CEO Employment Agreement
Between
U.S. Premium Beef, LLC
And
Steven D. Hunt
Employment Years   2010 - 2015

THIS EMPLOYMENT AGREEMENT (“Agreement”) made effective as of the 1st day of
September, 2009, is made by and between U.S. Premium Beef, LLC, a Delaware
limited liability company (“USPB”), and Steven D. Hunt (“Chief Executive
Officer” or “CEO”).

1.         Employment and Term of Agreement. 

(a)          Employment.  USPB will employ CEO as the chief executive officer of
USPB under this Agreement from September 1, 2009 (the “Effective Date”) until
August 29, 2015 (the “Expiration Date”) or the date the employment is otherwise
terminated as provided in this Agreement (“Termination Date”). 

(b)          Term of Agreement.  Employment under this Agreement starts on
September 1, 2009 and continues until the Expiration Date or the Termination
Date, whichever is earlier.  This Agreement is effective September 1, 2009 and
continues until the payments under this Agreement have been made and the
obligations have been discharged or fulfilled.  For clarity: CEO’s employment
terminates on the Expiration Date or the Termination Date, whichever is earlier;
the compensation provisions under Section 3(a) through Section 3(e) terminate
when the compensation has been paid; CEO’s rights to exercise phantom units and
purchase phantom units under Section 3(f) continue for 18 months after the
Expiration Date or Termination Date, whichever is earlier, and if not exercised
or purchased by that time, those rights are then terminated; Section 5 continues
until the payments under that section have been made which include payments
under Section 5(b) continuing for 18 months after termination of CEO’s
employment with USPB; Section 6(a) continues until 18 months after termination
of CEO’s employment with USPB; Sections 6(b) through Section 6(e), Section 7 and
Section 8 survive termination of this Agreement.

2.          Location of Employment.  CEO’s principal place of employment shall
be at the principal offices of USPB located in Kansas City, Missouri, or at
another location as mutually agreed by USPB and CEO.

3.          Compensation.  CEO shall be paid compensation for services as
provided in this Section 3.  All compensation paid under this Agreement will be
paid to CEO less necessary deductions and withholdings.

                                                                       

SIGNATURE COPY

June 15, 2009

 

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USPB/Steven D. Hunt

CEO Employment Agreement

2010-2015

 

(a)          Annual Salary.  CEO shall be paid by USPB a base annual salary of
$775,000 for employment years September 1, 2009 through August 28, 2010 (“YR
2010”), August 29, 2010 through August 27, 2011(“YR 2011”), and August 28, 2011
through August 25, 2012 (“YR 2012”); and $825,000 for employment years August
26, 2012 through August 31, 2013 (“YR 2013”), September 1, 2013 through August
30, 2014 (“YR 2014”), and August 31, 2014 through August 29, 2015 (“YR 2015”)
during the term of CEO’s employment under this Agreement, pro-rated for partial
years, payable on USPB’s normal payroll dates.

(b)          Incentive Cap.  The compensation provided in Sections 3(c) (Annual
Incentive), 3(d) (Long-Term Incentive), and 3(e) (Full-Term Incentive), and
including any incentive compensation under Section 5 (Compensation Upon
Termination) as it pertains to incentive compensation, specifically Section
5(a), clauses (2), (3), and (4) and Section 5 (c), clauses (3), (4), and (5);
shall be subject to a cumulative annual cap (referred to as “Incentive Cap”)
pro-rated over the term of this Agreement not to exceed $2,000,000 per year
averaged over the term (whether the term extends to the Expiration Date or
through an earlier Termination Date),  provided, however, that for purposes of
Section 5(c) (Termination By USPB For Other Than Cause, Death or Disability or
By CEO For Good Reason), the proration term shall extend through the Expiration
Date.  For example, other than an earlier termination under Section 5(c), if
this Agreement is earlier terminated after four (4) years the Incentive Cap
would be $2,000,000 per year averaged over four (4) years or $8,000,000).  An
example of the incentive compensation under Sections 3(c), 3(d), and 3(e) is
provided on Exhibit A.  For employment years YR 2010, YR 2011, YR 2013 and YR
2014 the Incentive Cap for those years will be $2,000,000.  For YR 2012, any
incentive compensation that exceeded the Incentive Cap in the prior two years
and the incentive compensation for the year ending YR 2012 will be paid to CEO
providing the amount does not exceed the Incentive Cap of $2,000,000 per year
averaged over the first three years of YR 2010, YR 2011, and YR 2012.  For the
year YR 2015, any incentive compensation that exceeded the Incentive Cap in
prior years plus the incentive compensation for the year YR 2015 shall be paid
to CEO subject to an Incentive Cap of $2,000,000 per year averaged over the six
years of the term, YR 2010, YR 2011, YR 2012, YR 2013, YR 2014, and YR 2015.

