Exhibit 10.3

 

EXECUTION VERSION

 

PLEDGE AGREEMENT

 

THIS PLEDGE AGREEMENT, dated as of December 30, 2011, is entered into 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 (the “Pledgor”).

 

RECITALS:

 

WHEREAS, Leucadia National Corporation (“Leucadia”), National Beef, Pledgor and
the other Sellers named therein and TMK Holdings, LLC have entered into a
Membership Interest Purchase Agreement dated as of December 5, 2011 (the
“Purchase Agreement”), pursuant to which Leucadia will, among other things,
purchase a portion of Pledgor’s (and the other Sellers’) respective membership
interests in National Beef;

 

WHEREAS, Pledgor and National Beef are parties to that certain Cattle Purchase
and Sale Agreement dated December 30, 2011 (as such agreement may be amended,
modified, supplemented, extended, or restated from time to time, the “Cattle
Agreement”); and

 

WHEREAS, as an inducement to National Beef to enter into the Cattle Agreement
and as security for its obligations thereunder, Pledgor desires to grant to
National Beef a perfected security interest in and to the Collateral (as defined
herein), subject only to the prior first priority security interest held on the
date hereof by CoBank, ACB, a federally chartered instrumentality of the United
States (“CoBank”), pursuant to the terms of (a) the Pledge Agreement, dated as
of July 26, 2011, by and between Pledgor and CoBank (as such agreement is in
effect on the date hereof (including giving effect to the Consent and First
Amendment to Pledge Agreement dated as of the date hereof (the “Consent and
First Amendment”)), subject to any amendment, modification, supplement,
extension or restatement as permitted by Section 3(b)(vi) hereof or unless
otherwise consented to in writing by National Beef, the “CoBank Pledge
Agreement”), entered into pursuant to the CoBank Loan Agreement (as defined
herein) and (b) the Security Agreement, dated as of July 26, 2011, by and
between Pledgor and CoBank (as such agreement is in effect on the date hereof
(including giving effect to the Consent and First Amendment), subject to any
amendment, modification, supplement, extension or restatement as permitted by
Section 3(b)(vi) hereof or unless otherwise consented to in writing by National
Beef, the “CoBank Security Agreement”; together with the CoBank Pledge
Agreement, the “CoBank Security Documents”), entered into pursuant to the CoBank
Loan Agreement (as defined herein).

 

NOW THEREFORE, for and in consideration of entering into the Cattle Agreement
and to secure the obligations of Pledgor to pay damages to National Beef
thereunder, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:

 

1.                                      Definitions and Interpretation of
Agreement. In addition to the terms defined elsewhere in this Agreement, the
following terms shall have the meanings indicated for

 

--------------------------------------------------------------------------------

 

purposes of this Agreement (such meanings to be equally applicable to both the
singular and plural forms of the terms defined).

 

“Agreement” means this Pledge Agreement, as it may be amended, modified,
supplemented, extended or restated from time to time.

 

“CoBank Loan Agreement” means, collectively, that certain Master Loan Agreement
No. RI0992, dated July 26, 2011 (the “MLA”) and that certain Supplement
No. RI0992T01 to the MLA, dated July 26, 2011, in each case, between Pledgor and
CoBank, as each such agreement is in effect on the date hereof subject to any
amendment, modification, supplement, extension or restatement as permitted by
Section 3(b)(vi) hereof or as otherwise consented to in writing by National
Beef.

 

“CoBank Loan Documents” means, collectively, the CoBank Loan Agreement and the
CoBank Security Documents, and the other agreements or documents between Pledgor
and CoBank entered into in connection with, or related to, each of the foregoing
(in each case, as each such agreement is in effect on the date hereof subject to
any amendment, modification, supplement, extension or restatement as permitted
by Section 3(b)(vi) hereof or as otherwise consented to in writing by National
Beef).

 

“Collateral” means the Membership Interests and, upon and during the continuance
of a Default, all proceeds received by the Pledgor in respect of a transfer of
or in exchange for such Membership Interests.

 

“Default” means the occurrence of any of the following:

 

(a)           an “Event of Default” as defined in the CoBank Loan Documents;

 

(b)           any representation or warranty made by Pledgor contained in this
Agreement shall have been false or misleading in any material respect on or as
of the date made or deemed made and, if susceptible to remedy, Pledgor shall
have failed to remedy the effect of such incorrect or misleading representation
or warranty within ten (10) days after notice from National Beef; provided that
no such notice and cure period shall be required with respect to any such
representation or warranty which was willfully incorrect or misleading when
made;

 

(c)           any breach of any covenant made by Pledgor under this Agreement
which has not been cured within ten (10) days after notice from National Beef;
or

 

(d)           an event under which National Beef shall have the right to
terminate, or shall have terminated, the Cattle Agreement pursuant to
Section (7)(1) thereof, for which a breach by Pledgor has resulted in damages to
National Beef, which National has demanded the damages to be paid by written
notice to Pledgor and have become an obligation of Pledgor to National under the
Cattle Agreement, and have been unpaid by Pledgor for at least (ten) 10 days.

 

2

--------------------------------------------------------------------------------

 

“Membership Interests” shall mean (i) all right, title and interest of Pledgor,
whether legal or equitable, now or hereafter existing, and howsoever evidenced
or arising, in National Beef as a member thereof, including, without limitation,
Units (as defined in the Operating Agreement) (the “National Beef Units”) and
(ii) all right, title and interest of Pledgor, whether legal or equitable, now
or hereafter existing, and howsoever evidenced or arising, in Pennsylvania LLC
as a member thereof, including, without limitation, Units (as defined in the
Pennsylvania LLC Operating Agreement) (the “Pennsylvania LLC Units”).

 

“National Beef Operating Agreement” shall mean that certain First Amended and
Restated Limited Liability Company Agreement of National Beef dated as of
December 30, 2011, as amended, modified, supplemented, extended or restated from
time to time.

 

“Obligations” means the performance of all covenants, agreements, and provisions
of Pledgor in this Agreement and damages incurred by National Beef as a result
of a breach by Pledgor of the Cattle Agreement that are an obligation of Pledgor
to National Beef under the Cattle Agreement.

