0001558370-16-003549.txt : 20160225 0001558370-16-003549.hdr.sgml : 20160225 20160225171553 ACCESSION NUMBER: 0001558370-16-003549 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 87 CONFORMED PERIOD OF REPORT: 20151231 FILED AS OF DATE: 20160225 DATE AS OF CHANGE: 20160225 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SEABOARD CORP /DE/ CENTRAL INDEX KEY: 0000088121 STANDARD INDUSTRIAL CLASSIFICATION: [6221] 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: 161456917 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 seb-20151231x10k.htm 10-K seb_Current folio_10K

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, 2015

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 West 67th Street, Merriam, Kansas  66202

(Address of principal executive offices)              (Zip Code)

 

(913) 676-8800

(Registrant’s telephone number, including area code)

 

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

 

 

 

 

 

 

Title of each class

Common Stock $1.00 Par Value

Name of each exchange on which registered

NYSE MKT

 

 

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

 

None

(Title of class)

 

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

 

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

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes [ X ]  No [    ]

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes [ X ]  No [    ]

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  [X ]

 

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

 

 

 

Large accelerated filer [X ]

Accelerated filer [    ]

 

 

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

Smaller reporting company [    ]

 

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

 

The aggregate market value of the 262,616 shares of Seaboard common stock held by nonaffiliates was approximately $925,986,642, based on the closing price of $3,526.01 per share on July 2, 2015, the end of Seaboard’s most recently completed second fiscal quarter. As of January 29, 2016, the number of shares of common stock outstanding was 1,170,550.

 

DOCUMENTS INCORPORATED BY REFERENCE

 

Portions of the following documents are incorporated by reference into the indicated parts of this report: (1) Seaboard Corporation’s annual report to stockholders furnished to the Commission pursuant to Rule 14a-3(b)  Parts I and II; and (2) Seaboard Corporation’s definitive proxy statement, which will be filed no later than 120 days after December 31, 2015, pursuant to Regulation 14A for the 2016 annual meeting of stockholders Part III.

 


 

FORM 10-K

 

SEABOARD CORPORATION

 

Forward-looking Statements

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

 

·

statements that are not historical in nature; and

 

·

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

 

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

 

·

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

 

·

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

 

·

statements of future economic performance;

 

·

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

 

(i)

Seaboard’s ability to obtain adequate financing and liquidity;

(ii)

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

(iii)

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

(iv)

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

(v)

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

(vi)

the charter hire rates and fuel prices for vessels;

(vii)

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

(viii)

the effect of the fluctuation in foreign currency exchange rates;

(ix)

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

(x)

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

(xi)

the productive capacity of facilities that are planned or under construction, and the timing of the commencement of operations at such facilities;

(xii)

the increase in Seaboard's hog and other production capacity attributable to acquisitions;

(xiii)

Seaboard's ability to convert its Haiti port project loan to equity, including the satisfaction of the conditions for such conversion;

(xiv)

the amount of Seaboard's funding commitment for an Oklahoma refined coal processing plant, or

(xv)

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

 

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

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FORM 10-K

 

SEABOARD CORPORATION

 

PART I

 

Item 1Business

 

(a)

General Development of Business

 

Originally founded in 1918, today Seaboard Corporation, a Delaware corporation organized in 1946, and its subsidiaries (“Seaboard”), is a diverse global agribusiness and transportation company. In the United States (“U.S.”), Seaboard is primarily engaged in pork production and processing and ocean transportation. Overseas, Seaboard is primarily engaged in commodity merchandising, grain processing, sugar production and electric power generation. Seaboard also has an interest in turkey operations in the U.S. See Item 1(c)(1)(ii) “Status of Product or Segment” below for a discussion of acquisitions, dispositions and other developments in specific divisions.

 

Seaboard Flour LLC and SFC Preferred LLC, Delaware limited liability companies, collectively own approximately 76% of the outstanding common stock of Seaboard. Mr. Steven J. Bresky, President and Chief Executive Officer of Seaboard, and other members of the Bresky family, including trusts created for their benefit, own the equity interests of Seaboard Flour LLC and SFC Preferred LLC.

 

(b)

Financial Information about Segments

 

The financial information relating to reportable segments required by this item is incorporated herein by reference to Note 12 to the Consolidated Financial Statements included in Seaboard’s annual report to stockholders furnished to the Commission pursuant to Rule 14a-3(b) and attached as Exhibit 13 to this annual report on Form 10-K (“Annual Report to Stockholders”).

 

(c)

Narrative Description of Business

 

(1)

Business Done and Intended to be Done by the Registrant

 

(i)Principal Products and Services

 

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

 

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

 

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

 

Seaboard’s Pork Division has a 50% noncontrolling interest in Daily’s Premium Meats, LLC (“Daily’s”). Daily’s produces and markets raw and pre-cooked bacon, ham and sausage under the Daily’s® brand name primarily for

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SEABOARD CORPORATION

 

the food service industry and, to a lesser extent, retail markets. Daily’s has two further processing plants located in Salt Lake City, Utah and Missoula, Montana that generally operate at capacity. In the second quarter of 2015, Daily’s began construction on a third further processing plant located in St. Joseph, Missouri. Operations are expected to begin in mid-2016. Seaboard and Triumph each supply raw product to Daily’s.

 

On May 13, 2015, the Pork Division and Triumph agreed to jointly develop and operate a pork processing facility in Sioux City, Iowa. The facility is anticipated to begin operations in mid-2017. As part of the operations, Seaboard agreed to provide a portion of the hogs to be processed at the facility. In February 2016, the Pork Division and a newly formed limited liability partnership that will be consolidated with Seaboard acquired hog inventory and related assets that are expected to increase Seaboard’s hog production capacity to meet the majority of such hog supply commitment for single shift processing at the new plant.

 

Commodity Trading and Milling Division – Seaboard’s Commodity Trading and Milling Division is an integrated agricultural commodity trading, processing and logistics company. This division markets wheat, corn, soybean meal and other commodities in bulk to third parties and affiliated companies. This division is principally managed under the name of Seaboard Overseas and Trading Group and conducts business primarily through its subsidiaries, Seaboard Overseas Limited with offices in Colombia, Ecuador, Isle of Man, Kenya, Singapore and South Africa, Seaboard Overseas Trading and Shipping (PTY) Ltd. located in South Africa, PS International, LLC located in Chapel Hill, North Carolina, and its non-consolidated affiliates, ContiLatin del Peru S.A. located in Lima, Peru, Interra International, LLC located in Atlanta, Georgia, Cereoil Uruguay S.A. located in Montevideo, Uruguay, and Plum Grove Pty Ltd located in Fremantle, Australia. This division also operates a grain and specialty crop storage and throughput facility through Fill-More Seeds, Inc. located in Fillmore, Canada, and an ocean transportation brokerage operation through Seaboard Bulk Services, Ltd. located in Athens, Greece. All of the commodities marketed by this division are purchased from growing regions worldwide, with primary destinations being Africa, South America and the Caribbean. This division sources, transports and markets approximately nine million tons of agricultural commodities on an annual basis. Seaboard integrates the service of delivering commodities to its customers through the use of short-term chartered bulk vessels and its three owned bulk carriers.

 

This division also operates grain and feed milling and related businesses with 35 locations in 21 countries, which are primarily supplied by the trading locations discussed above. The grain processing businesses are operated through 5 consolidated and 19 non-consolidated affiliates in Africa, South America, the Caribbean, and Asia. These are primarily flour, feed and maize milling and oil crush businesses, which produce approximately four million metric tons of finished products per year. In addition, this division has a noncontrolling interest in a poultry business in Africa and a bakery business in the Democratic Republic of Congo. Most of the products produced by these operations are sold in the countries in which the products are produced or into adjacent countries.

 

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

 

Seaboard’s primary marine operation is located in Miami, Florida and includes a terminal located at PortMiami and off-dock warehouses for cargo consolidation and temporary storage. Seaboard also operates a cargo terminal facility at the Port of Houston that includes an on-dock warehouse space for temporary storage of bagged grains, resins and other cargoes. Seaboard also makes scheduled vessel calls in Brooklyn, New York, New Orleans, Louisiana, Philadelphia, Pennsylvania, and 45 foreign ports. At December 31, 2015, Seaboard’s fleet consisted of approximately 22 chartered and 3 owned vessels, and dry, refrigerated and specialized containers and other related equipment.

 

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FORM 10-K

 

SEABOARD CORPORATION

 

Sugar Division – Seaboard, through its subsidiaries, Ingenio y Refineria San Martin del Tabacal S.R.L. and Alconoa S.R.L., as well as other Argentine non-consolidated affiliates, grows sugarcane, which it uses to produce refined sugar and alcohol in Argentina. This division also purchases sugar in bulk from third parties mostly within Argentina for subsequent resale. The sugar products are mostly sold in Argentina, primarily to retailers, soft drink manufacturers, and food manufacturers, with some exports to the U.S. and other South American countries. Seaboard grows a large portion of the sugarcane on the nearly 70,000 acres of land it owns in northern Argentina. The cane is processed at an owned mill, one of the largest in Argentina, with a current processing capacity of approximately 250,000 metric tons of sugar and approximately 15 million gallons of alcohol per year. Also, this division owns a 51 megawatt cogeneration power plant that is fueled by using sugarcane by-products, natural gas and other biomass when available.

 

Power Division – Seaboard, through its subsidiary, Transcontinental Capital Corp. (Bermuda) Ltd., is an independent power producer generating electricity for the local power grid in the Dominican Republic. Seaboard operates one owned floating power generating facility with capacity to generate approximately 108 megawatts of electricity. The facility is secured on the Ozama River in Santo Domingo, Dominican Republic. This operation is exempt from U.S. regulations under the Public Utility Holding Company Act of 1938, as amended. Seaboard is not directly involved in the transmission or distribution of electricity. Seaboard primarily sells on the spot market accessed primarily by wholly government-owned distribution companies or partially government-owned generation companies. This division also has a 29.9% noncontrolling interest in a 300 megawatt electricity generating facility in the Dominican Republic.

 

Turkey Segment – Seaboard has a 50% noncontrolling voting interest in Butterball, LLC (“Butterball”). Butterball is a vertically integrated producer, processor and marketer of branded and non-branded turkey and other products. Butterball has four processing plants, three further processing plants and numerous live production and feed milling operations located in North Carolina, Arkansas, Missouri, Illinois and Kansas. Butterball produces over one billion pounds of turkey each year. Butterball is a national supplier to retail and foodservice outlets, and also exports products to Mexico and numerous other foreign markets.

 

Other Businesses – Seaboard processes jalapeño peppers at its plant in Honduras, which are primarily shipped to and sold in the U.S.

 

The information required by this item with respect to the amount or percentage of total revenue contributed by any class of similar products or services which account for 10% or more of consolidated revenue in any of the last three fiscal years is set forth in Note 12 to the Consolidated Financial Statements included in Seaboard’s Annual Report to Stockholders, which information is incorporated herein by reference.

 

(ii)Status of Product or Segment

 

On May 13, 2015, the Pork Division agreed to contribute up to $207 million through 2019 to jointly develop and operate a pork processing facility in Sioux City, Iowa with Triumph. The facility is anticipated to begin operations in mid-2017. As part of the operations, Seaboard agreed to provide a portion of the hogs to be processed at the facility. In February 2016, the Pork Division and a newly formed limited liability partnership that will be consolidated with Seaboard paid $148 million to acquire hog inventory and related assets in Iowa and Colorado that is expected to increase Seaboard’s hog production capacity to meet the majority of such hog supply commitment for single shift processing at the new plant. Seaboard anticipates buying additional hog inventory and related assets during 2016 to fulfill the remaining amount of such hog supply commitment.

 

In the second quarter of 2015, Daily’s began construction on a third further processing plant located in St. Joseph, Missouri. Operations are expected to begin in mid-2016. To date, construction funding has been provided by current operations.

 

The Commodity Trading and Milling Division took delivery of two dry bulk vessels built for a total cost of approximately $45 million during 2015. An additional vessel was delivered in January 2016 and the final vessel is expected to be delivered during the first half of 2016 for a total cost of approximately $45 million. Seaboard entered into sales-leaseback transactions for the vessels delivered and anticipates selling and leasing back the 

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FORM 10-K

 

SEABOARD CORPORATION

 

remaining vessel when completed, which would result in Seaboard receiving back the amounts spent to build the vessels.

 

Also the Commodity Trading and Milling Division made various investments in affiliates. During the second quarter of 2015, the Commodity Trading and Milling Division invested $10 million in an oilseed crushing business in the Republic of Turkey for a 25% noncontrolling interest, $8 million in a flour milling and pasta business in Botswana for a 49% noncontrolling interest and $10 million in a commodity trading and flour milling business in Uruguay for a 45% noncontrolling interest, all accounted for using the equity method. In addition, this division invested $18 million in a grain trading and poultry business in Morocco for a 12% noncontrolling interest, which is accounted for using the cost method. During the fourth quarter of 2015, Seaboard contributed $13 million in cash, a small amount of other assets, certain employees and rights to sell certain agricultural commodities that Seaboard had previously sold through its subsidiary, PS International, LLC, for a 40% noncontrolling interest in a commodity trading business in Atlanta, Georgia.

 

In April 2015, the Power Division invested $10 million in a business operating a 300 megawatt electricity generating facility in the Dominican Republic, increasing Seaboard’s ownership interest to 29.9%.

 

(iii)Sources and Availability of Raw Materials

 

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

 

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

 

Seaboard uses the registered trademark of Seaboard®.

 

The Pork Division uses registered trademarks relating to its products, including Seaboard Farms®, Prairie Fresh®, A Taste Like No Other®, St. Joe Pork®, High Plains Bioenergy®, Prairie Fresh Prime®, Seaboard Foods®, Cook in Bag®, 67th Street™ and The Thrill Without The Grill®. The Pork Division’s non-consolidated affiliate, Daily’s Premium Meats, LLC, uses the trademarks Daily’s®, Daily’s Premium Meats Since 1893®, Buffet Brand® and Del Pueblo®. Seaboard considers the use of these trademarks important to the marketing and promotion of its pork products.

 

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

 

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

 

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

 

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

 

(v)Seasonal Business

 

The Turkey business is seasonal only on the whole bird side with Thanksgiving and Christmas holidays driving the majority of those sales. Seaboard’s other divisions are not seasonally dependent to any material extent.

