-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DIiUEVDVPO+xgLC40CaMx5dHeV8P/gxhJb6ru12aNEuJhHDJnJwRZDc3R0V6rmOP Mjp8lKr0+a/S/cM7Cjb7yQ== 0000950144-05-001922.txt : 20050301 0000950144-05-001922.hdr.sgml : 20050301 20050301125617 ACCESSION NUMBER: 0000950144-05-001922 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 20050223 ITEM INFORMATION: Entry into a Material Definitive Agreement ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20050301 DATE AS OF CHANGE: 20050301 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SANDERSON FARMS INC CENTRAL INDEX KEY: 0000812128 STANDARD INDUSTRIAL CLASSIFICATION: POULTRY SLAUGHTERING AND PROCESSING [2015] IRS NUMBER: 640615843 STATE OF INCORPORATION: MS FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-14977 FILM NUMBER: 05649066 BUSINESS ADDRESS: STREET 1: 225 N 13TH AVE STREET 2: PO BOX 988 CITY: LAUREL STATE: MS ZIP: 39441 BUSINESS PHONE: 6016494030 MAIL ADDRESS: STREET 1: 225 N 13TH AVENUE STREET 2: PO BOX 988 CITY: LAUREL STATE: MS ZIP: 39441 8-K 1 g93528e8vk.htm SANDERSON FARMS,INC. SANDERSON FARMS,INC.
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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): February 23, 2005

SANDERSON FARMS, INC.

(Exact name of registrant as specified in its charter)

         
Mississippi   1-14977   64-0615843
         
(State or other jurisdiction
of incorporation) 		  (Commission File Number)   (I.R.S. Employer
Identification No.)
     
225 N. 13th Avenue    
P.O. Box 988    
Laurel, Mississippi   39440
 
(Address of principal executive offices)   (Zip Code)

(601) 649-4030
 

(Registrant’s telephone number, including area code)

Not applicable.
(Former name or former address, if changed since last report)

     Check the appropriate box if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

     o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

     o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

     o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

     o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 
 

 

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Item 1.01 Entry into a Material Definitive Agreement
Item 2.02 Results of Operations and Financial Condition
Item 9.01 Financial Statements and Exhibits
SIGNATURES
EXHIBIT INDEX
EX-10.1 FORM OF RESTRICTED STOCK AGREEMENT
EX-10.2 FORM OF RESTRICTED STOCK AGREEMENT
EX-10.3 FORM OF AGREEMENT
EX-10.4 FORM OF AGREEMENT
EX-99.1 PRESS RELEASE OF SANDERSON FARMS INC.
EX-99.2 TRANSCRIPT OF CONFERENCE CALL

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Section 1 — Registrant’s Business and Operations

Item 1.01 Entry into a Material Definitive Agreement

     General

     On February 23, 2005, the Registrant’s Board of Directors approved the forms of four agreements for use under the Registrant’s Stock Incentive Plan, which was approved by the Registrant’s shareholders and adopted by its Board of Directors on February 17, 2005. For general information concerning the Stock Incentive Plan, awards under it, and the tax aspects of these awards, see pages 17 through 24 of the Registrant’s definitive proxy statement for its Annual Meeting held February 17, 2005, and the Supplement to that Proxy Statement, both of which are available at www.sec.gov and www.sandersonfarms.com.

     Two of these form agreements pertain to the Registrant’s issuance of restricted stock. One agreement is for the issuance of restricted stock to non-employee directors, and the other is for the issuance of restricted stock to officers and employees of the Registrant.

     The other two of these form agreements pertain to the Registrant’s Management Share Purchase Plan, or MSPP. One agreement is for non-employee directors who participate in the MSPP, and the other is for officers and employees who participate in the MSPP.

     The descriptions of these agreements below are necessarily not complete, and in each instance reference is made to the agreements themselves, which are filed as exhibits with this report and are incorporated by reference herein.

     Restricted Stock Agreements

     The forms of restricted stock agreement that have been approved by the Registrant’s Board of Directors provide for the grant of a specified number of shares of restricted stock to the participant as a reward for past service or as an incentive for the performance of future services and for no additional consideration, subject to the following terms and conditions:

  •   The restricted stock may not be sold or transferred during the restricted period except by Will or inheritance.
 
  •   The restricted period lasts for 10 years for officers and employees, except that it ends if death, disability or retirement occurs after five years or if a change of control occurs at any time. It lasts three years for non-employee directors, but ends upon death, disability or change of control.
 
  •   Rights to the shares are forfeited if employment of an officer or employee, or service of a non-employee director, terminates prior to the end of the restricted period, or if the board determines that the participant has engaged in specified detrimental conduct or activity while employed or has competed with the Registrant while employed by it or for two years thereafter.
 
  •   The participant is entitled to vote the shares and receive dividends, except that stock dividends become part of the restricted shares.

     Management Share Purchase Plan

     The MSPP agreement for officers and employees permits the participant to reduce his or her base salary by up to 15%, and his or her bonus by up to 75%, as the participant shall select, and receive restricted stock in lieu of the amount of the reduction, at the market value of the Registrant’s stock as quoted on Nasdaq.

     The MSPP for non-employee directors permits the participant to reduce his or her annual stipend (currently $20,000) and meeting fees (currently $7,000 per board meeting for committee chairs and $6,000 for all other

 

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directors) by up to 100%, as the participant shall select, and receive restricted stock in lieu of the amount of the reduction, at the market value of the stock as quoted on Nasdaq.

     The MSPP agreements further provide:

  •   The Registrant will, for no further consideration, match 25% of the restricted shares purchased by the participant.The shares provided by the Registrant will be restricted to the same extent as the shares they match.
 
  •   The restricted stock may not be sold or transferred during the restricted period except by Will or inheritance.
 
  •   The restricted period lasts for three years, except that it ends upon the death, disability or retirement of the participant.
 
  •   If employment as an officer or employee, or service of a non-employee director, terminates prior to the end of the restricted period, or if the board determines that the participant has engaged in specified detrimental conduct or activity while employed or has competed with the Registrant while employed by it or for two years thereafter, the participant forfeits the shares provided by the Registrant’s match, and the Registrant may elect to repurchase the other restricted stock at the price paid for it.
 
  •   The participant is entitled to vote the shares and receive dividends, except that stock dividends become part of the restricted shares.

Section 2 – Financial Information

Item 2.02 Results of Operations and Financial Condition.

On February 24, 2005, the Registrant issued a press release announcing its earnings for its fiscal quarter ended January 31, 2005. The press release is furnished herewith as Exhibit 99.1. Also on February 24, 2005, the Registrant held a conference call to discuss its earnings for its fiscal quarter and year ended January 31, 2005. A transcript of the conference call is furnished herewith as Exhibit 99.2. The information in the press release and transcript is not to be considered “filed” for purposes of the Securities Exchange Act of 1934.

Section 9 – Financial Statements and Exhibits

Item 9.01 Financial Statements and Exhibits.

(c) The following exhibits are filed with this Current Report:

     
Exhibit No.   Description
10.1
  Form of Restricted Stock Agreement between Registrant and its non-employee directors who are granted restricted stock
 
    
10.2
  Form of Restricted Stock Agreement between Registrant and its officers and employees who are granted restricted stock.
 
    
10.3
  Form of Agreement between Registrant and its non-employee directors who participate in its management share purchase plan.

 

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Exhibit No.   Description
10.4
  Form of Agreement between Registrant and its officers and employees who participate in its management share purchase plan.
 
    
99.1
  Press release of Sanderson Farms, Inc. dated February 24, 2005
 
    
99.2
  Transcript of conference call held by Sanderson Farms, Inc. on February 24, 2005

 

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SIGNATURES

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

SANDERSON FARMS, INC.
(Registrant)

         
Date: March 1, 2005
  By:       /s/ D. Michael Cockrell
       
      D. Michael Cockrell
      Treasurer and Chief Financial Officer

 

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EXHIBIT INDEX

     
Exhibit No.   Description
10.1
  Form of Restricted Stock Agreement between Registrant and its non-employee directors who are granted restricted stock
 
    
10.2
  Form of Restricted Stock Agreement between Registrant and its officers and employees who are granted restricted stock.
 
    
10.3
  Form of Agreement between Registrant and its non-employee directors who participate in its management share purchase plan.
 
    
10.4
  Form of Agreement between Registrant and its officers and employees who participate in its management share purchase plan.
 
    
99.1
  Press release of Sanderson Farms, Inc. dated February 24, 2005
 
    
99.2
  Transcript of conference call held by Sanderson Farms, Inc. on February 24, 2005

 

