UNITED STATES

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 December 31, 2012

OR

[    ]          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: 1-3390

 

SEABOARD CORPORATION

(Exact name of registrant as specified in its charter)

 

 

Delaware

 

04-2260388

 

 

(State or other jurisdiction of

 

(I.R.S. Employer Identification No.)

 

 

incorporation or organization)

 

 

 

 

9000 W. 67th Street, Shawnee Mission, Kansas  66202

(Address of principal executive offices)                       (Zip Code)

 

(913) 676-8800

(Registrant’s telephone number, including area code)

 

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

 

 

Title of each class

Common Stock $1.00 Par Value

Name of each exchange on which registered

NYSE MKT

 

 

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:

 

None

(Title of class)

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [   ]   No [ X ]

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes [   ]   No [ X ]

 

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.  Yes [ X ]   No [    ]

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes [ X ]   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.  [X ]

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “larger accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer [X ]

Accelerated filer [    ]

 

 

Non-accelerated filer [    ]   (Do not check if a smaller reporting company)

Smaller reporting company [    ]

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes [   ]   No [X ]

 

The aggregate market value of the 299,566 shares of Seaboard common stock held by nonaffiliates was approximately $638,968,287, based on the closing price of $2,132.98 per share on June 29, 2012, the end of Seaboard’s most recently completed second fiscal quarter.  As of January 25, 2013, the number of shares of common stock outstanding was 1,197,513.

 

DOCUMENTS INCORPORATED BY REFERENCE

 

Portions of the following documents are incorporated by reference into the indicated parts of this report: (1) Seaboard Corporation’s Annual Report to Stockholders furnished to the Commission pursuant to Rule 14a-3(b) – Parts I and II; and (2) Seaboard Corporation’s definitive proxy statement filed pursuant to Regulation 14A for the 2013 annual meeting of stockholders – Part III.

 



 

FORM 10-K

 

SEABOARD CORPORATION

 

Forward-Looking Statements

 

This report, including information included or incorporated by reference in this report, contains certain forward-looking statements with respect to the financial condition, results of operations, plans, objectives, future performance and business of Seaboard Corporation and its subsidiaries (Seaboard).  Forward-looking statements generally may be identified as:

 

·

statements that are not historical in nature; and

 

 

·

statements preceded by, followed by or that include the words “believes,” “expects,” “may,” “will,” “should,” “could,” “anticipates,” “estimates,” “intends” or similar expressions.

 

 

 

In more specific terms, forward-looking statements include, without limitation:

 

 

 

·

statements concerning the projection of revenues, income or loss, capital expenditures, capital structure or other financial items;

 

 

·

statements regarding the plans and objectives of management for future operations;

 

 

·

statements of future economic performance;

 

 

·

statements regarding the intent, belief or current expectations of Seaboard and its management with respect to:

 

 

 

 

(i)

Seaboard’s ability to obtain adequate financing and liquidity;

 

 

 

 

(ii)

the price of feed stocks and other materials used by Seaboard;

 

 

 

 

(iii)

the sale price or market conditions for pork, grains, sugar, turkey and other products and services;

 

 

 

 

(iv)

the recorded tax effects under certain circumstances and changes in tax laws;

 

 

 

 

(v)

the volume of business and working capital requirements associated with the competitive trading environment for the Commodity Trading and Milling division;

 

 

 

 

(vi)

the charter hire rates and fuel prices for vessels;

 

 

 

 

(vii)

the fuel costs and related spot market prices in the Dominican Republic;

 

 

 

 

(viii)

the effect of the fluctuation in foreign currency exchange rates;

 

 

 

 

(ix)

the profitability or sales volume of any of Seaboard’s divisions;

 

 

 

 

(x)

the anticipated costs and completion timetable for Seaboard’s scheduled capital improvements, acquisitions and dispositions; or

 

 

 

 

(xi)

other trends affecting Seaboard’s financial condition or results of operations, and statements of the assumptions underlying or relating to any of the foregoing statements.

 

This list of forward-looking statements is not exclusive.  Seaboard undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, changes in assumptions or otherwise.  Forward-looking statements are not guarantees of future performance or results.  They involve risks, uncertainties and assumptions.  Actual results may differ materially from those contemplated by the forward-looking statements due to a variety of factors.  The information contained in this Form 10-K and in other filings Seaboard makes with the Commission, including without limitation, the information under the headings “Risk Factors” and  “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Form 10-K, identifies important factors which could cause such differences.

 

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FORM 10-K

 

SEABOARD CORPORATION

 

PART I

 

Item 1 Business

 

(a)   General Development of Business

 

Seaboard Corporation, a Delaware corporation, and its subsidiaries (Seaboard), is a diverse global agribusiness and transportation company.  In the United States, Seaboard is primarily engaged in pork production and processing and ocean transportation.  Overseas, Seaboard is primarily engaged in commodity merchandising, grain processing, sugar production and electric power generation.  Seaboard also has an interest in turkey operations in the United States.  See Item 1(c) (1) (ii) “Status of Product or Segment” below for a discussion of acquisitions, dispositions and other developments in specific divisions.

 

Seaboard Flour LLC and SFC Preferred LLC, Delaware limited liability companies, collectively own approximately 74.6 percent of the outstanding common stock of Seaboard.  Mr. Steven J. Bresky, President and Chief Executive Officer of Seaboard, and other members of the Bresky family, including trusts created for their benefit, own the equity interests of Seaboard Flour LLC and SFC Preferred LLC.

 

(b)   Financial Information about Industry Segments

The financial information relating to Industry Segments required by Item 1 of Form 10-K is incorporated herein by reference to Note 13 of the Consolidated Financial Statements appearing on pages 55 through 59 of the Seaboard Corporation Annual Report to Stockholders furnished to the Commission pursuant to Rule 14a-3(b) and attached as Exhibit 13 to this Report.

 

(c)   Narrative Description of Business

(1)   Business Done and Intended to be Done by the Registrant

(i)    Principal Products and Services

Pork Division – Seaboard, through its subsidiary Seaboard Foods LLC, engages in the business of hog production and pork processing in the United States.  Through these operations, Seaboard produces and sells fresh and frozen pork products to further processors, foodservice operators, grocery stores, distributors and retail outlets throughout the United States.  Internationally, Seaboard sells to these same types of customers in Japan, Mexico and numerous other foreign markets.  Other further processing companies also purchase Seaboard’s fresh and frozen pork products in bulk and produce products, such as lunchmeat, ham, bacon, and sausage.  Fresh pork, such as loins, tenderloins and ribs are sold to distributors and grocery stores.  Seaboard also sells further processed pork products consisting primarily of raw and pre-cooked bacon from its two bacon further processing plants.  Seaboard sells some of its fresh products under the brand name Prairie Fresh® and its bacon and other further processed products under the Daily’s® brand name.  Seaboard’s hog processing plant is located in Guymon, Oklahoma and generally operates at full capacity.  Seaboard’s bacon plants are located in Salt Lake City, Utah and Missoula, Montana.  Seaboard has a majority interest in a ham-boning and processing plant in Mexico.   Seaboard also earns fees, based primarily on the number of head processed, to market substantially all of the products produced by Triumph Foods LLC at their pork processing plant located in St. Joseph, Missouri.

 

Seaboard’s hog production operations consist of the breeding and raising of over four million hogs annually primarily at facilities owned by Seaboard or at facilities owned and operated by third parties with whom Seaboard has grower contracts.  The hog production operations are located in the States of Oklahoma, Kansas, Texas and Colorado.  As a part of the hog production operations, Seaboard produces specially formulated feed for the hogs at six owned feed mills.  The remaining hogs processed are purchased from third party hog producers, primarily pursuant to purchase contracts.

 

Seaboard produces biodiesel at a facility in Guymon, Oklahoma.  The biodiesel is produced from pork fat from Seaboard’s Guymon pork processing plant and from animal fat supplied by non-Seaboard facilities.  The biodiesel is sold to third parties.  The facility can also produce biodiesel from vegetable oil.  Seaboard is able to reduce or stop production when it isn’t economically feasible to produce based on input costs or the price of biodiesel.

 

Commodity Trading and Milling Division – Seaboard’s Commodity Trading and Milling Division is an integrated grain trading, grain processing and logistics company.  This Division markets wheat, corn, soybean meal and other commodities in bulk to third parties and affiliated companies.  This division is managed under the name of Seaboard Overseas and Trading Group, conducts business primarily through its subsidiaries, Seaboard Overseas Limited with

 

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FORM 10-K

 

SEABOARD CORPORATION

 

offices in Colombia, Ecuador, Isle of Man and South Africa, Seaboard Overseas Trading and Shipping (PTY), Ltd. located in South Africa, and its non-consolidated affiliates, ContiLatin del Peru S.A. located in Lima, Peru, and Plum Grove Pty Ltd located in Fremantle, Australia.  In addition, although to a lesser degree, Seaboard also markets various specialty grains and other commodities to third party customers, through its subsidiaries PS International, LLC (previously a non-consolidated affiliate through December 31, 2011; see “Status of Product or Segment” below for further discussion) located in Chapel Hill, North Carolina, with multiple  international sales offices.  This division also operates a grain and specialty crop storage and throughput facility through Fill-More Seeds, Inc. located in Fillmore, Canada, and an ocean transportation brokerage operation through Seaboard Bulk Services, Ltd. located in Athens, Greece.  All of the commodities marketed by this division are purchased from growing regions worldwide, with primary destinations being Africa, South America and the Caribbean.  The division sources, transports and markets approximately seven million tons of grains and proteins on an annual basis.  Seaboard integrates the service of delivering commodities to its customers through the use of chartered bulk vessels and its six owned bulk carriers.

 

This division also operates grain and feed milling and related businesses with 28 locations in 14 countries, which are primarily supplied by the trading locations discussed above.  The grain processing businesses are operated through five consolidated and twelve non-consolidated affiliates in Africa, the Caribbean and South America.  These are flour, feed and maize milling businesses which produce approximately three million metric tons of finished products per year.  In addition, this division has a non-controlling interest in a poultry business in Africa and a bakery business in the Democratic Republic of Congo.  The bakery began operations in the fourth quarter of 2012.  Most of the products produced by these operations are sold in the countries in which the products are produced or into adjacent countries.

 

Marine Division – Seaboard, through its subsidiary, Seaboard Marine Ltd., and various foreign affiliated companies and third party agents, provides containerized cargo shipping service to 26 countries between the United States, the Caribbean Basin, and Central and South America.  Seaboard uses a network of offices and agents throughout the United States, Canada, Latin America and the Caribbean Basin to book cargo to and from the United States and between the countries it serves.  Through agreements with a network of connecting carriers, Seaboard can transport cargo to and from numerous U.S. locations by either truck or rail to and from one of its U.S. port locations, where it is staged for export via vessel or received as import cargo from abroad.

 

Seaboard’s primary marine operation is located in Miami and includes a terminal located at the Port of Miami and  off-dock warehouses for cargo consolidation and temporary storage.  Seaboard also operates a cargo terminal facility at the Port of Houston that includes an on-dock warehouse space for temporary storage of bagged grains, resins and other cargoes.  Seaboard also makes scheduled vessel calls in Brooklyn, New York, New Orleans, Louisiana and 45 foreign ports.  At December 31, 2012, Seaboard’s fleet consisted of 6 owned and approximately 30 chartered vessels, and dry, refrigerated and specialized containers and other related equipment.

 

Sugar Division – Seaboard, through its subsidiary, Ingenio y Refineria San Martin del Tabacal and other Argentine non-consolidated affiliates, grows sugar cane, produces and refines sugar, and produces alcohol in Argentina.  This division also purchases sugar in bulk from third parties mostly within Argentina for subsequent resale.  The sugar products are mostly sold in Argentina, primarily to retailers, soft drink manufacturers, and food manufacturers, with some exports to the United States and other South American countries.  Seaboard grows a large portion of the sugar cane on nearly 70,000 acres of land it owns in northern Argentina. The cane is processed at an owned mill, with a current processing capacity of approximately 250,000 metric tons of sugar and approximately 15 million gallons of alcohol per year.  The sugar mill is one of the largest in Argentina.  Also, this division operates a 38 megawatt cogeneration power plant. This plant primarily operates during the sugar harvest season, which is between May and November, with minimal operations outside of harvest season since this plant is primarily fueled using sugar by-product.

 

Power Division – Seaboard, through its subsidiary, Transcontinental Capital Corp. (Bermuda) Ltd., operates as an independent power producer generating electricity for the local power grid in the Dominican Republic.  Seaboard is not directly involved in the transmission or distribution of electricity.  This operation is exempt from U.S. regulation under the Public Utility Holding Company Act of 1938, as amended.  Seaboard primarily sells on the spot market accessed primarily by wholly government-owned distribution companies or partially government-owned generation companies.  Through early 2011, this division operated two floating power generating facilities with a system of

 

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FORM 10-K

 

SEABOARD CORPORATION

 

diesel engines capable of generating a combined rated capacity of approximately 112 megawatts of electricity.  See “Status of Product or Segment” below for discussion of the sale of the two facilities, the subsequent short-term lease of one of the two facilities sold and the construction of a new replacement floating power generating facility that began commercial operations in March 2012.  Seaboard continues to operate the floating power generating facilities, (one owned and one leased) with capacity to generate approximately 106 and 72 megawatts of electricity, respectively. The facilities are secured on the Ozama River in Santo Domingo, Dominican Republic.

 

Turkey Segment –Seaboard owns a 50 percent non-controlling voting interest in Butterball, LLC (“Butterball”).  The other 50 percent ownership interest is owned by a group consisting of Maxwell Farms, LLC, Goldsboro Milling Company and GM Acquisition LLC (collectively, the “Maxwell Group”) based in North Carolina.  Butterball is a vertically integrated producer, processor and marketer of branded and non-branded turkeys, and other turkey products.  Butterball has five processing plants and numerous live production and feed milling operations located in North Carolina, Arkansas, Missouri and Kansas.  Butterball produces approximately one billion pounds of turkey each year.  Butterball is a national supplier to retail and foodservice outlets and also exports products to Mexico and numerous other foreign markets.  On December 31, 2012, Butterball purchased the assets of Gusto Packing Company, Inc., a pork and turkey further processor located in Montgomery, Illinois.

 

Other Businesses Seaboard purchases and processes jalapeño peppers at its owned plant in Honduras.  The processed peppers are primarily sold to a customer in the United States, and are shipped to the United States by Seaboard’s Marine Division and distributed from Seaboard’s port facilities.

 

The information required by Item 1 of Form 10-K with respect to the amount or percentage of total revenue contributed by  any class of similar products or services which account for 10 percent or more of consolidated revenue in any of the last three fiscal years is set forth in Note 13 of Seaboard’s Consolidated Financial Statements, appearing on pages 55 through 59 of the Seaboard’s Annual Report to Stockholders, furnished to the Commission pursuant to rule 14a-3(b) and attached as Exhibit 13 to this report, which information is incorporated herein by reference.

 

(ii)  Status of Product or Segment

 

The Federal tax credits for biodiesel blended by the Pork division expired on December 31, 2011.  On January 2, 2013, the American Taxpayer Relief Act of 2012 was signed into law renewing the Federal tax credits for biodiesel blended by the Pork division retroactive to January 1, 2012 with an expiration date of December 31, 2013.

 

In 2010, Seaboard finalized an agreement to invest in a bakery to be built in the Democratic Republic of Congo.  Seaboard has a 50% non-controlling interest in this business.  As of December 31, 2012, Seaboard invested $46.3 million in this bakery.  The bakery began operations in the fourth quarter of 2012.

 

Effective, January 1, 2012, Seaboard increased its ownership from 50% to 70% in PS International, LLC (PSI), a specialty grain trading business located in Chapel Hill, North Carolina. Effective December 31, 2012, Seaboard increased its ownership from 70% to 85%.

 

In July 2012, the Commodity Trading and Milling segment made a down payment in the amount of $8.3 million on four dry bulk vessels to be built for a total cost of approximately $83.0 million. These vessels are expected to be completed in 2014 with the majority of the amount due in 2014.

 

On April 8, 2011, Seaboard closed the sale of its two existing power generating facilities in the Dominican Republic for $73.1 million.  On April 20, 2011, Seaboard signed a short-term lease agreement that allowed Seaboard to resume operations of one of the facilities (72 megawatts). Seaboard continues to operate this facility under a short-term lease agreement that may be canceled by either party. Seaboard and the purchaser also agreed to defer the sale to the purchaser of the inventory related to the EDM until the end of the lease term.  Seaboard retained all other physical properties of this business and constructed a new 106 megawatt floating power generating facility for use in the Dominican Republic for $136.0 million.  This new facility was delivered in January 2012 and began commercial operations in March 2012.

 

As of April 1, 2012, the Power Division’s tax holiday concession granted by the Dominican Republic government ceased.

 

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FORM 10-K

 

SEABOARD CORPORATION

 

On December 31, 2012, Butterball purchased the assets of Gusto Packing Company, Inc., a pork and turkey further processor located in Montgomery, Illinois.

 

(iii)  Sources and Availability of Raw Materials

 

None of Seaboard’s businesses utilize material amounts of raw materials that are dependent on purchases from one supplier or a small group of dominant suppliers.  However, the Turkey Segment purchases a significant portion of its feed for its turkeys in North Carolina from the Maxwell Group, Seaboard’s 50% partner in Butterball.

 

(iv)  Patents, Trademarks, Licenses, Franchises and Concessions

 

Seaboard uses the registered trademark of Seaboard®.

 

The Pork Division uses registered trademarks relating to its products, including Seaboard Farms®, Prairie Fresh®, A Taste Like No Other®, Daily’s®, Daily’s Premium Meats Since 1893®, St. Joe Pork®, High Plains Bioenergy®, Prairie Fresh Prime®, Seaboard Foods®, Buffet Brand®, Del Pueblo®, Cook in Bag® and The Thrill Without The Grill®. Seaboard considers the use of these trademarks important to the marketing and promotion of its pork products.

 

The Marine Division uses the trade name Seaboard Marine® and Seaboard Solutions® which are all registered trademarks.  Seaboard believes there is significant recognition of these trademarks in the industry and by many of its customers.

 

Part of the sales within the Sugar Division are made under the Chango® brand in Argentina, where this division operates.  Certain local sales prices are affected by government price control, primarily for one kilogram size bags, and sugar import duties imposed by the Argentine government, impacting local volume sold, as well as imported and exported volumes to and from international markets.  Sourcing in the domestic market is also closely monitored by the local government.

 

The Turkey Segment uses registered trademarks relating to its products, including Butterball® and Carolina Turkeys®.  Seaboard considers the use of these trademarks important to marketing and promotion of its turkey products.

 

Patents, trademarks, franchises, licenses and concessions are not material to any of Seaboard’s other divisions.

 

(v)  Seasonal Business

 

The Sugar Division’s cogeneration plant primarily operates during the sugar harvest season, which is between May and November, with minimal operations outside of harvest season since this plant is primarily fueled with sugar by-product. The Turkey business is seasonal only on the whole bird side with Thanksgiving and Christmas holidays driving the majority of those sales.  Seaboard’s other divisions are not seasonally dependent to any material extent.

 

(vi) Practices Relating to Working Capital Items

 

There are no unusual industry practices or practices of Seaboard relating to working capital items.

 

(vii) Depending on a Single Customer or Few Customers

 

Seaboard does not have sales to any one customer equal to 10% or more of consolidated revenues.  The Pork Division derives approximately 10% of its revenues from a few customers in Japan through one agent.  Historically, the Commodity Trading and Milling Division derives a significant portion of its operating income from sales to a non-consolidated affiliate. The Power Division sells power in the Dominican Republic on the spot market accessed primarily by three wholly government-owned distribution companies and two partially government-owned generation companies.  The Turkey segment derives approximately 10% of its revenues from one customer. No other division has sales to a few customers which, if lost, would have a material adverse effect on any such division or on Seaboard taken as a whole.

 

(viii) Backlog

 

Backlog is not material to Seaboard’s businesses.

 

(ix) Government Contracts

 

No material portion of Seaboard’s business involves government contracts.

 

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FORM 10-K

 

SEABOARD CORPORATION

 

(x)          Competitive Conditions

 

Competition in Seaboard’s Pork Division comes from a variety of national, international and regional producers and processors and is based primarily on product quality, customer service and price.  According to recent publications by Successful Farming and Informa Economics , trade publications, Seaboard ranks as one of the nation’s top five pork producers (based on sows in production) and top ten pork processors (based on daily processing capacity).

 

Seaboard’s commodity trading business to third parties faces competition from numerous traders around the world in a very competitive environment with low margin percentages on most trades.  Most of the grain processing and related businesses face competition from either imported products or other local producers in the same industries.

 

Seaboard’s ocean liner service for containerized cargoes faces competition based on price, reliable sailing frequencies and customer service.  Seaboard believes it is among the top five ranking ocean liner services for containerized cargoes in the Caribbean Basin and Central America based on cargo volume.

 

Seaboard’s sugar business owns one of the largest sugar mills in Argentina and faces significant competition for sugar sales in the local Argentine market.  Sugar prices in Argentina can fluctuate compared to world markets due to current Argentine government price control and protection policies.

 

Seaboard’s Power Division is located in the Dominican Republic.  Power generated by this division is sold on the spot market or to contract customers at prices based on market conditions and cost-based rates.

 

Competition for the Turkey Segment comes from a variety of national and regional producers and processors and is based primarily on product quality, customer service and price.  Butterball ranks as one of the nation’s top three turkey producers (based on live production).

 

(xi)  Research and Development Activities

 

Seaboard and its Turkey Segment conduct research and development activities focused on various aspects of Seaboard’s vertically integrated pork and turkey processing system, including improving product quality, production processes, animal genetics, nutrition and health.  Incremental costs incurred to perform these tests are expensed as incurred and are not material to operating results.

 

(xii) Environmental Compliance

 

Seaboard and its Turkey Segment are subject to numerous Federal, state and local provisions relating to the environment which require the expenditure of funds in the ordinary course of business.  Seaboard and its Turkey Segment do not anticipate making expenditures for these purposes, which, in the aggregate would have a material or significant effect on Seaboard’s financial condition or results of operations.

 

(xiii) Number of Persons Employed by Registrant

 

As of December 31, 2012, Seaboard, excluding non-consolidated affiliates, had 11,295 employees, of whom 6,173 were employed in the United States.  Approximately 2,100 employees in Seaboard’s Pork Division were covered by collective bargaining agreements as of December 31, 2012.  Seaboard considers its employee relations to be satisfactory.

 

(d)          Financial Information about Geographic Areas

 

In addition to the narrative disclosure provided below, the financial information relating to export sales required by Item 1 of Form 10-K is incorporated herein by reference to Note 13 of Seaboard’s Consolidated Financial Statements appearing on pages 55 through 59 of Seaboard’s Annual Report to Stockholders furnished to the Commission pursuant to Rule 14a-3(b) and attached as Exhibit 13 to this report.

 

Seaboard considers its relations with the governments of the countries in which its foreign subsidiaries and affiliates are located to be satisfactory, but foreign operations in lesser-developed countries are subject to risks of doing business such as potential civil unrests and government instabilities, increasing the exposure to potential expropriation, confiscation, war, insurrection, civil strife and revolution, sales price controls, currency inconvertibility and devaluation, and currency exchange controls.  To minimize certain of these risks, Seaboard has insured certain investments in its affiliate flour mills in Democratic Republic of Congo, Haiti, Lesotho, Madagascar, Republic of Congo and Zambia, to the extent available and deemed appropriate against certain of these risks with the Overseas Private Investment Corporation, an agency of the United States

 

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FORM 10-K

 

SEABOARD CORPORATION

 

Government.  At the date of this report, Seaboard is not aware of any situations which could have a material effect on Seaboard’s business.

 

(e)           Available Information

 

Seaboard electronically files with the Commission annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports pursuant to Section 13(a) or 15(d) of the Exchange Act.  The public may read and copy any materials filed with the Commission at their public reference room located at 100 F Street N.E., Washington, D.C. 20549.  The public may obtain further information concerning the public reference room and any applicable copy charges, as well as the process of obtaining copies of filed documents by calling the Commission at 1-800-SEC-0330.

 

The Commission maintains an internet website that contains reports, proxy and information statements, and other information regarding electronic filers at www.sec.gov .  Seaboard provides access to its most recent Form 10-K, 10-Q and 8-K reports, and any amendments to these reports, on its internet website, www.seaboardcorp.com , free of charge, as soon as reasonably practicable after those reports are electronically filed with the Commission.

 

Please note that any internet addresses provided in this report are for information purposes only and are not intended to be hyperlinks.  Accordingly, no information provided at such Internet addresses is intended or deemed to be incorporated herein by reference.

 

Item 1A Risk Factors

 

Seaboard has identified important risks and uncertainties that could affect the results of operations, financial condition or business and that could cause them to differ materially from Seaboard’s historical results of operations, financial condition or business, or those contemplated by forward-looking statements made herein or elsewhere, by, or on behalf of, Seaboard.  Factors that could cause or contribute to such differences include those factors described below.

 

(a) General

 

(1)     Seaboard’s Operations are Subject to the General Risks of the Food Industry .  The divisions of the business that are in the food products manufacturing industry are subject to the risks posed by:

 

·                   food spoilage or food contamination;

·                   evolving consumer preferences and nutritional and health-related concerns;

·                   federal, state, national, provincial and local food processing regulations;

·                   consumer product liability claims;

·                   product tampering; and

·                   public perception of food production practices.

If one or more of these risks were to materialize, Seaboard’s revenues could decrease, costs of doing business could increase, and Seaboard’s operating results could be adversely affected.

(2)     Foreign Political and Economic Conditions Have a Significant Impact on Seaboard’s Business .  Seaboard is a diverse agribusiness and transportation company with global operations in several industries.  Most of the sales and costs of Seaboard’s divisions are significantly influenced by worldwide fluctuations in commodity prices or changes in foreign political and economic conditions.  Accordingly, sales, operating income and cash flows can fluctuate significantly from year to year.  In addition, Seaboard’s international activities pose risks not faced by companies that limit themselves to United States markets. These risks include:

·                   changes in foreign currency exchange rates;

·                   foreign currency exchange controls;

·                   changes in a specific country’s or region’s political or economic conditions, particularly in emerging markets;

·                   hyperinflation;

·                   heightened customer credit and execution risk;

·                   tariffs, other trade protection measures and import or export licensing requirements;

·                   potentially negative consequences from changes in tax laws;

·                   different legal and regulatory structures and unexpected changes in legal and regulatory requirements;

 

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FORM 10-K

 

SEABOARD CORPORATION

 

·                   negative perception within a foreign country of a United States company doing business in that foreign country; and

·                   expropriation.

Seaboard cannot provide assurance that it will be successful in competing effectively in international markets.

(3)     Deterioration of Economic Conditions Could Negatively Impact Seaboard’s Business.   Seaboard’s business may be adversely affected by changes in national or global economic conditions, including inflation, interest rates, availability of capital markets, consumer spending rates, energy availability and costs and the effects of governmental initiatives to manage economic conditions.  Any such changes could adversely affect the demand for our meat products, grains and shipping services, or the cost and availability of our needed raw materials and packaging materials, thereby negatively affecting our financial results.  The current national and global economic conditions, could, among other things:

·                   impair the financial condition of some of our customers and suppliers thereby increasing customer bad debts or non-performance by customers and suppliers;

·                   negatively impact global demand for protein and grain-based products, which could result in a reduction of sales, operating income and cash flows;

·                   decrease the value of our investments in equity and debt securities, including pension plan assets; and

·                   impair the financial viability of our insurers.

(4)     Ocean Transportation Has Inherent Risks.   Seaboard’s owned and chartered vessels along with related cargoes are at risk of being damaged or lost because of events such as:

·                   marine disasters;

·                   bad weather;

·                   mechanical failures;

·                   grounding, fire, explosions and collisions;

·                   human error; and

·                   war, piracy and terrorism.

All of these hazards can result in death or injury to persons, loss of property, environmental damages, delays or rerouting.  If one of Seaboard’s vessels were involved in an accident, the resulting media coverage could have a material adverse effect on Seaboard’s business, financial condition and results of operations.

(5)     Seaboard’s Common Stock is Thinly Traded and Subject to Daily Price Fluctuations .  The common stock of Seaboard is closely held (74.6% is collectively owned by Seaboard Flour and SFC Preferred LLC , which are beneficially owned by S. Bresky and other members of the Bresky family) and thinly traded on a daily basis on the NYSE MKT.  Accordingly, the price of a share of common stock can fluctuate more significantly from day-to-day than that of a share of widely held stock that is actively traded on a daily basis.

 

(b) Pork Division

 

(1)     Fluctuations in Commodity Pork Prices Could Adversely Affect Seaboard’s Results of Operations.   Sales prices for Seaboard’s pork products are directly affected by both domestic and world-wide supply and demand for pork products and other proteins, all of which are determined by constantly changing market forces of supply and demand as well as other factors over which Seaboard has little or no control.  Commodity pork prices demonstrate a cyclical nature over periods of years, reflecting changes in the supply of fresh pork and competing proteins on the market, especially beef and chicken.  Seaboard’s results of operations could be adversely affected by fluctuations in pork commodity prices.

(2)     Increases in Costs of Seaboard’s Feed Components and Hog Purchases Could Adversely Affect Seaboard’s Costs and Operating Margins.   Feed costs are the most significant single component of the cost of raising hogs and can be materially affected by commodity price fluctuations for corn and soybean meal.  The results of Seaboard’s Pork Division can be negatively affected by increased costs of Seaboard’s feed components.  Drought conditions in the U.S. and the continued operation of ethanol plants has elevated this risk as it has increased the competing demand for feed ingredients, primarily corn.  Similarly, accounting for approximately 20% of Seaboard’s total hogs slaughtered, the cost of third party hogs purchased fluctuates with market conditions and can have an impact on Seaboard’s total costs.  The cost and supply of feed components and the third party hogs that we purchase are determined by constantly changing market forces of supply and demand, which are driven by matters over which we have no

 

9



 

FORM 10-K

 

SEABOARD CORPORATION

 

control, including weather, current and projected worldwide grain stocks and prices, grain export prices and supports and governmental agricultural policies.  Seaboard attempts to manage certain of these risks through the use of financial instruments, however this may also limit its ability to participate in gains from favorable commodity fluctuations.  Unless wholesale pork prices correspondingly increase, increases in the prices of Seaboard’s feed components or in the cost of third party hogs purchased would adversely affect Seaboard’s operating margins.

(3)     Seaboard May be Unable to Obtain Appropriate Personnel at Remote Locations.   The remote locations of the pork processing plant and live hog operations, and a more restrictive national policy on immigration could negatively affect the availability and cost of labor.  Seaboard is dependent on having sufficient properly trained operations personnel.  Attracting and retaining qualified personnel is important to Seaboard’s success.  The inability to acquire and retain the services of such personnel could have a material adverse effect on Seaboard’s operations.

(4)     The Loss of Seaboard’s Sole Hog Processing Facility Could Adversely Affect Seaboard’s Business.  Seaboard’s Pork Division is largely dependent on the continued operation of a single hog processing facility.  The loss of or damage to this facility for any reason – including fire, tornado, governmental action or other reason – could adversely affect Seaboard and Seaboard’s pork business.

(5)     Environmental Regulation and Related Litigation Could Have a Material Adverse Effect on Seaboard .  Seaboard’s operations and properties are subject to extensive and increasingly stringent laws and regulations pertaining to, among other things, odors, the discharge of materials into the environment and the handling and disposition of wastes (including solid and hazardous wastes) or otherwise relating to protection of the environment.  Failure to comply with these laws and regulations and any future changes to them may result in significant consequences to Seaboard, including civil and criminal penalties, liability for damages and negative publicity.  Some requirements applicable to Seaboard may also be enforced by citizen groups.  Seaboard has incurred, and will continue to incur, operating expenditures to comply with these laws and regulations.

(6)     Health Risk to Livestock Could Adversely Affect Production, the Supply of Raw Materials and Seaboard’s Business .  Seaboard is subject to risks relating to its ability to maintain animal health and control diseases.  The general health of the hogs and the reproductive performance of the sows can have an adverse impact on production and production costs, the supply of raw material to Seaboard’s pork processing operations and consumer confidence.  If Seaboard’s hogs are affected by disease, Seaboard may be required to destroy infected livestock, which could adversely affect Seaboard’s production or ability to sell or export its products.  Moreover, the herd health of third party suppliers could adversely affect the supply and cost of hogs available for purchase by Seaboard.  Adverse publicity concerning any disease or health concern could also cause customers to lose confidence in the safety and quality of Seaboard’s food products.

(7)     If Seaboard’s Pork Products Become Contaminated, We May be Subject to Product Liability Claims and Product Recalls .  Pork products may be subject to contamination by disease producing organisms.  These organisms are generally found in the environment and as a result, regardless of the manufacturing practices employed, there is a risk that they could be present in Seaboard’s processed pork products as a result of food processing.  Once contaminated products have been shipped for distribution, illness and death may result if the organisms are not eliminated at the further processing, foodservice or consumer level. Even an inadvertent shipment of contaminated products is a violation of law and may lead to increased risk of exposure to product liability claims, product recalls and increased scrutiny by federal and state regulatory agencies and may have a material adverse effect on Seaboard’s business, reputation, prospects, results of operations and financial condition.

(8)     Corporate Farming Legislation Could Result in the Divestiture or Restructuring of Seaboard’s Pork Operations .  The development of large corporate farming operations and concentration of hog production in larger-scale facilities has engendered opposition from residents of states in which Seaboard conducts its pork processing and live hog operations.  From time-to-time, corporate farming legislation has been introduced in the United States Senate and House of Representatives, as well as in several state legislatures.  These proposed anti-corporate farming bills have included provisions to prohibit or restrict meat packers, such as Seaboard, from owning or controlling livestock intended for slaughter, which would require divestiture or restructuring of Seaboard’s operations.

(9)     International Trade Barriers Could Adversely Affect Seaboard’s Pork Operations .  This division realizes a significant portion of its revenues from international markets, particularly Japan and Mexico.  International sales are subject to risks related to general economic conditions, imposition of tariffs, quotas, trade barriers and other restrictions, enforcement of remedies in foreign jurisdictions and compliance with applicable foreign laws, and other economic and political uncertainties.  These and other risks could result in border closings or other international trade barriers having an adverse effect on Seaboard’s earnings.

 

10



 

FORM 10-K

 

SEABOARD CORPORATION

 

(10)   Operations of Biodiesel Production Facility.   The profitability of Seaboard’s biodiesel plant could be adversely affected by various factors, including the market price of pork and other animal fat which is utilized to produce biodiesel, and the market price for biodiesel which is influenced by world oil prices and U.S. government mandates to use biofuels.  On January 2, 2013, the Federal tax credits that Seaboard is entitled to receive for the biodiesel it blends which had previously expired on December 31, 2011 were renewed retroactive to January 1, 2012 with an expiration date of December 31, 2013.  Based on market prices during 2012 while the credits had expired, it is believed that U.S. government mandates to use biofuels should adequately support market prices if the Federal tax credits once again expire and are not renewed.  However, unfavorable changes in these prices over extended periods of time or adverse changes in U.S. government mandates to use biofuels could adversely affect Seaboard’s results of operations and could result in the potential impairment of the recorded value of the property, plant and equipment related to this facility.

 

(c) Commodity Trading & Milling Division

 

(1)     Seaboard’s Commodity Trading & Milling Division is Subject to Risks Associated with Foreign Operations .  This division principally operates in Africa, South America and the Caribbean and, in most cases, in what are generally regarded to be lesser developed countries.  Many of these foreign operations are subject to risks of doing business in lesser-developed countries which are subject to potential civil unrests and government instabilities, increasing the exposure to potential expropriation, confiscation, war, insurrection, civil strife and revolution, currency inconvertibility and devaluation, and currency exchange controls, in addition to the risks of overseas operations mentioned in clause (a)(2) above.  In addition, foreign government policies and regulations could restrict the purchase of various grains, reducing or limiting Seaboard’s ability to access grains or to limit Seaboard’s sales price for grains sold in local markets.

(2)     Fluctuations in Commodity Grain Prices Could Adversely Affect the Business of Seaboard’s Commodity Trading & Milling Division .  This division’s sales are significantly affected by fluctuating worldwide prices for various commodities, such as wheat, corn, soybeans and, to a lesser degree, various other specialty products.  These prices are determined by constantly changing market forces of supply and demand as well as other factors over which Seaboard has little or no control.  North American and European subsidized wheat and flour exports, including donated food aid, flour dumping practices and world-wide and local crop production can contribute to these fluctuating market conditions and can have a significant impact on the trading and milling businesses’ sales, value of commodities held in inventory and operating income.  Seaboard’s results of operations could be adversely affected by fluctuations in commodity prices.

(3)     Seaboard’s Commodity Trading & Milling Division Largely Depends on the Availability of Chartered Ships .  Most of Seaboard’s third party trading is transported with chartered ships.  Charter hire rates, influenced by available charter capacity and demand for worldwide trade in bulk cargoes, port access and throughput time, and related fuel costs can impact business volumes and margins.

(4)     This Division Uses a Material Amount of Derivative Products to Manage Certain Market Risks .  The commodity trading portion of the business enters into various commodity derivatives, foreign exchange derivatives and freight derivatives to create what management believes is an economic hedge for commodity trades it executes or intends  to execute with its customers.  From time to time, this portion of the business may enter into speculative derivative transactions related to its market risks.  Failure to execute or improper execution of a derivative position or a firmly committed sale or purchase contract, a speculative transaction that closes without the desired result or exposure to counter party risk could have an adverse impact on the results of operations and liquidity.

(5)     This Division is Subject to Higher than Normal Risks for Attracting and Retaining Key Personnel .  In the commodity trading environment, a loss of a key employee such as a commodity trader can have a negative impact resulting from the loss of revenues as personal customer relationships can be vital to obtaining and retaining business with various foreign customers.  In the milling portion of this division, employing and retaining qualified expatriate personnel is a key element of success given the difficult living conditions, the unique operating environments and the reliance on a relatively small number of executives to manage each individual location.

(6)     This Division faces Increasing Competition. This division is experiencing increasing competition in certain markets by well capitalized originators and traders of commodities making sales directly to end-use customers.  If various grain originators refuse to sell commodities to Seaboard for sale in these markets, this could make it more challenging for Seaboard to purchase commodities for sale to its customers at competitive prices.  Seaboard’s sales

 

11



 

FORM 10-K

 

SEABOARD CORPORATION

 

volume and sale prices for commodities to customers as well as results of operations could be adversely impacted by such increased competition.

 

(d) Marine Division

 

(1)     The Demand for Seaboard’s Marine Division’s Services Are Affected by International Trade and Fluctuating Freight Rates .  This division provides containerized cargo shipping services primarily from the United States to 26 different countries in the Caribbean Basin, Central and South America.  In addition to the risks of overseas operations mentioned in clause (a)(2) above, fluctuations in economic conditions, unstable or hostile local political situations in the countries in which Seaboard operates can affect import/export trade volumes and the price of container freight rates and adversely affect Seaboard’s results of operations.

(2)     Chartered Ships Are Subject to Fluctuating Rates .  Time charter expenses are one of the division’s largest expenses.   Certain ships are under charters longer than one year while others are less than one year.  These costs can vary greatly due to a number of factors including the worldwide supply and demand for shipping.  It is not possible to determine in advance whether a charter contract for more or less than one year will be favorable to Seaboard’s business.  Accordingly, entering into long-term charter hire contracts during periods of decreasing charter hire costs or short term charter hire contracts during periods of increasing charter hire costs could have an adverse effect on Seaboard’s results of operation.

(3)     Increased Fuel Prices May Adversely Affect Seaboard’s Business .  Ship fuel expenses are one of the division’s largest expenses and vary greatly from year to year depending on fuel prices. While most trade lanes have a series of fuel surcharges in place that seek to adjust revenues with changes in fuel prices, such mechanisms do not act with precision in terms of timing and amount. When fuel prices increase rapidly or consistently, the surcharge mechanism may not adjust revenues enough to offset the increase in cost to Seaboard.  Fuel surcharges are also an area of competition among carriers and market forces may preclude us from generating enough revenue from the fuel surcharges to offset any increase in costs, which may have a negative effect on Seaboard’s profitability. Also, but to a lesser extent, fuel price increases can impact the cost of inland transportation costs.

(4)     Hurricanes May Disrupt Operations in the Caribbean Basin .   Seaboard’s port operations throughout the Caribbean Basin can be subject to disruption due to hurricanes, especially at Seaboard’s major ports in Miami, Florida and Houston, Texas, which could have an adverse effect on our results of operations.

(5)     Seaboard is Subject to Complex Laws and Regulations that May Adversely Affect the Revenues, Cost, Manner or Feasibility of Doing Business.   Federal, state and local laws and domestic and international regulations governing worker health and safety, environmental protection, port and terminal security, and the operation of vessels significantly affect Seaboard’s operations, including rate discussions and other related arrangements.  Many aspects of the marine industry, including rate agreements, are subject to extensive governmental regulation by the Federal Maritime Commission, the U.S. Coast Guard, and U.S. Customs and Border Protection, and to regulation by private industry organizations.  Compliance with applicable laws, regulations and standards may require installation of costly equipment or operational changes, while the failure to comply may result in administrative and civil penalties, criminal sanctions or the suspension or termination of Seaboard’s operations or detention of its vessels.  In addition, future changes in laws, regulations and standards, including allowed freight rate discussions and other related arrangements, may result in additional costs or a reduction in revenues.

 

(e) Sugar Division

 

(1)     The Success of this Division Depends on the Condition of the Argentinean Economy and Political Climate .  This division operates a sugar mill, alcohol production and power generation facility in Argentina, locally growing a substantial portion of the sugar cane processed at the mill.  The majority of the sales are within Argentina.  Fluctuations in economic conditions or changes in the Argentine political climate can have an impact on the costs of operations, the sales prices of products and export opportunities and the exchange rate of the Argentine peso to the U.S. dollar.  In this regard, local sales prices are affected by government price control and sugar import duties imposed by the Argentine government, impacting local volume sold, as well as imported and exported volumes to and from international markets.  If import duties are changed, this could have a negative impact on Seaboard’s sale price of its products.  In addition, the Argentine government attempts to control inflation through price controls on commodities, including sugar, which could adversely impact the local sales price of its products and the results of

 

12


 

 


 

FORM 10-K

 

SEABOARD CORPORATION

 

operations for this division. A devaluation of the Argentine peso would have a negative impact on Seaboard’s financial position.

(2)     This Division is Subject to the Risks that Are Inherent in any Agricultural Business .  Seaboard’s results of operations for this division may be adversely affected by numerous factors over which we have little or no control and that are inherent in any agricultural business, including reductions in the market prices for Seaboard’s products, adverse weather and growing conditions, pest and disease problems, and new government regulations regarding agriculture and the marketing of agricultural products.  Of these risks, weather particularly can adversely affect the amount and quality of the sugar cane produced by Seaboard and Seaboard’s competitors located in other regions of Argentina.

(3)     The Loss of Seaboard’s Sole Processing Facility Would Adversely Affect the Business of This Division .  Seaboard’s Sugar Division is largely dependent on the continued operation of a single processing facility.  The loss of or damage to this facility for any reason – including fire, tornado, earthquake, governmental action, labor unrest resulting in labor strikes or other reasons - would adversely affect the business of this division.

(4)     Labor Relations .  This division is dependent on unionized labor at its single sugar mill in Argentina.  The current nature of the political environment in Argentina makes normal labor relations very challenging.  Contributing to the situation are the policies of Argentina’s National Government, the failure of the Argentine courts to enforce contractual obligations with unions and basic property rights.  Interruptions in production as a result of labor unrest can adversely impact the quantity of sugar cane harvested and the amount of sugar, alcohol and power produced and can interfere with the distribution of products stored at the facility in the Salta Province.

 

(f) Power Division

 

(1)     This Division is Subject to Risks of Doing Business in the Dominican Republic .  This division operates in the Dominican Republic (DR).  In addition to significant currency fluctuations and the other risks of overseas operations mentioned in clause (a)(2) above, this division can experience difficulty in obtaining timely collections of trade receivables from the government owned distribution companies or other companies that must also collect from the government in order to make payments on their accounts.  Currently, the DR does not allow a free market to enable prices to rise with demand which could limit our profitability in this business.  The government has the ability to arbitrarily decide which power units will be able to operate, which could have adverse effects on results of operations.

(2)     Increases in Fuel Costs Could Adversely Affect Seaboard’s Operating Margins .  Fuel is the largest cost component of this division’s business and, therefore, margins may be adversely affected by fluctuations in fuel if such increases can not be fully passed to customers.

(3)     Supply of Natural Gas is Limited in the Dominican Republic .  Supply of natural gas in the Dominican Republic is limited to one primary supplier.  Although the recently constructed barge can run on other types of fuel, currently natural gas is the cheapest source of fuel and thus supply disruptions of natural gas could have a negative impact on this division’s operating income.

 

(g) Turkey Segment

 

(1)     Fluctuations in Commodity Turkey Prices Could Adversely Affect the Results of Operations.   Sales prices for turkey products are directly affected by both domestic and worldwide supply and demand for turkey products and other proteins which are determined by constantly changing market forces of supply and demand as well as other factors over which Butterball has little or no control.  Butterball’s results of operations and Seaboard’s investment in Butterball could be adversely affected by fluctuations in the turkey commodity prices.

(2)     Increases in Costs of Turkey’s Feed Components and Turkey Purchases Could Adversely Affect Costs and Operating Margins.   Feed costs are the most significant single component of the cost of raising turkeys and can be materially affected by commodity price fluctuations for corn, soybean meal, and other commodity grain inputs.  Butterball’s results may be negatively affected by increased costs of the feed components.  The recent increase in construction and operation of ethanol plants has elevated this risk as it has increased the competing demand for feed ingredients, primarily corn.  Butterball attempts to manage some of these risks through the use of financial instruments; however this may also limit its ability to participate in gains from favorable commodity fluctuations.  Unless wholesale turkey prices correspondingly increase, increases in the prices of Butterball’s feed components would adversely affect Butterball’s results of operations and Seaboard’s investment in Butterball.

 

13



 

FORM 10-K

 

SEABOARD CORPORATION

 

(3)     Adverse Operating Results Could Result in Need for Additional Investment. Butterball has third party bank loan facilities separate from Seaboard which are secured by substantially all of the assets of Butterball.  Adverse operating results could cause Butterball to default on such loan facilities which could result in a significant adverse impact on Butterball’s financial position, or result in Seaboard needing to increase its investment in Butterball.

(4)     Decreased Perception of Value in the Butterball’s Brand Could Adversely Affect Sales Quantity and Price of Butterball Products.   Butterball is a premium brand name, built on a long history of offering a quality product that has been differentiated in the market.  The value of the Butterball brand allows for sales of a higher unit price than other turkey products.  In order to maintain this advantage, Butterball must continue to support the brand with successful marketing efforts.  In addition, negative news reports for any reason in a variety of areas on the company or the turkey/poultry industry could negatively impact this brand perception and Butterball’s results of operation and the value of Seaboard’s investment in Butterball.

(5)     The Loss of Butterball’s Primary Further Processing Facility Could Adversely Affect Butterball’s Business.  Although Butterball has five processing plants, Butterball is disproportionately dependent on the continued operation of the further processing plant in Mt. Olive, North Carolina that handles the significant production of further processed turkey products.  The loss of or damage to this facility for any reason – including fire, tornado, governmental action or other reason – could adversely affect the results of operation for Butterball and the value of Seaboard’s investment in Butterball.

(6)     If Butterball’s Turkey Products Become Contaminated, the Company May be Subject to Product Liability Claims and Product Recalls .  Turkey products may be subject to contamination by disease producing organisms.  These organisms are generally found in the environment and as a result, there is a risk that they may contaminate products. Even an inadvertent shipment of contaminated products is a violation of law and may lead to increased risk of exposure to product liability claims, product recalls and increased scrutiny by federal and state regulatory agencies and may have a material adverse effect on the company’s business, reputation, and prospects.  This could adversely affect the results of operations and financial condition of Butterball and the value of Seaboard’s investment in Butterball.

(7)     Health Risk to Poultry Could Adversely Affect Production, the Supply of Raw Materials and Butterball’s Business .  Butterball is subject to risks relating to its ability to maintain animal health and control diseases.  The general health of the turkeys and reproductive performance can have an adverse impact on production and production costs, the supply of raw material to Butterball’s processing operations and consumer confidence.  If Butterball’s turkeys are affected by disease, Butterball may be required to destroy infected birds, which could adversely affect Butterball’s production or ability to sell or export its products.    Adverse publicity concerning any disease or health concern could also cause customers to lose confidence in the safety and quality of Butterball food products, resulting in an adverse effect on Butterball’s results of operations and the value of Seaboard’s investment in Butterball.

(8)     Butterball May be Unable to Obtain Appropriate Personnel at Remote Locations.   The remote locations of some of the turkey processing plants and live turkey operations along with a more restrictive national policy on immigration could negatively affect the availability and cost of labor.  Butterball is dependent on having sufficient properly trained operations personnel.  Attracting and retaining qualified personnel is important to Butterball’s success.  The inability to acquire and retain the services of such personnel could have a material adverse effect on Butterball’s operations and the value of Seaboard’s investment in Butterball.

 

Item 1B Unresolved Staff Comments

 

None

 

Item 2 Properties

 

(1)  Pork - Seaboard’s Pork Division owns a hog processing plant in Guymon, Oklahoma, which opened in 1995.  It has a daily double shift capacity to process approximately 19,700 hogs and generally operates at capacity with additional weekend shifts depending on market conditions. Seaboard’s hog production operations consist of the breeding and raising of approximately 4.3 million hogs annually at facilities it primarily owns or at facilities owned and operated by third parties with whom it has grower contracts.  This business owns and operates six centrally located feed mills which have a combined capacity to produce approximately 1,700,000 tons of formulated feed annually used primarily to support Seaboard’s existing hog production, and have the capability of supporting additional hog production in the future.  These facilities are located in Oklahoma, Texas, Kansas and Colorado.

 

14



 

FORM 10-K

 

SEABOARD CORPORATION

 

Seaboard’s Pork Division also owns two bacon further processing plants located in Salt Lake City, Utah and Missoula, Montana.  These plants are utilized near capacity throughout the year, which is a combined daily smoking capacity of approximately 300,000 pounds of raw pork bellies. The Pork Division also operates a majority-owned ham-boning and processing plant in Mexico that has the capacity to process 74.0 million pounds of ham annually.

 

The Pork Division owns a processing plant in Guymon, Oklahoma with the capacity to produce 32.0 million gallons of biodiesel annually, which is currently produced from pork fat from Seaboard’s Guymon pork processing plant and from animal fat supplied by non-Seaboard facilities.  The facility can also produce biodiesel from vegetable oil.

 

(2)  Commodity Trading and Milling - Seaboard’s Commodity Trading and Milling Division owns, in whole or in part, grain-processing and related agribusiness operations in 14 countries which have the capacity to mill approximately 7,300 metric tons of wheat and maize per day.  In addition, Seaboard has feed mill capacity of in excess of 250 metric tons per hour to produce formula animal feed.  The milling operations located in Colombia, Democratic Republic of Congo, Ecuador, Ghana, Guyana, Haiti, Kenya, Lesotho, Madagascar, Nigeria, Republic of Congo, Sierra Leone, Uganda and Zambia own their facilities; and in Kenya, Lesotho, Nigeria, Republic of Congo and Sierra Leone the land on which the mills are located is leased under long-term agreements.   Certain foreign milling operations may operate at less than full capacity due to low demand related to poor consumer purchasing power, excess milling capacity in their competitive environment or imported flour.  In addition, this division also has an investment through non-consolidated affiliates in poultry businesses operating in parts of Eastern and Southern Africa.  Seaboard also owns four 9,000 metric-ton deadweight dry bulk carriers, one 18,850 metric ton deadweight dry bulk carrier, one 23,400 metric ton deadweight dry bulk carrier, and charters vessels under short-term agreements, between 20 and 45 bulk carrier ocean vessels with deadweights ranging from 2,100 to 63,200 metric tons.

 

(3)  Marine - Seaboard’s Marine Division leases approximately 200,000 square feet of off-port warehouse space and 81 acres of port terminal land and facilities in Miami, Florida which are used in its containerized cargo operations.  Seaboard also leases an approximately 62 acre cargo handling and terminal facility in Houston, Texas, which includes several on-dock warehouses totaling approximately 690,000 square feet for cargo storage.  At December 31, 2012, Seaboard owned 6 ocean cargo vessels with deadweights ranging from 6,500 to 19,500 metric tons.  In addition, Seaboard chartered 30 vessels under contracts that typically range from approximately five months to three years with deadweights ranging from 3,700 to nearly 26,500 metric tons but has also entered into some longer-term charters up to twelve years.  Seaboard also owns or leases dry, refrigerated and specialized containers and other related equipment.

 

(4)  Sugar - Seaboard’s Argentine Sugar Division owns nearly 70,000 acres of planted sugarcane.  Depending on local market conditions, this business also purchases third party sugar for resale.  In addition, this division owns a sugar mill with a current capacity to process approximately 250,000 metric tons of sugar and an alcohol distillery with a current capacity of approximately 15 million gallons of alcohol per year.  This capacity is sufficient to process all of the cane harvested by this division and certain additional quantities purchased from third party farmers in the region.  The sugarcane fields and processing mill are located in northern Argentina in the Salta Province, which experiences seasonal rainfalls that may limit the harvest season, which then affects the duration of mill operations and quantities of sugar produced. The Sugar Division also owns a 38 megawatt cogeneration power plant that supplies surplus electricity to the Argentine grid.  The plant is primarily powered by the burning of sugarcane by-products during the harvest season.

 

(5) Power - Seaboard’s Power Division owns one floating electric power generating facility (106 megawatts) that began commercial operations in March 2012, and leases a second floating power generating facility (72 megawatts) under a short-term agreement that may be canceled by either party. Both facilities consist of a system of diesel engines mounted onto barge-type vessels located on the Ozama River in Santo Domingo, Dominican Republic.  The owned facility is capable of using natural gas or heavy fuel oil.  Seaboard operates as an independent power producer generating electricity for the local power grid.  Seaboard is not directly involved in the transmission and distribution facilities that deliver the power to the end users.

 

(6) Turkey – Seaboard’s Turkey Segment has a total of five processing plants and numerous company and third party live production facilities and feed milling operations, all of which are located in Arkansas, Kansas, Missouri and North Carolina.  These plants produce approximately one billion pounds of turkey each year.  On December 31, 2012, Butterball acquired the further processing plant of Gusto Packing Company, Inc. which operated at over 50% of capacity for 2012 and has the capacity to process approximately 300 million pounds of pork and turkey products.

 

(7)  Other - Seaboard owns a jalapeño pepper processing plant and warehouse in Honduras.

 

15



 

FORM 10-K

 

SEABOARD CORPORATION

 

In addition to the information provided above, the information under “Principal Locations” of Seaboard’s Annual Report to Stockholders furnished to the Commission pursuant to Rule 14a-3(b) and attached as Exhibit 13 to this report is incorporated herein by reference.

 

Management believes that Seaboard’s present facilities are adequate and suitable for its current purposes.

 

Item 3.  Legal Proceedings

 

The information required by Item 3 of Form 10-K is incorporated herein by reference to Note 11 of Seaboard’s Consolidated Financial Statements appearing on pages 53 and 54 of Seaboard’s Annual Report to Stockholders furnished to the Commission pursuant to Rule 14a-3(b) and attached as Exhibit 13 to this Report.

 

Item 4. Mine Safety Disclosures

 

Not Applicable.

 

Executive Officers of the Registrant

 

The following table lists the executive officers and certain significant employees of Seaboard.  Generally, executive officers are elected at the annual meeting of the Board of Directors following the Annual Meeting of Stockholders and hold office until the next such annual meeting or until their respective successors are duly chosen and qualified.  There are no arrangements or understandings pursuant to which any executive officer was elected.

 

Name (Age)

Positions and Offices with Registrant and Affiliates

Steven J. Bresky (59)

President and Chief Executive Officer

Robert L. Steer (53)

Executive Vice President, Chief Financial Officer

David M. Becker (51)

Senior Vice President, General Counsel and Secretary

Barry E. Gum (46)

Senior Vice President, Finance and Treasurer

James L. Gutsch (59)

Senior Vice President, Engineering

Ralph L. Moss (67)

Senior Vice President, Governmental Affairs

David S. Oswalt (45)

Senior Vice President, Taxation and Business Development

John A. Virgo (52)

Senior Vice President, Corporate Controller and Chief Accounting Officer

David H. Rankin (41)

Vice President

Ty A. Tywater (43)

Vice President, Audit Services

Terry J. Holton (53)

President, Seaboard Foods, LLC

David M. Dannov (51)

President, Seaboard Overseas and Trading Group

Edward A. Gonzalez (47)

President, Seaboard Marine Ltd.

 

Mr. Steven J. Bresky has served as President and Chief Executive Officer of Seaboard since July 2006.

 

Mr. Steer has served as Executive Vice President, Chief Financial Officer of Seaboard since April 2011, and previously as Senior Vice President, Chief Financial Officer since December 2006.

 

Mr. Becker has served as Senior Vice President, General Counsel and Secretary of Seaboard since April 2011, and previously as Vice President, General Counsel and Secretary since December 2003.

 

Mr. Gum has served as Senior Vice President, Finance and Treasurer of Seaboard since April 2011, and previously as Vice President, Finance and Treasurer since December 2006.

 

16



 

FORM 10-K

 

SEABOARD CORPORATION

 

Mr. Gutsch has served as Senior Vice President, Engineering of Seaboard since April 2011, and previously as Vice President, Engineering since December 1998.

 

Mr. Moss has served as Senior Vice President, Governmental Affairs of Seaboard since April 2011, and previously as Vice President, Governmental Affairs since December 2003.

 

Mr. Oswalt has served as Senior Vice President, Taxation and Business Development of Seaboard since April 2011, and previously as Vice President, Taxation and Business Development since December 2003.

 

Mr. Virgo has served as Senior Vice President, Corporate Controller and Chief Accounting Office of Seaboard since April 2011, and previously as Vice President, Corporate Controller and Chief Accounting Officer since December 2003.

 

Mr. Rankin has served as Vice President of Seaboard since December 2010 and previously as Director of Taxation and Business Development since January 2006.

 

Mr. Tywater has served as Vice President, Audit Services of Seaboard since November 2008 and previously as Internal Audit Director from 2002 to 2008.

 

Mr. Holton has served as President of Seaboard Foods, LLC since December 2011 and previously as Senior Vice President, Sales and Marketing since September 1997.

 

Mr. Dannov has served as President of Seaboard Overseas and Trading Group since August 2006.

 

Mr. Gonzalez has served as President of Seaboard Marine, Ltd. since January 2005.

 

PART II

 

Item 5 Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

 

In December 2012, Seaboard declared and paid a dividend of $12.00 per share on the common stock.  The increased amount of the dividend (which has historically been $0.75 per share on a quarterly basis or $3.00 per share on an annual basis) represented a prepayment of the annual 2013, 2014, 2015 and 2016 dividends ($3.00 per share per year).  Seaboard does not currently intend to declare any further dividends for the years 2013-2016. Seaboard did not declare a dividend in 2011. In 2010, Seaboard declared and paid dividends of $9.00 per share on the common stock, which included a prepayment of the annual 2011 and 2012 dividends ($3.00 per share per year). As discussed in Note 8 of the consolidated financial statements appearing on pages 43 and 44 of the Seaboard Corporation Annual Report to Stockholders furnished to the Commission pursuant to Rule 14a-3(b) and attached as Exhibit 13 to this Report (which discussion is incorporated herein by reference), Seaboard’s ability to declare and pay dividends is subject to limitations imposed by debt agreements referred to there.

 

Seaboard has not established any equity compensation plans or individual agreements for its employees under which Seaboard common stock, or options, rights or warrants with respect to Seaboard common stock, may be granted.

 

The following table sets forth information concerning any purchases made by or on behalf of Seaboard or any “affiliated purchaser” (as defined by applicable rules of the Commission) of shares of Seaboard’s common stock during the fourth quarter of the fiscal year covered by this report.

 

17



 

FORM 10-K

 

SEABOARD CORPORATION

 

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

 

 

Issuer Purchases of Equity Securities

 

 

Period

 

Total Number of
Shares Purchased

 

Average Price
Paid per Share

 

Total Number
of Shares

Purchased as Part
of Publicly
Announced Plans
or Programs

 

Approximate
Dollar Value

of Shares that
May Yet Be

Purchased
Under the
Plans or

Programs

 

 

September 30 to October 31, 2012

 

1,845

 

 

$2,285.37

 

1,845

 

 

$37,624,995

 

November 1 to November 30, 2012

 

1,086

 

 

$2,238.10

 

1,086

 

 

$35,194,414

 

December 1 to December 31, 2012

 

831

 

 

$2,394.73

 

831

 

 

$33,204,392

 

Total

 

3,762

 

 

$2,295.88

 

3,762

 

 

$33,204,392

 

 

All purchases during the quarter were made under the authorization from our Board of Directors.  On October 19, 2012, the Board of Directors extended through October 31, 2015 the share repurchase program initially approved on November 6, 2009.  Under this share repurchase program, Seaboard was originally authorized to repurchase from time to time up to $100.0 million market value of its Common Stock in open market or privately negotiated purchases above or below the traded market price.  Shares repurchased will be retired and resume the status of authorized and unissued shares.  

 

In addition to the information provided above, the information required by Item 5 of Form 10-K is incorporated herein by reference to (a) the information under “Stockholder Information - Stock Listing,” (b) the dividends per common share information and closing market price range per common share information under “Quarterly Financial Data” and (c) the information under “Company Performance Graph” appearing on pages 60, 10 and 9, respectively, of Seaboard’s Annual Report to Stockholders furnished to the Commission pursuant to Rule 14a-3(b) and attached as Exhibit 13 to this report.

 

Item 6 Selected Financial Data

 

The information required by Item 6 of Form 10-K is incorporated herein by reference to the “Summary of Selected Financial Data” appearing on page 8 of Seaboard’s Annual Report to Stockholders furnished to the Commission pursuant to Rule 14a-3(b) and attached as Exhibit 13 of this Report.

 

Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

The information required by Item 7 of Form 10-K is incorporated herein by reference to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” appearing on pages 11 through 24 of Seaboard’s Annual Report to Stockholders furnished to the Commission pursuant to Rule 14a-3(b) and attached as Exhibit 13 to this Report.

 

Item 7A Quantitative and Qualitative Disclosures About Market Risk

 

The information required by Item 7A of Form 10-K is incorporated herein by reference to (a) the material under the captions “Derivative Instruments and Hedging Activities” within Note 1 and 9 of Seaboard’s Consolidated Financial Statements appearing on pages 35, 48 and 49 of Seaboard’s Annual Report to Stockholders furnished to the Commission pursuant to Rule 14a-3(b) and attached as Exhibit 13 to this Report, and (b) the material under the caption “Derivative Information” within “Management’s Discussion and Analysis of Financial Condition and Results of Operations” appearing on pages 23 and 24 of Seaboard’s Annual Report to Stockholders furnished to the Commission pursuant to Rule 14a-3(b) and attached as Exhibit 13 to this Report.

 

18


 

 


 

FORM 10-K

 

SEABOARD CORPORATION

 

Item 8 Financial Statements and Supplementary Data

 

The information required by Item 8 of Form 10-K is incorporated herein by reference to Seaboard’s “Quarterly Financial Data,” “Report of Independent Registered Public Accounting Firm,” “Consolidated Statements of Comprehensive Income,” “Consolidated Balance Sheets,” “Consolidated Statements of Cash Flows,” “Consolidated Statements of Changes in Equity”  and “Notes to Consolidated Financial Statements” appearing on page 10 and pages 26 through 59 of Seaboard’s Annual Report to Stockholders furnished to the Commission pursuant to Rule 14a-3(b) and attached as Exhibit 13 to this Report.

 

Item 9 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

 

None.

 

Item 9A.  Controls and Procedures

 

Evaluation of Disclosure Controls and Procedures – As of December 31, 2012, Seaboard’s management has evaluated, under the direction of our chief executive and chief financial officers, the effectiveness of Seaboard’s disclosure controls and procedures, as defined in Exchange Act rule 13a - 15(e).  Based upon and as of the date of that evaluation, Seaboard’s chief executive and chief financial officers concluded that Seaboard’s disclosure controls and procedures were effective to ensure that information required to be disclosed in the reports it files and submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported as and when required.  It should be noted that any system of disclosure controls and procedures, however well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of the system are met.  In addition, the design of any system of disclosure controls and procedures is based in part upon assumptions about the likelihood of future events.  Due to these and other inherent limitations of any such system, there can be no assurance that any design will always succeed in achieving its stated goals under all potential future conditions.

 

Management’s Report on Internal Control Over Financial Reporting – Information required by Item 9A of Form 10-K concerning management’s report on Seaboard’s internal control over financial reporting, as defined in Exchange Act rule 13a-15(f) is incorporated herein by reference to Seaboard’s “Management’s Report on Internal Control over Financial Reporting” appearing on page 25 of Seaboard’s Annual Report to Stockholders furnished to the Commission pursuant to Rule 14a-3(b) and attached as Exhibit 13 to this report.

 

Registered Public Accounting Firm’s Attestation Report – Information required by Item 9A of Form 10-K with respect to the registered public accounting firm’s attestation report on Seaboard’s internal controls over financial reporting is incorporated herein by reference to “Report of Independent Registered Public Accounting Firm” appearing on page 27 of Seaboard’s Annual Report to Stockholders furnished to the Commission pursuant to Rule 14-3(b) and attached as Exhibit 13 to this report.

 

Change in Internal Controls – Effective January 1, 2012, Seaboard began consolidation accounting and discontinued the equity method of accounting for its investment in PS International, LLC (PSI).  Management is currently in the process of documenting and evaluating internal controls with respect to PSI.  Although management does not consider it material to its results of operations, Seaboard intends to extend its Sarbanes-Oxley Act of 2002 Section 404 compliance program to include PSI with an effective date of January 1, 2013.  Except as set forth above, there has been no change in Seaboard’s internal control over financial reporting that occurred during the fiscal quarter ended December 31, 2012 that has materially affected, or is reasonably likely to materially affect, Seaboard’s internal control over financial reporting.

 

Item 9B.   Other Information

 

None.

 

PART III

 

Item 10 Directors, Executive Officers and Corporate Governance

 

We refer you to the information under the caption “Executive Officers of Registrant” appearing immediately following the disclosure in Item 4 of Part I of this report.

 

Seaboard has a Code of Ethics Policy (the Code) for directors, officers (including our chief executive officer, chief financial officer, chief accounting officer, controller and persons performing similar functions) and employees.  Seaboard has posted the

 

19



 

FORM 10-K

 

SEABOARD CORPORATION

 

Code on its internet website, www.seaboardcorp.com, under the “About Us” tab and intends to disclose any future changes and waivers to the Code by posting such information on that website.

 

In addition to the information provided above, the information required by Item 10 of Form 10-K is incorporated herein by reference to (a) the disclosure relating to directors under “Item 1:  Election of Directors” appearing on pages 5 through 7 of Seaboard’s definitive proxy statement filed pursuant to Regulation 14A for the 2013 annual meeting of Stockholders (“2013 Proxy Statement”), (b) the disclosure relating to Seaboard’s audit committee and “audit committee financial expert” and its director nomination procedures under “Board of Directors Information -- Committees of the Board -- Audit Committee” and “Board of  Directors Information -- Director Nominations” appearing on page 8 of the 2013 Proxy Statement, and (c) the disclosure relating to late filings of reports required under Section 16(a) of the Securities Exchange Act of 1934 under “Section 16(a) Beneficial Ownership Reporting Compliance” appearing on  page 27 of the 2013 Proxy Statement.

 

Item 11 Executive Compensation

 

The information required by Item 11 of Form 10-K is incorporated herein by reference to (a) the disclosure relating to compensation of directors under “Board of Directors Information -- Compensation of Directors”  appearing on page 9 of the 2013 Proxy Statement, and (b) the disclosure relating to compensation of executive officers under “Executive Compensation and Other Information,” “Employment Arrangements with Named Executive Officers,” “Benefit Plans” and “Compensation Committee Interlocks and Insider Participation,” “Compensation Committee Report” and “Compensation Discussion and Analysis” appearing on pages 9 through 22 of the 2013 Proxy Statement.

 

Item 12 .   Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

 

Seaboard has not established any equity compensation plans or individual agreements for its employees under which Seaboard common stock, or options, rights or warrants with respect to Seaboard common stock may be granted.

 

In addition to the information provided above, the information required by Item 12 of  Form 10-K is incorporated herein by reference to the disclosure under “Principal Stockholders” and “Share Ownership of Management and Directors” appearing on pages 3 through 5 of the 2013 Proxy Statement.

 

Item 13 Certain Relationships and Related Transactions, and Director Independence

 

The information required by Item 13 of Form 10-K is incorporated herein by reference to the disclosure under “Compensation Committee Interlocks and Insider Participation” appearing on page 22 of the 2013 Proxy Statement, and the disclosure under “Board of Directors Information – Controlled Corporation” and “Board of Directors Information – Committees of the Board” appearing on pages 7 and 8 of the 2013 Proxy Statement.

 

Item 14 Principal Accounting Fees and Services

 

The information required by Item 14 of Form 10-K is incorporated herein by reference to the disclosure under “Item 2 Selection of Independent Auditors” appearing on pages 23 through 25 of the 2013 Proxy Statement.

 

PART IV

 

Item 15 Exhibits, Financial Statement Schedules

 

(a)

The following documents are filed as part of this report:

 

 

 

1.               Consolidated financial statements.

 

See Index to Consolidated Financial Statements on page F-1.

 

 

 

2.               Consolidated financial statement schedules.

 

See Index to Consolidated Financial Statements on page F-1.

 

 

 

3.               Exhibits.

 

3.1

Seaboard’s Restated Certificate of Incorporation.  Incorporated herein by reference to Exhibit 3.1 of Seaboard’s Form 10-Q for the quarter ended April 4, 2009.

 

3.2

Seaboard’s By-laws, as amended.  Incorporated herein by reference to Exhibit 3.2 of Seaboard’s Form 10-K for fiscal year ended December 31, 2005.

 

20



 

FORM 10-K

 

SEABOARD CORPORATION

 

 

4.1

Amended and Restated Terminal Agreement between Miami-Dade County and Seaboard Marine Ltd. for Marine Terminal Operations, dated May 30, 2008.  Incorporated herein by reference to Exhibit 10.1 of Seaboard’s Form 8-K dated May 30, 2008.

 

4.2

Amended and Restated Credit Agreement between Borrowers and Bank of America, N.A., dated February 20, 2013 ($200,000,000 revolving credit facility expiring February 20, 2018).

 

10.1*

Seaboard Corporation Executive Deferred Compensation Plan as Amended and Restated Effective January 1, 2009 and dated December 22, 2008, amending and restating the Seaboard Corporation Executive Deferred Compensation Plan dated December 29, 2005.  Incorporated herein by reference to Exhibit 10.2 of Seaboard’s Form 10-K for fiscal year ended December 31, 2008.

 

10.2*

Seaboard Corporation Executive Retirement Plan Trust dated November 5, 2004 between Seaboard Corporation and Robert L. Steer as trustee.  Incorporated herein by reference to Exhibit 10.2 of Seaboard’s Form 10-Q for the quarter ended October 2, 2004.

 

10.3*

Seaboard Corporation Investment Option Plan dated December 18, 2000.  Incorporated herein by reference to Exhibit 10.7 of Seaboard’s Form 10-K for fiscal year ended December 31, 2000.

 

10.4

Marketing Agreement dated February 2, 2004 by and among Seaboard Corporation, Seaboard Farms, Inc., Triumph Foods LLC, and for certain limited purposes only, the members of Triumph Foods LLC.  Incorporated herein by reference to Exhibit 10.2 of Seaboard’s Form 8-K dated February 3, 2004.

 

10.5*

Seaboard Corporation Retiree Medical Benefit Plan as Amended and Restated Effective January 1, 2009 and dated December 22, 2008, amending and restating the Seaboard Corporation Retiree Medical Benefit Plan dated March 4, 2005.  Incorporated herein by reference to Exhibit 10.6 of Seaboard’s Form 10-K for fiscal year ended December 31, 2008.

 

10.6*

Seaboard Corporation Executive Officers’ Bonus Policy.  Incorporated herein by reference to Exhibit 10.10 of Seaboard’s Form 10-K for fiscal year ended December 31, 2005.

 

10.7*

Seaboard Corporation Nonqualified Deferred Compensation Plan Effective January 1, 2009 and dated December 22, 2008, amending and restating the Seaboard Corporation Nonqualified Deferred Compensation Plan dated December 29, 2005.  Incorporated herein by reference to Exhibit 10.12 of Seaboard’s Form 10-K for fiscal year ended December 31, 2008.

 

10.8

Asset Purchase Agreement by and among Transcontinental Capital Corporation (Bermuda) Ltd. (as Seller), Seaboard Corporation (as Seller-Parent) and Pueblo Viejo Dominicana Corporation (as Buyer), dated as of September 23, 2008.  Incorporated herein by reference to Exhibit 10.21 of Seaboard’s Form 10-K for fiscal year ended December 31, 2008.

 

10.9

Amendment to Asset Purchase Agreement amount Transcontinental Capital Corporation (Bermuda) Ltd., Seaboard Corporation and Pueblo Viejo dated as of March 2, 2009.  Incorporated herein by reference to Exhibit 10.22 of Seaboard’s Form 10-K for fiscal year ended December 31, 2008.

 

10.10*

Seaboard Marine Ltd. 401(k) Excess Plan effective January 1, 2009 and dated December 18, 2009.  Incorporated herein by reference to Exhibit 10.2 of Seaboard’s Form 10-K for fiscal year ended December 31, 2009.

 

10.11*

Amendment No. 1 to the Seaboard Corporation Non-Qualified Deferred Compensation Plan effective January 1, 2009 and dated December 17, 2009.  Incorporated herein by reference to Exhibit 10.2 of Seaboard’s Form 10-K for fiscal year ended December 31, 2009.

 

10.12

Engineering, Procurement and Construction Contract dated as of August 17, 2010 by and between Seaboard Corporation and Wartsila Finland OY.  Incorporated herein by reference to Exhibit 10.1 of Seaboard’s Form 10-Q for the quarter ended October 2, 2010.

 

10.13

Purchase Agreement by and among Seaboard Corporation, Maxwell Farms, LLC, Goldsboro Milling Company and GM Acquisition, LLC as of September 9, 2010. Incorporated herein by reference to Exhibit 10.27 of Seaboard’s Form 10-K for fiscal year ended December 31, 2010.

 

21



 

FORM 10-K

 

SEABOARD CORPORATION

 

 

10.14*

Seaboard Corporation 409A Executive Retirement Plan Amended and Restated Effective January 1, 2013 and dated December 21, 2012, amending and restating the Seaboard Corporation Executive Retirement Plan, Amendment and Restatement dated December 22, 2008.

 

10.15*

Seaboard Corporation Cash Balance Executive Retirement Plan Amendment and Restatement Effective January 1, 2013 and dated December 21, 2012, amending and restating the Seaboard Corporation Cash Balance Executive Retirement Plan dated December 18, 2009.

 

10.16*

Employment Agreement between Seaboard Corporation and Steven J. Bresky dated December 21, 2012.

 

10.17*

Employment Agreement between Seaboard Corporation and Robert L. Steer dated December 21, 2012.

 

10.18*

Employment Agreement between Seaboard Foods LLC and Terry J. Holton, dated December 21, 2012.

 

10.19*

Employment Agreement between Seaboard Overseas and Trading Group and David M. Dannov dated December 21, 2012.

 

10.20*

Employment Agreement between Seaboard Marine Ltd. and Edward A. Gonzalez dated December 21, 2012.

 

13

Sections of Annual Report to security holders specifically incorporated herein by reference herein.

 

21

List of subsidiaries.

 

31.1

Certification of the Chief Executive Officer Pursuant to Exchange Act Rules 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

 

31.2

Certification of the Chief Financial Officer Pursuant to Exchange Act Rules 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

 

32.1

Certification of the Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

32.2

Certification of the Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

101

The following financial information from Seaboard Corporation’s Annual Report on Form 10-K for the year ended December 31, 2012, formatted in XBRL (Extensible Business Reporting Language): (1) Consolidated Statements of Comprehensive Income, (2) Consolidated Balance Sheets, (3) Consolidated Statements of Cash Flows,(4) Consolidated Statements of Changes in Equity and (5) the Notes to Unaudited Condensed Consolidated Financial Statements **.

 

*  Management contract or compensatory plan or arrangement.

 

**   Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, and otherwise are not subject to liability under these sections.

 

  (b)  Exhibits.

See exhibits identified above under Item 15(a)3.

 

(c)   Financial Statement Schedules.

See financial statement schedules identified above under Item 15(a)2.

 

22



 

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.

 

SEABOARD CORPORATION

 

 

 

 

By

/s/Steven J. Bresky

 

 

 

Steven J. Bresky, Chairman of the Board,

 

 

President and Chief Executive Officer

 

 

 

 

Date:

February 27, 2013

 

 

 

 

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of registrant and in the capacities and on the dates indicated.

 

Name

 

 

Date

 

Title

 

 

 

 

 

 

/s/Steven J. Bresky

 

 

February 27, 2013

 

Chairman of the Board, President, Chief Executive Officer and Director (principal executive officer)

Steven J. Bresky

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

/s/Robert L. Steer

 

 

February 27, 2013

 

Executive Vice President, Chief Financial Officer (principal financial officer)

Robert L. Steer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

/s/John A. Virgo

 

 

February 27, 2013

 

Senior Vice President, Corporate Controller and Chief Accounting Officer (principal accounting officer)

John A. Virgo

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

/s/David A. Adamsen

 

 

February 27, 2013

 

Director

David A. Adamsen

 

 

 

 

 

 

 

 

 

 

 

/s/Douglas W. Baena

 

 

February 27, 2013

 

Director

Douglas W. Baena

 

 

 

 

 

 

 

 

 

 

 

/s/Joseph E. Rodrigues

 

 

February 27, 2013

 

Director

Joseph E. Rodrigues

 

 

 

 

 

 

 

 

 

 

 

/s/Edward I. Shifman, Jr.

 

 

February 27, 2013

 

Director

Edward I. Shifman, Jr.

 

 

 

 

 

 

23


 


 

SEABOARD CORPORATION AND SUBSIDIARIES

 

Index to Consolidated Financial Statements and Schedule

 

Financial Statements

 

 

 

 

Stockholders’

 

 

Annual Report Page

 

 

 

Report of Independent Registered Public Accounting Firm

 

26

 

 

 

Consolidated Statements of Comprehensive Income for the years ended December 31, 2012, December 31, 2011 and December 31, 2010

 

28

 

 

 

Consolidated Balance Sheets as of December 31, 2012 and December 31, 2011

 

29

 

 

 

Consolidated Statements of Cash Flows for the years ended December 31, 2012, December 31, 2011 and December 31, 2010

 

30

 

 

 

Consolidated Statements of Changes in Equity for the years ended December 31, 2012, December 31, 2011 and December 31, 2010

 

31

 

 

 

Notes to Consolidated Financial Statements

 

32

 

 

 

The foregoing is incorporated herein by reference.

 

 

 

The individual financial statements of the nonconsolidated affiliates, which would be required if each such affiliate were a Registrant, are omitted because (a) Seaboard’s and its other subsidiaries’ investments in and advances to such affiliates do not exceed 20% of the total assets as shown by the most recent consolidated balance sheet and (b) Seaboard’s and its other subsidiaries’ equity in the earnings before income taxes and extraordinary items of the affiliates does not exceed 20% of such income of Seaboard and consolidated subsidiaries compared to the average income for the last five fiscal years.

 

Combined condensed financial information as to assets, liabilities and results of operations have been presented for nonconsolidated affiliates in Note 4 of “Notes to the Consolidated Financial Statements.”

 

II - Valuation and Qualifying Accounts for the years ended December 31, 2012, 2011 and 2010

 

F-3

 

All other schedules are omitted as the required information is inapplicable or the information is presented in the consolidated financial statements or related consolidated notes.

 

F-1



 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

The Board of Directors and Stockholders

Seaboard Corporation:

 

Under date of February 27, 2013, we reported on the consolidated balance sheets of Seaboard Corporation and subsidiaries (the Company) as of December 31, 2012 and 2011, and the related consolidated statements of comprehensive income, changes in equity, and cash flows for each of the years in the three-year period ended December 31, 2012, as contained in the annual report on Form 10-K for the year 2012.  In connection with our audits of the aforementioned consolidated financial statements, we also audited the related consolidated financial statement schedule as listed in the accompanying index.  This financial statement schedule is the responsibility of the Company’s management.  Our responsibility is to express an opinion on this financial statement schedule based on our audits.

 

In our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

 

 

 

/s/ KPMG LLP

 

Kansas City, Missouri

February 27, 2013

 

F-2



 

Schedule II

 

SEABOARD CORPORATION AND SUBSIDIARIES

Valuation and Qualifying Accounts

(In Thousands)

 

 

 

 

Balance at

 

 

 

 

Provision

 

 

Net deductions

 

Balance at

 

 

beginning of year

 

 

 

 

      (1)      

 

 

 

      (2)      

 

 

end of year

 

Allowance for Doubtful Accounts:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year ended December 31, 2012

 

$

10,941

 

 

 

 

 

3,092

 

 

 

(1,902)

 

 

$

12,131

 

Year ended December 31, 2011

 

$

8,170

 

 

 

 

 

4,400

 

 

 

(1,629)

 

 

$

10,941

 

Year ended December 31, 2010

 

$

7,330

 

 

 

 

 

2,771

 

 

 

(1,931)

 

 

$

8,170

 

 

 

(1)           The allowance for doubtful accounts provision is charged to selling, general and administrative expenses.

 

(2)           Includes write-offs net of recoveries and currency translation adjustments.

 

 

 

Balance at

 

 

Charged (credit)

 

 

Other

 

 

Balance at

 

 

beginning of year

 

 

 

 

to expense

 

 

 

 

      (3)      

 

 

end of year

 

Allowance for Deferred Tax Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year ended December 31, 2012

 

$

16,320

 

 

 

 

 

(4,562)

 

 

 

 

-  

 

 

$

11,758

 

Year ended December 31, 2011

 

$

30,664

 

 

 

 

 

(13,959)

 

 

 

 

(385)

 

 

$

16,320

 

Year ended December 31, 2010

 

$

28,621

 

 

 

 

 

2,512 

 

 

 

 

(469)

 

 

$

30,664

 

 

 

(3)           Activity related to currency translation.

 

 

 

Balance at

 

 

Charged (credit)

 

Balance at

 

 

 

 

beginning of year

 

 

 

 

to expense

 

 

 

end of year

 

 

 

Reserve for LIFO Valuation:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year ended December 31, 2012

 

$

57,783

 

 

 

 

 

32,947

 

 

 

$

90,730

 

 

 

 

Year ended December 31, 2011

 

$

24,085

 

 

 

 

 

33,698

 

 

 

$

57,783

 

 

 

 

Year ended December 31, 2010

 

$

22,807

 

 

 

 

 

1,278

 

 

 

$

24,085

 

 

 

 

 

F-3


 

Exhibit 4.2

 

EXECUTION VERSION

 

 

 

Published CUSIP Deal Number: 81154LAC1

Published CUSIP Revolver Number: 81154LAD9

 

 

AMENDED AND RESTATED CREDIT AGREEMENT

 

Dated as of February 20, 2013

 

among

 

 

SEABOARD CORPORATION

 

and

 

CERTAIN SUBSIDIARIES OF SEABOARD CORPORATION ,

as Borrowers,

 

BANK OF AMERICA, N.A. ,
as Administrative Agent, Swing Line Lender and an L/C Issuer,

 

and

 

The Other Lenders Party Hereto

 

 

BANK OF NOVA SCOTIA ,

as the Syndication Agent

 

 

SUNTRUST BANK

and

COOPERATIEVE CENTRALE RAIFFEISEN-BOERENLEENBANK, B.A.,
“RABOBANK INTERNATIONAL”, NEW YORK BRANCH
,

as Co-Documentation Agents

 

 

BANK OF AMERICA MERRILL LYNCH

and

SCOTIA CAPITAL, INC. ,
as
Joint Lead Arrangers and Joint Book Managers

 

 

 



 

TABLE OF CONTENTS

 

 

Section

Page

ARTICLE I.

AMENDMENT AND RESTATEMENT; DEFINITIONS AND ACCOUNTING TERMS

1.01

Amendment and Restatement

1

1.02

Defined Terms

3

1.03

Other Interpretive Provisions

31

1.04

Accounting Matters

32

1.05

Rounding

33

1.06

Exchange Rates; Currency Equivalents

33

1.07

Additional Alternative Currencies

33

1.08

Change of Currency

34

1.09

Times of Day

34

1.10

Letter of Credit Amounts

35

ARTICLE II.

THE COMMITMENTS AND CREDIT EXTENSIONS

2.01

Committed Loans

35

2.02

Borrowings, Conversions and Continuations of Committed Loans

35

2.03

Letters of Credit

37

2.04

Swing Line Loans

47

2.05

Prepayments

50

2.06

Termination or Reduction of Commitments

51

2.07

Repayment of Loans

52

2.08

Interest

52

2.09

Fees

53

2.10

Computation of Interest and Fees; Retroactive Adjustments of Applicable Rate

53

2.11

Evidence of Debt

54

2.12

Payments Generally; Administrative Agent’s Clawback

54

2.13

Sharing of Payments by Lenders

56

2.14

Designated Borrowers

57

2.15

Increase in Commitments

58

2.16

Cash Collateral

59

 

i



 

2.17

Defaulting Lenders

60

ARTICLE III.

TAXES, YIELD PROTECTION AND ILLEGALITY

3.01

Taxes

63

3.02

Illegality

68

3.03

Inability to Determine Rates

68

3.04

Increased Costs; Reserves on Eurocurrency Rate Loans

69

3.05

Compensation for Losses

71

3.06

Mitigation Obligations; Replacement of Lenders

71

3.07

Survival

72

ARTICLE IV.

CONDITIONS PRECEDENT TO CREDIT EXTENSIONS

4.01

Conditions of Initial Credit Extension

72

4.02

Conditions to all Credit Extensions

74

ARTICLE V.

REPRESENTATIONS AND WARRANTIES

5.01

Existence, Qualification and Power; Compliance with Laws

75

5.02

Authorization; No Contravention

75

5.03

Governmental Authorization; Other Consents

75

5.04

Binding Effect

75

5.05

Financial Statements; No Material Adverse Effect

75

5.06

Litigation

76

5.07

No Default

76

5.08

Ownership of Property; Liens

76

5.09

Environmental Compliance

76

5.10

Insurance

77

5.11

Taxes

77

5.12

ERISA Compliance

77

5.13

Subsidiaries; Equity Interests

78

5.14

Margin Regulations; Investment Company Act

78

5.15

Disclosure

78

5.16

Compliance with Laws

79

5.17

Intellectual Property; Licenses, Etc.

79

 

ii



 

5.18

Taxpayer Identification Number; Other Identifying Information

79

5.19

Representations as to Foreign Obligors

79

5.20

OFAC

80

5.21

Unrestricted Subsidiaries

80

ARTICLE VI.

AFFIRMATIVE COVENANTS

6.01

Financial Statements

81

6.02

Certificates; Other Information

82

6.03

Notices

84

6.04

Payment of Obligations

84

6.05

Preservation of Existence, Etc.

84

6.06

Maintenance of Properties

85

6.07

Maintenance of Insurance

85

6.08

Compliance with Laws

85

6.09

Books and Records

85

6.10

Inspection Rights

85

6.11

Use of Proceeds

86

6.12

Approvals and Authorizations

86

6.13

Designation of Subsidiaries

86

ARTICLE VII.

NEGATIVE COVENANTS

7.01

Negative Pledge

87

7.02

Investments

88

7.03

Subsidiary Indebtedness

89

7.04

Fundamental Changes

90

7.05

Dispositions

90

7.06

Restricted Payments

91

7.07

Change in Nature of Business

92

7.08

Transactions with Affiliates

92

7.09

Burdensome Agreements

92

7.10

Use of Proceeds

93

7.11

Acquisitions

93

7.12

Financial Covenants

93

 

iii



 

ARTICLE VIII.

EVENTS OF DEFAULT AND REMEDIES

8.01

Events of Default

94

8.02

Remedies Upon Event of Default

96

8.03

Application of Funds

96

ARTICLE IX.

ADMINISTRATIVE AGENT

9.01

Appointment and Authority

97

9.02

Rights as a Lender

97

9.03

Exculpatory Provisions

98

9.04

Reliance by Administrative Agent

99

9.05

Delegation of Duties

99

9.06

Resignation of Administrative Agent

99

9.07

Non-Reliance on Administrative Agent and Other Lenders

101

9.08

No Other Duties, Etc.

101

9.09

Administrative Agent May File Proofs of Claim

101

ARTICLE X.

MISCELLANEOUS

10.01

Amendments, Etc.

102

10.02

Notices; Effectiveness; Electronic Communication

103

10.03

No Waiver; Cumulative Remedies; Enforcement

106

10.04

Expenses; Indemnity; Damage Waiver

106

10.05

Payments Set Aside

108

10.06

Successors and Assigns

109

10.07

Treatment of Certain Information; Confidentiality

113

10.08

Right of Setoff

114

10.09

Interest Rate Limitation

115

10.10

Counterparts; Integration; Effectiveness

115

10.11

Survival of Representations and Warranties

115

10.12

Severability

116

10.13

Replacement of Lenders

116

10.14

Governing Law; Jurisdiction; Etc.

117

10.15

Waiver of Jury Trial

118

 

iv



 

10.16

No Advisory or Fiduciary Responsibility

118

10.17

Electronic Execution of Assignments and Certain Other Documents

119

10.18

USA PATRIOT Act

119

10.19

Judgment Currency

119

 

 

 

SIGNATURES

S-1

 

v



 

SCHEDULES

 

1.01

 

Mandatory Cost Formulae

1.01(a)

 

Applicable Rate

1.01(b)

 

Existing Letters of Credit

2.01

 

Commitments and Applicable Percentages

5.05

 

Supplement to Interim Financial Statements

5.13

 

Subsidiaries; Other Equity Investments

5.18

 

Identification Numbers for the Company and the Designated Borrowers

10.02

 

Administrative Agent’s Office; Certain Addresses for Notices

 

 

EXHIBITS

 

Form of

 

A

 

Committed Loan Notice

B

 

Swing Line Loan Notice

C

 

Note

D

 

Compliance Certificate

E

 

Assignment and Assumption

F

 

Letter of Credit Information Report

G

 

Designated Borrower Request and Assumption Agreement

H

 

Designated Borrower Notice

I

 

Opinion

J

 

Company Guaranty

K

 

U.S. Tax Compliance Certificates

L

 

Unrestricted Subsidiary Notice

 

vi



 

AMENDED AND RESTATED CREDIT AGREEMENT

 

This AMENDED AND RESTATED CREDIT AGREEMENT (this “ Agreement ”) is entered into as of February 20, 2013, among SEABOARD CORPORATION , a Delaware corporation (the “ Company ”), certain Restricted Subsidiaries of the Company party hereto pursuant to Section 2.14 (each a “ Designated Borrower ” and, together with the Company, the “ Borrowers ” and, each a “ Borrower ”), each lender from time to time party hereto (collectively, the “ Lenders ” and individually, a “ Lender ”), and BANK OF AMERICA, N.A., as Administrative Agent, Swing Line Lender and an L/C Issuer.

 

Preliminary Statements

 

A.        The Company, the lenders party thereto (the “ Existing Lenders ”) and Bank of America, N.A., as administrative agent, are parties to that certain Credit Agreement among the Company, the lenders party thereto, and Bank of America, N.A., as administrative agent, dated as of July 10, 2008 (as amended, amended and restated, extended, supplemented or otherwise modified prior to the date hereof, the “ Existing Five-Year Credit Agreement ”), pursuant to which the lenders party thereto (the “ Existing Lenders ”) originally agreed to provide the Company with a revolving credit facility, including a letter of credit subfacility and a swing line subfacility.

 

B.        The Company has requested that the Existing Five-Year Credit Agreement be amended and restated, subject to the conditions set forth herein, in order to, among other things, (a) extend the maturity date of the revolving credit facility and (b) make certain other amendments to the Existing Five-Year Credit Agreement (the “ Amendment and Restatement ”).

 

C.        The parties hereto are willing to amend and restate the Existing Five-Year Credit Agreement and to make and continue to make certain revolving credit and letter of credit facilities available to the Company upon the terms and conditions set forth herein.

 

In consideration of the mutual covenants and agreements herein contained, the parties hereto covenant and agree as follows:

 

ARTICLE I.
AMENDMENT AND RESTATEMENT; DEFINITIONS AND ACCOUNTING TERMS

 

1.01     Amendment and Restatement.   In order to facilitate the Amendment and Restatement and otherwise to effectuate the desires of the Company, the Administrative Agent and the Lenders agree as follows:

 

(a)        As of the Closing Date (immediately prior to the effectiveness of this Agreement) (i) the Aggregate Commitments under (and as defined in) the Existing Five-Year Credit Agreement are $200,000,000, (ii) the principal amount of the Loans (as defined in the Existing Five-Year Credit Agreement) outstanding under the Existing Five-Year Credit Agreement is $0, (iii) there are no Swing Line Loans (as defined in the Existing Five-Year Credit Agreement) outstanding under the Existing Five-Year Credit Agreement, and (iv) the aggregate amount of L/C Obligations (as defined in the Existing Five-Year Credit Agreement) outstanding under the Existing Five-Year Credit Agreement is $39,960,121.88.

 



 

(b)        Simultaneously with the Closing Date, but immediately prior to giving effect to Section 1.01(e) , the parties hereby agree that (i) the Commitments of each Lender and its Applicable Percentage shall be as set forth in Schedule 2.01 , and the Outstanding Amounts of Loans and Applicable Percentage of the Outstanding Amounts of L/C Obligations under the Existing Five-Year Credit Agreement (each as defined in the Existing Five-Year Credit Agreement) shall be reallocated as outstanding Loans hereunder in accordance with such Commitments, and the requisite assignments shall be deemed to be made in such amounts among the Lenders and from each Lender to each other Lender (and, if necessary, to Lenders from Existing Lenders who elect not to become Lenders under this Agreement or who reduce their commitments in connection with this Agreement), with the same force and effect as if such assignments were evidenced by applicable Assignments and Assumptions (as defined in the Existing Five-Year Credit Agreement) under the Existing Five-Year Credit Agreement, but without the payment of any related assignment fee, (ii) the Letter of Credit Sublimit (as defined in the Existing Five-Year Credit Agreement) shall continue as the Letter of Credit Sublimit hereunder and (iii) all Letters of Credit (as defined in the Existing Five-Year Credit Agreement) outstanding under the Existing Five-Year Credit Agreement on the Closing Date and identified on Schedule 1.01(b)  (the “ Existing Letters of Credit ”) shall continue as Letters of Credit outstanding under this Agreement.

 

(c)        The parties hereby consent to all reallocations and assignments of Commitments and Outstanding Amounts effected pursuant to Sections 1.01(b)  and 1.01(c)  and, subject to Article V hereof, waive any requirement for any other document or instrument, including any Assignment and Assumption (as defined in the Existing Five-Year Credit Agreement) under the Existing Five-Year Credit Agreement or Assignment and Assumption hereunder, necessary to give effect to any reallocation or assignment.  On the Closing Date the Lenders shall make full cash settlement with each other (and with the Existing Lenders whose Commitments are being decreased) through the Administrative Agent, as the Administrative Agent may direct or approve, with respect to all assignments and reallocations in Commitments as reflected in this Section 1.01 such that after giving effect to such settlements each Lender’s Applicable Percentage of the Commitments equals (with customary rounding) its Applicable Percentage of (i) the Outstanding Amount of all Loans, and (ii) the Outstanding Amount of all L/C Obligations.

 

(d)       The parties hereto hereby agree that upon the effectiveness of this Agreement, the terms and provisions of the Existing Five-Year Credit Agreement which in any manner govern or evidence the Obligations, the obligations of the Company and the other Loan Parties, the rights and interests of the Administrative Agent and the Lenders and any terms, conditions or matters related to any thereof, shall be and hereby are amended and restated in their entirety by the terms, conditions and provisions of this Agreement, and the terms and provisions of the Existing Five-Year Credit Agreement, except as otherwise expressly provided herein or therein, shall be superseded by this Agreement.

 

(e)        Notwithstanding this Amendment and Restatement of the Existing Five-Year Credit Agreement, including anything in this Section 1.01 , and in any related Loan Documents (as defined in the Existing Five-Year Credit Agreement and referred to herein, individually or collectively, as the “ Existing Loan Documents ”), (i) all of the indebtedness, liabilities and obligations owing by any Person under the Existing Five-Year Credit Agreement and other

 

2



 

Existing Loan Documents shall continue as Obligations hereunder, and (ii) each of this Agreement and the Notes and any other Loan Document (as defined herein) that is amended and restated in connection with this Agreement is given as a substitution of, and not as a payment of, the indebtedness, liabilities and obligations of the Company or any other Loan Party under the Existing Five-Year Credit Agreement or any Existing Loan Document and neither the execution and delivery of such documents nor the consummation of any other transaction contemplated hereunder is intended to constitute a novation of the Existing Five-Year Credit Agreement or of any of the other Existing Loan Documents or any obligations thereunder.  Upon the effectiveness of this Agreement, unless otherwise agreed to and arranged by the Administrative Agent, all Loans (as defined in the Existing Five-Year Credit Agreement) owing and outstanding under the Existing Five-Year Credit Agreement shall be converted to and, subject to conversion after the Closing Date, shall continue as Base Rate Loans hereunder and shall constitute advances hereunder, and all Letters of Credit (as defined in the Existing Five-Year Credit Agreement) outstanding under the Existing Five-Year Credit Agreement and any of the Existing Loan Documents, if any, shall continue as Letters of Credit hereunder; provided that if any Eurodollar Rate Loans (as defined in the Existing Five-Year Credit Agreement) are converted to Base Rate Loans pursuant to this Section 1.01(e)  on a day other than the last day of an Interest Period, the Borrowers shall compensate the Lenders holding such Eurodollar Rate Loans (as defined in the Existing Five-Year Credit Agreement) pursuant to Section 3.05 for any loss, cost or expense arising from such conversion on the Closing Date of Eurodollar Rate Loans under (and as defined in) the Existing Five-Year Credit Agreement to Base Rate Loans hereunder; provided further , that on and after the Closing Date, the Applicable Rate and fees applicable to Loans and Letters of Credit hereunder shall apply without regard to any margins or fees otherwise applicable thereto under the Existing Five-Year Credit Agreement prior to the Closing Date (which fees and margins applicable prior to the Closing Date shall be paid in full on the Closing Date).

 

1.02     Defined Terms .   As used in this Agreement, the following terms shall have the meanings set forth below:

 

Acquisition ” means any transaction or series of related transactions for the purpose of or resulting, directly or indirectly, in (a) the acquisition by the Company or a Subsidiary of all or substantially all of the assets of a Person, or of any line of business or division of a Person, or (b) the acquisition by the Company or a Subsidiary of in excess of 50% of the Equity Interests of any Person (other than a Person already a Subsidiary), or otherwise causing any Person to become a Subsidiary.

 

Administrative Agent ” means Bank of America in its capacity as administrative agent under any of the Loan Documents, or any successor administrative agent.

 

Administrative Agent’s Office ” means, with respect to any currency, the Administrative Agent’s address and, as appropriate, account as set forth on Schedule 10.02 with respect to such currency, or such other address or account with respect to such currency as the Administrative Agent may from time to time notify to the Company and the Lenders.

 

Administrative Questionnaire ” means an Administrative Questionnaire in form and substance reasonably satisfactory to the Administrative Agent.

 

3



 

Affiliate ” means, with respect to any Person, another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified.

 

Aggregate Commitments ” means the Commitments of all the Lenders.

 

Agreement ” means this Amended and Restated Credit Agreement.

 

Alternative Currency ” means each of Euro, Canadian Dollars, Yen and each other currency (other than Dollars) that is approved in accordance with Section 1.07 .

 

Alternative Currency Equivalent ” means, at any time, with respect to any amount denominated in Dollars, the equivalent amount thereof in the applicable Alternative Currency as determined by the Administrative Agent or the L/C Issuer, as the case may be, at such time on the basis of the Spot Rate (determined in respect of the most recent Revaluation Date) for the purchase of such Alternative Currency with Dollars.

 

Alternative Currency Sublimit ” means an amount equal to the lesser of the Aggregate Commitments and $75,000,000.   The Alternative Currency Sublimit is part of, and not in addition to, the Aggregate Commitments.

 

Amendment and Restatement ” has the meaning specified in the Preliminary Statements hereto.

 

Applicable Percentage ” means, with respect to any Lender at any time, the percentage (carried out to the ninth decimal place) of the Aggregate Commitments represented by such Lender’s Commitment at such time.  If the commitment of each Lender to make Loans and the obligation of the L/C Issuer to make L/C Credit Extensions have been terminated pursuant to Section 8.02 or if the Aggregate Commitments have expired, then the Applicable Percentage of each Lender shall be determined based on the Applicable Percentage of such Lender most recently in effect, giving effect to any subsequent assignments.  The initial Applicable Percentage of each Lender is set forth opposite the name of such Lender on Schedule 2.01 or in the Assignment and Assumption pursuant to which such Lender becomes a party hereto, as applicable.

 

Applicable Rate ” means the percentages per annum, based upon the Consolidated Leverage Ratio as set forth in the most recent Compliance Certificate received by the Administrative Agent pursuant to Section 6.02(a)  determined in accordance with the table set forth in Schedule 1.01(a) .  Any increase or decrease in the Applicable Rate resulting from a change in the Consolidated Leverage Ratio shall become effective as of the first Business Day immediately following the date a Compliance Certificate is delivered pursuant to Section 6.02(a) ; provided , however , that if a Compliance Certificate is not delivered when due in accordance with such Section, then Pricing Level 5 shall apply as of the first Business Day after the date on which such Compliance Certificate was required to have been delivered until the first Business Day after the date on which such Compliance Certificate is actually delivered.  The Applicable Rate in effect from the Closing Date through the first Business Day immediately following the date a Compliance Certificate is delivered or required to be pursuant to

 

4



 

Section 6.02(a)  for the fiscal year ended December 31, 2012 shall be determined based upon Pricing Level I.

 

Applicable Time ” means, with respect to any borrowings and payments in any Alternative Currency, the local time in the place of settlement for such Alternative Currency as may be determined by the Administrative Agent or the L/C Issuer, as the case may be, to be necessary for timely settlement on the relevant date in accordance with normal banking procedures in the place of payment.

 

Applicant Borrower ” has the meaning specified in Section 2.14 .

 

Approved Fund ” means any Fund that is administered or managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate of an entity that administers or manages a Lender.

 

Arrangers ” means MLPFS and Scotia Capital, Inc., in their capacities as joint lead arrangers and joint book managers.

 

Assignee Group ” means two or more Eligible Assignees that are Affiliates of one another or two or more Approved Funds managed by the same investment advisor.

 

Assignment and Assumption ” means an assignment and assumption entered into by a Lender and an Eligible Assignee (with the consent of any party whose consent is required by Section 10.06(b) ), and accepted by the Administrative Agent, in substantially the form of Exhibit E or any other form approved by the Administrative Agent.

 

Attributable Indebtedness ” means, on any date, (a) in respect of any capital lease of any Person, the capitalized amount thereof that would appear on a balance sheet of such Person prepared as of such date in accordance with GAAP, (b) in respect of any Synthetic Lease Obligation, the capitalized amount of the remaining lease payments under the relevant lease that would appear on a balance sheet of such Person prepared as of such date in accordance with GAAP if such lease were accounted for as a capital lease, and (c) in respect of any asset securitization transaction of any Person, (i) the actual amount of any unrecovered investment of purchasers or transferees of assets so transferred, plus (ii) in the case of any other recourse, repurchase, or debt obligation described in clause (a)  of the definition of “Off-Balance Sheet Liabilities,” the capitalized amount of such obligation that would appear on a balance sheet of such Person prepared on such date in accordance with GAAP if such sale or transfer or assets were accounted for as a secured loan.

 

Audited Financial Statements ” means the audited consolidated balance sheet of the Company and its Subsidiaries and Consolidated Entities for the fiscal year ended December 31, 2011, and the related consolidated statements of earnings, shareholders’ equity and cash flows for such fiscal year of the Company and its Subsidiaries and Consolidated Entities, including the notes thereto.

 

Availability Period ” means the period from and including the Closing Date to the earliest of (a) the Maturity Date, (b) the date of termination of the Aggregate Commitments

 

5



 

pursuant to Section 2.06 , and (c) the date of termination of the commitment of each Lender to make Loans and of the obligation of the L/C Issuer to make L/C Credit Extensions pursuant to Section 8.02 .

 

Bank of America ” means Bank of America, N.A. and its successors.

 

Base Rate ” means for any day a fluctuating rate per annum equal to the higher of (a) the Federal Funds Rate plus 1/2 of 1%, (b) the rate of interest in effect for such day as publicly announced from time to time by Bank of America as its “prime rate,” and (c) the Eurocurrency Rate plus 1.00%.  The “prime rate” is a rate set by Bank of America based upon various factors including Bank of America’s costs and desired return, general economic conditions and other factors, and is used as a reference point for pricing some loans, which may be priced at, above, or below such announced rate.  Any change in such rate announced by Bank of America shall take effect at the opening of business on the day specified in the public announcement of such change.

 

Base Rate Committed Loan ” means a Committed Loan that is a Base Rate Loan.

 

Base Rate Loan ” means a Loan that bears interest based on the Base Rate.  All Base Rate Loans shall be denominated in Dollars.

 

Borrower ” and “ Borrowers ” each has the meaning specified in the introductory paragraph hereto.

 

Borrower Materials ” has the meaning specified in Section 6.02 .

 

Borrowing ” means a Committed Borrowing or a Swing Line Borrowing, as the context may require.

 

Bresky Group ” means (a) the estate of H. Harry Bresky, Otto Bresky, Jr. (brother of the late H. Harry Bresky) and the estate of Marjorie Shifman (deceased sister of the late H. Harry Bresky), (b) spouses, heirs, legatees, lineal descendants, and spouses of lineal descendants, other blood relatives, step-children, adopted children, and/or estates or representatives of estates of H. Harry Bresky, Otto Bresky, Jr. and Marjorie Shifman, (c) trusts established for the benefit of spouses, lineal descendants and spouses of lineal descendants, other blood relatives, step-children, and/or adopted children of H. Harry Bresky, Otto Bresky, Jr., and Marjorie Shifman and (d) any person which is directly or indirectly Controlled by a person described in the preceding clauses (a) , (b)  or (c) .

 

Business Day ” means any day other than a Saturday, Sunday or other day on which commercial banks are authorized to close under the Laws of, or are in fact closed in, the state where the Administrative Agent’s Office with respect to Obligations denominated in Dollars is located and:

 

(a)        if such day relates to any interest rate settings as to a Eurocurrency Rate Loan denominated in Dollars, any fundings, disbursements, settlements and payments in Dollars in respect of any such Eurocurrency Rate Loan, or any other dealings in Dollars

 

6



 

to be carried out pursuant to this Agreement in respect of any such Eurocurrency Rate Loan, means any such day on which dealings in deposits in Dollars are conducted by and between banks in the London interbank eurodollar market;

 

(b)        if such day relates to any interest rate settings as to a Eurocurrency Rate Loan denominated in Euro, any fundings, disbursements, settlements and payments in Euro in respect of any such Eurocurrency Rate Loan, or any other dealings in Euro to be carried out pursuant to this Agreement in respect of any such Eurocurrency Rate Loan, means a TARGET Day;

 

(c)        if such day relates to any interest rate settings as to a Eurocurrency Rate Loan denominated in a currency other than Dollars or Euro, means any such day on which dealings in deposits in the relevant currency are conducted by and between banks in the London or other applicable offshore interbank market for such currency; and

 

(d)       if such day relates to any fundings, disbursements, settlements and payments in a currency other than Dollars or Euro in respect of a Eurocurrency Rate Loan denominated in a currency other than Dollars or Euro, or any other dealings in any currency other than Dollars or Euro to be carried out pursuant to this Agreement in respect of any such Eurocurrency Rate Loan (other than any interest rate settings), means any such day on which banks are open for foreign exchange business in the principal financial center of the country of such currency.

 

Butterball ” means Butterball, LLC, a North Carolina limited liability company, and its successors.

 

Canadian Dollar ” means the lawful currency of Canada.

 

Cash Collateralize ” means to pledge and deposit with or deliver to the Administrative Agent, for the benefit of one or more of the L/C Issuer or the Lenders, as collateral for L/C Obligations or obligations of the Lenders to fund participations in respect of L/C Obligations, cash or deposit account balances or, if the Administrative Agent and the L/C Issuer shall agree in their sole discretion, other credit support, in each case pursuant to documentation in form and substance satisfactory to the Administrative Agent and the L/C Issuer. “Cash Collateral” shall have a meaning correlative to the foregoing and shall include the proceeds of such cash collateral and other credit support.

 

Change in Law ” means the occurrence, after the date of this Agreement, of any of the following: (a) the adoption or taking effect of any law, rule, regulation or treaty, (b) any change in any law, rule, regulation or treaty or in the administration, interpretation, implementation or application thereof by any Governmental Authority or (c) the making or issuance of any request, rule, guideline or directive (whether or not having the force of law) by any Governmental Authority; provided that notwithstanding anything herein to the contrary, (x) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all laws, regulations, requests, rules, guidelines or directives thereunder or issued in connection therewith and (y) all laws, regulations, requests, rules, guidelines or directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority)

 

7



 

or the United States or foreign regulatory authorities, in each case pursuant to Basel III, shall in each case be deemed to be a “Change in Law”, regardless of the date enacted, adopted or issued.

 

Change of Control ” means an event or series of events by which any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, but excluding (w) any employee benefit plan of such person or its subsidiaries, and any person or entity acting in its capacity as trustee, agent or other fiduciary or administrator of any such plan, (x) Seaboard Flour, (y) SFC Preferred LLC, a Delaware limited liability company and (z) any member of the Bresky Group) (i) becomes the “beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934, except that a person or group shall be deemed to have “beneficial ownership” of all securities that such person or group has the right to acquire (such right, an “ option right ”), whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of 50% or more of the equity securities of the Company entitled to vote for members of the board of directors or equivalent governing body of the Company on a fully-diluted basis (and taking into account all such securities that such person or group has the right to acquire pursuant to any option right), or (ii) shall have acquired by contract or otherwise, or shall have entered into a contract or arrangement that, upon consummation thereof, will result in its or their acquisition of the power to exercise, directly or indirectly, a controlling influence over the management or policies of the Company, or control over the equity securities of the Company entitled to vote for members of the board of directors or equivalent governing body of the Company on a fully-diluted basis (and taking into account all such securities that such Person or group has the right to acquire pursuant to any option right) representing 50% or more of the combined voting power of such securities.

 

Closing Date ” means the first date all the conditions precedent in Section 4.01 are satisfied or waived in accordance with Section 10.01 .

 

Code ” means the Internal Revenue Code of 1986.

 

Commitment ” means, as to each Lender, its obligation to (a) make Committed Loans to the Borrowers pursuant to Section 2.01 , (b) purchase participations in L/C Obligations, and (c) purchase participations in Swing Line Loans, in an aggregate principal amount at any one time outstanding not to exceed the Dollar amount set forth opposite such Lender’s name on Schedule 2.01 or in the Assignment and Assumption pursuant to which such Lender becomes a party hereto, as applicable, as such amount may be adjusted from time to time in accordance with this Agreement.

 

Committed Borrowing ” means a borrowing consisting of simultaneous Committed Loans of the same Type, in the same currency and, in the case of Eurocurrency Rate Loans, having the same Interest Period made by each of the Lenders pursuant to Section 2.01 .

 

Committed Loan ” has the meaning specified in Section 2.01 .

 

Committed Loan Notice ” means a notice of (a) a Committed Borrowing, (b) a conversion of Committed Loans from one Type to the other, or (c) a continuation of Eurocurrency Rate Loans, pursuant to Section 2.02(a) , which, if in writing, shall be substantially in the form of Exhibit A .

 

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Company ” has the meaning specified in the introductory paragraph hereto.

 

Company Guaranty ” means a Guaranty Agreement in favor of the Administrative Agent and the Lenders, in substantially the form of Exhibit J , executed by the Company on behalf of a Designated Borrower that is a Foreign Obligor.

 

Compliance Certificate ” means a certificate substantially in the form of Exhibit D .

 

Connection Income Taxes ” means Other Connection Taxes that are imposed on or measured by net income (however denominated) or that are franchise Taxes or branch profits Taxes.

 

Consolidated Adjusted Leverage Ratio ” means, as of any date of determination, the ratio of (a) the remainder of Consolidated Funded Indebtedness as of such date, minus all unencumbered cash and cash equivalents of the Company and its Restricted Subsidiaries and Consolidated Entities as of such date with adjustments for international tax effects at an assumed withholding rate of 35%, as applicable, to (b) Consolidated EBITDA for the period of the four fiscal quarters most recently ended.

 

Consolidated EBITDA ” means, for any period, for the Company and its Restricted Subsidiaries and Consolidated Entities on a consolidated basis, an amount equal to Consolidated Net Income for such period plus (a) the following to the extent deducted in calculating such Consolidated Net Income: (i) Consolidated Interest Charges of the Company and its Restricted Subsidiaries and Consolidated Entities for such period, (ii) the provision for Federal, state, local and foreign income taxes payable by the Company and its Restricted Subsidiaries and Consolidated Entities for such period, (iii) depreciation and amortization expense of the Company and its Restricted Subsidiaries and Consolidated Entities and (iv) other expenses, losses or charges of the Company and its Restricted Subsidiaries and Consolidated Entities reducing such Consolidated Net Income which do not represent a cash item in such period or any future period, and minus (b) the following to the extent included in calculating such Consolidated Net Income: (i) Federal, state, local and foreign income tax credits of the Company and its Restricted Subsidiaries and Consolidated Entities for such period and (ii) all non-cash credits, income or gains and all other extraordinary, unusual or nonrecurring gains of the Company and its Restricted Subsidiaries and Consolidated Entities increasing Consolidated Net Income for such period.

 

Consolidated Entity ” means an entity, other than a Subsidiary, that is subject to consolidation under GAAP.

 

Consolidated Funded Indebtedness ” means, as of any date of determination, for the Company and its Restricted Subsidiaries and Consolidated Entities on a consolidated basis, without duplication, the sum of (a) the outstanding principal amount of all obligations, whether current or long-term, for borrowed money (including Obligations hereunder) and all obligations evidenced by bonds, debentures, notes, loan agreements or other similar instruments, (b) the outstanding principal amount of all purchase money Indebtedness, (c) all direct obligations arising under letters of credit (including standby and commercial), bankers’ acceptances, bank guaranties, surety bonds and similar instruments, (d) the outstanding amount of all obligations in

 

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respect of the deferred purchase price of property or services (other than trade accounts payable and accrued expenses in the ordinary course of business), (e) Attributable Indebtedness in respect of capital leases, Synthetic Lease Obligations and other Off-Balance Sheet Liabilities, (f) without duplication, all Guarantees with respect to outstanding Indebtedness of the types specified in clauses (a)  through (e)  above of Persons other than the Company, any Restricted Subsidiary or any Consolidated Entities, and (g) all Indebtedness of the types referred to in clauses (a)  through (f)  above of any partnership or joint venture (other than a joint venture that is itself a corporation or limited liability company) in which the Company or a Restricted Subsidiary or any Consolidated Entities is a general partner or joint venturer, unless such Indebtedness is non-recourse to the Company, such Restricted Subsidiary or such Consolidated Entities.

 

Consolidated Interest Charges ” means, for any period, for the Company and its Restricted Subsidiaries and Consolidated Entities on a consolidated basis, the sum of (a) all interest, premium payments, debt discount, fees, charges and related expenses of the Company and its Restricted Subsidiaries and Consolidated Entities in connection with borrowed money (including capitalized interest) or in connection with the deferred purchase price of assets, in each case to the extent treated as interest in accordance with GAAP, (b) the portion of rent expense of the Company and its Restricted Subsidiaries and Consolidated Entities with respect to such period under capital leases that is treated as interest in accordance with GAAP, and (c) all implicit interest in connection with Synthetic Lease Obligations and other Off-Balance Sheet Liabilities.

 

Consolidated Leverage Ratio ” means, as of any date of determination, the ratio of (a) Consolidated Funded Indebtedness as of such date to (b) Consolidated EBITDA for the period of the four fiscal quarters most recently ended.

