SEABOARD CORPORATION
9000 West 67th Street
Shawnee Mission, Kansas 66202
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
APRIL 26, 2004
Notice is hereby given that the 2004 Annual
Meeting of Stockholders of Seaboard Corporation, a
Delaware corporation, will be held at the Sheraton
Newton Hotel, 320 Washington Street, Newton,
Massachusetts, on Monday, April 26, 2004, commencing at
9 a.m., local time, and thereafter as it may from time
to time be adjourned, for the following purposes:
1. To elect five directors to hold office until
the 2005 annual meeting of stockholders and
until their respective successors are duly
elected and qualified;
2. To consider and act upon ratification and
approval of the selection of KPMG LLP as the
independent auditors of our Company for the
year ending December 31, 2004;
3. To consider and act upon a stockholder
proposal, if introduced at the meeting, as
described in the accompanying proxy
statement; and
4. To transact such other business as properly
may come before the meeting.
Our Board of Directors has fixed the close of
business on Monday, March 8, 2004, as the record date
for determination of the stockholders entitled to
notice of, and to vote at, the annual meeting.
If you do not expect to attend the annual meeting
in person, please sign, date and return the enclosed
proxy in the enclosed addressed envelope.
By order of the Board of
Directors,
/s/ David M. Becker
David M. Becker,
Vice President, General
Counsel and Secretary
March 12, 2004
SEABOARD CORPORATION
9000 West 67th Street
Shawnee Mission, Kansas 66202
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
APRIL 26, 2004
March 12, 2004
Date, Time and Place of the Meeting
This proxy statement is furnished in connection with
the solicitation of proxies for use at the annual
meeting of stockholders of Seaboard Corporation to be
held on Monday, April 26, 2004, commencing at 9 a.m.,
local time, and at any adjournment thereof. The
meeting is called for the purposes set forth in the
foregoing Notice of Annual Meeting, and will be held at
the Sheraton Newton Hotel, 320 Washington Street,
Newton, Massachusetts.
Stockholders Entitled to Vote at the Meeting
Stockholders of record as of the close of business
on the March 8, 2004 record date are entitled to notice
of, and to vote at, the annual meeting and at any
adjournment thereof. Our Company had 1,255,053.90
shares of common stock, $1.00 par value, outstanding
and entitled to vote as of the record date. Each such
share of common stock is entitled to one vote on each
matter properly to come before the annual meeting.
This proxy statement and the enclosed form of proxy
were first sent or given to stockholders on or about
March 12, 2004.
Quorum Requirement
A quorum of stockholders is necessary to hold a
valid meeting. A majority of our outstanding shares of
common stock on the record date, or 627,527 shares,
will be needed to establish a quorum for the annual
meeting. Votes cast at the annual meeting will be
tabulated by persons duly appointed to act as
inspectors of election and voting for the annual
meeting. The inspectors of election and voting will
treat shares represented by a properly signed and
returned proxy as present at the annual meeting for
purposes of determining a quorum, without regard to
whether the proxy is marked as casting a vote or
abstaining. Likewise, the inspectors will treat shares
of stock represented by "broker non-votes" as present
for purposes of determining a quorum. Broker non-votes
are proxies with respect to shares held in record name
by brokers or nominees, as to which (i) instructions
have not been received from the beneficial owners or
persons entitled to vote, (ii) the broker or nominee
does not have discretionary voting power under
applicable national securities exchange rules or the
instrument under which it serves in such capacity, and
(iii) the record holder has indicated on the proxy card
or otherwise notified our Company that it does not have
authority to vote such shares on that matter.
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Attending the Meeting and Voting in Person
If you plan to attend the annual meeting and vote in
person, we will give you a ballot when you arrive.
However, if your shares are held in the name of your
broker, bank or other nominee (commonly referred to as
being held in "street" name), proof of ownership may be
required for you to be admitted to the meeting. A
recent brokerage statement or letter from a bank or
broker are examples of proof of ownership. If you want
to vote your shares of common stock held in street name
in person at the meeting, you will have to get a
written proxy in your name from the broker, bank or
other nominee who holds your shares.
Voting by Proxy
Our Board of Directors solicits your proxy in the
form enclosed for use at the annual meeting. Any
stockholder giving a proxy in the enclosed form may
revoke it at any time before it is exercised. A
stockholder may revoke his or her proxy by delivering
to the Secretary of our Company a written notice of
revocation or a duly executed proxy bearing a later
date, or by attending the meeting and voting in person.
A completed and signed proxy in the enclosed form, if
received in time for voting and not revoked, will be
voted at the annual meeting in accordance with the
instructions of the stockholder. Where a stockholder's
voting instructions are not specified, the shares
represented by the proxy will be voted "for" the
election of the nominees for director listed herein,
"for" ratification of the selection of KPMG LLP as our
independent auditors for 2004 and "against" the
stockholder proposal described herein that would urge
our Board to require that an independent director serve
as Chair of our Board. Our Board of Directors does not
know of any matters that will be brought before the
meeting other than those referred to in the Notice of
Annual Meeting. However, if any other matter properly
comes before the meeting, it is intended that the
persons named in the enclosed form of proxy, or their
substitutes acting thereunder, will vote on such matter
in accordance with their discretion and judgment. If
your shares of common stock are held in street name,
you will receive instructions from your broker, bank or
other nominee that you must follow in order to have
your shares voted. Our Company will bear all expenses
in connection with the solicitation of proxies,
including preparing, assembling, and mailing this proxy
statement. After the initial mailing of this proxy
statement, proxies may be solicited by mail, telephone,
facsimile transmission or personally by directors,
officers, employees or agents of our Company.
Brokerage houses and other custodians, nominees and
fiduciaries will be requested to forward soliciting
materials to beneficial owners of shares held of record
by them, and their reasonable out-of-pocket expenses
will be paid by our Company.
Vote Required
A favorable plurality of votes cast (a number
greater than those cast for any other candidates) is
necessary to elect members of our Board of Directors.
Accordingly, abstentions or broker non-votes as to the
election of directors will not affect the election of
the candidates receiving the plurality of votes. The
remaining proposals set forth herein require the
affirmative vote of the majority of the shares present
at the meeting. Shares represented by broker non-votes
as to such matters are treated as not being present for
the purposes of such matters, while abstentions as to
such matters are treated as being present but not
voting in the affirmative. Accordingly, the effect
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of broker non-votes is only to reduce the number of
shares considered to be present for the consideration
of such matters, while abstentions will have the same
effect as votes against the matter.
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information
as of January 31, 2004 (unless otherwise indicated)
regarding the beneficial ownership of our Company's
common stock by each person known to us to own
beneficially 5% or more of our Company's common stock.