 

(vi)Practices Relating to Working Capital Items

 

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

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FORM 10-K

 

SEABOARD CORPORATION

 

 

(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. Historically, the Commodity Trading and Milling Division derives a significant portion of its operating income from sales to a non-consolidated affiliate. The Sugar Division derives approximately 20% of its revenues from one customer. The Power Division sells power in the Dominican Republic on the spot market accessed primarily by three wholly government-owned companies. No other division has sales to a few customers which, if lost, would have a material adverse effect on any such division or on Seaboard taken as a whole.

 

(viii)Backlog

 

Backlog is not material to Seaboard’s businesses.

 

(ix)Government Contracts

 

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

 

(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 Successful Farming and Informa Economics, trade publications, Seaboard was ranked number three in pork production (based on sows in production) and number four in processing (based on daily processing capacity) in the U.S. (including Triumph volume) in 2015.

 

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

 

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

 

Seaboard’s sugar business owns one of the largest sugar mills in Argentina and faces significant competition for sugar sales in the local Argentine market. Sugar prices in Argentina can fluctuate compared to world markets due to Argentine government price control and protection policies. High sugarcane production volumes in Argentina, in conjunction with low international sugar and alcohol prices, have increased competition in the domestic market.

 

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

 

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

 

(xi)Research and Development Activities

 

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

 

(xii)Environmental Compliance

 

Seaboard and its Turkey Segment are subject to numerous Federal, State and local provisions relating to the environment which require the expenditure of funds in the ordinary course of business. Seaboard and its Turkey

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SEABOARD CORPORATION

 

Segment do not anticipate making expenditures for these purposes, that, 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, 2015, Seaboard, excluding non-consolidated affiliates, had 10,772 employees, of whom 5,541 were employed in the U.S. Approximately 2,050 employees in Seaboard’s Pork Division were covered by collective bargaining agreements as of December 31, 2015. Seaboard considers its employee relations to be satisfactory.

 

(d)

Financial Information about Geographic Areas

 

In addition to the narrative disclosure provided below, the financial information relating to export sales required by this item is incorporated herein by reference to Note 12 to the Consolidated Financial Statements included in Seaboard’s Annual Report to Stockholders.

 

Seaboard considers its relations with the governments of the countries in which its foreign subsidiaries and affiliates are located to be satisfactory, but foreign operations in lesser-developed countries are subject to risks of doing business such as potential civil unrests and government instabilities, increasing the exposure to potential expropriation, confiscation, war, insurrection, civil strife and revolution, sales price controls, currency inconvertibility and devaluation, and currency exchange controls. To minimize certain of these risks, Seaboard has insured its investment in an affiliated flour mill in the Democratic Republic of Congo to the extent available and deemed appropriate against certain of these risks with the Overseas Private Investment Corporation, an agency of the U.S. Government. At the date of this report, Seaboard is not aware of any situations which could have a material effect on Seaboard’s business.

 

(e)

Available Information

 

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

 

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

 

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

 

Executive Officers of the Registrant

 

The following table lists the executive officers and certain significant employees of Seaboard. Generally, executive officers are elected at the annual meeting of the Board of Directors following the Annual Meeting of Stockholders and hold office

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SEABOARD CORPORATION

 

until the next such annual meeting or until their respective successors are duly chosen and qualified. There are no arrangements or understandings pursuant to which any executive officer was elected.

 

 

 

 

Name (Age)

    

Positions and Offices with Registrant and Affiliates

Steven J. Bresky (62)

 

President and Chief Executive Officer

Robert L. Steer (56)

 

Executive Vice President, Chief Financial Officer

David M. Becker (54)

 

Senior Vice President, General Counsel and Secretary

David S. Oswalt (48)

 

Senior Vice President, Finance and Treasurer

James L. Gutsch (62)

 

Senior Vice President, Engineering

Ralph L. Moss (70)

 

Senior Vice President, Governmental Affairs

David H. Rankin (44)

 

Senior Vice President, Taxation and Business Development

Michael D. Trollinger (47)

 

Vice President, Corporate Controller and Chief Accounting Officer

Ty A. Tywater (46)

 

Vice President, Audit Services

Terry J. Holton (56)

 

President, Seaboard Foods LLC

David M. Dannov (54)

 

President, Seaboard Overseas and Trading Group

Edward A. Gonzalez (50)

 

President, Seaboard Marine Ltd.

 

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

 

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

 

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

 

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

 

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

 

Mr. Oswalt has served as Senior Vice President, Finance and Treasurer since April 2013, and previously as Senior Vice President, Taxation and Business Development of Seaboard from 2011 to 2013 and as Vice President, Taxation and Business Development from 2003 to 2011.

 

Mr. Rankin has served as Senior Vice President, Taxation and Business Development since April 2015 and previously as Vice President, Taxation and Business Development since April 2013 and Vice President of Seaboard from 2010 to 2013.

 

Mr. Trollinger has served as Vice President, Corporate Controller and Chief Accounting Office of Seaboard since March 2015. Prior to that, he served as Vice President Finance & Operational Reporting for Jack Cooper Enterprises, Inc. from 2011 to 2015.

 

Mr. Tywater has served as Vice President, Audit Services of Seaboard since November 2008.

 

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

 

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

 

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

 

 

Item 1ARisk Factors

 

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

8


 

FORM 10-K

 

SEABOARD CORPORATION

 

 

(a)

General

 

(1)

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

·

food spoilage or food contamination;

·

evolving consumer preferences and nutritional and health-related concerns;

·

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

·

consumer product liability claims;

·

product tampering; and

·

public perception of food production practices, including handling of production and live animals.

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

(2)

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

·

changes in foreign currency exchange rates;

·

foreign currency exchange controls;

·

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

·

hyperinflation;

·

heightened customer credit and execution risk;

·

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

·

potentially negative consequences from changes in tax laws;

·

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

·

negative perception within a foreign country of a U.S. company doing business in that foreign country;

·

compliance with U.S. laws and regulations for conducting international business such as Foreign Account Tax Compliance Act, Foreign Corrupt Practices Act and Office of Foreign Assets Control regulations;

·

expropriation, civil unrest and government instabilities; and

·

inconsistent application or enforcement of local laws, including tax laws.

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

(3)

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

·

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

·

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

·

decrease the value of our investments in equity and debt securities, including pension plan assets, causing losses that would adversely impact our net earnings; and

·

impair the financial viability of our insurers.

9


 

FORM 10-K

 

SEABOARD CORPORATION

 

(4)

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

·

bad weather;

·

mechanical failures;

·

grounding, fire, explosions and collisions;

·

human error; and

·

war, piracy and terrorism.

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

(5)

Seaboard’s Common Stock is Thinly Traded and Subject to Daily Price Fluctuations. The common stock of Seaboard is closely held and thinly traded on a daily basis on the NYSE MKT.  Seaboard Flour LLC and SFC Preferred LLC, which are beneficially owned by Mr. Steven Bresky, President and Chief Executive Officer of Seaboard and other members of the Bresky family, hold approximately 76% of Seaboard outstanding common stock.  Accordingly, the price of a share of common stock can fluctuate more significantly from day-to-day than that of a share of widely held stock that is actively traded on a daily basis.

(6)

Seaboard has Investments in Non-consolidated Affiliates that are Managed by Third-parties. Seaboard has several equity method investments in which it owns 50% or less, with various third-party investors owning the remaining shares. Due to the ownership structure of these affiliates, Seaboard does not have control in all the decision making of these companies and could be exposed to various business risks if the business partners’ business practices do not align with Seaboard’s best interests, which could adversely impact the non-operating results of the Seaboard.

 

(b)

Pork Division

(1)

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

(2)

Increases in Costs of Seaboard’s Feed Components and Third-Party Hog Purchases Could Adversely Affect Seaboard’s Costs and Operating Margins. Feed costs are the most significant single component of the cost of raising hogs and can be materially affected by commodity price fluctuations for corn and soybean meal. The results of Seaboard’s Pork Division can be negatively affected by increased costs of Seaboard’s feed components. The continued operation of ethanol plants has elevated this risk as it has increased the competing demand for feed ingredients, primarily corn. Similarly, accounting for approximately 24% of Seaboard’s total hogs slaughtered, the cost of third-party hogs purchased fluctuates with market conditions and can have an impact on Seaboard’s total costs. The cost and supply of feed components and the third party hogs that Seaboard purchases are determined by constantly changing market forces of supply and demand, which are driven by matters over which Seaboard has no control, including weather, current and projected worldwide grain stocks and prices, grain export prices and supports and governmental agricultural policies. Seaboard attempts to manage certain of these risks through the use of financial instruments; however, this may also limit its ability to participate in gains from favorable commodity fluctuations. Unless wholesale pork prices correspondingly increase, increases in the prices of Seaboard’s feed components or in the cost of third-party hogs purchased would adversely affect Seaboard’s operating margins.

(3)

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

(4)

The Loss of Seaboard’s Sole Hog Processing Facility Could Adversely Affect Seaboard’s Business.  Seaboard’s Pork Division is largely dependent on the continued operation of a single hog processing facility. The loss of or

10


 

FORM 10-K

 

SEABOARD CORPORATION

 

damage to this facility for any reason, including fire, tornado, governmental action or other reason, could adversely affect Seaboard and Seaboard’s pork business.

(5)

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

(6)

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

(7)

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

(8)

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

(9)

The Operating Profit of the Biodiesel Production Facility Could Be Adversely Impacted by Various Factors. The profitability of Seaboard’s biodiesel plant could be adversely affected by various factors, including the market price of pork and other animal fat which is utilized to produce biodiesel, and the market price for biodiesel which is influenced by world oil prices and U.S. government mandates to use biofuels. Unfavorable changes in these prices over extended periods of time or adverse changes in U.S. government mandates to use biofuels, could adversely affect Seaboard’s results of operations and could result in the potential impairment of the recorded value of the property, plant and equipment related to this facility.

(10)

Difficulties Could Be Experienced in the Construction and Start-up of the New Pork Processing Facility. The Pork Division has agreed to contribute up to $207 million to jointly develop a new pork processing facility in Sioux City, Iowa. Significant operational delays, difficulty in hog procurement, or other difficulties encountered in the start-up of operations could have an adverse effect on results of operations.

 

(c)

Commodity Trading & Milling Division

(1)

This Division is Subject to Risks Associated with Foreign Operations. This division principally operates in Africa, South America, the Caribbean and Asia and, in most cases, in what are generally regarded to be lesser developed countries. Many of these foreign operations are subject to risks of doing business in lesser-developed countries which are subject to potential civil unrests and government instabilities, increasing the exposure to potential

11


 

FORM 10-K

 

SEABOARD CORPORATION

 

expropriation, confiscation, war, insurrection, civil strife and revolution, corruption, currency inconvertibility and devaluation, and currency exchange controls, in addition to the risks of overseas operations mentioned in clause (a)(2) above. In addition, foreign government policies and regulations could restrict the purchase of various grains, reducing or limiting Seaboard’s ability to access grains or to limit Seaboard’s sales price for grains sold in local markets.

(2)

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

(3)

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

(4)

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

(5)

This Division Faces Increasing Competition.  This division is experiencing increasing competition in certain foreign markets by well capitalized originators and traders of commodities making sales directly to end-use customers. If various grain originators refuse to sell commodities to Seaboard for sale in these foreign markets, this could make it more challenging for Seaboard to purchase commodities for sale to its customers at competitive prices. Seaboard’s sales volume and sale prices for commodities to customers, as well as results of operations, could be adversely impacted by such increased competition.

 

(d)

Marine Division

(1)

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

(2)

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

12


 

FORM 10-K

 

SEABOARD CORPORATION

 

(3)

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

(4)

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

(5)

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

(6)

The Division’s Revenues and Cost Structure is Dependent on the Continuation of Cost Sharing Arrangements. The division has entered into vessel cost sharing arrangements with other service providers that are short term in nature. If they are unable to be renewed or renewed with unfavorable terms it could result in a negative impact to the business.

 

(e)

Sugar Division

(1)

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

(2)

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

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FORM 10-K

 

SEABOARD CORPORATION

 

(3)

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

(4)

Labor Relation Challenges Could Adversely Affect Operations. This division is dependent on unionized labor at its single sugar mill in Argentina. The political and economic environment in Argentina makes normal labor relations very challenging. Contributing to the situation are the policies of Argentina’s government and the failure of the Argentine courts to enforce contractual obligations with unions and basic property rights. Interruptions in production as a result of labor unrest can adversely impact the quantity of sugarcane harvested and the amount of sugar, alcohol and power produced and can interfere with the distribution of products stored at the facility in the Salta Province.

(5)

The Operating Profit of the Alcohol Production Facility Could Be Adversely Impacted by Government Regulations. The profitability of Seaboard’s alcohol production facility could be adversely affected by Argentine government regulations related to the bio-ethanol market regarding production quotas and fuel blends. In addition, the entry of corn alcohol producers in Argentina has increased competition. Unfavorable changes in market prices over extended periods of time or adverse changes in the Argentine government’s regulations regarding bio-ethanol production quotas and fuel blends, could adversely affect Seaboard’s results of operations.

(6)

The Operating Profit of the Cogeneration Power Plant Could Be Adversely Impacted by Contract for the Sale of Energy. In 2013, the biomass cogeneration contract was ratified by the Argentine national energy regulator setting the sale price for energy produced and sold by Seaboard’s cogeneration power plant. The profitability of Seaboard’s cogeneration power plant could be adversely affected by the failure to enforce the terms of the contract, which could adversely affect Seaboard’s results of operations and could result in the potential impairment of the recorded value of the property, plant and equipment related to this facility.

 

(f)

Power Division

(1)

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

(2)

Fluctuations in Fuel Costs Could Adversely Affect Seaboard’s Operating Margins. Fuel is the largest cost component of this division’s business and, therefore, margins may be adversely affected by fluctuations in fuel prices if such fluctuations cannot be fully passed to customers through the spot market price mechanism.

(3)

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

(4)

The Loss of the Division’s Sole Facility would Adversely Affect the Business. Seaboard’s Power Division is dependent on the continued operation of a single facility. The loss of or damage to this facility for any reason, including fire, tornado, earthquake, governmental actions or labor unrest resulting in labor strikes or other reasons would adversely affect the business of this division.

