Exhibit 10.3


 


FORM OF
EXCHANGE AGREEMENT


 


This Exchange Agreement (this “Agreement”) is
dated as of                               ,
2009, by and among National Beef, Inc., a Delaware corporation (“National
Beef”), U.S. Premium Beef, LLC, a Delaware limited liability company (“USPB”),
NBPCo Holdings, LLC, a South Dakota limited liability company (“NBPCo
Holdings”), TKK Investments, LLC, a Missouri limited liability company (“TKK”),
and TMKCo, LLC, a Missouri limited liability company (“TMKCo”, and
together with TKK, the “Klein Entities”).


 


WHEREAS, National Beef intends to consummate an
initial public offering (the “IPO”) of shares of its Class A common
stock (the “Class A Common Stock”);


 


WHEREAS, in connection with the IPO, National Beef
will purchase from National Beef Packing Company, LLC, a Delaware limited
liability company (“NBP LLC”), and the Members of NBP LLC, units of NBP
LLC;


 


WHEREAS, USPB, NBPCo Holdings, and the Klein Entities
(collectively, the “Members”) will own the balance of the outstanding
units of NBP LLC;


 


WHEREAS, National Beef believes that it is in its best
interests to increase its ownership of units of NBP LLC over time and agrees to
permit the Members to transfer their units of NBP LLC to National Beef from
time to time in exchange for the consideration specified herein;


 


WHEREAS, the parties hereto desire that this Agreement
govern the terms and conditions for the exchange of certain NBP LLC units (the “NBP
LLC Units”) for Class A Common Stock, cash, or a combination of both,
on the terms and subject to the conditions set forth herein;


 


NOW, THEREFORE, in consideration of the mutual
covenants and undertakings contained herein and for good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto hereby agree as follows:


 


ARTICLE I 

DEFINITIONS


 


Section 1.1.           Definitions.


 


The following definitions shall be for all purposes,
unless otherwise clearly indicated to the contrary, applied to the terms used
in this Agreement.


 


“Business Day” means each day that is not a
Saturday, Sunday or other day on which banking institutions in Kansas City,
Missouri are authorized or required by law to close.


 


“Fair Market Value” means, with respect to the Class A
Common Stock, the average per share closing price of the Class A Common
Stock for the ten (10) days on which the relevant market was open for
trading immediately preceding the Quarterly Exchange Date on the national
securities exchange or interdealer quotation system on which such Class A
Common Stock is then traded or listed, as reported by the Wall Street
Journal.  If the per share closing price
of the 


 

















 


Class A Common Stock cannot be ascertained in accordance with the
preceding sentence, then the Fair Market Value shall be determined by an independent
third party appraisal firm selected by the National Beef Audit Committee (or
another committee of National Beef consisting solely of independent directors).


 


“Person” means an individual, corporation,
limited liability company, partnership, joint venture, trust, estate,
unincorporated organization, association (including any group, organization,
co-tenancy, plan, board, council or committee), government (including a
country, state, county, or any other governmental or political subdivision,
agency or instrumentality thereof) or other entity (or series thereof).


 


“Quarter” means, unless the context requires
otherwise, a fiscal quarter of National Beef.


 


“Quarterly Exchange Date” means the date that
is the first day of any Quarter.


 


“Transfer Agent” means such bank, trust company
or other Person as shall be appointed from time to time by National Beef to act
as registrar and transfer agent for the Class A Common Stock.


 


ARTICLE II 

EXCHANGE OF NBP LLC UNITS


 


Section 2.1.           Exchange of NBP LLC Units.


 


(a)           Beginning
with the first Quarter following the date that is one hundred eighty (180) days
after the date of this Agreement, and subject to adjustment as provided in this
Agreement, each Member shall be entitled on any Quarterly Exchange Date to
surrender  all or a portion of the
NBP LLC Units held by it in exchange for either (at the option of National Beef):
(i) the delivery by National Beef of a number of shares of Class A
Common Stock equal to the number of NBP LLC Units surrendered (with such 1 to 1
exchange ratio subject to adjustment pursuant to Section 2.3 below); (ii) cash
in an amount equal to the Fair Market Value of the Class A Common Stock a
Member would receive pursuant to (i) above; or (iii) a combination of
Class A Common Stock and cash (any such exchange, an “Exchange”);
provided that, any such Exchange must be for a minimum of the lesser of (I) 100
NBP LLC Units; or (II) all of the NBP LLC Units held by such Member.