Unless otherwise indicated, all beneficial ownership
consists of sole voting and sole investment power. Our
Company is a "controlled corporation," as defined in
the rules of the American Stock Exchange, because more
than 50 percent of the voting power of our Company is
owned by Seaboard Flour LLC.
Name and Address Amount and Nature of Percent
of Beneficial Owner Beneficial Ownership of Class
Seaboard Flour LLC(1) 887,634.90 70.7%
822 Boylston Street
Suite 301
Chestnut Hill, MA 02467
Dimensional Fund Advisors Inc.(2) 81,840.00 6.5
1299 Ocean Avenue
11th Floor
Santa Monica, CA 90401
(1)Mr. H. Harry Bresky, President and Chief
Executive Officer of our Company, and other members
of the Bresky family, including trusts created for
their benefit, beneficially own approximately
99.5 percent of the common units of Seaboard Flour
LLC (formerly Seaboard Flour Corporation). Mr. H.
Harry Bresky may be deemed to have indirect
beneficial ownership of our Company's common stock
held by Seaboard Flour LLC. Except for certain
annuities that may be received from certain of the
Bresky family trusts, Mr. Bresky disclaims any
beneficial ownership of these common units. In
addition to the shares shown as being owned by
Seaboard Flour LLC, Mr. H. Harry Bresky and other
members of the Bresky family beneficially own a total
of 37,105 shares, or 3.0 percent, of our Company's
common stock.
(2)Beneficial ownership information concerning
Dimensional Fund Advisors Inc. was obtained from its
Schedule 13G report filed with the Securities and
Exchange Commission on February 6, 2004. According
to that report, Dimensional Fund Advisors furnishes
investment advice to four investment companies and
serves as investment manager to certain other trusts
and accounts which own these securities. Dimensional
Fund Advisors has disclaimed beneficial ownership of
the shares shown as being owned by it.
3
SHARE OWNERSHIP OF MANAGEMENT AND DIRECTORS
The following table sets forth certain information
as of January 31, 2004 regarding the beneficial
ownership of our Company's common stock by each of our
directors and director nominees, each of our executive
officers named in the Summary Compensation Table on
page 7 and all of our directors and executive officers
as a group.
Name of Amount and Nature of Percent
Beneficial Owner Beneficial Ownership of Class
H. Harry Bresky 897,495.90 (1)(2) 71.5%
Joe E. Rodrigues 200 *
David A. Adamsen 20 *
Douglas W. Baena 100 *
Kevin M. Kennedy 15 *
Steven J. Bresky 2,538 *
Robert L. Steer 250 *
John Lynch 55 *
All directors & executive officers 900,673.90 (1) 71.8
as a group (15 persons)
(1)The shares reported include 887,634.90 shares of
our Company's common stock that may be attributed to
Mr. H. Harry Bresky by virtue of his ownership
interest in Seaboard Flour LLC, as described in the
Principal Stockholders section above, and
4,250 shares of our Company's common stock that may
be attributed to him as co-trustee of the "Bresky
Foundation" trust. Approximately 99.5 percent of the
common units of Seaboard Flour LLC are held by Mr. H.
Harry Bresky or in various trusts for the benefit of
Mr. Bresky's spouse and/or other Bresky family
members. Except for certain annuities that may be
received from certain of these trusts, Mr. Bresky
disclaims any beneficial ownership of these common
units.
(2)These shares exclude 5,285 shares, or
0.4 percent of the class, held by Mr. H. Harry
Bresky's wife, and annuities that may be received by
her from certain of the trusts referred to in
footnote (1) above, as to which Mr. Bresky disclaims
any beneficial ownership.
* Less than one percent.
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ITEM 1: ELECTION OF DIRECTORS
Our Board of Directors has fixed the number of
directors at five. Unless otherwise specified, proxies
will be voted in favor of the election as directors of
the following five persons for a term of one year and
until their successors are elected and qualified.
Director
Name Age Principal Occupations and Positions Since
H. Harry Bresky 78 Director, Chairman of the Board, President 1959
and Chief Executive Officer (since 2001),
President (from 1967-2001), Seaboard
Corporation; Manager, Seaboard Flour LLC
(since 2002); President (1987-2002),
Treasurer (1973-2002), Seaboard Flour
Corporation.
Joe E. Rodrigues 67 Director, former Executive Vice President and 1990
Treasurer (retired 2001), Seaboard Corporation.
David A. Adamsen 52 Director and Member of Audit Committee, Seaboard 1995
Corporation; Vice President-Group General
Manager, Northeast Region (since 2001), Vice
President-Sales and Marketing, Northeast
Region (1999-2001), Vice President of Special
Projects (1998-1999), Dean Foods Company, a
dairy specialty-food processor and distributor.
Douglas W. Baena 61 Director and Member of Audit Committee, Seaboard 2001
Corporation; Chief Executive Officer (since 1997),
CreditAmerica, Inc., venture capital company;
Chief Executive Officer (1999-2001), Ameristar
Capital Corporation, financial services company.
Kevin M. Kennedy 44 Director and Member of Audit Committee, 2003
Seaboard Corporation; President and Chief
Investment Officer (since 2001), Great Circle
Management LLC, a private equity fund;
Managing Director (Head Marine Financing)
(1999-2001), Vice President (Head of Marine
Financing) (1997-1999), GE Capital Services
Structured Finance Group, Inc., a provider of
structured financial products.
Mr. H. Harry Bresky is the father of Mr. Steven J.
Bresky, our Senior Vice President, International
Operations. There are no arrangements or
understandings between any nominee and any other person
pursuant to which such nominee was nominated.
In case any person or persons named herein for
election as directors are not available for election at
the annual meeting, proxies may be voted for a
substitute nominee or nominees (unless
5
the authority to vote for all nominees or for the
particular nominee who has ceased to be a candidate has
been withheld), as well as for the balance of those
named herein. Management has no reason to believe that
any of the nominees for the election as director
will be unavailable.
Our Board of Directors recommends that you vote for
the election as directors of the five persons listed
above.
MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES
Meetings of the Board
Our Board of Directors held six meetings in fiscal
2003, two of which were telephonic meetings. Other
actions of our Board of Directors were taken by
unanimous written consent as needed. Each director
attended more than 75 percent of the aggregate of the
total number of meetings of the Board of Directors and
the total number of meetings held by all committees of
the Board on which he served.
Our Company does not have any policy requiring
directors to attend our Company's annual meeting of
stockholders, although, generally, the directors have
attended our Company's annual stockholders' meetings.
Five directors attended the 2003 annual meeting,
including the director who was first elected to our
Board at that meeting. The director not standing for
re-election at the 2003 annual meeting did not attend
the meeting.
