Exhibit 10.6
 
EXECUTION VERSION

CATTLE PURCHASE AND SALE AGREEMENT
BETWEEN
NATIONAL BEEF PACKING COMPANY, LLC
AND
U.S. PREMIUM BEEF, LLC

THIS CATTLE PURCHASE AND SALE AGREEMENT (this “Agreement”) is entered into as of
the 30th day of December, 2011, by and between NATIONAL BEEF PACKING COMPANY,
LLC, a Delaware limited liability company (“National Beef”), and U.S. PREMIUM
BEEF, LLC, a Delaware limited liability company (“USPB”).  National Beef and
USPB are each referred to individually as a “Party” and collectively as the
“Parties.”

Recitals

    A.    USPB members are engaged in the production and marketing of cattle;

    B.    National Beef is engaged in the business of purchasing and processing
cattle and marketing beef and related products; and

    C.    National Beef desires to purchase cattle from USPB members, and USPB
members desire to sell and deliver cattle to National Beef, on the terms and
conditions in this Agreement.

    D.    USPB holds a membership interest in National Beef.  Pursuant to a
Pledge and Security Agreement dated as of the date hereof between USPB and
National Beef (the “Pledge Agreement”), USPB has granted to National Beef a
perfected security interest in all of USPB’s membership interests in National
Beef in order to support its obligations under this Agreement.

    NOW, THEREFORE, in consideration of the mutual agreements contained in this
Agreement, the Parties hereto agree as follows:

    1.   Purchase/Sale of Cattle.

       (a)    Purchase through USPB.  Subject to the terms and conditions in
this Agreement and during the term of this Agreement, National Beef shall
purchase through USPB from its members, and USPB shall cause to be sold and
delivered from its members to National Beef, on an annual basis, a base amount
of 735,385 (plus or minus ten percent (10%)) head of cattle per year.

       (b)    Additional Cattle Delivery Rights.  National Beef agrees to
discuss terms and conditions for USPB to increase cattle delivery rights through
cattle producers who would deliver to National Beef processing (slaughter)
facilities, at current and future locations.  If National Beef acquires or
develops new processing (slaughter) facilities, then USPB shall have a first
right to provide cattle to those facilities at the same proportion as provided
to the existing facilities as of the effective date of this Agreement.

 
 

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       (c)    Scheduling.  Delivery schedules shall be determined by National
Beef on a reasonable basis, consistent with all other provisions of this
Agreement, taking into account operational practicalities.  Delivery will be to
National Beef’s beef processing facilities located in the United States in the
traditional areas where USPB members have or are delivering cattle to National
Beef processing facilities.  Upon receipt of a request by National Beef, USPB
will forecast USPB’s anticipated deliveries thirty (30) days in advance of any
scheduled deliveries to National Beef.

    2.   Purchase Price of Cattle.

       (a)    Grid Pricing Criteria.  The purchase price for cattle purchased by
National Beef under this Agreement shall be an amount determined pursuant to
National Beef’s pricing grid for cattle to be delivered through USPB by USPB
members, as the pricing grid may be modified or supplemented from time to time
through mutual agreement by National Beef and USPB; provided, however, that the
pricing grid shall at all times be no less favorable than any other pricing grid
being utilized by National Beef; and provided, further, however, that the
pricing grid shall be competitive with National Beef’s major competitors for the
purchase of cattle. “Competitive with National Beef’s major competitors” means
the pricing grid is competitive with the best pricing grids offered by any two
or more competitors.  For purposes of the pricing grid, National Beef shall
grade beef derived from cattle purchased under this Agreement in accordance with
standard industry practice.  An example of grid pricing is given on Exhibit A.

       (b)    Carcass Data.  National Beef shall provide USPB carcass data on
all cattle delivered by USPB members to National Beef in a manner similar to the
customary information provided by National Beef to USPB, an example of which is
in Exhibit B, or as otherwise agreed to by the Parties.

    3.   Payment of Purchase Price.  Cattle purchased under this Agreement from
USPB members shall be paid for by National Beef on a finish and grade basis
consistent with standard industry practice, or on any other basis that is
consistent with any other standard industry practice utilized by National Beef
with respect to cattle purchased from third parties, and shall in any event be
in accordance with applicable law.

    4.   Cattle Quality.  For purposes of this Agreement, USPB agrees that USPB
members will not deliver to National Beef any cattle that have been condemned by
the United States Department of Agriculture or any other applicable regulatory
authority.

