Document:

jrcc_8k-ex1001.htm

 

Exhibit 10.1

 

 

 

[EXECUTION COPY]

FIRST AMENDMENT

 

TO

 

AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT

 

THIS FIRST AMENDMENT TO AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT (this “Agreement”), is made and entered into as of August 16, 2010 (the “Effective Date”), by and among James River Coal Company, a corporation organized under the laws of Virginia (“JRCC”), and certain of JRCC’s Subsidiaries identified on the signature pages hereof, as borrowers (such Subsidiaries, together with JRCC, are referred to hereinafter each individually as a “Borrower”, and collectively, jointly and severally, as the “Borrowers”), and the other credit parties party hereto, identified on the signature pages hereof as Guarantors (together, the Borrowers and Guarantors, the “Credit Parties”), the Lenders (as hereinafter defined) party hereto, General Electric Capital Corporation (“GECC”), a corporation formed under the laws of Delaware, as administrative agent for the Lenders (in such capacity, together with its successors and assigns, if any, the “Administrative Agent”) and as collateral agent for the Lenders (in such capacity, the “Collateral Agent”).

 

W I T N E S S E T H:

WHEREAS, the Borrowers, the other Credit Parties signatory thereto, the financial institutions from time to time party thereto as lenders (collectively, the “Lenders”), the L/C Issuers from time to time party thereto, the Administrative Agent, the Collateral Agent, and the other agents and arrangers from time to time party thereto are parties to that certain Amended and Restated Revolving Credit Agreement, dated as of January 28, 2010 (as amended, restated, supplemented and otherwise modified from time to time, the “Credit Agreement”), pursuant to which the Lenders and the L/C Issuers have committed to make certain loans and other extensions of credit to the Borrowers upon the terms and conditions set forth therein; and

 

WHEREAS, the Borrowers have requested that the undersigned Lenders and the Administrative Agent agree to amend certain of the terms and provisions of the Credit Agreement and the Security Agreement, as specifically set forth in this Agreement; and

WHEREAS, the undersigned Lenders and the Administrative Agent are prepared to amend the Credit Agreement and the Security Agreement on the terms, subject to the conditions and in reliance on the representations set forth herein.

 

NOW, THEREFORE, in consideration of the premises, the covenants and agreements contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto do hereby agree as follows:

 

1.           Defined Terms.  Capitalized terms used herein and not otherwise defined herein shall have the meanings given to such terms in the Credit Agreement (as amended hereby).

 

  

 

  

2.           Amendments to the Credit Agreement.

 

(a)           Section 1.01 of the Credit Agreement, Definitions, is hereby amended by inserting the following new definitions in the appropriate alphabetical order:

 

“Bank Product” shall mean any of the following products, services or facilities extended to any Credit Party or any of its Subsidiaries by GE Capital or any of its Affiliates or by any Lender or any of its Affiliates: (a) any services provided from time to time in connection with operating, collections, payroll, trust, or other depository or disbursement accounts, including automatic clearinghouse, controlled disbursement, depository, electronic funds transfer, information reporting, lockbox, stop payment, overdraft and/or wire transfer services; (b) commercial credit card and purchasing cards; (c) leases (including equipment leases) and letters of credit and (d) other banking products or services approved by the Administrative Agent; provided, however, that, except for Bank Products that have been provided or arranged by GE Capital or an Affiliate of GE Capital, for any of the foregoing to be included for purposes of a distribution under SECTION 2.09(a)(ii)) and for the purposes of the definition of “Obligations”, the applicable bank product provider and the applicable Credit Party or Subsidiary must have provided written notice to the Administrative Agent of (i) the existence of such Bank Product, (ii) the maximum dollar amount of obligations arising thereunder (“Bank Product Amount”), and (iii) the methodology to be used by such parties in determining the Bank Product Amount owing from time to time.

 

“Bank Product Amount” has the meaning specified in the definition of Bank Product.

 

(b)           The definition of the term “Obligations” contained in Section 1.01 of the Credit Agreement, Definitions, is hereby amended by amending and restating such definition in its entirety:

 

“Obligations” means (a) all Loans, Lender Expenses, advances, debts, liabilities, fees, interest, obligations, covenants and duties, owing by any Credit Party to the Administrative Agent, the Collateral Agent, any L/C Issuer, any Lender, any Affiliate of any Lender, or any Person entitled to indemnification pursuant to SECTION 14.9 of this Agreement, of any kind or nature, present or future, whether or not evidenced by any note, guaranty or other instrument, whether or not for the payment of money, whether arising by reason of an extension of credit, loan, guaranty, indemnification, interest rate contract, foreign exchange contract or in any other manner, whether direct or indirect (including those acquired by assignment), absolute or contingent, due or to become due, but in all such circumstances only to the extent now existing or hereafter arising or however acquired, arising under or in connection with this Agreement, the Notes, any other Loan Document or any application or documentation of any L/C Issuer in connection with the issuance of a Letter of Credit and (b) all obligations and liabilities in respect of Bank Products owing by any Credit Party or any of its Subsidiaries to GE Capital or any of its Affiliates or any Lender or any of its Affiliates, now existing or hereafter arising and however acquired.  The term “Obligations” includes all interest (including any interest that, but for the provisions of the Bankruptcy Code, would have accrued), charges, expenses, fees, attorneys’ fees and disbursements, Lender Expenses and any other sum chargeable to the Credit Parties under this Agreement, the Notes, or any other Loan Document and in respect of any Bank Products.  The parties agree that the aggregate amount of recourse to the Collateral in respect of obligations and liabilities of the Credit Parties and their Subsidiaries under leases constituting Bank Products shall not, at any time, without the consent of all of the Lenders, exceed $20,000,000.

 

  

2

  

(c)           Section 2.09 of the Credit Agreement, Application of Payments and Proceeds, is hereby amended by restating the second sentence of subsection 2.09(a)(ii) in its entirety as follows:

 

“In all circumstances, after acceleration or maturity of the Obligations, all payments and proceeds of Collateral shall be applied to amounts then due and payable in the following order:  (A) to the payment of any Protective Advances funded by the Collateral Agent; (B) fees, costs and expenses, including Lender Expenses, of Agents payable or reimbursable by the Credit Parties under the Loan Documents; (C) to payment of Lender Expenses of Lenders payable or reimbursable by the Borrowers under this Agreement; (D) to payment of all accrued unpaid interest on the Obligations and fees owed to Agents, Lenders and L/C Issuers; (E) to payment of principal of the Obligations (other than Bank Products) including, without limitation, to the payment of unreimbursed draws or payments made by the L/C Issuers under Letters of Credit; (F) to the cash collateralization of contingent Letter of Credit Usage obligations to the extent not then due and payable); (G) to all other Obligations (including Bank Products); and (H) any remainder shall be for the account of and paid to whoever may be lawfully entitled thereto.”

 

(d)           Article XIII of the Credit Agreement, The Agents, is hereby amended by inserting the following new Sections 13.15 and 13.16 immediately following existing Section 13.14:

 

“SECTION 13.15   Information Regarding Bank Products.  Each Lender agrees that, upon the reasonable request of the Administrative Agent, it shall from time to time provide the Administrative Agent with updated information regarding the Bank Product Amounts in order to facilitate the Administrative Agent’s administration of the credit facilities hereunder (it being understood that upon the failure of any Lender or any Affiliate of a Lender to provide such information, the Administrative Agent may, in its discretion, exclude the Bank Product Amounts of such Lender or such Affiliate from the “Obligations” and from distributions under SECTION 2.09(a)(ii)).

 

SECTION 13.16   Providers of Bank Products.

 

(a)           Each provider of Bank Products, by accepting the benefits of the Loan Documents, agrees that (i) any action taken by any Agent or the Required Lenders (or, if expressly required hereby, a greater proportion of the Lenders) in accordance with the provisions of the Loan Documents, (ii) any action taken by any Agent in reliance upon the instructions of Required Lenders (or, where so required, such greater proportion) and (iii) the exercise by any Agent or the Required Lenders (or, where so required, such greater proportion) of the powers set forth herein or therein, together with such other powers as are incidental thereto, shall be authorized and binding upon all of providers of Bank Products.

 

  

3

  

(b)           The benefit of the provisions of the Loan Documents directly relating to the Collateral or any Lien granted thereunder shall extend to and be available to any provider of Bank Products that is not a Lender or an L/C Issuer party hereto as long as, by accepting such benefits, such Person agrees, as among the Agents and all Lenders and L/C Issuers party hereto, that such Person is bound by (and, if requested by the Administrative Agent, shall confirm such agreement in a writing in form and substance acceptable to the Administrative Agent) this Article XIII and such other provisions applicable thereto and the decisions and actions of Agents and the Required Lenders (or, where expressly required by the terms of this Agreement, a greater proportion of the Lenders or other parties hereto as required herein) to the same extent a Lender is bound; provided, however, that, notwithstanding the foregoing, (a) such Secured Party shall be bound by SECTION 13.05 only to the extent of Indemnified Matters with respect to or otherwise relating to the Collateral held for the benefit of such Person, in which case the obligations of such Person thereunder shall not be limited by any concept of pro rata share or similar concept, (b) each Agent, the Lenders and the L/C Issuers party hereto shall be entitled to act at its sole discretion, without regard to the interest of such Person, regardless of whether any Obligation to such Person thereafter remains outstanding, is deprived of the benefit of the Collateral, becomes unsecured or is otherwise affected or put in jeopardy thereby, and without any duty or liability to such Person or any such Obligation and (c) except as otherwise set forth herein, such Person shall not have any right to be notified of, consent to, direct, require or be heard with respect to, any action taken or omitted in respect of the Collateral or under any Loan Document.”

 

3.           Amendment to Security Agreement.  The definition of the term “Secured Party” contained in Section 1.1 of the Security Agreement, Defined Terms, is hereby amended by amending and restating such definition in its entirety as follows:

 

“Secured Parties” means each of the Agents, the Lenders, any Lender (or the Affiliate of any Lender) providing any Bank Product, and the L/C Issuers.

 

4.           Collateral and Guaranty Matters.  Notwithstanding anything to the contrary contained in the Credit Agreement or in any other Loan Document the Agents, the Lenders, the L/C Issuers and the Credit Parties acknowledge and agree that (x) the guaranty of the Guaranteed Obligations made by the Guarantors under the Guaranty and (y) the Collateral granted by the Credit Parties as collateral security for the Obligations under the Loan Documents, are granted to and held by the Collateral Agent (subject to the express limitations contained in any Loan Document) for the benefit of the Agents, the Lenders, the L/C Issuers, the providers of Bank Products and their respective permitted successors, permitted transferees, endorsees and assigns.

 

  

4

  

5.           Affirmation and Acknowledgment of the Borrowers.  The Borrowers hereby ratify and confirm all of their Obligations to the Lenders, including, without limitation, the Loans, and the Borrowers hereby affirm their absolute and unconditional promise to pay to the Lenders all indebtedness, obligations and liabilities in respect of the Loans, the Letters of Credit, and all other amounts due under the Credit Agreement and the other Loan Documents as amended hereby.  The Borrowers hereby confirm that the Obligations are and remain secured pursuant to the Loan Documents and pursuant to all other instruments and documents executed and delivered by the Borrowers as security for the Obligations.

 

6.           No Other Waivers, Amendments or Consents.

 

Except for the amendments expressly set forth and referred to in Section 2 and Section 3 hereof, the Credit Agreement and the other Loan Documents shall remain unchanged and in full force and effect.  Nothing in this Agreement is intended or shall be construed to be a novation of any Obligations or any part of the Credit Agreement or any of the other Loan Documents or to affect, modify or impair the continuity or perfection of the Administrative Agent’s Liens under the Credit Agreement and Loan Documents.

