Exhibit 20.1

U.S. Premium Beef, LLC

December 5, 2011

Dear Member:

You are invited to attend a special meeting of members of U.S. Premium Beef, LLC (“USPB” or the “Company”) to be held at the Hilton-Kansas City Airport, 8801 NW 112th Street, Kansas City, Missouri, on Thursday, December 29, 2011, at 4:00 p.m. local time.  At the special meeting you will be asked to consider and vote on a proposal to authorize USPB to sell a substantial portion of USPB’s membership interest in National Beef Packing Company, LLC (“NBP”) to Leucadia National Corporation, a New York corporation (“LUK”).

On December 5, 2011, NBP and its members, including USPB, entered into a Membership Interest Purchase Agreement with LUK (referred to as the “purchase agreement”), pursuant to which LUK will purchase from USPB and NBPCo Holdings LLC (“NBPCo”) a substantial portion of the issued and outstanding membership interests in NBP.  (USPB and NBPCo are each referred to as a “Seller” and are jointly referred to as the “Sellers” in the attached proxy statement.)  The purchase price to be paid to each of the Sellers is based upon an aggregate value of $1.15 billion for all of the issued and outstanding membership interests of NBP.  USPB’s current ownership interest in NBP is comprised of NBP Class A-1 units and NBP Class B units; when all of the NBP Class A-1 units are converted to NBP Class B units, USPB’s ownership interest in NBP represents approximately 70.7% of the total ownership.  (NBP ownership on such “as converted” basis is referred to in the attached proxy statement as “fully-diluted ownership.”)  The proposed transaction values USPB’s fully-diluted ownership in NBP at approximately $812.5 million.  If the proposed transaction is completed, USPB will sell approximately 79.6% of its ownership (representing 56.2% of the total) to LUK for a cash purchase price of approximately $646.8 million.  Following completion of the sale to LUK and the other transactions contemplated by the purchase agreement, USPB will retain approximately 15.1% of the ownership of NBP.

If the transaction closes, the Company will receive consideration of approximately $646.8 million; of that amount approximately $609.8 million will be immediately paid to USPB in cash.  The remaining amount of approximately $37.0 million will be deposited in an escrow account to satisfy potential indemnification claims from LUK under the purchase agreement.  If no indemnification claims arise during a period of two years after the closing of the proposed transaction, those remaining funds (or any portion remaining after payment of any indemnification claims) will be distributed to USPB.  USPB estimates that, within 30 days after the closing, it will distribute a portion of the cash consideration to each unitholder in the amount of approximately $70 (before applicable tax withholding, if any) for each USPB Class A unit and $617 for each USPB Class B unit held by such unitholder, as described more fully in the section entitled “Distributions to USPB’s Unitholders” on page 32.  The Company also will repay all patronage notices, which total approximately $42.1 million.  Please note that when the value of USPB’s fully-diluted ownership interest in NBP, as reflected in the proposed transaction, is (i) reduced by the payment of the patronage notices and (ii) divided by the number of USPB Class A and Class B units issued and outstanding, the result is an implied valuation of $1,023 for the combination of one USPB Class A unit and one USPB Class B unit.

The Company’s board of directors and NBP’s board of managers have each unanimously determined that the proposed transaction with LUK is advisable, fair to and in the best interests of NBP and its members, as well as to the members and unitholders of those organizations that are members of NBP, which includes USPB.  Accordingly, USPB’s board of directors has unanimously approved and adopted the purchase agreement and unanimously recommends that you vote “FOR” the approval and adoption of the purchase agreement and the transactions contemplated thereby.

Your vote is important.  Whether or not you plan to attend the special meeting in person, please take time to vote by completing and mailing the enclosed proxy card or submitting your proxy by fax or hand delivery to the Company as soon as possible.  You may also vote in person by attending the special meeting.  Voting by any of these methods will ensure that your vote will be counted at the special meeting.  The failure to vote will have the same effect as a vote against the adoption and approval of the purchase agreement and the proposed transaction with LUK.

Accompanying this letter is a Notice of Special Meeting of Members and a Proxy Statement that provides detailed information about the purchase agreement and the proposed transaction with LUK, including information about the subsequent distribution of the Company’s net proceeds of that transaction to the Company’s unitholders.  We urge you to carefully read the entire Proxy Statement, including the discussion in the section entitled “Risk Factors” beginning on page 12.

We look forward to seeing you at the special meeting.  We are very excited about the proposed transaction with LUK and believe that the consideration represents an attractive return on your investment in USPB.

The accompanying Notice of Special Meeting of Members and Proxy Statement are each dated December 5, 2011 and are first being mailed to the Company’s members on or about December 5, 2011.

U.S. PREMIUM BEEF, LLC

P.O. Box 20103

Kansas City, Missouri 64195

(866) 877 2525

NOTICE OF SPECIAL MEETING OF MEMBERS

TO BE HELD ON THURSDAY, DECEMBER 29, 2011

To the Members of U.S. Premium Beef, LLC:

This is a notice of a special meeting of the members of U.S. Premium Beef, LLC, a Delaware limited liability company (“USPB” or the “Company”), to be held at the Hilton-Kansas City Airport, 8801 NW 112th Street, Kansas City, Missouri, on Thursday, December 29, 2011, at 4:00 p.m. local time, solely for the following purposes:

1.               To consider and vote upon a proposal to adopt and approve the Membership Interest Purchase Agreement, dated as of December 5, 2011, among Leucadia National Corporation (“LUK”), National Beef Packing Company, LLC (“NBP”), the several members of NBP including USPB, and TMK Holdings, LLC, and approve the transactions contemplated thereby (which are sometimes referred to in the accompanying proxy statement as the “proposed transaction” or “proposed transactions”); and

2.               To grant the persons named as proxies discretionary authority to vote to adjourn the special meeting, if necessary, for the purpose of soliciting additional proxies to vote in favor of the approval and adoption of the Membership Interest Purchase Agreement and approval of the proposed transaction.

December 5, 2011 has been fixed as the record date for determining those members of the Company entitled to vote at the special meeting and any adjournments or postponements of the meeting.  Under USPB’s Certificate of Formation, Amended and Restated Limited Liability Company Agreement and applicable Delaware law, the affirmative vote of members holding a majority of the voting power of each class of units is required to approve the purchase agreement.  The eligible members holding Class A units are each entitled to one vote per eligible member, and the members holding Class B units are each entitled to one vote per Class B unit owned by such member.

USPB’s board of directors unanimously recommends that members vote “FOR” approval of the Membership Interest Purchase Agreement and “FOR” the proposal to adjourn the special meeting, if necessary.

Pursuant to the provisions of Chapter 18 Section 210 of the Delaware Code and Section 3.7 of the Company’s Limited Liability Company Agreement, the Company’s members are not entitled to dissent to the approval and adoption of the Membership Interest Purchase Agreement nor assert appraisal rights.

To vote, please complete and return the enclosed proxy card to the Company in the envelope provided or submit your proxy card by fax or by hand delivery in accordance with the instructions provided on the proxy.  If you vote by mail, your proxy will not be counted unless it is received by USPB by 8:00 a.m. Central Standard Time on December 29, 2011, or prior to any applicable adjournment or postponement of the meeting.  If you vote by fax, your proxy will not be counted unless it is received by the Company by 2:00 p.m. Central Standard Time on December 29, 2011, or prior to any applicable adjournment or postponement of the meeting.  If you hand deliver your proxy, it must be received by USPB at or prior to the special meeting or any applicable adjournment or postponement of the special meeting.  You may, of course, vote in person by attending the special meeting (and any adjournments or postponements of the meeting) and submitting your vote at that time.

PROXY STATEMENT

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QUESTIONS AND ANSWERS ABOUT THE PROPOSED TRANSACTION AND SPECIAL MEETING

Below are answers to questions that we anticipate may be frequently asked by members of USPB in connection with making their decision on whether to vote in favor of the approval and adoption of the purchase agreement and approval of the proposed transaction.  We encourage you to read this entire document to obtain a more complete answer to these questions and to the other questions that you may have.

Questions and Answers about the Proposed Transaction

Q:                                  Why am I receiving this proxy statement?

A:                                   LUK has agreed to acquire approximately 78.9% of the outstanding ownership interest in NBP from the current owners, including USPB.  As indicated above, the proposed transaction values the equity ownership of NBP at $1.15 billion and USPB’s current fully-diluted ownership interest of approximately 70.7% of NBP at approximately $812.5 million.  If the proposed transaction is completed, USPB will sell approximately 79.6% of its fully-diluted ownership in NBP (representing approximately 56.2% of the total ownership in NBP) to LUK for a cash purchase price of approximately $646.8 million.  Following completion of the sale to LUK and the other transactions contemplated by the purchase agreement, USPB will retain approximately 15.1% of the ownership of NBP.  The proposed transaction will be pursuant to the terms of a purchase agreement that is described in detail in the section entitled “The Purchase Agreement” beginning on page 36 of this proxy statement.  A copy of the purchase agreement in substantially the form executed by USPB is attached as Appendix A to this proxy statement.

In order to complete the proposed transaction, USPB’s members must approve and adopt the purchase agreement and approve the transactions contemplated by the purchase agreement, and all other conditions to the proposed transaction must be satisfied or waived.  USPB will hold a special meeting of its members on December 29, 2011 to obtain the necessary member approval.  This proxy statement contains important information about the purchase agreement, the proposed transaction and the special meeting, and you should read it carefully.  The enclosed proxy card for the special meeting allows you to vote without attending the special meeting.

Q:                                  Why is USPB interested in selling a substantial portion of its ownership interests in NBP to LUK?

A:                                   The USPB Board unanimously approved the proposed transaction because, among other reasons, it enables USPB to address historical liquidity challenges of unit ownership for its maturing membership base by realizing an attractive price for a substantial portion of its processing ownership and to distribute a significant portion of the consideration to USPB’s unitholders.  A key factor in the Board’s approval of the proposed transaction is that USPB’s unitholders can continue to realize USPB’s original objectives including assurance of market access, value based pricing, and processing ownership.  The proposed transaction is the result of an unsolicited offer by a very successful company which is interested in making a long term investment in a stable, highly competitive and successful food business.  The result is a more diversified ownership base, a cleaner NBP balance sheet and the continuation of USPB’s highly successful cattle supply arrangement.  The proposed transaction addresses USPB’s desire to redeem its outstanding patronage notices and provides USPB unitholders with the opportunity to realize a significant return on their initial investment, while maintaining a sizable ongoing ownership interest in NBP.

Q:                                  What will I receive from USPB as a result of the proposed transaction?

A:                                   The proposed transaction will provide cash consideration to USPB of approximately $646.8 million.  Although approximately $37.0 million of the approximate $646.8 million to be received by USPB will be held in escrow pursuant to the escrow agreement described on page 38 of this proxy statement, USPB’s receipt of approximately $609.8 million upon completion of the proposed transaction will allow USPB to utilize the cash proceeds from the proposed transaction to repay all remaining patronage notices, which currently total approximately $42.1 million.  The remaining cash to be received by USPB in the proposed transaction represents a value of $77 per USPB Class A unit and $676 per Class B unit.  USPB intends to distribute approximately $70 to the holder of each issued and outstanding Class A Unit and $617 to the holder of each issued and outstanding Class B Unit, before applicable tax withholding, if any.  Please note

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that the proposed transaction does not involve cancellation or sale of the Class A or Class B units issued by USPB to its unitholders; those units will remain issued and outstanding.

Q:                                  What is the total value of the proposed transaction?

A:                                   USPB and the minority owners of NBP have negotiated a purchase agreement, subject to the approval of USPB’s members, that provides for the sale of approximately 78.9% of the ownership of NBP to LUK in a transaction that values the equity ownership of NBP at $1.15 billion.  The purchase agreement contains provisions that ensure the continuance of USPB’s current value based pricing system whereby USPB will enter into a cattle purchase and sale agreement with LUK to deliver to NBP 735,385 head of cattle annually, plus or minus 10%.  The purchase price for cattle purchased by NBP shall be determined pursuant to NBP’s pricing grids for cattle to be delivered by USPB’s unitholders and associates.

Q:                                  I own 1,000 USPB Class A units and 1,000 Class B units, which I acquired in USPB’s original offering.  What is the distribution that I can expect to receive if the proposed transaction is approved and completed?

A:                                   Assuming that a member acquired their ownership of 1,000 USPB Class A units and 1,000 Class B units for a price of $55 per linked unit (which was the offering price in U.S. Premium Beef, Ltd.’s original cooperative stock offering), that member would have invested $55,000 in USPB.  If the proposed transaction is approved and USPB completes the intended distribution, the member would receive a distribution of approximately $70 (before applicable tax withholding, if any) per Class A unit and $617 per Class B unit (before applicable tax withholding, if any).  That distribution would total approximately $687 for the combination of each Class A unit and Class B unit you own, resulting in a distribution of approximately $687,000 if you own 1,000 Class A units and 1,000 Class B units.  However, as indicated above, the proposed transaction does not involve cancellation or sale of the Class A and Class B units issued by USPB to its unitholders, all of which will remain issued and outstanding following the proposed transaction.

Q:                                  I own 1,000 USPB Class A units and 1,000 Class B units and $10,000 of patronage notices.  What is the distribution that I can expect to receive if the proposed transaction is approved and completed?

A:                                   If the proposed transaction is approved and USPB completes the intended distribution, the member would receive a distribution of approximately $697,000 (before applicable tax withholding, if any), which would represent $70 per Class A unit and $617 per Class B unit for each of his or her 1,000 units plus a distribution of $10,000 in satisfaction of the patronage notices.

Q:                                  Will I continue to hold my USPB Class A units and Class B units if the proposed transaction is completed?

A:                                   Yes.  All USPB Class A units and Class B units will remain outstanding, without any change in the rights and obligations associated with your ownership of those USPB units.  The proposed transactions involve USPB’s sale of its ownership interests in NBP and does not directly involve USPB’s Class A and Class B units, except that ownership of those USPB units will determine who is entitled to receive distributions of a portion of the proceeds of the proposed transactions.

Q:                                  Who is Leucadia National Corporation?

A:                                   Leucadia (“LUK”) is a diversified holding company engaged in a variety of businesses, including manufacturing, land based contract oil and gas drilling, gaming entertainment, real estate activities, medical product development and winery operations.  LUK also has significant investments in the common stock of two public companies that are accounted for at fair value, one of which is a full service investment bank and the other of which is a manufacturer of copper, brass, plastics and aluminum products.  LUK owns equity interests in a variety of operating businesses and concentrates on return on investment and cash flow to maximize long-term shareholder value.  Additionally, LUK continuously evaluates the retention and disposition of its existing operations and investigates possible acquisitions of new businesses.  LUK’s common stock is traded on the New York Stock Exchange; detailed information regarding LUK can be found in LUK’s filings with the Securities and Exchange Commission at www.sec.gov.

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Q:                                  What should I do now?

A:                                   After carefully reading this proxy statement, including its appendices, USPB urges you to please respond by voting through one of the following means:

·                  by mail, by completing, signing and dating the enclosed proxy card and returning it in the envelope provided;

·                  by fax, by completing, signing and dating the enclosed proxy card and faxing it to (816) 713-8810;

·                  by physical delivery¸ by completing, signing and dating the enclosed proxy card, sealing it in the envelope provided and physically delivering it to USPB or a USPB officer or director; or

·                  in person, by attending the special meeting and submitting your vote in person.

Q:                                  How does USPB’s board of directors recommend that members vote on the proposed transaction?

A:                                   After careful consideration, USPB’s board of directors unanimously determined that the proposed transaction is advisable, fair to and in the best interests of USPB and its unitholders and unanimously approved the purchase agreement and the transactions contemplated by the purchase agreement.  Accordingly, USPB’s board of directors unanimously recommends that you vote “FOR” Proposal No. 1.

Q:                                  What vote is required to adopt and approve the purchase agreement and approve the proposed transaction?

A:                                   The adoption and approval of the purchase agreement and the approval of the proposed transaction requires the affirmative vote of the majority of the voting power of the Class A members and the Class B members, voting as separate classes.

Q:                                  How will voting on any other business be conducted?

A:                                   Proposal No. 2 to grant discretionary authority to adjourn the special meeting, if necessary, to solicit additional proxies if there are not sufficient votes in favor of approving and adopting the purchase agreement and approving the proposed transactions requires a majority of votes cast by USPB’s members present in person or by proxy at the meeting.  USPB’s board of directors unanimously recommends that you vote “FOR” Proposal No. 2.

We do not know of any other business to be considered at the special meeting other than Proposal No. 1 and Proposal No. 2 described in this proxy statement, and USPB’s Limited Liability Company Agreement limits matters that may be considered at a special meeting to those approved by the board of directors and contained in the notice of the special meeting.

Q:                                  When do you expect to complete the proposed transaction?

A:                                   LUK and the Sellers will work to complete the proposed transaction as quickly as possible.  The parties cannot complete the transaction until each party satisfies a number of conditions, including approval by USPB’s members and the satisfaction of requirements under the applicable antitrust laws.  The parties intend to complete the transaction as soon as the necessary conditions have been satisfied.  Subject to the satisfaction of all conditions the parties expect to close the transaction on or about December 30, 2011.

Q:                                  Am I entitled to appraisal rights?

A:                                   No.  USPB’s members are not entitled to appraisal rights under USPB’s Amended and Restated Limited Liability Company Agreement or Certificate of Formation or under applicable state law.

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Q:                                  What are the tax consequences of the proposed transaction to me?

A:                                   If the transaction closes, USPB will recognize gain on the sale of the units in NBP in an amount equal to the excess of (1) USPB’s “amount realized” for federal income tax purposes, which equals the sum of the amount of cash consideration received (including any amounts of cash withheld), and the Company’s share of NBP’s pre-sale liabilities attributable to the units in NBP being sold, over (2) USPB’s adjusted tax basis in the units in NBP being sold (including the basis attributable to the share of pre-sale liabilities of NBP allocable to the units of NBP being sold).  You will be required to report on your federal income tax return your allocable share of USPB’s gain from the transaction as so calculated.

Although you will be required to report on your federal income tax return your allocable share of USPB’s gain from the transaction, any cash distributions from USPB to you generally will not trigger additional tax liability for federal income tax purposes except to the extent that the amount of cash distributed exceeds the adjusted tax basis of your interest in USPB immediately before the distribution.  Applicable regulations provide that advances of money against a partner’s distributive share of income are treated as if made on the last day of the partnership’s taxable year.  A partner’s basis in the partnership generally is increased by the partner’s allocable share of the partnership’s taxable (and other) income and decreased by the partner’s allocable share of losses of the partnership and other distributions, and allocations of income and loss generally are made on the last day of a partnership’s taxable year.  Because distributions to you of the cash proceeds of the sale will be made subject to your obligation to return any amount in excess of your allocable share of USPB’s taxable income for the year of the sale, they will be treated for federal income tax purposes as if made on the last day of USPB’s taxable year, after allocations to you of USPB income, if any.  As a result, for purposes of determining whether distributions to you of cash proceeds from the Sale exceed the adjusted tax basis of your interest in USPB, the adjusted tax basis of your interest in USPB will include your allocable share of any gain USPB recognized as a result of the Sale.  USPB expects that aggregate distributions to you during the year of the Sale, including distributions of cash proceeds of the sale, generally will not exceed your allocable share of USPB’s income for the year of the sale and therefore such distributions generally will not be taxable for federal income tax purposes and will not be required to be returned to USPB.

Q:                                  If the proposed transaction is completed, when and how will I receive the consideration?

A:                                   Within 30 days after closing, USPB intends to mail checks to USPB’s unitholders.  Each unitholder will receive a check consisting of such unitholder’s portion of the cash distribution.  In addition, within 45 days of closing, USPB intends to mail to each holder of patronage notices, including unitholders, a check for the full amount of such patronage notices.

Q:                                  Are there any risks related to or arising from the proposed transaction?

A:                                   Yes.  You should carefully review the section entitled “Risk Factors” beginning on page 12 of this proxy statement.

Questions and Answers About the USPB Special Meeting of Members

Q:                                  When and where will the USPB special meeting of members be held?

A:                                   The special meeting will take place at the Hilton-Kansas City Airport, 8801 NW 112th Street, Kansas City, Missouri, on Thursday, December 29, 2011, at 4:00 p.m. local time.

Q:                                  Who may vote at the special meeting of members?

A:                                   Only USPB’s members of record as of December 5, 2011, the record date for members who are eligible to vote, may vote at the special meeting.  As of December 5, 2011, USPB had 735,385 Class A units issued and outstanding. Of those Class A units, 734,780 were held on the record date by a total of 452 members who are eligible to vote.  On December 5, 2011, USPB had 755,385 Class B units issued and outstanding. Of those Class B units, 754,780 were held on the record date by a total of 453 members who are eligible to vote.  Class A members are entitled to one vote per member, regardless of the number of Class A units owned.  Class B members are entitled to one vote for each unit they own.

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Q:                                  How can I vote?

A:                                   If you are a member of record, you may submit a proxy for the special meeting by marking, signing, dating and returning the proxy card:

·                  by mail, in the envelope provided;

·                  by fax, by faxing it to (816) 713-8810; or

·                  by physical delivery, by sealing the proxy card it in the envelope provided and physically delivering it to USPB or one of USPB’s officers or directors.

If you plan to attend the special meeting and wish to vote in person, you will be given a ballot at the special meeting.  However, as your plans may change, USPB requests that you submit your completed proxy card even if you plan to attend the special meeting.  A ballot cast at the special meeting will supersede a previously completed proxy card.

Q:                                  Is my vote confidential?

A:                                   Proxy instructions and ballots will be disclosed within USPB and with other third parties (i) to allow for the tabulation of votes and certification of the vote and (ii) to facilitate a successful proxy solicitation and special meeting.  Proxy instructions and ballots may also be disclosed to satisfy any applicable legal requirements.

Q:                                  How will my proxy be exercised with respect to the proposal regarding the proposed transaction?

A:                                   All valid proxies received before the meeting will be exercised.  All Class A members and Class B units represented by a proxy will be voted, and where a member specifies by means of his or her proxy a choice with respect to the proposed transaction, the units and the member’s vote will be voted in accordance with the specification so made.

Q:                                  What happens if I do not indicate how to vote on my proxy card?

A:                                   If you sign and send in your proxy card and do not indicate how you want to vote, your proxy will be counted as a vote “FOR” approval and adoption of the purchase agreement and approval of the transactions contemplated by the purchase agreement, and as a vote “FOR” the grant of discretionary authority to the persons named as proxies to vote your units to adjourn the special meeting, if necessary, to solicit additional proxies if there are not sufficient votes in favor of approving and adopting the purchase agreement and approving the transactions contemplated by the purchase agreement.

Q:                                  What happens if I do not return a proxy card or vote?

A:                                   If you do not sign and mail in your proxy card, physically deliver it to USPB, vote by fax or vote at the special meeting, it will have the same effect as a vote against the approval and adoption of the purchase agreement and the transactions contemplated by the purchase agreement.  If you do not sign and send in your proxy card or vote at the special meeting, it will have no effect on the proposal to grant discretionary authority to adjourn the special meeting.

Q:                                  May I change my vote after I have mailed, faxed or hand delivered my signed proxy card or voted by fax?

A:                                  Yes.  If you have completed a proxy, you may change your vote at any time before your proxy is voted at the special meeting of members.  You can do this in one of three ways:

·                  You can send a written, dated notice to the Secretary of USPB stating that you would like to revoke your proxy;

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·                  You can complete, date and submit a new later-dated proxy card by mail, by fax or by hand delivery to USPB; or

·                  You can attend the special meeting and vote in person.  Your attendance alone will not revoke your proxy.

Q:                                  Who can answer my questions about the purchase agreement, the proposed transaction or USPB’s special meeting of members?

A:                                   If you have questions about the purchase agreement, the proposed transaction or USPB’s special meeting of members, including the procedures for voting, or if you would like additional copies of this proxy statement, you should contact Steven D. Hunt or Scott J. Miller at the following address or telephone number:

U.S. Premium Beef, LLC

P.O. Box 20103

Kansas City, Missouri 64195

(866) 877-2525

[The remainder of this page intentionally left blank]

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SUMMARY

The following summary highlights selected information from this document and, in conjunction with the preceding “Questions and Answers About the Proposed Transaction and Special Meeting”, is intended to provide an overview of the proposed sale of the NBP membership interests to LUK.  To understand the transaction fully and for a more complete description of the legal terms of the purchase agreement, we encourage you to read this entire document, including the sections entitled “The Purchase Agreement” and “The Proposed Transaction,” as well as the appendices and the financial statements and related notes to those statements included in this proxy statement.

The Proposed Transaction and the Purchase Agreement (see pages 27 and 36)

NBP, its members including USPB, and TMK Holdings, LLC (a newly formed entity controlled by Timothy M. Klein) entered into a Membership Interest Purchase Agreement with LUK dated December 5, 2011 (the “purchase agreement”).  The purchase agreement provides that LUK will purchase approximately 79.6% of the ownership of NBP from USPB and NBPCo for total consideration of approximately $875.4 million.  Immediately after consummation of that sale, two entities (TKK Investments, LLC and TMKCo, LLC) controlled by NBP’s Chief Executive Officer, Timothy M. Klein, will sell NBP ownership interests representing approximately 4.4% of NBP to NBP for cash consideration of approximately $75.9 million.  Immediately after that transaction, TMK Holdings, LLC will purchase an ownership interest of approximately 0.7% in NBP from LUK for a cash payment of $7,500,000.  Upon completion of those proposed transactions, LUK will hold approximately 78.9% of the ownership of NBP, USPB will hold approximately 15.1% of the ownership of NBP, NBPCo will hold approximately 5.3% of the ownership in NBP and Mr. Klein, through TMK Holdings, LLC, will own approximately 0.7% of the ownership in NBP.

