Document:

Exhibit 10.7(a)

 

CATTLE PURCHASE AND SALE AGREEMENT

BETWEEN

NATIONAL BEEF PACKING COMPANY, LLC

AND

U.S. PREMIUM BEEF, LLC

 

THIS
CATTLE PURCHASE AND SALE AGREEMENT (this “Agreement”) is entered into as of the
             day of
                                      ,
2009, by and between NATIONAL BEEF PACKING COMPANY, LLC, a Delaware limited
liability company (“National Beef”), and U.S. PREMIUM BEEF, LLC, a Delaware
limited liability company (“USPB”). 
National Beef and USPB are referred to individually as a “Party” and
collectively as the “Parties.”

 

RECITALS

 

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

 

B.            National Beef is engaged in the
business of purchasing and processing cattle and marketing beef and related
products (the “Beef Business”); and

 

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

 

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

 

1.             PURCHASE/SALE OF CATTLE.

 

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

 

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

 

(c)           Scheduling.  Delivery schedules shall be determined by
National Beef on a reasonable basis, consistent with all other provisions of
this Agreement, taking into account operational practicalities.  Delivery will be to National Beef’s beef
processing facilities located in 

 

 

the
United States in the traditional areas where USPB members have or are
delivering cattle to National Beef processing facilities.  Upon receipt of a request by National Beef,
USPB will forecast USPB’s anticipated deliveries thirty (30) days in advance of
any scheduled deliveries to National Beef.

 

2.             PURCHASE PRICE OF CATTLE.

 

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

 

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

 

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

 

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

 

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

 

6.             WEIGHING AND TRANSPORTATION.  All cattle purchased by National Beef from
USPB under this Agreement shall be weighed and transported according to
standard industry practice and on the same basis as other cattle purchased by
National Beef (or as otherwise mutually determined by the Parties through the
pricing grid determination process).

 

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7.             TERM OF AGREEMENT.  The term of this Agreement shall commence on
the date first written above and shall continue so long as USPB holds an
ownership interest in National Beef, subject to the following:

 

(1)           if there is a
material breach of any agreement or covenant of USPB contained in this
Agreement, National Beef may give written notice of the breach to USPB and, if
the breach is not cured within a period (“USPB’s Cure Period”) of thirty (30)
days following the notice of breach by National Beef to USPB, National Beef
shall have the right to terminate all rights of USPB under this Agreement upon
written termination notice to USPB within thirty (30) days following USPB’s
Cure Period, provided, however, if the breach is related to a shortage in the
number of cattle delivered by USPB and its members to National in a given year,
then USPB shall have the right to make up delivery shortages by increasing
cattle deliveries on a prorated basis equal to 10% of the annual deliveries per
month until the shortage in deliveries is made up.  National Beef must continue to purchase and
pay for cattle as provided in this Agreement that are delivered by USPB members
to National Beef for a period of six (6) months following any notice of
termination given under this Section 7(1);

 

(2)           if there is a
material breach of any agreement or covenant of National Beef contained in this
Agreement with respect to USPB, and delivery of cattle by USPB members to
National Beef or failure of National Beef to receive the cattle, USPB may give
written notice of the breach to National Beef and, if the breach is not cured
within a period (“National Beef Cure Period”) of thirty (30) days following the
notice of breach by USPB to National Beef or, in the case of a failure of
National Beef to make a payment to USPB or USPB members, ten (10) days
following the notice of breach by USPB to National Beef, then USPB shall have
the right to terminate all obligations of USPB and its members under this
Agreement upon notice to National Beef, provided that the notice of termination
is given by USPB to National Beef within thirty (30) days following the
National Beef Cure Period.  USPB shall
cause its members to continue to deliver cattle to National Beef for a period
of six (6) months following the termination if the USPB members are paid
as provided in this Agreement for the cattle delivered;

 

(3)           if National Beef, Inc.
(“NBI”) is no longer acting as the sole manager of National Beef or there is a change
in control of NBI or National Beef such that (i) the number of directors
of NBI designated by USPB pursuant to any stockholders agreement or other
agreement or arrangement no longer constitutes a majority of the Board of
Directors of NBI, (ii) NBI and any parties who are members of National
Beef as of the date of this Agreement do not collectively own more than 50% of
the membership interests of National Beef,  or (iii) National Beef is not the
controlling owner of any of the processing facilities where USPB members
deliver cattle under this Agreement, then USPB may terminate this Agreement by
providing written notice to National Beef. 
USPB shall cause its members to continue to deliver cattle to National
Beef for a period of six (6) months following the termination if the USPB
members are paid as provided in this Agreement for the cattle delivered;

 

(4)           if, at any time
after this Agreement has been in effect USPB divests completely of its
ownership interest in National Beef, this Agreement shall terminate; provided,
however, that the Parties may agree in writing to continue this Agreement under
mutually

 

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acceptable terms.  USPB shall
cause its members to continue to deliver cattle to National Beef for a period
of six (6) months following a termination under this Section 7(4) if
the USPB members are paid as provided in this Agreement for the cattle delivered;
and

 

(5)           notwithstanding the
foregoing clauses (1), (2), (3) and (4), the obligation to purchase and
pay for cattle and the obligation to deliver cattle under this Section 7,
and rights of either Party to collect applicable damages and to exercise its
remedies for failure to purchase and deliver cattle as provided under this
Agreement, shall survive any termination of this Agreement.

 

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

 

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

 

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

 

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11.          NOTICES.  All notices and other communications under this
Agreement shall be in writing and shall be deemed to have been duly given if
delivered by hand, five (5) days after mailed by certified mail with
postage paid and return receipt requested, or sent by facsimile transmission to
the parties at the following addresses and facsimile numbers (or at another
address or facsimile number for a Party as the Party shall designate in a
notice given pursuant to this Section):

 

(a)           If to National
Beef, to:

 

Chief Executive Officer

National Beef Packing Company, LLC

P.O. Box 20046

Kansas City, MO  64195-0046

 

With a copy to:

 

General Counsel

National Beef Packing Company, LLC

P.O. Box 20046

Kansas City, MO  64195-0046

 

(b)           If to USPB, to:

 

Steven D. Hunt, CEO

U.S. Premium Beef, LLC

P.O. Box 20103

Kansas City, MO  64195

Facsimile:  (816) 713-8810

 

with a copy to:

 

Stoel Rives LLP

Attn:  Mark J. Hanson

33 South Sixth Street

Suite 4200

Minneapolis, MN 55402

Facsimile:  (612) 373-8881

 

12.          ENTIRE AGREEMENT.  This Agreement contains all of the terms
agreed upon by the Parties with respect to the subject matter of this Agreement
and supersedes all prior agreements of the Parties or their predecessors in
interest as to the subject matter of this Agreement.  This Agreement may not be modified except in
writing, signed by the Parties hereto, that specifically references this
Agreement.

