-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TbyTqLnr5YKXPdLZtlEHXXesXB33AZYsvLOc14ciGtGhPxpQdobGmjBAWTpQYK1P AzfYmBNYDpEFqR46ZSotDg== 0000088121-05-000004.txt : 20050304 0000088121-05-000004.hdr.sgml : 20050304 20050304161641 ACCESSION NUMBER: 0000088121-05-000004 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 11 CONFORMED PERIOD OF REPORT: 20041231 FILED AS OF DATE: 20050304 DATE AS OF CHANGE: 20050304 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SEABOARD CORP /DE/ CENTRAL INDEX KEY: 0000088121 STANDARD INDUSTRIAL CLASSIFICATION: MEAT PACKING PLANTS [2011] IRS NUMBER: 042260388 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-03390 FILM NUMBER: 05661519 BUSINESS ADDRESS: STREET 1: 9000 W. 67TH STREET CITY: SHAWNEE MISSION STATE: KS ZIP: 66202 BUSINESS PHONE: 9136768800 MAIL ADDRESS: STREET 1: 9000 W. 67TH STREET CITY: SHAWNEE MISSION STATE: KS ZIP: 66202 FORMER COMPANY: FORMER CONFORMED NAME: SEABOARD ALLIED MILLING CORP DATE OF NAME CHANGE: 19820328 FORMER COMPANY: FORMER CONFORMED NAME: HATHAWAY BAKERIES INC DATE OF NAME CHANGE: 19710315 10-K 1 k-102004.txt SEABOARD CORPORATION 2004 10-K 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, 2004 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 className of each exchange on which registered Common Stock $1.00 Par Value American Stock Exchange SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: None (Title of class) 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 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 an accelerated filer (as defined in Rule 12b-2 of the Act). Yes [ X ] No [ ] The aggregate market value of 354,380 shares of Seaboard voting stock held by nonaffiliates was approximately $175,453,538, based on the closing price of $495.10 per share on July 2, 2004, the end of Seaboard's second fiscal quarter. As of February 18, 2005, the number of shares of common stock outstanding was 1,255,053.90. DOCUMENTS INCORPORATED BY REFERENCE Part I, item 1(b), a part of item 1(c)(1) and the financial information required by item 1(d) and Part II, items 6, 7, 7A and 8 are incorporated herein by reference to Seaboard Corporation's Annual Report to Stockholders furnished to the Commission pursuant to Rule 14a-3(b). Part II, a part of item 5, and Part III, a part of item 10 and items 11, 12 and 13 are incorporated herein by reference to Seaboard Corporation's definitive proxy statement filed pursuant to Regulation 14A for the 2005 annual meeting of stockholders. 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 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) the cost and timing of the completion of new or expanded facilities, (ii) Seaboard's ability to obtain adequate financing and liquidity, (iii) the price of feed stocks and other materials used by Seaboard, (iv) the sale price for pork products from such operations, (v) the price for other products and services, (vi) the charter hire rates and fuel prices for vessels, (vii) the demand for power, related spot market prices and collectibility of receivables in the Dominican Republic, (viii) the effect of the fluctuation in exchange rates for the Dominican Republic peso, (ix) the effect of the Venezuelan economy on the Marine segment, (x) the potential effect of Seaboard's investment in a wine business on the consolidated financial statements, (xi) the potential impact of various environmental actions pending or threatened against Seaboard, (xii) the potential impact of the American Jobs Creation Act, or (xiii) 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. 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 heading "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. 2 PART I Item 1. Business (a) General Development of Business Seaboard Corporation, a Delaware corporation, the successor corporation to a company first incorporated in 1928, and subsidiaries (Seaboard) is a diversified international agribusiness and transportation company which is primarily engaged domestically in pork production and processing, and cargo shipping. Overseas, Seaboard is primarily engaged in commodity merchandising, flour and feed milling, sugar production, and electric power generation. See Item 1(c) (1) (ii) "Status of Product or Segment" below for a discussion of developments in specific segments. Seaboard Flour LLC, a Delaware limited liability company, owns approximately 70.7 percent of the outstanding common stock of Seaboard. Mr. H. Harry Bresky, President and Chief Executive Officer of Seaboard, and other members of the Bresky family, including trusts created for their benefit, own approximately 99.5 percent of the common units of Seaboard Flour LLC. Such Bresky family members also own additional shares, representing approximately 2.7 percent of the outstanding common stock of Seaboard. (b) Financial Information about Industry Segments The information required by Item 1(b) of Form 10-K relating to Industry Segments is incorporated herein by reference to Note 13 of the Consolidated Financial Statements appearing on pages 54 through 58 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 Farms, Inc., engages in the businesses of hog production and pork processing in the United States. Through these operations, Seaboard produces and sells fresh and frozen pork to further processors, foodservice outlets, grocery stores and other retail outlets, and other distributors throughout the United States, and to Japan and other foreign markets. Further processing companies purchase Seaboard's pork products in bulk and produce products, such as lunchmeat, hams, bacon, and sausages. Fresh pork, such as loins, tenderloins and ribs are sold to distributors and grocery stores. Seaboard also sells a small amount of packaged, further processed and marinated pork products. Seaboard sells some of its products under the brand name Prairie Fresh. Seaboard's hog processing plant is located in Guymon, Oklahoma, and operates at double shift capacity. Seaboard's hog production operations consist of the breeding and raising of approximately 3.5 million hogs annually at facilities it either owns or leases or at facilities owned and operated by third parties with whom it 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. Commodity Trading and Milling Division - Seaboard's Commodity Trading and Milling Division, through its subsidiaries, Seaboard Overseas Limited located in Bermuda, Seaboard Overseas Trading and Shipping (PTY), Ltd. located in Durban, South Africa, and other locations in Peru, Ecuador and Zambia, internationally markets wheat, corn, soybean meal and other commodities in bulk to third party customers and affiliated companies. These commodities are purchased worldwide, with primary destinations to Africa, South America, the Caribbean, and the Eastern Mediterranean. The division originates, transports and markets approximately 4.8 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 seven owned bulk carriers. This division also operates milling businesses in 13 countries, which are primarily supplied by the trading locations discussed above. The grain processing businesses are operated through five consolidated and eight non- consolidated affiliates in Africa, the Caribbean and South America, with flour, feed and maize milling businesses which produce approximately 1.5 million metric tons of finished products per year. Most of the products produced by the milling operations are sold in the countries in which the products are produced. 3 Marine Division - Seaboard, through its subsidiary, Seaboard Marine Limited, and various foreign affiliated companies and third party agents, provides containerized cargo shipping service to over twenty-five 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 both northbound and southbound cargo. Through intermodal arrangements, Seaboard can transport cargo to and from numerous U.S. mainland locations by either truck or rail to and from one of its U.S. port locations, where it is staged for export via sea or received as import cargo from abroad. Seaboard's primary marine operations located in Miami include a 135,000 square foot warehouse for cargo consolidation and temporary storage, and a 70 acre terminal at the Port of Miami. At the Port of Houston, Seaboard operates a 62 acre cargo terminal facility that includes over 690,000 square feet of on-dock warehouse space for temporary storage of bagged grains, resins and other cargoes. Seaboard also makes scheduled vessel calls in New Orleans, Louisiana, Fernandina Beach, Florida and Philadelphia, Pennsylvania. Seaboard's fleet consists of seven owned and approximately 23 chartered vessels, thousands of dry, refrigerated and specialized containers and related equipment. Seaboard also provides cargo transportation service from its domestic ports of call to and from multiple foreign destinations where Seaboard does not make vessel calls through connecting carrier agreements with third party regional and global carriers. Sugar and Citrus Division - Seaboard, through its subsidiary, Ingenio y Refineria San Martin del Tabacal and other Argentine non-consolidated affiliates, is involved in the production and refining of sugar cane and the production and processing of citrus in Argentina. This division also purchases sugar and citrus in bulk from third parties within Argentina for subsequent resale. The sugar products are primarily sold in Argentina, primarily to retailers, soft drink manufacturers, and food manufacturers, with some exports to the United States, South America and Europe while the citrus products are primarily exported to the global market. Seaboard grows a large portion of the sugar cane on approximately 46,000 acres of land it owns in northern Argentina. The cane is processed at an owned mill, with a current processing capacity of approximately 180,000 metric tons of sugar per year. During 2005 Seaboard plans to increase this capacity to approximately 200,000 metric tons. The sugar mill is one of the largest in Argentina. Another 3,000 acres of land is planted with oranges. Power Division - Seaboard, through its subsidiary, Transcontinental Capital Corp. (Bermuda) Ltd., operates as an independent power producer in the Dominican Republic. This operation is exempt from U.S. regulation under the Public Utility Holding Company Act of 1938, as amended. The business operates two floating barges with a system of diesel engines capable of generating a combined rated capacity of approximately 112 megawatts of electricity. Seaboard generates electricity into the local Dominican Republic power grid, but is not involved in the transmission or distribution of the electricity. The barges are secured on the Ozama River in Santo Domingo, Dominican Republic. The electricity is sold at contracted pricing to certain large commercial users with contract terms extending from one to four years. Seaboard also sells power under short- term contracts with certain government-owned distribution companies. The remaining electricity is sold in the "spot market" at prevailing market prices, primarily to three wholly or partially government-owned electric distribution companies. Other Businesses - Seaboard purchases and processes jalapeno peppers at its owned plant in Honduras. The processed peppers are primarily sold to a customer in the United States, and are shipped by Seaboard's Marine Division and distributed from Seaboard's Port of Miami cold storage warehouse. Seaboard has a truck transportation business which arranges truck freight services for third parties as a broker and as a carrier. This business also provides logistics and transportation services to other Seaboard companies, using its owner-operator program and extensive carrier network. Seaboard also has an equity investment in a wine business that produces wine in Bulgaria for distribution, primarily throughout Europe. 4 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 54 through 58 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 In early 2004, Seaboard entered into a marketing agreement with Triumph Foods LLC (Triumph) to market all of the pork products processed at Triumph's pork processing plant to be constructed in St. Joseph, Missouri. The plant is scheduled to begin operations in late 2005. This plant will have capacity similar to Seaboard's Guymon, Oklahoma plant with the business based upon the same integrated model as Seaboard's. The Triumph plant is not expected to reach full double shift operating capacity until 2007. In early 2002, Seaboard announced plans to build a second pork processing plant in northern Texas along with related plans to expand its vertically integrated hog production facilities. However, with the planned construction of the Triumph pork processing plant discussed above, Seaboard does not intend to proceed with the expansion project at this time. From time to time bills have been introduced in the United States Senate and House of Representatives which included provisions to prohibit meat packers, such as Seaboard, from owning or controlling livestock intended for slaughter. Such bills could have prohibited Seaboard from owning or controlling hogs, and thus would have required divestiture of our operations, or otherwise a restructuring of its ownership and operation. Currently, no such bill is active nor have any been passed into law, and Seaboard does not expect any such actions to be passed in 2005. The economic environment in the Dominican Republic (DR) has been in turmoil for the last two years. During 2003, the exchange rate for the Dominican peso devalued significantly before strengthening somewhat during 2004. In addition, since the last half of 2003, the power industry in the DR has suffered from a cash flow imbalance that began when the government did not allow retail electricity rates charged by the distribution companies to increase sufficiently to cover the significant peso devaluation and increases in dollar-denominated fuel costs. The government has not fully funded this cash shortfall. As a result of the weakened economic environment in the DR, the generating companies have experienced 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. As a result, similar to other independent power producers, Seaboard has curtailed its level of power generation in 2004 based on management's belief about collectibility of receivables from spot sales. While multilateral credit agencies may eventually provide funding support to this country to improve liquidity, management can not predict if adequate funding will occur to fully resolve this situation during the next year. With the exception of those government or government-reliant customers, all commercial contract customers generally pay their accounts timely. Seaboard continues to pursue additional commercial contract customers which would reduce dependency on the government for liquidity. In addition, Seaboard is pursuing additional investment opportunities in the DR power industry. Seaboard has an equity investment in a wine business in Bulgaria. In February 2005, the Board of Directors and the majority of owners, including Seaboard, agreed to pursue the sale of the entire business or all of its assets. No assurance can be given as to whether any such sale will occur. (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. (iv) Patents, Trademarks, Licenses, Franchises and Concessions Seaboard uses the registered trademark of Seaboard. 5 The Pork Division uses registered trademarks relating to its products, including Seaboard Farms, Inc., Seaboard Farms, PrairieFresh, and A Taste Like No Other. 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 which is also a registered trademark. Seaboard believes there is significant recognition of the Seaboard Marine trademark in the industry and by many of its customers. Part of the sales within the Sugar and Citrus Division are made under the Chango brand in Argentina, where this division operates. Local sales prices benefit from sugar import duties imposed by the Argentine government, which affects the volume of sugar imported to that market. Seaboard's Power Division benefits from a tax exempt concession granted by the Dominican Republic government through 2012. Patents, trademarks, franchises, licenses and concessions are not material to any of Seaboard's other divisions. (v) Seasonal Business Profits from processed pork are generally higher in the fall months. Sugar prices in Argentina are generally lower during the typical sugarcane harvest period between June and November. 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 ten percent of its revenues from three customers in Japan through one agent. The Power division sells power in the Dominican Republic to a limited number of contract customers and on the spot market accessed primarily by three wholly or partially government-owned distribution companies. Seaboard's Produce Division sells nearly all of its processed jalapeno peppers to one customer under a contract expiring in 2006. We do not believe the loss of this customer would have a material adverse effect on Seaboard's consolidated financial position or results of operations. No other division has sales to a few customers which, if lost, would have a material adverse effect on any such segment or on Seaboard taken as a whole. (viii) Backlog Backlog is not material to Seaboard businesses. (ix) Government Contracts No material portion of Seaboard business involves government contracts. (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 issues of Successful Farming and Feedstuffs, 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 ocean liner service for containerized cargoes faces competition based on price and customer service. Seaboard believes it is among the top five ranking ocean liner services for containerized cargoes in the Caribbean Basin 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 are higher than world markets due to current Argentine government price protection policies. Seaboard's Power Division is located in the Dominican Republic. Power generated by this segment is sold on the spot market or to contract customers at prices primarily based on market conditions rather than cost-based rates. 6 (xi) Research and Development Activities Seaboard does not engage in material research and development activities. (xii) Environmental Compliance Seaboard is 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 does not anticipate making expenditures for these purposes, including expenditures with respect to the items disclosed in Item 3, Legal Proceedings, 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, 2004, Seaboard, excluding non- consolidated foreign affiliates, had 9,532 employees, of whom 5,383 were employed in the United States. Approximately 2,000 employees in Seaboard's Pork Division and approximately 10 employees in Seaboard's Produce Division are covered by collective bargaining agreements. Seaboard considers its employee relations to be satisfactory. (d) Financial Information about Geographic Areas The financial information required by Item 1(d) of Form 10-K relating to export sales is incorporated herein by reference to Note 13 of Seaboard's Consolidated Financial Statements appearing on pages 54 through 58 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 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. To minimize certain of these risks, Seaboard has insured certain investments in its affiliate flour mills in Angola, Haiti, Lesotho, Mozambique, 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 Government. At the date of this report, Seaboard is not aware of any situations referred to above 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 Judiciary Plaza, 450 Fifth Street, N.W., 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 site 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. 7 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 16,000 hogs and generally operates at capacity with additional weekend shifts depending on market conditions. The plant is utilized at near capacity throughout the year. Seaboard's hog production operations consist of the breeding and raising of approximately 3.5 million hogs annually at facilities it either owns or leases, 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 has the capability of supporting additional hog production in the future. These facilities are located in Oklahoma, Texas, Kansas and Colorado. (2) Commodity Trading and Milling - Seaboard's Commodity Trading and Milling Division owns, in whole or in part, grain-processing operations in 13 countries which have the capacity to mill over 6,000 metric tons of wheat and maize per day. In addition, Seaboard has feed mill capacity of in excess of 112 metric tons per hour to produce formula animal feed. The milling operations located in Angola, Democratic Republic of Congo, Ecuador, Guyana, Haiti, Kenya, Lesotho, Mozambique, Nigeria, Republic of Congo, Sierra Leone, Uganda and Zambia own their facilities; in Kenya, Lesotho, Mozambique, Nigeria, Republic of Congo and Sierra Leone the land the mills are located on 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 and European-subsidized wheat and flour exports. Seaboard also owns seven 9,000 metric-ton deadweight dry bulk carriers and "time charters" (the charter of a vessel, whereby the vessel owner is responsible to provide the captain and crew necessary to operate the vessel), under short-term agreements, between seven and twenty-three bulk carrier ocean vessels with deadweights ranging from 8,000 to 60,000 metric tons. (3) Marine - Seaboard's Marine Division leases a 135,000 square foot warehouse and 70 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 over 690,000 square feet for cargo storage. Seaboard owns seven ocean cargo vessels with deadweights ranging from 2,813 to 14,545 metric tons and time charters under long-term contracts ranging from one to three years, and short-term agreements, between fifteen and twenty containerized ocean cargo vessels with deadweights ranging from 2,600 to 19,456 metric-tons. In addition, this business also "bareboat charters" (the charter of a vessel, whereby the charterer is responsible for providing the captain and crew necessary to operate the vessel), under long-term lease agreements, three containerized ocean cargo vessels with deadweights ranging from 12,169 to 12,648 metric tons. Seaboard owns or leases an aggregate of approximately 35,000 dry, refrigerated and specialized containers and related equipment. (4) Sugar and Citrus - Seaboard's Argentine Sugar and Citrus Division owns approximately 46,000 acres of planted sugarcane and approximately 3,000 acres of orange trees. Depending on local harvest and market conditions, this business also purchases third party sugar and citrus for resale. In addition, this division owns a sugar mill with a current capacity to process approximately 180,000 metric tons of sugar per year with plans to increase capacity to approximately 200,000 metric tons for the 2005 harvest. This capacity is sufficient to process all of the cane harvested by this division and certain additional quantities harvested on behalf of the 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. This division also owns a juice processing plant and fresh fruit packaging plant with capacity to produce approximately 3,500 tons of concentrated juice and package approximately 300,000 boxes of fresh fruit annually. (5) Power - Seaboard's Power Division owns two floating electric power generating facilities, consisting of a system of diesel engines mounted onto barge-type vessels, with a combined rated capacity of approximately 112 megawatts, both located on the Ozama River in Santo Domingo, Dominican Republic. The barges historically generated power at near capacity throughout the year as the demand for power in the Dominican Republic exceeds reliable power supply. However, Seaboard curtailed production from time to time throughout 2004 due to non-payment by certain customers. Seaboard operates as an independent power producer and is not involved in the transmission and distribution facilities that deliver the power to the end users. 8 (6) Other - Seaboard owns a jalapeno pepper processing plant and warehouse in Honduras, and leases 40,000 square feet of refrigerated space and 70,000 square feet of dry space in the Port of Miami for warehousing produce products. Management believes that Seaboard's present facilities are adequate and suitable for its current purposes. Item 3. Legal Proceedings Sierra Club Settlement In order to settle threatened additional litigation with Sierra Club, Seaboard agreed to conduct an investigation to determine if corrective action is required at three farms purchased from PIC located in Kingfisher and Major Counties in Oklahoma according to an agreed upon process. Based on the investigation, it has been determined that two farms do not require any corrective action. The investigation is ongoing at the remaining farm, and it is unknown if any remediation will be required. The costs of conducting the monitoring and the investigation are not material. Environmental Protection Agency (EPA) and State of Oklahoma Claims Concerning Farms in Major and Kingfisher County, Oklahoma On June 29, 2001, the EPA filed a Unilateral Administrative Order (the "RCRA Order") pursuant to Section 7003 of the Resource Conservation and Recovery Act, as amended, 42 U.S.C. Sec. 6973 ("RCRA"), against Seaboard Farms, Inc. ("Seaboard Farms"), Shawnee Funding, Limited Partnership and PIC International Group, Inc. ("PIC") (collectively, "Respondents"). The RCRA Order alleges that five swine farms located in Major County and Kingfisher County, Oklahoma purchased from PIC are causing or could cause contamination of the groundwater. The RCRA Order alleges that, as a result, Respondents have contributed to an "imminent and substantial endangerment" within the meaning of RCRA from the leaking of solid waste in the lagoons or other infrastructure at the farms. The RCRA Order requires Respondents to develop and undertake a study to determine if there has been any contamination from farm infrastructure, and if contamination has occurred, to develop and undertake a remedial plan. In the event the Respondents fail to comply with the RCRA Order, the EPA may commence a civil action and can seek a civil penalty of up to $5,500 per day, per violation. On July 23, 2002, Seaboard Farms received a Notice of Violation from the State of Oklahoma, alleging that Seaboard Farms has violated various provisions of state law and the operating permits related to these same farms based on the same conditions which gave rise to the RCRA Order. In the event the State brings an enforcement action, they have threatened to do so as an administrative action in which they can seek administrative penalties of not more than $10,000 per day of noncompliance and can seek to assess violation points which could prohibit Seaboard Farms from continuing to operate one or more of these farms. On April 15, 2003, EPA sent a formal Notice of Violation letter to the Respondents, alleging that the Respondents have failed to comply with the RCRA Order because they have not undertaken an investigation of land on which Seaboard Farms spreads effluent originating from the five facilities. The Respondents believe that the Notice of Violation letter has no merit because the RCRA Order, by its terms, does not cover these areas, and EPA does not have jurisdiction to impose the RCRA Order with respect to land application activities. Seaboard Farms disputes the RCRA Order and the State of Oklahoma's contentions on legal and factual grounds, and advised the EPA that it won't comply with the RCRA Order, as written. Notwithstanding, Seaboard Farms has undertaken an extensive investigation under the RCRA Order, and has had significant discussions with the EPA and the State of Oklahoma, proposing to take a number of corrective actions with respect to the farms in order to attempt to settle the RCRA Order and the Oklahoma Notice of Violation. As a part of those discussions, the EPA and the State of Oklahoma, advised Seaboard Farms that one additional farm in Kingfisher County must be included in any settlement, although neither agency has filed any formal claims with respect to that farm. The EPA recently advised Seaboard Farms that any such settlement must include a civil fine of $1,200,000. Seaboard Farms believes that the EPA has no authority to impose a civil fine, but is attempting to negotiate a settlement. If the matter is not settled, the EPA could bring an action against Seaboard Farms to enforce the RCRA Order, although Seaboard Farms believes it has meritorious defenses to any such action, or the EPA could determine to take no further action. A tentative verbal settlement has been reached with the State of Oklahoma which would require Seaboard Farms to pay a fine of $100,000 and to undertake agreed upon supplemental environmental projects at a cost of $80,000. The settlement is subject to the final terms of the settlement being agreed to and the approval of the Oklahoma Board of Agriculture. Irrespective of the settlement, Seaboard intends to proceed with its proposed corrective actions with respect to the farms. 9 The farms at issue were previously owned by PIC and PIC is indemnifying Seaboard Farms with respect to the RCRA Order (reserving its right to contest the obligation to do so), pursuant to an indemnification agreement which has a $5 million limit. If the tentative settlement with the State of Oklahoma is agreed to, the estimated cumulative costs which will be expended pursuant to the settlement will total approximately $6.2 million, not including the additional legal costs required to negotiate the settlement and not including any fines which are required by EPA or the fine tentatively agreed to with the State of Oklahoma. If the measures taken pursuant to the settlement are not effective or if certain additional issues arise at the farms after the settlement, other measures with additional costs may be required. PIC has advised Seaboard Farms that it is not responsible for the costs in excess of $5 million. Seaboard Farms disputes PIC's determination of the costs to be included in the calculation. Seaboard Farms believes that the costs to be considered are less than $5 million, such that PIC is responsible for all such costs and penalties, except for approximately $180,000 of estimated costs that would be incurred over 5 years subsequent to the settlement for certain testing and sampling. Seaboard Farms has agreed to conduct such testing and sampling as a part of the sampling it conducts in the normal course of operations and believes that the incremental costs incurred to conduct such testing and sampling will be less than $180,000. Seaboard Farms also believes that a more general indemnity agreement would require indemnification of liability in excess of $5 million (excluding the estimated $180,000 cost for testing and sampling), although PIC disputes this. Potential Additional EPA Claims EPA has been conducting a broad-reaching investigation of Seaboard Farms, seeking information as to compliance with the Clean Water Act (CWA), Comprehensive Environmental Response, Compensation & Liability Act (CERCLA) and the Clean Air Act. Through Information Requests and farm inspections, EPA obtained information that may be related to whether Seaboard Farms' operations are discharging pollutants to waters of the United States in violation of the CWA, whether National Pollutant Discharge Elimination System storm water construction permits were obtained, where required, whether there has been unlawful filling of or discharge to "wetlands" within the jurisdiction of the CWA, whether Seaboard Farms has properly reported emissions of hazardous substances into the air under CERCLA, and whether some of its farms may be emitting air pollutants at levels subject to Clean Air Act permitting requirements. As a result of the investigation, EPA requested that Seaboard Farms engage in settlement discussions to avoid further EPA investigative efforts and potential formal claims being filed. EPA has presented settlement demands, and Seaboard Farms has responded. Management believes it has meritorious legal and factual defenses and objections to EPA's demands, but will continue to engage in settlement discussions. Such settlement discussions could lead to an enforceable settlement agreement. On April 2, 2002, the United States Environmental Protection Agency ("EPA") sent to Seaboard Farms a letter pursuant to the Clean Air Act ("CAA") demanding Seaboard Farms monitor emissions at certain hog confinement facilities for purposes of determining whether these operations are in compliance with the CAA. The EPA also requested that Seaboard Farms agree that these facilities are comparable to all other facilities operated, and that the monitoring results can be reasonably extrapolated to estimate the emissions for all other farms operated by Seaboard Farms. If any of the specified farms are not comparable, the letter demanded that Seaboard Farms conduct monitoring at those farms. The letter also required that Seaboard Farms submit a plan and protocol for testing for emissions of particulate matter, volatile organic compounds and hydrogen sulfide. Although management believes that EPA's demand is beyond the Agency's authority pursuant to the CAA and that Seaboard Farms cannot be required to undertake the air monitoring, Seaboard Farms is engaging in discussions with EPA to attempt to reach an agreement that will be satisfactory to EPA. Seaboard Farms has proposed to conduct certain studies to resolve the CAA allegations, which studies are estimated to cost approximately $30,000. No final settlement has been reached with EPA. If no agreement is reached with EPA, EPA could bring a suit to enforce the provisions of the letter, and if a court were to determine that EPA is within its authority, the court could impose a civil penalty of up to $27,500 per day of non-compliance, and could order injunctive relief requiring that Seaboard Farms conduct the monitoring. Seaboard Farms believes the emissions from its hog operations do not require CAA permits. On February 20, 2003, Seaboard Farms received an additional Information Request from EPA seeking information as to compliance with the CWA by Seaboard Farms with respect to virtually all of its confined animal feeding operations. Management has complied with the Information Request. At present, no relief has been sought by the EPA. 10 On March 24, 2003, Seaboard Farms received an additional Information Request seeking information as to a hog farm and a feed mill, each located in Colorado. The Company has complied with the Information Request. At present, no relief has been sought by the EPA. The costs incurred to comply with the various Information Requests from EPA are not material. Other On January 26, 2004, the U.S. Department of Justice sent Seaboard Marine, Ltd. a letter stating that it was investigating possible violations of 49 U.S.C. sections 5104-5124 and 49 C.F.R. sections 171-173 relating to the transportation, storage and discharge of hazardous materials. On September 21, 2004, Seaboard Marine pled guilty to the violations. In conjunction with this guilty plea, Seaboard Marine entered into a Plea Agreement agreeing to pay a fine, restitution and other costs totaling approximately $300,000, to implement a compliance plan, and to conduct training of employees. At the sentencing, the US attorney will recommend that the judge impose the sentence set forth in the Plea Agreement, although the judge has discretion to impose a fine of up to $500,000. Item 4. Submission of Matters to a Vote of Security Holders No matter was submitted to a vote of security holders during the last quarter of the fiscal year covered by this report. Executive Officers of Registrant The following table lists the executive officers and certain significant employees of Seaboard. Generally, each executive officer is elected at the annual meeting of the Board of Directors following the Annual Meeting of Stockholders and holds his office until the next such annual meeting or until his successor is 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 H. Harry Bresky (79) Chairman of the Board, President and Chief Executive Officer of Seaboard; Manager of Seaboard Flour LLC Steven J. Bresky (51) Senior Vice President, International Operations Robert L. Steer (45) Senior Vice President, Treasurer and Chief Financial Officer David M. Becker (43) Vice President, General Counsel and Secretary Barry E. Gum (38) Vice President, Finance James L. Gutsch (51) Vice President, Engineering Ralph L. Moss (59) Vice President, Governmental Affairs David S. Oswalt (37) Vice President, Taxation and Business Development John A. Virgo (44) Vice President, Corporate Controller and Chief Accounting Officer Rodney K. Brenneman (40) President, Seaboard Farms, Inc. Edward A. Gonzalez (39) President, Seaboard Marine Ltd. Mr. H. Harry Bresky has served as President and Chief Executive Officer of Seaboard since February 2001 and previously as President of Seaboard from 1967 to 2001. He has served as Manager of Seaboard Flour, LLC (previously Seaboard Flour Corporation) since 2002. Previously he served as President of Seaboard Flour Corporation from 1987 through 2002, and as Treasurer of Seaboard Flour Corporation from 1973 through 2002. Mr. Bresky is the father of Steven J. Bresky. Mr. Steven J. Bresky has served as Senior Vice President, International Operations of Seaboard since February 2001 and previously as Vice President of Seaboard from 1989 to 2001. Mr. Steer has served as Senior Vice President, Treasurer and Chief Financial Officer of Seaboard since February 2001 and previously as Vice President, Chief Financial Officer of Seaboard from 1998 to 2001. 11 Mr. Becker has served as Vice President, General Counsel and Secretary of Seaboard since December 2003, and previously as Vice President, General Counsel and Assistant Secretary from 2001 to 2003. He served as General Counsel and Assistant Secretary of Seaboard from 1998 to 2001. Mr. Gum has served as Vice President, Finance of Seaboard since December 2003, previously as Director of Finance from 2000 to 2003 and prior to that as Finance Manager from 1999 to 2000. Mr. Gutsch has served as Vice President, Engineering of Seaboard since December 1998. Mr. Moss has served as Vice President, Governmental Affairs of Seaboard since December 2003 and previously as Director, Government Affairs from 1993 to 2003. Mr. Oswalt has served as Vice President, Taxation and Business Development of Seaboard since December 2003 and previously as Director of Tax from 1995 to 2003. Mr. Virgo has served as Vice President, Corporate Controller and Chief Accounting Officer of Seaboard since December 2003 and previously as Corporate Controller from 1996 to 2003. Mr. Brenneman has served as President of Seaboard Farms, Inc. since June 2001 and previously served as Senior Vice President and Chief Financial Officer of Seaboard Farms, Inc. from 1997 to 2001. Mr. Gonzalez has served as President of Seaboard Marine, Ltd. since January 2005 and previously served as Vice President of Terminal Operations of Seaboard Marine Ltd. from 2000 to 2005 and Director of Terminal Operations from 1998 to 2000. PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters Seaboard's Board of Directors intends that Seaboard will continue to pay quarterly dividends, with the actual amount of any dividends being dependant upon such factors as Seaboard's financial condition, results of operations and current and anticipated cash needs, including capital requirements. As discussed in Note 8 of the consolidated financial statements appearing on pages 43 through 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, Seaboard's ability to declare and pay dividends is subject to limitations imposed by the note 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. Seaboard did not sell any equity securities during the fiscal year covered by this report that were not registered under the Securities Act of 1933. There were no 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. 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" and (b) the dividends per common share information and market price range per common share information under "Quarterly Financial Data" appearing on pages 59 and 8, 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 7 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. 12 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 9 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 of Seaboard's Consolidated Financial Statements appearing on pages 34 and 35, and (b) to the material under the caption "Derivative Information" within "Management's Discussion and Analysis of Financial Condition and Results of Operations" appearing on pages 22 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 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 Balance Sheets," "Consolidated Statements of Earnings," "Consolidated Statements of Changes in Equity," "Consolidated Statements of Cash Flows" and "Notes to Consolidated Financial Statements" appearing on page 8 and pages 26 through 58 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 Not applicable. Item 9A. Controls and Procedures Evaluation of Disclosure Controls and Procedures - As of December 31, 2004, 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 15(d) - 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. Because of 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, regardless of how remote. Management's Report on Internal Control Over Financial Reporting - - Information required by Item 9A pursuant to rules 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. Change in Internal Controls - There has been no change in Seaboard's internal control over financial reporting that occurred during the fiscal quarter ended December 31, 2004 that has materially affected, or is reasonably likely to materially affect, Seaboard's internal control over financial reporting. Item 9B. Other Information As discussed in Note 13 to the Consolidated Financial Statements appearing on page 55 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, during the fourth quarter of 2004 Seaboard recorded an impairment in value of its equity investment in a wine business. On March 4, 2005 Seaboard adopted the Seaboard Corporation Retiree Medical Benefit Plan, included as Exhibit 10.10. On March 4, 2005, Seaboard filed the Seaboard Corporation Executive Officers' Bonus Policy, included as Exhibit 10.11. On March 4, 2005, Seaboard amended it Code of Ethics Policy as discussed in Item 10 below. 13 PART III Item 10. Directors and Executive Officers of the Registrant 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 adopted 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, which Code was amended and restated effective March 4, 2005. A copy of this Code, as amended, is attached as Exhibit 14 to this Report. The amendment clarified that subsidiaries of Seaboard must adopt a similar policy and made certain other clarifications. Seaboard has posted the Code on its internet website, www.seaboardcorp.com, 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 page 5 of the 2005 Proxy statement, (b) the disclosure relating to Seaboard's audit committee and "audit committee financial expert" and its director nomination procedures under "Meetings of the Board of Directors and Committees -- Committees of the Board" appearing on pages 6 and 7 of Seaboard's definitive proxy statement filed pursuant to Regulation 14A for the 2005 annual meeting of Stockholders ("2005 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 22 of the 2005 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 "Meetings of the Board of Directors and Committees -- Committees of the Board" appearing on pages 6 and 7 of the 2005 Proxy statement, and (b) the disclosure relating to compensation of executive officers under "Executive Compensation and Other Information," "Retirement Plans" and "Compensation Committee Interlocks and Insider Participation" appearing on pages 8 through 13 and pages 17 and 18 of the 2005 Proxy Statement. Item 12. Security Ownership of Certain Beneficial Owners and Management 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 and 4 of the 2005 Proxy Statement. Item 13. Certain Relationships and Related Transactions The information required by Item 13 of Form 10-K is incorporated herein by reference to "Compensation Committee Interlocks and Insider Participation" appearing on pages 17 and 18 of the 2005 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 "Item 2 Selection of Independent Auditors" appearing on pages 18 through 20 of the 2005 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. 14 3.Exhibits. 3.1 Seaboard's Certificate of Incorporation, as amended. Incorporated herein by reference to Exhibit 3.1 of Seaboard's Annual Report on Form 10-K for the fiscal year ended December 31, 1992. 3.2 Seaboard's By-laws, as amended. Incorporated herein by reference to Exhibit 3.2 of Seaboard's Annual Report on Form 10-K for the fiscal year ended December 31, 2001. 4.1 Note Purchase Agreement dated December 1, 1993 between Seaboard and various purchasers as listed in the exhibit. Incorporated herein by reference to Exhibit 4.1 of Seaboard's Annual Report on Form 10-K for the fiscal year ended December 31, 1993. The Annexes and Exhibits to the Note Purchase Agreement have been omitted from the filing, but will be provided supplementally upon request of the Commission. 4.2 Seaboard Corporation 6.49% Senior Note Due December 1, 2005 issued pursuant to the Note Purchase Agreement described above. Incorporated herein by reference to Exhibit 4.2 of Seaboard's Annual Report on Form 10-K for the fiscal year ended December 31, 1993. 4.3 Note Purchase Agreement dated June 1, 1995 between Seaboard and various purchasers as listed in the exhibit. Incorporated herein by reference to Exhibit 4.3 of Seaboard's Form 10-Q for the quarter ended September 9, 1995. The Annexes and Exhibits to the Note Purchase Agreement have been omitted from the filing, but will be provided supplementally upon request of the Commission. 4.4 Seaboard Corporation 7.88% Senior Note Due June 1, 2007 issued pursuant to the Note Purchase Agreement described above. Incorporated herein by reference to Exhibit 4.4 of Seaboard's Form 10-Q for the quarter ended September 9, 1995. 4.5 Seaboard Corporation Note Agreement dated as of December 1, 1993 ($100,000,000 Senior Notes due December 1, 2005). First Amendment to Note Agreement. Incorporated herein by reference to Exhibit 4.7 of Seaboard's Form 10-Q for the quarter ended March 23, 1996. 4.6 Seaboard Corporation Note Agreement dated as of June 1, 1995 ($125,000,000 Senior Notes due June 1, 2007). First Amendment to Note Agreement. Incorporated herein by reference to Exhibit 4.8 of Seaboard's Form 10-Q for the quarter ended March 23, 1996. 4.7 Second Amendment to the Note Purchase Agreements dated as of December 1, 1993 ($100,000,000 Senior Notes due December 1, 2005). Incorporated herein by reference to Exhibit 4.1 of Seaboard's Form 10-Q for the quarter ended September 28, 2002. 4.8 Second Amendment to the Note Purchase Agreements dated as of June 1, 1995 ($125,000,000 Senior Notes due June 1, 2007). Incorporated herein by reference to Exhibit 4.2 of Seaboard's Form 10-Q for the quarter ended September 28, 2002. 4.9 Seaboard Corporation Note Purchase Agreement dated as of September 30, 2002 between Seaboard and various purchasers as listed in the exhibit. Incorporated herein by reference to Exhibit 4.3 of Seaboard's Form 10-Q for the quarter ended September 28, 2002. The Annexes and Exhibits to the Note Purchase Agreement have been omitted from the filing, but will be provided supplementally upon request of the Commission. 4.10 Seaboard Corporation $32,500,000 5.8% Senior Note, Series A, due September 30, 2009 issued pursuant to the Note Purchase Agreement described above. Incorporated herein by reference to Exhibit 4.4 of Seaboard's Form 10-Q for the quarter ended September 28, 2002. 4.11 Seaboard Corporation $38,000,000 6.21% Senior Note, Series B, due September 30, 2009 issued pursuant to the Note Purchase Agreement described above. Incorporated herein by reference to Exhibit 4.5 of Seaboard's Form 10-Q for the quarter ended September 28, 2002. 4.12 Seaboard Corporation $7,500,000 6.21% Senior Note, Series C, due September 30, 2012 issued pursuant to the Note Purchase Agreement described above. Incorporated herein by reference to Exhibit 4.6 of Seaboard's Form 10-Q for the quarter ended September 28, 2002. 15 4.13 Seaboard Corporation $31,000,000 6.92% Senior Note, Series D, due September 30, 2012 issued pursuant to the Note Purchase Agreement described above. Incorporated herein by reference to Exhibit 4.7 of Seaboard's Form 10-Q for the quarter ended September 28, 2002. 4.14 Seaboard Corporation Credit Agreement dated as of December 3, 2004 ($200,000,000 revolving credit facility expiring on December 2, 2009). The schedules and exhibits to the Credit Agreement have been omitted from this filing, but will be provided supplementally upon request of the Commission. 10.1* Seaboard Corporation Executive Retirement Plan dated November 5, 2004, amending and restating the Seaboard Corporation Executive Retirement Plan dated January 1, 1997 as amended and restated February 28, 2001. The addendums to the Executive Retirement Plan have been omitted from the filing, but will be provided supplementally upon request of the Commission. Incorporated herein by reference to Exhibit 10.1 of Seaboard's Form 10-Q for the quarter ended October 2, 2004. 10.2* Seaboard Corporation Supplemental Executive Benefit Plan as Amended and Restated. Incorporated herein by reference to Exhibit 10.2 of Seaboard's Form 10-K for fiscal year ended December 31, 2000. 10.3* Seaboard Corporation Supplemental Executive Retirement Plan for H. Harry Bresky dated March 21, 1995. Incorporated herein by reference to Exhibit 10.3 of Seaboard's Annual Report on Form 10-K for the fiscal year ended December 31, 1995. 10.4* Seaboard Corporation Executive Deferred Compensation Plan dated January 1, 1999. Incorporated herein by reference to Exhibit 10.1 of Seaboard's Form 10-Q for the quarter ended March 31, 1999. 10.5* 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. 10.6* 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. 10.7 Reorganization Agreement by and between Seaboard Corporation and Seaboard Flour Corporation as of October 18, 2002. Incorporated herein by reference to Exhibit 10.1 of the Form 8-K dated October 18, 2002. 10.8 Purchase and Sale Agreement dated October 18, 2002 by and between Flour Holdings LLC and Seaboard Flour Corporation with respect to which the "Earnout Payments" thereunder have been assigned to Seaboard Corporation. Incorporated herein by reference to Exhibit 10.2 of Seaboard's Form 10-Q for the quarter ended September 28, 2002. 10.9 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. 10.10* Seaboard Corporation Retiree Medical Benefit Plan dated March 4, 2005. The exhibit to the Retiree Medical Benefit Plan has been omitted from this filing, but will be provided supplementally upon request of the Commission. 10.11* Seaboard Corporation Executive Officers' Bonus Policy. 13 Sections of Annual Report to security holders specifically incorporated herein by reference herein. 14 Code of Ethics Policy as amended as of March 4, 2005. 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. 16 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. * Management contract or compensatory plan or arrangement. (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. 17 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Seaboard has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. SEABOARD CORPORATION By /s/H. H. Bresky By /s/Robert L. Steer H. H. Bresky, President and Chief Robert L. Steer, Senior Vice Executive Officer President, Treasurer and (principal executive officer) Chief Financial Officer (principal financial officer) Date: March 4, 2005 Date: March 4, 2005 By /s/John A. Virgo John A. Virgo, Vice President, Corporate Controller and Chief Accounting Officer (principal accounting officer) Date: March 4, 2005 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. By /s/H. H. Bresky By /s/Kevin M. Kennedy H. H. Bresky, Director and Chairman Kevin M. Kennedy, Director of the Board Date: March 4, 2005 Date: March 4, 2005 By /s/David A. Adamsen By /s/Joseph E. Rodrigues David A. Adamsen, Director Joseph E. Rodrigues, Director Date: March 4, 2005 Date: March 4, 2005 By /s/Douglas W. Baena Douglas W. Baena, Director Date: March 4, 2005 18 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 Balance Sheets as of December 31, 2004 and December 31, 2003 28 Consolidated Statements of Earnings for the years ended December 31, 2004, December 31, 2003 and December 31, 2002 29 Consolidated Statements of Changes in Equity for the years ended December 31, 2004, December 31, 2003 and December 31, 2002 30 Consolidated Statements of Cash Flows for the years ended December 31, 2004, December 31, 2003 and December 31, 2002 31 Notes to Consolidated Financial Statements 32 The foregoing are incorporated herein by reference. The individual financial statements of the nonconsolidated foreign affiliates, which would be required if each such foreign affiliate were a Registrant, are omitted because (a) Seaboard's and its other subsidiaries' investments in and advances to such foreign 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 foreign 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 foreign affiliates in Note 5 of "Notes to the Consolidated Financial Statements." II - Valuation and Qualifying Accounts for the years ended December 31, 2004, 2003 and 2002 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 March 4, 2005, we reported on the consolidated balance sheets of Seaboard Corporation and subsidiaries (the Company) as of December 31, 2004 and 2003, and the related consolidated statements of earnings, changes in equity and cash flows for each of the years in the three-year period ended December 31, 2004, as contained in the December 31, 2004 annual report to stockholders. These consolidated financial statements and our report thereon are incorporated by reference in the annual report on Form 10-K for the year ended December 31, 2004. 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. Our report dated March 4, 2005 contains an explanatory paragraph that states that the Company adopted Statement of Financial Standards No. 143, "Accounting for Asset Retirement Obligations," and FASB Interpretation No. 46, "Consolidation of Variable Interest Entities," and changed its method of accounting for costs expected to be incurred during regularly scheduled drydocking of vessels from the accrual method to the direct- expense method in 2003. KPMG LLP Kansas City, Missouri March 4, 2005 F-2
