EX-10.2 BONUS AWARD PROGRAM

EX-10.2 5 g87367exv10w2.txt EX-10.2 BONUS AWARD PROGRAM EXHIBIT 10.2 SANDERSON FARMS, INC. BONUS AWARD PROGRAM (ALL SALARIED EMPLOYEES) Effective November 1, 2003 Supercedes November 1, 2002 1 SANDERSON FARMS, INC. Bonus Award Program Effective Nov. 1, 2003 I. PURPOSE The Board of Directors of Sanderson Farms, Inc. has determined that in addition to the Company's existing competitive and equitable total compensation package, it is desirable to maintain a bonus award program for its salaried employees. The purposes for such a program include: A. To encourage excellence and high levels of performance. B. To recognize the contributions of the salaried employees to the overall profitability of the Company. C. To encourage all employees from every division in the Company to cooperate, share information and work together as a team for the overall benefit of the Company and its shareholders. II. PARTICIPATION AND MAXIMUM AWARD The Executive Committee of Sanderson Farms, Inc. will select and recognize personnel eligible to participate in the bonus award program, and reserves the right to review and change the class of eligible employees at any time. Those now designated include: A. Salaried personnel within the corporate structure of Sanderson Farms, Inc., Sanderson Farms, Inc. (Production Division), Sanderson Farms, Inc. (Processing Division) and Sanderson Farms, Inc. (Foods Division). B. All salaried management and accounting trainees within the corporate structure. 2 SANDERSON FARMS, INC. Bonus Award Program III. ELIGIBILITY EMPLOYMENT/PARTICIPATION Except in the case of death, disability or retirement, as set forth below, employees must be employed in a designated position on October 31 of the applicable fiscal year and must have been employed in a designated position for a period of nine months prior to the end of the fiscal year to be eligible to participate in the bonus award program. Base salary for this purpose shall include regular compensation only, and shall not include bonus award payments and any other miscellaneous payments that might be treated as income to the employee. DEATH, DISABILITY AND RETIREMENT If an eligible employee terminates employment with the Company during the fiscal year before October 31 as a result of death, disability or retirement, and had been employed in a designated position for a period of at least nine months, such employee will be eligible to participate in the Bonus Award Program notwithstanding the fact that the employee is not employed on October 31, and the base salary paid to such employee during that portion of the year during which he or she was employed in a designated position will be used to calculate the amount of such employee's bonus award. EXTRAORDINARY CIRCUMSTANCES Extraordinary circumstances will be subject to review by the Executive Committee. 3 SANDERSON FARMS, INC. Bonus Award Program IV. DETERMINATION OF AWARD AND PAYMENT Bonus award programs for many corporations focus in some form or another on the real dollar profits earned by the corporation within a given time frame. This method of determining bonuses to be paid to employees recognizes that bonuses should be paid to employees only after a fair and equitable return has been earned for the shareholders who own the company. With this basic philosophy in mind, the Board has determined that no bonuses will be paid under this program unless net return on average stockholders' equity after consideration is taken for any bonus paid under this program for the year exceeds eight percent (8%). After this minimum threshold is met, the Bonus Award Program will become effective, and bonuses will be paid if the other criteria described in this program are met. In recognition of the fact that one of our primary obligations as employees of this Company is to our shareholders, the Board of Directors has determined that net profits made by the consolidated corporations [Sanderson Farms, Inc., Sanderson Farms, Inc. (Production Division), Sanderson Farms, Inc. (Processing Division) and Sanderson Farms, Inc. (Foods Division)] on a per share basis for the period November 1 through October 31 of each year will be the primary basis for bonus awards. The earnings per share for purposes of computing the bonus awards, as set forth herein, shall be computed net of any bonuses awarded and net of any extraordinary, non recurring income items. For all employees of Sanderson Farms other than certain management level employees, this will be the sole basis for determining bonus awards. The audited annual financial statements, on a consolidated basis, of Sanderson Farms, Inc. will be the measuring tool for the net return to shareholders portion of the bonus award program. The annual bonus award will be paid to participants in the bonus award program after the outside auditors have completed their annual audit of the corporations, which is usually approximately two (2) months after the end of the fiscal year. 4 SANDERSON FARMS, INC. Bonus Award Program V. OBJECTIVES AND FORMULAS FOR DETERMINATION OF THE BONUS AWARD All salaried employees will receive a bonus if the net income per share objectives set forth below are met, and if the minimum return on average stockholders equity for the year is earned. Net income shall be computed net of any bonuses awarded and net of any extraordinary, non recurring income items not related to the fiscal year's operations. The annual audited financial statements, on a consolidated basis, of Sanderson Farms, Inc., will be the measuring tool for this portion of the Bonus Award Program. The annual bonus award will be paid to participants after the outside auditors have completed their annual audit of the consolidated corporation. The earnings per share objectives and the respective percentage of employees' bonus dependent upon EPS earned for the fiscal year (November 1 thru October 31) are as follows:

* Net of bonus and net of extraordinary, non recurring income items not related to the fiscal year's operations. The per share return targets were calculated using 13,292,760 diluted shares. Adjustments to these targets will be made to reflect changes in the number of shares outstanding resulting from any merger, consolidation, reorganization, re-capitalization, re-incorporation, stock-splits, stock dividend, stock repurchase, or other changes in the corporate structure of the Company. Furthermore, the target per share return numbers were calculated based on a target net return on projected sales. The Company reserves the right to adjust these targets in the event of a substantial fluctuation in sales pounds or dollars during the year. 5 The following formula will be utilized to determine the exact dollar amount of a participant's bonus award dependent upon EPS performance. A = Gross Award S = Base Salary (excluding bonus award payments and other items of miscellaneous income) of the Participant during that portion of the year in which he or she was employed in a designated position. P = Percentage of award earned based on above schedule M = Percent of salary eligible to be earned as a bonus based on EPS performance. FORMULA S X P X M = A As with any awards made under this Bonus Award Program, no bonus will be paid unless total net income return (after bonus) on average stockholders' equity for the year exceeds eight percent (8%). Net return on average stockholders' equity will be computed by taking the average of beginning and ending stockholders' equity for the applicable year, and dividing that number into net income for the year. The percent of salary eligible to be earned as a bonus based on EPS performance ("M" in the above formula) for the fiscal year is 25%. 6 SANDERSON FARMS, INC. Bonus Award Program VI. PARAMETERS This bonus award program has been designed to encourage teamwork and cooperation among all of the divisions of Sanderson Farms, and to ensure that Sanderson Farms is consistently among the leaders in profitability in the broiler and prepared foods industry. The program is also designed to pay a bonus to employees only after the Company has returned to its shareholders a fair and equitable return. 1. In the event of extraordinary operating conditions that were unforeseen when setting the objectives and percentages in this bonus award program, such circumstances will be considered by the Executive Committee of Sanderson Farms, Inc. in making awards. 2. In the event of possible reporting errors affecting the ranking, such circumstances will be considered by the Executive Committee of Sanderson Farms, Inc. in making awards. 3. In the event changes in laws or accounting procedures affect the ranking, such circumstances will be considered by the Executive Committee of Sanderson Farms, Inc. in making awards. 4. The per share return targets were calculated using 13,292,760 diluted shares. Adjustments to these targets will be made to reflect changes in the number of shares outstanding resulting from any merger, consolidation, reorganization, re-capitalization, re-incorporation, stock-splits, stock dividend, stock repurchase, or other changes in the corporate structure of the Company. Furthermore, the target per share return numbers were calculated based on a target net return on projected sales. The Company reserves the right to adjust these targets in the event of a substantial fluctuation in sales pounds or dollars during the year. 7 SANDERSON FARMS, INC. BONUS AWARD PROGRAM (DIVISION MANAGERS) Effective November 1, 2003 Supercedes November 1, 2002 1 SANDERSON FARMS, INC. Bonus Award Program as of November 1, 2003 I. PURPOSE The Board of Directors of Sanderson Farms, Inc. has determined that in addition to the Company's existing competitive and equitable total compensation package, it is desirable to maintain a bonus award program for its salaried employees. The purposes for such a program include: A. To encourage excellence and high levels of performance. B. To recognize the contributions of the salaried employees to the overall profitability of the Company. C. To encourage all employees from every division in the Company to cooperate, share information and work together as a team for the overall benefit of the Company and its shareholders. II. PARTICIPATION AND MAXIMUM AWARD The Executive Committee of Sanderson Farms, Inc. will select and recognize personnel eligible to participate in the bonus award program, and reserves the right to review and change the class of eligible employees at any time. Those now designated include: A. Salaried personnel within the corporate structure of Sanderson Farms, Inc., Sanderson Farms, Inc. (Production Division), Sanderson Farms, Inc. (Processing Division) and Sanderson Farms, Inc. (Foods Division). B. All salaried management and accounting trainees within the corporate structure. 2 SANDERSON FARMS, INC. Bonus Award Program III. ELIGIBILITY EMPLOYMENT/PARTICIPATION Except in the case of death, disability or retirement, as set forth below, employees must be employed in a designated position on October 31 of the applicable fiscal year and must have been employed in a designated position for period of nine months prior to the end of the fiscal year to be eligible to participate in the bonus award program. Base salary for this purpose shall include regular compensation only, and shall not include bonus award payments and any other miscellaneous payments that might be treated as income to the employee. DEATH, DISABILITY AND RETIREMENT If an eligible employee terminates employment with the Company during the fiscal year before October 31 as a result of death, disability or retirement, and had been in a designated position for a period of at least nine months, such employee will be eligible to participate in the Bonus Award Program notwithstanding the fact that the employee is not employed on October 31, and the base salary paid to such employee during that portion of the year during which he or she was employed in a designated position will be used to calculate the amount of such employee's bonus award. EXTRAORDINARY CIRCUMSTANCES Extraordinary circumstances will be subject to review by the Executive Committee. 3 SANDERSON FARMS, INC. Bonus Award Program IV. DETERMINATION OF AWARD AND PAYMENT Bonus award programs for many corporations focus in some form or another on the real dollar profits earned by the corporation within a given time frame. This method of determining bonuses to be paid to employees recognizes that bonuses should be paid to employees only after a fair and equitable return has been earned for the shareholders who own the company. With this basic philosophy in mind, the Board has determined that no bonuses will be paid under this program unless net return on average stockholders' equity after consideration is taken for any bonus paid under this program for the year exceeds eight percent (8%). After this minimum threshold is met, the Bonus Award Program will become effective, and bonuses will be paid if the other criteria described in this program are met. In recognition of the fact that one of our primary obligations as employees of this Company is to our shareholders, the Board of Directors has determined that net profits made by the consolidated corporations [Sanderson Farms, Inc., Sanderson Farms, Inc. (Production Division), Sanderson Farms, Inc. (Processing Division) and Sanderson Farms, Inc. (Foods Division)] on a per share basis for the period November 1 through October 31 of each year will be the primary basis for bonus awards. The earnings per share for purposes of computing the bonus awards, as set forth herein, shall be computed net of any bonuses awarded and net of any extraordinary, non recurring income items. For all employees of Sanderson Farms other than certain management level employees, this will be the sole basis for determining bonus awards. Although the Board has determined that net profits earned for shareholders of the Company should be the primary method of determining the bonuses to be paid to employees, the Board has also recognized that certain management level employees have responsibility for and more direct control over the operating performance and profitability of the Company. In recognition of this fact, the Board has concluded that a certain percentage of your bonus should be determined by evaluating the operating and profitability performance of the Company relative to its peers and competitors. Therefore, while a portion of your bonus will be determined by the Company's earnings per share performance, a portion will also be determined by evaluating the performance of the Company as compared to our peers and competitors by Agri Stats for the poultry division, and certain net income growth targets for managers in the foods division, all as described herein. The audited annual financial statements, on a consolidated basis, of Sanderson Farms, Inc. will be the measuring tool for the net return to shareholders portion of the bonus award program. The annual bonus award will be paid to participants in the bonus award program after the outside auditors have completed their annual audit of the corporations, which is usually approximately two (2) months after the end of the fiscal year. The Company's performance relative to its peers and competitors as reported by Agri Stats will be used to evaluate and determine bonuses paid to those employees whose bonuses are determined in part by such performance. The appropriate measuring tool as set forth in this Bonus Award Program as reported by Agri Stats for the twelve (12) month period ending on October 31 each year will be used to determine if a bonus has been earned by such employees. 4 SANDERSON FARMS, INC. Bonus Award Program V. OBJECTIVES AND FORMULAS FOR DETERMINATION OF THE BONUS AWARD A. EPS Bonus All salaried employees will receive a bonus if the net income per share objectives set forth below are met, and if the minimum return on average stockholders equity for the year is earned. Net income shall be computed net of any bonuses awarded and net of any extraordinary, non recurring income items not related to the fiscal year's operations. The annual audited financial statements, on a consolidated basis, of Sanderson Farms, Inc., will be the measuring tool for this portion of the Bonus Award Program. The annual bonus award will be paid to participants after the outside auditors have completed their annual audit of the consolidated corporation. The earnings per share objectives and the respective percentage of employees' bonus dependent upon EPS earned for the fiscal year (November 1 thru October 31) are as follows:

The division manager at the Foods Division will receive a bonus based in part upon the Company's earnings per share performance as described on pages 5 and 6 of this plan, and in part based on the Foods Division's performance as measured by "growth in pre-tax operating income" and Corporate Agri Stats Bottom Line Analysis, per head, report as described below. The final results of the Foods Division will be determined after the Company's external auditors have completed their audit at the end of each fiscal year, which is completed approximately two months after the last day of each fiscal year end. 6

The following formula will be utilized for all employees whose bonus is to be determined in part by factors other than EPS performance to determine that portion of the award dependent upon such factors: A = Gross Award S = Salary (excluding bonus award payments and other items of miscellaneous income) of the Participant during that portion of the year in which he or she was employed in a designated position. P = Percentage of award earned based on performance factor M = Percentage of salary eligible to be earned and paid as a bonus on performance factor. FORMULA S X P X M = A 7 SANDERSON FARMS, INC. Bonus Award Program VI. PARAMETERS This bonus award program has been designed to encourage teamwork and cooperation among all of the divisions of Sanderson Farms, and to ensure that Sanderson Farms is consistently among the leaders in profitability in the broiler and prepared foods industry. The program is also designed to pay a bonus to employees only after the Company has returned to its shareholders a fair and equitable return. 1. In the event of extraordinary operating conditions that were unforeseen when setting the objectives and percentages in this bonus award program, such circumstances will be considered by the Executive Committee of Sanderson Farms, Inc. in making awards. 2. In the event of possible reporting errors affecting the ranking, such circumstances will be considered by the Executive Committee of Sanderson Farms, Inc. in making awards. 3. In the event changes in laws or accounting procedures affect the ranking, such circumstances will be considered by the Executive Committee of Sanderson Farms, Inc. in making awards. 4. The per share return targets were calculated using 13,292,760 diluted shares. Adjustments to these targets will be made to reflect changes in the number of shares outstanding resulting from any merger, consolidation, reorganization, re-capitalization, re-incorporation, stock-splits, stock dividend, stock repurchase, or other changes in the corporate structure of the Company. Furthermore, the target per share return numbers were calculated based on a target net return on projected sales. The Company reserves the right to adjust these targets in the event of a substantial fluctuation in sales pounds or dollars during the year. 8 SANDERSON FARMS, INC. BONUS AWARD PROGRAM (EXECUTIVE COMMITTEE) Effective November 1, 2003 Supercedes November 1, 2002 1 SANDERSON FARMS, INC. Bonus Award Program Effective Nov. 1, 2003 I. PURPOSE The Board of Directors of Sanderson Farms, Inc. has determined that in addition to the Company's existing competitive and equitable total compensation package, it is desirable to maintain a bonus award program for its salaried employees. The purposes for such a program include: A. To encourage excellence and high levels of performance. B. To recognize the contributions of the salaried employees to the overall profitability of the Company. C. To encourage all employees from every division in the Company to cooperate, share information and work together as a team for the overall benefit of the Company and its shareholders. II. PARTICIPATION AND MAXIMUM AWARD The Executive Committee of Sanderson Farms, Inc. will select and recognize personnel eligible to participate in the bonus award program, and reserves the right to review and change the class of eligible employees at any time. Those now designated include: A. Salaried personnel within the corporate structure of Sanderson Farms, Inc., Sanderson Farms, Inc. (Production Division), Sanderson Farms, Inc. (Processing Division) and Sanderson Farms, Inc. (Foods Division). B. All salaried management and accounting trainees within the corporate structure. The maximum bonus award achievable will vary depending on the employee's position in the Company. 2 SANDERSON FARMS, INC. Bonus Award Program III. ELIGIBILITY EMPLOYMENT/PARTICIPATION LEVEL Except in the case of death, disability or retirement, as set forth below, employees must be employed in a designated position on October 31 of the applicable fiscal year and must have been employed in a designated position for a period of nine months prior to the end of the fiscal year to be eligible to participate in the bonus award program. Base salary for this purpose shall include regular compensation only, and shall not include bonus award payments and any other miscellaneous payments that might be treated as income to the employee. DEATH, DISABILITY AND RETIREMENT If an eligible employee terminates employment with the Company during the fiscal year before October 31 as a result of death, disability or retirement, and had been employed in a designated position for a period of at least nine months, such employee will be eligible to participate in the Bonus Award Program notwithstanding the fact that the employee is not employed on October 31, and the base salary paid to such employee during that portion of the year during which he or she was employed in a designated position will be used to calculate the amount of such employee's bonus award. EXTRAORDINARY CIRCUMSTANCES Extraordinary circumstances will be subject to review by the Executive Committee. 3 SANDERSON FARMS, INC. Bonus Award Program IV. DETERMINATION OF AWARD AND PAYMENT Bonus award programs for many corporations focus in some form or another on the real dollar profits earned by the corporation within a given time frame. This method of determining bonuses to be paid to employees recognizes that bonuses should be paid to employees only after a fair and equitable return has been earned for the shareholders who own the company. With this basic philosophy in mind, the Board has determined that no bonuses will be paid under this program unless net return on average stockholders' equity after consideration is taken for any bonus paid under this program for the year exceeds eight percent (8%). After this minimum threshold is met, the Bonus Award Program will become effective, and bonuses will be paid if the other criteria described in this program are met. In recognition of the fact that one of our primary obligations as employees of this Company is to our shareholders, the Board of Directors has determined that net profits made by the consolidated corporations [Sanderson Farms, Inc., Sanderson Farms, Inc. (Production Division), Sanderson Farms, Inc. (Processing Division) and Sanderson Farms, Inc. (Foods Division)] on a per share basis for the period November 1 through October 31 of each year will be the primary basis for bonus awards. The earnings per share for purposes of computing the bonus awards, as set forth herein, shall be computed net of any bonuses awarded and net of any extraordinary, non recurring income items. For all employees of Sanderson Farms other than those management level employees specifically described in this program, this will be the sole basis for determining bonus awards. Although the Board has determined that net profits earned for shareholders of the Company should be the primary method of determining the bonuses to be paid to employees, the Board has also recognized that certain management level employees have responsibility for and more direct control over the operating performance and profitability of the Company. In recognition of this fact, the Board has concluded that a certain percentage of such employees' bonus should be determined by evaluating the operating and profitability performance of the Company relative to its peers and competitors. Therefore, while a portion of such employees' bonus will be determined by the Company's earnings per share performance, a portion of such employees' bonus will also be determined by evaluating the performance of the Company as compared to our peers and competitors by Agri Stats for the poultry division, and certain net income growth targets for managers in the foods division, all as described herein. The audited annual financial statements, on a consolidated basis, of Sanderson Farms, Inc. will be the measuring tool for the net return to shareholders portion of the bonus award program. The annual bonus award will be paid to participants in the bonus award program after the outside auditors have completed their annual audit of the corporations, which is usually approximately two (2) months after the end of the fiscal year. The Company's performance relative to its peers and competitors as reported by Agri Stats will be used to evaluate and determine bonuses paid to those employees whose bonuses are determined in part by such performance. The appropriate measuring tool as set forth in this Bonus Award Program as reported by Agri Stats for the twelve (12) month period ending on October 31 each year will be used to determine if a bonus has been earned by such employees. 4 SANDERSON FARMS, INC. Bonus Award Program V. OBJECTIVES AND FORMULAS FOR DETERMINATION OF THE BONUS AWARD A. All salaried employees All salaried employees will receive a bonus if the net income per share objectives set forth below are met, and if the minimum return on average stockholders equity for the year is earned. Net income shall be computed net of any bonuses awarded and net of any extraordinary, non recurring income items not related to the fiscal year's operations. The annual audited financial statements, on a consolidated basis, of Sanderson Farms, Inc., will be the measuring tool for this portion of the Bonus Award Program. The annual bonus award will be paid to participants after the outside auditors have completed their annual audit of the consolidated corporation. The earnings per share objectives and the respective percentage of employees' bonus dependent upon EPS earned for the fiscal year (November 1 thru October 31) are as follows:

B. Executive Committee Bonus awards under this Bonus Award Program for the Chief Executive Officer, Chief Financial Officer, VP-Sales, Director of Marketing, Director of Production, Director of Processing, Director of Development, the Controller, the Director of Administration, the Director of Technical Services, the Director of Sales and the Chief Financial Analyst will be granted based on a combination of earnings per share performance and general corporate performance as measured against the Company's peers and competitors as reported by Agri Stats. For purposes of calculating bonuses awarded and paid to individuals in these positions based on operating performance, the corporate Agri Stats measure will be as reported in Agri Stats' "bottom line analysis, per head" report, net of bonus. Awards made to these individuals based on the operating performance factor will be as follows: 6
PERCENTAGE OF SALARY ELIGIBLE TO BE EARNED AS CORPORATE AGRI STATS BONUS ON OPERATING BOTTOM LINE PERFORMANCE FACTORS REPORT (PER HEAD) (PERCENTAGE OF AWARD EARNED) TARGET TOP THREE PLACES CEO 50% 100% CFO, VP Sales, 35% 100% Dir. Mktg, Dir. Proc. 35% 100% Dir.Prod. 35% 100% Controller, Dir. Admn., 25% 100% Dir.Tech Svcs., Dir. Sales, 25% 100% Dir. Devlop., Chief Analyst 25% 100% HIGH AVERAGE PLACES FOUR THROUGH SIX CEO 50% 66 2/3% CFO, VP Sales, 35% 66 2/3% Dir.-Marketing, 35% 66 2/3% Dir.-Prod., Dir.-Proc. 35% 66 2/3% Controller, Dir.-Admin., 25% 66 2/3% Dir-Tech Svcs., Dir.-Sales, 25% 66 2/3% Dir. Develop.,Chief Analyst 25% 66 2/3% LOW AVERAGE PLACES SEVEN THROUGH NINE CEO 50% 33 1/3% CFO, VP Sales, 35% 33 1/3% Dir.-Marketing, 35% 33 1/3% Dir.-Prod., Dir.-Proc., 35% 33 1/3% Controller, Dir.-Admin, 25% 33 1/3% Dir-Tech Svcs., Dir.-Sales, 25% 33 1/3% Dir. Develop.,Chief Analyst 25% 33 1/3%
The following formula will be utilized for all employees whose bonus is to be determined in part by factors other than EPS performance to determine that portion of the award dependent upon such factors: A = Gross Award S = Base Salary (excluding bonus award payments and other items of miscellaneous income) of the Participant during that portion of the year in which he or she was employed in a designated position. P = Percentage of award earned based on performance factor M = Percentage of salary eligible to be earned and paid as a bonus on performance factor. FORMULA S X P X M = A 7 SANDERSON FARMS, INC. Bonus Award Program VI. PARAMETERS This bonus award program has been designed to encourage teamwork and cooperation among all of the divisions of Sanderson Farms, and to ensure that Sanderson Farms is consistently among the leaders in profitability in the broiler and prepared foods industry. The program is also designed to pay a bonus to employees only after the Company has returned to its shareholders a fair and equitable return. 1. In the event of extraordinary operating conditions that were unforeseen when setting the objectives and percentages in this bonus award program, such circumstances will be considered by the Executive Committee of Sanderson Farms, Inc. in making awards. 2. In the event of possible reporting errors affecting the ranking, such circumstances will be considered by the Executive Committee of Sanderson Farms, Inc. in making awards. 3. In the event changes in laws or accounting procedures affect the ranking, such circumstances will be considered by the Executive Committee of Sanderson Farms, Inc. in making awards. 4. The per share return targets were calculated using 13,292,760 diluted shares. Adjustments to these targets will be made to reflect changes in the number of shares outstanding resulting from any merger, consolidation, reorganization, re-capitalization, re-incorporation, stock-splits, stock dividend, stock repurchase, or other changes in the corporate structure of the Company. Furthermore, the target per share return numbers were calculated based on a target net return on projected sales. The Company reserves the right to adjust these targets in the event of a substantial fluctuation in sales pounds or dollars during the year. 8 SANDERSON FARMS, INC. BONUS AWARD PROGRAM (GENERAL OFFICE PERFORMANCE AWARDS PARTICIPANTS) Effective November 1, 2003 Supercedes November 1, 2002 1 SANDERSON FARMS, INC. Bonus Award Program Effective Nov. 1, 2003 I. PURPOSE The Board of Directors of Sanderson Farms, Inc. has determined that in addition to the Company's existing competitive and equitable total compensation package, it is desirable to maintain a bonus award program for its salaried employees. The purposes for such a program include: A. To encourage excellence and high levels of performance. B. To recognize the contributions of the salaried employees to the overall profitability of the Company. C. To encourage all employees from every division in the Company to cooperate, share information and work together as a team for the overall benefit of the Company and its shareholders. II. PARTICIPATION AND MAXIMUM AWARD The Executive Committee of Sanderson Farms, Inc. will select and recognize personnel eligible to participate in the bonus award program, and reserves the right to review and change the class of eligible employees at any time. Those now designated include: A. Salaried personnel within the corporate structure of Sanderson Farms, Inc., Sanderson Farms, Inc. (Production Division), Sanderson Farms, Inc. (Processing Division) and Sanderson Farms, Inc. (Foods Division). B. All salaried management and accounting trainees within the corporate structure. 2 SANDERSON FARMS, INC. Bonus Award Program III. ELIGIBILITY EMPLOYMENT/PARTICIPATION Except in the case of death, disability or retirement, as set forth below, employees must be employed in a designated position on October 31 of the applicable fiscal year and must have been employed in a designated position for a period of nine months prior to the end of the fiscal year to be eligible to participate in the bonus award program. Base salary for this purpose shall include regular compensation only, and shall not include bonus award payments and any other miscellaneous payments that might be treated as income to the employee. DEATH, DISABILITY AND RETIREMENT If an eligible employee terminates employment with the Company during the fiscal year before October 31 as a result of death, disability or retirement, and had been employed in a designated position for a period of at least nine months, such employee will be eligible to participate in the Bonus Award Program notwithstanding the fact that the employee is not employed on October 31, and the base salary paid to such employee during that portion of the year during which he or she was employed in a designated position will be used to calculate the amount of such employee's bonus award. EXTRAORDINARY CIRCUMSTANCES Extraordinary circumstances will be subject to review by the Executive Committee. 3 SANDERSON FARMS, INC. Bonus Award Program IV. DETERMINATION OF AWARD AND PAYMENT Bonus award programs for many corporations focus in some form or another on the real dollar profits earned by the corporation within a given time frame. This method of determining bonuses to be paid to employees recognizes that bonuses should be paid to employees only after a fair and equitable return has been earned for the shareholders who own the company. With this basic philosophy in mind, the Board has determined that no bonuses will be paid under this program unless net return on average stockholders' equity after consideration is taken for any bonus paid under this program for the year exceeds eight percent (8%). After this minimum threshold is met, the Bonus Award Program will become effective, and bonuses will be paid if the other criteria described in this program are met. In recognition of the fact that one of our primary obligations as employees of this Company is to our shareholders, the Board of Directors has determined that net profits made by the consolidated corporations [Sanderson Farms, Inc., Sanderson Farms, Inc. (Production Division), Sanderson Farms, Inc. (Processing Division) and Sanderson Farms, Inc. (Foods Division)] on a per share basis for the period November 1 through October 31 of each year will be the primary basis for bonus awards. The earnings per share for purposes of computing the bonus awards, as set forth herein, shall be computed net of any bonuses awarded and net of any extraordinary, non recurring income items. For all employees of Sanderson Farms other than certain management level employees, this will be the sole basis for determining bonus awards. Although the Board has determined that net profits earned for shareholders of the Company should be the primary method of determining the bonuses to be paid to employees, the Board has also recognized that certain management level employees have responsibility for and more direct control over the operating performance and profitability of the Company. In recognition of this fact, the Board has concluded that a certain percentage of your bonus should be determined by evaluating the operating and profitability performance of the Company relative to its peers and competitors. Therefore, while a portion of your bonus will be determined by the Company's earnings per share performance, a portion of your bonus will also be determined by evaluating the performance of the Company as compared to our peers and competitors by Agri Stats for managers in the poultry division, and based on certain net income growth targets for managers in the foods division, all as described herein. The audited annual financial statements, on a consolidated basis, of Sanderson Farms, Inc. will be the measuring tool for the net return to shareholders portion of the bonus award program. The annual bonus award will be paid to participants in the bonus award program after the outside auditors have completed their annual audit of the corporations, which is usually approximately two (2) months after the end of the fiscal year. The Company's performance relative to its peers and competitors as reported by Agri Stats will be used to evaluate and determine bonuses paid to those employees whose bonuses are determined in part by such performance. The appropriate measuring tool as set forth in this Bonus Award Program as reported by Agri Stats for the twelve (12) month period ending on October 31 each year will be used to determine if a bonus has been earned by such employees. 4 SANDERSON FARMS, INC. Bonus Award Program V. OBJECTIVES AND FORMULAS FOR DETERMINATION OF THE BONUS AWARD A. EPS Performance All salaried employees will receive a bonus if the net income per share objectives set forth below are met, and if the minimum return on average stockholders equity for the year is earned. Net income shall be computed net of any bonuses awarded and net of any extraordinary, non recurring income items not related to the fiscal year's operations. The annual audited financial statements, on a consolidated basis, of Sanderson Farms, Inc., will be the measuring tool for this portion of the Bonus Award Program. The annual bonus award will be paid to participants after the outside auditors have completed their annual audit of the consolidated corporation. The earnings per share objectives and the respective percentage of employees' bonus dependent upon EPS earned for the fiscal year (November 1 thru October 31) are as follows:
RANK PER SHARE RETURN* PERCENTAGE OF AWARD ---- ----------------- ------------------- Best (1st) $3.5000 100.0% 2nd $3.4444 95.5% 3rd $3.3888 91.0% 4th $3.3333 86.5% 5th $3.2777 82.0% 6th $3.2222 77.5% 7th $3.1666 73.0% 8th $3.1111 68.5% 9th $3.0555 64.0% 10th $3.0000 59.5% 11th $2.9444 55.0% 12th $2.8889 50.5% 13th $2.8333 46.0% 14th $2.7778 41.5% 15th $2.7222 37.0% 16th $2.6667 32.5% 17th $2.6111 28.0% 18th $2.5556 23.5% 19th $2.5000 19.0% 20th BELOW ZERO
