, or modify any provision of this Agreement. The decision of the arbitrator in writing on any issue properly before the arbitrator in accordance with the provisions of this Agreement, shall be final and binding on the aggrieved employee or employees, the Union, and the Employer.
Section 8.4. Multiple grievances shall not be heard before one arbitrator at the same hearing except by mutual agreement of the parties.
Section 8.5. The Union and the Employer shall each bear its own costs in these arbitration proceedings, except that they shall share equally the fee and other expenses of the arbitrator in connection with the grievance.
Section 8.6. The Grievance Committee of the Union shall have the sole authority to determine whether or not the employee's grievance is qualified to be submitted to arbitration by the Union. The decision of the Grievance Committee shall be made at its first meeting after the Company's Step 3 answer, and the Union will promptly inform the Company of its decision.
ARTICLE 9
SENIORITY
Section 9.1. Seniority is defined as the length of an employee's continuous employment in the bargaining unit at the Company's Bryan, Texas, poultry processing plant since the last permanent date of employment. For purposes of layoff, recall, promotion, and vacation only, this shall include continuous service which began prior to the acquisition of the plant by the Company.
Section 9.2. All newly hired or rehired employees shall be considered as probationary employees for a period of ninety (90) days during which period they shall not acquire seniority, and during which they may be discharged without recourse to the grievance and arbitration procedures provided herein. If retained as a regular employee upon satisfactory completion of the probationary period, seniority shall be retroactive to the first day of employment.
Section 9.3 In matters of promotion, consideration will be given to an employee's skill, ability, attendance, versatility, training, physical fitness, and seniority; and when, in the opinion of the Company, the factors other than seniority are relatively equal, seniority will be the deciding factor. In layoffs and recalls, seniority will prevail, provided the employees involved are relatively equal in ability and fitness to immediately perform the available work.
Section 9.4. An employee's seniority shall be lost and employment considered terminated by:
(a) discharge for just cause;
(b) failure to return from layoff within five (5) working days
after written notice by certified mail is sent by the Company
to the employee's last known address on the Company's books.
Actual notice to the employee of recall by any other means
shall satisfy the terms of this provision;
(c) voluntary termination of employment;
(d) failure to report after termination of a leave of absence
approved by the Company in writing on the first scheduled day
following the expiration of such leave of absence;
(e) engaging in a gainful occupation while on leave of absence;
(f) absence from work for three (3) consecutive working days
without notice to the Company, which shall be considered as a
voluntary quit, unless notice was prevented by a cause beyond
the control of the employee;
(g) separation from the Company's active payroll for any reason,
exclusive of leaves of absence approved by the Company, for a
period exceeding an employee's length of service in the Bryan
plant, or three (3) months, whichever is less.
Section 9.5. For the purposes of this Agreement, layoffs shall be classified as
(a) "short term" and (b) "long term". A short term layoff is a layoff which will
not exceed ten (10) workdays in length. Short term layoffs may be made without
regard to seniority. A long term layoff is a layoff which will exceed ten (10)
workdays in length. Long term layoffs shall be made subject to Section 3 of this
Article.
Section 9.6. All permanent job vacancies in premium rated classifications shall
be posted for two (2) consecutive working days on the plant bulletin board.
Employees in lower rated classifications desiring promotion to such jobs shall
sign a bid sheet posted on the bulletin board. An employee who does not sign
such bid sheet shall have no right to consideration for the vacancy. However,
the fact that an employee did not sign the bid sheet will not preclude that
employee's selection for the job by the Company if none of the signers is
determined to be qualified. If no qualified employee bids on the posted
position, the Company may fill the position in its discretion. If, after a
reasonable period not to exceed thirty (30) days, the employee selected for the
posted position achieves an acceptable level of performance, the employee shall
receive the rate of the new position. If the employee fails to perform in an
acceptable manner, such employee shall return to a job in their former
classification and the premium job shall be posted again. An employee who
self-disqualifies shall return to the extra board at the line operator's rate of
pay and shall not be eligible for bidding on a premium job for a period of six
(6) months.
Section 9.7. Assignments involving employees on the extra board shall be in
order of seniority. Within a department, no extra board employee shall be
retained over a permanently assigned employee.
ARTICLE 10
SENIORITY LIST
Section 10.1. Upon request at any reasonable time, the Company shall furnish to the Union a current seniority list. The list shall be alphabetical and shall include department, social security number, date of hire, address, zip code, phone number and rate of pay. The obligation of the Company shall be satisfied by furnishing the most recent information in its records.
ARTICLE 11
HOURS OF WORK
Section 11.1. The regular work week shall consist of five (5) days or forty (40) hours. This shall not be construed as a guarantee of any amount of hours or work. The basic work week shall be the seven (7) day period from 12:01 a.m. Sunday until midnight the following Saturday. Employees will be given at least one (1) calendar week's notice of any change by the Company of the payroll week.
Section 11.2. An employee who works more than forty (40) hours in any one week shall be paid at time and one-half the regular rate of pay for all hours in excess of forty (40).
Section 11.3. When employees are called to work a shift outside their regularly scheduled shift and report for work, or when they report to work at their regularly scheduled time, they shall be given the opportunity to work a minimum of three (3) hours or receive pay for same at the applicable hourly rate, except that no such pay shall be made when the plant cannot operate for reasons beyond the control of the Employer, such as, but not limited to, strikes, utility failure, fire, flood, storms or other acts of God interfering with work, or a breakdown of machinery or equipment when the Company notifies the employees not to report to work at least four (4) hours prior to the scheduled time to work.
Section 11.4. Employees will be paid at their regular rate for all waiting time
of thirty (30) minutes or less, so long as they do any job they are assigned.
Employees will not be paid for waiting time which exceeds thirty (30) minutes if
(1) they are relieved of all duties, (2) are free to leave the plant, and (3)
are told the time they must return to work. Employees will not be relieved
without pay more than once in any workday except for a lunch break of not more
than one (1) hour. Section 11.5. The Company will provide one (1) unpaid break
of not less than thirty (30) minutes for lunch during each shift, and shall
provide one (1) twelve (12) minute paid rest period prior to lunch each day. In
addition, all employees will be allowed one (1) twelve (12) minute paid rest
period after the lunch break provided the work time is expected to be not less
than two and one-half (2 1/2) hours. No unpaid break shall be provided for
maintenance employees.
The Company shall have the right to provide a twenty-four (24) minute paid lunch break to Clean-Up Line Operators on restricted hours in lieu of all breaks provided in this Section. Section 11.6. Effective January 5, 2003, a Clean-Up Line Operator who has completed the probationary period and is permanently assigned to restricted hours in the clean up department shall receive an hourly adjustment of $1.25 per hour for each hour worked in that assignment. Said adjustment shall be $1.30 effective January 4, 2004; and $1.35 effective January 2, 2005.
Section 11.7. Employees who have completed the probationary period and are temporarily assigned for one or more consecutive hours to perform the duties of an absent employee in a higher paid classification shall receive the rate of that classification while performing the duties of the classification. Employees who work at more than one pay rate during a week in which they earn overtime shall receive overtime pay based upon an average of the rates earned during that week.
Section 11.8. When daily overtime in excess of fifteen (15) minutes is required for processing employees, they shall be notified by second break, or as soon as the Company knows such overtime is required.
ARTICLE 12
LEAVES OF ABSENCE
Section 12.1. An employee who has completed the probationary period may be
granted, at the Company's discretion, a leave of absence without pay for a
reasonable period of time, not to exceed one (1) month, for the following
reasons:
(a) emergency personal business; and
(b) Union business, upon written request by the Union's Business
Manager, provided that no more than three (3) employees shall
be on such leave simultaneously.
Section 12.2. Employees who have completed their probationary period are eligible for up to thirteen (13) weeks per year of unpaid family and medical treatment leave for the following reasons:
(a) Employee's serious health condition -- a medical
certification will be required which states that the employee
is unable to perform the functions of the employee's position.
(b) Family serious health condition -- spouse, parent, or
child. A medical certification will be required stating the
employee is "needed to care for the individual." (c) New child
leave -- the birth, adoption or foster care placement by a
state agency of a child, and, the need to care for the child;
such leave may be prior to the actual birth or placement.
The provisions of this Section shall be administered in accordance with the Family and Medical Leave Act of 1993 (FMLA).
Section 12.3. Employees who have completed their probationary period who lose actual work time in order to attend the funeral of a family member shall receive a paid funeral leave for time necessarily lost during the employee's regularly scheduled shift, provided the employee would have been scheduled and at work during that day. Said leave shall be up to three (3) days with pay for a deceased parent, spouse, child, brother, or sister and one (1) day for a deceased father-in-law, mother-in-law, grandparent, brother-in-law, sister-in-law or grandchild. In order to receive pay under this Section, an employee must be actively working, must make application for such paid leave, and must attend the funeral. The Company may require satisfactory evidence of attendance at the funeral and the relationship of the deceased.
Section 12.4. If the Company has knowledge that an employee, in a premium-rated classification, will be on family and medical leave, military leave, or an industrial injury leave for more than thirty (30) calendar days, the job will be posted and filled on a temporary basis. The successful bidder will receive the rate of the premium classification for the period its duties are performed. When employees on leave under this Section return, they shall be immediately assigned to their old job; employees temporarily filling the job shall return to their regular classification and pay rate.
Section 12.5. The Company shall pay each active employee who reports for jury duty the difference between pay up to eight times the hourly rate for time actually lost and the juror's daily fee for each day the employee is required to serve on a jury. The employee must report to work during those days of his regularly scheduled shift during which the employee is not required to report for jury duty or be available at court for jury service. The employee must present proof of jury service and the amount of compensation received from the court.
ARTICLE 13
VACATIONS
Section 13.1. Regular full-time employees shall be eligible for one (1) week's vacation after the first anniversary date of continuous employment, and after the anniversary date of each succeeding year.
Employees shall be eligible for a second week of vacation after the second anniversary date of continuous employment, and after the anniversary date of each succeeding year of continuous employment.
Employees shall be eligible for a third week of vacation after the tenth anniversary date of continuous employment, and after the anniversary date of each succeeding year of continuous employment.
Employees shall be eligible for a fourth week of vacation after the twentieth anniversary date of continuous employment and after the anniversary date of each succeeding year of continuous employment.
Section 13.2. To be eligible for a vacation, an employee must have worked
sixteen hundred (1,600) hours during the preceding twelve (12) months or eighty
(80) percent of available hours for that period, whichever is less. Vacations
and holidays not worked shall be considered time worked for purposes of this
Section.
Section 13.3. Vacation pay shall be computed at forty (40) times the Employee's regular straight time hourly rate.
Section 13.4. Due consideration will be given employees' choice of vacation time, but all vacations scheduled are subject to the final approval of the Company in keeping with the Company's scheduling needs. In the event that two or more employees cannot be released at the same time, the employee with the longest service with the Company will be given preference. An employee who notifies the Company of a vacation choice thirty (30) days in advance shall not lose that vacation choice to another employee. Vacations may not be scheduled for periods of less than a week, and all vacations must be taken within an anniversary year.
Section 13.5. The Company reserves the right to schedule a plant shutdown for one .(l) week in any year, which shall be treated as a vacation week for those employees entitled to vacation.
ARTICLE 14
HOLIDAYS
Section 14.1. The following shall be considered holidays:
New Year's Day Labor Day Martin Luther King's Birthday Thanksgiving Day Memorial Day Christmas Day July Fourth Birthday Holiday |
The birthday holiday shall be taken on the employee's birthday. If the birthday falls on a Saturday or Sunday, the holiday shall be taken on a day agreed upon by the Company and the employee within one week of the birthday.
In the event any other holiday falls on a Saturday or Sunday, the Company will announce whether it will be observed on the Friday preceding or the Monday following the holiday. Such notice shall be given at least four (4) days in advance.
Section 14.2. All regular full-time employees who have completed their probationary period shall be paid for eight (8) hours at their regular straight time rate for each holiday enumerated above, provided they report for work and work all scheduled hours on the workday preceding and the workday next following the holiday, unless the employee was necessarily absent due to personal illness, supported by a doctor's certificate, or because of an emergency occurring to the employee or the employee's immediate family (meaning only spouse, children, or parents). No employee shall lose holiday pay because of missing no more than thirty (30) minutes on the workday before or the workday following the holiday.
In any event, an employee must work at least one (1) day during the calendar week in which a holiday falls in order to be eligible for holiday pay, except the employee who is on vacation.
Section 14.3. Employees required to work on a holiday shall be paid the amount provided above, in addition to their regular earnings for that day. Hours not worked on a holiday shall not be considered as work time in computing any additional compensation due under the overtime provisions of this contract.
Section 14.4. If an employee is required to work and fails to report or fails to work scheduled hours on a holiday, the employee shall forfeit holiday pay for that day. Section 14.5. Employees on vacation during the week in which a holiday falls shall receive holiday pay.
ARTICLE 15
INSURANCE
Section 15.1. The Company shall provide a group insurance program for employees covered by this Agreement. The Company will continue to make monthly contributions toward group insurance premiums in the same proportion as is currently in effect. Employees will bear the remaining costs of the insurance.
Section 15.2. Effective January 1, 2003, the Company shall pay sixty (60%) percent of the cost of employee coverage only under the group health insurance plan elected by an employee. On January 1, 2004, the contribution on employee coverage will increase to seventy (70%) percent, and on January 1, 2005, it will increase to seventy-five (75%) percent of the premium for employee coverage. Monthly contributions by the Company toward group family coverage shall remain in the same proportion as is currently in effect.
ARTICLE 16
EMPLOYEE STOCK OWNERSHIP PLAN - RETIREMENT
Section 16.1. Employees covered by this Agreement will continue to be covered by the Employee Stock Ownership Plan of Sanderson Farms, Inc. and Affiliates. Participation and benefits in the plan shall be in accordance with the provisions of that plan.
ARTICLE 17
WAGES
Section 17.1. Wages shall be paid as provided in Appendix A attached hereto and made a part of this Agreement.
Section 17.2. Whenever a new job classification is created by the Company, or there is a change or merger of job classifications or the job content of job classifications, the Company will discuss the appropriate wage rate with the Union. If a mutually satisfactory rate cannot be agreed upon, the Company will set the rate. The Union may file a grievance on the rate, and the dispute shall be settled in accordance with the grievance and arbitration procedures of this contract.
Section 17.3. The rates of pay set forth in Appendix A of this Agreement are minimum straight time hourly wage rates, and nothing contained herein shall be construed as prohibiting or requiring the Company to grant individual employees, for length of service, efficiency, productivity, or other reasons, a wage increase which would result in such employee's regular straight time hourly wage rate being in excess of the minimum wage rate herein specified for the work operation he or she performs. The Company will notify the Union of any change pursuant to this Section in advance.
Section 17.4. Any employees who, upon the effective date of this Agreement, are receiving a wage in excess of the applicable rate set forth in Appendix A, shall continue to receive their current rate until the contract rate equals or exceeds that rate.
Section 17.5. In addition to the wage rates as provided in Appendix A, production employees who have been continuously employed for five (5) or more years shall receive seniority pay of twenty (20) cents per hour. Maintenance employees who have been continuously employed for five (5) or more years will receive seniority pay of fifty (50) cents per hour. Section 17.6. Employees who have been continuously employed for one (1) or more years shall receive a night shift differential of twenty-five (25) cents per hour for work performed on a shift starting during the hours beginning 12:00 noon through 1:00 a.m. The starting time of a shift determines if it is subject to the shift differential. Employees performing work on a night shift which is not their regular shift will receive shift differential for such work if it lasts three (3) or more hours.
ARTICLE 18
MISCELLANEOUS
Section 18.1. The Company shall maintain safe, sanitary, and healthy working conditions at all times, and employees will be required to cooperate in maintaining such conditions. Any complaints regarding safety or health shall be processed through the grievance and arbitration provisions of this Agreement.
Section 18.2. There shall be a Safety Committee consisting of members selected from the bargaining unit, one-half selected by the Union and one-half selected by the Company. A management representative shall be designated Chairman of the committee by the Division Manager. The Safety Committee shall perform whatever functions are assigned, which shall include periodic meetings; review of safety related suggestions from any source; and recommending corrective actions to facilitate safety related changes in work environment and work practices.
Section 18.3. The Company will provide any uniforms required of employees who have completed their probationary period. The Company will furnish required safety equipment, gloves, aprons, hair nets, freezer gloves, cotton gloves, raincoats, and smocks at no cost to the employee. Needed replacements, through normal use, will be made at no cost provided the worn out article is returned to the Company. If an item is lost or destroyed through employee negligence, the employee will be charged for its replacement.
Section 18.4. The Employer may require any employee to take a physical examination at any time at the Employer's expense.
Section 18.5. It shall be the responsibility of all employees to keep the Employer apprised of their current address, telephone number, marital status and number of dependents.
Section 18.6. It is the intent of the parties hereto that no provisions of this Agreement shall require either party to perform any act which shall be unlawful under any Texas or Federal statute.
Section 18.7. Employees will be allowed reasonable relief from the line to visit the restroom. Employees who abuse this privilege will be subject to discipline up to and including discharge.
Section 18.8. Verified emergency messages will be relayed to the employee as soon as possible after receipt of the message. Section 18.9. This Agreement shall be in both English and Spanish. If there is a discrepancy in translation regarding contract language or interpretation, the English language contract shall prevail.
ARTICLE 19
NO DISCRIMINATION
Section 19.1. The Company and the Union agree that they will not discriminate against any person with regard to employment or Union membership because of race, creed, color, sex, religion, age, national origin, or disability (as defined in the Americans With Disabilities Act).
Section 19.2. Whenever masculine gender is used in this Agreement, it shall apply to the feminine gender.
ARTICLE 20
COMPLETE AGREEMENT AND SEPARABILITY
Section 20.1. Complete Agreement: The parties expressly declare that they have bargained between themselves on all phases of hours, wages, rate of pay, conditions of employment and working conditions, and that this contract represents their full and complete agreement without reservations or unexpressed understanding. Any aspect of hours, rates of pay, wages, conditions of employment and working conditions not covered by a particular provision of this agreement is declared to have been expressly eliminated as a subject for bargaining and during the life of this Agreement may not be raised for further bargaining in negotiations without written consent of all parties hereto.
It is further understood and agreed that neither party hereto has been induced to enter into this Agreement by any representations or promises made by the other which are not expressly set forth herein, and that this document correctly sets forth the effect of all preliminary negotiations, understandings, and agreements, and supersedes any previous agreements, whether written or verbal. This contract constitutes the entire Agreement and understanding between the parties and shall not be modified, altered, change, or amended in any respect except on mutual agreement set forth in writing and signed by both parties.
Section 20.2. Separability: In the event any of the provisions of this Agreement are held to be in conflict with or in violation of any state or federal statute or another applicable law, administrative rule or regulation, such decision shall not affect the validity of the remaining provisions of the Agreement. The parties further agree that they will meet within thirty (30) days to re-negotiate the provisions of the Agreement held to be invalid, provided that Article 6 shall remain in full force and effect during all such negotiations.
ARTICLE 21
AUTHORIZATION FOR REPRESENTATION AND CHECK-OFF
Section 21.1. During the term of this Agreement, the Company will deduct initiation fees, assessments, and Union dues weekly from the wages of employees who individually authorize the Company on a form in compliance with Appendix B to this Agreement.
Section 21.2. The Company will make deductions from employees according to the signed Active Ballot Club check-off card on a form in compliance with Appendix B to this Agreement, and the funds will be forwarded by separate check to UFCW Local 408. It is understood that this deduction shall not be made more than four times in any calendar year.
Section 21.3. The Union shall save the company harmless against and from all claims, demands, suits or other forms of liability that arise out of or by reason of action taken or not taken by the company in reliance upon or compliance with any provisions of this Article.
Section 21.4. It is agreed that by reason of institution of the above check-off system, collections by any other method on the Company's premises are prohibited, except with the permission of the Company.
Section 21.5. Credit Union: Upon receipt of a signed authorization, the Company
shall deduct from employees' wages and turn over to the proper official of the
Credit Union deductions from the pay of such members of the Credit Union as
individually and voluntarily certify in writing that they authorize such
deductions. Employees and officers of UFCW Local 408 Credit Union may, with five
(5) working days notice to management, be allowed access to break areas to sign
up new credit union members and promote credit union activity only four (4)
times a year.
ARTICLE 22
DURATION OF AGREEMENT
Section 22.1. This Agreement shall remain in full force and effect from the 25th day of October, 2002 until the 31st day of December, 2005, and shall continue thereafter from year to year until either party to this Agreement desires to terminate this Agreement by giving written notice at least sixty (60) days prior to December 31, 2005, or at least sixty (60) days' written notice prior to any anniversary date thereafter. The parties to this Agreement shall endeavor to satisfactorily negotiate any contemplated change or execute a new Agreement during the sixty (60) day period, after proper notice in writing has been given as provided herein and above. Notice, as specified in this Article, shall be mailed via United States Certified Mail.
