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Exhibit 10.2
SANDERSON FARMS, INC.
FORM OF PERFORMANCE SHARE AGREEMENT
This
PERFORMANCE SHARE AGREEMENT (this "Agreement"), made and entered
into
as of the ___ day of _________, 200__ (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 Performance Share 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 Issuance of Performance Shares.
(a) As a reward for past service and 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, the
right to receive at the end of the
Performance Period (hereinafter defined)
that certain number of shares of the
Company's common stock, par value $1.00 per
share (the "Performance Shares"),
determined in accordance with Section 2
below, subject to the further terms and
conditions set forth herein and in the
Plan. The right to receive Performance
Shares 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
"Performance Period" means the three fiscal
years of the Company commencing
November 1, 2005.
(b) Except as otherwise provided in this Agreement or the Plan,
the
right to receive Performance Shares shall
vest and no longer be subject to
forfeiture or any transfer restrictions
hereunder at the end of the Performance
Period, 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, (ii) his termination of
employment with the Company after his
attainment of eligibility for retirement
(as determined by the Board from time to
time), or (iii) a Change of Control
prior to the end of the Performance Period,
the Participant shall be entitled to
receive, at the end of the Performance
Period, a pro rata portion of the number
of Performance Shares to which he otherwise
would have been entitled, determined
in accordance with the ratio that the
number of months the Participant was
employed with the Company during the
Performance Period bears to the total
number of months in the Performance Period.
If the Participant's employment with
the Company is terminated for any other
reason, voluntarily or involuntarily,
prior to the expiration of the Performance
Period, then the right to receive
Performance Shares at the end of the
Performance Period shall immediately be
forfeited.
(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
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during the two-year period following the
Participant's voluntary termination of
employment or his termination by the
Company for Cause, then as of the date of
the Board determination the Participant's
right to receive Performance Shares
shall be forfeited or, if the Performance
Shares have already been issued, the
Participant shall repay to the Company the
fair market value of the Performance
Shares as of their issue date.
2.
Issuance of Performance Shares.
(a) The Participant's Performance Share Award is a function of
his
"Target ROE Award" and his "Target ROS
Award," calculated as set forth below.
The Participant's Target ROE Award is _____
Shares. The Participant's Target ROS
Award is _____ Shares.
(b) At the end of the Performance Period, the Board (or its
permitted
delegate) will calculate the Company's
Return on Equity for each of its fiscal
years during the Performance Period and
divide the sum by that number of years
(the "Average ROE"). "Return on Equity"
means (i) the Company's net after-tax
income for the fiscal year in question,
divided by (ii) the average of the
shareholders' equity as of the end of the
preceding fiscal year and the
shareholders' equity as of the end of the
fiscal year in question, in each case
as shown in the Company's audited financial
statements (provided that if there
is any change in accounting standards used
by the Company after the Grant Date,
Return on Equity will be calculated without
regard to such change). The
Participant's "Threshold ROE" is _____
percent; his "Target ROE" is _____
percent; and his "Maximum ROE" is _____
percent. If, at the end of the
Performance Period, the Company's Average
ROE is equal to the Threshold ROE, the
Participant will be entitled to receive 50
percent of the Target ROE Award; if
the Company's Average ROE is equal to the
Target ROE, the Participant will be
entitled to receive 100 percent of the
Target ROE Award; and if the Company's
Average ROE is equal to or greater than the
Maximum ROE, the Participant will be
entitled to receive 150 percent of the
Target ROE Award. If the Company's
Average ROE is otherwise between the
Threshold ROE and the Maximum ROE, the
number of Performance Shares that the
Participant is entitled to receive will be
calculated using a straight-line
interpolation. If the Company's Average ROE is
less than the Threshold ROE, the
Participant will not be entitled to receive any
Shares as part of his Target ROE Award. In
no event will the Participant be
entitled to receive pursuant to this
Agreement more than 150 percent of the
Target ROE Award.
(c) Likewise, at the end of the Performance Period, the Board (or
its
permitted delegate) will calculate the
Company's Return on Sales for each of its
fiscal years during the Performance Period
and divide the sum by that number of
years (the "Average ROS"). "Return on
Sales" means the Company's net after-tax
income for the fiscal year in question
divided by its net sales for such fiscal
year, in each case as shown in the
Company's audited financial statements
(provided that if there is any change in
accounting standards used by the
Company after the Grant Date, Return on
Sales will be calculated without regard
to such change). The Participant's
"Threshold ROS" is _____ percent; his "Target
ROS" is _____ percent; and his "Maximum
ROS" is _____ percent. If, at the end of
the Performance Period, the Company's
Average ROS is equal to the Threshold ROS,
the Participant will be entitled to receive
50 percent of the Target ROS Award;
if the Company's Average ROS is equal to
the Target ROS, the Participant will be
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entitled to receive 100 percent of the
Target ROS Award; and if the Company's
Average ROS is equal to or greater than the
Maximum ROS, the Participant will be
entitled to receive 150 percent of the
Target ROS Award. If the Company's
Average ROS is otherwise between the
Threshold ROS and the Maximum ROS, the
number of Performance Shares that the
Participant is entitled to receive will be
calculated using a straight-line
interpolation. If the Company's Average ROS is
le
