UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. _____)*
Sanderson Farms, Inc.
(Name of Issuer)
Common Stock, $1.00 par value per share
(Title of Class of Securities)
800013
(CUSIP Number)
Estate of Joe Frank Sanderson
225 N. 13th Avenue
Laurel, Mississippi 39440
(601) 649-4030
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications)
December 15, 1999
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Sections 240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check
the following box G.
NOTE: Schedules filed in paper format shall include a signed original and five
copies of the schedule, including all exhibits. See Section 240.13d-7 for other
parties to whom copies are to be sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
<PAGE>
CUSIP No. 800013
1) NAME OF REPORTING PERSON
I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (entities only)
Estate of Joe Frank Sanderson
64-6213477
2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (See Instructions)
(a) _
(b) _
3) SEC USE ONLY
4) SOURCE OF FUNDS (See Instructions)
Not applicable.
5) CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS
2(D) OR 2(E)
6) CITIZENSHIP OR PLACE OF ORGANIZATION
Estate subject to the laws of the State of Mississippi
(7) SOLE VOTING POWER
NUMBER OF SHARES
BENEFICIALLY 0 shares of Common Stock, $1.00 par value per
share (ACommon Stock@)
OWNED BY
EACH (8) SHARED VOTING POWER
REPORTING
PERSON 3,229,672 shares of Common Stock
WITH
(9) SOLE DISPOSITIVE POWER
0 shares of Common Stock
(10) SHARED DISPOSITIVE POWER
3,229,672 shares of Common Stock
11) AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
3,229,672 shares of Common Stock
<PAGE>
12) CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (See
Instructions)
_
13) PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
23.5%
14) TYPE OF REPORTING PERSON (See Instructions)
00
<PAGE>
SCHEDULE 13D
Preliminary Statement
The Reporting Person previously filed a statement on Schedule 13G pursuant
to Section 240.13d-1(c). The Reporting Person files this Schedule 13D to report
the developments set forth in Item 6, and because the Reporting Person, as the
beneficial owner of more than 20% of the common stock, par value $1.00 per
share, of Sanderson Farms, Inc., may not have been eligible to file Schedule 13G
even though the decedent, Joe Frank Sanderson, was eligible to file Schedule 13G
under the provisions of Section 240.13d-(c).
ITEM 1. Security and Issuer
The class of equity securities to which this statement relates is the
common stock, $1.00 par value per share (the "Common Stock"), of Sanderson
Farms, Inc. a Mississippi corporation (the "Company"), whose principal executive
offices are located at 225 N. 13th Street, Laurel, Mississippi 39440.
ITEM 2. Identity and Background.
(a) This statement is filed on behalf of the Estate of Joe Frank
Sanderson (the AEstate@).
(b) The Estate's address is c/o Joe F. Sanderson, Jr. or William R.
Sanderson, co-executors, 225 N. 13th Street, Laurel, Mississippi
39440.
(c) Not applicable.
(d) During the last five years, the Estate has not been convicted in a
criminal proceeding (excluding any traffic violations or similar misdemeanors).
(e) During the last five years, the Estate has not been a party to a civil
proceeding of a judicial or administrative body of competent jurisdiction as a
result of which it was or is subject to a judgment, order, decree or final order
enjoining future violations of, or prohibiting or mandating activities subject
to, federal or state securities laws or finding any violation with respect to
such laws.
(f) The Estate is subject to the laws of the State of Mississippi.
ITEM 3. Source and Amount of Funds or Other Consideration.
Not applicable.
<PAGE>
ITEM 4. Purpose of Transaction.
On January 4, 1998, Joe Frank Sanderson died. The 3,229,672 shares of
Common Stock that Mr. Sanderson owned of record are now owned of record by
the Estate. The co-executors of the Estate are Mr. Sanderson's sons, Joe F.
Sanderson, Jr. and William R. Sanderson (the ACo-executors@).
The Estate does not have any plans or proposals that relate to or would
result in any of the following actions:
- - the acquisition by any person of additional securities of the Company or
the disposition of securities of the Company, other than the distribution
of the Common Stock held by the Estate to the heirs and legatees under the
decedent's last will. Those heirs and legatees are primarily the
decedent's four children, who include the Co-executors;
- - an extraordinary corporate transaction, such as a merger,
reorganization or liquidation, involving the Company or any of its
subsidiaries;
- - a sale or transfer of a material amount of assets of the Company or any
of its subsidiaries;
- - any change in the present board of directors or management of the Company,
including any plans or proposals to change the number or term of directors
or to fill any vacancies on the board;
- - any material change in the present capitalization or dividend policy of
the Company;
- - any other material change in the Company's business or corporate
structure;
- - changes in the Company's charter, by-laws or instruments corresponding
thereto or other actions which may impede the acquisition of control of
the Company by any person;
- - causing a class of securities of the Company to be delisted from a
national securities exchange or to cease to be authorized to be quoted in
an inter-dealer quotation system of a registered national securities
association;
- - causing a class of securities of the Company to become eligible for
termination of registration pursuant to Section 12(g)(4) of the
Exchange Act; or
- - any action similar to any of those enumerated above.
<PAGE>
Both of the Co-executors are directors of the Company (and one is an
officer of the Company) and, as such, participate in deliberations of the Board
of Directors and Executive Committee that could involve actions such as the
foregoing from time to time.
ITEM 5. Interest in Securities of the Issuer.
(a) The Estate is the beneficial owner of 3,229,672 shares of Common
Stock, representing approximately 23.5% of the shares of Common Stock of the
Company outstanding.
(b) The Co-executors of the Estate share the power to vote or to direct
the vote and to dispose or to direct the disposition (including selling or
encumbering the shares or distributing them to heirs and legatees) of the
3,229,672 shares of Common Stock owned of record by the Estate. Pursuant to Rule
13d-4 of the Exchange Act, each of the Co-executors disclaims the beneficial
ownership of the 3,229,672 shares of Common Stock owned of record by the Estate.
Joe F. Sanderson, Jr. is the President and Chief Executive Officer of the
Company and the Chairman of the Board of Directors of the Company. William R.
Sanderson is employed as the Director of Marketing for the Company and is a
member of the Board of Directors of the Company. The business address for each
of them is 225 N. 13th Street, Laurel, Mississippi 39440. During the last five
years, neither of them has been (a) convicted in a criminal proceeding
(excluding any traffic violations and similar misdemeanors) or (b) a party to a
civil proceeding of a judicial or administrative body of competent jurisdiction
as a result of which he was or is subject to a judgment, order, decree or final
order enjoining future violations of, or prohibiting or mandating activities
subject to, federal or state securities laws or finding any violation with
respect to such laws. They are both citizens of the United States.
(c) During the past sixty days, the Estate has not effected any
transactions involving the Common Stock of the Company.
(d) To the knowledge of the Estate, no other person has the right to
receive or the power to direct the receipt of dividends from, or the proceeds
from the sale of, the 3,229,672 shares of Common Stock owned of record by the
Estate.
(e) Not applicable.
ITEM 6. Contracts, Arrangements, Understandings or Relationships With
Respect to Securities of the Issuer.
Pursuant to a Pledge Agreement dated as of March 31, 1999 between Bank of
America National Trust and Savings Association (the "Lender") and the
Co-executors of the Estate, solely in their capacities as co-executors, the
Estate has pledged 3,150,672 of its shares of Common Stock to secure its
obligations under the Loan Agreement dated as of March 31, 1999 between the
Lender and the Co-executors, solely in their capacities as co-executors. The
Loan Agreement pertains to borrowings of $13,500,000, the proceeds of which were
used primarily to pay estate taxes.
<PAGE>
The Lender has recently notified the Estate that the decline in market
value of the Common Stock pledged as collateral for the Loan Agreement has
caused the Estate to have insufficient collateral for the loan, in violation of
the Loan Agreement. The Estate has been unable to cure this violation and is in
the process of negotiating with another lender to take over the loan. The Estate
has not received a notice of default from the Lender. A copy of the Loan
Agreement is filed herewith as Exhibit 1, and a copy of the Pledge Agreement is
filed herewith as Exhibit 2.
