-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RB7aU4rXljNJ2oey6DopY4Cjh4vVLmSqo6jAAMYJ40L7hunbkrzotZizeP5Gysl9 a9VseT/XS3BF5SKVI9TyoA== 0000812128-01-000016.txt : 20010123 0000812128-01-000016.hdr.sgml : 20010123 ACCESSION NUMBER: 0000812128-01-000016 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 20001031 FILED AS OF DATE: 20010122 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SANDERSON FARMS INC CENTRAL INDEX KEY: 0000812128 STANDARD INDUSTRIAL CLASSIFICATION: POULTRY SLAUGHTERING AND PROCESSING [2015] IRS NUMBER: 640615843 STATE OF INCORPORATION: MS FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-14977 FILM NUMBER: 1512524 BUSINESS ADDRESS: STREET 1: 225 N 13TH AVE STREET 2: PO BOX 988 CITY: LAUREL STATE: MS ZIP: 39441 BUSINESS PHONE: 6016494030 MAIL ADDRESS: STREET 1: 225 N 13TH AVENUE STREET 2: PO BOX 988 CITY: LAUREL STATE: MS ZIP: 39441 10-K 1 0001.txt SANDERSON FARMS, INC. FORM 10-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) /X / Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended October 31, 2000 / / Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from to Commission file number : 0-16567 SANDERSON FARMS, INC. (Exact name of registrant as specified in its charter) Mississippi 64-0615843 (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 225 North 13th Avenue Laurel, Mississippi 39440 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (601) 649-4030 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to section 12(g) of the Act: Common Stock, $1.00 per share par value Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. X Yes No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K [ ]. Aggregate market value (based on the closing sales price in the NASDAQ National Market System) of the voting stock held by non-affiliates of the Registrant as of December 31, 2000: approximately $36,757,718. Number of Shares outstanding of the Registrant's common stock as of December 31, 2000: 13,632,955 shares of common stock, $1.00 per share par value. Portions of the Registrant's definitive proxy statement filed or to be filed in connection with its 2000 Annual Meeting of Stockholders are incorporated by reference into Part III. INTRODUCTORY Definitions. Except where the context indicates otherwise, the following terms have the following respective meanings when used in this Annual Report. "Registrant" and "Company" mean Sanderson Farms, Inc. and its subsidiaries and predecessor organizations. "Fiscal year" means the fiscal year ended October 31, 2000, which is the year for which this Annual Report is filed. Presentation and Dates of Information. Except for Item 4A herein, the Item numbers and letters appearing in this Annual Report correspond with those used in Securities and Exchange Commission Form 10-K (and, to the extent that it is incorporated into Form 10-K, the letters used in the Commission's Regulation S-K) as effective on the date hereof, which specifies the information required to be included in Annual Reports to the Commission. Item 4A ("Executive Officers of the Registrant") has been included by the Registrant in accordance with General Instruction G(3) of Form 10-K and Instruction 3 of Item 401(b) of Regulation S-K. The information contained in this Annual Report is, unless indicated to be given as of a specified date or for the specified period, given as of the date of this Report, which is January 25, 2001. PART I Item 1. Business -------- (a) GENERAL DEVELOPMENT OF THE REGISTRANT'S BUSINESS The Registrant was incorporated in Mississippi in 1955, and is a fully-integrated poultry processing company engaged in the production, processing, marketing and distribution of fresh and frozen chicken products. In addition, through its wholly-owned subsidiary, Sanderson Farms, Inc. (Foods Division), the Registrant is engaged in the processing, marketing and distribution of processed and prepared food items. The Registrant sells ice pack, chill pack and frozen chicken, in whole, cut-up and boneless form, primarily under the Sanderson Farms(R) brand name to retailers, distributors, and fast food operators principally in the southeastern, southwestern and western United States. During its fiscal year ended October 31, 2000 the Registrant processed 247.7 million chickens, or approximately 1.1 billion dressed pounds. According to 2000 industry statistics, the Registrant was the 7th largest processor of dressed chickens in the United States based on estimated average weekly processing. The Registrant's chicken operations presently encompass five hatcheries, four feed mills, six processing plants and one by-products plant. The Registrant has contracts with operators of approximately 495 grow-out farms that provide it with sufficient housing capacity for its current operations. The Registrant also has contracts with operators of 152 breeder farms. The Registrant sells over 200 processed and prepared food items nationally and regionally, primarily to distributors, national food service accounts, retailers and club stores. These food items include frozen entrees, such as chicken and dumplings, lasagna, seafood gumbo, and shrimp creole and specialty products, such as corn dogs. The Registrant also sells a retail entree line of six different two-pound frozen entrees including chicken primavera, lasagna with meat, seafood gumbo and Mexican casserole with beef. This product line is designed as a convenient, quality product for the family. Since the Registrant completed the initial public offering of its common stock through the sale of 1,150,000 shares to an underwriting syndicate managed by Smith Barney, Harris Upham & Co. Incorporated and Morgan Keegan & Co. Inc. in May 1987, the Registrant has significantly expanded its operations to increase production capacity, product lines and marketing flexibility. Through 1995, this expansion included the expansion of the Registrant's Hammond, Louisiana processing facility, the construction of new waste water facilities at the Hammond, Louisiana and Collins and Hazlehurst, Mississippi processing facilities, the addition of second shifts at the Hammond, Louisiana, Laurel, Mississippi, Hazlehurst, Mississippi, and Collins, Mississippi processing facilities, expansion of freezer and production capacity at its prepared foods facility in Jackson, Mississippi, the expansion of freezer capacity at its Laurel, Mississippi, Hammond, Louisiana and Collins, Mississippi processing facilities, the addition of deboning capabilities at all of the Registrant's poultry processing facilities, and the construction and start-up of its Pike County, Mississippi, production and processing facilities, including a hatchery, a feed mill, a processing plant, a waste water treatment facility and a water treatment facility. During 1997, the Registrant completed the construction and start-up of its Brazos County, Texas production and processing facilities, including a hatchery, a feed mill located in Robertson County, Texas, a processing plant, a waste water treatment facility and a water treatment facility. In addition, since 1987, the Registrant completed the expansion and renovation of the hatchery at its Hazlehurst, Mississippi production facilities, and completed the renovation and expansion of its Collins, Mississippi by-products facility, allowing for the elimination of a smaller by-products facility at the Laurel, Mississippi plant. Capital expenditures for fiscal 2000 were funded by working capital and borrowings under a revolving credit agreement. Effective July 29, 1999, the Registrant amended its revolving credit agreement to, among other things, decrease the revolving credit available to the Registrant thereunder from $130.0 million to $100.0 million. On June 15, 1999, the Registrant entered into a Note Purchase Agreement with the Lincoln National Life Insurance Company pursuant to which the Company issued $20 million, 6.65% senior notes due July 7, 2007. The proceed of such notes were used to pay a portion of the debt outstanding under the revolving credit agreement. The Registrant anticipates that capital expenditures for fiscal 2001 will be funded by internally generated working capital and borrowings under the revolving credit agreement. During fiscal 1997, the Registrant completed the start-up of its Brazos County, Texas processing facility. During October 1998, the Registrant began operating one line of its Brazos County, Texas processing facility on a double shift basis, and during fiscal 2000 completed the double shifting of the plant, which is now operating at full capacity. The Registrant currently has additional processing capacity available to it through the double shifting of the second line at its Collins, Mississippi processing facility. In addition, the Registrant continually evaluates internal and external expansion opportunities to continue its growth in poultry and/or related food products. (b) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS Not applicable. (c) NARRATIVE DESCRIPTION OF BUSINESS REGISTRANT'S BUSINESS General The Registrant is engaged in the production, processing, marketing and distribution of fresh and frozen chicken and the preparation, processing, marketing and distribution of processed and prepared food items. The Registrant sells chill pack, ice pack and frozen chicken, both whole and cut-up, primarily under the Sanderson Farms(R) brand name to retailers, distributors and fast food operators principally in the southeastern, southwestern and western United States. During its fiscal year ended October 31, 2000, the Registrant processed approximately 247.7 million chickens, or approximately 1.1 billion dressed pounds. In addition, the Registrant purchased and further processed 17.4 million pounds of poultry products during fiscal 2000. According to 2000 industry statistics, the Registrant was the 7th largest processor of dressed chicken in the United States based on estimated average weekly processing. The Registrant conducts its chicken operations through Sanderson Farms, Inc. (Production Division) and Sanderson Farms, Inc. (Processing Division), both of which are wholly-owned subsidiaries of Sanderson Farms, Inc. The production subsidiary, Sanderson Farms, Inc. (Production Division), which has facilities in Laurel, Collins, Hazlehurst and Pike County, Mississippi, and Bryan, Texas, is engaged in the production of chickens to the broiler stage. Sanderson Farms, Inc. (Processing Division), which has facilities in Laurel, Collins, Hazlehurst and Pike County, Mississippi, Hammond, Louisiana, and Bryan, Texas, is engaged in the processing, sale and distribution of chickens. The Registrant conducts its processed and prepared foods business through its wholly-owned subsidiary, Sanderson Farms, Inc. (Foods Division), which has a facility in Jackson, Mississippi. The Foods Division is engaged in the processing, marketing and distribution of over 200 processed and prepared food items, which it sells nationally and regionally, principally to distributors, national food service accounts, retailers and club stores. Products The Registrant has the ability to produce a wide range of processed chicken products and processed and prepared food items thereby allowing it to take advantage of marketing opportunities as they arise. Processed chicken is first saleable as an ice packed whole chicken. The Registrant adds value to its ice packed whole chickens by removing the giblets, weighing, packaging and labeling the product to specific customer requirements and cutting the product based on customer specifications. The additional processing steps of giblet removal, close tolerance weighing and cutting increase the value of the product to the customer over whole chickens by reducing customer handling and cutting labor and capital costs, reducing the shrinkage associated with cutting, and ensuring consistently sized portions. With respect to chill pack products, additional value can be achieved by deep chilling and packaging whole chickens in bags or combinations of fresh chicken parts in various sized individual trays under the Registrant's brand name, which then may be weighed and prepriced, based on each customer's needs. The chill pack process increases the value of the product by extending shelf life, reducing customer weighing and packaging labor, and providing the customer with a wide variety of products with uniform, well designed packaging, all of which enhance the customer's ability to merchandise chicken products. To satisfy some customers' merchandising needs, the Registrant quick freezes the chicken product, which adds value by meeting the customers' handling, storage, distribution and marketing needs and by permitting shipment of product overseas where transportation time may be as long as 25 days. Value added products usually generate higher sale prices per pound, exhibit less finished price volatility and generally result in higher and more consistent profit margins over the long-term than non-value added product forms. Selling fresh chickens as a prepackaged brand name product has been a significant step in the development of the value added, higher margin consumer business. The Registrant evaluates daily the potential profitability of all product lines and attempts to maximize its profits on a short-term basis by making strategic changes in its product mix to meet customer demand. The following table sets forth, for the periods indicated, the contribution, as a percentage of sales of chicken products, of value added and non-value added chicken products. Fiscal Year Ended October 31, ----------------------------- 1996 1997 1998 1999 2000 ----- ----- ------ ----- ----- Value added .............. 98.2% 98.1% 98.6% 99.2 % 99.5% Non-value added .......... 1.8% 1.9% 1.4% .8 % .5% ----- ----- ----- ----- ----- Total Registrant chicken sales ............ 100.0% 100.0% 100.0% 100.0% 100.0% ----- ----- ----- ----- ----- The following table sets forth, for the years indicated, the contribution, as a percentage of net sales, of each of the Registrant's major product lines. Fiscal Year Ended October 31, -----------------------------
1996 1997 1998 1999 2000 ----- ----- ----- ----- ----- Registrant processed chicken: Value added: Chill pack ............... 18.6% 20.8% 24.4% 33.2% 36.4% Fresh bulk pack .......... 49.9 45.9 46.6 46.5 43.3 Frozen ................... 17.0 15.7 11.6 8.0 7.5 ----- ----- ----- ----- ----- Subtotal .................. 85.5 82.4 82.6 87.7 87.2 ----- ----- ----- ----- ----- Non-value added: Ice pack ................. 0.9 0.9 0.7 .5 .3 Frozen ................... 0.7 0.7 0.5 .2 .1 ----- ----- ----- ----- ----- Subtotal .................. 1.6 1.6 1.2 .7 .4 ----- ----- ----- ----- ----- Total Company processed chicken ....... 87.1 84.0 83.8 88.4 87.6 Processed and prepared foods ............ 12. 9 16.0 16.2 11.6 12.4 --- - ---- ---- ---- ---- Total ............. 100.0% 100.0% 100.0% 100.0% 100.0% ===== ===== ===== ===== =====
Sales and Marketing The Registrant's chicken products are sold primarily to retailers (including national and regional supermarket chains and local supermarkets), distributors and fast food operators located principally in the southeastern, southwestern and western United States. The Registrant also sells its chicken products to governmental agencies and to customers who resell the products outside of the continental United States. This wide range of customers, together with the Registrant's broad product mix, provides the Registrant with flexibility in responding to changing market conditions in its effort to maximize profits. This flexibility also assists the Registrant in its efforts to reduce its exposure to market volatility. Sales and distribution of the Registrant's chicken products are conducted primarily by sales personnel at the Registrant's general corporate offices in Laurel, Mississippi and by customer service representatives at each of its six processing complexes and through independent food brokers. Each complex has individual on-site distribution centers and uses the Registrant's truck fleet, as well as contract carriers, for distribution of its products. Generally, the Registrant prices much of its chicken products based upon weekly market prices reported by the United States Department of Agriculture. Consistent with the industry, the Registrant's profitability is impacted by such market prices, which may fluctuate substantially and exhibit cyclical characteristics. The Registrant adds a markup to base prices, which depends upon value added, volume, product mix and other factors. While base prices may change weekly, the Registrant's markup is generally negotiated from time to time with the Registrant's customers. The Registrant's sales are generally made on an as-ordered basis, and the Registrant maintains few long-term sales contracts with its customers. The Registrant uses television, radio and newspaper advertising, coupon promotion, point of purchase material and other marketing techniques to develop consumer awareness of and brand recognition for its Sanderson Farms(R) products. The Registrant has achieved a high level of public awareness and acceptance of its products through television advertising featuring a celebrity as the Registrant's spokesperson. Brand awareness is an important element of the Registrant's marketing philosophy, and it intends to continue brand name merchandising of its products. The Registrant's processed and prepared food items are sold nationally and regionally, primarily to distributors, national food service accounts, retailers and club stores. Sales of such products are handled by independent food brokers located throughout the United States, primarily in the southeast and southwest United States, and by sales personnel of the Registrant. Processed and prepared food items are distributed from the Registrant's plant in Jackson, Mississippi, through arrangements with contract carriers. Production and Facilities General. The Registrant is a vertically-integrated producer of fresh and frozen chicken products, controlling the production of hatching eggs, hatching, feed manufacturing, growing, processing and packaging of its product lines. Breeding and Hatching. The Registrant maintains its own breeder flocks for the production of hatching eggs. The Registrant's breeder flocks are acquired as one-day old chicks (known as pullets or cockerels) from primary breeding companies that specialize in the production of genetically designed breeder stock. As of October 31, 2000, the Registrant maintained contracts with 31 pullet farm operators for the grow-out of pullets (growing the pullet to the point at which it is capable of egg production, which takes approximately six months). Thereafter, the mature breeder flocks are transported by Registrant vehicles to breeder farms that are maintained, as of October 31, 2000, by 121 independent contractors under the Registrant's supervision. Eggs produced by independent contract breeders are transported to Registrant's hatcheries in Registrant's vehicles. The Registrant owns and operates five hatcheries located in Mississippi and Texas where eggs are incubated and hatched in a process requiring 21 days. Once hatched, the day-old chicks are vaccinated against common poultry diseases and are transported by Registrant vehicles to independent contract grow-out farms. As of October 31, 2000, the Registrant's hatcheries were capable of producing an aggregate of approximately 5.6 million chicks per week. Grow-out. The Registrant places its chicks on 495 grow-out farms, as of October 31, 2000, located in Mississippi, Louisiana and Texas where broilers are grown to an age of approximately six to seven weeks. The farms provide the Registrant with sufficient housing capacity for its operations, and are typically family-owned farms operated under contract with the Registrant. The farm owners provide facilities, utilities and labor; the Registrant supplies the day-old chicks, feed and veterinary and technical services. The farm owner is compensated pursuant to an incentive formula designed to promote production cost efficiency. Historically, the Registrant has been able to accommodate expansion in grow-out facilities through additional contract arrangements with independent growers. Feed Mills. An important factor in the grow-out of chickens is the rate at which chickens convert feed into body weight. The Registrant purchases on the open market the primary feed ingredients, including corn and soybean meal, which historically have been the largest cost components of the Registrant's total feed costs. The quality and composition of the feed are critical to the conversion rate, and accordingly, the Registrant formulates and produces its own feed. As of October 31, 2000, the Registrant operated four feed mills, three of which are located in Mississippi and one in Texas. The Registrant's annual feed requirements for fiscal 2000 were approximately 1,480,000 tons, and it has the capacity to produce approximately 1,685,000 tons of finished feed annually under current configurations. Feed grains are commodities subject to volatile price changes caused by weather, size of harvest, transportation and storage costs and the agricultural policies of the United States and foreign governments. On October 31, 2000, the Registrant had approximately 439,000 bushels of corn storage capacity at its feed mills, which was sufficient to store all of its weekly requirements for corn. Generally, the Registrant purchases its corn and other feed supplies at current prices from suppliers and, to a limited extent, direct from farmers. Feed grains are available from an adequate number of sources. Although the Registrant has not experienced and does not anticipate problems in securing adequate supplies of feed grains, price fluctuations of feed grains can be expected to have a direct and material effect upon the Registrant's profitability. Although the Registrant sometimes purchases grains in forward markets, it cannot eliminate the potentially adverse effect of grain price increases. During the fall of 1998, market prices for corn and soy meal reached levels that prompted the Company to buy a significant portion of its 1999 requirements on a forward basis. As a result of these purchases, the Company substantially reduced its exposure to the risk of material increases in feed grain prices during its fiscal year ending October 31, 1999. Processing. Once the chicks reach processing weight, they are transported to the Registrant's processing plants. These plants use modern, highly automated equipment to process and package the chickens. The Registrant's Pike County, Mississippi processing plant, which currently operates two processing lines on a double shift basis, is currently processing approximately 1,150,000 chickens per week. The Registrant's Collins, Mississippi processing plant, which is currently operating one of its two lines on a double shift basis and one line on a single shift basis, is currently processing approximately 900,000 chickens per week. The Registrant's Brazos County, Texas processing plant, which is currently operating one line on a single shift basis and one line on a double shift basis, is currently processing approximately 1,150,000 chickens per week. The Registrant's Laurel and Hazlehurst, Mississippi and Hammond, Louisiana processing plants currently operate on a double shift basis, are currently processing approximately 1,800,000 chickens per week. The Registrant also has the capabilities to produce deboned product at six processing facilities. At October 31, 2000, these deboning facilities were operating on a double shifted basis resulting in a combined capacity to process approximately 8.5 million pounds of product per week. Sanderson Farms, Inc. (Foods Division). The facilities of Sanderson Farms, Inc. (Foods Division) are located in Jackson, Mississippi in a plant with approximately 75,000 square feet of refrigerated manufacturing and storage space. The plant uses highly automated equipment to prepare, process and freeze food items. The Registrant could increase significantly its production of processed and prepared food items without incurring significant capital expenditures or delays. Executive Offices; Other Facilities. The Registrant's corporate offices are located in Laurel, Mississippi. As of October 31, 2000, the Registrant operated one by-products plant, and six automotive maintenance shops which service approximately 486 Registrant over-the-road and farm vehicles. In addition, the Registrant has one child care facility located near its Collins, Mississippi, processing plant currently serving over 220 children. Quality Control The Registrant believes that quality control is important to its business and conducts quality control activities throughout all aspects of its operations. The Registrant believes these activities are beneficial to efficient production and in assuring its customers wholesome, high quality products. From the corporate offices, the Director of Technical Services supervises the operation of a modern, well-equipped laboratory which, among other things, monitors sanitation at the hatcheries, quality and purity of the Registrant's feed ingredients and feed, the health of the Registrant's breeder flocks and broilers, and conducts microbiological tests of live chickens, facilities and finished products. The Registrant conducts on-site quality control activities at each of the five processing plants and the processed and prepared food plant. Regulation The Registrant's facilities and operations are subject to regulation by various federal and state agencies, including, but not limited to, the federal Food and Drug Administration ("F.D.A."), the United States Department of Agriculture ("U.S.D.A."), the Environmental Protection Agency, the Occupational Safety and Health Administration and corresponding state agencies. The Registrant's chicken processing plants are subject to continuous on-site inspection by the U.S.D.A. The Sanderson Farms, Inc. (Foods Division) processing plant operates under the U.S.D.A.'s Total Quality Control Program which is a strict self-inspection plan written in cooperation with and monitored by the U.S.D.A. The F.D.A. inspects the production of the Registrant's feed mills. Compliance with existing regulations has not had a material adverse effect upon the Registrant's earnings or competitive position in the past and is not anticipated to have a materially adverse effect in the future. Management believes that the Registrant is in substantial compliance with existing laws and regulations relating to the operation of its facilities and does not know of any major capital expenditures necessary to comply with such statutes and regulations. The Registrant takes extensive precautions to ensure that its flocks are healthy and that its processing plants and other facilities operate in a healthy and environmentally sound manner. Events beyond the control of the Registrant, however, such as an outbreak of disease in its flocks or the adoption by governmental agencies of more stringent regulations, could materially and adversely affect its operations. Competition The Registrant is subject to significant competition from regional and national firms in all markets in which it competes. Some of the Registrant's competitors have greater financial and marketing resources than the Registrant. The primary methods of competition are price, product quality, number of products offered, brand awareness and customer service. The Registrant has emphasized product quality and brand awareness through its advertising strategy. See "Business - Sales and Marketing". Although poultry is relatively inexpensive in comparison with other meats, the Registrant competes indirectly with the producers of other meats and fish, since changes in the relative prices of these foods may alter consumer buying patterns. Sources of Supply During fiscal 2000, the Registrant purchased its pullets and its cockerels from six (6) major breeders. The Registrant has found the genetic cross of the breeds supplied by these companies to produce chickens most suitable to the Registrant's purposes. The Registrant has no written contracts with these breeders for the supply of breeder stock. Other sources of breeder stock are available, and the Registrant continually evaluates these sources of supply. Should breeder stock from its present suppliers not be available for any reason, the Registrant believes that it could obtain adequate breeder stock from other suppliers. Other major raw materials used by the Registrant include feed grains, cooking ingredients and packaging materials. The Registrant purchases these materials from a number of different vendors and believes that its sources of supply are adequate for its present needs. The Registrant does not anticipate any difficulty in obtaining these materials in the future. Seasonality The demand for the Registrant's chicken products generally is greatest during the spring and summer months and lowest during the winter months. Trademarks The Registrant has registered with the United States Patent and Trademark Office the trademark Sanderson Farms(R) which it uses in connection with the distribution of its premium grade chill pack products. The Registrant considers the protection of this trademark to be important to its marketing efforts due to consumer awareness of and loyalty to the Sanderson Farms(R) label. The Registrant also has registered with the United States Patent and Trademark Office seven other trademarks which are used in connection with the distribution of chicken and other products and for other competitive purposes. The Registrant has registered with the United States Patent and Trademark Office the trademark Sanderson Farms(R) which it uses in connection with the distribution of its prepared foods and two pound frozen entree products, as well as in connection with the distribution of its premium grade chill pack chicken products. The Registrant, over the years, has developed important non-public proprietary information regarding product related matters. While the Registrant has internal safeguards and procedures to protect the confidentiality of such information, it does not generally seek patent protection for its technology. Employees and Labor Relations As of October 31, 2000, the Registrant had 7,863 employees, including 767 salaried and 7,096 hourly employees. A collective bargaining agreement with the United Food and Commercial Workers International Union covering 582 hourly employees who work at the Registrant's processing plant in Hammond, Louisiana expired on November 30, 1998. That contract was renegotiated and executed on November 1, 1998, and has been extended to November 30, 2001.The collective bargaining agreement has a grievance procedure and no strike-no lockout clauses that should assist in maintaining stable labor relations at the Hammond plant. A collective bargaining agreement with the Laborers' International Union of North America, Professional Employees Local Union #693, AFL-CIO, covering 468 hourly employees who work at the Registrant's processing plant in Hazlehurst, Mississippi was negotiated and signed by the union and the Registrant effective July 15, 1995. This Agreement expired on June 30, 1999, and was renegotiated and executed on July 26, 1999, and has a new expiration date of December 31, 2002. This collective bargaining agreement has a grievance procedure and no strike-no lockout clauses that should assist in maintaining stable labor relations at the Hazlehurst plant. A collective bargaining agreement with the Laborers' International Union of North America, Professional Employees Local Union #693, AFL-CIO, covering 1,115 hourly employees who work at the Registrant's processing plant in Collins, Mississippi was negotiated and signed by the union and the Registrant effective September 9, 1995, and expired on December 30, 1999. Negotiations were completed and a new agreement was reached on January 13, 2000. The new agreement has a termination date of December 31, 2003. On June 9, 1999, the production, maintenance and clean-up employees at the Company's Brazos County, Texas poultry processing facility voted to be represented by the United Food and Commercial Workers Union Local #408, AFL-CIO. A collective bargaining agreement was negotiated and signed on October 7, 1999, and will expire on December 31, 2002. This collective bargaining agreement has a grievance procedure and no strike - no lockout clauses that should assist in maintaining stable labor relations at the Brazos County, Texas processing facility. On May 28, 1999, truck drivers at the Company's Brazos County, Texas processing and production facilities voted to be represented in collective bargaining by the Teamsters International Local #968. Negotiations with this union were completed in December 1999, and a collective bargaining agreement effective January 1, 2000 was signed, which agreement will expire on December 31, 2002. Although this agreement includes a provision allowing re-opening of bargaining during January 2000 on certain economic issues, no changes have been made to the Agreement, with the last meeting on this matter being held August 21, 2000. No further meetings have been scheduled in this matter. (d) FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND EXPORT SALES The Registrant engages in no material foreign operations, and no material portion of its revenues was derived from customers in foreign countries. Item 2. Properties. ---------- The Registrant's principal properties are as follows: Use Location (City, State) --- ---------------------- Poultry complex, including Laurel, Mississippi poultry processing plant, hatchery and feedmill Poultry complex, including Pike County, Mississippi poultry processing plant, hatchery and feedmill Poultry complex, including Hazlehurst, Mississippi poultry processing plant, hatchery and feedmill Poultry complex, including Brazos and Robertson Counties, poultry processing plant, Texas hatchery and feedmill Poultry processing plant Hammond, Louisiana Poultry processing plant, Collins, Mississippi hatchery and by-products plant Prepared food plant Jackson, Mississippi Corporate general offices Laurel, Mississippi The Registrant owns substantially all of its major operating facilities with the following exceptions: one processing plant and feed mill complex is leased on an annual renewal basis through 2063 with an option to purchase at a nominal amount, at the end of the lease term. One processing plant complex is leased under four leases, which are renewable annually through 2061, 2063, 2075 and 2073, respectively. Certain infrastructure improvements associated with a processing plant are leased under a lease which expires in 2012 and is thereafter renewable annually through 2091. All of the foregoing leases are capital leases. There are no material encumbrances on the major operating facilities owned by the Registrant, except that the plant of Sanderson Farms, Inc. (Foods Division) is encumbered by a mortgage which collateralizes a note with an outstanding principal balance of $1.1 million on December 31, 2000, which bears interest at the rate of 5% per annum and is payable in equal annual installments through 2009. In addition, under the terms of the revolving credit agreement effective July 29, 1996, as amended, and under the $20 million long-term fixed rate loan agreements effective in February 1993 and June 1999, the Registrant may not pledge any additional assets as collateral other than fixed assets up to 15% of its tangible assets. Management believes that the Company's facilities are suitable for its current purposes, and believes that current renovations and expansions will enhance present operations and allow for future internal growth. Item 3. Legal Proceedings. ----------------- There are no material pending legal proceedings, other than those described in Note 8 of the consolidated financial statements and routine litigation incidental to the Registrant's business, to which the Registrant is a party or of which its property is the subject, and no such proceedings are known by the Registrant to be contemplated by governmental authorities. Item 4. Submission of Matters to a Vote of Security Holders. -------------------------- No matters were submitted to a vote of the Registrant's security holders, through the solicitation of proxies or otherwise, during the fourth quarter of the Fiscal Year. Item 4A. Executive Officers of the Registrant. Executive Name Age Office Officer Since ---- ---- ------ ------------- Joe F. Sanderson, Jr ............ 54 Chairman of the Board, 1984 (1) President and Chief Executive Officer D. Michael Cockrell ............. 43 Treasurer and Chief 1993 (2) Financial Officer, Board Member James A. Grimes ................. 52 Secretary and 1993 (3) Chief Accounting Officer Lampkin Butts ................... 49 Vice President - Sales, 1996 (4) Board Member (1) Joe F. Sanderson, Jr. has served as President and Chief Executive Officer of the Registrant since November 1, 1989, and as Chairman of the Board since January 8, 1998. From January 1984, to November 1989, Mr. Sanderson served as Vice-President, Processing and Marketing of the Registrant. (2) D. Michael Cockrell became Treasurer and Chief Financial Officer of the Registrant effective November 1, 1993, and was elected to the Board of Directors on February 19, 1998. Prior to that time, for more than five years, Mr. Cockrell was a member and shareholder of the Jackson, Mississippi law firm of Wise Carter Child & Caraway, Professional Association. (3) James A. Grimes became Secretary of the Registrant effective November 1, 1993. Mr. Grimes also serves as Chief Accounting Officer, which position he has held since 1985. (4) Lampkin Butts became Vice President - Sales of the Registrant effective November 1, 1996, and was elected to the Board of Directors on February 19, 1998. Prior to that time, Mr. Butts served the Registrant in various capacities since 1973. Executive officers of the Company serve at the pleasure of the Board of Directors. There are no understandings or agreements relating to any person's service or prospective service as an executive officer of the Registrant. PART II Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters. The Company's common stock is traded on the NASDAQ National Market System under the symbol SAFM. The number of stockholders as of December 31, 2000, was 1,856. The following table shows quarterly cash dividends and quarterly high and low prices for the common stock for the past two fiscal years. National Market System quotations are based on actual sales prices. Stock Price Fiscal Year 2000 High Low Dividends ----------------------------------------------------------------------- First Quarter $11.25 $ 7.44 $.05 Second Quarter $ 8.94 $ 6.56 $.05 Third Quarter $ 9.06 $ 6.00 $.05 Fourth Quarter $ 8.12 $ 5.94 $.05 Stock Price Fiscal Year 1999 High Low Dividends ----------------------------------------------------------------------- First Quarter $17.00 $14.00 $.05 Second Quarter $16.00 $12.00 $.05 Third Quarter $15.00 $12.13 $.05 Fourth Quarter $13.06 $ 9.38 $.05 On December 29, 2000 the closing sales price for the common stock was $7.50 per share. Item 6. Selected Financial Data. Year Ended October 31