 

Consolidated Net Income ” means, for any period, for the Company and its Restricted Subsidiaries and Consolidated Entities on a consolidated basis, the net income of the Company and its Restricted Subsidiaries and Consolidated Entities for that period; provided , however , that there shall not be included in such net income:

 

(a)        any net income (or loss) of any Person if such Person is not the Company or a Restricted Subsidiary, except that subject to the limitations contained in clauses (c)  and (d)  below, the Company’s equity in the net income of any Unrestricted Subsidiary or unconsolidated Joint Venture for such period shall be included in such Consolidated Net Income up to the aggregate amount of cash actually distributed by such Person during such period or within 12 months after the end of such period to the Company or a Restricted Subsidiary as a dividend or other distribution (subject, in the case of a dividend or other distribution to a Restricted Subsidiary, to the limitations contained in clause (b)  below); provided , however , that, for any net income to be included pursuant to this clause (a)  whereby cash is received by the Company or a Restricted Subsidiary after the end of the period in which the related net income was actually earned, such net income will be retroactively recognized in the period in which such net income was actually earned only with respect to the then current and future periods of the Company and its Restricted Subsidiaries;

 

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(b)        any net income (or loss) of any Restricted Subsidiary to the extent that the distribution thereof is not permitted by contractual restrictions (other than under any Loan Document), directly or indirectly, to the Company, except that subject to the limitations contained in clauses (c)  and (d)  below, the Company’s equity in the net income of any such Restricted Subsidiary for such period shall be included in such net income up to the aggregate amount of cash distributed (or permitted by such contractual restrictions to have been distributed) by such Restricted Subsidiary during such period to the Company or another Restricted Subsidiary as a dividend or other distribution (subject, in the case of a dividend or distribution that could have been made to another Restricted Subsidiary, to the limitation contained in this clause);

 

(c)        any gain or loss realized upon the sale or other disposition of any asset of the Company or its Restricted Subsidiaries (including pursuant to any sale-leaseback transaction) that is not sold or otherwise disposed of in the ordinary course of business and any gain or loss realized upon the sale or other disposition of any Equity Interests of any Person; and

 

(d)       any extraordinary gains.

 

Consolidated Tangible Net Worth ” means, as of any date of determination, for the Company and its Restricted Subsidiaries and Consolidated Entities on a consolidated basis, Shareholders’ Equity on such date minus the Intangible Assets of the Company and its Restricted Subsidiaries and Consolidated Entities on such date.

 

Contractual Obligation ” means, as to any Person, any provision of any security issued by such Person or of any agreement, instrument or other undertaking to which such Person is a party or by which it or any of its property is bound.

 

Control ” means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise.  “ Controlling ” and “ Controlled ” have meanings correlative thereto.

 

Cost of Acquisition ” means, with respect to any Acquisition, as at the date of entering into any agreement therefor, the sum of the following (without duplication):  (a) the value of the Equity Interests of the Company or any Restricted Subsidiary to be transferred in connection therewith, (b) the amount of any cash and fair market value of other property (excluding property described in clause (a)  and the unpaid principal amount of any debt instrument) given as consideration, (c) the amount (determined by using the face amount or the amount payable at maturity, whichever is greater) of any Indebtedness incurred, assumed or acquired by the Company or any Restricted Subsidiary in connection with such Acquisition, (d) all additional purchase price amounts in the form of earnouts and other contingent obligations that should be recorded on the financial statements of the Company and its Restricted Subsidiaries in accordance with GAAP, (e) all amounts paid in respect of covenants not to compete, consulting agreements that should be recorded on financial statements of the Company and its Restricted Subsidiaries in accordance with GAAP, and other affiliated contracts in connection with such Acquisition, (f) the aggregate fair market value of all other consideration given by the Company

 

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or any Restricted Subsidiary in connection with such Acquisition, and (g) out of pocket transaction costs for the services and expenses of attorneys, accountants and other consultants incurred in effecting such transaction, and other similar transaction costs so incurred.  For purposes of determining the Cost of Acquisition for any transaction, the capital stock of the Company or a Restricted Subsidiary shall be valued (A) in the case of capital stock that is then designated as a national market system security by the National Association of Securities Dealers, Inc. (“ NASDAQ ”) or is listed on a national securities exchange, the average of the last reported bid and ask quotations or the last prices reported thereon, and (B) with respect to any other Equity Interests, as determined by a committee composed of the disinterested members of the Board of Directors of the Company and, if requested by the Administrative Agent, determined to be a reasonable valuation by the independent public accountants referred to in Section 6.01(a) , and (C) with respect to any Acquisition accomplished pursuant to the exercise of options or warrants or the conversion of securities, the Cost of Acquisition shall include both the cost of acquiring such option, warrant or convertible security as well as the cost of exercise or conversion.

 

Credit Exposure ” means, as to any Lender at any time, the aggregate principal amount at such time of its outstanding Committed Loans and such Lender’s participation in L/C Obligations and Swing Line Loans at such time.

 

Credit Extension ” means each of the following: (a) a Borrowing and (b) an L/C Credit Extension.

 

Debtor Relief Laws ” means the Bankruptcy Code of the United States, and all other liquidation, conservatorship, bankruptcy, assignment for the benefit of creditors, moratorium, rearrangement, receivership, insolvency, reorganization, or similar debtor relief Laws of the United States or other applicable jurisdictions from time to time in effect and affecting the rights of creditors generally.

 

Default ” means any event or condition that constitutes an Event of Default or that, with the giving of any notice, the passage of time, or both, would be an Event of Default.

 

Default Rate ” means (a) when used with respect to Obligations other than Letter of Credit Fees, an interest rate equal to (i) the Base Rate plus (ii) the Applicable Rate, if any, applicable to Base Rate Loans plus (iii) 2% per annum; provided , however , that with respect to a Eurocurrency Rate Loan, the Default Rate shall be an interest rate equal to the interest rate (including any Applicable Rate and any Mandatory Cost) otherwise applicable to such Loan plus 2% per annum, and (b) when used with respect to Letter of Credit Fees, a rate equal to the Applicable Rate plus 2% per annum.

 

Defaulting Lender ” means, subject to Section 2.17(b) , any Lender that (a) has failed to (i) fund all or any portion of its Loans within two Business Days of the date such Loans were required to be funded hereunder unless such Lender notifies the Administrative Agent and the Company in writing that such failure is the result of such Lender’s determination that one or more conditions precedent to funding (each of which conditions precedent, together with any applicable default, shall be specifically identified in such writing) has not been satisfied, or (ii) pay to the Administrative Agent, the L/C Issuer, the Swing Line Lender or any other Lender

 

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any other amount required to be paid by it hereunder (including in respect of its participation in Letters of Credit or Swing Line Loans) within two Business Days of the date when due, (b) has notified the Company, the Administrative Agent, the L/C Issuer or the Swing Line Lender in writing that it does not intend to comply with its funding obligations hereunder, or has made a public statement to that effect (unless such writing or public statement relates to such Lender’s obligation to fund a Loan hereunder and states that such position is based on such Lender’s determination that a condition precedent to funding (which condition precedent, together with any applicable default, shall be specifically identified in such writing or public statement) cannot be satisfied), (c) has failed, within three Business Days after written request by the Administrative Agent or the Company, to confirm in writing to the Administrative Agent and the Company that it will comply with its prospective funding obligations hereunder ( provided that such Lender shall cease to be a Defaulting Lender pursuant to this clause (c)  upon receipt of such written confirmation by the Administrative Agent and the Company), or (d) has, or has a direct or indirect parent company that has, (i) become the subject of a proceeding under any Debtor Relief Law, or (ii) had appointed for it a receiver, custodian, conservator, trustee, administrator, assignee for the benefit of creditors or similar Person charged with reorganization or liquidation of its business or assets, including the Federal Deposit Insurance Corporation or any other state or federal regulatory authority acting in such a capacity; provided that a Lender shall not be a Defaulting Lender solely by virtue of the ownership or acquisition of any Equity Interest in that Lender or any direct or indirect parent company thereof by a Governmental Authority so long as such ownership interest does not result in or provide such Lender with immunity from the jurisdiction of courts within the United States or from the enforcement of judgments or writs of attachment on its assets or permit such Lender (or such Governmental Authority) to reject, repudiate, disavow or disaffirm any contracts or agreements made with such Lender.  Any determination by the Administrative Agent that a Lender is a Defaulting Lender under any one or more of clauses (a)  through (d)  above, and of the effective date of such status, shall be conclusive and binding absent manifest error, and such Lender shall be deemed to be a Defaulting Lender (subject to Section 2.17(b) ) as of the date established therefor by the Administrative Agent in a written notice of such determination, which shall be delivered by the Administrative Agent to the Company, the L/C Issuer, the Swing Line Lender and each other Lender promptly following such determination.

 

Designated Borrower ” has the meaning specified in the introductory paragraph hereto.

 

Designated Borrower Sublimit ” means an amount equal to the lesser of the Aggregate Commitments and $50,000,000.  The Designated Borrower Sublimit is part of, and not in addition to, the Aggregate Commitments.

 

Designated Borrower Notice ” has the meaning specified in Section 2.14 .

 

Designated Borrower Request and Assumption Agreement ” has the meaning specified in Section 2.14 .

 

Designated Jurisdiction ” means any country or territory to the extent that such country or territory itself is the subject of any Sanction.

 

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Disposition ” or “ Dispose ” means the sale, transfer, license, sales type or direct financing lease or other disposition (including any sale and leaseback transaction) of any property by any Person, including any sale, assignment, transfer or other disposal, with or without recourse, of any notes or accounts receivable or any rights and claims associated therewith.

 

Dollar ” and “ $ ” mean lawful money of the United States.

 

Dollar Equivalent ” means, at any time, (a) with respect to any amount denominated in Dollars, such amount, and (b) with respect to any amount denominated in any Alternative Currency, the equivalent amount thereof in Dollars as determined by the Administrative Agent or the L/C Issuer, as the case may be, at such time on the basis of the Spot Rate (determined in respect of the most recent Revaluation Date) for the purchase of Dollars with such Alternative Currency.

 

Domestic Subsidiary ” means any Subsidiary that is organized under the laws of any state of the United States or the District of Columbia.

 

Eligible Assignee ” means any Person that meets the requirements to be an assignee under Section 10.06(b)(iii) , (v) , (vi)  and ( vii ) subject to such consents, if any, as may be required under Section 10.06(b)(iii) ).

 

EMU ” means the economic and monetary union in accordance with the Treaty of Rome 1957, as amended by the Single European Act 1986, the Maastricht Treaty of 1992 and the Amsterdam Treaty of 1998.

 

EMU Legislation ” means the legislative measures of the European Council for the introduction of, changeover to or operation of a single or unified European currency.

 

Environmental Laws ” means any and all Federal, state, local, and foreign statutes, laws, regulations, ordinances, rules, judgments, orders, decrees, permits, concessions, grants, franchises, licenses, agreements or governmental restrictions relating to pollution and the protection of the environment or the release of any materials into the environment, including those related to hazardous substances or wastes, air emissions and discharges to waste or public systems.

 

Environmental Liability ” means any liability, contingent or otherwise (including any liability for damages, costs of environmental remediation, fines, penalties or indemnities), of the Company, any other Loan Party or any of their respective Subsidiaries directly or indirectly resulting from or based upon (a) violation of any Environmental Law, (b) the generation, use, handling, transportation, storage, treatment or disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the release or threatened release of any Hazardous Materials into the environment or (e) any contract, agreement or other consensual arrangement pursuant to which liability is assumed or imposed with respect to any of the foregoing.

 

Equity Interests ” means, with respect to any Person, all of the shares of capital stock of (or other ownership or profit interests in) such Person, all of the warrants, options or other rights for the purchase or acquisition from such Person of shares of capital stock of (or other ownership

 

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or profit interests in) such Person, all of the securities convertible into or exchangeable for shares of capital stock of (or other ownership or profit interests in) such Person or warrants, rights or options for the purchase or acquisition from such Person of such shares (or such other interests), and all of the other ownership or profit interests in such Person (including partnership, member or trust interests therein), whether voting or nonvoting, and whether or not such shares, warrants, options, rights or other interests are outstanding on any date of determination.

 

ERISA ” means the Employee Retirement Income Security Act of 1974.

 

ERISA Affiliate ” means any trade or business (whether or not incorporated) under common control with the Company within the meaning of Section 414(b) or (c) of the Code (and Sections 414(m) and (o) of the Code for purposes of provisions relating to Section 412 of the Code).

 

ERISA Event ” means (a) a Reportable Event with respect to a Pension Plan; (b) a withdrawal by the Company or any ERISA Affiliate from a Pension Plan subject to Section 4063 of ERISA during a plan year in which it was a substantial employer (as defined in Section 4001(a)(2) of ERISA) or a cessation of operations that is treated as such a withdrawal under Section 4062(e) of ERISA; (c) a complete or partial withdrawal by the Company or any ERISA Affiliate from a Multiemployer Plan or notification that a Multiemployer Plan is in reorganization; (d) the filing of a notice of intent to terminate, the treatment of a Plan amendment as a termination under Section 4041 or 4041A of ERISA, or the commencement of proceedings by the PBGC to terminate a Pension Plan or Multiemployer Plan; (e) an event or condition which constitutes grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan or Multiemployer Plan; or (f) the imposition of any liability under Title IV of ERISA, other than for PBGC premiums due but not delinquent under Section 4007 of ERISA, upon the Company or any ERISA Affiliate.

 

Euro ” and “ EUR ” mean the lawful currency of the Participating Member States introduced in accordance with the EMU Legislation.

 

Eurocurrency Rate ” means:

 

(a)        for any Interest Period with respect to a Eurocurrency Rate Loan, the rate per annum equal to (i) the British Bankers Association LIBOR Rate or the successor thereto if the British Bankers Association is no longer making a LIBOR rate available (“ LIBOR ”), as published by Reuters (or such other commercially available source providing quotations of LIBOR as may be designated by the Administrative Agent from time to time) at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period, for deposits in the relevant currency (for delivery on the first day of such Interest Period) with a term equivalent to such Interest Period or, (ii) if such rate is not available at such time for any reason, the rate per annum determined by the Administrative Agent to be the rate at which deposits in the relevant currency for delivery on the first day of such Interest Period in Same Day Funds in the approximate amount of the Eurocurrency Rate Loan being made, continued or converted and with a term equivalent to such Interest Period would be offered by Bank of America’s London Branch (or other Bank of America branch or Affiliate) to major banks in the London or other offshore interbank market for such currency at their request at approximately

 

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11:00 a.m. (London time) two Business Days prior to the commencement of such Interest Period; and

 

(b)        for any interest calculation with respect to a Base Rate Loan on any date, the rate per annum equal to (i) LIBOR, at approximately 11:00 a.m., London time determined two London Banking Days prior to such date for Dollar deposits being delivered in the London interbank market for a term of one month commencing that day or (ii) if such published rate is not available at such time for any reason, the rate per annum determined by the Administrative Agent to be the rate at which deposits in Dollars for delivery on the date of determination in same day funds in the approximate amount of the Base Rate Loan being made or maintained and with a term equal to one month would be offered by Bank of America’s London Branch to major banks in the London interbank Eurodollar market at their request at the date and time of determination.

 

Eurocurrency Rate Loan ” means a Committed Loan that bears interest at a rate based on the Eurocurrency Rate.  Eurocurrency Rate Loans may be denominated in Dollars or in an Alternative Currency.  All Committed Loans denominated in an Alternative Currency must be Eurocurrency Rate Loans.

 

Event of Default ” has the meaning specified in Section 8.01 .

 

Excluded Taxes ” means any of the following Taxes imposed on or with respect to any Recipient or required to be withheld or deducted from a payment to a Recipient, (a) Taxes imposed on or measured by net income (however denominated), franchise Taxes, and branch profits Taxes, in each case, (i) imposed as a result of such Recipient being organized under the laws of, or having its principal office or, in the case of any Lender, its Lending Office located in, the jurisdiction imposing such Tax (or any political subdivision thereof) or (ii) that are Other Connection Taxes, (b) in the case of a Lender, U.S. federal withholding Taxes imposed on amounts payable to or for the account of such Lender with respect to an applicable interest in a Loan or Commitment pursuant to a law in effect on the date on which (i) such Lender acquires such interest in the Loan or Commitment (other than pursuant to an assignment request by the Company under Section 10.13 ) or (ii) such Lender changes its Lending Office, except in each case to the extent that, pursuant to Section 3.01(a)(ii) , (a)(iii)  or (c) , amounts with respect to such Taxes were payable either to such Lender’s assignor immediately before such Lender became a party hereto or to such Lender immediately before it changed its Lending Office, (c) Taxes attributable to such Recipient’s failure to comply with Section 3.01(e)  and (d) any U.S. federal withholding Taxes imposed pursuant to FATCA.

 

Existing Five-Year Credit Agreement ” has the meaning specified in the Preliminary Statements hereto.

 

Existing Lender ” has the meaning specified in the Preliminary Statements hereto.

 

Existing Letters of Credit ” has the meaning specified in Section 1.01(b)  above.

 

Federal Funds Rate ” means, for any day, the rate per annum equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal

 

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Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Business Day next succeeding such day; provided that (a) if such day is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day as so published on the next succeeding Business Day, and (b) if no such rate is so published on such next succeeding Business Day, the Federal Funds Rate for such day shall be the average rate (rounded upward, if necessary, to a whole multiple of 1/100 of 1%) charged to Bank of America on such day on such transactions as determined by the Administrative Agent.

 

Fee Letter ” means the letter agreement, dated January 31, 2013, among the Company, the Administrative Agent and MLPFS.

 

Foreign Lender ” means (a) if any Borrower is a U.S. Person, a Lender that is not a U.S. Person, and (b) if any Borrower is not a U.S. Person, a Lender that is resident or organized under the laws of a jurisdiction other than that in which such Borrower is resident for tax purposes.  For purposes of this definition, the United States, each State thereof and the District of Columbia shall be deemed to constitute a single jurisdiction.

 

Foreign Obligor ” means a Loan Party that is a Foreign Subsidiary.

 

Foreign Subsidiary ” means any Subsidiary that is organized under the laws of a jurisdiction other than the United States, a State thereof or the District of Columbia.

 

FRB ” means the Board of Governors of the Federal Reserve System of the United States.

 

Fronting Exposure ” means, at any time there is a Defaulting Lender, (a) with respect to the L/C Issuer, such Defaulting Lender’s Applicable Percentage of the outstanding L/C Obligations other than L/C Obligations as to which such Defaulting Lender’s participation obligation has been reallocated to other Lenders or Cash Collateralized in accordance with the terms hereof, and (b) with respect to the Swing Line Lender, such Defaulting Lender’s Applicable Percentage of Swing Line Loans other than Swing Line Loans as to which such Defaulting Lender’s participation obligation has been reallocated to other Lenders in accordance with the terms hereof.

 

Fund ” means any Person (other than a natural person) that is (or will be) engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the ordinary course of its business activities.

 

GAAP ” means generally accepted accounting principles in the United States set forth in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or such other principles as may be approved by a significant segment of the accounting profession in the United States, that are applicable to the circumstances as of the date of determination, consistently applied.

 

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Governmental Authority ” means the government of the United States or any other nation, or of any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government (including any supra-national bodies such as the European Union or the European Central Bank).

 

Guarantee ” means, as to any Person, any (a) obligation, contingent or otherwise, of such Person guaranteeing or having the economic effect of guaranteeing any Indebtedness payable or performable by another Person (the “primary obligor”) in any manner, whether directly or indirectly, and including any obligation of such Person, direct or indirect, (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness, (ii) to purchase or lease property, securities or services for the purpose of assuring the obligee in respect of such Indebtedness of the payment or performance of such Indebtedness, (iii) to maintain working capital, equity capital or any other financial statement condition or liquidity or level of income or cash flow of the primary obligor so as to enable the primary obligor to pay such Indebtedness, or (iv) entered into for the purpose of assuring in any other manner the obligee in respect of such Indebtedness of the payment or performance thereof or to protect such obligee against loss in respect thereof (in whole or in part), or (b) Lien on any assets of such Person securing any Indebtedness of any other Person, whether or not such Indebtedness is assumed by such Person (or any right, contingent or otherwise, of any holder of such Indebtedness to obtain any such Lien); provided , that “Guarantee” shall not include obligations relating to the endorsement of checks or other items for collection in the ordinary course of business.  The amount of any Guarantee shall be deemed to be an amount equal to the stated or determinable amount of the related primary Indebtedness, or portion thereof, in respect of which such Guarantee is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof as determined by the guaranteeing Person in good faith.  The term “Guarantee” as a verb has a corresponding meaning.

 

Hazardous Materials ” means all explosive or radioactive substances or wastes and all hazardous or toxic substances, wastes or other pollutants, including petroleum or petroleum distillates, asbestos or asbestos-containing materials, polychlorinated biphenyls, radon gas, infectious or medical wastes and all other substances or wastes of any nature regulated pursuant to any Environmental Law.

 

Honor Date ” has the meaning specified in Section 2.03(c)(i) .

 

Indebtedness ” means, as to any Person at a particular time, without duplication, all of the following, whether or not included as indebtedness or liabilities in accordance with GAAP:

 

(i)         all obligations of such Person for borrowed money and all obligations of such Person evidenced by bonds, debentures, notes, loan agreements or other similar instruments;

 

(ii)        all direct or contingent obligations of such Person arising under letters of credit (including standby and commercial), bankers’ acceptances, bank guaranties, surety bonds and similar instruments;

 

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(iii)       net obligations of such Person under any Swap Contract;

 

(iv)       all obligations of such Person to pay the deferred purchase price of property or services (other than trade accounts payable in the ordinary course of business and, in each case, not past due for more than 60 days and other than accrued expenses in the ordinary course of business);

 

(v)        indebtedness (excluding prepaid interest thereon) secured by a Lien on property owned or being purchased by such Person (including indebtedness arising under conditional sales or other title retention agreements), whether or not such indebtedness shall have been assumed by such Person or is limited in recourse;

 

(vi)       capital leases, Synthetic Lease Obligations and other Off-Balance Sheet Liabilities;

 

(vii)      all obligations of such Person to purchase, redeem, retire, defease or otherwise make any payment in respect of any Equity Interest in such Person or any other Person, valued, in the case of a redeemable preferred interest, at the greater of its voluntary or involuntary liquidation preference plus accrued and unpaid dividends; and

 

(viii)     all Guarantees of such Person in respect of any of the foregoing.

 

For all purposes hereof, the Indebtedness of any Person shall include the Indebtedness of any partnership or joint venture (other than a joint venture that is itself a corporation or limited liability company) in which such Person is a general partner or a joint venturer, unless such Indebtedness is non-recourse to such Person.  The amount of any net obligation under any Swap Contract on any date shall be deemed to be the Swap Termination Value thereof as of such date.  The amount of any capital lease, Synthetic Lease Obligation or other Off-Balance Sheet Liability as of any date shall be deemed to be the amount of Attributable Indebtedness in respect thereof as of such date.

 

Indemnified Taxes ” means (a) Taxes, other than Excluded Taxes, imposed on or with respect to any payment made by or on account of any obligation of any Loan Party under any Loan Document and (b) to the extent not otherwise described in clause (a) , Other Taxes.

 

Indemnitees ” has the meaning specified in Section 10.04(b) .

 

Information ” has the meaning specified in Section 10.07 .

 

Intangible Assets ” means assets that are considered to be intangible assets under GAAP, including customer lists, goodwill, computer software, copyrights, trade names, trademarks, patents, franchises, licenses, unamortized deferred charges (but excluding any deferred taxes), unamortized debt discount and capitalized research and development costs.

 

Interest Payment Date ” means, (a) as to any Loan other than a Base Rate Loan, the last day of each Interest Period applicable to such Loan and the Maturity Date; provided , however , that if any Interest Period for a Eurocurrency Rate Loan exceeds three months, the respective

 

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dates that fall every three months after the beginning of such Interest Period shall also be Interest Payment Dates; and (b) as to any Base Rate Loan (including a Swing Line Loan), the last Business Day of each March, June, September and December and the Maturity Date.

 

Interest Period ” means, as to each Eurocurrency Rate Loan, the period commencing on the date such Eurocurrency Rate Loan is disbursed or converted to or continued as a Eurocurrency Rate Loan and ending on the date one, two, three or six months thereafter, as selected by the Company in its Committed Loan Notice or such other period that is twelve months or less requested by the Company and consented to by all the Lenders; provided that:

 

(a)        any Interest Period that would otherwise end on a day that is not a Business Day shall be extended to the next succeeding Business Day unless such Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Business Day;

 

(b)        any Interest Period that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of the calendar month at the end of such Interest Period; and

 

(c)        no Interest Period shall extend beyond the Maturity Date.

 

Investment ” means, as to any Person, any direct or indirect acquisition or investment by such Person, whether by means of (a) the purchase or other acquisition of capital stock or other securities of another Person, (b) a loan, advance or capital contribution to, Guarantee or assumption of debt of, or purchase or other acquisition of any other debt or equity participation or interest in, another Person, including any partnership or joint venture interest in such other Person and any arrangement pursuant to which the investor Guarantees Indebtedness of such other Person, or (c) the purchase or other acquisition (in one transaction or a series of transactions) of assets of another Person that constitute a business unit.  For purposes of covenant compliance, the amount of any Investment shall be the amount actually invested, without adjustment for subsequent increases or decreases in the value of such Investment.

 

IP Rights ” has the meaning specified in Section 5.17 .

 

IRS ” means the United States Internal Revenue Service.

 

ISP ” means, with respect to any Letter of Credit, the “International Standby Practices 1998” published by the Institute of International Banking Law & Practice, Inc. (or such later version thereof as may be in effect at the time of issuance).

 

Issuer Documents ” means with respect to any Letter of Credit, the Letter of Credit Application, and any other document, agreement and instrument entered into by the L/C Issuer and the Company (or any Subsidiary) or in favor of the L/C Issuer and relating to such Letter of Credit.

 

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Joint Venture ” means any Person (other than a Subsidiary) in which the Company and/or its Restricted Subsidiaries own more than 5% of such Person’s Equity Interests.

 

Laws ” means, collectively, all international, foreign, Federal, state and local statutes, treaties, rules, guidelines, regulations, sanctions, ordinances, codes and administrative or judicial precedents or authorities, including the interpretation or administration thereof by any Governmental Authority charged with the enforcement, interpretation or administration thereof, and all applicable administrative orders, directed duties, requests, licenses, authorizations and permits of, and agreements with, any Governmental Authority, in each case whether or not having the force of law.

 

L/C Advance ” means, with respect to each Lender, such Lender’s funding of its participation in any L/C Borrowing in accordance with its Applicable Percentage.  All L/C Advances shall be denominated in Dollars.

 

L/C Borrowing ” means an extension of credit resulting from a drawing under any Letter of Credit which has not been reimbursed on the date when made or refinanced as a Committed Borrowing. All L/C Borrowings shall be denominated in Dollars.

 

L/C Credit Extension ” means, with respect to any Letter of Credit, the issuance thereof or extension of the expiry date thereof, or the increase of the amount thereof.

 

L/C Issuer ” means (a) Bank of America in its capacity as issuer of Letters of Credit hereunder, (b) The Bank of Nova Scotia in its capacity as issuer of Letters of Credit hereunder, (c) SunTrust Bank in its capacity as issuer of Letters of Credit hereunder, (d) Wells Fargo Bank, National Association in its capacity as issuer of Letters of Credit hereunder, (e) The Bank of New York Mellon solely in its capacity as issuer of the Existing Letters of Credit issued by it, and (f) any successor issuer(s) of Letters of Credit hereunder.  All singular references to the L/C Issuer shall mean any L/C Issuer, either L/C Issuer, the L/C Issuer that has issued the applicable Letter of Credit, or all L/C Issuers, as the context may require.

 

L/C Obligations ” means, as at any date of determination, the aggregate amount available to be drawn under all outstanding Letters of Credit plus the aggregate of all Unreimbursed Amounts, including all L/C Borrowings.  For purposes of computing the amount available to be drawn under any Letter of Credit, the amount of such Letter of Credit shall be determined in accordance with Section 1.10 .  For all purposes of this Agreement, if on any date of determination a Letter of Credit has expired by its terms but any amount may still be drawn thereunder by reason of the operation of Rule 3.14 of the ISP, such Letter of Credit shall be deemed to be “outstanding” in the amount so remaining available to be drawn.

 

Lender ” has the meaning specified in the introductory paragraph hereto and, as the context requires, includes the Swing Line Lender and each L/C Issuer.

 

Lending Office ” means, as to any Lender, the office or offices of such Lender described as such in such Lender’s Administrative Questionnaire, or such other office or offices as a Lender may from time to time notify the Company and the Administrative Agent.

 

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Letter of Credit ” means any letter of credit issued hereunder and shall include the Existing Letters of Credit.  A Letter of Credit may be a commercial letter of credit or a standby letter of credit.  Letters of Credit may be issued in Dollars or in an Alternative Currency.

 

Letter of Credit Application ” means an application and agreement for the issuance or amendment of a Letter of Credit in the form from time to time in use by the L/C Issuer.

 

Letter of Credit Expiration Date ” means the day that is seven days prior to the Maturity Date then in effect (or, if such day is not a Business Day, the next preceding Business Day).

 

Letter of Credit Fee ” has the meaning specified in Section 2.03(h) .

 

Letter of Credit Sublimit ” means an amount equal to $100,000,000.  The Letter of Credit Sublimit is part of, and not in addition to, the Aggregate Commitments.

 

Lien ” means any mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), charge, or preference, priority or other security interest or preferential arrangement in the nature of a security interest of any kind or nature whatsoever (including any conditional sale or other title retention agreement, any easement, right of way or other encumbrance on title to real property, and any financing lease having substantially the same economic effect as any of the foregoing).

 

Loan ” means an extension of credit by a Lender to a Borrower under Article II in the form of a Committed Loan or a Swing Line Loan.

 

Loan Documents ” means this Agreement, the Company Guaranty, each Designated Borrower Request and Assumption Agreement, each Note, each Issuer Document, any agreement creating or perfecting rights in Cash Collateral pursuant to the provisions of Section 2.16 of this Agreement, and the Fee Letter.

 

Loan Parties ” means, collectively, the Company and each Designated Borrower.

 

London Banking Day ” means any day on which dealings in Dollar deposits are conducted by and between banks in the London interbank Eurodollar market.

 

Mandatory Cost ” means, with respect to any period, the percentage rate per annum determined in accordance with Schedule 1.01 .

 

Material Adverse Effect ” means (a) a material adverse change in, or a material adverse effect upon, the operations, business, properties, liabilities (actual or contingent), condition (financial or otherwise) or prospects of the Company or the Company and its Restricted Subsidiaries and Consolidated Entities taken as a whole; (b) a material impairment of the ability of any Loan Party to perform its obligations under any Loan Document to which it is a party; or (c) a material adverse effect upon the legality, validity, binding effect or enforceability against any Loan Party of any Loan Document to which it is a party.

 

Material Subsidiary ” means a Restricted Subsidiary that:

 

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(a)        at any time during the then current fiscal year or the two then preceding fiscal years of the Company, constituted more than three percent (3%) of consolidated total assets (as shown on the Company’s consolidated balance sheet) or Shareholders’ Equity; or

 

(b)        accounted for more than three percent (3%) of the revenues of the Company and its Restricted Subsidiaries, determined on a consolidated basis, in respect of any one or more of the then preceding twelve (12) fiscal quarters of the Company.

 

For purposes of this definition, a Designated Borrower shall be deemed to be a “Material Subsidiary” hereunder.

 

Maturity Date ” means February 20, 2018.

 

Minimum Collateral Amount ” means, at any time, (a) with respect to Cash Collateral consisting of cash or deposit account balances provided to reduce or eliminate Fronting Exposure during the existence of a Defaulting Lender, an amount equal to 105% of the Fronting Exposure of the L/C Issuer with respect to Letters of Credit issued and outstanding at such time, (b) with respect to Cash Collateral consisting of cash or deposit account balances provided in accordance with the provisions of Section 2.16(a)(i) , (a)(ii)  or (a)(iii) , an amount equal to 105% of the Outstanding Amount of all LC Obligations, and (c) otherwise, an amount determined by the Administrative Agent and the L/C Issuer in their sole discretion.

 

MLPFS ” means Merrill Lynch, Pierce, Fenner & Smith Incorporated and its successors.

 

Multiemployer Plan ” means any employee benefit plan of the type described in Section 4001(a)(3) of ERISA, to which the Company or any ERISA Affiliate makes or is obligated to make contributions, or during the preceding five plan years, has made or been obligated to make contributions.

 

Net Cash Proceeds ” means, with respect to the sale of any asset by the Company or any Subsidiary, the remainder, if any, of (a) the sum of cash and cash equivalents received in connection with such sale (including any cash received by way of deferred payment pursuant to, or by monetization of, a note receivable or otherwise, but only as and when so received) minus (b) the sum of (i) the principal amount of any Indebtedness that is secured by such asset and that is required to be repaid in connection with the sale thereof, (ii) the out-of-pocket expenses incurred by the Company or any Subsidiary in connection with such sale and (iii) income taxes reasonably estimated to be actually payable within two years of the date of the relevant asset sale as a result of any gain recognized in connection therewith.

 

Non-Consenting Lender ” means any Lender that (a) does not approve any consent, waiver or amendment that requires the approval of all Lenders or all affected Lenders in accordance with the terms of Section 10.01 or (b) fails to consent to the designation of a Subsidiary of the Company as a Designated Borrower pursuant to Section 2.14(a)  and, in each case, which consent, waiver or amendment (as applicable) has been approved by the Required Lenders.

 

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Non-Defaulting Lender ” means, at any time, each Lender that is not a Defaulting Lender at such time.

 

Non-Material Subsidiary ” means any Subsidiary that is not a Material Subsidiary.

 

Note ” means a promissory note made by a Borrower in favor of a Lender evidencing Loans made by such Lender to such Borrower, substantially in the form of Exhibit C .

 

OFAC ” means the Office of Foreign Assets Control of the United States Department of the Treasury.

 

Obligations ” means all advances to, and debts, liabilities, obligations, covenants and duties of, any Loan Party arising under any Loan Document or otherwise with respect to any Loan or Letter of Credit, whether direct or indirect (including those acquired by assumption), absolute or contingent, due or to become due, now existing or hereafter arising and including interest and fees that accrue after the commencement by or against any Loan Party or any Affiliate thereof of any proceeding under any Debtor Relief Laws naming such Person as the debtor in such proceeding, regardless of whether such interest and fees are allowed claims in such proceeding.

 

Off-Balance Sheet Liabilities ” means, with respect to any Person as of any date of determination thereof, without duplication and to the extent not included as a liability on the consolidated balance sheet of such Person and its Subsidiaries in accordance with GAAP: (a) with respect to any asset securitization transaction (including any accounts receivable purchase facility), the unrecovered investment of purchasers or transferees of assets so transferred and the principal amount of any recourse, repurchase or debt obligations incurred in connection therewith; and (b) the monetary obligations under any financing lease or so-called “synthetic,” tax retention or off-balance sheet lease transaction which, upon the application of any Debtor Relief Law to such Person or any of its Subsidiaries, would be characterized as indebtedness.

 

Organization Documents ” means, (a) with respect to any corporation, the certificate or articles of incorporation and the bylaws (or equivalent or comparable constitutive documents with respect to any non-U.S. jurisdiction); (b) with respect to any limited liability company, the certificate or articles of formation or organization and operating agreement; and (c) with respect to any partnership, joint venture, trust or other form of business entity, the partnership, joint venture or other applicable agreement of formation or organization and any agreement, instrument, filing or notice with respect thereto filed in connection with its formation or organization with the applicable Governmental Authority in the jurisdiction of its formation or organization and, if applicable, any certificate or articles of formation or organization of such entity.

 

Other Connection Taxes ” means, with respect to any Recipient, Taxes imposed as a result of a present or former connection between such Recipient and the jurisdiction imposing such Tax (other than connections arising from such Recipient having executed, delivered, become a party to, performed its obligations under, received payments under, received or

 

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perfected a security interest under, engaged in any other transaction pursuant to or enforced any Loan Document, or sold or assigned an interest in any Loan or Loan Document).

 

Other Taxes ” means all present or future stamp, court or documentary, intangible, recording, filing or similar Taxes that arise from any payment made under, from the execution, delivery, performance, enforcement or registration of, from the receipt or perfection of a security interest under, or otherwise with respect to, any Loan Document, except any such Taxes that are Other Connection Taxes imposed with respect to an assignment (other than an assignment made pursuant to Section 3.06 ).

 

Outstanding Amount ” means (a) with respect to Committed Loans on any date, the Dollar Equivalent amount of the aggregate outstanding principal amount thereof after giving effect to any borrowings and prepayments or repayments of such Committed Loans occurring on such date; (b) with respect to Swing Line Loans on any date, the aggregate outstanding principal amount thereof after giving effect to any borrowings and prepayments or repayments of such Swing Line Loans occurring on such date; and (c) with respect to any L/C Obligations on any date, the Dollar Equivalent amount of the aggregate outstanding amount of such L/C Obligations on such date after giving effect to any L/C Credit Extension occurring on such date and any other changes in the aggregate amount of the L/C Obligations as of such date, including as a result of any reimbursements by the Company of Unreimbursed Amounts.

 

Overnight Rate ” means, for any day, (a) with respect to any amount denominated in Dollars, the greater of (i) the Federal Funds Rate and (ii) an overnight rate determined by the Administrative Agent, the L/C Issuer, or the Swing Line Lender, as the case may be, in accordance with banking industry rules on interbank compensation, and (b) with respect to any amount denominated in an Alternative Currency, the rate of interest per annum at which overnight deposits in the applicable Alternative Currency, in an amount approximately equal to the amount with respect to which such rate is being determined, would be offered for such day by a branch or Affiliate of Bank of America in the applicable offshore interbank market for such currency to major banks in such interbank market.

 

Participant ” has the meaning specified in Section 10.06(d) .

 

Participating Member State ” means any member state of the European Union that has the Euro as its lawful currency in accordance with legislation of the European Union relating to Economic and Monetary Union.

 

Participant Register ” has the meaning specified in Section 10.06(d) .

 

PBGC ” means the Pension Benefit Guaranty Corporation.

 

Pension Plan ” means any “employee pension benefit plan” (as such term is defined in Section 3(2) of ERISA), other than a Multiemployer Plan, that is subject to Title IV of ERISA and is sponsored or maintained by the Company or any ERISA Affiliate or to which the Company or any ERISA Affiliate contributes or has an obligation to contribute, or in the case of a multiple employer or other plan described in Section 4064(a) of ERISA, has made contributions at any time during the immediately preceding five plan years.

 

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Permitted Lines of Business ” means (a) meat (including chicken, turkey, beef, lamb and pork), poultry and seafood production, processing and marketing, (b) ocean, ground and rail transportation and related support, (c) animal feed production and processing, (d) flour and feed milling, (e) power production, (f) commodity merchandising, (g) baking, (h) fruit and vegetable production and processing, (i) sugar production and processing, (j) the production, transportation and marketing of alternative energy products (including bio-diesel and ethanol) and (k) the holding of cash and investments held for future use by the Company and its Subsidiaries in connection with any of the aforementioned Permitted Lines of Business.

 

Person ” means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, Governmental Authority or other entity.

 

Plan ” means any “employee benefit plan” (as such term is defined in Section 3(3) of ERISA) established by the Company or, with respect to any such plan that is subject to Section 412 of the Code or Title IV of ERISA, any ERISA Affiliate.

 

Platform ” has the meaning specified in Section 6.02 .

 

Priority Indebtedness ” means, as of any date of determination, the sum (without duplication) of (a) all Indebtedness of the Company secured by Liens permitted by Section 7.01(m) , plus (b) all Indebtedness of Restricted Subsidiaries permitted by Sections 7.03(b)  and (e) .

 

Public Lender ” has the meaning specified in Section 6.02 .

 

Purchase Money Liens ” means Liens securing Indebtedness (including renewals, extensions and refinancings thereof) in respect of capital leases, Synthetic Lease Obligations and purchase money obligations for fixed or capital assets; provided in each case, that (a) such Lien shall not extend to or cover any property other than property acquired or constructed after the Closing Date with the proceeds of the Indebtedness secured thereby, and shall not secure Indebtedness other than such Indebtedness, (b) the Indebtedness secured thereby does not exceed the cost or fair market value, whichever is lower, of the property being acquired on the date of acquisition , (c) such property is either expansionary in nature and thus not intended to replace existing assets of the company, or replaces formerly leased property, and (d) if the Indebtedness secured thereby is owing to any Subsidiary, the property being financed thereby has not been previously owned by the Company or any Subsidiary.

 

Qualifying Lender ” shall mean a Lender which is beneficially entitled to interest payable to that Lender in respect of an advance under a Loan Document and is:

 

(a)        a Lender:  (i) which is a bank (as defined for the purpose of section 349 of the Taxes Act) making an advance under a Loan Document; or (ii) in respect of an advance made under a Loan Document by a person that was a bank (as defined for the purpose of section 349 of the Taxes Act) at the time that that advance was made, and which is within the charge to United Kingdom corporation tax as respects any payments of interest made in respect of that advance; or

 

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(b)           a Lender which is (i) a company resident in the United Kingdom for United Kingdom tax purposes; (ii) a partnership each member of which is: (aa) a company so resident in the United Kingdom; or (bb) a company not so resident in the United Kingdom which carries on a trade in the United Kingdom through a permanent establishment and which brings into account in computing its chargeable profits (for the purposes of section 11(2) of the Taxes Act) the whole of any share of interest payable in respect of that advance that falls to it by reason of sections 114 and 115 of the Taxes Act; (iii) a company not so resident in the United Kingdom which carries on a trade in the United Kingdom through a permanent establishment and which brings into account interest payable in respect of that advance in computing the chargeable profits (for the purposes of section 11(2) of the Taxes Act) of the company; or

 

(c)           a Treaty Lender.

 

Recipient ” means the Administrative Agent, any Lender, the L/C Issuer or any other recipient of any payment to be made by or on account of any obligation of any Loan Party hereunder.

 

Register ” has the meaning specified in Section 10.06(c) .

 

Related Parties ” means, with respect to any Person, such Person’s Affiliates and the partners, directors, officers, employees, agents, trustees, administrators, managers, advisors and representatives of such Person and of such Person’s Affiliates.

 

Reportable Event ” means any of the events set forth in Section 4043(c) of ERISA, other than events for which the 30 day notice period has been waived.

 

Request for Credit Extension ” means (a) with respect to a Borrowing, conversion or continuation of Committed Loans, a Committed Loan Notice, (b) with respect to an L/C Credit Extension, a Letter of Credit Application, and (c) with respect to a Swing Line Loan, a Swing Line Loan Notice.

 

Required Lenders ” means, as of any date of determination, Lenders having more than 50% of the Aggregate Commitments or, if the commitment of each Lender to make Loans and the obligation of the L/C Issuer to make L/C Credit Extensions have been terminated pursuant to Section 8.02 , Lenders holding in the aggregate more than 50% of the Total Outstandings (with the aggregate amount of each Lender’s risk participation and funded participation in L/C Obligations and Swing Line Loans being deemed “held” by such Lender for purposes of this definition); provided that the Commitment of, and the portion of the Total Outstandings held or deemed held by, any Defaulting Lender shall be excluded for purposes of making a determination of Required Lenders.

 

Responsible Officer ” means the chief executive officer, president, chief financial officer, treasurer or assistant treasurer or any vice president of a Loan Party.  Any document delivered hereunder that is signed by a Responsible Officer of a Loan Party shall be conclusively presumed to have been authorized by all necessary corporate, partnership and/or other action on

 

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the part of such Loan Party and such Responsible Officer shall be conclusively presumed to have acted on behalf of such Loan Party.

 

Restricted Payment ” means any dividend or other distribution (whether in cash, securities or other property) with respect to any capital stock or other Equity Interest of the Company or any Subsidiary, or any payment (whether in cash, securities or other property), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, acquisition, cancellation or termination of any such capital stock or other Equity Interest, or on account of any return of capital to the Company’s stockholders, partners or members (or the equivalent Person thereof).

 

Restricted Subsidiary ” means (a) each Loan Party and (b) each Subsidiary of the Company that is not an Unrestricted Subsidiary.  For purposes of this definition, any Designated Borrower shall be deemed to be a “Restricted Subsidiary” hereunder.

 

Revaluation Date ” means (a) with respect to any Loan, each of the following:  (i) each date of a Borrowing of a Eurocurrency Rate Loan denominated in an Alternative Currency, (ii) each date of a continuation of a Eurocurrency Rate Loan denominated in an Alternative Currency pursuant to Section 2.02 , and (iii) such additional dates as the Administrative Agent shall determine or the Required Lenders shall require; and (b) with respect to any Letter of Credit, each of the following:  (i) each date of issuance of a Letter of Credit denominated in an Alternative Currency, (ii) each date of an amendment of any such Letter of Credit having the effect of increasing or decreasing the amount thereof (solely with respect to the increased or decreased amount), (iii) each date of any payment by the L/C Issuer under any Letter of Credit denominated in an Alternative Currency, and (iv) such additional dates as the Administrative Agent or the L/C Issuer shall determine or the Required Lenders shall require.

 

Same Day Funds ” means (a) with respect to disbursements and payments in Dollars, immediately available funds, and (b) with respect to disbursements and payments in an Alternative Currency, same day or other funds as may be determined by the Administrative Agent or the L/C Issuer, as the case may be, to be customary in the place of disbursement or payment for the settlement of international banking transactions in the relevant Alternative Currency.

 

Sanction(s) ” means any international economic sanction administered or enforced by OFAC.

 

SEC ” means the Securities and Exchange Commission, or any Governmental Authority succeeding to any of its principal functions.

 

Seaboard Flour ” means Seaboard Flour LLC, a Delaware limited liability company.

 

Shareholders’ Equity ” means, as of any date of determination, consolidated shareholders’ equity of the Company and its Subsidiaries and Consolidated Entities as of that date determined in accordance with GAAP.

 

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Special Notice Currency ” means at any time an Alternative Currency, other than the currency of a country that is a member of the Organization for Economic Cooperation and Development at such time located in North America or Europe.

 

Spot Rate ” for a currency means the rate determined by the Administrative Agent or the L/C Issuer, as applicable, to be the rate quoted by the Person acting in such capacity as the spot rate for the purchase by such Person of such currency with another currency through its principal foreign exchange trading office at approximately 11:00 a.m. on the date two Business Days prior to the date as of which the foreign exchange computation is made; provided that the Administrative Agent or the L/C Issuer may obtain such spot rate from another financial institution designated by the Administrative Agent or the L/C Issuer if the Person acting in such capacity does not have as of the date of determination a spot buying rate for any such currency; and provided further that the L/C Issuer may use such spot rate quoted on the date as of which the foreign exchange computation is made in the case of any Letter of Credit denominated in an Alternative Currency.

 

Subsidiary ” of a Person means a corporation, partnership, joint venture, limited liability company or other business entity of which a majority of the shares of securities or other interests having ordinary voting power for the election of directors or other governing body (other than securities or interests having such power only by reason of the happening of a contingency) are at the time beneficially owned by such Person.  Unless otherwise specified, all references herein to a “Subsidiary” or to “Subsidiaries” shall refer to a Subsidiary or Subsidiaries of the Company.

 

Swap Contract ” means (a) any and all rate swap transactions, basis swaps, credit derivative transactions, forward rate transactions, commodity swaps, commodity options, forward commodity contracts, equity or equity index swaps or options, bond or bond price or bond index swaps or options or forward bond or forward bond price or forward bond index transactions, interest rate options, forward foreign exchange transactions, cap transactions, floor transactions, collar transactions, currency swap transactions, cross-currency rate swap transactions, currency options, spot contracts, or any other similar transactions or any combination of any of the foregoing (including any options to enter into any of the foregoing), whether or not any such transaction is governed by or subject to any master agreement, and (b) any and all transactions of any kind, and the related confirmations, which are subject to the terms and conditions of, or governed by, any form of master agreement published by the International Swaps and Derivatives Association, Inc., any International Foreign Exchange Master Agreement, or any other master agreement (any such master agreement, together with any related schedules, a “ Master Agreement ”), including any such obligations or liabilities under any Master Agreement.

 

Swap Termination Value ” means, in respect of any one or more Swap Contracts, after taking into account the effect of any legally enforceable netting agreement relating to such Swap Contracts, (a) for any date on or after the date such Swap Contracts have been closed out and termination value(s) determined in accordance therewith, such termination value(s), and (b) for any date prior to the date referenced in clause (a) , the amount(s) determined as the mark-to-market value(s) for such Swap Contracts, as determined based upon one or more mid-market or

 

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other readily available quotations provided by any recognized dealer in such Swap Contracts (which may include a Lender or any Affiliate of a Lender).

 

Swing Line Borrowing ” means a borrowing of a Swing Line Loan pursuant to Section 2.04 .

 

Swing Line Lender ” means Bank of America in its capacity as provider of Swing Line Loans, or any successor swing line lender hereunder.

 

Swing Line Loan ” has the meaning specified in Section 2.04(a) .

 

Swing Line Loan Notice ” means a notice of a Swing Line Borrowing pursuant to Section 2.04(b) , which, if in writing, shall be substantially in the form of Exhibit B .

 

Swing Line Sublimit ” means an amount equal to the lesser of (a) $25,000,000 and (b) the Aggregate Commitments.  The Swing Line Sublimit is part of, and not in addition to, the Aggregate Commitments.

 

Synthetic Lease Obligation ” means the monetary obligation of a Person under (a) a so-called synthetic, off-balance sheet or tax retention lease, or (b) an agreement for the use or possession of property creating obligations that do not appear on the balance sheet of such Person but which, upon the insolvency or bankruptcy of such Person, would be characterized as the indebtedness of such Person (without regard to accounting treatment).

 

TARGET Day ” means any day on which the Trans-European Automated Real-time Gross Settlement Express Transfer (TARGET) payment system (or, if such payment system ceases to be operative, such other payment system (if any) determined by the Administrative Agent to be a suitable replacement) is open for the settlement of payments in Euro.

 

Taxes ” means all present or future taxes, levies, imposts, duties, deductions, withholdings (including backup withholding), assessments, fees or other charges imposed by any Governmental Authority, including any interest, additions to tax or penalties applicable thereto.

 

Taxes Act ” shall mean the Income and Corporation Taxes Act 1988.

 

Total Credit Exposure ” means, as to any Lender at any time, the unused Commitments and Credit Exposure of such Lender at such time.

 

Total Outstandings ” means the aggregate Outstanding Amount of all Loans and all L/C Obligations.

 

Treaty Lender ” shall mean a Lender which (a) is treated as a resident of a Treaty State for the purposes of a double taxation agreement (a Treaty) and (b) does not carry on a business in the United Kingdom through a permanent establishment with which that Lender’s participation in the Loan is effectively connected.

 

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Treaty State ” shall mean a jurisdiction having a double taxation agreement (a Treaty) with the United Kingdom which makes provision for full exemption from tax imposed by the United Kingdom on interest.

 

Type ” means, with respect to a Committed Loan, its character as a Base Rate Loan or a Eurocurrency Rate Loan.

 

UCP ” means, with respect to any Letter of Credit, the Uniform Customs and Practice for Documentary Credits, International Chamber of Commerce (“ICC”) Publication No. 600 (or such later version thereof as may be in effect at the time of issuance).

 

Unfunded Pension Liability ” means the excess of a Pension Plan’s benefit liabilities under Section 4001(a)(16) of ERISA, over the current value of that Pension Plan’s assets, determined in accordance with the assumptions used for funding the Pension Plan pursuant to Section 412 of the Code for the applicable plan year.

 

United States ” and “ U.S. ” mean the United States of America.

 

Unreimbursed Amount ” has the meaning specified in Section 2.03(c)(i) .

 

Unrestricted Subsidiary ” means any Subsidiary that is designated as such by the Company (a) as of the Closing Date and identified on Schedule 5.13 or (b) after the Closing Date in accordance with Section 6.13 , in each case, until such Person ceases to be an Unrestricted Subsidiary of the Company in accordance with Section 6.13 or ceases to be a Subsidiary of the Company.

 

U.S. Person ” means any Person that is a “United States Person” as defined in Section 7701(a)(30) of the Code.

 

U.S. Tax Compliance Certificate ” has the meaning specified in Section 3.01(e)(ii)(B)(III) .

 

Yen ” and “ ¥ ” mean the lawful currency of Japan.

 

1.03        Other Interpretive Provisions .  With reference to this Agreement and each other Loan Document, unless otherwise specified herein or in such other Loan Document:

 

(a)           The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined.  Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms.  The words “ include ,” “ includes ” and “ including ” shall be deemed to be followed by the phrase “without limitation.”  The word “ will ” shall be construed to have the same meaning and effect as the word “ shall .”  Unless the context requires otherwise, (i) any definition of or reference to any agreement, instrument or other document (including any Organization Document) shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein or in any other Loan Document), (ii) any reference herein to any

 

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Person shall be construed to include such Person’s successors and assigns, (iii) the words “ herein ,” “ hereof ” and “ hereunder ,” and words of similar import when used in any Loan Document, shall be construed to refer to such Loan Document in its entirety and not to any particular provision thereof, (iv) all references in a Loan Document to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, the Loan Document in which such references appear, (v) any reference to any law shall include all statutory and regulatory provisions consolidating, amending, replacing or interpreting such law and any reference to any law or regulation shall, unless otherwise specified, refer to such law or regulation as amended, modified or supplemented from time to time, and (vi) the words “ asset ” and “ property ” shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights.

 

(b)           In the computation of periods of time from a specified date to a later specified date, the word “ from ” means “ from and including ;” the words “ to ” and “ until ” each mean “ to but excluding ;” and the word “ through ” means “ to and including .”

 

(c)           Section headings herein and in the other Loan Documents are included for convenience of reference only and shall not affect the interpretation of this Agreement or any other Loan Document.

 

1.04        Accounting Matters .   (a)  Generally .  All accounting terms not specifically or completely defined herein shall be construed in conformity with, and all financial data (including financial ratios and other financial calculations) required to be submitted pursuant to this Agreement shall be prepared in conformity with, GAAP applied on a consistent basis, as in effect from time to time, applied in a manner consistent with that used in preparing the Audited Financial Statements, except as otherwise specifically prescribed herein.

 

(b)           Changes in GAAP .  If at any time any change in GAAP would affect the computation of any financial ratio or requirement set forth in any Loan Document, and either the Company or the Required Lenders shall so request, the Administrative Agent, the Lenders and the Company shall negotiate in good faith to amend such ratio or requirement to preserve the original intent thereof in light of such change in GAAP (subject to the approval of the Required Lenders); provided that , until so amended, (i) such ratio or requirement shall continue to be computed in accordance with GAAP prior to such change therein and (ii) the Company shall provide to the Administrative Agent and the Lenders financial statements and other documents required under this Agreement or as reasonably requested hereunder setting forth a reconciliation between calculations of such ratio or requirement made before and after giving effect to such change in GAAP.

 

(c)           Accounting for Acquisitions and Dispositions .  (i)  With respect to any Acquisition having a Cost of Acquisition of at least $50,000,000 consummated on or after the Closing Date, for each of the four fiscal quarter periods ending next following the date of any Acquisition, (x) Consolidated EBITDA shall include the historical results of operations of the Person or assets so acquired, and which amounts may include such adjustments as are permitted under Regulation S-X of the SEC and reasonably satisfactory to the Administrative Agent but (y) for purposes of determining compliance

 

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with the provisions of Section 7.12(a) , any increase in Consolidated Net Income resulting solely from such pro forma treatment of such Acquisition shall be disregarded;

 

(ii)           For each of the four periods of four fiscal quarters ending next following the date of any Disposition of a Material Subsidiary or all or substantially all of the assets of a Material Subsidiary, (i) Consolidated EBITDA shall exclude the results of operations of the Person or assets so disposed of on a historical pro forma basis, and which amounts shall include only adjustments reasonably satisfactory to the Administrative Agent; and

 

(iii)          For each of the four periods of four fiscal quarters ending next following the date of any Disposition of a Material Subsidiary or all or substantially all of the assets of a Material Subsidiary, Consolidated Interest Charges shall be adjusted on a historical pro forma basis to eliminate interest expense accrued during such period on (i) any Indebtedness repaid or assumed from the Material Subsidiary in connection with such Disposition or (ii) if such Disposition is of all of the Equity Interests of the Material Subsidiary, any Indebtedness of such Material Subsidiary for which neither the Company nor any other Restricted Subsidiary is directly or indirectly liable.

 

(d)           Consolidation of Variable Interest Entities .  All references herein to consolidated financial statements of the Company and its Subsidiaries or to the determination of any amount for the Company and its Subsidiaries on a consolidated basis or any similar reference shall, in each case, be deemed to include each variable interest entity that the Company is required to consolidate pursuant to FASB Interpretation No. 46 – Consolidation of Variable Interest Entities:  an interpretation of ARB No. 51 (January 2003) , or any successor pronouncement, standard or interpretation thereof, as if such variable interest entity were a Subsidiary as defined herein.

 

1.05        Rounding .  Any financial ratios required to be maintained by the Company pursuant to the Agreement shall be calculated by dividing the appropriate component by the other component, carrying the result to one place more than the number of places by which such ratio is expressed herein and rounding the result up or down to the nearest number (with a rounding-up if there is no nearest number).

 

1.06        Exchange Rates; Currency Equivalents .   (a)   The Administrative Agent or the L/C Issuer, as applicable, shall determine the Spot Rates as of each Revaluation Date to be used for calculating Dollar Equivalent amounts of Credit Extensions and Outstanding Amounts denominated in Alternative Currencies.  Such Spot Rates shall become effective as of such Revaluation Date and shall be the Spot Rates employed in converting any amounts between the applicable currencies until the next Revaluation Date to occur.  Except for purposes of financial statements delivered by Loan Parties hereunder or calculating financial covenants hereunder or except as otherwise provided herein, the applicable amount of any currency (other than Dollars) for purposes of the Loan Documents shall be such Dollar Equivalent amount as so determined by the Administrative Agent or the L/C Issuer, as applicable.

 

(b)           Wherever in this Agreement in connection with a Committed Borrowing, conversion, continuation or prepayment of a Eurocurrency Rate Loan or the issuance, amendment or extension of a Letter of Credit, an amount, such as a required minimum or multiple amount, is expressed in Dollars, but such Committed Borrowing, Eurocurrency Rate

 

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Loan or Letter of Credit is denominated in an Alternative Currency, such amount shall be the relevant Alternative Currency Equivalent of such Dollar amount (rounded to the nearest unit of such Alternative Currency, with 0.5 of a unit being rounded upward), as determined by the Administrative Agent or the L/C Issuer, as the case may be.

 

1.07        Additional Alternative Currencies .   (a)  The Company may from time to time request that Eurocurrency Rate Loans be made and/or Letters of Credit be issued in a currency other than those specifically listed in the definition of “Alternative Currency;” provided that such requested currency is a lawful currency (other than Dollars) that is readily available and freely transferable and convertible into Dollars.  In the case of any such request with respect to the making of Eurocurrency Rate Loans, such request shall be subject to the approval of the Administrative Agent and the Lenders; and in the case of any such request with respect to the issuance of Letters of Credit, such request shall be subject to the approval of the Administrative Agent and the L/C Issuer.

 

(b)           Any such request shall be made to the Administrative Agent not later than 10:00 a.m., 20 Business Days prior to the date of the desired Credit Extension (or such other time or date as may be agreed by the Administrative Agent and, in the case of any such request pertaining to Letters of Credit, the L/C Issuer, in its or their sole discretion).  In the case of any such request pertaining to Eurocurrency Rate Loans, the Administrative Agent shall promptly notify each Lender thereof; and in the case of any such request pertaining to Letters of Credit, the Administrative Agent shall promptly notify the L/C Issuer thereof.  Each Lender (in the case of any such request pertaining to Eurocurrency Rate Loans) or the L/C Issuer (in the case of a request pertaining to Letters of Credit) shall notify the Administrative Agent, not later than 10:00 a.m., ten Business Days after receipt of such request whether it consents, in its sole discretion, to the making of Eurocurrency Rate Loans or the issuance of Letters of Credit, as the case may be, in such requested currency.

 

(c)           Any failure by a Lender or the L/C Issuer, as the case may be, to respond to such request within the time period specified in the preceding sentence shall be deemed to be a refusal by such Lender or the L/C Issuer, as the case may be, to permit Eurocurrency Rate Loans to be made or Letters of Credit to be issued in such requested currency.  If the Administrative Agent and all the Lenders consent to making Eurocurrency Rate Loans in such requested currency, the Administrative Agent shall so notify the Company and such currency shall thereupon be deemed for all purposes to be an Alternative Currency hereunder for purposes of any Committed Borrowings of Eurocurrency Rate Loans; and if the Administrative Agent and the L/C Issuer consent to the issuance of Letters of Credit in such requested currency, the Administrative Agent shall so notify the Company and such currency shall thereupon be deemed for all purposes to be an Alternative Currency hereunder for purposes of any Letter of Credit issuances. If the Administrative Agent shall fail to obtain consent to any request for an additional currency under this Section 1.07 , the Administrative Agent shall promptly so notify the Company.

 

1.08        Change of Currency .  (a) Each obligation of the Borrowers to make a payment denominated in the national currency unit of any member state of the European Union that adopts the Euro as its lawful currency after the date hereof shall be redenominated into Euro at the time of such adoption (in accordance with the EMU Legislation).  If, in relation to the

 

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currency of any such member state, the basis of accrual of interest expressed in this Agreement in respect of that currency shall be inconsistent with any convention or practice in the London interbank market for the basis of accrual of interest in respect of the Euro, such expressed basis shall be replaced by such convention or practice with effect from the date on which such member state adopts the Euro as its lawful currency; provided that if any Committed Borrowing in the currency of such member state is outstanding immediately prior to such date, such replacement shall take effect, with respect to such Committed Borrowing, at the end of the then current Interest Period.

 

(b)           Each provision of this Agreement shall be subject to such reasonable changes of construction as the Administrative Agent may from time to time specify to be appropriate to reflect the adoption of the Euro by any member state of the European Union and any relevant market conventions or practices relating to the Euro.

 

(c)           Each provision of this Agreement also shall be subject to such reasonable changes of construction as the Administrative Agent may from time to time specify to be appropriate to reflect a change in currency of any other country and any relevant market conventions or practices relating to the change in currency.

 

1.09        Times of Day .  Unless otherwise specified, all references herein to times of day shall be references to Pacific time (daylight or standard, as applicable).

 

1.10        Letter of Credit Amounts .   Unless otherwise specified herein, the amount of a Letter of Credit at any time shall be deemed to be the Dollar Equivalent of the stated amount of such Letter of Credit in effect at such time; provided, however, that with respect to any Letter of Credit that, by its terms or the terms of any Issuer Document related thereto, provides for one or more automatic increases in the stated amount thereof, the amount of such Letter of Credit shall be deemed to be the Dollar Equivalent of the maximum stated amount of such Letter of Credit after giving effect to all such increases, whether or not such maximum stated amount is in effect at such time.

 

ARTICLE II.
THE COMMITMENTS AND CREDIT EXTENSIONS

 

2.01        Committed Loans .   Subject to the terms and conditions set forth herein, each Lender severally agrees to make loans (each such loan, a “ Committed Loan ”) to the Borrowers in Dollars or in one or more Alternative Currencies from time to time, on any Business Day during the Availability Period, in an aggregate amount not to exceed at any time outstanding the amount of such Lender’s Commitment; provided , however , that after giving effect to any Committed Borrowing, (i) the Total Outstandings shall not exceed the Aggregate Commitments, (ii) the Credit Exposure of any Lender shall not exceed such Lender’s Commitment, (iii) the aggregate Outstanding Amount of all Committed Loans made to the Designated Borrowers shall not exceed the Designated Borrower Sublimit, and (iv) the aggregate Outstanding Amount of all Committed Loans denominated in Alternative Currencies shall not exceed the Alternative Currency Sublimit.  Within the limits of each Lender’s Commitment, and subject to the other terms and conditions hereof, the Borrowers may borrow under this Section 2.01 , prepay under

 

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Section 2.05 , and reborrow under this Section 2.01 .  Committed Loans may be Base Rate Loans or Eurocurrency Rate Loans, as further provided herein.

 

2.02        Borrowings, Conversions and Continuations of Committed Loans .

 

(a)           Each Committed Borrowing, each conversion of Committed Loans from one Type to the other, and each continuation of Eurocurrency Rate Loans shall be made upon the Company’s irrevocable notice to the Administrative Agent, which may be given by telephone.  Each such notice must be received by the Administrative Agent not later than 10:00 a.m. (i) three Business Days prior to the requested date of any Borrowing of, conversion to or continuation of Eurocurrency Rate Loans denominated in Dollars or of any conversion of Eurocurrency Rate Loans denominated in Dollars to Base Rate Committed Loans, (ii) four Business Days (or five Business Days in the case of a Special Notice Currency) prior to the requested date of any Borrowing or continuation of Eurocurrency Rate Loans denominated in Alternative Currencies, and (iii) on the requested date of any Borrowing of Base Rate Committed Loans; provided , however , that if the Company wishes to request Eurocurrency Rate Loans having an Interest Period other than one, two, three or six months in duration as provided in the definition of “Interest Period”, the applicable notice must be received by the Administrative Agent not later than 10:00 a.m. (i) four Business Days prior to the requested date of such Borrowing, conversion or continuation of Eurocurrency Rate Loans denominated in Dollars, or (ii) five Business Days (or six Business days in the case of a Special Notice Currency) prior to the requested date of such Borrowing, conversion or continuation of Eurocurrency Rate Loans denominated in Alternative Currencies, whereupon the Administrative Agent shall give prompt notice to the Lenders of such request and determine whether the requested Interest Period is acceptable to all of them.  Not later than 10:00 a.m., (i) three Business Days before the requested date of such Borrowing, conversion or continuation of Eurocurrency Rate Loans denominated in Dollars, or (ii) four Business Days (or five Business days in the case of a Special Notice Currency) prior to the requested date of such Borrowing, conversion or continuation of Eurocurrency Rate Loans denominated in Alternative Currencies, the Administrative Agent shall notify the Company (which notice may be by telephone) whether or not the requested Interest Period has been consented to by all the Lenders.  Each telephonic notice by the Company pursuant to this Section 2.02(a)  must be confirmed promptly by delivery to the Administrative Agent of a written Committed Loan Notice, appropriately completed and signed by a Responsible Officer of the Company.  Each Borrowing of, conversion to or continuation of Eurocurrency Rate Loans shall be in a principal amount of $5,000,000 or a whole multiple of $1,000,000 in excess thereof.  Except as provided in Sections 2.03(c)  and 2.04(c) , each Committed Borrowing of or conversion to Base Rate Committed Loans shall be in a principal amount of $500,000 or a whole multiple of $100,000 in excess thereof.  Each Committed Loan Notice (whether telephonic or written) shall specify (i) whether the Company is requesting a Committed Borrowing, a conversion of Committed Loans from one Type to the other, or a continuation of Eurocurrency Rate Loans, (ii) the requested date of the Borrowing, conversion or continuation, as the case may be (which shall be a Business Day), (iii) the principal amount of Committed Loans to be borrowed, converted or continued, (iv) the Type of Committed Loans to be borrowed or to which existing Committed Loans are to be converted, (v) if applicable, the duration of the Interest Period with respect thereto, (vi) the currency of the Committed Loans to be borrowed, and (vii) if applicable, the Designated Borrower.  If the Company fails to specify a currency in a Committed Loan

 

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Notice requesting a Borrowing, then the Committed Loans so requested shall be made in Dollars.  If the Company fails to specify a Type of Committed Loan in a Committed Loan Notice or if the Company fails to give a timely notice requesting a conversion or continuation, then the applicable Committed Loans shall be made as, or converted to, Base Rate Loans; provided , however , that in the case of a failure to timely request a continuation of Committed Loans denominated in an Alternative Currency, such Loans shall be continued as Eurocurrency Rate Loans in their original currency with an Interest Period of one month.  Any automatic conversion to Base Rate Loans shall be effective as of the last day of the Interest Period then in effect with respect to the applicable Eurocurrency Rate Loans.  If the Company requests a Borrowing of, conversion to, or continuation of Eurocurrency Rate Loans in any such Committed Loan Notice, but fails to specify an Interest Period, it will be deemed to have specified an Interest Period of one month.  No Committed Loan may be converted into or continued as a Committed Loan denominated in a different currency, but instead must be prepaid in the original currency of such Committed Loan and reborrowed in the other currency.

 

(b)           Following receipt of a Committed Loan Notice, the Administrative Agent shall promptly notify each Lender of the amount (and currency) of its Applicable Percentage of the applicable Committed Loans, and if no timely notice of a conversion or continuation is provided by the Company, the Administrative Agent shall notify each Lender of the details of any automatic conversion to Base Rate Loans or continuation of Committed Loans denominated in a currency other than Dollars, in each case as described in the preceding subsection.  In the case of a Committed Borrowing, each Lender shall make the amount of its Committed Loan available to the Administrative Agent in Same Day Funds at the Administrative Agent’s Office for the applicable currency not later than 12:00 p.m., in the case of any Committed Loan denominated in Dollars, and not later than the Applicable Time specified by the Administrative Agent in the case of any Committed Loan in an Alternative Currency, in each case on the Business Day specified in the applicable Committed Loan Notice.  Upon satisfaction of the applicable conditions set forth in Section 4.02 (and, if such Borrowing is the initial Credit Extension, Section 4.01 ), the Administrative Agent shall make all funds so received available to the Company or the other applicable Borrower in like funds as received by the Administrative Agent either by (i) crediting the account of such Borrower on the books of Bank of America with the amount of such funds or (ii) wire transfer of such funds, in each case in accordance with instructions provided to (and reasonably acceptable to) the Administrative Agent by the Company; provided , however , that if, on the date the Committed Loan Notice with respect to such Borrowing denominated in Dollars is given by the Company, there are L/C Borrowings outstanding, then the proceeds of such Borrowing, first , shall be applied to the payment in full of any such L/C Borrowings, and, second , shall be made available to the applicable Borrower as provided above.

 

(c)           Except as otherwise provided herein, a Eurocurrency Rate Loan may be continued or converted only on the last day of an Interest Period for such Eurocurrency Rate Loan.  During the existence of a Default, no Loans may be requested as, converted to or continued as Eurocurrency Rate Loans (whether in Dollars or any Alternative Currency) without the consent of the Required Lenders, and the Required Lenders may demand that any or all of the then outstanding Eurocurrency Rate Loans denominated in an Alternative Currency be prepaid, or redenominated into Dollars in the amount of the Dollar Equivalent thereof, on the last day of the then current Interest Period with respect thereto.

 

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(d)                              The Administrative Agent shall promptly notify the Company and the Lenders of the interest rate applicable to any Interest Period for Eurocurrency Rate Loans upon determination of such interest rate.  At any time that Base Rate Loans are outstanding, the Administrative Agent shall notify the Company and the Lenders of any change in Bank of America’s prime rate used in determining the Base Rate promptly following the public announcement of such change.

 

(e)                                After giving effect to all Committed Borrowings, all conversions of Committed Loans from one Type to the other, and all continuations of Committed Loans as the same Type, there shall not be more than ten Interest Periods in effect with respect to Committed Loans.

 

2.03                     Letters of Credit .

 

(a)                                The Letter of Credit Commitment .

 

(i)                                   Subject to the terms and conditions set forth herein, (A) the L/C Issuer agrees, in reliance upon the agreements of the Lenders set forth in this Section 2.03 , (1) from time to time on any Business Day during the period from the Closing Date until the Letter of Credit Expiration Date, to issue Letters of Credit denominated in Dollars or in one or more Alternative Currencies for the account of the Company or its Subsidiaries, and to amend or extend Letters of Credit previously issued by it, in accordance with subsection (b)  below, and (2) to honor drawings under the Letters of Credit; and (B) the Lenders severally agree to participate in Letters of Credit issued for the account of the Company or its Subsidiaries and any drawings thereunder; provided that after giving effect to any L/C Credit Extension with respect to any Letter of Credit, (x) the Total Outstandings shall not exceed the Aggregate Commitments, (y) the Credit Exposure of any Lender shall not exceed such Lender’s Commitment, and (z) the Outstanding Amount of the L/C Obligations shall not exceed the Letter of Credit Sublimit.  Each request by the Company for the issuance or amendment of a Letter of Credit shall be deemed to be a representation by the Company that the L/C Credit Extension so requested complies with the conditions set forth in the proviso to the preceding sentence.  Within the foregoing limits, and subject to the terms and conditions hereof, the Company’s ability to obtain Letters of Credit shall be fully revolving, and accordingly the Company may, during the foregoing period, obtain Letters of Credit to replace Letters of Credit that have expired or that have been drawn upon and reimbursed.  All Existing Letters of Credit shall be deemed to have been issued pursuant hereto, and from and after the Closing Date shall be subject to and governed by the terms and conditions hereof.

 

(ii)                               The L/C Issuer shall not issue any Letter of Credit, if:

 

(A)                           subject to Section 2.03(b)(iii) , the expiry date of such requested Letter of Credit (other than the Existing Letters of Credit or extensions or renewals thereof) would occur more than twelve months after the date of issuance or last extension, unless the Required Lenders have approved such expiry date; or

 

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(B)                            the expiry date of such requested Letter of Credit would occur after the Letter of Credit Expiration Date, unless all the Lenders have approved such expiry date.

 

(iii)                           The L/C Issuer shall not be under any obligation to issue any Letter of Credit if:

 

(A)                           any order, judgment or decree of any Governmental Authority or arbitrator shall by its terms purport to enjoin or restrain the L/C Issuer from issuing such Letter of Credit, or any Law applicable to the L/C Issuer or any request or directive (whether or not having the force of law) from any Governmental Authority with jurisdiction over the L/C Issuer shall prohibit, or request that the L/C Issuer refrain from, the issuance of letters of credit generally or such Letter of Credit in particular or shall impose upon the L/C Issuer with respect to such Letter of Credit any restriction, reserve or capital requirement (for which the L/C Issuer is not otherwise compensated hereunder) not in effect on the Closing Date, or shall impose upon the L/C Issuer any unreimbursed loss, cost or expense which was not applicable on the Closing Date and which the L/C Issuer in good faith deems material to it;

 

(B)                            the issuance of such Letter of Credit would violate one or more policies of the L/C Issuer;

 

(C)                            except as otherwise agreed by the Administrative Agent and the L/C Issuer, such Letter of Credit is in an initial stated amount less than $100,000, in the case of a commercial Letter of Credit, or $50,000, in the case of a standby Letter of Credit;

 

(D)                           except as otherwise agreed by the Administrative Agent and the L/C Issuer, such Letter of Credit is to be denominated in a currency other than Dollars or an Alternative Currency;

 

(E)                             the L/C Issuer does not as of the issuance date of such requested Letter of Credit issue Letters of Credit in the requested currency;

 

(F)                              such Letter of Credit (other than the Existing Letters of Credit or extensions or renewals thereof) contains any provisions for automatic reinstatement of the stated amount after any drawing thereunder; or

 

(G)                           any Lender is at that time a Defaulting Lender, unless the L/C Issuer has entered into arrangements, including the delivery of Cash Collateral, satisfactory to the L/C Issuer (in its sole discretion) with the Borrowers or such Lender to eliminate the L/C Issuer’s actual or potential Fronting Exposure (after giving effect to Section 2.17(a)(iv) ) with respect to the Defaulting Lender arising from either the Letter of Credit then proposed to be issued or that Letter of Credit and all other L/C Obligations as to which the L/C Issuer has actual or potential Fronting Exposure, as it may elect in its sole discretion.

 

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(iv)                           The L/C Issuer shall not amend any Letter of Credit, excluding, except with respect to the requirement under Section 2.03(ii)(B)  that the expiry date of such Letter of Credit not occur after the Letter of Credit Expiration Date, all Existing Letters of Credit, if the L/C Issuer would not be permitted at such time to issue such Letter of Credit in its amended form under the terms hereof.

 

(v)                               The L/C Issuer shall be under no obligation to amend any Letter of Credit if (A) the L/C Issuer would have no obligation at such time to issue such Letter of Credit in its amended form under the terms hereof, or (B) the beneficiary of such Letter of Credit does not accept the proposed amendment to such Letter of Credit.

 

(vi)                           The L/C Issuer shall act on behalf of the Lenders with respect to any Letters of Credit issued by it and the documents associated therewith, and the L/C Issuer shall have all of the benefits and immunities (A) provided to the Administrative Agent in Article IX with respect to any acts taken or omissions suffered by the L/C Issuer in connection with Letters of Credit issued by it or proposed to be issued by it and Issuer Documents pertaining to such Letters of Credit as fully as if the term “Administrative Agent” as used in Article IX included the L/C Issuer with respect to such acts or omissions, and (B) as additionally provided herein with respect to the L/C Issuer.

 

(b)                               Procedures for Issuance and Amendment of Letters of Credit; Auto-Extension Letters of Credit .

 

(i)                                   Each Letter of Credit shall be issued or amended, as the case may be, upon the request of the Company delivered to the L/C Issuer (with a copy to the Administrative Agent) in the form of a Letter of Credit Application, appropriately completed and signed by a Responsible Officer of the Company.  Such Letter of Credit Application may be sent by facsimile, by United States mail, by overnight courier, by electronic transmission using the system provided by the L/C Issuer, by personal delivery or by any other means acceptable to the L/C Issuer.  Such Letter of Credit Application must be received by the L/C Issuer and the Administrative Agent not later than 10:00 a.m. at least two Business Days (or such other date and time as the Administrative Agent and the L/C Issuer may agree in a particular instance in their sole discretion) prior to the proposed issuance date or date of amendment, as the case may be.  In the case of a request for an initial issuance of a Letter of Credit, such Letter of Credit Application shall specify in form and detail satisfactory to the L/C Issuer: (A) the proposed issuance date of the requested Letter of Credit (which shall be a Business Day); (B) the amount and currency thereof; (C) the expiry date thereof; (D) the name and address of the beneficiary thereof; (E) the documents to be presented by such beneficiary in case of any drawing thereunder; (F) the full text of any certificate to be presented by such beneficiary in case of any drawing thereunder; (G) the purpose and nature of the requested Letter of Credit; and (H) such other matters as the L/C Issuer may require.  In the case of a request for an amendment of any outstanding Letter of Credit, such Letter of Credit Application shall specify in form and detail satisfactory to the L/C Issuer (A) the Letter of Credit to be amended; (B) the proposed date of amendment thereof (which shall be a Business Day); (C) the nature of the proposed amendment; and (D) such other matters as the L/C Issuer may require.

 

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Additionally, the Company shall furnish to the L/C Issuer and the Administrative Agent such other documents and information pertaining to such requested Letter of Credit issuance or amendment, including any Issuer Documents, as the L/C Issuer or the Administrative Agent may require.

 

(ii)                               Promptly after receipt of any Letter of Credit Application, the L/C Issuer will confirm with the Administrative Agent (by telephone or in writing) that the Administrative Agent has received a copy of such Letter of Credit Application from the Company and, if not, the L/C Issuer will provide the Administrative Agent with a copy thereof.  Unless the L/C Issuer has received written notice from any Lender, the Administrative Agent or any Loan Party, at least one Business Day prior to the requested date of issuance or amendment of the applicable Letter of Credit, that one or more applicable conditions contained in Article IV shall not then be satisfied, then, subject to the terms and conditions hereof, the L/C Issuer shall, on the requested date, issue a Letter of Credit for the account of the Company (or the applicable Subsidiary) or enter into the applicable amendment, as the case may be, in each case in accordance with the L/C Issuer’s usual and customary business practices.  Immediately upon the issuance of each Letter of Credit, each Lender shall be deemed to, and hereby irrevocably and unconditionally agrees to, purchase from the L/C Issuer a risk participation in such Letter of Credit in an amount equal to the product of such Lender’s Applicable Percentage times the amount of such Letter of Credit.

 

(iii)                           If the Company so requests in any applicable Letter of Credit Application, the L/C Issuer may, in its sole and absolute discretion, agree to issue a Letter of Credit that has automatic extension provisions (each, an “ Auto-Extension Letter of Credit ”); provided that any such Auto-Extension Letter of Credit must permit the L/C Issuer to prevent any such extension at least once in each twelve-month period (commencing with the date of issuance of such Letter of Credit) by giving prior notice to the beneficiary thereof not later than a day (the “ Non-Extension Notice Date ”) in each such twelve-month period to be agreed upon at the time such Letter of Credit is issued.  Unless otherwise directed by the L/C Issuer, the Company shall not be required to make a specific request to the L/C Issuer for any such extension.  Once an Auto-Extension Letter of Credit has been issued, the Lenders shall be deemed to have authorized (but may not require) the L/C Issuer to permit the extension of such Letter of Credit at any time to an expiry date not later than the Letter of Credit Expiration Date; provided , however , that the L/C Issuer shall not permit any such extension if (A) the L/C Issuer has determined that it would not be permitted, or would have no obligation, at such time to issue such Letter of Credit in its revised form (as extended) under the terms hereof (by reason of the provisions of clause (ii)  or (iii)  of Section 2.03(a)  or otherwise), or (B) it has received notice (which may be by telephone or in writing) on or before the day that is five Business Days before the Non-Extension Notice Date (1) from the Administrative Agent that the Required Lenders have elected not to permit such extension or (2) from the Administrative Agent, any Lender or the Company that one or more of the applicable conditions specified in Section 4.02 is not then satisfied, and in each such case directing the L/C Issuer not to permit such extension.

 

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(iv)                           Promptly after its delivery of any Letter of Credit or any amendment to a Letter of Credit to an advising bank with respect thereto or to the beneficiary thereof, the L/C Issuer will also deliver to the Company and the Administrative Agent a true and complete copy of such Letter of Credit or amendment.

 

(c)                                Drawings and Reimbursements; Funding of Participations .

 

(i)                                   Upon receipt from the beneficiary of any Letter of Credit of any notice of a drawing under such Letter of Credit, the L/C Issuer shall notify the Company and the Administrative Agent thereof.  In the case of a Letter of Credit denominated in an Alternative Currency, the Company shall reimburse the L/C Issuer in such Alternative Currency, unless (A) the L/C Issuer ( at its option with respect to standby letters of credit, but only with mutual agreement between the Company and the L/C Issuer with respect to commercial letters of credit) shall have specified in such notice that it will require reimbursement in Dollars, or (B) in the absence of any such requirement for reimbursement in Dollars, the Company shall have notified the L/C Issuer promptly following receipt of the notice of drawing that the Company will reimburse the L/C Issuer in Dollars (subject to the mutual agreement of the L/C Issuer with respect to reimbursement of commercial letters of credit).  In the case of any such reimbursement in Dollars of a drawing under a Letter of Credit denominated in an Alternative Currency, the L/C Issuer shall notify the Company of the Dollar Equivalent of the amount of the drawing promptly following the determination thereof.  Not later than 11:00 a.m. on the date of any payment by the L/C Issuer under a Letter of Credit to be reimbursed in Dollars, or the Applicable Time on the date of any payment by the L/C Issuer under a Letter of Credit to be reimbursed in an Alternative Currency (each such date, an “ Honor Date ”), the Company shall reimburse the L/C Issuer through the Administrative Agent in an amount equal to the amount of such drawing and in the applicable currency.  In the event that (A) a drawing denominated in an Alternative Currency is to be reimbursed in Dollars pursuant to the second sentence in this Section 2.03(c)(i)  and (B) the Dollar amount paid by the Company, whether on or after the Honor Date, shall not be adequate on the date of that payment to purchase in accordance with normal banking procedures a sum denominated in the Alternative Currency equal to the drawing, the Company agrees, as a separate and independent obligation, to indemnify the L/C Issuer for the loss resulting from its inability on that date to purchase the Alternative Currency in the full amount of the drawing.  If the Company fails to so reimburse the L/C Issuer by such time, the Administrative Agent shall promptly notify each Lender of the Honor Date, the amount of the unreimbursed drawing (expressed in Dollars in the amount of the Dollar Equivalent thereof in the case of a Letter of Credit denominated in an Alternative Currency) (the “ Unreimbursed Amount ”), and the amount of such Lender’s Applicable Percentage thereof.  In such event, the Company shall be deemed to have requested a Committed Borrowing of Base Rate Loans to be disbursed on the Honor Date in an amount equal to the Unreimbursed Amount, without regard to the minimum and multiples specified in Section 2.02 for the principal amount of Base Rate Loans, but subject to the amount of the unutilized portion of the Aggregate Commitments and the conditions set forth in Section 4.02 (other than the delivery of a Committed Loan Notice).  Any notice given by the L/C Issuer or the Administrative Agent pursuant to this Section

 

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2.03(c)(i)  may be given by telephone if immediately confirmed in writing; provided that the lack of such an immediate confirmation shall not affect the conclusiveness or binding effect of such notice.

 

(ii)                               Each Lender shall upon any notice pursuant to Section 2.03(c)(i)  make funds available (and the Administrative Agent may apply Cash Collateral provided for this purpose) for the account of the L/C Issuer, in Dollars, at the Administrative Agent’s Office for Dollar-denominated payments in an amount equal to its Applicable Percentage of the Unreimbursed Amount not later than 1:00 p.m. on the Business Day specified in such notice by the Administrative Agent, whereupon, subject to the provisions of Section 2.03(c)(iii) , each Lender that so makes funds available shall be deemed to have made a Base Rate Committed Loan to the Company in such amount.  The Administrative Agent shall remit the funds so received to the L/C Issuer in Dollars.

 

(iii)                           With respect to any Unreimbursed Amount that is not fully refinanced by a Committed Borrowing of Base Rate Loans because the conditions set forth in Section 4.02 cannot be satisfied or for any other reason, the Company shall be deemed to have incurred from the L/C Issuer an L/C Borrowing in the amount of the Unreimbursed Amount that is not so refinanced, which L/C Borrowing shall be due and payable on demand (together with interest) and shall bear interest at the Default Rate.  In such event, each Lender’s payment to the Administrative Agent for the account of the L/C Issuer pursuant to Section 2.03(c)(ii)  shall be deemed payment in respect of its participation in such L/C Borrowing and shall constitute an L/C Advance from such Lender in satisfaction of its participation obligation under this Section 2.03 .

 

(iv)                           Until each Lender funds its Committed Loan or L/C Advance pursuant to this Section 2.03(c)  to reimburse the L/C Issuer for any amount drawn under any Letter of Credit, interest in respect of such Lender’s Applicable Percentage of such amount shall be solely for the account of the L/C Issuer.

 

(v)                               Each Lender’s obligation to make Committed Loans or L/C Advances to reimburse the L/C Issuer for amounts drawn under Letters of Credit, as contemplated by this Section 2.03(c) , shall be absolute and unconditional and shall not be affected by any circumstance, including (A) any setoff, counterclaim, recoupment, defense or other right which such Lender may have against the L/C Issuer, the Company, any Subsidiary or any other Person for any reason whatsoever; (B) the occurrence or continuance of a Default, or (C) any other occurrence, event or condition, whether or not similar to any of the foregoing; provided , however , that each Lender’s obligation to make Committed Loans pursuant to this Section 2.03(c)  is subject to the conditions set forth in Section 4.02 (other than delivery by the Company of a Committed Loan Notice).  No such making of an L/C Advance shall relieve or otherwise impair the obligation of the Company to reimburse the L/C Issuer for the amount of any payment made by the L/C Issuer under any Letter of Credit, together with interest as provided herein.

 

(vi)                           If any Lender fails to make available to the Administrative Agent for the account of the L/C Issuer any amount required to be paid by such Lender pursuant to the foregoing provisions of this Section 2.03(c)  by the time specified in Section 2.03(c)(ii) ,

 

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the L/C Issuer shall be entitled to recover from such Lender (acting through the Administrative Agent), on demand, such amount with interest thereon for the period from the date such payment is required to the date on which such payment is immediately available to the L/C Issuer at a rate per annum equal to the applicable Overnight Rate from time to time in effect, plus any administrative, processing or similar fees customarily charged by the L/C Issuer in connection with the foregoing.  If such Lender pays such amount (less such interest and fees as aforesaid), the amount so paid shall constitute such Lender’s Committed Loan included in the relevant Committed Borrowing or L/C Advance in respect of the relevant L/C Borrowing, as the case may be.  A certificate of the L/C Issuer submitted to any Lender (through the Administrative Agent) with respect to any amounts owing under this clause (vi)  shall be conclusive absent manifest error.

 

(d)                              Repayment of Participations .

 

(i)                                   At any time after the L/C Issuer has made a payment under any Letter of Credit and has received from any Lender such Lender’s L/C Advance in respect of such payment in accordance with Section 2.03(c) , if the Administrative Agent receives for the account of the L/C Issuer any payment in respect of the related Unreimbursed Amount or interest thereon (whether directly from the Company or otherwise, including proceeds of Cash Collateral applied thereto by the Administrative Agent), the Administrative Agent will distribute to such Lender its Applicable Percentage thereof (appropriately adjusted, in the case of interest payments, to reflect the period of time during which such Lender’s L/C Advance was outstanding) in Dollars and in the same funds as those received by the Administrative Agent.

 

(ii)                               If any payment received by the Administrative Agent for the account of the L/C Issuer pursuant to Section 2.03(c)(i)  is required to be returned under any of the circumstances described in Section 10.05 (including pursuant to any settlement entered into by the L/C Issuer in its discretion), each Lender shall pay to the Administrative Agent for the account of the L/C Issuer its Applicable Percentage thereof on demand of the Administrative Agent, plus interest thereon from the date of such demand to the date such amount is returned by such Lender, at a rate per annum equal to the applicable Overnight Rate from time to time in effect.  The obligations of the Lenders under this clause shall survive the payment in full of the Obligations and the termination of this Agreement.

 

(e)                                Obligations Absolute .   The obligation of the Company to reimburse the L/C Issuer for each drawing under each Letter of Credit and to repay each L/C Borrowing shall be absolute, unconditional and irrevocable, and shall be paid strictly in accordance with the terms of this Agreement under all circumstances, including the following:

 

(i)                                   any lack of validity or enforceability of such Letter of Credit, this Agreement, or any other Loan Document;

 

(ii)                               the existence of any claim, counterclaim, setoff, defense or other right that the Company or any Subsidiary may have at any time against any beneficiary or any

 

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transferee of such Letter of Credit (or any Person for whom any such beneficiary or any such transferee may be acting), the L/C Issuer or any other Person, whether in connection with this Agreement, the transactions contemplated hereby or by such Letter of Credit or any agreement or instrument relating thereto, or any unrelated transaction;

 

(iii)                           any draft, demand, certificate or other document presented under such Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect; or any loss or delay in the transmission or otherwise of any document required in order to make a drawing under such Letter of Credit;

 

(iv)                           waiver by the L/C Issuer of any requirement that exists for the L/C Issuer’s protection and not the protection of the Company or any waiver by the L/C Issuer which does not in fact materially prejudice the Company;

 

(v)                               honor of a demand for payment presented electronically even if such Letter of Credit requires that demand be in the form of a draft;

 

(vi)                           any payment made by the L/C Issuer in respect of an otherwise complying item presented after the date specified as the expiration date of, or the date by which documents must be received under, such Letter of Credit if presentation after such date is authorized by the UCC, the ISP or the UCP, as applicable;

 

(vii)                       any payment by the L/C Issuer under such Letter of Credit against presentation of a draft or certificate that does not strictly comply with the terms of such Letter of Credit; or any payment made by the L/C Issuer under such Letter of Credit to any Person purporting to be a trustee in bankruptcy, debtor-in-possession, assignee for the benefit of creditors, liquidator, receiver or other representative of or successor to any beneficiary or any transferee of such Letter of Credit, including any arising in connection with any proceeding under any Debtor Relief Law;

 

(viii)                   any adverse change in the relevant exchange rates or in the availability of the relevant Alternative Currency to the Company or any Subsidiary or in the relevant currency markets generally; or

 

(ix)                           any other circumstance or happening whatsoever, whether or not similar to any of the foregoing, including any other circumstance that might otherwise constitute a defense available to, or a discharge of, the Company or any Subsidiary.

 

The Company shall promptly examine a copy of each Letter of Credit and each amendment thereto that is delivered to it and, in the event of any claim of noncompliance with the Company’s instructions or other irregularity, the Company will immediately notify the L/C Issuer.  The Company shall be conclusively deemed to have waived any such claim against the L/C Issuer and its correspondents unless such notice is given as aforesaid.

 

(f)                                 Role of L/C Issuer .   Each Lender and the Company agree that, in paying any drawing under a Letter of Credit, the L/C Issuer shall not have any responsibility to obtain any

 

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document (other than any sight draft, certificates and documents expressly required by the Letter of Credit) or to ascertain or inquire as to the validity or accuracy of any such document or the authority of the Person executing or delivering any such document.  None of the L/C Issuer, the Administrative Agent, any of their respective Related Parties nor any correspondent, participant or assignee of the L/C Issuer shall be liable to any Lender for (i) any action taken or omitted in connection herewith at the request or with the approval of the Lenders or the Required Lenders, as applicable; (ii) any action taken or omitted in the absence of gross negligence or willful misconduct; or (iii) the due execution, effectiveness, validity or enforceability of any document or instrument related to any Letter of Credit or Issuer Document.  The Company hereby assumes all risks of the acts or omissions of any beneficiary or transferee with respect to its use of any Letter of Credit; provided , however , that this assumption is not intended to, and shall not, preclude the Company’s pursuing such rights and remedies as it may have against the beneficiary or transferee at law or under any other agreement.  None of the L/C Issuer, the Administrative Agent, any of their respective Related Parties nor any correspondent, participant or assignee of the L/C Issuer shall be liable or responsible for any of the matters described in clauses (i)  through (ix)  of Section 2.03(e) ; provided , however , that anything in such clauses to the contrary notwithstanding, the Company may have a claim against the L/C Issuer, and the L/C Issuer may be liable to the Company, to the extent, but only to the extent, of any direct, as opposed to consequential or exemplary, damages suffered by the Company which the Company proves were caused by the L/C Issuer’s willful misconduct or gross negligence or the L/C Issuer’s willful failure to pay under any Letter of Credit after the presentation to it by the beneficiary of a sight draft and certificate(s) strictly complying with the terms and conditions of a Letter of Credit.  In furtherance and not in limitation of the foregoing, the L/C Issuer may accept documents that appear on their face to be in order, without responsibility for further investigation, regardless of any notice or information to the contrary, and the L/C Issuer shall not be responsible for the validity or sufficiency of any instrument transferring or assigning or purporting to transfer or assign a Letter of Credit or the rights or benefits thereunder or proceeds thereof, in whole or in part, which may prove to be invalid or ineffective for any reason.  The L/C Issuer may send a Letter of Credit or conduct any communication to or from the beneficiary via the Society for Worldwide Interbank Financial Telecommunication (“ SWIFT ”) message or overnight courier, or any other commercially reasonable means of communicating with a beneficiary.

 

(g)                               Applicability of ISP and UCP; Limitation of Liability . Unless otherwise expressly agreed by the L/C Issuer and the Company when a Letter of Credit is issued (including any such agreement applicable to an Existing Letter of Credit), (i) the rules of the ISP shall apply to each standby Letter of Credit, and (ii) the rules of the UCP shall apply to each commercial Letter of Credit.  Notwithstanding the foregoing, the L/C Issuer shall not be responsible to the Company for, and the L/C Issuer’s rights and remedies against the Company shall not be impaired by, any action or inaction of the L/C Issuer required or permitted under any law, order, or practice that is consistent with this Agreement and that is required or permitted to be applied to any Letter of Credit or this Agreement, including the Law or any order of a jurisdiction where the L/C Issuer or the beneficiary is located, the practice stated in the ISP or UCP, as applicable, or in the decisions, opinions, practice statements, or official commentary of the ICC Banking Commission, the Bankers Association for Finance and Trade - International Financial Services Association (BAFT-IFSA), or the Institute of International Banking Law & Practice, whether or not any Letter of Credit chooses such law or practice.

 

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(h)           Letter of Credit Fees .  The Company shall pay to the Administrative Agent for the account of each Lender in accordance with its Applicable Percentage, in Dollars, a Letter of Credit fee (the “ Letter of Credit Fee ”) for each Letter of Credit equal to the Applicable Rate times the Dollar Equivalent of the daily amount available to be drawn under such Letter of Credit.  For purposes of computing the daily amount available to be drawn under any Letter of Credit, the amount of such Letter of Credit shall be determined in accordance with Section 1.10 .  Letter of Credit Fees shall be (i) computed on a quarterly basis in arrears and (ii) due and payable on the first Business Day after the end of each March, June, September and December, commencing with the first such date to occur after the issuance of such Letter of Credit, on the Letter of Credit Expiration Date and thereafter on demand.  If there is any change in the Applicable Rate during any quarter, the daily amount available to be drawn under each Letter of Credit shall be computed and multiplied by the Applicable Rate separately for each period during such quarter that such Applicable Rate was in effect.  Notwithstanding anything to the contrary contained herein, upon the request of the Required Lenders, while any Event of Default exists, all Letter of Credit Fees shall accrue at the Default Rate.

 

(i)            Fronting Fee and Documentary and Processing Charges Payable to L/C Issuer .  The Company shall pay directly to the L/C Issuer for its own account, in Dollars, a fronting fee (i) with respect to each commercial Letter of Credit, at the rate equal to 0.125% of the amount of such Letter of Credit, computed on the Dollar Equivalent of the amount of such Letter of Credit, and payable upon the issuance thereof, (ii) with respect to any amendment of a commercial Letter of Credit increasing the amount of such Letter of Credit, at a rate separately agreed between the Company and the L/C Issuer, computed on the Dollar Equivalent of the amount of such increase, and payable upon the effectiveness of such amendment, and (iii) with respect to each standby Letter of Credit, at the rate per annum equal to 0.125%, computed on the Dollar Equivalent of the daily amount available to be drawn under such Letter of Credit  on a quarterly basis in arrears and due and payable on the first Business Day after the end of each March, June, September and December in respect of the most recently-ended quarterly period (or portion thereof, in the case of the first payment), commencing with the first such date to occur after the issuance of such Letter of Credit, on the Letter of Credit Expiration Date and thereafter on demand.  For purposes of computing the daily amount available to be drawn under any Letter of Credit, the amount of such Letter of Credit shall be determined in accordance with Section 1.10 .  In addition, the Company shall pay directly to the L/C Issuer for its own account, in Dollars, the customary issuance, presentation, amendment and other processing fees, and other standard costs and charges, of the L/C Issuer relating to letters of credit as from time to time in effect.  Such customary fees and standard costs and charges are due and payable on demand and are nonrefundable.

 

(j)            Conflict with Issuer Documents .  In the event of any conflict between the terms hereof and the terms of any Issuer Document, the terms hereof shall control.

 

(k)           Letters of Credit Issued for Subsidiaries .  Notwithstanding that a Letter of Credit issued or outstanding hereunder is in support of any obligations of, or is for the account of, a Subsidiary, the Company shall be obligated to reimburse the L/C Issuer hereunder for any and all drawings under such Letter of Credit.  The Company hereby acknowledges that the issuance of

 

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Letters of Credit for the account of Subsidiaries inures to the benefit of the Company, and that the Company’s business derives substantial benefits from the businesses of such Subsidiaries.

 

(l)            Reporting of Letter of Credit Information .  On (i) the last Business Day of each calendar month, and (ii) each date that an L/C Credit Extension occurs with respect to any Letter of Credit, the L/C Issuer shall deliver to the Administrative Agent a report in the form of Exhibit F hereto, appropriately completed with the information for every Letter of Credit issued by the L/C Issuer that is outstanding hereunder

 

2.04        Swing Line Loans .

 

(a)           The Swing Line .  Subject to the terms and conditions set forth herein, the Swing Line Lender agrees, in reliance upon the agreements of the other Lenders set forth in this Section 2.04 , to make loans in Dollars (each such loan, a “ Swing Line Loan ”) to the Company from time to time on any Business Day during the Availability Period in an aggregate amount not to exceed at any time outstanding the amount of the Swing Line Sublimit, notwithstanding the fact that such Swing Line Loans, when aggregated with the Applicable Percentage of the Outstanding Amount of Committed Loans and L/C Obligations of the Lender acting as Swing Line Lender, may exceed the amount of such Lender’s Commitment; provided , however , that after giving effect to any Swing Line Loan, (i) the Total Outstandings shall not exceed the Aggregate Commitments, and (ii) the Credit Exposure of any Lender shall not exceed such Lender’s Commitment, and provided , further , that the Company shall not use the proceeds of any Swing Line Loan to refinance any outstanding Swing Line Loan.  Within the foregoing limits, and subject to the other terms and conditions hereof, the Company may borrow under this Section 2.04 , prepay under Section 2.05 , and reborrow under this Section 2.04 .  Each Swing Line Loan shall be a Base Rate Loan.  Immediately upon the making of a Swing Line Loan, each Lender shall be deemed to, and hereby irrevocably and unconditionally agrees to, purchase from the Swing Line Lender a risk participation in such Swing Line Loan in an amount equal to the product of such Lender’s Applicable Percentage times the amount of such Swing Line Loan.

 

(b)           Borrowing Procedures .  Each Swing Line Borrowing shall be made upon the Company’s irrevocable notice to the Swing Line Lender and the Administrative Agent, which may be given by telephone. Each such notice must be received by the Swing Line Lender and the Administrative Agent not later than 10:00 a.m. on the requested borrowing date, and shall specify (i) the amount to be borrowed, which shall be a minimum of $100,000 and (ii) the requested borrowing date, which shall be a Business Day.  Each such telephonic notice must be confirmed promptly by delivery to the Swing Line Lender and the Administrative Agent of a written Swing Line Loan Notice, appropriately completed and signed by a Responsible Officer of the Company.  Promptly after receipt by the Swing Line Lender of any telephonic Swing Line Loan Notice, the Swing Line Lender will confirm with the Administrative Agent (by telephone or in writing) that the Administrative Agent has also received such Swing Line Loan Notice and, if not, the Swing Line Lender will notify the Administrative Agent (by telephone or in writing) of the contents thereof.  Unless the Swing Line Lender has received notice (by telephone or in writing) from the Administrative Agent (including at the request of any Lender) prior to 11:00 a.m. on the date of the proposed Swing Line Borrowing (A) directing the Swing Line Lender not to make such Swing Line Loan as a result of the limitations set forth in the first proviso to the

 

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first sentence of Section 2.04(a) , or (B) that one or more of the applicable conditions specified in Article IV is not then satisfied, then, subject to the terms and conditions hereof, the Swing Line Lender will, not later than 12:00 p.m. on the borrowing date specified in such Swing Line Loan Notice, make the amount of its Swing Line Loan available to the Company either (i) at its office by crediting the account of the Company on the books of the Swing Line Lender in immediately available funds, or (ii) by wire transfer to any third party for which the Company has provided wiring instructions to the Swing Line Lender not less than two Business Days prior to the related borrowing date.

 

(c)           Refinancing of Swing Line Loans .

 

(i)            The Swing Line Lender at any time in its sole and absolute discretion may request, on behalf of the Company (which hereby irrevocably authorizes the Swing Line Lender to so request on its behalf), that each Lender make a Base Rate Committed Loan in an amount equal to such Lender’s Applicable Percentage of the amount of Swing Line Loans then outstanding.  Such request shall be made in writing (which written request shall be deemed to be a Committed Loan Notice for purposes hereof) and in accordance with the requirements of Section 2.02 , without regard to the minimum and multiples specified therein for the principal amount of Base Rate Loans, but subject to the unutilized portion of the Aggregate Commitments and the conditions set forth in Section 4.02 .  The Swing Line Lender shall furnish the Company with a copy of the applicable Committed Loan Notice promptly after delivering such notice to the Administrative Agent.  Each Lender shall make an amount equal to its Applicable Percentage of the amount specified in such Committed Loan Notice available to the Administrative Agent in Same Day Funds (and the Administrative Agent may apply Cash Collateral available with respect to the applicable Swing Line Loan) for the account of the Swing Line Lender at the Administrative Agent’s Office for Dollar-denominated payments not later than 10:00 a.m. on the day specified in such Committed Loan Notice, whereupon, subject to Section 2.04(c)(ii) , each Lender that so makes funds available shall be deemed to have made a Base Rate Committed Loan to the Company in such amount.  The Administrative Agent shall remit the funds so received to the Swing Line Lender.

 

(ii)           If for any reason any Swing Line Loan cannot be refinanced by such a Committed Borrowing in accordance with Section 2.04(c)(i) , the request for Base Rate Committed Loans submitted by the Swing Line Lender as set forth herein shall be deemed to be a request by the Swing Line Lender that each of the Lenders fund its risk participation in the relevant Swing Line Loan and each Lender’s payment to the Administrative Agent for the account of the Swing Line Lender pursuant to Section 2.04(c)(i)  shall be deemed payment in respect of such participation.

 

(iii)          If any Lender fails to make available to the Administrative Agent for the account of the Swing Line Lender any amount required to be paid by such Lender pursuant to the foregoing provisions of this Section 2.04(c)  by the time specified in Section 2.04(c)(i) , the Swing Line Lender shall be entitled to recover from such Lender (acting through the Administrative Agent), on demand, such amount with interest thereon for the period from the date such payment is required to the date on which such payment

 

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is immediately available to the Swing Line Lender at a rate per annum equal to the applicable Overnight Rate from time to time in effect, plus any administrative processing or similar fees customarily charged by the Swing Line Lender in connection with the foregoing.  If such Lender pays such amount (with interest and fees as aforesaid), the amount so paid shall constitute such Lender’s Committed Loan included in the relevant Committed Borrowing or funded participation in the relevant Swing Line Loan, as the case may be.  A certificate of the Swing Line Lender submitted to any Lender (through the Administrative Agent) with respect to any amounts owing under this clause (iii)  shall be conclusive absent manifest error.

 

(iv)          Each Lender’s obligation to make Committed Loans or to purchase and fund risk participations in Swing Line Loans pursuant to this Section 2.04(c)  shall be absolute and unconditional and shall not be affected by any circumstance, including (A) any setoff, counterclaim, recoupment, defense or other right which such Lender may have against the Swing Line Lender, the Company or any other Person for any reason whatsoever, (B) the occurrence or continuance of a Default, or (C) any other occurrence, event or condition, whether or not similar to any of the foregoing; provided , however , that each Lender’s obligation to make Committed Loans pursuant to this Section 2.04(c)  is subject to the conditions set forth in Section 4.02 .  No such funding of risk participations shall relieve or otherwise impair the obligation of the Company to repay Swing Line Loans, together with interest as provided herein.

 

(d)           Repayment of Participations .

 

(i)            At any time after any Lender has purchased and funded a risk participation in a Swing Line Loan, if the Swing Line Lender receives any payment on account of such Swing Line Loan, the Swing Line Lender will distribute to such Lender its Applicable Percentage of such payment (appropriately adjusted, in the case of interest payments, to reflect the period of time during which such Lender’s risk participation was funded) in the same funds as those received by the Swing Line Lender.

 

(ii)           If any payment received by the Swing Line Lender in respect of principal or interest on any Swing Line Loan is required to be returned by the Swing Line Lender under any of the circumstances described in Section 10.05 (including pursuant to any settlement entered into by the Swing Line Lender in its discretion), each Lender shall pay to the Swing Line Lender its Applicable Percentage thereof on demand of the Administrative Agent, plus interest thereon from the date of such demand to the date such amount is returned, at a rate per annum equal to the applicable Overnight Rate.  The Administrative Agent will make such demand upon the request of the Swing Line Lender.  The obligations of the Lenders under this clause shall survive the payment in full of the Obligations and the termination of this Agreement.

 

(e)           Interest for Account of Swing Line Lender .  The Swing Line Lender shall be responsible for invoicing the Company for interest on the Swing Line Loans.  Until each Lender funds its Base Rate Committed Loan or risk participation pursuant to this Section 2.04 to refinance such Lender’s Applicable Percentage of any Swing Line Loan, interest in respect of such Applicable Percentage shall be solely for the account of the Swing Line Lender.

 

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(f)            Payments Directly to Swing Line Lender .  The Company shall make all payments of principal and interest in respect of the Swing Line Loans directly to the Swing Line Lender.

 

2.05        Prepayments .  (a)  Each Borrower may, upon notice from the Company to the Administrative Agent, at any time or from time to time voluntarily prepay Committed Loans in whole or in part without premium or penalty; provided that (i) such notice must be received by the Administrative Agent not later than 10:00 a.m. (A) three Business Days prior to any date of prepayment of Eurocurrency Rate Loans denominated in Dollars, (B) four Business Days (or five, in the case of prepayment of Loans denominated in Special Notice Currencies) prior to any date of prepayment of Eurocurrency Rate Loans denominated in Alternative Currencies, and (C) on the date of prepayment of Base Rate Committed Loans; (ii) any prepayment of Eurocurrency Rate Loans denominated in Dollars shall be in a principal amount of $5,000,000 or a whole multiple of $1,000,000 in excess thereof; (iii) any prepayment of Eurocurrency Rate Loans denominated in Alternative Currencies shall be in a minimum principal amount of $5,000,000 or a whole multiple of $1,000,000 in excess thereof; and (iv) any prepayment of Base Rate Committed Loans shall be in a principal amount of $500,000 or a whole multiple of $100,000 in excess thereof or, in each case, if less, the entire principal amount thereof then outstanding.  Each such notice shall specify the date and amount of such prepayment and the Type(s) of Committed Loans to be prepaid and, if Eurocurrency Rate Loans are to be prepaid, the Interest Period(s) of such Loans.  The Administrative Agent will promptly notify each Lender of its receipt of each such notice, and of the amount of such Lender’s Applicable Percentage of such prepayment.  If such notice is given by the Company, the applicable Borrower shall make such prepayment and the payment amount specified in such notice shall be due and payable on the date specified therein.  Any prepayment of a Eurocurrency Rate Loan shall be accompanied by all accrued interest on the amount prepaid, together with any additional amounts required pursuant to Section 3.05 .  Subject to Section 2.17 , each such prepayment shall be applied to the Committed Loans of the Lenders in accordance with their respective Applicable Percentages.

 

(b)           The Company may, upon notice to the Swing Line Lender (with a copy to the Administrative Agent), at any time or from time to time, voluntarily prepay Swing Line Loans in whole or in part without premium or penalty; provided that (i) such notice must be received by the Swing Line Lender and the Administrative Agent not later than 10:00 a.m. on the date of the prepayment, and (ii) any such prepayment shall be in a minimum principal amount of $100,000.  Each such notice shall specify the date and amount of such prepayment.  If such notice is given by the Company, the Company shall make such prepayment and the payment amount specified in such notice shall be due and payable on the date specified therein.

 

(c)           If the Administrative Agent notifies the Company at any time that the Total Outstandings at such time exceed the Aggregate Commitments then in effect, then, within two Business Days after receipt of such notice, the Borrowers shall prepay Loans and/or the Company shall Cash Collateralize the L/C Obligations in an aggregate amount sufficient to reduce such Outstanding Amount as of such date of payment to an amount not to exceed 100% of the Aggregate Commitments then in effect; provided , however , that, subject to the provisions of Section 2.03(g)(ii) , the Company shall not be required to Cash Collateralize the L/C Obligations pursuant to this Section 2.05(c)  unless after the prepayment in full of the Loans the

 

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Total Outstandings exceed the Aggregate Commitments then in effect.  The Administrative Agent may, at any time and from time to time after the initial deposit of such Cash Collateral, request that additional Cash Collateral be provided in order to protect against the results of further exchange rate fluctuations.

 

(d)           If the Administrative Agent notifies the Company at any time that the Outstanding Amount of all Loans denominated in Alternative Currencies at such time exceeds the Alternative Currency Sublimit then in effect, then, within two Business Days after receipt of such notice, the Borrowers shall prepay Loans in an aggregate amount sufficient to reduce such Outstanding Amount as of such date of payment to an amount not to exceed 100% of the Alternative Currency Sublimit then in effect.

 

2.06        Termination or Reduction of Commitments .   The Company may, upon notice to the Administrative Agent, terminate the Aggregate Commitments, or from time to time permanently reduce the Aggregate Commitments; provided that (i) any such notice shall be received by the Administrative Agent not later than 10:00 a.m. five Business Days prior to the date of termination or reduction, (ii) any such partial reduction shall be in an aggregate amount of $10,000,000 or any whole multiple of $1,000,000 in excess thereof, (iii) the Company shall not terminate or reduce the Aggregate Commitments if, after giving effect thereto and to any concurrent prepayments hereunder, the Total Outstandings would exceed the Aggregate Commitments, and (iv) if, after giving effect to any reduction of the Aggregate Commitments, the Alternative Currency Sublimit, the Letter of Credit Sublimit, the Designated Borrower Sublimit or the Swing Line Sublimit exceeds the amount of the Aggregate Commitments, such Sublimit shall be automatically reduced by the amount of such excess.  The Administrative Agent will promptly notify the Lenders of any such notice of termination or reduction of the Aggregate Commitments.  The amount of any such Aggregate Commitment reduction shall not be applied to the Alternative Currency Sublimit or the Letter of Credit Sublimit unless otherwise specified by the Company.  Any reduction of the Aggregate Commitments shall be applied to the Commitment of each Lender according to its Applicable Percentage.  All fees accrued until the effective date of any termination of the Aggregate Commitments shall be paid on the effective date of such termination.

 

2.07        Repayment of Loans .  (a)  Each Borrower shall repay to the Lenders on the Maturity Date the aggregate principal amount of Committed Loans made to such Borrower outstanding on such date.

 

(b)           The Company shall repay each Swing Line Loan on the earlier to occur of (i) the date ten Business Days after such Loan is made and (ii) the Maturity Date.

 

2.08        Interest .  (a)  Subject to the provisions of subsection (b)  below, (i) each Eurocurrency Rate Loan shall bear interest on the outstanding principal amount thereof for each Interest Period at a rate per annum equal to the Eurocurrency Rate for such Interest Period plus the Applicable Rate plus (in the case of a Eurocurrency Rate Loan of any Lender which is lent from a Lending Office in the United Kingdom or a Participating Member State) the Mandatory Cost; (ii) each Base Rate Committed Loan shall bear interest on the outstanding principal amount thereof from the applicable borrowing date at a rate per annum equal to the Base Rate plus the Applicable Rate; and (iii) each Swing Line Loan shall bear interest on the outstanding principal

 

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amount thereof from the applicable borrowing date at a rate per annum equal to the Base Rate plus the Applicable Rate.

 

(b)           (i)            If any amount of principal of any Loan is not paid when due (without regard to any applicable grace periods), whether at stated maturity, by acceleration or otherwise, such amount shall thereafter bear interest at a fluctuating interest rate per annum at all times equal to the Default Rate to the fullest extent permitted by applicable Laws.

 

(ii)           If any amount (other than principal of any Loan) payable by any Borrower under any Loan Document is not paid when due (without regard to any applicable grace periods), whether at stated maturity, by acceleration or otherwise, then upon the request of the Required Lenders, such amount shall thereafter bear interest at a fluctuating interest rate per annum at all times equal to the Default Rate to the fullest extent permitted by applicable Laws.

 

(iii)          Upon the request of the Required Lenders, while any Event of Default exists (other than as set forth in clauses (b)(i)  and (b)(ii)  above), the Borrowers shall pay interest on the principal amount of all outstanding Obligations hereunder at a fluctuating interest rate per annum at all times equal to the Default Rate to the fullest extent permitted by applicable Laws.

 

(iv)          Accrued and unpaid interest on past due amounts (including interest on past due interest) shall be due and payable upon demand.

 

(c)           Interest on each Loan shall be due and payable in arrears on each Interest Payment Date applicable thereto and at such other times as may be specified herein.  Interest hereunder shall be due and payable in accordance with the terms hereof before and after judgment, and before and after the commencement of any proceeding under any Debtor Relief Law.

 

(d)           For the purposes of the Interest Act (Canada), (i) whenever a rate of interest or fee rate hereunder is calculated on the basis of a year (the “deemed year”) that contains fewer days than the actual number of days in the calendar year of calculation, such rate of interest or fee rate shall be expressed as a yearly rate by multiplying such rate of interest or fee rate by the actual number of days in the calendar year of calculation and dividing it by the number of days in the deemed year, (ii) the principle of deemed reinvestment of interest shall not apply to any interest calculation hereunder and (iii) the rates of interest stipulated herein are intended to be nominal rates and not effective rates or yields.

 

2.09        Fees .   In addition to certain fees described in subsections (i)  and (j)  of Section 2.03 :

 

(a)           Facility Fee .  The Company shall pay to the Administrative Agent for the account of each Lender in accordance with its Applicable Percentage, a facility fee in Dollars equal to the Applicable Rate times the actual daily amount of the Aggregate Commitments (or, if the Aggregate Commitments have terminated, on the Outstanding Amount of all Committed Loans, Swing Line Loans and L/C Obligations), regardless of usage, subject to adjustment as provided

 

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in Section 2.17 .  The facility fee shall accrue at all times during the Availability Period (and thereafter so long as any Committed Loans, Swing Line Loans or L/C Obligations remain outstanding), including at any time during which one or more of the conditions in Article IV is not met, and shall be due and payable quarterly in arrears on the last Business Day of each March, June, September and December, commencing with the first such date to occur after the Closing Date, and on the Maturity Date (and, if applicable, thereafter on demand).  The facility fee shall be calculated quarterly in arrears, and if there is any change in the Applicable Rate during any quarter, the actual daily amount shall be computed and multiplied by the Applicable Rate separately for each period during such quarter that such Applicable Rate was in effect.

 

(b)           Other Fees .  (i)  The Company shall pay to MLPFS and the Administrative Agent for their own respective accounts, in Dollars, fees in the amounts and at the times specified in the Fee Letter.  Such fees shall be fully earned when paid and shall not be refundable for any reason whatsoever.

 

(ii)           The Company shall pay to the Lenders, in Dollars, such fees as shall have been separately agreed upon in writing in the amounts and at the times so specified.  Such fees shall be fully earned when paid and shall not be refundable for any reason whatsoever.