EX-10.1 2 g93528exv10w1.txt EX-10.1 FORM OF RESTRICTED STOCK AGREEMENT EXHIBIT 10.1 SANDERSON FARMS, INC. RESTRICTED STOCK AGREEMENT (NON-EMPLOYEE DIRECTOR) This RESTRICTED STOCK AGREEMENT (this "Agreement"), made and entered into as of the _____ day of _______________, 20____ (the "Grant Date"), by and between ___________________________ (the "Participant") and Sanderson Farms, Inc. (together with its subsidiaries and affiliates, the "Company"), sets forth the terms and conditions of a Restricted Stock Award issued pursuant to the Sanderson Farms, Inc. and Affiliates Stock Incentive Plan, adopted on February 17, 2005 (the "Plan") and this Agreement. Any capitalized term used but not defined herein shall have the meaning ascribed to such term in the Plan. 1. Grant and Vesting of Restricted Stock. (a) As a reward for past service or in consideration of and as an incentive to the Participant's continued service as a non-employee director on the Company's Board, and for no additional consideration, the Company hereby grants to the Participant, as of the Grant Date, ______________ shares of the Company's common stock, par value $1.00 per share (the "Restricted Stock"), subject to the terms and conditions set forth herein and in the Plan. The Restricted Stock is subject to forfeiture as provided herein and may not be sold, exchanged, transferred, pledged, hypothecated or otherwise disposed of by the Participant, other than by will or by the laws of descent and distribution of the state in which the Participant resides on the date of his death. The period during which the Restricted Stock is not vested and is subject to transfer restrictions is referred to herein as the "Restriction Period." (b) Except as otherwise provided in this Agreement or the Plan, the Restricted Stock shall vest and no longer be subject to forfeiture or any transfer restrictions hereunder on the third anniversary of the Grant Date, so long as the Participant has continued to serve as a director on the Company's Board continuously from the Grant Date through such date. (c) If the Participant ceases to serve as a director on the Company's Board by reason of death or Disability, or if there is a Change of Control, the Restricted Stock that has not vested shall immediately vest and no longer be subject to forfeiture or any transfer restrictions hereunder. If the Participant ceases to serve as a director for any other reason, voluntarily or involuntarily, prior to the expiration of the Restriction Period, then the Restricted Stock that has not vested as of the cessation date shall immediately be forfeited, ownership shall be transferred back to the Company and the Restricted Stock shall become authorized but unissued Shares. 2. Issuance of Shares. Certificates representing the Restricted Stock shall be registered in the Participant's name (or an appropriate book entry shall be made). Certificates, if issued, may, at the Company's option, either be held by the Company in escrow until the Restriction Period expires or until the restrictions thereon otherwise lapse and/or be issued to the Participant and registered in the name of the Participant, bearing an appropriate restrictive legend that refers to this Agreement and remaining subject to appropriate stop-transfer orders. The Participant agrees to deliver to the Board, upon request, one or more stock powers endorsed in blank relating to the Restricted Stock. If and when the Restricted Stock vests and is no longer subject to forfeiture or transfer restrictions, unlegended certificates for such Restricted Stock shall be delivered to the Participant (subject to Section 6 pertaining to the withholding of taxes and Section 14 pertaining to the Securities Act of 1933, as amended (the "Securities Act")); provided, however, that the Board may cause such legend or legends to be placed on any such certificates as it may deem advisable under Applicable Law. 3. Rights as a Stockholder. Except as otherwise provided in this Agreement or the Plan, during the Restriction Period the Participant shall have, with respect to the Restricted Stock, all of the rights of a stockholder of the Company, including the right to vote the Restricted Stock and the right to receive any dividends or other distributions with respect thereto. 4. Adjustments. If any change in corporate capitalization, such as a stock split, reverse stock split, stock dividend, or any corporate transaction such as a reorganization, reclassification, merger or consolidation or separation, including a spin-off of the Company or sale or other disposition by the Company of all or a portion of its assets, any other change in the Company's corporate structure, or any distribution to stockholders (other than a cash dividend) results in the outstanding Shares, or any securities exchanged therefor or received in their place, being exchanged for a different number or class of shares or other securities of the Company, or for shares of stock or other securities of any other corporation, or new, different or additional shares or other securities of the Company or of any other corporation being received by the holders of outstanding Shares, then the shares of Restricted Stock granted pursuant to this Agreement shall be treated in the same manner as other outstanding Shares of the Company. 5. Validity of Share Issuance. The shares of Restricted Stock have been duly authorized by all necessary corporate action of the Company and are validly issued, fully paid and non-assessable. 6. Taxes and Withholding. As soon as practicable on or after the date as of which an amount first becomes includible in the gross income of the Participant for federal income tax purposes with respect to this Award of Restricted Stock, the Participant shall pay to the Company, or make arrangements satisfactory to 2 the Company regarding the payment of, or the Company may deduct or withhold from any cash or property payable to the Participant, an amount equal to all federal, state, local and foreign taxes that are required by Applicable Law to be withheld with respect to such includible amount. Notwithstanding anything to the contrary contained herein, the Participant may, if the Company consents, discharge this withholding obligation by directing the Company to withhold shares of Restricted Stock having a Fair Market Value on the date that the withholding obligation is incurred equal to the amount of tax required to be withheld in connection with such vesting, as determined by the Board. 7. Notices. Any notice to the Company provided for in this Agreement shall be in writing and shall be addressed to it in care of its Secretary at its principal executive offices, and any notice to the Participant shall be addressed to the Participant at the current address shown on the payroll records of the Company. Any notice shall be deemed to be duly given if and when properly addressed and posted by registered or certified mail, postage prepaid. 8. Legal Construction. (a) Severability. If any provision of this Agreement is or becomes or is deemed invalid, illegal or unenforceable in any jurisdiction, or would disqualify the Plan or this Agreement under any law with respect to which the Plan or this Agreement is intended to qualify, or would cause compensation deferred under the Plan to be includible in a Plan participant's gross income pursuant to Section 409A(a)(1) of the Internal Revenue Code of 1986, as amended, as determined by the Board, such provision shall be construed or deemed amended to conform to Applicable Law or, if it cannot be construed or deemed amended without, in the determination of the Board, materially altering the intent of the Plan or the Agreement, it shall be stricken and the remainder of this Agreement shall remain in full force and effect. (b) Gender and Number. Where the context admits, words in any gender shall include the other gender, words in the singular shall include the plural and words in the plural shall include the singular. (c) Governing Law. To the extent not preempted by federal law, this Agreement shall be construed in accordance with and governed by the laws of the State of Mississippi. 9. Incorporation of Plan. This Agreement and the Restricted Stock Award made pursuant hereto are subject to, and this Agreement hereby incorporates and makes a part hereof, all terms and conditions of the Plan that are applicable to Agreements and Awards generally and to Restricted Stock Awards in particular. The Board has the right to interpret, construe and administer the Plan, this Agreement and the Restricted Stock Award made pursuant hereto. All acts, determinations and decisions of the 3 Board made or taken pursuant to grants of authority under the Plan or with respect to any questions arising in connection with the administration and interpretation of the Plan, including the severability of any and all of the provisions thereof, shall be in the Board's sole discretion and shall be conclusive, final and binding upon all parties, including the Company, its stockholders, Participants, Eligible Participants and their estates, beneficiaries and successors. The Participant acknowledges that he has received a copy of the Plan. 10. No Implied Rights. Neither this Agreement nor the issuance of any Restricted Stock shall confer on the Participant any right with respect to continuance of employment or other service with the Company. If the Participant is an employee of the Company, then except as may otherwise be limited by a written agreement between the Company and the Participant, and acknowledged by the Participant, the right of the Company to terminate at will the Participant's employment with it at any time (whether by dismissal, discharge, retirement or otherwise) is specifically reserved by the Company. 11. Integration. This Agreement and the other documents referred to herein, including the Plan, or delivered pursuant hereto, contain the entire understanding of the parties with respect to their subject matter. There are no restrictions, agreements, promises, representations, warranties, covenants or undertakings with respect to the subject matter hereof other than those expressly set forth herein and restrictions imposed by the Securities Act and applicable state securities laws. This Agreement, including the Plan, supersedes all prior agreements and understandings between the parties with respect to its subject matter. 12. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but which together constitute one and the same instrument. 13. Amendments. The Board may, at any time, without consent of or receiving further consideration from the Participant, amend this Agreement and the Restricted Stock Award made pursuant hereto in response to, or to comply with changes in, Applicable law. To the extent not inconsistent with the terms of the Plan, the Board may, at any time, amend this Agreement in a manner that is not unfavorable to the Participant without the consent of the Participant. The Board may amend this Agreement and the Restricted Stock Award made pursuant hereto otherwise with the written consent of the Participant. 4 14. Securities Act. (a) The issuance and delivery of the Restricted Stock to the Participant have been registered under the Securities Act by a Registration Statement on Form S-8 that has been filed with the Securities and Exchange Commission ("SEC") and has become effective. The Participant acknowledges receipt from the Company of its Prospectus dated February ___, 2005, relating to the Restricted Stock. (b) If the Participant is an "affiliate" of the Company, which generally means a director, executive officer or holder of 10% or more of its outstanding shares, at the time certificates representing Restricted Stock are delivered to the Participant, such certificates shall bear the following legend, or other similar legend then being generally used by the Company for certificates held by its affiliates: "THESE SHARES MUST NOT BE OFFERED FOR SALE, SOLD, ASSIGNED OR TRANSFERRED EXCEPT IN A TRANSACTION WHICH, IN THE OPINION OF COUNSEL FOR THE ISSUER, IS EXEMPT FROM REGISTRATION THROUGH COMPLIANCE WITH RULE 144 OR WITH ANOTHER EXEMPTION FROM REGISTRATION." The Company shall remove such legend upon request by the Participant if, at the time of such request, the shares are eligible for sale under SEC Rule 144(k), or any provision that has replaced it, in the opinion of the Company's counsel. 15. Arbitration. Any controversy or claim arising out of or relating to this Restricted Stock Agreement shall be settled by arbitration administered by the American Arbitration Association under its Commercial Arbitration Rules and judgment upon the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof. 5 IN WITNESS WHEREOF, the Participant has executed this Agreement on his own behalf, thereby representing that he has carefully read and understands this Agreement and the Plan as of the day and year first written above, and the Company has caused this Agreement to be executed in its name and on its behalf, all as of the day and year first written above. SANDERSON FARMS, INC. By: ________________________________ Name: _______________________ Title: ________________________ _____________________________________ Participant 6 EX-10.2 3 g93528exv10w2.txt EX-10.2 FORM OF RESTRICTED STOCK AGREEMENT EXHIBIT 10.2 SANDERSON FARMS, INC. RESTRICTED STOCK AGREEMENT (MANAGEMENT EMPLOYEE) This RESTRICTED STOCK AGREEMENT (this "Agreement"), made and entered into as of the _____ day of _______________, 20____ (the "Grant Date"), by and between ___________________________ (the "Participant") and Sanderson Farms, Inc. (together with its subsidiaries and affiliates, the "Company"), sets forth the terms and conditions of a Restricted Stock Award issued pursuant to the Sanderson Farms, Inc. and Affiliates Stock Incentive Plan, adopted on February 17, 2005 (the "Plan") and this Agreement. Any capitalized term used but not defined herein shall have the meaning ascribed to such term in the Plan. 1. Grant and Vesting of Restricted Stock. (a) As a reward for past service or in consideration of and as an incentive to the Participant's performance of future services on behalf of the Company, and for no additional consideration, the Company hereby grants to the Participant, as of the Grant Date, ______________ shares of the Company's common stock, par value $1.00 per share (the "Restricted Stock"), subject to the terms and conditions set forth herein and in the Plan. The Restricted Stock is subject to forfeiture as provided herein and may not be sold, exchanged, transferred, pledged, hypothecated or otherwise disposed of by the Participant, other than by will or by the laws of descent and distribution of the state in which the Participant resides on the date of his death. The period during which the Restricted Stock is not vested and is subject to transfer restrictions is referred to herein as the "Restriction Period." (b) Except as otherwise provided in this Agreement or the Plan, the Restricted Stock shall vest and no longer be subject to forfeiture or any transfer restrictions hereunder on the tenth anniversary of the Grant Date, so long as the Participant has remained continuously employed by the Company from the Grant Date through such date. (c) In the event of (i) the Participant's termination of employment with the Company by reason of death or Disability, in either case five years or more from the Grant Date, (ii) his termination of employment with the Company on or after five years from the Grant Date and after his attainment of eligibility for retirement (as determined by the Board from time to time), or (iii) a Change of Control, the Restricted Stock that has not vested shall immediately vest and no longer be subject to forfeiture or any transfer restrictions hereunder. If the Participant's employment with the Company is terminated for any other reason, voluntarily or involuntarily, prior to the expiration of the Restriction Period, then the Restricted Stock that has not vested as of the termination date shall immediately be forfeited, ownership shall be transferred back to the Company and the Restricted Stock shall become authorized but unissued Shares. (e) If the Board determines in good faith that the Participant has engaged in any Detrimental Activity during the period that the Participant is employed by the Company or during the two-year period following the Participant's voluntary termination of employment or his termination by the Company for Cause, then the Restricted Stock that has not vested as of the date of the Board determination shall immediately be forfeited, ownership shall be transferred back to the Company and the Restricted Stock shall become authorized but unissued Shares or, if the Restricted Stock has already vested, the Participant shall repay to the Company the fair market value of the Shares as of the Grant Date. For purposes of this Section 1(e), the parties hereto agree that the fair market value of the Shares as of the Grant Date is $_________ per share. 