 

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13.          ASSIGNMENT.  This Agreement may not be assigned by any
Party without prior written consent of the other Party.  This Agreement shall be binding upon, and
inure to the benefit of, the Parties and their respective heirs, legal
representatives, successors, and permitted assigns. Notwithstanding the
foregoing, Beef Co may assign this agreement to any wholly owned subsidiary or
affiliate without any prior written consent.

 

14.          CONSTRUCTION.  This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Kansas.  The Parties agree that if any part, term or
provision of this Agreement is held by a court of competent jurisdiction to be
illegal or unenforceable or in conflict with any controlling state law, the
validity of the remaining parts, terms and provisions of this Agreement shall
not be affected, and the rights and obligations of the Parties shall be
construed and enforced as if this Agreement did not contain the particular
part, term or provision held to be illegal or unenforceable or in conflict with
any controlling state law.

 

[Signature page follows]

 

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IN
WITNESS WHEREOF, the undersigned have executed this Agreement as of the             
day of                                     ,
2009, to be effective as of the closing of the transactions under the [S-1 of
NBP, Inc.].

 

 

	
   

  	
  NATIONAL
  BEEF PACKING COMPANY, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  U.S.
  PREMIUM BEEF, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  
	
   

  	
  Title:

  	
   

  
				

 

7Exhibit 10.8

 

CONFIDENTIAL MATERIAL APPEARING
IN THIS DOCUMENT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION IN ACCORDANCE WITH RULE 406 PROMULGATED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED. 
OMITTED INFORMATION HAS BEEN REPLACED WITH ASTERISKS.

 

RAW MATERIAL AND FINISHED
PRODUCTS SUPPLY AGREEMENT

 

THIS RAW MATERIAL AND FINISHED PRODUCTS
SUPPLY AGREEMENT (this “Agreement”) is entered into this
           day of
                              ,
2009 by and between National Beef Packing Company, LLC, a Delaware limited
liability corporation with a principal office at 12200 N. Ambassador Drive, Suite 500,
Kansas City, MO 64163 and its affiliates and related entities (collectively, “NBP”),
and Beef Products, Inc., LLC, a Nebraska corporation with its principal
offices at 891 Two Rivers Drive, Dakota Dunes, SD 57049 (“BPI”).

 

RECITALS

 

A.            NBP
is engaged in the business of producing, distributing and marketing fresh beef
products.  NBP’s current United States
beef processing operations are located at Dodge City, KS; Liberal, KS; and
Brawley, CA (collectively, the “Locations”).

 

B.            BPI
is engaged in the business of producing, distributing and selling lean beef,
pork and other meat products and currently has production facilities in
Amarillo, Texas; Finney County, Kansas; Waterloo, Iowa; and South Sioux City,
Nebraska.

 

C.            NBP
desires to sell, and BPI desires to purchase, all of Seller’s Raw Materials,
under the terms and conditions of this Agreement.

 

NOW, THEREFORE, in consideration of the
foregoing recitals (which are specifically incorporated herein by this
reference) and the mutual covenants described below, the parties agree as
follows:

 

1.             Sale
and Purchase of the Raw Materials and Finished Products.  (a) Subject to the limitations below,
NBP shall sell, and BPI shall purchase, all of the beef trimmings produced at
the Locations containing less than 50% lean content and meeting the
specifications set forth in Exhibit B (the “Raw Materials” or “XF Trim”).  The parties acknowledge that BPI may purchase
Raw Materials from other suppliers provided that BPI has purchased, or still
purchases all of NBP’s available Raw Materials under the terms of this
Agreement.

 

(b) 
During the term of this Agreement, NBP shall have the right (but not the
obligation) to purchase from BPI (in which case BPI shall sell to NBP) finished
products produced by
BPI from materials similar to the Raw Materials purchased by BPI pursuant to
this Agreement (the “Finished Products”) at such prices and upon such terms
consistent with sales of Finished Products by BPI to BPI’s other Raw Material
suppliers, subject to the provisions of Section 3(b) of this
Agreement.  The quantity of Finished
Products that BPI must sell, and NBP may purchase, pursuant to this subparagraph
(b) shall be that quantity of Finished Products that is produced by BPI
from the quantity of Raw Materials purchased by BPI from NBP pursuant to this
Agreement.

 

2.             Quantity.  As of the Effective Date, it is estimated
that NBP will be able to produce the Raw Materials in the amounts indicated on Exhibit C
for each facility.  This

 

 

CONFIDENTIAL
MATERIAL APPEARING IN THIS DOCUMENT HAS BEEN OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION IN ACCORDANCE WITH RULE 406 PROMULGATED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED. 
OMITTED INFORMATION HAS BEEN REPLACED WITH ASTERISKS.

 

production
rate is only an estimate and BPI shall accept any reasonable amount of Raw
Materials.  While NBP is under no
obligation to produce any minimum quantity of the Raw Materials, certain terms
and conditions relating to Purchase Price (defined below) may vary based upon
pound per head achieved or other volume and quality measurements for the Raw
Materials.

 

3.             Purchase
Price.  The “Purchase Price” for the Raw Materials
shall be calculated in accordance with the attached Exhibit A.  NBP shall invoice BPI each week for the Raw
Materials delivered to and accepted by BPI during the immediately preceding
week.  BPI shall pay each invoice within
7 days after receipt of the applicable invoice.

 

(a)           If
at any time during the term of this Agreement, BPI purchases, or offers to
purchase, from a third party a product substantially similar to the Raw
Materials provided under this Agreement at a price and on terms that are more
favorable than the price and terms of this Agreement, then BPI shall notify NBP
in writing and NBP shall have the option to adjust the Purchase Price and the
associated terms of this Agreement to be as favorable as what is offered to the
third party.  Notwithstanding the
foregoing, BPI shall have no obligations under this section unless such third
party purchases the products on a contract basis in quantities greater than 40
loads per week.