The proposed transaction values the equity ownership of NBP at $1.15 billion and USPB’s current fully-diluted ownership interest of approximately 70.7% of NBP at approximately $812.5 million.  If the proposed transaction is completed, USPB will sell approximately 79.6% of its fully-diluted ownership in NBP (representing approximately 56.2% of the total ownership in NBP) to LUK for a cash purchase price of approximately $646.8 million.  However, approximately $37.0 million of the approximate $646.8 million to be received by USPB will be held in escrow pursuant to the escrow agreement described on page 38 of this proxy statement, as a source of payment for any indemnification claims made by LUK following completion of the transaction.  As a result, if the proposed transaction is completed, USPB expects to receive approximately $609.8 million in immediately available funds upon completion of the proposed transaction.

Please see the sections of this proxy statement entitled “The Proposed Transaction”, “The Purchase Agreement” and “Comparison of Rights of Members of NBP” for a detailed discussion of the proposed transaction and the terms and conditions of the purchase agreement, the escrow agreement and the proposed First Amended and Restated Limited Liability Company Agreement (“Restated LLC Agreement”) for NBP.

Certain Parties to the Proposed Transaction

U.S. Premium Beef, LLC (see page 60)

U.S. Premium Beef, LLC (“USPB” or the “Company”) provides an integrated cattle production, processing and marketing system for the benefit of its members, unitholders and associates.  It is owned by beef producers who produce high quality, value-added beef products designed to meet consumers’ demands.  USPB markets the finished beef cattle of its members, unitholders and associates through the National Beef Packing Company, LLC, the nation’s fourth largest beef processor.  USPB is the majority owner of the membership interests in NBP.

USPB was originally formed as a Kansas cooperative in July of 1996, and converted to a Delaware limited liability company in August of 2004 (the “Restructuring”).  USPB’s principal executive offices are located at 12200 North Ambassador Drive, Suite 501, Kansas City, Missouri 64163, and its telephone number is (866) 877-2525.  USPB’s website is www.uspremiumbeef.com.  Information contained on USPB’s website does not constitute part of this proxy statement.  USPB files annual, quarterly and current reports and other information with the Securities and Exchange Commission; USPB’s reports and filings can be found on the SEC’s website at www.sec.gov.

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National Beef Packing Company, LLC (see page 63)

NBP is one of the largest beef processing companies in the U.S., accounting for approximately 14% of the federally inspected steer and heifer slaughter during its fiscal year ended August 27, 2011, as reported by the USDA.  NBP processes, packages and delivers fresh and frozen beef and beef by-products for sale to customers in the U.S. and international markets.  NBP’s products include boxed beef, ground beef, hides, tallow and other beef and beef by-products.  In addition, NBP sells value-added beef products including branded boxed beef, case-ready beef, portion control beef, and further processed hides.  NBP markets its products to retailers, food service providers, distributors, further processors and the U.S. military.

NBP is a Delaware limited liability company that was formed on August 6, 2003 in an acquisition of Farmland Industries, Inc.’s ownership interest in Farmland National Beef by USPB and the other members of NBP.  NBP’s principal executive offices are located at 12200 North Ambassador Drive, Suite 500, Kansas City, Missouri 64163, and its telephone number is (800) 449-2333.  NBP’s website is www.nationalbeef.com.  Information contained on NBP’s website does not constitute part of this proxy statement.  NBP files annual, quarterly and current reports and other information with the Securities and Exchange Commission; NBP’s reports and filings can be found on the SEC’s website at www.sec.gov.

Leucadia National Corporation (see page 85)

LUK is a diversified holding company engaged in a variety of businesses, including manufacturing, land based contract oil and gas drilling, gaming entertainment, real estate activities, medical product development and winery operations.  LUK also has significant investments in the common stock of two public companies that are accounted for at fair value, one of which is a full service investment bank and the other of which is a manufacturer of copper, brass, plastics and aluminum products.  LUK owns equity interests in a variety of operating businesses and concentrates on return on investment and cash flow to maximize long-term shareholder value.  Additionally, LUK continuously evaluates the retention and disposition of its existing operations and investigates possible acquisitions of new businesses.  LUK’s common stock is traded on the New York Stock Exchange; detailed information regarding LUK can be found in LUK’s filings with the Securities and Exchange Commission at www.sec.gov.

The Special Meeting of USPB’s Members (see page 24)

The special meeting of members of USPB will be held at the Hilton-Kansas City Airport, 8801 NW 112th Street, Kansas City, Missouri, on Friday, December 29, 2011, at 4:00 p.m. local time.  The purpose of the special meeting is for the members to consider and vote upon a proposal to adopt and approve the purchase agreement with LUK pursuant to which USPB and NBPCo will sell to LUK a substantial portion of the issued and outstanding membership interests in NBP.

Members of the Company as of the record date of December 5, 2011 who are eligible to vote will be entitled to vote at the special meeting, either in person or by submitting the enclosed proxy card.  Please see the section of this proxy statement entitled “The Special Meeting” for a detailed discussion of the special meeting and the procedures regarding voting at that meeting.

Risk Factors (see page 12)

The “Risk Factors” beginning on page 12 of this proxy statement should be considered carefully by USPB’s members in evaluating whether to approve and adopt the purchase agreement and approve the proposed transaction.  These risk factors should be considered along with any other information included in this proxy statement.

Recommendation by the Board of Directors (see pages 29 and 91)

After careful consideration of various reasons for and against the proposed transaction, USPB’s board of directors has determined that the proposed transaction is fair to and in the best interests of USPB and its members and unitholders, and recommends that you vote “FOR” the adoption and approval of the purchase agreement and approval of the proposed transactions.  Please see the sections of this proxy statement entitled “The Proposed Transaction - Reasons for the Proposed Transaction” and “ - Recommendations of USPB’s Board of Directors and NBP’s Board of Managers” for a more detailed discussion of these topics.

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Opinion of the Company’s Financial Advisor (see page 33)

CC Capital Advisors (“CC Capital”) has given its opinion that, based upon and subject to the assumptions, conditions, limitations and other matters set forth in that opinion, the proposed transaction is fair from a financial point of view to USPB.

CC Capital provided its opinion for the information and assistance of USPB’s board of directors in connection with its consideration of the purchase agreement and the proposed transactions contemplated by the purchase agreement, and such opinion is not a recommendation as to how any member of USPB should vote with respect to the proposed transaction.  CC Capital was retained solely to provide its opinion as to such fairness from a financial point of view, and did not provide any other financial advisory services to USPB or NBP in connection with the proposed transaction.

The full text of CC Capital’s written opinion is included as Appendix B to this proxy statement.  We urge you to carefully read the opinion in its entirety.

Interests of Certain Persons in the Proposed Transaction (see page 47)

In connection with the proposed transaction, USPB, NBP and their executive officers, directors and managers will enter into a variety of new or revised arrangements and agreements.  In certain circumstances, those new or revised arrangements may give rise to interests for USPB, NBP and their executive officers, directors and managers that are different from, or in addition to, the interests of USPB’s members.  The new or revised arrangements to be entered in connection with the proposed transaction include, among others:

·                  USPB, the members of USPB’s board of directors, the entities those board members represent and Mr. Steven D. Hunt, USPB’s Chief Executive Officer, will enter into non-competition agreement restricting their involvement with NBP competitors in cattle slaughter, beef processing, packaging and marketing and hide tanning;

·                  USPB will enter into a new Cattle Purchase and Sale Agreement with NBP;

·                  USPB will enter into a Pledge Agreement with NBP, pursuant to which USPB will grant NBP a security interest in USPB’s retained ownership interest in NBP to secure USPB’s performance of its obligations under the Cattle Purchase and Sale Agreement;

·                  Mr. Timothy M. Klein will enter into a new employment agreement with NBP; and

·                  Mr. Steven D. Hunt, USPB’s Chief Executive Officer, will enter into an amendment to the CEO Employment Agreement between USPB and Mr. Hunt.

Conditions to Completing the Proposed Transaction (see page 43)

Several conditions must be satisfied or waived before the closing of the proposed transaction, including, among others, those summarized below:

·                  approval and adoption of the purchase agreement and approval of the proposed transactions by USPB’s members;

·                  absence of any law, regulation or order making the proposed transaction illegal or otherwise prohibiting the proposed transaction;

·                  accuracy of each party’s respective representations and warranties in the purchase agreement, except as would not have a material adverse effect on such party;

·                  material compliance by each party with its covenants set forth in the purchase agreement; and

·                  receipt of certain approvals and consents required in connection with the proposed transaction, including those required to be given by the United States Federal Trade Commission (the “FTC”) and the Antitrust

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Division of the United States Department of Justice under the Hart-Scott-Rodino Antitrust Act of 1976, as amended (the “HSR Act”) and applicable foreign jurisdictions.

Sellers and NBP are Prohibited from Soliciting Other Offers (see page 41)

The purchase agreement contains detailed provisions that prohibit any Seller, TMK Holdings, LLC and NBP from taking any action to solicit or engage in discussions or participate in negotiations with any person or group with respect to an alternative acquisition proposal.  The purchase agreement also provides that neither any Seller nor NBP shall authorize any investment bankers, consultants or other advisors to any Seller, NBP or subsidiaries of NBP to solicit, initiate, or encourage the making of any proposal described above.  The purchase agreement does not, however, prohibit USPB’s board of directors from considering and potentially recommending an unsolicited bona fide written acquisition proposal from a third party if specified conditions are met.  If USPB’s board of directors changes its recommendation, as described below, the purchase agreement may be terminated.  Contemporaneously with such a termination, Sellers shall cause NBP to pay LUK a termination fee of $35.0 million.

LUK and Sellers May Terminate the Purchase Agreement Under Certain Circumstances (see page 45)

The purchase agreement may be terminated under specified circumstances, including, among others:

·                  by mutual written consent of LUK and the Sellers at any time prior to the completion of the proposed transaction;

·                  by LUK if USPB fails to obtain the approval of its members within 90 days of the date of execution of the purchase agreement;

·                  by the Sellers if LUK breaches any covenant or agreement set forth in the purchase agreement, which breach would give rise to the failure of a condition to the closing and the breach cannot or has not been cured by LUK within the applicable cure period;

·                  by LUK if NBP, the Sellers or the newly formed TMK Holdings, LLC breach(es) any covenant or agreement set forth in the purchase agreement, which breach would give rise to the failure of a condition to the closing and the breach cannot or has not been cured by NBP or the Sellers within the applicable cure period;

·                  by Sellers if USPB’s board of directors, after receipt of a bona fide superior proposal from a third party as permitted in the purchase agreement, recommends that the Sellers terminate the purchase agreement and enter into an agreement with respect to a superior proposal and LUK does not make an offer that is at least as favorable as the superior proposal;

·                  by LUK or the Sellers if the closing has not occurred within 90 days after the date the purchase agreement is executed unless otherwise extended; or

·                  by either party for any other reason, provided that the terminating party pays a termination fee.

LUK or NBP May Pay a Termination Fee Under Certain Circumstances (see page 46)

If the purchase agreement is terminated, NBP may be required to pay a termination fee of up to $35.0 million to LUK under specified circumstances.  Similarly, LUK may be required to pay a termination fee of up to $35.0 million to NBP under specified circumstances.  NBP may also be required to pay LUK an expense reimbursement fee of up to $2.5 million; that fee will be payable if either LUK or the Sellers terminate the purchase agreement because the USPB members fail to approve the purchase agreement and the proposed transactions and neither NBP or LUK is to pay the $35.0 million termination fee.

Material U.S. Federal Income Tax Consequences of the Proposed Transaction (see page 86)

USPB will recognize gain on the sale of the units in NBP in an amount equal to the excess of (1) USPB’s “amount realized” for federal income tax purposes, which equals the sum of the amount of cash consideration received (including any amounts of cash withheld), and USPB’s share of NBP’s pre-sale liabilities attributable to the

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units in NBP being sold, over (2) USPB’s adjusted tax basis in the units in NBP being sold (including the basis attributable to the share of pre-sale liabilities of NBP allocable to the units of NBP being sold).  You will be required to report on your federal income tax return your allocable share of USPB’s gain from the transaction as so calculated.

Although you will be required to report on your federal income tax return your allocable share of USPB’s gain from the transaction, any cash distributions from USPB to you generally will not trigger additional tax liability for federal income tax purposes except to the extent that the amount of cash distributed exceeds the adjusted tax basis of your interest in USPB immediately before the distribution.  Applicable regulations provide that advances of money against a partner’s distributive share of income are treated as if made on the last day of the partnership’s taxable year.  A partner’s basis in the partnership generally is increased by the partner’s allocable share of the partnership’s taxable (and other) income and decreased by the partner’s allocable share of losses and other distributions of the partnership, and allocations of income and loss generally are made on the last day of a partnership’s taxable year.  Because distributions to you of the cash proceeds of the sale will be made subject to your obligation to return any amount in excess of your allocable share of USPB’s taxable income for the year of the sale, they will be treated for federal income tax purposes as if made on the last day of USPB’s taxable year, after allocations to you of USPB income, if any.  As a result, for purposes of determining whether distributions to you of cash proceeds from the Sale exceed the adjusted tax basis of your interest in USPB, the adjusted tax basis of your interest in USPB will include your allocable share of any gain USPB recognized as a result of the Sale.  USPB expects that aggregate distributions to you during the year of the Sale, including distributions of cash proceeds of the sale, generally will not exceed your allocable share of USPB’s income for the year of the sale and therefore such distributions generally will not be taxable for federal income tax purposes and will not be required to be returned to USPB.

USPB has treated the patronage notices that were outstanding at the time of USPB’s conversion from a cooperative into its current form as a limited liability company as “qualified written notices of allocation” within the meaning of Code Section 1388(c).  Owners of qualified written notices of allocation generally are not subject to tax on payments of qualified written notices of allocation.

USPB Members Do Not Have Appraisal Rights (see page 3)

USPB’s members are not entitled to appraisal rights under the Company’s Certificate of Formation, Limited Liability Company Agreement or under applicable Delaware law.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This proxy statement contains forward-looking statements based on assumptions by the management of the Company and NBP as of the date of this document, including assumptions about risks and uncertainties faced by the Company and NBP.  When used in this document, the words “believe,” “expect,” “anticipate,” “intend,” “will” and similar verbs or expressions are intended to identify such forward-looking statements.

If management’s assumptions prove incorrect or should unanticipated circumstances arise, USPB’s and NBP’s actual results could differ materially from those anticipated.  These differences could be caused by a number of factors or combination of factors beyond the control of USPB and NBP.  Readers are urged to consider such factors when evaluating any forward-looking statement, and USPB cautions you not to put undue reliance on any forward-looking statements.

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RISK FACTORS

Risks Related to the Proposed Transaction

LUK and NBP must obtain certain regulatory approvals to complete the proposed transaction.

The proposed transaction is subject to the requirements of the HSR Act, and the rules and regulations promulgated thereunder, which provide that some acquisition transactions may not be completed until required information has been furnished to the FTC, the Antitrust Division of the Department of Justice, and applicable foreign jurisdictions and until the waiting period has been terminated or has expired.  LUK and NBP intend to file the required HSR Act notifications with the Antitrust Division, the FTC and applicable foreign jurisdictions as soon as practicable following the date of this proxy statement, and may request early termination of the HSR Act waiting period.  There can be no assurance that such early termination will be granted and, even if granted, the termination of the HSR Act waiting period does not preclude the Antitrust Division, the FTC or others from challenging the proposed transaction on antitrust grounds and seeking to preliminarily or permanently enjoin the proposed transaction or challenge the completed transaction.  Neither NBP, the Sellers, nor LUK believes that the proposed transaction will violate federal antitrust laws, but there can be no guarantee that the Antitrust Division, the FTC or others will not take a different position.  The fact that LUK does not own other companies or interests in beef processing enterprises is expected to assist the parties’ efforts to obtain the necessary regulatory approvals.

Certain of the officers, managers and directors of NBP and the Company have interests and arrangements that could affect their decision to support or approve the proposed transaction.

NBP’s board of managers and USPB’s board of directors were involved in and directed the negotiation of the proposed transaction agreement with LUK, approved the purchase agreement and are now each recommending that USPB’s members vote to approve and adopt the purchase agreement and the proposed transactions contemplated by the purchase agreement.  Certain of the officers and managers of NBP and the officers and board of directors of USPB have interests in the proposed transaction and related transactions that are different from, or in addition to, the interests of the Company’s members.  Such interests include the following:

·                  following the proposed transaction, NBP’s managers and executive officers will receive indemnification for certain liabilities incurred prior to the closing of the proposed transaction;

·                  Timothy M. Klein, President and Chief Executive Officer of NBP, will be offered continued employment with NBP after the closing of the proposed transaction; and

·                  Steven D. Hunt, Chairman of the Board of NBP and Chief Executive Officer of USPB, will continue to serve as Chief Executive Officer of USPB after the closing of the proposed transaction and will receive payment for these services.

For a description of these and other interests of the NBP’s and USPB’s managers, directors and executive officers in the proposed transaction, please see the section entitled “Interests of Certain Persons in the Proposed Transaction” beginning on page 47 of this proxy statement.

USPB’s members have no dissenters’ rights of appraisal.

USPB’s members are not entitled to dissent to the proposed transaction and assert appraisal rights under USPB’s LLC Agreement or under applicable Delaware law.  Accordingly, you do not have the right to seek a judicial determination of the fair value of your Class A and Class B units.

The purchase agreement limits NBP’s ability to pursue alternatives to the proposed transaction.

The proposed transaction agreement contains terms and conditions that make it more difficult for NBP to sell its business to a party other than LUK.  These “no shop” provisions impose restrictions on NBP, TMK Holdings, LLC, USPB and the other current members of NBP that, subject to certain exceptions, limit their ability to discuss, facilitate or commit to competing third party proposals to acquire all or a significant part of NBP.  See the section entitled “Covenants of the Parties - No Solicitation of Alternative Transactions” beginning on page 41 of this proxy statement.

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LUK and the Sellers may waive one or more conditions to the proposed transaction without USPB having to resolicit member approval for the proposed transaction.

Each of the conditions to LUK’s and the Sellers’ obligations to complete the proposed transaction may be waived, in whole or in part, to the extent permitted by applicable law, by agreement of LUK and the Sellers if the condition is a condition to both parties’ obligation to complete the proposed transaction, or by the party for which such condition is a condition of its obligation to complete the proposed transaction.  USPB’s board of directors will evaluate the materiality of any such waiver to determine whether amendment of this proxy statement and resolicitation of proxies is necessary.  However, USPB generally does not expect any such waiver to be significant enough to require resolicitation of USPB’s members.  In the event USPB’s board of directors determines any such waiver is not significant enough to require resolicitation of members, it will have the discretion to complete the proposed transaction without seeking further member approval.  See “Conditions to the Proposed Transaction” on page 43 of this proxy statement.

The businesses of NBP and USPB may be adversely affected if the proposed transaction is not completed.

Completion of the proposed transaction is subject to several closing conditions, including obtaining the requisite USPB member approval.  USPB may be unable to obtain such approval on a timely basis or at all.  NBP’s future operations may be harmed to the extent that potential customers and suppliers are uncertain about its future direction.  NBP and USPB will also be required to pay significant costs incurred in connection with the proposed transaction, including legal and accounting fees, whether or not the proposed transaction is completed.  In addition, USPB will incur the fees and expenses associated with the fairness opinion by CC Capital.  Moreover, under specified circumstances described in the section entitled “Termination Fees” beginning on page 46 of this proxy statement, NBP could be required to pay LUK a termination fee of up to $35.0 million plus reimbursement of certain LUK expenses in connection with the termination of the purchase agreement.  Under other circumstances, LUK could be required to pay NBP in connection with the termination of the purchase agreement a termination fee of up to $35.0 million.

In the event that the USPB members do not approve the proposed transaction and the $35.0 million termination fee described above is not otherwise payable, under the purchase agreement, NBP is contractually obligated to reimburse LUK for LUK’s expenses of completing due diligence on NBP and negotiating the purchase agreement, up to a maximum amount of $2.5 million.  Please see the section of this proxy statement entitled “Termination Fee” for more information regarding the reimbursement of LUK’s expenses in such circumstances.

The proposed transaction will be taxable to USPB’s unitholders.

If the transaction closes, USPB will recognize gain on the sale of the units in NBP in an amount equal to the excess of (1) USPB’s “amount realized” for federal income tax purposes, which equals the sum of the amount of cash consideration received (including any amounts of cash withheld), and USPB’s share of NBP’s pre-sale liabilities attributable to the units in NBP being sold, over (2) USPB’s adjusted tax basis in the units of NBP being sold (including the basis attributable to the share of pre-sale liabilities of NBP allocable to the units of NBP being sold).  You will be required to report on your federal income tax return your allocable share of USPB’s gain from the transaction as so calculated.

Although you will be required to report on your federal income tax return your allocable share of USPB’s gain from the transaction, any cash distributions from USPB to you generally will not trigger additional tax liability for federal income tax purposes except to the extent that the amount of cash distributed exceeds the adjusted tax basis of your interest in USPB immediately before the distribution.  Applicable regulations provide that advances of money against a partner’s distributive share of income are treated as if made on the last day of the partnership’s taxable year.  A partner’s basis in the partnership generally is increased by the partner’s allocable share of the partnership’s taxable (and other) income and decreased by the partner’s allocable share of losses and other distributions of the partnership, and allocations of income and loss generally are made on the last day of a partnership’s taxable year.  Because distributions to you of the cash proceeds of the sale will be made subject to your obligation to return any amount in excess of your allocable share of USPB’s taxable income for the year of the sale, they will be treated for federal income tax purposes as if made on the last day of USPB’s taxable year, after allocations to you of USPB income, if any.  As a result, for purposes of determining whether distributions to you of cash proceeds from the Sale exceed the adjusted tax basis of your interest in USPB, the adjusted tax basis of your interest in USPB will include your allocable share of any gain USPB recognized as a result of the Sale.  USPB expects that aggregate distributions to you during the year of the Sale, including distributions of cash proceeds of the sale, generally will not exceed

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your allocable share of USPB’s income for the year of the sale and therefore such distributions generally will not be taxable for federal income tax purposes and will not be required to be returned to USPB.

USPB has treated the patronage notices that were outstanding at the time of the Restructuring as “qualified written notices of allocation” within the meaning of Code Section 1388(c).  Owners of qualified written notices of allocation generally are not subject to tax on payments of qualified written notices of allocation.

Your distributive share of taxable income may be reallocated by the IRS.

Pursuant to the Internal Revenue Code an allocation, or portion thereof, of federal taxable income, gain, loss, or deduction will be respected only if it either has “substantial economic effect” or is in accordance with the “partner’s interest in the partnership.”  The Service has provided certain “safe harbors” in the Treasury Regulations which, if met, will ensure that an allocation has economic effect.  As part of the Sale, NBP’s Limited Liability Company Agreement (“LLC Agreement”) will be amended and restated, including changes to the manner in which NBP’s income (or loss) will be allocated among the NBP members.  That new allocation method will not fall within such “safe harbors.”  USPB believes that the allocations of income, gain, loss or deductions for federal income tax purposes set forth in the Restated LLC Agreement will have substantial economic effect or will be in accordance with the partner’s interest in the partnership.  Nevertheless, if the IRS determines that the method of allocation used in the Restated LLC Agreement does not have substantial economic effect or is not in accordance with the partner’s interest in the partnership, then the IRS may make a reallocation of such items in accordance with its determination of each member’s economic interest in NBP.

The Internal Revenue Service could assert that the Company is not entitled to a capital loss resulting from a payment by the Company of the full face amount of the outstanding patronage notices.

In 2004 U.S. Premium Beef, Ltd., a Kansas cooperative (the “Cooperative”) undertook a restructuring transaction consisting of two steps: a statutory merger of the Cooperative into a Delaware corporation, followed by a statutory conversion of the Delaware corporation into a Delaware limited liability company (the Company).  As a result of the Restructuring, the payment obligations of the Cooperative represented by its outstanding patronage notices became payment obligations of the Company (referred to as “patronage notices”).  For federal income tax purposes, the Company treated the Restructuring as a taxable liquidation of the Cooperative followed by a contribution by the Cooperative’s shareholders of all of the assets and liabilities of the Cooperative to the Company.  In addition, for federal income tax purposes, the Company treated the patronage notices as reducing the aggregate value of the liquidating distribution by the amount of their aggregate fair market value at the time of the restructuring as determined by an appraisal.

USPB expects to pay the full face amounts of all outstanding patronage notices after the sale of a portion of USPB’s ownership interest in NBP to LUK.  USPB will treat these payments as giving rise to a capital loss in an amount equal to the excess of the amounts paid with respect to the outstanding patronage notices over the adjusted tax basis of the patronage notices at the time of the restructuring as determined by the appraisal completed at the time of Restructuring (which equaled their fair market value at that time).  Applying this treatment, you would be required to report on your federal income tax return your allocable share of USPB’s capital loss, if any, with respect to the patronage notices.  The treatment of payments by USPB with respect to the outstanding patronage notices is uncertain, however, and there can be no assurance that the position that the payments give rise to a capital loss will not be successfully challenged by the IRS.  In addition, limitations on the deductibility of capital losses could reduce or eliminate the benefit of the deduction to you.

Risks Related to NBP

Outbreaks of disease affecting livestock can adversely affect demand for NBP’s products and the supply of cattle and thereby adversely affect its business.