2. Issuance of Shares. Certificates representing the Restricted Stock shall be registered in the Participant's name (or an appropriate book entry shall be made). Certificates, if issued, may, at the Company's option, either be held by the Company in escrow until the Restriction Period expires or until the restrictions thereon otherwise lapse and/or be issued to the Participant and registered in the name of the Participant, bearing an appropriate restrictive legend that refers to this Agreement and remaining subject to appropriate stop-transfer orders. The Participant agrees to deliver to the Board, upon request, one or more stock powers endorsed in blank relating to the Restricted Stock. If and when the Restricted Stock vests and is no longer subject to forfeiture or transfer restrictions, unlegended certificates for such Restricted Stock shall be delivered to the Participant (subject to Section 6 pertaining to the withholding of taxes and Section 14 pertaining to the Securities Act of 1933, as amended (the "Securities Act")); provided, however, that the Board may cause such legend or legends to be placed on any such certificates as it may deem advisable under Applicable Law. 3. Rights as a Stockholder. Except as otherwise provided in this Agreement or the Plan, during the Restriction Period the Participant shall have, with respect to the Restricted Stock, all of the rights of a stockholder of the Company, including the right to vote the Restricted Stock and the right to receive any dividends or other distributions with respect thereto. 4. Adjustments. If any change in corporate capitalization, such as a stock split, reverse stock split, stock dividend, or any corporate transaction such as a reorganization, reclassification, merger or consolidation or separation, including a spin-off of the Company or sale or other disposition by the Company of all or a portion of its assets, any other change in the Company's corporate structure, or any distribution to stockholders (other than a cash dividend) results in the outstanding Shares, or any securities exchanged therefor or received in their place, being exchanged for a different number or class of shares or other securities of the Company, or for shares of stock or other securities of any other corporation, or new, different or additional shares or other securities of the Company or of any other corporation being received by the holders of 2 outstanding Shares, then the shares of Restricted Stock granted pursuant to this Agreement shall be treated in the same manner as other outstanding Shares of the Company. 5. Validity of Share Issuance. The shares of Restricted Stock have been duly authorized by all necessary corporate action of the Company and are validly issued, fully paid and non-assessable. 6. Taxes and Withholding. As soon as practicable on or after the date as of which an amount first becomes includible in the gross income of the Participant for federal income tax purposes with respect to this Award of Restricted Stock, the Participant shall pay to the Company, or make arrangements satisfactory to the Company regarding the payment of, or the Company may deduct or withhold from any cash or property payable to the Participant, an amount equal to all federal, state, local and foreign taxes that are required by Applicable Law to be withheld with respect to such includible amount. Notwithstanding anything to the contrary contained herein, the Participant may, if the Company consents, discharge this withholding obligation by directing the Company to withhold shares of Restricted Stock having a Fair Market Value on the date that the withholding obligation is incurred equal to the amount of tax required to be withheld in connection with such vesting, as determined by the Board. 7. Notices. Any notice to the Company provided for in this Agreement shall be in writing and shall be addressed to it in care of its Secretary at its principal executive offices, and any notice to the Participant shall be addressed to the Participant at the current address shown on the payroll records of the Company. Any notice shall be deemed to be duly given if and when properly addressed and posted by registered or certified mail, postage prepaid. 8. Legal Construction. (a) Severability. If any provision of this Agreement is or becomes or is deemed invalid, illegal or unenforceable in any jurisdiction, or would disqualify the Plan or this Agreement under any law with respect to which the Plan or this Agreement is intended to qualify, or would cause compensation deferred under the Plan to be includible in a Plan participant's gross income pursuant to Section 409A(a)(1) of the Internal Revenue Code of 1986, as amended, as determined by the Board, such provision shall be construed or deemed amended to conform to Applicable Law or, if it cannot be construed or deemed amended without, in the determination of the Board, materially altering the intent of the Plan or the Agreement, it shall be stricken and the remainder of this Agreement shall remain in full force and effect. 3 (b) Gender and Number. Where the context admits, words in any gender shall include the other gender, words in the singular shall include the plural and words in the plural shall include the singular. (c) Governing Law. To the extent not preempted by federal law, this Agreement shall be construed in accordance with and governed by the laws of the State of Mississippi. 9. Incorporation of Plan. This Agreement and the Restricted Stock Award made pursuant hereto are subject to, and this Agreement hereby incorporates and makes a part hereof, all terms and conditions of the Plan that are applicable to Agreements and Awards generally and to Restricted Stock Awards in particular. The Board has the right to interpret, construe and administer the Plan, this Agreement and the Restricted Stock Award made pursuant hereto. All acts, determinations and decisions of the Board made or taken pursuant to grants of authority under the Plan or with respect to any questions arising in connection with the administration and interpretation of the Plan, including the severability of any and all of the provisions thereof, shall be in the Board's sole discretion and shall be conclusive, final and binding upon all parties, including the Company, its stockholders, Participants, Eligible Participants and their estates, beneficiaries and successors. The Participant acknowledges that he has received a copy of the Plan. 10. No Implied Rights. Neither this Agreement nor the issuance of any Restricted Stock shall confer on the Participant any right with respect to continuance of employment or other service with the Company. Except as may otherwise be limited by a written agreement between the Company and the Participant, and acknowledged by the Participant, the right of the Company to terminate at will the Participant's employment with it at any time (whether by dismissal, discharge, retirement or otherwise) is specifically reserved by the Company. 11. Integration. This Agreement and the other documents referred to herein, including the Plan, or delivered pursuant hereto, contain the entire understanding of the parties with respect to their subject matter. There are no restrictions, agreements, promises, representations, warranties, covenants or undertakings with respect to the subject matter hereof other than those expressly set forth herein and restrictions imposed by the Securities Act and applicable state securities laws . This Agreement, including the Plan, supersedes all prior agreements and understandings between the parties with respect to its subject matter. 12. Counterparts. 4 This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but which together constitute one and the same instrument. 13. Amendments. The Board may, at any time, without consent of or receiving further consideration from the Participant, amend this Agreement and the Restricted Stock Award made pursuant hereto in response to, or to comply with changes in, Applicable law. To the extent not inconsistent with the terms of the Plan, the Board may, at any time, amend this Agreement in a manner that is not unfavorable to the Participant without the consent of the Participant. The Board may amend this Agreement and the Restricted Stock Award made pursuant hereto otherwise with the written consent of the Participant. 14. Securities Act. (a) The issuance and delivery of the Restricted Stock to the Participant have been registered under the Securities Act by a Registration Statement on Form S-8 that has been filed with the Securities and Exchange Commission ("SEC") and has become effective. The Participant acknowledges receipt from the Company of its Prospectus dated February ___, 2005, relating to the Restricted Stock. (b) If the Participant is an "affiliate" of the Company, which generally means a director, executive officer or holder of 10% or more of its outstanding shares, at the time certificates representing Restricted Stock are delivered to the Participant, such certificates shall bear the following legend, or other similar legend then being generally used by the Company for certificates held by its affiliates: "THESE SHARES MUST NOT BE OFFERED FOR SALE, SOLD, ASSIGNED OR TRANSFERRED EXCEPT IN A TRANSACTION WHICH, IN THE OPINION OF COUNSEL FOR THE ISSUER, IS EXEMPT FROM REGISTRATION THROUGH COMPLIANCE WITH RULE 144 OR WITH ANOTHER EXEMPTION FROM REGISTRATION." The Company shall remove such legend upon request by the Participant if, at the time of such request, the shares are eligible for sale under SEC Rule 144(k), or any provision that has replaced it, in the opinion of the Company's counsel. 15. Arbitration. Any controversy or claim arising out of or relating to this Restricted Stock Agreement shall be settled by arbitration administered by the American Arbitration Association under its Commercial Arbitration Rules and judgment upon the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof. 5 IN WITNESS WHEREOF, the Participant has executed this Agreement on his own behalf, thereby representing that he has carefully read and understands this Agreement and the Plan as of the day and year first written above, and the Company has caused this Agreement to be executed in its name and on its behalf, all as of the day and year first written above. SANDERSON FARMS, INC. By:________________________________ Name: _______________________ Title: ________________________ _____________________________________ Participant 6 EX-10.3 4 g93528exv10w3.txt EX-10.3 FORM OF AGREEMENT EXHIBIT 10.3 SANDERSON FARMS, INC. SHARE PURCHASE AGREEMENT (MANAGEMENT SHARE PURCHASE PLAN) (NON-EMPLOYEE DIRECTOR AGREEMENT) This SHARE PURCHASE AGREEMENT (this "Agreement"), made and entered into as of the _____ day of _______________, 20____ (the "Grant Date"), by and between ___________________________ (the "Participant") and Sanderson Farms, Inc. (together with its subsidiaries and affiliates, the "Company"), sets forth the terms and conditions of an Award of Share Purchase Rights granted pursuant to the Sanderson Farms, Inc. and Affiliates Stock Incentive Plan, adopted on February 17, 2005 (the "Plan") and this Agreement. Any capitalized term used but not defined herein shall have the meaning ascribed to such term in the Plan. The term "Fiscal Year" shall mean the fiscal year of the Company which begins on November 1 of each calendar year and ends on October 31 of the next calendar year. 1. Rights to Purchase Restricted Stock. The Participant may elect to reduce the annual retainer and meeting fees otherwise payable to him in respect of his services as a member of the Board of the Company ("Director Compensation") by a specified percentage (up to 100 percent) and, in lieu of receiving such specified percentage of Director Compensation, receive a number of Shares of the Company, subject to the terms, conditions and restrictions set forth herein ("Restricted Stock"), equal to the amount of such reduction divided by a dollar amount equal to the Fair Market Value of a Share on the date on which such Restricted Stock is issued or allocated to the account of the Participant. An election in respect of Director Compensation payable during calendar year 2005 must be made on or before March 18, 2005 ("Initial Election"), and shall become irrevocable on March 18, 2005. The Initial Election shall be effective beginning with the date that Director Compensation is otherwise payable (each such date, a "Director Payment Date") that first occurs after March 18, 2005. Any election to reduce Director Compensation otherwise payable in calendar year 2006 or thereafter shall be effective beginning with the first Director Payment Date occurring on or after January 1 of the calendar year next following the calendar year in which such election is made (and shall become irrevocable on December 31 of the calendar year in which such election is made with respect to the next calendar year). Any cancellation of, or other change in, any such Director Compensation reduction election shall become effective as of the first Director Payment Date occurring on or after January 1 of the calendar year next following the calendar year in which notice of such cancellation or change is filed (and any such notice shall become irrevocable on December 31 of the calendar year in which it is filed with respect to the next calendar year). Any Director Compensation reduction hereunder shall apply ratably to the Participant's Director Compensation otherwise payable on each Director Payment Date covered by such election. Restricted Stock shall be issued or purchased for the account of the Participant in respect of such Director Compensation reductions on each Director Payment Date. Fractional shares will be issued (or allocated) where necessary. 