Document:

Exhibit 10.4

 

EXHIBIT B

 

 

RESTRICTED STOCK AGREEMENT

THIS AGREEMENT, dated _______________ ___, 2007 (the “Grant Date”) is made by and between PEABODY ENERGY CORPORATION, a Delaware corporation (the “Company”), and the undersigned employee of the Company or a Subsidiary (as defined below) or an Affiliate (as defined below) of the Company (“Grantee”).

WHEREAS, the Company wishes to afford the Grantee the opportunity to own shares of its $.01 par value Common Stock (“Common Stock”);

WHEREAS, the Company wishes to carry out the Plan (as hereinafter defined), the terms of which are hereby incorporated by reference and made a part of this Agreement; and

WHEREAS, the Committee (as hereinafter defined) appointed to administer the Plan has determined that it would be to the advantage and best interest of the Company and its stockholders to give the shares of Common Stock provided for herein to the Grantee, on a restricted basis, as an incentive for increased efforts during his or her term of office with the Company or its Subsidiaries or Affiliates, and has advised the Company thereof and instructed the undersigned officers to so grant;

NOW, THEREFORE, in consideration of the mutual covenants herein contained and other good and valuable consideration, receipt of which is hereby acknowledged, the parties hereto agree as follows:

ARTICLE I

DEFINITIONS

Whenever the following terms are used in this Agreement, they shall have the meaning specified below unless the context clearly indicates to the contrary.  Capitalized terms not otherwise defined in this Agreement shall have the meaning specified in the Plan.

Section 1.1 –  “Affiliate”, as applied to any Person, shall mean any other Person directly or indirectly controlling, controlled by, or under common control with, that Person.  For purposes of this definition, the term “control” (including, with correlative meanings, the terms “controlling”, “controlled by” and “under common control with”), as applied to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of that Person, whether through the ownership of voting securities, by contract or otherwise.

Section 1.2 –  “Board of Directors” or “Board” shall mean the Board of Directors of the Company.

Section 1.3 –  “Cause” shall mean (i) any material and uncorrected breach by Grantee of the terms of his or her employment agreement with the Company, if any, including, but not limited to, engaging in action in violation of any restrictive covenants therein, (ii) any willful fraud or dishonesty of Grantee involving the property or business of the Company, (iii) a deliberate or willful refusal or failure of Grantee to comply with any major corporate policy of the Company 

 

 

which is communicated to Grantee in writing, or (iv) Grantee’s conviction of, or plea of nolo contendere to, any felony if such conviction results in Grantee’s imprisonment; provided that with respect to clauses (i), (ii) or (iii) above, Grantee shall have 10 days following written notice of the conduct that is the basis for the potential termination for Cause within which to cure such conduct to prevent termination for Cause by the Company.

Section 1.4 –  “Committee” shall mean the Compensation Committee of the Company, duly appointed by the Board as the Administrator under Section 2 of the Plan.

Section 1.5 –  “EBITDA” shall mean income from continuing operations before deducting early debt extinguishment costs, net interest expenses, income taxes, minority interests, asset retirement obligation expense and depreciation, depletion and amortization.

Section 1.6 –  “Good Reason” shall mean (i) a reduction by the Company in Grantee’s Base Salary, or (ii) a material reduction in the aggregate program of employee benefits and perquisites to which Grantee is entitled (other than a reduction that affects all executives).

Section 1.7 –  “Person” shall mean an individual, partnership, corporation, business trust, joint stock company, trust, unincorporated association, joint venture, governmental authority or other entity of whatever nature.

Section 1.8 –  “Plan” shall mean the Peabody Energy Corporation 2004 Long-Term Equity Incentive Plan, as amended from time to time.

Section 1.9 –  “Pronouns” The masculine pronoun shall include the feminine and neuter, and the singular the plural, where the context so indicates.

Section 1.10 –  “Retirement” shall mean normal retirement at or after age 55 with at least ten (10) years of service with the Company.