 


(b)           On
the Quarterly Exchange Date (and in accordance with the terms of this
Agreement): (i) the relevant NBP LLC Units shall be surrendered for
Exchange; (ii) all rights of the transferring Member as holder of such NBP
LLC Units shall cease; (iii) such Member shall be treated for all purposes
as having become the record holder of the issued Class A Common Stock, if
any; (iv) the Member’s right to receive cash, if any, shall vest with the
Member; and (v) the relevant shares of the Member’s Class B Common
Stock shall be surrendered to National Beef.


 


Section 2.2.           Exchange Procedures.


 


(a)           A
Member may exercise the right to Exchange NBP LLC Units set forth in Section 2.1(a) above
by providing to National Beef a written notice of Exchange, substantially 


 


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in
the form of Exhibit A hereto (the “Exchange Notice”), at
least ten (10) days prior to the Quarterly Exchange Date for the
applicable Quarter or within such shorter period of time as may be agreed by
National Beef and the exchanging Member. 
The Exchange Notice shall be duly executed by such Member and delivered
in accordance with Section 3.2 of this Agreement.  At
least three (3) Business Days prior to the Quarterly Exchange Date,
National Beef shall give written notice (the “Option Notice”) to the
exchanging Member of its intended settlement method; provided that, if National
Beef does not timely deliver an Option Notice, National Beef shall be deemed to
have elected to pay the consideration entirely in Class A Common
Stock.  The exchanging Member may retract
its Exchange Notice by giving written notice (the “Retraction Notice”)
to National Beef within two (2) Business Days after delivery of the Option
Notice (or, if no Option Notice is delivered, one (1) Business Day prior
to the Exchange Date).  The timely
delivery of a Retraction Notice shall terminate all of the exchanging Member’s
and National Beef’s rights and obligations under this Agreement arising from
the Exchange Notice and the NBP LLC Units subject to such retracted Exchange
shall remain beneficially owned by such Member and subject to the terms and
conditions of this Agreement.


 


(b)           Each
Member beneficially owning the NBP LLC Units that are subject to Exchange
pursuant to Section 2.1(a) above shall execute and deliver on or
before the Quarterly Exchange Date a written assignment and acceptance
agreement with respect to such NBP LLC Units, in a form reasonably acceptable
to National Beef.


 


(c)           In addition to the NBP LLC Units
exchanged pursuant to this Agreement, each exchanging Member shall surrender to
National Beef, for no additional consideration, a number of shares of National
Beef ‘s class B common stock (the “Class B Common Stock”) equal to
the number of NBP LLC Units transferred by the Member on such Quarterly
Exchange Date, all subject to adjustment consistent with Section 2.3; provided
that, if an Exchange occurs after the termination of the Stockholders’
Agreement of even date herewith between National Beef and the Members, then an
exchanging Member shall surrender one (1) share of Class B Common
Stock (for no additional consideration) for every ten (10) NBP LLC Units
(subject to adjustment consistent with Section 2.3 of this Agreement)
transferred by the Member on such Quarterly Exchange Date; and provided
further that, if such Exchange is in connection with an Internal Revenue
Code Section 351 transaction, then this subsection (c) shall not
apply.  To effect such surrender, the
exchanging Member shall execute and
deliver on or before the Quarterly Exchange Date a written stock power in a form reasonably acceptable
to National Beef surrendering such Class B Common Stock.


 


(d)           As
promptly as practicable following the surrender for Exchange of NBP LLC Units,
National Beef shall deliver or cause to be delivered, as applicable: (i) to
the exchanging Member, or to the office of the Transfer Agent, the number of
shares of Class A Common Stock issuable upon such Exchange, issued in the
name of the exchanging Member; and (ii) to the exchanging Member, the cash
due pursuant to this Agreement.


