Document:

exv10w9

 

Exhibit 10.9

NISOURCE INC.

NONEMPLOYEE DIRECTOR

STOCK INCENTIVE PLAN

(As Amended and Restated Effective January 1, 2005)

 

 

NISOURCE INC.

NONEMPLOYEE DIRECTOR

STOCK INCENTIVE PLAN

(As Amended and Restated Effective January 1, 2005)

TABLE OF CONTENTS

	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	Page	 
	 
	 	 	 	 	 	 	 	 	 	 
	ARTICLE I	 	ESTABLISHMENT, PURPOSE, AND DURATION	 	 	2	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	1.1	 	Establishment of the Plan	 	 	2	 
	 	 	1.2	 	Purpose of the Plan	 	 	2	 
	 	 	1.3	 	Duration of the Plan	 	 	2	 
	 
	 	 	 	 	 	 	 	 	 	 
	ARTICLE II	 	DEFINITIONS	 	 	3	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	2.1	 	Award	 	 	3	 
	 	 	2.2	 	Award Agreement	 	 	3	 
	 	 	2.3	 	Board or Board of Directors	 	 	3	 
	 	 	2.4	 	Change in Control	 	 	3	 
	 	 	2.5	 	Code	 	 	5	 
	 	 	2.6	 	Company	 	 	5	 
	 	 	2.7	 	Committee	 	 	5	 
	 	 	2.8	 	Director	 	 	5	 
	 	 	2.9	 	Disability	 	 	5	 
	 	 	2.10	 	Employee	 	 	6	 
	 	 	2.11	 	Fair Market Value	 	 	6	 
	 	 	2.12	 	Nonemployee Director	 	 	6	 
	 	 	2.13	 	Nonqualified Stock Option or NQSO	 	 	6	 
	 	 	2.14	 	Option	 	 	6	 
	 	 	2.15	 	Participant	 	 	6	 
	 	 	2.16	 	Period of Restriction	 	 	6	 
	 	 	2.17	 	Restricted Stock	 	 	6	 
	 	 	2.18	 	Restricted Stock Unit	 	 	6	 
	 	 	2.19	 	Shares	 	 	6	 
	 
	 	 	 	 	 	 	 	 	 	 
	ARTICLE III	 	ADMINISTRATION	 	 	7	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	3.1	 	Committee	 	 	7	 
	 	 	3.2	 	Administration by the Committee	 	 	7	 
	 	 	3.3	 	Decisions Binding	 	 	7	 
	 
	 	 	 	 	 	 	 	 	 	 
	ARTICLE IV	 	SHARES AND RESTRICTED STOCK UNITS SUBJECT TO THE PLAN	 	 	7	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	4.1	 	Number of Shares and Restricted Stock Units	 	 	7	 
	 	 	4.2	 	Lapsed Awards	 	 	8	 
	 	 	4.3	 	Adjustments in Authorized Shares and Restricted Stock Units	 	 	8	 
	 
	 	 	 	 	 	 	 	 	 	 
	ARTICLE V	 	ELIGIBILITY AND PARTICIPATION	 	 	9	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	5.1	 	Eligibility	 	 	9	 
	 	 	5.2	 	Actual Participation	 	 	9	 

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TABLE OF CONTENTS

(continued)

	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	Page	 
	 
	 	 	 	 	 	 	 	 	 	 
	ARTICLE VI	 	GRANTS OF RESTRICTED STOCK AND RESTRICTED STOCK UNITS	 	 	9	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	6.1	 	Initial Grant	 	 	9	 
	 	 	6.2	 	Special Grant of Restricted Stock Units	 	 	9	 
	 	 	6.3	 	Grants Prior to January 1, 2004	 	 	10	 
	 	 	6.4	 	Future Grants On and After January 1, 2004	 	 	10	 
	 	 	6.5	 	Award Agreements	 	 	11	 
	 	 	6.6	 	Other Restrictions	 	 	11	 
	 	 	6.7	 	Certificate Legend	 	 	12	 
	 	 	6.8	 	Restricted Stock Unit Account	 	 	12	 
	 	 	6.9	 	Vesting and Transferability	 	 	12	 
	 	 	6.10	 	Voting and Stock Ownership Rights	 	 	13	 
	 	 	6.11	 	Dividends and Other Distributions	 	 	14	 
	 	 	6.12	 	Payment of Restricted Stock Units	 	 	14	 
	 
	 	 	 	 	 	 	 	 	 	 
	ARTICLE VII	 	NONQUALIFIED STOCK OPTIONS	 	 	15	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	7.1	 	Potential Grants of Options	 	 	15	 
	 	 	7.2	 	Option Award Agreement	 	 	15	 
	 	 	7.3	 	Option Price	 	 	15	 
	 	 	7.4	 	Duration of Options	 	 	16	 
	 	 	7.5	 	Vesting of Shares Subject to Option	 	 	16	 
	 	 	7.6	 	Payment	 	 	16	 
	 	 	7.7	 	Restrictions on Share Transferability	 	 	17	 
	 
	 	 	 	 	 	 	 	 	 	 
	ARTICLE VIII	 	CHANGE IN CONTROL	 	 	17	 
	 
	 	 	 	 	 	 	 	 	 	 
	ARTICLE IX	 	AMENDMENT, MODIFICATION AND TERMINATION	 	 	18	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	9.1	 	Amendment, Modification and Termination	 	 	18	 
	 	 	9.2	 	Awards Previously Granted	 	 	18	 
	 
	 	 	 	 	 	 	 	 	 	 
	ARTICLE X	 	GENERAL PROVISIONS	 	 	18	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	10.1	 	Additional Awards	 	 	18	 
	 	 	10.2	 	Gender and Number	 	 	19	 
	 	 	10.3	 	Severability	 	 	19	 
	 	 	10.4	 	Indemnification	 	 	19	 
	 	 	10.5	 	Beneficiary Designation	 	 	20	 
	 	 	10.6	 	Termination of Directorship	 	 	20	 
	 	 	10.7	 	Nontransferability of Options	 	 	21	 
	 	 	10.8	 	No Right of Nomination	 	 	23	 
	 	 	10.9	 	Shares Available	 	 	23	 
	 	 	10.10	 	Additional Compensation	 	 	23	 
	 	 	10.11	 	Successors	 	 	23	 
	 	 	10.12	 	Requirements of Law	 	 	23	 
	 	 	10.13	 	Governing Law	 	 	23	 

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NISOURCE INC.