 

(g)

Turkey Segment

(1)

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

(2)

Increases in Costs of Turkey’s Feed Components and Turkey Purchases Could Adversely Affect Costs and Operating Margins. Feed costs are the most significant single component of the cost of raising turkeys and can be

14


 

FORM 10-K

 

SEABOARD CORPORATION

 

materially affected by commodity price fluctuations for corn, soybean meal, and other commodity grain inputs. Butterball’s results may be negatively affected by increased costs of the feed components. The continued operation of ethanol plants has elevated this risk as it has increased the competing demand for feed ingredients, primarily corn. Butterball attempts to manage some of these risks through the use of financial instruments; however this may also limit its ability to participate in gains from favorable commodity fluctuations. Unless wholesale turkey prices correspondingly increase, increases in the prices of Butterball’s feed components would adversely affect Butterball’s results of operations and the value of Seaboard’s investment in Butterball.

(3)

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

(4)

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

(5)

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

(6)

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

(7)

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

(8)

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

 

Item 1BUnresolved Staff Comments

 

None

 

15


 

FORM 10-K

 

SEABOARD CORPORATION

 

Item 2Properties

 

As of December 31, 2015, Seaboard’s principal properties by Division are described below:

 

(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 20,500 hogs and generally operates at capacity with additional weekend shifts depending on market conditions. Seaboard’s hog production operations consist of the breeding and raising of approximately four million hogs annually at facilities it primarily owns or at facilities owned and operated by third parties with whom it has grower contracts. This business owns and operates five centrally located feed mills, which have a combined capacity to produce approximately two million tons of formulated feed annually. These feed mills are used primarily to support Seaboard’s existing hog production, and have the capability of supporting additional hog production in the future. These facilities are located in Oklahoma, Texas, Kansas and Colorado. The Pork Division also operates a ham-boning and processing plant in Mexico that has the capacity to process 96 million pounds of ham annually.

 

The Pork Division owns a biodiesel plant in Guymon, Oklahoma with the capacity to produce 36 million gallons of biodiesel annually, which is currently produced from pork fat from Seaboard’s Guymon pork processing plant and from animal fat supplied by non-Seaboard facilities. The facility can also produce biodiesel from vegetable oil.

 

Seaboard’s Pork Division’s non-consolidated affiliate, Daily’s, owns two bacon further processing plants located in Salt Lake City, Utah and Missoula, Montana. These plants are utilized near capacity throughout the year, which is a combined daily smoking capacity of approximately 350,000 pounds of raw pork bellies. In the second quarter of 2015, Daily’s began construction on a third further processing plant located in St. Joseph, Missouri, which is expected to have daily capacity of 230,000 pounds of raw pork bellies. Operations are anticipated to begin in mid-2016. 

 

Also, the Pork Division and Triumph formed another joint venture during 2015 to develop and operate a pork processing facility in Sioux City, Iowa, which is anticipated to begin operations in mid-2017. The plant is expected to process about three million market hogs annually operating a single shift.

 

(2)   Commodity Trading and Milling - Seaboard’s Commodity Trading and Milling Division owns, in whole or in part, grain-processing and related agribusiness operations in 19 countries which have the capacity to mill approximately 10,300 metric tons of wheat and maize per day. In addition, Seaboard has feed mill capacity of approximately 175 metric tons per hour to produce formula animal feed. The grain-processing and related agribusiness operations located in Botswana, Brazil, Colombia, Democratic Republic of Congo, Ecuador, Gambia, Ghana, Guyana, Haiti, Jamaica, Kenya, Lesotho, Madagascar, Mozambique, Nigeria, Republic of Congo, South Africa, Turkey, Uganda, Uruguay, and Zambia own their facilities; and in Kenya, Lesotho, Mozambique, Nigeria, and Republic of Congo the land on which the facilities are located is leased under long-term agreements. Certain foreign milling operations may operate at less than full capacity due to low demand, poor consumer purchasing power, excess milling capacity in their competitive environment or imported flour. In addition, this division has an investment through non-consolidated affiliates in poultry businesses operating in parts of Eastern and Southern Africa. This division also has an investment through a non-consolidated affiliate in a bakery business in the Democratic Republic of Congo. Seaboard owns three 18,900 metric ton deadweight dry bulk carriers and charters between 29 and 52 bulk carriers with deadweights ranging from 5,000 to 76,000 metric tons under short-term agreements. The Commodity Trading and Milling Division took delivery of two dry bulk vessels built for a total cost of approximately $45 million during 2015. An additional vessel was delivered in January 2016, and the final vessel is expected to be delivered during the first half of 2016 for a total cost of approximately $45 million. Seaboard entered into sales-leaseback transactions for the vessels delivered and anticipates selling and leasing back the remaining vessel when completed, which would result in Seaboard receiving back the amounts spent to build the vessels.

 

(3)   Marine - Seaboard’s Marine Division leases approximately 267,000 square feet of off-port warehouse space and 95 acres of port terminal land and facilities in Miami, Florida, which are used in its containerized cargo operations. Seaboard also leases an approximately 62 acre cargo handling and terminal facility in Houston, Texas, which includes several on-dock warehouses totaling approximately 690,000 square feet for cargo storage. At December 31, 2015, Seaboard owned three ocean cargo vessels with deadweights ranging from 7,700 to 11,000 metric tons. In addition, Seaboard chartered approximately 22 vessels under contracts that typically range from approximately six months to three years with

16


 

FORM 10-K

 

SEABOARD CORPORATION

 

deadweights ranging from approximately 8,000 to 33,900 metric tons but has also entered into some longer-term charters up to ten years. Seaboard owns or leases dry, refrigerated and specialized containers and other related equipment.

 

(4)   Sugar - Seaboard’s Argentine Sugar Division owns nearly 70,000 acres of planted sugarcane and a sugar mill with a current capacity to process approximately 250,000 metric tons of sugar and an alcohol distillery with a current capacity of approximately 15 million gallons of alcohol per year. This capacity is sufficient to process all of the cane harvested by this division and additional quantities purchased from third party farmers in the region. Depending on local market conditions, this business also purchases third-party sugar for resale. 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 and alcohol produced. The Sugar Division also owns a 51 megawatt cogeneration power plant that supplies electricity to the Argentine power grid under renewable energy contracts with an Argentine state owned company. The plant is powered by the burning of sugarcane by-products, natural gas and other biomass when available.

 

(5)   Power - Seaboard’s Power Division owns one floating electric power generating facility (108 megawatts). The facility consists of a system of diesel engines mounted onto barge-type vessels located on the Ozama River in Santo Domingo, Dominican Republic. The owned facility is capable of using natural gas or heavy fuel oil. Seaboard operates as an independent power producer generating electricity for the local power grid. Seaboard is not directly involved in the transmission and distribution facilities that deliver the power to the end user.

 

(6)   Turkey – Seaboard’s Turkey Segment has a total of four processing plants, three further processing plants and numerous company and third-party live production facilities and feed milling operations, all of which are located in North Carolina, Arkansas, Missouri, Illinois and Kansas. These plants produce over one billion pounds of turkey each year.

 

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

 

In addition to the information provided above, the information under the caption “Principal Locations” of Seaboard’s Annual Report to Stockholders is incorporated herein by reference.

 

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

 

Item 3.  Legal Proceedings

 

The information required by this item is incorporated herein by reference to Note 10 to the Consolidated Financial Statements included in Seaboard’s Annual Report to Stockholders.

 

Item 4. Mine Safety Disclosures

 

Not Applicable.

 

PART II

 

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

 

In December 2012, Seaboard declared and paid a dividend of $12.00 per share on the common stock. The amount of the dividend (which has historically been $0.75 per share on a quarterly basis or $3.00 per share on an annual basis) represented a prepayment of the annual 2013, 2014, 2015 and 2016 dividends ($3.00 per share per year). Therefore, Seaboard did not declare a dividend during the three years ended December 31, 2015, and does not currently intend to declare a dividend for 2016. As discussed in Note 7 to the Consolidated Financial Statements included in Seaboard’s Annual Report to Stockholders (which discussion is incorporated herein by reference), Seaboard’s ability to declare and pay dividends is subject to limitations imposed by debt agreements referred to there.

 

17


 

FORM 10-K

 

SEABOARD CORPORATION

 

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 presently may repurchase up to $100 million market value of its common stock from time to time in open market or privately negotiated purchases under its share repurchase program. See Note 11 to the Consolidated Financial Statements included in Seaboard’s Annual Report to Stockholders for further discussion. 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 this item is incorporated herein by reference to the information under the captions of Stockholder Information - Stock Listing,” “Quarterly Financial Data” and “Company Performance Graph” of Seaboard’s Annual Report to Stockholders.

 

Item 6Selected Financial Data

 

The information required by this item is incorporated herein by reference to the “Summary of Selected Financial Data” of Seaboard’s Annual Report to Stockholders.

 

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

 

The information required by this item is incorporated herein by reference to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of Seaboard’s Annual Report to Stockholders.

 

Item 7AQuantitative and Qualitative Disclosures About Market Risk

 

The information required by this item is incorporated herein by reference to the information under the caption “Derivative Information” within “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Derivative Instruments and Hedging Activities” within Note 1, and Note 8 of Seaboard’s Consolidated Financial Statements of Seaboard’s Annual Report to Stockholders.

 

Item 8Financial Statements and Supplementary Data

 

The information required by this item is incorporated herein by reference to the information under the captions “Quarterly Financial Data,” “Report of Independent Registered Public Accounting Firm,” “Consolidated Statements of Comprehensive Income,” “Consolidated Balance Sheets,” “Consolidated Statements of Cash Flows,” “Consolidated Statements of Changes in Equity” and “Notes to Consolidated Financial Statements” included in Seaboard’s Annual Report to Stockholders and attached as Exhibit 13 to this report.

 

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

 

None.

 

Item 9A.    Controls and Procedures

 

Evaluation of Disclosure Controls and Procedures – As of December 31, 2015, 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 under the Securities Exchange Act of 1934 (the “Exchange Act”) rule 13a-15(e). Based upon and as of the date of that evaluation, Seaboard’s chief executive and chief financial officers concluded that Seaboard’s disclosure controls and procedures were effective to ensure that information required to be disclosed in the reports it files and submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported as and when required. It should be noted that any system of disclosure controls and procedures, however well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of the system are met. In addition, the design

18


 

FORM 10-K

 

SEABOARD CORPORATION

 

of any system of disclosure controls and procedures is based in part upon assumptions about the likelihood of future events. Due to these and other inherent limitations of any such system, there can be no assurance that any design will always succeed in achieving its stated goals under all potential future conditions.

 

Reports on Internal Control Over Financial Reporting – Management’s report on internal control over financial reporting and the attestation report of KPMG LLP, Seaboard’s independent registered public accounting firm, on Seaboard’s internal control over financial reporting, as defined in Exchange Act rule 13a-15(f), is incorporated herein by reference to all information under the captions “Management’s Report on Internal Control over Financial Reporting” and “Report of Independent Registered Public Accounting Firm,” respectively, of Seaboard’s Annual Report to Stockholders and attached as Exhibit 13 to this report.

 

Change in Internal Control Over Financial Reporting – There have been no change in Seaboard’s internal control over financial reporting that occurred during the fiscal quarter ended December 31, 2015 that has materially affected, or is reasonably likely to materially affect, Seaboard’s internal control over financial reporting.

 

Item 9B.    Other Information

 

None.

19


 

FORM 10-K

 

SEABOARD CORPORATION

 

PART III

 

Item 10Directors, Executive Officers and Corporate Governance

 

The information about the executive officers of the Company is included under the caption “Executive Officers of the Registrant” in Item 1 of this annual report on Form 10-K.

 

Seaboard has a Code of Ethics Policy (the “Code”) for directors, officers (including our chief executive officer, chief financial officer, chief accounting officer, and persons performing similar functions) and employees. 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 this item is incorporated herein by reference to the information under the captions “Item 1: Election of Directors,” “Board of Directors Information – Committees of the Board – Audit Committee,” “Board of Directors Information – Director Nominations” and “Section 16(a) Beneficial Ownership Reporting Compliance” of Seaboard’s definitive proxy statement for the 2016 annual meeting of stockholders, which will be filed no later than 120 days after December 31, 2015 (“Proxy Statement”).

 

Item 11Executive Compensation

 

The information required by this item is incorporated herein by reference to the information under the captions “Board of Directors Information – Compensation of Directors,” “Executive Compensation and Other Information,” “Employment Arrangements with Named Executive Officers,” “Benefit Plans,” “Compensation Committee Interlocks and Insider Participation,” “Compensation Committee Report,” and “Compensation Discussion and Analysis” included in our Proxy Statement.

 

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

 

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

 

In addition to the information provided above, the information required by this item is incorporated herein by reference to the information under the captions “Principal Stockholders” and “Share Ownership of Management and Directors” included in our Proxy Statement.

 

Item 13Certain Relationships and Related Transactions, and Director Independence

 

The information required by this item is incorporated herein by reference to the information under the captions “Compensation Committee Interlocks and Insider Participation,”  “Board of Directors Information – Controlled Corporation” and “Board of Directors Information – Committees of the Board” included in our Proxy Statement.

 

 Item 14.    Principal Accounting Fees and Services

 

The information required by this item is incorporated herein by reference to the information under the captions “Item 2: Selection of Independent Auditors” included in our Proxy Statement.

20


 

FORM 10-K

 

SEABOARD CORPORATION

 

PART IV

Item 15Exhibits, Financial Statement Schedules

(a)List the following documents filed as a part of the report:

1.Financial statements.

The consolidated financial statements and accompanying notes are incorporated herein by reference to the Annual Report to Stockholders filed as Exhibit 13 hereto.

2.Financial statement schedules.

Schedule II - Valuation and Qualifying Accounts

 

 

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.

3.Exhibits.

 

 

 

 

 

 

 

 

 

Exhibit No.

 

Description

 

 

 

 

 

3.1

 

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

 

 

 

 

 

3.2

 

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

 

 

 

 

 

10.1*

 

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

 

 

 

 

 

10.2*

 

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

 

 

 

 

 

10.3*

 

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

 

 

 

 

 

10.4*

 

First Amendment to the Seaboard Corporation Retiree Medical Benefit Plan Effective March 25, 2015 and dated March 31, 2015. Incorporated herein by reference to Exhibit 10.1 of Seaboard’s Form 10-Q for the quarter ended April 4, 2015.

 

 

 

 

 

10.5*

 

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

 

 

 

 

 

10.6*

 

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

 

 

 

 

 

10.7*

 

Seaboard Corporation 409A Executive Retirement Plan Amended and Restated Effective January 1, 2013 and dated December 21, 2012, amending and restating the Seaboard Corporation Executive Retirement Plan, Amendment and Restatement dated December 22, 2008. Incorporated by reference to Exhibit 10.14 to Seaboard’s Form 10-K for fiscal year ended December 31, 2012.