IN WITNESS WHEREOF, the parties have hereunto signed their names this 13th day of December, 2002.
SANDERSON FARMS, INC. UNITED FOOD AND COMMERCIAL
(Brazos Processing Division) WORKERS UNION, LOCAL 408
AFL-CIO
/s/Eric G. Erickson III, Div. Mgr. /s/Steve Gault
/s/Lionel Garcia FERM /s/Cesar Garza
/s/Melinda Mullins
/s/Donna Kapel
/s/Helen Servantes
/s/Alma Mendez
|
APPENDIX "A"
WAGE SCHEDULE
EFFECTIVE
CURRENT 1/5/03 1/4/04 1/2/05
PROCESSING
RECEIVING
Lift Truck Operator 8.80 9.15 9.50 9.90
Receiving Dock 8.65 9.00 9.35 9.75
PICKING
Killer 8.90 9.25 9.60 10.00
Floorworker 8.55 8.90 9.25 9.65
Line Operator 8.40 8.75 9.10 9.50
EVISCERATING
Floorworker 8.55 8.90 9.25 9.75
Bird Chiller Operator 8.55 8.90 9.25 9.65
Line Operator 8.40 8.75 9.10 9.50
DRIP LINE
Lift Truck Operator 8.85 9.20 9.55 9.95
Scale Operator 8.65 9.00 9.35 9.75
Floorworker 8.55 8.90 9.25 9.65
Giblet Chiller Operator 8.55 8.90 9.25 9.65
Grader 8.50 8.85 9.20 9.60
Line Operator 8.40 8.75 9.10 9.50
SPECIALTY
Scale Operator 8.65 9.00 9.35 9.75
Floorworker 8.55 8.90 9.25 9.65
Line Operator 8.40 8.75 9.10 9.50
Grader 8.50 8.85 9.20 9.60
Lift Truck Operator 8.85 9.20 9.55 9.95
OVERWRAP
Line Operator 8.40 8.75 9.10 9.50
PAWLINE
Chiller Operator 8.55 8.90 9.25 9.65
Line Operator 8.40 8.75 9.10 9.50
Floorworker 8.55 8.90 9.25 9.65
BOX WASH
Line Operator 8.40 8.75 9.10 9.50
Lift Truck Operator 8.85 9.20 9.55 9.95
MARINATION
Line Operator 8.40 8.75 9.10 9.50
Formulation Mixer 8.55 8.90 9.25 9.65
Floorworker 8.55 8.90 9.25 9.65
Scale Operator 8.65 9.00 9.35 9.75
DEBONING
Line Operator 8.40 8.75 9.10 9.50
Stack Off 8.50 8.85 9.20 9.60
Front Half Puller 8.50 8.85 9.20 9.60
Floorworker 8.55 8.90 9.25 9.65
Scale Operator 8.65 9.00 9.35 9.75
SAW CUT
Line Operator 8.40 8.75 9.10 9.50
Floorworker 8.55 8.90 9.25 9.65
Scale Operator 8.65 9.00 9.35 9.75
POLY BAG
Line Operator 8.40 8.75 9.10 9.50
Grader 8.50 8.85 9.20 9.60
Floorworker 8.55 8.90 9.25 9.65
MDM
Line Operator 8.40 8.75 9.10 9.50
Machine Operator 8.50 8.85 9.20 9.60
Jack Operator 8.50 8.85 9.20 9.60
Floorworker 8.55 8.90 9.25 9.65
Forklift Operator 8.85 9.20 9.55 9.95
CHILLING
Lift Truck Operator 8.85 9.20 9.55 9.95
Chilling Room Operator 8.50 8.85 9.20 9.60
PREPRICE
Data Print Operator 8.65 9.00 9.35 9.75
Line Operator 8.40 8.75 9.10 9.50
SHIPPING
Lift Truck Operator 8.85 9.20 9.55 9.95
Billing Clerk 8.55 8.90 9.25 9.65
Loading Crew 8.50 8.85 9.20 9.60
QUALITY CONTROL
QC Operator 8.65 9.00 9.35 9.75
QC Lab Tech 8.65 9.00 9.35 9.75
|
PURCHASING.
Supply Clerk 8.85 9.20 9.55 9.95
Line Operator 8.40 8.75 9.10 9.50
WASTEWATER
Waste Treatment Operator 8.50 8.85 9.20 9.60
BY-PRODUCTS
By-Products Operator 8.65 9.00 9.35 9.75
MAINTENANCE
Master Skilled Operator I 14.35 14.70 15.05 15.45
Master Skilled Operator II 12.00 12.35 12.70 13.10
Skilled Maintenance Men 11.00 11.35 11.70 12.10
Mechanic 10.25 10.60 10.95 11.35
Mechanic Helper 8.70 9.05 9.40 9.80
Clean-Up Floor Worker 8.55 8.90 9.25 9.65
Clean-Up Line Operators 8.40 8.75 9.10 9.50
RATES FOR NEWLY HIRED EMPLOYEES
1/5/03 1/4/04 1/2/05
Training Rate 6.45 6.55 6.65
Sixty-day Rate 7.45 7.65 7.85
Six-Month Rate 8.00 8.25 8.50
One-Year Rate 8.75 9.10 9.50
|
Newly hired employees in premium classifications above shall receive the rate of that classification as soon as they can perform satisfactorily all of the duties of the classification.
APPENDIX "B"
CHECK-OFF AUTHORIZATION
To: Any Employer under contract with United Food and Commercial Workers Union, Local 408, AFL-CIO.
You are hereby authorized and directed to deduct from my wages, commencing with the next payroll period, an amount equivalent to dues and initiation fees as shall be certified by the President of Local 408, of the United Food and Commercial Workers International Union, AFL-CIO, and remit same to said President.
This authorization and assignment is voluntary, made in consideration
for the cost of representation and collective bargaining and is not
contingent upon my present or future membership in the Union. This
authorization and assignment shall be irrevocable for a period of one
(1) year from the date of execution or until the termination date of
the Agreement between the Employer and Local 408, whichever occurs
sooner, and from year to year thereafter, unless not less than thirty
(30) days and not more than forty-five (45) days prior to the end of
any subsequent yearly period, I give the Employer and Union written
notice of revocation bearing my signature thereto. The President of
Local 480 is authorized to deposit this authorization with any Employer
under contract with Local 408and is further authorized to transfer this
authorization to any other Employer under contract with Local 408 in
the event that I should change employment.
AUTHORIZATION FOR POLITICAL DEDUCTION
I hereby authorize to deduct from my pay the sum of $ each year and/or week at the time when my regular Union dues check-off is deducted from my paycheck, and to forward that amount to the President of UFCW Local 408.
This authorization is signed voluntarily and on the understanding that the Active Ballot Club will use that money to make political contributions and expenditures in connection with Federal, State and Local elections. Contributions or gifts to the UFCW Active Ballot Club are not deductible as charitable contributions for Federal tax purposes.
DATE SIGNATURE
SOCIAL SECURITY NUMBER NAME - PRINT
EXHIBIT 10.18
SANDERSON FARMS, INC.
FORM OF PHANTOM STOCK AGREEMENT
THIS PHANTOM STOCK AGREEMENT ("Phantom Stock Agreement"), dated as of the ____th day of _____, 200__ (the "Date of Grant"), is delivered by Sanderson Farms, Inc., and its subsidiaries and affiliates (collectively referred to as "SFI") to _________________________ (the "Holder"), who is an executive officer or key employee of SFI.
WHEREAS, the Board of Directors of Sanderson Farms, Inc. (the "Board") has approved the grant of phantom stock to certain executive officers or key employees of SFI;
WHEREAS, the Board considers the Holder to be a person who is eligible for grant of phantom stock, and has determined that it would be in the best interest of SFI to grant the phantom stock documented herein.
NOW, THEREFORE, the parties hereto, intending to be legally bound hereby, agree as follows:
1. Grant of Phantom Stock.
(a) Subject to the terms and conditions hereinafter set forth, SFI, with the approval and at the direction of the Board, hereby grants to the Holder, as of the Date of Grant, ______ shares of Phantom Common Stock of SFI ("Phantom Stock" or the "Award" as the case may be) at an award value of $__________ per share ("Award Value"), which value per share is at or above the present fair market value of SFI common stock ("Common Stock").
(b) The Date of Grant is ___________, 200__.
2. Reference to Stock Option Plan.
This Phantom Stock Agreement is intended to correspond to the extent practical to the Sanderson Farms, Inc. and Affiliates Stock Option Plan, as amended and restated to the date hereof ("Plan"). The terms of the Plan, to the extent not inconsistent with this Phantom Stock Agreement, are incorporated herein by reference where indicated. Capitalized terms used in this Phantom Stock Agreement shall have the same meanings ascribed to such terms in the Plan.
3. Term and Exercise.
The Phantom Stock may be converted to cash or Common Stock during a period beginning one year after and ending ten years after the Date of Grant (the "Award Term") in accordance with the following vesting schedule. Except in the event of a change described in Section 6 of this Agreement or, unless a shorter period is provided by the Board, the Phantom Stock shall be converted in accordance with this Section 3. The first year of the Award Term begins one year after the Date of Grant and ends 12 months later. During the first year of the Award Term, no more than 25% of the initial total number of shares of Phantom Stock may be converted to cash or Common Stock by the Holder. During the second year of the Award Term, no more than 50% of the initial total number of shares of Phantom Stock may be converted to cash or Common Stock by the Holder, such percentage to include the percentage, by number of shares, converted in the previous year of the Award Term. During the third year of the Award Term, no more than 75% of the initial total number of shares of Phantom Stock may be exercised and purchased by the Holder, such percentage to include the percentages, by number of shares, previously purchased in earlier years of the Award Term on a cumulative basis. During the fourth year of the Award Term and until the end of the Award Term, 100% of the initial total number of shares of Phantom Stock may be exercised and purchased by the Holder, such percentage to include the percentages, by number of shares, previously purchased in earlier years of the Award Term on a cumulative basis. No fractional shares may be converted. No Phantom Stock shall be converted after the expiration of its Award Term.
4. Termination and Forfeiture of Phantom Stock.
(a) Except as provided in Sections 4(b), 4(c) and 4(d) of this Phantom Stock Agreement, upon termination of the Holder's employment, the Phantom Stock, to the extent not previously converted, shall terminate and be forfeited immediately upon such termination of employment.
(b) Upon termination of the Holder's employment by reason of death of the Holder, the Phantom Stock may be converted, but only to the extent convertible on the date of such death, within one (1) year from and after the date of the Holder's death. The Phantom Stock may be converted by the executor or administrator of the deceased Holder's estate or by a person receiving the Phantom Stock by will or under the laws of descent and distribution of the state in which the Holder resided.
(c) Upon termination of the Holder's employment by reason of permanent and total disability as defined under Section 22(e)(3) of the Internal Revenue Code, the Phantom Stock may be converted, but only to the extent convertible on the date of such permanent and total disability, during the one (1) year period following the date of such termination of the Holder's employment.
(d) Upon termination of the Holder's employment by reason of retirement or disability other than as defined by Section 4(c) of this Agreement, the Phantom Stock may be converted, but only to the extent convertible on the date of such retirement or disability, during the three (3) month period following the date of such termination of the Holder's employment.
(e) A transfer of the Holder's employment from one affiliate of SFI to another shall not be deemed to be a termination of the Holder's employment.
(f) Notwithstanding any other provisions set forth herein or in the Plan, if the Holder shall (i) commit any act of malfeasance or wrongdoing affecting SFI, (ii) breach any covenant not to compete or employment contract with SFI, or (iii) engage in conduct that would warrant the Holder's discharge for cause (excluding general dissatisfaction with the performance of the Holder's duties, but including any act of disloyalty or any conduct clearly tending to bring discredit upon SFI), then any portion of the Phantom Stock not already converted shall immediately terminate and be forfeited and void.
(g) Notwithstanding any other provisions set forth herein or in the Plan, if during the period that the Holder is employed by SFI or during the two year period following the Holder's voluntary termination of employment or his termination by SFI for cause (excluding general dissatisfaction with the performance of the Holder's duties, but including any act of disloyalty or any conduct clearly tending to bring discredit upon SFI) the Holder shall, without the prior written consent of the Board, directly or indirectly, as employee, agent, consultant, stockholder, director, co-partner or in any other individual or representative capacity, own, operate, manage, control, engage in, invest in or participate in any manner in, act as a consultant or advisor to, render services for, or otherwise assist any person or entity that directly or indirectly engages in, the business of producing, marketing, distributing or selling poultry products anywhere that SFI is then doing business (such activities being hereinafter referred to as "Competition"), then: (i) any unexercised portion of the Phantom Stock shall immediately terminate and be void; and (ii) the Holder shall be required, and hereby agrees, upon thirty (30) days' written notice from SFI, to return to SFI in immediately available funds the difference between the exercise price and the fair market value on the date of exercise of the exercised portion of the Phantom Stock. The provisions of this Section 2.06(f) shall not apply, however, to the passive investment by the Holder in publicly traded common equity of any entity that is engaged in the business of producing marketing, distributing or selling poultry products so long as such investment does not exceed two percent of the outstanding common equity of such entity.
The determination of whether the Holder has voluntarily terminated his employment, has been terminated for cause or has engaged in Competition shall be determined by the Board (or, if applicable, a committee thereof appointed pursuant to Section 1.02(d) of the Plan) in good faith and in its sole discretion, and any such determinations by such body shall be final and binding on the Holder.
5. Conversion of Phantom Stock.
(a) Vested shares of Phantom Stock may be converted by a Holder into cash, Common Stock, or both, only in accordance with this Section 5. To convert vested, convertible shares of Phantom Stock, a Holder must deliver or mail to the Treasurer a written notice of conversion substantially in the form attached hereto as Exhibit "A" stating the number of shares of the Holder's Phantom Stock to be converted. Such conversion shall be effective on the date of receipt by the Treasurer (the "Conversion Date").
(b) Upon receipt by the Treasurer of a proper written notice of
conversion by a Holder in accordance with the terms of this Phantom Stock
Agreement, the Holder shall be entitled to receive an amount of cash equal to:
(i) the aggregate Fair Market Value of the shares converted on the Conversion
Date less (ii) the aggregate Award Value of the number of shares of Common Stock
equal to the number of shares converted (the "Conversion Gain"). In the
discretion of the Treasurer, the Company may satisfy its obligation upon
conversion of shares of Phantom Stock by the distribution of that number of
shares of Common Stock having an aggregate Fair Market Value (as of the
Conversion Date) equal to the amount of cash otherwise payable to the Holder,
with a cash settlement to be made for any fractional share interests, or the
Company may settle such obligation in part with shares of Common Stock and in
part with cash.
(c) The Conversion Gain shall be paid by the Company to a Holder subject to such conditions as are deemed advisable by the Treasurer to permit compliance by the Company with the federal and state withholding provisions applicable to employers.
(d) Payment shall also be subject to compliance by the Holder with any written agreement between the Holder and the Company, including an employment agreement or other agreement relating to confidential information; if the Holder breaches any such agreement or engages in any conduct that would entitle SFI to terminate the Phantom Stock pursuant to Section 4(f) of this Phantom Stock Agreement, then the Holder shall immediately forfeit his right to receive any unpaid amounts under this Phantom Stock Agreement, and no further payments shall be made to the Holder hereunder.
6. Adjustment of and Changes in Stock of SFI.
In the event of a reorganization, recapitalization, change of shares, stock split, spinoff, stock dividend, reclassification, subdivision or combination of shares, merger, consolidation, rights offering, or any other change in the corporate structure or shares of capital stock of SFI, the Board (or, if applicable, a committee thereof appointed pursuant to Section 1.02(d) of the Plan) shall make such adjustment as it deems appropriate to the Award in order to preserve, but not increase, the benefits to the Holder; provided, however, that subject to any required action of the stockholders, if SFI shall not be the surviving corporation in any merger, consolidation, or reorganization, then each Holder shall have the right immediately prior to such merger, consolidation or reorganization to exercise his or her outstanding Award, notwithstanding that such option(s) or right(s) may not be fully vested at such time.
7. Fair Market Value.
"Fair Market Value" as of any date and in respect of any share of Common Stock means the closing price on such date or on the next business day, if such date is not a business day, of a share of Common Stock reflected in the NASDAQ National Market System traded under the Symbol SAFM, provided that, if shares of Common Stock shall not have been traded on NASDAQ for more than 10 days immediately preceding such date or if deemed appropriate by the Board (or, if applicable, a committee thereof appointed pursuant to Section 1.02(d) of the Plan) for any other reason, the Fair Market Value of shares of Common Stock shall be as determined by the Board (or, if applicable, a committee thereof appointed pursuant to Section 1.02(d) of the Plan) in such other manner as it may deem appropriate. In no event shall the Fair Market Value of any share of Common Stock be less than its par value.
8. No Rights as a Stockholder.
Neither the Holder nor any personal representative shall be, or shall have any of the rights and privileges of, a stockholder of SFI with respect to any shares of Common Stock purchasable or issuable upon the exercise of this Award, in whole or in part, prior to the issuance of certificates for shares of Common Stock to said person.
9. Insider Trading Short-Swing Profit Liability Exemption Requirements.
Notwithstanding any other provision of this Agreement to the contrary, the Phantom Stock granted under this Agreement shall be transferable (i) by the Holder only by will or under the laws of descent and distribution of the state in which the Holder resided on the date of his death, and (ii) by the Company pursuant to a qualified domestic relations order as defined by the Code or Title I of the Employee Retirement Income Security Act or the Rules thereunder.
10. No Rights of Employment.
Neither the granting of this Phantom Stock nor its exercise shall be construed as granting to the Holder any right with respect to continuance of employment with SFI. Except as may otherwise be limited by a written agreement between SFI and the Holder, and acknowledged by the Holder, the right of SFI to terminate at will the Holder's employment with it at any time (whether by dismissal, discharge, retirement or otherwise) is specifically reserved by SFI.
11. Amendment of Phantom Stock Agreement.
The Board (or, if applicable, a committee thereof appointed pursuant to
Section 1.02(d) of the Plan) may, without the consent of or further
consideration from the Holder, amend, condition or modify this Phantom Stock
Agreement in response to changes in securities or other laws or rules,
regulations or regulatory interpretations thereof applicable to the Phantom
Stock, the Award or the Phantom Stock Agreement or to comply with stock exchange
rules or requirements. The Board (or, if applicable, a committee thereof
appointed pursuant to Section 1.02(d) of the Plan) may amend this Phantom Stock
Agreement otherwise with the written consent of the Holder.
12. Notice.
Any notice to SFI provided for in this instrument shall be addressed to it in care of its Treasurer at its executive offices at Post Office Box 988, Laurel, Mississippi 39441, and any notice to the Holder shall be addressed to the Holder at the current address shown on the payroll records of SFI. Any notice shall be deemed to be duly given if and when properly addressed and posted by registered or certified mail, postage prepaid.
13. Interpretation.
Pursuant to Section 2 of this Phantom Stock Agreement, the terms of the Plan are incorporated herein by reference, and the Phantom Stock shall in all respects be interpreted in accordance with the Plan, where applicable. The Board (or, if applicable, a committee thereof appointed pursuant to Section 1.02(d) of the Plan) shall interpret and construe the Plan and this instrument, and its interpretations and determinations shall be conclusive and binding on the parties hereto and any other person claiming an interest hereunder, with respect to any issue arising hereunder or thereunder.
14. Governing law.
The validity, construction, interpretation and effect of this instrument shall exclusively be governed by and determined in accordance with the laws of the State of Mississippi, except to the extent preempted by federal law, which shall to that extent govern.
15. Compliance with Other Laws and Regulations.
Notwithstanding anything contained herein to the contrary, SFI shall not be required to sell or issue shares of Common Stock under any Award if the issuance thereof would constitute a violation by the Holder or SFI of any provisions of any law or regulation of any governmental authority or any national securities exchange or other forum in which shares of Common Stock are traded (including Section 16 of the 1934 Act); and, as a condition of any sale or issuance of shares of Common Stock under an Award, the Treasurer may require such agreements or undertakings, if any, as the Treasurer may deem necessary or advisable to assure compliance with any such law or regulation. The Plan, the grant and conversion of Phantom Stock hereunder, and the delivery of shares of Common Stock, shall be subject to all applicable federal and state laws, rules and regulations and to such approvals by any government or regulatory agency as may be required.