 

2.10        Computation of Interest and Fees; Retroactive Adjustments of Applicable Rate .   (a)  All computations of interest for Base Rate Loans when the Base Rate is determined by Bank of America’s “prime rate” shall be made on the basis of a year of 365 or 366 days, as the case may be, and actual days elapsed.  All other computations of fees and interest shall be made on the basis of a 360-day year and actual days elapsed (which results in more fees or interest, as applicable, being paid than if computed on the basis of a 365-day year), or, in the case of interest in respect of Committed Loans denominated in Alternative Currencies as to which market practice differs from the foregoing, in accordance with such market practice.  Interest shall accrue on each Loan for the day on which the Loan is made, and shall not accrue on a Loan, or any portion thereof, for the day on which the Loan or such portion is paid, provided that any Loan that is repaid on the same day on which it is made shall, subject to Section 2.12(a) , bear interest for one day.  Each determination by the Administrative Agent of an interest rate or fee hereunder shall be conclusive and binding for all purposes, absent manifest error.

 

(b)           If, as a result of any restatement of or other adjustment to the financial statements of the Company or for any other reason, the Company or the Lenders determine that (i) the Consolidated Leverage Ratio as calculated by the Company as of any applicable date was inaccurate and (ii) a proper calculation of the Consolidated Leverage Ratio would have resulted in higher pricing for such period, each Borrower shall immediately and retroactively be obligated to pay to the Administrative Agent for the account of the applicable Lenders or the L/C Issuer, as the case may be, promptly on demand by the Administrative Agent (or, after the occurrence of an actual or deemed entry of an order for relief with respect to any Borrower under Debtor Relief Laws automatically and without further action by the Administrative Agent, any Lender or the L/C Issuer), an amount equal to the excess of the amount of interest and fees that should have been paid for such period over the amount of interest and fees actually paid for such period.  This paragraph shall not limit the rights of the Administrative Agent, any Lender or the L/C Issuer, as

 

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the case may be, under Section 2.03(c)(iii) , 2.03(h)  or 2.08(b)  or under Article VIII .  The Company’s obligations under this paragraph shall survive the termination of the Aggregate Commitments and the repayment of all other Obligations hereunder.

 

2.11        Evidence of Debt .  (a)  The Credit Extensions made by each Lender shall be evidenced by one or more accounts or records maintained by such Lender and by the Administrative Agent in the ordinary course of business.  The accounts or records maintained by the Administrative Agent and each Lender shall be conclusive absent manifest error of the amount of the Credit Extensions made by the Lenders to the Borrowers and the interest and payments thereon.  Any failure to so record or any error in doing so shall not, however, limit or otherwise affect the obligation of the Borrowers hereunder to pay any amount owing with respect to the Obligations.  In the event of any conflict between the accounts and records maintained by any Lender and the accounts and records of the Administrative Agent in respect of such matters, the accounts and records of the Administrative Agent shall control in the absence of manifest error.  Upon the request of any Lender to a Borrower made through the Administrative Agent, such Borrower shall execute and deliver to such Lender (through the Administrative Agent) a Note, which shall evidence such Lender’s Loans to such Borrower in addition to such accounts or records.  Each Lender may attach schedules to a Note and endorse thereon the date, Type (if applicable), amount, currency and maturity of its Loans and payments with respect thereto.

 

(b)           In addition to the accounts and records referred to in subsection (a), each Lender and the Administrative Agent shall maintain in accordance with its usual practice accounts or records evidencing the purchases and sales by such Lender of participations in Letters of Credit and Swing Line Loans.  In the event of any conflict between the accounts and records maintained by the Administrative Agent and the accounts and records of any Lender in respect of such matters, the accounts and records of the Administrative Agent shall control in the absence of manifest error.

 

2.12        Payments Generally; Administrative Agent’s Clawback .  (a)  General .  All payments to be made by the Borrowers shall be made without condition or deduction for any counterclaim, defense, recoupment or setoff.  Except as otherwise expressly provided herein and except with respect to principal of and interest on Loans denominated in an Alternative Currency, all payments by the Borrowers hereunder shall be made to the Administrative Agent, for the account of the respective Lenders to which such payment is owed, at the applicable Administrative Agent’s Office in Dollars and in Same Day Funds not later than 11:00 a.m. on the date specified herein.  Except as otherwise expressly provided herein, all payments by the Borrowers hereunder with respect to principal and interest on Loans denominated in an Alternative Currency shall be made to the Administrative Agent, for the account of the respective Lenders to which such payment is owed, at the applicable Administrative Agent’s Office in such Alternative Currency and in Same Day Funds not later than the Applicable Time specified by the Administrative Agent on the dates specified herein. Without limiting the generality of the foregoing, the Administrative Agent may require that any payments due under this Agreement be made in the United States.  If, for any reason, any Borrower is prohibited by any Law from making any required payment hereunder in an Alternative Currency, such Borrower shall make such payment in Dollars in the Dollar Equivalent of the Alternative Currency payment amount.  The Administrative Agent will promptly distribute to each Lender

 

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its Applicable Percentage (or other applicable share as provided herein) of such payment in like funds as received by wire transfer to such Lender’s Lending Office.  All payments received by the Administrative Agent (i) after 11:00 a.m., in the case of payments in Dollars, or (ii) after the Applicable Time specified by the Administrative Agent in the case of payments in an Alternative Currency, shall in each case be deemed received on the next succeeding Business Day and any applicable interest or fee shall continue to accrue.  If any payment to be made by any Borrower shall come due on a day other than a Business Day, payment shall be made on the next following Business Day, and such extension of time shall be reflected in computing interest or fees, as the case may be.

 

(b)           (i)            Funding by Lenders; Presumption by Administrative Agent .  Unless the Administrative Agent shall have received notice from a Lender prior to the proposed date of any Committed Borrowing of Eurocurrency Rate Loans (or, in the case of any Committed Borrowing of Base Rate Loans, prior to 12:00 p.m. on the date of such Committed Borrowing) that such Lender will not make available to the Administrative Agent such Lender’s share of such Committed Borrowing, the Administrative Agent may assume that such Lender has made such share available on such date in accordance with Section 2.02 (or, in the case of a Committed Borrowing of Base Rate Loans, that such Lender has made such share available in accordance with and at the time required by Section 2.02 ) and may, in reliance upon such assumption, make available to the applicable Borrower a corresponding amount.  In such event, if a Lender has not in fact made its share of the applicable Committed Borrowing available to the Administrative Agent, then the applicable Lender and the applicable Borrower severally agree to pay to the Administrative Agent forthwith on demand such corresponding amount in Same Day Funds with interest thereon, for each day from and including the date such amount is made available to such Borrower to but excluding the date of payment to the Administrative Agent, at (A) in the case of a payment to be made by such Lender, the Overnight Rate, plus any administrative, processing or similar fees customarily charged by the Administrative Agent in connection with the foregoing,  and (B) in the case of a payment to be made by such Borrower, the interest rate applicable to Base Rate Loans.  If such Borrower and such Lender shall pay such interest to the Administrative Agent for the same or an overlapping period, the Administrative Agent shall promptly remit to such Borrower the amount of such interest paid by such Borrower for such period.  If such Lender pays its share of the applicable Committed Borrowing to the Administrative Agent, then the amount so paid shall constitute such Lender’s Committed Loan included in such Committed Borrowing.  Any payment by such Borrower shall be without prejudice to any claim such Borrower may have against a Lender that shall have failed to make such payment to the Administrative Agent.

 

(ii)           Payments by Borrowers; Presumptions by Administrative Agent .  Unless the Administrative Agent shall have received notice from a Borrower prior to the date on which any payment is due to the Administrative Agent for the account of the Lenders or the L/C Issuer hereunder that such Borrower will not make such payment, the Administrative Agent may assume that such Borrower has made such payment on such date in accordance herewith and may, in reliance upon such assumption, distribute to the Lenders or the L/C Issuer, as the case may be, the amount due.  In such event, if such Borrower has not in fact made such payment, then each of the Lenders or the L/C Issuer, as the case may be, severally agrees to repay to the Administrative Agent forthwith on

 

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demand the amount so distributed to such Lender or the L/C Issuer, in Same Day Funds with interest thereon, for each day from and including the date such amount is distributed to it to but excluding the date of payment to the Administrative Agent, at the Overnight Rate.

 

A notice of the Administrative Agent to any Lender or Borrower with respect to any amount owing under this subsection (b) shall be conclusive, absent manifest error.

 

(c)           Failure to Satisfy Conditions Precedent .  If any Lender makes available to the Administrative Agent funds for any Loan to be made by such Lender to any Borrower as provided in the foregoing provisions of this Article II , and such funds are not made available to such Borrower by the Administrative Agent because the conditions to the applicable Credit Extension set forth in Article IV are not satisfied or waived in accordance with the terms hereof, the Administrative Agent shall return such funds (in like funds as received from such Lender) to such Lender, without interest.

 

(d)           Obligations of Lenders Several .  The obligations of the Lenders hereunder to make Committed Loans, to fund participations in Letters of Credit and Swing Line Loans and to make payments pursuant to Section 10.04(c)  are several and not joint.  The failure of any Lender to make any Committed Loan, to fund any such participation or to make any payment under Section 10.04(c)  on any date required hereunder shall not relieve any other Lender of its corresponding obligation to do so on such date, and no Lender shall be responsible for the failure of any other Lender to so make its Committed Loan, to purchase its participation or to make its payment under Section 10.04(c) .

 

(e)           Funding Source .  Nothing herein shall be deemed to obligate any Lender to obtain the funds for any Loan in any particular place or manner or to constitute a representation by any Lender that it has obtained or will obtain the funds for any Loan in any particular place or manner.

 

2.13        Sharing of Payments by Lenders .   If any Lender shall, by exercising any right of setoff or counterclaim or otherwise, obtain payment in respect of any principal of or interest on any of the Committed Loans made by it, or the participations in L/C Obligations or in Swing Line Loans held by it resulting in such Lender’s receiving payment of a proportion of the aggregate amount of such Committed Loans or participations and accrued interest thereon greater than its pro rata share thereof as provided herein, then the Lender receiving such greater proportion shall (a) notify the Administrative Agent of such fact, and (b) purchase (for cash at face value) participations in the Committed Loans and subparticipations in the L/C Obligations and Swing Line Loans of the other Lenders, or make such other adjustments as shall be equitable, so that the benefit of all such payments shall be shared by the Lenders ratably in accordance with the aggregate amount of principal of and accrued interest on their respective Committed Loans and other amounts owing them, provided that:

 

(i)            if any such participations or subparticipations are purchased and all or any portion of the payment giving rise thereto is recovered, such participations or subparticipations shall be rescinded and the purchase price restored to the extent of such recovery, without interest; and

 

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(ii)           the provisions of this Section shall not be construed to apply to (x) any payment made by or on behalf of any Borrower pursuant to and in accordance with the express terms of this Agreement (including the application of funds arising from the existence of a Defaulting Lender), (y) the application of Cash Collateral provided for in Section 2.16 , or (z) any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Committed Loans or subparticipations in L/C Obligations or Swing Line Loans to any assignee or participant, other than to the Company or any Subsidiary thereof (as to which the provisions of this Section shall apply).

 

Each Borrower consents to the foregoing and agrees, to the extent it may effectively do so under applicable law, that any Lender acquiring a participation pursuant to the foregoing arrangements may exercise against such Borrower rights of setoff and counterclaim with respect to such participation as fully as if such Lender were a direct creditor of such Borrower in the amount of such participation.

 

2.14        Designated Borrowers .   (a)  The Company may, with the prior written consent of all Lenders (such consent not to be unreasonably withheld or delayed), at any time, upon not less than 15 Business Days’ notice from the Company to the Administrative Agent (or such shorter period as may be agreed by the Administrative Agent in its sole discretion), designate any additional Subsidiary of the Company (an “ Applicant Borrower ”) as a Designated Borrower to receive Loans hereunder by delivering to the Administrative Agent (which shall promptly deliver counterparts thereof to each Lender) a duly executed notice and agreement in substantially the form of Exhibit G (a “ Designated Borrower Request and Assumption Agreement ”).  The parties hereto acknowledge and agree that prior to any Applicant Borrower becoming entitled to utilize the credit facilities provided for herein the Administrative Agent and the Lenders shall have received (i) in the case of any Applicant Borrower that is a Foreign Subsidiary, an executed Company Guaranty and (ii) in the case of all Applicant Borrowers, such supporting resolutions, incumbency certificates, opinions of counsel and other documents or information, each in form, content and scope reasonably satisfactory to the Administrative Agent, as may be required by the Administrative Agent or any Lender in their sole discretion, and Notes signed by such new Borrowers to the extent any Lenders so require.  If the Administrative Agent and each Lender agree that an Applicant Borrower shall be entitled to receive Loans hereunder, then promptly following receipt of all such requested resolutions, incumbency certificates, opinions of counsel and other documents or information, the Administrative Agent shall send a notice in substantially the form of Exhibit H (a “ Designated Borrower Notice ”) to the Company and the Lenders specifying the effective date upon which the Applicant Borrower shall constitute a Designated Borrower for purposes hereof, whereupon each of the Lenders agrees to permit such Designated Borrower to receive Loans hereunder, on the terms and conditions set forth herein, and each of the parties agrees that such Designated Borrower otherwise shall be a Borrower for all purposes of this Agreement; provided that no Committed Loan Notice or Letter of Credit Application may be submitted by or on behalf of such Designated Borrower until the date five Business Days after such effective date.

 

(b)           The Obligations of the Company and each Designated Borrower that is a Domestic Subsidiary shall be joint and several in nature with respect to Committed Loans made

 

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to any Designated Borrower.  The Obligations of all Designated Borrowers that are Foreign Subsidiaries shall be several in nature.

 

(c)           Each Subsidiary of the Company that is or becomes a “Designated Borrower” pursuant to this Section 2.14 hereby irrevocably appoints the Company as its agent for all purposes relevant to this Agreement and each of the other Loan Documents, including (i) the giving and receipt of notices, (ii) the execution and delivery of all documents, instruments and certificates contemplated herein and all modifications hereto, and (iii) the receipt of the proceeds of any Loans made by the Lenders, to any such Designated Borrower hereunder.  Any acknowledgment, consent, direction, certification or other action which might otherwise be valid or effective only if given or taken by all Borrowers, or by each Borrower acting singly, shall be valid and effective if given or taken only by the Company, whether or not any such other Borrower joins therein.  Any notice, demand, consent, acknowledgement, direction, certification or other communication delivered to the Company in accordance with the terms of this Agreement shall be deemed to have been delivered to each Designated Borrower.

 

(d)           The Company may from time to time, upon not less than 15 Business Days’ notice from the Company to the Administrative Agent (or such shorter period as may be agreed by the Administrative Agent in its sole discretion), terminate a Designated Borrower’s status as such, provided that there are no outstanding Loans payable by such Designated Borrower, or other amounts payable by such Designated Borrower on account of any Loans made to it, and there are no outstanding Letters of Credit issued for the benefit of such Designated Borrower, as of the effective date of such termination. The Administrative Agent will promptly notify the Lenders of any such termination of a Designated Borrower’s status.

 

2.15        Increase in Commitments .

 

(a)           Request for Increase .  Provided there exists no Default and the Company has made no voluntary reduction of the Aggregate Commitments pursuant to Section 2.06 , upon notice to the Administrative Agent (which shall promptly notify the Lenders), the Company may from time to time, request an increase in the Aggregate Commitments by an amount (for all such requests) not exceeding $100,000,000; provided that any such request for an increase shall be in a minimum amount of $25,000,000.  At the time of sending such notice, the Company (in consultation with the Administrative Agent) shall specify the time period within which each Lender is requested to respond (which shall in no event be less than ten Business Days from the date of delivery of such notice to the Lenders).

 

(b)           Lender Elections to Increase .  Each Lender shall notify the Administrative Agent within such time period whether or not it agrees to increase its Commitment and, if so, whether by an amount equal to, greater than, or less than its Applicable Percentage of such requested increase.  Any Lender not responding within such time period shall be deemed to have declined to increase its Commitment.

 

(c)           Notification by Administrative Agent; Additional Lenders .  The Administrative Agent shall notify the Company and each Lender of the Lenders’ responses to each request made hereunder.  To achieve the full amount of a requested increase and subject to the approval of the Administrative Agent and the L/C Issuers (which approvals shall not be unreasonably withheld,

 

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conditioned or delayed), the Company may also invite additional Eligible Assignees to become Lenders pursuant to a joinder agreement in form and substance satisfactory to the Administrative Agent and its counsel.

 

(d)           Effective Date and Allocations .  If the Aggregate Commitments are increased in accordance with this Section, the Administrative Agent and the Company shall determine the effective date (the “ Increase Effective Date ”) and the final allocation of such increase.  The Administrative Agent shall promptly notify the Company and the Lenders of the final allocation of such increase and the Increase Effective Date.

 

(e)           Conditions to Effectiveness of Increase .  As a condition precedent to such increase, the Company shall deliver to the Administrative Agent a certificate dated as of the Increase Effective Date (in sufficient copies for each Lender) signed by a Responsible Officer (i) certifying and attaching the resolutions adopted by the Borrowers approving or consenting to such increase, and (ii) certifying that, before and after giving effect to such increase, (A) the representations and warranties contained in Article V and the other Loan Documents are true and correct in all material respects on and as of the Increase Effective Date, except to the extent that such representations and warranties specifically refer to an earlier date, in which case they are true and correct in all material respects as of such earlier date, and except that for purposes of this Section 2.15 , the representations and warranties contained in subsections (a)  and (b)  of Section 5.05 shall be deemed to refer to the most recent statements furnished pursuant to clauses (a)  and (b) , respectively, of Section 6.01 , and (B) no Default exists.  The Borrowers shall prepay any Committed Loans outstanding on the Increase Effective Date (and pay any additional amounts required pursuant to Section 3.05 ) to the extent necessary to keep the outstanding Committed Loans ratable with any revised Applicable Percentages arising from any nonratable increase in the Commitments under this Section.

 

(f)            Conflicting Provisions .  This Section shall supersede any provisions in Sections 2.13 or 10.01 to the contrary.

 

2.16        Cash Collateral .

 

(a)           Certain Credit Support Events .  If (i) the L/C Issuer has honored any full or partial drawing request under any Letter of Credit and such drawing has resulted in an L/C Borrowing, (ii) as of the Letter of Credit Expiration Date, any L/C Obligation for any reason remains outstanding, (iii) the Company shall be required to provide Cash Collateral pursuant to Section 8.02(c) , or (iv) there shall exist a Defaulting Lender, the Company shall immediately (in the case of clause (iii)  above) or within one Business Day (in all other cases) following any request by the Administrative Agent or the L/C Issuer, provide Cash Collateral in an amount not less than the applicable Minimum Collateral Amount (determined in the case of Cash Collateral provided pursuant to clause (iv)  above, after giving effect to Section 2.17(a)(iv)  and any Cash Collateral provided by the Defaulting Lender).  Additionally, if the Administrative Agent notifies the Company at any time that the Outstanding Amount of all L/C Obligations at such time exceeds 105% of the Letter of Credit Sublimit then in effect, then, within two Business Days after receipt of such notice, the Company shall provide Cash Collateral for the Outstanding Amount of the L/C Obligations in an amount not less than the amount by which the Outstanding Amount of all L/C Obligations exceeds the Letter of Credit Sublimit.

 

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(b)           Grant of Security Interest .  The Company, and to the extent provided by any Defaulting Lender, such Defaulting Lender, hereby (i) grants to (and subjects to the control of) the Administrative Agent, for the benefit of the Administrative Agent, the L/C Issuer and the Lenders, a security interest in all such cash, deposit accounts and all balances therein, and all other property so provided as collateral pursuant hereto, and in all proceeds of the foregoing, all as security for the obligations to which such Cash Collateral may be applied pursuant to Section 2.16(c)  and (ii) agrees to execute any documents or take any actions reasonably requested by the Administrative Agent in order to perfect and maintain the first priority status of such security interest.  If at any time the Administrative Agent determines that Cash Collateral is subject to any right or claim of any Person other than the Administrative Agent, the L/C Issuer or a Lender as herein provided, or that the total amount of such Cash Collateral is less than the Minimum Collateral Amount, the Company will, promptly upon demand by the Administrative Agent, pay or provide to the Administrative Agent additional Cash Collateral in an amount sufficient to eliminate such deficiency. All Cash Collateral (other than credit support not constituting funds subject to deposit) shall be maintained in blocked, non-interest bearing deposit accounts at Bank of America.  The Company shall pay on demand therefor from time to time all customary account opening, activity and other administrative fees and charges in connection with the maintenance and disbursement of Cash Collateral.

 

(c)           Notwithstanding anything to the contrary contained in this Agreement, Cash Collateral provided under any of this Section 2.16 or Sections 2.03 , 2.05 , 2.17 or 8.02 in respect of Letters of Credit shall be held and applied to the satisfaction of the specific L/C Obligations, obligations to fund participations therein (including, as to Cash Collateral provided by a Defaulting Lender, any interest accrued on such obligation) and other obligations for which the Cash Collateral was so provided, prior to any other application of such property as may otherwise be provided for herein.

 

(d)           Release .  Cash Collateral (or the appropriate portion thereof) provided to reduce Fronting Exposure or to secure other obligations shall be released promptly following (i) the elimination of the applicable Fronting Exposure or other obligations giving rise thereto (including by the termination of Defaulting Lender status of the applicable Lender (or, as appropriate, its assignee following compliance with Section 10.06(b)(vii) )) or (ii) the determination by the Administrative Agent and the L/C Issuer that there exists excess Cash Collateral; provided , however , the Person providing Cash Collateral and the L/C Issuer may agree that Cash Collateral shall not be released but instead held to support future anticipated Fronting Exposure or other obligations.

 

2.17        Defaulting Lenders .

 

(a)           Adjustments .  Notwithstanding anything to the contrary contained in this Agreement, if any Lender becomes a Defaulting Lender, then, until such time as that Lender is no longer a Defaulting Lender, to the extent permitted by applicable Law:

 

(i)            Waivers and Amendments .  Such Defaulting Lender’s right to approve or disapprove any amendment, waiver or consent with respect to this Agreement shall be restricted as set forth in the definition of “Required Lenders” and Section 10.01 .

 

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(ii)           Defaulting Lender Waterfall .  Any payment of principal, interest, fees or other amounts received by the Administrative Agent for the account of such Defaulting Lender (whether voluntary or mandatory, at maturity, pursuant to Article VIII or otherwise) or received by the Administrative Agent from a Defaulting Lender pursuant to Section 10.08 shall be applied at such time or times as may be determined by the Administrative Agent as follows: first , to the payment of any amounts owing by such Defaulting Lender to the Administrative Agent hereunder; second , to the payment on a pro rata basis of any amounts owing by such Defaulting Lender to the L/C Issuer or Swing Line Lender hereunder; third , to Cash Collateralize the L/C Issuer’s Fronting Exposure with respect to such Defaulting Lender in accordance with Section 2.16 ; fourth , as the Company may request (so long as no Default exists), to the funding of any Loan in respect of which such Defaulting Lender has failed to fund its portion thereof as required by this Agreement, as determined by the Administrative Agent; fifth , if so determined by the Administrative Agent and the Company, to be held in a deposit account and released pro rata in order to (x) satisfy such Defaulting Lender’s potential future funding obligations with respect to Loans under this Agreement and (y) Cash Collateralize the L/C Issuer’s future Fronting Exposure with respect to such Defaulting Lender with respect to future Letters of Credit issued under this Agreement, in accordance with Section 2.16 ; sixth , to the payment of any amounts owing to the Lenders, the L/C Issuer or Swing Line Lender as a result of any judgment of a court of competent jurisdiction obtained by any Lender, the L/C Issuer or the Swing Line Lender against such Defaulting Lender as a result of such Defaulting Lender’s breach of its obligations under this Agreement; seventh , so long as no Default exists, to the payment of any amounts owing to the Company as a result of any judgment of a court of competent jurisdiction obtained by the Company against such Defaulting Lender as a result of such Defaulting Lender’s breach of its obligations under this Agreement; and eighth , to such Defaulting Lender or as otherwise directed by a court of competent jurisdiction; provided that if (x) such payment is a payment of the principal amount of any Loans or L/C Borrowings in respect of which such Defaulting Lender has not fully funded its appropriate share, and (y) such Loans were made or the related Letters of Credit were issued at a time when the conditions set forth in Section 4.02 were satisfied or waived, such payment shall be applied solely to pay the Loans of, and L/C Obligations owed to, all Non-Defaulting Lenders on a pro rata basis prior to being applied to the payment of any Loans of, or L/C Obligations owed to, such Defaulting Lender until such time as all Loans and funded and unfunded participations in L/C Obligations and Swing Line Loans are held by the Lenders pro rata in accordance with the Commitments hereunder without giving effect to Section 2.17(a)(iv) .  Any payments, prepayments or other amounts paid or payable to a Defaulting Lender that are applied (or held) to pay amounts owed by a Defaulting Lender or to post Cash Collateral pursuant to this Section 2.17(a)(ii)  shall be deemed paid to and redirected by such Defaulting Lender, and each Lender irrevocably consents hereto.

 

(iii)          Certain Fees .

 

(A)          Each Defaulting Lender shall be entitled to receive fees payable under Sections 2.09(a)  for any period during which that Lender is a Defaulting Lender only to extent allocable to the sum of (1) the Outstanding Amount of the

 

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Committed Loans funded by it, and (2) its Applicable Percentage of the stated amount of Letters of Credit for which it has provided Cash Collateral pursuant to Section 2.16 .

 

(B)          Each Defaulting Lender shall be entitled to receive Letter of Credit Fees for any period during which that Lender is a Defaulting Lender only to the extent allocable to its Applicable Percentage of the stated amount of Letters of Credit for which it has provided Cash Collateral pursuant to Section 2.16 .

 

(C)          With respect to any fee payable under Section 2.09(a)  or any Letter of Credit Fee not required to be paid to any Defaulting Lender pursuant to clause (A)  or (B)  above, the Company shall (x) pay to each Non-Defaulting Lender that portion of any such fee otherwise payable to such Defaulting Lender with respect to such Defaulting Lender’s participation in L/C Obligations or Swing Line Loans that has been reallocated to such Non-Defaulting Lender pursuant to clause (iv)  below, (y) pay to the L/C Issuer and Swing Line Lender, as applicable, the amount of any such fee otherwise payable to such Defaulting Lender to the extent allocable to such L/C Issuer’s or Swing Line Lender’s Fronting Exposure to such Defaulting Lender, and (z) not be required to pay the remaining amount of any such fee.

 

(iv)          Reallocation of Applicable Percentages to Reduce Fronting Exposure .  All or any part of such Defaulting Lender’s participation in L/C Obligations and Swing Line Loans shall be reallocated among the Non-Defaulting Lenders in accordance with their respective Applicable Percentages (calculated without regard to such Defaulting Lender’s Commitment) but only to the extent that (x) the conditions set forth in Section 4.02 are satisfied at the time of such reallocation (and, unless the Company shall have otherwise notified the Administrative Agent at such time, the Company shall be deemed to have represented and warranted that such conditions are satisfied at such time), and (y) such reallocation does not cause the aggregate Credit Exposure of any Non-Defaulting Lender to exceed such Non-Defaulting Lender’s Commitment.  No reallocation hereunder shall constitute a waiver or release of any claim of any party hereunder against a Defaulting Lender arising from that Lender having become a Defaulting Lender, including any claim of a Non-Defaulting Lender as a result of such Non-Defaulting Lender’s increased exposure following such reallocation.

 

(v)           Cash Collateral, Repayment of Swing Line Loans .  If the reallocation described in clause (a)(iv)  above cannot, or can only partially, be effected, the Company shall, without prejudice to any right or remedy available to it hereunder or under applicable Law, (x) first, prepay Swing Line Loans in an amount equal to the Swing Line Lenders’ Fronting Exposure and (y) second, Cash Collateralize the L/C Issuers’ Fronting Exposure in accordance with the procedures set forth in Section 2.16 .

 

(b)           Defaulting Lender Cure .  If the Company, the Administrative Agent, Swing Line Lender and the L/C Issuer agree in writing that a Lender is no longer a Defaulting Lender, the Administrative Agent will so notify the parties hereto, whereupon as of the effective date specified in such notice and subject to any conditions set forth therein (which may include

 

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arrangements with respect to any Cash Collateral), that Lender will, to the extent applicable, purchase at par (plus payment of any amounts that would otherwise have been payable by the Company under Section 3.05 if such purchase or payment were made by the Company) that portion of outstanding Loans of the other Lenders or take such other actions as the Administrative Agent may determine to be necessary to cause the Committed Loans and funded and unfunded participations in Letters of Credit and Swing Line Loans to be held on a pro rata basis by the Lenders in accordance with their Applicable Percentages (without giving effect to Section 2.17(a)(iv) ), whereupon such Lender will cease to be a Defaulting Lender; provided that no adjustments will be made retroactively with respect to fees accrued or payments made by or on behalf of the Company while that Lender was a Defaulting Lender; and provided , further , that except to the extent otherwise expressly agreed by the affected parties, no change hereunder from Defaulting Lender to Lender will constitute a waiver or release of any claim of any party hereunder arising from that Lender’s having been a Defaulting Lender.

 

ARTICLE III.
TAXES, YIELD PROTECTION AND ILLEGALITY

 

3.01        Taxes .

 

(a)           Payments Free of Taxes; Obligation to Withhold; Payments on Account of Taxes .  (i)  Any and all payments by or on account of any obligation of any Loan Party under any Loan Document shall be made without deduction or withholding for any Taxes, except as required by applicable Laws.  If any applicable Laws (as determined in the good faith discretion of the Administrative Agent) require the deduction or withholding of any Tax from any such payment by the Administrative Agent or a Loan Party, then the Administrative Agent or such Loan Party shall be entitled to make such deduction or withholding, upon the basis of the information and documentation to be delivered pursuant to subsection (e)  below.

 

(ii)           If any Loan Party or the Administrative Agent shall be required by the Code to withhold or deduct any Taxes, including both United States Federal backup withholding and withholding taxes, from any payment, then (A) the Administrative Agent shall withhold or make such deductions as are determined by the Administrative Agent to be required based upon the information and documentation it has received pursuant to subsection (e)  below, (B) the Administrative Agent shall timely pay the full amount withheld or deducted to the relevant Governmental Authority in accordance with the Code, and (C) to the extent that the withholding or deduction is made on account of Indemnified Taxes, the sum payable by the applicable Loan Party shall be increased as necessary so that after any required withholding or the making of all required deductions (including deductions applicable to additional sums payable under this Section 3.01 ) the applicable Recipient receives an amount equal to the sum it would have received had no such withholding or deduction been made.

 

(iii)          If any Loan Party or the Administrative Agent shall be required by any applicable Laws other than the Code to withhold or deduct any Taxes from any payment, then (A) such Loan Party or the Administrative Agent, as required by such Laws, shall withhold or make such deductions as are determined by it to be required based upon the information and documentation it has received pursuant to subsection (e)  below, (B) such

 

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Loan Party or the Administrative Agent, to the extent required by such Laws, shall timely pay the full amount withheld or deducted to the relevant Governmental Authority in accordance with such Laws, and (C) to the extent that the withholding or deduction is made on account of Indemnified Taxes, the sum payable by the applicable Loan Party shall be increased as necessary so that after any required withholding or the making of all required deductions (including deductions applicable to additional sums payable under this Section 3.01 ) the applicable Recipient receives an amount equal to the sum it would have received had no such withholding or deduction been made.

 

(b)           Payment of Other Taxes by the Loan Parties .  Without limiting the provisions of subsection (a)  above, the Loan Parties shall timely pay to the relevant Governmental Authority in accordance with applicable law, or at the option of the Administrative Agent timely reimburse it for the payment of, any Other Taxes.

 

(c)           Tax Indemnifications .  (i)  Each of the Loan Parties shall, and does hereby, jointly and severally indemnify each Recipient, and shall make payment in respect thereof within 10 days after demand therefor, for the full amount of any Indemnified Taxes (including Indemnified Taxes imposed or asserted on or attributable to amounts payable under this Section 3.01 ) payable or paid by such Recipient or required to be withheld or deducted from a payment to such Recipient, and any penalties, interest and reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority.  A certificate as to the amount of such payment or liability delivered to the Company by a Lender or the L/C Issuer (with a copy to the Administrative Agent), or by the Administrative Agent on its own behalf or on behalf of a Lender or the L/C Issuer, shall be conclusive absent manifest error.  Each of the Loan Parties shall, and does hereby, jointly and severally indemnify the Administrative Agent, and shall make payment in respect thereof within 10 days after demand therefor, for any amount which a Lender or the L/C Issuer for any reason fails to pay indefeasibly to the Administrative Agent as required pursuant to Section 3.01(c)(ii)  below.

 

(ii)           Each Lender and the L/C Issuer shall, and does hereby, severally indemnify, and shall make payment in respect thereof within 10 days after demand therefor, (x) the Administrative Agent against any Indemnified Taxes attributable to such Lender or the L/C Issuer (but only to the extent that any Loan Party has not already indemnified the Administrative Agent for such Indemnified Taxes and without limiting the obligation of the Loan Party to do so), (y) the Administrative Agent and the Loan Party, as applicable, against any Taxes attributable to such Lender’s failure to comply with the provisions of Section 10.06(d)  relating to the maintenance of a Participant Register and (z) the Administrative Agent and the Loan Party, as applicable, against any Excluded Taxes attributable to such Lender or the L/C Issuer, in each case, that are payable or paid by the Administrative Agent or a Loan Party in connection with any Loan Document, and any reasonable expenses arising therefrom or with respect thereto, whether or not such Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority.  A certificate as to the amount of such payment or liability delivered to any Lender by the Administrative Agent shall be conclusive absent manifest error.  Each Lender and the L/C Issuer hereby authorizes the Administrative Agent to set

 

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off and apply any and all amounts at any time owing to such Lender or the L/C Issuer, as the case may be, under this Agreement or any other Loan Document against any amount due to the Administrative Agent under this clause (ii) .

 

(d)           Evidence of Payments .   Upon request by the Company or the Administrative Agent, as the case may be, after any payment of Taxes by any Loan Party or by the Administrative Agent to a Governmental Authority as provided in this Section 3.01 , the Company shall deliver to the Administrative Agent or the Administrative Agent shall deliver to the Company, as the case may be, the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of any return required by Laws to report such payment or other evidence of such payment reasonably satisfactory to the Company or the Administrative Agent, as the case may be.

 

(e)           Status of Lenders; Tax Documentation .  (i) Any Lender that is entitled to an exemption from or reduction of withholding Tax with respect to payments made under any Loan Document shall deliver to the Company and the Administrative Agent, at the time or times reasonably requested by the Company or the Administrative Agent, such properly completed and executed documentation prescribed by applicable law or the taxing authorities of a jurisdiction pursuant to such applicable law or reasonably requested by the Company or the Administrative Agent as will permit such payments to be made without withholding or at a reduced rate of withholding.  In addition, any Lender, if reasonably requested by the Company or the Administrative Agent, shall deliver such other documentation prescribed by applicable law or reasonably requested by the Company or the Administrative Agent as will enable the Company or the Administrative Agent to determine whether or not such Lender is subject to backup withholding or information reporting requirements.  Notwithstanding anything to the contrary in the preceding two sentences, the completion, execution and submission of such documentation (other than such documentation either (A) set forth in Section 3.01(e)(ii)(A) , (ii)(B)  and (ii)(D)  below or (B) required by applicable law other than the Code or the taxing authorities of the jurisdiction pursuant to such applicable law to comply with the requirements for exemption or reduction of withholding tax in that jurisdiction) shall not be required if in the Lender’s reasonable judgment such completion, execution or submission would subject such Lender to any material unreimbursed cost or expense or would materially prejudice the legal or commercial position of such Lender.

 

(ii)           Without limiting the generality of the foregoing, in the event that a Borrower is a U.S. Person,

 

(A)          any Lender that is a U.S. Person shall deliver to the Company and the Administrative Agent on or prior to the date on which such Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Company or the Administrative Agent), executed originals of IRS Form W-9 certifying that such Lender is exempt from U.S. federal backup withholding tax;

 

(B)          any Foreign Lender shall, to the extent it is legally entitled to do so, deliver to the Company and the Administrative Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such

 

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Foreign Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Company or the Administrative Agent), whichever of the following is applicable:

 

a.             in the case of a Foreign Lender claiming the benefits of an income tax treaty to which the United States is a party (x) with respect to payments of interest under any Loan Document, executed originals of IRS Form W-8BEN or W-8BEN-E, as applicable, establishing an exemption from, or reduction of, U.S. federal withholding Tax pursuant to the “interest” article of such tax treaty and (y) with respect to any other applicable payments under any Loan Document, IRS Form W-8BEN or W-8BEN-E, as applicable, establishing an exemption from, or reduction of, U.S. federal withholding Tax pursuant to the “business profits” or “other income” article of such tax treaty;

 

b.             executed originals of IRS Form W-8ECI;

 

c.             in the case of a Foreign Lender claiming the benefits of the exemption for portfolio interest under Section 881(c) of the Code, (x) a certificate substantially in the form of Exhibit K-1 to the effect that such Foreign Lender is not a “bank” within the meaning of Section 881(c)(3)(A) of the Code, a “10 percent shareholder” of the Company within the meaning of Section 881(c)(3)(B) of the Code, or a “controlled foreign corporation” described in Section 881(c)(3)(C) of the Code (a “U.S. Tax Compliance Certificate”) and (y) executed originals of IRS Form W-8BEN or W-8BEN-E, as applicable; or

 

d.             to the extent a Foreign Lender is not the beneficial owner, executed originals of IRS Form W-8IMY, accompanied by IRS Form W-8ECI, IRS Form W-8BEN or W-8BEN-E, as applicable, a U.S. Tax Compliance Certificate substantially in the form of Exhibit K-2 or Exhibit K-3 , IRS Form W-9, and/or other certification documents from each beneficial owner, as applicable; provided that if the Foreign Lender is a partnership and one or more direct or indirect partners of such Foreign Lender are claiming the portfolio interest exemption, such Foreign Lender may provide a U.S. Tax Compliance Certificate substantially in the form of Exhibit K-4 on behalf of each such direct and indirect partner;

 

(C)          any Foreign Lender shall, to the extent it is legally entitled to do so, deliver to the Company and the Administrative Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Foreign Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Company or the Administrative Agent), executed originals of any other form prescribed by applicable law as a basis for claiming exemption from or a reduction in U.S. federal withholding Tax, duly completed, together with such supplementary documentation as may be prescribed by applicable law to permit the Company or the Administrative Agent to determine the withholding or deduction required to be made; and

 

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(D)          if a payment made to a Lender under any Loan Document would be subject to U.S. federal withholding Tax imposed by FATCA if such Lender were to fail to comply with the applicable reporting requirements of FATCA (including those contained in Section 1471(b) or 1472(b) of the Code, as applicable), such Lender shall deliver to the Company and the Administrative Agent at the time or times prescribed by law and at such time or times reasonably requested by the Company or the Administrative Agent such documentation prescribed by applicable law (including as prescribed by Section 1471(b)(3)(C)(i) of the Code) and such additional documentation reasonably requested by the Company or the Administrative Agent as may be necessary for the Company and the Administrative Agent to comply with their obligations under FATCA and to determine that such Lender has complied with such Lender’s obligations under FATCA or to determine the amount to deduct and withhold from such payment.  Solely for purposes of this clause (D) , “FATCA” shall include any amendments made to FATCA after the date of this Agreement.

 

(iii)          Each Lender agrees that if any form or certification it previously delivered pursuant to this Section 3.01 expires or becomes obsolete or inaccurate in any respect, it shall update such form or certification or promptly notify the Company and the Administrative Agent in writing of its legal inability to do so.

 

(f)            Treatment of Certain Refunds .  Unless required by applicable Laws, at no time shall the Administrative Agent have any obligation to file for or otherwise pursue on behalf of a Lender or the L/C Issuer, or have any obligation to pay to any Lender or the L/C Issuer, any refund of Taxes withheld or deducted from funds paid for the account of such Lender or the L/C Issuer, as the case may be.  If any Recipient determines, in its sole discretion exercised in good faith, that it has received a refund of any Taxes as to which it has been indemnified by any Loan Party or with respect to which any Loan Party has paid additional amounts pursuant to this Section 3.01 , it shall pay to such Loan Party an amount equal to such refund (but only to the extent of indemnity payments made, or additional amounts paid, by a Loan Party under this Section 3.01 with respect to the Taxes giving rise to such refund), net of all out-of-pocket expenses (including Taxes) incurred by such Recipient, and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund), provided that each Loan Party, upon the request of the Recipient, agrees to repay the amount paid over to such Loan Party (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) to the Recipient in the event the Recipient is required to repay such refund to such Governmental Authority.  Notwithstanding anything to the contrary in this subsection, in no event will the applicable Recipient be required to pay any amount to such Loan Party pursuant to this subsection the payment of which would place the Recipient in a less favorable net after-Tax position than such Recipient would have been in if the Tax subject to indemnification and giving rise to such refund had not been deducted, withheld or otherwise imposed and the indemnification payments or additional amounts with respect to such Tax had never been paid.  This subsection shall not be construed to require any Recipient to make available its tax returns (or any other information relating to its taxes that it deems confidential) to any Loan Party or any other Person.

 

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(g)                               Survival .  Each party’s obligations under this Section 3.01 shall survive the resignation or replacement of the Administrative Agent or any assignment of rights by, or the replacement of, a Lender or the L/C Issuer, the termination of the Commitments and the repayment, satisfaction or discharge of all other Obligations.

 

3.02                     Illegality .  If any Lender determines that any Law has made it unlawful, or that any Governmental Authority has asserted that it is unlawful, for any Lender or its applicable Lending Office to make, maintain or fund Loans whose interest is determined by reference to the Eurocurrency Rate (whether denominated in Dollars or an Alternative Currency), or to determine or charge interest rates based upon the Eurocurrency Rate, or any Governmental Authority has imposed material restrictions on the authority of such Lender to purchase or sell, or to take deposits of, Dollars or any Alternative Currency in the applicable interbank market, then, on notice thereof by such Lender to the Company through the Administrative Agent, (i) any obligation of such Lender to make or continue Eurocurrency Rate Loans in the affected currency or currencies or, in the case of Eurocurrency Rate Loans in Dollars, to convert Base Rate Committed Loans to Eurocurrency Rate Loans, shall be suspended, and (ii) if such notice asserts the illegality of such Lender making or maintaining Base Rate Loans the interest rate on which is determined by reference to the Eurocurrency Rate component of the Base Rate, the interest rate on which Base Rate Loans of such Lender shall, if necessary to avoid such illegality, be determined by the Administrative Agent without reference to the Eurocurrency Rate component of the Base Rate, in each case until such Lender notifies the Administrative Agent and the Company that the circumstances giving rise to such determination no longer exist.  Upon receipt of such notice, (x) the Borrowers shall, upon demand from such Lender (with a copy to the Administrative Agent), prepay or, if applicable and such Loans are denominated in Dollars, convert all Eurocurrency Rate Loans of such Lender to Base Rate Loans (the interest rate on which Base Rate Loans of such Lender shall, if necessary to avoid such illegality, be determined by the Administrative Agent without reference to the Eurocurrency Rate component of the Base Rate), either on the last day of the Interest Period therefor, if such Lender may lawfully continue to maintain such Eurocurrency Rate Loans to such day, or immediately, if such Lender may not lawfully continue to maintain such Eurocurrency Rate Loans and (y) if such notice asserts the illegality of such Lender determining or charging interest rates based upon the Eurocurrency Rate, the Administrative Agent shall during the period of such suspension compute the Base Rate applicable to such Lender without reference to the Eurocurrency Rate component thereof until the Administrative Agent is advised in writing by such Lender that it is no longer illegal  for such Lender to determine or charge interest rates based upon the Eurocurrency Rate.  Upon any such prepayment or conversion, the Borrowers shall also pay accrued interest on the amount so prepaid or converted.

 

3.03                     Inability to Determine Rates .  If in connection with any request for a Eurodollar Rate Loan or a conversion to or continuation thereof, (a) the Administrative Agent determines that (i) Dollar deposits are not being offered to banks in the London interbank eurodollar market for the applicable amount and Interest Period of such Eurodollar Rate Loan, or (ii) adequate and reasonable means do not exist for determining the Eurodollar Rate for any requested Interest Period with respect to a proposed Eurodollar Rate Loan or in connection with an existing or proposed Base Rate Loan, or (b) the Required Lenders determine that for any reason the Eurodollar Rate for any requested Interest Period with respect to a proposed Eurodollar Rate

 

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Loan does not adequately and fairly reflect the cost to such Lenders of funding such Loan, the Administrative Agent will promptly so notify the Borrowers and each Lender.  Thereafter, (x) the obligation of the Lenders to make or maintain Eurodollar Rate Loans shall be suspended (to the extent of the affected Eurodollar Rate Loans or Interest Periods), and (y) in the event of a determination described in the preceding sentence with respect to the Eurodollar Rate component of the Base Rate, the utilization of the Eurodollar Rate component in determining the Base Rate shall be suspended, in each case until the Administrative Agent (upon the instruction of the Required Lenders) revokes such notice.  Upon receipt of such notice, the Borrower may revoke any pending request for a Borrowing of, conversion to or continuation of Eurodollar Rate Loans (to the extent of the affected Eurodollar Rate Loans or Interest Periods) or, failing that, will be deemed to have converted such request into a request for a Committed Borrowing of Base Rate Loans in the amount specified therein.

 

3.04                     Increased Costs; Reserves on Eurocurrency Rate Loans .

 

(a)                                Increased Costs Generally .  If any Change in Law shall:

 

(i)                                   impose, modify or deem applicable any reserve, special deposit, compulsory loan, insurance charge or similar requirement against assets of, deposits with or for the account of, or credit extended or participated in by, any Lender (except (A) any reserve requirement contemplated by Section 3.04(e)  and (B) the requirements of the Bank of England and the Financial Services Authority or the European Central Bank reflected in the Mandatory Cost, other than as set forth below) or the L/C Issuer;

 

(ii)                               subject any Recipient to any Taxes (other than (A) Indemnified Taxes, (B) Taxes described in clauses (b)  through (d)  of the definition of Excluded Taxes and (C) Connection Income Taxes) on its loans, loan principal, letters of credit, commitments, or other obligations, or its deposits, reserves, other liabilities or capital attributable thereto; or;

 

(iii)                           result in the failure of the Mandatory Cost, as calculated hereunder, to represent the cost to any Lender of complying with the requirements of the Bank of England and/or the Financial Services Authority or the European Central Bank in relation to its making, funding or maintaining Eurocurrency Rate Loans; or

 

(iv)                           impose on any Lender or the L/C Issuer or the London interbank market any other condition, cost or expense affecting this Agreement or Eurocurrency Rate Loans made by such Lender or any Letter of Credit or participation therein;

 

and the result of any of the foregoing shall be to increase the cost to such Lender of making, converting to, continuing or maintaining any Loan the interest on which is determined by reference to the Eurocurrency Rate Loan (or of maintaining its obligation to make any such Loan), or to increase the cost to such Lender or the L/C Issuer of participating in, issuing or maintaining any Letter of Credit (or of maintaining its obligation to participate in or to issue any Letter of Credit), or to reduce the amount of any sum received or receivable by such Lender or the L/C Issuer hereunder (whether of principal, interest or any other amount) then, upon request of such Lender or the L/C Issuer, the Company will pay (or cause the applicable Designated

 

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Borrower to pay) to such Lender or the L/C Issuer, as the case may be, such additional amount or amounts as will compensate such Lender or the L/C Issuer, as the case may be, for such additional costs incurred or reduction suffered.

 

(b)                               Capital Requirements .  If any Lender or the L/C Issuer determines that any Change in Law affecting such Lender or the L/C Issuer or any Lending Office of such Lender or such Lender’s or the L/C Issuer’s holding company, if any, regarding capital or liquidity requirements has or would have the effect of reducing the rate of return on such Lender’s or the L/C Issuer’s capital or on the capital of such Lender’s or the L/C Issuer’s holding company, if any, as a consequence of this Agreement, the Commitments of such Lender or the Loans made by, or participations in Letters of Credit or Swing Line Loans held by, such Lender, or the Letters of Credit issued by the L/C Issuer, to a level below that which such Lender or the L/C Issuer or such Lender’s or the L/C Issuer’s holding company could have achieved but for such Change in Law (taking into consideration such Lender’s or the L/C Issuer’s policies and the policies of such Lender’s or the L/C Issuer’s holding company with respect to capital adequacy), then from time to time the Company will pay (or cause the applicable Designated Borrower to pay) to such Lender or the L/C Issuer, as the case may be, such additional amount or amounts as will compensate such Lender or the L/C Issuer or such Lender’s or the L/C Issuer’s holding company for any such reduction suffered.

 

(c)                                Certificates for Reimbursement .  A certificate of a Lender or the L/C Issuer setting forth in reasonable detail the amount or amounts necessary to compensate such Lender or the L/C Issuer or its holding company, as the case may be, as specified in subsection (a)  or (b)  of this Section and delivered to the Company shall be conclusive absent manifest error.  The Company shall pay (or cause the applicable Designated Borrower to pay) such Lender or the L/C Issuer, as the case may be, the amount shown as due on any such certificate within 10 days after receipt thereof.

 

(d)                              Delay in Requests .  Failure or delay on the part of any Lender or the L/C Issuer to demand compensation pursuant to the foregoing provisions of this Section 3.04 shall not constitute a waiver of such Lender’s or the L/C Issuer’s right to demand such compensation, provided that no Borrower shall be required to compensate a Lender or the L/C Issuer pursuant to the foregoing provisions of this Section for any increased costs incurred or reductions suffered more than nine months prior to the date that such Lender or the L/C Issuer, as the case may be, notifies the Company of the Change in Law giving rise to such increased costs or reductions and of such Lender’s or the L/C Issuer’s intention to claim compensation therefor (except that, if the Change in Law giving rise to such increased costs or reductions is retroactive, then the nine-month period referred to above shall be extended to include the period of retroactive effect thereof).

 

(e)                                Additional Reserve Requirements .  The Company shall pay (or cause the applicable Designated Borrower to pay) to each Lender, as long as such Lender shall be required to maintain reserves with respect to liabilities or assets consisting of or including Eurocurrency funds or deposits (currently known as “ Eurocurrency liabilities ”), additional interest on the unpaid principal amount of each Eurocurrency Rate Loan equal to the actual costs of such reserves allocated to such Loan by such Lender (as determined by such Lender in good faith,

 

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which determination shall be conclusive), which shall be due and payable on each date on which interest is payable on such Loan, provided the Company shall have received at least ten (10) days’ prior notice (with a copy to the Administrative Agent) of such additional interest or costs from such Lender.  If a Lender fails to give notice ten (10) days prior to the relevant Interest Payment Date, such additional interest or costs shall be due and payable ten (10) days from receipt of such notice.

 

3.05                     Compensation for Losses .  Upon demand of any Lender (with a copy to the Administrative Agent) from time to time, the Company shall promptly compensate (or cause the applicable Designated Borrower to compensate) such Lender for and hold such Lender harmless from any loss, cost or expense incurred by it as a result of:

 

(a)                                any continuation, conversion, payment or prepayment of any Loan other than a Base Rate Loan on a day other than the last day of the Interest Period for such Loan (whether voluntary, mandatory, automatic, by reason of acceleration, or otherwise);

 

(b)                               any failure by any Borrower (for a reason other than the failure of such Lender to make a Loan) to prepay, borrow, continue or convert any Loan other than a Base Rate Loan on the date or in the amount notified by the Company or the applicable Designated Borrower;

 

(c)                                any failure by any Borrower to make payment of any Loan or drawing under any Letter of Credit (or interest due thereon) denominated in an Alternative Currency on its scheduled due date or any payment thereof in a different currency; or

 

(d)                              any assignment of a Eurocurrency Rate Loan on a day other than the last day of the Interest Period therefor as a result of a request by the Company pursuant to Section 10.13 ;

 

including any foreign exchange losses and any loss or expense arising from the liquidation or reemployment of funds obtained by it to maintain such Loan, from fees payable to terminate the deposits from which such funds were obtained or from the performance of any foreign exchange contract.  The Company shall also pay (or cause the applicable Designated Borrower to pay) any customary administrative fees charged by such Lender in connection with the foregoing.

 

For purposes of calculating amounts payable by the Company (or the applicable Designated Borrower) to the Lenders under this Section 3.05 , each Lender shall be deemed to have funded each Eurocurrency Rate Loan made by it at the Eurocurrency Rate for such Loan by a matching deposit or other borrowing in the offshore interbank market for such currency for a comparable amount and for a comparable period, whether or not such Eurocurrency Rate Loan was in fact so funded.  Any demand for compensation shall set forth in reasonable detail the amount and method for determining the loss, cost or expenses claimed.

 

3.06                         Mitigation Obligations; Replacement of Lenders .

 

(a)                                Designation of a Different Lending Office .  If any Lender requests compensation under Section 3.04 , or requires any Borrower to pay any Indemnified Taxes or additional amounts to any Lender, the L/C Issuer, or any Governmental Authority for the account of any Lender or the L/C Issuer pursuant to Section 3.01 , or if any Lender gives a notice pursuant to

 

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Section 3.02 , then at the request of the Company such Lender or the L/C Issuer shall, as applicable, use reasonable efforts to designate a different Lending Office for funding or booking its Loans hereunder or to assign its rights and obligations hereunder to another of its offices, branches or affiliates, if, in the judgment of such Lender or the L/C Issuer, such designation or assignment (i) would eliminate or reduce amounts payable pursuant to Section 3.01 or 3.04 , as the case may be, in the future, or eliminate the need for the notice pursuant to Section 3.02 , as applicable, and (ii) in each case, would not subject such Lender or the L/C Issuer, as the case may be, to any unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender or the L/C Issuer, as the case may be.  The Company hereby agrees to pay (or to cause the applicable Designated Borrower to pay) all reasonable costs and expenses incurred by any Lender or the L/C Issuer in connection with any such designation or assignment.

 

(b)                               Replacement of Lenders .  If any Lender requests compensation under Section 3.04 , or if any Borrower is required to pay any Indemnified Taxes or additional amounts to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 3.01 and, in each case, such Lender has declined or is unable to designate a different lending office in accordance with Section 3.06(a) , the Company may replace such Lender in accordance with Section 10.13 .

 

3.07                     Survival .  All obligations of the Loan Parties under this Article III shall survive termination of the Aggregate Commitments, repayment of all other Obligations hereunder, and resignation of the Administrative Agent.

 

ARTICLE IV.
CONDITIONS PRECEDENT TO CREDIT EXTENSIONS

 

4.01                     Conditions of Initial Credit Extension .  The obligation of the L/C Issuer and each Lender to make its initial Credit Extension hereunder is subject to satisfaction of the following conditions precedent:

 

(a)                                The Administrative Agent’s receipt of the following, each of which shall be originals or telecopies (followed promptly by originals) unless otherwise specified, each properly executed by a Responsible Officer of the signing Loan Party, each dated the Closing Date (or, in the case of certificates of governmental officials, a recent date before the Closing Date) and each in form and substance satisfactory to the Administrative Agent and each of the Lenders:

 

(i)                                   executed counterparts of this Agreement, sufficient in number for distribution to the Administrative Agent, each Lender and the Company;

 

(ii)                               Notes executed by the Borrowers in favor of each Lender requesting Notes;

 

(iii)                           such certificates of resolutions or other action, incumbency certificates and/or other certificates of Responsible Officers of each Loan Party as the Administrative Agent may require evidencing the identity, authority and capacity of each Responsible Officer thereof authorized to act as a Responsible Officer in connection with this Agreement and the other Loan Documents to which such Loan Party is a party;

 

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(iv)                           such documents and certifications as the Administrative Agent may reasonably require to evidence that each Loan Party is duly organized or formed, and that the Company is validly existing, in good standing and qualified to engage in business in each jurisdiction where its ownership, lease or operation of properties or the conduct of its business requires such qualification, except to the extent that failure to do so could not reasonably be expected to have a Material Adverse Effect;

 

(v)                               a favorable opinion of Stinson Morrison Hecker LLP, counsel to the Loan Parties, addressed to the Administrative Agent and each Lender, in the form of Exhibit I ;

 

(vi)                           a certificate of a Responsible Officer of each Loan Party either (A) attaching copies of all consents, licenses and approvals required in connection with the execution, delivery and performance by such Loan Party and the validity against such Loan Party of the Loan Documents to which it is a party, and such consents, licenses and approvals shall be in full force and effect, or (B) stating that no such consents, licenses or approvals are so required;

 

(vii)                       a certificate signed by a Responsible Officer of the Company certifying (A) that the conditions specified in Sections 4.02(a)  and (b)  have been satisfied, and (B) that there has been no event or circumstance since the date of the Audited Financial Statements that has had or could be reasonably expected to have, either individually or in the aggregate, a Material Adverse Effect;

 

(viii)                   executed counterparts of a Company Guaranty for each Foreign Obligor that is a Designated Borrower on the Closing Date, if any;

 

(ix)                           all documentation and other information requested prior to the Closing Date by the Administrative Agent or any Lender, as applicable, in order to comply with their respective obligations under applicable “know your customer” and anti-money laundering rules and regulations, including the USA PATRIOT Act (Title III of Pub. L. 107-56 (signed into law on October 26, 2001)); and

 

(x)                               such other assurances, certificates, documents, consents or opinions as the Administrative Agent, the L/C Issuer, the Swing Line Lender or the Required Lenders reasonably may require.

 

(b)                               Any fees required to be paid on or before the Closing Date shall have been paid.

 

(c)                                Unless waived by the Administrative Agent, the Company shall have paid all fees, charges and disbursements of counsel to the Administrative Agent to the extent invoiced prior to or on the Closing Date, plus such additional amounts of such fees, charges and disbursements as shall constitute its reasonable estimate of such fees, charges and disbursements incurred or to be incurred by it through the closing proceedings ( provided that such estimate shall not thereafter preclude a final settling of accounts between the Company and the Administrative Agent).

 

Without limiting the generality of the provisions of the last paragraph of Section 9.03 , for purposes of determining compliance with the conditions specified in this Section 4.01 , each

 

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Lender that has signed this Agreement shall be deemed to have consented to, approved or accepted or to be satisfied with, each document or other matter required thereunder to be consented to or approved by or acceptable or satisfactory to a Lender unless the Administrative Agent shall have received notice from such Lender prior to the proposed Closing Date specifying its objection thereto.

 

4.02                     Conditions to all Credit Extensions .   The obligation of each Lender to honor any Request for Credit Extension (other than a Committed Loan Notice requesting only a conversion of Committed Loans to the other Type, or a continuation of Eurocurrency Rate Loans) is subject to the following conditions precedent:

 

(a)                                The representations and warranties of (i) the Borrowers contained in Article V and (ii) each Loan Party contained in each other Loan Document or in any document furnished at any time under or in connection herewith or therewith, shall be true and correct in all material respects on and as of the date of such Credit Extension, except to the extent that such representations and warranties specifically refer to an earlier date, in which case they shall be true and correct in all material respects as of such earlier date, and except that for purposes of this Section 4.02 , the representations and warranties contained in subsections (a)  and (b)  of Section 5.05 shall be deemed to refer to the most recent statements furnished pursuant to clauses (a)  and (b) , respectively, of Section 6.01 .

 

(b)                               No Default shall exist, or would result from such proposed Credit Extension or the application of the proceeds thereof.

 

(c)                                The Administrative Agent and, if applicable, the L/C Issuer or the Swing Line Lender shall have received a Request for Credit Extension in accordance with the requirements hereof.

 

(d)                              If the applicable Borrower is a Designated Borrower, then the conditions of Section 2.14 to the designation of such Borrower as a Designated Borrower shall have been met to the satisfaction of the Administrative Agent.

 

(e)                                In the case of a Credit Extension to be denominated in an Alternative Currency, there shall not have occurred any change in national or international financial, political or economic conditions or currency exchange rates or exchange controls which in the reasonable opinion of the Administrative Agent, the Required Lenders (in the case of any Loans to be denominated in an Alternative Currency) or the L/C Issuer (in the case of any Letter of Credit to be denominated in an Alternative Currency) would make it impracticable for such Credit Extension to be denominated in the relevant Alternative Currency.

 

Each Request for Credit Extension (other than a Committed Loan Notice requesting only a conversion of Committed Loans to the other Type or a continuation of Eurocurrency Rate Loans) submitted by the Company shall be deemed to be a representation and warranty by each Loan Party that the conditions specified in Sections 4.02(a)  and (b)  have been satisfied on and as of the date of the applicable Credit Extension.

 

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ARTICLE V.
REPRESENTATIONS AND WARRANTIES

 

Each Borrower represents and warrants to the Administrative Agent and the Lenders that:

 

5.01                     Existence, Qualification and Power .   Each Loan Party and each Restricted Subsidiary thereof (a) is duly organized or formed, validly existing and in good standing under the Laws of the jurisdiction of its incorporation or organization, (b) has all requisite power and authority and all requisite governmental licenses, authorizations, consents and approvals to (i) own its assets and carry on its business and (ii) execute, deliver and perform its obligations under the Loan Documents to which it is a party, and (c) is duly qualified and is licensed and in good standing under the Laws of each jurisdiction where its ownership, lease or operation of properties or the conduct of its business requires such qualification or license, except in each case referred to in clauses (a)  (but only with respect to Non-Material Subsidiaries), (b)(i)  or (c) , to the extent that failure to do so could not reasonably be expected to have a Material Adverse Effect.

 

5.02                     Authorization; No Contravention .   The execution, delivery and performance by each Loan Party of each Loan Document have been duly authorized by all necessary corporate action, and do not and will not (a) contravene the terms of any of such Person’s Organization Documents; (b) conflict with or result in any breach or contravention of, or the creation of any Lien under, or require any payment to be made under (i) any Contractual Obligation to which such Person is a party or affecting such Person or the properties of such Person or any of its Subsidiaries or (ii) any order, injunction, writ or decree of any Governmental Authority or any arbitral award to which such Person or its property is subject; or (c) violate any Law.  The Company and each Restricted Subsidiary thereof is in compliance with all Contractual Obligations referred to in clause (b)(i) , except to the extent that failure to do so could not reasonably be expected to have a Material Adverse Effect.

 

5.03           Governmental Authorization; Other Consents .   No approval, consent, exemption, authorization, or other action by, or notice to, or filing with, any Governmental Authority or any other Person is necessary or required in connection with the execution, delivery or performance by, or enforcement against, any Borrower of this Agreement or any other Loan Document.

 

5.04                     Binding Effect .   This Agreement has been, and each other Loan Document, when delivered hereunder, will have been, duly executed and delivered by each Loan Party that is party thereto.  This Agreement constitutes, and each other Loan Document when so delivered will constitute, a legal, valid and binding obligation of each Borrower, enforceable against each Borrower in accordance with its terms, except as enforceability may be limited by Debtor Relief Laws and subject to equitable remedies.

 

5.05                        Financial Statements; No Material Adverse Effect .

 

(a)                                The Audited Financial Statements (i) were prepared in accordance with GAAP consistently applied throughout the period covered thereby, except as otherwise expressly noted therein; (ii) fairly present in all material respects the financial condition of the Company and its

 

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Subsidiaries and Consolidated Entities as of the date thereof and their results of operations for the period covered thereby in accordance with GAAP consistently applied throughout the period covered thereby, except as otherwise expressly noted therein; and (iii) show all material indebtedness and other liabilities, direct or contingent, of the Company and its Subsidiaries and Consolidated Entities as of the date thereof, including liabilities for taxes, material commitments and indebtedness.

 

(b)                               The unaudited consolidated balance sheet of the Company and its Subsidiaries and Consolidated Entities dated September 29, 2012 and the related consolidated statements of earnings, shareholders equity and cash flows for the fiscal quarter ended on that date (i) were prepared in accordance with GAAP consistently applied throughout the period covered thereby, except as otherwise expressly noted therein, and (ii) fairly present in all material respects the financial condition of the Company and its Subsidiaries and Consolidated Entities as of the date thereof and their results of operations for the period covered thereby, subject, in the case of clauses (i)  and (ii) , to the absence of footnotes and to normal year-end audit adjustments.  Schedule 5.05 sets forth all material indebtedness and other liabilities, direct or contingent, of the Company and its consolidated Subsidiaries and Consolidated Entities on the Closing Date that are not shown on such financial statements, including liabilities for taxes, material commitments and Indebtedness.

 

(c)                                Since the date of the Audited Financial Statements, there has been no event or circumstance, either individually or in the aggregate, that has had or could reasonably be expected to have a Material Adverse Effect.

 

5.06                     Litigation .   There are no actions, suits, proceedings, claims or disputes pending or, to the knowledge of the Company, threatened or contemplated, at law, in equity, in arbitration or before any Governmental Authority, by or against the Company or any of its Restricted Subsidiaries or against any of their properties or revenues that (a) purport to affect or pertain to this Agreement or any other Loan Document, or any of the transactions contemplated hereby, or (b) either individually or in the aggregate could reasonably be expected to have a Material Adverse Effect

 

5.07                     No Default .   Neither any Loan Party nor any Restricted Subsidiary thereof is in default under or with respect to any Contractual Obligation that could, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.  No Default has occurred and is continuing or would result from the consummation of the transactions contemplated by this Agreement or any other Loan Document.

 

5.08                     Ownership of Property; Liens .   Each of the Company and each Restricted Subsidiary has good record and marketable title in fee simple to, or valid leasehold interests in, all real property necessary or used in the ordinary conduct of its business, except for such defects in title as could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.  The property of the Company and its Restricted Subsidiaries is subject to no Liens, other than Liens permitted by Section 7.01 .

 

5.09                     Environmental Compliance .   The Company and its Restricted Subsidiaries conduct in the ordinary course of business a review of the effect of existing Environmental Laws

 

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and claims alleging potential liability or responsibility for violation of any Environmental Law on their respective businesses, operations and properties, and as a result thereof the Company has reasonably concluded that such Environmental Laws and claims could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

 

5.10                     Insurance .   The properties of the Company and its Restricted Subsidiaries are insured with financially sound and reputable insurance companies not Affiliates of the Company, in such amounts (including self-insurance, if adequate reserves are maintained with respect thereto), with such deductibles and covering such risks as are customarily carried by companies engaged in similar businesses and owning similar properties in localities where the Company or the applicable Restricted Subsidiary operates.

 

5.11                     Taxes .   The Company and its Restricted Subsidiaries have filed all Federal, state and other tax returns and reports required to be filed, and have paid all Federal, state and other taxes, assessments, fees and other governmental charges levied or imposed upon them or their properties, income or assets otherwise due and payable, except those which are being contested in good faith by appropriate proceedings diligently conducted and for which adequate reserves have been provided in accordance with GAAP or which the nonpayment of, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect.  There is no proposed tax assessment against the Company or any Restricted Subsidiary that would, if made, have a Material Adverse Effect.  Neither the Company nor any Restricted Subsidiary thereof is party to any tax sharing agreement.

 

5.12                        ERISA Compliance .

 

(a)                                Each Plan is in compliance in all material respects with the applicable provisions of ERISA, the Code and other Federal or state Laws.  Each Plan that is intended to qualify under Section 401(a) of the Code has received a favorable determination letter from the IRS or an application for such a letter is currently being processed by the IRS with respect thereto and, to the best knowledge of the Company, nothing has occurred which would prevent, or cause the loss of, such qualification.  The Company and each ERISA Affiliate have made all required contributions to each Plan subject to Section 412 of the Code, and no application for a funding waiver or an extension of any amortization period pursuant to Section 412 of the Code has been made with respect to any Plan.

 

(b)                               There are no pending or, to the best knowledge of the Company, threatened claims, actions or lawsuits, or action by any Governmental Authority, with respect to any Plan that could reasonably be expected to have a Material Adverse Effect.  There has been no prohibited transaction or violation of the fiduciary responsibility rules with respect to any Plan that has resulted or could reasonably be expected to result in a Material Adverse Effect.

 

(c)                                No ERISA Event has occurred or is reasonably expected to occur; (ii) the aggregate Unfunded Pension Liability of all Pension Plans does not exceed an amount that could reasonably be expected to have a Material Adverse Effect; (iii) neither the Company nor any ERISA Affiliate has incurred, or reasonably expects to incur, any liability under Title IV of ERISA with respect to any Pension Plan (other than premiums due and not delinquent under Section 4007 of ERISA); (iv) neither the Company nor any ERISA Affiliate has incurred, or

 

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reasonably expects to incur, any liability (and no event has occurred which, with the giving of notice under Section 4219 of ERISA, would result in such liability) under Sections 4201 or 4243 of ERISA with respect to a Multiemployer Plan; and (v) neither the Company nor any ERISA Affiliate has engaged in a transaction that could be subject to Sections 4069 or 4212(c) of ERISA.

 

5.13                        Subsidiaries; Equity Interests .  As of the Closing Date:

 

(a)                                the Company has no Subsidiaries other than those specifically disclosed in Part (a) of Schedule 5.13 (which Schedule indicates those Subsidiaries that are Material and Non-Material Subsidiaries), and all of the outstanding Equity Interests in such Subsidiaries have been validly issued, are fully paid and nonassessable and are owned, directly or indirectly, by the Company in the amounts specified on Part (a) of Schedule 5.13 free and clear of all Liens;

 

(b)                               the Company has no Equity Interests (other than those permitted by Section 7.02(a) ) in any other Person other than those specifically disclosed in Part (b) of Schedule 5.13 , and has no Control over any other Person except as disclosed in Part (c) of Schedule 5.13 ; and

 

(c)                                each Restricted Subsidiary and each Unrestricted Subsidiary, respectively, of the Company is identified on Part (d) of Schedule 5.13 .

 

5.14                        Margin Regulations; Investment Company Act .

 

(a)                                No Borrower is engaged and no Borrower will engage, principally or as one of its important activities, in the business of purchasing or carrying margin stock (within the meaning of Regulation U issued by the FRB), or extending credit for the purpose of purchasing or carrying margin stock.  Following the application of the proceeds of each Borrowing or drawing under each Letter of Credit, not more than twenty-five percent (25%) of the value of the assets (either of such Borrower only or of the Company and its Subsidiaries on a consolidated basis) subject to the provisions of Section 7.01 or Section 7.05 or subject to any restriction contained in any agreement or instrument between such Borrower and any Lender or any Affiliate of any Lender relating to Indebtedness and within the scope of Section 8.01(e)  will be margin stock.

 

(b)                               None of the Company, any Person Controlling the Company, or any Restricted Subsidiary is or is required to be registered as an “investment company” under the Investment Company Act of 1940.

 

5.15                     Disclosure .   The Company has disclosed to the Administrative Agent and the Lenders all agreements, instruments and corporate or other restrictions to which it or any of its Restricted Subsidiaries is subject, and all other matters known to it, that, individually or in the aggregate, could reasonably be expected (in light of the circumstances existing at each respective time this representation is made) to result in a Material Adverse Effect.  No report, financial statement, certificate or other information furnished (whether in writing or orally) by or on behalf of the Company to the Administrative Agent or any Lender in connection with the transactions contemplated hereby and the negotiation of this Agreement or delivered hereunder or under any other Loan Document (in each case, as modified or supplemented by other

 

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information so furnished) contains any material misstatement of fact or omits to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that, (a) with respect to projected financial information, the Company represents only that such information was prepared in good faith based upon assumptions believed to be reasonable at the time and (b) with respect to general industry information, the foregoing representation is only to the best of the Company’s knowledge.

 

5.16                     Compliance with Laws .   Each Loan Party and each Restricted Subsidiary is in compliance in all material respects with the requirements of all Laws and all orders, writs, injunctions and decrees applicable to it or to its properties, except in such instances in which (a) such requirement of Law or order, writ, injunction or decree is being contested in good faith by appropriate proceedings diligently conducted or (b) the failure to comply therewith, either individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect.

 

5.17                     Intellectual Property; Licenses, Etc .  The Company and its Restricted Subsidiaries own, or possess the right to use, all of the trademarks, service marks, trade names, copyrights, patents, patent rights, franchises, licenses and other intellectual property rights (collectively, “ IP Rights ”) that are reasonably necessary for the operation of their respective businesses, without conflict with the rights of any other Person, except where the failure to own or possess the same, either individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect.  To the best knowledge of the Company, no slogan or other advertising device, product, process, method, substance, part or other material now employed, or now contemplated to be employed, by the Company or any Restricted Subsidiary infringes upon any rights held by any other Person, except where such infringement, either individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect.  No claim or litigation regarding any of the foregoing is pending or, to the best knowledge of the Company, threatened, which, either individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect

 

5.18                     Taxpayer Identification Number; Other Identifying Information .   The true and correct U.S. taxpayer identification number of the Company and each Designated Borrower that is a Domestic Subsidiary and a party hereto on the Closing Date is set forth on Schedule 5.18 .  The true and correct unique identification number of each Designated Borrower that is a Foreign Subsidiary and a party hereto on the Closing Date that has been issued by its jurisdiction of organization and the name of such jurisdiction are set forth on Schedule 5.18 .

 

5.19                     Representations as to Foreign Obligors .   Each of the Company and each Foreign Obligor represents and warrants to the Administrative Agent and the Lenders that:

 

(a)                                Such Foreign Obligor is subject to civil and commercial Laws with respect to its obligations under this Agreement and the other Loan Documents to which it is a party (collectively as to such Foreign Obligor, the “ Applicable Foreign Obligor Documents ”), and the execution, delivery and performance by such Foreign Obligor of the Applicable Foreign Obligor Documents constitute and will constitute private and commercial acts and not public or governmental acts.  Neither such Foreign Obligor nor any of its property has any immunity from

 

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jurisdiction of any court or from any legal process (whether through service or notice, attachment prior to judgment, attachment in aid of execution, execution or otherwise) under the laws of the jurisdiction in which such Foreign Obligor is organized and existing in respect of its obligations under the Applicable Foreign Obligor Documents.

 

(b)                               The Applicable Foreign Obligor Documents are in proper legal form under the Laws of the jurisdiction in which such Foreign Obligor is organized and existing for the enforcement thereof against such Foreign Obligor under the Laws of such jurisdiction, and to ensure the legality, validity, enforceability, priority or admissibility in evidence of the Applicable Foreign Obligor Documents.  It is not necessary to ensure the legality, validity, enforceability, priority or admissibility in evidence of the Applicable Foreign Obligor Documents that the Applicable Foreign Obligor Documents be filed, registered or recorded with, or executed or notarized before, any court or other authority in the jurisdiction in which such Foreign Obligor is organized and existing or that any registration charge or stamp or similar tax be paid on or in respect of the Applicable Foreign Obligor Documents or any other document, except for (i) any such filing, registration, recording, execution or notarization as has been made or is not required to be made until the Applicable Foreign Obligor Document or any other document is sought to be enforced and (ii) any charge or tax as has been timely paid.

 

(c)                                There is no tax, levy, impost, duty, fee, assessment or other governmental charge, or any deduction or withholding, imposed by any Governmental Authority in or of the jurisdiction in which such Foreign Obligor is organized and existing either (i) on or by virtue of the execution or delivery of the Applicable Foreign Obligor Documents or (ii) on any payment to be made by such Foreign Obligor pursuant to the Applicable Foreign Obligor Documents, except as has been disclosed to the Administrative Agent.

 

(d)                              The execution, delivery and performance of the Applicable Foreign Obligor Documents executed by such Foreign Obligor are, under applicable foreign exchange control regulations of the jurisdiction in which such Foreign Obligor is organized and existing, not subject to any notification or authorization except (i) such as have been made or obtained or (ii) such as cannot be made or obtained until a later date ( provided that any notification or authorization described in clause (ii)  shall be made or obtained as soon as is reasonably practicable).

 

5.20                     OFAC .  No Loan Party nor any Subsidiary of a Loan Party (a) is currently on the list of persons and entities subject of any Sanctions, (b) is located, organized or residing in any Designated Jurisdiction, or (c) is engaged in any unlawful transaction with any Person who is the subject of Sanctions.  No Loan, nor the proceeds from any Loan, has been unlawfully used, directly or indirectly, to lend, contribute, provide or has otherwise made available to fund any activity or business in any Designated Jurisdiction or to unlawfully fund any activity or business of any Person located, organized or residing in any Designated Jurisdiction or who is on the list of persons and entities subject of any Sanctions, or in any other manner that will result in any violation by any Person (including any Lender, the Arranger, the Administrative Agent, the L/C Issuer or the Swing Line Lender) of Sanctions.

 

5.21                     Unrestricted Subsidiaries .  As of the Closing Date and at the end of each fiscal quarter of the Company thereafter, (a) the total assets of all Unrestricted Subsidiaries do not

 

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exceed 30% of the consolidated total assets of the Company and all of its Subsidiaries and (b) the total Consolidated EBITDA of all Unrestricted Subsidiaries does not exceed 30% of Consolidated EBITDA of the Company and all of its Subsidiaries.  For the avoidance of doubt, all components of the calculations in this Section 5.21 will exclude, if applicable, Butterball.

 

ARTICLE VI.
AFFIRMATIVE COVENANTS

 

So long as any Lender shall have any Commitment hereunder, any Loan or other Obligation hereunder shall remain unpaid or unsatisfied (other than contingent reimbursement and indemnification obligations to the extent no unsatisfied claim with respect thereto has been asserted), or any Letter of Credit shall remain outstanding, the Company shall, and shall (except in the case of the covenants set forth in Sections 6.01 , 6.02 , and 6.03 ) cause each Restricted Subsidiary to:

 

6.01                     Financial Statements .   Deliver to the Administrative Agent and each Lender, in form and detail satisfactory to the Administrative Agent and the Required Lenders:

 

(a)                                as soon as practicable, but in any event within 90 days after the end of each fiscal year of the Company (or, if earlier, 15 days after the date required to be filed with the SEC (without giving effect to any extension permitted thereby)), (i) a consolidated balance sheet of the Company and its Subsidiaries and Consolidated Entities as at the end of such fiscal year, and the related consolidated statements of earnings, shareholders’ equity and cash flows for such fiscal year, setting forth in each case in comparative form the figures for the previous fiscal year, all in reasonable detail and prepared in accordance with GAAP, such consolidated statements to be audited and accompanied by a report and opinion of an independent certified public accountant of nationally recognized standing reasonably acceptable to the Required Lenders, which report and opinion shall be prepared in accordance with generally accepted auditing standards and shall not be subject to any “going concern” or like qualification or exception or any qualification or exception as to the scope of such audit, and (ii) to the extent there exist any Unrestricted Subsidiaries during such period, a consolidating balance sheet of the Company and its Restricted Subsidiaries and Consolidated Entities as at the end of such fiscal year, and the related consolidating statements of earnings and cash flows for such fiscal year, all in reasonable detail and prepared in accordance with GAAP (subject to the absence of footnotes), such consolidating statements to be certified by a Responsible Officer of the Company to the effect that such statements are fairly stated in all material respects when considered in relation to the consolidated financial statements of the Company and its Restricted Subsidiaries and Consolidated Entities, setting forth in each case in comparative form the figures for the previous fiscal year; and

 

(b)                               as soon as practicable, but in any event within 50 days after the end of each of the first three fiscal quarters of each fiscal year of the Company (commencing with the fiscal quarter ended March 30, 2013) (or, if earlier, five days after the date required to be filed with the SEC (without giving effect to any extension permitted thereby)), (i) a consolidated balance sheet of the Company and its Subsidiaries and Consolidated Entities as at the end of such fiscal quarter, and the related consolidated statements of earnings and cash flows for such fiscal quarter and for the portion of the Company’s fiscal year then ended, setting forth in each case in comparative

 

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form the figures for the corresponding fiscal quarter of the previous fiscal year and the corresponding portion of the previous fiscal year, all in reasonable detail, certified by a Responsible Officer of the Company as fairly presenting in all material respects the financial condition, results of earnings and cash flows of the Company and its Subsidiaries and Consolidated Entities in accordance with GAAP, subject only to normal year-end audit adjustments and the absence of footnotes, and (ii) to the extent there exist any Unrestricted Subsidiaries during such period, a consolidating balance sheet of the Company and its Restricted Subsidiaries and Consolidated Entities as at the end of such fiscal quarter, and the related consolidating statements of earnings and cash flows for such fiscal quarter and for the portion of the Company’s fiscal year then ended, all in reasonable detail, such consolidating statements to be certified by a Responsible Officer of the Company to the effect that such statements are fairly stated in all material respects when considered in relation to the consolidated financial statements of the Company and its Restricted Subsidiaries and Consolidated Entities, and setting forth in each case in comparative form the figures for the corresponding fiscal quarter of the previous fiscal year and the corresponding portion of the previous fiscal year.

 

As to any information contained in materials furnished pursuant to Section 6.02(c) , the Company shall not be separately required to furnish such information under clause (a)  or (b)  above, but the foregoing shall not be in derogation of the obligation of the Company to furnish the information and materials described in clauses (a)  and (b)  above at the times specified therein.

 

6.02                     Certificates; Other Information .   Deliver to the Administrative Agent and each Lender, in form and detail satisfactory to the Administrative Agent and the Required Lenders:

 

(a)                                Not later than ten days after the delivery of the financial statements referred to in Sections 6.01(a)  and (b)  (commencing with the delivery of the financial statements for the fiscal year ended December 31, 2012), a duly completed Compliance Certificate signed by a Responsible Officer of the Company;

 

(b)                               with reasonable promptness after any request by the Administrative Agent or any Lender, copies of any detailed audit reports, management letters or recommendations submitted to the board of directors (or the audit committee of the board of directors) of the Company by independent accountants in connection with the accounts or books of the Company or any Subsidiary, or any audit of any of them;

 

(c)                                promptly after the same are available, copies of each annual report, proxy or financial statement or other report or communication sent to the stockholders of the Company, and copies of all annual, regular, periodic and special reports and registration statements which the Company may file or be required to file with the SEC under Section 13 or 15(d) of the Securities Exchange Act of 1934, and not otherwise required to be delivered to the Administrative Agent pursuant hereto;

 

(d)                              promptly, after the same are available, copies of each notice or other correspondence received from the SEC (or comparable agency in any applicable non-U.S. jurisdiction) concerning any investigation or possible investigation or other inquiry by such agency regarding financial or other operational results of any Loan Party or any Restricted Subsidiary thereof; and

 

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(e)                                with reasonable promptness, such additional information regarding the business, financial or corporate affairs of any Loan Party or any Restricted Subsidiary, or compliance with the terms of the Loan Documents, as the Administrative Agent or any Lender may from time to time reasonably request.

 

Documents required to be delivered pursuant to Section 6.01(a)  or (b)  or Section 6.02(c)  (to the extent any such documents are included in materials otherwise filed with the SEC) may be delivered electronically and if so delivered, shall be deemed to have been delivered on the date (i) on which the Company posts such documents, or provides a link thereto on the Company’s website on the Internet at the website address listed on Schedule 10.02 ; or (ii) on which such documents are posted on the Company’s behalf on an Internet or intranet website, if any, to which each Lender and the Administrative Agent have access (whether a commercial, third-party website or whether sponsored by the Administrative Agent); provided that: (i) the Company shall deliver paper copies of such documents to the Administrative Agent or any Lender that requests the Company to deliver such paper copies until a written request to cease delivering paper copies is given by the Administrative Agent or such Lender and (ii) the Company shall notify the Administrative Agent and each Lender (by telecopier or electronic mail) of the posting of any such documents and provide to the Administrative Agent by electronic mail electronic versions ( i.e. , soft copies) of such documents.  Notwithstanding anything contained herein, in every instance the Company shall be required to provide paper copies of the Compliance Certificates required by Section 6.02(a)  to the Administrative Agent.  Except for such Compliance Certificates, the Administrative Agent shall have no obligation to request the delivery or to maintain copies of the documents referred to above, and in any event shall have no responsibility to monitor compliance by the Company with any such request for delivery, and each Lender shall be solely responsible for requesting delivery to it or maintaining its copies of such documents.

 

Each Borrower hereby acknowledges that (a) the Administrative Agent and/or the Arrangers will make available to the Lenders and the L/C Issuer materials and/or information provided by or on behalf of the Borrowers hereunder (collectively, “ Borrower Materials ”) by posting the Borrower Materials on IntraLinks or another similar electronic system (the “ Platform ”) and (b) certain of the Lenders (each, a “ Public Lender ”) may have personnel who do not wish to receive material non-public information with respect to any of the Borrowers or their respective Affiliates, or the respective securities of any of the foregoing, and who may be engaged in investment and other market-related activities with respect to such Persons’ securities.  Each Borrower hereby agrees that (w) all Borrower Materials that are to be made available to Public Lenders shall be clearly and conspicuously marked “PUBLIC” which, at a minimum, shall mean that the word “PUBLIC” shall appear prominently on the first page thereof; (x) by marking Borrower Materials “PUBLIC”, the Borrowers shall be deemed to have authorized the Administrative Agent, the Arrangers, the L/C Issuer and the Lenders to treat such Borrower Materials as not containing any material non-public information with respect to any Borrower or its securities for purposes of United States Federal and state securities laws ( provided , however , that to the extent such Borrower Materials constitute Information, they shall be treated as set forth in Section 10.07 ); (y) all Borrower Materials marked “PUBLIC” are permitted to be made available through a portion of the Platform designated “Public Side Information”; and (z) the Administrative Agent and the Arrangers shall be entitled to treat any

 

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Borrower Materials that are not marked “PUBLIC” as being suitable only for posting on a portion of the Platform not designated “Public Side Information”.

 

6.03                     Notices .   Notify the Administrative Agent and each Lender:

 

(a)                                immediately, and in any event within three (3) days upon becoming aware of the occurrence of any Default;

 

(b)                               promptly, of any matter that could reasonably be expected to result in a Material Adverse Effect (including, to the extent it could reasonably be expected to result in a Material Adverse Effect, (i) breach or non-performance of, or any default under, a Contractual Obligation of the Company or any Restricted Subsidiary; (ii) any dispute, litigation, or proceeding between the Company or any Restricted Subsidiary and any Governmental Authority or the suspension of any permit or license issued by any Governmental Authority and needed by the Company or any Restricted Subsidiary to operate; or (iii) the commencement of any litigation or proceeding against the Company or any Restricted Subsidiary, including pursuant to any applicable Environmental Laws);

 

(c)                                immediately, and in any event within three (3) days, upon becoming aware of the occurrence of any ERISA Event; and

 

(d)                              promptly, of any material change in accounting policies or financial reporting practices by the Company or any Restricted Subsidiary, including any determination by the Company referred to in Section 2.10(b) .

 

Each notice pursuant to this Section 6.03 shall be accompanied by a statement of a Responsible Officer of the Company setting forth details of the occurrence referred to therein and stating what action the Company has taken and proposes to take with respect thereto.  Each notice pursuant to Section 6.03(a)  shall describe with particularity any and all provisions of this Agreement and any other Loan Document that have been breached.

 

6.04                     Payment of Obligations .   Pay and discharge as the same shall become due and payable, all its obligations and liabilities, including (a) all tax liabilities, assessments and governmental charges or levies upon it or its properties or assets, unless the same are being contested in good faith by appropriate proceedings diligently conducted and adequate reserves in accordance with GAAP are being maintained by the Company or such Restricted Subsidiary; (b) all lawful claims which, if unpaid, would by law become a Lien upon its property, unless the same are disputed or are being contested, in each case, in good faith by appropriate proceedings diligently conducted and adequate reserves in accordance with GAAP are being maintained by the Company or such Restricted Subsidiary; and (c) all Indebtedness, as and when due and payable, but subject to any subordination provisions contained in any instrument or agreement evidencing or relating to such Indebtedness, except, in the case of clauses (a) , (b)  and (c) , to the extent that any such obligations or liabilities, individually or in the aggregate, are not reasonably likely to result in a Material Adverse Effect.

 

6.05                     Preservation of Existence, Etc .   (a) Preserve, renew and maintain in full force and effect its legal existence and good standing under the Laws of the jurisdiction of its

 

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organization except in a transaction permitted by Section 7.04 or 7.05 , and except (but only with respect to Non-Material Subsidiaries) where the failure to do so could not reasonably be expected to have a Material Adverse Effect; (b) take all reasonable action to maintain all rights, privileges, permits, licenses and franchises necessary or desirable in the normal conduct of its business, except to the extent that failure to do so could not reasonably be expected to have a Material Adverse Effect; and (c) preserve or renew all of its registered patents, trademarks, trade names and service marks, the non-preservation of which could reasonably be expected to have a Material Adverse Effect.

 

6.06                     Maintenance of Properties .   (a) Maintain, preserve and protect all of its material properties and equipment necessary in the operation of its business in good working order and condition, ordinary wear, tear and obsolescence excepted; (b) make all necessary repairs thereto and renewals and replacements thereof (provided that the Company and its Restricted Subsidiaries may discontinue the operation and maintenance of any of its properties if such discontinuance is desirable in the conduct of its business) except where the failure to do so could not reasonably be expected to have a Material Adverse Effect; and (c) use the standard of care typical in the industry in the operation and maintenance of its facilities.

 

6.07                    Maintenance of Insurance .   Maintain with financially sound and reputable insurance companies that are not Affiliates of the Company, insurance with respect to its properties and business against loss or damage of the kinds customarily insured against by Persons engaged in the same or similar business, of such types and in such amounts (including self-insurance, if adequate reserves are maintained with respect thereto) as are customarily carried under similar circumstances by such other Persons.

 

6.08                     Compliance with Laws .   Comply in all material respects with the requirements of all Laws and all orders, writs, injunctions and decrees applicable to it or to its business or property, except in such instances in which (a) such requirement of Law or order, writ, injunction or decree is being contested in good faith by appropriate proceedings diligently conducted; or (b) the failure to comply therewith could not reasonably be expected to have a Material Adverse Effect.

 

6.09                     Books and Records .   (a)  Maintain proper books of record and account, in which full, true and correct entries in conformity with GAAP consistently applied shall be made of all financial transactions and matters involving the assets and business of the Company or such Restricted Subsidiary, as the case may be; and (b) maintain such books of record and account in material conformity with all applicable requirements of any Governmental Authority having regulatory jurisdiction over the Company or such Restricted Subsidiary, as the case may be.

 

6.10                     Inspection Rights .   Permit representatives and independent contractors of the Administrative Agent and each Lender to visit and inspect any of its properties, to examine its corporate, financial and operating records, and make copies thereof or abstracts therefrom, and to discuss its affairs, finances and accounts with its directors, officers, and independent public accountants, at such reasonable times during normal business hours and as often as may be reasonably desired, upon reasonable advance notice to the Company and in accordance with the Company’s bio-security policies; provided , however , that (a) so long as no Event of Default exists, such inspection shall be limited to once per fiscal year of the Company and shall be at the

 

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expense of the Lender(s) requesting such inspection and (b) when an Event of Default exists the Administrative Agent or any Lender (or any of their respective representatives or independent contractors) may do any of the foregoing at the expense of the Borrowers at any time during normal business hours and without advance notice.

 

6.11                     Use of Proceeds .   Use the proceeds of the Credit Extensions (a) to refinance Indebtedness outstanding under the Existing Five-Year Credit Agreement and (b) for general corporate purposes not in contravention of any Law or of any Loan Document.

 

6.12                     Approvals and Authorizations .   Maintain all authorizations, consents, approvals and licenses from, exemptions of, and filings and registrations with, each Governmental Authority of the jurisdiction in which each Foreign Obligor is organized and existing, and all approvals and consents of each other Person in such jurisdiction, in each case that are required in connection with the Loan Documents.

 

6.13                     Designation of Subsidiaries .   The Company may at any time designate any Subsidiary to be an Unrestricted Subsidiary by delivering to the Administrative Agent (which shall promptly deliver counterparts thereof to each Lender) a duly executed notice in substantially the form of Exhibit L (an “ Unrestricted Subsidiary Notice ”); provided that (a) the book value of such Subsidiary at the time it is designated as an Unrestricted Subsidiary shall be deemed to be an Investment by the Company at such time, (b) at the time such Subsidiary is designated as an Unrestricted Subsidiary, the total assets of all Unrestricted Subsidiaries (including such Subsidiary) shall not exceed 20% of the consolidated total assets of the Company and all of its Subsidiaries and the total Consolidated EBITDA of all Unrestricted Subsidiaries (including such Subsidiary) shall not exceed 20% of Consolidated EBITDA of the Company and all of its Subsidiaries, (c) at the time such Subsidiary is designated as an Unrestricted Subsidiary, (i) no Default shall then exist or would occur as a result thereof and (ii) the Company shall be in pro forma compliance with the financial covenants set forth in Section 7.12 after giving effect to such designation, and (d) the Administrative Agent shall have consented to such designation (such consent not to be unreasonably withheld, delayed or conditioned).  If the Company does not elect to designate a Subsidiary as an Unrestricted Subsidiary pursuant to the conditions of this Section 6.13 , such Subsidiary shall be deemed to be a Restricted Subsidiary.  The Company may, at any time, elect to re-designate any Unrestricted Subsidiary as a Restricted Subsidiary; provided that once such Unrestricted Subsidiary is re-designated as a Restricted Subsidiary, it shall no longer be eligible to be an Unrestricted Subsidiary thereafter.  Notwithstanding the foregoing, if Butterball becomes a Subsidiary of the Company after the Closing Date, the Company may then or at any time thereafter designate it as an Unrestricted Subsidiary without regard to any of the conditions set forth in this Section 6.13 and, if it is so designated, its assets and Consolidated EBITDA shall be disregarded for the purpose of determining if any other Subsidiary may thereafter be designated as an Unrestricted Subsidiary under the foregoing restrictions.  In each such case of a designation by the Company of any Subsidiary hereunder, the Company shall, notwithstanding the provisions of Section 10.01 , provide to the Administrative Agent an updated Part (a) and Part (d) of Schedule 5.13 .

 

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ARTICLE VII.
NEGATIVE COVENANTS

 

So long as any Lender shall have any Commitment hereunder, any Loan or other Obligation hereunder shall remain unpaid or unsatisfied (other than contingent reimbursement and indemnification obligations to the extent no unsatisfied claim with respect thereto has been asserted), or any Letter of Credit shall remain outstanding, the Company shall not, nor shall it permit any Restricted Subsidiary to, directly or indirectly:

 

7.01                     Negative Pledge .  Create, incur, assume or suffer to exist any Lien upon any of its property, assets or revenues, whether now owned or hereafter acquired, other than the following:

 

(a)                                Liens pursuant to any Loan Document;

 

(b)                             Liens for taxes not yet due or which are being contested in good faith and by appropriate proceedings diligently conducted, if adequate reserves with respect thereto are maintained on the books of the applicable Person in accordance with GAAP;

 

(c)                                carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s or other like Liens arising in the ordinary course of business which are not overdue for a period of more than 30 days or which are being contested in good faith and by appropriate proceedings diligently conducted, if adequate reserves with respect thereto are maintained on the books of the applicable Person;

 

(d)                              pledges or deposits in the ordinary course of business in connection with workers’ compensation, unemployment insurance and other social security legislation, other than any Lien imposed by ERISA;

 

(e)                                deposits to secure the performance of bids, trade contracts and leases (other than Indebtedness), statutory obligations, surety bonds (other than bonds related to judgments or litigation), performance bonds and other obligations of a like nature incurred in the ordinary course of business;

 

(f)                                 easements, rights-of-way, restrictions and other similar encumbrances affecting real property which, in the aggregate, are not substantial in amount, and which do not in any case materially detract from the value of the property subject thereto or materially interfere with the ordinary conduct of the business of the applicable Person;

 

(g)                               Liens securing judgments for the payment of money not constituting an Event of Default under Section 8.01(h)  or securing appeal or other surety bonds related to such judgments;

 

(h)                               Purchase Money Liens;

 

(i)                                 Liens securing Indebtedness (including renewals, extensions and refinancings thereof) on property in existence at the time such property is acquired by the Company or a

 

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Restricted Subsidiary in connection with an Acquisition not prohibited herein; provided , that such Liens do not at any time encumber any property other than the property so acquired;

 

(j)                                   Liens under UCC § 4-210, Liens in deposit accounts or in other assets in the possession of a financial institution created under the standard deposit agreement of any financial institution at which the Company or any Restricted Subsidiary maintains a deposit account and Liens in commodity accounts or in other assets in the possession of a commodity broker created under the standard account agreement of any commodity broker at which the Company or any Restricted Subsidiary maintains a commodity account;

 

(k)                              Liens on property owned by a Restricted Subsidiary, provided that such Liens secure only obligations owing to the Company or a wholly-owned Restricted Subsidiary;

 

(l)                                   Liens on the barge securing the financing obtained by Transcontinental Capital Corp. (Bermuda) Ltd. in connection with the purchase of a 106 MW barge-mounted power plant in the Dominican Republic; and

 

(m)                          Liens not otherwise permitted by this Section 7.01 ; provided , that the aggregate amount of Indebtedness secured by Liens permitted by this clause (m)  shall not at any time exceed 15% of Consolidated Tangible Net Worth determined at such time.

 

In the case any property shall be subjected to a Lien in violation of this Section 7.01 , the Company shall forthwith make or cause to be made to the fullest extent permitted by applicable law, provision whereby the Obligations will be secured equally and ratably with all other obligations secured by such Lien pursuant to such agreements and instruments as shall be reasonably approved by the Administrative Agent, and the Company shall cause to be delivered to the Administrative Agent and each Lender an opinion of independent counsel reasonably satisfactory to the Administrative Agent to the effect that such agreements and instruments are enforceable in accordance with their terms, and in any such case the Obligations shall have the benefit, to the fullest extent that, and with such priority as, the holders of the Obligations may be entitled under applicable law, of an equitable Lien on such property (and the proceeds thereof) securing the Obligations.  Such violation of this Section 7.01 will constitute an Event of Default hereunder, whether or not any such provision is made pursuant to this Section 7.01 .

 

7.02                     Investments .   Make or hold any Investments, except:

 

(a)                                Investments held by the Company or such Restricted Subsidiary in the form of cash equivalents or readily marketable debt or equity securities;

 

(b)                               (i)  Loans to officers, directors and employees of the Company or any Restricted Subsidiary that would not be prohibited by the Sarbanes-Oxley Act of 2002 and the rules and regulations promulgated thereunder, provided that the aggregate amount of all such loans outstanding at any time shall not exceed $5,000,000 and (ii) advances to any member of the Bresky Group or to any officer, director or employee of the Company or any Restricted Subsidiary, provided such advances are for travel, entertainment, relocation and analogous ordinary course business purposes provided that the aggregate amount of all such advances at any time outstanding shall not exceed $500,000;

 

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(c)                                Investments of the Company in any Restricted Subsidiary and Investments of any Restricted Subsidiary in the Company or in another Restricted Subsidiary;

 

(d)                              Investments of the Company and Restricted Subsidiaries existing on the Closing Date, as set forth on Schedule 5.13 ;

 

(e)                                Investments consisting of extensions of credit in the nature of accounts receivable or notes receivable arising from the grant of trade credit in the ordinary course of business, and Investments received in satisfaction or partial satisfaction thereof from financially troubled account debtors to the extent reasonably necessary in order to prevent or limit loss;

 

(f)                                 Guarantees permitted by Section 7.03 ;

 

(g)                               Investments made or acquired in connection with Acquisitions permitted hereby;

 

(h)                              Investments in “seller take-back” notes arising in connection with a Disposition of assets permitted hereby; provided that the principal amount of any such “seller take-back” note does not exceed the fair market value of the assets so Disposed;

 

(i)                                  Investments in Unrestricted Subsidiaries consisting of (i) the book value of Butterball at the time of its designation as an Unrestricted Subsidiary, (ii) the book value of any other Subsidiary at the time of its designation as an Unrestricted Subsidiary and (iii) additional Investments in any Unrestricted Subsidiary but only to the extent that, on the day of and after giving effect to such additional Investments, the Company could have designated such Unrestricted Subsidiary as an Unrestricted Subsidiary under Section 6.13 ; and

 

(j)                                   other Investments not permitted by this Section 7.02 ; provided , (i) the aggregate value of all individual Investments exceeding $10,000,000 made in any fiscal year shall not exceed $50,000,000 unless both immediately before and immediately after making such Investment the Consolidated Adjusted Leverage Ratio is less than 3.00 to 1.00, and (ii) to the extent that any individual Investment exceeding $10,000,000 would cause the aggregate value of all such individual Investments exceeding $10,000,000 made (which are still outstanding or owed) in any fiscal year to exceed $50,000,000, the Company shall have furnished to the Administrative Agent a certificate of a Responsible Officer, which certificate shall calculate the Consolidated Adjusted Leverage Ratio both immediately before and immediately after making such Investment.

 

7.03                     Subsidiary Indebtedness .   Permit any Restricted Subsidiary to create, incur, assume or suffer to exist, or otherwise become or remain directly or indirectly liable with respect to, any Indebtedness other than:

 

(a)                                Indebtedness under the Loan Documents;

 

(b)                               Indebtedness (including renewals, extensions and refinancings thereof so long as the principal amount thereof is not increased) in respect of capital leases, Synthetic Lease Obligations and purchase money obligations for fixed or capital assets within the limitations set forth in clause (a)  of the definition of “Purchase Money Liens”;

 

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(c)                                Swap Contracts entered into (i) to hedge interest rate and/or currency risk with respect to Indebtedness incurred in the ordinary course of business and pursuant to prudent and reasonable business practices that are consistent with the business practices of other companies similarly situated, (ii) to hedge currency risk with respect to any such payments expected to be received or made pursuant to a contract entered into in the ordinary course of business and pursuant to prudent and reasonable business practices that are consistent with the business practices of other companies similarly situated (iii) to hedge commodity risk with respect to any commodity held, required to be delivered or anticipated to be received in the ordinary course of business and pursuant to prudent and reasonable business practices that are consistent with the business practices of other companies similarly situated or (iv) to hedge shipping, freight or other transportation risk with respect to any obligation to deliver any goods or commodities required to be delivered in the ordinary course of business and pursuant to prudent and reasonable business practices that are consistent with the business practices of other companies similarly situated;

 

(d)                              Indebtedness of a Restricted Subsidiary owing to the Company or a Restricted Subsidiary; provided such indebtedness has a tenor of less than 365 days; and

 

(e)                                Indebtedness (including renewals, extensions and refinancings thereof so long as the principal amount thereof is not increased) not otherwise permitted under this Section 7.03 ; provided that the aggregate amount of Priority Indebtedness shall not at any time exceed 20% of Consolidated Tangible Net Worth determined at such time.

 

7.04                     Fundamental Changes .   Merge, dissolve, liquidate, consolidate with or into another Person, or Dispose of (whether in one transaction or in a series of transactions) all or substantially all of its assets (whether now owned or hereafter acquired) to or in favor of any Person, except that, so long as no Default exists or would result therefrom:

 

(a)                                any Restricted Subsidiary may merge with (i) the Company, provided that the Company shall be the continuing or surviving Person, (ii) any one or more other Restricted Subsidiaries ( provided that when any wholly-owned Restricted Subsidiary is merging with another Restricted Subsidiary, the wholly-owned Restricted Subsidiary shall be the continuing or surviving Person) or (iii) any one or more Unrestricted Subsidiaries if (A) such Restricted Subsidiary is the continuing or surviving Person or (B) an Unrestricted Subsidiary is the continuing or surviving Person but only if, on the day of and after giving effect to such merger, the Company could have designated such Unrestricted Subsidiary as an Unrestricted Subsidiary under Section 6.13 ;

 

(b)                               any Restricted Subsidiary may Dispose of all or substantially all of its assets (upon voluntary liquidation or otherwise) to (i) the Company, (ii) another Restricted Subsidiary ( provided that if the transferor in such a transaction is a wholly-owned Restricted Subsidiary, then the transferee must either be the Company or a wholly-owned Restricted Subsidiary) or (iii) an Unrestricted Subsidiary but only if, on the day of and after giving effect to such Disposition, the Company could have designated such Unrestricted Subsidiary as an Unrestricted Subsidiary under Section 6.13 ;

 

(c)                                the Company or any Restricted Subsidiary may merge with a Person in order to consummate an Acquisition permitted by Section 7.11 ; and

 

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(d)                              except for the Company and any Designated Borrower, any Non-Material Subsidiary may be dissolved, liquidated or otherwise have its existence terminated.

 

7.05                     Dispositions .   Make any Disposition or enter into any agreement to make any Disposition, except:

 

(a)                                Dispositions of obsolete or worn out property, whether now owned or hereafter acquired, in the ordinary course of business;

 

(b)                               Dispositions of inventory in the ordinary course of business;

 

(c)                                Dispositions of equipment or real property to the extent that (i) such property is exchanged for credit against the purchase price of similar replacement property or (ii) the Net Cash Proceeds of such Disposition are reasonably promptly applied to the purchase price of such replacement property;

 

(d)                              Dispositions of property by any Restricted Subsidiary to the Company or to any wholly-owned Restricted Subsidiary;

 

(e)                                Dispositions permitted by Section 7.04 ;

 

(f)                                 Dispositions by the Company or a Restricted Subsidiary that satisfy each of the following conditions and which shall not be deemed to be a Disposition under this clause (f)  until all of the following conditions have been satisfied:

 

(i)                                   the Company shall have delivered a written notice to the Administrative Agent contemporaneously with the consummation of the Disposition in which the Company:

 

(A)                           identifies the property that is the subject of the Disposition,

 

(B)                            states the nature and terms of the transaction and the nature and use of the proceeds of the transaction, and

 

(C)                            states that, within three hundred and sixty-five (365) days following the consummation of such Disposition, the entire proceeds of such Disposition (or portion thereof which has not been allocated by the Company to clause (g)  below), net of reasonable and ordinary transaction costs and expenses incurred in connection with such Disposition and any Indebtedness required by its terms to be repaid in connection with such Disposition, shall be applied to the acquisition by the Company or any Restricted Subsidiary of operating assets or Equity Interests of a Person which will become a Restricted Subsidiary and which owns operating assets and which operating assets will be used in the ordinary course of business of the Company and its Restricted Subsidiaries, and

 

(ii)                               the proceeds of such Disposition shall have been applied as described in such written notice; and

 

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(g)                               Dispositions by the Company and its Restricted Subsidiaries not otherwise permitted under this Section 7.05 ; provided that (i) at the time of such Disposition, no Default shall exist or would result from such Disposition and (ii) the aggregate book value of all property Disposed of in reliance on this clause (g)  shall not exceed 25% of Consolidated Tangible Net Worth as of the Closing Date;

 

provided , however , that any Disposition pursuant to clauses (a)  through (g)  shall be for fair market value.

 

7.06                     Restricted Payments .   Declare or make, directly or indirectly, any Restricted Payment, or incur any obligation (contingent or otherwise) to do so, except that, so long as no Default shall have occurred and be continuing at the time of any action described below or would result therefrom:

 

(a)                                each Restricted Subsidiary may make Restricted Payments to any Persons that own an Equity Interest in such Subsidiary, ratably according to their respective holdings of the type of Equity Interest in respect of which such Restricted Payment is being made;

 

(b)                               the Company and each Restricted Subsidiary may declare and make dividend payments or other distributions payable solely in the common stock or other common Equity Interests of such Person;

 

(c)                                the Company and each Restricted Subsidiary may purchase, redeem or otherwise acquire Equity Interests issued by it with the proceeds received from the substantially concurrent issue of new shares of its common stock or other common Equity Interests; and

 

(d)                              the Company may declare or pay cash dividends to its stockholders and purchase, redeem or otherwise acquire for cash Equity Interests issued by it; provided , that, (i) the aggregate amount of all such dividends, purchases, redemptions and acquisitions shall not exceed $25,000,000 in any given fiscal year of the Company unless both immediately before and immediately after making such payment the Consolidated Adjusted Leverage Ratio is less than 2.50 to 1.00, and (ii) to the extent any such dividend, purchase, redemption or acquisition would cause the aggregate amount of all such Restricted Payments in any fiscal year to exceed $25,000,000, the Company shall have furnished to the Administrative Agent a certificate of a Responsible Officer, which certificate shall calculate the Consolidated Adjusted Leverage Ratio both immediately before and immediately after making such dividend, purchase, redemption or acquisition, as the case may be.

 

7.07                     Change in Nature of Business .   Engage in any material line of business substantially different from those lines of business conducted by the Company and its Restricted Subsidiaries on the date hereof or any business substantially related or incidental thereto.  In furtherance of the foregoing, the Company shall at all times cause (a) the amount of revenues of the Company and its Restricted Subsidiaries derived from Permitted Lines of Business to be at least sixty-six and two-thirds percent (66-2/3%) of the amount of all revenues of the Company and its Restricted Subsidiaries, determined in each case for the then most recently ended period of twelve (12) fiscal months on a consolidated basis, or (b) the net book value of assets of the Company and its Restricted Subsidiaries used in Permitted Lines of Business to be at least sixty-

 

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six and two-thirds percent (66-2/3%) of the amount of the net book value of all assets of the Company and its Restricted Subsidiaries, in each case determined as of the end of then most recently ended calendar month on a consolidated basis.

 

7.08                     Transactions with Affiliates .   Enter into any transaction of any kind with any Affiliate of the Company, whether or not in the ordinary course of business, other than on fair and reasonable terms substantially as favorable to the Company or such Restricted Subsidiary as would be obtainable by the Company or such Restricted Subsidiary at the time in a comparable arm’s length transaction with a Person other than an Affiliate.

 

7.09                     Burdensome Agreements .   Be a party to or enter into any Contractual Obligation (including for this purpose, its organizational documents) other than this Agreement and any other Loan Document) that (a) limits the ability (i) of any Restricted Subsidiary to make Restricted Payments to the Company or to otherwise transfer property to the Company, (ii) of any Restricted Subsidiary to Guarantee the Indebtedness of the Company or (iii) of the Company or any Restricted Subsidiary to create, incur, assume or suffer to exist Liens on property of such Person; provided , however , that this clause (iii)  shall not prohibit any negative pledge incurred or provided in favor of any holder of Indebtedness in respect of a capital lease, Synthetic Lease Obligation or purchase money obligation for fixed or capital assets solely to the extent any such negative pledge relates to the property financed by or the subject of such Indebtedness; or (b) requires the grant of a Lien to secure an obligation of such Person if a Lien is granted to secure another obligation of such Person.

 

7.10                     Use of Proceeds .   Use the proceeds of any Credit Extension, whether directly or indirectly, and whether immediately, incidentally or ultimately, to purchase or carry margin stock (within the meaning of Regulation U of the FRB) or to extend credit to others for the purpose of purchasing or carrying margin stock or to refund indebtedness originally incurred for such purpose.

 

7.11                     Acquisitions .  Enter into any agreement, contract, binding commitment or other arrangement providing for any Acquisition, or take any action to solicit the tender of securities or proxies in respect thereof in order to effect any Acquisition, unless (a) no Default or Event of Default shall have occurred and be continuing either immediately prior to or immediately after giving effect to such Acquisition and, if the Cost of Acquisition is in excess of $50,000,000, the Company shall have furnished to the Administrative Agent (i) pro forma historical financial statements as of the end of the most recently completed fiscal year of the Company and most recent interim fiscal quarter, if applicable giving effect to such Acquisition and (ii) a Compliance Certificate prepared on a historical pro forma basis as of the most recent date for which financial statements have been furnished pursuant to Section 6.01(a)  or (b)  (or if no such financial statements have been furnished, from the date of the financial statements referred to in Section 5.05(b) ) giving effect to such Acquisition, which certificate shall demonstrate that no Default or Event of Default would exist immediately after giving effect thereto, (b) the Person acquired shall be a Subsidiary, or be merged into the Company or a Subsidiary, immediately upon consummation of the Acquisition (or if assets are being acquired, the acquiror shall be the Company or a Subsidiary), and (c) after giving effect to such Acquisition, the aggregate Costs of Acquisition incurred in any fiscal year of the Company with respect to all Acquisitions having an

 

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individual Cost of Acquisition exceeding $10,000,000 shall not exceed $50,000,000 (on a noncumulative basis, with the effect that amounts not incurred in any fiscal year may not be carried forward to a subsequent period) unless, both immediately before and immediately after making such Acquisition, the Consolidated Adjusted Leverage Ratio is less than 3.00 to 1.00.

 

7.12                     Financial Covenants .

 

(a)                                Consolidated Tangible Net Worth .  Permit Consolidated Tangible Net Worth at any time to be less than the sum of (i) $1,870,444,804.00 plus and (ii) an amount equal to 25% of the Consolidated Net Income earned in each full fiscal quarter ending after September 30, 2012 (with no deduction for a net loss in any such fiscal quarter).

 

(b)                               Consolidated Adjusted Leverage Ratio .  Permit the Consolidated Adjusted Leverage Ratio at any time to be greater than 3.50 to 1.00.

 

ARTICLE VIII.
EVENTS OF DEFAULT AND REMEDIES

 

8.01                     Events of Default .   Any of the following shall constitute an Event of Default:

 

(a)                                Non-Payment .  Any Borrower or any other Loan Party fails to pay (i) when and as required to be paid herein, and in the currency required hereunder, any amount of principal of any Loan or any L/C Obligation, or (ii) within five days after the same becomes due, any interest on any Loan or on any L/C Obligation, or any fee due hereunder, or (iii) within five days after the same becomes due, any other amount payable hereunder or under any other Loan Document; or

 

(b)                               Specific Covenants .  The Company fails to perform or observe any term, covenant or agreement contained in any of  Sections 6.03 , 6.10 , or 6.11 or Article VII ; or

 

(c)                                Other Defaults .  Any Loan Party fails to perform or observe any other covenant or agreement (not specified in subsection (a)  or (b)  above) contained in any Loan Document on its part to be performed or observed and such failure continues for ten days, in the case of any failure under Sections 6.01 or 6.02 , or 30 days, in the case of any failure under other such covenant or agreement, after such Loan Party has knowledge thereof; or

 

(d)                              Representations and Warranties .  Any representation, warranty, certification or statement of fact made or deemed made by or on behalf of the Company herein, in any other Loan Document, or in any document delivered in connection herewith or therewith shall be incorrect or misleading in any material respect when made or deemed made; or

 

(e)                                Cross-Default .  (i) The Company or any Restricted Subsidiary (A) fails to make any payment when due (whether by scheduled maturity, required prepayment, acceleration, demand, or otherwise, but giving effect to any applicable grace or cure period) in respect of any Indebtedness or Guarantee (other than Indebtedness hereunder and Indebtedness under Swap Contracts) having an aggregate principal amount (including undrawn committed or available amounts and including amounts owing to all creditors under any combined or syndicated credit

 

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arrangement) of more than $25,000,000, or (B) fails to observe or perform any other agreement or condition relating to any such Indebtedness or Guarantee or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event occurs, the effect of which default or other event is to cause, or to permit the holder or holders of such Indebtedness or the beneficiary or beneficiaries of such Guarantee (or a trustee or agent on behalf of such holder or holders or beneficiary or beneficiaries) to cause, with the giving of notice if required, such Indebtedness to be demanded or to become due or to be repurchased, prepaid, defeased or redeemed (automatically or otherwise), or an offer to repurchase, prepay, defease or redeem such Indebtedness to be made, prior to its stated maturity, or such Guarantee to become payable or cash collateral in respect thereof to be demanded; or (ii) there occurs under any Swap Contract an Early Termination Date (as defined in such Swap Contract) resulting from (A) any event of default under such Swap Contract as to which the Company or any Restricted Subsidiary is the Defaulting Party (as defined in such Swap Contract) or (B) any Termination Event (as so defined) under such Swap Contract as to which the Company or any Subsidiary is an Affected Party (as so defined) and, in either event, the Swap Termination Value owed by the Company or such Restricted Subsidiary as a result thereof is greater than $25,000,000; or

 

(f)                                 Insolvency Proceedings, Etc.   Any Loan Party or any of its Restricted Subsidiaries institutes or consents to the institution of any proceeding under any Debtor Relief Law, or makes an assignment for the benefit of creditors; or applies for or consents to the appointment of any receiver, trustee, custodian, conservator, liquidator, rehabilitator or similar officer for it or for all or any material part of its property; or any receiver, trustee, custodian, conservator, liquidator, rehabilitator or similar officer is appointed without the application or consent of such Person and the appointment continues undischarged or unstayed for 60 calendar days; or any proceeding under any Debtor Relief Law relating to any such Person or to all or any material part of its property is instituted without the consent of such Person and continues undismissed or unstayed for 60 calendar days, or an order for relief is entered in any such proceeding; or

 

(g)                               Inability to Pay Debts; Attachment .  (i) The Company or any Restricted Subsidiary becomes unable or admits in writing its inability or fails generally to pay its debts as they become due, or (ii) any writ or warrant of attachment or execution or similar process is issued or levied against all or any material part of the property of any such Person and is not released, vacated or fully bonded within 30 days after its issue or levy; or

 

(h)                               Judgments .  There is entered against the Company or any Restricted Subsidiary (i) a final, non-appealable judgment or order for the payment of money in an aggregate amount exceeding $50,000,000 (to the extent coverage by any applicable independent third-party insurer has been denied), or (ii) any one or more non-monetary final, non-appealable judgments that have, or could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect and, in either case, (A) enforcement proceedings are commenced by any creditor upon such judgment or order; or (B) there is a period of 30 consecutive days during which a stay of enforcement of such judgment, by reason of a pending appeal or otherwise, is not in effect; or

 

(i)                                   ERISA .  (i) An ERISA Event occurs with respect to a Pension Plan or Multiemployer Plan which has resulted or could reasonably be expected to result in liability of the Company under Title IV of ERISA to the Pension Plan, Multiemployer Plan or the PBGC in

 

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an amount that could reasonably be expected to have a Material Adverse Effect, or (ii) the Company or any ERISA Affiliate fails to pay when due, after the expiration of any applicable grace period, any installment payment with respect to its withdrawal liability under Section 4201 of ERISA under a Multiemployer Plan in an aggregate amount that could reasonably be expected to have a Material Adverse Effect; or

 

(j)                                   Invalidity of Loan Documents .  Any provision of any Loan Document, at any time after its execution and delivery and for any reason other than as expressly permitted hereunder or satisfaction in full of all the Obligations, ceases to be in full force and effect; or any Borrower or any other Person who is a party thereto contests in any manner the validity or enforceability of any provision of any Loan Document; or any Borrower denies that it has any or further liability or obligation under any Loan Document, or purports to revoke, terminate or rescind any provision of any Loan Document; or

 

(k)                               Change of Control .  There occurs any Change of Control.