 

7.           Representations, Warranties and Covenants.  To induce the undersigned Lenders to enter into this Agreement, the Credit Parties hereby warrant, represent and covenant to and with to the Lenders and the Administrative Agent that: (a) this Agreement has been duly authorized, executed and delivered by the Credit Parties; (b) this Agreement and the Credit Agreement as amended hereby constitute legal, valid and binding obligations of the Credit Parties, enforceable in accordance with their respective terms; (c) after giving effect to this Agreement, no Default or Event of Default has occurred and is continuing as of this date; (d) no approval or consent of, or filing with, any governmental agency or authority is required to make valid and legally binding the execution, delivery or performance by the Credit Parties of this Agreement or the Credit Agreement or any other Loan Document as amended hereby; and (e) after giving effect to this Agreement, all of the representations and warranties made by the Credit Parties in the Credit Agreement and the other Loan Documents are true and correct in all material respects on and as of the date of this Agreement (except to the extent that any such representations or warranties expressly referred to a specific prior date and except for changes therein expressly permitted or expressly contemplated by the Credit Agreement or the other Loan Documents).  Any breach by the Credit Parties of any of its representations, warranties and covenants contained in this Section 5 shall be an Event of Default under the Credit Agreement.

 

8.           Conditions to Effectiveness.  This Agreement shall not become effective unless and until the Administrative Agent has received one or more counterparts of this Agreement, duly executed, completed and delivered by the Borrowers, the other Credit Parties and the Required Lenders.

 

9.           Reimbursement of Expenses.  The Borrowers hereby agree to reimburse the Administrative Agent on demand for all reasonable fees and reasonable out-of-pocket costs and expenses (including without limitation the reasonable and actual fees and expenses of its counsel) incurred by the Administrative Agent in connection with the negotiation, documentation and consummation of this Agreement and the other documents executed in connection herewith and the transactions contemplated hereby.

 

  

5

  

10.           Governing Law.  THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK FOR CONTRACTS TO BE PERFORMED ENTIRELY WITHIN SAID STATE AND ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA.

 

11.           Severability of Provisions.  Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof or affecting the validity or enforceability of such provision in any other jurisdiction.  To the extent permitted by applicable law, the Borrowers hereby waive any provision of law that renders any provision hereof prohibited or unenforceable in any respect.

 

12.           Counterparts.  This Agreement may be executed in any number of several counterparts, all of which shall be deemed to constitute but one original and shall be binding upon all parties, their successors and permitted assigns.  Delivery of an executed signature page of this Agreement by facsimile transmission or other electronic transmission shall be as effective as delivery of a manually executed counterpart hereof.

 

13.           Entire Agreement.  The Credit Agreement as amended through this Agreement embodies the entire agreement between the parties hereto relating to the subject matter thereof and supersedes all prior agreements, representations and understandings, if any, relating to the subject matter thereof.

 

14.           No Strict Construction.  The parties hereto have participated jointly in the negotiation and drafting of this Agreement.  In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties hereto and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provisions of this Agreement.

 

15.           No Third Party Reliance.  This Agreement is solely for the benefit of the parties signatory hereto, their successors and permitted assigns.  No waiver, consent or amendment pursuant to this Agreement may be relied upon by any third parties.

 

16.           Release.  The Credit Parties hereby remise, release, acquit, satisfy and forever discharge the Lenders, the Administrative Agent, the Collateral Agent, and the L/C Issuer and their respective agents, employees, officers, directors, predecessors, attorneys and all others acting or purporting to act on behalf of or at the direction of the Lenders, the Administrative Agent, the Collateral Agent, or the L/C Issuer of and from any and all manner of actions, causes of action, suit, debts, accounts, covenants, contracts, controversies, agreements, variances, damages, judgments, claims and demands whatsoever, in law or in equity, which any of such parties ever had or now has against the Lenders, the Administrative Agent, the Collateral Agent, and the L/C Issuer their respective agents, employees, officers, directors, attorneys and all persons acting or purporting to act on behalf of or at the direction of the Lenders or the Administrative Agent (“Releasees”), for, upon or by reason of any matter, cause or thing whatsoever arising from, in connection with or in relation to the Credit Agreement or any of the other Loan Documents (including this Agreement) through the date hereof.  Without limiting the generality of the foregoing, the Credit Parties waive and affirmatively agree not to allege or otherwise pursue any defenses, affirmative defenses, counterclaims, claims, causes of action, setoffs or other rights they do, shall or may have as of the date hereof, including, but not limited to, the rights to contest any conduct of the Lenders, Administrative Agent or other Releasees on or prior to the date hereof.

 

[Remainder of page intentionally blank; next page is signature page]

 

  

6

  

IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed by their respective officers or representatives thereunto duly authorized, as of the date first above written.

 

	  	
BORROWERS:

 

JAMES RIVER COAL COMPANY

 

 

By:  /s/ Samuel M. Hopkins II                                                                

     Name:  Samuel M. Hopkins II

     Title: Vice President

	  	  
	  	
JAMES RIVER COAL SERVICE COMPANY

 

 

By:  /s/ Samuel M. Hopkins II                                                                

     Name:  Samuel M. Hopkins II

     Title: Vice President

	  	  
	  	
LEECO, INC.

 

 

By:  /s/ Samuel M. Hopkins II                                                                

     Name:  Samuel M. Hopkins II

     Title: Vice President

	  	  
	  	
TRIAD MINING, INC.

 

 

By:  /s/ Samuel M. Hopkins II                                                                

     Name:  Samuel M. Hopkins II

     Title: Vice President

	  	  
	  	
TRIAD UNDERGROUND MINING, LLC

 

 

By:  /s/ Samuel M. Hopkins II                                                                

     Name:  Samuel M. Hopkins II

     Title: Member

	  	  

  

7

  

	  	  

	  	
BLEDSOE COAL CORPORATION

 

 

By:  /s/ Samuel M. Hopkins II                                                                

     Name:  Samuel M. Hopkins II

     Title: Vice President

	  	  
	  	
JOHNS CREEK ELKHORN COAL CORPORATION

 

 

By:  /s/ Samuel M. Hopkins II                                                                

     Name:  Samuel M. Hopkins II

     Title: Vice President

	  	  
	  	
BELL COUNTY COAL CORPORATION

 

 

By:  /s/ Samuel M. Hopkins II                                                                

     Name:  Samuel M. Hopkins II

     Title: Vice President

	  	  
	  	
JAMES RIVER COAL SALES, INC.

 

 

By:  /s/ Samuel M. Hopkins II                                                                

     Name:  Samuel M. Hopkins II

     Title: Vice President

	  	  
	  	
BLEDSOE COAL LEASING COMPANY

 

 

By:  /s/ Samuel M. Hopkins II                                                                

     Name:  Samuel M. Hopkins II

     Title: Vice President

	  	  
	  	
BLUE DIAMOND COAL COMPANY

 

 

By:  /s/ Samuel M. Hopkins II                                                                

     Name:  Samuel M. Hopkins II

     Title: Vice President

  

8

  

	  	  
	  	
MCCOY ELKHORN COAL CORPORATION

 

 

By:  /s/ Samuel M. Hopkins II                                                                

     Name:  Samuel M. Hopkins II

     Title: Vice President

	  	  

 

 

 

 

 

 

 

 

 

 

 

  

9

  

	  	
GUARANTORS:

 

BDCC HOLDING COMPANY, INC.

 

 

By:  /s/ Samuel M. Hopkins II                                                                

     Name:  Samuel M. Hopkins II

     Title: Vice President

	  	  
	  	
EOLIA RESOURCES, INC.

 

 

By:  /s/ Samuel M. Hopkins II    

     Name:  Samuel M. Hopkins II

     Title: Vice President

	  	  
	  	
SHAMROCK COAL COMPANY, INCORPORATED

 

 

By:  /s/ Samuel M. Hopkins II                                                                

     Name:  Samuel M. Hopkins II

     Title: Vice President

	  	  
	  	
JOHNS CREEK COAL COMPANY

 

 

By:  /s/ Samuel M. Hopkins II                                                                

     Name:  Samuel M. Hopkins II

     Title: Vice President

	  	  
	  	
JOHNS CREEK PROCESSING COMPANY

 

 

By:  /s/ Samuel M. Hopkins II                                                                

     Name:  Samuel M. Hopkins II

     Title: Vice President

  

10

  

	  	
LENDER, ADMINISTRATIVE AGENT AND COLLATERAL AGENT:

 

GENERAL ELECTRIC CAPITAL CORPORATION

 

 

By:  /s/ Daniel T. Eubanks                                                                

     Name:  Daniel T. Eubanks

     Title:    Duly Authorized Signatory

 

 

 

 

 

 

 

 

 

 

 

 

 

  

11

  

	 	
LENDERS:

	 	
 

 

	 	
GE CAPITAL COMMERCIAL INC.

	 	
By: /s/ Allan Pagnotta_____________________

	 	
Name:  Allan Pagnotta

	 	
Title:    Duly Authorized Signatory

	 	 
	 	
UBS LOAN FINANCE LLC

	 	 
	 	
By: /s/ Irja R. Otsa________________________

	 	
Name:  Irja R. Otsa

	 	
Title:    Associate Director

	 	 
	 	
By: /s/ April Varner-Nanton________________

	 	
Name:  April Varner-Nanton

	 	
Title:    Director

 

 

 

 

 

 

 

 

 

 

 

  

12

  

	 	
L/C ISSUER:

 

 

UBS AG, STAMFORD BRANCH

 

 

	 	
By: /s/ Irja R. Otsa________________________

	 	
Name:  Irja R. Otsa

	 	
Title:    Associate Director

	 	 
	 	
By: /s/ April Varner-Nanton_________________

	 	
Name:  April Varner-Nanton

	 	
Title:    Director

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

13Exhibit 10.1

 

TAX RECEIVABLE AGREEMENT

 

among

 

NATIONAL BEEF, INC.,

U.S. PREMIUM BEEF, LLC,

TKK INVESTMENTS, LLC,

TMKCo, LLC,

and

NBPCo Holdings, LLC

 

DATED AS OF
            , 2010

 

 

1

 

TABLE OF CONTENTS

 

	
   

  	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE I DEFINITIONS

  	
   

  	
  5

  
	
   

  	
   

  	
   

  
	
  Section 1.1

  	
   

  	
  Definitions

  	
   

  	
  5

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE II DETERMINATION OF CERTAIN REALIZED
  TAX BENEFIT

  	
   

  	
  13

  
	
   

  	
   

  	
   

  
	
  Section 2.1

  	
   

  	
  Basis
  Adjustment

  	
   

  	
  13

  
	
  Section 2.2

  	
   

  	
  Basis
  Schedule

  	
   

  	
  13

  
	
  Section 2.3

  	
   

  	
  Tax
  Benefit Schedule

  	
   

  	
  14

  
	
  Section 2.4

  	
   

  	
  Procedures,
  Amendments

  	
   

  	
  14

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE III TAX BENEFIT PAYMENTS

  	
   

  	
  15

  
	
   

  	
   

  	
   

  
	
  Section 3.1

  	
   

  	
  Payments

  	
   

  	
  15

  
	
  Section 3.2

  	
   

  	
  Lump
  Sum Payment

  	
   

  	
  16

  
	
  Section 3.3

  	
   

  	
  No
  Duplicative Payments

  	
   

  	
  17

  
	
  Section 3.4

  	
   

  	
  Pro
  Rata Payments

  	
   

  	
  17

  
	
  Section 3.5

  	
   

  	
  Coordination

  	
   

  	
  18

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE IV TERMINATION

  	
   

  	
  18

  
	
   

  	
   

  	
   

  
	
  Section 4.1

  	
   

  	
  Termination
  and Breach of Agreement

  	
   

  	
  18

  
	
  Section 4.2

  	
   

  	
  Termination
  Notice

  	
   

  	
  19

  
	
  Section 4.3

  	
   

  	
  Payment
  upon Termination

  	
   

  	
  20

  
	
  Section 4.4

  	
   

  	
  Unilateral
  Termination

  	
   

  	
  20

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE V SUBORDINATION AND LATE PAYMENTS

  	
   

  	
  20

  
	
   

  	
   

  	
   

  
	
  Section 5.1

  	
   

  	
  Subordination

  	
   

  	
  20

  
	
  Section 5.2

  	
   

  	
  Late
  Payments by National Beef

  	
   

  	
  21

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VI NO DISPUTES; CONSISTENCY;
  COOPERATION

  	
   

  	
  21

  
	
   

  	
   

  	
   

  
	