Description of the contents of any document referred to in this Schedule
13D and filed as an exhibit hereto is necessarily not complete and, in each
instance, reference is made to the document itself which is filed as an exhibit
herewith.
ITEM 7. Material to be Filed as Exhibits.
EXHIBIT 1 Loan Agreement dated as of March 31, 1999 between Bank of
America National Trust and Savings Association and Joe
Franklin Sanderson, Jr. and William Ramon Sanderson, not
individually but solely as co-executors of the Estate of
Joe Franklin Sanderson, deceased.
EXHIBIT 2 Pledge Agreement dated as of March 31, 1999 between Bank of
America National Trust and Savings Association and Joe
Franklin Sanderson, Jr. and William Ramon Sanderson, not
individually but solely as co-executors of the Estate of
Joe Franklin Sanderson, deceased.
SIGNATURE.
After reasonable inquiry and to the best of my knowledge and belief, the
undersigned certify that the information set forth in this statement is true,
complete and correct.
ESTATE OF JOE FRANK SANDERSON
By:/Joe F. Sanderson, Jr.
Joe F.Sanderson, Jr., Co-Executor
By:/s/William R. Sanderson
William R. Sanderson, Co-Executor
Dated: December 15, 1999
<PAGE>
EXHIBIT 1
Bank of America Loan Agreement
National Trust and
Savings Association
231 South LaSalle Street
Chicago, Illinois 60697
This Agreement, dated as of March 31, 1999, is between BANK OF AMERICA
NATIONAL TRUST AND SAVINGS ASSOCIATION (the "Bank") and JOE FRANKLIN SANDERSON,
JR. AND WILLIAM RAMON SANDERSON, NOT INDIVIDUALLY BUT SOLELY AS CO-EXECUTORS OF
THE ESTATE OF JOE FRANKLIN SANDERSON, DECEASED (the "Borrower").
1. TERM LOAN AMOUNT AND TERMS.
1.1 Term Loan Amount. The Bank agrees to provide a term loan (the "Term
Loan") to the Borrower in the amount of $13,500,000 (the "Term Loan
Commitment").
1.2 Availability Period. The Term Loan is available in one disbursement
from the Bank between the date of this Agreement and April 15, 1999,
unless an Event of Default has occurred.
1.3 Interest Rate. The interest rate is a per annum rate equal to 7.64%.
1.4 Repayment Terms.
(a) Interest. The Borrower will pay interest on July 1, 1999, and
then quarterly thereafter on the first day of each January,
April, July and October thereafter until payment in full of
any principal outstanding under the Term Loan.
(b) Principal. The Borrower will repay (i) $1,000,000 of the
principal in 8 successive quarterly installments of
$125,000 starting on April 1, 2000 and on the first day of
each January, April, July and October thereafter through
and including January 1, 2002, and (ii) the remaining
principal in 16 successive quarterly installments of
$781,250 starting April 1, 2002 and on the first day of
each January, April, July and October thereafter. On
January 1, 2006, the Borrower will repay the remaining
principal balance plus any interest then due.
(c) Prepayments Prohibited. The Borrower may not prepay the
outstanding principal amount of the Term Loan in full or in
part.
<PAGE>
(d) Prepayment Penalty. In the event that the Borrower prepays the Term
Loan in violation of Section 1.4(c) for any reason, such prepayment will be
accompanied by payment of all accrued interest on the amount prepaid, plus an
amount equal to the amount of interest that would have otherwise been paid on
the portion of the Term Loan so prepaid through and including April 1, 2006.
2. EXPENSES.
The Borrower agrees to pay or, if previously paid by the Bank, reimburse
the Bank upon demand, whether or not any loan is made under this Agreement, for:
(a) Filing and search fees, documentation fees, and other similar
fees, costs and expenses incurred by the Bank in connection
with this Agreement.
(b) The reasonable fees or expenses of the Bank's outside counsel,
Rudnick & Wolfe, relating to the preparation of this Agreement
and any agreement or instrument required by this Agreement.
(c) Any stamp or other taxes which may be payable with respect to
the execution or delivery of this Agreement or any agreement
or instrument required by this Agreement.
The amounts payable by the Borrower under this Section 2 shall be calculated so
that in all events the Borrower will not be responsible for paying the same cost
or expense more than once. The Borrower will be provided with statements in
reasonable detail setting forth all fees, costs and expenses payable by the
Borrower.
3. DISBURSEMENTS, PAYMENTS AND COSTS.
3.1 Requests for Credit. Each request for an extension of credit will be
made in writing in a manner acceptable to the Bank, or by another
means acceptable to the Bank.
3.2 Disbursements and Payments. Each disbursement by the Bank will
--------------------------
be made in immediately available funds and will be evidenced by
records kept by the Bank. Each payment made by the Borrower will
be made without set-off or counterclaim in immediately available
funds not later than 2:00 p.m., Chicago time, on the date called
for under this Agreement at the Bank's office at 231 South
LaSalle Street, Chicago, Illinois 60697. Funds received on any
day after such time will be deemed to have been received on the
next Banking Day. Whenever any payment to be made under this
Agreement is stated to be due on a day which is not a Banking
Day, such payment will be made on the next succeeding Banking Day
and such extension of time will be included in the computation of
any interest.
3.3 Banking Days. Unless otherwise provided in this Agreement, a
------------
"Banking Day" is a day other than a Saturday or a Sunday on which
the Bank is open for business in Chicago, Illinois. All payments
and disbursements which would be due on a day which is not a
Banking Day will be due on the next Banking Day. All payments
received on a day which is not a Banking Day will be applied to
the Term Loan on the next Banking Day.
3.4 Additional Costs. The Borrower will pay the Bank, on demand, for
----------------
the Bank's costs or losses arising from any statute or
regulation, or any request or requirement of a regulatory agency,
which in any such case is applicable to all national banks or a
class of all national banks and imposed on the Bank by virtue of
the Bank's status as a national bank. The costs and losses will
be allocated to the Term Loan in a manner determined by the Bank,
using any reasonable method. The costs include the following:
(a) any reserve or deposit requirements; and
<PAGE>
(b) any capital requirements relating to the Bank's assets and
commitments for credit.
The costs under this Section 3.4 will not include (i) costs that are imposed and
assessed on the date of this Agreement by existing statutes or regulations, or
(ii) taxes imposed on the overall net income of the Bank. The provisions of this
Section 3.4 will not be applicable following repayment in full of the Term Loan.
3.5 Interest Calculation. Except as otherwise stated in this Agreement,
all interest and fees, if any, will be computed on the basis of a
360 day year and the actual number of days elapsed. Installments of
principal which are not paid when due under this Agreement shall
continue to bear interest until paid.
3.6 Default Rate. Upon written notice from the Bank to the Borrower
------------
of the occurrence of any Event of Default, advances under this
Agreement will bear interest during the continuance of such Event
of Default at a rate per annum which is 4% higher than the Bank's
Reference Rate. This will not constitute a waiver of any Event
of Default. Any interest, fees or costs which are not paid when
due shall bear interest at the Bank's Reference Rate plus 4%.
This may result in compounding of interest. The Bank will
notify the Borrower in writing of the imposition of such default
rate of interest. The "Reference Rate" is the rate of interest
publicly announced from time to time by the Bank in San
Francisco, California, as its Reference Rate. The Reference Rate
is set by the Bank based on various factors, including the Bank's
costs and desired return, general economic conditions and other
factors, and is used as a reference point for pricing some
loans. The Bank may price loans to its customers at, above or
below the Reference Rate. Any change in the Reference Rate will
take effect at the opening of business on the day specified in
the public announcement of a change in the Bank's Reference Rate.