 


(e)           Each
certificate of Class A Common Stock issued pursuant to this Agreement
shall be imprinted with a legend in substantially the following form:


 


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“THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED.”


 


(f)            The parties hereto acknowledge and
agree that National Beef’s determination hereunder of the settlement method
(i.e., stock, cash or a combination thereof) for the Exchange shall be made by
the Audit Committee of National Beef (or another committee of National Beef consisting
solely of independent directors).


 


Section 2.3.           Splits, Distributions and
Reclassifications.   The exchange ratio set
forth in Section 2.1(a) shall be adjusted accordingly if there is: (1) any
subdivision (by split, distribution, reclassification, recapitalization or
otherwise) or combination (by reverse split, reclassification, recapitalization
or otherwise) of the NBP LLC Units that is not accompanied by an identical
subdivision or combination of the Class A Common Stock; or (2) any
subdivision (by split, distribution, dividend, reclassification,
recapitalization or otherwise) or combination (by reverse split,
reclassification, recapitalization or otherwise) of the Class A Common
Stock that is not accompanied by an identical subdivision or combination of the
NBP LLC Units.


 


Section 2.4.           Class A Common Stock to be
Issued.   National Beef shall use commercially
reasonable efforts to list the Class A Common Stock required to be
delivered upon Exchange prior to such delivery upon each national securities
exchange or inter-dealer quotation system upon which the outstanding Class A
Common Stock may be listed or traded at the time of such delivery. Nothing
contained herein shall be construed to preclude National Beef from satisfying
its obligations in respect of the Exchange of the NBP LLC Units by delivery of Class A
Common Stock which is held in the treasury of National Beef.


 


Section 2.5.           Tax Matters.  The delivery of Class A
Common Stock upon Exchange of NBP LLC Units shall be made without charge to the
exchanging Member for any stamp or other similar tax in respect of such
issuance.  The
parties shall report an Exchange consummated pursuant to this Agreement as a
taxable sale of NBP LLC Units by the exchanging Member to National Beef and no
party shall take a contrary position on any tax return.  At the time of an Exchange, the consideration
paid for the exchanged NBP LLC Units shall be allocated among the assets of NBP
LLC (and any subsidiary of NBP LLC that is a flow-thru or disregarded entity
for U.S. federal income tax purposes) in accordance with Sections 755 and 743(b) of
the Code and the Treasury Regulations promulgated thereunder, as reasonably
determined by the manager of NBP LLC.


 


Section 2.6.           Consideration for Exchange. 
The parties hereto acknowledge and agree that the consideration paid by
National Beef to the Members pursuant to the Tax Receivable Agreement by and
among National Beef and the Members  shall serve as
a portion of the consideration for the Exchanges contemplated hereunder.


 


Section 2.7.           Member Representations.  Each Member issued Class A Common Stock pursuant
to this Agreement hereby severally represents and warrants that, as of each
Quarterly Exchange Date upon which a Member is issued Class A Common
Stock, that: (a) it is acquiring the Class A Common Stock issued in
accordance with this Agreement for its own account with the present intention
of holding such stock for purposes of investment, and that it has no 


 


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intention of selling such
stock in a public distribution in violation of any federal or state securities
laws; (b) it is a sophisticated party for purposes of applicable federal
and state securities laws and regulations; (c) it believes that it has
such knowledge and experience in financial and business matters that such
Member is capable of evaluating the merits and risks of an investment in
National Beef; (d) it is able to bear the economic risks of an investment
in the Class A Common Stock and could afford a complete loss of such
investment; (e) the execution, delivery and performance of this Agreement
by such Member does not and will not conflict with, violate or cause a breach
of any agreement, contract or instrument to which such Member is subject; and (f) the
NBP LLC Units surrendered in connection with such Exchange are owned by the
Exchanging Member, free and clear from all liens and encumbrances.