2. Company Matching Contribution. For each four shares of Restricted Stock acquired by the Participant pursuant to Section 1 above, the Company shall simultaneously issue for or there shall be allocated to the account of the Participant, for no additional consideration, one additional share of Restricted Stock (the "Company Match"), including fractional shares where necessary. 3. Terms of Restricted Stock. (a) The Restricted Stock is subject to forfeiture as provided herein and, during the Restriction Period defined below, may not be sold, exchanged, transferred, pledged, hypothecated or otherwise disposed of by the Participant, other than by will or by the laws of descent and distribution of the state in which the Participant resides on the date of his death. The period during which the Restricted Stock is not vested and is subject to transfer restrictions is referred to herein as the "Restriction Period." (b) Except as otherwise provided in this Agreement or the Plan, each share of Restricted Stock shall vest and no longer be subject to forfeiture or any transfer restrictions hereunder on the third anniversary of its acquisition by the Participant, so long as the Participant has continued to serve as a member of the Company's Board from such acquisition date through such third anniversary. (c) If the Participant ceases to serve as a member of the Company's Board by reason of death or Disability (for purposes of this Section 3, "Disability" shall have the meaning set forth in Section 409A(a)(2)(C) of the Code at any time such definition is more restrictive than the Plan definition of "Disability"), or if there is a Change in Control (provided that such Change in Control also constitutes a "change in ownership or effective control" of the Company within the meeting of Section 409A(a)(2)(A)(v) of the Code), then any portion of the Restricted Stock that has not vested shall immediately vest and no longer be subject to forfeiture or any transfer restrictions hereunder. If the Participant ceases to serve as a member of the Company's Board for any other reason, voluntarily or involuntarily, prior to the expiration of the Restriction Period for any shares of Restricted Stock acquired pursuant to this Agreement by the Participant, then (X) any portion of the Restricted Stock acquired by the Participant pursuant to the Company Match that has not vested as of the date of cessation of service shall immediately be forfeited, ownership shall be transferred back to the Company and the Restricted Stock shall become authorized but unissued Shares, and (Y) any portion of the Restricted Stock acquired by the Participant in respect of Director Compensation reductions that has not vested as of the date of cessation of service may, at the Company's option, be repurchased by the Company at the price paid by the Participant for such Restricted Stock (and the Company may pay such purchase price in whole or in part by cancellation of any indebtedness owed by the Participant to the Company). 2 4. Registration of Shares. Certificates representing the number of shares of Restricted Stock purchased from time to time shall be registered in the Participant's name (or an appropriate book entry shall be made). Certificates, if issued, may, at the Company's option, either be held by the Company in escrow until the applicable Restriction Period expires or until the restrictions thereon otherwise lapse and/or be delivered to the Participant and registered in the name of the Participant, bearing an appropriate restrictive legend that refers to this Agreement and remaining subject to appropriate stop-transfer orders. The Participant agrees to deliver to the Board, upon request, one or more stock powers endorsed in blank relating to the Restricted Stock. If and when shares of Restricted Stock vest and are no longer subject to forfeiture or transfer restrictions, unlegended certificates for such Restricted Stock shall be delivered to the Participant (subject to Section 8 pertaining to the withholding of taxes and Section 16 pertaining to the Securities Act of 1933, as amended (the "Securities Act")); provided, however, that the Board may cause such legend or legends to be placed on any such certificates as it may deem advisable under Applicable Law. If the Company elects to hold certificates in escrow, then it shall deliver to the Participant not less often than every six months a statement of the aggregate number of shares of Restricted Stock held for his account and the applicable acquisition dates and purchase prices of shares of Restricted Stock acquired by the Participant since the last such statement. 5. Rights as a Stockholder. Except as otherwise provided in this Agreement or the Plan, during the Restriction Period applicable to any Restricted Stock, the Participant shall have, with respect to the Restricted Stock, all of the rights of a stockholder of the Company, including the right to vote the Restricted Stock and the right to receive any dividends or other distributions with respect thereto; provided that any dividends or other distributions with respect to shares of Restricted Stock shall be credited to the account of the Participant until the vesting date of the shares in respect of which such dividends or other distributions were paid. 6. Adjustments. If any change in corporate capitalization, such as a stock split, reverse stock split, stock dividend, or any corporate transaction such as a reorganization, reclassification, merger or consolidation or separation, including a spin-off of the Company or sale or other disposition by the Company of all or a portion of its assets, any other change in the Company's corporate structure, or any distribution to stockholders (other than a cash dividend) results in the outstanding Shares, or any securities exchanged therefor or received in their place, being exchanged for a different number or class of shares or other securities of the Company, or for shares of stock or other securities of any other corporation, or new, different or additional shares or other securities of the Company or of any other corporation being received by the holders of 3 outstanding Shares, then the shares of Restricted Stock acquired pursuant to this Agreement shall be treated in the same manner as other outstanding Shares of the Company. 7. Validity of Share Issuance. Upon the issuance of Restricted Stock pursuant to the terms of this Agreement, such shares of Restricted Stock will be duly authorized by all necessary corporate action of the Company and will be validly issued, fully paid and non-assessable. 8. Taxes and Withholding. As soon as practicable on or after the date as of which an amount first becomes includible in the gross income of the Participant for federal income tax purposes with respect to the acquisition of Restricted Stock pursuant to this Agreement, the Participant shall pay to the Company, or make arrangements satisfactory to the Company regarding the payment of, or the Company may deduct or withhold from any cash or property payable to the Participant, an amount equal to all federal, state, local and foreign taxes that are required by Applicable Law to be withheld with respect to such includible amount. Notwithstanding anything to the contrary contained herein, the Participant may, if the Company consents, discharge this withholding obligation by directing the Company to withhold shares of Restricted Stock having a Fair Market Value on the date that the withholding obligation is incurred equal to the amount of tax required to be withheld in connection with such vesting, as determined by the Board 9. Notices. Any notice to the Company provided for in this Agreement shall be in writing and shall be addressed to it in care of its Secretary at its principal executive offices, and any notice to the Participant shall be addressed to the Participant at the current address shown on the payroll records of the Company. Any notice shall be deemed to be duly given if and when properly addressed and posted by registered or certified mail, postage prepaid. 10. Legal Construction. (a) Severability. If any provision of this Agreement is or becomes or is deemed invalid, illegal or unenforceable in any jurisdiction, or would disqualify the Plan or this Agreement under any law with respect to which the Plan or this Agreement is intended to qualify, or would cause Director Compensation reductions under this Agreement to be includible in a Plan participant's gross income pursuant to Section 409A(a)(1) of the Code, as determined by the Board, such provision shall be construed or deemed amended to conform to Applicable Law or, if it cannot be construed or deemed amended without, in the determination of the Board, materially altering the intent of the Plan or the Agreement, it shall be stricken and the remainder of this Agreement shall remain in full force and effect. 4 (b) Gender and Number. Where the context admits, words in any gender shall include the other gender, words in the singular shall include the plural and words in the plural shall include the singular. (c) Governing Law. To the extent not preempted by federal law, this Agreement shall be construed in accordance with and governed by the laws of the State of Mississippi. 11. Incorporation of Plan. This Agreement, the Share Purchase Rights awarded pursuant hereto and the Restricted Stock acquired pursuant hereto are subject to, and this Agreement hereby incorporates and makes a part hereof, all terms and conditions of the Plan that are applicable to Agreements and Awards generally and to Share Purchase Rights in particular. The Board has the right to interpret, construe and administer the Plan, this Agreement and the Share Purchase Rights awarded and the Restricted Stock acquired pursuant hereto. All acts, determinations and decisions of the Board made or taken pursuant to grants of authority under the Plan or with respect to any questions arising in connection with the administration and interpretation of the Plan, including the severability of any and all of the provisions thereof, shall be in the Board's sole discretion and shall be conclusive, final and binding upon all parties, including the Company, its stockholders, Participants, Eligible Participants and their estates, beneficiaries and successors. The Participant acknowledges that he has received a copy of the Plan. 12. No Implied Rights. Neither this Agreement nor the award of Share Purchase Rights nor the acquisition of any Restricted Stock shall confer on the Participant any right with respect to continuance of employment or other service with the Company. 13. Integration. This Agreement and the other documents referred to herein, including the Plan, or delivered pursuant hereto, contain the entire understanding of the parties with respect to their subject matter. There are no restrictions, agreements, promises, representations, warranties, covenants or undertakings with respect to the subject matter hereof other than those expressly set forth herein and restrictions imposed by the Securities Act and applicable state securities laws. This Agreement, including the Plan, supersedes all prior agreements and understandings between the parties with respect to its subject matter. 5 14. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but which together constitute one and the same instrument. 15. Amendments; Termination. The Board may, at any time, without consent of or receiving further consideration from the Participant, amend this Agreement and the Restricted Stock acquired pursuant hereto in response to, or to comply with changes in, Applicable Law. To the extent not inconsistent with the terms of the Plan, the Board may, at any time, amend this Agreement in a manner that is not unfavorable to the Participant without the consent of the Participant. The Board may amend this Agreement and the Restricted Stock acquired pursuant hereto otherwise with the written consent of the Participant. The Company may suspend or terminate this Agreement at any time, provided that no such suspension or termination may adversely affect the Participant's rights with respect to any Restricted Stock previously acquired pursuant to this Agreement, unless his written consent is obtained. 16. Securities Act. (a) [THE ISSUANCE AND DELIVERY OF THE SHARE PURCHASE RIGHTS TO THE PARTICIPANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT BY A REGISTRATION STATEMENT ON FORM S-8 THAT HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ("SEC") AND HAS BECOME EFFECTIVE. THE PARTICIPANT ACKNOWLEDGES RECEIPT FROM THE COMPANY OF ITS PROSPECTUS DATED MARCH ___, 2005, RELATING TO THE PLAN.] (b) If the Participant is an "affiliate" of the Company, which generally means a director, executive officer or holder of 10% or more of its outstanding shares, at the time certificates representing Restricted Stock are delivered to the Participant, such certificates shall bear the following legend, or other similar legend then being generally used by the Company for certificates held by its affiliates: "THESE SHARES MUST NOT BE OFFERED FOR SALE, SOLD, ASSIGNED OR TRANSFERRED EXCEPT IN A TRANSACTION WHICH, IN THE OPINION OF COUNSEL FOR THE ISSUER, IS EXEMPT FROM REGISTRATION THROUGH COMPLIANCE WITH RULE 144 OR WITH ANOTHER EXEMPTION FROM REGISTRATION." The Company shall remove such legend upon request by the Participant if, at the time of such request, the shares are eligible for sale under SEC Rule 144(k), or any provision that has replaced it, in the opinion of the Company's counsel. 