 

“Operating Agreements” means the National Beef Operating Agreement and the
Pennsylvania Operating Agreement.

 

“Pennsylvania LLC” means National Beef Pennsylvania, LLC, a Delaware limited
liability company, a subsidiary of National Beef formed to hold all of National
Beef’s and its subsidiaries’ tangible and intangible assets located in the
Commonwealth of Pennsylvania, the membership interests of which will be
distributed to the members of National Beef as contemplated by Schedule
1.2(d) of the Purchase Agreement.

 

“Pennsylvania LLC Operating Agreement” means the Amended and Restated Limited
Liability Company Agreement of Pennsylvania LLC dated as of December 30, 2011,
as amended, modified, supplemented, extended or restated from time to time.

 

“Uniform Commercial Code” means the Uniform Commercial Code as in effect in the
State of Delaware from time to time.

 

A Section is, unless otherwise stated, a reference to a section hereof, as the
case may be. Section captions used in this Agreement are for convenience only,
and shall not affect the construction of this Agreement. The words “hereof,”
“herein,” “hereto” and “hereunder” and words of similar purport when used in
this Agreement shall refer to this Agreement as a whole and not to any
particular provision of this Agreement. Unless otherwise defined therein, all
terms defined in this Agreement shall have the defined meanings when used in any
certificate or other documents made or delivered pursuant hereto.

 

2.                                      Grant of Security Interest.  For
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and in order to secure the payment and performance of all of the
Obligations, Pledgor hereby grants to National Beef a lien on and a continuing

 

3

--------------------------------------------------------------------------------

 

security interest in the Collateral. The security interest granted to National
Beef hereunder shall rank second in priority only to the security interest
granted to CoBank under the CoBank Security Documents as in effect on the date
hereof (subject only to any amendment, modification, supplement, extension or
restatement as permitted by Section 3(b)(vi) hereof or as otherwise consented to
in writing by National Beef) as security for the obligations of Pledgor under
the CoBank Loan Agreement as in effect on the date hereof (subject only to any
amendment, modification, supplement, extension or restatement as permitted by
Section 3(b)(vi) hereof or as otherwise consented to in writing by National
Beef).

 

3                                         Representations, Warranties and
Covenants.

 

(a)                                  Pledgor represents and warrants to National
Beef as of the date of this Agreement that: (i) National Beef has, or when this
Agreement is delivered to National Beef will have, a valid perfected security
interest in the Collateral free of all liens, claims and rights of third parties
whatsoever other than the pledge under, and the lien and security interest
created by, the CoBank Security Documents; (ii) all documentary, stamp or other
similar taxes or fees owing in connection with the issuance, transfer and/or
pledge of the Membership Interests have been paid and will hereafter be paid by
Pledgor as such become due and payable; (iii) Pledgor is the lawful owner of the
Collateral pledged by it hereunder free of all liens, claims and rights of third
parties whatsoever other than the pledge under, and the lien and security
interest created by, the CoBank Security Documents, with full right to deliver,
pledge, assign and transfer such Collateral to National Beef hereunder; (iv) the
Collateral represents all of Pledgor’s Membership Interests; (v) neither the
respective members nor the respective managers of National Beef or Pennsylvania
LLC have declared, nor do any of National Beef’s or Pennsylvania LLC’s
respective governance agreements expressly provide, that any ownership interest
in National Beef or Pennsylvania LLC, as applicable, is a “security” under
Section 8-103(c) (or similar provision) of the Uniform Commercial Code of the
state of its organization; (vi) all of the Membership Interests are
uncertificated; (vii) other than the pledge under, and the lien and security
interest created by, the CoBank Security Documents, the execution and delivery
of this Agreement and the performance by Pledgor of its obligations hereunder do
not and will not contravene or conflict with any provision of law or of any
agreement binding upon or applicable to it or the Collateral and this Agreement
is its legal, valid and binding obligation, enforceable against it in accordance
with its terms, except as such enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating to the
enforcement of creditors’ or secured creditors’ rights generally and subject to
the qualification that general equitable principles may limit the availability
of enforcement of certain remedies, including, without limitation, the remedy of
specific performance; and (viii) except for the approvals or consents required
under the Operating Agreements and subject to the provisions of the CoBank
Security Documents, if National Beef exercises its rights under Section 6 hereof
with respect to the Collateral, no approval or consent of any person or entity,

 

4

--------------------------------------------------------------------------------

 

including, without limitation, any other member of National Beef or Pennsylvania
LLC, as applicable, is required for National Beef to exercise all rights granted
by Pledgor to National under this Agreement with respect to the Collateral.

 

(b)                                 So long as the Obligations remain
outstanding, Pledgor will, unless National Beef shall otherwise consent in
writing: (i) at its sole expense, promptly deliver to National Beef, from time
to time upon request of National Beef, such documents, reasonably satisfactory
in form and substance to National Beef, with respect to the Collateral as
National Beef may reasonably request, to preserve and protect, and to enable
National Beef to enforce, its rights and remedies hereunder; (ii) notify
National Beef and/or Pennsylvania LLC to note in the books and records of
National Beef and/or Pennsylvania LLC, as applicable, the security interest
granted to National Beef pursuant to this Agreement; (iii) not create or suffer
to exist any lien, security interest or other charge, claim, right or
encumbrance against, in or with respect to any of the Collateral except for
(A) the pledge hereunder and the lien and security interest created hereby and
(B) the pledge under, and the lien and security interest created by, the CoBank
Security Documents; (iv) not enter into any agreement or permit to exist any
restriction with respect to any of its right, title and interest in or to the
Collateral other than pursuant hereto or the CoBank Security Documents; (v) not
take or fail to take any action which would in any manner impair the
enforceability of National Beef’s lien and security interest in any of the
Collateral; and (vi) other than an extension of the term of the CoBank Loan
Documents, not consent to any amendment, supplement, restatement, waiver or
other modification of any of the terms or provisions of the Operating Agreements
relating to the Collateral or CoBank Loan Documents, which in any case is
contrary to the terms of this Agreement or any other CoBank Loan Document, could
reasonably be expected to be adverse in any material respect to the rights,
interests or privileges of National Beef or its ability to enforce the same,
results in the imposition or expansion in any material respect of any
restriction or burden on Pledgor or National Beef, reduces in any material
respect any rights or benefits of Pledgor or National Beef or impairs the
Collateral.