 

(b)           If
at any time during the term of this Agreement NBP purchases Finished Products
from BPI, the price, terms and conditions for the purchase of such Finished
Products shall be at least as favorable as the price, terms and conditions any
other Raw Material supplier to BPI is able to purchase Finished Products from
BPI.

 

4.             Shipments.  NBP shall ship all the Raw Materials as soon
as practicable following production of the Raw Materials and in accordance with
the customary past practice of the Parties. 
Shipments will be FOB the applicable Location with title passing upon
BPI’s acceptance (provided such acceptance is accomplished promptly after
delivery) of the applicable Raw Materials at BPI’s facility.  NBP shall ensure that all of the Raw
Materials are suitably packed and marked in accordance with the requirements of
common carriers and the Raw Materials Specifications (defined below).  All shipments are to be inspected by NBP
prior to shipment to BPI to provide reasonable assurances that such Raw
Materials comply with the Raw Material Specifications.  BPI shall inspect such Raw Materials upon
receipt, shall notify NBP if BPI does not accept the Raw Materials, and shall
consult with NBP regarding the disposition of such Raw Materials.  Such inspection by BPI shall not waive BPI’s
right to later reject such Raw Materials or pursue damages against NBP for Raw
Materials that do not comply with NBP’s warranties in Section 11.

 

5.             Specifications.  NBP represents and warrants that the Raw
Materials shall comply with the specifications attached hereto as Exhibit B
(the “Raw Material Specifications”), as amended from time to time based upon
the mutual agreement of the parties.  If
NBP fails to comply with the Raw Materials Specifications, BPI shall notify NBP
within 15 days of receipt of the Raw Materials. 
After receiving such notice, if NBP fails to cure according to the terms
of this Agreement than BPI, in addition to its other rights and remedies under
the law, may also reduce the Purchase Price for the applicable Raw Materials
accordingly by an equitable amount.

 

6.             Recoverable
Costs.  A separate packaging and collection charge
for the Raw Materials at the inception of this Agreement shall be *** per pound — cardboard/pallet or ***
per pound — BPI plastic vat, respectively. 
This charge shall be reviewed annually and adjusted as

 

2

 

necessary
(either up or down), with the goal to ensure that it closely approximates NBP’s
actual “Recoverable Costs,” as identified below. Recoverable Costs shall
include the actual labor costs, including fringe benefits as defined below, for
production workers involved with collection of the Raw Materials and other
recoverable costs associated with the collection and packaging of the Raw
Materials (as may be agreed upon by the parties) that NBP incurs specifically
for the purpose of collecting and/or packaging the Raw Materials.  In addition to labor costs, these costs may
include equipment installation and other similar costs to be borne by NBP.  Before inclusion as a Recoverable Cost, the
parties will review and determine efficacy and, if installed, proper
amortization schedule for inclusion in Recoverable Costs.  Where actual costs are not reasonably
available, NBP may use standard or estimated costs, subject to adjustment to
actual costs at the end of each fiscal year. 
NBP agrees that expenses charged to BPI shall be reasonable in kind and
amount.

 

The number of full-time employees
utilized by NBP to produce the Raw Materials will vary by Location.  The parties shall review the headcount and
productivity for each Location on at least a quarterly basis.

 

Fringe benefits include, without
limitation, company paid employment taxes, company paid health, life and
disability insurance, workers compensation costs, vacation days, paid holidays,
deferred compensation benefit/bonus contributions and other similar fringe
benefits mutually agreed to, and consistent with fringe benefits of similar
employees of NBP.  For the convenience of
the parties, the recovery for fringe benefits will be expressed as a percentage
of the direct labor costs.  NBP may vary
the percentage figure used on a monthly basis as may be required from time to
time to obtain full recovery.  The dollar
amount of the recovery of fringe benefits shall be determined by multiplying the
labor cost of the hourly workers employed in the collection of Raw Materials by
a fraction, the numerator of which is the total fringe benefit costs for NBP’s
applicable Location  and the
denominator of which is the total direct labor cost for the applicable
Location.  In the event of a significant
unexpected increase in benefit costs, the parties will engage in good faith
re-negotiation to ensure the aims and purposes of this Agreement are being met.

 

Notwithstanding the provisions of this Section 6,
in no event will the employees of NBP be deemed to be employees of BPI for any
purpose.

 

7.             Ownership
and Use of the Equipment.  BPI has, or from time to time during the term
of this Agreement may with NBP’s approval, install certain equipment at one or
more of the Locations in order to facilitate the production of the Raw
Materials by NBP and delivery of the Raw Materials to BPI (the “Equipment”).  NBP may use the Equipment for that purpose
without any royalties or fees owed to BPI, but agrees to maintain the Equipment
in working condition at NBP’s expense. 
Title and risk of loss of the Equipment shall at all times remain with
BPI.  Upon the termination of this
Agreement, BPI shall remove the Equipment from any and all Locations at BPI’s
expense within 90 days after the effective date of such termination, or such
longer period of time as reasonably necessary to remove the Equipment.  After the termination of this Agreement, NBP
shall continue to have the right to use the Equipment without owing any
royalties or fees to BPI (except that it shall pay for any maintenance or
repair costs NBP incurs) until the Equipment is removed by BPI.  NBP shall not charge any warehousing or other
storage fees for the Equipment during the term or thereafter.

 

8.             Noncompetition,
Nonsolicitation, Noninterference.  NBP shall not during the term of this Agreement
and for 18 months thereafter (the “Restrictive Period”), (i) sell or
distribute Raw Materials to any party that sells products that are competitive
with BPI® Boneless Lean Beef Trimmings or (ii) produce or manufacture any
product that is competitive with BPI® Boneless Lean Beef Trimmings for the
purpose of selling such product to a third party or

 

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utilizing such product in NBP’s own
products.  During the Restrictive Period, neither party
shall hire, attempt to hire or contact or solicit with respect to hiring any
employee of the other party without the other party’s prior consent.