 

 

 

 

21


 

FORM 10-K

 

SEABOARD CORPORATION

 

 

10.8*+

 

First Amendment to the Seaboard Corporation 409A Executive Retirement Plan effective as of January 1, 2015 and dated January 14, 2016.

 

 

 

 

 

10.9*

 

Seaboard Corporation Cash Balance Executive Retirement Plan Amendment and Restatement Effective January 1, 2013 and dated December 21, 2012, amending and restating the Seaboard Corporation Cash Balance Executive Retirement Plan dated December 18, 2009. Incorporated by reference to Exhibit 10.15 to Seaboard’s Form 10-K for fiscal year ended December 31, 2012.

 

 

 

 

 

10.10*

 

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

 

 

 

 

 

10.11*

 

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.

 

 

 

 

 

10.12*

 

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

 

 

 

 

 

10.13*

 

Employment Agreement between Seaboard Corporation and Steven J. Bresky dated December 21, 2012. Incorporated by reference to Exhibit 10.16 to Seaboard’s Form 10-K for fiscal year ended December 31, 2012.

 

 

 

 

 

10.14*

 

Employment Agreement between Seaboard Corporation and Robert L. Steer dated December 21, 2012. Incorporated by reference to Exhibit 10.17 to Seaboard’s Form 10-K for fiscal year ended December 31, 2012.

 

 

 

 

 

10.15*

 

Employment Agreement between Seaboard Foods LLC and Terry J. Holton, dated December 21, 2012. Incorporated by reference to Exhibit 10.18 to Seaboard’s Form 10-K for fiscal year ended December 31, 2012.

 

 

 

 

 

10.16*

 

Employment Agreement between Seaboard Overseas and Trading Group and David M. Dannov dated December 21, 2012. Incorporated by reference to Exhibit 10.19 to Seaboard’s Form 10-K for fiscal year ended December 31, 2012.

 

 

 

 

 

10.17*

 

Employment Agreement between Seaboard Marine Ltd. and Edward A. Gonzalez dated December 21, 2012. Incorporated by reference to Exhibit 10.20 to Seaboard’s Form 10-K for fiscal year ended December 31, 2012.

 

 

 

 

 

10.18

 

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

 

 

 

 

 

10.19

 

Amendment No. 1 to Amended and Restated Terminal Agreement between Miami-Dade County and Seaboard Marine, Ltd. for Marine Terminal Operations dated March 30, 2009. Incorporated herein by reference to Exhibit 10.1 of Seaboard’s Form 10-Q for the quarter ended June 29, 2013.

 

 

 

 

 

10.20

 

Amendment No. 2 to Amended and Restated Terminal Agreement between Miami-Dade County and Seaboard Marine, Ltd. for Marine Terminal Operations dated July 31, 2013. Incorporated herein by reference to Exhibit 10.2 of Seaboard’s Form 10-Q for the quarter ended June 29, 2013.

 

 

 

 

 

10.21

 

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.

 

 

 

 

 

10.22

 

Seaboard Triumph Foods, LLC Subscription Agreement dated May 13, 2015. Incorporated herein by reference to Exhibit 10.1 of Seaboard’s Form 8-K dated May 13, 2015.

 

 

 

 

22


 

FORM 10-K

 

SEABOARD CORPORATION

 

 

10.23

 

Term Loan Credit Agreement dated December 4, 2015. Incorporated herein by reference to Exhibit 10.1 of Seaboard’s Form 8-K dated December 9, 2015.

 

 

 

 

 

 

 

 

 

10.24+

 

Asset Purchase Agreement by and among Christensen Farms & Feedlots, Inc., Christensen Farms Midwest, LLC, Seaboard Foods of Iowa, LLC, Seaboard Foods LLC and Woodford Creek Farms LLP dated January 26, 2016.

 

 

 

 

 

10.25+

 

First Amendment to the Asset Purchase Agreement dated February 6, 2016.

 

 

 

 

 

13+

 

Sections of 2015 Annual Report to Stockholders specifically incorporated herein by reference herein.

 

 

 

 

 

21+

 

List of subsidiaries.

 

 

 

 

 

31.1+

 

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

 

 

 

 

 

31.2+

 

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

 

 

 

 

 

32.1+

 

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

 

 

 

 

 

32.2+

 

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

 

 

 

 

 

99.1+

 

Audited statements of Butterball, LLC as of and for the years ended January 3, 2016, December 28, 2014 and December 29, 2013.

 

 

 

 

 

101.INS+

 

XBRL Instance Document.

 

 

 

 

 

101.SCH+

 

XBRL Taxonomy Extension Schema Document.

 

 

 

 

 

101.CAL+

 

XBRL Taxonomy Extension Calculation Linkbase Document.

 

 

 

 

 

101.DEF+

 

XBRL Taxonomy Extension Definition Linkbase Document.

 

 

 

 

 

101.LAB+

 

XBRL Taxonomy Extension Label Linkbase Document.

 

 

 

 

 

101.PRE+

 

XBRL Taxonomy Extension Presentation Linkbase Document.

 


*     Management contract or compensatory plan or arrangement.

+     Filed electronically herewith.

 

(b)Exhibits.

 

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

 

(c)Financial Statement Schedules.

 

 

 

 

Schedule II - Valuation and Qualifying Accounts

 

25

Schedule II – Report of Independent Registered Public Accounting Firm

 

26

 

 

 

 

 

 

23


 

 

SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

SEABOARD CORPORATION

 

 

 

 

By

/s/ Steven J. Bresky

 

 

 

Steven J. Bresky, Chairman of the Board,

 

 

 

President and Chief Executive Officer

 

 

 

 

Date:

February 25, 2016

 

 

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

 

 

 

 

 

 

 

Name

 

Date

 

Title

 

 

 

 

 

 

/s/ Steven J. Bresky

 

February 25, 2016

 

Chairman of the Board, President,

 

Steven J. Bresky

 

 

 

Chief Executive Officer and

 

 

 

 

 

Director (principal executive

 

 

 

 

 

officer)

 

 

 

 

 

 

 

 

 

 

 

 

 

/s/ Robert L. Steer

 

February 25, 2016

 

Executive Vice President,

 

Robert L. Steer

 

 

 

Chief Financial Officer

 

 

 

 

 

(principal financial officer)

 

 

 

 

 

 

 

 

 

 

 

 

 

/s/ Michael D. Trollinger

 

February 25, 2016

 

Vice President, Corporate

 

Michael D. Trollinger

 

 

 

Controller and Chief Accounting

 

 

 

 

 

Officer (principal accounting

 

 

 

 

 

officer)

 

 

 

 

 

 

 

/s/ David A. Adamsen

 

February 25, 2016

 

Director

 

David A. Adamsen

 

 

 

 

 

 

 

 

 

 

 

/s/ Douglas W. Baena

 

February 25, 2016

 

Director

 

Douglas W. Baena

 

 

 

 

 

 

 

 

 

 

 

/s/ Edward I. Shifman, Jr.

 

February 25, 2016

 

Director

 

Edward I. Shifman, Jr.

 

 

 

 

 

 

 

24


 

 

 

Schedule II

 

SEABOARD CORPORATION AND SUBSIDIARIES

Valuation and Qualifying Accounts 

(In Millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

Balance at

    

 

    

 

    

Balance at

 

 

 

beginning of year

 

Provision(1)

 

Net deductions(2)

 

end of year

 

Allowance for Doubtful Accounts:

 

 

 

 

 

 

 

 

 

 

 

Year Ended December 31, 2015

 

$

12

 

13

 

(4)

 

$

21

 

Year Ended December 31, 2014

 

$

13

 

 —

 

(1)

 

$

12

 

Year Ended December 31, 2013

 

$

12

 

3

 

(2)

 

$

13

 


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

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

 

 

 

 

 

 

 

 

 

 

 

 

 

    

Balance at

    

Charged (credit)

    

Balance at

 

 

 

beginning of year

 

to expense

 

end of year

 

Allowance for Deferred Tax Assets:

 

 

 

 

 

 

 

 

 

Year Ended December 31, 2015

 

$

21

 

(2)

 

$

19

 

Year Ended December 31, 2014

 

$

18

 

3

 

$

21

 

Year Ended December 31, 2013

 

$

12

 

6

 

$

18

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

Balance at

    

Credit

    

Balance at

 

 

 

beginning of year

 

to expense

 

end of year

 

Reserve for LIFO Valuation:

 

 

 

 

 

 

 

 

 

Year Ended December 31, 2015

 

$

37

 

(9)

 

$

28

 

Year Ended December 31, 2014

 

$

62

 

(25)

 

$

37

 

Year Ended December 31, 2013

 

$

91

 

(29)

 

$

62

 

 

 

See accompanying report of independent registered public accounting firm.

25


 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

The Board of Directors and Stockholders

Seaboard Corporation:

 

Under date of February 25, 2016, we reported on the consolidated balance sheets of Seaboard Corporation and subsidiaries (the Company) as of December 31, 2015 and 2014, and the related consolidated statements of comprehensive income, changes in equity, and cash flows for each of the years in the three-year period ended December 31, 2015, as contained in the annual report on Form 10-K for the year 2015. In connection with our audits of the aforementioned consolidated financial statements, we also audited the related consolidated financial statement schedule noted as Schedule II under Item 15(a)(2). This financial statement schedule is the responsibility of the Company’s management. Our responsibility is to express an opinion on this financial statement schedule based on our audits.

 

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

 

 

 

 

 

/s/ KPMG LLP

 

 

Kansas City, Missouri

 

February 25, 2016

 

 

 

26


EX-10.24 2 seb-20151231ex1024f3bb4.htm EX-10.24 seb_EX_10.24

Exhibit 10.24

ASSET PURCHASE AGREEMENT

by and among

CHRISTENSEN FARMS & FEEDLOTS, INC.,

CHRISTENSEN FARMS MIDWEST, LLC,

SEABOARD FOODS OF IOWA, LLC,

SEABOARD FOODS LLC

and

WOODFORD CREEK FARMS LLP

 

 

Dated as of January 26, 2016

 

 


 

 

 

 

 

Table of Contents

 

 

ARTICLE 1 PURCHASE AND SALE 

1.1 

Purchase and Sale of Acquired Assets

1.2 

Excluded Assets

1.3 

Assumed Liabilities

1.4 

Retained Liabilities

1.5 

Total Consideration

1.6 

Payment

1.7 

Valuation, Sampling and Adjustment Procedures

10 

1.8 

1031 Exchange

12 

1.9 

Remittances, Erroneous Transfers

12 

1.10 

Post-Closing, Consents and Permit Transfers

13 

 

 

 

ARTICLE 2 CLOSING, DELIVERIES AND OTHER ACTIONS 

14 

 

 

2.1 

Time and Place of the Closing

14 

2.2 

Deliveries by Seller Parties

14 

2.3 

Deliveries by Buyer Parties

15 

 

 

 

ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF SELLER PARTIES 

16 

 

 

3.1 

Existence and Good Standing; Organization

16 

3.2 

Power

16 

3.3 

Authority, Validity, Effect and No Conflict

16 

3.4 

Consents

16 

3.5 

Subsidiaries

17 

3.6 

Property

17 

3.7 

Litigation

18 

3.8 

Compliance with Laws

19 

3.9 

Operation of the Business; Sufficiency of Assets

19 

3.10 

Absence of Changes

19 

3.11 

Labor Matters

19 

3.12 

Employee Plans

20 

3.13 

Environmental and Safety

21 

3.14 

Contracts

23 

3.15 

Permits

24 

3.16 

Intellectual Property

24 

3.17 

Insurance

25 

3.18 

Financial Statements

25 

3.19 

Taxes

25 

3.20 

Inventory

25 

3.21 

Records

26 

3.22 

Brokers

26 

3.23 

Solvency

26 

3.24 

No Further Representations

26 

 

 

 

ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF BUYER PARTIES 

26 

 

 

4.1 

Existence and Good Standing

26 

4.2 

Authority, Validity, Effect and No Conflict

26 

4.3 

Consents

26 

4.4 

Brokers

27 

 


 

 

 

 

 

 

 

 

4.5 

Financing

27 

4.6 

No Further Representations

27 

 

 

 

ARTICLE 5 PRE-CLOSING COVENANTS 

27 

 

 

5.1 

General

27 

5.2 

Conduct of the Business in Normal Course

27 

5.3 

Access to Information

27 

5.4 

Notice of Developments

28 

5.5 

Breeding Practices

28 

5.6 

No Solicitation of Other Bids; Exclusivity

28 

5.7 

Risk of Loss; Casualty Loss

29 

 

 

 

ARTICLE 6 CONDITIONS TO OBLIGATION TO CLOSE 

29 

 

 

6.1 

Conditions to Obligation of Buyer Parties

29 

6.2 

Conditions to Obligation of Seller Parties

30 

 

 

 

ARTICLE 7 TERMINATION 

31 

 

 

7.1 

Termination of Agreement

31 

7.2 

Effect of Termination

31 

 

 

 

ARTICLE 8 ADDITIONAL AGREEMENTS 

31 

 

 

8.1 

Non-Solicitation and Non-Disclosure

31 

8.2 

Further Assurances

32 

8.3 

Press Release and Announcements

32 

8.4 

Expenses

33 

8.5 

No Amendment of Employee Plans or Arrangements

33 

8.6 

Employee Matters

33 

8.7 

Operating Costs Proration

34 

8.8 

Davis County Nuisance Mediation

34 

8.9 

Survey Exceptions

35 

8.10 

Antitrust Cooperation

35 

 

 

 

ARTICLE 9 TAX MATTERS 

35 

 

 

9.1 

Total Consideration Allocation

35 

9.2 

Transfer Taxes

36 

9.3 

Cooperation on Tax Matters

36 

9.4 

Tax Clearance Certificates

36 

9.5 

Pre-Closing Tax Periods

36 

9.6 

Straddle Periods; Proration

36 

9.7 

Exception

38 

 

 

ARTICLE 10 REMEDIES 

38 

 

 

10.1 

General Indemnification Obligations

38 

10.2 

Scope of Indemnification

39 

10.3 

Notice and Third Party Claims

39 

10.4 

Survival

40 

10.5 

Tax Treatment

41 

10.6 

Damages

41 

10.7 

Indemnification in Case of Strict Liability or Indemnitee Negligence

41 

 