Committees of the Board
Our Company's Board of Directors has established an
Audit Committee. Members of the Audit Committee
currently are David A. Adamsen, Douglas W. Baena and
Kevin M. Kennedy. The Audit Committee selects and
retains independent auditors and assists the Board in
its oversight of the integrity of our Company's
financial statements, including the performance of our
independent auditors in their audit of our annual
financial statements. The Audit Committee meets with
management and the independent auditors as may be
required. The independent auditors have full and free
access to the Audit Committee without the presence of
management. Our Board of Directors has determined that
Kevin M. Kennedy is an "audit committee financial
expert" and is "independent," each within the meaning
of the rules and regulations of the Securities and
Exchange Commission. Mr. Kennedy became a financial
expert through his experiences in obtaining a Masters
Degree in Business Administration, and in working as a
bank officer for Bank of New York, where he conducted
financial analysis and managed a corporate loan
portfolio, as an officer for GE Capital Services
Structured Finance Group, Inc., where he supervised the
financial analysis of potential customers and
structured complex transactions, and as President and
Chief Investment Officer of Great Circle Capital LLC,
where he is a member of the management committee,
responsible for financial reporting of a private equity
fund. The Audit Committee held six meetings in fiscal
2003, four of which were telephonic meetings.
Our Company has no nominating or compensation
committees, or committees performing similar functions.
Our Board of Directors believes it is not necessary to
have a separate
6
nominating committee because of the low turnover of
Board of Director seats and because the entire Board
of Directors participates in the consideration of
director nominees.
Compensation of Directors
Each non-employee director receives $7,500 quarterly
and an additional $2,000 per quarter for service on the
Audit Committee of the Board. The Chairman of the
Audit Committee also receives an additional $1,000 per
quarter.
EXECUTIVE COMPENSATION AND OTHER INFORMATION
The following table shows all compensation earned,
during the fiscal years indicated, by the Chief
Executive Officer and the four other highest paid
executive officers of our Company (the "Named Executive
Officers") for such period in all capacities in which
they have served:
SUMMARY COMPENSATION TABLE
Annual Compensation
Name Other (3) (4)
and (1) (2) Annual All Other
Principal Salary Bonus Compensation Compensation
Position Year ($) ($) ($) ($)
H. Harry Bresky 2003 945,000 800,000 24,223 28,127
President 2002 900,000 800,000 27,051 23,949
Chief Executive Officer 2001 800,000 800,000 27,053 14,948
Steven J. Bresky 2003 397,000 300,000 2,977 17,820
Senior Vice President, 2002 379,000 300,000 - 19,927
International Operations 2001 345,539 300,000 - 15,796
Robert L. Steer 2003 397,000 300,000 - 20,755
Senior Vice President, 2002 379,000 300,000 - 20,163
Treasurer and 2001 344,577 300,000 - 16,517
Chief Financial Officer
John Lynch 2003 356,600 125,000 22,765 6,000
President, Seaboard 2002 340,100 200,000 28,502 5,100
Marine Ltd. 2001 335,677 200,000 32,534 5,100
Rodney K. Brenneman(5) 2003 325,900 200,000 3,779 12,000
President, Seaboard 2002 310,727 200,000 4,189 11,100
Farms, Inc. 2001 249,583 200,000 5,810 5,100
(1)Salary includes amounts deferred at the election
of the Named Executive Officers under our Company's
401(k) retirement savings plan and under our Company's
Investment Option Plan described below under "Benefit
Plans."
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(2)Reflects bonus earned for each fiscal year
presented and includes compensation reduced at the
election of the Named Executive Officers under our
Company's Investment Option Plan described below under
"Benefit Plans."
(3)Other Annual Compensation represents benefits
earned under the Supplemental Executive Benefit Plan
described below under "Benefit Plans." In addition,
for J. Lynch, the amount includes imputed taxable
interest of $6,103, $10,102 and $17,449 for 2003, 2002
and 2001, respectively, on the employee loan described
under "Compensation Committee Interlocks and Insider
Participation."
(4)All Other Compensation represents our Company's
contributions to our 401(k) retirement savings plan
and Investment Option Plan on behalf of the Named
Executive Officers. The amounts for fiscal 2003 are as
follows: (i) 401(k) retirement savings plan: H. Bresky
$6,000, S. Bresky $6,000, R. Steer $5,593, J. Lynch
$6,000 and R. Brenneman $6,000; and (ii) Investment
Option Plan: H. Bresky $22,127, S. Bresky $11,820, R.
Steer $17,820 and R. Brenneman $6,000. The amounts for
fiscal 2002 are as follows: (i) 401(k) retirement
savings plan: H. Bresky $5,100, S. Bresky $4,495, R.
Steer $5,001, J. Lynch $5,100 and R. Brenneman $5,100;
and (ii) Investment Option Plan: H. Bresky $18,849, S.
Bresky $15,432, R. Steer $15,162 and R. Brenneman
$6,000. The amounts for fiscal 2001 are as follows:
(i) 401(k) retirement savings plan: H. Bresky $5,100,
S. Bresky $4,714, R. Steer $4,775, J. Lynch $5,100 and
R. Brenneman $5,100; and (ii) Investment Option Plan:
H. Bresky $9,848, S. Bresky $11,082 and R. Steer
$11,742. Excludes perquisites and other benefits,
unless the aggregate amount of such compensation
exceeds the lesser of either $50,000 or 10 percent of
the total of annual salary and bonus reported for the
Named Executive Officer.
(5)Mr. Brenneman was promoted to President of
Seaboard Farms, Inc. in June, 2001.
BENEFIT PLANS
Executive Retirement Plan
The Seaboard Corporation Executive Retirement Plan
(the "Executive Retirement Plan") provides retirement
benefits for a select group of our officers and
managers, including the Named Executive Officers.
Effective January 1, 1997, the Executive Retirement
Plan provides that participants will accrue a benefit
in an amount equal to 2.5 percent of the final average
remuneration (salary plus bonus) of the participant
multiplied by the participant's years of service from
January 1, 1997. This amount will be reduced by the
amount such participant has accrued under the Seaboard
Corporation Pension Plan (described below). Benefits
under the Executive Retirement Plan are unfunded. As
of December 31, 2003, all of the Named Executive
Officers were fully vested as defined in the Executive
Retirement Plan. Payment of Plan benefits begin at
normal retirement. In the case of a married
participant, the benefit is paid pursuant to a
"50 Percent Joint and Survivor Annuity." This means
the participant will receive a monthly annuity benefit
for his/her lifetime and an eligible surviving spouse
will receive a lifetime annuity equal to 50 percent of
the participant's benefit. The payment of the benefit
for an unmarried participant is pursuant to a "Single
Life Annuity." The Plan allows for optional forms of
payment
8
under certain circumstances. The table below
shows annual benefits by remuneration and years of
service beginning with fiscal 1997.