 

The Parties acknowledges that the
covenants and restrictions contained in this Section 8 are necessary,
fundamental and required for the protection of each party and the goodwill of
each Party; and relate to matters which are of a special, unique and
extraordinary character that gives each of the covenants and restrictions a
special, unique and extraordinary value. The Parties also acknowledge that a
breach of any covenant or restriction contained in this Agreement will result
in irreparable harm and damage to the other Party.  Accordingly, each Party expressly agrees
that, in the event of a breach or threat of a breach of any provision of this Section 8
by the other Party, their remedies at law will be inadequate, and in each such
event, they will be entitled to an injunction or other similar relief to
prevent any breach of this Section 8 and to enforce specifically the
provisions of this Section 8, in addition to money damages sustained
resulting from the breach or threatened breach of this Section 8, and in
addition to any other remedy to which they may be entitled at law or in
equity.  If either BPI or NBP institutes
legal action to enforce the provisions of this Section 8, in addition to
any and all other rights or remedies which the prevailing party may obtain, in
any such litigation, the prevailing party shall also be entitled to recover
from the other party its reasonable attorneys’ fees and out-of-pocket expenses
incurred in such litigation.

 

9.             Inspection.  BPI may (but is not obligated to) inspect the
equipment, factories and other facilities of NBP in order to ensure compliance
with the terms and conditions of this Agreement at commercially reasonable
times during the term of this Agreement and upon 5 days’ notice to NBP,
provided however, that such inspection shall not unreasonably interfere with
NBPs business and shall occur only during normal business hours.

 

10.           NBP’s
Warranties.  NBP warrants that: (a) it has full power
and authority to enter into this Agreement and to perform its obligations
hereunder and that its performance of this Agreement will not violate any
agreement between NBP and any other third person; (b) the Raw Materials
will meet or exceed the Raw Material Specifications in effect as of the date
the Raw Materials are shipped to BPI and shall comply with the provisions of
NBP’s standard food guaranty which shall be provided to BPI contemporaneously
with the execution of this Agreement; and (c) the Raw Materials will be
free and clear of all liens and encumbrances. 
NBP MAKES NO OTHER WARRANTY, EXPRESS OR IMPLIED, INCLUDING, WITHOUT
LIMITATION, THE WARRANTIES OF MERCHANTABILITY OR FITNESS OF THE PRODUCTS FOR
ANY PARTICULAR PURPOSES EVEN IF SUCH PURPOSES ARE KNOWN TO NBP.

 

11.           Term.  This primary term of this Agreement is for a
10 year period commencing upon the execution of this Agreement; provided,
however, that this Agreement will automatically renew for successive 1 year
periods after such primary term unless either party notifies the other, no
later than 6 months prior to any renewal date, that it desires to terminate
this Agreement as of such date.  This
Agreement may be terminated earlier (a) by written agreement of the
parties; or (b) by either party if the other party materially breaches in
any manner and does not cure such breach within 60 days after it receives
notification thereof from the non-breaching party.

 

12.           Compliance
with Laws.  Each party agrees that it will neither
undertake nor cause to be undertaken in its performance under this Agreement,
any action or omission that is illegal under the laws of the USA or the laws of
any other applicable governmental authority. Each party shall comply with any
requirements for the translation, registration or the submission or recording
of this Agreement with applicable governmental entities after providing notice
of the same to BPI.  Each party agrees
that it will not, directly or indirectly, offer, pay, promise to pay

 

4

 

or
authorize the payment of any money or thing of value to any official, party or
candidate, or to any person, while knowing or having reason to know that all or
a portion of such money or thing of value will be offered, given or promised,
directly or indirectly, to an official party or candidate, for the purpose of: (a) influencing
any act or decision of such official, party or candidate, including a decision
to fail to perform his official functions; or (b) inducing such official,
party or candidate, to use his influence with the government or instrumentality
thereof to affect or influence any act or decision of such government or
instrumentality, in order to assist BPI in obtaining or retaining business for
or with, or directing business to, any person.

 

13.           Remedies.  The Parties hereto acknowledge that
compliance with this Agreement is necessary to protect their respective
businesses and a breach of this Agreement will irreparably and continually
damage the other Party for which money damages may not be adequate.  In addition, the Parties agree that, in the
event of a breach or threatened breach to this Agreement, the non-breaching
party shall be entitled to (a) an injunction to prevent the continuation
of such harm, (b) money damages insofar as they can be determined and (c) reasonable
attorneys’ fees and costs.  Nothing in
this Agreement, however, shall be construed to prohibit the non-breaching party
from also pursuing any other remedy, the parties having agreed that all
remedies shall be cumulative.

 

14.           Confidentiality.  During the term of this Agreement, each party
(the “Disclosing Party”) may provide the other (the “Receiving Party”) with
certain confidential and proprietary information (“Confidential Information”).  Confidential Information includes, but is not
limited to, all business, financial and technical trade secrets, current or
future products, production and marketing plans and volume, equipment
(including equipment designed by other companies affiliated with BPI),
processes and facilities of the parties, any written information which is
marked “Confidential” and any information which is orally disclosed, identified
as confidential at the time of disclosure and confirmed in writing as being
confidential within 30 days thereafter. 
However, “Confidential Information” will not include (i) the
existence, terms or conditions of this Agreement to the extent such information
must be disclosed pursuant to law, rule or regulation (including
regulations and rules promulgated by the Securities and Exchange
Commission, New York Stock Exchange or other applicable self-regulatory
organization) or (ii) information that (a) is publicly known at the
time of its disclosure; (b) is lawfully received by the Receiving Party
from a third party not under an obligation of confidentiality to the Disclosing
Party; (c) is published or otherwise made known to the public by the
Disclosing Party; or (d) was generated independently by the Receiving
Party before disclosure by the Disclosing Party.  The Receiving Party will refrain from using
the Disclosing Party’s Confidential Information except to the extent necessary
to exercise its rights or perform its obligations under this Agreement.  The Receiving Party will likewise restrict
its disclosure of the Disclosing Party’s Confidential Information to those who
have an absolute need to know such Confidential Information in order for the
Receiving Party to perform its obligations and enjoy its rights under this
Agreement.  Such persons will be informed
of and will agree to the provisions of this Section 15, and the Receiving
Party will remain responsible for any unauthorized use or disclosure of the
Confidential Information by any of them. 
The Receiving Party may also disclose Confidential Information pursuant
to the requirement or request of a governmental agency, a court or
administrative subpoena or an order or other legal process or requirement of
law so long as it shall (x) first notify the Disclosing Party of such
request or requirement; (y) in the case of a required disclosure, furnish
only such portion of the Confidential Information as it is advised counsel that
it is legally required to disclose; and (z) cooperate with the Disclosing
Party in its efforts to obtain an order or other reliable assurance that
confidential treatment will be accorded to that portion of the Confidential
Information that is required to be disclosed.  Upon the termination of this Agreement for any
reason, each party will return (or, if requested, destroy) the Confidential
Information (including any and all copies and derivatives thereof) of the other
party provided pursuant to this Agreement. 
Upon a party’s written request, an authorized officer of the other

 

5

 

party
will certify in writing that this Section 15 has been complied with by
such other party.