    5.   Permits.  USPB members shall provide National Beef with all permits
necessary to qualify cattle for interstate shipment, if applicable, in the same
manner as required for other cattle purchased by National Beef.  Each Party
otherwise covenants with the other Party to perform the Party’s obligations
under this Agreement in accordance with all applicable laws.

    6.   Weighing and Transportation.  All cattle purchased by National Beef
from USPB under this Agreement shall be weighed and transported according to
standard industry

 
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practice and on the same basis as other cattle purchased by National Beef (or as
otherwise mutually determined by the Parties through the pricing grid
determination process).

    7.   Term of Agreement.  The term of this Agreement shall commence on the
date first written above and shall continue for an initial term of five years
(such period, as it may be extended pursuant to the terms of this Agreement,
referred to herein as the “Term”).  Unless either Party gives written notice to
the other Party that it does not want to extend the Term at least sixty (60)
days prior to each one year anniversary of the date of this Agreement, then, on
each such anniversary, the Term shall be extended by one (1) year.  If such
written notice is given, this Agreement will continue until the expiration of
the Term, subject to the following:

       (1)    if there is a material breach of any agreement or covenant of USPB
contained in this Agreement, National Beef may give written notice of the breach
to USPB and, if the breach is not cured within a period of thirty (30) days
following the notice of breach by National Beef to USPB (“USPB’s Cure Period”),
National Beef shall have the right to terminate this Agreement upon written
notice to USPB within thirty (30) days following the expiration of USPB’s Cure
Period, provided, however, if the breach is related to a shortage in the number
of cattle delivered by USPB and its members to National Beef in a given year,
then USPB shall have the right to make up delivery shortages by increasing
cattle deliveries on a prorated basis equal to 10% of the annual deliveries per
month until the shortage in deliveries is made up.  The effective date of any
such termination under this Section 7(1) shall be six (6) months following the
date of delivery of the notice of termination by National Beef to USPB, and
during such six (6) month period USPB and National Beef shall continue to
perform their respective obligations under this Agreement; provided, however,
USPB may terminate the Agreement prior to such six (6) month period upon written
notice to National Beef if National Beef fails to comply with the terms of and
conditions of this Agreement including to pay for cattle as required (subject to
a five (5) business day cure period or any shorter period required by federal
law);
 
       (2)    if there is a material breach of any agreement or covenant of
National Beef contained in this Agreement, USPB may give written notice of the
breach to National Beef and, if the breach is not cured within a period of
thirty (30) days (or, if the breach is a failure of National Beef to make a
payment to USPB or USPB members, five (5) business days) following the notice of
breach by USPB to National Beef (“National Beef Cure Period”), USPB shall have
the right to terminate this Agreement upon written notice to National Beef
within thirty (30) days following the expiration of the National Beef Cure
Period.  The effective date of any such termination under this Section 7(2)
shall be six (6) months following the date of delivery of the notice of
termination by USPB to National Beef, and during such six (6) month period USPB
and National Beef shall continue to perform their respective obligations under
this Agreement; provided, however, USPB may terminate the Agreement prior to
such six (6) month period upon written notice to National Beef if National Beef
fails to comply with the terms and conditions of this Agreement including to pay
for cattle as required (subject to a five (5) business day cure period or any
shorter period required by federal law);

       (3)    if (i) at any time USPB owns less than twenty percent (20%) of
USPB’s Aggregate Units (as defined in the National Beef Packing Company, LLC
First Amended and Restated Limited Liability Company Agreement dated as of
December 30, 2011, as amended, modified, supplemented, extended or restated from
time to time) or (ii) at any time after the

 
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Effective Date (as defined in the National Beef Pennsylvania, LLC Amended and
Restated Limited Liability Company Agreement dated as of December 30, 2011, as
amended, modified, supplemented, extended or restated from time to time (the
“Pennsylvania LLC Agreement”)), USPB owns less than twenty percent (20%) of
USPB’s Aggregate Units (as defined in the Pennsylvania LLC Agreement), then
National Beef shall have the right to terminate this Agreement upon written
notice to USPB.  The effective date of any such termination under this Section
7(3) shall be six (6) months following the date of delivery of the notice of
termination by National Beef to USPB, and during such six (6) month period USPB
and National Beef shall continue to perform their respective obligations under
this Agreement; provided, however, USPB may terminate the Agreement prior to
such six (6) month period upon written notice to National Beef if National Beef
fails to comply with the terms and conditions of this Agreement including to pay
for cattle as required (subject to a five (5) business day cure period or any
shorter period required by federal law);

