EMPLOYMENT
AGREEMENT, dated as of September 15, 2009 (the “
Employment Agreement ”), by and between Sanderson
Farms, Inc., a Mississippi corporation (the “ Company
”), and D. Michael Cockrell (the “ Executive
”).
WHEREAS, the
Executive possesses skills, experience and knowledge that are of
significant value to the Company;
WHEREAS, the
Company and the Executive desire to enter into this Employment
Agreement;
NOW, THEREFORE, in
consideration of the mutual covenants contained herein and other
valid consideration the sufficiency of which is acknowledged, the
parties hereto agree as follows:
1.1. Term .
Subject to Section 3 hereof, the Company agrees to employ the
Executive, and the Executive agrees to be employed by the Company,
in each case pursuant to this Employment Agreement, for a period
commencing on the date set forth above and ending on the
termination of the Executive’s employment in accordance with
Section 3 hereof (the “ Term ”).
1.2. Title;
Duties; Place of Performance . During the Term, the Executive
shall serve as Treasurer and Chief Financial Officer of the Company
and such other positions as an officer or director of the Company
and such Affiliates of the Company as the Executive and the board
of directors of the Company (the “ Board ”) or
an appropriate committee thereof shall mutually agree from time to
time. In such positions, the Executive shall perform such duties,
functions and responsibilities during the Term as directed by the
Board and shall operate within the guidelines, plans or policies as
may be established or approved by the Company from time to time.
The Executive’s principal places of employment during the
Term shall be Laurel, Mississippi, except for reasonable travel as
required in connection with the business and affairs of the
Company.
1.3. Outside
Affairs . During the Term, the Executive shall devote such
time, attention, and diligence to the business and affairs of the
Company as are necessary to the satisfactory performance of his
duties to the Company, and shall conform to and comply with the
lawful and reasonable directions and instructions given to him by
the Board, consistent with Paragraph 1.2 hereof. During the
Term, the Executive shall use his best efforts to promote and serve
the interests of the Company . Notwithstanding this Paragraph, the
Executive may during the Term: (i) engage in charitable and
community activities and (ii) manage personal and family
investments and affairs, in each case so long as such activities do
not violate the terms of this Employment Agreement or interfere
with the satisfactory performance of his duties hereunder. In
addition, without limiting the generality of the foregoing, during
the Term the Executive shall not serve on the boards of directors
of any for-profit entity without the prior consent of the Board or
an appropriate committee thereof.
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Section 2. Compensation .
2.1. Salary
. As compensation for the performance of the Executive’s
services hereunder, the Company shall pay to the Executive a salary
at an initial annual rate of Four Hundred Ninety-Six Thousand Nine
Hundred Sixty-Seven Dollars ($496,967), payable with the same
frequency and on the same basis that the Company normally makes
salary payments to other executive personnel of the Company (the
“ Base Salary ”). The Compensation Committee of
the Board (the “ Compensation Committee ”) shall
review and reassess the Base Salary at least annually and may elect
to change it, subject to Paragraph 3.2 hereof. Any resolution
of the Compensation Committee changing the Base Salary shall
automatically amend and be incorporated into this Employment
Agreement.
2.2. Annual
Bonus . The Executive shall be entitled to any cash bonus award
payable to him in accordance with any bonus award program adopted
by the Compensation Committee.
2.3.
Benefits . During the Term, the Executive shall be eligible
to participate in the health insurance, retirement and other
perquisites and benefits of the Company as in effect from time to
time.
2.4. Vacation
and Sick Pay . The Executive will be entitled to paid vacation
and sick leave during the Term in accordance with the terms and
conditions of the Company’s vacation and sick leave policies
as in effect from time to time.
2.5.
Holidays . The Executive shall be entitled to all paid
holidays given to the Company’s executive employees in
accordance with Company policy.
2.6. Business
and Entertainment Expenses . The Company shall promptly pay or
reimburse the Executive for all reasonable business out-of-pocket
expenses that the Executive incurs during the Term in performing
his duties under this Employment Agreement, upon presentation of
documentation and in accordance with the expense reimbursement
policy of the Company in effect from time to time. With respect to
any such payment or reimbursement that would otherwise constitute a
deferral of compensation within the meaning of Section 409A
(“ Section 409A ”) of the Internal Revenue
Code of 1986, as amended (the “ Code ”), the
payment or reimbursement will be made no later than the 15
th day of the third month following the later of
the end of the calendar year or the end of the Company’s
fiscal year in which the expense was incurred.