 

(c)                                  In the event that Pledgor fails or refuses
to perform any of its obligations set forth herein, National Beef shall have the
right, without obligation, to do all things it deems necessary or advisable to
discharge the same and any sums paid by National Beef, or the cost thereof,
including, without limitation, amounts to discharge and pay all amounts owed by
Pledgor to CoBank under the CoBank Loan Documents and attorneys’ fees, shall
constitute a part of the Obligations secured hereby and bear interest until paid
at the interest rate equal to the prime lending rate as published in The Wall
Street Journal plus 3%, and be secured by the Collateral; provided, however,
that Pledgor acknowledges and agrees that nothing contained herein shall
obligate National Beef or impose a duty upon National Beef to assume any duties
or obligations of Pledgor with respect to any of the Collateral.

 

5

--------------------------------------------------------------------------------

 

(d)                                 Subject to the rights of CoBank under the
CoBank Security Documents, upon any certification of the Membership Interests,
Pledgor shall hold such certificates as National Beef’s agent and in trust for
National Beef as additional Collateral and shall pledge and deliver to National
Beef such certificates, along with proper instruments of assignment duly
executed by Pledgor and by such other instruments or documents as National Beef
or its counsel may reasonably request.

 

4.                                      Certain Permitted Activities.

 

(a)                                  Subject to the rights of CoBank under the
CoBank Loan Documents, National Beef may, from time to time, without notice to
Pledgor, take any or all of the following actions: (i) retain or obtain a lien
upon, or a security interest in, the Collateral to secure the Obligations; and
(ii) during the continuance of a Default, resort to the Collateral (without any
marshalling) for payment of any of the Obligations, whether or not National Beef
(A) shall have resorted to any other property securing any of the Obligations or
any obligation hereunder or (B) shall have proceeded against any other obligor
primarily or secondarily obligated with respect to any of the Obligations (all
of the actions referred to in preceding clauses (A) and (B) being hereby
expressly waived by Pledgor).

 

(b)                                 National Beef shall have no right to vote
the Membership Interests or other Collateral or give consents, waivers or
ratifications in respect thereof prior to the occurrence of a Default.  Subject
to the rights of CoBank under the CoBank Security Documents, during the
continuance of a Default, Pledgor shall have the right to vote any and all of
the Membership Interests and other Collateral pledged by it hereunder and give
consents, waivers and ratifications in respect thereof.

 

5.                                      Dividends, Distributions, etc.  National
Beef shall have no right to distributions made on or in respect of the
Collateral.

 

6.                                      Default

 

(a)                                  Subject to the rights of CoBank under the
CoBank Security Documents, upon the occurrence of a Default, National Beef may
redeem from Pledgor or sell so much of the Collateral as necessary to satisfy
the Obligations (including, without limitation, any amounts necessary to satisfy
Pledgor’s obligations under the CoBank Loan Documents), providing any such
redemption or sale shall be after an appraisal of Fair Value of the Collateral
as determined pursuant to Exhibit I hereto and the redemption or sale shall not
be at a price less than the Fair Value.  No rights and remedies of National Beef
expressed hereunder are intended to be exclusive of any other right or remedy
under the Cattle Agreement, but every such right or remedy shall be cumulative
and shall be in addition to all other rights and remedies herein conferred, or
conferred upon National Beef under the Cattle Agreement or now or hereafter
existing at law or in equity or by statute. No delay on the part of National
Beef in the exercise of any right or remedy shall

 

6

--------------------------------------------------------------------------------

 

operate as a waiver thereof, and no single or partial exercise by National Beef
of any right or remedy shall preclude other or further exercise thereof or the
exercise of any other right or remedy. No action of National Beef permitted
hereunder shall impair or affect the rights of National Beef in and to the
Collateral.

 

(b)                                 (i) The Pledgor agrees that, in any sale of
any of the Collateral when a Default shall have occurred and be continuing,
subject to the rights of CoBank under the CoBank Security Documents, National
Beef is authorized to comply with any limitation or restriction in connection
with such sale as is necessary in order to avoid any violation of applicable law
or the Operating Agreements (including, without limitation, compliance with such
procedures as may restrict the number of prospective bidders and purchasers,
require that such prospective bidders and purchasers have certain
qualifications, and restrict such prospective bidders and purchasers to persons
who will represent and agree that they are purchasing for their own account for
investment and not with a view to the distribution or resale of such
Collateral), or in order to obtain any required approval of the sale or of the
purchaser by any governmental regulatory authority or official, and Pledgor
further agrees that such compliance shall not result in such sale being
considered or deemed not to have been made in a commercially reasonable manner,
nor shall National Beef be liable nor accountable to Pledgor for any reasonable
discount allowed by the reason of the fact that such Collateral is sold in
compliance with any such limitation or restriction, providing the sale price is
at least Fair Value.

 

(ii)                                          Pledgor further agrees, after a
Default shall have occurred and be continuing, and upon written request from
National Beef, to (A) deliver to National Beef such information concerning
Pledgor or the Collateral as National Beef shall reasonably request in
connection with the sale of all or any portion of the Collateral, which
information shall not contain any untrue statement of a material fact or omit to
state a material fact required to be stated or necessary to make such
information not misleading, and (B) do or cause to be done all such other acts
and things as may be necessary to make such sale of all or any portion of such
Collateral valid and binding and in compliance with any and all applicable laws,
regulations, orders, writs, injunctions, decrees or awards of any and all
courts, arbitrators or governmental agencies or instrumentalities, domestic or
foreign, having jurisdiction over any such sale.

 

Without limiting the foregoing paragraph, if National Beef decides to exercise
its right to sell all or any of the Collateral, upon written request, Pledgor
shall furnish or cause to be furnished to National Beef all such information as
National Beef may request in order to qualify the Collateral as exempt
securities, or the sale of such Collateral as exempt transactions, under federal
and state securities laws.

 

Nothing herein shall be construed to be Pledgor’s consent to, or any obligation
to undertake, a public offering of any pledged securities.