NONEMPLOYEE DIRECTOR

STOCK INCENTIVE PLAN

(As Amended and Restated Effective January 1, 2005)

     WHEREAS, NiSource Inc. (the “Company”) adopted the NiSource Inc. Nonemployee Director Stock
Incentive Plan (formerly the NIPSCO Industries, Inc. Nonemployee Director Stock Incentive Plan),
effective February 1, 1992, as last amended effective December 16, 1997 and February 1, 1998
(“Plan”); and

     WHEREAS, the Company adopted the NiSource Inc. Nonemployee Director Restricted Stock Unit Plan
(formerly the NIPSCO Industries, Inc. Nonemployee Director Restricted Stock Unit Plan) effective
January 1, 1999 (“Stock Unit Plan”); and

     WHEREAS, pursuant to Section 9.1 of the Plan and Section 14 of the Stock Unit Plan, the
Company amended the Plan and the Stock Unit Plan in certain respects, and merged the Stock Unit
Plan into the Plan and restated the merged Plan in a single document, effective July 1, 2002; and

     WHEREAS, the Plan was amended and restated to reflect changes in the structure of nonemployee
director compensation, effective January 1, 2004; and

     WHEREAS, pursuant to Section 9.1 of the Plan, the Company wishes to further amend and restate
the Plan to comply with Internal Revenue Code Section 409A, and guidance and regulations
thereunder, with respect to Awards granted and/or vested under the Plan from and after January 1,
2005.

     NOW THEREFORE, the Plan is hereby amended and restated, effective January 1, 2005, as follows:

 

 

ARTICLE I

ESTABLISHMENT, PURPOSE, AND DURATION

     1.1 Establishment of the Plan. NiSource Inc. established an incentive compensation
plan known as the “NiSource Inc. Nonemployee Director Stock Incentive Plan,” as set forth in this
document. The Plan permits the grant of Restricted Stock, Nonqualified Stock Options and
Restricted Stock Units to Nonemployee Directors, subject to the terms and provisions set forth
herein.

     Awards granted and/or vested under the Plan from and after January 1, 2005 shall be
administered in compliance with Code Section 409A, and guidance and regulations thereunder. Awards
under the Plan granted, vested and freely transferable prior to January 1, 2005 shall be
administered in accordance with the Plan as then in effect and without regard to Code Section 409A,
and guidance and regulations thereunder.

     1.2 Purpose of the Plan. The purpose of the Plan is to promote the achievement of
long-term objectives of the Company by linking the personal interests of Nonemployee Directors to
those of Company shareholders, enhancing the interest of Nonemployee Directors in the growth and
success of the Company, and attracting and retaining Nonemployee Directors of outstanding
competence.

     1.3 Duration of the Plan. The Plan, as amended and restated herein, is effective
January 1, 2005 and shall remain in effect, subject to the right of the Committee to terminate the
Plan at any time pursuant to Article IX herein, until all Shares subject to it shall have been
purchased or acquired according to the Plan’s provisions. However, in no event may an Award be
granted under the Plan on or after June 30, 2012.

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ARTICLE II

DEFINITIONS

     Whenever used in the Plan, the following terms shall have the meanings set forth below and,
when the meaning is intended, the initial letter of the word is capitalized:

     2.1 Award. “Award” means, individually or collectively, a grant of Restricted Stock,
Nonqualified Stock Options or Restricted Stock Units under the Plan.

     2.2 Award Agreement. “Award Agreement” means an agreement entered into by and between
the Company and a Nonemployee Director, setting forth the terms and provisions applicable to an
Award granted under the Plan.

     2.3 Board or Board of Directors. “Board” or “Board of Directors” means the Board of
Directors of the Company, and includes any committee of the Board of Directors designated by the
Board to administer part or all of the Plan.

     2.4 Change in Control. “Change in Control” means the occurrence of either a “Change
in Ownership,” “Change in Effective Control” or a “Change of Ownership of a Substantial Portion of
Assets,” as defined below:

     (a) Change in Ownership. A Change in Ownership of the Company occurs on the
date that any one person, or more than one Person Acting as a Group (as defined below),
acquires ownership of stock of the Company that, together with stock held by such person or
group, constitutes more than 50% of the total fair market value or total voting power of the
stock of the Company. However, if any one person or more than one Person Acting as a Group,
is considered to own more than 50% of the total fair market value or total voting power of
the stock of the Company, the acquisition of additional stock by the same person or persons
is not considered to cause a Change in Ownership of the Company (or to cause a Change in
Effective Control of the Company). An increase in the percentage of stock owned by any one
person, or Persons Acting as a Group, as a result of a transaction in which the Company
acquires its stock in exchange for property will be treated as an acquisition of stock. This
subsection (a) applies only when there is a transfer of stock of the Company (or issuance of
stock of the Company) and stock in the Company remains outstanding after the transaction.

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     (b) Change in Effective Control. A Change in Effective Control of the Company
occurs on the date that either —

     (i) any one person, or more than one Person Acting as a Group, acquires (or has
acquired during the 12-month period ending on the date of the most recent
acquisition by such person or persons) ownership of stock of the Company possessing
35% or more of the total voting power of the stock of the Company; or

     (ii) a majority of members of the Board is replaced during any 12-month period
by directors whose appointment or election is not endorsed by a majority of the
members of the Board prior to the date of the appointment or election.