  Section 6.1

  	
   

  	
  Election
  to be Filed

  	
   

  	
  21

  
	
  Section 6.2

  	
   

  	
  Participation
  in National Beef’s and NBP LLC’s Tax Matters

  	
   

  	
  21

  
	
  Section 6.3

  	
   

  	
  Consistency

  	
   

  	
  21

  
	
  Section 6.4

  	
   

  	
  Cooperation

  	
   

  	
  22

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VII MISCELLANEOUS

  	
   

  	
  22

  
	
   

  	
   

  	
   

  
	
  Section 7.1

  	
   

  	
  Notices

  	
   

  	
  22

  
	
  Section 7.2

  	
   

  	
  Counterparts

  	
   

  	
  23

  

 

2

 

	
  Section 7.3

  	
   

  	
  Entire
  Agreement; No Third Party Beneficiaries

  	
   

  	
  23

  
	
  Section 7.4

  	
   

  	
  Governing
  Law

  	
   

  	
  24

  
	
  Section 7.5

  	
   

  	
  Severability

  	
   

  	
  24

  
	
  Section 7.6

  	
   

  	
  Successors;
  Assignment; Amendments; Waivers

  	
   

  	
  24

  
	
  Section 7.7

  	
   

  	
  Titles
  and Subtitles

  	
   

  	
  24

  
	
  Section 7.8

  	
   

  	
  Resolution
  of Disputes

  	
   

  	
  24

  
	
  Section 7.9

  	
   

  	
  Reconciliation

  	
   

  	
  25

  
	
  Section 7.10

  	
   

  	
  Withholding

  	
   

  	
  26

  
	
  Section 7.11

  	
   

  	
  Admission
  of National Beef into a Consolidated Group; Transfers of Corporate Assets

  	
   

  	
  26

  
	
  Section 7.12

  	
   

  	
  Confidentiality

  	
   

  	
  27

  
	
  Section 7.13

  	
   

  	
  Change
  in Law

  	
   

  	
  27

  

 

3

 

TAX RECEIVABLE AGREEMENT

 

This
TAX RECEIVABLE AGREEMENT (this “Agreement”), dated as of
                        ,
2010, is hereby entered into by and among National Beef, Inc., a Delaware
corporation (“National Beef”), each of the undersigned parties hereto
identified as Non-Corporate Members (as defined below), and each of the
successors and assigns thereto.

 

RECITALS

 

WHEREAS,
the Non-Corporate Members (as defined below) hold member interests (the “Units”)
in National Beef Packing Company, LLC, a Delaware limited liability company (“NBP
LLC”), which is treated as a partnership for United States federal income
tax purposes;

 

WHEREAS,
National Beef, NBP LLC and the Non-Corporate Members (as defined below) entered
into certain Assignments of Membership Interests dated as of
                            ,
2010 (collectively, the “Assignments”) and National Beef, NBP LLC and
the Non-Corporate Members (as defined below) entered into a certain Exchange
Agreement as of
                              ,
2010 (the (“2010 Exchange Agreement”) and collectively the Assignments
and the 2010 Exchange Agreement, the “Exchange Agreement”);

 

WHEREAS,
pursuant to the Exchange Agreement and the LLC Agreement (as defined below),
certain Units held by U.S. Premium Beef, LLC, a Delaware limited liability
company (“USPB”), NBPCo Holdings, LLC, a South Dakota limited liability
company (“NBPCo”), TKK Investments, LLC, a Missouri limited liability
company (“TKK”), and TMKCo LLC, a Missouri limited liability company (“TMKCo”)
(so long as owning a Unit, or if no longer owning a Unit owed a payment under
this Agreement with respect to a Unit exchanged or sold to National Beef, a “Non-Corporate
Member”, and collectively, the “Non-Corporate Members”) will be sold
to National Beef in exchange for cash and the right to payments under this
Agreement (the “Original Sale”) and additional Units held by the
Non-Corporate Members may be exchanged over time for cash, Class A common
stock (the “Class A Shares”) of National Beef, or a combination of
cash and Class A Shares, and the right to payments under this Agreement
(an “Exchange”);

 

WHEREAS,
contemporaneous with the Original Sale, National Beef will become the manager
of NBP LLC, and will hold, directly and/or indirectly, Units;

 

WHEREAS,
NBP LLC and each of its direct and indirect subsidiaries which are treated as a
partnership for United States federal income tax purposes (together with NBP
LLC and any direct or indirect subsidiary (owned through a chain of
pass-through entities) of NBP LLC that is treated as a disregarded entity for
United States federal income tax purposes, the “NBP LLC Group”)
currently have and will have in effect an election under section 754 of the
United States Internal Revenue Code of 1986, as amended (the “Code”),
and comparable elections under, foreign, state and local tax law for the
Taxable Year in which the Original Sale occurs and for each Taxable Year in
which an Exchange occurs, which election is intended to result in an adjustment
to the tax basis of the assets owned by the NBP LLC Group (solely with respect
to

 

4

 

National
Beef) at the time (such time, the “Original Sale Date” or “Exchange
Date”, as applicable) of the Original Sale and an Exchange;

 

WHEREAS,
the income, gain, loss, expense and other Tax (as defined below) items of
National Beef may be affected by (i) the Basis Adjustments (as defined
below) and (ii) the Imputed Interest (as defined below);

 

WHEREAS,
the parties to this Agreement desire to make certain arrangements with respect
to the effect of the Basis Adjustments and Imputed Interest on the liability
for Taxes of National Beef;

 

NOW,
THEREFORE, in consideration of the foregoing and the respective covenants and
agreements set forth herein, and intending to be legally bound hereby, the
parties hereto agree as follows:

 

ARTICLE I

 

DEFINITIONS

 

Section 1.1
Definitions. As used in this Agreement, the terms set forth in this Article I
shall have the following meanings (such meanings to be equally applicable to
both the singular and plural forms of the terms defined).

 

“Affiliate”
means, with respect to any Person, any other Person that directly or
indirectly, through one or more intermediaries, Controls, is Controlled by, or
is under common Control with, such first Person.

 

“Agreed
Rate” means LIBOR plus 100 basis points.

 

“Agreement”
is defined in the Recitals of this Agreement.

 

“Amended
Schedule” is defined in Section 2.4(b) of this Agreement.

 

“Assignments”
is defined in the Recitals of this Agreement.

 

“Basis
Adjustment” means the adjustment to the tax basis of a Reference Asset under
sections 732, 734(b) and 1012 of the Code (in situations where, as a
result of one or more Exchanges, NBP LLC becomes an entity that is disregarded
as separate from its owner for tax purposes) or under sections 734(b), 743(b) and
754 of the Code (in situations where, following the Original Sale or an
Exchange, as applicable, NBP LLC remains in existence as an entity for United
States federal income tax purposes) and, in each case, comparable sections of
foreign, state and local income and franchise tax laws, as a result of the
Original Sale, any Exchange and payments under this Agreement. For the
avoidance of doubt, the amount of any Basis Adjustment resulting from the
Original Sale or an Exchange of one or more Units shall be determined without
regard to any Pre-Original Sale Transfer or Pre-Exchange Transfer, as
applicable, of such Units and as if any such Pre-Original Sale Transfer or
Pre-Exchange

 

5

 

Transfer,
as applicable, had not occurred.  For
purposes of clarity, Basis Adjustment shall not include any adjustment to the
tax basis of a Reference Asset attributable to a transaction which occurs prior
to the date of this Agreement.

 

A
“Beneficial Owner” of a security is a Person who directly or indirectly,
through any contract, arrangement, understanding, relationship or otherwise,
has or shares: (i) voting power, which includes the power to vote, or to
direct the voting of, such security and/or (ii) investment power, which
includes the power to dispose of, or to direct the disposition of, such
security. The terms “Beneficially Own” and “Beneficial Ownership” shall have
correlative meanings.

 

“Board”
means the Board of Directors of National Beef.

 

“Business
Day” means Monday through Friday of each week, except that a legal holiday
recognized as such by the government of the United States of America or the
State of Missouri shall not be regarded as a Business Day.

 

“Change
in Tax Law” is defined in Section 7.13(a) of this Agreement.

 

“Change
of Control” means the occurrence of any of the following events:

 

(i)            any Person or any
group of Persons acting together which would constitute a “group” for purposes
of Section 13(d) of the Securities and Exchange Act of 1934, or any
successor provisions thereto, excluding a group of Persons which includes all
Non-Corporate Members or their Affiliates, becomes the Beneficial Owner,
directly or indirectly, of securities of National Beef representing more than
50% of the combined voting power of National Beef’s then outstanding voting
securities;

 

(ii)           the following
individuals cease for any reason to constitute a majority of the number of
directors of National Beef then serving: individuals who, on the IPO Date,
constitute the Board and any new director whose appointment or election by the
Board or nomination for election by National Beef’s stockholders was approved
or recommended by a vote of at least two-thirds (2/3) of the directors then
still in office who either were directors on the IPO Date or whose appointment,
election or nomination for election was previously so approved or recommended
by the directors referred to in this clause (ii);

 

(iii)          there is
consummated a merger or consolidation of National Beef with any other
corporation or other entity, and, immediately after the consummation of such
merger or consolidation, either (x) the Board immediately prior to the
merger or consolidation does not constitute at least a majority of the board of
directors of the company surviving the merger or, if the surviving company is a
Subsidiary, the ultimate parent thereof, or (y) the voting securities of
National Beef immediately prior to such merger or consolidation do not continue
to represent or are not converted into more than 50% of the combined voting
power of the then outstanding voting securities of the Person resulting from
such merger or consolidation or, if the surviving company is a Subsidiary, the
ultimate parent thereof; or

 

6

 

(iv)          the stockholders of
National Beef approve a plan of complete liquidation or dissolution of National
Beef or there is consummated an agreement or series of related agreements for
the sale or other disposition, directly or indirectly, by National Beef of all
or substantially all of National Beef’s assets, other than such sale or other
disposition by National Beef of all or substantially all of National Beef’s
assets to an entity, at least 50% of the combined voting power of the voting
securities of which are owned by stockholders of National Beef in substantially
the same proportions as their ownership of National Beef immediately prior to
such sale.

 

Notwithstanding
the foregoing, except with respect to clause (ii) and clause (iii)(x) above,
a “Change of Control” shall not be deemed to have occurred by virtue of the 351
transaction contemplated by Section 16 of the LLC Agreement or the
consummation of any transaction or series of integrated transactions immediately
following which the record holders of the shares of National Beef immediately
prior to such transaction or series of transactions continue to have
substantially the same proportionate ownership in, and own substantially all of
the shares of, an entity which owns all or substantially all of the assets of
National Beef immediately following such transaction or series of transactions.

 

“Change
of Control Termination Date” means the date of a Change of Control Termination
Notice for purposes of determining the Change of Control Termination Payment.

 

“Change
of Control Termination Effective Date” is defined in Section 4.2 of this
Agreement.

 

“Change
of Control Termination Notice” is defined in Section 4.2 of this
Agreement.

 

“Change
of Control Termination Payment” is defined in Section 4.3(b) of this
Agreement.

 

“Change
of Control Termination Schedule” is defined in Section 4.2 of this
Agreement.

 

“Class A
Shares” is defined in the Recitals of this Agreement.

 

“Code”
is defined in the Recitals of this Agreement.

 

“Control”
means the possession, direct or indirect, of the power to direct or cause the
direction of the management and policies of a Person, whether through ownership
of voting securities, by contract or otherwise.

 

“Covered
Taxable Year” means any Taxable Year of National Beef ending before or
including the due date of the Lump Sum Present Value payment or Unilateral
Termination Date, as applicable.

 

“Cumulative
Net Realized Tax Benefit” for a Taxable Year means with respect to each
Non-Corporate Member the cumulative amount of Realized Tax Benefits for all
Taxable Years of National Beef, up to and including such Taxable Year, net of
the cumulative amount of

 

7

 

Realized
Tax Detriments for the same period. The Realized Tax Benefit and Realized Tax
Detriment for each Taxable Year shall be determined based on the most recent
Tax Benefit Schedule or Amended Schedule, if any, in existence at the time of
such determination, or, if applicable, the Early Termination Schedule, Change
of Control Termination Schedule, or amendments thereto.