 

15.           Insurance.  BPI shall maintain liability and other
insurance appropriate for its business, including comprehensive general
liability and product liability insurance with minimum limits of $5 million per
occurrence, an aggregate of $10 million (with the other party reserving the
right to request reasonable increases in such limits upon 90 days’ prior
notice).  All such insurance is to be
purchased from reputable, duly qualified insurance companies (at least A-
rated), and such insurance is to be maintained during the term of this
Agreement and for a minimum of 12 months thereafter.  BPI agrees to (a) furnish the other
party with certificates of insurance properly executed by such party’s
insurance company evidencing such insurance; (b) include the other party
as an additional insured; and (c) give the other party at least 30 days’
prior notice of any cancellation or material alteration of such insurance
coverage.

 

16.           Indemnification.  Each party (the “Indemnifying Party”) agrees
to indemnify and hold the other party (the “Indemnified Party”) harmless from
and against any and all damages, claims, losses and reasonable costs and
expenses (including reasonable attorneys’ fees) incurred by the Indemnified
Party as a result of any claim, action, recall, suit, proceeding or
investigation filed or threatened by the government, customer or any other
third party (collectively, a “Claim”) to the extent such a Claim arises out of
the breach of any of the representations, warranties or obligations made or
assumed by the Indemnifying Party pursuant to this Agreement.  This indemnification provision shall survive
for the applicable statute of limitations period for the applicable claim.  The Indemnified Party shall notify the
Indemnifying Party immediately of any claim for which it believes may be
entitled to indemnification hereunder.

 

17.           Independent
Contractors.  BPI and NBP are independent contractors, and
neither of the parties is the legal representative or agent of the other party
for any purpose whatsoever, and neither of the parties has any right or
authority to assume or create any obligation express or implied on behalf of
the other party or to bind it in any respect whatever.  Nothing in this Agreement shall be deemed to
create a partnership relationship between BPI and NBP to make either of the
parties jointly liable with the others for any obligation arising out of the
activities contemplated by this Agreement. 
BPI and NBP will each be solely responsible for the direction and
control of the work of its own employees, and each will assume complete
responsibility for the personal safety of its respective employees.

 

18.           No
Third Party Beneficiaries.  Nothing in this Agreement is intended, or
shall be construed, to give any person other than the parties hereto any legal
or equitable right, remedy or claim under or in respect of this Agreement or
any of the provisions contained herein.

 

19.           Assignment.  This Agreement may not be assigned or
transferred by either Party by operation of law, a change of control event
(e.g., a merger, acquisition, reorganization, sale of substantially all the
assets or stock of NBP or any similar event) or otherwise without the express
written consent of the other Party, which consent shall not be unreasonably
withheld.  Any purported assignment in
violation of the preceding sentence shall be void and of no effect.  This Agreement shall be binding upon the
parties’ respective successors and permitted assigns.  Notwithstanding the foregoing, either Party
may transfer this Agreement to any subsidiary and affiliate provided that the
assigning party remains liable for all of its obligations under this Agreement.

 

20.           Change
in the Locations.  During the term of this Agreement, NBP shall
make a good faith effort as part of the sale of any of its Locations, to
encourage the new owner of the applicable Location to enter into a new
agreement with BPI under similar terms and conditions

 

6

 

as
this Agreement.  Provided however,
nothing herein shall obligate NBP to expend any money, or make any representation,
or covenant obligation to such new owner.

 

21.           Right
of First Offer.  In the event that NBP acquires, builds,
purchases or otherwise operates a new beef processing operation (an “Additional
Location”), it shall promptly notify BPI of the Additional Location and offer
BPI a right of first offer to add such Additional Location as a “Location”
under the terms and conditions of this Agreement.  BPI shall have 3 months from the date of
receiving notice of such offer from NBP, to accept such offer.

 

22.           Construction.  “Including” means “including without
limitation” and does not limit the preceding words or terms.  The words “or” and “nor” are inclusive and
include “and”.  Whenever the context
shall require, each term stated in either the singular or plural shall include
the singular and the plural, and masculine or neuter pronouns shall include the
masculine, the feminine and the neuter. 
All references to dollar amounts shall be in United States dollars.  References to “Sections” or “Exhibits” shall
mean the Sections of this Agreement or Exhibits attached to this Agreement,
unless otherwise expressly indicated. 
The headings or titles preceding the text of the Sections are inserted
solely for convenience of reference, and shall not constitute a part of this
Agreement, nor shall they affect the meaning, construction or effect of this
Agreement.  Both parties have
participated in the negotiation and drafting of this Agreement.  This Agreement shall not be supplemented or
modified by any course of dealing or trade usage.

 

23.           Notices.  Except as otherwise provided in this
Agreement, any notice, consent or other communication required or permitted
hereunder shall be shall be deemed given when (a) delivered personally; (b) sent
by confirmed facsimile transmission; or (c) sent by commercial courier
with written verification of receipt returned to the sender.  Rejection or other refusal to accept or the
inability to deliver because of changed address of which no notice was given
shall be deemed to constitute receipt of the notice or communication sent.  Names, addresses and facsimile numbers for
notices (unless and until written notice of other names, addresses and
facsimile numbers are provided by either or both parties) are as follows:

 

	
  If
  to NBP, to:

  	
  National Beef Packing
  Company, LLC

  Attn: General Counsel

  12200 Ambassador Drive

  Suite 500

  Kansas City, MO

  Facsimile (816) 713-8889

  
	
   

  	
   

  
	
  If
  to BPI, to:

  	
  Beef Products, Inc.