       (4)    for a period of six (6) months following any termination of this
Agreement due to the expiration of the Term, National Beef and USPB shall
continue to perform their respective obligations under this Agreement as if this
Agreement was still in effect; provided, however, USPB may terminate the
Agreement prior to such six (6) month period upon written notice to National
Beef if National Beef fails to comply with the terms and conditions of this
Agreement including to pay for cattle as required (subject to a five (5)
business day cure period or any shorter period required by federal law); and

       (5)    notwithstanding the foregoing clauses (1), (2), (3) and (4), the
obligation to purchase and pay for cattle and the obligation to deliver cattle
under this Section 7, and rights of either Party to collect applicable damages
and to exercise its remedies for failure to purchase and deliver cattle as
provided under this Agreement all of which shall be subject to reasonable
written notice to the other party if not specified in this Agreement (including,
in the case of National Beef, National Beef’s exercise of its rights under the
Pledge Agreement), shall survive any notice of termination or termination of
this Agreement.

    8.   Warranties.  USPB MAKES NO WARRANTIES EITHER EXPRESS OR IMPLIED TO
NATIONAL BEEF OTHER THAN AS EXPRESSLY PROVIDED IN THIS AGREEMENT AND, EXCEPT AS
EXPRESSLY PROVIDED IN THIS AGREEMENT, SPECIFICALLY MAKES NO WARRANTY AS TO ANY
SPECIFIC GRADE OF BEEF TO BE DERIVED FROM ANY CATTLE SOLD UNDER THIS AGREEMENT,
AND DISCLAIMS ANY WARRANTIES OF MERCHANTABILITY OR OF FITNESS FOR A PARTICULAR
PURPOSE.

    9.   Dispute Resolution.  Any and all disputes related to Section 2(a) which
cannot be settled amicably, including any ancillary claims of any Party, arising
out of, relating to or in connection with the interpretation, performance or
non-performance of Section 2(a) of this Agreement (each a “Dispute”) shall be
finally settled by arbitration conducted by a single arbitrator in Missouri in
accordance with the then-existing American Arbitration Association Rules and
Procedures for commercial arbitration.  If the Parties to the Dispute fail to
agree on the selection of an arbitrator within ten (10) days of the receipt of
the request for arbitration, the American Arbitration Association shall make the
appointment.  The arbitrator shall be a lawyer

 
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admitted to the practice of law in the State of Missouri and shall conduct the
proceedings in the English language.  Performance under Section 2(a) of this
Agreement shall continue if reasonably possible during any arbitration
proceedings.

    10.   Remedies. If either Party is in default under this Agreement, the
other Party may exercise any and all rights and remedies available to the Party
under this Agreement, under any applicable Uniform Commercial Code, or otherwise
at law or in equity (including, in the case of National Beef, National Beef’s
exercise of its rights under the Pledge Agreement).  Notwithstanding other
provisions of this Section, if a force majeure event occurs precluding National
Beef from receiving and/or processing cattle, National Beef must still purchase
cattle from USPB and its members as provided under this Agreement.  Cattle
available for delivery from USPB and its members to a plant during a force
majeure event are defined as “Force Majeure Cattle.”  Notwithstanding the
foregoing National Beef shall have no obligation to purchase Force Majeure
Cattle unless the logistics and financial components of purchasing the Force
Majeure Cattle (such as delivery to another plant within a reasonable distance
to the plant affected by the force majeure event) would be substantially the
same to National Beef as they would have been without the occurrence of the
force majeure event.  National Beef shall notify USPB in writing if National
Beef will not purchase Force Majeure Cattle and take delivery at a plant with a
force majeure event and must offer to purchase the Force Majeure Cattle with
pricing adjustments to compensate National Beef for the actual additional costs
to purchase the Force Majeure Cattle over the purchase of the Force Majeure
Cattle if the force majeure event had not occurred.