 

“Default
Rate” means LIBOR plus 500 basis points.

 

“Determination”
shall have the meaning ascribed to such term in section 1313(a) of the
Code or similar provision of foreign, state and local tax law, as applicable,
or any other event (including the execution of IRS Form 870-AD) that
finally and conclusively establishes the amount of any liability for Tax.

 

“Dispute”
has the meaning set forth in Section 7.8(a) of this Agreement.

 

“Early
Termination Date” means the date of an Early Termination Notice for purposes of
determining the Early Termination Payment.

 

“Early
Termination Effective Date” is defined in Section 4.2 of this Agreement.

 

“Early
Termination Notice” is defined in Section 4.2 of this Agreement.

 

“Early
Termination Schedule” is defined in Section 4.2 of this Agreement.

 

“Early
Termination Payment” is defined in Section 4.3(b) of this Agreement.

 

“Early
Termination Rate” means the lesser of (i) 6.5% per annum, compounded
annually, and (ii) LIBOR plus 100 basis points.

 

“Exchange”
is defined in the Recitals of this Agreement.

 

“Exchange
Agreement” is defined in the Recitals of this Agreement.

 

“Exchange
Basis Schedule” is defined in Section 2.2 of this Agreement.

 

“Exchange
Date” means the date of any Exchange.

 

“Expert”
is defined in Section 7.9 of this Agreement.

 

“Hypothetical
Tax Liability” means, with respect to any Taxable Year, the liability for Taxes
of (i) National Beef and (ii) without duplication, NBP LLC, but only
with respect to Taxes imposed on NBP LLC and allocable to National Beef or to
the other members of the consolidated group of which National Beef is the
parent, in each case using the same methods, elections, conventions and similar
practices used on the relevant National Beef Return, but (x) using the
Non-Stepped Up Tax Basis as reflected on the Original Sale Basis Schedule or an
Exchange Basis Schedule, as applicable, including amendments thereto for the
Taxable Year and

 

8

 

(y) excluding
any deduction attributable to Imputed Interest for the Taxable Year. For the
avoidance of doubt, Hypothetical Tax Liability shall be determined without
taking into account the carryover or carryback of any Tax item (or portions
thereof) that is attributable to the Basis Adjustment or Imputed Interest.

 

“Imputed
Interest” shall mean any interest imputed under section 1272, 1274 or 483 or
other provision of the Code and any similar provision of foreign, state, and
local tax law, as applicable, with respect to National Beef’s payment
obligations under this Agreement.

 

“Independent
Director” means any member of the Board who is not affiliated with any of the
Non-Corporate Members, the principal stockholders of National Beef and is
neither a current officer nor a former officer of National Beef or any of its
Subsidiaries.

 

“Interest
Amount” is defined in Section 3.1(b) of this Agreement.

 

“IPO”
means the initial public offering of Class A Shares by National Beef.

 

“IPO
Date” means the closing date of the IPO.

 

“IRS”
means the United States Internal Revenue Service.

 

“LIBOR”
means during any period, an interest rate per annum equal to the one-year LIBOR
reported, on the date two days prior to the first day of such period, on the
Telerate Page 3750 (or if such screen shall cease to be publicly
available, as reported on Reuters Screen page “LIBOR01” or by any other
publicly available source of such market rate) for London interbank offered
rates for United States dollar deposits for such period.

 

“LLC
Agreement” means, with respect to NBP LLC, the Amended and Restated Limited
Liability Company Agreement of NBP LLC.

 

“Lump
Sum Election Notice” is defined in Section 3.2(a) of this Agreement.

 

“Lump
Sum Present Value” shall have the meaning set forth in Section 3.2(a) hereof.

 

“Market
Value” shall mean the closing price of the Class A Shares on the
applicable Original Sale Date or Exchange Date, or deemed Exchange Date, on the
national securities exchange or interdealer quotation system on which such Class A
Shares are then traded or listed, as reported by the Wall Street Journal;
provided, that if the closing price is not reported by the Wall Street Journal
for the applicable Exchange Date, then the “Market Value” shall mean the closing
price of the Class A Shares on the Business Day immediately preceding such
Exchange Date, or deemed Exchange Date, on the national securities exchange or
interdealer quotation system on which such Class A Shares are then traded
or listed, as reported by the Wall Street Journal; provided, further, that if
the Class A Shares are not then listed on a national securities exchange
or interdealer quotation system, “Market Value” shall mean the cash
consideration paid for Class A Shares, or the fair market value of the
other property delivered for Class A Shares, as determined by the Board in
good faith.

 

9

 

“Material
Objection Notice” has the meaning set forth in Section 4.2 of this
Agreement.

 

“Members”
means the Non-Corporate Members, and shall not include National Beef and NBP
LLC and successors and assigns thereto.

 

“National
Beef” is defined in the Recitals of this Agreement.

 

“National
Beef Return” means the United States federal, and/or foreign, and/or state
and/or local Tax Return, as applicable, of National Beef filed with respect to
Taxes of any Taxable Year.

 

“NBP
LLC Group” is defined in the Recitals of this Agreement.

 

“Net
Tax Benefit” is defined in Section 3.1(b) of this Agreement.

 

“Non-Corporate
Member” is defined in the Recitals of this Agreement.

 

“Non-Corporate
Members” is defined in the Recitals of this Agreement, and includes each other
Person who from time to time executes a Joinder Agreement in the form attached
hereto as Exhibit A, other than National Beef and NBP LLC and the
successors and assigns thereto.

 

“Non-Stepped
Up Tax Basis” means, with respect to any Reference Asset at any time, the tax
basis that such asset would have had at such time if no Basis Adjustments had
been made.

 

“Objection
Notice” has the meaning set forth in Section 2.4(a) of this
Agreement.

 

“Original
Sale” is defined in the Recitals of this Agreement.

 

“Original
Sale Basis Schedule” is defined in Section 2.2 of this Agreement.

 

“Original
Sale Date” is defined in the Recitals of this Agreement.

 

“Payment
Date” means any date on which a payment is required to be made pursuant to this
Agreement.

 

“Person”
means any individual, corporation, firm, partnership, joint venture, limited
liability company, estate, trust, business association, organization,
governmental entity or other entity.

 

“Pre-Exchange
Transfer” means any transfer (including upon the death of a Member) or
distribution in respect of one or more Units (i) that occurred prior to an
Exchange of such Units, and (ii) to which section 743(b) or 734(b) of
the Code applies.

 

10

 

“Pre-Original
Sale Transfer” means any transfer (including upon the death of a Member) or
distribution in respect of one or more Units (i) that occurs prior to
Units sold in the Original Sale, and (ii) to which section 743(b) or
734(b) of the Code applies.

 

“Qualified
Tax Advisor” means any law or accounting firm that is nationally recognized as
being expert in Tax matters and that is reasonably acceptable to National Beef.

 

“Realized
Tax Benefit” means, for a Taxable Year, the excess, if any, of (A) the Hypothetical
Tax Liability over (B) the actual liability for Taxes of (i) National
Beef and (ii) without duplication, NBP LLC, but only with respect to Taxes
imposed on NBP LLC that are allocable to National Beef or to the other members
of the consolidated group of which National Beef is the parent for such Taxable
Year.  If all or a portion of the actual
liability for such Taxes for the Taxable Year arises as a result of an audit by
a Taxing Authority of any Taxable Year, such liability shall not be included in
determining the Realized Tax Benefit unless and until there has been a
Determination.

 

“Realized
Tax Detriment” means, for a Taxable Year, the excess, if any, of (A) the
actual liability for Taxes of (i) National Beef and (ii) without
duplication, NBP LLC, but only with respect to Taxes imposed on NBP LLC that
are allocable to National Beef or to the other members of the consolidated
group of which National Beef is the parent for such Taxable Year, over (B) the
Hypothetical Tax Liability for such Taxable Year. If all or a portion of the
actual liability for such Taxes for the Taxable Year arises as a result of an
audit by a Taxing Authority of any Taxable Year, such liability shall not be
included in determining the Realized Tax Detriment unless and until there has
been a Determination.

 

“Reconciliation
Dispute” has the meaning set forth in Section 7.9 of this Agreement.

 

“Reconciliation
Procedures” has the meaning set forth in Section 2.4(a) of this
Agreement.

 

“Reference
Asset” means an asset that is held by any member of the NBP LLC Group, at the
time of the Original Sale or an Exchange, as applicable.  A Reference Asset also includes any asset
that is “substituted basis property” under section 7701(a)(42) of the Code with
respect to a Reference Asset.

 

“Schedule”
means any of the following: (i) an Original Sale Basis Schedule, (ii) an
Exchange Basis Schedule, (iii) a Tax Benefit Schedule, (iv) the Early
Termination Schedule, or (v) the Change of Control Termination Schedule.

 

“Senior
Obligations” is defined in Section 5.1 of this Agreement.

 

“Subsidiaries”
means, with respect to any Person, as of any date of determination, any other
Person as to which such Person owns, directly or indirectly, or otherwise
controls more than 50% of the voting power or other similar interests or the
sole general partner interest or managing member or similar interest of such
Person.

 

11

 

“Tax
Benefit Payment” is defined in Section 3.1(b) of this Agreement.

 

“Tax
Benefit Schedule” is defined in Section 2.3(a) of this Agreement.

 

“Tax
Return” means any return, declaration, report or similar statement required to
be filed with respect to Taxes (including any attached schedules), including,
without limitation, any information return, claim for refund, amended return
and declaration of estimated Tax.

 

“Taxable
Year” means a taxable year of National Beef as defined in Section 441(b) of
the Code or comparable section of foreign, state or local tax law, as
applicable (and, therefore, for the avoidance of doubt, may include a period of
less than 12 months for which a Tax Return is made), ending on or after the IPO
Date or on or after the Original Sale Date, whichever occurs earlier.

 

“Taxes”
means any and all United States federal, foreign, state and local taxes,
assessments or similar charges that are based on or measured with respect to
net income or profits, franchise taxes of such governmental entities, and any
interest related to such Tax.

 

“Taxing
Authority” shall mean any domestic, federal, national, foreign, state, county
or municipal or other local government, any subdivision, agency, commission or
authority thereof, or any quasi-governmental body exercising any taxing
authority or any other authority exercising Tax regulatory authority.

 

“Treasury
Regulations” means the final, temporary and proposed regulations under the Code
promulgated from time to time (including corresponding provisions and
succeeding provisions) as in effect for the relevant taxable period.

 

“Unilateral
Termination Date” is defined in Section 4.4 of this Agreement.

 

“Unilateral
Termination Notice” is defined in Section 4.4 of this Agreement.

 

“Units”
is defined in the Recitals of this Agreement.

 

“Valuation
Assumptions” shall mean, as of an Early Termination Date, Change of Control
Termination Date, or date applicable for calculation of the Lump Sum Present
Value payment under Section 3.2 or payment upon Change in Tax Law under Section 7.13,
the assumptions that:

 

(1)           in each Taxable Year
ending on or after such Early Termination Date, National Beef will have taxable
income sufficient to fully utilize the deductions arising from the Basis
Adjustments and the Imputed Interest during such Taxable Year or future Taxable
Years (including, for the avoidance of doubt, Basis Adjustments and Imputed
Interest that would result from future Tax Benefit Payments that would be paid
in accordance with the Valuation Assumptions) in which such deductions would
become available;

 

12

 

(2)           the United States
federal income tax rates, and any foreign, state and local income tax rates
that will be in effect for each such Taxable Year will be those specified for
each such Taxable Year by the Code and other law as in effect on such date;

 

(3)           all taxable income
of National Beef will be subject to the maximum applicable Tax rates throughout
the relevant period;

 

(4)           any loss carryovers
generated by any Basis Adjustment or Imputed Interest and available as of the
date of an applicable Schedule will be utilized by National Beef in the taxable
year of the Early Termination Date or otherwise on a pro rata basis from the
date of the such schedule through the scheduled expiration date of such loss
carryovers;

 

(5)           any non-amortizable
assets will be disposed of on the fifteenth anniversary of the applicable Basis
Adjustment; provided, that in the event of a Change of Control, such
non-amortizable assets shall be deemed disposed of at the time of sale of the
relevant asset (if earlier than such fifteenth anniversary); and

 

(6)           if, as of such date,
there are Units that were not sold in the Original Sale and have not been
Exchanged, then each such Unit shall be deemed to be Exchanged for the Market
Value of the Class A Shares and the amount of cash that would be
transferred if the Exchange occurred on the Early Termination Date.