Section 1.11 –  “Subsidiary” shall mean any corporation in an unbroken chain of corporations beginning with the Company if each of the corporations, or group of commonly controlled corporations, other than the last corporation in the unbroken chain then owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain.

Section 1.12 –  “Termination of Employment” shall mean a termination of the Grantee’s employment with the Company, a Subsidiary or an Affiliate (regardless of the reason therefor).

ARTICLE II

GRANT OF RESTRICTED STOCK

Section 2.1 –  Grant of Restricted Stock.  For good and valuable consideration, the Company shall grant to the Grantee the number of shares set forth on the signature page hereof of its Common Stock (the “Restricted Stock”) upon the terms and subject to the conditions set forth in this Agreement.

 

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Section 2.2 –  Transfer Restrictions.  At any time prior to vesting in accordance with Article III, the shares of Restricted Stock or any interest therein cannot be directly or indirectly transferred, sold, assigned, pledged, hypothecated or otherwise disposed of.  Upon vesting in accordance with Article III, the shares of Restricted Stock shall cease to be restricted and shall become non-forfeitable, and the Grantee shall own such shares free of all restrictions otherwise imposed by this Agreement.

Section 2.3 –  No Obligation of Employment.  Nothing in this Agreement or in the Plan shall confer upon the Grantee any right to continue in the employ of the Company or any Subsidiary or Affiliate or interfere with or restrict in any way the rights of the Company and its Subsidiaries or Affiliates, which are hereby expressly reserved, to terminate the employment of the Grantee at any time for any reason whatsoever, with or without Cause.

Section 2.4 –  Adjustments in Restricted Shares.  In the event that the outstanding shares of the stock subject to this Restricted Stock grant are, from time to time, changed into or exchanged for a different number or kind of shares of the Company or other securities of the Company by reason of a merger, consolidation, recapitalization event, reclassification, stock split, stock dividend, combination of shares, or otherwise, the Committee shall make an appropriate and equitable adjustment in the number and kind of shares that shall constitute Restricted Stock and in any other characteristics or terms applicable to the Restricted Stock as it may determine appropriate in its sole discretion to equitably reflect such corporate event or transaction.  Any such adjustment made by the Committee shall be final and binding upon the Grantee, the
Company and all other interested persons.

ARTICLE III

VESTING OF RESTRICTED STOCK

Section 3.1 –  Restricted Stock.  Unless otherwise provided in this Agreement, the shares of Restricted Stock shall become vested and non-forfeitable in accordance with the following schedule, provided that the Grantee does not experience a Termination of Employment before the designated dates:

	
             

Vesting Date
 	
             
 	
            Number of Shares of Restricted Stock that May Become Vested
 
	
             
 	
             
 	
             
 
	
            Grant Date
 	
             
 	
            3,000
 
	
             
 	
             
 	
             
 
	
            Third anniversary
 of the Grant Date
 	
             
 	
            3,000
 
	
             
 	
             
 	
             
 
	
            Sixth anniversary
 of the Grant Date
 	
             
 	
            3,000
 

 

Section 3.2 –  Acceleration Events.  Notwithstanding anything in this Article III to the contrary, the shares of Restricted Stock shall become fully vested and non-forfeitable upon: (i) a Change of Control; (ii) the Grantee’s death while he or she is employed with the Company, a Subsidiary or an Affiliate; (iii) the Grantee’s Termination of Employment due to Disability; (iv) the Grantee’s Termination of Employment for Good Reason (as defined in the Grantee’s employment 

 

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agreement); or (v) the Grantee’s involuntary Termination of Employment by the Company, a Subsidiary or an Affiliate for a reason other than Cause.

Section 3.3 –  Effect of Termination of Employment.  Unless otherwise provided in this Article III, no share of Restricted Stock shall become vested and non-forfeitable following Termination of Employment, and any such non-vested and forfeitable share of Restricted Stock shall be immediately and automatically forfeited upon Termination of Employment.