NBP is subject to risks relating to animal health and disease control.  An outbreak of disease affecting livestock, such as BSE (also commonly referred to as mad cow disease) or foot-and-mouth disease could result in restrictions on sales of products to NBP’s customers or purchases of livestock from its suppliers.  Also, outbreaks of these diseases, or the perception by the public that such an outbreak has occurred or other concerns regarding such disease, whether or not resulting in regulatory action, can lead to cancellation of orders by NBP’s customers and create adverse publicity that may have a material adverse effect on consumer demand and, as a result, on NBP’s

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results of operations.  Furthermore, an outbreak of disease could lead to widespread destruction of cattle, which could have a negative impact on NBP.

If NBP’s products or products made by others using NBP’s products become contaminated or are alleged to be contaminated, NBP may be subject to product liability claims and product recalls that would adversely affect its business.

NBP may be subject to significant liability potentially in excess of applicable liability insurance policy limits if the consumption of any of its products or products made by others using its products causes injury, illness or death due to contamination or otherwise.  In addition, NBP may in the future recall products in the event its products are or may be contaminated, spoiled or inappropriately labeled.  Contamination of NBP’s products or those of its competitors also may create adverse publicity or cause consumers to lose confidence in the safety and quality of NBP’s products that could negatively affect its business.  NBP may encounter the same risks of contamination or negative publicity if a third party tampers with NBP’s products.  Allegations of contamination of NBP’s products may also be harmful to NBP even if such allegations are untrue.  The occurrence of any of these risks may increase NBP’s costs and decrease demand for its products, which could negatively affect its business, financial condition, results of operations and cash flows.  Organisms producing food borne illnesses are generally found in the environment and there is a risk that as a result of food processing they could be present in NBP’s products.  For example, E. coli is one of many food borne bacteria commonly associated with beef products.  Once contaminated products have been shipped for distribution and consumption, illness or death may result if pathogens are present or increase due to handling or temperatures, and are not otherwise eliminated at the further processing, food service or consumer level.  There can be no assurance NBP will not be required to perform product recalls, or that product liability claims will not be asserted against NBP, in the future.

NBP’s margins may be negatively impacted by fluctuating raw material and utility costs, selling prices, changes in its relationships with its suppliers and other factors that are outside of NBP’s control.

NBP’s margins are dependent on the price at which its beef products can be sold and the price it pays for raw materials, among other factors.  These prices can vary significantly over a relatively short period of time as a result of a number of factors, including the relative supply and demand for live cattle and beef products, as well as the market for competing or complimentary products, such as pork and poultry.  In addition, closure of international markets to U.S. beef product exports as a result of the December 23, 2003 BSE discovery negatively affected U.S. beef product margins, as certain by-products, classified as Specific Risk Materials, have been banned from use in feedstocks and the human food chain.  Some of these products previously enjoyed a market in foreign countries.

The supply and market price of the livestock that constitute NBP’s principal raw material and represent the substantial majority of its cost of goods sold are dependent upon a variety of factors over which NBP has little or no control, including fluctuations in the size of herds maintained by producers, the relative cost of feed and energy, weather and livestock diseases.  In addition, NBP purchases approximately 52% of the cattle it processes on the open market.  If NBP does not attract and maintain acceptable relationships with growers, the quantity, quality or pricing of its supply of cattle could be negatively affected.

Severe price swings in raw materials, and the resulting impact on the prices NBP charges for its products, have at times had, and may in the future have, a material adverse effect on NBP’s financial condition, results of operations and cash flows.  If NBP experiences increased costs, it may not be able to pass them along to its customers.  In addition, the costs for utilities, such as energy and water may fluctuate over time.

NBP’s international operations expose it to political and economic risks in foreign countries, as well as to risks related to currency fluctuations and could negatively affect NBP’s sales to customers in foreign countries and its operations and assets in such countries.

In fiscal year 2011, exports, primarily to Mexico, Japan, South Korea, Canada, China (for hides), Hong Kong, Egypt, and Taiwan accounted for approximately 12.6% of NBP’s total net sales and these sales on average had a higher margin than its sales generally.  A reduction in its international sales would likely adversely affect its margins.  In addition, NBP’s international activities expose it to risks not faced by companies that limit themselves to the domestic market.  One significant risk is that the international operations may be affected by tariffs, other trade protection or food safety measures and import or export licensing requirements.

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Risks associated with NBP’s international activities include:

·                  changes in foreign currency exchange rates and inflation or deflation in the foreign countries in which NBP operates;

·                  the closing of borders by foreign countries to the import of NBP’s products due to disease or other perceived health or food safety issues;

·                  exchange controls;

·                  changes in tariffs;

·                  changes in political or economic conditions in a specific country or region, particularly in emerging markets;

·                  trade restrictions imposed by countries with respect to the importation of NBP’s products, including actions taken in connection with trade disputes;

·                  potentially negative consequences from changes in regulatory requirements; and

·                  international conflict, including terrorist acts, which could significantly impact NBP’s financial condition and results of operations.

The occurrence of any of these events could increase NBP’s costs, lower demand for its products or limit its operations, which could have a material adverse effect on NBP’s business, financial condition, results of operations or prospects.

Compliance with environmental regulations could result in significant costs and failure to comply with environmental regulations and the use of hazardous substances, including at National Beef Leather’s tannery facility, could result in civil as well as criminal penalties, liability for damages and negative publicity.

NBP’s operations are subject to extensive and increasingly stringent regulations, including those relating to wastewater and storm water discharges, air emissions, waste handling and disposal and remediation of soil and groundwater contamination that are administered by the U.S. Environmental Protection Agency and state, local and other authorities.  In many areas, these laws and regulations are becoming increasingly stringent.  Failure to comply with these laws and regulations can have serious consequences for NBP, including criminal as well as civil and administrative penalties and negative publicity.  NBP has incurred and will continue to incur significant capital and operating expenditures to adapt to more stringent regulations and to avoid violations of these laws and regulations.  Additional environmental requirements imposed in the future could result in currently unanticipated investigations, assessments or expenditures, and may require NBP to incur significant additional costs.  Because the nature of these potential future charges is unknown, management is not able to estimate the magnitude of any future costs and NBP has not accrued any reserve for any potential future costs with respect to unknown items or requirements.

Some of NBP’s facilities have been in operation for many years.  During that time, NBP and previous owners of these facilities have generated and disposed of wastes that are or may be considered hazardous or may have polluted the soil or groundwater at NBP’s facilities, including adjacent properties.  The discovery of previously unknown contamination of property underlying or in the vicinity of NBP’s present or former properties or manufacturing facilities and/or waste disposal sites could require NBP to incur material unforeseen expenses.  Occurrences of any of these events may have a material adverse effect on NBP’s business, financial condition, results of operations and cash flows.

In most locations, NBP’s processing facilities rely on municipal or other regional governmental agencies for its water supply and for the treatment of its wastewater discharges.  These entities themselves are subject to environmental laws regarding the quality of their water discharges, and must meet permit limits.  If permit limits become more stringent, upgrades and capital improvements to these municipal treatment facilities are likely.  In those locations where NBP is a significant volume discharger, it is possible it may be asked to contribute toward the costs of such upgrades, or NBP may become subject to significant increases in water or sewer charges in order for such upgrade costs to be recouped.

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NBP’s indebtedness could adversely affect its business and liquidity position.

As of August 27, 2011, NBP had $360.4 million of long-term debt, of which $38.5 million was classified as a current liability.  As of August 27, 2011, NBP’s Credit Facility consisted of a $375.0 million term loan, $342.3 million of which was outstanding, a $250.0 million revolving line of credit loan, which had no outstanding borrowings, outstanding letters of credit of $24.1 million and available borrowings of $225.9 million, based on the most restrictive financial covenant calculations.  In addition, as of August 27, 2011, NBP had outstanding industrial revenue bonds of $12.2 million and capital leases and other obligations of $5.9 million.

NBP’s indebtedness may increase from time to time in the future for various reasons, including fluctuations in operating results, capital expenditures and potential acquisitions.

NBP’s indebtedness, together with additional future indebtedness it may incur, and restrictive covenants contained in the Credit Facility could:

·                  make it difficult for NBP to satisfy its obligations, including making interest payments on its debt obligations;

·                  limit NBP’s ability to obtain additional financing to operate its business;

·                  require NBP to dedicate a substantial portion of its cash flow to payments on its debt, reducing its ability to use cash flows to fund capital expenditures and working capital and other general operational requirements;

·                  limit NBP’s flexibility to plan for and react to changes in its business and the beef processing industry;

·                  place NBP at a competitive disadvantage relative to some of its competitors that have less debt than NBP;

·                  limit NBP’s ability to pursue acquisitions; and

·                  increase NBP’s vulnerability to general adverse economic and industry conditions, including changes in interest rates, changes in cattle prices or a downturn in NBP’s business or the economy.

The occurrence of any one of these events could have a material adverse effect on NBP’s business, financial condition and results of operations or cause a significant decrease in its liquidity and impair its ability to pay amounts due on its indebtedness.

The Credit Facility contains, among other things, restrictive covenants that will limit NBP’s and its subsidiaries’ ability to finance future operations or capital needs or to engage in other business activities.  The Credit Facility restricts, among other things, its ability and the ability of its subsidiaries to:

·                  incur additional indebtedness or issue guarantees;

·                  create liens on NBP’s assets;

·                  make distributions on or redeem equity interests;

·                  make investments;

·                  transfer or sell properties or other assets; and

·                  engage in mergers, consolidations or acquisitions.

In addition, the Credit Facility requires NBP to meet specified financial ratios and tests under certain circumstances.

If NBP’s cash flow and capital resources are insufficient to fund its debt service obligations, NBP may be forced to reduce or delay capital expenditures, sell material assets or operations, obtain additional capital or restructure debt.  NBP’s ability to generate cash and make scheduled payments or refinance NBP’s obligations

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depends on its successful financial and operating performance, which depend upon prevailing economic conditions and other factors, many of which are beyond its control.

NBP’s operating results could be negatively impacted by its hedging and derivative positions.

NBP uses derivative financial instruments and other hedging strategies in an attempt to reduce its exposure to various market risks, including changes in commodity prices.  NBP holds certain positions that do not qualify as hedges for financial reporting purposes.  These positions are marked to fair value, and the unrealized gains and losses are reported in earnings at each reporting date.  Therefore, losses on these contracts will adversely affect NBP’s reported operating results.  The use of such instruments may ultimately limit NBP’s ability to benefit from favorable commodity price movements, which may adversely affect reported operating results.

NBP generally does not have long-term contracts with its customers, and, as a result, the prices at which it sells its beef products are subject to market forces.

NBP generally does not have long-term sales arrangements with its customers and, as a result, the prices at which it sells products to them are determined in large part by market forces.  NBP’s customers, mostly excluding those with which NBP has long-term contracts, place orders for products on an as-needed basis and, as a result, their order levels have varied from period to period in the past and may vary significantly in the future.  The loss of one or more of NBP’s key customers, a significant decline in the number of orders from one or more of its key customers or a significant decrease in beef product prices for a sustained period of time could have a material adverse effect on NBP’s business, financial condition or results of operations.

Wal-Mart’s failure to continue purchasing from NBP could have a material adverse effect on its sales.

Sales to Wal-Mart Stores, Inc., (Wal-Mart), and its affiliate, Sam’s Club, represented approximately 9% of total net sales in fiscal year 2011.  NBP’s contractual agreement with Wal-Mart expired on January 31, 2004, and NBP has not entered into a new agreement.  If Wal-Mart and its affiliates do not continue to purchase from NBP, it could have a material adverse effect on NBP’s sales, financial position, results of operations and cash flows.

NBP is subject to extensive governmental regulation and its noncompliance with or changes in applicable requirements could adversely affect its business, financial condition, results of operations and cash flows.

In addition to the environmental regulations discussed above, NBP’s operations are subject to extensive regulation and oversight by the United States Department of Agriculture (USDA), the Grain Inspection Packers and Stockyards Administration (GIPSA), the Food and Drug Administration (FDA), and other state, local and foreign authorities regarding the processing, packaging, storage, distribution, advertising and labeling of NBP’s products, including food safety standards.  NBP’s domestic operations are subject to the Packers and Stockyards Act of 1921 (PSA).  This statute generally prohibits meat packers in the livestock industry from engaging in certain practices including violations of the PSA’s prompt payment provisions.  In general (unless otherwise agreed in writing by NBP’s livestock suppliers), this statute requires NBP to make full payment for livestock purchases in the case of cash sales before the close of the next business day following the purchase and transfer of possession of the livestock NBP purchases, or, in the case of a cash purchase on a carcass or ‘‘grade and yield’’ basis, that NBP make full payment of the purchase price not later than the close of the first business day following determination of the purchase price.

On June 22, 2010, GIPSA published a proposed rule that would add new regulations under the PSA.  Among other things, the proposed rule would eliminate the requirement that GIPSA or livestock producers demonstrate competitive harm to prove violations of Sections 202(a) and 202(b) of the PSA, which sections limit unfair, unjustly discriminatory or deceptive practices and undue or unreasonable preferences or advantages in livestock purchasing practices.  Elimination of this requirement could have a significant impact on cattle procurement and marketing practices in the beef processing industry. In particular, it could impair NBP’s ability to pay premiums for cattle that meet the quality standards for NBP’s value-added or export programs, thus affecting how NBP (i) procures cattle for those programs and (ii) processes and markets value-added and exported products. NBP cannot predict whether the proposed rule or some modified rule will be adopted or the extent of the effect of any such rule on the beef processing industry or on NBP’s operations or financial results.

Recently, the food safety practices and procedures in the meat processing industry have been subject to more intense scrutiny and oversight by the USDA.  Food safety standards, processes and procedures are subject to the

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USDA Hazard Analysis Critical Control Point program, which includes compliance with the Public Health Security and Bioterrorism Preparedness and Response Act of 2002.  In hopes of reducing the development and spread to humans of dangerous antibiotic-resistant bacteria, the Obama administration announced in July 2009 that it would seek to ban routine use of antibiotics, which are fed to farm animals to encourage growth.

NBP is also subject to a variety of immigration, labor and worker safety laws and regulations, including those relating to the hiring and retention of employees.  NBP’s failure to comply with applicable laws and regulations could subject it to administrative penalties and injunctive relief, civil remedies, including fines, injunctions, interruption of its operations, recalls of its products or seizures of its properties, as well as potential criminal sanctions or personal injury or other damage claims.  These remedies, changes in the applicable laws and regulations or discovery of currently unknown conditions could increase NBP’s costs and limit its business operations.

Failure to successfully implement NBP’s business strategy may impede its plans to increase revenues, margins and cash flow.

NBP’s revenues, margins and cash flows will not increase as planned if it fails to implement the key elements of its strategy, and its ability to successfully implement this strategy is dependent at least in part on factors beyond NBP’s control.  For example, the willingness of consumers to purchase value-added products depends in part on economic conditions.  In periods of economic uncertainty, consumers tend to purchase more private label or less-expensive products.  Thus, if NBP encounters periods of economic uncertainty, the sales volume for its value-added products could suffer.  Also, NBP may not be successful in identifying favorable international expansion opportunities.

Changes in consumer preferences could adversely affect NBP’s business.

The food industry in general is subject to changing consumer trends, demands and preferences.  NBP’s products compete with other protein sources, such as pork and poultry, and other foods.  Trends within the food industry change often and the failure to anticipate, identify or react to changes in these trends could lead to, among other things, reduced demand and price reductions for NBP’s products, and could have a material adverse effect on NBP’s business, financial condition, results of operations and cash flows.  In addition, NBP does not have any other material lines of business or other sources of revenue to rely upon if it is unable to efficiently process and sell beef products or if the market for beef declines.  This lack of diversification means that NBP may not be able to adapt to changing market conditions or withstand any significant decline in the beef industry.

The beef processing industry is highly competitive and NBP’s customers might not continue to purchase its products or prices it receives for its products could fluctuate or be adversely impaired by actions taken by NBP’s competitors.

The beef processing industry is highly competitive.  Competition exists both in the purchase of live cattle and in the sale of beef products.  In addition, NBP’s products compete with a number of other protein sources, including pork and poultry.

NBP’s principal competition arises from other beef processors, including Tyson Foods, Inc., Cargill Meat Solutions and JBS USA LLC.  The principal competitive factors in the beef processing industry are price, quality, food safety, product distribution, technological innovations and brand loyalty.  NBP’s ability to be an effective competitor will depend on its ability to compete on the basis of these characteristics.  Some of its competitors have substantially larger beef operations, greater financial and other resources and wider recognition for their consumer branded products than NBP does.  There can be no assurance that NBP will be able to compete effectively with these companies and its ability to compete could be adversely affected by NBP’s debt levels.

Extreme weather or other forces beyond NBP’s control could negatively impact its business.

Natural disasters, fire, bioterrorism, pandemic or extreme weather, including droughts, floods, excessive cold or heat, hurricanes or other storms, could impair the health or growth of livestock or interfere with NBP’s operations due to power outages, fuel shortages, water shortages, damage to its production and processing facilities or disruption of transportation channels, among other things.  Any of these factors, as well as disruptions in its information systems, could have an adverse effect on NBP’s financial results.

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The sales of NBP’s beef products are subject to seasonal variations and, as a result, NBP’s quarterly operating results may fluctuate.

The beef industry is characterized by prices that change based on seasonal consumption patterns.  The highest period of demand for our products is usually the summer and spring months when weather patterns permit more outdoor activities and there is increased demand for higher value items that are grilled, such as steaks.  In addition, because of higher consumption, more favorable growing conditions and the housing of animals in feedlots for the winter months, there are generally more cattle available in the summer and fall.  As a result of these seasonal fluctuations, NBP’s revenue and profitability tend to be higher for its third and fourth fiscal quarters ended May and August, respectively, than for its first and second fiscal quarters ended November and February, respectively.  However these seasonal patterns may vary substantially from year to year.

NBP depends on the service of key individuals, the loss of whom could materially harm its business.

NBP’s success will depend, in part, on the efforts of its officers and other key employees.  In addition, the market for qualified personnel is competitive and NBP’s future success will depend on its ability to attract and retain these personnel.  With the exception of its Chief Executive Officer, NBP does not have long-term employment agreements with its officers or maintain key-person insurance on any officer.  The loss of the services of any of NBP’s key employees or the failure to attract and retain employees could have a material adverse effect on its business, results of operations and financial condition.

NBP’s performance depends on favorable labor relations with its employees.  Any deterioration of those relations or increase in labor costs could adversely affect NBP’s business.

As of August 27, 2011, NBP had approximately 9,100 employees worldwide.  Approximately 2,800 employees at its Liberal, Kansas facility are represented by the United Food and Commercial Workers International Union under a collective bargaining agreement that expires on December 16, 2012.  Approximately 1,100 employees at its Brawley, California facility are jointly represented by the United Food and Commercial Workers International Union and Teamsters International Union under a collective bargaining agreement that expires on December 8, 2013.  Approximately 90 employees at NBP’s St. Joseph, Missouri facility are represented by the United Cereal Workers of the United Food and Commercial Workers International Union (“UFCWU”) under a collective bargaining agreement scheduled to expire on May 18, 2014.  The employees at NBP’s Dodge City, Kansas facility have voted in favor of union representation in a two day National Labor Relations Board-supervised secret ballot election.  The tally of ballots, released November 5, 2011, was in favor of representation by the UFCWU.  The union has been certified as the representative of a bargaining unit of approximately 2,600 employees in production and maintenance, shipping and receiving, grounds keeping and the warehouse.  The election was conducted on November 3, 2011 and November 4, 2011.

A labor-related work stoppage by NBP’s unionized employees could limit NBP’s ability to process and ship its products or increase its costs, which could adversely affect its results of operations and financial condition.  In addition, it is possible that any labor union efforts to organize employees at NBP’s non-unionized facilities might be successful and that any labor-related work stoppages at these non-unionized facilities in the future could adversely affect NBP’s results of operations and financial condition.  In general, any significant increase in labor costs, deterioration of employee relations, slowdowns or work stoppages at any of NBP’s locations, whether due to union activities, employee turnover or otherwise, could have a material adverse effect on its business, financial condition, results of operations and cash flows.

The consolidation of NBP’s retail and food service customers may put pressures on NBP’s operating margins.

In recent years, the trend among retail and food service customers, such as supermarkets, warehouse clubs and food service distributors, has been towards consolidation.  These consolidations, along with the entry of mass merchants into the grocery industry, have resulted in customers with increasing negotiating strength who tend to exert pressure on NBP with respect to pricing terms, product quality and new products.  As the customer base continues to consolidate, competition for the business of fewer customers is expected to intensify.  If NBP does not negotiate favorable terms of sale with its customers and implement appropriate pricing to respond to these trends, or if NBP loses its existing large customers, NBP’s profitability could decrease.

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NBP may not be able to successfully complete acquisitions, affecting its ability to grow, or integrate completed and future acquisitions, which could result in failure to achieve its expected acquisition benefits, the disruption of NBP’s business and an increase in its costs.

NBP continually explores opportunities to acquire related businesses, some of which could be material to it.  NBP’s ability to continue to grow may depend upon identifying and successfully acquiring attractive companies, effectively integrating these companies, achieving cost efficiencies and managing these businesses as part of NBP.

NBP may not be able to effectively execute on acquisitions or integrate acquired companies and successfully implement appropriate operational, financial and management systems and controls to achieve the benefits expected to result from these acquisitions.  NBP’s efforts to integrate these businesses could be affected by a number of factors beyond its control, such as regulatory developments, general economic conditions and increased competition.  In addition, the process of integrating these businesses could cause the interruption of, or loss of momentum in, the activities of its existing business.  The diversion of management’s attention and any delays or difficulties encountered in connection with the integration of these businesses or relating to legacy liabilities of businesses acquired by NBP could negatively impact its business and results of operations.  Further, the benefits NBP anticipates from acquisitions may not develop.

NBP’s operations are subject to the general risks of litigation.

NBP is involved on an ongoing basis in litigation arising in the ordinary course of business or otherwise.  Trends in litigation may include class actions involving consumers, employees or injured persons, and claims related to commercial, labor, employment, antitrust, securities or environmental matters.  These actions could also divert the attention of NBP’s management team and expose it to significant liability and adverse publicity, which might adversely affect its brands, reputation and/or customer preference for its products.  Due to the unpredictable nature of litigation, it is not possible to predict the ultimate outcome of any potential lawsuits, and NBP may be held liable for significant judgments, or other losses, that are not fully covered by its insurance and could have a material adverse effect on NBP’s business.

Deterioration of economic conditions could negatively impact NBP’s business.

NBP’s business may be adversely affected by changes in national or global economic conditions, including inflation, interest rates, availability of capital markets, consumer spending rates, energy availability and costs (including fuel surcharges) and the effects of governmental initiatives to manage economic conditions.  Any such changes could adversely affect the demand for NBP’s products or the cost and availability of its needed raw materials and packaging materials, thereby negatively affecting NBP’s financial results.

A downturn in the U.S. economy may result in reduced demand for certain of NBP’s products, downward pressure on prices and shifts to less profitable private label products.  Moreover, any material reduction in demand for NBP’s products in its key export markets (Japan and South Korea) could have an adverse effect on its results of operations.

The recent disruptions and instability in credit and other financial markets and deterioration of national and global economic conditions, could, among other things:

·                  make it more difficult or costly for NBP to obtain financing for its operations or investments or to refinance its debt in the future;

·                  cause NBP’s lenders to depart from prior credit industry practice and make more difficult or expensive the granting of any technical or other waivers under NBP’s credit agreements to the extent it may seek them in the future;

·                  impair the financial condition of some of NBP’s customers, suppliers or counterparties to its derivative instruments, thereby increasing customer bad debts, non-performance by suppliers or counterparty failures negatively impacting NBP’s treasury operations; and

·                  negatively impact global demand for beef products, which could result in a reduction of sales, operating income and cash flows.

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Risks Related to USPB

USPB facilitates the delivery of the cattle provided by its unitholders and associates to NBP and does not have arrangements for alternative markets for its unitholders and associates cattle.

USPB’s sole customer for the cattle provided by its unitholders and associates is NBP.  Given USPB’s ownership of a majority interest in NBP, USPB has not developed alternative customers for the cattle provided by USPB’s unitholders and associates.  If events were to occur which would prevent NBP from purchasing and processing the cattle supplied by USPB’s unitholders and associates, USPB would need to exercise provisions in its agreements with both NBP and USPB’s unitholders that would permit USPB to reduce the number of cattle acquired from unitholders and sold to NBP.  While such provisions would mitigate harm to USPB, it is likely that the value of the Class A and Class B units and the associated delivery rights held by USPB’s unitholders would be impaired.

The other members of NBP do not deliver cattle to NBP for processing, creating the possibility that the interests of those other members of NBP could conflict with the interests of USPB and its unitholders.

The other members of NBP do not deliver cattle to NBP for processing and marketing.  As a result, conflicts of interest may arise between USPB and NBP relating to cattle purchases.  If a dispute were to arise, the settlement of any such dispute may not be on terms as favorable to USPB as would be expected if all of the members of NBP were involved in the delivery of cattle to NBP for processing.

The adoption of rules proposed by the Grain Inspection Packers and Stockyards Administration (“GIPSA”) could adversely affect the cattle delivery arrangements between NBP, USPB and USPB’s unitholders.

As described in the sections entitled “Risks Related to NBP” and “Description of NBP’s Business—Regulation”, GIPSA has proposed regulations that could have a significant impact on cattle procurement and marketing practices in the beef industry.  In particular, the proposed regulations could impair NBP’s ability to pay premiums for cattle that meet NBP’s quality standards for value-added or export programs.  As USPB’s unitholders and associates have historically benefited from receipt of premiums for delivered cattle that meet the applicable NBP standards, adoption of such rules could adversely impact both USPB and its unitholders.  USPB cannot predict whether the proposed rules will be adopted or the extent or the effect of any revised rules on USPB or its unitholders and associates.

