EXHIBIT 10.3
================================================================================
INTERCREDITOR AGREEMENT
Dated as of November 17, 2005
Re: $20,000,000 6.65% Senior Notes,
due July 7, 2007
of
SANDERSON FARMS, INC.
================================================================================
TABLE OF CONTENTS
SECTION HEADING PAGE
- ------- ------- ----
Parties.................................................................. 1
Recitals................................................................. 1
SECTION 1. DEFINITIONS........................................... 2
SECTION 2. SHARING OF RECOVERIES................................. 3
SECTION 3. AGREEMENTS AMONG THE CREDITORS........................ 4
Section 3.1. Independent Actions by Creditors...................... 4
Section 3.2. Relation of Creditors................................. 4
Section 3.3. Acknowledgment of Guaranties.......................... 5
Section 3.4. Additional Guarantors................................. 5
SECTION 4. MISCELLANEOUS......................................... 5
Section 4.1. Entire Agreement...................................... 5
Section 4.2. Notices............................................... 5
Section 4.3. Successors and Assigns................................ 5
Section 4.4. Consents, Amendment, Waivers.......................... 5
Section 4.5. Governing Law......................................... 5
Section 4.6. Counterparts.......................................... 5
Section 4.7. Sale of Interest...................................... 5
Section 4.8. Severability.......................................... 5
Section 4.9. Expenses.............................................. 6
Section 4.10. Term of Agreement..................................... 6
Signatures............................................................... 1
INTERCREDITOR AGREEMENT
INTERCREDITOR AGREEMENT dated as of November 17, 2005 among the Creditors
(as defined below) of certain subsidiaries (each a "Subsidiary Guarantor") of
Sanderson Farms, Inc., a corporation incorporated under the laws of Mississippi
(the "Company").
RECITALS:
A. Under and pursuant to separate and several Note Purchase Agreements,
each dated as of June 15, 1999 (the "Note Purchase Agreements"), between the
Company and the purchasers named on Annex 1 attached to said Note Purchase
Agreements (individually a "Noteholder" and collectively, the "Noteholders"),
the Company issued and sold to the Noteholders $20,000,000 aggregate principal
amount of its 6.65% Senior Notes, due July 7, 2007 (collectively the "Notes").
B. The Noteholders required as a condition of their purchase of the Notes
that each of Sanderson Farms, Inc. (Foods Division), a Mississippi corporation,
Sanderson Farms, Inc. (Production Division), a Mississippi corporation, and
Sanderson Farms, Inc. (Processing Division), a Mississippi corporation, (each a
"Subsidiary Guarantor" and collectively the "Subsidiary Guarantors") enter into
a guaranty as security for the Notes and accordingly each of the Subsidiary
Guarantors has agreed to provide a guaranty. Each such Subsidiary Guarantor
executed and delivered a Guarantee Agreement (each a "Noteholders' Guarantee"
and collectively the "Noteholders' Guarantees") dated as of June 15, 1999,
pursuant to which such Subsidiary Guarantor irrevocably, absolutely and
unconditionally guaranteed to the Noteholders the payment of the principal of,
premium, if any, and interest on the Notes and the payment and performance of
all other obligations of the Company under the Note Purchase Agreements.
C. Under and pursuant to that certain Credit Agreement dated as of November
17, 2005 (as such agreement may be modified, amended, renewed or replaced,
including any increase in the amount thereof, the "Revolving Credit Agreement")
between the Company, various lending institutions and Harris N.A. (individually
a "Lender" and collectively the "Lenders"), the Lenders have made available to
the Company certain credit facilities in a current aggregate principal amount up
to $200,000,000 (all amounts outstanding in respect of said credit facilities
being hereinafter collectively referred to as the "Loans").
D. In connection with the execution of the Revolving Credit Agreement and
as security for the Loans made thereunder, the Subsidiary Guarantors have
guaranteed to the Lenders the payment of the Loans and all other obligations of
the Company under the Revolving Credit Agreement under those certain guaranty
agreements (as such agreement may be modified, amended, renewed or replaced,
including any increase in the amount thereof, the "Lenders' Guaranties").
E. The Lenders' Guaranties and the Noteholders' Guarantees are each
hereinafter individually referred to as a "Subsidiary Guaranty" and collectively
referred to as the "Subsidiary Guaranties".