6 17. Arbitration. Any controversy or claim arising out of or relating to this Share Purchase Agreement shall be settled by arbitration administered by the American Arbitration Association under its Commercial Arbitration Rules and judgment upon the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof. IN WITNESS WHEREOF, the Participant has executed this Agreement on his own behalf, thereby representing that he has carefully read and understands this Agreement and the Plan as of the day and year first written above, and the Company has caused this Agreement to be executed in its name and on its behalf, all as of the day and year first written above. SANDERSON FARMS, INC. By: ________________________________ Name: _______________________ Title: ________________________ ______________________________________ Participant 7 EX-10.4 5 g93528exv10w4.txt EX-10.4 FORM OF AGREEMENT EXHIBIT 10.4 SANDERSON FARMS, INC. SHARE PURCHASE AGREEMENT (MANAGEMENT SHARE PURCHASE PLAN) (EMPLOYEE AGREEMENT) This SHARE PURCHASE AGREEMENT (this "Agreement"), made and entered into as of the _____ day of _______________, 20____ (the "Grant Date"), by and between ___________________________ (the "Participant") and Sanderson Farms, Inc. (together with its subsidiaries and affiliates, the "Company"), sets forth the terms and conditions of an Award of Share Purchase Rights granted pursuant to the Sanderson Farms, Inc. and Affiliates Stock Incentive Plan, adopted on February 17, 2005 (the "Plan") and this Agreement. Any capitalized term used but not defined herein shall have the meaning ascribed to such term in the Plan. The term "Fiscal Year" shall mean the fiscal year of the Company which begins on November 1 of each calendar year and ends on October 31 of the next calendar year. 1. Rights to Purchase Restricted Stock. (a) Base Salary Reduction. The Participant may elect to reduce his base salary by a specified percentage thereof (not to exceed 15%) and, in lieu of receiving such salary, receive a number of Shares of the Company, subject to the terms, conditions and restrictions set forth herein ("Restricted Stock"), equal to the amount of such salary reduction divided by a dollar amount equal to the Fair Market Value of a Share on the date on which such Restricted Stock is issued or allocated to the account of the Participant. An election for salary paid during calendar year 2005 must be made on or before March 18, 2005 ("Initial Salary Election"), and shall become irrevocable on March 18, 2005. The Initial Salary Election shall be effective beginning with the first pay period that ends after March 18, 2005. Any election to reduce salary otherwise payable in calendar year 2006 or thereafter shall be effective beginning with the first pay period that ends after January 1 of the calendar year next following the calendar year in which such election is made (and shall become irrevocable on December 31 of the calendar year in which such election is made with respect to the next calendar year). Any cancellation of, or other change in, any such salary reduction election shall become effective as of the first pay period ending after January 1 of the calendar year next following the calendar year in which notice of such cancellation or change is filed (and any such notice shall become irrevocable on December 31 of the calendar year in which it is filed with respect to the next calendar year). Any salary reduction hereunder shall apply ratably to the Participant's salary for each pay period covered by such election. Restricted Stock shall be issued for the account of the Participant, or allocated to the account of the Participant from Shares purchased for the account of the Participant, in respect of such salary reductions on the last business day in each calendar quarter ending March 31, June 30, September 30 and December 31 (each such date, a "Quarterly Allocation Date"). The number of shares of Restricted Stock issued or allocated to the Participant on each Quarterly Allocation Date shall be based upon the aggregate salary reduction for pay periods ending since the next preceding Quarterly Allocation Date and the Fair Market Value of a Share on such later Quarterly Allocation Date. Fractional shares will be issued (or allocated) where necessary. If a Participant who has elected salary reductions hereunder shall terminate employment before shares of Restricted Stock are issued or allocated in respect of all such salary reductions, any salary reduction amounts in respect of which Restricted Stock has not been granted by the date of Participant's termination of employment shall be returned to Participant promptly in cash, subject to compliance with the requirements of Sections 409A(a)(2) and (3) of the Code. (b) Bonus Reduction. The Participant may also elect to reduce his annual bonus compensation, if any, by a specified percentage thereof (not to exceed 75%) and, in lieu of receiving such bonus, receive a number of shares of Restricted Stock equal to the amount of such bonus reduction divided by a dollar amount equal to the Fair Market Value of a Share on the date on which such Restricted Stock is issued or allocated to the account of the Participant. An election for the bonus payable with respect to the Fiscal Year ending October 31, 2005 and for the bonus payable with respect to any subsequent Fiscal Year must be made on or before April 30 of that Fiscal Year (or if such day is not a business day, then on or before the next preceding business day) and shall become irrevocable on that date with respect to that Fiscal Year. Any cancellation of, or other change in, any such bonus reduction election shall become effective with respect to the Fiscal Year in which notice of such cancellation or change is filed if it is filed on or before April 30 of that Fiscal Year (or, if such day is not a business day, then on or before the next preceding business day); otherwise, it shall become effective with respect to the Fiscal Year next following the Fiscal Year in which it is filed. Restricted Stock shall be issued or allocated to the account of the Participant in respect of any such bonus reduction on the date that such bonus is otherwise payable. If a Participant who has elected a bonus reduction hereunder shall terminate employment before shares of Restricted Stock are issued or allocated in respect of such bonus reduction, such election shall be deemed canceled and any bonus compensation due to the Participant shall be paid in cash, subject to compliance with the requirements of Sections 409A(a)(2) and (3) of the Code. 2. Company Matching Contribution. For each four shares of Restricted Stock acquired by the Participant pursuant to Section 1 above, whether in respect of base salary or bonus reductions, the Company shall simultaneously issue to, or there shall be allocated to the account of the Participant, for no additional consideration, one additional share of Restricted Stock (the "Company Match"), including fractional shares where necessary. 3. Terms of Restricted Stock. (a) The Restricted Stock is subject to forfeiture as provided herein and, during the Restriction Period defined below, may not be sold, exchanged, transferred, pledged, hypothecated or otherwise disposed of by the Participant, other than by will or by the laws of 2 descent and distribution of the state in which the Participant resides on the date of his death. The period during which the Restricted Stock is not vested and is subject to transfer restrictions is referred to herein as the "Restriction Period." (b) Except as otherwise provided in this Agreement or the Plan, each share of Restricted Stock shall vest and no longer be subject to forfeiture or any transfer restrictions hereunder on the third anniversary of its acquisition by the Participant, so long as the Participant has remained continuously employed by the Company from such acquisition date through such third anniversary. (c) In the event of (i) the Participant's termination of employment with the Company by reason of death or Disability (for purposes of this Section 3, "Disability" shall have the meaning set forth in Section 409A(a)(2)(C) of the Code at any time such definition is more restrictive than the Plan definition of "Disability"), (ii) his termination of employment with the Company on or after his attainment of eligibility for retirement (as determined by the Board from time to time), or (iii) a Change in Control (provided that such Change in Control also constitutes a "change in ownership or effective control" of the Company within the meeting of Section 409A(a)(2)(A)(v) of the Code), any portion of the Restricted Stock that has not vested shall immediately vest and no longer be subject to forfeiture or any transfer restrictions hereunder; provided that in the case of a Participant who is a "specified employee" within the meaning of Section 409A(a)(2)(B) of the Code, such Restricted Stock shall not vest before the date which is six months after the date of the Participant's separation from service (or, if earlier, the date of his death). If the Participant's employment with the Company is terminated for any other reason, voluntarily or involuntarily, prior to the expiration of the Restriction Period for any shares of Restricted Stock acquired pursuant to this Agreement by the Participant, then (X) any portion of the Restricted Stock acquired by the Participant pursuant to the Company Match that has not vested as of the date of employment termination shall immediately be forfeited, ownership shall be transferred back to the Company and the Restricted Stock shall become authorized but unissued Shares, and (Y) any portion of the Restricted Stock acquired by the Participant in respect of salary or bonus reductions that has not vested as of the date of the employment termination may, at the Company's option, be repurchased by the Company at the price paid by the Participant for such Restricted Stock (and the Company may pay such purchase price in whole or in part by cancellation of any indebtedness owed by the Participant to the Company). (d) If the Board determines in good faith that the Participant has engaged in any Detrimental Activity during the period that the Participant is employed by the Company or during the two-year period following the Participant's voluntary termination of employment or his termination by the Company for Cause, then (X) any portion of the Restricted Stock acquired by the Participant pursuant to the Company Match that has not vested as of the date of the Board's determination shall immediately be forfeited, ownership shall be transferred back to the Company and the Restricted Stock shall become authorized but unissued Shares, and (Y) any portion of the Restricted Stock acquired by the Participant in respect of salary or bonus reductions that has not vested as of the date of the Board's determination may, at the Company's option, be repurchased by the Company at the price paid by the Participant for such Restricted Stock (and the Company may pay such purchase price in whole or in part by cancellation of any indebtedness owed by the Participant to the Company). If, at the time of such determination, 3 shares of Restricted Stock acquired by the Participant pursuant to the Company Match have already vested, the Participant shall repay to the Company the Fair Market Value of such Shares as of the date(s) that they were issued or allocated to the Participant. 4. Registration of Shares. Certificates representing the number of shares of Restricted Stock purchased from time to time shall be registered in the Participant's name (or an appropriate book entry shall be made). Certificates, if issued, may, at the Company's option, either be held by the Company in escrow until the applicable Restriction Period expires or until the restrictions thereon otherwise lapse and/or be delivered to the Participant and registered in the name of the Participant, bearing an appropriate restrictive legend that refers to this Agreement and remaining subject to appropriate stop-transfer orders. The Participant agrees to deliver to the Board, upon request, one or more stock powers endorsed in blank relating to the Restricted Stock. If and when shares of Restricted Stock vest and are no longer subject to forfeiture or transfer restrictions, unlegended certificates for such Restricted Stock shall be delivered to the Participant (subject to Section 8 pertaining to the withholding of taxes and Section 16 pertaining to the Securities Act of 1933, as amended (the "Securities Act")); provided, however, that the Board may cause such legend or legends to be placed on any such certificates as it may deem advisable under Applicable Law. If the Company elects to hold certificates in escrow, then it shall deliver to the Participant not less often than every six months a statement of the aggregate number of shares of Restricted Stock held for his account and the applicable acquisition dates and purchase prices of shares of Restricted Stock acquired by the Participant since the last such statement. 5. Rights as a Stockholder. Except as otherwise provided in this Agreement or the Plan, during the Restriction Period applicable to any Restricted Stock, the Participant shall have, with respect to the Restricted Stock, all of the rights of a stockholder of the Company, including the right to vote the Restricted Stock and the right to receive any dividends or other distributions with respect thereto; provided that any dividends or other distributions with respect to shares of Restricted Stock shall be credited to the account of the Participant until the vesting date of the shares in respect of which such dividends or other distributions were paid. 6. Adjustments. If any change in corporate capitalization, such as a stock split, reverse stock split, stock dividend, or any corporate transaction such as a reorganization, reclassification, merger or consolidation or separation, including a spin-off of the Company or sale or other disposition by the Company of all or a portion of its assets, any other change in the Company's corporate structure, or any distribution to stockholders (other than a cash dividend) results in the 4 outstanding Shares, or any securities exchanged therefor or received in their place, being exchanged for a different number or class of shares or other securities of the Company, or for shares of stock or other securities of any other corporation, or new, different or additional shares or other securities of the Company or of any other corporation being received by the holders of outstanding Shares, then the shares of Restricted Stock acquired pursuant to this Agreement shall be treated in the same manner as other outstanding Shares of the Company. 7. Validity of Share Issuance. Upon the issuance or Restricted Stock pursuant to the terms of this Agreement, such shares of Restricted Stock will be duly authorized by all necessary corporate action of the Company and will be validly issued, fully paid and non-assessable. 8. Taxes and Withholding. As soon as practicable on or after the date as of which an amount first becomes includible in the gross income of the Participant for federal income tax purposes with respect to the acquisition of Restricted Stock pursuant to this Agreement, the Participant shall pay to the Company, or make arrangements satisfactory to the Company regarding the payment of, or the Company may deduct or withhold from any cash or property payable to the Participant, an amount equal to all federal, state, local and foreign taxes that are required by Applicable Law to be withheld with respect to such includible amount. Notwithstanding anything to the contrary contained herein, the Participant may, if the Company consents, discharge this withholding obligation by directing the Company to withhold shares of Restricted Stock having a Fair Market Value on the date that the withholding obligation is incurred equal to the amount of tax required to be withheld in connection with such vesting, as determined by the Board 9. Notices. Any notice to the Company provided for in this Agreement shall be in writing and shall be addressed to it in care of its Secretary at its principal executive offices, and any notice to the Participant shall be addressed to the Participant at the current address shown on the payroll records of the Company. Any notice shall be deemed to be duly given if and when properly addressed and posted by registered or certified mail, postage prepaid. 