ARTICLE IV

RECEIPT OF STOCK

Section 4.1 –  Conditions to Issuance of Stock Certificates.  The shares of Common Stock deliverable hereunder may be either previously authorized but unissued shares or issued shares that have been reacquired by the Company.  Such shares shall be fully paid and nonassessable.  The Company shall not be required to issue or deliver any certificate or certificates for shares of Common Stock granted hereunder prior to fulfillment of both of the following conditions:

(a)          The obtaining of approval or other clearance from any state or federal governmental agency that the Committee, in its absolute discretion, determines to be necessary or advisable; and

(b)          The lapse of such reasonable period of time following the grant as the Committee may establish from time to time for administrative convenience.

Section 4.2 –  Escrow.  Upon issuance, the certificates for the shares of Restricted Stock shall be held in escrow by the Company until, and to the extent, the shares of Restricted Stock cease to be restricted and become non-forfeitable and the Grantee owns such shares free of all restrictions otherwise imposed by this Agreement.  Any new, substituted or additional securities or other property described in Section 2.4 shall immediately be delivered to the Company to be held in such escrow.  Shares of Restricted Stock, together with any other assets or securities held in escrow hereunder, shall be (i) surrendered to the Company for cancellation upon forfeiture, if any, of such shares of Restricted Stock by the Grantee hereunder or (ii), subject to the provisions of Section 5.1, released to the Grantee to the extent the shares of Restricted
Stock are no longer subject to any of the restrictions otherwise imposed by this Agreement.

Section 4.3 –  Rights as Stockholder.  The Grantee shall not be, and shall not have any of the rights or privileges of, a stockholder of the Company in respect of any shares granted hereunder unless and until the date on which certificates representing such shares shall have been issued by the Company to such Grantee (the “Issuance Date”).  The Grantee shall be entitled to receive any dividends paid with respect to the shares of Restricted Stock that become payable on or after the Issuance Date; provided, however, that no dividends shall be payable to or for the benefit of the Grantee for shares of Restricted Stock with respect to record dates occurring prior to the Issuance Date, or with respect to record dates occurring on or after the date, if any, on which the Grantee has forfeited
those shares of Restricted Stock.  The Grantee shall be entitled to vote the shares of Restricted Stock on or after the Issuance Date to the same extent as would have been applicable to the Grantee if the shares of Restricted Stock had then become fully vested and non-forfeitable; provided, however, that the Grantee shall not be entitled to vote the shares of Restricted Stock with respect to record dates for such voting rights occurring prior to the Issuance Date, or with 

 

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respect to record dates occurring on or after the date, if any, on which the Grantee has forfeited those shares of Restricted Stock.

ARTICLE V

MISCELLANEOUS

Section 5.1 –  Tax Consequences.  The Company shall not be liable or responsible in any way for any tax (including any withholding tax) consequences relating to the shares of Restricted Stock, and the Grantee agrees to undertake to determine, and be responsible for, any and all tax (including any withholding tax) consequences to himself or herself with respect to the shares of Restricted Stock.  Notwithstanding any other provision of this Agreement, the shares of Restricted Stock, together with any other assets or securities held in escrow hereunder, shall not be released to the Grantee unless the Grantee has paid to the Company, or made arrangements satisfactory to the Company regarding the payment of, any federal, state, local or foreign taxes of any kind required by law to be withheld with respect to the grant of the shares of Restricted
Stock or the lapse of restrictions imposed by this Agreement.

Section 5.2 –  Section 83(b) Election.  The Grantee understands that Section 83 of the Code may tax as compensation income equal to the difference between the amount paid for the shares of Restricted Stock, if any, and the fair market value of the shares of Restricted Stock as of the date any restrictions on the shares of Restricted Stock lapse in the absence of an election under Section 83(b) of the Code.  In this context, “restriction” means the forfeitability of the shares of Restricted Stock pursuant to the terms of this Agreement.  To the extent that the Company has registered under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the term “restriction,” with respect to officers, directors, and 10% shareholders, may also mean the six-month period after the acquisition of the shares of
Restricted Stock during which sales of certain securities by such officers, directors, and ten percent (10%) shareholders would give rise to liability under Section 16(b) of the Exchange Act.  