F. The Company and the Subsidiary Guarantors contemplate that from time to
time after the date hereof, additional subsidiaries of the Company may, subject
to the terms and conditions of the Revolving Credit Agreement and the Note
Purchase Agreements, issue additional guaranties which the Company, the
Subsidiary Guarantors and the Creditors wish to become subject to this
Intercreditor Agreement pursuant to the requirements of SECTION 3.4 hereof.
G. Pursuant to the requirements of the Note Purchase Agreements and the
Revolving Credit Agreement, the Company has requested and the Lenders and the
Noteholders have agreed to enter into this Agreement.
H. The Revolving Credit Agreement replaces the Credit Agreement dated as of
July 31, 1996, as amended, among the Company and the lenders named therein (the
"Original Revolving Lenders") and this Agreement replaces the Intercreditor
Agreement dated as of June 15, 1999, among the Original Revolving Lenders and
the Noteholders.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the sufficiency and receipt of which are hereby
acknowledged, the parties hereto hereby agree as follows:
SECTION 1. DEFINITIONS.
The following terms shall have the meanings assigned to them below in this
SECTION 1 or in the provisions of this Agreement referred to below:
"Additional Guarantors" shall mean the Subsidiaries which are intended to
be subject to this Intercreditor Agreement pursuant to the requirements of
SECTION 3.4 hereof.
"Company" shall have the meaning assigned thereto in the Recitals hereof.
"Creditor" shall individually mean any Lender or Noteholder and "Creditors"
shall mean all of the Lenders and the Noteholders.
"Excess Subsidiary Payment" shall mean as to any Creditor an amount equal
to the Subsidiary Payment received by such Creditor less the Pro Rata Share of
Subsidiary Payments to which such Creditor is then entitled.
"Lender" and "Lenders" shall have the meanings assigned thereto in the
Recitals hereto.
"Lenders Guaranty" and "Lenders Guaranties" shall have the meanings
assigned thereto in the Recitals hereof.
"Loans" shall have the meaning assigned thereto in the Recitals hereof.
"Noteholder" and Noteholders" shall have the meanings assigned thereto in
the Recitals hereof.
-2-
"Noteholders' Guarantee" and "Noteholders' Guarantees" shall have the
meaning assigned thereto in the Recitals hereof.
"Note Purchase Agreements" shall have the meaning assigned thereto in the
Recitals hereof.
"Notes" shall have the meaning assigned thereto in the Recitals hereof.
"Person" shall mean an individual, partnership, limited liability company,
corporation, trust or unincorporated organization, and a government or agency or
political subdivision thereof.
"Pro Rata Share of Subsidiary Payments" shall mean as of the date of any
Subsidiary Payment to a Creditor in respect to a Subsidiary Agreement an amount
equal to the product obtained by multiplying (a) the amount of all Subsidiary
Payments made by the Subsidiary Guarantor to all Creditors less all reasonable
costs incurred by such Creditors in connection with the collection of such
Subsidiary Payments by (b) a fraction, the numerator of which shall be the
Specified Amount owing to such Creditor, and the denominator of which is the
aggregate amount of all outstanding Subject Obligations (without giving effect
in the denominator to the application of any such Subsidiary Payments).
"Receiving Creditor" shall have the meaning assigned thereto in SECTION 2.
"Revolving Credit Agreement" shall have the meaning assigned thereto in the
Recitals hereof.
"Specified Amount" shall mean as to any Creditor the aggregate amount of
the Subject Obligations owed to such Creditor.
"Subject Obligations" shall mean all principal of, premium, if any, and
interest on, the Notes and the Loans and all other obligations of the Company
under or in respect of the Notes and the Loans and under the Note Purchase
Agreements or the Revolving Credit Agreement and any other obligations of the
Company to the Lenders which are guaranteed by the Lenders' Guaranty.
"Subsidiary Agreements" shall mean the Subsidiary Guaranties.
"Subsidiary Guarantor" and "Subsidiary Guarantors" shall have the meaning
assigned thereto in the Recitals hereof.
"Subsidiary Guaranty" and "Subsidiary Guaranties shall have the meanings
assigned thereto in the Recitals hereof.
"Subsidiary Payment" shall have the meaning assigned thereto in SECTION 2.