 

7

--------------------------------------------------------------------------------

 

(c)                                  For the purpose of carrying out the terms
of this Agreement, Pledgor appoints National Beef, or any other person whom
National Beef may designate, as attorney in fact, effective from the occurrence
and during the continuance of any Default hereunder, with power to take any and
all actions and to execute any and all documents and instruments that may, in
the judgment of National Beef, be necessary or desirable to accomplish the
purposes of this Agreement, including but not limited to (i) the power to pay
off all obligations of Pledgor under the CoBank Loan Documents and terminate the
CoBank Loan Documents, and (ii) do any and all things necessary to carry out the
purposes of this Agreement.  Pledgor ratifies and approves all acts of such
attorney.  Neither National Beef nor any other person or entity designated by it
as attorney hereunder will be liable for any act or omission nor for any error
of judgment or mistake of facts or law.  This power, being coupled with an
interest, is irrevocable until this Agreement is terminated as herein provided.

 

7.                                      Application of Proceeds. The proceeds of
the Collateral redeemed or sold pursuant to the terms of Section 6 hereof shall
be applied by National Beef as follows:

 

First: as required by the CoBank Loan Agreement; and

 

Second: to the Obligations in accordance with the Cattle Agreement and this
Agreement.

 

8.                                      Nature of Obligations. Pledgor
acknowledges and agrees that Pledgor shall be liable for the Obligations.
Pledgor represents and warrants to National Beef at all times that the Cattle
Agreement directly or indirectly confers a material benefit on Pledgor.

 

9.                                      No Marshalling. To the extent National
Beef holds a security interest in other assets or interests of Pledgor, nothing
contained herein shall require National Beef to proceed against any security
interest in any of the assets or interests of Pledgor prior to enforcing its
rights against the Collateral.

 

10.                               Indemnity. Pledgor shall indemnify, defend and
hold harmless National Beef and its members (other than Pledgor), agents,
officers, managers and employees, and every attorney appointed pursuant to this
Agreement (a) in respect of all liabilities and reasonable expenses incurred by
them in good faith in the execution or purported execution of any rights, powers
or discretions vested in them pursuant to this Agreement, and (b) for any losses
arising in connection with the exercise or purported exercise of any of their
rights, powers and discretions hereunder except that National Beef will be
liable for any liabilities, expenses and losses which arise as a result of its
own willful misconduct or gross negligence.

 

11.                               Filing as a Financing Statement. National Beef
shall be authorized to execute and file such UCC financing statements and other
documents (in all public offices reasonably deemed necessary or appropriate by
National Beef), and Pledgor shall do such other acts and things, all as National
Beef may from time to time request, to establish and maintain

 

8

--------------------------------------------------------------------------------

 

a valid, perfected security interest in the Collateral to secure the payment of
the Obligations.

 

12.                               Notices. All notices hereunder shall be deemed
to be duly given upon delivery in the form and manner set forth in Section 11 of
the Cattle Agreement to the parties at the addresses set forth in Section 11 of
the Cattle Agreement, as the same may be updated as provided therein.

 

13.                               Amendments. No amendment, modification or
waiver of, or consent with respect to, any provision of this Agreement shall in
any event be effective unless the same shall be in writing and signed and
delivered by National Beef and Pledgor. Any waiver of any provision of this
Agreement, and any consent to any departure by Pledgor from the terms of any
provision of this Agreement, shall be effective only in the specific instance
and for the specific purpose for which given.

 

14.                               Termination of Agreement. Pledgor agrees that
its pledge hereunder is continuing and shall, unless sooner terminated by
National Beef (notwithstanding, without limitation, that at any time or from
time to time all Obligations may have been paid in full), terminate only when
the Cattle Agreement terminates and the Obligations (including, without
limitation, any and all extensions or renewals of any thereof, any and all
interest on any thereof, and any and all expenses incurred by National Beef in
seeking to collect any of the Obligations and to collect or enforce any rights
under the Collateral) have been satisfied in full, at which time National Beef
shall release any security interest in the Collateral as shall not have been
sold or otherwise redeemed by National Beef pursuant to the terms hereof.  This
Agreement shall continue to be effective or be automatically reinstated, as the
case may be, if at any time payment, in whole or in part, of any of the
Obligations is rescinded or must otherwise be restored or returned by National
Beef as a preference, fraudulent conveyance or otherwise under any bankruptcy,
insolvency or similar law, all as though such payment had not been made.

 

15.                               Severability. Any provision in this Agreement
that is held to be inoperative, unenforceable, or invalid in any jurisdiction
shall, as to that jurisdiction, be inoperative, unenforceable, or invalid
without affecting the remaining provisions in that jurisdiction or the
operation, enforceability, or validity of that provision in any other
jurisdiction, and to this end the provisions of this Agreement are declared to
be severable.

 

16.                               Successors and Assigns. The terms and
provisions of this Agreement shall be binding upon and inure to the benefit of
Pledgor and National Beef and their respective successors and permitted assigns,
except that (a) Pledgor shall not have the right to assign its rights or
obligations under this Agreement and (b) any assignment by National Beef must be
made in compliance with the Cattle Agreement.

 

17.                               CHOICE OF LAW. THIS AGREEMENT SHALL BE
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS (WITHOUT REGARD TO THE CONFLICT
OF LAWS PROVISIONS) OF THE STATE OF DELAWARE.

 

9

--------------------------------------------------------------------------------

 

18.                               WAIVER OF JURY TRIAL. PLEDGOR AND NATIONAL
BEEF HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY
OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN
ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS AGREEMENT OR THE
RELATIONSHIP ESTABLISHED HEREUNDER.