 


ARTICLE III 

GENERAL PROVISIONS


 


Section 3.1.           Amendment. 
The provisions of this Agreement may be amended by the affirmative vote
or written consent of each of the parties hereto.


 


Section 3.2.           Addresses and Notices.  All notices, requests, claims, demands and
other communications hereunder shall be in writing and shall be given (and
shall be deemed to have been duly given upon receipt) by delivery in person, by
recognized overnight delivery service, by courier service, by fax, by
electronic mail (delivery receipt requested) or by registered or certified mail
(postage prepaid, return receipt requested) to the respective parties at the
following addresses (or at such other address for a party as shall be as
specified in a notice given in accordance with this Section 3.2):


 


	
  (a)

  	
   

  	
  If to National Beef, to:

  	
   

  	
  National Beef, Inc.

  
	
   

  	
   

  	
   

  	
   

  	
  12200 Ambassador Drive, 5th Floor

  
	
   

  	
   

  	
   

  	
   

  	
  Kansas City, MO 64163

  
	
   

  	
   

  	
   

  	
   

  	
  Attention: General Counsel

  
	
   

  	
   

  	
   

  	
   

  	
  Fax: (816) 713-8889

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  With a copy to:

  	
   

  	
  Sidley Austin LLP

  
	
   

  	
   

  	
   

  	
   

  	
  One South Dearborn Street

  
	
   

  	
   

  	
   

  	
   

  	
  Chicago, IL 60603

  
	
   

  	
   

  	
   

  	
   

  	
  Attention: John Sabl and Paul Choi

  
	
   

  	
   

  	
   

  	
   

  	
  Fax: (312) 853-7036

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (b)

  	
   

  	
  If to USPB, to:

  	
   

  	
  U.S. Premium Beef, LLC

  
	
   

  	
   

  	
   

  	
   

  	
  P.O. Box 20103

  
	
   

  	
   

  	
   

  	
   

  	
  Kansas City, MO 64195

  
	
   

  	
   

  	
   

  	
   

  	
  Attention: Steven D. Hunt

  
	
   

  	
   

  	
   

  	
   

  	
  Fax: (816) 713-8810

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  With a copy to:

  	
   

  	
  Stoel Rives LLP

  
	
   

  	
   

  	
   

  	
   

  	
  33 South Sixth Street, Suite 4200

  
	
   

  	
   

  	
   

  	
   

  	
  Minneapolis, MN 55402

  
	
   

  	
   

  	
   

  	
   

  	
  Attention: Mark J. Hanson

  
	
   

  	
   

  	
   

  	
   

  	
  Fax: (612) 373-8881

  



 


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  (c)

  	
   

  	
  If to NBPCo, to:

  	
   

  	
  NBPCo Holdings, LLC

  
	
   

  	
   

  	
   

  	
   

  	
  891 Two Rivers Drive

  
	
   

  	
   

  	
   

  	
   

  	
  Dakota Dunes, SD 57049

  
	
   

  	
   

  	
   

  	
   

  	
  Attention: Rich Jochum

  
	
   

  	
   

  	
   

  	
   

  	
  Fax: (605) 217-8001

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  With a copy to:

  	
   

  	
  Koley Jessen P.C., LLO

  
	
   

  	
   

  	
   

  	
   

  	
  1125 S 103rd Street,
  Suite 800

  
	
   

  	
   

  	
   

  	
   

  	
  Omaha, NE 68124

  
	
   

  	
   

  	
   

  	
   

  	
  Attention: Michael M. Hupp and

  
	
   

  	
   

  	
   

  	
   

  	
  Matthew Maser

  
	
   

  	
   

  	
   

  	
   

  	
  Fax: (402) 390-9005

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (d)

  	
   

  	
  If to the Klein Entities, to:

  	
   

  	
  TKK Investments, LLC

  
	
   

  	
   

  	
   

  	
   

  	
  TMKCo, LLC

  
	
   

  	
   

  	
   

  	
   

  	
  10217 Hwy 92

  
	
   

  	
   

  	
   

  	
   

  	
  Kearney, MO 64060

  
	
   

  	
   

  	
   

  	
   

  	
  Attention: Timothy M. Klein

  
	
   

  	
   

  	
   

  	
   

  	
  Fax: (816) 713-8852

  



 


Section 3.3.           Further Action. 
The parties shall execute and deliver all documents, provide all
information and take or refrain from taking action as may be necessary or
appropriate to achieve the purposes of this Agreement.