 

8.02                     Remedies Upon Event of Default .   If any Event of Default occurs and is continuing, the Administrative Agent shall, at the request of, or may, with the consent of, the Required Lenders, take any or all of the following actions:

 

(a)                                declare the commitment of each Lender to make Loans and any obligation of the L/C Issuer to make L/C Credit Extensions to be terminated, whereupon such commitments and obligation shall be terminated;

 

(b)                               declare the unpaid principal amount of all outstanding Loans, all interest accrued and unpaid thereon, and all other amounts owing or payable hereunder or under any other Loan Document to be immediately due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived by the Borrowers;

 

(c)                                require that the Company Cash Collateralize the L/C Obligations (in an amount equal to the Minimum Collateral Amount with respect thereto); and

 

(d)                              exercise on behalf of itself, the Lenders and the L/C Issuer all rights and remedies available to it, the Lenders and the L/C Issuer under the Loan Documents;

 

provided , however , that upon the occurrence of an actual or deemed entry of an order for relief with respect to any Borrower under the Bankruptcy Code of the United States, the obligation of each Lender to make Loans and any obligation of the L/C Issuer to make L/C Credit Extensions shall automatically terminate, the unpaid principal amount of all outstanding Loans and all interest and other amounts as aforesaid shall automatically become due and payable, and the obligation of the Company to Cash Collateralize the L/C Obligations as aforesaid shall automatically become effective, in each case without further act of the Administrative Agent or any Lender.

 

8.03                     Application of Funds .   After the exercise of remedies provided for in Section 8.02 (or after the Loans have automatically become immediately due and payable and the L/C Obligations have automatically been required to be Cash Collateralized as set forth in the proviso

 

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to Section 8.02 ), any amounts received on account of the Obligations shall, subject to the provisions of Sections 2.16 and 2.17 , be applied by the Administrative Agent in the following order:

 

First , to payment of that portion of the Obligations constituting fees, indemnities, expenses and other amounts (including fees, charges and disbursements of counsel to the Administrative Agent and amounts payable under Article III ) payable to the Administrative Agent in its capacity as such;

 

Second , to payment of that portion of the Obligations constituting fees, indemnities and other amounts (other than principal, interest and Letter of Credit Fees) payable to the Lenders and the L/C Issuer (including  fees, charges and disbursements of counsel to the respective Lenders and the L/C Issuer (including fees and time charges for attorneys who may be employees of any Lender or the L/C Issuer) and amounts payable under Article III ), ratably among them in proportion to the respective amounts described in this clause Second payable to them;

 

Third , to payment of that portion of the Obligations constituting accrued and unpaid Letter of Credit Fees and interest on the Loans, L/C Borrowings and other Obligations, ratably among the Lenders and the L/C Issuer in proportion to the respective amounts described in this clause Third payable to them;

 

Fourth , to payment of that portion of the Obligations constituting unpaid principal of the Loans and L/C Borrowings, ratably among the Lenders and the L/C Issuer in proportion to the respective amounts described in this clause Fourth held by them;

 

Fifth , to the Administrative Agent for the account of the L/C Issuer, to Cash Collateralize that portion of L/C Obligations comprised of the aggregate undrawn amount of Letters of Credit to the extent not otherwise Cash Collateralized by the Company pursuant to Sections 2.03 and 2.16 ; and

 

Last , the balance, if any, after all of the Obligations have been indefeasibly paid in full, to the Company or as otherwise required by Law.

 

Subject to Sections 2.03(c)  and 2.17 , amounts used to Cash Collateralize the aggregate undrawn amount of Letters of Credit pursuant to clause Fifth above shall be applied to satisfy drawings under such Letters of Credit as they occur.  If any amount remains on deposit as Cash Collateral after all Letters of Credit have either been fully drawn or expired, such remaining amount shall be applied to the other Obligations, if any, in the order set forth above.

 

ARTICLE IX.
ADMINISTRATIVE AGENT

 

9.01                     Appointment and Authority .   Each of the Lenders and the L/C Issuer hereby irrevocably appoints Bank of America to act on its behalf as the Administrative Agent hereunder and under the other Loan Documents and authorizes the Administrative Agent to take such actions on its behalf and to exercise such powers as are delegated to the Administrative Agent by

 

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the terms hereof or thereof, together with such actions and powers as are reasonably incidental thereto.  The provisions of this Article are solely for the benefit of the Administrative Agent, the Lenders and the L/C Issuer, and no Borrower shall have rights as a third party beneficiary of any of such provisions.  It is understood and agreed that the use of the term “agent” herein or in any other Loan Documents (or any other similar term) with reference to the Administrative Agent is not intended to connote any fiduciary or other implied (or express) obligations arising under agency doctrine of any applicable Law. Instead such term is used as a matter of market custom, and is intended to create or reflect only an administrative relationship between contracting parties.

 

9.02                     Rights as a Lender .   The Person serving as the Administrative Agent hereunder shall have the same rights and powers in its capacity as a Lender as any other Lender and may exercise the same as though it were not the Administrative Agent and the term “Lender” or “Lenders” shall, unless otherwise expressly indicated or unless the context otherwise requires, include the Person serving as the Administrative Agent hereunder in its individual capacity.  Such Person and its Affiliates may accept deposits from, lend money to, own securities of, act as the financial advisor or in any other advisory capacity for and generally engage in any kind of business with the Borrowers or any Subsidiary or other Affiliate thereof as if such Person were not the Administrative Agent hereunder and without any duty to account therefor to the Lenders.

 

9.03                     Exculpatory Provisions .   The Administrative Agent shall not have any duties or obligations except those expressly set forth herein and in the other Loan Documents, and its duties hereunder shall be administrative in nature.  Without limiting the generality of the foregoing, the Administrative Agent:

 

(a)                                shall not be subject to any fiduciary or other implied duties, regardless of whether a Default has occurred and is continuing;

 

(b)                               shall not have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated hereby or by the other Loan Documents that the Administrative Agent is required to exercise as directed in writing by the Required Lenders (or such other number or percentage of the Lenders as shall be expressly provided for herein or in the other Loan Documents), provided that the Administrative Agent shall not be required to take any action that, in its opinion or the opinion of its counsel, may expose the Administrative Agent to liability or that is contrary to any Loan Document or applicable law, including for the avoidance of doubt any action that may be in violation of the automatic stay under any Debtor Relief Law or that may effect a forfeiture, modification or termination of property of a Defaulting Lender in violation of any Debtor Relief Law; and

 

(c)                                shall not, except as expressly set forth herein and in the other Loan Documents, have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to any of the Borrowers or any of their respective Affiliates that is communicated to or obtained by the Person serving as the Administrative Agent or any of its Affiliates in any capacity.

 

The Administrative Agent shall not be liable for any action taken or not taken by it (i) with the consent or at the request of the Required Lenders (or such other number or

 

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percentage of the Lenders as shall be necessary, or as the Administrative Agent shall believe in good faith shall be necessary, under the circumstances as provided in Sections 10.01 and 8.02 ) or (ii) in the absence of its own gross negligence or willful misconduct as determined by a court of competent jurisdiction by final and non-appealable judgment.  The Administrative Agent shall be deemed not to have knowledge of any Default unless and until notice describing such Default is given in writing to the Administrative Agent by the Company, a Lender or the L/C Issuer.

 

The Administrative Agent shall not be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or representation made in or in connection with this Agreement or any other Loan Document, (ii) the contents of any certificate, report or other document delivered hereunder or thereunder or in connection herewith or therewith, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth herein or therein or the occurrence of any Default, (iv) the validity, enforceability, effectiveness or genuineness of this Agreement, any other Loan Document or any other agreement, instrument or document or (v) the satisfaction of any condition set forth in Article IV or elsewhere herein, other than to confirm receipt of items expressly required to be delivered to the Administrative Agent.

 

9.04                     Reliance by Administrative Agent .   The Administrative Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing (including any electronic message, Internet or intranet website posting or other distribution) believed by it to be genuine and to have been signed, sent or otherwise authenticated by the proper Person.  The Administrative Agent also may rely upon any statement made to it orally or by telephone and believed by it to have been made by the proper Person, and shall not incur any liability for relying thereon.  In determining compliance with any condition hereunder to the making of a Loan, or the issuance, extension, renewal or increase of a Letter of Credit, that by its terms must be fulfilled to the satisfaction of a Lender or the L/C Issuer, the Administrative Agent may presume that such condition is satisfactory to such Lender or the L/C Issuer unless the Administrative Agent shall have received notice to the contrary from such Lender or the L/C Issuer prior to the making of such Loan or the issuance of such Letter of Credit.  The Administrative Agent may consult with legal counsel (who may be counsel for the Company), independent accountants and other experts selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts.

 

9.05                     Delegation of Duties .   The Administrative Agent may perform any and all of its duties and exercise its rights and powers hereunder or under any other Loan Document by or through any one or more sub-agents appointed by the Administrative Agent.  The Administrative Agent and any such sub-agent may perform any and all of its duties and exercise its rights and powers by or through their respective Related Parties.  The exculpatory provisions of this Article shall apply to any such sub-agent and to the Related Parties of the Administrative Agent and any such sub-agent, and shall apply to their respective activities in connection with the syndication of the credit facilities provided for herein as well as activities as Administrative Agent.  The Administrative Agent shall not be responsible for the negligence or misconduct of any sub-agents except to the extent that a court of competent jurisdiction determines in a final and non-

 

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appealable judgment that the Administrative Agent acted with gross negligence or willful misconduct in the selection, instruction or supervision of such sub-agents.

 

9.06                     Resignation of Administrative Agent .   (a)  The Administrative Agent may at any time give notice of its resignation to the Lenders, the L/C Issuer and the Company.  Upon receipt of any such notice of resignation, the Required Lenders shall have the right, in consultation with the Company, to appoint a successor, which shall be a bank with an office in the United States, or an Affiliate of any such bank with an office in the United States.  If no such successor shall have been so appointed by the Required Lenders and shall have accepted such appointment within 30 days after the retiring Administrative Agent gives notice of its resignation (or such earlier day as shall be agreed by the Required Lenders) (the “ Resignation Effective Date ”), then the retiring Administrative Agent may (but shall not be obligated to) on behalf of the Lenders and the L/C Issuer, appoint a successor Administrative Agent meeting the qualifications set forth above.  Whether or not a successor has been appointed, such resignation shall become effective in accordance with such notice on the Resignation Effective Date.

 

(b)                               If the Person serving as Administrative Agent is a Defaulting Lender pursuant to clause (d)  of the definition thereof, the Required Lenders may, to the extent permitted by applicable law, by notice in writing to the Company and such Person remove such Person as Administrative Agent and, in consultation with the Company, appoint a successor.  If no such successor shall have been so appointed by the Required Lenders and shall have accepted such appointment within 30 days (or such earlier day as shall be agreed by the Required Lenders) (the “ Removal Effective Date ”), then such removal shall nonetheless become effective in accordance with such notice on the Removal Effective Date.

 

(c)                                With effect from the Resignation Effective Date or the Removal Effective Date (as applicable) (1) the retiring or removed Administrative Agent shall be discharged from its duties and obligations hereunder and under the other Loan Documents and (2) except for any indemnity payments or other amounts then owed to the retiring or removed Administrative Agent, all payments, communications and determinations provided to be made by, to or through the Administrative Agent shall instead be made by or to each Lender and the L/C Issuer directly, until such time, if any, as the Required Lenders appoint a successor Administrative Agent as provided for above.  Upon the acceptance of a successor’s appointment as Administrative Agent hereunder, such successor shall succeed to and become vested with all of the rights, powers, privileges and duties of the retiring (or removed) Administrative Agent (other than as provided in Section 3.01(g)  and other than any rights to indemnity payments or other amounts owed to the retiring or removed Administrative Agent as of the Resignation Effective Date or the Removal Effective Date, as applicable), and the retiring or removed Administrative Agent shall be discharged from all of its duties and obligations hereunder or under the other Loan Documents (if not already discharged therefrom as provided above in this Section) .  The fees payable by the Company to a successor Administrative Agent shall be the same as those payable to its predecessor unless otherwise agreed between the Company and such successor.  After the retiring or removed Administrative Agent’s resignation or removal hereunder and under the other Loan Documents, the provisions of this Article and Section 10.04 shall continue in effect for the benefit of such retiring or removed Administrative Agent, its sub-agents and their respective

 

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Related Parties in respect of any actions taken or omitted to be taken by any of them while the retiring or removed Administrative Agent was acting as Administrative Agent.

 

(d)                              Any resignation by Bank of America as Administrative Agent pursuant to this Section shall also constitute its resignation as L/C Issuer and Swing Line Lender.  If Bank of America resigns as an L/C Issuer, it shall retain all the rights, powers, privileges and duties of the L/C Issuer hereunder with respect to all Letters of Credit outstanding as of the effective date of its resignation as L/C Issuer and all L/C Obligations with respect thereto, including the right to require the Lenders to make Base Rate Loans or fund risk participations in Unreimbursed Amounts pursuant to Section 2.03(c) .  If Bank of America resigns as Swing Line Lender, it shall retain all the rights of the Swing Line Lender provided for hereunder with respect to Swing Line Loans made by it and outstanding as of the effective date of such resignation, including the right to require the Lenders to make Base Rate Loans or fund risk participations in outstanding Swing Line Loans pursuant to Section 2.04(c) .  Upon the appointment by the Company of a successor L/C Issuer or Swing Line Lender hereunder (which successor shall in all cases be a Lender other than a Defaulting Lender), (a) such successor shall succeed to and become vested with all of the rights, powers, privileges and duties of the retiring L/C Issuer or Swing Line Lender, as applicable, (b) the retiring L/C Issuer and Swing Line Lender shall be discharged from all of their respective duties and obligations hereunder or under the other Loan Documents, and (c) the successor L/C Issuer shall issue letters of credit in substitution for the Letters of Credit, if any, outstanding at the time of such succession or make other arrangements satisfactory to Bank of America to effectively assume the obligations of Bank of America  with respect to such Letters of Credit.

 

9.07                     Non-Reliance on Administrative Agent and Other Lenders .   Each Lender and the L/C Issuer acknowledges that it has, independently and without reliance upon the Administrative Agent or any other Lender or any of their Related Parties and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement.  Each Lender and the L/C Issuer also acknowledges that it will, independently and without reliance upon the Administrative Agent or any other Lender or any of their Related Parties and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement, any other Loan Document or any related agreement or any document furnished hereunder or thereunder.

 

In the event of any dismissal or resignation by any other L/C Issuer, any Letters of Credit issued by such retiring L/C Issuer shall remain outstanding until termination pursuant to their terms and such retiring L/C Issuer shall retain all the rights and obligations of an L/C Issuer hereunder with respect to all such Letters of Credit and all L/C Obligations with respect thereto (including the right to require the Lenders to make Base Rate Committed Loans or fund risk participations in Unreimbursed Amounts pursuant to Section 2.03(c) ), but excluding the right to consent to Eligible Assignees and the obligation to issue new Letters of Credit.

 

9.08                     No Other Duties, Etc .   Anything herein to the contrary notwithstanding, none of the Joint Book Managers, Arrangers or other titles as necessary listed on the cover page hereof shall have any powers, duties or responsibilities under this Agreement or any of the other Loan

 

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Documents, except in its capacity, as applicable, as the Administrative Agent, a Lender or an L/C Issuer hereunder.

 

9.09                     Administrative Agent May File Proofs of Claim.  In case of the pendency of any proceeding under any Debtor Relief Law or any other judicial proceeding relative to any Loan Party, the Administrative Agent (irrespective of whether the principal of any Loan or L/C Obligation shall then be due and payable as herein expressed or by declaration or otherwise and irrespective of whether the Administrative Agent shall have made any demand on any Borrower) shall be entitled and empowered, by intervention in such proceeding or otherwise

 

(a)                                to file and prove a claim for the whole amount of the principal and interest owing and unpaid in respect of the Loans, L/C Obligations and all other Obligations that are owing and unpaid and to file such other documents as may be necessary or advisable in order to have the claims of the Lenders, the L/C Issuer and the Administrative Agent (including any claim for the reasonable compensation, expenses, disbursements and advances of the Lenders, the L/C Issuer and the Administrative Agent and their respective agents and counsel and all other amounts due the Lenders, the L/C Issuer and the Administrative Agent under Sections 2.03(h)  and (i) , 2.09 and 10.04 ) allowed in such judicial proceeding; and

 

(b)                               to collect and receive any monies or other property payable or deliverable on any such claims and to distribute the same;

 

and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Lender and the L/C Issuer to make such payments to the Administrative Agent and, in the event that the Administrative Agent shall consent to the making of such payments directly to the Lenders and the L/C Issuer, to pay to the Administrative Agent any amount due for the reasonable compensation, expenses, disbursements and advances of the Administrative Agent and its agents and counsel, and any other amounts due the Administrative Agent under Sections 2.09 and 10.04 .

 

Nothing contained herein shall be deemed to authorize the Administrative Agent to authorize or consent to or accept or adopt on behalf of any Lender or the L/C Issuer any plan of reorganization, arrangement, adjustment or composition affecting the Obligations or the rights of any Lender or the L/C Issuer to authorize the Administrative Agent to vote in respect of the claim of any Lender or the L/C Issuer in any such proceeding.

 

ARTICLE X.
MISCELLANEOUS

 

10.01             Amendments, Etc .   No amendment or waiver of any provision of this Agreement or any other Loan Document, and no consent to any departure by the Company or any other Loan Party therefrom, shall be effective unless in writing signed by the Required Lenders and the Company or the applicable Loan Party, as the case may be, and acknowledged by the Administrative Agent, and each such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided , however , that no such amendment, waiver or consent shall:

 

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(a)           waive any condition set forth in Section 4.01(a)  without the written consent of each Lender;

 

(b)           extend or increase the Commitment of any Lender (or reinstate any Commitment terminated pursuant to Section 8.02 ) without the written consent of such Lender;

 

(c)           postpone any date fixed by this Agreement or any other Loan Document for any payment of principal, interest, fees or other amounts due to the Lenders (or any of them) hereunder or under any other Loan Document without the written consent of each Lender directly affected thereby;

 

(d)           reduce the principal of, or the rate of interest specified herein on, any Loan or L/C Borrowing, or (subject to clause (iv)  of the second proviso to this Section 10.01 ) any fees or other amounts payable hereunder or under any other Loan Document without the written consent of each Lender directly affected thereby; provided , however , that only the consent of the Required Lenders shall be necessary (i) to amend the definition of “Default Rate” or to waive any obligation of any Borrower to pay interest or Letter of Credit Fees at the Default Rate or (ii) to amend any financial covenant hereunder (or any defined term used therein) even if the effect of such amendment would be to reduce the rate of interest on any Loan or L/C Borrowing or to reduce any fee payable hereunder;

 

(e)           change Section 2.13 or Section 8.03 in a manner that would alter the pro rata sharing of payments required thereby without the written consent of each Lender;

 

(f)            amend (i)  Section 1.07 or the definition of “Alternative Currency” or (ii)  Section 2.14 , in either case, without the written consent of each Lender;

 

(g)           change any provision of this Section or the definition of “Required Lenders” or any other provision hereof specifying the number or percentage of Lenders required to amend, waive or otherwise modify any rights hereunder or make any determination or grant any consent hereunder without the written consent of each Lender; or

 

(h)           release the Company from the Company Guaranty without the written consent of each Lender;

 

and, provided further , that (i) no amendment, waiver or consent shall, unless in writing and signed by the L/C Issuer in addition to the Lenders required above, affect the rights or duties of the L/C Issuer under this Agreement or any Issuer Document relating to any Letter of Credit issued or to be issued by it; (ii) no amendment, waiver or consent shall, unless in writing and signed by the Swing Line Lender in addition to the Lenders required above, affect the rights or duties of the Swing Line Lender under this Agreement; (iii) no amendment, waiver or consent shall, unless in writing and signed by the Administrative Agent in addition to the Lenders required above, affect the rights or duties of the Administrative Agent under this Agreement or any other Loan Document; and (iv) the Fee Letter may be amended, or rights or privileges thereunder waived, in a writing executed only by the parties thereto.  Notwithstanding anything to the contrary herein, no Defaulting Lender shall have any right to approve or disapprove any amendment, waiver or consent hereunder (and any amendment, waiver or consent which by its

 

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terms requires the consent of all Lenders or each affected Lender may be effected with the consent of the applicable Lenders other than Defaulting Lenders), except that (x) the Commitment of any Defaulting Lender may not be increased or extended without the consent of such Lender and (y) any waiver, amendment or modification requiring the consent of all Lenders or each affected Lender that by its terms affects any Defaulting Lender disproportionately adversely relative to other affected Lenders shall require the consent of such Defaulting Lender.

 

In addition, notwithstanding anything else to the contrary contained in this Section 10.01 , if the Administrative Agent and the Company shall have jointly identified any error or omission of a technical nature in any provision of the Loan Documents, then the Administrative Agent and the Company shall be permitted to amend such provision, and such amendments shall become effective without any further action or consent of any other party to any Loan Document if the same is not objected to in writing by the Required Lenders within ten (10) Business Days following receipt of notice thereof.  The Lenders hereby expressly authorize the Administrative Agent to enter into any amendment to the Loan Documents contemplated by the preceding sentence.

 

10.02     Notices; Effectiveness; Electronic Communication .

 

(a)           Notices Generally .  Except in the case of notices and other communications expressly permitted to be given by telephone (and except as provided in subsection (b) below), all notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by telecopier as follows, and all notices and other communications expressly permitted hereunder to be given by telephone shall be made to the applicable telephone number, as follows:

 

(i)            if to a Borrower, the Administrative Agent, the L/C Issuer or the Swing Line Lender, to the address, telecopier number, electronic mail address or telephone number specified for such Person on Schedule 10.02 ; and

 

(ii)           if to any other Lender, to the address, telecopier number, electronic mail address or telephone number specified in its Administrative Questionnaire (including, as appropriate, notices delivered solely to the Person designated by a Lender on its Administrative Questionnaire then in effect for the delivery of notices that may contain material non-public information relating to the Company).

 

Notices and other communications sent by hand or overnight courier service, or mailed by certified or registered mail, shall be deemed to have been given when received; notices and other communications sent by telecopier shall be deemed to have been given when sent (except that, if not given during normal business hours for the recipient, shall be deemed to have been given at the opening of business on the next business day for the recipient).  Notices and other communications delivered through electronic communications to the extent provided in subsection (b) below, shall be effective as provided in such subsection (b).

 

(b)           Electronic Communications .  Notices and other communications to the Lenders and the L/C Issuer hereunder may be delivered or furnished by electronic communication (including e mail and Internet or intranet websites) pursuant to procedures approved by the

 

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Administrative Agent, provided that the foregoing shall not apply to notices to any Lender or the L/C Issuer pursuant to Article II if such Lender or the L/C Issuer, as applicable, has notified the Administrative Agent that it is incapable of receiving notices under such Article by electronic communication.  The Administrative Agent, the Swing Line Lender, the L/C Issuer or the Company may each, in its discretion, agree to accept notices and other communications to it hereunder by electronic communications pursuant to procedures approved by it, provided that approval of such procedures may be limited to particular notices or communications.

 

Unless the Administrative Agent otherwise prescribes, (i) notices and other communications sent to an e-mail address shall be deemed received upon the sender’s receipt of an acknowledgement from the intended recipient (such as by the “return receipt requested” function, as available, return e-mail or other written acknowledgement), provided that if such notice or other communication is not sent during the normal business hours of the recipient, such notice or communication shall be deemed to have been sent at the opening of business on the next business day for the recipient, and (ii) notices or communications posted to an Internet or intranet website shall be deemed received upon the deemed receipt by the intended recipient at its e-mail address as described in the foregoing clause (i)  of notification that such notice or communication is available and identifying the website address therefor.

 

(c)           The Platform .  THE PLATFORM IS PROVIDED “AS IS” AND “AS AVAILABLE.”  THE AGENT PARTIES (AS DEFINED BELOW) DO NOT WARRANT THE ACCURACY OR COMPLETENESS OF THE BORROWER MATERIALS OR THE ADEQUACY OF THE PLATFORM, AND EXPRESSLY DISCLAIM LIABILITY FOR ERRORS IN OR OMISSIONS FROM THE BORROWER MATERIALS.  NO WARRANTY OF ANY KIND, EXPRESS, IMPLIED OR STATUTORY, INCLUDING ANY WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT OF THIRD PARTY RIGHTS OR FREEDOM FROM VIRUSES OR OTHER CODE DEFECTS, IS MADE BY ANY AGENT PARTY IN CONNECTION WITH THE BORROWER MATERIALS OR THE PLATFORM.  In no event shall the Administrative Agent or any of its Related Parties (collectively, the “ Agent Parties ”) have any liability to any Borrower, any Lender, the L/C Issuer or any other Person for losses, claims, damages, liabilities or expenses of any kind (whether in tort, contract or otherwise) arising out of the Company’s, any Loan Party or the Administrative Agent’s transmission of Borrower Materials through the Internet, except to the extent that such losses, claims, damages, liabilities or expenses are determined by a court of competent jurisdiction by a final and non-appealable judgment to have resulted from such Agent Party’s gross negligence, willful misconduct or breach in bad faith of its obligations under the Loan Documents; provided , however , that in no event shall any Agent Party have any liability to any Borrower, any Lender, the L/C Issuer or any other Person for indirect, special, incidental, consequential or punitive damages (as opposed to direct or actual damages).

 

(d)           Change of Address, Etc .  Each of the Borrowers, the Administrative Agent, the L/C Issuer and the Swing Line Lender may change its address, telecopier or telephone number for notices and other communications hereunder by notice to the other parties hereto.  Each other Lender may change its address, telecopier or telephone number for notices and other communications hereunder by notice to the Company, the Administrative Agent, the L/C Issuer

 

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and the Swing Line Lender.  In addition, each Lender agrees to notify the Administrative Agent from time to time to ensure that the Administrative Agent has on record (i) an effective address, contact name, telephone number, telecopier number and electronic mail address to which notices and other communications may be sent and (ii) accurate wire instructions for such Lender.  Furthermore, each Public Lender agrees to cause at least one individual at or on behalf of such Public Lender to at all times have selected the “Private Side Information” or similar designation on the content declaration screen of the Platform in order to enable such Public Lender or its delegate, in accordance with such Public Lender’s compliance procedures and applicable Law, including United States Federal and state securities Laws, to make reference to Borrower Materials that are not made available through the “Public Side Information” portion of the Platform and that may contain material non-public information with respect to any Borrower or its securities for purposes of United States Federal or state securities laws.

 

(e)           Reliance by Administrative Agent, L/C Issuer and Lenders .   The Administrative Agent, the L/C Issuer and the Lenders shall be entitled to rely and act upon any notices (including telephonic Committed Loan Notices and Swing Line Loan Notices) believed in good faith to have been given by or on behalf of any Borrower even if (i) such notices were not made in a manner specified herein, were incomplete or were not preceded or followed by any other form of notice specified herein, or (ii) the terms thereof, as understood by the recipient, varied from any confirmation thereof.  The Company shall indemnify the Administrative Agent, the L/C Issuer, each Lender and the Related Parties of each of them from all losses, costs, expenses and liabilities resulting from the reliance by such Person on each notice believed in good faith to have been given by or on behalf of any Borrower.  All telephonic notices to and other telephonic communications with the Administrative Agent may be recorded by the Administrative Agent, and each of the parties hereto hereby consents to such recording.

 

10.03     No Waiver; Cumulative Remedies; Enforcement .   No failure by any Lender or the Administrative Agent to exercise, and no delay by any such Person in exercising, any right, remedy, power or privilege hereunder or under any other Loan Document shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege.  The rights, remedies, powers and privileges herein provided, and provided under each other Loan Document, are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law.

 

Notwithstanding anything to the contrary contained herein or in any other Loan Document, the authority to enforce rights and remedies hereunder and under the other Loan Documents against the Loan Parties or any of them shall be vested exclusively in, and all actions and proceedings at law in connection with such enforcement shall be instituted and maintained exclusively by, the Administrative Agent in accordance with Section 8.02 for the benefit of all the Lenders and the L/C Issuer; provided , however , that the foregoing shall not prohibit (a) the Administrative Agent from exercising on its own behalf the rights and remedies that inure to its benefit (solely in its capacity as Administrative Agent) hereunder and under the other Loan Documents, (b) the L/C Issuer or the Swing Line Lender from exercising the rights and remedies that inure to its benefit (solely in its capacity as L/C Issuer or Swing Line Lender, as the case may be) hereunder and under the other Loan Documents, (c) any Lender from exercising setoff

 

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rights in accordance with Section 10.08 (subject to the terms of Section 2.13 ), or (d) any Lender from filing proofs of claim or appearing and filing pleadings on its own behalf during the pendency of a proceeding relative to any Loan Party under any Debtor Relief Law; and provided , further , that if at any time there is no Person acting as Administrative Agent hereunder and under the other Loan Documents, then (i) the Required Lenders shall have the rights otherwise ascribed to the Administrative Agent pursuant to Section 8.02 and (ii) in addition to the matters set forth in clauses (b), (c)  and (d)  of the preceding proviso and subject to Section 2.13 , any Lender may, with the consent of the Required Lenders, enforce any rights and remedies available to it and as authorized by the Required Lenders.

 

10.04     Expenses; Indemnity; Damage Waiver .

 

(a)           Costs and Expenses .  Each Borrower shall pay (i) all reasonable out of pocket expenses incurred by the Administrative Agent and its Affiliates (including the reasonable fees, charges and disbursements of counsel for the Administrative Agent in an amount not to exceed $50,000), in connection with the syndication of the credit facilities provided for herein, the preparation, negotiation, execution, delivery and administration of this Agreement and the other Loan Documents (which in the case of administration shall be expenses which are consistent with practices and activities that are generally accepted and customary for administrative agents in the syndicated loan market) or any amendments, modifications or waivers of the provisions hereof or thereof (whether or not the transactions contemplated hereby or thereby shall be consummated), (ii) all reasonable out of pocket expenses incurred by the L/C Issuer in connection with the issuance, amendment, renewal or extension of any Letter of Credit or any demand for payment thereunder and (iii) all out of pocket expenses incurred by the Administrative Agent, any Lender or the L/C Issuer (including the fees, charges and disbursements of any counsel for the Administrative Agent, any Lender or the L/C Issuer), and shall pay all fees and time charges for attorneys who may be employees of the Administrative Agent, any Lender or the L/C Issuer, in connection with the enforcement or protection of its rights (A) in connection with this Agreement and the other Loan Documents, including its rights under this Section, or (B) in connection with the Loans made or Letters of Credit issued hereunder, including all such out of pocket expenses incurred during any workout, restructuring or negotiations in respect of such Loans or Letters of Credit.

 

(b)           Indemnification by the Company .  Each Borrower shall indemnify the Administrative Agent (and any sub-agent thereof), each Lender and the L/C Issuer, and each Related Party of any of the foregoing Persons (each such Person being called an “ Indemnitee ”) against, and hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related expenses (including the fees, charges and disbursements of any counsel for any Indemnitee), and shall indemnify and hold harmless each Indemnitee from all fees and time charges and disbursements for attorneys who may be employees of any Indemnitee, incurred by any Indemnitee or asserted against any Indemnitee by any third party or by any Borrower or any other Loan Party arising out of, in connection with, or as a result of (i) the execution or delivery of this Agreement, any other Loan Document or any agreement or instrument contemplated hereby or thereby, the performance by the parties hereto of their respective obligations hereunder or thereunder, the consummation of the transactions contemplated hereby or thereby, or, in the case of the Administrative Agent (and any sub-agent thereof) and its Related Parties only, the

 

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administration of this Agreement and the other Loan Documents (including in respect of any matters addressed in Section 3.01 ), (ii) any Loan or Letter of Credit or the use or proposed use of the proceeds therefrom (including any refusal by the L/C Issuer to honor a demand for payment under a Letter of Credit if the documents presented in connection with such demand do not strictly comply with the terms of such Letter of Credit), (iii) any actual or alleged presence or release of Hazardous Materials on or from any property owned or operated by any Borrower or any of its Subsidiaries, or any Environmental Liability related in any way to any Borrower or any of its Subsidiaries, or (iv) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory, whether brought by a third party or by the Company or any other Loan Party, and regardless of whether any Indemnitee is a party thereto; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses (x) are determined by a court of competent jurisdiction by final and non-appealable judgment to have resulted from the gross negligence or willful misconduct of such Indemnitee or (y) result from a claim brought by the Company or any other Loan Party against an Indemnitee for breach in bad faith of such Indemnitee’s obligations hereunder or under any other Loan Document, if the Company or such other Loan Party has obtained a final and non-appealable judgment in its favor on such claim as determined by a court of competent jurisdiction.  Without limiting the provisions of Section 3.01(c) , this Section 10.04(b)  shall not apply with respect to Taxes other than any Taxes that represent losses, claims, damages, etc. arising from any non-Tax claim.

 

(c)           Reimbursement by Lenders .  To the extent that any Borrower for any reason fails to indefeasibly pay any amount required under subsection (a)  or (b)  of this Section to be paid by it to the Administrative Agent (or any sub-agent thereof), the L/C Issuer, the Swing Line Lender or any Related Party of any of the foregoing, each Lender severally agrees to pay to the Administrative Agent (or any such sub-agent), the L/C Issuer, the Swing Line Lender or such Related Party, as the case may be, such Lender’s pro rata share (determined as of the time that the applicable unreimbursed expense or indemnity payment is sought based on each Lender’s share of the Total Credit Exposure at such time) of such unpaid amount (including any such unpaid amount in respect of a claim asserted by such Lender), such payment to be made severally among them based on such Lender’s Applicable Percentage (determined as of the time that the applicable unreimbursed expense or indemnity payment is sought), provided further that the unreimbursed expense or indemnified loss, claim, damage, liability or related expense, as the case may be, was incurred by or asserted against the Administrative Agent (or any such sub-agent), the L/C Issuer or the Swing Line Lender in its capacity as such, or against any Related Party of any of the foregoing acting for the Administrative Agent (or any such sub-agent), the L/C Issuer or the Swing Line Lender in connection with such capacity.  The obligations of the Lenders under this subsection (c)  are subject to the provisions of Section 2.12(d) .

 

(d)           Waiver of Consequential Damages, Etc.   To the fullest extent permitted by applicable law, no Borrower shall assert, and hereby waives, any claim against any Indemnitee, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement, any other Loan Document or any agreement or instrument contemplated hereby, the transactions contemplated hereby or thereby, any Loan or Letter of Credit or the use of the proceeds thereof.  No Indemnitee referred to in subsection (b)  above shall be liable for any damages arising from

 

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the use by unintended recipients of any information or other materials distributed to such unintended recipients by such Indemnitee through telecommunications, electronic or other information transmission systems in connection with this Agreement or the other Loan Documents or the transactions contemplated hereby or thereby other than for direct or actual damages resulting from the gross negligence, willful misconduct or breach in bad faith by such Indemnitee of the Loan Documents as determined by a final and non-appealable judgment of a court of competent jurisdiction.

 

(e)           Payments .  All amounts due under this Section shall be payable not later than ten Business Days after demand therefor.

 

(f)            Survival .  The agreements in this Section and the indemnity provisions of Section 10.02(e)  shall survive the resignation of the Administrative Agent, the L/C Issuer and the Swing Line Lender, the replacement of any Lender, the termination of the Aggregate Commitments and the repayment, satisfaction or discharge of all the other Obligations.

 

10.05     Payments Set Aside .   To the extent that any payment by or on behalf of any Borrower is made to the Administrative Agent, the L/C Issuer or any Lender, or the Administrative Agent, the L/C Issuer or any Lender exercises its right of setoff, and such payment or the proceeds of such setoff or any part thereof is subsequently invalidated, declared to be fraudulent or preferential, set aside or required (including pursuant to any settlement entered into by the Administrative Agent, the L/C Issuer or such Lender in its discretion) to be repaid to a trustee, receiver or any other party, in connection with any proceeding under any Debtor Relief Law or otherwise, then (a) to the extent of such recovery, the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such setoff had not occurred, and (b) each Lender and the L/C Issuer severally agrees to pay to the Administrative Agent upon demand its applicable share (without duplication) of any amount so recovered from or repaid by the Administrative Agent, plus interest thereon from the date of such demand to the date such payment is made at a rate per annum equal to the applicable Overnight Rate from time to time in effect, in the applicable currency of such recovery or payment.  The obligations of the Lenders and the L/C Issuer under clause (b)  of the preceding sentence shall survive the payment in full of the Obligations and the termination of this Agreement.

 

10.06     Successors and Assigns .

 

(a)           Successors and Assigns Generally .  The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby, except that no Borrower may assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of the Administrative Agent and each Lender and no Lender may assign or otherwise transfer any of its rights or obligations hereunder except (i) to an assignee in accordance with the provisions of subsection (b) of this Section, (ii) by way of participation in accordance with the provisions of subsection (d) of this Section, or (iii) by way of pledge or assignment of a security interest subject to the restrictions of subsection (f)  of this Section (and any other attempted assignment or transfer by any party hereto shall be null and void).  Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns

 

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permitted hereby, Participants to the extent provided in subsection (d)  of this Section and, to the extent expressly contemplated hereby, the Related Parties of each of the Administrative Agent, the L/C Issuer and the Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement.

 

(b)           Assignments by Lenders .  Any Lender may at any time assign to one or more assignees all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans (including for purposes of this subsection (b), participations in L/C Obligations and in Swing Line Loans) at the time owing to it); provided that any such assignment shall be subject to the following conditions:

 

(i)            Minimum Amounts .

 

(A)          in the case of an assignment of the entire remaining amount of the assigning Lender’s Commitment or contemporaneous assignments to related Approved Funds that equal at least the amount specified in subsection (b)(i)(B) of this Section in the aggregate and the Loans at the time owing to it or in the case of an assignment to a Lender, an Affiliate of a Lender or an Approved Fund, no minimum amount need be assigned; and

 

(B)          in any case not described in subsection (b)(i)(A) of this Section, the aggregate amount of the Commitment (which for this purpose includes Loans outstanding thereunder) or, if the Commitment is not then in effect, the principal outstanding balance of the Loans of the assigning Lender subject to each such assignment, determined as of the date the Assignment and Assumption with respect to such assignment is delivered to the Administrative Agent or, if “Trade Date” is specified in the Assignment and Assumption, as of the Trade Date, shall not be less than $5,000,000 unless each of the Administrative Agent and, so long as no Event of Default has occurred and is continuing, the Company otherwise consents (each such consent not to be unreasonably withheld or delayed).

 

(ii)           Proportionate Amounts .  Each partial assignment shall be made as an assignment of a proportionate part of all the assigning Lender’s rights and obligations under this Agreement with respect to the Loans or the Commitment assigned, except that this clause (ii)  shall not apply to the Swing Line Lender’s rights and obligations in respect of Swing Line Loans;

 

(iii)          Required Consents .  No consent shall be required for any assignment except to the extent required by subsection (b)(i)(B)  of this Section and, in addition:

 

(A)          the consent of the Company (such consent not to be unreasonably withheld, conditioned or delayed) shall be required unless (1) an Event of Default has occurred and is continuing at the time of such assignment or (2) such assignment is to a Lender, an Affiliate of a Lender or an Approved Fund;

 

(B)          the consent of the Administrative Agent (such consent not to be unreasonably withheld, conditioned or delayed) shall be required if such

 

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assignment is to a Person that is not a Lender, an Affiliate of such Lender or an Approved Fund with respect to such Lender; and

 

(C)          the consent of the L/C Issuer and the consent of the Swing Line Lender (such consent not to be unreasonably withheld, conditioned or delayed) shall be required for any assignment.

 

(iv)          Assignment and Assumption .  The parties to each assignment shall execute and deliver to the Administrative Agent an Assignment and Assumption, together with a processing and recordation fee in the amount of $3,500; provided , however , that the Administrative Agent may, in its sole discretion, elect to waive such proceeding and recordation fee in the case of any assignment.  The assignee, if it is not a Lender, shall deliver to the Administrative Agent an Administrative Questionnaire

 

(v)           No Assignment to Certain Persons .  No such assignment shall be made (A) to the Company or any of the Company’s Subsidiaries, (B) to any Defaulting Lender or any of its Subsidiaries, or any Person who, upon becoming a Lender hereunder, would constitute any of the foregoing Persons described in this clause (B) , or (C) to a natural Person.

 

(vi)          No Assignment Resulting in Additional Indemnified Taxes .  No such assignment shall be made to any Person that, through its Lending Offices, is not capable of lending the applicable Alternative Currencies to the relevant Borrowers without the imposition of any additional Indemnified Taxes.

 

(vii)        Certain Additional Payments .  In connection with any assignment of rights and obligations of any Defaulting Lender hereunder, no such assignment shall be effective unless and until, in addition to the other conditions thereto set forth herein, the parties to the assignment shall make such additional payments to the Administrative Agent in an aggregate amount sufficient, upon distribution thereof as appropriate (which may be outright payment, purchases by the assignee of participations or subparticipations, or other compensating actions, including funding, with the consent of the Company and the Administrative Agent, the applicable pro rata share of Loans previously requested but not funded by the Defaulting Lender, to each of which the applicable assignee and assignor hereby irrevocably consent), to (x)pay and satisfy in full all payment liabilities then owed by such Defaulting Lender to the Administrative Agent, the L/C Issuer or any Lender hereunder (and interest accrued thereon) and (y)acquire (and fund as appropriate) its full pro rata share of all Loans and participations in Letters of Credit and Swing Line Loans in accordance with its Applicable Percentage.  Notwithstanding the foregoing, in the event that any assignment of rights and obligations of any Defaulting Lender hereunder shall become effective under applicable Law without compliance with the provisions of this paragraph, then the assignee of such interest shall be deemed to be a Defaulting Lender for all purposes of this Agreement until such compliance occurs.

 

Subject to acceptance and recording thereof by the Administrative Agent pursuant to subsection (c)  of this Section, from and after the effective date specified in each Assignment and

 

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Assumption, the Eligible Assignee thereunder shall be a party to this Agreement and, to the extent of the interest assigned by such Assignment and Assumption, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Assumption, be released from its obligations under this Agreement (and, in the case of an Assignment and Assumption covering all of the assigning Lender’s rights and obligations under this Agreement, such Lender shall cease to be a party hereto) but shall continue to be entitled to the benefits of Sections 3.01 , 3.04 , 3.05 , and 10.04 with respect to facts and circumstances occurring prior to the effective date of such assignment; provided , that except to the extent otherwise expressly agreed by the affected parties, no assignment by a Defaulting Lender will constitute a waiver or release of any claim of any party hereunder arising from that Lender’s having been a Defaulting Lender.  Upon request, each Borrower (at its expense) shall execute and deliver a Note to the assignee Lender.  Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this subsection shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with subsection (d)  of this Section.

 

(c)           Register .  The Administrative Agent, acting solely for this purpose as an agent of the Borrowers (and such agency being solely for tax purposes), shall maintain at the Administrative Agent’s Office a copy of each Assignment and Assumption delivered to it (or the equivalent thereof in electronic form) and a register for the recordation of the names and addresses of the Lenders, and the Commitments of, and principal amounts (and stated interest) of the Loans and L/C Obligations owing to, each Lender pursuant to the terms hereof from time to time (the “ Register ”).  The entries in the Register shall be conclusive absent manifest error, and the Borrowers, the Administrative Agent and the Lenders shall treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement.  The Register shall be available for inspection by the Borrowers and any Lender, at any reasonable time and from time to time upon reasonable prior notice.

 

(d)           Participations .  Any Lender may at any time, without the consent of, or notice to, any Borrower or the Administrative Agent, sell participations to any Person (other than a natural Person, a Defaulting Lender or the Company or any of the Company’s Affiliates or Subsidiaries) (each, a “ Participant ”) in all or a portion of such Lender’s rights and/or obligations under this Agreement (including all or a portion of its Commitment and/or the Loans (including such Lender’s participations in L/C Obligations and/or Swing Line Loans) owing to it); provided that (i)such Lender’s obligations under this Agreement shall remain unchanged, (ii)such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (iii)the Borrowers, the Administrative Agent, the Lenders and the L/C Issuer shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Agreement.  For the avoidance of doubt, each Lender shall be responsible for the indemnity under Section10.04(c)  without regard to the existence of any participation.

 

Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and to approve any amendment, modification or waiver of any  provision of this Agreement; provided that such agreement or instrument may provide that such Lender will not, without the consent of the

 

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Participant, agree to any amendment, waiver or other modification described in the first proviso to Section 10.01 that affects such Participant.  The Company agrees that each Participant shall be entitled to the benefits of Sections 3.01 , 3.04 and 3.05 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to subsection (b) of this Section (it being understood that the documentation required under Section 3.01(e)  shall be delivered to the Lender who sells the participation) to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to paragraph (b) of this Section; provided that such Participant (A)agrees to be subject to the provisions of Sections 3.06 and 10.13 as if it were an assignee under paragraph (b)of this Section and (B)shall not be entitled to receive any greater payment under Sections 3.01 or 3.04 , with respect to any participation, than the Lender from whom it acquired the applicable participation would have been entitled to receive, except to the extent such entitlement to receive a greater payment results from a Change in Law that occurs after the Participant acquired the applicable participation.  Each Lender that sells a participation agrees, at the Company’s request and expense, to use reasonable efforts to cooperate with the Company to effectuate the provisions of Section3.06 with respect to any Participant.  To the extent permitted by law, each Participant also shall be entitled to the benefits of Section10.08 as though it were a Lender; provided that such Participant agrees to be subject to Section2.13 as though it were a Lender.  Each Lender that sells a participation shall, acting solely for this purpose as an agent of the Company, maintain a register on which it enters the name and address of each Participant and the principal amounts (and stated interest) of each Participant’s interest in the Loans or other obligations under the Loan Documents (the “ Participant Register ”); provided that no Lender shall have any obligation to disclose all or any portion of the Participant Register (including the identity of any Participant or any information relating to a Participant’s interest in any commitments, loans, letters of credit or its other obligations under any Loan Document) to any Person except to the extent that such disclosure is necessary to establish that such commitment, loan, letter of credit or other obligation is in registered form under Section5f.103-1(c) of the United States Treasury Regulations.  The entries in the Participant Register shall be conclusive absent manifest error, and such Lender shall treat each Person whose name is recorded in the Participant Register as the owner of such participation for all purposes of this Agreement notwithstanding any notice to the contrary.  For the avoidance of doubt, the Administrative Agent (in its capacity as Administrative Agent) shall have no responsibility for maintaining a Participant Register.

 

(e)           Certain Pledges .  Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement (including under its Note, if any) to secure obligations of such Lender, including any pledge or assignment to secure obligations to a Federal Reserve Bank; provided that no such pledge or assignment shall release such Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto.

 

(f)            Resignation as L/C Issuer or Swing Line Lender after Assignment .  Notwithstanding anything to the contrary contained herein, if at any time Bank of America assigns all of its Commitment and Loans pursuant to subsection (b) above, Bank of America may, (i) upon 30 days’ notice to the Company and the Lenders, resign as L/C Issuer and/or (ii) upon 30 days’ notice to the Company, resign as Swing Line Lender and the Company may (i) upon 30 calendar days’ written notice to Bank of America, remove Bank of America as L/C

 

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Issuer and/or (ii) upon 30 calendar days’ notice to Bank of America, remove Bank of America as Swing Line Lender.  In the event of any such resignation or removal as L/C Issuer or Swing Line Lender, the Company shall be entitled to appoint from among the Lenders a successor L/C Issuer or Swing Line Lender hereunder; provided , however , that no failure by the Company to appoint any such successor shall affect the resignation or removal of Bank of America as L/C Issuer or Swing Line Lender, as the case may be.  If Bank of America resigns or is removed as L/C Issuer, it shall retain all the rights, powers, privileges and duties of the L/C Issuer hereunder with respect to all Letters of Credit outstanding as of the effective date of its resignation or removal as L/C Issuer and all L/C Obligations with respect thereto (including the right to require the Lenders to make Base Rate Committed Loans or fund risk participations in Unreimbursed Amounts pursuant to Section 2.03(c) ).  If Bank of America resigns or is removed as Swing Line Lender, it shall retain all the rights of the Swing Line Lender provided for hereunder with respect to Swing Line Loans made by it and outstanding as of the effective date of such resignation or removal, including the right to require the Lenders to make Base Rate Committed Loans or fund risk participations in outstanding Swing Line Loans pursuant to Section 2.04(c) .  Upon the appointment of a successor L/C Issuer and/or Swing Line Lender, (a) such successor shall succeed to and become vested with all of the rights, powers, privileges and duties of the retiring  or removed L/C Issuer or Swing Line Lender, as the case may be, and (b) the successor L/C Issuer shall issue letters of credit in substitution for the Letters of Credit, if any, outstanding at the time of such succession or make other arrangements satisfactory to Bank of America to effectively assume the obligations of Bank of America with respect to such Letters of Credit.

 

10.07     Treatment of Certain Information; Confidentiality .   Each of the Administrative Agent, the Lenders and the L/C Issuer agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a)to its Affiliates and to its Related Parties (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential), (b)to the extent required or requested by any regulatory authority purporting to have jurisdiction over such Person or its Related Parties (including any self-regulatory authority, such as the National Association of Insurance Commissioners), (c)to the extent required by applicable laws or regulations or by any subpoena or similar legal process, (d)to any other party hereto, (e)in connection with the exercise of any remedies hereunder or under any other Loan Document or any action or proceeding relating to this Agreement or any other Loan Document or the enforcement of rights hereunder or thereunder, (f)subject to an agreement containing provisions substantially the same as those of this Section, to (i)any assignee of or Participant in, or any prospective assignee of or Participant in, any of its rights and obligations under this Agreement or any Eligible Assignee invited to be a Lender pursuant to Section 2.15(c)  or (ii)any actual or prospective party (or its Related Parties) to any swap, derivative or other transaction under which payments are to be made by reference to any of the Borrowers and their obligations, this Agreement or payments hereunder, (g)on a confidential basis to (i)any rating agency in connection with rating the Company or its Subsidiaries or the credit facilities provided hereunder or (ii)the CUSIP Service Bureau or any similar agency in connection with the issuance and monitoring of CUSIP numbers or other market identifiers with respect to the credit facilities provided hereunder, (h)with the consent of the Company or (i)to the extent such Information (x)becomes publicly available other than as a result of a breach of this Section or (y)becomes available to the Administrative Agent, any Lender, the L/C Issuer or

 

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any of their respective Affiliates on a nonconfidential basis from a source other than the Company.

 

For purposes of this Section, “Information” means all information received from the Company or any Subsidiary relating to the Company or any Subsidiary or any of their respective businesses, other than any such information that is available to the Administrative Agent, any Lender or the L/C Issuer on a nonconfidential basis prior to disclosure by the Company or any Subsidiary, provided that, in the case of information received from the Company or any Subsidiary after the date hereof, such information is clearly identified at the time of delivery as confidential.  Any Person required to maintain the confidentiality of Information as provided in this Section shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information.

 

Each of the Administrative Agent, the Lenders and the L/C Issuer acknowledges that (a)the Information may include material non-public information concerning the Company or a Subsidiary, as the case may be, (b)it has developed compliance procedures regarding the use of material non-public information and (c)it will handle such material non-public information in accordance with applicable Law, including United States Federal and state securities Laws.

 

10.08     Right of Setoff .   If an Event of Default shall have occurred and be continuing, each Lender, the L/C Issuer and each of their respective Affiliates is hereby authorized at any time and from time to time, to the fullest extent permitted by applicable law, to set off and apply any and all deposits (general or special, time or demand, provisional or final, in whatever currency) at any time held and other obligations (in whatever currency) at any time owing by such Lender, the L/C Issuer or any such Affiliate to or for the credit or the account of the Company or any other Loan Party against any and all of the obligations of the Company or such Loan Party now or hereafter existing under this Agreement or any other Loan Document to such Lender or the L/C Issuer or their respective Affiliates, irrespective of whether or not such Lender, L/C Issuer or Affiliate shall have made any demand under this Agreement or any other Loan Document and although such obligations of the Company or such Loan Party may be contingent or unmatured or are owed to a branch, office or Affiliate of such Lender or the L/C Issuer different from the branch, office or Affiliate holding such deposit or obligated on such indebtedness; provided , that in the event that any Defaulting Lender shall exercise any such right of setoff, (x)all amounts so set off shall be paid over immediately to the Administrative Agent for further application in accordance with the provisions of Section2.17 and, pending such payment, shall be segregated by such Defaulting Lender from its other funds and deemed held in trust for the benefit of the Administrative Agent, the L/C Issuer and the Lenders, and (y)the Defaulting Lender shall provide promptly to the Administrative Agent a statement describing in reasonable detail the Obligations owing to such Defaulting Lender as to which it exercised such right of setoff.  The rights of each Lender, the L/C Issuer and their respective Affiliates under this Section are in addition to other rights and remedies (including other rights of setoff) that such Lender, the L/C Issuer or their respective Affiliates may have.  Each Lender and the L/C Issuer agrees to notify the Company and the Administrative Agent promptly after any such setoff and application, provided that the failure to give such notice shall not affect the validity of such setoff and application.

 

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10.09   Interest Rate Limitation .   Notwithstanding anything to the contrary contained in any Loan Document, the interest paid or agreed to be paid under the Loan Documents shall not exceed the maximum rate of non-usurious interest permitted by applicable Law (the “ Maximum Rate ”).  If the Administrative Agent or any Lender shall receive interest in an amount that exceeds the Maximum Rate, the excess interest shall be applied to the principal of the Loans or, if it exceeds such unpaid principal, refunded to the Company.  In determining whether the interest contracted for, charged, or received by the Administrative Agent or a Lender exceeds the Maximum Rate, such Person may, to the extent permitted by applicable Law, (a) characterize any payment that is not principal as an expense, fee, or premium rather than interest, (b) exclude voluntary prepayments and the effects thereof, and (c) amortize, prorate, allocate, and spread in equal or unequal parts the total amount of interest throughout the contemplated term of the Obligations hereunder.

 

10.10   Counterparts; Integration; Effectiveness .   This Agreement and the other Loan Documents may be executed in counterparts (and by different parties hereto in different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract.  This Agreement and the other Loan Documents constitute the entire contract among the parties relating to the subject matter hereof and supersede any and all previous agreements and understandings, oral or written, relating to the subject matter hereof.  Except as provided in Section 4.01 , this Agreement and the other Loan Documents shall become effective when it shall have been executed by the Administrative Agent and when the Administrative Agent shall have received counterparts hereof that, when taken together, bear the signatures of each of the other parties hereto.  Delivery of an executed counterpart of a signature page of this Agreement and any other Loan Document by telecopy or other electronic imaging means (e.g., “pdf” or “tif”) shall be effective as delivery of a manually executed counterpart of this Agreement and the other Loan Documents.

 

10.11   Survival of Representations and Warranties .   All representations and warranties made hereunder and in any other Loan Document or other document delivered pursuant hereto or thereto or in connection herewith or therewith shall survive the execution and delivery hereof and thereof.  Such representations and warranties have been or will be relied upon by the Administrative Agent and each Lender, regardless of any investigation made by the Administrative Agent or any Lender or on their behalf and notwithstanding that the Administrative Agent or any Lender may have had notice or knowledge of any Default at the time of any Credit Extension, and shall continue in full force and effect as long as any Loan or any other Obligation hereunder shall remain unpaid or unsatisfied or any Letter of Credit shall remain outstanding.

 

10.12   Severability .   If any provision of this Agreement or the other Loan Documents is held to be illegal, invalid or unenforceable, (a) the legality, validity and enforceability of the remaining provisions of this Agreement and the other Loan Documents shall not be affected or impaired thereby and (b) the parties shall endeavor in good faith negotiations to replace the illegal, invalid or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the illegal, invalid or unenforceable provisions.  The invalidity of a provision in a particular jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.  Without limiting the foregoing provisions of this

 

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Section10.12 , if and to the extent that the enforceability of any provisions in this Agreement relating to Defaulting Lenders shall be limited by Debtor Relief Laws, as determined in good faith by the Administrative Agent, the L/C Issuer or the Swing Line Lender, as applicable, then such provisions shall be deemed to be in effect only to the extent not so limited.

 

10.13   Replacement of Lenders .   If the Company is entitled to replace a Lender pursuant to the provisions of Section 3.06 , or if any Lender is a Defaulting Lender or a Non-Consenting Lender or if any other circumstance exists hereunder that gives the Company the right to replace a Lender as a party hereto, then the Company may, at its sole expense and effort, upon notice to such Lender and the Administrative Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in, and consents required by, Section 10.06 ), all of its interests, rights (other than its existing rights to payments pursuant to Sections 3.01 and 3.04 ) and obligations under this Agreement and the related Loan Documents to an Eligible Assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment), provided that:

 

(a)        the Company shall have paid (or caused a Designated Borrower to pay) to the Administrative Agent the assignment fee (if any) specified in Section 10.06(b) ;

 

(b)        such Lender shall have received payment of an amount equal to the outstanding principal of its Loans and L/C Advances, accrued interest thereon, accrued fees and all other amounts payable to it hereunder and under the other Loan Documents (including any amounts under Section 3.05 ) from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the Company or applicable Designated Borrower (in the case of all other amounts);

 

(c)        in the case of any such assignment resulting from a claim for compensation under Section 3.04 or payments required to be made pursuant to Section 3.01 , such assignment will result in a reduction in such compensation or payments thereafter;

 

(d)       such assignment does not conflict with applicable Laws; and

 

(e)        in the case of an assignment resulting from a Lender becoming a Non-Consenting Lender, the applicable assignee shall have consented to the applicable amendment, waiver or consent.

 

A Lender shall not be required to make any such assignment or delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the Company to require such assignment and delegation cease to apply.

 

10.14   Governing Law; Jurisdiction; Etc .

 

(a)        GOVERNING LAW .  THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS AND ANY CLAIMS, CONTROVERSY, DISPUTE OR CAUSE OF ACTION (WHETHER IN CONTRACT OR TORT OR OTHERWISE) BASED UPON, ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT (EXCEPT, AS TO ANY OTHER LOAN DOCUMENT, AS EXPRESSLY SET FORTH

 

118



 

THEREIN) AND THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.

 

(b)        SUBMISSION TO JURISDICTION .  EACH BORROWER IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK SITTING IN NEW YORK COUNTY AND OF THE UNITED STATES DISTRICT COURT OF THE SOUTHERN DISTRICT OF NEW YORK, AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH OF THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH NEW YORK STATE COURT OR, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, IN SUCH FEDERAL COURT.  EACH OF THE PARTIES HERETO AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW.  NOTHING IN THIS AGREEMENT OR IN ANY OTHER LOAN DOCUMENT SHALL AFFECT ANY RIGHT THAT THE ADMINISTRATIVE AGENT, ANY LENDER OR THE L/C ISSUER MAY OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AGAINST ANY BORROWER OR ITS PROPERTIES IN THE COURTS OF ANY JURISDICTION.

 

(c)        WAIVER OF VENUE .  EACH BORROWER IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT IN ANY COURT REFERRED TO IN PARAGRAPH (B)  OF THIS SECTION.  EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH COURT.

 

(d)       SERVICE OF PROCESS .  EACH PARTY HERETO IRREVOCABLY CONSENTS TO SERVICE OF PROCESS IN THE MANNER PROVIDED FOR NOTICES IN SECTION 10.02 .  NOTHING IN THIS AGREEMENT WILL AFFECT THE RIGHT OF ANY PARTY HERETO TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY APPLICABLE LAW.

 

10.15   Waiver of Jury Trial .   EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR

 

119



 

THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY).  EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PERSON WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

 

10.16   No Advisory or Fiduciary Responsibility .   In connection with all aspects of each transaction contemplated hereby (including in connection with any amendment, waiver or other modification hereof or of any other Loan Document), each Borrower acknowledges and agrees that:  (i) (A) the arranging and other services regarding this Agreement provided by the Administrative Agent and the Arrangers are arm’s-length commercial transactions between such Borrower and its respective Affiliates, on the one hand, and the Administrative Agent and the Arrangers, on the other hand, (B) such Borrower has consulted its own legal, accounting, regulatory and tax advisors to the extent it has deemed appropriate, and (C) such Borrower is capable of evaluating, and understands and accepts, the terms, risks and conditions of the transactions contemplated hereby and by the other Loan Documents; (ii) (A), the Administrative Agent and the each Arranger each is and has been acting solely as a principal and, except as expressly agreed in writing by the relevant parties, has not been, is not, and will not be acting as an advisor, agent or fiduciary for such Borrower or any of its Affiliates or any other Person and (B) neither the Administrative Agent nor the Arrangers has any obligation to such Borrower or any of its Affiliates with respect to the transactions contemplated hereby except those obligations expressly set forth herein and in the other Loan Documents; and (iii) the Administrative Agent and the Arrangers and their respective Affiliates may be engaged in a board range of transactions that involve interests that differ from those of such Borrower and its Affiliates, and neither the Administrative Agent nor the Arrangers has any obligation to disclose any of such interests to such Borrower or its Affiliates.  To the fullest extent permitted by law, each of the Borrowers hereby waives and releases any claims that it may have against the Administrative Agent and the Arrangers with respect to any breach or alleged breach of agency or fiduciary duty in connection with any aspect of any transaction contemplated hereby.

 

10.17   Electronic Execution of Assignments and Certain Other Documents .   The words “execute,” “execution,” “signed,” “signature,” and words of like import in any Assignment and Assumption or in any amendment or other modification hereof (including waivers and consents) shall be deemed to include electronic signatures, the electronic matching of assignment terms and contract formations on electronic platforms approved by the Administrative Agent, or the keeping of records in electronic form, each of which shall be of the same legal effect, validity or enforceability as a manually executed signature or the use of a paper-based recordkeeping system, as the case may be, to the extent and as provided for in any applicable law, including the Federal Electronic Signatures in Global and National Commerce Act, the New York State Electronic Signatures and Records Act, or any other similar state laws based on the Uniform Electronic Transactions Act.

 

120



 

10.18   USA PATRIOT Act .   Each Lender that is subject to the Act (as hereinafter defined) and the Administrative Agent (for itself and not on behalf of any Lender) hereby notifies the Borrowers that pursuant to the requirements of the USA PATRIOT Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the “ Act ”), it is required to obtain, verify and record information that identifies the Borrowers, which information includes the name and address of each Borrower and other information that will allow such Lender or the Administrative Agent, as applicable, to identify such Borrower in accordance with the Act.  Each Borrower shall, promptly following a request by the Administrative Agent or any Lender, provide all documentation and other information that the Administrative Agent or such Lender requests in order to comply with its ongoing obligations under applicable “know your customer” and anti-money laundering rules and regulations, including the Act.

 

10.19   Judgment Currency .  If, for the purposes of obtaining judgment in any court, it is necessary to convert a sum due hereunder or any other Loan Document in one currency into another currency, the rate of exchange used shall be that at which in accordance with normal banking procedures the Administrative Agent could purchase the first currency with such other currency on the Business Day preceding that on which final judgment is given.  The obligation of each Borrower in respect of any such sum due from it to the Administrative Agent or any Lender hereunder or under the other Loan Documents shall, notwithstanding any judgment in a currency (the “ Judgment Currency ”) other than that in which such sum is denominated in accordance with the applicable provisions of this Agreement (the “ Agreement Currency ”), be discharged only to the extent that on the Business Day following receipt by the Administrative Agent or such Lender, as the case may be, of any sum adjudged to be so due in the Judgment Currency, the Administrative Agent or such Lender, as the case may be, may in accordance with normal banking procedures purchase the Agreement Currency with the Judgment Currency.  If the amount of the Agreement Currency so purchased is less than the sum originally due to the Administrative Agent or any Lender from any Borrower in the Agreement Currency, such Borrower agrees, as a separate obligation and notwithstanding any such judgment, to indemnify the Administrative Agent or such Lender, as the case may be, against such loss.  If the amount of the Agreement Currency so purchased is greater than the sum originally due to the Administrative Agent or any Lender in such currency, the Administrative Agent or such Lender, as the case may be, agrees to return the amount of any excess to such Borrower (or to any other Person who may be entitled thereto under applicable law).

 

 

[SIGNATURE PAGES FOLLOW]

 

121



 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first above written.

 

 

 

SEABOARD CORPORATION , as a Borrower

 

 

 

 

 

 

By: /s/ Robert Steer

 

 

Name:

Robert Steer

 

 

Title:

Executive Vice President

 

 

 

and Chief Financial Officer

 

 

Seaboard Corporation

Amended and Restated Credit Agreement

Signature Page

 



 

 

 

BANK OF AMERICA, N.A., as

 

 

Administrative Agent

 

 

 

 

 

By: /s/ David L. Catherall

 

 

Name:

David L. Catherall

 

 

Title:

Managing Director

 

 

Seaboard Corporation

Amended and Restated Credit Agreement

Signature Page

 



 

 

 

BANK OF AMERICA, N.A., as a Lender, L/C Issuer and Swing Line Lender

 

 

 

 

 

 

By: /s/ David L. Catherall

 

 

Name:

David L. Catherall

 

 

Title:

Managing Director

 

 

Seaboard Corporation

Amended and Restated Credit Agreement

Signature Page

 



 

 

 

THE BANK OF NOVA SCOTIA , as a Lender

 

 

 

 

 

 

By: /s/ Laura Gimena

 

 

Name:

Laura Gimena

 

 

Title:

Director

 

 

Seaboard Corporation

Amended and Restated Credit Agreement

Signature Page

 



 

 

 

COBANK, ACB , as a Lender

 

 

 

 

 

 

By: /s/ Alan V. Schuler

 

 

Name:

Alan V. Schuler

 

 

Title:

Vice President

 

 

Seaboard Corporation

Amended and Restated Credit Agreement

Signature Page

 



 

 

 

AGFIRST FARM CREDIT BANK , as a Lender

 

 

 

 

 

 

By: /s/ John W. Burnside, Jr

 

 

Name:

John W. Burnside, Jr

 

 

Title:

Vice President

 

 

Seaboard Corporation

Amended and Restated Credit Agreement

Signature Page

 



 

 

 

COÖPERATIEVE CENTRALE RAIFFEISEN-BOERENLEENBANK B.A. “RABOBANK NEDERLAND”, NEW YORK BRANCH, as a Lender

 

 

 

 

 

 

By: /s/ James V. Kenwood

 

 

Name:

James V. Kenwood

 

 

Title:

Managing Director

 

 

 

 

 

 

By: /s/ Jeff Geisbauer

 

 

Name:

Jeff Geisbauer

 

 

Title:

Executive Director

 

 

Seaboard Corporation

Amended and Restated Credit Agreement

Signature Page

 



 

 

 

SUNTRUST BANK , as a Lender

 

 

 

 

 

 

By: /s/ Tesha Winslow

 

 

Name:

Tesha Winslow

 

 

Title:

Vice President

 

 

Seaboard Corporation

Amended and Restated Credit Agreement

Signature Page

 



 

 

 

THE BANK OF NEW YORK MELLON , as a Lender and an L/C Issuer

 

 

 

 

 

 

By: /s/ John T. Smathers

 

 

Name:

John T. Smathers

 

 

Title:

First Vice President

 

 

Seaboard Corporation

Amended and Restated Credit Agreement

Signature Page

 



 

 

 

WELLS FARGO BANK, NATIONAL ASSOCIATION , as a Lender

 

 

 

 

 

 

By: /s/ John R. Carley

 

 

Name:

John R. Carley

 

 

Title:

VP & Senior Relationship Manager

 

 

Seaboard Corporation

Amended and Restated Credit Agreement

Signature Page

 



 

SCHEDULES AND EXHIBITS TO AMENDED AND
RESTATED CREDIT AGREEMENT

 

 

 

Following is a list of Schedules and Exhibits to the Amended and Restated Credit Agreement, which are omitted from the Amended and Restated Credit Agreement which is filed with the Securities and Exchange Commission (“SEC”).  Seaboard Corporation (“Seaboard’) undertakes to provide to the SEC the Schedules and Exhibits, as requested, subject to Seaboard’s right to confidential treatment under the Freedom of Information Act.

 

 

Schedule 1.01                                          --                                             Mandatory Cost Formulae

Schedule 1.01(a)                         --                                             Applicable Rate

Schedule 1.01(b)                        --                                             Existing Letters of Credit

Schedule 2.01                                          --                                             Commitments and Applicable Percentages

Schedule 5.05                                          --                                             Supplement to Interim Financial Statements

Schedule 5.13                                          --                                             Subsidiaries; Other Equity Investments

Schedule 5.18                                          --                                             Identification Numbers for the Company and the Designated Borrowers

Schedule 10.02                                  --                                             Administrative Agent’s Office; Certain Addresses for Notices

 

 

Exhibit A                                                                      --                                             Form of Committed Loan Notice

Exhibit B                                                                       --                                             Form of Swing Line Loan Notice

Exhibit C                                                                       --                                             Form of Note

Exhibit D                                                                      --                                             Form of Compliance Certificate

Exhibit E                                                                        --                                             Assignment and Assumption

Exhibit F                                                                         --                                             Form of Letter of Credit Information Report

Exhibit G                                                                      --                                             Form of Designated Borrowers Request and Assumption Agreement

Exhibit H                                                                      --                                             Form of Designated Borrower Notice

Exhibit I                                                                            --                                             Opinion

Exhibit J                                                                            --                                             Form of Company Guaranty

Exhibit K                                                                      --                                             Form of U.S. Tax Compliance Certificates

Exhibit L                                                                        --                                             Form of Unrestricted Subsidiary Notice

 

 

Seaboard Corporation

Amended and Restated Credit Agreement

Signature Page

 


Exhibit 10.14

 

 

 

SEABOARD CORPORATION

409A EXECUTIVE RETIREMENT PLAN

AMENDED AND RESTATED EFFECTIVE JANUARY 1, 2013

 

 

 



 

SEABOARD CORPORATION

409A EXECUTIVE RETIREMENT PLAN

AMENDED AND RESTATED EFFECTIVE JANUARY 1, 2013

 

TABLE OF CONTENTS

 

ARTICLE I. HISTORY AND PURPOSE

1

 

 

ARTICLE II. DEFINITIONS

2

2.1.

162(m) Account

2

2.2.

Accrued Benefit

2

2.3.

Actuarial Equivalent

2

2.4.

Actuarial Value

2

2.5.

Board

2

2.6.

Change of Control

2

2.7.

Code

3

2.8.

Committee

3

2.9.

Company

3

2.10.

Covered Compensation

3

2.11.

Covered Employee s

3

2.12.

Disability

4

2.13.

Early Retirement Date

4

2.14.

Earnings

4

2.15.

Effective Date

4

2.16.

Executive Deferred Compensation Plan

4

2.17.

Eligible Spouse

5

2.18.

Final Average Earnings

5

2.19.

Final Average Earnings Limit

5

2.20.

Interest Rate

5

2.21.

Investment Option Plan

5

2.22.

Investment Options

5

2.23.

Investment Return

5

2.24.

Late Retirement Date

5

2.25.

Named Executive Officer

6

2.26.

Nonqualified Deferred Compensation Plan

6

2.27.

Normal Retirement Date

6

2.28.

Participant

6

2.29.

Officer

6

2.30.

Participation Date

6

2.31.

Pension Plan

6

2.32.

Plan

6

2.33.

Plan Administrator

6

2.34.

Plan Year or Year

6

2.35.

Pre-2013 Accrued Benefit

6

2.36.

Post-2012 Accrued Benefit

6

2.37.

Post-2012 Accrued Benefit Payment Date

6

 



 

2.38.

Related Company

7

2.39.

Separation Date

7

2.40.

Separation from Service

7

2.41.

Years of Service

7

2.42.

Years of Accrual Service

7

2.43.

Years of Pre-Participation Accrual Service

7

2.44.

Years of Post-Participation Accrual Service

7

2.45.

Years of Post-Participation Accrual Service Limit

7

 

 

 

ARTICLE III. PARTICIPATION

8

3.1.

Participation Date

8

3.2.

Cessation of Participation

8

3.3.

Participation Not Contract of Employment

8

 

 

 

ARTICLE IV. RETIREMENT BENEFITS

8

4.1.

Determination of Accrued Benefits

8

4.2.

Early Retirement Accrued Benefit

9

4.3.

Late Retirement Benefit

10

4.4.

Establishment of Participant 162(m) Account

10

 

 

 

ARTICLE V. 162(m) ACCOUNTS AND INVESTMENT RETURN

10

5.1.

Payment of 162(m) Account

10

5.2.

162(m) Account Adjustments for Investment Return

10

 

 

 

ARTICLE VI. PAYMENT OF BENEFITS

10

6.1.

Fully Vested Benefits

10

6.2.

Forfeitures

11

6.3.

Commencement of Payment

11

6.4.

Method of Payment

11

6.5.

Participant Elections of Method of Payment

13

6.6.

Death Benefit

13

6.7.

Determination of Beneficiary

14

 

 

 

ARTICLE VII. FUNDING

14

7.1.

Unfunded Plan

14

 

 

 

ARTICLE VIII. WITHHOLDING OF TAXES

15

8.1.

Tax Withholding

15

 

 

 

ARTICLE IX. PLAN ADMINISTRATOR

15

9.1.

Membership and Authority

15

9.2.

Delegation

15

9.3.

Information to be Furnished

15

9.4.

Plan Administrator’s Decision Final

16

9.5.

Remuneration and Expenses

16

 

- ii -



 

9.6.

Indemnification of Committee Member

16

9.7.

Resignation or Removal of Committee Member

16

9.8.

Interested Committee Member

16

 

 

 

ARTICLE X. CLAIMS PROCEDURE

16

10.1.

Claim

16

10.2.

Denial of Claim

16

10.3.

Review of Claim

16

10.4.

Final Decision

17

 

 

 

ARTICLE XI. AMENDMENTS TO THE PLAN

17

11.1.

General

17

11.2.

Amendments for Compliance with Laws

17

11.3.

Automatic Changes in Interest Rate and Mortality Assumptions

18

 

 

 

ARTICLE XII. MISCELLANEOUS

18

12.1.

Captions

18

12.2.

Company Action

18

12.3.

Company Records

18

12.4.

Evidence

18

12.5.

Gender and Number

18

12.6.

Governing Law

18

12.7.

Nonassignability

18

12.8.

Participant Cooperation

19

12.9.

Successors

19

12.10.

Unsecured General Creditor

19

12.11.

Validity

19

12.12.

Waiver of Notice

19

 

- iii -



 

SEABOARD CORPORATION

409A EXECUTIVE RETIREMENT PLAN

AMENDED AND RESTATED EFFECTIVE JANUARY 1, 2013

 

ARTICLE I.
HISTORY AND PURPOSE

 

Seaboard Corporation (the “Company”) adopted the Seaboard Corporation Executive Retirement Plan (the “Plan”) originally effective January 1, 1994.  The Plan was amended and restated in its entirety effective January 1, 1997 (the “1997 Plan”).  The 1997 Plan continues to apply to certain employees and former employees of the Company, all of whose benefits under the 1997 Plan were frozen prior to January 1, 2005, and are governed by the 1997 Plan, which, as it applies to these participants, has not been materially modified after October 3, 2004.

 

The Plan was amended and restated in its entirety effective November 5, 2004, applicable to certain participants as provided therein, and was again amended and restated in its entirety effective January 1, 2005 for the primary purpose of complying with Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”).

 

The Plan was further amended and restated effective January 1, 2009 for the purpose of simplifying administration of the Plan and for the purpose of complying with final Treasury regulations issued under Code Section 409A.

 

The Plan is now further amended and restated as provided herein effective January 1, 2013 for the purpose of (i) calculating and freezing the accrued benefit of each Participant as of December 31, 2012 (“Pre-2013 Accrued Benefit”) and (ii) providing each Plan Participant remaining in the Plan after December 31, 2012 the opportunity to accrue additional, but limited, benefits (“Post-2012 Accrued Benefit”) based on a Participant’s years of service with the Company after December 31, 2012.  The Actuarial Value of such Post-2012 Accrued Benefit will be paid as a lump sum payment on the earlier of the designated Post-2012 Accrued Benefit Payment Date specified for each Participant, the Participant’s death or disability, a Change of Control, or the first day of the seventh month following the Participant’s separation from service.  Certain Post-2012 Accrued Benefits’ payments will be delayed if any such payment would not be deductible by the Company under Section 162(m) of the Internal Revenue Code or any successor provision.  The Participants in the Plan as of January 1, 2013 and each such Participant’s Pre-2013 Accrued Benefit and Post-2012 Accrued Benefit Payment Date will be set forth on an addendum to this Plan, which addendum shall be completed as soon as possible after the applicable Pre-2013 Accrued Benefit values have been calculated and shall be kept with the Company’s general counsel and human resources departments (“Addendum B”).

 

The purpose of the Plan is to aid in retaining and attracting certain key employees of Seaboard Corporation and participating affiliated companies by providing to them supplemental retirement income.  The Plan is intended to be an arrangement that is unfunded and maintained primarily for the purpose of providing supplemental retirement benefits to a select group of management or highly compensated employees within the meaning of Sections 201(2), 301(a)(3) and 401(a)(1) of the Employee Retirement Income Security Act of 1974, as amended, and the

 

- 1 -



 

Plan is intended to satisfy the requirements of Code Section 409A.  The Plan shall be interpreted and administered in a manner consistent with this intent.

 

ARTICLE II.
DEFINITIONS

 

For the purpose of this Plan, the following words and phrases shall have the meaning indicated, unless the context clearly indicates otherwise:

 

2.1.                         162(m) Account means the bookkeeping account maintained by the Committee for a Participant whose Post-2012 Accrued Benefit is converted to a lump sum present value as described in Section 4.4, which is adjusted to reflect earnings and losses, and which may be paid in a lump sum as soon as permitted pursuant to Section 5.1.  Any reference herein to a distribution of the Participant’s 162(m) Account shall mean a payment of the amount credited to the Participant’s 162(m) Account as of the date of such distribution.

 

2.2.                         Accrued Benefit means the sum of a Participant’s Pre-2013 Accrued Benefit and Post-2012 Accrued Benefit.

 

2.3.                         Actuarial Equivalent means a form of benefit differing in time, period or manner of payment from a specified payment form, but having equivalent value when computed using an interest rate of eight percent (8%) per year compounded annually and the 1983 Group Annuity Mortality Table.  It is the intent that at all times reasonable actuarial assumptions be used to determine an actuarial equivalent form of benefit hereunder.  Accordingly, the Committee is authorized to amend the Plan to change the actuarial assumptions under this Section 2.3 at any time deemed advisable by the Committee based upon the advice of the actuary providing actuarial services to the Plan.  At any given time the same actuarial assumptions must be used for purposes of valuing each annuity option, and any change in actuarial assumptions must apply to all annuity options simultaneously.

 

2.4.                         Actuarial Value means the lump sum equivalent value as of the payment date of a Participant’s Post-2012 Accrued Benefit or Pre-2013 Accrued Benefit payable at his Normal Retirement Date and determined by using (i) the average annual interest rate on 30-year Treasury securities as specified by the Commissioner of the Internal Revenue Service (the “Commissioner”) for the 36-month period ending on November immediately preceding the Plan Year in which the earlier of such lump sum is (a) paid to the Participant or (b) calculated and credited to the Participant’s 162(m) Account and (ii) the applicable mortality table used for purposes of satisfying the requirements of Code Section 417(e) as of the applicable benefit commencement date set forth in Section 6.3.

 

2.5.                         Board means the Board of Directors of Seaboard Corporation.

 

2.6.                         Change of Control means an event or transaction described below; provided , however , an event or transaction described below will not be a Change of Control for purposes of a payment event under the Plan unless it constitutes a change in the ownership or effective control of the Company, or in the ownership of a substantial portion of the assets of the Company, within the meaning of Code Section 409A(a)(2)(A)(v):

 

- 2 -



 

(a)           The acquisition by any unrelated person or entity of more than fifty percent (50%) of either the outstanding shares of common stock or the combined voting power of the Company’s then outstanding voting securities entitled to vote generally in the election of directors;

 

(b)           The sale to an unrelated person or entity of Company assets that have a total gross fair market value of more than eighty-five percent (85%) of the total gross fair market value of all of the assets of the Company immediately prior to such sale;

 

(c)       The acquisition, whether by reorganization, merger, consolidation, purchase or similar transaction, by any person or entity or more than one person or entity acting as a group of more than fifty percent (50%) of the outstanding shares of stock of the Company or the combined voting power entitled to vote generally in the election of directors of the Company or the entity in which the Company was reorganized, merged or consolidated into;

 

(d)           The acquisition by any person or entity (other than by any descendant of Otto Bresky, Senior or any trust established primarily for the benefit of any descendant of Otto Bresky, Senior or any other related person (including spouses) or entity) of more than fifty percent (50%) of either the membership interests or the combined voting power of Seaboard Flour, LLC and SFC Preferred LLC (or any successor related companies) at any time when Seaboard Flour, LLC and/or SFC Preferred LLC or any successor related companies collectively own fifty percent (50%) or more of the Company.

 

For purposes of determining whether there has been a Change of Control under this Section 2.6, the attribution of ownership rules under Code Section 318(a) shall apply.  Also for purposes of determining whether there has been a Change of Control, “Company” means only Seaboard Corporation and any successors to the business of Seaboard Corporation.

 

2.7.                         Code means the Internal Revenue Code of 1986, as amended from time to time. References to any Section of the Internal Revenue Code shall include any successor provision thereto.

 

2.8.                         Committee means the committee, if any, appointed to administer this Plan pursuant to ARTICLE IX.

 

2.9.                         Company means Seaboard Corporation, a Delaware corporation, and any of its subsidiaries or affiliates that are participating in this Plan, and any successors to the business of Seaboard Corporation and such participating subsidiaries or affiliates.

 

2.10.                 Covered Compensation shall be determined under the same methodology as set forth for such term under the Pension Plan provisions in effect on the Effective Date.

 

2.11.                 Covered Employee shall have the same definition and meaning as that term is defined in Code Section 162(m)(3) and the applicable regulations and guidance issued thereunder.

 

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2.12.                 Disability means the Participant is (a) unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than six (6) months; or (b) by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than six (6) months, receiving income replacement benefits for a period of not less than three (3) months under an accident and health plan sponsored by the Company.

 

2.13.                 Early Retirement Date means the date as of which a Participant has both (a) completed ten (10) Years of Service and (b) been a Participant for five (5) Years.

 

2.14.                 Earnings with respect to any particular Year means: (a) the total salary and bonus received by the Participant from the Company for the Participant’s services during such Year; (b) the amount of any elective contributions made by the Participant in such Year pursuant to a plan maintained by the Company where such amount is not includable in gross income in such Year under the provisions of Code Sections 125, 401(k) or 132(f); (c) the amount of the compensation reduction of a Participant effective for such Year under the Investment Option Plan; (d) the amount of the Participant’s compensation otherwise payable to the Participant in such Year that is instead deferred and credited to an account for the benefit of the Participant with respect to such Year under the Executive Deferred Compensation Plan; (e) the amount of any Company discretionary contribution attributable to such Year that is credited to an account for the benefit of the Participant under the Executive Deferred Compensation Plan; and (f) the amount credited to an account for the benefit of the Participant pursuant to a deferral election of the Participant applicable for such Year under the Nonqualified Deferred Compensation Plan.

 

Earnings with respect to any particular Year shall not include:  (a) reimbursements or other expense allowances, fringe benefits (cash and noncash), moving expenses and welfare benefits, whether or not taxable to the Participant; (b) any benefits of the Participant accrued or paid under this Plan whether before or after the Effective Date; (c) any amount received upon the exercise of an option granted to the Participant under the Investment Option Plan; (d) any amounts credited to an account for the benefit of the Participant, and any amounts paid with respect to any such account, under the Executive Deferred Compensation Plan, except the amounts described in clauses (d) and (e) of the preceding paragraph of this Section 2.14; (e) any amounts credited to an account for the benefit of the Participant, and any amounts paid with respect to any such account, under the Nonqualified Deferred Compensation Plan, except the amount described in clause (f) of the preceding paragraph of this Section 2.14; and (f) any benefits of the Participant accrued or paid under any retirement plan qualified under Code Section 401(a), except any elective contributions described in clause (b) of the preceding paragraph of this Section 2.14.

 

2.15.                 Effective Date means the effective date of this Plan, which is January 1, 2013.

 

2.16.    Executive Deferred Compensation Plan means the Seaboard Executive Deferred Compensation Plan, adopted by Seaboard Corporation effective January 1, 1999, as most recently amended and restated effective January 1, 2009, and as hereafter amended from time to time.

 

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2.17.                 Eligible Spouse means the spouse of a Participant to whom the Participant was married on the date payment of the Participant’s vested Accrued Benefit commences, or, if earlier, on the date of the Participant’s death. The length of the marriage prior to either of such dates shall not be taken into consideration.

 

2.18.                 Final Average Earnings means, unless otherwise provided in an agreement between a Participant and the Company, a multiple of 12 times the average monthly Earnings received by a Participant for the sixty (60) consecutive months which produce the highest average Earnings during the last one hundred twenty (120) whole months for which the Participant received Earnings.  A Participant’s Final Average Earnings shall be frozen as of the end of the Plan Year in which the Participant attains the Years of Accrual Service Limit under the Plan. For purposes of determining the Participant’s Final Average Earnings a Participant’s monthly Earnings for a specific month shall be equal to a fraction of the Participant’s Earnings for the Plan Year in which such month occurs, the numerator of which fraction is one and the denominator of which fraction is the number of months (and fractions thereof) in the Plan Year for which the Participant received Earnings.  If a Participant does not receive Earnings during a minimum of sixty (60) whole months, Final Average Earnings shall be determined based upon the Participant’s average monthly earnings for all months preceding the date of determination.  Final Average Earnings cannot exceed the Final Average Earnings Limit as defined in the Plan, unless otherwise provided in an agreement between a Participant and the Company.

 

2.19.                 Final Average Earnings Limit means a limitation generally based upon a Participant’s Earnings for the 2011 Plan Year, as provided in this Section 2.19.  Unless otherwise provided in an agreement between a Participant and the Company, for each of Steven Bresky, Robert Steer, David Dannov and Terry Holton, Final Average Earnings cannot exceed one hundred percent (100%) of such Participant’s 2011 Earnings. Unless otherwise provided in an agreement between a Participant and the Company, for any other Participant, Final Average Earnings cannot exceed one hundred fifty percent (150%) of such Participant’s 2011 Earnings.

 

2.20.                 Interest Rate means the Moody’s AAA Seasoned Bond Index average rate as of the first business day of the Plan Year containing the period for which the interest amount payable hereunder is to be determined.

 

2.21.                 Investment Option Plan means the Seaboard Corporation Investment Option Plan, adopted by Seaboard Corporation effective December 1, 2000, as amended from time to time.  The Investment Option Plan is now frozen.

 

2.22.                 Investment Options means the investment options available from time to time under the Company’s Nonqualified Deferred Compensation Plan, unless different or additional investment options are selected by the Committee.

 

2.23.                 Investment Return means the amount of earnings, gains or losses applicable to the Participant’s Account, if any, as measured by the Investment Options applicable pursuant to the Participant’s direction or as otherwise provided herein.

 

2.24.                 Late Retirement Date means the first day of the calendar month coinciding with or next following the date the Participant actually retires after his Normal Retirement Date.

 

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2.25.                 Named Executive Officer means those Participants for whom disclosure is required pursuant to United States Securities and Exchange Commission Regulation § 229.402 (17 CFR § 229.402) or any successor regulation thereto.

 

2.26.                 Nonqualified Deferred Compensation Plan means the Seaboard Corporation Nonqualified Deferred Compensation Plan, adopted by Seaboard Corporation effective September 1, 2005, as most recently amended and restated effective January 1, 2009, and as hereafter amended from time to time.

 

2.27.                 Normal Retirement Date means the first day of the calendar month coinciding with or next following the date the Participant attains age sixty-two (62).

 

2.28.                 Participant means any individual who is designated as a Participant in the Plan as provided in Section 3.1 and who has not ceased to be a Participant under Section 3.2.

 

2.29.                 Officer means a person elected by the Board of Directors of an entity as an officer of that entity, excluding Assistant Secretary but including, without limitation, President, Vice President, Treasurer, Secretary and Assistant Treasurer.

 

2.30.          Participation Date means the date an employee becomes a Participant as provided in Section 3.1.  The Participation Date of each Participant shall be stated on Addendum B.

 

2.31.               Pension Plan means the Seaboard Corporation Pension Plan, a retirement plan qualified under Code Section 401(a) and sponsored by Seaboard Corporation, as amended from time to time.

 

2.32.                 Plan means the Seaboard Corporation 409A Executive Retirement Plan as set forth herein and as amended from time to time.

 

2.33.               Plan Administrator means the Committee, if any, but if at any time there is no Committee acting hereunder then the Plan Administrator will be Seaboard Corporation.

 

2.34.            Plan Year or Year means the twelve (12) month period beginning January 1 and ending December 31.

 

2.35.                 Pre-2013 Accrued Benefit means, for each individual that was a Participant in the Plan as of December 31, 2012, that benefit expressed as a benefit payable in the form of a single life annuity commencing on the Participant’s Normal Retirement Date and set forth on Addendum B.

 

2.36.                 Post-2012 Accrued Benefit means a Participant’s benefit determined as of a particular time under the provisions of this Plan, including, where applicable, the value of an 162 (m) Account established for the Participant pursuant to Section 4.4.

 

2.37.                 Post-2012 Accrued Benefit Payment Date means, for each Participant, that designated payment date set forth on Addendum B.

 

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2.38.                 Related Company means any corporation which is a member of a controlled group of corporations (as defined in Code Section 414(b)) that includes the Company or any corporation or other entity with whom the Company is considered a single employer under Code Section 414(c).

 

2.39.                 Separation Date means the date the Participant has a Separation from Service.

 

2.40.                 Separation from Service means the Participant’s termination of employment with the Company.  Whether a termination of employment has occurred shall be determined based on whether the facts and circumstances indicate the Participant and Company reasonably anticipate that no further services will be performed by the Participant for the Company; provided , however , that a Participant shall be deemed to have a termination of employment if the level of services he or she would perform for the Company after a certain date permanently decreases to no more than twenty percent (20%) of the average level of bona fide services performed for the Company (whether as an employee or independent contractor) over the immediately preceding thirty-six (36) month period (or the full period of services to the Company if the Participant has been providing services to the Company for less than 36 months).  For this purpose, a Participant is not treated as having a Separation from Service while he or she is on a military leave, sick leave, or other bona fide leave of absence, if the period of such leave does not exceed six (6) months, or if longer, so long as the Participant has a right to reemployment with the Company under an applicable statute or by contract.  Where used in this Section 2.40, the term Company includes any Related Company.

 

2.41.                 Years of Service at any particular time means the years of service the Participant has at that time as determined under the Pension Plan provisions in effect on the Effective Date for vesting purposes.

 

2.42.                 Years of Accrual Service at any particular time means Years of Accrual Service at that time as determined under the Pension Plan provisions in effect on the Effective Date, except that Years of Accrual Service shall be determined (a) based upon all hours of service with either the Company or a Related Company whether or not the Participant was a Participant in the Plan at the time of such service, (b) without applying the maximum limit of 35 Years of Accrual Service under the Pension Plan, and (c) without applying the Pension Plan’s exclusion of service during any period from January 1, 1994 through January 1, 1997 that the Participant was accruing benefits under either this Plan or any predecessor plan that merged into this Plan.  Notwithstanding the preceding sentence, Years of Accrual Service will not include any service for an entity occurring prior to the time the entity became a Related Company.

 

2.43.                 Years of Pre-Participation Accrual Service means a Participant’s Years of Accrual Service as of his Participation Date.

 

2.44.                 Years of Post-Participation Accrual Service means a Participant’s Years of Accrual Service after the Participant’s Participation Date, not to exceed the Years of Post-Participation Accrual Service Limit.

 

2.45.                 Years of Post-Participation Accrual Service Limit means, unless otherwise provided in an agreement between a Participant and the Company, (a) for each Participant who is

 

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as of the Effective Date a Named Executive Officer or an Officer of Seaboard Corporation, 20 Years of Post-Participation Accrual Service, (b) for each Participant who is as of the Effective Date an Officer of a Related Company, 15 Years of Post-Participation Accrual Service, and (c) for each Participant who is as of the Effective Date neither a Named Executive Officer nor an Officer of the Company or any Related Company, 10 Years of Post-Participation Accrual Service.  For these purposes, the General Counsel of SOTG (Zach Holden) is an Officer of a Related Company and not the Company.

 

ARTICLE III.
PARTICIPATION

 

3.1.                         Participation Date .  All persons listed on Addendum B and who were Participants in the Plan immediately prior to the Effective Date will remain Participants as of the Effective Date, and the Participation Date of any such Participant is that date prior to the Effective Date that he became a Participant.  There will be no other Participants in the Plan.

 

3.2.                         Cessation of Participation .  A Participant will cease to be a Participant when he no longer has an Accrued Benefit.

 

3.3.                         Participation Not Contract of Employment . The Plan does not constitute a contract of employment, and participation in the Plan will not give any Participant the right to continue in the employ of or provide services to the Company, or interfere in any way with the right of the Company to terminate the employment of the Participant or give any right or claim to any benefit under the terms of the Plan unless such right or claim is specifically vested under the terms of the Plan.

 

ARTICLE IV.
RETIREMENT BENEFITS

 

4.1.                         Determination of Accrued Benefits.   A Participant’s Accrued Benefit is a benefit calculated as a single life annuity commencing on the Participant’s Normal Retirement Date in an amount equal to the sum of the Participant’s Pre-2013 Accrued Benefit and the Participant’s Post-2012 Accrued Benefit.

 

(a)           Amount of Pre-2013 Accrued Benefit .  A Participant’s Pre-2013 Accrued Benefit is that benefit calculated as a single life annuity commencing on the Participant’s Normal Retirement Date, and as set forth in Addendum B.

 

(b)           Amount of Post-2012 Accrued Benefit.   A Participant’s Post-2012 Accrued Benefit is a benefit calculated as a single life annuity commencing on the Participant’s Normal Retirement Date in an annual amount equal to the excess of (1) the sum of (i) the “Pre-Participation Service Benefit” and (ii) the “Post-Participation Service Benefit” below, over (2) the sum of (iii) the “Pension Plan Offset,” (iv) the “Prior Cash Payment Offset;” and (v) the “Pre-2013 Accrued Benefit Offset,” provided , however , in no event shall the Participant’s Post-2012 Accrued Benefit be less than $0.

 

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(i)                                   Pre-Participation Service Benefit .  A Participant’s Pre-Participation Service Benefit will be determined taking into account only the Participant’s Years of Pre-Participation Accrual Service and will be an amount equal to the sum of:

 

(1)                               .65% of his Final Average Earnings multiplied by his Years of Pre-Participation Accrual Service; and

 

(2)                             .50% of his Final Average Earnings in excess of Covered Compensation multiplied by his Years of Pre-Participation Accrual Service.

 

(ii)           Post-Participation Service Benefit .  A Participant’s Post-Participation Service Benefit will be determined taking into account the Participant’s Years of Post-Participation Accrual Service and will be an amount equal to two and one-half percent (2.5%) of his Final Average Earnings multiplied by his Years of Post-Participation Accrual Service.

 

(iii)          Pension Plan Offset .  The amount of a Participant’s Pension Plan Offset is the Actuarial Equivalent of the Participant’s accrued benefit as defined in the Pension Plan, determined (A) as if such benefit were payable in the form of a single life annuity that commences on the Participant’s Normal Retirement Date and (B) as of the Post-2012 Accrued Benefit Payment Date.

 

(iv)                           Prior Cash Payment Offset .  This offset applies only to those Participants who received one or more cash payments under the provisions of the Plan in effect from January 1, 1994 through January 1, 1997.  The amount of the Prior Cash Payment Offset is the Actuarial Equivalent of the benefit satisfied with such cash payments, determined as if such benefit were payable in the form of a single life annuity that commences on the Participant’s Normal Retirement Date or, if later, the Participant’s Separation Date.  The name of each Participant who received one or more such cash payments and the benefit satisfied with such cash payment or payments are listed on Addendum A attached hereto.

 

(v)                               Pre-2013 Accrued Benefit Offset .  This offset applies only to those Participants who have a Pre-2013 Accrued Benefit set forth on Addendum B and the amount of such this offset is equal to the Pre-2013 Accrued Benefit.

 

4.2.                         Early Retirement Accrued Benefits . If the payment commencement date of a Participant’s Pre-2013 Accrued Benefit or Post-2012 Accrued Benefit occurs on or after the Participant’s Early Retirement Date and prior to the Participant’s Normal Retirement Date, such benefit, if determined as of a date that is on or after the date the Participant attains age 55, shall equal the Participant’s Pre-2013 Accrued Benefit or Post-2012 Accrued Benefit, as the case may be and as determined under Section 4.1, reduced by four percent (4%) for each year by which the

 

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date of the determination of such Participant’s early retirement Pre-2013 Accrued Benefit or early retirement Post-2012 Accrued Benefit payment commencement date precedes the Participant’s Normal Retirement Date.  If the Participant’s early retirement Pre-2013 Accrued Benefit or early retirement Post-2012 Accrued Benefit is determined as of any date that is prior to the date the Participant attains age 55, such benefit shall equal the actuarial equivalent of such respective Accrued Benefit, as of such Accrued Benefit’s determination date, based on the interest and mortality tables then applicable under Section 2.4, of the Participant’s early retirement Pre-2013 Accrued Benefit at age 55 or early retirement Post-2012 Accrued Benefit at age 55, as the case may be, as determined in accordance with the preceding sentence.

 

4.3.                         Late Retirement Benefit. If the payment commencement date of a Participant’s Pre-2013 Accrued Benefit occurs on the Participant’s Late Retirement Date, the Late Retirement Benefit will be equal to the Actuarial Equivalent of the Pre-2013 Accrued Benefit on the Late Retirement Date.

 

4.4.                         Establishment of Participant 162(m) Account . Solely with respect to a Participant’s vested Post-2012 Accrued Benefit, if on the Participant’s Post-2012 Accrued Benefit Payment Date, the Company reasonably anticipates that, if made, such payment would not be deductible for income tax purposes by the Company under Code section 162(m), then the value of such vested Post-2012 Accrued Benefit as determined pursuant to Section 6.4 shall be credited to the Participant’s 162(m) Account as the initial value for such account.

 

ARTICLE V.
162(m) ACCOUNTS AND INVESTMENT RETURN

 

5.1.                         Payment of 162(m) Account . Notwithstanding any other provision of this Plan, a Participant with a 162(m) Account shall receive a lump sum benefit under this Plan in an amount equal to the value of the Participant’s 162(m) Account as set forth in this Article on the first day of the seventh month following the month in which the Participant has a Separation from Service.

 

5.2.                         162(m) Account Adjustments for Investment Return . A Participant’s 162(m) Account will be deemed invested in one or more Investment Options as directed by the Participant pursuant to procedures established by the Committee.  At such time(s) as determined by the Committee, such as when a Participant’s entire 162(m) Account is to be distributed hereunder, the Investment Return will be credited (in the case of net earnings) or charged (in the case of net losses) to the Participant’s 162(m) Account based upon information available as near as administratively feasible to the applicable determination date.

 

ARTICLE VI.
PAYMENT OF BENEFITS

 

6.1.                         Fully Vested Benefits . A Participant will be fully vested in the Participant’s Accrued Benefit upon the first to occur of:

 

(a)                              The Participant’s Normal Retirement Date if the Participant is an employee of the Company or a Related Company on the Participant’s Normal Retirement Date; or

 

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(b)                              The Participant’s disability as determined by the Committee if such disability occurs while the Participant is an employee of the Company or a Related Company; or

 

(c)                                The Participant’s death while the Participant is an employee of the Company or a Related Company; or

 

(d)                              The Participant’s completion of five Years of Service; or

 

(e)                                A Change of Control.

 

6.2.                         Forfeitures .  If the Participant does not have a vested Accrued Benefit under the provisions of Section 6.1 upon the Participant’s Separation Date, then the Participant’s Accrued Benefit will be forfeited.

 

6.3.                         Commencement of Payment.

 

(a)                               Pre-2013 Accrued Benefit .  If the Participant’s vested Pre-2013 Accrued Benefit is paid in the form of an annuity as hereinafter provided, then payment will commence in the seventh month following the month in which the Participant has a Separation from Service, or in the month of the Participant’s attainment of age 62 if later.  If the Participant’s vested Pre-2013 Accrued Benefit is paid in the form of a lump sum as hereinafter provided, then payment will be made in the seventh month following the month in which the Participant has a Separation from Service (or during the 90-day period following the effective date of this amended and restated Plan if later).  The following provisions of this Section 6.3 will apply notwithstanding the preceding provisions of this Section 6.3.  If a Change of Control occurs prior to the date the Participant has a Separation from Service, then the Participant’s vested Pre-2013 Accrued Benefit will be paid to the Participant in a lump sum payment within ninety (90) days following the Change of Control.  If the Participant incurs a Disability prior to the date the Participant has a Separation from Service, then the Participant’s vested Pre-2013 Accrued Benefit will be paid to the Participant in a lump sum within ninety (90) days following the determination of such Disability.

 

(b)                              Post-2012 Accrued Benefit.   Unless the Participant’s Post-2012 Accrued Benefit is converted into a 162(m) Account and paid in accordance with Section 5.1 above, the Participant’s vested Post-2012 Accrued Benefit shall be paid in the form of a lump sum on the earlier of (i) the first day of the seventh month following the month in which the Participant has a Separation from Service, (ii) the Participant’s Post-2012 Accrued Benefit Payment Date, (iii) a Change of Control or (iv) the Participant’s Disability.

 

6.4.                         Method of Payment.

 

(a)                               Post-2012 Accrued Benefit .  The Participant’s vested Post-2012 Accrued Benefit shall be paid as a single cash payment in an amount equal to the Actuarial Value of the Participant’s vested Post-2012 Accrued Benefit as of the payment date;

 

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provided , however , if the Participant is eligible to receive an early retirement benefit under Section 4.2, then the amount of a single lump sum payment to the Participant will be determined as of such payment date in accordance with Section 4.2.

 

(b)                              Pre-2013 Accrued Benefit .  The Participant’s vested Pre-2013 Accrued Benefit will be paid in one of the following methods elected by the Participant in accordance with Section 6.5:

 

(i)                                   Lump Sum Payment : A lump sum payment is a single cash payment in an amount equal to the Actuarial Value of the Participant’s vested Pre-2013 Accrued Benefit determined as of the payment date; provided , however , if the Participant is eligible to receive an early retirement benefit under Section 4.2, then the amount of a single lump sum payment to the Participant will equal the present value determined as of the payment date of the Participant’s early retirement benefit under Section 4.2 payable in the form of a single life annuity commencing on the payment date and determined by using the interest and mortality tables then applicable for purposes of determining Actuarial Value.

 

(ii)                               Mandatory Lump Sum .  Regardless of any contrary election made by a Participant, the Participant’s vested Pre-2013 Accrued Benefit will always be paid on the Pre-2013 Accrued Benefit commencement date in a lump sum payment if, as of the commencement date determined under Section 6.3, the Actuarial Value present value of the Accrued Benefit is less than or equal to the sum of $50,000, unless Section 4.4 applies.

 

(iii)                           Annuity Payment :  An annuity is payment in one of the forms described in the subparagraphs under this paragraph (b) that is the Actuarial Equivalent of the Participant’s vested Pre-2013 Accrued Benefit.  If the Participant has an Eligible Spouse at the time the election is made and elects a joint and survivor annuity payment, but does not have an Eligible Spouse at the time benefit payments commence, then benefit payments will be made in the form of a single life annuity unless the Participant elects a single life annuity with a ten (10) year term certain in accordance with the provisions of Section 6.5.

 

(1)           Single Life Annuity .  A single life annuity is the Actuarial Equivalent of the Participant’s vested Pre-2013 Accrued Benefit payable in annual payments to the Participant for the lifetime of the Participant.

 

(2)           50% Joint and Survivor Annuity .  A fifty percent (50%) joint and survivor annuity is the Actuarial Equivalent of the Participant’s vested Pre-2013 Accrued Benefit payable in annual payments to the Participant for the lifetime of the Participant and to the Participant’s Eligible Spouse upon the Participant’s death for the

 

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lifetime of the Participant’s Eligible Spouse, with each payment to the Participant’s Eligible Spouse being fifty percent (50%) of the amount of each payment to the Participant.

 

(3)           Single Life Annuity with 10 Year Term Certain .  A single life annuity with a ten (10) year term certain is a single life annuity described in subparagraph (1) above with a guaranteed payment term of ten (10) years.

 

(4)           Seventy-Five Percent (75%) Joint and Survivor Annuity .  A seventy-five percent (75%) joint and survivor annuity is the Actuarial Equivalent of the Participant’s vested Pre-2013 Accrued Benefit payable in annual payments to the Participant for the lifetime of the Participant and to the Participant’s Eligible Spouse upon the Participant’s death for the lifetime of the Participant’s Eligible Spouse, with each payment to the Participant’s Eligible Spouse being seventy-five percent (75%) of the amount of each payment to the Participant.

 

(5)           One Hundred Percent (100%) Joint and Survivor Annuity .  A one hundred percent (100%) joint and survivor annuity is the Actuarial Equivalent of the Participant’s vested Pre-2013 Accrued Benefit payable in annual payments to the Participant for the lifetime of the Participant and to the Participant’s Eligible Spouse upon the Participant’s death for the lifetime of the Participant’s Eligible Spouse, with each payment to the Participant’s Eligible Spouse being one hundred percent (100%) of the amount of each payment to the Participant.

 

6.5.                         Participant Elections of Method of Payment.  No method of payment election is permitted to be made with respect to a Participant’s vested Post-2012 Accrued Benefit.  Any Participant who did not make a timely election with respect to any Pre-2013 Accrued Benefit as determined under rules of the Plan effective as of January 1, 2009 shall be deemed to have elected a lump sum payment with respect to such Pre-2013 Accrued Benefit.  If a Participant’s method of payment of the Participant’s vested Accrued Benefit is an annuity, then at any time prior to the time the first annuity payment to the Participant is made, the Participant may elect to change the form of annuity to another form of annuity provided under the provisions of subparagraph (b)(ii) of Section 6.4.  Such election shall be made by an instrument in writing signed by the Participant and delivered to the Committee.

 

6.6.                         Death Benefit.   If the Participant dies prior to the payment of the Participant’s vested Post-2012 Accrued Benefit or 162(m) Account, then such benefit or 162(m) Account will be paid to the Participant’s beneficiary as determined under Section 6.7 as soon as practical after the Participant’s death, in the form of a lump sum payment.  If the Participant dies prior to the commencement of payment of the Participant’s vested Pre-2013 Accrued Benefit, then such Participant’s vested Pre-2013 Accrued Benefit will be paid to the Participant’s beneficiary as determined under Section 6.7 as soon as practical after the Participant’s death, in the form of a

 

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lump sum payment. If the Participant dies after the commencement of payment of the Participant’s vested Pre-2013 Accrued Benefit, no further payments will be made hereunder with respect to the Participant and the Participant’s benefits hereunder shall be deemed to be fully paid with respect to that Pre-2013 Accrued Benefit; provided , however , that if at the time of the Participant’s death, the Participant’s vested Pre-2013 Accrued Benefit was being paid in the form of a single life annuity with a ten (10) year term certain and all of the guaranteed payments had not been made, then the remaining guaranteed payments will be paid to the Participant’s beneficiary as determined under Section 6.7; and provided, further, that if at the time of the Participant’s death, the Participant’s vested Pre-2013 Accrued Benefit was being paid in the form of a joint and survivor annuity, then if the Participant’s Eligible Spouse survives the Participant, the survivor annuity benefit will be paid to the Participant’s Eligible Spouse until the death of the Participant’s Eligible Spouse.

 

6.7.                         Determination of Beneficiary.   Each Participant from time to time may designate any person or persons, trust, estate or charitable institution (who may be designated concurrently or contingently) to whom the Participant’s vested Accrued Benefit under the Plan will be paid if the Participant dies prior to the payment or commencement of payment of the Participant’s Accrued Benefit or if the Participant dies after the commencement of payment in the form of a single life annuity with a ten (10) year term certain and prior to the completion of such guaranteed payments.  A beneficiary designation will be effective only if filed in writing with the Plan Administrator while the Participant is alive.  The Participant’s beneficiary will be the beneficiary designated on the last such written designation filed by the Participant prior to the Participant’s death. A Participant may designate separate persons as beneficiaries for the Participant’s Pre-2013 Accrued Benefit and Post-2012 Accrued Benefit.

 

If a Participant fails to validly designate a beneficiary, then the Participant’s beneficiary will be the Participant’s Eligible Spouse, but if the Participant is not survived by an Eligible Spouse then the Participant’s beneficiary will be the personal representative of the Participant’s estate in his or her capacity as representative; provided , however , if the Participant does not otherwise have a probate estate, the Plan Administrator may pay the Participant’s vested Accrued Benefit to such person or persons whom the Plan Administrator determines, in the Plan Administrator’s sole and absolute discretion, would be the beneficiaries in a probate proceeding, and the Plan Administrator shall have no liability to any person for any such determination.

 

ARTICLE VII.
FUNDING

 

7.1.                         Unfunded Plan.   This Plan is an unfunded plan for income tax purposes and for purposes of Title I of ERISA.  With the approval of the President or the Board, the Company may from time to time deposit assets in a trust established by the Company that is subject to the creditors of the Company but which assets must otherwise be used for the purpose of paying Accrued Benefits hereunder.  The Committee may, but is not required to, invest assets of such trust in the Plan’s Investment Options or to invest such trust assets in any other investment as determined by the Committee in its sole discretion.  In the event of a Change of Control, the Company will, as soon as practical following such Change of Control, deposit or cause to be deposited in such trust, assets of an amount sufficient (as determined by the actuary of the

 

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Pension Plan) to pay all vested Accrued Benefits of the Participants as determined as of the first day following such Change of Control.

 

ARTICLE VIII.
WITHHOLDING OF TAXES

 

8.1.                         Tax Withholding.  The Company has the right to retain and withhold from any payment of benefits hereunder the amount of taxes required by any government to be withheld or otherwise be deducted and paid with respect to such payment.

 

ARTICLE IX.
PLAN ADMINISTRATOR

 

9.1.                         Membership and Authority . The Board will appoint, or delegate the appointment of, a Committee to act as Plan Administrator.  In the event a Committee is acting as Plan Administrator, the Committee shall act by a majority of its members except to the extent it has delegated responsibilities hereunder.  The Plan Administrator shall have the following powers, rights and duties in addition to those vested in it elsewhere in the Plan:

 

(a)           To adopt such rules of procedure and regulations as, in its opinion, may be necessary for the proper and efficient administration of the Plan and as are consistent with the provisions of the Plan.

 

(b)           To enforce the Plan in accordance with its terms and with such applicable rules and regulations as may be adopted.

 

(c)           To construe and interpret the Plan in the Plan Administrator’s sole discretion, and to determine all questions arising under the Plan, including the power to determine the rights of Participants and their beneficiaries and the amount of their respective benefits.

 

(d)           To maintain and keep adequate records concerning the Plan and concerning its proceedings and acts in such form and detail as the Plan Administrator may decide.

 

(e)           To direct all payments of benefits under the Plan.

 

9.2.                         Delegation .  In exercising its authority to control and manage the operation and administration of the Plan, the Plan Administrator may employ agents and counsel (who may also be employed by the Company) and delegate to them such powers as the Plan Administrator deems desirable.

 

9.3.                         Information to be Furnished .  The Company shall furnish the Plan Administrator or its delegees such data and information as may be required. The records of the Company as to an employee’s or Participant’s period of employment, Separation from Service and the reason therefore, leave of absence and compensation will be conclusive on all persons unless determined to be incorrect.

 

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9.4.                         Plan Administrator’s Decision Final .  Any interpretation of the Plan and any decision on any matter within the discretion of the Plan Administrator made in good faith is binding on all persons. A misstatement or other mistake of fact shall be corrected when it becomes known, and the Plan Administrator shall make such adjustment on account thereof as it considers equitable and practicable.

 

9.5.                         Remuneration and Expenses .  No remuneration shall be paid to the Plan Administrator (or any Committee member) for services hereunder.  All expenses of the Plan Administrator (or a Committee member) incurred in the performance of the administration of the Plan shall be reimbursed by the Company.

 

9.6.                         Indemnification of Committee Member .  The Committee and the individual members thereof shall be indemnified by the Company against any and all liabilities, losses, costs, and expenses (including fees and expenses) of whatsoever kind and nature which may be imposed on, incurred by or asserted against the Committee or the members by reason of the performance of a Committee function if the Committee or such members did not act dishonestly or in willful or negligent violation of the law or regulations under which such liability, loss, cost or expense arises.

 

9.7.                         Resignation or Removal of Committee Member .  A Committee member may resign at any time by giving ten (10) days advance written notice to the Company and the other Committee members. The Company may remove a Committee member by giving advance written notice to him or her, and the other Committee members.

 

9.8.                         Interested Committee Member .  A member of the Committee may not decide or determine any matter or question concerning his or her own benefits under the Plan.

 

ARTICLE X.
CLAIMS PROCEDURE

 

10.1.                 Claim .  Any person claiming a benefit, requesting an interpretation or ruling under the Plan, or requesting information under the Plan shall present the request in writing to the Committee which shall respond in writing as soon as practicable.

 

10.2.                 Denial of Claim .  If the claim or request is denied, the written notice of denial shall be made within ninety (90) days of the date of receipt of such claim or request by the Committee and shall state:

 

(a)                               The reason for denial, with specific reference to the Plan provisions on which the denial is based.

 

(b)                              A description of any additional material or information required and an explanation of why it is necessary.

 

(c)                                An explanation of the Plan’s claim review procedure.

 

10.3.                 Review of Claim .  Any person whose claim or request is denied or who has not received a response within ninety (90) days may request review by notice given in writing to the

 

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Committee within sixty (60) days of receiving a response or one hundred fifty (150) days from the date the claim was received by the Committee. The claim or request shall be reviewed by the Committee who may, but shall not be required to, grant the claimant a hearing. On review, the claimant may have representation, examine pertinent documents, and submit issues and comments in writing.

 

10.4.                 Final Decision .  The decision on review shall normally be made within sixty (60) days after the Committee’s receipt of a request for review. If an extension of time is required for a hearing or other special circumstances, the claimant shall be notified and the time limit shall be one hundred twenty (120) days after the Committee’s receipt of a request for review.  The decision shall be in writing and shall state the reasons and relevant plan provisions. All decisions on review shall be final and bind all parties concerned.

 

ARTICLE XI.
AMENDMENTS TO THE PLAN

 

11.1.                 General .   The Board may, at any time or times, amend the Plan, pursuant to written resolution adopted by the Board; provided , however , no amendment shall be effective to decrease or adversely affect:

 

(a)                               the amount of any Participant’s Accrued Benefit as of the Effective Date;

 

(b)                              the benefit that will accrue or be paid to such Participant; or

 

(c)                                subject to the last sentence of Section 11.3, the lump sum value of any Accrued Benefit under the Plan,

 

unless the Participant agrees to such amendment, and no amendment may relieve the Company of its obligations under ARTICLE VII unless all of the Participants agree to such amendment.  If, without a Participant’s consent, any amendment adversely affects or reduces a Participant’s Accrued Benefit as of the Effective Date, or in any way reduces the benefit that will accrue or be paid to the Participant under the Plan, then such purported amendment shall not apply to such Participant and the Plan provisions as in effect immediately before such amendment shall remain in effect for such Participant.

 

11.2.                 Amendments for Compliance with Laws .  In addition to the preceding amendment authority of the Board, the appropriate officers of the Company are authorized to amend the Plan from time to time as they deem advisable for purposes of complying with any provisions of the Internal Revenue Code and Treasury Regulations and any other guidance issued by the Secretary of the Treasury, and the Committee is authorized to amend the Plan as provided in Section 2.4; provided , however , in the event an amendment is made by the Board, the Committee or an authorized officer in order to conform the Plan to applicable changes in law which amendment results in a reduction to the Accrued Benefit or the benefit that will accrue or be paid to any Participant, the Company shall establish an alternative provision or plan that will provide benefits to such Participants that are substantially equal to the benefits reduced in this Plan as a result of such amendment.  To be certain, if any such amendment to the Plan is made to conform the Plan to applicable law and this results in an increase to the federal, state or local

 

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income taxes payable upon receipt of the Accrued Benefit, the Company shall not establish an alternative provision or plan that will pay or reimburse Participants for such taxes.

 

11.3.                 Automatic Changes in Interest Rate and Mortality Assumptions .   Notwithstanding any of the foregoing provisions of this ARTICLE XI, it is understood that, as the formula to calculate a benefit hereunder contains certain interest rate and mortality assumptions, which change from time to time, changes to such interest rate (such as an increase in the 30-year Treasury securities rate) or mortality assumptions which are otherwise in accordance with the Plan as of the Effective Date but which may result in a reduction in absolute (but not actuarial) benefits, such changes are not considered to decrease or adversely affect the amount of a Participant’s Accrued Benefit.