 

“2010
Exchange Agreement” is defined in the Recitals of this Agreement.

 

ARTICLE II

 

DETERMINATION OF CERTAIN REALIZED TAX BENEFITS

 

Section 2.1
Basis Adjustment.  The parties
hereto acknowledge that National Beef’s share of the basis in the Reference
Assets shall be increased by the excess, if any, of (A) the sum of (x) the
Market Value of cash, Class A Shares or other consideration transferred to
Non-Corporate Members pursuant to the Original Sale or an Exchange as payments
for Units, (y) the amount of payments made pursuant to this Agreement with
respect to such Original Sale or Exchange, and (z) the amount of
liabilities allocated to the Units acquired pursuant to the Original Sale or
Exchange, over (B) National Beef’s proportionate share of the basis of the
Reference Assets immediately after the Original Sale or Exchange attributable
to the Units exchanged, determined as if each member of the NBP LLC Group
remains in existence as an entity for tax purposes and no member of the NBP LLC
Group made the election provided by section 754 of the Code.  For the avoidance of doubt, payments made
under this Agreement shall not be treated as resulting in a Basis Adjustment to
the extent such payments are treated as Imputed Interest.

 

Section 2.2
Basis Schedule.  Within forty-five
(45) calendar days after the filing of the United States federal income tax
return of National Beef for each Taxable Year in which the Original Sale or any
Exchange has been effected, National Beef shall deliver to each Non-Corporate
Member a schedule (the “Original Sale Basis Schedule” or “Exchange
Basis

 

13

 

Schedule”, as
applicable) that shows, in reasonable detail necessary to perform the
calculations required by this Agreement, including with respect to each such
Non-Corporate Member, for purposes of Taxes, (i) the Non-Stepped Up Tax
Basis of the Reference Assets as of each Original Sale Date or Exchange Date, (ii) the
Basis Adjustment with respect to the Reference Assets as a result of the
Original Sale and any Exchanges effected in such Taxable Year, calculated in
the aggregate, (iii) the period (or periods) over which the Reference
Assets are amortizable and/or depreciable and (iv) the period (or periods)
over which each Basis Adjustment is amortizable and/or depreciable.  The Original Basis Schedule and an Exchange
Basis Schedule will become final as provided in Section 2.4(a) and
may be amended as provided in Section 2.4(b) (subject to the
procedures set forth in Section 2.4(b)).

 

Section 2.3
Tax Benefit Schedule. (a) Tax Benefit Schedule. Within
forty-five (45) calendar days after the filing of the United States federal
income tax return of National Beef for any Taxable Year in which there is a
Realized Tax Benefit or Realized Tax Detriment, National Beef shall provide to
each Non-Corporate Member a schedule showing, in reasonable detail and, at the
request of a Non-Corporate Member, with respect to the Original Sale and each
separate Exchange, the calculation of the Realized Tax Benefit or Realized Tax
Detriment for such Taxable Year (a “Tax Benefit Schedule”). The Tax
Benefit Schedule will become final as provided in Section 2.4(a) and
may be amended as provided in Section 2.4(b) (subject to the
procedures set forth in Section 2.4(b)).

 

(b) Applicable
Principles.  Subject to Sections 3.4
and 3.5 of this Agreement, the Realized Tax Benefit or Realized Tax Detriment
for each Taxable Year is intended to measure the decrease or increase in the
actual liability for Taxes of National Beef for such Taxable Year attributable
to the Basis Adjustments and Imputed Interest, determined using a “with and
without” methodology.  For the avoidance
of doubt, the actual liability for Taxes will take into account the deduction
of the portion of the Tax Benefit Payment that must be accounted for as
interest under the Code based upon the characterization of Tax Benefit Payments
as additional consideration payable by National Beef for the Units acquired in
the Original Sale or an Exchange. Carryovers or carrybacks of any Tax item
attributable to the Basis Adjustment and Imputed Interest shall be considered
to be subject to the rules of the Code and the Treasury Regulations or the
appropriate provisions of foreign, state and local income and franchise tax
law, as applicable, governing the use, limitation and expiration of carryovers
or carrybacks of the relevant type.  If a
carryover or carryback of any Tax item includes a portion that is attributable
to the Basis Adjustment or Imputed Interest and another portion that is not,
such portions shall be considered to be used in accordance with the “with and
without” methodology.  The parties agree
that (i) all Tax Benefit Payments (other than amounts accounted for as
interest under the Code) will (A) be treated as subsequent upward purchase
price adjustments that give rise to further Basis Adjustments to Reference
Assets for National Beef and (B) have the effect of creating additional
Basis Adjustments to Reference Assets for National Beef in the year of payment,
and (ii) as a result, such additional Basis Adjustments will be
incorporated into the current year calculation and into future year
calculations, as appropriate.

 

Section 2.4
Procedures, Amendments. (a) Procedure.  Every time National Beef delivers to a
Non-Corporate Member an applicable Schedule under this Agreement, including any
Amended Schedule delivered pursuant to Section 2.4(b), but excluding any
Early Termination

 

14

 

Schedule,
Change of Control Termination Schedule, amended Early Termination Schedule, or
amended Change of Control Termination Schedule, National Beef shall also (x) deliver
to the Non-Corporate Member schedules and work papers, as determined by
National Beef or requested by the Non-Corporate Member, providing reasonable
detail regarding the preparation of the Schedule and (y) allow the
Non-Corporate Member reasonable access at no cost to the appropriate
representatives at National Beef, as determined by National Beef or requested
by the Non-Corporate Member, in connection with a review of such Schedule.  Without limiting the application of the
preceding sentence, each time National Beef delivers to a Non-Corporate Member
a Tax Benefit Schedule, in addition to the Tax Benefit Schedule duly completed,
National Beef shall deliver to the Non-Corporate Member the National Beef
Return, the reasonably detailed calculation by National Beef of the
Hypothetical Tax Liability, the reasonably detailed calculation by National
Beef of the actual Tax liability, as well as any other work papers as
determined by National Beef or requested by the Non-Corporate Member.  An applicable Schedule or amendment thereto
shall become final and binding on National Beef and a Non-Corporate Member
thirty (30) calendar days from the first date on which a Non-Corporate Member
received the applicable Schedule or amendment thereto unless the Non-Corporate
Member (i) within 30 calendar days after receiving an applicable Schedule
or amendment thereto, provides National Beef with notice of a material
objection to such Schedule (“Objection Notice”) made in good faith or (ii) provides
a written waiver of such right of any Objection Notice within the period described
in clause (i) above, in which case such Schedule or amendment thereto
becomes binding on the date the waiver is received by National Beef.  If the parties, for any reason, are unable to
successfully resolve the issues raised in the Objection Notice within 30
calendar days after receipt by National Beef of an Objection Notice, National
Beef and the Non-Corporate Member shall employ the reconciliation procedures as
described in Section 7.9 of this Agreement (the “Reconciliation
Procedures”).

 

(b) Amended
Schedule.  The applicable Schedule
for any Taxable Year may be amended from time to time by National Beef (i) in
connection with a Determination affecting such Schedule, (ii) to correct
inaccuracies in the Schedule identified as a result of the receipt of
additional factual information relating to a Taxable Year after the date the
Schedule was provided to the Non-Corporate Member, (iii) to comply with
the Expert’s determination under the Reconciliation Procedures, (iv) to
reflect a change in the Realized Tax Benefit or Realized Tax Detriment for such
Taxable Year attributable to a carryback or carryforward of a loss or other Tax
item to such Taxable Year, (v) to reflect a change in the Realized Tax
Benefit or Realized Tax Detriment for such Taxable Year attributable to an
amended Tax Return filed for such Taxable Year, or (vi) to adjust the
Original Basis Schedule or an Exchange Basis Schedule to take into account
payments made pursuant to this Agreement (any such Schedule, an “Amended
Schedule”).

 

ARTICLE III

 

TAX BENEFIT PAYMENTS

 

Section 3.1
Payments.  (a) Payments.  Within five (5) calendar days after a
Tax Benefit Schedule delivered to a Non-Corporate Member becomes final in
accordance with Section 2.4(a), National Beef shall pay to the
Non-Corporate Member for such Taxable Year the Tax

 

15

 

Benefit
Payment determined pursuant to Section 3.1(b).  Each such Tax Benefit Payment shall be made
by wire transfer of immediately available funds to the bank account previously
designated by the Non-Corporate Member to National Beef or as otherwise agreed
by National Beef and the Non-Corporate Member. 
For the avoidance of doubt, no Tax Benefit Payment shall be made in
respect of estimated tax payments, including, without limitation, federal
estimated income tax payments.

 

(b) 
A “Tax Benefit Payment” means with respect to each Non-Corporate Member
an amount, not less than zero, equal to the sum of the Net Tax Benefit and the
Interest Amount.  For the avoidance of
doubt, for Tax purposes, the Interest Amount shall not be treated as interest
but instead shall be treated as additional consideration for the acquisition of
Units in Exchanges, unless otherwise required by law.  Subject to Sections 3.4 and 3.5, the “Net
Tax Benefit” for a Taxable Year shall be an amount equal to the excess, if
any, of 85% of the Cumulative Net Realized Tax Benefit for such Taxable Year
over the total amount of payments previously made under this Section 3.1
(excluding payments attributable to Interest Amounts).  The “Interest Amount” shall equal the
interest on the Net Tax Benefit calculated at the Agreed Rate from the due date
(without extensions) for filing a National Beef Return with respect to Taxes
for such Taxable Year until the Payment Date. 
For the avoidance of doubt, the Non-Corporate Members shall have no
obligation to make any payment to National Beef, or to reimburse National Beef
for amounts previously paid, pursuant to this Agreement, except as provided in Section 7.9.

 

Section 3.2
Lump Sum Payment. (a) At any time that (1) the present value
of the remaining payments under Section 3.1 for each Covered Taxable Year
beginning after the last Covered Taxable Year for which a payment was made
pursuant to Section 3.1, based upon the Valuation Assumptions and using a
discount rate of the Early Termination Rate, (the “Lump Sum Present Value”)
is equal to or less than $1 million (as computed assuming that all
Non-Corporate Members make an election under this Section 3.2), and (2) the
Non-Corporate Members are record owners of less than 10% of the outstanding
Units, a Non-Corporate Member may elect to require National Beef to pay to the
Non-Corporate Member its proportionate share of the Lump Sum Present Value (in
accordance with the next paragraph), by giving National Beef a notice (the “Lump
Sum Election Notice”) stating that such Non-Corporate Member is electing
its right to receive the Lump Sum Present Value payment under this Section 3.2
and showing in reasonable detail its calculation of the Lump Sum Present Value
(as of the date of the Lump Sum Election Notice) and its ownership in NBP LLC.

 

(b) 
National Beef shall pay the portion of the Lump Sum Present Value attributable
to such electing Non-Corporate Member in cash. 
National Beef shall pay such portion of the Lump Sum Present Value
attributable to an electing Non-Corporate Member within ten (10) business
days of receiving the Lump Sum Election Notice or within ten (10) business
days of the resolution of a dispute undertaken pursuant to Section 3.2(d) (or
such other date as may be agreed upon by such electing Non-Corporate Member and
National Beef).  The Lump Sum Present
Value shall be calculated as of the date that such Lump Sum Election Notice is
received by National Beef.  A Non-Corporate
Member electing pursuant to Section 3.2(a) shall be entitled to the
portion of the Lump Sum Present Value payment as separately computed for such
Non-Corporate Member.