4. COLLATERAL.
4.1 Borrower's Obligations. The Borrower's obligations
----------------------
to the Bank under this Agreement will be secured by the
shares of the common stock of Sanderson Farms, Inc.
referred to in the Pledge Agreement, dated the date hereof
(the "Securities"), between the Borrower and the Bank and
may also be secured by cash or cash equivalents pursuant to
the terms of the Security Agreement (Deposit Accounts),
dated the date hereof by the Borrower in favor of the Bank.
4.2 Under Margin - Additional Pledge. If for any reason, including a
---------------------------------
decline in the Market Value of the Securities, the ratio (the
"Loan-to-Value Ratio") of (i) the remainder of (x) the unpaid
principal amount of the Term Loan, minus (y) the amount of any
cash or cash equivalents subject to a first priority security
interest in favor of the Bank and securing the obligations of the
Borrower with respect to the principal of the Term Loan, to (ii)
the Market Value of the Securities, exceeds 45%, the Bank will
notify the Borrower that the Borrower is under margin. Within
five Banking Days of the giving of any such notice by the Bank,
the Borrower will cause the Loan-to-Value Ratio to be reduced to
35% by either (i) with the consent of the Bank, making a payment
on the Term Loan in the amount of the shortfall, or (ii) pledging
to the Bank additional collateral that is acceptable to the Bank
in its sole discretion exercised in a commercially reasonable
manner. It is acknowledged by the Bank that the common stock of
Sanderson Farms, Inc. and cash or cash equivalents are acceptable
collateral. "Market Value" means, to the extent quotations are
available, the closing sale price of the Securities on the
preceding Banking Day as appearing on any regularly published
reporting or quotation service or, if there is no closing sale
price, any reasonable estimate used by the Bank in accordance
with sound banking practices; provided, however, that any equity
-------- -------
Securities having a closing sale price of less than $6 per share
or unit shall be deemed to have a Market Value of zero dollars
($0).
<PAGE>
4.3 Application of Cash Collateral. In the event that at any time the
Borrower has granted to the Bank a first priority security interest in cash or
cash equivalents as collateral for the Term Loan, as provided in Sections 4.2
and 7.10, provided that no Event of Default has occurred and is continuing and
that after giving effect to any such application the 35% Loan to Value Ratio
required by Section 4.2 is maintained, upon the request of the Borrower the Bank
will permit the application of such cash or cash equivalents to regularly
scheduled principal installments of the Term Loan or to the principal or
interest installments or payments on the Term Loan, as the case may be.
5. CONDITIONS.
The Bank must receive the following items, in form and content acceptable
to the Bank, before it is required to extend any credit to the Borrower under
this Agreement:
5.1 Authorizations. Evidence that the execution, delivery and
performance by the Borrower of this Agreement and any agreement or
instrument required by this Agreement have been duly authorized.
5.2 Pledge Agreement. A signed original Pledge Agreement providing for a
pledge by the Borrower to the Bank of 2,600,000 shares of the common
stock of Sanderson Farms, Inc., together with stock certificates
representing such shares and blank stock powers.
5.3 Security Agreement. A signed original Security Agreement (Deposit
Accounts) providing for the grant of a security interest by the Borrower to the
Bank in the money market account or accounts or certificate(s) of deposit of the
Borrower maintained with the Bank for that purpose.
5.4 Evidence of Priority. Evidence that security interests and liens in
favor of the Bank are valid, enforceable, and prior to all others'
rights and interests, except those the Bank consents to in writing.
5.5 Co-Executors' Certificate. A certificate of the co-executors of the
Borrower concerning such matters as the Bank may reasonably require,
together with a copy of the evidence of the appointment and
authority of the co-executors of the Borrower.
5.6 Legal Opinion. A written opinion from the Borrower's legal counsel,
Butler, Snow, O'Mara, Stevens & Cannada, PLLC, covering such matters
as the Bank may require. The terms of the opinion
must be acceptable to the Bank.
5.7 Form U-1. Federal Reserve Form U-1 executed by the Borrower.
5.8 Probate Court Authorization. An order from the Chancery Court of the
Second Judicial District of Jones County, Mississippi (a)
authorizing the Term Loan, and (b) finding that the Term Loan was
necessarily incurred in the administration of the Estate of Joe
Franklin Sanderson, Deceased.
5.9 Payment of Fees. Payment of all accrued and unpaid expenses
incurred by the Bank as required by the Section of this Agreement
entitled "Expenses".
5.10 Other Items. Any other items that the Bank reasonably requires.
6. REPRESENTATIONS AND WARRANTIES.
When the Borrower signs this Agreement, and until the Bank is repaid in
full, the Borrower makes the following representations and warranties. Each
request for an extension of credit constitutes a renewed representation.
<PAGE>
6.1 Authorization. This Agreement, and any instrument or agreement
required hereunder, are within the Borrower's powers and have
been duly authorized.
6.2 Enforceable Agreement. This Agreement is a legal, valid and binding
agreement of the Borrower, enforceable against the Borrower in
accordance with its terms, and any instrument or agreement required
hereunder, when executed and delivered, will be similarly legal,
valid, binding and enforceable.
6.3 No Conflicts. This Agreement does not conflict with any law,
agreement, or obligation by which the Borrower is bound.
6.4 Financial Information. All financial and other information that has
been or will be supplied to the Bank, including the Borrower's
financial statement dated as of December 31, 1998, is:
(a) sufficiently complete to give the Bank accurate knowledge of the
Borrower's financial condition including all material
contingent liabilities.
(b) in compliance with all government regulations that apply.
Since the date of the financial statement specified above, there has been no
material adverse change in the Borrower's ability to repay the Term Loan.
6.5 Lawsuits. As of the date of this Agreement, there is
no lawsuit, tax claim or other dispute pending or
threatened against the Borrower or the Borrower's property,
which, if lost, would impair the Borrower's financial
condition or would impair the Borrower's ability to repay
the Term Loan, except as disclosed in writing to the Bank.
It is acknowledged by the Bank that the Borrower has
disclosed to the Bank that inchoate liens may exist against
the property of the Borrower for state and federal estate
taxes until such taxes are paid.
6.6 Collateral. All collateral required in this Agreement is owned
by the grantor of the security interest free of any title defects
or any liens or interests of others, except as disclosed in
writing to the Bank. It is acknowledged by the Bank that the
Borrower has disclosed to the Bank that inchoate liens may exist
against the property of the Borrower for state and federal estate
taxes until such taxes are paid.
6.7 Other Obligations. As of the date of this Agreement, the Borrower is
not in default on any obligation for borrowed money, any purchase
money obligation or any other material lease, commitment, contract,
instrument or obligation.
6.8 Income Taxes. As of the date of this Agreement, the Borrower has
filed (or has obtained extension of the due date from the
applicable authorities) all tax returns required to be filed and
has paid, or made adequate provisions for the payment of, all
taxes due and payable pursuant to such returns and pursuant to
any assessments made against the Borrower or any of the
Borrower's property. As of the date of this Agreement, no tax
liens have been filed and no material claims are being asserted
with respect to any such taxes. As of the date of this
Agreement, the Borrower is not aware of any proposed assessment
or adjustment for additional taxes (or any basis for any such
assessment) which might be material to the Borrower.
6.9 No Event of Default. There is no event which is, or with notice or
lapse of time or both would be, an Event of Default under this
Agreement.
<PAGE>
6.10 Sanderson Farms, Inc. Stock Ownership. As of the date of this
Agreement, Borrower owns not less than 3,000,000 shares of the common stock
of Sanderson Farms, Inc.
7. COVENANTS.
The Borrower agrees, so long as credit is available under this Agreement
and until the Bank is repaid in full:
7.1 Use of Proceeds. To use the proceeds of the Term Loan only for the
payment of Federal and Mississippi state estate taxes and income
taxes.
7.2 Financial Information. To provide the following financial
information and statements in form and content acceptable to the
Bank and such additional information as reasonably requested by the
Bank from time to time:
(a) The Borrower's annual financial statements in form
satisfactory to Bank by February 15 of each year.
(b) The Borrower's quarterly financial statements in form
satisfactory to the Bank within 30 days after the end of each
calendar quarter.