2000 1999 1998 1997 1996 - ------------------------------------------------------------------------------------------------------------------------------------ (In thousands, except per share data) Net sales .................................. $ 605,911 $ 559,031 $ 521,394 $ 481,789 $ 455,100 Operating income (loss) .................... (588) 23,008 31,822 7,467 1,189 Income (loss) before extraordinary gain and cumulative effect of accounting change ............... (5,337) 10,546 15,256 558 (2,443) Net income (loss) .......................... (5,571) 10,546 15,256 1,234 (2,443) Basic and diluted earnings (loss) per share before extraordinary gain and cumulative effect of accounting change ................................... (.39) .75 1.06 .04 (.18) Basic and diluted earnings (loss) per share) .......................... (.41) .75 1.06 .09 (.18) Working capital ............................ 71,334 67,272 59,665 66,751 60,826 Total assets ............................... 281,856 283,510 265,671 264,893 237,226 Long-term debt, less current maturities ....................... 107,491 104,651 95,695 118,782 90,102 Stockholders' equity ....................... 120,015 130,844 129,482 116,771 118,250 Cash dividends declared per share ................................ $ .20 $ .20 $ .20 $ .20 $ .20
QUARTERLY FINANCIAL DATA Fiscal Year 2000
First Second Third Fourth Quarter Quarter Quarter Quarter ------- ------- ------- ------- (In thousands, except per share data) (Unaudited) Net sales .................................. $ 137,008 $ 139,781 $ 158,422 $ 170,700 Operating income (loss) .................... (345) (5,172) (6,558) 11,487 Net income (loss) .......................... (1,416) (4,497) (5,628) 5,970 Basic and diluted earnings (loss) per share .............................. $ (.10) $ (.33) $ (.41) $ .44
Fiscal Year 1999
First Second Third Fourth Quarter Quarter Quarter Quarter ------- ------- ------- ------- (In thousands, except per share data) (Unaudited) Net sales .................................. $ 126,229 $ 134,586 $ 148,842 $ 149,374 Operating income ........................... 7,022 5,474 7,350 3,162 Net income ................................. 3,444 2,438 3,689 975 Basic and diluted earnings per share ....................... $ .24 $ .17 $ .26 $ .08
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. CAUTIONARY STATEMENT REGARDING RISKS AND UNCERTAINTIES THAT MAY AFFECT FUTURE PERFORMANCE This Annual Report contains certain forward-looking statements about the business, financial condition and prospects of the Company. The actual performance of the Company could differ materially from that indicated by the forward-looking statements because of various risks and uncertainties, including, without limitation, changes in the market price for the Company's finished products and for feed grains, both of which may fluctuate substantially and exhibit cyclical characteristics typically associated with commodity markets, as described below; changes in competition and economic conditions; various inventory risks due to changes in market conditions; changes in governmental rules and regulations applicable to the Company and the poultry industry; and other risks described below. These risks and uncertainties can not be controlled by the Company. When used in this Annual Report, the words "believes," "estimates," "plans," "expects," "should," "outlook," and "anticipates," and similar expressions as they relate to the Company or its management are intended to identify forward-looking statements. GENERAL The Company's poultry operations are integrated through its control of all functions relative to the production of its chicken products, including hatching egg production, hatching, feed manufacturing, raising chickens to marketable age ("grow-out"), processing and marketing. Consistent with the poultry industry, the Company's profitability is substantially impacted by the market price for its finished products and feed grains, both of which may fluctuate substantially and exhibit cyclical characteristics typically associated with commodity markets. Other costs, excluding feed grains, related to the profitability of the Company's poultry operations, including hatching egg production, hatching, growing, and processing cost, are responsive to efficient cost containment programs and management practices. Over the past three fiscal years, these other production costs have averaged approximately 64.2 % of the Company's total production costs. The Company believes that value-added products are subject to less price volatility and generate higher, more consistent profit margin than whole chickens ice packed and shipped in bulk form. To reduce its exposure to market cyclicality that has historically characterized commodity chicken market prices, the Company has increasingly concentrated on the production and marketing of value-added product lines with emphasis on product quality, customer service, and brand recognition. The Company adds value to its poultry products by performing one or more processing steps beyond the stage where the whole chicken is first saleable as a finished product, such as cutting, deep chilling, packaging and labeling the product. The Company believes that one of its major strengths is its ability to change its product mix to meet customer demands. The Company's processed and prepared foods product line includes approximately 200 institutional and consumer packaged food items that it sells nationally, primarily to distributors, food service establishments and retailers. A majority of the prepared food items are made to the specifications of food service users. Poultry prices per pound, as measured by the Georgia dock price, fluctuated during the three years ended October 31, 2000 as follows: 1st 2nd 3rd 4th Quarter Quarter Quarter Quarter Fiscal 2000 High .................... $.5850 $.5800 $.5975 $.6200* Low ..................... $.5800 $.5725* $.5725 $.6000 Fiscal 1999 High .................... $.6825* $.6275 $.6150 $.6150 Low ..................... $.6275 $.5750* $.5825 $.5850 Fiscal 1998 High .................... $.5850 $.5775 $.6825 $.7150* Low ..................... $.5550* $.5550 $.5775 $.6875 *Year High/Low For the year ended October 31, 1999 as compared to the year ended October 31, 1998, lower prices for poultry products more than offset an advantage in the cost of feed grains. The decrease in net income for the fourth quarter of fiscal 1999 from the fourth quarter of fiscal 1998 resulted primarily from lower prices for poultry products and slightly higher grain prices. During fiscal 2000 compared to fiscal 1999, the average market prices for whole chickens and boneless breast meat decreased approximately 4.0% and 15.0% respectively. In addition, slightly higher average feed grain costs and bad debt expense of $1.2 million during fiscal 2000 from the bankruptcy filing by AmeriServe Food Distribution, Inc. ("AmeriServe") reduced the Company's operating margin. RESULTS OF OPERATIONS Fiscal 2000 Compared to Fiscal 1999 The Company's net sales for fiscal 2000 were $605.9 million compared to $559.0 million during fiscal 1999, an increase of $46.9 million. A majority of the increase in net sales was derived from an increase in pounds of poultry products sold of 10.0%. The additional pounds of poultry products sold resulted primarily from an increase in the average live weight of chickens processed. However, the effect of the increase in pounds of poultry products sold on net sales was partially offset by a decrease in the average sales price per pound of poultry products of 2.3%. During fiscal 2000 as compared to fiscal 1999, a simple average of the Georgia dock whole bird prices reflected a decrease of 4.0%. In addition to the price decrease for whole birds, average boneless breast meat prices were approximately 15.0% lower during fiscal 2000 as compared to fiscal 1999. Net sales of prepared food products during fiscal 2000 increased $10.0 million or 14.7% as compared to net sales during fiscal 1999. This increase resulted from an increase in the pounds of prepared food products sold of 8.8% and an increase in the average sales price of prepared food products of 5.4%. Cost of sales for fiscal 2000 as compared to fiscal 1999 increased $66.0 million or 12.8%. Cost of sales of poultry products increased $58.3 million or 12.8%. This increase in the cost of sales of poultry products was the result of an increase in the pounds of poultry products sold of 10.0%, an increase in the processing cost of poultry products related to the Company's increased presence in the chill pack market and higher cost of soybean meal. Corn and soybean meal cash market prices reflected a decrease of 3.1% and an increase of 17.9%, respectively. Cost of sales of prepared food products during fiscal 2000 as compared to fiscal 1999 increased $7.7 million or 13.2% due primarily to the increase in the pounds of prepared food products sold. Selling, general and administrative expenses for the year ended October 31, 2000 increased $4.5 million as compared to the year ended October 31, 1999. This increase reflects the additional advertising and marketing costs related to the Company's change of certain of its production from the fast food market to the chill pack market. In addition, the Company recorded additional bad debt expense of $1.2 million during the second quarter of fiscal 2000 resulting from the bankruptcy filing by AmeriServe on February 1, 2000. The Company's operating loss for fiscal 2000 was $588,000 as compared to operating income during fiscal 1999 of $23.0 million. The Company's operating margin during fiscal 2000 as compared to fiscal 1999 was adversely affected by lower prices for poultry products and the additional bad debt expense from the bankruptcy filing by AmeriServe. The Company expects the current weakness in the poultry market to continue through the first quarter of fiscal 2001. Interest expense for the year ended October 31, 2000 was $8.2 million as compared to the year ended October 31, 1999 of $6.4 million, an increase of $1.8 million. The Company adopted the AICPA Statement of Position 98-5, "Reporting the Costs of Start-up Activities" in the first quarter of fiscal 2000. The effect of adopting SOP 98-5 was to record a charge for the cumulative effect of an accounting change of $234,000 (net of income taxes of $140,000). The effective tax rate for the years ended October 31, 2000 and October 31, 1999 were 37.2% and 37.8%, respectively. Fiscal 1999 Compared to Fiscal 1998 The Company's net sales for fiscal 1999 were $559.0 million, an increase of $37.6 million or 7.2% over fiscal 1998. The increase in the Company's net sales resulted from a 24.0% increase in the pounds of poultry products sold which was partially offset by decreases in the average sale price of poultry products and prepared food products of 8.1% and 4.4%, respectively, and a decrease in the pounds of prepared food products sold of 21.1%. The additional pounds of poultry products sold resulted primarily from an increase in the average live weight of chickens processed as the Company shifted certain of its chicken production from the fast food market to the chill pack and big bird deboning markets. During fiscal 1999 as compared to fiscal 1998, the poultry industry experienced lower average sale prices for poultry products due to an over supply of chicken and other meats in the market place. A decrease in the sales of prepared food products for fiscal 1999 as compared to fiscal 1998 was the result of decreases in the pounds of prepared food products sold of 21.1% and the decrease in the average sale price of prepared food products of 4.4%. During fiscal 1999 management reduced or eliminated sales of certain less profitable prepared food items resulting in fewer pounds of prepared food products sold. The Company's cost of sales for fiscal 1999 as compared to fiscal 1998 increased $44.7 million to $514.2 million. Cost of sales of poultry products increased $70.2 million or 18.2% during fiscal 1999. The increase in pounds of poultry products sold of 24.0% and decreases in the cash market prices for corn and soybean meal of 13.0% and 17.7%, respectively, were the primary factors resulting in the net increase in cost of sales of poultry products during fiscal 1999 as compared to fiscal 1998. Cost of sales of prepared food products sold decreased approximately $25.5 million or 30.5% during fiscal 1999 as compared to fiscal 1998. This decrease is primarily from the planned decrease in the pounds of prepared food products sold and lower prices of chicken products which are a major ingredient in many of the products sold by the prepared foods division. Selling, general and administrative expenses for fiscal 1999 increased $1.7 million, or 8.5%, as compared to fiscal 1998. This increase reflects the additional advertising and marketing costs incurred during fiscal 1999 as the Company shifted poultry production from the fast food market segments to the chill pack and big bird debone market segments. In addition, the increase reflects certain of the Company's cost of modifications to its information technology systems that were expensed during fiscal 1999. The Company's operating income during fiscal 1999 decreased $8.8 million as compared to fiscal 1998. The weakness in the poultry market during the second half of fiscal 1999 as compared to the same period during fiscal 1998 more than offset the advantage of the lower cost of feed grains. Interest expense decreased $1.3 million as a result of lower outstanding debt during fiscal 1999 as compared to fiscal 1998. The effective tax rate during fiscal 1999 was approximately 37.8% as compared to 37.4% during fiscal 1998. Liquidity and Capital Resources As of October 31, 2000, the Company's working capital was $71.3 million and its current ratio was 2.9 to 1, as compared to working capital of $67.3 million and a current ratio of 3.1 to 1 at October 31, 1999. During the year ended October 31, 2000, the Company spent approximately $16.6 million on planned capital projects and $2.5 million to purchase 299,500 shares of its Common Stock under its existing stock repurchase plan. The Company's capital budget for fiscal 2001 is approximately $11.7 million. Included in the fiscal 2001 budget are items that include cost of renovations, changes and additions to existing processing facilities to allow better product flows and product mix for more product flexibility. The Company's capital expenditures for fiscal 2001 are expected to be funded from working capital and cash flows from operations; however, if needed the Company has $28.0 million available under its revolving credit facility as of October 31, 2000. Item 7A. Quantitative and Qualitative Disclosure About Market Risk. Market Risk The Company's interest expense is sensitive to changes in the general level of U.S. interest rates. The Company maintains certain of its debt as fixed rate in nature to mitigate the impact of fluctuations in interest rates. The fair value of the Company's fixed rate debt approximates the carrying amount at October 31, 2000. Management believes the potential effects of near-term changes in interest rates on the Company's fixed rate debt is not material. The Company is a party to no other market risk sensitive instruments requiring disclosure. Item 8. Financial Statements and Supplementary Data. Sanderson Farms, Inc. and Subsidiaries CONSOLIDATED BALANCE SHEETS
October 31 2000 1999 - ----------------------------------------------------------------------------------------------- (In thousands) Assets Current assets: Cash and temporary cash investments ............................$ 8,643 $ 7,052 Accounts receivable, less allowance of $460,000 in 2000 and $249,000 in 1999 .................................... 37,038 36,577 Inventories .................................................... 50,262 47,634 Refundable income taxes ....................................... 3,783 426 Prepaid expenses .............................................. 8,308 7,503 --------- --------- Total current assets ................................................ 108,034 99,192 Property, plant and equipment: Land and buildings ............................................. 128,738 125,337 Machinery and equipment ....................................... 240,106 230,939 --------- --------- 368,844 356,276 Accumulated depreciation ....................................... (195,689) (173,204) - ------------------------------------------------------------------------------ --------- 173,155 183,072 Other assets ........................................................ 667 1,246 --------- Total assets ........................................................$ 281,856 $ 283,510 ========= ========= Liabilities and Stockholders' Equity Current liabilities: Accounts payable ...............................................$ 17,507 $ 12,505 Accrued expenses ............................................... 15,135 15,372 Current maturities of long-term debt ........................... 4,058 4,043 --------- --------- Total current liabilities ........................................... 36,700 31,920 Long-term debt, less current maturities ............................. 107,491 104,651 Claims payable ...................................................... 1,800 1,100 Deferred income taxes ............................................... 15,850 14,995 Stockholders' equity: Preferred Stock: Series A Junior Participating Preferred Stock, $100 par value: authorized shares-500,000; none issued Par value to be determined by the Board of Directors: authorized shares-4,500,000; none issued Common Stock, $1 par value: authorized shares-100,000,000; issued and outstanding shares-13,632,955 in 2000 and 13,932,455 in 1999 ...................................... 13,633 13,932 Paid-in capital ................................................ 3,616 5,835 Retained earnings .............................................. 102,766 111,077 --------- Total stockholders' equity .......................................... 120,015 130,844 --------- --------- Total liabilities and stockholders' equity ..........................$ 281,856 $ 283,510 ========= =========
See accompanying notes. Sanderson Farms, Inc. and Subsidiaries CONSOLIDATED STATEMENTS OF INCOME
Years Ended October 31 2000 1999 1998 (In thousands, except per share data) Net sales .....................................................$ 605,911 $ 559,031 $ 521,394 Cost and expenses: Cost of sales ............................................... 580,136 514,162 469,429 Selling, general and administrative ......................... 26,363 21,861 20,143 ------ ------ ------ 606,499 536,023 489,572 ------- ------- ------- Operating income (loss) ....................................... (588) 23,008 31,822 Other income (expense): Interest income ............................................. 213 266 341 Interest expense ............................................ (8,195) (6,384) (7,721) Other ....................................................... 69 56 (86) -- -- --- (7,913) (6,062) (7,466) ------ ------ ------ Income (loss) before income taxes and cumulative effect of accounting change ........................................ (8,501) 16,946 24,356 Income tax expense (benefit) .................................. (3,164) 6,400 9,100 ------ ----- ----- Income (loss) before cumulative effect of accounting change ... (5,337) 10,546 15,256 Cumulative effect of accounting change (net of income taxes of $140,000) .......................................... (234) 0 0 -------- ---- - - Net income (loss) .............................................$ (5,571) $ 10,546 $ 15,256 ========= ========= ======== Basic and diluted net income (loss) per share: Income (loss) before cumulative effect of accounting change ...............................$ (.39) $ .75 $ 1.06 Cumulative effect of accounting change ...................... (.02) 0 0 ---- - - Net income (loss) per share .................................$ (.41) $ .75 $ 1.06 ========= ========= ========= Weighted average shares outstanding: Basic ....................................................... 13,726 14,068 14,369 ====== ====== ====== Diluted ..................................................... 13,726 14,121 14,426 ====== ====== ======
See accompanying notes. Sanderson Farms, Inc. and Subsidiaries CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY Total Common Stock Paid-in Retained Stockholders' Shares Amount Capital Earnings Equity
------------------------------------------------------------------------------ (In thousands, except shares and per share amounts) Balance at November 1, 1997 14,367,580 $14,368 $11,447 $ 90,956 $116,771 Net income for year 15,256 15,256 Cash dividends ($.20 per share) (2,874) (2,874) Issuance of common stock 6,000 6 58 64 Principal payments received on note receivable from ESOP 265 265 -------------------------------------------------------------------------------- Balance at October 31, 1998 14,373,580 14,374 11,770 103,338 129,482 Net income for year 10,546 10,546 Cash dividends ($.20 per share) (2,807) (2,807) Issuance of common stock 36,875 36 378 414 Purchase and retirement of common stock (478,000) (478) (6,438) (6,916) Principal payments received on note receivable from ESOP 125 125 -------------------------------------------------------------------------------- Balance at October 31, 1999 13,932,455 13,932 5,835 111,077 130,844 Net loss for year (5,571) (5,571) Cash dividends ($20 per share) (2,740) (2,740) Purchase and retirement of common stock (299,500) (299) (2,219) (2,518) --------------------------------------------------------------------------------- Balance at October 31, 2000 $13,632,955 $13,633 $ 3,616 $102,766 $120,015 =================================================================================
See accompanying notes. SANDERSON FARMS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended October 31 2000 1999 1998 (In thousands) Operating activities Net income (loss) $ (5,571) $ 10,546 $ 15,256 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Cumulative effect of accounting change 374 0 0 Depreciation and amortization 26,432 24,736 23,241 Provision for losses on accounts receivable 1,413 124 240 Deferred income taxes 340 600 2,710 Change in assets and liabilities: Increase in accounts receivable (1,874) (5,678) (329) (Increase) decrease in inventories (2,628) (4,755) 1,331 (Increase) decrease in prepaid expenses (3,647) 263 63 (Increase) decrease in other assets 30 (422) 329 Increase in accounts payable 5,002 6,612 281 Increase (decrease) in accrued expenses and claims payable 463 (234) 7,161 --- ---- ----- Total adjustments 25,905 21,246 35,027 ------ ------ ------ Net cash provided by operating activities 20,334 31,792 50,283 Investing activities Capital expenditures (16,557) (28,627) (23,673) Net proceeds from sale of property and equipment 217 474 202 --- --- --- Net cash used in investing activities (16,340) (28,153) (23,471) Financing activities Long-term borrowings 0 20,000 0 Net change in revolving credit 6,000 (7,000) (19,000) Principal payments on long-term debt (2,950) (3,844) (2,998) Principal payments on capital lease (195) (185) (174) Principal payments received on note receivable from ESOP 0 125 265 Dividends paid (2,740) (2,807) (2,874) Purchase and retirement of common stock (2,518) (6,916) 0 Net proceeds from common stock issued 0 414 64 - --- -- Net cash used in financing activities (2,403) (213) (24,717) ------ ---- ------- Net increase in cash and temporary cash investments 1,591 3,426 2,095 Cash and temporary cash investments at beginning of year 7,052 3,626 1,531 ----- ----- ----- Cash and temporary cash investments at end of year $ 8,643 $ 7,052 $ 3,626 ======== ======== ======== Supplemental disclosure of cash flow information: Income taxes paid $ 397 $ 10,459 $ 2,834 ======== ======== ======== Income taxes refunded $ 464 $ 0 $ 2,474 ======== ======== ======== Interest paid $ 8,728 $ 5,844 $ 7,880 ======== ======== ========
See accompanying notes. Sanderson Farms, Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Significant Accounting Policies Principles of Consolidation: The consolidated financial statements include the accounts of Sanderson Farms, Inc.(the "Company") and its wholly-owned subsidiaries. All significant intercompany transactions and accounts have been eliminated in consolidation. Business: The Company is engaged in the production, processing, marketing and distribution of fresh and frozen chicken and other prepared food items. The Company's net sales and cost of sales are significantly affected by market price fluctuations of its principal products sold and of its principal ingredients, corn and other grains. The Company sells to retailers, distributors and fast food operators primarily in the southern and western United States. Revenue is recognized when product is shipped to customers. Revenue on certain international sales is recognized upon transfer of title, which may occur after shipment. Management periodically performs credit evaluations of its customers' financial condition and generally does not require collateral. Shipping and handling costs are included as a component of cost of sales. Use of Estimates: The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. Temporary Cash Investments: Temporary cash investments include investment agreements for securities purchased under agreements to resell with a maturity of one day. Inventories: Processed food and poultry inventories and inventories of feed, eggs, medication and packaging supplies are stated at the lower of cost (first-in, first-out method) or market. Live poultry inventories of broilers are stated at the lower of cost or market and breeders at cost less accumulated amortization. The costs associated with breeders, including breeder chicks, feed, medicine and grower pay, are accumulated up to the production stage and amortized over nine months using the straight-line method. Property, Plant and Equipment: Property, plant and equipment is stated at cost. Depreciation of property, plant and equipment is provided by the straight-line and units of production methods over the estimated useful lives of 19 to 39 years for buildings and 3 to 7 years for machinery and equipment. Impairment of Long-Lived Assets: The Company continually reevaluates the carrying value of its long-lived assets for events or changes in circumstances which indicate that the carrying value may not be recoverable. As part of this reevaluation, the Company estimates the future cash flows expected to result from the use of the asset and its eventual disposal. If the sum of the expected future cash flows (undiscounted and without interest charges) is less than the carrying amount of the asset, an impairment loss is recognized through a charge to operations. Income Taxes: Deferred income taxes are accounted for using the liability method and relate principally to cash basis temporary differences and depreciation expense accounted for differently for financial and income tax purposes. Effective November 1, 1988, the Company changed from the cash to the accrual basis of accounting for its farming subsidiary. The Taxpayer Relief Act of 1997 (the "Act") provides that the taxes on the cash basis temporary differences as of that date are payable over 20 years beginning in fiscal 1998 or in full in the first fiscal year in which the Company fails to qualify as a "Family Farming Corporation." The Company will continue to qualify as a "Family Farming Corporation" provided there are no changes in ownership control, which management does not anticipate during fiscal 2001. Stock Based Compensation: The Company accounts for stock option grants in accordance with APB Opinion No. 25, "Accounting for Stock Issued to Employees." Earnings Per Share: Basic earnings per share is based upon the weighted average number of common shares outstanding during the year. Diluted earnings per share includes any dilutive effects of options, warrants, and convertible securities. Fair Value of Financial Instruments: The carrying amounts for cash and temporary cash investments approximate their fair values. The carrying amounts of the Company's borrowings under its credit facilities and long-term debt also approximate the fair values based on current rates for similar debt. Impact of Recently Issued Accounting Standards: Effective in fiscal 2001, FASB No. 133, "Accounting for Derivative Instruments and Hedging Activities", requires all derivatives to be recorded on the balance sheet at fair value. The effect of adopting this statement on the consolidated earnings and financial position of the Company will be immaterial. In April 1998, the American Institute of Certified Public Accountants issued Statement of Position 98-5, "Reporting the Costs of Start-Up Activities," which requires that costs related to start-up activities be expensed as incurred. Prior to October 31, 1999, the Company capitalized its start-up costs. The Company adopted the provisions of the SOP in its consolidated financial statements in the first quarter of fiscal 2000. The effect of adoption of SOP 98-5 was to record a charge for the cumulative effect of an accounting change of $234,000 (net of income taxes of $140,000) or $.02 per basic and diluted earnings per share. 2. Inventories Inventories consisted of the following: October 31 2000 1999 ---- ---- (In thousands) Live poultry-broilers and breeders $30,004 $29,323 Feed, eggs and other 6,651 6,494 Processed poultry 5,924 3,037 Processed food 3,785 4,900 Packaging materials 3,898 3,880 -------- ------- $50,262 $47,634 ====== ====== 3. Long-term Credit Facilities and Debt Long-term debt consisted of the following: October 31 2000 1999 ---- ---- (In thousands) Revolving credit agreement with banks (weighted average rate of 7.6% at October 31, 2000) $72,000 $66,000 Term loan with an insurance company, accruing interest at 7.49%; due in annual principal installments of $2,850,000 8,600 11,450 Term loan with an insurance company, accruing interest at 6.65%; due in annual principal installments of $2,857,000, beginning in July 2004 20,000 20,000 Note payable, accruing interest at 5%; due in annual installments of $161,400, including interest, maturing in 2009 1,169 1,269 6% Mississippi Business Investment Act bond-capital lease obligation 3,480 3,675 Robertson County, Texas, Industrial Revenue Bonds accruing interest at a variable rate, 3.6% at October 31, 2000; due in annual principal installments of $900,000 6,300 6,300 -------- ----- ----- 111,549 108,694 Less current maturities of long-term debt 4,058 4,043 ----- ----- $107,491 $104,651 ======== ======== The Company has a $100.0 million ($28.0 million available at October 31, 2000) revolving credit agreement with five banks. The revolver extends to fiscal 2004, when the outstanding borrowings may be converted to a term loan payable in equal semi-annual installments over four years. Borrowings are at prime or below and may be prepaid without penalty. A commitment fee of .20% is payable quarterly on the unused portion of the revolver. Covenants related to the revolving credit and the term loan agreements include requirements for maintenance of minimum consolidated net working capital, tangible net worth, debt to total capitalization and current ratio. The agreements also establish limits on dividends, assets that can be pledged and capital expenditures. Property, plant and equipment with a carrying value of approximately $3.1 million is pledged as collateral to a note payable and the capital lease obligation. The aggregate annual maturities of long-term debt at October 31, 2000 are as follows (in thousands): Fiscal Year Amount 2001 $ 4,058 2002 4,078 2003 4,144 2004 24,264 2005 24,285 Thereafter 50,720 -------- $111,549 ======== 4. Income Taxes Income tax expense (benefit) consisted of the following: Years Ended October 31 2000 1999 1998 ------------------------------ (In thousands) Current: Federal $(3,600) $ 5,200 $ 5,900 State (44) 600 490 ----------------------------- (3,644) 5,800 6,390 Deferred: Federal 325 486 2,197 State 15 114 513 ----------------------------- 340 600 2,710 ----------------------------- (3,304) 6,400 9,100 Less income tax expense applicable to cumulative effect of accounting change 140 0 0 ----------------------------- Income tax expense (benefit) applicable to income (loss) before cumulative effect of accounting change $(3,164) $ 6,400 $ 9,100 ============================= Significant components of the Company's deferred tax assets and liabilities were as follows: October 31, 2000 1999 ------------------- (In thousands) Deferred tax liabilities: Cash basis temporary differences $ 3,309 $ 3,503 Property, plant and equipment 13,694 12,371 Prepaid and other assets 143 250 ------------------- Total deferred tax liabilities 17,146 16,124 Deferred tax assets: Accrued expenses and accounts receivable 2,921 2,017 State net operating loss and credit carryforwards 275 497 ------------------- Total deferred tax assets 3,196 2,514 ------------------- Net deferred tax liabilities $13,950 $13,610 =================== Current deferred tax assets (included in prepaid expenses) $ 1,900 $ 1,385 ------------------- Long-term deferred tax liabilities 15,850 14,995 ------------------- Net deferred tax liabilities $13,950 $13,610 =================== The differences between the consolidated effective income tax rate and the federal statutory rate are as follows: Years Ended October 31 2000 1999 1998 --------------------------- (In thousands) Income taxes (benefit) at statutory rate $(3,018) $ 5,762 $ 8,525 State income taxes (benefit) (19) 731 1,041 State income tax credit 0 (260) (389) Other, net (267) 167 (77) ------------------------------ Income tax expense (benefit) $(3,304) $ 6,400 $ 9,100 ============================== 5. Employee Benefit Plans The Company has an Employee Stock Ownership Plan ("ESOP") covering substantially all employees. Contributions to the ESOP are determined at the discretion of the Company's Board of Directors. Total contributions to the ESOP were $840,000 and $1,100,000 in fiscal 1999 and 1998, respectively. The Company did not make a contribution to the ESOP in fiscal 2000. The Company has a 401(k) plan which covers substantially all employees after six months of service. Participants in the plan may contribute up to the maximum allowed by IRS regulations. Effective July 1, 2000, the Company matches 100% of employee contributions to the 401(k) plan up to 3% of each employee's compensation and 50% of employee contributions between 3% and 5% of each employee's compensation. The Company's contributions to the 401(k) plan totaled $457,000 in fiscal 2000. 6. Stock Option Plan The Company has elected to follow Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" and related interpretations in accounting for its employee stock options because the alternative fair value accounting provided for under FASB Statement No. 123, "Accounting for Stock-Based Compensation," requires use of option valuation models that were not developed for use in valuing employee stock options. Under the Company's Stock Option Plan, 750,000 shares of Common Stock have been reserved for grant to key management personnel. Options granted in fiscal 2000 and 1998 have ten-year terms and vest over four years beginning one year after the date of grant. No options were granted in fiscal 1999. Pro forma information regarding net income (loss) and earnings (loss) per share is required by Statement 123, and has been determined as if the Company had accounted for its employee stock options under the fair value method of that Statement. The fair value for these options was estimated at the date of grant using a Black-Scholes option pricing model with the following weighted average assumptions: risk-free interest rate of 6.6% in fiscal 2000 and 4.4% in fiscal 1998; dividend yields of 2.7% for fiscal 2000 and 1.5% for fiscal 1998; volatility factors of the expected market price of the Company's Common Stock of .302 for fiscal 2000 and .260 for fiscal 1998; and a weighted-average expected life of the options of four years. The weighted-average fair value of options granted was $1.94 in fiscal 2000 and $3.14 in fiscal 1998. The pro forma effect of the estimated fair value of the options granted was insignificant to the Company's net income (loss) and net income (loss) per share in fiscal 2000, 1999 and 1998. A summary of the Company's stock option activity and related information is as follows:
Weighted-Average Shares Exercise Price - --------------------------------------------------------------------------------------- Outstanding at November 1, 1997 538,000 $12.51 Granted 194,000 13.00 Exercised (7,000) 10.77 Forfeited (29,000) 12.87 Outstanding at November 1, 1998 696,000 12.64 Exercised (69,375) 10.82 Forfeited (44,625) 12.92 ------ Outstanding at October 31, 1999 582,000 12.90 Granted 141,000 7.47 Forfeited (84,000) 11.60 Outstanding at October 31, 2000 639,000 11.83
The exercise price of the options outstanding as of October 31, 2000 ranged from $7.47 to $15.00 per share. At October 31, 2000, the weighted average remaining contractual life of the options outstanding was 5 years and 371,500 options were exercisable. In fiscal 2000, the Company granted 141,000 "phantom shares" to certain key management personnel. Upon exercise of a phantom share, the holder will receive a cash payment or an equivalent number of shares of the Company's Common Stock, at the Company's option, equal to the excess of the fair market value of the Company's Common Stock over the phantom share award value of $7.47 per share. The phantom shares have a ten-year term and vest over four years beginning one year after the date of grant. No compensation expense was recognized applicable to the phantom shares in fiscal 2000 because the award value exceeded the fair market value of the Company's Common Stock. 7. Shareholder Rights Agreement On April 22, 1999, the Company adopted a shareholder rights agreement (the "Agreement") with similar terms as the previous one. Under the terms of the Agreement a one share purchase ("right") was declared as a dividend for each share of the Company's Common Stock outstanding on May 4, 1999. The rights do not become exercisable and certificates for the rights will not be issued until ten business days after a person or group acquires or announces a tender offer for the beneficial ownership of 20% or more of the Company's Common Stock. Special rules set forth in the Agreement apply to determine beneficial ownership for members of the Sanderson family. Under these rules, such a member will not be considered to beneficially own certain shares of Common Stock, the economic benefit of which is received by any member of the Sanderson family, and certain shares of Common Stock acquired pursuant to employee benefit plans of the Company. The exercise price of a right has been established at $75. Once exercisable, each right would entitle the holder to purchase one one-hundredth of a share of Series A Junior Participating Preferred Stock, par value $100 per share. The rights may be redeemed by the Board of Directors at $.01 per right prior to an acquisition, through open market purchases, a tender offer or otherwise, of the beneficial ownership of 20% or more of the Company's Common Stock, or by two-thirds of the Directors who are not the acquirer, or an affiliate of the acquirer prior to the acquisition of 50% or more of the Company's Common Stock by such acquirer. The rights expire on May 4, 2009. 8. Other Matters The Company self-insures for losses related to workers' compensation claims with excess coverage by underwriters on a per claim and aggregate basis. Claims payable are based upon estimates of the ultimate cost of reported claims by the Company's claims administrator and totaled $5,193,000 and $4,227,000 at October 31, 2000 and 1999, respectively. Claims payable of $3,393,000 and $3,127,000 at October 31, 2000 and 1999, respectively, are included in accrued expenses in the accompanying consolidated balance sheets because the amounts are expected to be paid within one year from the respective balance sheet dates. The ultimate cost for outstanding claims may vary significantly from current estimates. No customer accounted for more than 10% of consolidated sales for the years ended October 31, 2000, 1999 and 1998. Export sales were less than 10% of consolidated sales in each year presented. On June 15, 2000, the Company delivered to two banks a guaranty of $3.2 million on a $13.5 million loan (the "Loan") under a credit agreement from those banks to the Estate of Joe Frank Sanderson, a co-founder and former member of the Company's Board of Directors. The Estate collateralized the Loan with 3,229,672 shares of Common Stock of the company and agreed to indemnify the Company against any loss from such guaranty. On April 5, 2000, thirteen individuals claiming to be former hourly employees of the Company filed a lawsuit in the United States District Court for the Southern District of Texas claiming that the Company violated requirements of the Fair Labor Standards Act. The Plaintiffs' lawsuit also purported to represent similarly situated workers who have filed or will file consents to join the suit. At filing, 109 individuals had consented to join the lawsuit. The lawsuit alleges that the Company (1) failed to pay its hourly employees "for time spent donning and doffing sanitary and safety equipment, obtaining and sharpening knives and scissors, working in the plant and elsewhere before and after the scheduled end of the shift, cleaning safety equipment and sanitary equipment, and walktime," and (2) altered employee time records by using an automated time keeping system. Plaintiffs further claim that the Company concealed the alteration of time records and seek on that account an equitable tolling of the statute of limitations beyond the three-year limitation period back to the date the automated time-keeping system was allegedly implemented. Plaintiffs seek an unspecified amount of unpaid hourly and overtime wages plus an equal amount as liquidated damages, for present and former hourly employees who file consents to join the lawsuit. There were 7,267 hourly workers employed at the Company's processing plants as of October 31, 2000. On May 15, 2000, an employee of the Company filed suit against the Company in the United States District Court for the Southern District of Texas on behalf of live-haul drivers to recover an unspecified amount of overtime compensation and liquidated damages. Approximately 18 employees have filed consents to this lawsuit. Previously, the United States Department of Labor ("DOL") filed suit against the Company in the United States District Court for the Southern District of Mississippi, Hattiesburg Division. The lawsuit was brought under the Fair Labor Standards Act and seeks recovery of overtime compensation, together with an equal amount as liquidated damages, for thirty-two live-haul employees (i.e., live-haul drivers, chicken catchers, and loader-operators) employed by the Company. The lawsuit asserted that additional overtime compensation and liquidated damages may be owed to certain employees. The lawsuit also seeks an injunction to prevent the withholding of overtime compensation to live-haul employees in the future. The Company is vigorously defending both suits, and has denied any and all liability. Numerous affirmative defenses have been asserted against the plaintiff(s) in these matters, including the Company's reliance upon, and compliance with, the DOL's longstanding policy and practice of treating live-haul workers as exempt under the Fair Labor Standards Act. Both cases are in the early stages of discovery. Docket call concerning trial of the employees' suit has been set for July 27, 2001, while no trial date has been set for the DOL suit. Substantially similar lawsuits have been filed against other integrated poultry companies. In addition, organizing activity conducted by the representatives or affiliates of the United Food and Commercial Workers Union against the poultry industry has encouraged worker participation in this and the other lawsuits. The Company believes it has substantial defenses and is vigorously defending these lawsuits. On September 26, 2000, three current and former contract growers filed suit against the Company in the Chancery Court of Lawrence County, Mississippi. The plaintiffs filed suit on behalf of "all Mississippi residents to whom, between, on or about November 1981 and the present, the Company induced into growing chickens for it and paid compensation under the so called `ranking system'." Plaintiffs allege that the Company "has defrauded plaintiffs by unilaterally imposing and utilizing the so called `ranking system' which wrongfully places each grower into a competitive posture against other growers and arbitrarily penalizes each less successful grower based upon criteria which were never revealed, explained or discussed with plaintiffs." Plaintiffs further allege that they are required to accept chicks which are genetically different and with varying degrees of healthiness, and feed of dissimilar quantity and quality. Finally, plaintiffs allege that they are ranked against each other although they possess dissimilar facilities, equipment and technology. Plaintiffs seek an unspecified amount in compensatory and punitive damages, as well as varying forms of equitable relief. The Company is vigorously defending this action, and has removed the case to the United States District Court for the Southern District of Mississippi. The plaintiffs have filed a motion to remand, which is currently pending before the Court. The Company has invoked the arbitration provision present in the contracts signed by each of the plaintiffs. The Company is also involved in various claims and litigation incidental to its business. Although the outcome of such matters cannot be determined with certainty, management, upon the advice of counsel, is of the opinion that the final outcome should not have a material effect on the Company's consolidated results of operation or financial position. Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure. Not applicable. PART III Item 10. Directors and Executive Officers of the Registrant. As permitted by General Instruction G(3) to Form 10-K, reference is made to the information concerning the Directors of the Registrant and the nominees for election as Directors appearing in the Registrant's definitive proxy statement filed or to be filed with the Commission pursuant to Rule 14a-6(b). Such information is incorporated herein by reference to the definitive proxy statement. Information concerning the executive officers of the Registrant is set forth in Item 4A of Part I of this Annual Report. Item 11. Executive Compensation. As permitted by General Instruction G(3) to Form 10-K, reference is made to the information concerning remuneration of Directors and executive officers of the Registrant appearing in the Registrant's definitive proxy statement filed or to be filed with the Commission pursuant to Rule 14a-6(b). Such information is incorporated herein by reference to the definitive proxy statement. Item 12. Security Ownership of Certain Beneficial Owners and Management. As permitted by General Instruction G(3) to Form 10-K, reference is made to the information concerning beneficial ownership of the Registrant's Common Stock, which is the only class of the Registrant's voting securities, appearing in the Registrant's definitive proxy statement filed or to be filed with the Commission pursuant to Rule 14a-6(b). Such information is incorporated herein by reference to the definitive proxy statement. Item 13. Certain Relationships and Related Transactions. As permitted by General Instruction G(3) to Form 10-K, information, if any, required to be reported by Item 13 of Form 10-K, with respect to transactions with management and others, certain business relationships, indebtedness of management, and transactions with promoters, is set forth in the Registrant's definitive proxy statement filed or to be filed with the Commission pursuant to Rule 14a-6(b). Such information, if any, is incorporated herein by references to the definitive proxy statement. PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K. (a)1. FINANCIAL STATEMENTS: The following consolidated financial statements of the Registrant are included in Item 8: Consolidated Balance Sheets - October 31, 2000 and 1999 Consolidated Statements of Income - Years ended October 31, 2000, 1999 and 1998 Consolidated Statements of Stockholders' Equity - Years ended October 31, 2000, 1999 and 1998 Consolidated Statements of Cash Flows - Years ended October 31, 2000, 1999 and 1998 Notes to Consolidated Financial Statements - October 31, 2000 (a)2. FINANCIAL STATEMENT SCHEDULES: The following consolidated financial statement schedules of the Registrant are included in Item 8: Schedule II - Valuation and Qualifying Accounts All other schedules are omitted as they are not applicable or the required information is set forth in the Financial Statements or notes thereto. (a)3. EXHIBITS: The following exhibits are filed with this Annual Report or are incorporated herein by reference: Exhibit Brief Number Description
(1) 3-A - Copy of Articles of Incorporation of the Registrant, as amended. 3-B - Copy of Restated By-Laws of the Registrant as of January 8, 1998. 3-B-1 - Copy of Restated By-Laws of the Registrant as of October 23, 2000. (1) 4 - Copy of Certificate of Designations of Series A Junior Participating Preferred Stock of the Registrant (2) 10-A - Copy of Agreement of Purchase and Sale of Assets dated March 10, 1986 among the Registrant, National Prepared Foods, Inc., Trend Line Corporation, Business Advisors and Investor, Inc., W. T. Hogg, Jr., W. T. Hogg, Jr. Trust for Grandchildren, Noreen Mary Hogg Case Trust Under Agreement December 20, 1972 and Sherrie Ann Hogg Ford Trust Under Agreement December 20, 1972. (2) 10-B - Copy of Contract dated July 31, 1964 between the Registrant and the City of Laurel, Mississippi. (2) 10-B-1 - Copy of Contract Amendment dated December 1, 1970 between the Registrant and the City of Laurel, Mississippi. (2) 10-B-2 - Copy of Contract Amendment dated June 11, 1985 between the Registrant and the City of Laurel, Mississippi. (2) 10-B-3 - Copy of Contract Amendment dated October 7, 1986 between the Registrant and the City of Laurel, Mississippi. (8) 10-B-4 - Copy of Contract Amendment dated August 16, 1994 between the Registrant and the City of Laurel, Mississippi. (2) 10-C - Copy of Lease Agreement dated May 19, 1964 among the Town of Collins, Covington County, Mississippi and Mississippi Federated Cooperatives ALL. (2) 10-C-1 - Copy of Assignment of Lease and Leasehold Estate, and Conveyance of Leaseholder Improvements and Other Properties, Reserving a Purchase Money Security Interest, dated December 21, 1981 between M.C. Services (ALL) and Sanderson Farms, Inc. (Processing Division). (2) 10-D - Copy of Lease Agreement dated November 28, 1962 between the Board of Supervisors of Covington County, Mississippi acting for and on behalf of Supervisors Districts 1, 2, 3 and 5 of Covington County, Mississippi and Mississippi Federated Cooperatives, ALL. (2) 10-D-1 - Copy of Contract dated October 2, 1972 between the Board of Supervisors of Covington County, Mississippi, acting for and on behalf of Covington County, Mississippi and M.C. Services (ALL). (2) 10-D-2 - Copy of Lease Agreement dated May 1, 1976 between Supervisors Districts One, Two, Three and Five of Covington County, Mississippi and M.C. Services (ALL). (2) 10-D-3 - Copy of Assignment of Leases and Leasehold Estate, and Conveyance of Leasehold Improvements and Other Properties, Reserving a Purchase Money Security Interest, dated December 21, 1981 between M.C. Services (ALL) and Sanderson Farms, Inc. (Processing Division). (2) 10-E - Copy of Agreement dated December 1, 1986, between Sanderson Farms, Inc. (Hammond Processing Division) and United Food and Commercial Workers Local Union 210 affiliated with the United Food and Commercial Workers International Union. (5) 10-E-1 - Copy of Agreement dated February 14, 1990 between Sanderson Farms, Inc. (Hammond Processing Division) and United Food and Commercial Workers Local Union 210, affiliated with the United Food and Commercial Workers International Union. (8) 10-E-2 - Copy of Agreement effective November 6, 1994 between Sanderson Farms, Inc. (Hammond Processing Division) and United Food and Commercial Workers Local Union 210, affiliated with the United Food and Commercial Workers International Union. (9) 10-E-3 - Copy of Agreement effective July 15, 1995 between Sanderson Farms, Inc. (Hazlehurst Processing Division) and Laborers' International Union of North America, Professional Employees Local Union #697, AFL-CIO. (9) 10-E-4 - Copy of Agreement effective September 9, 1995 between Sanderson Farms, Inc. (Collins Processing Division) and Laborers' International Union of North America, Professional Employees Local Union #697, AFL-CIO. 10-E-5 - Copy of Agreement effective November 1, 1998 between Sanderson Farms, Inc. (Hammond Processing Division) and United Food and Commercial Workers Local Union #210 affiliated with the United Food and Commercial Workers International Union. 10-E-6 - Copy of Agreement effective July 26, 1999 between Sanderson Farms, Inc. (Hazlehurst Processing Division) and Laborers' International Union of North America, Professional Employees Local Union #697, AFL-CIO. 10-E-7 - Copy of Agreement effective January 13, 2000 between Sanderson Farms, Inc. (Collins Processing Division) and Laborers' International Union of North America, Professional Employees Local Union #697, AFL-CIO. 10-E-8 - Copy of Agreement effective October 7, 1999 between Sanderson Farms, Inc. (Brazos Processing Division) and the United Food and Commercial Workers Local Union #408, AFL-CIO. 10-E-9 - Copy of Agreement effective January 1, 2001 between Sanderson Farms, Inc. (Brazos Production Division) and the Teamsters International Local #968. (2) 10-F - Copy of Employee Stock Ownership Plan and Trust Agreement of Sanderson Farms, Inc. and Affiliates. (2) 10-F-1 - Copy of Amendment One to the Employee Stock Ownership Plan and Trust Agreement of Sanderson Farms, Inc. and Affiliates. (3) 10-F-2 - Copy of Amendment Two to the Employee Stock Ownership Plan and Trust Agreement of Sanderson Farms, Inc. and Affiliates. (2) 10-G - Copy of General Employee's Profit Sharing-Retirement Trust Agreement of Sanderson Farms, Inc. and Affiliates. (6) 10-H - Copy of Sanderson Farms, Inc. Performance Incentive Program effective January 1, 1991. (6) 10-H-1 - Copy of Sanderson Farms, Inc. Performance Incentive Program for Sanderson Farms, Inc. (Foods Division) effective November 1, 1990. (6) 10-H-2 - Copy of Sanderson Farms, Inc. Performance Incentive Program for Sanderson Farms, Inc.(Foods Division) Retail Entree effective November 1, 1990. (8) 10-H-3 - Copy of Sanderson Farms, Inc. Bonus Award Program effective November 1, 1993. (10) 10-I - Copy of Sanderson Farms, Inc. and Affiliates Stock Option Plan. (5) 10-J - Copy of Memorandum of Agreement dated as of June 13, 1989, between Pike County, Mississippi and the Registrant. (6) 10-K - Copy of Wastewater Treatment Agreement between the City of Magnolia, Mississippi and the Registrant dated August 19, 1991. (6) 10-L - Copy of Memorandum of Agreement and Purchase Option between Pike County, Mississippi and the Registrant dated May, 1991. (7) 10-M - Copy of Lease Agreement between Pike County, Mississippi and the Registrant dated as of November 1, 1992. 21 - List of subsidiaries of the Registrant. 23 - Consent of Independent Auditors 27 - Copy of Financial Data Schedule (2) 28-A - Copy of Certificate of Registration of Trademark "Miss Goldy". (2) 28-B - Copy of Certificate of Registration of Trademark "Wise Choice". (2) 28-C - Copy of Certificate of Registration of Trademark "Buttercup Farms". (2) 28-D - Copy of Certificate of Registration of Trademark "Collinswood". (2) 28-E - Copy of Certificate of Registration of Trademark "Covington Farms". (2) 28-F - Copy of Certificate of Registration of Trademark "Smart Cuts". (4) 28-G - Copy of Certificate of Registration of Trademark "Kettle Classics". (5) 28-H - Copy of Certificate of Registration of Trademark "Sanderson Farms".
(1) Filed as an exhibit to the Registrant's Annual Report on Form 10-K for the fiscal year ended October 31, 1989, and incorporated herein by reference. (2) Filed as an exhibit to the Registrant's Registration Statement on Form S-1 (Commission File No. 33-13141) and incorporated herein by reference. (3) Filed as an exhibit to the Registrant's Annual Report on Form 10-K for the fiscal year ended October 31, 1987, and incorporated herein by reference. (4) Filed as an exhibit to the Registrant's Annual Report on Form 10-K for the fiscal year ended October 31, 1988, and incorporated herein by reference. (5) Filed as an exhibit to the Registrant's Annual Report on Form 10-K for the fiscal year ended October 31, 1990, and incorporated herein by reference. (6) Filed as an exhibit to the Registrant's Annual Report on Form 10-K for the fiscal year ended October 31, 1991, and incorporated herein by reference. (7) Filed as an exhibit to the Registrant's Annual Report on Form 10-K for the fiscal year ended October 31, 1992, and incorporated herein by reference. (8) Filed as an exhibit to the Registrant's Annual Report on Form 10-K for the fiscal year ended October 31, 1994 and incorporated herein by reference. (9) Filed as an exhibit to the Registrant's Annual Report on Form 10-K for the fiscal year ended October 31, 1995 and incorporated herein by reference. (b) REPORTS ON FORM 8-K: No reports on From 8-K were filed during the fourth quarter of the Fiscal Year ended October 31, 1999. (c) Agreements Available Upon Request by the Commission. --------------------------------------------------- The Registrant is a party to various agreements defining the rights of holders of long-term debt of the Registrant, but no single agreement authorizes securities in an amount which exceeds 10% of the total assets of the Company. Upon request of the Commission, the Registrant will furnish a copy of any such agreement to the Commission. Accordingly, such agreements are omitted as exhibits as permitted by Item 601(b)(4)(iii) of Regulation S-K. QUALIFICATION BY REFERENCE Information contained in this Annual Report as to the contents of any contract or other document referred to or evidencing a transaction referred to is necessarily not complete, and in each document filed as an exhibit to this Annual Report or incorporated herein by reference, all such information being qualified in its entirety by such reference. REPORT OF INDEPENDENT AUDITORS The Board of Directors and Stockholders Sanderson Farms, Inc. We have audited the accompanying consolidated balance sheets of Sanderson Farms, Inc. and subsidiaries as of October 31, 2000 and 1999 and the related consolidated statements of income, stockholders' equity, and cash flows for each of the three years in the period ended October 31, 2000. Our audit also included the financial statement schedule listed in the index under item 14(a).These financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes accessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Sanderson Farms, Inc. and subsidiaries at October 31, 2000 and 1999, and the consolidated results of their operations and their cash flows for each of the three years in the period ended October 31, 2000, in conformity with accounting principles generally accepted in the United States. Also in our opinion the related financial statement schedule when considered in relation to the basic financial statements as a whole, presents fairly in all material respects the information set forth therein. /s/Ernst & Young LLP Jackson, Mississippi December 7, 2000 Sanderson Farms, Inc. and Subsidiaries Valuation and Qualifying Accounts Schedule II COL. A COL. B COL. C COL. D COL. E COL. F - ----------------------------------------------------------------------------------------------- Balance at Charged to Charged to Balance at Beginning Costs and Other Deductions End of Classification of Period Expenses Accounts Describe(1) Period - ----------------------------------------------------------------------------------------------- (In Thousands)
Year ended October 31, 2000 Deducted from accounts receivable: Allowance for doubtful accounts Totals $ 249 $1,413 $1,242 $ 420 Year ended October 31, 1999 Deducted from accounts receivable: Allowance for doubtful accounts Totals $ 249 $ 124 $ 124 $ 249 Year ended October 31, 1998 Deducted from accounts receivable: Allowance for doubtful accounts $ 233 $ 240 $ 224 $ 249 Totals
(1) Uncollectible accounts written off, net of recoveries SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. SANDERSON FARMS, INC. Date: January 25, 2001 /s/Joe F. Sanderson, Jr. Joe F. Sanderson, Jr. Chairman of the Board Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities as of the dates indicated. /s/ Joe F. Sanderson, Jr. 1/25/01 /s/ John H. Baker, III 1/25/01 - -------------------------------------- ----------------------------------- Joe F. Sanderson, Jr., John H. Baker, III, Chairman of the Board, President Director and Chief Executive Officer /s/ William R. Sanderson 1/25/01 /s/ Charles W. Ritter, Jr. 1/25/01 - ------------------------------------- ----------------------------------- William R. Sanderson, Director, Charles W. Ritter, Jr., Director of Marketing Director /s/Hugh V. Sanderson 1/25/01 /s/ Rowan H. Taylor 1/25/01 - ------------------------------------- ----------------------------------- Hugh V. Sanderson, Director, Rowan H. Taylor, Manager of Customer Relations Director /s/ Donald W. Zacharias 1/25/01 /s/ Robert Buck Sanderson 1/25/01 - ------------------------------------ ------------------------------------ Donald W. Zacharias, Robert Buck Sanderson, Director, Director Corporate Live Production Assistant /s/ Phil K. Livingston 1/25/01 /s/ Lampkin Butts 1/25/01 - ----------------------------------------- ------------------------------------ Phil K. Livingston, Lampkin Butts, Director, Director Vice President - Sales /s/ D. Michael Cockrell 1/25/01 /s/James A. Grimes 1/25/01 - --------------------------------------- ------------------------------------ D. Michael Cockrell, James A. Grimes, Secretary Director, Treasurer and Chief and Chief Accounting Officer Financial Officer EX-23 2 0002.txt CONSENT OF INDEPENDENCE AUDITORS Exhibit 23 Consent of Independent Auditors We consent to the incorporation by reference in Post Effective Amendment No. 1 to Registration Statement (Form S-8 No. 33-67474) pertaining to the Sanderson Farms, Inc. and Affiliates Stock Option Plan of our report dated December 7, 2000 with respect to the consolidated financial statements and schedule of Sanderson Farms, Inc. included in the Annual Report (Form 10-K) for the year ended October 31, 2000. /s/Ernst & Young LLP Jackson, Mississippi January 22, 2001 EX-10 3 0003.txt HAMMOND PROCESSING UNION AGREEMENT A G R E E M E N T BETWEEN SANDERSON FARMS, INC. (HAMMOND PROCESSING DIVISION) AND UNITED FOOD AND COMMERCIAL WORKERS LOCAL UNION 210 affiliated with the UNITED FOOD AND COMMERCIAL WORKERS INTERNATIONAL UNION November 1, 1998 - November 30, 2001 TABLE OF CONTENTS ARTICLE PAGE - ------- ---- I. AGREEMENT 1 II. RECOGNITION 1 III. MANAGEMENT PREROGATIVES 2 IV. SHOP STEWARDS 2 V. GRIEVANCE PROCEDURE 3 STEP 1 3 STEP 2 4 STEP 3 4 VI. ARBITRATION 5 VII. NO STRIKE - NO LOCK OUT 7 VIII. UNION BULLETIN BOARD 7 IX. HOURS OF WORK 8 X. SENIORITY 10 XI. LEAVES OF ABSENCE 12 XII. SENIORITY LIST 14 XIII. MISCELLANEOUS 15 XIV. VACATIONS 16 XV. INSURANCE 17 XVI. HOLIDAYS 17 XVII. WAGES 19 XVIII. NO DISCRIMINATION 20 XIX. AUTHORIZATION FOR REPRESENTATION AND CHECK-OFF 21 XX. UNION SECURITY 21 XXI. PROFIT SHARING -- RETIREMENT 22 XXII. DURATION OF AGREEMENT 22 SIGNATURES 23 APPENDIX A 24 APPENDIX B 26 288522 ARTICLE I AGREEMENT Section 1. This Agreement made and entered into this 1st day of November, 1998, by and between Sanderson Farms, Inc. (Hammond Processing Division) of Hammond, Louisiana, hereinafter referred to as the Company or Employer, and United Food and Commercial Workers Local Union 210, affiliated with the United Food and Commercial Workers International Union, hereinafter referred to as the Union. Section 2. The general purpose of this Agreement is to establish just and equitable terms and conditions of employment and to provide methods for fair and peaceful adjustment of differences which may arise. It is recognized by the Agreement to be the respective duty of the Company, the Union and the Employees to cooperate fully, individually and collectively toward the accomplishment of said aims. ARTICLE II RECOGNITION Section 1. The Company recognizes the Union as the exclusive bargaining agent for all production and maintenance employees, including truck drivers, at the Employer's poultry processing and rendering plant in Hammond, Louisiana, and excluding office clerical employees, guards and/or watchmen, salesmen, professional employees, and supervisors as defined in the Act. ARTICLE III MANAGEMENT PREROGATIVES Section 1. Nothing in this Agreement shall be deemed to limit the Employer in any way in the exercise of the customary functions of management which are recognized as the Employer's exclusive responsibility, including, but not limited to, the right to plan, direct, and control operations, to utilize the services of contractors, to determine the number, size and location of its establishments, to close an establishment or departments thereof, to hire, to promote, to demote, and for proper cause to discipline, suspend or discharge, to assign and schedule work and transfer employees from one job or department to another, and to make and enforce reasonable rules and regulations relative to any and all of these matters or to the management of its operation, provided that the reasonableness of rules may be tested in the grievance procedure. The Employer shall be the exclusive judge of all matters pertaining to its operations and their scheduling and the methods, processes, equipment, means of operation and size of workforce. Section 2. The Employer retains all prerogatives and rights of management and all privileges and responsibilities not specifically limited by this Agreement. ARTICLE IV SHOP STEWARDS Section 1. The Employer recognizes the right of the Union to designate shop stewards, not to exceed eight (8) in number, who shall be assigned to serve specific areas of the plant to handle such Union business as may arise. The shop stewards shall be employees of the Company. The Union shall notify the Company in writing as to the names of the stewards and of any changes in designation of stewards. Section 2. A representative of the Union shall be permitted to enter the plant at reasonable times, upon Employer's premises and plant, provided such representative shall in no way interfere with the operations of Employer's business and shall make arrangements with the Employer's manager. ARTICLE V GRIEVANCE PROCEDURE Section 1. Grievances arising under this contract are herein defined as a claim by a party to this Agreement or an employee covered by this Agreement that the Company or the Union has violated a provision of this Agreement. STEP I The employee shall discuss the grievance or complaint with the immediate supervisor within five (5) working days after the event giving rise thereto occurs, or within five (5) working days following the date on which the grievant had or reasonably would have had knowledge thereof. In the event the employee so requests, the appropriate steward shall be present at this step. The supervisor shall give an answer within five (5) working days after the grievance is received. STEP 2 If there is no settlement in Step 1, the grievance may be presented by the employee and/or shop steward within five (5) working days from the date on which the supervisor's answer was given in Step 1. The grievance must be presented in writing to the department superintendent and must state the following information: (a) name or names of employee or employees involved; (b) the department or departments involved; (c) the date and time of the occurrence or discovery of the grievance; (d) the facts of the incident on which the claim is based; (e) the specific provision of this Agreement alleged to have been violated; (f) the remedy requested. The department superintendent shall give the Company's answer in writing within five (5) working days after the grievance is received by the superintendent. STEP 3 In the event the grievance is not settled in Step 2, then the grievance may be appealed in writing to the division manager or a designated representative by the Union to Step 3 within five (5) working days from the Company's answer in Step 2. The division manager or a designated representative shall give an answer in writing within five (5) working days from the date of the appeal. In the event the grievance is not settled then the aggrieved party or parties shall have the right to request arbitration. In the event a grievance arises on behalf of the Employer, the matter shall be presented to the Union Business Agent in writing, who shall have seven (7) days from the date of submission within which to endeavor to reconcile the grievance presented and shall give an answer in writing within that time. If not settled within that time, the aggrieved party or parties shall have the right to request arbitration. Section 2. Discharge grievances shall be processed initially under Step 3 of the grievance procedure. The written grievance shall be filed with the division manager within five (5) working days following the date of discharge. Section 3. A failure to observe the time limit specified herein for original presentation of a grievance or presentation in any subsequent step of the grievance procedure on the part of either the grievant or the Union shall be conclusive evidence that the grievance has been settled and abandoned. Failure on the part of the Company to comply with the time limits for delivering its answer in any step of the grievance procedure shall automatically advance the grievance to the next step of the grievance procedure. The time limits of the grievance procedure may be extended by mutual consent of the Union and the Company. ARTICLE VI ARBITRATION Section 1. If a party to this Agreement desires to take a grievance to arbitration, it shall within fifteen (15) calendar days after the denial of the grievance, give written notice of his intention to the other party, together with a written statement of the specific provision or provisions of this Agreement at issue. Section 2. The parties shall attempt to select an impartial arbitrator. If they are unable to agree upon a choice within seven (7) calendar days after the receipt of Notice of Intent to Arbitrate, either party may request the Federal Mediation and Conciliation Service to submit a list of five (5) arbitrators, from which the arbitrator will be selected. Selection shall be made by the parties alternately striking any name from the list (the first to strike shall be the party requesting arbitration) until only one (1) name remains. The final name remaining shall be the arbitrator of the grievance. Section 3. The jurisdiction and the decision of the arbitrator of the grievance shall be confined to a determination of the acts and the interpretation or application of the specific provision or provisions of this Agreement at issue. The Arbitrator shall be bound by terms and provisions of this Agreement and shall have the authority to consider only grievances representing solely an arbitration issue under this Agreement. The arbitrator shall have no authority to add to, alter, amend, or modify any provision of this Agreement. The decision of the arbitrator in writing on any issue properly before the arbitrator in accordance with the provisions of this Agreement, shall be final and binding on the aggrieved employee or employees, the Union, and the Employer. Section 4. Multiple grievances shall not be heard before one arbitrator at the same hearing except by mutual agreement of the parties. Section 5. The Union and the Employer shall each bear its own costs in these arbitration proceedings, except that they shall share equally the fee and other expenses of the arbitrator in connection with the grievance. ARTICLE VII NO STRIKE - NO LOCK OUT Section 1. For the duration of this Agreement, there shall be no strike, stoppages, slowdowns, picketing, or other interruption of or interference with the operations of the plant. Section 2. The Company shall not lock out employees for the duration of this Agreement. Section 3. Neither the violation of any provisions of the Agreement, nor the commission of any act constituting an unfair labor practice, or otherwise made unlawful, shall excuse the employees, the Union, or the Company from their obligations under the provisions of this Article. Section 4. An employee discharged or otherwise disciplined for violation of this Article, may seek review of such discipline through the grievance and arbitration procedures provided herein. In this event, the only question to be reviewed shall be whether or not the employee participated in the prohibited conduct. ARTICLE VIII UNION BULLETIN BOARD The Employer will provide a bulletin board in the plant for posting of Union notices. All matters to be posted shall be submitted to the Division Manager or a designated representative for approval prior to posting, and management's decision shall be final. ARTICLE IX HOURS OF WORK Section 1. The regular work week shall consist of five (5) days or forty (40) hours. This shall not be construed as a guarantee of any amount of hours or work. The basic work week shall be the seven (7) day period from 12:01 a.m. Sunday until midnight the following Saturday. Employees will be given at least one (1) calendar week's notice of any change by the Company of the payroll week. Section 2. An employee who works more than forty (40) hours in any one week shall be paid at time and one-half the regular rate of pay for all hours in excess of forty (40). Section 3. When employees are called to work a shift outside their regularly scheduled shift and report for work, or when they report to work at their regularly scheduled time, they shall be given the opportunity to work a minimum of three (3) hours or receive pay for same at the applicable hourly rate, except that no such pay shall be made when the plant cannot operate for reasons beyond the control of the Employer, such as, but not limited to, strikes, utility failure, fire, flood, storms or other acts of God interfering with work, or a breakdown of machinery or equipment when the Company notifies the employees not to report to work at least four (4) hours prior to the scheduled time to work. Section 4. Employees will be paid at their regular rate for all waiting time of thirty (30) minutes or less, so long as they do any job they are assigned. Employees will not be paid for waiting time which exceeds thirty (30) minutes if (1) they are relieved of all duties, (2) are free to leave the plant, and (3) are told the time they must return to work. Employees will not be relieved without pay more than once in any workday except for a lunch break of not more than one (1) hour. Section 5. The Company will provide one (1) unpaid break of not less than thirty (30) minutes for lunch during each shift, and shall provide one (1) twelve (12) minute paid rest period prior to lunch each day. In addition, all employees will be allowed one (1) twelve (12) minute paid rest period after the lunch break provided the work time is expected to be not less than two and one-half (2 1/2) hours. No unpaid break shall be provided for maintenance employees and truck drivers. The Company shall have the right to provide a twenty-four (24) minute paid lunch break to Clean-Up Line Operators on restricted hours in lieu of all breaks provided in this Section. Section 6. A Clean-Up Line Operator who has completed the probationary period and is permanently assigned to restricted hours in the clean up department shall receive an hourly adjustment of ninety (90) cents for each hour worked in that assignment. Section 7. Employees who have completed the probationary period and are temporarily assigned for one or more consecutive hours to perform the duties of an absent employee in a higher paid classification shall receive the rate of that classification while performing the duties of the classification. Employees who work at more than one pay rate during a week in which they earn overtime shall receive overtime pay based upon an average of the rates earned during that week. ARTICLE X SENIORITY Section 1. Seniority is defined as the length of an employee's continuous employment in the bargaining unit at the Company's Hammond, Louisiana, poultry processing plant since the last permanent date of employment. For purposes of layoff, recall, promotion, and vacation only, this shall include continuous service which began prior to the acquisition of the plant by the Company. Section 2. All newly hired or rehired employees shall be considered as probationary employees for a period of ninety (90) days during which period they shall not acquire seniority, and during which they may be discharged without recourse to the grievance and arbitration procedures provided herein. If retained as a regular employee upon satisfactory completion of the probationary period, seniority shall be retroactive to the first day of employment. Section 3. In matters of layoff, recall, and promotion, consideration will be given to an employee's skill, ability, attendance, versatility, training, physical fitness, and seniority; and when, in the opinion of the Company, the factors other than seniority are relatively equal, seniority will be the deciding factor. Section 4. An employee's seniority shall be lost and employment considered terminated by: (a) discharge for just cause; (b) failure to return from layoff within five (5) working days after written notice by certified mail is sent by the Company to the employee's last known address on the Company's books. Actual notice to the employee of recall by any other means shall satisfy the terms of this provision; (c) voluntary termination of employment; (d) failure to report after termination of a leave of absence approved by the Company in writing on the first scheduled day following the expiration of such leave of absence; (e) engaging in a gainful occupation while on leave of absence; (f) absence from work for three (3) consecutive working days without notice to the Company, which shall be considered as a voluntary quit, unless notice was prevented by a cause beyond the control of the employee; (g) separation from the Company's active payroll for any reason, exclusive of leaves of absence approved by the Company, for a period exceeding an employee's length of service in the Hammond plant, or three (3) months, whichever is less. Section 5. For the purposes of this Agreement, layoffs shall be classified as (a) "short term" and (b) "long term". A short term layoff is a layoff which will not exceed ten (10) workdays in length. Short term layoffs may be made without regard to seniority. A long term layoff is a layoff which will exceed ten (10) workdays in length. Long term layoffs shall be made subject to Section 3 of this Article. Section 6. All permanent job vacancies in premium rated classifications shall be posted for twenty-four (24) hours on the plant bulletin board. Employees in lower rated classifications desiring promotion to such jobs shall sign a bid sheet posted on the bulletin board. An employee who does not sign such bid sheet shall have no right to consideration for the vacancy. However, the fact that an employee did not sign the bid sheet will not preclude that employee's selection for the job by the Company if none of the signers is determined to be qualified. If no qualified employee bids on the posted position, the Company may fill the position in its discretion. If, after a reasonable period not to exceed thirty (30) days, the employee selected for the posted position achieves an acceptable level of performance, the employee shall receive the rate of the new position. If the employee fails to perform in an acceptable manner, such employee shall return to a job in their former classification and the premium job shall be posted again. An employee who self-disqualifies shall return to the extra board at the line operator's rate of pay and shall not be eligible for bidding on a premium job for a period of six (6) months. Section 7. Assignments involving employees on the extra board shall be in order of seniority. Within a department, no extra board employee shall be retained over a permanently assigned employee. ARTICLE XI LEAVES OF ABSENCE Section 1. An employee who has completed the probationary period may be granted, at the Company's discretion, a leave of absence without pay for a reasonable period of time, not to exceed one (1) month, for the following reasons: (a) emergency personal business; (b) serious illness in the immediate family (spouse, children or parents), supported by a doctor's certificate; and (c) Union business, upon written request by the Union's Business Manager, provided that no more than three (3) employees shall be on such leave simultaneously. Section 2. Employees who have completed their probationary period are eligible for up to thirteen (13) weeks per year of unpaid family and medical treatment leave for the following reasons: (a) Employee's serious health condition -- a medical certification will be required which states that the employee is unable to perform the functions of the employee's position. (b) Family serious health condition -- spouse, parent, or child. A medical certification will be required stating the employee is "needed to care for the individual." (c) New child leave -- the birth, adoption or foster care placement by a state agency of a child, and, the need to care for the child; such leave may be prior to the actual birth or placement. The provisions of this Section shall be administered in accordance with the Family and Medical Leave Act of 1993 (FMLA). Section 3. Employees who have completed their probationary period who lose actual work time in order to attend the funeral of a family member shall receive a paid funeral leave for time necessarily lost during the employee's regularly scheduled shift, provided the employee would have been scheduled and at work during that day. Said leave shall be up to three (3) days with pay for a deceased parent, spouse, child, brother, or sister and one (1) day for a deceased father-in-law, mother-in-law, grandparent, brother-in-law, or sister-in-law. In order to receive pay under this Section, an employee must be actively working, must make application for such paid leave, and must attend the funeral. The Company may require satisfactory evidence of attendance at the funeral and the relationship of the deceased. Section 4. If the Company has knowledge that an employee, in a premium-rated classification, will be on family and medical leave, military leave, or an industrial injury leave for more than thirty (30) calendar days, the job will be posted and filled on a temporary basis. The successful bidder will receive the rate of the premium classification for the period its duties are performed. When employees on leave under this Section return, they shall be immediately assigned to their old job; employees temporarily filling the job shall return to their regular classification and pay rate. Section 5. The Company shall pay each active employee who reports for jury duty the difference between pay up to eight times the hourly rate for time actually lost and the juror's daily fee for each day the employee is required to serve on a jury. The employee must report to work during those days of his regularly scheduled shift during which the employee is not required to report for jury duty or be available at court for jury service. The employee must present proof of jury service and the amount of compensation received from the court. ARTICLE XII SENIORITY LIST Section 1. Upon request at any reasonable time, the Company shall furnish to the Union a current seniority list. ARTICLE XIII MISCELLANEOUS Section 1. The Company shall maintain safe, sanitary, and healthy working conditions at all times, and employees will be required to cooperate in maintaining such conditions. Any complaints regarding safety or health shall be processed through the grievance and arbitration provisions of this Agreement. Section 2. The Company will provide any uniforms required of employees who have completed their probationary period. The Company will furnish required safety equipment, gloves, aprons, hair nets, freezer gloves, cotton gloves, and smocks at no cost to the employee. Needed replacements, through normal use, will be made at no cost provided the worn out article is returned to the Company. If an item is lost or destroyed through employee negligence, the employee will be charged for its replacement. Section 3. The Employer may require any employee to take a physical examination at any time at the Employer's expense. Section 4. It shall be the responsibility of all employees to keep the Employer apprised of their current address, telephone number, marital status and number of dependents. Section 5. It is the intent of the parties hereto that no provisions of this Agreement shall require either party to perform any act which shall be unlawful under any Louisiana or Federal statute. ARTICLE XIV VACATIONS Section 1. Regular full-time employees shall be eligible for one (1) week's vacation after the first anniversary date of continuous employment, and after the anniversary date of each succeeding year. Employees shall be eligible for a second week of vacation after the second anniversary date of continuous employment, and after the anniversary date of each succeeding year of continuous employment. Employees shall be eligible for a third week of vacation after the tenth anniversary date of continuous employment, and after the anniversary date of each succeeding year of continuous employment. Employees shall be eligible for a fourth week of vacation after the twentieth anniversary date of continuous employment and after the anniversary date of each succeeding year of continuous employment. Section 2. To be eligible for a vacation, an employee must have worked sixteen hundred (1,600) hours during the preceding twelve (12) months or eighty (80) percent of available hours for that period, whichever is less. Vacations and holidays not worked shall be considered time worked for purposes of this Section. Section 3. Vacation pay shall be computed at forty (40) times the Employee's regular straight time hourly rate. Section 4. Due consideration will be given employees' choice of vacation time, but all vacations scheduled are subject to the final approval of the Company in keeping with the Company's scheduling needs. In the event that two or more employees cannot be released at the same time, the employee with the longest service with the Company will be given preference. An employee who notifies the Company of a vacation choice thirty (30) days in advance shall not lose that vacation choice to another employee. Vacations may not be scheduled for periods of less than a week, and all vacations must be taken within an anniversary year. Section 5. The Company reserves the right to schedule a plant shutdown for one .(l) week in any year, which shall be treated as a vacation week for those employees entitled to vacation. ARTICLE XV INSURANCE The Company will provide a group insurance program for employees covered by this Agreement. The Company will continue to make monthly contributions toward group insurance premiums in the same proportion as is currently in effect. Employees will bear the remaining costs of the insurance. ARTICLE XVI HOLIDAYS Section 1. The following shall be considered holidays: New Year's Day Labor Day Martin Luther King's Birthday Thanksgiving Day Memorial Day Christmas Day July Fourth Birthday Holiday The birthday holiday shall be taken on the employee's birthday. If the birthday falls on a Saturday or Sunday, the holiday shall be taken on a day agreed upon by the Company and the employee within one (1) week of the birthday. Section 2. All regular full-time employees who have completed their probationary period shall be paid for eight (8) hours at their regular straight time rate for each holiday enumerated above, provided they report for work and work all scheduled hours on the workday preceding and the workday next following the holiday, unless the employee was necessarily absent due to personal illness, supported by a doctor's certificate, or because of an emergency occurring to the employee or the employee's immediate family (meaning only spouse, children, or parents). No employee shall lose holiday pay because of missing no more than thirty (30) minutes on the workday before or the workday following the holiday. In any event, an employee must work at least one (1) day during the calendar week in which a holiday falls in order to be eligible for holiday pay, except the employee who is on vacation. Section 3. Employees required to work on a holiday shall be paid the amount provided above, in addition to their regular earnings for that day. Hours not worked on a holiday shall not be considered as work time in computing any additional compensation due under the overtime provisions of this contract. Section 4. If an employee is required to work and fails to report or fails to work scheduled hours on a holiday, the employee shall forfeit holiday pay for that day. Section 5. Employees on vacation during the week in which a holiday falls shall receive holiday pay. ARTICLE XVII WAGES Section 1. Wages shall be paid as provided in Appendix A attached hereto and made a part of this Agreement. Section 2. Whenever a new job classification is created by the Company, or there is a change or merger of job classifications or the job content of job classifications, the Company will discuss the appropriate wage rate with the Union. If a mutually satisfactory rate cannot be agreed upon, the Company will set the rate. The Union may file a grievance on the rate, and the dispute shall be settled in accordance with the grievance and arbitration procedures of this contract. Section 3. Any employees who, upon the effective date of the wage rate set forth in Appendix A, are earning in excess of the applicable rate, shall, during the term of this Agreement, continue to receive their current rate until the contract rate equals or exceeds that rate. This section shall not apply to any employee in a classification which has been paid on a salary basis under any past contract. Section 4. If, during the term of this Agreement, Congress enacts new minimum wage legislation which requires the payment of a minimum wage greater than the rate provided in Appendix A for newly-hired employees, the rate for newly-hired employees shall be raised to the federal minimum rate, and the spread between the rates provided in this Agreement shall be maintained. Any such change shall be effective upon the effective date of the new federal minimum rate. Section 5. In addition to the wage rates as provided in Appendix A, production employees who have been continuously employed for five (5) or more years shall receive seniority pay of twenty (20) cents per hour. Maintenance employees and distribution drivers who have been continuously employed for five (5) or more years will receive seniority pay of fifty (50) cents per hour. Section 6. Employees who have been continuously employed for one (1) or more years shall receive a night shift differential of twenty-five (25) cents per hour for work performed on a shift starting during the hours beginning 12:00 noon through 1:00 a.m. The starting time of a shift determines if it is subject to the shift differential. Employees performing work on a night shift which is not their regular shift will receive shift differential for such work if it lasts three (3) or more hours. Distribution drivers shall not receive shift differential regardless of the time they begin work. ARTICLE XVIII NO DISCRIMINATION Section 1. The Company and the Union agree that they will not discriminate against any person with regard to employment or Union membership because of race, creed, color, sex, religion, age, national origin, or disability (as defined in the Americans With Disabilities Act). Section 2. Whenever masculine gender is used in this Agreement, it shall apply to the feminine gender. ARTICLE XIX AUTHORIZATION FOR REPRESENTATION AND CHECK-OFF Section 1. During the term of this Agreement, the Company will deduct initiation fees, assessments, and Union dues from the wages of employees who individually authorize the Company on a form in compliance with Appendix B to this Agreement. Section 2. The Union shall save the Company harmless against and from all claims, demands, suits or other forms of liability that arise out of or by reason of action taken or not taken by the Company in reliance upon or compliance with any provisions of this Article. Section 3. It is agreed that by reason of institution of the above check-off system, collections by any other method on the Company's premises are prohibited, except with the permission of the Company. ARTICLE XX UNION SECURITY Section 1. It shall be a condition of employment that all employees of the Employer covered by this Agreement become members of the Union in good standing not later than thirty-one (31) days after the effective date of this Agreement, and remain members in good standing of the Union. It shall also be a condition of employment that all employees covered by this Agreement and hired on or after its effective date shall on the thirty-first (31st) day following the beginning of such employment become and remain members in good standing in the Union. The Union shall save the Company harmless against and from all claims, demands, suits, or other forms of liability that arise out of or by reason of action taken or not taken by the Company in reliance upon or compliance with any provisions of this Article. It is understood and agreed that the provisions of this Article shall be effective only to the extent permitted by applicable law. ARTICLE XXI PROFIT SHARING -- RETIREMENT Section 1. Since November 1, 1989 employees covered by this Agreement have been covered by the General Employees Profit Sharing - Retirement Trust Agreement of Sanderson Farms, Inc. and Affiliates. Approval has been sought from the Internal Revenue Service (IRS) to merge said Plan into the Employee Stock Ownership Plan of Sanderson Farms, Inc. and Affiliates, effective as of November 1, 1993. When the merger is approved, participation and benefits in the newly merged plan shall be in accordance with the provisions of that plan beginning with the effective date of the merger. In the event the IRS does not approve the merger, employees covered by this Agreement shall continue to be governed by the preexisting Plan and its provisions. ARTICLE XXII DURATION OF AGREEMENT Section 1. This Agreement shall remain in full force and effect from the 1st day of November, 1998 until the 30th day of November, 2001, and shall continue thereafter from year to year until either party to this Agreement desires to terminate this Agreement by giving written notice at least sixty (60) days prior to November 30, 2001, or at least sixty (60) days' written notice prior to any anniversary date thereafter. The parties to this Agreement shall endeavor to satisfactorily negotiate any contemplated change or execute a new Agreement during the sixty (60) day period, after proper notice in writing has been given as provided herein above. Notice, as specified in this Article, shall be mailed via United States Certified Mail. IN WITNESS WHEREOF, the parties have hereunto signed their names this ______ day of November, 1998. SANDERSON FARMS, INC. UNITED FOOD AND COMMERCIAL (Hammond Processing Division) WORKERS LOCAL UNION 210, Affiliated with the United Food and Commercial Workers /s/Brian C. Williams International Union - ------------------------------ /s/Stephen C. Blessey /s/Oneal W. Scott - ------------------------------ ------------------------------------ /s/Eva Mae Adams ------------------------------------ /s/Annie Landry ------------------------------------ /s/Lucille Bickham ------------------------------------ /s/Hattie Lloyd ------------------------------------ /s/Raymond L. Carver ------------------------------------ APPENDIX "A" WAGE SCHEDULE
EFFECTIVE EFFECTIVE EFFECTIVE 11/1/98 1/2/2000 1/7/2001 PROCESSING Receiving Forklift Operator .................... 8.00 8.25 8.45 Hanging Dock ......................... 7.85 8.10 8.30 Picking Killer ............................... 8.10 8.35 8.55 Floorworker .......................... 7.75 8.00 8.20 Line Operator ........................ 7.60 7.85 8.05 Eviscerating Floorworker .......................... 7.75 8.00 8.20 Bird Chiller Operator ................ 7.75 8.00 8.20 Line Operator ........................ 7.60 7.85 8.05 By-Products Department By-Products Operator ................. 7.85 8.10 8.30 CUSTOMER SERVICE Saws Floorworker .......................... 7.75 8.00 8.20 Line Operator ........................ 7.60 7.85 8.05 Packing Scale Operator ....................... 7.85 8.10 8.30 Floorworker .......................... 7.75 8.00 8.20 Giblet Chiller Operator .............. 7.75 8.00 8.20 Grader ............................... 7.70 7.95 8.15 Line Operator ........................ 7.60 7.85 8.05 Specialty Forklift Operator .................... 8.05 8.30 8.50 Scale Operator ....................... 7.85 8.10 8.30 Floorworker .......................... 7.75 8.00 8.20 Stackoff ............................. 7.70 7.95 8.15 Line Operator ........................ 7.60 7.85 8.05 Marination Scale Operator ....................... 7.85 8.10 8.30 Formulating Mixer .................... 7.75 8.00 8.20 Floorworker .......................... 7.75 8.00 8.20 Stack Off ............................ 7.70 7.95 8.15 Line Operator ........................ 7.60 7.85 8.05
EFFECTIVE EFFECTIVE EFFECTIVE 11/1/98 1/2/2000 1/7/2001 SHIPPING Forklift Operator ................... 8.05 8.30 8.50 Cooler & Shipping Dock .............. 7.70 7.95 8.15 Distribution Driver ................. 10.15 10.40 10.60 DEBONE DEPARTMENT Deboning Forklift Operator ................... 8.00 8.25 8.45 Scale Operator ...................... 7.85 8.10 8.30 Floorworker ......................... 7.75 8.00 8.20 Front Half Puller ................... 7.70 7.95 8.15 Combo Packer ........................ 7.70 7.95 8.15 Stack Off ........................... 7.70 7.95 8.15 Line Operator ....................... 7.60 7.85 8.05 Quality Control Technician ................ 7.85 8.10 8.30 MAINTENANCE DEPARTMENT Master Skilled Operator I ........... 12.40 12.65 12.85 Master Skilled Operator II .......... 10.90 11.15 11.35 Skilled Maintenance Men ............. 10.00 10.25 10.45 Mechanic ............................ 9.40 9.65 9.85 Mechanic Helper ..................... 7.90 8.15 8.35 Clean-Up Line Operators ............. 7.60 7.85 8.05
Probationary employees shall receive a training rate of $6.05 per hour for the first ninety (90) days of their employment, which shall be $6.15 effective January 2, 2000 and $6.25 effective January 7, 2001. Upon the expiration of the ninety (90) day period, the rate shall be $6.75 per hour, which shall be $6.85 effective January 2, 2000 and $6.95 effective January 7, 2001. After one year of employment, an employee's rate shall be as shown hereinabove. Newly hired employees in premium classifications above shall receive the rate of that classification upon the expiration of a forty-five (45) day period. APPENDIX "B" CHECK-OFF AUTHORIZATION To: Any Employer under contract with United Food and Commercial Workers Union, Local 210, AFL-CIO You are hereby authorized and directed to deduct from my wages, commencing with the next payroll period, an amount equivalent to dues and initiation fees as shall be certified by the Secretary-Treasurer of Local 210, of the United Food and Commercial Workers International Union, AFL-CIO, and remit same to said Secretary-Treasurer. This authorization and assignment is voluntary, made in consideration for the cost of representation and collective bargaining and is not contingent upon my present or future membership in the Union. This authorization and assignment shall be irrevocable for a period of one (1) year from the date of execution or until the termination date of the Agreement between the Employer and Local 210, whichever occurs sooner, and from year to year thereafter, unless not less than thirty (30) days and not more than forty-five (45) days prior to the end of any subsequent yearly period, I give the Employer and Union written notice of revocation bearing my signature thereto. The Secretary-Treasurer of Local 210 is authorized to deposit this authorization with any Employer under contract with Local 210 and is further authorized to transfer this authorization to any other Employer under contract with Local 210 in the event that I should change employment. EX-10 4 0004.txt HAZLEHURST PROCESSING UNION AGREEMENT A G R E E M E N T BETWEEN SANDERSON FARMS, INC. (HAZLEHURST PROCESSING DIVISION) AND LABORERS' INTERNATIONAL UNION OF NORTH AMERICA, PROFESSIONAL EMPLOYEES LOCAL UNION #693, AFL-CIO JULY 26, 1999 - DECEMBER 31, 2002 TABLE OF CONTENTS ARTICLE PAGE - ------- ---- 1. AGREEMENT 1 2. RECOGNITION 1 3. MANAGEMENT PREROGATIVES 2 4. SHOP STEWARDS 2 5. UNION BULLETIN BOARD 3 6. NO STRIKE - NO LOCK OUT 3 7. GRIEVANCE PROCEDURE 3 STEP 1 4 STEP 2 4 STEP 3 4 8. ARBITRATION 5 9. SENIORITY 6 10. SENIORITY LIST 8 11. HOURS OF WORK 8 12. LEAVES OF ABSENCE 9 13. VACATIONS 11 14. HOLIDAYS 12 15. INSURANCE 13 16. WAGES 13 17. MISCELLANEOUS 14 18. EMPLOYEE STOCK OWNERSHIP PLAN 15 19. NO DISCRIMINATION 15 20. AUTHORIZATION FOR REPRESENTATION AND CHECK-OFF 15 21. UNION SECURITY 16 22. DURATION OF AGREEMENT 16 SIGNATURES 17 APPENDIX A - WAGE RATES * APPENDIX B - CHECK-OFF * ARTICLE 1 AGREEMENT Section 1. This Agreement made and entered into this 26th day of July, 1999, by and between Sanderson Farms, Inc. (Hazlehurst Processing Division) at its Hazlehurst, Mississippi, location (hereinafter referred to as the "Company"), and Laborers' International Union of North America, Professional Employees Local Union #693, AFL-CIO (hereinafter referred to as the "Union". WITNESSETH Section 1.2. WHEREAS, the Company and the Union are desirous of entering into a contractual relationship covering rates of pay, hours of work and other terms and conditions of employment of employees employed within the unit of representation as hereinafter described; and Section 1.3. WHEREAS, the parties have conferred, negotiated and agreed upon the terms and conditions of employment to be applicable to the employees covered by this Agreement for the contract period as herein specified. Section 1.4. NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, the parties do hereby agree as follows: ARTICLE 2 RECOGNITION Section 2.1. The Employer recognizes the Union as the sole exclusive bargaining agency for all production and maintenance employees employed by its Hazlehurst, Mississippi Poultry Processing Plan, excluding office clerical employees, guards, professional employees, and supervisors, as defined in the Act, certified on March 15, 1995, by the National Labor Relations Board through an NLRB election, Case No. 15-RC-7876. The following jobs are excluded from coverage: (1) Office Clerical Employees (2) Cost Counting Records Clerks (3) Processing Accounting Clerks (4) Sales Clerks (5) Live Haul Drivers (6) Cage Repair Employees (7) Professional Employees (8) Guards and Supervisors (9) Quality Control Technicians 10) Maintenance Parts Buyers Section 2.2. No employee shall be required to make any written or verbal agreement that will conflict with this Agreement. No employee shall be reclassified so as to defeat the purpose of this Agreement. ARTICLE 3 MANAGEMENT PREROGATIVES Section 3.1. Nothing in this Agreement shall be deemed to limit the Employer in any way in the exercise of the customary functions of management which are recognized as the Employer's exclusive responsibility, including, but not limited to, the right to plan, direct, and control operations, to utilize the services of contractors, to determine the number, size and location of its establishments, to close an establishment or departments thereof, to hire, to promote, to demote, and for proper cause to discipline, suspend or discharge, to assign and schedule work and transfer employees from one job or department to another, and to make and enforce reasonable rules and regulations relative to any and all of these matters or to the management of its operation, provided that the reasonableness of rules may be tested in the grievance procedure. The Employer shall be the exclusive judge of all matters pertaining to its operations and their scheduling and the methods, processes, equipment, means of operation and size of workforce. Section 3.2. The Employer retains all prerogatives and rights of management and all privileges and responsibilities not specifically limited by this Agreement. ARTICLE 4 SHOP STEWARDS Section 4.1. The Employer recognizes the right of the Union to designate shop stewards, not to exceed eight (8) in number, who shall be assigned to serve specific areas of the plant to handle such Union business as may arise. The shop stewards shall be employees of the Company. The Union shall notify the Company in writing as to the names of the stewards and of any changes in designation of stewards. Section 4.2. A representative of the Union shall be permitted to enter the plant at reasonable times, upon Employer's premises and plant, provided such representative shall in no way interfere with the operations of Employer's business and shall make arrangements with the Employer's manager. ARTICLE 5 UNION BULLETIN BOARD Section 5.1. The Employer will provide a bulletin board in the plant for posting of Union notices. All matters to be posted shall be submitted to the Division Manager or a designated representative for approval prior to posting, and management's decision shall be final. ARTICLE 6 NO STRIKE - NO LOCK OUT Section 6.1. For the duration of this Agreement, there shall be no strike, stoppages, slowdowns, picketing, or other interruption of or interference with the operations of the plant. Section 6.2. The Company shall not lock out employees for the duration of this Agreement. Section 6.3. Neither the violation of any provisions of the Agreement, nor the commission of any act constituting an unfair labor practice, or otherwise made unlawful, shall excuse the employees, the Union, or the Company from their obligations under the provisions of this Article. Section 6.4. An employee discharged or otherwise disciplined for violation of this Article, may seek review of such discipline through the grievance and arbitration procedures provided herein. In this event, the only question to be reviewed shall be whether or not the employee participated in the prohibited conduct. ARTICLE 7 GRIEVANCE PROCEDURE Section 7.1. Grievances arising under this contract are herein defined as a claim by a party to this Agreement or an employee covered by this Agreement that the Company or the Union has violated a provision of this Agreement. STEP I The employee shall discuss the grievance or complaint with the immediate supervisor within five (5) working days after the event giving rise thereto occurs, or within five (5) working days following the date on which the grievant had or reasonably would have had knowledge thereof. In the event the employee so requests, the appropriate steward shall be present at this step. The supervisor shall give an answer within five (5) working days after the grievance is received. STEP 2 If there is no settlement in Step 1, the grievance may be presented by the employee and/or shop steward within five (5) working days from the date on which the supervisor's answer was given in Step 1. The grievance must be presented in writing to the department superintendent and must state the following information: (a) name or names of employee or employees involved; (b) the department or departments involved; (c) the date and time of the occurrence or discovery of the grievance; (d) the facts of the incident on which the claim is based; (e) the specific provision of this Agreement alleged to have been violated; (f) the remedy requested. The department superintendent shall give the Company's answer in writing within five (5) working days after the grievance is received by the superintendent. STEP 3 In the event the grievance is not settled in Step 2, then the grievance may be appealed in writing to the division manager or a designated representative by the Union to Step 3 within five (5) working days from the Company's answer in Step 2. The division manager or a designated representative shall give an answer in writing within five (5) working days from the date of the appeal. In the event the grievance is not settled then the aggrieved party or parties shall have the right to request arbitration. In the event a grievance arises on behalf of the Employer, the matter shall be presented to the Union Business Agent in writing, who shall have seven (7) days from the date of submission within which to endeavor to reconcile the grievance presented and shall give an answer in writing within that time. If not settled within that time, the aggrieved party or parties shall have the right to request arbitration. Section 7.2. Discharge grievances shall be processed initially under Step 3 of the grievance procedure. The written grievance shall be filed with the division manager within five (5) working days following the date of discharge. Section 7.3. A failure to observe the time limit specified herein for original presentation of a grievance or presentation in any subsequent step of the grievance procedure on the part of either the grievant or the Union shall be conclusive evidence that the grievance has been settled and abandoned. Failure on the part of the Company to comply with the time limits for delivering its answer in any step of the grievance procedure shall automatically advance the grievance to the next step of the grievance procedure. The time limits of the grievance procedure may be extended by mutual consent of the Union and the Company. ARTICLE 8 ARBITRATION Section 8.1. If a party to this Agreement desires to take a grievance to arbitration, it shall within fifteen (15) calendar days after the denial of the grievance, give written notice of his intention to the other party, together with a written statement of the specific provision or provisions of this Agreement at issue. Section 8.2. The parties shall attempt to select an impartial arbitrator. If they are unable to agree upon a choice within seven (7) calendar days after the receipt of Notice of Intent to Arbitrate, either party may request the Federal Mediation and Conciliation Service to submit a list of five (5) arbitrators, from which the arbitrator will be selected. Selection shall be made by the parties alternately striking any name from the list (the first to strike shall be the party requesting arbitration) until only one (1) name remains. The final name remaining shall be the arbitrator of the grievance. Section 8.3. The jurisdiction and the decision of the arbitrator of the grievance shall be confined to a determination of the acts and the interpretation or application of the specific provision or provisions of this Agreement at issue. The Arbitrator shall be bound by terms and provisions of this Agreement and shall have the authority to consider only grievances representing solely an arbitration issue under this Agreement. The arbitrator shall have no authority to add to, alter, amend, or modify any provision of this Agreement. The decision of the arbitrator in writing on any issue properly before the arbitrator in accordance with the provisions of this Agreement, shall be final and binding on the aggrieved employee or employees, the Union, and the Employer. Section 8.4. Multiple grievances shall not be heard before one arbitrator at the same hearing except by mutual agreement of the parties. Section 8.5. The Union and the Employer shall each bear its own costs in these arbitration proceedings, except that they shall share equally the fee and other expenses of the arbitrator in connection with the grievance. ARTICLE 9 SENIORITY Section 9.1. Seniority is defined as the length of an employee's continuous employment in the bargaining unit at the Company's Hazlehurst, Mississippi, poultry processing plant since the last permanent date of employment. For purposes of layoff, recall, promotion, and vacation only, this shall include continuous service which began prior to the acquisition of the plant by the Company. Section 9.2. All newly hired or rehired employees shall be considered as probationary employees for a period of ninety (90) days during which period they shall not acquire seniority, and during which they may be discharged without recourse to the grievance and arbitration procedures provided herein. If retained as a regular employee upon satisfactory completion of the probationary period, seniority shall be retroactive to the first day of employment. Section 9.3. In matters of layoff, recall, and promotion, consideration will be given to an employee's skill, ability, attendance, versatility, training, physical fitness, and seniority; and when, in the opinion of the Company, the factors other than seniority are relatively equal, seniority will be the deciding factor. Section 9.4. An employee's seniority shall be lost and employment considered terminated by: (a) discharge for just cause; (b) failure to return from layoff within five (5) working days after written notice by certified mail is sent by the Company to the employee's last known address on the Company's books. Actual notice to the employee of recall by any other means shall satisfy the terms of this provision; (c) voluntary termination of employment; (d) failure to report after termination of a leave of absence approved by the Company in writing on the first scheduled day following the expiration of such leave of absence; (e) engaging in a gainful occupation while on leave of absence; (f) absence from work for three (3) consecutive working days without notice to the Company, which shall be considered as a voluntary quit, unless notice was prevented by a cause beyond the control of the employee; (g) separation from the Company's active payroll for any reason, exclusive of leaves of absence approved by the Company, for a period exceeding an employee's length of service in the Hazlehurst plant, or three (3) months, whichever is less. Section 9.5. For the purposes of this Agreement, layoffs shall be classified as (a) "short term" and (b) "long term". A short term layoff is a layoff which will not exceed ten (10) workdays in length. Short term layoffs may be made without regard to seniority. A long term layoff is a layoff which will exceed ten (10) workdays in length. Long term layoffs shall be made subject to Section 3 of this Article. Section 9.6. All permanent job vacancies in premium rated classifications shall be posted for two (2) consecutive working days on the plant bulletin board. Employees in lower rated classifications desiring promotion to such jobs shall sign a bid sheet posted on the bulletin board. An employee who does not sign such bid sheet shall have no right to consideration for the vacancy. However, the fact that an employee did not sign the bid sheet will not preclude that employee's selection for the job by the Company if none of the signers is determined to be qualified. If no qualified employee bids on the posted position, the Company may fill the position in its discretion. If, after a reasonable period not to exceed thirty (30) days, the employee selected for the posted position achieves an acceptable level of performance, the employee shall receive the rate of the new position. If the employee fails to perform in an acceptable manner, such employee shall return to a job in their former classification and the premium job shall be posted again. An employee who self-disqualifies shall return to the extra board at the line operator's rate of pay and shall not be eligible for bidding on a premium job for a period of six (6) months. Section 9.7. Assignments involving employees on the extra board shall be in order of seniority. Within a department, no extra board employee shall be retained over a permanently assigned employee. ARTICLE 10 SENIORITY LIST Section 10.1. Upon request at any reasonable time, the Company shall furnish to the Union a current seniority list. ARTICLE 11 HOURS OF WORK Section 11.1. The regular work week shall consist of five (5) days or forty (40) hours. This shall not be construed as a guarantee of any amount of hours or work. The basic work week shall be the seven (7) day period from 12:01 a.m. Sunday until midnight the following Saturday. Employees will be given at least one (1) calendar week's notice of any change by the Company of the payroll week. Section 11.2. An employee who works more than forty (40) hours in any one week shall be paid at time and one-half the regular rate of pay for all hours in excess of forty (40). Section 11.3. When employees are called to work a shift outside their regularly scheduled shift and report for work, or when they report to work at their regularly scheduled time, they shall be given the opportunity to work a minimum of three (3) hours or receive pay for same at the applicable hourly rate, except that no such pay shall be made when the plant cannot operate for reasons beyond the control of the Employer, such as, but not limited to, strikes, utility failure, fire, flood, storms or other acts of God interfering with work, or a breakdown of machinery or equipment when the Company notifies the employees not to report to work at least four (4) hours prior to the scheduled time to work. Section 11.4. Employees will be paid at their regular rate for all waiting time of thirty (30) minutes or less, so long as they do any job they are assigned. Employees will not be paid for waiting time which exceeds thirty (30) minutes if (1) they are relieved of all duties, (2) are free to leave the plant, and (3) are told the time they must return to work. Employees will not be relieved without pay more than once in any workday except for a lunch break of not more than one (1) hour. Section 11.5. The Company will provide one (1) unpaid break of not less than thirty (30) minutes for lunch during each shift, and shall provide one (1) twelve (12) minute paid rest period prior to lunch each day. In addition, all employees will be allowed one (1) twelve (12) minute paid rest period after the lunch break provided the work time is expected to be not less than two and one-half (2 1/2) hours. No unpaid break shall be provided for maintenance employees and truck drivers. The Company shall have the right to provide a twenty-four (24) minute paid lunch break to Clean-Up Line Operators on restricted hours in lieu of all breaks provided in this Section. Section 11.6. A Clean-Up Line Operator who has completed the probationary period and is permanently assigned to restricted hours in the clean up department shall receive an hourly adjustment of ninety (90) cents for each hour worked in that assignment. Section 11.7. Employees who have completed the probationary period and are temporarily assigned for one or more consecutive hours to perform the duties of an absent employee in a higher paid classification shall receive the rate of that classification while performing the duties of the classification. Employees who work at more than one pay rate during a week in which they earn overtime shall receive overtime pay based upon an average of the rates earned during that week. ARTICLE 12 LEAVES OF ABSENCE Section 12.1. An employee who has completed the probationary period may be granted, at the Company's discretion, a leave of absence without pay for a reasonable period of time, not to exceed one (1) month, for the following reasons: (a) emergency personal business; (b) serious illness in the immediate family (spouse, children or parents), supported by a doctor's certificate; and (c) Union business, upon written request by the Union's Business Manager, provided that no more than three (3) employees shall be on such leave simultaneously. Section 12.2. Employees who have completed their probationary period are eligible for up to thirteen (13) weeks per year of unpaid family and medical treatment leave for the following reasons: (a) Employee's serious health condition -- a medical certification will be required which states that the employee is unable to perform the functions of the employee's position. (b) Family serious health condition -- spouse, parent, or child. A medical certification will be required stating the employee is "needed to care for the individual." (c) New child leave -- the birth, adoption or foster care placement by a state agency of a child, and, the need to care for the child; such leave may be prior to the actual birth or placement. The provisions of this Section shall be administered in accordance with the Family and Medical Leave Act of 1993 (FMLA). Section 12.3. Employees who have completed their probationary period who lose actual work time in order to attend the funeral of a family member shall receive a paid funeral leave for time necessarily lost during the employee's regularly scheduled shift, provided the employee would have been scheduled and at work during that day. Said leave shall be up to three (3) days with pay for a deceased parent, spouse, child, brother, or sister and one (1) day for a deceased father-in-law, mother-in-law, grandparent, brother-in-law, or sister-in-law. In order to receive pay under this Section, an employee must be actively working, must make application for such paid leave, and must attend the funeral. The Company may require satisfactory evidence of attendance at the funeral and the relationship of the deceased. Section 12.4. If the Company has knowledge that an employee, in a premium-rated classification, will be on family and medical leave, military leave, or an industrial injury leave for more than thirty (30) calendar days, the job will be posted and filled on a temporary basis. The successful bidder will receive the rate of the premium classification for the period its duties are performed. When employees on leave under this Section return, they shall be immediately assigned to their old job; employees temporarily filling the job shall return to their regular classification and pay rate. Section 12.5. The Company shall pay each active employee who reports for jury duty the difference between pay up to eight times the hourly rate for time actually lost and the juror's daily fee for each day the employee is required to serve on a jury. The employee must report to work during those days of his regularly scheduled shift during which the employee is not required to report for jury duty or be available at court for jury service. The employee must present proof of jury service and the amount of compensation received from the court. ARTICLE 13 VACATIONS Section 13.1. Regular full-time employees shall be eligible for one (1) week's vacation after the first anniversary date of continuous employment, and after the anniversary date of each succeeding year. Employees shall be eligible for a second week of vacation after the second anniversary date of continuous employment, and after the anniversary date of each succeeding year of continuous employment. Employees shall be eligible for a third week of vacation after the tenth anniversary date of continuous employment, and after the anniversary date of each succeeding year of continuous employment. Employees shall be eligible for a fourth week of vacation after the twentieth anniversary date of continuous employment and after the anniversary date of each succeeding year of continuous employment. Section 13.2. To be eligible for a vacation, an employee must have worked sixteen hundred (1,600) hours during the preceding twelve (12) months or eighty (80) percent of available hours for that period, whichever is less. Vacations and holidays not worked shall be considered time worked for purposes of this Section. Section 13.3. Vacation pay shall be computed at forty (40) times the Employee's regular straight time hourly rate. Section 13.4. Due consideration will be given employees' choice of vacation time, but all vacations scheduled are subject to the final approval of the Company in keeping with the Company's scheduling needs. In the event that two or more employees cannot be released at the same time, the employee with the longest service with the Company will be given preference. An employee who notifies the Company of a vacation choice thirty (30) days in advance shall not lose that vacation choice to another employee. Vacations may not be scheduled for periods of less than a week, and all vacations must be taken within an anniversary year. Section 13.5. The Company reserves the right to schedule a plant shutdown for one .(l) week in any year, which shall be treated as a vacation week for those employees entitled to vacation. ARTICLE 14 HOLIDAYS Section 14.1. The following shall be considered holidays: New Year's Day Labor Day Martin Luther King's Birthday Thanksgiving Day Memorial Day Christmas Day July Fourth Birthday Holiday The birthday holiday shall be taken on the employee's birthday. If the birthday falls on a Saturday or Sunday, the holiday shall be taken on a day agreed upon by the Company and the employee within one week of the birthday. Section 14.2. All regular full-time employees who have completed their probationary period shall be paid for eight (8) hours at their regular straight time rate for each holiday enumerated above, provided they report for work and work all scheduled hours on the workday preceding and the workday next following the holiday, unless the employee was necessarily absent due to personal illness, supported by a doctor's certificate, or because of an emergency occurring to the employee or the employee's immediate family (meaning only spouse, children, or parents). No employee shall lose holiday pay because of missing no more than thirty (30) minutes on the workday before or the workday following the holiday. In any event, an employee must work at least one (1) day during the calendar week in which a holiday falls in order to be eligible for holiday pay, except the employee who is on vacation. Section 14.3. Employees required to work on a holiday shall be paid the amount provided above, in addition to their regular earnings for that day. Hours not worked on a holiday shall not be considered as work time in computing any additional compensation due under the overtime provisions of this contract. Section 14.4. If an employee is required to work and fails to report or fails to work scheduled hours on a holiday, the employee shall forfeit holiday pay for that day. Section 14.5. Employees on vacation during the week in which a holiday falls shall receive holiday pay. ARTICLE 15 INSURANCE Section 15.1. The Company will provide a group insurance program for employees covered by this Agreement. The Company will continue to make monthly contributions toward group insurance premiums in the same proportion as is currently in effect. Employees will bear the remaining costs of the insurance. ARTICLE 16 WAGES Section 16.1. Wages shall be paid as provided in Appendix A attached hereto and made a part of this Agreement. Section 16.2. Whenever a new job classification is created by the Company, or there is a change or merger of job classifications or the job content of job classifications, the Company will discuss the appropriate wage rate with the Union. If a mutually satisfactory rate cannot be agreed upon, the Company will set the rate. The Union may file a grievance on the rate, and the dispute shall be settled in accordance with the grievance and arbitration procedures of this contract. Section 16.3. Any employees who, upon the effective date of the wage rate set forth in Appendix A, are earning in excess of the applicable rate, shall, during the term of this Agreement, continue to receive their current rate until the contract rate equals or exceeds that rate. This section shall not apply to any employee in a classification which has been paid on a salary basis under any past contract. Section 16.4. If, during the term of this Agreement, Congress enacts new minimum wage legislation which requires the payment of a minimum wage greater than the rate provided in Appendix A for newly-hired employees, the rate for newly-hired employees shall be raised to the federal minimum rate, and the spread between the rates provided in this Agreement shall be maintained. Any such change shall be effective upon the effective date of the new federal minimum rate. Section 16.5. In addition to the wage rates as provided in Appendix A, production employees who have been continuously employed for five (5) or more years shall receive seniority pay of twenty (20) cents per hour. Maintenance employees and distribution drivers who have been continuously employed for five (5) or more years will receive seniority pay of fifty (50) cents per hour. Section 16.6. Employees who have been continuously employed for one (1) or more years shall receive a night shift differential of twenty-five (25) cents per hour for work performed on a shift starting during the hours beginning 12:00 noon through 1:00 a.m. The starting time of a shift determines if it is subject to the shift differential. Employees performing work on a night shift which is not their regular shift will receive shift differential for such work if it lasts three (3) or more hours. Distribution drivers shall not receive shift differential regardless of the time they begin work. ARTICLE 17 MISCELLANEOUS Section 17.1. The Company shall maintain safe, sanitary, and healthy working conditions at all times, and employees will be required to cooperate in maintaining such conditions. Any complaints regarding safety or health shall be processed through the grievance and arbitration provisions of this Agreement. Section 17.2. The Company will provide any uniforms required of employees who have completed their probationary period. The Company will furnish required safety equipment, gloves, aprons, hair nets, freezer gloves, cotton gloves, and smocks at no cost to the employee. Needed replacements, through normal use, will be made at no cost provided the worn out article is returned to the Company. If an item is lost or destroyed through employee negligence, the employee will be charged for its replacement. Section 17.3. The Employer may require any employee to take a physical examination at any time at the Employer's expense. Section 17.4. It shall be the responsibility of all employees to keep the Employer apprised of their current address, telephone number, marital status and number of dependents. Section 17.5. It is the intent of the parties hereto that no provisions of this Agreement shall require either party to perform any act which shall be unlawful under any Mississippi or Federal statute. ARTICLE 18 EMPLOYEE STOCK OWNERSHIP PLAN - RETIREMENT Section 18.1. Employees covered by this Agreement will continue to be covered by the Employee Stock Ownership Plan of Sanderson Farms, Inc. and Affiliates. Participation and benefits in the plan shall be in accordance with the provisions of that plan. ARTICLE 19 NO DISCRIMINATION Section 19.1. The Company and the Union agree that they will not discriminate against any person with regard to employment or Union membership because of race, creed, color, sex, religion, age, national origin, or disability (as defined in the Americans With Disabilities Act). Section 19.2. Whenever masculine gender is used in this Agreement, it shall apply to the feminine gender. ARTICLE 20 AUTHORIZATION FOR REPRESENTATION AND CHECK-OFF Section 20.1. During the term of this Agreement, the Company will deduct initiation fees, assessments, and Union dues from the wages of employees who individually authorize the Company on a form in compliance with Appendix B to this Agreement. Section 20.2. The Union shall save the Company harmless against and from all claims, demands, suits or other forms of liability that arise out of or by reason of action taken or not taken by the Company in reliance upon or compliance with any provisions of this Article. Section 20.3. It is agreed that by reason of institution of the above check-off system, collections by any other method on the Company's premises are prohibited, except with the permission of the Company. ARTICLE 21 UNION SECURITY Section 21.1. It shall be a condition of employment that all employees of the Employer covered by this Agreement become members of the Union in good standing not later than thirty-one (31) days after the effective date of this Agreement, and remain members in good standing of the Union. It shall also be a condition of employment that all employees covered by this Agreement and hired on or after its effective date shall on the thirty-first (31st) day following the beginning of such employment become and remain members in good standing in the Union. The Union shall save the Company harmless against and from all claims, demands, suits, or other forms of liability that arise out of or by reason of action taken or not taken by the Company in reliance upon or compliance with any provisions of this Article. It is understood and agreed that the provisions of this Article shall be effective only to the extent permitted by applicable law. ARTICLE 22 DURATION OF AGREEMENT Section 22.1. This Agreement shall remain in full force and effect from the 26th day of July, 1999 until the 31st day of December, 2002, and shall continue thereafter from year to year until either party to this Agreement desires to terminate this Agreement by giving written notice at least sixty (60) days prior to December 31, 2002, or at least sixty (60) days' written notice prior to any anniversary date thereafter. The parties to this Agreement shall endeavor to satisfactorily negotiate any contemplated change or execute a new Agreement during the sixty (60) day period, after proper notice in writing has been given as provided herein and above. Notice, as specified in this Article, shall be mailed via United States Certified Mail. IN WITNESS WHEREOF, the parties have hereunto signed their names this ______ day of ___________________________, 1999. SANDERSON FARMS, INC. LABORERS' INTERNATIONAL UNION (Hazlehurst Processing Division) OF NORTH AMERICA, PROFESSIONAL EMPLOYEES LOCAL UNION #693 /s/Larry Lampkin AFL-CIO - -------------------------------- ----------------------------------- /s/Tony Waltman /s/Bobbie Jackson - -------------------------------- ----------------------------------- /s/Joe W. Brown - -------------------------------- ----------------------------------- /s/Martha Jackson ----------------------------------- /s/Priscilla Morris ----------------------------------- ----------------------------------- ----------------------------------- ----------------------------------- APPENDIX "A" WAGE SCHEDULE EFFECTIVE 7/26/99 1/2/00 1/7/01 1/6/02 PROCESSING Receiving Forklift Operator ................ 8.00 8.25 8.45 8.80 Hanging Dock ..................... 7.85 8.10 8.30 8.65 Picking Killer ........................... 8.10 8.35 8.55 8.90 Floorworker ...................... 7.75 8.00 8.20 8.55 Line Operator .................... 7.60 7.85 8.05 8.40 Eviscerating Floorworker ...................... 7.75 8.00 8.20 8.55 Bird Chiller Operator ............ 7.75 8.00 8.20 8.55 Line Operator .................... 7.60 7.85 8.05 8.40 By-Products Department By-Products Operator ............. 7.85 8.10 8.30 8.65 CUSTOMER SERVICE Saws Floorworker ...................... 7.75 8.00 8.20 8.55 Line Operator .................... 7.60 7.85 8.05 8.40 Packing Scale Operator ................... 7.85 8.10 8.30 8.55 Floorworker ...................... 7.75 8.00 8.20 8.55 Giblet Chiller Operator 7.75 ..... 8.00 8.20 8.55 Grader ........................... 7.70 7.95 8.15 8.50 Line Operator .................... 7.60 7.85 8.05 8.40 Specialty Forklift Operator ................ 8.05 8.30 8.50 8.85 Scale Operator ................... 7.85 8.10 8.30 8.65 Floorworker ...................... 7.75 8.00 8.20 8.55 Stackoff ......................... 7.70 7.95 8.15 8.50 Line Operator .................... 7.60 7.85 8.05 8.40 Marination Scale Operator ................... 7.85 8.10 8.30 8.65 Formulating Mixer ................ 7.75 8.00 8.20 8.55 Floorworker ...................... 7.75 8.00 8.20 8.55 Stack Off ........................ 7.70 7.95 8.15 8.50 Line Operator .................... 7.60 7.85 8.05 8.40 EFFEC 7/26/99 0 1/7/01 1/6/02 SHIPPING Forklift Operator ................ 8.05 8.30 8.50 8.85 Cooler & Shipping Dock ........... 7.70 7.95 8.15 8.60 Distribution Driver .............. 10.15 10.40 10.60 10.95 DEBONE DEPARTMENT Deboning Forklift Operator ................ 8.00 8.25 8.45 8.80 Scale Operator ................... 7.85 8.10 8.30 8.65 Floorworker ...................... 7.75 8.00 8.20 8.55 Front Half Puller ................ 7.70 7.95 8.15 8.50 Combo Packer ..................... 7.70 7.95 8.15 8.50 Stack Off ........................ 7.70 7.95 8.15 8.50 Line Operator .................... 7.60 7.85 8.05 8.40 MAINTENANCE DEPARTMENT Master Skilled Operator I ........ 12.40 12.65 12.85 13.20 Master Skilled Operator II ....... 10.90 11.15 11.35 11.70 Skilled Maintenance Men 10.00 .... 10.25 10.45 10.80 Mechanic ......................... 9.40 9.65 9.85 10.20 Mechanic Helper .................. 7.90 8.15 8.35 8.70 Clean-Up Line Operators .......... 7.60 7.85 8.05 8.40 Probationary employees shall receive a training rate of $6.05 per hour for the first ninety (90) days of their employment, which shall be $6.15 effective January 2, 2000, $6.25 effective January 7, 2001, and $6.35 effective January 6, 2002. Upon the expiration of the ninety (90) day period, the rate shall be $6.75 per hour, which shall be $7.05 effective January 2, 2000, $7.15 effective January 7, 2002 and $7.25 effective January 6, 2002. After one year of employment, an employee's rate shall be as shown hereinabove. Newly hired employees in premium classifications above shall receive the rate of that classification upon the expiration of a forty-five (45) day period. APPENDIX "B" CHECK-OFF AUTHORIZATION AND ASSIGNMENT TO: ALL EMPLOYERS BY WHOM I AM EMPLOYED I, _________________________________________________________, do hereby assign to Local Union No. 693, LIUNA Professional Employees, AFL-CIO, such amounts from my wages as shall be required to pay the initiation fees, readmission fees, membership dues and assessments of the Local Union as may be established from time to time. My Employer is hereby authorized to deduct amounts from my wages and pay the same to the Local Union and/or its authorized representative, in accordance with the collective bargaining agreement in existence between the Local Union and my Employer. This authorization shall become operative upon the effective date of each collective bargaining agreement entered into between my Employer and the Local Union. This authorization shall be irrevocable for a period of one year, or until the termination of the collective bargaining agreement in existence between my Employer and the Local Union, whichever occurs sooner; and I agree and direct that this authorization shall be automatically renewed and shall be irrevocable for successive periods of one year each, or for the period of such succeeding applicable collective bargaining agreement between my Employer and the Local Union, whichever be shorter, unless I give written notice to my Employer and the Local Union not more than twenty days and not less than ten days prior to the expiration of each period of one year, or of each applicable collective bargaining agreement between my Employer and the Local Union, whichever occurs sooner. Dues and fees paid to Local Union No. 693 are not deductible as charitable contributions for federal income tax purposes. Dues and fees paid to Local Union 693, however, may qualify as business expenses, and may be deductible in limited circumstances subject to various restrictions imposed by the Internal Revenue Service. This assignment has been executed this _____ day of ______________________________, 19_______ EX-10 5 0005.txt COLLINS PROCESSING UNION AGREEMENT A G R E E M E N T BETWEEN SANDERSON FARMS, INC. (COLLINS PROCESSING DIVISION) AND LABORERS' INTERNATIONAL UNION OF NORTH AMERICA, PROFESSIONAL EMPLOYEES LOCAL UNION #693, AFL-CIO JANUARY 13, 2000 - DECEMBER 31, 2003 TABLE OF CONTENTS ARTICLE PAGE - ------- ---- 1. AGREEMENT 1 2. RECOGNITION 1 3. MANAGEMENT PREROGATIVES 1 4. SHOP STEWARDS 2 5. UNION BULLETIN BOARD 2 6. NO STRIKE - NO LOCK OUT 2 7. GRIEVANCE PROCEDURE 3 STEP 1 3 STEP 2 3 STEP 3 3 8. ARBITRATION 4 9. SENIORITY 5 10. SENIORITY LIST 6 11. HOURS OF WORK 7 12. LEAVES OF ABSENCE 8 13. VACATIONS 9 14. HOLIDAYS 10 15. INSURANCE 11 16. WAGES 11 17. MISCELLANEOUS 12 18. EMPLOYEE STOCK OWNERSHIP PLAN 13 19. NO DISCRIMINATION 13 20. AUTHORIZATION FOR REPRESENTATION AND CHECK-OFF 13 21. UNION SECURITY 13 22. DURATION OF AGREEMENT 14 SIGNATURES 14 APPENDIX A - WAGE RATES * APPENDIX B - CHECK-OFF * ARTICLE 1 AGREEMENT Section 1. This Agreement made and entered into this 13th day of January, 2000, by and between Sanderson Farms, Inc. (Collins Processing Division) at its Collins, Mississippi, location (hereinafter referred to as the "Company"), and Laborers' International Union of North America, Professional Employees Local Union #693, AFL-CIO (hereinafter referred to as the "Union". ARTICLE 2 RECOGNITION Section 2.1. The Employer recognizes the Union as the sole exclusive bargaining agency for all production and maintenance employees, including truck drivers and rendering employees, employed at its Collins, Mississippi facility, excluding office clerical employees, truck shop employees, guards, professional employees, and supervisors, as defined in the Act, certified on February 23, 1995, by the National Labor Relations Board through an NLRB election, Case No. 15-RC-7846. The following jobs are excluded from coverage: (1) Office Clerical Employees (2) Cost Counting Records Clerks (3) Processing Accounting Clerks (4) Sales Clerks (5) Live Haul Drivers (6) Cage Repair Employees (7) Professional Employees (8) Guards and Supervisors (9) Child Care Employees (10) Maintenance Parts Buyers ARTICLE 3 MANAGEMENT PREROGATIVES Section 3.1. Nothing in this Agreement shall be deemed to limit the Employer in any way in the exercise of the customary functions of management which are recognized as the Employer's exclusive responsibility, including, but not limited to, the right to plan, direct, and control operations, to utilize the services of contractors, to determine the number, size and location of its establishments, to close an establishment or departments thereof, to hire, to promote, to demote, and for proper cause to discipline, suspend or discharge, to assign and schedule work and transfer employees from one job or department to another, and to make and enforce reasonable rules and regulations relative to any and all of these matters or to the management of its operation, provided that the reasonableness of rules may be tested in the grievance procedure. The Employer shall be the exclusive judge of all matters pertaining to its operations and their scheduling and the methods, processes, equipment, means of operation and size of workforce. Section 3.2. The Employer retains all prerogatives and rights of management and all privileges and responsibilities not specifically limited by this Agreement. ARTICLE 4 SHOP STEWARDS Section 4.1. The Employer recognizes the right of the Union to designate shop stewards, not to exceed eleven (11) in number, who shall be assigned to serve specific areas of the plant to handle such Union business as may arise. The shop stewards shall be employees of the Company. The Union shall notify the Company in writing as to the names of the stewards and of any changes in designation of stewards. Section 4.2. A representative of the Union shall be permitted to enter the plant at reasonable times, upon Employer's premises and plant, provided such representative shall in no way interfere with the operations of Employer's business and shall make arrangements with the Employer's manager. ARTICLE 5 UNION BULLETIN BOARD Section 5.1. The Employer will provide a bulletin board in the plant for posting of Union notices. All matters to be posted shall be submitted to the Division Manager or a designated representative for approval prior to posting, and management's decision shall be final. ARTICLE 6 NO STRIKE - NO LOCK OUT Section 6.1. For the duration of this Agreement, there shall be no strike, stoppages, slowdowns, picketing, or other interruption of or interference with the operations of the plant. Section 6.2. The Company shall not lock out employees for the duration of this Agreement. Section 6.3. Neither the violation of any provisions of the Agreement, nor the commission of any act constituting an unfair labor practice, or otherwise made unlawful, shall excuse the employees, the Union, or the Company from their obligations under the provisions of this Article. Section 6.4. An employee discharged or otherwise disciplined for violation of this Article, may seek review of such discipline through the grievance and arbitration procedures provided herein. In this event, the only question to be reviewed shall be whether or not the employee participated in the prohibited conduct. ARTICLE 7 GRIEVANCE PROCEDURE Section 7.1. Grievances arising under this contract are herein defined as a claim by a party to this Agreement or an employee covered by this Agreement that the Company or the Union has violated a provision of this Agreement. STEP I The employee shall discuss the grievance or complaint with the immediate supervisor within five (5) working days after the event giving rise thereto occurs, or within five (5) working days following the date on which the grievant had or reasonably would have had knowledge thereof. In the event the employee so requests, the appropriate steward shall be present at this step. The supervisor shall give an answer within five (5) working days after the grievance is received. STEP 2 If there is no settlement in Step 1, the grievance may be presented by the employee and/or shop steward within five (5) working days from the date on which the supervisor's answer was given in Step 1. The grievance must be presented in writing to the department superintendent and must state the following information: (a) name or names of employee or employees involved; (b) the department or departments involved; (c) the date and time of the occurrence or discovery of the grievance; (d) the facts of the incident on which the claim is based; (e) the specific provision of this Agreement alleged to have been violated; (f) the remedy requested. The department superintendent shall give the Company's answer in writing within five (5) working days after the grievance is received by the superintendent. STEP 3 In the event the grievance is not settled in Step 2, then the grievance may be appealed in writing to the division manager or a designated representative by the Union to Step 3 within five (5) working days from the Company's answer in Step 2. The division manager or a designated representative shall give an answer in writing within five (5) working days from the date of the appeal. In the event the grievance is not settled then the aggrieved party or parties shall have the right to request arbitration. In the event a grievance arises on behalf of the Employer, the matter shall be presented to the Union Business Agent in writing, who shall have seven (7) days from the date of submission within which to endeavor to reconcile the grievance presented and shall give an answer in writing within that time. If not settled within that time, the aggrieved party or parties shall have the right to request arbitration. Section 7.2. Discharge grievances shall be processed initially under Step 3 of the grievance procedure. The written grievance shall be filed with the division manager within five (5) working days following the date of discharge. Section 7.3. A failure to observe the time limit specified herein for original presentation of a grievance or presentation in any subsequent step of the grievance procedure on the part of either the grievant or the Union shall be conclusive evidence that the grievance has been settled and abandoned. Failure on the part of the Company to comply with the time limits for delivering its answer in any step of the grievance procedure shall automatically advance the grievance to the next step of the grievance procedure. The time limits of the grievance procedure may be extended by mutual consent of the Union and the Company. ARTICLE 8 ARBITRATION Section 8.1. If a party to this Agreement desires to take a grievance to arbitration, it shall within fifteen (15) calendar days after the denial of the grievance, give written notice of his intention to the other party, together with a written statement of the specific provision or provisions of this Agreement at issue. Section 8.2. The parties shall attempt to select an impartial arbitrator. If they are unable to agree upon a choice within seven (7) calendar days after the receipt of Notice of Intent to Arbitrate, either party may request the Federal Mediation and Conciliation Service to submit a list of five (5) arbitrators, from which the arbitrator will be selected. Selection shall be made by the parties alternately striking any name from the list (the first to strike shall be the party requesting arbitration) until only one (1) name remains. The final name remaining shall be the arbitrator of the grievance. Section 8.3. The jurisdiction and the decision of the arbitrator of the grievance shall be confined to a determination of the acts and the interpretation or application of the specific provision or provisions of this Agreement at issue. The Arbitrator shall be bound by terms and provisions of this Agreement and shall have the authority to consider only grievances representing solely an arbitration issue under this Agreement. The arbitrator shall have no authority to add to, alter, amend, or modify any provision of this Agreement. The decision of the arbitrator in writing on any issue properly before the arbitrator in accordance with the provisions of this Agreement, shall be final and binding on the aggrieved employee or employees, the Union, and the Employer. Section 8.4. Multiple grievances shall not be heard before one arbitrator at the same hearing except by mutual agreement of the parties. Section 8.5. The Union and the Employer shall each bear its own costs in these arbitration proceedings, except that they shall share equally the fee and other expenses of the arbitrator in connection with the grievance. ARTICLE 9 SENIORITY Section 9.1. Seniority is defined as the length of an employee's continuous employment in the bargaining unit at the Company's Collins, Mississippi, poultry processing plant since the last permanent date of employment. For purposes of layoff, recall, promotion, and vacation only, this shall include continuous service which began prior to the acquisition of the plant by the Company. Section 9.2. All newly hired or rehired employees shall be considered as probationary employees for a period of ninety (90) days during which period they shall not acquire seniority, and during which they may be discharged without recourse to the grievance and arbitration procedures provided herein. If retained as a regular employee upon satisfactory completion of the probationary period, seniority shall be retroactive to the first day of employment. Section 9.3. In matters of layoff, recall, and promotion, consideration will be given to an employee's skill, ability, attendance, versatility, training, physical fitness, and seniority; and when, in the opinion of the Company, the factors other than seniority are relatively equal, seniority will be the deciding factor. Section 9.4. An employee's seniority shall be lost and employment considered terminated by: (a) discharge for just cause; (b) failure to return from layoff within five (5) working days after written notice by certified mail is sent by the Company to the employee's last known address on the Company's books. Actual notice to the employee of recall by any other means shall satisfy the terms of this provision; (c) voluntary termination of employment; (d) failure to report after termination of a leave of absence approved by the Company in writing on the first scheduled day following the expiration of such leave of absence; (e) engaging in a gainful occupation while on leave of absence; (f) absence from work for three (3) consecutive working days without notice to the Company, which shall be considered as a voluntary quit, unless notice was prevented by a cause beyond the control of the employee; (g) separation from the Company's active payroll for any reason, exclusive of leaves of absence approved by the Company, for a period exceeding an employee's length of service in the Collins plant, or three (3) months, whichever is less. Section 9.5. For the purposes of this Agreement, layoffs shall be classified as (a) "short term" and (b) "long term". A short term layoff is a layoff which will not exceed ten (10) workdays in length. Short term layoffs may be made without regard to seniority. A long term layoff is a layoff which will exceed ten (10) workdays in length. Long term layoffs shall be made subject to Section 3 of this Article. Section 9.6. All permanent job vacancies in premium rated classifications shall be posted for two (2) consecutive working days on the plant bulletin board. Employees in lower rated classifications desiring promotion to such jobs shall sign a bid sheet posted on the bulletin board. An employee who does not sign such bid sheet shall have no right to consideration for the vacancy. However, the fact that an employee did not sign the bid sheet will not preclude that employee's selection for the job by the Company if none of the signers is determined to be qualified. If no qualified employee bids on the posted position, the Company may fill the position in its discretion. If, after a reasonable period not to exceed thirty (30) days, the employee selected for the posted position achieves an acceptable level of performance, the employee shall receive the rate of the new position. If the employee fails to perform in an acceptable manner, such employee shall return to a job in their former classification and the premium job shall be posted again. An employee who self-disqualifies shall return to the extra board at the line operator's rate of pay and shall not be eligible for bidding on a premium job for a period of six (6) months. Section 9.7. Assignments involving employees on the extra board shall be in order of seniority. Within a department, no extra board employee shall be retained over a permanently assigned employee. ARTICLE 10 SENIORITY LIST Section 10.1. Upon request at any reasonable time, the Company shall furnish to the Union a current seniority list. ARTICLE 11 HOURS OF WORK Section 11.1. The regular work week shall consist of five (5) days or forty (40) hours. This shall not be construed as a guarantee of any amount of hours or work. The basic work week shall be the seven (7) day period from 12:01 a.m. Sunday until midnight the following Saturday. Employees will be given at least one (1) calendar week's notice of any change by the Company of the payroll week. Section 11.2. An employee who works more than forty (40) hours in any one week shall be paid at time and one-half the regular rate of pay for all hours in excess of forty (40). Section 11.3. When employees are called to work a shift outside their regularly scheduled shift and report for work, or when they report to work at their regularly scheduled time, they shall be given the opportunity to work a minimum of three (3) hours or receive pay for same at the applicable hourly rate, except that no such pay shall be made when the plant cannot operate for reasons beyond the control of the Employer, such as, but not limited to, strikes, utility failure, fire, flood, storms or other acts of God interfering with work, or a breakdown of machinery or equipment when the Company notifies the employees not to report to work at least four (4) hours prior to the scheduled time to work. Section 11.4. Employees will be paid at their regular rate for all waiting time of thirty (30) minutes or less, so long as they do any job they are assigned. Employees will not be paid for waiting time which exceeds thirty (30) minutes if (1) they are relieved of all duties, (2) are free to leave the plant, and (3) are told the time they must return to work. Employees will not be relieved without pay more than once in any workday except for a lunch break of not more than one (1) hour. Section 11.5. The Company will provide one (1) unpaid break of not less than thirty (30) minutes for lunch during each shift, and shall provide one (1) twelve (12) minute paid rest period prior to lunch each day. In addition, all employees will be allowed one (1) twelve (12) minute paid rest period after the lunch break provided the work time is expected to be not less than two and one-half (2 1/2) hours. No unpaid break shall be provided for maintenance employees and truck drivers. The Company shall have the right to provide a twenty-four (24) minute paid lunch break to Clean-Up Line Operators on restricted hours in lieu of all breaks provided in this Section. Section 11.6. A Clean-Up Line Operator who has completed the probationary period and is permanently assigned to restricted hours in the clean up department shall receive an hourly adjustment of ninety (90) cents for each hour worked in that assignment. Section 11.7. Employees who have completed the probationary period and are temporarily assigned for one or more consecutive hours to perform the duties of an absent employee in a higher paid classification shall receive the rate of that classification while performing the duties of the classification. Employees who work at more than one pay rate during a week in which they earn overtime shall receive overtime pay based upon an average of the rates earned during that week. ARTICLE 12 LEAVES OF ABSENCE Section 12.1. An employee who has completed the probationary period may be granted, at the Company's discretion, a leave of absence without pay for a reasonable period of time, not to exceed one (1) month, for the following reasons: (a) emergency personal business; (b) serious illness in the immediate family (spouse, children or parents), supported by a doctor's certificate; and (c) Union business, upon written request by the Union's Business Manager, provided that no more than three (3) employees shall be on such leave simultaneously. Section 12.2. Employees who have completed their probationary period are eligible for up to thirteen (13) weeks per year of unpaid family and medical treatment leave for the following reasons: (a) Employee's serious health condition -- a medical certification will be required which states that the employee is unable to perform the functions of the employee's position. (b) Family serious health condition -- spouse, parent, or child. A medical certification will be required stating the employee is "needed to care for the individual." (c) New child leave -- the birth, adoption or foster care placement by a state agency of a child, and, the need to care for the child; such leave may be prior to the actual birth or placement. The provisions of this Section shall be administered in accordance with the Family and Medical Leave Act of 1993 (FMLA). Section 12.3. Employees who have completed their probationary period who lose actual work time in order to attend the funeral of a family member shall receive a paid funeral leave for time necessarily lost during the employee's regularly scheduled shift, provided the employee would have been scheduled and at work during that day. Said leave shall be up to three (3) days with pay for a deceased parent, spouse, child, brother, or sister and one (1) day for a deceased father-in-law, mother-in-law, grandparent, brother-in-law, or sister-in-law. In order to receive pay under this Section, an employee must be actively working, must make application for such paid leave, and must attend the funeral. The Company may require satisfactory evidence of attendance at the funeral and the relationship of the deceased. Section 12.4. If the Company has knowledge that an employee, in a premium-rated classification, will be on family and medical leave, military leave, or an industrial injury leave for more than thirty (30) calendar days, the job will be posted and filled on a temporary basis. The successful bidder will receive the rate of the premium classification for the period its duties are performed. When employees on leave under this Section return, they shall be immediately assigned to their old job; employees temporarily filling the job shall return to their regular classification and pay rate. Section 12.5. The Company shall pay each active employee who reports for jury duty the difference between pay up to eight times the hourly rate for time actually lost and the juror's daily fee for each day the employee is required to serve on a jury. The employee must report to work during those days of his regularly scheduled shift during which the employee is not required to report for jury duty or be available at court for jury service. The employee must present proof of jury service and the amount of compensation received from the court. ARTICLE 13 VACATIONS Section 13.1. Regular full-time employees shall be eligible for one (1) week's vacation after the first anniversary date of continuous employment, and after the anniversary date of each succeeding year. Employees shall be eligible for a second week of vacation after the second anniversary date of continuous employment, and after the anniversary date of each succeeding year of continuous employment. Employees shall be eligible for a third week of vacation after the tenth anniversary date of continuous employment, and after the anniversary date of each succeeding year of continuous employment. Employees shall be eligible for a fourth week of vacation after the twentieth anniversary date of continuous employment and after the anniversary date of each succeeding year of continuous employment. Section 13.2. To be eligible for a vacation, an employee must have worked sixteen hundred (1,600) hours during the preceding twelve (12) months or eighty (80) percent of available hours for that period, whichever is less. Vacations and holidays not worked shall be considered time worked for purposes of this Section. Section 13.3. Vacation pay shall be computed at forty (40) times the Employee's regular straight time hourly rate. Section 13.4. Due consideration will be given employees' choice of vacation time, but all vacations scheduled are subject to the final approval of the Company in keeping with the Company's scheduling needs. In the event that two or more employees cannot be released at the same time, the employee with the longest service with the Company will be given preference. An employee who notifies the Company of a vacation choice thirty (30) days in advance shall not lose that vacation choice to another employee. Vacations may not be scheduled for periods of less than a week, and all vacations must be taken within an anniversary year. Section 13.5. The Company reserves the right to schedule a plant shutdown for one .(l) week in any year, which shall be treated as a vacation week for those employees entitled to vacation. ARTICLE 14 HOLIDAYS Section 14.1. The following shall be considered holidays: New Year's Day Labor Day Martin Luther King's Birthday Thanksgiving Day Memorial Day Christmas Day July Fourth Birthday Holiday The birthday holiday shall be taken on the employee's birthday. If the birthday falls on a Saturday or Sunday, the holiday shall be taken on a day agreed upon by the Company and the employee within one week of the birthday. Section 14.2. All regular full-time employees who have completed their probationary period shall be paid for eight (8) hours at their regular straight time rate for each holiday enumerated above, provided they report for work and work all scheduled hours on the workday preceding and the workday next following the holiday, unless the employee was necessarily absent due to personal illness, supported by a doctor's certificate, or because of an emergency occurring to the employee or the employee's immediate family (meaning only spouse, children, or parents). No employee shall lose holiday pay because of missing no more than thirty (30) minutes on the workday before or the workday following the holiday. In any event, an employee must work at least one (1) day during the calendar week in which a holiday falls in order to be eligible for holiday pay, except the employee who is on vacation. Section 14.3. Employees required to work on a holiday shall be paid the amount provided above, in addition to their regular earnings for that day. Hours not worked on a holiday shall not be considered as work time in computing any additional compensation due under the overtime provisions of this contract. Section 14.4. If an employee is required to work and fails to report or fails to work scheduled hours on a holiday, the employee shall forfeit holiday pay for that day. Section 14.5. Employees on vacation during the week in which a holiday falls shall receive holiday pay. ARTICLE 15 INSURANCE Section 15.1. The Company will provide a group insurance program for employees covered by this Agreement. The Company will continue to make monthly contributions toward group insurance premiums in the same proportion as is currently in effect. Employees will bear the remaining costs of the insurance. ARTICLE 16 WAGES Section 16.1. Wages shall be paid as provided in Appendix A attached hereto and made a part of this Agreement. Section 16.2. Whenever a new job classification is created by the Company, or there is a change or merger of job classifications or the job content of job classifications, the Company will discuss the appropriate wage rate with the Union. If a mutually satisfactory rate cannot be agreed upon, the Company will set the rate. The Union may file a grievance on the rate, and the dispute shall be settled in accordance with the grievance and arbitration procedures of this contract. Section 16.3. Any employees who, upon the effective date of the wage rate set forth in Appendix A, are earning in excess of the applicable rate, shall, during the term of this Agreement, continue to receive their current rate until the contract rate equals or exceeds that rate. This section shall not apply to any employee in a classification which has been paid on a salary basis under any past contract. Section 16.4. In addition to the wage rates as provided in Appendix A, production employees who have been continuously employed for five (5) or more years shall receive seniority pay of twenty (20) cents per hour. Maintenance employees and distribution drivers who have been continuously employed for five (5) or more years will receive seniority pay of fifty (50) cents per hour. Long haul drivers who have been continuously employed for five (5) more years will receive an additional one (1) cent on the applicable mileage rate. Section 16.5. Employees who have been continuously employed for one (1) or more years shall receive a night shift differential of twenty-five (25) cents per hour for work performed on a shift starting during the hours beginning 12:00 noon through 1:00 a.m. The starting time of a shift determines if it is subject to the shift differential. Employees performing work on a night shift which is not their regular shift will receive shift differential for such work if it lasts three (3) or more hours. Distribution drivers shall not receive shift differential regardless of the time they begin work. ARTICLE 17 MISCELLANEOUS Section 17.1. The Company shall maintain safe, sanitary, and healthy working conditions at all times, and employees will be required to cooperate in maintaining such conditions. Any complaints regarding safety or health shall be processed through the grievance and arbitration provisions of this Agreement. Section 17.2. The Company will provide any uniforms required of employees who have completed their probationary period. The Company will furnish required safety equipment, gloves, aprons, hair nets, freezer gloves, cotton gloves, and smocks at no cost to the employee. Needed replacements, through normal use, will be made at no cost provided the worn out article is returned to the Company. If an item is lost or destroyed through employee negligence, the employee will be charged for its replacement. Section 17.3. The Employer may require any employee to take a physical examination at any time at the Employer's expense. Section 17.4. It shall be the responsibility of all employees to keep the Employer apprised of their current address, telephone number, marital status and number of dependents. Section 17.5. It is the intent of the parties hereto that no provisions of this Agreement shall require either party to perform any act which shall be unlawful under any Mississippi or Federal statute. ARTICLE 18 EMPLOYEE STOCK OWNERSHIP PLAN - RETIREMENT Section 18.1. Employees covered by this Agreement will continue to be covered by the Employee Stock Ownership Plan of Sanderson Farms, Inc. and Affiliates. Participation and benefits in the plan shall be in accordance with the provisions of that plan. ARTICLE 19 NO DISCRIMINATION Section 19.1. The Company and the Union agree that they will not discriminate against any person with regard to employment or Union membership because of race, creed, color, sex, religion, age, national origin, or disability (as defined in the Americans With Disabilities Act). Section 19.2. Whenever masculine gender is used in this Agreement, it shall apply to the feminine gender. ARTICLE 20 AUTHORIZATION FOR REPRESENTATION AND CHECK-OFF Section 20.1. During the term of this Agreement, the Company will deduct initiation fees, assessments, and Union dues from the wages of employees who individually authorize the Company on a form in compliance with Appendix B to this Agreement. Section 20.2. The Union shall save the Company harmless against and from all claims, demands, suits or other forms of liability that arise out of or by reason of action taken or not taken by the Company in reliance upon or compliance with any provisions of this Article. Section 20.3. It is agreed that by reason of institution of the above check-off system, collections by any other method on the Company's premises are prohibited, except with the permission of the Company. ARTICLE 21 UNION SECURITY Section 21.1. It shall be a condition of employment that all employees of the Employer covered by this Agreement become members of the Union in good standing not later than thirty-one (31) days after the effective date of this Agreement, and remain members in good standing of the Union. It shall also be a condition of employment that all employees covered by this Agreement and hired on or after its effective date shall on the thirty-first (31st) day following the beginning of such employment become and remain members in good standing in the Union. The Union shall save the Company harmless against and from all claims, demands, suits, or other forms of liability that arise out of or by reason of action taken or not taken by the Company in reliance upon or compliance with any provisions of this Article. It is understood and agreed that the provisions of this Article shall be effective only to the extent permitted by applicable law. ARTICLE 22 DURATION OF AGREEMENT Section 22.1. This Agreement shall remain in full force and effect from the 13th day of January, 2000 until the 31st day of December, 2003, and shall continue thereafter from year to year until either party to this Agreement desires to terminate this Agreement by giving written notice at least sixty (60) days prior to December 31, 2003, or at least sixty (60) days' written notice prior to any anniversary date thereafter. The parties to this Agreement shall endeavor to satisfactorily negotiate any contemplated change or execute a new Agreement during the sixty (60) day period, after proper notice in writing has been given as provided herein and above. Notice, as specified in this Article, shall be mailed via United States Certified Mail. IN WITNESS WHEREOF, the parties have hereunto signed their names this ______ day of January, 2000. SANDERSON FARMS, INC. LABORERS' INTERNATIONAL UNION (Collins Processing Division) OF NORTH AMERICA, PROFESSIONAL EMPLOYEES LOCAL UNION #693 AFL-CIO /c/Daniel J. Nicovich /s/Charles Carney - -------------------------------- ----------------------------------- /s/Jimmie Funelin - -------------------------------- ----------------------------------- /s/Sheila Richardson - -------------------------------- ----------------------------------- /s/Jerry Barnes ----------------------------------- /s/Easter Ducksworth ----------------------------------- /s/Cassandra Magee ----------------------------------- ----------------------------------- ----------------------------------- -----------------------------------
APPENDIX "A" WAGE SCHEDULE EFFECTIVE 1/16/00 1/07/01 1/06/02 1/05/03 PROCESSING Receiving Forklift Operator ................ 8.25 8.45 8.80 9.15 Hanging Dock ..................... 8.10 8.30 8.65 9.00 Picking Killer ........................... 8.35 8.55 8.90 9.25 Floorworker ...................... 8.00 8.20 8.55 8.90 Line Operator .................... 7.85 8.05 8.40 8.75 Eviscerating Floorworker ...................... 8.00 8.20 8.55 8.90 Bird Chiller Operator ............ 8.00 8.20 8.55 8.90 Line Operator .................... 7.85 8.05 8.40 8.75 PACKING Drip Line Forklift Operator ................ 8.30 8.50 8.85 9.20 Scale Operator ................... 8.10 8.30 8.65 9.00 Floorworker ...................... 8.00 8.20 8.55 8.90 Giblet Chiller Operator .......... 8.00 8.20 8.55 8.90 Grader ........................... 7.95 8.15 8.50 8.85 Line Operator .................... 7.85 8.05 8.40 8.75 Specialty Scale Operator ................... 8.10 8.30 8.65 9.00 Floorworker ...................... 8.00 8.20 8.55 8.90 Line Operator .................... 7.85 8.05 8.40 8.75 Polybag Scale Operator ................... 8.10 8.30 8.65 9.00 Floorworker ...................... 8.00 8.20 8.55 8.90 Line Operator .................... 7.85 8.05 8.40 8.75 Paw Line Scale Operator ................... 8.10 8.30 8.65 9.00 Chiller Operator ................. 8.00 8.20 8.55 8.90 Line Operator .................... 7.85 8.05 8.40 8.75
EFFECTIVE 1/16/00 1/07/01 1/06/02 1/05/03 CHILLING/PREPRICE/SHIPPING Chilling Forklift Operator ................ 8.30 8.50 8.85 9.20 Chilling Room Operator ........... 7.95 8.15 8.50 8.85 Preprice Data Printer Operator ............ 8.10 8.30 8.65 9.00 Line Operator .................... 7.85 8.05 8.40 8.75 Shipping Forklift Operator ................ 8.30 8.50 8.85 9.20 Billing Clerk .................... 8.00 8.20 8.55 8.90 Loading Crew ..................... 7.95 8.15 8.50 8.85 Distribution Driver .............. 10.40 10.60 10.95 11.30 DEBONE DEPARTMENT Deboning Scale Operator ................... 8.10 8.30 8.65 9.00 Floorworker ...................... 8.00 8.20 8.55 8.90 Knife Sharpener .................. 8.00 8.20 8.55 8.90 Cooler Arranger .................. 7.95 8.15 8.50 8.85 Combo Packer ..................... 7.95 8.15 8.50 8.85 Dumper ........................... 7.95 8.15 8.50 8.85 Stack Off ........................ 7.95 8.15 8.50 8.85 Line Operator .................... 7.85 8.05 8.40 8.75 QUALITY CONTROL Quality Control Technician ....... 8.10 8.30 8.65 9.00 Purchasing Supply Clerk ..................... 8.30 8.50 8.85 9.20 Line Operator .................... 7.85 8.05 8.40 8.75 Waste Water Waste Treatment Operator ......... 7.95 8.15 8.50 8.85
EFFECTIVE 1/16/00 1/07/01 1/06/02 1/05/03 MAINTENANCE DEPARTMENT Master Skilled Operator I ............ 12.65 12.85 13.20 13.55 Master Skilled Operator II ........... 11.15 11.35 11.70 12.05 Skilled Maintenance Men 10.25 ........ 10.45 10.80 11.15 Mechanic ............................. 9.65 9.85 10.20 10.55 Mechanic Helper ...................... 8.15 8.35 8.70 9.05 Clean-Up Floor Worker ................ 8.00 8.20 8.55 8.90 Clean-Up Line Operators .............. 7.85 8.05 8.40 8.75 BY-PRODUCTS (Rendering) Maintenance Master Skilled Maint. I .............. 12.65 12.85 13.20 13.55 Master Skilled Maint. II ............. 11.15 11.35 11.70 12.05 Skilled Maintenance .................. 10.25 10.45 10.80 11.15 Mechanic ............................. 9.65 9.85 10.20 10.55 Mechanic Production Feather Loader ....................... 8.30 8.50 8.85 9.20 Feather Cooker Operator 8.30 ......... 8.50 8.85 9.20 Meat Cooker Operator ................. 8.30 8.50 8.85 9.20 Utility .............................. 8.30 8.50 8.85 9.20 By-Products Crew ..................... 8.30 8.50 8.85 9.20 Bobcat Loader ........................ 8.10 8.30 8.65 9.00 Driver Raw Material Driver .................. 9.05 9.25 9.60 9.95 Finish Material Driver ............... 9.05 9.25 9.60 9.95
Probationary employees shall receive a training rate of $6.15 per hour for the first ninety (90) days of their employment, which shall be $6.25 effective January 7, 2001, $6.35 effective January 6, 2002, and $6.45 effective January 5, 2003. Upon the expiration of the ninety (90) day period, the rate shall be $7.05 per hour, which shall be $7.15 effective January 7, 2001, $7.25 effective January 6, 2002, and $7.35 effective January 5, 2003. After one year of employment, an employee's rate shall be as shown hereinabove. Newly hired employees in premium classifications above shall receive the rate of that classification upon the expiration of a forty-five (45) day period. Long haul drivers will be paid on a per mile basis as follows: Trips in excess of 100 miles from Collins: Less than one year 28 cents per mile One year to five years 30 cents per mile Over five years 32 cents per mile Trips up to 100 miles from Collins: Less than one year 32 cents per mile One year to five years 34 cents per mile Over five years 36 cents per mile Double team operation: Less than five years 19 cents per mile After five years 22 cents per mile Miscellaneous paid time, including breakdowns, is paid at the distribution driver hourly rate. APPENDIX "B" CHECK-OFF AUTHORIZATION AND ASSIGNMENT TO: ALL EMPLOYERS BY WHOM I AM EMPLOYED I, _________________________________________________________, do hereby assign to Local Union No. 693, LIUNA Professional Employees, AFL-CIO, such amounts from my wages as shall be required to pay the initiation fees, readmission fees, membership dues and assessments of the Local Union as may be established from time to time. My Employer is hereby authorized to deduct amounts from my wages and pay the same to the Local Union and/or its authorized representative, in accordance with the collective bargaining agreement in existence between the Local Union and my Employer. This authorization shall become operative upon the effective date of each collective bargaining agreement entered into between my Employer and the Local Union. This authorization shall be irrevocable for a period of one year, or until the termination of the collective bargaining agreement in existence between my Employer and the Local Union, whichever occurs sooner; and I agree and direct that this authorization shall be automatically renewed and shall be irrevocable for successive periods of one year each, or for the period of such succeeding applicable collective bargaining agreement between my Employer and the Local Union, whichever be shorter, unless I give written notice to my Employer and the Local Union not more than twenty days and not less than ten days prior to the expiration of each period of one year, or of each applicable collective bargaining agreement between my Employer and the Local Union, whichever occurs sooner. Dues and fees paid to Local Union No. 693 are not deductible as charitable contributions for federal income tax purposes. Dues and fees paid to Local Union 693, however, may qualify as business expenses, and may be deductible in limited circumstances subject to various restrictions imposed by the Internal Revenue Service. This assignment has been executed this _____ day of ______________________________, 2000. EX-10 6 0006.txt BRAZOS PROCESSING UNION AGREEMENT A G R E E M E N T BETWEEN SANDERSON FARMS, INC. (BRAZOS PROCESSING DIVISION) AND UNITED FOOD AND COMMERCIAL WORKERS UNION, LOCAL 408, AFL-CIO Chartered by the UNITED FOOD AND COMMERCIAL WORKERS INTERNATIONAL UNION, AFL-CIO, CLC OCTOBER 7, 1999 - OCTOBER 6, 2002 TABLE OF CONTENTS ARTICLE PAGE - ------- ---- 1. AGREEMENT 4 2. RECOGNITION 4 3. MANAGEMENT PREROGATIVES 5 4. SHOP STEWARDS 6 5. UNION BULLETIN BOARD 7 6. NO STRIKE - NO LOCK OUT 7 7. GRIEVANCE PROCEDURE 7 STEP 1 7 STEP 2 8 STEP 3 8 8. ARBITRATION 9 9. SENIORITY 10 10. SENIORITY LIST 12 11. HOURS OF WORK 12 12. LEAVES OF ABSENCE 14 13. VACATIONS 15 14. HOLIDAYS 16 15. INSURANCE 17 16. EMPLOYEE STOCK OWNERSHIP PLAN 18 17. WAGES 18 18. MISCELLANEOUS 19 19 NO DISCRIMINATION 20 20. COMPLETE AGREEMENT AND SEPARABILITY 20 21. AUTHORIZATION FOR REPRESENTATION AND CHECK-OFF 21 22. DURATION OF AGREEMENT 21 SIGNATURES 22 APPENDIX A - WAGE RATES * APPENDIX B - CHECK OFF AUTHORIZATION * ARTICLE 1 AGREEMENT Section 1.1. This Agreement made and entered into this _7th day of October, 1999, by and between Sanderson Farms, Inc. (Brazos Processing Division) at its Bryan, Texas processing plant (hereinafter referred to as "Employer" or "Company"), and United Food and Commercial Workers Union, Local 408, AFL-CIO, chartered by the United Food and Commercial Workers International Union, AFL-CIO, CLC (hereinafter referred to as the "Union". WITNESSETH Section 1.2. WHEREAS, the Company and the Union are desirous of entering into a contractual relationship covering rates of pay, hours of work and other terms and conditions of employment of employees employed within the unit of representation as hereinafter described; and Section 1.3. WHEREAS, the parties have conferred, negotiated and agreed upon the terms and conditions of employment to be applicable to the employees covered by this Agreement for the contract period as herein specified. Section 1.4. NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, the parties do hereby agree as follows: ARTICLE 2 RECOGNITION Section 2.1. The Employer recognizes the Union as the certified bargaining representative (NLRB Case No. 16-RC-10107) for all production and maintenance employees employed at its Bryan, Texas Poultry Processing Plant, excluding office clerical employees, guards, professional employees, and supervisors, as defined in the Act. Section 2.2. No employee shall be required to make any written or verbal agreement that will conflict with this Agreement. No employee shall be reclassified so as to defeat the purpose of this Agreement. ARTICLE 3 A. MANAGEMENT RIGHTS Section 3.1 There shall remain in the Company the exclusive and unilateral right of management of the Company's plant and facilities and the assignment and direction of the working forces, not limited to but including the following: to determine the number, location and type of plants it may operate; to decide the products to be manufactured, the methods of manufacture, the materials to be used and the continuance or discontinuance of any product mater or method of production; to introduce new equipment, machinery or processes and to change or eliminate existing equipment, machinery or processes; to discontinue, temporarily or permanently, in whole or in part, conduct of its business or operations; and to relocate its business or operations in whole or in part; to decide the nature of materials, supplies, equipment or machinery to be used and the price to be paid; to decide upon the sales methods and sales price of all products; to subcontract any work performed by or for the Company; to hire the workforce in accordance with the requirements set by management; to transfer, promote or demote employees subject to the seniority provisions of this Agreement; to lay off employees for economic reasons and to terminate, discharge, suspend or otherwise relieve employee from duty for just cause; to direct and control the workforce; to establish and enforce reasonable rules governing employment, conduct, and working conditions; to determine the size of the workforce; to determine the number of employee assigned to any particular operation; to determine the workplace and to set reasonable work performance levels; to establish, change, combine or abolish job classifications and to determine the length of the work week; to utilize job rotation as deemed necessary by the company; to determine work starting and stopping time, the length of the work day, when overtime shall be worked, to require overtime; and to determine the qualifications of employees. All other rights of Management are also expressly retained even though not particularly enumerated above unless they are clearly limited by the explicit language of some other provisions of this Agreement. It is understood that the word "unilateral right" as used herein mean that the company shall have the unquestioned right to take such action without prior notification or consultation with the Union, except that any such action, once taken, may be questioned, to the extent provided in this Article or as specifically provided elsewhere in this Agreement, through the grievance and arbitration procedures. Section 3.2. If the sub-contracting of work usually performed by bargaining unit employees or partial or complete plant relocation will have the foreseeable effect of causing the layoff of any unit employee, the Company will give notice to the Union and the parties will negotiate on the effects of the layoff. It is further understood that none of the provisions of this Article shall have the effect to reduce or waive any rights of unit employees under the Worker Adjustment and Retraining Notification Act (WARN). Section 3.3. Failure of the Company to exercise rights herein reserved to it or exercising them in a particular way shall not be deemed a waiver of said rights of the Company's rights to exercise said rights in some other manner not in conflict with the terms of this Agreement. ARTICLE 4 SHOP STEWARDS Section 4.1. The Employer recognizes the right of the Union to designate shop stewards, not to exceed twenty (20) in number who shall be assigned to serve specific areas of the plant to handle such Union business as may arise. The shop stewards shall be employees of the Company. The Union shall notify the Company in writing as to the names of the stewards and of any changes in designation of stewards. Section 4.2. A representative of the Union shall be permitted to enter the plant at reasonable times, upon Employer's premises and plant, provided such representative shall in no way interfere with the operations of Employer's business and shall make arrangements with the Employer's manager. Section 4.3. Upon reasonable notice from the Union, the Employer shall grant an unpaid leave of absence to stewards up to one week per year for training purposes. The Union agrees that it will not seek such leave for more than half of the stewards at any one time. ARTICLE 5 UNION BULLETIN BOARD Section 5.1. The Employer will provide a bulletin board in the plant for posting of Union notices. All matters to be posted shall be submitted to the Division Manager or a designated representative for approval prior to posting, and management's decision shall be final. ARTICLE 6 NO STRIKE - NO LOCK OUT Section 6.1. For the duration of this Agreement, there shall be no strike, stoppages, slowdowns, picketing, or other interruption of or interference with the operations of the plant. Section 6.2. The Company shall not lock out employees for the duration of this Agreement. Section 6.3. Neither the violation of any provisions of the Agreement, nor the commission of any act constituting an unfair labor practice, or otherwise made unlawful, shall excuse the employees, the Union, or the Company from their obligations under the provisions of this Article. Section 6.4. An employee discharged or otherwise disciplined for violation of this Article, may seek review of such discipline through the grievance and arbitration procedures provided herein. In this event, the only question to be reviewed shall be whether or not the employee participated in the prohibited conduct. ARTICLE 7 GRIEVANCE PROCEDURE Section 7.1. Grievances arising under this contract are herein defined as a claim by a party to this Agreement or an employee covered by this Agreement that the Company or the Union has violated a provision of this Agreement. STEP I The employee shall discuss the grievance or complaint with the immediate supervisor within five (5) working days after the event giving rise thereto occurs, or within five (5) working days following the date on which the grievant had or reasonably would have had knowledge thereof. In the event the employee so requests, the appropriate steward shall be present at this step. The supervisor shall give an answer within five (5) working days after the grievance is received. STEP 2 If there is no settlement in Step 1, the grievance may be presented by the employee and/or shop steward within five (5) working days from the date on which the supervisor's answer was given in Step 1. The grievance must be presented in writing to the department superintendent and must state the following information: (a) name or names of employee or employees involved; (b) the department or departments involved; (c) the date and time of the occurrence or discovery of the grievance; (d) the facts complained about (e) the specific provision of this Agreement alleged to have been violated; (failure to designate the correct provision will not affect the merits of the grievance); (f) the remedy requested. The superintendent shall give the Company's answer in writing within five (5) working days after the grievance is received by the superintendent. STEP 3 In the event the grievance is not settled in Step 2, then the grievance may be appealed in writing to the division manager or a designated representative by the Union to Step 3 within five (5) working days from the Company's answer in Step 2. The division manager or a designated representative shall give an answer in writing within five (5) working days from the date of the appeal. In the event the grievance is not settled then the aggrieved party or parties shall have the right to request arbitration. In the event a grievance arises on behalf of the Employer, the matter shall be presented to the Union Business Agent in writing, who shall have seven (7) days from the date of submission within which to endeavor to reconcile the grievance presented and shall give an answer in writing within that time. If not settled within that time, the aggrieved party or parties shall have the right to request arbitration. Section 7.2. Discharge grievances shall be processed initially under Step 3 of the grievance procedure. The written grievance shall be filed with the division manager within five (5) working days following the date of discharge. Section 7.3. A failure to observe the time limit specified herein for original presentation of a grievance or presentation in any subsequent step of the grievance procedure on the part of either the grievant or the Union shall be conclusive evidence that the grievance has been settled and abandoned. Failure on the part of the Company to comply with the time limits for delivering its answer in any step of the grievance procedure shall automatically advance the grievance to the next step of the grievance procedure. The time limits of the grievance procedure may be extended by mutual consent of the Union and the Company. ARTICLE 8 ARBITRATION Section 8.1. If a party to this Agreement desires to take a grievance to arbitration, it shall within fifteen (15) calendar days after the denial of the grievance, give written notice of his intention to the other party, together with a written statement of the specific provision or provisions of this Agreement at issue. Section 8.2. The parties shall attempt to select an impartial arbitrator. If they are unable to agree upon a choice within seven (7) calendar days after the receipt of Notice of Intent to Arbitrate, either party may request the Federal Mediation and Conciliation Service to submit a list of five (5) arbitrators, from which the arbitrator will be selected. Selection shall be made by the parties alternately striking any name from the list (the first to strike shall be the party requesting arbitration) until only one (1) name remains. The final name remaining shall be the arbitrator of the grievance. Section 8.3. The jurisdiction and the decision of the arbitrator of the grievance shall be confined to a determination of the acts and the interpretation or application of the specific provision or provisions of this Agreement at issue. The Arbitrator shall be bound by terms and provisions of this Agreement and shall have the authority to consider only grievances representing solely an arbitration issue under this Agreement. The arbitrator shall have no authority to add to, alter, amend, or modify any provision of this Agreement. The decision of the arbitrator in writing on any issue properly before the arbitrator in accordance with the provisions of this Agreement, shall be final and binding on the aggrieved employee or employees, the Union, and the Employer. Section 8.4. Multiple grievances shall not be heard before one arbitrator at the same hearing except by mutual agreement of the parties. Section 8.5. The Union and the Employer shall each bear its own costs in these arbitration proceedings, except that they shall share equally the fee and other expenses of the arbitrator in connection with the grievance. Section 8.6. The Grievance Committee of the Union shall have the sole authority to determine whether or not the employee's grievance is qualified to be submitted to arbitration by the Union. The decision of the Grievance Committee shall be made at its first meeting after the Company's Step 3 answer, and the Union will promptly inform the Company of its decision. ARTICLE 9 SENIORITY Section 9.1. Seniority is defined as the length of an employee's continuous employment in the bargaining unit at the Company's Bryan, Texas, poultry processing plant since the last permanent date of employment. For purposes of layoff, recall, promotion, and vacation only, this shall include continuous service which began prior to the acquisition of the plant by the Company. Section 9.2. All newly hired or rehired employees shall be considered as probationary employees for a period of ninety (90) days during which period they shall not acquire seniority, and during which they may be discharged without recourse to the grievance and arbitration procedures provided herein. If retained as a regular employee upon satisfactory completion of the probationary period, seniority shall be retroactive to the first day of employment. Section 9.3 In matters of promotion, consideration will be given to an employee's skill, ability, attendance, versatility, training, physical fitness, and seniority; and when, in the opinion of the Company, the factors other than seniority are relatively equal, seniority will be the deciding factor. In layoffs and recalls, seniority will prevail, provided the employees involved are relatively equal in ability and fitness to immediately perform the available work. Section 9.4. An employee's seniority shall be lost and employment - ------------ considered terminated by: (a) discharge for just cause; (b) failure to return from layoff within five (5) working days after written notice by certified mail is sent by the Company to the employee's last known address on the Company's books. Actual notice to the employee of recall by any other means shall satisfy the terms of this provision; (c) voluntary termination of employment; (d) failure to report after termination of a leave of absence approved by the Company in writing on the first scheduled day following the expiration of such leave of absence; (e) engaging in a gainful occupation while on leave of absence; (f) absence from work for three (3) consecutive working days without notice to the Company, which shall be considered as a voluntary quit, unless notice was prevented by a cause beyond the control of the employee; (g) separation from the Company's active payroll for any reason, exclusive of leaves of absence approved by the Company, for a period exceeding an employee's length of service in the Bryan plant, or three (3) months, whichever is less. Section 9.5. For the purposes of this Agreement, layoffs shall be classified as (a) "short term" and (b) "long term". A short term layoff is a layoff which will not exceed ten (10) workdays in length. Short term layoffs may be made without regard to seniority. A long term layoff is a layoff which will exceed ten (10) workdays in length. Long term layoffs shall be made subject to Section 3 of this Article. Section 9.6. All permanent job vacancies in premium rated classifications shall be posted for two (2) consecutive working days on the plant bulletin board. Employees in lower rated classifications desiring promotion to such jobs shall sign a bid sheet posted on the bulletin board. An employee who does not sign such bid sheet shall have no right to consideration for the vacancy. However, the fact that an employee did not sign the bid sheet will not preclude that employee's selection for the job by the Company if none of the signers is determined to be qualified. If no qualified employee bids on the posted position, the Company may fill the position in its discretion. If, after a reasonable period not to exceed thirty (30) days, the employee selected for the posted position achieves an acceptable level of performance, the employee shall receive the rate of the new position. If the employee fails to perform in an acceptable manner, such employee shall return to a job in their former classification and the premium job shall be posted again. An employee who self-disqualifies shall return to the extra board at the line operator's rate of pay and shall not be eligible for bidding on a premium job for a period of six (6) months. Section 9.7. Assignments involving employees on the extra board shall be in order of seniority. Within a department, no extra board employee shall be retained over a permanently assigned employee. ARTICLE 10 SENIORITY LIST Section 10.1. Upon request at any reasonable time, the Company shall furnish to the Union a current seniority list. The list shall be alphabetical and shall include department, social security number, date of hire, and rate of pay. ARTICLE 11 HOURS OF WORK Section 11.1. The regular work week shall consist of five (5) days or forty (40) hours. This shall not be construed as a guarantee of any amount of hours or work. The basic work week shall be the seven (7) day period from 12:01 a.m. Sunday until midnight the following Saturday. Employees will be given at least one (1) calendar week's notice of any change by the Company of the payroll week. Section 11.2. An employee who works more than forty (40) hours in any one week shall be paid at time and one-half the regular rate of pay for all hours in excess of forty (40). Section 11.3. When employees are called to work a shift outside their regularly scheduled shift and report for work, or when they report to work at their regularly scheduled time, they shall be given the opportunity to work a minimum of three (3) hours or receive pay for same at the applicable hourly rate, except that no such pay shall be made when the plant cannot operate for reasons beyond the control of the Employer, such as, but not limited to, strikes, utility failure, fire, flood, storms or other acts of God interfering with work, or a breakdown of machinery or equipment when the Company notifies the employees not to report to work at least four (4) hours prior to the scheduled time to work. Section 11.4. Employees will be paid at their regular rate for all waiting time of thirty (30) minutes or less, so long as they do any job they are assigned. Employees will not be paid for waiting time which exceeds thirty (30) minutes if (1) they are relieved of all duties, (2) are free to leave the plant, and (3) are told the time they must return to work. Employees will not be relieved without pay more than once in any workday except for a lunch break of not more than one (1) hour. Section 11.5. The Company will provide one (1) unpaid break of not less than thirty (30) minutes for lunch during each shift, and shall provide one (1) twelve (12) minute paid rest period prior to lunch each day. In addition, all employees will be allowed one (1) twelve (12) minute paid rest period after the lunch break provided the work time is expected to be not less than two and one-half (2 1/2) hours. No unpaid break shall be provided for maintenance employees. The Company shall have the right to provide a twenty-four (24) minute paid lunch break to Clean-Up Line Operators on restricted hours in lieu of all breaks provided in this Section. Section 11.6. A Clean-Up Line Operator who has completed the probationary period and is permanently assigned to restricted hours in the clean up department shall receive an hourly adjustment of ninety (90) cents for each hour worked in that assignment. Section 11.7. Employees who have completed the probationary period and are temporarily assigned for one or more consecutive hours to perform the duties of an absent employee in a higher paid classification shall receive the rate of that classification while performing the duties of the classification. Employees who work at more than one pay rate during a week in which they earn overtime shall receive overtime pay based upon an average of the rates earned during that week Section 11.8. When daily overtime in excess of fifteen (15) minutes is required for processing employees, they shall be notified by second break, or as soon as the Company knows such overtime is required. ARTICLE 12 LEAVES OF ABSENCE Section 12.1. An employee who has completed the probationary period may be granted, at the Company's discretion, a leave of absence without pay for a reasonable period of time, not to exceed one (1) month, for the following reasons: (a) emergency personal business; and (b) Union business, upon written request by the Union's Business Manager, provided that no more than three (3) employees shall be on such leave simultaneously.. Section 12.2. Employees who have completed their probationary period are eligible for up to thirteen (13) weeks per year of unpaid family and medical treatment leave for the following reasons: (a) Employee's serious health condition -- a medical certification will be required which states that the employee is unable to perform the functions of the employee's position. (b) Family serious health condition -- spouse, parent, or child. A medical certification will be required stating the employee is "needed to care for the individual." (c) New child leave -- the birth, adoption or foster care placement by a state agency of a child, and, the need to care for the child; such leave may be prior to the actual birth or placement. The provisions of this Section shall be administered in accordance with the Family and Medical Leave Act of 1993 (FMLA). Section 12.3. Employees who have completed their probationary period who lose actual work time in order to attend the funeral of a family member shall receive a paid funeral leave for time necessarily lost during the employee's regularly scheduled shift, provided the employee would have been scheduled and at work during that day. Said leave shall be up to three (3) days with pay for a deceased parent, spouse, child, brother, or sister and one (1) day for a deceased father-in-law, mother-in-law, grandparent, brother-in-law, or sister-in-law. In order to receive pay under this Section, an employee must be actively working, must make application for such paid leave, and must attend the funeral. The Company may require satisfactory evidence of attendance at the funeral and the relationship of the deceased. Section 12.4. If the Company has knowledge that an employee, in a premium-rated classification, will be on family and medical leave, military leave, or an industrial injury leave for more than thirty (30) calendar days, the job will be posted and filled on a temporary basis. The successful bidder will receive the rate of the premium classification for the period its duties are performed. When employees on leave under this Section return, they shall be immediately assigned to their old job; employees temporarily filling the job shall return to their regular classification and pay rate. Section 12.5. The Company shall pay each active employee who reports for jury duty the difference between pay up to eight times the hourly rate for time actually lost and the juror's daily fee for each day the employee is required to serve on a jury. The employee must report to work during those days of his regularly scheduled shift during which the employee is not required to report for jury duty or be available at court for jury service. The employee must present proof of jury service and the amount of compensation received from the court. ARTICLE 13 VACATIONS Section 13.1. Regular full-time employees shall be eligible for one (1) week's vacation after the first anniversary date of continuous employment, and after the anniversary date of each succeeding year. Employees shall be eligible for a second week of vacation after the second anniversary date of continuous employment, and after the anniversary date of each succeeding year of continuous employment. Employees shall be eligible for a third week of vacation after the tenth anniversary date of continuous employment, and after the anniversary date of each succeeding year of continuous employment. Employees shall be eligible for a fourth week of vacation after the twentieth anniversary date of continuous employment and after the anniversary date of each succeeding year of continuous employment. Section 13.2. To be eligible for a vacation, an employee must have worked sixteen hundred (1,600) hours during the preceding twelve (12) months or eighty (80) percent of available hours for that period, whichever is less. Vacations and holidays not worked shall be considered time worked for purposes of this Section. Section 13.3. Vacation pay shall be computed at forty (40) times the Employee's regular straight time hourly rate. Section 13.4. Due consideration will be given employees' choice of vacation time, but all vacations scheduled are subject to the final approval of the Company in keeping with the Company's scheduling needs. In the event that two or more employees cannot be released at the same time, the employee with the longest service with the Company will be given preference. An employee who notifies the Company of a vacation choice thirty (30) days in advance shall not lose that vacation choice to another employee. Vacations may not be scheduled for periods of less than a week, and all vacations must be taken within an anniversary year. Section 13.5. The Company reserves the right to schedule a plant shutdown for one .(l) week in any year, which shall be treated as a vacation week for those employees entitled to vacation. ARTICLE 14 HOLIDAYS Section 14.1. The following shall be considered holidays: - ------------- New Year's Day Labor Day Martin Luther King's Birthday Thanksgiving Day Memorial Day Christmas Day July Fourth Birthday Holiday The birthday holiday shall be taken on the employee's birthday. If the birthday falls on a Saturday or Sunday, the holiday shall be taken on a day agreed upon by the Company and the employee within one week of the birthday. In the event any other holiday falls on a Saturday or Sunday, the Company will announce whether it will be observed on the Friday preceding or the Monday following the holiday. Such notice shall be given at least four (4) days in advance. Section 14.2. All regular full-time employees who have completed their probationary period shall be paid for eight (8) hours at their regular straight time rate for each holiday enumerated above, provided they report for work and work all scheduled hours on the workday preceding and the workday next following the holiday, unless the employee was necessarily absent due to personal illness, supported by a doctor's certificate, or because of an emergency occurring to the employee or the employee's immediate family (meaning only spouse, children, or parents). No employee shall lose holiday pay because of missing no more than thirty (30) minutes on the workday before or the workday following the holiday. In any event, an employee must work at least one (1) day during the calendar week in which a holiday falls in order to be eligible for holiday pay, except the employee who is on vacation. Section 14.3. Employees required to work on a holiday shall be paid the amount provided above, in addition to their regular earnings for that day. Hours not worked on a holiday shall not be considered as work time in computing any additional compensation due under the overtime provisions of this contract. Section 14.4. If an employee is required to work and fails to report or fails to work scheduled hours on a holiday, the employee shall forfeit holiday pay for that day. Section 14.5. Employees on vacation during the week in which a holiday falls shall receive holiday pay. ARTICLE 15 INSURANCE Section 15.1. The Company shall provide a group insurance program for employees covered by this Agreement. The Company will continue to make monthly contributions toward group insurance premiums in the same proportion as is currently in effect. Employees will bear the remaining costs of the insurance. ARTICLE 16 EMPLOYEE STOCK OWNERSHIP PLAN - RETIREMENT Section 16.1. Employees covered by this Agreement will continue to be covered by the Employee Stock Ownership Plan of Sanderson Farms, Inc. and Affiliates. Participation and benefits in the plan shall be in accordance with the provisions of that plan. ARTICLE 17 WAGES Section 17.1. Wages shall be paid as provided in Appendix A attached hereto and made a part of this Agreement. Section 17.2. Whenever a new job classification is created by the Company, or there is a change or merger of job classifications or the job content of job classifications, the Company will discuss the appropriate wage rate with the Union. If a mutually satisfactory rate cannot be agreed upon, the Company will set the rate. The Union may file a grievance on the rate, and the dispute shall be settled in accordance with the grievance and arbitration procedures of this contract. Section 17.3. The rates of pay set forth in Appendix A of this Agreement are minimum straight time hourly wage rates, and nothing contained herein shall be construed as prohibiting or requiring the Company to grant individual employees, for length of service, efficiency, productivity, or other reasons, a wage increase which would result in such employee's regular straight time hourly wage rate being in excess of the minimum wage rate herein specified for the work operation he or she performs. The Company will notify the Union of any change pursuant to this Section in advance. Section 17.4. Any employees who, upon the effective date of this Agreement, are receiving a wage in excess of the applicable rate set forth in Appendix A, shall continue to receive their current rate until the contract rate equals or exceeds that rate. Section 17.5. In addition to the wage rates as provided in Appendix A, production employees who have been continuously employed for five (5) or more years shall receive seniority pay of twenty (20) cents per hour. Maintenance employees who have been continuously employed for five (5) or more years will receive seniority pay of fifty (50) cents per hour. Section 17.6. Employees who have been continuously employed for one (1) or more years shall receive a night shift differential of twenty-five (25) cents per hour for work performed on a shift starting during the hours beginning 12:00 noon through 1:00 a.m. The starting time of a shift determines if it is subject to the shift differential. Employees performing work on a night shift which is not their regular shift will receive shift differential for such work if it lasts three (3) or more hours. ARTICLE 18 MISCELLANEOUS Section 18.1. The Company shall maintain safe, sanitary, and healthy working conditions at all times, and employees will be required to cooperate in maintaining such conditions. Any complaints regarding safety or health shall be processed through the grievance and arbitration provisions of this Agreement. Section 18.2. There shall be a Safety Committee consisting of members selected from the bargaining unit, one-half selected by the Union and one-half selected by the Company. A management representative shall be designated Chairman of the committee by the Division Manager. The Safety Committee shall perform whatever functions are assigned, which shall include periodic meetings; review of safety related suggestions from any source; and recommending corrective actions to facilitate safety related changes in work environment and work practices. Section 18.3. The Company will provide any uniforms required of employees who have completed their probationary period. The Company will furnish required safety equipment, gloves, aprons, hair nets, freezer gloves, cotton gloves, raincoats, and smocks at no cost to the employee. Needed replacements, through normal use, will be made at no cost provided the worn out article is returned to the Company. If an item is lost or destroyed through employee negligence, the employee will be charged for its replacement. Section 18.4. The Employer may require any employee to take a physical examination at any time at the Employer's expense. Section 18.5. It shall be the responsibility of all employees to keep the Employer apprised of their current address, telephone number, marital status and number of dependents. Section 18.6. It is the intent of the parties hereto that no provisions of this Agreement shall require either party to perform any act which shall be unlawful under any Texas or Federal statute Section 18.7. Employees will be allowed reasonable relief from the line to visit the restroom. Employees who abuse this privilege will be subject to discipline up to and including discharge. Section 18.8. Verified emergency messages will be relayed to the employee as soon as possible after receipt of the message. Section 18.9. This Agreement shall be in both English and Spanish. If there is a discrepancy in translation regarding contract language or interpretation, the English language contract shall prevail. The Company shall pay the cost of translation which shall be done by a qualified translator. ARTICLE 19 NO DISCRIMINATION Section 19.1. The Company and the Union agree that they will not discriminate against any person with regard to employment or Union membership because of race, creed, color, sex, religion, age, national origin, or disability (as defined in the Americans With Disabilities Act). Section 19.2. Whenever masculine gender is used in this Agreement, it shall apply to the feminine gender. ARTICLE 20 COMPLETE AGREEMENT AND SEPARABILITY Section 20.1. Complete Agreement: The parties expressly declare that they have bargained between themselves on all phases of hours, wages, rate of pay, conditions of employment and working conditions, and that this contract represents their full and complete agreement without reservations or unexpressed understanding. Any aspect of hours, rates of pay, wages, conditions of employment and working conditions not covered by a particular provision of this agreement is declared to have been expressly eliminated as a subject for bargaining and during the life of this Agreement may not be raised for further bargaining in negotiations without written consent of all parties hereto. It is further understood and agreed that neither party hereto has been induced to enter into this Agreement by any representations or promises made by the other which are not expressly set forth herein, and that this document correctly sets forth the effect of all preliminary negotiations, understandings, and agreements, and supersedes any previous agreements, whether written or verbal. This contract constitutes the entire Agreement and understanding between the parties and shall not be modified, altered, change, or amended in any respect except on mutual agreement set forth in writing and signed by both parties. Section 20.2. Separability: In the event any of the provisions of this Agreement are held to be in conflict with or in violation of any state or federal statute or another applicable law, administrative rule or regulation, such decision shall not affect the validity of the remaining provisions of the Agreement. The parties further agree that they will meet within thirty (30) days to re-negotiate the provisions of the Agreement held to be invalid, provided that Article 6 shall remain in full force and effect during all such negotiations. ARTICLE 21 AUTHORIZATION FOR REPRESENTATION AND CHECK-OFF Section 21.1. During the term of this Agreement, the Company will deduct initiation fees, assessments, and Union dues from the wages of employees who individually authorize the Company on a form in compliance with Appendix B to this Agreement. Section 21.2. The Union shall save the company harmless against and from all claims, demands, suits or other forms of liability that arise out of or by reason of action taken or not taken by the company in reliance upon or compliance with any provisions of this Article. Section 21.3. It is agreed that by reason of institution of the above check-off system, collections by any other method on the Company's premises are prohibited, except with the permission of the Company. Section 21.4. Credit Union: Upon receipt of a signed authorization, the Company shall deduct from employees' wages and turn over to the proper official of the Credit Union deductions from the pay of such members of the Credit Union as individually and voluntarily certify in writing that they authorize such deductions. Employees and officers of UFCW Local 408 Credit Union may, with five (5) working days notice to management, be allowed access to break areas to sign up new credit union members and promote credit union activity only four (4) times a year. ARTICLE 22 DURATION OF AGREEMENT Section 22.1. This Agreement shall remain in full force and effect from the 7th day of October, 1999 until the 6th day of October, 2002, and shall continue thereafter from year to year until either party to this Agreement desires to terminate this Agreement by giving written notice at least sixty (60) days prior to October 6, 2002, or at least sixty (60) days' written notice prior to any anniversary date thereafter. The parties to this Agreement shall endeavor to satisfactorily negotiate any contemplated change or execute a new Agreement during the sixty (60) day period, after proper notice in writing has been given as provided herein and above. Notice, as specified in this Article, shall be mailed via United States Certified Mail. IN WITNESS WHEREOF, the parties have hereunto signed their names this 18th day of November, 1999. SANDERSON FARMS, INC. UNITED FOOD AND COMMERCIAL (Brazos Processing Division) WORKERS UNION, LOCAL 408 AFL-CIO /s/Doug Lee /s/Emilio Gomez - ------------------------------------- ------------------------------------ /s/Eric Erickson /s/Steve Gault - ------------------------------------- ------------------------------------ /s/Lionel Garcia - ------------------------------------- ------------------------------------ ------------------------------------ ------------------------------------ ------------------------------------ ------------------------------------ ------------------------------------ ------------------------------------ APPENDIX "A" WAGE SCHEDULE
EFFECTIVE CURRENT 1/2/00 1/7/01 1/6/02 PROCESSING RECEIVING Lift Truck Operator ................ 8.00 8.25 8.45 8.80 Receiving Dock ..................... 7.85 8.10 8.30 8.65 PICKING Killer ............................. 8.10 8.35 8.55 8.90 Floorworker ........................ 7.75 8.00 8.20 8.55 Line Operator ...................... 7.60 7.85 8.05 8.40 EVISCERATING Floorworker ........................ 7.75 8.00 8.20 8.55 Bird Chiller Operator .............. 7.75 8.00 8.20 8.55 Line Operator ...................... 7.60 7.85 8.05 8.40 DRIP LINE Lift Truck Operator ................ 8.05 8.30 8.50 8.85 Scale Operator ..................... 7.85 8.10 8.30 8.65 Floorworker ........................ 7.75 8.00 8.20 8.55 Giblet Chiller Operator ............ 7.75 8.00 8.20 8.55 Grader ............................. 7.70 7.95 8.15 8.50 Line Operator ...................... 7.60 7.85 8.05 8.40 SPECIALTY Scale Operator ..................... 7.85 8.10 8.30 8.65 Floorworker ........................ 7.75 8.00 8.20 8.55 Line Operator ...................... 7.60 7.85 8.05 8.40 Grader ............................. 7.70 7.95 8.15 8.50 Lift Truck Operator ................ 8.05 8.30 8.50 8.85 OVERWRAP Line Operator ...................... 7.60 7.85 8.05 8.40 PAWLINE Chiller Operator ................... 7.75 8.00 8.20 8.55 Line Operator ...................... 7.60 7.85 8.05 8.40 Floorworker ........................ 7.75 8.00 8.20 8.55 BOX WASH Line Operator ...................... 7.60 7.85 8.05 8.40 Lift Truck Operator ................ 8.05 8.30 8.50 8.85 MARINATION Line Operator ...................... 7.60 7.85 8.05 8.40 Formulation Mixer .................. 7.75 8.00 8.20 8.55 Floorworker ........................ 7.75 8.00 8.20 8.55 Scale Operator ..................... 7.85 8.10 8.30 8.65 DEBONING Line Operator ...................... 7.60 7.85 8.05 8.40 Stack Off .......................... 7.70 7.95 8.15 8.50 Front Half Puller .................. 7.70 7.95 8.15 8.50 Floorworker ........................ 7.75 8.00 8.20 8.55 Scale Operator ..................... 7.85 8.10 8.30 8.65 SAW CUT Line Operator ...................... 7.60 7.85 8.05 8.40 Floorworker ........................ 7.75 8.00 8.20 8.55 Scale Operator ..................... 7.85 8.10 8.30 8.65 POLY BAG Line Operator ...................... 7.60 7.85 8.05 8.40 Grader ............................. 7.70 7.95 8.15 8.50 Floorworker ........................ 7.75 8.00 8.20 8.55 MDM Line Operator ...................... 7.60 7.85 8.05 8.40 Machine Operator ................... 7.70 7.95 8.15 8.50 Jack Operator ...................... 7.70 7.95 8.15 8.50 Floorworker ........................ 7.75 8.00 8.20 8.55 Forklift Operator .................. 8.05 8.30 8.50 8.85 CHILLING Lift Truck Operator ................ 8.05 8.30 8.50 8.85 Chilling Room Operator ............. 7.70 7.95 8.15 8.50 PREPRICE Data Print Operator ................ 7.85 8.10 8.30 8.65 Line Operator ...................... 7.60 7.85 8.05 8.40 SHIPPING Lift Truck Operator ................ 8.05 8.30 8.50 8.85 Billing Clerk ...................... 7.75 8.00 8.20 8.55 Loading Crew ....................... 7.70 7.95 8.15 8.50 QUALITY CONTROL QC Operator ........................ 7.85 8.10 8.30 8.65 QC Lab Tech ........................ 7.85 8.10 8.30 8.65 PURCHASING ............................... Supply Clerk ....................... 8.05 8.30 8.50 8.85 Line Operator ...................... 7.60 7.85 8.05 8.40 WASTEWATER Waste Treatment Operator ........... 7.70 7.95 8.15 8.50 BY-PRODUCTS By-Products Operator ............... 7.85 8.10 8.30 8.65 MAINTENANCE Master Skilled Operator I .......... 12.40 12.65 12.85 13.20 Master Skilled Operator II ......... 10.90 11.15 11.35 11.70 Skilled Maintenance Men 10.00 ...... 10.25 10.45 10.80 Mechanic ........................... 9.40 9.65 9.85 10.20 Mechanic Helper .................... 7.90 8.15 8.35 8.70 Clean-Up Floor Worker .............. 7.75 8.00 8.20 8.55 Clean-Up Line Operators 7.60 ....... 7.85 8.05 8.40
Probationary employees shall receive a training rate of $6.05 per hour for the first ninety (90) days of their employment, which shall be $6.15 effective January 2, 2000, $6.25 effective January 7, 2001, and $6.35 effective January 6, 2002. Upon the expiration of the ninety (90) day period, the rate shall be $6.75 per hour, which shall be $7.05 effective January 2, 2000, $7.15 effective January 7, 2002 and $7.25 effective January 6, 2002. After one year of employment, an employee's rate shall be as shown hereinabove. Newly hired employees in premium classifications above shall receive the rate of that classification upon the expiration of a forty-five (45) day period. APPENDIX "B" CHECK-OFF AUTHORIZATION To: Any Employer under contract with United Food and Commercial Workers Union, Local 408, AFL-CIO. You are hereby authorized and directed to deduct from my wages, commencing with the next payroll period, an amount equivalent to dues and initiation fees as shall be certified by the President of Local 408, of the United Food and Commercial Workers International Union, AFL-CIO, and remit same to said President. This authorization and assignment is voluntary, made in consideration for the cost of representation and collective bargaining and is not contingent upon my present or future membership in the Union. This authorization and assignment shall be irrevocable for a period of one (1) year from the date of execution or until the termination date of the Agreement between the Employer and Local 408, whichever occurs sooner, and from year to year thereafter, unless not less than thirty (30) days and not more than forty-five (45) days prior to the end of any subsequent yearly period, I give the Employer and Union written notice of revocation bearing my signature thereto. The President of Local 480 is authorized to deposit this authorization with any Employer under contract with Local 408and is further authorized to transfer this authorization to any other Employer under contract with Local 408 in the event that I should change employment. EX-10 7 0007.txt TEAMSTERS UNION AGREEMENT - BRAZOS PRODUCTION A G R E E M E N T BETWEEN SANDERSON FARMS, INC. (BRAZOS PRODUCTION DIVISION) AND SANDERSON FARMS, INC. (BRAZOS PROCESSING DIVISION) AND TEAMSTERS LOCAL UNION NO. 968 Affiliated with INTERNATIONAL BROTHERHOOD OF TEAMSTERS DECEMBER 27, 1999 - DECEMBER 26, 2002 TABLE OF CONTENTS ARTICLE PAGE - ------- ---- 1. AGREEMENT 4 2. RECOGNITION 4 3. MANAGEMENT RIGHTS 4 4. JOB STEWARDS 5 5. UNION BULLETIN BOARD 6 6. NO STRIKE - NO LOCK OUT 6 7. GRIEVANCE PROCEDURE 6 STEP 1 6 STEP 2 7 STEP 3 7 8. ARBITRATION 8 9. SENIORITY 9 10. SENIORITY LIST 11 11. HOURS OF WORK 11 12. LEAVES OF ABSENCE 12 13. VACATIONS 13 14. HOLIDAYS 14 15. INSURANCE 15 16. EMPLOYEE STOCK OWNERSHIP PLAN 16 17. WAGES 16 18. MISCELLANEOUS 16 19 NO DISCRIMINATION 17 20. COMPLETE AGREEMENT AND SEPARABILITY 17 21. CHECK-OFF 18 22. DURATION OF AGREEMENT 19 SIGNATURES 19 APPENDIX A - WAGE RATES 20 APPENDIX B - CHECK OFF AUTHORIZATION 21 ARTICLE 1 AGREEMENT Section 1.1. This Agreement made and entered into this 27TH day of December, 1999, by and between SANDERSON FARMS, INC. (BRAZOS PRODUCTION DIVISION) and SANDERSON FARMS, INC. (BRAZOS PROCESSING DIVISION) at their Bryan, Texas facilities (hereinafter referred to as "Employer" or "Company"), and TEAMSTERS LOCAL No. 968, affiliated with INTERNATIONAL BROTHERHOOD OF TEAMSTERS (hereinafter referred to as the "Union". WITNESSETH Section 1.2. WHEREAS, the Company and the Union are desirous of entering into a contractual relationship covering rates of pay, hours of work and other terms and conditions of employment of employees employed within the unit of representation as hereinafter described; and Section 1.3. WHEREAS, the parties have conferred, negotiated and agreed upon the terms and conditions of employment to be applicable to the employees covered by this Agreement for the contract period as herein specified. Section 1.4. NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, the parties do hereby agree as follows: ARTICLE 2 RECOGNITION Section 2.1. The Employer recognizes the Union as the certified bargaining representative (NLRB Case No. 16-RC-10102) for all forklift operators, distribution, feed mill and live haul drivers in and around Bryan, Texas, excluding all other employees, guards, watchmen, office clerical, and supervisors as defined in the Act. ARTICLE 3 MANAGEMENT RIGHTS Section 3.1. Nothing in this Agreement shall be deemed to limit the Employer in any way in the exercise of the customary functions of management which are recognized as the Employer's exclusive responsibility, including, but not limited to, the right to plan, direct, and control operations, to utilize the services of contractors, to determine the number, size and location of its establishments, to close an establishment or departments thereof, to hire, to promote, to demote, and for proper cause to discipline, suspend or discharge, to assign and schedule work and transfer employees from one job or department to another, and to make and enforce reasonable rules and regulations relative to any and all of these matters or to the management of its operation, provided that the reasonableness of rules may be tested in the grievance procedure. The Employer shall be the exclusive judge of all matters pertaining to its operations and their scheduling and the methods, processes, equipment, means of operation and size of workforce. Section 3.2. The Employer retains all prerogatives and rights of management and all privileges and responsibilities not specifically limited by this Agreement. Section 3.3. If the sub-contracting of work usually performed by bargaining unit employees or partial or complete plant relocation will have the foreseeable effect of causing the layoff of any unit employee, the Company will give notice to the Union and the parties will negotiate on the effects of the layoff. It is further understood that none of the provisions of this Article shall have the effect to reduce or waive any rights of unit employees under the Worker Adjustment and Retraining Notification Act (WARN). ARTICLE 4 JOB STEWARDS Section 4.1. The Employer recognizes the right of the Union to designate job stewards, not to exceed two (2) in each department. Alternates may be designated but there shall be only one active steward during each shift at any one time. The Union shall notify the Company in writing as to the names of the stewards. Section 4.2. A representative of the Union shall be permitted to enter the Employer's premises at reasonable times, provided such representative complies with all safety requirements and does not interfere with the operations of Employer's business and shall make arrangements with the Employer's manager. ARTICLE 5 UNION BULLETIN BOARD Section 5.1. The Employer will provide a bulletin board in each department for posting union notices. All matters to be posted shall be of union matters such as meeting notices, information pertaining to union business and must be on union letterhead signed by a union representative. ARTICLE 6 NO STRIKE - NO LOCK OUT Section 6.1. For the duration of this Agreement, there shall be no strike, stoppages, slowdowns, picketing, or other interruption of or interference with Employer's operations. Section 6.2. The Company shall not lock out employees for the duration of this Agreement. Section 6.3. Neither the violation of any provisions of the Agreement, nor the commission of any act constituting an unfair labor practice, or otherwise made unlawful, shall excuse the employees, the Union, or the Company from their obligations under the provisions of this Article. Section 6.4. An employee discharged or otherwise disciplined for violation of this Article, may seek review of such discipline through the grievance and arbitration procedures provided herein. In this event, the only question to be reviewed shall be whether or not the employee participated in the prohibited conduct. ARTICLE 7 GRIEVANCE PROCEDURE Section 7.1. Grievances arising under this contract are herein defined as a claim by a party to this Agreement or an employee covered by this Agreement that the Company or the Union has violated a provision of this Agreement. STEP I The employee shall discuss the grievance or complaint with the immediate supervisor within five (5) working days after the event giving rise thereto occurs, or within five (5) working days following the date on which the grievant had or reasonably would have had knowledge thereof. In the event the employee so requests, the appropriate steward shall be present at this step. The supervisor shall give an answer within five (5) working days after the grievance is received. STEP 2 If there is no settlement in Step 1, the grievance may be presented by the employee and/or shop steward within five (5) working days from the date on which the supervisor's answer was given in Step 1. The grievance must be presented in writing to the department superintendent and must state the following information: (a) name or names of employee or employees involved; (b) the department or departments involved; (c) the date and time of the occurrence or discovery of the grievance; (d) the facts of the incident on which the claim is based; (e) the specific provision of this Agreement alleged to have been violated; (f) the remedy requested. The superintendent shall give the Company's answer in writing within five (5) working days after the grievance is received by the superintendent. STEP 3 In the event the grievance is not settled in Step 2, then the grievance may be appealed in writing to the division manager or a designated representative by the Union to Step 3 within five (5) working days from the Company's answer in Step 2. The division manager or a designated representative shall give an answer in writing within five (5) working days from the date of the appeal. In the event the grievance is not settled then the aggrieved party or parties shall have the right to request arbitration. In the event a grievance arises on behalf of the Employer, the matter shall be presented to the Union Business Agent in writing, who shall have seven (7) days from the date of submission within which to endeavor to reconcile the grievance presented and shall give an answer in writing within that time. If not settled within that time, the aggrieved party or parties shall have the right to request arbitration. Section 7.2. Discharge grievances shall be processed initially under Step 3 of the grievance procedure. The written grievance shall be filed with the division manager within five (5) working days following the date of discharge. Section 7.3. A failure to observe the time limit specified herein for original presentation of a grievance or presentation in any subsequent step of the grievance procedure on the part of either the grievant or the Union shall be conclusive evidence that the grievance has been settled and abandoned. Failure on the part of the Company to comply with the time limits for delivering its answer in any step of the grievance procedure shall automatically advance the grievance to the next step of the grievance procedure. The time limits of the grievance procedure may be extended by mutual consent of the Union and the Company. ARTICLE 8 ARBITRATION Section 8.1. If a party to this Agreement desires to take a grievance to arbitration, it shall within fifteen (15) calendar days after the denial of the grievance, give written notice of his intention to the other party, together with a written statement of the specific provision or provisions of this Agreement at issue. Section 8.2. The parties shall attempt to select an impartial arbitrator. If they are unable to agree upon a choice within seven (7) calendar days after the receipt of Notice of Intent to Arbitrate, either party may request the Federal Mediation and Conciliation Service to submit a list of five (5) arbitrators, from which the arbitrator will be selected. Selection shall be made by the parties alternately striking any name from the list (the first to strike shall be the party requesting arbitration) until only one (1) name remains. The final name remaining shall be the arbitrator of the grievance. Section 8.3. The jurisdiction and the decision of the arbitrator of the grievance shall be confined to a determination of the facts and the interpretation or application of the specific provision or provisions of this Agreement at issue. The Arbitrator shall be bound by terms and provisions of the Agreement and shall have the authority to consider only grievances representing solely an arbitration issue under this Agreement. The arbitrator shall have no authority to add to, alter, amend, or modify any provision of this Agreement. The decision of the arbitrator in writing on any issue properly before the arbitrator in accordance with the provisions of this Agreement, shall be final and binding on the aggrieved employee or employees, the Union, and the Employer. Section 8.4. Multiple grievances shall not be heard before one arbitrator at the same hearing except by mutual agreement of the parties. Section 8.5. The Union and the Employer shall each bear its own costs in these arbitration proceedings, except that they shall share equally the fee and other expenses of the arbitrator in connection with the grievance. ARTICLE 9 SENIORITY Section 9.1. Company seniority is defined as the length of an employee's continuous employment in the bargaining unit since the last permanent date of employment. Departmental seniority is defined as the length of an employee's continuous employment in a department within the bargaining unit. The departments are (1) Live Haul Driver Department, (2) Feed Mill Driver Department, and (3) Distribution Driver Department. Eligibility for vacation, holidays, and other company benefits shall be determined by company seniority. Section 9.2. All newly hired or re-hired employees shall be considered as probationary employees for a period of ninety (90) days during which, they shall not acquire any seniority, and during which they may be discharged without recourse to the grievance and arbitration procedures provided herein. If retained as a regular employee upon satisfactory completion of the probationary period, seniority shall be retroactive to the first day of employment. Section 9.3. Beginning departmental seniority shall be the date of company seniority as of the effective date of this agreement. Thereafter, departmental seniority shall begin on the date of entry into the department. In matters of layoff, recall, promotion and choice of vacation, departmental seniority will be the deciding factor, provided employees have the skill and ability immediately to perform required duties. Section 9.4. Departmental seniority shall prevail as follows: - ------------- (a) All starting times in the Live Haul Driver Department shall be filled in accordance with Section 9.8 of this Article; (b) Shifts in the Field Mill Driver Department shall be filled in accordance with Section 9.8 of this Article; and (c) Vacancies in all departments shall be filled in accordance with the procedures in Section 9.8 and Section 9.9. Section 9.5. Distribution drivers shall indicate their preference for not more than two scheduled days off for the following week to their supervisor no later than the preceding Thursday. In the event two or more employees seek the same days off, the employee with the most departmental seniority will prevail. Special requests for days off shall be granted if the request (1) is received not less than two weeks prior to the week when the days off are needed, (2) the time has not already been claimed by another employee, and (3) customer needs can be met. The weekly schedule shall be prepared on the preceding Friday, but it is understood that it is subject to change based upon employee absences, customer orders, and availability of experienced drivers. Section 9.6. An employee's seniority shall be lost and employment considered terminated by: (a) discharge for just cause; (b) failure to return from layoff within five (5) working days after written notice by certified mail is sent by the Company to the employee's last known address on the Company's books. Actual notice to the employee of recall by any other means shall satisfy the terms of this provision; (c) voluntary termination of employment; (d) failure to report after termination of a leave of absence approved by the Company in writing on the first scheduled day following the expiration of such leave of absence; (e) engaging in a gainful occupation while on leave of absence; (f) absence from work for three (3) consecutive days without notice to the Company, which shall be considered as a voluntary quit, unless notice was prevented by a cause beyond the control of the employee; (g) layoff for a period exceeding an employee's length of service in the bargaining unit, or three months, whichever is less. Section 9.7. For thepurposes of this Agreement, layoffs shall be classified as (a) "short term" and (b) "long term". A short term layoff is a layoff which will not exceed ten (10) workdays in length. Short term layoffs may be made without regard to seniority. A long term layoff is a layoff which will exceed ten (10) workdays in length. Long term layoffs shall be made subject to Section 3 of this Article. Section 9.8. All permanent job vacancies shall be posted for three (3) consecutive working days on the bulletin board. Employees in the department desiring, respectively, the starting time or the shift, as the case may be, shall sign a bid sheet posted on the bulletin board. An employee who does not sign such bid sheet shall have no right to consideration for the vacancy. If no employee within the department bids on the posted position, the company may fill the position in its discretion. If an employee from another department has requested transfer into the department with a vacancy, said employee shall have preference over any new hire. Section 9.9. Employees desiring a transfer to a different department within the bargaining unit shall indicate their desire by notifying their immediate supervisor. Any opening in that department shall be offered to the requesting employee before a new employee is hired. In the event two or more employees from outside the department have requested transfer, the vacancy shall be filled by the employee with the greatest company seniority. Section 9.10. An employee laid off in a reduction in force shall have the right to bid into an existing vacancy in another department, and his departmental seniority in that department shall begin on the date of the successful move. Section 9.11 The Company will continue its practice of permitting live haul drivers access to available casual overtime, which shall be offered to the senior available driver. ARTICLE 10 SENIORITY LIST Section 10.1. Upon request at any reasonable time, the Company shall furnish to the Union a current seniority list. The list shall be by departmental seniority and shall include social security number, date of hire, and rate of pay. ARTICLE 11 HOURS OF WORK Section 11.1. The regular work week shall consist of five (5) days or forty (40) hours. This shall not be construed as a guarantee of any amount of hours or work. The basic work week shall be the seven (7) day period from 12:01 a.m. Sunday until midnight the following Saturday. Employees will be given at least one (1) calendar week's notice of any change by the Company of the payroll week. Section 11.2. An employee who works more than forty (40) hours in any one week which includes work in either the Feed Mill or Distribution Departments shall be paid at time and one-half the regular rate of pay for all hours in excess of forty (40). If pending litigation finally establishes live haul drivers to be covered under the Fair Labor Standards Act, they also shall receive overtime premium. Section 11.3. When employees are called to work a shift outside their regularly scheduled shift and report for work, or when they report to work at their regularly scheduled time, they shall be given the opportunity to work a minimum of three (3) hours or receive pay for same at the applicable hourly rate, except that no such pay shall be made when the plant cannot operate for reasons beyond the control of the Employer, such as, but not limited to, strikes, utility failure, fire, flood, storms or other acts of God interfering with work, or a breakdown of machinery or equipment when the Company notifies the employees not to report to work at least four (4) hours prior to the scheduled time to work. ARTICLE 12 LEAVES OF ABSENCE Section 12.1. An employee who has completed the probationary period may be granted, at the Company's discretion, a leave of absence without pay for a reasonable period of time, not to exceed one (1) month, for the following reasons: (a) emergency personal business; and (b) Union business, upon written request by the Union's Business Manager, provided that no more than three (3) employees shall be on such leave simultaneously. Section 12.2. Employees who have completed their probationary period are eligible for up to thirteen (13) weeks per year of unpaid family and medical treatment leave for the following reasons: (a) Employee's serious health condition -- a medical certification will be required which states that the employee is unable to perform the functions of the employee's position. (b) Family serious health condition -- spouse, parent, or child. A medical certification will be required stating the employee is "needed to care for the individual." (c) New child leave -- the birth, adoption or foster care placement by a state agency of a child, and, the need to care for the child; such leave may be prior to the actual birth or placement. The provisions of this Section shall be administered in accordance with the Family and Medical Leave Act of 1993 (FMLA). Section 12.3. Employees who have completed their probationary period who lose actual work time in order to attend the funeral of a family member shall receive a paid funeral leave for time necessarily lost during the employee's regularly scheduled shift, provided the employee would have been scheduled and at work during that day. Said leave shall be up to three (3) days with pay for a deceased parent, spouse, child, brother, or sister and one (1) day for a deceased father-in-law, mother-in-law, grandparent, brother-in-law, or sister-in-law. In order to receive pay under this Section, an employee must be actively working, must make application for such paid leave, and must attend the funeral. The Company may require satisfactory evidence of attendance at the funeral and the relationship of the deceased. Section 12.4. If the Company has knowledge that an employee will be on family and medical leave, military leave, or an industrial injury leave for more than thirty (30) calendar days, the job will be posted and filled on a temporary basis within the department. When employees on leave under this Section return, they shall be immediately assigned to their old job; employees temporarily filling the job shall return to their regular jobs Section 12.5. The Company shall pay each active employee who reports for jury duty the difference between pay up to eight times the hourly rate for time actually lost and the juror's daily fee for each day the employee is required to serve on a jury. The employee must report to work during those days of his regularly scheduled shift during which the employee is not required to report for jury duty or be available at court for jury service. The employee must present proof of jury service and the amount of compensation received from the court. ARTICLE 13 VACATIONS Section 13.1. Regular full-time employees shall be eligible for one (1) week's vacation after the first anniversary date of continuous employment, and after the anniversary date of each succeeding year. Employees shall be eligible for a second week of vacation after the second anniversary date of continuous employment, and after the anniversary date of each succeeding year of continuous employment. Employees shall be eligible for a third week of vacation after the tenth anniversary date of continuous employment, and after the anniversary date of each succeeding year of continuous employment. Employees shall be eligible for a fourth week of vacation after the twentieth anniversary date of continuous employment and after the anniversary date of each succeeding year of continuous employment. Section 13.2. To be eligible for a vacation, an employee must have worked sixteen hundred (1,600) hours during the preceding twelve (12) months or eighty (80) percent of available hours for that period, whichever is less. Vacations and holidays not worked shall be considered time worked for purposes of this Section. Section 13.3. Vacation pay shall be computed at forty (40) times the Employee's regular straight time hourly rate. Section 13.4. Due consideration will be given employees' choice of vacation time, but all vacations scheduled are subject to the final approval of the Company in keeping with the Company's scheduling needs. In the event that two or more employees cannot be released at the same time, the employee with the longest service with the Company will be given preference. An employee who notifies the Company of a vacation choice thirty (30) days in advance shall not lose that vacation choice to another employee. Vacations may not be scheduled for periods of less than a week, and all vacations must be taken within an anniversary year. Section 13.5. The Company reserves the right to schedule a plant shutdown for one .(l) week in any year, which shall be treated as a vacation week for those employees entitled to vacation. ARTICLE 14 HOLIDAYS Section 14.1. The following shall be considered holidays: - ------------- New Year's Day Labor Day Martin Luther King's Birthday Thanksgiving Day Memorial Day Christmas Day July Fourth Birthday Holiday The birthday holiday shall be taken on the employee's birthday. If the birthday falls on a Saturday or Sunday, the holiday shall be taken on a day agreed upon by the Company and the employee within one week of the birthday. In the event any other holiday falls on a Saturday or Sunday, the Company will announce whether it will be observed on the Friday preceding or the Monday following the holiday. Such notice shall be given at least four (4) days in advance. Section 14.2. All regular full-time employees who have completed their probationary period shall be paid for eight (8) hours at their regular straight time rate for each holiday enumerated above, provided they report for work and work all scheduled hours on the workday preceding and the workday next following the holiday, unless the employee was necessarily absent due to personal illness, supported by a doctor's certificate, or because of an emergency occurring to the employee or the employee's immediate family (meaning only spouse, children, or parents). No employee shall lose holiday pay because of missing no more than thirty (30) minutes on the workday before or the workday following the holiday. In any event, an employee must work at least one (1) day during the calendar week in which a holiday falls in order to be eligible for holiday pay, except the employee who is on vacation. Section 14.3. Employees required to work on a holiday shall be paid the amount provided above, in addition to their regular earnings for that day. Hours not worked on a holiday shall not be considered as work time in computing any additional compensation due under the overtime provisions of this contract. Section 14.4. If an employee is required to work and fails to report or fails to work scheduled hours on a holiday, the employee shall forfeit holiday pay for that day. Section 14.5. Employees on vacation during the week in which a holiday falls shall receive holiday pay. ARTICLE 15 INSURANCE Section 15.1. The Company shall provide a group insurance program for employees covered by this Agreement. The Company will continue to make monthly contributions toward group insurance premiums in the same proportion as is currently in effect. Employees will bear the remaining costs of the insurance. ARTICLE 16 EMPLOYEE STOCK OWNERSHIP PLAN - RETIREMENT Section 16.1. Employees covered by this Agreement will continue to be covered by the Employee Stock Ownership Plan of Sanderson Farms, Inc. and Affiliates. Participation and benefits in the plan shall be in accordance with the provisions of that plan. ARTICLE 17 WAGES Section 17.1. Wages shall be paid as provided in Appendix A attached hereto and made a part of this Agreement. Section 17.2. Whenever a new job classification is created by the Company, or there is a change or merger of job classifications or the job content of job classifications, the Company will discuss the appropriate wage rate with the Union. If a mutually satisfactory rate cannot be agreed upon, the Company will set the rate. The Union may file a grievance on the rate, and the dispute shall be settled in accordance with the grievance and arbitration procedures of this contract Section 17.3. Loader Operators shall receive downtime pay for delays exceeding thirty (30) minutes on a farm due to truck delays, slow startup, excessive distance between farms, and the like, unless the delay is due to reasons described in Section 11.3 of this Agreement. Travel time to the first farm and travel time from the last farm are included in the piece rate. Downtime shall be paid an hourly rate in addition to piece rate earnings. Section 17.4. In addition to the wage rates as provided in Appendix A, drivers who have been continuously employed for five (5) or more years shall receive seniority pay of fifty (50) cents per hour, effective on their respective anniversary dates. Section 17.5. It is understood by the parties that the Company is engaged in a review of payment methods for its drivers which will possibly result in changes to be effective on or about January 1, 2000. Beginning on that date the contract will be automatically reopened for the purpose of considering the adoption of revised payment methods. Only those portions of the contract affected by such changes will be reopened, as the remaining provisions shall remain in effect. In the event the parties reach impasse on the reopener, the parties may exercise their legal rights. It is specifically agreed that Article 6 shall be suspended until agreement is reached. ARTICLE 18 MISCELLANEOUS Section 18.1. The Company shall maintain safe, sanitary, and healthy working conditions at all times, and employees will be required to cooperate in maintaining such conditions. Any complaints regarding safety or health shall be processed through the grievance and arbitration provisions of this Agreement. Section 18.2. The Company will provide any uniforms required of employees who have completed their probationary period. The Company will furnish required safety equipment, gloves, aprons, hair nets, freezer gloves, cotton gloves, and smocks at no cost to the employee. Needed replacements, through normal use, will be made at no cost provided the worn out article is returned to the Company. If an item is lost or destroyed through employee negligence, the employee will be charged for its replacement. Section 18.3. The Employer may require an employee, upon return from on the job injury, to take a physical examination at the Employer's expense. Section 18.4. It shall be the responsibility of all employees to keep the Employer apprised of their current address, telephone number, marital status and number of dependents. Section 18.5. The Company will continue its current practice to reimburse employees for hotel/motel and meal expenses required for overnight travel. The meal allowance shall not exceed $17.00 within a twenty-four hour period. Section 18.6. It is the intent of the parties hereto that no provisions of this Agreement shall require either party to perform any act which shall be unlawful under any Texas or Federal statute ARTICLE 19 NO DISCRIMINATION Section 19.1. The Company and the Union agree that they will not discriminate against any person with regard to employment or Union membership because of race, creed, color, sex, religion, age, national origin, or disability (as defined in the Americans With Disabilities Act). Section 19.2. Whenever masculine gender is used in this Agreement, it shall apply to the feminine gender. - ------------ ARTICLE 20 COMPLETE AGREEMENT AND SEPARABILITY Section 20.1. Complete Agreement: The parties expressly declare that they have bargained between themselves on all phases of hours, wages, rate of pay, conditions of employment and working conditions, and that this contract represents their full and complete agreement without reservations or unexpressed understanding. Any aspect of hours, rates of pay, wages, conditions of employment and working conditions not covered by a particular provision of this agreement is declared to have been expressly eliminated as a subject for bargaining and during the life of this Agreement may not be raised for further bargaining in negotiations without written consent of all parties hereto. It is further understood and agreed that neither party hereto has been induced to enter into this Agreement by any representations or promises made by the other which are not expressly set forth herein, and that this document correctly sets forth the effect of all preliminary negotiations, understandings, and agreements, and supersedes any previous agreements, whether written or verbal. This contract constitutes the entire Agreement and understanding between the parties and shall not be modified, altered, change, or amended in any respect except on mutual agreement set forth in writing and signed by both parties. Section 20.2. Separability: In the event any of the provisions of this Agreement are held to be in conflict with or in violation of any state or federal statute or other applicable law, administrative rule or regulation, such decision shall not affect the validity of the remaining provisions of the Agreement. The parties further agree that they will meet within thirty (30) days to re-negotiate the provisions of the Agreement held to be invalid, provided that Article 6 shall remain in full force and effect during all such negotiations. ARTICLE 21 CHECK-OFF Section 21.1 The Employer agrees that it will deduct the initiation fee and all current monthly Union dues on a monthly basis from the wages of the employees who have made application for membership in the Union and who are covered by this Agreement, provided the Employer receives from each employee on whose account such deductions are made, a written assignment individually signed authorizing the Employer to make such deductions in the form as shown on Appendix "B". Dues shall be deducted from the payroll each month no later than the fifteenth day of each month and forwarded to the Union within ten (10) days. Section 21.2 Deductions are made for the convenience of the Union and the Union shall indemnify and save the Employer harmless against any claims, demands, suits or other forms of liability that shall arise out of or by reason of action taken or not taken by the Employer for the purpose of complying with any of the provisions of this Article. Section 21.3 The Company agrees to make Credit Union deductions from the wages of employees who duly authorize same. Deductions will be made on a weekly basis as requested by the employee with the following restrictions: An employee during any calendar year may authorize a regular weekly deduction and/or a single one-time deduction. An employee may further authorize an increase in deductions to establish a loan payment. Except for those instances outlined above, no employee may increase, decrease or withdraw from the program more than one time in any calendar year. Said deductions shall be forwarded to the Credit Union (Charger No. 20147) on a monthly basis. The Union will indemnify and hold the Company harmless from any and all claims of nature, whatsoever, arising or resulting from the operation of this provision and the making of deductions pursuant thereto. ARTICLE 22 DURATION OF AGREEMENT Section 22.1. This Agreement shall remain in full force and effect from the 27th day of December, 1999 until the 26th day of December, 2002, and shall continue thereafter from year to year until either party to this Agreement desires to terminate this Agreement by giving written notice at least sixty (60) days prior to December 26, 2002, or at least sixty (60) days' written notice prior to any anniversary date thereafter. The parties to this Agreement shall endeavor to satisfactorily negotiate any contemplated change or execute a new Agreement during the sixty (60) day period, after proper notice in writing has been given as provided herein and above. Notice, as specified in this Article, shall be mailed via United States Certified Mail. IN WITNESS WHEREOF, the parties have hereunto signed there names this 28th day of December, 1999. SANDERSON FARMS, INC. TEAMSTERS LOCAL UNION NO. 968 (Brazos Production Division) /s/Kevin Crook /s/Leo Correa - ------------------------------------- ------------------------------------ - ------------------------------------- ------------------------------------ - ------------------------------------- ------------------------------------ SANDERSON FARMS, INC. (Brazos Procession Division) /s/Eric Erickson - ------------------------------------- - ------------------------------------- - ------------------------------------- APPENDIX "A" WAGE SCHEDULE EFFECTIVE: Current 1/2/00 1/7/01 1/6/02 Distribution 10.15 10.40 10.60 10.95 Feed Mill 8.95 9.20 9.40 9.75 Live Haul 9.80 10.05 10.25 10.60 Loader Operators 8.65 8.90 9.10 9.45 (Downtime) (Piece Rate) Per thousand head: (4.00 lb. bird) Night 2.05 2.10 2.14 2.21 Day 2.15 2.20 2.24 2.31 (5.25 lb. bird) Night 2.25 2.31 2.36 2.44 Day 2.35 2.41 2.46 2.54 (6.25 lb. bird) Night 2.95 3.02 3.08 3.14 Day 3.05 3.12 3.18 3.24 APPENDIX "B" CHECK-OFF AUTHORIZATION AND ASSIGNMENT I, ________________________________________________, hereby authorize (Print Name) my employer to deduct from my wages each and every month an amount equal to the monthly dues, initiation fees and uniform assessments of Local Union 968, and direct such amounts so deducted to be turned over each month to the Secretary-Treasurer of such Local Union for and on my behalf. This authorization is voluntary and is not conditioned on my present or future membership in the Union. This authorization and assignment shall be irrevocable for the term of the applicable contract between the union and the employer or for one year, whichever is the lesser, and shall automatically renew itself for successive yearly or applicable contract periods thereafter, whichever is lesser, unless I give written notice to the company and the union at least sixty (60) days, but not more than seventy-five (75) days before any periodic renewal date of this authorization and assignment of my desire to revoke same. Signature: _____________________________________________________________________ Social Security Number: ___________________________________ Date: _____________ Address: ______________________________________________________________________ City: _________________________________ State: _____________ Zip Code: _________ Employer: ____________________________________________________________________ Original to Employer Copy to Local Union Union dues are not deductible as charitable contributions for Federal Tax purposes. -----END PRIVACY-ENHANCED MESSAGE-----