 


 

 

 


 

 

LIST OF SCHEDULES

 

Schedule 1.1(a)(i)

Colorado CFF Sites

Schedule 1.1(a)(ii)

Feed Mill

Schedule 1.1(a)(iii)

Truck Washes

Schedule 1.1(a)(ix)

Iowa Rolling Stock

Schedule 1.1(a)(x)(1)

SFI Contracts

Schedule 1.1(a)(x)(2)

Contract Producer Sites

Schedule 1.1(a)(xi)

SFI Acquired Permits

Schedule 1.1(a)(xii)

SFI Tangible Personal Property

Schedule 1.1(b)(vii)

Colorado Rolling Stock

Schedule 1.1(b)(viii)

Colorado Tangible Personal Property

Schedule 1.1(b)(ix)

SF Acquired Contracts

Schedule 1.1(b)(x)

Colorado Effluent Easements

Schedule 1.1(b)(xi)

SF Acquired Permits

Schedule 1.1(c)(i)

Woodford CFF Sites

Schedule 1.1(c)(ii)

Bare Land Property

Schedule 1.1(c)(iii)

Woodford Acquired Contracts

Schedule 1.1(c)(iv)

Iowa Effluent Easements

Schedule 1.1(c)(v)

Woodford Acquired Permits

Schedule 1.1(c)(vi)

Iowa Tangible Personal Property

Schedule 1.2(m)

Excluded Assets

Schedule 3.4

Consents

Schedule 3.5

Subsidiaries

Schedule 3.6(b)(i)

Owned Real Property

Schedule 3.6(b)(ii)

Leased Real Property

Schedule 3.7

Litigation

Schedule 3.8

Compliance with Laws

Schedule 3.9

Operation of the Business

Schedule 3.10

Absence of Changes

Schedule 3.11

Labor Matters

Schedule 3.11(d)

Employees and Independent Contractors

Schedule 3.11(e)

Government Contracting

Schedule 3.12(a)

Employee Benefit Plans

Schedule 3.13

Environmental and Safety

Schedule 3.14

Other Material Contracts

Schedule 3.16(a)

Intellectual Property

Schedule 3.17

Insurance Policies

Schedule 3.19

Taxes

Schedule 11.1(a)

Permitted Liens

 

 


 

 

LIST OF EXHIBITS

Exhibit A

Pig Inventory Value Methodology

Exhibit B

Form of Bill of Sale

Exhibit C

Form of Assignment and Assumption Agreement

Exhibit D

Form of Transition Management Support and Services Agreement

Exhibit E

Form of Assignment of Easements

Exhibit F

Form of FIRPTA Certificates

 

 

 

 


 

 

ASSET PURCHASE AGREEMENT

This Asset Purchase Agreement (this "Agreement"), dated as of this 26th day of January, 2016, is by and among Seaboard Foods of Iowa, LLC, a Delaware limited liability company ("SFI"), Seaboard Foods LLC, an Oklahoma limited liability company ("SF"), Woodford Creek Farms LLP, an Iowa limited liability partnership ("Woodford" and, together with SFI and SF, "Buyer Parties" and each individually a "Buyer Party"), Christensen Farms & Feedlots, Inc., a Minnesota corporation ("CFFI"), and Christensen Farms Midwest, LLC, a Minnesota limited liability company ("CFM" and, together with CFFI, "Seller Parties" and each individually a "Seller Party").  Each Seller Party and Buyer Party is sometimes individually referred to as a "Party," and they are sometimes collectively referred to as the "Parties."

RECITALS

A.Seller Parties own and operate the following facilities (the "Facilities"):

(i)hog confinement facilities located in Iowa and Colorado (collectively, the "CFF Sites") and more specifically identified and described on Schedule 1.1(a)(i) and Schedule 1.1(c)(i), respectively;

(ii)a feed mill located in Iowa Falls, Iowa (the "Feed Mill") and more specifically identified and described on Schedule 1.1(a)(ii); and

(iii)truck wash facilities (collectively, the "Truck Washes") located in Alden and Bloomfield, Iowa and more specifically identified and described on Schedule 1.1(a)(iii);

B.Seller Parties have entered into contract grower agreements with the owners of contract finisher facilities located in Iowa (collectively, the "Contract Producer Sites") and more specifically identified and described on Schedule 1.1(a)(x)(2);

C.Seller Parties are engaged in the business (the "Business") of (i) breeding, producing, marketing, distributing and selling pigs at, or from, the CFF Sites and the Contract Producer Sites and (ii) operating the Feed Mill and Truck Washes;

D.Each Seller Party desires to sell to certain of Buyer Parties, as set forth herein, substantially all of its assets used by one or both of Seller Parties in the Business, and Buyer Parties desire to purchase from Seller Parties such assets and assume certain liabilities of Seller Parties, upon the terms and conditions set forth herein (the "Acquisitions");

E.Buyer Parties and Seller Parties desire to make certain representations, warranties, covenants and agreements specified herein in connection with the Acquisitions and to prescribe certain conditions to the consummation of the Acquisitions; and

F.Capitalized terms used in this Agreement without definition have the respective meanings set forth in Article 11.

AGREEMENT

In consideration of the foregoing and the respective representations, warranties, covenants and agreements set forth in this Agreement and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree as follows:

 

 

 


 

 

 

ARTICLE 1
PURCHASE AND SALE

1.1Purchase and Sale of Acquired Assets.  Subject to the terms and conditions of this Agreement, at the Closing:

(a)Acquired Assets Purchased by SFI. SFI shall purchase from Seller Parties, and Seller Parties shall sell, transfer, assign, convey and deliver to SFI, or cause to be sold, transferred, conveyed, assigned and delivered to SF, free and clear of all Indebtedness and Liens (other than Permitted Liens), all right, title and interest of Seller Parties in, to and under the assets, properties, goodwill and other rights of every nature, kind and description, tangible and intangible, whether or not carried on the books of Seller Parties, in each case, that relate primarily or exclusively to the Business or that are used by or are held for the benefit of either Seller Party related primarily or exclusively to the Business (in each case, other than the SF Acquired Assets, the Woodford Acquired Assets and the Excluded Assets) (collectively, the "SFI Acquired Assets"), including the following:

(i)the real property owned by Seller Parties and comprising the CFF Sites located in Colorado, as more specifically identified and described on Schedule 1.1(a)(i) (specifically excluding all Improvements located thereon), together with all easements (other than the Effluent Easements), rights-of-way, water rights, oil, gas and mineral rights, wells, all other rights appurtenant thereto and all zoning rights, air rights and development rights, in each case, relating to CFF Sites located in Colorado;

(ii)the real property owned by Seller Parties and comprising the site of the Feed Mill, as more specifically identified and described on Schedule 1.1(a)(ii), together with all Improvements located thereon and all easements, rights-of-way, water rights, oil, gas and mineral rights, wells, all other rights appurtenant thereto and all zoning rights, air rights and development rights, in each case, relating to Feed Mill;

(iii)the real property owned by Seller Parties and comprising the sites of the Truck Washes, as more specifically identified and described on Schedule 1.1(a)(iii), together with all Improvements located thereon and all easements, rights-of-way, water rights, oil, gas and mineral rights, wells, all other rights appurtenant thereto and all zoning rights, air rights and development rights, in each case, relating to the Truck Washes;

(iv)all unweaned, suckling pigs owned by Seller Parties that are located at the CFF Sites located in Iowa at the Effective Time (collectively, the "Iowa Unweaned Pig Inventory");

(v)all sows, boars, gilts and breeding stock owned by Seller Parties that are located at the CFF Sites located in Iowa at the Effective Time, including all bred sows, gestating sows, unbred sows, cull sows, unbred gilts and boars at the CFF Sites located in Iowa at the Effective Time (collectively, together with the Iowa Unweaned Pig Inventory, the "Iowa Breeding Stock"), and all unborn piglets of the Iowa Breeding Stock;

(vi)all weaned pigs, feeder pigs and grow-finish pigs owned by Seller Parties that are located at the CFF Sites located in Iowa and the Contract Producer Sites at the Effective Time (collectively, "Iowa Grow-Finish Inventory" and, together with the Iowa Breeding Stock, the "Iowa Swine Inventory");

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(vii)all feed and feed ingredients owned by a Seller Party that are located at the CFF Sites located in Iowa, the Contract Producer Sites and the Feed Mill at the Effective Time (collectively, the "Iowa Feed Inventory");

(viii)all inventories of animal health supplies and medications, including injectable and other treatments, liquid propane and farm supplies and materials (other than Feed Inventory) owned by a Seller Party that are located at the CFF Sites located in Iowa and the Contract Producer Sites at the Effective Time (collectively, the "Iowa Other Inventory");

(ix)the vehicles, trucks, trailers and other rolling stock owned or leased by Seller Parties set forth on Schedule 1.1(a)(ix) that are located in Iowa (collectively, the "Iowa Rolling Stock");

(x)all of Seller Parties' rights and incidents of interest in, to and under the Contracts set forth on Schedule 1.1(a)(x)(1), including the contractor-producer Contracts related to the Contract Producer Sites identified and described on Schedule 1.1(a)(x)(2) and the lease Contracts related to the leased Iowa Rolling Stock (collectively, the "SFI Acquired Contracts");

(xi)to the extent assignable or transferable by Seller Parties, all Permits issued primarily or exclusively in connection with the operation of the Business in Iowa, in each case, other than the Woodford Permits, or the ownership, possession, occupancy or use of the Feed Mill or Truck Washes located in Iowa, including the Permits identified in Schedule 1.1(a)(xi), and all pending applications for any such Permits (collectively, the "SFI Acquired Permits");

(xii)all fixed assets, equipment, machinery, inventory, fixtures, furniture, computers and Software on the computers necessary to operate such hardware at the Facilities, tools, spare parts, supplies and other tangible personal property owned or leased by a Seller Party, in each case, that is (A) located at the Feed Mill, (B) located at a Truck Wash, (C) located at the Bloomfield, Iowa office, or (D) identified in Schedule 1.1(a)(xii) (the "SFI Tangible Personal Property");

(xiii)all claims, counterclaims, Actions, rights, recoveries, refunds, rights of offset or other rights related primarily or exclusively to the SFI Acquired Assets or to the Assumed Liabilities with respect to Iowa or the Business located in Iowa, whether choate or inchoate, known or unknown, contingent or noncontingent;

(xiv)the goodwill of Seller Parties related to the SFI Acquired Assets; and

(xv)all of Seller Parties' telephone numbers and facsimile numbers used primarily or exclusively in connection with the SFI Acquired Assets; and

(xvi)the Records, in each case, related to the SFI Acquired Assets or the Business in Iowa (other than Records with respect to the Woodford Acquired Assets).

(b)Acquired Assets Purchased by SF. SF shall purchase from Seller Parties, and Seller Parties shall sell, transfer, assign, convey and deliver to SF, or cause to be sold, transferred, conveyed, assigned and delivered to SF, free and clear of all Indebtedness and Liens (other than Permitted Liens), all right, title and interest of Seller Parties in, to and under the following assets,

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properties and rights (in each case, other than the SFI Acquired Assets, the Woodford Acquired Assets and the Excluded Assets) (collectively, the "SF Acquired Assets"):

(i)all Improvements located on the real property owned by Seller Parties and comprising the CFF Sites located in Colorado;

(ii)all unweaned, suckling pigs owned by Seller Parties that are located at the CFF Sites located in Colorado at the Effective Time (collectively, the "Colorado Unweaned Pig Inventory" and, together with the Iowa Unweaned Pig Inventory, collectively, the "Unweaned Pig Inventory");

(iii)all sows, boars, gilts and breeding stock owned by Seller Parties that are located at the CFF Sites located in Colorado at the Effective Time, including all bred sows, gestating sows, unbred sows, cull sows, unbred gilts and boars at the CFF Sites located in Colorado at the Effective Time (collectively, together with the Colorado Unweaned Pig Inventory, the "Colorado Breeding Stock"), and all unborn piglets of the Colorado Breeding Stock;

(iv)all weaned pigs, feeder pigs and grow-finish pigs owned by Seller Parties that are located at the CFF Sites located in Colorado at the Effective Time (collectively, "Colorado Grow-Finish Inventory" and, together with the Colorado Breeding Stock, the "Colorado Swine Inventory");

(v)all feed and feed ingredients owned by a Seller Party that are located at the CFF Sites located in Colorado at the Effective Time (collectively, the "Colorado Feed Inventory" and, together with the Iowa Feed Inventory, collectively, the "Feed Inventory");

(vi)all inventories of animal health supplies and medications, including injectable and other treatments, liquid propane and farm supplies and materials (other than Feed Inventory) owned by a Seller Party that are located at the CFF Sites located in Colorado at the Effective Time (collectively, the "Colorado Other Inventory" and, together with the Iowa Other Inventory, collectively, the "Other Inventory");

(vii)the vehicles, trucks, trailers and other rolling stock owned or leased by Seller Parties set forth on Schedule 1.1(b)(vii) that are located in Colorado (collectively, the "Colorado Rolling Stock" and, together with the Iowa Rolling Stock, collectively, the "Rolling Stock");

(viii)all fixed assets, equipment, machinery, inventory, fixtures, furniture, computers and Software on the computers necessary to operate such hardware at the Facilities, tools, spare parts, supplies and other tangible personal property owned or leased by a Seller Party and not otherwise identified in Section 1.1(a), in each case, that is (A) located at the Facilities in Colorado, (B) identified in Schedule 1.1(b)(viii), or (C) used or held for use primarily or exclusively in connection with the Business located in Colorado (the "Colorado Tangible Personal Property");

(ix)all of Seller Parties' rights and incidents of interest in, to and under the Contracts (in each case, other than the Colorado Effluent Easements) set forth on Schedule 1.1(b)(ix), including effluent and manure spreading agreements and the lease Contracts related to the leased Colorado Rolling Stock (collectively, the "SF Acquired Contracts");

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(x)all of Seller Parties' rights and incidents of interest in, to and under the easements set forth on Schedule 1.1(b)(x) (collectively, the "Colorado Effluent Easements");

(xi)to the extent assignable or transferable by Seller Parties, all Permits issued primarily or exclusively in connection with the operation of the Business in Colorado or the ownership, possession, occupancy or use of the Facilities located in Colorado, including the Permits identified in Schedule 1.1(b)(xi), and all pending applications for any such Permits (collectively, the "SF Acquired Permits");

(xii)all claims, counterclaims, Actions, rights, recoveries, refunds, rights of offset or other rights related primarily or exclusively to the SF Acquired Assets or to the Assumed Liabilities with respect to Colorado or the Business located in Colorado, whether choate or inchoate, known or unknown, contingent or noncontingent;

(xiii)the goodwill of Seller Parties related to the SF Acquired Assets, the Business in Colorado and the Business as a going concern in Colorado;

(xiv)all of Seller Parties' telephone numbers and facsimile numbers used primarily or exclusively in connection with the SF Acquired Assets; and

(xv)the Records, in each case, related to the SF Acquired Assets or the Business in Colorado.