16. Tax Requirements.
SFI shall have the right to deduct from all amounts hereunder paid in cash or other form, any Federal, state, or local taxes required by law to be withheld with respect to such payments. The Holder receiving shares of Common Stock issued upon redemption of Phantom Stock shall be required to pay SFI the amount of any taxes which SFI is required to withhold with respect to such shares of Common Stock. Such payments shall be required to be made prior to the delivery of any certificate representing such shares of Common Stock. Such payment may be made in cash, by check, or through the delivery of shares of Common Stock owned by the Holder (which may be effected by the actual delivery of shares of Common Stock by the Holder or by SFI's withholding a number of shares to be issued upon the redemption of the Phantom Stock), which shares have an aggregate Fair Market Value equal to the required withholding payment, or any combination thereof.
IN WITNESS WHEREOF, SFI has caused its duly authorized officers to execute and attest this Phantom Stock Agreement, and to apply the corporate seal hereto, and the Holder has placed his or her signature hereon, effective as of the Date of Grant.
SANDERSON FARMS, INC.
ATTEST:
By:
Name:
Title:
ACCEPTED AND AGREED TO:
Holder
EXHIBIT A
NOTICE OF EXERCISE OF PHANTOM STOCK
SANDERSON FARMS, INC.
ATTENTION: Treasurer
Gentlemen:
Notice is hereby given of the undersigned's intent to exercise the Phantom Stock granted to the undersigned pursuant to the Phantom Stock Agreement dated _______________, ______ entered into by and between the undersigned and Sanderson Farms, Inc. The conversion shall be exercised with respect to ________________________ (_____) shares of the Phantom Stock of Sanderson Farms, Inc.
Dated: ________________, ______
EXHIBIT 10.19
SANDERSON FARMS, INC.
BONUS AWARD PROGRAM
(DIVISION MANAGERS)
Effective November 1, 2001
Supercedes November 1, 1997
SANDERSON FARMS, INC.
Bonus Award Program
as of November 1, 1997
I. PURPOSE
The Board of Directors of Sanderson Farms, Inc. has determined that in addition to the Company's existing competitive and equitable total compensation package, it is desirable to maintain a bonus award program for its salaried employees. The purposes for such a program include:
A. To encourage excellence and high levels of performance.
B. To recognize the contributions of the salaried employees to the overall profitability of the Company.
C. To encourage all employees from every division in the Company to cooperate, share information and work together as a team for the overall benefit of the Company and its shareholders.
II. PARTICIPATION AND MAXIMUM AWARD
The Executive Committee of Sanderson Farms, Inc. will select and recognize personnel eligible to participate in the bonus award program, and reserves the right to review and change the class of eligible employees at any time. Those now designated include:
A. Salaried personnel within the corporate structure of Sanderson Farms, Inc., Sanderson Farms, Inc. (Production Division), Sanderson Farms, Inc. (Processing Division) and Sanderson Farms, Inc. (Foods Division).
B. All salaried management and accounting trainees within the corporate structure.
SANDERSON FARMS, INC.
Bonus Award Program
Effective Nov. 1, 2001
Supercedes Nov. 1, 1997
III. ELIGIBILITY
EMPLOYMENT/PARTICIPATION
Except in the case of death, disability or retirement, as set forth below, employees must be employed in a designated position on October 31 of the applicable fiscal year and must have been employed in a designated position for period of nine months prior to the end of the fiscal year to be eligible to participate in the bonus award program. Base salary for this purpose shall include regular compensation only, and shall not include bonus award payments and any other miscellaneous payments that might be treated as income to the employee.
DEATH, DISABILITY AND RETIREMENT
If an eligible employee terminates employment with the Company during the fiscal year before October 31 as a result of death, disability or retirement, and had been in a designated position for a period of at least nine months, such employee will be eligible to participate in the Bonus Award Program notwithstanding the fact that the employee is not employed on October 31, and the base salary paid to such employee during that portion of the year during which he or she was employed in a designated position will be used to calculate the amount of such employee's bonus award.
EXTRAORDINARY CIRCUMSTANCES
Extraordinary circumstances will be subject to review by the Executive Committee.
SANDERSON FARMS, INC.
Bonus Award Program
Effective Nov. 1, 1997
IV. DETERMINATION OF AWARD AND PAYMENT
Bonus award programs for many corporations focus in some form or another on the real dollar profits earned by the corporation within a given time frame. This method of determining bonuses to be paid to employees recognizes that bonuses should be paid to employees only after a fair and equitable return has been earned for the shareholders who own the company. With this basic philosophy in mind, the Board has determined that no bonuses will be paid under this program unless net return on average stockholders' equity after consideration is taken for any bonus paid under this program for the year exceeds eight percent (8%). After this minimum threshold is met, the Bonus Award Program will become effective, and bonuses will be paid if the other criteria described in this program are met.
In recognition of the fact that one of our primary obligations as employees of this Company is to our shareholders, the Board of Directors has determined that net profits made by the consolidated corporations [Sanderson Farms, Inc., Sanderson Farms, Inc. (Production Division), Sanderson Farms, Inc. (Processing Division) and Sanderson Farms, Inc. (Foods Division)] on a per share basis for the period November 1 through October 31 of each year will be the primary basis for bonus awards. For all employees of Sanderson Farms other than certain management level employees, this will be the sole basis for determining bonus awards.
Although the Board has determined that net profits earned for shareholders of the Company should be the primary method of determining the bonuses to be paid to employees, the Board has also recognized that certain management level employees have responsibility for and more direct control over the operating performance and profitability of the Company. In recognition of this fact, the Board has concluded that a certain percentage of your bonus should be determined by evaluating the operating and profitability performance of the Company relative to its peers and competitors. Therefore, while a portion of your bonus will be determined by the Company's earnings per share performance, a portion will also be determined by evaluating the performance of the Company as compared to our peers and competitors by Agri Stats for the poultry division, and certain net income growth targets for managers in the foods division, all as described herein.
The audited annual financial statements, on a consolidated basis, of Sanderson Farms, Inc. will be the measuring tool for the net return to shareholders portion of the bonus award program. The annual bonus award will be paid to participants in the bonus award program after the outside auditors have completed their annual audit of the corporations, which is usually approximately two (2) months after the end of the fiscal year.
The Company's performance relative to its peers and competitors as reported by Agri Stats will be used to evaluate and determine bonuses paid to those employees whose bonuses are determined in part by such performance. The appropriate measuring tool as set forth in this Bonus Award Program as reported by Agri Stats for the twelve (12) month period ending on October 31 each year will be used to determine if a bonus has been earned by such employees.
SANDERSON FARMS, INC.
Bonus Award Program
Effective November 1, 2001
Supercedes Nov. 1, 1997
V. OBJECTIVES AND FORMULAS FOR DETERMINATION OF THE BONUS AWARD
A. EPS Bonus
All salaried employees will receive a bonus if the net income per share objectives set forth below are met, and if the minimum return on average stockholders equity for the year is earned. The annual audited financial statements, on a consolidated basis, of Sanderson Farms, Inc., will be the measuring tool for this portion of the Bonus Award Program. The annual bonus award will be paid to participants after the outside auditors have completed their annual audit of the consolidated corporation.
The earnings per share objectives and the respective percentage of employees' bonus dependent upon EPS earned for the fiscal year (November 1 thru October 31) are as follows:
RANK PER SHARE RETURN* PERCENTAGE OF AWARD
---- ------------------ -------------------
Best (1st) $2.6568 100.0%
2nd $2.6022 95.5%
3rd $2.5407 91.0%
4th $2.4793 86.5%
5th $2.4178 82.0%
6th $2.3564 77.5%
7th $2.2948 73.0%
8th $2.2333 68.5%
9th $2.1718 64.0%
10th $2.1104 59.5%
11th $2.0488 55.0%
12th $1.9873 50.5%
13th $1.9259 46.0%
14th $1.8644 41.5%
15th $1.8028 37.0%
16th $1.7414 32.5%
17th $1.6799 28.0%
18th $1.6181 23.5%
19th $1.5568 19.0%
20th BELOW ZERO (0)
|
*Net of bonus. The per share return targets were calculated using 12,992,876 shares outstanding. Adjustments to these targets will be made to reflect changes in the number of shares outstanding resulting from any merger, consolidation, reorganization, re-capitalization, re-incorporation, stock-splits, stock dividend, stock repurchase, or other changes in the corporate structure of the Company. Furthermore, the target per share return numbers were calculated based on a target net return on projected sales. The Company reserves the right to adjust these targets in the event of a substantial fluctuation in sales pounds or dollars during the year.
The following formula will be utilized to determine the exact dollar amount of a participant's bonus award dependent upon EPS performance.
A = Gross Award
S = Base Salary (excluding bonus award
payments and other items of
miscellaneous income) of the
Participant during that portion
of the year in which he or she
was employed in a designated
position.
P = Percentage of award earned based on above
schedule
M = Percent of salary eligible to be earned
as a bonus based on EPS performance.
|
FORMULA
S X P X M = A
As with any awards made under this Bonus Award Program, no bonus will be paid unless total net income return (after bonus) on average stockholders' equity for the year exceeds eight percent (8%). Net return on average stockholders' equity will be computed by taking the average of beginning and ending stockholders' equity for the applicable year, and dividing that number into net income for the year.
The percent of salary eligible to be earned as a bonus based on EPS performance ("M" in the above formula) for the fiscal year is 25%.
B. Performance Based Bonus
All processing and production division managers will receive a bonus based in part upon the Company's earnings per share performance, in part based on the Company's overall corporate Agri Stats performance, and in part based on the performance of the complexes to which they are assigned (for example, "big bird debone" complexes will be grouped and "tray pack" complexes will be grouped) relative to the Company's peers and competitors as reported by Agri Stats. The overall corporate Agri Stats performance measure will be the Company's performance relative to its peers and competitors as reported by Agri Stats in its "bottom line analysis, per head" report, net of bonus. The performance of the applicable complexes will be measured by the complexes' combined performance relative to its peers and competitors as reported by corporate Agri Stats in its complex "operational profit analysis, per head" report, net of bonus.
These managers will be paid in accordance with the following schedules:
Percentage of Salary Assigned Corporate
Eligible to be Earned Complex Agri Stats
As Bonus Based Operating Bottom
on Performance Profit Line
Factors Report Report
(Per Head) (Per Head)
(Percentage of Award Earned) (Percentage of Award Earned)
Prod. Div. Managers, 50% 50%
Proc. Div. Managers, 50% 50%
By-Products Div. Mgr. 20% 100%
HIGH AVERAGE Top 20% Top 20%
Prod. Div. Managers, 33.3% 33.3%
Proc. Div. Managers 33.3% 33.3%
By-Products Div. Mgr. 20% 66.67%
LOW AVERAGE Top 30% Top 30%
Prod. Div. Managers, 16.7% 16.7%
Proc. Div. Managers 16.7% 16.7%
By-Products Div. Mgr. 20% 33.3%
|
The division manager at the Foods Division will receive a bonus based in part upon the Company's earnings per share performance as described on pages 5 and 6 of this plan, and in part based on the Foods Division's performance as measured by "net income before tax growth", "net income return on sales, before tax" and Corporate Agri Stats Bottom Line Analysis, per head, report as described below. The final results of the Foods Division will be determined after the Company's external auditors have completed their audit at the end of each fiscal year, which is completed approximately two months after the last day of each fiscal year end.
Percentage of Salary
Eligible to be Earned Corporate
As Bonus Based Target Pre Target Pre Agri Stats
On Performance Tax Return Tax Income Bottom Line
Factors On Sales Growth Rpt (Per Head)
(Percentage of Award Earned)
Target 15% 59% Top 10%
Division Mgr.-Foods 20% 40% 40% 20%
14% 49%
Division Mgr.-Foods 20% 34% 34%
Average 13% 38% Top 20%
Division Mgr.-Foods 20% 28% 28% 10%
12% 27%
Division Mgr.-Foods 20% 22% 22%
Low 11% 17% Top 30%
Division Mgr.-Foods 20% 16% 16% 5%
|
The following formula will be utilized for all employees whose bonus is to be determined in part by factors other than EPS performance to determine that portion of the award dependent upon such factors:
A = Gross Award
S = Salary (excluding bonus award
payments and other items of miscellaneous
income) of the Participant during that portion
of the year in which he or she was employed in a
designated position.
P = Percentage of award earned based on performance
factor
M = Percentage of salary eligible to be earned and
paid as a bonus on performance factor.
|
FORMULA
S X P X M = A
SANDERSON FARMS, INC.
Bonus Award Program
Effective Nov. 1, 2001
Supercedes Nov. 1, 1997
VI. PARAMETERS
This bonus award program has been designed to encourage teamwork and cooperation among all of the divisions of Sanderson Farms, and to ensure that Sanderson Farms is consistently among the leaders in profitability in the broiler and prepared foods industry. The program is also designed to pay a bonus to employees only after the Company has returned to its shareholders a fair and equitable return.
1. In the event of extraordinary operating conditions that were unforeseen when setting the objectives and percentages in this bonus award program, such circumstances will be considered by the Executive Committee of Sanderson Farms, Inc. in making awards.
2. In the event of possible reporting errors affecting the ranking, such circumstances will be considered by the Executive Committee of Sanderson Farms, Inc. in making awards.
3. In the event changes in laws or accounting procedures affect the ranking, such circumstances will be considered by the Executive Committee of Sanderson Farms, Inc. in making awards.
4. The per share return targets were calculated using 12,992,876 shares outstanding. Adjustments to these targets will be made to reflect changes in the number of shares outstanding resulting from any merger, consolidation, reorganization, re-capitalization, re-incorporation, stock-splits, stock dividend, stock repurchase, or other changes in the corporate structure of the Company. Furthermore, the target per share return numbers were calculated based on a target net return on projected sales. The Company reserves the right to adjust these targets in the event of a substantial fluctuation in sales pounds or dollars during the year.
SANDERSON FARMS, INC.
BONUS AWARD PROGRAM
(EXECUTIVE COMMITTEE)
Effective November 1, 2001
Supercedes November 1, 1997
SANDERSON FARMS, INC.
Bonus Award Program
Effective Nov. 1, 1997
I. PURPOSE
The Board of Directors of Sanderson Farms, Inc. has determined that in addition to the Company's existing competitive and equitable total compensation package, it is desirable to maintain a bonus award program for its salaried employees. The purposes for such a program include:
A. To encourage excellence and high levels of performance.
B. To recognize the contributions of the salaried employees to the overall profitability of the Company.
C. To encourage all employees from every division in the Company to cooperate, share information and work together as a team for the overall benefit of the Company and its shareholders.
II. PARTICIPATION AND MAXIMUM AWARD
The Executive Committee of Sanderson Farms, Inc. will select and recognize personnel eligible to participate in the bonus award program, and reserves the right to review and change the class of eligible employees at any time. Those now designated include:
A. Salaried personnel within the corporate structure of Sanderson Farms, Inc., Sanderson Farms, Inc. (Production Division), Sanderson Farms, Inc. (Processing Division) and Sanderson Farms, Inc. (Foods Division).
B. All salaried management and accounting trainees within the corporate structure.
The maximum bonus award achievable will vary depending on the employee's position in the Company.
SANDERSON FARMS, INC.
Bonus Award Program
Effective Nov. 1, 2001
Supercedes Nov. 1, 1997
III. ELIGIBILITY
EMPLOYMENT/PARTICIPATION LEVEL
Except in the case of death, disability or retirement, as set forth below, employees must be employed in a designated position on October 31 of the applicable fiscal year and must have been employed in a designated position for a period of nine months prior to the end of the fiscal year to be eligible to participate in the bonus award program. Base salary for this purpose shall include regular compensation only, and shall not include bonus award payments and any other miscellaneous payments that might be treated as income to the employee.
DEATH, DISABILITY AND RETIREMENT
If an eligible employee terminates employment with the Company during the fiscal year before October 31 as a result of death, disability or retirement, and had been employed in a designated position for a period of at least nine months, such employee will be eligible to participate in the Bonus Award Program notwithstanding the fact that the employee is not employed on October 31, and the base salary paid to such employee during that portion of the year during which he or she was employed in a designated position will be used to calculate the amount of such employee's bonus award.
EXTRAORDINARY CIRCUMSTANCES
Extraordinary circumstances will be subject to review by the Executive Committee.
SANDERSON FARMS, INC.
Bonus Award Program
Effective Nov. 1, 1997
IV. DETERMINATION OF AWARD AND PAYMENT
Bonus award programs for many corporations focus in some form or another on the real dollar profits earned by the corporation within a given time frame. This method of determining bonuses to be paid to employees recognizes that bonuses should be paid to employees only after a fair and equitable return has been earned for the shareholders who own the company. With this basic philosophy in mind, the Board has determined that no bonuses will be paid under this program unless net return on average stockholders' equity after consideration is taken for any bonus paid under this program for the year exceeds eight percent (8%). After this minimum threshold is met, the Bonus Award Program will become effective, and bonuses will be paid if the other criteria described in this program are met.
In recognition of the fact that one of our primary obligations as employees of this Company is to our shareholders, the Board of Directors has determined that net profits made by the consolidated corporations [Sanderson Farms, Inc., Sanderson Farms, Inc. (Production Division), Sanderson Farms, Inc. (Processing Division) and Sanderson Farms, Inc. (Foods Division)] on a per share basis for the period November 1 through October 31 of each year will be the primary basis for bonus awards. For all employees of Sanderson Farms other than those management level employees specifically described in this program, this will be the sole basis for determining bonus awards.
Although the Board has determined that net profits earned for shareholders of the Company should be the primary method of determining the bonuses to be paid to employees, the Board has also recognized that certain management level employees have responsibility for and more direct control over the operating performance and profitability of the Company. In recognition of this fact, the Board has concluded that a certain percentage of such employees' bonus should be determined by evaluating the operating and profitability performance of the Company relative to its peers and competitors. Therefore, while a portion of such employees' bonus will be determined by the Company's earnings per share performance, a portion of such employees' bonus will also be determined by evaluating the performance of the Company as compared to our peers and competitors by Agri Stats for the poultry division, and certain net income growth targets for managers in the foods division, all as described herein.
The audited annual financial statements, on a consolidated basis, of Sanderson Farms, Inc. will be the measuring tool for the net return to shareholders portion of the bonus award program. The annual bonus award will be paid to participants in the bonus award program after the outside auditors have completed their annual audit of the corporations, which is usually approximately two (2) months after the end of the fiscal year.
The Company's performance relative to its peers and competitors as reported by Agri Stats will be used to evaluate and determine bonuses paid to those employees whose bonuses are determined in part by such performance. The appropriate measuring tool as set forth in this Bonus Award Program as reported by Agri Stats for the twelve (12) month period ending on October 31 each year will be used to determine if a bonus has been earned by such employees.
SANDERSON FARMS, INC.
Bonus Award Program
Effective November 1, 2001
Supercedes November 1, 1997
V. OBJECTIVES AND FORMULAS FOR DETERMINATION OF THE BONUS AWARD
A. All salaried employees
All salaried employees will receive a bonus if the net income per share objectives set forth below are met, and if the minimum return on average stockholders equity for the year is earned. The annual audited financial statements, on a consolidated basis, of Sanderson Farms, Inc., will be the measuring tool for this portion of the Bonus Award Program. The annual bonus award will be paid to participants after the outside auditors have completed their annual audit of the consolidated corporation.
The earnings per share objectives and the respective percentage of employees' bonus dependent upon EPS earned for the fiscal year (November 1 thru October 31) are as follows:
RANK PER SHARE RETURN* PERCENTAGE OF AWARD
---- ----------------- -------------------
Best (1st) $2.6568 100.0%
2nd $2.6022 95.5%
3rd $2.5407 91.0%
4th $2.4793 86.5%
5th $2.4178 82.0%
6th $2.3564 77.5%
7th $2.2948 73.0%
8th $2.2333 68.5%
9th $2.1718 64.0%
10th $2.1104 59.5%
11th $2.0488 55.0%
12th $1.9873 50.5%
13th $1.9259 46.0%
14th $1.8644 41.5%
15th $1.8028 37.0%
16th $1.7414 32.5%
17th $1.6799 28.0%
18th $1.6181 23.5%
19th $1.5568 19.0%
20th BELOW ZERO (0)
|
*Net of bonus. The per share return targets were calculated using 12,992,876 shares outstanding. Adjustments to these targets will be made to reflect changes in the number of shares outstanding resulting from any merger, consolidation, reorganization, re-capitalization, re-incorporation, stock-splits, stock dividend, stock repurchase, or other changes in the corporate structure of the Company. Furthermore, the target per share return numbers were calculated based on a target net return on projected sales. The Company reserves the right to adjust these targets in the event of a substantial fluctuation in sales pounds or dollars during the year.
The following formula will be utilized to determine the exact dollar amount of a participant's bonus award dependent upon EPS performance.
A = Gross Award
S = Base Salary (excluding bonus
award payments and other items of
miscellaneous income) of the
Participant during that portion
of the year in which he or she
was employed in a designated
position.
P = Percentage of award earned based on above schedule
M = Percent of salary eligible to be earned as a bonus based on
EPS performance.