In the absence of an event described in paragraph (i) or (ii), a Change in Effective Control
of the Company shall not have occurred.

Acquisition of additional control. If any one person, or more than one Person
Acting as a Group, is considered to effectively control the Company, the acquisition of
additional control of the Company by the same person or persons is not considered to cause a
Change in Effective Control of the Company (or to cause a Change in Ownership of the
Company).

     (c) Change of Ownership of a Substantial Portion of Assets. A Change of
Ownership of a Substantial Portion of Assets occurs on the date that any one person, or more
than one Person Acting as a Group, acquires (or has acquired during the 12-month period
ending on the date of the most recent acquisition by such person or persons) assets from the
Company that have a total gross fair market value equal to or more than 40% of the total
gross fair market value of all of the assets of the Company immediately prior to such
acquisition or acquisitions. For this purpose, gross fair market value means the value of
the assets of the Company, or the value of the assets being disposed of, determined without
regard to any liabilities associated with such assets.

Transfers to a related person. There is no Change in Control when there is a
transfer to an entity that is controlled by the shareholders of the Company immediately
after the transfer. A transfer of assets by the Company is not treated as a Change of
Ownership of a Substantial Portion of Assets if the assets are
transferred to —

     (i) a shareholder of the Company (immediately before the asset transfer) in
exchange for or with respect to its stock;

     (ii) an entity, 50% or more of the total value or voting power of which is
owned, directly or indirectly, by the Company;

     (iii) a person, or more than one Person Acting as a Group, that owns, directly
or indirectly, 50% or more of the total value or voting power of all the outstanding
stock of the Company; or

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     (iv) an entity, at least 50% of the total value or voting power of which is
owned, directly or indirectly, by a person described in paragraph (iii) next above.

A person’s status is determined immediately after the transfer of assets. For example, a
transfer to a corporation in which the Company has no ownership interest before the
transaction, but which is a majority-owned subsidiary of the Company after the transaction
is not treated as a Change of Ownership of a Substantial Portion of Assets of the Company.

     (d) Persons Acting as a Group. Persons shall not be considered to be acting as
a group solely because they purchase or own stock of the same corporation at the same time
or as a result of the same public offering. However, persons will be considered to be acting
as a group if they are owners of a corporation that enters into a merger, consolidation,
purchase or acquisition of stock, or similar business transaction with the Company. If a
person, including an entity, owns stock in both corporations that enter into a merger,
consolidation, purchase or acquisition of stock, or similar transaction, such shareholder is
considered to be acting as a group with other shareholders in a corporation prior to the
transaction giving rise to the change and not with respect to the ownership interest in the
other corporation.

     2.5 Code. “Code” means the Internal Revenue Code of 1986, as amended from time to
time.

     2.6 Company. “Company” means NiSource Inc., a Delaware corporation, or any successor
thereto as provided in Section 10.11 herein.

     2.7 Committee. “Committee” means the Corporate Governance Committee of the Board.

     2.8 Director. “Director” means any individual who is a member of the Board of
Directors of the Company.

     2.9 Disability. “Disability” means a condition that (a) causes a Director to be
unable to engage in any substantial gainful activity by reason of any medically determinable
physical or mental impairment that can be expected to result in death or can be expected to last
for a continuous period of not less than twelve months or (b) causes a Director to be eligible to
receive Social Security disability payments.

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     2.10 Employee. “Employee” means any full-time, nonunion, salaried employee of the
Company. For purposes of the Plan, an individual whose only employment relationship with the
Company is as a Director shall not be deemed to be an Employee.

     2.11 Fair Market Value. “Fair Market Value” means the average of the high and low
prices on the New York Stock Exchange Composite Transactions on the date of the grant, or on any
other applicable date.

     2.12 Nonemployee Director. “Nonemployee Director” means a Director who is not
currently employed by the Company or any subsidiary of the Company.

     2.13 Nonqualified Stock Option or NQSO. “Nonqualified Stock Option” or “NQSO” means
an option to purchase Shares, granted under Article VII herein that does not constitute an
Incentive Stock Option under Code Section 422 (or any successor Code Section).

     2.14 Option. “Option” means a Nonqualified Stock Option granted under the Plan.

     2.15 Participant. “Participant” means a Nonemployee Director of the Company who has a
viable outstanding Award granted under the Plan.

     2.16 Period of Restriction. “Period of Restriction” means the period during which the
transfer of Shares of Restricted Stock is limited in some way, and the Shares are subject to a
substantial risk of forfeiture, as provided in Article VI herein.

     2.17 Restricted Stock. “Restricted Stock” means an Award granted to a Nonemployee
Director pursuant to Article VI herein.

     2.18 Restricted Stock Unit. “Restricted Stock Unit” means an Award granted to a
Nonemployee Director pursuant to Article VI herein.

     2.19 Shares. “Shares” means the common shares, $0.01 par value per share, of NiSource
Inc.

6

 

ARTICLE III

ADMINISTRATION

     3.1 Committee. The Plan shall be administered by the Committee, subject to the
restrictions set forth in the Plan.

     3.2 Administration by the Committee. The Committee shall have the full power,
discretion and authority to interpret and administer the Plan in a manner that is consistent with
the Plan’s provisions. However, except as otherwise set forth in Section 10.1, in no event shall
the Committee have the power to determine Plan eligibility, or to determine the number, the value,
the vesting period, or the timing of Awards to be made under the Plan (all such determinations are
automatic pursuant to the provisions of the Plan). Notwithstanding the preceding sentence, the
Committee shall have the authority to designate whether an upcoming grant of Awards shall consist
of Restricted Stock, Nonqualified Stock Options or Restricted Stock Units.

     3.3 Decisions Binding. All determinations and decisions made by the Committee
pursuant to the provisions of the Plan, and all related orders or resolutions of the Committee,
shall be final, conclusive and binding on all persons, including the Company, its stockholders,
employees, Participants, and their estates and beneficiaries.