(c) Copies of the Borrower's federal income tax return (with all
forms K-1 attached), within 30 days of filing, and, if
requested by the Bank, copies of any extensions of the filing
date.
7.3 Transfers to Trusts. Not to transfer any of the Borrower's assets to
a trust, except for transfers permitted by Section 7.10 which
permitted transfers may include transfers to the Joe Frank and Ann
Sanderson Family Trust established pursuant to the Last Will and
Testament of Joe Franklin Sanderson.
7.4 Other Debts. Not to have outstanding or incur any direct or
contingent liabilities or lease obligations (other than those to the
Bank), or become liable for the liabilities of others, without the
Bank's written consent. This does not prohibit:
(a) Liabilities for, and debt incurred by the Borrower to pay, estate taxes
which are in excess of the amounts currently estimated to be due from the
Borrower as disclosed in writing to the Bank and which are due and payable.
(b) Debt not exceeding $250,000 in aggregate principal amount at any
time outstanding incurred to provide for the payment of operating costs of
the property known as Pine Lane Ranch owned by the Joe Frank Sanderson
Family Limited Partnership.
(c) Liabilities for administration expenses of the Estate (as defined
below) including, but not limited to, fees and expenses of attorneys,
accountants and other professionals and income and capital gains taxes and
liabilities incurred in the ordinary course in connection with the
maintenance or sale of the assets of the Estate.
(d) Liabilities for income taxes which are not yet due and payable.
(e) Contingent liabilities permitted by this Agreement.
<PAGE>
(f) At any time from and during the period that the Borrower has
granted to the Bank a first priority security interest in
cash or cash equivalents as collateral for the Term Loan
(the "Cash Collateral") equal to the sum (the "Principal
and Interest Cash Collateral Requirement") of (i) the
outstanding principal balance of the Term Loan, plus (ii)
the present value (as determined by the Bank using a
commercially reasonable discount rate acceptable to the
Bank) of the remaining interest payments on the Term Loan
through and including April 1, 2006, additional debt for
borrowed money without limitation.
7.5 Other Liens. Not to create, assume, or allow any security
interest or lien (including judicial liens) on property the
Borrower now or later owns, except:
(a) Mortgages or deeds of trust and security agreements in favor of
the Bank.
(b) Liens for state and federal estate taxes and income taxes not
yet due.
(c) Liens on assets of the Borrower which are not subject to a
security interest in favor of the Bank and which secure
indebtedness permitted by Section 7.4.
(d) Liens limited to the Pine Lane Ranch assets securing loans
permitted by Section 7.4(b).
(e) Liens arising by operation of law, which liens and/or the
obligation secured thereby are being contested by the Borrower in good
faith by proper legal actions or proceedings, and as to which the Borrower
has given the Bank written notice of its intention to contest such lien
and/or obligation and at the time of commencement of any such action or
proceeding, and during the pendency thereof (i) no Event of Default shall
have occurred and be continuing, (ii) adequate reserves with respect to
the obligation which such lien secures are maintained on the books of the
Borrower, (iii) such contest operates to suspend collection of the
obligation such lien secures and such contest is maintained and prosecuted
continuously with diligence, (iv) none of the collateral for the Term Loan
would be subject to forfeiture or loss of the security interest in favor
of the Bank by reason of the institution or prosecution of such contest,
and (v) the Borrower promptly pays or discharges the obligation secured by
such lien, and provides to the Bank evidence thereof satisfactory to the
Bank, if such contest is terminated or discontinued adversely to the
Borrower.
(f) Liens securing debt permitted by Section 7.4(f).
7.6 Notices to Bank. To promptly notify the Bank in writing of:
(a) any lawsuit over $500,000 against the Borrower or any of the
Borrower's property.
(b) any substantial dispute between the Borrower and any
government authority.
(c) any failure to comply with this Agreement.
(d) any material adverse change in the Borrower's financial condition.
7.7 Compliance with Laws. To comply with the laws, regulations, and
orders of any government body with authority over the Borrower.
7.8 Perfection of Liens. To help the Bank perfect and protect its
security interests and liens, and reimburse it for related
reasonable out-of-pocket expenses and reasonable fees of outside
counsel it incurs to protect its security interests and liens.
7.9 Cooperation. To take any action reasonably requested by the Bank to
carry out the intent of this Agreement.
<PAGE>
7.10 Disposition of Assets. Not to, without the Bank's written
consent, distribute or transfer without receipt of fair market
value consideration any shares of the common stock of Sanderson
Farms, Inc. held by the Borrower or all or a substantial part of
the Borrower's other assets; provided, however, that if no Event
of Default has occurred and is continuing or would exist
immediately after the distribution and after giving effect to the
distribution the 35% Loan to Value Ratio required by Section 4.2
is maintained:
(i) during the period from the date hereof through and including
December 31, 2000, the Borrower may, in each calendar year during such
period, distribute to the legatees of the Estate of Joe Franklin
Sanderson, Deceased (the "Estate") not more than (x) 200,000 shares in the
aggregate of the common stock of Sanderson Farms, Inc. (or an equivalent
amount of cash) which are not pledged to the Bank, plus, during the
calendar year ending December 31, 2000, (y) the number of such shares of
common stock of Sanderson Farms, Inc. (or an equivalent amount of cash)
permitted to be distributed during the immediately preceding calendar year
by clause (x) above and not so distributed during the immediately
preceding calendar year;
(ii) from and after December 31, 2000 the Borrower may distribute to
the legatees of the Estate any of the shares of the common stock of
Sanderson Farms, Inc. (or an equivalent amount of cash) which was
permitted to be distributed under clause (i) above and which was not
distributed during the period specified in clause (i);
(iii) during the period commencing on January 1, 2001 and
thereafter, if shares of common stock of Sanderson Farms, Inc. have been
released from the lien of the Pledge Agreement referred to in Section 5.2
hereof (the "Pledge Agreement") pursuant to Section 8 of the Pledge
Agreement and provided that after giving effect to the distribution the
Borrower's Net Worth (as defined below) is not less than $2,500,000, the
Borrower may, in each calendar year during such period distribute to the
legatees of the Estate not more than 200,000 shares in the aggregate of
the common stock of Sanderson Farms, Inc. (or an equivalent amount of
cash) which are not pledged to the Bank. Notwithstanding the foregoing, in
the event that pursuant to Section 4.2 the Borrower has granted to the
Bank a security interest in Cash Collateral equal to the outstanding
principal balance of the Term Loan, no Event of Default has occurred or is
continuing or would occur as a result of the distribution or sale and
after giving effect to the distribution or sale the Borrower's Net Worth
is not less than $2,500,000, Borrower may distribute to the legatees of
the Estate any number of shares of the common stock of Sanderson Farms,
Inc.; provided, however, that the Borrower will not have to satisfy such
Net Worth requirement if the Borrower has granted to the Bank a security
interest in Cash Collateral equal to the Principal and Interest Cash
Collateral Requirement. At least one Banking Day prior to any distribution
permitted under this clause (iii) for which a minimum Net Worth is
required, the Borrower shall deliver to the Bank a written verification of
the Borrower's Net Worth, in form and content acceptable to the Bank and
as of the date not more than 30 days prior to the date of delivery,
together with a projection of the Borrower's Net Worth immediately after
the proposed distribution. "Net Worth" means the gross fair market value
of the Borrower's assets (excluding all intangibles and all collateral in
which the Bank has a security interest as security for the Term Loan) less
total liabilities (excluding the Term Loan), including, but not limited
to, estimated taxes.
Not to, without the prior written consent of the Bank, distribute,
transfer, dispose or utilize dividends paid with respect to common stock of
Sanderson Farms, Inc. held by the Estate; provided, however, that the Borrower
may utilize dividends received on the shares of common stock of Sanderson Farms,
Inc. held by the Borrower, to pay expenses of the Estate including income tax
obligations, professional fees and expenses and other customary fees and
expenses incurred in connection with the administration of the Estate,
including, but not limited to, fees and expenses of attorneys, accountants and
other professionals and income and capital gains taxes and liabilities incurred
in the ordinary course in connection with the maintenance or sale of the assets
of the Estate.
