Exhibit 10.2

 

EXECUTION VERSION

 

CATTLE PURCHASE AND SALE AGREEMENT

BETWEEN

NATIONAL BEEF PACKING COMPANY, LLC

AND

U.S. PREMIUM BEEF, LLC

 

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

 

RECITALS

 

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

 

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

 

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

 

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

 

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

 

1.                                      PURCHASE/SALE OF CATTLE.

 

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

 

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

 

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

 

2.                                      PURCHASE PRICE OF CATTLE.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

(2)                                  if there is a material breach of any
agreement or covenant of National Beef contained in this Agreement, USPB may
give written notice of the breach to National Beef and, if the breach is not
cured within a period of thirty (30) days (or, if the breach is a failure of
National Beef to make a payment to USPB or USPB members, five (5) business days)
following the notice of breach by USPB to National Beef (“National Beef Cure
Period”), USPB shall have the right to terminate this Agreement upon written
notice to National Beef within thirty (30) days following the expiration of the
National Beef Cure Period.  The effective date of any such termination under
this Section 7(2) shall be six (6) months following the date of delivery of the
notice of termination by USPB to National Beef, and during such six (6) month
period USPB and National Beef shall continue to perform their respective
obligations under this Agreement; provided, however, USPB may terminate the
Agreement prior to such six (6) month period upon written notice to National
Beef if National Beef fails to comply with the terms and conditions of this
Agreement including to pay for cattle as required (subject to a five
(5) business day cure period or any shorter period required by federal law);

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

11.                               NOTICES.  All notices and other communications
under this Agreement shall be in writing and shall be deemed to have been duly
delivered (i) upon delivery by hand, (ii) upon delivery by fax or electronic
transmission, provided written confirmation of such delivery is received,
(ii) five (5) days after being mailed by certified mail with postage paid and
return receipt requested or (iii) one (1) day after being mailed by overnight
courier to the Parties at the following addresses and fax numbers (or at another
address or fax number for a Party as the Party shall designate in a notice given
pursuant to this Section):

 

(a)                                  If to National Beef, to:

 

Chief Executive Officer

National Beef Packing Company, LLC

12200 Ambassador Drive, 5th Floor

Kansas City, MO  64163

 

With a copy to:

 

General Counsel

National Beef Packing Company, LLC

12200 Ambassador Drive, 5th Floor

Kansas City, MO  64163

Fax: (816) 713-8889

 

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and (which shall not be considered notice):

 

Leucadia National Corporation

Attn:  Justin R. Wheeler

315 Park Avenue South

New York, New York 10010

Fax: (212) 598-3245

Email:  jwheeler@leucadia-slc.com

 

and

 

Weil, Gotshal & Manges LLP

Attn:  Andrea A. Bernstein

Matthew J. Gilroy

767 Fifth Avenue

New York, New York 10153

Fax:  212-310-8007

Email: andrea.bernstein@weil.com

matthew.gilroy@weil.com

 

(b)                                 If to USPB, to:

 

Steven D. Hunt, CEO

U.S. Premium Beef, LLC

P.O. Box 20103

Kansas City, MO  64195

Fax:  (816) 713-8810

Email:  sdhunt@uspb.com

 

with a copy to:

 

Stoel Rives LLP

Attn:  Mark J. Hanson

33 South Sixth Street, Suite 4200

Minneapolis, MN 55402

Fax:  (612) 373-8881

Email:  mjhanson@stoel.com

 

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

 

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

 

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

 

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

 

[Signature page follows]

 

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

 

 

 

NATIONAL BEEF PACKING COMPANY, LLC

 

 

 

 

 

By:

/s/ Timothy M. Klein

 

Name:

Timothy M. Klein

 

Title:

Chief Executive Officer, President and Manager

 

 

 

 

 

U.S. PREMIUM BEEF, LLC

 

 

 

 

 

By:

/s/ Steven D. Hunt

 

Name:

Steven D. Hunt

 

Title:

Chief Executive Officer

 

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