The Grantee understands that he or she may elect to be taxed at the time he or she receives the shares of Restricted Stock and while the shares of Restricted Stock are subjected to restrictions rather than waiting to be taxed on the shares of Restricted Stock when and as the restrictions lapse.  The Grantee realizes that he or she may choose this tax treatment by filing an election under Section 83(b) of the Code with the Internal Revenue Service within thirty (30) days after the Grant Date and by filing a copy of such election with his or her tax return for the tax year in which the Restricted Shares were subjected to the restrictions.  THE GRANTEE UNDERSTANDS THAT FAILURE TO MAKE THIS FILING IN A TIMELY MANNER MAY RESULT IN THE RECOGNITION OF COMPENSATION INCOME BY THE GRANTEE, AS THE RESTRICTIONS LAPSE, ON ANY DIFFERENCE BETWEEN THE PURCHASE PRICE, IF ANY, AND THE FAIR MARKET VALUE OF
THE SHARES OF RESTRICTED STOCK AT THE TIME SUCH RESTRICTIONS LAPSE.  THE GRANTEE ACKNOWLEDGES THAT IT IS THE GRANTEE’S SOLE RESPONSIBILITY AND NOT THE COMPANY’S TO TIMELY FILE THE ELECTION UNDER SECTION 83(b) OF THE CODE.  THE GRANTEE ACKNOWLEDGES THAT HE OR SHE SHALL CONSULT HIS OWN TAX ADVISERS REGARDING THE ADVISABILITY OR NON-ADVISABILITY OF MAKING THE ELECTION UNDER SECTION 83(b) OF THE CODE AND 

 

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ACKNOWLEDGES THAT HE OR SHE SHALL NOT RELY ON THE COMPANY OR ITS ADVISERS FOR SUCH ADVICE.

 

Section 5.3 –  Administration.  The Committee has the power to interpret the Plan and this Agreement and to adopt such rules for the administration, interpretation and application of the Plan as are consistent therewith and to interpret or revoke any such rules.  All actions taken and all interpretations and determinations made by the Committee shall be final and binding upon the Grantee, the Company and all other interested persons.  No member of the Committee shall be personally liable for any action, determination or interpretation made in good faith with respect to the Plan or the shares of Restricted Stock.  In its absolute discretion, the Board of Directors may at any time and from time to time exercise any and all rights and duties of the Committee under the Plan and this Agreement.

Section 5.4 –  Notices.  Any notice to be given under the terms of this Agreement to the Company shall be addressed to the Company in care of its Secretary, and any notice to be given to the Grantee shall be addressed to him or her at the address given beneath his or her signature hereto.  By a notice given pursuant to this Section 5.4, either party may hereafter designate a different address for notices to be given to him, her or it.  Any notice that is required to be given to the Grantee shall, if the Grantee is then deceased, be given to the Grantee’s personal representative if such representative has previously informed the Company of his, her or its status and address by written notice under this Section 5.4.  Any notice shall be deemed duly given when enclosed in a properly sealed envelope or wrapper addressed as aforesaid,
deposited (with postage prepaid) in a post office or branch post office regularly maintained by the United States Postal Service.

Section 5.5 –  Titles.  Titles are provided herein for convenience only and are not to serve as a basis for interpretation or construction of this Agreement.

Section 5.6 –  Applicability of Plan.  The shares of Common Stock issued to the Grantee hereunder shall be subject to all of the terms and provisions of the Plan, to the extent applicable to such shares.  In the event of any conflict between this Agreement and the Plan, the terms of the Plan shall control.

Section 5.7 –  Amendment.  This Agreement may be amended only by a writing executed by the parties hereto that specifically states that it is amending this Agreement.