2.7.
Indemnification . To the maximum extent permitted by
applicable law and the Company’s Articles of Incorporation,
as amended, and Bylaws, the Company shall indemnify the Executive
for losses or damages incurred by the Executive as a result of all
causes of action arising against him from the Executive’s
performance of duties for the benefit of the Company. The Executive
shall be covered under any directors’ and officers’
insurance that the Company maintains for its directors and other
officers in the same manner and on the same basis as the
Company’s directors and other officers.
2.8.
Supplemental Disability Plan . The Executive is hereby
designated a “Participant” pursuant to Section 1.6
of the Sanderson Farms, Inc. Supplemental Disability Plan effective
September 1, 2008.
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Section 3. Employment Termination .
3.1.
Termination of Employment . The Company may terminate the
Executive’s employment for any reason during the Term, and
the Executive may voluntarily terminate his employment for any
reason during the Term, in each case (other than a termination by
the Company for Cause) at any time upon not less than
30 days’ notice to the other party specifying the reason
therefor, if applicable to the termination. Such notice may not be
given until any other notice required by Paragraph 3.2(a) or
(b) has been given. The Executive’s employment shall
automatically and immediately terminate upon the Executive’s
death. Upon the termination of the Executive’s employment
with the Company for any reason, the Executive shall be entitled to
any Base Salary earned but unpaid through the date of termination,
any accrued but unpaid benefits, and any unreimbursed expenses in
accordance with Paragraph 2.6 hereof (collectively, the
“ Accrued Amounts ”). If the Executive’s
employment terminates due to his death, the Company shall pay the
Accrued Amounts to his designated beneficiary (such beneficiary to
be designated in writing by the Executive, or in the absence of a
separate written designation, such beneficiary shall be
Executive’s spouse or, if there is no spouse, his estate),
and shall also pay to such beneficiary the Executive’s Base
Salary at the rate in effect on the date of his death according to
the Company’s regular payroll schedule from the date of his
death until the first anniversary thereof. Nothing in this
Agreement shall entitle the Executive to the Severance Payments and
other benefits provided for in Paragraph 3.2 if his employment
terminates due to his death, disability or retirement.
3.2.
Termination by the Company Other Than For Cause or Poor
Performance; Change in Control; Termination by the Executive for
Good Reason . If (i) prior to a Change in Control, the
Executive’s employment is terminated by the Company during
the Term other than for Cause or Poor Performance,
(ii) simultaneously with or after a Change in Control, the
Executive’s employment is terminated by the Company other
than for Cause, or (iii) the Executive resigns for Good Reason
within 30 days following the deadline set forth in
Paragraph 3.2(a)(C) by which the Company must cure the
Resignation Condition (the “Cure Deadline”), then in
addition to the Accrued Amounts the Executive shall be entitled to
the following payments and benefits: (a) an amount equal to
two times the Executive’s annual Base Salary in effect at the
time of termination, and (b) an amount equal to two times
fifty percent of the maximum bonus opportunity available to the
Executive (had the Executive’s employment not terminated)
under any bonus award program in effect for the fiscal year in
which termination occurs (based on the bonus plan (if any) in
effect for that year) (the payments provided for in clauses
(a) and (b) are referred to as the “ Severance
Payments ”) and (c) the continuation, on the same
terms as an active employee, of medical benefits the Executive
would otherwise be eligible to receive as an active employee of the
Company for twenty-four (24) months or, if earlier, until such
time as the Executive becomes eligible for substantially similar
medical benefits from a subsequent employer. The Severance Payments
shall be payable in a lump sum in immediately available funds as
soon as practicable following the Executive’s termination or
resignation, but in any event no later than the 45
th day after the termination of the
Executive’s employment. Notwithstanding the preceding
sentence, if payment of the Severance Payments as aforesaid would
cause the imposition of an excise tax on all or any part of the
Severance Payments pursuant to Section 409A of the Code, then
payment of all or such part of the Severance
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Payments shall
be delayed or advanced to the earliest practicable date that avoids
the imposition of such excise tax. The Company’s obligations
to make the Severance Payments and provide the benefits described
in clause (c) above shall be conditioned upon: (i) the
Executive’s continued compliance with his obligations under
Section 4 of this Employment Agreement and (ii) the
Executive’s execution, delivery and non-revocation of a valid
and enforceable release of claims arising in connection with the
Executive’s employment and termination of employment with the
Company and its Affiliates (the “ Release ”)
substantially in the form attached hereto as Exhibit A. In the
event that the Executive breaches any of the covenants set forth in
Section 4 of this Employment Agreement, the Executive will
immediately return to the Company any portion of the Severance
Payments that has been paid to the Executive pursuant to this
Section 3 and Executive’s entitlement to continued
medical benefits shall immediately cease.
For purposes of
this Employment Agreement:
(a) “
Good Reason ” shall mean (A) one of the following
(each, a “ Resignation Condition ”) has
occurred: (i) a material breach by the Company of any of the
covenants in this Employment Agreement, (ii) any reduction in
the Executive’s Base Salary or target bonus opportunity,
other than a reduction that is part of a salary and bonus
opportunity reduction program affecting senior executives of the
Company generally, (iii) the relocation of the
Executive’s principal place of employment, without the
Executive’s consent, that would increase the
Executive’s one-way commute by more than 40 miles,
(iv) assignment of duties or responsibilities inappropriate
for an executive officer, except as a result of the
Executive’s Disability or ill health, or (v) after a
Change in Control, the alteration of the Executive’s position
in a way that significantly changes his status, offices, reporting
requirements, authority, daily routine or responsibilities as they
existed before the Change in Control, whether or not the
Executive’s title and location remain the same, which results
in a material diminution in such position; (B) the Executive
has given the Company written notice of the occurrence of the
Resignation Condition within 30 days after the Resignation
Condition occurred; and (C) the Company has not cured the
Resignation Condition by the date that is 30 days after
receiving the notice from the Executive required by clause
(B) of this Paragraph.
(b) “
Cause ” means (1) any conviction of, or plea of
guilty or nolo contendere to (x) any felony (except for
vehicular-related felonies, other than vehicular manslaughter or
vehicular homicide) or (y) any crime (whether or not a felony)
involving dishonesty, fraud, or breach of fiduciary duty;
(2) willful misconduct by the Executive; (3) failure or
refusal, other than by reason of Disability or ill health, to
perform faithfully and diligently the usual and customary duties of
his employment; (4) failure or refusal to comply with the
reasonable policies, standards and regulations of the Company
which, from time to time, may be established and disseminated;
(5) a material breach by the Executive of any terms related to
his employment in any applicable agreement; or (6) the
Executive engaging in any Prohibited Activity (as defined below);
provided that the conduct described in clauses
(2) through (5) shall not constitute Cause unless the
Company has provided the Executive with written notice of such
conduct and the Executive has failed to cure such conduct within
five business days of receiving such notice. Following a Change in
Control, the duties of the Executive’s employment and
policies, standards and regulations of the Company referred to in
Paragraphs 3.2(b)(3) and (4) above shall not be more onerous
than those in place before the Change in Control.
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(c) As used
in this Employment Agreement, conduct is “cured” if,
within the applicable time period, its effect is reversed, to the
extent it is capable of being reversed, and the conduct ceases to
continue; provided , however, that conduct shall be deemed
to be unable to be “cured” if such conduct has had or
would have, individually or in the aggregate, a material adverse
effect on the Company and its subsidiaries, taken as a
whole.
(d) “Prohibited
Activity” means engaging in conduct proscribed by
Section 4.
(e) “Poor
Performance” means the failure by the Executive to perform
the duties of his office to the satisfaction of the Board or the
Chief Executive Officer of the Company as approved by the Board.
Poor performance shall be exclusively determined by the Board or
the Chief Executive Officer as approved by the Board.