 

19.                               CONSENT TO JURISDICTION. PLEDGOR HEREBY
IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL
OR DELAWARE STATE COURT SITTING IN THE STATE OF DELAWARE IN ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT AND PLEDGOR HEREBY
IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING
MAY BE HEARD AND DETERMINED IN ANY SUCH COURT AND IRREVOCABLY WAIVES ANY
OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT, ACTION
OR PROCEEDING BROUGHT IN SUCH A COURT OR THAT SUCH COURT IS AN INCONVENIENT
FORUM. NOTHING HEREIN SHALL LIMIT THE RIGHT OF NATIONAL BEEF TO BRING
PROCEEDINGS AGAINST PLEDGOR IN THE COURTS OF ANY OTHER JURISDICTION. ANY
JUDICIAL PROCEEDING BY PLEDGOR AGAINST NATIONAL BEEF OR ANY AFFILIATE OF
NATIONAL BEEF INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING
OUT OF, RELATED TO, OR CONNECTED WITH THIS AGREEMENT SHALL BE BROUGHT ONLY IN A
COURT IN THE STATE OF DELAWARE.

 

20.                               Counterparts. This Agreement may be executed
in any number of counterparts, all of which taken together shall constitute one
agreement, and any of the parties hereto may execute this Agreement by signing
any such counterpart.  This Agreement shall be effective upon execution by
Pledgor and National Beef.

 

21.                               Miscellaneous. Except as provided herein,
Pledgor hereby expressly waives: (i) notice of the acceptance by National Beef
of this Agreement and (ii) all diligence in defense, collection or protection of
or realization upon this Pledge Agreement, any obligation hereunder, or any
security for or guaranty of any of the foregoing.

 

(a)                                  No action of National Beef permitted
hereunder shall in any way affect or impair the rights of National Beef and the
obligations of Pledgor under this Agreement.  The Pledgor hereby acknowledges
that, other than receiving CoBank’s written consent to create the lien and
security interest for the benefit of National Beef hereunder, there are no
conditions to the effectiveness of this Agreement that are not stated in this
Agreement.

 

(b)                                 All obligations of Pledgor and rights of
National Beef expressed in this Agreement shall be in addition to and not in
limitation of those provided in applicable law or in any other written
instrument or agreement relating to any of the Obligations.

 

10

--------------------------------------------------------------------------------

 

(c)                                  Pledgor shall reimburse National Beef for
all costs and expenses incurred by National Beef (including, without limitation,
attorneys’ fees and disbursements) to:  (i) commence, defend or intervene in any
court proceeding relating to the Collateral or this Agreement; (ii) file a
petition, complaint, answer, motion or other pleadings, or to take any other
action in or with respect to any suit or proceeding (bankruptcy or otherwise)
relating to the Collateral, this Agreement or the CoBank Loan Documents;
(iii) protect, collect, lease, sell, or liquidate any of the Collateral;
(iv) attempt to enforce any security interest in any of the Collateral or to
seek any advice with respect to such enforcement; and (v) enforce any of
National Beef’s rights to collect any of the Obligations.

 

[REMAINDER OF PAGE LEFT BLANK]

 

11

--------------------------------------------------------------------------------

 

IN WITNESS WHEREOF, this Agreement has been duly executed as of the day and year
first above written.

 

 

 

U.S. PREMIUM BEEF, LLC

 

 

 

By:

/s/ Steven D. Hunt

 

Name:

Steven D. Hunt

 

Title:

Chief Executive Officer

 

 

 

NATIONAL BEEF PACKING COMPANY, LLC

 

 

 

By:

/s/ Timothy M. Klein

 

Name:

Timothy M. Klein

 

Title:

Chief Executive Officer, President and Manager

 

[SIGNATURE PAGE TO PLEDGE AGREEMENT]

 

--------------------------------------------------------------------------------

 

EXHIBIT I

 

Determination of Fair Value

 

The Fair Value of any Collateral to be sold or redeemed pursuant to Section 6
shall be determined as of the date of Default (the “Default Date”), which shall
be determined by agreement between National Beef and the Pledgor, and shall be
determined within twenty (20) business days after National Beef notifies Pledgor
that it intends to sell or redeem the Collateral pursuant to Section 6 (the
“Appraisal Notice”).  If National Beef and the Pledgor are unable to agree on
the Fair Value of such Collateral as of the Default Date within such period,
National Beef and Pledgor will each designate an appraiser to determine the Fair
Value of such Collateral as of the Default Date, such appraisals to be delivered
no later than forty-five (45) business days after the delivery of the Appraisal
Notice.  If the lower of the two initial appraisals is equal to or greater than
90% of the higher of the two initial determinations, the Fair Value of such
Collateral shall be the average of the two determinations.  If the lower of the
two initial appraisals is less than 90% of the higher of the initial appraisals
with respect to such Collateral, National Beef and the Pledgor shall attempt in
good faith for a period of ten (10) business days following the later of the
dates on which the two initial appraisals were delivered to determine a mutually
acceptable Fair Value of such Collateral.  If an agreement is not reached during
such period, National Beef and the Pledgor shall promptly (but in any event
within five (5) business days after the completion of such ten business day
period) direct the appraisers to designate a third appraiser to determine,
within ten business days after such designation, which appraisal of the Fair
Value of such Collateral by the initial two appraisers is the more accurate
appraisal of Fair Value of such Collateral in the sole discretion of such third
appraiser (who shall be limited to choosing one of the two initial
determinations of Fair Value of such Collateral).  The determination of Fair
Value by such third appraiser shall be final and binding on all parties.  Each
party shall pay the cost of its initially appointed appraiser, and if a third
appraiser is necessary, the appraisal costs of the third appraiser shall be
shared equally by National Beef and the Pledgor.  The “Fair Value” shall be the
fair market value of such Collateral, determined on the basis of the aggregate
equity value of National Beef or Pennsylvania LLC, as applicable, valuing such
Collateral as a proportionate interest in a going concern with reference to the
relative economic rights and preferences of such Collateral as set forth in
Article 5 of the applicable Operating Agreement, but without discount for
marketability, lack of liquidity, minority status or otherwise.  In order to
determine the aggregate equity value of National Beef or Pennsylvania LLC
referred to in the preceding sentence after the Pennsylvania LLC Units have been
distributed to the members of National Beef as contemplated by Schedule
1.2(d) of the Purchase Agreement, (i) the aggregate equity value of National
Beef and Pennsylvania LLC shall be determined as if they were a single entity,
(ii) the percentage of such aggregate equity value attributable to National
Beef, on the one hand, and Pennsylvania LLC, on the other hand, shall be
determined and (iii) all of such aggregate equity value shall be allocated
between National Beef and Pennsylvania LLC in accordance with such percentages. 
The Fair Value shall not take into account the value of National Beef,
Pennsylvania LLC or the membership interests of any member of National Beef or
Pennsylvania LLC, in each case, reflected on the books and records or financial
statements of any such member of National Beef or Pennsylvania LLC.