EXECUTIVE RETIREMENT PLAN TABLE
YEARS OF SERVICE FROM JANUARY 1, 1997
REMUNERATION 15 20 25 30 35
$ 125,000 28,800 38,300 47,800 57,500 67,000
$ 150,000 33,800 45,000 56,300 67,500 78,800
$ 175,000 38,800 51,800 64,800 77,700 90,600
$ 200,000 43,900 58,500 73,200 87,800 102,400
$ 225,000 53,300 71,000 88,800 106,600 124,300
$ 250,000 62,700 83,500 104,500 125,300 146,200
$ 300,000 81,400 108,500 135,700 162,800 189,900
$ 400,000 118,900 158,500 198,200 237,800 277,400
$ 450,000 137,700 183,500 229,500 275,300 321,200
$ 500,000 156,400 208,500 260,700 312,800 364,900
Frozen Executive Retirement Plan Benefit
Mr. H. Bresky is 100 percent vested in an Executive
Retirement Plan, frozen effective December 31, 1996, in
which he has accrued an annual benefit of $22,500 upon
his retirement. Under this Plan, the automatic form of
benefit payment is pursuant to a "Ten-year Certain and
Continuous Annuity." This means Mr. Bresky will
receive a monthly annuity benefit for his lifetime and,
if Mr. Bresky dies while in the ten-year certain
period, the balance of the ten-year benefit will be
paid to his designated beneficiary. If Mr. Bresky dies
while employed by our Company or after retirement, but
before the commencement of benefits, monthly payments
would be made to Mr. Bresky's beneficiary in the form
of a 100 percent joint and survivor benefit. The Plan
allows for optional forms of payment under certain
circumstances.
Seaboard Corporation Pension Plan
The Seaboard Corporation Pension Plan ("the Plan")
provides defined benefits for its domestic salaried and
clerical employees upon retirement. Beginning in
fiscal 1997, each of the individuals named in the
Summary Compensation Table participates in this Plan.
Benefits under this Plan generally are based upon the
number of years of service and a percentage of final
average remuneration (salary plus bonus), subject to
limitation under applicable federal law. As of
December 31, 2003, all of the Named Executive Officers
were fully vested, as defined in the Plan. Under the
Plan, the benefit payment for a married participant is
pursuant to a "50 Percent Joint and Survivor Annuity."
This means the participant will receive a monthly
annuity benefit for his/her lifetime and an eligible
surviving spouse will receive a lifetime annuity equal
to 50 percent of the participant's benefit. The
payment of the benefit for an unmarried participant is
pursuant to a "Single Life Annuity." The Plan allows
for optional forms of payment under certain
circumstances. The table below shows benefits by
remuneration and years of service.
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PENSION PLAN TABLE
YEARS OF SERVICE FROM JANUARY 1, 1997
REMUNERATION 15 20 25 30 35
$ 125,000 18,100 24,200 30,300 36,300 42,400
$ 150,000 22,500 30,000 37,500 45,000 52,500
$ 175,000 26,800 35,700 44,600 53,600 62,500
$ 200,000 31,100 41,500 51,800 62,200 72,600
$ 225,000 31,100 41,500 51,800 62,200 72,600
$ 250,000 31,100 41,500 51,800 62,200 72,600
$ 300,000 31,100 41,500 51,800 62,200 72,600
$ 400,000 31,100 41,500 51,800 62,200 72,600
$ 450,000 31,100 41,500 51,800 62,200 72,600
$ 500,000 31,100 41,500 51,800 62,200 72,600
Frozen Retirement Plan
Each of the Named Executive Officers in the Summary
Compensation Table is 100 percent vested under a
particular defined benefit plan that was frozen at
December 31, 1993. A definitive actuarial
determination of the benefit amounts was made in 1995.
The annual amounts payable upon retirement after
attaining age 62 under this predecessor defined benefit
plan are as follows: H. Bresky, $120,108; S. Bresky,
$32,796; R. Steer, $15,490; J. Lynch, $25,872; and
R. Brenneman $6,540. Under this Plan, the payment of
the benefit for a married participant is pursuant to a
"Ten-year Certain and Continuous Annuity." This means
the participant would receive a monthly annuity benefit
for his/her lifetime and, if the participant dies while
in the ten- year certain period, the balance of the ten-
year benefit would be paid to his/her designated
beneficiary. The payment of the benefit for an
unmarried participant is pursuant to a "Single Life
Annuity." If the participant dies while employed by
our Company or after retirement, but before the
commencement of benefits, monthly payments would be
made to the participant's beneficiary in the form of a
100 percent joint and survivor benefit. The Plan
allows for optional forms of payment under certain
circumstances.
Supplemental Retirement Plans
The Supplemental Executive Benefit Plan provides for
discretionary investment options under the Investment
Option Plan (described below) and for cash compensation
payable to J. Lynch and R. Brenneman in 2003, 2002 and
2001 in an amount equal to 3 percent of the
participant's annual compensation in excess of
$200,000. Additionally, the cash compensation amounts
paid pursuant to this plan are grossed up to cover
100 percent of a participant's estimated income tax
liability on the benefit. The amounts of benefits
payable, including the gross up for taxes, under the
Supplemental Executive Benefit Plan is reported in the
Summary Compensation Table above.
In addition to the Supplemental Executive Benefit
Plan, our Company has agreed to provide a supplementary
pension benefit to Mr. H. Bresky. Mr. H. Bresky is
entitled to receive a supplementary annual pension in
the amount of $410,088 per year. Under this Plan, the
benefit payment is pursuant to a "Ten-year Certain and
Continuous Annuity." This means Mr. Bresky
10
will receive a monthly annuity benefit for his lifetime
and, if Mr. Bresky dies while in the ten-year
certain period, the balance of the ten-year benefit
will be paid to his designated beneficiary. If
Mr. Bresky dies while employed by our Company or after
retirement, but before the commencement of benefits,
monthly payments would be made to Mr. Bresky's
beneficiary for a period of ten years. Under these
plans, payment of benefits commences with the
executive's retirement from our Company.
Investment Option Plan
The Investment Option Plan allows executives to
reduce their compensation in exchange for options to
buy shares of certain mutual funds and/or pooled
separate accounts. In addition, our Company may grant
discretionary investment options under the Investment
Option Plan, which do not require a reduction to
executive compensation. The exercise price for each
investment option is established based upon the fair
market value of the underlying investment on the date
of grant.
Executive Deferred Compensation Plan
The Executive Deferred Compensation Plan requires
the deferral of salary and bonus on a pre-tax basis for
executives whose compensation exceeds $1 million, the
maximum allowable deductible amount under Section
162(m) of the Code.
None of the benefits payable under the
aforementioned plans contain an offset for social
security benefits.