 

                                                                      

 

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USPB/Steven D. Hunt

CEO Employment Agreement

2010-2015

 

(c)           Annual Incentive Plan. In addition to CEO’s base Annual Salary, if
CEO is employed by USPB on the last day of any employment year (except as
otherwise provided in this Agreement), CEO shall be paid an annual incentive
compensation, (“Annual Incentive”) equal to two percent (2.0%) of the sum of the
total financial benefits to USPB (“USPB Total Benefits”) that exceed
$25,000,000.  USPB Total Benefits are: (1) audited fiscal year-end USPB earnings
before tax; and (2) two times the fiscal year USPB grid premiums which is the
net sum of all USPB member grid premiums and discounts calculated through all
USPB grids at all plants, taking into account all calculators including, but not
limited to, base price, dressing percent, quality grade, outlier cattle, A/V,
Natural, per head category premiums, and other specific categories, less the
base price calculator excluding any set base price premium.  (Example, if 25
cents per cwt. is paid to a member for one head of cattle over the western
Kansas reported USDA average, then 25 cents per cwt. times the weight of the
head of cattle would be added to the net grid premium.)  This calculation shall
be based on the actual cattle delivered by USPB members to National Beef Packing
Company, LLC or its successor under the Cattle Purchase and Sale Agreement
unless one of the following two events occur:  (1) the member cattle delivery
requirements are reduced below the fiscal year requirements of 98% delivery; or
(2) the penalties for nondelivery are reduced below fiscal year 2009 levels.  If
either member delivery requirements are reduced below 98% or the penalties for
nondelivery are reduced below the fiscal year 2009 levels, then the fiscal year
grid premiums under clause (2) above shall be adjusted to reflect the grid
premium per head of cattle actually delivered multiplied times the number of
USPB delivery rights held by members.  In no event shall the nondelivery
penalties paid by members be included in the net sum of all USPB member grid
premiums under clause (2) above.  The Annual Incentive is subject to the
following:

(1)               Any Annual Incentive accruing with respect to an employment
year shall be payable, on or before the date (the “Annual Incentive Payment
Date”) that is sixty (60) days following the end of the employment year or, if
later, ten (10) days following receipt by the USPB Board of Directors, of all
completed financial statements that are relevant to the calculation of the
Annual Incentive, but in no event later than March 15th of the calendar year
first occurring after the end of the employment year to which the Annual
Incentive relates.

(2)               For purposes of calculating any Annual Incentive under this
Section 3(c), or any Long-Term Incentive under Section 3(d), USPB’s Total
Benefits shall be determined by USPB’s accountants using generally accepted
accounting principles consistently applied to the fiscal year.

(d)        Long-Term Incentive Plan.  In addition to CEO’s base Annual Salary
and Annual Incentive, CEO shall, (except as otherwise provided in this
Agreement), if CEO is employed by USPB through the end of YR 2012, be paid
long-term incentive compensation calculated as described in clause (1) below,
and if CEO is employed by USPB as of the end of YR 2015 be paid an additional
long-term incentive compensation, calculated as described in clause (2) below
(in both cases referred to as “Long-Term Incentive”):

(1)               the Long-Term Incentive to be paid as a result of CEO’s
employment on August 25, 2012 shall be equal to one and one-quarter percent
(1.25%) of the amount by which USPB’s Total Benefits from YR 2010, YR 2011, and
YR 2012, exceed $100,000,000 but are equal to or less than $130,000,000; plus
seventy-five one hundredths of a percent (0.75%) of the amount by which USPB’s
Total Benefits from YR 2010, YR 2011, and YR 2012 exceed $130,000,000, subject
to clause (3) below; and

(2)               the Long-Term Incentive to be paid as a result of CEO’s
employment on August 29, 2015 shall be equal to one and one-quarter percent
(1.25%) of the amount by which USPB’s Total Benefits from YR 2013, YR 2014, and
YR 2015, exceed $100,000,000 but are equal to or less than $130,000,000; plus
seventy-five one hundredths of a percent (0.75%) of the amount by which USPB’s
Total Benefits from YR 2013, YR 2014, and YR 2015 exceed $130,000,000, subject
to clause (3) below; and

(3)               any Long-Term Incentive accruing under this Agreement shall be
payable, on or before the date (“Long-Term Incentive Payment Date”) that is
sixty (60) days following the last day of YR 2012 or YR 2015, respectively, or,
if later, ten (10) days following receipt by USPB’s Board of Directors, of all
completed financial statements that are relevant to the calculation of the
applicable Long-Term Incentive, but in no event later than March 15th of the
calendar year first occurring after the end of the respective employment year.

 

                                                                  

 

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USPB/Steven D. Hunt

CEO Employment Agreement

2010-2015

 

(e)           Full-Term Incentive Plan.  In addition to any other payments paid
under this agreement, CEO shall be paid full-term incentive compensation
(“Full-Term Incentive”) in the amount of $775,000 if CEO is employed under this
Agreement through the end of YR 2012, and additionally, $825,000 if CEO is
employed under this Agreement through the end of YR 2015, except as otherwise
provided in this Agreement.  Any Full-Term Incentive accruing under this
Agreement shall be payable, on or before the date that is sixty (60) days
following the last day of YR 2012 or YR 2015, respectively, or if agreed to by
CEO, a later date coinciding with payments under Section 3(c) (Annual Incentive)
or Section 3(d) (Long-Term Incentive) for employment through the end of YR 2012,
and employment through the end of YR 2015, but in no event later than March 15
of the calendar year first occurring after the end of the respective employment
year.