    11.   Notices.  All notices and other communications under this Agreement
shall be in writing and shall be deemed to have been duly delivered (i) upon
delivery by hand, (ii) upon delivery by fax or electronic transmission, provided
written confirmation of such delivery is received, (ii) five (5) days after
being mailed by certified mail with postage paid and return receipt requested or
(iii) one (1) day after being mailed by overnight courier to the Parties at the
following addresses and fax numbers (or at another address or fax number for a
Party as the Party shall designate in a notice given pursuant to this Section):
 
       (a)    If to National Beef, to:
 
          Chief Executive Officer
          National Beef Packing Company, LLC
          12200 Ambassador Drive, 5th Floor
          Kansas City, MO  64163

          With a copy to:

          General Counsel
          National Beef Packing Company, LLC
          12200 Ambassador Drive, 5th Floor
          Kansas City, MO  64163
          Fax: (816) 713-8889

 
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          and (which shall not be considered notice):
 
Leucadia National Corporation
Attn:  Justin R. Wheeler
315 Park Avenue South
New York, New York 10010
Fax: (212) 598-3245
Email:  jwheeler@leucadia-slc.com
 
             and
 
Weil, Gotshal & Manges LLP
Attn:  Andrea A. Bernstein
Matthew J. Gilroy
767 Fifth Avenue
New York, New York 10153
Fax:  212-310-8007
Email: andrea.bernstein@weil.com
matthew.gilroy@weil.com
 
          (b)    If to USPB, to:
 
Steven D. Hunt, CEO
U.S. Premium Beef, LLC
P.O. Box 20103
Kansas City, MO  64195
Fax:  (816) 713-8810
Email:  sdhunt@uspb.com
 
with a copy to:
 
Stoel Rives LLP
Attn:  Mark J. Hanson
33 South Sixth Street, Suite 4200
Minneapolis, MN 55402
Fax:  (612) 373-8881
Email:  mjhanson@stoel.com

    12.   Entire Agreement; Amendment; Survival.  This Agreement contains all of
the terms agreed upon by the Parties with respect to the subject matter of this
Agreement and supersedes all prior agreements of the Parties or their
predecessors in interest as to the subject matter of this Agreement.  This
Agreement may not be modified except in writing, signed by the Parties hereto,
that specifically references this Agreement.  Sections 9, 11, 12, 13 and 14
shall survive the expiration or termination of this Agreement.

    13.   Assignment. This Agreement may not be assigned by any Party without
prior written consent of the other Party.  This Agreement shall be binding upon,
and inure to the

 
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benefit of, the Parties and their respective heirs, legal representatives,
successors, and permitted assigns. Notwithstanding the foregoing, National Beef
may assign this Agreement to any wholly owned subsidiary or affiliate without
any prior written consent.

    14.   Governing Law; Construction.  This Agreement, other than Section 2(a)
which is subject to the dispute resolution provisions in Section 9 of this
Agreement, shall be governed by, and construed in accordance with, the laws of
the State of Kansas, and shall be settled exclusively in the state or federal
courts located in the State of Kansas, according to the rules of jurisdiction
and procedure applicable to those courts.  Except for matters relating to
Section 2(a), each Party consents exclusively to subject matter and jurisdiction
and venue in the federal and state courts of the State of Kansas. The Parties
agree that if any part, term or provision of this Agreement is held by a court
of competent jurisdiction to be illegal or unenforceable or in conflict with any
controlling state law, the validity of the remaining parts, terms and provisions
of this Agreement shall not be affected, and the rights and obligations of the
Parties shall be construed and enforced as if this Agreement did not contain the
particular part, term or provision held to be illegal or unenforceable or in
conflict with any controlling state law.

[Signature page follows]

 
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IN WITNESS WHEREOF, the undersigned have executed this Agreement on the day and
year first above written.

 

 
NATIONAL BEEF PACKING COMPANY, LLC
     
By: /s/ Timothy M. Klein
 
Name: Timothy M. Klein
 
Title: Cheif Executive Officer, President and Manager

 
U.S. PREMIUM BEEF, LLC
     
By: /s/ Steven D. Hunt
 
Name: Steven D. Hunt
 
Title: Chief Executive Officer

 
 

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EXHIBIT A
Grid Pricing Example

10.6 page 9 [jg12-30_ex106p9.jpg]
 
 
Exhibit A-1
 

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10.6 page 10 [jg12-30_ex106p10.jpg]
Exhibit A-2
 

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EXHIBIT B
Carcass Data Example

10.6 page 11 [jg12-30_ex106p11.jpg]
 
Exhibit B-1
 

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10.6 page 12 [jg12-30_ex106p12.jpg]
Exhibit B-2