**SEVENTH AMENDMENT TO CREDIT AGREEMENT**

THIS SEVENTH AMENDMENT TO CREDIT AGREEMENT ("**SeventhAmendment**") is executed this 19th day of July, 2006 ("**Effective Date**"),by and between U.S. PREMIUM BEEF, LLC, a limited liability company formed underthe laws of the State of Delaware (successor, by merger, to U.S. Premium Beef,Ltd.), ("**Borrower**"), whose mailing address is 12200 North AmbassadorDrive, Suite 501, Kansas City, Missouri 64163, and COBANK, ACB ("**CoBank**"),as agent for the benefit of the Syndication Parties (in that capacity, "**Agent**"),whose mailing address is 5500 South Quebec Street, Greenwood Village, Colorado80111.

**RECITALS**

A.**     **CoBank, as Agent and as a Syndication Party(collectively, the present and future Syndication Parties shall be referred toherein as the "**Syndication Parties**" and, each, a "**Syndication Party**")and Borrower's predecessor, U.S. Premium Beef, Ltd. ("**Original BorrowerEntity**"), entered into that certain Credit Agreement (Term Loan) dated asof November 25, 1997, as amended by that certain First Amendment to CreditAgreement (Term Loan) dated effective as of March 21, 2000, as amended by thatcertain Second Amendment to Credit Agreement (Term Loan) dated effective as ofAugust 24, 2001, as amended by that certain Third Amendment to Credit Agreementdated effective as of August 29, 2002, as amended by that certain FourthAmendment to Credit Agreement dated effective as of August 6, 2003, as amendedby that certain Fifth Amendment to Credit Agreement dated effective as ofSeptember 29, 2004, and as amended by that certain Sixth Amendment to CreditAgreement dated effective as of June 20, 2006 (as so amended and as furtheramended, modified, supplemented, restated or replaced from time to time, the "**CreditAgreement**") pursuant to which the Syndication Parties agreed to make a termloan to Original Borrower Entity under the terms and conditions set forth inthe Credit Agreement.

B.      Borrower has requested that the SyndicationParties amend the Credit Agreement provisions with respect to distributions toequity holders, which the Syndication Parties are willing to do under the termsand conditions as set forth in this Seventh Amendment.

**AGREEMENT**

NOW, THEREFORE, for good andvaluable consideration, the receipt of which is hereby acknowledged, includingthe mutual promises and agreements contained herein, the parties hereto herebyagree as follows:

 

 

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**1.                 ****Amendments to Credit Agreement.**  The Credit Agreementis amended as of the Effective Date as follows:

**1.1       **A new Section 1.136 is added to Article I, reading asfollows:

**1.136**   **Excessive Distribution**: shall have the meaning set forth in Section 13.11.

**1.2       **Section 13.11 is amended in its entirety to read as follows:

**13.11 Payment of Dividends**.  Borrower shall not,directly or indirectly, declare or pay any dividends on account of any sharesof any class of its capital stock now or hereafter outstanding, or set aside orotherwise deposit or invest any sums for such purpose, or redeem, retire,defease, purchase or otherwise acquire any shares of any class of its capitalstock (or set aside or otherwise deposit or invest any sums for such purpose)for any consideration other than common stock or apply or set apart any sum, ormake any other distribution (by reduction or capital or otherwise) in respectof any such shares or retire capital equities or other written notices ofallocation, or make any other distribution or allocation of its earnings,surplus or assets to any holder of stock, allocated equities or other writtennotices of allocation, or agree to do any of the foregoing; providedthat prior to the Conversion Date, Borrower may: (a) refund any Unit Retainsand/or pay interest on Unit Retains so long as such interest payments aretreated as expenses to be deducted from income in the calculation of the DebtService Coverage Ratio; (b) distribute patronage-sourced earnings annually inthe form of cash and qualified written notices of allocation, so long as thecash portion is the minimum amount required to qualify the distribution as adeductible patronage distribution for federal income tax purposes, and suchwritten notices constitute equity and not debt; (c) during any fiscal year ofBorrower retire written notices of allocation issued during any previous fiscalyear, and (d) redeem or retire the interests of retiring and/or terminatedmembers, and provided further that (e) on and after the Conversion Date,so long as Borrower is treated as a partnership for tax purposes, Borrowershall be entitled to make distributions to its members (i) on account of thefederal and state income taxes that would be assessed to such members based onBorrower's income, provided that the aggregate amount of all such distributionsin any calendar year may not exceed the amount of such income which would betaxable to such members for such calendar year, multiplied by the maximumapplicable state and federal income tax rate for the calendar year in whichtaxed, and (ii) without duplication of any amount included within clause(e)(i), equal to the amount, up to an aggregate of $2,000,000.00 indistributions under this clause (e)(ii) for all members, of federal and stateincome taxes that would be assessed to such member on account of the transferof assets and liabilities occurring in connection with the Permitted ConversionTransaction; so long as, in the case of (a), (b), (c), (d) and/or (e),Borrower will, after taking into account any such payments, satisfy therequirements of Section 12.19 hereof as of the end of the Quarter during whichsuch payments or refunds will be made; and provided that in the eventthat, with respect to any calendar year commencing on or after January 1, 2006,Borrower makes any distribution to its members pursuant to clause (e)(i) ofthis Section based on an estimate of the amount of Borrower's income whichwould be taxable to Borrower's members for such calendar year, and,subsequently, under the applicable federal income tax return of Borrower asfiled, Borrower's members are in fact taxed based on a lesser amount of income,resulting in a distribution to its members of an amount in excess of the amountallowed pursuant to clause (e)(i) of this Section ("**Excess Distribution**"),the amount of such Excess Distribution shall be deducted from the amount whichcould otherwise be distributed to its members during the following calendaryears until such Excess Distribution has been fully deducted.

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**2.                 ****Conditions to Effectiveness of thisSeventh Amendment**.  The effectiveness of this Seventh Amendment issubject to satisfaction, in Agent's sole discretion, of each of the followingconditions precedent:

**2.1    **Representations and Warranties. The representations and warranties of Borrower shall be true and correct in allmaterial respects on and as of the Effective Date as though made on and as ofsuch date.

**2.2    No Event of Default**.  No Event of Default shall haveoccurred and be continuing under the Credit Agreement as of the Effective Dateof this Seventh Amendment. 

**2.3    Costs and Expenses**.  Borrower shall have reimbursedAgent for all of its costs and expenses incurred in connection with thisSeventh Amendment, including attorney's fees to Agent's counsel.

**3.                 ****General Provisions**.

**3.1    No Other Modifications**.  The Credit Agreement, asexpressly modified herein, shall continue in full force and effect and bebinding upon the parties thereto.        

**3.2    Successors and Assigns**.  This Seventh Amendment shallbe binding upon and inure to the benefit of Borrower and Agent, and theirrespective successors and assigns, except that Borrower may not assign ortransfer its rights or obligations hereunder. 

**3.3     Definitions**.  Capitalized terms used, but not defined,in this Seventh Amendment shall have the meaning set forth in the CreditAgreement.

**3.4 **   **Severability**. Should any provision of this Seventh Amendment be deemed unlawful orunenforceable, said provision shall be deemed several and apart from all otherprovisions of this Seventh Amendment and all remaining provisions of thisSeventh Amendment shall be fully enforceable.

**3.5 **   **GoverningLaw**.  To the extent not governed by federal law, this Seventh Amendment andthe rights and obligations of the parties hereto shall be governed by,interpreted and enforced in accordance with the laws of the State of Colorado.

**3.6 **   **Headings**. The captions or headings in this Seventh Amendment are for convenience only andin no way define, limit or describe the scope or intent of any provision ofthis Seventh Amendment.

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**3.7      Counterparts**.  This Seventh Amendment may be executedin any number of counterparts and by different parties to this SeventhAmendment in separate counterparts, each of which when so executed shall bedeemed to be an original and all of which taken together shall constitute oneand the same agreement.  Copies of documents or signature pages bearingoriginal signatures, and executed documents or signature pages delivered by telefaxor facsimile or by e-mail transmission of an Adobeâ file format document (also known as a PDF file), shall, ineach such instance, be deemed to be, and shall constitute and be treated as, anoriginal signed document or counterpart, as applicable.  Any party delivering an executed counterpart of this SeventhAmendment by telefax or telefacsimile, or bye-mail transmission of an Adobe file format documentalso shall deliver an original executed counterpart of this SeventhAmendment, but the failure to deliver an originalexecuted counterpart shall not affect the validity, enforceability, and bindingeffect of this Seventh Amendment.

**[SignaturesFollow on Next Page]**

 

 

 

 

 

 

 

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** **

**IN WITNESS WHEREOF,**the parties hereto have caused this Seventh Amendment to Credit Agreement to beexecuted as of the Effective Date.

| **BORROWER:**                                                                                    |
|--------------------------------------------------------------------------------------------------|
|                                                                                             |
| U.S.PREMIUM BEEF, LLC, a limited liability company formed under the laws of theState of Delaware |
|                                                                                             |
| By: /s/Steven D. HuntName:Steven D. HuntTitle:Chief Executive Officer                            |
|                                                                                             |
| **AGENT:**                                                                                       |
|                                                                                             |
| COBANK, ACB                                                                                      |
|                                                                                             |
| By: /s/Jim StutzmanName: JimStutzmanTitle: VicePresident, Corporate Finance Division             |
|                                                                                             |
| **SYDICATIONPARTY:**                                                                             |
|                                                                                             |
| COBANK, ACB                                                                                      |
|                                                                                             |
| By: /s/Jim StutzmanName: JimStutzman Title: Vice President, Corporate Finance Division           |

                                                                                                                                                                                                                                                                                                                                                                                

 

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