The Internal Revenue Service could assert that USPB should be treated as a corporation for federal income tax purposes.

Under applicable regulations, an unincorporated entity such as a limited liability company is treated as a partnership for federal income tax purposes unless the entity is considered a “publicly traded partnership” or the entity affirmatively elects to be taxed as a corporation.  USPB has not elected to be taxed as a corporation, and USPB believes that it should be treated as a partnership not taxable as a corporation for federal income tax purposes.  USPB has not requested and will not request any ruling from the IRS, however, with respect to its classification as a partnership for federal income tax purposes.  If the IRS were to assert successfully that USPB were taxable as a corporation for federal income tax purposes in any taxable year, holders of Class A units and Class B units would not be required to report on their federal income tax returns their allocable share of USPB’s items of income, gain, deduction, and loss for that year and USPB would be subject to tax on its net income for that year at corporate tax rates.  In addition, any distributions would be taxable to holders of Class A units and Class B units as dividend income.  Taxation of USPB as a corporation could materially reduce the after-tax return on an investment in units and could substantially reduce the value of your units.

Failure to achieve and maintain effective internal controls could have a material adverse effect on USPB’s business, operating results and financial condition.

USPB documents and tests its internal control procedures in order to satisfy the requirements of Sarbanes-Oxley Act, which requires annual management assessments of the effectiveness of its internal controls over financial reporting.  This process is both costly and challenging.  If USPB fails to achieve and maintain the adequacy of its internal controls, as such standards are modified, supplemented or amended from time to time, it may not be able to ensure that it can conclude on an ongoing basis that it has effective internal controls over financial reporting in accordance with the Sarbanes-Oxley Act.  Moreover, effective internal controls are necessary for USPB to produce reliable financial reports and are important to helping prevent financial fraud.  If USPB cannot provide reliable

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financial reports or prevent fraud, its business and operating results could be harmed, investors could lose confidence in its reported financial information, and its business, results of operation and financial condition could be adversely affected.

USPB depends on the service of key senior management personnel, the loss of which could materially harm its business.

USPB’s success will depend, in part, on the efforts of its key senior management personnel.  The market for qualified personnel is competitive and USPB’s future success will depend on its ability to attract and retain these personnel.  USPB does not have long-term employment agreements with most of its senior management.  USPB may not be able to negotiate either new contracts or renewals of any existing long-term employment agreements on terms favorable to USPB or at all.  The loss of the services of any of USPB’s key senior management personnel or the failure to attract and retain highly skilled personnel in the future could have a material adverse effect on USPB’s business, results of operations and financial condition.

SELECTED FINANCIAL INFORMATION OF USPB

The following table sets forth selected USPB consolidated financial and other data for, and as of the end of, each of the fiscal years in the five-year period ended August 27, 2011.  The selected consolidated financial information for the five fiscal years ended August 27, 2011 (statement of operations data) and as of the five fiscal years ended August 27, 2011, August 28, 2010, August 29, 2009, August 30, 2008, and August 25, 2007 (balance sheet data) has been derived from USPB’s audited consolidated financial statements, as adjusted for the presentation requirements of Accounting Standards Codification (ASC) 810 — Consolidation, which was adopted by USPB as of August 30, 2009 with retrospective application to the historical years presented.  USPB’s fiscal year ends on the last Saturday in August.

We encourage you to read the financial data presented below along with the section entitled “Information About USPB and NBP - Management’s Discussion and Analysis of Financial Condition and Results of Operations,” as well as the financial statements and related notes included as Appendix D at the end of this proxy statement.

Selected Financial Data
(millions of dollars, except for per unit data)

(1)  Our fiscal year ends on the last Saturday in August.  Fiscal years 2011, 2010 and 2009 consisted of a 52 week year; fiscal year 2008 consisted of a 53 week year; and fiscal year 2007 consisted of a 52 week year.

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THE SPECIAL MEETING

Date, Time and Place of the Special Meeting

The special meeting of the members of U.S. Premium Beef, LLC will be held at the Hilton-Kansas City Airport, 8801 NW 112th Street, Kansas City, Missouri, on Thursday, December 29, 2011, at 4:00 p.m. local time.

Matters for Consideration

At the special meeting, the Company’s members will be asked:

1.               To consider and vote upon a proposal to adopt and approve the Membership Interest Purchase Agreement (the “purchase agreement”), dated as of December 5, 2011, among LUK, NBP, the several members of NBP including USPB, and TMK Holdings, LLC and approve the transactions contemplated by the purchase agreement (which are sometimes referred to in this proxy statement as the “proposed transaction”); and

2.               To grant the persons named as proxies discretionary authority to vote to adjourn the special meeting, if necessary, for the purpose of soliciting additional proxies to vote in favor of the approval and adoption of the purchase agreement and approval of the proposed transaction.

Recommendation of USPB’s Board of Directors

USPB’s board of directors has determined that the purchase agreement is advisable and in the best interests of USPB and its members and unitholders and unanimously recommends that members vote “FOR” approval of the purchase agreement and the proposed transaction and “FOR” the adjournment proposal, if the adjournment proposal is necessary.

Record Date; Units Entitled to Vote

Persons who are the Company’s members at the close of business on the record date of December 5, 2011 and who are eligible to vote are entitled to notice of and to vote at the special meeting. As of the record date, there were 735,385 Class A units issued and outstanding and 755,385 Class B units issued and outstanding. Of those units, 734,780 Class A units were held of record by 452 members eligible to vote at the Special Meeting and 754,780 Class B units were held by 453 members eligible to vote at the Special Meeting.

Proposal No. 1, to adopt and approve the purchase agreement and the proposed transaction, requires the affirmative vote of the majority of the voting power of the eligible Class A members and the eligible Class B members, voting as separate classes.

Proposal No. 2, to grant discretionary authority to adjourn the special meeting, if necessary, to solicit additional proxies to vote in favor of the adoption and approval of the purchase agreement and the proposed transaction, is not subject to a class voting requirement. Instead, approval of Proposal No. 2 requires the affirmative vote of a majority of the members who are present at the meeting, either in person or by proxy, without regard to class or number of units held.

Voting Power of Class A Units and Class B Units

USPB’s Class A units and Class B units have different voting power. An eligible member holding Class A units is entitled to one vote in matters for which Class A units may be voted, regardless of the number of Class A units held by the member. In contrast, in matters for which Class B units may be voted, an eligible member holding Class B units is entitled to one vote for each such unit held by the member. By way of example, an eligible member holding 1,000 of the Company’s Class A units and 1,000 of the Company’s Class B units is entitled to one vote in matters for which Class A units may be voted and 1,000 votes in matters for which Class B units may be voted.

Quorum; Vote Required

In order to conduct business at the special meeting, a quorum must be present. The holders of 20% or more of the voting power of each class of units on the record date, present in person or represented by proxy at the special

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meeting, constitutes a quorum under USPB’s Limited Liability Company Agreement. USPB will treat Class A and Class B units represented by a properly signed and returned proxy, including abstentions, as present at the meeting for purposes of determining the existence of a quorum.

Proposal No. 1, to approve the purchase agreement and the proposed transaction, requires:

·                  the affirmative vote of a majority of the Company’s Class A total voting power (each eligible member with one vote), voting together as a single class; and

·                  the affirmative vote of a majority of the Company’s Class B total voting power (one vote per Class B unit), also voting together as a single class.

Proposal No. 2, to grant discretionary authority to adjourn the special meeting, if necessary, to solicit additional proxies if there are not sufficient votes in favor of approving the proposed transaction, requires:

·                  the affirmative vote of the eligible members present at the meeting either in person or by proxy (each eligible member with one vote), without regard to class or the units held.

However, the majority of the voting power of either Class A or Class B present at the meeting either in person or by proxy may object to Proposal No. 2 by voting against it and force a class vote, in which case the vote required to pass Proposal No. 2 would be:

·                  the affirmative vote of a majority of USPB’s Class A voting power present at the meeting either in person or by proxy (each eligible member with one vote), voting together as a single class; and

·                  the affirmative vote of a majority of USPB’s Class B total voting power present at the meeting either in person or by proxy (one vote per Class B unit), also voting together as a single class.

Unit Ownership of Management

As of the record date, USPB’s directors and executive officers and their affiliates collectively owned (directly or beneficially) 215,811 Class A units and 212,811 Class B units, which represent approximately 28.6% of the fully diluted Class A units and approximately 28.2% of the fully diluted Class B units, respectively. The members of USPB’s board of directors and executive officers and their affiliates collectively have 10 Class A votes and 212,811 Class B votes.  The members of USPB’s board of directors, its executive officers and their affiliates who hold voting rights have indicated that it is their intention, as of the date of this proxy statement, to vote in favor of the purchase agreement and the proposed transactions.

Voting in Person

If you plan to attend the special meeting and wish to vote in person, you will be given a ballot at the special meeting. You should submit your completed proxy even if you plan to attend the special meeting. You can always change your vote at the special meeting.

Your vote is important. Because approval and adoption of the purchase agreement and the proposed transaction contemplated thereby require the affirmative vote of a majority of the Company’s eligible Class A members and the affirmative vote of the Company’s Class B eligible members holding a majority of the Company’s Class B units, a failure to vote will have the same effect as a vote against the proposal. Accordingly, please complete, sign, date and return the enclosed proxy card by mail, fax or by hand delivery to the Company whether or not you plan to attend the special meeting in person.

Voting of Proxies

As further described in the instructions to the enclosed proxy card, in addition to attending the special meeting and voting in person, you may vote using any of the following methods:

·                  by mail, by completing, signing and dating the enclosed proxy card and returning it in the envelope provided;

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·                  by fax, by completing, signing and dating the enclosed proxy card and faxing it to (816) 713-8810; or

·                  by physical delivery¸ by completing, signing and dating the enclosed proxy card, sealing it in the envelope provided and physically delivering it to the Company or a Company officer or director.

Class A and Class B units held by eligible members represented by a properly signed and dated proxy submitted in person, by mail, or by facsimile may be voted at the special meeting in accordance with the instructions indicated on the proxy. Proxies that are properly signed and dated but which do not contain voting instructions will be voted “FOR” Proposal No. 1 and “FOR” Proposal No. 2. The proxy holder may vote the proxy in its discretion as to any other matter that may properly come before the special meeting.

How to Revoke a Proxy

If you submit a proxy, you may revoke it at any time before it is voted by:

·                  delivering to the Secretary of the Company a written notice, dated later than the proxy you wish to revoke, stating that the proxy is revoked;

·                  submitting to the Secretary of the Company a new, signed proxy with a date later than the proxy you wish to revoke; or

·                  attending the special meeting and voting in person.

You should send any notice of revocation or your completed new proxy card, as the case may be, to the Company at the following address:

U.S. Premium Beef, LLC

P.O. Box 20103

Kansas City, Missouri 64195

Attention: Joe M. Morgan, Secretary

Solicitation of Proxies and Expenses

The Company will pay its own costs of soliciting proxies for the special meeting. Certain officers and employees of the Company may solicit proxies, without additional remuneration, by telephone, facsimile, electronic mail, telegraph and in person. The Company expects that the expenses of this special solicitation will be nominal.

Proxy Tabulation

PricewaterhouseCoopers, LLP, an independent third party, has been retained by USPB to assist and oversee USPB staff’s tabulation of the votes cast for and against the purchase agreement and the proposed transaction.  For those services, PricewaterhouseCoopers, LLP will receive customary fees based on the hourly rate of the PricewaterhouseCoopers, LLP employee or employees performing the tabulation services.

Assistance

If you have questions about or need assistance in completing or submitting your proxy card, please contact Steven D. Hunt or Scott J. Miller at the Company at the following address or telephone number:

U.S. Premium Beef, LLC

P.O. Box 20103

Kansas City, Missouri 64195

(866) 877-2525

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PROPOSAL 1 - APPROVAL OF THE PROPOSED TRANSACTION WITH LUK

THE PROPOSED TRANSACTION

Background of the Proposed Transaction

Over the past few years, the Company has explored alternatives to address long term sustainability objectives of the Company while dealing with the needs of its members to generate cash distributions above the tax liability, return patronage notices, simplify its balance sheet, create more unit liquidity and maintain competitiveness in a global industry environment.  In March the Company was approached by Leucadia National Corporation (“LUK”) to enter into a transaction, that in the Company’s opinion, serves to address these objectives.  Following is a chronological summary of events that culminated in the proposed transaction with LUK:

March 24, 2011:  Management of USPB, NBP and representatives of LUK met for introductions and discuss a proposal by LUK to acquire certain partnership interests in NBP.

April 6, 2011:  USPB, NBP and LUK representatives held calls to discuss operations of NBP.

April 7, 2011:  USPB board and management met to discuss strengths and weaknesses of USPB and strategic structure alternatives to consider addressing opportunities including a transaction with LUK that was considered.  The rationale behind the proposed transaction was discussed.

April 13, 2011:  USPB management met with legal counsel to explore legal and structural implications of proposed transaction.

April 15, 2011:  USPB management held conference call with LUK representatives to discuss terms of an Indication of Interest (the “IOI”).

April 18, 2011:  USPB management met with NBP and NBPCo to discuss rationale of proposed transaction.

April 18, 2011:  USPB management held call with LUK representatives to advance discussions on terms of IOI.

April 19, 2011:  USPB board and management held a conference call to discuss continued discussions with LUK, deal rationale and IOI terms.

April 27, 2011:  USPB management and LUK representatives met to discuss terms of an IOI.

April 28, 2011:  USPB board and management held a conference call to discuss continued negotiations with LUK regarding terms of IOI.

May 11, 2011:  USPB management and NBP management representatives met to discuss rationale of transaction.

May 13, 2011:  USPB management and LUK representatives met to discuss terms of IOI and rationale of transaction.

May 18, 2011:  USPB management met with tax and legal counsel to discuss deal legal and tax implications.

May 20, 2011:  USPB board and management held a conference call to discuss status of deal and IOI terms.

May 25, 2011:  USPB management, NBP representatives, USPB legal counsel and LUK legal counsel met to discuss terms of IOI and rationale of transaction.

May 26, 2011:  A Non-Binding Indication of Interest was executed.

June 3, 2011:  USPB management met with NBPCo principal and management to discuss rationale of deal and IOI terms.

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June 7, 2011:  USPB, NBP and LUK representatives met to discuss deal process and timeline.

June 9, 2011:  USPB management met with legal and tax counsel to organize deal responsibilities.

June 13, 2011:  USPB management met with CC Capital Advisors to discuss fairness opinion engagement.

July 6, 2011:  USPB management and NBP partners met to discuss status of discussions and deal points relating to the transaction.

July 7, 2011:  USPB board and management met to discuss progress and deal points of ongoing negotiations with LUK regarding Purchase Agreement, LLC Agreement, Cattle Supply Agreement and other documents related to the transaction.

July 21, 2011:  USPB board and management met to discuss progress and deal terms discussion points.

July 28, 2011:  USPB board and management met to discuss progress and deal terms discussion points.

August 3, 2011:  USPB management and legal counsel and LUK representatives and legal counsel met to negotiate deal terms.

August 12, 2011:  USPB board and management met to discuss progress and deal terms discussion.

August 23, 2011:  USPB board and management held call to discuss progress and deal terms discussion.

September 6, 2011:  USPB board and management held call to discuss progress and deal terms.

September 13, 2011:  USPB board and management held call to discuss progress and deal terms.

September 13, 2011:  NBP Management and legal counsel met with LUK representatives and legal counsel in document negotiations and drafting session.

September 15, 2011:  USPB board and management held call to discuss the proposed transaction.

September 26, 2011:  USPB management and LUK representatives met to discuss deal rationale and terms.

September 27, 2011:  USPB board and management met to discuss the proposed transaction and various terms associated with that arrangement.

September 30, 2011:  USPB management and NBPCo management and principal met to discuss deal rationale and terms.

October 13, 2011:  USPB board and management held call to discuss status of negotiations and terms.

October 19, 2011:  USPB and LUK representatives and NBP management met to prepare presentation for NBP’s lenders.

October 20, 2011:  USPB management met with CC Capital Advisors to discuss and review fairness opinion procedures and analysis.

October 26, 2011:  Representatives of USPB, NBP and LUK met with CoBank to introduce LUK, present proposed transaction to NBP’s lead lender and to request appropriate amendments to NBP’s existing credit facility.

November 3, 2011:  Representatives of USPB, NBP and LUK met to discuss status of proposed transaction and review draft documents.

November 9, 2011:  USPB management and LUK representatives met to review status of proposed transaction and draft documents.

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November 14, 2011:  USPB board of directors met to review deal rationale, discuss status of proposed transaction and to review draft fairness opinion information from, and presentation by, CC Capital Advisors.

November 15, 2011:  NBP board met to review deal rationale and discuss status of proposed transaction.

November 22, 2011:  USPB and LUK representatives and NBP management held call to discuss status of proposed transaction and current NBP performance.

November 29, 2011:  USPB board of directors met to review deal rationale, additional fairness opinion information provided by CC Capital Advisors, the status of proposed transaction and to approve the proposed transaction.

November 30, 2011:  NBP board met to review deal rationale, status of the proposed transaction and to approve the proposed transaction.

(In addition to the key meetings and discussions summarized above, USPB management and LUK representatives engaged in a variety of telephone conferences in connection with the negotiation and documentation of the proposed transaction.)

On December 5, 2011, following approval of the proposed transaction by LUK, the various parties to the purchase agreement, including USPB, NBP, LUK, NBPCo, TKK Investments, LLC, TMKCo, LLC and TMK Holdings, LLC, executed the purchase agreement.

Recommendations of USPB’s Board of Directors and NBP’s Board of Managers

Both USPB’s board of directors and NBP’s board of managers have unanimously determined that the terms of the proposed transaction are advisable, fair to and in the best interests of NBP and its members and to the members of those organizations that are members of NBP, including USPB. Accordingly, USPB’s board of directors recommends that you vote “FOR” the adoption and approval of the purchase agreement and approval of the proposed transaction with LUK.

For a discussion of the process leading to the respective boards’ recommendations to approve the proposed transaction with LUK and the factors contributing to its decision, see the following section entitled “Reasons for the Proposed Transaction,” and the section above entitled “Background of the Proposed Transaction.”

Reasons for the Proposed Transaction

In reaching its decision to approve the purchase agreement and the proposed transaction and to recommend that our members approve and adopt the purchase agreement, USPB’s board of directors consulted with management and its legal advisors. These consultations included discussions regarding USPB’s strategic business plan, USPB’s past and current business operations and financial condition, USPB’s future prospects and the implications of the proposed transaction with LUK. USPB’s board of directors also consulted with CC Capital Advisors, its investment banker, as to the fairness, from a financial point of view, to USPB of the proposed transaction consideration, and with Stoel Rives LLP (“Stoel Rives”), USPB’s legal counsel, regarding the terms of the purchase agreement and related matters.

The board’s considerations also involved a careful consideration of the business objective that led to the formation of USPB and its development. USPB was formed with three distinct objectives:

1.               Provide assurance of market access so that USPB’s producers can focus energies on managing cattle to an optimum end point;

2.               Provide value based pricing to give economic incentives to USPB’s producers to produce a product of higher value; and

3.               Have ownership in processing to enable USPB producers to reap the economic benefits beyond production and close the historical information gap that exists between the many segments of the beef industry.

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Over the years, USPB’s unique integrated production system has evolved, providing assurance of market access in times of abundant, as well as limited, marketing options. The USPB value based pricing system has grown with the expansion into multiple grid offerings and sustained premiums for those cattle that meet consumer preferences. In addition, the Company’s ownership in meat processing has grown over the years. Some of that growth has been by necessity, as in the case of the purchase of Farmland Industries’ interest in NBP, and some has been more strategic, as in the case of the case ready plants, the addition of a second shift at the Dodge City plant, the acquisition of the Brawley, California processing facility and the acquisition of the St. Joseph, Missouri tannery assets.

In considering the proposed transaction, the board carefully considered the strengths, weaknesses and business position of USPB and NBP. The board believes that the strengths of USPB have been the strategic advantages garnered from unique integrated strategies, value-added programs, and modern and efficient facilities. Over the years, NBP has utilized the superior cattle USPB producers delivered, as a result of USPB’s value-based cattle pricing and flow of information, to develop a platform of high quality value-added product offerings. Through NBP, USPB has continually invested in the facilities required for a modern and efficient processing enterprise.

While USPB has significant strengths, USPB’s and NBP’s weaknesses include a lack of diversification. NBP’s primary competitors have very diversified businesses that lower their risk substantially and create a more sustained level of profitability.  All of NBP’s major beef processing competitors also process pork.  Although NBP is believed to have outperformed the beef operations of its competitors, its diversified competitors often have the ability to cover losses in beef processing with significant profits in other businesses such as pork, poultry and international operations, and to obtain the benefits of geographically diversified beef processing facilities.

NBP and USPB are facing a set of competitors that are anchored deep in beef processing, have well diversified operations, and hold substantial financial strength.

As discussed above, USPB and the other owners of NBP have negotiated a purchase agreement, subject to certain approvals and conditions including the approval of USPB’s members, to sell a substantial portion of the ownership in NBP in a transaction that values the ownership of NBP at $1.15 billion in equity value.  This purchase agreement contains provisions that ensure the continuance of our current value based pricing system whereby USPB would continue to have a cattle purchase and sale agreement with NBP to deliver 735,385 head of cattle annually, plus or minus 10%. The purchase price for cattle purchased by NBP shall be determined pursuant to USPB’s pricing grids for cattle to be delivered by USPB’s unitholders and associates.

The board unanimously approved the proposed transaction because, among other reasons, it enables USPB to realize an attractive price for a portion of its processing ownership and to distribute a significant portion of the consideration to USPB’s unitholders. Additionally, USPB will retain an ongoing equity interest in NBP. A key factor in the Board’s approval of the proposed transaction is that USPB’s unitholders can continue to enjoy USPB’s original objectives including assurance of market access, value based pricing, and processing ownership, while substantially reducing the risk of loss of capital arising from participation in the beef industry.

In addition to the key issues described above, the Company’s board of directors considered positive factors in its deliberations, including:

·                  that the proposed transaction consideration payable to the Company totals approximately $646.8 million. The cash consideration provides immediate liquidity and certainty of value to USPB and its unitholders, compared to a transaction in which USPB would receive only stock in a potential acquirer, all while USPB retains a continued ownership interest in beef processing;

·                  that the proposed transaction will provide cash consideration sufficient to allow USPB to repay all outstanding patronage notices, which total approximately $42.1 million. The remaining cash represents a value of $77 per USPB Class A and $676 per Class B unit. The Company intends to distribute approximately $70 (before applicable tax withholding, if any) per Class A unit and $617 per Class B unit;

·                  that the Company’s unitholders will continue to have the right to deliver cattle to NBP pursuant to the Cattle Purchase and Sale Agreement to be entered into between the Company and NBP at the closing and will continue to have access to value-based pricing for their cattle;

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·                 the opinion of CC Capital Advisors to the effect that, as of December 5, 2011 and based upon and subject to the assumptions made, matters considered, qualifications and limitations on the scope of review undertaken by CC Capital Advisors, as set forth in its written opinion, the consideration to be received by USPB pursuant to the purchase agreement was fair, from a financial point of view, to USPB;

·                 the assessment, after discussion with CC Capital Advisors, among others, that LUK has the financial capability to complete the proposed transaction;

·                 the assessment of the board and management that the retention of the 15.1% ownership interest in NBP represents a method for continuing ownership in the beef processing industry.  By teaming with LUK, USPB believes that its unique integrated strategy and successful business platform will allow NBP and USPB to be well positioned for future competition and growth, with reduced risk in the competitive beef industry;

·                 the view of USPB’s board of directors, after receiving the advice of management and after consultation with USPB’s legal advisors, that regulatory approvals necessary to complete the proposed transaction are likely to be obtained; and

·                 the fact that the purchase agreement would be subject to the approval of the Company’s members and that the members would be free to reject the purchase agreement and the proposed transaction, subject to the payment of up to $2.5 million of expenses incurred by LUK in pursuing the proposed transaction.

USPB’s board of directors also considered potential drawbacks and risks relating to the proposed transaction, including the following:

·                 the purchase agreement precludes NBP, TMK Holdings, LLC and the Sellers from soliciting alternative transaction proposals;

·                 NBP would be obligated to pay the termination fee of $35.0 million, as described in the purchase agreement, if the purchase agreement is terminated because USPB approves a superior proposal, which may discourage others from proposing an alternative transaction involving NBP and USPB;

·                  although the proposed transaction is expected to be completed, there can be no assurance that all conditions to the parties’ obligations to complete the proposed transaction will be satisfied, and as a result, it is possible that the proposed transaction may not be completed even if the purchase agreement is adopted by USPB’s members.  USPB and NBP have each already incurred significant costs and expenses and each may incur significant additional risks and costs, including the possibility of disruption to business operations, diversion of management and employees, employee attrition and a potentially negative effect on business and customer relationships if the proposed transaction is not completed;

·                 the risk that the proposed transaction may not be approved by the appropriate governmental authorities; and

·                 the fact that the proposed transaction will be a taxable event; and

·                 the probable need to change USPB’s fiscal year to end on the last Saturday in December of each year, to conform with the fiscal year NBP is expected to adopt upon completion of the proposed transaction.