REPORT OF THE BOARD OF DIRECTORS ON EXECUTIVE
COMPENSATION
The following information is to provide stockholders
and other interested parties with a clear understanding
of our Company's philosophy regarding executive
compensation and to provide insight behind fundamental
compensation decisions.
Our Company maintains the philosophy that
determination of compensation for its executive
officers by the Board of Directors is primarily based
upon a recognition that these officers are responsible
for implementing our Company's long-term strategic
objectives. Our Company's goals with respect to its
executive compensation policies described below are to
attract and retain top executive employees.
Base compensation, increases thereto, and bonus
compensation for executive officers as presented in the
Summary Compensation Table herein are determined by the
following factors:
Competitive compensation ranges at or above the
average of a select group of comparable companies in an
independent market assessment which included peer group
analysis and comparison of national survey data. As
most of the peer group companies offer their executives
long-term stock incentives, in addition to base and
bonus compensation, while Seaboard does not, our Board
also considers this factor in its compensation
decisions. This peer group is comprised of comparable
sized firms in the
11
food processing and grain industries. While this
group contains some of the same firms listed in the
peer group index in the total return graphs herein,
it is not identical.
The diversity and complexity of our Company's
businesses.
Compensation decisions for the Chief Executive
Officer and other executive officers are not
principally based on Company performance.
As Chief Executive Officer, Mr. H. Bresky's base
compensation and bonus are also determined based on a
survey of the select group of firms referenced above.
An analysis of the data presented in this survey shows
that the typical total cash compensation for Chief
Executive Officers of these entities is comparable to
the base compensation and bonus paid to Mr. H. Bresky.
Discretionary bonuses for executive officers,
including the Chief Executive Officer, may not exceed
100 percent of each executive's base compensation.
Pursuant to Section 162(m) of the Internal Revenue
Code, compensation in excess of $1 million paid to Mr.
H. Bresky is not deductible by our Company. Our Board
of Directors has considered the effect of Section
162(m) of the Code on the Corporation's executive
compensation. As such, to assure that our Company does
not lose deductions for compensation paid, the Board of
Directors has adopted the Executive Deferred
Compensation Plan described above, requiring the
executive to defer receipt of any compensation in
excess of $1 million that is not deductible. In 2003,
2002 and 2001, no deferral was required as Mr. Bresky
elected under the Investment Option Plan to reduce his
compensation below $1 million.
The foregoing report has been furnished by the Board
of Directors:
H. Harry Bresky Joe E. Rodrigues David A. Adamsen
Douglas W. Baena Kevin M. Kennedy
COMPANY PERFORMANCE
The Securities and Exchange Commission requires a
five-year comparison of stock performance for our
Company with that of an appropriate broad equity market
index and similar industry index. Our Company's common
stock is traded on the American Stock Exchange, and one
appropriate comparison is with the American Stock
Exchange Market Value Index performance. Because there
is no single industry index to compare stock
performance, the companies comprising the Dow Jones
Food and Marine Transportation Industry indices were
chosen as the second comparison.
The following graph shows a five-year comparison of
cumulative total return for our Company, the American
Stock Exchange Market Value Index and the companies
comprising the Dow Jones Food and Marine Transportation
Industry indices weighted by market capitalization for
the five fiscal years commencing December 31, 1998, and
ending December 31, 2003. The information presented in
the performance graph is historical in nature and is
not intended to represent or guarantee future returns.
12
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
AMONG SEABOARD CORPORATION, THE AMEX MARKET VALUE
(U.S. & FOREIGN) INDEX AND A PEER GROUP
The graph depicts data points below.
* $100 invested on 12/31/98 in stock or index-
including reinvestment of dividends.
The comparison of cumulative total returns presented
in the above graph was plotted using the following
index values and common stock price values:
12/31/98 12/31/99 12/31/00 12/31/01 12/31/02 12/31/03
Seaboard Corporation $100.00 $46.21 $37.32 $73.54 $58.77 $69.36
AMEX Market Value $100.00 $169.96 $141.55 $122.47 $103.02 $144.90
(U.S. & Foreign)
Peer Group $100.00 $80.98 $90.68 $94.23 $93.89 $101.30
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Our Board of Directors has no compensation
committee. Mr. H. Bresky is a member of the Board of
Directors of our Company and participates in decisions
by the Board regarding executive compensation.
13
On February 2, 2000, our Company loaned Mr. Lynch
$400,000 to purchase his primary residence. The
promissory note is payable on demand, bears no interest
and is secured by a mortgage on the home. In
accordance with Internal Revenue Service regulations,
Mr. Lynch's annual compensation includes an amount for
imputed interest, as reported in the Summary
Compensation Table above.
Upon Mr. Rodrigues' retirement as Executive Vice
President and Treasurer in February 2001, our Company
entered into a consulting agreement with Mr. Rodrigues
for various services related to certain of our
Company's foreign investments. During 2003, 2002 and
2001, our Company paid Mr. Rodrigues $-0-, $10,000 and
$82,000, respectively, for consulting fees and
reimbursed him $6,708, $6,935 and $35,479,
respectively, for out-of-pocket expenses. Also, during
2003, 2002 and 2001, our Company paid Mr. Rodrigues
$442,780, $431,992 and $365,532, respectively, under
various retirement plans.
Seaboard Flour LLC maintains a deposit with our
Company to pay for any miscellaneous operating expenses
incurred by our Company on behalf of Seaboard Flour.
The largest amount of on deposit during 2003 was
$39,999 on January 25, 2003. As of December 31, 2003,
our Company owed Seaboard Flour $14,939.
During 2002, our Company consummated a transaction
with its parent company, Seaboard Flour LLC, pursuant
to which our Company effectively repurchased 232,414.85
shares of its common stock owned by Seaboard Flour. As
a part of the transaction, Seaboard Flour transferred
to our Company rights to receive possible future cash
payments from a subsidiary of Seaboard Flour, based
primarily on the future sale of real estate and the
benefit of other assets owned by that subsidiary. The
right to receive such payments expires September 17,
2007. To the extent our Company receives cash payments
in the future as a result of those transferred rights,
our Company has agreed to issue shares of our common
stock to Seaboard Flour, based on a share price equal
to the ten day rolling average closing price of our
shares, determined as of the twentieth day prior to the
issue date. The maximum number of shares of our
Company's common stock that may be issued to Seaboard
Flour under this transaction is capped and cannot
exceed the number of shares which were purchased from
Seaboard Flour. As of December 31, 2003, our Company
had not received any cash payments from the subsidiary
of Seaboard Flour.
14
ITEM 2: SELECTION OF INDEPENDENT AUDITORS
The Audit Committee of our Board of Directors has
selected the independent certified public accounting
firm of KPMG LLP as our Company's independent auditors
to audit the books, records and accounts of our Company
for the year ending December 31, 2004. Stockholders
will have an opportunity to vote at the annual meeting
on whether to ratify the Audit Committee decision in
this regard. Our Company has been advised by KPMG LLP
that neither it nor any member or associate has any
relationship with our Company or with any of its
affiliates other than as independent accountants and
auditors.