SECTION 2. SHARING OF RECOVERIES.
Each Creditor hereby agrees with each other Creditor that payments
(including payments made through setoff of deposit balances or otherwise or
payments or recoveries from any security interest
-3-
granted to any Creditor) made pursuant to the terms of the Subsidiary Agreements
(a "Subsidiary Payment") shall be shared so that each Creditor shall receive its
Pro Rata Share of Subsidiary Payments. Accordingly, each Creditor hereby agrees
that in the event (i) any Creditor shall receive a Subsidiary Payment (a
"Receiving Creditor") and (ii) any other Creditor shall not concurrently receive
its Pro Rata Share of Subsidiary Payments from such Subsidiary Guarantor, then
the Receiving Creditor shall promptly remit the Excess Subsidiary Payment to
each other Creditor who shall then be entitled thereto so that after giving
effect to such payment (and any other payments then being made by any other
Receiving Creditor pursuant to this SECTION 2) each Creditor shall have received
its Pro Rata Share of Subsidiary Payments.
Any such payments shall be deemed to be and shall be made in consideration
of the purchase for cash at face value, but without recourse, ratably from the
other Creditors such amount of Notes or Loans (or interest therein), as the case
may be, to the extent necessary to cause such Receiving Creditor to share such
Excess Subsidiary Payment with the other Creditors as hereinabove provided;
provided, however, that if any such purchase or payment is made by any Receiving
Creditor and if such Excess Subsidiary Payment or part thereof is thereafter
recovered from such Receiving Creditor by such Subsidiary Guarantor (including,
without limitation, by any trustee in bankruptcy of such Subsidiary Guarantor or
any creditor thereof), the related purchase from the other Creditors shall be
rescinded ratably and the purchase price restored as to the portion of such
Excess Subsidiary Payment so recovered, but without interest; and provided
further nothing herein contained shall obligate any Creditor to resort to any
setoff, application of deposit balance or other means of payment under any
Subsidiary Agreement or avail itself of any recourse by resort to any property
of the Company or any Subsidiary Guarantor, the taking of any such action to
remain within the absolute discretion of such Creditor without obligation of any
kind to the other Creditors to take any such action.
SECTION 3. AGREEMENTS AMONG THE CREDITORS.
Section 3.1. Independent Actions by Creditors. Nothing contained in this
Agreement shall prohibit any Creditor from accelerating the maturity of, or
demanding payment from a Subsidiary Guarantor on, any Subject Obligation of the
Company to such Creditor or from instituting legal action against the Company or
a Subsidiary Guarantor to obtain a judgment or other legal process in respect of
such Subject Obligation, but any funds received from a Subsidiary Guarantor in
connection with any recovery therefrom shall be subject to the terms of this
Agreement.
Section 3.2. Relation of Creditors. This Agreement is entered into solely
for the purposes set forth herein, and no Creditor assumes any responsibility to
any other party hereto to advise such other party of information known to such
other party regarding the financial condition of the Company or a Subsidiary
Guarantor or of any other circumstances bearing upon the risk of nonpayment of
the Subject Obligation. Each Creditor specifically acknowledges and agrees that
nothing contained in this Agreement is or is intended to be for the benefit of
the Company or a Subsidiary Guarantor and nothing contained herein shall limit
or in any way modify any of the obligations of the Company or any Subsidiary
Guarantor to the Creditors.
-4-
Section 3.3. Acknowledgment of Guaranties. The Lenders hereby expressly
acknowledge the existence of the Noteholder Guarantees and the Noteholders
hereby expressly acknowledge the existence of the Lenders Guaranties.
Section 3.4. Additional Guarantors. Additional Persons may become
"Subsidiary Guarantors" hereunder by executing and delivering to a then existing
Creditor a guaranty by which such Person has become a guarantor of the Notes or
Loans pursuant to the terms of the Revolving Credit Agreement or the Note
Purchase Agreements. Accordingly, upon the execution and delivery of any such
copy of the guaranty by any such Person, such Person shall, thereinafter become
a "Subsidiary Guarantor" for all purposes of this Agreement.
SECTION 4. MISCELLANEOUS.
Section 4.1. Entire Agreement. This Agreement represents the entire
Agreement among the Creditors and, except as otherwise provided, this Agreement
may not be altered, amended or modified except in a writing executed by all the
parties to this Agreement.