ARTICLE IV

SHARES AND RESTRICTED STOCK UNITS SUBJECT TO THE PLAN

     4.1 Number of Shares and Restricted Stock Units. Subject to adjustment as provided in
Section 4.3 herein, the total number of Shares available for grant as Awards under the Plan may not
exceed an aggregate of 500,000.

7

 

     4.2 Lapsed Awards. If any Share of Restricted Stock, Option, or Restricted Stock Unit
granted under the Plan terminates, expires or lapses for any reason, any such Share of Restricted
Stock, any Share subject to purchase pursuant to such Option and any such Restricted Stock Unit
again shall be available for grant under the Plan. Awards shall be subject to such terms and
conditions, in addition to the terms and conditions set forth in the Plan, as the Committee shall
determine.

     4.3 Adjustments in Authorized Shares and Restricted Stock Units.

     (a) Appropriate adjustments in the aggregate number of Shares and Restricted Stock
Units issuable pursuant to the Plan, the number of Shares and Restricted Stock Units subject
to each outstanding Award granted under the Plan and the Option price with respect to
Options, shall be made to give effect to any increase or decrease in the number of issued
Shares resulting from a subdivision or consolidation of shares, whether through
recapitalization, stock split, reverse stock split, spin-off, spinout or other distribution
of assets to stockholders, stock distributions or combinations of shares, payment of stock
dividends, other increase or decrease in the number of such Shares outstanding effected
without receipt of consideration by the Company, or any other occurrence for which the
Committee determines an adjustment is appropriate.

     (b) In the event of any merger, consolidation or reorganization of the Company with any
other corporation or corporations, or an acquisition by the Company of the stock or assets
of any other corporation or corporations, there shall be substituted on an equitable basis,
as determined by the Committee in its sole discretion, for each Share then subject to the
Plan, and for each Share then subject to an Award granted under the Plan, the number and
kind of shares of stock, other securities, cash or other property to which the holders of
Shares of the Company are entitled pursuant to such transaction.

     (c) Without limiting the generality of the foregoing provisions of this section, any
such adjustment shall be deemed to have prevented any dilution or enlargement of a
Participant’s rights, if such Participant receives in any such adjustment rights that are
substantially similar (after taking into account the fact that the Participant has not paid
the applicable Option price) to the rights the Participant would have received had he or she
exercised his or her outstanding Award and become a shareholder of the Company immediately
prior to the event giving rise to such adjustment. Adjustments under this Section 4.3 shall
be made by the Committee, whose decision as to the amount and timing of any such adjustment
shall be conclusive and binding on all persons.

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ARTICLE V

ELIGIBILITY AND PARTICIPATION

     5.1 Eligibility. Persons eligible to participate in the Plan are limited to
Nonemployee Directors who are serving on the Board on the date of each grant under the Plan.

     5.2 Actual Participation. All eligible Nonemployee Directors shall receive grants of
Restricted Stock, Options and Restricted Stock Units pursuant to the terms and provisions set forth
in Articles VI and VII herein.

ARTICLE VI

GRANTS OF RESTRICTED STOCK AND RESTRICTED STOCK UNITS

     6.1 Initial Grant. Each person who was a Nonemployee Director on February 1, 1992 was
then granted 250 Shares of Restricted Stock for each year of service as a Nonemployee Director of
the Company or its predecessor (the number of years of service was determined as of the date of the
first annual meeting of shareholders of the Company following February 1, 1992).

          Each person who was a Nonemployee Director on April 14, 1999 was then granted 500 Restricted
Stock Units.

     6.2 Special Grant of Restricted Stock Units. Each Nonemployee Director participating
in the NiSource Inc. Nonemployee Director Retirement Plan (the “Retirement Plan”) on December 31,
2001 made an irrevocable election, by written instrument delivered to the Committee between May 1,
2002 and June 30, 2002, to: (i) continue his or her participation in the Retirement Plan on and
after July 1, 2002 or (ii) terminate his or her participation in the Retirement Plan as of June 30,
2002 and have the present value of his or her retirement benefit under Article V of the Retirement
Plan, determined as of June 30, 2002, converted to Restricted Stock Units of comparable value and
granted to him or her under the Plan on July 1, 2002. Any

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Restricted Stock Units granted to a Nonemployee Director pursuant to this Section 6.2 who had
fewer than five Years of Service on June 30, 2002 shall fully vest upon the completion of such
Nonemployee Director’s fifth Year of Service. “Year of Service” means the 12-month period
commencing with the first day of the calendar month in which each annual meeting of the
shareholders of the Company takes place, and throughout which a Nonemployee Director served on the
Board as a Nonemployee Director.

     6.3 Grants Prior to January 1, 2004. Upon each election, reelection or appointment,
as applicable, of a Nonemployee Director to serve on the Board, on and after July 1, 2002 and prior
to January 1, 2004, such Nonemployee Director was granted 2,600 Shares of Restricted Stock and 600
Restricted Stock Units, subject to the terms of the Plan. Each such grant was made as of the first
day of the Board term of the newly-elected, reelected or appointed, as applicable, Nonemployee
Director, which began immediately following such election, reelection or appointment, as
applicable.

     6.4 Future Grants On and After January 1, 2004.

     (a) Each Nonemployee Director shall receive a portion of his or her annual retainer
equal to $20,000 in the form of an Award granted in four equal installments on the last
business day of each calendar quarter, commencing on March 31, 2004. Such Award shall be a
grant of Restricted Stock or Restricted Stock Units, or a combination thereof, as determined
by the Committee in its sole discretion. The number of Shares of Restricted Stock or
Restricted Stock Units, as applicable, constituting such quarterly grant shall be determined
by dividing $5,000 by the Fair Market Value of Shares on the last business day of the
relevant quarter.