Submission of the selection of the independent
auditors to the stockholders for ratification will not
limit the authority of the Audit Committee to appoint
another independent certified public accounting firm to
serve as independent auditors if the present auditors
resign or their engagement otherwise is terminated.
Submission to the stockholders of the selection of
independent auditors is not required by our Company's
bylaws.
A representative of KPMG LLP is expected to be
present at the annual meeting. Such representative
will have an opportunity to make a statement if he or
she desires to do so and will be available to respond
to appropriate questions.
Our Board of Directors recommends that you vote for
approval of the selection of KPMG LLP.
Independent Auditors' Fees
The following table presents fees for professional
audit services rendered by KPMG LLP for the audit of
our Company's annual financial statements for 2003 and
2002, and fees billed for other services rendered by
KPMG LLP during such years.
Type of Fee 2003 2002
Audit Fees (1) $622,124 $498,233
Audit-Related Fees (2) 191,527 51,904
Tax Fees (3) 195,717 284,584
All Other Fees (4) 1,503 5,670
(1)Audit Fees, including those for statutory
audits, include the aggregate fees paid by us during
2003 and 2002 for professional services rendered by
KPMG LLP for the audit of our annual financial
statements and the review of financial statements
included in our quarterly reports on Form 10-Q.
15
(2)Audit Related Fees include the aggregate fees
paid by us during 2003 and 2002 for assurance and
related services by KPMG LLP that are reasonably
related to the performance of the audit or review of
our financial statements and not included in Audit
Fees, including employee benefit plan audits and, in
2003, work related to Section 404 of the
Sarbanes-Oxley Act of 2002.
(3)Tax Fees include the aggregate fees paid by us
during 2003 and 2002 for professional services
rendered by KPMG LLP for tax compliance, tax advice
and tax planning, including IRS audit support and
transfer pricing studies.
(4)All Other Fees represent miscellaneous services
performed in certain foreign countries.
Pre-Approval of Audit and Permissible Non-Audit Services
The Audit Committee has established a policy to pre-
approve all audit and permissible non-audit services.
Prior to the engagement of the independent auditor, the
Audit Committee pre-approves the services by category
of service. Fees are estimated and the Audit Committee
requires the independent auditor and management to
report actual fees as compared to budgeted fees by
category of service. The Audit Committee has delegated
pre-approval authority to the Audit Committee chairman
for engagements of less than $25,000. For
informational purposes only, any pre-approval decisions
made by the Audit Committee chairman are reported at
the Audit Committee's next scheduled meeting. The
percentage of audit-related fees, tax fees and all
other fees that were approved by the Audit Committee
for fiscal 2003 is 99.6 percent of the total fees
incurred.
Audit Committee Report to Stockholders
The Audit Committee of our Company is comprised of
three directors who are "independent," as defined by
the American Stock Exchange, and operates under a
written charter. In February 2004, the Audit Committee
and the Board approved a new Audit Committee charter,
which is attached hereto as Appendix A.
The Audit Committee has reviewed the audited
financial statements for fiscal year 2003 and discussed
them with management and with the independent auditors,
KPMG LLP. The Audit Committee also discussed with KPMG
LLP the matters required to be discussed by Statement
on Auditing Standards No. 61, "Communication with Audit
Committees," as amended.
The Audit Committee has received the written
disclosures and the letter from the independent
auditors required by Independence Standards Board
Standard No. 1, "Independence Discussions with Audit
Committees," as amended, and have discussed with the
independent auditors their independence. The Audit
Committee has concluded that the independent auditors
currently meet applicable independence standards.
The Audit Committee has reviewed the independent
auditors' fees for audit and non-audit services for
fiscal year 2003. The Audit Committee considered
whether such non-audit services are compatible with
maintaining independent auditor independence and has
concluded that they are compatible at this time.
16
Based on its review of the audited financial
statements and the various discussions referred to
above, the Audit Committee recommended to the Board of
Directors that the audited financial statements be
included in our Company's Annual Report on Form 10-K
for the year ended December 31, 2003.
The foregoing has been furnished by the Audit
Committee:
David A. Adamsen (chair) Douglas W. Baena Kevin M. Kennedy
ITEM 3: STOCKHOLDER PROPOSAL FOR INDEPENDENT DIRECTOR
TO SERVE AS CHAIR OF THE BOARD
Stockholder Proposal
Sierra Club, 311 California Street, Suite 510, San
Francisco, California 94104, which owns 19 shares of
our Company's common stock, proposes the adoption of
the following resolution, and has furnished the
following statement in support of its proposal:
RESOLVED, that the shareholders of Seaboard
Corporation urge the Board to take the
necessary steps to require that an independent
director who is not nor was formerly the chief
executive of the Company serve as Chair of the
Board.
Supporting Statement: The Board's ability to
scrutinize management plans may be reduced when the
Board Chair is also the chief architect of the
management plan in his or her capacity as chief
executive officer. By requiring that the Chair be an
independent Director, the Board may be able to bring to
bear more critical review of basic management plans.
We at the Sierra Club believe such critical review is
especially important at Seaboard Corporation because of
its exposure to environmental and public health
liability.
Shareholders are concerned that our Company raises
hogs, using practices that typically involve routinely
feeding antibiotics to healthy animals. There is
growing concern in the scientific and medical community
about the increasing resistance of bacteria to
antibiotics that are medically important for humans.
The Union of Concerned Scientists estimates that
70 percent of antibiotics in the U.S. are fed to
healthy livestock to promote growth and to compensate
for unsanitary conditions. Some antibiotics used in
meat production are also used in human medicine.
(Clinical Infectious Diseases, June 1, 2002).
We believe that consumers are becoming increasingly
alarmed by widespread industry use of antibiotics. A
nationwide survey by Synovate in spring 2003 showed
that 74 percent of those polled - regardless of age,
education, income level and region - are concerned
about the presence of antibiotics in meat production.
http://www.organicconsumers.org/foodsafety/beef052903.c
fm.
17
We believe that such consumer pressure has reached
the management of our Company's competitors. According
to PBS Frontline, Tyson Foods, Perdue Farms and
Foster Farms recently declared their intention to
greatly reduce the amount of antibiotics fed to healthy
chickens. http://www.pbs.org/wgbh/pages/frontline/shows
/meat/safe. Whereas, "Fast food giant McDonalds has
banned some U.S. meat suppliers from feeding livestock
antibiotic growth promoters, following concerns about
the drugs' impact on human health," and we believe
that our Company may be indirectly affected by
that well-publicized development regarding antibiotic
use in the meat industry, we believe that an
independent director is better positioned to
evaluate risks associated with environmental liability.
http://www.theage.com.au/articles/2003/06/19/
1055828440561.html.