FORMULA
|
S X P X M = A
SANDERSON FARMS, INC.
Bonus Award Program
Effective Nov. 1, 2001
Supercedes Nov. 1, 1997
As with any awards made under this Bonus Award Program, no bonus will be paid unless total net income return (after bonus) on average stockholders' equity for the year exceeds eight percent (8%). Net return on average stockholders' equity will be computed by taking the average of beginning and ending stockholders' equity for the applicable year, and dividing that number into net income for the year.
For all employees other than those specifically set forth below, the percent of salary eligible to be earned as a bonus based on EPS performance ("M" in the above formula) is 25%. The management level employees set forth below shall be eligible to earn a bonus based on EPS performance equal to the percent of their salary as set forth below ("M" in the above formula):
CEO 50% CFO, 35% VP-Sales, 35% Dir.-Marketing, 35% Dir.-Production 35% Dir.-Processing 35% |
B. Executive Committee
Bonus awards under this Bonus Award Program for the Chief Executive Officer, Chief Financial Officer, VP-Sales, Director of Marketing, Director of Production, Director of Processing, Director of Development, the Controller, the Director of Administration, the Director of Technical Services, the Director of Sales and the Chief Financial Analyst will be granted based on a combination of earnings per share performance and general corporate performance as measured against the Company's peers and competitors as reported by Agri Stats. For purposes of calculating bonuses awarded and paid to individuals in these positions based on operating performance, the corporate Agri Stats measure will be as reported in Agri Stats' "bottom line analysis, per head" report, net of bonus. Awards made to these individuals based on the operating performance factor will be as follows:
Percentage of Salary
Eligible to be Earned as Corporate Agri Stats
Bonus on Operating Bottom Line
Performance Factors Report (per head)
(Percentage of Award Earned)
TARGET TOP 10%
CEO 50% 100%
CFO, VP Sales, 35% 100%
Dir. Mktg, Dir. Proc. 35% 100%
Dir.Prod. 35% 100%
Controller, Dir. Admn., 25% 100%
Dir.Tech Svcs., Dir. Sales , 25% 100%
Dir. Devlop., Chief Analyst 25% 100%
HIGH AVERAGE Top 20%
CEO 50% 66 2/3%
CFO, VP Sales, 35% 66 2/3%
Dir.-Marketing, 35% 66 2/3%
Dir.-Prod., Dir.-Proc. 35% 66 2/3%
Controller, Dir.-Admin., 25% 66 2/3%
Dir-Tech Svcs., Dir.-Sales, 25% 66 2/3%
Dir. Develop.,Chief Analyst 25% 66 2/3%
LOW AVERAGE Top 30%
CEO 50% 33 1/3%
CFO, VP Sales, 35% 33 1/3%
Dir.-Marketing, 35% 33 1/3%
Dir.-Prod., Dir.-Proc., 35% 33 1/3%
Controller, Dir.-Admin, 25% 33 1/3%
Dir-Tech Svcs., Dir.-Sales, 25% 33 1/3%
Dir. Develop.,Chief Analyst 25% 33 1/3%
|
The following formula will be utilized for all employees whose bonus is to be determined in part by factors other than EPS performance to determine that portion of the award dependent upon such factors:
A = Gross Award
S = Base Salary (excluding bonus award
payments and other items of
miscellaneous income) of the
Participant during that portion of
the year in which he or she was
employed in a designated position.
P = Percentage of award earned based on performance factor
M = Percentage of salary eligible to be earned and
paid as a bonus on performance factor.
FORMULA
S X P X M = A
|
SANDERSON FARMS, INC.
Bonus Award Program
Effective Nov. 1, 2001
Supercedes Nov. 1, 1997
VI. PARAMETERS
This bonus award program has been designed to encourage teamwork and cooperation among all of the divisions of Sanderson Farms, and to ensure that Sanderson Farms is consistently among the leaders in profitability in the broiler and prepared foods industry. The program is also designed to pay a bonus to employees only after the Company has returned to its shareholders a fair and equitable return.
1. In the event of extraordinary operating conditions that were unforeseen when setting the objectives and percentages in this bonus award program, such circumstances will be considered by the Executive Committee of Sanderson Farms, Inc. in making awards.
2. In the event of possible reporting errors affecting the ranking, such circumstances will be considered by the Executive Committee of Sanderson Farms, Inc. in making awards.
3. In the event changes in laws or accounting procedures affect the ranking, such circumstances will be considered by the Executive Committee of Sanderson Farms, Inc. in making awards.
4. The per share return targets were calculated using 12,992,876 shares outstanding. Adjustments to these targets will be made to reflect changes in the number of shares outstanding resulting from any merger, consolidation, reorganization, re-capitalization, re-incorporation, stock-splits, stock dividend, stock repurchase, or other changes in the corporate structure of the Company. Furthermore, the target per share return numbers were calculated based on a target net return on projected sales. The Company reserves the right to adjust these targets in the event of a substantial fluctuation in sales pounds or dollars during the year.
SANDERSON FARMS, INC.
BONUS AWARD PROGRAM
(GENERAL OFFICE PERFORMANCE AWARDS PARTICIPANTS)
Effective November 1, 2001
Supercedes November 1, 1997
SANDERSON FARMS, INC.
Bonus Award Program
Effective Nov. 1, 1997
I. PURPOSE
The Board of Directors of Sanderson Farms, Inc. has determined that in addition to the Company's existing competitive and equitable total compensation package, it is desirable to maintain a bonus award program for its salaried employees. The purposes for such a program include:
A. To encourage excellence and high levels of performance.
B. To recognize the contributions of the salaried employees to the overall profitability of the Company.
C. To encourage all employees from every division in the Company to cooperate, share information and work together as a team for the overall benefit of the Company and its shareholders.
II. PARTICIPATION AND MAXIMUM AWARD
The Executive Committee of Sanderson Farms, Inc. will select and recognize personnel eligible to participate in the bonus award program, and reserves the right to review and change the class of eligible employees at any time. Those now designated include:
A. Salaried personnel within the corporate structure of Sanderson Farms, Inc., Sanderson Farms, Inc. (Production Division), Sanderson Farms, Inc. (Processing Division) and Sanderson Farms, Inc. (Foods Division).
B. All salaried management and accounting trainees within the corporate structure.
SANDERSON FARMS, INC.
Bonus Award Program
Effective Nov. 1, 2001
Supercedes Nov. 1, 1997
III. ELIGIBILITY
EMPLOYMENT/PARTICIPATION
Except in the case of death, disability or retirement, as set forth below, employees must be employed in a designated position on October 31 of the applicable fiscal year and must have been employed in a designated position for a period of nine months prior to the end of the fiscal year to be eligible to participate in the bonus award program. Base salary for this purpose shall include regular compensation only, and shall not include bonus award payments and any other miscellaneous payments that might be treated as income to the employee.
DEATH, DISABILITY AND RETIREMENT
If an eligible employee terminates employment with the Company during the fiscal year before October 31 as a result of death, disability or retirement, and had been employed in a designated position for a period of at least nine months, such employee will be eligible to participate in the Bonus Award Program notwithstanding the fact that the employee is not employed on October 31, and the base salary paid to such employee during that portion of the year during which he or she was employed in a designated position will be used to calculate the amount of such employee's bonus award.
EXTRAORDINARY CIRCUMSTANCES
Extraordinary circumstances will be subject to review by the Executive Committee.
SANDERSON FARMS, INC.
Bonus Award Program
Effective Nov. 1, 1997
IV. DETERMINATION OF AWARD AND PAYMENT
Bonus award programs for many corporations focus in some form or another on the real dollar profits earned by the corporation within a given time frame. This method of determining bonuses to be paid to employees recognizes that bonuses should be paid to employees only after a fair and equitable return has been earned for the shareholders who own the company. With this basic philosophy in mind, the Board has determined that no bonuses will be paid under this program unless net return on average stockholders' equity after consideration is taken for any bonus paid under this program for the year exceeds eight percent (8%). After this minimum threshold is met, the Bonus Award Program will become effective, and bonuses will be paid if the other criteria described in this program are met.
In recognition of the fact that one of our primary obligations as employees of this Company is to our shareholders, the Board of Directors has determined that net profits made by the consolidated corporations [Sanderson Farms, Inc., Sanderson Farms, Inc. (Production Division), Sanderson Farms, Inc. (Processing Division) and Sanderson Farms, Inc. (Foods Division)] on a per share basis for the period November 1 through October 31 of each year will be the primary basis for bonus awards. For all employees of Sanderson Farms other than certain management level employees, this will be the sole basis for determining bonus awards.
Although the Board has determined that net profits earned for shareholders of the Company should be the primary method of determining the bonuses to be paid to employees, the Board has also recognized that certain management level employees have responsibility for and more direct control over the operating performance and profitability of the Company. In recognition of this fact, the Board has concluded that a certain percentage of your bonus should be determined by evaluating the operating and profitability performance of the Company relative to its peers and competitors. Therefore, while a portion of your bonus will be determined by the Company's earnings per share performance, a portion of your bonus will also be determined by evaluating the performance of the Company as compared to our peers and competitors by Agri Stats for managers in the poultry division, and based on certain net income growth targets for managers in the foods division, all as described herein.
The audited annual financial statements, on a consolidated basis, of Sanderson Farms, Inc. will be the measuring tool for the net return to shareholders portion of the bonus award program. The annual bonus award will be paid to participants in the bonus award program after the outside auditors have completed their annual audit of the corporations, which is usually approximately two (2) months after the end of the fiscal year.
The Company's performance relative to its peers and competitors as reported by Agri Stats will be used to evaluate and determine bonuses paid to those employees whose bonuses are determined in part by such performance. The appropriate measuring tool as set forth in this Bonus Award Program as reported by Agri Stats for the twelve (12) month period ending on October 31 each year will be used to determine if a bonus has been earned by such employees.
SANDERSON FARMS, INC.
Bonus Award Program
Effective November 1, 1997
Supercedes Nov. 1, 1997
V. OBJECTIVES AND FORMULAS FOR DETERMINATION OF THE BONUS AWARD
A. EPS Performance
All salaried employees will receive a bonus if the net income per share objectives set forth below are met, and if the minimum return on average stockholders equity for the year is earned. The annual audited financial statements, on a consolidated basis, of Sanderson Farms, Inc., will be the measuring tool for this portion of the Bonus Award Program. The annual bonus award will be paid to participants after the outside auditors have completed their annual audit of the consolidated corporation.
The earnings per share objectives and the respective percentage of employees' bonus dependent upon EPS earned for the fiscal year (November 1 thru October 31) are as follows:
RANK PER SHARE RETURN* RCENTAGE OF AWARD
---- ------------------ -----------------
Best (1st) $2.6568 100.0%
2nd $2.6022 95.5%
3rd $2.5407 91.0%
4th $2.4793 86.5%
5th $2.4178 82.0%
6th $2.3564 77.5%
7th $2.2948 73.0%
8th $2.2333 68.5%
9th $2.1718 64.0%
10th $2.1104 59.5%
11th $2.0488 55.0%
12th $1.9873 50.5%
13th $1.9259 46.0%
14th $1.8644 41.5%
15th $1.8028 37.0%
16th $1.7414 32.5%
17th $1.6799 28.0%
18th $1.6181 23.5%
19th $1.5568 19.0%
20th BELOW ZERO (0)
|
*Net of bonus. The per share return targets were calculated using 12,992,876 shares outstanding. Adjustments to these targets will be made to reflect changes in the number of shares outstanding resulting from any merger, consolidation, reorganization, re-capitalization, re-incorporation, stock-splits, stock dividend, stock repurchase, or other changes in the corporate structure of the Company. Furthermore, the target per share return numbers were calculated based on a target net return on projected sales. The Company reserves the right to adjust these targets in the event of a substantial fluctuation in sales pounds or dollars during the year.
The following formula will be utilized to determine the exact dollar amount of a participant's bonus award dependent upon EPS performance.
A = Gross Award
S = Base Salary (excluding bonus award
payments and other items of
miscellaneous income) of the
Participant during that portion
of the year in which he or she
was employed in a designated
position.
P = Percentage of award earned based on above schedule
M = Percent of salary eligible to be earned as a bonus based on
EPS performance.
FORMULA
S X P X M = A
|
As with any awards made under this Bonus Award Program, no bonus will be paid unless total net income return (after bonus) on average stockholders' equity for the year exceeds eight percent (8%). Net return on average stockholders' equity will be computed by taking the average of beginning and ending stockholders' equity for the applicable year, and dividing that number into net income for the year.
The percent of salary eligible to be earned as a bonus based on EPS performance ("M" in the above formula) for the fiscal year is 25%.
B. Performance Based Bonus
Bonus awards under this Bonus Award Program for the Nutritionist, Veterinarian, Assistant to Director of Live Production, Corporate Chill Pack Coordinator and Quality Assurance Manager will be granted based on a combination of earnings per share performance and general corporate performance as measured against the Company's peers and competitors as reported by Agri Stats. For purposes of calculating bonuses awarded and paid to individuals in these positions based on operating performance, the corporate Agri Stats measure will be as reported in Agri Stats' "bottom line analysis, per head, report." Awards made to these individuals based on the operating performance factor will be as follows:
Percentage of Salary
Eligible to be Earned as Corporate Agri Stats
Bonus on Operating Bottom Line
Performance Factors Report (Per Head)
(Percentage of Award Earned)
TARGET Top 10%
Corp. Processing Mgr. 20% 100%
Nutritionist, Veterinarian, 15% 100%
Asst. to Dir. of Live Prod. 15% 100%
Corp. Chill Pack Coord. 15% 100%
Quality Assurance Mgr 15% 100%
Corp. Maint. Mgr. 15% 100%
HIGH AVERAGE Top 20%
Corp. Processing Mgr. 20%
66 2/3%
Nutritionist, Veterinarian, 15% 66 2/3%
Asst. to Dir. Of Live Prod., 15% 66 2/3%
Corp. Chill Pack Coord. 15% 66 2/3%
Quality Assurance Mgr 15% 66 2/3%
Corp. Maint. Mgr. 15% 66 2/3%
LOW AVERAGE Top 30%
Corp. Processing Mgr. 20% 33 1/3%
Nutritionist, Veterinarian, . 15% 33 1/3%
Asst. to Dir. of Live Prod. 15% 33 1/3%
Corp. Chill Pack Coord. 15% 33 1/3%
Quality Assurance Mgr 15% 33 1/3%
Corp. Maint. Mgr. 15% 33 1/3%
|
All poultry sales managers will receive a bonus based in part upon the Company's earnings per share performance, in part based on the Company's overall corporate Agri Stats performance, and in part based on the performance of the complexes to which they are assigned (for example, "big bird debone" complexes will be grouped and "tray pack" complexes will be grouped) relative to the Company's peers and competitors as reported by Agri Stats. The overall corporate Agri Stats performance measure will be the Company's performance relative to its peers and competitors as reported by Agri Stats in its "bottom line analysis, per head" report. The performance of the applicable complexes will be measured by the complexes' combined performance relative to its peers and competitors as reported by corporate Agri Stats in its complex "operational profit analysis, per head" report.
These managers will be paid in accordance with the following schedule:
Percentage of Salary Assigned Corporate
Eligible to be Earned Complex Agri Stats
As Bonus Based Operations Bottom
On Performance Profit Line
Factors Agri Stats Report
(Per Head)
(Percentage of (Percentage of
Award Earned) Award Earned)
TARGET Top 10% Top 10%
Manager F/F & Export Sales 20% 50% 50%
Manager Debone/MDM Sales 20% 50% 50%
Manager Cust. Relations 20% 100.0%
Sales Managers 15% 50% 50%
HIGH AVERAGE Top 20% Top 20%
Manager F/F & Export Sales 20% 33.3% 33.3%
Manager Debone/MDM Sales 20% 33.3% 33.3%
Manager Cust. Relations 20% 66.67%
Sales Managers 15% 33.3% 33.3%
LOW AVERAGE Top 30% Top 30%
Manager F/F & Export Sales 20% 16.7% 16.7%
Manager Debone/MDM Sales 20% 16.7% 16.7%
Manager Cust. Relations 20% 33.3%
Sales Managers 15% 16.7% 16.7%
|
The Foods Sales Managers will receive a bonus based in part upon the Company's earnings per share performance as described on pages 5 and 6 of this plan, and in part based on the Foods Division's performance as measured by "net before tax income growth", "net income before tax return on sales" and Corporate Agri Stats Bottom Line Analysis, per head, report as described below. The final results of the Foods Division will be determined after the Company's external auditors have completed their audit at the end of each fiscal year, which is completed approximately two months after the last day of each fiscal year end.
Percentage of Salary
Eligible to be Earned Corporate
As Bonus Based Target Pre Target Pre Agri Stats
On Performance Tax Return Tax Income Bottom Line
Factors On Sales Growth Rpt (Per Head)
(Percentage of Award Earned)
Target 15% 59% Top 10%
Manager Foods Div. Sales 20% 40% 40% 20%
Foods Sales Manager 15% 40% 40% 20%
Prod, Development Mgr. 10% 40% 40% 20%
14% 49%
Manager Foods Div. Sales 20% 34% 34%
Foods Sales Manager 15% 34% 34%
Prod. Development Mgr 10% 34% 34%
Average 13% 38% Top 20%
Manager Foods Div. Sales 20% 28% 28% 10%
Foods Sales Manager 15% 28% 28% 10%
Prod. Development Mgr 10% 28% 28% 10%
12% 27%
Manager Foods Div. Sales 20% 22% 22%
Foods Sales Manager 15% 22% 22%
Prod. Development Mgr 10% 22% 22%
Low 11% 17% Top 30%
Manager Foods Div. Sales 20% 16% 16% 5%
Foods Sales Manager 15% 16% 16% 5%
Prod. Development Mgr 10% 16% 16% 5%
|
The following formula will be utilized for all employees whose bonus is to be determined in part by factors other than EPS performance to determine that portion of the award dependent upon such factors:
A = Gross Award
S = Base Salary (excluding bonus award
payments and other items of
miscellaneous income) of
the Participant during that
portion of the year in
which he or she was
employed in a designated
position.
P = Percent age of award earned based on
performance factor
M = Percentage of salary
eligible to be earned and
paid as a bonus on
performance factor.
FORMULA
S X P X M = A
|
SANDERSON FARMS, INC.
Bonus Award Program
Effective Nov. 1, 2001
Supercedes Nov. 1, 1997
VI. PARAMETERS
This bonus award program has been designed to encourage teamwork and cooperation among all of the divisions of Sanderson Farms, and to ensure that Sanderson Farms is consistently among the leaders in profitability in the broiler and prepared foods industry. The program is also designed to pay a bonus to employees only after the Company has returned to its shareholders a fair and equitable return.
1. In the event of extraordinary operating conditions that were unforeseen when setting the objectives and percentages in this bonus award program, such circumstances will be considered by the Executive Committee of Sanderson Farms, Inc. in making awards.
2. In the event of possible reporting errors affecting the ranking, such circumstances will be considered by the Executive Committee of Sanderson Farms, Inc. in making awards.
3. In the event changes in laws or accounting procedures affect the ranking, such circumstances will be considered by the Executive Committee of Sanderson Farms, Inc. in making awards.
4. The per share return targets were calculated using 12,992,876 shares outstanding. Adjustments to these targets will be made to reflect changes in the number of shares outstanding resulting from any merger, consolidation, reorganization, re-capitalization, re-incorporation, stock-splits, stock dividend, stock repurchase, or other changes in the corporate structure of the Company. Furthermore, the target per share return numbers were calculated based on a target net return on projected sales. The Company reserves the right to adjust these targets in the event of a substantial fluctuation in sales pounds or dollars during the year.
SANDERSON FARMS, INC.
BONUS AWARD PROGRAM
(PRODUCTION, PROCESSING AND FOODS PERFORMANCE AWARD PARTICIPANTS)
Effective November 1, 2001
Supercedes November 1, 1997
SANDERSON FARMS, INC.
Bonus Award Program
Effective Nov. 1, 1997
I. PURPOSE
The Board of Directors of Sanderson Farms, Inc. has determined that in addition to the Company's existing competitive and equitable total compensation package, it is desirable to maintain a bonus award program for its salaried employees. The purposes for such a program include:
A. To encourage excellence and high levels of performance.
B. To recognize the contributions of the salaried employees to the overall profitability of the Company.
C. To encourage all employees from every division in the Company to cooperate, share information and work together as a team for the overall benefit of the Company and its shareholders.
II. PARTICIPATION AND MAXIMUM AWARD
The Executive Committee of Sanderson Farms, Inc. will select and recognize personnel eligible to participate in the bonus award program, and reserves the right to review and change the class of eligible employees at any time. Those now designated include:
A. Salaried personnel within the corporate structure of Sanderson Farms, Inc., Sanderson Farms, Inc. (Production Division), Sanderson Farms, Inc. (Processing Division) and Sanderson Farms, Inc. (Foods Division).