(f)          Phantom Units Plan.  Effective as of the date of this Agreement,
CEO is granted phantom unit rights to phantom Class A Units of USPB with an
exercise price or purchase price of $55 per unit subject to reduction under
clause (4) below, and phantom Class B Units of USPB with an exercise price or
purchase price of $0 (the $55 per Class A Unit and $0 per Class B Unit referred
to as the “Exercise Price” or “Unit Purchase Price”) as provided in this
paragraph (f).  CEO has 20,000 phantom Class A Units minus any phantom Class A
Units purchased or exercised prior to September 1, 2009, and 20,000 phantom
Class B Units minus any phantom Class B Units exercised or purchased prior to
September 1, 2009.  The phantom Class A Units granted under this Agreement less
(any prior exercised or purchased phantom Class A Units and) any Class A Units
exercised or purchased under this Agreement are the “Available Phantom Class A
Units.”  The phantom Class B Units granted under this Agreement less (any prior
exercised or purchase of Class B Units and) any Class B Units exercised or
purchased under this Agreement are the “Available Class B Units.”  The rights of
exercise and purchase of the phantom unit rights are:

(1)               Appreciation Rights.  CEO shall exercise the phantom units by
written notice of the Chair of the Board of Directors of USPB.  Upon exercise of
the phantom units, CEO shall be paid the amount that the weighted average
trading price of the units (“Market Unit Price”) exceeds the Exercise Price per
unit times the number of phantom units exercised, not to exceed the number of
Available Phantom Class A Units and the Available Phantom Class B Units. 

(2)               Market Unit Price.  The “Market Unit Price” shall equal the
weighted average price of the previous 20,000 non-conditional unit transaction
prices of the prior sales of USPB Class A Units and/or Class B Units, from
Unitholders to unaffiliated third parties.  The weighted average price shall be
for the unit transactions of 20,000 units of USPB Class A and/or Class B Units
occurring immediately prior to the CEO’s notice of exercise. 

If the transactions of the Class A and Class B Units are linked, then the
transaction price shall be based on the linked Class A and Class B Unit Price
allocated to the Class A Units and Class B Units according to the percentage of
profits and losses allocated by USPB to Class A Units and Class B Units,
respectively, under the USPB LLC Agreement, Section 3.6(b). 

 

                                                                

 

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USPB/Steven D. Hunt

CEO Employment Agreement

2010-2015

 

If the number of exercised phantom Class A Units and phantom Class B Units are
not equal and/or the Market Unit Price is based in part or in whole on sales of
linked USPB Class A Units and Class B Units, then:  the Market Unit Price for
phantom Class A Units is the percentage of the linked Market Unit Price that is
the same as the percentage of profits and losses allocated to the Class A Units
at the time of exercise; and the Market Unit Price for phantom Class B Units is
the percentage of the linked Market Unit Price that is the same as the
percentage of profits and losses allocated to the Class B Units at the time of
exercise.

If the CEO is exercising an unequal number of phantom Class A Units and phantom
Class B Units, whether only phantom Class A Units, only phantom Class B Units,
or an unequal combination, and 20,000 separate Class A Units or Class B Units
for which the Market Unit Price will be determined have not transferred, then
the Market Unit Price shall be established first, from the appropriate separate
Class A Unit or Class B Unit transactions, and then, from the number of linked
Class A Unit and Class B Unit transactions so that in combination 20,000 unit
transactions are utilized to determine the Market Unit Price.

(3)               Exercise.  CEO shall be entitled to exercise phantom unit
rights at CEO’s election, at the time and under the conditions, and with the
same consequences as if CEO held similar unqualified options to purchase USPB
Class A or Class B Units acquired at the same time as the phantom unit rights. 
In either case, payment shall be made to CEO by 90 days after the notice of
exercise of the phantom unit rights, but in no event later than March 15th of
the calendar year first occurring after the end of the calendar year in which
the notice is given. 

(4)               Asset Sale Distribution Rights.  Should USPB liquidate some or
all of USPB’s assets and distribute the proceeds to unitholders, CEO shall be
paid an amount equal to the distribution to unitholders of Class A or Class B
Units on a per unit basis for the number of CEO’s Available Phantom Class A
Units and Available Phantom Class B Units without any deduction.  Of the
distributions to Class A Unitholders, the first $55 per Class A Unit of such
cumulative distributions shall not be paid to CEO per Available Phantom Class A
Unit and cumulative distributions in excess of $55 per Class A Unit shall be
paid to CEO without deduction.  The Exercise Price of phantom Class A Units
under this Section 3(f) shall be reduced by the distributions to Class A
Unitholders up to the cumulative first $55 per Class A Unit.  The amount under
this clause (4) shall be paid at the time distributions are made to the
unitholders.  If USPB Class A or Class B Units are redeemed as part of the
distribution, the corresponding proportional number of Available Phantom Class A
Units or Available Phantom Class B Units shall be deemed to be exercised as part
of the distribution.