Structure of the Proposed Transaction

NBP, its members including USPB and TMK Holdings, LLC, entered into a Membership Interest Purchase Agreement with LUK dated December 5, 2011 (the “purchase agreement”).  The purchase agreement provides that LUK will purchase approximately 79.6% of the ownership of NBP from USPB and NBPCo for total consideration of approximately $875.4 million.  Immediately after consummation of that sale, two entities (TKK Investments, LLC and TMKCo, LLC) controlled by NBP’s Chief Executive Officer, Timothy Klein will sell NBP ownership interests representing 4.3731% of NBP to NBP for cash consideration of approximately $75.9 million.  Immediately after that transaction, another entity owned and controlled by Mr. Klein, TMK Holdings, LLC, will purchase an ownership interest of approximately 0.7% in NBP from LUK for a cash payment of $7,500,000.  Upon completion of those proposed transactions, LUK will hold approximately 78.9% of the ownership of NBP, USPB will hold

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approximately 15.1% of the ownership of NBP, NBPCo will hold approximately 5.3% of the ownership in NBP and Mr. Klein, through TMK Holdings, LLC, will own approximately 0.7% of the ownership in NBP.

The proposed transaction values the equity ownership of NBP at $1.15 billion and USPB’s current fully-diluted ownership interest of approximately 70.7% of NBP at approximately $812.5 million.  If the proposed transaction is completed, USPB will sell approximately 79.6% of its fully-diluted ownership in NBP (representing approximately 56.2% of the total ownership in NBP) to LUK for a cash purchase price of approximately $646.8 million.  However, approximately $37.0 million of the approximate $646.8 million to be received by USPB will be held in escrow pursuant to the escrow agreement described on page 38 of this proxy statement, as a source of payment for any indemnification claims made by LUK following completion of the transaction.  As a result, if the proposed transaction is completed, USPB expects to receive approximately $609.8 million in immediately available funds upon completion of the proposed transaction.

Distributions to USPB’s Unitholders; Taxable Gain from the Transaction

As described above, the proposed transaction will provide USPB with an immediate cash payment of approximately $609.8 million, allowing USPB to utilize the cash proceeds from the proposed transaction to repay all patronage notices, which total approximately $42.1 million. The remaining cash represents a value of $77 per USPB Class A unit and $676 per USPB Class B unit. USPB intends to distribute approximately $70 (before applicable tax withholding, if any) per Class A unit and $617 (before applicable tax withholding, if any) per Class B unit in cash approximately 30 days after closing. In addition, within approximately 45 days of closing, USPB intends to send a check representing repayment of the full amount of the outstanding patronage notices to each party, including members and unitholders, who hold such patronage notices.

USPB will recognize gain on the sale of the units in NBP in an amount equal to the excess of (1) USPB’s “amount realized” for federal income tax purposes, which equals the sum of the amount of cash consideration received (including any amounts of cash withheld), and USPB’s share of NBP’s pre-sale liabilities attributable to the units in NBP being sold, over (2) USPB’s adjusted tax basis in the units in NBP being sold (including the basis attributable to the share of pre-sale liabilities of NBP allocable to the units of NBP being sold).  You will be required to report on your federal income tax return your allocable share of USPB’s gain from the transaction as so calculated.

Although you will be required to report on your federal income tax return your allocable share of USPB’s gain from the transaction, any cash distributions from USPB to you generally will not trigger additional tax liability for federal income tax purposes except to the extent that the amount of cash distributed exceeds the adjusted tax basis of your interest in USPB immediately before the distribution.  Applicable regulations provide that advances of money against a partner’s distributive share of income are treated as if made on the last day of the partnership’s taxable year.  A partner’s basis in the partnership generally is increased by the partner’s allocable share of the partnership’s taxable (and other) income and decreased by the partner’s allocable share of losses and other distributions of the partnership, and allocations of income and loss generally are made on the last day of a partnership’s taxable year.  Because distributions to you of the cash proceeds of the sale will be made subject to your obligation to return any amount in excess of your allocable share of USPB’s taxable income for the year of the sale, they will be treated for federal income tax purposes as if made on the last day of USPB’s taxable year, after allocations to you of USPB income, if any.  As a result, for purposes of determining whether distributions to you of cash proceeds from the Sale exceed the adjusted tax basis of your interest in USPB, the adjusted tax basis of your interest in USPB will include your allocable share of any gain USPB recognized as a result of the Sale.  USPB expects that aggregate distributions to you during the year of the Sale, including distributions of cash proceeds of the sale, generally will not exceed your allocable share of USPB’s income for the year of the sale and therefore such distributions generally will not be taxable for federal income tax purposes and will not be required to be returned to USPB.

Regulatory Approvals Required to Complete the Proposed Transaction

The proposed transaction with LUK is subject to the condition that all consents and approvals of any governmental authority required to consummate the proposed transaction shall have been obtained and remain in full force and effect and all statutory waiting periods in respect thereof shall have expired or been terminated.

Hart-Scott-Rodino Act

The proposed transaction is subject to the requirements of the Hart-Scott-Rodino Antitrust Act of 1976, as amended (the “HSR Act”), and the rules and regulations promulgated thereunder, which provide that some acquisition transactions may not be completed until required information has been furnished to the FTC, the Antitrust Division of the Department of Justice, and any applicable foreign jurisdictions and until the waiting period

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has been terminated or has expired. LUK and NBP intend to file the required HSR Act notifications with the Antitrust Division, the FTC and applicable foreign jurisdictions as soon as practicable following the date of this proxy statement, at which time the 30-day waiting period will commence (subject to the right of the Antitrust Division and the FTC to request additional information regarding the parties and the proposed transaction, which could extend the waiting period).

The parties may request early termination of the waiting period, however, there can be no assurance that such early termination will be granted and, even if granted, the termination of the HSR Act waiting period does not preclude the Antitrust Division, the FTC or others from challenging the proposed transaction on antitrust grounds and seeking to preliminarily or permanently enjoin the proposed transaction or challenge the completed transaction. Neither NBP, the Sellers, nor LUK believes that the proposed transaction will violate federal antitrust laws, but there can be no guarantee that the Antitrust Division, the FTC or others will not take a different position.

Other Regulatory Filings

The parties do not believe that any other filings with any other governmental agency or regulatory authority will be required to be made prior to or as a condition of closing the proposed transaction. LUK and NBP may, however, be required to make certain filings with foreign and domestic governmental agencies following the closing.

Opinion of CC Capital Advisors to USPB’s Board of Directors

On June 15, 2011 USPB’s board of directors engaged CC Capital Advisors to review the proposed transaction and to provide an opinion as to whether the proposed transaction was fair, from a financial point of view, to USPB. On November 14, 2011, CC Capital Advisors presented and discussed with USPB’s board of directors a draft of the basis of its opinion and opinion letter and provided the board updated information and confirmation of its opinion on November 29, 2011, contingent on the final details of the transaction, which opinion was subsequently confirmed by delivery of a written opinion dated December 5, 2011. The opinion states that, as of such date, and based upon and subject to various assumptions made, and such other matters considered relevant in the opinion, the consideration of approximately $646.8 million in cash for 79.6% of USPB’s ownership in NBP (approximately 56.2% of NBP) was fair, from a financial point of view, to USPB.

The full text of CC Capital Advisors written opinion, dated as of December 5, 2011, which sets forth, among other things, the assumptions made, procedures followed, matters considered, and limitations of the review undertaken in connection with the opinion, is attached as Appendix B to this proxy statement and is incorporated by reference herein.  CC Capital Advisors opinion relates solely to the fairness, from a financial point of view, of the consideration to be received by USPB and does not address the fairness of any other aspect of the transaction.  The opinion does not address USPB’s underlying business decision to effect the transaction.  The opinion does not constitute a recommendation to any member of USPB as to how such member should vote in connection with the transaction.  CC Capital Advisors expressed no opinion as to the fairness of the consideration to be received by other equity holders of NBP in the transaction or the fairness of the amount to be received by USPB in relationship to that received by other equity holders of NBP in the transaction. You are encouraged to read CC Capital Advisors opinion carefully in its entirety.

In connection with rendering the opinion described above and performing its related financial analyses, CC Capital Advisors performed the following:

1.               Held discussions with USPB, NBP, and LUK management;

2.               Reviewed drafts of the Membership Interest Purchase Agreement and other relevant documents pertaining to the transaction;

3.               Reviewed certain internal financial and operating information, including financial forecasts, analyses and projections prepared by NBP and provided to CC Capital Advisors for its analysis;

4.               Reviewed the financial valuation in the transaction relative to recent similar transactions in the protein industry;

5.               Reviewed the valuation of similar companies in the public market place;

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6.               Reviewed the prospects of NBP as a standalone entity, including industry considerations and the discounted cash flow of its projected financial results;

7.               Reviewed the historic operations and investment holdings of LUK by considering publicly available information, including analyst reports, and having discussions with its management;

8.               Reviewed other relevant information that CC Capital Advisors deemed necessary to assess the transaction;

In its review and analysis, CC Capital Advisors assumed and relied upon the accuracy and completeness of all of the financial and other information provided to them.  CC Capital Advisors was not engaged to, and did not attempt to, independently verify any of such information and relied upon the assurances of management of NBP that they are not aware of any facts or circumstances that would make such information inaccurate or misleading. CC Capital Advisors’ opinion was based on economic and market conditions and other circumstances existing on, and information made available to it as of the date of the opinion and CC Capital Advisors assumed no responsibility for updating, revising or reaffirming its opinion based on circumstances, developments or events occurring after the date of its opinion.

With respect to the financial and operational forecasts made available to CC Capital Advisors by management of NBP and used in CC Capital Advisors analysis, CC Capital Advisors assumed that such financial and operational forecasts were reasonably prepared on bases reflecting the best currently available estimates and judgments of management as to the matters covered thereby.  CC Capital Advisors was not engaged to assess the achievability of such projections or the assumptions on which they were based and expressed no view as to such projections or assumptions.  CC Capital Advisors did not conduct a physical inspection or appraisal of any of the assets or liabilities of the Company nor were they furnished with any such evaluation or appraisal.

CC Capital Advisors performed a variety of financial and comparative analyses regarding the valuation of NBP, including a peer group analysis comparing the financial performance and market valuation ratios of NBP with those of publicly traded protein companies deemed comparable to NBP; precedent merger and acquisition transactions that have taken place in the protein industry; and a discounted cash flow analysis of NBP’s projected, unlevered cash flows.

The preparation of a fairness opinion is a complex process involving various determinations as to the most appropriate and relevant methods of financial analyses and the application of those methods to the particular transaction and, therefore, is not necessarily susceptible to partial analysis or summary description. Accordingly, CC Capital Advisors believes that its analyses and the summary set forth below must be considered as a whole and that selecting portions of its analyses and factors, without considering all analyses and factors, could create a misleading or incomplete view of the processes underlying CC Capital Advisors analyses and opinion. CC Capital Advisors arrived at its ultimate opinion based on the results of all analyses undertaken by it and assessed as a whole.

Peer Group Analysis

CC Capital Advisors compared certain financial information of NBP with corresponding financial information for selected publicly traded protein companies that CC Capital Advisors deemed appropriate.  The companies reviewed in connection with this analysis were Tyson, Smithfield, Pilgrim’s Pride, Sanderson, JBS, Marfrig and Minerva.  Of the seven public peer companies, Tyson and Smithfield were determined to be the most appropriate and comparable. CC Capital Advisors reviewed, among other data, market value of equity to book value ratios, enterprise value as a multiple of EBITDA and price-to-earnings multiples. CC Capital Advisors used the range of multiples derived from Tyson’s and Smithfield’s trailing 30 day market volume weighted average enterprise value to EBITDA ratio multiplied times the trailing twelve months (TTM) EBITDA for NBP to compute a range of equity values for NBP. The derived range of equity values for NBP using multiples of EBITDA was $1,107 million to $1,266 million. CC Capital Advisors then used the range of multiples derived from Tyson’s and Smithfield’s trailing 30 day market volume weighted average price-to-earnings ratio multiplied times the trailing twelve months (TTM) net tax adjusted earnings for NBP to compute a range of market values of equity for NBP.  The derived range of equity values for NBP, using multiples of earnings, was from $1,107 million to $1,330 million. CC Capital Advisors then used the range of multiples derived from the selected companies’ trailing 30 day market volume weighted average market value to book value of equity ratio multiplied times NBP’s book value at August 27,2011 to compute a range of market values of equity for NBP. The derived range of equity values for NBP, using market value as a multiple of book value, was $359 million to $427 million. These ranges of equity value were then

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compared to the implied transaction consideration of $1,150 million being offered to NBP shareholders in the transaction.

Precedent Merger and Acquisition Transactions

CC Capital Advisors reviewed eight previous merger and acquisition transactions involving publicly traded companies in the protein industry.  The transactions selected, with the target company listed first and then the acquirer, were Gold Kist/Pilgrim’s Pride, Premium Standard Farms/Smithfield, Swift & Co./JBS, Smithfield Beef Group/JBS, Tasman Group/JBS, Pilgrim’s Pride/JBS, Seara/Marfrig, and Keystone Foods/Marfrig.  CC Capital Advisors reviewed the multiples of enterprise values to the trailing twelve months (TTM) EBITDA for the selected transactions.  Multiples for the selected transactions were based on publicly available information at the time of the announcement of the transaction.  While the publicly available merger and acquisition EBITDA multiples indicate higher values than the consideration being received by USPB, they represent only one measure of value.  CC Capital Advisors also weighted this factor less than other analyses because many of the transactions were completed in a different economic environment and reflect different industry and strategic characteristics of the target companies.  The derived range of equity values for NBP using these multiples of EBITDA was $1,506 million to $2,024 million. CC Capital Advisors then used the range of multiples derived from the selected companies’ market value to book value of equity ratio multiplied times NBP’s book value at August 27, 2011 to compute a range of market values of equity for NBP.  The derived range of equity values for NBP, using market value as a multiple of book value, was $273 million to $786 million.  These ranges of equity value were then compared to the implied transaction consideration of $1,150 million being offered to NBP shareholders in the transaction.

Discounted Cash Flow

CC Capital Advisors performed a discounted cash flow analysis to calculate the estimated present value of the stand-alone, unlevered, after-tax free cash flows that NBP could generate over the period from the fiscal year ending August 27, 2011 through the fiscal year ending August 29, 2015 based on internal estimates NBP management provided to CC Capital Advisors.  CC Capital Advisors calculated a range of terminal values for NBP by applying EBITDA exit multiples, derived from comparable Tyson and Smithfield 30 day market volume weighted average multiples of 4.37 to 4.86 times NBP’s projected EBITDA for the fiscal year ending August 29, 2015. The cash flows and terminal values were then discounted to present value using after-tax discount rates from 9.5% to 13.5%, based on CC Capital Advisors estimate of NBP’s weighted average cost of capital. This analysis provided a reference range for the market capitalization of equity for NBP of $1,032 million to $1,328 million. These ranges of equity value were then compared to the implied transaction consideration of $1,150 million being offered to NBP shareholders in the transaction.

Summary

The following is a summary of the material financial analyses performed by CC Capital Advisors and reviewed by the board of directors of the Company in connection with CC Capital Advisors opinion relating to the transaction.

Other

CC Capital Advisors is an independent investment banking firm that is regularly engaged to render financial opinions in connection with proposed transactions and acquisitions, corporate reorganizations, strategic planning, and other purposes.

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USPB has paid CC Capital Advisors a fee of $225,000 in connection with the services provided by it under this engagement and may pay additional fees for additional services in connection with the proposed transaction.  No portion of CC Capital Advisors’ fee was contingent upon consummation of the proposed transaction or the conclusion reached by CC Capital Advisors in its fairness opinion.  USPB has also agreed to reimburse CC Capital Advisors for its expenses incurred in performing its services and to indemnify CC Capital Advisors and its affiliates, their respective directors, officers, agents and employees against certain liabilities and expenses, including certain liabilities under federal securities laws, related to or arising out of CC Capital Advisors engagement and any related transactions.

THE PURCHASE AGREEMENT

The following summary describes certain aspects of the purchase agreement, including material provisions of the purchase agreement. This summary is not complete and is qualified in its entirety by reference to the purchase agreement.   A copy of the purchase agreement in substantially the form executed by USPB is attached as Appendix A to this proxy statement and is incorporated herein by reference. This summary may not contain all of the information about the proposed transaction that is important to you. Members should read the attached purchase agreement in its entirety.

The purchase agreement has been included to provide you with information regarding its terms. It is not intended to provide any other factual information about USPB. Such information can be found elsewhere in this proxy statement and in the other public filings USPB makes with the SEC, which are available without charge at www.sec.gov.

Structure of the Proposed Transaction; Purchase Price

NBP, its members including USPB, and TMK Holdings, LLC entered into a Membership Interest Purchase Agreement with LUK dated December 5, 2011 (the “purchase agreement”).  The purchase agreement provides that LUK will purchase approximately 79.6% of the ownership of NBP from USPB and NBPCo for total consideration of approximately $875.4 million.  Immediately after consummation of that sale, two entities (TKK Investments, LLC and TMKCo, LLC) controlled by NBP’s Chief Executive Officer, Timothy Klein will sell NBP ownership interests representing approximately 4.4% of NBP to NBP for cash consideration of approximately $75.9 million.  Immediately after that transaction, another entity owned and controlled by Mr. Klein, TMK Holdings, LLC, will purchase an ownership interest of approximately 0.7% in NBP from LUK for a cash payment of $7,500,000.  Upon completion of those proposed transactions, LUK will hold 78.9478% of the ownership of NBP, USPB will hold approximately 15.1% of the ownership of NBP, NBPCo will hold approximately 5.3% of the ownership in NBP and Mr. Klein, through TMK Holdings, LLC, will own approximately 0.7% of the ownership in NBP.  In connection with the transactions contemplated by the purchase agreement, NBP has caused the formation of a new entity, National Beef Pennsylvania, LLC.  In connection with the proposed transactions, NBP will contribute all of the tangible or intangible assets it holds in the Commonwealth of Pennsylvania to National Beef Pennsylvania, LLC.  Subsequent to the closing of transactions contemplated by the purchase agreement, NBP will distribute all of the ownership interests in National Beef Pennsylvania, LLC to LUK, USPB, NBPCo and TMK Holdings, LLC, such that those parties hold 100% of the ownership of National Beef Pennsylvania, LLC in proportion to their ownership of NBP.

The proposed transaction values the equity ownership of NBP at $1.15 billion and USPB’s current fully-diluted ownership interest of approximately 70.7% of NBP at approximately $812.5 million.  If the proposed transaction is completed, USPB will sell approximately 79.6% of its fully-diluted ownership in NBP (representing approximately 56.2% of the total ownership in NBP) to LUK for a cash purchase price of approximately $646.8 million.  However, approximately $37.0 million of the approximate $646.8 million to be received by USPB will be held in escrow pursuant to the escrow agreement described below, as a source of payment for any indemnification claims made by LUK following completion of the transaction.  As a result, if the proposed transaction is completed, USPB expects to receive approximately $609.8 million in immediately available funds upon completion of the proposed transaction.

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Indemnification of LUK; Escrow Agreement

Indemnification for Breach of NBP Representation or Warranty

Under the purchase agreement, USPB and NBPCo agree to indemnify LUK and its affiliates, successors and assigns (each a “Buyer Indemnified Person”) from and against any and all losses that any Buyer Indemnified Person incurs by reason of or arising out of or in connection with any breach or inaccuracy of any representation or warranty of NBP in Article III of the purchase agreement, the schedules or exhibits to the purchase agreement or any certificate delivered to LUK by NBP pursuant to the purchase agreement, all without giving effect to any materiality or material adverse effect qualifications contained in such representations or warranties except for NBP’s representation and warranty that no events or changes have occurred during the period between May 28, 2011 and the date of that closing that would reasonably be expected to have a material adverse effect on NBP.  USPB and NBPCo also agree to indemnify LUK and any other Buyer Indemnified Persons against any breach by NBP of any of the covenants or agreements contained in the purchase agreement or the schedules or exhibits to the purchase agreement.  Under the purchase agreement, USPB has also agreed to indemnify LUK and any other Buyer Indemnified Persons for any and all losses arising from USPB’s solicitation of USPB member approval of the proposed transactions.

Indemnification for Breach of Seller or TMK Holdings, LLC Representation or Warranty

Under the purchase agreement, each Seller and TMK Holdings, LLC agrees to indemnify LUK from and against any and all losses that LUK or any other Buyer Indemnified Person incurs by reason of or arising out of or in connection with any breach or inaccuracy of any representation or warranty of such Seller or TMK Holdings, LLC in the purchase agreement, the schedules or exhibits to the purchase agreement or any certificate delivered to LUK by a Seller or TMK Holdings, LLC pursuant to the purchase agreement.  Each Seller and TMK Holdings, LLC is also obligated to indemnify LUK and any other Buyer Indemnified Persons against any breach by such party of any of the covenants or agreements contained in the purchase agreement or the schedules or exhibits to the purchase agreement.

Environmental Indemnification

Under the purchase agreement, USPB and NBPCo also agree to indemnify NBP and any Buyer Indemnified Person with respect to 50% of any losses incurred by NBP or a Buyer Indemnified Person arising out of any obligation to pursue remedial activities with respect to any hazardous materials that may be discovered at NBP’s leather and tanning facility in St. Joseph, Missouri during contemplated construction activities at such site.  USPB and NBPCo will not be responsible for any such environmental indemnification unless the loss arising from such matters, in the aggregate, exceeds $1,000,000 and remedial action with respect to the hazardous materials is required under applicable environmental laws.  This indemnification obligation is also subject to the limitations described below in the section entitled “Limitations on Indemnification.”

Limitations on Indemnification for Breach of NBP Representation or Warranty

The maximum aggregate liability of USPB and NBPCo under the indemnification provisions for NBP’s breach of a representation, warranty, covenant or agreement is limited to $50,000,000, provided, that USPB and NBPCo will not become responsible for indemnification of NBP’s breach of any representation, warranty, covenant or agreement (other than NBP’s environmental representations and warranties) unless the indemnity amounts in the aggregate exceed $5,000,000 (the “Tipping Basket”), at which point USPB and NBPCo will be responsible to indemnify LUK for the amounts included in calculating the Tipping Basket.  In addition, individual losses of less than $1,000,000 will not be included in calculating the amount of losses for purposes of determining the Tipping Basket.  These limitations on USPB and NBPCo’s indemnification obligations do not apply if the loss to LUK arises from actual and knowing fraud by NBP and a Seller or for certain essential representations and warranties of NBP, including, but not limited to, NBP’s representations regarding: NBP’s organization and qualification; NBP’s authorization of the purchase agreement and the proposed transactions; NBP’s capital structure and the capital structure of its subsidiaries; the involvement of any broker in the proposed transactions and certain NBP representations regarding taxes on profits earned by NBP prior to the closing of the proposed transaction. A claim for a breach of any NBP representation or warranty must be submitted within two years after the closing date; provided, that indemnification claims with respect to NBP’s breach of its representations and warranties regarding NBP’s organization and qualification, NBP’s authorization of the purchase agreement and the proposed transactions, NBP’s capital structure and the capital structure of its subsidiaries and the involvement of any broker in the

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proposed transactions may be raised by a  Buyer Indemnified Person at any time after the closing.  Indemnification claims with respect to tax liabilities arising from profits earned by NBP prior to the closing of the proposed transaction may be raised at any time before the end of the 60 day period beginning upon expiration of the applicable statute of limitations associated with such tax matters.   A claim for indemnification associated with USPB’s or NBPCo’s breach of any of such party’s representations, warranties, covenants or agreements must be submitted within two years after the closing date; provided, that indemnification claims with respect to USPB’s breach of its representations and warranties regarding USPB’s authorization of the purchase agreement and the proposed transactions, USPB’s execution and performance of the purchase agreement and associated transaction documents, the absence of other necessary consents, the binding nature of USPB’s agreements and USPB’s ownership of the NBP interests to be sold to LUK may be raised by a Buyer Indemnified Person at any time after the closing.

Obligations of Sellers and TMK Holdings, LLC

The obligations of the Sellers and TMK Holdings, LLC under the indemnification provisions is several and not joint, with the maximum amount of each of USPB and NBPCo’s obligations for NBP’s breach of its representations, warranties, covenants and agreements, including the environmental representation and warranties, limited to that portion of the indemnification amount payable to LUK which is proportionate to USPB or NBPCo’s share of the aggregate consideration paid to USPB and NBPCo pursuant to the purchase agreement.  In addition, NBPCo’s maximum aggregate liability for NBP’s breach of a representation, warranty, covenant or agreement is limited to NBPCo’s portion of the purchase price and the maximum aggregate liability of the Seller entities controlled by Mr. Timothy M. Klein with respect to breach of such entities’ representations and warranties is limited to the value of the NBP ownership interests owned by those entities.

Escrow Agreement

In order to provide LUK with assurance regarding USPB and NBPCo’s indemnification obligations, as a condition to the closing of the proposed transaction, USPB, NBPCo, Leucadia and Marshall & Ilsley Trust Company N.A., part of the BMO Harris family of financial enterprises (the “Escrow Agent”) will enter into the escrow agreement in substantially the form attached to the purchase agreement (the “Escrow Agreement”).  The Escrow Agreement, together with the purchase agreement, sets forth the terms under which $50 million of the purchase price (the “Escrow Fund”) will be held, invested and disbursed.

At the closing of the proposed transaction, the Escrow Fund will be deposited into an escrow account with the Escrow Agent.  Obligations of USPB and/or NBPCo pursuant to Article VIII of the purchase agreement to indemnify Leucadia, its affiliates, successors and assigns (the “Buyer Indemnified Person”) shall first be satisfied from the Escrow Fund.  Upon receipt of (i) an indemnification notice from Buyer that is not followed by a rejection notice from Seller within the applicable time period specified in the Escrow Agreement, (ii) a joint written instruction executed by USPB, NBPCo and LUK, or (iii) a certified copy of a final court order, the Escrow Agent shall release the amount set forth in the written instructions or court order from the Escrow Fund to the Buyer Indemnified Person.  If the Buyer Indemnified Person has not properly submitted any claims for indemnification on or prior to the one year anniversary of the closing of the proposed transaction, then $20 million of the Escrow Fund shall be released to USPB and NBPCo by the Escrow Agent pursuant to written instructions signed by USPB and NBPCo providing for the allocation of the $20 million.  On the two year anniversary of the Closing, the positive amount, if any, remaining in the Escrow Fund, after satisfying the unsettled claims of the Buyer Indemnified Person properly made before the two year anniversary, shall be released to USPB and NBPCo pursuant to written instructions signed by USPB and NBPCo providing for the allocation of the final amount released.