B. All salaried management and accounting trainees within the corporate structure.
SANDERSON FARMS, INC.
Bonus Award Program
Effective Nov. 1, 2001
Supercedes Nov. 1, 1997
III. ELIGIBILITY
EMPLOYMENT/PARTICIPATION
Except in the case of death, disability or retirement, as set forth below, employees must be employed in a designated position on October 31 of the applicable fiscal year and must have been employed in a designated position for a period of nine months prior to the end of the fiscal year to be eligible to participate in the bonus award program. Base salary for this purpose shall include regular compensation only, and shall not include bonus award payments and any other miscellaneous payments that might be treated as income to the employee.
DEATH, DISABILITY AND RETIREMENT
If an eligible employee terminates employment with the Company during the fiscal year before October 31 as a result of death, disability or retirement, and had been employed in a designated position for a period of at least nine months, such employee will be eligible to participate in the Bonus Award Program notwithstanding the fact that the employee is not employed on October 31, and the base salary paid to such employee during that portion of the year during which he or she was employed in a designated position will be used to calculate the amount of such employee's bonus award.
EXTRAORDINARY CIRCUMSTANCES
Extraordinary circumstances will be subject to review by the Executive Committee.
SANDERSON FARMS, INC.
Bonus Award Program
Effective Nov. 1, 1997
IV. DETERMINATION OF AWARD AND PAYMENT
Bonus award programs for many corporations focus in some form or another on the real dollar profits earned by the corporation within a given time frame. This method of determining bonuses to be paid to employees recognizes that bonuses should be paid to employees only after a fair and equitable return has been earned for the shareholders who own the company. With this basic philosophy in mind, the Board has determined that no bonuses will be paid under this program unless net return on average stockholders' equity after consideration is taken for any bonus paid under this program for the year exceeds eight percent (8%). After this minimum threshold is met, the Bonus Award Program will become effective, and bonuses will be paid if the other criteria described in this program are met.
In recognition of the fact that one of our primary obligations as employees of this Company is to our shareholders, the Board of Directors has determined that net profits made by the consolidated corporations [Sanderson Farms, Inc., Sanderson Farms, Inc. (Production Division), Sanderson Farms, Inc. (Processing Division) and Sanderson Farms, Inc. (Foods Division)] on a per share basis for the period November 1 through October 31 of each year will be the primary basis for bonus awards. For all employees of Sanderson Farms other than certain management level employees, this will be the sole basis for determining bonus awards.
Although the Board has determined that net profits earned for shareholders of the Company should be the primary method of determining the bonuses to be paid to employees, the Board has also recognized that certain management level employees have responsibility for and more direct control over the operating performance and profitability of the Company. In recognition of this fact, the Board has concluded that a certain percentage of your bonus should be determined by evaluating the operating and profitability performance of the Company relative to its peers and competitors. Therefore, while a portion of your bonus will be determined by the Company's earnings per share performance, a portion of your bonus will also be determined by evaluating the performance of the Company as compared to our peers and competitors by Agri Stats for poultry division managers, and based on certain net income growth targets for managers in the foods division, all as described herein.
The audited annual financial statements, on a consolidated basis, of Sanderson Farms, Inc. will be the measuring tool for the net return to shareholders portion of the bonus award program. The annual bonus award will be paid to participants in the bonus award program after the outside auditors have completed their annual audit of the corporations, which is usually approximately two (2) months after the end of the fiscal year.
The Company's performance relative to its peers and competitors as reported by Agri Stats will be used to evaluate and determine bonuses paid to those employees whose bonuses are determined in part by such performance. The appropriate measuring tool as set forth in this Bonus Award Program as reported by Agri Stats for the twelve (12) month period ending on October 31 each year will be used to determine if a bonus has been earned by such employees.
SANDERSON FARMS, INC.
Bonus Award Program
Effective November 1, 2001
Supercedes Nov. 1, 1997
V. OBJECTIVES AND FORMULAS FOR DETERMINATION OF THE BONUS AWARD
A. EPS Bonus
All salaried employees will receive a bonus if the net income per share objectives set forth below are met, and if the minimum return on average stockholders equity for the year is earned. The annual audited financial statements, on a consolidated basis, of Sanderson Farms, Inc., will be the measuring tool for this portion of the Bonus Award Program. The annual bonus award will be paid to participants after the outside auditors have completed their annual audit of the consolidated corporation.
The earnings per share objectives and the respective percentage of employees' bonus dependent upon EPS earned for the fiscal year (November 1 thru October 31) are as follows:
RANK PER SHARE RETURN* PERCENTAGE OF AWARD
---- ------------------ -------------------
Best (1st) $2.6568 100.0%
2nd $2.6022 95.5%
3rd $2.5407 91.0%
4th $2.4793 86.5%
5th $2.4178 82.0%
6th $2.3564 77.5%
7th $2.2948 73.0%
8th $2.2333 68.5%
9th $2.1718 64.0%
10th $2.1104 59.5%
11th $2.0488 55.0%
12th $1.9873 50.5%
13th $1.9259 46.0%
14th $1.8644 41.5%
15th $1.8028 37.0%
16th $1.7414 32.5%
17th $1.6799 28.0%
18th $1.6181 23.5%
19th $1.5568 19.0%
20th BELOW ZERO (0)
|
*Net of bonus. The per share return targets were calculated using 12,992,876 shares outstanding. Adjustments to these targets will be made to reflect changes in the number of shares outstanding resulting from any merger, consolidation, reorganization, re-capitalization, re-incorporation, stock-splits, stock dividend, stock repurchase, or other changes in the corporate structure of the Company. Furthermore, the target per share return numbers were calculated based on a target net return on projected sales. The Company reserves the right to adjust these targets in the event of a substantial fluctuation in sales pounds or dollars during the year.
The following formula will be utilized to determine the exact dollar amount of a participant's bonus award dependent upon EPS performance.
A = Gross Award
S = Base Salary (excluding bonus award payments and other items
of miscellaneous income) of the
Participant during that portion
of the year in which he or she
was employed in a designated
position.
P = Percentage of award earned based on above schedule
M = Percent of salary eligible to be earned
as a bonus based on EPS performance.
FORMULA
S X P X M = A
|
As with any awards made under this Bonus Award Program, no bonus will be paid unless total net income return (after bonus) on average stockholders' equity for the year exceeds eight percent (8%). Net return on average stockholders' equity will be computed by taking the average of beginning and ending stockholders' equity for the applicable year, and dividing that number into net income for the year.
The percent of salary eligible to be earned as a bonus based on EPS performance ("M" in the above formula) for the fiscal year is 25%.
B. Performance Based Bonus
All production unit managers, processing shift managers, processing managers, packing managers and shipping/preprice managers will receive a bonus based in part upon the Company's earnings per share performance, in part based on the Company's overall corporate Agri Stats performance, and in part based on the performance of the complexes to which they are assigned (for example, "big bird debone" complexes will be grouped and "tray pack" complexes will be grouped) relative to the Company's peers and competitors as reported by Agri Stats. The overall corporate Agri Stats performance measure will be the Company's performance relative to its peers and competitors as reported by Agri Stats in its "bottom line analysis, per head" report, net of bonus. The performance of the applicable complexes will be measured by the complexes' combined performance relative to its peers and competitors as reported by corporate Agri Stats in its complex "operational profit analysis, per head" report, net of bonus.
These managers will be paid in accordance with the following schedule:
Percentage of Salary Assigned Corporate
Eligible to be Earned Complex Agri Stats
As Bonus Based Operations Bottom
On Performance Profit Line
Factors Agri Stats Report
(Per Head) (Per Head)
(Percentage of (Percentage of
Award Earned) Award Earned)
TARGET Top 10% Top 10%
Prod. Unit Mgrs, 10% 50% 50%
Proc. Shift Mgrs. 10% 50% 50%
Processing Mgrs 10% 50% 50%
Packing Mgrs. 10% 50% 50%
Ship/Preprice/ Mgrs. 10% 50% 50%
HIGH AVERAGE Top 20% Top 20%
Prod. Unit Mgrs. 10% 33.3% 33.3%
Proc. Shift Mgrs. 10% 33.3% 33.3%
Processing Mgrs. 10% 33.3% 33.3%
Packing Mgrs. 10% 33.3% 33.3%
Ship/Preprice/ Mgrs. 10% 33.3% 33.3%
LOW AVERAGE Top 30% Top 30%
Prod. Unit Mgrs. 10% 16.7% 16.7%
Proc.Shift Mgrs. 10% 16.7% 16.7%
Processing Mgrs. 10% 16.7% 16.7%
Packing Mgrs. 10% 16.7% 16.7%
Ship/Preprice/ Mgrs. 10% 16.7% 16.7%
|
At the Foods Division, the Production Manager will receive a bonus based in part upon the Company's earnings per share performance as described on pages 6 and 7 of this plan, and in part based on the Foods Division's performance as measured by "net income before tax growth", "net income before tax return on sales" and Corporate Agri Stats Bottom Line Analysis, per head, report, as described below. The final results of the Foods Division will be determined after the Company's external auditors have completed their audit at the end of each fiscal year, which is completed approximately two months after the last day of each fiscal year end.
Percentage of Salary
Eligible to be Earned Corporate
As Bonus Based Target Pre Target Pre Agri Stats
On Performance Tax Return Tax Income Bottom Line
Factors On Sales Growth Rpt (Per Head)
(Percentage of Award Earned)
Target 15% 59% Top 10%
Production Manager 10% 40% 40% 20%
14% 49%
Production Manager 10% 34% 34%
AVERAGE 13% 38% Top 20%
Production Manager 10% 28% 28% 10%
12% 27%
Production Manager 10% 22% 22%
LOW 11% 17% Top 30%
Production Manager 10% 16% 16% 5%
|
The following formula will be utilized for all employees whose bonus is to be determined in part by factors other than EPS performance to determine that portion of the award dependent upon such factors:
A = Gross Award
S = Base Salary (excluding bonus award payments
and other items of miscellaneous income) of the
Participant during that portion of the year in
which he or she was employed in a designated
position.
P = Percentage
of award earned based on performance factor
M = Percentage of salary eligible to be earned and
paid as a bonus on performance factor.
FORMULA
|
S X P X M = A
SANDERSON FARMS, INC.
Bonus Award Program
Effective Nov. 1, 2001
Supercedes Nov. 1, 1997
VI. PARAMETERS
This bonus award program has been designed to encourage teamwork and cooperation among all of the divisions of Sanderson Farms, and to ensure that Sanderson Farms is consistently among the leaders in profitability in the broiler and prepared foods industry. The program is also designed to pay a bonus to employees only after the Company has returned to its shareholders a fair and equitable return.
1. In the event of extraordinary operating conditions that were unforeseen when setting the objectives and percentages in this bonus award program, such circumstances will be considered by the Executive Committee of Sanderson Farms, Inc. in making awards.
2. In the event of possible reporting errors affecting the ranking, such circumstances will be considered by the Executive Committee of Sanderson Farms, Inc. in making awards.
3. In the event changes in laws or accounting procedures affect the ranking, such circumstances will be considered by the Executive Committee of Sanderson Farms, Inc. in making awards.
4. The per share return targets were calculated using 12,992,876 shares outstanding. Adjustments to these targets will be made to reflect changes in the number of shares outstanding resulting from any merger, consolidation, reorganization, re-capitalization, re-incorporation, stock-splits, stock dividend, stock repurchase, or other changes in the corporate structure of the Company. Furthermore, the target per share return numbers were calculated based on a target net return on projected sales. The Company reserves the right to adjust these targets in the event of a substantial fluctuation in sales pounds or dollars during the year.
SANDERSON FARMS, INC.
BONUS AWARD PROGRAM
(ALL SALARIED EMPLOYEES)
Effective November 1, 2001
Supercedes November 1, 1997
SANDERSON FARMS, INC.
Bonus Award Program
Effective Nov. 1, 1997
I. PURPOSE
The Board of Directors of Sanderson Farms, Inc. has determined that in addition to the Company's existing competitive and equitable total compensation package, it is desirable to maintain a bonus award program for its salaried employees. The purposes for such a program include:
A. To encourage excellence and high levels of performance.
B. To recognize the contributions of the salaried employees to the overall profitability of the Company.
C. To encourage all employees from every division in the Company to cooperate, share information and work together as a team for the overall benefit of the Company and its shareholders.
II. PARTICIPATION AND MAXIMUM AWARD
The Executive Committee of Sanderson Farms, Inc. will select and recognize personnel eligible to participate in the bonus award program, and reserves the right to review and change the class of eligible employees at any time. Those now designated include:
A. Salaried personnel within the corporate structure of Sanderson Farms, Inc., Sanderson Farms, Inc. (Production Division), Sanderson Farms, Inc. (Processing Division) and Sanderson Farms, Inc. (Foods Division).
B. All salaried management and accounting trainees within the corporate structure.
SANDERSON FARMS, INC.
Bonus Award Program
Effective Nov. 1, 2001
Supercedes Nov.1, 1997
III. ELIGIBILITY
EMPLOYMENT/PARTICIPATION
Except in the case of death, disability or retirement, as set forth below, employees must be employed in a designated position on October 31 of the applicable fiscal year and must have been employed in a designated position for a period of nine months prior to the end of the fiscal year to be eligible to participate in the bonus award program. Base salary for this purpose shall include regular compensation only, and shall not include bonus award payments and any other miscellaneous payments that might be treated as income to the employee.
DEATH, DISABILITY AND RETIREMENT
If an eligible employee terminates employment with the Company during the fiscal year before October 31 as a result of death, disability or retirement, and had been employed in a designated position for a period of at least nine months, such employee will be eligible to participate in the Bonus Award Program notwithstanding the fact that the employee is not employed on October 31, and the base salary paid to such employee during that portion of the year during which he or she was employed in a designated position will be used to calculate the amount of such employee's bonus award.
EXTRAORDINARY CIRCUMSTANCES
Extraordinary circumstances will be subject to review by the Executive Committee.
SANDERSON FARMS, INC.
Bonus Award Program
Effective Nov. 1, 1997
IV. DETERMINATION OF AWARD AND PAYMENT
Bonus award programs for many corporations focus in some form or another on the real dollar profits earned by the corporation within a given time frame. This method of determining bonuses to be paid to employees recognizes that bonuses should be paid to employees only after a fair and equitable return has been earned for the shareholders who own the company. With this basic philosophy in mind, the Board has determined that no bonuses will be paid under this program unless net return on average stockholders' equity after consideration is taken for any bonus paid under this program for the year exceeds eight percent (8%). After this minimum threshold is met, the Bonus Award Program will become effective, and bonuses will be paid if the other criteria described in this program are met.
In recognition of the fact that one of our primary obligations as employees of this Company is to our shareholders, the Board of Directors has determined that net profits made by the consolidated corporations [Sanderson Farms, Inc., Sanderson Farms, Inc. (Production Division), Sanderson Farms, Inc. (Processing Division) and Sanderson Farms, Inc. (Foods Division)] on a per share basis for the period November 1 through October 31 of each year will be the primary basis for bonus awards. For all employees of Sanderson Farms other than certain management level employees, this will be the sole basis for determining bonus awards.
The audited annual financial statements, on a consolidated basis, of Sanderson Farms, Inc. will be the measuring tool for the net return to shareholders portion of the bonus award program. The annual bonus award will be paid to participants in the bonus award program after the outside auditors have completed their annual audit of the corporations, which is usually approximately two (2) months after the end of the fiscal year.
SANDERSON FARMS, INC.
Bonus Award Program
Effective November 1, 2001
Supercedes November 1, 1997
V. OBJECTIVES AND FORMULAS FOR
DETERMINATION OF THE BONUS AWARD
All salaried employees will receive a bonus if the net income per share objectives set forth below are met, and if the minimum return on average stockholders equity for the year is earned. The annual audited financial statements, on a consolidated basis, of Sanderson Farms, Inc., will be the measuring tool for this portion of the Bonus Award Program. The annual bonus award will be paid to participants after the outside auditors have completed their annual audit of the consolidated corporation.
The earnings per share objectives and the respective percentage of employees' bonus dependent upon EPS earned for the fiscal year (November 1 thru October 31) are as follows:
RANK PER SHARE RETURN* PERCENTAGE OF AWARD
---- ------------------ -------------------
Best (1st) $2.6568 100.0%
2nd $2.6022 95.5%
3rd $2.5407 91.0%
4th $2.4793 86.5%
5th $2.4178 82.0%
6th $2.3564 77.5%
7th $2.2948 73.0%
8th $2.2333 68.5%
9th $2.1718 64.0%
10th $2.1104 59.5%
11th $2.0488 55.0%
12th $1.9873 50.5%
13th $1.9259 46.0%
14th $1.8644 41.5%
15th $1.8028 37.0%
16th $1.7414 32.5%
17th $1.6799 28.0%
18th $1.6181 23.5%
19th $1.5568 19.0%
20th BELOW ZERO (0)
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*Net of bonus. The per share return targets were calculated using 12,992,876 shares outstanding. Adjustments to these targets will be made to reflect changes in the number of shares outstanding resulting from any merger, consolidation, reorganization, re-capitalization, re-incorporation, stock-splits, stock dividend, stock repurchase, or other changes in the corporate structure of the Company. Furthermore, the target per share return numbers were calculated based on a target net return on projected sales. The Company reserves the right to adjust these targets in the event of a substantial fluctuation in sales pounds or dollars during the year.
The following formula will be utilized to determine the exact dollar amount of a participant's bonus award dependent upon EPS performance.
A = Gross Award
S = Base Salary (excluding bonus award payments and other
items of miscellaneous income) of the Participant
during that portion of the year in which he or she
was employed in a designated position.
P = Percentage of award earned based on above schedule
M = Percent of salary eligible to be earned as a bonus
based on EPS performance.
FORMULA
S X P X M = A
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As with any awards made under this Bonus Award Program, no bonus will be paid unless total net income return (after bonus) on average stockholders' equity for the year exceeds eight percent (8%). Net return on average stockholders' equity will be computed by taking the average of beginning and ending stockholders' equity for the applicable year, and dividing that number into net income for the year.
The percent of salary eligible to be earned as a bonus based on EPS performance ("M" in the above formula) for the fiscal year is 25%.
SANDERSON FARMS, INC.
Bonus Award Program
Effective November 1, 2001
Supercedes November 1, 1997
VI. PARAMETERS
This bonus award program has been designed to encourage teamwork and cooperation among all of the divisions of Sanderson Farms, and to ensure that Sanderson Farms is consistently among the leaders in profitability in the broiler and prepared foods industry. The program is also designed to pay a bonus to employees only after the Company has returned to its shareholders a fair and equitable return.
1. In the event of extraordinary operating conditions that were unforeseen when setting the objectives and percentages in this bonus award program, such circumstances will be considered by the Executive Committee of Sanderson Farms, Inc. in making awards.
2. In the event of possible reporting errors affecting the ranking, such circumstances will be considered by the Executive Committee of Sanderson Farms, Inc. in making awards.
3. In the event changes in laws or accounting procedures affect the ranking, such circumstances will be considered by the Executive Committee of Sanderson Farms, Inc. in making awards.
4. The per share return targets were calculated using 12,992,876 shares outstanding. Adjustments to these targets will be made to reflect changes in the number of shares outstanding resulting from any merger, consolidation, reorganization, re-capitalization, re-incorporation, stock-splits, stock dividend, stock repurchase, or other changes in the corporate structure of the Company. Furthermore, the target per share return numbers were calculated based on a target net return on projected sales. The Company reserves the right to adjust these targets in the event of a substantial fluctuation in sales pounds or dollars during the year.
EXHIBIT 10.25
SANDERSON FARMS, INC.
FIRST AMENDMENT TO CREDIT AGREEMENT
Harris Trust and Savings Bank
Chicago, Illinois
SunTrust Bank, Atlanta
Atlanta, Georgia
Deposit Guaranty National Bank
Jackson, Mississippi
Caisse Nationale de Credit Agricole, Chicago Branch Chicago, Illinois
Trustmark National Bank
Jackson, Mississippi
Ladies and Gentlemen:
Reference is hereby made to that certain Credit Agreement dated as of July 31, 1996 (the "Credit Agreement") among the undersigned, Sanderson Farms, Inc., a Mississippi corporation (the "Company"), you (the "Banks") and Harris Trust and Savings Bank, as agent for the Banks (the "Agent"). All defined terms used herein shall have the same meaning as in the Credit Agreement unless otherwise defined herein.
The Credit Agreement provides for a Revolving Credit to be made available to the Company for the period up to and including July 31, 1999 and the Company now applies to the Banks to extend the availability of the Revolving Credit up to and including July 31, 2000 in the manner and on the terms and conditions set forth herein.