(c)Acquired Assets Purchased by Woodford. Woodford shall purchase from Seller Parties, and Seller Parties shall sell, transfer, assign, convey and deliver to Woodford, or cause to be sold, transferred, conveyed, assigned and delivered to Woodford, free and clear of all Indebtedness and Liens (other than Permitted Liens), all right, title and interest of Seller Parties in, to and under the following assets, properties and rights (in each case, other than the SF Acquired Assets and the Excluded Assets) (collectively, the "Woodford Acquired Assets" and, together with the SF Acquired Assets, the "Acquired Assets"):

(i)the real property owned by Seller Parties and comprising the CFF Sites located in Iowa, as more specifically identified and described on Schedule 1.1(c)(i), together with all Improvements located thereon and all easements (other than the Effluent Easements), rights-of-way, water rights, oil, gas and mineral rights, wells, all other rights appurtenant thereto and all zoning rights, air rights and development rights, in each case, relating to the CFF Sites located in Iowa;

(ii)three parcels of bare land identified and described on Schedule 1.1(c)(ii) (the "Bare Land Property"), together with all Improvements located thereon and all easements, rights-of-way, water rights, oil, gas and mineral rights, wells, all other rights appurtenant thereto and all zoning rights, air rights and development rights, in each case, relating to the Bare Land Property;

(iii)all of Seller Parties' rights and incidents of interest in, to and under the Contracts (in each case, other than the Iowa Effluent Easements) set forth on Schedule 1.1(c)(iii),  including effluent and manure spreading agreements (the "Woodford Acquired Contracts" and, together with the SFI Acquired Contracts and the SF Acquired Contracts, collectively, the "Acquired Contracts");

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(iv)all of Seller Parties' rights and incidents of interest in, to and under the easements set forth on Schedule 1.1(c)(iv) (collectively, the "Iowa Effluent Easements" and, together with the Colorado Effluent Easements, collectively, the "Effluent Easements");

(v)to the extent assignable or transferable by Seller Parties, all Permits issued primarily or exclusively in connection with the ownership, operation, possession, occupancy or use of the CFF Sites located in Iowa, including the Permits identified in Schedule 1.1(c)(v), and all pending applications for any such Permits (collectively, the "Woodford Acquired Permits" and, together with the SFI Acquired Permits and the SF Acquired Permits, the "Acquired Permits");  

(vi)all fixed assets, equipment, machinery, inventory, fixtures, furniture, computers and Software on the computers necessary to operate such hardware at the Facilities, tools, spare parts, supplies and other tangible personal property owned by a Seller Party and not otherwise identified in Section 1.1(a) or (b), in each case, that is (A) located at the CFF Sites in Iowa, (B) identified in Schedule 1.1(c)(vi), or (C) other than the Colorado Tangible Personal Property and the SFI Tangible Personal Property, used or held for use primarily or exclusively in connection with the Business and regardless of where located (collectively, the "Iowa Tangible Personal Property" and, together with the Feed Inventory, Other Inventory, Rolling Stock, SFI Tangible Personal Property and Colorado Tangible Personal Property, collectively, the "Tangible Personal Property");

(vii)the goodwill of Seller Parties related to the Woodford Acquired Assets, the Business in Iowa and the Business as a going concern in Iowa;

(viii)all of Seller Parties' telephone numbers and facsimile numbers used primarily or exclusively in connection with the Woodford Acquired Assets; and

(ix)the Records, in each case, related to the Woodford Acquired Assets.

1.2Excluded Assets.  Notwithstanding anything to the contrary in this Agreement, the following assets of Seller Parties (the "Excluded Assets") are not part of the sale and purchase contemplated hereby, are excluded from the Acquired Assets and shall be retained by Seller Parties and remain the property of Seller Parties following the Closing:

(a)all assets and property of Seller Parties unrelated or not used by or in connection with the Business;

(b)all vehicles, tractors, trailers and other rolling stock other than the Rolling Stock;

(c)cash, checks, money orders, marketable securities, short-term instruments and other cash equivalents, funds in time and demand deposits or similar accounts, and any evidence of indebtedness issued or guaranteed by any Governmental Authority;

(d)all notes, accounts receivable, trade credits or other receivables arising in connection with the Business prior to the Closing;

(e)all right, title and interest in and to any Intellectual Property (other than the Software included on the computers that are part of the Acquired Assets), including for the avoidance of doubt, all right, title and interest in and to the name "Christensen" or any trademark

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or Internet domain name consisting of or containing the name "Christensen," any other trademarks or Internet domain names owned by Seller Parties;

(f)all Contracts, including the Packer Contracts, but excluding the Acquired Contracts and Effluent Easements (the "Excluded Contracts");

(g)all rights to receive refunds, credits and credit carry forwards with respect to any Taxes, in each case, to the extent attributable to a Pre-Closing Tax Period, including interest thereon, whether or not the foregoing is derived from the operation of the Acquired Assets;

(h)the corporate books and records of Seller Parties relating to the organization, maintenance, existence and good standing of Seller Parties as legal entities;

(i)to the extent related solely to a Retained Liability, any rights of each Seller Party against third parties related to or arising out of ownership of the Acquired Assets or operation of the Business prior to the Closing;

(j)all rights of each Seller Party under this Agreement and the Ancillary Agreements;

(k)all Employee Plans and all rights in connection with, and with respect to the assets associated with, any Employee Plan;

(l)subject to the requirements of Section 8.7, all rights of Seller Parties to any prepaid rentals, advance payments, deposits, advances and other prepaid items, including prepaid rent, purchase price and deposits with lessors, suppliers and utilities; and

(m)all Records other than the Records included in the Acquired Assets and those Records provided by Seller Parties in Seller Parties' electronic data room or located at the Facilities; and

(n)those assets of each Seller Party set forth on Schedule 1.2(n).

1.3Assumed Liabilities.  Subject to the terms and conditions of this Agreement and the Ancillary Agreements, Buyer Parties agree, at the Closing, to assume the Liabilities of Seller Parties arising under the Acquired Contracts, Effluent Easements and Acquired Assets to the extent relating to each Buyer Parties' respective ownership, management, control, operation or conduct of the Business or the Acquired Assets after the Closing Date and based on events or circumstances first occurring after the Closing Date, excluding Liabilities to the extent attributable to any breach of, default under or failure to perform the Acquired Contracts and Effluent Easements initiated, occurring or existing on or prior to the Closing Date or any Seller Parties' ownership, management, control, operation or conduct of the Acquired Assets on or prior to the Closing Date (collectively, the "Assumed Liabilities").

1.4Retained Liabilities.  Notwithstanding anything to the contrary in this Agreement, all Liabilities of each Seller Party, other than the Assumed Liabilities, are not part of the sale and purchase contemplated by this Agreement, shall be retained, paid, performed and discharged by Seller Parties and remain the sole responsibilities of Seller Parties following the Closing (the "Retained Liabilities"), including the following Liabilities:

(a)any Liability related to, or occurring or existing in connection with, or arising out of, the ownership or operation of the Business prior to the Closing;

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(b)any Liability arising out of, in connection with or relating to any Indebtedness or Liens;

(c)any Liability arising from, in connection with or relating to (i) the breach of, default under or failure to perform any Contract, initiated, occurring or existing on or prior to the Closing Date or (ii) any Liability for payments or amounts due or other obligations that were required to be performed under any Contract, including the Acquired Contracts and Effluent Easements, on or prior to the Closing Date;

(d)any Liability arising from, in connection with or relating to any Excluded Asset;

(e)for a period of two years following the Closing Date, all Liabilities related to Environmental Laws or Environmental Conditions to the extent arising out of or relating to events or circumstances that occurred, existed or were initiated on or prior to the Closing Date, including those arising out of or otherwise related to (i) the ownership or operation of (A) the Owned Real Property or Leased Real Property (or any condition thereon) on or prior to the Closing Date or (B) the Business on or prior to the Closing Date, or (ii) the onsite or offsite transportation, storage, disposal, treatment or recycling of Hazardous Material generated by or taken onsite or offsite prior to and through the Closing Date, including, with respect to clauses (i) and (ii), (1) the Release or continuing Release of any Hazardous Material, regardless of by whom and (2) any noncompliance with or Liability under Environmental Laws;

(f)all Liabilities related to Environmental Laws or Environmental Conditions arising out of or otherwise related to the Excluded Assets or any other Real Property formerly owned, operated, licensed or otherwise used by each Seller Party, including (i) the Release or continuing Release of any Hazardous Material, regardless of by whom and (ii) any noncompliance with or Liability under Environmental Laws;

(g)all Liabilities for (i) Taxes of each Seller Party and their Affiliates, (ii) Taxes related to or imposed on the Acquired Assets or the Business for any Pre-Closing Tax Period, as determined under this Agreement, (iii) payments under any Tax allocation, sharing or similar arrangement (oral or written) between either Seller Party and any other Person (other than Buyer Parties), (iv) the Transfer Taxes described in Section 9.2 and (v) an obligation, if any, imposed under any bulk sale or transfer or fraudulent transfer Law of any jurisdiction, under any de facto merger Law, successor liability Law or any other Law or any similar Law applicable to the transactions contemplated hereby;

(h)any Liability arising out of, in connection with or relating to any Employee Plan, and any Liability for severance payments;

(i)any Liability of a Seller Party to any Affiliate of a Seller Party, including intercompany accounts and notes payable, and any Liability arising from or related to any Excluded Asset;

(j)any Liability of a Seller Party under this Agreement, the Ancillary Agreements or any other Contract between a Seller Party and a Buyer Party;

(k)any payment obligation for products, other goods or services provided to a Seller Party on or prior to the Closing Date;

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(l)any Liability arising as a result of any Action (including, for the avoidance of doubt, any open workers' compensation claims against any Seller Party) initiated at any time or any action or omission by a Seller Party or any Affiliate of a Seller Party;

(m)any Liability for Selling Expenses;

(n)all trade accounts payable of each Seller Party;

(o)any Liability for any infringement, violation, misuse or misappropriation of the Intellectual Property owned, held or used by any Person other than a Seller Party arising on or prior to the Closing Date;

(p)any Liability to any current or former stockholder, optionholder, member, equity holder or debt holder of each Seller Party; and

(q)any Liabilities arising from or relating to an assignment or exchange in connection with the last sentence of Section 12.1.

1.5Total Consideration.

(a)The aggregate cash consideration payable by SFI to the account of Seller Parties for the SFI Acquired Assets (including the Feed Mill and the Truck Washes) at the Closing (the "SFI Purchase Price") shall be an amount equal to the sum of (i) $17,394,207, plus (iii) the value of the Iowa Swine Inventory, Iowa Feed Inventory, and Iowa Other Inventory at the Closing, as calculated, valued and sampled subject to and in accordance with Section 1.7 and Exhibit A.

(b)The aggregate cash consideration payable by SF to the account of Seller Parties for the SF Acquired Assets (the "SF Purchase Price") shall be an amount equal to the sum of (i) $4,270,705, plus (ii) the value of the Colorado Swine Inventory, Colorado Feed Inventory, and Colorado Other Inventory at the Closing, as calculated, valued and sampled subject to and in accordance with Section 1.7 and Exhibit A.

(c)The cash consideration payable by Woodford to the account of Seller Parties for the Woodford Acquired Assets (the "Woodford Purchase Price") shall be an amount equal to $75,761,875.

(d)The total consideration ("Total Consideration") payable by Buyer Parties to or for the account of Seller Parties in consideration for the Acquisitions and other transactions contemplated hereunder shall be an amount equal to the sum of the SFI Purchase Price, SF Purchase Price and Woodford Purchase Price, in each case, as adjusted, as applicable.

1.6Payment. If the Swine Inventory count is not required to be determined by the Parties in accordance with Section 1.7(a)(iv), Buyer Parties shall pay the full Total Consideration at Closing, which shall be set forth in the Funds Flow Statement as mutually agreed to by Buyer Parties and Seller Parties. If the Swine Inventory count has not been determined by the Closing Date in accordance with Section 1.7, the portion of the Total Consideration Buyer Parties shall pay at Closing shall be equal to the total Woodford Purchase Price, plus $17,394,207 from SFI, plus $4,270,705 from SF; plus the consideration for the Feed Inventory and Other Inventory, in each case, as calculated in accordance with Exhibit A and with respect to the Feed Inventory located at the Feed Mill, the Feed Mill Inventory Report; plus the consideration for all undisputed categories of Swine Inventory as calculated in accordance with Exhibit A and the February 6th (or February 5th, as the case may be) Swine Inventory Report; plus an amount equal to ninety-seven

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percent (97%), using the value methodology set forth on Exhibit A, of the value of the February 6th (or February 5th, as the case may be) Swine Inventory Report for any disputed category of Swine Inventory (subject to adjustments after the Closing Date in accordance with Section 1.7). Said amount shall be distributed at the Closing shall be set forth on, and distributed in accordance with, the Funds Flow Statement as follows: (a) an amount equal to the outstanding Indebtedness of Seller Parties for any of the Acquired Assets to be satisfied and discharged as of the Closing, if any, shall be set forth on, and delivered in accordance with, the Funds Flow Statement; (b) an amount equal to the unpaid Selling Expenses as of the Closing, if any, shall be set forth on, and delivered in accordance with, the Funds Flow Statement; and (c) an amount (the "Net Closing Cash Payment") equal to the difference of (i) the portion of the Total Consideration to be distributed at the Closing that remains after distribution of the amounts contemplated under (a) and (b),  minus (ii) any amounts determined by the Parties to be deducted from the Total Consideration for unpaid salary, wages, bonuses or benefits, if applicable, in accordance with Section 8.6(b), which Net Closing Cash Payment shall be set forth on, and delivered to Seller Parties in accordance with, the Funds Flow Statement. Subject to Section 1.7, any inventory count disputes shall be resolved, and payment of any remaining amount of the Total Consideration shall be made, no later than five days after the Closing Date.