Schedule II SEABOARD CORPORATION AND SUBSIDIARIES Valuation and Qualifying Accounts (In Thousands) Balance at Provision Net deductions Accounting Balance at beginning of year (1) (2) changes (3) end of year Year ended December 31, 2004: Allowance for doubtful accounts $23,359 2,463 (11,298) - $14,524 Year ended December 31, 2003: Allowance for doubtful accounts $16,178 8,473 (1,292) - $23,359 Drydock accrual $ 6,393 - - (6,393) $ - Year ended December 31, 2002: Allowance for doubtful accounts $20,571 62 (4,455) - $16,178 Drydock accrual $ 6,052 3,709 (3,368) - $ 6,393 (1) The allowance for doubtful accounts provision is charged to selling, general and administrative expenses. Through December 31, 2002, the provision for drydock was charged to cost of sales. (2) Includes write-offs net of recoveries and currency translation adjustments. (3) Effective January 1, 2003, Seaboard changed its method of accounting for drydock maintenance costs from the accrue-in- advance method to the direct-expense method. As a result, Seaboard reversed its allowance for drydock accrual as a cumulative effect of a change in accounting principle.
F-3 EX-4.14 2 ex4_14.txt SEABOARD CORPORATION CREDIT AGREEMENT DATED DECEMBER 3, 2004 Exhibit 4.14 Published Deal CUSIP Number: 81154LAA5 CREDIT AGREEMENT Dated as of December 3, 2004 among SEABOARD CORPORATION, as Borrower, BANK OF AMERICA, N.A., as Administrative Agent, Swing Line Lender and a L/C Issuer, SCOTIA CAPITAL, INC., as Syndication Agent, and HARRIS TRUST AND SAVINGS BANK and SUNTRUST BANK, as Co-Documentation Agents and The Other Lenders Party Hereto BANC OF AMERICA SECURITIES LLC and SCOTIA CAPITAL INC., as Joint Lead Arrangers and Joint Book Managers TABLE OF CONTENTS Section Page ARTICLE I. DEFINITIONS AND ACCOUNTING TERMS 1.01 Defined Terms 1 1.02 Other Interpretive Provisions 21 1.03 Accounting Matters 22 1.04 Times of Day 23 1.05 Letter of Credit Amounts 23 ARTICLE II. THE COMMITMENTS AND CREDIT EXTENSIONS 2.01 Committed Loans 23 2.02 Borrowings, Conversions and Continuations of Committed Loans 23 2.03 Letters of Credit. 25 2.04 Swing Line Loans 34 2.05 Prepayments 37 2.06 Termination or Reduction of Commitments 37 2.07 Repayment of Loans 38 2.08 Interest 38 2.09 Fees 39 2.10 Computation of Interest and Fees 39 2.11 Evidence of Debt 39 2.12 Payments Generally; Administrative Agent's Clawback 40 2.13 Sharing of Payments by Lenders 42 2.14 Increase in Commitments 42 ARTICLE III. TAXES, YIELD PROTECTION AND ILLEGALITY 3.01 Taxes 43 3.02 Illegality 46 3.03 Inability to Determine Rates 46 3.04 Increased Costs; Reserves on Eurodollar Rate Loans 47 3.05 Compensation for Losses 48 3.06 Mitigation Obligations; Replacement of Lenders 49 3.07 Survival 49 ARTICLE IV. CONDITIONS PRECEDENT TO CREDIT EXTENSIONS 4.01 Conditions of Initial Credit Extension 50 4.02 Conditions to all Credit Extensions 51 i ARTICLE V. REPRESENTATIONS AND WARRANTIES 5.01 Existence, Qualification and Power; Compliance with Laws 52 5.02 Authorization; No Contravention 52 5.03 Governmental Authorization; Other Consents 52 5.04 Binding Effect 53 5.05 Financial Statements; No Material Adverse Effect 53 5.06 Litigation 53 5.07 No Default 53 5.08 Ownership of Property; Liens 54 5.09 Environmental Compliance 54 5.10 Insurance 54 5.11 Taxes 54 5.12 ERISA Compliance 54 5.13 Subsidiaries; Equity Interests 55 5.14 Margin Regulations; Investment Company Act; Public Utility Holding Company Act 55 5.15 Disclosure 55 5.16 Compliance with Laws 56 5.17 Intellectual Property; Licenses, Etc 56 ARTICLE VI. AFFIRMATIVE COVENANTS 6.01 Financial Statements 56 6.02 Certificates; Other Information 57 6.03 Notices 59 6.04 Payment of Obligations 59 6.05 Preservation of Existence, Etc 59 6.06 Maintenance of Properties 60 6.07 Maintenance of Insurance 60 6.08 Compliance with Laws 60 6.09 Books and Records 60 6.10 Inspection Rights 60 6.11 Use of Proceeds 61 ARTICLE VII. NEGATIVE COVENANTS 7.01 Negative Pledge 61 7.02 Investments 63 7.03 Subsidiary Indebtedness 64 7.04 Fundamental Changes 65 7.05 Dispositions 65 7.06 Restricted Payments 66 7.07 Change in Nature of Business 67 ii 7.08 Transactions with Affiliates 67 7.09 Burdensome Agreements 67 7.10 Use of Proceeds 67 7.11 Acquisitions 68 7.12 Financial Covenants 68 7.13 Amendments to Senior Note Agreements and Seaboard Overseas Credit Facility 68 ARTICLE VIII. EVENTS OF DEFAULT AND REMEDIES 8.01 Events of Default 69 8.02 Remedies Upon Event of Default 71 8.03 Application of Funds 71 ARTICLE IX. ADMINISTRATIVE AGENT 9.01 Appointment and Authority 72 9.02 Rights as a Lender 72 9.03 Exculpatory Provisions 72 9.04 Reliance by Administrative Agent 73 9.05 Delegation of Duties 74 9.06 Resignation of Administrative Agent; L/C Issuer 74 9.07 Non-Reliance on Administrative Agent and Other Lenders 75 9.08 No Other Duties, Etc 75 9.09 Administrative Agent May File Proofs of Claim 75 ARTICLE X. MISCELLANEOUS 10.01 Amendments, Etc 76 10.02 Notices; Effectiveness; Electronic Communication 77 10.03 No Waiver; Cumulative Remedies 79 10.04 Expenses; Indemnity; Damage Waiver 79 10.05 Payments Set Aside 81 10.06 Successors and Assigns 81 10.07 Treatment of Certain Information; Confidentiality 85 10.08 Right of Setoff 86 10.09 Interest Rate Limitation 86 10.10 Counterparts; Integration; Effectiveness 86 10.11 Survival of Representations and Warranties 86 10.12 Severability 87 10.13 Replacement of Lenders 87 10.14 Governing Law; Jurisdiction; Etc 88 10.15 Waiver of Jury Trial 88 10.16 USA PATRIOT Act Notice 89 iii SCHEDULES 1.01(a) Existing Letters of Credit 2.01 Commitments and Applicable Percentages 5.05 Supplement to Interim Financial Statements 5.13 Subsidiaries and Other Equity Investments 7.01 Existing Liens 7.03 Existing Indebtedness 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-1 Opinion of Shook, Hardy & Bacon, L.L.P. F-2 Opinion of Helms Mulliss & Wicker, PLLC G Letter of Credit Information Report iv CREDIT AGREEMENT This CREDIT AGREEMENT is entered into as of December 3, 2004, among SEABOARD CORPORATION, a Delaware corporation (the "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 a L/C Issuer. The Borrower has requested that the Lenders provide a revolving credit facility, and the Lenders are willing to do so on 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. DEFINITIONS AND ACCOUNTING TERMS 1.01 Defined Terms. As used in this Agreement, the following terms shall have the meanings set forth below: "1993 Senior Note Agreements" means the Note Purchase Agreements dated as of December 1, 1993, among the Borrower and the purchasers of the Borrower's 1993 Senior Notes, as amended by the First Amendment to Note Agreements dated as of March 31, 1994, and the Second Amendment to Note Agreements dated as of September 30, 2002. "1993 Senior Notes" means, collectively, the Borrower's 6.49% Senior Notes due December 1, 2005, issued in an initial aggregate principal amount of $100,000,000. "1995 Senior Note Agreements" means the Note Purchase Agreements dated as of June 1, 1995, among the Borrower and the purchasers of the Borrower's 1995 Senior Notes, as amended by the First Amendment to Note Agreements dated as of December 15, 1995, and the Second Amendment to Note Agreements dated as of September 30, 2002. "1995 Senior Notes" means, collectively, the Borrower's 7.88% Senior Notes due June 1, 2007, issued in an initial aggregate principal amount of $125,000,000. "2002 Senior Note Agreements" means the Note Purchase Agreements dated as of September 30, 2002, among the Borrower and the purchasers of the Borrower's 2002 Senior Notes. "2002 Senior Notes" means, collectively, the Borrower's (a) 5.80% Senior Notes, Series A, due September 30, 2009, issued in an initial aggregate principal amount of $32,500,000, (b) 6.21% Senior Notes, Series B, due September 30, 2009, issued in an initial aggregate principal amount of $38,000,000, (c) 6.21% Senior Notes, Series C, due September 30, 2012, issued in an initial aggregate principal amount of $7,500,000, and (d) 6.92% Senior Notes, Series D, due September 30, 2012, issued in an initial aggregate principal amount of $31,000,000. "Acquisition" means any transaction or series of related transactions for the purpose of or resulting, directly or indirectly, in (a) the acquisition by the Borrower 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 Borrower 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 the Administrative Agent's address and, as appropriate, account as set forth on Schedule 10.02 or such other address or account as the Administrative Agent may from time to time notify to the Borrower and the Lenders. "Administrative Questionnaire" means an Administrative Questionnaire in a form supplied by the Administrative Agent. "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 Credit Agreement. "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 following 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): 2 Applicable Rate Eurodollar Rate + Standby Commercial Pricing Consolidated Facility Letter of Letters of Base Level Leverage Ratio Fee Credit Credit Rate + 1 Less than or 0.2000% 0.5500% 0.1375% 0.0000% equal to 1.50 to 1.00 2 Greater than 0.2250% 0.6500% 0.1625% 0.000% 1.50 to 1.00 but less than or equal to 2.00 to 1.00 3 Greater than 0.2500% 0.7500% 0.1875% 0.0000% 2.00 to 1.00 but less than or equal to 2.50 to 1.00 4 Greater than 0.3000% 0.9500% 0.2375% 0.0000% 2.50 to 1.00 but less than or equal to 3.00 to 1.00 5 Greater than 0.3500% 1.1500% 0.2875% 0.0000% 3.00 to 1.00 but less than or equal to 3.50 to 1.00 6 Greater than 0.4000% 1.3500% 0.3375% 0.2500% 3.50 to 1.00 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 6 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 Section 6.02(a) for the fiscal year ended December 31, 2004 shall be determined based upon the Consolidated Leverage Ratio set forth in the Compliance Certificate delivered on the Closing Date pursuant to Section 4.01(a)(vii). "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 BAS and Scotia Capital, Inc., in their capacities as joint lead arrangers and joint book managers. "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. 3 "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 Borrower and its Subsidiaries and Consolidated Entities for the fiscal year ended December 31, 2003, and the related consolidated statements of earnings, shareholders' equity and cash flows for such fiscal year of the Borrower 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 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. "BAS" means Banc of America Securities LLC 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% and (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." 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. "Borrower" has the meaning specified in the introductory paragraph hereto. "Borrowing" means a Committed Borrowing or a Swing Line Borrowing, as the context may require. 4 "Bresky Group" means (a) H. Harry Bresky, Otto Bresky, Jr. (brother of H. Harry Bresky) and the estate of Marjorie Shifman (deceased sister of 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 is located and, if such day relates to any Eurodollar Rate Loan, means any such day on which dealings in Dollar deposits are conducted by and between banks in the London interbank eurodollar market. "Cash Collateralize" has the meaning specified in Section 2.03(g). "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 or application thereof by any Governmental Authority or (c) the making or issuance of any request, guideline or directive (whether or not having the force of law) by any Governmental Authority. "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 (x) 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, (y) Seaboard Flour 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 Borrower entitled to vote for members of the board of directors or equivalent governing body of the Borrower 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 Borrower, or control over the equity securities of the Borrower entitled to vote for members of the board of directors or equivalent governing body of the Borrower 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. 5 "Code" means the Internal Revenue Code of 1986. "Commitment" means, as to each Lender, its obligation to (a) make Committed Loans to the Borrower 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 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 and, in the case of Eurodollar 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 Eurodollar Rate Loans, pursuant to Section 2.02(a), which, if in writing, shall be substantially in the form of Exhibit A. "Compliance Certificate" means a certificate substantially in the form of Exhibit D. "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 Borrower and its 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 Borrower and its 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 for such period, (ii) the provision for Federal, state, local and foreign income taxes payable by the Borrower and its Subsidiaries for such period, (iii) depreciation and amortization expense and (iv) other expenses, losses or charges of the Borrower and its 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 Borrower and its Subsidiaries and Consolidated Entities for such period and (ii) all non-cash items and all other extraordinary, unusual or nonrecurring gains of the Borrower and its 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. 6 "Consolidated Funded Indebtedness" means, as of any date of determination, for the Borrower and its 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 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 Borrower, any Subsidiary or any Consolidated Entity, 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 Borrower or a Subsidiary or any Consolidated Entity is a general partner or joint venturer, unless such Indebtedness is non-recourse to the Borrower, such Subsidiary or such Consolidated Entity. "Consolidated Interest Charges" means, for any period, for the Borrower and its 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 Borrower and its 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 Borrower and its 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 Borrower and its Subsidiaries and Consolidated Entities on a consolidated basis, the net income (after excluding therefrom any non-cash charges or credits relating to economic hedging transactions) of the Borrower and its Subsidiaries and Consolidated Entities (excluding extraordinary gains but including extraordinary losses) for that period. "Consolidated Tangible Net Worth" means, as of any date of determination, for the Borrower and its Subsidiaries and Consolidated Entities on a consolidated basis, Shareholders' Equity (after excluding therefrom any non-cash charges or credits relating to economic hedging transactions) on such date minus the Intangible Assets of the Borrower and its Subsidiaries and Consolidated Entities on such date. 7 "Consolidated Total Capitalization" means, as of any date of determination, the sum of (a) Consolidated Funded Indebtedness and (b) Shareholders' Equity (after excluding therefrom any non- cash charges or credits relating to economic hedging transactions) 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 Borrower or any 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 Borrower or any 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 Borrower and its 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 Borrower and its 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 Borrower or any 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 Borrower or a 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 Borrower 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 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 8 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 Eurodollar Rate Loan, the Default Rate shall be an interest rate equal to the interest rate (including any Applicable Rate) 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 any Lender that (a) has failed to fund any portion of the Committed Loans, participations in L/C Obligations or participations in Swing Line Loans required to be funded by it hereunder within one Business Day of the date required to be funded by it hereunder, (b) has otherwise failed to pay over to the Administrative Agent or any other Lender any other amount required to be paid by it hereunder within one Business Day of the date when due, unless the subject of a good faith dispute, or (c) has been deemed insolvent or become the subject of a bankruptcy or insolvency proceeding. "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. "Eligible Assignee" means (a) a Lender; (b) an Affiliate of a Lender; (c) an Approved Fund; and (d) any other financial institution approved by (i) the Administrative Agent, the L/C Issuer and the Swing Line Lender, and (ii) unless an Event of Default has occurred and is continuing, the Borrower (each such approval not to be unreasonably withheld or delayed); provided that notwithstanding the foregoing, "Eligible Assignee" shall not include the Borrower or any of the Borrower's Affiliates or Subsidiaries; and provided further, however, that an Eligible Assignee shall include only a Lender, an Affiliate of a Lender or another financial institution, which, through its Lending Offices, is capable of lending Dollars to the Borrower without the imposition of any Taxes, additional Taxes or Other Taxes, as the case may be. "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 9 Borrower or any of its 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 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 Borrower 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 Borrower 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 Borrower 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 Sections 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 Borrower or any ERISA Affiliate. "Eurodollar Rate" means for any Interest Period with respect to a Eurodollar Rate Loan, the rate per annum equal to the British Bankers Association LIBOR Rate ("BBA LIBOR"), as published by Reuters (or other commercially available source providing quotations of BBA LIBOR as 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 Dollar deposits (for delivery on the first day of such Interest Period) with a term equivalent to such Interest Period. If such rate is not available at such time for any reason, then the "Eurodollar Rate" for such Interest Period shall be the rate per annum determined by the Administrative Agent to be the rate at which deposits in Dollars for delivery on the first day of 10 such Interest Period in same day funds in the approximate amount of the Eurodollar Rate Loan being made, continued or converted by Bank of America and with a term equivalent to such Interest Period would be offered by Bank of America's London Branch to major banks in the London interbank eurodollar market at their request at approximately 11:00 a.m. (London time) two Business Days prior to the commencement of such Interest Period. "Eurodollar Rate Loan" means a Committed Loan that bears interest at a rate based on the Eurodollar Rate. "Event of Default" has the meaning specified in Section 8.01. "Excluded Taxes" means, with respect to 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 the Borrower hereunder, (a) taxes imposed on or measured by its overall net income (however denominated), and franchise taxes imposed on it (in lieu of net income taxes), by the jurisdiction (or any political subdivision thereof) under the laws of which such recipient is organized or in which its principal office is located or, in the case of any Lender, in which its applicable Lending Office is located, (b) any branch profits taxes imposed by the United States or any similar tax imposed by any other jurisdiction in which the Borrower is located and (c) in the case of a Foreign Lender (other than an assignee pursuant to a request by the Borrower under Section 10.13), any withholding tax that is imposed on amounts payable to such Foreign Lender at the time such Foreign Lender becomes a party hereto (or designates a new Lending Office) or is attributable to such Foreign Lender's failure or inability (other than as a result of a Change in Law) to comply with Section 3.01(e), except to the extent that such Foreign Lender (or its assignor, if any) was entitled, at the time of designation of a new Lending Office (or assignment), to receive additional amounts from the Borrower with respect to such withholding tax pursuant to Section 3.01(a). "Existing Letters of Credit" means the Letters of Credit listed on Schedule 1.01(a). "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 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 September 22, 2004, among the Borrower, the Administrative Agent and BAS. "Foreign Lender" means any Lender that is organized under the laws of a jurisdiction other than that in which the Borrower is resident for tax purposes. For purposes of this 11 definition, the United States, each State thereof and the District of Columbia shall be deemed to constitute a single jurisdiction. "FRB" means the Board of Governors of the Federal Reserve System of the United States. "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. "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. "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). "Granting Lender" has the meaning specified in Section 10.06(h). "Guarantee" means, as to any Person, (a) any obligation, contingent or otherwise, of such Person guaranteeing or having the economic effect of guaranteeing any Indebtedness or other obligation 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 or other obligation, (ii) to purchase or lease property, securities or services for the purpose of assuring the obligee in respect of such Indebtedness or other obligation of the payment or performance of such Indebtedness or other obligation, (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 other obligation, or (iv) entered into for the purpose of assuring in any other manner the obligee in respect of such Indebtedness or other obligation of the payment or performance thereof or to protect such obligee against loss in respect thereof (in whole or in part), or (b) any Lien on any assets of such Person securing any Indebtedness or other obligation of any other Person, whether or not such Indebtedness or other obligation 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 obligation, or portion thereof, in respect of which such Guarantee is made or, if not stated or determinable, the 12 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. "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: (a) 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; (b) 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; (c) net obligations of such Person under any Swap Contract; (d) 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); (e) 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; (f) capital leases, Synthetic Lease Obligations and other Off-Balance Sheet Liabilities; (g) 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 (h) 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 13 as of any date shall be deemed to be the amount of Attributable Indebtedness in respect thereof as of such date. "Indemnified Taxes" means Taxes other than Excluded Taxes. "Indemnitees" has the meaning specified in Section 10.04(b). "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 Eurodollar Rate Loan exceeds three months, the respective 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 Eurodollar Rate Loan, the period commencing on the date such Eurodollar Rate Loan is disbursed or converted to or continued as a Eurodollar Rate Loan and ending on the date one, two, three or six months thereafter, as selected by the Borrower in its Committed Loan Notice; provided that: (i) 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; (ii) 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 (iii) 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. 14 "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 (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 Credit Application, and any other document, agreement and instrument entered into by the L/C Issuer and the Borrower (or any Subsidiary) or in favor the L/C Issuer and relating to any such Letter of Credit. "Laws" means, collectively, all international, foreign, Federal, state and local statutes, treaties, rules, guidelines, regulations, 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. "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. "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) Bank of Nova Scotia in its capacity as issuer of Letters of Credit hereunder, (c) Harris Trust and Savings Bank in its capacity as issuer of Letters of Credit hereunder, (d) The Bank of New York in its capacity as issuer of Letters of Credit hereunder, (e) SunTrust Bank in its capacity as issuer of Letters of Credit hereunder, 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 1.05. 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. 15 "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 Borrower and the Administrative Agent. "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. "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(i). "Letter of Credit Sublimit" means an amount equal to $70,000,000. 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, each Note, each Issuer Document and the Fee Letter. "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 Borrower or the Borrower and its Subsidiaries and Consolidated Entities taken as a whole; (b) a material impairment of the ability of the Borrower to perform its obligations under any Loan Document; or (c) a material adverse effect upon the legality, validity, binding effect or enforceability against the Borrower of any Loan Document. "Maturity Date" means December 2, 2009. "Multiemployer Plan" means any employee benefit plan of the type described in Section 4001(a)(3) of ERISA, to which the Borrower 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. 16 "Net Cash Proceeds" means, with respect to the sale of any asset by the Borrower or any Subsidiary, the remainder, if any, of (i) 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 (ii) the sum of (A) 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, (B) the out-of-pocket expenses incurred by the Borrower or any Subsidiary in connection with such sale and (C) 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-Material Subsidiary" means a Subsidiary that, (a) at no time during the then current fiscal year or the two then preceding fiscal years of the Borrower, constituted more than three percent (3%) of consolidated total assets (as shown on the Borrower's consolidated balance sheet) or Shareholders' Equity; or (b) accounted for no more than three percent (3%) of the revenues of the Borrower and its Subsidiaries, determined on a consolidated basis, in respect of any one or more of the then preceding twelve (12) fiscal quarters of the Borrower. "Note" means a promissory note made by a Borrower in favor of a Lender evidencing Loans made by such Lender to the Borrower, substantially in the form of Exhibit C. "Obligations" means all advances to, and debts, liabilities, obligations, covenants and duties of, the Borrower 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 the Borrower 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 17 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 Taxes" means all present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies arising from any payment made hereunder or under any other Loan Document or from the execution, delivery or enforcement of, or otherwise with respect to, this Agreement or any other Loan Document. "Outstanding Amount" means (i) with respect to Committed Loans on any date, the aggregate outstanding principal amount thereof after giving effect to any borrowings and prepayments or repayments of such Committed Loans occurring on such date; (ii) 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 (iii) with respect to any L/C Obligations on any date, the 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 Borrower of Unreimbursed Amounts. "Participant" 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 Borrower or any ERISA Affiliate or to which the Borrower 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. "Permitted Lines of Business" means (a) meat (including chicken, turkey, beef, lamb and pork), poultry and seafood production and processing, (b) ocean transportation and related ground transportation and support, (c) animal feed production and processing, (d) flour and feed milling, (e) power production, (f) commodity merchandising, (g) baking, and (h) the holding of cash and investments held for future use by the Borrower 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 Borrower or, with respect to any such plan that is subject to Section 412 of the Code or Title IV of ERISA, any ERISA Affiliate. 18 "Priority Indebtedness" means, as of any date of determination, the sum (without duplication) of (a) all Indebtedness of the Borrower secured by Liens permitted by Section 7.01(n), plus (b) all Indebtedness of Subsidiaries permitted by Sections 7.03(c) and (g). "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 and advisors 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 the Borrower. Any document delivered hereunder that is signed by a Responsible Officer shall be conclusively presumed to have been authorized by all necessary corporate action on the part of the Borrower and such Responsible Officer shall be conclusively presumed to have acted on behalf of the Borrower. "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 Borrower 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 Borrower's stockholders, partners or members (or the equivalent Person thereof). "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. "Seaboard Overseas" means Seaboard Overseas Limited, a Bahamian corporation. 19 "Seaboard Overseas Credit Facility" means that certain Credit Agreement dated as of February 21, 2003, as amended and in effect on the date hereof, among Seaboard Overseas, Standard Chartered Bank, as the Administrative Agent, and the other parties thereto. "Senior Note Agreements" means collectively, (a) the 1993 Senior Note Agreements, (b) the 1995 Senior Note Agreements, and (c) the 2002 Senior Note Agreements. "Senior Notes" means, collectively, (a) the 1993 Senior Notes, (b) the 1995 Senior Notes, and (c) the 2002 Senior Notes. "Shareholders' Equity" means, as of any date of determination, consolidated shareholders' equity of the Borrower and its Subsidiaries and Consolidated Entities as of that date determined in accordance with GAAP. "SPC" has the meaning specified in Section 10.06(h). "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 Borrower. "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 other readily available quotations provided by any recognized dealer in such Swap Contracts (which may include a Lender or any Affiliate of a Lender). 20 "Swing Line" means the revolving credit facility made available by the Swing Line Lender pursuant to Section 2.04. "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). "Taxes" means all present or future taxes, levies, imposts, duties, deductions, withholdings, assessments, fees or other charges imposed by any Governmental Authority, including any interest, additions to tax or penalties applicable thereto. "Total Outstandings" means the aggregate Outstanding Amount of all Loans and all L/C Obligations. "Type" means, with respect to a Committed Loan, its character as a Base Rate Loan or a Eurodollar Rate Loan. "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). 1.02 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 21 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 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. 1.03 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 Borrower or the Required Lenders shall so request, the Administrative Agent, the Lenders and the Borrower 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 Borrower 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 22 between calculations of such ratio or requirement made before and after giving effect to such change in GAAP. (c) Accounting for Acquisitions. 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 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. 1.04 Times of Day. Unless otherwise specified, all references herein to times of day shall be references to Pacific time (daylight or standard, as applicable). 1.05 Letter of Credit Amounts. Unless otherwise specified herein, the amount of a Letter of Credit at any time shall be deemed to be 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 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 Borrower 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 and (ii) the aggregate Outstanding Amount of the Committed Loans of any Lender, plus such Lender's Applicable Percentage of the Outstanding Amount of all L/C Obligations, plus such Lender's Applicable Percentage of the Outstanding Amount of all Swing Line Loans shall not exceed such Lender's Commitment. Within the limits of each Lender's Commitment, and subject to the other terms and conditions hereof, the Borrower may borrow under this Section 2.01, prepay under Section 2.05, and reborrow under this Section 2.01. Committed Loans may be Base Rate Loans or Eurodollar 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 Eurodollar Rate Loans shall be made upon the Borrower'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 23 Eurodollar Rate Loans or of any conversion of Eurodollar Rate Loans to Base Rate Committed Loans, (ii) on the requested date of any Borrowing of Base Rate Committed Loans; provided, however, that if the Borrower wishes to request Eurodollar 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. four Business Days prior to the requested date of such Borrowing, conversion or continuation, 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. three Business Days before the requested date of such Borrowing, conversion or continuation, the Administrative Agent shall notify the Borrower (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 Borrower 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 Borrower. Each Borrowing of, conversion to or continuation of Eurodollar 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 Borrower is requesting a Committed Borrowing, a conversion of Committed Loans from one Type to the other, or a continuation of Eurodollar 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, and (v) if applicable, the duration of the Interest Period with respect thereto. If the Borrower fails to specify a Type of Committed Loan in a Committed Loan Notice or if the Borrower 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. 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 Eurodollar Rate Loans. If the Borrower requests a Borrowing of, conversion to, or continuation of Eurodollar 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. (b) Following receipt of a Committed Loan Notice, the Administrative Agent shall promptly notify each Lender of the amount of its Applicable Percentage of the applicable Committed Loans, and if no timely notice of a conversion or continuation is provided by the Borrower, the Administrative Agent shall notify each Lender of the details of any automatic conversion to Base Rate Loans described in the preceding subsection. In the case of a Committed Borrowing denominated in Dollars, each Lender shall make the amount of its Committed Loan available to the Administrative Agent in immediately available funds at the Administrative Agent's Office not later than 12:00 p.m. 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 Borrower or the other applicable Borrower in like funds as received by the Administrative Agent either by (i) crediting the account of the Borrower on the books of Bank of America with the amount of such funds or 24 (ii) wire transfer of such funds, in each case in accordance with instructions provided to (and reasonably acceptable to) the Administrative Agent by the Borrower; provided, however, that if, on the date the Committed Loan Notice with respect to such Borrowing is given by the Borrower, 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 Borrower as provided above. (c) Except as otherwise provided herein, a Eurodollar Rate Loan may be continued or converted only on the last day of an Interest Period for such Eurodollar Rate Loan. During the existence of a Default, no Loans may be requested as, converted to or continued as Eurodollar Rate Loans without the consent of the Required Lenders. (d) The Administrative Agent shall promptly notify the Borrower and the Lenders of the interest rate applicable to any Interest Period for Eurodollar Rate Loans upon determination of such interest rate. At any time that Base Rate Loans are outstanding, the Administrative Agent shall notify the Borrower 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 for the account of the Borrower 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 Borrower 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 aggregate Outstanding Amount of the Committed Loans of any Lender, plus such Lender's Applicable Percentage of the Outstanding Amount of all L/C Obligations, plus such Lender's Applicable Percentage of the Outstanding Amount of all Swing Line Loans 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 Borrower for the issuance or amendment of a Letter of Credit shall be deemed to be a representation by the Borrower 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 Borrower's ability to obtain Letters of Credit shall be fully revolving, and accordingly the Borrower may, during the foregoing period, obtain Letters of Credit to replace Letters of Credit that have expired or 25 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 (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) such Letter of Credit is to be denominated in a currency other than Dollars; (E) 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 (F) a default of any Lender's obligations to fund under Section 2.03(c) exists or any Lender is at such time a Defaulting Lender hereunder, unless the L/C 26 Issuer has entered into satisfactory arrangements with the Borrower or such Lender to eliminate the L/C Issuer's risk with respect to such Lender. (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 Borrower 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 Borrower. 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 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; and (G) 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. Additionally, the Borrower shall furnish to the L/C Issuer and the Administrative Agent such other documents and information pertaining to such 27 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 Borrower 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 the Borrower, 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 Borrower (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 Borrower 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 Borrower 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 Borrower 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. (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 28 L/C Issuer will also deliver to the Borrower 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 Borrower and the Administrative Agent thereof. Not later than 10:00 a.m. on the date of any payment by the L/C Issuer under a Letter of Credit (each such date, an "Honor Date"), the Borrower shall reimburse the L/C Issuer through the Administrative Agent in an amount equal to the amount of such drawing. If the Borrower 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 (the "Unreimbursed Amount"), and the amount of such Lender's Applicable Percentage thereof. In such event, the Borrower 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 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 to the Administrative Agent for the account of the L/C Issuer, in Dollars, at the Administrative Agent's Office in an amount equal to its Applicable Percentage of the Unreimbursed Amount not later than 12:00 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 Borrower in such amount. The Administrative Agent shall remit the funds so received to the L/C Issuer. (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 Borrower 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 29 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 Borrower, 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 Borrower of a Committed Loan Notice). No such making of an L/C Advance shall relieve or otherwise impair the obligation of the Borrower 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), 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 greater of the Federal Funds Rate and a rate determined by the L/C Issuer in accordance with banking industry rules or interbank compensation. 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 Borrower 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) 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 30 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 Federal Funds 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 Borrower 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 Borrower or any Subsidiary may have at any time against any beneficiary or any 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) 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; (v) 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 Borrower or any Subsidiary. The Borrower 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 Borrower's instructions or other irregularity, the Borrower will immediately notify the L/C Issuer. The Borrower 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 Borrower agree that, in paying any drawing under a Letter of Credit, the L/C Issuer shall not have any responsibility to obtain any 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 31 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 Borrower 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 Borrower'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 (iv) of Section 2.03(e); provided, however, that anything in such clauses to the contrary notwithstanding, the Borrower may have a claim against the L/C Issuer, and the L/C Issuer may be liable to the Borrower, to the extent, but only to the extent, of any direct, as opposed to consequential or exemplary, damages suffered by the Borrower which the Borrower 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. (g) Cash Collateral. (i) Upon the request of the Administrative Agent, (A) if 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, or (B) if, as of the Letter of Credit Expiration Date, any L/C Obligation for any reason remains outstanding, the Borrower shall, in each case, immediately Cash Collateralize the then Outstanding Amount of all L/C Obligations. (ii) Sections 2.05 and 8.02(c) set forth certain additional requirements to deliver Cash Collateral hereunder. For purposes of this Section 2.03, Section 2.05 and Section 8.02(c), "Cash Collateralize" means to pledge and deposit with or deliver to the Administrative Agent, for the benefit of the L/C Issuer and the Lenders, as collateral for the L/C Obligations, cash or deposit account balances pursuant to documentation in form and substance satisfactory to the Administrative Agent and the L/C Issuer (which documents are hereby consented to by the Lenders). Derivatives of such term have corresponding meanings. The Borrower hereby grants to the Administrative Agent, for the benefit of the L/C Issuer and the Lenders, a security interest in all such cash, deposit accounts and all balances therein and all proceeds of the foregoing. Cash Collateral shall be maintained in blocked, non-interest bearing deposit accounts at Bank of America. (h) Applicability of ISP and UCP. Unless otherwise expressly agreed by the L/C Issuer and the Borrower when a Letter of Credit is issued (including any such agreement 32 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 Uniform Customs and Practice for Documentary Credits, as most recently published by the International Chamber of Commerce at the time of issuance shall apply to each commercial Letter of Credit. (i) Letter of Credit Fees. The Borrower shall pay to the Administrative Agent for the account of each Lender in accordance with its Applicable Percentage, a Letter of Credit fee (the "Letter of Credit Fee") for each Letter of Credit equal to the Applicable Rate times 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 1.05. 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. (j) Fronting Fee and Documentary and Processing Charges Payable to L/C Issuer. The Borrower 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, 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 Borrower and the L/C Issuer, computed on 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 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, 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 1.05. In addition, the Borrower shall pay directly to the L/C Issuer for its own account, 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. (k) 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. (l) 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 Borrower shall be obligated to reimburse the L/C Issuer hereunder for any and all drawings under such Letter of Credit. The Borrower hereby acknowledges that the issuance of 33 Letters of Credit for the account of Subsidiaries inures to the benefit of the Borrower, and that the Borrower's business derives substantial benefits from the businesses of such Subsidiaries. (m) 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 G 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 (each such loan, a "Swing Line Loan") to the Borrower 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 aggregate Outstanding Amount of the Committed Loans of any Lender, plus such Lender's Applicable Percentage of the Outstanding Amount of all L/C Obligations, plus such Lender's Applicable Percentage of the Outstanding Amount of all Swing Line Loans shall not exceed such Lender's Commitment, and provided, further, that the Borrower 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 Borrower 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 Borrower'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 Borrower. 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 34 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 proviso to the 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 noon on the borrowing date specified in such Swing Line Loan Notice, make the amount of its Swing Line Loan available to the Borrower either (i) at its office by crediting the account of the Borrower on the books of the Swing Line Lender in immediately available funds, or (ii) by wire transfer to any third party for which the Borrower 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 Borrower (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 Borrower 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 immediately available funds for the account of the Swing Line Lender at the Administrative Agent's Office 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 Borrower 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 35 is immediately available to the Swing Line Lender at a rate per annum equal to the greater of the Federal Funds Rate and a rate determined by the Swing Line Lender in accordance with banking rules on interbank compensation. 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 Borrower 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 Borrower 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 Federal Funds 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 Borrower 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. (f) Payments Directly to Swing Line Lender. The Borrower shall make all payments of principal and interest in respect of the Swing Line Loans directly to the Swing Line Lender. 36 2.05 Prepayments. (a) The Borrower may, upon notice from the Borrower 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 Eurodollar Rate Loans, and (B) on the date of prepayment of Base Rate Committed Loans; (ii) any prepayment of Eurodollar 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; and (iii) 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 Eurodollar 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 Borrower, 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 Eurodollar Rate Loan shall be accompanied by all accrued interest on the amount prepaid, together with any additional amounts required pursuant to Section 3.05. Each such prepayment shall be applied to the Committed Loans of the Lenders in accordance with their respective Applicable Percentages. (b) The Borrower 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 Borrower, the Borrower 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 Borrower 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 Borrower shall prepay Loans and/or the Borrower shall Cash Collateralize the L/C Obligations in an aggregate amount equal to such excess; provided, however, that the Borrower 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 Total Outstandings exceed the Aggregate Commitments then in effect. 2.06 Termination or Reduction of Commitments. The Borrower 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 Borrower 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 Letter of Credit Sublimit or the Swing Line Sublimit exceeds the amount of the Aggregate 37 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. 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) The Borrower shall repay to the Lenders on the Maturity Date the aggregate principal amount of Committed Loans made to the Borrower outstanding on such date. (b) The Borrower 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 Eurodollar Rate Loan shall bear interest on the outstanding principal amount thereof for each Interest Period at a rate per annum equal to the Eurodollar Rate for such Interest Period plus the Applicable Rate; (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 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 the 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, the Borrower 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 38 judgment, and before and after the commencement of any proceeding under any Debtor Relief Law. 2.09 Fees. In addition to certain fees described in subsections (i) and (j) of Section 2.03: (a) Facility Fee. The Borrower shall pay to the Administrative Agent for the account of each Lender in accordance with its Applicable Percentage, a facility fee 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. 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 Borrower shall pay to the Arrangers and the Administrative Agent for their own respective accounts 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 Borrower shall pay to the Lenders 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. 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). 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. 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 Borrower and the interest and 39 payments thereon. Any failure to so record or any error in doing so shall not, however, limit or otherwise affect the obligation of the Borrower 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, the Borrower shall execute and deliver to such Lender (through the Administrative Agent) a Note, which shall evidence such Lender's Loans to the 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 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 Borrower shall be made without condition or deduction for any counterclaim, defense, recoupment or setoff. Except as otherwise expressly provided herein, all payments by the Borrower hereunder shall be made to the Administrative Agent, for the account of the respective Lenders to which such payment is owed, at the Administrative Agent's Office in Dollars and in immediately available funds not later than 11:00 a.m. on the date specified herein. The Administrative Agent will promptly distribute to each Lender 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 after 11:00 a.m. 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 the 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 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 and may, in reliance upon such assumption, make available to the Borrower a corresponding amount. In such event, if a Lender has not in fact made its share of the applicable Committed Borrowing or available to the Administrative Agent, then the applicable Lender and the Borrower severally agree to pay to the Administrative Agent forthwith on demand such corresponding amount in immediately available funds with interest thereon, for each day from and including the date such amount is made available to the 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 greater of the Federal Funds Rate and a rate determined in accordance with banking industry rules on 40 interbank compensation and (B) in the case of a payment to be made by the Borrower, the interest rate applicable to Base Rate Loans. If the 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 the Borrower the amount of such interest paid by the 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 the Borrower shall be without prejudice to any claim the Borrower may have against a Lender that shall have failed to make such payment to the Administrative Agent. (ii) Payments by Borrower; Presumptions by Administrative Agent. Unless the Administrative Agent shall have received notice from the 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 the Borrower will not make such payment, the Administrative Agent may assume that the 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 the 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 demand the amount so distributed to such Lender or the L/C Issuer, in immediately available 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 greater of the Federal Funds Rate and a rate determined in accordance with banking industry rules on interbank compensation. 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 the Borrower, as provided in the foregoing provisions of this Article II, and such funds are not made available to the 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 41 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 (ii) the provisions of this Section shall not be construed to apply to (x) any payment made by a Borrower pursuant to and in accordance with the express terms of this Agreement or (y) 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 Borrower or any Subsidiary thereof (as to which the provisions of this Section shall apply). The 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 the Borrower rights of setoff and counterclaim with respect to such participation as fully as if such Lender were a direct creditor of the Borrower in the amount of such participation. 2.14 Increase in Commitments. (a) Request for Increase. Provided there exists no Default and the Borrower 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 Borrower may from time to time, request an increase in the Aggregate Commitments by an amount (for all such requests) not exceeding $50,000,000; provided that (i) any such request for an increase shall be in a minimum amount of $10,000,000, and (ii) the Borrower may make a maximum of three such requests. At the time of sending such notice, the Borrower (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). 42 (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 Borrower 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), the Borrower 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 Borrower shall determine the effective date (the "Increase Effective Date") and the final allocation of such increase. The Administrative Agent shall promptly notify the Borrower 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 Borrower 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 Borrower 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 2.14, 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 Borrower 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. ARTICLE III. TAXES, YIELD PROTECTION AND ILLEGALITY 3.01 Taxes. (a) Payments Free of Taxes. Any and all payments by or on account of any obligation of the Borrower hereunder or under any other Loan Document shall be made free and 43 clear of and without reduction or withholding for any Indemnified Taxes or Other Taxes, provided that if the Borrower shall be required by applicable law to deduct any Indemnified Taxes (including any Other Taxes) from such payments, then (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section) the Administrative Agent, Lender or L/C Issuer, as the case may be, receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower shall make such deductions and (iii) the Borrower shall timely pay the full amount deducted to the relevant Governmental Authority in accordance with applicable law. (b) Payment of Other Taxes by the Borrower. Without limiting the provisions of subsection (a) above, the Borrower shall timely pay any Other Taxes to the relevant Governmental Authority in accordance with applicable law. (c) Indemnification by the Borrower. The Borrower shall indemnify the Administrative Agent, each Lender and the L/C Issuer, within 10 days after demand therefor, for the full amount of any Indemnified Taxes or Other Taxes (including Indemnified Taxes or Other Taxes imposed or asserted on or attributable to amounts payable under this Section) paid by the Administrative Agent, such Lender or the L/C Issuer, as the case may be, and any penalties, interest and reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority; provided, that if the Borrower, reasonably believes that such Taxes were not correctly or legally asserted, the Administrative Agent or such Lender or the L/C Issuer, as the case may be, will use reasonable efforts to cooperate with the Borrower to obtain a refund of such Taxes so long as such efforts would not, in the reasonable determination of the Administrative Agent or such Lender or the L/C Issuer, as the case may be, result in any additional costs, expenses or risks or otherwise be disadvantageous to it. A certificate as to the amount of such payment or liability delivered to a Borrower 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. (d) Evidence of Payments. As soon as practicable after any payment of Indemnified Taxes or Other Taxes by the Borrower to a Governmental Authority, the Borrower shall deliver to the Administrative Agent the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Administrative Agent. (e) Status of Lenders. Any Foreign Lender that is entitled to an exemption from or reduction of withholding tax under the law of the jurisdiction in which a Borrower is resident for tax purposes, or any treaty to which such jurisdiction is a party, with respect to payments hereunder or under any other Loan Document shall deliver to the Borrower (with a copy to the Administrative Agent), at the time or times prescribed by applicable law or reasonably requested by the Borrower or the Administrative Agent, such properly completed and executed documentation prescribed by applicable law as will permit such payments to be made without withholding or at a reduced rate of withholding. In addition, any Lender, if requested by the Borrower or the Administrative Agent, shall deliver such other documentation prescribed by applicable law or reasonably requested by the Borrower or the Administrative Agent as will 44 enable the Borrower or the Administrative Agent to determine whether or not such Lender is subject to backup withholding or information reporting requirements. Without limiting the generality of the foregoing, in the event that a Borrower is resident for tax purposes in the United States, any Foreign Lender shall deliver to Borrower 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 request of the Borrower or the Administrative Agent, but only if such Foreign Lender is legally entitled to do so), whichever of the following is applicable: (i) duly completed copies of Internal Revenue Service Form W- 8BEN claiming eligibility for benefits of an income tax treaty to which the United States is a party, (ii) duly completed copies of Internal Revenue Service Form W- 8ECI, (iii) 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 to the effect that such Foreign Lender is not (A) a "bank" within the meaning of section 881(c)(3)(A) of the Code, (B) a "10 percent shareholder" of the Borrower within the meaning of section 881(c)(3)(B) of the Code, or (C) a "controlled foreign corporation" described in section 881(c)(3)(C) of the Code and (y) duly completed copies of Internal Revenue Service Form W-8BEN, or (iv) any other form prescribed by applicable law as a basis for claiming exemption from or a reduction in United States Federal withholding tax duly completed together with such supplementary documentation as may be prescribed by applicable law to permit the Borrower to determine the withholding or deduction required to be made. Without limiting the obligations of the Lenders set forth above regarding delivery of certain forms and documents to establish each Lender's status for U.S. withholding tax purposes, each Lender agrees promptly to deliver to the Administrative Agent or the Borrower, as the Administrative Agent or the Borrower shall reasonably request, on or prior to the Closing Date, and in a timely fashion thereafter, such other documents and forms required by any relevant taxing authorities under the Laws of any other jurisdiction, duly executed and completed by such Lender, as are required under such Laws to confirm such Lender's entitlement to any available exemption from, or reduction of, applicable withholding taxes in respect of all payments to be made to such Lender outside of the U.S. by the Borrower pursuant to this Agreement or otherwise to establish such Lender's status for withholding tax purposes in such other jurisdiction. Each Lender shall promptly (i) notify the Administrative Agent of any change in circumstances which would modify or render invalid any such claimed exemption or reduction, and (ii) take such steps as shall not be materially disadvantageous to it, in the reasonable judgment of such Lender, and as may be reasonably necessary (including the re-designation of its Lending Office) to avoid any requirement of applicable Laws of any such jurisdiction that the Borrower make any deduction or withholding for taxes from amounts payable to such Lender. Additionally, each of the Borrower shall promptly deliver to the Administrative Agent or any Lender, as the Administrative Agent or such Lender shall reasonably request, on or prior to the 45 Closing Date, and in a timely fashion thereafter, such documents and forms required by any relevant taxing authorities under the Laws of any jurisdiction, duly executed and completed by the Borrower, as are required to be furnished by such Lender or the Administrative Agent under such Laws in connection with any payment by the Administrative Agent or any Lender of Taxes or Other Taxes, or otherwise in connection with the Loan Documents, with respect to such jurisdiction. (f) Treatment of Certain Refunds. If the Administrative Agent, any Lender or the L/C Issuer determines, in its sole discretion, that it has received a refund of any Taxes or Other Taxes as to which it has been indemnified by the Borrower or with respect to which the Borrower has paid additional amounts pursuant to this Section, it shall pay to the Borrower an amount equal to such refund (but only to the extent of indemnity payments made, or additional amounts paid, by the Borrower under this Section with respect to the Taxes or Other Taxes giving rise to such refund), net of all out-of-pocket expenses of the Administrative Agent, such Lender or the L/C Issuer, as the case may be, and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund), provided that the Borrower, upon the request of the Administrative Agent, such Lender or the L/C Issuer, agrees to repay the amount paid over to the Borrower (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) to the Administrative Agent, such Lender or the L/C Issuer in the event the Administrative Agent, such Lender or the L/C Issuer is required to repay such refund to such Governmental Authority. This subsection shall not be construed to require the Administrative Agent, any Lender or the L/C Issuer to make available its tax returns (or any other information relating to its taxes that it deems confidential) to the Borrower or any other Person. 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 Eurodollar Rate Loans, or to determine or charge interest rates based upon the Eurodollar 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 in the London interbank market, then, on notice thereof by such Lender to the Borrower through the Administrative Agent, any obligation of such Lender to make or continue Eurodollar Rate Loans to convert Base Rate Committed Loans to Eurodollar Rate Loans, shall be suspended until such Lender notifies the Administrative Agent and the Borrower that the circumstances giving rise to such determination no longer exist. Upon receipt of such notice, the Borrower shall, upon demand from such Lender (with a copy to the Administrative Agent), prepay or, if applicable, convert all such Eurodollar Rate Loans of such Lender to Base Rate Loans, either on the last day of the Interest Period therefor, if such Lender may lawfully continue to maintain such Eurodollar Rate Loans to such day, or immediately, if such Lender may not lawfully continue to maintain such Eurodollar Rate Loans. Upon any such prepayment or conversion, the Borrower shall also pay accrued interest on the amount so prepaid or converted. 3.03 Inability to Determine Rates. If the Required Lenders determine that for any reason in connection with any request for a Eurodollar Rate Loan or a conversion to or continuation thereof that (a) Dollar deposits are not being offered to banks in the London offshore interbank eurodollar market for the applicable amount and Interest Period of such Eurodollar Rate Loan, (b) adequate and reasonable means do not exist for determining the 46 Eurodollar Rate for any requested Interest Period with respect to a proposed Eurodollar Rate Loan, or (c) the Eurodollar Rate for any requested Interest Period with respect to a proposed Eurodollar Rate Loan does not adequately and fairly reflect the cost to such Lenders of funding such Eurodollar Rate Loan, the Administrative Agent will promptly so notify the Borrower and each Lender. Thereafter, the obligation of the Lenders to make or maintain Eurodollar Rate Loans shall be suspended 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 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 Eurodollar Rate Loans. (a) Increased Costs Generally. If any Change in Law shall: (i) (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 any reserve requirement contemplated by Section 3.04(e)); (ii) subject any Lender or the L/C Issuer to any tax of any kind whatsoever with respect to this Agreement, any Letter of Credit, any participation in a Letter of Credit or any Eurodollar Loan made by it, or change the basis of taxation of payments to such Lender or the L/C Issuer in respect thereof (except for Indemnified Taxes or Other Taxes covered by Section 3.01 and the imposition of, or any change in the rate of, any Excluded Tax payable by such Lender or the L/C Issuer); (iii) impose on any Lender or the L/C Issuer or the London interbank market any other condition, cost or expense affecting this Agreement or Eurodollar 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 or maintaining any Eurodollar 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 Borrower will 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 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 47 Letters of Credit 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 Borrower will 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 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 the manner of determining such amount and delivered to the Borrower shall be conclusive absent manifest error. The Borrower shall 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 shall not constitute a waiver of such Lender's or the L/C Issuer's right to demand such compensation, provided that the Borrower shall not 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 Borrower 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 Borrower shall pay to each Lender, (i) 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 Eurodollar 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, which determination shall be conclusive), which shall be due and payable on each date on which interest is payable on such Loan, provided the Borrower shall have received at least 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 10 days prior to the relevant Interest Payment Date, such additional interest or costs shall be due and payable 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 Borrower shall promptly 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); 48 (b) any failure by the 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 Borrower; (c) any assignment of a Eurodollar Rate Loan on a day other than the last day of the Interest Period therefor as a result of a request by the Borrower pursuant to Section 10.13; including 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. The Borrower shall also pay any customary administrative fees charged by such Lender in connection with the foregoing. For purposes of calculating amounts payable by the Borrower to the Lenders under this Section 3.05, each Lender shall be deemed to have funded each Eurodollar Rate Loan made by it at the Eurodollar Rate for such Loan by a matching deposit or other borrowing in the London interbank eurodollar market for a comparable amount and for a comparable period, whether or not such Eurodollar Rate Loan was in fact so funded. Any demand for compensation shall set forth in reasonable detail the amount and method of 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 the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 3.01, or if any Lender gives a notice pursuant to Section 3.02, then such Lender shall 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, 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 to any unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender. The Borrower hereby agrees to pay all reasonable costs and expenses incurred by any Lender in connection with any such designation or assignment. (b) Replacement of Lenders. If any Lender requests compensation under Section 3.04, or if the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 3.01, the Borrower may replace such Lender in accordance with Section 10.13. 3.07 Survival. All of the Borrower' obligations under this Article III shall survive termination of the Aggregate Commitments and repayment of all other Obligations hereunder. 49 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, 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 Borrower; (ii) Notes executed by the Borrower in favor of each Lender requesting Notes; (iii) such certificates of resolutions or other action, incumbency certificates and/or other certificates of Responsible Officers as the Administrative Agent may require evidencing the identity, authority and capacity of such Responsible Officers in connection with this Agreement and the other Loan Documents; (iv) such documents and certifications as the Administrative Agent may reasonably require to evidence that the Borrower is duly organized, 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 Shook, Hardy & Bacon, L.L.P., counsel to the Borrower, addressed to the Administrative Agent and each Lender, as to the matters set forth in Exhibit F-1 and such other matters concerning the Borrower and the Loan Documents as the Required Lenders may reasonably request; (vi) a favorable opinion of Helms Mulliss & Wicker, PLLC, counsel to the Administrative Agent, addressed to the Administrative Agent and each Lender, as to the matters set forth in Exhibit F-2 and such other matters concerning the Loan Documents as the Required Lenders may reasonably request; (vii) a certificate of a Responsible Officer either (A) attaching copies of all consents, licenses and approvals required in connection with the execution, delivery and performance by the Borrower and the validity against the Borrower of the Loan Documents, 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; (viii) a certificate signed by a Responsible Officer of the Borrower certifying (A) that attached thereto is a true and correct copy of each of the Seaboard Overseas 50 Credit Facility, the 1993 Senior Note Agreements, 1995 Senior Note Agreements and the 2002 Senior Note Agreements, (B) that the conditions specified in Sections 4.02(a) and (b) have been satisfied, (C) 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; and (D) a calculation of the Consolidated Leverage Ratio as of October 2, 2004; and (ix) 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 Borrower 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 Borrower and the Administrative Agent). Without limiting the generality of the provisions of Section 9.04, for purposes of determining compliance with the conditions specified in this Section 4.01, each 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 Eurodollar Rate Loans) is subject to the following conditions precedent: (a) The representations and warranties of the Borrower contained in Article V and 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. 51 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 Eurodollar Rate Loans) submitted by the Borrower shall be deemed to be a representation and warranty 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. ARTICLE V. REPRESENTATIONS AND WARRANTIES The Borrower represents and warrants to the Administrative Agent and the Lenders that: 5.01 Existence, Qualification and Power; Compliance with Laws. The Borrower and each 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, (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, and (d) is in compliance with all Laws; except in each case referred to in clause (a) (but only with respect to Non-Material Subsidiaries), and clauses (b)(i), (c) or (d), 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 the Borrower 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 Borrower and each 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, the Borrower of this Agreement or any other Loan Document. 52 5.04 Binding Effect. This Agreement has been, and each other Loan Document, when delivered hereunder, will have been, duly executed and delivered by the Borrower. This Agreement constitutes, and each other Loan Document when so delivered will constitute, a legal, valid and binding obligation of the Borrower, enforceable against the 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 Borrower and its 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 Borrower 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 Borrower and its Subsidiaries and Consolidated Entities dated October 2, 2004, 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 Borrower 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 Borrower 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 Borrower, threatened or contemplated, at law, in equity, in arbitration or before any Governmental Authority, by or against the Borrower or any of its 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 the Borrower nor any Subsidiary 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 53 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 Borrower and each 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 Borrower and its Subsidiaries is subject to no Liens, other than Liens permitted by Section 7.01. 5.09 Environmental Compliance. The Borrower and its Subsidiaries conduct in the ordinary course of business a review of the effect of existing Environmental Laws 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 Borrower 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 Borrower and its Subsidiaries are insured with financially sound and reputable insurance companies that are not Affiliates of the Borrower, 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 Borrower or the applicable Subsidiary operates. 5.11 Taxes. The Borrower and its Subsidiaries have filed all Federal, material state and other material tax returns and reports required to be filed, and have paid all Federal, material state and other material 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. There is no proposed tax assessment against the Borrower or any Subsidiary that would, if made, have a Material Adverse Effect. Neither the Borrower nor any 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 Borrower, nothing has occurred which would prevent, or cause the loss of, such qualification. The Borrower 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. 54 (b) There are no pending or, to the best knowledge of the Borrower, 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) (i) No ERISA Event has occurred or is reasonably expected to occur; (ii) the aggregate Unfunded Pension Liability of all Pension Plans does not exceed $35,000,000; (iii) neither the Borrower 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 Borrower nor any ERISA Affiliate has incurred, or 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 Borrower 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, the Borrower has no Subsidiaries other than those specifically disclosed in Part (a) of Schedule 5.13 (which Schedule indicates those Subsidiaries that are 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 by the Borrower in the amounts specified on Part (a) of Schedule 5.13 free and clear of all Liens. As of the Closing Date, the Borrower has no Equity Interests (other than those permitted by Section 7.02(a)) in any other corporation or entity other than those specifically disclosed in Part (b) of Schedule 5.13, and has no control over any other entity except as disclosed in Part (c) of Schedule 5.13. 5.14 Margin Regulations; Investment Company Act; Public Utility Holding Company Act. (a) The Borrower is not engaged and will not 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. (b) None of the Borrower, any Person Controlling the Borrower, or any Subsidiary (i) is a "holding company," or a "subsidiary company" of a "holding company," or an "affiliate" of a "holding company" or of a "subsidiary company" of a "holding company," within the meaning of the Public Utility Holding Company Act of 1935, or (ii) is or is required to be registered as an "investment company" under the Investment Company Act of 1940. 5.15 Disclosure. The Borrower has disclosed to the Administrative Agent and the Lenders all agreements, instruments and corporate or other restrictions to which it or any of its 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 55 Borrower 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 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 Borrower 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 Borrower's knowledge. 5.16 Compliance with Laws. Each of the Borrower and each 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 Borrower and its 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. To the best knowledge of the Borrower, no slogan or other advertising device, product, process, method, substance, part or other material now employed, or now contemplated to be employed, by the Borrower or any Subsidiary infringes upon any rights held by any other Person. No claim or litigation regarding any of the foregoing is pending or, to the best knowledge of the Borrower, threatened, which, either individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. 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, or any Letter of Credit shall remain outstanding, the Borrower shall, and shall (except in the case of the covenants set forth in Sections 6.01, 6.02, and 6.03) cause each 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 Borrower (or, if earlier, 15 days after the date required to be filed with the SEC (without giving effect to any extension permitted thereby)), a consolidated balance sheet of the Borrower 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 56 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 (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 Borrower (commencing with the fiscal quarter ended October 2, 2004) (or, if earlier, five days after the date required to be filed with the SEC (without giving effect to any extension permitted thereby)), a consolidated balance sheet of the Borrower 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 Borrower's fiscal year then ended, 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, all in reasonable detail, certified by a Responsible Officer of the Borrower as fairly presenting in all material respects the financial condition, results of earnings and cash flows of the Borrower and its Subsidiaries and Consolidated Entities in accordance with GAAP, subject only to normal year-end audit adjustments and the absence of footnotes. As to any information contained in materials furnished pursuant to Section 6.02(c), the Borrower 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 Borrower 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, 2004), a duly completed Compliance Certificate signed by a Responsible Officer of the Borrower; (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 Borrower by independent accountants in connection with the accounts or books of the Borrower 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 Borrower, and copies of all annual, regular, periodic and special reports and registration statements which the Borrower 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; 57 (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 the Borrower or any Subsidiary thereof; and (e) with reasonable promptness, such additional information regarding the business, financial or corporate affairs of the Borrower or any 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 Borrower posts such documents, or provides a link thereto on the Borrower's website on the Internet at the website address listed on Schedule 10.02; or (ii) on which such documents are posted on the Borrower'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 Borrower shall deliver paper copies of such documents to the Administrative Agent or any Lender that requests the Borrower 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 Borrower 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 Borrower 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 Borrower 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. The 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 Borrower hereunder (collectively, "Borrower Materials") by posting the Borrower Materials on IntraLinks or another similar electronic system (the "Platform") and (b) certain of the Lenders may be "public-side" Lenders (i.e., Lenders that do not wish to receive material non-public information with respect to the Borrower or its securities) (each, a "Public Lender"). The 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 Borrower shall be deemed to have authorized the Administrative Agent, the Arrangers, the L/C Issuer and the Lenders to treat the Borrower Materials as either publicly available information or not material information (although it may be sensitive and proprietary) with respect to the Borrower or its securities for purposes of United States Federal and state securities laws; (y) all Borrower Materials marked 58 "PUBLIC" are permitted to be made available through a portion of the Platform designated "Public Investor"; and (z) the Administrative Agent and the Arrangers shall be entitled to treat the Borrower Materials that are not marked "PUBLIC" as being suitable only for posting on a portion of the Platform not designated "Public Investor". 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 (including (i) breach or non- performance of, or any default under, a Contractual Obligation of the Borrower or any Subsidiary; (ii) any dispute, litigation, investigation, proceeding or suspension between the Borrower or any Subsidiary and any Governmental Authority; or (iii) the commencement of, or any material development in, any litigation or proceeding affecting the Borrower or any Subsidiary, including pursuant to any applicable Environmental Laws) that has resulted or could reasonably be expected to result in a Material Adverse Effect; (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 Borrower or any Subsidiary. Each notice pursuant to this Section shall be accompanied by a statement of a Responsible Officer of the Borrower setting forth details of the occurrence referred to therein and stating what action the Borrower 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 Borrower or such Subsidiary; (b) all lawful claims which, if unpaid, would by law become a Lien upon its property, 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 Borrower or such 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 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, 59 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 Borrower and its 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 Borrower, 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 Borrower or such 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 Borrower or such 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 Borrower; provided, however, that (a) so long as no Event of Default exists, such inspection shall be limited to once per fiscal year of the Borrower and shall be at the 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 Borrower at any time during normal business hours and without advance notice. 60 6.11 Use of Proceeds. Use the proceeds of the Credit Extensions for general corporate purposes not in contravention of any Law or of any Loan Document. 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, or any Letter of Credit shall remain outstanding, the Borrower shall not, nor shall it permit any 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 existing on the date hereof and listed on Schedule 7.01 (including but not limited to Liens securing Indebtedness of Seaboard Overseas contemplated under the Seaboard Overseas Credit Facility) and Liens securing renewals, extensions and refinancings of the Indebtedness secured by liens listed on Schedule 7.01; provided that (i) the property covered thereby is not changed, (ii) (except with respect to the Seaboard Overseas Credit Agreement) the amount secured or benefited thereby is not increased, (iii) any contingent obligor with respect thereto is not changed and (iv) in the event that the primary obligor with respect thereto is changed, title to the property financed with such Indebtedness is transferred substantially simultaneously to such new primary obligor; (c) 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; (d) 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; (e) 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; (f) 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; (g) 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 61 materially detract from the value of the property subject thereto or materially interfere with the ordinary conduct of the business of the applicable Person; (h) 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; (i) 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 (i) such Liens do not at any time encumber any property other than the property financed by such Indebtedness, (ii) 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 and (iii) if the Indebtedness secured thereby is owing to any Subsidiary, the property being financed thereby has not been previously owned by the Borrower or any Subsidiary; and (j) Liens securing Indebtedness (including renewals, extensions and refinancings thereof) on property in existence at the time such property is acquired by the Borrower or a 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; (k) Liens under UCC 4-210 and Liens in deposit accounts created under the standard deposit agreement of any financial institution at which the Borrower or any Subsidiary maintains a deposit account; (l) Liens on property owned by a Subsidiary, provided that such Liens secure only obligations owing to the Borrower or a wholly- owned Subsidiary; (m) Liens securing Indebtedness permitted under Section 7.03(e); provided that the fair market value of the assets subject to any such Lien shall not exceed by more than two hundred percent, as of the date of incurrence, the principal amount of the Indebtedness so secured; and (n) Liens not otherwise permitted by this Section 7.01; provided, that the aggregate amount of Indebtedness secured by Liens permitted by this clause (n) shall not at any time, when added to all other Priority Indebtedness, exceed 10% 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 Borrower 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 Borrower 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) 62 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 Borrower or such Subsidiary in the form of cash equivalents or readily marketable debt or equity securities; (b) (i) Loans to officers, directors and employees of the Borrower or any 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 Borrower or any 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; (c) Investments of the Borrower in any Subsidiary and Investments of any Subsidiary in the Borrower or in another Subsidiary; (d) Investments of the Borrower and 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; provided, however, that neither the Borrower nor any Subsidiary shall Guarantee any Indebtedness incurred pursuant to Section 7.03(e) except that Seaboard Overseas may Guarantee any such Indebtedness incurred by any of its Subsidiaries and each Subsidiary of Seaboard Overseas may Guarantee any such Indebtedness incurred by Seaboard Overseas (provided, in either case, that any such Subsidiary is in existence on the Closing Date) ; (g) Investments incurred in order to consummate 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; and (i) other Investments not permitted by this Section 7.02; provided, that, (i) the aggregate value of all such Investments made in any fiscal year shall not exceed $25,000,000 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 such Investment would cause the aggregate value of all such Investments made (which are still outstanding or owed) in any fiscal year to exceed $25,000,000, the Borrower shall have furnished to the Administrative Agent a certificate of a Responsible Officer, which certificate shall calculate the 63 Consolidated Adjusted Leverage Ratio both immediately before and immediately after making such Investment. 7.03 Subsidiary Indebtedness. Permit any 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 listed on Schedule 7.03 (including renewals, extensions and refinancings thereof ); (b) Indebtedness under the Seaboard Overseas Credit Facility (including any renewals, increases, extensions and refinancings thereof); (c) 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 (i) of Section 7.01; (d) 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 or (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; (e) Indebtedness (including renewals, extensions and refinancings thereof), in an aggregate principal amount not to exceed $100,000,000 (but excluding for this purpose any Indebtedness incurred under the Seaboard Overseas Facility) incurred by a non-domestic Subsidiary, the proceeds of which are paid as a dividend to the Borrower, or to a Subsidiary which in turn dividends such proceeds to the Borrower pursuant to Section 965 of the Internal Revenue Code as amended by the American Jobs Creation Act of 2004, and which proceeds will be invested in a domestic reinvestment plan pursuant to the terms of said Section 965 and the regulations promulgated thereunder; (f) Indebtedness of a Subsidiary owing to the Borrower or a Subsidiary; provided such indebtedness has a tenor of less than 365 days; and (g) 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 Indebtedness permitted by this clause (g) shall not at any time, when added together with all Indebtedness outstanding pursuant to clause (c) above and all other Priority Indebtedness, exceed 10% of Consolidated Tangible Net Worth determined at such time. 64 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 Subsidiary may merge with (i) the Borrower, provided that the Borrower shall be the continuing or surviving Person, or (ii) any one or more other Subsidiaries, provided that when any wholly-owned Subsidiary is merging with another Subsidiary, the wholly-owned Subsidiary shall be the continuing or surviving Person; (b) any Subsidiary may Dispose of all or substantially all of its assets (upon voluntary liquidation or otherwise) to the Borrower or to another Subsidiary; provided that if the transferor in such a transaction is a wholly-owned Subsidiary, then the transferee must either be the Borrower or a wholly-owned Subsidiary; and (c) a merger by the Borrower or a Subsidiary with a Person to consummate an Acquisition permitted by Section 7.11. 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 Subsidiary to the Borrower or to any wholly-owned Subsidiary; (e) Dispositions permitted by Section 7.04; (f) Dispositions by the Borrower or a 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 Borrower shall have delivered a written notice to the Administrative Agent contemporaneously with the consummation of the Disposition in which the Borrower: (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 65 (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 Borrower 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 Borrower or any Subsidiary of operating assets or Equity Interests of a Person which will become a Subsidiary and which owns operating assets and which operating assets will be used in the ordinary course of business of the Borrower and its Subsidiaries, and (ii) the proceeds of such Disposition shall have been applied as described in such written notice; (g) Dispositions by the Borrower and its 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 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 Borrower and each 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 Borrower and each 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 Borrower 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 $15,000,000 in any given fiscal year of the Borrower 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 $15,000,000, the Borrower shall have furnished to the Administrative Agent a certificate of a 66 Responsible Officer, which certificate shall calculate the Consolidated Adjusted Leverage Ratio both immediately before and immediately after making such dividend, purchase, redemption or and 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 Borrower and its Subsidiaries on the date hereof or any business substantially related or incidental thereto. In furtherance of the foregoing, the Borrower shall at all times cause, (i) the amount of revenues of the Borrower and its 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 Borrower and its Subsidiaries, determined in each case for the then most recently ended period of twelve (12) fiscal months on a consolidated basis, or (ii) the net book value of assets of the Borrower and its Subsidiaries used in Permitted Lines of Business to be at least sixty-six and two-thirds percent (66-2/3%) of the amount of the net book value of all assets of the Borrower and its 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 Borrower, whether or not in the ordinary course of business, other than on fair and reasonable terms substantially as favorable to the Borrower or such Subsidiary as would be obtainable by the Borrower or such Subsidiary at the time in a comparable arm's length transaction with a Person other than an Affiliate; provided that this Section 7.08 shall not prohibit the Borrower or any Subsidiary from entering into or consummating any transaction contemplated by any of the Permitted Affiliate Transactions (as defined in the Senior Note Agreements). 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, any other Loan Document, the Senior Note Agreements or the Seaboard Overseas Credit Facility (and refinancings or renewals thereof, on the same or substantially similar terms)) that (a) limits the ability (i) of any Subsidiary to make Restricted Payments to the Borrower or to otherwise transfer property to the Borrower, (ii) of any Subsidiary to Guarantee the Indebtedness of the Borrower or (iii) of the Borrower or any 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. 67 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 (i) 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 Borrower shall have furnished to the Administrative Agent (A) pro forma historical financial statements as of the end of the most recently completed fiscal year of the Borrower and most recent interim fiscal quarter, if applicable giving effect to such Acquisition and (B) 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, (ii) the Person acquired shall be a Subsidiary, or be merged into the Borrower or a Subsidiary, immediately upon consummation of the Acquisition (or if assets are being acquired, the acquiror shall be the Borrower or a Subsidiary), and (iii) after giving effect to such Acquisition, the aggregate Costs of Acquisition incurred in any fiscal year of the Borrower 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) $507,000,000, and (ii) an amount equal to 25% of the Consolidated Net Income earned in each full fiscal quarter ending after October 2, 2004 (with no deduction for a net loss in any such fiscal quarter). (b) Debt to Capitalization. Permit Consolidated Funded Indebtedness at any time to be greater than 50% of Consolidated Total Capitalization. (c) Consolidated Adjusted Leverage Ratio. Permit the Consolidated Adjusted Leverage Ratio at any time to be greater than 3.50 to 1.00. 7.13 Amendments to Senior Note Agreements and Seaboard Overseas Credit Facility. Enter into or suffer to exist any amendment or modification (a) to the amortization schedule or prepayment provisions (excluding the waiver of any prepayment premium or penalty) of the Indebtedness created under the Senior Note Agreements or the Seaboard Overseas Credit Facility or (b) to any other terms or conditions contained in the Senior Note Agreements or the Seaboard Overseas Credit Facility if such modification (i) would conflict with or be more restrictive than the terms or provisions of this Agreement, (ii) would provide for collateral security for such Indebtedness in excess of that provided under such agreements as of the Closing Date, (iii) would expand any negative pledge provision provided for therein, (iv) would alter any provision of the events of default under those agreements, (v) further limits, in any manner, Seaboard Overseas' ability to make Restricted Payments, or (vi) would alter the 68 advance rates used in the definition of "Borrowing Base" under the Seaboard Overseas Credit Facility. 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. The Borrower fails to pay (i) when and as required to be paid herein, 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 Borrower 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. The Borrower 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 10 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 the Borrower 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 Borrower 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 Borrower or any 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 (1) the Seaboard Overseas Credit Facility, (2) the Senior Notes or (3) any other 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 arrangement) of more than $10,000,000, or (B) fails to observe or perform any other agreement or condition relating to any such Indebtedness or Guarantee (including but not limited to the Seaboard Overseas Credit Facility and the Senior Notes) 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 69 Contract as to which the Borrower or any 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 Borrower or any Subsidiary is an Affected Party (as so defined) and, in either event, the Swap Termination Value owed by the Borrower or such Subsidiary as a result thereof is greater than $10,000,000; or (f) Insolvency Proceedings, Etc. The Borrower or any of its 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 Borrower or any 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 Borrower or any 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 Borrower under Title IV of ERISA to the Pension Plan, Multiemployer Plan or the PBGC in an aggregate amount in excess of $10,000,000, or (ii) the Borrower 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 in excess of the $10,000,000; 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 the Borrower or any other Person contests in any manner the validity or enforceability of any provision of any Loan Document; or the 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 70 (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 Borrower; (c) require that the Borrower Cash Collateralize the L/C Obligations (in an amount equal to the then Outstanding Amount thereof); and (d) exercise on behalf of itself and the Lenders all rights and remedies available to it and the Lenders under the Loan Documents; provided, however, that upon the occurrence of an actual or deemed entry of an order for relief with respect to the 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 Borrower 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 to Section 8.02), any amounts received on account of the Obligations shall 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 and interest) 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 amounts described in this clause Second payable to them; 71 Third, to payment of that portion of the Obligations constituting accrued and unpaid 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; and Last, the balance, if any, after all of the Obligations have been indefeasibly paid in full, to the Borrower or as otherwise required by Law. Subject to Section 2.03(c), 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 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 the Borrower shall not have rights as a third party beneficiary of any of such provisions. 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, act as the financial advisor or in any other advisory capacity for and generally engage in any kind of business with the Borrower 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. Without limiting the generality of the foregoing, the Administrative Agent: 72 (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; 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 Borrower 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 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. The Administrative Agent shall be deemed not to have knowledge of any Default unless and until notice describing such Default is given to the Administrative Agent by the Borrower, 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 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 73 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 Borrower), 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. 9.06 Resignation of Administrative Agent; L/C Issuer. Each of the Administrative Agent and the L/C Issuer may at any time give notice of its resignation to the Lenders, any other L/C Issuer and the Borrower. Upon receipt of any such notice of resignation, the Required Lenders shall have the right, in consultation with the Borrower so long as no Default exists, 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, then the retiring Administrative Agent may on behalf of the Lenders and the L/C Issuer, appoint a successor Administrative Agent meeting the qualifications set forth above; provided that if the Administrative Agent shall notify the Borrower and the Lenders that no qualifying Person has accepted such appointment, then such resignation shall nonetheless become effective in accordance with such notice and (1) the retiring Administrative Agent shall be discharged from its duties and obligations hereunder and under the other Loan Documents (except that in the case of any collateral security held by the Administrative Agent on behalf of the Lenders or the L/C Issuer under any of the Loan Documents, the retiring Administrative Agent shall continue to hold such collateral security until such time as a successor Administrative Agent is appointed) and (2) 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 as the Required Lenders appoint a successor Administrative Agent as provided for above in this Section. 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 retired) Administrative Agent, and the retiring 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 Borrower to a successor Administrative Agent shall be the same as those payable to its predecessor unless otherwise agreed between the Borrower and such successor. After the retiring Administrative Agent's resignation 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 Administrative Agent, its sub agents and their respective Related Parties 74 in respect of any actions taken or omitted to be taken by any of them while the retiring Administrative Agent was acting as Administrative Agent. 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. Upon the acceptance of a successor's appointment as Administrative Agent hereunder, (a) such successor shall succeed to and become vested with all of the rights, powers, privileges and duties of Bank of America as a retiring L/C Issuer and Swing Line Lender, (b) Bank of America shall be discharged from all its duties and obligations hereunder or under the other Loan Documents as L/C Issuer and Swing Line Lender, 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 arrangement satisfactory to Bank of America to effectively assume the obligations of the Bank of America as L/C Issuer with respect to the Letters of Credit issued by it. 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. 9.07 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. 9.08 No Other Duties, Etc. Anything herein to the contrary notwithstanding, none of the Bookrunners, Arrangers, Syndication Agent or Documentation Agent listed on the cover page hereof shall have any powers, duties or responsibilities under this Agreement or any of the other Loan Documents, except in its capacity, as applicable, as the Administrative Agent, a Lender or a L/C Issuer hereunder. 9.09 Administrative Agent May File Proofs of Claim. In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to the Borrower, 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 the Borrower) shall be entitled and empowered, by intervention in such proceeding or otherwise: 75 (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(i) and (j), 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 to authorize the Administrative Agent to vote in respect of the claim of any Lender 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 Borrower therefrom, shall be effective unless in writing signed by the Required Lenders and the Borrower, 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: (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; 76 (d) reduce the principal of, or the rate of interest specified herein on, any Loan or L/C Borrowing, or (subject to clause (v) 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 the 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) 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 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; (iv) Section 10.06(h) may not be amended, waived or otherwise modified without the consent of each Granting Lender all or any part of whose Loans are being funded by an SPC at the time of such amendment, waiver or other modification; and (v) 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, except that the Commitment of such Lender may not be increased or extended without the consent of such Lender. 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 the 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 77 (ii) if to any other Lender, to the address, telecopier number, electronic mail address or telephone number specified in its Administrative Questionnaire. Notices sent by hand or overnight courier service, or mailed by certified or registered mail, shall be deemed to have been given when received; notices 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 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 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 or the Borrower may, 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) Change of Address, Etc. Each of the Borrower, 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 Borrower, the Administrative Agent, the L/C Issuer and the Swing Line Lender. (d) 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 the 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 Borrower 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 78 liabilities resulting from the reliance by such Person on each notice ) believed in good faith to have been given by or on behalf of the 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. No failure by any Lender, the L/C Issuer or the Administrative Agent to exercise, and no delay by any such Person in exercising, any right, remedy, power or privilege hereunder 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 are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law. 10.04 Expenses; Indemnity; Damage Waiver. (a) Costs and Expenses. The 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 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 Borrower. The 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 the Borrower 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 or the consummation of the transactions contemplated hereby or thereby, (ii) any Loan or Letter of 79 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 the Borrower or any of its Subsidiaries, or any Environmental Liability related in any way to the 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 Borrower, 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 are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from such Indemnitee's gross negligence, willful misconduct or breach in bad faith of such Indemnitee's obligations hereunder or under any other Loan Document. (c) Reimbursement by Lenders. To the extent that the 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 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 or such Related Party, as the case may be, such Lender's Applicable Percentage (determined as of the time that the applicable unreimbursed expense or indemnity payment is sought) of such unpaid amount, provided 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) or the L/C Issuer 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) or L/C Issuer 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, the 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 the use by unintended recipients of any information or other materials distributed by it 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, except in the event of gross negligence, willful misconduct or breach in bad faith by such Indemnitee of this Agreement or any other Loan Document, as determined by a court of competent jurisdiction in a final and nonappealable judgment. (e) Payments. All amounts due under this Section shall be payable not later than ten Business Days after demand therefor. 80 (f) Survival. The agreements in this Section shall survive the resignation of the Administrative Agent and the L/C Issuer, 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 the 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 Federal Funds Rate from time to time in effect. 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 the Borrower may not 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 Eligible 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, (iii) by way of pledge or assignment of a security interest subject to the restrictions of subsection (f) of this Section, or (iv) to an SPC in accordance with the provisions of subsection (h) 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 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 Eligible 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 81 (i) except in the case of an assignment of the entire remaining amount of the assigning Lender's Commitment and the Loans at the time owing to it or in the case of an assignment to a Lender or an Affiliate of a Lender or an Approved Fund with respect to a Lender, 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 Borrower otherwise consents (each such consent not to be unreasonably withheld or delayed); (ii) 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 rights in respect of Swing Line Loans; (iii) any assignment of a Commitment must be approved by the Administrative Agent, the L/C Issuer and the Swing Line Lender unless the Person that is the proposed assignee is itself a Lender (whether or not the proposed assignee would otherwise qualify as an Eligible Assignee); (iv) the parties to each assignment shall execute and deliver to the Administrative Agent an Assignment and Assumption, together with a processing and recordation fee of $3,500, and the Eligible Assignee, if it shall not be a Lender, shall deliver to the Administrative Agent an Administrative Questionnaire. 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 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. Upon request, the 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 Borrower, shall maintain at the Administrative Agent's Office a copy of each Assignment and Assumption delivered to it and a register for the recordation of the names and addresses of 82 the Lenders, and the Commitments of, and principal amounts 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, and the Borrower, the Administrative Agent and the Lenders may 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, notwithstanding notice to the contrary. The Register shall be available for inspection by each of the Borrower and the L/C Issuer at any reasonable time and from time to time upon reasonable prior notice. In addition, at any time that a request for a consent for a material or substantive change to the Loan Documents is pending, any Lender wishing to consult with other Lenders in connection therewith may request and receive from the Administrative Agent a copy of the Register. (d) Participations. Any Lender may at any time, without the consent of, or notice to, the Borrower or the Administrative Agent, sell participations to any financial institution (other than a natural person or the Borrower or any of the Borrower'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 Borrower, 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. 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 Participant, agree to any amendment, waiver or other modification described in clauses (c) or (d) of the first proviso to Section 10.01 that affects such Participant. Subject to subsection (e) of this Section, the Borrower 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. To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 10.08 as though it were a Lender, provided such Participant agrees to be subject to Section 2.13 as though it were a Lender. (e) Limitation upon Participant Rights. A Participant shall not be entitled to receive any greater payment under Section 3.01 or 3.04 than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant, unless the sale of the participation to such Participant is made with the Borrower's prior written consent. In addition and without limitation of the foregoing sentence, a Participant that would be a Foreign Lender if it were a Lender shall not be entitled to the benefits of Section 3.01 unless the Borrower is notified of the participation sold to such Participant and such Participant agrees, for the benefit of the Borrower, to comply with Section 3.01(e) and Section 3.06 as though it were a Lender. (f) 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(s), if any) to secure obligations of such Lender, including any pledge or assignment to secure obligations to a 83 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. (g) Electronic Execution of Assignments. The words "execution," "signed," "signature," and words of like import in any Assignment and Assumption shall be deemed to include electronic signatures 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. (h) Special Purpose Funding Vehicles. Notwithstanding anything to the contrary contained herein, any Lender (a "Granting Lender") may grant to a special purpose funding vehicle identified as such in writing from time to time by the Granting Lender to the Administrative Agent and the Borrower (an "SPC") the option to provide all or any part of any Committed Loan that such Granting Lender would otherwise be obligated to make pursuant to this Agreement; provided that (i) nothing herein shall constitute a commitment by any SPC to fund any Committed Loan, and (ii) if an SPC elects not to exercise such option or otherwise fails to make all or any part of such Committed Loan, the Granting Lender shall be obligated to make such Committed Loan pursuant to the terms hereof or, if it fails to do so, to make such payment to the Administrative Agent as is required under Section 2.12(b)(ii). Each party hereto hereby agrees that (i) neither the grant to any SPC nor the exercise by any SPC of such option shall increase the costs or expenses or otherwise increase or change the obligations of the Borrower under this Agreement (including its obligations under Section 3.04), (ii) no SPC shall be liable for any indemnity or similar payment obligation under this Agreement for which a Lender would be liable, and (iii) the Granting Lender shall for all purposes, including the approval of any amendment, waiver or other modification of any provision of any Loan Document, remain the lender of record hereunder. The making of a Committed Loan by an SPC hereunder shall utilize the Commitment of the Granting Lender to the same extent, and as if, such Committed Loan were made by such Granting Lender. In furtherance of the foregoing, each party hereto hereby agrees (which agreement shall survive the termination of this Agreement) that, prior to the date that is one year and one day after the payment in full of all outstanding commercial paper or other senior debt of any SPC, it will not institute against, or join any other Person in instituting against, such SPC any bankruptcy, reorganization, arrangement, insolvency, or liquidation proceeding under the laws of the United States or any State thereof. Notwithstanding anything to the contrary contained herein, any SPC may (i) with notice to, but without prior consent of the Borrower and the Administrative Agent and with the payment of a processing fee of $3,500, assign all or any portion of its right to receive payment with respect to any Committed Loan to the Granting Lender and (ii) disclose on a confidential basis any non-public information relating to its funding of Committed Loans to any rating agency, commercial paper dealer or provider of any surety or Guarantee or credit or liquidity enhancement to such SPC. (i) 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 84 may, (i) upon 30 days' notice to the Borrower and the Lenders, resign as L/C Issuer and/or (ii) upon 30 days' notice to the Borrower, resign as Swing Line Lender. In the event of any such resignation as L/C Issuer or Swing Line Lender, the Borrower 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 Borrower to appoint any such successor shall affect the resignation of Bank of America as L/C Issuer or Swing Line Lender, as the case may be. If Bank of America resigns as L/C Issuer, it shall retain all the rights and obligations of the L/C Issuer hereunder with respect to all Letters of Credit issued by it and 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 Committed 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 Committed Loans or fund risk participations in outstanding Swing Line Loans pursuant to Section 2.04(c). 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 and its Affiliates' respective partners, directors, officers, employees, agents, advisors and representatives (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 requested by any regulatory authority purporting to have jurisdiction over it (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 or obligations under this Agreement or (ii) any actual or prospective counterparty (or its advisors) to any swap or derivative transaction relating to a Borrower and its obligations, (g) with the consent of the Borrower or (h) 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 any of their respective Affiliates on a nonconfidential basis from a source other than the Borrower. For purposes of this Section, "Information" means all information received from the Borrower or any Subsidiary relating to the Borrower 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 Borrower or any Subsidiary, provided that, in the case of information received from the Borrower 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. 85 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 Borrower against any and all of the obligations of the Borrower now or hereafter existing under this Agreement or any other Loan Document to such Lender or the L/C Issuer, irrespective of whether or not such Lender or the L/C Issuer shall have made any demand under this Agreement or any other Loan Document and although such obligations of the Borrower may be contingent or unmatured or are owed to a branch or office of such Lender or the L/C Issuer different from the branch or office holding such deposit or obligated on such indebtedness. 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 Borrower 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. 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 Borrower. 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 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 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 by telecopy shall be effective as delivery of a manually executed counterpart of this Agreement. 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 86 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. 10.13 Replacement of Lenders. If any Lender requests compensation under Section 3.04, or if the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 3.01, or if any Lender is a Defaulting Lender, then the Borrower 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 and obligations under this Agreement and the related Loan Documents to an assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment), provided that: (a) the Borrower shall have paid to the Administrative Agent the assignment fee 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 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; and (d) such assignment does not conflict with applicable Laws. 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 Borrower to require such assignment and delegation cease to apply. 87 10.14 Governing Law; Jurisdiction; Etc. (a) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. (b) SUBMISSION TO JURISDICTION. THE 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 THE BORROWER OR ITS PROPERTIES IN THE COURTS OF ANY JURISDICTION. (c) WAIVER OF VENUE. THE 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 88 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 USA PATRIOT Act Notice. 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 Borrower 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 Borrower, which information includes the name and address of the Borrower and other information that will allow such Lender or the Administrative Agent, as applicable, to identify the Borrower in accordance with the Act. 89 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first above written. SEABOARD CORPORATION By: /s/ Robert L. Steer Name: Robert L. Steer Title: Senior Vice President, Chief Financial Officer and Treasurer S-1 BANK OF AMERICA, N.A., as Administrative Agent By: /s/ Joan Mok Name: Joan Mok Title: Assistan Vice President S-2 BANK OF AMERICA, N.A., as a Lender, a L/C Issuer and Swing Line Lender By: /s/ David L. Catherall Name: David L. Catherall Title: Vice President S-3 THE BANK OF NOVA SCOTIA ATLANTA AGENCY By: /s/ N. Bell Name: N. Bell Title: Senior Manager S-4 HARRIS TRUST AND SAVINGS BANK By: /s/ John R. Carley Name: John R. Carley Title: Vice President S-5 THE BANK OF NEW YORK By: /s/ Mark O'Connor Name: Mark O'Connor Title: Vice President S-6 SUNTRUST BANK By: /s/ Hugh E. Brown Name: Hugh E. Brown Title: Vice President S-7 COOPERATIEVE CENTRALE RAIFFEISEN- BOERENLEENBANK, B.A., "RABOBANK INTERNATIONAL", NEW YORK BRANCH By: /s/ James V. Kenwood Name: James V. Kenwood Title: Vice President By: /s/ Rebecca O. Morrow Name: Rebecca O. Morrow Title: Executive Director S-8 U.S. AGBANK, FCB, AS DISCLOSED AGENT By: /s/ Travis W. Ball Name: Travis W. Ball Title: Vice President S-9 EX-10.10 3 ex10_10.txt SEABOARD CORPORATION RETIREE MEDICAL BENEFIT PLAN DATED MARCH 4, 2005 Exhibit 10.10 SEABOARD CORPORATION RETIREE MEDICAL BENEFIT PLAN ARTICLE I. PURPOSE This Seaboard Corporation Retiree Medical Benefit Plan is established by Seaboard Corporation effective March 4, 2005. The primary purpose of this Plan is to provide medical benefits not otherwise provided under the Seaboard Corporation Health Plan to certain individuals who have rendered valuable services to Seaboard Corporation. ARTICLE II. DEFINITIONS For purposes of this Plan, the following words and phrases shall have the meaning indicated below. 2.1 "Benefits" means the insured medical benefits provided through this Plan. 2.2 "Change of Control" means an event or transaction which results in one or more of the following: (a) The acquisition by any person or entity (other than by the Company or one of its subsidiaries) 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 liquidation of the Company or the sale of more than eighty-five percent (85%) of the assets of the Company to an unrelated person or entity; (c) The approval by the shareholders of the Company of a reorganization, merger or consolidation with respect to which persons who were the stockholders of the Company immediately prior to such reorganization, merger or consolidation do not, immediately thereafter, own more than fifty percent (50%) of the combined voting power entitled to vote generally in the election of the directors of the reorganized, merged or consolidated entity's then outstanding voting securities; or (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) of more than 50% of either the membership interests or the combined voting power of Seaboard Flour, LLC. 2.3 "COBRA" means the Consolidated Omnibus Reconciliation Act of 1985 as amended from time to time and the regulations thereunder. 2.4 "Committee" means the committee that administers this Plan pursuant to Article V. 2.5 "Company" means Seaboard Corporation, a Delaware corporation, and its successors and assigns. 2.6 "Company Health Plan" means the Seaboard Corporation Health Plan as from time to time amended. 2.7 "Dependent" means an unmarried child (natural or adopted) of an Eligible Employee or of a deceased Eligible Employee provided such unmarried child is either: (a) under 19 years of age and dependent on the Eligible Employee (if living) for support and maintenance; or (b) over 19 years of age and under 25 years of age, dependent on the Eligible Employee (if living) for support and maintenance, and enrolled as a full-time student (as determined by the educational institution) at a high school or licensed or accredited school of higher learning; or (c) over 19 years of age, primarily supported by the Eligible Employee (if living) and incapable of self-sustaining employment by reason of mental or physical handicap. 2.8 "Effective Date" means March 4, 2005, the date this Plan is effective. 2.9 "Eligible Employee" means an Employee or former Employee described in Section 3.1 who is eligible to become a Participant upon satisfying the requirements for participation as set forth herein. 2.10 "Employee" means an employee of the Employer. 2.11 "Employer" means the Company and any subsidiary or affiliate of the Company that participates in this Plan with the consent of the Company and employs the Eligible Employee. 2.12 "Family Member" means (a) a person who is legally married to (and not legally separated from) a Participant who is an Eligible Employee, and (b) any Dependant of a Participant who is an Eligible Employee. Family Member also means (a) a person who is legally married to (and not legally separated from) an Eligible Employee at the time of the Eligible Employee's death (whether or not such death occurs prior to the time the Eligible Employee becomes a Participant), and (b) any Dependant of an Eligible Employee at the time of the Eligible Employee's death (whether or not such death occurs prior to the time the Eligible Employee becomes a Participant); provided, however, a Dependant who is a child of a deceased Eligible Employee shall not be a Family Member on and after the date such Dependant attains 19 years of age except that such Dependant will be a Family Member at any time or times such Dependant is (a) under 25 years of age and enrolled as a full-time student (as determined by the educational institution) at a high school or licensed or accredited school of higher learning, or (b) incapable of self- sustaining employment by reason of mental or physical handicap. If an Eligible Employee ceases to be an Eligible Employee under the provisions of Section 3.2, then any Family Member with respect to such Eligible Employee shall thereupon cease to be a Family 2 Member and no individual shall thereafter become a Family Member with respect to such Eligible Employee. 2.13 "Medicare" means the program of medical care benefits provided under Title XIX of the Social Security Act of 1965, as amended from time to time. 2.14 "Participant" means an Eligible Employee or a Family Member who receives Benefits under this Plan. 2.15 "Plan" means the Seaboard Corporation Retiree Medical Benefit Plan as set forth herein and as from time to time amended to the extent permitted hereunder with respect to any particular individual. ARTICLE III. PARTICIPATION 3.1 Eligibility. All Employees whose names are listed on Addendum A attached to this Plan are Eligible Employees as of the Effective Date. Any other Employee of the Company or other Employer will be an Eligible Employee if such Employee is specifically designated as an Eligible Employee in writing signed by the Chief Executive Officer of the Company and attached as an addendum to this Plan. Once an Employee is an Eligible Employee the Employee will remain an Eligible Employee (even though no longer an Employee) except as otherwise provided in Section 3.2. 3.2 Loss of Eligibility. If an Eligible Employee unlawfully converts to his or her direct or indirect personal benefit a material amount of funds of the Company or of any subsidiary or affiliate of the Company, then such Eligible Employee shall cease to be an Eligible Employee as of the date of such conversion. 3.3 Age and Service Conditions for Participation of Eligible Employee -- General Rule. An Eligible Employee may not become a Participant unless he or she has both (i) attained age 50, and (ii) completed at least 15 calendar years of continuous service as an Employee of the Employer or of any affiliate or subsidiary of the Employer. 3.4 Age and Service Conditions for Participation of Eligible Employee -- Exceptions. An Eligible Employee may become a Participant without having satisfied the age and service conditions in Section 3.3 if (a) the Eligible Employee is involuntarily terminated by the Employer (other than under circumstances described in Section 3.2), or (b) there is a Change of Control prior to the Eligible Employee's termination of employment with the Employer, or (c) the Employer no longer provides medical benefits to Employees other than benefits provided under this Plan. 3.5 Commencement of Participation of Eligible Employee Following Termination of Employment. An Eligible Employee who has terminated employment with the Employer and who prior to termination of employment has satisfied the age and service conditions under Section 3.3, or who under Section 3.4 is not required to satisfy the age and service conditions, will become a Participant as follows: 3 (a) If at the time of the Eligible Employee's termination of employment with the Employer, the Eligible Employee continues to receive medical benefits under the Company Health Plan pursuant to the provisions of COBRA, then the Eligible Employee will become a Participant upon the expiration of the period that such individual is receiving medical benefits pursuant to the provisions of COBRA. (b) If at the time of such Eligible Employee's termination of employment with the Employer, the Eligible Employee continues to receive medical benefits under the Company Health Plan under provisions of the Company Health Plan that provide benefits to certain retirees who are not eligible for coverage under Medicare, then the Eligible Employee will become a Participant at the time the Eligible Employee is no longer eligible to receive such retiree medical benefits under the Company Health Plan. (c) If at the time of an Eligible Employee's termination of employment with the Employer, the Eligible Employee is not entitled to receive medical benefits under the provisions of Company Health Plan under paragraphs (a) or (b) of this Section 3.5, then the Eligible Employee will become a Participant at the time of the Eligible Employee's termination of employment with the Employer. 3.6 Commencement of Participation of Eligible Employee Prior to Termination of Employment. If prior to the termination of employment of an Eligible Employee the Company terminates the Company Health Plan, then the Eligible Employee will become a Participant at the time of the termination of the Company Health Plan. Such Eligible Employee will continue to be a Participant upon such Eligible Employee's termination of employment unless such Eligible Employee ceases to be an Eligible Employee under Section 3.2. 3.7 Commencement of Participation of Family Member. A Family Member will become a Participant at the time of becoming a Family Member under Section 2.12. 3.8 Termination of Participation of Participant. A Participant will cease to be a Participant only if the Participant ceases to be an Eligible Employee under Section 3.2. 3.9 Termination of Participation of Family Member. A Participant who is a Family Member will cease to be a Participant if he or she ceases to be a Family Member under Section 2.12. 3.10 No Continuation Coverage. The Employer will have no obligation under COBRA or any other law to provide continuation coverage to any Participant following the date the Participant ceases to be a Participant hereunder. 4 ARTICLE IV. BENEFITS 4.1 COBRA Payments. If an Eligible Employee is receiving medical benefits under the Company Health Plan pursuant to the provisions of COBRA, and if the Eligible Employee will become a Participant upon the expiration of the period that such individual is receiving medical benefits pursuant to the provisions of COBRA, then the Employer will pay the amounts payable by the Eligible Employee pursuant to COBRA necessary for medical coverage of the Eligible Employee and any legal spouse or Dependant of the Eligible Employee to continue for the period of coverage allowed under COBRA. Such payment may be by direct payment to the Eligible Employee or by any other method the Employer determines. 4.2 Insured Benefits. All Benefits will be provided only through individual medical benefit insurance policies or contracts purchased by the Employer. Benefits may be provided either through a traditional indemnity insurance policy or through an arrangement with a health maintenance organization. The Company will select the provider of the Benefits in its sole and absolute discretion and after making a good faith judgment that the provider has a history of good business practices and is in sound financial health. If at any time prior to the termination of an individual's participation in the Plan the provider of Benefits selected will no longer provide Benefits of any type to the Participant due to the dissolution of the provider or a change in the provider's business practices, then the Company will arrange for Benefits for the Participant through another provider. If a provider fails to pay any Benefits with respect to a Participant that would otherwise be payable by the provider solely because the provider has become insolvent, the Employer will pay such amounts that otherwise would have been paid by the provider. Except as provided in the preceding sentences, the Employer will have no responsibility or liability for any action or inaction of the provider of Benefits in connection with providing such Benefits to a Participant other than action or inaction due to the Employer's failure to pay the provider the payment amount specified in the initial arrangement. The Employer may, in its sole and absolute discretion with no obligation to do so, pay Benefits hereunder from the general assets of the Employer on a self-insured basis with respect to any one or more Participants. 4.3 Income Tax Gross-up Payments. In the event Benefits paid to a Participant in a particular calendar year constitute taxable income to the Participant and exceed in the aggregate the sum of $20,000, then the Employer will pay to the Participant a cash amount determined by the Employer in its discretion (which determination shall be made in good faith) sufficient to pay the state and federal income tax liability of the Participant with respect to the amount of taxable Benefits paid for such year in excess of the sum of $20,000. Such payment by the Employer shall be made no later than the later of (a) the last day of the year in which such taxable Benefits are paid, or (b) 90 days after the Employer determines that such Benefits are taxable. The payment to be made under this Section 4.3 shall be only with respect to taxable Benefits and not with respect to any other taxable income of the Participant (including taxable amounts paid under this Section 4.3.) 4.4 Benefits for Participants Not Eligible for Medicare. Benefits provided hereunder for a Participant who is not eligible for medical coverage under Medicare will be comparable to the medical benefits provided under the Company Health Plan at the time the 5 Participant becomes a Participant under this Plan; provided, however, that the Benefits will not be subject to any overall lifetime or annual maximum dollar limits. For purposes of this Section 4.4, "comparable" means as similar as possible as determined by the Company in its discretion in good faith taking into account the options available for the Company in selecting a provider of Benefits at such time. In the case of a Participant who was a participant in the Company Health Plan at the time of becoming a Participant, the Company will determine "comparable" based upon the medical benefits of such Participant in the Company Health Plan immediately prior to becoming a Participant. In the case of any other Participant, the Company will make a good faith effort to determine "comparable" in its discretion based upon reasonable assumptions as to the type of coverage the Participant would have had under the Company Health Care Plan. 4.5 Benefits for Participants Eligible for Medicare. Benefits provided hereunder for a Participant who is eligible for medical coverage under Medicare will be comparable to the medical coverage provided under the Company Health Plan for retired employees of Seaboard Corporation eligible for Medicare coverage at the time of the adoption of this Plan, except that the Benefits will not be subject to any overall lifetime or annual maximum dollar limits. For purposes of this Section 4.5, "comparable" means as similar as possible as determined by the Company in its discretion in good faith taking into account the options available for the Company in selecting a provider of Benefits at such time. 4.6 Benefits Secondary to Other Coverage. At any time a Participant has medical coverage in addition to the Benefits hereunder then the Benefits hereunder shall be secondary to any such other medical coverage. Therefore Benefits otherwise provided hereunder will be reduced to the extent provided under such other medical coverage. 4.7 Participant Agreement to Provide Information. As a condition to receiving Benefits, a Participant agrees to provide the Employer or the Committee any information reasonably needed in order to administer any of the provisions of the Plan. 4.8 No Benefits for Persons Related to Family Members. In no event will any Benefits be provided to any individual who is not an Eligible Employee or the Family Member of an Eligible Employee. ARTICLE V. ADMINISTRATION The Company may delegate the authority to administer the Plan to a Committee. In the absence of any such delegation the Company will be the Committee for purposes of the Plan. The Committee is authorized in its sole and absolute discretion to construe and interpret the provisions of the Plan. Any interpretation of the Plan and any decision on any matter within the discretion of the Committee made in good faith is binding on all persons. The Committee and the individual members of the Committee will be indemnified by the Company against any and all liabilities, losses, costs and expenses of any kind or nature incurred by or asserted against the Committee or any individual member of the Committee in connection with any action or inaction pursuant to this Plan. 6 ARTICLE VI. MISCELLANEOUS PROVISIONS 6.1 Amendment or Termination of Plan. The Company may amend the Plan at any time in its sole discretion by execution of a written amendment to the Plan or by resolution of the Board of Directors of the Company. An amendment to the Plan may provide for a partial or complete termination of the Plan. Notwithstanding the preceding sentences, if any such amendment would adversely affect any individual who is an Eligible Employee, Participant or Family Member at the time of such amendment, then the Plan provisions as in effect immediately prior to such amendment shall remain in effect for such individual and such amendment shall not apply with respect to such individual. 6.2 Special Rule for Substantial Change in United States Health Care. Notwithstanding the provisions of Section 6.1, the Company may amend the Plan in any manner it deems advisable in its sole and absolute discretion, with respect to current and future Eligible Employees and Participants, if there is a substantial change in the provision of health care coverage in the United States (including, but not limited to, the adoption of what is often referred to as "socialized medicine" or "universal coverage") such that medical coverage for Eligible Employees and Participants is available elsewhere and the nature of such other coverage is such that the Company would not have adopted this Plan had such other coverage been available at the time of the adoption of this Plan. The Company will act in good faith in adopting any amendment to the Plan under this Section 6.2 and the Company will endeavor in good faith to assure that those individuals who are Eligible Employees, Participants or Family Members at the time of any such amendment receive benefits comparable to the medical coverage they were receiving under the Plan, or were anticipated to receive in the future under the Plan, immediately prior to any such amendment. 6.3 No Employment Rights. Nothing contained herein shall be construed as conferring upon an Eligible Employee the right to continue in the employ of the Employer in the Eligible Employee's current position or in any other capacity. Each Eligible Employee shall have contractual rights to enforce the provisions of the Plan. 6.4 Successors and Assigns. The provisions of this Plan are binding upon the Employer and its successors and assigns. 6.5 Governing Law. This Plan shall be subject to and construed in accordance with the laws of the State of Kansas. 7 IN WITNESS WHEREOF, this Plan is executed this 4th day of March, 2005. SEABOARD CORPORATION By: /s/ H.H. Bresky Title: H. H. Bresky, President and Chief Executive Officer 8 EX-10.11 4 ex10_11.txt SEABOARD CORPORATION EXECUTIVE OFFICERS' BONUS POLICY Exhibit 10.11 SEABOARD CORPORATION EXECUTIVE OFFICERS' BONUS POLICY PURPOSE: The purpose of this policy is to establish guidelines for the payment of incentive compensation to named executive officers of Seaboard Corporation. AFFECTS: The Chief Executive Officer and the other named executive officers of Seaboard Corporation, as defined in Item 402 of Regulation S-K. POLICY: 1. Incentive Compensation Philosophy: The Company maintains the philosophy that determination of incentive compensation for its executive officers is based upon a recognition that these officers are responsible for implementing the Company's long-term strategic objectives. All executive compensation, including the incentive portion, is designed to attract and retain top executive employees. 2. Basis for Determination of Incentive Compensation: The Board of Directors shall determine annual bonus amounts for the named executive officers, including the Chief Executive Officer. This determination will be based on a subjective review of the Company's financial performance, an assessment of each officer's individual contribution to that performance and other discretionary factors. The amount assigned to each officer is discretionary. 3. Method and Timing of Payments: Payments will be made in cash after year-end financials are available. This will normally occur about February 1 following the end of the previous fiscal year. EFFECTIVE DATE: As of the 2004 bonus, and supersedes all Executive Bonus Policies in effect prior thereto with respect to the named executive officers. DEFERRED COMPENSATION: Any portion of a bonus which causes total compensation, as defined in Section 162(m) of the Internal Revenue Code of 1986, as amended, to exceed $1,000,000 shall be credited to Seaboard Corporation Executive Deferred Compensation Plan for the account of that Executive Officer. EX-13 5 ex13.txt 2004 ANNUAL REPORT Exhibit 13 SEABOARD CORPORATION Description of Business Seaboard Corporation is a diversified international agribusiness and transportation company primarily engaged domestically in pork production and processing, and cargo shipping. Overseas, Seaboard is primarily engaged in commodity merchandising, flour and feed milling, sugar production, and electric power generation. Table of Contents Letter to Stockholders 2 Division Summaries 4 Principal Locations 6 Summary of Selected Financial Data 7 Quarterly Financial Data (unaudited) 8 Management's Discussion & Analysis of Financial Condition and Results of Operations 9 Managements' Responsibility for Financial Statements 25 Managements' Report on Internal Control over Financial Reporting 25 Report of Independent Registered Public Accounting Firm on Internal Control over Financial Reporting 26 Report of Independent Registered Public Accounting Firm on Consolidated Financial Statements 27 Consolidated Balance Sheets 28 Consolidated Statements of Earnings 29 Consolidated Statements of Changes in Equity 30 Consolidated Statements of Cash Flows 31 Notes to Consolidated Financial Statements 32 Stockholder Information 59 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 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) the cost and timing of the completion of new or expanded facilities, (ii) Seaboard's ability to obtain adequate financing and liquidity, (iii) the price of feed stocks and other materials used by Seaboard, (iv) the sale price for pork products from such operations, (v) the price for other products and services, (vi) the charter hire rates and fuel prices for vessels, (vii) the demand for power, related spot market prices and collectibility of receivables in the Dominican Republic, (viii) the effect of the fluctuation in exchange rates for the Dominican Republic peso, (ix) the effect of the Venezuelan economy on the Marine Division, (x) the potential effect of Seaboard's investment in a wine business on the consolidated financial statements, (xi) the potential impact of various environmental actions pending or threatened against Seaboard, (xii) the potential impact of the American Jobs Creation Act, or (xiii) 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. 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. 1 Letter to Stockholders 2004 will be remembered as a breakthrough year for Seaboard. Sales topped $2 billion for the first time, and operating and net income were by far the highest in our eighty-plus year history. In fact, the fourth quarter of 2004 marked the eighth straight quarter of increasing operating income. We believe that largely because of this financial performance, our Company's stock price increased over 250% during the year, creating enormous value for our shareholders. What a great time to be part of the Seaboard family. Our strategy has always been to spread risk through the diversification of our business operations. In 2004 all of our major divisions performed exceptionally well. Our success was fueled by strong markets worldwide, notably high prices and demand for pork in both the domestic and export sales channels, and a strong ocean freight market. We also benefited from the overall increase in economic activity both in the U.S. and abroad. Seaboard Farms reached sales of almost $1 billion in 2004, with operating income of $144 million. These results are mostly due to higher pork prices in the domestic and international markets, which were attributable to strong demand and a weakened U.S. dollar. In order to meet the strong demand, we also increased our volumes sold by stretching the capacity of our plant with additional weekend processing shifts. We achieved greater efficiencies at the plant and at the farms in 2004, and raised more of our own hogs instead of purchasing these hogs on the open market, which provided additional cost savings. We are very excited about our marketing agreement with Triumph Foods, which was announced early last year. Triumph has a similar business plan, and will produce a similar high-quality product. We view this as a "win-win" situation and look forward to bringing their product on board later this year. The Commodity Trading and Milling business surpassed $1 billion in sales in 2004 representing an increase of 60% over the prior year. On the trading side, we increased our market share in many of the dedicated routes and regions we serve, and opened up new markets in select countries in order to strengthen our existing routes. Generally speaking, local market conditions improved in our milling locations in Africa, Latin America, and the Caribbean, as total sales increased 7% year over year. Seaboard Marine had an exceptional year as well in 2004. Sales were just under $500 million, and operating income was $62 million. Although in recent years we have seen increasing volumes from this division, we have also seen revenue per unit shipped decline. In 2004 we began to see this relationship change, as both volumes and revenue per unit shipped started to increase. The shipping industry as a whole enjoyed increased freight rates, and demand for shipping remains strong, mainly due to pressure from Asia. Earlier this year, my good friend and the longtime president of Seaboard Marine, John Lynch, retired. I very much appreciate his leadership and creativity, and the success he has brought the Company over the past years. Under his leadership, Seaboard Marine grew to become a leading carrier in Latin America and the Caribbean Basin. Taking over the reins is Eddie Gonzalez. Eddie has spent the majority of his career with Seaboard, most recently running Marine's Miami terminal operations. I am confident that with Eddie's knowledge and years of experience, he will continue to promote the growth of this business in the future. 2 Tabacal, our Sugar and Citrus business, has experienced lower prices for sugar domestically in Argentina, and because of high volume harvests during the past couple of years, we do not expect an increase in the sugar price in 2005. Also, our Power business in the Dominican Republic, while delivering positive operating income over the past several years, has struggled recently with slow payment of receivables from partially government-owned customers. Looking forward to 2005, there are some challenges on the horizon. Although the near term forecast for pork prices and cargo container shipping rates remains quite positive, they are still commodities, and commodity prices are notoriously cyclical. We cannot expect these prices to continue at their current levels indefinitely. At the same time, however, we are staying focused on increasing efficiencies in our production process, and are pursuing new value-added products to attempt to minimize the cyclical effect. In facing these issues, our strategy in 2005 will be to continue to identify opportunities for both increasing growth and decreasing operating costs wherever possible. Our focus will also be to further capitalize on synergies between and among our businesses in order to improve the utilization and management of our assets. I am glad that you, the shareholder, were rewarded in 2004 for your belief in Seaboard and in our business model. Although we were always confident of the intrinsic value of our Company, the market has not always reflected that value. Finally, I want to personally thank each and every Seaboard employee for their part in making 2004 such a tremendous year. The unique nature of our businesses requires an around-the-clock effort on the part of our employees, and without their hard work and commitment, we would not have had the results we did. I also ask each employee to continue their efforts in 2005, as we work toward making this year as memorable as the last. /s/ H.H. Bresky H.H. Bresky Chairman of the Board, President and Chief Executive Officer 3 Pork Division Seaboard's Pork Division is one of the largest vertically integrated pork processors in the United States. Seaboard is able to control animal production and processing from research and development in nutrition and genetics, to the production of high quality meat products at our processing facility. Seaboard's processing facility in Guymon, Oklahoma opened in 1995. The facility has a daily double shift capacity to process approximately 16,000 hogs and generally operates at capacity with additional weekend shifts depending on market conditions. Seaboard produces and sells fresh and frozen pork to further processors, foodservice outlets, grocery stores and other retail customers, and distributors throughout the United States and foreign markets. Hogs processed at the plant principally include Seaboard-raised hogs as well as hogs raised by third parties purchased under contract and in the open market. 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 approximately three and one- half million market hogs annually. Seaboard owns and operates six centrally located feed mills to provide formulated feed to these facilities and has additional feed mill capacity to support future growth. Seaboard's vertically integrated system provides a number of strategic advantages relative to other companies in the industry. These advantages, which result largely from significant control of the production and processing chain, allow Seaboard to produce high quality, safe products. The consistency and quality of Seaboard pork have allowed Seaboard to become one of the leading exporters of pork products from the United States to Japan and other foreign markets. Commodity Trading & Milling Division Seaboard's Commodity Trading & Milling Division internationally markets wheat, corn, soybean meal and other commodities in bulk to third party customers and affiliated companies. These commodities are purchased worldwide with primary destinations in Africa, South America, the Caribbean, and the Eastern Mediterranean. The division originates, transports and markets approximately 4.8 million tons annually of wheat, corn, soybean meal and other commodities. The focus remains on the efficient supply of quality products and services to the wheat and maize milling and animal feed industries. Seaboard integrates the service of delivering commodities to its customers primarily through the use of chartered bulk vessels and its seven owned bulk carriers. Seaboard's Commodity Trading and Milling Division operates in sixteen countries, including five trading locations and thirteen grain processing businesses. The grain processing businesses are operated through five consolidated and eight non-consolidated affiliates in Africa, South America, and the Caribbean with flour, feed and maize milling businesses producing approximately one and one-half million metric tons of finished product per year. 4 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 a 135,000 square-foot warehouse for cargo consolidation and temporary storage in addition to a 70 acre terminal at the Port of Miami. At the Port of Houston, Seaboard operates a 62 acre cargo terminal facility that includes over 690,000 square feet of on-dock warehouse space for temporary storage of bagged grains, resins and other cargoes. Seaboard also makes scheduled vessel calls in New Orleans, Louisiana, Fernandina Beach, Florida, and Philadelphia, Pennsylvania. Seaboard's fleet consists of seven owned and approximately 23 chartered vessels, thousands of dry, refrigerated and specialized containers and related equipment. Within its service lanes, Seaboard is one of the largest shippers in terms of cargo volume to and from the Port of Miami and provides direct service to over 25 countries. Seaboard also provides extended service from our domestic ports of call to and from multiple foreign destinations through connecting carrier agreements with major regional and global carriers. To maximize fleet utilization, Seaboard uses a network of offices and agents throughout the United States, Canada, Latin America, and the Caribbean Basin to book both northbound and southbound cargo to and from the United States and between the countries it serves. Seaboard's full service intermodal capabilities allow the transport by either truck or rail, of both import and export cargo to and from various U.S. ports. Seaboard's frequent sailings and fixed-day schedules make it convenient for customers to coordinate manufacturing schedules and maintain inventories at cost-efficient levels. Seaboard's approach is to work in partnership with its customers and provide the most effective level of service throughout the United States to and from Latin America and the Caribbean Basin and between the countries it serves. Other Divisions Seaboard's other businesses consist largely of food-related businesses and electric power generation. Seaboard is involved in the production and refining of sugar, and the production and processing of citrus products in Argentina. These products are primarily marketed locally with some exports to the United States, other South American countries and Europe. Seaboard's mill, one of the largest in Argentina, currently has a processing capacity of approximately 180,000 metric tons of sugar per year. During 2005 Seaboard plans to increase this capacity to approximately 200,000 metric tons. The mill is located on a large tract of land in the Salta Province. Approximately 46,000 acres of this land is planted with sugar cane which supplies the majority of the raw product processed by the mill. Another 3,000 acres is planted with orange trees. Seaboard owns two floating electric power generating facilities consisting of a system of diesel engines mounted on barges with a combined rated capacity of approximately 112 megawatts. Seaboard operates as an independent power producer that generates electricity into the local power grid but is not involved in the transmission or distribution of electricity. Electricity is sold under contract to certain large commercial users, and on the spot market that is accessed by three wholly or partially government- owned distribution companies, and limited others. Seaboard processes jalapeno peppers at its plant in Honduras. These products are shipped to the United States on Seaboard Marine vessels and distributed from Seaboard's Port of Miami cold storage warehouse. Seaboard sources and sells truck freight to third parties via its brokerage business. This business also provides logistics and transportation service to other Seaboard companies using its owner-operator program and extensive carrier network. Seaboard also has an equity investment in a wine business that produces wine in Bulgaria for distribution primarily throughout Europe. 5 Principal Locations Corporate Office Molinos Champion, S.A.* Seaboard del Peru, Molinos del Ecuados, C.A.* S.A. Seaboard Corporation Ecuador Peru Shawnee Mission, Kansas National Milling Company Seaboard Freight & of Guyana Limited Shipping Jamaica Pork Guyana Limited Jamaica Seaboard Farms National Milling Pork Division Office Corporation Limited Seaboard Marine Shawnee Mission, Zambia Bahamas Ltd. Kansas Bahamas Seaboard West Africa Limited Processing Plant Sierra Leone Seaboard Marine Guymon, Oklahoma (Trinidad) Ltd. Unga Holdings Limited* Trinidad Live Production Kenya and Uganda Operation Offices Seaboard Marine of Julesburg, Colorado Marine Haiti, S.E. Hugoton, Kansas Haiti Leoti, Kansas Seaboard Marine Liberal, Kansas Marine Division Office SEADOM, S.A. Rolla, Kansas Miami, Florida Dominican Republic Guymon, Oklahoma Hennessey, Oklahoma Port Operations Seamaritima S.A. Optima, Oklahoma Fernandina Beach, Florida de C.V. Houston, Texas Mexico Commodity Trading & Miami, Florida Milling New Orleans, Louisiana Sugar and Citrus Philadelphia, Pennsylvania Commodity Trading Ingenio y Refineria Operations Agencias Generales Conaven, C.A. San Martin del Bermuda Venezuela Tabacal SRL Ecuador Argentina Peru Agencia Maritima del Istmo, S.A. South Africa Costa Rica Zambia Power Cayman Freight and Shipping KWABA - Sociedade Services, Ltd. Transcontinental Industrial e Cayman Islands Capital Corp. Commercial, SARL* (Bermuda) Ltd. Angola JacintoPort International LP Dominican Republic Houston, Texas Les Moulins d'Haiti S.E.M.* Representationes Maritima y Other Haiti Aereas, S.A. Guatemala Boyar Estates S.A.* Lesotho Flour Mills Bulgaria Limited* Sea Cargo, S.A. Lesotho Panama Chestnut Hill Farms Honduras, S. de Life Flour Mill Ltd* Seaboard de Colombia, S.A. R.L. de C.V. Top Feeds Limited* Colombia Honduras Nigeria Seaboard Honduras, S. de R.L. Mount Dora Farms Inc. Minoterie de Matadi, de C.V. Miami, Florida S.A.R.L.* Honduras Democratic Republic Seaboard Transport, of Congo Inc. Shawnee Mission, Minoterie du Congo, S.A. Kansas Republic of Congo Mobeira, SARL Mozambique *Represents a non-controlled, non-consolidated affiliate 6 Summary of Selected Financial Data Years ended December 31, (Thousands of dollars except per share amounts) 2004 2003 2002 2001 2000 Net sales $2,683,980 $1,981,340 $1,829,307 $1,804,610 $1,583,696 Operating income $ 251,254 $ 68,786 $ 47,125 $ 114,352 $ 48,065 Earnings from continuing operations $ 168,096 $ 31,842 $ 13,507 $ 51,989 $ 8,872 Net earnings $ 168,096 $ 31,842 $ 13,507 $ 51,989 $ 98,909 Earnings per common share from continuing operations $ 133.94 $ 25.37 $ 9.38 $ 34.95 $ 5.96 Net earnings per common share $ 133.94 $ 25.37 $ 9.38 $ 34.95 $ 66.49 Total assets $1,436,694 $1,325,691 $1,281,141 $1,234,757 $1,274,234 Long-term debt, less current maturities $ 262,544 $ 321,555 $ 318,746 $ 255,819 $ 312,418 Stockholders' equity $ 692,682 $ 520,565 $ 486,731 $ 528,420 $ 540,685 Dividends per common share $ 3.00 $ 3.00 $ 2.50 $ 1.00 $ 1.00 In the fourth quarter of 2004, Seaboard recognized a $3,592,000 decline in value considered other than temporary in its investment in a Bulgarian wine business as a charge to loss from foreign affiliates. See Note 13 to the Consolidated Financial Statements for further discussion. As a result of its decision to sell this equity investment, in the fourth quarter of 2004, Seaboard recharacterized the related accounting for income tax purposes from ordinary to capital losses, which resulted in the reversal of a previously recorded tax benefit of $5,795,000 related to prior year losses. See Note 7 to the Consolidated Financial Statements for further discussion. The effect of these fourth quarter events related to this business was a decrease in net earnings of $7.48 per common share. In January 2005, Seaboard agreed to a tax settlement related to prior year tax returns resulting in a tax benefit of $14,356,000, or $11.44 per common share, which was recognized in the fourth quarter of 2004. See Note 7 to the Consolidated Financial Statements for further discussion. During the fourth quarter of 2003, Seaboard sold its equity investment in Fjord Seafood ASA (Fjord), an integrated salmon producer and processor headquartered in Norway, recognizing a gain of $18,036,000. The gain was not subject to tax. See Note 3 to the Consolidated Financial Statements for additional discussion. During 2003, Seaboard recorded its share of losses related to its investment in Fjord totaling $15,546,000, including $12,421,000 for asset impairment charges. Seaboard's share of losses from Fjord during 2002 and 2001 totaled $10,158,000 and $1,316,000, respectively. See Note 13 to the Consolidated Financial Statements for additional discussion. Also during 2003, Seaboard adopted Statement of Financial Accounting Standard No. 143, "Accounting for Asset Retirement Obligations," Financial Accounting Standards Board Interpretation No. 46, revised December 2003, "Consolidation of Variable Interest Entities," and changed its method of accounting for costs associated with the regularly scheduled drydocking of vessels from the accrue-in-advance method to the direct-expense method. As a result of these changes, Seaboard recorded a net cumulative effect of changes in accounting principles of $2,868,000, or $2.29 per share. See Note 1 to the Consolidated Financial Statements for additional information. During 2002, Seaboard completed a series of transactions related to its Argentine sugar business, resulting in a one-time tax benefit of $14,303,000. See Note 7 to the Consolidated Financial Statements for further discussion. During 2002, Seaboard effectively repurchased 232,414.85 shares of common stock from its parent company. See Note 12 to the Consolidated Financial Statements for further discussion. Seaboard's 2002 and 2001 financial position and results of operations were negatively impacted by the devaluation of the Argentine peso. See Note 12 to the Consolidated Financial Statements for further discussion. Seaboard completed the sale of its Poultry segment on January 3, 2000, recognizing an after-tax gain on disposal of discontinued operations of $90,037,000 or $60.53 per common share. 7 Quarterly Financial Date (unaudited) (UNAUDITED) (Thousands of dollars 1st 2nd 3rd 4th Total for except per share amounts) Quarter Quarter Quarter Quarter the Year 2004 Net sales $ 615,675 712,307 667,462 688,536 $2,683,980 Operating income $ 42,762 55,527 71,368 81,597 $ 251,254 Net earnings $ 27,377 34,256 46,548 59,915 $ 168,096 Earnings per common share $ 21.81 27.29 37.09 47.74 $ 133.94 Dividends per common share $ 0.75 0.75 0.75 0.75 $ 3.00 Market price range per common share: High $ 352.00 498.00 669.99 1,038.00 Low $ 280.00 317.00 482.65 545.00 2003 Net sales $ 461,867 485,883 485,417 548,173 $1,981,340 Operating income $ 7,974 10,289 17,845 32,678 $ 68,786 Net earnings (loss) $ 2,715 (2,916) 1,838 30,205 $ 31,842 Earnings (loss) per common share $ 2.16 (2.32) 1.46 24.07 $ 25.37 Dividends per common share $ 0.75 0.75 0.75 0.75 $ 3.00 Market price range per common share: High $ 263.00 225.75 268.00 284.95 Low $ 195.00 195.00 203.00 215.00 In the fourth quarter of 2004, Seaboard recognized a $3,592,000 decline in value considered other than temporary in its investment in a Bulgarian wine business as a charge to loss from foreign affiliates. See Note 13 to the Consolidated Financial Statements for further discussion. As a result of its decision to sell this equity investment, in the fourth quarter of 2004, Seaboard recharacterized the related accounting for income tax purposes from ordinary to capital losses, which resulted in the reversal of a previously recorded tax benefit of $5,795,000 related to prior year losses. See Note 7 to the Consolidated Financial Statements for further discussion. The effect of these fourth quarter events related to this business was a decrease in net earnings of $7.48 per common share. In January 2005, Seaboard agreed to a tax settlement related to prior year tax returns resulting in a tax benefit of $14,356,000, or $11.44 per common share, which was recognized in the fourth quarter of 2004. See Note 7 to the Consolidated Financial Statements for further discussion. In the first quarter of 2003, Seaboard adopted Statement of Financial Accounting Standard No. 143, "Accounting for Asset Retirement Obligations" and changed its method of accounting for costs associated with the regularly scheduled drydocking of vessels from the accrue-in-advance method to the direct-expense method. As result of these changes, Seaboard recorded a net cumulative effect of changes in accounting principles of $3,648,000, or $2.90 per share. See Note 1 to the Consolidated Financial Statements for further discussion. During the fourth quarter of 2003, Seaboard adopted Financial Accounting Standards Board Interpretation No. 46, revised December 2003, "Consolidation of Variable Interest Entities," and recorded a cumulative effect of a change in accounting principles of $(780,000), or $(0.62) per common share. See Note 1 to the Consolidated Financial Statements for further discussion. During the fourth quarter of 2003, Seaboard sold its equity investment in Fjord, recognizing a gain of $18,036,000. The gain was not subject to tax. See Note 3 to the Consolidated Financial Statements for further discussion. During the third quarter of 2003, Seaboard recorded a $12,421,000 charge to earnings for its share of asset impairments related to its investment in Fjord. See Note 13 to the Consolidated Financial Statements for further discussion. 8 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW Seaboard is a diverse agribusiness and transportation company with global operations in several industries. Most of the sales and costs of Seaboard's segments 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. As each segment operates in unrelated industries and different geographical locations, management evaluates their operations separately. Pork Segment Management views the Pork segment as Seaboard's most significant operation. It is primarily a domestic business with some export sales to Japan and other foreign markets. All sales of pork products are generated from a single hog processing plant in Guymon, Oklahoma, which operates at double shift capacity. In 2004, Seaboard raised over 70% of the hogs processed at the plant with the remaining hog requirements purchased primarily under contracts from independent producers. This segment is also the most capital intensive segment with approximately 45% of consolidated assets, including approximately 75% of Seaboard's fixed assets and material dollar amounts for live hog inventories. Management believes the Pork segment possesses the ability to generate the most material amount of operating income and cash flow in any one year than any of Seaboard's other businesses, as was demonstrated by the 2004 operating results. Of Seaboard's businesses, the Pork segment also has the greatest exposure 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 world wide supply and demand for pork products and other proteins. Feed costs are the most significant single component of the cost of raising hogs and can be materially affected by commodity prices for corn and soybean meal. In addition, costs can be materially affected by market prices for hogs purchased from third parties for processing at the plant. During 2003, this segment completed populating its last expansion of live production facilities. Management currently has no immediate plans for further expansion to support the Guymon plant. Furthermore, during 2004 management decided not to construct a second processing plant at this time. Accordingly, future working capital needs and other financing requirements related to incremental internal expansion should be minimal. As the Guymon plant operates at capacity, to improve operating income Seaboard is constantly working towards improving the efficiencies of the Pork operations as well as considering ways to increase margins by expanding product offerings. In early 2004, Seaboard entered into a marketing agreement with Triumph Foods LLC (Triumph) to market all of the pork products produced at Triumph's pork processing plant that is under construction in St. Joseph, Missouri. Seaboard will earn a commission for this service and will be reimbursed for certain expenses. The plant is scheduled to begin operations in late 2005. This plant will have similar capacity to Seaboard's Guymon plant with the business based upon the same integrated model as Seaboard's. The Triumph plant is not expected to reach full double shift operating capacity until 2007. Commodity Trading and Milling Segment The Commodity Trading and Milling segment, for the first time, exceeded $1 billion in sales during 2004. It is Seaboard's second largest segment with approximately 20% of consolidated assets, which consist primarily of working capital assets. This segment principally operates overseas with locations in Africa, Bermuda, South America and the Caribbean. These foreign operations can be significantly impacted by local crop production, political instability, economic conditions and currency fluctuations. This segment's sales are also significantly affected by fluctuating prices for various commodities, such as wheat, corn and soybean meal. Although this segment owns seven ships, most of the third party trading business is transacted with chartered ships. Charter hire rates, influenced by available charter capacity for worldwide trade in bulk cargoes, and related fuel costs can also impact business volumes and margins. The milling businesses, both consolidated and non-consolidated affiliates, operate in many foreign and, in most cases, lesser developed countries. Subsidized wheat and flour exports can create fluctuating market conditions that can have a significant impact on both the trading and milling businesses' sales and operating income. 9 The majority of the Commodity Trading and Milling segment's sales pertain to the commodity trading business which has experienced significant volume growth over the past few years, especially in 2004. This growth has increased the amount of working capital required to fund increases in accounts receivable and inventories. Increased shipping requirements have been satisfied by the charter-hiring of bulk cargo ships. As the commodity trading portion of the business originates grain sales from and sells to many international locations, timing of completion of voyages, and the availability of and rates for bulk cargo shipping can significantly affect sales volumes, operating income and cash flows from quarter-to-quarter. Seaboard continues to look for opportunities for additional markets to expand the commodity trading and milling operations. Marine Segment The Marine segment is the third largest in terms of sales and assets. This segment provides containerized cargo shipping services primarily from the United States to over twenty-five different countries in the Caribbean Basin, and Central and South America. Fluctuations in economic conditions or unstable local political situations in the countries in which Seaboard operates can affect import/export trade volumes. 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 also affected by fluctuations in charter hire rates and fuel costs. Seaboard's marine business is fairly mature and historically had fairly stable cash flows with minimal financing requirements. However, during 2003 and 2002 Seaboard experienced the effects of the economic and political instability in Venezuela which also affected other related South American markets. This had a significant negative impact on operating income while reducing related cash flows. During this time, Seaboard replaced the lost Venezuelan volumes with new routes, and expanded volumes on existing routes, although margins decreased. During 2004, Seaboard was able to increase cargo rates in most markets, and commercial activity improved in Venezuela. Assuming this segment continues to expand its volumes, needs for cargo carrying and handling equipment will increase over the next couple of years. Seaboard continues to look for ways to increase volumes on existing routes while looking to provide additional new services for the region. Sugar and Citrus Segment Seaboard's Sugar and Citrus segment operates a sugar mill in Argentina, locally growing a substantial portion of the sugar cane processed at the mill. This segment's sales and operating income are significantly impacted by local and worldwide sugar prices. Yields from the Argentine sugar harvest can have an impact on the local price of sugar. Also, but to a lesser degree, price fluctuations of the world market can affect local sugar prices and can also impact export sale volumes. Depending on local harvest and market conditions, this business purchases third party sugar and citrus for resale. Over the past several years, Seaboard made several modifications to this business to improve the efficiency of its operations. As the functional currency of the Sugar and Citrus segment is the Argentine peso, the currency exchange rate can also have an impact on reported U.S. dollar sales, operating income and cash flows. As discussed in Note 12 to the Consolidated Financial Statements, the Argentine peso experienced a significant devaluation compared to the U.S. dollar beginning in 2001 and extending into 2002, resulting in material foreign currency losses and write-downs of Seaboard's asset values related to this operation. Although the economy of Argentina was negatively impacted by the devaluation and ensuing recession throughout 2002, economic conditions steadily improved in 2003 and remained relatively stable throughout 2004. Since the devaluation, this segment has generated positive cash flows from operations. Financing needs for the foreseeable future are not expected to be significant for this operation. Seaboard continues to explore ways to improve and expand its existing operations while considering other alternatives to expand this segment. Power Segment Seaboard's Power segment operates as an unregulated independent power producer in the Dominican Republic (DR) generating power from diesel engines mounted on two barges. Historically, these engines have been fully dispatched as a result of the relative efficiency of the operations, and until the end of 2003, the engines operated at capacity. This segment's financing needs have been minimal. Until the past two years, this segment has produced some of Seaboard's best return on investment although operating cash flows have fluctuated from inconsistent customer collections. Seaboard has contracts to sell approximately 40% of its power to certain government-approved 10 commercial large users under long-term contracts and, at year-end, entered into short-term contracts for most of the remaining production. Energy produced in excess of contracted amounts is sold on the spot market to three wholly or partially- government-owned distribution companies or other generators who lack sufficient power production to service their customers. Fuel is the largest cost component but increases in fuel prices have generally been passed through to customers. The economic environment in the DR has been in turmoil for the last two years. During 2003, the exchange rate for the Dominican peso devalued significantly before strengthening somewhat during 2004. In addition, since the last half of 2003, the power industry in the DR has suffered from a cash flow imbalance that began when the government did not allow retail electricity rates charged by the distribution companies to increase sufficiently in a timely manner to cover the significant peso devaluation and increases in U.S. dollar-denominated fuel costs. As a result of the weakened economic environment in the DR, the generating companies have experienced 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. As a result, similar to other independent power producers at the end of 2003 and throughout 2004, Seaboard curtailed its level of power generation from time to time based on management's belief about collectibility of receivables from spot sales. While multilateral credit agencies may eventually provide funding support to this country to improve liquidity, management cannot predict if adequate funding will occur to fully resolve this situation during the next year. With the exception of those government or government-reliant customers, the commercial contract customers generally pay their accounts timely. Seaboard continues to pursue additional commercial contract customers, which would reduce dependency on the government for liquidity. In addition, Seaboard is pursuing additional investment opportunities in the DR power industry. LIQUIDITY AND CAPITAL RESOURCES Summary of Sources and Uses of Cash Cash and short-term investments as of December 31, 2004 increased $38.5 million from December 31, 2003 reflecting cash generated from operations. While cash from operating activities totaled $194.1 million, $54.2 million was used for scheduled maturities of long-term debt, $73.8 million was used to repay notes payable to banks, and $33.6 million was used for capital expenditures. Cash from operating activities for 2004 increased $102.4 million compared to 2003, primarily reflecting increased earnings, partially offset by the increased working capital needs primarily from the increase in business, especially in the Commodity Trading and Milling segment, and an additional special funding of $14.3 million to Seaboard's qualified defined benefit pension plan (see Note 10 to the Consolidated Financial Statements). For the Commodity Trading and Milling segment, the overall increase in trading activity and commodity costs caused increases in accounts receivable and inventories. Working capital needs also increased for the Power segment as a result of continuing slow collections of accounts receivable. Overall, the Pork segment and, to a lesser degree, the Marine segment generated the cash from operating activities. Cash and short-term investments as of December 31, 2003 increased $41.8 million over December 31, 2002 primarily reflecting the proceeds of $37.4 million from the sale of 100% of Seaboard's equity investment in Fjord Seafood, ASA (Fjord) in the fourth quarter of 2003. Uncertainties about the future profitability of this business, led to management's decision to divest its equity investment in the salmon industry. Cash generated from operating activities totaled $91.7 million for 2003 and was used primarily for scheduled principal payments of long-term debt of $52.9 million and capital expenditures of $31.5 million. Cash from operating activities for 2003 increased $64.2 million compared to 2002 primarily related to improved operating results of the Pork segment and a lower level of funding for working capital requirements. The reduced funding for working capital requirements primarily reflects the substantial increase in working capital requirements in 2002 for the expansion of the commodity trading business, while in 2003 such working capital needs remained fairly constant for this business. However, working capital requirements increased for the Pork segment in 2003, as live hog inventory levels were increased during 2003 reflecting new hog production facilities being fully populated. In addition, the Power segment's receivables increased due to collection problems. 11 Capital Expenditures During 2004 Seaboard invested $33.6 million in property, plant and equipment, of which $11.8 million was expended in the Pork segment, $10.3 million in the Marine segment, $4.9 million in the Commodity Trading and Milling segment, $5.5 million in the Sugar and Citrus segment and $1.1 million in the remaining businesses. The capital expenditures for 2004 were primarily of a normal recurring nature which included replacements of machinery and equipment, and general facility modernizations and upgrades. As of December 31, 2004 Seaboard was committed to spend $3.8 million to purchase equipment and $2.1 million to purchase a previously chartered containerized cargo vessel. Subsequent to December 31, 2004, Seaboard committed to spend $7.1 million to purchase a used bulk vessel for the Commodity Trading and Milling segment. With the exception of a $2.5 million sugar mill expansion project, there are no major expansions currently planned. The capital expenditure budget for 2005 totals $42.6 million, including $11.4 million in the Pork segment for improvement to existing hog production facilities and upgrades to the processing plant; $12.4 million in the Commodity Trading and Milling segment for the purchase of a bulk vessel discussed above, milling facility upgrades and related equipment; $8.9 million in the Marine segment for additional cargo carrying and handling equipment and to purchase a previously chartered vessel noted above; $8.9 million in the Sugar and Citrus segment for the mill expansion discussed above, improvements to the plantation and harvesting equipment; and $1.0 million in all other businesses for general replacements of machinery and equipment. Management anticipates paying for these capital expenditures from internally generated cash and the use of available short-term investments. During 2003 Seaboard invested $15.8 million in the Pork segment primarily for the expansion of existing hog production facilities, and land acquisition and permitting activities to support the requirements of the potential second processing plant that management has since decided not to pursue at this time. These capital expenditures exclude an increase in net fixed assets in 2003 for hog production facilities previously leased under a master lease agreement that were acquired for a total of $25.0 million primarily from the assumption of debt as discussed below, and also exclude $31.7 million of net fixed assets from the consolidation of variable interest entities (VIEs). See Note 1 to the Consolidated Financial Statements for further discussion of consolidation of VIEs. Also during 2003, Seaboard invested $7.7 million in the Marine segment primarily for expansion and replacement of cargo transportation and loading equipment, and facility improvements; $4.4 million in the Sugar and Citrus segment primarily for machinery and equipment, and improvements to the mill and sugarcane fields; and $3.6 million in all other segments for general modernization, mill expansion, and efficiency upgrades of plant and equipment. During 2002, Seaboard invested $149.9 million in property, plant and equipment including $135.1 million in the Pork segment. This amount was primarily to purchase hog production facilities previously leased, expand the hog production facilities, make improvements to the pork processing plant, and purchase land and obtain operating permits for the potential expansion project that management has since decided not to pursue at this time. The hog production facilities previously leased from Shawnee Funding, Limited Partnership under a master lease arrangement, were purchased in 2002 for a total of $117.5 million. This was financed primarily with the proceeds from a private placement of $109.0 million of Senior Notes, as discussed below. In early 2002, Seaboard announced plans to build a second processing plant in northern Texas along with related plans to expand its vertically integrated hog production facilities. With the pending completion of the construction of the Triumph pork processing plant discussed above, during 2004 management determined that Seaboard would not proceed with the expansion project at this time. Financing Activities, Debt and Related Covenants During the first half of 2004, Seaboard entered into two new one- year committed credit lines totaling $45.0 million and extended for one year a $20.0 million committed credit facility. In addition, Seaboard combined, increased, and extended its committed subsidiary credit facilities for use in the commodity trading business from a total of $80.0 million to $95.0 million expiring on April 30, 2005. These facilities are all denominated in U.S. dollars. 12 During the fourth quarter of 2004, Seaboard entered into a new $200 million, five year credit facility replacing three existing committed credit facilities totaling $70 million. 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. Management believes there are currently no covenants that materially restrict our ability to undertake additional debt financings. As of December 31, 2004, Seaboard is in compliance with all restrictive covenants relating to these arrangements. During 2004, the 10% minority interest owner of one of the power barges located in the Dominican Republic exercised a put option for the equity interest. See Note 2 to the Condensed Consolidated Financial Statements for further discussion. In conjunction with the 2003 purchase of hog production facilities previously leased, Seaboard assumed bank debt of $24.4 million as discussed in Note 8 to the Consolidated Financial Statements. In addition, Seaboard assumed $29.9 million of bank debt from one VIE. As of December 31, 2003, the consolidation of VIEs in accordance with FIN 46, including the assumed debt, increased long-term debt by $31.5 million. In 2002, Seaboard completed the private placement of $109.0 million of Senior Notes due 2009 and 2012 with a weighted average interest rate of 6.29%. Seaboard used $107.3 million of the proceeds from this private placement to purchase the indebtedness related to hog production facilities previously leased under a master lease program, effectively reducing the net lease payments. On December 31, 2002, Seaboard paid an additional $4.1 million and assumed a $10.0 million bond payable to complete the acquisition of Shawnee Funding, Limited Partnership effectively acquiring all of the related hog production facilities previously leased and $2.2 million of cash held in a construction fund which was used to repay a portion of the bonds payable. The following table represents a summary of Seaboard's available borrowing capacity as of December 31, 2004. Borrowings of $1.8 million were outstanding under uncommitted lines as of December 31, 2004. Letters of credit of $55.7 million reduced Seaboard's borrowing capacity under its committed credit lines primarily representing $44.3 million for Seaboard's outstanding Industrial Development Revenue Bonds and $10.4 million related to insurance coverages. Total amount (Thousands of dollars) available Long-term credit facility - committed $200,000 Short-term credit facilities - committed 115,000 Short-term uncommitted demand notes 30,225 Total borrowing capacity 345,225 Amounts drawn against lines (1,789) Letters of credit reducing borrowing availability (55,731) Available borrowing capacity at December 31, 2004 $287,705 During 2005, Seaboard intends to extend or replace its $95.0 million subsidiary credit facility and $20.0 million credit facility, both of which expire in April 2005. Scheduled long- term debt maturities range from $42.0 million to $65.0 million per year over the next three years. Seaboard's existing operations currently have no material capital expenditure needs. Based on current expenditure levels, it is anticipated that such annual capital expenditures will range between $25 million and $40 million. Accordingly, management believes Seaboard's current combination of internally generated cash, liquidity, capital resources and borrowing capabilities will be adequate for its existing operations. Management does, however, periodically review various alternatives for future financings to provide additional liquidity for future operating plans. Management intends to continue seeking opportunities for expansion in the industries in which Seaboard operates and, based on current liquidity and available borrowing capacity, has no plans to pursue other financing alternatives. 13 Contractual Obligations and Off-Balance-Sheet Arrangements A summary of Seaboard's contractual cash obligations as of December 31, 2004 is as follows: (Thousands of dollars) 2005 2006 2007 2008 2009 Thereafter Vessel time-charter commitments $ 49,389 $ 28,020 $ 10,807 $ 1,056 $ - $ - Contract grower finishing agreements 10,848 10,588 10,514 10,609 10,706 80,615 Other operating lease payments 8,728 8,280 7,170 5,456 2,055 6,862 Total lease obligations 68,965 46,888 28,491 17,121 12,761 87,477 Long-term debt 60,756 41,991 65,049 13,864 49,453 92,187 Short-term notes payable 1,789 - - - - - Other purchase commitments 267,885 84,621 58,555 - - - Total contractual cash obligations and commitments $399,395 $173,500 $152,095 $30,985 $62,214 $179,664 The Marine segment enters into contracts to time-charter vessels for use in its operations. Historically, these commitments have been short-term. However, as a result of increased demand for vessels and increasing charter hire rates, this segment has entered into long-term commitments. These agreements are discussed further in Note 11 to the Consolidated Financial Statements. To support the operations of the Pork segment, Seaboard has agreements in place with farmers to raise a portion of Seaboard's hogs according to specifications. See Note 11 to the Consolidated Financial Statements for further information. 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 also enters into commodity purchase contracts, primarily to support sales commitments. See Note 11 to the Consolidated Financial Statements for a further discussion and for a more detailed listing of other purchase commitments. Subsequent to December 31, 2004, Seaboard committed to spend $7.1 million to purchase a used bulk vessel for the Commodity Trading and Milling segment. Seaboard has also issued $2.9 million of guarantees to support certain activities of non-consolidated affiliates or third parties who provide services for Seaboard. See Note 11 to the Consolidated Financial Statements for a detailed discussion. In early 2004, in conjunction with the marketing agreement with Triumph, as discussed above, Seaboard committed to provide Triumph with future financing of up to $1.75 million in the event of certain specified cost over-runs incurred during plant development and construction. RESULTS OF OPERATIONS Net sales for the year ended December 31, 2004 increased $702.7 million to $2,684.0 million from $1,981.3 million in 2003 and $1,829.3 million for 2002. The increase in net sales in 2004 was primarily the result of increased commodity trading volumes and commodity prices, higher market prices for pork products and improved average rates for marine cargo service with increased volumes. The 2003 increase in net sales over 2002 primarily reflected higher domestic market prices for pork products, and higher sales for the Marine segment attributable to higher cargo volumes. Operating income increased to $251.3 million in 2004, up from $68.8 million in 2003 and $47.1 million in 2002. The 2004 improvement compared to 2003 primarily reflects the higher market prices for pork products along with the improved average rates and, to a lesser extent, increased volumes for marine cargo services. Increased trading volumes also contributed to the 2004 increase. The main component of the increase in 2003 compared to 2002 was higher market prices for pork products. Partially offsetting this increase were significant declines in the Marine and Power segments in 2003 reflecting various difficulties experienced in certain countries where they conduct business. 14 Pork Segment (Dollars in millions) 2004 2003 2002 Net sales $ 961.6 $ 735.7 $ 645.8 Operating income (loss) $ 143.9 $ 22.4 $ (13.9) Net sales for the Pork segment increased $225.9 million for the year ended December 31, 2004 compared to 2003, primarily as a result of higher domestic and international market prices for pork products and, to a lesser extent, higher sales volumes. The demand for pork products remained strong for both domestic and international markets throughout 2004 as a result of higher prices for competing proteins, favorable export conditions and a weakened U.S. dollar. Sales volumes increased as Seaboard operated additional weekend processing shifts during 2004 to take advantage of the favorable market conditions. Operating income increased $121.5 million for the year ended December 31, 2004 compared with 2003 primarily as a result of the higher sales prices and volumes discussed above, partially offset by higher costs for third party hogs used for processing. Also contributing to the improved profitability percentage was an increase in processing of both the number and percentage of Seaboard-raised hogs, which cost less than third party hogs in 2004. For 2004, operating income also includes an $8.1 million LIFO benefit, reflecting increases in the number of Seaboard- raised hogs over the prior year, compared with a $3.8 million LIFO benefit in 2003. During 2004, Seaboard expensed $1.4 million for abandoned land development costs for certain potential hog production sites and a potential second plant site that Seaboard has decided not to pursue at this time. Management is unable to predict future market prices for pork products, feed costs and third party hogs, or how long the relatively strong overall market conditions will be sustained. During 2004, market prices for pork products were unusually high compared to historic norms. History has demonstrated that high market prices are not sustained over long periods of time but rather rise and fall based on prevailing market conditions. Management currently anticipates favorable markets through the first half of 2005 for pork prices and feed costs, and overall expects this segment to remain profitable during 2005. Net sales for the Pork segment increased in 2003 compared to 2002 primarily as a result of higher domestic market prices for pork products. The excess domestic meat supplies experienced during 2002 resulted in lower sales prices throughout 2002 and into early 2003, although prices generally improved during 2003 compared with 2002, especially in the fourth quarter of 2003. Sales volumes remained relatively unchanged for 2003 compared to 2002. Operating income for the Pork segment increased in 2003 compared to operating losses incurred during 2002. The increase primarily reflects improved market prices as discussed above, partially offset by higher costs of hogs purchased from third parties for processing and higher feed costs for hogs raised by Seaboard. For 2003, operating income also includes a $3.8 million LIFO benefit (including a $7.5 million benefit in the fourth quarter), reflecting increases in the number of Seaboard-raised hogs over the prior year, as compared with a $6.2 million LIFO charge to earnings in 2002 (including a $6.5 million charge in the fourth quarter). Operating income for 2003 also included a $2.5 million charge for land development costs for several potential hog production sites that Seaboard determined it would no longer pursue. Commodity Trading and Milling Segment (Dollars in millions) 2004 2003 2002 Net sales $1,066.5 $ 667.9 $ 652.1 Operating income $ 27.4 $ 16.0 $ 18.4 Income (loss) from foreign affiliates $ 5.8 $ (0.4) $ (3.8) Net sales for the Commodity Trading and Milling segment increased $398.6 million for the year ended December 31, 2004 compared to 2003. This increase is primarily the result of higher trading volumes to third parties from increased volumes in existing markets and new market penetration, primarily for wheat, while corn and soybean meal volumes were also higher. To a lesser extent, volumes also increased to affiliates, primarily for wheat. Also contributing to the increase in sales were higher worldwide commodity prices and third party freight rates generally recoverable in sales 15 prices. However, commodity prices began to decline during the last half of 2004 compared to commodity prices during the first half of the year. As worldwide commodity price fluctuations cannot be predicted, management is unable to predict future sales but does not expect the rate of growth experienced in 2004 to continue in 2005. Operating income for this segment increased $11.4 million for 2004 compared to 2003 primarily reflecting the increased sales volumes in the trading business discussed above. However, the impact of mark-to-market accounting for commodity futures and options contracts partially offset the improvement. While management believes its commodity futures and options are economic hedges of its firm purchase and sales contracts, Seaboard does not perform the extensive record-keeping required to account for commodity transactions as hedges for accounting purposes. As a result, operating income for the year ended December 31, 2004 includes losses of $5.4 million compared to gains of $2.6 million for 2003 for these mark-to-market adjustments. As products are delivered to customers, these mark- to-market adjustments are primarily offset by actual contract margins, assuming no further commodity price fluctuation. See Note 9 to the Consolidated Financial Statements for further discussion on accounting for commodity derivatives. In addition, Seaboard had entered into some long-term charter contracts in 2003, allowing it to take advantage of higher freight market rates during 2004, increasing its overall profitability percentage. However, management expects these higher freight rates to stabilize or continue increasing throughout 2005 while the long-term charters expire, thus reducing freight leverage opportunities and the positive impact reflected in 2004. Due to the uncertain political and economic conditions in the countries in which Seaboard operates, management is unable to predict future operating results, but anticipates positive operating income for 2005. Income from foreign affiliates for the year ended December 31, 2004 improved $6.2 million from 2003. This improvement primarily reflects improved operating results from most milling operations generally as a result of improved local market conditions. Based on the uncertainty of local political and economic situations in the countries in which the flour and feed mills operate, management cannot predict future results, but currently anticipates these operations will collectively remain profitable during 2005. Net sales for the Commodity Trading and Milling segment increased in 2003 compared to 2002. The increase was primarily attributed to higher selling prices and increased commodity trading volumes to affiliates. This revenue increase was partially offset by a decrease in volume for third party customers during 2003 as a result of lower grain import demands in southern Africa primarily from changed crop conditions. Operating income for this segment decreased in 2003 compared to 2002. Operating income decreased primarily from lower commodity trading activity with third parties, as noted above, increased selling expenses and reserves for bad debts. In addition, during the latter half of 2003, increased demand for bulk cargo-carrying vessels caused a significant increase in charter hire costs. Partially offsetting this decrease was a gain in 2003 of $2.6 million compared to losses of $1.5 million for 2002 related to mark-to-market adjustments of commodity futures and options. Loss from foreign affiliates decreased in 2003 compared to 2002 primarily as a result of improved operating performance for several milling operations. As a result of improved local market conditions, these operations were able to obtain higher prices generally for their products. Marine Segment (Dollars in millions) 2004 2003 2002 Net sales $ 498.5 $ 409.0 $ 383.4 Operating income $ 61.6 $ 5.8 $ 16.6 Net sales for the Marine segment increased $89.5 million for the year ended December 31, 2004, compared to 2003 as a result of higher average cargo rates, especially in the last half of 2004, and higher cargo volumes. Average cargo rates for 2004 increased over 2003 reflecting improved market conditions and better cargo mixes in certain markets. Higher cargo volumes were experienced in most markets as a result of improved economic activities within the countries served by this segment. This was also true for the Venezuelan market, which had experienced significant decreases during the past two years as discussed below. 16 Operating income for the Marine segment increased by $55.8 million over 2003, primarily reflecting the higher average cargo rates and volumes discussed above. Although management cannot predict changes in future cargo rates or to what extent economic conditions will continue to improve for the Venezuelan market, it does anticipate this segment to remain profitable in 2005. The U.S. Maritime Transportation Security Act and corresponding international regulations under The International Ship and Port Facility Security Code became effective July 1, 2004. These regulations require comprehensive security assessments and plans for vessels and facilities in the U.S. and throughout the world. Management believes Seaboard is in compliance and, to date, has not experienced any trade disruptions from these regulations, although it cannot predict if any disruptions could occur in the future if foreign ports do not fully comply. Net sales for the Marine segment increased $25.6 million for 2003 compared to 2002 to $409.0 million. The increase primarily reflects increased cargo volumes in most existing markets, certain new routes added during the fourth quarter of 2002, and chartering of certain company-owned vessels to carry military cargo to the Middle East in the first quarter. The 2003 fourth quarter volumes were especially strong compared to 2002. These increases were partially offset by a decrease in average cargo rates and a significant decline in volumes in the Venezuelan market. Beginning in March 2002, this segment's operations began to experience significant declines in cargo volumes for certain South American routes due primarily to the political and economic instability in Venezuela. Commercial activity in Venezuela declined significantly throughout 2003 following the general strike that began in December 2002 and ended in February 2003 resulting in the discontinuance of all port calls to that country during that period of time. Operating income for the Marine segment decreased in 2003 compared to 2002, primarily reflecting the impact of the political instability in Venezuela, discussed above, higher fuel costs, increased charter hire costs and, to a lesser extent, increased selling expenses as a result of new routes. In addition, charter hire rates in the fourth quarter of 2003 increased significantly. Sugar and Citrus Segment (Dollars in millions) 2004 2003 2002 Net sales $ 72.9 $ 70.7 $ 57.7 Operating income $ 12.3 $ 18.8 $ 16.3 Earnings (loss) from foreign affiliates $ 0.7 $ (0.3) $ - Net sales for the Sugar and Citrus segment increased $2.2 million for the year ended December 31, 2004 compared to 2003. The increase was due to higher citrus trading volumes during the last half of 2004. This increase was partially offset by lower sugar prices during 2004 resulting from the abundant sugar harvests in Argentina during the last two years which resulted in large sugar supplies. As a result, although not able to predict sugar prices, management currently does not expect sugar prices to increase during 2005. Operating income decreased $6.5 million during 2004 compared to 2003 primarily as a result of lower 2004 sugar prices as discussed above, and, to a lesser extent, losses incurred with the citrus trading business. Management expects positive operating income for 2005. Net sales increased $13.0 million for 2003 compared to 2002 primarily as a result of higher sales prices for sugar. The peso price of sugar increased over 2002 prices to offset the effects of the devalued peso. Partially offsetting the increase in sales price were lower sales volumes as a result of lower quantities of sugar purchased from third parties for resale. Operating income for 2003 increased compared to 2002 primarily as a result of the higher sugar prices partially offset by higher operating expenses. Operating income does not include the effects of the material currency translation losses on shareholders' equity and net earnings that were incurred in 2002. See Note 12 to the Consolidated Financial Statements for further discussion. 17 Power Segment (Dollars in millions) 2004 2003 2002 Net sales $ 56.4 $ 69.6 $ 63.1 Operating income $ 4.4 $ 7.0 $ 14.3 Net sales for the Power segment decreased $13.2 million for the year ended December 31, 2004 compared to 2003 primarily due to lower production. Periodically during 2004, Seaboard curtailed production due to management's concerns about the collectibility of accounts receivable. In addition, Seaboard did not record approximately $1.9 million of spot market sales in the second half of 2004 as collectibility was not reasonably assured. The economic environment of the Dominican Republic has been unstable since late 2002. Historically, the DR government has funded electricity collection shortfalls with cash payments to the distribution companies. In recent years, the government has not fully funded the collection shortfalls. Consequently, this segment has continued to experience difficulty collecting amounts owed from certain generating and distribution companies. As of December 31, 2004, Seaboard's net receivable exposure from customers with significant past due balances totaled $26.2 million, including $10.3 million classified in other long-term assets on the Condensed Consolidated Balance Sheet to reflect negotiated payment terms. Although Seaboard is continuing to contract directly with large power users, which reduces the exposure to changes in spot market rates, currency fluctuations and collection risks, a significant exposure to the partially government-owned distribution companies still exists. Management may continue to impose further curtailments during 2005 if it determines that liquidity conditions warrant and thus cannot predict sales for 2005. Operating income decreased $2.6 million during 2004 compared to 2003 primarily due to the lower production discussed above. In addition to lower production, commission expenses increased by $1.3 million in 2004. As discussed in Note 2 to the Condensed Consolidated Financial Statements, during 2004 Seaboard made a commission payment of $2.0 million to terminate a business relationship. These decreases were partially offset by reduced bad debt expense. During 2003, Seaboard recorded $4.5 million of bad debt expense as a result of the liquidity problems discussed above. Absent improvement to the economic conditions in the DR including the related receivable collection issues, management cannot predict whether this segment will remain profitable for 2005. Foreign currency gains and losses for this segment are included in other income (expense) as discussed below. Net sales for the Power segment increased by $6.5 million for 2003 compared to 2002, despite curtailed production which began in mid-December 2003, primarily reflecting an increase in rates. During 2003, spot prices increased primarily as a result of higher fuel costs, a component of pricing. Operating income decreased for 2003 compared to 2002 primarily reflecting an increase in the allowance for doubtful accounts and increased transmission access tolls and fees. For 2003, Seaboard recorded a $4.5 million charge to earnings ($4.3 million in the fourth quarter) for an increase in the allowance for doubtful accounts compared to a credit of $2.9 million in 2002 (all in the fourth quarter) as a result of recovery of previously reserved receivables. All Other Segments (Dollars in millions) 2004 2003 2002 Net sales $ 28.0 $ 28.5 $ 27.1 Operating income (loss) $ 3.3 $ 2.0 $ (0.8) Loss from foreign affiliates $ (8.5) $ (20.6) $ (13.0) The improvement in operating income primarily reflects improved operations for the pepper processing business. For 2005, management expects operating income for All Other Segments to remain positive. Net sales and operating income for all other businesses increased for the year ended December 31, 2003 compared to 2002 primarily from improvements in the Produce Division and discontinuing two non-produce related small businesses during early 2002. The loss from foreign affiliates in 2004 improved from 2003 primarily because Seaboard sold its equity method investment in Fjord during the fourth quarter of 2003 as discussed below, leaving only results from its investment in a Bulgarian wine business (the Business) in 2004. As a result of sustained losses, during 2004 Seaboard's common 18 stock investment in the Business was reduced to zero, and Seaboard began applying losses against its remaining investments, consisting of preferred stock and debt, based on the change in Seaboard's claim on the Business' book value. Accordingly, Seaboard increased its share of losses from this Business from 37% to 73% in the third quarter of 2004. In the fourth quarter of 2004, Seaboard recognized a $3.6 million decline in value considered other than temporary in its investment in this Business as a charge to losses from foreign affiliates. See Note 13 to the Consolidated Financial Statements for further discussion. The 2004 losses from the Business also include Seaboard's share of inventory write-downs totaling $0.8 million. Losses for the Business in 2003 totaled $5.0 million, including $1.5 million for Seaboard's share of losses from a troubled debt restructuring, net of gains from the sale of assets as discussed in Note 13 to the Consolidated Financial Statements, compared to losses of $2.9 million for 2002. Seaboard's share of losses from Fjord in 2003 totaled $15.5 million, including $12.4 million related to asset impairment charges incurred by Fjord, compared to losses of $10.2 million in 2002. During the fourth quarter of 2003, Seaboard sold its equity investment in Fjord and recognized a gain on the sale of $18.0 million, recorded in Other Investment Income. See Note 13 to the Consolidated Financial Statements for further discussion. Selling, General and Administrative Expenses Selling, general and administrative (SG&A) expenses for the year ended December 31, 2004 increased by $9.7 million to $127.7 million over 2003 primarily due to costs in the Marine and Commodity Trading and Milling segments related to the growth of these businesses. Partially offsetting this increase were lower bad debt expenses in the Power and Commodity Trading and Milling segments. As a percentage of revenues, SG&A decreased to 4.8% for 2004 compared to 6.0% for 2003 as a result of increased sales in the Pork, Commodity Trading and Milling, and Marine segments. Selling, general and administrative (SG&A) expenses increased $15.1 million to $118.0 million for the year ended December 31, 2003 compared to 2002. The increase primarily reflects increased bad debt expense in the Power and Commodity Trading and Milling segments as discussed above. To a lesser extent, selling expenses also increased in the Marine and the Commodity Trading and Milling segments related to the expansion of these businesses. As a percentage of revenues, SG&A increased to 6.0% in 2003 from 5.6% in 2002. Interest Expense Interest expense totaled $26.4 million, $26.8 million and $22.7 million for the years ended December 31, 2004, 2003 and 2002, respectively. Interest expense decreased slightly during the year ended December 31, 2004 compared to 2003, as Seaboard repaid a significant portion of the notes payable to banks with cash from operations during 2004 partially offset by the increased borrowings during the last half of 2003 as discussed above in the Financing Activities, Debt and Related Covenants section. The increase in 2003 interest expense from 2002 primarily reflects a higher average level of long-term borrowings outstanding during the year. Interest Income Interest income totaled $8.1 million, $2.5 million and $5.9 million for the years ended December 31, 2004, 2003 and 2002, respectively. The increase during 2004 primarily reflects larger amounts of interest received from past due customer accounts receivable in the Power and Commodity Trading and Milling segments and, to a lesser extent, a higher level of short- term investments during 2004. The level of average invested funds during 2003 decreased from 2002, resulting in lower interest income for 2003 when compared to 2002. Other Investment Income, Net Other investment income, net totaled $1.6 million, $21.4 million and $0.8 million for the years ended December 31, 2004, 2003 and 2002, respectively. In the fourth quarter of 2003, Seaboard sold its equity investment in Fjord, recognizing a nontaxable gain of $18.0 million on the sale. See Note 3 to the Consolidated Financial Statements for further discussion. Foreign Currency Gains (Losses) For the year ended December 31, 2004, Seaboard recorded foreign currency gains totaling $1.6 million, compared with losses of $8.0 million and $17.1 million for the years ended December 31, 2003 and 2002, respectively. While the weakened economy and liquidity crisis in the DR continued throughout 2004, the Dominican peso regained some of the value it had lost during 2003 when there was a significant devaluation. Foreign currency gains (losses) for 19 2004, 2003 and 2002 in the Power segment related to the DR totaled $2.5 million, $(6.7) million, and $(2.0) million, respectively, related to the peso-denominated net assets, primarily trade receivables. The Argentine peso remained fairly stable during 2004 and 2003 after significant devaluation in 2002. The 2002 foreign currency losses include $12.5 million due to the Argentine peso devaluation effect on the dollar denominated net liabilities of the Sugar and Citrus segment. See Note 12 to the Consolidated Financial Statements for further discussion. Seaboard operates in many developing countries throughout the world. The political and economic conditions of these markets cause volatility in currency exchange rates, and expose Seaboard to the risk of exchange loss. Miscellaneous, Net Miscellaneous, net totaled $(3.6) million, $7.4 million and $(5.7) million for the years ended December 31, 2004, 2003 and 2002, respectively. Miscellaneous, net includes the impact of changing interest rates on interest rate swap agreements which mature in 2011. Seaboard pays a weighted average fixed rate of 5.52% on the notional amount of $150.0 million and receives a variable interest rate in return. These contracts are marked-to- market. During 2004, 2003 and 2002 Seaboard recorded losses of $4.6 million, $2.3 million, and $25.0 million respectively, related to these swaps, reflecting the higher contracted fixed rate compared to variable rates during those years. These swap agreements do not qualify as hedges for accounting purposes and accordingly, changes in the market value are recorded to earnings as interest rates change. See Note 9 to the Consolidated Financial Statements for additional discussion. Also included in each year are gains of $0.7 million, $7.0 million, and $18.3 million, respectively, of proceeds from settlements of antitrust litigation, primarily arising out of purchases of vitamins and methionine, feed additives used by Seaboard. Income Tax Expense The effective tax rate decreased for 2004 compared to 2003. The decrease is primarily related to a settlement with the Internal Revenue Service, resulting in a tax benefit of $14.4 million which was recognized in the fourth quarter of 2004. See Note 7 to the Consolidated Financial Statements for further discussion. During 2003, Seaboard generated income from foreign operations, which it planned to permanently invest overseas, free from U.S. tax, and domestic source income. In addition, while the 2003 sale of Seaboard's equity interest in Fjord generated a book gain, it generated a capital loss for U.S. income tax purposes. Because of the uncertainty surrounding Seaboard's ability to utilize this loss, the tax benefit of this loss was offset by a valuation allowance. In the event Seaboard generates sufficient capital gains to utilize the capital losses, a tax benefit will be recognized. During 2002, Seaboard generated domestic source losses and also recognized a one-time tax benefit of $14.3 million related to the cumulative basis difference in the Argentine Sugar and Citrus subsidiary. See Note 7 to the Consolidated Financial Statements for further discussion. 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 currently conducts its pork operations are restrictive. Future changes in environmental or corporate farming laws could affect the manner in which Seaboard operates its business and its cost structure. During the fourth quarter of 2004, President Bush signed into law H.R. 4520, the American Jobs Creation Act ("Act"). The Act is a significant and complicated reform of U.S. income tax law. Management is currently reviewing the new law to determine the impact on Seaboard. The Act contains several provisions which will be favorable for Seaboard. Of particular note, the Act repeals the prior law treatment of shipping income as a component of subpart F income. This change could allow Seaboard's post- 2004 shipping income to avoid current taxation in the U.S. and could have a material impact on Seaboard's future effective tax rate and cash tax payments. The Act will also allow Seaboard a one-time election to repatriate permanently invested foreign earnings at a 5.25% effective U.S. income tax rate rather than the statutory 35% rate, if certain domestic reinvestment requirements are met. See Note 7 to the Consolidated Financial Statements for further discussion. On December 21, 2004, the Financial Accounting Standard's Board (FASB) issued FASB Staff Position 109-1, "Application of FASB Statement No. 109, Accounting for Income Taxes (SFAS 109), to the Tax Deduction on 20 Qualified Production Activities Provided by the American Jobs Creations Act of 2004" (FSP 109-1). FSP 109-1, which was effective upon issuance, states the deduction should be accounted for as a special deduction in accordance with SFAS 109. FSP 109-1 will not have a material impact on Seaboard's financial position or net earnings based on its current tax situation. See Note 7 to the Consolidated Financial Statements for further discussion. On December 21, 2004, the FASB also issued FASB Staff Position 109-2, "Accounting and Disclosure Guidance for the Foreign Earnings Repatriation Provision within the American Jobs Creation Act of 2004" (FSP109-2). FSP 109-2, which was effective upon issuance, allows companies time beyond the financial reporting period of enactment to evaluate the effect of the earnings repatriation provision on its plan for reinvestment or repatriation of foreign earnings for purposes of applying Statement of SFAS 109. Additionally, FSP 109-2 provides guidance regarding the required disclosures surrounding a company's reinvestment or repatriation of foreign earnings. Seaboard continues to evaluate this provision of the Act to determine the amount of foreign earnings to repatriate and expects to complete its evaluation by the end of the second quarter of 2005. See Note 7 to the Consolidated Financial Statements for further discussion. In November 2004, the Financial Accounting Standard's Board issued Statement of Financial Accounting Standards No. 151, Inventory Costs (SFAS 151). This statement amends Accounting Research Board No. 43 to clarify the accounting for abnormal amounts of idle facility expense, freight, handling costs, and wasted material (spoilage). SFAS 151 requires that those items be recognized as current period charges regardless of whether they meet the criterion of "so abnormal". In addition, SFAS 151 requires that allocation of fixed production overheads to the costs of conversion be based on the normal capacity of the production facilities. Any costs outside the normal range would be considered a period expense instead of an inventoried cost. For Seaboard, this standard is effective for the fiscal year beginning January 1, 2006. The adoption of SFAS 151 is not expected to have a material impact on Seaboard's financial position or net earnings. Management does not believe its businesses have been materially adversely affected by general inflation. CRITICAL ACCOUNTING ESTIMATES The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America 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 policies 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 receivables are heavily weighted towards foreign receivables ($205.7 million or 75.9% at December 31, 2004), including receivables from foreign affiliates as discussed below and the Power segment, which generally represent more of a collection risk than its domestic receivables. For the Power segment which operates in the Dominican Republic (DR), collection patterns have been sporadic and are sometimes based upon negotiated settlements for past due receivables resulting in material revisions to the allowance for doubtful accounts from year to year. See Note 13 to the Consolidated Financial Statements for further discussion of 2004 events in the DR. Bad debt expense for the years ended December 31, 2004, 2003 and 2002 was $2.5 million, $8.5 million and $0.1 million, respectively. Future collections 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. Investments in and advances to foreign affiliates - Management uses the equity method of accounting for these investments. At the balance sheet date, management will evaluate equity investments and related advances for a potential decline in value deemed to be other than temporary when management believes conditions warrant such an 21 assessment. If management believes conditions warrant an assessment, such assessment encompasses various methods to determine net realizable value, including methods based on the probability weighting of various future projected net cash flow scenarios expected to be generated by the long-lived assets of the entity, and the resulting ability of that entity to repay its debt and equity based on priority, probability weighting of various future projected net cash flow scenarios expected to be realized through the sale of the ownership interest of the investment, or other methods to assess the fair value of the investment. For example, as more fully discussed in Note 13 to the Consolidated Financial Statements, in 2004 Seaboard incurred a $3.6 million charge to earnings for a decline in value considered other than temporary for its investment in a Bulgarian wine business. The fair value of this investment as of December 31, 2004 was based on probability weightings of current sale negotiation information and available fair value information for the remaining assets. These projected cash flows and other methods are subjective in nature and are based on management's best estimates and judgment. In addition, in most cases there is very little industry market data available for the countries in which these operations conduct their business. Since these investments mostly involve entities in foreign countries considered underdeveloped, changes in the local economy or political environment may occur suddenly and can materially alter the evaluation and estimates used to project cash flows. In most cases, Seaboard has an ongoing business relationship through sales of grain to these entities that also includes receivables from these foreign affiliates. Management considers the long-term business prospects of such investments when making its assessment. At December 31, 2004, the total investment in and advances to foreign affiliates was $38.0 million. See Note 5 to the Consolidated Financial Statements for further discussion. 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, 2004, Seaboard has deferred tax assets of $34.3 million, net of the valuation allowance of $22.9 million, and deferred tax liabilities of $145.5 million. For the years ended December 31, 2004, 2003 and 2002, income tax expense included $40.1 million, $11.9 million and $(26.2) million for deferred taxes to federal, foreign, state and local taxing jurisdictions. Contingent liabilities - Management has evaluated Seaboard's various exposures, including environmental exposures of its Pork segment, as described in Note 11 to the Consolidated Financial Statements. Based on currently available information and analysis, management has analyzed the potential probability of the various exposures and believes that all such items have been adequately accrued for and reflected in the consolidated balance sheet as of December 31, 2004. Changes in information, legal statutes or events could result in management making changes in estimates that could have a material adverse impact on the financial statements. DERIVATIVE INFORMATION Seaboard is exposed to various types of market risks from its day- to-day operations. Primary market risk exposures result from changing commodity prices, foreign currency exchange rates and interest rates. Changes in commodity prices impact the cost of necessary raw materials, finished product sales and firm sales commitments. Seaboard uses various grain and meal futures and options purchase contracts to manage certain risks of increasing prices of raw materials and firm sales commitments. 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 fuel oil derivatives may be used to lock in future vessel bunker costs. Because changes in foreign currency exchange rates impact 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 impact the cash required to service variable rate debt. From time to time, Seaboard uses interest rate swaps to manage risks of increasing interest rates. Inventories that are sensitive to changes in commodity prices, including carrying amounts at December 31, 2004 and 2003, are presented in Note 4 to the Consolidated Financial Statements. Raw material requirements, finished 22 product sales, and firm sales commitments are also sensitive to changes in commodity prices. The tables below provide information about Seaboard's derivative contracts that are sensitive to changes in commodity prices. Although used to manage overall market risks, Seaboard does not perform the extensive record- keeping required to account for commodity transactions as hedges. Management continues to believe its commodity futures and options are economic hedges and not speculative transactions although they do not qualify as hedges for accounting purposes. 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 year. The following tables present the notional quantity amounts, the weighted average contract prices, the contract maturities, and the fair values of the open commodity derivative positions at December 31, 2004. Trading: Contract Volumes Wtd.-avg. Fair Value Futures Contracts Quantity Units Price/Unit Maturity (000's) Corn purchases - long 8,020,893 bushels $ 2.48 2005 $(1,043) Corn sales - short 2,598,889 bushels 2.97 2005 502 Wheat purchases - long 8,814,221 bushels 3.46 2005 (84) Wheat sales - short 6,567,253 bushels 3.51 2005 511 Soybean meal purchases - long 215,100 tons 169.98 2005 (1,224) Soybean meal sales - short 134,100 tons 159.61 2005 (432) Soybean purchases - long 1,365,000 bushels 5.40 2005 106 Soybean sales - short 1,665,000 bushels 5.30 2005 (296) Soybean oil sales - short 2,100,000 pounds 0.21 2005 11 Fuel oil purchases - long 1,500 tons 218.00 2005 (52) Contract Volumes Wtd.-avg. Fair Value Options Contracts Quantity Units Price/Unit Maturity (000's) Soybean meal puts written - long 8,800 tons $ 1.75 2005 $ (4) Soybean meal calls purchased - long 8,800 tons 5.75 2005 68 Corn puts written - long 220,452 bushels 0.21 2005 (95) Corn puts purchased - long 36,742 bushels 0.15 2005 16 Corn calls purchased - long collars 293,936 bushels 0.12 2005 13 Corn calls written - short 293,936 bushels 0.39 2005 (13) At December 31, 2003, Seaboard had net trading contracts to purchase 11,492,000 bushels of grain (fair value of $441,000) and 96,600 tons of meal (fair value of $3,319,000). The table below provides information about the forward currency exchange agreements entered into by Seaboard's commodity trading business and the related firm commitments and trade receivables and financial instruments sensitive to foreign currency exchange rates at December 31, 2004. As more fully discussed in Note 1 to the Consolidated Financial Statements, through December 31, 2004 the majority of these forward exchange agreements were accounted for as hedges. As of January 1, 2005, Seaboard discontinued accounting for all forward exchange agreement as hedges. The information below is presented in U.S. dollar equivalents and all contracts mature through March 2006. The table presents the contract or historical cost, change in fair values and weighted average contractual exchange rate. 23 December 31, 2004 Contract or Change in (Dollars in thousands) Historical Cost Fair Values Trading: Forward exchange agreements (receive $U.S./ pay South African rand (ZAR)) $21,709 $ 90 Nontrading: Hedged items: Accounts receivables and firmly committed sales contracts (denominated in ZAR) $76,767 $ 6,609 Accounts receivables and firmly committed sales contracts (denominated in Euro) $ 779 $ 30 Related derivatives: Forward exchange agreements (receive $U.S./pay ZAR) $76,767 $(6,693) Forward exchange agreements (receive $U.S./pay Euro) $ 778 $ (30) Weighted average contractual exchange rates: Forward exchange agreements (receive $U.S./pay ZAR) 6.14 Forward exchange agreements (receive $U.S./pay Euro) 0.77 At December 31, 2003, Seaboard had net agreements to exchange the equivalent of $78,969,000 of South African rand at an average contractual exchange rate of 7.06 ZAR to one U.S. dollar and $773,000 of euros at an average rate of 0.83 euro to one U.S. dollar. The table below provides information about Seaboard's non-trading financial instruments sensitive to changes in interest rates at December 31, 2004. For debt obligations, the table presents principal cash flows and related weighted average interest rates by expected maturity dates. At December 31, 2004, long-term debt included foreign subsidiary obligations of $2.4 million denominated in CFA francs (a currency used in several central African countries), $1.9 million payable in Argentine pesos, and $0.8 million denominated in Mozambique metical. At December 31, 2003, long-term debt included foreign subsidiary obligations of $2.5 million payable in Argentine pesos, $2.4 million denominated in CFA francs, and $2.0 million denominated in U.S. dollars. 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) 2005 2006 2007 2008 2009 Thereafter Total Long-term debt: Fixed rate $60,443 $41,991 $65,049 $13,864 $49,453 $50,398 $281,198 Average interest rate 6.78% 6.88% 4.38% 5.73% 5.97% 5.47% 5.82% Variable rate $ 313 $ - $ - $ - $ - $41,789 $ 42,102 Average interest rate 7.0% - - - - 2.08% 2.11% Non-trading financial instruments sensitive to changes in interest rates at December 31, 2003 consisted of fixed rate long- term debt totaling $335.2 million with an average interest rate of 6.02%, and variable rate long-term debt totaling $43.3 million with an average interest rate of 1.34%. Seaboard entered into five, ten-year interest rate exchange agreements during 2001 in which Seaboard pays a stated fixed rate and receives a variable rate of interest on a total notional amount of $150.0 million. As of December 31, 2004, the weighted average fixed rate payable was 5.52% and the aggregate fair value of the contracts at December 31, 2004 of $(12.4) million was recorded in accrued financial derivative liabilities. As of December 31, 2003, these agreements had a net fair value of $(14.2) million. 24 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 registered public accounting firm have unrestricted access to the audit committee with or without the presence of management. The consolidated financial statements have been audited by the independent registered public accounting firm of KPMG LLP. Their responsibility is to examine records and transactions related to the consolidated financial statements to the extent required by the standards of the Public Company Accounting Oversight Board. KPMG has rendered their opinion that the consolidated financial statements are fairly presented, in all material respects, in conformity with U.S. generally accepted accounting principles. Their report is included herein. 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 Rules 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, 2004. Seaboard's registered independent public accounting firm, that audited the consolidated financial statements included in the annual report, have issued an audit report on management's assessment of Seaboard's internal control over financial reporting. Their report is included herein. 25 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, 2004 and 2003, and the related consolidated statements of earnings, changes in equity and cash flows for each of the years in the three-year period ended December 31, 2004. 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 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, 2004 and 2003, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2004, in conformity with U.S. generally accepted accounting principles. As discussed in Note 1 to the Consolidated Financial Statements, the Company adopted Statement of Financial Accounting Standards No. 143, "Accounting for Asset Retirement Obligations", and FASB Interpretation No. 46, "Consolidation of Variable Interest Entities", and changed its method of accounting for costs expected to be incurred during regularly scheduled drydocking of vessels from the accrual method to the direct-expense method in 2003. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of Seaboard Corporation's internal control over financial reporting as of December 31, 2004, 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 March 4, 2005 expressed an unqualified opinion on management's assessment of, and the effective operation of, internal control over financial reporting. /s/ KPMG LLP Kansas City, Missouri March 4, 2005 26 Report of Independent Registered Public Accounting Firm The Board of Directors and Stockholders Seaboard Corporation: We have audited management's assessment, included in the accompanying Management's Report on Internal Control Over Financial Reporting, that Seaboard Corporation maintained effective internal control over financial reporting as of December 31, 2004, 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. Our responsibility is to express an opinion on management's assessment and an opinion on the effectiveness of 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, evaluating management's assessment, testing and evaluating the design and operating effectiveness of internal control, and 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 (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) 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 (3) 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, management's assessment that Seaboard Corporation maintained effective internal control over financial reporting as of December 31, 2004, is fairly stated, in all material respects, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Also, in our opinion, Seaboard Corporation maintained, in all material respects, effective internal control over financial reporting as of December 31, 2004, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). 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, 2004 and 2003, and the related consolidated statements of earnings, changes in equity, and cash flows for each of the years in the three-year period ended December 31, 2004, and our report dated March 4, 2005 expressed an unqualified opinion on those consolidated financial statements. Our report dated March 4, 2005 also contains an explanatory paragraph that states that the Company adopted Statement of Financial Standards No. 143, "Accounting for Asset Retirement Obligations," and FASB Interpretation No. 46, "Consolidation of Variable Interest Entities," and changed its method of accounting for costs expected to be incurred during regularly scheduled drydocking of vessels from the accrual method to the direct-expense method in 2003. /s/ KPMG LLP Kansas City, Missouri March 4, 2005 27 Seaboard Corporation Consolidated Balance Sheets December 31, (Thousands of dollars except per share amounts) 2004 2003 Assets Current assets: Cash and cash equivalents $ 14,620 $ 37,377 Short-term investments 119,259 58,022 Receivables: Trade 199,253 152,136 Due from foreign affiliates 49,038 47,979 Other 12,362 13,257 260,653 213,372 Allowance for doubtful accounts (14,524) (23,359) Net receivables 246,129 190,013 Inventories 301,049 276,033 Deferred income taxes 14,341 17,972 Other current assets 48,040 35,419 Total current assets 743,438 614,836 Investments in and advances to foreign affiliates 38,001 46,680 Net property, plant and equipment 603,382 643,968 Other assets 51,873 20,207 Total Assets $1,436,694 $1,325,691 Liabilities and Stockholders' Equity Current liabilities: Notes payable to banks $ 1,789 $ 75,564 Current maturities of long-term debt 60,756 56,983 Accounts payable 83,506 61,817 Accrued compensation and benefits 50,081 42,509 Income taxes payable 29,660 19,692 Accrued voyage costs 25,134 20,682 Accrued financial derivative liabilities 19,445 20,109 Other accrued liabilities 38,535 46,734 Total current liabilities 308,906 344,090 Long-term debt, less current maturities 262,544 321,555 Deferred income taxes 125,559 85,295 Other liabilities 44,865 46,720 Total non-current and deferred liabilities 432,968 453,570 Minority and other noncontrolling interests 2,138 7,466 Commitments and contingent liabilities Stockholders' equity: Common stock of $1 par value. Authorized 4,000,000 shares;issued and outstanding 1,255,054 shares 1,255 1,255 Accumulated other comprehensive loss (53,741) (61,527) Retained earnings 745,168 580,837 Total stockholders' equity 692,682 520,565 Total Liabilities and Stockholders' Equity $1,436,694 $1,325,691 See accompanying notes to consolidated financial statements. 28 Seaboard Corporation Consolidated Statements of Earnings (Thousands of dollars Years ended December 31, except per share amounts) 2004 2003 2002 Net sales: Products $2,088,030 $1,474,101 $1,365,314 Service revenues 539,564 437,617 400,887 Other 56,386 69,622 63,106 Total net sales 2,683,980 1,981,340 1,829,307 Cost of sales and operating expenses: Products 1,844,693 1,362,904 1,296,370 Services 416,132 379,681 337,177 Other 44,177 51,934 45,717 Total cost of sales and operating expenses 2,305,002 1,794,519 1,679,264 Gross income 378,978 186,821 150,043 Selling, general and administrative expenses 127,724 118,035 102,918 Operating income 251,254 68,786 47,125 Other income (expense): Interest expense (26,406) (26,847) (22,659) Interest income 8,132 2,520 5,887 Other investment income, net 1,629 21,440 757 Loss from foreign affiliates (2,045) (21,274) (16,826) Minority and other noncontrolling interests (625) (332) (1,087) Foreign currency gain (loss), net 1,616 (7,965) (17,143) Miscellaneous, net (3,644) 7,393 (5,696) Total other income (expense), net (21,343) (25,065) (56,767) Earnings (loss) before income taxes and cumulative effect of changes in accounting principles 229,911 43,721 (9,642) Income tax benefit (expense) (61,815) (14,747) 23,149 Earnings before cumulative effect of changes in accounting principles 168,096 28,974 13,507 Cumulative effect of changes in accounting for asset retirement obligations, drydock accruals, and variable interest entities, net of income tax expense of $52 - 2,868 - Net earnings $ 168,096 $ 31,842 $ 13,507 Net earnings per common share: Net earnings before cumulative effect of changes in accounting principles $ 133.94 $ 23.08 $ 9.38 Cumulative effect of changes in accounting for asset retirement obligations, drydock accruals, and variable interest entities - 2.29 - Net earnings per common share $ 133.94 $ 25.37 $ 9.38 Dividends declared per common share $ 3.00 $ 3.00 $ 2.50 Average number of shares outstanding 1,255,054 1,255,054 1,439,753 Pro forma amounts assuming changes in accounting for asset retirement obligations, drydock accruals, and variable interest entities were applied retroactively: Net earnings $ 28,800 $ 13,373 Net earnings per common share $ 22.95 $ 9.29 See accompanying notes to consolidated financial statements. 29
Seaboard Corporation Consolidated Statement of Changes in Equity Accumulated Other (Thousands of dollars Common Treasury Additional Comprehensive Retained except per share amounts) Stock Stock Capital Loss Earnings Total Balances, January 1, 2002 $1,790 $(302) $ 13,214 $(62,873) $576,591 $528,420 Comprehensive income Net earnings 13,507 13,507 Other comprehensive loss net of income tax benefit of $37,557: Foreign currency translation adjustment 33 33 Unrealized gain on investments 282 282 Unrecognized pension cost (4,526) (4,526) Amortization of deferred gains on interest rate swaps (200) (200) Comprehensive income 9,096 Repurchase of common stock and cancellation of treasury stock (535) 302 (13,214) (33,794) (47,241) Dividends on common stock (3,544) (3,544) Balances, December 31, 2002 1,255 - - (67,284) 552,760 486,731 Comprehensive income Net earnings 31,842 31,842 Other comprehensive income net of income taxes of $3,470: Foreign currency translation adjustment 6,065 6,065 Unrealized loss on investments (104) (104) Unrecognized pension cost 27 27 Unrealized loss on cash flow hedges (30) (30) Amortization of deferred gains on interest rate swaps (201) (201) Comprehensive income 37,599 Dividends on common stock (3,765) (3,765) Balances, December 31, 2003 1,255 - - (61,527) 580,837 520,565 Comprehensive income Net earnings 168,096 168,096 Other comprehensive income net of income taxes of $4,329: Foreign currency translation adjustment 2,504 2,504 Unrealized gain on investments 243 243 Unrecognized pension cost 5,397 5,397 Unrealized loss on cash flow hedges (158) (158) Amortization of deferred gains on interest rate swaps (200) (200) Comprehensive income 175,882 Dividends on common stock (3,765) (3,765) Balances, December 31, 2004 $1,255 $ - $ - $(53,741) $745,168 $692,682 See accompanying notes to consolidated financial statements.
30 Seaboard Corporation Consolidated Statement Cash Flows Years ended December 31, (Thousands of dollars) 2004 2003 2002 Cash flows from operating activities: Net earnings $ 168,096 $ 31,842 $ 13,507 Adjustments to reconcile net earnings to cash from operating activities: Depreciation and amortization 64,620 64,203 52,636 Loss from foreign affiliates 2,045 21,274 16,826 Other investment income, net (1,629) (21,440) (757) Foreign currency exchange (gains) losses (229) (3,775) 15,552 Cumulative effect of accounting changes, net - (2,868) - Deferred income taxes 39,566 7,773 (26,244) Loss (gain) from sale of fixed assets (1,350) 1,280 (1,452) Changes in current assets and liabilities: Receivables, net of allowance (70,133) 14,067 (28,408) Inventories (18,744) (28,983) (50,917) Other current assets (12,266) 12,039 (3,292) Current liabilities exclusive of debt 30,851 (7,634) 41,693 Other, net (6,732) 3,913 (1,658) Net cash from operating activities 194,095 91,691 27,486 Cash flows from investing activities: Purchase of short-term investments (317,479) (88,453)(129,806) Proceeds from the sale of short-term investments 256,448 51,246 223,643 Proceeds from the maturity of short-term investments - 165 2,725 Proceeds from disposition of investment in foreign affiliate - 37,390 - Investments in and advances to foreign affiliates, net 3,037 (1,388) (27,674) Capital expenditures (33,622) (31,472)(149,879) Proceeds from the sale of fixed assets 9,254 10,054 3,321 Other, net 368 436 6,166 Net cash from investing activities (81,994) (22,022) (71,504) Cash flows from financing activities: Notes payable to banks, net (73,775) (548) 38,409 Proceeds from issuance of long-term debt - - 109,000 Principal payments of long-term debt (54,236) (52,922) (51,352) Repurchase of minority interest in a controlled subsidiary (5,000) - - Purchase of common stock - - (47,241) Dividends paid (3,765) (3,765) (3,544) Bond construction fund 1,289 654 563 Other, net (1,357) (1,588) - Net cash from financing activities (136,844) (58,169) 45,835 Effect of exchange rate change on cash 1,986 2,635 (1,572) Net change in cash and cash equivalents (22,757) 14,135 245 Cash and cash equivalents at beginning of year 37,377 23,242 22,997 Cash and cash equivalents at end of year $ 14,620 $ 37,377 $ 23,242 See accompanying notes to consolidated financial statements. 31 Note 1 Summary of Significant Accounting Policies Operations of Seaboard Corporation and its Subsidiaries Seaboard Corporation and its subsidiaries (Seaboard) is a diversified international agribusiness and transportation company primarily engaged domestically in pork production and processing, and cargo shipping. Overseas, Seaboard is primarily engaged in commodity merchandising, flour and feed milling, sugar production, and electric power generation. Seaboard Flour LLC (the Parent Company) is the owner of 70.7% 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 intercompany balances and transactions have been eliminated in consolidation. The investments in non-controlled foreign 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 accounts, tax-exempt bonds, corporate bonds and U.S. government obligations. All short-term investments held by Seaboard are categorized as available-for- sale and are reported at fair value with any related unrealized gains and losses reported net of tax, as a component of accumulated other comprehensive income. When held, the cost of debt securities is adjusted for amortization of premiums and accretion of discounts to maturity. Such amortization is included in interest income. 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 and/or markets due to local business conditions. The allowance for doubtful accounts is Seaboard's best estimate of the amount of probable credit losses in Seaboard's existing accounts receivable. For most operating segments, Seaboard uses a specific identification approach to determine, in management's best judgment, the collection value of certain past due accounts. 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, dressed pork product and related materials. All other inventories 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 generally 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 maintenance, repairs, and minor renewals are charged to operations while major renewals and improvements are capitalized. Deferred Grant Revenue Included in other liabilities at December 31, 2004 and 2003 is $8,587,000 and $9,010,000, respectively, of deferred grant revenue. Deferred grant revenue represents economic development funds contributed by government entities that were limited to construction of a hog processing facility in Guymon, Oklahoma. Deferred grants are being amortized to income over the life of the assets acquired with the funds. 32 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 the Financial Accounting Standards Board Staff Position No. 109-1, Application of FASB Statement No. 109, "Accounting for Income Taxes, to the Tax Deduction on Qualified Production Activities Provided by the American Jobs Creation Act of 2004", Seaboard will recognize the benefit or cost of this change in the future. Revenue Recognition Revenue of the containerized cargo service is recognized ratably over the transit time for each voyage. Revenue of the commodity trading business is recognized when the commodity is delivered to the customer. Revenues from all other commercial exchanges are recognized at the time products are shipped 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 and 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. Actual results could differ from those estimates. Reclassifications Certain reclassifications have been made to the prior year amounts to conform to the current year presentation. Impairment of Long-lived Assets At each balance sheet date, long-lived assets, primarily fixed assets, 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. 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. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. Earnings Per Common Share Earnings per common share are based upon the average shares outstanding during the period. Average shares outstanding were 1,255,054, 1,255,054 and 1,439,753 for the years ended December 31, 2004, 2003 and 2002, respectively. 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. Included in accounts payable are outstanding checks in excess of cash balances of $31,866,000 and $16,935,000 at December 31, 2004 and 2003, respectively. The amounts paid for interest and income taxes are as follows: Years ended December 31, (Thousands of dollars) 2004 2003 2002 Interest (net of amounts capitalized) $26,179 $26,891 $21,310 Income taxes 11,752 3,039 2,856 33 Supplemental Noncash Transactions As of December 31, 2003, Seaboard consolidated the balance sheets of certain variable interest entities as required by Financial Accounting Standards Board (FASB) Interpretation No. 46, revised December 2003 (FIN 46) resulting in an increase in net fixed assets, related debt and other non-controlling interests of $31,717,000, $31,492,000 and $1,619,000, respectively. See below for further discussion under the caption Accounting Changes and New Accounting Standards. During 2003, in connection with the purchase of certain hog production facilities previously leased under master lease agreements, Seaboard recorded fixed assets of $25,042,000 and assumed debt and a related interest payable totaling $24,507,000. See Note 6 for additional information. During 2002, Seaboard also acquired previously leased hog production facilities valued at $117,535,000 assuming a $10,000,000 bond payable and $2.2 million of related funds held in trust which were used to repay a portion of the bonds assumed. This purchase was financed primarily with proceeds from a private placement of senior notes as discussed in Note 8. As more fully described in Note 12, the volatility of the Argentine peso has affected the U.S. dollar value of the peso- denominated assets and liabilities of the Sugar and Citrus segment. During 2004, 2003 and 2002 this segment recorded non- cash net gains or (losses) of $229,000, $3,775,000 and ($15,552,000), respectively, related to the revaluation of certain dollar-denominated net assets or liabilities. The following table shows the non-cash impact of the change in exchange rates on various peso-denominated balance sheet items caused by the change in the Argentine peso exchange rate over the past three years. Years ended December 31, Increase (Decrease) (Thousands of dollars) 2004 2003 2002 Working capital $2,454 $7,545 $(17,177) Fixed assets 628 6,545 (35,302) Other long-term net assets or liabilities 35 (62) (2,107) 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 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 and Citrus segment and two foreign affiliates (a Bulgarian wine business and a flour and feed milling operation in Kenya), 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. U.S. dollar denominated net asset or liability conversions to the local currency are recorded through income. Derivative Instruments and Hedging Activities Seaboard follows Statement of Financial Accounting Standards No. 133 (SFAS 133), "Accounting for Derivative Investments and Hedging Activities," as amended to account for its derivative contracts. This statement requires that an entity recognize 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 34 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 including commodity futures and option contracts, foreign currency exchange agreements and interest rate exchange agreements. While management believes each of these instruments effectively manages various market risks, as of December 31, 2004 only a portion of the Commodity Trading and Milling segment's foreign currency exchange agreements are designated and accounted for as hedges as a result of the extensive record-keeping requirements. As of January 1, 2005, Seaboard discontinued accounting for the foreign currency exchange agreements as hedges for all new agreements entered into by the commodity trading business. In addition, as of January 1, 2005, Seaboard de-designated all prior outstanding hedges, effectively fixing the asset resulting from the mark-to-market gain on the firm sales commitment of $5,558,000 recorded in other current assets on the Consolidated Balance Sheets as of December 31, 2004, until such time as the firm sales commitments mature through March 2006. Beginning January 1, 2005, the mark-to-market changes in the foreign exchange agreements will no longer be offset with the mark-to- market changes of the underlying firm sales commitment. Although management still believes all of these instruments effectively manage market risks, the growth of Seaboard's commodity trading business increased the ongoing costs to maintain the extensive record-keeping requirements to qualify these instruments as hedges for accounting purposes. Transactions with Parent Company As of December 31, 2004 and 2003, Seaboard had a liability to the Parent Company of $19,000 and $15,000, respectively, for a deposit to pay for any miscellaneous operating expenses incurred by Seaboard on behalf of the Parent Company. Until October 2002, Seaboard had a promissory note receivable from the Parent Company which was collateralized by 100,000 shares of Seaboard stock and bore interest at the greater of the prime rate or 7.88% per annum. In October 2002, Seaboard effectively repurchased common stock from its Parent Company and the Parent Company repaid the Promissory Note in full. Related interest income for the year ended December 31, 2002 totaled $634,000. See Note 12 for further discussion. Accounting Changes and New Accounting Standards On December 21, 2004, the Financial Accounting Standard's Board (FASB) issued FASB Staff Position 109-1, "Application of FASB Statement No. 109, Accounting for Income Taxes (SFAS 109), to the Tax Deduction on Qualified Production Activities Provided by the American Jobs Creations Act of 2004" (FSP 109-1). FSP 109-1, which was effective upon issuance, states the deduction should be accounted for as a special deduction in accordance with SFAS 109. FSP 109-1 will not have a material impact on Seaboard's financial position or net earnings based on its current tax situation. See Note 7 for further discussion. On December 21, 2004, the FASB also issued FASB Staff Position 109-2, "Accounting and Disclosure Guidance for the Foreign Earnings Repatriation Provision within the American Jobs Creation Act of 2004" (FSP 109-2). FSP 109-2, which was effective upon issuance, allows companies time beyond the financial reporting period of enactment to evaluate the effect of the earnings repatriation provision on its plan for reinvestment or repatriation of foreign earnings for purposes of applying SFAS 109. Additionally, FSP 109-2 provides guidance regarding the required disclosures surrounding a company's reinvestment or repatriation of foreign earnings. Seaboard continues to evaluate this provision of the Act to determine the amount of foreign earnings to repatriate and expects to complete its evaluation by the end of the second quarter of 2005. See Note 7 for further discussion. In November 2004, the FASB issued Statement of Financial Accounting Standards No. 151, "Inventory Costs" (SFAS 151). This statement amends Accounting Research Board No. 43 to clarify the accounting for abnormal amounts of idle facility expense, freight, handling costs, and wasted material (spoilage). SFAS 151 requires that those items be recognized as current period charges regardless of whether they meet the criterion of "so abnormal". In addition, SFAS 151 requires that allocation of fixed production overheads to the costs of conversion be based on the normal capacity of the production facilities. Any costs outside the normal range would be considered a period expense instead of an inventoried cost. For Seaboard, this standard is effective for the fiscal year beginning January 1, 2006. The adoption of SFAS 151 is not expected to have a material impact on Seaboard's financial position or net earnings. 35 Effective January 1, 2003, Seaboard adopted SFAS No. 143 (SFAS 143), "Accounting for Asset Retirement Obligations," which required Seaboard to record a long-lived asset and related liability for asset retirement obligation costs associated with the closure of the hog lagoons it is legally obligated to close. Management has performed detailed assessments and obtained the appraisals to estimate the future retirement costs and, accordingly, on January 1, 2003, the cumulative effect of the change in accounting principle was recorded with a charge to earnings of $2,195,000 ($1,339,000 net of tax, or $1.07 per common share), an increase in fixed assets of $3,221,000, and the recognition of a liability, discounted to reflect present value, of $5,416,000. The retirement asset is depreciated over the economic life of the related asset. The following table shows the changes in the asset retirement obligation during 2004 and 2003. If Seaboard had adopted SFAS 143 retroactively to January 1, 2002, operating income, net earnings and net earnings per common share would have decreased by $526,000, $321,000 and $0.22 per share, respectively, in 2002. Years Ended December 31, (Thousands of dollars) 2004 2003 Beginning balance $6,086 $ - Cumulative effect of change in accounting principle - 5,416 Accretion expense 356 420 Liability for additional lagoons placed in service 78 250 Lagoon site sold (254) - Ending balance $6,266 $6,086 Through December 31, 2002, costs expected to be incurred during regularly scheduled drydocking of vessels were accrued ratably prior to the drydock date. Effective January 1, 2003, Seaboard changed its method of accounting for these costs from the accrual method to the direct-expense method. Under the new accounting method, drydock maintenance costs are recognized as expense when maintenance services are performed. Management believes the newly adopted accounting principle is preferable in these circumstances because the maintenance expense is not recorded until the maintenance services are performed and, accordingly, the direct-expense method eliminates significant estimates and judgments inherent under the accrual method. As a result, on January 1, 2003, the balance of the accrued liability for drydock maintenance as of December 31, 2002 for its Marine, Commodity Trading and Milling, and Power segments was reversed, resulting in an increase in earnings of $6,393,000 ($4,987,000 net of related tax expense, or $3.97 per common share) as a cumulative effect of a change in accounting principle. If the change in accounting principle was made retroactively to January 1, 2002, operating income, net earnings and net earnings per common share would have increased by $341,000, $413,000, and $0.29 per share, respectively, for 2002. As of December 31, 2003, Seaboard adopted Financial Accounting Standard's Board Interpretation No. 46, revised December 2003 (FIN 46) "Consolidation of Variable Interest Entities" (VIEs) and performed the required analysis to determine whether its non- consolidated affiliates or other arrangements qualified as VIEs pursuant to the requirements. The VIEs for which Seaboard was determined to be the primary beneficiary based on these evaluations, are discussed in the following paragraph. In the event of certain changes in structure as defined in FIN 46, Seaboard will re-evaluate those relationships as needed. Seaboard is a party to certain contract production agreements (the "Facility Agreements") with limited liability companies which own certain of the facilities used in connection with the Pork segment's vertically integrated hog production. Through December 31, 2003 these arrangements were accounted for as operating leases. These facilities are owned by companies considered to be VIEs in accordance with FIN 46, for which Seaboard is deemed to be the primary beneficiary. Accordingly, Seaboard consolidated these entities as of December 31, 2003. In December 2003, Seaboard assumed the bank debt (with a balance of $29,895,000 at December 31, 2003) of one VIE. Under that Facility Agreement, which supplies approximately 14% of the Seaboard-owned hogs processed at the plant, Seaboard has the right to acquire any or all of the properties at the adjusted production cost, as defined. In the event Seaboard does not acquire any property for which the production agreement terminates, Seaboard would be obligated to pay any deficiency between the adjusted production cost of the property and the price for which it is 36 sold. As of December 31, 2003, the adjusted production cost of these fixed assets was $30,699,000. Consolidation of these VIEs on December 31, 2003, including the debt assumption, increased fixed assets, debt and non-controlling interest by $31,717,000, $31,492,000 and $1,619,000, respectively, and decreased net liabilities by $116,000, with a cumulative effect of a change in accounting principle for the excess of fixed asset depreciation over mortgage loan amortization of $1,278,000, ($780,000 net of tax, or $0.62 per common share) in 2003. If the consolidation requirements would have been applied retroactively to January 1, 2002, operating income, net earnings, and net earnings per common share would have decreased by $252,000, $174,000 and $0.14, respectively for 2003 and $370,000, $226,000 and $0.16, respectively, for 2002. Note 2 Repurchase of Minority Interest In connection with the December 2001 sale of a 10% minority interest in one of the two power barges in the Dominican Republic, the buyer was given a three-year option to sell the interest back to Seaboard for the book value at the time of sale, pending collections of outstanding receivables. During January 2004, the buyer provided notice to exercise the option. An initial payment of $5,000,000 was paid during the second quarter of 2004 to reacquire this interest. The remaining balance of $922,000 as of December 31, 2004 is payable subject to the collection of the remaining outstanding receivables. In addition, Seaboard has historically paid commissions to a related entity of the above party relative to the performance of the other power barge. During the second quarter of 2004 Seaboard agreed to terminate that relationship by making a one- time payment of $2,000,000, included in selling, general and administrative expenses. Note 3 Investments Seaboard's short-term marketable debt securities are treated as available-for-sale securities and are stated at their fair market values. As of December 31, 2004 and 2003, the short-term investments primarily consisted of variable rate municipal debt securities and money market funds, so cost and fair market value were the same. All available-for-sale securities are readily available to meet current operating needs. The following is a summary of the estimated fair value of available-for-sale securities classified as short-term investments at December 31, 2004 and 2003. December 31, (Thousands of dollars) 2004 2003 Obligations of states and political subdivisions $ 81,735 $24,520 Money market funds 37,524 33,502 Total short-term investments $119,259 $58,022 In addition to its short-term investments, as of December 31, 2004 and 2003 Seaboard also had long-term investments totaling $3.8 million and $1.6 million, respectively, included in other assets on the Consolidated Balance Sheets. Included in long-term investments as of December 31, 2004 is $716,000 representing a twenty percent escrow payment for what will be a $3,582,000, or 12.9%, total investment in an electricity generating company in the Dominican Republic. The remaining portion of the investment will be made as soon as the local government, regulatory, shareholder and banking approvals are received. See Note 10 for a discussion of assets held in conjunction with Seaboard's Investment Option Plan. Other investment income for each year is as follows: Years ended December 31, (Thousands of dollars) 2004 2003 2002 Realized gain on sale/exchange of non-controlled affiliates $ - $18,036 $ - Realized gain on sale of securities 196 1,081 383 Other 1,433 2,323 374 Other investment income, net $ 1,629 $21,440 $ 757 37 Until the fourth quarter of 2003, Seaboard owned 21% of the common stock of Fjord Seafood ASA, an integrated salmon producer and processor headquartered in Norway. During the fourth quarter of 2003, Seaboard sold its equity investment for $37,273,000, resulting in a gain on the sale of $18,036,000, which includes approximately $3,537,000 of foreign currency translation gains previously recorded through other comprehensive income. The gain was not subject to tax. See Note 7 for further discussion of the tax treatment. Note 4 Inventories A summary of inventories at the end of each year is as follows: December 31, (Thousands of dollars) 2004 2003 At lower of LIFO cost or market: Live hogs & materials $141,126 $142,396 Dressed pork & materials 20,334 22,220 161,460 164,616 LIFO adjustment 461 (7,608) Total inventories at lower of LIFO cost or market 161,921 157,008 At lower of FIFO cost or market: Grain, flour and feed 98,699 87,831 Sugar produced & in process 20,006 14,807 Other 20,423 16,387 Total inventories at lower of FIFO cost or market 139,128 119,025 Total inventories $301,049 $276,033 The use of the LIFO method increased 2004 and 2003 net earnings by $4,922,000 ($3.92 per common share) and $2,327,000 ($1.85 per common share), respectively, and decreased 2002 earnings by $3,777,000 ($2.62 per common share). If the FIFO method had been used for certain inventories of the Pork segment, inventories would have been lower as of December 31, 2004 by $461,000 and higher as of December 31, 2003 by $7,608,000. Note 5 Investments in and Advances to Foreign Affiliates Seaboard's investments in and advances to non-controlled, non- consolidated foreign affiliates are primarily with businesses conducting flour, maize and feed milling. The location and percentage ownership of these foreign affiliates are as follows: Angola (45%), the Democratic Republic of Congo (50%), Lesotho (50%), Kenya (35%), and Nigeria (45-48%) in Africa; Ecuador (50%) in South America; and Haiti (23%) in the Caribbean. In addition, Seaboard has investments in and advances to a wine business in Bulgaria (37%) and two sugar-related businesses in Argentina (46% - - 50%). The equity method is used to account for these investments. As more fully discussed in Note 13, in the fourth quarter of 2004, Seaboard recognized a $3,592,000 decline in value considered other than temporary in its investment in the Bulgarian wine business (the Business). See Note 7 for discussion of Seaboard's taxes related to this business. During 2003, the Business went through a troubled debt restructuring as more fully discussed in Note 13. As discussed in Note 3, during the fourth quarter of 2003, Seaboard sold its equity investment in Fjord, previously accounted for as a non-controlled foreign affiliate. During the third quarter of 2002, Seaboard purchased for $26,908,000 an additional 66,666,667 shares of Fjord, increasing its ownership to 21%. 38 Seaboard generally is the primary provider of choice for grains and supplies purchased by the non-controlled foreign affiliates primarily conducting grain processing. Sales of grain and supplies to these non-consolidated foreign affiliates included in consolidated net sales for the years ended December 31, 2004, 2003 and 2002 amounted to $229,422,000, $148,318,000 and $124,151,000, respectively. At December 31, 2004 and 2003, Seaboard had $26,762,000 and $28,040,000, respectively, of investments in and advances to, and $48,097,000 and $46,434,000, respectively, of receivables due from, these foreign affiliates. Combined condensed financial information of the non-controlled, non-consolidated foreign affiliates for their fiscal periods ended within each of Seaboard's years ended, including the operations of affiliates through disposition dates, are as follows: Commodity Trading and Milling Segment December 31, (Thousands of dollars) 2004 2003 2002 Net sales $442,064 329,506 296,261 Net income (loss) $ 8,450 (1,408) (9,407) Total assets $202,788 178,458 160,658 Total liabilities $141,867 120,986 107,103 Total equity $ 60,921 57,472 53,555 Other Businesses December 31, (Thousands of dollars) 2004 2003 2002 Net sales $ 33,230 614,626 438,263 Net loss $ (8,143) (90,497) (74,281) Total assets $ 52,827 64,106 708,096 Total liabilities $ 43,969 49,000 476,356 Total equity $ 8,858 15,106 231,740 Although the balance sheet data for the Other Businesses in 2003 excludes amounts related to Fjord, net sales and net loss for 2003 reflect $571,978,000 and $(77,030,000) respectively, related to Fjord's operations through the date of disposition. Note 6 Property, Plant and Equipment A summary of property, plant and equipment at the end of each year is as follows: December 31, (Thousands of dollars) 2004 2003 Land and improvements $ 112,298 $ 106,864 Buildings and improvements 272,375 272,269 Machinery and equipment 558,014 544,098 Transportation equipment 111,260 108,194 Office furniture and fixtures 14,881 12,881 Construction in progress 3,075 11,658 1,071,903 1,055,964 Accumulated depreciation and amortization (468,521) (411,996) Net property, plant and equipment $ 603,382 $ 643,968 39 During 2004, Seaboard sold certain hog production facilities for approximately $6,364,000 and entered into a grow finish agreement with the purchaser of the facilities, with a term expiring in 2019. The deferred gain on the sale of $2,822,000 will be amortized over the term of that agreement. During 2003, Seaboard purchased certain hog production facilities previously leased under a master lease agreement for $25,042,000 consisting of $535,000 net cash and the assumption of $24,358,000 in bank debt, and a related interest payable. In addition, as of December 31, 2003, Seaboard adopted FIN 46 as discussed in Note 1, which required the consolidation of certain limited liability companies for which Seaboard was determined to be the primary beneficiary. Consolidation of these entities increased fixed assets and accumulated depreciation as of December 31, 2003 by $38,059,000 and $6,342,000, respectively. During 2003, Seaboard sold certain hog production facilities for approximately $6,400,000 and entered into a grow finish agreement with the purchaser of the facilities, with a term expiring in 2018. The deferred gain on the sale of $432,000 will be amortized over the term of that agreement. During 2002, Seaboard purchased certain hog production facilities previously leased under a master lease agreement with Shawnee Funding, Limited Partnership for $117,535,000, consisting of $107,535,000 net cash and the assumption of a $10,000,000 bond payable. This purchase was primarily financed with the proceeds from a private placement of notes for $109,000,000 as discussed in Note 8. Note 7 Income Taxes Income taxes attributable to continuing operations for the years ended December 31, 2004, 2003 and 2002 differ from the amounts computed by applying the statutory U.S. Federal income tax rate of 35 percent to earnings (loss) before income taxes for the following reasons: Years ended December 31, (Thousands of dollars) 2004 2003 2002 Computed "expected" tax expense (benefit) $ 80,468 $ 15,302 $ (3,375) Adjustments to tax expense (benefit) attributable to: Foreign tax differences (18,585) (9,195) (19,083) Tax-exempt investment income (221) (55) (87) State income taxes, net of Federal benefit 1,461 407 313 Change in valuation allowance (3,540) 4,638 10,352 Other 2,232 3,650 (11,269) Income tax (benefit) expense before cumulative effect 61,815 14,747 (23,149) Income tax expense - cumulative effect of changes in accounting principles - 52 - Total income tax (benefit) expense $ 61,815 $ 14,799 $(23,149) 40 The components of total income taxes are as follows: Years ended December 31, (Thousands of dollars) 2004 2003 2002 Current: Federal $ 16,132 $ 517 $ - Foreign 4,271 2,239 2,989 State and local 1,317 136 107 Deferred: Federal 39,249 10,930 (27,193) Foreign - 531 573 State and local 846 394 375 Income tax (benefit) expense 61,815 14,747 (23,149) Unrealized changes in other comprehensive income 4,329 3,470 (37,557) Income tax expense - cumulative effect of changes in accounting principles - 52 - Total income taxes $ 66,144 $ 18,269 $(60,706) Components of the net deferred income tax liability at the end of each year are as follows: December 31, (Thousands of dollars) 2004 2003 Deferred income tax liabilities: Cash basis farming adjustment $ 12,820 $ 13,253 Deferred earnings of foreign subsidiaries 6,966 11,373 Depreciation 92,903 86,721 LIFO 32,721 29,218 Other 106 - 145,516 140,565 Deferred income tax assets: Reserves/accruals 29,117 37,823 Tax credit carryforwards 6,872 16,877 Net operating and capital loss carryforwards 21,244 38,848 Other - 3,628 57,233 97,176 Valuation allowance 22,935 23,934 Net deferred income tax liability $111,218 $ 67,323 On October 22, 2004, President Bush signed into law H.R. 4520, the American Jobs Creation Act ("Act"). The Act is a significant and complicated reform of U.S. income tax law. Management is currently reviewing the new law to determine the impact on Seaboard. The Act contains several provisions which appear to be favorable for Seaboard. These include: phasing out the Extraterritorial Income Exclusion and replacing it with an income tax deduction for U.S. manufacturers (such as Seaboard's Pork segment), simplifying the U.S. foreign tax credit calculation by reducing the foreign tax credit baskets, reforming the interest allocation rules and allowing for recharacterization of overall domestic losses, and repealing the alternative minimum tax limitation on the use of foreign tax credits. The carryover period for foreign tax credits was generally extended from 5 to 10 years. 41 The Act also repeals the prior law treatment of shipping income as a component of subpart F income. This change could allow Seaboard's post-2004 shipping income to avoid current taxation in the U.S. and could have a material favorable impact on Seaboard's future effective tax rate and cash tax payments. Management notes that this benefit could be impacted by either existing Regulations or Regulations to be issued by the Treasury Department. The Act would also allow Seaboard a one-time election to repatriate permanently invested foreign earnings at a 5.25% effective U.S. income tax rate rather than the statutory 35% rate, if certain domestic reinvestment requirements are met. Management is currently evaluating this provision of the Act and expects to complete its evaluation during the second quarter of 2005. The Company's ability to utilize this provision largely hinges on its ability to economically borrow at the foreign subsidiary level to allow for the payment of a qualifying dividend. Because the Company's borrowing capacity at this level is unknown, the range of potential dividend amounts and corresponding taxes cannot be reasonably estimated at this time. At December 31, 2004 and 2003, no provision has been made in the accounts for Federal income taxes which would be payable if the undistributed earnings of certain foreign subsidiaries were distributed to Seaboard Corporation since management has currently determined that the earnings are permanently invested in these foreign operations. Should such accumulated earnings be distributed, the resulting Federal income taxes would amount to approximately $69,000,000, assuming a 35% federal income tax rate. As a matter of course, Seaboard is regularly audited by federal, state and foreign tax authorities, which may result in adjustments. In January 2005, Seaboard agreed to a settlement with the Internal Revenue Service (IRS) related to a protest for Seaboard's federal income tax returns for 1994 through 1996 resulting in a $14,356,000 tax benefit which was recognized in the fourth quarter of 2004. Among current audits, the IRS is examining Seaboard's federal income tax returns for 2000 through 2002 and is evaluating certain of Seaboard's tax positions for the years under examination. Management believes that its tax positions comply with applicable tax law and that it has adequately provided for any reasonably foreseeable outcome of the matters. Accordingly, Seaboard does not anticipate any material negative earnings impact from their ultimate resolution. If a favorable outcome is reached, Seaboard will record the earnings impact at the time of resolution. As more fully discussed in Note 13, Seaboard intends to sells its equity investment in a Bulgarian wine business. As a result of the decision to sell this business, the accumulated losses for this business, which were previously considered ordinary for tax purposes, are now characterized as capital losses, which utilization is currently viewed as uncertain as discussed below. Accordingly, in the fourth quarter of 2004 Seaboard reversed previously recorded tax benefits of $5,795,000 related to prior year losses. While the 2003 sale of Seaboard's equity investment in Fjord generated a gain for book purposes, a capital loss was generated for tax purposes. Utilization of this capital loss is also uncertain as discussed below. 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 and from losses on investments that would be recognized as capital 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. In the event Seaboard generates sufficient capital gains to utilize the capital losses, a tax benefit will be recognized. At December 31, 2004, Seaboard had foreign net operating loss carryforwards (NOLs) of approximately $35,130,000, a portion of which expire in varying amounts between 2005 and 2009, and others that have indefinite expiration periods. At December 31, 2004, Seaboard had federal capital loss carryforwards of approximately $17,947,000 expiring in varying amounts in 2007 and 2008. At December 31, 2004, Seaboard had tax credit carryforwards of approximately $6,872,000. Approximately $5,705,000 of these carryforwards expire in varying amounts in 2008 through 2023, while the remaining balance may be carried forward indefinitely. At December 31, 2004, Seaboard had state NOLs of approximately $84,921,000 expiring between 2011 and 2023. As discussed more fully in Note 12, at December 31, 2004, Seaboard also has federal NOLs available to use from its Parent pursuant to an earlier agreement. If the Company utilizes these federal NOLs, it would be required to issue shares to its Parent. 42 Seaboard had not previously recognized any tax benefits from losses generated by Tabacal for financial reporting purposes since it was not a controlled entity for tax purposes and it was not apparent that the permanent basis difference would reverse in the foreseeable future. In the second quarter of 2002, management completed the purchase of the outstanding shares of Tabacal not owned by Seaboard, and converted Tabacal from a Sociedad Anonima (S.A.) to a Sociedad de Responsabilidad Limitada (S.R.L.) organizational entity. This conversion resulted in the recognition of a one-time tax benefit of $48,944,000, of which $34,641,000 reduced the currency translation adjustment recorded as accumulated other comprehensive income. The remaining benefit of $14,303,000 was recognized as a current tax benefit in the Consolidated Statement of Earnings for 2002. Note 8 Notes Payable and Long-term Debt Notes payable amounting to $1,789,000 and $75,564,000 at December 31, 2004 and 2003, respectively, consisted of obligations due banks on demand or within one year. During December 2004, Seaboard entered into a new five year committed credit line totaling $200,000,000, replacing three committed credit lines totaling $70,000,000. At December 31, 2004, Seaboard had committed lines totaling $315,000,000 and uncommitted lines totaled approximately $30,225,000. As of December 31, 2004, there were no borrowings outstanding under the committed lines, but $1,789,000 was borrowed under the uncommitted lines. The committed short-term lines include a $95,000,000 subsidiary credit line for the Commodity Trading and Milling segment which is secured by certain commodity trading inventory and accounts receivable, and includes financial covenants for that subsidiary which require maintenance of certain levels of working capital and net worth, limitations on debt to net worth, and liabilities to net worth ratios. At December 31, 2004, Seaboard's borrowing capacity under its committed lines was reduced by letters of credit (LCs) totaling $55,750,000, including $44,325,000 of LCs for Seaboard's outstanding Industrial Development Revenue Bonds (IDRBs) and $10,373,000 related to insurance coverages. The weighted average interest rates for outstanding notes payable were 11.26% and 3.59% at December 31, 2004 and 2003, respectively. The 2004 interest rate reflects only foreign subsidiary local borrowing under uncommitted lines as there were no amounts outstanding under Seaboard's domestic committed or uncommitted lines. With the exception of the notes payable under the Commodity Trading and Milling credit line, 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. As discussed in Note 6, in connection with the purchase of certain previously-leased hog production facilities during 2003, Seaboard assumed bank debt of $24,358,000 with a weighted average interest rate of 7.45% with a final maturity in 2014. As discussed in Note 1, in accordance with FIN 46, on December 31, 2003 Seaboard consolidated certain limited liability companies. As a result, bank debt totaling $29,837,000 and $31,492,000 as of December 31, 2004 and 2003, respectively, is included in the table below. This bank debt is collateralized by fixed assets totaling $31,307,000 as of December 31, 2004. In connection with this consolidation, during December 2003, Seaboard assumed the bank debt of one VIE (with a balance of $28,459,000 and $29,895,000 as of December 31, 2004 and 2003, respectively, a weighted average interest rate of 7.53%, and a maturity date in 2007). During 2002, Seaboard completed a private placement of $109,000,000 of Senior Notes due 2009 and 2012 with a weighted average interest rate of 6.29%. Seaboard used $107,267,000 of the proceeds from this private placement to refinance the indebtedness related to hog production facilities previously leased under a master lease program, effectively reducing Seaboard's net lease payments. On December 31, 2002, Seaboard paid an additional $4,077,000 to complete the acquisition of Shawnee Funding, Limited Partnership, effectively acquiring all of the related hog production facilities previously leased. As part of the purchase, Seaboard also assumed a variable rate (2.06% at December 31, 2004) $10,000,000 bond payable due 2014, and $2,210,000 of related cash in a construction fund which was used to repay a portion of bond during 2003. 43 A summary of long-term debt at the end of each year is as follows: December 31, (Thousands of dollars) 2004 2003 Private placements: 6.49% senior notes, due 2005 $ 20,000 $ 40,000 7.88% senior notes, due 2005 through 2007 75,000 100,000 5.80% senior notes, due 2005 through 2009 32,500 32,500 6.21% senior notes, due 2009 38,000 38,000 6.21% senior notes, due 2006 through 2012 7,500 7,500 6.92% senior notes, due 2012 31,000 31,000 Industrial Development Revenue Bonds, floating rates (2.06%-2.10% at December 31, 2004) due 2014 through 2027 41,789 42,989 Bank debt, 5.79 - 8.58%, due 2005 through 2014 69,397 76,424 Foreign subsidiary obligations, 2.00% - 17.50%, due 2005 through 2010 4,762 6,582 Foreign subsidiary obligation, floating rate due 2005 314 309 Capital lease obligations and other 3,038 3,234 323,300 378,538 Current maturities of long-term debt (60,756) (56,983) Long-term debt, less current maturities $262,544 $321,555 Of the 2004 foreign subsidiary obligations, $2,396,000 is denominated in CFA francs, $1,908,000 is payable in Argentine pesos and the remaining $772,000 is denominated in Mozambique metical. Of the 2003 foreign subsidiary obligations, $2,490,000 is payable in Argentine pesos, $2,401,000 is denominated in CFA francs and the remaining $2,000,000 is denominated in U.S. dollars. At December 31, 2004, Argentine land, sugar production facilities and equipment with a depreciated cost of $4,790,000 secured certain foreign subsidiary obligations. During 2004, Seaboard used $1,289,000 of unexpended bond proceeds held in trust to redeem a portion of and pay interest on the related industrial development revenue bonds (IDRBs). The terms of the note agreements pursuant to which the senior notes, 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 $507,000,000 plus 25% of cumulative consolidated net income beginning October 2, 2004; limits aggregate dividend payments to $10.0 million plus 50% of consolidated net income less 100% of consolidated net losses beginning January 1, 2002 plus the aggregate amount of Net Proceeds of Capital Stock for such period ($123,887,000 as of December 31, 2004) or $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, 2004. Annual maturities of long-term debt at December 31, 2004 are as follows: $60,756,000 in 2005, $41,991,000 in 2006, $65,049,000 in 2007, $13,864,000 in 2008, $ 49,453,000 in 2009 and $92,187,000 thereafter. 44 Note 9 Derivatives and Fair Value of Financial Instruments 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 cost and fair values of investments and long-term debt at December 31, 2004 and 2003 are presented below. December 31, 2004 2003 (Thousands of dollars) Cost Fair Value Cost Fair Value Short-term investments $119,259 $119,259 $ 58,022 $ 58,022 Long-term debt 323,300 327,288 378,538 386,814 The fair value of the short-term investments is based on quoted market prices at the reporting date for these or similar investments. The fair value of long-term debt is determined by comparing interest rates for debt with similar terms and maturities. Commodity Instruments Seaboard uses various grain, meal, hog and fuel oil futures and options to manage its exposure to price fluctuations for raw materials, finished product sales and firm sales commitments. However, due to the extensive record-keeping required to designate the commodity derivative transactions as hedges for accounting purposes, Seaboard marks to market its commodity futures and options primarily as a component of cost of sales. Management continues to believe its commodity futures and options are 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 commodity prices could have a material impact on earnings in any given year. At December 31, 2004 and 2003, Seaboard had open net contracts to purchase 277,000 and 409,000 metric tons of grain with fair values of $(1,975,000) and $3,760,000 included with other accrued financial derivative liabilities or current assets, respectively on the Consolidated Balance Sheets. In addition, Seaboard also had contracts to sell 2,100,000 pounds of soybean oil with a fair value of $11,000, and purchase 1,500 tons on fuel oil with a fair value of $(52,000). For the years ended December 31, 2004, 2003 and 2002 Seaboard realized net gains (losses) of $(11,886,000), $4,882,000, and $5,304,000 related to commodity contracts, primarily included in cost of sales on the Consolidated Statements of Earnings. 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, primarily related to its commodity trading business. Seaboard accounts for its currency exchange hedges of firm commitments and trade receivables from third parties as fair value hedges as of December 31, 2004. Exchange agreements related to firm commitments and receivables from foreign affiliates are accounted for as cash flow hedges as of December 31, 2004. For foreign currency exchange agreements designated as fair value hedges, the derivative gains and losses are recognized in operating income along with the change in fair value of the related contract. For foreign currency exchange agreements designated as cash flow hedges, the derivative gains and losses are included as a component of other comprehensive income until the underlying contract is recorded and revalued through earnings. The change in value of third party firm commitments and all foreign exchange derivatives are included in other current assets or accrued financial derivative liabilities on the Consolidated Balance Sheets. The firm sales commitments and related derivatives mature during 2005. The net gains and losses recognized in the Consolidated Statements of Earnings from the exchange agreements and related firm commitments were not material for the years ended December 31, 2004, 2003 and 2002. 45 At December 31, 2004 and 2003, Seaboard had hedged South African Rand (ZAR) denominated firm sales contracts and trade receivables from third parties with historical values totaling $72,237,000 and $64,353,000 with changes in fair values of $6,421,000 and $2,734,000, respectively. To hedge the change in value of these firm contracts and trade receivables, Seaboard entered into agreements to exchange $72,237,000 and $64,353,000 of contracts denominated in ZAR, with derivative fair values of $(6,505,000) and $(2,779,000), respectively. As of December 31, 2003, Seaboard also had ZAR denominated firm purchase contracts with historical values totaling $196,000 and changes in fair value totaling $5,000. Hedging the change in value of these agreements, Seaboard entered into agreements to exchange $196,000 for ZAR with derivative fair values totaling $(5,000) at December 31, 2003. At December 31, 2004 and 2003, Seaboard had hedged Euro denominated sales contracts and trade receivables from third parties totaling $779,000 and $773,000 with changes in fair value of $30,000 and $(2,000), respectively. To hedge the changes in values of the firm contracts and receivables, at December 31, 2004 and 2003 Seaboard had open agreements to exchange $778,000 and $773,000 of contracts denominated in Euros with derivative fair values of $(30,000) and $2,000, respectively. At December 31, 2004 and 2003, Seaboard had ZAR denominated firm sales contracts with a foreign affiliate with historical values totaling $4,530,000 and $4,524,000, respectively, and changes in fair values of $188,000 and $30,000, respectively. To hedge the change in value of these contracts, Seaboard entered into agreements to exchange $4,530,000 and $4,524,000 of contracts denominated in ZAR with derivative fair values of $(188,000) and $(30,000), respectively, which are included as a component of other comprehensive income at December 31, 2004 and 2003. At December 31, 2004 and 2003, Seaboard also had trading foreign exchange contracts (receive $U.S./pay ZAR) to cover various foreign currency working capital needs for notional amounts of $21,709,000 and $10,288,000, respectively, with fair values of $90,000 and $(89,000). Interest Rate Exchange Agreements Seaboard entered into 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. At December 31, 2004 and 2003, deferred gains on prior year's terminated interest rate exchange agreements (net of tax) totaled $551,000 and $751,000, respectively, relating to swaps that hedged variable rate debt. This amount is included in accumulated other comprehensive loss on the Consolidated Balance Sheets. For each of the years ended December 31, 2004, 2003 and 2002, interest rate exchange agreements accounted for as hedges decreased interest expense by $329,000 resulting from amortization of terminated proceeds. At December 31, 2004 and 2003 Seaboard had five, ten-year interest rate exchange agreements outstanding that are not paired with specific variable rate contracts, whereby Seaboard pays a stated fixed rate and receives a variable rate of interest on a total notional amount of $150,000,000. While Seaboard has certain variable rate debt, these interest rate exchange agreements do not qualify as hedges for accounting purposes. At December 31, 2004 and 2003, the fair values of these contracts totaled $(12,354,000) and $(14,160,000), respectively, and are included in accrued financial derivative liabilities on the Consolidated Balance Sheets. For the years ended December 31, 2004, 2003, and 2002 the net loss for interest rate exchange agreements not accounted for as hedges were $4,597,000, $2,296,000 and $25,030,000, respectively, and are included in miscellaneous, net in the Consolidated Statements of Earnings. Included in the losses are net payments of $6,403,000, $6,155,000 and $4,970,000, respectively, during 2004, 2003 and 2002 for the difference between the fixed rate paid and variable rate received on these contracts. 46 Note 10 Employee Benefits Seaboard maintains a defined benefit pension plan (the Plan) for its domestic salaried and clerical employees. The Plan generally provides eligibility for participation after one year's 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. However, because of Seaboard's liquidity position, in December 2004 Seaboard made a $14,250,000 special, contribution approximately equal to the maximum deductible amount, resulting in an over-funding of the Plan. As a result, management does not expect to make any contributions to the Plan during 2005. Plan assets are invested to achieve a diversified overall portfolio consisting of various mutual funds. Seaboard is willing to accept a moderate level of risk to potentially achieve higher investment returns. The overall portfolio is evaluated relative to customized benchmarks, and is expected to exceed the customized benchmark over five year rolling periods and longer. The investment strategy is periodically reviewed for continued appropriateness. Derivatives, real estate investments, non- marketable and private equity or placement securities are not allowed investments under the Plan. Seaboard's asset allocation targets and actual investment composition within the Plan are as follows: Actual Plan Composition at December 31, Target Percentage of Portfolio 2004 2003 Domestic Large Cap Equity 35% 35% 36% Domestic Small Cap Equity 15% 16% 16% International Equity 15% 16% 14% Domestic Fixed Income 35% 33% 34% Seaboard also sponsors non-qualified, unfunded supplemental executive plans. On November 5, 2004, Seaboard amended its Executive Retirement Plan, which provides a supplemental retirement benefit to officers and certain key employees of Seaboard and its subsidiaries, to conform the benefit calculation to the Plan discussed above by changing the methodology for calculating the benefit to a percentage of final average pay for all years of service. The amendment also changes the normal form of the benefit to a lump sum payment, provided the employee has at least 5 years of service after the plan amendment was adopted. Seaboard has also established a Rabbi Trust in order to provide a mechanism to provide discretionary funding for the benefit. While this amendment has no effect on the 2004 net periodic benefit cost, it will impact the amount of future benefit costs. Had this amendment been in effect at the beginning of 2004, the 2004 annual net periodic benefit cost would have increased by $1,179,000 ($719,000 after tax, or $0.57 per share). Management is considering making a contribution to the Rabbi Trust in 2005, although neither the funding decision nor the amount has been determined. The assets from any contributions to the Executive Retirement Plan would remain on the books of Seaboard as a long- term asset. Assumptions used in determining pension information for the plans were: Years ended December 31, 2004 2003 2002 Weighted-average assumptions Discount rate 6.00% 6.25% 6.75% Expected return on plan assets 8.25% 8.25% 8.45% Long-term rate of increase in compensation levels 4.00-5.00% 4.00-5.00% 4.00-5.00% 47 Management selects the discount rate based on Moody's year-end published Aa corporate bond yield plus 25 basis points (to reflect the long-term nature of the pension liability compared to the average duration of the corporate bond), rounded to the nearest quarter percentage point. The expected return on Plan assets assumption is based on the weighted average of asset class expected returns that are consistent with historical returns. The assumed rate is selected to fall between the 50th and 75th percentiles of model-based results that reflect the Plan's asset allocation. The measurement date for the Plan is December 31. The changes in the plans' benefit obligations and fair value of assets for the Plan and nonqualified executive plans for the years ended December 31, 2004 and 2003, and a statement of the funded status as of December 31, 2004 and 2003 are as follows: December 31 2004 2003 Assets exceed Accumulated Accumulated Accumulated benefits benefits (Thousands of dollars) Benefits exceed assets exceed assets Reconciliation of benefit obligation: Benefit obligation at beginning of year $ 47,401 $ 12,633 $ 49,167 Service cost 2,203 923 2,892 Interest cost 2,925 694 3,407 Actuarial gains (losses) 2,277 (959) 6,454 Benefits paid (1,688) (116) (1,886) Plan amendments - 8,696 - Benefit obligation at end of year 53,118 21,871 60,034 Reconciliation of fair value of plan assets: Fair value of plan assets at beginning of year 33,194 - 23,987 Actual return on plan assets 4,378 - 6,004 Employer contributions 20,012 116 5,089 Benefits paid (1,688) (116) (1,886) Fair value of plan assets at end of year 55,896 - 33,194 Funded status 2,778 (21,871) (26,840) Unrecognized transition obligation 82 113 301 Unamortized prior service cost (527) 8,697 (664) Unrecognized net actuarial losses 12,619 3,463 17,029 Prepaid (accrued) benefit cost $ 14,952 $ (9,598) $(10,174) Amounts recognized in the Consolidated Balance Sheets as of December 31, 2004 and 2003 consist of: December 31 2004 2003 Assets exceed Accumulated Accumulated Accumulated benefits benefits (Thousands of dollars) Benefits exceed assets exceed assets Prepaid benefit cost $ 14,952 $ - $ - Accrued benefit liability - (14,926) (19,221) Accumulated other comprehensive loss - - 9,047 Intangible asset - 5,328 - Prepaid (accrued) benefit cost $ 14,952 $ (9,598) $(10,174) 48 As of December 31, 2003, the projected benefit obligation and accumulated benefit obligation for unfunded pension plans were $12,633,000 and $9,161,000, respectively. The net periodic benefit cost of these plans was as follows: Years ended December 31, (Thousands of dollars) 2004 2003 2002 Components of net periodic benefit cost: Service cost $ 3,126 $ 2,892 $ 2,242 Interest cost 3,619 3,407 2,978 Expected return on plan assets (2,873) (2,128) (2,209) Amortization and other 729 913 232 Net periodic benefit cost $ 4,601 $ 5,084 $ 3,243 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: $3,654,000, $7,091,000, $3,014,000, $3,097,000, $3,135,000, and $21,228,000, respectively. Seaboard also has certain individual, non-qualified, unfunded supplemental retirement agreements for certain executive employees. Pension expense for these agreements was $666,000, $697,000 and $726,000 for the years ended December 31, 2004, 2003 and 2002, respectively. Included in other liabilities at December 31, 2004 and 2003 is $10,362,000 and $10,260,000, respectively, representing the accrued benefit obligation for these agreements. As of December 31, 2004 and 2003, the unrecognized pension cost related to these agreements of $615,000 and $415,000, respectively, was included in accumulated other comprehensive loss, net of related tax. During the next five years and for the aggregate five year period beginning with the sixth year, management expects future net benefits payments under these agreements to be $778,000, $1,179,000, $1,157,000, $1,138,000, $1,119,000, and $5,260,000, respectively. Seaboard maintains a defined contribution plan covering most of its domestic salaried and clerical employees. Seaboard contributes to the plan an amount equal to 100% of employee contributions up to a maximum of 3% of employee compensation. 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 was $1,445,000, $1,471,000 and $1,428,000 for the years ended December 31, 2004, 2003 and 2002, respectively. Seaboard has an Investment Option Plan which allowed certain employees to reduce their compensation in exchange for options to buy shares of certain mutual funds and/or pooled separate accounts. However, as a result of U.S. tax legislation passed in October 2004, reductions to compensation earned after 2004 is no longer allowed. The exercise price for each investment option is established based upon the fair market value of the underlying investment on the date of grant. Seaboard contributes to the plan based on 3% of the employees reduced compensation. Seaboard's expense for this plan, which primarily includes amounts related to the change in fair value of the underlying investment accounts, was $1,602,000, $2,127,000, and $(1,360,000) for the years ended December 31, 2004, 2003 and 2002, respectively. Included in other liabilities at December 31, 2004 and 2003 are $11,896,000 and $8,275,000, respectively, representing the market value of the payable to the employees upon exercise. In conjunction with this plan, Seaboard purchased the specified number of units of the employee-designated investment plus the option price. These investments are treated as trading securities and are stated at their fair market values. Accordingly, as of December 31, 2004 and 2003, $15,103,000 and $10,742,000 were included in other current assets on the Consolidated Balance Sheets. Investment income related to the mark-to-market of these investments for 2004, 2003, and 2002 totaled $1,537,000, $2,061,000 and $(1,430,000), respectively. 49 Note 11 Commitments and Contingencies Seaboard reached an agreement in 2002 to settle litigation brought by the Sierra Club. Under the terms of the settlement, Seaboard conducted an investigation at three farms. Based on the investigation, it has been determined that two farms do not require any corrective action. The investigation is ongoing at the remaining farm, and Seaboard will potentially be required to take remedial actions at the farm if conditions so warrant. The costs of conducting the monitoring and the investigation are not material. Seaboard is subject to regulatory actions and an investigation by the United States Environmental Protection Agency and the State of Oklahoma. One such action involves five properties utilized in Seaboard's hog production operations which were purchased from PIC International Group, Inc. (PIC). Seaboard has undertaken an extensive investigation, and has had significant discussions with the EPA and the State of Oklahoma, proposing to take a number of corrective actions with respect to the farms, and one additional farm, in order to attempt to settle the action. In connection with these discussions, EPA stated that any settlement must include a civil fine of $1,200,000 for EPA. Seaboard believes that the EPA has no authority to impose a civil fine, but settlement discussions are continuing. If the matter is not settled, the EPA could bring an action against Seaboard, although Seaboard believes it has meritorious defenses to any such action, or the EPA could determine to take no further action. A tentative verbal settlement has been reached with the State of Oklahoma, which would require Seaboard Farms to pay a fine of $100,000 and to undertake agreed upon supplemental environmental projects at a cost of $80,000. The settlement is subject to the final terms of the settlement being agreed to and the approval of the Oklahoma Board of Agriculture. Irrespective of the settlement, Seaboard intends to proceed with its proposed corrective actions with respect to the farms. PIC is indemnifying Seaboard with respect to the action pursuant to an indemnification agreement which has a $5 million limit. If the tentative settlement with the State of Oklahoma is agreed to, the estimated cumulative costs which will be expended will total approximately $6.2 million, not including the additional legal costs required to negotiate the settlement or the penalties demanded by EPA and tentatively agreed to with the State of Oklahoma. If the measures taken pursuant to the settlement are not effective, other measures with additional costs may be required. PIC has advised Seaboard that it is not responsible for the costs in excess of $5 million. Seaboard disputes PIC's determination of the costs to be included in the calculation and believes that the costs to be considered are less than $5 million, such that PIC is responsible for all such costs and penalties, except for approximately $180,000 of estimated costs that would be incurred over 5 years subsequent to the settlement for certain testing and sampling. Seaboard has agreed to conduct such testing and sampling as a part of the sampling it conducts in the normal course of operations and believes that the incremental costs incurred to conduct such testing and sampling will be less than $180,000. Seaboard also believes that a more general indemnity agreement would require indemnification of a liability in excess of $5 million (excluding the estimated $180,000 cost for testing and sampling), although PIC disputes this. With respect to other actions and the investigation, neither is expected to have a material adverse effect on Seaboard's consolidated financial statements. Seaboard is subject to various other 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. From time to time bills have been introduced in the United States Senate and House of Representatives which included provisions to prohibit meat packers, such as Seaboard, from owning or controlling livestock intended for slaughter. Such bills could have prohibited Seaboard from owning or controlling hogs, and thus would have required divestiture of our operations, or otherwise a restructuring of the ownership and operation. As there currently are no such bills pending, Seaboard does not expect any such actions to be passed in 2005. 50 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. The following table sets forth the terms of guarantees as of December 31, 2004. Guarantee beneficiary Maximum exposure Maturity Foreign non-consolidated affiliate grain $ 1,000,000 Annual renewal processor - Uganda Foreign non-consolidated affiliate food $ 400,000 August 2005 product distributor - Ecuador Various hog contract growers $ 1,532,000 Annual renewal Seaboard guaranteed a bank borrowing for a subsidiary of a foreign affiliate grain processor in Kenya, Unga Holdings Limited (Unga), a non-consolidated milling affiliate, to facilitate bank financing used for the rehabilitation and expansion of a milling facility in Uganda. This guarantee was a part of the original purchase agreement with Unga when Seaboard first invested in this company in 2000. The guarantee can be drawn upon in the event of non-payment of a bank borrowing by Unga. While the guarantee may be cancelled by Seaboard annually, the bank has the right to draw on the guarantee in the event it is advised that the guarantee will be cancelled. The guarantee renews annually until the debt expires in 2007. Unga Holdings has provided a reciprocal guarantee to Seaboard. As of December 31, 2004, $832,000 of borrowings was outstanding related to this guarantee. The non-consolidated affiliate food product distributor in Ecuador purchases certain products from a U.S. domiciled vendor. Seaboard has guaranteed the payments in order to secure normal credit terms for this affiliate. Seaboard has guaranteed a portion of the bank debt for certain farmers, which debt proceeds were used to construct facilities to raise hogs for Seaboard's Pork segment. The guarantees enabled the farmers to obtain favorable financing terms. These bank guarantees renew annually until the underlying debt is fully repaid in 2013-2014. The maximum exposure to Seaboard from these guarantees is $1,532,000. 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. As of December 31, 2004, Seaboard had outstanding $55,750,000 of letters of credit (LCs) with various banks that reduced Seaboard's borrowing capacity under its committed credit facilities as discussed in Note 8. Included in this amount are LCs totaling $44,325,000 which support the IDRBs included as long- term debt and $10,373,000 of LCs related to insurance coverages. Commitments As of December 31, 2004 Seaboard had various firm noncancelable purchase commitments and commitments under other agreements, arrangements and operating leases as described in the table below. 51 Purchase commitments Years ended December 31, (Thousands of dollars) 2005 2006 2007 2008 2009 Thereafter Hog procurement contracts $129,257 $ 84,621 $58,555 $ - $ - $ - Grain and feed ingredients 38,769 - - - - - Grain purchase contracts for resale 71,734 - - - - - Freight contracts 13,905 - - - - - Fuel purchase contract 6,584 - - - - - Vessel and equipment purchases and facility improvements 5,923 - - - - - Other purchase commitments 1,713 - - - - - Total firm purchase commitments 267,885 84,621 58,555 - - - Vessel time-charter arrangements 49,389 28,020 10,807 1,056 - - Contract grower finishing agreements 10,848 10,588 10,514 10,609 10,706 80,615 Other operating lease payments 8,728 8,280 7,170 5,456 2,055 6,862 Total unrecognized firm commitments $336,850 $131,509 $87,046 $17,121 $12,761 $87,477 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, 2004. During 2004, 2003 and 2002, this segment paid $177,107,000, $155,012,000 and $113,383,000, respectively for live hogs purchased under contracts. The Commodity Trading and Milling segment enters into grain purchase contracts primarily to support firm sales commitments. These contracts are valued based on projected commodity prices as of December 31, 2004. This segment also has short-term freight contracts in place for delivery of future grain sales. The Power segment has entered into a contract for the supply of substantially all fuel required through June 2005 at market-based prices. The fuel commitment shown above reflects the average price per barrel at December 31, 2004 for the minimum number of barrels specified in the agreement. The Power segment has reduced its production from time to time resulting in reduced fuel requirements and while the minimum quantity to be delivered is stated in the contract, the vendor has allowed Seaboard to reduce the amount of fuel purchases. The Marine segment enters into contracts to time-charter vessels for use in its operations. Historically, these commitments have been short-term. However, as a result of increased demand for vessels and increasing charter-hire rates, this segment has entered into long-term commitments ranging from one to three years. In addition to its long-term lease agreements, the short- term time-charter contracts of $3,542,000 for 2005 are included above in vessel time-charter arrangements. This segment's charter hire expenses during 2004, 2003 and 2002 totaled $51,064,000, $47,533,000 and $43,719,000, 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 purchase contracts. 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 2004, 2003 and 2002, Seaboard paid $10,099,000, $5,981,000 and $3,338,000, respectively under contract grower finishing agreements. 52 Seaboard also leases various facilities and equipment under noncancelable operating lease agreements. Rental expense for operating leases, including payments made under the Facility Agreements prior to adoption of FIN 46, amounted to $8,761,000, $7,237,000 and $24,067,000 in 2004, 2003 and 2002, respectively. Subsequent to December 31, 2004, Seaboard committed to spend $7,070,000 to purchase a used bulk vessel for the Commodity Trading and Milling segment. In early 2004, in conjunction with a marketing agreement with Triumph Foods LLC (Triumph), Seaboard committed to provide Triumph with up to $1,750,000 of future financing in the event of specified costs over-runs incurred in the development and construction of the plant. Note 12 Stockholders' Equity and Accumulated Other Comprehensive Loss In October 2002, Seaboard consummated a transaction with the Parent Company (the Transaction), pursuant to which Seaboard effectively repurchased 232,414.85 shares of its common stock owned by the Parent Company for $203.26 per share. Of the total consideration of $47,241,000, the Parent Company was required under the terms of the Transaction immediately to pay $11,260,000 to Seaboard to repay in full all indebtedness owed by the Parent Company to Seaboard, and to use the balance of the consideration to pay bank indebtedness of the Parent Company and Transaction expenses. During the fourth quarter of 2002, Seaboard cancelled 534,547 shares of common stock held in treasury, including shares previously held by the Parent Company. The Transaction was approved by Seaboard's Board of Directors after receiving the recommendation in favor of the Transaction by a special committee of independent directors. The special committee was advised by independent legal counsel and an independent investment banking firm. As a result of the Transaction, the Parent Company's ownership interest dropped from 75.3 percent to 70.7 percent. As a part of the Transaction, the Parent Company also transferred to Seaboard rights to receive possible future cash payments from a subsidiary of the Parent Company, based primarily on the future sale of real estate and the benefit of other assets owned by that subsidiary. Seaboard also received tax net operating losses ("NOLs") which may allow Seaboard to reduce the amount of future income taxes it otherwise would pay. To the extent Seaboard receives cash payments in the future as a result of the transferred rights or reduces its federal income taxes payable by utilizing the NOLs, Seaboard will issue to the Parent Company new shares of common stock with a value equal to the cash received and/or the NOL utilized. For these purposes, the value of the common stock issued will be equal to the ten day rolling average closing price, determined as of the twentieth day prior to the issue date. The maximum number of shares of common stock which may be issued to the Parent Company under the Transaction is capped at 232,414.85, the number of shares which were originally purchased from the Parent Company. As of December 31, 2004, Seaboard had not received any cash payments from the subsidiary of its Parent Company and had not used any NOLs. The right to receive such payments expires September 17, 2007. If on September 17, 2007 there are remaining NOLs that have not been used, then Seaboard is to issue shares based on the present value of such NOLs projected to be used in the future. As noted above, Seaboard has available NOLs from the Parent Company totaling $23,764,000. These NOLs may be utilized in Seaboard's 2004 tax return pending finalization of the audits of Seaboard's prior years' income tax returns currently being conducted by the Internal Revenue Service as discussed in Note 7. If these NOLs are not utilized in the 2004 tax return, they will be carried forward. If these NOLs are utilized in the 2004 tax return (anticipated to be filed September 15, 2005) or in subsequent tax returns, generating a tax benefit of $8,317,000, Seaboard will issue additional shares of its common stock to the Parent Company for the tax benefit received in accordance with the terms of the Transaction, as described above. 53 The components of accumulated other comprehensive loss, net of related taxes, are summarized as follows: Years ended December 31, (Thousands of dollars) 2004 2003 2002 Cumulative foreign currency translation adjustment $(53,986) $(56,490) $(62,555) Unrealized gain on investments 257 14 118 Unrecognized pension cost (375) (5,772) (5,799) Net unrealized loss on cash flow hedges (188) (30) - Deferred gain on interest rate swaps 551 751 952 Accumulated other comprehensive loss $(53,741) $(61,527) $(67,284) The foreign currency translation adjustment primarily represents the effect of the Argentine peso currency exchange fluctuation on the net assets of the Sugar and Citrus segment. When the Argentine government lifted the one to one parity of the peso to the U.S. dollar at the end of 2001, the peso lost significant value against the dollar. While the devaluation continued throughout 2002, the peso regained some value during 2003 and remained relatively stable during 2004. As a result of the change in peso value, stockholders' equity increased for the years ended December 31, 2004 and 2003 by $3,006,000 and $10,749,000, respectively, compared to a decrease of $50,372,000 for the year ended December 31, 2002. These changes reflect the foreign currency exchange gains and losses recorded in earnings in each year of $128,000, $519,000 and $(12,540,000) for 2004, 2003 and 2002, respectively, relating to net dollar-denominated debt of the Argentine subsidiary, and currency translation adjustments of $2,878,000, $10,230,000 and $(37,832,000) as other comprehensive gains or losses for the peso-denominated net assets as of December 31, 2004, 2003, and 2002, respectively. At December 31, 2004, the Sugar and Citrus segment has $74,970,000 in net assets denominated in Argentine pesos and $4,922,000 in net assets denominated in U.S. dollars in Argentina. Until 2002, no tax benefit was provided related to this reduction of shareholders' equity. However, after a series of transactions was completed in 2002 which changed the organizational structure of this subsidiary as described in Note 7, Seaboard recorded a 35% deferred tax benefit relating to the currency translation adjustment component of accumulated other comprehensive loss and a one-time current benefit of $14,303,000 through the Consolidated Statements of Earnings. 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. Note 13 Segment Information Seaboard Corporation had five reportable segments through December 31, 2004: Pork, Commodity Trading and Milling, Marine, Sugar and Citrus, and Power, each offering a specific product or service. The Pork segment produces and sells fresh and frozen pork to further processors, foodservice outlets, grocery stores and other retail outlets, and distributors throughout the United States and to certain foreign markets. The Commodity Trading and Milling segment internationally markets wheat, corn, soybean meal and other commodities in bulk to third party customers and to non- consolidated foreign affiliates, and operates flour, maize and feed mills in 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 and Citrus segment produces and processes sugar and citrus in Argentina primarily to be marketed locally. The Power segment operates as an unregulated independent power producer in the Dominican Republic generating power from a system of diesel engines mounted on two barges. Revenues from all other segments are primarily derived from the jalapeno pepper processing and domestic trucking transportation operations. Each of the five main segments is separately managed and each was started or acquired independent of the other segments. 54 As a result of the weakened economic environment in the Dominican Republic (DR), where the Power segment operates, the local government has experienced liquidity problems that have impaired its ability to pay commercial creditors on a timely basis. The liquidity problems have directly affected the government-owned distribution companies and other companies that must collect from the government to make payments on their accounts. Historically, the DR government funded electricity collection shortfalls with cash payments to the distribution companies. In recent years, the government has not fully funded the collection shortfalls. Consequently, this segment has continued to experience difficulty collecting amounts owed from certain generating and distribution companies. During 2004, as a result of management's concern over its ability to collect certain customer accounts, Seaboard curtailed power production from time to time to avoid spot market sales to troubled companies or entities that were not making timely payments. In addition, approximately $1,932,000 of spot market sales were not recorded during the second half of 2004 as collectibility was not reasonably assured. As of December 31, 2004, Seaboard's net receivable exposure from customers with significant past due balances totaled $26,213,000, including $10,300,000 classified in other long-term assets on the Consolidated Balance Sheets. During the latter half of 2003, certain customers did not make any payments for electric power sold to them by Seaboard. As a result, Seaboard recorded a $4,284,000 charge to operating expense during the fourth quarter of 2003 to increase the allowance for doubtful accounts related to those nonpaying customers. For 2002, the allowance was reduced by $2,932,000, reflecting the recovery of previously reserved receivables for which Seaboard had negotiated full payment for all past due amounts. While the economy in the DR continued to suffer from the cash imbalance throughout 2004, the peso regained some of the value it had lost during 2003 when the Dominican peso devalued approximately 68%. Foreign exchange gains (losses) included in other income (expense) for this segment totaled $2,460,000, $(6,735,000) and $(1,952,000) for 2004, 2003 and 2002, respectively. As a result of the sustained losses from an investment in a Bulgarian wine business (the Business), during the third quarter of 2004 Seaboard's common stock investment was reduced to zero and Seaboard began applying losses against its remaining investments, consisting of preferred stock and debt, based on the change in Seaboard's claim on the Business' book value. Accordingly, Seaboard increased its share of losses from this Business from 37% to 73% during the third quarter of 2004. In February 2005, the Board of Directors and the majority of the owners of this Business, including Seaboard, agreed to pursue the sale of the entire Business or all of its assets. Accordingly, Seaboard assessed the fair value of this Business based on current negotiations to sell a substantial portion of the Business and all related wine labels, and other information on the fair value for the sale of all other assets of this Business. The result of this assessment indicated a fair value of $9,189,000 compared to the cost basis of $12,781,000 as of December 31, 2004. As a result, in the fourth quarter of 2004, Seaboard recognized a $3,592,000 decline in value considered other than temporary in its investment in this Business as a charge to losses from foreign affiliates in the All Other segment. Seaboard also has $2,511,000 of foreign currency translation gains recorded in other comprehensive income from this business which will be recognized in earnings upon completion of the sale. During the third quarter of 2003, the Business negotiated a refinancing of certain of its debt after it was unable to make a scheduled principal payment in 2002 to a bank syndication. As part of the refinancing, the bank syndication forgave a portion of the debt and the Business sold certain assets, the proceeds of which were used to repay a portion of the principal balance plus accrued interest. As a result of this transaction, the Business incurred a loss from the sale of assets, net of the gain from debt forgiveness, of which Seaboard recorded its share, $1,489,000, during the third quarter of 2003. During 2003, Seaboard sold its shrimp farming and processing assets in Honduras with a book value of $2,744,000 for $3,900,000, including cash received of $200,000 and notes receivable of $3,700,000, due in annual installments through 2009. As a substantial portion of the sale price is in the form of a long-term note receivable from the buyer, management will use the cost recovery method of accounting and no gain will be recognized until the actual cash is collected. 55 As discussed in Note 3, during the fourth quarter of 2003, Seaboard sold its equity investment in Fjord, a non-consolidated affiliate included in the All Other segment. Seaboard's share of Fjord's losses recognized during 2003 and 2002 as a loss from foreign affiliates totaled $15,546,000 and $10,158,000, respectively. Included in 2003 losses is $12,421,000 for asset impairment charges primarily related to inventory, license, and fixed assets caused by sustained low worldwide salmon prices and an unfavorable U.S. Court ruling restricting Fjord from the use of its genetic material. The following tables set forth specific financial information about each segment as reviewed by management. Operating income for segment reporting is prepared on the same basis as that used for consolidated operating income. Operating income, along with losses from foreign affiliates for the Commodity Trading and Milling 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) 2004 2003 2002 Pork $ 961,614 $ 735,662 $ 645,820 Commodity Trading and Milling 1,066,545 667,869 652,120 Marine 498,504 408,971 383,419 Sugar and Citrus 72,940 70,740 57,700 Power 56,386 69,622 63,106 All Other 27,991 28,476 27,142 Segment/Consolidated Totals $2,683,980 $1,981,340 $1,829,307 Operating Income: Years ended December 31, (Thousands of dollars) 2004 2003 2002 Pork $ 143,939 $ 22,447 $ (13,876) Commodity Trading and Milling 27,409 15,951 18,430 Marine 61,607 5,759 16,599 Sugar and Citrus 12,263 18,755 16,294 Power 4,357 7,037 14,258 All Other 3,255 2,014 (784) Segment Totals 252,830 71,963 50,921 Corporate (1,576) (3,177) (3,796) Consolidated Totals $ 251,254 $ 68,786 $ 47,125 Gain (Loss) from Foreign Affiliates: Years ended December 31, (Thousands of dollars) 2004 2003 2002 Commodity Trading and Milling $ 5,806 $ (384) $ (3,813) Sugar and Citrus 687 (337) - All Other (8,538) (20,553) (13,013) Segment/Consolidated Totals $ (2,045) $ (21,274) $ (16,826) 56 Depreciation and Amortization: Years ended December 31, (Thousands of dollars) 2004 2003 2002 Pork $ 40,017 $ 37,173 $ 24,069 Commodity Trading and Milling 2,945 3,261 3,148 Marine 11,504 13,264 14,276 Sugar and Citrus 4,214 3,817 3,857 Power 5,363 5,348 5,220 All Other 360 936 1,322 Segment Totals 64,403 63,799 51,892 Corporate 217 404 744 Consolidated Totals $ 64,620 $ 64,203 $ 52,636 Capital Expenditures: Years ended December 31, (Thousands of dollars) 2004 2003 2002 Pork $ 11,807 $ 15,756 $ 135,145 Commodity Trading and Milling 4,862 2,741 1,122 Marine 10,345 7,651 9,710 Sugar and Citrus 5,485 4,435 2,545 Power 198 396 814 All Other 847 235 128 Segment Totals 33,544 31,214 149,464 Corporate 78 258 415 Consolidated Totals $ 33,622 $ 31,472 $ 149,879 Investment in and Advances to Foreign Affiliates: December 31, (Thousands of dollars) 2004 2003 Commodity Trading and Milling $ 26,762 $ 28,040 Sugar and Citrus 2,050 1,612 All Other 9,189 17,028 Segment/Consolidated Totals $ 38,001 $ 46,680 Total Assets: December 31, (Thousands of dollars) 2004 2003 Pork $ 655,551 $ 670,288 Commodity Trading and Milling 278,324 243,065 Marine 138,238 114,375 Sugar and Citrus 90,035 75,674 Power 77,978 76,920 All Other 13,924 13,953 Segment Totals 1,254,050 1,194,275 Corporate 182,644 131,416 Consolidated Totals $1,436,694 $1,325,691 57 Administrative services provided by the corporate office are primarily allocated to the individual segments based on the size and nature of their operations. Corporate assets include short- term investments, certain investments in and advances to foreign affiliates, fixed assets, deferred tax amounts and other miscellaneous items. Corporate operating losses represent certain operating costs not specifically allocated to individual segments. Geographic Information Seaboard had sales in South Africa totaling $355,475,000, $200,310,000, and $242,415,000 for the years ended December 31, 2004, 2003 and 2002, respectively, representing approximately 13%, 10% and 13% of total sales for each respective year. No other individual foreign country accounts 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) 2004 2003 2002 United States $ 951,650 $ 758,325 $ 636,091 Caribbean, Central and South America 713,921 555,680 541,332 Africa 744,552 485,619 478,273 Pacific Basin and Far East 133,307 93,568 94,550 Canada/Mexico 70,208 72,051 56,575 Eastern Mediterranean 51,786 9,301 14,435 Europe 18,556 6,796 8,051 Totals $2,683,980 $1,981,340 $1,829,307 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) 2004 2003 United States $ 505,489 $ 544,016 Dominican Republic 39,644 45,898 Argentina 38,760 37,174 All other 21,105 19,121 Totals $ 604,998 $ 646,209 At December 31, 2004 and 2003, Seaboard had approximately $156,685,000 and $107,828,000, respectively, of foreign receivables, excluding receivables due from foreign affiliates, which generally represent more of a collection risk than the domestic receivables. Management believes its allowance for doubtful receivables is adequate. 58 Board of Directors H.H. Bresky Kevin M. Kennedy Chairman of the Board, Director President and President and Chief Investment Chief Executive Officer Officer, Great Circle Management LLC David A. Adamsen Director Joseph E. Rodrigues Vice President - Group General Director Manager, Retired Executive Vice Northeast Region, Dean Foods President and Treasurer Company Douglas W. Baena Director Chief Executive Officer, CreditAmerica, Inc. Officers H.H. Bresky Barry E. Gum Chairman of the Board, Vice President, Finance President and Chief Executive Officer James L. Gutsch Vice President, Engineering Steven J. Bresky Senior Vice President, Ralph L. Moss International Operations Vice President, Governmental Affairs Robert L. Steer Senior Vice President, David S. Oswalt Treasurer and Chief Financial Vice President, Taxation and Officer Business Development David M. Becker John A. Virgo Vice President, General Vice President, Corporate Counsel and Secretary Controller and Chief Accounting Officer Chief Executive Officers of Principal Seaboard Operations Rodney K. Brenneman Edward A. Gonzalez Pork Marine Steven J. Bresky Commodity Trading and Milling Stock Transfer Agent and Availability of 10-K Report Registrar of Stock Seaboard files its Annual Report on Form 10-K with the UMB Bank, n.a. Securities and Exchange Securities Transfer Division Commission. Copies of the P.O. Box 410064 Form 10-K for fiscal 2004 are Kansas City, Missouri 64141-0064 available without charge by (800) 884-4225 writing Seaboard Corporation, 9000 West 67th Street, Shawnee Auditors Mission, Kansas 66202, Attention: Shareholder KPMG LLP Relations or via the Internet 1000 Walnut, Suite 1000 at www.seaboardcorp.com. Kansas City, Missouri 64106 Seaboard provides access to its most recent Form 10-K, Stock Listing 10-Q and 8-K reports on its Internet website, free of Seaboard's common stock is charge, as soon as reasonably traded on the American Stock practicable after those Exchange under the symbol SEB. reports are electronically Seaboard had 215 shareholders filed with the Securities and of record of shares of its Exchange Commission. common stock as of December 31, 2004. 59 EX-14 6 ex14.txt CODE OF ETHICS POLICY AS AMENDED AS OF MARCH 4, 2005 Exhibit 14 Code of Ethics Policy Date: 3/4/05 The successful operation and reputation of Seaboard Corporation and its subsidiaries and affiliates (collectively, the "Company") depend upon the principles of fairness and ethical conduct of its directors, officers and employees. The Company's reputation for integrity and excellence requires careful compliance with the spirit and letter of all laws and regulations, as well as a commitment to the highest standards of personal and professional conduct. The success and survival of this organization depends upon wise business decisions and an attitude of trust and respect between the Company and its customers, vendors and suppliers, employees, and shareholders. That trust must be preserved. Directors, officers and employees have a duty to support the goals and objectives of the Company, and to act in a way that will always merit the continued trust and confidence of the Company's customers, vendors and suppliers, employees, and shareholders. Accordingly, the Company adopts the following Code of Ethics: I. Honest and Ethical Conduct Directors, officers and employees will exhibit and promote the highest standards of honest and ethical conduct which: Encourages and rewards professional integrity in all aspects of the Company, by eliminating inhibitions and barriers to responsible behavior, such as coercion, fear of reprisal, or alienation from the Company itself. Desists from, prohibits and eliminates any conflict of interest or appearance of a conflict of interest between the Company and what could result in personal gain for a director, officer or employee of the Company, as defined in the attached Conflict of Interest policy. Provides a process for employees of the Company to inform senior management of practices which deviate from honest and ethical behavior. Demonstrates their personal support for such policies and procedures through periodic communication reinforcing these ethical standards throughout the Company. II. Financial Records and Periodic Reports Directors, officers and employees will establish and manage the enterprise transaction and reporting systems and procedures to ensure that: Business transactions are properly authorized and completely and accurately recorded on the Company's books and records in accordance with Generally Accepted Accounting Principles (GAAP) and established Company financial policy. The retention or proper disposal of Company records shall be in accordance with established Company policies and applicable legal and regulatory requirements. Periodic financial communications and reports will be delivered in a manner that facilitates the highest degree of clarity of content and meaning so that readers and users will quickly and accurately determine their significance and consequence. III. Anti-Competitive Conduct .. Directors, officers and employees shall not enter into any agreement, understanding or arrangement with any competitor about prices, territory restrictions, refusals to sell, allocation of business, bidding, or engage in any other type of anti competitive practice. IV. Compliance with Applicable Laws, Rules and Regulations Directors, officers and employees, to the extent applicable to their job function, shall comply with all federal, state and local statutes, regulations and administrative procedures in the course of all conduct on behalf of the Company. In addition to the general policies above, the Company adopts the following additional conduct-related policies as part of the Code of Ethics: Conflict of Interest and Confidentiality Trading Seaboard Securities These policies are attached. As a condition of employment, each employee of the Company must be familiar with these policies and agree to abide by their provisions. Violations of the content or spirit of these provisions are unacceptable and may lead to disciplinary action up to and including termination of employment or separation of ongoing business relationship with the Company. If anyone has knowledge of or is suspicious of any breach of any section of this Code or is concerned whether circumstances could lead to a violation of this Code, such person should report the matter to one or more of the following: the person's immediate supervisor, the Company's Director of Human Resources or the Company's General Counsel. Alternatively, the matter may be reported by calling the Company's dedicated toll free number, 866-676-8886, which will be answered by the Company's Director of Human Resources. The Company will not allow any retaliation against an employee who acts in good faith in reporting any such violation or suspected violation. All subsidiaries of Seaboard Corporation shall adopt this Code of Ethics or a similar policy containing only such changes as are approved by Seaboard Corporation's Director of Human Resources. CONFLICT OF INTEREST AND CONFIDENTIALITY Seaboard Corporation, its subsidiaries and affiliates (collectively, the "Company") require directors, officers and employees to conduct their non-work activities in such a manner that they do not conflict with the best interests of the Company or detract from the performance of their responsibilities. Directors, officers and employees shall follow the general guidelines set forth below. The failure of any employee to adhere to these general guidelines may result in discipline, including termination of employment. 1. Conflicts of Interest: A. All directors, officers and employees of the Company shall not have, directly or indirectly, any financial or other interest in any entity which is a supplier or customer of the Company. The foregoing shall not prohibit the ownership of not more than one percent (1%) of the stock of any supplier or customer which is listed upon a national stock exchange or actively traded in the over-the-counter market. B. Officers and employees shall not be employed by another entity, participate in self-employment, or serve another entity in any manner where such activity affects the employee's work efficiency or interferes with the employee's ability to act in the best interests of the Company. Officers and employees whose job functions involve coordination with commercial institutions shall not conduct similar business with such institutions for such officer's or employee's own personal affairs or business. C. All officers and employees shall be required to complete a form disclosing all known conflicts of interest, or questions regarding such, to the Corporate Director of Human Resources for review and acceptance by the Company. The Company may require a person with a conflict of interest to dispense of such conflict of interest. The failure of any person to complete such form disclosing all conflicts of interests, to disclose all known conflicts of interest or to dispense with a conflict of interest, when requested by the Company, may result in discipline by the Company, including termination of employment. 2. Personal Gain: A. All of the business affairs of the Company with all parties, including government officials, suppliers, customers, unions and competitors, shall always be conducted on an ethical, legal and arm's length basis. B. Directors, officers and employees shall not provide or accept payments, gifts, or favorable business arrangements for the purpose of securing preferential consideration for the Company or as inducement to enter into any transaction. Examples of such prohibited conduct include giving or taking gifts, gratuities, favors, loans, guarantees of loans, commissions, excessive entertainment, kickbacks, rebates, and other types of financial inducements. C. Common business practice permits the offer or acceptance of certain courtesies of nominal value, usually in the form of meals and entertainment, provided objectivity of the parties will not be unduly affected. 3. Confidential Information: It is vital that we protect the privacy of the Company's confidential information. Confidential information includes proprietary, technical, business, financial, joint venture, customer and employee information that is not available publicly. It is the employee's responsibility to know what information is confidential and to obtain clarification when in doubt. A. Employees must not disclose confidential information to any person outside of the Company, unless authorized to do so. This includes, as prohibited, any disclosure of confidential information to family and friends. Where confidential information is entrusted to persons outside of the Company, efforts must be made to ensure the continuing protection and confidentiality of that information. Within the Company, confidential information should be disclosed only on a "need to know" basis. B. Employees must not use confidential information for unauthorized purposes. They must also take reasonable care to protect confidential information against loss, theft, unauthorized access, alteration or misuse. C. Employees leaving the Company who have had access to Company confidential information will be reminded of their continuing responsibility to protect it and maintain its confidentiality. The Company expects that employees joining it from other companies will not disclose the confidential information to those companies. POLICY WITH REGARD TO TRADING SEABOARD SECURITIES 1. In General In the course of their employment with Seaboard Corporation or its subsidiaries and affiliates (collectively, the "Company"), directors, officers and employees frequently come into possession of confidential and highly sensitive information concerning the Company, its customers, suppliers or other corporations with which the Company has contractual relationships or may be negotiating transactions. Much of this information has a potential for affecting the market price of securities issued by the corporations involved. Under some circumstances, federal securities law imposes potentially substantial civil and criminal penalties on persons who improperly obtain, use or provide material, non-public information, in connection with a purchase or sale of securities. Also keep in mind, the Securities and Exchange Commission ("SEC") may seek substantial civil penalties from any person who, at the time of an insider trading violation, "directly or indirectly controlled the person who committed such violation," i.e., an employer. As noted above, civil penalties for persons who control violators can equal the greater of $1,000,000 or three times the profit gained or losses avoided. Employers may also be subject to criminal penalties of $2,500,000 for insider trading violations committed by employees. Accordingly, when the maximum criminal penalty is combined with the maximum civil penalty, employers of persons who trade on the basis of insider information may be liable for up to $3,500,000 - even for employee violations that yield a small profit gained or loss avoided. The statute provides that any "controlling person" may be liable for civil penalties up to the amount specified above if the controlling person both (i) knew or recklessly disregarded the fact that the employee was likely to engage in a violation; and (ii) failed to take appropriate steps to prevent that violation before it occurred. Moreover, in recent years, the SEC and governmental prosecutors have been vigorously enforcing the insider trading laws against both individuals and institutions. Given all of these factors, the Company has determined to provide specific guidance concerning the propriety of various personal transactions, and to impose specific procedures in certain cases to attempt reasonably to ensure that neither the Company nor any of its directors, officers and employees violates insider trading laws. 2. Material Non-Public Information The federal securities laws and regulations have been held to prohibit the purchase or sale of a security at a time when the person trading in that security possesses material non-public information concerning the issuer of the security, or the market for the security, which has not yet become a matter of general public knowledge and which has been obtained or is being used in breach of a duty to maintain the information in confidence. Whether the information is proprietary information about the Company or information that could have an impact on the Company's stock price, employees must not pass the information on to others. The penalties discussed above apply, whether or not you derive any benefit from another's actions. "Material non-public information" includes information that is not available to the public at large which could affect the market price of the security and to which a reasonable investor would attach importance in deciding whether to buy, sell, or retain the security. Examples of information that might be deemed material include the following: annual or quarterly financial results, dividend increases or decreases, the declaration of a stock split or the offering of additional securities, earnings estimates, changes in previously announced earnings estimates, significant expansion or curtailment of operations, a significant increase or decline in business, a significant merger or acquisition proposal or agreement, unusual borrowings or securities offerings, major litigation, impending bankruptcy or financial liquidity problems, significant changes in management, purchases or sales of substantial assets, or the gain or loss of a substantial customer or supplier. This list is not exhaustive. Other types of information may be material at any particular time, depending upon the circumstances. It should be noted that either positive or adverse information may be material. Information is considered to be available to the public only when it has been released to the public through appropriate channels (e.g., by means of a press release or a statement from one of the Company's senior officers) and enough time has elapsed to permit the investment market to absorb and evaluate the information. Once public release has occurred, information will normally be regarded as absorbed and evaluated within two or three days thereafter. 3. Company Policy As long as an officer, director or employee has material non-public information relating to the Company or any other issuer, including any of the Company's customers, it is Company policy that the officer, director or employee may not directly or indirectly buy or sell the securities of the Company or any other affected issuer. Equally important, the information may not be passed along to others. This policy shall apply to officers, directors and employees of the Company or its subsidiaries and affiliates. To avoid potential liability under this policy, all officers, directors and employees of the Company must not purchase or sell securities of the Company or of any other issuer of a security at a time when the officer, director or employee is aware of any material non-public information about the Company or any issuer, regardless of how that information was obtained. The officer, director or employee also must not permit any member of his or her immediate family or anyone acting on his or her behalf, or anyone to whom he or she has disclosed the information, to purchase or sell such securities. After the information has been publicly disclosed through appropriate channels, a reasonable time should be allowed to elapse (at least three business days) before trading in the security, to allow for public dissemination and evaluation of the information. Without limiting the generality of the policy stated herein, no director or officer of the Company or its subsidiaries and affiliates, or other employee possessing material non-public information, may make any purchase or sale of securities of the Company (i) from the date two weeks prior to the end of each fiscal quarter until the beginning of the third business day after the public release of earnings for such quarter; (ii) from the time of the public release of any material information until the beginning of the third business day after such release; (iii) during any period when he or she is aware that the Company expects to make a public release of material information in the near future; and (iv) during any other period when he or she has knowledge of any "material inside information" concerning the Company. 4. Application of Policy to Family Members and Affiliates The foregoing requirements also apply to any purchase or sale of securities of the Company by a family member or others sharing the same address or by a corporation, partnership, trust or other entity owned or controlled by a director, officer or employee. 5. Prohibition of Short-Sales Federal securities laws prohibit any short sale or any short sale "against the box" of Company securities by any officers, directors or greater than ten-percent shareholders. A short sale is the sale of a security either not owned by the seller, or if owned, not delivered (the so-called short sale "against the box"), which involves the borrowing of shares by the seller's broker for the account of the seller and delivery of the borrowed shares to the buying broker. At some point in the future, the short seller must purchase the securities to cover the short position. Because the short seller hopes that he or she will be able to purchase at a price lower than the price at which the short sale was made, a short seller expects a security to decline in market value from present levels. Since short sales can depress the price of securities, the Company requires that none of its officers, directors or employees ever make short sales of the Company's securities (whether or not such short sales would be permitted under the federal securities laws). 6. Prohibited Practices In addition, it is the Company's policy that officers, directors and employees should not engage in any of the following activities with respect to the securities of the Company: A. Trading in securities on a short-term basis. Any security purchased must be held for a minimum of six (6) months before sale, unless the security is subject to forced sale, e.g., as a consequence of merger or acquisition; B. Purchases on margin without the prior, written consent of the Company after disclosure to the Company's Board of Directors; C. Short sales; or D. Buying or selling put or call options. EX-21 7 ex21.txt LIST OF SUBSIDIARIES EXHIBIT 21 SUBSIDIARIES NAMES UNDER STATE OR OTHER OF THE WHICH SUBSIDIARIES JURISDICTION REGISTRANT DO BUSINESS OF INCORPORATION Agencias Generales Conaven, C.A. Conaven Venezuela Agencia Maritima del Istmo, S.A. Same Costa Rica Almacenadora Conaven, S.A. Conaven Venezuela Boyar Estates S.A.* Same Luxembourg 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 Delta Packaging Company Ltd.* Same Nigeria Desarrollo Industrial Bioacuatico, S.A.* Same Ecuador Eureka Chicken Limited * Same Zambia Franquicias Azucareras S.A.* Same Argentina H&O Shipping Limited Same Liberia Ingenio y Refineria San Martin del Tabacal S.R.L. Tabacal Argentina JacintoPort International LP Same Texas KWABA - Sociedade Industrial e Comercial, SARL* KWABA Angola Les Moulins d'Haiti S.E.M. (LHM)* Same Haiti Lesotho Flour Mills Limited* Same Lesotho Life Flour Mill Ltd.* Same Nigeria Minoterie de Matadi, S.A.R.L.* Same Democratic Republic of Congo Minoterie du Congo, S.A. Same Republic of Congo Mission Funding, L.L.C. Same Delaware Mobeira, SARL Same Mozambique Molinos Champion, S.A.* Same Ecuador Molinos del Ecuador, C.A.* Same Ecuador Mount Dora Farms Inc. Same Florida National Milling Company of Guyana, Ltd. Same Guyana National Milling Corporation Limited Same Zambia EXHIBIT 21 (continued) Productores de Alcoholes y Melaza S.A.* PAMSA Argentina Port of Miami Cold Storage, Inc. Same Florida Representaciones Maritimas y Aereas, S.A. Same Guatemala Representaciones y Ventas S.A.* Same Ecuador Sea Cargo, S.A. Same Panama Seaboard de Colombia, S.A. Same Colombia Seaboard del Peru, S.A. Same Peru Seaboard Farms, Inc. Same Oklahoma Seaboard Freight & Shipping Jamaica Limited Same Jamaica Seaboard Honduras, S. de R.L. de C.V. Same Honduras Seaboard Marine Bahamas, Ltd. Same Bahamas Seaboard Marine of Haiti, S.E. Same Haiti Seaboard Marine Ltd. Same Liberia Seaboard Marine of Florida, Inc. Same Florida Seaboard Marine (Trinidad) Limited Same Trinidad Seaboard Overseas Limited Same Bahamas Seaboard Overseas Management Company, Ltd. Same Bermuda Seaboard Overseas Peru SRL Same Peru Seaboard Overseas Trading and Shipping (PTY) Ltd. Same South Africa Seaboard Ship Management Inc. Same Florida Seaboard Software Innovations, Inc. Same Delaware Seaboard Solutions, Inc. Same Delaware Seaboard Trading and Shipping Ltd. Same Kansas Seaboard Transport Inc. Same Oklahoma Seaboard West Africa Limited Same Sierra Leone Seaboard Zambia Commodity Trading Limited Same Zambia SEADOM, S.A. Same Dominican Republic Seamaritima, S.A. de C.V. Same Mexico Shawnee Funding, Limited Partnership Same Delaware Top Feeds Limited* Same Nigeria Transcontinental Capital Corp. (Bermuda) Ltd. TCCB Bermuda Unga Holdings Limited* Unga Kenya *Represents a non-controlled, non-consolidated affiliate. EX-31.1 8 ex31_1.txt CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 302 Exhibit 31.1 CERTIFICATIONS I, H. H. 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: March 4, 2005 /s/ H. H. Bresky H. H. Bresky, Chairman of the Board, President and Chief Executive Officer EX-31.2 9 ex31_2.txt CERTIFICATION OF THE CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 302 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: March 4, 2005 /s/ Robert L. Steer Robert L. Steer, Senior Vice President, Treasurer and Chief Financial Officer EX-32.1 10 ex32_1.txt CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 906 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, 2004 (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. section 1350, as adopted pursuant to section 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: March 4, 2005 /s/ H. H. Bresky H. H. Bresky, Chairman of the Board, President and Chief Executive Officer EX-32.2 11 ex32_2.txt CERFITICATION OF THE CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 906 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, 2004 (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. section 1350, as adopted pursuant to section 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: March 4, 2005 /s/ Robert L. Steer Robert L. Steer, Senior Vice President, Treasurer and Chief Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----