* Net of bonus and net of extraordinary, non recurring income items not related to the fiscal year's operations. The per share return targets were calculated using 13,292,760 diluted shares. Adjustments to these targets will be made to reflect changes in the number of shares outstanding resulting from any merger, consolidation, reorganization, re-capitalization, re-incorporation, stock-splits, stock dividend, stock repurchase, or other changes in the corporate structure of the Company. Furthermore, the target per share return numbers were calculated based on a target net return on projected sales. The Company reserves the right to adjust these targets in the event of a substantial fluctuation in sales pounds or dollars during the year. 5 The following formula will be utilized to determine the exact dollar amount of a participant's bonus award dependent upon EPS performance. A = Gross Award S = Base Salary (excluding bonus award payments and other items of miscellaneous income) of the Participant during that portion of the year in which he or she was employed in a designated position. P = Percentage of award earned based on above schedule M = Percent of salary eligible to be earned as a bonus based on EPS performance. FORMULA S X P X M = A As with any awards made under this Bonus Award Program, no bonus will be paid unless total net income return (after bonus) on average stockholders' equity for the year exceeds eight percent (8%). Net return on average stockholders' equity will be computed by taking the average of beginning and ending stockholders' equity for the applicable year, and dividing that number into net income for the year. The percent of salary eligible to be earned as a bonus based on EPS performance ("M" in the above formula) for the fiscal year is 25%. 6 B. Performance Based Bonus Bonus awards under this Bonus Award Program for the Nutritionist, Veterinarian, Assistant to Director of Live Production, Corporate Chill Pack Coordinator and Quality Assurance Manager will be granted based on a combination of earnings per share performance and general corporate performance as measured against the Company's peers and competitors as reported by Agri Stats. For purposes of calculating bonuses awarded and paid to individuals in these positions based on operating performance, the corporate Agri Stats measure will be as reported in Agri Stats' "bottom line analysis, per head, report." Awards made to these individuals based on the operating performance factor will be as follows:
PERCENTAGE OF SALARY ELIGIBLE TO BE EARNED AS CORPORATE AGRI STATS BONUS ON OPERATING BOTTOM LINE PERFORMANCE FACTORS REPORT (PER HEAD) (PERCENTAGE OF AWARD EARNED) TARGET TOP THREE PLACES Corp. Processing Mgr. 20% 100% Corp. Production Mgr. 20% 100% Nutritionist 15% 100% Veterinarian 15% 100% Corp. Live Prod. Asst. 15% 100% Quality Assurance Mgr 15% 100% Corp. Maint. Mgr. 15% 100% HIGH AVERAGE PLACES FOUR THROUGH SIX Corp. Processing Mgr. 20% 66 2/3% Corp. Production Mgr. 20% 66 2/3% Nutritionist 15% 66 2/3% Veterinarian 15% 66 2/3% Corp. Live Prod. Asst 15% 66 2/3% Quality Assurance Mgr 15% 66 2/3% Corp. Maint. Mgr. 15% 66 2/3% LOW AVERAGE PLACES SEVEN THROUGH NINE Corp. Processing Mgr. 20% 33 1/3% Corp. Production Mgr. 20% 33 1/3% Nutritionist 15% 33 1/3% Veterinarian 15% 33 1/3% Corp. Live Prod. Asst. 15% 33 1/3% Quality Assurance Mgr 15% 33 1/3% Corp. Maint. Mgr. 15% 33 1/3%
All poultry sales managers will receive a bonus based in part upon the Company's earnings per share performance, in part based on the Company's overall corporate Agri Stats performance, and in part based on the performance of the complexes to which they are assigned (that is, "big bird debone" complexes (Laurel, Hammond and Hazlehurst) will be grouped and "tray pack" complexes (Collins, Texas and McComb) will be grouped) relative to the Company's peers and competitors as reported by Agri Stats. The overall corporate Agri Stats performance measure will be the Company's performance relative to its peers and competitors as reported by Agri Stats in its "bottom line analysis, per head" report. The performance of the applicable complexes will be measured by the complexes' combined performance relative to its peers and competitors as reported by corporate Agri Stats in its complex "operational profit analysis, per head" report. 7 These managers will be paid in accordance with the following schedule:
PERCENTAGE OF SALARY ASSIGNED CORPORATE ELIGIBLE TO BE EARNED COMPLEX AGRI STATS AS BONUS BASED OPERATIONS BOTTOM ON PERFORMANCE PROFIT (PER HEAD) LINE REPORT FACTORS AGRI STATS (PER HEAD) (% OF AWARD EARNED) (% OF AWARD EARNED) TARGET Top 10% Top Three Places Manager Export Sales 20% 0% 100.0% Manager Debone/MDM Sales 20% 50% 50% Manager Cust. Relations 20% 0% 100.0% Corporate Export Sales Managers 15% 0% 100.0% Corporate Sales Managers 15% 50% 50% HIGH AVERAGE Top 20% Places Four through Six Manager Export Sales 20% 0% 66.67% Manager Debone/MDM Sales 20% 33.3% 33.3% Manager Cust. Relations 20% 0% 66.67% Corporate Export Sales Managers 15% 0% 66.67% Corporate Sales Managers 15% 33.3% 33.3% LOW AVERAGE Top 30% Places Seven through Nine Manager Export Sales 20% 0% 33.3% Manager Debone/MDM Sales 20% 16.7% 16.7% Manager Cust. Relations 20% 0% 33.3% Corporate Export Sales Managers 15% 0% 33.3% Corporate Sales Managers 15% 16.7% 16.7%
The Foods Sales Managers will receive a bonus based in part upon the Company's earnings per share performance as described on pages 5 and 6 of this plan, and in part based on the Foods Division's performance as measured by "pre-tax operating income growth" and Corporate Agri Stats Bottom Line Analysis, per head, report as described below. The final results of the Foods Division will be determined after the Company's external auditors have completed their audit at the end of each fiscal year, which is completed approximately two months after the last day of each fiscal year end. 8
PERCENTAGE OF SALARY ELIGIBLE TO BE EARNED TARGET CORPORATE AS BONUS BASED PRE TAX AGRI STATS ON PERFORMANCE OPERATING BOTTOM LINE FACTORS INCOME GROWTH RPT (PER HEAD) TARGET 54% TOP THREE PLACES Manager Foods Div. Sales 20% 80% 20% Foods Sales Manager 15% 80% 20% Prod. Development Mgr. 10% 80% 20% 50% Manager Foods Div. Sales 20% 65% Foods Sales Manager 15% 65% Prod. Development Mgr 10% 65% AVERAGE 46% PLACES FOURTH THROUGH SIX Manager Foods Div. Sales 20% 50% 10% Foods Sales Manager 15% 50% 10% Prod. Development Mgr 10% 50% 10% 42% Manager Foods Div. Sales 20% 35% Foods Sales Manager 15% 35% Prod. Development Mgr 10% 35% LOW 38% PLACES SEVEN THROUGH NINE Manager Foods Div. Sales 20% 20% 5% Foods Sales Manager 15% 20% 5% Prod. Development Mgr 10% 20% 5%
The following formula will be utilized for all employees whose bonus is to be determined in part by factors other than EPS performance to determine that portion of the award dependent upon such factors: A = Gross Award S = Base Salary (excluding bonus award payments and other items of miscellaneous income) of the Participant during that portion of the year in which he or she was employed in a designated position. P = Percent age of award earned based on performance factor M = Percentage of salary eligible to be earned and paid as a bonus on performance factor. FORMULA S X P X M = A 9 SANDERSON FARMS, INC. Bonus Award Program VI. PARAMETERS This bonus award program has been designed to encourage teamwork and cooperation among all of the divisions of Sanderson Farms, and to ensure that Sanderson Farms is consistently among the leaders in profitability in the broiler and prepared foods industry. The program is also designed to pay a bonus to employees only after the Company has returned to its shareholders a fair and equitable return. 1. In the event of extraordinary operating conditions that were unforeseen when setting the objectives and percentages in this bonus award program, such circumstances will be considered by the Executive Committee of Sanderson Farms, Inc. in making awards. 2. In the event of possible reporting errors affecting the ranking, such circumstances will be considered by the Executive Committee of Sanderson Farms, Inc. in making awards. 3. In the event changes in laws or accounting procedures affect the ranking, such circumstances will be considered by the Executive Committee of Sanderson Farms, Inc. in making awards. 4. The per share return targets were calculated using 13,292,760 diluted shares. Adjustments to these targets will be made to reflect changes in the number of shares outstanding resulting from any merger, consolidation, reorganization, re-capitalization, re-incorporation, stock-splits, stock dividend, stock repurchase, or other changes in the corporate structure of the Company. Furthermore, the target per share return numbers were calculated based on a target net return on projected sales. The Company reserves the right to adjust these targets in the event of a substantial fluctuation in sales pounds or dollars during the year. 10 SANDERSON FARMS, INC. BONUS AWARD PROGRAM (PRODUCTION, PROCESSING AND FOODS PERFORMANCE AWARD PARTICIPANTS) Effective November 1, 2003 Supercedes November 1, 2002 1 SANDERSON FARMS, INC. Bonus Award Program Effective Nov. 1, 2003 I. PURPOSE The Board of Directors of Sanderson Farms, Inc. has determined that in addition to the Company's existing competitive and equitable total compensation package, it is desirable to maintain a bonus award program for its salaried employees. The purposes for such a program include: A. To encourage excellence and high levels of performance. B. To recognize the contributions of the salaried employees to the overall profitability of the Company. C. To encourage all employees from every division in the Company to cooperate, share information and work together as a team for the overall benefit of the Company and its shareholders. II. PARTICIPATION AND MAXIMUM AWARD The Executive Committee of Sanderson Farms, Inc. will select and recognize personnel eligible to participate in the bonus award program, and reserves the right to review and change the class of eligible employees at any time. Those now designated include: A. Salaried personnel within the corporate structure of Sanderson Farms, Inc., Sanderson Farms, Inc. (Production Division), Sanderson Farms, Inc. (Processing Division) and Sanderson Farms, Inc. (Foods Division). B. All salaried management and accounting trainees within the corporate structure. 2 SANDERSON FARMS, INC. Bonus Award Program III. ELIGIBILITY EMPLOYMENT/PARTICIPATION Except in the case of death, disability or retirement, as set forth below, employees must be employed in a designated position on October 31 of the applicable fiscal year and must have been employed in a designated position for a period of nine months prior to the end of the fiscal year to be eligible to participate in the bonus award program. Base salary for this purpose shall include regular compensation only, and shall not include bonus award payments and any other miscellaneous payments that might be treated as income to the employee. DEATH, DISABILITY AND RETIREMENT If an eligible employee terminates employment with the Company during the fiscal year before October 31 as a result of death, disability or retirement, and had been employed in a designated position for a period of at least nine months, such employee will be eligible to participate in the Bonus Award Program notwithstanding the fact that the employee is not employed on October 31, and the base salary paid to such employee during that portion of the year during which he or she was employed in a designated position will be used to calculate the amount of such employee's bonus award. EXTRAORDINARY CIRCUMSTANCES Extraordinary circumstances will be subject to review by the Executive Committee. 3 SANDERSON FARMS, INC. Bonus Award Program IV. DETERMINATION OF AWARD AND PAYMENT Bonus award programs for many corporations focus in some form or another on the real dollar profits earned by the corporation within a given time frame. This method of determining bonuses to be paid to employees recognizes that bonuses should be paid to employees only after a fair and equitable return has been earned for the shareholders who own the company. With this basic philosophy in mind, the Board has determined that no bonuses will be paid under this program unless net return on average stockholders' equity after consideration is taken for any bonus paid under this program for the year exceeds eight percent (8%). After this minimum threshold is met, the Bonus Award Program will become effective, and bonuses will be paid if the other criteria described in this program are met. In recognition of the fact that one of our primary obligations as employees of this Company is to our shareholders, the Board of Directors has determined that net profits made by the consolidated corporations [Sanderson Farms, Inc., Sanderson Farms, Inc. (Production Division), Sanderson Farms, Inc. (Processing Division) and Sanderson Farms, Inc. (Foods Division)] on a per share basis for the period November 1 through October 31 of each year will be the primary basis for bonus awards. The earnings per share for purposes of computing the bonus awards, as set forth herein, shall be computed net of any bonuses awarded and net of any extraordinary, non recurring income items. For all employees of Sanderson Farms other than certain management level employees, this will be the sole basis for determining bonus awards. Although the Board has determined that net profits earned for shareholders of the Company should be the primary method of determining the bonuses to be paid to employees, the Board has also recognized that certain management level employees have responsibility for and more direct control over the operating performance and profitability of the Company. In recognition of this fact, the Board has concluded that a certain percentage of your bonus should be determined by evaluating the operating and profitability performance of the Company relative to its peers and competitors. Therefore, while a portion of your bonus will be determined by the Company's earnings per share performance, a portion of your bonus will also be determined by evaluating the performance of the Company as compared to our peers and competitors by Agri Stats for poultry division managers, and based on certain net income growth targets for managers in the foods division, all as described herein. The audited annual financial statements, on a consolidated basis, of Sanderson Farms, Inc. will be the measuring tool for the net return to shareholders portion of the bonus award program. The annual bonus award will be paid to participants in the bonus award program after the outside auditors have completed their annual audit of the corporations, which is usually approximately two (2) months after the end of the fiscal year. The Company's performance relative to its peers and competitors as reported by Agri Stats will be used to evaluate and determine bonuses paid to those employees whose bonuses are determined in part by such performance. The appropriate measuring tool as set forth in this Bonus Award Program as reported by Agri Stats for the twelve (12) month period ending on October 31 each year will be used to determine if a bonus has been earned by such employees. 4 SANDERSON FARMS, INC. Bonus Award Program V. OBJECTIVES AND FORMULAS FOR DETERMINATION OF THE BONUS AWARD A. EPS Bonus All salaried employees will receive a bonus if the net income per share objectives set forth below are met, and if the minimum return on average stockholders equity for the year is earned. Net income shall be computed net of any bonuses awarded and net of any extraordinary, non recurring income items not related to the fiscal year's operations. The annual audited financial statements, on a consolidated basis, of Sanderson Farms, Inc., will be the measuring tool for this portion of the Bonus Award Program. The annual bonus award will be paid to participants after the outside auditors have completed their annual audit of the consolidated corporation. The earnings per share objectives and the respective percentage of employees' bonus dependent upon EPS earned for the fiscal year (November 1 thru October 31) are as follows:
RANK PER SHARE RETURN* PERCENTAGE OF AWARD - ---- ----------------- ------------------- Best (1st) $3.5000 100.0% 2nd $3.4444 95.5% 3rd $3.3888 91.0% 4th $3.3333 86.5% 5th $3.2777 82.0% 6th $3.2222 77.5% 7th $3.1666 73.0% 8th $3.1111 68.5% 9th $3.0555 64.0% 10th $3.0000 59.5% 11th $2.9444 55.0% 12th $2.8889 50.5% 13th $2.8333 46.0% 14th $2.7778 41.5% 15th $2.7222 37.0% 16th $2.6667 32.5% 17th $2.6111 28.0% 18th $2.5556 23.5% 19th $2.5000 19.0% 20th BELOW ZERO
* Net of bonus and net of extraordinary, non recurring income items not related to the fiscal year's operations. The per share return targets were calculated using 13,292,760 diluted shares. Adjustments to these targets will be made to reflect changes in the number of shares outstanding resulting from any merger, consolidation, reorganization, re-capitalization, re-incorporation, stock-splits, stock dividend, stock repurchase, or other changes in the corporate structure of the Company. Furthermore, the target per share return numbers were calculated based on a target net return on projected sales. The Company reserves the right to adjust these targets in the event of a substantial fluctuation in sales pounds or dollars during the year. The following formula will be utilized to determine the exact dollar amount of a participant's bonus award dependent upon EPS performance. A = Gross Award S = Base Salary (excluding bonus award payments and other items of miscellaneous income) of the Participant during that portion of the year in which he or she was employed in a designated position. P = Percentage of award earned based on above schedule M = Percent of salary eligible to be earned as a bonus based on EPS performance. FORMULA S X P X M = A 5 As with any awards made under this Bonus Award Program, no bonus will be paid unless total net income return (after bonus) on average stockholders' equity for the year exceeds eight percent (8%). Net return on average stockholders' equity will be computed by taking the average of beginning and ending stockholders' equity for the applicable year, and dividing that number into net income for the year. The percent of salary eligible to be earned as a bonus based on EPS performance ("M" in the above formula) for the fiscal year is 25%. B. Performance Based Bonus All production unit managers, processing shift managers, processing managers, packing managers and shipping/preprice managers will receive a bonus based in part upon the Company's earnings per share performance, in part based on the Company's overall corporate Agri Stats performance, and in part based on the performance of the complexes to which they are assigned (for example, "big bird debone" complexes (Laurel, Hammond and Hazlehurst) will be grouped and "tray pack" complexes (McComb, Collins and Texas) will be grouped) relative to the Company's peers and competitors as reported by Agri Stats. The overall corporate Agri Stats performance measure will be the Company's performance relative to its peers and competitors as reported by Agri Stats in its "bottom line analysis, per head" report, net of bonus. The performance of the applicable complexes will be measured by the complexes' combined performance relative to its peers and competitors as reported by corporate Agri Stats in its complex "operational profit analysis, per head" report, net of bonus. These managers will be paid in accordance with the following schedule:
ASSIGNED COMPLEX CORPORATE PERCENTAGE OF SALARY OPERATIONS AGRI STATS ELIGIBLE TO BE EARNED PROFIT BOTTOM AS BONUS BASED AGRI STATS LINE REPORT ON PERFORMANCE (PER HEAD) (PER HEAD) FACTORS (PERCENTAGE OF AWARD EARNED) (PERCENTAGE OF AWARD EARNED) TARGET TOP 10% TOP THREE PLACES Prod. Unit Mgrs, 10% 50% 50% Proc. Plant Mgrs 10% 50% 50% Proc. Shift Mgrs 10% 50% 50% Processing Mgrs 10% 50% 50% Packing Mgrs. 10% 50% 50% Ship/Preprice/ Mgrs 10% 50% 50% HIGH AVERAGE TOP 20% PLACES FOUR THROUGH SIX Prod. Unit Mgrs. 10% 33.3% 33.3% Proc. Plant Mgrs 10% 33.3% 33.3% Proc. Shift Mgrs. 10% 33.3% 33.3% Processing Mgrs. 10% 33.3% 33.3% Packing Mgrs. 10% 33.3% 33.3% Ship/Preprice/ Mgrs. 10% 33.3% 33.3% LOW AVERAGE TOP 30% PLACES SEVEN THROUGH NINE Prod. Unit Mgrs. 10% 16.7% 16.7% Proc. Plant Mgrs 10% 16.7% 16.7% Proc.Shift Mgrs. 10% 16.7% 16.7% Processing Mgrs. 10% 16.7% 16.7% Packing Mgrs. 10% 16.7% 16.7% Ship/Preprice/ Mgrs. 10% 16.7% 16.7%
6 At the Foods Division, the Production Manager will receive a bonus based in part upon the Company's earnings per share performance as described on pages 6 and 7 of this plan, and in part based on the Foods Division's performance as measured by "growth in pre-tax operating income" and Corporate Agri Stats Bottom Line Analysis, per head, report, as described below. The final results of the Foods Division will be determined after the Company's external auditors have completed their audit at the end of each fiscal year, which is completed approximately two months after the last day of each fiscal year end.
PERCENTAGE OF SALARY ELIGIBLE TO BE EARNED TARGET CORPORATE AS BONUS BASED PRE TAX AGRI STATS ON PERFORMANCE OPERATING BOTTOM LINE FACTORS INCOME GROWTH RPT (PER HEAD) TARGET 54% TOP THREE PLACES Production Manager 10% 80% 20% 50% Production Manager 10% 65% AVERAGE 46% PLACES FOUR THROUGH SIX Production Manager 10% 50% 10% 42% Production Manager 10% 35% LOW 38% PLACES SEVEN THROUGH NINE Production Manager 10% 20% 5%
The following formula will be utilized for all employees whose bonus is to be determined in part by factors other than EPS performance to determine that portion of the award dependent upon such factors: A = Gross Award S = Base Salary (excluding bonus award payments and other items of miscellaneous income) of the Participant during that portion of the year in which he or she was employed in a designated position. P = Percentage of award earned based on performance factor M = Percentage of salary eligible to be earned and paid as a bonus on performance factor. FORMULA S X P X M = A 7 SANDERSON FARMS, INC. Bonus Award Program VI. PARAMETERS This bonus award program has been designed to encourage teamwork and cooperation among all of the divisions of Sanderson Farms, and to ensure that Sanderson Farms is consistently among the leaders in profitability in the broiler and prepared foods industry. The program is also designed to pay a bonus to employees only after the Company has returned to its shareholders a fair and equitable return. 1. In the event of extraordinary operating conditions that were unforeseen when setting the objectives and percentages in this bonus award program, such circumstances will be considered by the Executive Committee of Sanderson Farms, Inc. in making awards. 2. In the event of possible reporting errors affecting the ranking, such circumstances will be considered by the Executive Committee of Sanderson Farms, Inc. in making awards. 3. In the event changes in laws or accounting procedures affect the ranking, such circumstances will be considered by the Executive Committee of Sanderson Farms, Inc. in making awards. 4. The per share return targets were calculated using 13,292,760 diluted shares. Adjustments to these targets will be made to reflect changes in the number of shares outstanding resulting from any merger, consolidation, reorganization, re-capitalization, re-incorporation, stock-splits, stock dividend, stock repurchase, or other changes in the corporate structure of the Company. Furthermore, the target per share return numbers were calculated based on a target net return on projected sales. The Company reserves the right to adjust these targets in the event of a substantial fluctuation in sales pounds or dollars during the year. 8