     (b) Each Nonemployee Director elected, reelected or appointed on the date of an Annual
Meeting of Shareholders shall receive an additional Award equal to $30,000 for each full
Year in the term for which he or she is elected, reelected or appointed, granted upon the
date of such election, reelection or appointment, as applicable, of such Nonemployee
Director to serve on the Board, on and after May 11, 2004. Such additional Award shall be a
grant of Restricted Stock or Restricted Stock Units, or a combination thereof, as determined
by the Committee in its sole discretion. The number of Shares of Restricted Stock or
Restricted Stock Units, as applicable, constituting such

10

 

grant shall be determined by dividing the total value of the grant under this
subsection (b) by the Fair Market Value of Shares on the date of the Annual Meeting of
Shareholders coincident with such election, reelection or appointment, or if the Annual
Meeting of Shareholders is not held on a business day, the first business day preceding the
date of such Meeting.

     (c) Each Nonemployee Director elected or appointed on a date other than the date of an
Annual Meeting of Shareholders shall receive an additional Award equal to $30,000 for each
full Year in the term for which he or she is elected or appointed, granted upon the date of
such election or appointment, as applicable, of such Nonemployee Director to serve on the
Board, on and after May 11, 2004; such Nonemployee Director shall receive an additional
Award with respect to any fractional Year in the term for which he or she is elected or
appointed equal to $2,500 for each full month of the term from the date of election or
appointment to the date of the first Annual Meeting of Shareholders next following such
election or appointment, granted upon the date of such election or appointment, as
applicable, of such Nonemployee Director to serve on the Board, on and after May 11, 2004.
Such additional Award shall be a grant of Restricted Stock or Restricted Stock Units, or a
combination thereof, as determined by the Committee in its sole discretion. The number of
Shares of Restricted Stock or Restricted Stock Units, as applicable, constituting such grant
shall be determined by dividing the total value of the grant under this subsection (c) by
the Fair Market Value of Shares on the date of the election or appointment of such
Nonemployee Director, or if the election or appointment does not occur on a business day,
the first business day preceding such election or appointment.

     (d) For purposes of subsections (b) and (c), Year shall mean each period commencing on
the date of an Annual Meeting of Shareholders and ending on the date of the next Annual
Meeting of Shareholders.

     6.5 Award Agreements.

     (a) Each Restricted Stock grant under the Plan shall be evidenced by a Restricted Stock
Award Agreement that shall specify the Period(s) of Restriction, the number of Restricted
Stock Shares granted and such other provisions as the Committee shall determine consistent
with the Plan.

     (b) Each Restricted Stock Unit grant under the Plan may, in the Committee’s sole
discretion, be evidenced by a Restricted Stock Unit Award Agreement that shall specify the
vesting period of Restricted Stock Units, the number of Restricted Stock Units granted and
such other provisions as the Committee shall determine consistent with the Plan.

     6.6 Other Restrictions. The Committee shall impose such other restrictions on any
Shares of Restricted Stock granted pursuant to the Plan as it may deem advisable, including

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restrictions imposed under Section 7.7 hereof. Any restriction imposed on Shares of
Restricted Stock shall be included in a legend appearing on the certificates representing Shares of
Restricted Stock.

     6.7 Certificate Legend. In addition to any legends placed on certificates pursuant to
Section 6.6 herein, each certificate representing Shares of Restricted Stock granted pursuant to
the Plan shall bear the following legend:

“The sale or other transfer of the Shares of stock represented by this certificate,
whether voluntary, involuntary or by operation of law, is subject to certain
restrictions on transfer as set forth in the NiSource Inc. Nonemployee Director
Stock Incentive Plan, and in a Restricted Stock Award Agreement. A copy of the Plan
and such Restricted Stock Award Agreement may be obtained from the Secretary of
NiSource Inc.”

     6.8 Restricted Stock Unit Account. Restricted Stock Units granted to a Nonemployee
Director under the Plan shall be credited to a Restricted Stock Unit Account (the “Account”)
established and maintained for such Nonemployee Director. The Account of a Nonemployee Director
shall be the record of Restricted Stock Units granted to him or her under the Plan. The Account is
solely for accounting purposes and shall not require a segregation of any assets of the Company.
Each Restricted Stock Unit shall be valued by the Committee, in the manner provided in Section
6.12, as of the date of payment thereof. Each grant of Restricted Stock Units under the Plan to a
Nonemployee Director and the value of such Restricted Stock Units as of the date of grant shall be
communicated by the Committee in writing to the Nonemployee Director within 30 days after the date
of grant.

     6.9 Vesting and Transferability. Except as otherwise provided in the Plan, all
Restricted Stock Units granted under the Plan shall vest, and in the case of Restricted Stock shall
become freely transferable, by the Participant according to the following schedule:

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	 	 	Annual	 	Cumulative
	 	 	Percentage of Units or	 	Percentage of Units or
	Anniversary	 	Shares Which Vest or	 	Shares Which are Vested or
	of Grant Date	 	Become Freely Transferable	 	Became Freely Transferable
	1
	 	 	20	%	 	 	20	%
	2
	 	 	20	%	 	 	40	%
	3
	 	 	20	%	 	 	60	%
	4
	 	 	20	%	 	 	80	%
	5
	 	 	20	%	 	 	100	%

          Regardless of the schedule set forth above, all Shares of Restricted Stock and Restricted
Stock Units held by a Participant or credited to a Participant’s Account, as applicable, shall
immediately become 100% freely transferable or vested, as applicable, upon the first to occur of
the following:

     (a) The completion of the schedule set forth above (or in Section 6.2, if applicable);

     (b) The death of the Participant;

     (c) The Disability of the Participant;

     (d) The retirement of the Participant from service on the Board prior to death or
Disability and after attaining the age of 70 years; or

     (e) The effective date of a Change in Control of the Company.

          However, in no event may any Shares of Restricted Stock granted under the Plan become freely
transferable by a Participant prior to six months following the date of its grant. Upon becoming
freely transferable, each Participant shall be entitled to have the legend required by Section 6.6
and/or Section 6.7 removed from his or her Share certificates.