  Attn: General Counsel

  891 Two Rivers Drive

  Dakota Dunes, South Dakota
  57049

  Facsimile: (605) 217-8001

  

 

24.           Choice
of Law and Venue.  This Agreement shall be governed by and
construed under the laws the State of Nebraska, without regards to conflicts of
law principles.  Each party expressly
consents to the exclusive jurisdiction of the federal, state and local courts
serving Douglas County, Nebraska, to govern all disputes arising out of this
Agreement.

 

25.           Force
Majeure. 
Neither Party shall be
deemed to have defaulted or failed to perform under this Agreement if that
Party’s ability to perform or default shall have been caused by an event or
events beyond the control and without the fault of that Party, including fire,
flood, explosion, act of God or a public enemy, strike, labor dispute, civil
riot, the inability to procure

 

7

 

necessary
raw materials, supplies, or equipment for the production, storage and/or
delivery of the Raw Materials, or if the ability of NBP to produce the Raw
Materials is impacted by any of the foregoing (“Force Majeure Event”). Upon the
occurrence of the Force Majeure Event, the Party claiming the Force Majeure
Event shall notify the other Party in writing within ten (10) days of such
event and, to the extent possible, inform the other Party of the expected
duration of the Force Majeure Event and the quantity of Raw Materials to be
affected by the suspension or curtailment of this Agreement.  Notwithstanding this provision, nothing
contained in this Agreement shall relieve the purchaser of the Raw Materials of
the obligation to pay in full the purchase price for any amounts due for the
Raw Materials delivered and received hereunder. 
NBP shall not be obligated to make up delivery of the Products that have
been prevented by a Force Majeure Event.

 

26.           Severability.  If any term or provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law or
public policy, all other terms and provisions of this Agreement shall
nevertheless remain in full force and effect without regard to the invalid,
illegal or unenforceable term or provision. 
If the courts of any one or more jurisdictions shall hold all or any
part of such term or provision wholly unenforceable by reason of the breadth of
such scope or otherwise, it is the intention of the parties that such determination
shall not bar or in any way affect either party’s right to relief in the court
of any other jurisdiction as to failures to observe such term or provision in
such other jurisdictions, the above provisions as they relate to each
jurisdiction, being, for this purpose, severable into diverse and independent
provisions.

 

27.           Waiver.  No right of either party under this
Agreement, may be waived except as expressly set forth in a writing signed by
an authorized representative of the party waiving such right.  No waiver of any provision shall be implied
by a party’s failure to enforce any of its rights or remedies herein provided,
and no express waiver shall affect any provision other than that to which the
waiver is applicable and only for that occurrence.

 

28.           Entire
Agreement.  This Agreement, including all of the Exhibits
attached hereto (all of which are incorporated herein by this reference),
contains the entire agreement of the parties with respect to the subject matter
hereof and will supersede and replace any and all other prior or
contemporaneous agreements and understandings between the parties, whether
written or oral, regarding the subject matter hereof.  Any modifications, revisions or amendments to
this Agreement must be set forth in a writing signed by authorized
representatives of both parties.

 

29.           Survival.  Provisions of this Agreement which are either
expressed to survive its termination or, from their nature or context it is
contemplated that they are to survive such termination, shall remain in full
force and effect notwithstanding such termination.

 

8

 

IN WITNESS WHEREOF, the parties hereto
have executed this Agreement as of the date indicated below.

 

	
  National Beef Packing
  Company , LLC

  	
  Beef Products, Inc.

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Date:

  	
   

  	
   

  	
  Date:

  	
   

  

 

9

 

CONFIDENTIAL MATERIAL APPEARING IN THIS DOCUMENT HAS BEEN OMITTED AND
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION IN ACCORDANCE WITH
RULE 406 PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.  OMITTED INFORMATION HAS BEEN REPLACED WITH
ASTERISKS.

 

Exhibit A

 

Raw Materials Price Calculation

 

The “Purchase Price” shall be determined in
accordance with the following formula:

 

***

 

These calculations will derive a Raw Materials
Price based upon predicted rendered Meat Product yields from the Product.  With inputs of analyses and rendered product
prices, a gross value is calculated. 
From this is subtracted an incremental costs of drying the meal (one
pound of water evaporated per pound of meal product).

 

In addition, a premium will be paid based upon
the Lean Based Premium Schedule which is attached hereto as Schedule 1 and
incorporated herein by this reference, as adjusted, based on volume (pounds per
head)

 

***

 

In addition, a negotiated Packaging and
Collection charge will be paid based on NBP’s Recoverable Costs as defined in
the Agreement.

 

This Raw Materials Price Calculation may be
modified from time to time by the written consent of both parties.  In addition, certain components like the
tallow freight adjustment, energy cost credit, and lean based premium schedule
will be reviewed on a semi-annual basis. 
Recoverable Costs will be reviewed at least annually.

 

10

 

Exhibit B

 

RAW
MATERIAL SPECIFICATIONS

 

January 25, 2007

 

Only
raw materials supplied from USDA/FSIS inspected beef slaughter and processing
facilities or facilities operating under an equivalent inspection program may
be used in the production of BPI products. 
Raw material suppliers are required to have written HACCP plans, SSOPs,
or other prerequisite programs necessary to ensure raw materials supplied to
BPI meet all applicable food safety regulatory requirements and other criteria,
including but not limited to the specifications below.  HACCP plans, SSOPs, and other programs must
be available for BPI review upon request.  BPI may also request to visit
supplying facilities to review these records along with a review of the
operations.  In addition, suppliers must
have a documented, functioning food defense program.

 

HACCP
plans must contain at least one, but preferably more, critical control points
(CCPs), validated to eliminate or to reduce E.coli O157:H7
below detectable levels.  Raw material
suppliers are required to update BPI upon implementation of additional CCPs or
other material changes to their HACCP plans. 
Continued use of CCPs identified by raw material suppliers will comply
with these specifications will be confirmed annually.

 

If
raw material supplier is a processing establishment that utilizes outside carcasses
or raw materials, supplier must confirm that its raw material suppliers have
HACCP plans, SSOPs, or other prerequisite programs in place consistent with the
requirements above.  Raw material
suppliers will maintain records of purchase source or slaughter plant to allow
trace back of raw materials in the event of a recall.