 

--------------------------------------------------------------------------------

 

EXECUTION VERSION

 

CONSENT AND FIRST AMENDMENT

TO PLEDGE AGREEMENT AND SECURITY AGREEMENT

 

This Consent and First Amendment to Pledge Agreement and Security Agreement
(this “First Amendment”) is entered into this 30th day of December, 2011 (the
“Effective Date”), by and between CoBank, ACB (“CoBank”), and U.S. Premium Beef,
LLC, a Delaware limited liability company (“Pledgor”).  CoBank and Pledgor may
be referred to in this First Amendment collectively as the “Parties” and
individually as a “Party”.

 

RECITALS

 

A.                                   Pledgor and CoBank are parties to that
certain Master Loan Agreement dated July 26, 2011 (the “Master Loan Agreement”),
pursuant to which CoBank may, from time to time, make loans to Pledgor.  Each
loan made by CoBank to Pledgor pursuant to the Master Loan Agreement is to be
evidenced by a supplement to the Master Loan Agreement.  As of the Effective
Date, CoBank has made one revolving term loan to Pledgor in the principal amount
of $15,000,000, as evidenced by that certain Revolving Term Loan Supplement
No. RI0992T01 dated July 26, 2011 (the “Supplement”).

 

B.                                     In connection with the Master Loan
Agreement and Supplement, Pledgor and CoBank also executed (a) that certain
Pledge Agreement dated July 26, 2011 (the “Pledge Agreement”), pursuant to which
Pledgor pledged to CoBank all of Pledgor’s membership interests in National Beef
Packing Company, LLC, a Delaware limited liability company (“National Beef”), as
security for the Obligations defined in the Pledge Agreement and (b) that
certain Security Agreement dated July 26, 2011 (the “Security Agreement”),
pursuant to which Pledgor granted to CoBank a security interest in all of the
personal property of Pledgor, including Pledgor’s membership interests in
National Beef, as security for the Obligations defined in the Security
Agreement.  Capitalized terms not otherwise defined in this First Amendment
shall have the meanings given to them in the Pledge Agreement.

 

C.                                     Section 9 of the Master Loan Agreement
prohibits Pledgor from, among other things, (1) selling any of its assets with
an aggregate fair market value in excess of $200,000 in any calendar year, and
(2) creating or permitting to exist any lien upon any of its property, in each
case without CoBank’s prior written consent.

 

D.                                    Section 3(b) of the Pledge Agreement
prohibits Pledgor from, among other things, (1) selling any of the Membership
Interests, (2) creating or permitting to exist any lien on the Membership
Interests, and (3) consenting to certain amendments or modifications of the
Limited Liability Company Agreement of National Beef dated August 6, 2003 (the
“National Beef Operating Agreement”), in each case without CoBank’s prior
written consent.

 

E.                                      Section 3(J) of the Security Agreement
prohibits Pledgor from, among other things, disposing of any Collateral (as
defined in the Security Agreement), including the Membership Interests, without
CoBank’s prior written consent.

 

F.                                      Pledgor intends to sell a portion of the
Membership Interests to Leucadia National Corporation (the “Membership Interest
Sale”).  As part of the Membership Interest Sale, it is

 

--------------------------------------------------------------------------------

 

contemplated that National Beef (i) will form National Beef Pennsylvania, LLC, a
new Delaware limited liability company, to hold all of its tangible and
intangible assets located in the State of Pennsylvania (“PA Newco”) and
(ii) will distribute membership interests in PA Newco (the “PA Newco Membership
Interests”) to its members following consummation of the Membership Interest
Sale (the “PA Distribution”).  Also, as part of the Membership Interest Sale,
Pledgor will grant a lien upon the Membership Interests and the PA Newco
Membership Interests upon receipt thereof in favor of National Beef (the
“National Beef Pledge”) and (i) the National Beef Operating Agreement will be
amended and restated in full (x) simultaneously with consummation of the
Membership Interests Sale and (y) thereafter to give effect to the PA
Distribution and (ii) the limited liability company agreement of PA Newco (the
“PA Newco Operating Agreement”) will be amended and restated in full.

 

G.                                     Pledgor has requested that CoBank
(i) consent to the Membership Interest Sale and the PA Distribution,
(ii) release its security interest in, and liens on, the Membership Interests
being sold pursuant to the Membership Interest Sale, (iii) consent to the
National Beef Pledge and (iv) consent to the amendments and restatements of the
National Beef Operating Agreement and the PA Newco Operating Agreement.

 

H.                                    CoBank is willing to provide its consent
upon the terms and conditions contained in this First Amendment.

 

AGREEMENT

 

NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the Parties hereby agree as follows:

 

1.                                       Consent, Acknowledgment and Release. 
Subject to the satisfaction of the other terms and conditions contained in this
First Amendment, CoBank hereby consents to (a) the Membership Interest Sale,
(b) the PA Distribution, (c) the National Beef Pledge, and (d) the amendments
and restatements of the National Beef Operating Agreement and the PA Newco
Operating Agreement.  CoBank hereby acknowledges the terms of the amended and
restated National Beef Operating Agreement and the amended and restated PA Newco
Operating Agreement, and releases the security interests granted pursuant to the
Pledge Agreement and the Security Agreement in the Membership Interests being
sold pursuant to the Membership Interest Sale.

 

2.                                       Amendments.

 

(a)                                  Schedule A.  Schedule A attached to the
Pledge Agreement is hereby amended and restated in full and replaced with the
Schedule A attached as Exhibit 1 to this First Amendment.

 

(b)                                 Recital.  The third Recital on the first
page of the Pledge Agreement beginning, “WHEREAS, Pledgor is the legal and
beneficial owner . . .” is hereby amended and restated in full to read as
follows:

 

2

--------------------------------------------------------------------------------

 

WHEREAS, Pledgor is the legal and beneficial owner of the units and percentage
interest in National Beef Packing (as hereinafter defined) and NBP (as
hereinafter defined) that are set forth on Schedule A attached hereto; and

 

(c)                                  Definitions.