 

ARTICLE XII.
MISCELLANEOUS

 

12.1.                 Captions .  The captions of articles, sections, paragraphs and subparagraphs of this Plan are for convenience only and shall not control or affect the meaning or construction of any of its provisions.

 

12.2.                 Company Action .  Except as may be specifically provided herein, any action required or permitted to be taken by the Company may be taken on behalf of the Company by the President of the Company.

 

12.3.                 Company Records .  Records of the Company as to an employee’s or Participant’s period of employment, Separation from Service and the reason therefore, leaves of absence, reemployment and compensation will be conclusive on all persons, unless determined to be incorrect.

 

12.4.                 Evidence .  Evidence required of anyone under the Plan may be by certificate, affidavit, document or other information which the person acting on it considers pertinent and reliable, and may be signed, made or presented by the proper party or parties.

 

12.5.                 Gender and Number .  Where the context permits, words in the masculine gender shall include the feminine and neuter genders, the plural shall include the singular, and the singular shall include the plural.

 

12.6.                 Governing Law .  Except to the extent governed by ERISA or the Code, the provisions of this Plan shall be construed and interpreted according to the laws of the state of Delaware.

 

12.7.                 Nonassignability . Neither a Participant nor any other person shall have any right to commute, sell, assign, transfer, pledge, anticipate, mortgage or otherwise encumber, hypothecate or convey in advance of actual receipt the amounts, if any, payable hereunder, or any part thereof, which are, and all rights to which are, expressly hereby declared to be unassignable and nontransferable.  No part of the amounts payable shall, prior to actual payment, be subject to seizure or separation for the payment of any debts, judgments, alimony or separate maintenance owed by a Participant or any other person, nor be transferable by operation of law in the event of a Participant’s or another person’s bankruptcy or insolvency.

 

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12.8.                 Participant Cooperation .  A Participant will cooperate with the Company by furnishing any and all information requested by the Company in order to facilitate the payment of benefits hereunder and such other action as may be requested by the Company.

 

12.9.                 Successors .  The provisions of this Plan shall bind and inure to the benefit of the Company and its successors and assigns.  The term successors as used herein shall include any corporate or other business entity which shall, whether by merger, consolidation, purchase or otherwise acquire all or substantially all of the business and assets of the Company, and successors of any such corporation or other business entity.

 

12.10.         Unsecured General Creditor . Participants and their beneficiaries, heirs, successors, and assigns will have no secured interest or claim in any property or assets of the Company whether or not such assets are held in a trust that may be used for the purpose of paying benefits hereunder.  For purposes of the Plan, any and all of the Company’s assets shall be, and remain, the general, unpledged, assets of the Company. The Company’s obligation under the Plan shall be merely that of an unfunded and unsecured promise of the Company to pay money in the future.  No Company shall have any obligation under this Plan with respect to individuals other than that Company’s employees.

 

12.11.         Validity .  In case any provision of this Plan shall be held illegal or invalid for any reason, said illegality or invalidity shall not affect the remaining parts hereof, but this Plan shall be construed and enforced as if such illegal and invalid provision had never been inserted herein.

 

12.12.         Waiver of Notice . Any notice required under the Plan may be waived by the person entitled to notice.

 

The Company hereby agrees to the provisions of this Plan, and, in witness thereof, the Company causes this Agreement to be, executed on this    21    day of     December     , 2012.

 

 

 

SEABOARD CORPORATION

 

 

 

 

 

By:

    /s/ Steven J. Bresky

 

 

    Steven J. Bresky, President

 

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ADDENDUM

 

TO

SEABOARD CORPORATION

409A EXECUTIVE RETIREMENT PLAN,

AMENDED AND RESTATED

EFFECTIVE JANUARY 1, 2013

 

Following is an Addendum to the Seaboard Corporation 409A Executive Retirement Plan, Effective January 1, 2013, which is filed with the Securities and Exchange Commission (“SEC”).  Seaboard Corporation (“Seaboard”) undertakes to provide to the SEC the Addendum, as requested, subject to Seaboard’s right to request confidential treatment under the Freedom of Information Act.

 

Addendum A  --  Prior Cash Payments

 

- 20 -


Exhibit 10.15

 

SEABOARD CORPORATION

CASH BALANCE EXECUTIVE RETIREMENT PLAN

AMENDED AND RESTATED

EFFECTIVE JANUARY 1, 2013

 



 

SEABOARD CORPORATION

CASH BALANCE EXECUTIVE RETIREMENT PLAN

AMENDED AND RESTATED EFFECTIVE JANUARY 1, 2013

 

TABLE OF CONTENTS

 

ARTICLE I. HISTORY AND PURPOSE

1

 

 

 

ARTICLE II. DEFINITIONS

1

 

 

 

2.1.

Accrued Benefit

1

2.2

Board

1

2.3.

Change of Control

1

2.4.

Code

2

2.5.

Committee

2

2.6.

Company

2

2.7

Disability

2

2.8.

Effective Date

3

2.9.

Eligible Spouse

3

2.10.

Event Payment Date

3

2.11.

Investment Account Conversion Date

3

2.12.

Investment Options

3

2.13.

Investment Return

3

2.14.

Market Interest Rate

3

2.15.

Normal Retirement Date

3

2.16.

Participant

3

2.17.

Participation Date

3

2.18.

Plan

3

2.19.

Plan Administrator

3

2.20.

Plan Year or Year

3

2.21.

Related Company

3

2.22.

Separation Date

4

2.23.

Separation from Service

4

2.24.

SERP Actuarial Value

4

2.25.

SERP Plan

5

2.26.

Year

5

2.27.

Years of Service

5

 

 

 

ARTICLE III. PARTICIPATION

5

 

 

 

3.1.

Participation Date

5

3.2.

Cessation of Participation

5

3.3.

Participation not Contract of Employment

5

3.4.

SERP Plan

5

 

i



 

ARTICLE IV. RETIREMENT BENEFITS

5

 

 

 

4.1.

Determination of Accrued Benefit

5

4.2.

Annual Allocation to Cash Balance Account

6

4.3.

Final Cash Balance Account Allocation

6

4.4.

Interest Allocation to Cash Balance Account

7

4.5.

Tax Distributions

7

 

 

 

ARTICLE V. PAYMENT OF BENEFITS

7

 

 

 

5.1.

Fully Vested Benefits

7

5.2.

Forfeitures

8

5.3.

Payment of Lump Sum

8

5.4.

Death Benefit

8

5.5.

Determination of Beneficiary

8

 

 

 

ARTICLE VI. FUNDING

8

 

 

 

6.1.

Unfunded Plan

8

 

 

 

ARTICLE VII. WITHHOLDING OF TAXES

9

 

 

 

7.1.

Tax Reporting

9

7.2.

Tax Withholding

9

 

 

 

ARTICLE VIII. PLAN ADMINISTRATOR

9

 

 

 

8.1.

Membership and Authority

9

8.2.

Delegation

10

8.3.

Information to be Furnished

10

8.4.

Plan Administrator’s Decision Final

10

8.5.

Remuneration and Expenses

10

8.6.

Indemnification of Committee Member

10

8.7.

Resignation or Removal of Committee Member

10

8.8.

Interested Committee Member

11

 

 

 

ARTICLE IX. CLAIMS PROCEDURE

11

 

 

 

9.1.

Claim

11

9.2.

Denial of Claim

11

9.3.

Review of Claim

11

9.4.

Final Decision

11

 

 

 

ARTICLE X. AMENDMENTS OR TERMINATION OF THE PLAN

11

 

 

 

10.1.

General

11

10.2.

Amendments for Compliance with Laws

12

10.3.

Automatic Changes in Interest Rate and Mortality Assumptions

12

 

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ARTICLE XI. MISCELLANEOUS

12

 

 

 

11.1.

Captions

12

11.2.

Company Action

12

11.3.

Company Records

12

11.4.

Evidence

13

11.5.

Gender and Number

13

11.6.

Governing Law

13

11.7.

Non-Assignability

13

11.8.

Participant Cooperation

13

11.9.

Successors

13

11.10.

Unsecured General Creditor

14

11.11.

Validity

14

11.12.

Waiver of Notice

14

 

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SEABOARD CORPORATION

CASH BALANCE EXECUTIVE RETIREMENT PLAN

AMENDED AND RESTATED

EFFECTIVE JANUARY 1, 2013

 

ARTICLE I.
HISTORY AND PURPOSE

 

Seaboard Corporation (the “Company”) adopted the Cash Balance Executive Retirement Plan (the “Plan”) effective as of January 1, 2009.  The Company previously adopted the Seaboard Corporation 409A Executive Retirement Plan (the “SERP Plan”), amended and restated effective January 1, 2009.  The SERP Plan was further amended and restated effective January 1, 2013.  Section 457A of the Internal Revenue Code of 1986, as amended (the “Code”) provides for adverse tax consequences to the employees of certain foreign affiliates of the Company participating in the SERP Plan.  Accordingly, the Participants in the SERP Plan listed on the Addendum A attached hereto were removed as Participants from the SERP Plan, and became Participants under this Plan.  The purpose of this Plan is to provide a supplemental retirement benefit to the Participants which is substantially similar to the benefits that would have been provided to said Participants under the SERP Plan.

 

The Plan is now further amended and restated as provided herein, effective January 1, 2013.

 

The Plan is intended to satisfy the requirements of Code Section 457A.  The Plan shall be interpreted and administered in a manner consistent with this intent.

 

ARTICLE II.
DEFINITIONS

 

For the purpose of this Plan, the following words and phrases shall have the meaning indicated, unless the context clearly indicates otherwise:

 

2.1.                         Accrued Benefit means a Participant’s benefit determined as of a particular time under the provisions of this Plan.

 

2.2.                         Board means the Board of Directors of Seaboard Corporation.

 

2.3.                         Change of Control means an event or transaction described below; provided, however, an event or transaction described below will not be a Change of Control for purposes of a payment event under the Plan unless it constitutes a change in the ownership or effective control of the Company, or in the ownership of a substantial portion of the assets of the Company, within the meaning of Code Section 409A(a)(2)(A)(v):

 

(a)                                The acquisition by any unrelated person or entity of more than fifty percent (50%) of either the outstanding shares of common stock or the combined voting power of the Company’s then outstanding voting securities entitled to vote generally in the election of directors;

 



 

(b)                               The sale to an unrelated person or entity of Company assets that have a total gross fair market value of more than eighty-five percent (85%) of the total gross fair market value of all of the assets of the Company immediately prior to such sale;

 

(c)                                The acquisition, whether by reorganization, merger, consolidation, purchase or similar transaction, by any person or entity or more than one person or entity acting as a group of more than fifty percent (50%) of the outstanding shares of stock of the Company or the combined voting power entitled to vote generally in the election of directors of the Company or the entity in which the Company was reorganized, merged or consolidated into;

 

(d)                              The acquisition by any person or entity (other than by any descendant of Otto Bresky, Senior or any trust established primarily for the benefit of any descendant of Otto Bresky, Senior or any other related person (including spouses) or entity) of more than fifty percent (50%) of either the membership interests or the combined voting power of Seaboard Flour, LLC and SFC Preferred LLC (or any successor-related companies) at any time when Seaboard Flour, LLC and/or SFC Preferred LLC or any successor-related companies collectively own fifty percent (50%) or more of the Company.

 

For purposes of determining whether there has been a Change of Control under this Section 2.3, the attribution of ownership rules under Code Section 318(a) shall apply.  Also for purposes of determining whether there has been a Change of Control, “Company” means only Seaboard Corporation and any successors to the business of Seaboard Corporation.

 

2.4.                         Code means the Internal Revenue Code of 1986, as amended from time to time. References to any Section of the Internal Revenue Code shall include any successor provision thereto.

 

2.5.                         Committee means the committee, if any, appointed to administer this Plan pursuant to ARTICLE VIII.

 

2.6.                         Company means Seaboard Corporation, a Delaware corporation, and any of its subsidiaries or affiliates that are participating in this Plan, and any successors to the business of Seaboard Corporation and such participating subsidiaries or affiliates.

 

2.7.                         Disability means a period in which the Participant is (a) unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than six (6) months; or (b) by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than six (6) months, receiving income replacement benefits for a period of not less than three (3) months under an accident and health plan sponsored by the Company.

 

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2.8.                         Effective Date means the effective date of this Plan, which is January 1, 2009.

 

2.9.                         Eligible Spouse means the spouse of a Participant to whom the Participant was married on the date payment of the Participant’s vested Accrued Benefit commences, or, if earlier, on the date of the Participant’s death. The length of the marriage prior to either of such dates shall not be taken into consideration.

 

2.10.                 Event Payment Date has the meaning given to such term in Section 4.3.

 

2.11.                 Investment Account Conversion Date means the date, as specified in Appendix A, upon which a Participant’s Accrued Benefit is converted to an account subject to Investment Return.

 

2.12.                 Investment Options means the investment options selected by the Committee from time to time among which a Participant may direct the investment of his or her Account, if any, in accordance with procedures established by the Committee.

 

2.13.                 Investment Return means the amount of earnings, gains or losses applicable to the Participant’s Account, if any, as measured by the Investment Options applicable pursuant to the Participant’s direction or as otherwise provided herein.

 

2.14.                 Market Interest Rate shall mean for each Year the equivalent annual rate of the Moody’s AA Long Term Corporate Bond Yield Index, as of the first day of such Year in which the index is published, or such other rate which is established by the Committee from time to time.

 

2.15.                 Normal Retirement Date means the first day of the calendar month coinciding with or next following date the Participant attains age sixty-two (62).

 

2.16.                 Participant means any individual who is designated as a Participant in the Plan as provided in Section 3.1 and who has not ceased to be a Participant under Section 3.2.

 

2.17.                 Participation Date means the date an employee becomes a Participant, as provided in Section 3.1.  The Participation Date of each Participant shall be stated on Addendum A.

 

2.18.                 Plan means the Seaboard Corporation Cash Balance Executive Retirement Plan as set forth herein and as amended from time to time.

 

2.19.                 Plan Administrator means the Committee, if any, but if at any time there is no Committee acting hereunder then the Plan Administrator will be Seaboard Corporation.

 

2.20.                 Plan Year or Year means the twelve (12) month period beginning January 1 and ending December 31.

 

2.21.                 Related Company means any corporation which is a member of a controlled group of corporations (as defined in Code Section 414(b)) that includes the Company or any

 

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corporation or other entity with whom the Company is considered a single employer under Code Section 414(c).

 

2.22.                 Separation Date means the date the Participant has a Separation from Service.

 

2.23.                 Separation from Service means the Participant’s termination of employment with the Company.  Whether a termination of employment has occurred shall be determined based on whether the facts and circumstances indicate the Participant and Company reasonably anticipate that no further services will be performed by the Participant for the Company; provided, however, that a Participant shall be deemed to have a termination of employment if the level of services he or she would perform for the Company after a certain date permanently decreases to no more than twenty percent (20%) of the average level of bona fide services performed for the Company (whether as an employee or independent contractor) over the immediately preceding thirty-six (36) month period (or the full period of services to the Company if the Participant has been providing services to the Company for less than 36 months).  For this purpose, a Participant is not treated as having a Separation from Service while he or she is on a military leave, sick leave, or other bona fide leave of absence, if the period of such leave does not exceed six (6) months, or if longer, so long as the Participant has a right to reemployment with the Company under an applicable statute or by contract.  Where used in this Section 0, the term Company includes any Related Company.

 

2.24.                 SERP Actuarial Value means, with respect to each Participant, the amount which would have been such Participant’s Actuarial Value under the SERP Plan if Participant had remained a Participant in such SERP Plan through the date as of which the SERP Actuarial Value is being determined pursuant to this Plan, but with the following revisions:

 

(a)                                Final Average Earnings shall, unless otherwise provided in an agreement between the Participant and the Company, not exceed: (i) for Edward Gonzalez, one hundred percent (100%) of his 2011 Earnings; and (ii) with respect to any other Participant, one hundred fifty percent (150%) of such Participant’s 2011 Earnings.

 

(b)                               Years of Accrual Service , with respect to post-Participation Date Accrual Service, shall, unless otherwise provided in an agreement between a Participant and the Company, be limited to twenty (20) Years of Accrual Service from the Participation Date with respect to each respective Participant.

 

(c)                                Actuarial Value shall mean the lump sum equivalent value as of the date a Participant’s Accrued Benefit is being determined by using (i) the average annual interest rate on 30-year Treasury securities, as specified by the Commissioner of the Internal Revenue Service (the “Commissioner”) for the thirty-six (36) month period ending on November immediately preceding the Plan Year in which such lump sum is being calculated; and (ii) the applicable mortality table used for purposes of satisfying the requirements of Code Section 417(e).

 

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(d)                              The Actuarial Value of each Tax Distribution pursuant to Section 4.5 below already made for such Participant shall be subtracted from the SERP Actuarial Value.

 

2.25.                 SERP Plan means the Seaboard Corporation 409A Executive Retirement Plan, adopted by Seaboard Corporation effective January 1, 1999, as amended and restated effective January 1, 2009, but not including the amendments made which are effective January 1, 2013.

 

2.26.                 Year means a calendar year.

 

2.27.                 Years of Service at any particular time means the Years of Service as defined in the SERP Plan.

 

ARTICLE III.
PARTICIPATION

 

3.1.                         Participation Date .  Those persons who are set forth on Addendum A shall be Participants in the Plan on the Effective Date.  There will be no other Participants in the Plan.  Such employee’s Participation Date will be the date specified by the President of Seaboard Corporation.

 

3.2.                         Cessation of Participation .  A Participant will cease to be a Participant when he no longer has an Accrued Benefit.

 

3.3.                         Participation not Contract of Employment . The Plan does not constitute a contract of employment, and participation in the Plan will not give any Participant the right to continue in the employ of or provide services to the Company, or interfere in any way with the right of the Company to terminate the employment of the Participant or give any right or claim to any benefit under the terms of the Plan unless such right or claim is specifically vested under the terms of the Plan.

 

3.4.                         SERP Plan . This Plan is provided to the Participants in lieu of any benefit under the SERP Plan.  On the Effective Date, the Participants shall no longer have any benefit under the SERP Plan, whether or not accrued or vested, and in consideration of this Plan, such benefit and Participant’s rights under said SERP Plan shall be terminated and void.

 

ARTICLE IV.
RETIREMENT BENEFITS

 

4.1.                         Determination of Accrued Benefit .  A Participant’s Accrued Benefit is a benefit payable in the form of a lump sum payment made on the date described in Section 5.3 or Section 5.4 below, in an amount equal to the balance in the Cash Balance Account as of the Event Payment Date (as defined in Section 4.3 below).

 

(a)                                Calculation Through Investment Account Conversion Date . The Cash Balance Account for each Participant shall equal: (a) the SERP Lump Sum Actuarial Value, as shown on Addendum B attached hereto; plus/minus (b) the cumulative amount of all Annual Cash Balance Allocations made

 

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pursuant to Section 4.2 below; plus/minus (c) the Final Cash Balance Account Allocation made pursuant to Section 4.3 below; plus (d) the Interest Allocation made pursuant to Section 4.4 below; less (e) the sum of all Tax Distributions made pursuant to Section 4.5 below.

 

(b)                               Calculation After Investment Account Conversion Date . If no Event Payment Date precedes the Investment Account Conversion Date, then a Final Cash Balance Account Allocation shall be made as of the Investment Account Conversion Date, pursuant to Section 4.3 below. Upon and after the Investment Account Conversion Date, the Participant’s Accrued Benefit shall be deemed invested in one or more Investment Options as directed or deemed directed by the Participant pursuant to procedures established by the Committee. At such times as determined by the Committee, such as when a Participant’s entire Cash Balance Account is to be distributed hereunder, and at the end of each Year, the Investment Return will be credited (in the case of net earnings) or charged (in the case of net losses) to the Participant’s Account based upon information available as near as administratively feasible to the applicable determination date. Any distribution from a Participant’s Account will be charged to the Account as of the time of the distribution.

 

4.2.                         Annual Allocation to Cash Balance Account .  The Company shall cause its actuary to calculate the SERP Actuarial Value as of December 31 for each Year that ends on or before the Investment Account Conversion Date. This calculation shall occur approximately thirty (30) days before the end of the Year. To the extent the SERP Actuarial Value is more than the then Cash Balance Account (taking into account the Interest Allocation and the Tax Distribution to be made pursuant to Sections 4.4 and 4.5 below) (the “Deficiency”), there shall be added to the Cash Balance Account an amount equal to the Deficiency.  To the extent the SERP Actuarial Value is less than the then Cash Balance Account (taking into account the Interest Allocation and the Tax Distribution, if any, to be made pursuant to Sections 4.4 and 4.5 below) (the “Surplus”), there shall be deducted from the Cash Balance Account an amount equal to the Surplus (the amount added to or deducted from the Cash Balance Account pursuant to this Section 4.2 being hereinafter referred to as the “Annual Cash Balance Allocation”).

 

4.3.                         Final Cash Balance Account Allocation .  As soon as practicable after the earliest to occur of: (a) a Participant’s Separation of Service; (b) a Participant’s Disability; (c) a Participant’s death; or (d) a Change of Control (each, an “Event Payment Date”), preceding or coinciding with the Investment Account Conversion Date, the Company shall cause its actuary to calculate the SERP Actuarial Value as of the Event Payment Date.  If no Event Payment Date precedes the Investment Account Conversion Date, the Company shall cause its actuary to calculate the SERP Actuarial Value as of the Investment Account Conversion Date. To the extent the SERP Actuarial Value is more than the then Cash Balance Account (taking into account the Interest Allocation to be made pursuant to Section 4.4 below) (the “Final Deficiency”), there shall be added to the Cash Balance Account an amount equal to the Final Deficiency.  To the extent the SERP Actuarial Value is less than the then Cash Balance Account (taking into account the Interest Allocation to be made pursuant to Section 4.4 below) (the “Final

 

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Surplus”), there shall be deducted from the Cash Balance Account an amount equal to the Final Surplus (the amount being added to or deducted from the Cash Balance Account pursuant to this Section 4.3 being hereinafter referred to as the “Final Cash Balance Allocation”).

 

4.4.                         Interest Allocation to Cash Balance Accoun t .  Simple interest shall accrue on the amount of the Cash Balance Account at the Market Interest Rate, through the earlier of the Event Payment Date or the Investment Account Conversion Date.  Such interest shall be allocated to the account as of the end of each Year and as of the Event Payment Date, if any, that precedes or coincides with the Final Cash Balance Allocation (the “Interest Allocation”).

 

4.5.                         Tax Distributions .  To the extent there is an amount includible in income by reason of Section 457A of the Code (both before and after the Investment Account Conversion Date), the Company shall pay to each Participant before the end of each Year an amount equal to the product of: (a) the Tax Distribution Percentage (as defined below); and (b) the sum of the Annual Cash Balance Allocation and the Interest Allocation for such Year included in income under Section 457A of the Code, provided such sum is positive, representing the estimated federal and state taxes the Participant will incur as a result of said allocations (the “Annual Tax Distribution”).

 

In connection with any reporting of the SERP Lump Sum Actuarial Value as income on the W-2 of a Participant pursuant to Section 7.1 below, the Company shall pay to such Participant a payment of the Tax Distribution Percentage of the amount of the SERP Lump Sum Actuarial Value, representing the estimated federal and state income taxes the Participant will incur as a result of said reporting (the “SERP Tax Distribution”) (the sum of the Annual Tax Distributions and the SERP Tax Distribution are collectively referred to as the “Tax Distributions”).  The SERP Tax Distribution shall be made from Annual Cash Balance Allocations made for Years of Accrual Service accruing after 2008.

 

For purposes of this Agreement, the Tax Distribution Percentage for each Participant shall initially be as set forth on Addendum B.  The Company may increase or decrease the Tax Distribution Percentage for any Year and participant by a notice to each Participant.

 

ARTICLE V.
PAYMENT OF BENEFITS

 

5.1.                         Fully Vested Benefits . A Participant will be fully vested in the Participant’s Accrued Benefit upon the first to occur of:

 

(a)                                The Participant’s Normal Retirement Date if the Participant is an employee of the Company or a Related Company on the Participant’s Normal Retirement Date; or

 

(b)                               The Participant’s Disability as determined by the Committee if such disability occurs while the Participant is an employee of the Company or a Related Company; or

 

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(c)                                The Participant’s death while the Participant is an employee of the Company or a Related Company; or

 

(d)                              The Participant’s completion of five Years of Service; or

 

(e)                                A Change of Control.

 

5.2.                         Forfeitures .  If the Participant does not have a vested Accrued Benefit under the provisions of Section 5.1 upon the Participant’s Separation Date, then the Participant’s Accrued Benefit will be forfeited.

 

5.3.                         Payment of Lump Sum.   The Participant’s vested Accrued Benefit shall be paid in a lump sum payment as soon as administratively feasible in accordance with then applicable provisions of the Code upon the earlier of:  (a) the Participant has a Separation from Service; (b) there has been a Change of Control which occurs prior to the date the Participant has a Separation from Service; or (c) the Participant incurs a Disability prior to the date the Participant has a Separation from Service.  Payment of all or a portion of the Accrued Benefit may be delayed by up to six (6) months in accordance with the then applicable provisions of the Code.

 

5.4.                         Death Benefit.   If the Participant dies prior to the lump sum payment of Participant’s Accrued Benefit, then the Participant’s vested Accrued Benefit will be paid to the Participant’s beneficiary as determined under Section 5.5 as soon as practical after the Participant’s death in the form of a lump sum payment.

 

5.5.                         Determination of Beneficiary.   Each Participant from time to time may designate any person or persons, trust, estate or charitable institution (who may be designated concurrently or contingently) to whom the Participant’s vested Accrued Benefit under the Plan will be paid if the Participant dies prior to the lump sum payment of the Participant’s Accrued Benefit.  A beneficiary designation will be effective only if filed in writing with the Plan Administrator while the Participant is alive.  The Participant’s beneficiary will be the beneficiary designated on the last such written designation filed by the Participant prior to the Participant’s death.

 

If a Participant fails to validly designate a beneficiary, then the Participant’s beneficiary will be the Participant’s Eligible Spouse, but if the Participant is not survived by an Eligible Spouse then the Participant’s beneficiary will be the personal representative of the Participant’s estate; provided, however, if the Participant does not otherwise have a probate estate, the Plan Administrator may pay the Participant’s vested Accrued Benefit to such person or persons whom the Plan Administrator determines, in the Plan Administrator’s sole and absolute discretion, would be the beneficiaries in a probate proceeding, and the Plan Administrator shall have no liability to any person for any such determination.

 

ARTICLE VI.
FUNDING

 

6.1.                         Unfunded Plan.   This Plan is an unfunded plan for income tax purposes and for purposes of Title I of ERISA.  With the approval of the President or the Board, the Company

 

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may from time to time deposit assets in a trust established by the Company that is subject to the creditors of the Company but which assets must otherwise be used for the purpose of paying Accrued Benefits hereunder.  In the event of a Change of Control, the Company will, as soon as practical following such Change of Control, deposit or cause to be deposited in such trust an amount sufficient (as determined by the Company’s actuary for its Pension Plan) to pay all vested Accrued Benefits of the Participants as determined as of the first day following such Change of Control, to the extent such amounts are not payable within ninety (90) days of the Change in Control.

 

ARTICLE VII.
WITHHOLDING OF TAXES

 

7.1.                         Tax Reporting.   The W-2 prepared by the Company for Participants for each Year (and after the Event Payment Date) shall report the Annual Cash Balance Allocation (Final Cash Balance Allocation) and the Interest Allocation pursuant to Section 4.4 above, provided the net amount of said allocations is positive, to the extent such inclusion in income is required by Section 457A of the Code or otherwise.  Notwithstanding the foregoing, a W-2 will not include any allocation pursuant to this Plan as income for a Participant until the Participant is fully vested in the Plan, and the W-2 for the Year in which the Participant becomes vested shall report all income through the end of the Year in which the Participant becomes vested.

 

In the event a Participant’s Accrued Benefit has not been paid to such Participant before December 31, 2017, then the W-2 for such Participant for the year ended December 31, 2017 shall report as income the SERP Lump Sum Actuarial Value, to the extent such reporting is required by Section 457A of the Code.

 

7.2.                         Tax Withholding.   The Company has the right to retain and withhold from any payment of benefits hereunder the amount of taxes required by any government to be withheld or otherwise be deducted and paid with respect to such payment.

 

ARTICLE VIII.
PLAN ADMINISTRATOR

 

8.1.                         Membership and Authority . The Board will appoint, or delegate the appointment of, a Committee to act as Plan Administrator.  In the event a Committee is acting as Plan Administrator, the Committee shall act by a majority of its members uninterested except to the extent it has delegated responsibilities hereunder.  The Plan Administrator shall have the following powers, rights and duties in addition to those vested in it elsewhere in the Plan:

 

(a)                                To adopt such rules of procedure and regulations as, in its opinion, may be necessary for the proper and efficient administration of the Plan and as are consistent with the provisions of the Plan.

 

(b)                               To enforce the Plan in accordance with its terms and with such applicable rules and regulations as may be adopted.

 

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(c)                                To construe and interpret the Plan in the Plan Administrator’s sole discretion, and to determine all questions arising under the Plan, including the power to determine the rights of Participants and their beneficiaries and the amount of their respective benefits.

 

(d)                              To maintain and keep adequate records concerning the Plan and concerning its proceedings and acts in such form and detail as the Plan Administrator may decide.

 

(e)                                To direct all payments of benefits under the Plan.

 

8.2.                         Delegation .  In exercising its authority to control and manage the operation and administration of the Plan, the Plan Administrator may employ agents and counsel (who may also be employed by the Company) and delegate to them such powers as the Plan Administrator deems desirable.

 

8.3.                         Information to be Furnished .  The Company shall furnish the Plan Administrator or its delegees such data and information as may be required. The records of the Company as to an employee’s or Participant’s period of employment, Separation from Service and the reason therefore, leave of absence and compensation will be conclusive on all persons unless determined to be incorrect.

 

8.4.                         Plan Administrator’s Decision Final .  Any interpretation of the Plan and any decision on any matter within the discretion of the Plan Administrator made in good faith is binding on all persons. A misstatement or other mistake of fact shall be corrected when it becomes known, and the Plan Administrator shall make such adjustment on account thereof as it considers equitable and practicable.

 

8.5.                         Remuneration and Expenses .  No remuneration shall be paid to the Plan Administrator (or any Committee member) for services hereunder.  All expenses of the Plan Administrator (or a Committee member) incurred in the performance of the administration of the Plan shall be reimbursed by the Company.

 

8.6.                         Indemnification of Committee Member .  The Committee and the individual members thereof shall be indemnified by the Company against any and all liabilities, losses, costs, and expenses (including fees and expenses) of whatsoever kind and nature which may be imposed on, incurred by or asserted against the Committee or the members by reason of the performance of a Committee function if the Committee or such members did not act dishonestly or in willful or negligent violation of the law or regulations under which such liability, loss, cost or expense arises.

 

8.7.                         Resignation or Removal of Committee Member .  A Committee member may resign at any time by giving ten (10) days’ advance written notice to the Company and the other Committee members. The Company may remove a Committee member by giving advance written notice to him or her, and the other Committee members.

 

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8.8.                         Interested Committee Member .  A member of the Committee may not decide or determine any matter or question concerning his or her own benefits under the Plan.

 

ARTICLE IX.
CLAIMS PROCEDURE

 

9.1.                         Claim .  Any person claiming a benefit, requesting an interpretation or ruling under the Plan, or requesting information under the Plan shall present the request in writing to the Committee which shall respond in writing as soon as practicable.

 

9.2.                         Denial of Claim .  If the claim or request is denied, the written notice of denial shall be made within ninety (90) days of the date of receipt of such claim or request by the Committee and shall state:

 

(a)                                The reason for denial, with specific reference to the Plan provisions on which the denial is based.

 

(b)                               A description of any additional material or information required and an explanation of why it is necessary.

 

(c)                                An explanation of the Plan’s claim review procedure.

 

9.3.                         Review of Claim .  Any person whose claim or request is denied or who has not received a response within ninety (90) days may request review by notice given in writing to the Committee within sixty (60) days of receiving a response or one hundred fifty (150) days from the date the claim was received by the Committee. The claim or request shall be reviewed by the Committee who may, but shall not be required to, grant the claimant a hearing. On review, the claimant may have representation, examine pertinent documents, and submit issues and comments in writing.

 

9.4.                         Final Decision .  The decision on review shall normally be made within sixty (60) days after the Committee’s receipt of a request for review. If an extension of time is required for a hearing or other special circumstances, the claimant shall be notified and the time limit shall be one hundred twenty (120) days after the Committee’s receipt of a request for review.  The decision shall be in writing and shall state the reasons and relevant plan provisions. All decisions on review shall be final and bind all parties concerned.

 

ARTICLE X.
AMENDMENTS OR TERMINATION OF THE PLAN

 

10.1.                 General .   The Board may, at any time or times, amend the Plan, pursuant to written resolution adopted by the Board; provided, however, no amendment shall be effective to decrease or adversely affect the (i) amount of any Participant’s Accrued Benefit as of January 1, 2013; (ii) the benefit that will accrue or be paid to such Participant; or (iii) subject to the last sentence of Section 10.3, the lump sum value of any Accrued Benefit under the Plan, unless the Participant agrees to such amendment, and no amendment may relieve the Company of its obligations under ARTICLE IV unless all of the Participants agree to such amendment.  If,

 

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without a Participant’s consent, any amendment adversely affects or reduces a Participant’s Accrued Benefit as of January 1, 2013, or in any way reduces the benefit that will accrue or be paid to the Participant under the Plan, then such purported amendment shall not apply to such Participant and the Plan provisions as in effect immediately before such amendment shall remain in effect for such Participant.

 

10.2.                 Amendments for Compliance with Laws .   In addition to the preceding amendment authority of the Board, the appropriate officers of the Company are authorized to amend the Plan from time to time as they deem advisable for purposes of complying with any provisions of the Internal Revenue Code and Treasury Regulations and any other guidance issued by the Secretary of the Treasury; provided , however , in the event an amendment is made by the Board, the Committee or an authorized officer in order to conform the Plan to applicable changes in law which amendment results in a reduction to the Accrued Benefit or the benefit that will accrue or be paid to any Participant, the Company shall establish an alternative provision or plan that will provide benefits to such Participants that are substantially equal to the benefits reduced in this Plan as a result of such amendment.  To be certain, if any such amendment to the Plan is made to conform the Plan to applicable law and this results in an increase in the federal, state or local income taxes payable upon receipt of the Accrued Benefit, the Company shall not establish an alternative provision or plan that will pay or reimburse Participants for such taxes.

 

10.3.                 Automatic Changes in Interest Rate and Mortality Assumptions .   Notwithstanding any of the foregoing provisions in this ARTICLE X, it is understood that, as the formula to calculate a benefit under the SERP Plan and thus hereunder contains certain interest rate and mortality assumptions, which change from time to time, changes to such interest rate (such as an increase in the 30-year Treasury securities rate) or mortality assumptions which are otherwise in accordance with the SERP Plan as of January 1, 2013 but which may result in a reduction in absolute (but not actuarial) benefits are not considered to decrease or adversely affect the amount of a Participant’s Accrued Benefit.

 

ARTICLE XI.
MISCELLANEOUS

 

11.1.                 Captions .  The captions of articles, sections, paragraphs and subparagraphs of this Plan are for convenience only and shall not control or affect the meaning or construction of any of its provisions.

 

11.2.                 Company Action .  Except as may be specifically provided herein, any action required or permitted to be taken by the Company may be taken on behalf of the Company by the President of the Company.

 

11.3.                 Company Records .  Records of the Company as to an employee’s or Participant’s period of employment, Separation from Service and the reason therefore, leaves of absence, reemployment and compensation will be conclusive on all persons, unless determined by the Plan Administrator to be incorrect.

 

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11.4.                 Evidence .  Evidence required of anyone under the Plan may be by certificate, affidavit, document or other information which the person acting on it considers pertinent and reliable, and may be signed, made or presented by the proper party or parties.

 

11.5.                 Gender and Number .  Where the context permits, words in the masculine gender shall include the feminine and neuter genders, the plural shall include the singular, and the singular shall include the plural.

 

11.6.                 Governing Law .  Except to the extent governed by ERISA, the provisions of this Plan shall be construed and interpreted according to the laws of the state of Delaware.

 

11.7.                 Non-Assignability . Neither a Participant nor any other person shall have any right to commute, sell, assign, transfer, pledge, anticipate, mortgage or otherwise encumber, hypothecate or convey in advance of actual receipt the amounts, if any, payable hereunder, or any part thereof, which are, and all rights to which are, expressly hereby declared to be unassignable and nontransferable.  No part of the amounts payable shall, prior to actual payment, be subject to seizure or separation for the payment of any debts, judgments, alimony or separate maintenance owed by a Participant or any other person, nor be transferable by operation of law in the event of a Participant’s or another person’s bankruptcy or insolvency.

 

11.8.                 Participant Cooperation .  A Participant will cooperate with the Company by furnishing any and all information requested by the Company in order to facilitate the payment of benefits hereunder and such other action as may be requested by the Company.

 

11.9.                 Successors .  The provisions of this Plan shall bind and inure to the benefit of the Company and its successors and assigns.  The term successors as used herein shall include any corporate or other business entity which shall, whether by merger, consolidation, purchase or otherwise acquire all or substantially all of the business and assets of the Company, and successors of any such corporation or other business entity.

 

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11.10.         Unsecured General Creditor . Participants and their beneficiaries, heirs, successors, and assigns will have no secured interest or claim in any property or assets of the Company whether or not such assets are held in a trust that may be used for the purpose of paying benefits hereunder.  For purposes of the Plan, any and all of the Company’s assets shall be, and remain, the general, unpledged, assets of the Company. The Company’s obligation under the Plan shall be merely that of an unfunded and unsecured promise of the Company to pay money in the future.  No Company shall have any obligation under this Plan with respect to individuals other than that Company’s employees.

 

11.11.         Validity .  In case any provision of this Plan shall be held illegal or invalid for any reason, said illegality or invalidity shall not affect the remaining parts hereof, but this Plan shall be construed and enforced as if such illegal and invalid provision had never been inserted herein.

 

11.12.         Waiver of Notice . Any notice required under the Plan may be waived by the person entitled to notice.

 

The Company hereby agrees to the provisions of this Plan, and, in Witness Thereof, the Company causes this Agreement to be executed on this   21   day of    December   , 2012.

 

 

SEABOARD CORPORATION

 

 

 

 

 

By:

/s/ Steven J. Bresky

 

 

Steven J. Bresky

 

 

President

 

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ADDENDA

 

TO

SEABOARD CORPORATION

CASH BALANCE EXECUTIVE RETIREMENT PLAN,

AMENDED AND RESTATED

EFFECTIVE JANUARY 1, 2013

 

Following is a list of the Addenda to the Seaboard Corporation Cash Balance Executive Retirement Plan, Amended and Restated Effective January 1, 2013, which is filed with the Securities and Exchange Commission (“SEC”).  Seaboard Corporation (“Seaboard”) undertakes to provide to the SEC the Addenda, as requested, subject to Seaboard’s right to request confidential treatment under the Freedom of Information Act.

 

Addendum A  --  Participants

Addendum B  --  Lump Sum Actuarial Value (as of January 1, 2009)

 

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Exhibit 10.16

 

EMPLOYMENT AGREEMENT

 

This EMPLOYMENT AGREEMENT (this “Agreement”) is entered into as of December 21, 2012 by and between SEABOARD CORPORATION , a Delaware corporation (together with any Successor thereto, the “Company”), and Steven J. Bresky (“Executive”).

 

WITNESSETH:

 

WHEREAS, the Company desires to employ and secure the exclusive services of Executive on the terms and conditions set forth in this Agreement; and

 

WHEREAS, Executive desires to accept such employment on such terms and conditions;

 

NOW, THEREFORE, in consideration of the premises and the mutual covenants and promises contained herein and for other good and valuable consideration, the Company and Executive hereby agree as follows:

 

1.         Agreement to Employ .  Upon the terms and subject to the conditions of this Agreement, the Company hereby agrees to continue to employ Executive, and Executive hereby accepts such continued employment with the Company.

 

2.         Term; Position and Responsibilities; and Location .

 

(a)        Term of Employment .  Unless Executive’s employment shall sooner terminate pursuant to Section 8, the Company shall continue to employ Executive on the terms and subject to the conditions of this Agreement for a term commencing as of the date of this Agreement (the “Commencement Date”) and ending on December 31, 2013; provided , however , on December 31, 2013 and on each annual anniversary date of December 31, 2013 (an “Annual Anniversary Date”), Executive’s employment hereunder shall be deemed to be automatically extended, upon the same terms and conditions for an additional one (1) year after such Annual Anniversary Date, unless the Company shall have given written notice to Executive, at least thirty (30) days prior to the expiration of such Annual Anniversary Date, of its intention not to extend the Employment Period (as defined below) hereunder, unless the Company shall have given written notice to Executive at least thirty (30) days prior to the expiration of such Annual Anniversary Date of its intention not to extend the Employment Period (as defined below) hereunder.  Notwithstanding the foregoing, unless mutually agreed to by the Company and the Executive, Executive’s employment hereunder shall under no circumstances extend beyond December 31, 2015.  The period during which Executive is employed by the Company pursuant to this Agreement, including any extension thereof in accordance with the preceding sentence, shall be referred to as the “Employment Period.”

 

(b)        Position and Responsibilities .  During the Employment Period, Executive shall serve as President and Chief Executive Officer of the Company, and shall have such duties and responsibilities as are customarily assigned to individuals serving in such position and such other duties consistent with Executive’s title and position as the Board of Directors of the Company (the “Board”) specifies from time to time.  Executive shall devote all of his skill, knowledge, commercial

 



 

efforts and business time to the conscientious and good faith performance of his duties and responsibilities for the Company to the best of his ability.

 

(c)        Location .  During the Employment Period, Executive’s services shall be performed primarily in the Kansas City metropolitan area.  However, Executive may be required to travel in and outside of Kansas City as the needs of the Company’s business dictate.

 

3.         Base Salary .  Commencing January 1, 2012, the Company shall pay Executive a base salary at an annualized rate of eight hundred eighty thousand dollars ($880,000), payable in installments on the Company’s regular payroll dates.  The Board shall review Executive’s base salary annually during the Employment Period and may increase (but not decrease without the written prior consent of Executive) such base salary from time to time, based on its periodic review of Executive’s performance in accordance with the Company’s regular policies and procedures.  The annual base salary payable to Executive from time to time under this Section 3 shall hereinafter be referred to as the “Base Salary.”

 

4.         Annual Bonus Compensation .  Executive shall be eligible to receive an annual bonus (“Annual Bonus”) with respect to each calendar year ending during the Employment Period.  The Annual Bonus shall be determined under the Company’s Executive Officers’ Bonus Plan or such other annual bonus plan maintained by the Company for similarly situated Executives that the Company designates, in its sole discretion (any such plan, the “Bonus Plan”), in accordance with the terms of such plan as in effect from time to time.  Executive’s Annual Bonus shall not be less than four hundred fifty thousand dollars ($450,000) for any calendar year during the Employment Period.  The Annual Bonus is earned pro-rata throughout each year, unless Executive’s employment is terminated by the Company pursuant to Section 8(b) for Cause, in which case, the Annual Bonus shall not be earned or paid for service during the year of the Date of Termination.  The Annual Bonus for each year shall be payable in cash on or before March 1 of the following year.

 

5.         Car Allowance .  During Executive’s Employment Period, Executive will be entitled to receive an annual car allowance and gasoline charge privileges in accordance with the Company’s car allowance policy.

 

6.         Executive Benefits .

 

(a)        During the Employment Period and thereafter for so long as Executive continues to be employed by the Company or affiliate, Executive will be eligible to participate in the employee and executive benefit plans and programs maintained by the Company from time to time in which executives of the Company at Executive’s grade level are eligible to participate, including medical, dental, disability, hospitalization, life insurance, and retirement (i.e., 401K, pension and executive retirement plans), deferred compensation and savings plans, on the terms and subject to the conditions set forth in such plans; as may be amended from time to time.

 

(b)        Executive shall continue to be a participant in the Seaboard Corporation 409A Executive Retirement Plan, Amended and Restated Effective January 1, 2009, as amended and

 

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restated by that Seaboard Corporation 409A Executive Retirement Plan Amended and Restated Effective January 1, 2013 (“SERP”), during the Employment Period, and thereafter for so long as Executive continues to be employed by the Company or affiliate.  Executive consents to the January 1, 2013 amendments made to the SERP.  During the Employment Period and thereafter, the Company shall not make any further amendment to the SERP that would adversely affect or reduce the benefit that will accrue or be paid to Executive under the SERP, it being understood that the formula to calculate the benefit may result in a reduction in benefits, such as if there is an increase in the 30 year U.S. Treasury Rate.  The preceding sentence shall not apply to amendments made in order to conform the SERP to applicable changes in law; provided , however , in the event an amendment made in order to conform the SERP to applicable changes in law results in a reduction to the accrued benefit or the benefit that will accrue to Executive, the Company shall establish an alternative provision or plan that will provide a benefit to Executive that is substantially equal to the benefits reduced in the SERP as a result of such amendment.  To be certain, if any such amendment to the SERP is made to conform the SERP to applicable law and this results in an increase to the federal or state income taxes payable upon receipt of the Accrued Benefit, the Company shall not establish an alternative provision or plan that will pay or reimburse Employee for such taxes.

 

(c)        For purposes of calculating the benefit payable under the SERP, the Company and Executive agree that the Final Average Earnings shall not exceed $2,065,000.

 

7.         Indemnification; Expenses; Paid Time Off .

 

(a)        Indemnification .  Except to the extent, if any, prohibited by law, the Company shall indemnify Executive against expenses (including attorneys’ fees of counsel selected by Executive), judgments, fines and amounts paid in settlement actually and reasonably incurred by Executive in connection with any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, to which Executive was, is, or is threatened to be, made a party by reason of facts which include Executive’s being or having been an employee, officer, director or agent of the Company or any Affiliates.  Except to the extent, if any, prohibited by law, the Company shall pay expenses (including attorneys’ fees of counsel selected by Executive) actually and reasonably incurred by Executive in defending any such action, suit or proceeding in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by Executive to repay such amounts so paid on Executive’s behalf if it shall ultimately be determined that Executive is not entitled to be indemnified by the Company for such expenses under applicable law.  The provisions of this Section 7(a) shall (i) survive termination of this Agreement; and (ii) not be deemed exclusive of any other indemnification or expense rights to which Executive may be entitled.

 

(b)        Business Expenses .  During the Employment Period, the Company will reimburse Executive for all reasonable and necessary business-related expenses incurred by Executive at the request of and on behalf of the Company in accordance with The Company’s normal expense reimbursement policies.

 

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(c)        Paid Time Off .  During the Employment Period, Executive shall be entitled to paid time off on an annualized basis in accordance with the Company’s paid time off policy.  Executive shall also be entitled to Company-designated holidays.

 

8.         Termination of Employment .

 

(a)        Termination Due to Death or Disability .  Executive’s employment shall automatically terminate upon Executive’s death and may be terminated by the Company due to Executive’s Disability (as defined below in this subsection (a)).  In the event that Executive’s employment is terminated due to his Disability or death, no termination benefits shall be payable to or in respect of Executive except as provided in Section 8(f)(ii).  For purposes of this Agreement, “Disability” means a physical or mental disability that prevents or would prevent the performance by Executive of his duties hereunder for a continuous period of six months or longer.  The determination of Executive’s Disability will be made by an independent physician agreed to by the parties.  If the parties are unable to agree within ten (10) days after a request for designation by a party, then the Company and the Executive shall each select a physician, and the two (2) physicians selected shall select a third physician.  The three (3) physicians so selected shall make a determination of the Executive’s Disability, as determined by at least two (2) of the three (3) physicians selected.  Such determination shall be final and binding on the parties hereto, and shall be based on such competent medical evidence as shall be presented to such physicians by Executive and/or the Company or by any physician or group of physicians or other competent medical experts employed by Executive and/or the Company to advise such physicians.

 

(b)        Termination by the Company for Cause .  Executive’s employment may be terminated by the Company for Cause (as defined below in this subsection (b)).  In the event of a termination of Executive’s employment by the Company for Cause, Executive shall be paid the termination benefits, as provided in clauses (x) and (z) of Section 8(f)(i).  For purposes of this Agreement, “Cause” means (i) a material breach by Executive of any provision of this Agreement; (ii) a material violation by Executive of any Policy (as defined in Section 14), resulting in material injury to the Company; (iii) Executive’s willful misconduct or gross negligence that has caused or is reasonably expected to result in material injury to the business, reputation or prospects of the Company or any of its Affiliates; (iv) Executive’s material fraud or misappropriation of funds; or (v) the commission by Executive of a felony involving moral turpitude; provided that no termination under clauses (i) or (ii) shall be effective unless Company shall have given Executive notice of the event or events constituting Cause and Executive shall have failed to cure such event or events within thirty (30) business days after receipt of such notice.

 

(c)        Termination Without Cause .  Executive’s employment may be terminated by the Company Without Cause (as defined below in this subsection (c)) at any time.  In the event of a termination of Executive’s employment by the Company Without Cause, the Executive shall be paid the termination benefits as provided in Section 8(f)(i).  For purposes of this Agreement, a termination “Without Cause” shall mean a termination of Executive’s employment by the Company other than due to Executive’s death or Disability as described in Section 8(a) and other than for Cause as described in Section 8(b).

 

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(d)       Termination by Executive .  Executive may resign from his employment for any reason, including for Good Reason (as defined below in this subsection (d)).  In the event of a termination of Executive’s employment by Executive’s resignation other than for Good Reason, no termination benefits shall be payable to or in respect of Executive except as provided in Section 8(f)(ii) and in the event of a termination of Executive’s employment by Executive for Good Reason, no termination benefits shall be payable to or in respect of Executive except as provided in Section 8(f)(i).  For purposes of this Agreement, a termination of employment by Executive for “Good Reason” shall mean a resignation by Executive from his employment with the Company within one hundred eighty (180) days following the initial occurrence, without Executive’s consent, of any one or more of the following events: (i) a material diminution in the Executive’s authority, duties or responsibilities; (ii) a material change in the geographic location where Executive primarily performs his services; or (iii) any other material breach by the Company of any material provision of this Agreement; provided that the Executive shall have given the Company notice of the occurrence of the event or events constituting Good Reason within ninety (90) days following the initial occurrence of such event or such events and the Company shall have failed to cure such event or events (to the extent capable of being cured) within thirty (30) business days after receipt of such notice.

 

(e)        Notice of Termination; Date of Termination .

 

(i)         Notice of Termination .  Any termination of Executive’s employment by the Company or by Executive (other than as a result of Executive’s death) shall be communicated by a written Notice of Termination addressed to the other party to this Agreement.  A “Notice of Termination” shall mean a notice stating that Executive or the Company, as the case may be, is electing to terminate Executive’s employment with the Company (and thereby terminating the Employment Period), stating the proposed effective date of such termination, indicating the specific provision of this Section 8 under which such termination is being effected and, if applicable, setting forth in reasonable detail the circumstances claimed to provide the basis for such termination.  Any Notice of Termination given by an Executive must specify an effective date of termination which is at least thirty (30) days after the giving of the Notice of Termination.

 

(ii)        Date of Termination .  The term “Date of Termination” shall mean (i) if Executive’s employment is terminated by his death, the date of his death; and (ii) if Executive’s employment is terminated for any other reason, the effective date of termination specified in such Notice of Termination.  The Employment Period shall expire on the Date of Termination.

 

(f)        Payments Upon Certain Terminations .

 

(i)         In the event of a termination of Executive’s employment by the Company Without Cause or by Executive’s resignation from employment for Good Reason during the Employment Period, the Company shall pay to Executive (or, following his death,

 

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to Executive’s estate), within thirty (30) days of the Date of Termination, (x) his Base Salary through the Date of Termination, to the extent not previously paid; (y) the pro-rata amount of the Annual Bonus (based on the amount paid for the previous year) which is accrued through the date of termination; and (z) reimbursement for any unreimbursed business expenses incurred by Executive prior to the Date of Termination that are subject to reimbursement pursuant to the terms hereof, and payment for paid time off accrued as of the Date of Termination but unused (such amounts under clauses (x), (y) and (z), collectively the “Accrued Obligations”).  In addition, in the event of any such termination of Executive’s employment, if Executive executes and delivers to the Company a Release and Discharge of All Claims substantially in the form attached hereto (“Release”) within 30 days after the Date of Termination, Executive shall be entitled to the following payments and benefits (provided, however, in the event of Executive’s death following the Date of Termination but prior to delivery of the executed Release, the following payments shall be paid to Executive’s estate, notwithstanding that the Release has not been executed):

 

(A)       the Executive’s Base Salary (at the Base Salary being paid on the Date of Termination), for the longer of: (x) the remaining Employment Period (assuming Executive’s employment had not terminated) or (y) one (1) year (the “Severance Period”), payable in installments in accordance with the Company’s regular payroll policies for one year after the Date of Termination, with the first installment being paid on the Company’s regular pay date following the day which is 30 days after the Date of Termination (the “Payment Commencement Date”) (with the first installment being the sum of the Base Salary installments from the Date of Termination through the Payment Commencement Date and with subsequent installments being based on the Base Salary), and with the balance, if any, being paid pursuant to a lump sum payment on the one year anniversary date of the Date of Termination; and

 

(B)       the Executive’s Annual Bonus (at the amount of the Annual Bonus paid to the Executive for the year prior to the Date of Termination) which would have been paid to the Executive had Executive’s employment continued for the Severance Period, duly apportioned for any partial year, such amount to be payable to Executive on the one year anniversary date of the Date of Termination; and

 

(C)       the Executive shall automatically vest in all employee welfare and benefit plans in which the Executive was participating as of the Date of Termination and such benefits shall be paid to Executive in accordance with the terms of such plans; and

 

(D)       the Company shall provide outplacement services to Executive for up to ninety (90) days; and

 

(E)                             The Company and Executive agree that each payment made by the Company to Executive pursuant to subsections (A) and (B) of this Section 8(f)(i)

 

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shall be deemed to be a separate and distinct payment for purposes of Internal Revenue Code Section 409A and the related regulations, as opposed to an annuity or other collective series of payments; and

 

(F)       Notwithstanding anything to the contrary contained herein, to the extent the aggregate amount to be paid to the Executive pursuant to Subsections (A) and (B) of this Section 8(f)(i) during the six (6) months following the Date of Termination exceeds two (2) times the maximum amount that may be taken into account under a qualified retirement plan pursuant to Section 401(a)(17) of the Internal Revenue Code of 1986, as amended (“Code”), for the calendar year of such Date of Termination (the “401(a)(17) Limit”), then payment of such amount that is in excess of two (2) times the 401(a)(17) Limit shall not be paid during the sixth (6) months following the Date of Termination but instead shall be paid in a lump sum payment on the next day after the date which is six (6) months following the Date of Termination.

 

Executive shall not have a duty to mitigate the costs to the Company under this Section 8(f)(i), nor shall any payments from the Company to Executive hereunder be reduced, offset or canceled by any compensation or fees earned by (whether or not paid currently) or offered to Executive during the remainder of the fiscal year of the Company that includes the Date of Termination by a subsequent employer or other Person (as defined below in Section 18(k) below) for which Executive performs services, including, but not limited to, consulting services.  The foregoing shall not relieve Executive of the non-competition prohibitions provided in Section 10 below.

 

(ii)        If Executive’s employment shall terminate upon his death or due to Executive’s Disability or Executive shall resign from his employment without Good Reason, in any such case during the Employment Period, the Company shall pay to Executive (or, in the event of Executive’s death, to his estate) the Accrued Obligations within thirty (30) days following the Date of Termination.  If the Company shall terminate Executive’s employment for Cause, the Company shall pay Executive the termination benefits, as provided in clauses (x) and (z) of Section 8(f)(i).

 

(iii)       Except as specifically set forth in this Section 8(f), no termination benefits shall be payable to or in respect of Executive’s employment with the Company or its Affiliates.

 

(iv)                           The Company shall have the right to apply and set off against the Accrued Obligations or any other amounts owing to Executive hereunder, any amounts owing by the Executive to the Company, whether pursuant to this Agreement or otherwise.  Notwithstanding the foregoing, such set off shall not accelerate the time or schedule of a payment of Deferred Compensation except as permitted under Treasury Regulation Section 1.409A-3(j)(4)(xiii).

 

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(g)        Resignation upon Termination .  Effective as of any Date of Termination under this Section 8 or otherwise as of the date of Executive’s termination of employment with the Company, Executive shall resign, in writing, from all Board memberships and other positions then held by him, or to which he has been appointed, designated or nominated, with the Company and its Affiliates.

 

9.         Confidentiality .

 

(a)        Executive acknowledges and agrees that the terms of this Agreement, including all addendums and attachments hereto, are confidential.  Executive agrees not to disclose any information contained in this Agreement, or the fact of this Agreement, to anyone, other than to Executive’s lawyer, financial advisor or immediate family members.  If Executive discloses any information contained in this Agreement to his lawyer, financial advisor or immediate family members as permitted herein, Executive agrees to immediately tell each such individual that he or she must abide by the confidentiality restrictions contained herein and keep such information confidential as well.

 

(b)        Executive agrees that during his employment with the Company and thereafter, Executive will not, directly or indirectly (i) disclose any Confidential Information to any Person (other than, only with respect to the period that Executive is employed by the Company, to an Executive of the Company who requires such information to perform his or her duties for the Company); or (ii) use any Confidential Information for Executive’s own benefit or the benefit of any third party.  “Confidential Information” means confidential, proprietary or commercially sensitive information relating to (i) the Company or its Affiliates, or members of their management or boards; or (ii) any third parties who do business with the Company or its Affiliates, including customers and suppliers.  Confidential Information includes, without limitation, marketing plans, business plans, financial information and records, intellectual property, operation methods, personnel information, drawings, designs, information regarding product development, other commercial or business information and any other information not available to the public generally.  The foregoing obligation shall not apply to any Confidential Information that has been previously disclosed to the public or is in the public domain (other than by reason of a breach of Executive’s obligations to hold such Confidential Information confidential).  If Executive is required or requested by a court or governmental agency to disclose Confidential Information, Executive must notify the General Counsel of the Company in writing of such disclosure obligation or request no later than three business days after Executive learns of such obligation or request, and permit the Company to take all lawful steps it deems appropriate to prevent or limit the required disclosure.  The foregoing provisions of this Section 9(b) are in addition to the provisions set forth in the Company’s Code of Ethics Policy.

 

10.       Partial Restraint on Post-termination Competition .

 

(a)        Definitions.  For the purposes of this Section 10, the following definitions shall apply:

 

“Competitor” means any business, individual, partnership, joint venture, association, firm, corporation or other entity, other than the Company and its affiliates, that is

 

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engaging or actively planning to engage, wholly or partly, in activities (“Competitive Activities”) that directly compete or would compete with the Company or its affiliates in the Company Activities (as hereinafter defined) in the Territory (as hereinafter defined).

 

“Competitive Position” means (i) the direct or indirect ownership or control of all or any portion of a Competitor; or (ii) any employment or independent contractor arrangement with any Competitor whereby Executive will serve such Competitor in any managerial, sales, executive or consultant capacity with respect to Competitive Activities in the Territory.

 

“The Company Activities” means the businesses conducted by Seaboard Corporation, including, without limitation, (i) animal production (hogs and turkeys) and meat processing (pork and turkey); (ii) cargo transportation, whether over land or water and all related business, including, without limitation, logistics, freight forwarding, agency representation and stevedoring; (iii) commodity trading; (iv) flour milling; (v) generation and sale of electricity; and (vi) sugar production and processing.

 

“Non-Compete Period” or “Non-Solicitation Period” means the period beginning with the Commencement Date and ending six (6) months after the Date of Termination, no matter whether terminated by the Company or by the Executive any reason or no reason.

 

“Territory” means the states, provinces and territories in the countries in which Seaboard Corporation operates with respect to each of the Company Activities.

 

(b)        Non-Competition .

 

(i)         The parties hereto acknowledge that Executive, by virtue of his position with and responsibilities to the Company, is engaging and is expected to continue to engage during the Term in the Company Activities throughout the Territory and has executive management responsibilities with respect to the Company responsibilities which extend throughout the Territory.  Executive acknowledges that to protect adequately the interest of the Company in the business of the Company it is essential that any non-compete covenant with respect thereto cover all the Company Activities and the entire Territory.

 

(ii)        Executive hereby agrees that, during the Non-compete Period, Executive will not, either directly or indirectly, alone or in conjunction with any other party, accept or enter into a Competitive Position.  Executive shall notify the Company promptly in writing if Executive receives an offer of a Competitive Position during the Non-compete Period, and such notice shall describe all material terms of such offer.

 

Nothing contained in this Section 10 shall prohibit Executive from acquiring not more than five percent (5%) of any company whose common stock is publicly traded on a national securities exchange or in the over-the-counter market.

 

(c)        Severability .  If a judicial or arbitral determination is made that any of the provisions of this Section 10 constitutes an unreasonable or otherwise unenforceable restriction against Executive the provisions of this Section 10 shall be rendered void only to the extent that such

 

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judicial or arbitral determination finds such provisions to be unreasonable or otherwise unenforceable with respect to Executive.  In this regard, Executive hereby agrees that any judicial or arbitral authority construing this Agreement shall sever or reform any portion of the Territory, any prohibited business activity or any time period from the coverage of this Agreement to allow the covenants in this Section 10 to be enforced to the maximum extent authorized by law, and shall then enforce the covenants in this Section 10 as so severed or reformed.

 

(d)       Reasonable Restrictions .  Executive acknowledges that the restrictions and covenants contained in this Agreement are reasonably necessary to protect the goodwill and legitimate business interests of the Company, are not overbroad, overlong, or unfair (including in duration and scope), and will not curtail Executive’s ability to earn a livelihood upon Executive’s termination of employment with the Company.

 

11.       Non-Solicitation of Employees and Customers .  During the period of Executive’s employment with the Company and for the one-year period following the termination of his employment, Executive shall not, directly or indirectly, by himself or through any third party, whether on Executive’s own behalf or on behalf of any other Person or entity, (i) solicit or endeavor to solicit, employ or retain; (ii) interfere with the relationship of the Company or any of its Affiliates with; or (iii) attempt to establish a business relationship with (A) any natural person who is or was (during Executive’s employment with the Company) an employee or engaged by the Company or any Affiliate to provide services to it, or (B) any customer of the Company or any of its Affiliates who was a customer at any time during which Executive was an employee of the Company.

 

12.       Work Product .  Executive agrees that all of Executive’s work product (created solely or jointly with others, and including any intellectual property or moral rights in such work product), given, disclosed, created, developed or prepared in connection with Executive’s employment with the Company , whether ensuing during or after Executive’s employment with the Company (“Work Product”) shall exclusively vest in and be the sole and exclusive property of the Company and shall constitute “work made for hire” (as that term is defined under Section 101 of the U.S. Copyright Act, 17 U.S.C. § 101) with the Company being the person for whom the work was prepared.  In the event that any such Work Product is deemed not to be a “work made for hire” or does not vest by operation of law in the Company, Executive hereby irrevocably assigns, transfers and conveys to the Company, exclusively and perpetually, all right, title and interest which Executive may have or acquire in and to such Work Product throughout the world, including without limitation any copyrights and patents, and the right to secure registrations, renewals, reissues, and extensions thereof.  The Company and its Affiliates or their designees shall have the exclusive right to make full and complete use of, and make changes to all Work Product without restrictions or liabilities of any kind, and Executive shall not have the right to use any such materials, other than within the legitimate scope and purpose of Executive’s employment with the Company.  Executive shall promptly disclose to the Company the creation or existence of any Work Product and shall take

 

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whatever additional lawful action may be necessary, and sign whatever documents the Company may require, in order to secure and vest in the Company or its designee all right, title and interest in and to all Work Product and any intellectual property rights therein (including full cooperation in support of any Company applications for patents and copyright or trademark registrations).

 

13.       Return of Company Property In the event of termination of Executive’s employment for any reason, Executive shall return to the Company all of the property of the Company and its Affiliates, including without limitation all materials or documents containing or pertaining to Confidential Information, and including without limitation, any company car, all computers (including laptops and I-Pads), cell phones, keys, PDAs, I-Phones, credit cards, facsimile machines, card access to any Company building, customer lists, computer disks, reports, files, e-mails, work papers, Work Product, documents, memoranda, records and software, computer access codes or disks and instructional manuals, internal policies, and other similar materials or documents which Executive used, received or prepared, helped prepare or supervised the preparation of in connection with Executive’s employment with the Company.  Executive agrees not to retain any copies, duplicates, reproductions or excerpts of such material or documents.

 

14.       Compliance With Company Policies .  During Executive’s employment with the Company, Executive shall be governed by and be subject to, and Executive hereby agrees to comply with, all Company policies applicable to employees generally or to employees at Executive’s grade level, including without limitation, the Company’s Code of Business Ethics and Conduct, in each case, as any such policies may be amended from time to time in the Company’s sole discretion (collectively, the “Policies”).

 

15.       Injunctive Relief with Respect to Covenants; Forum, Venue and Jurisdiction .  Executive acknowledges and agrees that a breach by Executive of any of Section 9, 10, 11, 12, 13 or 14 is a material breach of this Agreement and that remedies at law may be inadequate to protect the Company and its Affiliates in the event of such breach, and, without prejudice to any other rights and remedies otherwise available to the Company, Executive agrees to the granting of injunctive relief in the Company’s favor in connection with any such breach or violation without proof of irreparable harm, plus attorneys’ fees and costs to enforce these provisions.  Executive further acknowledges and agrees that the Company’s obligations to pay Executive any amount or provide Executive with any benefit or right pursuant to Section 8 is subject to Executive’s compliance with Executive’s obligations under Sections 9 through 14 inclusive, and that in the event of a breach by Executive of any of Section 9, 10, 11, 12, 13 or 14, the Company shall immediately cease paying such benefits and Executive shall be obligated to immediately repay to the Company all amounts theretofore paid to Executive pursuant to Section 8.  In addition, if not repaid, the Company shall have the right to set off from any amounts otherwise due to Executive any amounts previously paid pursuant to Section 8(f) (other than the Accrued Obligations).  Executive further agrees that the foregoing is appropriate for any such breach inasmuch as actual damages cannot be readily calculated, the amount is fair and reasonable under the circumstances, and the Company would suffer irreparable harm if any of these Sections were breached.  All disputes not relating to any request or application for injunctive relief in accordance with this Section 15 shall be resolved by arbitration in accordance with Section 18(b).

 

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16.       Assumption of Agreement .  The Company shall require any Successor thereto, by agreement in form and substance reasonably satisfactory to Executive, to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place.  Failure of the Company to obtain such agreement prior to the effectiveness of any such succession shall be a breach of this Agreement and shall entitle Executive to compensation from the Company in the same amount and on the same terms as Executive would be entitled hereunder if the Company had terminated Executive’s employment Without Cause as described in Section 8, except that for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the Date of Termination.

 

17.       Entire Agreement .  This Agreement constitutes the entire agreement among the parties hereto with respect to the subject matter hereof, and supersedes and replaces the Employment Agreement of Executive dated July 1, 2005, as amended.  All prior correspondence and proposals (including, but not limited to, summaries of proposed terms) and all prior promises, representations, understandings, arrangements and agreements relating to such subject matter are merged herein and superseded hereby.  The covenants and agreements set forth in Sections 6, 7, 8, 9, 12, 13, 14, 15, 16, 17 and 18 of this Agreement shall survive any termination of this Agreement or expiration of the term of this Agreement.

 

18.       Miscellaneous .

 

(a)        Binding Effect; Assignment .  This Agreement shall be binding on and inure to the benefit of the Company and its Successors and permitted assigns.  This Agreement shall also be binding on and inure to the benefit of Executive and his heirs, executors, administrators and legal representatives.  This Agreement shall not be assignable by any party hereto without the prior written consent of the other parties hereto.  The Company may effect such an assignment without prior written approval of Executive upon the transfer of all or substantially all of its business and/or assets (by whatever means), provided that the Successor to the Company shall expressly assume and agree to perform this Agreement in accordance with the provisions of Section 16.

 

(b)        Arbitration .  The Company and Executive agree that any dispute or controversy arising under or in connection with this Agreement shall be resolved by final and binding arbitration before the American Arbitration Association (“AAA”).  The arbitration shall be conducted in accordance with AAA’s National Rules for the Resolution of Employment Disputes then in effect at the time of the arbitration.  The arbitration shall be held in the general Kansas City, Kansas metropolitan area.  The dispute shall be heard and determined by one arbitrator selected from a list of arbitrators who are members of AAA’s Regional Employment Dispute Resolution roster.  If the parties cannot agree upon a mutually acceptable arbitrator from the list, each party shall number the names in order of preference and return the list to AAA within ten (10) days from the date of the list.  A party may strike a name from the list only for good cause.  The arbitrator receiving the highest ranking by the parties shall be selected.  Depositions, if permitted by the arbitrator, shall be limited to a maximum of two (2) per party and to a maximum of four (4) hours in duration.  The

 

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arbitration shall not impair either party’s right to request injunctive or other equitable relief in accordance with Section 15 of this Agreement.

 

(c)        Governing Law .  This Agreement shall be governed by and construed in accordance with the laws of the State of Kansas without reference to principles of conflicts of laws.

 

(d)       Taxes .  The Company may withhold from any payments made under this Agreement all applicable taxes, including, but not limited to, income, employment and social insurance taxes, as shall be required by law.

 

(e)        Amendments .  No provision of this Agreement may be modified, waived or discharged unless such modification, waiver or discharge is approved by the Company and is agreed to in writing by Executive.  No waiver by any party hereto at any time of any breach by any other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time.  No waiver of any provision of this Agreement shall be implied from any course of dealing between or among the parties hereto or from any failure by any party hereto to assert its rights hereunder on any occasion or series of occasions.

 

(f)        Severability .  In the event that any one or more of the provisions of this Agreement shall be or become invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not be affected thereby.

 

(g)        Notices .  Any notice or other communication required or permitted to be delivered under this Agreement shall be (i) in writing; (ii) delivered personally, by courier service or by certified or registered mail, first-class postage prepaid and return receipt requested; (iii) deemed to have been received on the date of delivery or, if mailed, on the third business day after the mailing thereof; and (iv) addressed as follows (or to such other address as the party entitled to notice shall hereafter designate in accordance with the terms hereof):

 

(i)         If to the Company, to it at:

 

Seaboard Corporation

9000 West 67 th  Street

Shawnee Mission, Kansas  66202

Attention:                               General Counsel

Telephone:                           (913) 676-8925

Facsimile:                                 (913) 676-8978

 

(ii)        if to Executive, to his residential address as currently on file with the Company.

 

(h)        Voluntary Agreement; No Conflicts .  Executive represents that he is entering into this Agreement voluntarily and that Executive’s employment hereunder and compliance with

 

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the terms and conditions of this Agreement will not conflict with or result in the breach by Executive of any agreement to which he is a party or by which he or his properties or assets may be bound.

 

(i)         Counterparts/Facsimile .  This Agreement may be executed in counterparts (including by facsimile), each of which shall be deemed an original and all of which together shall constitute one and the same instrument.

 

(j)         Headings .  The section and other headings contained in this Agreement are for the convenience of the parties only and are not intended to be a part hereof or to affect the meaning or interpretation hereof.

 

(k)        Certain Other Definitions .

 

“Affiliate” with respect to any Person, means any other Person that, directly or indirectly through one or more intermediaries, Controls, is Controlled by, or is under common Control with the first Person, including, but not limited to, a Subsidiary of any such Person.

 

“Control” (including, with correlative meanings, the terms “Controlling,” “Controlled by” and “under common Control with”):  with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise.

 

“Person” any natural person, firm, partnership, limited liability company, association, corporation, company, trust, business trust, governmental authority or other entity.

 

“Subsidiary”  with respect to any Person, each corporation or other Person in which the first Person owns or Controls, directly or indirectly, capital stock or other ownership interests representing fifty percent (50%) or more of the combined voting power of the outstanding voting stock or other ownership interests of such corporation or other Person.

 

“Successor” of a Person means a Person that succeeds to the assets and liabilities of Seaboard Corporation by merger, liquidation, dissolution or otherwise by operation of law, or a Person to which all or substantially all the assets and/or business of Seaboard Corporation are transferred.

 

(l)         The Employment Agreement is intended to comply with, or otherwise be exempt from, Section 409A.  The Company shall undertake to administer, interpret, and construe the Employment Agreement in a manner that does not result in the imposition to the Executive of additional taxes or interest under Section 409A.

 

(m)       With respect to any reimbursement of expenses of, or any provision of in-kind benefits to, the Executive, as specified under the Employment Agreement, such reimbursement any expenses or provision of in-kind benefits that are Deferred Compensation shall be subject to the

 

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following conditions: (A) the expenses eligible for reimbursement or the amount of in-kind benefits provided in one taxable year shall not affect the expenses eligible for reimbursement or the amount of in-kind benefits provided in any other taxable year, except for any medical reimbursement arrangement providing for the reimbursement of expenses referred to in Section 105(b) of the Internal Revenue Code of 1986 and related regulations; (B) the reimbursement of an eligible expense shall be made no later than the end of the year after the year in which such expense was incurred; and (C) the right to reimbursement or in-kind benefits shall not be subject to liquidation or exchange for another benefit.

 

(n)        “Termination of employment,” “termination,” “resignation” or words of similar import, as used in the Employment Agreement mean, for purposes of any payments of Deferred Compensation under the Employment Agreement, the Executive’s “separation from service” as defined in Section 409A; provided that for this purpose, a “separation from service” is deemed to occur on the date that the Company and the Executive reasonably anticipate that the level of bona fide services the Executive would perform after that date (whether as an employee or independent contractor) would permanently decrease to no more than twenty percent (20%) of the average level of bona fide services provided in the immediately preceding thirty-six (36) months.

 

SIGNATURE PAGE FOLLOWS

 

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IN WITNESS WHEREOF, the Company has duly executed this Agreement by its authorized representatives, and Executive has hereunto set his hand, in each case effective as of the date first above written.

 

THIS AGREEMENT CONTAINS A PROVISION REQUIRING THAT ARBITRATION PURSUANT TO THE AMERICAN ARBITRATION ASSOCIATION NATIONAL RULES FOR THE RESOLUTION OF EMPLOYMENT DISPUTES IS THE EXCLUSIVE MEANS FOR RESOLVING ANY DISPUTE BETWEEN THE PARTIES HERETO AS TO THIS AGREEMENT.

 

 

SEABOARD CORPORATION

 

 

 

 

 

By:

 

  /s/ Robert L. Steer

 

Name:

 

  Robert L. Steer

 

Title:

 

 

  Executive Vice President

 

 

 

 

Executive:

 

 

 

 

 

 

 

By:

 

  /s/ Steven J. Bresky

 

 

Steven J. Bresky

 

 

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RELEASE AND DISCHARGE OF ALL CLAIMS

 

This Release and Discharge of All Claims (“Release”) is made and entered into by and between _________________________________ (hereinafter “You”), and Seaboard Corporation, a Delaware corporation (“Seaboard”).

 

For and in consideration of the following promises, the parties agree to the following:

 

1.                                     You acknowledge that your employment with Seaboard has ended effective _______________ in accordance with the terms of the Employment Agreement between You and Seaboard (“Employment Agreement”).

 

2.                                    Subject to the conditions set forth in Section 8(f)(i) of the Employment Agreement, Seaboard agreed to pay You the amounts described in said Section 8(f)(i) (“Severance”) and take certain actions.  The effectiveness of this Release is conditioned on Seaboard making the payments and taking the actions provided in Section 8(f)(i).  If such payments are not made or such actions are not taken, this Release shall be of no effect.

 

3.                                     You agree to, and do, hereby remiss, release and forever discharge Seaboard, and any and all companies affiliated with Seaboard, and their respective agents, officers, employees, successors and assigns (hereinafter collectively the “Released Parties”), from and against any and all matters, claims, demands, damages, causes of action, debts, liabilities, controversies, judgments, and suits of every kind and nature whatsoever, foreseen, unforeseen, known or unknown, which You now have, or hereinafter may have against Seaboard based on any and all aspects of your employment with Seaboard or the termination of You prior to the date hereof.  This release of claims includes, but is not limited to, any rights or claims You may have under Title VII of the Civil Rights Act of 1964, as amended; the Equal Pay Act; the Age Discrimination in Employment Act of 1967, as amended; the Employment Retirement Income Security Act; the Omnibus Budget Reconciliation Act; the Americans With Disabilities Act; the Family and Medical Leave Act of 1993; the Kansas Acts Against Discrimination; the Kansas Age Discrimination in Employment Act; the Fair Labor Standard Act; any claims for wrongful discharge or breach of contract; severance; claims under worker’s compensation laws; or any other federal, state or local laws or regulations relating to employment and wages arising from events occurring prior to the date of execution of this Agreement.  You agree that this Agreement includes a release of all claims based on theories of contract or tort (e.g., negligent or intentional infliction of emotional distress, defamation, assault, battery, false imprisonment, wrongful termination, etc.), whether based on common law or otherwise.  The foregoing list is meant to be illustrative rather than exhaustive.  Further, You declare that as of the date of this Agreement, You have not suffered any on the job or work-related accident, injury, occupational disease or disability whether temporary, permanent, partial or total.

 



 

YOU ACKNOWLEDGE AND AGREE THAT THIS RELEASE IS A FULL AND FINAL BAR TO ANY AND ALL CLAIMS OF ANY TYPE THAT YOU MAY NOW HAVE AGAINST ANY OF THE RELEASED PARTIES.

 

4.                                     You waive the rights and claims set forth above, and also agree not to institute, or have instituted, a lawsuit against any of the Released Parties on any such claims or rights or to submit or file any charges, claims, complaints or actions with any agency, court, organization, or judicial forum.  You further acknowledge and agree that with respect to the rights and claims You are waiving, You are waiving not only your right to recover money or any other relief action You might commence, but also your rights to recover any action brought on your behalf by any other party, including, but not limited to the United States Equal Employment Opportunity Commission or any other federal, state, or local governmental agency or department.

 

5.                                     Notwithstanding the foregoing, this Release shall not constitute any release or waiver of any claims for retirement benefits, insurance or welfare benefits or any other benefits of employment with Seaboard which accrued or arose prior to the date your employment ended and in which You are vested.

 

6.                                     The parties to this Agreement agree that nothing in this Agreement is an admission by any party hereto of any wrongdoing, either in violation of an applicable law or otherwise, and that nothing in this Agreement is to be construed as such by any person.

 

7.                                     You and Seaboard agree that neither will publicize this Agreement either directly or indirectly, either in specific or as to general content, to either the public generally, to any employee of Seaboard or to any other person.

 

8.                                     You hereby acknowledge that You have been advised to consult an attorney, and that You fully understand the Agreement and the effect of signing the Agreement.  You further represent, declare and agree that You voluntarily accept the payment described above for the purposes of making a full and final compromise, adjustment and settlement of all claims hereinabove described.

 

9.                                     The foregoing Agreement, together with your Employment Agreement, constitutes the entire agreement among the parties and there are no other understandings or agreements, written or oral, between them on the subject.  Separate copies of this document shall constitute original documents which may be signed separately, but which together will constitute one single agreement.

 

10.                             You covenant and agree as follows:

 

a.                                      You shall protect and safeguard the trade secrets and confidential and proprietary information of Seaboard and its parent and subsidiaries and affiliate companies, including, but not limited to, the identity of its customers and suppliers, its

 

- 2 -



 

arrangements with customers and suppliers, and its technical and financial data, records, compilations of information, processes and specification relating to its customers, suppliers, products and services;

 

b.                                     You shall not disclose any of such trade secrets and confidential and proprietary information;

 

c.                                      You shall not use, directly or indirectly, for your own benefit or for the benefit of another, any of such trade secrets and confidential and proprietary information; and

 

d.                                    You agree not to make any disparaging comment in any format, whether written, electronic or oral, to any customer, employee, the press or any other individual or entity regarding Seaboard that relates to Seaboard’s business or related activities or the relationship between the parties.

 

11.                             All files, records, documents, drawings, specifications, memoranda, notes, or other documents relating to the business of Seaboard, whether prepared by You or otherwise coming into your possession, shall be the exclusive property of Seaboard, and shall be delivered to Seaboard and not retained by You for any reason whatsoever.  It is expressly agreed that the remedy at law for the breach of any such covenant is inadequate and injunctive relief shall be available to prevent the breach or any threatened breach thereof.

 

12.                             You acknowledge that You have been given at least twenty-one (21) days within which to consider this Agreement before its execution.  You agree that any changes made to this Release (whether material or not) must be made in writing, be signed and dated by both parties, and does not restart the running of the twenty-one (21) day period.  This Agreement shall not become effective until seven (7) calendar days after the date of execution.  During this seven (7) day period, You may revoke the Agreement.  After said seven (7) day period, You acknowledge that this Agreement becomes final and binding.

 

13.                             This Agreement shall be construed and governed by the laws of the State of Kansas.

 

THE PARTIES HAVE READ, UNDERSTOOD AND FULLY CONSIDERED THIS RELEASE AND DISCHARGE OF ALL CLAIMS, AND ARE MUTUALLY DESIROUS OF ENTERING INTO SUCH RELEASE AND DISCHARGE OF ALL CLAIMS.  THE TERMS OF THIS RELEASE AND DISCHARGE OF ALL CLAIMS ARE THE PRODUCT OF MUTUAL NEGOTIATION AND COMPROMISE BETWEEN THE PARTIES, HAVING ELECTED TO EXECUTE THIS RELEASE AND DISCHARGE OF ALL CLAIMS, TO FULFILL THE PROMISES SET FORTH HEREIN, AND TO RECEIVE THEREBY THE COMPENSATION SET FORTH IN THE EMPLOYMENT AGREEMENT.  THE PARTIES FREELY AND KNOWINGLY, AND AFTER DUE CONSIDERATION, VOLUNTARILY ENTER INTO THIS RELEASE AND DISCHARGE OF ALL CLAIMS.

 

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IN WITNESS WHEREOF, the undersigned parties have executed this Settlement Agreement and Release.

 

 

SEABOARD CORPORATION

 

 

 

 

Date:

 

 

By:

 

 

 

 

 

Company Representative

 

 

 

 

 

 

 

 

 

 

Date:

 

 

By:

 

 

 

Employee

 

 

 

 

STATE OF _____________

)

 

 

) ss

 

COUNTY OF ___________

)

 

 

On this ____ day of ___________, 20__, before me ___________, to me personally known, who, after being duly sworn, acknowledged that he/she executed the foregoing Agreement and Release as his/her free act and deed.

 

IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official seal the day and year first above written.

 

 

 

 

 

Notary Public

 

 

My commission expires:

 

 

 

 

 

 

 

- 4 -


Exhibit 10.17

 

EMPLOYMENT AGREEMENT

 

 

This EMPLOYMENT AGREEMENT (this “Agreement”) is entered into as of December 21, 2012 by and between SEABOARD CORPORATION, a Delaware corporation (together with any Successor thereto, the “Company”), and Robert L. Steer (“Executive”).

 

WITNESSETH:

 

WHEREAS, the Company desires to employ and secure the exclusive services of Executive on the terms and conditions set forth in this Agreement; and

 

WHEREAS, Executive desires to accept such employment on such terms and conditions;

 

NOW, THEREFORE, in consideration of the premises and the mutual covenants and promises contained herein and for other good and valuable consideration, the Company and Executive hereby agree as follows:

 

1.                                     Agreement to Employ .  Upon the terms and subject to the conditions of this Agreement, the Company hereby agrees to continue to employ Executive, and Executive hereby accepts such continued employment with the Company.

 

2.                                     Term; Position and Responsibilities; and Location .

 

(a)                                Term of Employment .  Unless Executive’s employment shall sooner terminate pursuant to Section 8, the Company shall continue to employ Executive on the terms and subject to the conditions of this Agreement for a term commencing as of the date of this Agreement (the “Commencement Date”) and ending December 31, 2015; provided , however , on December 31, 2013 and on each annual anniversary date of December 31, 2013 (an “Annual Anniversary Date”) through December 31, 2015, Executive’s employment hereunder shall be deemed to be automatically extended, upon the same terms and conditions for three (3) years after such Annual Anniversary Date, unless the Company shall have given written notice to Executive, at least thirty (30) days prior to the expiration of such Annual Anniversary Date, of its intention not to extend the Employment Period (as defined below) hereunder.  As such, on December 31, 2015, the remaining term will be for three (3) years; on December 31, 2016, the remaining term will be for two (2) years; and on December 31, 2017, the remaining term will be for one (1) year.  Beginning with the December 31, 2018 Anniversary Date and each Anniversary Date thereafter, Executive’s employment hereunder shall be deemed to be automatically extended, upon the same terms and conditions for one (1) year after such Annual Anniversary Date, unless the Company shall have given written notice to Executive, at least thirty (30) days prior to the expiration of such Annual Anniversary Date, of its intention not to extend the Employment Period (as defined below) hereunder.  Notwithstanding the foregoing, unless mutually agreed to by the Company and the Executive, Executive’s employment hereunder shall under no circumstances extend beyond December 31, 2021.  The period during which Executive is employed by the Company pursuant to this Agreement, including any extension thereof in accordance with the preceding sentence, shall be referred to as the “Employment Period.”

 



 

(b)                               Position and Responsibilities .  During the Employment Period, Executive shall serve as Executive Vice President and Chief Financial Officer of the Company, and shall have such duties and responsibilities as are customarily assigned to individuals serving in such position and such other duties consistent with Executive’s title and position as the President of the Company specifies from time to time.  Executive shall devote all of his skill, knowledge, commercial efforts and business time to the conscientious and good faith performance of his duties and responsibilities for the Company to the best of his ability.

 

(c)                                Location .  During the Employment Period, Executive’s services shall be performed primarily in the Kansas City metropolitan area.  However, Executive may be required to travel in and outside of Kansas City as the needs of the Company’s business dictate.

 

3.                                     Base Salary .  Commencing January 1, 2012, the Company shall pay Executive a base salary at an annualized rate of six hundred eighty thousand dollars ($680,000), payable in installments on the Company’s regular payroll dates.  The Board shall review Executive’s base salary annually during the Employment Period and may increase (but not decrease without the prior written consent of Executive) such base salary from time to time, based on its periodic review of Executive’s performance in accordance with the Company’s regular policies and procedures.  The annual base salary payable to Executive from time to time under this Section 3 shall hereinafter be referred to as the “Base Salary.”

 

4.                                     Annual Bonus Compensation .  Executive shall be eligible to receive an annual bonus (“Annual Bonus”) with respect to each calendar year ending during the Employment Period.  The Annual Bonus shall be determined under the Company’s Executive Officers’ Bonus Plan or such other annual bonus plan maintained by the Company for similarly situated Executives that the Company designates, in its sole discretion (any such plan, the “Bonus Plan”), in accordance with the terms of such plan as in effect from time to time.  Executive’s Annual Bonus shall not be less than four hundred fifty thousand dollars ($450,000) for any calendar year during the Employment Period.  The Annual Bonus is earned pro-rata throughout each year, unless Executive’s employment is terminated by the Company pursuant to Section 8(b) for Cause, in which case, the Annual Bonus shall not be earned or paid for service during the year of the Date of Termination.  The Annual Bonus for each year shall be payable in cash on or before March 1 of the following year.

 

5.                                     Car Allowance .  During Executive’s Employment Period, Executive will be entitled to receive an annual car allowance and gasoline charge privileges in accordance with the Company’s car allowance policy.

 

6.                                     Executive Benefits .

 

(a)                                During the Employment Period and thereafter for so long as Executive continues to be employed by the Company or affiliate, Executive will be eligible to participate in the employee and executive benefit plans and programs maintained by the Company from time to time in which executives of the Company at Executive’s grade level are eligible to participate, including medical, dental, disability, hospitalization, life insurance, and retirement (i.e., 401K, pension and executive retirement plans), deferred compensation and savings plans, on the terms and subject to the conditions set forth in such plans; as may be amended from time to time.

 

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(b)                               Executive shall continue to be a participant in the Seaboard Corporation 409A Executive Retirement Plan, Amended and Restated Effective January 1, 2009, as amended and restated by that Seaboard Corporation 409A Executive Retirement Plan Amended and Restated Effective January 1, 2013 (“SERP”), during the Employment Period, and thereafter for so long as Executive continues to be employed by the Company or affiliate.  Executive consents to the January 1, 2013 amendments made to the SERP.  During the Employment Period and thereafter, the Company shall not make any further amendment to the SERP that would adversely affect or reduce the benefit that will accrue or be paid to Executive under the SERP, it being understood that the formula to calculate the benefit may result in a reduction in benefits, such as if there is an increase in the 30 year U.S. Treasury Rate.  The preceding sentence shall not apply to amendments made in order to conform the SERP to applicable changes in law; provided , however , in the event an amendment made in order to conform the SERP to applicable changes in law results in a reduction to the accrued benefit or the benefit that will accrue to Executive, the Company shall establish an alternative provision or plan that will provide a benefit to Executive that is substantially equal to the benefits reduced in the SERP as a result of such amendment.  To be certain, if any such amendment to the SERP is made to conform the SERP to applicable law and this results in an increase to the federal or state income taxes payable upon receipt of the Accrued Benefit, the Company shall not establish an alternative provision or plan that will pay or reimburse Employee for such taxes.

 

(c)                                For purposes of calculating the benefit payable under the SERP, the Company and Executive agree that: (i) if Executive remains employed with the Company through August 28, 2017, the Final Average Earnings shall equal $1,785,385; and (ii) if the Executive’s employment with the Company is terminated prior to August 28, 2017, the Final Average Earnings shall not exceed $1,785,385.

 

(d)                              As a retention incentive to encourage Executive to continue in the employment of the Company, notwithstanding that the Years of Accrual Service Limit set forth in the SERP limits Executive’s Years of Accrual Service to a maximum of twenty (20) Years of Accrual Service, Executive shall accrue an additional Year of Accrual Service pursuant to the SERP for each Year of Service after December 31, 2013 completed by the Executive, up to an additional 3.68 Years of Accrual Service.  The terms used herein shall have the meaning given to such term in the SERP.

 

7.                                     Indemnification; Expenses; Paid Time Off .

 

(a)                                Indemnification .  Except to the extent, if any, prohibited by law, the Company shall indemnify Executive against expenses (including attorneys’ fees of counsel selected by Executive), judgments, fines and amounts paid in settlement actually and reasonably incurred by Executive in connection with any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, to which Executive was, is, or is threatened to be, made a party by reason of facts which include Executive’s being or having been an employee, officer, director or agent of the Company or any Affiliates.  Except to the extent, if any, prohibited by law, the Company shall pay expenses (including attorneys’ fees of counsel selected by Executive) actually and reasonably incurred by Executive in defending any such action, suit or proceeding in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by

 

- 3 -



 

Executive to repay such amounts so paid on Executive’s behalf if it shall ultimately be determined that Executive is not entitled to be indemnified by the Company for such expenses under applicable law.  The provisions of this Section 7(a) shall (i) survive termination of this Agreement; and (ii) not be deemed exclusive of any other indemnification or expense rights to which Executive may be entitled.

 

(b)                               Business Expenses .  During the Employment Period, the Company will reimburse Executive for all reasonable and necessary business-related expenses incurred by Executive at the request of and on behalf of the Company in accordance with the Company’s normal expense reimbursement policies.

 

(c)                                Paid Time Off .  During the Employment Period, Executive shall be entitled to paid time off on an annualized basis in accordance with the Company’s paid time off policy.  Executive shall also be entitled to Company-designated holidays.

 

8.                                     Termination of Employment .

 

(a)                                Termination Due to Death or Disability .  Executive’s employment shall automatically terminate upon Executive’s death and may be terminated by the Company due to Executive’s Disability (as defined below in this subsection (a)).  In the event that Executive’s employment is terminated due to his Disability or death, no termination benefits shall be payable to or in respect of Executive except as provided in Section 8(f)(ii).  For purposes of this Agreement, “Disability” means a physical or mental disability that prevents or would prevent the performance by Executive of his duties hereunder for a continuous period of six months or longer.  The determination of Executive’s Disability will be made by an independent physician agreed to by the parties.  If the parties are unable to agree within ten (10) days after a request for designation by a party, then the Company and the Executive shall each select a physician, and the two (2) physicians selected shall select a third physician.  The three (3) physicians so selected shall make a determination of the Executive’s Disability, as determined by at least two (2) of the three (3) physicians selected.  Such determination shall be final and binding on the parties hereto, and shall be based on such competent medical evidence as shall be presented to such physicians by Executive and/or the Company or by any physician or group of physicians or other competent medical experts employed by Executive and/or the Company to advise such physicians.

 

(b)                               Termination by the Company for Cause .  Executive’s employment may be terminated by the Company for Cause (as defined below in this subsection (b)).  In the event of a termination of Executive’s employment by the Company for Cause, Executive shall be paid the termination benefits, as provided in clauses (x) and (z) of Section 8(f)(i).  For purposes of this Agreement, “Cause” means (i) a material breach by Executive of any provision of this Agreement; (ii) a material violation by Executive of any Policy (as defined in Section 14), resulting in material injury to the Company; (iii) Executive’s willful misconduct or gross negligence that has caused or is reasonably expected to result in material injury to the business, reputation or prospects of the Company or any of its Affiliates; (iv) Executive’s material fraud or misappropriation of funds; or (v) the commission by Executive of a felony involving moral turpitude; provided that no termination under clauses (i) or (ii) shall be effective unless Company shall have given Executive notice of the

 

- 4 -



 

event or events constituting Cause and Executive shall have failed to cure such event or events within thirty (30) business days after receipt of such notice.

 

(c)                                Termination Without Cause .  Executive’s employment may be terminated by the Company Without Cause (as defined below in this subsection (c)) at any time.  In the event of a termination of Executive’s employment by the Company Without Cause, the Executive shall be paid the termination benefits as provided in Section 8(f)(i).  For purposes of this Agreement, a termination “Without Cause” shall mean a termination of Executive’s employment by the Company other than due to Executive’s death or Disability as described in Section 8(a) and other than for Cause as described in Section 8(b).

 

(d)                              Termination by Executive .  Executive may resign from his employment for any reason, including for Good Reason (as defined below in this subsection (d)).  In the event of a termination of Executive’s employment by Executive’s resignation other than for Good Reason, no termination benefits shall be payable to or in respect of Executive except as provided in Section 8(f)(ii) and in the event of a termination of Executive’s employment by Executive for Good Reason, no termination benefits shall be payable to or in respect of Executive except as provided in Section 8(f)(i).  For purposes of this Agreement, a termination of employment by Executive for “Good Reason” shall mean a resignation by Executive from his employment with the Company within one hundred eighty (180) days following the initial occurrence, without Executive’s consent, of any one or more of the following events: (i) a material diminution in the Executive’s authority, duties or responsibilities; (ii) a material change in the geographic location where Executive primarily performs his services; or (iii) any other material breach by the Company of any material provision of this Agreement; provided that the Executive shall have given the Company notice of the occurrence of the event or events constituting Good Reason within ninety (90) days following the initial occurrence of such event or such events and the Company shall have failed to cure such event or events (to the extent capable of being cured) within thirty (30) business days after receipt of such notice.

 

(e)                                Notice of Termination; Date of Termination .

 

(i)                                   Notice of Termination .  Any termination of Executive’s employment by the Company or by Executive (other than as a result of Executive’s death) shall be communicated by a written Notice of Termination addressed to the other party to this Agreement.  A “Notice of Termination” shall mean a notice stating that Executive or the Company, as the case may be, is electing to terminate Executive’s employment with the Company (and thereby terminating the Employment Period), stating the proposed effective date of such termination, indicating the specific provision of this Section 8 under which such termination is being effected and, if applicable, setting forth in reasonable detail the circumstances claimed to provide the basis for such termination.  Any Notice of Termination given by an Executive must specify an effective date of termination which is at least thirty (30) days after the giving of the Notice of Termination.

 

(ii)                               Date of Termination .  The term “Date of Termination” shall mean (i) if Executive’s employment is terminated by his death, the date of his death; and (ii) if Executive’s employment is terminated for any other reason, the effective date of termination

 

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specified in such Notice of Termination.  The Employment Period shall expire on the Date of Termination.

 

(f)                                 Payments Upon Certain Terminations .

 

(i)                                   In the event of a termination of Executive’s employment by the Company Without Cause or by Executive’s resignation from employment for Good Reason during the Employment Period, the Company shall pay to Executive (or, following his death, to Executive’s estate), within thirty (30) days of the Date of Termination, (x) his Base Salary through the Date of Termination, to the extent not previously paid; (y) the pro-rata amount of the Annual Bonus (based on the amount paid for the previous year) which is accrued through the date of termination; and (z) reimbursement for any unreimbursed business expenses incurred by Executive prior to the Date of Termination that are subject to reimbursement pursuant to the terms hereof, and payment for paid time off accrued as of the Date of Termination but unused (such amounts under clauses (x), (y) and (z), collectively the “Accrued Obligations”).  In addition, in the event of any such termination of Executive’s employment, if Executive executes and delivers to the Company a Release and Discharge of All Claims substantially in the form attached hereto (“Release”) within thirty (30) days after the Date of Termination, Executive shall be entitled to the following payments and benefits (provided, however, in the event of Executive’s death following the Date of Termination but prior to delivery of the executed Release, the following payments shall be paid to Executive’s estate, notwithstanding that the Release has not been executed):

 

(A)                           the Executive’s Base Salary (at the Base Salary being paid on the Date of Termination), for the longer of: (x) the remaining Employment Period (assuming Executive’s employment had not terminated) or (y) one (1) year (the “Severance Period”), payable in installments in accordance with the Company’s regular payroll policies for one year after the Date of Termination, with the first installment being paid on the Company’s regular pay date following the day which is thirty (30) days after the Date of Termination (the “Payment Commencement Date”) (with the first installment being the sum of the Base Salary installments from the Date of Termination through the Payment Commencement Date and with subsequent installments being based on the Base Salary), and with the balance, if any, being paid pursuant to a lump sum payment on the one year anniversary date of the Date of Termination; and

 

(B)                            the Executive’s Annual Bonus (at the amount of the Annual Bonus paid to the Executive for the year prior to the Date of Termination) which would have been paid to the Executive had Executive’s employment continued for the Severance Period, duly apportioned for any partial year, such amount to be payable to Executive on the one year anniversary date of the Date of Termination; and

 

(C)                            the Executive shall automatically vest in all employee welfare and benefit plans in which the Executive was participating as of the Date of Termination and such benefits shall be paid to Executive in accordance with the terms of such plans; and

 

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(D)                           the Company shall provide outplacement services to Executive for up to ninety (90) days.

 

(E)                             The Company and Executive agree that each payment made by the Company to Executive pursuant to subsections (A) and (B) of this Section 8(f)(i) shall be deemed to be a separate and distinct payment for purposes of Internal Revenue Code Section 409A and the related regulations, as opposed to an annuity or other collective series of payments.

 

(F)                              Notwithstanding anything to the contrary contained herein, to the extent the aggregate amount to be paid to the Executive pursuant to Subsections (A) and (B) of this Section 8(f)(i) during the six (6) months following the Date of Termination exceeds two (2) times the maximum amount that may be taken into account under a qualified retirement plan pursuant to Section 401(a)(17) of the Internal Revenue Code of 1986, as amended (“Code”), for the calendar year of such Date of Termination (the “401(a)(17) Limit”), then payment of such amount that is in excess of two (2) times the 401(a)(17) Limit shall not be paid during the sixth (6) months following the Date of Termination but instead shall be paid in a lump sum payment on the next day after the date which is six (6) months following the Date of Termination.

 

Executive shall not have a duty to mitigate the costs to the Company under this Section 8(f)(i), nor shall any payments from the Company to Executive hereunder be reduced, offset or canceled by any compensation or fees earned by (whether or not paid currently) or offered to Executive during the remainder of the fiscal year of the Company that includes the Date of Termination by a subsequent employer or other Person (as defined below in Section 18(k) below) for which Executive performs services, including, but not limited to, consulting services.  The foregoing shall not relieve Executive of the non-competition prohibitions provided in Section 10 below.

 

(ii)                               If Executive’s employment shall terminate upon his death or due to Executive’s Disability or Executive shall resign from his employment without Good Reason, in any such case during the Employment Period, the Company shall pay to Executive (or, in the event of Executive’s death, to his estate) the Accrued Obligations within thirty (30) days following the Date of Termination.  If the Company shall terminate Executive’s employment for Cause, the Company shall pay Executive the termination benefits, as provided in clauses (x) and (z) of Section 8(f)(i).

 

(iii)                           Except as specifically set forth in this Section 8(f), no termination benefits shall be payable to or in respect of Executive’s employment with the Company or its Affiliates.

 

(iv)                           The Company shall have the right to apply and set off against the Accrued Obligations or any other amounts owing to Executive hereunder, any amounts owing by the Executive to the Company, whether pursuant to this Agreement or otherwise.  Notwithstanding the foregoing, such set off shall not accelerate the time or schedule of a

 

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payment of Deferred Compensation except as permitted under Treasury Regulation Section 1.409A-3(j)(4)(xiii).

 

(g)                               Resignation upon Termination .  Effective as of any Date of Termination under this Section 8 or otherwise as of the date of Executive’s termination of employment with the Company, Executive shall resign, in writing, from all Board memberships and other positions then held by him, or to which he has been appointed, designated or nominated, with the Company and its Affiliates.

 

9.                                     Confidentiality .

 

(a)                                Executive acknowledges and agrees that the terms of this Agreement, including all addendums and attachments hereto, are confidential.  Executive agrees not to disclose any information contained in this Agreement, or the fact of this Agreement, to anyone, other than to Executive’s lawyer, financial advisor or immediate family members.  If Executive discloses any information contained in this Agreement to his lawyer, financial advisor or immediate family members as permitted herein, Executive agrees to immediately tell each such individual that he or she must abide by the confidentiality restrictions contained herein and keep such information confidential as well.

 

(b)                               Executive agrees that during his employment with the Company and thereafter, Executive will not, directly or indirectly (i) disclose any Confidential Information to any Person (other than, only with respect to the period that Executive is employed by the Company, to an Executive of the Company who requires such information to perform his or her duties for the Company); or (ii) use any Confidential Information for Executive’s own benefit or the benefit of any third party.  “Confidential Information” means confidential, proprietary or commercially sensitive information relating to (i) the Company or its Affiliates, or members of their management or boards; or (ii) any third parties who do business with the Company or its Affiliates, including customers and suppliers.  Confidential Information includes, without limitation, marketing plans, business plans, financial information and records, intellectual property, operation methods, personnel information, drawings, designs, information regarding product development, other commercial or business information and any other information not available to the public generally.  The foregoing obligation shall not apply to any Confidential Information that has been previously disclosed to the public or is in the public domain (other than by reason of a breach of Executive’s obligations to hold such Confidential Information confidential).  If Executive is required or requested by a court or governmental agency to disclose Confidential Information, Executive must notify the General Counsel of the Company in writing of such disclosure obligation or request no later than three business days after Executive learns of such obligation or request, and permit the Company to take all lawful steps it deems appropriate to prevent or limit the required disclosure.  The foregoing provisions of this Section 9(b) are in addition to the provisions set forth in the Company’s Code of Ethics Policy.

 

10.                             Partial Restraint on Post-Termination Competition .

 

(a)                                Definitions.  For the purposes of this Section 10, the following definitions shall apply:

 

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“Competitor” means any business, individual, partnership, joint venture, association, firm, corporation or other entity, other than the Company and its affiliates, that is engaging or actively planning to engage, wholly or partly, in activities (“Competitive Activities”) that directly compete or would compete with the Company or its affiliates in the Company Activities (as hereinafter defined) in the Territory (as hereinafter defined).

 

“Competitive Position” means (i) the direct or indirect ownership or control of all or any portion of a Competitor; or (ii) any employment or independent contractor arrangement with any Competitor whereby Executive will serve such Competitor in any managerial, sales, executive or consultant capacity with respect to Competitive Activities in the Territory.

 

“The Company Activities” means the businesses conducted by Seaboard Corporation, including, without limitation, (i) animal production (hogs and turkeys) and meat processing (pork and turkey); (ii) cargo transportation, whether over land or water and all related business, including, without limitation, logistics, freight forwarding, agency representation and stevedoring; (iii) commodity trading; (iv) flour milling; (v) generation and sale of electricity; and (vi) sugar production and processing.

 

“Non-Compete Period” or “Non-Solicitation Period” means the period beginning with the Commencement Date and ending: (i) one (1) year after the Date of Termination with respect to any termination prior to August 28, 2017, no matter whether terminated by the Company or by the Executive for any reason or no reason, or (ii) six (6) months after the Date of Termination with respect to any termination on or after August 28, 2017, no matter whether terminated by the Company or by the Executive for any reason or no reason.

 

“Territory” means the states, provinces and territories in the countries in which Seaboard Corporation operates with respect to each of the Company Activities.

 

(b)                               Non-Competition .

 

(i)                                   The parties hereto acknowledge that Executive, by virtue of his position with and responsibilities to the Company, is engaging and is expected to continue to engage during the Term in the Company Activities throughout the Territory and has executive management responsibilities with respect to the Company responsibilities which extend throughout the Territory.  Executive acknowledges that to protect adequately the interest of the Company in the business of the Company it is essential that any non-compete covenant with respect thereto cover all the Company Activities and the entire Territory.

 

(ii)                               Executive hereby agrees that, during the Non-compete Period, Executive will not, either directly or indirectly, alone or in conjunction with any other party, accept or enter into a Competitive Position.  Executive shall notify the Company promptly in writing if Executive receives an offer of a Competitive Position during the Non-compete Period, and such notice shall describe all material terms of such offer.

 

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Nothing contained in this Section 10 shall prohibit Executive from acquiring not more than five percent (5%) of any company whose common stock is publicly traded on a national securities exchange or in the over-the-counter market.

 

(c)                                Severability .  If a judicial or arbitral determination is made that any of the provisions of this Section 10 constitutes an unreasonable or otherwise unenforceable restriction against Executive the provisions of this Section 10 shall be rendered void only to the extent that such judicial or arbitral determination finds such provisions to be unreasonable or otherwise unenforceable with respect to Executive.  In this regard, Executive hereby agrees that any judicial or arbitral authority construing this Agreement shall sever or reform any portion of the Territory, any prohibited business activity or any time period from the coverage of this Agreement to allow the covenants in this Section 10 to be enforced to the maximum extent authorized by law, and shall then enforce the covenants in this Section 10 as so severed or reformed.

 

(d)                              Reasonable Restrictions .  Executive acknowledges that the restrictions and covenants contained in this Agreement are reasonably necessary to protect the goodwill and legitimate business interests of the Company, are not overbroad, overlong, or unfair (including in duration and scope), and will not curtail Executive’s ability to earn a livelihood upon Executive’s termination of employment with the Company.

 

11.                             Non-Solicitation of Employees and Customers .  During the period of Executive’s employment with the Company and for the one-year period following the termination of his employment, Executive shall not, directly or indirectly, by himself or through any third party, whether on Executive’s own behalf or on behalf of any other Person or entity, (i) solicit or endeavor to solicit, employ or retain; (ii) interfere with the relationship of the Company or any of its Affiliates with; or (iii) attempt to establish a business relationship with (A) any natural person who is or was (during Executive’s employment with the Company) an employee or engaged by the Company or any Affiliate to provide services to it, or (B) any customer of the Company or any of its Affiliates who was a customer at any time during which Executive was an employee of the Company.

 

12.                             Work Product .  Executive agrees that all of Executive’s work product (created solely or jointly with others, and including any intellectual property or moral rights in such work product), given, disclosed, created, developed or prepared in connection with Executive’s employment with the Company, whether ensuing during or after Executive’s employment with the Company (“Work Product”) shall exclusively vest in and be the sole and exclusive property of the Company and shall constitute “work made for hire” (as that term is defined under Section 101 of the U.S. Copyright Act, 17 U.S.C. § 101) with the Company being the person for whom the work was prepared.  In the event that any such Work Product is deemed not to be a “work made for hire” or does not vest by operation of law in the Company, Executive hereby irrevocably assigns, transfers and conveys to the Company, exclusively and perpetually, all right, title and interest which Executive may have or acquire in and to such Work Product throughout the world, including without limitation any copyrights and patents, and the right to secure registrations, renewals, reissues, and extensions thereof.  The Company and its Affiliates or their designees shall have the exclusive right to make full and complete use of, and make changes to all Work Product without restrictions or liabilities of any kind, and Executive shall not have the right to use any such materials, other than within the legitimate scope and purpose of Executive’s employment with the Company.  Executive shall

 

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promptly disclose to the Company the creation or existence of any Work Product and shall take whatever additional lawful action may be necessary, and sign whatever documents the Company may require, in order to secure and vest in the Company or its designee all right, title and interest in and to all Work Product and any intellectual property rights therein (including full cooperation in support of any Company applications for patents and copyright or trademark registrations).

 

13.                             Return of Company Property .  In the event of termination of Executive’s employment for any reason, Executive shall return to the Company all of the property of the Company and its Affiliates, including without limitation all materials or documents containing or pertaining to Confidential Information, and including without limitation, any company car, all computers (including laptops and I-Pads), cell phones, keys, PDAs, I-Phones, credit cards, facsimile machines, card access to any Company building, customer lists, computer disks, reports, files, e-mails, work papers, Work Product, documents, memoranda, records and software, computer access codes or disks and instructional manuals, internal policies, and other similar materials or documents which Executive used, received or prepared, helped prepare or supervised the preparation of in connection with Executive’s employment with the Company.  Executive agrees not to retain any copies, duplicates, reproductions or excerpts of such material or documents.

 

14.                             Compliance With Company Policies .  During Executive’s employment with the Company, Executive shall be governed by and be subject to, and Executive hereby agrees to comply with, all Company policies applicable to employees generally or to employees at Executive’s grade level, including without limitation, the Company’s Code of Business Ethics and Conduct, in each case, as any such policies may be amended from time to time in the Company’s sole discretion (collectively, the “Policies”).

 

15.                             Injunctive Relief with Respect to Covenants; Forum, Venue and Jurisdiction .  Executive acknowledges and agrees that a breach by Executive of any of Section 9, 10, 11, 12, 13 or 14 is a material breach of this Agreement and that remedies at law may be inadequate to protect the Company and its Affiliates in the event of such breach, and, without prejudice to any other rights and remedies otherwise available to the Company, Executive agrees to the granting of injunctive relief in the Company’s favor in connection with any such breach or violation without proof of irreparable harm, plus attorneys’ fees and costs to enforce these provisions.  Executive further acknowledges and agrees that the Company’s obligations to pay Executive any amount or provide Executive with any benefit or right pursuant to Section 8 is subject to Executive’s compliance with Executive’s obligations under Sections 9 through 14 inclusive, and that in the event of a breach by Executive of any of Section 9, 10, 11, 12, 13 or 14, the Company shall immediately cease paying such benefits and Executive shall be obligated to immediately repay to the Company all amounts theretofore paid to Executive pursuant to Section 8.  In addition, if not repaid, the Company shall have the right to set off from any amounts otherwise due to Executive any amounts previously paid pursuant to Section 8(f) (other than the Accrued Obligations).  Executive further agrees that the foregoing is appropriate for any such breach inasmuch as actual damages cannot be readily calculated, the amount is fair and reasonable under the circumstances, and the Company would suffer irreparable harm if any of these Sections were breached.  All disputes not relating to any request or application for injunctive relief in accordance with this Section 15 shall be resolved by arbitration in accordance with Section 18(b).

 

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16.                             Assumption of Agreement .  The Company shall require any Successor thereto, by agreement in form and substance reasonably satisfactory to Executive, to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place.  Failure of the Company to obtain such agreement prior to the effectiveness of any such succession shall be a breach of this Agreement and shall entitle Executive to compensation from the Company in the same amount and on the same terms as Executive would be entitled hereunder if the Company had terminated Executive’s employment Without Cause as described in Section 8, except that for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the Date of Termination.

 

17.                             Entire Agreement; Survival .  This Agreement constitutes the entire agreement among the parties hereto with respect to the subject matter hereof, and supersedes and replaces the Employment Agreement of Executive dated July 1, 2005, as amended.  All prior correspondence and proposals (including, but not limited to, summaries of proposed terms) and all prior promises, representations, understandings, arrangements and agreements relating to such subject matter are merged herein and superseded hereby.  The covenants and agreements set forth in Sections 6, 7, 8, 9, 12, 13, 14, 15, 16, 17 and 18 of this Agreement shall survive any termination of this Agreement or expiration of the term of this Agreement.

 

18.                             Miscellaneous .

 

(a)                                Binding Effect; Assignment .  This Agreement shall be binding on and inure to the benefit of the Company and its Successors and permitted assigns.  This Agreement shall also be binding on and inure to the benefit of Executive and his heirs, executors, administrators and legal representatives.  This Agreement shall not be assignable by any party hereto without the prior written consent of the other parties hereto.  The Company may effect such an assignment without prior written approval of Executive upon the transfer of all or substantially all of its business and/or assets (by whatever means), provided that the Successor to the Company shall expressly assume and agree to perform this Agreement in accordance with the provisions of Section 16.

 

(b)                               Arbitration .  The Company and Executive agree that any dispute or controversy arising under or in connection with this Agreement shall be resolved by final and binding arbitration before the American Arbitration Association (“AAA”).  The arbitration shall be conducted in accordance with AAA’s National Rules for the Resolution of Employment Disputes then in effect at the time of the arbitration.  The arbitration shall be held in the general Kansas City, Kansas metropolitan area.  The dispute shall be heard and determined by one arbitrator selected from a list of arbitrators who are members of AAA’s Regional Employment Dispute Resolution roster.  If the parties cannot agree upon a mutually acceptable arbitrator from the list, each party shall number the names in order of preference and return the list to AAA within ten (10) days from the date of the list.  A party may strike a name from the list only for good cause.  The arbitrator receiving the highest ranking by the parties shall be selected.  Depositions, if permitted by the arbitrator, shall be limited to a maximum of two (2) per party and to a maximum of four (4) hours in duration.  The arbitration shall not impair either party’s right to request injunctive or other equitable relief in accordance with Section 15 of this Agreement.

 

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(c)                                Governing Law .  This Agreement shall be governed by and construed in accordance with the laws of the State of Kansas without reference to principles of conflicts of laws.

 

(d)                              Taxes .  The Company may withhold from any payments made under this Agreement all applicable taxes, including, but not limited to, income, employment and social insurance taxes, as shall be required by law.

 

(e)                                Amendments .  No provision of this Agreement may be modified, waived or discharged unless such modification, waiver or discharge is approved by the Company and is agreed to in writing by Executive.  No waiver by any party hereto at any time of any breach by any other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time.  No waiver of any provision of this Agreement shall be implied from any course of dealing between or among the parties hereto or from any failure by any party hereto to assert its rights hereunder on any occasion or series of occasions.

 

(f)                                 Severability .  In the event that any one or more of the provisions of this Agreement shall be or become invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not be affected thereby.

 

(g)                               Notices .  Any notice or other communication required or permitted to be delivered under this Agreement shall be (i) in writing; (ii) delivered personally, by courier service or by certified or registered mail, first-class postage prepaid and return receipt requested; (iii) deemed to have been received on the date of delivery or, if mailed, on the third business day after the mailing thereof; and (iv) addressed as follows (or to such other address as the party entitled to notice shall hereafter designate in accordance with the terms hereof):

 

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(i)                                   If to the Company, to it at:

 

Seaboard Corporation

9000 West 67 th  Street

Shawnee Mission, Kansas  66202

Attention:

General Counsel

Telephone:

(913) 676-8925

Facsimile:

(913) 676-8978

 

(ii)                               if to Executive, to his residential address as currently on file with the Company.

 

(h)                               Voluntary Agreement; No Conflicts .  Executive represents that he is entering into this Agreement voluntarily and that Executive’s employment hereunder and compliance with the terms and conditions of this Agreement will not conflict with or result in the breach by Executive of any agreement to which he is a party or by which he or his properties or assets may be bound.

 

(i)                                   Counterparts/Facsimile .  This Agreement may be executed in counterparts (including by facsimile), each of which shall be deemed an original and all of which together shall constitute one and the same instrument.

 

(j)                                   Headings .  The section and other headings contained in this Agreement are for the convenience of the parties only and are not intended to be a part hereof or to affect the meaning or interpretation hereof.

 

(k)                               Certain Other Definitions .

 

“Affiliate” with respect to any Person, means any other Person that, directly or indirectly through one or more intermediaries, Controls, is Controlled by, or is under common Control with the first Person, including, but not limited to, a Subsidiary of any such Person.

 

“Control” (including, with correlative meanings, the terms “Controlling,” “Controlled by” and “under common Control with”):  with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise.

 

“Person” any natural person, firm, partnership, limited liability company, association, corporation, company, trust, business trust, governmental authority or other entity.

 

“Subsidiary” with respect to any Person, each corporation or other Person in which the first Person owns or Controls, directly or indirectly, capital stock or other ownership interests representing fifty percent (50%) or more of the combined voting power of the outstanding voting stock or other ownership interests of such corporation or other Person.

 

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“Successor” of a Person means a Person that succeeds to the assets and liabilities of Seaboard Corporation by merger, liquidation, dissolution or otherwise by operation of law, or a Person to which all or substantially all the assets and/or business of Seaboard Corporation are transferred.