 

16

 

(c) If
a Non-Corporate Member elects to receive the Lump Sum Present Value payment,
and such Lump Sum Present Value payment is paid in full in accordance with the
provisions of this Section 3.2, then National Beef shall have no further
obligations to make any further payments under Section 3.1 in respect of
any Covered Taxable Year included in the present value calculation under which
the Lump Sum Present Value payment was made with respect to such Non-Corporate
Member.  Differences in actual events after
the date of the present value calculation from those used in the present value
calculation, including, without limitation, in the assumptions, amounts of
taxable income or other facts used in the present value calculation, shall not
affect, or require any adjustment or reimbursement of, the Lump Sum Present
Value once such amount has been paid in full.

 

(d) 
National Beef shall, within five (5) calendar days of a request by a
Non-Corporate Member, prepare its estimate of the Lump Sum Present Value as of
the date of such request, together with reasonable supporting detail showing
the basis of its calculations.  In the
event National Beef’s estimate of the Lump Sum Present Value does not equal the
Non-Corporate Member’s estimate set forth in the Lump Sum Election Notice,
procedures similar to those set forth in Section 2.4(a) shall
apply.  Upon payment of the Non-Corporate
Member’s share of the Lump Sum Present Value payment by National Beef, National
Beef shall not have any further payment obligations under this Agreement with
respect to such Non-Corporate Member, other than for any (a) Tax Benefit
Payment agreed to by National Beef and the Non-Corporate Member as due and
payable but unpaid as of the Lump Sum Election Notice and (b) Tax Benefit
Payment due for the Taxable Year ending with or including the date of the Lump
Sum Election Notice (except to the extent that the amount described in clause (b) is
included in the Non-Corporate Member’s share of the Lump Sum Present Value
payment). If an Exchange occurs by such Non-Corporate Member after National
Beef makes such payment, National Beef shall have no obligations under this
Agreement with respect to such Exchange.

 

Section 3.3
No Duplicative Payments. It is intended that the provisions of this
Agreement will not result in duplicative payment of any amount (including
interest) required under this Agreement. 
It is also intended that the provisions of this Agreement provide that
Tax Benefit Payments are paid to Non-Corporate Members pursuant to this Agreement.  The provisions of this Agreement shall be
construed in the appropriate manner to ensure such intentions are realized.

 

Section 3.4
Pro Rata Payments. 
Notwithstanding anything in Section 3.1 to the contrary, and
subject to Section 3.5 hereof, to the extent that the aggregate tax
benefit of National Beef’s deduction with respect to the Basis Adjustments or
Imputed Interest under this Agreement is limited in a particular Taxable Year
because National Beef does not have sufficient taxable income or to the extent
that National Beef lacks sufficient funds to satisfy its obligations to make
all Tax Benefit Payments due with respect to a particular Taxable Year, the
limitation on the tax benefit for National Beef, or the payments under this
Agreement that may be made, as the case may be, shall be taken into account or
made for each applicable Non-Corporate Member on a pro rata basis for the
Non-Corporate Members by comparing the amount of such Non-Corporate Member’s
share of the tax benefits or amounts payable (as the case may be) with respect
to the applicable Taxable Year to the aggregate amount of the tax benefits or
amounts payable to all Non-Corporate Members with respect to the applicable
Taxable Year.

 

17

 

Section 3.5
Coordination.  If for any reason
National Beef does not fully satisfy its obligations to make all payments due
under this Agreement in respect of a particular Taxable Year, then no payments
shall be made under this Agreement in respect of any Taxable Year until all
payments in respect of prior Taxable Years have been made in full, including
any additional amounts due under Section 5.2 of this Agreement.

 

ARTICLE IV

 

TERMINATION

 

Section 4.1
Termination and Breach of Agreement. (a)  With the written approval
of a majority of the Independent Directors, National Beef may terminate this
Agreement with respect to all amounts payable to the Non-Corporate Members at
any time by paying to them the Early Termination Payment; provided, however,
that this Agreement only terminates under this Section 4.1(a) upon
the receipt of the Early Termination Payment by the Non-Corporate Members, and
provided, further, that National Beef may withdraw any notice to execute its
termination rights under this Section 4.1(a) prior to the time at
which any Early Termination Payment has been paid.  Upon payment of the Early Termination Payment
by National Beef, National Beef shall not have any further payment obligations
under this Agreement, other than for any (a) Tax Benefit Payment agreed to
by National Beef and the Non-Corporate Members as due and payable but unpaid as
of the Early Termination Notice and (b) Tax Benefit Payment due for the
Taxable Year ending with or including the date of the Early Termination Notice
(except to the extent that the amount described in clause (b) is included
in the Early Termination Payment). If an Exchange occurs after National Beef
makes such payment, National Beef shall have no obligations under this
Agreement with respect to such Exchange.

 

(b) Upon
the occurrence of a Change of Control, National Beef shall be obligated to
terminate this Agreement effective as of the Change of Control Termination Date
by paying to the Non-Corporate Members the Change of Control Termination
Payment, substituting Change of Control Termination Date for Early Termination
Date each time Early Termination Date appears in the definition of Valuation
Assumptions and substituting Change of Control Termination Schedule for Early
Termination Schedule each time Early Termination Schedule appears in the definition
of Valuation Assumptions, and following the procedures set forth in Sections
4.2 and 4.3, as applicable to a Change of Control; provided, however, that this
Agreement shall terminate under this Section 4.1(b) only upon the
receipt of the Change of Control Termination Payment by the Non-Corporate
Members.  Upon payment of the Change of
Control Termination Payment by National Beef, National Beef shall have no
further payment obligations under this Agreement, other than for any (a) Tax
Benefit Payment agreed to by National Beef and the Non-Corporate Members as due
and payable but unpaid as of the Change of Control Termination Notice and (b) Tax
Benefit Payment due for the Taxable Year ending with or including the date of
the Change of Control Termination Notice (except to the extent that the amount
described in clause (b) is included in the Change of Control Termination
Payment).  If an Exchange occurs by a
Non-Corporate Member after National Beef makes such payment to the
Non-Corporate Member, National Beef shall have no obligations under this
Agreement with respect to such Exchange.

 

18

 

(c) In
the event that National Beef breaches any of its material obligations under
this Agreement, whether as a result of failure to make any payment when due,
failure to honor any other material obligation required hereunder or by
operation of law as a result of the rejection of this Agreement in a case
commenced under the Bankruptcy Code or otherwise, then all obligations hereunder
shall be accelerated and such obligations shall be calculated as if an Early
Termination Notice had been delivered on the date of such breach and shall
include, but not be limited to, (1) the Early Termination Payment
calculated as if an Early Termination Notice had been delivered on the date of
a breach, (2) any Tax Benefit Payment agreed to by National Beef and the
Non-Corporate Members as due and payable but unpaid as of the date of a breach,
and (3) any Tax Benefit Payment due for the Taxable Year ending with or
including the date of a breach. 
Notwithstanding the foregoing, in the event that National Beef breaches
this Agreement, the Non-Corporate Members shall be entitled to elect to receive
the amounts set forth in clauses (1), (2) and (3) above or to seek
specific performance of the terms hereof. 
The parties agree that the failure to make any payment due pursuant to
this Agreement within three months after the date such payment is due shall be
deemed to be a breach of a material obligation under this Agreement for all
purposes of this Agreement, and that it will not be considered to be a breach
of a material obligation under this Agreement to make a payment due pursuant to
this Agreement within three months after the date such payment is due.

 

Section 4.2
Termination Notice. If National Beef chooses to exercise its right of
early termination under Section 4.1 above, or within 30 days of a Change
of Control, National Beef shall deliver to the Non-Corporate Members notice of
such intention to exercise such right or of such occurrence (“Early
Termination Notice” or “Change of Control Termination Notice”, as
applicable) and a schedule (the “Early Termination Schedule” or “Change
of Control Termination Schedule”, as applicable) specifying National Beef’s
intention to exercise such right or of such occurrence and showing in
reasonable detail the calculation of the Early Termination Payment or the
Change of Control Termination Payment, as applicable, for the Non-Corporate
Members.  National Beef shall, along with
such notice and schedule, (x) deliver to the Non-Corporate Members
schedules and work papers, as determined by National Beef or requested by a
Non-Corporate Member, providing reasonable detail regarding the preparation of
the Schedule and (y) allow the Non-Corporate Members reasonable access at
no cost to the appropriate representatives at National Beef, as determined by
National Beef or requested by a Non-Corporate Member, in connection with a
review of such schedule.  The Early
Termination Schedule or Change of Control Termination Schedule, as applicable,
shall become final and binding on National Beef and a Non-Corporate Member 30
calendar days from the first date on which the Non-Corporate Member received
such schedule or amendment thereto unless the Non-Corporate Member (i) within
30 calendar days after receiving such schedule, provides National Beef with
notice of a material objection to such schedule made in good faith (“Material
Objection Notice”) or (ii) provides a written waiver of such right of
a Material Objection Notice within the period described in clause (i) above,
in which case such schedule becomes binding on the date the waiver is received
by National Beef (the “Early Termination Effective Date” or “Change
of Control Termination Effective Date”). 
If the parties, for any reason, are unable to successfully resolve the
issues raised in such notice within 30 calendar days after receipt by National
Beef of the Material Objection Notice, National Beef and the Non-Corporate
Member shall employ the Reconciliation Procedures.

 

19

 

Section 4.3
Payment upon Termination. (a) Within three (3) calendar days
after the Early Termination Effective Date National Beef shall pay to the
Non-Corporate Members an amount equal to the Early Termination Payment, which
amount shall be allocated among the Non-Corporate Members as if such amount was
separately computed for each such Non-Corporate Member.  Within three calendar days after the Change
of Control Termination Effective Date, National Beef shall pay to the
Non-Corporate Members an amount equal to the Change of Control Termination
Payment.  Such payments shall be made by
wire transfer of immediately available funds to a bank account or accounts
designated by the Non-Corporate Members or as otherwise agreed by National Beef
and the Non-Corporate Members.  A payment
pursuant to this Section 4.3 shall be allocated among the Non-Corporate
Members pro rata based upon such Non-Corporate Member’s computed payment to the
aggregate computed payment for all Non-Corporate Members.

 

(b) “Early
Termination Payment” shall equal the present value, discounted at the Early
Termination Rate as of the Early Termination Effective Date, of all Tax Benefit
Payments that would be required to be paid by National Beef to the
Non-Corporate Members beginning from the Early Termination Date and assuming
that the Valuation Assumptions are applied. 
“Change of Control Termination Payment” shall equal the present
value, discounted at the Early Termination Rate as of the Change of Control
Termination Effective Date, of all Tax Benefit Payments that would be required
to be paid by National Beef to the Non-Corporate Members beginning as of the
Change of Control Termination Date and assuming that the Valuation Assumptions
are applied, as amended by Section 4.1(b). 
Each of the Early Termination Payment and the Change of Control
Termination Payment shall be computed with respect to each Non-Corporate Member
separately and such payments shall be the aggregate for all of the
Non-Corporate Members.

 

Section 4.4
Unilateral Termination.  At any
time, by providing notice (the “Unilateral Termination Notice”) to
National Beef, a Non-Corporate Member may elect to terminate this Agreement
with respect to such Non-Corporate Member effective as of the date designated
by the Non-Corporate Member in such notice (the “Unilateral Termination Date”).  Upon receipt of the Unilateral Termination
Notice, National Beef shall have no further payment obligations under this
Agreement with respect to such Non-Corporate Member, other than for a (i) Tax
Benefit Payment agreed to by National Beef through a majority vote of its
Independent Directors and the Non-Corporate Member as due and payable but
unpaid as of the Unilateral Termination Date and (ii) Tax Benefit Payment
due for the Covered Taxable Year ending with or including the Unilateral
Termination Date (except to the extent that the amount described in clause (ii) is
attributable to Units exchanged after the Unilateral Termination Date).

 

ARTICLE V

 

SUBORDINATION AND LATE PAYMENTS

 

Section 5.1
Subordination. Notwithstanding any other provision of this Agreement to
the contrary, any payment required to be made by National Beef to a
Non-Corporate Member under this Agreement shall rank subordinate and junior in
right of payment to any principal, interest or

 

20

 

other
amounts due and payable in respect of any obligations in respect of
indebtedness for borrowed money of National Beef and its Subsidiaries (“Senior
Obligations”) and shall rank pari passu with all current or future
unsecured obligations of National Beef that are not Senior Obligations.

 

Section 5.2
Late Payments by National Beef. The amount of all or any portion of any
payment not made to a Non-Corporate Member when due under the terms of this
Agreement shall be payable together with any interest thereon, computed at the
Default Rate and commencing from the date on which such payment was due.

 

ARTICLE VI

 

NO DISPUTES; CONSISTENCY; COOPERATION

 

Section 6.1
Election to be Filed. As managing member of NBP LLC, National Beef shall
cause NBP LLC and each NBP LLC Group member that is treated as a partnership
for United States federal income tax purposes to file an election under Section 754
of the Code commencing with its Taxable Year in which the Original Sale occurs,
unless such entity already has a Section 754 election in effect, and shall
not cause any such entity to revoke such election until this Agreement is no
longer in effect for any Non-Corporate Member. 
If NBP LLC acquires an interest in an entity that is treated as a
partnership for United States federal income tax purposes, National Beef shall
use its best efforts to cause such entity to file an election under Section 754
of the Code and comparable elections under foreign, state and local tax law
effective for each such entity’s Taxable Year in which such acquisition occurs,
unless such entity already has an election under Section 754 of the Code
and comparable elections under foreign, state and local tax law in effect, and
shall not cause such entity to revoke such election until this Agreement is no
longer in effect.

 

Section 6.2
Participation in National Beef’s and NBP LLC’s Tax Matters. Except as
otherwise provided herein, National Beef shall have full responsibility for,
and sole discretion over, all Tax matters concerning National Beef and NBP LLC,
including without limitation the preparation, filing and amending of any Tax
Return and defending, contesting and settling any issue pertaining to Taxes.
Notwithstanding the foregoing, National Beef shall notify a Non-Corporate
Member, and keep a Non-Corporate Member reasonably informed with respect to,
the portion of any audit of National Beef and NBP LLC by a Taxing Authority the
outcome of which is reasonably expected to affect the rights and obligations of
the Non-Corporate Member under this Agreement, and shall provide to the
Non-Corporate Member reasonable opportunity to provide information and other
input to National Beef, NBP LLC and their respective advisors concerning the
conduct of any such portion of such audit; provided, however, that National
Beef and NBP LLC shall not be required to take any action that is inconsistent
with any provision of the LLC Agreement.

 

Section 6.3
Consistency. National Beef and the Non-Corporate Members agree to report
and cause to be reported for all purposes, including federal, foreign, state
and local Tax purposes and financial reporting purposes, all Tax-related items
(including, without limitation, the Basis Adjustments and each Tax Benefit
Payment) in a manner consistent with that specified by

 

21

 

National
Beef in any Schedule required to be provided by or on behalf of National Beef
under this Agreement unless otherwise required by law.

 

Section 6.4
Cooperation. A Non-Corporate Member shall (a) furnish to National
Beef in a timely manner such information, documents and other materials as
National Beef may reasonably request for purposes of making any determination
or computation necessary or appropriate under this Agreement, preparing any Tax
Return or contesting or defending any audit, examination or controversy with
any Taxing Authority, (b) make itself available to National Beef and its
representatives to provide explanations of documents and materials and such
other information as National Beef or its representatives may reasonably
request in connection with any of the matters described in clause (a) above,
and (c) reasonably cooperate in connection with any such matter, and
National Beef shall reimburse the Non-Corporate Member for any reasonable
third-party costs and expenses incurred pursuant to this Section.

 

ARTICLE VII

 

MISCELLANEOUS

 

Section 7.1
Notices. All notices, requests, claims, demands and other communications
hereunder shall be in writing and shall be deemed duly given and received (a) on
the date of delivery if delivered personally, or by facsimile upon confirmation
of transmission by the sender’s fax machine if sent on a Business Day (or
otherwise on the next Business Day) or (b) on the first Business Day
following the date of dispatch if delivered by a recognized next-day courier
service. All notices hereunder shall be delivered as set forth below, or
pursuant to such other instructions as may be designated in writing by the
party to receive such notice:

 

	
  If
  to National Beef, to:

  	
  National
  Beef, Inc.

  
	
   

  	
  12200
  Ambassador Drive, 5th Floor

  
	
   

  	
  Kansas
  City, MO 64163

  
	
   

  	
  Attention:
  President

  
	
   

  	
  Fax:
  (816) 713-8889

  
	
   

  	
   

  
	
  With
  a copy to:

  	
  National
  Beef, Inc.

  
	
   

  	
  12200
  Ambassador Drive, 5th Floor

  
	
   

  	
  Kansas
  City, MO 64163

  
	
   

  	
  Attention:
  General Counsel

  
	
   

  	
  Fax:
  (816) 713-8889

  
	
   

  	
   

  
	
  If
  to USPB, to:

  	
  U.S.
  Premium Beef, LLC

  
	
   

  	
  P.O. Box
  20103

  
	
   

  	
  Kansas
  City, MO 64195

  
	
   

  	
  Attention:
  Steven D. Hunt

  
	
   

  	
  Fax:
  (816) 713-8810

  
	
   

  	
   

  
	
  With
  a copy to:

  	
  Stoel
  Rives LLP

  
	
   

  	
  33
  South Sixth Street, Suite 4200

  

 

22

 

	
   

  	
  Minneapolis,
  MN 55402

  
	
   

  	
  Attention:
  Mark J. Hanson

  
	
   

  	
  Fax:
  (612) 373-8881

  
	
   

  	
   

  
	
  If
  to NBPCo, to:

  	
  NBPCo
  Holdings, LLC

  
	
   

  	
  891
  Two Rivers Drive

  
	
   

  	
  Dakota
  Dunes, SD 57049

  
	
   

  	
  Attention:
  Rich Jochum

  
	
   

  	
  Fax:
  (605) 217-8001

  
	
   

  	
   

  
	
  With
  a copy to:

  	
  Michael
  M. Hupp

  
	
   

  	
  Attention:
  Koley Jessen P.C., LLO

  
	
   

  	
  1125
  S 103rd Street, Suite 800

  
	
   

  	
  Omaha,
  NE 68124

  
	
   

  	
  Fax:
  (402) 390-9005

  
	
   

  	
   

  
	
  If
  to TKK, to:

  	
  TKK
  Investments, LLC

  
	
   

  	
  10217
  Hwy 92

  
	
   

  	
  Kearney,
  MO 64060

  
	
   

  	
  Attention:
  Timothy M. Klein

  
	
   

  	
  Fax:
  (816) 713-8852

  
	
   

  	
   

  
	
  If
  to TMKCo, to:

  	
  TMKCo,
  LLC

  
	
   

  	
  10217
  Hwy 92

  
	
   

  	
  Kearney,
  MO 64060

  
	
   

  	
  Attention:
  Timothy M. Klein

  
	
   

  	
  Fax:
  (816) 713-8852

  

 

Any
party may change its address or fax number by giving the other parties written
notice of its new address or fax number in the manner set forth above.

 

Section 7.2
Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each
of the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart. Delivery of an executed signature page to
this Agreement by facsimile transmission shall be as effective as delivery of a
manually signed counterpart of this Agreement.

 

Section 7.3
Entire Agreement; No Third Party Beneficiaries. This Agreement
constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof.  This Agreement
shall be binding upon and inure solely to the benefit of each party hereto and
their respective successors and permitted assigns, and nothing in this
Agreement, express or implied, is intended to or shall confer upon any other
Person any right, benefit or remedy of any nature whatsoever under or by reason
of this Agreement.

 

23

 

Section 7.4
Governing Law. This Agreement shall be governed by, and construed in
accordance with, the law of the State of Delaware, without regard to the
conflicts of laws principles thereof that would mandate the application of the
laws of another jurisdiction.

 

Section 7.5
Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any law or public policy,
all other terms and provisions of this Agreement shall nevertheless remain in
full force and effect so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner materially adverse to any
party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in an acceptable manner in order that the
transactions contemplated hereby are consummated as originally contemplated to
the greatest extent possible.

 

Section 7.6
Successors; Assignment; Amendments; Waivers. (a) A Non-Corporate
Member may assign any of its rights under this Agreement to any Person as long
as such transferee has executed and delivered, or, in connection with such
transfer, executes and delivers, a joinder to this Agreement, in form and
substance reasonably satisfactory to National Beef, agreeing to become a
Non-Corporate Member for all purposes of this Agreement, except as otherwise
provided in such joinder.

 

(b) No
provision of this Agreement may be amended unless such amendment is approved in
writing by both National Beef and the Non-Corporate Members; provided, that,
the definition of Change of Control cannot be amended without the written
approval of a majority of the Independent Directors. No provision of this
Agreement may be waived unless such waiver is in writing and signed by the
party against whom the waiver is to be effective.

 

(c) All
of the terms and provisions of this Agreement shall be binding upon, shall
inure to the benefit of and shall be enforceable by the parties hereto and
their respective successors, assigns, heirs, executors, administrators and
legal representatives. National Beef shall require and cause any direct or
indirect successor (whether by purchase, merger, consolidation or otherwise) to
all or substantially all of the business or assets of National Beef, by written
agreement, expressly to assume and agree to perform this Agreement in the same
manner and to the same extent that National Beef would be required to perform
if no such succession had taken place.

 

Section 7.7
Titles and Subtitles. The titles of the sections and subsections of this
Agreement are for convenience of reference only and are not to be considered in
construing this Agreement.

 

Section 7.8
Resolution of Disputes. (a) Any and all disputes which cannot be
settled amicably, including any ancillary claims of any party, arising out of,
relating to or in connection with the validity, negotiation, execution,
interpretation, performance or non-performance of this Agreement (including the
validity, scope and enforceability of this arbitration provision) (each a “Dispute”)
shall be finally settled by arbitration conducted by a single arbitrator in
Missouri in accordance with the then-existing Rules of Arbitration of the
International Chamber of

 

24

 

Commerce.  If the parties to the Dispute fail to agree
on the selection of an arbitrator within ten (10) days of the receipt of
the request for arbitration, the International Chamber of Commerce shall make
the appointment. The arbitrator shall be a lawyer admitted to the practice of
law in the State of Missouri and shall conduct the proceedings in the English
language. Performance under this Agreement shall continue if reasonably
possible during any arbitration proceedings.

 

(b) Notwithstanding
the provisions of paragraph (a), National Beef may bring an action or special
proceeding in any court of competent jurisdiction for the purpose of compelling
a party to arbitrate, seeking temporary or preliminary relief in aid of an
arbitration hereunder, and/or enforcing an arbitration award and, for the
purposes of this paragraph (b), the Non-Corporate Members (i) expressly
consent to the application of paragraph (c) of this Section 7.8 to
any such action or proceeding, (ii) agree that proof shall not be required
that monetary damages for breach of the provisions of this Agreement would be
difficult to calculate and that remedies at law would be inadequate, and (iii) irrevocably
appoint National Beef as agent of the Non-Corporate Members for service of
process in connection with any such action or proceeding and agree that service
of process upon such agent, who shall promptly advise the Non-Corporate Members
of any such service of process, shall be deemed in every respect effective
service of process upon the Non-Corporate Members in any such action or
proceeding.

 

(c) (i) EACH
PARTY HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF COURTS LOCATED IN
KANSAS CITY, MISSOURI FOR THE PURPOSE OF ANY JUDICIAL PROCEEDING BROUGHT IN
ACCORDANCE WITH THE PROVISIONS OF THIS SECTION 7.8, OR ANY JUDICIAL
PROCEEDING ANCILLARY TO AN ARBITRATION OR CONTEMPLATED ARBITRATION ARISING OUT
OF OR RELATING TO OR CONCERNING THIS AGREEMENT. Such ancillary judicial proceedings
include any suit, action or proceeding to compel arbitration, to obtain
temporary or preliminary judicial relief in aid of arbitration, or to confirm
an arbitration award. The parties acknowledge that the fora designated by this
paragraph (c) have a reasonable relation to this Agreement, and to the
parties’ relationship with one another; and

 

(ii) The
parties hereby waive, to the fullest extent permitted by applicable law, any
objection which they now or hereafter may have to personal jurisdiction or to
the laying of venue of any such ancillary suit, action or proceeding brought in
any court referred to in the preceding paragraph of this Section 7.8 and
such parties agree not to plead or claim the same.

 

Section 7.9
Reconciliation. In the event that National Beef and a Non-Corporate
Member are unable to resolve a disagreement with respect to the matters
governed by Sections 2.4, 4.2 and 6.3 within the relevant period designated in
this Agreement (“Reconciliation Dispute”), the Reconciliation Dispute
shall be submitted for determination to a nationally recognized expert (the “Expert”)
in the particular area of disagreement mutually acceptable to both parties. The
Expert shall be a partner or principal in a nationally recognized accounting or
law firm, and unless National Beef and the Non-Corporate Member agree
otherwise, the Expert shall not, and the firm that employs the Expert shall
not, have any material relationship with National Beef or the Non-Corporate
Member or other actual or potential conflict of interest.  If the parties are unable to agree on an
Expert within fifteen (15) days of receipt by the respondent(s) of written
notice of a Reconciliation Dispute, the Expert shall be appointed by the
International Chamber of

 

25

 

Commerce
Centre for Expertise.  The Expert shall
resolve any matter relating to the Original Basis Schedule, or an amendment
thereto, an Exchange Basis Schedule, or an amendment thereto, the Early
Termination Schedule, or an amendment thereto, or the Change of Control
Termination Schedule, or an amendment thereto, 
within 30 calendar days and shall resolve any matter relating to a Tax
Benefit Schedule or an amendment thereto within 15 calendar days or as soon
thereafter as is reasonably practicable, in each case after the matter has been
submitted to the Expert for resolution. 
Notwithstanding the preceding sentence, if the matter is not resolved
before any payment that is the subject of a disagreement would be due (in the
absence of such disagreement) or any Tax Return reflecting the subject of a
disagreement is due, the undisputed amount shall be paid on the date prescribed
by this Agreement and such Tax Return may be filed as prepared by National
Beef, subject to adjustment or amendment upon resolution.  The costs and expenses relating to the
engagement of such Expert or amending any Tax Return shall be borne by National
Beef except as provided in the next sentence. 
National Beef and a Non-Corporate Member shall bear their own costs and
expenses of such proceeding, unless (i) the Expert adopts the
Non-Corporate Member’s position, in which case National Beef shall reimburse
the Non-Corporate Member for any reasonable out-of-pocket costs and expenses in
such proceeding, or (ii) the Expert adopts National Beef’s position, in
which case the Non-Corporate Member shall reimburse National Beef for any
reasonable out-of-pocket costs and expenses in such proceeding.  Any dispute as to whether a dispute is a
Reconciliation Dispute within the meaning of this Section 7.9 shall be
decided by the Expert.  The Expert shall
finally determine any Reconciliation Dispute and the determinations of the
Expert pursuant to this Section 7.9 shall be binding on National Beef and
a Non-Corporate Member which is a party to such Dispute and may be entered and
enforced in any court having jurisdiction.

 

Section 7.10
Withholding. National Beef shall be entitled to deduct and withhold from
any payment payable pursuant to this Agreement such amounts as National Beef is
required to deduct and withhold with respect to the making of such payment
under the Code or any provision of state, local or foreign Tax law.  To the extent that amounts are so withheld
and paid over to the appropriate Taxing Authority by National Beef, such
withheld amounts shall be treated for all purposes of this Agreement as having
been paid to the applicable Non-Corporate Member.

 

Section 7.11
Admission of National Beef into a Consolidated Group; Transfers of Corporate
Assets. (a) If National Beef is or becomes a member of an affiliated
or consolidated group of corporations that files a consolidated income tax
return pursuant to Sections 1501 et seq. of the Code or any corresponding
provisions of state or local law, then: (i) the provisions of this
Agreement shall be applied with respect to the group as a whole; and (ii) Tax
Benefit Payments, Early Termination Payments, Change of Control Termination
Payments, Lump Sum Present Value payments, and other applicable items hereunder
shall be computed with reference to the consolidated taxable income of the
group as a whole.

 

(b) If
any entity that is obligated to make a Tax Benefit Payment, Early Termination
Payment, Change of Control Termination Payment, or Lump Sum Present Value
payment, hereunder transfers one or more assets to a corporation (or a Person
classified as a corporation for United States federal income tax purposes) with
which such entity does not file a consolidated tax return pursuant to Section 1501
of the Code, such entity, for purposes of

 

26

 

calculating
the amount of any Tax Benefit Payment, Early Termination Payment, Change of
Control Termination Payment, or Lump Sum Present Value payment (e.g.,
calculating the gross income of the entity and determining the Realized Tax
Benefit of such entity) due hereunder, shall be treated as having disposed of
such asset in a fully taxable transaction on the date of such transfer. The
consideration deemed to be received by such entity shall be equal to the fair
market value of the transferred asset. For purposes of this Section 7.11,
a transfer of a partnership interest shall be treated as a transfer of the
transferring partner’s share of each of the assets and liabilities of that
partnership.

 

Section 7.12
Confidentiality. The Non-Corporate Members and each of their assignees
acknowledge and agree that the information of National Beef is confidential
and, except in the course of performing any duties as necessary for National
Beef and its Affiliates, as required by law or legal process or to enforce the
terms of this Agreement, such person shall keep and retain in the strictest
confidence and not disclose to any Person any confidential matters, acquired
pursuant to this Agreement, of National Beef and its Affiliates and successors,
concerning NBP LLC and its Affiliates and successors or the Members, learned by
the Non-Corporate Members heretofore or hereafter. This Section 7.12 shall
not apply to (i) any information that has been made publicly available by
National Beef or any of its Affiliates, becomes public knowledge (except as a
result of an act of a Non-Corporate Member in violation of this Agreement) or
is generally known to the business community and (ii) the disclosure of
information to the extent necessary for the Non-Corporate Members to prepare
and file their Tax Returns, to respond to any inquiries regarding the same from
any Taxing Authority or to prosecute or defend any action, proceeding or audit
by any taxing authority with respect to such returns.  Notwithstanding anything to the contrary
herein, the Non-Corporate Members and each of their assignees (and each
employee, representative or other agent of the Non-Corporate Members or their
assignees, as applicable) may disclose to any and all Persons, without
limitation of any kind, the tax treatment and tax structure of National Beef,
NBP LLC, the Members and their Affiliates, and any of their transactions, and
all materials of any kind (including opinions or other tax analyses) that are
provided to the Non-Corporate Members relating to such tax treatment and tax
structure.

 

If
a Non-Corporate Member or an assignee of a Non-Corporate Member commits a
breach, or threatens to commit a breach, of any of the provisions of this Section 7.12,
National Beef shall have the right and remedy to have the provisions of this Section 7.12
specifically enforced by injunctive relief or otherwise by any court of
competent jurisdiction without the need to post any bond or other security, it
being acknowledged and agreed that any such breach or threatened breach shall
cause irreparable injury to National Beef or any of its Subsidiaries and the
accounts and funds managed by National Beef and that money damages alone shall
not provide an adequate remedy to such Persons. Such rights and remedies shall
be in addition to, and not in lieu of, any other rights and remedies available
at law or in equity.

 

Section 7.13
Change in Law. (a) Notwithstanding anything herein to the contrary,
if, in connection with an actual or proposed change in law, a Non-Corporate
Member reasonably believes that the existence of this Agreement could cause
income (other than income arising from receipt of a payment under this
Agreement) recognized by any member affiliated with the Non-Corporate Member
(or direct or indirect equity holders in such member) upon the IPO, Original
Sale or any Exchange to be treated as ordinary income rather than capital gain
(or

 

27

 

otherwise
taxed at ordinary income rates) for United States federal income tax purposes
or would have other material adverse tax consequences to the Non-Corporate
Member or any direct or indirect owner of the Non-Corporate Member (a “Change
in Tax Law”), then at the election of the Non-Corporate Member and to the
extent specified by such Non-Corporate Member, this Agreement (i) shall
cease to have further effect with respect to such Non-Corporate Member, (ii) shall
not apply to an Exchange by such Non-Corporate Member occurring after a date specified
by the Non-Corporate Member, or (iii) shall otherwise be amended in a
manner determined by such Non-Corporate Member provided that such amendment
shall not result in an increase in payments under this Agreement at any time as
compared to the amounts and times of payments that would have been due in the
absence of such amendment (assuming that no payment is due under Section 7.13(b)).

 

(b) If
a Non-Corporate Member delivers to National Beef a notice of acceleration
accompanied by an opinion of a Qualified Tax Advisor to the effect that based
upon such Change in Tax Law (taking into account any applicable administrative
pronouncements or rulings, formal or informal Congressional actions or
statements, or otherwise) (i) the existence of this Agreement will more
likely than not cause income (other than income arising from receipt of a
payment under this Agreement) recognized by the Non-Corporate Member (or direct
or indirect equity holders in such Member) upon the Original Sale or any
Exchange to be treated as ordinary income rather than capital gain (or
otherwise taxed at ordinary income rates) for United States federal income tax
purposes or would have other material adverse tax consequences to the
Non-Corporate Member (or any direct or indirect owner thereof), and (ii) substantially
all of such income described in Section 7.13(b)(i) above would be
more likely than not taxable at capital gain rates or such other material
adverse tax consequences would be avoided as a result of making the election
described in this Section 7.13(b), then the Non-Corporate Member may elect
to cause National Beef to make the Non-Corporate Member’s share of a lump sum
payment to the Non-Corporate Member in lieu of the Tax Benefit Payments
otherwise provided in this Agreement for the Non-Corporate Member in accordance
with the procedures described in Article IV.  The lump sum payment is in an amount equal to
the sum of the present values of all such Tax Benefits Payments, substituting
in each case “70%” for “85%” in the calculation of Net Tax Benefit, discounted
at the Early Termination Rate as of the effective date specified in the notice
of acceleration, and assuming the Valuation Assumptions (1) through (5) are
applied (substituting the effective date specified in the notice of
acceleration for the Early Termination Date each time Early Termination Date
appears in the Valuation Assumptions definition); provided, that no amount
shall be payable under this Section 7.13(b) unless, with respect to
at least 50% of the Units held by the Non-Corporate Member at the time of
execution of this Agreement, all rights to payments under this Agreement shall
have been terminated pursuant to Section 7.13(a) (and for the
avoidance of doubt, no payments pursuant to this Section 7.13(b) shall
be made in respect of such Units); provided, further, that if such payment
would be due on or after the effective date of the applicable Change in Tax
Law, at the election of the Non-Corporate Member, such payment shall to the
extent reasonably practicable instead be made no later than the date prior to
the effective date of the applicable Change in Tax Law (using the best
available estimates and information at such time).

 

(c) National
Beef shall have the right to satisfy its obligation to make a lump sum payment
under Section 7.13(b) by issuing a subordinated debt instrument of
National Beef, with

 

28

 

a
maturity date seven years after issuance, with interest payment required to be
made quarterly, and bearing interest at a rate equal to the lesser of (i) 6%
per annum and (ii) LIBOR plus 200 basis points.

 

(d) Notwithstanding
anything herein to the contrary, Section 3.5 of this Agreement shall not
apply to payments made by National Beef pursuant to this Section 7.13.

 

[The remainder of this page is intentionally left blank.  Signature page to follow.]

 

29

 

IN
WITNESS WHEREOF, National Beef and the Non-Corporate Members have duly executed
this Agreement as of the date first written above.

 

	
   

  	
  National
  Beef, Inc.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  U.S.
  Premium Beef, LLC

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  NBPCo
  Holdings, LLC

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  TKK
  Investments, LLC

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  TMKCo,
  LLC

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  

 

Signature Page to Tax Receivable Agreement

 

 

Exhibit A

 

Form of Joinder Agreement

 

[                                            ]
does hereby agree to the terms and conditions of the Tax Receivable Agreement,
dated as of [              ],
2010, a copy of which is attached hereto, and shall be and hereby is a
Non-Corporate Member, as defined in such Agreement, and is bound by its terms
and conditions.

 

Effective
[                      ].

 

 

	
   

  	
  National
  Beef, Inc.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  [                                            ]

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

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