10. Legal Construction. (a) Severability. If any provision of this Agreement is or becomes or is deemed invalid, illegal or unenforceable in any jurisdiction, or would disqualify the Plan or this Agreement under any law with respect to which the Plan or this Agreement is intended to qualify, or would cause base salary or bonus reductions under this Agreement to be includible in a Plan participant's gross income pursuant to Section 409A(a)(1) of the Code, as determined by 5 the Board, such provision shall be construed or deemed amended to conform to Applicable Law or, if it cannot be construed or deemed amended without, in the determination of the Board, materially altering the intent of the Plan or the Agreement, it shall be stricken and the remainder of this Agreement shall remain in full force and effect. (b) Gender and Number. Where the context admits, words in any gender shall include the other gender, words in the singular shall include the plural and words in the plural shall include the singular. (c) Governing Law. To the extent not preempted by federal law, this Agreement shall be construed in accordance with and governed by the laws of the State of Mississippi. 11. Incorporation of Plan. This Agreement , the Share Purchase Rights awarded pursuant hereto and the Restricted Stock acquired pursuant hereto are subject to, and this Agreement hereby incorporates and makes a part hereof, all terms and conditions of the Plan that are applicable to Agreements and Awards generally and to Share Purchase Rights in particular. The Board has the right to interpret, construe and administer the Plan, this Agreement and the Share Purchase Rights awarded and the Restricted Stock acquired pursuant hereto. All acts, determinations and decisions of the Board made or taken pursuant to grants of authority under the Plan or with respect to any questions arising in connection with the administration and interpretation of the Plan, including the severability of any and all of the provisions thereof, shall be in the Board's sole discretion and shall be conclusive, final and binding upon all parties, including the Company, its stockholders, Participants, Eligible Participants and their estates, beneficiaries and successors. The Participant acknowledges that he has received a copy of the Plan. 12. No Implied Rights. Neither this Agreement nor the award of Share Purchase Rights nor the acquisition of any Restricted Stock shall confer on the Participant any right with respect to continuance of employment or other service with the Company. Except as may otherwise be limited by a written agreement between the Company and the Participant, and acknowledged by the Participant, the right of the Company to terminate at will the Participant's employment with it at any time (whether by dismissal, discharge, retirement or otherwise) is specifically reserved by the Company. 13. Integration. This Agreement and the other documents referred to herein, including the Plan, or delivered pursuant hereto, contain the entire understanding of the parties with respect to their subject matter. There are no restrictions, agreements, promises, representations, warranties, covenants or undertakings with respect to the subject matter hereof other than those expressly set forth herein and restrictions imposed by the Securities Act and applicable state securities laws. This 6 Agreement, including the Plan, supersedes all prior agreements and understandings between the parties with respect to its subject matter. 14. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but which together constitute one and the same instrument. 15. Amendments; Termination. The Board may, at any time, without consent of or receiving further consideration from the Participant, amend this Agreement and the Restricted Stock acquired pursuant hereto in response to, or to comply with changes in, Applicable Law. To the extent not inconsistent with the terms of the Plan, the Board may, at any time, amend this Agreement in a manner that is not unfavorable to the Participant without the consent of the Participant. The Board may amend this Agreement and the Restricted Stock acquired pursuant hereto otherwise with the written consent of the Participant. The Company may suspend or terminate this Agreement at any time, provided that no such suspension or termination may adversely affect the Participant's rights with respect to any Restricted Stock previously acquired pursuant to this Agreement, unless his written consent is obtained. 16. Securities Act. (a) [THE ISSUANCE AND DELIVERY OF THE SHARE PURCHASE RIGHTS TO THE PARTICIPANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT BY A REGISTRATION STATEMENT ON FORM S-8 THAT HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ("SEC") AND HAS BECOME EFFECTIVE. THE PARTICIPANT ACKNOWLEDGES RECEIPT FROM THE COMPANY OF ITS PROSPECTUS DATED MARCH ___, 2005, RELATING TO THE PLAN.] (b) If the Participant is an "affiliate" of the Company, which generally means a director, executive officer or holder of 10% or more of its outstanding shares, at the time certificates representing Restricted Stock are delivered to the Participant, such certificates shall bear the following legend, or other similar legend then being generally used by the Company for certificates held by its affiliates: "THESE SHARES MUST NOT BE OFFERED FOR SALE, SOLD, ASSIGNED OR TRANSFERRED EXCEPT IN A TRANSACTION WHICH, IN THE OPINION OF COUNSEL FOR THE ISSUER, IS EXEMPT FROM REGISTRATION THROUGH COMPLIANCE WITH RULE 144 OR WITH ANOTHER EXEMPTION FROM REGISTRATION." 7 The Company shall remove such legend upon request by the Participant if, at the time of such request, the shares are eligible for sale under SEC Rule 144(k), or any provision that has replaced it, in the opinion of the Company's counsel. 17. Arbitration. Any controversy or claim arising out of or relating to this Share Purchase Agreement shall be settled by arbitration administered by the American Arbitration Association under its Commercial Arbitration Rules and judgment upon the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof. IN WITNESS WHEREOF, the Participant has executed this Agreement on his own behalf, thereby representing that he has carefully read and understands this Agreement and the Plan as of the day and year first written above, and the Company has caused this Agreement to be executed in its name and on its behalf, all as of the day and year first written above. SANDERSON FARMS, INC. By:________________________________ Name: _______________________ Title: ________________________ ____________________________________ Participant 8 EX-99.1 6 g93528exv99w1.txt EX-99.1 PRESS RELEASE OF SANDERSON FARMS INC. EXHIBIT 99.1 [SANDERSON FARMS LOGO] Sanderson Farms,Inc. GENERAL OFFICES Post Office Box 988-Laurel, Mississippi 39441-0988 Telephone (601) 649-4030-Facsimile (601) 426-1461 CONTACT: MIKE COCKRELL TREASURER & CHIEF FINANCIAL OFFICER (601) 649-4030 SANDERSON FARMS, INC. REPORTS FIRST QUARTER RESULTS FOR FISCAL 2005 LAUREL, Miss. (February 24, 2005) -- Sanderson Farms, Inc. (NASDAQ/NM:SAFM) today reported results for the first quarter of fiscal 2005 ended January 31, 2005. Net sales for the first quarter of fiscal 2005 were $233.3 million compared with $226.4 million for the same period a year ago. For the quarter, the Company reported net income of $10.0 million, or $0.50 per diluted share, compared with net income of $19.0 million, or $0.96 per diluted share, for the first quarter of fiscal 2004. For the first quarter of fiscal 2004, the Company recognized $177,000, net of income taxes, or $0.01 per diluted share, for Sanderson Farms' share in the partial settlement of litigation against a vitamin supplier for overcharges. On January 29, 2004, the Company's Board of Directors approved a three-for-two stock split effected as a 50% stock dividend. All share and per share data for the periods presented have been adjusted to reflect this split. "Sanderson Farms' financial and operating performance during the first quarter marked a solid start for fiscal 2005," said Joe F. Sanderson, Jr., chairman and chief executive officer of Sanderson Farms, Inc. "While our cost structure during the first half of the quarter reflected relatively high priced grain bought before the start of the fiscal year, that cost structure improved steadily during the quarter, as did the market for chicken." According to Sanderson, market prices for all poultry products showed improvement from the previous quarter, but were mixed when compared to the first quarter a year ago. As measured by a simple average of the Georgia dock price for whole chickens, values increased approximately 7.2% in the Company's first fiscal quarter compared with the same period in fiscal 2004. Boneless breast meat prices during the quarter, however, were approximately 10% lower than the prior-year period and bulk leg quarter prices were up slightly during the quarter. Wing prices averaged 1.05 cents per pound, up 5.4% from the average of 99.7 cents per pound during the first quarter of fiscal 2004. -MORE- Sanderson Farms Reports First Quarter 2005 Results Page 2 February 24, 2005 "While our operating costs for the first quarter of fiscal 2005 still reflected the higher grain prices we incurred in late fiscal 2004, by the end of the quarter we began to realize significant savings in our cost structure. We believe we will enjoy these lower costs for the balance of our fiscal year. We have already contracted for a portion of our feed grain needs for the year in order to take advantage of the lower prices projected for corn and soybean meal, our primary feed ingredients. Based on current trends, we now expect to realize savings of between $65 million and $70 million during fiscal 2005 compared with fiscal 2004. "We are excited about the opportunities ahead for Sanderson Farms in fiscal 2005," added Sanderson. "Our expansion into Georgia is underway as planned and we still expect initial operations to begin during the fourth fiscal quarter. Considering the current market environment and lower feed costs, positive consumer demand trends and the renewed growth in exports, we expect favorable market conditions to prevail in fiscal 2005." Sanderson Farms will hold a conference call to discuss this press release today, February 24, 2005, at 10:00 a.m. Central, 11:00 a.m. Eastern. Investors will have the opportunity to listen to a live Internet broadcast of the conference call through the Company's Web site at www.sandersonfarms.com or through www.companyboardroom.com. To listen to the live call, please go to the Web site at least 15 minutes early to register, download, and install any necessary audio software. For those without Internet access or who would rather listen live via telephone, you may call 1-800-967-7140. For those who cannot listen to the live broadcast, an Internet replay will be available shortly after the call and continue through March 24, 2005. Sanderson Farms, Inc. is engaged in the production, processing, marketing and distribution of fresh and frozen chicken and other prepared food items. Its shares trade on the Nasdaq Stock Market under the symbol SAFM. This press release contains forward-looking statements based on management's current views and assumptions. Actual results and events may differ. For a discussion of these matters, please refer to the "Cautionary Statement Regarding Risks and Uncertainties That May Affect Future Performance" in Item 7 of the Company's 2004 Annual Report on Form 10-K and please refer to the cautionary statement found in Management's Discussion and Analysis of Financial Condition and Results of Operations under the heading "General" in Part I, Item 2 of the Quarterly Report on Form 10-Q for the Company's first quarter ended January 31, 2005. -MORE- Sanderson Farms Reports First Quarter 2005 Results Page 3 February 24, 2005 SANDERSON FARMS, INC. AND SUBSIDIARIES (Unaudited) (In thousands, except per share amounts)
THREE MONTHS ENDED JANUARY 31, ----------------------------- 2005 2004 ------------- -------------- Net sales $ 233,290 $ 226,441 Cost and expenses: Cost of sales 203,755 183,798 Selling, general and administrative 13,027 11,260 ------------- -------------- 216,782 195,058 ------------- -------------- Operating income 16,508 31,383 Other income (expense): Interest income 199 45 Interest expense (318) (432) Other 4 2 ------------- -------------- (115) (385) ------------- -------------- Income before income taxes 16,393 30,998 Income tax expense 6,352 12,012 ------------- -------------- Net income $ 10,041 $ 18,986 ============= ============== Basic earnings per share $ 0.50 $ 0.97 ============= ============== Diluted earnings per share $ 0.50 $ 0.96 ============= ============== Dividends per share $ 0.10 $ 0.10 ============= ============== Weighted average shares outstanding: Basic 19,962 19,562 ============= ============== Diluted 20,115 19,818 ============= ==============
-MORE- Sanderson Farms Reports First Quarter 2005 Results Page 4 February 24, 2005 SANDERSON FARMS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands)
JANUARY 31, OCTOBER 31, 2005 2004 ------------- -------------- (Unaudited) ASSETS Current assets: Cash and cash equivalents $ 74,149 $ 75,910 Accounts receivable, net 42,257 49,240 Inventories 72,876 75,603 Refundable income taxes 0 2,592 Prepaid expenses 14,073 13,077 ------------- -------------- Total current assets 203,355 216,422 Property, plant and equipment Land and buildings 142,005 134,219 Machinery and equipment 254,201 257,671 Construction in progress 17,979 7,508 ------------- -------------- 414,185 399,398 Less accumulated depreciation (248,224) (242,685) ------------- -------------- 165,961 156,713 Other assets 2,283 1,872 ------------- -------------- Total assets $ 371,599 $ 375,007 ============= ============== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 25,924 $ 30,384 Accrued expenses 24,010 31,029 Current maturities of long-term debt 4,391 4,385 ------------- -------------- Total current liabilities 54,325 65,798 Long-term debt, less current maturities 10,787 10,918 Claims payable 2,600 2,600 Deferred income taxes 16,270 16,350 Stockholders' equity 287,617 279,341 ------------- -------------- Total liabilities and stockholders' equity $ 371,599 $ 375,007 ============= ==============