 

(l)                                   The Employment Agreement is intended to comply with, or otherwise be exempt from, Section 409A.  The Company shall undertake to administer, interpret, and construe the Employment Agreement in a manner that does not result in the imposition to the Executive of additional taxes or interest under Section 409A.

 

(m)                           With respect to any reimbursement of expenses of, or any provision of in-kind benefits to, the Executive, as specified under the Employment Agreement, such reimbursement any expenses or provision of in-kind benefits that are Deferred Compensation shall be subject to the following conditions: (A) the expenses eligible for reimbursement or the amount of in-kind benefits provided in one taxable year shall not affect the expenses eligible for reimbursement or the amount of in-kind benefits provided in any other taxable year, except for any medical reimbursement arrangement providing for the reimbursement of expenses referred to in Section 105(b) of the Internal Revenue Code of 1986 and related regulations; (B) the reimbursement of an eligible expense shall be made no later than the end of the year after the year in which such expense was incurred; and (C) the right to reimbursement or in-kind benefits shall not be subject to liquidation or exchange for another benefit.

 

(n)                               “Termination of employment,” “termination,” “resignation” or words of similar import, as used in the Employment Agreement mean, for purposes of any payments of Deferred Compensation under the Employment Agreement, the Executive’s “separation from service” as defined in Section 409A; provided that for this purpose, a “separation from service” is deemed to occur on the date that the Company and the Executive reasonably anticipate that the level of bona fide services the Executive would perform after that date (whether as an employee or independent contractor) would permanently decrease to no more than twenty percent (20%) of the average level of bona fide services provided in the immediately preceding thirty-six (36) months.

 

IN WITNESS WHEREOF, the Company has duly executed this Agreement by its authorized representatives, and Executive has hereunto set his hand, in each case effective as of the date first above written.

 

 

THIS AGREEMENT CONTAINS A PROVISION REQUIRING THAT ARBITRATION PURSUANT TO THE AMERICAN ARBITRATION ASSOCIATION NATIONAL RULES FOR THE RESOLUTION OF EMPLOYMENT DISPUTES IS THE EXCLUSIVE MEANS FOR RESOLVING ANY DISPUTE BETWEEN THE PARTIES HERETO AS TO THIS AGREEMENT.

 

(SIGNATURES ON NEXT PAGE)

 

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SEABOARD CORPORATION

 

 

 

 

 

By:

 

/s/ Steven J. Bresky

 

 

Name:

 

Steven J. Bresky

 

 

Title:

 

President

 

 

 

 

 

 

Executive:

 

 

 

 

 

 

 

By:

 

/s/ Robert L. Steer

 

 

Robert L. Steer

 

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RELEASE AND DISCHARGE OF ALL CLAIMS

 

This Release and Discharge of All Claims (“Release”) is made and entered into by and between                                                                    (hereinafter “You”), and Seaboard Corporation, a Delaware corporation (“Seaboard”).

 

For and in consideration of the following promises, the parties agree to the following:

 

1.                                     You acknowledge that your employment with Seaboard has ended effective                                in accordance with the terms of the Employment Agreement between You and Seaboard (“Employment Agreement”).

 

2.                                     Subject to the conditions set forth in Section 8(f)(i) of the Employment Agreement, Seaboard agreed to pay You the amounts described in said Section 8(f)(i) (“Severance”) and take certain actions.  The effectiveness of this Release is conditioned on Seaboard making the payments and taking the actions provided in Section 8(f)(i).  If such payments are not made or such actions are not taken, this Release shall be of no effect.

 

3.                                     You agree to, and do, hereby remiss, release and forever discharge Seaboard, and any and all companies affiliated with Seaboard, and their respective agents, officers, employees, successors and assigns (hereinafter collectively the “Released Parties”), from and against any and all matters, claims, demands, damages, causes of action, debts, liabilities, controversies, judgments, and suits of every kind and nature whatsoever, foreseen, unforeseen, known or unknown, which You now have, or hereinafter may have against Seaboard based on any and all aspects of your employment with Seaboard or the termination of You prior to the date hereof.  This release of claims includes, but is not limited to, any rights or claims You may have under Title VII of the Civil Rights Act of 1964, as amended; the Equal Pay Act; the Age Discrimination in Employment Act of 1967, as amended; the Employment Retirement Income Security Act; the Omnibus Budget Reconciliation Act; the Americans With Disabilities Act; the Family and Medical Leave Act of 1993; the Kansas Acts Against Discrimination; the Kansas Age Discrimination in Employment Act; the Fair Labor Standard Act; any claims for wrongful discharge or breach of contract; severance; claims under worker’s compensation laws; or any other federal, state or local laws or regulations relating to employment and wages arising from events occurring prior to the date of execution of this Agreement.  You agree that this Agreement includes a release of all claims based on theories of contract or tort (e.g., negligent or intentional infliction of emotional distress, defamation, assault, battery, false imprisonment, wrongful termination, etc.), whether based on common law or otherwise.  The foregoing list is meant to be illustrative rather than exhaustive.  Further, You declare that as of the date of this Agreement, You have not suffered any on the job or work-related accident, injury, occupational disease or disability whether temporary, permanent, partial or total.

 



 

YOU ACKNOWLEDGE AND AGREE THAT THIS RELEASE IS A FULL AND FINAL BAR TO ANY AND ALL CLAIMS OF ANY TYPE THAT YOU MAY NOW HAVE AGAINST ANY OF THE RELEASED PARTIES.

 

4.                                     You waive the rights and claims set forth above, and also agree not to institute, or have instituted, a lawsuit against any of the Released Parties on any such claims or rights or to submit or file any charges, claims, complaints or actions with any agency, court, organization, or judicial forum.  You further acknowledge and agree that with respect to the rights and claims You are waiving, You are waiving not only your right to recover money or any other relief action You might commence, but also your rights to recover any action brought on your behalf by any other party, including, but not limited to the United States Equal Employment Opportunity Commission or any other federal, state, or local governmental agency or department.

 

5.                                     Notwithstanding the foregoing, this Release shall not constitute any release or waiver of any claims for retirement benefits, insurance or welfare benefits or any other benefits of employment with Seaboard which accrued or arose prior to the date your employment ended and in which You are vested.

 

6.                                     The parties to this Agreement agree that nothing in this Agreement is an admission by any party hereto of any wrongdoing, either in violation of an applicable law or otherwise, and that nothing in this Agreement is to be construed as such by any person.

 

7.                                    You and Seaboard agree that neither will publicize this Agreement either directly or indirectly, either in specific or as to general content, to either the public generally, to any employee of Seaboard or to any other person.

 

8.                                  You hereby acknowledge that You have been advised to consult an attorney, and that You fully understand the Agreement and the effect of signing the Agreement.  You further represent, declare and agree that You voluntarily accept the payment described above for the purposes of making a full and final compromise, adjustment and settlement of all claims hereinabove described.

 

9.                                     The foregoing Agreement, together with your Employment Agreement, constitutes the entire agreement among the parties and there are no other understandings or agreements, written or oral, between them on the subject.  Separate copies of this document shall constitute original documents which may be signed separately, but which together will constitute one single agreement.

 

10.                             You covenant and agree as follows:

 

a.                                      You shall protect and safeguard the trade secrets and confidential and proprietary information of Seaboard and its parent and subsidiaries and affiliate companies, including, but not limited to, the identity of its customers and suppliers, its

 

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arrangements with customers and suppliers, and its technical and financial data, records, compilations of information, processes and specification relating to its customers, suppliers, products and services;

 

b.                                     You shall not disclose any of such trade secrets and confidential and proprietary information;

 

c.                                      You shall not use, directly or indirectly, for your own benefit or for the benefit of another, any of such trade secrets and confidential and proprietary information; and

 

d.                                    You agree not to make any disparaging comment in any format, whether written, electronic or oral, to any customer, employee, the press or any other individual or entity regarding Seaboard that relates to Seaboard’s business or related activities or the relationship between the parties.

 

11.                             All files, records, documents, drawings, specifications, memoranda, notes, or other documents relating to the business of Seaboard, whether prepared by You or otherwise coming into your possession, shall be the exclusive property of Seaboard, and shall be delivered to Seaboard and not retained by You for any reason whatsoever.  It is expressly agreed that the remedy at law for the breach of any such covenant is inadequate and injunctive relief shall be available to prevent the breach or any threatened breach thereof.

 

12.                             You acknowledge that You have been given at least twenty-one (21) days within which to consider this Agreement before its execution.  You agree that any changes made to this Release (whether material or not) must be made in writing, be signed and dated by both parties, and does not restart the running of the twenty-one (21) day period.  This Agreement shall not become effective until seven (7) calendar days after the date of execution.  During this seven (7) day period, You may revoke the Agreement.  After said seven (7) day period, You acknowledge that this Agreement becomes final and binding.

 

13.                             This Agreement shall be construed and governed by the laws of the State of Kansas.

 

THE PARTIES HAVE READ, UNDERSTOOD AND FULLY CONSIDERED THIS RELEASE AND DISCHARGE OF ALL CLAIMS, AND ARE MUTUALLY DESIROUS OF ENTERING INTO SUCH RELEASE AND DISCHARGE OF ALL CLAIMS.  THE TERMS OF THIS RELEASE AND DISCHARGE OF ALL CLAIMS ARE THE PRODUCT OF MUTUAL NEGOTIATION AND COMPROMISE BETWEEN THE PARTIES, HAVING ELECTED TO EXECUTE THIS RELEASE AND DISCHARGE OF ALL CLAIMS, TO FULFILL THE PROMISES SET FORTH HEREIN, AND TO RECEIVE THEREBY THE COMPENSATION SET FORTH IN THE EMPLOYMENT AGREEMENT.  THE PARTIES FREELY AND KNOWINGLY, AND AFTER DUE CONSIDERATION, VOLUNTARILY ENTER INTO THIS RELEASE AND DISCHARGE OF ALL CLAIMS.

 

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IN WITNESS WHEREOF, the undersigned parties have executed this Settlement Agreement and Release.

 

 

 

 

SEABOARD CORPORATION

 

 

 

 

 

 

 

 

Date:

 

 

By:

 

 

 

Company Representative

 

 

 

 

Date:

 

 

By:

 

 

 

Employee

 

 

 

STATE OF

 

 

)

 

 

 

 

 

) ss

 

 

COUNTY OF

 

 

)

 

 

 

On this          day of                        , 20      , before me                        , to me personally known, who, after being duly sworn, acknowledged that he/she executed the foregoing Agreement and Release as his/her free act and deed.

 

IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official seal the day and year first above written.

 

 

 

 

 

 

Notary Public

 

 

My commission expires:

 

 

 

 

 

 

 

 

 

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Exhibit 10.18

 

EMPLOYMENT AGREEMENT

 

This EMPLOYMENT AGREEMENT (this “Agreement”) is entered into as of December 21, 2012 by and between SEABOARD FOODS LLC , an Oklahoma limited liability company (together with any Successor thereto, the “Company”), and Terry J. Holton (“Executive”).

 

WITNESSETH:

 

WHEREAS, the Company desires to employ and secure the exclusive services of Executive on the terms and conditions set forth in this Agreement; and

 

WHEREAS, Executive desires to accept such employment on such terms and conditions;

 

NOW, THEREFORE, in consideration of the premises and the mutual covenants and promises contained herein and for other good and valuable consideration, the Company and Executive hereby agree as follows:

 

1.                                     Agreement to Employ .  Upon the terms and subject to the conditions of this Agreement, the Company hereby agrees to continue to employ Executive, and Executive hereby accepts such continued employment with the Company.

 

2.                                     Term; Position and Responsibilities; and Location .

 

(a)                                Term of Employment .  Unless Executive’s employment shall sooner terminate pursuant to Section 8, the Company shall continue to employ Executive on the terms and subject to the conditions of this Agreement for a term commencing as of the date of this Agreement (the “Commencement Date”) and ending on December 31, 2015; provided, however, on December 31, 2013 and on each annual anniversary date of December 31, 2013 (an “Annual Anniversary Date”) through December 31, 2015, Executive’s employment hereunder shall be deemed to be automatically extended, upon the same terms and conditions for three (3) years after such Annual Anniversary Date, unless the Company shall have given written notice to Executive, at least thirty (30) days prior to the expiration of such Annual Anniversary Date, of its intention not to extend the Employment Period (as defined below) hereunder.  As such, on December 31, 2015, the remaining term will be for three (3) years; on December 31, 2016, the remaining term will be for two (2) years; and on December 31, 2017, the remaining term will be for one (1) year.  Beginning with the December 31, 2018 Anniversary Date and each Anniversary Date thereafter, Executive’s employment hereunder shall be deemed to be automatically extended, upon the same terms and conditions for one (1) year after such Annual Anniversary Date, unless the Company shall have given written notice to Executive, at least thirty (30) days prior to the expiration of such Annual Anniversary Date, of its intention not to extend the Employment Period (as defined below) hereunder.  Notwithstanding the foregoing, unless mutually agreed to by the Company and the Executive, Executive’s employment hereunder shall under no circumstances extend beyond December 31, 2021.  The period during which Executive is employed by the Company pursuant to this Agreement, including any extension thereof in accordance with the preceding sentence, shall be referred to as the “Employment Period.”

 



 

(b)                               Position and Responsibilities .  During the Employment Period, Executive shall serve as President and Chief Executive Officer of Seaboard Foods LLC, and shall have such duties and responsibilities as are customarily assigned to individuals serving in such position and such other duties consistent with Executive’s title and position as the Board of Directors of the Company (the “Board”) specifies from time to time.  Executive shall devote all of his skill, knowledge, commercial efforts and business time to the conscientious and good faith performance of his duties and responsibilities for the Company to the best of his ability.

 

(c)                                Location .  During the Employment Period, Executive’s services shall be performed primarily in the Kansas City metropolitan area.  However, Executive may be required to travel in and outside of Kansas City as the needs of the Company’s business dictate.

 

3.                                     Base Salary .  Commencing January 1, 2012, the Company shall pay Executive a base salary at an annualized rate of four hundred twenty thousand dollars ($420,000), payable in installments on the Company’s regular payroll dates.  The Board shall review Executive’s base salary annually during the Employment Period and may increase (but not decrease without the prior written consent of Executive) such base salary from time to time, based on its periodic review of Executive’s performance in accordance with the Company’s regular policies and procedures.  The annual base salary payable to Executive from time to time under this Section 3 shall hereinafter be referred to as the “Base Salary.”

 

4.                                     Annual Bonus Compensation .  Executive shall be eligible to receive an annual bonus (“Annual Bonus”) with respect to each calendar year ending during the Employment Period.  The Annual Bonus shall be determined under the Company’s Executive Officers’ Bonus Plan or such other annual bonus plan maintained by the Company for similarly situated Executives that the Company designates, in its sole discretion (any such plan, the “Bonus Plan”), in accordance with the terms of such plan as in effect from time to time.  Executive’s Annual Bonus shall not be less than five hundred thousand dollars ($500,000) for any calendar year during the Employment Period.  The Annual Bonus is earned pro-rata throughout each year, unless Executive’s employment is terminated by the Company pursuant to Section 8(b) for Cause, in which case, the Annual Bonus shall not be earned or paid for service during the year of the Date of Termination.  The Annual Bonus for each year shall be payable in cash on or before March 1 of the following year.

 

5.                                     Car Allowance .  During Executive’s Employment Period, Executive will be entitled to receive an annual car allowance and gasoline charge privileges in accordance with the Company’s car allowance policy.

 

6.                                     Executive Benefits .

 

(a)                                During the Employment Period and thereafter for so long as Executive continues to be employed by the Company or affiliate, Executive will be eligible to participate in the employee and executive benefit plans and programs maintained by the Company from time to time in which executives of the Company at Executive’s grade level are eligible to participate, including medical, dental, disability, hospitalization, life insurance, and retirement (i.e., 401K, pension and

 

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executive retirement plans), deferred compensation and savings plans, on the terms and subject to the conditions set forth in such plans; as may be amended from time to time.

 

(b)                               Executive shall continue to be a participant in the Seaboard Corporation 409A Executive Retirement Plan, Amended and Restated Effective January 1, 2009, as amended and restated by that Seaboard Corporation 409A Executive Retirement Plan Amended and Restated Effective January 1, 2013 (“SERP”), during the Employment Period, and thereafter for so long as Executive continues to be employed by the Company or affiliate.  Executive consents to the January 1, 2013 amendments made to the SERP.  During the Employment Period and thereafter, the Company shall not make any further amendment to the SERP that would adversely affect or reduce the benefit that will accrue or be paid to Executive under the SERP, it being understood that the formula to calculate the benefit may result in a reduction in benefits, such as if there is an increase in the 30 year U.S. Treasury Rate.  The preceding sentence shall not apply to amendments made in order to conform the SERP to applicable changes in law; provided, however, in the event an amendment made in order to conform the SERP to applicable changes in law results in a reduction to the accrued benefit or the benefit that will accrue to Executive, the Company shall establish an alternative provision or plan that will provide a benefit to Executive that is substantially equal to the benefits reduced in the SERP as a result of such amendment.  To be certain, if any such amendment to the SERP is made to conform the SERP to applicable law and this results in an increase to the federal or state income taxes payable upon receipt of the Accrued Benefit, the Company shall not establish an alternative provision or plan that will pay or reimburse Employee for such taxes.

 

(c)                                For purposes of calculating the benefit payable under the SERP, the Company and Executive agree that: (i) if Executive remains employed with the Company through June 1, 2017, the Final Average Earnings shall equal $1,000,000; and (ii) if the Executive’s employment with the Company is terminated prior to June 1, 2017, the Final Average Earnings shall not exceed $1,000,000.

 

(d)                              As a retention incentive to encourage Executive to continue in the employment of the Company, notwithstanding that the Years of Accrual Service Limit set forth in the SERP limits Executive’s Years of Accrual Service to a maximum of twenty (20) Years of Accrual Service, Executive shall accrue an additional .44 Year of Accrual Service pursuant to the SERP, so long as the Executive completes another .44 Year of Accrual Service after December 31, 2016.  The terms used herein shall have the meaning given to such term in the SERP.

 

7.                                     Indemnification; Expenses; Paid Time Off .

 

(a)                                Indemnification .  Except to the extent, if any, prohibited by law, the Company shall indemnify Executive against expenses (including attorneys’ fees of counsel selected by Executive), judgments, fines and amounts paid in settlement actually and reasonably incurred by Executive in connection with any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, to which Executive was, is, or is threatened to be, made a party by reason of facts which include Executive’s being or having been an employee, officer, director or agent of the Company or any Affiliates.  Except to the extent, if any, prohibited by law, the Company shall pay expenses (including attorneys’ fees of counsel selected by Executive)

 

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actually and reasonably incurred by Executive in defending any such action, suit or proceeding in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by Executive to repay such amounts so paid on Executive’s behalf if it shall ultimately be determined that Executive is not entitled to be indemnified by the Company for such expenses under applicable law.  The provisions of this Section 7(a) shall (i) survive termination of this Agreement; and (ii) not be deemed exclusive of any other indemnification or expense rights to which Executive may be entitled.

 

(b)                               Business Expenses .  During the Employment Period, the Company will reimburse Executive for all reasonable and necessary business-related expenses incurred by Executive at the request of and on behalf of the Company in accordance with the Company’s normal expense reimbursement policies.

 

(c)                                Paid Time Off .  During the Employment Period, Executive shall be entitled to paid time off on an annualized basis in accordance with the Company’s paid time off policy.  Executive shall also be entitled to Company-designated holidays.

 

8.                                     Termination of Employment .

 

(a)                                Termination Due to Death or Disability .  Executive’s employment shall automatically terminate upon Executive’s death and may be terminated by the Company due to Executive’s Disability (as defined below in this subsection (a)).  In the event that Executive’s employment is terminated due to his Disability or death, no termination benefits shall be payable to or in respect of Executive except as provided in Section 8(f)(ii).  For purposes of this Agreement, “Disability” means a physical or mental disability that prevents or would prevent the performance by Executive of his duties hereunder for a continuous period of six months or longer.  The determination of Executive’s Disability will be made by an independent physician agreed to by the parties.  If the parties are unable to agree within ten (10) days after a request for designation by a party, then the Company and the Executive shall each select a physician, and the two (2) physicians selected shall select a third physician.  The three (3) physicians so selected shall make a determination of the Executive’s Disability, as determined by at least two (2) of the three (3) physicians selected.  Such determination shall be final and binding on the parties hereto, and shall be based on such competent medical evidence as shall be presented to such physicians by Executive and/or the Company or by any physician or group of physicians or other competent medical experts employed by Executive and/or the Company to advise such physicians.

 

(b)                               Termination by the Company for Cause .  Executive’s employment may be terminated by the Company for Cause (as defined below in this subsection (b)).  In the event of a termination of Executive’s employment by the Company for Cause, Executive shall be paid the termination benefits, as provided in clauses (x) and (z) of in Section 8(f)(i).  For purposes of this Agreement, “Cause” means (i) a material breach by Executive of any provision of this Agreement; (ii) a material violation by Executive of any Policy (as defined in Section 14), resulting in material injury to the Company; (iii) Executive’s willful misconduct or gross negligence that has caused or is reasonably expected to result in material injury to the business, reputation or prospects of the Company or any of its Affiliates; (iv) Executive’s material fraud or misappropriation of funds; or

 

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(v) the commission by Executive of a felony involving moral turpitude; provided that no termination under clauses (i) or (ii) shall be effective unless Company shall have given Executive notice of the event or events constituting Cause and Executive shall have failed to cure such event or events within thirty (30) business days after receipt of such notice.

 

(c)                                Termination Without Cause .  Executive’s employment may be terminated by the Company Without Cause (as defined below in this subsection (c)) at any time.  In the event of a termination of Executive’s employment by the Company Without Cause, the Executive shall be paid the termination benefits as provided in Section 8(f)(i).  For purposes of this Agreement, a termination “Without Cause” shall mean a termination of Executive’s employment by the Company other than due to Executive’s death or Disability as described in Section 8(a) and other than for Cause as described in Section 8(b).

 

(d)                              Termination by Executive .  Executive may resign from his employment for any reason, including for Good Reason (as defined below in this subsection (d)).  In the event of a termination of Executive’s employment by Executive’s resignation other than for Good Reason, no termination benefits shall be payable to or in respect of Executive except as provided in Section 8(f)(ii) and in the event of a termination of Executive’s employment by Executive for Good Reason, no termination benefits shall be payable to or in respect of Executive except as provided in Section 8(f)(i).  For purposes of this Agreement, a termination of employment by Executive for “Good Reason” shall mean a resignation by Executive from his employment with the Company within one hundred eighty (180) days following the initial occurrence, without Executive’s consent, of any one or more of the following events: (i) a material diminution in the Executive’s authority, duties or responsibilities; (ii) a material change in the geographic location where Executive primarily performs his services; or (iii) any other material breach by the Company of any material provision of this Agreement; provided that the Executive shall have given the Company notice of the occurrence of the event or events constituting Good Reason within ninety (90) days following the initial occurrence of such event or such events and the Company shall have failed to cure such event or events (to the extent capable of being cured) within thirty (30) business days after receipt of such notice.

 

(e)                                Notice of Termination; Date of Termination .

 

(i)                                   Notice of Termination .  Any termination of Executive’s employment by the Company or by Executive (other than as a result of Executive’s death) shall be communicated by a written Notice of Termination addressed to the other party to this Agreement.  A “Notice of Termination” shall mean a notice stating that Executive or the Company, as the case may be, is electing to terminate Executive’s employment with the Company (and thereby terminating the Employment Period), stating the proposed effective date of such termination, indicating the specific provision of this Section 8 under which such termination is being effected and, if applicable, setting forth in reasonable detail the circumstances claimed to provide the basis for such termination.  Any Notice of Termination given by an Executive must specify an effective date of termination which is at least thirty (30) days after the giving of the Notice of Termination.

 

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(ii)                               Date of Termination .  The term “Date of Termination” shall mean (i) if Executive’s employment is terminated by his death, the date of his death; and (ii) if Executive’s employment is terminated for any other reason, the effective date of termination specified in such Notice of Termination.  The Employment Period shall expire on the Date of Termination.

 

(f)                                 Payments Upon Certain Terminations .

 

(i)                                   In the event of a termination of Executive’s employment by the Company Without Cause or by Executive’s resignation from employment for Good Reason during the Employment Period, the Company shall pay to Executive (or, following his death, to Executive’s estate), within thirty (30) days of the Date of Termination, (x) his Base Salary through the Date of Termination, to the extent not previously paid; (y) the pro-rata amount of the Annual Bonus (based on the amount paid for the previous year) which is accrued through the date of termination; and (z) reimbursement for any unreimbursed business expenses incurred by Executive prior to the Date of Termination that are subject to reimbursement pursuant to the terms hereof, and payment for paid time off accrued as of the Date of Termination but unused (such amounts under clauses (x), (y) and (z), collectively the “Accrued Obligations”).  In addition, in the event of any such termination of Executive’s employment, if Executive executes and delivers to the Company a Release and Discharge of All Claims substantially in the form attached hereto (“Release”) within thirty (30) days after the Date of Termination, Executive shall be entitled to the following payments and benefits (provided, however, in the event of Executive’s death following the Date of Termination but prior to delivery of the executed Release, the following payments shall be paid to Executive’s estate, notwithstanding that the Release has not been executed):

 

(A)                           the Executive’s Base Salary (at the Base Salary being paid on the Date of Termination), for the longer of: (x) the remaining Employment Period (assuming Executive’s employment had not terminated) or (y) one (1) year (the “Severance Period”), payable in installments in accordance with the Company’s regular payroll policies for one year after the Date of Termination, with the first installment being paid on the Company’s regular pay date following the day which is thirty (30) days after the Date of Termination (the “Payment Commencement Date”) (with the first installment being the sum of the Base Salary installments from the Date of Termination through the Payment Commencement Date and with subsequent installments being based on the Base Salary), and with the balance, if any, being paid pursuant to a lump sum payment on the one year anniversary date of the Date of Termination; and

 

(B)                            the Executive’s Annual Bonus (at the amount of the Annual Bonus paid to the Executive for the year prior to the Date of Termination) which would have been paid to the Executive had Executive’s employment continued for the Severance Period, duly apportioned for any partial year, such amount to be payable to Executive on the one year anniversary date of the Date of Termination; and

 

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(C)                            the Executive shall automatically vest in all employee welfare and benefit plans in which the Executive was participating as of the Date of Termination and such benefits shall be paid to Executive in accordance with the terms of such plans; and

 

(D)                           the Company shall provide outplacement services to Executive for up to ninety (90) days.

 

(E)                             The Company and Executive agree that each payment made by the Company to Executive pursuant to subsections (A) and (B) of this Section 8(f)(i) shall be deemed to be a separate and distinct payment for purposes of Internal Revenue Code Section 409A and the related regulations, as opposed to an annuity or other collective series of payments.

 

(F)                              Notwithstanding anything to the contrary contained herein, to the extent the aggregate amount to be paid to the Executive pursuant to Subsections (A) and (B) of this Section 8(f)(i) during the six (6) months following the Date of Termination exceeds two (2) times the maximum amount that may be taken into account under a qualified retirement plan pursuant to Section 401(a)(17) of the Internal Revenue Code of 1986, as amended (“Code”), for the calendar year of such Date of Termination (the “401(a)(17) Limit”), then payment of such amount that is in excess of two (2) times the 401(a)(17) Limit shall not be paid during the sixth (6) months following the Date of Termination but instead shall be paid in a lump sum payment on the next day after the date which is six (6) months following the Date of Termination.

 

Executive shall not have a duty to mitigate the costs to the Company under this Section 8(f)(i), nor shall any payments from the Company to Executive hereunder be reduced, offset or canceled by any compensation or fees earned by (whether or not paid currently) or offered to Executive during the remainder of the fiscal year of the Company that includes the Date of Termination by a subsequent employer or other Person (as defined below in Section 18(k) below) for which Executive performs services, including, but not limited to, consulting services.  The foregoing shall not relieve Executive of the non-competition prohibitions provided in Section 10 below.

 

(ii)                               If Executive’s employment shall terminate upon his death or due to Executive’s Disability or Executive shall resign from his employment without Good Reason, in any such case during the Employment Period, the Company shall pay to Executive (or, in the event of Executive’s death, to his estate) the Accrued Obligations within thirty (30) days following the Date of Termination.  If the Company shall terminate Executive’s employment for Cause, the Company shall pay Executive the termination benefits, as provided in clauses (x) and (z) of Section 8(f)(i).

 

(iii)                           Except as specifically set forth in this Section 8(f), no termination benefits shall be payable to or in respect of Executive’s employment with the Company or its Affiliates.

 

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(iv)                           The Company shall have the right to apply and set off against the Accrued Obligations or any other amounts owing to Executive hereunder, any amounts owing by the Executive to the Company, whether pursuant to this Agreement or otherwise.  Notwithstanding the foregoing, such set off shall not accelerate the time or schedule of a payment of Deferred Compensation except as permitted under Treasury Regulation Section 1.409A-3(j)(4)(xiii).

 

(g)                               Resignation upon Termination .  Effective as of any Date of Termination under this Section 8 or otherwise as of the date of Executive’s termination of employment with the Company, Executive shall resign, in writing, from all Board memberships and other positions then held by him, or to which he has been appointed, designated or nominated, with the Company and its Affiliates.

 

9.                                     Confidentiality .

 

(a)                                Executive acknowledges and agrees that the terms of this Agreement, including all addendums and attachments hereto, are confidential.  Executive agrees not to disclose any information contained in this Agreement, or the fact of this Agreement, to anyone, other than to Executive’s lawyer, financial advisor or immediate family members.  If Executive discloses any information contained in this Agreement to his lawyer, financial advisor or immediate family members as permitted herein, Executive agrees to immediately tell each such individual that he or she must abide by the confidentiality restrictions contained herein and keep such information confidential as well.

 

(b)                               Executive agrees that during his employment with the Company and thereafter, Executive will not, directly or indirectly (i) disclose any Confidential Information to any Person (other than, only with respect to the period that Executive is employed by the Company, to an Executive of the Company who requires such information to perform his or her duties for the Company); or (ii) use any Confidential Information for Executive’s own benefit or the benefit of any third party.  “Confidential Information” means confidential, proprietary or commercially sensitive information relating to (i) the Company or its Affiliates, or members of their management or boards; or (ii) any third parties who do business with the Company or its Affiliates, including customers and suppliers.  Confidential Information includes, without limitation, marketing plans, business plans, financial information and records, intellectual property, operation methods, personnel information, drawings, designs, information regarding product development, other commercial or business information and any other information not available to the public generally.  The foregoing obligation shall not apply to any Confidential Information that has been previously disclosed to the public or is in the public domain (other than by reason of a breach of Executive’s obligations to hold such Confidential Information confidential).  If Executive is required or requested by a court or governmental agency to disclose Confidential Information, Executive must notify the General Counsel of the Company in writing of such disclosure obligation or request no later than three business days after Executive learns of such obligation or request, and permit the Company to take all lawful steps it deems appropriate to prevent or limit the required disclosure.  The foregoing

 

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provisions of this Section 9(b) are in addition to the provisions set forth in the Company’s Code of Ethics Policy.

 

10.                             Partial Restraint on Post-Termination Competition .

 

(a)                                Definitions.  For the purposes of this Section 10, the following definitions shall apply:

 

“Competitor” means any business, individual, partnership, joint venture, association, firm, corporation or other entity, other than the Company and its affiliates, that is engaging or actively planning to engage, wholly or partly, in activities (“Competitive Activities”) that directly compete or would compete with the Company or its affiliates in the Company Activities (as hereinafter defined) in the Territory (as hereinafter defined).

 

“Competitive Position” means (i) the direct or indirect ownership or control of all or any portion of a Competitor; or (ii) any employment or independent contractor arrangement with any Competitor whereby Executive will serve such Competitor in any managerial, sales, executive or consultant capacity with respect to Competitive Activities in the Territory.

 

“The Company Activities” means the businesses of the Company, including, without limitation, hog production and pork processing.

 

“Non-Compete Period” or “Non-Solicitation Period” means the period beginning with the Commencement Date and ending: (i) one (1) year after the Date of Termination with respect to any termination prior to June 1, 2017, no matter whether terminated by the Company or by the Executive for any reason or no reason; or (ii) six (6) months after the Date of Termination with respect to any termination on or after June 1, 2017, no matter whether terminated by the Company or by the Executive for any reason or no reason.

 

“Territory” means the states, provinces and territories in the countries in which the Company operates or markets products with respect to each of the Company Activities.

 

(b)                               Non-Competition .

 

(i)                                   The parties hereto acknowledge that Executive, by virtue of his position with and responsibilities to the Company, is engaging and is expected to continue to engage during the Term in the Company Activities throughout the Territory and has executive management responsibilities with respect to the Company responsibilities which extend throughout the Territory.  Executive acknowledges that to protect adequately the interest of the Company in the business of the Company it is essential that any non-compete covenant with respect thereto cover all the Company Activities and the entire Territory.

 

(ii)                               Executive hereby agrees that, during the Non-compete Period, Executive will not, either directly or indirectly, alone or in conjunction with any other party, accept or enter into a Competitive Position.  Executive shall notify the Company promptly in

 

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writing if Executive receives an offer of a Competitive Position during the Non-compete Period, and such notice shall describe all material terms of such offer.

 

Nothing contained in this Section 10 shall prohibit Executive from acquiring not more than five percent (5%) of any company whose common stock is publicly traded on a national securities exchange or in the over-the-counter market.

 

(c)                                Severability .  If a judicial or arbitral determination is made that any of the provisions of this Section 10 constitutes an unreasonable or otherwise unenforceable restriction against Executive the provisions of this Section 10 shall be rendered void only to the extent that such judicial or arbitral determination finds such provisions to be unreasonable or otherwise unenforceable with respect to Executive.  In this regard, Executive hereby agrees that any judicial or arbitral authority construing this Agreement shall sever or reform any portion of the Territory, any prohibited business activity or any time period from the coverage of this Agreement to allow the covenants in this Section 10 to be enforced to the maximum extent authorized by law, and shall then enforce the covenants in this Section 10 as so severed or reformed.

 

(d)                              Reasonable Restrictions .  Executive acknowledges that the restrictions and covenants contained in this Agreement are reasonably necessary to protect the goodwill and legitimate business interests of the Company, are not overbroad, overlong, or unfair (including in duration and scope), and will not curtail Executive’s ability to earn a livelihood upon Executive’s termination of employment with the Company.

 

11.                             Non-Solicitation of Employees and Customers .  During the period of Executive’s employment with the Company and for the one-year period following the termination of his employment, Executive shall not, directly or indirectly, by himself or through any third party, whether on Executive’s own behalf or on behalf of any other Person or entity, (i) solicit or endeavor to solicit, employ or retain; (ii) interfere with the relationship of the Company or any of its Affiliates with; or (iii) attempt to establish a business relationship with (A) any natural person who is or was (during Executive’s employment with the Company) an employee or engaged by the Company or any Affiliate to provide services to it, or (B) any customer of the Company or any of its Affiliates who was a customer at any time during which Executive was an employee of the Company.

 

12                                 Work Product .  Executive agrees that all of Executive’s work product (created solely or jointly with others, and including any intellectual property or moral rights in such work product), given, disclosed, created, developed or prepared in connection with Executive’s employment with the Company, whether ensuing during or after Executive’s employment with the Company (“Work Product”) shall exclusively vest in and be the sole and exclusive property of the Company and shall constitute “work made for hire” (as that term is defined under Section 101 of the U.S. Copyright Act, 17 U.S.C. § 101) with the Company being the person for whom the work was prepared.  In the event that any such Work Product is deemed not to be a “work made for hire” or does not vest by operation of law in the Company, Executive hereby irrevocably assigns, transfers and conveys to the Company, exclusively and perpetually, all right, title and interest which Executive may have or acquire in and to such Work Product throughout the world, including without limitation any copyrights and patents, and the right to secure registrations, renewals, reissues, and extensions

 

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thereof.  The Company and its Affiliates or their designees shall have the exclusive right to make full and complete use of, and make changes to all Work Product without restrictions or liabilities of any kind, and Executive shall not have the right to use any such materials, other than within the legitimate scope and purpose of Executive’s employment with the Company.  Executive shall promptly disclose to the Company the creation or existence of any Work Product and shall take whatever additional lawful action may be necessary, and sign whatever documents the Company may require, in order to secure and vest in the Company or its designee all right, title and interest in and to all Work Product and any intellectual property rights therein (including full cooperation in support of any Company applications for patents and copyright or trademark registrations).

 

13.                             Return of Company Property .  In the event of termination of Executive’s employment for any reason, Executive shall return to the Company all of the property of the Company and its Affiliates, including without limitation all materials or documents containing or pertaining to Confidential Information, and including without limitation, any company car, all computers (including laptops and I-Pads), cell phones, keys, PDAs, I-Phones, credit cards, facsimile machines, card access to any Company building, customer lists, computer disks, reports, files, e-mails, work papers, Work Product, documents, memoranda, records and software, computer access codes or disks and instructional manuals, internal policies, and other similar materials or documents which Executive used, received or prepared, helped prepare or supervised the preparation of in connection with Executive’s employment with the Company.  Executive agrees not to retain any copies, duplicates, reproductions or excerpts of such material or documents.

 

14.                             Compliance With Company Policies .  During Executive’s employment with the Company, Executive shall be governed by and be subject to, and Executive hereby agrees to comply with, all Company policies applicable to employees generally or to employees at Executive’s grade level, including without limitation, the Company’s Code of Business Ethics and Conduct, in each case, as any such policies may be amended from time to time in the Company’s sole discretion (collectively, the “Policies”).

 

15.                             Injunctive Relief with Respect to Covenants; Forum, Venue and Jurisdiction .  Executive acknowledges and agrees that a breach by Executive of any of Section 9, 10, 11, 0, 13 or 14 is a material breach of this Agreement and that remedies at law may be inadequate to protect the Company and its Affiliates in the event of such breach, and, without prejudice to any other rights and remedies otherwise available to the Company, Executive agrees to the granting of injunctive relief in the Company’s favor in connection with any such breach or violation without proof of irreparable harm, plus attorneys’ fees and costs to enforce these provisions.  Executive further acknowledges and agrees that the Company’s obligations to pay Executive any amount or provide Executive with any benefit or right pursuant to Section 8 is subject to Executive’s compliance with Executive’s obligations under Sections 9 through 14 inclusive, and that in the event of a breach by Executive of any of Section 9, 10, 11, 0, 13 or 14, the Company shall immediately cease paying such benefits and Executive shall be obligated to immediately repay to the Company all amounts theretofore paid to Executive pursuant to Section 8.  In addition, if not repaid, the Company shall have the right to set off from any amounts otherwise due to Executive any amounts previously paid pursuant to Section 8(f) (other than the Accrued Obligations).  Executive further agrees that the foregoing is appropriate for any such breach inasmuch as actual damages cannot be readily

 

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calculated, the amount is fair and reasonable under the circumstances, and the Company would suffer irreparable harm if any of these Sections were breached.  All disputes not relating to any request or application for injunctive relief in accordance with this Section 15 shall be resolved by arbitration in accordance with Section 18(b).

 

16.                             Assumption of Agreement .  The Company shall require any Successor thereto, by agreement in form and substance reasonably satisfactory to Executive, to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place.  Failure of the Company to obtain such agreement prior to the effectiveness of any such succession shall be a breach of this Agreement and shall entitle Executive to compensation from the Company in the same amount and on the same terms as Executive would be entitled hereunder if the Company had terminated Executive’s employment Without Cause as described in Section 8, except that for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the Date of Termination.

 

17.                             Entire Agreement; Survival .  This Agreement constitutes the entire agreement among the parties hereto with respect to the subject matter hereof, and supersedes and replaces the Employment Agreement of Executive dated March 22, 2012.  All prior correspondence and proposals (including, but not limited to, summaries of proposed terms) and all prior promises, representations, understandings, arrangements and agreements relating to such subject matter are merged herein and superseded hereby.  The covenants and agreements set forth in Sections 6, 7, 8, 9, 0, 13, 14, 15, 16, 17 and 18 of this Agreement shall survive any termination of this Agreement or expiration of the term of this Agreement.

 

18.                             Miscellaneous .

 

(a)                                Binding Effect; Assignment .  This Agreement shall be binding on and inure to the benefit of the Company and its Successors and permitted assigns.  This Agreement shall also be binding on and inure to the benefit of Executive and his heirs, executors, administrators and legal representatives.  This Agreement shall not be assignable by any party hereto without the prior written consent of the other parties hereto.  The Company may effect such an assignment without prior written approval of Executive upon the transfer of all or substantially all of its business and/or assets (by whatever means), provided that the Successor to the Company shall expressly assume and agree to perform this Agreement in accordance with the provisions of Section 16.

 

(b)                               Arbitration .  The Company and Executive agree that any dispute or controversy arising under or in connection with this Agreement shall be resolved by final and binding arbitration before the American Arbitration Association (“AAA”).  The arbitration shall be conducted in accordance with AAA’s National Rules for the Resolution of Employment Disputes then in effect at the time of the arbitration.  The arbitration shall be held in the general Kansas City, Kansas metropolitan area.  The dispute shall be heard and determined by one arbitrator selected from a list of arbitrators who are members of AAA’s Regional Employment Dispute Resolution roster.  If the parties cannot agree upon a mutually acceptable arbitrator from the list, each party shall number the names in order of preference and return the list to AAA within ten (10) days from the date of the

 

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list.  A party may strike a name from the list only for good cause.  The arbitrator receiving the highest ranking by the parties shall be selected.  Depositions, if permitted by the arbitrator, shall be limited to a maximum of two (2) per party and to a maximum of four (4) hours in duration.  The arbitration shall not impair either party’s right to request injunctive or other equitable relief in accordance with Section 15 of this Agreement.

 

(c)                                Governing Law .  This Agreement shall be governed by and construed in accordance with the laws of the State of Kansas without reference to principles of conflicts of laws.

 

(d)                              Taxes .  The Company may withhold from any payments made under this Agreement all applicable taxes, including, but not limited to, income, employment and social insurance taxes, as shall be required by law.

 

(e)                                Amendments .  No provision of this Agreement may be modified, waived or discharged unless such modification, waiver or discharge is approved by the Company and is agreed to in writing by Executive.  No waiver by any party hereto at any time of any breach by any other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time.  No waiver of any provision of this Agreement shall be implied from any course of dealing between or among the parties hereto or from any failure by any party hereto to assert its rights hereunder on any occasion or series of occasions.

 

(f)                                 Severability .  In the event that any one or more of the provisions of this Agreement shall be or become invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not be affected thereby.

 

(g)                               Notices .  Any notice or other communication required or permitted to be delivered under this Agreement shall be (i) in writing; (ii) delivered personally, by courier service or by certified or registered mail, first-class postage prepaid and return receipt requested; (iii) deemed to have been received on the date of delivery or, if mailed, on the third business day after the mailing thereof; and (iv) addressed as follows (or to such other address as the party entitled to notice shall hereafter designate in accordance with the terms hereof):

 

(i)                                   If to the Company, to it at:

 

Seaboard Corporation

9000 West 67 th  Street

Shawnee Mission, Kansas  66202

Attention:

General Counsel

Telephone:

(913) 676-8925

Facsimile:

(913) 676-8978

 

(ii)                               if to Executive, to his residential address as currently on file with the Company.

 

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(h)                               Voluntary Agreement; No Conflicts .  Executive represents that he is entering into this Agreement voluntarily and that Executive’s employment hereunder and compliance with the terms and conditions of this Agreement will not conflict with or result in the breach by Executive of any agreement to which he is a party or by which he or his properties or assets may be bound.

 

(i)                                   Counterparts/Facsimile .  This Agreement may be executed in counterparts (including by facsimile), each of which shall be deemed an original and all of which together shall constitute one and the same instrument.

 

(j)                                   Headings .  The section and other headings contained in this Agreement are for the convenience of the parties only and are not intended to be a part hereof or to affect the meaning or interpretation hereof.

 

(k)                               Certain Other Definitions .

 

“Affiliate” with respect to any Person, means any other Person that, directly or indirectly through one or more intermediaries, Controls, is Controlled by, or is under common Control with the first Person, including, but not limited to, a Subsidiary of any such Person.

 

“Control” (including, with correlative meanings, the terms “Controlling,” “Controlled by” and “under common Control with”):  with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise.

 

“Person” any natural person, firm, partnership, limited liability company, association, corporation, company, trust, business trust, governmental authority or other entity.

 

“Subsidiary”  with respect to any Person, each corporation or other Person in which the first Person owns or Controls, directly or indirectly, capital stock or other ownership interests representing fifty percent (50%) or more of the combined voting power of the outstanding voting stock or other ownership interests of such corporation or other Person.

 

“Successor” of a Person means a Person that succeeds to the assets and liabilities of Seaboard Foods LLC by merger, liquidation, dissolution or otherwise by operation of law, or a Person to which all or substantially all the assets and/or business of the Seaboard Foods LLC are transferred.

 

(l)                                   The Employment Agreement is intended to comply with, or otherwise be exempt from, Section 409A.  The Company shall undertake to administer, interpret, and construe the Employment Agreement in a manner that does not result in the imposition to the Executive of additional taxes or interest under Section 409A.

 

(m)                           With respect to any reimbursement of expenses of, or any provision of in-kind benefits to, the Executive, as specified under the Employment Agreement, such reimbursement any

 

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expenses or provision of in-kind benefits that are Deferred Compensation shall be subject to the following conditions: (A) the expenses eligible for reimbursement or the amount of in-kind benefits provided in one taxable year shall not affect the expenses eligible for reimbursement or the amount of in-kind benefits provided in any other taxable year, except for any medical reimbursement arrangement providing for the reimbursement of expenses referred to in Section 105(b) of the Internal Revenue Code of 1986 and related regulations; (B) the reimbursement of an eligible expense shall be made no later than the end of the year after the year in which such expense was incurred; and (C) the right to reimbursement or in-kind benefits shall not be subject to liquidation or exchange for another benefit.

 

(n)                               “Termination of employment,” “termination,” “resignation” or words of similar import, as used in the Employment Agreement mean, for purposes of any payments of Deferred Compensation under the Employment Agreement, the Executive’s “separation from service” as defined in Section 409A; provided that for this purpose, a “separation from service” is deemed to occur on the date that the Company and the Executive reasonably anticipate that the level of bona fide services the Executive would perform after that date (whether as an employee or independent contractor) would permanently decrease to no more than twenty percent (20%) of the average level of bona fide services provided in the immediately preceding thirty-six (36) months.

 

IN WITNESS WHEREOF, the Company has duly executed this Agreement by its authorized representatives, and Executive has hereunto set his hand, in each case effective as of the date first above written.

 

THIS AGREEMENT CONTAINS A PROVISION REQUIRING THAT ARBITRATION PURSUANT TO THE AMERICAN ARBITRATION ASSOCIATION NATIONAL RULES FOR THE RESOLUTION OF EMPLOYMENT DISPUTES IS THE EXCLUSIVE MEANS FOR RESOLVING ANY DISPUTE BETWEEN THE PARTIES HERETO AS TO THIS AGREEMENT.

 

 

SEABOARD FOODS LLC

 

 

 

 

 

 

 

By:

/s/ Steve J. Bresky

 

 

Name:

Steven J. Bresky

 

 

Title:

Vice President

 

 

 

 

 

 

 

 

Executive:

 

 

 

 

 

 

 

 

 

 

By:

/s/ Terry J. Holton

 

 

 

Terry J. Holton

 

 

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RELEASE AND DISCHARGE OF ALL CLAIMS

 

This Release and Discharge of All Claims (“Release”) is made and entered into by and between _________________________________ (hereinafter “You”), and Seaboard Foods LLC, an Oklahoma limited liability company (“Seaboard”).

 

For and in consideration of the following promises, the parties agree to the following:

 

1.                                  You acknowledge that your employment with Seaboard has ended effective _______________ in accordance with the terms of the Employment Agreement between You and Seaboard (“Employment Agreement”).

 

2.                                     Subject to the conditions set forth in Section 8(f)(i) of the Employment Agreement, Seaboard agreed to pay You the amounts described in said Section 8(f)(i) (“Severance”) and take certain actions.  The effectiveness of this Release is conditioned on Seaboard making the payments and taking the actions provided in Section 8(f)(i).  If such payments are not made or such actions are not taken, this Release shall be of no effect.

 

3.                                  You agree to, and do, hereby remiss, release and forever discharge Seaboard, Seaboard’s parent corporation, Seaboard Corporation, and any and all companies affiliated with Seaboard, and their respective agents, officers, employees, successors and assigns (hereinafter collectively the “Released Parties”), from and against any and all matters, claims, demands, damages, causes of action, debts, liabilities, controversies, judgments, and suits of every kind and nature whatsoever, foreseen, unforeseen, known or unknown, which You now have, or hereinafter may have against Seaboard based on any and all aspects of your employment with Seaboard or the termination of You prior to the date hereof.  This release of claims includes, but is not limited to, any rights or claims You may have under Title VII of the Civil Rights Act of 1964, as amended; the Equal Pay Act; the Age Discrimination in Employment Act of 1967, as amended; the Employment Retirement Income Security Act; the Omnibus Budget Reconciliation Act; the Americans With Disabilities Act; the Family and Medical Leave Act of 1993; the Kansas Acts Against Discrimination; the Kansas Age Discrimination in Employment Act; the Fair Labor Standard Act; any claims for wrongful discharge or breach of contract; severance; claims under worker’s compensation laws; or any other federal, state or local laws or regulations relating to employment and wages arising from events occurring prior to the date of execution of this Agreement.  You agree that this Agreement includes a release of all claims based on theories of contract or tort (e.g., negligent or intentional infliction of emotional distress, defamation, assault, battery, false imprisonment, wrongful termination, etc.), whether based on common law or otherwise.  The foregoing list is meant to be illustrative rather than exhaustive.  Further, You declare that as of the date of this Agreement, You have not suffered any on the job or work-related accident, injury, occupational disease or disability whether temporary, permanent, partial or total.

 



 

YOU ACKNOWLEDGE AND AGREE THAT THIS RELEASE IS A FULL AND FINAL BAR TO ANY AND ALL CLAIMS OF ANY TYPE THAT YOU MAY NOW HAVE AGAINST ANY OF THE RELEASED PARTIES.

 

4.                                  You waive the rights and claims set forth above, and also agree not to institute, or have instituted, a lawsuit against any of the Released Parties on any such claims or rights or to submit or file any charges, claims, complaints or actions with any agency, court, organization, or judicial forum.  You further acknowledge and agree that with respect to the rights and claims You are waiving, You are waiving not only your right to recover money or any other relief action You might commence, but also your rights to recover any action brought on your behalf by any other party, including, but not limited to the United States Equal Employment Opportunity Commission or any other federal, state, or local governmental agency or department.

 

5.                                     Notwithstanding the foregoing, this Release shall not constitute any release or waiver of any claims for retirement benefits, insurance or welfare benefits or any other benefits of employment with Seaboard which accrued or arose prior to the date your employment ended and in which You are vested.

 

6.                                     The parties to this Agreement agree that nothing in this Agreement is an admission by any party hereto of any wrongdoing, either in violation of an applicable law or otherwise, and that nothing in this Agreement is to be construed as such by any person.

 

7.                                     You and Seaboard agree that neither will publicize this Agreement either directly or indirectly, either in specific or as to general content, to either the public generally, to any employee of Seaboard or to any other person.

 

8.                                     You hereby acknowledge that You have been advised to consult an attorney, and that You fully understand the Agreement and the effect of signing the Agreement.  You further represent, declare and agree that You voluntarily accept the payment described above for the purposes of making a full and final compromise, adjustment and settlement of all claims hereinabove described.

 

9.                                     The foregoing Agreement, together with your Employment Agreement, constitutes the entire agreement among the parties and there are no other understandings or agreements, written or oral, between them on the subject.  Separate copies of this document shall constitute original documents which may be signed separately, but which together will constitute one single agreement.

 

10.                             You covenant and agree as follows:

 

a.                                      You shall protect and safeguard the trade secrets and confidential and proprietary information of Seaboard and its parent and subsidiaries and affiliate companies, including, but not limited to, the identity of its customers and suppliers, its arrangements with customers and suppliers, and its technical and financial data,

 

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records, compilations of information, processes and specification relating to its customers, suppliers, products and services;

 

b.                                     You shall not disclose any of such trade secrets and confidential and proprietary information;

 

c.                                      You shall not use, directly or indirectly, for your own benefit or for the benefit of another, any of such trade secrets and confidential and proprietary information; and

 

d.                                    You agree not to make any disparaging comment in any format, whether written, electronic or oral, to any customer, employee, the press or any other individual or entity regarding Seaboard that relates to Seaboard’s business or related activities or the relationship between the parties.

 

11.                             All files, records, documents, drawings, specifications, memoranda, notes, or other documents relating to the business of Seaboard, whether prepared by You or otherwise coming into your possession, shall be the exclusive property of Seaboard, and shall be delivered to Seaboard and not retained by You for any reason whatsoever.  It is expressly agreed that the remedy at law for the breach of any such covenant is inadequate and injunctive relief shall be available to prevent the breach or any threatened breach thereof.

 

12.                             You acknowledge that You have been given at least twenty-one (21) days within which to consider this Agreement before its execution.  You agree that any changes made to this Release (whether material or not) must be made in writing, be signed and dated by both parties, and does not restart the running of the twenty-one (21) day period.  This Agreement shall not become effective until seven (7) calendar days after the date of execution.  During this seven (7) day period, You may revoke the Agreement.  After said seven (7) day period, You acknowledge that this Agreement becomes final and binding.

 

13.                             This Agreement shall be construed and governed by the laws of the State of Kansas.

 

THE PARTIES HAVE READ, UNDERSTOOD AND FULLY CONSIDERED THIS RELEASE AND DISCHARGE OF ALL CLAIMS, AND ARE MUTUALLY DESIROUS OF ENTERING INTO SUCH RELEASE AND DISCHARGE OF ALL CLAIMS.  THE TERMS OF THIS RELEASE AND DISCHARGE OF ALL CLAIMS ARE THE PRODUCT OF MUTUAL NEGOTIATION AND COMPROMISE BETWEEN THE PARTIES, HAVING ELECTED TO EXECUTE THIS RELEASE AND DISCHARGE OF ALL CLAIMS, TO FULFILL THE PROMISES SET FORTH HEREIN, AND TO RECEIVE THEREBY THE COMPENSATION SET FORTH IN THE EMPLOYMENT AGREEMENT.  THE PARTIES FREELY AND KNOWINGLY, AND AFTER DUE CONSIDERATION, VOLUNTARILY ENTER INTO THIS RELEASE AND DISCHARGE OF ALL CLAIMS.

 

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IN WITNESS WHEREOF, the undersigned parties have executed this Settlement Agreement and Release.

 

 

 

 

SEABOARD FOODS LLC

 

 

 

 

 

 

 

 

 

 

Date:

 

 

By:

 

 

 

 

 

Company Representative

 

 

 

 

 

 

 

 

 

 

Date:

 

 

By:

 

 

 

 

 

Employee

 

 

 

 

 

 

 

 

 

 

 

STATE OF

________________

)

 

 

 

 

 

) ss

 

 

 

COUNTY OF

_______________

)

 

 

 

 

On this ____ day of ___________, 20__, before me ___________, to me personally known, who, after being duly sworn, acknowledged that he/she executed the foregoing Agreement and Release as his/her free act and deed.

 

IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official seal the day and year first above written.

 

 

 

 

 

Notary Public

 

 

My commission expires:

 

 

 

 

 

 

 

 

- 4 -


 

Exhibit 10.19

 

EMPLOYMENT AGREEMENT

 

This EMPLOYMENT AGREEMENT (this “Agreement”) is entered into as of December 21, 2012 by and between SEABOARD OVERSEAS AND TRADING GROUP , a Division of SEABOARD CORPORATION , a Delaware corporation (together with any Successor thereto, the “Company”), and David M. Dannov (“Executive”).

 

WITNESSETH:

 

WHEREAS, the Company desires to employ and secure the exclusive services of Executive on the terms and conditions set forth in this Agreement; and

 

WHEREAS, Executive desires to accept such employment on such terms and conditions;

 

NOW, THEREFORE, in consideration of the premises and the mutual covenants and promises contained herein and for other good and valuable consideration, the Company and Executive hereby agree as follows:

 

1.                                     Agreement to Employ .  Upon the terms and subject to the conditions of this Agreement, the Company hereby agrees to continue to employ Executive, and Executive hereby accepts such continued employment with the Company.

 

2.                                     Term; Position and Responsibilities; and Location .

 

(a)                                Term of Employment .  Unless Executive’s employment shall sooner terminate pursuant to Section 8, the Company shall continue to employ Executive on the terms and subject to the conditions of this Agreement for a term commencing as of the date of this Agreement (the “Commencement Date”) and ending December 31, 2015; provided, however, on December 31, 2013 and on each annual anniversary date of December 31, 2013 (an “Annual Anniversary Date”) through December 31, 2017, Executive’s employment hereunder shall be deemed to be automatically extended, upon the same terms and conditions for three (3) years after such Annual Anniversary Date, unless the Company shall have given written notice to Executive, at least thirty (30) days prior to the expiration of such Annual Anniversary Date, of its intention not to extend the Employment Period (as defined below) hereunder.  As such, on December 31, 2017, the remaining term will be for three (3) years; on December 31, 2018, the remaining term will be for two (2) years; and on December 31, 2019, the remaining term will be for one (1) year.  Beginning with the December 31, 2020 Anniversary Date and each Anniversary Date thereafter, Executive’s employment hereunder shall be deemed to be automatically extended, upon the same terms and conditions for one (1) year after such Annual Anniversary Date, unless the Company shall have given written notice to Executive, at least thirty (30) days prior to the expiration of such Annual Anniversary Date, of its intention not to extend the Employment Period (as defined below) hereunder.  Notwithstanding the foregoing, unless mutually agreed to by the Company and the Executive, Executive’s employment hereunder shall under no circumstances extend beyond December 31, 2023.  The period during which Executive is employed by the Company pursuant to this Agreement, including any extension thereof in accordance with the preceding sentence, shall be referred to as the “Employment Period.”

 



 

(b)                               Position and Responsibilities .  During the Employment Period, Executive shall serve as President and Chief Executive Officer of Seaboard Overseas and Trading Group, and shall have such duties and responsibilities as are customarily assigned to individuals serving in such position and such other duties consistent with Executive’s title and position as the Board of Directors of the Company (the “Board”) specifies from time to time.  Executive shall devote all of his skill, knowledge, commercial efforts and business time to the conscientious and good faith performance of his duties and responsibilities for the Company to the best of his ability.

 

(c)                                Location .  During the Employment Period, Executive’s services shall be performed primarily in the Kansas City metropolitan area.  However, Executive may be required to travel in and outside of Kansas City as the needs of the Company’s business dictate.

 

3.                                     Base Salary .  Commencing January 1, 2012, the Company shall pay Executive a base salary at an annualized rate of four hundred twenty thousand dollars ($420,000), payable in installments on the Company’s regular payroll dates.  The Board shall review Executive’s base salary annually during the Employment Period and may increase (but not decrease without the prior written consent of Executive) such base salary from time to time, based on its periodic review of Executive’s performance in accordance with the Company’s regular policies and procedures.  The annual base salary payable to Executive from time to time under this Section 3 shall hereinafter be referred to as the “Base Salary.”

 

4.                                     Annual Bonus Compensation .  Executive shall be eligible to receive an annual bonus (“Annual Bonus”) with respect to each calendar year ending during the Employment Period.  The Annual Bonus shall be determined under the Company’s Executive Officers’ Bonus Plan or such other annual bonus plan maintained by the Company for similarly situated Executives that the Company designates, in its sole discretion (any such plan, the “Bonus Plan”), in accordance with the terms of such plan as in effect from time to time.  Executive’s Annual Bonus shall not be less than four hundred thousand dollars ($400,000) for any calendar year during the Employment Period.  The Annual Bonus is earned pro-rata throughout each year, unless Executive’s employment is terminated by the Company pursuant to Section 8(b) for Cause, in which case, the Annual Bonus shall not be earned or paid for service during the year of the Date of Termination.  The Annual Bonus for each year shall be payable in cash on or before March 1 of the following year.

 

5.                                     Car Allowance .  During Executive’s Employment Period, Executive will be entitled to receive an annual car allowance and gasoline charge privileges in accordance with the Company’s car allowance policy.

 

6.                                     Executive Benefits .

 

(a)                                During the Employment Period and thereafter for so long as Executive continues to be employed by the Company or affiliate, Executive will be eligible to participate in the employee and executive benefit plans and programs maintained by the Company from time to time in which executives of the Company at Executive’s grade level are eligible to participate, including medical, dental, disability, hospitalization, life insurance, and retirement (i.e., 401K, pension and

 

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executive retirement plans), deferred compensation and savings plans, on the terms and subject to the conditions set forth in such plans; as may be amended from time to time.

 

(b)                               Executive shall continue to be a participant in the Seaboard Corporation 409A Executive Retirement Plan, Amended and Restated Effective January 1, 2009, as amended and restated by that Seaboard Corporation 409A Executive Retirement Plan Amended and Restated Effective January 1, 2013 (“SERP”), during the Employment Period, and thereafter for so long as Executive continues to be employed by the Company or affiliate.  Executive consents to the January 1, 2013 amendments made to the SERP.  During the Employment Period and thereafter, the Company shall not make any further amendment to the SERP that would adversely affect or reduce the benefit that will accrue or be paid to Executive under the SERP, it being understood that the formula to calculate the benefit may result in a reduction in benefits, such as if there is an increase in the 30 year U.S. Treasury Rate.  The preceding sentence shall not apply to amendments made in order to conform the SERP to applicable changes in law; provided, however, in the event an amendment made in order to conform the SERP to applicable changes in law results in a reduction to the accrued benefit or the benefit that will accrue to Executive, the Company shall establish an alternative provision or plan that will provide a benefit to Executive that is substantially equal to the benefits reduced in the SERP as a result of such amendment.  To be certain, if any such amendment to the SERP is made to conform the SERP to applicable law and this results in an increase to the federal or state income taxes payable upon receipt of the Accrued Benefit, the Company shall not establish an alternative provision or plan that will pay or reimburse Employee for such taxes.

 

(c)                                For purposes of calculating the benefit payable under the SERP, the Company and Executive agree that: (i) if Executive remains employed with the Company through June 28, 2019, the Final Average Earnings shall equal $1,140,000; and (ii) if the Executive’s employment with the Company is terminated prior to June 28, 2019, the Final Average Earnings shall not exceed $1,140,000.

 

(d)                              As a retention incentive to encourage Executive to continue in the employment of the Company, notwithstanding that the Years of Accrual Service Limit set forth in the SERP limits Executive’s Years of Accrual Service to a maximum of twenty (20) Years of Accrual Service, Executive shall accrue an additional Year of Accrual Service pursuant to the SERP for each Year of Service after December 31, 2013 completed by the Executive, up to an additional 5.52 Years of Accrual Service.  The terms used herein shall have the meaning given to such term in the SERP.

 

7.                                     Indemnification; Expenses; Paid Time Off .

 

(a)                                Indemnification .  Except to the extent, if any, prohibited by law, the Company shall indemnify Executive against expenses (including attorneys’ fees of counsel selected by Executive), judgments, fines and amounts paid in settlement actually and reasonably incurred by Executive in connection with any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, to which Executive was, is, or is threatened to be, made a party by reason of facts which include Executive’s being or having been an employee, officer, director or agent of the Company or any Affiliates.  Except to the extent, if any, prohibited

 

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by law, the Company shall pay expenses (including attorneys’ fees of counsel selected by Executive) actually and reasonably incurred by Executive in defending any such action, suit or proceeding in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by Executive to repay such amounts so paid on Executive’s behalf if it shall ultimately be determined that Executive is not entitled to be indemnified by the Company for such expenses under applicable law.  The provisions of this Section 7(a) shall (i) survive termination of this Agreement; and (ii) not be deemed exclusive of any other indemnification or expense rights to which Executive may be entitled.

 

(b)                               Business Expenses .  During the Employment Period, the Company will reimburse Executive for all reasonable and necessary business-related expenses incurred by Executive at the request of and on behalf of the Company in accordance with the Company’s normal expense reimbursement policies.

 

(c)                                Paid Time Off .  During the Employment Period, Executive shall be entitled to paid time off on an annualized basis in accordance with the Company’s paid time off policy.  Executive shall also be entitled to Company-designated holidays.

 

8.                                     Termination of Employment .

 

(a)                                Termination Due to Death or Disability .  Executive’s employment shall automatically terminate upon Executive’s death and may be terminated by the Company due to Executive’s Disability (as defined below in this subsection (a)).  In the event that Executive’s employment is terminated due to his Disability or death, no termination benefits shall be payable to or in respect of Executive except as provided in Section 8(f)(ii).  For purposes of this Agreement, “Disability” means a physical or mental disability that prevents or would prevent the performance by Executive of his duties hereunder for a continuous period of six months or longer.  The determination of Executive’s Disability will be made by an independent physician agreed to by the parties.  If the parties are unable to agree within ten (10) days after a request for designation by a party, then the Company and the Executive shall each select a physician, and the two (2) physicians selected shall select a third physician.  The three (3) physicians so selected shall make a determination of the Executive’s Disability, as determined by at least two (2) of the three (3) physicians selected.  Such determination shall be final and binding on the parties hereto, and shall be based on such competent medical evidence as shall be presented to such physicians by Executive and/or the Company or by any physician or group of physicians or other competent medical experts employed by Executive and/or the Company to advise such physicians.

 

(b)                                                                               Termination by the Company for Cause .  Executive’s employment may be terminated by the Company for Cause (as defined below in this subsection (b)).  In the event of a termination of Executive’s employment by the Company for Cause, Executive shall be paid the termination benefits, as provided in clauses (x) and (z) of Section 8(f)(i).  For purposes of this Agreement, “Cause” means (i) a material breach by Executive of any provision of this Agreement; (ii) a material violation by Executive of any Policy (as defined in Section 14), resulting in material injury to the Company; (iii) Executive’s willful misconduct or gross negligence that has caused or is reasonably expected to result in material injury to the business, reputation or prospects of the Company or any

 

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of its Affiliates; (iv) Executive’s material fraud or misappropriation of funds; or (v) the commission by Executive of a felony involving moral turpitude; provided that no termination under clauses (i) or (ii) shall be effective unless Company shall have given Executive notice of the event or events constituting Cause and Executive shall have failed to cure such event or events within thirty (30) business days after receipt of such notice.

 

(c)                                Termination Without Cause .  Executive’s employment may be terminated by the Company Without Cause (as defined below in this subsection (c)) at any time.  In the event of a termination of Executive’s employment by the Company Without Cause, the Executive shall be paid the termination benefits as provided in Section 8(f)(i).  For purposes of this Agreement, a termination “Without Cause” shall mean a termination of Executive’s employment by the Company other than due to Executive’s death or Disability as described in Section 8(a) and other than for Cause as described in Section 8(b).

 

(d)                              Termination by Executive .  Executive may resign from his employment for any reason, including for Good Reason (as defined below in this subsection (d)).  In the event of a termination of Executive’s employment by Executive’s resignation other than for Good Reason, no termination benefits shall be payable to or in respect of Executive except as provided in Section 8(f)(ii) and in the event of a termination of Executive’s employment by Executive for Good Reason, no termination benefits shall be payable to or in respect of Executive except as provided in Section 8(f)(i).  For purposes of this Agreement, a termination of employment by Executive for “Good Reason” shall mean a resignation by Executive from his employment with the Company within one hundred eighty (180) days following the initial occurrence, without Executive’s consent, of any one or more of the following events: (i) a material diminution in the Executive’s authority, duties or responsibilities; (ii) a material change in the geographic location where Executive primarily performs his services; or (iii) any other material breach by the Company of any material provision of this Agreement; provided that the Executive shall have given the Company notice of the occurrence of the event or events constituting Good Reason within ninety (90) days following the initial occurrence of such event or such events and the Company shall have failed to cure such event or events (to the extent capable of being cured) within thirty (30) business days after receipt of such notice.

 

(e)                                Notice of Termination; Date of Termination .

 

(i)                                   Notice of Termination .  Any termination of Executive’s employment by the Company or by Executive (other than as a result of Executive’s death) shall be communicated by a written Notice of Termination addressed to the other party to this Agreement.  A “Notice of Termination” shall mean a notice stating that Executive or the Company, as the case may be, is electing to terminate Executive’s employment with the Company (and thereby terminating the Employment Period), stating the proposed effective date of such termination, indicating the specific provision of this Section 8 under which such termination is being effected and, if applicable, setting forth in reasonable detail the circumstances claimed to provide the basis for such termination.  Any Notice of Termination given by an Executive must specify an effective date of termination which is at least thirty (30) days after the giving of the Notice of Termination.

 

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(ii)                               Date of Termination .  The term “Date of Termination” shall mean (i) if Executive’s employment is terminated by his death, the date of his death; and (ii) if Executive’s employment is terminated for any other reason, the effective date of termination specified in such Notice of Termination.  The Employment Period shall expire on the Date of Termination.

 

(f)                                 Payments Upon Certain Terminations .

 

(i)                                   In the event of a termination of Executive’s employment by the Company Without Cause or by Executive’s resignation from employment for Good Reason during the Employment Period, the Company shall pay to Executive (or, following his death, to Executive’s estate), within thirty (30) days of the Date of Termination, (x) his Base Salary through the Date of Termination, to the extent not previously paid; (y) the pro-rata amount of the Annual Bonus (based on the amount paid for the previous year) which is accrued through the date of termination; and (z) reimbursement for any unreimbursed business expenses incurred by Executive prior to the Date of Termination that are subject to reimbursement pursuant to the terms hereof, and payment for paid time off accrued as of the Date of Termination but unused (such amounts under clauses (x), (y) and (z), collectively the “Accrued Obligations”).  In addition, in the event of any such termination of Executive’s employment, if Executive executes and delivers to the Company a Release and Discharge of All Claims substantially in the form attached hereto (“Release”) within thirty (30) days after the Date of Termination, Executive shall be entitled to the following payments and benefits (provided, however, in the event of Executive’s death following the Date of Termination but prior to delivery of the executed Release, the following payments shall be paid to Executive’s estate, notwithstanding that the Release has not been executed):

 

(A)                           the Executive’s Base Salary (at the Base Salary being paid on the Date of Termination), for the longer of: (x) the remaining Employment Period (assuming Executive’s employment had not terminated) or (y) one (1) year (the “Severance Period”), payable in installments in accordance with the Company’s regular payroll policies for one year after the Date of Termination, with the first installment being paid on the Company’s regular pay date following the day which is thirty (30) days after the Date of Termination (the “Payment Commencement Date”) (with the first installment being the sum of the Base Salary installments from the Date of Termination through the Payment Commencement Date and with subsequent installments being based on the Base Salary), and with the balance, if any, being paid pursuant to a lump sum payment on the one year anniversary date of the Date of Termination; and

 

(B)                            the Executive’s Annual Bonus (at the amount of the Annual Bonus paid to the Executive for the year prior to the Date of Termination) which would have been paid to the Executive had Executive’s employment continued for the Severance Period, duly apportioned for any partial year, such amount to be payable to Executive on the one year anniversary date of the Date of Termination; and

 

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(C)                            the Executive shall automatically vest in all employee welfare and benefit plans in which the Executive was participating as of the Date of Termination and such benefits shall be paid to Executive in accordance with the terms of such plans; and

 

(D)                           the Company shall provide outplacement services to Executive for up to ninety (90) days.

 

(E)                             The Company and Executive agree that each payment made by the Company to Executive pursuant to subsections (A) and (B) of this Section 8(f)(i) shall be deemed to be a separate and distinct payment for purposes of Internal Revenue Code Section 409A and the related regulations, as opposed to an annuity or other collective series of payments.

 

(F)                              Notwithstanding anything to the contrary contained herein, to the extent the aggregate amount to be paid to the Executive pursuant to Subsections (A) and (B) of this Section 8(f)(i) during the six (6) months following the Date of Termination exceeds two (2) times the maximum amount that may be taken into account under a qualified retirement plan pursuant to Section 401(a)(17) of the Internal Revenue Code of 1986, as amended (“Code”), for the calendar year of such Date of Termination (the “401(a)(17) Limit”), then payment of such amount that is in excess of two (2) times the 401(a)(17) Limit shall not be paid during the sixth (6) months following the Date of Termination but instead shall be paid in a lump sum payment on the next day after the date which is six (6) months following the Date of Termination.

 

Executive shall not have a duty to mitigate the costs to the Company under this Section 8(f)(i), nor shall any payments from the Company to Executive hereunder be reduced, offset or canceled by any compensation or fees earned by (whether or not paid currently) or offered to Executive during the remainder of the fiscal year of the Company that includes the Date of Termination by a subsequent employer or other Person (as defined below in Section 18(k) below) for which Executive performs services, including, but not limited to, consulting services.  The foregoing shall not relieve Executive of the non-competition prohibitions provided in Section 10 below.

 

(ii)                               If Executive’s employment shall terminate upon his death or due to Executive’s Disability or Executive shall resign from his employment without Good Reason, in any such case during the Employment Period, the Company shall pay to Executive (or, in the event of Executive’s death, to his estate) the Accrued Obligations within thirty (30) days following the Date of Termination.  If the Company shall terminate Executive’s employment for Cause, the Company shall pay Executive the termination benefits, as provided in clauses (x) and (z) of Section 8(f)(i).

 

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(iii)                           Except as specifically set forth in this Section 8(f), no termination benefits shall be payable to or in respect of Executive’s employment with the Company or its Affiliates.

 

(iv)                           The Company shall have the right to apply and set off against the Accrued Obligations or any other amounts owing to Executive hereunder, any amounts owing by the Executive to the Company, whether pursuant to this Agreement or otherwise.  Notwithstanding the foregoing, such set off shall not accelerate the time or schedule of a payment of Deferred Compensation except as permitted under Treasury Regulation Section 1.409A-3(j)(4)(xiii).

 

(g)                               Resignation upon Termination .  Effective as of any Date of Termination under this Section 8 or otherwise as of the date of Executive’s termination of employment with the Company, Executive shall resign, in writing, from all Board memberships and other positions then held by him, or to which he has been appointed, designated or nominated, with the Company and its Affiliates.

 

9.                                     Confidentiality .

 

(a)                                Executive acknowledges and agrees that the terms of this Agreement, including all addendums and attachments hereto, are confidential.  Executive agrees not to disclose any information contained in this Agreement, or the fact of this Agreement, to anyone, other than to Executive’s lawyer, financial advisor or immediate family members.  If Executive discloses any information contained in this Agreement to his lawyer, financial advisor or immediate family members as permitted herein, Executive agrees to immediately tell each such individual that he or she must abide by the confidentiality restrictions contained herein and keep such information confidential as well.

 

(b)                                                                               Executive agrees that during his employment with the Company and thereafter, Executive will not, directly or indirectly (i) disclose any Confidential Information to any Person (other than, only with respect to the period that Executive is employed by the Company, to an Executive of the Company who requires such information to perform his or her duties for the Company); or (ii) use any Confidential Information for Executive’s own benefit or the benefit of any third party.  “Confidential Information” means confidential, proprietary or commercially sensitive information relating to (i) the Company or its Affiliates, or members of their management or boards; or (ii) any third parties who do business with the Company or its Affiliates, including customers and suppliers.  Confidential Information includes, without limitation, marketing plans, business plans, financial information and records, intellectual property, operation methods, personnel information, drawings, designs, information regarding product development, other commercial or business information and any other information not available to the public generally.  The foregoing obligation shall not apply to any Confidential Information that has been previously disclosed to the public or is in the public domain (other than by reason of a breach of Executive’s obligations to hold such Confidential Information confidential).  If Executive is required or requested by a court or governmental agency to disclose Confidential Information, Executive must notify the General Counsel of the Company in writing of such disclosure obligation or request no later than three

 

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business days after Executive learns of such obligation or request, and permit the Company to take all lawful steps it deems appropriate to prevent or limit the required disclosure.  The foregoing provisions of this Section 9(b) are in addition to the provisions set forth in the Company’s Code of Ethics Policy.

 

10.                             Partial Restraint on Post-termination Competition .

 

(a)                                Definitions.  For the purposes of this Section 10, the following definitions shall apply:

 

“Competitor” means any business, individual, partnership, joint venture, association, firm, corporation or other entity, other than the Company and its affiliates, that is engaging or actively planning to engage, wholly or partly, in activities (“Competitive Activities”) that directly compete or would compete with the Company or its affiliates in the Company Activities (as hereinafter defined) in the Territory (as hereinafter defined).

 

“Competitive Position” means (i) the direct or indirect ownership or control of all or any portion of a Competitor; or (ii) any employment or independent contractor arrangement with any Competitor whereby Executive will serve such Competitor in any managerial, sales, executive or consultant capacity with respect to Competitive Activities in the Territory.

 

“The Company Activities” means the businesses conducted by Seaboard Overseas and Trading Group, including, without limitation, (i) grain processing and flour milling; (ii) bulk ocean transportation; (iii) commodity trading; (iv) grain terminal operations; and (v) poultry and pork production and processing.

 

“Non-Compete Period” or “Non-Solicitation Period” means the period beginning with the Commencement Date and ending: (i) one (1) year after the Date of Termination with respect to any termination prior to June 28, 2019, no matter whether terminated by the Company or by the Executive for any reason or no reason, or (ii) six (6) months after the Date of Termination with respect to any termination on or after June 28, 2019, no matter whether terminated by the Company or by the Executive for any reason or no reason.

 

“Territory” means the states, provinces and territories in the countries in which Seaboard Overseas and Trading Group operates with respect to each of the Company Activities.

 

(b)                               Non-Competition .

 

(i)                                   The parties hereto acknowledge that Executive, by virtue of his position with and responsibilities to the Company, is engaging and is expected to continue to engage during the Term in the Company Activities throughout the Territory and has executive management responsibilities with respect to the Company responsibilities which extend throughout the Territory.  Executive acknowledges that to protect adequately the

 

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interest of the Company in the business of the Company it is essential that any non-compete covenant with respect thereto cover all the Company Activities and the entire Territory.

 

(ii)                               Executive hereby agrees that, during the Non-compete Period, Executive will not, either directly or indirectly, alone or in conjunction with any other party, accept or enter into a Competitive Position.  Executive shall notify the Company promptly in writing if Executive receives an offer of a Competitive Position during the Non-compete Period, and such notice shall describe all material terms of such offer.

 

Nothing contained in this Section 10 shall prohibit Executive from acquiring not more than five percent (5%) of any company whose common stock is publicly traded on a national securities exchange or in the over-the-counter market.

 

(c)                                Severability .  If a judicial or arbitral determination is made that any of the provisions of this Section 10 constitutes an unreasonable or otherwise unenforceable restriction against Executive the provisions of this Section 10 shall be rendered void only to the extent that such judicial or arbitral determination finds such provisions to be unreasonable or otherwise unenforceable with respect to Executive.  In this regard, Executive hereby agrees that any judicial or arbitral authority construing this Agreement shall sever or reform any portion of the Territory, any prohibited business activity or any time period from the coverage of this Agreement to allow the covenants in this Section 10 to be enforced to the maximum extent authorized by law, and shall then enforce the covenants in this Section 10 as so severed or reformed.

 

(d)                              Reasonable Restrictions .  Executive acknowledges that the restrictions and covenants contained in this Agreement are reasonably necessary to protect the goodwill and legitimate business interests of the Company, are not overbroad, overlong, or unfair (including in duration and scope), and will not curtail Executive’s ability to earn a livelihood upon Executive’s termination of employment with the Company.

 

11.                             Non-Solicitation of Employees and Customers .  During the period of Executive’s employment with the Company and for the one-year period following the termination of his employment, Executive shall not, directly or indirectly, by himself or through any third party, whether on Executive’s own behalf or on behalf of any other Person or entity, (i) solicit or endeavor to solicit, employ or retain; (ii) interfere with the relationship of the Company or any of its Affiliates with; or (iii) attempt to establish a business relationship with (A) any natural person who is or was (during Executive’s employment with the Company) an employee or engaged by the Company or any Affiliate to provide services to it, or (B) any customer of the Company or any of its Affiliates who was a customer at any time during which Executive was an employee of the Company.

 

12.                             Work Product .  Executive agrees that all of Executive’s work product (created solely or jointly with others, and including any intellectual property or moral rights in such work product), given, disclosed, created, developed or prepared in connection with Executive’s employment with the Company, whether ensuing during or after Executive’s employment with the Company (“Work Product”) shall exclusively vest in and be the sole and exclusive property of the Company and shall constitute “work made for hire” (as that term is defined under Section 101 of the U.S. Copyright Act,

 

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17 U.S.C. § 101) with the Company being the person for whom the work was prepared.  In the event that any such Work Product is deemed not to be a “work made for hire” or does not vest by operation of law in the Company, Executive hereby irrevocably assigns, transfers and conveys to the Company, exclusively and perpetually, all right, title and interest which Executive may have or acquire in and to such Work Product throughout the world, including without limitation any copyrights and patents, and the right to secure registrations, renewals, reissues, and extensions thereof.  The Company and its Affiliates or their designees shall have the exclusive right to make full and complete use of, and make changes to all Work Product without restrictions or liabilities of any kind, and Executive shall not have the right to use any such materials, other than within the legitimate scope and purpose of Executive’s employment with the Company.  Executive shall promptly disclose to the Company the creation or existence of any Work Product and shall take whatever additional lawful action may be necessary, and sign whatever documents the Company may require, in order to secure and vest in the Company or its designee all right, title and interest in and to all Work Product and any intellectual property rights therein (including full cooperation in support of any Company applications for patents and copyright or trademark registrations).

 

13.                             Return of Company Property .  In the event of termination of Executive’s employment for any reason, Executive shall return to the Company all of the property of the Company and its Affiliates, including without limitation all materials or documents containing or pertaining to Confidential Information, and including without limitation, any company car, all computers (including laptops and I-Pads), cell phones, keys, PDAs, I-Phones, credit cards, facsimile machines, card access to any Company building, customer lists, computer disks, reports, files, e-mails, work papers, Work Product, documents, memoranda, records and software, computer access codes or disks and instructional manuals, internal policies, and other similar materials or documents which Executive used, received or prepared, helped prepare or supervised the preparation of in connection with Executive’s employment with the Company.  Executive agrees not to retain any copies, duplicates, reproductions or excerpts of such material or documents.

 

14.                             Compliance With Company Policies .  During Executive’s employment with the Company, Executive shall be governed by and be subject to, and Executive hereby agrees to comply with, all Company policies applicable to employees generally or to employees at Executive’s grade level, including without limitation, the Company’s Code of Business Ethics and Conduct, in each case, as any such policies may be amended from time to time in the Company’s sole discretion (collectively, the “Policies”).

 

15.                             Injunctive Relief with Respect to Covenants; Forum, Venue and Jurisdiction .  Executive acknowledges and agrees that a breach by Executive of any of Section 9, 10, 11, 12, 13 or 14 is a material breach of this Agreement and that remedies at law may be inadequate to protect the Company and its Affiliates in the event of such breach, and, without prejudice to any other rights and remedies otherwise available to the Company, Executive agrees to the granting of injunctive relief in the Company’s favor in connection with any such breach or violation without proof of irreparable harm, plus attorneys’ fees and costs to enforce these provisions.  Executive further acknowledges and agrees that the Company’s obligations to pay Executive any amount or provide Executive with any benefit or right pursuant to Section 8 is subject to Executive’s compliance with Executive’s obligations under Sections 9 through 14 inclusive, and that in the event of a breach by

 

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Executive of any of Section 9, 10, 11, 12, 13 or 14, the Company shall immediately cease paying such benefits and Executive shall be obligated to immediately repay to the Company all amounts theretofore paid to Executive pursuant to Section 8.  In addition, if not repaid, the Company shall have the right to set off from any amounts otherwise due to Executive any amounts previously paid pursuant to Section 8(f) (other than the Accrued Obligations).  Executive further agrees that the foregoing is appropriate for any such breach inasmuch as actual damages cannot be readily calculated, the amount is fair and reasonable under the circumstances, and the Company would suffer irreparable harm if any of these Sections were breached.  All disputes not relating to any request or application for injunctive relief in accordance with this Section 15 shall be resolved by arbitration in accordance with Section 18(b).

 

16.                             Assumption of Agreement .  The Company shall require any Successor thereto, by agreement in form and substance reasonably satisfactory to Executive, to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place.  Failure of the Company to obtain such agreement prior to the effectiveness of any such succession shall be a breach of this Agreement and shall entitle Executive to compensation from the Company in the same amount and on the same terms as Executive would be entitled hereunder if the Company had terminated Executive’s employment Without Cause as described in Section 8, except that for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the Date of Termination.

 

17.                             Entire Agreement; Survival .  This Agreement constitutes the entire agreement among the parties hereto with respect to the subject matter hereof, and supersedes and replaces the Employment Agreement of Executive dated July 1, 2006, as amended.  This Agreement constitutes the entire agreement among the parties hereto with respect to the subject matter hereof.  All prior correspondence and proposals (including, but not limited to, summaries of proposed terms) and all prior promises, representations, understandings, arrangements and agreements relating to such subject matter are merged herein and superseded hereby.  The covenants and agreements set forth in Sections 6, 7, 8, 9, 12, 13, 14, 15, 16, 17 and 18 of this Agreement shall survive any termination of this Agreement or expiration of the term of this Agreement.

 

18.                             Miscellaneous .

 

(a)                                Binding Effect; Assignment .  This Agreement shall be binding on and inure to the benefit of the Company and its Successors and permitted assigns.  This Agreement shall also be binding on and inure to the benefit of Executive and his heirs, executors, administrators and legal representatives.  This Agreement shall not be assignable by any party hereto without the prior written consent of the other parties hereto.  The Company may effect such an assignment without prior written approval of Executive upon the transfer of all or substantially all of its business and/or assets (by whatever means), provided that the Successor to the Company shall expressly assume and agree to perform this Agreement in accordance with the provisions of Section 16.

 

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(b)                               Arbitration .  The Company and Executive agree that any dispute or controversy arising under or in connection with this Agreement shall be resolved by final and binding arbitration before the American Arbitration Association (“AAA”).  The arbitration shall be conducted in accordance with AAA’s National Rules for the Resolution of Employment Disputes then in effect at the time of the arbitration.  The arbitration shall be held in the general Kansas City, Kansas metropolitan area.  The dispute shall be heard and determined by one arbitrator selected from a list of arbitrators who are members of AAA’s Regional Employment Dispute Resolution roster.  If the parties cannot agree upon a mutually acceptable arbitrator from the list, each party shall number the names in order of preference and return the list to AAA within ten (10) days from the date of the list.  A party may strike a name from the list only for good cause.  The arbitrator receiving the highest ranking by the parties shall be selected.  Depositions, if permitted by the arbitrator, shall be limited to a maximum of two (2) per party and to a maximum of four (4) hours in duration.  The arbitration shall not impair either party’s right to request injunctive or other equitable relief in accordance with Section 15 of this Agreement.

 

(c)                                Governing Law .  This Agreement shall be governed by and construed in accordance with the laws of the State of Kansas without reference to principles of conflicts of laws.

 

(d)                              Taxes .  The Company may withhold from any payments made under this Agreement all applicable taxes, including, but not limited to, income, employment and social insurance taxes, as shall be required by law.

 

(e)                                Amendments .  No provision of this Agreement may be modified, waived or discharged unless such modification, waiver or discharge is approved by the Company and is agreed to in writing by Executive.  No waiver by any party hereto at any time of any breach by any other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time.  No waiver of any provision of this Agreement shall be implied from any course of dealing between or among the parties hereto or from any failure by any party hereto to assert its rights hereunder on any occasion or series of occasions.

 

(f)                                 Severability .  In the event that any one or more of the provisions of this Agreement shall be or become invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not be affected thereby.

 

(g)                               Notices .  Any notice or other communication required or permitted to be delivered under this Agreement shall be (i) in writing; (ii) delivered personally, by courier service or by certified or registered mail, first-class postage prepaid and return receipt requested; (iii) deemed to have been received on the date of delivery or, if mailed, on the third business day after the mailing thereof; and (iv) addressed as follows (or to such other address as the party entitled to notice shall hereafter designate in accordance with the terms hereof):

 

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(i)                                   If to the Company, to it at:

 

Seaboard Corporation

9000 West 67 th  Street

Shawnee Mission, Kansas 66202

Attention:

 

General Counsel

Telephone:

 

(913) 676-8925

Facsimile:

 

(913) 676-8978

 

(ii)                               if to Executive, to his residential address as currently on file with the Company.

 

(h)                               Voluntary Agreement; No Conflicts .  Executive represents that he is entering into this Agreement voluntarily and that Executive’s employment hereunder and compliance with the terms and conditions of this Agreement will not conflict with or result in the breach by Executive of any agreement to which he is a party or by which he or his properties or assets may be bound.

 

(i)                                   Counterparts/Facsimile .  This Agreement may be executed in counterparts (including by facsimile), each of which shall be deemed an original and all of which together shall constitute one and the same instrument.

 

(j)                                   Headings .  The section and other headings contained in this Agreement are for the convenience of the parties only and are not intended to be a part hereof or to affect the meaning or interpretation hereof.

 

(k)                               Certain other Definitions .

 

“Affiliate” with respect to any Person, means any other Person that, directly or indirectly through one or more intermediaries, Controls, is Controlled by, or is under common Control with the first Person, including, but not limited to, a Subsidiary of any such Person.

 

“Control” (including, with correlative meanings, the terms “Controlling,” “Controlled by” and “under common Control with”):  with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise.

 

“Person” any natural person, firm, partnership, limited liability company, association, corporation, company, trust, business trust, governmental authority or other entity.

 

“Subsidiary”  with respect to any Person, each corporation or other Person in which the first Person owns or Controls, directly or indirectly, capital stock or other ownership interests representing fifty percent (50%) or more of the combined voting power of the outstanding voting stock or other ownership interests of such corporation or other Person.

 

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“Successor” of a Person means a Person that succeeds to the assets and liabilities of Seaboard Overseas and Trading Group by merger, liquidation, dissolution or otherwise by operation of law, or a Person to which all or substantially all the assets and/or business of Seaboard Overseas and Trading Group are transferred.

 

(l)                                   The Employment Agreement is intended to comply with, or otherwise be exempt from, Section 409A.  The Company shall undertake to administer, interpret, and construe the Employment Agreement in a manner that does not result in the imposition to the Executive of additional taxes or interest under Section 409A.

 

(m)                           With respect to any reimbursement of expenses of, or any provision of in-kind benefits to, the Executive, as specified under the Employment Agreement, such reimbursement any expenses or provision of in-kind benefits that are Deferred Compensation shall be subject to the following conditions: (A) the expenses eligible for reimbursement or the amount of in-kind benefits provided in one taxable year shall not affect the expenses eligible for reimbursement or the amount of in-kind benefits provided in any other taxable year, except for any medical reimbursement arrangement providing for the reimbursement of expenses referred to in Section 105(b) of the Internal Revenue Code of 1986 and related regulations; (B) the reimbursement of an eligible expense shall be made no later than the end of the year after the year in which such expense was incurred; and (C) the right to reimbursement or in-kind benefits shall not be subject to liquidation or exchange for another benefit.

 

(n)                               “Termination of employment,” “termination,” “resignation” or words of similar import, as used in the Employment Agreement mean, for purposes of any payments of Deferred Compensation under the Employment Agreement, the Executive’s “separation from service” as defined in Section 409A; provided that for this purpose, a “separation from service” is deemed to occur on the date that the Company and the Executive reasonably anticipate that the level of bona fide services the Executive would perform after that date (whether as an employee or independent contractor) would permanently decrease to no more than twenty percent (20%) of the average level of bona fide services provided in the immediately preceding thirty-six (36) months.

 

IN WITNESS WHEREOF, the Company has duly executed this Agreement by its authorized representatives, and Executive has hereunto set his hand, in each case effective as of the date first above written.

 

THIS AGREEMENT CONTAINS A PROVISION REQUIRING THAT ARBITRATION PURSUANT TO THE AMERICAN ARBITRATION ASSOCIATION NATIONAL RULES FOR THE RESOLUTION OF EMPLOYMENT DISPUTES IS THE EXCLUSIVE MEANS FOR RESOLVING ANY DISPUTE BETWEEN THE PARTIES HERETO AS TO THIS AGREEMENT.

 

[SIGNATURE ON FOLLOWING PAGE]

 

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SEABOARD OVERSEAS AND TRADING GROUP, a division of Seaboard Corporation

 

 

 

 

 

By:

/s/ Steven J. Bresky

 

 

Name:

Steve Bresky

 

 

Title:

CEO

 

 

 

 

 

 

 

 

 

 

 

 

Executive:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

By:

/s/ David M. Dannov

 

 

David M. Dannov

 

 

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RELEASE AND DISCHARGE OF ALL CLAIMS

 

This Release and Discharge of All Claims (“Release”) is made and entered into by and between _________________________________ (hereinafter “You”), and Seaboard Corporation, a Delaware corporation (“Seaboard”).

 

For and in consideration of the following promises, the parties agree to the following:

 

1.             You acknowledge that your employment with Seaboard has ended effective _______________ in accordance with the terms of the Employment Agreement between You and Seaboard (“Employment Agreement”).

 

2.                                     Subject to the conditions set forth in Section 8(f)(i) of the Employment Agreement, Seaboard agreed to pay You the amounts described in said Section 8(f)(i) (“Severance”) and take certain actions.  The effectiveness of this Release is conditioned on Seaboard making the payments and taking the actions provided in Section 8(f)(i).  If such payments are not made or such actions are not taken, this Release shall be of no effect.

 

3.                                     You agree to, and do, hereby remiss, release and forever discharge Seaboard, and any and all companies affiliated with Seaboard, and their respective agents, officers, employees, successors and assigns (hereinafter collectively the “Released Parties”), from and against any and all matters, claims, demands, damages, causes of action, debts, liabilities, controversies, judgments, and suits of every kind and nature whatsoever, foreseen, unforeseen, known or unknown, which You now have, or hereinafter may have against Seaboard based on any and all aspects of your employment with Seaboard or the termination of You prior to the date hereof.  This release of claims includes, but is not limited to, any rights or claims You may have under Title VII of the Civil Rights Act of 1964, as amended; the Equal Pay Act; the Age Discrimination in Employment Act of 1967, as amended; the Employment Retirement Income Security Act; the Omnibus Budget Reconciliation Act; the Americans With Disabilities Act; the Family and Medical Leave Act of 1993; the Kansas Acts Against Discrimination; the Kansas Age Discrimination in Employment Act; the Fair Labor Standard Act; any claims for wrongful discharge or breach of contract; severance; claims under worker’s compensation laws; or any other federal, state or local laws or regulations relating to employment and wages arising from events occurring prior to the date of execution of this Agreement.  You agree that this Agreement includes a release of all claims based on theories of contract or tort (e.g., negligent or intentional infliction of emotional distress, defamation, assault, battery, false imprisonment, wrongful termination, etc.), whether based on common law or otherwise.  The foregoing list is meant to be illustrative rather than exhaustive.  Further, You declare that as of the date of this Agreement, You have not suffered any on the job or work-related accident, injury, occupational disease or disability whether temporary, permanent, partial or total.

 



 

YOU ACKNOWLEDGE AND AGREE THAT THIS RELEASE IS A FULL AND FINAL BAR TO ANY AND ALL CLAIMS OF ANY TYPE THAT YOU MAY NOW HAVE AGAINST ANY OF THE RELEASED PARTIES.

 

4.                                     You waive the rights and claims set forth above, and also agree not to institute, or have instituted, a lawsuit against any of the Released Parties on any such claims or rights or to submit or file any charges, claims, complaints or actions with any agency, court, organization, or judicial forum.  You further acknowledge and agree that with respect to the rights and claims You are waiving, You are waiving not only your right to recover money or any other relief action You might commence, but also your rights to recover any action brought on your behalf by any other party, including, but not limited to the United States Equal Employment Opportunity Commission or any other federal, state, or local governmental agency or department.

 

5.                                     Notwithstanding the foregoing, this Release shall not constitute any release or waiver of any claims for retirement benefits, insurance or welfare benefits or any other benefits of employment with Seaboard which accrued or arose prior to the date your employment ended and in which You are vested.

 

6.                                     The parties to this Agreement agree that nothing in this Agreement is an admission by any party hereto of any wrongdoing, either in violation of an applicable law or otherwise, and that nothing in this Agreement is to be construed as such by any person.

 

7.                                     You and Seaboard agree that neither will publicize this Agreement either directly or indirectly, either in specific or as to general content, to either the public generally, to any employee of Seaboard or to any other person.

 

8.                                     You hereby acknowledge that You have been advised to consult an attorney, and that You fully understand the Agreement and the effect of signing the Agreement.  You further represent, declare and agree that You voluntarily accept the payment described above for the purposes of making a full and final compromise, adjustment and settlement of all claims hereinabove described.

 

9.                                     The foregoing Agreement, together with your Employment Agreement, constitutes the entire agreement among the parties and there are no other understandings or agreements, written or oral, between them on the subject.  Separate copies of this document shall constitute original documents which may be signed separately, but which together will constitute one single agreement.

 

10.                             You covenant and agree as follows:

 

a.                                      You shall protect and safeguard the trade secrets and confidential and proprietary information of Seaboard and its parent and subsidiaries and affiliate companies, including, but not limited to, the identity of its customers and suppliers, its

 

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arrangements with customers and suppliers, and its technical and financial data, records, compilations of information, processes and specification relating to its customers, suppliers, products and services;

 

b.                                     You shall not disclose any of such trade secrets and confidential and proprietary information;

 

c.                                      You shall not use, directly or indirectly, for your own benefit or for the benefit of another, any of such trade secrets and confidential and proprietary information; and

 

d.                                    You agree not to make any disparaging comment in any format, whether written, electronic or oral, to any customer, employee, the press or any other individual or entity regarding Seaboard that relates to Seaboard’s business or related activities or the relationship between the parties.

 

11.                             All files, records, documents, drawings, specifications, memoranda, notes, or other documents relating to the business of Seaboard, whether prepared by You or otherwise coming into your possession, shall be the exclusive property of Seaboard, and shall be delivered to Seaboard and not retained by You for any reason whatsoever.  It is expressly agreed that the remedy at law for the breach of any such covenant is inadequate and injunctive relief shall be available to prevent the breach or any threatened breach thereof.

 

12.                             You acknowledge that You have been given at least twenty-one (21) days within which to consider this Agreement before its execution.  You agree that any changes made to this Release (whether material or not) must be made in writing, be signed and dated by both parties, and does not restart the running of the twenty-one (21) day period.  This Agreement shall not become effective until seven (7) calendar days after the date of execution.  During this seven (7) day period, You may revoke the Agreement.  After said seven (7) day period, You acknowledge that this Agreement becomes final and binding.

 

13.                             This Agreement shall be construed and governed by the laws of the State of Kansas.

 

THE PARTIES HAVE READ, UNDERSTOOD AND FULLY CONSIDERED THIS RELEASE AND DISCHARGE OF ALL CLAIMS, AND ARE MUTUALLY DESIROUS OF ENTERING INTO SUCH RELEASE AND DISCHARGE OF ALL CLAIMS.  THE TERMS OF THIS RELEASE AND DISCHARGE OF ALL CLAIMS ARE THE PRODUCT OF MUTUAL NEGOTIATION AND COMPROMISE BETWEEN THE PARTIES, HAVING ELECTED TO EXECUTE THIS RELEASE AND DISCHARGE OF ALL CLAIMS, TO FULFILL THE PROMISES SET FORTH HEREIN, AND TO RECEIVE THEREBY THE COMPENSATION SET FORTH IN THE EMPLOYMENT AGREEMENT.  THE PARTIES FREELY AND KNOWINGLY, AND AFTER DUE CONSIDERATION, VOLUNTARILY ENTER INTO THIS RELEASE AND DISCHARGE OF ALL CLAIMS.

 

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IN WITNESS WHEREOF, the undersigned parties have executed this Settlement Agreement and Release.

 

 

 

SEABOARD CORPORATION

 

 

 

 

 

 

Date:_____________________

 

By:

 

 

 

Company Representative

 

 

 

 

 

 

Date:_____________________

 

By:

 

 

 

Employee

 

 

 

STATE OF _____________

)

 

 

) ss

 

COUNTY OF ___________

)

 

 

On this ____ day of ___________, 20__, before me ___________, to me personally known, who, after being duly sworn, acknowledged that he/she executed the foregoing Agreement and Release as his/her free act and deed.

 

IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official seal the day and year first above written.

 

 

 

 

Notary Public

 

My commission expires:

 

_______________________

 

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Exhibit 10.20

 

EMPLOYMENT AGREEMENT

 

This EMPLOYMENT AGREEMENT (this “Agreement”) is entered into as of December 21, 2012 by and between SEABOARD MARINE LTD. , a Liberian corporation (together with any Successor thereto, the “Company”), and Edward A. Gonzalez (“Executive”).

 

WITNESSETH:

 

WHEREAS, the Company desires to employ and secure the exclusive services of Executive on the terms and conditions set forth in this Agreement; and

 

WHEREAS, Executive desires to accept such employment on such terms and conditions;

 

NOW, THEREFORE, in consideration of the premises and the mutual covenants and promises contained herein and for other good and valuable consideration, the Company and Executive hereby agree as follows:

 

1.                                     Agreement to Employ .  Upon the terms and subject to the conditions of this Agreement, the Company hereby agrees to continue to employ Executive, and Executive hereby accepts such continued employment with the Company.

 

2.                                     Term; Position and Responsibilities; and Location .

 

(a)                                Term of Employment .  Unless Executive’s employment shall sooner terminate pursuant to Section 8, the Company shall continue to employ Executive on the terms and subject to the conditions of this Agreement for a term commencing as of the date of this Agreement (the “Commencement Date”) and ending on December 31, 2015; provided , however , on December 31, 2013 and on each annual anniversary date of December 31, 2013 (an “Annual Anniversary Date”) through December 31, 2021, Executive’s employment hereunder shall be deemed to be automatically extended, upon the same terms and conditions for three (3) years after such Annual Anniversary Date, unless the Company shall have given written notice to Executive, at least thirty (30) days prior to the expiration of such Annual Anniversary Date, of its intention not to extend the Employment Period (as defined below) hereunder.  As such, on December 31, 2021, the remaining term will be for three (3) years; on December 31, 2022, the remaining term will be for two (2) years; and on December 31, 2023, the remaining term will be for one (1) year.  Beginning with the December 31, 2024 Anniversary Date and each Anniversary Date thereafter, Executive’s employment hereunder shall be deemed to be automatically extended, upon the same terms and conditions for one (1) year after such Annual Anniversary Date, unless the Company shall have given written notice to Executive, at least thirty (30) days prior to the expiration of such Annual Anniversary Date, of its intention not to extend the Employment Period (as defined below) hereunder.  Notwithstanding the foregoing, unless mutually agreed to by the Company and the Executive, Executive’s employment hereunder shall under no circumstances extend beyond December 31, 2027.  The period during which Executive is employed by the Company pursuant to this Agreement, including any extension thereof in accordance with the preceding sentence, shall be referred to as the “Employment Period.”

 



 

(b)                               Position and Responsibilities .  During the Employment Period, Executive shall serve as President and Chief Executive Officer of the Company, and shall have such duties and responsibilities as are customarily assigned to individuals serving in such position and such other duties consistent with Executive’s title and position as the Board of Directors of the Company (the “Board”) specifies from time to time.  Executive shall devote all of his skill, knowledge, commercial efforts and business time to the conscientious and good faith performance of his duties and responsibilities for the Company to the best of his ability.

 

(c)                                Location .  During the Employment Period, Executive’s services shall be performed primarily in the Miami, Florida metropolitan area.  However, Executive may be required to travel in and outside of Miami, Florida as the needs of the Company’s business dictate.

 

3.                                     Base Salary .  Commencing January 1, 2012, the Company shall pay Executive a base salary at an annualized rate of four hundred twenty thousand dollars ($420,000), payable in installments on the Company’s regular payroll dates.  The Board shall review Executive’s base salary annually during the Employment Period and may increase (but not decrease without the prior written consent of Executive) such base salary from time to time, based on its periodic review of Executive’s performance in accordance with the Company’s regular policies and procedures.  The annual base salary payable to Executive from time to time under this Section 3 shall hereinafter be referred to as the “Base Salary.”

 

4.                                     Annual Bonus Compensation .  Executive shall be eligible to receive an annual bonus (“Annual Bonus”) with respect to each calendar year ending during the Employment Period.  The Annual Bonus shall be determined under the Company’s Executive Officers’ Bonus Plan or such other annual bonus plan maintained by the Company for similarly situated Executives that the Company designates, in its sole discretion (any such plan, the “Bonus Plan”), in accordance with the terms of such plan as in effect from time to time.  Executive’s Annual Bonus shall not be less than four hundred thousand dollars ($400,000) for any calendar year during the Employment Period.  The Annual Bonus is earned pro-rata throughout each year, unless Executive’s employment is terminated by the Company pursuant to Section 8(b) for Cause, in which case, the Annual Bonus shall not be earned or paid for service during the year of the Date of Termination.  The Annual Bonus for each year shall be payable in cash on or before March 1 of the following year.

 

5.                                     Car Allowance .  During Executive’s Employment Period, Executive will be entitled to receive an annual car allowance and gasoline charge privileges in accordance with the Company’s car allowance policy.

 

6.                                     Executive Benefits .

 

(a)                                During the Employment Period and thereafter for so long as Executive continues to be employed by the Company or affiliate, Executive will be eligible to participate in the employee and executive benefit plans and programs maintained by the Company from time to time in which executives of the Company at Executive’s grade level are eligible to participate, including medical, dental, disability, hospitalization, life insurance, and retirement (i.e., 401K, pension and

 

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executive retirement plans), deferred compensation and savings plans, on the terms and subject to the conditions set forth in such plans; as may be amended from time to time.

 

(b)                               Executive shall continue to be a participant in the Seaboard Corporation Cash Balance Executive Retirement Plan, Amended and Restated Effective January 1, 2009, as amended by the Amended and Restated Cash Balance Executive Retirement Plan effective January 1, 2013 (“SERP”) during the Employment Period, and thereafter for so long as Executive is employed with the Company or an affiliate.  Executive consents to the changes made to the SERP pursuant to the January 1, 2013 amendments.  During the Employment Period and thereafter, the Company shall not make any further amendment to the SERP that would adversely affect or reduce the benefit that will accrue or be paid to Executive under the SERP, it being understood that the formula to calculate the benefit may result in a reduction in benefits, such as if there is an increase in the 30 year U.S. Treasury Rate.  The preceding sentence shall not apply to amendments made in order to conform the SERP to applicable changes in law; provided , however , in the event an amendment made in order to conform the SERP to applicable changes in law results in a reduction to the accrued benefit or the benefit that will accrue to Executive, the Company shall establish an alternative provision or plan that will provide a benefit to Executive that is substantially equal to the benefits reduced in the SERP as a result of such amendment.  To be certain, if any such amendment to the SERP is made to conform the SERP to applicable law and this results in an increase to the federal or state income taxes payable upon receipt of the Accrued Benefit, the Company shall not establish an alternative provision or plan that will pay or reimburse Employee for such taxes.

 

(c)                                For purposes of calculating the benefit payable under the SERP, the Company and Executive agree that: (i) if the Executive remains employed with the Company through December 31, 2023, the Final Average Earnings shall equal $1,025,769; and (ii) if the Executive’s employment with the Company is terminated prior to December 31, 2023, the Final Average Earnings shall not exceed $1,025,769.

 

(d)                              It is agreed that effective December 31, 2012, Executive shall be deemed to have become a participant in the SERP effective January 1, 2002 (instead of January 1, 2005), such that he will have an additional three (3) Years of Accrual Service.  Such additional Years of Accrual Service shall be considered in calculating the Annual Cash Balance Allocation pursuant to Section 4.2 of the SERP with respect to the Year 2012.

 

(e)                                As a retention incentive to encourage Executive to continue in the employment of the Company, notwithstanding that pursuant to the SERP, the Years of Accrual Service is limited to a maximum of twenty (20) Years of Accrual Service, Executive shall accrue an additional Year of Accrual Service pursuant to the SERP for each Year of Service after December 31, 2013 completed by the Executive, up to an additional 1.52 Years of Accrual Service.  The terms used herein shall have the meaning given to such term in the SERP.

 

7.                                     Indemnification; Expenses; Paid Time Off .

 

(a)                                Indemnification .  Except to the extent, if any, prohibited by law, the Company shall indemnify Executive against expenses (including attorneys’ fees of counsel selected by

 

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Executive), judgments, fines and amounts paid in settlement actually and reasonably incurred by Executive in connection with any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, to which Executive was, is, or is threatened to be, made a party by reason of facts which include Executive’s being or having been an employee, officer, director or agent of the Company or any Affiliates.  Except to the extent, if any, prohibited by law, the Company shall pay expenses (including attorneys’ fees of counsel selected by Executive) actually and reasonably incurred by Executive in defending any such action, suit or proceeding in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by Executive to repay such amounts so paid on Executive’s behalf if it shall ultimately be determined that Executive is not entitled to be indemnified by the Company for such expenses under applicable law.  The provisions of this Section 7(a) shall (i) survive termination of this Agreement; and (ii) not be deemed exclusive of any other indemnification or expense rights to which Executive may be entitled.

 

(b)                               Business Expenses .  During the Employment Period, the Company will reimburse Executive for all reasonable and necessary business-related expenses incurred by Executive at the request of and on behalf of the Company in accordance with the Company’s normal expense reimbursement policies.

 

(c)                                Paid Time Off .  During the Employment Period, Executive shall be entitled to paid time off on an annualized basis in accordance with the Company’s paid time off policy.  Executive shall also be entitled to Company-designated holidays.

 

8.                                     Termination of Employment .

 

(a)                                Termination Due to Death or Disability .  Executive’s employment shall automatically terminate upon Executive’s death and may be terminated by the Company due to Executive’s Disability (as defined below in this subsection (a)).  In the event that Executive’s employment is terminated due to his Disability or death, no termination benefits shall be payable to or in respect of Executive except as provided in Section 8(f)(ii).  For purposes of this Agreement, “Disability” means a physical or mental disability that prevents or would prevent the performance by Executive of his duties hereunder for a continuous period of six months or longer.  The determination of Executive’s Disability will be made by an independent physician agreed to by the parties.  If the parties are unable to agree within ten (10) days after a request for designation by a party, then the Company and the Executive shall each select a physician, and the two (2) physicians selected shall select a third physician.  The three (3) physicians so selected shall make a determination of the Executive’s Disability, as determined by at least two (2) of the three (3) physicians selected.  Such determination shall be final and binding on the parties hereto, and shall be based on such competent medical evidence as shall be presented to such physicians by Executive and/or the Company or by any physician or group of physicians or other competent medical experts employed by Executive and/or the Company to advise such physicians.

 

(b)                               Termination by the Company for Cause .  Executive’s employment may be terminated by the Company for Cause (as defined below in this subsection (b)).  In the event of a termination of Executive’s employment by the Company for Cause, Executive shall be paid the

 

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termination benefits, as provided in clauses (x) and (z) of Section 8(f)(i).  For purposes of this Agreement, “Cause” means (i) a material breach by Executive of any provision of this Agreement; (ii) a material violation by Executive of any Policy (as defined in Section 14), resulting in material injury to the Company; (iii) Executive’s willful misconduct or gross negligence that has caused or is reasonably expected to result in material injury to the business, reputation or prospects of the Company or any of its Affiliates; (iv) Executive’s material fraud or misappropriation of funds; or (v) the commission by Executive of a felony involving moral turpitude; provided that no termination under clauses (i) or (ii) shall be effective unless Company shall have given Executive notice of the event or events constituting Cause and Executive shall have failed to cure such event or events within thirty (30) business days after receipt of such notice.

 

(c)                                Termination Without Cause .  Executive’s employment may be terminated by the Company Without Cause (as defined below in this subsection (c)) at any time.  In the event of a termination of Executive’s employment by the Company Without Cause, the Executive shall be paid the termination benefits as provided in Section 8(f)(i).  For purposes of this Agreement, a termination “Without Cause” shall mean a termination of Executive’s employment by the Company other than due to Executive’s death or Disability as described in Section 8(a) and other than for Cause as described in Section 8(b).

 

(d)                              Termination by Executive .  Executive may resign from his employment for any reason, including for Good Reason (as defined below in this subsection (d)).  In the event of a termination of Executive’s employment by Executive’s resignation other than for Good Reason, no termination benefits shall be payable to or in respect of Executive except as provided in Section 8(f)(ii) and in the event of a termination of Executive’s employment by Executive for Good Reason, no termination benefits shall be payable to or in respect of Executive except as provided in Section 8(f)(i).  For purposes of this Agreement, a termination of employment by Executive for “Good Reason” shall mean a resignation by Executive from his employment with the Company within one hundred eighty (180) days following the initial occurrence, without Executive’s consent, of any one or more of the following events: (i) a material diminution in the Executive’s authority, duties or responsibilities; (ii) a material change in the geographic location where Executive primarily performs his services; or (iii) any other material breach by the Company of any material provision of this Agreement; provided that the Executive shall have given the Company notice of the occurrence of the event or events constituting Good Reason within ninety (90) days following the initial occurrence of such event or such events and the Company shall have failed to cure such event or events (to the extent capable of being cured) within thirty (30) business days after receipt of such notice.

 

(e)                                Notice of Termination; Date of Termination .

 

(i)                                   Notice of Termination .  Any termination of Executive’s employment by the Company or by Executive (other than as a result of Executive’s death) shall be communicated by a written Notice of Termination addressed to the other party to this Agreement.  A “Notice of Termination” shall mean a notice stating that Executive or the Company, as the case may be, is electing to terminate Executive’s employment with the Company (and thereby terminating the Employment Period), stating the proposed effective

 

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date of such termination, indicating the specific provision of this Section 8 under which such termination is being effected and, if applicable, setting forth in reasonable detail the circumstances claimed to provide the basis for such termination.  Any Notice of Termination given by an Executive must specify an effective date of termination which is at least thirty (30) days after the giving of the Notice of Termination.

 

(ii)                               Date of Termination .  The term “Date of Termination” shall mean (i) if Executive’s employment is terminated by his death, the date of his death; and (ii) if Executive’s employment is terminated for any other reason, the effective date of termination specified in such Notice of Termination.  The Employment Period shall expire on the Date of Termination.

 

(f)                                 Payments Upon Certain Terminations .

 

(i)                                   In the event of a termination of Executive’s employment by the Company Without Cause or by Executive’s resignation from employment for Good Reason during the Employment Period, the Company shall pay to Executive (or, following his death, to Executive’s estate), within thirty (30) days of the Date of Termination, (x) his Base Salary through the Date of Termination, to the extent not previously paid; (y) the pro-rata amount of the Annual Bonus (based on the amount paid for the previous year) which is accrued through the date of termination; and (z) reimbursement for any unreimbursed business expenses incurred by Executive prior to the Date of Termination that are subject to reimbursement pursuant to the terms hereof, and payment for paid time off accrued as of the Date of Termination but unused (such amounts under clauses (x), (y) and (z), collectively the “Accrued Obligations”).  In addition, in the event of any such termination of Executive’s employment, if Executive executes and delivers to the Company a Release and Discharge of All Claims substantially in the form attached hereto (“Release”) within thirty (30) days after the Date of Termination, Executive shall be entitled to the following payments and benefits (provided, however, in the event of Executive’s death following the Date of Termination but prior to delivery of the executed Release, the following payments shall be paid to Executive’s estate, notwithstanding that the Release has not been executed):

 

(A)                           the Executive’s Base Salary (at the Base Salary being paid on the Date of Termination), for the longer of: (x) the remaining Employment Period (assuming Executive’s employment had not terminated) or (y) one (1) year (the “Severance Period”), payable in installments in accordance with the Company’s regular payroll policies for one year after the Date of Termination, with the first installment being paid on the Company’s regular pay date following the date which is thirty (30) days after the Date of Termination (the “Payment Commencement Date”) (with the first installment being the sum of the Base Salary installments from the Date of Termination through the Payment Commencement Date and with subsequent installments being based on the Base Salary), and with the balance, if any, being paid pursuant to a lump sum payment on the one year anniversary date of the Date of Termination; and

 

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(B)                            the Executive’s Annual Bonus (at the amount of the Annual Bonus paid to the Executive for the year prior to the Date of Termination) which would have been paid to the Executive had Executive’s employment continued for the Severance Period, duly apportioned for any partial year, such amount to be payable to Executive on the one year anniversary date of the Date of Termination; and

 

(C)                            the Executive shall automatically vest in all employee welfare and benefit plans in which the Executive was participating as of the Date of Termination and such benefits shall be paid to Executive in accordance with the terms of such plans; and

 

(D)                           the Company shall provide outplacement services to Executive for up to ninety (90) days.

 

Executive shall not have a duty to mitigate the costs to the Company under this Section 8(f)(i), nor shall any payments from the Company to Executive hereunder be reduced, offset or canceled by any compensation or fees earned by (whether or not paid currently) or offered to Executive during the remainder of the fiscal year of the Company that includes the Date of Termination by a subsequent employer or other Person (as defined below in Section 18(k) below) for which Executive performs services, including, but not limited to, consulting services.  The foregoing shall not relieve Executive of the non-competition prohibitions provided in Section 10 below.