<PAGE>
The provisions of this Section 7.10 are not intended to and do not
prohibit the Borrower from selling shares of the common stock of Sanderson
Farms, Inc. which at the time of such sale are held by the Bank as collateral
for the Term Loan provided that (i) at the time of such sale no Event of Default
has occurred and is continuing, (ii) the Bank receives as substitute collateral
such portion of the proceeds of such sale as are necessary to maintain the 35%
Loan to Value Ratio required by Section 4.2, and (iii) such sale is effected in
a manner reasonably acceptable to the Bank which provides for an uninterrupted
security interest in favor of the Bank in the stock to be sold and following the
sale, the proceeds thereof.
The provisions of this Section 7.10 are not intended to and do not
prohibit the Borrower from paying liabilities of the Estate permitted by this
Agreement from the assets of the Estate which are not serving as collateral for
the Term Loan.
The provisions of this Section are not intended to and do not prohibit
liens permitted by Section 7.5.
110 Termination. Not to close the Estate.
120 Income Taxes. The Borrower will file (or obtain extension of the due
date from the applicable authorities) all tax returns required to be filed and
pay, or make adequate provisions for the payment of, all taxes due and payable
pursuant to such returns and pursuant to any assessments made against the
Borrower or any of the Borrower's property.
8. DEFAULT.
If any of the following events ("Events of Default") occurs, the Bank may
do one or more of the following: declare the Borrower in default (of which
declaration prompt notice shall be given to the Borrower), stop making any
additional credit available to the Borrower, and require the Borrower to repay
the entire Term Loan immediately and without prior notice. If an Event of
Default occurs under the section entitled "Bankruptcy" below, then the entire
Term Loan outstanding under this Agreement will automatically become due
immediately.
8.1 Failure to Pay. The Borrower fails to make a payment under this
Agreement within five days when due.
8.2 Lien Priority. The Bank fails to have an enforceable first lien
(except for any prior liens to which the Bank has consented in
writing) on or security interest in any property given as security
for the Term Loan.
8.3 False Information. The Borrower has given the Bank false or
misleading information or representations.
8.4 Termination. The Borrower is terminated.
8.5 Bankruptcy. The Borrower files a bankruptcy petition, a
bankruptcy petition is filed against the Borrower and is not
dismissed within 60 days, or the Borrower makes a general
assignment for the benefit of creditors. The default will be
deemed cured if any bankruptcy petition filed against the
Borrower is dismissed within a period of 60 days after the
filing; provided, however, that the Bank will not be obligated to
extend any additional credit to the Borrower during that period.
8.6 Receivers; Termination. A receiver or similar official is appointed
for the Borrower's assets.
8.7 Lawsuits. Any lawsuit or lawsuits are filed against the Borrower in
an aggregate amount of $500,000 or more in excess of the sum of (i)
any insurance coverage and (ii) the unencumbered assets of the
Borrower which is not dismissed within 180 days of the date when
filed.
<PAGE>
8.8 Judgments. Any judgments or arbitration awards are entered
against the Borrower; or the Borrower enters into any settlement
agreements (excluding settlement agreements with respect to the
Borrower's Federal or Mississippi state estate tax liability)
with respect to any litigation or arbitration, in an aggregate
amount of $500,000 or more in excess of the sum of (i) any
insurance coverage, and (ii) the fair market value of any
unencumbered assets of the Borrower.
8.9 Material Adverse Change. A material adverse change occurs, or is
reasonably likely to occur, in the Borrower's ability to repay
the Term Loan.
8.10 Cross Default. Any default occurs under any agreement in connection
with any credit the Borrower has obtained from anyone else or which
the Borrower has guaranteed, in the amount of $100,000 or more in
the aggregate, if the default consists of failing to make a payment
when due or gives the other lender the right to accelerate the
obligation.
8.11 Default under Related Documents. Any guaranty, subordination
agreement, security agreement, mortgage, deed of trust, or other
document required by this Agreement is violated by the Borrower or
no longer in effect without the Bank's concurrence.
8.12 Other Bank Agreements. The Borrower fails to meet the conditions of,
or fails to perform any obligation under, any other agreement the
Borrower has with the Bank or any affiliate of the Bank or demand is
made by the Bank or an affiliate of the Bank on an obligation owing
to the Bank or such affiliate under any other agreement the Borrower
has with the Bank or any affiliate of the Bank.
8.13 Use of Proceeds. The Borrower does not utilize or invest the
proceeds of any extension of credit made under this Agreement
for the purposes described in Section 7.1.
8.14 Other Breach under Agreement. The Borrower fails to perform any
obligation under any term of this Agreement not specifically
referred to in this Article 8. If, in the Bank's opinion, the
breach is capable of being remedied, the breach will not be
considered an Event of Default under this Agreement for a period
of 30 days after the date on which the Bank gives written notice
of the breach to the Borrower; provided, however, that the Bank
will not be obligated to extend any additional credit to the
Borrower during that period.
9. ENFORCING THIS AGREEMENT; MISCELLANEOUS.
9.1 Financial Computations. Except as otherwise stated in this
Agreement, all financial information provided to the Bank and all
financial covenants will be made in accordance with accounting
principles applied consistently with those applied in the
preparation of the Borrower's financial statements dated December
31, 1998.
9.2 Adjustment of Number of Shares. The number of shares of Sanderson
Farms, Inc. common stock designated in Section 7.10 of this Agreement shall be
automatically adjusted to give effect to any stock split or similar event.
9.3 Illinois Law. THIS AGREEMENT IS GOVERNED BY THE INTERNAL LAWS OF
THE STATE OF ILLINOIS.
<PAGE>
9.4 Successors and Assigns. This Agreement is binding on the Borrower's
and the Bank's successors and assignees. The Borrower agrees that
the Borrower may not assign this Agreement without the Bank's prior
consent. The Bank may sell participations in or assign the Term
Loan, but will give the Borrower prior written notice thereof.
9.5 Severability; Waivers. If any part of this Agreement is not
enforceable, the rest of the Agreement may be enforced. The Bank
retains all rights, even if it makes a loan after default. If the
Bank waives a default, it may enforce a later default. Any consent
or waiver under this Agreement must be in writing.
9.6 Attorneys' Fees. Except as provided in the next sentence, the
Borrower shall pay or, if previously paid by the Bank, reimburse
the Bank for any reasonable costs and attorneys' fees incurred by
the Bank in connection with the enforcement or preservation of
any rights or remedies under this Agreement and any other
documents executed in connection with this Agreement, and in
connection with any amendment, waiver, "workout" or restructuring
under this Agreement. In the event of a lawsuit or arbitration
proceeding, the prevailing party is entitled to recover costs and
reasonable attorneys' fees incurred in connection with the
lawsuit or arbitration proceeding, as determined by the court or
arbitrator. In the event that any case is commenced by or
against the Borrower under the Bankruptcy Code (Title 11, United
States Code) or any similar or successor statute, the Bank is
entitled to recover costs and reasonable attorneys' fees incurred
by the Bank related to the preservation, protection, or
enforcement of any rights of the Bank in such a case.
9.7 One Agreement. This Agreement and any related security or other
agreements required by this Agreement, collectively:
(a) represent the sum of the understandings and agreements between
the Bank and the Borrower concerning this credit;
(b) replace any prior oral or written agreements between the Bank
and the Borrower concerning this credit; and
(c) are intended by the Bank and the Borrower as the final,
complete and exclusive statement of the terms agreed to by
them.
In the event of any conflict between this Agreement and any other agreements
required by this Agreement, this Agreement will prevail.