1.7Valuation, Sampling and Adjustment Procedures. The purchase price set forth in Section 1.5 above for the values of Swine Inventory and Feed Inventory categories of Acquired Assets shall be determined and adjusted, as applicable, based on counts and qualities of such Acquired Assets in accordance with this Section 1.7 and Exhibit A:

(a)Swine Inventory

(i)Seller Parties have provided to Buyer Parties a true and correct detailed inventory report of the Swine Inventory, by site, as of the close of business on January 22, 2016.  Seller Parties will provide to Buyer Parties a true and correct updated detailed inventory report of the Swine Inventory, by site, as of the close of business on January 29, 2016 (or such other date that is approximately eight days prior to Closing).  Each inventory report delivered pursuant to this Section 1.7 (a "Swine Inventory Report") will include separate counts for the Breeding Stock and Grow-Finish categories (consistent with the January 22, 2016 report).

(ii)Buyer Parties will select farm sites for inventory verification sampling counts that represent at least 10% of each category of the Swine Inventory reflected in the Swine Inventory Report.  A list of such verification sites will be communicated by Buyer Parties to Seller Parties in advance of the date selected for inventory verification.

(iii)On January 30 and/or January 31, 2016, physical verification count teams, including representatives of each of Buyer Parties, Seller Parties, and either KPMG LLP or SF's internal audit division (each, a "Count Team") will visit the sites selected by Buyer Parties in accordance with Section 1.7(a)(ii) and will determine via the process further described below whether the quantities of each category of the Swine Inventory at each such site (excluding sick, unhealthy, out of condition and/or dead animals) is within a three percent (3%) margin of error of the corresponding category of the Swine Inventory at such site reflected on the updated Swine Inventory Report. The Parties acknowledge that such determinations shall be made based on arriving at a total count made by reasonably experienced farm workers based on the number of pens, pen capacities and occupancy at such site. The Count Team representatives of KPMG LLP or SF's internal audit division will be present for observation purposes only to determine that the inventory counts are accurate in accordance with the terms hereof.

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(A)If the quantities of any category of the Swine Inventory at a site (excluding sick, unhealthy, out of condition and/or dead animals) are determined by a Count Team to be within a three percent (3%) margin of error of the corresponding category of the Swine Inventory at such site reflected on the updated Swine Inventory Report, no further count with respect to such site will be needed prior to Closing.

(B)If the Count Team has a reasonable concern that the quantities of any category of the Swine Inventory at a site (excluding sick, unhealthy, out of condition and/or dead animals) are outside a three percent (3%) margin of error of the corresponding category of the Swine Inventory at such site reflected on the updated Swine Inventory Report, the Count Team will conduct a full, physical inventory count of such category of the Swine Inventory at such site.  If it is determined from this full, physical inventory count that the quantities of such category of the Swine Inventory at such site (excluding sick, unhealthy, out of condition and/or dead animals) is less or more than the corresponding amount on the updated Swine Inventory Report, the amount of such shortfall or windfall is referred to herein as a "Shortfall Amount" or "Windfall Amount" for such category of Swine Inventory.

(iv)After the Count Teams have completed their work at the selected sites, (A) if the sum of the Shortfall Amounts and Windfall Amounts for the applicable category of Swine Inventory is greater than an amount equal to one-half (1/2) of one percent (0.5%) of the total count for such category of the Swine Inventory reflected on the updated Swine Inventory Report with respect to such selected sites, or (B) if the Shortfall Amount for the applicable category of Swine Inventory at any site is greater than an amount equal to three percent (3%) of the amount of such category of the Swine Inventory at such site as reflected on the updated Swine Inventory Report; then, in either such case, the Parties shall cooperate in good faith to arrive at a mutually acceptable process for determining the Swine Inventory for purposes of Closing. If the Parties cannot agree to a mutually acceptable process for determining the Swine Inventory, the Parties may conduct a full, physical count of all Swine Inventory in the disputed category or categories at all sites.  If there remain any disputed amounts with respect to the Swine Inventory at 12:01 p.m. Central Time on February 2, 2016, the Parties will engage Steve Weiss of Nutriquest, LLC to mediate a resolution of any such remaining disputed amounts between the Parties.  The Parties shall mediate and reach resolution within five days following Closing unless otherwise extended by mutual agreement of the Parties.

(v)If the Swine Inventory count is not required to be determined by the Parties in accordance with Section 1.7(a)(iv), Seller Parties will deliver a true and correct Swine Inventory Report, generated from the same system and process used to generate the initial and updated Swine Inventory Reports, as of the close of business on February 6, 2016 (or on February 5, 2016 if agreed by the Parties), which will establish the Swine Inventory count for purposes of determining the value of the Colorado Swine Inventory and Iowa Swine Inventory included in the SF Purchase Price and SFI Purchase Price under Section 1.5

(vi)If applicable, within five days after the Closing Date, Buyer Parties may notify Seller Parties that, in the judgment of Buyer Parties, the actual Swine Inventory count as of the Closing Date with respect to either category of Swine Inventory at any site is more than five percent (5%) above or below the count with respect to such category of

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Swine Inventory at such site used by the Parties for purposes of Closing.  Thereupon, the Parties shall cooperate in good faith to arrive at a mutually agreeable resolution of the possible shortfall at that site or any other site, which may include a possible payment by Seller Parties to Buyer Parties or payment by Buyer Parties to Seller Parties in an amount corresponding to any such shortfall or windfall.  If the Parties cannot arrive at a mutually agreeable resolution after five days following the beginning of discussions on the possible shortfall or windfall at that site or any other site, the Parties will engage Steve Weiss of Nutriquest, LLC to mediate a resolution of any such remaining disputed amounts. Within three Business Days following the final determination of any shortfall or windfall amount under this subsection, Seller Parties (or Buyer Parties, as the case may be) shall pay such shortfall amount to Buyer Parties (or to Seller Parties, as the case may be), and such shortfall or windfall amount shall be deemed a purchase price adjustment.  

(b)Feed Inventory.  Seller Parties will take a physical inventory of the Feed Inventory at the Feed Mill as of the close of business on February 5 or 6, 2016, whichever date is the last day that the Feed Mill is in operation prior to the Closing Date, and generate an inventory report (the "Feed Mill Inventory Report").  Buyer Parties shall be present during the physical inventory and generation of the Feed Mill Inventory Report to confirm their accuracy.  The Feed Mill Inventory Report shall be used for purposes of determining the value of that portion of the Iowa Feed Inventory located at the Feed Mill included in the SFI Purchase Price under Section 1.5.

1.81031 Exchange. The Acquisitions and the other transactions contemplated hereunder are intended to qualify as like kind exchanges and qualifying use within the meaning of Section 1031 of the Code and Seller Parties reserve the rights to assign their rights (but not their obligations) to a Qualified Intermediary as provided in Treas. Reg. 1.1031(k) – 1(g) on or before the Closing Date in accordance with Section 12.1. Buyer Parties shall incur no cost or charges, nor assume any responsibility regarding any such exchange.  Seller Parties shall indemnify Buyer Parties of and from any liability or claim arising therefrom; which indemnification shall not be subject to the limitations set forth at Article 10.

1.9Remittances, Erroneous Transfers.

(a)After the Closing, if a Seller Party (or any of its Affiliates) receives any amount that is properly due and owing to a Buyer Party in accordance with the terms of this Agreement, Seller Party shall promptly remit, or shall cause to be remitted, such amount by check to Buyer Parties at the address set forth in Section 12.6 or by wire transfer into an account or accounts of a Buyer Party or any Person that Buyer Parties designate in writing. After the Closing, if a Buyer Party (or any of its Affiliates) receives any amount that is properly due and owing to a Seller Party in accordance with the terms of this Agreement, such Buyer Party promptly shall remit, or shall cause to be remitted, such amount by check to the address set forth in Section 12.6 or by wire transfer into an account or accounts designated in writing by Seller Parties.

(b)After the Closing, if the Parties determine that (i) a Seller Party (or any Affiliate of a Seller Party) has retained any assets that are Acquired Assets and should have been transferred to a Buyer Party hereunder, such Seller Party shall promptly transfer, or cause to be transferred, such assets to such Buyer Party, or (ii) a Buyer Party (or any of its Affiliates) has received title to any assets that should have been retained by a Seller Party hereunder, such Buyer Party shall transfer, or cause to be transferred, promptly such assets to such Seller Party.

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1.10Post-Closing, Consents and Permit Transfers.

(a)To the extent a Consent to assignment is not obtained or taken at or prior to the Closing with respect to any Acquired Contract, (i) each Seller Party shall use its reasonable efforts to obtain or take such Consent following the Closing for such Acquired Contract; (ii) each Seller Party shall use reasonable efforts to provide to the applicable Buyer Party the benefits of such Acquired Contract or Effluent Easement (including the right to enforce for the benefit of such Buyer Party any and all rights of Seller Parties or any Affiliate of a Seller Party against any third party thereunder) for the remaining term of such Acquired Contract and (iii) subject to the foregoing limitations, each Seller Party shall cooperate with Buyer Parties in any lawful and contractually permitted arrangements acceptable to Buyer Parties that are designed to provide to Buyer Parties such benefits and obligations of the Acquired Contract for its term remaining as of the Closing Date. In connection with any such arrangements related to an Acquired Contract, Buyer Parties and Seller Parties (A) shall each abide by the terms and conditions set forth in such Acquired Contract, (B) subject to any arrangement contemplated by this Section 1.10, shall reimburse each other for payments made to or received from counterparties on behalf of each other pursuant to the terms of such Acquired Contract , (C) shall fully indemnify each other or their respective Affiliates for any Liabilities arising out of any failure by a Buyer Party or a Seller Party, as applicable, to abide by the terms and conditions of such Acquired Contract and (D) shall use reasonable efforts to ensure that Buyer Parties are put in the same economic position with respect to such Acquired Contract as if the relevant Consent had been obtained or taken as of the Closing. Notwithstanding the foregoing, in the event that any required Consent to the partial assignment of the Master Lease Agreement, dated July 26, 2012, and Equipment Schedule (Fixed) Schedule No. 8740349-029, dated August 8, 2014, is not obtained within 10 Business Days after the Closing Date, and with respect to any individual items of property subject to such Contracts which Seller Parties have not elected, in their sole discretion, to purchase prior to the Closing Date, Seller Parties shall purchase the remaining Leased Tangible Personal Property identified on Schedule 1.1(c)(vi) and Schedule 1.1(b)(viii) from the lessor, and Buyer Parties shall immediately thereafter purchase such property from Seller Parties for the lesser of cost or fair market value.  Further, notwithstanding the foregoing, in the event that Seller Parties are unable to obtain a Consent to the assignment of Commercial Rental Agreement effective February 13, 2014, or Dwelling Unit Rental Agreement effective July 10, 2015, within thirty (30) days after Closing, said leases shall be deemed Excluded Assets, and neither Seller Parties nor Buyer Parties shall have any further obligation to assign or assume such Agreements. Once any such Consent is obtained or taken, such Acquired Contract shall be deemed assigned, transferred, conveyed and delivered in accordance with the Bill of Sale, and any executory Liabilities arising out of the performance of any obligation due thereunder to the extent such obligation arose after the date such Consent is obtained or taken shall be assumed in accordance with the Assignment and Assumption Agreement.

(b)Seller Parties make no representations or warranties as to the assignability or enforceability of the Effluent Easements.  Upon Buyer Parties' request after Closing, Seller Parties shall take reasonable efforts to assist Buyer Parties in obtaining Consent to Seller Parties' assignment of particular Effluent Easements identified by Buyer Parties (but at no cost to any Seller Party).

(c)If there are any Permits held by a Seller Party or any Affiliate of a Seller Party necessary for the operations and conduct of the Business which have not been transferred to Buyer Parties as of the Closing because the transfer thereof is not permitted by Law or by the applicable Governmental Authority, or for any other reason, each Seller Party shall reasonably cooperate with Buyer Parties (but at no cost to any Seller Party) in securing such Permits for Buyer Parties. Buyer

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Parties shall pay the cost of applying for any such Permits and the cost of obtaining the transfer of existing Permits and/or issuance of new Permits.

ARTICLE 2
CLOSING, DELIVERIES AND OTHER ACTIONS

2.1Time and Place of the ClosingSubject to the terms and conditions of this Agreement, the consummation of the transactions contemplated by this Agreement (the "Closing") shall be deemed to take place at the offices of Gislason & Hunter, LLP, 2700 Broadway, New Ulm, Minnesota, and, with respect to the real property comprising the Facilities at the offices of Title Resources, LLC, 2700 Broadway, New Ulm, Minnesota (the "Title Company") at 10:00 a.m. Central time (a) on February 7, 2016, subject to the satisfaction or waiver of all conditions to the obligations of the Parties to consummate the transactions contemplated hereby (other than conditions with respect to actions the respective Parties will take at the Closing itself), (b) on the second business day following the satisfaction or waiver of all conditions to the obligations of the Parties to consummate the transactions contemplated hereby (other than conditions with respect to actions the respective Parties will take at the Closing itself), or (c) at such other time and place as agreed by the Parties, (the "Closing Date"). The Closing will be effective as of 12:01 a.m. Central time on the Closing Date (the "Effective Time"). Other than with respect to Real Property (regarding any recording and other requirements for closing at the Title Company) and to Tangible Personal Property subject to certificates of title that are included in the Acquired Assets, the Closing shall not be a physical Closing, but shall occur by delivery of facsimile signatures (including PDF signatures delivered via email) by all Persons on the Closing Date of each of the documents required to be delivered by such Party pursuant to the terms hereof, with the obligation to deliver original signatures or such documents by overnight delivery by the Parties or their respective legal representatives promptly as requested by the Parties. All acts, deliveries and confirmations comprising the Closing, regardless of chronological sequence, shall be deemed to occur contemporaneously and simultaneously on the Closing Date.