The Company incurs risk if its products are
determined to be contaminated or cause illness or
injury. This risk includes (i) cost of, and negative
consumer reaction associated with, adverse publicity
and product recalls; (ii) exposure to related civil
litigation; and (iii) regulatory administrative
penalties, which can include injunctive relief and
other civil remedies, including plant closings.
We believe that these environmental liabilities
count as some of the more conspicuous, difficult
challenges the Board must oversee. We think that such
a Board should be led by someone distinctly independent
of any plan and implementation to address these
challenges.
Numerous scholars have called for greater
distinction between directors and management.
For these reasons, we urge you to vote FOR this
proposal.
Company Response To Stockholder Proposal
It is the Company's belief that the Board's ability
to scrutinize management plans is not reduced by the
fact that the Chair of the Board is not an independent
director. This is especially the case with respect to
our Company, where Mr. H. Harry Bresky, our Chairman of
the Board, is such a large stockholder.
It is our Company's belief that the use of
anti-microbials, when used judiciously, are a valuable
practice to maintain a healthy herd. Our Company's use
of antibiotics is under the direction of two full-time
staff veterinarians and numerous outside consulting
veterinarians. By strictly following label directions
regarding withdrawal periods, and increasing those
withdrawal periods in many cases, no detectable
antibiotic residue is present in any of our Company's
pork products. In fact, our Company guarantees, in its
marketing of pork, that its products contain no
antibiotic residues.
The pork industry, along with all of animal
agriculture, continues to study the use of
anti-microbials in animal agriculture and any possible
cause/effect relation with drug resistant bacteria.
Our Company supports the Federal Interagency Public
Health Action Plan, the development of species-specific
judicious-use guidelines by the American Veterinary
Medical Association, the National Pork Board's Pork
Quality Assurance Program and the National Pork
Producer Council's Anti-Microbial Working Group.
18
In the past, the Sierra Club stated that by removing
antibiotics from the diets of pigs, our Company will
attract the loyalty of health-conscious consumers by
producing and sourcing livestock without the
non-therapeutic use of antibiotics. Our Company
believes that it has earned the loyalty of
health-conscious consumers by exercising care in the
utilization of antibiotics and by guaranteeing that no
antibiotic residues remain in its pork products.
Seaboard's Board of Directors believes it would be
at a competitive disadvantage if it changed its
practices with respect to the use of antibiotics
because of increased death losses and associated herd
health problems.
For the foregoing reasons, your Board of Directors
recommends a vote AGAINST the adoption of this
stockholder proposal.
OTHER MATTERS
The notice of meeting provides for the election of
Directors, the selection of independent auditors and
for the transaction of such other business, including
consideration of a stockholder proposal, as may
properly come before the meeting. As of the date of
this proxy statement, our Board of Directors does not
intend to present to the meeting any other business,
and, except for the stockholder's proposal, it has not
been informed of any business intended to be presented
by others. However, if any other matters properly come
before the meeting, the persons named in the enclosed
proxy will take action and vote proxies, in accordance
with their judgment of such matters.
Action may be taken on the business to be transacted
at the meeting on the date specified in the notice of
meeting or on any date or dates to which such meeting
may be adjourned.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely on a review of the copies of reports
furnished to our Company and written representations
that no other reports were required, our Company
believes that during fiscal 2003 all reports of
ownership required under Section 16(a) of the
Securities Exchange Act of 1934 for Directors and
executive officers of our Company and beneficial owners
of more than 10 percent of our Company's common stock
have been timely filed, except that Kevin Kennedy was
late in filing a Form 4, reporting his purchase of
15 shares in November 2003.
19
STOCKHOLDER PROPOSALS
It is anticipated that the 2005 annual meeting of
stockholders will be held on April 25, 2005. Any
stockholder who intends to present a proposal at the
2005 annual meeting must deliver the proposal to our
Company at 9000 West 67th Street, Shawnee Mission,
Kansas 66202, Attention: David M. Becker by the
applicable deadline below:
If the stockholder proposal is intended for
inclusion in our Company's proxy materials for that
meeting, our Company must receive the proposal no event
later than November 12, 2004. Such proposal must also
comply with the other requirements of the proxy
solicitation rules of the Securities and Exchange
Commission.
If the stockholder proposal is to be presented
without inclusion in our Company's proxy materials for
that meeting, our Company must receive the proposal no
event later than January 26, 2005.
Proxies solicited in connection with the 2005 annual
meeting of stockholders will confer on the appointed
proxies discretionary voting authority to vote on
stockholder proposals that are not presented for
inclusion in the proxy materials unless the proposing
stockholder notifies our Company by January 26, 2005
that such proposal will be made at the meeting.
Our Board of Directors does not provide a process
for stockholders to send communications to the Board
because it believes that the process available under
applicable federal securities laws for stockholders to
submit proposals for consideration at the annual
meeting is adequate.
FINANCIAL STATEMENTS
The consolidated financial statements of our Company
for the fiscal year ended December 31, 2003, together
with corresponding consolidated financial statements
for the fiscal year ended December 31, 2002, are
contained in the Annual Report which is mailed to
stockholders with this proxy statement. The Annual
Report is not to be regarded as proxy solicitation
material.
ADDITIONAL INFORMATION
Any stockholder desiring additional information
about our Company and its operations may, upon written
request, obtain a copy of our Company's Annual Report
to the Securities and Exchange Commission on Form 10-K
without charge. Requests should be directed to
Shareholder Relations, Seaboard Corporation, 9000 West
67th Street, Shawnee Mission, Kansas 66202. Our
Company's Annual Report to the Securities and Exchange
Commission on Form 10-K is also available on our
Company's Internet website at www.seaboardcorp.com.
20
HOUSEHOLDING OF PROXY MATERIALS
The Securities and Exchange Commission has adopted
rules that permit companies and intermediaries
(including brokers) to satisfy the delivery
requirements for proxy statements and annual reports
with respect to two or more stockholders sharing the
same address by delivering a single proxy statement
addressed to those stockholders. This process, which
is commonly referred to as "householding," potentially
means extra convenience for stockholders and cost
savings for companies.
This year, a number of brokers with account holders
who are stockholders of our Company may be
"householding" our proxy materials. A single proxy
statement may be delivered to multiple stockholders
sharing an address unless contrary instructions have
been received from the affected stockholders. Once you
have received notice from your broker that it will be
"householding" communications to your address,
"householding" will continue until you are notified
otherwise or until you notify your broker or us that
you no longer wish to participate in "householding."