9.8 Indemnification. The Borrower will defend, indemnify and hold
the Bank harmless from any loss, liability, damages, judgments,
and costs of any kind arising from claims, actions or proceedings
asserted or instituted by parties other than the Borrower
relating to or arising directly or indirectly out of (a) this
Agreement or any document required hereunder, (b) any credit
extended or committed by the Bank to the Borrower hereunder, and
(c) any litigation or proceeding related to or arising out of
this Agreement, any such document, or any such credit, except for
any loss, liability, damages, judgments or costs incurred as a
direct result of the Bank's intentional breach of its obligations
under this Agreement or the Bank's gross negligence or willful
misconduct. This indemnity includes but is not limited to
reasonable attorneys' fees. This indemnity extends to the Bank,
its parent, subsidiaries and all of their directors, officers,
employees, agents, successors, attorneys, and assigns. This
indemnity will survive repayment of the Borrower's obligations to
the Bank. All sums due to the Bank hereunder shall be
obligations of the Borrower, due and payable immediately without
demand. The Bank will give the Borrower prompt notice of any
indemnified matter and will not settle any such matter if such
settlement results in a liability of the Borrower to the Bank
hereunder without the Borrower's prior written consent.
<PAGE>
9.9 No Future Commitment. The Borrower acknowledges that the Bank has
made no commitment to extend any additional credit to the Borrower
or to continue the credit provided hereunder after this Agreement
expires or is terminated as provided herein.
9.10 Notices. All notices required under this Agreement will be in
writing and will be transmitted by personal delivery, first class
mail, overnight courier, or facsimile to the addresses or facsimile
numbers on the signature page of this Agreement, or to such other
addresses or facsimile numbers as the Bank and the Borrower may
specify from time to time in writing.
9.11 Headings. Article and section headings are for reference only
and do not affect the interpretation or meaning of any provisions
of this Agreement.
9.12 Counterparts. This Agreement may be executed in as many counterparts
as necessary or convenient, and by the different parties on separate
counterparts each of which, when so executed, will be deemed an
original but all such counterparts constitute but one and the same
agreement.
9.13 Consent to Jurisdiction. To induce the Bank to accept this
Agreement, the Borrower irrevocably agrees that, subject to the
Bank's sole and absolute election, ALL ACTIONS OR PROCEEDINGS IN
ANY WAY ARISING OUT OF OR RELATED TO THIS AGREEMENT WILL BE
LITIGATED IN COURTS HAVING SITUS IN CHICAGO, ILLINOIS. THE
BORROWER HEREBY CONSENTS AND SUBMITS TO THE JURISDICTION OF ANY
COURT LOCATED WITHIN CHICAGO, ILLINOIS, WAIVES PERSONAL SERVICE
OF PROCESS UPON THE BORROWER, AND AGREES THAT ALL SUCH SERVICE OF
PROCESS MAY BE MADE BY REGISTERED MAIL DIRECTED TO THE BORROWER
AT THE ADDRESS STATED ON THE SIGNATURE PAGE HEREOF AND SERVICE SO
MADE WILL BE DEEMED TO BE COMPLETED UPON ACTUAL RECEIPT. THE
PROVISIONS OF THIS SECTION 9.13 DO NOT CONSTITUTE A WAIVER OF THE
BORROWER'S ABILITY TO REMOVE ANY ACTION OR PROCEEDING FROM A
STATE COURT LOCATED IN CHICAGO, ILLINOIS TO A FEDERAL COURT
LOCATED IN CHICAGO, ILLINOIS.
9.14 Waiver of Jury Trial. THE BORROWER AND THE BANK EACH WAIVES ANY
RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE
OR DEFEND ANY RIGHTS (a) UNDER THIS AGREEMENT OR ANY RELATED
AGREEMENT OR UNDER ANY AMENDMENT, INSTRUMENT, DOCUMENT OR
AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN
CONNECTION WITH THIS AGREEMENT OR (b) ARISING FROM ANY BANKING
RELATIONSHIP EXISTING IN CONNECTION WITH THIS AGREEMENT, AND
AGREES THAT ANY SUCH ACTION OR PROCEEDING WILL BE TRIED BEFORE A
COURT AND NOT BEFORE A JURY.
<PAGE>
This Agreement is executed as of the date stated at the top of the first
page.
<PAGE>
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION /s/Joe Franklin Sanderson, Jr.
JOE FRANKLIN SANDERSON, JR., AS
CO-EXECUTOR OF THE ESTATE OF JOE
By:/s/Heidi J. Westland FRANKLIN SANDERSON, DECEASED, AND
Name: NOT IN HIS INDIVIDUAL CAPACITY
Title:Vice President
/s/William Ramon Sanderson
WILLIAM RAMON SANDERSON, AS
CO-EXECUTOR OF THE ESTATE OF JOE
FRANKLIN SANDERSON, DECEASED, AND
NOT IN HIS INDIVIDUAL CAPACITY
Address where notices to the Bank
are to be sent: Address where notices to the
Borrower are to be sent:
Bank of America National Trust
and Savings Association 225 North 13th Avenue
231 South LaSalle Street Laurel, Mississippi 39440
Chicago, Illinois 60697 Facsimile No.: (601) 426-1461
Attention: Sherri Lange
Facsimile No.: (312) 987-0806
<PAGE>
STATE OF MISSISSIPPI )
) SS
COUNTY OF JONES )
Subscribed, sworn to and acknowledged before me this 24th day of March,
1999 by Joe Franklin Sanderson, Jr. and William Ramon Sanderson, as Co-Executors
of the Estate of Joe Franklin Sanderson, Deceased, who personally appeared
before me.
Witness my hand and official seal.
/s/Sarah J. Twiddy
Notary Public
My commission expires:
August 14, 2001
<PAGE>
EXHIBIT 2
Bank of America Pledge Agreement
National Trust and
Savings Association
Agreement dated as of March 31, 1999, entered into by and between JOE
FRANKLIN SANDERSON, JR. AND WILLIAM RAMON SANDERSON, NOT INDIVIDUALLY BUT SOLELY
AS CO-EXECUTORS OF THE ESTATE OF JOE FRANKLIN SANDERSON, DECEASED ("Pledgor")
and BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION ("Lender").
WHEREAS, Lender and Pledgor have entered into a certain Loan Agreement
dated as of March 31, 1999 (the "Loan Agreement").
NOW, THEREFORE, in order to induce Lender to make loans and advances to
Pledgor pursuant to the Loan Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties agree as follows:
Section 10. Pledge. Pledgor hereby pledges, hypothecates,
assigns, transfers, sets over and delivers unto Lender, and grants to Lender
a security interest in,
14. the securities described in Schedule A,
15. all securities, rights and other property described in Section
2(b)(2),
16. each certificate or other instrument representing any of the
foregoing,
17. all privileges and preferences appertaining or incidental to any
or all of the foregoing,
18. all monies of every kind and nature payable in respect of any
or all of the foregoing, and
19. the proceeds of the foregoing,
(collectively, the "Collateral"), in order to secure all obligations of Pledgor
hereunder and all obligations of Pledgor under the Loan Agreement.
Pledgor may, from time to time, cause additional securities to be included
as part of the Collateral by delivering to Lender a Pledge Amendment, duly
executed by Pledgor, in substantially the form of Schedule B (a "Pledge
Amendment"), in respect of the additional securities which are to be pledged.
Pledgor hereby authorizes Lender to attach each such Pledge Amendment to this
Agreement and agrees that all securities listed on any Pledge Amendment
delivered to Lender shall for all purposes hereunder be considered Collateral.
Section 11. Power of Attorney; Registration; Income and Voting
Rights.
20. Pledgor hereby irrevocably appoints Lender Pledgor's attorney,
coupled with an interest, with full power of substitution,
<PAGE>
1. for purposes not inconsistent with this Agreement, to arrange
for the transfer of the Collateral or any part thereof into
the name of Lender or into the name of Lender's nominee, if,
at any time, Lender shall, in its sole discretion, deem such a
transfer to be desirable, and
2. for the purpose of taking any action and executing any
instrument, in the name of Pledgor or otherwise, which
Lender may at any time deem necessary or appropriate in
order to (i) perfect its security interest in the
Collateral or any part thereof, and (ii) foreclose said
security interest or otherwise exercise its rights under
this Agreement and in and to the Collateral.