 

 

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USPB/Steven D. Hunt

CEO Employment Agreement

2010-2015

 

(5)               Ownership Interest Distribution Rights.  If USPB distributes
ownership rights of another entity to its unitholders, CEO shall be granted
phantom ownership rights in proportion to the Available Phantom Class A Units
and Available Phantom Class B Units held by CEO to the total issued units or, at
the election of CEO, actual ownership rights corresponding to the phantom units
as if the Available Phantom Class A Units are Available Phantom Class B Units
were purchased by CEO under clause (6) and were issued to CEO prior to the time
of ownership right distribution.  If USPB units are redeemed as part of the
distribution, the corresponding amount of Available Phantom Class A Units and
Available Phantom Class B Units shall be deemed to be exercised as part of the
distribution.

(6)               Purchase Rights.  Effective as of termination of this
Agreement until 18 months after termination of this Agreement, or within 10 days
prior to an event that is a liquidation or an event under which liquidation
distributions would be made by USPB to Class A Unitholders, and at the election
of CEO; or, upon mutual agreement of CEO and USPB; CEO may purchase the number
of USPB Class A Units at the Unit Purchase Price corresponding to the Available
Phantom Class A Units held by CEO.  At the election of CEO, CEO may purchase the
number of USPB Class B Units at the Unit Purchase Price corresponding to the
Available Phantom Class B Units held by CEO.  USPB shall pay the costs of
appraisal of USPB Class A Units and USPB Class B Units, if CEO purchases all
Available Phantom Class A Units or all Available Phantom Class B Units.  Upon
purchase, USPB will grant CEO the same rights, privileges, allocations,
distributions, liquidating distributions, and transferability of the Class A
Units and Class B Units purchased by CEO as other holders of Class A Units and
Class B Units, which may require special allocations as provided in the USPB LLC
Agreement, Section 3.3(h).  CEO may designate the purchased Class A Units or
Class B Units to be held by CEO’s Designated Beneficiary identified under
Section 3(h), providing CEO retains control over voting rights and any right to
transfer the Class A or Class B Units during the time CEO is employed by USPB. 
The purchase of Class A Units or Class B Units under this clause (6) shall
reduce the corresponding number of Available Phantom Class A Units and Available
Phantom Class B Units held by CEO.

(7)               Anti-dilution.  CEO’s phantom unit rights under this paragraph
(f) shall not be diluted by actions of USPB including transfer of assets to
another entity or issuance of units such that the number of unexercised phantom
unit rights held by CEO at the time of a dilution event under this paragraph (f)
shall be increased so that CEO’s phantom unit rights are not diluted.  For
purposes of this clause (7), USPB’s issuance to CEO under this paragraph (f),
issuance of additional units at or above the Market Unit Price, or the issuance
of debt instruments or preferred units with fixed (interest like) returns shall
not be considered dilution of CEO’s phantom unit rights.

(g)        Other Benefits. CEO shall be entitled to paid vacations, personal and
sick days consistent with the policy of USPB.  CEO shall receive other
compensation as approved by the Board of Directors and shall participate in all
fringe benefits approved by the Board of Directors (including, without
limitation, group medical, life, disability and accidental death and
dismemberment insurance) and benefit plans which shall be available from time to
time to management employees of USPB. 

 

 

 

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USPB/Steven D. Hunt

CEO Employment Agreement

2010-2015

 

(h)        Beneficiary If CEO Is Deceased.  If CEO has deceased:  (1) during the
term of this Agreement, or (2) after this Agreement expires or is terminated,
the payments due or payable to CEO shall be paid to the CEO’s beneficiary
(referred to as the “Designated Beneficiary”) as provided in this Section
3(h).   If the CEO has deceased, the Designated Beneficiary shall have the
authority of the CEO under Section 3(f)(3) to exercise the phantom unit rights
and under Section 3(f)(6) to purchase Available Phantom Class A Units and
Available Class B Units.

The Designated Beneficiary is Mary F. Hunt, if she is then living, primary
beneficiary; or if Mary F. Hunt is not then living, the Trustee, serving as
such, of the Steven D. Hunt Trust under Trust Agreement dated February 11, 2005,
secondary beneficiary.  If Mary F. Hunt is the Designated Beneficiary and she
deceases prior to all of the payments and rights under this Section 3(h) being
completed, then the Trustee identified above shall be the Designated Beneficiary
under this Section 3(h).  Mary F. Hunt  may be replaced by the Trustee as the
Designated Beneficiary if the Trustee notifies USPB in writing that the Trustee
is assuming the duties of Designated Beneficiary, whether due to Mary F. Hunt
being unable, incapacitated or otherwise.  Upon receipt of the written notice,
the Trustee shall then replace Mary F. Hunt as the Designated Beneficiary.  Upon
request, the Chair of the Board of Directors will acknowledge the Trustee as
second beneficiary upon receipt of proper notification.  CEO shall notify the
Chair of the Board of Directors in writing as to who is the Trustee and the
contact information for the Trustee, as well as any change in the Trustee.  The
Trustee as the secondary beneficiary shall be entitled to receive the payments
due or payable to CEO and the Trustee shall have the authority of the CEO under
Section 3(f)(3) to exercise the phantom unit rights and under Section 3(f)(6) to
purchase Available Phantom Class A Units and Available Phantom Class B Units,
provided the Company has been notified in writing of the Trustee and there is
demonstration that the Trustee is duly authorized to act as such. 