The Escrow Agreement requires payment of an annual administration fee to the Escrow Agent in the amount of $2,500 along with certain miscellaneous fees that may arise, all to be paid equally by USPB and NBPCo on the one hand and LUK on the other hand.  USPB, NBPCo and LUK jointly and severally are obligated to indemnify the Escrow Agent for liabilities and expenses incurred by the Escrow Agent in connection with the Escrow Agreement and not due to a breach of the Escrow Agent’s duties or willful misconduct.  The Escrow Agreement will terminate upon distribution of the entire fund.

Representations and Warranties of the Parties

The purchase agreement contains customary representations and warranties of NBP relating to its businesses, as well as representations and warranties of LUK, each of the Sellers and TMK Holdings, LLC, separately, pertaining

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to their respective rights and authority to enter into the purchase agreement.  The representations and warranties of each of NBP, the Sellers and TMK Holdings, LLC, on the one hand, and LUK, on the other, have been made solely for the benefit of the other party(ies) and are not to be relied upon by any other person. In addition, such representations and warranties: (i) in some cases, have been qualified or modified by information set forth in the confidential disclosure schedules exchanged by the parties in connection with the execution of the purchase agreement or are subject to materiality standards that may be different from what you may consider to be material; and (ii) were made as of the date of the purchase agreement and, subject to supplementation and delivery to LUK by NBP of any changes, as of the closing of the proposed transaction, except as specifically noted otherwise.

NBP, LUK, TMK Holdings, LLC and each of the Sellers has made representations and warranties to one another regarding, among other things:

·                 corporate matters, including due organization, qualification and good standing;

·                 power and authority to execute and deliver the purchase agreement and the absence of conflicts with, or violations of, organizational documents or other obligations as a result of the proposed transaction;

·                 governmental filings and consents necessary to complete the proposed transaction;

·                 each Seller’s title to the NBP ownership interests to be sold to LUK pursuant to the purchase agreement;

·                 LUK’s financial ability to complete the transactions contemplated by the purchase agreement;

·                 the absence of any party’s knowledge of misrepresentations or omissions in representations and warranties in the purchase agreement and associated disclosure schedules; and

·                 absence of material legal proceedings against LUK.

In addition to the above, NBP has made other representations and warranties to LUK regarding, among other things:

·                 capital structure of NBP and its subsidiaries;

·                 delivery and accuracy of financial statements, including no unreported material liabilities;

·                 absence of certain changes or events;

·                 validity and full force and effect of material contracts and commitments;

·                 title to, and encumbrances on, NBP’s real and personal property;

·                 intellectual property rights;

·                 employee benefit plans;

·                 compliance with applicable laws, including securities laws;

·                 environmental compliance and reports;

·                 employee and labor matters; and

·                 no liability for broker’s fees payable in connection with the proposed transaction.

In addition, USPB also represented and warranted to LUK that the USPB Board of Directors has unanimously approved the purchase agreement and will unanimously recommend approval of the purchase agreement and the proposed transactions to the USPB members and has agreed that it will seek the approval of the purchase agreement from its members in accordance with the conditions set forth in the purchase agreement.

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Survival of Representations and Warranties

The representations, warranties and covenants made by USPB under the purchase agreement are made as of the date of the purchase agreement and as of the closing and will terminate on the second anniversary of the closing date or upon termination of the purchase agreement, as described below under the section titled “Termination of the Purchase Agreement.” Notwithstanding the general period of survival of USPB’s representations and warranties, USPB’s representations and warranties regarding USPB’s authorization of the purchase agreement and the proposed transactions, USPB’s execution and performance of the purchase agreement and associated transaction documents, the absence of other necessary consents, the binding nature of USPB’s agreements and USPB’s ownership of the NBP interests to be sold to LUK will survive indefinitely.

The representations, warranties and covenants made by NBP under the purchase agreement are as of the date of execution of the purchase agreement and as of the closing and will terminate two years after the closing date or upon termination of the purchase agreement, as described below under the section titled “Termination of the Purchase Agreement.” Notwithstanding the general period survival of NBP’s representations and warranties, NBP’s representations and warranties regarding NBP’s organization and qualification, NBP’s authorization of the purchase agreement and the proposed transactions, NBP’s capital structure and the capital structure of its subsidiaries and the involvement of any broker in the proposed transactions shall survive indefinitely.  NBP’s representations with respect to tax liabilities arising from profits earned by NBP prior to the closing of the proposed transaction shall survive until the end of  the 60 day period beginning upon expiration of the applicable statute of limitations associated with such tax matters.

The foregoing notwithstanding, the limitations on the survival of the Sellers’ and NBP’s representations, warranties and covenants shall not limit any covenant or agreement that contemplates performance or creates rights or remedies after the closing or the termination of the purchase agreement.

Covenants of the Parties

Conduct of NBP’s Business Pending the Close of the Transaction

Under the purchase agreement, NBP has undertaken customary covenants that place restrictions on it and its subsidiaries until the closing of the proposed transaction. In general, NBP has agreed that it will conduct its business in the ordinary course including preserving its goodwill and business relationships and maintaining its and its subsidiaries’ material assets. NBP has further agreed that, with certain exceptions, it will not and will not permit its subsidiaries to, among other things, undertake the following actions outside of the ordinary course of business:

·                 modify, amend, terminate or fail to renew any material contract, or waive, release or assign any material rights or material claims thereunder;

·                 adopt a plan of complete or partial liquidation, dissolution, merger, consolidation, restructuring, recapitalization or other reorganization of NBP or any of its material subsidiaries;

·                 make or offer to make any change in the compensation payable or to become payable to any of its officers, directors, employees, agents or consultants or to persons providing management services, or enter into, adopt, amend or terminate any employment, severance, consulting or other agreement or employee benefit plan or make any loans to any of its officers, directors, employees, affiliates, agents or consultants or make any change in its existing borrowing or lending arrangements for or on behalf of any of such persons;

·                 voluntarily mortgage, pledge or subject to any material lien any of its material assets;

·                 with certain exceptions, pay any pension or retirement allowance to any officer, director, employee of NBP or any of its subsidiaries, or pay, offer to pay or agree to pay or make any arrangement for payment to any officers, directors or employees of NBP or any of its subsidiaries of any amount relating to unused vacation days;

·                 transfer, grant or modify any rights or licenses under, or enter into any settlement regarding the breach or infringement of, any United States or foreign license of any intellectual property, or modify any existing rights with respect thereto;

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·                 except as required by generally accepted accounting principles, change any of the accounting principles or practices used by NBP or any of its subsidiaries;

·                 change any of its practices, policies, procedures or timing of the collection of accounts receivable, billing, payment terms, cash collections, cash payments, or terms with vendors;

·                 pay, discharge or satisfy any material claims, liabilities or obligations (whether absolute, accrued, asserted or unasserted, contingent or otherwise) that individually exceeds $500,000 or in the aggregate exceed $7,000,000;

·                 make any distributions to its members, other than distributions provided for in Section 5.2.1 (Tax Distributions) and Section 5.2.2 (Priority Return Distributions) of the NBP Limited Liability Company Agreement consistent with past practices of NBP and permitted under NBP’s credit agreement;

·                 offer, issue, sell, pledge, dispose of, encumber or grant rights with respect to (whether through the issuance or granting of any options, warrants, commitments, subscriptions, rights to purchase or otherwise) any member interests of any class or any securities convertible into or exercisable or exchangeable for member interests of any class (except for pledges of capital stock or securities under the NBP credit agreements and other than the issuance of certificates in replacement of lost certificates) or adjust or reclassify any of its equity securities or issue new equity securities;

·                 other than in connection with the repurchase of NBP ownership interests from entities controlled by Mr. Timothy Klein as contemplated by the purchase agreement, redeem or otherwise acquire NBP ownership interests or securities;

·                 change or amend its charter documents, certificate of formation, operating agreement, constitution, bylaws or other similar governing documents; provided that NBP may amend its LLC Agreement by the adoption of the Restated LLC Agreement, substantially in the form attached hereto as Appendix C;

·                 except under the NBP credit agreement and except for current liabilities incurred in the ordinary course of NBP’s business, incur or assume any indebtedness for borrowed money, assume, guarantee, endorse or otherwise become liable or responsible for the obligations of any other person or make any loans, advances or capital contributions to, or investments in, any person;

·                 make any settlement of or compromise any material tax liability or change in any material respect any tax election or tax method of accounting or make any new tax election or adopt any new tax method of accounting;

·                 make or commit to any capital expenditure other than as set forth in NBP’s current annual budget or, if not stated in such budget, make any individual capital expenditure in excess of $5,000,000 for maintenance purposes, an individual capital expenditure in excess of $2,000,000 for regulatory purposes or, in connection with growth or expansion purposes, make an individual capital expenditure in excess of $1,000,000 or aggregate capital expenditures in excess of $5,000,000; or

·                 authorize any of, or commit or agree to take any of, the foregoing actions.

No Solicitation of Alternative Transactions

The purchase agreement provides that neither any Seller, nor TMK Holdings, LLC, nor NBP or its subsidiaries will solicit, initiate or encourage the making of any proposal relating to the acquisition of assets of NBP representing 15% or more of NBP’s consolidated assets, the acquisition of  assets of NBP to which 15% or more of NBP’s consolidated revenues or earnings are attributable or any merger, consolidation, share exchange, business combination or similar transaction involving NBP, any of its subsidiaries or USPB. The purchase agreement also provides that neither any Seller, nor TMK Holdings, LLC, nor NBP shall authorize any investment bankers, consultants or other advisors to any Seller, NBP or subsidiaries of NBP to solicit, initiate, or encourage the making of any proposal described above. Further, USPB agrees that its board of directors will not withdraw or modify in any manner adverse to LUK its recommendation or declaration of advisability the approval of the purchase agreement or recommend, adopt or approve any other acquisition proposal that NBP or the Sellers receive. However, if the Sellers

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or NBP receive a bona fide acquisition proposal prior to approval of the purchase agreement by USPB’s members and USPB’s board of directors determines in good faith that the terms and conditions of such proposal are or are reasonably likely to be more favorable than the terms of the purchase agreement, then, after notifying LUK of the material conditions of the proposal and giving LUK an opportunity to make a new and binding offer in response, Sellers and NBP may:

·                 furnish information about NBP and the Sellers to the party making the acquisition proposal, subject to a confidentiality agreement;

·                 participate in discussions or negotiations with such party; and

·                 postpone any meeting of the USPB members to consider approval of the purchase agreement during the period when the USPB board of directors is determining if an acquisition proposal is or is reasonably likely to lead to a proposal superior to the transactions contemplated by the purchase agreement and during any period while Sellers and NBP are discussing or negotiating with regard to such alternative proposal, except that the period of any such postponement may not exceed 10 days, unless certain conditions are satisfied that allow the period of such postponement to extend for an additional 20 days.

In addition, USPB’s board of directors may:

·                 withdraw or modify its recommendation of the purchase agreement and cancel or postpone any meeting of USPB’s members if it determines in good faith, after consultation with legal counsel, that it is advisable to do so to comply with its duties to the members under applicable law because of a material event or development with respect to NBP (other than an alternative acquisition proposal) which was not known to the USPB board of directors as of the date of the purchase agreement; and

·                 in response to a superior proposal received prior to approval of the purchase agreement by USPB’s members, withdraw or modify its recommendation of the purchase agreement and cancel or postpone any meeting of USPB’s members and otherwise communicate with USPB’s members.  In addition, USPB may enter into an agreement with respect to such superior proposal if the purchase agreement is terminated by USPB and NBP pays LUK the termination fee described below.

Access to NBP Information

NBP and its subsidiaries will allow LUK and its authorized representatives access to information about NBP and its subsidiaries from the date of the purchase agreement up to and until the date of the closing or until termination of the purchase agreement and will also permit LUK to make such inspections of NBP facilities as LUK may request. However, prior to the closing date, neither NBP nor its subsidiaries will be required to provide LUK or its representatives with access to information related to NBP’s proprietary business strategy, NBP’s monitoring formula and process or information access to which is prohibited by law.

Governmental Consents; Antitrust Laws

Promptly following execution of the purchase agreement, the parties agree to file with the FTC and the DOJ the notifications and other information (if any) required to be filed under the Hart-Scott-Rodino Act (“HSR Act”) with respect to the proposed transaction.

The parties agree to use their commercially reasonable efforts to take, or cause to be taken, all actions, and to do, or cause to be done, all things necessary, proper or advisable (subject to any applicable laws) to consummate the proposed transaction as promptly as practicable, including that none of the Sellers, NBP nor LUK shall take any action after the date of the purchase agreement to materially delay the obtaining of, or result in not obtaining, any consent from any governmental entity necessary to be obtained prior to the closing.

The parties further agree that, except as to certain actions permitted under the purchase agreement, from the date of the purchase agreement through the date clearance is obtained or the date of termination of the required waiting period under the HSR Act and the antitrust laws of any applicable foreign jurisdictions, respectively, none of the parties or their affiliates will not take any action that could reasonably be expected to hinder or delay the

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obtaining of clearance or the expiration of the required waiting period under the HSR Act or any other applicable antitrust laws.

USPB Member Approval

Within 30 days after the execution of the purchase agreement but subject to extension of such 30 day period when USPB’s board of directors is considering a change of recommendation or alternative proposal as described above, USPB agrees to take all action necessary to properly call, give notice of, and convene a special meeting of its members seeking the approval and adoption of the purchase agreement and proposed transaction. Subject to the observation of the fiduciary duties of USPB’s board of directors to the members and the provisions of the purchase agreement described above, USPB’s board of directors shall recommend that USPB’s members approve and adopt the purchase agreement and approve the proposed transactions.

Conditions to the Proposed Transaction

Under the purchase agreement, the obligations of the Sellers and LUK to complete the proposed transactions are subject to satisfaction of a variety of conditions. While some of the conditions are mutual, many apply only with respect to either LUK or the Sellers.

Conditions to the Obligations of All Parties

The obligations of all parties to complete the proposed transaction are subject to the satisfaction or waiver of the following conditions:

·                 the waiting period applicable to the transaction under antitrust laws, including the HSR Act, have been terminated or have expired, and all consents, approvals, permits, authorizations and waiting periods have been obtained or expired, as the case may be;

·                 no temporary restraining order, preliminary or permanent injunction or other order preventing the consummation of the proposed transaction shall be in effect;

·                 no action shall have been taken nor any statute, rule or regulation shall have been enacted or promulgated by any governmental entity that prohibits consummation of the proposed transaction; and

·                 USPB’s members shall have approved the purchase agreement and the proposed transactions.

Conditions to the Sellers’ Obligations

The obligations of the Sellers to complete the proposed transaction are subject to the satisfaction or waiver of the following conditions:

·                 each of the representations and warranties of LUK set forth in the purchase agreement shall be true and correct in all material respects both as of the date of the purchase agreement and as of the closing date (other than such representations and warranties that are made as of another date, which shall be so true and correct as of that date); provided, however, that this condition shall be deemed to have been satisfied unless the individual or aggregate impact of all inaccuracies of such representations and warranties materially adversely affect the ability of LUK to timely consummate the proposed transaction;

·                 LUK shall have performed or complied in all material respects with all obligations and covenants required under the purchase agreement and the related transaction documents at or prior to the closing date;

·                 all required documents, instruments, certificates or other items, including the payments to be made at closing, shall have been delivered unless otherwise waived by the Sellers; and

·                 the Restated LLC Agreement of NBP shall have been executed by LUK and shall be in full force and effect.

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Conditions to LUK’s Obligations

LUK’s obligations to complete the proposed transaction are subject to the satisfaction or waiver of the following conditions:

·                 each of the representations of the Sellers and NBP with regard to (i) the Sellers’ authorization of the purchase agreement and the proposed transaction, (ii) the Sellers’ ownership of their respective interests in NBP, (iii) NBP’s organization and qualification, (iv) NBP’s authorization of the purchase agreement and the proposed transaction, (v) the capital structure of NBP and its subsidiaries, and (vi) the delivery and preparation of NBP’s financial statements are true and correct in all respects both as of the date of the purchase agreement and the closing date;

·                 each of NBP’s representations with regard to (i) NBP’s liabilities (ii) NBP’s representations regarding developments in its business in the period between May 28, 2011 and the date of the purchase agreement, (iii) NBP’s taxes, and (iv) the absence of any fees or commissions due to any broker in connection with the proposed transaction are true and correct in all material respects both as of the date of the purchase agreement and the closing date;

·                 all of the remaining representations and warranties of the Seller’s and NBP contained in the purchase agreement are true and correct in all respects both as of the date of the purchase agreement and the closing date, provided, however, that the purchase agreement specifies that this condition will be deemed to have been satisfied unless the individual or aggregate impact of all inaccuracies of such representations and warranties would have (or could reasonably be expected to have) a material adverse effect in the business, operations or financial condition of NBP or its subsidiaries;

·                 NBP and the Sellers shall have performed and complied in all material respects with all obligations and covenants under the purchase agreement and the related documents;

·                 each Seller shall have delivered to LUK a duly executed and acknowledged certificate, in compliance with the Internal Revenue Code and Treasury Regulations, certifying such facts as to establish that such Seller’s sale of its membership interests in NBP are exempt from withholding pursuant to Section 1445 of the Internal Revenue Code;

·                 all required documents, instruments, certificates or other items to be delivered at the closing by NBP and the Sellers shall have been delivered unless otherwise waived by the appropriate party(ies);

·                 each Seller shall have executed an assignment of their applicable membership interests in NBP to LUK.

·                 the third party consents specified in the schedules to the purchase agreement shall have been obtained;

·                 no proceeding or action shall have been instituted or overtly threatened by or before a governmental entity seeking to restrain, prohibit or obtain damages in connection with the proposed transactions;

·                 no event, change or circumstance, individually or in the aggregate, shall have occurred that has (or would be reasonably expected to have) a material adverse effect on the business, operations or financial condition of NBP or its subsidiaries;

·                 on or prior to the closing date, NBP and its subsidiaries that are treated as a partnership for federal income tax purposes shall have made a valid protective Section 754 election under the Internal Revenue Code;

·                 no change in applicable laws (or in the interpretation of such laws) generally affecting the industries of cattle slaughter and processing, retail and wholesale marketing of beef and hide tanning shall occurred that is materially adverse to the business, operations or financial condition of NBP and its subsidiaries, taken as a whole;

·                 NBP and each Seller, as appropriate, shall have executed the Restated LLC Agreement, the escrow agreement, the cattle purchase and sale agreement, USPB’s pledge agreement, and Mr. Timothy M. Klein’s pledge agreement;

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·                 Mr. Timothy M. Klein’s employment agreement and each of the non-competition agreements shall be in full force and effect;

·                 NBP and the Sellers shall have delivered to NBP all collective bargaining agreements, collective labor contracts and industrial instruments that were not previously made available to LUK prior to the date of the purchase agreement and LUK, in its reasonable discretion, is satisfied with the terms and conditions of such agreements;

·                 NBP, certain of its subsidiaries and its various lenders shall have entered into an amendment to NBP’s credit agreement with its various lenders and such amendment shall remain in full force and effect; and

·                 NBP, TMK Holdings, LLC and the various members of NBP shall have agreed to the various documents required for the creation of National Beef Pennsylvania, LLC, NBP’s conveyance of its Pennsylvania assets to National Beef Pennsylvania, LLC and the subsequent distribution of the ownership interests in National Beef Pennsylvania, LLC to LUK, USPB, NBPCo and TMK Holdings, LLC.

Termination of the Purchase Agreement

Either the Sellers or LUK may terminate the purchase agreement if:

·                 they mutually consent in writing to terminate the purchase agreement at any time prior to the completion of the proposed transaction;

·                 USPB fails to obtain the approval of its members at a meeting had in accordance with the terms of the purchase agreement;

·                 a court of competent jurisdiction or other governmental entity shall have issued an order, decree or ruling or taken any other action, or there shall be any statute, rule or regulation enacted or promulgated by any governmental entity, which prohibits the consummation of the proposed transaction; or

·                 the closing has not occurred on or before the date 90 days after the date the purchase agreement is executed, unless that date is extended pursuant to the terms and conditions of the purchase agreement.

In addition, either LUK or the Sellers may terminate the purchase agreement, in their discretion, for any other reason by providing written notice of such termination; such termination is referred to elsewhere in this proxy statement as the “Any Other Reason termination provision”.  As described below, if LUK elects to terminate the purchase agreement pursuant to the Any Other Reason termination provision, LUK must pay NBP a $35,000,000 termination fee;  if the Sellers elect to terminate the purchase agreement pursuant to the Any Other Reason termination provision, they must cause NBP to pay LUK a $35,000,000 termination fee.

LUK may terminate the purchase agreement if:

·                 there has been any breach by NBP, Sellers or TMK Holdings, LLC of any covenant or agreement set forth in the purchase agreement, which (i) would give rise to the failure of a condition to the closing in the favor of LUK, and (ii) cannot be cured by NBP or Sellers, or has not been cured by NBP or Sellers, within 20 days following receipt of written notice of such breach (provided, that this termination right will not be available to LUK if LUK is also in breach of its representations and warranties and such LUK breach constitutes a failure to meet the Sellers’ conditions to closing); or

·                 there is an incorrect representation or warranty given by NBP or a Seller in the purchase agreement which would give rise to the failure of a condition to the closing in favor of LUK;  or

·                 USPB’s board of directors changes its recommendation that the USPB members approve the purchase agreement and the proposed transactions; or

·                 the Sellers have breached their obligations not to solicit alternative proposals or transactions in any material respect; or

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·                 USPB shall not have held a vote of its members with respect to the purchase agreement and the proposed transaction by the 75th day after the date of the purchase agreement.

The Sellers may terminate the purchase agreement if:

·                 there shall have been any breach by LUK which breach would (i) give rise to the failure of a condition to the closing in favor of the terminating Seller, and (ii) cannot be cured by LUK, or has not been cured by LUK, within 20 days following receipt by LUK of notice of such breach (provided, that this termination right will not be available to Sellers if the Sellers or NBP are also in breach of any covenant or obligation which constitutes a failure to meet LUK’s conditions to closing);

·                 NBP or any of the Sellers receive a bona fide acquisition proposal that USPB’s board of directors determines, in accordance with the purchase agreement, to contain terms and conditions that are more favorable than those contained in the purchase agreement, USPB’s board of directors changes its recommendation to USPB’s members, notifies LUK of such change of recommendation and, at the time of such termination, pays the termination fee described below to LUK; or

·                 USPB’s Board of Directors changes it recommendation to USPB’s members with respect to the proposed transactions because of a material event or development with respect to NBP other than an acquisition proposal, notifies LUK of such change of recommendation and, at the time of such termination, Sellers’ pay or cause payment of the termination fee described below to LUK.

Effect of Termination

In the event of the termination of the purchase agreement by either LUK or the Sellers, the purchase agreement becomes void and of no further force or effect with no liability or obligation on the part of any of the parties or their respective affiliates, officers, directors, employees or stockholders, except that the provisions relating to, among other things, the termination of the purchase agreement, return of documentation regarding NBP, amendments, notices, interpretation of the purchase agreement, governing law and jurisdiction and expenses shall survive the termination.

Termination Fees

Termination fee to be paid by LUK

Pursuant to the purchase agreement, in certain circumstances termination of the agreement will give rise to an obligation of NBP or LUK, respectively to pay a termination fee to the counterparties to the agreement.  When a termination fee is to be paid, the amount of that fee will be $35,000,000.  However, no termination fee will be paid by any party if the purchase agreement is terminated by the mutual consent of the parties or is terminated by either party following a court order enjoining or prohibiting the transactions contemplated by the purchase agreement.  In other circumstances, a termination fee will be payable between the parties as described below.

Under the purchase agreement, LUK is obligated to pay the $35,000,000 termination fee to NBP if all of LUK’s conditions to closing have been satisfied, LUK fails to consummate the transactions contemplated by the purchase agreement within 2 business days of the date that the closing of the proposed transactions should have occurred and the Sellers terminate the purchase agreement because of LUK’s breach of the terms and conditions of the purchase agreement.  In such circumstances, LUK is obligated to pay the termination fee to NBP within 2 business days following the Sellers termination of the purchase agreement because of LUK’s breach.  In addition, LUK will also be required to pay the termination fee to NBP if LUK terminates the purchase agreement pursuant to the Any Other Reason termination provision described above; in such circumstances, LUK must pay the termination fee to NBP concurrently with its termination of the purchase agreement.

Termination Fee to Be Paid by NBP

NBP is obligated to pay the $35,000,000 termination fee to LUK in the event of termination of the purchase agreement pursuant to certain of the termination provisions described above.  NBP is obligated to pay the fee if:

·                 LUK terminates the purchase agreement because of breach of the agreement by either NBP or the Sellers;

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·                 the Sellers terminate the purchase agreement because the proposed transaction has not occurred within the 90 day period specified in the purchase agreement and, at the time of that termination of the purchase agreement, (i) LUK has provided notice to NBP and the Sellers of breach of the purchase agreement by either NBP or a Seller and (ii) LUK could have terminated the purchase agreement due to such breach by NBP or a Seller;

·                 the Sellers terminate the purchase agreement because USPB’s board of directors has changed its recommendation that USPB’s members approve the purchase agreement and the proposed transaction;

·                 the Sellers terminate the purchase agreement pursuant to the Any Other Reason termination provision described above; or

·                 LUK terminates the purchase agreement because:  (i) USPB’s board of directors changes its recommendation that the USPB members approve the purchase agreement and the proposed transaction; (ii) the Sellers have breached their obligations not to solicit or negotiate an alternative transaction; or (iii) USPB fails to hold a meeting of its members to consider the purchase agreement and the proposed transaction within 75 days of the date of the purchase agreement.