1. AMENDMENTS.
Upon satisfaction of all of the conditions precedent set forth in
Section 2 hereof, the Credit Agreement shall be amended as follows:
1.1. The date "July 31, 1999" appearing in the last sentence of Section 1.1(a) of the Credit Agreement shall be replaced with the date "July 31, 2000", and the Revolving Credit Termination Date under the Credit Agreement shall be July 31, 2000.
1.2. Section 7.8 of the Credit Agreement shall be amended to read as follows:
"Section 7.8. Consolidated Net Working Capital. The Company will maintain at all times Consolidated Net Working Capital in an amount not less than the amount indicated below during each fiscal year of the Company indicated below:
FISCAL YEAR ENDING MINIMUM REQUIRED AMOUNT October 31, 1996 $42,000,000 October 31, 1997 $45,000,000 October 31, 1998 $48,000,000 October 31, 1999 $50,000,000 October 31, 2000 $50,000,000 October 31, 2001 $50,000,000 October 31, 2002 $50,000,000 October 31, 2003 $50,000,000 October 31, 2004 $50,000,000" |
1.3. Section 7.10 of the Credit Agreement shall be amended to read as follows:
"Section 7.10. Consolidated Indebtedness for Borrowed Money to Total Capitalization. The Company will not permit the ratio of its Consolidated Indebtedness for Borrowed Money to its Total Capitalization (the "Funded Debt Ratio") at any time to exceed the percentage indicated below during each fiscal year of the Company specified below:
FISCAL YEAR ENDING MAXIMUM PERCENTAGE October 31, 1996 55% October 31, 1997 65% October 31, 1998 65% October 31, 1999 55% October 31, 2000 55% October 31, 2001 50% October 31, 2002 45% October 31, 2003 40% October 31, 2004 40%" |
1.4. Section 7.12 of the Credit Agreement shall be amended to read as follows:
"Section 7.12. Capital Expenditures. The Company will not, and will not permit any Subsidiary to, be obligated to spend during any fiscal year for capital expenditures (as defined and classified in accordance with generally accepted accounting principles consistently applied, including without limitation any such capital expenditures in respect of Capitalized Leases but excluding any acquisition permitted by Section 7.14(d) which might constitute such a capital expenditure) an aggregate amount for the Company and its Subsidiaries in excess of the amount indicated below for each fiscal year of the Company plus an amount (the "Carryover Amount") permitted to be spent in the preceding fiscal year but not actually spent therein (the "Maximum Carryover Amount to the Next Fiscal Year"):
MAXIMUM MAXIMUM CARRYOVER AMOUNT
FISCAL YEAR ENDING LIMITATION AMOUNT TO THE NEXT FISCAL YEAR
October 31, 1996 $65,000,000 Unlimited
October 31, 1997 $45,000,000 Unlimited
October 31, 1998 $25,000,000 $ 7,500,000
October 31, 1999 Prior Year's $ 7,500,000
Depreciation
October 31, 2000 Prior Year's $ 7,500,000
Depreciation
October 31, 2001 Prior Year's $ 7,500,000
Depreciation
October 31, 2002 Prior Year's $ 7,500,000
Depreciation
October 31, 2003 Prior Year's $ 7,500,000
Depreciation
October 31, 2004 Prior Year's $ 7,500,000
Depreciation
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For purposes of this Section, any capital expenditures made in any fiscal year shall be applied first to the Carryover Amount, if any, available during such fiscal year."
2. CONDITIONS PRECEDENT.
The effectiveness of this Amendment is subject to the satisfaction of all of the following conditions precedent:
2.1. The Company and each of the Banks shall have executed this Amendment.
2.2. Each Guarantor Subsidiary shall have executed the Guarantors' Acknowledgment attached hereto.
2.3. The Agent shall have received the favorable written opinion of counsel for the Company in the form of Exhibit A attached hereto.
2.4. The Agent shall have received a Certificate of the Treasurer of the Company and each of the Guarantor Subsidiaries with respect to (a) resolutions of their respective Board of Directors authorizing the transactions contemplated hereby, and (b) incumbency and signature of the President, Treasurer and Secretary of the Company and each Guarantor Subsidiary.
3. REPRESENTATIONS AND WARRANTIES.
3.1. Each of the representations and warranties set forth in Section 5 of the Credit Agreement are true and correct.
3.2. The Company is in full compliance with all of the terms and conditions of the Credit Agreement and no Event of Default or Potential Default has occurred and is continuing thereunder or shall result after giving effect to this Amendment.
4. MISCELLANEOUS.
4.1. Reference to this specific Amendment need not be made in any note, document, letter, certificate, the Credit Agreement itself, the Revolving Notes, or any communication issued or made pursuant to or with respect to the Credit Agreement or the Revolving Notes, any reference to the Credit Agreement being sufficient to refer to the Credit Agreement as amended hereby.
4.2. This Amendment may be executed in any number of counterparts, and by the different parties on different counterparts, all of which taken together shall constitute one and the same agreement. Any of the parties hereto may execute this Amendment by signing any such counterpart and each of such counterparts shall for all purposes be deemed to be an original. This Amendment shall be governed by the internal laws of the State of Illinois.
Upon acceptance hereof by the Agent and the Banks in the manner hereinafter set forth, this Amendment shall be a contract between us for the purposes hereinabove set forth.
Dated as of October 23, 1997.
SANDERSON FARMS, INC.
By /s/D. Michael Cockrell
Its Treasurer and Chief Financial Officer
Accepted and agreed to as of the day and year last above written.
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HARRIS TRUST AND SAVINGS BANK
individually and as Agent
By /s/Carl Blackham Its Vice President SUNTRUST BANK, ATLANTA By /s/Gregory L. Cannon Its Vice President By /s/Brian Davis Its Assistant Vice President DEPOSIT GUARANTY NATIONAL BANK By /s/Stanley A. Herren Its Senior Vice President CAISSE NATIONALE DE CREDIT AGRICOLE, CHICAGO BRANCH BY /s/W. Leroy Startz ITS First Vice President TRUSTMARK NATIONAL BANK By /s/W. H. Edwards Its Vice President |
GUARANTORS' ACKNOWLEDGMENT
The undersigned, each of which has executed and delivered to the Banks a Guaranty Agreement dated as of July 31, 1996 (the "Guaranty Agreement"), hereby acknowledges the amendment of the Credit Agreement as set forth above and agrees that all of the Company's indebtedness, obligations and liabilities to the Banks and the Agent under the Credit Agreement and the Notes as amended by the foregoing Amendment shall continue to be entitled to the benefits of said Guaranty Agreement. The undersigned further agree that the Acknowledgment or consent of the undersigned to any further amendments of the Credit Agreement shall not be required as a result of this Acknowledgment having been obtained, except to the extent, if any, required by the Guaranty Agreement.
Dated as of October 23, 1997.
SANDERSON FARMS, INC. (FOODS DIVISION)
By /s/D. Michael Cockrell Its Treasurer and Chief Financial Officer |
SANDERSON FARMS, INC. (PRODUCTION DIVISION)
By /s/D. Michael Cockrell Its Treasurer and Chief Financial Officer |
SANDERSON FARMS, INC. (PROCESSING DIVISION)
By /s/D. Michael Cockrell Its Treasurer and Chief Financial Officer |
EXHIBIT A
FORM OF OPINION OF COUNSEL
EXHIBIT 10.26
SANDERSON FARMS, INC.
SECOND AMENDMENT TO CREDIT AGREEMENT
Harris Trust and Savings Bank
Chicago, Illinois
SunTrust Bank, Atlanta
Atlanta, Georgia
Deposit Guaranty National Bank
Jackson, Mississippi
Credit Agricole Indosuez, Chicago Branch
(formerly known as Caisse Nationale de Credit
Agricole, Chicago Branch)
Chicago, Illinois
Trustmark National Bank
Jackson, Mississippi
Ladies and Gentlemen:
Reference is hereby made to that certain Credit Agreement dated as of July 31, 1996, as amended (the "Credit Agreement") among the undersigned, Sanderson Farms, Inc., a Mississippi corporation (the "Company"), you (the "Banks") and Harris Trust and Savings Bank, as agent for the Banks (the "Agent"). All defined terms used herein shall have the same meaning as in the Credit Agreement unless otherwise defined herein.
The Credit Agreement provides for a $125,000,000 Revolving Credit to be made available to the Company for the period up to and including July 31, 2000 and the Company now applies to the Banks to increase the amount of the Revolving Credit to $130,000,000 and extend the availability of the Revolving Credit up to and including July 31, 2001 in the manner and on the terms and conditions set forth herein.
1. AMENDMENTS.
Upon satisfaction of all of the conditions precedent set forth in
Section 2 hereof, the Credit Agreement shall be amended as follows:
1.1. The date "July 31, 2000" appearing in the last sentence of Section 1.1(a) of the Credit Agreement shall be replaced with the date "July 31, 2001", and the Revolving Credit Termination Date under the Credit Agreement shall be July 31, 2001.
1.2. Section 1.1(c) of the Credit Agreement shall be amended to read as follows:
"(c) The respective maximum aggregate principal amounts of the Revolving Credit at any one time outstanding and the percentage of the Revolving Credit available at any time which each Bank by its acceptance hereof severally agrees to make available to the Company are as follows (collectively, the "Revolving Credit Commitments" and individually, a "Revolving Credit Commitment"):
Harris Trust and Savings Bank $36,400,000 28%
SunTrust Bank, Atlanta $33,280,000 25.60000000%
Deposit Guaranty National Bank $20,800,000 16%
Credit Agricole Indosuez, Chicago Branch $20,800,000 16%
Trustmark National Bank $18,720,000 14.40000000%
Total $130,000,000 100%"
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1.3. Section 7.8 of the Credit Agreement shall be amended to read as follows:
"Section 7.8. Consolidated Net Working Capital. The Company will maintain at all times Consolidated Net Working Capital in an amount not less than the amount indicated below during each fiscal year of the Company indicated below:
FISCAL YEAR ENDING MINIMUM REQUIRED AMOUNT October 31, 1996 $42,000,000 October 31, 1997 $45,000,000 October 31, 1998 $48,000,000 October 31, 1999 $50,000,000 October 31, 2000 $50,000,000 October 31, 2001 $50,000,000 October 31, 2002 $50,000,000 October 31, 2003 $50,000,000 October 31, 2004 $50,000,000 October 31, 2005 $50,000,000" |
1.4. Section 7.10 of the Credit Agreement shall be amended to read as follows:
"Section 7.10. Consolidated Indebtedness for Borrowed Money to Total Capitalization. The Company will not permit the ratio of its Consolidated Indebtedness for Borrowed Money to its Total Capitalization (the "Funded Debt Ratio") at any time to exceed the percentage indicated below during each fiscal year of the Company specified below:
FISCAL YEAR ENDING MAXIMUM PERCENTAGE October 31, 1996 55% October 31, 1997 65% October 31, 1998 65% October 31, 1999 55% October 31, 2000 55% October 31, 2001 50% October 31, 2002 45% October 31, 2003 40% October 31, 2004 40% October 31, 2005 40%" |
1.5. Section 7.12 of the Credit Agreement shall be amended to read as follows:
"Section 7.12. Capital Expenditures. The Company will not, and will not permit any Subsidiary to, be obligated to spend during any fiscal year for capital expenditures (as defined and classified in accordance with generally accepted accounting principles consistently applied, including without limitation any such capital expenditures in respect of Capitalized Leases but excluding any acquisition permitted by Section 7.14(d) which might constitute such a capital expenditure) an aggregate amount for the Company and its Subsidiaries in excess of the amount indicated below for each fiscal year of the Company plus an amount (the "Carryover Amount") permitted to be spent in the preceding fiscal year but not actually spent therein (the "Maximum Carryover Amount to the Next Fiscal Year"):
MAXIMUM MAXIMUM CARRYOVER AMOUNT
FISCAL YEAR ENDING LIMITATION AMOUNT TO THE NEXT FISCAL YEAR
October 31, 1996 $65,000,000 Unlimited
October 31, 1997 $45,000,000 Unlimited
October 31, 1998 $25,000,000 $ 7,500,000
October 31, 1999 Prior Year's $ 7,500,000
Depreciation
October 31, 2000 Prior Year's $ 7,500,000
Depreciation
October 31, 2001 Prior Year's $ 7,500,000
Depreciation
October 31, 2002 Prior Year's $ 7,500,000
Depreciation
October 31, 2003 Prior Year's $ 7,500,000
Depreciation
October 31, 2004 Prior Year's $ 7,500,000
Depreciation
October 31, 2005 Prior Year's $7,500,000
Depreciation
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For purposes of this Section, any capital expenditures made in any fiscal year shall be applied first to the Carryover Amount, if any, available during such fiscal year."
2. CONDITIONS PRECEDENT.
The effectiveness of this Amendment is subject to the satisfaction of all of the following conditions precedent:
2.1. The Company and each of the Banks shall have executed this Amendment.
2.2. Each Guarantor Subsidiary shall have executed the Guarantors' Acknowledgment attached hereto.
2.3. The Agent shall have received the favorable written opinion of counsel for the Company in the form of Exhibit A attached hereto.
2.4. The Agent shall have received a Certificate of the Treasurer of the Company and each of the Guarantor Subsidiaries with respect to (a) resolutions of their respective Board of Directors authorizing the transactions contemplated hereby, and (b) incumbency and signature of the President, Treasurer and Secretary of the Company and each Guarantor Subsidiary.
3. REPRESENTATIONS AND WARRANTIES.
3.1. Each of the representations and warranties set forth in Section 5 of the Credit Agreement are true and correct.
3.2. The Company is in full compliance with all of the terms and conditions of the Credit Agreement and no Event of Default or Potential Default has occurred and is continuing thereunder or shall result after giving effect to this Amendment.
4. MISCELLANEOUS.
4.1. Reference to this specific Amendment need not be made in any note, document, letter, certificate, the Credit Agreement itself, the Revolving Notes, or any communication issued or made pursuant to or with respect to the Credit Agreement or the Revolving Notes, any reference to the Credit Agreement being sufficient to refer to the Credit Agreement as amended hereby.
4.2. This Amendment may be executed in any number of counterparts, and by the different parties on different counterparts, all of which taken together shall constitute one and the same agreement. Any of the parties hereto may execute this Amendment by signing any such counterpart and each of such counterparts shall for all purposes be deemed to be an original. This Amendment shall be governed by the internal laws of the State of Illinois.
4.3. The Company hereby requests that Harris extend the Stated Expiration Date of its Letter of Credit Number SPL 34947 dated November 16, 1995 which Harris has issued for the Company's account to First Trust National Association, as trustee (the "Trustee") under the Indenture of Trust dated as of November 1, 1995 between Robertson County Industrial Development Corporation and the Trustee from July 31, 1999, to July 31, 2000. The Banks hereby consent and agree to such extension.
Upon acceptance hereof by the Agent and the Banks in the manner hereinafter set forth, this Amendment shall be a contract between us for the purposes hereinabove set forth.
Dated as of July 23, 1998.
SANDERSON FARMS, INC.
By /s/D. Michael Cockrell
Its Treasurer & Chief Financial Officer
Accepted and agreed to as of the day and year last above written.
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HARRIS TRUST AND SAVINGS BANK
individually and as Agent
By /s/Carl A. Blackham Its Vice President SUNTRUST BANK, ATLANTA By /s/Gregory L. Cannon Its Vice President By /s/F. Steven Parrish Its Vice President DEPOSIT GUARANTY NATIONAL BANK By /s/Stanley A. Herren Its Senior Vice President CREDIT AGRICOLE INDOSUEZ, CHICAGO BRANCH (formerly known as Caisse Nationale de Credit Agricole, Chicago Branch) BY /s/David Bouhl, F.V.P. Its Head of Corporate Banking, Chicago By /s/Katherine L. Abbott Its First Vice President______________________________ |
TRUSTMARK NATIONAL BANK
By /s/W. H. Edward Its Vice President___________________________________ |
GUARANTORS' ACKNOWLEDGMENT
The undersigned, each of which has executed and delivered to the Banks a Guaranty Agreement dated as of July 31, 1996 (the "Guaranty Agreement"), hereby acknowledges the amendment of the Credit Agreement as set forth above and agrees that all of the Company's indebtedness, obligations and liabilities to the Banks and the Agent under the Credit Agreement and the Notes as amended by the foregoing Amendment shall continue to be entitled to the benefits of said Guaranty Agreement. The undersigned further agree that the Acknowledgment or consent of the undersigned to any further amendments of the Credit Agreement shall not be required as a result of this Acknowledgment having been obtained, except to the extent, if any, required by the Guaranty Agreement.
Dated as of July 23, 1998.
SANDERSON FARMS, INC. (FOODS DIVISION)
By /s/D. Michael Cockrell Its Treasurer & Chief Financial Officer |
SANDERSON FARMS, INC. (PRODUCTION DIVISION)
By /s/D. Michael Cockrell Its Treasurer & Chief Financial Officer |
SANDERSON FARMS, INC. (PROCESSING DIVISION)
By /s/D. Michael Cockrell Its Treasurer & Chief Financial Officer |
EXHIBIT A
FORM OF OPINION OF COUNSEL
EXHIBIT 10.27
SANDERSON FARMS, INC.
THIRD AMENDMENT TO CREDIT AGREEMENT
Harris Trust and Savings Bank
Chicago, Illinois
SunTrust Bank, Atlanta
Atlanta, Georgia
First American National Bank,
d/b/a Deposit Guaranty National Bank
Jackson, Mississippi
Credit Agricole Indosuez, Chicago Branch
(formerly known as Caisse Nationale de Credit
Agricole, Chicago Branch)
Chicago, Illinois
Trustmark National Bank
Jackson, Mississippi
Ladies and Gentlemen:
Reference is hereby made to that certain Credit Agreement dated as of July 31, 1996, as amended (the "Credit Agreement") among the undersigned, Sanderson Farms, Inc., a Mississippi corporation (the "Company"), you (the "Banks") and Harris Trust and Savings Bank, as agent for the Banks (the "Agent"). All defined terms used herein shall have the same meaning as in the Credit Agreement unless otherwise defined herein.
The Credit Agreement provides for a $130,000,000 Revolving Credit to be made available to the Company. The Company now applies to the Banks to amend the Credit Agreement to extend the Termination Date thereof from July 31, 2001 to July 31, 2002, reduce the amount of the Revolving Credit to $100,000,000, provide for the termination of First American National Bank, d/b/a Deposit Guaranty National Bank ("First American") as a member of the bank group, and amend certain covenants contained in the Credit Agreement, all in the manner and on the terms and conditions set forth herein.
1. AMENDMENTS.
Upon satisfaction of all of the conditions precedent set forth in
Section 2 hereof, the Credit Agreement shall be amended as follows:
1.1. The date "July 31, 2001" appearing in the last sentence of Section 1.1(a) of the Credit Agreement shall be replaced with the date "July 31, 2002", and the Revolving Credit Termination Date under the Credit Agreement shall be July 31, 2002.
1.2. Section 1.1(c) of the Credit Agreement shall be amended to read as follows:
"(c) The respective maximum aggregate principal amounts of the Revolving Credit at any one time outstanding and the percentage of the Revolving Credit available at any time which each Bank by its acceptance hereof severally agrees to make available to the Company are as follows (collectively, the "Revolving Credit Commitments" and individually, a "Revolving Credit Commitment"):
Harris Trust and Savings Bank $33,333,333 33.333333%
SunTrust Bank, Atlanta $30,476,191 30.476191%
Credit Agricole Indosuez $19,047,619 19.047619%
Trustmark National Bank $17,142,857 17.142857%
Total $100,000,000 100%"
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1.3. Section 7.8 of the Credit Agreement shall be amended to read as follows:
"Section 7.8. Consolidated Net Working Capital. The Company will maintain at all times Consolidated Net Working Capital in an amount not less than the amount indicated below during each fiscal year of the Company indicated below:
FISCAL YEAR ENDING MINIMUM REQUIRED AMOUNT October 31, 1996 $42,000,000 October 31, 1997 $45,000,000 October 31, 1998 $48,000,000 October 31, 1999 $50,000,000 October 31, 2000 $50,000,000 October 31, 2001 $50,000,000 October 31, 2002 $50,000,000 October 31, 2003 $50,000,000 October 31, 2004 $50,000,000 October 31, 2005 $50,000,000 October 31, 2006 $50,000,000." |
1.4. Section 7.10 of the Credit Agreement shall be amended to read as follows:
"Section 7.10. Consolidated Indebtedness for Borrowed Money to Total Capitalization. The Company will not permit the ratio of its Consolidated Indebtedness for Borrowed Money to its Total Capitalization (the "Funded Debt Ratio") at any time to exceed the percentage indicated below during each fiscal year of the Company specified below:
FISCAL YEAR ENDING MAXIMUM PERCENTAGE October 31, 1996 55% October 31, 1997 65% October 31, 1998 65% October 31, 1999 55% October 31, 2000 55% October 31, 2001 50% October 31, 2002 45% October 31, 2003 40% October 31, 2004 40% October 31, 2005 40% October 31, 2006 40%." |
1.5. Section 7.11 of the Credit Agreement shall be amended by replacing the phrase "3.0 to 1" appearing therein with the phrase "2.5 to 1".
1.6. Section 7.12 of the Credit Agreement shall be amended to read as follows:
"Section 7.12. Capital Expenditures. The Company will not, and will not permit any Subsidiary to, be obligated to spend during any fiscal year for capital expenditures (as defined and classified in accordance with generally accepted accounting principles consistently applied, including without limitation any such capital expenditures in respect of Capitalized Leases but excluding any acquisition permitted by Section 7.14(d) which might constitute such a capital expenditure) an aggregate amount for the Company and its Subsidiaries in excess of the amount indicated below for each fiscal year of the Company plus an amount (the "Carryover Amount") permitted to be spent in the preceding fiscal year but not actually spent therein (the "Maximum Carryover Amount to the Next Fiscal Year"):
MAXIMUM MAXIMUM CARRYOVER AMOUNT
FISCAL YEAR ENDING LIMITATION AMOUNT TO THE NEXT FISCAL YEAR
October 31, 1996 $65,000,000 Unlimited
October 31, 1997 $45,000,000 Unlimited
October 31, 1998 $25,000,000 $ 7,500,000
October 31, 1999 Prior Year's $ 7,500,000
Depreciation
October 31, 2000 Prior Year's $ 7,500,000
Depreciation
October 31, 2001 Prior Year's $ 7,500,000
Depreciation
October 31, 2002 Prior Year's $ 7,500,000
Depreciation
October 31, 2003 Prior Year's $ 7,500,000
Depreciation
October 31, 2004 Prior Year's $ 7,500,000
Depreciation
October 31, 2005 Prior Year's $7,500,000
Depreciation
October 31, 2006 Prior Year's $7,500,000
Depreciation
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1.7. The terms "Revolving Note" and "Revolving Notes" shall mean the Revolving Credit Notes executed and delivered by the Company in satisfaction of the condition precedent contained in Section 2.2 of this Amendment.
2. CONDITIONS PRECEDENT.
The effectiveness of this Amendment is subject to the satisfaction of all of the following conditions precedent:
2.1. The Company and each of the Banks shall have executed this Amendment.
2.2. The Company shall have executed and delivered to each Bank a Revolving Credit Note in the form attached to this Amendment as Exhibit B payable to the order of such Bank in the principal amount of such Bank's Revolving Credit Commitment after giving effect to this Amendment.
2.3. Each Guarantor Subsidiary shall have executed the Guarantors' Acknowledgment attached hereto.
2.4. The Agent shall have received the favorable written opinion of counsel for the Company in the form of Exhibit A attached hereto.
2.5. The Agent shall have received a Certificate of the Treasurer of the Company and each of the Guarantor Subsidiaries with respect to (a) resolutions of their respective Board of Directors authorizing the transactions contemplated hereby, and (b) incumbency and signature of the President, Treasurer and Secretary of the Company and each Guarantor Subsidiary.
3. REPRESENTATIONS AND WARRANTIES.
3.1. Each of the representations and warranties set forth in Section 5 of the Credit Agreement are true and correct.
3.2. The Company is in full compliance with all of the terms and conditions of the Credit Agreement and no Event of Default or Potential Default has occurred and is continuing thereunder or shall result after giving effect to this Amendment.
4. MISCELLANEOUS.
4.1. Upon satisfaction of the conditions precedent set forth above, the Company shall be deemed to have requested from the Banks other than First American loans in an aggregate principal amount equal to the unpaid principal amount of the Revolving Credit Note dated July 31, 1996 payable to the order of First American (the "First American Note"), and such Banks will make such loans if all conditions set forth in Section 6.3 of the Credit Agreement are satisfied. The proceeds of such loans shall be used exclusively to pay the outstanding principal balance of the First American Note, and the Company will pay all accrued interest thereon and all other fees and other amounts due to First American, including without limitation accrued and unpaid commitment fees, letter of credit fees and all amounts, if any, payable under Section 9.4 of the Credit Agreement with respect to such prepayment. Upon payment in full of all principal of and accrued interest on such First American Note, and all such other amounts, all participations in L/Cs and Reimbursement Obligations by First American shall terminate and First American shall cease to be a party to the Credit Agreement and shall have no rights or obligations thereunder except for its rights under Sections 9.3, 9.4, 11.6 and 11.9 which shall continue unaffected by this Amendment.
4.2. Reference to this specific Amendment need not be made in any note, document, letter, certificate, the Credit Agreement itself, the Revolving Notes, or any communication issued or made pursuant to or with respect to the Credit Agreement or the Revolving Notes, any reference to the Credit Agreement being sufficient to refer to the Credit Agreement as amended hereby.
4.3. This Amendment may be executed in any number of counterparts, and by the different parties on different counterparts, all of which taken together shall constitute one and the same agreement. Any of the parties hereto may execute this Amendment by signing any such counterpart and each of such counterparts shall for all purposes be deemed to be an original. This Amendment shall be governed by the internal laws of the State of Illinois.
4.4. The Company hereby requests that Harris extend the Stated Expiration Date of its Letter of Credit Number SPL 34947 dated November 16, 1995 which Harris has issued for the Company's account to First Trust National Association, as trustee (the "Trustee") under the Indenture of Trust dated as of November 1, 1995 between Robertson County Industrial Development Corporation and the Trustee from July 31, 2000, to July 31, 2001. The Banks hereby consent and agree to such extension.
Upon acceptance hereof by the Agent and the Banks in the manner hereinafter set forth, this Amendment shall be a contract between us for the purposes hereinabove set forth.
Dated as of July 29, 1999.
SANDERSON FARMS, INC.
By /s/D. Michael Cockrell
Its Treasurer and Chief Financial Officer
Accepted and agreed to as of the day and year last above written.
|
HARRIS TRUST AND SAVINGS BANK
individually and as Agent
By /s/Curtis Flammini Its Vice President SUNTRUST BANK, ATLANTA By /s/Gregory L. Cannon Its Vice President By /s/F. Steven Parrish Its Vice President FIRST AMERICAN NATIONAL BANK, D/B/A DEPOSIT GUARANTY NATIONAL BANK By /s/Stanley A. Herren Its Senior Vice President CREDIT AGRICOLE INDOSUEZ, CHICAGO BRANCH (formerly known as Caisse Nationale de Credit Agricole, Chicago Branch) By /s/Katherine L. Abbott Its First Vice President By /s/Bradley C. Peterson Its Vice President, Manager TRUSTMARK NATIONAL BANK By /s/W. H. Edward Its Vice President |
GUARANTORS' ACKNOWLEDGMENT
The undersigned, each of which has executed and delivered to the Banks a Guaranty Agreement dated as of July 31, 1996 (the "Guaranty Agreement"), hereby acknowledges the amendment of the Credit Agreement as set forth above and agrees that all of the Company's indebtedness, obligations and liabilities to the Banks and the Agent under the Credit Agreement and the Notes as amended by the foregoing Amendment shall continue to be entitled to the benefits of said Guaranty Agreement. The undersigned further agree that the Acknowledgment or consent of the undersigned to any further amendments of the Credit Agreement shall not be required as a result of this Acknowledgment having been obtained, except to the extent, if any, required by the Guaranty Agreement.
Dated as of July 29, 1999.
SANDERSON FARMS, INC. (FOODS DIVISION)
By /s/D. Michael Cockrell Its Treasurer and Chief Financial Officer SANDERSON FARMS, INC. (PRODUCTION DIVISION) By /s/D. Michael Cockrell Its Treasurer and Chief Financial Officer SANDERSON FARMS, INC. (PROCESSING DIVISION) By /s/D. Michael Cockrell Its Treasurer and Chief Financial Officer |
EXHIBIT A
FORM OF OPINION OF COUNSEL
EXHIBIT B
SANDERSON FARMS, INC.
REVOLVING CREDIT NOTE
______________, 1999
FOR VALUE RECEIVED, the undersigned, SANDERSON FARMS, INC., a Mississippi corporation (the "Company") promises to pay to the order of _________________________ (the "Lender") on the Revolving Credit Termination Date (as defined in the Credit Agreement referred to below) at the principal office of Harris Trust and Savings Bank in Chicago, Illinois, the principal sum of ____________________________________________ or, if less, the aggregate unpaid principal amount of all Revolving Credit Loans made by the Lender to the Company under the Revolving Credit provided for under the Credit Agreement hereinafter mentioned and remaining unpaid on the Revolving Credit Termination Date together with interest on the principal amount of each Revolving Credit Loan from time to time outstanding hereunder at the rates, and payable in the manner and on the dates, specified in said Credit Agreement.
The Lender shall record on its books or records or on the schedule to this Note which is a part hereof the principal amount of each Revolving Credit Loan made under the Revolving Credit, all payments of principal and interest and the principal balances from time to time outstanding; provided that prior to the transfer of this Note all such amounts shall be recorded on the schedule attached to this Note. The record thereof, whether shown on such books or records or on the schedule to this Note, shall be prima facie evidence as to all such amounts; provided, however, that the failure of the Lender to record, or any mistake in recording, any of the foregoing shall not limit or otherwise affect the obligation of the Company to repay all Revolving Credit Loans made under the Revolving Credit, together with accrued interest thereon.
This Note is one of the Revolving Notes referred to in and issued under that certain Credit Agreement dated as of July 31, 1996, as amended, among the Company, Harris Trust and Savings Bank, as Agent, and the banks named therein, as amended from time to time (the "Credit Agreement"), and this Note and the holder hereof are entitled to all of the benefits and security provided for thereby or referred to therein. Payment of this Note has been guaranteed pursuant to that certain Guaranty Agreement dated as of July 31, 1996 from the Guarantor Subsidiaries to the Banks, to which reference is hereby made for a statement of the terms thereof. All defined terms used in this Note, except terms otherwise defined herein, shall have the same meaning as such terms have in said Credit Agreement.
Prepayments may be made on any Revolving Credit Loan evidenced hereby and this Note (and the Revolving Credit Loans evidenced hereby) may be declared due prior to the expressed maturity thereof, all in the events, on the terms and in the manner as provided for in said Credit Agreement.
This Note is issued in substitution and replacement of, and in part evidences indebtedness formerly evidenced by, the Revolving Credit Note dated July 31, 1996, of the Company payable to the order of the Lender issued pursuant to the Credit Agreement.
The Company hereby waives presentment for payment and demand.
This Note is governed by and shall be construed in accordance with the internal laws of the State of Illinois.
SANDERSON FARMS, INC.
By
Its________________________________________________
EXHIBIT 10.28
SANDERSON FARMS, INC.
FOURTH AMENDMENT TO CREDIT AGREEMENT
Harris Trust and Savings Bank
Chicago, Illinois
SunTrust Bank (formerly known as
SunTrust Bank, Atlanta)
Atlanta, Georgia
Credit Agricole Indosuez, Chicago Branch
(formerly known as Caisse Nationale de Credit
Agricole, Chicago Branch)
Chicago, Illinois
Trustmark National Bank
Jackson, Mississippi
Ladies and Gentlemen:
Reference is hereby made to that certain Credit Agreement dated as of July 31, 1996, as amended (the "Credit Agreement") among the undersigned, Sanderson Farms, Inc., a Mississippi corporation (the "Company"), you (the "Banks") and Harris Trust and Savings Bank, as agent for the Banks (the "Agent"). All defined terms used herein shall have the same meaning as in the Credit Agreement unless otherwise defined herein.
The Credit Agreement provides for a Revolving Credit to be made available to the Company. The Company now applies to the Banks to amend the Credit Agreement to permit the Company to guaranty the payment when due of certain loans made by Harris Trust and Savings Bank and SunTrust Bank to Joe Franklin Sanderson, Jr. and William Ramon Sanderson, not individually but as co-executors of the estate of Joe Franklin Sanderson, deceased, without regard to the restrictions contained in Section 7.7 of the Credit Agreement, all in the manner and on the terms and conditions set forth herein.
1. AMENDMENTS.
Upon satisfaction of all of the conditions precedent set forth in
Section 2 hereof, the Credit Agreement shall be amended as follows:
1.1. Section 7.7 of the Credit Agreement shall be amended by adding the following phrase immediately before the period appearing at the end thereof:
", and provided further, that the foregoing shall not prevent the Company from guaranteeing the payment when due of certain loans made by Harris Trust and Savings Bank and SunTrust Bank to Joe Franklin Sanderson, Jr. and William Ramon Sanderson, not individually but as co-executors of the estate of Joe Franklin Sanderson, deceased."
2. CONDITIONS PRECEDENT.
The effectiveness of this Amendment is subject to the satisfaction of all of the following conditions precedent:
2.1. The Company and the required Banks shall have executed this Amendment.
2.2. Each Guarantor Subsidiary shall have executed the Guarantors' Acknowledgment attached hereto.
3. REPRESENTATIONS AND WARRANTIES.
3.1. Each of the representations and warranties set forth in Section 5 of the Credit Agreement are true and correct.
3.2. The Company is in full compliance with all of the terms and conditions of the Credit Agreement and no Event of Default or Potential Default has occurred and is continuing thereunder or shall result after giving effect to this Amendment.
4. MISCELLANEOUS.
4.1. Reference to this specific Amendment need not be made in any note, document, letter, certificate, the Credit Agreement itself, the Revolving Notes, or any communication issued or made pursuant to or with respect to the Credit Agreement or the Revolving Notes, any reference to the Credit Agreement being sufficient to refer to the Credit Agreement as amended hereby.
4.2. This Amendment may be executed in any number of counterparts, and by the different parties on different counterparts, all of which taken together shall constitute one and the same agreement. Any of the parties hereto may execute this Amendment by signing any such counterpart and each of such counterparts shall for all purposes be deemed to be an original. This Amendment shall be governed by the internal laws of the State of Illinois.
Upon acceptance hereof by the Agent and the Banks in the manner hereinafter set forth, this Amendment shall be a contract between us for the purposes hereinabove set forth.
Dated as of March 17, 2000.
SANDERSON FARMS, INC.
By /s/D. Michael Cockrell
Its Treasurer and Chief Financial Officer
Accepted and agreed to as of the day and year last above written.
|
HARRIS TRUST AND SAVINGS BANK
individually and as Agent
By/s/Curt Flammini Its Vice President SUNTRUST BANK (formerly known as SunTrust Bank, Atlanta) By/s/Gregory L. Cannon Its Vice President CREDIT AGRICOLE INDOSUEZ, CHICAGO BRANCH (formerly known as Caisse Nationale de Credit Agricole, Chicago Branch) |
By
Its___________________________________________________
By
Its___________________________________________________
TRUSTMARK NATIONAL BANK
By /s/William H. Edward Its Vice President |
GUARANTORS' ACKNOWLEDGMENT
The undersigned, each of which has executed and delivered to the Banks a Guaranty Agreement dated as of July 31, 1996 (the "Guaranty Agreement"), hereby acknowledges the amendment of the Credit Agreement as set forth above and agrees that all of the Company's indebtedness, obligations and liabilities to the Banks and the Agent under the Credit Agreement and the Notes as amended by the foregoing Amendment shall continue to be entitled to the benefits of said Guaranty Agreement. The undersigned further agree that the Acknowledgment or consent of the undersigned to any further amendments of the Credit Agreement shall not be required as a result of this Acknowledgment having been obtained, except to the extent, if any, required by the Guaranty Agreement.
Dated as of March 17, 2000.
SANDERSON FARMS, INC. (FOODS DIVISION)
By /s/D. Michael Cockrell Its Treasurer and Chief Financial Officer SANDERSON FARMS, INC. (PRODUCTION DIVISION) By /s/D. Michael Cockrell Its Treasurer and Chief Financial Officer SANDERSON FARMS, INC. (PROCESSING DIVISION) By /s/D. Michael Cockrell Its Treasurer and Chief Financial Officer |
EXHIBIT 10.29
SANDERSON FARMS, INC.
FIFTH AMENDMENT TO CREDIT AGREEMENT
Harris Trust and Savings Bank
Chicago, Illinois
SunTrust Bank, Atlanta
Atlanta, Georgia
Credit Agricole Indosuez, Chicago Branch
(formerly known as Caisse Nationale de Credit
Agricole, Chicago Branch)
Chicago, Illinois
Trustmark National Bank
Jackson, Mississippi
Ladies and Gentlemen:
Reference is hereby made to that certain Credit Agreement dated as of July 31, 1996, as amended (the "Credit Agreement") among the undersigned, Sanderson Farms, Inc., a Mississippi corporation (the "Company"), you (the "Banks") and Harris Trust and Savings Bank, as agent for the Banks (the "Agent"). All defined terms used herein shall have the same meaning as in the Credit Agreement unless otherwise defined herein.
The Credit Agreement provides for a $100,000,000 Revolving Credit to be made available to the Company. The Company now applies to the Banks to amend the Credit Agreement to change the Applicable Margins and amend certain covenants contained in the Credit Agreement, all in the manner and on the terms and conditions set forth herein.
1. AMENDMENTS.
Upon satisfaction of all of the conditions precedent set forth in
Section 2 hereof, the Credit Agreement shall be amended as follows:
1.1. Section 1.3 of the Credit Agreement shall be amended to read as follows:
"Section 1.3. Intentionally Omitted."
1.2. The definition of the term "Applicable Eurodollar Margin" appearing in Section 4 of the Credit Agreement shall be amended to read as follows:
" "Applicable Eurodollar Margin" with respect to Eurodollar Loans and "Applicable Commitment Fee Margin" with respect to the commitment fee payable under Section 2.1 hereof, shall each mean the rate specified for such obligation below in Levels I, II, III and IV for the range of Funded Debt Ratio specified for each Level:
LEVEL I LEVEL II LEVEL III LEVEL IV LEVEL V
Funded Debt Ratio <35%> 35% and <45%> 45% and <55%> 55% < 65%> 65% Revolving Credit 1.25% 1.75% 2.25% 2.50% 2.75% Eurodollar Margin Commitment Fee .20% .25% .30% .30% .30% ------------------------------------------------------------------------------- |
Not later than ten (10) Business Days after receipt by the Banks of the Compliance Certificate called for by Section 7.4(c) hereof for the applicable fiscal quarter, the Agent shall determine the Funded Debt Ratio for the applicable period and shall promptly notify the Company of such determination and of any change in the Applicable Eurodollar Margin and Applicable Commitment Fee Margin (collectively, "Applicable Margins") resulting therefrom. Any such change in the Applicable Margins shall be effective as of the date the Agent so notifies the Company with respect to all Eurodollar Loans and Eurodollar Portions outstanding, and commitment fees payable, on such date, and such new Applicable Margins shall continue in effect until the effective date of the next quarterly redetermination in accordance with this Section. Each determination of the Funded Debt Ratio and Applicable Margins by the Agent in accordance with this Section shall be conclusive and binding on the Company absent manifest error. From the date hereof until the Applicable Margins are first adjusted pursuant hereto, the Applicable Margins shall be those set forth in Level II above."
1.3. Section 7.8 of the Credit Agreement shall be amended to read as follows:
"Section 7.8. Consolidated Net Working Capital. The Company will maintain at all times Consolidated Net Working Capital in an amount not less than the amount indicated below during each fiscal year of the Company indicated below:
FISCAL YEAR ENDING MINIMUM REQUIRED AMOUNT October 31, 1996 $42,000,000 October 31, 1997 $45,000,000 October 31, 1998 $48,000,000 October 31, 1999 $50,000,000 October 31, 2000 $50,000,000 October 31, 2001 $50,000,000 October 31, 2002 $50,000,000 Thereafter $50,000,000" |
1.4. Section 7.9 of the Credit Agreement shall be amended to read as follows:
"Section 7.9. Consolidated Tangible Net Worth The Company will maintain at all times Consolidated Tangible Net Worth during each fiscal year of the Company in an amount not less than:
(a) during each fiscal quarter of the fiscal year ending October 31, 2000, $95,000,000 plus any Net Proceeds of Stock issued during any preceding quarter or quarters of such fiscal year plus 50% of an amount (but not less than zero) equal to (i) the Company's Consolidated Net Income through the preceding quarter-end in such fiscal year, minus (ii) $3,000,000; and
(b) during each fiscal quarter of each fiscal year of the Company thereafter, an amount equal to the sum of the minimum amount required to be maintained on the last day of the preceding fiscal year of the Company plus the Net Proceeds of Stock issued in the last quarter of the preceding fiscal year and any preceding quarter or quarters of the then current fiscal year plus 50% of an amount (but not less than zero) equal to (i) the Company's Consolidated Net Income, if any, through the immediately preceding fiscal quarter end of such fiscal year minus (ii) $3,000,000."
1.5. Section 7.10 of the Credit Agreement shall be amended to read as follows:
"Section 7.10. Consolidated Indebtedness for Borrowed Money to Total Capitalization. The Company will not permit the ratio of its Consolidated Indebtedness for Borrowed Money to its Total Capitalization (the "Funded Debt Ratio") at any time to exceed the percentage indicated below during each fiscal year of the Company specified below:
FISCAL YEAR ENDING MAXIMUM PERCENTAGE October 31, 1996 55% October 31, 1997 65% October 31, 1998 65% October 31, 1999 55% October 31, 2000 55% October 31, 2001 60% October 31, 2002 55% Thereafter 55%." |
1.6. Section 7.12 of the Credit Agreement shall be amended to read as follows:
"Section 7.12. Capital Expenditures. The Company will not, and will not permit any Subsidiary to, be obligated to spend during any fiscal year for capital expenditures (as defined and classified in accordance with generally accepted accounting principles consistently applied, including without limitation any such capital expenditures in respect of Capitalized Leases but excluding any acquisition permitted by Section 7.14(d) which might constitute such a capital expenditure) an aggregate amount for the Company and its Subsidiaries in excess of the amount indicated below for each fiscal year of the Company plus an amount (the "Carryover Amount") permitted to be spent in the preceding fiscal year but not actually spent therein (the "Maximum Carryover Amount to the Next Fiscal Year"):
MAXIMUM MAXIMUM CARRYOVER AMOUNT
FISCAL YEAR ENDING LIMITATION AMOUNT TO THE NEXT FISCAL YEAR
October 31, 1996 $65,000,000 Unlimited
October 31, 1997 $45,000,000 Unlimited
October 31, 1998 $25,000,000 $ 7,500,000
October 31, 1999 Prior Year's $ 7,500,000
Depreciation
October 31, 2000 Prior Year's $ 7,500,000
Depreciation
October 31, 2001 Prior Year's $ 7,500,000
Depreciation
October 31, 2002 Prior Year's $ 7,500,000
Depreciation
Thereafter Prior Year's $ 7,500,000
Depreciation
|
2. CONDITIONS PRECEDENT.
The effectiveness of this Amendment is subject to the satisfaction of all of the following conditions precedent:
2.1. The Company and each of the Banks shall have executed this Amendment.
2.2. Each Guarantor Subsidiary shall have executed the Guarantors' Acknowledgment attached hereto.
2.3. The Agent shall have received the favorable written opinion of counsel for the Company and the Guarantor Subsidiaries in the form of Exhibit A attached hereto.
2.4. The Agent shall have received a Certificate of the Treasurer of the Company and each of the Guarantor Subsidiaries with respect to (a) resolutions of their respective Board of Directors authorizing the transactions contemplated hereby, and (b) incumbency and signature of the President, Treasurer and Secretary of the Company and each Guarantor Subsidiary.
3. REPRESENTATIONS AND WARRANTIES.
3.1. Each of the representations and warranties set forth in Section 5 of the Credit Agreement are true and correct.
3.2. The Company is in full compliance with all of the terms and conditions of the Credit Agreement and no Event of Default or Potential Default has occurred and is continuing thereunder or shall result after giving effect to this Amendment.
4. MISCELLANEOUS.
4.1. Reference to this specific Amendment need not be made in any note, document, letter, certificate, the Credit Agreement itself, the Revolving Notes, or any communication issued or made pursuant to or with respect to the Credit Agreement or the Revolving Notes, any reference to the Credit Agreement being sufficient to refer to the Credit Agreement as amended hereby.
4.2. This Amendment may be executed in any number of counterparts, and by the different parties on different counterparts, all of which taken together shall constitute one and the same agreement. Any of the parties hereto may execute this Amendment by signing any such counterpart and each of such counterparts shall for all purposes be deemed to be an original. This Amendment shall be governed by the internal laws of the State of Illinois.
Upon acceptance hereof by the Agent and the Banks in the manner hereinafter set forth, this Amendment shall be a contract between us for the purposes hereinabove set forth.
Dated as of February 16, 2001.
SANDERSON FARMS, INC.
By /s/D. Michael Cockrell
Its Treasurer and Chief Financial Officer
Accepted and agreed to as of the day and year last above written.
|
HARRIS TRUST AND SAVINGS BANK
individually and as Agent
By /s/Curtis Flammini Its Vice President SUNTRUST BANK, ATLANTA By /s/Hugh Brown Its AVP By /s/Gregory L. Cannon Its Director CREDIT AGRICOLE INDOSUEZ, CHICAGO BRANCH (formerly known as Caisse Nationale de Credit Agricole, Chicago Branch) |
By
Its___________________________________________________
By
Its___________________________________________________
TRUSTMARK NATIONAL BANK
By /s/William H. Edward Its Vice President |
GUARANTORS' ACKNOWLEDGMENT
The undersigned, each of which has executed and delivered to the Banks a Guaranty Agreement dated as of July 31, 1996 (the "Guaranty Agreement"), hereby acknowledges the amendment of the Credit Agreement as set forth above and agrees that all of the Company's indebtedness, obligations and liabilities to the Banks and the Agent under the Credit Agreement and the Notes as amended by the foregoing Amendment shall continue to be entitled to the benefits of said Guaranty Agreement. The undersigned further agree that the Acknowledgment or consent of the undersigned to any further amendments of the Credit Agreement shall not be required as a result of this Acknowledgment having been obtained, except to the extent, if any, required by the Guaranty Agreement.
Dated as of February 16, 2001.
SANDERSON FARMS, INC. (FOODS DIVISION)
By /s/D. Michael Cockrell Its Treasurer and Chief Financial Officer _ SANDERSON FARMS, INC. (PRODUCTION DIVISION) By /s/D. Michael Cockrell Its Treasurer and Chief Financial Officer _ SANDERSON FARMS, INC. (PROCESSING DIVISION) B /s/D. Michael Cockrell Its Treasurer and Chief Financial Officer |
EXHIBIT A
LAW OFFICES
Wise Carter Child & Caraway
PROFESSIONAL ASSOCIATION
600 HERITAGE BUILDING
401 EAST CAPITOL STREET
POST OFFICE BOX 651
JACKSON, MISSISSIPPI 39205-0651
601-968-5500
HENRY E. CHATHAM, JR. DIRECT DIAL: 601-968-5520
hec@wisecarter.com FACSIMILE: 601-968-5593
February 16, 2001
Harris Trust and Savings Bank
Chicago, Illinois
SunTrust Bank, Atlanta
Atlanta, Georgia
Credit Agricole Indosuez,
Chicago Branch (formerly known as
Caisse Nationale de Credit Agricole, Chicago Branch)
Chicago, Illinois
Trustmark National Bank
Jackson, Mississippi
Ladies and Gentlemen:
We have served as counsel to Sanderson Farms, Inc., a Mississippi corporation (the "Borrower"), in connection with the amendment of the Credit Agreement dated as of July 31, 1996, as previously amended (the "Credit Agreement") among the Borrower and you pursuant to a Fifth Amendment to Credit Agreement of even date herewith (the "Amendment") and that certain Second Amendment to the Reimbursement Agreement of even date herewith by and between Borrower and Harris Trust and Savings Bank ("Second Amendment to Reimbursement Agreement"). We have also served as counsel to (a) Sanderson Farms, Inc. (Foods Division), a Mississippi corporation, (b) Sanderson Farms, Inc. (Production Division), a Mississippi corporation, and (c) Sanderson Farms, Inc. (Processing Division), a Mississippi corporation (individually a "Subsidiary" and collectively the "Subsidiaries") in connection with the acknowledgment, pursuant to a Guarantors' Acknowledgment of even date herewith, of each such Subsidiary's guaranty of the Borrower's obligations under the Credit Agreement pursuant to a Guaranty Agreement dated July 31, 1996 (the "Guaranty Agreement"). As such counsel, we have reviewed the records of the corporate proceedings necessary to authorize the execution and
Harris Trust and Savings Bank, et al.
February 16, 2001
delivery of the Amendment and the Second Amendment to Reimbursement Agreement and related documents by the Borrower and of the Guarantors' Acknowledgment by each of the Subsidiaries and have examined the original executed Amendment, Second Amendment to Reimbursement Agreement and the Guarantors' Acknowledgment (collectively, the "Loan Documents") or copies or facsimiles thereof certified or otherwise identified to our satisfaction. Capitalized terms used but not defined in this opinion have the meanings ascribed to them by the Credit Agreement.
As counsel to the Borrower and the Subsidiaries, we have reviewed a copy of the Certificate of Existence/Authority for each of the Borrower and the Subsidiaries issued by the Secretary of State of Mississippi as of a recent date and the certificate of incorporation, articles of incorporation and bylaws under which the Borrower and the Subsidiaries are organized. We have also examined such other instruments and records and inquired into such other factual matters and matters of law as we deem necessary or pertinent to the formulation of the opinions hereinafter expressed. As to various questions of fact material to the opinions hereinafter expressed, we have relied without independent investigation upon statements or certificates of officers, assistant officers or representatives of the Borrower and the Subsidiaries, including the certificate attached hereto as Exhibit A, and the correctness of the representations made in the Loan Documents by the Borrower or any one of the Subsidiaries.
With your permission and without independent investigation, we have assumed, except to the extent specifically opined below, for purposes of this opinion the following:
a. The genuineness of all signatures other than those of the Borrower and the Subsidiaries;
b. The authenticity of all documents submitted to us as originals and the conformity to authentic original documents of all documents submitted to us as certified, conformed or photostatic copies or submitted to us by facsimile;
c. The due authorization, execution and delivery by each party other than the Borrower and the Subsidiaries and, where appropriate, recordation of each of the Loan Documents, and all other documents referred to herein;
d. That all documents submitted to us are accurate and complete;
e. That each of the Borrower and the Subsidiaries has complied with all applicable federal and state securities laws in connection with the transactions contemplated by the Loan Documents;
Harris Trust and Savings Bank, et al.
February 16, 2001
f. That, except as stated in the Loan Documents, there are no documents or agreements between any one or more of you, on the one hand, and any one or more of the Borrower and the Subsidiaries, on the other hand, that would have an effect on the opinions expressed in this opinion letter; and
g. That Certificates of Existence/Authority issued on the date hereof for the Borrower and the Subsidiaries would be substantially identical to the ones referred to above.
Based on the foregoing and upon our examination of the Certificate of Existence/Authority, certificate of incorporation, articles of incorporation and bylaws of each of the Borrower and each Subsidiary, in reliance thereon and subject to the assumptions, qualifications, exceptions and limitations set forth in this opinion, we are of the opinion that:
2. Each of the Borrower and the Subsidiaries is a valid and subsisting corporation duly organized and existing under the laws of the State of Mississippi with corporate power and authority to carry on its business as now conducted and is duly licensed or qualified in each jurisdiction wherein the failure to be so licensed or qualified would have a material adverse effect on the condition, financial or otherwise, of the Borrower and its Subsidiaries taken as a whole.
3. The Borrower has full corporate right, power and authority to borrow from you, to execute and deliver the Loan Documents to which it is a party, and to perform its obligations under the Loan Documents to which it is a party. Except as specified in the Credit Agreement, the execution and delivery of such Loan Documents by the Borrower do not, nor will the observance or performance of any of the matters or things therein provided for, contravene any provision of law or of the certificate of incorporation, articles of incorporation or bylaws of the Borrower (there being no other agreements under which the Borrower is organized) or, to the best of our knowledge, of any covenant, indenture or agreement binding upon or affecting the Borrower or any of its properties or assets.
4. The Amendment and the Second Amendment to Reimbursement Agreement executed by the Borrower have been duly authorized by all necessary corporate action (no stockholder approvals being required), have been executed and delivered by the proper officers of the Borrower, and, if the internal law of Mississippi, without regard to choice of law principles, were to apply, the Credit Agreement, as amended by the Amendment and the Second Amendment to Reimbursement Agreement, constitute the valid and binding agreements of the Borrower and are enforceable against the Borrower in accordance with their respective terms.
5. Each Subsidiary has full corporate right, power and authority to guarantee all indebtedness, obligations and liabilities, whether now existing or hereafter arising, of the
Harris Trust and Savings Bank, et al.
February 16, 2001
Borrower to you under the Credit Agreement, to execute and deliver the Guarantors' Acknowledgment and to perform its obligations thereunder. Except as specified in the Credit Agreement, the execution and delivery of the Guarantors' Acknowledgment by the Subsidiaries do not, nor will the observance or performance of any of the matters or things therein provided for, contravene any provision of law or of the certificate of incorporation, articles of incorporation or bylaws of any Subsidiary (there being no other agreements under which any Subsidiary is organized) or, to the best of our knowledge, of any covenant, indenture or agreement binding upon or affecting any Subsidiary or any of their respective properties or assets.
6. The Guarantors' Acknowledgment has been duly authorized by all necessary corporate action, has been executed and delivered by the proper officers of each Subsidiary, and the Guaranty Agreement as supplemented by the Guarantors' Acknowledgment constitutes the valid and binding agreement of each Subsidiary and, if the internal law of Mississippi, without regard to choice of law principles, were to apply, is enforceable against each Subsidiary in accordance with its terms.
7. The rates of interest applicable under the Credit Agreement as amended by the Amendment would not violate the usury laws of the State of Mississippi should such laws apply to the loans outstanding under the Credit Agreement.
8. Except as specified in the Credit Agreement, no order, authorization, consent, license or exemption of, or filing or registration with, any court or governmental department, agency, instrumentality or regulatory body, whether local, state or federal, is or will be required in connection with the lawful execution and delivery by Borrower of the Loan Documents to which it is a party or by any Subsidiary of the Guarantors' Acknowledgment or the observance and performance by the Borrower and the Subsidiaries of any of the respective terms thereof.
9. Except as may be disclosed in the Certificate of the Treasurer of the Company attached hereto, we have not been engaged to give substantive attention to any litigation pending or threatened against or involving the Borrower, any Subsidiary or any of their respective assets and properties, which if adversely determined would reasonably be expected to result in a material adverse change in the properties, business, operations, or financial condition of the Borrower and its Subsidiaries taken as a whole.
Notwithstanding anything stated herein to the contrary, we express no opinion as to any of the following with respect to any of the Loan Documents.
(i) Enforceability of any powers of attorney whether or not designated as irrevocable;
Harris Trust and Savings Bank, et al.
February 16, 2001
(ii) (a) The availability of injunctive relief, specific performance or any other recourse or remedy normally dependent upon the exercise of judicial discretion; (b) the availability of self- help remedies; and (c) the enforceability of waivers or relinquishment of procedural or other protections (such as, but without limitation, notices, delays, rights to appraisement and/or redemptions) afforded by applicable laws and judicial decisions;
(iii) The effect of the Agent's and/or the Banks' compliance or noncompliance with any state or federal laws or regulations applicable because of their legal or regulatory status or the nature of their business or their participation in the transactions contemplated by the Loan Documents;
(iv) The enforceability of any provision in which a party attempts to contract out of liability for its own negligence, fault, gross fault, intentional wrongful acts, gross negligence, strict liability or other conduct;
(v) The enforceability of any provision in which a party is indemnified or held harmless for its own negligence, fault, gross fault, gross negligence, intentional misconduct, strict liability or other conduct or for the acts or omissions of third parties;
(vi) The enforceability of any provision for attorneys' fees other than reasonable attorneys' fees;
(vii) The enforceability of any provision stipulating for the imputation or application of payments in any manner other than that provided by Mississippi law;
(viii) The enforceability of any provision by which an assignee succeeds to the rights and benefits of the assignor but disclaims responsibility for any obligations of the assignor;
(ix) The strict enforceability of each and every remedy and provision in accordance with the terms thereof under all facts and circumstances; or the compliance of each and every such remedy and provision with Mississippi statutes or regulatory orders;
(x) The enforceability of any provision entitling any party to the appointment of a receiver;
(xi) The enforceability of any provision (a) waiving any statutes of limitation or prescriptive periods; (b) submitting to the jurisdiction of any court; (c) waiving rights to assert counterclaims or defenses; (d) constituting a forum selection clause; (e) in the Guaranty Agreement purporting to make the obligation of any of the Subsidiaries absolute, notwithstanding any defect, invalidity, irregularity or unenforceability of the instruments giving rise to the Borrower's
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February 16, 2001
obligation under the Loan Documents; (f) waiving liability of any other party; or (g) waiving the right to trial by jury; and
(xii) The enforceability of any choice of law provision.
The opinions expressed in this letter are qualified to the extent that the validity, binding nature, and enforceability of any of the terms of the Loan Documents may be limited or otherwise affected by (1) general principles of equity, including without limitation concepts of materiality, reasonableness, good faith and fair dealing (regardless of whether enforceability is considered in a proceeding in equity or at law); (2) applicable bankruptcy, insolvency, reorganization, arrangement, moratorium, fraudulent transfer, receivership or other similar laws generally affecting the enforcement of creditors' rights at the time in effect; (3) limitations based on Mississippi statutes or on Mississippi public policy limiting a person's right to waive the benefits of statutory provisions or common law rights; or (4) limitations imposed by Mississippi law on the right of a lender to exercise rights and remedies under the Loan Documents for default by the borrower if it is determined that the defaults are not material. As used herein, the phrases "to our knowledge" or "to the best of our knowledge" or any phrase of like import refers to the conscious awareness of information, without special investigation, of the lawyer or lawyers within this firm who devote substantive legal attention to the affairs of the Borrower or the Subsidiaries.
Notwithstanding the foregoing, it is our opinion that the remedies and provisions contained in the Loan Documents that would (assuming the enforceability of the Loan Documents under Mississippi law) be enforceable and that do not violate Mississippi statutes or regulatory orders or public policy are sufficient as a whole, subject to the qualifications, limitations and exceptions stated elsewhere herein, for the practical realization of the essential benefits intended to be provided thereby.
The opinions expressed herein are based upon an interpretation of, and are limited to, existing laws, ordinances and regulations of the State of Mississippi, which laws are subject to change at any time by legislation, administrative action or judicial decision. We undertake no obligation and hereby disclaim any obligation to update or supplement this opinion in response to subsequent changes in the law or future events affecting the transactions contemplated by the Loan Documents.
We are admitted to the practice of law in the State of Mississippi. We are opining herein only with respect to the laws of Mississippi, and we assume no responsibility and render no opinion as to the applicability to, or the effect on, the matters addressed herein of the laws of any other jurisdiction. We do not express any opinion, either implicitly or otherwise, on any issue not expressly set forth herein.
Harris Trust and Savings Bank, et al.
February 16, 2001
Please be advised that this opinion letter is rendered solely for your information and assistance in connection with the above transaction and may not be otherwise used, relied upon, quoted or referred to by any other person or for any other purpose without our prior written consent.
Very truly yours,
WISE CARTER CHILD & CARAWAY,
Professional Association
By:/s/Henry E. Chatham, Jr. --------------------------- Henry E. Chatham, Jr. |
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Attachment
EXHIBIT 21
SANDERSON FARMS SUBSIDIARIES
NAME OF SUBSIDIARY STATE OF INCORPORATION
Sanderson Farms, Inc. (Production Division) Mississippi Sanderson Farms, Inc. (Processing Division) Mississippi Sanderson Farms, Inc. (Food Division - Mississippi formerly National Prepared Foods, Inc.) |
Exhibit 23
Consent of Independent Auditors
We consent to the incorporation by reference in the Registration Statements (Form S-8 No. 333-67474 and Form S-8 No. 333-92412) pertaining to the Sanderson Farms, Inc. and Affiliates Stock Option Plan of our report dated December 10, 2002, with respect to the consolidated financial statements and schedule of Sanderson Farms, Inc. included in its Annual Report (Form 10-K) for the year ended October 31, 2002.
/s/ Ernst & Young LLP
Laurel, Mississippi
December 23, 2002
|
Exhibit 99.1
CERTIFICATION PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Sanderson Farms, Inc. (the "Company") on Form 10-K for the year ended October 31, 2002 (the "Report"), I, Joe F. Sanderson, Jr., President and Chief Executive Officer of the Company, certify that:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.
/s/ Joe F. Sanderson, Jr. ------------------------------ Joe F. Sanderson, Jr. President and Chief Executive Officer December 27, 2002 |
EXHIBIT 99.2
CERTIFICATION PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Sanderson Farms, Inc. (the "Company") on Form 10-K for the year ended October 31, 2002 (the "Report"), I, D. Michael Cockrell, Treasurer and Chief Financial Officer of the Company, certify that:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.
/s/ D. Michael Cockrell ------------------------------- D. Michael Cockrell Treasurer and Chief Financial Officer December 27, 2002 |