 

BPI
will not currently require raw material suppliers to sample product and test
for the presence of E.coli 0157:H7
other than as noted below, assuming the following criteria are met.  If these criteria are not met, BPI reserves
the right to require sampling/testing of all raw materials sold to BPI and also
reserves the right to conduct its own sampling/testing of all incoming raw
materials.  Those criteria are:

1.               Existence of one or more
validated CCPs in use by supplier;

2.               Raw material supplies
consistently meet the performance specifications below;

3.               Raw material supplier
participates in quarterly verification sampling/testing with BPI; and

4.               BPI continues finished
product sampling/testing program and holds product pending negative test result
for E.coli O157:H7.

 

With
the exception of E.coli O157:H7, which is an
adulterant and must not be present in any raw materials supplied to BPI, the
following specifications will be reviewed and reports may be provided to raw
material suppliers for trending purposes only. 
BPI may choose certain safeguards when supplier’s trends are out of
specification, such as accelerated sampling, product segregation, process using
additional interventions, implementation of alternate pricing for supplier raw
materials, or others.

 

	
  ·

  	
  Total
  plate count

  	
  <
  100,000 cfu/gram

  
	
  ·

  	
  E.coli

  	
  <
  100 cfu/gram

  

 

11

 

	
  ·

  	
  Coliform

  	
  <
  100 cfu/gram

  
	
  ·

  	
  Staphylococcus
  aureus

  	
  <
  100 cfu/gram

  
	
  ·

  	
  Listeria
  monocytogenes

  	
  Negative

  
	
  ·

  	
  Salmonella

  	
  Negative

  
	
  ·

  	
  E.coli O157:H7

  	
  Negative

  

 

On
a quarterly basis, on dates established by BPI, a lot of five randomly chosen
combos will be sampled/tested for the presence of E.coli
O157:H7 using sampling and testing methods established by BPI.  The purpose of this quarterly sampling/testing
is to verify the continued effectiveness of the CCPs employed by raw material
supplier.  If a verification sample is
found to be positive the lot tested will be destroyed and the originating
supplier will be immediately contacted to conduct a review of policies and
programs.  BPI may request a documented
response of the findings of this review.

 

Acceptable
Products

 

All
raw materials shall be free from defects as identified in the “Boneless Beef
AQL” criteria established under subpart 18-b of the USDA-MPI Manual.  All raw materials must have a minimum
chemical lean of 23.25%.  The product
should be free of: all specified risk material as defined in 9 CFR 310.22 or
Annex XI, Section A, to Regulation (EC) No. 999/2001, contamination
(including ingesta, grease, rail dust, etc.), and foreign objects.

 

All raw materials must meet the follow general
requirements:

 

	
  1.

  	
  Be
  produced from only young, fed cattle in compliance with Title 21 CFR,
  Part 589.2000 addressing feeding bans as measures to control BSE. No raw
  materials from cows, bulls, or other classifications of raw materials unless
  supplier is participating in a BPI pre-approved segregation program, in which
  combos and load manifest are to be clearly identified.

  
	
  2.

  	
  SRM
  materials identified in 9 CFR 310.22 are not allowed in any product destined
  for BPI and must be disposed of in accordance with 9 CFR 314.1 or 314.3.

  
	
  3.

  	
  No
  fresh raw materials will be delivered to BPI’s facility more than 5 days from
  their cut date, nor more than 10 days from date of slaughter without advance
  approval of BPI Quality Assurance department.

  
	
  4.

  	
  Without
  advance approval, the facility may not use chemical sprays, including
  hyperchlorinated water, organic acids (unless part of an approved BPI quality
  control program), or alginate coatings, in any of its processes.

  
	
  5.

  	
  The
  establishment must have an active “Downer” policy that prohibits the
  fabrication of downer carcasses. A downer carcass includes any animal that is
  unable to enter or exit a trailer/truck under its own power (subject to
  USDA-FSIS guidelines as outlined in 69 Federal Register 1862, et seq).

  
	
  6.

  	
  The
  establishment must demonstrate GMP, Food safety, and humane handling
  practices consistent with industry standards. If requested, the establishment
  will provide BPI with a review of recently conducted third party audits.

  
	
  7.

  	
  Each
  raw material combo may contain product from only one (1) production or
  cut date. Partial combos will not be carried over to the next production date
  to be filled out with additional production.

  
	
  8.

  	
  Suppliers
  must have a documented pest control program.

  

 

12

 

	
  9.

  	
  Suppliers
  must comply with APHIS rev. January 2002 and USDA safeguards measures
  against Foot and Mouth Disease.

  
	
  10.

  	
  Raw
  materials must be free of illegal residues such as antibiotics, hormones and
  agricultural chemicals as set forth in 1997 by USDA and APHIS.

  
	
  11.

  	
  Free
  of foreign materials as defined by FSIS Directive 7310.5.

  

 

Fresh
Raw Material Acceptable carcass portions:

 

	
  1.

  	
  Flank
  fat — fat from the flank area of the carcass with traces of lean;

  
	
  2.

  	
  Bottom
  butt fat — kernel of tri-tip with traces of lean;

  
	
  3.

  	
  Chuck
  fat — fat associated with the break down of the chuck;

  
	
  4.

  	
  Loin
  wing cap — fat portion with traces of lean;

  
	
  5.

  	
  Rib
  cap — fat portion with traces of lean;

  
	
  6.

  	
  Any
  small pieces of fat derived from the normal breakdown of the beef carcass.

  

 

Fresh
Raw Material Non-acceptable carcass portions:

 

	
  1.

  	
  Bones
  of any kind;

  
	
  2.

  	
  Cartilage
  (unless specifically approved);

  
	
  3.

  	
  Tunic
  tissue (unless specifically approved);

  
	
  4.

  	
  Kidney
  knob fat (unless specifically approved);

  
	
  5.

  	
  Material
  from bone cannons, mechanically deboned meat, or materials from advanced meat
  recovery systems;

  
	
  6.

  	
  Spinal
  cords, any central nervous system materials, dorsal root ganglia, or other
  specified risk materials identified by USDA in 9 CFR 310.22(1);

  
	
  7.

  	
  Catch
  pan materials;

  
	
  8.

  	
  Foreign
  objects, hair, ingesta, bruises, or abscesses;

  
	
  9.

  	
  Mammary
  tissue.

  
	
   

  	
   

  
	
   

  	
  Mammary
  tissue is any brownish or off-colored covering on the flank fat from heifer
  carcasses.  This substance must be
  trimmed out of the product, to leave only incidental traces behind.  The trimming should be taken to the depth
  that the mammary tissue appears freckled among the fat.  “Incidental” means any mass smaller than a
  dime.  Combos
  containing mammary tissue by this definition will be rejected.

  
	
   

  	
   

  
	
  BPI will notify the originating
  supplier upon identification of a non-compliance.  BPI may request reasonable appropriate
  corrective actions and preventive measures addressing these non-compliances.

  

 

Packaging

 

Fresh raw materials are to be packed into a
40x48x54-inch or taller combo lined with a poly liner.  Poly liners should be securely attached to
the combos with filament tape to prevent the 

 

(1) Supplier shall continue efforts to
put in place product flows and segregation plans to ensure that specified risk
materials do not become commingled with raw materials provided to BPI at any
stage of the production process.

 

13

 

liner from slipping during the filling
process.  Combos should be placed on good
quality 40x48-inch pallets and should not have top or bottom boards missing or
broken.  Board nails should not be
exposed in order to limit the possibility of puncture through the combo and
liner, or from falling into product during dumping of the combo.

 

When
applicable, trimmings are to be packed into a plastic BPI combo lined with a
poly liner.  Poly liners should be
securely attached to the combos with filament tape to prevent the liner from
slipping during the filling process.  The
plastic BPI combo should be in sound shape, being free from any cracks or
chips.  The plastic BPI combos should be
washed and sanitized before filling with product.

 

Combos are to have a combo
cap securely attached and covering the entire top of the combo as to prevent
possible contamination during transport.

 

Combo
liners are to be 4 mil. thick or greater, or exhibit comparable tear
strength.  The combo liners will
preferably be blue, but may be of such other color sufficiently distinct from
the color of the raw material to allow liner to be easily identifiable from the
raw materials.

 

Combos
should be filled to a target weight of 2,200-lbs gross weight when
possible.  Once filled, the combo should
be covered with a poly cap that is securely attached to the sides of the
combo.  Any combos that are torn,
punctured, or leaning should be reworked. 
GROSS trailer weight should not fall
below 44,000 lbs, with a NET weight of
approximately 40,000 lbs.

 

Labeling

 

Combos should be properly labeled with the
following information:

	
  ·

  	
  Product
  label, labeled appropriately as trimmings according to contents as approved
  by USDA;

  
	
  ·

  	
  Gross
  weight — includes tare and net weight; a separate gross weight will be listed
  to include dry ice tare;

  
	
  ·

  	
  Tare
  weight, including pallet, combo, liner, and cover weights (not including dry
  ice)

  
	
  ·

  	
  Tare
  weight of dry ice, listed separately (if applicable)

  
	
  ·

  	
  Net
  weight — weight of the product only;

  
	
  ·

  	
  Date
  of production;

  
	
  ·

  	
  Combo
  sequence number per shift and shift ID

  
	
  ·

  	
  Manifest
  number;

  
	
  ·

  	
  When
  using BPI plastic combos, labels are to be attached to the liner of the
  combo, not the plastic combo

  
	
  ·

  	
  When
  applicable, BEV compliant product should be appropriately labeled and be
  accompanied by necessary supporting documentation.

  
	
  ·

  	
  When
  applicable materials must be labeled as domestic only product in compliance
  with USDA AMS programs.

  

 

Trailer Loading

 

14

 

Combos should be placed in the trailer in a
manner so that the face of the combo is toward the rear of the trailer.  In the event that a combo is staged by itself
in a row, support should be placed beside it to prevent the combo from tipping
or falling during transit.

 

A
load manifest should be attached to the Bill of Lading, and given to the
driver.  Another copy of the manifest
should be attached in a packing slot at the rear of the trailer.  The load manifest should include the
following information:

	
  ·

  	
  Sales
  order number and purchase order number;

  
	
  ·

  	
  Trailer
  number and carrier;

  
	
  ·

  	
  Product
  code of each combo;

  
	
  ·

  	
  Production
  date of each combo;

  
	
  ·

  	
  Combo
  number of each combo

  
	
  ·

  	
  Manifest
  number of each combo;

  
	
  ·

  	
  Gross
  weight of each combo;

  
	
  ·

  	
  Net
  weight of each combo;

  
	
  ·

  	
  Tare
  weight of each combo.

  

 

The
refer unit should be set at a temperature of 20° F during summer months, and 28°
F during the winter months for fresh raw materials.  All changes to these set points will be
coordinated through the BPI Traffic Coordinator or designee.

 

Dry Ice & Receiving
Temperatures

 

Dry
ice should be added either manually or automatically to fresh raw materials so
that approximately 50 lbs of CO2 is
incorporated into each combo at a minimum of three (3) proportional
locations (eg 500, 1000, 1500 lb increments). 
The amount and tare of dry ice may vary depending on the type of CO2 used and time of year. Receiving temperatures
at the processing facilities for fresh raw materials shall not exceed 45 ° F.

 

15

 

Exhibit C

 

RAW
MATERIAL VOLUMES AND LEAN UPGRADE MATRIX

 

The parties are targeting an
overall average raw material supply from the National facilities of at least 80
lb/head.  That average will vary over
time depending upon a number of factors, including carcass weights, carcass
grades, supplier product mix, and other characteristics.  In addition, those factors are often
influenced by market and other considerations as well.  Still, based upon experience of each at the
facilities listed below, the parties have established the following target and
minimum quantities for each facility.

 

	
  Location

  	
   

  	
  Minimum

  	
   

  	
  Target

  	
   

  
	
  Brawley, CA

  	
   

  	
  35

  	
   

  	
  **

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Dodge City, KS

  	
   

  	
  60

  	
   

  	
  80+

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Liberal, KS

  	
   

  	
  60

  	
   

  	
  80+

  	
   

  

 

At the outset of this Agreement,
no Target has been established for the Brawley, CA facility.  The parties shall review periodically to
determine whether establishment of any target above the Minimum is appropriate
for this facility.

 

16

 

CONFIDENTIAL
MATERIAL APPEARING IN THIS DOCUMENT HAS BEEN OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION IN ACCORDANCE WITH RULE 406 PROMULGATED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED. 
OMITTED INFORMATION HAS BEEN REPLACED WITH ASTERISKS.

 

SCHEDULE
1

 

LEAN
BASED PREMIUM SCHEDULE

 

***

 

17

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