If NBP’s obligation to pay the termination fee arises upon termination of the purchase agreement by LUK, NBP is required to pay the termination fee within 2 business days of such termination.  If NBP’s obligation to pay the termination fee arises upon termination of the purchase agreement by the Sellers, such payment is due to LUK concurrently with the termination of the purchase agreement.

NBP is also obligated to pay the fee to LUK if (i) either LUK or the Sellers terminate the purchase agreement because the proposed transaction has not occurred within the 90 day period specified in the purchase agreement or because USPB’s members do not approve the purchase agreement and (ii) certain other conditions are satisfied.  In the event of such a termination of the purchase agreement, NBP will be responsible to pay the termination fee to LUK if (i) prior to termination of the purchase agreement, a third party has made an alternative proposal for  acquisition of ownership of NBP or its assets and (ii) within 12 months following termination of the purchase agreement, NBP or the Sellers announce, enter into an agreement with respect to, or consummate any transaction involving the sale of NBP’s assets or ownership interests (other than the sale of NBP ownership interests in an initial public offering in which the Sellers retain control of NBP and its subsidiaries).

NBP may also be required to pay LUK an amount equal to LUK’s reasonable expenses and costs associated with the negotiation and implementation of the transactions contemplated by the purchase agreement, with such amount not to exceed $2,500,000 (the “Expense Reimbursement.”)  NBP shall be required to pay the Expense Reimbursement to LUK if either LUK or the Sellers terminate the purchase agreement because the USPB members fail to approve the agreement and the proposed transaction and neither LUK nor NBP is to pay the $35,000,000 termination fee described above.  If NBP has paid the Expense Reimbursement and later becomes obligated to pay the $35,000,000 termination fee in the circumstances described in the prior paragraph, NBP will receive a credit against the termination fee for the previously paid Expense Reimbursement.

INTERESTS OF CERTAIN PERSONS IN THE PROPOSED TRANSACTION

In considering the recommendations of USPB’s board of directors and NBP’s board of managers to vote in favor of the proposed transaction with LUK, you should be aware that the officers and directors of USPB and NBP may have interests in the proposed transaction that may be different from, or in addition to, the interests of the USPB’s members generally. USPB’s board of directors was aware of these interests and considered them, among other matters, when it approved the proposed transaction.

Noncompetition Agreements

USPB, USPB Board Members and USPB Chief Executive Officer

In connection with the purchase agreement, USPB has agreed that it will not own or control any ownership interests (other than its retained ownership interests in NBP) in any business that is engaged, directly or indirectly, in cattle slaughter, beef processing and/or packaging, retail and/or wholesale beef marketing or hide tanning anywhere in the world, nor will USPB participate in the management, operation or control of any such business.  These restrictions on USPB’s activities become effective if the proposed transaction is completed and will apply so long as

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USPB or its affiliates own or control any ownership interests in NBP, but not less than 10 years after the closing of the proposed transactions.  USPB may, however, own up to a 2% ownership interest in a publicly traded competing business.  In addition, USPB and its affiliates may not employ any officers or key employees of NBP or induce or encourage such individuals to leave employment with NBP.

In addition to the restrictions imposed on USPB, each of the members of the USPB board of directors, certain of the entities that those board members represent and USPB’s Chief Executive Officer, Mr. Steven D. Hunt,  have been required to enter into a non-competition agreement with terms and conditions equivalent to those contained in the Non-Competition Agreement to be entered into by USPB, except that the non-competition agreements to be entered into by each member of the USPB board of directors and certain of the entities that those board members represent will carry a term of not less than 5 years.  The non-competition agreement to be entered into by Mr. Hunt will carry a term of not less than 10 years.  The various non-competition agreements will become effective if the proposed transaction is completed.

NBPCo Holdings, LLC

As a partial owner of NBP and a “Seller” under the purchase agreement, NBPCo is also subject to certain restrictions on activities that involve competition with NBP.  However, the terms and conditions of those restrictions vary from those to which USPB is subject.  The restrictions on NBPCo’s activities are found in Section 6.7 of the Restated LLC Agreement that will govern NBP if the proposed transactions are completed; under those provisions, NBPCo is prohibited from owning or controlling more than a 5% ownership interest in a business that engages in beef slaughtering, beef processing or hide tanning in the United States or Mexico.  In addition, if NBPCo commences a venture on its own that competes with NBP in a segment of the beef market, it must offer NBP an opportunity to supply beef as a raw material to that venture on arms length terms and conditions.  If NBPCo commences a joint venture with an NBP competitor in a segment of the beef market, it must provide NBP with the opportunity to participate in a comparable venture on terms and conditions at least as favorable as those offered and agreed to with NBP’s competitor.  NBPCo is also prohibited from using its ownership interest in NBP to acquire confidential information from NBP for any purpose that is detrimental to NBP.  The restrictions on NBP’s activities will apply so long as NBPCo or its affiliates own or control an ownership interest in NBP.

Cattle Purchase and Sale Agreement

As a condition to the proposed transaction, USPB will enter into a Cattle Purchase and Sale Agreement with NBP, pursuant to which USPB will facilitate the delivery of cattle from USPB’s unitholders and associates to NBP.  NBP, in the aggregate, will purchase on an annual basis, a base amount of 735,385 head of cattle annually, subject to an adjustment of plus or minus ten percent (10%).

The purchase price for cattle purchased by NBP will be an amount determined pursuant to NBP’s pricing grids for cattle to be delivered by USPB’s unitholders and associates, as the pricing grids may be modified or supplemented from time to time by NBP.  The pricing grids must be no less favorable to USPB and its unitholders and associates than any other pricing grid being used by NBP and must be competitive with NBP’s major competitors.  For purposes of the pricing grid, NBP will grade beef derived from cattle purchased under the Cattle Purchase and Sale Agreement in accordance with standard industry practice.  NBP will pay for cattle on a finish and grade basis consistent with standard industry practice in accordance with applicable law.

The Cattle Purchase and Sale Agreement will remain in effect for an initial term of five years.  Unless either party gives written notice to the other party that it does not want to extend the term at least 60 days prior to the one year anniversary of the date of the Cattle Purchase and Sale agreement, then on each one year anniversary, the term will be extended by one year.  The Cattle Purchase and Sale Agreement may, however, be terminated if there is a material breach by USPB or NBP that is not cured in the applicable time period; in such circumstances, the non-breaching party may terminate the Cattle Purchase and Sale Agreement.  In addition, NBP may terminate the Cattle Purchase and Sale Agreement if at any time USPB owns less than 20% of the sum of i) USPB’s ownership in NBP (or National Beef Pennsylvania, LLC)  immediately following the transactions contemplated by the purchase agreement plus ii) any ownership interests in NBP (or National Beef Pennsylvania, LLC) subsequently acquired by USPB.  For six months following any termination of the Cattle Purchase and Sale Agreement, USPB shall perform its obligations and NBP must continue to purchase and pay for cattle delivered by USPB and its unitholders and associates as provided under the Cattle Purchase and Sale Agreement.

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Pledge Agreement

As a condition to the proposed transaction, USPB will enter into a Pledge Agreement with NBP (the “Pledge Agreement”).  The Pledge Agreement is being entered into in order to secure the payment and performance of USPB’s obligations under the Cattle Purchase and Sale Agreement (the “Obligations”).  Under the terms of the Pledge Agreement, USPB will grant NBP a perfected security interest in and to USPB’s Membership Interests of NBP (the “Collateral”), subject only to the prior first priority security interest in the Collateral held by CoBank, ACB (“CoBank”), up to a maximum principal amount of $15.0 million plus fees and expenses, pursuant to Pledge Agreement dated July 26, 2011 by and between USPB and CoBank (the “CoBank Pledge Agreement”).  NBP will be authorized to execute and file UCC financing statements, and USPB will cooperate as requested by NBP, in taking all actions to establish and maintain NBP’s security interest in the Collateral.

Under the terms of the Pledge Agreement, USPB will be required to make certain representations and warranties, including that NBP will have a valid perfected security interest in the Collateral free of all liens, claims and rights of third parties other than the CoBank security interest.  As long as USPB is subject to the Obligations, USPB must cooperate with NBP in providing requested documents with respect to the Collateral in order for NBP to enforce its rights in the Collateral.  USPB may not: (i) allow any other lien, security interest or other encumbrance against the Collateral; (ii) enter into any agreement with respect to USPB’s right, title and interest in or to the Collateral other than pursuant to the Pledge Agreement or the CoBank Pledge Agreement; (iii) take or fail to take any action that would impair the enforceability of NBP’s lien and security interest; or (iv) consent to any amendment or modification to its Operating Agreement relating to the Collateral or the CoBank loan documents which would have an adverse effect on NBP’s rights under the Pledge Agreement.

Under the terms of the Pledge Agreement, a “Default” occurs if: (i) there is an “Event of Default” as defined in the CoBank Pledge Agreement; (ii) any representation or warranty made by USPB shall have been false or misleading in any material respect on or as of the date made and remains uncured; (iii) there is an uncured breach of any covenant made by USPB; or (iv) an event has occurred giving NBP the right to terminate the Cattle Purchase and Sale Agreement as a result of an uncured breach by USPB.  NBP has no right to vote the Membership Interests of USPB prior to the occurrence of a Default, and NBP has no right to distributions made in respect of the Collateral.  Upon the occurrence of a Default and subject to CoBank’s rights, NBP may redeem or sell the Collateral to satisfy the Obligations provided that an appraisal of fair value of the Collateral has been completed prior to the redemption or sale.  If there is a continuing Default, USPB must deliver information and complete other acts as may be required for NBP to exercise its rights. The proceeds of the Collateral redeemed or sold shall be applied first to satisfy USPB’s obligations to CoBank and then to satisfy the Obligations in accordance with the Cattle Purchase and Sale Agreement and the Pledge Agreement.

USPB’s pledge of the Collateral will terminate, unless terminated earlier by NBP, when the Cattle Purchase and Sale Agreement terminates and the Obligations have been satisfied in full.

Employment Agreements

Following the closing, NBP will continue to employ Timothy M. Klein as President and Chief Executive Officer pursuant to an employment agreement to be entered into by and between NBP and Mr. Klein entered into in connection with execution of the purchase agreement.  Although Mr. Klein’s employment has been negotiated directly between Mr. Klein and LUK, it is USPB’s understanding that Mr. Klein’s employment agreement contains substantially the same terms as Mr. Klein’s current employment agreement, except that the term of the new employment agreement is two years longer than Mr. Klein’s current employment agreement.

USPB and its Chief Executive Officer, Mr. Steven D. Hunt, are currently parties to a “CEO Employment Agreement” which governs Mr. Hunt’s service as USPB’s Chief Executive Officer for the period from 2010 through 2015.  If the proposed transaction is approved by USPB’s members and is completed, USPB and Mr. Hunt will enter into an amendment of the CEO Employment Agreement.  Most of the terms and conditions of the existing CEO Employment Agreement will continue without modification.  However, several changes to that agreement will be adopted in connection with completion of the proposed transaction.  First, the current CEO Employment Agreement provides that its terms are subject to renegotiation upon the occurrence of certain events, including USPB’s involvement in a joint venture by acquisition, merger or otherwise, in which USPB does not remain as the majority owner of such joint venture.  If the terms of the CEO Employment Agreement are renegotiated, the renegotiated terms will apply for the final three years (2013 through 2015) of the term of the CEO Employment Agreement.  Under the amendment to be entered into in connection with the proposed transaction, Mr. Hunt and USPB have

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agreed that the terms of the CEO Employment Agreement will not be renegotiated.  Second, the CEO Employment Agreement currently provides that if Mr. Hunt’s employment with USPB (or its affiliated entities) is terminated for reasons other than death, disability or cause, Mr. Hunt will not participate in the management or control of a competitor in the beef packing or processing industry during an 18 month period beginning upon termination of Mr. Hunt’s employment with USPB.  During that 18 month period, USPB is required to pay Mr. Hunt monthly payments equal to Mr. Hunt’s monthly base salary during the term of the CEO Employment Agreement and to allow Mr. Hunt to participate in the USPB group benefits plans available to USPB employees.  As noted above, one of the conditions to the proposed transaction is Mr. Hunt’s agreement to enter into a non-competition agreement that carries a term of 10 years.  Under the amendment of the CEO Employment Agreement to be adopted in connection with the proposed transaction, USPB will be required to pay Mr. Hunt the monthly payments and provide the group benefits described above during the 10 year period of the non-competition agreement to be entered into by Mr. Hunt.

Directors of USPB

All of USPB’s directors hold Class A and Class B units and are also agricultural producers. By virtue of their unitholder status and ownership of Class A and Class B units, each of these individuals will receive their proportionate share of the transaction consideration that will be distributed by USPB to its unitholders and will receive the benefits of delivering cattle to NBP pursuant to the terms of the Cattle Purchase and Sale Agreement, described above. The amount and terms of the payments received by these individuals (or the entities they represent) for the delivery of cattle will be made on exactly the same basis as those received by other unitholders and associates of USPB for the delivery of their cattle. In addition, each director who holds patronage notices will receive repayment from the Company of such patronage notices.

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COMPARISON OF RIGHTS OF MEMBERS OF NBP UNDER THE CURRENT NBP LLC AGREEMENT AND THE FIRST AMENDED AND RESTATED LLC AGREEMENT

As a condition to the closing of the proposed transaction, the members of NBP will be required to enter into the First Amended and Restated LLC Agreement (the “Restated LLC Agreement”), which amends and restates NBP’s Limited Liability Company Agreement dated as of August 6, 2003, as amended (the “LLC Agreement”).  The Restated LLC Agreement changes certain rights of NBP’s Members.  The following is a summary of the material differences in the rights of the Members of NBP under the LLC Agreement and the Restated LLC Agreement.  This summary is qualified in its entirety by reference to the Delaware laws governing limited liability companies, the certificate of formation and the Restated LLC Agreement of NBP to be entered into effective as of the closing of the proposed transaction.  A copy of the Restated LLC Agreement in substantially the form to be adopted as of the closing is attached as Appendix C to this document.  You may obtain a copy of NBP’s LLC Agreement as currently in effect, without charge, by downloading a copy from NBP’s filings with the U.S. Securities and Exchange Commission, which can be found at the SEC website located at www.sec.gov.

As noted elsewhere in this proxy statement, in connection with the transactions contemplated by the purchase agreement, NBP has caused the formation of a new entity, National Beef Pennsylvania, LLC.  In connection with the proposed transactions, NBP will contribute all of the tangible or intangible assets it holds in the Commonwealth of Pennsylvania to National Beef Pennsylvania, LLC.  Subsequent to the closing of transactions contemplated by the purchase agreement, NBP will distribute all of the ownership interests in National Beef Pennsylvania, LLC to LUK, USPB, NBPCo and TMK Holdings, LLC, such that those parties hold 100% of the ownership of National Beef Pennsylvania, LLC in proportion to their ownership of NBP.  Upon distribution of the ownership interests in National Beef Pennsylvania, LLC to LUK, USPB, NBPCo and TMK Holdings, LLC, the various members of NBP will adopt a Second Amended and Restated Limited Liability Company Agreement for NBP and an Amended and Restated Limited Liability Company Agreement for National Beef Pennsylvania, LLC.  NBP’s Second Amended and Restated Limited Liability Company Agreement and National Beef Pennsylvania’s Amended and Restated Limited Liability Company Agreement will jointly provide the members with the same rights and obligations as will be contained in the Restated LLC Agreement effective upon the closing of the transactions contemplated by the purchase agreement.

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INFORMATION ABOUT USPB

Description of USPB’s Business

U.S. Premium Beef, LLC (USPB) was organized in July 1996 as a Kansas cooperative by a steering committee of cattle producers.  USPB’s goal is to provide market access and improve the marketing and processing of beef products requiring higher quality cattle for wholesale and retail customers and consumers while providing higher returns to cattle producers.  USPB operates an integrated cattle processing and beef marketing enterprise where consumer and processor demands and requirements are implemented through changes in genetics, feeding, and management.  USPB’s unitholders benefit from its supplier alliance with National Beef Packing Company, LLC (NBP) through (i) premiums received in excess of cash market prices for higher quality cattle, (ii) allocations of profits and losses and potential distributions, (iii) potential unit price appreciation, and (iv) information that permits unitholders to make informed production decisions.

On June 12, 2003, USPB entered into an agreement with Farmland Industries, Inc. (Farmland) to acquire all of the partnership interests in Farmland National Beef Packing Company (FNB) held by Farmland.  USPB formed NB Acquisition, LLC (NB Acquisition) to consummate the acquisition.  To finance the acquisition, USPB, NBPCo Holdings, LLC (NBPCo Holdings) and certain members of FNB’s management team purchased equity in NB Acquisition for $46.0 million in cash.  FNB issued $160.0 million of senior notes, amended its credit facility and transferred a portion of the proceeds of the offering of the senior notes and borrowings under its amended credit facility to NB Acquisition.  Subsequently, NB Acquisition merged into FNB, and FNB then converted into a limited liability company under Delaware law and became known as National Beef Packing Company, LLC.  These transactions closed on August 6, 2003.

Effective August 29, 2004, the cooperative restructured into a limited liability company (LLC) under Delaware law (Conversion).  The business of USPB, the cooperative, is being continued in the limited liability company form of business organization.

USPB holds approximately 69.3% of the Class B interests, as well as Class A and Class A1 interests with an aggregate face amount of approximately $150.5 million, NBPCo Holdings owns approximately 24.8% of the Class B interests, as well as Class A and Class A1 interests with an aggregate face amount of approximately $51.2 million, and affiliates of Timothy M. Klein own approximately 5.9% of the Class B interests, as well as Class A interests with an aggregate face amount of approximately $2.3 million.

Products and Production

USPB provides an integrated cattle production, processing and marketing system for the benefit of its unitholders and associates.  As the basis of that system, USPB’s unitholders have a guaranteed right plus an obligation (on a one head per Class A unit per year basis) to deliver cattle to USPB, pursuant to the Uniform Cattle Delivery and Marketing Agreement (see the section below entitled “Cattle Delivery Arrangements”).  USPB facilitates the delivery of cattle to NBP for processing and subsequent product distribution and marketing.  Shortly after the cattle are processed, cattle suppliers receive, at no extra charge, individual animal carcass data previously considered proprietary by many processors.  This carcass data assists producers in refining production methodologies, thereby improving the product quality and subsequently enhancing the return to the producer.

We believe the primary advantage of USPB’s ownership in NBP centers around USPB’s ability to provide NBP with a consistent supply of quality beef from a verified source, allowing NBP to target higher margin value-added markets.  Consumers have historically demonstrated their willingness and desire to buy branded products that offer better value in other consumer product markets, with the Certified Angus Beef® product line being an example in the beef industry.

Cattle Producers’ Uniform Cattle Delivery and Marketing Agreements

USPB facilitates the delivery of cattle from its unitholders and associates to NBP.  Under the cooperative structure, each share of common stock held by a shareholder entitled and obligated that shareholder to deliver one head of cattle per year to the cooperative.  Each shareholder was required to enter into a Uniform Delivery and Marketing Agreement with the cooperative whereby the shareholder was committed to supply a designated number of cattle on an annual basis to be delivered during the delivery periods set forth in the delivery agreement.  In the LLC structure, each Class A unit held by a unitholder entitles and obligates that unitholder to deliver one head of

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cattle per year to USPB. The initial delivery agreement was for a term of 10 years, with the term of the cooperative’s agreements continuing following the Conversion.  Subsequent renewals of the delivery agreement are for a term of 5 years with an evergreen renewal provision.  These arrangements are described in greater detail in the section below entitled “Cattle Delivery Arrangements”.

Company Background

USPB was originally organized as a tax exempt cooperative within the meaning of Section 521(b)(l) of the Internal Revenue Code.  The cooperative began operations on December 1, 1997, when the cooperative acquired its initial interest in Farmland National Beef, now known as National Beef Packing Company, LLC.  In connection with the cooperative’s purchase of its interest in Farmland National Beef, the cooperative owned the right and was subject to the obligation to deliver cattle annually to NBP relative to: (i) USPB’s ownership in NBP and (ii) the number of cattle processed annually by NBP.  That arrangement continues following the Conversion.  Under that arrangement, USPB has delivered more than 9.1 million head of cattle to NBP for processing since it commenced deliveries.

On August 6, 2003, USPB became the majority owner in NBP.

On August 18, 2004, the shareholders of U.S. Premium Beef, Ltd. approved the conversion of the cooperative into a Delaware LLC.  Under the new ownership structure, each share of common stock of the cooperative was converted to one unit of Class A interest and one unit of Class B interest.  Immediately following the Conversion, there were 691,845 units of Class A interests and 691,845 units of Class B interests.  Initially, each Class A unit was linked to its corresponding Class B unit and each pair of linked units, if transferred, were required to be transferred together.  On March 27, 2010, the board of directors amended the USPB’s LLC Agreement to enable the Class A and Class B units to be transferred separately.  Patronage Refunds for Reinvestment in the cooperative were carried over at their face amount into the LLC as Patronage Notices.

On June 1, 2006, USPB’s majority owned subsidiary, NBP, completed the acquisition of substantially all of the assets of Brawley Beef.  As a result of the acquisition, USPB issued 44,160 new Class A units and 44,160 new Class B units to Brawley Beef in exchange for 44,160 limited partnership units in National Beef California, LP (NBC), a subsidiary of NBP.  USPB then exchanged the limited partnership units with NBP for a higher ownership percentage in NBP.  After the acquisition, Brawley Beef, LLC changed its name to Desert Beef, LLC.

On April 14, 2009, NBP, USPB’s majority owned subsidiary, redeemed all of the membership interests in NBP that were owned or controlled by its former Chief Executive Officer, John R. Miller, and an affiliate of its former General Counsel, Scott H. Smith, as well as 25% of the membership interests in NBP that were owned by affiliates of its current President and Chief Executive Officer, Timothy M. Klein.  In order to partially finance such redemptions, USPB contributed cash of approximately $55.8 million in exchange for a higher ownership percentage in NBP.

On June 4, 2010, NBP, USPB’s majority owned subsidiary, redeemed 164,631 NBP Class B units held by affiliates of its current President and Chief Executive Officer, Timothy M. Klein.  As a result of the redemption, USPB’s ownership percentage in NBP increased.

When the Conversion occurred, holders of USPB Class A units were entitled to a pro rata share of 33% of the profits and losses; to receive distributions of USPB’s net cash flow when declared by the board of directors; to participate in the distribution of USPB’s assets if it dissolves or liquidates after payment of the Patronage Notices, and to vote on matters submitted to a vote of USPB’s members.  On November 9, 2009, USPB members approved an amendment to USPB’s limited liability company agreement that changed the allocation of profits and losses to Class A unitholders to 10%.  Holders of USPB Class A units, committed under Uniform Cattle Delivery and Marketing Agreements, have the right and obligation to deliver one head of cattle to USPB annually for each unit held.

When the Conversion occurred, holders of USPB Class B units were entitled to a pro rata share of 67% of the profits and losses; to receive distributions of USPB’s net cash flow when declared by the board of directors; to participate in the distribution of USPB’s assets if it dissolves or liquidates after the payment of the Patronage Notices, and to vote on matters submitted to a vote of USPB’s members.  On November 9, 2009, USPB members approved an amendment to USPB’s limited liability company agreement that changed the allocation of profits and losses to Class B unitholders to 90%.  Holders of USPB Class B units have no cattle delivery commitment.

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Patronage Notices do not constitute units or membership interests in USPB, and holders will not be unitholders or associates of USPB by virtue of holding Patronage Notices.  As was the case in the cooperative, Patronage Notices will be paid by USPB at such time and in such amounts as may be determined by the board of directors in its sole and absolute discretion.  In the event of a liquidation, holders of Patronage Notices will be paid before holders of Class A and Class B units.  Patronage Notices carry no other or additional rights.

Employees

USPB has nine employees.  USPB’s governance and strategic oversight responsibilities with NBP and the complexity of USPB’s obligations under its various contracts with NBP require USPB to retain the services of key senior management personnel with the experience, skill and expertise necessary to manage an enterprise competitive with other sophisticated participants in the beef and meat industries.  Each employee is compensated through the payment of a base salary with management being eligible for incentive and discretionary bonuses.  In addition, each employee is eligible to participate in benefits programs maintained by USPB.  These programs include group medical insurance, accidental death and dismemberment insurance and similar programs.

USPB’s employees are not unionized and USPB believes that its relationship with its employees is good.

Governmental Regulation and Environmental Matters

The Company is subject to federal and state regulations relating to grading of animals, quality control, labeling, sanitary control and waste disposal.  However, as many of the Company’s operational activities are conducted through its majority-owned subsidiary, NBP, and as USPB does not directly operate any processing facilities itself, the significant efforts with respect to governmental and environmental regulation are conducted by NBP.

Sales, Marketing, and Customers

USPB’s sole customer is its majority-owned subsidiary, NBP.  The ultimate customers of and the market for the products resulting from the processing of cattle supplied by USPB’s unitholders and associates are described in Description of NBP’s Business — General.