     6.10 Voting and Stock Ownership Rights.

     (a) During the Period of Restriction, except as set forth in the applicable Restricted
Stock Award Agreement, a Participant holding Shares of Restricted Stock

13

 

granted hereunder may exercise full voting and other stock ownership rights with
respect to such Shares.

     (b) Except as set forth in Section 6.11(b), no Participant shall be entitled to any
voting or other stock ownership rights with respect to Shares attributable to Restricted
Stock Units granted under the Plan.

     6.11 Dividends and Other Distributions.

     (a) During the Period of Restriction, Participants holding Shares of Restricted Stock
granted hereunder shall be entitled to receive all dividends and other distributions paid
with respect to such Shares while they are so held. Any such dividends or distributions
shall be fully vested and shall be paid to Participants on the date such dividends are
actually paid to shareholders of the Company.

     (b) Additional Restricted Stock Units shall be credited to each Participant’s Account
with respect to Restricted Stock Units included in such Account from time to time, to
reflect dividends paid to stockholders of the Company with respect to Shares. The
additional Restricted Stock Units credited before January 1, 2004 shall be granted at such
time or times and shall be subject to such terms and conditions, in addition to the terms
and conditions set forth in the Plan, as the Committee shall determine. The additional
Restricted Stock Units credited on or after January 1, 2004 shall be fully vested and
granted on the date such dividends are actually paid to shareholders of the Company.

     6.12 Payment of Restricted Stock Units.

     (a) Except as provided in paragraph (b) or (c) below, upon a Participant’s separation
from service on the Board for any reason other than for Cause (as defined in Section 10.6),
the Participant shall be entitled to receive from the Company, with respect to each then
vested Restricted Stock Unit in the Participant’s Account, a number of Shares with an
aggregate Fair Market Value on the date of payment equal to the aggregate Fair Market Value
of such vested Restricted Stock Units. Payment to a Participant for Restricted Stock Units
shall be made in Shares in a single payment within 60 days after the date of the
Participant’s separation from service on the Board.

     (b) Restricted Stock Units in the Participant’s Account granted pursuant to Section
6.2, and additional Restricted Stock Units with respect thereto credited pursuant to Section
6.11(b), shall be paid to the Participant in a single payment within six months after the
date of the Participant’s separation from service on the Board. Payment to a Participant
for such Restricted Stock Units shall be made in the form of a number of Shares with an
aggregate Fair Market Value on the date of payment equal to the aggregate Fair Market Value
of such vested Restricted Stock Units in the Participant’s Account on the date of payment.

14

 

     (c) With respect to Restricted Stock Units granted pursuant to Section 6.4, and
additional Restricted Stock Units with respect thereto credited pursuant to Section 6.11(b),
on or after January 1, 2004, upon a Participant’s separation from service on the Board for
any reason other than for Cause (as defined in Section 10.6), the Participant shall be
entitled to receive from the Company, with respect to such then vested Restricted Stock
Units in the Participant’s Account, a number of Shares with an aggregate Fair Market Value
on the date of payment equal to the aggregate Fair Market Value of such vested Restricted
Stock Units. Payment to a Participant for Restricted Stock Units shall be made in Shares in
a single payment six months after the date of the Participant’s separation from service on
the Board, or as soon as administratively practicable thereafter.

     (d) A Participant shall be credited with additional Restricted Stock Units pursuant to
Section 6.11(b) on the value of his or her Restricted Stock Units with respect to the period
between his or her separation from service on the Board and the receipt of payment under the
Plan.

ARTICLE VII

NONQUALIFIED STOCK OPTIONS

     7.1 Potential Grants of Options. In the event that the Committee properly designates
(pursuant to Section 3.2 herein) that a scheduled Award under Section 6.4 shall consist of Options
rather than Restricted Stock or Restricted Stock Units, then each eligible Nonemployee Director
shall be granted an Option to purchase a number of Shares so that the Option shall have a value, as
determined by the Committee in its sole discretion, equal to the value of the Restricted Stock or
Restricted Stock Units that would otherwise have been awarded, subject to the terms and provisions
of the Plan.

     7.2 Option Award Agreement. Each Option grant shall be evidenced by an Option Award
Agreement that shall specify the Option Price, the duration of the Option, the number of Shares
available for purchase under the Option, and such other provisions as the Committee shall
determine.

     7.3 Option Price. The purchase price per Share available for purchase under an Option
shall equal the Fair Market Value of a Share on the date the Option is granted.

15

 

     7.4 Duration of Options. Each Option shall expire on the tenth anniversary of its
grant date.

     7.5 Vesting of Shares Subject to Option. Subject to Section 10.6, Participants shall
be entitled to exercise Options at any time and from time to time, but no sooner than the time
period beginning six months after the grant of the Option and ending ten years after the grant of
the Option, and according to the following vesting schedule:

	 	 	 	 	 	 	 	 	 
	 	 	Annual	 	Cumulative
	Anniversary	 	Percentage of	 	Percentage of
	of Grant Date	 	Options Which Vest	 	Options Which are Vested
	1
	 	 	20	%	 	 	20	%
	2
	 	 	20	%	 	 	40	%
	3
	 	 	20	%	 	 	60	%
	4
	 	 	20	%	 	 	80	%
	5
	 	 	20	%	 	 	100	%

Regardless of the vesting schedule set forth above, all Options held by a Participant shall
immediately become 100% vested upon the first to occur of the following:

     (a) the completion of the vesting schedule set forth above;

     (b) the death of the Participant;

     (c) the Disability of the Participant;

     (d) the retirement of the Participant from service on the Board prior to death or
Disability and after attaining the age of 70 years; or

     (e) the effective date of a Change in Control of the Company.