 

(ii)                               If Executive’s employment shall terminate upon his death or due to Executive’s Disability or Executive shall resign from his employment without Good Reason, in any such case during the Employment Period, the Company shall pay to Executive (or, in the event of Executive’s death, to his estate) the Accrued Obligations within thirty (30) days following the Date of Termination.  If the Company shall terminate Executive’s employment for Cause, the Company shall pay Executive the termination benefits, as provided in clauses (x) and (z) of Section 8(f)(i).

 

(iii)                           Except as specifically set forth in this Section 8(f), no termination benefits shall be payable to or in respect of Executive’s employment with the Company or its Affiliates.

 

(iv)                           The Company shall have the right to apply and set off against the Accrued Obligations or any other amounts owing to Executive hereunder, any amounts owing by the Executive to the Company, whether pursuant to this Agreement or otherwise.

 

(g)                               Resignation upon Termination .  Effective as of any Date of Termination under this Section 8 or otherwise as of the date of Executive’s termination of employment with the Company, Executive shall resign, in writing, from all Board memberships and other positions then held by him, or to which he has been appointed, designated or nominated, with the Company and its Affiliates.

 

9.                                     Confidentiality .

 

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(a)                                Executive acknowledges and agrees that the terms of this Agreement, including all addendums and attachments hereto, are confidential.  Executive agrees not to disclose any information contained in this Agreement, or the fact of this Agreement, to anyone, other than to Executive’s lawyer, financial advisor or immediate family members.  If Executive discloses any information contained in this Agreement to his lawyer, financial advisor or immediate family members as permitted herein, Executive agrees to immediately tell each such individual that he or she must abide by the confidentiality restrictions contained herein and keep such information confidential as well.

 

(b)                               Executive agrees that during his employment with the Company and thereafter, Executive will not, directly or indirectly (i) disclose any Confidential Information to any Person (other than, only with respect to the period that Executive is employed by the Company, to an Executive of the Company who requires such information to perform his or her duties for the Company); or (ii) use any Confidential Information for Executive’s own benefit or the benefit of any third party.  “Confidential Information” means confidential, proprietary or commercially sensitive information relating to (i) the Company or its Affiliates, or members of their management or boards; or (ii) any third parties who do business with the Company or its Affiliates, including customers and suppliers.  Confidential Information includes, without limitation, marketing plans, business plans, financial information and records, intellectual property, operation methods, personnel information, drawings, designs, information regarding product development, other commercial or business information and any other information not available to the public generally.  The foregoing obligation shall not apply to any Confidential Information that has been previously disclosed to the public or is in the public domain (other than by reason of a breach of Executive’s obligations to hold such Confidential Information confidential).  If Executive is required or requested by a court or governmental agency to disclose Confidential Information, Executive must notify the General Counsel of the Company in writing of such disclosure obligation or request no later than three business days after Executive learns of such obligation or request, and permit the Company to take all lawful steps it deems appropriate to prevent or limit the required disclosure.  The foregoing provisions of this Section 9(b) are in addition to the provisions set forth in the Company’s Code of Ethics Policy.

 

10.                             Partial Restraint on Post-Termination Competition .

 

(a)                                Definitions .  For the purposes of this Section 10, the following definitions shall apply:

 

“Competitor” means any business, individual, partnership, joint venture, association, firm, corporation or other entity, other than the Company and its affiliates, that is engaging or actively planning to engage, wholly or partly, in activities (“Competitive Activities”) that directly compete or would compete with the Company or its affiliates in the Company Activities (as hereinafter defined) in the Territory (as hereinafter defined).

 

“Competitive Position” means (i) the direct or indirect ownership or control of all or any portion of a Competitor; or (ii) any employment or independent contractor arrangement

 

- 8 -



 

with any Competitor whereby Executive will serve such Competitor in any managerial, sales, executive or consultant capacity with respect to Competitive Activities in the Territory.

 

“The Company Activities” means the businesses conducted by the Company, including, without limitation, cargo transportation, whether over land or water, and all related business, including, without limitation, logistics, freight forwarding, agency representation and stevedoring.

 

“Non-Compete Period” or “Non-Solicitation Period” means the period beginning with the Commencement Date and ending: (i) one (1) year after the Date of Termination with respect to any termination prior to July 1, 2023, no matter whether terminated by the Company or by the Executive for any reason or no reason, or (ii) six (6) months after the Date of Termination with respect to any termination on or after July 1, 2023, no matter whether terminated by the Company or by the Executive for any reason or no reason .

 

“Territory” means the states, provinces and territories in the countries in which the Company operates or provides services with respect to each of the Company Activities.

 

(b)                               Non-Competition .

 

(i)                                   The parties hereto acknowledge that Executive, by virtue of his position with and responsibilities to the Company, is engaging and is expected to continue to engage during the Term in the Company Activities throughout the Territory and has executive management responsibilities with respect to the Company responsibilities which extend throughout the Territory.  Executive acknowledges that to protect adequately the interest of the Company in the business of the Company it is essential that any non-compete covenant with respect thereto cover all the Company Activities and the entire Territory.

 

(ii)                               Executive hereby agrees that, during the Non-compete Period, Executive will not, either directly or indirectly, alone or in conjunction with any other party, accept or enter into a Competitive Position.  Executive shall notify the Company promptly in writing if Executive receives an offer of a Competitive Position during the Non-compete Period, and such notice shall describe all material terms of such offer.

 

Nothing contained in this Section 10 shall prohibit Executive from acquiring not more than five percent (5%) of any company whose common stock is publicly traded on a national securities exchange or in the over-the-counter market.

 

(c)                                Severability .  If a judicial or arbitral determination is made that any of the provisions of this Section 10 constitutes an unreasonable or otherwise unenforceable restriction against Executive the provisions of this Section 10 shall be rendered void only to the extent that such judicial or arbitral determination finds such provisions to be unreasonable or otherwise unenforceable with respect to Executive.  In this regard, Executive hereby agrees that any judicial or arbitral authority construing this Agreement shall sever or reform any portion of the Territory, any prohibited business activity or any time period from the coverage of this Agreement to allow the

 

- 9 -



 

covenants in this Section 10 to be enforced to the maximum extent authorized by law, and shall then enforce the covenants in this Section 10 as so severed or reformed.

 

(d)                              Reasonable Restrictions .  Executive acknowledges that the restrictions and covenants contained in this Agreement are reasonably necessary to protect the goodwill and legitimate business interests of the Company, are not overbroad, overlong, or unfair (including in duration and scope), and will not curtail Executive’s ability to earn a livelihood upon Executive’s termination of employment with the Company.

 

11.                             Non-Solicitation of Employees and Customers .  During the period of Executive’s employment with the Company and for the one-year period following the termination of his employment, Executive shall not, directly or indirectly, by himself or through any third party, whether on Executive’s own behalf or on behalf of any other Person or entity, (i) solicit or endeavor to solicit, employ or retain; (ii) interfere with the relationship of the Company or any of its Affiliates with; or (iii) attempt to establish a business relationship with (A) any natural person who is or was (during Executive’s employment with the Company) an employee or engaged by the Company or any Affiliate to provide services to it, or (B) any customer of the Company or any of its Affiliates who was a customer at any time during which Executive was an employee of the Company.

 

12.                             Work Product .  Executive agrees that all of Executive’s work product (created solely or jointly with others, and including any intellectual property or moral rights in such work product), given, disclosed, created, developed or prepared in connection with Executive’s employment with the Company, whether ensuing during or after Executive’s employment with the Company (“Work Product”) shall exclusively vest in and be the sole and exclusive property of the Company and shall constitute “work made for hire” (as that term is defined under Section 101 of the U.S. Copyright Act, 17 U.S.C. § 101) with the Company being the person for whom the work was prepared.  In the event that any such Work Product is deemed not to be a “work made for hire” or does not vest by operation of law in the Company, Executive hereby irrevocably assigns, transfers and conveys to the Company, exclusively and perpetually, all right, title and interest which Executive may have or acquire in and to such Work Product throughout the world, including without limitation any copyrights and patents, and the right to secure registrations, renewals, reissues, and extensions thereof.  The Company and its Affiliates or their designees shall have the exclusive right to make full and complete use of, and make changes to all Work Product without restrictions or liabilities of any kind, and Executive shall not have the right to use any such materials, other than within the legitimate scope and purpose of Executive’s employment with the Company.  Executive shall promptly disclose to the Company the creation or existence of any Work Product and shall take whatever additional lawful action may be necessary, and sign whatever documents the Company may require, in order to secure and vest in the Company or its designee all right, title and interest in and to all Work Product and any intellectual property rights therein (including full cooperation in support of any Company applications for patents and copyright or trademark registrations).

 

13.                             Return of Company Property .  In the event of termination of Executive’s employment for any reason, Executive shall return to the Company all of the property of the Company and its Affiliates, including without limitation all materials or documents containing or pertaining to Confidential Information, and including without limitation, any company car, all computers

 

- 10 -



 

(including laptops and I-Pads), cell phones, keys, PDAs, I-Phones, credit cards, facsimile machines, card access to any Company building, customer lists, computer disks, reports, files, e-mails, work papers, Work Product, documents, memoranda, records and software, computer access codes or disks and instructional manuals, internal policies, and other similar materials or documents which Executive used, received or prepared, helped prepare or supervised the preparation of in connection with Executive’s employment with the Company.  Executive agrees not to retain any copies, duplicates, reproductions or excerpts of such material or documents.

 

14.                             Compliance With Company Policies .  During Executive’s employment with the Company, Executive shall be governed by and be subject to, and Executive hereby agrees to comply with, all Company policies applicable to employees generally or to employees at Executive’s grade level, including without limitation, the Company’s Code of Business Ethics and Conduct, in each case, as any such policies may be amended from time to time in the Company’s sole discretion (collectively, the “Policies”).

 

15.                             Injunctive Relief with Respect to Covenants; Forum, Venue and Jurisdiction .  Executive acknowledges and agrees that a breach by Executive of any of Section 9, 10, 11, 12, 13 or 14 is a material breach of this Agreement and that remedies at law may be inadequate to protect the Company and its Affiliates in the event of such breach, and, without prejudice to any other rights and remedies otherwise available to the Company, Executive agrees to the granting of injunctive relief in the Company’s favor in connection with any such breach or violation without proof of irreparable harm, plus attorneys’ fees and costs to enforce these provisions.  Executive further acknowledges and agrees that the Company’s obligations to pay Executive any amount or provide Executive with any benefit or right pursuant to Section 8 is subject to Executive’s compliance with Executive’s obligations under Sections 9 through 14 inclusive, and that in the event of a breach by Executive of any of Section 9, 10, 11, 12, 13 or 14, the Company shall immediately cease paying such benefits and Executive shall be obligated to immediately repay to the Company all amounts theretofore paid to Executive pursuant to Section 8.  In addition, if not repaid, the Company shall have the right to set off from any amounts otherwise due to Executive any amounts previously paid pursuant to Section 8(f) (other than the Accrued Obligations).  Executive further agrees that the foregoing is appropriate for any such breach inasmuch as actual damages cannot be readily calculated, the amount is fair and reasonable under the circumstances, and the Company would suffer irreparable harm if any of these Sections were breached.  All disputes not relating to any request or application for injunctive relief in accordance with this Section 15 shall be resolved by arbitration in accordance with Section 18(b).

 

16.                             Assumption of Agreement .  The Company shall require any Successor thereto, by agreement in form and substance reasonably satisfactory to Executive, to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place.  Failure of the Company to obtain such agreement prior to the effectiveness of any such succession shall be a breach of this Agreement and shall entitle Executive to compensation from the Company in the same amount and on the same terms as Executive would be entitled hereunder if the Company had terminated Executive’s employment Without Cause as described in Section 8, except that for purposes of implementing the

 

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foregoing, the date on which any such succession becomes effective shall be deemed the Date of Termination.

 

17.                             Entire Agreement; Survival .  This Agreement constitutes the entire agreement among the parties hereto with respect to the subject matter hereof, and supersedes and replaces the Employment Agreement of Executive dated July 1, 2005, as amended.  All prior correspondence and proposals (including, but not limited to, summaries of proposed terms) and all prior promises, representations, understandings, arrangements and agreements relating to such subject matter are merged herein and superseded hereby.  The covenants and agreements set forth in Sections 6, 7, 8, 9, 12, 13, 14, 15, 16, 17 and 18 of this Agreement shall survive any termination of this Agreement or expiration of the term of this Agreement.

 

18.                             Miscellaneous .

 

(a)                                Binding Effect; Assignment .  This Agreement shall be binding on and inure to the benefit of the Company and its Successors and permitted assigns.  This Agreement shall also be binding on and inure to the benefit of Executive and his heirs, executors, administrators and legal representatives.  This Agreement shall not be assignable by any party hereto without the prior written consent of the other parties hereto.  The Company may effect such an assignment without prior written approval of Executive upon the transfer of all or substantially all of its business and/or assets (by whatever means), provided that the Successor to the Company shall expressly assume and agree to perform this Agreement in accordance with the provisions of Section 16.

 

(b)                               Arbitration .  The Company and Executive agree that any dispute or controversy arising under or in connection with this Agreement shall be resolved by final and binding arbitration before the American Arbitration Association (“AAA”).  The arbitration shall be conducted in accordance with AAA’s National Rules for the Resolution of Employment Disputes then in effect at the time of the arbitration.  The arbitration shall be held in the general Kansas City, Kansas metropolitan area.  The dispute shall be heard and determined by one arbitrator selected from a list of arbitrators who are members of AAA’s Regional Employment Dispute Resolution roster.  If the parties cannot agree upon a mutually acceptable arbitrator from the list, each party shall number the names in order of preference and return the list to AAA within ten (10) days from the date of the list.  A party may strike a name from the list only for good cause.  The arbitrator receiving the highest ranking by the parties shall be selected.  Depositions, if permitted by the arbitrator, shall be limited to a maximum of two (2) per party and to a maximum of four (4) hours in duration.  The arbitration shall not impair either party’s right to request injunctive or other equitable relief in accordance with Section 15 of this Agreement.

 

(c)                                Governing Law .  This Agreement shall be governed by and construed in accordance with the laws of the State of Kansas without reference to principles of conflicts of laws.

 

(d)                              Taxes .  The Company may withhold from any payments made under this Agreement all applicable taxes, including, but not limited to, income, employment and social insurance taxes, as shall be required by law.

 

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(e)                                Amendments .  No provision of this Agreement may be modified, waived or discharged unless such modification, waiver or discharge is approved by the Company and is agreed to in writing by Executive.  No waiver by any party hereto at any time of any breach by any other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time.  No waiver of any provision of this Agreement shall be implied from any course of dealing between or among the parties hereto or from any failure by any party hereto to assert its rights hereunder on any occasion or series of occasions.

 

(f)                                 Severability .  In the event that any one or more of the provisions of this Agreement shall be or become invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not be affected thereby.

 

(g)                               Notices .  Any notice or other communication required or permitted to be delivered under this Agreement shall be (i) in writing; (ii) delivered personally, by courier service or by certified or registered mail, first-class postage prepaid and return receipt requested; (iii) deemed to have been received on the date of delivery or, if mailed, on the third business day after the mailing thereof; and (iv) addressed as follows (or to such other address as the party entitled to notice shall hereafter designate in accordance with the terms hereof):

 

(i)                                   If to the Company, to it at:

 

Seaboard Corporation

9000 West 67 th  Street

Shawnee Mission, Kansas 66202

Attention:

General Counsel

Telephone:

(913) 676-8925

Facsimile:

(913) 676-8978

 

(ii)                               if to Executive, to his residential address as currently on file with the Company.

 

(h)                               Voluntary Agreement; No Conflicts .  Executive represents that he is entering into this Agreement voluntarily and that Executive’s employment hereunder and compliance with the terms and conditions of this Agreement will not conflict with or result in the breach by Executive of any agreement to which he is a party or by which he or his properties or assets may be bound.

 

(i)                                   Counterparts/Facsimile .  This Agreement may be executed in counterparts (including by facsimile), each of which shall be deemed an original and all of which together shall constitute one and the same instrument.

 

(j)                                   Headings .  The section and other headings contained in this Agreement are for the convenience of the parties only and are not intended to be a part hereof or to affect the meaning or interpretation hereof.

 

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(k)                               Certain Other Definitions .

 

“Affiliate” with respect to any Person, means any other Person that, directly or indirectly through one or more intermediaries, Controls, is Controlled by, or is under common Control with the first Person, including, but not limited to, a Subsidiary of any such Person.

 

“Control” (including, with correlative meanings, the terms “Controlling,” “Controlled by” and “under common Control with”):  with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise.

 

“Person” any natural person, firm, partnership, limited liability company, association, corporation, company, trust, business trust, governmental authority or other entity.

 

“Subsidiary”  with respect to any Person, each corporation or other Person in which the first Person owns or Controls, directly or indirectly, capital stock or other ownership interests representing fifty percent (50%) or more of the combined voting power of the outstanding voting stock or other ownership interests of such corporation or other Person.

 

“Successor” of a Person means a Person that succeeds to the assets and liabilities of Seaboard Marine ltd. by merger, liquidation, dissolution or otherwise by operation of law, or a Person to which all or substantially all the assets and/or business of Seaboard Marine Ltd. are transferred.

 

IN WITNESS WHEREOF, the Company has duly executed this Agreement by its authorized representatives, and Executive has hereunto set his hand, in each case effective as of the date first above written.

 

THIS AGREEMENT CONTAINS A PROVISION REQUIRING THAT ARBITRATION PURSUANT TO THE AMERICAN ARBITRATION ASSOCIATION NATIONAL RULES FOR THE RESOLUTION OF EMPLOYMENT DISPUTES IS THE EXCLUSIVE MEANS FOR RESOLVING ANY DISPUTE BETWEEN THE PARTIES HERETO AS TO THIS AGREEMENT.

 

 

SEABOARD MARINE LTD.

 

 

 

 

 

 

 

By:

/s/ Steven J. Bresky

 

 

Name:

Steven J. Bresky

 

 

Title:

Vice President

 

 

 

 

 

 

Executive:

 

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By:

/s/ Edward A. Gonzalez

 

 

Edward A. Gonzalez

 

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RELEASE AND DISCHARGE OF ALL CLAIMS

 

This Release and Discharge of All Claims (“Release”) is made and entered into by and between _________________________________ (hereinafter “You”), and Seaboard Marine Ltd., a Liberian limited liability company (“Seaboard”).

 

For and in consideration of the following promises, the parties agree to the following:

 

1.                                     You acknowledge that your employment with Seaboard has ended effective _______________ in accordance with the terms of the Employment Agreement between You and Seaboard (“Employment Agreement”).

 

2.                                     Subject to the conditions set forth in Section 8(f)(i) of the Employment Agreement, Seaboard agreed to pay You the amounts described in said Section 8(f)(i) (“Severance”) and take certain actions.  The effectiveness of this Release is conditioned on Seaboard making the payments and taking the actions provided in Section 8(f)(i).  If such payments are not made or such actions are not taken, this Release shall be of no effect.

 

3.                                     You agree to, and do, hereby remiss, release and forever discharge Seaboard, Seaboard’s parent corporation, Seaboard Corporation, and any and all companies affiliated with Seaboard, and their respective agents, officers, employees, successors and assigns (hereinafter collectively the “Released Parties”), from and against any and all matters, claims, demands, damages, causes of action, debts, liabilities, controversies, judgments, and suits of every kind and nature whatsoever, foreseen, unforeseen, known or unknown, which You now have, or hereinafter may have against Seaboard based on any and all aspects of your employment with Seaboard or the termination of You prior to the date hereof.  This release of claims includes, but is not limited to, any rights or claims You may have under Title VII of the Civil Rights Act of 1964, as amended; the Equal Pay Act; the Age Discrimination in Employment Act of 1967, as amended; the Employment Retirement Income Security Act; the Omnibus Budget Reconciliation Act; the Americans With Disabilities Act; the Family and Medical Leave Act of 1993; the Kansas Acts Against Discrimination; the Kansas Age Discrimination in Employment Act; the Fair Labor Standard Act; any claims for wrongful discharge or breach of contract; severance; claims under worker’s compensation laws; or any other federal, state or local laws or regulations relating to employment and wages arising from events occurring prior to the date of execution of this Agreement.  You agree that this Agreement includes a release of all claims based on theories of contract or tort (e.g., negligent or intentional infliction of emotional distress, defamation, assault, battery, false imprisonment, wrongful termination, etc.), whether based on common law or otherwise.  The foregoing list is meant to be illustrative rather than exhaustive.  Further, You declare that as of the date of this Agreement, You have not suffered any on the job or work-related accident, injury, occupational disease or disability whether temporary, permanent, partial or total.

 



 

YOU ACKNOWLEDGE AND AGREE THAT THIS RELEASE IS A FULL AND FINAL BAR TO ANY AND ALL CLAIMS OF ANY TYPE THAT YOU MAY NOW HAVE AGAINST ANY OF THE RELEASED PARTIES.

 

4.                                     You waive the rights and claims set forth above, and also agree not to institute, or have instituted, a lawsuit against any of the Released Parties on any such claims or rights or to submit or file any charges, claims, complaints or actions with any agency, court, organization, or judicial forum.  You further acknowledge and agree that with respect to the rights and claims You are waiving, You are waiving not only your right to recover money or any other relief action You might commence, but also your rights to recover any action brought on your behalf by any other party, including, but not limited to the United States Equal Employment Opportunity Commission or any other federal, state, or local governmental agency or department.

 

5.                                     Notwithstanding the foregoing, this Release shall not constitute any release or waiver of any claims for retirement benefits, insurance or welfare benefits or any other benefits of employment with Seaboard which accrued or arose prior to the date your employment ended and in which You are vested.

 

6.                                     The parties to this Agreement agree that nothing in this Agreement is an admission by any party hereto of any wrongdoing, either in violation of an applicable law or otherwise, and that nothing in this Agreement is to be construed as such by any person.

 

7.                                     You and Seaboard agree that neither will publicize this Agreement either directly or indirectly, either in specific or as to general content, to either the public generally, to any employee of Seaboard or to any other person.

 

8.                                     You hereby acknowledge that You have been advised to consult an attorney, and that You fully understand the Agreement and the effect of signing the Agreement.  You further represent, declare and agree that You voluntarily accept the payment described above for the purposes of making a full and final compromise, adjustment and settlement of all claims hereinabove described.

 

9.                                     The foregoing Agreement, together with your Employment Agreement, constitutes the entire agreement among the parties and there are no other understandings or agreements, written or oral, between them on the subject.  Separate copies of this document shall constitute original documents which may be signed separately, but which together will constitute one single agreement.

 

10.                             You covenant and agree as follows:

 

a.                                      You shall protect and safeguard the trade secrets and confidential and proprietary information of Seaboard and its parent and subsidiaries and affiliate companies, including, but not limited to, the identity of its customers and suppliers, its

 

- 2 -



 

arrangements with customers and suppliers, and its technical and financial data, records, compilations of information, processes and specification relating to its customers, suppliers, products and services;

 

b.                                     You shall not disclose any of such trade secrets and confidential and proprietary information;

 

c.                                      You shall not use, directly or indirectly, for your own benefit or for the benefit of another, any of such trade secrets and confidential and proprietary information; and

 

d.                                    You agree not to make any disparaging comment in any format, whether written, electronic or oral, to any customer, employee, the press or any other individual or entity regarding Seaboard that relates to Seaboard’s business or related activities or the relationship between the parties.

 

11.                             All files, records, documents, drawings, specifications, memoranda, notes, or other documents relating to the business of Seaboard, whether prepared by You or otherwise coming into your possession, shall be the exclusive property of Seaboard, and shall be delivered to Seaboard and not retained by You for any reason whatsoever.  It is expressly agreed that the remedy at law for the breach of any such covenant is inadequate and injunctive relief shall be available to prevent the breach or any threatened breach thereof.

 

12.                             You acknowledge that You have been given at least twenty-one (21) days within which to consider this Agreement before its execution.  You agree that any changes made to this Release (whether material or not) must be made in writing, be signed and dated by both parties, and does not restart the running of the twenty-one (21) day period.  This Agreement shall not become effective until seven (7) calendar days after the date of execution.  During this seven (7) day period, You may revoke the Agreement.  After said seven (7) day period, You acknowledge that this Agreement becomes final and binding.

 

13.                             This Agreement shall be construed and governed by the laws of the State of Kansas.

 

THE PARTIES HAVE READ, UNDERSTOOD AND FULLY CONSIDERED THIS RELEASE AND DISCHARGE OF ALL CLAIMS, AND ARE MUTUALLY DESIROUS OF ENTERING INTO SUCH RELEASE AND DISCHARGE OF ALL CLAIMS.  THE TERMS OF THIS RELEASE AND DISCHARGE OF ALL CLAIMS ARE THE PRODUCT OF MUTUAL NEGOTIATION AND COMPROMISE BETWEEN THE PARTIES, HAVING ELECTED TO EXECUTE THIS RELEASE AND DISCHARGE OF ALL CLAIMS, TO FULFILL THE PROMISES SET FORTH HEREIN, AND TO RECEIVE THEREBY THE COMPENSATION SET FORTH IN THE EMPLOYMENT AGREEMENT.  THE PARTIES FREELY AND KNOWINGLY, AND AFTER DUE CONSIDERATION, VOLUNTARILY ENTER INTO THIS RELEASE AND DISCHARGE OF ALL CLAIMS.

 

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IN WITNESS WHEREOF, the undersigned parties have executed this Settlement Agreement and Release.

 

 

 

 

SEABOARD MARINE LTD.

 

 

 

 

 

 

 

 

 

 

Date:

 

 

By:

 

 

 

 

 

Company Representative

 

 

 

 

 

 

 

 

 

 

Date:

 

 

By:

 

 

 

 

 

Employee

 

 

 

 

 

 

 

 

 

 

 

STATE OF

________________

)

 

 

 

 

 

) ss

 

 

 

COUNTY OF

_______________

)

 

 

 

 

On this ____ day of ___________, 20__, before me ___________, to me personally known, who, after being duly sworn, acknowledged that he/she executed the foregoing Agreement and Release as his/her free act and deed.

 

IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official seal the day and year first above written.

 

 

 

 

 

Notary Public

 

 

My commission expires:

 

 

 

 

 

 

 

 

- 4 -


Exhibit 13

 

 

 

 

2012 Annual Report

 

 



 

SEABOARD CORPORATION

 

 

Description of Business

 

Seaboard Corporation is a diverse global agribusiness and transportation company. In the United States, Seaboard is primarily engaged in pork production and processing and ocean transportation. Overseas, Seaboard is primarily engaged in commodity merchandising, grain processing, sugar production and electric power generation. Seaboard also has an interest in turkey operations in the United States.

 

Table of Contents

 

Letter to Stockholders

2

Principal Locations

5

Division Summaries

6

Summary of Selected Financial Data

8

Company Performance Graph

9

Quarterly Financial Data (unaudited)

10

Management’s Discussion & Analysis of Financial Condition and Results of Operations

11

Management’s Responsibility for Consolidated Financial Statements

25

Management’s Report on Internal Control over Financial Reporting

25

Report of Independent Registered Public Accounting Firm on Consolidated Financial Statements

26

Report of Independent Registered Public Accounting Firm on Internal Control over Financial Reporting

27

Consolidated Statements of Comprehensive Income

28

Consolidated Balance Sheets

29

Consolidated Statements of Cash Flows

30

Consolidated Statements of Changes in Equity

31

Notes to Consolidated Financial Statements

32

Stockholder Information

60

 

This report, including information included or incorporated by reference in this report, contains certain forward-looking statements with respect to the financial condition, results of operations, plans, objectives, future performance and business of Seaboard Corporation and its subsidiaries (Seaboard). Forward-looking statements generally may be identified as statements that are not historical in nature and statements preceded by, followed by or that include the words: “believes,” “expects,” “may,” “will,” “should,” “could,” “anticipates,” “estimates,” “intends,” or similar expressions. In more specific terms, forward-looking statements, include, without limitation: statements concerning the projection of revenues, income or loss, capital expenditures, capital structure or other financial items, including the impact of mark-to-market accounting on operating income; statements regarding the plans and objectives of management for future operations; statements of future economic performance; statements regarding the intent, belief or current expectations of Seaboard and its management with respect to: (i) Seaboard’s ability to obtain adequate financing and liquidity; (ii) the price of feed stocks and other materials used by Seaboard; (iii) the sales price or market conditions for pork, grains, sugar, turkey and other products and services; (iv) the recorded tax effects under certain circumstances and changes in tax laws; (v) the volume of business and working capital requirements associated with the competitive trading environment for the Commodity Trading and Milling segment; (vi) the charter hire rates and fuel prices for vessels; (vii) the fuel costs and related spot market prices in the Dominican Republic; (viii) the effect of the fluctuation in foreign currency exchange rates; (ix) the profitability or sales volume of any of Seaboard’s segments; (x) the anticipated costs and completion timetable for Seaboard’s scheduled capital improvements, acquisitions and dispositions; or (xi) other trends affecting Seaboard’s financial condition or results of operations, and statements of the assumptions underlying or relating to any of the foregoing statements.

 

This list of forward-looking statements is not exclusive. Seaboard undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, changes in assumptions or otherwise. Forward-looking statements are not guarantees of future performance or results. They involve risks, uncertainties and assumptions. Actual results may differ materially from those contemplated by the forward-looking statements due to a variety of factors. The information contained in this report, including, without limitation, the information under the headings “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Letter to Stockholders” identifies important factors which could cause such differences.

 

 

 

 

2012 Annual Report

 

1

 



 

SEABOARD CORPORATION

Letter to Stockholders

 

 

 

 

 

 

 

 

 

 

Letter to Stockholders is intentionally omitted from Exhibit 13 and will be included in printed Annual Report.

 

 

 

 

 

 

 

 

 

 

 

2

 

2012 Annual Report

 

 

 



 

SEABOARD CORPORATION

Letter to Stockholders

 

 

 

 

 

 

 

 

 

 

Letter to Stockholders is intentionally omitted from Exhibit 13 and will be included in printed Annual Report.

 

 

 

 

 

 

 

 

 

 

 

 

2012 Annual Report

 

3

 



 

SEABOARD CORPORATION

Letter to Stockholders

 

 

 

 

 

 

 

 

 

 

Letter to Stockholders is intentionally omitted from Exhibit 13 and will be included in printed Annual Report.

 

 

 

 

 

 

 

 

 

 

 

4

 

2012 Annual Report

 

 

 



 

SEABOARD CORPORATION

Principal Locations

 

 

Corporate Office

 

Life Flour Mill Ltd.*

 

Seaboard de Nicaragua, S.A.

Seaboard Corporation

 

Premier Feeds Mills Company Limited*

 

Nicaragua

Merriam, Kansas

 

Nigeria

 

Seaboard del Peru, S.A.

 

 

LMM Farine, S.A.

 

Peru

Pork

 

Madagascar

 

Seaboard Freight & Shipping

Seaboard Foods LLC

 

Minoterie de Matadi, S.A.R.L.*

 

Jamaica Limited

Pork Division Office

 

Societe Africaine de Developpement

 

Jamaica

Merriam, Kansas

 

Industriel Alimentaire*

 

Seaboard Honduras, S.de R.L. de

Processing Plant

 

Democratic Republic of Congo

 

C.V.

Guymon, Oklahoma

 

Minoterie du Congo, S.A.

 

Honduras

Processed Meats

 

Republic of Congo

 

Seaboard Marine (Trinidad) Ltd.

Salt Lake City, Utah

 

Moderna Alimentos, S.A.*

 

Trinidad

Missoula, Montana

 

Molinos Champion, S.A.*

 

Seaboard Marine of Haiti, S.E.

High Plains Bioenergy, LLC

 

Ecuador

 

Haiti

Guymon, Oklahoma

 

National Milling Corporation Limited

 

SEADOM, S.A.

Seaboard de Mexico USA LLC

 

Zambia

 

Dominican Republic

Mexico

 

Seaboard West Africa Limited*

 

SeaMaritima S.A. de C.V.

 

 

Sierra Leone

 

Mexico

Commodity Trading and Milling

 

Unga Holdings Limited*

 

 

Commodity Trading Operations

 

Kenya and Uganda

 

Sugar

Australia*

 

 

 

Ingenio y Refineria San Martin del

Canada

 

Marine

 

Tabacal SRL

Chapel Hill, North Carolina

 

Seaboard Marine Ltd.

 

Argentina

Colombia

 

Marine Division Office

 

 

Ecuador

 

Miami, Florida

 

Power

Greece

 

Port Operations

 

Transcontinental Capital Corp.

Isle of Man

 

Brooklyn, New York

 

(Bermuda) Ltd.

Peru*

 

Houston, Texas

 

Dominican Republic

South Africa

 

Miami, Florida

 

 

 

 

New Orleans, Louisiana

 

Turkey

African Poultry Development Limited*

 

Agencias Generales Conaven, C.A.

 

Butterball LLC*

Democratic Republic of Congo,

 

Venezuela

 

Division Office

Kenya and Zambia

 

Agencia Maritima del Istmo, S.A.

 

Garner, North Carolina

Compania Industrial de Productos

 

Costa Rica

 

Processing Plants

Agreopecuarios SA*

 

Cayman Freight Shipping Services, Ltd.

 

Huntsville, Arkansas

Rafael del Castillo & Cia. S.A*

 

Cayman Islands

 

Jonesboro, Arkansas

Colombia

 

JacintoPort International LLC

 

Ozark, Arkansas

Fairfield Rice Inc.*

 

Houston, Texas

 

Carthage, Missouri

National Milling Company

 

Representaciones Maritimas y Aereas, S.A.

 

Mt. Olive, North Carolina

of Guyana, Inc.

 

Guatemala

 

 

Guyana

 

Sea Cargo, S.A.

 

Other

Les Moulins d’Haiti S.E.M.*

 

Panama

 

Mount Dora Farms de Honduras,

Haiti

 

Seaboard de Colombia, S.A.

 

S.R.L.

Lesotho Flour Mills Limited*

 

Colombia

 

Honduras

Lesotho

 

 

 

Mount Dora Farms Inc.

Flour Mills of Ghana

 

 

 

Houston, Texas

Ghana

 

 

 

 

 

 

* Represents a non-controlled, non-consolidated affiliate

 

 

 

 

2012 Annual Report

 

5

 



 

SEABOARD CORPORATION

Division Summaries

 

Pork Division

 

Seaboard was a pioneer in the vertical integration of the U.S. Pork industry and its Pork Division is one of the largest producers and processors in the United States. Seaboard is able to efficiently control pork production across the entire life cycle of the hog, beginning with research and development in nutrition and genetics and extending to the production of high quality meat products at our processing and further processing facilities.

 

Seaboard’s hog processing facility is located in Guymon, Oklahoma. The facility is a double shift operation that processes approximately 19,700 hogs per day and generally operates at capacity.  Weekend shifts are added as market conditions dictate. Hogs processed at the plant are primarily Seaboard raised hogs. In addition, the remaining hogs processed are raised by third parties and purchased under contract or occasionally in the open market. Seaboard produces and sells fresh and frozen pork products to further processors, food service operators, grocery stores, distributors and retail outlets throughout the United States. Seaboard also sells to distributors, trading companies and further processors in Japan, Mexico and numerous other foreign markets.

 

Seaboard’s hog production facilities consist of genetic and commercial breeding, farrowing, nursery and finishing buildings located in Oklahoma, Kansas, Texas and Colorado. These facilities have a capacity to produce over four million hogs annually. Seaboard owns and operates six centrally located feed mills to provide formulated feed to these hogs.

 

Seaboard’s Pork Division also owns two further processing plants located in Salt Lake City, Utah and Missoula, Montana. The processing plants produce sliced and pre-cooked bacon primarily for the food service industry and, to a lesser extent, retail markets. These operations have enabled Seaboard to expand its integrated pork model into value-added products and have enhanced its ability to extend production closer to the retail and value added markets.

 

Seaboard produces biodiesel at a facility in Guymon, Oklahoma. The biodiesel is primarily produced from pork fat from Seaboard’s Guymon pork processing plant and from animal fat supplied by non-Seaboard facilities. The biodiesel is sold to blenders for distribution and in the retail markets. The facility can also produce biodiesel from vegetable oil.

 

Seaboard’s Pork Division has an agreement with a similar size pork processor, Triumph Foods LLC (Triumph), to market substantially all of the pork products produced at Triumph’s plant in St. Joseph, Missouri. The agreement enhances the efficiency of Seaboard’s sales and marketing efforts and expands Seaboard’s geographic footprint. Seaboard receives a fee on a per head basis on all Triumph products.  In 2012, Seaboard was ranked number 2 in pork production and number 4 in processing in the U.S. (including Triumph volume).

 

Commodity Trading and Milling Division

 

Seaboard’s Commodity Trading and Milling Division is an integrated grain trading, grain processing and logistics operation.  This division sources, transports and markets approximately seven million metric tons per year of wheat, corn, soybean meal and other commodities primarily to third party customers and affiliated companies. These commodities are purchased worldwide, with primary destinations in Africa, South America and the Caribbean. Seaboard integrates the delivery of commodities to its customers through the use of company owned and chartered bulk carriers.

 

Seaboard’s Commodity Trading and Milling Division operates facilities in 21 countries. The commodity trading business has eight offices in seven countries in addition to two non-consolidated affiliates in two other countries. The grain processing businesses operate facilities at 28 locations in 14 countries, and include five consolidated and twelve non-consolidated affiliates in Africa, South America and the Caribbean. Seaboard and its affiliates produce approximately three million metric tons of wheat flour, maize meal and manufactured feed per year in addition to other related grain based products.

 

Marine Division

 

Seaboard’s Marine Division provides containerized shipping service between the United States, the Caribbean Basin and Central and South America. Seaboard’s primary operations, located in Miami, include an off-port warehouse for cargo consolidation and temporary storage and a terminal at the Port of Miami. At the Port of Houston, Seaboard operates a cargo terminal facility that includes on-dock warehouse space for temporary storage of bagged grains, resins and other cargoes. Seaboard also makes scheduled vessel calls to Brooklyn, New York, New Orleans,

 

 

 

6

 

2012 Annual Report

 

 

 



 

SEABOARD CORPORATION

Division Summaries

 

 

Louisiana and various foreign ports in the Caribbean Basin and Central and South America.

 

This Division’s fleet consists of owned and chartered vessels, and includes dry, refrigerated and specialized containers and other cargo related equipment. Seaboard is the largest shipper in terms of cargo volume in the Port of Miami. Seaboard provides extensive service between our domestic ports of call and multiple foreign destinations.

 

To maximize fleet utilization, Seaboard uses a network of offices and agents throughout the United States, Canada, Latin America and the Caribbean Basin to sell freight to and from multiple points. Seaboard’s full service capabilities, including through agreements with connecting carriers, allow transport by truck or rail of import and export cargo to and from various U.S. ports. Seaboard’s frequent sailings and fixed-day schedules allow customers to coordinate manufacturing schedules and maintain inventories at cost-efficient levels.

 

Sugar Division

 

In Argentina, Seaboard grows sugar cane, produces and refines sugar and produces alcohol.  The sugar is primarily marketed locally, with some exports to the United States and other South American countries. Seaboard’s sugar processing plant, one of the largest in Argentina, has an annual capacity to produce approximately 250,000 metric tons of sugar and approximately 15 million gallons of alcohol per year. The mill is located in the Salta Province of Argentina, with administrative offices in Buenos Aires. Land owned by Seaboard in Argentina is planted with sugar cane, which supplies the majority of the raw material processed. Depending on local market conditions, sugar may also be purchased from third parties for resale.  In addition, this division sells dehydrated alcohol to certain oil companies under the Argentine government bio-ethanol program, which requires alcohol to be blended with gasoline.  This division also owns a 38 megawatt cogeneration power plant.  The plant is powered by the burning of sugarcane by-products during the harvest season, which is between May and November.

 

Power Division

 

In the Dominican Republic, Seaboard is an independent power producer generating electricity for the local power grid from two floating power generating facilities with a combined capacity of 178 megawatts.  Seaboard is not directly involved in the transmission or distribution of electricity.  Seaboard primarily sells power on the spot market.  Principal buyers are government-owned distribution companies and partially government-owned generation companies.  Through early 2011, this division operated two floating electric power generating facilities consisting of a system of diesel engines mounted onto barge-type vessels located on the Ozama River in Santo Domingo.  On April 8, 2011, Seaboard closed the sale of its two power generating facilities. On April 20, 2011, a short-term lease agreement was signed allowing Seaboard to resume operations of one of the facilities (72 megawatts).  Seaboard continues to operate this facility under a short-term lease agreement that may be canceled by either party. In addition, Seaboard retained all other physical properties of this business and constructed a new 106 megawatt floating power generating facility.  This new facility was delivered in January 2012 and began commercial operations in March 2012.

 

Other Divisions

 

On December 6, 2010, Seaboard purchased a 50 percent non-controlling voting interest in Butterball, LLC (Butterball). Butterball is a vertically integrated producer, processor and marketer of branded and non-branded turkeys and other turkey products. Butterball has five processing plants and numerous live production and feed milling operations located in North Carolina, Arkansas, Missouri and Kansas. Butterball produces approximately one billion pounds of turkey each year. Butterball is a national supplier to retail and foodservice outlets, and also exports products to Mexico and numerous other foreign markets.  On December 31, 2012, Butterball purchased the assets of Gusto Packing Company, Inc., a pork and turkey further processor located in Montgomery, Illinois.

 

Seaboard processes jalapeño peppers at its plant in Honduras. These products are shipped to the United States on Seaboard Marine vessels and distributed from Seaboard’s port facilities.

 

 

 

 

2012 Annual Report

 

7

 



 

SEABOARD CORPORATION

 

Summary of Selected Financial Data

 

 

 

 

Years ended December 31,

 

(Thousands of dollars except per share amounts)

 

2012

 

2011

 

2010

 

2009

 

2008

 

Net sales

 

$

6,189,133

 

$

5,746,902

 

$

4,385,702

 

$

3,601,308

 

$

4,267,804

 

Operating income

 

$

309,661

 

$

407,204

 

$

321,066

 

$

23,723

 

$

121,809

 

Net earnings attributable to Seaboard

 

$

282,311

 

$

345,847

 

$

283,611

 

$

92,482

 

$

146,919

 

Basic earnings per common share

 

$

234.54

 

$

284.66

 

$

231.69

 

$

74.74

 

$

118.19

 

Total assets

 

$

3,347,781

 

$

3,006,728

 

$

2,734,086

 

$

2,337,133

 

$

2,331,361

 

Long-term debt, less current maturities

 

$

120,825

 

$

116,367

 

$

91,407

 

$

76,532

 

$

78,560

 

Stockholders’ equity

 

$

2,308,189

 

$

2,079,467

 

$

1,778,249

 

$

1,545,419

 

$

1,463,578

 

Dividends per common share

 

$

12.00

 

$

-

 

$

9.00

 

$

3.00

 

$

3.00

 

 

In December 2012, Seaboard declared and paid a dividend of $12.00 per share on the common stock.  The increased amount of the dividend (which has historically been $0.75 per share on a quarterly basis or $3.00 per share on an annual basis) represented a prepayment of the annual 2013, 2014, 2015 and 2016 dividends ($3.00 per share per year).  Seaboard does not currently intend to declare any further dividends for the years 2013-2016. Seaboard did not declare a dividend in 2011. In 2010, Seaboard declared and paid dividends of $9.00 per share on the common stock, which included a prepayment of the annual 2011 and 2012 dividends ($3.00 per share per year). Basic and diluted earnings per common share are the same for all periods presented.

 

In 2011, Seaboard closed the sale of its two floating power generating facilities in the Dominican Republic resulting in a gain on sale of assets of $52,923,000, or $43.56 per share, included in operating income.  There was no tax expense on these transactions.  See Note 13 to the Consolidated Financial Statements for further discussion.

 

In 2009, Seaboard Corporation and affiliated companies in its Commodity Trading and Milling segment, resolved a dispute with a third party related to a 2005 transaction.  As a result, Seaboard Overseas Limited received $16,787,000, net of expenses, or $13.57 per common share, in 2009 included in other income.  There was no tax expense on this transaction.

 

 

 

 

8

 

 

2012 Annual Report

 

 

 

 



 

SEABOARD CORPORATION

 

Company Performance Graph

 

The Securities and Exchange Commission requires a five-year comparison of stock performance for Seaboard with that of an appropriate broad equity market index and similar industry index.  Seaboard’s common stock is traded on the NYSE MKT (formerly the NYSE Amex Equities) and provides an appropriate comparison for Seaboard’s stock performance.  Because there is no single industry index to compare stock performance, the companies comprising the Dow Jones Food and Marine Transportation Industry indices (the “Peer Group”) were chosen as the second comparison.

 

The following graph shows a five-year comparison of cumulative total return for Seaboard, the NYSE MKT Index and the companies comprising the Dow Jones Food and Marine Transportation Industry indices, weighted by market capitalization for the five fiscal years commencing December 31, 2007 and ending December 31, 2012.  The information presented in the performance graph is historical in nature and is not intended to represent or guarantee future returns.

 

 

The comparison of cumulative total returns presented in the above graph was plotted using the following index values and common stock price values:

 

 

 

12/31/07

 

12/31/08

 

12/31/09

 

12/31/10

 

12/31/11

 

12/31/12

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Seaboard Corporation

 

$

100.00

 

$

81.41

 

$

92.23

 

$

136.78

 

$

139.87

 

$

174.67

 

NYSE MKT Composite

 

$

100.00

 

$

62.15

 

$

82.82

 

$

104.10

 

$

122.59

 

$

121.01

 

Peer Group

 

$

100.00

 

$

77.46

 

$

94.43

 

$

106.43

 

$

122.41

 

$

132.20

 

 

 

 

 

2012 Annual Report

 

9

 



 

SEABOARD CORPORATION

 

Quarterly Financial Data (unaudited)

 

 

(UNAUDITED)

 

1st

 

2nd

 

3rd

 

4th

 

Total for

 

(Thousands of dollars except per share amounts)

 

Quarter

 

Quarter

 

Quarter

 

Quarter

 

the Year

 

2012

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

$

1,471,113

 

$

1,510,593

 

$

1,479,416

 

$

1,728,011

 

$

6,189,133

 

Operating income

 

$

93,356

 

$

60,723

 

$

85,057

 

$

70,525

 

$

309,661

 

Net earnings attributable to Seaboard

 

$

82,209

 

$

50,097

 

$

74,422

 

$

75,583

 

$

282,311

 

Earnings per common share

 

$

68.00

 

$

41.58

 

$

61.92

 

$

63.03

 

$

234.54

 

Dividends per common share

 

$

-

 

$

-

 

$

-

 

$

12.00

 

$

12.00

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Closing market price range per common share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

High

 

$

2,139.96

 

$

2,133.90

 

$

2,327.69

 

$

2,637.11

 

 

 

 

Low

 

$

1,852.00

 

$

1,828.65

 

$

1,997.80

 

$

2,142.00

 

 

 

2011

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

$

1,468,179

 

$

1,398,587

 

$

1,476,718

 

$

1,403,418

 

$

5,746,902

 

Operating income

 

$

130,276

 

$

136,965

 

$

66,989

 

$

72,974

 

$

407,204

 

Net earnings attributable to Seaboard

 

$

116,864

 

$

113,486

 

$

36,560

 

$

78,937

 

$

345,847

 

Earnings per common share

 

$

96.11

 

$

93.34

 

$

30.07

 

$

65.12

 

$

284.66

 

Dividends per common share

 

$

-

 

$

-

 

$

-

 

$

-

 

$

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Closing market price range per common share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

High

 

$

2,413.00

 

$

2,443.00

 

$

2,704.00

 

$

2,307.00

 

 

 

 

Low

 

$

1,965.00

 

$

2,160.00

 

$

1,801.99

 

$

1,684.00

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

In December 2012, Seaboard declared and paid a dividend of $12.00 per share on the common stock.  The increased amount of the dividend (which has historically been $0.75 per share on a quarterly basis or $3.00 per share on an annual basis) represented a prepayment of the annual 2013, 2014, 2015 and 2016 dividends ($3.00 per share per year).  Seaboard does not currently intend to declare any further dividends for the years 2013-2016. Seaboard did not declare a dividend in 2011 as there was a prepayment of the annual 2011 and 2012 dividends in December 2010.

 

During 2012, Seaboard repurchased 3,250 common shares in the first quarter, 4,875 shares in the second quarter, 1,050 shares in the third quarter and 3,762 shares in the fourth quarter.  During 2011, Seaboard repurchased 600 common shares in the third quarter and 4,682 shares in the fourth quarter as authorized by Seaboard’s Board of Directors. See Note 12 to the Consolidated Financial Statements for further discussion.

 

In April 2011, Seaboard closed the sale of its two floating power generating facilities in the Dominican Republic.  Seaboard recognized a gain on sale of assets of $51,423,000, or $42.29 per share, included in operating income in the second quarter of 2011.  In July 2011, Seaboard received $1,500,000 of the $3,000,000 in escrow for potential dry dock costs of these facilities.  The $1,500,000, or $1.23 per share, was recognized as a gain on sale of assets in operating income in the third quarter of 2011.  There was no tax expense on these transactions.  See Note 13 to the Consolidated Financial Statements for further discussion.

 

 

 

10

 

 

2012 Annual Report

 

 

 

 



 

SEABOARD CORPORATION

 

Management’s Discussion & Analysis

 

 

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

 

OVERVIEW

 

Seaboard is a diverse global agribusiness and transportation company, with operations in several industries. Most of the sales and costs of Seaboard’s segments are significantly influenced by worldwide fluctuations in commodity prices and changes in foreign political and economic conditions. Accordingly, sales, operating income and cash flows can fluctuate significantly from year to year. As each segment operates in distinct industries and different geographical locations, management evaluates their operations separately. Seaboard’s reporting segments are based on information used by Seaboard’s Chief Executive Officer in his capacity as chief operating decision maker to determine allocation of resources and assess performance.

 

Pork Segment

 

The Pork segment is primarily a domestic business, with some export sales to Japan, Mexico, and numerous other foreign markets. Revenues from the sale of pork products are primarily generated from a single hog processing plant in Guymon, Oklahoma, which generally operates at daily double shift processing capacity of 19,700 hogs, two bacon further processing plants located in Salt Lake City, Utah and Missoula, Montana, and a ham boning and processing plant in Mexico. In 2012, Seaboard raised approximately 80% of the hogs processed at the Guymon plant, with the remaining hog requirements purchased primarily under contracts from independent producers. This segment is Seaboard’s most capital intensive segment, representing approximately 45% of Seaboard’s total fixed assets in addition to material amounts of inventories.

 

Within the portfolio of Seaboard’s businesses, management believes profitability of the Pork segment is most susceptible to commodity price fluctuations. As a result, this segment’s operating income and cash flows can materially fluctuate from year to year, significantly affecting Seaboard’s consolidated operating income and cash flows. Sales prices are directly affected by both domestic and worldwide supply and demand for pork products and other proteins. Feed accounts for the largest input costs in raising hogs and is materially affected by price changes for corn and soybean meal. Market prices for hogs purchased from third parties for processing at the plant also represent a major cost factor. With the Guymon plant generally operating at capacity, Seaboard is constantly looking for ways to enhance the facility’s operational efficiency while also looking to increase margins by introducing new, higher value products.

 

The Pork segment also produces biodiesel which is sold to third parties. Biodiesel is produced from pork fat from Seaboard’s pork processing plant and from animal fat purchased from third parties. The processing plant also is capable of producing biodiesel from vegetable oil. Seaboard is also a majority-owner of a ham-boning and processing plant in Mexico.

 

The Pork segment has an agreement with Triumph Foods LLC (Triumph) to market substantially all of the pork products produced at Triumph’s plant in St. Joseph, Missouri. The Pork segment markets the related pork products for a fee primarily based on the number of head processed by Triumph. Triumph has processing capacity similar to that of Seaboard’s Guymon plant and operates with an integrated model similar to Seaboard’s. Seaboard’s sales prices for its pork products are primarily based on a margin sharing arrangement that considers the average sales price and mix of products sold from both Seaboard’s and Triumph’s hog processing plants.

 

Commodity Trading and Milling Segment

 

The Commodity Trading and Milling segment, which is managed under the name of Seaboard Overseas and Trading Group, primarily operates overseas and is an integrated grain trading, grain processing and logistics operation with locations in Africa, South America, the Caribbean and Europe. These foreign operations can be significantly impacted by changes in local crop production, political instability and local government policies, as well as fluctuations in economic and industry conditions and currency fluctuations. This segment’s sales are also significantly affected by fluctuating prices of various commodities, such as wheat, corn, soybean meal and, to a lesser degree, various other specialty products. Although this segment owns six ships, the majority of the third party trading business is transacted with chartered ships. Freight rates, influenced by available charter capacity for worldwide trade in bulk cargoes, and related fuel costs affect business volumes and margins. The milling businesses, both consolidated and non-consolidated affiliates, operate in foreign and, in most cases, lesser developed countries. Subsidized wheat and flour exports of various countries can exacerbate volatile market conditions that may have a significant impact on both the trading and milling businesses’ sales and operating income. This segment is Seaboard’s most working capital intensive segment, with approximately 41% of Seaboard’s total working capital at December 31, 2012, primarily consisting of inventories and receivables.

 

 

 

 

2012 Annual Report

 

11

 



 

SEABOARD CORPORATION

 

Management’s Discussion & Analysis

 

 

The majority of the Commodity Trading and Milling segment’s sales derive from its commodity trading business in which grain is sourced from multiple origins and delivered to third party and affiliate customers in various international locations. Execution of these purchase and delivery transactions have long cycles of completion which may extend for several months with a high degree of price volatility. As a result, these factors can significantly affect sales volumes, operating income, working capital and related cash flows from quarter to quarter.  Profit margins are protected, when possible, by using commodity derivatives and other risk management practices.

 

Effective, January 1, 2012, Seaboard increased its ownership from 50% to 70% in PS International, LLC, a specialty grain trading business located in Chapel Hill, North Carolina.  Effective December 31, 2012, Seaboard increased its ownership from 70% to 85%. Seaboard invested in several entities in recent years and continues to seek opportunities to expand its trading and milling businesses.

 

Marine Segment

 

The Marine segment provides containerized cargo shipping services primarily between the United States and 26 countries in the Caribbean Basin, Central and South America. Fluctuations in economic conditions and political instability in the regions or countries in which Seaboard operates each may affect trade volumes and operating profits. In addition, containerized cargo rates can fluctuate depending on local supply and demand for shipping services. This segment time-charters or leases the majority of its ocean cargo vessels and is thus affected by fluctuations in charter hire rates, as well as fuel costs.

 

Seaboard continues to explore ways to increase volumes on existing routes, while seeking opportunities to broaden its route structure in the regions it serves.

 

Sugar Segment

 

Seaboard’s Sugar segment operates a vertically integrated sugar and alcohol production facility in Argentina. This segment’s sales and operating income are significantly affected by local and worldwide sugar prices. Domestic sugar production levels in Argentina may affect the local price.  Global sugar fluctuations, to a lesser extent, have an impact in Argentina as well.  Depending on local market conditions, this business purchases sugar from third parties for resale. Over the past several years, Seaboard has taken a number of steps to enhance the efficiency of its operations and expand its sugar and alcohol production capacity. This segment sells dehydrated alcohol to certain oil companies under an Argentine government bio-ethanol program, which mandates alcohol to be blended with gasoline.  This segment also owns a 38 megawatt cogeneration power plant which is powered by the burning of sugarcane by-products during the harvest season, which is between May and November.

 

The functional currency of the Sugar segment is the Argentine peso. The currency exchange rate can have an impact on reported U.S. dollar sales, operating income and cash flows. Following several years of heavy capital investment in this segment to expand production capacity and to construct a 38 megawatt cogeneration power plant, financing needs for this segment were minimal in 2012 and should remain minimal in 2013. With the division’s improved operating results, Seaboard continues to explore various ways to improve and expand this segment.

 

Power Segment

 

Seaboard’s Power segment is an independent power producer in the Dominican Republic (DR) generating electricity from a system of diesel engines mounted on floating barges for the local power grid.  Seaboard primarily sells power on the spot market primarily to government-owned distribution companies and partially government-owned generation companies.  This segment is subject to delays in obtaining timely collections from sales to these government related entities.  In some prior years, operating cash flows have fluctuated from inconsistent customer collections.

 

As discussed in Note 13 to the Consolidated Financial Statements, in April 2011, Seaboard sold two power generating facilities and later signed a short-term lease that allowed Seaboard to resume operations of one of the facilities (72 megawatts).  Seaboard continues to operate this facility under a short-term lease agreement subject to cancellation by either party. During 2011, Seaboard also completed the construction of a new floating power generating facility with a rated capacity of 106 megawatts.  This facility was delivered in January 2012 and began operations in March 2012.  The total cost of the project was $136.0 million, including capitalized interest, and was primarily financed with a $114.0 million financing agreement.  Additional financing needs for this segment should be minimal for 2013, but Seaboard may pursue further power industry investments in the future.

 

Supply of power in the DR is determined by a government body and is subject to fluctuations based on government budgetary constraints. While fuel is this segment’s largest cost component and is subject to price swings, higher fuel costs generally have been passed on to customers.

 

 

 

 

12

 

 

2012 Annual Report

 

 

 

 



 

SEABOARD CORPORATION

 

Management’s Discussion & Analysis

 

 

Turkey Segment

 

On December 6, 2010, Seaboard purchased a 50 percent non-controlling voting interest in Butterball, LLC (Butterball). Butterball is a vertically integrated producer, processor and marketer of branded and non-branded turkeys and other turkey products. Butterball has five processing plants and numerous live production and feed milling operations located in North Carolina, Arkansas, Missouri and Kansas. Sales prices are directly affected by both domestic and worldwide supply and demand for turkey products and other proteins. Feed accounts for the largest input cost in raising turkeys and is materially affected by price changes for corn and soybean meal. The turkey business is seasonal only on the whole bird side, with Thanksgiving and Christmas holidays driving the majority of those sales. In addition, on December 31, 2012, this segment purchased the assets of Gusto Packing Company, Inc., a pork and turkey further processor located in Montgomery, Illinois.

 

LIQUIDITY AND CAPITAL RESOURCES

 

Summary of Sources and Uses of Cash

 

Cash and short-term investments as of December 31, 2012 decreased $33.7 million from December 31, 2011. The decrease was primarily the result of cash used for capital expenditures of $158.8 million, a loan to Butterball discussed below of $81.2 million, principal payments of long-term debt of $43.9 million, repurchases of common stock of $26.8 million, investments in and advances to affiliates discussed below of $24.9 million and dividends paid of $14.4 million. Partially offsetting the decrease was net cash from operating activities of $261.7 million, proceeds from issuance of long-term debt of $32.7 million, proceeds from sale of fixed assets of $15.9 million and an increase in notes payable of $12.6 million.  Cash from operating activities for 2012 increased $41.7 million compared to 2011, primarily as a result of timing of payments related to certain current liabilities in the Commodity Trading and Milling segment as total current liabilities increased in 2012 while they decreased in 2011.

 

Cash and short-term investments as of December 31, 2011 increased $21.4 million from December 31, 2010. The increase was primarily the result of $220.0 million in net cash from operating activities, $65.0 million in proceeds from issuance of long-term debt and $59.6 million of proceeds received from the sale of power generating facilities. Partially offsetting the increase was cash used for capital expenditures of $183.7 million, decreases in notes payable to banks of $62.5 million, notes receivable issued to affiliates, net of $40.3 million, investments in and advances to affiliates of $18.5 million and repurchases of common stock of $10.0 million.  Cash from operating activities for 2011 decreased $119.8 million compared to 2010, primarily as a result of changes in net working capital needs in the Commodity Trading and Milling segment for increases in receivables and inventories and also timing of payments for current liabilities.

 

Capital Expenditures, Acquisitions and Other Investing Activities

 

During 2012, Seaboard invested $158.8 million in property, plant and equipment, of which $52.3 million was expended in the Pork segment, $22.8 million in the Commodity Trading and Milling segment, $35.4 million in the Marine segment, $22.1 million in the Sugar segment and $25.0 million in the Power segment.  The Pork segment expenditures were primarily for additional finishing barns, improvements to existing facilities and related equipment and construction of a new feed mill.  The Commodity Trading and Milling segment expenditures were primarily for the purchase of a dry bulk vessel and for a down payment of $8.3 million made in July 2012 on four dry bulk vessels to be built for a total cost of approximately $83.0 million. See Note 11 to the Consolidated Financial Statements for further discussion. The Marine segment expenditures were primarily for purchases of cargo carrying and handling equipment and the purchase of a containerized cargo vessel.  In the Sugar segment, the capital expenditures were primarily for expansion of cane growing operations and normal upgrades to existing operations.  The Power segment expenditures were primarily used to complete the construction in the Dominican Republic of a 106 megawatt power generating facility, which began commercial operations in March 2012.  The total cost of the project was $136.0 million, including capitalized interest.  All other capital expenditures were of a normal recurring nature and primarily included replacements of machinery and equipment, and general facility modernizations and upgrades.

 

The total 2013 capital expenditures budget is $186.4 million. The Pork segment plans to spend $73.5 million primarily for additional finishing barns, improvements to existing facilities and related equipment and to complete construction on a new feed mill mentioned above.  The Commodity Trading and Milling segment plans to spend $27.3 million primarily for improvements to existing facilities and related equipment and another payment on four dry bulk vessels mentioned above. The Marine segment has budgeted $60.0 million primarily for additional cargo carrying and handling equipment.  In addition, management will be evaluating whether to purchase additional dry bulk vessels for the Commodity Trading and Milling segment and containerized cargo vessels for the Marine segment during 2013.  The Sugar segment plans to spend $23.7 million primarily for normal upgrades to existing operations, including cane re-planting. Management anticipates paying for these capital expenditures from a

 

 

 

 

2012 Annual Report

 

13

 



 

SEABOARD CORPORATION

Management’s Discussion & Analysis

 

 

combination of available cash, the use of available short-term investments and Seaboard’s available borrowing capacity.

 

During 2011, Seaboard invested $183.7 million in property, plant and equipment, of which $39.9 million was expended in the Pork segment, $31.2 million in the Marine segment, $22.6 million in the Sugar segment and $84.0 million in the Power segment.  The Pork segment expenditures were primarily for additional finishing barns, tractor-trailers and improvements to existing facilities and related equipment.  The Marine segment expenditures were primarily for purchases of cargo carrying and handling equipment.  In the Sugar segment, the capital expenditures were primarily for the completion of the cogeneration plant with the remaining amount for normal upgrades to existing operations.  The cogeneration plant became fully operational in October 2011.  The Power segment expenditures were primarily used for the construction of a 106 megawatt power generating facility discussed above.  All other capital expenditures were of a normal recurring nature and primarily included replacements of machinery and equipment, and general facility modernizations and upgrades.

 

During 2010, Seaboard invested $103.3 million in property, plant and equipment, of which $9.6 million was expended in the Pork segment, $28.4 million in the Marine segment, $30.6 million in the Sugar segment, $31.7 million in the Power segment and $3.0 million in the remaining businesses. The capital expenditures for the Pork segment were primarily for improvements to existing facilities and related equipment. Capital expenditures for the Marine segment included $23.5 million spent to purchase cargo carrying and handling equipment. The capital expenditures for the Sugar segment were primarily for construction of the cogeneration power plant with the remaining capital expenditures for normal upgrades to existing operations. Capital expenditures for the Power segment were primarily used for the construction of the power generation facility discussed above.  All other capital expenditures were primarily of a normal recurring nature and primarily included replacement of machinery and equipment, and general facility modernizations and upgrades.

 

Effective, January 1, 2012, Seaboard increased its ownership interest in PS International, LLC (PSI), a specialty grain trading business located in Chapel Hill, North Carolina, from 50% to 70%.  Accordingly, Seaboard began consolidation accounting and discontinued the equity method of accounting for this entity.  On December 31, 2012, Seaboard increased its ownership from 70% to 85%.  Total cash paid in 2012 for these two transactions, net of cash acquired, was $3.2 million and $3.0 million, respectively. Seaboard initially acquired a 50% non-controlling interest in PSI in late March 2010 for $7.7 million. During the fourth quarter of 2011, Seaboard provided a $35.0 million line of credit to this then 50% owned, non-consolidated affiliate. See Note 4 to the Consolidated Financial Statements for further discussion of these transactions.

 

On December 31, 2012, Seaboard provided a loan of $81.2 million to its non-consolidated affiliate, Butterball, LLC (Butterball) to fund its purchase of assets from Gusto Packing Company, Inc.  During the third quarter of 2011, Seaboard provided a term loan of $13.0 million to Butterball.  Also during the third quarter of 2011, Seaboard made an additional capital contribution of $5.6 million in Butterball.  On December 6, 2010, Seaboard acquired its 50 percent non-controlling voting interest in Butterball for a cash purchase price of $177.5 million.  In connection with this investment, Seaboard provided to Butterball $100.0 million of subordinated financing.  See Note 4 to the Consolidated Financial Statements for further discussion of these transactions.

 

In December 2011, Seaboard made an $8.5 million advance capital lease payment to begin operations in 2012 of a flour mill in Ghana.  In April, 2011, Seaboard closed the sale of its two power generating facilities in the Dominican Republic for $73.1 million.  See Note 13 to the Consolidated Financial Statements for further discussion.

 

During the fourth quarter of 2010, Seaboard acquired a 25 percent non-controlling interest in a commodity trading business in Australia for $5.0 million. Also during the fourth quarter of 2010, Seaboard invested $10.5 million in a newly-combined poultry business in Africa for a 50 percent non-controlling interest.

 

During the third quarter of 2010, Seaboard acquired a majority interest in a commodity origination, storage and processing business in Canada for approximately $6.7 million.  The assets acquired included cash of $1.2 million. Also during the third quarter of 2010, Seaboard finalized an agreement to invest in a bakery to be built in the Democratic Republic of Congo for a 50 percent non-controlling interest in this business. During 2012, 2011 and 2010, Seaboard invested $24.8 million, $11.4 million and $10.1 million, respectively, in equity and long-term advances for a total of $46.3 million as of December 31, 2012 in this project. The bakery began operations in the fourth quarter of 2012.

 

During 2010, Seaboard agreed to invest in various limited partnerships as a limited partner that are expected to enable Seaboard to obtain certain low income housing tax credits over a period of approximately ten years.  The

 

14

 

2012 Annual Report

 

 



 

SEABOARD CORPORATION

Management’s Discussion & Analysis

 

 

total commitment is approximately $17.5 million.  As of December 31, 2012, Seaboard had invested a total of $13.2 million in these partnerships with the remaining investment anticipated to be made in 2013.

 

Financing Activities, Debt and Related Covenants

The following table presents a summary of Seaboard’s available borrowing capacity as of December 31, 2012.  At December 31, 2012, there were no borrowings outstanding under the committed line of credit and borrowings under the uncommitted lines of credit totaled $28.8 million, all related to foreign subsidiaries.  Letters of credit reduced Seaboard’s borrowing capacity under its committed and uncommitted credit lines by $40.0 million and $4.0 million, respectively, primarily representing $18.4 million for Seaboard’s outstanding Industrial Development Revenue Bonds (IDRBs) and $21.8 million related to various insurance coverage.  In February 2013, Seaboard refinanced its long-term committed credit facility for the same available amount and a maturity date of February 20, 2018.  See Note 8 to the Consolidated Financial Statements for further discussion.

 

 

 

Total amount

 

(Thousands of dollars)

 

available

 

Long-term credit facility – committed

 

$

200,000

 

Short-term uncommitted demand notes

 

199,208

 

Total borrowing capacity

 

399,208

 

Amounts drawn against lines

 

(28,786

)

Letters of credit reducing borrowing availability

 

(43,948

)

Available borrowing capacity at December 31, 2012

 

$

326,474

 

 

 

 

 

 

In December 2012, Seaboard provided notice of call for early redemption to holders of certain IDRBs effective January 14, 2013.  As a result, $13.0 million of IDRBs were reclassified from long-term debt to current maturities of long-term debt as of December 31, 2012.  In June 2012, Seaboard’s committed line of credit was reduced from $300.0 million to $200.0 million. On September 17, 2010, Seaboard entered into a credit agreement for $114.0 million at a fixed rate of 5.34% for the financing of the construction of the new power generating facility in the Dominican Republic completed in 2012, as discussed above.  The credit agreement will mature in December 2021 and is secured by the power generating facility.  During 2012, 2011 and 2010, Seaboard borrowed $32.7 million, $65.0 million, and $16.3 million respectively, from this credit agreement.  See Note 8 to the Consolidated Financial Statements for further discussion.

 

Seaboard has capacity under existing loan covenants to undertake additional debt financings of approximately $1,533.4 million.  As of December 31, 2012, Seaboard was in compliance with all restrictive covenants related to these loans and facilities.  See Note 8 to the Consolidated Financial Statements for a summary of the material terms of Seaboard’s credit facilities, including financial ratios and covenants.

 

Scheduled long-term debt maturities are $25.1 million, $11.6 million and $11.4 million over the three years ending December 31, 2015.  As of December 31, 2012, Seaboard had cash and short-term investments of $361.0 million, additional total working capital of $745.2 million and a $200.0 million committed line of credit recently extended to February 2018.  Accordingly, management believes Seaboard’s combination of internally generated cash, liquidity, capital resources and borrowing capabilities will be adequate for its existing operations and any currently known potential plans for expansion of existing operations or business segments for 2013.  Management does, however, periodically review various alternatives for future financing to provide additional liquidity for future operating plans.  Management intends to continue seeking opportunities for expansion in the industries in which Seaboard operates, utilizing existing liquidity, available borrowing capacity and other financing alternatives.

 

As of December 31, 2012, $160.1 million of the $361.0 million of cash and short-term investments were held by Seaboard’s foreign subsidiaries and Seaboard could be required to accrue and pay taxes to repatriate these funds if needed for Seaboard’s operations in the U.S.  However, Seaboard’s intent is to permanently reinvest these funds outside the U.S. and current plans do not demonstrate a need to repatriate them to fund Seaboard’s U.S. operations.

 

As of December 31, 2012, Seaboard believes its exposure to the current potential European sovereign debt problems is not material. Seaboard monitors these exposures and currently does not believe there is a significant risk.

 

On October 19, 2012, the Board of Directors extended through October 31, 2015 the share repurchase program initially approved on November 6, 2009. Seaboard used cash to repurchase 12,937, 5,282 and 20,879 shares of

 

 

 

2012 Annual Report

15

 



 

SEABOARD CORPORATION

Management’s Discussion & Analysis

 

 

common stock at a total price of $26.8 million, $10.0 million and $30.0 million in 2012, 2011 and 2010, respectively. See Note 12 to the Consolidated Financial Statements for further discussion.

 

In December 2012, Seaboard declared and paid a dividend of $12.00 per share on the common stock which represented a prepayment of the annual 2013, 2014, 2015 and 2016 dividends ($3.00 per share per year).  Seaboard does not currently intend to declare any further dividends for the years 2013-2016.  Seaboard did not declare or pay any dividends in 2011.  In 2010, Seaboard declared and paid dividends of $9.00 per share on the common stock, which included a prepayment of the annual 2011 and 2012 dividends ($3.00 per share per year).

 

Contractual Obligations and Off-Balance Sheet Arrangements

 

The following table provides a summary of Seaboard’s contractual cash obligations as of December 31, 2012.

 

 

 

Payments due by period

 

 

 

 

 

Less than

 

1-3

 

3-5

 

More than

 

(Thousands of dollars)

 

Total

 

1 year

 

years

 

years

 

5 years

 

Vessel time and voyage-charter commitments

 

$

264,569

 

$

77,846

 

$

66,840

 

$

38,014

 

$

81,869

 

Contract grower finishing agreements

 

61,797

 

11,883

 

20,845

 

19,828

 

9,241

 

Other operating lease payments

 

251,933

 

19,583

 

31,092

 

28,749

 

172,509

 

Total lease obligations

 

578,299

 

109,312

 

118,777

 

86,591

 

263,619

 

Long-term debt

 

145,963

 

25,138

 

22,953

 

22,800

 

75,072

 

Other long-term liabilities

 

83,625

 

3,597

 

7,907

 

11,928

 

60,193

 

Short-term notes payable

 

28,786

 

28,786

 

-

 

-

 

-

 

Other purchase commitments

 

1,592,392

 

1,128,819

 

302,201

 

156,883

 

4,489

 

Total contractual cash obligations and commitments

 

$

2,429,065

 

$

1,295,652

 

$

451,838

 

$

278,202

 

$

403,373

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The Marine segment enters into contracts to time-charter vessels for use in its operations. To support the operations of the Pork segment, Seaboard has contract grower finishing agreements in place with farmers to raise a portion of Seaboard’s hogs. Seaboard has entered into grain and feed ingredient purchase contracts to support the live hog operations of the Pork segment, and has contracted for the purchase of additional hogs from third parties. The Commodity Trading and Milling segment enters into commodity purchase contracts and ocean freight contracts, primarily to support sales commitments. Seaboard also leases various facilities and equipment under non-cancelable operating lease agreements. Seaboard guarantees to third parties were not material as of December 31, 2012. See Note 11 to the Consolidated Financial Statements for a further discussion and for a more detailed listing of other purchase commitments.

 

Other long-term liabilities in the table above represent expected benefit payments for various non-qualified pension plans and supplemental retirement arrangements as discussed in Note 10 to the Consolidated Financial Statements, which are unfunded obligations that are deemed to be employer contributions. No contributions are planned at this time to the two qualified pension plans. Non-current deferred income taxes and certain other long-term liabilities on the Consolidated Balance Sheets are not included in the table above as management is unable to reliably estimate the timing of the payments for these items. In addition, deferred revenues and other deferred credits included in other long-term liabilities on the Consolidated Balance Sheets have been excluded from the table above since they do not represent contractual obligations.

 

RESULTS OF OPERATIONS

Net sales for the years ended December 31, 2012, 2011 and 2010 were $6,189.1 million, $5,746.9 million and $4,385.7 million, respectively. The increase in net sales for 2012 compared to 2011 primarily reflected higher sales for commodity trading and increased sales volume from the start-up of the new power generating facility in March 2012.  Partially offsetting the increase was lower domestic sales prices for pork products sold. The increase in net sales for 2011 compared to 2010 primarily reflected increased prices for and volumes of commodities traded and also an increase in overall sale prices for pork products.

 

Operating income for the years ended December 31, 2012, 2011 and 2010 were $309.7 million, $407.2 million and $321.1 million, respectively. The decrease for 2012 compared to 2011 primarily reflects lower domestic sales prices for pork products sold and, to a lesser extent, higher feed costs and a one-time gain on sale of power generating

 

16

 

2012 Annual Report

 

 



 

SEABOARD CORPORATION

Management’s Discussion & Analysis

 

 

facilities of $52.9 million recognized in 2011.  Partially offsetting the decrease was higher operating income from the start-up of the new power generating facility in March 2012 and lower costs along with higher rates for the Marine segment.  The increase for 2011 compared to 2010 reflects a one-time gain on sale of power generating facilities of $52.9 million recognized in 2011. The increase also reflected $33.8 million fluctuation of marking to market Commodity Trading and Milling derivative contracts, as discussed below, higher sugar prices and higher pork prices.  The increases were partially offset by write-downs of $15.4 million in 2011 for certain grain inventories for customer contract performance issues as discussed below and declining performance in the Marine segment from higher operating costs.

 

Pork Segment

 

(Dollars in millions)

 

2012

 

2011

 

2010

 

Net sales

 

$

1,638.4

 

$

1,744.6

 

$

1,388.3

 

Operating income

 

$

122.6

 

$

259.3

 

$

213.3

 

 

Net sales for the Pork segment decreased $106.2 million for the year ended December 31, 2012 compared to 2011.  The decrease primarily reflected lower domestic sales prices for pork products and, to a lesser extent, lower export sales volume for pork products sold.

 

Operating income decreased $136.7 million for the year ended December 31, 2012 compared to 2011.  The decrease was primarily a result of lower prices for domestic pork products sold as noted above and, to a lesser extent, higher feed costs.  Partially offsetting the decrease was a $5.6 million impairment charge incurred during the third quarter of 2011 related to the ham boning plant in Mexico, which resulted in a decrease in operating income for 2011as noted below.

 

Management is unable to predict future market prices for pork products or the cost of feed.  However, management anticipates positive operating income for this segment in 2013.  Also, see Note 13 to the Consolidated Financial Statements for discussion of a one-time credit of approximately $11.3 million for Federal blender’s credits that will be recognized as revenues in the first quarter of 2013.

 

Net sales for the Pork segment increased $356.3 million for the year ended December 31, 2011 compared to 2010.  The increase primarily reflected an increase in overall sales prices for pork products and, to a lesser extent, increased sales prices for and volume of biodiesel, and also higher volume of pork products sold.

 

Operating income for the Pork segment increased $46.0 million for the year ended December 31, 2011 compared to 2010.  The increase was primarily a result of higher sales prices and, to a lesser extent, higher volumes of pork products sold and an increase in payments received from the U.S. Government for biodiesel production in 2011 compared to 2010.  Partially offsetting the increase was higher feed costs primarily from higher corn prices and, to a lesser degree, higher costs for hogs purchased from third parties and the impact of using the LIFO method for determining certain inventory costs.  LIFO decreased operating income $33.7 million in 2011 compared to $1.3 million in 2010 primarily as a result of higher costs to purchase corn during 2011.  Also, during the third quarter of 2011, a $5.6 million impairment charge was incurred related to the ham boning plant in Mexico.  See Note 13 to the Consolidated Financial Statements for further discussion of the impairment charge.

 

Commodity Trading and Milling Segment

 

(Dollars in millions)

 

2012

 

2011

 

2010

 

Net sales

 

$

3,023.5

 

$

2,689.8    

 

$

1,808.9

 

Operating income as reported

 

$

71.9

 

$

43.2    

 

$

34.4

 

Less mark-to-market adjustments

 

0.9

 

(16.6)

 

17.2

 

Operating income excluding mark-to-market adjustments

 

$

72.8

 

$

26.6    

 

$

51.6

 

Income from affiliates

 

$

10.5

 

$

13.4    

 

$

21.0

 

 

 

 

 

 

 

 

 

 

Net sales for the Commodity Trading and Milling segment increased $333.7 million for the year ended December 31, 2012 compared to 2011.  The increase was primarily the result of the consolidation of PSI discussed above, partially offset by lower sales volumes to non-consolidated affiliates.  Also in 2011, $101.1 million in net sales were recognized related to previously deferred costs and deferred revenues under contracts for which the final sale prices were not fixed and determinable until the first quarter of 2011.

 

 

 

2012 Annual Report

17

 



 

SEABOARD CORPORATION

Management’s Discussion & Analysis

 

 

Operating income increased $28.7 million for the year ended December 31, 2012, compared to 2011.  The increase primarily reflected higher margins on commodity sales to third parties and net-write-downs of $15.4 million in 2011 for certain grain inventories for customer contract performance issues.  Partially offsetting the increase was the $17.5 million fluctuation of marking to market the derivative contracts in 2012, as discussed below.  Excluding the effects of these derivative contracts, operating income increased $46.2 million for 2012 compared to 2011.

 

As worldwide commodity price fluctuations cannot be predicted, management is unable to predict the level of future sales. Due to the uncertain political and economic conditions in the countries in which Seaboard operates and the current volatility in the commodity markets, management is unable to predict future sales and operating results for this segment. However, management anticipates positive operating income for this segment in 2013, excluding the potential effects of marking to market derivative contracts, although lower than 2012.

 

Had Seaboard not applied mark-to-market accounting to its derivative instruments, operating income for this segment in 2012 would have been higher by $0.9 million and $17.2 million in 2010, respectively, and in 2011 would have been lower by $16.6 million.  While management believes its commodity futures and options and foreign exchange contracts are primarily economic hedges of its firm purchase and sales contracts or anticipated sales contracts, Seaboard does not perform the extensive record-keeping required to account for these types of transactions as hedges for accounting purposes.  Accordingly, while the changes in value of the derivative instruments were marked to market, the changes in value of the firm purchase or sales contracts were not.  As products are delivered to customers, these existing mark-to-market adjustments should be primarily offset by realized margins or losses as revenue is recognized over time and thus, these mark-to-market adjustments could reverse in fiscal 2013.  Management believes eliminating these adjustments, as noted in the table above, provides a more reasonable presentation to compare and evaluate period-to-period financial results for this segment.

 

Income from affiliates for the year ended December 31, 2012 decreased by $2.9 million from 2011.  Based on the uncertainty of local political and economic environments in the countries in which the flour and feed mills operate, management cannot predict future results.

 

Net sales for the Commodity Trading and Milling segment increased $880.9 million for the year ended December 31, 2011 compared to 2010.  The increase was primarily the result of increased prices for wheat and corn, and increased volumes of commodities sold to both third parties and non-consolidated affiliates.  In addition, $101.1 million in net sales were recognized in the first quarter of 2011 related to previously deferred costs and deferred revenues under contracts for which the final sale prices were not fixed and determinable until the first quarter of 2011.

 

Operating income increased $8.8 million for the year ended December 31, 2011, compared to 2010.  The increase primarily reflects the $33.8 million fluctuation of marking to market the derivative contracts in 2011, as discussed above.  Excluding the effects of these derivative contracts, operating income decreased $25.0 million for 2011 compared to 2010.  The decrease was primarily the result of certain grain inventory write-downs of $15.4 million in 2011 for various customer contract performance issues. The decrease was also the result of, but to a lesser extent, higher selling, general and administrative expenses primarily from higher personnel costs and bad debt expense.

 

Income from affiliates for the year ended December 31, 2011 decreased by $7.6 million from 2010.  The decrease primarily represents unfavorable market conditions for certain affiliates.  Partially offsetting this decrease was a $5.1 million gain (Seaboard’s proportionate share) recognized in the fourth quarter of 2011 as a result of Seaboard’s non-consolidated affiliate in Haiti’s final insurance settlement for the 2010 earthquake.

 

Marine Segment

 

(Dollars in millions)

 

2012

 

2011

 

2010

 

Net sales

 

$

969.6

 

$

928.5

 

$

853.6

 

Operating income (loss)

 

$

26.1

 

$

(3.9

)

$

47.6

 

 

Net sales for the Marine segment increased $41.1 million for the year ended December 31, 2012, compared to 2011.  The increase was primarily the result of higher volumes and, to a lesser extent, increased rates in certain markets served during 2012 compared to 2011.

 

Operating income increased by $30.0 million for the year ended December 31, 2012, compared to 2011.  The increase was primarily the result of lower cost on a per unit shipped basis particularly for charter hire and trucking. Also, but to a lesser extent, the increases were the result of higher rates as noted above. Management cannot predict

 

 

18

 

2012 Annual Report

 

 



 

SEABOARD CORPORATION

Management’s Discussion & Analysis

 

 

changes in future cargo volumes and cargo rates or to what extent changes in economic conditions in markets served will affect net sales or operating income during 2013. However, management anticipates positive operating income for this segment in 2013.

 

Net sales of the Marine segment increased $74.9 million for the year ended December 31, 2011, compared to 2010 primarily as the result of increased rates in most markets served during 2011 and, to a lesser extent, higher cargo volumes as economic activity generally increased in 2011 compared to 2010.

 

Operating income decreased by $51.5 million for the year ended December 31, 2011, compared to 2010.  The decrease was primarily the result of cost increases for fuel, trucking and charter hire on a per unit shipped basis. Partially offsetting the decrease was higher cargo rates as discussed above.

 

Sugar Segment

 

(Dollars in millions)

 

2012

 

2011

 

2010

 

Net sales

 

$

288.3

 

$

259.8

 

$

196.0

 

Operating income

 

$

60.2

 

$

65.1

 

$

31.7

 

Income from affiliates

 

$

0.1

 

$

0.4

 

$

1.0

 

 

Net sales for the Sugar segment increased $28.5 million for the year ended December 31, 2012 compared to 2011.  The increase primarily reflects increased volumes of sugar produced and sold and, to a lesser extent, higher sales prices for alcohol and increased sales volumes of alcohol.  Partially offsetting the increase was lower sales prices for sugar.  Management cannot predict sugar and alcohol prices for 2013.

 

Operating income decreased $4.9 million for the year ended December 31, 2012 compared to 2011.  The decrease primarily represents lower income from sugar sales as a result of lower sale prices for sugar purchased from third parties for resale and, to a lesser extent, higher selling and administrative personnel costs. Partially offsetting this decrease was higher sales prices for alcohol as noted above.  Management anticipates positive operating income for this segment in 2013, although lower than 2012.

 

Net sales of the Sugar segment increased $63.8 million for the year ended December 31, 2011 compared to 2010.  The increase primarily reflects increased domestic sugar prices partially offset by lower volumes.

 

Operating income increased $33.4 million for the year ended December 31, 2011 compared to 2010.  The increase primarily represents higher margins resulting from the increase in sugar prices discussed above.

 

Power Segment

 

(Dollars in millions)

 

2012

 

2011

 

2010

 

Net sales

 

$

255.4

 

$

111.4

 

$

124.0

 

Operating income

 

$

55.0

 

$

60.8

 

$

13.4

 

 

Net sales for the Power segment increased $144.0 million for the year ended December 31, 2012 compared to 2011.   The increase primarily reflected increased volumes from the start-up of the new power generating facility in March 2012.

 

Operating income decreased $5.8 million for the year ended December 31, 2012 compared to 2011. The decrease primarily reflected the one-time gain on sale of power generating facilities of $52.9 million recognized in operating income during 2011 as referenced below.   Partially offsetting this decrease was increased volumes discussed above and, to a lesser extent, lower fuel cost per kilowatt hour generated as a result of using natural gas for a portion of production at the new power generating facility.  See Note 13 to the Consolidated Financial Statements for the sale of certain assets of this business in April 2011, subsequent leasing of one power generating facility and the construction of a new replacement power generating facility.

 

Management anticipates that sales volumes will be higher for 2013 as a result of the start-up of the new power generating facility in March 2012.  Management cannot predict future fuel costs or the extent to which rates will fluctuate compared to fuel costs.  However, management anticipates positive operating income for this segment in 2013, although lower than 2012.

 

Net sales of the Power segment decreased $12.6 million for the year ended December 31, 2011 compared to 2010 primarily reflected lower production levels, partially offset by higher rates.  The lower production levels are the

 

 

 

2012 Annual Report

19

 



 

SEABOARD CORPORATION

Management’s Discussion & Analysis

 

 

result of the sale of the power generating facilities as noted below which eliminated production for part of April 2011 and also because only one of the two facilities was subsequently leased and operated.  The higher rates were attributable primarily to higher fuel costs, a component of pricing.

 

Operating income increased $47.4 million for the year ended December 31, 2011 compared to 2010. This increase was primarily a result of the gain on sale of power generating facilities of $52.9 million, partially offset by lower production levels discussed above.

 

Turkey Segment

(Dollars in millions)

 

2012

 

2011

 

2010

 

Income (loss) from affiliate

 

$

20.2

 

$

12.7

 

$

(1.0)

 

 

The Turkey segment, accounted for using the equity method, represents Seaboard’s investment in Butterball. The increase in income from affiliate for 2012 compared to 2011 was primarily the result of higher sale prices for certain products and, to a lesser extent, higher volumes.  Partially offsetting the increase was higher feed cost.  See Note 4 to the Consolidated Financial Statements for discussion of Seaboard’s investment in Butterball, which occurred on December 6, 2010.  Accordingly, the loss from affiliate for 2010 above represents the period from December 6, 2010 to December 31, 2010.  During the third quarter of 2011, management of Butterball announced the closing of its Longmont, Colorado facilities by December 31, 2011, resulting in an impairment of fixed assets charge and accrued severance charges.  Seaboard’s proportionate share of these charges in the second half of 2011 was $3.0 million recognized in income from affiliate for 2011.  As management is still attempting to sell this facility, additional impairment charges to earnings are possible in the future.  On December 31, 2012, Butterball purchased the assets of Gusto Packing Company, Inc., a pork and turkey further processor located in Montgomery, Illinois.  Management anticipates positive income for this segment in 2013, excluding the potential effects of marking to market commodity derivative contracts and interest rate exchange agreements, although lower than 2012.

 

Selling, General and Administrative Expenses

Selling, general and administrative (SG&A) expenses for the year ended December 31, 2012 increased by $30.7 million over 2011 to $251.4 million.  This increase was primarily the result of increased personnel costs in most segments, the consolidation of PSI on January 1, 2012 discussed above and, to a lesser extent, higher costs related to Seaboard’s deferred compensation programs (which are offset by the mark-to-market investments recorded in Other Investment Income, Net discussed below).  As a percentage of revenues, SG&A increased to 4.1% for 2012 compared to 3.8% for 2011.

 

Selling, general and administrative (SG&A) expenses for the year ended December 31, 2011 increased by $15.8 million over 2010 to $220.7 million.  This increase was primarily the result of increased personnel costs in most segments partially offset by lower costs related to Seaboard’s deferred compensation programs (which are offset by the mark-to-market investments recorded in Other Investment Income, Net discussed below).  As a percentage of revenues, SG&A decreased to 3.8% for 2011 compared to 4.7% for 2010 primarily as a result of increased sales in the Commodity Trading and Milling and Pork segments.

 

Interest Expense

Interest expense totaled $11.0 million, $6.9 million and $5.6 million for the years ended December 31, 2012, 2011 and 2010, respectively. Interest expense increased for 2012 compared to 2011, which primarily reflected lower capitalized interest during 2012 compared to the same periods in 2011 related to the construction of the cogeneration plant completed in the fourth quarter of 2011 and the new power generating facility completed in March 2012.  Interest expense increased for 2011 compared to 2010, primarily from higher average interest rates on total borrowings outstanding.

 

Interest Income from Affiliates

Interest income from affiliates totaled $20.6 million, $17.8 million and $1.5 million for the years ended December 31, 2012, 2011 and 2010, respectively.  The increase for 2012 compared to 2011 primarily represented increased interest from notes receivable from Butterball in 2012 compared to 2011. The increase for 2011 compared to 2010 primarily represented interest from notes receivable from Butterball.  Seaboard invested in Butterball in December 2010, as noted above.

 

Other Investment Income, Net

Other investment income, net totaled $8.5 million, $0.2 million and $14.1 million for the years ended December 31, 2012, 2011 and 2010, respectively. The increase for 2012 compared to 2011 primarily reflected a gain of $4.1

 

 

20

 

2012 Annual Report

 

 



 

SEABOARD CORPORATION

Management’s Discussion & Analysis

 

 

million in 2012 compared to a loss of $1.6 million in 2011 from the mark-to-market value of Seaboard’s investments related to the deferred compensation programs.  The decrease for 2011 compared to 2010 primarily reflected a loss of $1.6 million in 2011 compared to a gain of $4.2 million in 2010 from the mark-to-market value of Seaboard’s investments related to the deferred compensation programs and realized gains of $0.7 million on short-term investments in 2011 compared to $6.6 million of realized gains for 2010.  Other investment income for 2010 also included $2.2 million in syndication fees recognized from the Butterball investment transaction.

 

Foreign Currency Gains, Net

Seaboard operates in many developing countries.  The political and economic conditions of these markets, along with fluctuations in the value of the U.S. dollar, cause volatility in currency exchange rates which exposes Seaboard to fluctuating foreign currency gains and losses which cannot be predicted by Seaboard.  Although Seaboard does not utilize hedge accounting, the commodity trading business does utilize foreign currency exchange contracts to manage its risks and exposure to foreign currency fluctuations primarily related to the South African rand and the Euro Zone euro.  Management believes these gains and losses, including the mark-to-market effects, of these foreign currency contracts relate to the underlying commodity transactions and classifies such gains and losses in cost of sales.

 

Miscellaneous, Net

Miscellaneous, net totaled $(3.0) million, $(13.1) million and $(0.4) million for the years ended December 31, 2012, 2011 and 2010, respectively. Miscellaneous, net included losses on interest rate exchange agreements of $5.1 million, $14.5 million and $1.3 million in 2012, 2011 and 2010, respectively.

 

Income Tax Expense

The effective tax rate for 2012 is comparable to prior years even though the mix of domestic and foreign earnings has fluctuated.  This is primarily the result of lower domestic taxable earnings offset by the Power segment being taxable for the majority of 2012 compared to being non-taxable in prior years, including the gain on sale of power generating facilities in the second quarter of 2011.  See Note 7 to the Consolidated Financial Statements for discussion of a one-time tax benefit from the American Taxpayer Relief Act of 2012 on income taxes in the first quarter of 2013.

 

OTHER FINANCIAL INFORMATION

Seaboard is subject to various federal and state regulations regarding environmental protection and land and water use. Among other things, these regulations affect the disposal of livestock waste and corporate farming matters in general. Management believes it is in compliance, in all material respects, with all such regulations. Laws and regulations in the states where Seaboard conducts its pork operations are restrictive. Future changes in environmental or corporate farming laws could adversely affect the manner in which Seaboard operates its business and its cost structure.

 

Management does not believe its businesses have been materially adversely affected by inflation.

 

CRITICAL ACCOUNTING 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 reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period.  Actual results could differ from those estimates.  Management has identified the accounting estimates believed to be the most important to the portrayal of Seaboard’s financial condition and results, and which require management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. Management has reviewed these critical accounting estimates with the Audit Committee of the Board of Directors. These critical accounting estimates include:

 

Allowance for Doubtful Accounts – Seaboard primarily uses a specific identification approach, in management’s best judgment, to evaluate the adequacy of this reserve for estimated uncollectible receivables as of the consolidated balance sheet date. Changes in estimates, developing trends and other new information can have a material effect on future evaluations. Furthermore, Seaboard’s total current and long-term receivables are heavily weighted toward foreign receivables ($417.9 million or 57% at December 31, 2012), including foreign receivables due from affiliates ($120.9 million at December 31, 2012), which generally represent more of a collection risk than its domestic receivables.  Receivables due from affiliates are generally associated with entities located in foreign countries considered lesser developed than the U.S., which can experience conditions causing sudden changes to their ability

 

 

 

2012 Annual Report

21

 



 

SEABOARD CORPORATION

Management’s Discussion & Analysis

 

 

to repay such receivables on a timely basis or in full.  Future collections of receivables or lack thereof could result in a material charge or credit to earnings depending on the ultimate resolution of each individual customer past due receivable.  Bad debt expense for the years ended December 31, 2012, 2011 and 2010 was $3.1 million, $4.4 million and $2.8 million, respectively.

 

Valuation of Inventories – Inventories are generally valued at the lower of cost or market. In determining market, management makes assumptions regarding replacement costs, estimated sales prices, estimated costs to complete, estimated disposal costs and normal profit margins. For commodity trading inventories, when contract performance by a customer becomes a concern, management must also evaluate available options to dispose of the inventory, including assumptions about potential negotiated changes to sales contracts, sales prices in alternative markets in various foreign countries and potentially additional transportation costs.  At times, management must consider probability weighting various viable alternatives in its determination of the net realizable value of the inventories. These assumptions and probabilities are subjective in nature, and are based on management’s best estimates and judgments existing at the time of preparation. Changes in future market prices of grains or facts and circumstances could result in a material write-down in value of inventory or decreased future margins on the sale of inventory.  See Note 13 to the Consolidated Financial Statements for further discussion on the Commodity Trading and Milling segment and its $15.4 million write-down of inventories in 2011.

 

Impairment of Long-Lived Assets – At each balance sheet date, long-lived assets, primarily property, plant and equipment, are reviewed for impairment when events or changes in circumstances indicate that the carrying amount may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the asset to future net cash flows expected to be generated by the asset group. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Some of the key assumptions utilized in determining future projected cash flows include estimated growth rates, expected future sales prices and estimated costs. In some cases, judgment is also required in assigning probability weighting to the various future cash flow scenarios. The probability weighting percentages used and the various future projected cash flow models prepared by management are based on facts and circumstances existing at the time of preparation and management’s best estimates and judgment of future operating results. Seaboard cannot predict the occurrence of certain future events that might adversely affect the reported value of long-lived assets, which include, but are not limited to, a change in the business climate, government incentives, a negative change in relationships with significant customers, and changes to strategic decisions made in response to economic and competitive conditions. Changes in these facts, circumstances and management’s estimates and judgment could result in an impairment of fixed assets resulting in a material charge to earnings.  See Note 5 to the Consolidated Financial Statements for further discussion on the Pork Segment and its $5.6 million impairment charge recorded in cost of sales in 2011 related to its ham-boning and processing plant in Mexico.

 

Goodwill and Other Intangible Assets – Goodwill and other indefinite-life intangible assets, not subject to amortization, are evaluated annually for impairment at the quarter end closest to the anniversary date of the acquisition, or more frequently if circumstances indicate that impairment is possible.  In performing its annual evaluation, management first performs a qualitative assessment to determine if it is more likely than not that the fair value of the reporting unit is less than its carrying value.  If management cannot reasonably conclude it is more likely that fair value exceeds carrying value, then a two-step quantitative test for impairment is performed for the reporting unit.  Otherwise, Seaboard concludes that no impairment is indicated and does not perform the two-step test.   The qualitative assessment requires management to make judgments in identifying the key drivers used in the fair value measurement for each indefinite-live asset.  Management then has to assess the current potential impact of the factors identified on the fair value and consider any events that impact the carrying amount of the asset. In those situations where it is determined to perform a two-step quantitative test for impairment, management then has to make judgments in determining what assumptions to use in estimating fair value. One of the methods used by Seaboard to determine fair value is the income approach using discounted future projected cash flows. Some of the key assumptions utilized in determining future projected cash flows include estimated growth rates, expected future sales prices and costs, and future capital expenditures requirements. In some cases, judgment is also required in assigning probability weighting to the various future cash flow scenarios. The probability weighting percentages used and the various future projected cash flow models prepared by management are based on facts and circumstances existing at the time of preparation and management’s best estimates and judgment of future operating results. Seaboard cannot predict the occurrence of certain future events that might adversely affect the reported value of goodwill and indefinite-life intangible assets that may include, but are not limited to, a change in the business

 

 

22

 

2012 Annual Report

 

 



 

SEABOARD CORPORATION

Management’s Discussion & Analysis

 

 

climate, a negative change in relationships with significant customers and changes to strategic decisions, including decisions to expand made in response to economic and competitive conditions. Changes in these facts, circumstances and management’s estimates and judgment could result in an impairment of goodwill and/or other intangible assets resulting in a material charge to earnings. At December 31, 2012, Seaboard had goodwill of $43.2 million and other intangible assets not subject to amortization of $17.0 million.

 

Income Taxes – Income taxes are determined by management based on current tax regulations in the various worldwide taxing jurisdictions in which Seaboard conducts its business. In various situations, accruals have been made for estimates of the tax effects for certain transactions, business structures, the estimated reversal of timing differences and future projected profitability of Seaboard’s various business units based on management’s interpretation of existing facts, circumstances and tax regulations. Should new evidence come to management’s attention which could alter previous conclusions or if taxing authorities disagree with the positions taken by Seaboard, the change in estimate could result in a material adverse or favorable impact on the financial statements. As of December 31, 2012, Seaboard has deferred tax assets of $119.9 million, net of the valuation allowance of $11.8 million, and deferred tax liabilities of $129.3 million. For the years ended December 31, 2012, 2011 and 2010, income tax expense included $(22.4) million, $(1.9) million and $13.4 million, respectively, for deferred taxes to federal, foreign, state and local taxing jurisdictions.

 

Accrued Pension Liability – The measurement of Seaboard’s pension liability and related expense is dependent on a variety of assumptions and estimates regarding future events. These assumptions include discount rates, assumed rate of return on plan assets, compensation increases, turnover rates, mortality rates and retirement rates. The discount rate and return on plan assets are important elements of liability and expense measurement, and are reviewed on an annual basis. The effect of decreasing both the discount rate and assumed rate of return on plan assets by 50 basis points would be an increase in pension expense of approximately $2.5 million per year. The effects of actual results differing from the assumptions (i.e. gains or losses) are primarily accumulated in accrued pension liability and amortized over future periods if it exceeds the 10 percent corridor and, therefore, could affect Seaboard’s recognized pension expense in such future periods, as permitted under U.S. GAAP.  Accordingly, accumulated gains or losses in excess of the 10 percent corridor are amortized over the average future service of active participants. See Note 10 to the Consolidated Financial Statements for further discussion of management’s assumptions.

 

DERIVATIVE INFORMATION

Seaboard is exposed to various types of market risks in its day-to-day operations. Primary market risk exposures result from changing commodity prices, foreign currency exchange rates and interest rates. Derivatives are used to manage these overall market risks; however, Seaboard does not perform the extensive record-keeping required to account for derivative transactions as hedges. Management believes it uses derivatives primarily as economic hedges, although they do not qualify as hedges for accounting purposes. Since these derivatives are not accounted for as hedges, fluctuations in the related prices could have a material impact on earnings in any given year. Seaboard also enters into speculative derivative transactions related to its market risks.

 

Changes in commodity prices affect the cost of necessary raw materials and other inventories, finished product sales and firm sales commitments. Seaboard uses various grain, oilseed and other commodities futures and options purchase contracts to manage certain risks of increasing prices of raw materials and firm sales commitments or anticipated sales contracts.  Short sales contracts are then used to offset the open purchase derivatives when the related commodity inventory is purchased in advance of the derivative maturity, effectively offsetting the initial futures or option purchase contract. From time to time, hog futures are used to manage risks of increasing prices of live hogs acquired for processing, and hog futures are used to manage risks of fluctuating prices of pork product inventories and related future sales.  From time to time, Seaboard may enter into short positions in energy related resources (i.e., heating oil, crude oil, etc.) to manage certain exposures related to bio-energy margins. Inventories that are sensitive to changes in commodity prices, including carrying amounts at December 31, 2012 and 2011, are presented in Note 3 to the Consolidated Financial Statements. Raw material requirements, finished product sales and firm sales commitments are also sensitive to changes in commodity prices.

 

Because changes in foreign currency exchange rates affect the cash paid or received on foreign currency denominated receivables and payables, Seaboard manages certain of these risks through the use of foreign currency forward exchange agreements. Changes in interest rates affect the cash required to service variable rate debt. From time to time, Seaboard uses interest rate swaps to manage risks of increasing interest rates.

 

During 2010, Seaboard entered into four ten-year interest rate exchange agreements which involve the exchange of

 

 

2012 Annual Report

23

 



 

SEABOARD CORPORATION

Management’s Discussion & Analysis

 

 

fixed-rate and variable-rate interest payments over the life of the agreements without the exchange of the underlying notional amounts to mitigate the effects of fluctuations in interest rates on variable rate debt. In September 2012, Seaboard terminated one interest rate exchange agreement with a notional value of $25.0 million. Seaboard pays a fixed rate and receives a variable rate of interest on three notional amounts of $25.0 million each. While Seaboard has certain variable rate debt, these interest rate exchange agreements do not qualify as hedges for accounting purposes. Accordingly, the changes in fair value of these agreements are recorded in Miscellaneous, net in the Consolidated Statements of Comprehensive Income.

 

The following table presents the sensitivity of the fair value of Seaboard’s open net commodity future and option contracts, foreign currency contracts and interest rate exchange agreements to a hypothetical 10 percent change in market prices or in foreign exchange rates and interest rates as of December 31, 2012 and December 31, 2011. For all open derivatives, the fair value of such positions is a summation of the fair values calculated for each item by valuing each net position at quoted market prices as of the applicable date.

 

(Thousands of dollars)

 

December 31, 2012

 

December 31, 2011

 

Grains and oilseeds

 

$             8,296

 

$                     6,628

 

Hogs

 

1,955

 

201

 

Sugar

 

639

 

-

 

Energy related resources

 

165

 

478

 

Dry dairy products

 

22

 

-

 

Foreign currencies

 

28,457

 

17,885

 

Interest rates

 

892

 

1,393

 

 

The table below provides information about Seaboard’s non-trading financial instruments sensitive to changes in interest rates at December 31, 2012.  For debt obligations, the table presents principal cash flows and related weighted average interest rates by expected maturity dates.  At December 31, 2012, long-term debt included foreign subsidiary obligations of $102.6 million payable in U.S. dollars and $0.2 million payable in Argentine pesos.  At December 31, 2011, long-term debt included foreign subsidiary obligations of $81.3 million payable in U.S. dollars and $0.2 million payable in Argentine pesos.  Weighted average variable rates are based on rates in place at the reporting date. Short-term instruments, including short-term investments, non-trade receivables and current notes payable have carrying values that approximate market and are not included in this table due to their short-term nature.

 

(Dollars in thousands)

 

2013

 

2014

 

2015

 

2016

 

2017

 

Thereafter

 

Total

 

Long-term debt:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed rate

 

$11,956

 

$11,553

 

$11,400

 

$11,400

 

$11,400

 

$46,272

 

$ 103,981

 

Average interest rate

 

5.83%

 

5.48%

 

5.34%

 

5.34%

 

5.34%

 

5.50%

 

5.48%

 

Variable rate

 

$13,182

 

$        -   

 

$        -   

 

$        -   

 

$        -   

 

$28,800

 

$   41,982

 

Average interest rate

 

1.56%

 

       -   

 

       -   

 

       -   

 

       -   

 

1.47%

 

1.50%

 

Non-trading financial instruments sensitive to changes in interest rates at December 31, 2011 consisted of fixed rate long-term debt totaling $115.2 million, with an average interest rate of 5.95 percent and variable rate long-term debt totaling $42.0 million, with an average interest rate of 1.61 percent.

 

 

24

 

2012 Annual Report

 

 



 

SEABOARD CORPORATION

Management’s Reports

 

 

Management’s Responsibility for Consolidated Financial Statements

The management of Seaboard Corporation and its consolidated subsidiaries (Seaboard) is responsible for the preparation of its consolidated financial statements and related information appearing in this report. Management believes that the consolidated financial statements fairly present Seaboard’s financial position and results of operations in conformity with U.S. generally accepted accounting principles, and necessarily includes amounts that are based on estimates and judgments which it believes are reasonable based on current circumstances with due consideration given to materiality.

 

Management relies on a system of internal controls over financial reporting that is designed to provide reasonable assurance that assets are safeguarded, transactions are executed in accordance with company policy and U.S. generally accepted accounting principles and are properly recorded, and accounting records are adequate for preparation of financial statements and other information and disclosures. The concept of reasonable assurance is based on recognition that the cost of a control system should not exceed the benefits expected to be derived, and such evaluations require estimates and judgments. The design and effectiveness of the system are monitored by a professional staff of internal auditors.

 

All internal control systems, no matter how well designed, have inherent limitations. Internal control over financial reporting is a process that involves human diligence and compliance, and is subject to lapses in judgment and breakdowns resulting from human failures. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

 

The Board of Directors pursues its review of auditing, internal controls and financial statements through its audit committee, composed entirely of independent directors. In the exercise of its responsibilities, the audit committee meets periodically with management, with the internal auditors and with the independent registered public accounting firm to review the scope and results of audits. Both the internal auditors and the independent registered public accounting firm have unrestricted access to the audit committee, with or without the presence of management.

 

Management’s Report on Internal Control Over Financial Reporting

The management of Seaboard Corporation and its consolidated subsidiaries (Seaboard) is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Under the supervision, and with the participation of management and its Internal Audit Department, Seaboard conducted an evaluation of the effectiveness of its internal control over financial reporting based on the framework in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on its evaluation under the framework in Internal Control - Integrated Framework , management concluded that Seaboard’s internal control over financial reporting was effective as of December 31, 2012.

 

Seaboard’s independent registered public accounting firm, that audited the consolidated financial statements included in the annual report, has issued an audit report on the effectiveness of Seaboard’s internal control over financial reporting.  Their report is included herein.

 

 

 

2012 Annual Report

25

 



 

SEABOARD CORPORATION

Report of Independent Registered Public Accounting Firm

 

 

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders

Seaboard Corporation:

 

We have audited the accompanying consolidated balance sheets of Seaboard Corporation and subsidiaries (the Company) as of December 31, 2012 and 2011 and the related consolidated statements of comprehensive income, changes in equity, and cash flows for each of the years in the three-year period ended December 31, 2012. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

 

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (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 assessing 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 consolidated financial statements referred to above present fairly, in all material respects, the financial position of Seaboard Corporation and subsidiaries as of December 31, 2012 and 2011, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2012, in conformity with U.S. generally accepted accounting principles.

 

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Seaboard Corporation’s internal control over financial reporting as of December 31, 2012, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated February 27, 2013 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

 

 

 

 

 

 

 

 

Kansas City, Missouri

February 27, 2013

 

 

 

26

 

2012 Annual Report

 

 



 

SEABOARD CORPORATION

Report of Independent Registered Public Accounting Firm

 

 

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders

Seaboard Corporation:

 

We have audited Seaboard Corporation’s internal control over financial reporting as of December 31, 2012, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) . Seaboard Corporation’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying “Management’s Report on Internal Control over Financial Reporting.” Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

 

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

 

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

 

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

 

In our opinion, Seaboard Corporation maintained, in all material respects, effective internal control over financial reporting as of December 31, 2012, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

 

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Seaboard Corporation and subsidiaries as of December 31, 2012 and 2011, and the related consolidated statements of comprehensive income, changes in equity and cash flows for each of the years in the three-year period ended December 31, 2012, and our report dated February 27, 2013 expressed an unqualified opinion on those consolidated financial statements.

 

 

 

 

 

 

 

 

Kansas City, Missouri

February 27, 2013

 

 

 

 

2012 Annual Report

27

 


 


 

SEABOARD CORPORATION

Consolidated Statements of Comprehensive Income

 

 

 

 

 

 

Years ended December 31,

 

(Thousands of dollars except per share amounts)

 

 

 

2012

 

 

 

2011

 

 

 

2010

 

Net sales:

 

 

 

 

 

 

 

 

 

 

 

 

 

Products (includes sales to affiliates of $747,064, $808,834 and $500,265)

 

 

 

$

4,916,322

 

 

 

  $

4,666,172

 

 

 

  $

3,354,348

 

Service revenues

 

 

 

1,015,481

 

 

 

969,339

 

 

 

907,320

 

Other

 

 

 

257,330

 

 

 

111,391

 

 

 

124,034

 

Total net sales

 

 

 

6,189,133

 

 

 

5,746,902

 

 

 

4,385,702

 

Cost of sales and operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

Products

 

 

 

4,536,582

 

 

 

4,196,360

 

 

 

2,980,606

 

Services

 

 

 

896,062

 

 

 

879,199

 

 

 

775,637

 

Gain on sale of power generating facilities

 

 

 

-

 

 

 

(52,923

)

 

 

-

 

Other

 

 

 

195,431

 

 

 

96,383

 

 

 

103,465

 

Total cost of sales and operating expenses

 

 

 

5,628,075

 

 

 

5,119,019

 

 

 

3,859,708

 

Gross income

 

 

 

561,058

 

 

 

627,883

 

 

 

525,994

 

Selling, general and administrative expenses

 

 

 

251,397

 

 

 

220,679

 

 

 

204,928

 

Operating income

 

 

 

309,661

 

 

 

407,204

 

 

 

321,066

 

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

 

(11,049

)

 

 

(6,868

)

 

 

(5,632

)

Interest income

 

 

 

11,050

 

 

 

10,004

 

 

 

11,088

 

Interest income from affiliates

 

 

 

20,570

 

 

 

17,826

 

 

 

1,543

 

Income from affiliates

 

 

 

30,707

 

 

 

26,621

 

 

 

20,965

 

Other investment income, net

 

 

 

8,461

 

 

 

249

 

 

 

14,145

 

Foreign currency gains, net

 

 

 

352

 

 

 

651

 

 

 

1,254

 

Miscellaneous, net

 

 

 

(2,974

)

 

 

(13,079

)

 

 

(384

)

Total other income, net

 

 

 

57,117

 

 

 

35,404

 

 

 

42,979

 

Earnings before income taxes

 

 

 

366,778

 

 

 

442,608

 

 

 

364,045

 

Income tax expense

 

 

 

(84,190

)

 

 

(99,051

)

 

 

(81,033

)

Net earnings

 

 

 

$

282,588

 

 

 

  $

343,557

 

 

 

  $

283,012

 

Less: Net loss (income) attributable to noncontrolling interests

 

 

 

(277

)

 

 

2,290

 

 

 

599

 

Net earnings attributable to Seaboard

 

 

 

$

282,311

 

 

 

  $

345,847

 

 

 

  $

283,611

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per common share

 

$

234.54

 

 

 

$

284.66

 

 

 

$

231.69

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income (loss), net of income tax benefit of $9,197, $12,604 and $5,443:

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustment

 

 

 

(15,788

)

 

 

(12,389

)

 

 

(3,704

)

Unrealized gain on investments

 

 

 

2,543

 

 

 

(756

)

 

 

(2,134

)

Unrealized loss on cash flow hedges

 

 

 

(113

)

 

 

-

 

 

 

-

 

Unrecognized pension cost

 

 

 

(2,121

)

 

 

(19,013

)

 

 

(3,283

)

Other comprehensive loss, net of tax

 

 

 

$

(15,479

)

 

 

  $

(32,158

)

 

 

  $

(9,121

)

Comprehensive income

 

 

 

267,109

 

 

 

311,399

 

 

 

273,891

 

Less: Comprehensive loss (income) attributable to the noncontrolling interest

 

 

 

(279

)

 

 

2,351

 

 

 

599

 

Comprehensive income attributable to Seaboard

 

 

 

$

266,830

 

 

 

  $

313,750

 

 

 

  $

274,490

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average number of shares outstanding

 

 

 

1,203,698

 

 

 

1,214,934

 

 

 

1,224,092

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends declared per common share

 

 

 

$

12.00

 

 

 

  $

-

 

 

 

  $

9.00

 

 

See accompanying notes to consolidated financial statements.

 

 

 

28

2012 Annual Report

 



 

SEABOARD CORPORATION

Consolidated Balance Sheets

 

 

 

 

December 31,

 

(Thousands of dollars except per share amounts)

 

2012

 

2011

 

Assets

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

 

$

47,651

 

$

71,510

 

Short-term investments

 

313,379

 

323,256

 

Receivables:

 

 

 

 

 

Trade

 

367,321

 

280,279

 

Due from affiliates

 

124,006

 

126,616

 

Other

 

42,696

 

81,255

 

 

 

534,023

 

488,150

 

Allowance for doubtful accounts

 

(12,131

)

(10,941

)

Net receivables

 

521,892

 

477,209

 

Inventories

 

756,864

 

644,930

 

Deferred income taxes

 

24,586

 

23,203

 

Other current assets

 

118,391

 

91,934

 

Total current assets

 

1,782,763

 

1,632,042

 

Net property, plant and equipment

 

843,879

 

796,822

 

Investments in and advances to affiliates

 

410,542

 

364,840

 

Notes receivable from affiliate

 

202,931

 

110,903

 

Goodwill

 

43,218

 

40,628

 

Other intangible assets, net

 

19,843

 

19,496

 

Other assets

 

44,605

 

41,997

 

Total Assets

 

$

3,347,781

 

$

3,006,728

 

Liabilities and Stockholders’ Equity

 

Current liabilities:

 

 

 

 

 

Notes payable to banks

 

$

28,786

 

$

16,219

 

Current maturities of long-term debt

 

25,138

 

40,885

 

Accounts payable

 

217,041

 

151,869

 

Accrued compensation and benefits

 

127,141

 

114,323

 

Deferred revenue

 

53,811

 

29,147

 

Deferred revenue from affiliates

 

24,131

 

27,806

 

Accrued voyage costs

 

47,674

 

46,399

 

Accrued commodity inventory

 

46,509

 

54,357

 

Other accrued liabilities

 

106,344

 

80,404

 

Total current liabilities

 

676,575

 

561,409

 

Long-term debt, less current maturities

 

120,825

 

116,367

 

Deferred income taxes

 

33,929

 

66,300

 

Accrued pension liability

 

127,837

 

106,673

 

Other liabilities and deferred credits

 

80,426

 

76,512

 

Total non-current liabilities

 

363,017

 

365,852

 

Commitments and contingent liabilities

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

Common stock of $1 par value. Authorized 1,250,000 shares;
issued and outstanding 1,197,660 and 1,210,597 shares

 

1,198

 

1,211

 

Accumulated other comprehensive loss

 

(171,544

)

(156,065

)

Retained earnings

 

2,474,896

 

2,233,778

 

Total Seaboard stockholders’ equity

 

2,304,550

 

2,078,924

 

Noncontrolling interests

 

3,639

 

543

 

Total equity

 

2,308,189

 

2,079,467

 

Total Liabilities and Stockholders’ Equity

 

$

3,347,781

 

$

3,006,728

 

 

See accompanying notes to consolidated financial statements.