 

(i)                                     National Beef.  The term “National Beef”
contained in Section 1 of the Pledge Agreement is hereby amended and restated in
full to read as follows:

 

“National Beef” shall mean, (i) prior to the consummation of the PA
Distribution, National Beef Packing and (ii) from and after the consummation of
the PA Distribution, collectively, National Beef Packing and NBP.

 

(ii)                                  NBP.  Section 1 of the Pledge Agreement is
hereby further amended to add new definitions to read as follows:

 

“National Beef Packing” shall mean National Beef Packing Company, LLC, a
Delaware limited liability company.

 

“NBP” shall mean National Beef Pennsylvania, LLC, a Delaware limited liability
company.

 

(iii)                               Operating Agreement.  The term “Operating
Agreement” contained in Section 1 of the Pledge Agreement is hereby amended and
restated in full to read as follows:

 

“Operating Agreement” shall mean, (i) prior to the consummation of the PA
Distribution, that certain National Beef Packing Company, LLC First Amended and
Restated Limited Liability Company Agreement dated as of December 30, 2011, as
amended, modified or restated from time to time and (ii) from and after the
consummation of the PA Distribution, collectively (A) that certain National Beef
Packing Company, LLC Second Amended and Restated Limited Liability Company
Agreement dated as of December 30, 2011, and (B) that certain National Beef
Pennsylvania, LLC Amended and Restated Limited Liability Company Agreement dated
as of December 30, 2011, both as amended, modified or restated from time to
time.

 

3.                                       Conditions Precedent.  Notwithstanding
any provision contained in this First Amendment to the contrary, this First
Amendment shall not be effective unless and until CoBank shall have received:

 

(a)                                  this First Amendment, duly executed by
Pledgor, CoBank and the Chairman of the Board of Managers of National Beef;

 

(b)                                 a fully executed copy of the Pledge
Agreement between Pledgor and National Beef creating the National Beef Pledge,
which shall be in substantially the same form as the draft received by CoBank as
of the Effective Date;

 

3

--------------------------------------------------------------------------------

 

(c)                                  a fully executed copy of each of (i) the
National Beef Packing Company, LLC First Amended and Restated Limited Liability
Company Agreement, (ii) the National Beef Packing Company, LLC Second Amended
and Restated Limited Liability Company Agreement and (iii) the National Beef
Pennsylvania, LLC Amended and Restated Limited Liability Company Agreement,
which, in each case, shall be in substantially the same form as the draft
received by CoBank as of the Effective Date;

 

(d)                                 a fully executed Intercreditor Agreement
(the “Intercreditor Agreement”) among CoBank, Pledgor and National Beef in form
and substance satisfactory to CoBank in its discretion, addressing the priority
of the liens created by the Pledge Agreement and the National Beef Pledge;

 

(e)                                  such other documents as CoBank may
reasonably request by not less than five business days prior notice relating to
the transactions addressed in this First Amendment, all in form and substance
reasonably satisfactory to CoBank; and

 

(f)                                    an executed Resolution of the Board of
Managers of National Beef in form and substance satisfactory to CoBank
authorizing the execution of the Board of Managers Consent for National Beef
attached to this First Amendment and the Intercreditor Agreement.

 

4.                                       Representations, Warranties and
Agreements of Pledgor.  Pledgor hereby represents and warrants to CoBank and
agrees that:

 

(a)                                  the execution, delivery and performance by
Pledgor of this First Amendment are within the limited liability company powers
of Pledgor, have been duly authorized by all necessary limited liability company
action on the part of Pledgor and require no consent of, action by or in respect
of, or filing, recording or registration with, any governmental or regulatory
body, instrumentality, authority, agency or official or any other person or
entity;

 

(b)                                 the execution, delivery and performance by
Pledgor of this First Amendment do not conflict with, or result in a breach of
the terms, conditions or provisions of, or constitute a default under or result
in any violation of, the terms of any of the organizational documents of
Pledgor, any applicable law, rule, regulation, order, writ, judgment or decree
of any court or governmental or regulatory body, instrumentality, authority,
agency or official or any agreement, document or instrument to which Pledgor is
a party or by which Pledgor or any of its property or assets is bound or to
which Pledgor or any of its property or assets is subject;

 

(c)                                  this First Amendment has been duly executed
and delivered by Pledgor and constitutes the legal, valid and binding obligation
of Pledgor enforceable against Pledgor in accordance with its terms;

 

(d)                                 all of the representations and warranties
made by Pledgor in the Master Loan Agreement, Supplement and any other document
executed in connection with the same are true and correct in all material
respects on and as of the Effective Date as if made on and as of the Effective
Date;

 

(e)                                  as of the date of this First Amendment and
after giving effect to this First Amendment, no Event of Default (as defined in
the Master Loan Agreement) under or within the

 

4

--------------------------------------------------------------------------------

 

meaning of the Master Loan Agreement has occurred and is continuing, and no
event has occurred which, with the passage of time, the giving of notice or
both, would constitute and Event of Default;

 

(f)                                    none of Pledgor’s organizational or
governing documents have been revised or amended since the execution of the
Master Loan Agreement, all resolutions, incumbency certificates and the like
delivered to Pledgor in connection with the Master Loan Agreement remain in full
force and effect, and Pledgor remains in good standing in the state of its
organization;

 

(g)                                 promptly after the PA Distribution is
consummated, Pledgor shall provide CoBank with (1) an executed Resolution of the
Board of Managers of PA Newco in form and substance satisfactory to CoBank
authorizing the execution of the Board of Managers Consent for PA Newco attached
to this First Amendment, and (2) the executed Board of Managers Consent for PA
Newco attached to this First Amendment; and

 

(h)                                 for the avoidance of doubt, for valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, and
in order to secure the payment and performance of all of the Obligations,
Pledgor, from and after the consummation of the PA Distribution, hereby grants
to CoBank a continuing security interest in all of Pledgor’s interest in that
portion of the Collateral consisting of Membership Interests in PA Newco.