Section 5.8 –  Dispute Resolution.  Any dispute or controversy arising under or in connection with this Agreement shall be resolved by arbitration.  Arbitrators shall be selected, and arbitration shall be conducted, in accordance with the rules of the American Arbitration Association.  The Company shall pay any legal fees in connection with such arbitration in the event that the Grantee prevails on a material element of his claim or defense.

Section 5.9 –  Governing Law.  The laws of the State of Delaware shall govern the interpretation, validity and performance of the terms of this Agreement regardless of the law that might be applied under principles of conflicts of laws.

 

[SIGNATURE PAGE FOLLOWS]

 

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IN WITNESS WHEREOF, this Agreement has been executed and delivered by the parties hereto.

	
            GRANTEE
 	
             
 	
            PEABODY ENERGY CORPORATION
 
	
             
 	
             
 	
             
 	
             
 
	
             
 	
             
 	
             
 	
             
 
	
             
 	
             
 	
            By
 	
             
 
	
            Eric Ford
 	
             
 	
             
 	
            Gregory H. Boyce
 President and Chief Executive Officer
 
	
            77 Moons Lane
 Brookfield
 Brisbane
 Queensland 4069
 AUSTRALIA
 	
             
 	
             
 	
             
 
	
             
 	
             
 	
             
 	
             
 
	
             
 	
             
 	
             
 	
             
 
	
            Grantee’s Taxpayer Identification Number:
 
 ________-______-__________
 	
             
 	
            Aggregate number of shares of Common Stock granted hereunder: 9,000
 

 

 

 

7Ex-10.22

 

Exhibit 10.22

SANDERSON FARMS, INC.

FORM OF PERFORMANCE SHARE AGREEMENT

     This PERFORMANCE SHARE AGREEMENT (this “Agreement”), made and entered into as of the ___day of
                    , 2006 (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) 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,
2006.

          (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.

          (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 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 less than the Threshold ROS, the Participant will
not be entitled to receive any Shares as part of his Target ROS Award. In no event will the
Participant be entitled to receive pursuant to this Agreement more than 150 percent of the Target
ROS Award.

          (d) Within 60 days of the end of the Performance Period, certificates representing the
Performance Shares that the Participant is entitled to receive shall be registered in the
Participant’s name and be delivered to the Participant (or an appropriate book entry shall be
made), 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. Fractional shares will be issued where necessary. Upon issuance, Performance
Shares will be fully vested and transferable, except to the extent that their transfer is
restricted by Applicable Law.

          (e) If this Performance Share Award is intended to satisfy the requirements of Section 162(m)
of the Internal Revenue Code of 1986, as amended (the “Code”), then prior to the issuance of the
Performance Shares, the Compensation Committee of the Board shall certify in writing that the
performance goals and any other material terms of the Award were in fact satisfied.

     3. No Rights as a Stockholder.

     Except as otherwise provided in this Agreement or the Plan, until the issuance of Performance
Shares to him, the Participant shall have, with respect to the Performance Shares, none of the
rights of a stockholder of the Company, including the right to vote the Performance Shares 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 number of Performance Shares to which the Participant is entitled
pursuant to this Agreement shall be adjusted in the same manner as other outstanding Shares of the
Company.

     5. Validity of Share Issuance.

     The Performance Shares have been duly authorized by all necessary corporate action of the
Company and when issued will be 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
Performance Shares, 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 Performance
Shares 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 therewith, 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 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.

          (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 Performance Share 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 Performance Share Awards in particular.
The Board has the right to interpret, construe and administer the Plan, this Agreement and the
Performance Share Award made pursuant hereto. All acts, determinations and decisions of the Board
(including its Compensation Committee) 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 and the
calculation of the Average ROE, Average ROS and the number of Performance Shares that the
Participant is entitled to receive pursuant to this Agreement, 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 Performance Shares 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.

     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 Performance Share 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
Performance Share Award made pursuant hereto otherwise with the written consent of the Participant.

     14. Securities Act.

          (a) The issuance and delivery of the Performance Share Award 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 November 28, 2005, relating to the
Performance Share Award.

          (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 Performance Shares 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 Performance Share 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

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