21. As long as no Default, as hereinafter defined, and no event which
with the giving of notice or the lapse of time or both would
constitute such a Default, shall have occurred and be continuing:
1. Pledgor shall be entitled to exercise any and all voting
and/or consensual rights and powers relating or pertaining to
the Collateral or any part thereof for any purpose not
inconsistent with the terms of this Agreement or the Loan
Agreement.
2. Pledgor shall, unless otherwise prohibited, be entitled to
receive and retain any and all dividends and interest on
the Collateral, but, except as otherwise provided in the
Loan Agreement, any and all other cash and other property
received in payment of the principal of or in redemption of
or in exchange for any of the Collateral (either at
maturity or otherwise), shall be and become part of the
Collateral pledged hereunder and, if received by Pledgor,
shall be held in trust for the benefit of Lender and shall
forthwith be delivered to Lender or its designated nominee
(accompanied by proper instruments of assignment and/or
stock or bond powers executed by Pledgor in accordance with
Lender's instructions) to be held subject to the terms of
this Agreement.
3. Lender shall execute and deliver (or cause to be executed and
delivered) to Pledgor all of such proxies, powers of
attorney, interest coupons and other papers as Pledgor may
request for the purpose of enabling Pledgor to exercise the
voting and/or consensual rights and powers which Pledgor is
entitled to exercise pursuant to (1) above and/or to
receive the interest which Pledgor is authorized to receive
and retain pursuant to (2) above.
22. Upon the occurrence and during the continuance of a Default
hereunder, or any event which with the giving of notice or the
lapse of time, or both, would constitute such a Default, all
rights of Pledgor to exercise the voting and/or consensual rights
and powers which Pledgor is entitled to exercise pursuant to
(b)(1) hereof and/or to receive the dividends and interest which
Pledgor is authorized to receive and retain pursuant to (b)(2)
hereof shall cease, and all such rights shall thereupon become
vested in Lender; provided, however, that Lender, as the sole
-------- -------
further condition to the vesting pursuant to this (c) of such
voting and/or consensual rights and powers of Lender, shall
notify Pledgor in writing that Lender elects to exercise such
rights and powers, and Lender shall have the sole and exclusive
right and authority to exercise such voting and/or consensual
rights and powers and/or to receive and retain the dividends and
interest which Pledgor would otherwise be authorized to retain
pursuant to (b)(2) hereof.
23. Any and all money and other property paid over to or received by
Lender pursuant to the provisions of (c) above shall be retained by
Lender as additional Collateral under, and be applied in accordance
with the provisions of this Agreement and the Loan Agreement.
Section 12. Representations and Warranties. Pledgor represents
and warrants that:
<PAGE>
24. All stock constituting Collateral is duly authorized, validly issued
and outstanding, and non-assessable, and Pledgor will warrant and
defend Pledgor's title thereto and sole beneficial ownership thereof
against all persons claiming any interest therein except Lender or
any person claiming through Lender.
25. Except for restrictions imposed by this Agreement and restrictions
on public offerings and sales of securities imposed by applicable
securities laws of the United States of America, or any state
thereof, there are not and will not be any restrictions upon the
sale or other disposition of any of the Collateral.
26. None of the Collateral was acquired pursuant to an investment
letter or in any other fashion which would restrict free
salability or require registration under applicable securities
laws of the United States of America, or any state thereof, as a
condition for sale of any of the Collateral, other than
restrictions that result from Pledgor's status as an "affiliate"
of Sanderson Farms, Inc., as such term is defined in Securities
and Exchange Commission Rule 144.
27. Except as contemplated by (b) above, Pledgor now has and will
have, without obtaining the consent of any governmental
authority, stock exchange or any other person except Lender, the
right to pledge, to grant a security interest in and otherwise to
transfer and to dispose of the Collateral free of any liens,
security interests or other encumbrances, and free of any rights
or equities in favor of any other persons, except those created
by this Agreement.
28. This Agreement is Pledgor's valid and legally binding agreement
enforceable in accordance with its terms.
Section 13. Defaults, etc. and Remedies. Any of the following shall
constitute a "Default" under this Agreement: (a) if any representation or
warranty made by Pledgor in this Agreement or in any instrument, document or
certificate furnished hereunder or in connection herewith shall prove to have
been incorrect in any material respect at the time it was made; (b) if Pledgor
fails to observe or perform any of Pledgor's covenants, agreements, obligations
and undertakings contained in this Agreement, provided that if, in Lender's
opinion, the failure is capable of being remedied, such failure will not be
considered a Default under this Agreement for a period of 30 days after the date
on which Lender gives written notice of the failure to Pledgor; or (c) if an
"Event of Default" occurs under the Loan Agreement. In the event of any such
Default, Lender shall be cumulatively or alternatively entitled, without further
notice to Pledgor, and without necessity for legal proceedings, to apply any or
all cash Collateral to the debt secured hereby; to sell (subject to applicable
securities laws) any or all of the securities serving as Collateral; and to
transfer to the name of, or register in the name of, Lender or its nominee, as
owner rather than as secured party, any or all Collateral. In addition, and not
by way of limitation of the foregoing, Lender shall have any or all remedies
provided by law, including but not limited to all rights and powers of a secured
party after default pursuant to the Uniform Commercial Code.
Section 14. Application of Proceeds of Sale, etc. Upon any exercise of
remedies following an Event of Default pursuant to Section 4, the proceeds of
any sale or other disposition of, or any collection of or realization on, any of
the Collateral, and any cash held by Lender as part of the Collateral hereunder,
shall be applied by Lender from time to time to pay:
first: all costs, fees and expenses paid by Lender or which Lender
has agreed to pay (including all amounts paid by Lender for the account of
Pledgor or to Lender's agents, brokers, outside counsel and consultants)
in connection with the exercise, protection or enforcement of Lender's
rights and remedies under this Agreement and in and to the Collateral,
including any and all taxes, assessments, charges and encumbrances of
every kind affecting the Collateral prior to the security interest created
by this Agreement which Lender may consider necessary or desirable to pay;
second: to the payment of the entire indebtedness due Lender
under the Loan Agreement;
third: the excess, if any, shall be paid to Pledgor or to
whomever is then legally entitled to receive the same.
<PAGE>
Section 15. Duty of Pledgee; Exercise of Rights and Remedies. Lender shall
have no duty as to the protection of any of the Collateral or any income with
respect thereto, nor as to the preservation of rights against prior parties, nor
as to the preservation of any rights pertaining to any of the Collateral beyond
reasonable care in its custody. Upon Default, Lender may exercise its rights and
remedies with respect to any of the Collateral without resort or regard to other
security or sources of payment for the Pledgor's obligations.
Section 16. Terms Subject to Applicable Law. All rights, powers and
remedies provided herein may be exercised only to the extent that the exercise
thereof does not violate any applicable laws, and are intended to be limited to
the extent necessary so that they will not render this Agreement invalid,
unenforceable or entitled to be recorded, registered or filed under any
applicable law. If any term of this Agreement or any application thereof shall
be held to be invalid, illegal or unenforceable, the validity of any other terms
of this Agreement or any other applications of such term shall in no way be
affected thereby.
Section 17. Release of Collateral. On payment in full of all obligations
of Pledgor hereunder and all obligations of Pledgor under the Loan Agreement,
Lender shall promptly release its security interest in the Collateral. In
addition, if at any time on or after October 1, 1999 (i) no Default has occurred
and is continuing, and (ii) the ratio of (x) remainder of (A) the unpaid
principal amount of the "Term Loan" (as defined in the Loan Agreement), minus
(B) the amount of any cash or cash equivalents subject to a first priority
security interest in favor of the Bank and securing the obligations of Pledgor
under the Loan Agreement to (y) the "Market Value" (as defined in the Loan
Agreement) of the securities included in the Collateral (the "Loan to Value
Ratio"), is not more than 30% for a period of 30 consecutive days, then in such
event Lender will, upon the written request of Pledgor, release to Pledgor the
maximum number of shares of the common stock of Sanderson Farms, Inc. included
in the Collateral which may be released without causing the Loan to Value Ratio
to exceed 35%.