-END- EX-99.2 7 g93528exv99w2.txt EX-99.2 TRANSCRIPT OF CONFERENCE CALL EXHIBIT 99.2 SANDERSON FARMS INCORPORATED Moderator: Joe Sanderson 02-24-05/10:00 am CT Conference #500024 Page 1 SANDERSON FARMS INCORPORATED MODERATOR: JOE SANDERSON FEBRUARY 24, 2005 10:00 AM CT Operator: Good day, everyone, and welcome to the Sanderson Farms, Incorporated, conference call. Today's call is being recorded. At this time for opening remarks and introductions I would like to turn the call over to the Chairman and Chief Executive Officer, Mr. Joe Sanderson. Please go ahead, sir. Joe Sanderson: Thank you. Good morning and thank you for joining us today. I would like to welcome you to Sanderson Farms First Quarter conference call with shareholders, analysts and investors. With me on the call today is Lampkin Butts, President and Chief Operating Officer and Mike Cockrell, Chief Financial Officer of Sanderson Farms. The purpose of this call is to review financial results and operating trends reflected in the first fiscal quarter ended January 31. We issued a news release this morning announcing net earnings of $10 million or 50 cents per fully diluted share for our first fiscal quarter of 2005. This compares to $19 million or 96 cents per share earned during last year's first quarter which included 1 cent per share or $177,000 net of income taxes for the recovery of settlement proceeds from certain vitamin litigation. SANDERSON FARMS INCORPORATED Moderator: Joe Sanderson 02-24-05/10:00 am CT Conference #500024 Page 2 I will begin the call with some brief comments about general market conditions and the company's operations and then I will turn the call over to Mike for a more detailed account of financial results. Before we make any further comments I would like to ask Mike to give the cautionary statement regarding forward-looking statements. Mike Cockrell: Thank you, Joe, and good morning to everyone. Before we begin the call this morning, as always we need to caution you that the call will contain forward-looking statements about the business, financial condition and prospects for the company. All forward-looking statements are made pursuant to the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995 and are based on management's current expectations or beliefs as well as assumptions made by and information currently available to management. The actual performance of the company could differ materially from that indicated by the forward-looking statements because of various risks and uncertainties. Those risks and uncertainties are described in Item 7 of our most recent annual report on form 10K and in the MD&A portion found in Item 2 of Part 1 of the company's quarterly report on form 10Q filed with the SEC in connection with the first quarter ended January 31, 2005, which form 10Q was filed this morning. Joe Sanderson: Thank you, Mike. Our financial and operating results for the first fiscal quarter marked a strong start for fiscal 2005 and reflect a poultry market that improved as the quarter progressed and input costs have steadily decreased throughout the quarter. Market prices for poultry products were mixed during the quarter when compared to our first quarter last year although they were higher across the SANDERSON FARMS INCORPORATED Moderator: Joe Sanderson 02-24-05/10:00 am CT Conference #500024 Page 3 board when compared to our last quarter. The average Georgia dock price during our first quarter was 7.4% higher than last year's first quarter. The Georgia dock price is currently 73-3/4 cents per pound which compares to 72 cents per pound for the same week last year. To put the current market price in perspective, the average dock price for the two previous years for the week of February 24 was 63 cents per pound. While bulk leg quarter prices were steady for the quarter compared to last year's first quarter increasing less than 1%, the market for leg quarters reflects good export demand. While export data for January are not yet available chicken exports during December of 2004 increased 22.7% in quantity and 16.8% in value when compared to December a year ago, continuing the improvement we began seeing last fall. Exports to Russia, which was the top market during the quarter for the industry, reflected more normal levels during December 2004 when compared to the relatively low levels of 2003, increasing by 92% in tonnage and 85% in value. Bulk leg quarter prices averaged 29 cents per pound during our first quarter and leg quarters are currently trading for 31 cents per pound. Wing prices during our first fiscal quarter averaged $1.05 a pound, up a bit over 5% from the average of 99-3/4 cents per pound during last year's first quarter. Boneless breast meat prices during our first quarter however were lower falling by 9.69% when compared to the first quarter a year ago. While lower for the quarter, boneless prices strengthened as the quarter progressed reaching a high of $1.66 in January. Boneless breast meat averaged $1.38 during the first quarter and today the market for boneless is $1.48 per pound. SANDERSON FARMS INCORPORATED Moderator: Joe Sanderson 02-24-05/10:00 am CT Conference #500024 Page 4 All this said, the overall average selling price for poultry products decreased 2% for the quarter compared to last year's first quarter. While chicken prices were mixed during the first quarter when compared to last year's first quarter, the same can be said about grain prices. As we reported in December, our operating costs during our first fiscal quarter reflected the higher grain prices we incurred during the second half of fiscal 2004. Although we began paying lower prices for corn and soybean meal delivered to our mills in November, the chickens processed and sold during the first half of the quarter still reflected the higher price grain bought prior to our fiscal year-end. By the end of the quarter we began to realize significant savings in our cost structures. We have already contracted for a portion of our feed grain needs for the balance of our fiscal year and we still expect to realize savings of between $60 million and $65 million during fiscal 2005 compared with fiscal 2004. We are pleased to report that our operating performance also continued to be strong. We were particularly pleased with the strides made at our Hammond processing division which completed its shift to the big bird market during 2004. Both our processing division and our live grow out continue to compete very well in the industry. Just as we did at the beginning of fiscal 2004, we have identified opportunities in our plants in the field and in sales that we will work to capture during fiscal 2005 and we look forward to continued improvement in our overall operating performance. SANDERSON FARMS INCORPORATED Moderator: Joe Sanderson 02-24-05/10:00 am CT Conference #500024 Page 5 The performance of our prepared foods division during the first quarter improved over last year's first quarter as it paid less for raw materials than a year ago. While sales decreased approximately 7.6% the profitability of the foods division improved relative to a year ago. Our foods division purchases much of its fresh chicken needs from our Hammond, Louisiana, facility. As most of you know, Winn-Dixie, a customer of ours for many years, filed for protection under Chapter XI of the U.S. Bankruptcy Code early Tuesday morning. Our exposure at the time of the filing was not material to our financial statements and we will take all possible steps to recover the pre-petition receivable. Going forward we will continue to supply Winn-Dixie and do all we can to support their efforts to successfully reorganize their business. Looking ahead we remain confident that we will continue to improve our operating performance and sales execution. While we don't expect the peak market prices for poultry products we enjoyed during 2004, the market appears balanced. With projected improved export demand the market should manage to project a 2-1/2% to 3% increase in poultry supplies. We remain on schedule to begin operations at our new South Georgia poultry complex during our fourth fiscal quarter. We have live chickens on the ground in Georgia and construction at all three facilities - our feed mill, hatchery and processing plant - remains on schedule. At this point I'd like to turn the call over to Mike for financial statements. Mike Cockrell: Thanks, Joe. As Joe said we are pleased with our financial performance during the first fiscal quarter. Net sales for the quarter totaled $233.3 million, up from $226.4 million for the same quarter a year ago. The 50 cents per share earned SANDERSON FARMS INCORPORATED Moderator: Joe Sanderson 02-24-05/10:00 am CT Conference #500024 Page 6 during the quarter from operations compared to 96 cents earning during last year's first quarter and as Joe said, that 96 cents reflects a 1-cent per share recovery on the partial settlement of litigation against vitamin suppliers. Our cost of sales for the three months ended January 31, 2005, as compared to the same three months of fiscal 2004, increased 10.9%. The increase is a result of the increase in pounds of poultry products sold in the first quarter compared to the same quarter a year ago as well as an increase in the cost of feed grains recognized in cost of sales. As Joe already mentioned we experienced higher feed grain costs during the first half of the quarter compared to last year but expect to enjoy lower costs for the balance of the year. SG&A expenses for the first fiscal quarter were up $1.8 million compared to last year. This increase is primarily the result of an increase in marketing expenses and an increase in administrative costs associated with the constructions and startup of the new Georgia facility. Interest expense during the quarter decreased $114,000 to $318,000 during the quarter reflecting our lower outstanding debt. At the end of our first quarter our balance sheet reflects stockholders equity of $287.6 million and net working capital of $149 million. The current ratio was 3.74 to 1. Our debt totaled $15.2 million and our debt to total capitalization ratio was 5% as of January 31, 2005. Our net debt was less than zero resulting in a net debt to cap ratio of a negative amount. We spent $15.5 million on capital expenditures during the quarter of our total annual budget of $127 million and that included $10.5 million in Georgia. We also spent $2 million on dividends reflecting our higher dividend rate of 10 cents per quarter. SANDERSON FARMS INCORPORATED Moderator: Joe Sanderson 02-24-05/10:00 am CT Conference #500024 Page 7 During fiscal 2005 we expect to spend $127 million on planned capital projects which amount includes approximately $7 million in vehicle and other operating leases, $13 million on our new general office building, $18 million on maintenance at existing facilities and $89 million in Georgia. Our depreciation and amortization during the first quarter totaled $6.3 million and we expect approximately $26 million for fiscal 2005. That ends our prepared remarks and we will now open up the call for questions and hopefully answers. Operator: Thank you. The question and answer session will be conducted electronically today. If you'd like to ask a question please signal by pressing the star key followed by the number 1 on your touchtone telephone. If you're using a speakerphone make sure that your mute button is turned off to allow your signal to reach our equipment. Again it is star 1 if you'd like to ask a question. We'll pause just a moment. We'll take our first question from (Christine McCracken) with (FTN). (Christine McCracken): Good morning. All: Good morning, (Christine). (Christine McCracken): Just looking at again your outlook for feed obviously much better for the balance of the year as we move into some of this lower cost grain and oil seed specifically, I'm wondering, you know, we've kind of seen the bottom. Prices are starting to move up. Why haven't you been more SANDERSON FARMS INCORPORATED Moderator: Joe Sanderson 02-24-05/10:00 am CT Conference #500024 Page 8 aggressive at locking in these very low feed costs than, you know, you mentioned in your comments? Joe Sanderson: We did not mention how aggressive we had been. (Christine McCracken): Okay. Joe Sanderson: We've been fairly aggressive however, relatively speaking, and we don't know, we think what's happened in the last 10 days has been a weather scare out of South America. (Christine McCracken): Right. Joe Sanderson: And had we priced out yesterday or the day before when the prices were higher we still would have been in that range that I told you about. Our advisors believe that we have not seen the bottom in grain values. (Christine McCracken): Fair enough. I guess we all need a crystal ball for that. Also looking at the egg set and chicks, at the hatchability I guess numbers lately, it seems like we've seen slightly better hatching rates lately. I'm wondering if you could comment on that and to what extent that's going to impact total production going forward. Joe Sanderson: Well, the comments are that from people watching that say that we are getting a little better hatch and my guess is that compared to a year ago the flock is younger. Probably a year ago people were holding older hens a bit longer to get eggs and as a result of that you might have seen a lower hatch rate. I think the flock if you look back over the last 12 months the breeder flock is up 1% and I just think you've got a normal aged breeder out there. I think SANDERSON FARMS INCORPORATED Moderator: Joe Sanderson 02-24-05/10:00 am CT Conference #500024 Page 9 you're going to see weeks ahead where you have 2% and 3% and 4% more head coming on the market. I think it'll average close to 3% at the end of the day and we believe the market can manage that. (Christine McCracken): And so really the increases that we're seeing from production this year, part of it is really tied to a more productive bird and probably slightly heavier weights given the low cost feed and not really expansion on the part of the producer. Joe Sanderson: Right. That's what we think. And we think that because of breeder placements. (Christine McCracken): Sure. Joe Sanderson: You can't make that many more chickens out of 1% more hens. (Christine McCracken): I hear you. And then just on Georgia it sounds like things are moving along there quite well and you did mention I think that you had birds on the ground so it seems like production data out today would already incorporate kind of your increases that you're expecting to make there? Joe Sanderson: Yeah. We've placed breeder stock there in November, December, January and have we placed February? And February. And those pullets are in the reported numbers as far as we know. The primary breeders report those numbers and I feel certain they were included, they're included. (Christine McCracken): That's good to hear. With regard to that, you know, obviously we're looking at the cost of construction going up pretty considerably. We're working on a house and certainly our costs have gone up relative to expectations. Now how do you avoid that with the cost of steel being so high, SANDERSON FARMS INCORPORATED Moderator: Joe Sanderson 02-24-05/10:00 am CT Conference #500024 Page 10 concrete especially in the Southeast? How do you avoid higher costs than expected? Joe Sanderson: Well, you know, when we - I'm trying to think about our timetable. When we were doing this we knew when we were planning and when the contracts were let in Georgia, what the costs were going to be and we have fixed price contract and those contracts reflected higher cost concrete, steel. We also saw that in the construction of poultry houses and at the time lumber was higher than it is today. But when we looked at the overall package it was something that didn't, you know, we felt like we could manage and for the growers it's reflected in their contract pay and what we're paying over there is the same thing we're paying in Mississippi and Texas for that matter. Mike Cockrell: You might remember, (Christine), that when we first announced the Georgia project we estimated what it would cost and then on the next call we increased that once the contracts were let and once we got everything, we got on the ground over there and got the contracts in place. Joe Sanderson: It was $8 million or $9 million more dollars. Mike Cockrell: Yeah, about $8 million more from the first announcement to the second. (Christine McCracken): You're not going to come up with the same surprises my contractor will. Mike Cockrell: You building a chicken house or...? (Christine McCracken): Oh, no. SANDERSON FARMS INCORPORATED Moderator: Joe Sanderson 02-24-05/10:00 am CT Conference #500024 Page 11 Mike Cockrell: Oh. (Christine McCracken): In any event, and then just relative to your expectations from Georgia, are you selling that product already into the market? Are you preparing customers for that product so that, you know, day 1 you kind of have a place to go with that chicken or is it a gradual process that you'd expect? Can you give us any insight on that? Joe Sanderson: Well, I'm going to tell you what I think. We'll plow ground and have salesmen out making calls just as we do every day but none of that product is really going to be sold until it's on the back dock, packaged and ready to go. But we feel like that that plant in particular is going to be in pretty good sales shape when we crank up over there and we'll crank up gradually over a six-month period and we feel like that'll be sold well enough. (Christine McCracken): All right. So it's not the production that you're putting in I would assume. You're not say putting in, you know, full capacity - expectations for full capacity day 1 obviously and the birds that you're putting in are probably a small percentage of what you'll end up having over time. Joe Sanderson: Yes, it'll represent about a 20% increase in our production and it'll be probably May or June of 2006 before you're at full capacity at that plant. (Christine McCracken): Good to have that timeline. Thanks a lot. Joe Sanderson: Good. Thank you. Operator: Once again it is star 1 if you'd like to ask a question. SANDERSON FARMS INCORPORATED Moderator: Joe Sanderson 02-24-05/10:00 am CT Conference #500024 Page 12 There are no other questions at this time. A final opportunity - it is star 1 to ask a question. We have a follow up question from (Christine McCracken). (Christine McCracken): I can ask another question. Joe Sanderson: All right. (Christine McCracken): Not to dominate the conversation but, you know, there was some articles out this weekend about the WHO meetings and the potential for avian influenza to spread, possibly, you know, some concerns there. What's your take on that? Do you think that there's any realistic way that it'll spread, you know, beyond kind of what we've seen so far and what steps does the U.S. take? Maybe you can kind of give us some perspective. On that relative to being able to control AI, how does it differ here and why should we not be concerned about this as a major issue for you? Joe Sanderson: Right. Well, first of all I would defer to the comments that the leader of WHO made and Dr. (Gerberding). I know in that area they're much more equipped to comment than I. But there's a significant difference. First of all in the industry in the United States and the existence of birds - turkeys, ducks, chickens - in Asia and there's a difference in housing. As a matter of fact a lot of the birds over there are not in housing. They roam and they mix with other animals and it's a totally different situation. The type of virus that they have seen in Asia has never been seen in the United States. And in the United States almost all the commercial industry, SANDERSON FARMS INCORPORATED Moderator: Joe Sanderson 02-24-05/10:00 am CT Conference #500024 Page 13 the birds are housed; they're confined and they're under bio-security programs. And secondarily I would say that the response of industry, the industry that serves us with medications and vaccine would likely once the virus is identified, respond quickly, much differently than it could be done in Asia and in the countries that are effected over there. (Christine McCracken): That sounds like we're a little bit prepared, more prepared and given the structure of the industry, we wouldn't see the same spread of the virus as they've seen in Asia. Joe Sanderson: You wouldn't see it done in the same way because a lot of the fowl over there roam. They're not confined. And I think most of their comments were concerned with bird to human and then human to human. (Christine McCracken): Right. Joe Sanderson: And, you know, I would never - if they believe that's going to happen I would defer to their judgment and I think they would know how to - you know, we're going to confine our birds, we're going to practice bio-security, we're going to be vigilant. We test all the time for avian influenza virus in our flocks and I now a lot of other processors do. And I'm sure that does not happen with backyard birds and roaming birds in Asia. Mike Cockrell: (Christine), it's also, you know, as we said last year when the same issue was raised after some avian influenza was detected in the United States, it's important to remember that the particular strain in Asian that has effected poultry and some humans over there, there's no history of that highly SANDERSON FARMS INCORPORATED Moderator: Joe Sanderson 02-24-05/10:00 am CT Conference #500024 Page 14 pathogenic strain of avian influenza in the United States. We haven't had it and don't have it now. (Christine McCracken): Correct. Good stuff. Unless they come over on a plane or something I guess we're pretty safe. Joe Sanderson: Well, you know, at one time it was attributed to migratory waterfowl and other birds over there. I don't know and I guess someone knows if there's a chance that there would be some co-mingling of migratory birds that would somehow get into North America. But it hasn't happened thus far. (Christine McCracken): But in any event it seems like there's some checks in place to keep that from spiraling out of control. Joe Sanderson: I would think so, yes. It's much better prepared than Asia would be. (Christine McCracken): And then just if I could on breast meat prices lately obviously they've been trending down here since the first of the month. You know, looking at cold storage numbers it seems like we're working down some of those inventories. You had mentioned that exports still pretty strong and that's pretty nice dark meat market. Wondering, if you could, just comment on why the weakness in breast meat prices and if you expect it to turn around at any point? Lampkin Butts: (Christine), this is Lampkin Butts. We did see a little softening of the breast market in February but it has stabilized now and seems to have leveled out. We expect to see seasonal price increases for white meat, for boneless breast, particularly after Easter and through the summer. SANDERSON FARMS INCORPORATED Moderator: Joe Sanderson 02-24-05/10:00 am CT Conference #500024 Page 15 We don't expect to see the spikes that we saw last year. Not expecting those kind of prices but we think that once we get the Easter season behind us that those prices will trend up and move up probably slowly through the summer and this year maybe through Labor Day where last year they began coming down right after the fourth. We think maybe it'll be better demand through the summer till Labor Day. (Christine McCracken): Fair enough. And you did mention strong export demand. You know, Russia's I guess opened up to Brazilian imports. Any comments on competition from Brazil? Joe Sanderson: Well, as you said the export market and the demand for that dark meat is good. We're not feeling the competition from Brazil and barring any unforeseen political disaster we're expecting Russia to (fill) that quota this year. Mike Cockrell: Yeah. Joe Sanderson: Brazil has a quota as well. (Christine McCracken): Right. Joe Sanderson: And so those numbers are set. (Christine McCracken): Right. And it seems like they're exporting a slightly different product in any case so that's good stuff. Thanks. Joe Sanderson: Thank you, (Christine). Operator: And next we'll go to (Hewitt) (Unintelligible) with (Romani. com). SANDERSON FARMS INCORPORATED Moderator: Joe Sanderson 02-24-05/10:00 am CT Conference #500024 Page 16 (Hewitt): Gentlemen, I wanted to ask if you've given any further thought to the item in the proxy regarding executive compensation. There are if I recall about 31 different data points that the managers might be evaluated on and I'm wondering if with all those data points that might create a problem in terms of deciding which data point to use in any given year. Mike Cockrell: This is Mike. The board, the shareholders last week at the annual shareholders meeting did approve the omnibus stock incentive plan that you're referring to. And although that plan is an omnibus plan that the compensation committee on advice of advisors and experts that they hired, recommended that the full board approve and ask the shareholders to approve - that plan is a long-term plan that the compensation committee of the board tried to anticipate the future and put in place a menu of options that they would have available to them going forward. No, there's not been any concrete - the compensation committee and the board has not put in place any specific plan that utilizes those various options that they have available to them. You know, there are many options and they're available on how to measure the executive compensation but they have not put in place anything concrete yet. Joe Sanderson: Historically we have two that we've used forever and we will continue to use those two and one of those is earnings per share and the other is our relative position in our industry, our competitiveness. (Hewitt): Great. And Mike, thanks for that. And one other item just to refresh my memory. The one-time gain in the Q1,'04, results for the vitamin supplements. SANDERSON FARMS INCORPORATED Moderator: Joe Sanderson 02-24-05/10:00 am CT Conference #500024 Page 17 Mike Cockrell: Right. (Hewitt): That added how many cents per share to your earnings? Mike Cockrell: Last year in the first quarter it added 1 cent. (Hewitt): One cent. Mike Cockrell: Gosh, over the last four years I don't recall the exact number. (Hewitt): I was just curious versus, you know, '05 versus '04, you know, Q1, '05, versus Q1, '04. Mike Cockrell: Just the 1 cent and there's no more for the rest of the year. And we don't expect anymore out of that particular vitamin settlement either. But for the year there was 1 cent and it happened in last year's first quarter. So going forward there will be none. (Hewitt): If I could just get back to the executive compensation for a second, just emphasize if I think return on capital is always a good metric to use and so I would suggest that it might be worth adding as one of the factors you look at. And by the way I think your return on capital figures are good so it's not like I'm trying to introduce a tougher metric. Mike Cockrell: We certainly look at it internally frequently and appreciate that and we do, you know, every year when we set our goals we do take that into consideration and appreciate that. But it has never been used specifically by the compensation committee although, as you know from looking at the proxy, they now have that available to them if they want to. SANDERSON FARMS INCORPORATED Moderator: Joe Sanderson 02-24-05/10:00 am CT Conference #500024 Page 18 (Hewitt): Right. Could I ask another question? Mike Cockrell: Sure. (Hewitt): Someone on one of the discussion boards on the Internet suggested it might be cheaper for you or more advantageous if you bought an existing chicken facility rather than building one from scratch. Can you just talk about sort of the economics or the thought process of first of all, is that possible and second, what sort of economies do you expect from the brand new facility versus say buying someone else's facility if in fact, you know, it's even possible to do that? Joe Sanderson: We've done that throughout our history. The Hazlehurst plant was bought, the Laurel plant was built, the Collins plant was bought, the Hammond plant was bought, the McComb plant was built. The prepared foods division was bought. So we've utilized both methods - Greenfield construction or acquisition -and we evaluate them all, all of the time. During the year of 2003 there were a number of assets available that we looked at across the country and at the end of the day for whatever reasons, that didn't work out and we ended up building the plant in Georgia. So to us either one works. If it's in the right place, it has marketing advantage and that's our first - our first deal is market. Access to a market or participate in a market segment, acquire customers in a market segment and our first step consideration is marketing. And if that can be achieved with an acquisition, fine. If it can be achieved with building we'll do that too. (Hewitt): Great. I think the comment was suggesting that with your stock price performing terrifically over the last several years that you might be falling in SANDERSON FARMS INCORPORATED Moderator: Joe Sanderson 02-24-05/10:00 am CT Conference #500024 Page 19 love with the idea of brand new plants rather than a philosophy of really monitoring every penny that you spend. Mike Cockrell: No. Yeah, as Joe just said, you know, we look at both and I don't think that's - that's not true. You know, we'd evaluate every opportunity on its own merits and make a decision but certainly the construction during the `90s has paid off well for us. Those plants we're building from Greenfield have done well but the other plants are operating well too. (Hewitt): Right. Thanks, gentlemen. All: Thank you. Operator: There are no further questions at this time. Mr. Sanderson, I'll turn things back to you for any closing comments. Joe Sanderson: Thank you. Thank you for spending time with us this morning. We're pleased with our results to-date and look forward to continued progress in fiscal 2005. We look forward to reporting our results to you throughout the year. Thank you very much. Operator: That does conclude today's conference call. Again, thank you all for your participation and have a great day. END -----END PRIVACY-ENHANCED MESSAGE-----