 


Section 3.4.           Binding Effect. 
This Agreement shall be binding upon and inure to the benefit of all of
the parties and their successors, executors, administrators, heirs, legal
representatives and assigns. Other than as expressly provided herein, nothing
in this Agreement will be construed to give any person other than the parties
to this Agreement any legal or equitable right, remedy, or claim under or with
respect to this Agreement or any provision of this Agreement.


 


Section 3.5.           Severability. 
If any term or other provision of this Agreement is held to be invalid,
illegal or incapable of being enforced by any rule of law, or public
policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions is not affected in any manner materially adverse
to any party. Upon a determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in a mutually acceptable manner in order that
the transactions contemplated hereby be consummated as originally contemplated
to the fullest extent possible.


 


Section 3.6.           Integration. 
This Agreement constitutes the entire agreement among the parties hereto
pertaining to the subject matter hereof and supersedes all prior agreements and
understandings pertaining thereto.


 


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Section 3.7.           Waiver. 
No failure by any party to insist upon the strict performance of any
covenant, duty, agreement or condition of this Agreement or to exercise any
right or remedy consequent upon a breach thereof shall constitute waiver of any
such breach of any other covenant, duty, agreement or condition.


 


Section 3.8.           Counterparts. 
This Agreement may be executed and delivered (including by facsimile
transmission) in one or more counterparts, and by the different parties hereto
in separate counterparts, each of which when executed and delivered shall be
deemed to be an original but all of which taken together shall constitute one
and the same agreement. Copies of executed counterparts transmitted by telecopy
or other electronic transmission service shall be considered original executed
counterparts for purposes of this Section 3.8.


 


Section 3.9.           Applicable Law. 
This Agreement shall be governed by, and construed in accordance with,
the law of the State of Delaware.


 


[Signature Page Follows]


 


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IN WITNESS WHEREOF, the parties have caused this
Agreement to be duly executed and delivered, all as of the date first set forth
above.


 


	
   

  	
  NATIONAL BEEF, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  U.S. PREMIUM BEEF, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  NBPCO HOLDINGS, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  TKK INVESTMENTS, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  TMKCo, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  



 


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EXHIBIT A


 


FORM OF

NOTICE OF EXCHANGE


 


National Beef, Inc.


12200 Ambassador Drive, 5th Floor


Kansas City, MO  64163


Attention:  General Counsel


Fax:  (816) 713-8889


 


Reference is hereby made to the Exchange Agreement,
dated as of                                 ,
2009 (the “Exchange Agreement”), among National Beef, Inc., U.S.
Premium Beef, LLC, NBPCo Holdings, LLC, and TKK Investments, LLC, and TMKCo,
LLC, as amended from time to time.  Capitalized terms used but not defined
herein shall have the meanings given to them in the Exchange Agreement.


 


(the “Exchanging
Member”) desires to Exchange the number of NBP LLC Units set forth below.


 


Number of NBP LLC Units to be Exchanged:


 


The Exchanging Member hereby: (1) affirms and gives the
representations set forth in Section 2.7 of the Exchange Agreement; (2) gives
notice of its desire to Exchange such NBP LLC Units for [Class A Common
Stock] as set forth in the Exchange Agreement, (3) irrevocably constitutes
and appoints any officer of National Beef as its attorney, with full power of
substitution, to Exchange said NBP LLC Units on the books of NBP LLC for [Class A
Common Stock on the books of National Beef], with full power of substitution in
the premises.


 


IN WITNESS WHEREOF the undersigned, by authority duly
given, has caused this Notice of Exchange to be executed and delivered by the
undersigned.


 


 


	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  



 


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