Exhibit 10.19
SANDERSON FARMS, INC.
PERFORMANCE SHARE AGREEMENT
This PERFORMANCE SHARE AGREEMENT
(this “Agreement”), made and entered into as of the 1
st day
of November 2007 (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, 2007.
(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 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.
1
(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 10.80 percent; his “Target ROE” is
12.70 percent; and his “Maximum ROE” is
21.20 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 200 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 200 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 3.70
percent; his “Target ROS” is 3.90 percent; and his
“Maximum ROS” is 4.70 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
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 rece
