Document:

exh10-02.htm

    
      
         

      

      
         

        
          

        

      

      Form8K

    

    SILICON
IMAGE, INC.

     

    TRANSITIONAL
EMPLOYMENT AND SEPARATION AGREEMENT

     

    This
Transitional Employment and Separation Agreement (“Agreement”) is entered into as of
January 6, 2010 by and between Harold Covert (“Employee”)
and Silicon Image, Inc. (“Company”)
(collectively referred to as the “Parties”).

     

    RECITALS

     

         WHEREAS, Employee has been
employed by the Company as its President and Chief Operating Officer as the
Company undertook a search for a Chief Executive Officer; and

     

         WHEREAS, the Company has
hired a Chief Executive Officer, and the Parties wish to agree upon the terms
and conditions applicable to a transitional period of employment for Employee
and upon Employee’s termination of employment with the Company;

     

    NOW THEREFORE, in
consideration of the promises made herein, the Parties hereby agree as
follows:

     

    AGREEMENT

     

    1. Transitional Employment and
Service on Board of Directors.  Employee shall continue in
active full-time employment with the Company for the “Transitional
Period”, which shall commence on January 6, 2010 (the “Transitional
Date”) and which shall continue until September 30, 2010, unless earlier
terminated for “Cause” (as hereinafter defined) (in any case, the “Termination
Date”).  During the Transitional Period, Employee shall serve
solely as the Company’s President and, as such, shall serve at the pleasure of
the Company’s CEO in assisting with the transition of the day to day operations
of the Company to the CEO.  Within ten (10) business days of the
Transitional Date, the Board of Directors of the Company (the “Board”) shall
appoint Employee to the Board, and Employee shall serve on the Board for the
Transitional Period.

     

    2. Resignation of Titles and
Positions.  Effective as of the Termination Date, Employee will
resign from employment with the Company and his membership on the Board and
relinquish all titles and positions then held by Employee with the Company or
any subsidiary of the Company.  Employee’s resignation from the
Company and the Board shall be in the form attached hereto as Exhibit
1.

     

    3. Compensation and Benefits
During Transitional Period.  As an inducement to Employee to
enter into this Agreement and provide services to the Company during the
Transitional Period, the Company shall pay Employee the amount of $100,000 on
the Transitional Date.

     

    During
the Transitional Period, Employee will continue to receive payment of his
current base salary and will continue to participate in applicable Company
employee benefit plans to the extent of his participation and on the terms and
conditions in effect immediately prior to the commencement of the Transitional
Period.  During the Transitional Period, Employee’s stock options will
continue to vest in accordance with their terms, provided, however, that
Employee shall not receive any additional options or other rights to purchase
shares of the Company’s common stock (except for shares acquired in connection
with participation under the Company’s Employee Stock Purchase Plan) following
the Transitional Date.

     

     

    
      
        
        

      

      
        
        

        
        

        
          

          

        

      

      
        
        

      

    

     

    4. Payments and
Benefits.

     

           (a) Accrued Payments and
Benefits.  Upon the termination of Employee’s employment with
the Company for any reason, the Company shall pay to Employee all amounts and
benefits that have accrued or were earned but remain unpaid through the
Termination Date in respect of salary and unreimbursed expenses, including
accrued and unused vacation.

     

           (b) Separation
Payment.  Upon the conclusion of the Transitional Period, and
subject to Employee’s delivery to the Company of a signed general release of
claims in favor of the Company in a form acceptable to the Company, which shall
be substantially in the form attached hereto as Exhibit 2 (the “Release”)
and the resignation in the form attached hereto as Exhibit 1, following
expiration of the statutory rescission period without any rescission of the
Release, the Company will pay Employee the amount of $200,000 (the “Separation
Payment”). Employee acknowledges that the Company may withhold applicable
taxes from all payments hereunder.

     

    Notwithstanding
the foregoing, Employee acknowledges and agrees that in the event that the
Company terminates Employee’s employment for Cause (as hereinafter defined) or
Employee resigns for any reason during the Transitional Period, Employee will
not be entitled to the Separation Payment.

     

    For
purposes of this Agreement, “Cause” shall mean:

     

            (1) a good
faith determination by the Board that Employee willfully failed to follow the
lawful written directions of the Board; provided that no termination for Cause
shall occur unless Employee: (i) has been provided with notice of the Company’s
intention to terminate the Employee for Cause, and (ii) has had at least 30 days
to cure or correct his behavior;

     

           (2) Employee’s
engagement in gross misconduct, which the Board determines in good faith is
detrimental to the Company; provided that no termination for Cause shall occur
unless the Employee: (i) has been provided with notice of the Company’s
intention to terminate the Employee for Cause, and (ii) has had at least 30 days
to cure or correct his behavior;

     

           (3) Employee’s
failure or refusal to comply in all material respects with (i) the Company’s
Employee Invention Assignment, Confidentiality and Arbitration Agreement, (ii)
the Company’s insider trading policy, or (iii) any other policies of the
Company, where such failure or refusal to comply would be detrimental to the
Company; provided that no termination for Cause shall occur unless Employee: (i)
has been provided with notice of the Company’s intention to terminate Employee
for Cause, and (ii) has had at least 30 days to cure or correct his behavior if
such behavior is curable;

     

           (4) Employee’s
conviction of, or a plea of no contest to, a felony or crime involving moral
turpitude or commission of a fraud which the Board in good faith believes would
reflect adversely on the Company; or

     

           (5) Employee’s
unreasonable or bad-faith failure or refusal to cooperate with the Company in
any investigation or formal proceeding initiated by the Board in good
faith.

     

           (c) Company Stock
Options.

     

              (i) Vested
Options.  Employee shall have that period of time following the
Termination Date specified in the governing written stock option agreement to
exercise any options to purchase shares of the Company’s common stock (“Options”)
which are vested, outstanding and not exercised as of the Termination
Date.

     

              (ii) Unvested
Options.  Any Options which remain unvested as of the
Termination Date shall expire effective as of the Termination Date.

     

           (d) Benefits. Employee’s
health insurance benefits will cease on the Termination Date, subject to
Employee’s eligibility and timely election to continue group health coverage
under COBRA, in which case Employee will be responsible for the payment of all
further COBRA premiums.  Employee’s participation in all other
employee benefits and incidents of employment will cease on the Termination
Date.  Employee will cease accruing employee benefits, including, but
not limited to, vacation time and paid time off, as of the Termination
Date.

     

    
      
      

      
        

        

      

    

    
    

     

    5. No Mitigation
Required.  The parties agree that the payments and benefits
provided to Employee under this Agreement are over and above anything owed to
Employee by law and are offered in exchange for and conditioned upon Employee’s
execution of the Release.  Employee shall not be required to seek
other employment or to attempt in any way to reduce amounts payable to him
pursuant to this Agreement.  Further, the amount of benefits provided
under this Agreement shall not be reduced by any compensation earned by or other
benefits provided to Employee as a result of employment by another employer
following the Termination Date.

     

    6. Confidential
Information.  During the Transitional Period and following the
Termination Date, Employee shall continue to maintain the confidentiality of
this Agreement and of all confidential and proprietary information of the
Company and shall continue to comply with the terms and conditions of the
Employee Inventions and Confidentiality Agreement between Employee and the
Company.  Employee shall return all of the Company’s property and
confidential and proprietary information in his/her possession to the Company on
the Termination Date.

     

    7. No
Cooperation.  Employee agrees that he will not counsel or
assist any attorneys or their clients in the presentation or prosecution of any
disputes, differences, grievances, claims, charges, or complaints by any third
party against the Company and/or any officer, director, employee, agent,
representative, shareholder or attorney of the Company, unless under a subpoena
or other court order to do so.  Employee further agrees both to
immediately notify the Company upon receipt of any court order, subpoena, or any
legal discovery device that seeks or might require the disclosure or production
of the existence or terms of this Agreement, and to furnish, within three (3)
business days of its receipt, a copy of such subpoena or legal discovery device
to the Company.

     

    8. Non-Solicitation.  Employee
agrees that for a period of eighteen (18) months immediately following the
Termination Date, Employee shall not either directly or indirectly solicit,
induce, recruit or encourage any of the Company’s employees to leave their
employment, or take away such employees, or attempt to solicit, induce, recruit,
encourage, or take away employees of the Company, either for him/herself or any
other person or entity.  Employee further agrees not to otherwise
interfere with the relationship of the Company or any of its subsidiaries or
affiliates with any person who, to the knowledge of Employee, is employed by or
otherwise engaged to perform services for the Company or its subsidiaries or
affiliates (including, but not limited to, any independent sales representatives
or organizations) or who is, or was within the then most recent prior
twelve-month period, a customer or client of the Company, or any of its
subsidiaries.

     

    9. Costs.  The
Parties shall each bear their own costs, expert fees, attorneys’ fees and other
fees incurred in connection with this Agreement except as specifically set forth
herein.

     

    10. Post-Termination
Assistance.  Following the Termination Date, and upon
reasonable notice, Employee shall provide such information and assistance to the
Company as may reasonably be requested by the Company in connection with any
audit, investigation or litigation in which it or any of its subsidiaries is or
may become a party; provided that (i) the Company
agrees to reimburse Employee for any related out-of-pocket expenses, including
travel expenses, and (ii) any such assistance may not unreasonably interfere
with Employee’s then-current employment.

     

    11. Tax
Consequences.  The Company makes no representations or
warranties with respect to the tax consequences of the payment of any sums to
Employee under the terms of this Agreement.  Employee agrees and
understands that he is responsible for payment, if any, of local, state and/or
federal taxes on the sums paid hereunder by the Company and any penalties or
assessments thereon and that all such sums shall be paid less all applicable
withholdings and deductions.  Employee further agrees to indemnify and
hold the Company harmless from any claims, demands, deficiencies, penalties,
assessments, executions, judgments, or recoveries by any government agency
against the Company for any amounts claimed due on account of Employee’s failure
to pay federal or state taxes or damages sustained by the Company by reason of
any such claims, including reasonable attorneys’ fees.

     

    12. Arbitration.  The
parties agree that any controversy or claim arising out of or relating to this
Agreement, or the breach thereof, shall be submitted to the American Arbitration
Association (“AAA”) and
that a neutral arbitrator will be selected in a manner consistent with its
National Rules for the Resolution of Employment Disputes.  The
arbitration proceedings will allow for discovery according to the rules set
forth in the National Rules for the Resolution of Employment Disputes (the
“Rules”).  All
arbitration proceedings shall be conducted in Santa Clara County,
California.

     

    Except as
provided by the Rules, arbitration shall be the sole, exclusive and final remedy
for any dispute between Employee and the Company.  Accordingly, except
as provided for by the Rules, neither Employee nor the Company will be permitted
to pursue court action regarding claims that are subject to
arbitration.  The
Parties expressly waive any entitlement to have such controversies decided by a
court or a jury.  In addition to the right under the Rules to
petition the court for provisional relief, Employee agrees that any party may
also petition the court for injunctive relief where either party alleges or
claims a violation of this Agreement in particular Section 6 of this
Agreement.

     

    
      
      

      
        

        

      

    

    
    

     

    13. Authority.  The
Company represents and warrants that the undersigned has the authority to act on
behalf of the Company and to bind the Company and all who may claim through it
to the terms and conditions of this Agreement.  Employee represents
and warrants that he has the capacity to act on his/her own behalf and on behalf
of all who might claim through him/her to bind them to the terms and conditions
of this Agreement.

     

    14. No
Representations.  The Parties represent that each has had the
opportunity to consult with an attorney, and has carefully read and understands
the scope and effect of the provisions of this Agreement.  Neither
party has relied upon any representations or statements made by the other party
hereto which are not specifically set forth in this Agreement.

     

    15. Severability.  In
the event that any provision hereof becomes or is declared by a court of
competent jurisdiction to be illegal, unenforceable or void, this Agreement
shall continue in full force and effect without said provision so long as the
remaining provisions remain intelligible and continue to reflect the original
intent of the Parties.

     

    16. Entire Agreement.
This Agreement represents the entire agreement and understanding between the
Company and Employee concerning the subject matter of this Agreement and
Employee’s relationship with the Company, and supersedes and replaces any and
all prior agreements and understandings between the Parties concerning the
subject matter of this Agreement and Employee’s relationship with the Company,
with the exception of the Employee Inventions and Confidentiality Agreement, the
agreements governing the Options or any shares of restricted Company stock
(including the equity compensation plan under which such Options or such stock
were granted) and any right to indemnification Employee has pursuant to any
indemnification agreement between Employee and Company.

     

    17. Public
Filing.  Employee and the Company understand and agree that
this Agreement may need to be filed with the Securities and Exchange Commission
and that its confidentiality cannot be protected.

     

    18. Code Section
409A.  If any payments or benefits due under this Agreement
would subject Employee to any penalty tax imposed under Section 409A of the
Internal Revenue Code of 1986, as amended, if such payments and benefits were
made at the time as contemplated herein, then the Parties agree to cooperate
with each other and to take reasonably necessary steps to avoid the imposition
of any such penalty tax.

     

    19. No
Waiver.  The failure of any party to insist upon the
performance of any of the terms and conditions in this Agreement, or the failure
to prosecute any breach of any of the terms and conditions of this Agreement,
shall not be construed thereafter as a waiver of any such terms or
conditions.  This entire Agreement shall remain in full force and
effect as if no such forbearance or failure of performance had
occurred.

     

    20. No Oral
Modification.  Any modification or amendment of this Agreement,
or additional obligation assumed by either party in connection with this
Agreement, shall be effective only if placed in writing and signed by both
Parties or by authorized representatives of each party.

     

    21. Governing
Law.  This Agreement shall be deemed to have been executed and
delivered within the State of California, and it shall be construed,
interpreted, governed, and enforced in accordance with the laws of the State of
California, without regard to conflict of law principles.  To the
extent that either party seeks injunctive relief in any court having
jurisdiction for any claim relating to the alleged misuse or misappropriation of
trade secrets or confidential or proprietary information, each party hereby
consents to personal and exclusive jurisdiction and venue in the state and
federal courts of the State of California.

     

    22. Attorneys’
Fees.  In the event that either Party brings an action to
enforce or effect its rights under this Agreement, the prevailing party shall be
entitled to recover its costs and expenses, including the costs of mediation,
arbitration, litigation, court fees, plus reasonable attorneys’ fees, incurred
in connection with such an action.

     

    23. Counterparts.  This
Agreement may be executed in counterparts, and each counterpart shall have the
same force and effect as an original and shall constitute an effective, binding
agreement on the part of each of the undersigned.

     

    24. Successors and
Assigns.  This Agreement, and any and all rights, duties, and
obligations under this Agreement, will not be assigned, transferred, delegated,
or sublicensed by Employee without the Company’s prior written
consent.

     

    
       

      
        
          

          

        

      

       

    

     

    
       

      IN
WITNESS WHEREOF, the Parties have executed this Agreement on the respective
dates set forth below.

    

     

    
      
         

        
          	 
      	
                  SILICON
      IMAGE, INC.

                

        

         

      

      
        	 
      Date: January 6, 2010	 
      	
                By:

              	
                /s/
      Peter Hanelt

              	 
      
	 
      	 
      	 
      	
                Peter
      Hanelt

              	 
      
	 
      	 
      	 
      	
                Chairman
      of the Board

              	 
      

      

       

    

     

    
      
        	 
      	
                HAROLD
      COVERT, an individual

              

      

       

      
        	 
      Date: January 6, 2010	 
      	
                By:

              	
                /s/
      Harold Covert

              	 
      
	 
      	 
      	 
      	
                Harold
      Covert

              	 
      
	 
      	 
      	 
      	
                 

              	 
      

      

       

    
      
        
          --

        

         

      

      
         

        
        

        
          

          

        

      

       

    

    EXHIBIT
1

    

    RESIGNATION

    

    Effective the Termination Date, as such
term is defined in that certain Transitional Employment and Separation
Agreement, entered into as of January 6, 2010, by and between the undersigned
and Silicon Image, Inc. (the “Company”),
the undersigned resigns from his employment with the Company and his membership
on the Board of Directors of the Company and relinquish all titles and positions
held by the undersigned with the Company or any subsidiary of the
Company.

    

    

    
       

      
        	 
      	 
      	
                By:

              	
                /s/
      Harold Covert

              	 
      
	 
      	 
      	 
      	
                Harold
      Covert

              	 
      
	 
      	 
      	 
      	
                 

              	 
      

      

       

      

      
        
           

          
             

            
            

            
              

              

            

          

          
             

          

        

      

      

    

    EXHIBIT
2

     

    GENERAL RELEASE OF ALL
CLAIMS

     

    1. This
General Release of All Claims (hereinafter “Agreement”)
is entered into between Harold Covert (hereinafter “Employee”)
and by Silicon Image, Inc. (hereinafter the “Company”).

     

    2. WHEREAS, Employee has been
employed by the Company; and

     

     

    WHEREAS Employee and the
Company desire to mutually, amicably and finally resolve and compromise all
issues and claims surrounding Employee’s employment by the Company and the
termination thereof;

     

    NOW THEREFORE, in
consideration for the mutual promises and undertakings of the parties as set
forth below, Employee and the Company hereby enter into this
Agreement.

     

    3. Consideration.  In
consideration of the payments and benefits offered to Employee by the Company
pursuant to the Transitional Employment and Separation Agreement by and between
Employee and the Company dated April 5, 2007, and in connection with the
termination of Employee’s employment, Employee agrees to the following general
release (the “Release”).

     

    4. General Release of
Claims.

     

    (a) In
further consideration for the payment and undertakings described above, to the
fullest extent permitted by law, Employee, individually and on behalf of his/her
attorneys, representatives, successors, and assigns, does hereby completely
release and forever discharge the Company, its affiliated and subsidiary
corporations, and its and their shareholders, officers and all other
representatives, agents, directors, employees, successors and assigns, from all
claims, rights, demands, actions, obligations, and causes of action of any and
every kind, nature and character, known or unknown, which Employee may now have,
or has ever had, against them arising from or in any way connected with the
employment relationship between the parties, any actions during the
relationship, or the termination thereof.  This release covers all
statutory, common law, constitutional and other claims, including but not
limited to, all claims for wrongful discharge in violation of public policy,
breach of contract, express or implied, breach of covenant of good faith and
fair dealing, intentional or negligent infliction of emotional distress,
intentional or negligent misrepresentation, discrimination, any tort, personal
injury, or violation of statute including but not limited to Title VII of the
Civil Rights Act, the Age Discrimination in Employment Act, the Americans with
Disabilities Act, and the California Fair Employment and Housing Act, which
Employee may now have, or has ever had.  The parties agree that any
past or future claims for money damages, loss of wages, earnings and benefits,
both past and future, medical expenses, attorneys’ fees and costs, reinstatement
and other equitable relief, are all released by this Agreement.

     

    (b) Employee
and the Company do not intend to release claims that Employee may not release as
a matter of law, including but not limited to claims for indemnity under
California Labor Code section 2802.

     

    (c) To the
fullest extent permitted by law, any dispute regarding the scope of this general
release shall be determined by an arbitrator under the procedures set forth in
the arbitration clause below.

     

    5. Waiver of Unknown
Claims. Employee has read or been advised of Section 1542 of the Civil
Code of the State of California, which provides as follows:

     

     

    
      
        
        

      

      
        
        

        
        

        
          

          

        

      

      
        
        

      

    

     

    A
GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR
SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH
IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH
THE DEBTOR.

     

    Employee
understands that Section 1542 gives him/her the right not to release existing
claims of which s/he is not now aware, unless s/he voluntarily chooses to waive
this right.  Having been so apprised, s/he nevertheless hereby
voluntarily elects to and does waive the rights described in Section 1542, and
elects to assume all risks for claims that now exist in his/her favor, known or
unknown.

     

    6. Non-Admission.  It
is understood and agreed that this is a compromise settlement of a disputed
claim or claims and that neither this Agreement itself nor the furnishing of the
consideration for this Agreement shall be deemed or construed as an admission of
liability or wrongdoing of any kind by the Company.

     

    7. Covenant Not to
Sue.

     

    (a) To the
fullest extent permitted by law, at no time subsequent to the execution of this
Agreement will Employee pursue, or cause or knowingly permit the prosecution, in
any state, federal or foreign court, or before any local, state, federal or
foreign administrative agency, or any other tribunal, any charge, claim or
action of any kind, nature and character whatsoever, known or unknown, which
s/he may now have, has ever had, or may in the future have against the Company
and/or any officer, director, employee or agent of the Company, which is based
in whole or in part on any matter covered by this Agreement.

     

    (b) Nothing
in this paragraph shall prohibit Employee from filing a charge or complaint with
a government agency such as but not limited to the Equal Employment Opportunity
Commission, the National Labor Relations Board, the Department of Labor, the
California Department of Fair Employment and Housing, or other applicable state
agency. However, Employee understands and agrees that, by entering into this
agreement, s/he is releasing any and all individual claims for relief, and that
any and all subsequent disputes between the Company and Employee shall be
resolved in arbitration.

     

    (c) Nothing
in this Agreement shall prohibit or impair Employee or the Company from
complying with all applicable laws, nor shall this Agreement be construed to
obligate either party to commit (or aid or abet in the commission of) any
unlawful act.

     

    8. Waiver of Right to
Reemployment. Employee agrees that s/he will not be entitled to any
further employment with the Company.  S/he therefore waives any claim
now or in the future to other employment or reemployment with the Company, or
any of its related entities, and agrees that s/he will not apply for nor accept
employment with the Company or any of its related entities in the
future.

     

    9. Nondisparagement.  Employee
agrees that s/he will refrain from making any adverse, derogatory or disparaging
statements about the company, its board of directors, officers, management,
practices or procedures, or business operations to any person or
entity.  Nothing in this paragraph shall prohibit Employee from
providing truthful information in response to a subpoena or other legal
process.

     

    10. Return of Company Property;
Obligation to Protect Proprietary Information.  To the extent
Employee has not already done so, s/he agrees to return to the Company all
Company property, including but not limited to the files and documents, whether
electronic or hardcopy, and whether in Employee’s possession or under his/her
control. Employee also understands that whether s/he signs this Agreement or
not, s/he must maintain the confidentiality of Company trade secrets,
confidential and/or proprietary information (“Proprietary
Information”), and not make use of any Proprietary Information on behalf
of anyone.

     

    11. Acknowledgement of
Representation or Opportunity to be Represented by Counsel; Attorneys’
Fees.  Employee acknowledges that s/he has been or had the
opportunity to be represented by counsel in the negotiation and preparation of
this Agreement.  The parties further agree that each party will be
responsible for his/her or its own attorney’s fees and costs incurred in
connection with this Agreement.

     

    
      
      

      
        

        

      

    

     

     

    12. Arbitration.  Except
for any claim for injunctive relief arising out of a breach of a party’s
obligations to protect the other’s Proprietary Information, the parties agree to
arbitrate any and all disputes or claims arising out of or related to the
validity, enforceability, interpretation, performance or breach of this
Agreement, whether sounding in tort, contract, statutory violation or otherwise,
or involving the construction or application or any of the terms, provisions, or
conditions of this Agreement.  Any arbitration may be initiated by a
written demand to the other party.  The arbitrator’s decision shall be
final, binding, and conclusive.  The parties further agree that this
Agreement is intended to be strictly construed to provide for arbitration as the
sole and exclusive means for resolution of all disputes hereunder to the fullest
extent permitted by law.  The parties expressly waive any
entitlement to have such controversies decided by a court or a
jury.

     

    13. Governing
Law.  This Agreement shall be construed in accordance with, and
governed by, the laws of the State of California.

     

    14. Savings Clause.
Should any of the provisions of this Agreement be determined to be invalid by a
court, arbitrator, or government agency of competent jurisdiction, it is agreed
that such determination shall not affect the enforceability of the other
provisions herein. Specifically, should a court, arbitrator, or agency conclude
that a particular claim may not be released as a matter of law, it is the
intention of the parties that the general release, the waiver of unknown claims,
and the covenant not to sue above shall otherwise remain effective to release
any and all other claims.

     

    15. Complete and Voluntary
Agreement. This Agreement constitutes the entire understanding of the
parties on the subjects covered.  Employee expressly warrants that
s/he has read and fully understands this Agreement; that s/he has had the
opportunity to consult with legal counsel of his/her own choosing and to have
the terms of the Agreement fully explained to him/her; that s/he is not
executing this Agreement in reliance on any promises, representations or
inducements other than those contained herein; and that s/he is executing this
Agreement voluntarily, free of any duress or coercion.

     

    16. Modification.  No
modification, amendment or waiver of any provision of this Agreement shall be
effective unless in writing signed by Employee and an authorized representative
of the Company.

     

    17. Notice and Revocation
Period. Employee acknowledges that the Company advised him/her to consult
with an attorney prior to signing this Agreement; that s/he understands that
s/he has twenty-one (21) days in which to consider whether s/he should sign this
Agreement; and that s/he further understands that if s/he signs this Agreement,
s/he will be given seven (7) days following the date on which s/he signs this
Agreement to revoke it and that this Agreement will not be effective until after
this seven-day period has expired without revocation by him/her.

     

    18. Effective Date. This
Agreement is effective on the eighth (8th) day
after Employee signed it and without revocation by him/her.Exhibit 10.3

 

 

 

 

U.S. PREMIUM BEEF, LLC

A Delaware Limited Liability Company

AMENDED AND RESTATED

LIMITED LIABILITY
COMPANY AGREEMENT

 

 

-- Includes Amendments Through December 9, 2009 --

 

                                                                                                                                                            

 

 

 

 

 

U.S. PREMIUM BEEF, LLC

Amended and Restated Limited Liability Company
Agreement

TABLE OF CONTENTS

 

	

 	
		Page

	

OPERATION, MANAGEMENT, AND INTERESTS IN THE COMPANY 

			1
	

ARTICLE 1.
DEFINITIONS

			1
	

Section 1.1.      Reference To Certain
Terms

			1
	

Section 1.2.     
Definitions

			1
	

ARTICLE 2. THE COMPANY: FORMATION, PURPOSES, LIMITED LIABILITY

			5
	

Section 2.1.     
Formation

			5
	

Section 2.2.      Purpose; Powers

			5
	

Section 2.3.     
Name

			5
	

Section 2.4.      Principal Place Of
Business

			5
	

Section 2.5.     
Term

			5
	

Section 2.6.      Filings; Agent For Service Of
Process

			5
	

Section 2.7.      Title To
Property

			6
	

Section 2.8.      No Payments Of Individual
Obligations

			6
	

Section 2.9.      Independent Non-Competitive
Activities

			6
	

Section 2.10.    Limited
Liability

			6
	

Section 2.11.    Members and Unitholders
Bound Without Execution

			7
	

ARTICLE 3. UNITS, UNITHOLDERS,
FINANCIAL RIGHTS

			7
	

Section 3.1.      Rights And Obligations Of Unitholders

			7
	

Section 3.2.     
Units

			7
	

Section 3.3.      Capital
Contributions

			8
	

Section 3.4.      No Certificate For
Units

			9
	

Section 3.5.      Unit
Ledger

			9
	

Section 3.6.      Allocations And
Distributions

			9
	

Section 3.7.      Unitholder
Conditions And Limitations

			10
	

Section 3.8.      Restrictions On
Transfers

			12
	

ARTICLE 4. MEMBERS AND MEMBER VOTING
	13
	

Section 4.1.      Rights And Obligations Of Members

			13
	

Section 4.2.      Membership Requirements
	15
	

Section 4.3.      Admission Of Members
	15
	

Section 4.4.      Cattle Delivery Agreement
	15
	

Section 4.5.      Member Voting
	16
	

Section 4.6.      Member Meetings
	17
	

Section 4.7.      Termination Of Membership
	19
	

Section 4.8.      Resignation
	20
	

Section 4.9.      Continuation Of The Company
	20

 

i

 

 

 

 

 

	

ARTICLE 5. MANAGEMENT OF COMPANY

			
		20

	

Section 5.1.      Governance By Board, CEO

			
		21

	

Section 5.2.      Actions By Board; Committees;
Reliance On Authority

			22
	

Section 5.3.      The Board

			23
	

Section 5.4.      Board Meetings

			24
	

Section 5.5.      Officers

			26
	

Section 5.6.      Liability And Indemnification Of
Directors And Officers

			27
	

Section 5.7.      Contracts With Directors Or Their
Affiliates

			28
	

ARTICLE 6. AMENDMENTS

			28
	

Section 6.1.      Amendments

			28
	

ARTICLE 7. DISSOLUTION AND WINDING UP

			29
	

Section 7.1.      Dissolution Commencement

			29
	

Section 7.2.      Winding Up

			29
	

Section 7.3.      Rights Of Unitholders

			30
	

Section 7.4.      Notice Of Dissolution

			30
	

Section 7.5.      Allocations During Period Of
Liquidation

			31
	

Section 7.6.      The Liquidator

			31
	

Section 7.7.      Form Of Liquidating Distributions

			31
	

ARTICLE 8. MISCELLANEOUS

			31
	

Section 8.1.      Notices

			32
	

Section 8.2.      Binding Effect

			32
	

Section 8.3.      Construction

			32
	

Section 8.4.      Time

			32
	

Section 8.5.      Headings

			32
	

Section 8.6.      Severability

			32
	

Section 8.7.      Incorporation By Reference

			33
	

Section 8.8.      Variation Of Terms

			33
	

Section 8.9.      Governing Law

			33
	

Section 8.10.    Specific Performance

			33
	

Section 8.11.    Consent To Jurisdiction

			33
	

Section 8.12.    Waiver Of Jury Trial

			34
	

 

			 
	

APPENDICES

			 
	

Appendix A   Principal Place of Business of U.S. Premium Beef, LLC

			A-1
	

      
Appendix B   Agent for Service of Process of U.S. Premium Beef, LLC

			B-1
	

      
Appendix C   Unit Transfer Policy of U.S. Premium Beef, LLC

			C-1
	

      
Appendix D   Board of Directors of U.S. Premium Beef, LLC

			D-1
	
		
		       Appendix E   Allocations,
		Distributions, Tax Matters, and Accounting
	E-1

 

	
                                                                       

  

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U.S. Premium Beef, LLC
	AMENDED AND RESTATED LLC AGREEMENT

		

 

 

 

U.S. PREMIUM BEEF, LLC

Amended and Restated Limited Liability Company Agreement

THIS LIMITED LIABILITY COMPANY AGREEMENT of U. S.
Premium Beef LLC (the “Company”) was adopted by U.S. Premium Beef, Inc.
effective as of the completion of the Restructuring (as defined
below); this Agreement has been amended from time to time after the
Restructuring and all such amendments are hereby incorporated into this Amended
and Restated Limited Liability Company Agreement effective as of January 7,
2010.

RECITALS

U.S. Premium Beef, Ltd. (the “Cooperative”) caused the
Company to be formed to acquire all of the business and assets of the
Cooperative by merger of the Cooperative with and into U. S. Premium Beef, Inc.
(the “Corporation”) (the “Merger”) and immediate and subsequent conversion
under Delaware Law into the Company (the entire process of the Merger and
subsequent conversion of the Corporation into the Company referred to as the
“Restructuring”).  The Cooperative as the sole shareholder of the
Corporation prior to the Merger and statutory conversion into the Company
adopted this Agreement as the Limited Liability Company Agreement of the
Company and such Limited Liability Company Agreement is hereby amended and
restated to reflect all amendments adopted on or prior to January 7,
2010. 

OPERATION, MANAGEMENT, AND INTERESTS

IN THE COMPANY

ARTICLE 1.

DEFINITIONS

Section 1.1. Reference To Certain Terms.

For purposes of this Agreement:  (1) references to
“Articles” and “Sections” are to those Articles and Sections appearing in this
Agreement unless explicitly indicated otherwise; and (2) references to statutes
include all rules and regulations under those statutes, and all amendments and
successors to those statutes.

Section 1.2. Definitions.

The definitions in this Section 1.2 (and the definitions
in Section 1.10 of Appendix E) apply throughout this Agreement unless the
context requires otherwise.

“Act” means the Delaware Limited
Liability Company Act as set forth in the Delaware Code (commencing with
Section 18-101 of the Delaware Code), as amended from time to time (or any
corresponding provision or provisions of any succeeding law).

	
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U.S. Premium Beef, LLC
	AMENDED AND RESTATED LLC AGREEMENT

		

                                                                                                                                                                                                                

 

 

 

“Affiliate” means, with respect to
any Person:  (1) a Business Entity directly or indirectly Controlling,
Controlled by or under common Control with the Person; (2) an officer,
director, general partner, or trustee of a Person that is a Business Entity; or
(3) a Person or its representative who is an officer, director, general
partner, or trustee of the Business Entity described in clauses (1) or (2) of
this sentence.

“Agreement” means this Limited
Liability Company Agreement, as amended, modified or restated from time to
time.

“Associate” means a Person
approved by the Board as an “Associate” under Section 4.4(c).

“Board” or “Board
of Directors” means the individuals who are named, appointed, or elected
as Directors of the Company under Section 5.3 acting collectively pursuant to
this Agreement.

“Business Entity” means a partnership
(whether general or limited), limited liability company, corporation,
unincorporated association or entity, governmental entity, trust, estate,
cooperative, association, nominee or other entity, including an individual
acting as a sole proprietorship or as a business.

“Cattle Delivery Agreement” means
the Uniform Delivery and Marketing Agreement to deliver cattle between a Class
A Member and the Company.

“CEO” means the President and
Chief Executive Officer of the Company, as appointed by the Board.

“Certificate of Formation” means
the certificate of formation of the Company as amended or restated and filed
with the Delaware Secretary of State pursuant to the Act.

“Class” is the designated division
of Interests as provided in Section 3.2(a).

“Class A Member” means a Person
who holds Class A Units, meets the requirements of Section 4.2(a), is admitted
as a Class A Member and has not ceased to be a Class A Member.  “Class A Members” mean all Persons who hold Class A Units,
meet the requirements of Section 4.2(a), are admitted as Class A Members and
have not ceased to be Class A Members.

“Class A Units” mean Units that
are designated Class A Units pursuant to Section 3.2(a).

“Class B Member” means a Person
who holds Class B Units, meets the requirements of Section 4.2(b), is admitted
as a Class B Member and has not ceased to be a Class B Member.  “Class B Members” mean all Persons who hold Class B Units,
meet the requirements of Section 4.2(b), are admitted as Class B Members and
have not ceased to be Class B Members.

“Class B Units” mean Units that
are designated as Class B Units pursuant to Section 3.2(a).

	
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U.S. Premium Beef, LLC
	AMENDED AND RESTATED LLC AGREEMENT

		

                                                                                                                                                                                                                

 

 

 

“Company” means the limited
liability company formed pursuant to the filing of the Certificate of Formation
and the limited liability company continuing the business of this Company in
the event of dissolution of the Company as provided in this Agreement and the
Act.

“Confidential Information” has the meaning given in
Section 4.1(c).

“Control”, “Controlling”, “Controlled by” and “under
common Control with” mean the possession, direct or indirect, of the power
to direct or cause the direction of the management and policies of a Business
Entity, whether through the ownership of voting securities, by contract, or
otherwise, or the power to elect at least fifty percent (50%) of the Board of
Directors, or persons exercising similar authority with respect to the Business
Entity.

“Cooperative” is defined in the Recitals to this
Agreement.

“Corporation” is defined in the Recitals to this
Agreement.

“Director” means an individual
serving on the Board of Directors of the Company.  The Directors of the Company
shall constitute the “managers” of the Company for all purposes of the Act.

“Dissolution Event” has the
meaning given in Section 7.1(a).

“Distribution” means a payment of
cash or property to a Unitholder based on the Unitholder’s Interest in the
Company as provided in this Agreement.

“Effective Date” is the date the
Restructuring is completed as provided in the introductory paragraph of this
Agreement.

“Event of Disassociation” has the
meaning given in Section 4.7(a).

“Interest” means, collectively,
the Unitholders’ financial rights to Profits, Losses and other allocation
items, and to receive Distributions and, with respect to Members, the right of
the Members to vote on matters and to receive information concerning the
business and affairs of the Company as provided for in this Agreement.  

“Lien” means a security interest,
lien or other encumbrance in Units pledged or granted for the purpose of
securing debt financing.

“Liquidator” has the meaning given in Section
7.6(a).

“Member” means a Person admitted
as a Member under Section 4.3 who has not ceased to be a Member.  “Members” mean all Persons who are Members.

“Merger” is defined in the Recitals.

“Other Class” means a Class other
than Class A or Class B, designated by the Board under Section 3.2(a).

	
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U.S. Premium Beef, LLC
	AMENDED AND RESTATED LLC AGREEMENT

		

                                                                                                                                                                                                                

 

 

 

“Patronage Notice” means a written notice of
allocation within the meaning of Section 1388(b) of the Code that was issued
with respect to the patronage of U.S. Premium Beef, Ltd., the Cooperative, was
not redeemed by the Cooperative, and continues as an obligation of the Company
as provided in Section 3.6(c).

“Permitted Transfer” has the
meaning given in Section 3.8(a).

“Person” means any individual
natural person, or a Business Entity.

“Property” means all real and
personal property acquired by the Company, including cash, and any improvements
to the Property, and includes both tangible and intangible property.

“Quorum” as to meetings of Members
has the meaning given in Section 4.6(f) and as to meetings of the Board has the
meaning given in Section 5.4(d).

“Restructuring” has the meaning
given in the Recitals to this Agreement.

“Securities Act” means the
Securities Act of 1933.

“Subsidiary” means, with respect
to any Business Entity, any corporation, partnership, joint venture, limited
liability company, association or other entity Controlled by the Business
Entity.

“Transfer” means, as a noun, any
voluntary or involuntary transfer, sale, or other disposition, whether by
operation of law (e.g., pursuant to a merger) or otherwise, and, as a verb,
voluntarily or involuntarily to convey, sell, or otherwise dispose of, but does
not include a pledge or grant of a Lien.

“Transfer Restrictions” means the
restrictions on Transfer of Units in Section 3.8 and the Unit Transfer Policy.

“Unit” means the unit of
measurement within a Class into which Interests in the Company are divided as
provided in Section 3.2(a).

“Unit Ledger” has the meaning
given in Section 3.5.

“Unit Transfer Policy” is the
policy for Transferring Units attached as Appendix C.

“Unitholder” means a Person who
holds Units, whether or not the Person is a Member.  “Unitholders”
mean all Persons holding Units.  Unitholders may be designated with respect to
specific types or classes of Units held.

	
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U.S. Premium Beef, LLC
	AMENDED AND RESTATED LLC AGREEMENT

		

                                                                                                                                                                                                                

 

 

 

ARTICLE 2.

THE COMPANY: FORMATION, PURPOSES, LIMITED LIABILITY

Section 2.1. Formation.

The Company has been formed as a Delaware limited
liability company pursuant to the Act.

SECTION 2.2. PURPOSE; POWERS.

(a) Purpose.  The business and
purposes of the Company are to engage in any business and investment purpose or
activity in which a limited liability company organized under the Act may
lawfully be engaged, and to conduct any and all activities related or
incidental to that business and purpose.

(b) Powers.  The Company shall possess
and may exercise all the powers and privileges granted by the Act, by any other
law, or by this Agreement, together with any lawful powers incidental to those
powers and privileges, including the powers and privileges as are necessary or
convenient to the conduct, promotion or attainment of the business, purposes or
activities of the Company.

Section 2.3. Name.

The name of the Company is stated in the Certificate of
Formation, and all business of the Company shall be conducted in that name or
under other names as the Board, without Member approval, may from time to time
determine. The Board may, without Member approval, change the name of the
Company from time to time in accordance with the Act.

Section 2.4. Principal
Place Of Business.

The principal place of business of the Company shall be at
the place or places stated in the Principal Place of Business attached as
Appendix A and incorporated as part of this Agreement.  The Principal Place of
Business may be amended or changed by resolution of the Board without Member
approval. The records required by the Act shall be maintained at one of the
Company’s principal offices.

Section 2.5. Term.

The term of the Company shall continue until the winding up
and liquidation of the Company and its business is completed following a
Dissolution Event as provided in this Agreement.

Section 2.6. Filings;
Agent For Service Of Process.

	
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U.S. Premium Beef, LLC
	AMENDED AND RESTATED LLC AGREEMENT

		

                                                                                                                                                                                                                

 

 

 

(a) Maintenance of Delaware Status.  The Board shall take any actions reasonably
necessary to perfect and maintain the status of the Company as a limited
liability company under the laws of the State of Delaware.  The Board shall
cause amendments to the Certificate of Formation to be filed whenever required
by the Act.

(b) Maintenance of Status in Other
Jurisdictions.  The Board shall take any and all other actions as may be
reasonably necessary to perfect and maintain the status of the Company as a
limited liability company or similar type of entity under the laws of any other
jurisdictions in which the Company engages in business.

(c) Agent For Service of Process. 
The name and address of the agent for service of process on the Company in the
State of Delaware shall be stated in the Agent for Service of Process attached
as Appendix B and incorporated as part of this Agreement which shall be amended
by the Board, without Member approval, to reflect the appointment of any
successor.

(d) Filings Upon Dissolution. 
Upon the dissolution and completion of the winding up and liquidation of the
Company, the Board shall cause to be filed a Certificate of Cancellation in
accordance with the Act and cause similar filings as necessary to be made under
the laws of any other jurisdictions.

Section 2.7. Title
To Property.

All Property owned by the Company is owned by the Company
as an entity, and a Unitholder, Member, or Director does not have any ownership
interest in the Property in their individual name.  The Company shall hold
title to all of its Property in the name of the Company and not in the name of
any Unitholder, Member, or Director.

Section 2.8. No
Payments Of Individual Obligations.

The Company’s credit and assets shall be used solely for
the benefit of the Company, and an asset of the Company shall not be
Transferred or encumbered for, or in payment of, any individual obligation of
any Unitholder, Member, or Director.

Section 2.9. Independent
Non-Competitive Activities.

Neither this Agreement nor any activity under this
Agreement shall prevent a Unitholder, Member, or Director or any of their
Affiliates, acting on their own behalf, from engaging in whatever activities
they choose, unless the activities are competitive with the Company or the
Company’s Affiliates as determined by the Board.  Activities, other than
activities that are competitive with the Company or the Company’s Affiliates,
may be undertaken by a Unitholder, Member, or Director without having or
incurring any obligation to: (1) offer any interest in the activities to the
Company or any other Unitholder or Member; or (2) require the Unitholder,
Member, or Director undertaking the activity to allow the Company, the
Company’s Affiliates, or other Unitholders, Members, Directors, or their
Affiliates to participate in any of those activities.  As a material part of
the consideration for becoming a Unitholder, Member, or Director, each
Unitholder, Member, or Director shall not have any right or claim of
participation in another Unitholder’s, Member’s or Director’s activities.

	
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U.S. Premium Beef, LLC
	AMENDED AND RESTATED LLC AGREEMENT

		

                                                                                                                                                                                                                

 

 

 

Section 2.10.  Limited Liability.

Except as otherwise expressly provided by the Act, this
Agreement, or agreed to under another written agreement, the debts,
obligations, and liabilities of the Company, whether arising in contract, tort
or otherwise, are solely the debts, obligations, and liabilities of the Company,
and a Unitholder, Member, or Director of the Company is not obligated
personally for any debt, obligation, or liability of the Company solely by
reason of being a Unitholder or Member or by acting as a Director of the
Company.  The failure of the Company to observe any formalities or requirements
relating to the exercise of its powers or management of its business or affairs
under this Agreement or the Act shall not be grounds for imposing liability on
the Unitholders, Members, or Directors for any debt, obligation, or liability
of the Company.

Section 2.11.  Members
and Unitholders Bound Without Execution.

A Member or Unitholder who has Interests in the Company
shall be bound by this Agreement without the necessity of executing a physical
copy of this Agreement.

ARTICLE
3.

UNITS, UNITHOLDERS, FINANCIAL RIGHTS

Section 3.1. Rights
And Obligations Of Unitholders.

The respective rights and obligations of the Unitholders
will be determined pursuant to the Act and this Agreement.  To the extent that
any right or obligation of any Unitholder is different by reason of any
provision of this Agreement than it would be in the absence of that provision,
this Agreement, to the extent permitted by the Act, will control.

Section 3.2. Units.

(a) Unitholder Interests and
Units.  The Interests of the Unitholders will be divided into one or
more classes (“Classes”), with the initial Classes designated as Class A and
Class B. Subsequent Classes may be established by the Board and designated as
Class C, Class D and sequentially lettered for Units of each sequential Class
(“Other Classes”).  Interests within each Class will be divided into units
(the “Units”) designated as Class A Units (with respect to Class A), Class B
Units (with respect to Class B), and sequentially lettered for Units of each
sequential Class.  With respect to subsequent Classes of Units, the Board
without Member approval is granted the express authority, by resolution and
conforming amendments to this Agreement, to fix and establish the designations,
powers, preferences, and governance and veto rights including Member voting
rights and rights to appoint or elect Directors to the Board, qualifications,
limitations or restrictions of each additional Class of Units (and the
corresponding obligation to fix and establish these designations, powers,
preferences, governance and other rights, qualifications, limitations and
restrictions whenever any additional Class is established).  The power of
the Board extends to and includes the express authority to create Classes and
Units (without Member approval) which have terms granting the additional Class
and the Units (and the holders of the Units) rights, powers, preferences, and
privileges greater than the rights, powers, preferences, and privileges
associated with any previously established and designated Classes or issued
Units.  The rights, powers, preferences and privileges are the same for all
Units within a Class except as expressly provided otherwise in this Agreement,
the Class designation approved by the Board, or the subscription or other
agreement regarding the Units approved by the Board.

 

	
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U.S. Premium Beef, LLC
	AMENDED AND RESTATED LLC AGREEMENT

		

                                                                                                                                                                                                                

 

 

 

(b) Class A and Class B Units Linked
Together.  Class A Units and Class B Units shall be issued, redeemed,
and transferred together on a one for one basis until the Board determines by
resolution the extent and conditions under which Class A Units and Class B
Units may be issued, redeemed, and transferred separately.  Until additional
capital contributions are accepted and additional Units are issued, profits and
losses for any Fiscal Year shall be allocated ten percent (10%) to Class A and
then to Class A Unitholders in proportion to Class A Units held, and ninety
percent (90%) to Class B and then to Class B Unitholders in proportion to Class
B Units held, as provided in Article III of Appendix E.  The resolution of the
Board under this Section 3.2(b) amends this Agreement without Member approval
to effect the terms of the resolution.

(c) Additional Units.  The Board may
issue additional Units, including Class A Units and Class B Units, to existing
or new Unitholders in exchange for Capital Contributions as provided in Section
3.3(b).

(d) Adjustment of Books and Records and
Amendment of this Agreement.  Upon acceptance of Capital Contributions
under Section 3.3, the issuance of additional Units, or any change in Unitholders or Members, the Board shall cause the books and records of the
Company and the Unit Ledger to be appropriately adjusted, and the Board shall
amend this Agreement, without Member approval, to reflect the terms and
conditions of the Capital Contributions and the issuance of Units, including
changes to the percentages stated in Appendix E, Sections 3.1, 3.2, and 4.1 and
Section 3.6 of this Agreement.

Section 3.3. Capital
Contributions.

(a) By Unitholders Through the Restructuring. 
Each Person who becomes a Unitholder as a result of the Restructuring shall be
deemed to have made a Capital Contribution consisting of the Person’s share of
the initial Gross Asset Value (as defined in Appendix E, Section 1.10) of any
Property that is owned by the Company immediately after the effective time of
the Restructuring.  Each Person’s share of the initial Gross Asset Value shall
be determined by apportioning the aggregate initial Gross Asset Value entirely
to the initial holders of Class A Units in proportion to Class A Units acquired
by each Person in the Restructuring.  No portion of the initial Gross Asset
Value shall be apportioned to Class B Units in the Restructuring.

(b) By Unitholders For Additional Units. 
Each Unitholder’s Capital Contribution, if any, may be any consideration,
whether in cash or a form other than cash, (including past or future services),
upon execution of any documents and on any other terms and conditions
(including, in the case of Units issued to employees and consultants, any
vesting and forfeiture provisions) as the Board determines to be appropriate,
without Member approval.

	
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U.S. Premium Beef, LLC
	AMENDED AND RESTATED LLC AGREEMENT

		

                                                                                                                                                                                                                

 

 

 

(c) Additional Contributions Not Required. 
A Unitholder is not obligated to make any additional Capital Contributions to
the Company or to pay any assessment to the Company, other than the unpaid
portion of a Unitholder’s written agreement to make Capital Contributions.
Units and their holders are not subject to any mandatory assessment, requests
or demands for capital.

Section 3.4. No
Certificate For Units.

The Units of the Company are not certificated Units unless
otherwise determined by the Board.  If the Board determines that the Units
shall be certificated, the Board shall have the power and authority to make
rules and regulations, not inconsistent with this Agreement or the Act, as the
Board deems appropriate relating to the issuance, Transfer, conversion, and
registration of certificates of the Company, including legend requirements or
the appointment or designation of one or more transfer agents and one or more
registrars.  The Company may act as its own transfer agent and registrar.

Section 3.5. Unit
Ledger.

The Board shall prepare, amend, and supplement a Unit
Ledger without approval of the Members that states the Unitholders and the
Class and number of Units held by each Unitholder, the Capital Contribution of
the Unitholder, and those Unitholders who are Members of each Class.

Section 3.6. Allocations
And Distributions.

(a) Generally.  The provisions
relating to allocations of Profits, Losses, items of profit and loss, and
Distributions are provided in this Section 3.6 and Article 7; Appendix C as to
Transfers; and in Article III, Article IV, and Article XII of Appendix E.  The
provisions of this Section 3.6 may be amended by the Board, without Member
approval, to conform with Class designations under Section 3.2(a).  Appendix E
is attached and incorporated as part of this Agreement.  Appendix E may be
amended by the Board without Member approval.  As provided in Appendix E,
Distributions, other than Distributions upon liquidation, generally will be
made on a Class and unitary basis in proportion to the Units held in any Class.

(b) Between Class A and Class B.

Distributions.  Generally, subject
to the designations of any Other Class, the issuance of additional units, and
the provisions in Section 3.6(a), between Class A Units collectively (“Class
A”) and Class B Units collectively (“Class B”):

(1)  ten percent (10%) of the allocations of Profits,
Losses and other allocation items and Distributions (other than liquidating
Distributions) shall be made to Class A, and then to Class A unitholders in
proportion to Class A Units held; and

(2)  ninety percent (90%) to Class B and then to Class B
unitholders in proportion to Class B Units held.

	
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U.S. Premium Beef, LLC
	AMENDED AND RESTATED LLC AGREEMENT

		

                                                                                                                                                                                                                

 

 

 

Liquidating Distributions. 
Liquidating Distributions generally will be made to the unitholders in
accordance with their positive Capital Account balances, subject to Section
3.6(a) after payment of any obligations, including Patronage Notices.

(c) Patronage Notices.  All amounts standing on the
books of this Company as Patronage Notices shall carry the rights and
obligations specified in this Section and Section 7.2(2) and no other or
additional rights and obligations.  Subject to the provisions of this Section
and Section 7.2(2), Patronage Notices may be paid by paying to the holders of
the Patronage Notices the face amount of the Patronage Notices, without
interest or other appreciation or increase.  Other than as provided in Section
7.2(2) with respect to dissolution of this Company, Patronage Notices shall be
paid by the Company at the time and in the amounts as may be determined by the
Board in its sole and absolute discretion.  In exercising its discretion, the
Board may consider, among other factors to be selected by the Board, the
chronological order of issuance of the Patronage Notices by U.S. Premium Beef,
Ltd., a Kansas cooperative, the amount of all outstanding Patronage Notices and
the portion of the Patronage Notices issued in a particular year and the death
or age of the holders of any Patronage Notices.

(d) Offset.  The Company may offset
any debts, liabilities, or amounts owed by a Unitholder to the Company in
amounts and at times determined by the Board in their discretion against
Distributions or other amounts owed or to be paid to a Unitholder or against
Patronage Notices held by the Unitholder.

Section 3.7. Unitholder
Conditions And Limitations.

(a) Interests Are Personal Property. 
The interests of a Unitholder (whether or not a Member) in the Company are
personal property for all purposes.

(b) No Compensation or Reimbursement. 
Except as otherwise provided in a written agreement or policy approved by the
Board and except for compensation employees receive as employees of the Company,
a Unitholder, whether or not a Member, in the status as Unitholder or Member
shall not receive any salary, fee, or draw for services rendered to or on
behalf of the Company and shall not be reimbursed for any expenses incurred by
the Unitholder or Member on behalf of the Company.

(c) Advances to Company.  A Unitholder
or Affiliate of the Unitholder may, with the consent of the Board, lend or
advance money to the Company.  If any Unitholder or Affiliate of the Unitholder
loans or advances money to the Company on its behalf, the amount of any loan or
advance shall not be treated as a contribution to the capital of the Company
but shall be a debt due from the Company.  The amount of the loan or advance by
a lending Unitholder or Affiliate shall be repayable out of the Company’s cash
and shall bear interest at a rate agreed upon by the Board and the Unitholder. 
The Unitholders or their Affiliates are not obligated to make any loan or
advance to the Company.

	
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U.S. Premium Beef, LLC
	AMENDED AND RESTATED LLC AGREEMENT

		

                                                                                                                                                                                                                

 

 

 

(d) No Return of Distributions. 
Except as required by law, a Unitholder (whether or not a Member) is not
obligated by this Agreement to return any Distribution to the Company or pay
the amount of any Distribution for the account of the Company or to any
creditor of the Company; provided, however, that if any court of competent
jurisdiction holds that, notwithstanding this Agreement, any Unitholder is
obligated to return or pay any part of any Distribution, the obligation will
bind the Unitholder alone and not any other Unitholder.  The provisions of the
immediately preceding sentence are solely for the benefit of the Unitholders
and will not be construed as benefiting any third party.  The amount of any
Distribution returned to the Company by a Unitholder or upon approval of the
Board paid by a Unitholder for the account of the Company or to a creditor of
the Company will be added to the account or accounts from which it was
subtracted when it was distributed to the Unitholder.

 

(e) Redemption.  The Company, by
resolution of the Board of Directors and without the necessity of Member
approval, may offer to redeem Class B Units from any unitholder upon such terms
and conditions as the Board of Directors deems appropriate in its sole
discretion (a “voluntary redemption.”)  An offer of voluntary redemption by the
Company may represent an offer to purchase Class B Units at a fixed price
determined by the Board of Directors or may include procedures, including but
not limited to the process commonly known as a “Dutch Auction”, by which those
unitholders who wish to accept the Company’s offer of voluntary redemption of
Class B Units determine the price of the Class B Units to be redeemed by the
Company.  In addition, subject to the terms and conditions contained in this
subpart (e), the Company, by resolution of the Board of Directors and without
the necessity of Member approval, may redeem Class B Units from any Class B
unitholder without the requirement of Class B unitholder agreement (a
“mandatory redemption”) upon such terms and conditions as the Board of Directors
deems appropriate in its sole discretion.  Notwithstanding the previous
sentence, the Board of Directors may authorize a mandatory redemption only upon
the following conditions:  i) such mandatory redemption occurs within a
reasonable time period following the Company’s disposition of a portion of its
ownership interest in National Beef Packing Company, LLC; ii) such mandatory
redemption is funded from the net proceeds of the Company’s disposition of a
portion of its ownership interest in National Beef Packing Company, LLC; iii)
such mandatory redemption shall, to the extent possible, result in a reduction
of the number of issued and outstanding Class B Units that is not less than
proportionate to the corresponding reduction of the Company’s ownership interest
in National Beef Packing Company, LLC that provides the funds for the mandatory
redemption; iv) the price paid by the Company for the redemption of the Class B
Units equals or exceeds the greater of a) the average price per Class B unit
for Class B Units that have been validly priced for transfer, as determined by
the Board of Directors in its sole discretion on a nonconditional transfer
basis during the 90 day period ending 5 days prior to the date of the
redemption, and b) the average price per Class B unit of the last
nonconditional transfers of 3,000 units that have been authorized by the Board
of Directors prior to the redemption; and v) such mandatory redemption shall
require the pro rata redemption of Class B Units from each Class B unitholder, such
that each Class B unitholder’s percentage of ownership in the Company shall not
be reduced or increased. (With respect to subpart iv) of the preceding
sentence, in the event that no separate transfers of Class B Units have
occurred prior to the date of the redemption, the redemption price for the
Class B units shall be ninety percent (90%) of the price for “linked” Class A
and Class B Units, determined in accordance with subpart iv) of the prior
sentence.)  The Company by resolution of the Board, may redeem the units of a
Class of a unitholder that are not held by a Member of that Class in accordance
with the provisions of Section 4.7 of this Agreement, entitled “Termination of
Membership.”  Unless otherwise provided by resolution of the Board, a unitholder
(whether or not a Member), or any transferee of a unitholder, does not have a
right: to demand, withdraw or receive a return of the unitholder’s (or
transferee’s) Capital Contributions or Capital Account; to require the purchase
or redemption of the unitholder’s (or transferee’s) units or Interest, or to
receive a Distribution in partial or complete redemption of the fair value of
the unitholder’s units or Interest in the Company, (except in all cases a
redemption authorized by the resolution of the Board under this Section 3.7(e)
or as provided in Appendix E, Article XII, or Article 7 of this Agreement
following a Dissolution Event), notwithstanding any provisions of the Act or
any other provision of law.  The other unitholders and the Company do not have
any obligation to purchase or redeem the units or Interest of any unitholder or
transferee.  Each unitholder (whether or not a Member) as a condition of
becoming a unitholder has no right to receive a Distribution in partial or
complete redemption of the fair value of the units or Interest of any
unitholder upon an Event of Disassociation or otherwise which, in the absence
of the provisions in this Agreement, it would otherwise be afforded by Section
18-604 of the Act or any other provision of the Act.

	
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U.S. Premium Beef, LLC
	AMENDED AND RESTATED LLC AGREEMENT

		

                                                                                                                                                                                                                

 

(f) Rights of Unitholders Who Are Not
Members.  Unless admitted as a Member pursuant to Section 4.3, a Person
who acquires Units, or a Person who holds Units and ceases to be a Member, has
only the rights of an “unadmitted assignee” and is only entitled to allocations
and Distributions with respect to the Units in accordance with this Agreement,
and does not have any right to any information or accounting of the affairs of
the Company, and is not entitled to inspect the books or records of the
Company, and does not have any of the rights of a Member under the Act or this
Agreement.  Units held by a Person who is not a Member are subject to the
Transfer Restrictions.

(g) Specific Limitations.  A Unitholder (whether or not a Member) does not have the right, power or
authority to: (1) reduce the Unitholder’s Capital Account, except as a result
of the dissolution of the Company or as otherwise provided by law or in this
Agreement; (2) make voluntary Capital Contributions to the Company except when
authorized by the Board; (3) bring an action for partition against the Company
or any Company assets; (4) cause the termination and dissolution of the
Company, except as set forth in this Agreement; (5) require that any
Distribution to the Unitholder be made in the form of property other than cash;
(6) (in the Unitholder’s capacity as a Unitholder or Member) take part in or
interfere in any manner with the management of the business and affairs of the
Company; (7) (in the Unitholder’s capacity as a Unitholder or Member) act for
or bind the Company notwithstanding Section 18-402 of the Act; and (8) have any
contractual appraisal rights under Section 18-210 of the Act.  Each Unitholder
(whether or not a Member) by becoming a Unitholder shall have irrevocably
waived each of the rights contained in clauses (1) through (8) of this Section
3.7(g).

Section 3.8. Restrictions
On Transfers.

(a) General Restrictions.  The Board
shall not approve, and the Company shall not recognize for any purpose, any
purported Transfer of Units unless and until the Transfer Restrictions,
consisting of the provisions of this Section and the Unit Transfer Policy, have
been satisfied or the Board has by resolution specifically waived any
unsatisfied provision, condition or restriction.  A Transfer of Units approved
by the Board that satisfies the provisions and conditions of the Transfer
Restrictions (or if any unsatisfied condition is waived), shall be referred to
in this Agreement as a “Permitted Transfer”.

(b) Not Binding Until Entered in Company Books. 
A Transfer of Units is not binding on the Company without the approval of the
Board and not until the Transfer is entered in the books and records of the
Company.

	
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U.S. Premium Beef, LLC
	AMENDED AND RESTATED LLC AGREEMENT

		

                                                                                                                                                                                                                

 

 

 

(c) Pledge of Units Allowed. 
Notwithstanding the Transfer Restrictions, a Unitholder may pledge, grant a
Lien on all or any portion of its Units as security for the payment of debt,
provided that a subsequent foreclosure or transfer to the secured party in lieu
of foreclosure or otherwise shall be considered a Transfer.

(d) Unless Permitted, Transfers Void. 
A purported Transfer of Units that is not a Permitted Transfer is null and void
and of no force or effect whatsoever; provided that, if the Company is required
to recognize a Transfer that is not a Permitted Transfer (or if the Board, in its
sole discretion, elects to recognize a Transfer that is not a Permitted
Transfer), the Units Transferred shall be strictly limited to the transferor’s
rights to allocations and Distributions as provided by this Agreement with
respect to the transferred Units, which allocations and Distributions may be
applied or set off against (without limiting any other legal or equitable
rights of the Company) to satisfy any debts, obligations, or liabilities for
damages that the transferor or transferee of the Units may have to the Company.

(e) Indemnification of Company.  If a
Transfer or attempted Transfer of Units is not a Permitted Transfer, the Unitholder and the prospective transferee engaging or attempting to engage in
the Transfer is liable to and shall indemnify and hold harmless the Company and
the other Unitholders from all cost, liability, and damage that the Company and
any of the other Unitholders may incur (including incremental tax liabilities,
lawyers’ fees and expenses) as a result of the Transfer or attempted Transfer
and efforts to prohibit the transfer or enforce the indemnity.

(f) Transferee Subject to Transfer
Restrictions.  Units held by a transferee are subject to the Transfer
Restrictions.

(g) Unit Transfer Policy.  The Unit
Transfer Policy shall be consistent with this Agreement and impose conditions
and restrictions on Transfers to: (1) preserve the tax status of the Company;
(2) comply with state or federal securities laws; (3) require appropriate
information from the transferor and transferee regarding the transfer; (4)
require representations from the transferor and/or transferee regarding the
Transfer; and (5) allow the Board to determine whether or not the transferee is
a competitor of the Company or the Company’s Affiliates.  The Unit Transfer
Policy also shall state the permitted method and conventions that shall be used
in allocating Profits, Losses, and each item of Profits and Losses and all
other items attributable between the transferor and the transferee.  The Unit
Transfer Policy is attached as Appendix C, and incorporated as part of this
Agreement.  The Unit Transfer Policy may be amended by the Board without Member
approval.

ARTICLE
4.

MEMBERS AND MEMBER VOTING

Section 4.1. Rights
And Obligations Of Members.

	
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U.S. Premium Beef, LLC
	AMENDED AND RESTATED LLC AGREEMENT

		

                                                                                                                                                                                                                

 

 

 

(a) Authority.  The respective rights
and obligations of Members will be determined pursuant to the Act and this
Agreement.  To the extent that the rights or obligations of any Member are
different by reason of any provision of this Agreement than they would be in
the absence of any provision of this Agreement, to the extent permitted by the
Act, this Agreement shall control.  A Member, other than a Member acting in his
or her capacity as an officer of the Board or an officer of the Company
pursuant to delegated authority, does not have the power or authority to act
for or on behalf of the Company, to bind the Company by any act, or to incur
any expenditures on behalf of the Company, except with the prior consent of the
Board.  

(b) Access to Records.  The Company shall provide to a
Member upon written request of the Member:  (1) the Class and Number of Units
held by the Member; (2) the percentage or share of annual Distributions to
which the Member is entitled based upon the Units held by the Member; (3) the
voting rights of the Member for each Class of Units held; (4) the most recent
audited financial statements of the Company; (5) copies or internet access to
any annual, quarterly, and special reports filed by the Company with the
Securities and Exchange Commission; and (6) for Class A Members, the number of
cattle required to be delivered by the Class A Member during the applicable
delivery period, the number of cattle delivered by the Class A Member or on the
Class A Member’s behalf, and the quality and pricing of the cattle delivered. 
The Board shall prescribe the form and format in which the information in
clauses (1) to (6) is transmitted to the Member.  For all other
information, upon the request of a Member for a proper purpose related to the
Member's Interest as determined by the Board, the Board will allow the Member
and its designated representatives or agents, upon at least ten
(10) business days prior written notice to the Board and during reasonable
business hours, to examine the Company's books and records to the extent
required by the Act for the proper purpose at the Member's sole cost and
expense.  Each Member and Unitholder has an expectation of privacy that
information about them or their Interests in the Company will not be shared
with other Members for an improper purpose.  The Member’s request for
information and right to inspect information is subject to any reasonable
standards as may be established by the Board on a case by case basis or from
time to time and the inspection rights will be restricted by the Board to
protect the rights of other Members and the Company from damage from the
requesting Member. The Board has the authority and shall restrict access to and
protect Confidential Information of the Company in a manner consistent with
this Section 4.1(b) and Section 4.1(c) as deemed appropriate by the Board.

(c) Nondisclosure.  Except as otherwise consented to by the Board, all
non-public information furnished to the Member pursuant to this Agreement or
otherwise regarding the Company or its business that is not generally available
to the public (“Confidential Information”) will be kept confidential and will
not be disclosed by the Member, or by any of the Member’s agents,
representatives or employees, in any manner, in whole or in part, except that:
(1) a Member will be permitted to disclose Confidential Information to those of
the Member’s agents, representatives and employees who need to be familiar with
the information in connection with the Member’s investment in the Company and
who are charged with an obligation of confidentiality and nondisclosure to
other Persons; (2) a Member will be permitted to disclose Confidential
Information to the Member’s partners and equity holders so long as they agree
to keep the information confidential on the terms set forth in this Agreement;
(3) a Member will be permitted to disclose Confidential Information to the
extent required by law, so long as the Member will have first provided the
Company a reasonable opportunity to contest the necessity of disclosing the
information; and (4) a Member will be permitted to disclose Confidential
Information with prior written notice to the Company regarding the Persons and
the nature of and restrictions on the Confidential Information to be disclosed,
only to the Persons to the extent necessary for the enforcement of any right of
the Member arising under this Agreement.

	
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U.S. Premium Beef, LLC
	AMENDED AND RESTATED LLC AGREEMENT

		

                                                                                                                                                                                                                

 

 

 

Section 4.2. Membership
Requirements.

(a) Class A Members.  Class A Members
must hold at least one hundred (100) Class A Units and have a Cattle Delivery
Agreement in effect with the Company as provided in Section 4.4.

(b) Class B Members.  Class B Members
must hold at least one hundred (100) Class B Units.

(c) Other Classes.  A Unitholder must
hold the minimum number of Units of any Other Class, and meet the other requirements,
if any, as stipulated in the designations governing the Other Class.

Section 4.3. Admission
Of Members.

(a) Members Through the Restructuring. 
The Persons who held at least 100 shares of common stock of the Cooperative and
receive at least 100 Class A Units and 100 Class B Units through the
Restructuring, are admitted as Class A Members and Class B Members through the
Restructuring without any further action of the Board, the Members, or the
Company.

(b) Additional Members.  Additional
Persons may, upon the approval of the Board, be admitted as Members of the
Company with respect to any Class of Units: (1) by meeting the requirements for
membership with respect to any Class under Section 4.2 and otherwise under this
Agreement including any subscription and payment for Units as determined by the
Board; (2) by submitting documents required by the Board to evaluate membership
approval; and (3) by submitting an executed document approved by the Board
agreeing to be bound by this Agreement.  A Person is not admitted as a Member
of any Class by the Board unless and until an officer of the Company, acting
under authority from the Board, has countersigned the Person’s application,
subscription agreement, or other document required by the Board for admission
as a Member of any Class.  The Board in its sole discretion may refuse to admit
any Person as a Member of any Class.

(c) Admission of Transferees as Members. 
A transferee of Units will be admitted as a Member with respect to a Class of
Units (if not already a Member) if: (1) the Transfer Restrictions are satisfied
with respect to the applicable Transfer; (2) the requirements of Section 4.2
are satisfied with respect to the transferee and the Class of Units, (3) the
Board approves the membership of the transferee (which approval may be granted,
delayed, considered or withheld in the sole discretion of the Board); and (4)
the transferee executes any instruments and satisfies any other requirements
that the Board deems reasonably necessary or desirable for admission of the
transferee as a Member. In the absence of satisfying the foregoing
requirements, the transferee will be a non-member Unitholder with only the
rights of an unadmitted assignee as provided in Section 3.7(f).

	
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U.S. Premium Beef, LLC
	AMENDED AND RESTATED LLC AGREEMENT

		

                                                                                                                                                                                                                

 

 

 

Section 4.4. Cattle Delivery Agreement.

(a) Requirement.  Each Class A Member
shall at all times have a Cattle Delivery Agreement in effect with the
Company.  The Company will cause the transfer price of the cattle delivered to
be paid under the Cattle Delivery Agreement subject to any offset for any debts
or amounts owed under the Cattle Delivery Agreement or by the Class A Member to
the Company.  Patronage will not be paid by the Company for delivery of cattle
under the Cattle Delivery Agreement.  If the Board determines by resolution that
a Class A Member does not have a Cattle Delivery Agreement in effect with the
Company or is in breach of the Cattle Delivery Agreement, then the Member shall
forfeit voting rights with respect to the Member’s Class A Units the Units
shall become subject to repurchase by the Company pursuant to Section 4.7(b),
and the Member’s membership may be terminated as provided in Section 4.7.

(b) Transfer of Cattle Delivery Obligations
by Member.  Notwithstanding the Transfer Restrictions for Transfer of
Units, a Class A Member with a Cattle Delivery Agreement in effect with the
Company may Transfer any of the Member’s rights to deliver cattle according to
the Cattle Delivery Agreement, in whole or in part, to a Person who is an
Associate.  The Transfer of rights under the Cattle Delivery Agreement does not
constitute a Transfer of the Member’s Units for purposes of this Agreement and
does not release the Class A Member from liability from the Company.  From and
after the Transfer of rights under the Cattle Delivery Agreement, the
transferee Associate shall have the right to perform all of the transferred
portions of the transferor Member’s obligations under the Cattle Delivery
Agreement, but the transferor Member is liable to the Company for performance
of the obligations.

(c) Approval of Associates.  The Board
(in its sole discretion and for the period of time as the Board determines is
appropriate in the circumstances) may approve a Person (who may or may not be a
Member) as an “Associate” eligible to receive Transfers of the rights and
obligations of a Class A Member under the Class A Member’s Cattle Delivery
Agreement.  The Board may impose a fee (annual or otherwise) as a condition of
being accepted as an Associate.  The status of an Associate does not grant the
Associate any of the rights of a Member or Unitholder under the Act or this
Agreement (including, without limitation, any right to vote or to receive
allocations and/or Distributions).

Section 4.5. Member
Voting.

(a) Voting Rights Restricted.  A
Member does not have any voting rights except with respect to those matters
requiring a Member vote or approval for:  (1) the election and removal of
Directors; (2) approval of certain mergers or consolidations as provided in
Section 5.1(c); (3) approval of certain dispositions of all or substantially
all of the assets of the Company under Section 5.1(c); (4) approval of the
dissolution of the Company under Article 7; and (5) approval of certain
amendments to this Agreement under Article 6, or as specifically provided for
in this Agreement.

	
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U.S. Premium Beef, LLC
	AMENDED AND RESTATED LLC AGREEMENT

		

                                                                                                                                                                                                                

 

 

 

(b) Class A Member Voting Rights. 
Each Class A Member has one vote for any matter in which Class A Members are
entitled to vote.  Cumulative voting for Class A Members is not permitted
unless expressly authorized by the Board.

(c) Class B Members Voting Rights. 
Other than matters as provided in Section 4.5(e) each Class B Member may cast
one vote for each Class B Unit held on matters in which Class B Members are
entitled to vote.  Cumulative voting for Class B Members is not permitted
unless expressly authorized by the Board.

(d) Voting Method for Classes. 
Subject to the governance rights of any Other Class of Units, Members shall
vote by Class, and the Members shall take action by the affirmative vote of the
majority of voting power of each Class authorized to vote as provided in this
Agreement for:  (1) approval of certain mergers or consolidations as provided
in Section 5.1(c); (2) approval of certain dispositions of all or substantially
all of the assets of the Company under Sections 5.1(c); (3) approval of
dissolution of the Company under Article 7; and (4) approval of certain
amendments of this Agreement under Article 6.  In the election (or removal) of
Directors by the Members under Section 5.3, Members shall take action by the
affirmative vote of a majority of the voting power of the Class electing (or
removing) the Director, present either in person, by proxy, or by mail ballot,
at a duly held meeting of the Members at which a Quorum is present for the
transaction of business.

(e) Voting on Procedural and Other Matters. 
Except for Class voting matters in Section 4.5(d), the Members shall take
action at a Members meeting on procedural and other matters determined by the
Chair by the affirmative vote of the Members (each Member with one vote),
without regard to the Class or the Units held, unless objected to by the
majority of the voting power of any Class present at the meeting.

Section 4.6. Member
Meetings.

(a) Place and Manner of Meeting.  All
meetings of Members shall be held at a time and place, within or without the
State of Delaware, as stated in the notice of the meeting or in a duly executed
waiver of notice.  Presence in person, or by proxy or mail ballot, constitutes
participation in a meeting, except where a person participates in the meeting
for the express purpose of objecting to the transaction of business on the
ground that the meeting is not lawfully convened.

(b) Conduct of Meetings.  The meetings
of the Members shall be presided over by the Chair and shall be conducted in
general accordance with the most recent edition of Roberts’ Rules of Order,
or other rules and procedures as may be determined by the Board in its
discretion.  Resolutions to be voted on by the Members shall be limited to
those that have been approved by the Board for presentation to the Members and
contained in the notice of the meeting.

(c) Annual Meeting.  The annual
meeting of the Members shall be held on a date determined by the Board. 
Failure to hold the annual meeting at the designated time is not grounds for
dissolution of the Company.

	
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U.S. Premium Beef, LLC
	AMENDED AND RESTATED LLC AGREEMENT

		

                                                                                                                                                                                                                

 

 

 

(d) Special Meetings.  Special
meetings of the Members may be called at any time by the Chair or the Board, or
by the Secretary upon the request of thirty-three percent (33%) of all Members
(total Members without respect to Class) regardless of the number of Units held
by the requesting Members.  The special meeting request shall state a proper
purpose or purposes of the special meeting and the matters if any proposed to
be acted on at the special meeting.  Except as may be required by applicable
law, the Board in its discretion may determine whether a special meeting
request contains a proper purpose.  If the Board determines the purpose is not
proper, the Board shall notify the Person requesting the special meeting in
writing of the reasons that the requestor’s purpose was not proper, and may
either revise the purpose and proceed with the procedures to call a special
meeting or decline to call a special meeting until a proper purpose is
requested.

(e) Notice.  The Secretary shall cause
a written or printed notice, reviewed by the Company’s legal counsel, stating
the place, day and time of the meeting and, in the case of a special meeting,
the proper purpose or purposes for which the meeting is called.  The notice
shall be delivered not less than ten (10) nor more than sixty (60) days before
the date of the meeting either personally or by mail, to each Member entitled
to vote at the meeting. If mailed, the notice shall be deemed to be delivered
when deposited in the United States mail addressed to the Member at the
Member’s address as it appears on the records of the Company, with postage
prepaid.  If the purpose of the meeting is to consider any item requiring Class
voting of Members under Section 4.5(d), the notice shall be in a form that is
approved by the Board and shall state the purpose, identify the Director if the
purpose is removal and a summary of the transaction to be considered or a
verbatim statement of the amendment to be considered must accompany the notice.

(f) Quorum.  At any annual or special
meeting of the Members, a Quorum necessary for the transaction of business is
present if:  (1) when the Board has authorized the use of mail ballot or
proxies, Members with twenty percent (20%) or more of the voting power are
present; and (2) in any other case, Members with ten percent (10%) or more of
the voting power are present.  If a vote of more than one Class is required,
the Quorum requirement will be applied to the Members of each Class.  The
Members present at a duly organized meeting at which a Quorum is present may
transact business until adjournment, notwithstanding the departure or
withdrawal of Members leaving less than a Quorum, provided however, if the
question of a Quorum is called and the Chair determines a Quorum is not
present, the meeting shall be adjourned.  The registration of Members eligible
to vote shall be verified by the Secretary and shall be reported in the minutes
of the meeting.

(g) Record Date.  For the purpose of
determining Members entitled to notice of or to vote at any meeting of Members
or to make a determination of Members for any other proper purpose, the Board
may designate a record date or provide that the record books shall be closed
for a stated period not exceeding sixty (60) days. If the record books shall be
closed for the purpose of determining Members entitled to notice of or to vote
at a meeting of Members, the books shall be closed for a period not exceeding
the period immediately preceding the meeting starting on the date when the
notice is mailed or transmitted from the Company and the date of the meeting. 
In lieu of closing the record books, the Board may fix in advance a date as the
record date for determination of Members.  Unless otherwise determined by the
Board, if the record books are not closed and a record date is not fixed for
the determination of Members entitled to notice of or to vote at a meeting of
Members, the date on which notice of the meeting is first mailed or transmitted
from the Company, as the case may be, shall be the record date for the
determination of Members. When a determination of Members entitled to vote at
any meeting of Members has been made as provided in this Section, the
determination applies to the reconvening of an adjournment, except where the
determination has been made through the closing of record books and the stated
period of closing has expired.

	
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U.S. Premium Beef, LLC
	AMENDED AND RESTATED LLC AGREEMENT

		

                                                                                                                                                                                                                

 

 

 

(h) Ballots; Proxies.  If and to the
extent authorized by the Board, a Member may vote at a meeting of Members by
alternative ballot (mail or otherwise) or by proxy granted by the Member or by
the Member’s duly authorized attorney-in-fact.  If authorized by the Board, a
proxy may be granted in writing, by means of electronic transmission, or as
otherwise permitted by applicable law.  A proxy shall be filed with the
Secretary of the Company before the meeting is convened, as determined by the
Board. A proxy shall be considered filed with the Company when received by the
Company at its executive offices or other place designated by the Board, unless
later revoked.  A proxy is not valid after eleven months from the date of its
execution, unless otherwise provided in the proxy. A proxy is revocable at the
discretion of the Member executing the proxy.  While the right to vote can be exercised
by proxy, only a Member has the right to be recognized in a meeting of the
Members unless otherwise determined by the Chair in the Chair’s sole
discretion.

Section 4.7. Termination
Of Membership.

(a) Termination Events.  Membership as
to any Class may be terminated by the Board upon a determination by the Board
that the requirements to be a Member of that Class are not met.  Membership in
the Company (membership in all Classes) is terminated if any of the following
events occur (any of the events are referred to as an “Event of
Disassociation”):

(1) a Member does not meet the requirements to be a Member
with regard to at least one of the Classes of Units held by the Member as
determined by the Board;

(2) a Class A Member breaches a Cattle Delivery Agreement or
does not have a Cattle Delivery Agreement in effect with the Company;

(3) a Member that is an individual dies, or a member that is
not an individual ceases to exist as a Business Entity, and leaves no successor
qualified as determined by the Board to be a Member;

(4) a Member Transfers all of the Member’s Units;

(5) the Member resigns as a Member with respect to all
Classes of Units held under Section 4.8; or

(6) the Board by resolution finds that a Member has:

(i)         intentionally or repeatedly violated any
provision of this Agreement; 

 

(ii)        breached any agreement with or obligation to the
Company;

 

	
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(iii)       taken actions that will impede the Company from
accomplishing its purposes;

 

(iv)       taken or propose or threaten to take actions that
compete with the Company or an Affiliate of the Company; 

 

(v)        taken or threatened actions that adversely affect
the interests of the Company or Affiliates of the Company or its Members; or 

 

(vi)       willfully obstructed any lawful purpose or
activity of the Company.

 

(b) Company’s Right of Redemption. 
Upon membership termination under clauses (1), (2), (5) or (6) in Section
4.7(a), the Company may, at its option purchase the terminated Member’s Units
at eighty percent (80%) of the weighted average trailing sale price of the
Units for arms length transactions (as reasonably determined by the Board),
measured over the six (6) month period immediately preceding the date the Board
determines by resolution to purchase the terminated Member’s Units.  The
Company may exercise the right to purchase the terminated Member’s Units at any
time after the membership termination.  The Board by resolution may waive the
Company’s right to purchase the terminated Member’s Units.

(c) Cancellation of Cattle Delivery
Agreement.  If a Class A Member’s membership is terminated, the Company
has the right, but not the obligation, to cancel the Cattle Delivery Agreement
with the former Class A Member.

Section 4.8. Resignation.

A Member may resign as a Member of any Class or all
Classes at any time.  A resignation must be made in writing delivered to the
Secretary of the Company, and will take effect at the time specified in the
resignation or, if no time is specified, upon receipt.  The acceptance of a
resignation will not be necessary to make it effective, unless expressly so
provided in the resignation.  The resignation as a Member does not terminate or
cancel any contractual or other obligations of the resigning Member to the
Company or obligate the Company to make any distributions to the resigning
Member under Section 18-604 of the Act or otherwise, except as approved by
resolution of the Board.

Section 4.9. Continuation
Of The Company.

The occurrence of an Event of Disassociation or any other
event which is deemed to terminate the continued membership of a Member in one
or all Classes, will not dissolve the Company, the Company’s affairs shall not
be required to be wound up, and the Company shall continue without dissolution.

	
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ARTICLE 5.

MANAGEMENT OF COMPANY

Section 5.1. Governance
By Board, CEO.

(a) General Authority.  As provided in
this Agreement, the powers and privileges of the Company shall be exercised by
or under the authority of the Board, and the business and affairs of the
Company shall be governed by the Board, and management of the Company shall be
delegated to the CEO.  The Company shall not be governed or managed by the
Members, except those matters for which consent or approval of the Members is
required by this Agreement or any nonwaivable provisions of the Act.  The Board
by resolution and employment agreement shall allocate and delegate governance
and management of the Company between the Board and the CEO.  Any delegation or
allocation by the Board shall not cause the individuals constituting the Board
to cease to be “managers” of the Company for purposes of the Act.

(b) Policies, Rules, Regulations.  The
Board may adopt policies, rules, and regulations and may take actions as it
deems advisable in furtherance of the purposes of the Company, provided that
the Board shall not act in a manner contrary to this Agreement.

(c) Board Actions Requiring Member Consent. 
Notwithstanding any other provision of this Agreement, the following actions
will not be taken by the Company without a resolution describing and
authorizing the action that is approved by the Board and is also approved by
the Members: 

(1) mergers or consolidations with or into any other Business
Entity which is not an Affiliate of the Company, whether or not the Company is
the surviving entity; 

(2) dispositions (whether effected by merger, sale of assets,
lease, equity exchange or otherwise) of all or substantially all of the assets
of the Company, other than through a pledge, security, transfer to a subsidiary
under the control of the Company or transfer to effect a securitization of the
Company’s assets for purposes of debt financing;

(3) amendments of this Agreement requiring approval by the
Members to the extent provided in Article 6; and

(4) dissolution of the Company under Section 7.1.

	
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(d) Duty to the Company.  The Board
shall cause the Company to conduct
its business and operations separate and apart from that of any Member,
Director, or any of their Affiliates.  The Board shall take all actions which
may be necessary or appropriate: (1) for the continuation of the Company’s
valid existence as a limited liability company under the laws of the State of
Delaware and each other jurisdiction in which the existence is necessary to
protect the limited liability of Members and Unitholders or to enable the
Company to conduct the business in which it is engaged; and (2) for the
accomplishment of the Company’s purposes, including the acquisition,
development, maintenance, preservation, and operation of Company property in
accordance with the provisions of this Agreement and applicable laws and
regulations. Each Director shall have the duty to discharge the foregoing
duties in good faith, in a manner the Director reasonably believes to be in the
best interests of the Company, and with the care an ordinarily prudent person
in a like position would exercise under similar circumstances.  A Director is
not under any other duty to the Company or the Members to conduct the affairs
of the Company in a particular manner.

(e) Duty of Care and Loyalty.  Without
limiting the applicability of Section 5.1(d) or any other provision of this
Agreement, the following provisions will be applicable to the Board and to the
Directors in their capacity as Directors:

(1) the Board and the Directors and the decisions of the
Board will have the benefit of the business judgment rule to the same extent as
the Board, the Directors and the decisions would have the benefit of the rule
if the Board were a board of directors of a Delaware corporation; and

(2) the Board and the Directors will have the same duties of
care and loyalty as they would have if they were a board of directors and
directors of a Delaware corporation but in no event will any member of the
Board be liable for any action or inaction for which this Agreement expressly
waives liability for the Director.

Section 5.2. Actions
By Board; Committees; Reliance On Authority.

(a) Board Action.  In taking any
action under this Agreement, the Directors shall act:  (1) collectively through
meetings of the Board held and conducted pursuant to the provisions of this
Agreement or by written action taken pursuant to the provisions of this
Agreement; (2) through committees established pursuant to Section 5.2(b); and
(3) through officers of the Board, and through the CEO by resolutions of
delegated and reserved authorities and employment agreement.  The Board shall
take action by the affirmative vote of the Directors present at a duly held
meeting of the Board at which a Quorum is present.

(b) Committees.   The Board, by
resolution approved by the affirmative vote of a majority of the Directors then
holding office, may from time to time establish one or more committees, each of
which shall be comprised of one or more natural persons who may but need not be
Directors or Members, provided that a majority of committee members on each
committee must be a Director or Member.  Any committee shall have and may only
exercise the authority and duties to the extent provided by the Board in the
resolution establishing the committee, subject at all times to the limitations
set forth in the Act, this Agreement and to the direction and control of the
Board.  Unless otherwise provided by the Board, the presence of a majority of
the members of the committee constitutes a Quorum for the transaction of
business at a meeting of the committee, and the committee shall act by the
affirmative vote of a majority of committee members present at a duly held
meeting.  In other matters of procedure the provisions of this Agreement shall
apply to committees and their members to the same extent they apply to the
Board and Directors, including the provisions with respect to meetings and
notice, absent members, written actions, and valid acts.  Each committee shall
keep regular minutes of its proceedings and report the same to the Board.  The
Board may dissolve any committee at any time.

	
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(c) Reliance on Authority.  A Person
dealing with the Company may rely on the authority of an officer of the Board
or an officer of the Company in taking an action in the name of the Company
without inquiry into the provisions of this Agreement or compliance with this
Agreement, regardless of whether the action is actually taken in accordance
with the provisions of this Agreement, unless the Person dealing with the
Company has actual knowledge that the officer lacks authority to act or the Act
establishes that the officer lacks authority to act.

Section 5.3. The
Board.

(a) Director Election and Appointment. 
The Board shall consist of individuals appointed or elected under this Section
(“Directors”) who are “managers” of the Company for all purposes under the
Act.  Directors shall be appointed by the Board and Members, and elected by the
Members at the times, in the manner, and for the terms as prescribed by this
Agreement.  The initial Directors comprising the initial Board, who shall serve
in the manner and as prescribed by this Agreement consists of the individuals,
terms, and classification as provided in the Board attached as Appendix D and
incorporated as part of this Agreement.  Other than the initial appointment,
Directors appointed by the Board or Members shall have one year terms, and for
Directors appointed by Members, shall be appointed by Members at the Annual
Meeting of Members, and for Directors appointed by the Board, shall be
appointed by the Board within 30 days after the Annual Meeting of Members.  The
Board may adopt written procedures for determining the qualification and
nomination of Directors.  The Board, without Member approval, shall amend
Appendix D to comply with any change in Directors.  For purposes of this
Agreement, the initial Directors in Appendix D shall be deemed to have been
elected by the Class A Members.

(b) Qualification.  Each Director
elected by Class A Members must be a Member or (in the case of a Member that is
not a natural person) an elected or appointed representative of a Member. This
qualification only applies to Directors elected by Class A Members.

(c) Term.  The elected Directors shall
serve three-year terms and until their successors are duly elected and
qualified, or until their earlier death, resignation or removal.  In order to
preserve continuity of governance and the harmonious transition of the initial
Board to the elected or appointed Board, the terms of the initial Directors
shall be staggered as stated on Appendix D, with all subsequent terms for
elected Directors to be for a period of three years.  The Board shall adopt
nomination, reporting and other election procedures and policies for the
Company in its sole discretion and which may be amended or modified by the Board
in its sole discretion.

	
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(d) Number.  The board shall consist
of not less than seven (7) Directors elected by Members, as determined by the
Board from time to time.  Seven (7) of the Directors serving on the Board shall
always be elected by the Class A Members and any designations for the Directors
elected by the Class A Members shall be approved solely by the Class A Members
taking action in the same manner as provided for electing or removing Directors
under Section 4.5(d).  Between zero (0) and five (5) Directors shall represent
the Class B Members as determined by the Board from time to time, provided that
no reduction in the number of Directors shall shorten the term of a director
previously elected.  The Directors representing the Class B Members may (as
determined by the Board):  (1) be appointed by the Board; or (2) be appointed
or elected by the Class B Members.  The Board shall have the power to divide
the Class B Units into two or more subclasses, and allocate the right to elect
or appoint Directors among the Class B Members on the basis of the subclasses. 
Members holding any Units of any Other Class shall have the right to elect or
appoint Directors as provided in the designations governing the Class.

(e) Independent Non-Competitive Activities. 
A Director is only required to devote the time to the affairs of the Company as
are necessary to govern the business and affairs of the Company in accordance
with this Agreement, and shall be free to serve any other Business Entity or
enterprise in any capacity that the Director deems appropriate in his or her
discretion, provided that the other Business Entity or enterprise or one of
their Affiliates is not a competitor of the Company or one of the Company’s
Affiliates as determined by the Board.

(f) Resignation.  A Director may
resign at any time.  The resignation must be made in writing and shall take
effect at the time specified in the written resignation or, if a time is not
specified then at the time of its receipt by the Chair or the Secretary of the
Company.  The acceptance of a resignation is not necessary to make it
effective, unless expressly provided in the written resignation.

(g) Removal.  A Director elected by
Members may be removed for any reason at any special meeting of Members by the
affirmative vote of the majority of the voting power of the Class of Members
who elected the Director. A Director appointed by the Board may be removed by
the affirmative vote of two-thirds (2/3) of the Directors excluding the
Director to be removed.  A Director appointed by one or more Members pursuant
to a Class designation may be removed at any time by the appointing Member or
Members or as otherwise provided in the Class designation.  A Director elected
or appointed by the Members may be removed at any special meeting of the Board
by the affirmative vote of three-fourths (3/4) the Directors who are not
subject to removal for an act or failure to act in a manner that constitutes
any of the following: (1) a willful failure to deal fairly with the Company or
its Members in connection with a matter in which the Director or officer has a
material conflict of interest; (2) a violation of criminal law, unless the
Board determines the Director had reasonable cause to believe that the
Director’s or officer’s conduct was lawful or no reasonable cause to believe
that the conduct was unlawful; (3) a transaction from which the Director
derived an improper personal profit; or (4) willful misconduct.  The notice of
the meeting shall state that the removal will be discussed and acted upon at
the meeting, and must also be provided to the Director in question at least 10
days in advance of the meeting.  The Director in question has a right to be
heard at the meeting.

(h) Vacancies.  A vacancy occurring on
the Board (whether by reason of an increase in the number of Directors or by
reason of a vacancy in an existing Director seat) may be filled by appointment
through an affirmative vote of a majority of the remaining Directors, though
less than a Quorum.  A Director appointed by the Board to fill a vacancy for an
elected Director shall serve until a successor is elected and qualified at the
next annual or special meeting of the Members held for the purpose of electing
Directors.  At the next annual meeting or special meeting of the Members called
for the purpose of electing a Director, the Members shall elect a Director to
fill the unexpired term of the vacant Director’s position.

	
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Section 5.4. Board Meetings.

(a) Meetings.  Regular meetings of the
Board shall be held from time to time as determined by the Board.  Special
meetings of the Board shall be held upon the call of the Chair or three (3) or
more Directors.  Board meetings shall be held at the principal office of the
Company or at another place, either within or without the State of Delaware, as designated by the person calling the meeting and stated in the notice of the
meeting or a duly executed waiver of notice of the meeting.  Directors may
participate in a Board meeting by means of video or audio conferencing or
similar communications equipment whereby all Directors participating in the
meeting can hear each other.

(b) Notice.  Notice of each meeting of
the Board, stating the place, day and hour of the meeting, shall be given to
each Director at least three (3) days before the day on which the meeting is to
be held.  The notice may be given orally, in writing, by facsimile
transmission, by electronic mail or by any other form or means of communication
that provides reasonable assurances of effective communication.  Except as expressly
required in this Agreement, the notice or waiver of notice of any special or
regular meeting of the Board does not need to specify the business to be
transacted or the purpose of the meeting.

(c) Waiver.  Whenever a notice is
required to be given to a Director under the provisions of this Agreement, a
waiver of the notice in writing signed by the Director, whether before or after
the meeting time stated in the notice, shall be deemed equivalent to the giving
of the notice.  Attendance of a Director at a meeting of the Board constitutes
a waiver of notice of the meeting by the Director, except where the Director
attends a meeting for the express purpose of stating his or her objection to
the transaction of any business because the meeting is not lawfully called or
convened.

(d) Quorum.  One-half of the Directors
in office (provided that at least one-half of the Directors present have been
elected by the Class A Members) constitute a Quorum necessary for the
transaction of business at any regular or special meeting of the Board.  If
less than a Quorum is present, those Directors present may adjourn the meeting
from time to time until a Quorum shall be present.

(e) Voting and Act of the Board.  Each
Director has one (1) vote, without regard to the Class or Class of Members that
elected or appointed the Director, unless otherwise provided in a Class
designation.  The Board shall take action by the affirmative vote of a majority
of the Directors present at a duly held meeting at which a Quorum is present.  Provided
that a Quorum is present, there is no requirement that any action of the Board
be approved by Directors elected or appointed by a certain Class of Members,
unless otherwise provided in a Class designation.

(f) Action Without a Meeting.  An
action required or permitted to be taken at a meeting of the Board may be taken
by written action signed by the Directors with a majority of the voting power
of the Directors comprising the Board, unless this Agreement prescribes a
greater Director approval for the action to be taken.

	
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(g) Compensation.  The Board may fix
the compensation, if any, of Directors.  Directors shall also be entitled to
reimbursement for actual expenses incurred in attending meetings of the Board
or conducting other business of the Company.

Section 5.5. Officers.

(a) Qualification; Election.  Officers
of the Board, and the CEO must be natural persons, and shall be elected or
appointed by the Board.  The officers of the Company shall consist of the
following persons:

(1) officers of the Board, elected on an annual basis, who
shall consist of a Chair and a Vice Chair, who must be Directors, and a
Secretary who need not be a Director and may be appointed by the Board;

(2) the CEO who shall be appointed by the Board; and

(3) a chief financial officer for the Company and other
officers and assistant officers of the Company, who shall be appointed by the
CEO.

(b) Bonds and Insurance.  The Board
may require all officers, agents and employees charged by this Company with
responsibility for the custody of its funds or property to give bonds.  Bonds
shall be furnished by a responsible bonding company and approved by the Board,
and the cost shall be paid by the Company.  The Board shall cause the Company
to provide for insurance of the property of the Company, or property which may
be in the possession of the Company and not otherwise adequately insured by the
owner of the property.  In addition, the Board shall cause the Company to
provide for insurance covering liability of the Company to all employees and
the public, in a commercially reasonable amount as is customary for businesses
similar to the Company.

(c) Term of Office.  An officer
appointed by the Board other than the CEO shall hold office for a term of one
year and until a successor is duly elected or appointed, unless prior to the
end of the term the officer has resigned, deceased or has been removed from
office.  

(d) Removal and Vacancies.  Any
officer elected or appointed by the Board may be removed, with or without
cause, at any time by a resolution of the Board; provided that the removal is
subject to the termination procedures of any written employment agreement with
the Company.  A vacancy in an office of the Board or the CEO shall be filled by
a resolution of the Board.  The CEO may remove any officer appointed by the
CEO.  An officer may resign at any time by giving written notice to the
Company.  The resignation is effective without acceptance when the notice is
given to the Company, unless a later effective date is specified in the notice.

	
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(e) Chief Executive Officer.  The CEO
shall have direct and general charge and supervision of all business and
administrative operations of the Company and all other duties,
responsibilities, authorities and privileges as are set forth in the CEO’s employment
agreement, if any, as amended from time to time, in addition to those duties,
responsibilities, authorities and privileges as are delegated to the CEO by the
Board by resolution, or that a CEO of a Delaware corporation would have in
respect of a Delaware corporation in the absence of a specific delegation of
the duties, responsibilities, authorities and privileges.  The CEO may be an
officer of any Business Entity in which the Company owns an interest.  The CEO
shall also perform other duties that may be assigned by the Board to the extent
consistent with this Agreement and the CEO’s employment agreement, if any, as
amended from time to time.

(f) Duties of Other Officers.  Unless
provided otherwise by a resolution adopted by the Board, the officers of the
Company, other than the CEO, shall have the duties as are customarily
associated with their respective offices and shall perform other duties as may
from time to time be prescribed by any officer to whom the officer reports.

(g) Delegation.  Unless prohibited by
a resolution of the Board, an officer elected or appointed by the Board may
delegate in writing some or all of the duties and powers of the person’s
management position to other persons.  An officer who delegates the duties or
powers of an office remains subject to the standard of conduct for an officer
with respect to the discharge of all duties and powers so delegated.

Section 5.6. Liability
And Indemnification Of Directors And Officers.

(a) Liability Limitation.  A Director
or officer of the Company is not personally liable to the Company or its
Members for monetary damages for a breach of fiduciary duty by the Director or
officer; provided that this provision does not eliminate or limit the liability
of a Director or officer for an act or failure to act in a manner that
constitutes any of the following: (1) a willful failure to deal fairly with the
Company or its Members in connection with a matter in which the Director or
officer has a material conflict of interest; (2) a violation of criminal law,
unless the Director had reasonable cause to believe that the Director’s or
officer’s conduct was lawful and had no reasonable cause to believe that the
conduct was unlawful; (3) a transaction from which the Director derived an
improper personal benefit or profit; or (4) willful misconduct.

	
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(b) Indemnification.  To the fullest
extent permitted or required by law, the Company, its receiver, or its trustee
(in the case of its receiver or trustee, to the extent of Company Property)
shall indemnify, defend, save harmless, and pay all judgments and claims
against, and reasonable expenses of, each present and former Director or
officer relating to any liability or damage or reasonable expenses incurred
with respect to a proceeding if the Director or officer (or former Director or
officer) was a party to the proceeding as a result of or in connection with (1)
his or her capacity as a Director or officer of the Company (which reasonable
expenses including reasonable attorneys’ fees may be paid as incurred); or (2)
his or her service of any other Person at the request of the Company.
Notwithstanding the foregoing provisions, the Company shall not indemnify,
defend, save harmless, or pay any portion of any judgments or claims against,
or any expenses of, a Director or officer (or former Director or officer) under
the foregoing provisions where the judgments and claims or proceedings arise
out of or are related to an act or failure to act of the Director or officer in
a manner that constitutes any of the following:  (1) a willful failure to deal
fairly with the Company or its Members in connection with a matter in which the
Director or officer has a material conflict of interest; (2) a violation of
criminal law, unless the Director or officer had reasonable cause to believe
that the Director’s conduct was lawful or no reasonable cause to believe that
the conduct was unlawful; (3) a transaction from which the Director or officer
derived an improper personal profit; or (4) willful misconduct.

(c) Insurance.  The Company may
purchase and maintain insurance on behalf of a person in the person’s official
capacity against any liability or expense asserted against or incurred by the
person in or arising from that capacity, whether or not the Company would be
required to indemnify the person against the liability.

Section 5.7. Contracts
With Directors Or Their Affiliates.

(a) Material Financial Interest in Contracts
or Transactions.  A contract or transaction between the Company or an
Affiliate of the Company and a Director or the Director’s Affiliate or between
the Company and the Company’s Affiliate and any other entity in which a
Director or the Director’s Affiliate has a material financial interest, is not
void or voidable and does not require the Director to account to the Company
and hold as trustee for the Company any profit or benefit derived from the
contract or transaction solely for this reason, or solely because the Director
is present at or participates in the Board meeting at which the contract or
transaction is authorized, if: (1) the material facts of the Director’s
material financial interest are disclosed to the Board; and (2) the contract or
transaction is authorized or approved by two-thirds of all of the disinterested
Directors.  The presence of the interested Director may be counted in
determining the presence of a Quorum at the meeting at which the contract or
transaction is authorized but the interested Director’s presence or vote may
not be counted in determining the authorization or approval of the contract or
transaction by the necessary two-thirds quantum of consent.

(b) Cattle Delivery Contracts.  A
contract or transaction involving the sale or delivery of cattle, between the
Company and a Director or the Director’s Affiliate or between the Company and any
other entity in which a Director or the Director’s Affiliate has a material
financial interest, is not void or voidable and does not require the Director
to account to the Company and hold as trustee for the Company any profit or
benefit derived from the contract or transaction solely for this reason, or
solely because the Director is present at or participates in the Board meeting
at which or pursuant to which the contract or transaction is authorized or
approved, notwithstanding the fact that the standard of Section 5.7(a) was not
met, provided that the terms of the contract or transaction are or were no less
favorable to the Company than could be or could have been obtained between
disinterested parties negotiating at an arms-length basis at the time the
contract or transaction was entered into (and without the benefit of
hindsight).

ARTICLE
6.

AMENDMENTS.

Section 6.1. Amendments.

	
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(a) Procedure For Amendments.  Other
than amendments by the Board under Section 6.1(b), amendments to this Agreement
shall be proposed solely by the Board and approved by the Members.  Following
the Board’s approval of any proposed amendment, the Board shall submit to the
Members a verbatim statement of the proposed amendment, providing that counsel
for the Company has approved of the amendment in writing as to form.  The Board
shall include in any submission to the Members a recommendation as to the
proposed amendment. The Board shall seek the approval of the Members on the
proposed amendment by consent (written or electronic affirmation as determined
by the Board) of the required number of Members or shall call a meeting of the
Members to vote on the proposed amendment and to transact any other business
deemed appropriate. A proposed amendment is adopted and is effective as an
amendment of this Agreement if the amendment is approved by Members of each
Class entitled to vote on the amendment.  The Board shall incorporate any
amendment as a restated Agreement effective as of the effective date of the
amendment.

(b) Amendments By Board.  This
Agreement may be amended by the Board, without Member approval, to the extent
provided in: Section 2.4 for the Principal Place of Business; Section 2.6(c)
for the Agent for Service of Process; Section 3.2(a), 3.2(b) and Section 3.2(c)
for designations of Classes and issuance of Units; Section 3.6 as to Class
designations under Section 3.2(a) and Appendix E; Section 3.8(g) for the Unit
Transfer Policy; Section 5.3 as to the change in Directors and Section 7.2 as
to liquidating Distributions conforming to Class designations under Section
3.2(a) and Appendix E; which includes the authority of the Board to amend
Appendices A, B, C, D, and E without Member approval.

(c) Amendments Of Sections By Specified
Percentage.  A provision of this Agreement that requires the approval or
consent of a specified percentage or number in interest of the Members or any
Class of Members may not be amended without the affirmative vote of Members
holding at least the specified percentage or number of voting rights of all of
the Members or of the specified Class.

(d) Amendment Of This Section.  This
Section shall not be amended without the approval or consent of at least
two-thirds (2/3) of the voting power of Members holding each Class of Units.

ARTICLE
7.

DISSOLUTION AND WINDING UP

Section 7.1. Dissolution
Commencement.

(a) Dissolution Event.  The Company
shall dissolve and shall commence winding up and liquidating upon the first to
occur of either of the following (each a “Dissolution Event”): 
(1) the affirmative vote of the Board and a majority of the voting power
of each class of Members to dissolve, wind up, and liquidate the Company; or
(2) the entry of a decree of judicial dissolution pursuant to the Act.

(b) No Dissolution Prior To Dissolution
Event.  The
Members agree that, notwithstanding any provision of the Act, the Company shall
not dissolve prior to the occurrence of a Dissolution Event.

	
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U.S. Premium Beef, LLC
	AMENDED AND RESTATED LLC AGREEMENT

		

                                                                                                                                                                                                                

 

 

 

Section 7.2. Winding Up.

Upon the occurrence of a Dissolution Event, the Company
shall continue solely for the purposes of winding up its affairs in an orderly
manner, liquidating its assets, and satisfying the claims of its creditors,
Unitholders and Members, and no Unitholder or Member shall take any action that
is inconsistent with, or not necessary to or appropriate for, the winding up of
the Company’s business and affairs, provided that all covenants contained in
this Agreement and obligations provided for in this Agreement shall continue to
be fully binding upon the Unitholders and Members until the time as the
Property has been distributed pursuant to this Section and the Certificate of
Formation has been canceled pursuant to the Act. The Liquidator shall be
responsible for overseeing the prompt and orderly winding up and dissolution of
the Company. The Liquidator appointed under Section 7.6 shall take full account
of the Company’s liabilities and Property and shall cause the Property or the
proceeds from the sale of the Property, to be applied and distributed, to the
maximum extent permitted by law, in the following order (subject to any
priority Distributions applicable to Units of any specific Class or Classes and
Appendix E):

(1) first,
to creditors (including Directors, Members, and Unitholders and Affiliates of
Unitholders and Members, who are creditors, to the extent otherwise permitted
by law) in satisfaction of all of the Company’s debts, obligations and
liabilities (whether by payment or making of reasonable provision for payment
of the liabilities), other than debts, obligations and liabilities for which
reasonable provision for payment has been made and those described in Section
7.2(2);

(2) second,
the excess of the amounts paid in Section 7.2(1) above, to each holder of
Patronage Notices in the amount of the Company’s remaining obligation with
respect to the holder’s Patronage Notices on the books of the Company, as
adjusted from time to time, or if the excess is inadequate to pay the Company’s
total  remaining obligation, then, the excess in proportion to each holder’s
share of the Company’s remaining obligation; and

(3) third,
the excess of the amounts paid in Sections 7.2(1) and 7.2(2) above, subject to
any priorities in the designation of Unit Classes, to the Unitholders in
accordance with the positive balance in their Capital Accounts after giving
effect to all Capital Contributions, Distributions and allocations for all
periods.

Section 7.3. Rights Of Unitholders.

Except as otherwise provided in this Agreement, in winding
up under Section 7.2 each Unitholder shall look solely to the Property of the
Company for any Distribution and has no right or power to demand or receive
Property other than cash from the Company.  If the assets of the Company
remaining after payment or discharge of the debts, obligations and liabilities
of the Company are insufficient to return the Capital Contributions, the
Unitholders shall have no recourse against the Company or any other Unitholder
or Unitholders.

	
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	AMENDED AND RESTATED LLC AGREEMENT

		

                                                                                                                                                                                                                

 

 

 

Section 7.4. Notice Of Dissolution.

(a) Notice to Unitholders and Claimants.  Within thirty (30) days after
the occurrence of a Dissolution Event, the Board shall provide written notice
of the Dissolution Event to each of the Members and any Unitholders who are not
Members and the Board may notify its known claimants and/or publish notice as
further provided in the Act.

(b) Certificate of Cancellation.  Upon completion of
the distribution of the Company’s Property as provided in this Article 7, the
Company shall be terminated, and the Liquidator shall cause the filing of a
Certificate of Cancellation in accordance with the Act and shall take all other
actions as may be necessary to terminate the Company.

Section 7.5. Allocations During Period Of Liquidation.

During the period commencing on the first day of the
Fiscal Year during which a Dissolution Event occurs and ending on the date on
which all of the assets of the Company have been distributed to the Unitholders
pursuant to Section 7.2 (the “Liquidation Period”), the Unitholders shall
continue to share Profits, Losses, gain, loss, and other items of Company
income, gain, loss or deduction in the manner provided in Article 3 and
Appendix E.

Section 7.6. The Liquidator.

(a) Definition.  The “Liquidator” shall mean a Person
appointed by the Board to oversee the liquidation of the Company.  The
Liquidator may be the Board or a committee of three or more Directors appointed
by the Board.

(b) Fees.  The Company is authorized
to pay a reasonable fee to the Liquidator for its services performed pursuant
to this Article 7 and to reimburse the Liquidator for its reasonable costs and
expenses incurred in performing those services.

(c) Indemnification.  The Company
shall indemnify, save harmless, and pay all judgments and claims against the
Liquidator or any officers, directors, agents or employees of the Liquidator
relating to any liability or damage incurred by reason of any act performed or
omitted to be performed by the Liquidator, or any officers, directors, agents
or employees of the Liquidator in connection with the liquidation of the
Company, including reasonable attorneys’ fees incurred by the Liquidator,
officer, director, agent or employee in connection with the defense of any
action based on any act or omission, which attorneys’ fees may be paid as
incurred, except to the extent the liability or damage is caused by the fraud,
intentional misconduct of, or a knowing violation of the laws by the Liquidator
which was material to the cause of action.

Section 7.7. Form Of Liquidating Distributions.

For purposes of making Distributions required by Section 7.2,
the Liquidator may determine whether to distribute all or any portion of the
Property in kind or to sell all or any portion of the Property and distribute
the proceeds from the sale.

	
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U.S. Premium Beef, LLC
	AMENDED AND RESTATED LLC AGREEMENT

		

                                                                                                                                                                                                                

 

 

 

ARTICLE 8.

MISCELLANEOUS

Section 8.1. Notices.

A notice, payment, demand, or communication required or permitted
to be given by any provision of this Agreement shall be in writing, facsimile
or electronic communication, as determined by the Board, and shall be deemed to
have been delivered, given, and received for all purposes: (1) if delivered
personally to the Person or to an officer of the Business Entity to whom the
same is directed; or (2) when the same is actually delivered to the recipient’s
address on record with the Company.  Notices, payments and demands shall be
transmitted or sent: (1) if to the Company, to the address determined pursuant
to Section 2.4; and (2) if to the Unitholders or Members, to the address of the
Unitholder or Member on record with the Company.

Section 8.2. Binding
Effect.

Except as otherwise provided in this Agreement, every covenant,
term, and provision of this Agreement shall be binding upon and inure to the
benefit of the Members and Unitholders and their respective successors,
transferees, and assigns, without the necessity of physical execution of this
Agreement.

Section 8.3. Construction.

Every covenant, term, and provision of this Agreement
shall be construed simply according to its fair meaning and not strictly for or
against any Member or Unitholder.

Section 8.4. Time.

In computing any period of time pursuant to this Agreement,
the day of the act, event or default from which the designated period of time
begins to run shall not be included, but the time shall begin to run on the
next succeeding day. The last day of the period so computed shall be included,
unless it is a Saturday, Sunday or legal holiday, in which event the period
shall run until the end of the next day which is not a Saturday, Sunday or
legal holiday.

Section 8.5. Headings.

Section and other headings contained in this Agreement are
for reference purposes only and are not intended to describe, interpret,
define, or limit the scope, extent, or intent of this Agreement or any
provision of this Agreement.

Section 8.6. Severability.

	
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	AMENDED AND RESTATED LLC AGREEMENT

		

                                                                                                                                                                                                                

 

 

 

Every provision of this Agreement is intended to be
severable, and, if any term or provision of this Agreement is illegal or
invalid for any reason whatsoever, the illegality or invalidity shall not
affect the validity or legality of the remainder of this Agreement.
Notwithstanding the foregoing, if the illegality or invalidity would be to
cause the Members to lose the material benefit of their economic bargain, then
the Members agree to negotiate in good faith to amend this Agreement in order
to restore the lost material benefit.

Section 8.7. Incorporation
By Reference.

Every exhibit, schedule, and other appendix attached to
this Agreement and referred to in this Agreement is not incorporated in this
Agreement by reference unless this Agreement expressly provides that the
exhibit, schedule or appendix is to be incorporated as part of this Agreement.

Section 8.8. Variation
Of Terms.

All terms and any variations of the terms shall be deemed
to refer to masculine, feminine, or neuter, singular or plural, as the identity
of the term may require.

Section 8.9. Governing
Law.

The laws of the State of Delaware shall govern the
validity of this Agreement, the construction of its terms, and the
interpretation of the rights and duties arising under this Agreement.

Section 8.10. Specific
Performance.

Each Member and Unitholder agrees that the other Members
and Unitholders would be irreparably damaged if any of the provisions of this
Agreement are not performed in accordance with their specific terms and that
monetary damages would not provide an adequate remedy. Accordingly, it is
agreed that, in addition to any other remedy to which the Company on behalf of
the nonbreaching Members may be entitled, at law or in equity, the Company on
behalf of the nonbreaching Members shall be entitled to injunctive relief to
prevent breaches of the provisions of this Agreement and specifically to
enforce the terms and provisions of this Agreement in any action instituted in
any court of the United States or any state having subject matter jurisdiction.

Section 8.11. Consent
To Jurisdiction.

All actions, suits or proceedings arising out of or based
upon this Agreement or the subject matter of this Agreement if brought by a
person other than the Company shall be brought and maintained exclusively in
the federal courts located in the State of Missouri, provided that upon
determination by the Board of Directors, the Company has the right to bring,
maintain, or remove any action, suit, or proceeding arising out of or based on
this Agreement or the subject matter of this Agreement to any state or federal
court located in the State of Delaware.  Each of the Unitholders and Members:
(1) shall irrevocably be subject to the jurisdiction of the federal courts
located in the State of Missouri (or Delaware as applicable) for the purpose of
any action, suit or proceeding arising out of or based upon this Agreement or
the subject matter of this Agreement; and (2) waives to the extent not
prohibited by applicable law, and shall not be entitled to assert, by way of
motion, as a defense or otherwise, in any action, suit or proceeding, any claim
that he, she, or it is not subject personally to the jurisdiction of one of the
above-named courts, that he, she, or it is immune from extraterritorial
injunctive relief or other injunctive relief, that he, she, or its property is
exempt or immune from attachment or execution, that any action, suit or
proceeding may not be brought or maintained in one of the above-named courts
should be dismissed on the grounds of forum non conveniens, should be
transferred to any court other than one of the above-named courts, should be
stayed by virtue of the pendency of any other action, suit or proceeding in any
court other than one of the above-named courts, or that this Agreement or the
subject matter of this Agreement may not be enforced in or by any one of the
above-named courts.  Each Unitholder, Member, or other party to this Agreement
shall be subject to service of process in any suit, action or proceeding in any
manner permitted by the laws of the State of Missouri (or Delaware as
applicable), shall be subject to service of process by registered or certified
mail, return receipt requested, at the address specified in or pursuant to this
Agreement on the records of the Company (on grounds that it is reasonably
calculated to give actual notice) and waives and shall not be entitled to
assert by way of motion, as a defense or otherwise, in any action, suit or
proceeding any claim that service of process made in accordance with this
Agreement does not constitute good and sufficient service of process.  The provisions
of this Section shall not restrict the ability of any party to enforce in any
court any judgment obtained in the federal courts located in the states of Missouri or   Delaware.

 

	
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U.S. Premium Beef, LLC
	AMENDED AND RESTATED LLC AGREEMENT

		

                                                                                                                                                                                                                

 

Section 8.12. Waiver
Of Jury Trial.

To the extent not prohibited by applicable law which
cannot be waived, the Company and each of the Unitholders and Members waive and
shall not be entitled to assert (whether as plaintiff, defendant or otherwise)
any right to trial by jury in any forum in respect of any issue, claim, demand,
action or cause of action arising out of or based upon this Agreement or the
subject matter of this Agreement, whether now existing or arising later and
whether sounding in tort or contract or otherwise.

 

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		Liability Company Agreement

	

 

			
		APPENDIX A

 

Appendix A

PRINCIPAL PLACE OF BUSINESS

OF

  U.S. PREMIUM BEEF, LLC 

 

The principal place of business of U.S. Premium Beef, LLC
is 12200 North Ambassador Drive, Suite 501, Kansas City, Missouri 64163 and other places as determined by the Board of Directors of U.S. Premium Beef, LLC.

 

 

 

 

 

	
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		Liability Company Agreement

	

 

			
		APPENDIX B 
		

 

Appendix B

AGENT FOR SERVICE

OF PROCESS

OF

  U.S. PREMIUM BEEF, LLC

 

The name and address of the agent for service of process
on U.S. Premium Beef, LLC in the State of Delaware is Corporation Trust Center, 1209 Orange Street, City of Wilmington, County of New Castle, Delaware 19801.

 

 

 

 

 

 

 

 

 

	
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		Liability Company Agreement

	

 

			
		APPENDIX C

 

Appendix C

Amended as of December 9, 2009 

UNIT TRANSFER POLICY

OF

  U.S. PREMIUM BEEF, LLC

 

Section 1.1. Definitions, Applicability.

(a)        Definitions.  The
definitions of the Limited Liability Company Agreement (the “Agreement”) of
U.S. Premium Beef, LLC (the “Company”) and Appendix E of the Agreement apply to
this Unit Transfer Policy (the “Policy”).

(b)        Applicability.  This Policy
and Section 3.8 of the Agreement and the other applicable provisions of the
Agreement apply to all Transfers of Units of the Company.

(c)        Intent of Policy.  It is
the intent of this Policy as it relates to any Transfers that: (1) the tax
status of the Company is the same as for a partnership; (2) this Company
preserve its partnership tax status by complying with Regulations, Section
1.7704-1, et seq., and any amendments; and (3) to the extent possible, this
Policy shall be read and interpreted to prohibit the free transferability of
Units.

Section 2.1. Complete Prohibition On Certain Transfers Of Units.

Notwithstanding any other provisions of this Policy, the
following Transfers will be prohibited and the Board of Directors will have no
authority to approve any of the following Transfers: 

(1) a Transfer in violation of the Securities Act or any
state securities or blue sky laws applicable to the Company or the Interest to
be transferred;

(2) a Transfer that would cause the Company to be
considered a publicly traded partnership under Section 7704(b) of the Code;

(3) a Transfer that would cause the Company to lose its
status as a partnership for federal income tax purposes; or

(4) a Transfer that would cause a termination of the
Company for federal income tax purposes.

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		Liability Company Agreement

	

 

			
		APPENDIX C

 

Section 2.2. Class A And Class B Units May Not Be Transferred Separately.

For the period when Class A and Class B Units must be
Transferred together under Section 3.2(b) of the Agreement, a Class A Unit may
not be Transferred separately from a Class B Unit and a Class B Unit may not be
transferred separately from a Class A Unit.

Section 3.1. Conditions To Permitted Transfers.

(a)        Requirement.  A Transfer
shall not be treated as a Permitted Transfer unless and until the conditions in
this Section are satisfied.

(b)        Conveyance Documents. 
Except in the case of a Transfer involuntarily by operation of law, the
transferor and transferee shall execute and deliver to the Company documents
and instruments of conveyance as may be necessary or appropriate in the opinion
of legal counsel to the Company to effect such Transfer, including for
transfers after February 29, 2008 that may receive distributions or allocations
under Section 3.2(b), a Unit Transfer Agreement in a form approved by legal
counsel to the Company.  In the case of a Transfer of Units involuntarily by
operation of law, the Transfer shall be confirmed by presentation to the
Company of legal evidence of the Transfer, in form and substance satisfactory
to legal counsel to the Company, which may include documents and agreements
with the Company to make the transfer effective. In all cases, the Company
shall be reimbursed by the transferor and/or transferee for all costs and
expenses that it reasonably incurs in connection with the Transfer.

(c)        Tax Information.  The
transferor and transferee shall furnish the Company with the transferee’s
taxpayer identification number, sufficient information to determine the
transferee’s initial tax basis in the Units transferred, and any other
information reasonably necessary to permit the Company to file all required
federal and state tax returns and other legally required information statements
or returns. In addition, the transferee must consent to the use of the method
and convention of allocating Profits and Losses for the year of the transfer
that is specified in the Unit Transfer Policy.  Without limiting the generality
of the foregoing, the Company shall not be required to make any Distribution
otherwise provided for in the Agreement with respect to any Transferred Units
until it has received this information.

(d)        Securities Compliance. 
Except in the case of a Transfer of Units involuntarily by operation of law,
either (1) the Units are registered under the Securities Act, and any
applicable state securities laws, or (2) if requested by the Board of Directors
in its discretion, the transferor provides an opinion of legal counsel, which
opinion and legal counsel shall be reasonably satisfactory to the Board of
Directors, to the effect that the Transfer is exempt from all applicable
registration requirements and that the Transfer will not violate any applicable
laws regulating the Transfer of securities.

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		Liability Company Agreement

	

 

			
		APPENDIX C

 

 

(e)        Does Not Cause Company To Be
Investment Company.  Except in the case of a Transfer of Units
involuntarily by operation of law, if requested by the Board of Directors in
its sole discretion, the transferor shall provide an opinion of legal counsel,
which opinion and legal counsel shall be reasonably satisfactory to the Board
of Directors, to the effect that the Transfer will not cause the Company to be
deemed to be an “investment company” under the Investment Company Act of 1940.

(f)        Does Not Cause Company To Be
Publicly Traded Partnership.  Except in the case of a Transfer of Units
involuntarily by operation of law, if requested by the Board of Directors in
its discretion, the transferor shall provide an opinion of legal counsel, which
opinion and legal counsel shall be reasonably satisfactory to the Board of
Directors, to the effect that such Transfer will not cause the Company to be
deemed to be a “publicly-traded limited partnership” under applicable
provisions of the Code.

(g)        Transferee Is Not A Competitor Of
The Company.  Except in the case of a Transfer of Units involuntarily by
operation of law, the Board must determine (in its sole discretion) that the
transferee is not a competitor of the Company or the Company’s Affiliates, or
an Affiliate of a competitor of the Company or a Person who as a Unitholder or
Member would or may be detrimental to the interests of the Company.  The
Unitholder and proposed transferee shall submit information requested by the
Board to make the determination.

(h)        Tax Status Compliance. 
Unless otherwise approved by the Board of Directors, a Transfer of Units shall
not be made except upon terms which would not, in the opinion of legal counsel
chosen by and mutually acceptable to the Board and the transferor, result in
the termination of the Company within the meaning of Section 708 of the Code or
cause the application of the rules of Sections 168(g)(1)(B) and 168(h) of the
Code or similar rules to apply to the Company.  In determining whether a
particular proposed Transfer will result in a termination of the Company, legal
counsel to the Company shall take into account the existence of prior written
commitments to Transfer and the commitments shall always be given precedence
over subsequent proposed Transfers.

(i)         Suspension Of Transfers After
Dissolution Event.  No notice or request initiating the procedures
contemplated by this Section may be given by Unitholder after a Dissolution
Event has occurred.

(j)         Board May Waive Conditions. 
Subject to Section 2.1 of this Policy, the Board of Directors shall have the
authority to waive any legal opinion or other condition required in this
Section.

Section 3.2. Distributions And Allocations In Respect To Transferred
Units.

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		Liability Company Agreement

	

 

			
		APPENDIX C

 

 

(a)        General Rule. 
Except for distributions and allocations in Section 3.2(b), if any Unit is
transferred in compliance with the Transfer Restrictions, then Profits and
Losses, each item thereof, and all other items attributable to the Units for
the fiscal year of the Transfer shall be divided and allocated between the
transferor and the transferee by taking into account their varying interests
during the fiscal year in accordance with Code Section 706(d).  Solely for
purposes of making the allocations, the Company shall use a method and
convention that divides and allocates the Profits, Losses and items between the
transferor and transferee based on the portion of the 52-53 week taxable year
that has elapsed prior to the Transfer determined by recognizing the Transfer
as of the first day of the 52-53 week taxable quarter during which the notice,
documentation and information and approval requirements of the Transfer have
been substantially complied with.  For this calculation, Profits, Losses and
items thereof for the 52-53 week taxable year shall be apportioned to the first
three quarters on the basis of taxable income estimates used in determining
Distributions made during the following quarter and any remaining amount shall
be apportioned to the fourth quarter.  Solely for purposes of determining
whether the transferor or transferee is entitled to a Distribution, all
Distributions made on or before the last day of the 52-53 week taxable quarter
during which the requirements have been substantially complied with shall be
made to the transferor and all Distributions thereafter shall be made to the
transferee.  The purpose of this method and convention is that Distributions
are likely to be based on the estimated taxable income of the previous quarter
and the Board believes that allocations will be better and more equitably
aligned with Distributions.  The Board shall have the power and authority to
adopt another reasonable method and/or convention with respect to the
allocations and Distributions by resolution or by amending this Section;
provided, that reasonable notice of any change is given to the Unitholders in
advance of the change.  Neither the Company, the Board, any Director nor any
Unitholder shall incur any liability for making allocations and Distributions
in accordance with the provisions of this Section, whether or not the Board or
any Director or the Company or any Unitholder has knowledge of any Transfer of
ownership of any interest in the Company.  The Unitholders acknowledge that the
method and convention designated in this Section 3.2 constitutes an “agreement
among the partners” within the meaning of Regulations, Section 1.706-1.

(b)        Distributions and Allocations Related To Sale of NBP Interests.  Notwithstanding the general provisions in Section 3.2(a), for
any allocations or Distributions attributable to the transactions under the
Membership Interest Purchase Agreement dated February 29, 2008 entered into by
and between JBS S.A. and the Company and other members of National Beef Packing
Company (“MIPA”), the allocation of profits and losses and Distributions of
proceeds from those MIPA transactions shall be made to the transferee of unit
transfer transactions approved by the Board after February 29, 2008 and prior
to the allocation or Distribution.

Section 3.3. Other Rules Regarding Transfers.

(a) Market Of Units Not Made.  A Unitholder may not: (1) make a market in Units; (2) Transfer its Units on an
established securities market, a secondary market (or the substantial
equivalent of those markets) within the meaning of Code Section 7704(b) (and
any Regulations, proposed Regulations, revenue rulings, or other official
pronouncements of the Internal Revenue Service or Treasury Department that may
be promulgated or published); and (3) in the event the Regulations, revenue
rulings, or other pronouncements treat any or all arrangements which facilitate
the selling of Company interests and which are commonly referred to as
“matching services” as being a secondary market or substantial equivalent of a
secondary market, Transfer any Units through a matching service that is not
approved in advance by the Company.  A Unitholder may not Transfer any Units to
any Person unless the Person agrees to be bound by the Transfer Restrictions
and to Transfer the Units only to Persons who agree to be similarly bound.

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		Liability Company Agreement

	

 

			
		APPENDIX C

 

 

(b) Units Acquired For Unitholder’s Account. 
The acquisition of Units by a Unitholder shall be deemed to be a representation
and warranty to the Company and the other Unitholders, that the Unitholder’s
acquisition of Units is made as principal for the Unitholder’s own account and
not for resale or distribution of the Units to others in violation of
securities laws as determined by the Company and its legal counsel.

 

 

 

 

 

 

 

 

 

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		APPENDIX 
		D

 

Appendix D

BOARD OF DIRECTORS

OF

  U.S. PREMIUM BEEF, LLC 

 

	
  Director

  	
   

  	
  Term
	

	Expires

  	
   

  	
         Position

  
	
  Mark Gardiner

  	
   

  	
  2010

  	
   

  	
         Chair

  
	
  Duane Ramsey

  	
   

  	
  2012

  	
   

  	
         Vice Chair

  
	
  Joe Morgan

  	
   

  	
  2010

  	
   

  	
         Secretary

  
	
  Doug Laue

  	
   

  	
  2010

  	
   

  	
   

  
	
  Rex McCloy

  	
   

  	
  2011

  	
   

  	
   

  
	
  Jerald Bohn

  	
   

  	
  2012

  	
   

  	
   

  
	
  Jeff Sternberger

  	
   

  	
  2011

  	
   

  	
   

  

	
   

	 

	 

	 

	 

	 

	 

	 

	 

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		Liability Company Agreement

	

 

			
		APPENDIX 
		E

 

APPENDIX E

ALLOCATIONS, DISTRIBUTIONS, TAX MATTERS,

AND ACCOUNTING

CONTENTS

	

ARTICLE I. THE COMPANY
	
		E-2

	

Section 1.10.    Definitions
	
		E-2

	

ARTICLE II. CAPITAL AND INTERESTS
	
		E-5

	

Section 2.4.      Capital Accounts
	
		E-6

	

ARTICLE III. ALLOCATIONS
	
		E-7

	

Section 3.1.      Profits
	
		E-7

	

Section 3.2.      Losses
	
		E-7

	

Section 3.3.      Special Allocations
	
		E-7

	

Section 3.4.      Curative Allocations
	
		E-9

	

Section 3.5.      Loss Limitation
	
		E-9

	

Section 3.6.      Other Allocation Rules
	
		E-9

	

Section 3.7.      Tax Allocations: Code Section 704(c)

			
		E-10

	

ARTICLE IV. DISTRIBUTIONS
	
		E-11

	

Section 4.1.      Net Cash Flow
	
		E-11

	

Section 4.2.      Amounts Withheld
	
		E-11

	

Section 4.3.      Limitations Of Distributions
	
		E-11

	

ARTICLE V. [RESERVED]
	
		E-11

	

ARTICLE VI. [RESERVED]
	
		E-11

	

ARTICLE VII. [RESERVED]
	
		E-11

	

ARTICLE VIII. ACCOUNTING, BOOKS AND RECORDS
	
		E-12

	

Section 8.1.      Accounting, Books And Records

			
		E-12

	

Section 8.2.      Reports
	
		E-12

	

Section 8.3.      Tax Matters
	
		E-13

	

ARTICLE IX. [RESERVED]
	
		E-14

	

ARTICLE X. [RESERVED]
	
		E-14

	

ARTICLE XI. [RESERVED]
	
		E-14

	

ARTICLE XII. DISSOLUTION AND WINDING UP
	
		E-14

	

Section 12.1.    Compliance With Certain Requirements Of
Regulations; Deficit Capital Accounts
	
		E-14

	

Section 12.2.    Deemed Distribution And Recontribution

			
		E-14

	

Section 12.3.    Character Of Liquidating Distributions

			
		E-15

  
	 

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		APPENDIX 
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ALLOCATIONS, DISTRIBUTIONS, TAX MATTERS,

AND ACCOUNTING

The Sections in this Appendix E relate to allocations,
distributions, tax matters, accounting, dissolution and other related matters. 
The numbering of the Sections is not sequential but the Sections are numbered
to reflect the numbering conventions of certain forms.

ARTICLE I.

THE COMPANY

Section 1.10.        Definitions.

The definitions in this section (and the definitions in
Section 1.2 of the Agreement) apply to this Appendix E.  References to Articles
and Sections refer to Articles and Sections in this Appendix E unless the
context implies or it is stated otherwise.

“Adjusted Capital Account Deficit”
means, with respect to any Unitholder, the deficit balance, if any, in the
Unitholder’s Capital Account as of the end of the relevant Fiscal Year, after
giving effect to the following adjustments:

(a) Credit to the Capital Account any amounts which the
Unitholder is deemed to be obligated to restore pursuant to the next to the
last sentences in Regulations, Sections 1.704-2(g)(1) and 1.704-2(i)(5); and

(b) Debit to the Capital Account the items described in
Regulations, Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5) and
1.704-1(b)(2)(ii)(d)(6).

The foregoing definition is intended to comply and shall
be interpreted consistently with the provisions of Regulations, Section
1.704-1(b)(2)(ii)(d).

“Capital Account” means the
capital account maintained for each Unitholder in accordance with Section 2.4.

“Capital Contributions” means,
with respect to any Unitholder, the amount of cash, property, services
rendered, or a promissory note or other obligation to contribute cash or
property or to perform services contributed to the Company with respect to the
Units in the Company held or purchased by the Unitholder.

“Code” means the United States
Internal Revenue Code of 1986, as amended from time to time.

“Company Minimum Gain” has the
meaning given the term “partnership minimum gain” in Regulations, Sections
1.704-2(b)(2) and 1.704-2(d).

	
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“Depreciation” means, for each
Fiscal Year, an amount equal to the depreciation, amortization, or other cost
recovery deduction allowable with respect to an asset for the Fiscal Year,
except that if the Gross Asset Value of an asset differs from its adjusted
basis for federal income tax purposes at the beginning of the Fiscal Year,
Depreciation shall be an amount which bears the same ratio to the beginning
Gross Asset Value as the federal income tax depreciation, amortization, or
other cost recovery deduction for the Fiscal Year bears to the beginning
adjusted tax basis; provided, however, that if the adjusted basis for federal
income tax purposes of an asset at the beginning of the Fiscal Year is zero,
Depreciation shall be determined with reference to the beginning Gross Asset
Value using any reasonable method selected by the Board.

“Fiscal Year” means, subject to a
change in Fiscal Year pursuant to Section 8.1(b), the fiscal year of the
Company, which shall be the Company’s taxable year as determined under
Regulations, Section 1.441-1 or Section 1.441-2 and the Regulations under
Section 706 of the Code or, if the context requires, any portion of a fiscal
year for which an allocation of Profits, Losses or other allocation items or a
Distribution is to be made; provided that the Board may designate a different
fiscal year for GAAP reporting purposes but that designation shall not affect
the taxable year of the Company or the provisions of this Agreement relating to
Capital Accounts, allocations of Profits, Losses or other allocation items, or
Distributions.

“GAAP” means generally accepted
accounting principles in effect in the United States of America from time to
time.

“Gross Asset Value” means with
respect to any asset, the asset’s adjusted basis for federal income tax
purposes, except as follows:

(a) The initial Gross Asset Value of any asset contributed by
a Unitholder to the Company shall be the gross fair market value of such asset,
as determined by the Board, provided that Property
owned by the Company immediately after the effective time of the Restructuring
shall be deemed to have been accepted by the Company as a Capital Contribution
of Property having an aggregate gross fair market value, net of minority
interest and marketability discounts to be determined by appraisal to be
obtained by the Cooperative and approved by the Board shortly before the
Restructuring;

(b) The Gross Asset Values of all Company assets shall be
adjusted to equal their respective gross fair market values (taking Code
Section 7701(g) into account) as determined by the Board as of the following
times: (i) the acquisition of an additional interest in the Company by any new
or existing Unitholder in exchange for more than a de minimis Capital
Contribution; (ii) the Distribution by the Company to a Unitholder of more than
a de minimis amount of Company property as consideration for an interest in the
Company; (iii) the liquidation of the Company within the meaning of
Regulations, Section 1.704-1(b)(2)(ii)(g); and (iv) other times as the
Regulations may permit; provided that an
adjustment described in clauses (i), (ii), and (iv) of this subparagraph shall
be made only if the Board determines that such adjustment is necessary to
reflect the relative economic interests of the Unitholders in the Company;

(c) The Gross Asset Value of any item of Company assets
distributed to any Unitholder shall be adjusted to equal the gross fair market
value (taking Code Section 7701(g) into account) of such asset on the date of
Distribution as determined by the Board; and

	
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(d) The Gross Asset Values of Company assets shall be
increased (or decreased) to reflect any adjustments to the adjusted basis of
such assets pursuant to Code Section 734(b) or Code Section 743(b), but only to
the extent that such adjustments are taken into account in determining Capital
Accounts pursuant to Regulations, Section 1.704-1(b)(2)(iv)(m) and
subparagraph (d) of the definition of “Profits” and “Losses” or Section 3.3(g);
provided, however,
that Gross Asset Values shall not be adjusted pursuant to this subparagraph (d)
to the extent that an adjustment pursuant to subparagraph (b) is required in
connection with a transaction that would otherwise result in an adjustment
pursuant to this subparagraph (d).

If the Gross Asset Value of an asset has been determined
or adjusted pursuant to subparagraph (b) or (d), the Gross Asset Value shall
thereafter be adjusted by the Depreciation taken into account with respect to
such asset, for purposes of computing Profits, Losses and other allocation
items.

“Liquidation Period” has the
meaning set forth in Section 7.5 of the Agreement.

“Liquidation Provisions” means the provisions of
Article XII of this Appendix E and Article 7 of the Agreement.

“Liquidator” has the meaning set
forth in Section 7.6 of the Agreement.

“Losses” has the meaning set forth
in the definition of “Profits” and “Losses.”

“Net Cash Flow” means the gross
cash proceeds of the Company less the portion thereof used to pay or establish
reserves for all Company expenses, debts, obligations and liabilities of the
Company, including Patronage Notices, capital improvements, replacements, and
contingencies, all as reasonably determined by the Board. “Net Cash Flow” shall
not be reduced by depreciation, amortization, cost recovery deductions, or
similar allowances, but shall be increased by any reductions of reserves
previously established.

“Nonrecourse Deductions” has the
meaning set forth in Regulations, Sections 1.704-2(b)(1) and 1.704-2(c).

“Nonrecourse Liability” has the
meaning in Regulations, Section 1.704-2(b)(3).

“Profits” and “Losses”
mean, for each Fiscal Year, an amount equal to the Company’s taxable income or
loss for the Fiscal Year, determined in accordance with Code Section 703(a)
(for this purpose, all items of income, gain, loss, or deduction required to be
stated separately pursuant to Code Section 703(a)(1) shall be included in
taxable income or loss), with the following adjustments (without duplication):

(a) Any income of the Company that is
exempt from federal income tax and not otherwise taken into account in
computing Profits or Losses pursuant to this definition of “Profits” and
“Losses” shall be added to the taxable income or loss;

(b) Any expenditures of the Company
described in Code Section 705(a)(2)(B) or treated as Code Section 705(a)(2)(B)
expenditures pursuant to Regulations, Section 1.704-1(b)(2)(iv)(i), and not
otherwise taken into account in computing Profits or Losses pursuant to this
definition of “Profits” and “Losses” shall be subtracted from the taxable
income or loss;

	
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(c) In the event the Gross Asset Value
of any Company asset is adjusted pursuant to subparagraphs (b) or (c) of the
definition of Gross Asset Value, the amount of the adjustment shall be treated
as an item of gain (if the adjustment increases the Gross Asset Value of the
asset) or an item of loss (if the adjustment decreases the Gross Asset Value of
the asset) from the disposition of the asset and shall be taken into account
for purposes of computing Profits or Losses;

(d) Gain or loss resulting from any
disposition of Property with respect to which gain or loss is recognized for
federal income tax purposes shall be computed by reference to the Gross Asset
Value of the Property disposed of, notwithstanding that the adjusted tax basis
of the Property differs from its Gross Asset Value;

(e) In lieu of the depreciation,
amortization, and other cost recovery deductions taken into account in
computing such taxable income or loss, there shall be taken into account
Depreciation for such Fiscal Year, computed in accordance with the definition
of Depreciation;

(f) To the extent an adjustment to the
adjusted tax basis of any Company asset pursuant to Code Section 734(b) is
required, pursuant to Regulations, Section 1.704-(b)(2)(iv)(m)(4), to be
taken into account in determining Capital Accounts as a result of a Distribution
other than in liquidation of a Unitholder’s interest in the Company, the amount
of the adjustment shall be treated as an item of gain (if the adjustment
increases the basis of the asset) or loss (if the adjustment decreases such
basis) from the disposition of the asset and shall be taken into account for
purposes of computing Profits or Losses; and

(g) Notwithstanding any other
provision of this definition, any items which are specially allocated pursuant
to Section 3.3 and Section 3.4 shall not be taken into account in computing
Profits or Losses.

The amounts of the items of Company income, gain, loss or
deduction available to be specially allocated pursuant to Sections 3.3 and
Section 3.4 shall be determined by applying rules analogous to those set forth
in subparagraphs (a) through (f) above.

“Regulations” means the Income Tax
Regulations, including Temporary Regulations, promulgated under the Code, as
the regulations are amended from time to time.

“Regulatory Allocations” has the
meaning set forth in Section 3.4.

“Unitholder Nonrecourse Debt” has
the same meaning as the term “partner nonrecourse debt” in Regulations, Section
1.704-2(b)(4).

“Unitholder Nonrecourse Debt Minimum
Gain” means an amount, with respect to each Unitholder Nonrecourse Debt,
equal to the Company Minimum Gain that would result if such Unitholder
Nonrecourse Debt were treated as a Nonrecourse Liability, determined in
accordance with Regulations, Section 1.704-2(i)(3).

“Unitholder Nonrecourse Deductions”
has the same meaning as the term “partner nonrecourse deductions” in
Regulations, Sections 1.704-2(i)(1) and 1.704-2(i)(2).

	
  
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		APPENDIX 
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ARTICLE II.

CAPITAL AND INTERESTS

Section 2.4. Capital Accounts.

A Capital Account shall be maintained for each Unitholder
in accordance with the following provisions.  To facilitate the accounting for
acquisitions, ownership and transfers of more than one Class of Units by a
Unitholder, each Unitholder’s Capital Account shall be subdivided into separate
Capital Accounts for each Class of Units owned, and the following adjustments
to Capital Accounts shall be made by reference to Units of each Class of Units
owned:

(a) To each Unitholder’s Capital
Account there shall be credited (i) the initial Gross Asset Value of any
Property, including money contributed to the Company as a Capital Contribution
with respect to the Units in the Company held by the Unitholder, (ii) the
Unitholder’s distributive share of Profits and any items in the nature of
income or gain which are specially allocated pursuant to Section 3.3 and
Section 3.4, and (iii) the amount of any Company liabilities assumed by the
Unitholder or which are secured by any Property distributed to the Unitholder.
The principal amount of a promissory note which is not readily traded on an
established securities market and which is contributed to the Company by the
maker of the note (or a Unitholder related to the maker of the note within the
meaning of Regulations, Section 1.704-1(b)(2)(ii)(c)) shall not be included in
the Capital Account of any Unitholder until the Company makes a taxable
disposition of the note or until (and to the extent) principal payments are
made on the note, all in accordance with Regulations, Section
1.704-1(b)(2)(iv)(d)(2);

(b) To each Unitholder’s Capital
Account there shall be debited (i) the Gross Asset Value of any Property
including money distributed to the Unitholder pursuant to any provision of this
Agreement, (ii) the Unitholder’s distributive share of Losses and any items in
the nature of expenses or losses which are specially allocated pursuant to
Section 3.3 and Section 3.4, and (iii) the amount of any liabilities of the
Unitholder assumed by the Company or which are secured by any Property
contributed by the Unitholder to the Company including the Unitholder’s share,
determined in proportion to Class A Units issued in the Restructuring, of
liabilities for which the Company is obligated immediately after the effective
time of the Restructuring, including the obligation represented by Patronage
Notices to the extent of their fair market value as determined by an appraisal
to be obtained by the Cooperative shortly before the Restructuring;

(c) In the event Units are
Transferred in accordance with the terms of Article 3 of the Agreement, the
transferee shall succeed to the Capital Account of the transferor to the extent
it relates to the Transferred Units; and

	
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(d) In determining the amount of
any liability for purposes of subparagraphs (a) and (b) above there shall be
taken into account Code Section 752(c) and any other applicable provisions of
the Code and Regulations; provided, that the
amount of the liability for Patronage Notices for which the Company is
obligated immediately after the effective time of the Restructuring shall be
the aggregate amount by which the gain or loss recognized by the shareholders
of the Cooperative in the Restructuring is adjusted to take into account the
payment obligation represented by the Patronage Notices.

The foregoing provisions and the other provisions of this
Agreement relating to allocation of Profits, Losses and other allocation items,
nonliquidating Distributions, liquidating Distributions, and the maintenance of
Capital Accounts, including and subject to Section 12.1 of this Appendix E, are
intended to comply with Regulations, Section 1.704-1(b), and shall be
interpreted and applied in a manner consistent with the Regulations.  In the
event the Board shall determine that it is prudent, the Board may modify the
manner in which the Capital Accounts, or any debits or credits thereto
(including debits or credits relating to liabilities which are secured by
contributed or distributed property or which are assumed by the Company or any
Unitholders), are computed in order to comply with the Regulations.  The Board
also shall (i) make any adjustments that are necessary or appropriate to
maintain equality between the Capital Accounts of the Unitholders and the
amount of capital reflected on the Company’s balance sheet, as computed for
book purposes, in accordance with Regulations, Section 1.704-1(b)(2)(iv)(q),
and (ii) make any appropriate modifications in the event unanticipated events
might otherwise cause the Agreement not to comply with Regulations, Section
1.704-1(b).

ARTICLE III.

ALLOCATIONS

Section 3.1. Profits.

After giving effect to the special allocations in Section
3.3 and Section 3.4 of this Appendix E, Profits for any Fiscal Year shall be
allocated ten percent (10%) to Class A and then to Class A unitholders in
proportion to Class A Units held, and ninety percent (90%) to Class B and then
to Class B unitholders in proportion to Class B Units held.  The stated
percentages are subject to change if the Company issues additional units
pursuant to Section 3.2(c) of the Agreement.

Section 3.2. Losses.

After giving effect to the special allocations in Section
3.3 and Section 3.4 of this Appendix E, and except as otherwise provided in
Section 3.5 of this Appendix E, Losses for any Fiscal Year shall be allocated
ten percent (10%) to Class A and then to Class A unitholders in proportion to
Class A Units held, and ninety percent (90%) to the Class B and then to Class B
unitholders in proportion to Class B Units held.  The stated percentages are
subject to change if the Company issues additional units pursuant to Section
3.2(c) of the Agreement.

Section 3.3. Special Allocations.

The following special allocations shall be made in the
following order:

	
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(a) Minimum Gain Chargeback.  Except
as otherwise provided in Section 1.704-2(f) of the Regulations, notwithstanding
any other provision of this Article III, if there is a net decrease in Company
Minimum Gain during any Fiscal Year, each Unitholder shall be specially
allocated items of Company income and gain for the Fiscal Year (and, if
necessary, subsequent Fiscal Years) in an amount equal to the Unitholder’s
share of the net decrease in Company Minimum Gain, determined in accordance
with Regulations, Section 1.704-2(g).  Allocations pursuant to the previous
sentence shall be made in proportion to the respective amounts required to be
allocated to each Unitholder pursuant thereto. The items to be so allocated
shall be determined in accordance with Regulations, Sections 1.704-2(f)(6) and
1.704-2(j)(2).  This Section 3.3(a) is intended to comply with the minimum gain
chargeback requirement in Regulations, Section 1.704-2(f) and shall be
interpreted consistently therewith.

(b) Unitholder Minimum Gain Chargeback.
Except as otherwise provided in Regulations, Section 1.704-2(i)(4),
notwithstanding any other provision of this Section, if there is a net decrease
in Unitholder Nonrecourse Debt Minimum Gain attributable to a Unitholder
Nonrecourse Debt during any Fiscal Year, each Unitholder who has a share of the
Unitholder Nonrecourse Debt Minimum Gain attributable to the Unitholder
Nonrecourse Debt, determined in accordance with Regulations, Section
1.704-2(i)(5), shall be specially allocated items of Company income and gain
for the Fiscal Year (and, if necessary, subsequent Fiscal Years) in an amount
equal to the Unitholder’s share of the net decrease in Unitholder Nonrecourse Debt,
determined in accordance with Regulations, Section 1.704-2(i)(4).  Allocations
pursuant to the previous sentence shall be made in proportion to the respective
amounts required to be allocated to each Unitholder pursuant thereto.  The
items to be so allocated shall be determined in accordance with Regulations,
Sections 1.704-2(i)(4) and 1.704-2(j)(2). This Section 3.3(b) is intended to
comply and shall be interpreted consistently with the minimum gain chargeback
requirement in Regulations, Section 1.704-2(i)(4).

(c) Qualified Income Offset. In the
event any Unitholder unexpectedly receives any adjustments, allocations, or
Distributions described in Regulations, Sections 1.704-1(b)(2)(ii)(d)(4),
1.704-1(b)(2)(ii)(d)(5), or
1.704-1(b)(2)(ii)(d)(6), items of
Company income and gain shall be specially allocated to the Unitholder in an
amount and manner sufficient to eliminate, to the extent required by the
Regulations, the Adjusted Capital Account Deficit of the Unitholder as quickly
as possible, provided that an allocation pursuant to this Section 3.3(c) shall
be made only if and to the extent that the Unitholder would have an Adjusted
Capital Account Deficit after all other allocations provided for in this
Article III have been tentatively made as if this Section 3.3(c) were not in
this Appendix E.

(d) Gross Income Allocation.  In the
event any Unitholder has a deficit Capital Account at the end of any Fiscal
Year which is in excess of the sum of (i) the amount such Unitholder is
obligated to restore pursuant to the penultimate sentences of Regulations,
Sections 1.704-2(g)(1) and 1.704-2(i)(5), each Unitholder shall be specially
allocated items of Company income and gain in the amount of the excess as
quickly as possible, provided that an allocation pursuant to this Section
3.3(d) shall be made only if and to the extent that such Unitholder would have
a deficit Capital Account in excess of such sum after all other allocations
provided for in this Article III have been made as if Section 3.3(c) and this
Section 3.3(d) were not in this Appendix E.

(e) Nonrecourse Deductions. 
Nonrecourse Deductions for any Fiscal Year shall be specially allocated to the Unitholders in the manner which Profits would be allocated under Section 3.1
determined without regard to the other provisions of this Article III.

	
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(f) Unitholder Nonrecourse Deductions.
Any Unitholder Nonrecourse Deductions for any Fiscal Year shall be specially
allocated to the Unitholder who bears the economic risk of loss with respect to
the Unitholder Nonrecourse Debt to which such Unitholder Nonrecourse Deductions
are attributable in accordance with Regulations, Section 1.704-2(i)(1).

(g) Section 754 Adjustments. To the
extent an adjustment to the adjusted tax basis of any Company asset, pursuant
to Code Section 734(b) or Code Section 743(b) is required, pursuant to
Regulations, Section 1.704-1(b)(2)(iv)(m)(2) or 1.704-1(b)(2)(iv)(m)(4), to be
taken into account in determining Capital Accounts as the result of a
Distribution to a Unitholder in complete liquidation of the Unitholder’s
interest in the Company, the amount of the adjustment to Capital Accounts shall
be treated as an item of gain (if the adjustment increases the basis of the
asset) or loss (if the adjustment decreases such basis) and such gain or loss
shall be specially allocated to the Unitholders in accordance with their
interests in the Company in the event Regulations, Section 1.704-1(b)(2)(iv)(m)(2) applies, or
to the Unitholder to whom the Distribution was made in the event Regulations,
Section 1.704-1(b)(2)(iv)(m)(4)
applies.

(h) Issuance of a Capital Interest for
Services.  If the Company issues Units in consideration of services that
would entitle the recipient to share in liquidation proceeds if the Company
were hypothetically liquidated immediately following the issuance (a capital
interest for federal income tax purposes), gross receipts of the Company shall
be specially allocated to the recipient in the amount of the entitlement.

Section 3.4. Curative Allocations.

The allocations set forth in Sections 3.3(a) through (g)
and 3.5 (the “Regulatory Allocations”) are intended to comply with certain
requirements of the Regulations. It is the intent that, to the extent possible,
all Regulatory Allocations shall be offset either with other Regulatory
Allocations or with special allocations of other items of Company income, gain,
loss or deduction pursuant to this Section 3.4. Therefore, notwithstanding any
other provision of this Article III (other than the Regulatory Allocations),
the Board shall make the offsetting special allocations of Company income,
gain, loss or deduction in whatever manner it determines appropriate so that,
after the offsetting allocations are made, each Unitholder’s Capital Account
balance is, to the extent possible, equal to the Capital Account balance such
Unitholder would have had if the Regulatory Allocations were not part of the
Agreement.

Section 3.5. Loss Limitation.

Losses allocated pursuant to Section 3.2 shall not exceed
the maximum amount of Losses that can be allocated without causing any
Unitholder to have an Adjusted Capital Account Deficit at the end of any Fiscal
Year.  In the event some but not all of the Unitholders would have Adjusted
Capital Account Deficits as a consequence of an allocation of Losses pursuant
to Section 3.2, the limitation set forth in this Section 3.5 shall be applied
on a Unitholder by Unitholder basis among the Units, so as to allocate the
maximum permissible Losses to each Unitholder under Regulations, Section
1.704-1(b)(2)(ii)(d).

	
  
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Section 3.6. Other Allocation Rules.

(a) For purposes of determining the
Profits, Losses, or any other items allocable to any period, Profits, Losses,
and any such other items shall be determined by the Board using any permissible
method under Code Section 706 and the Regulations under Code Section 706.

(b) If additional Units are issued
pursuant to Section 3.2(c) of the Agreement during a Fiscal Year, the Profits,
Losses and other items allocated with respect to the Class of Units issued for
that Fiscal Year will be allocated among the Unitholders of that Class in a
manner that takes into account their varying interests in the Company during
the Fiscal Year using any permissible methods under Code Section 706 and the
Regulations under Code Section 706 and any conventions permitted by law as may
be specified in the terms governing the issuance of the Units or, if not
specified, as directed by the Board.

(c) The Unitholders agree to be bound
by the provisions of this Article III in reporting their shares of Company
income and loss for income tax purposes.

(d) Solely for purposes of determining
a Unitholder’s proportionate share of the “excess nonrecourse liabilities” of
the Company within the meaning of Regulations, Section 1.752-3(a) (3), the
Unitholders’ aggregate interests in Company profits shall be deemed to be as
provided in the capital accounts.

(e) To the extent permitted by
Regulations, Section 1.704-2(h) (3), the Unitholders shall endeavor to treat
Distributions as having been made from the proceeds of a Nonrecourse Liability
or a Unitholder Nonrecourse Debt only to the extent that the Distributions
would cause or increase an Adjusted Capital Account Deficit for any Unitholder.

Section 3.7. Tax Allocations: Code Section 704(c).

(a) In accordance with Code Section
704(c) and the Regulations under Section 704(c), income, gain, loss, and
deduction with respect to any Property contributed to the capital of the
Company shall, solely for tax purposes, be allocated among the Unitholders so
as to take into account any variation between the adjusted basis of such
Property to the Company for federal income tax purposes and its initial Gross
Asset Value (computed in accordance with the definition of Gross Asset Value).

(b) In the event the Gross Asset Value
of any Company asset is adjusted pursuant to subparagraph (b) (ii) of the
definition of Gross Asset Value, subsequent allocations of income, gain, loss,
and deduction with respect to such asset shall take account of any variation
between the adjusted basis of such asset for federal income tax purposes and
its Gross Asset Value in the same manner as under Code Section 704(c) and the
Regulations under Code Section 704(c).

	
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(c) Allocations pursuant to this
Section shall be made as required or permitted by Regulations, Section 1.704-3
pursuant to such method provided therein as may reasonably be designated by the
Board. Any elections or other decisions relating to allocations under this
Section will be made in any manner that the Board reasonably determines to
reflect the purpose and intention of this Agreement. Allocations under this
Section are solely for purposes of federal, state and local taxes and shall not
affect, or in any way be taken into account in computing, any Unitholder’s
Capital Account or share of Profits, Losses and other allocation items or
Distributions under any provision of this Appendix E or the Agreement.

ARTICLE IV.

DISTRIBUTIONS

Section 4.1. Net Cash Flow.

The Board may make Distributions of Net Cash Flow at times
and in aggregate amounts determined by the Board in its sole discretion.  When
the Board determines that a Distribution is to be made, except as otherwise
provided in the Liquidation Provisions, Net Cash Flow, if any, shall be
distributed: (1) ten percent (10%) to Class A and then to Class A unitholders
in proportion to Class A Units held; and (2) ninety percent (90%) to Class B
and then to Class B unitholders in proportion to Class B Units held.  The
stated percentages are subject to change if additional units are issued
pursuant to Section 3.2(c) of the Agreement.

Section 4.2. Amounts Withheld.

All amounts withheld pursuant to the Code or any provision
of any state, local or foreign tax law with respect to any payment,
Distribution or allocation to the Company or the Unitholders shall be treated
as amounts paid or distributed, as the case may be, to the Unitholders with
respect to which the amount was withheld pursuant to this Section for all
purposes under this Agreement. The Company is authorized to withhold from
payments and Distributions, or with respect to allocations to the Unitholders,
and to pay over to any federal, state and local government or any foreign
government, any amounts required to be so withheld pursuant to the Code or any
provisions of any other federal, state or local law or any foreign law, and
shall allocate any such amounts to the Unitholders with respect to which such
amount was withheld.

Section 4.3. Limitations Of Distributions.

(a) The Company shall make no
Distributions to the Unitholders except as provided in this Article IV, Article
XII, Article 7 of the Agreement, and Section 3.6 of the Agreement.

(b) A Unitholder may not receive a
Distribution from the Company to the extent that, after giving effect to the
Distribution, all liabilities of the Company, other than liability to
Unitholders on account of their Capital Contributions, would exceed the Gross
Asset Value of the Company’s assets.

ARTICLE
V.

[RESERVED]

ARTICLE
VI.

[RESERVED]

ARTICLE VII.

[RESERVED]

	
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U.S. Premium Beef, LLC  
	
		 Limited
		Liability Company Agreement

	

 

			
		APPENDIX 
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ARTICLE
VIII.

ACCOUNTING, BOOKS AND RECORDS

Section 8.1. Accounting, Books And Records.

(a) The books and records of the
Company shall be kept, and the financial position and the results of its
operations recorded, in accordance with GAAP, consistently applied; provided,
that the financial provisions in the Agreement relating to Capital
Contributions, Profits, Losses and other allocation items, Distributions and
Capital Accounts shall be construed and determined in accordance with this
Agreement without regard to whether such provisions are inconsistent with GAAP. 
The books and records shall reflect all the Company’s transactions and shall be
appropriate and adequate for the Company’s business.  The Company shall
maintain all of the following:

(i)         a current list of the full name and last
known business or residence address of each Unitholder set forth in
alphabetical order, together with the Capital Contributions, Capital Account
and Units of each Unitholder;

(ii)        the full name and business address of each
Director;

(iii)       a copy of the Certificate of Formation and
any and all amendments thereto together with executed copies of any powers of
attorney pursuant to which the Certificate of Formation or any amendments
thereto have been executed;

(iv)       copies of the Company’s federal, state, and
local income tax or information returns and reports, if any, for the six most
recent taxable years;

(v)        a copy of this Agreement and any and all
amendments thereto together with executed copies of any powers of attorney
pursuant to which this Agreement or any amendments thereto have been executed;

(vi)       copies of the financial statements of the
Company, if any, for the six most recent Fiscal Years; and

(vii)      the Company’s books and records as they
relate to the internal affairs of the Company for at least the current and past
four Fiscal Years.

(b) The Company shall use the accrual
method of accounting in preparing its financial reports and for tax purposes
and shall keep its books and records accordingly. The Board may, without any
further consent of the Unitholders (except as specifically required by the
Code), apply for IRS consent to, and otherwise effect a change in, the
Company’s Fiscal Year.

Section 8.2. Reports.

	
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		 Limited
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		APPENDIX 
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(a) In General. The chief financial
officer of the Company (or other officer determined by the Board or the CEO)
shall be responsible for causing the preparation of financial reports of the
Company and the coordination of financial matters of the Company with the
Company’s accountants.

(b) Financial Statements. The Company
shall maintain the financial statements listed in clauses (i) and (ii) below,
prepared, in each case (other than with respect to Unitholder’s Capital
Accounts, which shall be prepared in accordance with this Agreement) in
accordance with GAAP consistently applied (and file with the Securities and
Exchange Commission, if required, for purposes of reporting under the
Securities Exchange Act of 1934, Regulation S-X).

(i)         As soon as practicable following the end of
each GAAP Fiscal Year (and in any event not later than one hundred and twenty
(120) days after the end of the GAAP Fiscal Year) and at the time as
Distributions are made to the Unitholders pursuant to the Liquidation
Provisions following the occurrence of a Dissolution Event, a balance sheet of
the Company as of the end of the GAAP Fiscal Year and the related statements of
operations, statement of Unitholders’ Capital and changes therein, and cash
flows for the GAAP Fiscal Year, together with appropriate notes to the
financial statements and supporting schedules, all of which shall be audited
and certified by the Company’s accountants, and in each case, to the extent the
Company was in existence, setting forth in comparative form the corresponding
figures for the immediately preceding GAAP Fiscal Year end (in the case of the
balance sheet) and the two (2) immediately preceding GAAP Fiscal Years (in the
case of the statements).

(ii)        If required by the Securities and Exchange
Commission, as soon as practicable following the end of the first three
quarters of each GAAP Fiscal Year (and in any event not later than forty-five
(45) days after the end of such quarter), an unaudited balance sheet of the
Company as of the end of such quarter and the related unaudited statements of
operations and cash flows for such GAAP Fiscal Quarter and for the GAAP Fiscal
Year to date, in each case, to the extent the Company was in existence, setting
forth in comparative form the corresponding figures for the prior GAAP Fiscal
Year’s quarter and the quarter just completed.

Section 8.3. Tax Matters.

(a) Generally.  The Board shall have
the power and authority, without any further consent of the Members being
required: (i) to cause the Company to make or revoke any and all elections for
federal, state, local, and foreign tax purposes including an election pursuant
to Code Section 754; (ii) to extend the statute of limitations for assessment
of tax deficiencies against the Unitholders with respect to adjustments to the
Company’s federal, state, local or foreign tax returns; (iii) to the extent
provided in Code Sections 6221 through 6231 and similar provisions of federal,
state, local, or foreign law, to represent the Company and the Unitholders
before taxing authorities or courts of competent jurisdiction in tax matters
affecting the Company or the Unitholders in their capacities as Unitholders;
and (iv) to file or amend any tax returns and execute any agreements or other
documents relating to or affecting tax matters, including agreements or other
documents that bind the Unitholders with respect to tax matters.  The Board
shall designate a qualifying Member to act as the tax matters partner within
the meaning of and pursuant to Regulations, Sections 301.6231(a)(7)-1 and -2 or
any similar provision under state or local law.

	
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U.S. Premium Beef, LLC  
	
		 Limited
		Liability Company Agreement

	

 

			
		APPENDIX 
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(b) Tax Information.  Necessary tax
information shall be delivered to each Unitholder as soon as practicable after
the end of each Fiscal Year of the Company but not later than five (5) months
after the end of each Fiscal Year.

ARTICLE
IX.

[RESERVED]

ARTICLE
X.

[RESERVED]

ARTICLE
XI.

[RESERVED]

ARTICLE XII.

DISSOLUTION AND WINDING UP

Section 12.1. Compliance With Certain
Requirements Of Regulations; Deficit Capital Accounts.

In the event the Company is “liquidated” within the
meaning of Regulations, Section 1.704-1(b)(2)(ii)(g), Distributions shall be
made pursuant to the Liquidation Provisions to the Unitholders who have
positive Capital Accounts in compliance with Regulations, Section
1.704-1(b)(2)(ii)(b)(2). If any Unitholder has a deficit balance in his Capital
Account (after giving effect to all Capital Contributions, Distributions and
allocations of Profits, Losses and other allocation items for all Fiscal Years,
including the Fiscal Year during which such liquidation occurs), such
Unitholder shall have no obligation to make any contribution to the capital of
the Company with respect to such deficit, and such deficit shall not be
considered a debt owed to the Company or to any other Person for any purpose
whatsoever.  In the discretion of the Liquidator, a pro rata portion of the
Distributions that would otherwise be made to the Unitholders pursuant to the
Liquidation Provisions may be:

(a) Distributed to a trust established
for the benefit of the Unitholders for the purposes of liquidating Company
assets, collecting amounts owed to the Company, and paying any contingent or
unforeseen liabilities or obligations of the Company. The assets of any such
trust shall be distributed to the Unitholders from time to time, in the
reasonable discretion of the Liquidator, in the same proportions as the amount
distributed to the trust by the Company would otherwise have been distributed
to the Unitholders pursuant to Section 7.2 of the Agreement; or

(b) Withheld to provide a reasonable
reserve for Company liabilities (contingent or otherwise) and to reflect the
unrealized portion of any installment obligations owed to the Company, provided
that the withheld amounts shall be distributed to the Unitholders as soon as
practicable.

Section 12.2. Deemed Distribution And Recontribution.

	
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U.S. Premium Beef, LLC  
	
		 Limited
		Liability Company Agreement

	

 

			
		APPENDIX 
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Notwithstanding any other provision of the Liquidation
Provisions, in the event the Company is liquidated within the meaning of
Regulations, Section 1.704-1(b)(2)(ii)(g) but no Dissolution Event has
occurred, the Property shall not be liquidated, the debts, obligations and
liabilities of the Company shall not be paid or discharged, and the Company’s
affairs shall not be wound up. Instead, solely for federal income tax purposes,
the Company shall be deemed to have contributed all of its Property and
liabilities to a new limited liability company in exchange for an interest in
the new company, and immediately thereafter, the Company will be deemed to
liquidate by distributing the interest in the new company to the Unitholders.

Section 12.3. Character Of Liquidating
Distributions.

All payments made in liquidation of the interest of a
Unitholder in the Company shall be made in exchange for the interest of such
Unitholder in Property pursuant to Section 736(b)(1) of the Code, including the
interest of the Unitholder in Company goodwill.

 

 

 

 

 

 

 

	
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