Section 4.2. Notices. Notices hereunder shall be given to the Creditors at
their addresses as set forth in the Note Purchase Agreements or the Revolving
Credit Agreement, as the case may be, or at such other address as may be
designated by each in a written notice to the other parties hereto.
Section 4.3. Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of each of the Creditors and their respective
successors and assigns, whether so expressed or not, and, in particular, shall
inure to the benefit of and be enforceable by any future holder or holders of
any Subject Obligations, and the term "Creditor" shall include any such
subsequent holder of Subject Obligations, wherever the context permits.
Section 4.4. Consents, Amendment, Waivers. All amendments, waivers or
consents of any provision of this Agreement shall be effective only if the same
shall be in writing and signed by all of the Creditors.
SECTION 4.5. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS.
Section 4.6. Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one Agreement, and
any of the parties hereto may execute this Agreement by signing any such
counterpart.
Section 4.7. Sale of Interest. No Creditor will sell, transfer or otherwise
dispose of any interest in the Subject Obligations unless such purchaser or
transferee shall agree, in writing, to be bound by the terms of this Agreement.
Section 4.8. Severability. In case any one or more of the provisions
contained in this Agreement shall be invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions
of this Agreement shall not in any way be affected or impaired thereby.
-5-
Section 4.9. Expenses. In the event of any litigation to enforce this
Agreement, the prevailing party shall, if not reimbursed by the Company, be
entitled to its reasonable attorney's fees (including the allocated costs of
in-house counsel).
Section 4.10. Term of Agreement. This Agreement shall terminate when all
Subject Obligations are paid in full and such payments are not subject to any
possibility of revocation or rescission or until all of the parties hereto
mutually agree in a writing to terminate this Agreement.
-6-
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed as of the date first above written.
THE LINCOLN NATIONAL LIFE INSURANCE
COMPANY, as a Noteholder
By: Delaware Investment Advisers, a
Series of Delaware Management Business
Trust, its Attorney-In-Fact
By /s/ Devon K. Everhart
-------------------------------------
Its Vice President
------------------------------------
HARRIS N.A., as Lender and as Agent
under the Revolving Credit Agreement
By /s/ David J. Bechstein
-------------------------------------
Its Vice President
------------------------------------
SUNTRUST BANK, as Lender under the
Revolving Credit Agreement
By /s/ Gregory L. Cannon
-------------------------------------
Its Director
------------------------------------
AMSOUTH BANK, as Lender under the
Revolving Credit Agreement
By /s/ Stanley A. Herren
-------------------------------------
Its Vice President
------------------------------------
U.S. BANK NATIONAL ASSOCIATION, as
Lender under the Revolving Credit
Agreement
By /s/ Harold Nelson
-------------------------------------
Its Senior Vice President
------------------------------------
Sanderson Farms, Inc.
Signature Page to Intercreditor Agreement
REGIONS BANK, as Lender under the
Revolving Credit Agreement
By /s/ Jay Ingram
-------------------------------------
Its Vice President
------------------------------------
TRUSTMARK NATIONAL BANK, as Lender under
the Revolving Credit Agreement
By /s/ William H. Edwards
-------------------------------------
Its First Vice President
------------------------------------
Sanderson Farms, Inc.
Signature Page to Intercreditor Agreement
The undersigned hereby acknowledge and agree to the foregoing Agreement.
SANDERSON FARMS, INC. (FOODS DIVISION)
By /s/ D. Michael Cockrell
-------------------------------------
Its Treasurer and Chief Financial Officer
-------------------------------------
SANDERSON FARMS, INC. (PRODUCTION
DIVISION)
By /s/ D. Michael Cockrell
-------------------------------------
Its Treasurer and Chief Financial Officer
-------------------------------------
SANDERSON FARMS, INC. (PROCESSING
DIVISION)
By /s/ D. Michael Cockrell
-------------------------------------
Its Treasurer and Chief Financial Officer
-------------------------------------
SANDERSON FARMS, INC.
By /s/ D. Michael Cockrell
-------------------------------------
Its Treasurer and Chief Financial Officer
-------------------------------------
Sanderson Farms, Inc.
Signature Page to Intercreditor Agreement