Section 18. Substitution of Collateral. Pledgor may substitute cash or
cash equivalents as Collateral in substitution for shares of the common stock of
Sanderson Farms, Inc., provided that the Loan to Value Ratio does not exceed 35%
after giving effect to such substitution.
Section 19. Miscellaneous.
29. Waivers. No failure to exercise and no delay in exercising on
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the part of Lender, any right, power or remedy under this
Agreement or the Loan Agreement shall operate as a waiver
thereof; nor shall any single or partial exercise of any right,
power or remedy hereunder or thereunder preclude any other or
further exercise thereof or the exercise of any other right,
power, or remedy. The failure of Lender to insist upon the
strict observance or enforcement of any provision of this
Agreement or the Loan Agreement shall not be construed as a
waiver or relinquishment of such provision. Any waiver of any
right, power, remedy, term or condition contained herein shall
only be effective if it is in writing and signed by Lender.
30. Survival of Agreements, etc. All representations, warranties,
covenants and agreements made by Pledgor in this Agreement or in any
instrument, document or certificate furnished hereunder or in
connection herewith shall be deemed to have been relied upon by
Lender, notwithstanding any investigation heretofore or hereafter
made by Lender, and shall survive the delivery of this Agreement,
the Collateral and the incurrence of any obligations.
31. Notices. All notices required under this Agreement will be in
writing and will be transmitted by personal delivery, first class
mail, overnight courier or facsimile to the addresses or facsimile
numbers on the signature page of this Agreement, or to such other
addresses or facsimile numbers as Lender and the Pledgor may specify
from time to time in writing.
32. Amendments. This Agreement may only be amended by a writing executed
by Pledgor and Lender.
<PAGE>
33. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Illinois.
34. Consent to Jurisdiction. To induce Lender to accept this
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Agreement and enter into the Loan Agreement, Pledgor irrevocably
agrees that, subject to Lender's sole and absolute election, ALL
ACTIONS OR PROCEEDINGS IN ANY WAY ARISING OUT OF OR RELATED TO
THIS AGREEMENT OR THE LOAN AGREEMENT WILL BE LITIGATED IN COURTS
HAVING SITUS IN CHICAGO, ILLINOIS. PLEDGOR HEREBY CONSENTS AND
SUBMITS TO THE JURISDICTION OF ANY COURT LOCATED WITHIN CHICAGO,
ILLINOIS, WAIVES PERSONAL SERVICE OF PROCESS UPON PLEDGOR, AND
AGREES THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE BY REGISTERED
MAIL DIRECTED TO PLEDGOR AT THE ADDRESS STATED ON THE SIGNATURE
PAGE HEREOF AND SERVICE SO MADE WILL BE DEEMED TO BE COMPLETED
UPON ACTUAL RECEIPT. THE PROVISIONS OF THIS SECTION 10(f) DO NOT
CONSTITUTE A WAIVER OF THE BORROWER'S ABILITY TO REMOVE ANY
ACTION OR PROCEEDING FROM A STATE COURT LOCATED IN CHICAGO,
ILLINOIS TO A FEDERAL COURT LOCATED IN CHICAGO, ILLINOIS.
35. Waiver of Jury Trial. PLEDGOR AND LENDER EACH WAIVE ANY RIGHT TO
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A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND
ANY RIGHTS (a) UNDER THIS AGREEMENT, THE LOAN AGREEMENT OR ANY
RELATED AGREEMENT OR UNDER ANY AMENDMENT, INSTRUMENT, DOCUMENT OR
AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN
CONNECTION WITH THIS AGREEMENT OR THE LOAN AGREEMENT OR
(b) ARISING FROM ANY BANKING RELATIONSHIP EXISTING IN CONNECTION
WITH THIS AGREEMENT OR THE LOAN AGREEMENT, AND AGREE THAT ANY
SUCH ACTION OR PROCEEDING WILL BE TRIED BEFORE A COURT AND NOT
BEFORE A JURY.
36. Further Assurances. Pledgor agrees to cooperate with Lender and
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to execute and deliver, or cause to be executed and delivered,
all such other papers and to take all such other actions as
Lender may reasonably request from time to time in order to carry
out the provisions and purposes of this Agreement. Without
limiting the foregoing, Pledgor agrees that all securities
constituting Collateral shall at all times be in such form that
Lender may sell, transfer, or otherwise dispose of same without
any signature, action, or assistance from Pledgor; and Pledgor
agrees to deliver to Lender the Collateral (whether pledged at
inception by substitution or by addition) endorsed in blank and
with executed stock powers or bond powers, as appropriate.
Lender agrees not to sell or transfer any securities constituting
Collateral in violation of applicable securities laws.
37. Successors and Assigns. This Agreement shall be binding upon and
shall inure to the benefit of Pledgor and Lender and their
respective successors and assigns.
38. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which
when taken together shall be deemed to constitute one and the same
agreement.
39. Section Headings. The headings set forth in this Agreement are for
convenience of reference only and shall not be deemed to define or
limit the provisions hereof or to affect in any way their
construction and application.
IN WITNESS WHEREOF, Pledgor has executed and delivered this Agreement on
the date first above written.
<PAGE>
BANK OF AMERICA NATIONAL TRUST /s/Joe Franklin Sanderson, Jr.
AND SAVINGS ASSOCIATION JOE FRANKLIN SANDERSON, JR., AS
CO-EXECUTOR OF THE ESTATE OF JOE
By:/s/Heidi J. Westland FRANKLIN SANDERSON, DECEASED, AND
Name: NOT IN HIS INDIVIDUAL CAPACITY
Title:VicePresident
/s/ William Ramon Sanderson
WILLIAM RAMON SANDERSON, AS
CO-EXECUTOR OF THE ESTATE OF JOE
FRANKLIN SANDERSON, DECEASED, AND
NOT IN HIS INDIVIDUAL CAPACITY
Address where notices to Lender are to be sent:
Address where notices to Pledgor
Bank of America National Trust are to be sent:
and Savings Association
231 South LaSalle Street 225 North 13th Avenue
Chicago, Illinois 60697 Laurel, Mississippi 39440
Attention: Sherri Lange Facsimile No.: (601) 426-1461
Facsimile No.: (312) 987-0806
<PAGE>
SCHEDULE A
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Issuer Class Number of Shares Certificate Numbers
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Sanderson Farms, Inc. Common 3,085,000 *
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<PAGE>
* Stock Certificate number SFC10056 delivered by Pledgor to be DTC registered
<PAGE>
SCHEDULE B
PLEDGE AMENDMENT
This Pledge Amendment, dated ,19 is delivered pursuant to Section 1 of the
Pledge Agreement referred to below. The undersigned hereby agrees that this
Pledge Amendment may be attached to that certain Pledge Agreement, dated as of
March 31, 1999, by the undersigned, as Pledgor, to Bank of America National
Trust and Savings Association, and that the Collateral listed on this Pledge
Amendment shall be and become a part of the Collateral referred to in said
Pledge Agreement and shall secure all of the obligations referred to in said
Pledge Agreement.
Dated: , 19___
JOE FRANKLIN SANDERSON, JR., AS
CO-EXECUTOR OF THE ESTATE OF JOE
FRANKLIN SANDERSON, DECEASED, AND
NOT IN HIS INDIVIDUAL CAPACITY
WILLIAM RAMON SANDERSON, AS
CO-EXECUTOR OF THE ESTATE OF JOE
FRANKLIN SANDERSON, DECEASED, AND
NOT IN HIS INDIVIDUAL CAPACITY
DESCRIPTION OF COLLATERAL
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Issuer Class Number of Shares Certificate
Numbers
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