 

 

 

2012 Annual Report

29

 


 


 

SEABOARD CORPORATION

Consolidated Statements of Cash Flows

 

 

 

Years ended December 31,

 

(Thousands of dollars)

 

2012

 

2011

 

2010

 

Cash flows from operating activities:

 

 

 

 

 

 

 

Net earnings

 

$

282,588

 

$

343,557

 

$

283,012

 

Adjustments to reconcile net earnings to cash from operating activities:

 

 

 

 

 

 

 

Depreciation and amortization

 

90,216

 

81,223

 

86,802

 

Gain on sale of power generating facilities

 

-

 

(52,923

)

-

 

Gain from sale of fixed assets

 

(8,710

)

(1,566

)

(2,555

)

Fixed asset impairment charge

 

-

 

5,600

 

-

 

Deferred income taxes

 

(24,560

)

(1,558

)

12,506

 

Pay-in-kind interest and accretion on note receivable from affiliate

 

(11,936

)

(10,584

)

(695

)

Income from affiliates

 

(30,707

)

(26,621

)

(20,965

)

Dividends received from affiliates

 

785

 

1,813

 

1,843

 

Other investment income, net

 

(8,461

)

(249

)

(14,145

)

Foreign currency exchange gain

 

(244

)

(336

)

(140

)

Other

 

3,614

 

829

 

1,005

 

Changes in assets and liabilities, net of business acquired:

 

 

 

 

 

 

 

Receivables, net of allowance

 

(66,583

)

(88,434

)

(86,205

)

Inventories

 

(64,943

)

(118,731

)

(40,053

)

Other current assets

 

(18,167

)

85,856

 

(2,570

)

Current liabilities, exclusive of debt

 

93,246

 

(36,875

)

107,482

 

Other, net

 

25,565

 

38,995

 

14,490

 

Net cash from operating activities

 

261,703

 

219,996

 

339,812

 

Cash flows from investing activities:

 

 

 

 

 

 

 

Purchase of short-term investments

 

(773,111

)

(233,431

)

(687,335

)

Proceeds from the sale of short-term investments

 

755,141

 

220,823

 

695,384

 

Proceeds from the maturity of short-term investments

 

36,693

 

19,255

 

69,534

 

Short-term note receivable issued to affiliate, net

 

-

 

(30,096

)

-

 

Investments in and advances to affiliates, net

 

(24,927

)

(18,533

)

(217,578

)

Capital expenditures

 

(158,755

)

(183,748

)

(103,336

)

Proceeds from the sale of fixed assets

 

15,906

 

4,882

 

7,655

 

Proceeds from the sale of power generating facilities

 

-

 

59,603

 

-

 

Advance payment on capital lease

 

-

 

(8,493

)

-

 

Long-term notes receivable issued to affiliate

 

(81,231

)

(13,037

)

(100,000

)

Principal payments received on long-term notes receivable from affiliate

 

1,139

 

2,827

 

-

 

Proceeds from syndication and subordinated loan fees

 

-

 

-

 

6,525

 

Sale (purchase) of long-term investments

 

(9,789

)

(4,696

)

552

 

Acquisition of business, net of cash acquired

 

(3,186

)

-

 

(5,578

)

Other, net

 

849

 

1,394

 

1,140

 

Net cash from investing activities

 

(241,271

)

(183,250

)

(333,037

)

Cash flows from financing activities:

 

 

 

 

 

 

 

Notes payable to banks, net

 

12,592

 

(62,510

)

(2,535

)

Proceeds from the issuance of long-term debt

 

32,682

 

64,967

 

16,352

 

Principal payments of long-term debt

 

(43,947

)

(1,476

)

(2,179

)

Repurchase of common stock

 

(26,830

)

(9,971

)

(29,994

)

Dividends paid

 

(14,376

)

-

 

(10,963

)

Partial purchase of noncontrolling interest in a consolidated subsidiary

 

(3,045

)

-

 

-

 

Dividends paid to noncontrolling interests

 

(36

)

(148

)

(36

)

Other, net

 

492

 

452

 

370

 

Net cash from financing activities

 

(42,468

)

(8,686

)

(28,985

)

Effect of exchange rate change on cash

 

(1,823

)

2,326

 

1,477

 

Net change in cash and cash equivalents

 

(23,859

)

30,386

 

(20,733

)

Cash and cash equivalents at beginning of year

 

71,510

 

41,124

 

61,857

 

Cash and cash equivalents at end of year

 

$

47,651

 

$

71,510

 

$

41,124

 

 

See accompanying notes to consolidated financial statements.

 

 

 

30

2012 Annual Report

 



 

SEABOARD CORPORATION

Consolidated Statements of Changes in Equity

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

Other

 

 

 

 

 

 

 

 

 

Common

 

Comprehensive

 

Retained

 

Noncontrolling

 

 

 

(Thousands of dollars except per share amounts)

 

Stock

 

Loss

 

Earnings

 

Interest

 

Total

 

Balances, January 1, 2010

 

$

1,237

 

$

(114,786

)

$

1,655,222

 

$

3,746

 

$

1,545,419

 

Comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

Net earnings

 

 

 

 

 

283,611

 

(599

)

283,012

 

Other comprehensive loss, net of tax

 

 

 

(9,121

)

 

 

 

 

(9,121

)

Addition of noncontrolling interests

 

 

 

 

 

 

 

(68

)

(68

)

Dividends paid to noncontrolling interests

 

 

 

 

 

 

 

(36

)

(36

)

Repurchase of common stock

 

(21

)

 

 

(29,973

)

 

 

(29,994

)

Dividends on common stock

 

 

 

 

 

(10,963

)

 

 

(10,963

)

Balances, December 31, 2010

 

1,216

 

(123,907

)

1,897,897

 

3,043

 

1,778,249

 

Comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

Net earnings

 

 

 

 

 

345,847

 

(2,290

)

343,557

 

Other comprehensive loss, net of tax

 

 

 

(32,158

)

 

 

(61

)

(32,219

)

Dividends paid to noncontrolling interests

 

 

 

 

 

 

 

(149

)

(149

)

Repurchase of common stock

 

(5

)

 

 

(9,966

)

 

 

(9,971

)

Balances, December 31, 2011

 

1,211

 

(156,065

)

2,233,778

 

543

 

2,079,467

 

Comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

Net earnings

 

 

 

 

 

282,311

 

277

 

282,588

 

Other comprehensive loss, net of tax

 

 

 

(15,479

)

 

 

2

 

(15,477

)

Addition of noncontrolling interests

 

 

 

 

 

 

 

2,853

 

2,853

 

Dividends paid to noncontrolling interests

 

 

 

 

 

 

 

(36

)

(36

)

Repurchase of common stock

 

(13

)

 

 

(26,817

)

 

 

(26,830

)

Dividends on common stock

 

 

 

 

 

(14,376

)

 

 

(14,376

)

Balances, December 31, 2012

 

$

1,198

 

$

(171,544

)

$

2,474,896

 

$

3,639

 

$

2,308,189

 

 

See accompanying notes to consolidated financial statements.

 

 

 

2012 Annual Report

31

 


 


 

SEABOARD CORPORATION

Notes to Consolidated Financial Statements

 

 

Note 1

Summary of Significant Accounting Policies

Operations of Seaboard Corporation and its Subsidiaries

Seaboard Corporation and its subsidiaries (Seaboard) is a diverse global agribusiness and transportation company. In the United States, Seaboard is primarily engaged in pork production and processing and ocean transportation. Overseas, Seaboard is primarily engaged in commodity merchandising, grain processing, sugar production, and electric power generation.  Seaboard also has an interest in turkey operations in the United States. Seaboard Flour LLC and SFC Preferred LLC (Parent Companies) are the owners of 74.6 percent of Seaboard’s outstanding common stock.

 

Principles of Consolidation and Investments in Affiliates

The consolidated financial statements include the accounts of Seaboard Corporation and its domestic and foreign subsidiaries. All significant inter-company balances and transactions have been eliminated in consolidation. Investments in non-controlled affiliates are accounted for by the equity method. Financial information from certain foreign subsidiaries and affiliates is reported on a one- to three-month lag, depending on the specific entity.

 

Short-Term Investments

Short-term investments are retained for future use in the business and may include money market funds, corporate bonds, U.S. government obligations, mutual funds, mortgage-backed and municipal debt securities and, on a limited basis, high yield bonds, domestic equity securities and foreign government bonds. Investments held by Seaboard that are categorized as available-for-sale are reported at their estimated fair value with any related unrealized gains and losses reported net of tax, as a component of accumulated other comprehensive income.  Investments held by Seaboard that are categorized as trading securities are reported at their estimated fair value with any unrealized gains and losses included in other investment income on the Consolidated Statements of Comprehensive Income. Debt securities that are categorized as held to maturity are recorded at amortized cost, which is adjusted for amortization of premiums and accretion of discounts to maturity. Such amortization is included in interest income. Gains and losses on sale of investments are generally based on the specific identification method.

 

Accounts Receivable

Accounts receivable are recorded at the invoiced amount and generally do not bear interest. The Power segment, however, collects interest on certain past due accounts, and the Commodity Trading and Milling segment provides extended payment terms for certain customers in certain countries due to local market conditions. The allowance for doubtful accounts is Seaboard’s best estimate of the amount of probable credit losses. For most operating segments, Seaboard uses a specific identification approach to determine, in management’s judgment, the collection value of certain past due accounts based on contractual terms. For the Marine segment, the allowance for doubtful accounts is based on an aging percentage methodology primarily based on historical write-off experience. Seaboard reviews its allowance for doubtful accounts monthly. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote.

 

Inventories

Seaboard uses the lower of last-in, first-out (LIFO) cost or market for determining inventory cost of live hogs, fresh pork product and related materials. Grain, flour and feed inventories at foreign milling operations are valued at the lower of weighted average cost or market.  All other inventories, including further processed pork products, are valued at the lower of first-in, first-out (FIFO) cost or market.

 

Property, Plant and Equipment

Property, plant and equipment are carried at cost and are being depreciated on the straight-line method over useful lives, ranging from 3 to 30 years.  Property, plant and equipment leases which are deemed to be installment purchase obligations have been capitalized and included in the property, plant and equipment accounts. Routine and planned major maintenance, repairs and minor renewals are expensed as incurred, while major renewals and improvements are capitalized.

 

Impairment of Long-Lived Assets

Long-lived assets, primarily property, plant and equipment, are reviewed for impairment when events or changes in circumstances indicate that the carrying amount may not be recoverable.  Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the asset to future undiscounted net cash flows expected to be generated by the asset. If such assets are determined to be impaired, the impairment to be recognized

 

 

 

32

2012 Annual Report

 



 

SEABOARD CORPORATION

Notes to Consolidated Financial Statements

 

 

is measured by the amount by which the carrying amount of the assets exceeds the estimated fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell.

 

Notes Receivable from Affiliate

Seaboard monitors the credit quality of notes receivable from its affiliate, Butterball, LLC (Butterball), by obtaining and reviewing financial information for this affiliate on a monthly basis and by having Seaboard representatives serve on the Board of Directors of Butterball.

 

Goodwill and Other Intangible Assets

Goodwill and other indefinite-life intangible assets are assessed annually for impairment by each reporting unit at the quarter end closest to the anniversary date of the acquisition, or more frequently if circumstances indicate that impairment is likely. Separable intangible assets with finite lives are amortized over their estimated useful lives. Any one event or a combination of events such as change in the business climate, a negative change in relationships with significant customers and changes to strategic decisions, including decisions to expand made in response to economic or competitive conditions could require an interim assessment prior to the next required annual assessment.  Based on the annual assessments conducted by each reporting unit during 2012, there were no impairment charges recorded for the year ended December 31, 2012.

 

Accrued Self-Insurance

Seaboard is self-insured for certain levels of workers’ compensation, health care coverage, property damage and general, vehicle and product recall liability. The cost of these self-insurance programs is accrued based upon estimated settlements for known and anticipated claims. Changes in estimates to previously recorded reserves are reflected in current operating results.

 

Deferred Grants

Included in other liabilities at December 31, 2012 and 2011 was $5,231,000 and $5,631,000, respectively, of deferred grants. The deferred grants represent economic development funds contributed by government entities that were limited to construction of a pork processing facility in Guymon, Oklahoma. Deferred grants are being amortized as a reduction of depreciation expense over the life of the assets acquired with the funds.

 

Asset Retirement Obligation

Seaboard has recorded long-lived assets and a related liability for the asset retirement obligation costs associated with the closure of the hog lagoons it is legally obligated to close in the future should Seaboard cease operations or plan to close such lagoons voluntarily in accordance with a changed operating plan. Based on detailed assessments and appraisals obtained to estimate the future retirement costs, Seaboard has determined and recorded the present value of the projected costs in non-current other liabilities on the Consolidated Balance Sheets, with the retirement asset depreciated over the economic life of the related asset. The following table shows the changes in the asset retirement obligation during 2012 and 2011:

 

 

 

Years ended December 31,

 

(Thousands of dollars)

 

2012     

 

2011     

 

Beginning balance

 

$  13,109

 

$      12,028

 

Accretion expense

 

1,090

 

1,007

 

Liability for additional lagoons placed in service

 

116

 

74

 

Ending balance

 

$  14,315

 

$      13,109

 

 

Income Taxes

Deferred income taxes are recognized for the tax consequences of temporary differences by applying enacted statutory tax rates applicable to future years to differences between the financial statement carrying amounts and the tax bases of existing assets and liabilities. However, in the future, as these timing differences reverse, a lower statutory tax rate may apply pursuant to the provisions for domestic manufacturers of the American Jobs Creation Act of 2004.  In accordance with U.S. GAAP, Seaboard will recognize the benefit or cost of this change in the future.

 

Revenue Recognition

As a result of a marketing agreement with Triumph Foods LLC (Triumph), Seaboard’s sales prices for its pork products included in product revenues are primarily based on a margin sharing arrangement that considers the

 

 

 

2012 Annual Report

33

 



 

SEABOARD CORPORATION

Notes to Consolidated Financial Statements

 

 

average sales price and mix of products sold from both Seaboard’s and Triumph’s hog processing plants. Seaboard earns a fee for marketing the pork products of Triumph, and recognizes this fee as service revenue primarily based on the number of head processed by Triumph. Revenue of the commodity trading business is recognized when the commodity is delivered to the customer, collection is reasonably assured and the sales price is fixed or determinable. Revenue of the containerized cargo service is recognized ratably over the transit time for each voyage, with expenses associated with containerized cargo service being recognized as incurred. Revenues from all other commercial exchanges are recognized at the time products are shipped or delivered in accordance with shipping terms or services rendered, the customer takes ownership and assumes risk of loss, collection is reasonably assured and the sales price is fixed or determinable.

 

Use of Estimates

The preparation of the consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Significant items subject to such estimates and assumptions include those related to allowance for doubtful accounts, valuation of inventories, impairment of long-lived assets, goodwill and other intangible assets, income taxes and accrued pension liability. Actual results could differ from those estimates.

 

Earnings Per Common Share

Earnings per common share are based upon the weighted average shares outstanding during the period. Basic and diluted earnings per share are the same for all periods presented.

 

Cash and Cash Equivalents

For purposes of the consolidated statements of cash flows, management considers all demand deposits and overnight investments as cash equivalents. The following table shows the amounts paid for interest and income taxes:

 

 

 

Years ended December 31,

 

(Thousands of dollars)

 

2012

 

2011

 

2010

 

Interest (net of amounts capitalized)

 

$

11,674

 

$

6,786

 

$

8,377

 

Income taxes (net of refunds)

 

69,760

 

126,730

 

69,626

 

 

Included in property, plant and equipment is capitalized interest in the amount of $1,125,000, $6,723,000 and $3,350,000 for 2012, 2011 and 2010, respectively.

 

Supplemental Non-Cash Transactions

As discussed in Note 4, as of December 31, 2012 and 2011, Seaboard had a note receivable from an affiliate which accrues pay-in-kind interest income.  Non-cash, pay-in-kind interest income and accretion of discount recognized on this note receivable for the years ended December 31, 2012 and 2011 was $11,936,000 and $10,584,000, respectively.

 

As discussed in Note 4, effective January 1, 2012, Seaboard began consolidation accounting and discontinued the equity method of accounting for their investment in PS International, LLC (PSI) with Seaboard’s ownership interest increasing from 50% to 70%. On December 31, 2012, Seaboard further increased its ownership from 70% to 85%.  Total cash paid during 2012 for these two transactions, net of cash acquired was $3,186,000 and $3,045,000, respectively, and increased working capital by $14,209,000, fixed assets by $163,000, goodwill by $2,590,000, intangible assets by $1,441,000, other long-term assets by $96,000, non-controlling interest by $2,853,000 and decreased investment in and advances to affiliates by $9,415,000.

 

As discussed in Note 13, during the third quarter of 2010, Seaboard acquired a majority interest in a commodity origination, storage and processing business in Canada. Total cash paid, net of cash acquired, was $5,578,000, and increased working capital by $1,254,000, fixed assets by $4,637,000, other long-term assets in the amount of $833,000, deferred tax liabilities by $896,000 and non-controlling interest by $250,000.

 

Foreign Currency Transactions and Translation

Seaboard has operations in and transactions with customers in a number of foreign countries. The currencies of the countries fluctuate in relation to the U.S. dollar. Certain of the major contracts and transactions, however, are denominated in U.S. dollars. In addition, the value of the U.S. dollar fluctuates in relation to the currencies of

 

 

 

34

2012 Annual Report

 



 

SEABOARD CORPORATION

Notes to Consolidated Financial Statements

 

 

countries where certain of Seaboard’s foreign subsidiaries and affiliates primarily conduct business. These fluctuations result in exchange gains and losses. The activities of these foreign subsidiaries and affiliates are primarily conducted with U.S. subsidiaries or operate in hyper-inflationary environments. As a result, the financial statements of certain foreign subsidiaries and affiliates are re-measured using the U.S. dollar as the functional currency.

 

Seaboard’s Sugar segment, a consolidated subsidiary in Canada (Commodity Trading and Milling segment) and seven non-controlled, non-consolidated affiliates (Commodity Trading and Milling segment businesses in Australia, Colombia, Guyana, Kenya, Lesotho and Zambia), use local currency as their functional currency. Assets and liabilities of these subsidiaries are translated to U.S. dollars at year-end exchange rates, and income and expense items are translated at average rates. Translation gains and losses are recorded as components of other comprehensive loss. For these entities, U.S. dollar denominated net asset or liability conversions to the local currency are recorded through income.

 

Derivative Instruments and Hedging Activities

Seaboard recognizes all derivatives as either assets or liabilities at their fair values. Accounting for changes in the fair value of a derivative depends on its designation and effectiveness. Derivatives qualify for treatment as hedges for accounting purposes when there is a high correlation between the change in fair value of the instrument and the related change in value of the underlying commitment. In order to designate a derivative financial instrument as a hedge for accounting purposes, extensive record keeping is required. For derivatives that qualify as hedges for accounting purposes, the change in fair value has no net impact on earnings, to the extent the derivative is considered effective, until the hedged transaction affects earnings. For derivatives that are not designated as hedging instruments for accounting purposes, or for the ineffective portion of a hedging instrument, the change in fair value does affect current period net earnings.

 

Seaboard holds and issues certain derivative instruments to manage various types of market risks from its day-to-day operations, primarily including commodity futures and option contracts and foreign currency exchange agreements, and from time to time, interest rate exchange agreements. While management believes each of these instruments primarily are entered into in order to effectively manage various market risks, as of December 31, 2012, none of the derivatives are designated and accounted for as hedges, primarily as a result of the extensive record-keeping requirements. Seaboard also enters into speculative derivative transactions related to its market risks.

 

Recently Adopted Accounting Standards

In May 2011, the Financial Accounting Standards Board (FASB) issued guidance to amend the requirements related to fair value measurement which changed the wording used to describe many requirements in GAAP for measuring fair value and for disclosing information about fair value measurements. Additionally, the amendments clarify the FASB’s intent about the application of existing fair value measurement requirements. Seaboard adopted this guidance on January 1, 2012.  The adoption of this guidance did not have a material impact on Seaboard’s financial position or net earnings.

 

In June 2011, the FASB issued guidance to revise the manner in which entities present comprehensive income in the financial statements.  The new guidance removed the footnote presentation option used by Seaboard in the past and required entities to report components of comprehensive income in either a continuous statement of comprehensive income or two separate but consecutive statements.  Seaboard adopted this guidance in the first quarter of 2012.  The adoption of this guidance did not have an impact on Seaboard’s financial position or net earnings.

 

In September 2011, the FASB issued guidance to allow entities the option of performing a qualitative assessment to test goodwill for impairment.  This guidance permits an entity to first perform a qualitative assessment to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying value.  If it is concluded that this is the case, it is necessary to perform the currently prescribed two-step goodwill impairment test.  Otherwise, the two-step goodwill impairment test is not required.  Seaboard adopted this guidance on January 1, 2012.  The adoption of this guidance did not have an impact on Seaboard’s financial position or net earnings.

 

In July 2012, the FASB issued guidance to allow entities the option of performing a qualitative assessment to test indefinite-lived intangible assets for impairment.  This guidance permits an entity to first perform a qualitative assessment to determine whether it is more likely than not that the fair value of the intangible asset is less than its carrying value.  If it is concluded that this is the case, it is necessary to calculate the fair value of the intangible asset.  Otherwise, calculating the fair value of the intangible asset is not required.  Early adoption is permitted and

 

 

 

2012 Annual Report

35

 



 

SEABOARD CORPORATION

Notes to Consolidated Financial Statements

 

 

Seaboard adopted this guidance on June 30, 2012. The adoption of this guidance did not have an impact on Seaboard’s financial position or net earnings.

 

Note 2

Investments

All of Seaboard’s available-for-sale and trading securities are classified as current assets, as they are readily available to support Seaboard’s current operating needs.  At December 31, 2012 and 2011, amortized cost and estimated fair market value were not materially different for these investments. At December 31, 2012 and 2011, money market funds included $6,437,000 and $25,755,000 denominated in Euros, respectively, and at December 31, 2012 also included $2,620,000 denominated in British Pounds and $2,441,000 denominated in Canadian dollars. As of December 31, 2012 and 2011, the trading securities primarily consisted of high yield debt securities. As of December 31, 2012 and 2011, unrealized gains related to trading securities were $2,042,000 and $376,000, respectively.

 

The following is a summary of the amortized cost and estimated fair value of short-term investments for both available for sale and trading securities at December 31, 2012 and 2011:

 

 

 

2012

 

2011

 

 

Amortized

 

Fair

 

Amortized

 

Fair

(Thousands of dollars)

 

Cost

 

Value

 

Cost

 

Value

Money market funds

 

$

126,537

 

$

126,537

 

$

139,420

 

$

139,420

Corporate bonds

 

67,275

 

69,214

 

88,589

 

89,146

U.S. Government agency securities

 

23,647

 

23,775

 

9,720

 

9,757

Emerging markets debt mutual fund

 

17,693

 

18,734

 

17,693

 

16,399

U.S. Treasury securities

 

17,165

 

17,169

 

4,848

 

4,905

Collateralized mortgage obligations

 

15,059

 

15,162

 

14,915

 

15,011

Asset backed debt securities

 

12,180

 

12,238

 

3,533

 

3,533

Fixed rate municipal notes and bonds

 

-   

 

-   

 

17,718

 

17,788

Other

 

-   

 

-   

 

1,480

 

1,484

Total available-for-sale short-term investments

 

279,556

 

282,829

 

297,916

 

297,443

High yield trading debt securities

 

21,839

 

23,406

 

20,155

 

20,750

Emerging markets trading debt mutual funds

 

3,046

 

3,237

 

2,620

 

2,487

Emerging markets trading debt securities

 

2,361

 

2,600

 

2,444

 

2,355

Other trading investments

 

1,262

 

1,307

 

218

 

221

Total short-term investments

 

$

308,064

 

$

313,379

 

$

323,353

 

$

323,256

 

The following table summarizes the estimated fair value of fixed rate securities designated as available-for-sale, classified by the contractual maturity date of the security as of December 31, 2012:

 

(Thousands of dollars)

 

2012

 

Due within one year

 

$    2,587

 

Due after one year through three years

 

52,411

 

Due after three years

 

60,721

 

Total fixed rate securities

 

$115,719

 

 

In addition to its short-term investments, Seaboard also has trading securities related to Seaboard’s deferred compensation plans classified in other current assets on the Consolidated Balance Sheets. See Note 9 for information on the types of trading securities held related to the deferred compensation plans and Note 10 for a discussion of assets held in conjunction with investments related to Seaboard’s defined benefit pension plan.

 

 

 

36

2012 Annual Report

 



 

SEABOARD CORPORATION

Notes to Consolidated Financial Statements

 

 

Note 3

Inventories

The following table is a summary of inventories at the end of each year:

 

 

 

December 31,

 

(Thousands of dollars)

 

2012

 

2011

 

At lower of LIFO cost or market:

 

 

 

 

 

Live hogs and materials

 

$

258,638

 

$

228,624

 

Fresh pork and materials

 

31,495

 

29,426

 

 

 

290,133

 

258,050

 

LIFO adjustment

 

(90,730

)

(57,783

)

Total inventories at lower of LIFO cost or market

 

199,403

 

200,267

 

At lower of FIFO cost or market:

 

 

 

 

 

Grains, oilseeds and other commodities

 

317,573

 

251,839

 

Sugar produced and in process

 

65,986

 

78,730

 

Other

 

73,606

 

63,449

 

Total inventories at lower of FIFO cost or market

 

457,165

 

394,018

 

Grain, flour and feed at lower of weighted average cost or market

 

100,296

 

50,645

 

 Total inventories

 

$

756,864

 

$

644,930

 

 

The use of the LIFO method decreased 2012, 2011 and 2010 earnings by $20,098,000 ($16.70 per common share), $20,556,000 ($16.92 per common share) and $780,000 ($0.64 per common share), respectively. If the FIFO method had been used for certain inventories of the Pork segment, inventories would have been higher by $90,730,000 and $57,783,000 as of December 31, 2012 and 2011, respectively.

 

Note 4

Investments in and Advances to Affiliates and Notes Receivable from Affiliate

Seaboard’s investments in and advances to non-controlled, non-consolidated affiliates are primarily related to Butterball, as discussed below, and Commodity Trading and Milling segment businesses conducting flour, maize and feed milling, baking operations and poultry production and processing. As of December 31, 2012, the location and percentage ownership of these affiliates excluding Butterball are as follows:  Democratic Republic of Congo (50%), Lesotho (50%), Kenya (35%-49%), Nigeria (25%-48%), and Zambia (49%) in Africa; Colombia (40%) and Ecuador (25%-50%) in South America, and Haiti (23%) in the Caribbean. Also, Seaboard has investments in grain trading businesses in Australia (25%) and Peru (50%). Seaboard generally is the primary provider of choice for grains, feed and supplies purchased by these non-controlled affiliates. As Seaboard conducts its commodity trading business with third parties, consolidated subsidiaries and affiliates on an interrelated basis, cost of sales on affiliates cannot be clearly distinguished without making numerous assumptions, primarily with respect to mark-to-market accounting for commodity derivatives. In addition, Seaboard has investments in and advances to two sugar-related businesses in Argentina (46%-50%).  The equity method is used to account for all of the above investments.

 

On December 6, 2010, Seaboard Corporation acquired a 50% non-controlling voting interest in Butterball from Maxwell Farms, LLC, Goldsboro Milling Company and GM Acquisition LLC (collectively, the Maxwell Group) for a cash purchase price of $177,500,000.  Butterball is a vertically integrated producer, processor and marketer of branded and non-branded turkeys and other turkey products. Seaboard purchased its interest in Butterball from the Maxwell Group after the Maxwell Group had reacquired a 49% interest held by Murphy-Brown, LLC (Murphy-Brown), a subsidiary of Smithfield Foods, Inc.  The other 50% ownership interest in Butterball continues to be owned by the Maxwell Group.  In connection with the purchase, Butterball also acquired the live turkey growing and related assets of the Maxwell Group and of Murphy-Brown. As of December 31, 2012, Butterball had intangible assets of $111,000,000 for trade name and $60,265,000 for goodwill.  The equity method is used to account for this investment.

 

 

 

2012 Annual Report

37

 



 

SEABOARD CORPORATION

Notes to Consolidated Financial Statements

 

 

In connection with this transaction, Seaboard provided Butterball with a $100,000,000 unsecured subordinated loan (the subordinated loan) with a seven-year maturity and interest of 15% per annum, comprised of 5% payable in cash semi-annually, plus 10% pay-in-kind interest, compounded semi-annually which accumulates and is paid at maturity.  In connection with providing the subordinated loan, Seaboard received detachable warrants, which upon exercise for a nominal price, would enable Seaboard to acquire an additional 5% equity interest in Butterball. Seaboard can exercise these warrants at any time before December 6, 2020. Butterball has the right to repurchase the warrants for fair market value. The warrant agreement essentially provides Seaboard with a 52.5% economic interest, as these warrants are in substance an additional equity interest. Therefore, Seaboard recorded 52.5% of Butterball’s earnings as Income from Affiliates in the Consolidated Statements of Comprehensive Income. However, all significant corporate governance matters would continue to be shared equally between Seaboard and Maxwell even if the warrants are exercised, unless Seaboard already owns a majority of the voting rights at the time of exercise. The warrants qualify for equity treatment under accounting standards. Accordingly, as of December 6, 2010, the warrants were allocated a value of $10,586,000, classified as Investments in and Advances to Affiliates on the Consolidated Balance Sheets, and the subordinated loan was allocated a discounted value of $89,414,000, classified as Notes Receivable from Affiliate on the Consolidated Balance Sheets, of the total $100,000,000 subordinated financing discussed above.  The discount on the subordinated loan is being accreted monthly in Interest Income From Affiliate through the maturity date of December 6, 2017.  Also as part of issuing the subordinated loan, Seaboard received a $2,000,000 cash fee from Butterball as consideration for providing this financing that is being amortized over the term of the subordinated loan.  At December 31, 2012 and 2011, the recorded balance of this Note Receivable from Affiliate was $112,629,000 and $100,693,000, respectively.

 

In addition, in connection with this transaction Seaboard arranged financing to refinance the existing Butterball debt with third party lenders. For these services, in December 2010, Seaboard received a cash syndication fee from Butterball of $4,525,000, net of arrangement fees paid to several banks who assisted with the third party financing. Since Seaboard has a 52.5% economic interest in Butterball, Seaboard only recognized 47.5% of this net syndication fee in December 2010 in Other Investment Income in the Consolidated Statements of Comprehensive Income. The remaining net syndication fee is being amortized over the five year term of the related Butterball debt through December 2015.

 

On December 31, 2012, Seaboard provided a loan of $81,231,000 to Butterball and is included in Notes Receivable from Affiliate.  This loan was made to fund Butterball’s purchase of assets from Gusto Packing Company, Inc., a pork and turkey further processor located in Montgomery, Illinois.  The interest rate on this loan is prime rate plus 2%.  Although this loan currently cannot be paid off without the consent of Butterball’s third party lenders, it is anticipated this loan could be repaid during 2013 as Butterball currently plans to renegotiate its third party financing in 2013.

 

During the third quarter of 2011, Seaboard provided a term loan of $13,037,000 to Butterball to pay off capital leases for certain fixed assets which originally were financed with third parties.  The effective interest rate on this term loan is approximately 12%.  Although the term loan expires on January 31, 2018, Seaboard anticipates that Butterball will pay off the term loan prior to such expiration date as Butterball is expected to sell all of the related assets and is required to remit the proceeds from such sale to Seaboard to repay the loan. As of December 31, 2012 and 2011, the balance of the term loan included in Notes Receivable from Affiliate was $9,071,000 and $10,210,000, respectively.  Also, during the third quarter of 2011, Seaboard made an additional capital contribution of $5,598,000 in Butterball to assist Butterball in its acquisition of certain live growing facilities.  Maxwell Farms, LLC, made an equal capital contribution.

 

In October 2010, Seaboard acquired for $5,000,000 a 25% non-controlling interest in a commodity trading business in Australia. Also in October 2010, Seaboard combined its existing investment in poultry operations in Africa with another existing African based poultry business. Seaboard invested an additional $10,500,000 in this newly-combined poultry business, for a total investment of $16,988,000, which represents a 50% non-controlling interest. This newly-combined business has operations primarily in Kenya and Zambia, and began operating in the Democratic Republic of Congo in the first quarter of 2012.  In the second quarter of 2011, Seaboard’s interest in this business was reduced from 50% to 49%.

 

In 2010, Seaboard finalized an agreement to invest in a bakery to be built in the Democratic Republic of Congo for a 50% non-controlling interest in this business.  During 2012, 2011 and 2010, Seaboard invested $24,814,000, $11,397,000 and $10,080,000, respectively, in equity and long-term advances for a total of $46,291,000 as of

 

 

 

38

2012 Annual Report

 



 

SEABOARD CORPORATION

Notes to Consolidated Financial Statements

 

 

December 31, 2012 in this project. The bakery began operations in the fourth quarter of 2012.  Including this investment, as of December 31, 2012 Seaboard had a total of $82,257,000 of investments in and advances to various equity interests in the Democratic Republic of Congo, which represents the single largest foreign country risk exposure for Seaboard’s equity method investments.

 

In March 2010, Seaboard acquired a 50% non-controlling interest in an international specialty grain trading business, PSI, located in North Carolina for approximately $7,650,000. There was an initial payment of $6,000,000 made in March 2010, an additional payment of $990,000 in the fourth quarter of 2010, with the remaining $660,000 paid in the first half of 2011 upon verification of the balance sheet as of the date of closing and collection of certain receivables outstanding.  In the fourth quarter of 2011, Seaboard provided a $35,000,000 line of credit to PSI to pay off a credit facility with third party banks used for working capital needs.  As of December 31, 2011, Seaboard had a due from affiliates receivable balance of $30,096,000 for amounts advanced under this line of credit.  Effective January 1, 2012, Seaboard began consolidation accounting and discontinued the equity method of accounting for this investment in PSI with Seaboard’s ownership interest increasing from 50% to 70%.  On December 31, 2012, Seaboard further increased its ownership from 70% to 85%.  Total cash paid for these two transactions in 2012, net of cash acquired was $3,186,000 and $3,045,000, respectively.  Pro forma results of operations are not presented, as the effects of consolidation are not material to Seaboard’s results of operations.

 

Combined condensed financial information of the non-controlled, non-consolidated affiliates for their fiscal periods ended within each of Seaboard’s years ended were as follows (the 2010 net sales and 2010 net income for the Turkey segment below represent the period from December 6, 2010 to December 31, 2010):

 

Commodity Trading and Milling Segment

 

 

 

December 31,

 

 

 

(Thousands of dollars)

 

2012   

 

2011    

 

2010   

 

Net sales

 

$

1,510,101

 

1,750,714

 

1,117,440

 

Net income

 

$

24,686

 

33,058

 

47,594

 

Total assets

 

$

862,992

 

864,802

 

581,755

 

Total liabilities

 

$

469,265

 

480,328

 

250,076

 

Total equity

 

$

393,727

 

384,474

 

331,679

 

 

 

 

 

 

 

 

 

Sugar Segment

 

 

 

December 31,

 

 

 

(Thousands of dollars)

 

2012   

 

2011   

 

2010   

 

Net sales

 

$

12,107

 

12,880

 

20,132

 

Net income

 

$

194

 

950

 

2,064

 

Total assets

 

$

8,865

 

10,743

 

10,248

 

Total liabilities

 

$

2,839

 

3,851

 

3,791

 

Total equity

 

$

6,026

 

6,892

 

6,457

 

 

 

 

 

 

 

 

 

Turkey Segment

 

 

 

December 31,

 

 

 

(Thousands of dollars)

 

2012   

 

2011   

 

2010   

 

Net sales

 

$

1,437,376

 

1,375,751

 

83,409

 

Net income (loss)

 

$

38,384

 

24,250

 

(1,901

)

Total assets

 

$

871,945

 

819,618

 

725,464

 

Total liabilities

 

$

443,291

 

428,361

 

360,673

 

Total equity

 

$

428,654

 

391,257

 

364,791

 

 

At December 31, 2012, Seaboard’s carrying value of certain of these investments in affiliates in the Commodity Trading and Milling segment was $8,995,000 more than its share of the affiliate’s book value. The excess is attributable primarily to the valuation of property, plant and equipment and intangible assets. The amortizable assets are being amortized to earnings from affiliates over the remaining life of the assets.

 

 

 

2012 Annual Report

39

 



 

SEABOARD CORPORATION

Notes to Consolidated Financial Statements

 

 

Note 5

Property, Plant and Equipment

The following table is a summary of property, plant and equipment at the end of each year:

 

 

 

Useful

 

December 31,

 

(Thousands of dollars)

 

Lives

 

2012   

 

2011   

 

Land and improvements

 

0-15 years

 

$

186,971

 

$

173,517

 

Buildings and improvements

 

30 years

 

384,535

 

376,659

 

Machinery and equipment

 

3-20 years

 

942,631

 

794,435

 

Vessels and vehicles

 

3-18 years

 

157,368

 

147,125

 

Office furniture and fixtures

 

5 years

 

29,972

 

28,376

 

Construction in progress

 

 

 

42,879

 

136,396

 

 

 

 

 

1,744,356

 

1,656,508

 

Accumulated depreciation and amortization

 

 

 

(900,477

)

(859,686

)

Net property, plant and equipment

 

 

 

$

843,879

 

$

796,822

 

 

During the second quarter of 2009, Seaboard started operations at its ham boning and processing plant in Mexico.  Despite being in operation for over two years, overall results had been below expectations with inconsistencies in margins and volumes. In the third quarter of 2011, Seaboard performed an impairment evaluation of this plant and determined there was an impairment loss based on management’s current cash flow assumptions and probabilities of outcomes. This analysis resulted in a $5,600,000 impairment charge recorded in cost of sales on the Consolidated Statements of Comprehensive Income during the third quarter of 2011 to write down the recorded value of these assets to the estimated fair value.  As this plant is not wholly-owned by Seaboard, this impairment charge is partially offset by a reduction (loss attributable) to noncontrolling interest of $1,830,000.  Accordingly, the total impact on net earnings attributable to Seaboard, net of taxes, was $2,300,000.  The remaining net book value of these assets as of December 31, 2012 was $3,666,000.

 

Note 6

Goodwill and Other Intangible Assets, Net

Goodwill and other intangible assets primarily relate to the 2005 acquisition of Daily’s, a bacon processor located in the western United States, and the related subsequent repurchase of a non-controlling interest of Seaboard Foods LLC in the Pork segment for total goodwill of $40,628,000 as of December 31, 2012.  As of December 31, 2012, the Commodity Trading and Milling segment had goodwill of $2,590,000 and other intangible assets subject to amortization of $596,000, related to its investment in PSI.

 

The following table is a summary of other intangible assets at the end of each year:

 

 

 

December 31,

 

(Thousands of dollars)

 

2012

 

2011

 

Other intangible assets subject to amortization:

 

 

 

 

 

Gross carrying amount customer relationships

 

$

9,045

 

$

9,045

 

Accumulated amortization customer relationships

 

(6,798

)

(6,549

)

Gross carrying amount other intangible assets

 

1,441

 

-   

 

Accumulated amortization other intangible assets

 

(845

)

-   

 

Other intangible assets subject to amortization, net

 

2,843

 

2,496

 

Other intangible assets not subject to amortization:

 

 

 

 

 

Carrying amount-trade names and registered trademarks

 

17,000

 

17,000

 

Total other intangible assets, net

 

$

19,843

 

$

19,496

 

 

The amortization expense of other amortizable intangible assets for the years ended December 31, 2012, 2011 and 2010 was $1,095,000, $250,000 and $930,000, respectively. Amortization expense for the five succeeding years is $810,000 for the next year, $267,000 each for the second and third year, $252,000 in the fourth year and $250,000 in the fifth year.

 

 

 

40

2012 Annual Report

 



 

SEABOARD CORPORATION

Notes to Consolidated Financial Statements

 

 

Note 7

Income Taxes

Income taxes attributable to continuing operations for the years ended December 31, 2012, 2011 and 2010 differed from the amounts computed by applying the statutory U.S. Federal income tax rate of 35% to earnings before income taxes excluding non-controlling interest for the following reasons:

 

 

 

Years ended December 31,

 

(Thousands of dollars)

 

2012

 

2011

 

2010

 

Computed “expected” tax expense excluding non-controlling interest

 

$

128,275

 

$

155,714

 

$

127,625

 

Adjustments to tax expense attributable to:

 

 

 

 

 

 

 

Foreign tax differences

 

(36,139

)

(40,733

)

(33,322

)

Tax-exempt investment income

 

(62

)

(116

)

(974

)

State income taxes, net of federal benefit

 

658

 

3,849

 

1,803

 

Change in valuation allowance

 

-  

 

(754

)

(6,189

)

Federal tax credits

 

(1,693

)

(5,153

)

(3,351

)

Change in pension deferred tax

 

(1,252

)

(199

)

(329

)

Domestic manufacturing deduction

 

(5,643

)

(8,012

)

(4,837

)

Other

 

46

 

(5,545

)

607

 

Total income tax expense

 

$

84,190

 

$

99,051

 

$

81,033

 

 

Most of Seaboard’s foreign tax differences are attributable to a significant portion of the earnings from Seaboard’s foreign operations being subject to no income tax or a tax rate which is considerably lower than the U.S. corporate tax rate.

 

Earnings before income taxes consisted of the following:

 

 

 

Years ended December 31,

 

(Thousands of dollars)

 

2012

 

2011

 

2010

 

United States

 

$

178,821

 

$

300,992

 

$

223,401

 

Foreign

 

187,680

 

143,906

 

141,243

 

Total earnings excluding non-controlling interest

 

366,501

 

444,898

 

364,644

 

Less: net loss (income) attributable to non-controlling interest

 

(277

)

2,290

 

599

 

Total earnings before income taxes

 

$

366,778

 

$

442,608

 

$

364,045

 

 

The components of total income taxes were as follows:

 

 

 

Years ended December 31,

 

(Thousands of dollars)

 

     2012

 

   2011

 

   2010

 

Current:

 

 

 

 

 

 

 

Federal

 

$

68,928

 

$

79,069

 

$

48,814

 

Foreign

 

31,149

 

15,318

 

15,855

 

State and local

 

6,507

 

6,549

 

2,924

 

Deferred:

 

 

 

 

 

 

 

Federal

 

(16,818

)

(1,761

)

13,204

 

Foreign

 

(935

)

(232

)

15

 

State and local

 

(4,641

)

108

 

221

 

Income tax expense

 

84,190

 

99,051

 

81,033

 

Unrealized changes in other comprehensive income

 

(9,197

)

(12,604

)

(5,443

)

Total income taxes

 

$

74,993

 

$

86,447

 

$

75,590

 

 

 

 

2012 Annual Report

41

 



 

SEABOARD CORPORATION

Notes to Consolidated Financial Statements

 

 

As of December 31, 2012 and 2011, Seaboard had income taxes receivable of $8,046,000 and $33,539,000, respectively, primarily related to domestic tax jurisdictions, and had income taxes payable of $14,381,000 and $2,604,000, respectively, primarily related to foreign tax jurisdictions.

 

Components of the net deferred income tax liability at the end of each year were as follows:

 

 

 

December 31,

 

(Thousands of dollars)

 

2012

 

2011

 

Deferred income tax liabilities:

 

 

 

 

 

Cash basis farming adjustment

 

$

10,413

 

$

10,581

 

Depreciation

 

108,083

 

109,409

 

LIFO

 

7,012

 

27,927

 

Other

 

3,770

 

4,406

 

 

 

$

129,278

 

$

152,323

 

Deferred income tax assets:

 

 

 

 

 

Reserves/accruals

 

$

87,836

 

$

83,816

 

Tax credit carry-forwards

 

12,813

 

11,217

 

Deferred earnings of foreign subsidiaries

 

17,851

 

12,672

 

Net operating and capital loss carry-forwards

 

11,756

 

15,800

 

Other

 

1,442

 

2,041

 

 

 

131,698

 

125,546

 

Valuation allowance

 

11,758

 

16,320

 

Net deferred income tax liability

 

$

9,338

 

$

43,097

 

 

Seaboard recognizes interest accrued related to unrecognized tax benefits and penalties in income tax expense. For the years ended December 31, 2012, 2011 and 2010, such interest and penalties were not material. The Company had approximately $926,000 and $1,377,000 accrued for the payment of interest and penalties on uncertain tax positions at December 31, 2012, and 2011, respectively.

 

As of December 31, 2012 and 2011, Seaboard had $5,053,000 and $7,898,000, respectively, in total unrecognized tax benefits all of which, if recognized, would affect the effective tax rate. Seaboard does not have any material uncertain tax positions in which it is reasonably possible that the total amounts of the unrecognized tax benefits will significantly increase or decrease within 12 months of the reporting date.  The following table is a reconciliation of the beginning and ending amount of unrecognized tax benefits:

 

(Thousands of dollars)

 

2012

 

2011

 

Beginning balance at January 1

 

$

7,898

 

$

3,548

 

Additions for uncertain tax positions of prior years

 

929

 

66

 

Decreases for uncertain tax positions of prior years

 

(2,715

)

(109

)

Additions for uncertain tax positions of current year

 

1,165

 

4,791

 

Lapse of statute of limitations

 

(2,224

)

(398

)

Ending balance at December 31

 

$

5,053

 

$

7,898

 

 

Seaboard’s tax returns are regularly audited by federal, state and foreign tax authorities, which may result in adjustments. Seaboard’s U.S. federal income tax years’ are closed through 2009. Seaboard’s 2010 U.S. income tax return is currently under IRS examination.

 

As of December 31 2012, Seaboard had not provided for U.S. Federal Income and foreign withholding taxes on $985,402,000 of undistributed earnings from foreign operations, as Seaboard intends to reinvest such earnings indefinitely outside of the United States. Determination of the tax that might be paid on these undistributed earnings if eventually remitted is not practical.

 

 

 

42

2012 Annual Report

 



 

SEABOARD CORPORATION

Notes to Consolidated Financial Statements

 

 

Seaboard had a tax holiday in the Dominican Republic for the Power segment in 2012, 2011 and 2010, which resulted in tax savings of approximately $2,063,000, $16,275,000 and $3,434,000, or $1.71, $13.40 and $2.80 per diluted earnings per common share for the years ended December 31, 2012, 2011 and 2010, respectively. The tax holiday ceased on April 1, 2012.

 

Management believes Seaboard’s future taxable income will be sufficient for full realization of the net deferred tax assets. The valuation allowance relates to the tax benefits from foreign net operating losses. Management does not believe these benefits are more likely than not to be realized due to limitations imposed on the deduction of these losses. At December 31, 2012, Seaboard had foreign net operating loss carry-forwards (NOLs) of approximately $39,241,000 a portion of which expire in varying amounts between 2013 and 2019, while others have indefinite expiration periods.

 

At December 31, 2012, Seaboard had state tax credit carry-forwards of approximately $19,712,000, net of valuation allowance, all of which carry-forward indefinitely.

 

On January 2, 2013, the American Taxpayer Relief Act of 2012 (the Tax Act) was signed into law.  The Tax Act extends many expired corporate income tax provisions that impact current and deferred taxes for financial reporting purposes.  In accordance with U.S. GAAP, the determination of current and deferred taxes is based on the provisions of the enacted law as of the balance sheet date; the effects of future changes in tax law are not anticipated.  The effects of changes in tax laws, including retroactive changes, are recognized in the financial statements in the period that the changes are enacted.  Accordingly, as the Tax Act was signed into law in 2013, the effects of the retroactive provisions in the new law on current and deferred taxes assets and liabilities for Seaboard will be recorded in the first quarter of 2013.  Although management is currently still evaluating the impacts of the Tax Act on its 2012 income tax liability, it is anticipated the total impact will be a one-time tax benefit of approximately $7,500,000 to $15,000,000 recorded in the first quarter of 2013.  In addition to this amount is a one-time credit of approximately $11,260,000 for 2012 Federal blender’s credits that will be recognized as revenues in the first quarter of 2013.  See Note 13 for further discussion of this Federal blender’s credit.

 

Note 8

Notes Payable and Long-Term Debt

Notes payable amounting to $28,786,000 and $16,219,000 at December 31, 2012 and 2011, respectively, consisted of obligations due banks on demand or based on Seaboard’s ability and intent to repay within one year. In June 2012, the committed line of credit was reduced from $300,000,000 to $200,000,000. At December 31, 2012, Seaboard had a committed bank line totaling $200,000,000, maturing July 10, 2013, and uncommitted bank lines totaling approximately $199,208,000, of which $149,208,000 of the uncommitted lines relate to foreign subsidiaries. At December 31, 2012, there were no borrowings outstanding under the committed line, and borrowings outstanding under the uncommitted lines totaled $28,786,000, all related to foreign subsidiaries.  The uncommitted borrowings outstanding at December 31, 2012 primarily represented $23,732,000 denominated in South African rand. The weighted average interest rates for outstanding notes payable were 7.45% and 9.34% at December 31, 2012 and 2011, respectively.  In February 2013, Seaboard refinanced its committed bank line for $200,000,000 with similar credit terms as noted below, and also extended the maturity date to February 20, 2018.

 

At December 31, 2012, Seaboard’s borrowing capacity under its committed and uncommitted lines was reduced by letters of credit (LCs) totaling $39,960,000 and $3,988,000, respectively, primarily including $18,397,000 of LCs for Seaboard’s outstanding Industrial Development Revenue Bonds (IDRBs) and $21,801,000 related to various insurance coverage.

 

The notes payable to banks under the credit lines are unsecured. The lines of credit do not require compensating balances. Facility fees on these agreements are not material.

 

In December 2012, Seaboard provided notice of call for early redemption to holders of certain IDRBs effective January 14, 2013.  As a result, $13,000,000 of IDRBs were reclassified from long-term debt to current maturities of long-term debt as of December 31, 2012.  In 2010, Seaboard entered into a credit agreement for $114,000,000 at a fixed rate of 5.34% for the financing of the new power generating facility in the Dominican Republic, as discussed in Note 13. The credit facility will mature in December 2021 and is secured by the power generating facility.

 

 

 

2012 Annual Report

43

 



 

SEABOARD CORPORATION

Notes to Consolidated Financial Statements

 

 

The following table is a summary of long-term debt at the end of each year:

 

 

 

December 31,

 

(Thousands of dollars)

 

2012

 

2011

 

Private placements:

 

 

 

 

 

6.21% senior notes, repaid in 2012

 

$

-

 

$

1,072

 

6.92% senior notes, repaid in 2012

 

-

 

31,000

 

Industrial Development Revenue Bonds, floating rates

 

 

 

 

 

(1.30% -1.76% at December 31, 2012) due 2013 through 2027

 

41,800

 

41,800

 

Foreign subsidiary obligation, 5.34%, due 2013 through 2021

 

102,600

 

81,318

 

Foreign subsidiary obligation, floating rate

 

182

 

206

 

Capital lease obligations and other

 

1,381

 

1,856

 

 

 

145,963

 

157,252

 

Current maturities of long-term debt

 

(25,138

)

(40,885

)

Long-term debt, less current maturities

 

$

120,825

 

$

116,367

 

 

Of the 2012 foreign subsidiary obligations, $102,600,000 was payable in U.S. dollars and $182,000 was payable in Argentine pesos.  Of the 2011 foreign subsidiary obligations, $81,318,000 was payable in U.S. dollars and $206,000 was payable in Argentine pesos.

 

The terms of the note agreements pursuant to which the IDRBs, bank debt and credit lines were issued require, among other terms, the maintenance of certain ratios and minimum net worth, the most restrictive of which requires consolidated funded debt not to exceed 50% of consolidated total capitalization; an adjusted leverage ratio of less than 3.5 to 1.0; requires the maintenance of consolidated tangible net worth, as defined, of not less than $1,150,000,000, plus 25% of cumulative consolidated net income beginning March 29, 2008; limits aggregate dividend payments to $15,000,000 per year under certain circumstances; limits the sum of subsidiary indebtedness and priority indebtedness to 10% of consolidated tangible net worth; and limits Seaboard’s ability to acquire investments and sell assets under certain circumstances. Seaboard is in compliance with all restrictive debt covenants relating to these agreements as of December 31, 2012.  The refinancing of the committed bank line in February 2013 noted above revised the above terms by increasing the tangible net worth to $1,870,445,000, plus 25% of cumulative consolidated net income beginning after December 31, 2012, increasing the dividend payment limit to $25,000,000, increasing the subsidiary and priority indebtedness to 20% and eliminates the required consolidated funded debt to consolidated total capitalization ratio.

 

Annual maturities of long-term debt at December 31, 2012 are as follows: $25,138,000 in 2013, $11,553,000 in 2014, $11,400,000 in 2015, $11,400,000 in 2016, $11,400,000 in 2017 and $75,072,000 thereafter.

 

Note 9

Derivatives and Fair Value of Financial Instruments

U.S. GAAP discusses several valuation techniques, such as the market approach (prices and other relevant information generated by market conditions involving identical or comparable assets or liabilities), the income approach (techniques to convert future amounts to single present amounts based on market expectations including present value techniques and option pricing) and the cost approach (amount that would be required to replace the service capacity of an asset which is often referred to as replacement cost). U.S. GAAP utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels:

 

Level 1: Quoted Prices in Active Markets for Identical Assets - Observable inputs such as unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.

 

 

 

44

2012 Annual Report

 



 

SEABOARD CORPORATION

Notes to Consolidated Financial Statements

 

 

Level 2 : Significant Other Observable Inputs - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.

 

Level 3: Significant Unobservable Inputs - Unobservable inputs that reflect the reporting entity’s own assumptions.

 

Financial instruments consisting of cash and cash equivalents, net receivables, notes payable and accounts payable are carried at cost, which approximates fair value, as a result of the short-term nature of the instruments.

 

The fair value of long-term debt is estimated by comparing interest rates for debt with similar terms and maturities. If Seaboard’s debt was measured at fair value on its Consolidated Balance Sheets, it would have been classified as level 2 in the fair value hierarchy. The amortized cost and estimated fair values of investments and long-term debt at December 31, 2012 and 2011, are presented below:

 

December 31,

 

2012

 

2011

 

(Thousands of dollars)

 

Amortized Cost

 

Fair Value

 

Amortized Cost

 

Fair Value

 

Short-term investments, available-for-sale

 

$ 279,556

 

$ 282,829

 

$  297,916

 

$   297,443

 

Short-term investments, trading debt securities

 

28,508

 

30,550

 

25,437

 

25,813

 

Long-term debt

 

145,963

 

149,333

 

157,252

 

161,636

 

 

The following tables show assets and liabilities measured at fair value (derivatives exclude margin accounts) on a recurring basis as of December 31, 2012 and 2011, respectively, and also the level within the fair value hierarchy used to measure each category of assets. Seaboard uses the end of the reporting period to determine if there were any transfers between levels.  There were no transfers between levels that occurred in 2012 and 2011.

 

 

 

2012 Annual Report

45

 



 

SEABOARD CORPORATION

Notes to Consolidated Financial Statements

 

 

 

 

Balance

 

 

 

 

 

 

 

 

 

December 31,

 

 

 

 

 

 

 

(Thousands of dollars)

 

2012

 

Level 1

 

Level 2

 

Level 3

 

Assets:

 

 

 

 

 

 

 

 

 

Available-for-sale securities – short-term investments:

 

 

 

 

 

 

 

 

 

Money market funds

 

   $

126,537

 

     $

126,537

 

     $

-

 

     $

-

 

Corporate bonds

 

69,214

 

-

 

69,214

 

-

 

U.S. Government agency securities

 

23,775

 

-

 

23,775

 

-

 

Emerging markets debt mutual fund

 

18,734

 

18,734

 

-

 

-

 

U.S. Treasury securities

 

17,169

 

-

 

17,169

 

-

 

Collateralized mortgage obligations

 

15,162

 

-

 

15,162

 

-

 

Asset backed debt securities

 

12,238

 

-

 

12,238

 

-

 

Trading securities- short term investments:

 

 

 

 

 

 

 

 

 

High yield debt securities

 

23,406

 

-

 

23,406

 

-

 

Emerging markets trading debt mutual fund

 

3,237

 

3,237

 

-

 

-

 

Emerging markets trading debt securities

 

2,600

 

-

 

2,600

 

-

 

Other debt securities

 

1,307

 

822

 

485

 

-

 

Trading securities – other current assets:

 

 

 

 

 

 

 

 

 

Domestic equity securities

 

15,864

 

15,864

 

-

 

-

 

Fixed income mutual funds

 

7,153

 

7,153

 

-

 

-

 

Foreign equity securities

 

6,831

 

4,218

 

2,613

 

-

 

Money market funds

 

3,157

 

3,157

 

-

 

-

 

U.S. Government agency securities

 

2,117

 

-

 

2,117

 

-

 

U.S. Treasury securities

 

1,567

 

-

 

1,567

 

-

 

Corporate bonds

 

60

 

-

 

60

 

-

 

Other

 

239

 

187

 

52

 

-

 

Derivatives

 

 

 

 

 

 

 

 

 

Commodities (1)

 

6,916

 

6,699

 

217

 

-

 

Foreign currencies

 

-

 

-

 

-

 

-

 

Total Assets

 

   $

357,283

 

     $

186,608

 

     $

170,675

 

     $

-

 

Liabilities:

 

 

 

 

 

 

 

 

 

Derivatives:

 

 

 

 

 

 

 

 

 

Commodities (1)

 

   $

7,112

 

     $

7,112

 

     $

-

 

     $

-

 

Interest rate swaps

 

9,810

 

-

 

9,810

 

-

 

Foreign currencies

 

4,157

 

-

 

4,157

 

-

 

Total Liabilities

 

   $

21,079

 

     $

7,112

 

     $

13,967

 

     $

-

 

 

(1)  Seaboard’s commodities derivative assets and liabilities are presented in the Consolidated Balance Sheets on a net basis, including netting the derivatives with the related margin accounts.  As of December 31, 2012, the commodity derivatives had a margin account balance of $14,063,000 resulting in a net other current asset on the Consolidated Balance Sheets of $13,867,000.

 

 

 

46

2012 Annual Report

 



 

SEABOARD CORPORATION

Notes to Consolidated Financial Statements

 

 

 

 

Balance

 

 

 

 

 

 

 

 

 

December 31,

 

 

 

 

 

 

 

(Thousands of dollars)

 

2011

 

Level 1

 

Level 2

 

Level 3

 

Assets:

 

 

 

 

 

 

 

 

 

Available-for-sale securities – short-term investments:

 

 

 

 

 

 

 

 

 

Money market funds

 

   $

139,420

 

     $

139,420

 

     $

-

 

     $

-

 

Corporate bonds

 

89,146

 

-

 

89,146

 

-

 

Fixed rate municipal notes and bonds

 

17,788

 

-

 

17,788

 

-

 

Emerging markets debt mutual fund

 

16,399

 

16,399

 

-

 

-

 

Collateralized mortgage obligations

 

15,011

 

-

 

15,011

 

-

 

U.S. Government agency securities

 

9,757

 

-

 

9,757

 

-

 

U.S. Treasury securities

 

4,905

 

-

 

4,905

 

-

 

Asset backed debt securities

 

3,533

 

-

 

3,533

 

-

 

Other

 

1,484

 

-

 

1,484

 

-

 

Trading securities- short term investments:

 

 

 

 

 

 

 

 

 

High yield debt securities

 

20,750

 

-

 

20,750

 

-

 

Emerging markets trading debt mutual fund

 

2,487

 

2,487

 

-

 

-

 

Emerging markets trading debt securities

 

2,355

 

-

 

2,355

 

-

 

Other debt securities

 

221

 

-

 

221

 

-

 

Trading securities – other current assets:

 

 

 

 

 

 

 

 

 

Domestic equity securities

 

13,563

 

13,563

 

-

 

-

 

Foreign equity securities

 

7,490

 

3,991

 

3,499

 

-

 

Money market funds

 

4,521

 

4,521

 

-

 

-

 

Fixed income mutual funds

 

4,483

 

4,483

 

-

 

-

 

U.S. Government agency securities

 

2,085

 

-

 

2,085

 

-

 

U.S. Treasury securities

 

1,474

 

-

 

1,474

 

-

 

Corporate bonds

 

72

 

-

 

72

 

-

 

Other

 

236

 

159

 

77

 

-

 

Derivatives

 

 

 

 

 

 

 

 

 

Commodities (1)

 

5,144

 

5,144

 

-

 

-

 

Foreign currencies

 

2,247

 

-

 

2,247

 

-

 

Total Assets

 

   $

364,571

 

     $

190,167

 

     $

174,404

 

     $

-

 

Liabilities:

 

 

 

 

 

 

 

 

 

Derivatives:

 

 

 

 

 

 

 

 

 

Commodities (1)

 

   $

5,529

 

     $

5,529

 

     $

-

 

     $

-

 

Interest rate swaps

 

11,268

 

-

 

11,268

 

-

 

Foreign currencies

 

3,380

 

-

 

3,380

 

-

 

Total Liabilities

 

   $

20,177

 

     $

5,529

 

     $

14,648

 

     $

-

 

 

(1)  Seaboard’s commodities derivative assets and liabilities are presented in the Consolidated Balance Sheets on a net basis, including netting the derivatives with the related margin accounts.  As of December 31, 2011, the commodity derivatives had a margin account balance of $8,619,000 resulting in a net other current asset on the Consolidated Balance Sheets of $8,234,000.

 

 

 

2012 Annual Report

47

 



 

SEABOARD CORPORATION

Notes to Consolidated Financial Statements

 

 

While management believes its derivatives are primarily economic hedges of its firm purchase and sales contracts or anticipated sales contracts, Seaboard does not perform the extensive record-keeping required to account for these types of transactions as hedges for accounting purposes.

 

Commodity Instruments

Seaboard uses various derivative futures and options to manage its risk to price fluctuations for raw materials and other inventories, finished product sales and firm sales commitments. Seaboard also enters into speculative derivative transactions not directly related to its raw material requirements. The nature of Seaboard’s market risk exposure has not changed materially since December 31, 2011. Commodity derivatives are recorded at fair value, with any changes in fair value being marked to market as a component of cost of sales on the Consolidated Statements of Comprehensive Income. Since these derivatives are not accounted for as hedges, fluctuations in the related commodity prices could have a material impact on earnings in any given period.

 

At December 31, 2012, Seaboard had open net derivative contracts to purchase 28,896,000 pounds of sugar, 15,403,000 bushels of grain and 120,000 pounds of cheese and open net derivative contracts to sell 21,080,000 pounds of hogs, 546,000 gallons of heating oil, 220,000 pounds of dry whey powder and 53,000 tons of soybean meal.  At December 31, 2011, Seaboard had open net derivative contracts to purchase 23,300 tons of soybean meal, 2,580,000 pounds of soybean oil and 2,280,000 pounds of hogs and open net derivative contracts to sell 10,599,000 bushels of grain and 1,176,000 gallons of heating oil.  For the year ended December 31, 2012, Seaboard recognized net realized and unrealized losses of $6,098,000 and for the years ended December 31, 2011 and 2010, Seaboard recognized net realized and unrealized gains of $20,279,000 and $8,047,000, respectively, related to commodity contracts, primarily included in cost of sales on the Consolidated Statements of Comprehensive Income.

 

Foreign Currency Exchange Agreements

Seaboard enters into foreign currency exchange agreements to manage the foreign currency exchange rate risk with respect to certain transactions denominated in foreign currencies. Foreign exchange agreements that were primarily related to the underlying commodity transaction were recorded at fair value, with changes in value marked to market as a component of cost of sales on the Consolidated Statements of Comprehensive Income. Foreign exchange agreements that were not related to an underlying commodity transaction were recorded at fair value, with changes in value marked to market as a component of foreign currency gain on the Consolidated Statements of Comprehensive Income. Since these agreements are not accounted for as hedges, fluctuations in the related currency exchange rates could have a material impact on earnings in any given year.

 

At December 31, 2012 and 2011, Seaboard had trading foreign exchange contracts to cover its firm sales and purchase commitments and related trade receivables and payables, with notional amounts of $243,563,000 and $158,266,000, respectively, primarily related to the South African rand.

 

Interest Rate Exchange Agreements

In May 2010, Seaboard entered into three ten-year interest rate exchange agreements which involve the exchange of fixed-rate and variable-rate interest payments over the life of the agreements without the exchange of the underlying notional amounts to mitigate the effects of fluctuations in interest rates on variable rate debt. Seaboard pays a fixed rate and receives a variable rate of interest on three notional amounts of $25,000,000 each. In August 2010, Seaboard entered into another ten-year interest rate exchange agreement, with a notional amount of $25,000,000 that has terms similar to those for the other three interest rate exchange agreements referred to above. In September 2012, Seaboard terminated one interest rate exchange agreement with a notional value of $25,000,000. Seaboard made a payment in the amount of $3,861,000 to unwind this agreement. While Seaboard has certain variable rate debt, these interest rate exchange agreements do not qualify as hedges for accounting purposes. Accordingly, the changes in fair value of these agreements are recorded in Miscellaneous, net in the Consolidated Statements of Comprehensive Income. At December 31, 2012, Seaboard had three interest rate exchange agreements outstanding with a total notional value of $75,000,000 compared to four interest rate exchange agreements outstanding with a total notional value of $100,000,000 at December 31, 2011.

 

The following table provides the amount of gain or (loss) recognized for each type of derivative and where it was recognized in the Consolidated Statements of Comprehensive Income for the year ended December 31, 2012 and 2011:

 

 

 

48

2012 Annual Report

 



 

SEABOARD CORPORATION

Notes to Consolidated Financial Statements

 

 

 

 

 

 

2012

 

2011

 

 

 

Location of Gain or (Loss)

 

Amount of Gain or (Loss)

 

 

Recognized in Income on

 

Recognized in Income on

(Thousands of dollars)

 

Derivatives

 

Derivatives

Commodities

 

Cost of sales-products

 

$   (6,098

)

$    20,279

 

Foreign currencies

 

Cost of sales-products

 

3,027

 

25,692

 

Foreign currencies

 

Foreign currency

 

(3,919

)

(1,957

)

Interest rate

 

Miscellaneous, net

 

(5,132

)

(14,467

)

 

The following table provides the fair value of each type of derivative held as of December 31, 2012 and 2011 and where each derivative is included on the Consolidated Balance Sheets:

 

(Thousands of dollars)

 

Asset Derivatives

 

Liability Derivatives

 

 

 

 

 

2012

 

2011

 

 

 

2012

 

2011

 

 

 

Balance Sheet

 

Fair

 

Balance Sheet

 

Fair

 

 

 

Location

 

Value

 

Location

 

Value

 

Commodities (1)

 

Other current assets

 

$6,916

 

$5,144

 

Other current assets

 

 $

7,112

 

 $

5,529

 

Foreign currencies

 

Other current assets

 

-

 

2,247

 

Other accrued liabilities

 

4,157

 

3,380

 

Interest rate

 

Other current assets

 

-

 

-

 

Other accrued liabilities

 

9,810

 

11,268

 

 

(1)  Seaboard’s commodities derivative assets and liabilities are presented in the Consolidated Balance Sheets on a net basis, including netting the derivatives with the related margin accounts. As of December 31, 2012 and 2011, the commodity derivatives had a margin account balance of $14,063,000 and $8,619,000, respectively, resulting in a net other current asset on the Consolidated Balance Sheets of $13,867,000 and $8,234,000, respectively.

 

Counterparty Credit Risk

From time to time Seaboard is subject to counterparty credit risk related to its foreign currency exchange agreements and interest rate swaps, should the counterparties fail to perform according to the terms of the contracts. As of December 31, 2012, Seaboard did not have any credit risk related to its foreign currency exchange agreements and interest rate swaps.  Seaboard does not hold any collateral related to these agreements.

 

Note 10

Employee Benefits

Seaboard maintains two defined benefit pension plans (“the Plans”) for its domestic salaried and clerical employees. The Plans generally provide eligibility for participation after one year of service upon attaining the age of 21. Benefits are generally based upon the number of years of service and a percentage of final average pay.

 

Seaboard has historically based pension contributions on minimum funding standards to avoid the Pension Benefit Guaranty Corporation variable rate premiums established by the Employee Retirement Income Security Act of 1974. Management did not make any contributions in 2012, 2011 and 2010 and currently does not plan on making any contributions to the Plans in 2013.

 

Seaboard has separate investment policies for each Plan. The difference in target allocation percentages are based on one plan having more current retirees and thus a more conservative portfolio versus the other plan, which can assume greater risk as it will have a longer investment time horizon. Assets are invested in the Plans to achieve a diversified overall portfolio consisting primarily of individual stocks, money market funds, collective investment funds, bonds and mutual funds. Seaboard is willing to accept a moderate level of risk to potentially achieve higher investment returns. The overall portfolios are evaluated relative to customized benchmarks. The investment strategy provides investment managers’ discretion, and is periodically reviewed by management for adherence to policy and performance against benchmarks. Seaboard’s asset allocation targets and actual investment composition within the Plans were as follows:

 

 

 

2012 Annual Report

49

 



 

SEABOARD CORPORATION

Notes to Consolidated Financial Statements

 

 

 

 

 

 

Actual Composition of Plans at December 31,

 

 

Target Allocations

 

 

2012

 

2011

 

Domestic large cap equity

 

29-40%

 

 

31-42%

 

29-40%

 

Domestic small and mid-cap equity

 

7-10%

 

 

9-12%

 

11-13%

 

International equity

 

11-16%

 

 

11-13%

 

10-15%

 

Fixed income

 

25-42%

 

 

20-37%

 

23-40%

 

Alternative investments

 

6-8%

 

 

8-10%

 

6-7%

 

Cash and cash equivalents

 

1-5%

 

 

3-4%

 

2-4%

 

 

As described in Note 9 to the Consolidated Financial Statements, U.S. GAAP utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following tables shows the Plans’ assets measured at estimated fair value as of December 31, 2012 and 2011, respectively, and also the level within the fair value hierarchy used to measure each category of assets:

 

 

 

Balance

 

 

 

 

 

 

 

 

 

December 31,

 

 

 

 

 

 

 

(Thousands of dollars)

 

2012

 

   Level 1

 

Level 2 

 

Level 3

 

Assets:

 

 

 

 

 

 

 

 

 

Domestic equity securities

 

$     36,346

 

$  36,346

 

$

-

 

$

-

 

Fixed income mutual funds

 

12,533

 

12,533

 

-

 

-

 

Foreign equity securities

 

7,475

 

7,475

 

-

 

-

 

Corporate bonds

 

6,387

 

-

 

6,387

 

-

 

Money market funds

 

6,285

 

6,285

 

-

 

-

 

U.S. Government agency securities

 

6,218

 

-

 

6,218

 

-

 

U.S. Government bonds

 

5,680

 

-

 

5,680

 

-

 

Emerging markets-equity

 

5,607

 

5,607

 

-

 

-

 

Real estate mutual fund

 

5,453

 

5,453

 

-

 

-

 

Mutual funds-equities

 

2,701

 

2,701

 

-

 

-

 

Treasury inflation indexed bonds

 

2,083

 

-

 

2,083

 

-

 

Other

 

818

 

-

 

818

 

-

 

Total Assets

 

$     97,586

 

$  76,400

 

$

21,186

 

$

-

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance

 

 

 

 

 

 

 

 

 

December 31,

 

 

 

 

 

 

 

(Thousands of dollars)

 

2011

 

   Level 1

 

Level 2 

 

Level 3

 

Assets:

 

 

 

 

 

 

 

 

 

Domestic equity securities

 

$     34,770

 

$  34,770

 

$

-

 

$

-

 

Corporate bonds

 

18,526

 

-

 

18,526

 

-

 

Foreign equity securities

 

7,107

 

7,107

 

-

 

-

 

Fixed income mutual funds

 

6,400

 

6,400

 

-

 

-

 

Money market funds

 

6,513

 

6,513

 

-

 

-

 

U.S. Treasury STRIPS

 

3,587

 

-

 

3,587

 

-

 

Emerging markets-equity

 

3,349

 

3,349

 

-

 

-

 

Mutual funds-equities

 

3,485

 

3,485

 

-

 

-

 

Real estate mutual fund

 

2,909

 

2,909

 

-

 

-

 

Exchange traded funds-fixed income

 

1,788

 

1,788

 

-

 

-

 

Municipal bonds

 

2,048

 

-

 

2,048

 

-

 

Other

 

1,030

 

-

 

1,030

 

-

 

Total Assets

 

$     91,512

 

$  66,321

 

$

25,191

 

$

-

 

 

Seaboard also sponsors non-qualified, unfunded supplemental executive plans, and has certain individual, non-qualified, unfunded supplemental retirement agreements for certain retired employees. The unamortized prior service cost is being amortized over the average remaining working lifetime of the active participants for this plan.

 

 

 

50

2012 Annual Report

 



 

SEABOARD CORPORATION

Notes to Consolidated Financial Statements

 

 

Management has no plans to provide funding for these supplemental executive plans in advance of when the benefits are paid.

 

Assumptions used in determining pension information for all of the above plans were:

 

 

 

Years ended December 31,

 

 

 

2012

 

2011

 

2010

 

Weighted-average assumptions

 

 

 

 

 

 

 

Discount rate used to determine obligations

 

2.50-4.15%

 

3.75-4.70%

 

4.45-5.65%

 

Discount rate used to determine net periodic benefit cost

 

3.75-4.70%

 

4.45-5.65%

 

5.25-6.25%

 

Expected return on plan assets

 

6.50-7.25%

 

7.00-7.50%

 

7.25-7.75%

 

Long-term rate of increase in compensation levels

 

4.00%

 

4.00-5.00%

 

4.00-5.00%

 

 

Management selected the discount rate based on a model-based result where the timing and amount of cash flows approximates the estimated payouts. The expected returns on the Plans’ assets assumption are based on the weighted average of asset class expected returns that are consistent with historical returns. The assumed rate selected was based on model-based results that reflect the Plans’ asset allocation and related long-term projected returns. The measurement date for all plans is December 31. The unrecognized net actuarial losses are generally amortized over the average remaining working lifetime of the active participants for all of these plans.

 

The changes in the plans’ benefit obligations and fair value of assets for the Plans, supplemental executive plans and retirement agreements for the years ended December 31, 2012 and 2011, and a statement of the funded status as of December 31, 2011 and 2010 were as follows:

 

December 31,

 

2012

 

2011

 

 

 

Accumulated

 

Accumulated

 

 

 

benefits

 

benefits

 

(Thousands of dollars)

 

exceed assets

 

exceed assets

 

Reconciliation of benefit obligation:

 

 

 

 

 

Benefit obligation at beginning of year

 

    $

204,540

 

     $

173,023

 

Service cost

 

8,843

 

7,523

 

Interest cost

 

8,918

 

9,025

 

Actuarial losses

 

25,749

 

19,637

 

Benefits paid

 

(5,872

)

(4,668

)

Plan curtailments

 

(6,136

)

-

 

Plan settlement

 

(5,532

)

-

 

Plan amendments

 

(3,785

)

-

 

Benefit obligation at end of year

 

    $

226,725

 

     $

204,540

 

Reconciliation of fair value of plan assets:

 

 

 

 

 

Fair value of plan assets at beginning of year

 

    $

91,512

 

     $

93,638

 

Actual return on plan assets

 

9,426

 

807

 

Employer contributions

 

8,052

 

1,735

 

Benefits paid

 

(5,872

)

(4,668

)

Plan settlement

 

(5,532

)

-

 

Fair value of plan assets at end of year

 

    $

97,586

 

     $

91,512

 

Funded status

 

    $

(129,139

)

     $

(113,028

)

 

The net funded status of the Plans was $(45,515,000) and $(26,819,000) at December 31, 2012 and 2011, respectively. The accumulated benefit obligation for the Plans was $120,573,000 and $102,165,000, and for the other plans was $68,194,000 and $59,229,000 at December 31, 2012 and 2011, respectively. Expected future net benefit payments for all plans during each of the next five years and in aggregate for the five year period beginning with the sixth year are as follows: $7,344,000, $7,708,000, $8,416,000, $10,354,000, $10,993,000, and $76,635,000, respectively.

 

During June 2012 when the actual pension costs for 2012 were finalized, it was determined that a settlement payment made in March 2012 was greater than the actual service cost and interest cost components of 2012’s net

 

 

 

2012 Annual Report

51

 



 

SEABOARD CORPORATION

Notes to Consolidated Financial Statements

 

 

periodic pension cost for a non-qualified, unfunded supplemental executive plan.  As a result, during the second quarter of 2012, a settlement loss of $1,796,000 was recorded in the Pork division’s results of operations.  In December 2012, certain non-qualified, unfunded supplemental executive plans were amended primarily to limit years of service and final average earnings.  As a result, in December 2012, curtailment losses of $1,134,000 were recorded for these plans from the reduction in the amortization period of prior service cost.

 

The net periodic cost of benefits of these plans was as follows:

 

 

 

Years ended December 31,

 

(Thousands of dollars)

 

2012

 

2011

 

2010

 

Components of net periodic benefit cost:

 

 

 

 

 

 

 

Service cost

 

$

8,843

 

$

7,550

 

$

6,367

 

Interest cost

 

8,918

 

8,997

 

8,712

 

Expected return on plan assets

 

(6,431

)

(6,598

)

(6,218

)

Amortization and other

 

6,748

 

4,027

 

4,046

 

Settlement

 

1,796

 

-

 

-

 

Curtailment

 

1,134

 

-

 

-

 

Net periodic benefit cost

 

$

21,008

 

$

13,976

 

$

12,907

 

 

The amounts not reflected in net periodic benefit cost and included in accumulated other comprehensive loss (AOCL) before taxes at December 31, 2012 and 2011 were as follows:

 

(Thousands of dollars)

 

2012

 

2011

 

Accumulated loss, net of gain

 

$

(91,611

)

$

(81,708

)

Prior service cost, net of credit

 

(72

)

(6,351

)

Total accumulated other comprehensive loss

 

$

(91,683

)

$

(88,059

)

 

The amounts in AOCL expected to be recognized as components of net periodic benefit cost in 2013 are as follows:

 

(Thousands of dollars)

 

2013

 

Accumulated loss, net of gain

 

$

(6,588

)

Prior service cost, net of credit

 

24

 

Estimated net periodic benefit cost

 

$

(6,564

)

 

Seaboard participates in a multi-employer pension fund, the United Food & Commercial Workers International Union-Industry Pension Fund, which covers certain union employees under a collective bargaining agreement. This fund’s employer identification plan is 51-6055922 and this plan’s number is 001.  For the plan year beginning July 1, 2012, this plan’s “zone status” is green and is not subject to a funding improvement plan. Seaboard is required to make contributions to this plan in amounts established under the collective bargaining agreement that expires in July 2014. Contribution expense for this plan was $584,000, $545,000 and $528,000 for the years ended December 31, 2012, 2011 and 2010, respectively, which represents less than five percent of total contributions to this plan. The applicable portion of the total plan benefits and net assets of this plan is not separately identifiable, although Seaboard has received notice that, under certain circumstances, it could be liable for unfunded vested benefits or other expenses of this jointly administered union plan.  Seaboard has not established any liabilities for potential future withdrawal, as such withdrawal from this plan is not probable.

 

Seaboard maintains a defined contribution plan covering most of its domestic salaried and clerical employees. In 2012, 2011 and 2010, Seaboard contributed to this plan an amount equal to 50% of the first 6% of each employee’s contributions to the plan. Employee vesting is based upon years of service, with 20% vested after one year of service and an additional 20% vesting with each additional complete year of service. Contribution expense for this plan was $2,063,000, $1,956,000 and $1,826,000 for the years ended December 31, 2012, 2011 and 2010, respectively. In addition, Seaboard maintains a defined contribution plan covering most of its hourly, non-union employees and two defined contribution plans covering most of Daily’s employees.  Contribution expense for these plans was $546,000, $577,000 and $1,455,000 for the years ended December 31, 2012, 2011 and 2010, respectively.

 

Seaboard has a deferred compensation plan which allows certain employees to reduce their compensation in exchange for values in four investments. Seaboard also has an Investment Option Plan which allowed certain

 

 

 

52

2012 Annual Report

 



 

SEABOARD CORPORATION

Notes to Consolidated Financial Statements

 

 

employees to reduce their compensation in exchange for an option to acquire interests measured by reference to three investments. However, as a result of U.S. tax legislation passed in 2004, reductions to compensation earned after 2004 are no longer allowed under the Investment Option Plan. The exercise price for each investment option was established based upon the fair market value of the underlying investment on the date of grant. Under both plans, Seaboard contributes 3% of the employees’ reduced compensation. Seaboard’s expense (income) for these two deferred compensation plans, which primarily includes amounts related to the change in fair value of the underlying investment accounts was $4,148,000, $(1,505,000) and $4,267,000 for the years ended December 31, 2012, 2011 and 2010, respectively. Included in other liabilities at December 31, 2012 and 2011 are $32,774,000 and $29,647,000, respectively, representing the market value of the payable to the employees upon distribution or exercise for each plan. In conjunction with these plans, Seaboard purchased the specified number of units of the employee-designated investment, plus the applicable option price for the Investment Option Plan. These investments are treated as trading securities and are stated at their fair market values. Accordingly, as of December 31, 2012 and 2011, $36,988,000 and $33,924,000, respectively, were included in other current assets on the Consolidated Balance Sheets. Investment income (loss) related to the mark-to-market of these investments for 2012, 2011, and 2010 totaled $4,076,000, $(1,584,000) and $4,203,000, respectively.

 

Note 11

Commitments and Contingencies

On September 19, 2012, the United States Immigration and Customs Enforcement (“ICE”) executed three search warrants authorizing the seizure of certain records from Seaboard’s offices in Merriam, Kansas and at the Seaboard Foods employment office and the human resources department in Guymon, Oklahoma.  The warrants generally called for the seizure of employment-related files, certain e-mails and other electronic records relating to Medicaid and Medicaid recipient, certain health care providers in the Guymon area, and Seaboard’s health plan and certain personnel issues.  This investigation is being handled by the United States Attorney’s Office for the Western District of Oklahoma (“USAO”).  Seaboard is cooperating with the USAO in connection with this investigation.  No civil or criminal proceedings or charges have been filed or brought.  It is not possible at this time to determine whether Seaboard will incur any fines, penalties or liabilities in connection with this matter.

 

Seaboard is subject to various legal proceedings related to the normal conduct of its business, including various environmental related actions. In the opinion of management, none of these actions is expected to result in a judgment having a materially adverse effect on the consolidated financial statements of Seaboard.

 

Contingent Obligations

Certain of the non-consolidated affiliates and third party contractors who perform services for Seaboard have bank debt supporting their underlying operations. From time to time, Seaboard will provide guarantees of that debt allowing a lower borrowing rate or facilitating third party financing in order to further business objectives. Seaboard does not issue guarantees of third parties for compensation. As of December 31, 2012, guarantees outstanding to third parties were not material. Seaboard has not accrued a liability for any of the third party or affiliate guarantees as management considers the likelihood of loss to be remote. See Note 8 for discussion of letters of credit.

 

Commitments

As of December 31, 2012 Seaboard had various firm non-cancelable purchase commitments and commitments under other agreements, arrangements and operating leases, as described in the table below:

 

 

 

2012 Annual Report

53

 



 

SEABOARD CORPORATION

Notes to Consolidated Financial Statements

 

 

 

 

 

 

Purchase commitments

 

Years ended December 31,

 

(Thousands of dollars)

 

2013

 

2014

 

2015

 

2016

 

2017

 

Thereafter

 

Hog procurement contracts

 

$

187,555

 

$

118,035

 

$

105,410

 

$

87,767

 

$

69,047

 

$

4,358

 

Grain and feed ingredients

 

120,308

 

4,317

 

3,700

 

-

 

-

 

-

 

Grain purchase contracts for resale

 

665,192

 

-

 

-

 

-

 

-

 

-

 

Fuel supply contract

 

85,279

 

-

 

-

 

-

 

-

 

-

 

Equipment purchases and facility improvements

 

48,814

 

-

 

-

 

-

 

-

 

-

 

Construction of new dry bulk vessels

 

4,150

 

70,550

 

-

 

-

 

-

 

-

 

Other purchase commitments

 

17,521

 

144

 

45

 

34

 

35

 

131

 

Total firm purchase commitments

 

1,128,819

 

193,046

 

109,155

 

87,801

 

69,082

 

4,489

 

Vessel, time and voyage-charters

 

77,846

 

36,558

 

30,282

 

19,021

 

18,993

 

81,869

 

Contract grower finishing agreements

 

11,883

 

11,156

 

9,689

 

9,997

 

9,831

 

9,241

 

Other operating lease payments

 

19,583

 

16,498

 

14,594

 

14,281

 

14,468

 

172,509

 

Total unrecognized firm commitments

 

$

1,238,131

 

$

257,258

 

$

163,720

 

$

131,100

 

$

112,374

 

$

268,108

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Seaboard has contracted with third parties for the purchase of live hogs to process at its pork processing plant, and has entered into grain and feed ingredient purchase contracts to support its live hog operations. The commitment amounts included in the table are based on projected market prices as of December 31, 2012.  During 2012, 2011 and 2010, this segment paid $190,471,000, $181,383,000 and $183,982,000, respectively, for live hogs purchased under committed contracts.

 

The Commodity Trading and Milling segment enters into grain purchase contracts and ocean freight contracts, primarily to support firm sales commitments. These contracts are valued based on projected commodity prices as of December 31, 2012.  This segment also has short-term voyage-charters in place for delivery of future grain sales.

 

The Power segment has a natural gas supply contract for 2013 which will supply the majority of the fuel required for the operation of the dual fuel power generating facility.  The commitment has both fixed and variable price components and thus the amount included in the table above is partially based on market prices as of December 31, 2012.

 

In June 2012, Seaboard entered into an agreement to build four dry bulk vessels to be used by the Commodity Trading and Milling segment at a total cost of approximately $83,000,000. A down payment of $8,300,000 was made in July 2012.  These vessels are expected to be completed in 2014 with the majority of the amount due in 2014.

 

The Marine segment enters into contracts to time-charter vessels for use in its operations. These contracts range from short-term time charters for a few months and long-term commitments ranging from one to twelve years. This segment’s charter hire expenses during 2012, 2011 and 2010 totaled $88,110,000, $87,895,000 and $57,606,000, respectively.

 

To support the operations of the Pork segment, Seaboard has contract grower finishing agreements in place with farmers to raise a portion of Seaboard’s hogs according to Seaboard’s specifications under long-term service agreements. Under the terms of the agreements, additional payments would be required if the grower achieves certain performance standards. The contract grower finishing obligations shown above do not reflect these incentive payments which, given current operating performance, total approximately $1,500,000 per year. In the event the farmer is unable to perform at an acceptable level, Seaboard has the right to terminate the contract. During the years ended 2012, 2011 and 2010, Seaboard paid $13,641,000, $13,037,000 and $13,752,000, respectively, under contract grower finishing agreements.

 

Seaboard also leases various facilities and equipment under non-cancelable operating lease agreements, including a terminal operations agreement at the Port of Miami which runs through 2028. Rental expense for operating leases amounted to $29,224,000, $25,916,000 and $24,835,000 in 2012, 2011 and 2010, respectively.

 

 

 

54

2012 Annual Report

 



 

SEABOARD CORPORATION

Notes to Consolidated Financial Statements

 

 

Note 12

Stockholders’ Equity and Accumulated Other Comprehensive Loss

On October 19, 2012, the Board of Directors extended through October 31, 2015, the share repurchase program initially approved on November 6, 2009.  Under this share repurchase program, Seaboard was originally authorized to repurchase from time to time up to $100,000,000 market value of its Common Stock in open market or privately negotiated purchases which may be above or below the traded market price.  During the period that the share repurchase program remains in effect, from time to time, Seaboard may enter into a 10b5-1 plan authorizing a third party to make such purchases on behalf of Seaboard.  The stock repurchase will be funded by cash on hand.  Shares repurchased will be retired and resume the status of authorized and unissued shares. All stock repurchased will be made in compliance with applicable legal requirements and the timing of the repurchases and the number of shares repurchased at any given time will depend upon market conditions, compliance with Securities and Exchange Commission regulations and other factors.  The Board’s stock repurchase authorization does not obligate a specific amount of common stock and the stock repurchase program may be suspended at any time at Seaboard’s discretion. As of December 31, 2012, $33,204,000 remains available for repurchase under this program. Seaboard used cash to repurchase, 12,937, 5,282 and 20,879 shares of common stock at a total price of $26,830,000, $9,971,000 and $29,994,000 in 2012, 2011 and 2010, respectively.

 

In December 2012, Seaboard declared and paid a dividend of $12.00 per share on the common stock.  The increased amount of the dividend (which has historically been $0.75 per share on a quarterly basis or $3.00 per share on an annual basis) represented a prepayment of the annual 2013, 2014, 2015 and 2016 dividends ($3.00 per share per year).  Seaboard does not currently intend to declare any further dividends for the years 2013-2016. Seaboard did not declare or pay a dividend in 2011. In 2010, Seaboard declared and paid dividends of $9.00 per share on the common stock, which included a prepayment of the annual 2011 and 2012 dividends ($3.00 per share per year).

 

The components of accumulated other comprehensive loss, net of related taxes, are summarized as follows:

 

 

 

December 31,

 

(Thousands of dollars)

 

2012

 

2011

 

2010

 

 

 

 

 

 

 

 

 

Cumulative foreign currency translation adjustment

 

$

(109,457

)

$

(93,669

)

$

(81,280

)

Unrealized gain (loss) on investments

 

2,232

 

(311

)

445

 

Unrealized loss on cash flow hedges

 

(113

)

-

 

-

 

Unrecognized pension cost

 

(64,206

)

(62,085

)

(43,072

)

 

 

 

 

 

 

 

 

Accumulated other comprehensive loss

 

$

(171,544

)

$

(156,065

)

$

(123,907

)

 

In 2012, a pension settlement loss of $1,796,000 and a pension curtailment loss of $1,134,000 were incurred.  This resulted in a combined $2,930,000 reclassified out of accumulated other comprehensive loss for unrecognized pension cost to net earnings in 2012. See Note 10 for further discussion.

 

The foreign currency translation adjustment primarily represents the effect of the Argentine peso currency exchange fluctuation on the net assets of the Sugar segment. At December 31, 2012, the Sugar segment had $193,380,000 in net assets denominated in Argentine pesos and $5,843,000 in net assets denominated in U.S. dollars in Argentina.  At December 31, 2011, the Sugar segment had $215,921,000 in net assets denominated in Argentine pesos and $4,608,000 in net assets denominated in U.S. dollars in Argentina.

 

With the exception of the provision related to the foreign currency translation gains and losses discussed above, which are taxed at a 35% rate, income taxes for components of accumulated other comprehensive loss were recorded using a 39% effective tax rate. For 2012 and 2011, the unrecognized pension cost includes $21,129,000 and $20,362,000, respectively, related to employees at certain subsidiaries for which no tax benefit has been recorded.

 

Note 13

Segment Information

Seaboard Corporation had six reportable segments through December 31, 2012: Pork, Commodity Trading and Milling, Marine, Sugar, Power and Turkey, each offering a specific product or service. Seaboard’s reporting segments are based on information used by Seaboard’s Chief Executive Officer in his capacity as chief operating

 

 

 

2012 Annual Report

55

 



 

SEABOARD CORPORATION

Notes to Consolidated Financial Statements

 

 

decision maker to determine allocation of resources and assess performance. Each of the six main segments is separately managed, and each was started or acquired independent of the other segments. The Pork segment produces and sells fresh and frozen pork products to further processors, foodservice operators, grocery stores, distributors and retail outlets throughout the United States, and to Japan, Mexico and numerous other foreign markets. The Commodity Trading and Milling segment is an integrated grain trading, grain processing and logistics operations that internationally markets wheat, corn, soybean meal and other commodities in bulk to third party customers and to non-consolidated affiliates. This segment also operates flour, maize and feed mills, baking operations, and poultry production and processing in numerous foreign countries. The Marine segment, based in Miami, Florida, provides containerized cargo shipping services between the United States, the Caribbean Basin and Central and South America. The Sugar segment produces and processes sugar and alcohol in Argentina, primarily to be marketed locally. The Power segment is an unregulated independent power producer in the Dominican Republic operating two floating power generating facilities. The Turkey segment, accounted for using the equity method, produces and sells branded and non-branded turkeys and other turkey products. Total assets for the Turkey segment represents Seaboard’s investment in and notes receivable from this affiliate. Revenues for the All Other segment are primarily derived from a jalapeño pepper processing operation.

 

The Pork segment derives approximately 10% of its revenues from a few customers in Japan through one agent. Substantially all of its hourly employees at its Guymon processing plant are covered by a collective bargaining agreement. The Pork segment incurred an impairment charge of $5,600,000 recorded in cost of sales on the Consolidated Statements of Comprehensive Income related to its ham boning and processing plant in Mexico in the third quarter of 2011.  See Note 5 for further discussion.  Also, the Tax Act signed into law in January 2013 as discussed in Note 7, renews and extends the Federal blender’s credits that Seaboard is entitled to receive for biodiesel it blends which had previously expired on December 31, 2011 and renewed retroactively to January 1, 2012 with an expiration of December 31, 2013.  As a result, in the first quarter of 2013 the Pork segment will recognize a one-time credit of approximately $11,260,000 as revenues related to this Federal blender’s tax incentive for gallons produced and sold in fiscal 2012.  The impact for the remainder of 2013 is not expected to be as significant as market prices for biodiesel are anticipated to adjust downward as a result of the renewed credit.

 

In the first quarter of 2011, the Commodity Trading and Milling (CT&M) segment recognized $101,080,000 in net sales related to previously deferred costs and deferred revenues under contracts for which the final sale prices were not fixed and determinable until 2011.  In 2011, the CT&M segment incurred certain grain inventory write-downs of $15,374,000 (with no tax benefit recognized), or $12.65 per share, for various customer contract performance issues.

 

In the fourth quarter of 2011, the CT&M segment recognized a $5,080,000 gain (Seaboard’s proportionate share) in income from affiliates as a result of its non-consolidated affiliate in Haiti’s final insurance settlement related to the 2010 earthquake. The insurance settlement related to property damages and business interruption. The rebuilt mill was completed in December 2011. The CT&M segment derives a significant portion of its operating income from sales to a non-consolidated affiliate and also historically derived a significant portion of its income from affiliates from this same affiliate.

 

As discussed in Note 4, effective January 1, 2012, Seaboard began consolidation accounting and discontinued the equity method of accounting for its investment in PSI.  In December 2011, the CT&M segment made an $8,493,000 advance capital lease payment to begin operations in 2012 of a flour mill in Ghana.  The initial lease term is for 33 years with an option to renew for additional years.  This lease was accounted for as a capital lease and increased fixed assets by $9,763,000 and liabilities by $1,270,000 as of December 31, 2011.  During the third quarter of 2010, Seaboard acquired a majority interest in a commodity origination, storage and processing business in Canada for approximately $6,747,000, including $1,169,000 of cash acquired. This transaction was accounted for using the purchase method, and would not have significantly affected net earnings or earnings per share on a pro forma basis.

 

On April 8, 2011, Seaboard closed the sale of its two floating power generating facilities in the Dominican Republic, for $73,102,000 (net of $3,000,000 placed in escrow for potential dry dock costs).  In the second quarter of 2011, the previously escrowed balance of $55,000,000, less $3,000,000 to remain in escrow for potential dry dock costs, plus $2,796,000 of escrow earnings and $3,306,000 for various inventory items related to one of the facilities, was paid to Seaboard.  Seaboard received $1,500,000 of the $3,000,000 in escrow in the third quarter of 2011.  The $1,500,000 was recognized as a gain on sale of assets in operating income in the third quarter of 2011.  The net book value of the two power generating facilities and certain inventory items was $21,679,000 at the sale close date.  Seaboard recognized a gain on sale of assets of $51,423,000 in operating income in the second quarter of 2011.  In

 

 

 

56

2012 Annual Report

 



 

SEABOARD CORPORATION

Notes to Consolidated Financial Statements

 

 

late March 2011, the purchaser entered into discussions with Seaboard to lease one of the facilities to Seaboard for a short period of time.  On April 20, 2011, Seaboard signed a short-term lease agreement that allowed Seaboard to resume operations of one of the facilities (72 megawatts).  Seaboard and the purchaser also agreed to defer the sale to the purchaser of the inventory related to the leased facility until the end of the lease term.  Seaboard continues to operate this facility under a short-term lease agreement that may be canceled by either party. Also, as of December 31, 2012, $1,500,000 of the original sale price for this power generating facility remained in escrow for potential dry dock costs. Seaboard retained all other physical properties of this business and constructed a new 106 megawatt floating power generating facility for use in the Dominican Republic, which began commercial operations in March 2012.  The total project cost capitalized was $136,000,000.

 

The Turkey segment, acquired on December 6, 2010 and accounted for using the equity method, had operating income in 2012 and 2011 of $65,694,000 and $55,120,000, respectively, and operating loss of $169,000 in 2010.  On December 31, 2011, Butterball closed its Longmont, Colorado processing plant, resulting in an impairment of fixed assets charge and accrued severance charges.  Seaboard’s proportionate share of these charges was $(3,005,000) recognized in income from affiliates in the second half of 2011.  As management is still attempting to sell this facility, additional impairment charges to earnings are possible in the future.  The Turkey segment derives approximately 10% of its revenues from one customer. On December 31, 2012, Butterball purchased the assets of Gusto Packing Company, Inc., a pork and turkey further processor located in Montgomery, Illinois.

 

The following tables set forth specific financial information about each segment as reviewed by management, except for the Turkey segment information previously disclosed in Note 4 to the Consolidated Financial Statements. Operating income for segment reporting is prepared on the same basis as that used for consolidated operating income. Operating income, along with income from affiliates for the Commodity Trading and Milling and Turkey segment, is used as the measure of evaluating segment performance because management does not consider interest and income tax expense on a segment basis.

 

Sales to External Customers:

 

 

 

Years ended December 31,

 

(Thousands of dollars)

 

2012

 

2011

 

2010

 

 

 

 

 

 

 

 

 

Pork

 

$

1,638,404

 

$

1,744,630

 

$

1,388,265

 

Commodity Trading and Milling

 

3,023,531

 

2,689,786

 

1,808,948

 

Marine

 

969,575

 

928,548

 

853,565

 

Sugar

 

288,315

 

259,786

 

195,993

 

Power

 

255,390

 

111,391

 

124,034

 

All Other

 

13,918

 

12,761

 

14,897

 

Segment/Consolidated Totals

 

$

6,189,133

 

$

5,746,902

 

$

4,385,702

 

 

Operating Income:

 

 

 

Years ended December 31,

 

(Thousands of dollars)

 

2012

 

2011

 

2010

 

 

 

 

 

 

 

 

 

Pork

 

$

122,556

 

$

259,271

 

$

213,325

 

Commodity Trading and Milling

 

71,852

 

43,225

 

34,432

 

Marine

 

26,111

 

(3,904

)

47,612

 

Sugar

 

60,180

 

65,101

 

31,741

 

Power

 

55,042

 

60,845

 

13,424

 

All Other

 

607

 

(1,191

)

832

 

Segment Totals

 

336,348

 

423,347

 

341,366

 

Corporate

 

(26,687

)

(16,143

)

(20,300

)

Consolidated Totals

 

$

309,661

 

$

407,204

 

$

321,066

 

 

 

 

2012 Annual Report

57

 



 

SEABOARD CORPORATION

Notes to Consolidated Financial Statements

 

 

Income from Affiliates:

 

 

Years ended December 31,

 

(Thousands of dollars)

 

2012

 

2011

 

2010

 

 

 

 

 

 

 

 

 

Commodity Trading and Milling

 

$

10,467

 

$

13,450

 

$

20,983

 

Sugar

 

88

 

440

 

980

 

Turkey

 

20,152

 

12,731

 

(998

)

Segment/Consolidated Totals

 

$

30,707

 

$

26,621

 

$

20,965

 

 

Depreciation and Amortization:

 

 

Years ended December 31,

 

(Thousands of dollars)

 

2012

 

2011

 

2010

 

 

 

 

 

 

 

 

 

Pork

 

$

43,014

 

$

43,866

 

$

50,813

 

Commodity Trading and Milling

 

6,330

 

5,567

 

5,165

 

Marine

 

23,490

 

22,675

 

22,743

 

Sugar

 

11,222

 

8,289

 

7,180

 

Power

 

5,467

 

192

 

204

 

All Other

 

366

 

403

 

428

 

Segment Totals

 

89,889

 

80,992

 

86,533

 

Corporate

 

327

 

231

 

269

 

Consolidated Totals

 

$

90,216

 

$

81,223

 

$

86,802

 

 

Total Assets:

 

 

December 31,

 

(Thousands of dollars)

 

2012

 

2011

 

 

 

 

 

 

 

Pork

 

$

740,245

 

$

738,574

 

Commodity Trading and Milling

 

992,507

 

755,903

 

Marine

 

281,215

 

261,781

 

Sugar

 

254,445

 

269,564

 

Power

 

235,377

 

165,118

 

Turkey

 

423,825

 

312,164

 

All Other

 

5,288

 

6,257

 

Segment Totals

 

2,932,902

 

2,509,361

 

Corporate

 

414,879

 

497,367

 

Consolidated Totals

 

$

3,347,781

 

$

3,006,728

 

 

Investment in and Advances to Affiliates:

 

 

December 31,

 

(Thousands of dollars)

 

2012

 

2011

 

 

 

 

 

 

 

Commodity Trading and Milling

 

$

186,873

 

$

160,402

 

Sugar

 

2,775

 

3,177

 

Turkey

 

220,894

 

201,261

 

Segment/Consolidated Totals

 

$

410,542

 

$

364,840

 

 

 

58

 

2012 Annual Report

 



 

SEABOARD CORPORATION

Notes to Consolidated Financial Statements

 

 

Capital Expenditures:

 

 

Years ended December 31,

 

(Thousands of dollars)

 

2012

 

2011

 

2010

 

Pork

 

$

52,333

 

$

39,890

 

$

9,568

 

Commodity Trading and Milling

 

22,817

 

5,192

 

2,390

 

Marine

 

35,365

 

31,210

 

28,411

 

Sugar

 

22,066

 

22,626

 

30,620

 

Power

 

25,022

 

84,041

 

31,709

 

All Other

 

112

 

60

 

362

 

Segment Totals

 

157,715

 

183,019

 

103,060

 

Corporate

 

1,040

 

729

 

276

 

Consolidated Totals

 

$

158,755

 

$

183,748

 

$

103,336

 

 

Administrative services provided by the corporate office allocated to the individual segments represent corporate services rendered to and costs incurred for each specific segment, with no allocation to individual segments of general corporate management oversight costs. Corporate assets include short-term investments, other current assets related to deferred compensation plans, fixed assets, deferred tax amounts and other miscellaneous items. Corporate operating losses represent certain operating costs not specifically allocated to individual segments and includes all costs related to Seaboard’s deferred compensation programs (which are offset by the effect of the mark-to-market investments recorded in Other Investment Income, Net).

 

Geographic Information

Seaboard had sales in South Africa totaling $563,088,000, $622,354,000 and $420,277,000 for the years ended December 31, 2012, 2011 and 2010, respectively, representing approximately 9%, 11% and 10% of total sales for each respective year. No other individual foreign country accounted for 10% or more of sales to external customers.

 

The following table provides a geographic summary of net sales based on the location of product delivery:

 

 

 

Years ended December 31,

 

(Thousands of dollars)

 

2012   

 

2011   

 

2010   

 

Caribbean, Central and South America

 

$2,566,056

 

$

2,225,829

 

$

1,702,823

 

Africa

 

1,471,574

 

1,489,409

 

1,061,221

 

United States

 

1,303,533

 

1,328,116

 

1,079,316

 

Canada/Mexico

 

351,505

 

407,593

 

245,935

 

Pacific Basin and Far East

 

334,215

 

238,116

 

198,100

 

Europe

 

87,741

 

8,367

 

19,927

 

Eastern Mediterranean

 

74,509

 

49,472

 

78,380

 

Totals

 

$6,189,133

 

$

5,746,902

 

$

4,385,702

 

 

The following table provides a geographic summary of Seaboard’s long-lived assets according to their physical location and primary port for the vessels:

 

 

 

December 31,

 

(Thousands of dollars)

 

2012   

 

2011   

 

United States

 

$

530,169

 

$

515,375

 

Dominican Republic

 

140,195

 

120,707

 

Argentina

 

108,492

 

111,726

 

All other

 

66,371

 

50,419

 

Totals

 

$

845,227

 

$

798,227

 

 

At December 31, 2012 and 2011, Seaboard had approximately $296,990,000 and $221,584,000, respectively, of foreign receivables, excluding receivables due from affiliates, which generally represent more of a collection risk than the domestic receivables.  Management believes its allowance for doubtful accounts is adequate and reduces receivables recorded to their expected net realizable value.

 

 

 

 

 

 

2012 Annual Report

59

 

 



 

SEABOARD CORPORATION

Stockholder Information

 

Board of Directors

 

 

 

 

 

Steven J. Bresky

Director and Chairman of the Board

President and Chief Executive Officer of Seaboard

 

David A. Adamsen

Director and Audit Committee Member

Former Vice President – Wholesale Sales,

C&S Wholesale Grocers

 

Douglas W. Baena

Director and Audit Committee Chair

Self-employed, engaging in facilitation of equipment leasing financings and consulting

 

Joseph E. Rodrigues

Director

Retired, former Executive Vice President and Treasurer of Seaboard

 

Edward I. Shifman, Jr.

Director and Audit Committee Member

Retired, former Managing Director and Executive

Vice President of Wachovia Capital Finance

 

 

 

Officers

 

 

 

 

 

Steven J. Bresky

President and Chief Executive Officer

 

Robert L. Steer

Executive Vice President, Chief Financial Officer

 

David M. Becker

Senior Vice President, General Counsel and Secretary

 

Barry E. Gum

Senior Vice President, Finance and Treasurer

 

James L. Gutsch

Senior Vice President, Engineering

 

Ralph L. Moss

Senior Vice President, Governmental Affairs

 

David S. Oswalt

Senior Vice President, Taxation and Business Development

 

John A. Virgo

Senior Vice President, Corporate Controller and Chief Accounting Officer

 

David H. Rankin

Vice President

 

Ty A. Tywater

Vice President, Audit Services

 

Zachery J. Holden

Assistant Secretary

 

Adriana N. Hoskins

Assistant Treasurer

 

 

 

Chief Executive Officers of Principal Seaboard Operations

 

 

 

 

 

Terry J. Holton

 

Hugo D. Rossi

Pork

 

Sugar

 

 

 

David M. Dannov

 

Armando G. Rodriguez

Commodity Trading and Milling

 

Power

 

 

 

Edward A. Gonzalez

 

 

Marine

 

 

 

 

 

Stock Transfer Agent and Registrar of Stock

 

Availability of Form 10-K Report

 

 

 

Computershare

P.O. Box 43006

Providence, RI  02940-3006

(866) 351-3330

www.computershare.com/investor

 

Auditors

 

Seaboard files its Annual Report on Form 10-K with the Securities and Exchange Commission.  Copies of the Form 10-K for fiscal 2012 are available without charge by writing Seaboard Corporation, 9000 West 67 th  Street, Merriam, Kansas 66202, Attention: Shareholder Relations or via the Internet at http://www.seaboardcorp.com/investor-sec.aspx .

 

 

 

KPMG LLP

1000 Walnut, Suite 1000

Kansas City, Missouri 64106

 

Stock Listing

 

Seaboard provides access to its most recent Form 10-K, 10-Q and 8-K reports on its Internet website, free of charge, as soon as reasonably practicable after those reports are electronically filed with the Securities and Exchange Commission.

 

Seaboard’s common stock is traded on the NYSE MKT under the symbol SEB.  Seaboard had 143 shareholders of record of its common stock as of January 25, 2013.

 

 

 

 

60

 

2012 Annual Report

 


 

EXHIBIT 21

 

SUBSIDIARIES

 

NAMES UNDER

 

STATE OR OTHER

OF THE

 

WHICH SUBSIDIARIES

 

JURISDICTION

REGISTRANT

 

DO BUSINESS

 

OF INCORPORATION

Africa Staple Food, S.A.

Same

 

Republic of Congo

African Poultry Development Limited*

Same

 

Mauritius

Agencias Generales Conaven, C.A.

Conaven

 

Venezuela

Agencia Maritima del Istmo, S.A.

Same

 

Costa Rica

Alconoa S.R.L.

Same

 

Argentina

BB Colorado Holdings LLC

Same

 

Colorado

BINA Congo Limited*

Same

 

Bermuda

Butterball, LLC*

Same

 

North Carolina

Cape Fear Railways, Inc.

Same

 

North Carolina

Cayman Freight Shipping Services, Ltd.

Same

 

Cayman Islands

Chestnut Hill Farms Honduras, S. de R.L. de C.V.

Same

 

Honduras

Compania Industrial de Productos Agropecuarios S.A.*

Same

 

Colombia

Congo Poultry Limited*

Same

 

Mauritius

ContiLatin del Peru S.A.*

Same

 

Peru

Corporacion Alto Valle, S.A.S.

ALVASA

 

Dominican Republic

Dalian Sino Fortune Trading Co., Ltd.

Same

 

China

Delta Packaging Company Ltd.*

Same

 

Nigeria

Ecuador Holdings, Ltd*

Same

 

Bermuda

Eureka Chickens Limited*

Same

 

Zambia

Fairfield Rice Incorporated*

Same

 

Guyana

Fill-More Seeds Inc.

Same and

 

Canada

 

Seaboard Specialty Grains & Foods

 

Flour Mills of Ghana Limited

Same

 

Ghana

Franquicias Azucareras S.A.*

Same

 

Argentina

Global Trading Sierra Leone Limited

Same

 

Bahamas

Gloridge Bakery (PTY) Limited*

Same

 

Republic of South Africa

Grassmere Holdings Limited

Same

 

Mauritius

Green Island Maritime, Inc.

Same

 

Florida

High Plains Bioenergy, LLC

Same

 

Oklahoma

HPB Biodiesel Inc.

Same

 

Oklahoma

High Plains Transport LLC

Same

 

Oklahoma

Hybrid Poultry (Mauritius) Limited*

Same

 

Mauritius

H & O Shipping Limited¹

Same

 

Liberia

I.A.G. (Zambia) Limited

Same

 

Zambia

Ingenio y Refineria San Martin del Tabacal S.R.L.

Tabacal

 

Argentina

InterAfrica Grains Ltd.

Same

 

Bermuda

InterAfrica Grains (Proprietary) Limited

Same

 

Republic of South Africa

Inversiones y Servicios Diversos, S.A.

INVERSA

 

Guatemala

 

24



 

EXHIBIT 21

 

(continued)

 

JacintoPort International LLC

Same

 

Texas

JP LP, LLC

Same

 

Delaware

Kenchic Limited *

Same

 

Kenya

Kenya Poultry Development Limited *

Same

 

Mauritius

Les Moulins d’Haiti S.E.M.*

Same

 

Haiti

Lesotho Flour Mills Limited*

Same

 

Lesotho

Life Flour Mill Limited.*

Same

 

Nigeria

LMM Farine S.A.

Same

 

Madagascar

Maple Creek Farms, LLC

Same

 

Kansas

Merriam Financial Services, Ltd.

Same

 

Bermuda

Merriam International Finance B.V.

Same

 

The Netherlands

Minoterie de Matadi, S.A.R.L.*

Midema

 

Democratic Republic of Congo

Minoterie du Congo, S.A.

Minoco

 

Republic of Congo

Mission Funding, L.L.C.

Same

 

Delaware

Moderna Alimentos, S.A.*

Same

 

Ecuador

Molinos Champion, S.A.*

Same

 

Ecuador

Mount Dora Farms de Honduras, S.R.L.

Same

 

Honduras

Mount Dora Farms Inc.

Same

 

Florida

National Milling Company of Guyana, Inc.

Namilco

 

Guyana

National Milling Corporation Limited

Namilco

 

Zambia

Plum Grove Pty Ltd.*

Same

 

Australia

Premier Feed Mills Company Limited*

Same

 

Nigeria

Productores de Alcoholes y Melaza S.A.*

PAMSA

 

Argentina

Productos Alimenticios Nutradeli Ecuador S.A.*

Same

 

Ecuador

PS International, LLC

Same

 

Delaware

Rafael del Castillo & Cia. S.A.*

Molinos Tres Castillos

 

Colombia

Representaciones Maritimas y Aereas, S.A.

REMARSA

 

Guatemala

Sea Cargo, S.A.

Same

 

Panama

Seaboard Bulk Services, Ltd.

Same

 

Bermuda

Seaboard de Colombia, S.A.

Same

 

Colombia

Seaboard de Mexico USA LLC²

Same

 

Delaware

Seaboard de Nicaragua, S.A.

Same

 

Nicaragua

Seaboard del Peru, S.A.

Same

 

Peru

Seaboard Farms of Athens, Inc.

Same

 

Kansas

Seaboard Farms of Elberton, Inc.

Same

 

Kansas

Seaboard Foods LLC

Same

 

Oklahoma

Seaboard Foods of Missouri, Inc.

Same

 

Missouri

Seaboard Freight & Shipping Jamaica Limited

Same

 

Jamaica

Seaboard Ghana Ltd.

Same

 

Bermuda

 

25



 

EXHIBIT 21

 

(continued)

 

Seaboard Guyana Ltd.

Same

 

Bermuda

Seaboard Honduras, S. de R.L. de C.V.

Same

 

Honduras

Seaboard Marine Bahamas, Ltd.

Same

 

Bahamas

Seaboard Marine of Haiti, S.A.

Same

 

Haiti

Seaboard Marine Ltd.³

Same

 

Liberia

Seaboard Marine of Florida, Inc.

Same

 

Florida

Seaboard Marine (Trinidad) Limited

Same

 

Trinidad

Seaboard Minoco Ltd.

Same

 

Bermuda

Seaboard MOZ Limited

Same

 

Bermuda

Seaboard Overseas Colombia Limitada

Same

 

Colombia

Seaboard Overseas (IOM) Ltd.

Same

 

Isle of Man

Seaboard Overseas (Kenya) Limited

Same

 

Kenya

Seaboard Overseas Limited

Same

 

Bermuda

Seaboard Overseas Management Company, Ltd.

Same

 

Bermuda

Seaboard Overseas Trading and Shipping (PTY) Ltd.

Same

 

South Africa

Seaboard Ship Management Inc.

Same

 

Florida

Seaboard Solutions de Honduras, S.de R.L.

Same

 

Honduras

Seaboard Solutions, Inc.

Same

 

Delaware

Seaboard Trading and Shipping Ltd.

Same

 

Kansas

Seaboard Transport Canada, Inc.

Same

 

Delaware

Seaboard Transport LLC

Same

 

Oklahoma

Seaboard West Africa Limited*

Same

 

Sierra Leone

Seaboard Zambia Ltd.

Same

 

Bermuda

SEADOM, S.A.S.

Same

 

Dominican Republic

Sea Fin Holdings Limited

Same

 

Bermuda

SeaMaritima, S.A. de C.V.

Same

 

Mexico

SeaRice Limited

Same

 

Bermuda

SeaRice Guyana, Inc.

Same

 

Guyana

Secuador Limited

Same

 

Bermuda

SEEPC (Nigeria) Ltd.*

Same

 

Nigeria

Sermarin Servicios Maritimos Intermodales, C.A.

Same

 

Venezuela

Shawnee Funding, Limited Partnership

Same

 

Delaware

Shawnee GP LLC

Same

 

Delaware

Shawnee Leasing LLC

Same

 

Oklahoma

Shawnee LP LLC

Same

 

Delaware

Shilton Limited

Same

 

Cayman Islands

Shilton Zambia, Ltd.

Same

 

Zambia

Societe Africaine de Developpement Industrielle Alimentaire*

SADIA

 

Democratic Republic of Congo

SSI Ocean Services, Inc.

Same

 

Florida

 

26



 

EXHIBIT 21

 

(continued)

 

Stewart Southern Railway Inc.*

Same

 

Canada

Tanbreed Limited*

Same

 

Mauritius

T-S Shared Operations, LLC*

Same

 

Missouri

TFL Life Foods Limited*

Same

 

Nigeria

Transcontinental Capital Corp. (Bermuda) Ltd.

TCCB

 

Bermuda

Unga Farmcare (East Africa) Limited*

Same

 

Kenya

Unga Holdings Limited*

Same

 

Kenya

Unga Limited*

Same

 

Kenya

Unga Millers (Uganda) Limited*

Same

 

Uganda

Zenith Investment Limited*

Same

 

Nigeria

 

 

¹ Owns thirteen foreign ship holding company subsidiaries

² Owns three Mexican incorporated subsidiaries

³ Owns eleven foreign ship holding company subsidiaries

*Represents a non-controlled, non-consolidated affiliate.

 

27


Exhibit 31.1

 

CERTIFICATIONS

 

I, Steven J. Bresky, certify that:

 

1. I have reviewed this annual report on Form 10-K of Seaboard Corporation;

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the  preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

a) All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

 

 

 

Date:

  February 27, 2013

 

 

 

/s/ Steven J. Bresky

 

 

Steven J. Bresky, President and Chief Executive Officer

 

28


Exhibit 31.2

 

CERTIFICATIONS

 

I, Robert L. Steer, certify that:

 

1. I have reviewed this annual report on Form 10-K of Seaboard Corporation;

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the  preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

a) All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

 

 

 

Date:

  February 27, 2013

 

 

 

 

 

/s/ Robert L. Steer

 

 

Robert L. Steer, Executive Vice President, Chief

 

Financial Officer

 

29


Exhibit 32.1

 

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION. 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the filing of the Annual Report on Form 10-K for the fiscal year ended December 31, 2012 (the Report) by Seaboard Corporation (the Company), the undersigned, as the Chief Executive Officer of the Company, hereby certifies pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

 

·                   The Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and

 

·                   The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

 

Date:

 February 27, 2013

 

 

 

 

 

/s/ Steven J. Bresky

 

 

Steven J. Bresky, President and Chief Executive Officer

 

30


Exhibit 32.2

 

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION. 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the filing of the Annual Report on Form 10-K for the fiscal year ended December 31, 2012 (the Report) by Seaboard Corporation (the Company), the undersigned, as the Chief Financial Officer of the Company, hereby certifies pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

 

·                   The Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and

 

·                   The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

 

Date:

 February 27, 2013

 

 

 

 

 

/s/ Robert L. Steer

 

 

Robert L. Steer, Executive Vice President, Chief

 

Financial Officer

 

31