CEO may change the Designated Beneficiary by submitting a written change of
beneficiary form to the Chair of the Board of Directors to be included in the
minutes of the Board of Directors.  If the Board of Directors is unable to
determine or locate the Designated Beneficiary in the two functions of:  (1) to
whom or what entity should payments due or payable to CEO be paid; and (2) who
shall have the authority of the CEO under Section 3(f)(3) to exercise the
phantom unit rights, then the Designated Beneficiary shall be deemed to be the
estate of the CEO as to the entity to which the payments should be made, and the
administrator of CEO’s estate shall have the authority of the CEO under Section
3(f)(3).

(i)            Reimbursement Of Business Expenses. During his employment under
this Agreement, CEO shall also be reimbursed by USPB for reasonable business
expenses actually incurred or services provided under this Agreement, upon
presentation of expense statements or other supporting information within 60
days after the expense is incurred.  In no event will any expense be reimbursed
later than December 31st of the calendar year first following the calendar year
in which the expense was incurred.

(j)            Renegotiation Due to Change in Business.  USPB and CEO agree to
renegotiate the terms and conditions of this Section 3 to be effective for the
remainder of the term of the Agreement after August 31, 2012 if during CEO’s
employment under this Agreement if a material change in the business of USPB
occurs, in which:

 

 

 

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USPB/Steven D. Hunt

CEO Employment Agreement

2010-2015

 

(i)                revenues of National Beef Packing Company, LLC or its
successor increase by more than 50% in a fiscal year over the average revenue of
the prior two fiscal years;

(ii)               USPB enters a joint venture by merger, acquisition, contract
or otherwise in which USPB is not a majority owner; 

(iii)              the source of revenues of USPB or National Beef Packing
Company, LLC or its successor change more than 50% from the source of revenues
in fiscal year 2009;

(iv)              an adverse event such as widespread disease or widespread
calamity which prohibits or materially changes the ability of the members as a
whole to deliver cattle to USPB; or

(v)               other material change events of the same scope and magnitude
as those listed in clauses (i) to (iv).

4.          Termination.

(a)          Termination Upon Permanent Disability.  The employment of CEO may
be terminated by USPB on at least thirty (30) days prior written notice if the
Board of Directors determines that the CEO has become permanently disabled.  CEO
shall be deemed to be “permanently disabled,” as used in this Section, if CEO
has been substantially unable to discharge his duties and obligations under this
Agreement by reason of illness, accident, or disability for a period of 180 days
in any twelve-month period.  Any disputes concerning the nature or extent of
CEO’s disability will be determined by a neutral physician at the expense of
USPB.

(b)          Termination Upon Death.  The employment of CEO shall automatically
terminate on the date of CEO’s death.

(c)           Termination For Cause.  The employment of CEO may be terminated
immediately by USPB for cause upon written notice from the Chair of the Board of
Directors to the CEO after a Board determination that cause for termination
exists as provided in this paragraph.  The written notice shall provide
reasonable detail regarding the basis for the termination decision.  USPB shall
have “cause” to terminate CEO, as used in this Subsection, only if CEO has, and
the Board of Directors has determined by resolution that CEO has:

(1)               refused or failed, after reasonable written notice that the
refusal or failure would constitute a default under this Agreement, to carry out
any reasonable and material order of the Board of Directors given to him in
writing;

(2)               been guilty of a willful breach of the terms of this
Agreement;

(3)               demonstrated gross negligence or willful misconduct in the
execution of his material assigned duties;

 

                   

 

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USPB/Steven D. Hunt

CEO Employment Agreement

2010-2015

 

(4)               been convicted of a felony or other serious crime;

(5)               engaged in fraud, embezzlement or other illegal conduct to the
detriment of USPB;

(6)               intentionally imparted confidential information relating to
USPB to a third party, other than in the course of carrying out CEO’s duties,
which as resulted in material damage to USPB; or

(7)               otherwise fails to reasonably perform his duties and
obligations as contemplated under this Agreement.

(d)         Termination By USPB Other Than For Cause, Death, Or Disability.  In
addition to the circumstances set forth above in Sections 4(a), 4(b) and 4(c),
USPB may terminate CEO’s employment for any reason or no reason and with or
without cause upon thirty (30) days prior written notice to CEO.

(e)          Termination By CEO Other Than For Good Reason.  CEO may terminate
his employment under this Agreement for any reason or no reason upon thirty (30)
days prior written notice to USPB.

(f)          Termination By CEO For Good Reason.  CEO may terminate his
employment immediately at any time for good reason (as hereinafter defined) upon
written notice to USPB.  For purposes of this Subsection, “good reason” shall
mean the occurrence of any of the following: 

(1)               a significant reduction or adverse alteration in the duties,
authorities or responsibilities as CEO;

(2)               removal of CEO from, or any failure to re-appoint CEO to, any
titles, offices or positions held by CEO;

(3)               a significant reduction by USPB in CEO’s incentive
compensation as provided in this Agreement; or

(4)               a material and willful breach by USPB of any of its
obligations to CEO under this Agreement.

5.          Compensation Upon Termination.

(a)               Termination Upon Death Or Permanent Disability.  If CEO’s
employment is terminated pursuant to Section 4(a) or 4(b) above, CEO shall be
entitled to, and USPB’s obligation under this Agreement shall be limited to:

 

 

 

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CEO Employment Agreement

2010-2015

 

(1)               the payment of salary accrued under Section 3(a) to the date
of the termination plus continued monthly payment of salary under Section 3(a)
through the date (“Deemed Termination Date”) that is the earlier of the first
anniversary of the termination or the Expiration Date;

(2)               if termination occurs under Section 4(a), provision of fringe
benefits listed in Section 3(g), through the Deemed Termination Date, but
excluding vacation pay, personal and sick days, vehicle, telecommunications, and
401K contributions, (subject to any necessary consent of applicable insurers
which, if consent is not obtained within 30 days after termination, then the
cash value of the monthly premiums at the date of termination shall be paid to
CEO in equal monthly payments), through the Deemed Termination Date;

(3)               payment of the Annual Incentive in the amounts and at the
times provided under Section 3(c) through the employment year in which the
Deemed Termination Date occurs pro-rated for the last employment year based upon
the period through the Deemed Termination Date;

(4)               payment of the Long-Term Incentive is as provided in Section
3(d)(1) (less any amounts paid) and Section 3(d)(2) that would have accrued if
the CEO had remained employed under this Agreement through the end of YR 2015,
with payments to be made at the same times specified in Section 3(d)(3);

(5)               payment of the Full-Term Incentive under Section 3(e) within
thirty (30) days following the termination, that would have been paid if CEO had
remained employed under this Agreement through the end of YR 2012 (less any
amounts paid) and YR 2015, pro-rated based upon the period of CEO’s employment
under this Agreement through the Deemed Termination Date versus the period of
employment under this Agreement through the Expiration Date;

(6)               payments under this Section 5(a)(3), (4) and (5) are subject
to the Incentive Cap under Section 3(b) and USPB shall make payments that exceed
the Incentive Cap subject to the $2,000,000 per year Incentive Cap average in YR
2012 and YR 2015 as provided in Section 3(b).

(b)         Termination By USPB For Cause Or By CEO For Other Than Good Reason. 
If CEO’s employment is terminated by USPB pursuant to Section 4(c) above, or if
CEO terminates his employment pursuant to Section 4(e) above, USPB’s obligation
hereunder shall be limited to the payment of salary accrued under Section 3(a)
to the date of the termination, and the payment of noncompetition compensation
under Section 5(d), unless CEO is terminated pursuant to Section 4(c)(4) or
Section 4(c)(5) in which case noncompetition compensation will not be paid.

(c)          Termination By USPB Other Than For Cause, Death or Disability;
Termination By CEO For Good Reason.  If CEO’s employment is terminated pursuant
to Section 4(d) or 4(f) above, CEO shall be entitled to, and USPB’s obligation
under this Agreement shall be limited to:

 

                                                                 

 

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(1)               the payment of the salary accrued under Section 3(a) to the
date of the termination plus continued monthly payment of salary under Section
3(a) through the Expiration Date;

(2)               provision of fringe benefits listed in Section 3(g) through
the Expiration Date, but excluding vacation pay, personal and sick days,
vehicle, telecommunications, and 401K contributions, (subject to any necessary
consent of applicable insurers which, if consent is not obtained within 30 days
after termination, then the cash value of the monthly premiums at the date of
termination shall be paid to CEO in equal monthly payments); 

(3)               payment of the Annual Incentive in the amounts and at the
times provided under Section 3(c) as if CEO has remained employed through the
Expiration Date;

(4)               payment of the Long-Term Incentive at the amounts provided in
Section 3(d)(1) (less any amounts paid) and Section 3(d)(2) that would have
accrued if the CEO had remained employed under this Agreement through the end of
YR 2015, with payments to be made at the same times specified in Section
3(d)(3);

(5)               the payment of the Full-Term Incentive at the times and in the
amounts under Section 3(e) as if CEO had remained employed through the end of YR
2012 (less any amounts paid) and through the end of  YR 2015;

(6)               payments under this Section 5(c)(3),(4) and (5) are subject to
the Incentive Cap under Section 3(b) and USPB shall make payments that exceed
the Incentive Cap subject to the $2,000,000 per year Incentive Cap average in YR
2012 and YR 2015 as provided in Section 3(b); and

(7)               payment of the noncompetition compensation under Section 5(d).

(d)         Noncompetition Compensation.  In the event that CEO’s employment is
terminated (including by expiration of this Agreement), other than by death or
permanent disability under Section 4(a) or Section 4(b) or for cause under
Sections 4(c)(4) or 4(c)(5), and CEO is not employed by USPB or one of the USPB
Entities (defined in Section 7(a)); then USPB shall provide noncompetition
compensation for each of the eighteen (18) months first following the
termination of employment of CEO with USPB, provided USPB may terminate
noncompetition compensation prior to the end of the eighteen month period if the
Board of Directors determines the CEO violated the noncompetition restriction in
Section 6(a) or any of the remaining obligations under Section 6.  The period in
which noncompetition compensation is provided, from start to expiration or
earlier termination, is the “Noncompetition Period.”  Noncompetition
compensation shall be paid during the Noncompetition Period as follows:   

 

  

 

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(1)               Monthly Payments.  USPB shall pay CEO an additional month’s
salary in an amount equal to the annual Base Salary that would be paid to CEO
under this Agreement if CEO was employed or CEO’s Base Salary at the time of
termination, whichever is greater, divided by twelve (12), which payments shall
be paid at normal salary payment intervals in effect for USPB’s management
personnel at the date of termination; and

(2)               Group Benefits.  USPB shall also provide to CEO the benefits
provided to other employees of USPB such as group medical, life, disability, and
accidental death and dismemberment insurance, but excluding paid vacations,
personal and sick days, allowances, telecommunications equipment or services,
expense reimbursement (except on prior written approval), or 401K contributions,
subject to any necessary consent of applicable insurers.  If the consent of the
applicable insurers is not received within 30 days or in the event any
applicable law or any benefit plan referred to in Section 3(g)  prohibits or
otherwise precludes the provision of the benefits to CEO, the cash value of the
current premiums will be distributed to CEO in equal monthly payments during the
Noncompetition Period. The value of any prohibited or precluded benefits shall
be equal to the sum of the amount of premium, payment, or contribution that USPB
would have made on behalf of the CEO for the benefits during the Noncompetition
Period.

6.         Certain CEO Covenants. CEO expressly covenants and agrees to and with
USPB as set forth in this Section:

(a)       Noncompetition.  CEO recognizes and acknowledges that he has knowledge
of USPB and its affiliates (including National Beef Packing Co., LLC and
entities owned or controlled by National Beef Packing Co., LLC and its
affiliates), their operations, strategies and plans (collectively the
“Affiliates”) which was acquired during his employment with USPB.  During the
employment term and for a period of eighteen (18) months after the termination
of the CEO’s employment with USPB, CEO shall not, without the written consent of
USPB, within the United States of America, participate through management or
control or consult or be employed by any business or enterprise, other than USPB
and its Affiliates, which is engaged in the beef packing or processing industry
that involves any business activity that competes with the business of USPB and
its Affiliates.

 

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(b)       Confidential Information. CEO recognizes the interests of USPB and its
Affiliates in maintaining the confidential nature of its respective proprietary
information.  CEO shall not, during the Employment Term or at any time after the
termination of employment with the USPB, in any manner that does not promote the
interests of USPB and its Affiliates, directly or indirectly, publish, disclose
or use, or authorize anyone else to publish, disclose or use, any secret,
confidential or proprietary information of USPB, or its Affiliates which USPB
and its Affiliates intend to be maintained as confidential information that is
in the public domain through no fault of CEO, which is information acquired by
CEO in connection with CEO’s employment with USPB or work with the USPB prior to
the date of this agreement and relates to any aspect of the operations,
activities, research, investigations or obligations of USPB, or its Affiliates,
including confidential material or information relating to the business,
customers, suppliers, trade or industrial practices, trade secrets, technology,
know-how or intellectual property of USPB and its Affiliates (collectively, the
“Confidential Information”). Confidential Information does not include all
records, files, data, documents and the like relating to suppliers, customers,
costs, prices, systems, methods, personnel, equipment and other materials
relating to USPB, or the its Affiliates (including, but not limited to, the
Confidential Information), shall be and remain the sole property of USPB or its
Affiliates.  Any disclosure of Confidential Information by the CEO shall include
appropriate protection for the type of information to protect USPB’s interests
in the Confidential Information.  Upon termination of CEO’s employment with
USPB, CEO shall not remove from USPB’s premises, or retain, any of the
Confidential Information materials described in this Section. 

(c)        Return of Information.  Upon termination of CEO’s employment with
USPB for whatever reason, CEO shall return to or leave all Confidential
Information with USPB and its Affiliates, without making or retaining copies of
the Confidential Information, including all documents, records, notebooks and
other repositories containing Confidential Information.

(d)        Breach of Covenants.  If CEO breaches any of the covenants and
agreements contained in this Section 6, then, in addition to any other rights or
remedies of USPB, USPB shall have at its option the following specific rights
and remedies: (1) CEO’s right to any payments pursuant to Section 5(d) may be
terminated by USPB; (2) USPB shall have the right to enforce any legal or
equitable remedy (including injunctive relief) that may be available to USPB;
and (3) USPB shall be entitled to relief as necessary to remedy any willful
breach of the covenants and agreements under this Section that injures USPB or
its Affiliates.

(e)        Covenants Survive Termination.  Except to the extent otherwise
expressly limited to a restricted period in Section 6(a), all covenants and
provisions contained in this Section 6 shall survive any termination of CEO’s
employment with Company.

7.          Indemnification.

 

 

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(a)         Indemnified Claims.  USPB shall, to the extent not expressly
prohibited by the Delaware Limited Liability Company Act as set forth in the
Delaware Code commencing with Section 18-101 of the Delaware Code, indemnify CEO
against reasonable expenses, including attorneys' fees, and against loss or
liability incurred by or asserted against CEO in a legal matter or proceeding in
which CEO is a party or is threatened to be made a party because CEO is, or was,
an officer or employee of USPB or an affiliate of USPB (specifically including,
but not limited to, any acts of the CEO related to affiliates of USPB, National
Beef Packing Co., LLC and its affiliates, with USPB and all of these entities
referred to as “USPB Entities”).  USPB’s obligation to indemnify and hold
harmless includes, but is not limited to, all pending and future litigation and
claims against the USPB Entities, its officers, employees and directors which
may impose liability on CEO including those claims against the USPB Entities,
and claims relating to investigations relating to tort claims against the USPB
Entities, deceptive trade practices and anti-competitive conduct of the USPB
Entities, or their officers, employees and directors. The expenses against which
CEO is indemnified include, but are not limited to, all reasonable attorney fees
and other costs associated with legal representation for representation and
costs that are not reasonably covered by the USPB Entities.  USPB shall advance
amounts to cover expenses, or pay expenses, that are included in the foregoing
indemnity, upon request from the CEO. These indemnification rights shall not be
deemed to exclude any rights to which the CEO may otherwise be entitled.   The
foregoing right to indemnification shall:  (1) inure to the CEO whether or not
he is an officer or employee of the USPB Entities at the time the liability or
expenses are asserted, imposed or incurred and whether or not the claim asserted
is based on matters which pre-date this Indemnification Agreement; and (2)
extend to the CEO's heirs and legal representatives in the event of the CEO's
death. 

(b)         Exclusions from Indemnification.  The right to indemnification in
Subsection 8(a) does not include any liability or expense relating to a matter
in which the CEO is finally adjudged to have breached or failed to perform a
duty that CEO owes to the USPB Entities and the breach or failure to perform
constitutes any of the following:  (1) a willful failure to deal fairly with the
USPB Entities, or USPB or its members in connection with a matter in which the
CEO has a material conflict of interest; (2) a violation of the criminal law,
unless the CEO had reasonable cause to believe that CEO’s conduct was lawful or
no reasonable cause to believe that CEO’s conduct was unlawful; (3) a
transaction from which the CEO derived an improper personal profit; or (4)
willful misconduct.   Determination of whether the CEO is entitled to the
indemnification provided for above shall be made as provided in the Delaware
Limited Liability Company Act.

(c)         Insurance.  USPB further agrees that during the term of the
Employment Agreement and for a period of six (6) years after termination of the
Employment Agreement, USPB shall maintain in full force and effect a director’s
and officer’s insurance policy insuring the CEO against liability asserted and
incurred by the CEO in the CEO’s capacity as an officer, manager, employee or
agent of USPB Entities or arising from the CEO’s status as an officer, manager,
employee or agent of USPB Entities.  The insurance shall be in  amounts and
contain terms and conditions as are reasonable and customary for a company of
the size and scope of USPB participating in the industry and business in which
USPB is engaged, all as determined by the mutual agreement of USPB and the CEO.

(d)         Claims After Termination of Employment.  If CEO is no longer
employed by USPB and existing or new claims are made against USPB Entities or
the CEO, the CEO shall be paid (at a daily rate equal to CEO’s Base Salary at
the time of termination divided by 260) for all time spent as a witness, for
depositions, and similar pre-approved claim-related expenses to defend against
an indemnified claim.  The USPB Entities shall promptly make information of USPB
Entities available to CEO to defend the claims which may impose liability on
CEO.        

8.         Other Provisions.

(a)         Successors and Assigns.  This Agreement shall be binding on and
inure to the benefit of any successor of USPB.  Any successor shall absolutely
and unconditionally assume all of USPB’s obligations under this Agreement.

(b)         Disputes.  Any dispute, controversy or claim for damages arising in
connection with this agreement shall be settled exclusively by arbitration in
Kansas City, Missouri, at a location designated by USPB by an arbitrator
selected by the parties and in accordance with the rules of the American
Arbitration Association then in effect.  The parties shall share equally the
expenses of arbitration, unless otherwise agreed.

 

 

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(c)         Governing Law.  The validity, interpretation, construction,
performance, enforcement and remedies relating to this agreement and the rights
and obligations of the parties shall be governed by the substantive laws of the
state of Kansas.

(d)         Entire Agreement.  This Agreement constitutes the entire agreement
and understanding between the CEO and USPB in reference to all matters in this
Agreement.  This Agreement replaces and rescinds any prior agreements or
understandings between CEO and USPB.

 

CEO

 

 

/s/ Steven D. Hunt                   

Steven D. Hunt

 

 

U.S. PREMIUM BEEF, LLC

 

 

By:       /s/ Mark Gardiner        

       Mark Gardiner, Chair

       Board of Directors

 

Date:    July 10, 2009              

 

 

 

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Exhibit A

Compensation Example

 

 

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