(f) “Change
in Control” means the occurrence, in a single transaction or
in a series of related transactions, of any one or more of the
following events:
(1) The
acquisition (other than an acquisition from or by the Company or by
a Company-sponsored employee benefit plan or by a person that
directly or indirectly controls, is controlled by, or is under
common control with the Company) by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934 (the “Exchange Act”))
(a “Person”) of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of more
than 50 percent of the then outstanding shares of common stock
of the Company; or
(2) Approval by
the stockholders of the Company of a reorganization, merger or
consolidation or sale or other disposition of all or substantially
all of the assets of the Company or approval by the Board of the
acquisition by the Company of assets of another corporation (each
of the foregoing, a “Business Combination”), in each
case, unless, following such Business Combination, the individuals
and entities who were the beneficial owners, respectively, of the
outstanding common stock of the Company immediately prior to such
Business Combination beneficially own, directly or indirectly, more
than 50 percent of the combined voting power of the then
outstanding voting securities entitled to vote generally in the
election of directors of the corporation surviving or resulting
from such Business Combination (or of a corporation which as a
result of such transaction controls the Company or owns all or
substantially all of the Company’s assets either directly or
through one or more subsidiaries), in substantially the same
proportions as their ownership, immediately prior to such Business
Combination, of the common stock of the Company; or
(3) individuals
who, as of the date of this Employment Agreement, constitute the
Board of Directors (the “Incumbent Board”) cease for
any reason to constitute at least a majority of the Board;
provided, however, that any individual becoming a director
subsequent to such date whose election, or nomination for election
by the Company’s stockholders, was approved by a vote of at
least a majority of the directors then comprising the Incumbent
Board shall be considered as though such individual were a member
of the Incumbent Board, but excluding, for this purpose, any such
individual whose initial assumption of office occurs as a result of
an actual or threatened election
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contest with
respect to the election or removal of directors or other actual or
threatened solicitation of proxies or consents by or on behalf of a
Person other than the Board; or
(4) approval by
the stockholders of the Company of a complete liquidation or
dissolution of the Company.
(g) “Disability”
has such meaning as determined by the Board from time to
time.
3.3. Exclusive
Remedy . The foregoing payments upon termination of the
Executive’s employment shall constitute the exclusive
payments due the Executive upon a termination of his employment
under this Employment Agreement.
3.4.
Resignation from All Positions . Upon the termination of the
Executive’s employment with the Company for any reason, the
Executive shall be deemed to have resigned, as of the date of such
termination, from all positions he then holds as an officer,
director, employee and member of the Board (and any committee
thereof) and the boards of all of its subsidiaries.
3.5.
Cooperation . Following the termination of the
Executive’s employment with the Company for any reason, the
Executive agrees to reasonably cooperate with the Company upon
reasonable request of the Board and to be reasonably available to
the Company with respect to matters arising out of the
Executive’s services to the Company and its subsidiaries. The
Company shall reimburse the Executive for expenses reasonably
incurred by him in connection with such matters as agreed by the
Executive and the Board.
3.6.
Section 409A . Notwithstanding the foregoing provisions
of this Employment Agreement, if as of the date of termination of
the Executive’s employment, he is a “specified
employee” within the meaning of Section 409A of the Code
(as determined in accordance with the methodology established by
the Company as in effect on such date of termination), amounts or
benefits that are deferred compensation subject to
Section 409A of the Code, as determined in the reasonable
discretion of the Company, that would otherwise be payable or
provided during the six-month period immediately following
termination (other than the Accrued Amounts), shall instead be paid
or provided, with interest on any delayed payment at the prime
lending rate prevailing at such time, as published in the Wall
Street Journal, on the first business day after the date that is
six months following Executive’s “separation from
service” within the meaning of Section 409A of the Code
(or, if earlier, the Executive’s date of death).
3.7. Golden
Parachute Excise Tax Provisions . In the event it is determined
that any payment or benefit (within the meaning of
Section 280G(B)(2)) of the Code to the Executive or for his
benefit paid or payable or distributed to or distributable pursuant
to the terms of this Employment Agreement or otherwise in
connection with, or arising out of, his employment
(“Termination Payments”), would be subject to the
excise tax imposed by Section 4999 of the Code or any interest
or penalties are incurred by the Executive with respect to such
excise tax (such excise tax, together with any such interest and
penalties, are hereinafter collectively referred to as the
“Golden Parachute Excise Tax”), then the total
Termination Payments shall be reduced to the extent the payment of
such amounts would no longer cause any portion of the
Executive’s total termination benefits to constitute an
“excess” parachute payment under
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Section 280G of the Code and by reason of
such excess parachute payment the Executive would be subject to an
excise tax under Section 4999(a) of the Code, but only if the
Executive (or the Executive’s tax advisor) determines that
the after-tax value of the termination benefits calculated with the
foregoing restriction exceeds that calculated without the foregoing
restriction. Except as otherwise expressly provided herein, all
determinations under this Paragraph 3.7 shall be made at the
expense of the Company by a nationally recognized public accounting
or consulting firm selected by the Company and subject to the
approval of Executive, which approval shall not be unreasonably
withheld. Such determination shall be binding upon Executive and
the Company.
3.8. Company
Withholding . Notwithstanding anything contained in this
Agreement to the contrary, in the event that, according to the
determination of the Executive or his advisor pursuant to
Paragraph 3.7 hereof, a Golden Parachute Excise Tax will be
imposed on any Termination P
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