     7.6 Payment. Options shall be exercised by the delivery of a written notice of
exercise to the Secretary of the Company, setting forth the number of Shares with respect to which
the Option is to be exercised, accompanied by full payment for the Shares.

16

 

          The Option Price upon exercise of any Option shall be payable to the Company in full either:
(i) in cash or its equivalent, or (ii) by tendering previously acquired Shares having a Fair Market
Value at the time of exercise equal to the total Option Price of the Shares for which the Option is
being exercised (provided that the Shares tendered upon Option exercise have been held by the
Participant for at least six months prior to their tender to satisfy the Option Price), or (iii) by
a combination of (i) and (ii). The proceeds from such a payment shall be added to the general
funds of the Company and shall be used for general corporate purposes.

          As soon as practicable after receipt of a written notification of exercise and full payment,
the Company shall deliver to the Participant, in the Participant’s name, Share certificates in an
appropriate amount based upon the number of Shares purchased pursuant to the exercise of the
Option.

     7.7 Restrictions on Share Transferability. The Committee shall impose such
restrictions on any Shares acquired pursuant to the exercise of an Option under the Plan as it may
deem advisable, including, without limitation, restrictions under applicable federal securities
laws, under the requirements of any stock exchange or market upon which such Shares are then listed
and/or traded, and under any blue sky or state securities laws applicable to such Shares.

ARTICLE VIII

CHANGE IN CONTROL

     In the event of a Change in Control of the Company, all Awards granted under the Plan that are
still outstanding and not yet vested or freely transferable, shall become immediately 100% vested
and freely transferable for each Participant, as of the effective date of the Change in Control,
and shall remain as such for the remaining life of the Award, as such life is provided herein, and
within the provisions of the related Award Agreements. All Options that are

17

 

outstanding as of the effective date of the Change in Control shall remain exercisable for the
remaining lives of the Options.

ARTICLE IX

AMENDMENT, MODIFICATION AND TERMINATION

     9.1 Amendment, Modification and Termination. Subject to the terms set forth in this
Section 9.1, the Committee may terminate, amend or modify the Plan at any time and from time to
time; provided, however, that the provisions set forth in the Plan regarding the amount of
securities to be awarded to Nonemployee Directors, the price of securities to be awarded to
Nonemployee Directors, and the timing of Awards to Nonemployee Directors, may not be amended more
than once within any six month period.

          Amendment or termination of the Plan may occur without the approval of the shareholders of the
Company (except as may be required by law or by any national securities exchange or system on which
the Shares are then listed or reported, or by a regulatory body having jurisdiction with respect
hereto).

     9.2 Awards Previously Granted. Unless required by law, no termination, amendment or
modification of the Plan shall in any manner adversely affect any Award previously granted under
the Plan without the written consent of the Participant holding the Award.

ARTICLE X

GENERAL PROVISIONS

     10.1 Additional Awards. In addition to any Award received pursuant to Section 6.3,
6.4 or 7.1, each Nonemployee Director who first serves on the Board on or after January 1, 2002,
and each Nonemployee Director who served on the Board on December 31, 2001 and who

18

 

elected to discontinue participation in the NiSource Inc. Nonemployee Director Retirement Plan
on and after July 1, 2002, shall receive a grant of Shares of Restricted Stock upon each election,
reelection or appointment, as applicable, to the Board on or after July 1, 2002. At the discretion
of the Committee, such grant may be in any combination of Shares of Restricted Stock and Restricted
Stock Units, as determined by the Committee. Such Award shall have an aggregate value, as
determined by the Committee, based on information provided by the management of the Company, that
ensures that the Award, together with other compensation paid to the Nonemployee Director for
service on the Board, delivers a compensation package to the Nonemployee Director competitive with
the nonemployee director compensation packages offered by companies in the same or similar
industries as that of the Company.

     10.2 Gender and Number. Except where otherwise indicated by the context, any
masculine term used herein also shall include the feminine, the plural shall include the singular
and the singular shall include the plural.

     10.3 Severability. In the event any provision of the Plan shall be held illegal or
invalid for any reason, the illegality or invalidity shall not affect the remaining parts of the
Plan, and the Plan shall be construed and enforced as if the illegal or invalid provision had not
been included.

     10.4 Indemnification. Each individual who is or was a member of the Committee shall
be indemnified and held harmless by the Company against and from any loss, cost, liability, or
expense that may be imposed upon or reasonably incurred by him or her in connection with or
resulting from any claim, action, suit or proceeding to which he or she may be a party or in which
he or she may be involved by reason of any action taken or failure to act under the Plan and
against and from any and all amounts paid by him or her in settlement thereof, with the

19

 

Company’s approval, or paid by him or her in satisfaction of any judgment in any such action,
suit, or proceeding against him or her, provided he or she shall give the Company an opportunity,
at its own expense, to handle and defend the same before he or she undertakes to handle and defend
it on his or her own behalf.

          The foregoing right of indemnification shall not be exclusive of any other rights of
indemnification to which such individuals may be entitled under the Company’s Articles of
Incorporation or By-laws, as a matter of law, or otherwise, or any power that the Company may have
to indemnify them or hold them harmless.

     10.5 Beneficiary Designation. Each Participant under the Plan may, from time to time,
name any beneficiary or beneficiaries (who may be named contingently or successively) to whom any
benefit under the Plan is to be paid in the event of his or her death (and/or who may exercise the
Participant’s vested Options following his or her death). Each designation shall revoke all prior
designations by the same Participant, shall be in a form prescribed by the Committee, and shall be
effective only when filed by the Participant in writing with the Committee during his or her
lifetime. In the absence of any such designation, benefits remaining unpaid at the Participant’s
death shall be paid to the Participant’s estate (and, subject to the terms and provisions of the
Plan, any unexercised vested Options may be exercised by the administrator or executor of the
Participant’s estate).