 

5.                                       Inconsistencies.  In the event of any
inconsistency or conflict between this First Amendment and the Pledge Agreement,
the terms, provisions and conditions contained in this First Amendment shall
govern and control.

 

6.                                       Counterparts.  This First Amendment may
be executed by the Parties in any number of counterparts and each such
counterpart shall be deemed to be an original, but all such counterparts shall
together constitute one and the same agreement. Receipt of an executed signature
page to this First Amendment by facsimile, pdf or other electronic transmission
shall constitute effective delivery thereof, provided that Pledgor shall
promptly thereafter deliver an original of this First Amendment to CoBank.

 

7.                                       Pledge Agreement as Amended.  All
references in the Pledge Agreement to “this Agreement” and any other references
similar references shall hereafter mean the Pledge Agreement as amended by this
First Amendment and as the same may from time to time be further amended,
modified, extended, renewed or restated.  All references in the Master Loan
Agreement and any other document executed in connection therewith to the Pledge
Agreement shall hereafter mean the Pledge Agreement as amended by this First
Amendment and as the same may from time to time be further amended, modified,
extended, renewed or restated.  Except to the extent specifically amended by
this First Amendment, all of the terms, provisions, conditions, covenants,
representations and warranties contained in the Pledge Agreement shall be and
remain in full force and effect and the same are hereby ratified and confirmed
by the Parties.

 

8.                                       Authority.  CoBank represents and
confirms that it is authorized under the Master Loan Agreement, the Pledge
Agreement and the Security Agreement to enter into this First Amendment and
release the security interests granted pursuant to the Pledge Agreement and the

 

5

--------------------------------------------------------------------------------

 

Security Agreement in the Membership Interests being sold pursuant to the
Membership Interest Sale.

 

[Signatures on Following Page]

 

6

--------------------------------------------------------------------------------

 

IN WITNESS WHEREOF, the Parties have executed this Consent and First Amendment
to Pledge Agreement and Security Agreement as of the Effective Date.

 

U.S. PREMIUM BEEF, LLC,

 

a Delaware limited liability company

 

 

 

 

 

By:

/s/ Steven D. Hunt

 

Name:

Steven D. Hunt

 

Title:

Chief Executive Officer

 

 

 

 

 

COBANK, ACB

 

 

 

 

 

By:

/s/ Hal Nelson

 

Name:

Hal Nelson

 

Title:

Vice President

 

 

[Board of Managers Consents on Following Pages]

 

[SIGNATURE PAGE TO CONSENT AND FIRST AMENDMENT TO PLEDGE AGREEMENT AND SECURITY
AGREEMENT]

 

--------------------------------------------------------------------------------

 

BOARD OF MANAGERS CONSENT

OF

NATIONAL BEEF PACKING COMPANY, LLC

 

The undersigned, on behalf of the Board of Managers (as defined in the National
Beef Operating Agreement) of National Beef Packing, hereby consents to the above
First Amendment and reaffirms the Board of Managers’ prior consent attached to
the Pledge Agreement, which consent remains in full force and effect.

 

In addition, the undersigned, on behalf of the Board of Managers, acknowledges
that CoBank, or any purchaser of the Collateral, may become the owner of the
Collateral if CoBank exercises its rights and remedies under the Pledge
Agreement, and that the Applicable Holding Period (as defined in the National
Beef Packing Company, LLC First Amended and Restated Limited Liability Company
Agreement or the National Beef Packing Company, LLC Second Amended and Restated
Limited Liability Company Agreement, as applicable) shall not apply to CoBank or
any purchaser of the Collateral in such instance.

 

IN WITNESS WHEREOF, the undersigned has caused this Consent to be executed and
delivered to be effective as of the Effective Date.

 

 

 

By:

/s/ Steven D. Hunt

 

Name: Steven D. Hunt

 

Title: Chairman of the Board of Managers

 

--------------------------------------------------------------------------------

 

BOARD OF MANAGERS CONSENT

OF

NATIONAL BEEF PENNSYLVANIA, LLC

 

The undersigned, on behalf of the Board of Managers (as defined in the PA Newco
Operating Agreement) of National Beef Pennsylvania, LLC, a Delaware limited
liability company (“PA Newco”), hereby acknowledges the Consent and First
Amendment to Pledge Agreement and Security Agreement (this “First Amendment”)
dated December 30, 2011, by and between CoBank, ACB (“CoBank”), and U.S. Premium
Beef, LLC, a Delaware limited liability company (“Pledgor”), consents to the
pledge of the Collateral by Pledgor to CoBank pursuant to the Pledge Agreement
and the First Amendment, and shall cause PA Newco to duly make a notation in its
books and records that the Collateral has been pledged to CoBank and that CoBank
has a first priority security interest therein.  Capitalized terms not otherwise
defined herein shall have the meanings given to them in the First Amendment.

 

In addition, the undersigned, on behalf of the Board of Managers, agrees to
cause PA Newco to comply exclusively with instructions originated by CoBank in
accordance with the Loan Documents and Pledge Agreement, as amended by the First
Amendment, with respect to the Collateral without further consent of the
Pledgor.  The undersigned, on behalf of the Board of Managers, acknowledges that
CoBank, or any purchaser of the Collateral, may become the owner of the
Collateral if CoBank exercises its rights and remedies under the Pledge
Agreement, and that the Applicable Holding Period (as defined in the National
Beef Pennsylvania, LLC Amended and Restated Limited Liability Company Agreement)
shall not apply to CoBank or any purchaser of the Collateral in such instance.

 

IN WITNESS WHEREOF, the undersigned has caused this Consent to be executed and
delivered to be effective as of [Insert Date PA Distribution is Consummated].

 

 

By:

 

 

Name:

 

 

Title: Member of the Board of Managers

 

--------------------------------------------------------------------------------

 

Exhibit 1

 

SCHEDULE A TO

PLEDGE AGREEMENT

 

Name of Pledgor

 

Units in National Beef

 

Percentage Interest in
National Beef

 

U.S. Premium Beef, LLC

 

1,507.29

*

15.0729

%

 

--------------------------------------------------------------------------------

*Also includes any units of PA Newco distributed to Pledgor in connection with
the PA Distribution.

 

--------------------------------------------------------------------------------