Beef Industry, Markets, and Competition

As indicated above, USPB’s business activities are focused on facilitating the delivery of cattle produced by its unitholders and associates to USPB’s majority-owned subsidiary, NBP.  Information regarding the beef industry, the market for beef and beef products and competition within the beef industry are described in Description of NBP’s Business - Industry Overview.

Intellectual Property

USPB owns little intellectual property because USPB’s sales are transacted through NBP.  However, USPB maintains a trademark on a U.S. Premium Beef logo that it uses periodically on certain, selected products.

Research and Development

USPB does not conduct any research and development activities independent of the activities of NBP.

USPB CATTLE DELIVERY ARRANGEMENTS

Cattle Producers’ Uniform Cattle Delivery and Marketing Agreements and Payments to Unitholders and Associates for Cattle

USPB facilitates the delivery of cattle from its unitholders and associates to NBP.  Under the cooperative structure, each share of common stock held by a shareholder entitled and obligated that shareholder to deliver one head of cattle per year to the cooperative.  Each shareholder was required to enter into a Uniform Delivery and Marketing Agreement with the cooperative whereby the shareholder was committed to supply a designated number of cattle on an annual basis to be delivered during the delivery periods set forth in the delivery agreement.  In the LLC structure, following the conversion from a cooperative, each Class A unit held by a unitholder entitles and obligates that unitholder to deliver one head of cattle per year to USPB.  The initial delivery agreement was for a

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term of 10 years, with the term of the cooperative’s agreements continuing following the Conversion.  At the termination of the initial delivery agreement, unitholders are required to enter into a Uniform Cattle Delivery and Marketing Agreement.  The new agreement is for a term of 5 years with an evergreen renewal provision.

Cattle delivered by USPB’s unitholders and associates are delivered to NBP for processing (with the effect that NBP is USPB’s sole customer).  The resulting beef and beef products are marketed by NBP.  Each unitholder or associate is paid for the cattle delivered to USPB based on a market-based purchase price that is subject to the agreements between USPB and NBP.

Pursuant to the Uniform Cattle Delivery and Marketing Agreement, payment for cattle is based on the individual carcass quality of cattle delivered.  In addition to the payments described in this section, the cooperative paid patronage dividends from its taxable income, in accordance with its bylaws.  Such patronage dividends were based on the cooperative’s taxable income and were distributed to the cooperative’s shareholders and associate members in proportion to the number of cattle delivered to the cooperative by its shareholders and associate members.  As a result, the patronage dividends received by the cooperative’s shareholders and associate members reflected the benefits and profits, if any, obtained from value-added marketing of the beef and beef products created from the cattle delivered to the cooperative for processing.  As a limited liability company, allocations of profits and losses and potential distributions are not tied to cattle delivery, but rather to the number of Class A and Class B units held and the respective rights of those units.

INFORMATION ABOUT NBP

Description of NBP’s Business

General

NBP is one of the largest beef processing companies in the United States (U.S.), accounting for approximately 14% of the federally inspected steer and heifer slaughter during fiscal year ended August 27, 2011, as reported by the United States Department of Agriculture (USDA).  During the fiscal year ended August 27, 2011, NBP generated approximately $6.8 billion in total net sales and had net income of approximately $259.1 million.

Led by an entrepreneurial management team, NBP began operations in 1992 with a single facility in Dodge City, Kansas.  Since then, it has successfully grown through internal expansion, selective facility acquisitions, process improvements and a focus on increasing its value-added product offerings consisting of branded boxed beef, case ready beef, portion control beef and further processed hides.  NBP has invested approximately $478.2 million from the beginning of fiscal year 2001 through the end of fiscal year 2011 to expand its operations, modernize and increase the capacity of its facilities, and increase its ability to produce and sell higher margin, value-added products.  In 1997, USPB entered into a strategic relationship with NBP.  In fiscal year 2011, USPB Class A unitholders and associates supplied NBP with approximately 20% of the cattle NBP processed pursuant to its contractual arrangement with USPB.  NBP believes its relationship with USPB provides it with a competitive advantage through a consistent and dependable supply of high-quality cattle, including for processing in NBP’s value-added and other programs.

NBP processes, packages and delivers fresh and frozen beef and beef by-products for sale to customers in the U.S. and international markets.  NBP’s products include boxed beef, ground beef, hides, tallow, and other beef and beef by-products.  NBP emphasizes the sale of higher-margin, value-added beef products including branded boxed beef, case-ready beef, portion control beef, and further processed hides.  NBP markets its branded products under several trade names that it owns including Black Canyon® Angus Beef, Black Canyon® Premium Reserve, Certified Premium Beef®, Naturewell® Natural Beef, NatureSource® Natural Angus Beef, Vintage Natural Beef® and Imperial Valley® Premium Beef.  In addition to brands NBP owns, it also markets value-added products under the following registered trademarks pursuant to license agreements: Certified Angus Beef®, a registered trademark of Certified Angus Beef LLC, a wholly-owned subsidiary of the American Angus Association; and Certified Hereford Beef® and Nuestro Rancho®, registered trademarks of Certified Hereford Beef, LLC.

NBP markets its products to retailers, food service providers, distributors, further processors, and the U.S. military.  Value-added products represented approximately 36% of NBP’s total net sales, and a substantially higher proportion of its operating profit, during fiscal year 2011.  NBP currently exports its products to more than 30 countries and has dedicated sales offices in Japan, South Korea, and China.  NBP’s export sales represented approximately 13% of its net sales for the fiscal year ended August 27, 2011.  According to export data from PIERS,

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NBP is currently the largest exporter of chilled beef produced in the U.S. to Japan.  In addition, NBP is a majority owner of Kansas City Steak Company, LLC (Kansas City Steak), which sells portioned beef and other products directly to customers in the food service and retail channels as well as direct to consumers through the internet, direct mail and QVC.

NBP believes its Dodge City, Kansas and Liberal, Kansas beef processing facilities are among the highest capacity and most efficient plants in the U.S.  In addition, NBP believes its beef processing facility in Brawley, California is among the newest in the industry.  These three beef processing facilities are located to provide efficient access to a ready supply of high quality cattle.  NBP’s two case-ready facilities, which take primal cuts and further process and package meat to customer specifications, are located in Hummels Wharf, Pennsylvania and Moultrie, Georgia and service key customers in readily accessible high density population centers.  NBP also owns and operates a refrigerated and livestock transportation company, National Carriers, Inc. (NCI), as part of its commitment to provide high service levels to its customers and suppliers.

Competitive Strengths

Significant Value-Added Product Portfolio.  NBP is a leading producer of value-added beef products.  Its customers market these products under its brands as well as through their own premium private label programs.  NBP believes its value-added products are able to command higher prices because of its ability to consistently meet product specifications, based on quality, trim, weight, size, breed or other factors, tailored to the needs of its customers.  NBP also provides marketing support for its value-added programs.  NBP believes its value-added products and programs not only provide higher profitability, but also improve customer acquisition and retention.

In March 2009, NBP expanded its value-added product portfolio through its acquisition of a wet blue tanning facility in Saint Joseph, Missouri.  NBP sells its wet blue tanned hides to processors that produce finished leather for high quality applications in industries such as automotive, luxury goods, apparel, and furniture.  NBP believes supplementing its value-added product portfolio through further processing of a portion of its hides will generate additional profit for NBP.

NBP’s total value-added sales in fiscal year 2011 were approximately $2,482.2 million, comprising approximately 36% of its total net sales.  This represents a compound annual growth rate of 17% from approximately $595.2 million of total value-added sales in fiscal year 2002.  NBP believes its value-added products will continue to be an important contributor to its profitability.  Margins on NBP’s value-added products historically have been less volatile than margins on its commodity products.

Differentiated Cattle Supply.  USPB is contractually obligated to deliver approximately 735,000 head of cattle per year to NBP.  NBP believes the cattle it receives from USPB producers are of high quality, which is important for NBP’s value-added programs.  In fiscal year 2011, pursuant to the contractual arrangement with NBP, USPB producers provided NBP with approximately 20% of the total cattle NBP processed.  NBP believes this supply relationship with USPB provides it with significant competitive advantages, including: (i) the ability to consistently provide NBP’s customers with higher margin, value-added products and (ii) a predictable supply of cattle that enhances production efficiencies.

NBP’s two largest beef processing facilities, which represent approximately 86% of its slaughter capacity, are located in southwest Kansas.  The primary market area for the purchase of cattle for those facilities includes Kansas, Texas and Oklahoma.  According to information from the USDA, cattle on feed in the Kansas, Texas and Oklahoma area represented approximately 48% of the cattle on feed in the U.S. during fiscal year 2011.  A significant portion of USPB’s unitholders and associates are located in this area.  NBP’s third beef processing facility is located in southeastern California.  An important source of cattle for this facility is an alliance of cattle producers in Arizona and California with whom NBP has cattle supply agreements.

The close proximity of NBP’s facilities to large supplies of cattle gives its buyers the ability to visit feedlots on a regular basis, which enables NBP to develop strong working relationships with its suppliers, reduces its reliance on any one cattle supplier and lowers in-bound transportation costs.

Modern and Efficient Facilities.  NBP has invested more than $478.2 million from the beginning of fiscal year 2001 through the end of fiscal year 2011 to expand its operations, modernize and increase the capacity of its facilities, and increase its ability to produce and sell higher margin, value-added products.  NBP believes its beef processing facilities in Dodge City, Kansas and Liberal, Kansas are among the largest, most modern and efficient

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processing facilities in the U.S. With the acquisition of the Brawley, California plant in June 2006, NBP expanded its daily processing capacity to approximately 14,000 cattle per day and gained a strategic location to access more efficiently western U.S. and Asian export markets.  NBP’s two case-ready facilities in Hummels Wharf, Pennsylvania and Moultrie, Georgia, which began operating in 2001, are outfitted with state-of-the-art processing and packaging equipment that allows NBP to serve key customers in high density population centers in the Eastern U.S.  NBP is in the process of an expansion project (budgeted at approximately $28.9 million) at its tannery in St. Joseph, Missouri, which is expected to be completed in 2012.  This project, which was contemplated as part of the acquisition plan for the tannery assets in March 2009, is designed to increase the capacity and product capabilities of the tannery facility.  NBP believes this facility will be one of the largest and most efficient wet blue processing plants in the world once this expansion is completed.

Customer and Channel Diversification.  NBP has a diversified sales mix across distribution channels and customers.  This approach provides multiple avenues of potential growth and reduces its dependence on any one market or customer.  NBP sells its products to retailers, food service providers, distributors, further processors, the U.S. military and through other channels.  Across these channels, NBP serves over 1,100 customers worldwide, which represent most major retailers and food service providers in the U.S.  In fiscal year 2011, no one customer represented more than 3% of its total net sales, other than Wal-Mart and its affiliate Sam’s Club, which together represented approximately 9% of its total net sales.  NBP’s top 10 customers represented approximately 30% of its total net sales in fiscal year 2011.

Export products provide NBP with geographic diversification and reduce its reliance on the U.S. market.  Of NBP’s export sales for fiscal year 2011, approximately 56% were meat and offal products.  The balance was hides and other by-products, which are not generally subject to animal health, food safety or political risks.

Disciplined Financial Management.  NBP’s indebtedness of $360.4 million as of August 27, 2011 represents approximately 1.1 times its earnings before interest, taxes, depreciation and amortization (EBITDA) for the 52 weeks ended August 27, 2011 (EBITDA is calculated in a substantially similar manner under NBP’s amended and restated credit facility (Credit Facility)).  This relatively low leverage provides NBP with significant operating and financial flexibility to respond to market conditions and to capitalize on business opportunities.  A core aspect of NBP’s disciplined approach to financial management is its proprietary management information systems that enable it to make data driven, analytical decisions to operate efficiently, allocate capital prudently and manage risk.

Experienced Management Team and Workforce with Entrepreneurial Company Culture.  NBP is led by an experienced management team.  Timothy M. Klein, its President and Chief Executive Officer, has more than 31 years of experience in the beef processing industry and is a founding member and significant owner of NBP.  The rest of NBP’s executive management team has, on average, over 25 years of industry experience and over 13 years with NBP.  NBP believes its entrepreneurial company culture, advancement opportunities, benefits, training programs and employee safety policies contribute to relatively low employee turnover rates.  Its entrepreneurial culture is evidenced by its record of growth, emphasis on individual employee accountability and company-wide focus on profitability.  NBP has never experienced a work stoppage at any of its facilities.

NBP’s Business Strategy

Expand Sales of Value-Added Products.  NBP’s value-added sales grew to approximately $2,482.2 million in fiscal year 2011 from approximately $595.2 million in fiscal year 2002, representing a compound annual growth rate of approximately 17%.  NBP intends to continue expanding sales of value-added products by increasing its penetration with existing customers, targeting new customers that are well-suited for its value-added programs and expanding the number of value-added products NBP offers.  NBP believes that the investments it has already made in its value-added business, including in retail merchandising expertise, customer service and fulfillment capabilities and operational/processing technologies, along with its differentiated cattle supply chain, position it well to capitalize on this strategy.  For example, NBP has been a leader in establishing the case-ready market, and believes its experience will enable it to benefit from increased customer interest in the advantages case-ready products provide, such as reducing labor costs and workplace injuries associated with slicing beef, reducing food safety risks and shifting the square footage currently used by ‘‘back-of-the-store’’ portioning and packaging to higher profit uses.  In addition to beef products, NBP’s value-added initiatives also include its wet blue tanning business.  NBP is in the process of expanding its tanning operation, which is expected to be completed in 2012.  When the project is completed, NBP expects to be able to process nearly all of the hides it produces at its Kansas beef processing plants.

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Pursue Additional Export Opportunities.  NBP believes international markets present a significant growth and profit opportunity.  NBP believes protein demand will increase in the long term due to rising living standards and a growing middle class in developing countries.  As a leading producer of beef products, NBP believes it is well-positioned to serve this growing global demand.  According to export data from PIERS, NBP is currently the largest exporter of chilled beef produced in the U.S. to Japan.  South Korea is another significant market for U.S. beef, and NBP believes it can leverage its existing relationships to grow its business there.  Although the margins NBP realizes on export sales can vary significantly by product and market, on average NBP currently realizes higher margins on export sales than on domestic sales.

Maintain Highly Disciplined Approach to Acquisitions and Capital Expenditures.  NBP’s management team has a history of following a disciplined approach to capital investment.  NBP has effectively executed and integrated several acquisitions in core and complementary businesses, as well as numerous capital expenditure initiatives.  NBP believes the success of these activities is reflected in its rates of return on invested capital.  NBP plans to continue to pursue opportunities that generate attractive returns on invested capital.

Continuing Focus on Margin Expansion.  NBP’s operating philosophy is to seek to maximize its profits on all cattle it processes regardless of prevailing commodity prices or stage of the cattle cycle.  NBP endeavors to accomplish this through management actions, such as reduction of operating costs, increasing price realization across the entire carcass and improving product yields.  NBP believes its proprietary management information systems allow it to more accurately measure costs and yields against relevant benchmarks and to make better processing decisions with respect to the cattle it procures in order to increase profitability.

Industry Overview

Beef products represent the largest segment of the U.S. meat industry based on retail sales and the U.S. is the largest producer of beef in the world, producing approximately 26.4 billion pounds of beef in calendar year 2010.  According to the USDA, beef consumption in the United States increased from approximately 24.3 billion pounds in 1992 to approximately 26.4 billion pounds in calendar year 2010, representing a compound annual growth rate of 0.5%.

Beef production, from the birth of the animal through the delivery of beef products to the end customer, is comprised of two primary segments: production and processing.  The production segment raises cattle for slaughter and the processing segment slaughters cattle and packages beef for delivery to customers.  Beef processors seek to procure cattle through multiple methods, including spot market purchases and a variety of contractual arrangements.  The owners of the cattle bear the cost of feeding the cattle to the appropriate market weights and have direct financial exposure to the volatility in grain and other input costs.  Beef processors are primarily ‘‘spread’’ operators, earning margin between the price they realize for their products and the cost of procuring and processing the cattle.

The domestic beef industry is characterized by prices that change daily based on seasonal consumption patterns and overall supply and demand for beef and other proteins in the U.S. and abroad.  In general, domestic and worldwide consumer demand for beef products determines beef processors’ long-term demand for cattle.  In order to operate profitably, beef processors seek to acquire cattle at the lowest possible cost and to minimize processing costs by optimizing plant utilization and minimizing the cost of packaging and other input costs.  Cattle prices vary seasonally and are affected by cattle inventory levels, weather and other factors.  In addition to seasonal factors, cattle prices are impacted by the longer term nature of the cattle cycle.  Cattle supply in the beef industry typically follows a ten to twelve year cycle, consisting of about six to seven years of expansion followed by one to two years of consolidation and three to four years of contraction.  This cycle is unique to cattle among major protein sources as other animals (such as hogs and chickens) can generate multiple offspring and have shorter incubation periods.

During the past few decades, consumer demand for beef products in the U.S. has generally grown in line with population growth, which is a key driver of aggregate demand.  We believe consumer demand for U.S. exports in international markets is driven not only by population growth, but also by economic growth.  As international consumers’ economic circumstances improve, they increasingly shift their diets to protein.  The ability of the U.S. beef industry to supply the growing international demand has been hindered in certain international markets following the discovery, in 2003 and 2004, of isolated cases of Bovine Spongiform Encephalopathy (BSE) (also commonly referred to as mad cow disease), which resulted in the temporary closing of those markets to U.S. beef.  Industry-wide export sales, however, have been increasing from 2004 through mid-2010, trending toward their pre-2003 levels.

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In recent years, one U.S. beef processor eliminated approximately two million head per year of slaughter capacity in four plants.  These eliminations represented a reduction of approximately 7% of total U.S. industry-wide capacity based on information from Cattle Buyers Weekly, an industry publication, and have helped improve the supply/demand balance of beef in the U.S. and export markets.  We currently do not expect the industry to experience a material increase in capacity for the foreseeable future.

Competition

The beef processing industry is highly competitive.  Competition exists both in the purchase of live cattle, as well as in the sale of beef products.  NBP’s products compete with a large number of other protein sources, including pork and poultry, but NBP’s principal competition comes from other beef processors, including Tyson Foods, Inc., Cargill Meat Solutions, and JBS USA LLC.  NBP management believes the principal competitive factors in the beef processing industry are price, quality, food safety, customer service, product distribution, technological innovations and brand loyalty.  In particular, NBP focuses on quality, food safety, customer service and the offering of value-added programs on an ongoing basis.  Some of NBP’s competitors have substantially larger beef operations, greater financial and other resources and wider recognition for their consumer branded products than NBP.

Regulation

NBP’s operations are subject to extensive regulation by the USDA, the Grain Inspection Packers and Stockyards Administration (GIPSA), the Food and Drug Administration (FDA), the U.S. Environmental Protection Agency (EPA) and other state, local and foreign authorities regarding the processing, packaging, storage, distribution, advertising and labeling of its products, including food safety standards.  Recently, the food safety practices and procedures in the beef processing industry have been subject to more intense scrutiny and oversight by the USDA.  For example, on January 12, 2004, Food Safety and Inspection Service (FSIS) published an interim final rule on Specified Risk Materials (SRMs) and requirements for non-ambulatory disabled cattle due to the finding of BSE in routine testing.  NBP immediately implemented the appropriate programs/policies to ensure compliance with FSIS rules.  FSIS published a final rule on July 13, 2007, making permanent the interim regulations issued in January 2004 that prohibits the slaughter of non-ambulatory disabled cattle, requires the description and removal of SRMs that are considered to be inedible, and restricts the use of captive bolt stunners that deliberately inject compressed air into the cranium of an animal.  NBP works closely with the USDA and other regulatory agencies to help ensure its operations comply with all applicable food safety laws and regulations.

NBP’s domestic operations are subject to the Packers and Stockyards Act of 1921 (PSA).  This statute generally prohibits meat packers in the livestock industry from engaging in certain practices including violations of the PSA’s prompt payment provisions.  In general (unless otherwise agreed in writing by NBP’s livestock suppliers), this statute requires NBP to make full payment for livestock purchases in the case of cash sales before the close of the next business day following the purchase and transfer of possession of the livestock it purchases, or, in the case of a cash purchase on a carcass or ‘‘grade and yield’’ basis, that NBP make full payment of the purchase price not later than the close of the first business day following determination of the purchase price.  Any delay or attempt to delay payment as required by the PSA will be deemed an unfair practice in violation of the statute.  Under the PSA, NBP must hold in trust for the benefit of its unpaid livestock suppliers all livestock it purchases in cash sales (as well as all inventories of, or receivables for or proceeds from, meat, meat food products or livestock products derived from these cash sales) until the sellers have received full payment.  As of August 27, 2011, NBP has secured a bond of $35.9 million to satisfy these requirements.

On June 22, 2010, GIPSA published a proposed rule that would add new regulations under the PSA.  Among other things, the proposed rule would eliminate the requirement that GIPSA or livestock producers demonstrate competitive harm to prove violations of Sections 202(a) and 202(b) of the PSA, which sections limit unfair, unjustly discriminatory or deceptive practices and undue or unreasonable preferences or advantages in livestock purchasing practices.  Elimination of this requirement could have a significant impact on cattle procurement and marketing practices in the beef processing industry. In particular, it could impair NBP’s ability to pay premiums for cattle that meet the quality standards for NBP’s value-added or export programs, thus affecting how NBP (i) procures cattle for those programs and (ii) processes and markets value-added and exported products. NBP cannot predict whether the proposed rule or some modified rule will be adopted or the extent of the effect of any such rule on the beef processing industry or on NBP’s operations or financial results.

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NBP’s Dodge City, Kansas and Liberal, Kansas facilities are subject to Title V permitting pursuant to the federal Clean Air Act and the Kansas Air Quality Act and implementing regulations.  These permits expired on January 25, 2010, but were administratively extended pending renewal by the Kansas Department of Health and Environment (KDHE) of NBP’s renewal applications.  The Brawley and St. Joseph plants are subject to secondary air permits which are in place.  The Moultrie and Hummels Wharf plants are subject only to certain reporting requirements.  NBP’s Dodge City, Liberal, Hummels Wharf, Moultrie and Brawley, facilities are subject to Clean Air Act Risk Management Plan requirements relating to the use of ammonia as a refrigerant.  In February 2010, KDHE requested the Liberal plant submit a construction permit application and a ‘‘Best Available Control Technology’’ (BACT) analysis for a bone dryer that was installed in the Liberal plant in 1981 by a prior owner of the Liberal plant.  NBP has completed the BACT analysis and has submitted a construction permit for the bone dryer pursuant to KDHE’s request.

All of NBP’s plants are indirect dischargers of wastewater to publicly-owned treatment works and are subject to requirements under the federal Clean Water Act and corresponding state laws and implementing municipal laws as well as agreements or permits with municipal or county authorities.  NBP has an agreement with the City of Liberal for wastewater and storm water treatment and are working with the City regarding expansion of the City’s treatment facilities to address new and more stringent discharge requirements that will apply to the City’s discharge in the context of the renewal of the City’s discharge permit.  Depending upon the ultimate cost of the required upgrade, there may be significant expenditures associated with the expansion of the City’s treatment facilities.  NBP has an agreement with the City of Moultrie and The Joint Development Authority of Brooks, Colquitt, Grady, Mitchell and Thomas Counties for treatment of wastewater from the Moultrie plant, and has a pretreatment permit from the City of Moultrie for treatment of wastewater from the Moultrie plant.  This permit was reissued in March 2010, and NBP is making the capital improvements needed to meet new phosphorus limits that are in the reissued permit.  Estimated capital expenditures associated with the treatment of phosphorus in NBP’s wastewater at Moultrie are estimated at approximately $3.0 million, of which approximately $2.7 million was spent during fiscal years 2010 and 2011, with the remaining included in NBP’s fiscal year 2012 capital expenditure budget.  NBP has upgraded its treatment facilities at the Brawley plant to provide treatment that meets the ammonia requirements of the Brawley City Ordinance and is in the process of making improvements that will allow it to consistently meet the total suspended solids limits in such Ordinance.  The City of Brawley is in the process of upgrading its publicly-owned treatment works in order to comply with its direct discharge permit, including requirements for ammonia and nutrient controls.

Storm water discharges from NBP’s plants are regulated pursuant to general permits issued by the respective states with the exception of Missouri which does not have a general permit program available to the St. Joseph tannery.  The Missouri Department of Natural Resources made a comprehensive storm water inspection at the tannery in April-May 2009 and in an inspection report and Notice of Violation requested that the plant submit an application for storm water discharges which previously had been determined to be discharged to the City publicly-owned treatment works and, thus, not requiring a permit.  NBP submitted the requested permit application in November 2009.

NBP’s Dodge City, Liberal, Hummels Wharf, and St. Joseph plants are supplied by water from supply wells on its property.  NBP purchases water from the City of Moultrie and the City of Brawley and some water is purchased from the City of St. Joseph, all pursuant to municipal water rate structures.  NBP has purchased irrigation water rights for the majority of water needed at the Dodge City plant, which originally were governed by renewable term permits.  NBP has since converted the renewable term permits into certificates of appropriation.  NBP holds public water supply permits allowing it to supply potable water to its employees at its Dodge City, Kansas and Liberal, Kansas facilities.  The public water supply permits do not have expiration dates.

All of NBP’s facilities generate solid wastestreams, including small quantities of hazardous wastes.  While NBP is subject to laws that provide for strict, and in certain circumstances joint and several, liability for remediation of hazardous substances at contaminated sites, which could include current or former facilities or other sites where wastes NBP generated have been disposed, NBP has not received any demands nor are they aware that they have any liability at such sites under the Comprehensive Environmental Response, Compensation and Liability Act, or Superfund, or state counterparts.