     10.6 Termination of Directorship. In the event a Participant ceases to be a Director
for any reason other than death, Disability, retirement from service on the Board after attaining
the age of 70 years, or a Change in Control of the Company, all Shares of Restricted Stock, all
Options and all Restricted Stock Units that have not vested or become freely transferable on or
prior to the date of the occurrence of such event shall terminate and be forfeited and neither the

20

 

Participant nor his or her heirs, personal representatives, successors or assigns shall have
any future rights with respect to any such Shares of Restricted Stock, Options and Restricted Stock
Units. All Options that are vested as of such date shall remain exercisable for six months
following the date the Director’s service on the Board terminates, or until their expiration date,
whichever period is shorter.

     Notwithstanding any other provision of the Plan, in the event a Participant is discharged from
service on the Board for Cause, all rights to any Shares of Restricted Stock that have not become
freely transferable, any vested or unvested Options granted on and after July 1, 2002, and any
vested or unvested Restricted Stock Units shall be discontinued and forfeited, and the Company
shall have no further obligation hereunder to such Participant or any other person. For purposes
of the Plan, “Cause” shall mean:

     (a) the Participant’s conviction of any criminal violation involving dishonesty, fraud
or breach of trust;

     (b) the Participant’s willful engagement in any misconduct in the performance of his or
her duty that materially injures the Company;

     (c) the Participant’s performance of any act which, if known to the customers or
stockholders of the Company, would materially and adversely impact the business of the
Company; or

     (d) the Participant’s willful and substantial nonperformance of assigned duties.

     The Committee shall have sole discretion with respect to the application of the provisions of
subsections (a)-(d) next above, and such exercise of discretion shall be conclusive and binding
upon the Participant and all other persons.

     10.7 Nontransferability of Options. No Share of Restricted Stock (until the end of
the applicable Period of Restriction specified in the Restricted Stock Award Agreement), Option or
Restricted Stock Unit granted under the Plan may be sold, transferred, pledged, assigned, or

21

 

otherwise alienated or hypothecated, other than by will or by the laws of descent and
distribution. In the event of a Participant’s death, payment of any amount due under the Plan
shall be made to the duly appointed and qualified executor or other personal representative of the
Participant’s estate to be distributed in accordance with the Participant’s will or applicable
intestacy law; or in the event that there shall be no such representative duly appointed and
qualified within six months after the date of death of such deceased Participant, then to such
persons as, at the date of his or her death, would be entitled to share in the distribution of such
deceased Participant’s personal estate under the provisions of the applicable statute then in force
governing the descent of intestate property, in the proportions specified in such statute. All
Options granted to a Participant under the Plan shall be exercisable, during his or her lifetime,
only by such Participant.

          Notwithstanding the preceding provisions of this Section, a Participant, at any time prior to
his or her death, may assign all or any portion of an Award granted to him or her under the Plan to
(i) his or her spouse or lineal descendant, (ii) the trustee of a trust for the primary benefit of
his or her spouse or lineal descendant or (iii) a tax-exempt organization as described in Code
Section 501(c)(3). In such event, the spouse, lineal descendant, trustee, or tax-exempt
organization shall be entitled to all of the rights of the Participant with respect to the assigned
portion of such Award, and such portion of the Award shall continue to be subject to all of the
terms, conditions and restrictions applicable to the Award as set forth herein, and in the related
Award Agreement, immediately prior to the effective date of the assignment. Any such assignment
shall be permitted only if (A) the Participant does not receive any consideration therefor, and (B)
the assignment is expressly approved by the Committee or its delegate. Any such assignment shall
be evidenced by an appropriate written document executed by the

22

 

Participant, and a copy thereof shall be delivered to the Committee or its delegate on or
prior to the effective date of the assignment.

     10.8 No Right of Nomination. Nothing in the Plan shall be deemed to create any
obligation on the part of the Board to nominate any Director for reelection by the Company’s
shareholders.

     10.9 Shares Available. The Shares made available pursuant to Awards under the Plan
may be either authorized but unissued Shares or Shares that have been or may be reacquired by the
Company, as determined from time to time by the Committee.

     10.10 Additional Compensation. Awards granted under the Plan shall be in addition to
any additional annual retainer, attendance fees or other compensation payable to each Participant
as a result of his or her service on the Board.

     10.11 Successors. All obligations of the Company under the Plan, with respect to
Awards granted hereunder, shall be binding on any successor to the Company, whether the existence
of such successor is the result of a direct or indirect purchase, merger, consolidation, or
otherwise, of all or substantially all of the business and/or assets of the Company.

     10.12 Requirements of Law. The granting of Awards under the Plan shall be subject to
all applicable laws, rules and regulations, and to such approvals by any governmental agencies or
national securities exchanges as may be required.

     10.13 Governing Law. To the extent not preempted by federal law, the Plan, and all
agreements hereunder, shall be construed in accordance with and governed by the laws of the State
of Indiana.

23

 

     IN WITNESS WHEREOF, the Company has caused the amended and restated Plan to be signed on this
2nd day of December, 2005, effective as of January 1, 2005.

	 	 	 	 	 
	 	NISOURCE INC.

 	 
	 	By:  	/s/
Michael W. O’Donnell	 
	 	 	Michael W. O’Donnell	 
	 	 	 	 
	 

24<PAGE>

                                                                    Exhibit 10.1

                              SANDERSON FARMS, INC.

                       FORM OF RESTRICTED STOCK AGREEMENT

      This RESTRICTED STOCK 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 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 fourth 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 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.

         (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 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

<PAGE>

market value of the Shares as of the Grant Date. For purposes of this Section
1(d), 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 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.

                                                                               2
<PAGE>

      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.

         (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.

                                                                               3
<PAGE>

      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.

      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.

                                                                               4
<PAGE>

      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 November 28, 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.

      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.

                                                                               5
<PAGE>

                                               SANDERSON FARMS, INC.

                                               By: _________________________
                                                       Name:
                                                       Title:

                                                   -------------------------
                                                       Name:

                                                                               6

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