If, at any time, you no longer wish to participate in
"householding" and would prefer to receive a separate
proxy statement and annual report in the future you may
(1) notify your broker, (2) direct your written request
to: Shareholder Relations, Seaboard Corporation, 9000
West 67th Street, Shawnee Mission, Kansas 66202, or
(3) contact Shareholder Relations at (913) 676-8800.
Stockholders who currently receive multiple copies of
the proxy statement at their address and would like to
request "householding" of their communications should
contact their broker. In addition, we will promptly
deliver, upon written or oral request to the address or
telephone number above, a separate copy of the annual
report and proxy statement to a stockholder at a shared
address to which a single copy of the documents was
delivered.
21
APPENDIX A
Seaboard Corporation
Charter of the Audit Committee of the Board of
Directors
I. Audit Committee Purpose
The Audit Committee is appointed by the Board of
Directors to assist the Board in fulfilling its
oversight responsibilities. The Audit Committee's
primary duties and responsibilities are to:
Monitor the integrity of the Company's financial
reporting process and systems of internal controls
regarding finance, accounting, and legal compliance.
Be responsible for the appointment, compensation,
retention and oversight of the Company's auditors,
including resolution of disagreements between
management and the auditors regarding financial
reporting.
Monitor the independence and performance of the
Company's independent auditors and internal auditing
department.
Provide an avenue of communication among the
independent auditors, management, the internal auditing
department, and the Board of Directors.
The Audit Committee has the authority to conduct
any investigation appropriate to fulfilling its
responsibilities, and it has direct access to the
independent auditors as well as anyone in the
organization. The Audit Committee has the ability
to retain, at the Company's expense, special
legal, accounting or other consultants or experts
it deems necessary in the performance of its
duties.
II. Audit Committee Composition and Meetings
Audit Committee members shall meet the
requirements of the American Stock Exchange. The
Audit Committee shall be comprised of three or
more directors as determined by the Board, each of
whom shall be an independent director, free from
any relationship that would interfere with the
exercise of his or her independent judgment. All
members of the Committee shall be able to read and
understand fundamental financial statements
including a company's balance sheet, income
statement and cash flow statement, and at least
one member of the Committee shall be financially
sophisticated, in that he or she has past
employment experience in finance or accounting,
requisite professional certification in
accounting, or any other comparable experience or
background which results in the individual's
financial sophistication, including but not
limited to being or having been a chief executive
officer, chief financial officer, other senior
officer with financial oversight responsibilities.
A-1
APPENDIX A
Audit Committee members shall be appointed by the
Board. If an audit committee Chair is not
designated or present, the members of the
Committee may designate a Chair by majority vote
of the Committee membership.
The Committee shall meet at least four times
annually, either in person or telephonically, or
more frequently as circumstances dictate. The
Audit Committee Chair shall prepare and/or approve
an agenda in advance of each meeting. The
Committee should meet privately in executive
session at least annually with management, the
director of the internal auditing department, the
independent auditors, and as a committee to
discuss any matters that the Committee or each of
these groups believe should be discussed. In
addition, the Committee, should communicate with
management and the independent auditors quarterly
to review the Company's financial statements and
significant findings based upon the auditors
limited review procedures.
III. Audit Committee Responsibilities and Duties
Review Procedures
1. Review and reassess the adequacy of the Charter at
least annually. Submit the charter to the Board of
Directors for approval and have the document published
at least every three years in accordance with SEC
regulations.
2. Review the Company's annual audited financial
statements prior to filing or distribution. Review
should include discussion with management and
independent auditors of significant issues regarding
accounting principles, practices, and judgments.
3. In consultation with the management, the
independent auditors, and the internal auditors,
consider the integrity of the Company's financial
reporting processes and controls. Discuss significant
financial risk exposures and the steps management has
taken to monitor, control, and report such exposures.
Review significant findings prepared by the independent
auditors and the internal auditing department together
with management's responses.
4. Review with financial management and the
independent auditors the Company's quarterly financial
statements prior to filing or distribution. Discuss
any significant changes to the Company's accounting
principles and any items required to be communicated by
the independent auditors recommended in accordance with
SAS 61 (see item 9).
Independent Auditors
5. The independent auditors are ultimately
accountable to the Audit Committee and the Board of
Directors. The Audit Committee shall review the
independence and performance of the auditors and
annually recommend to the Board of Directors the
appointment of the independent auditors or recommend or
approve any discharge of auditors when circumstances
warrant.
A-2
APPENDIX A
6. Approve the audit engagement letter, pre-approve
all fees and other significant compensation to be paid
to the independent auditors in accordance with the
Audit Committee Policy.
7. On an annual basis, the Committee should review
and discuss with the independent auditors all
significant relationships they have with the Company
that could impair the auditors' independence. The
Independent Auditors shall be required to furnish the
Audit Committee, each year, with a written report of
all its relationships with the Company.
8. On an annual basis, the Committee will review and
approve the independent auditors audit plan discuss
scope, staffing, locations, reliance upon management,
and internal audit and general audit approach.
9. Prior to releasing the year-end earnings, discuss
the results of the audit with the independent auditors.
Discuss certain matters required to be communicated to
audit committees in accordance with AICPA SAS 61.
10. Consider the independent auditors' judgments about
the quality and appropriateness of the Company's
accounting principles as applied in its financial
reporting. Discuss certain matters required to be
communicated to the audit committee regarding the
critical accounting policies with management and the
independent auditors. Discuss all material alternative
accounting treatments of financial information within
generally accepted accounting principles that have been
discussed with management by the independent auditors,
including the ramifications of the use of such
alternative treatments and disclosures and the
treatment preferred by the independent auditors.
Internal Audit Department
11. Review and approve the plan, changes in plan,
activities, organizational structure, and
qualifications of the internal audit department, as
needed.
12. Review and approve the appointment, performance,
and replacement of the senior internal audit executive.
13. Review significant reports prepared by the
internal audit department together with management's
response and follow-up to these reports.
Other Audit Committee Responsibilities
14. On at least an annual basis, review with the
Company's counsel, any legal matters that could have a
significant impact on the organization's financial
statements, the Company's compliance with applicable
laws and regulations, and inquiries received from
regulators or governmental agencies.
A-3
APPENDIX A
15. The Committee shall establish procedures for the
receipt, retention and treatment of complaints received
by the Company regarding accounting, internal
accounting controls or auditing matters, including
confidential, anonymous submissions by employees
regarding questionable accounting or auditing matters.
16. Annually prepare a report to shareholders as
required by the Securities and Exchange Commission.
The report should be included in the Company's annual
proxy statement.
17. Perform any other activities consistent with this
Charter, the Company's by-laws, and governing law, as
the Committee or the Board deems necessary or
appropriate.
18. Maintain minutes of meetings and periodically
report to the Board of Directors on significant results
of the foregoing activities.
A-4