2.2Deliveries by Seller Parties.  At the Closing, Seller Parties, as applicable, shall deliver, or cause to be delivered, to Buyer Parties the following items:

(a)(in escrow with the Title Company pending the Closing) with respect to the Owned Real Property, special warranty deeds subject only to Permitted Liens (collectively, the "Deeds"), dated the Closing Date and duly executed by each Seller Party, as applicable, together with any required Transfer Taxes or Tax notifications required under applicable Law;

(b)a bill of sale, substantially in the form of Exhibit B hereto (the "Bill of Sale"), dated the Closing Date and duly executed by Seller Parties;

(c)an assignment and assumption agreement, substantially in the form of Exhibit C hereto (the "Assignment and Assumption Agreement"), dated the Closing Date and duly executed by Seller Parties;

(d)appropriate instruments of transfer for the Rolling Stock and other Acquired Assets subject to certificates of title, in form reasonably acceptable to Buyer Parties, dated the Closing Date and duly executed and endorsed by Seller Parties;

(e)a Transition Management Support and Services Agreement between Seller Parties and SF, substantially in the form of Exhibit D hereto, regarding certain management services to be provided by Seller Parties following the Closing Date (the "TMSA"), dated the Closing Date and duly executed by Seller Parties;

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(f)with respect to the Effluent Easements, a master assignment of easements substantially in the form of Exhibit E attached hereto (the "Assignment of Easements"), or such other document related to the assignment of the Effluent Easements reasonably requested by Buyer Parties, in each case, dated the Closing Date and duly executed by Seller Parties;

(g)a certificate attesting to the satisfaction of the conditions set forth in Sections 6.1(a),  (b), and (d) in form and substance reasonably satisfactory to Buyer Parties, dated as of the Closing Date and duly executed by an authorized officer or manager, or other appropriate authorized officer or representative, of each Seller Party;

(h)the FIRPTA Certificates, dated the Closing Date and duly executed by Seller Parties;

(i)payoff letters or Contracts, in form reasonably acceptable to Buyer Parties and the Title Company, (i) from each creditor with whom a Seller Party had any outstanding Indebtedness immediately prior to the Closing set forth on the Funds Flow Statement, (ii) from each creditor with whom a Seller Party had any outstanding Indebtedness (secured or collateralized by any Acquired Asset) immediately prior to the Closing, including all creditors set forth on the Funds Flow Statement, (iii) for all Selling Expenses that have not been paid as of immediately prior to the Closing, and (iv) from any Person releasing and terminating all Liens (other than Permitted Liens) in favor of any such Person on any of the Acquired Assets, in each case, executed by the applicable parties thereto;

(j)UCC-3 termination statements in recordable form with respect to any financing statements filed against any of the Acquired Assets, releasing and terminating all Liens (other than Permitted Liens) on any of the Acquired Assets, duly executed by the parties thereto;

(k)documentation, in form reasonably acceptable to Buyer Parties, evidencing receipt of all Consents set forth on Schedule 3.4;

(l)(in escrow with the Title Company pending the Closing) affidavits sufficient to cause the deletion of the standard exceptions to title in the title commitments relating to the Owned Real Property; and

(m)such other documents and instruments as Buyer Parties shall reasonably request to consummate the transactions contemplated hereby, including such other deeds, general conveyances, endorsements, bills of sale, assignments, and other good and sufficient instruments of sale, conveyance, assignment, transfer and delivery as Buyer Parties may reasonably request in order more effectively to vest in Buyer Parties all right, title and interest in and to the Acquired Assets, in each case, duly executed by Seller Parties.

2.3Deliveries by Buyer Parties.  At the Closing (or within one Business Day thereafter solely for purposes of Section 2.3(a) below), Buyer Parties shall deliver to Seller Parties (or such other Person, as applicable) the following items:

(a)the Net Closing Cash Payment;

(b)the Assignment and Assumption Agreement, duly executed by Buyer Parties;

(c)the TMSA, duly executed by Buyer Parties;

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(d)the Assignment of Easements, duly executed by Buyer Parties; and

(e)a certificate attesting to the satisfaction of the conditions set forth in Sections 6.2(a) and (b) in form and substance reasonably satisfactory to Seller Parties, dated as of the Closing Date and duly executed by an authorized officer or other appropriate authorized officer or representative of each Buyer Party.

ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLER PARTIES

Seller Parties, jointly and severally, represent and warrant to Buyer Parties as of the date hereof and the Closing Date as follows:

3.1Existence and Good Standing; Organization.  CFFI is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Minnesota. CFM is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Minnesota. Each Seller Party is duly authorized, qualified or licensed to do business as a foreign corporation, company or enterprise in the States of Iowa and Colorado.

3.2Power.  Seller Parties have the requisite power and authority to (a) own, hold, operate, license and lease their properties and assets as and where currently owned, held, operated, licensed and leased and (b) carry on the Business as currently conducted.

3.3Authority, Validity, Effect and No Conflict.

(a)Each Seller Party has all requisite authority and full legal capacity to enter into and perform its obligations under this Agreement and the Ancillary Agreements to which it is or is to be a party and to consummate the transactions contemplated hereby and thereby.  This Agreement has been, and at the Closing each Ancillary Agreement to which it is or is to be a party will be, duly executed and delivered by each Seller Party pursuant to all necessary authorization and is, or at Closing will be, the legal, valid and binding obligation of each Seller Party, enforceable against such Seller Party in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium, liquidation, fraudulent conveyance and other similar Laws and principles of equity affecting creditors' rights and remedies generally (the "General Enforceability Exceptions").

(b)Neither the execution of this Agreement or the Ancillary Agreements, nor the performance by each Seller Party of its respective obligations hereunder or thereunder shall (i) violate or conflict with its articles of incorporation or articles of organization, as applicable, or its bylaws or operating agreement, as applicable, in each case as amended to date and in full force and effect on the Closing Date or with any Law, Permit or Order, (ii) violate, conflict with or result in a breach or termination of, or otherwise give any Person additional rights or compensation under, or the right to terminate or accelerate, or constitute (with notice or lapse of time, or both) a default under the terms of any Contract to which any Seller Party is a party or by which any of its assets or properties are bound or (iii) result in the creation or imposition of any Lien (other than a Permitted Lien) with respect to, or otherwise have a Material Adverse Effect upon, the Acquired Assets or any other assets used in or necessary to the conduct or operation of the Business.

3.4Consents.  Except as set forth on Schedule 3.4 and any pre-acquisition notification or Consent requirements under the HSR Act, no Consent is required in connection with the execution and delivery by any Seller Party of this Agreement or the Ancillary Agreements or the consummation of the

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transactions contemplated hereby or thereby, including any Consents required under any of the Acquired Contracts.

3.5Subsidiaries.  Except as set forth on Schedule 3.5, no Seller Party currently has, or has had, any Subsidiaries through which the Business is or has been conducted.

3.6Property.

(a)Title.  Seller Parties (i) are in lawful possession of and (ii)(A) have good, marketable and valid fee simple title to, (B) have good, valid and marketable title to, (C) have valid and enforceable leasehold interests in, or (D) have valid and enforceable licenses or rights to use, as the case may be, all of the Acquired Assets (real or personal, tangible or intangible or mixed, including any Real Property and Tangible Personal Property), and all of the Acquired Assets and all other assets and properties of either Seller Party are free and clear of any Liens, other than Permitted Liens.

(b)Real Property

(i)Schedule 3.6(b)(i) sets forth all real property owned by Seller Parties and primarily or exclusively used in connection with the Business (collectively, the "Owned Real Property"). Except as set forth on Schedule 3.6(b)(i), Seller Parties have not leased or granted to any Person the right to possess or use any portion of the Owned Real Property or granted any unrecorded options, rights of first offer or rights of first refusal to purchase any of the Owned Real Property.

(ii)Schedule 3.6(b)(ii) sets forth a true and complete description of all Real Property currently leased, licensed to or otherwise used or occupied (but not owned) by any Seller Party and primarily or exclusively used in connection with the Business (the Real Property required to be listed on Schedule 3.6(b)(ii), collectively, the "Leased Real Property") including, for each tract of Leased Real Property, the owner, the address, the annual fixed rental, the expiration of the term, any extension options and any security deposits.  Except as set forth on Schedule 3.6(b)(ii), no Seller Party leases any Real Property or any interest in any Real Property used primarily or exclusively in connection with the Business.  All of the Leased Real Property is used or occupied by a Seller Party pursuant to a written or oral lease, License or occupancy Contract, (collectively with all amendments, extensions, renewals, guaranties and other agreements with respect thereto, the "Real Property Leases"). A true and correct copy of each written Real Property Lease and a true and correct written description of the terms of each oral Real Property Lease, in each case, with respect to the Leased Real Property required to be listed on Schedule 3.6(b)(ii), has been delivered to Buyer Parties. Each Real Property Lease is valid, binding and enforceable in accordance with its terms and is in full force and effect, subject to the General Enforceability Exceptions. With respect to each Real Property Lease, except as set forth on Schedule 3.6(b)(ii), (A) there are no existing defaults or facts or circumstances requiring a Seller Party to indemnify any other Person thereunder, (B) no event has occurred which (with notice, lapse of time or both) could reasonably be expected to constitute a breach or default by a Seller Party or, to the Knowledge of Seller Parties, any other party, to require a Seller Party to indemnify any other Person thereunder or to give Seller Parties or, to the Knowledge of Seller Parties, any other party the right to terminate, accelerate or modify any such Real Property Lease, (C) no Seller Party has subleased or assigned to any Person the right to possess or use any portion of the Leased Real Property or any interest in the Real Property Leases, and (D) the transactions contemplated by this

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Agreement do not require the consent of any other party to such Real Property Lease, will not result in a breach or default under such Real Property Lease, and will not otherwise cause such Real Property Lease to cease to be valid, binding, enforceable and in full force and effect on identical terms following the Closing.  Except as set forth on Schedule 3.6(b)(ii), no Affiliate of a Seller Party is the owner or lessor of any Leased Real Property. Neither Seller Party has granted to any Person the right to use or occupy, and no third party is in possession of, the Leased Real Property or any portion thereof.  Other than the Owned Real Property, the Leased Real Property comprises all of the Real Property used primarily or exclusively in the Business, and no Seller Party is a party to any Contract to purchase or lease any Real Property or interest therein other than as provided in the Real Property Leases.

(iii)There are no conditions on any parcel of the Real Property that (A) would be revealed by a current and accurate survey of such parcel of the Real Property, and (B) have or could have a material adverse effect on the Business or such parcel of the Real Property.

(c)Tangible Personal Property.  Schedules 1.1(b)(viii) and 1.1(c)(vi) set forth a true and complete list, by category, of all material Tangible Personal Property, and also set forth a true and complete list of any other material tangible personal property that is leased by a Seller Party pursuant to a Contract, in each case, used primarily or exclusively in connection with the Business. Each Seller Party owns, or has a valid leasehold interest in, and is in possession of all of its respective Tangible Personal Property or such other tangible personal property listed on Schedules 1.1(b)(viii) and 1.1(c)(vi).

(d)Absence of Violations and Claims.  Seller Parties have not received any written notice that any of the Owned Real Property, the Leased Real Property, or the leasing (as applicable), occupancy or use of the Owned Real Property or the Leased Real Property or operation of the Business thereon, are in violation of any Laws or Permits, including the Americans with Disabilities Act of 1990 (42 U.S.C. Section 12101 et seq.) or building, zoning and other ordinances, codes, rules and regulations.

(e)Condition of Property and Assets.  There are no material defects in or damage to, the Owned Real Property or Leased Real Property (or Improvements thereon) or the Tangible Personal Property. To the Knowledge of Seller Parties, the mechanical, electrical, plumbing and other systems serving the Owned Real Property and the Leased Real Property are, in all material respects, in good working condition (ordinary wear and tear and Seller Parties' normal maintenance and replacement schedule excepted). Except as set forth in the previous sentence, the Tangible Personal Property, the Owned Real Property, the Leased Real Property, the Improvements and the other tangible assets included in the Acquired Assets are, in all material respects, in good condition, good working order and in a state of good maintenance and repair relative to customary standards in the industries in which the Business is conducted (ordinary wear and tear excepted).

3.7Litigation.  Except as set forth on Schedule 3.7, as it relates to the Business or the Acquired Assets, no Seller Party is currently, or has been, (a) subject to any continuing or unsatisfied Order, or (b) a party to or, to the Knowledge of Seller Parties, threatened to be made a party to any Action.  Except as set forth on Schedule 3.7, there are no Actions pending or, to the Knowledge of Seller Parties, threatened or Orders outstanding against Seller Parties that call into question the validity of this Agreement, the Ancillary Agreements or any of the transactions contemplated hereby or thereby.  Except as set forth on Schedule 3.7, to the Knowledge of Seller Parties, no event has occurred or circumstances exist that could reasonably

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be expected to give rise to or serve as a basis for the commencement of any Action of the type described in this Section 3.7.

3.8Compliance with Laws.  Except as set forth on Schedule 3.8:

(a)Each Seller Party is complying, and has complied at all times, in all material respects, with each applicable Law relating to the Acquired Assets, the Business or its operations.

(b)Without limiting the generality of the foregoing, as it relates to the Business or the Acquired Assets, no Seller Party nor any of a Seller Party's directors, officers, managers, members or employees nor, to the Knowledge of Seller Parties, any of a Seller Party's agents, brokers, representatives or consultants, acting on a Seller Party's behalf, has made, directly or indirectly, any unlawful contribution, gift, bribe, forgiveness of all or part of a debt, payoff, kickback or other unlawful payment or promise to or at the direction of any Government Official, customer or supplier in violation of any Law.

3.9Operation of the Business; Sufficiency of Assets.  Except as set forth in detail on Schedule 3.9, Seller Parties are the only entities through which the Business is or, for the past three years, has been conducted.  Except for the Excluded Assets and as otherwise set forth on Schedule 3.9, the Acquired Assets constitute all of the assets and properties (a) that are used primarily or exclusively in the Business and (b) that are necessary, adequate and sufficient to conduct and operate the Business in the Ordinary Course. The Real Property included in the Acquired Assets, subject to any Permitted Lien, together with easements and effluent spreading agreements included in the Acquired Contracts and the Effluent Easements, constitute sufficient land in order to spread effluent from the operations of the CFF Sites as required under applicable Laws. Seller Parties have the right to utilize water in accordance with valid water appropriation permits in such amounts as is necessary to operate the Business in the Ordinary Course.

3.10Absence of Changes.  Since November 13, 2015, the Business and operations of Seller Parties with respect to the Acquired Assets have been conducted in the Ordinary Course and there has not been any Material Adverse Effect in the operation of the Business or the performance or financial condition of either Seller Party related to the Business, except as set forth on Schedule 3.10.

3.11Labor Matters.  Except as set forth on Schedule 3.11: