CONSENT DECREE



 





Exhibit 10.10




IN THE CIRCUIT COURT OF JACKSON COUNTY, MISSOURI




	 	 	 	 	 	 	 
	STATE OF MISSOURI ex rel.

	 	 	)	 	 	 
	JEREMIAH W. (JAY) NIXON,

	 	 	)	 	 	 
	and the MISSOURI CLEAN

	 	 	)	 	 	 
	WATER COMMISSION,

	 	 	)	 	 	 
	

	 	 	)	 	 	 
	   Plaintiff,

	 	 	)	 	 	 
	

	 	 	)	 	 	 
	   v.

	 	 	)	 	 	Case No. 02-CV-217927
	

	 	 	)	 	 	 
	PREMIUM STANDARD FARMS, INC.,

	 	 	)	 	 	 
	and CONTI-GROUP COMPANIES, INC.

	 	 	)	 	 	 
	

	 	 	)	 	 	 
	   Defendants.

	 	 	)	 	 	 
	

	 	 	)	 	 	 







CONSENT JUDGMENT




     WHEREAS, the State of Missouri (“Plaintiff” or “State”) filed a Petition
against Premium Standard Farms, Inc. (“PSF”) and ContiGroup Companies, Inc.
(“CGC”) styled STATE OF MISSOURI ex rel. JEREMIAH W. (JAY) NIXON, Plaintiff, v.
PREMIUM STANDARD FARMS, INC. and CONTIGROUP COMPANIES, INC., Defendants, on
June 4, 2002, and bearing Case No. 02-CV-217957 (“Lawsuit”);



     WHEREAS, the Defendants constructed swine production facilities in the
early to mid 1990s utilizing standard anaerobic lagoons for the storage and
treatment of effluent and traveling irrigation sprayers for the application of
effluent on farm fields in accordance with then-existing industry standards and
state guidelines;



     WHEREAS, a management advisory team of independent university experts
(“Management Advisory Team”) was established pursuant to this Court’s August 3,
1999



 









 




Consent Judgment to oversee and assist PSF and CGC with the development and
implementation of “Next Generation Technology” as defined in that Consent
Judgment;




     WHEREAS, the process established by this Court’s August 3, 1999 Consent
Judgment has yielded substantial results, including reducing by more than 90
percent the use of traveling irrigation sprayers, the successful testing and
implementation of numerous scientifically advanced technologies that had not
previously been applied to agricultural waste management, extensive useful air
quality data collection and analysis, and detailed water quality sampling and
analysis, all leading to a superior and advanced swine waste management;



     WHEREAS, the companies have constructed an Advanced Nitrification and
Denitrification (“AND”) wastewater treatment system at a 70,000 animal
finishing operation, which is the largest such system ever implemented at an
animal feeding operation and which has reduced the amount of nitrogen in
effluent to be land applied by as much as 90 percent over the lagoon and
sprayfield approach;



     WHEREAS, the Management Advisory Team has to date unconditionally endorsed
two of the pilot alternatives – Crystal Peak Fertilizer and Water Reuse – as
Next Generation Technology;



     WHEREAS, the Crystal Peak Fertilizer alternative has the potential of
significantly reducing land application acreage and eliminating lagoons by
harvesting minerals and nutrients from the effluent and putting them to
beneficial reuse as an organic commercial fertilizer;



 









 





     WHEREAS, the Water Reuse alternative has the promise of reducing an
operation’s demand for freshwater as it treats and disinfects the wastewater to
the extent that it can be safely consumed by growing animals;



     WHEREAS, the research and development of Next Generation Technology has
proceeded expeditiously with due diligence to ensure the selection and
implementation of the best, most feasible and most reasonably practical
alternatives;



     WHEREAS, in accomplishing the above and in an effort to satisfy the $25
million Capital Improvement Fund obligation provided in the August 3, 1999
Consent Judgment, the Defendants have invested more than $12 million in
research, development, implementation, and monitoring of new technologies;



     WHEREAS, the Defendants are currently scheduled to propose final treatment
technologies for installation at the various farms no later than August 4,
2004, and the Plaintiff desires to see the most protective and scientifically
possible technology installed at each facility;



     WHEREAS, while it would be possible for the Defendants to expend the
balance of the $25 million in accordance with the original schedule, the only
means of doing so would be installing technologies with less capability of
reducing the risk of environmental impacts than an approved technology such as
Water Reuse or Crystal Peak;



     WHEREAS, the State of Missouri is authorized to implement and enforce the
federal Clean Water Act (“CWA”), 33 U.S.C. § 1251 et seq., within the State
pursuant to its National Pollutant Discharge Elimination System (“NPDES”)
program under the



 









 




Missouri Clean Water Law (“MCWL”), which has been approved by the United States
Environmental Protection Agency (“EPA”) under Section 402(b) of the Clean Water
Act, 33 U.S.C. § 1342(b);




     WHEREAS, the State is authorized to implement and enforce the federal
Clean Air Act (“CAA”), 42 U.S.C. § 7401 et seq., within the State pursuant to
its State Implementation Plan (“SIP”) under the Missouri Clean Air Conservation
Law (“MACL”), which has been approved by EPA under Section 110 of the Clean Air
Act, 42 U.S.C. § 7410;



     WHEREAS, the State is authorized to seek an order from this Court against
Defendants assessing civil penalties and imposing injunctive relief for alleged
violations of the CWA, MCWL, CAA, and MACL; and



     WHEREAS, the State and Defendants have consented, without trial or
adjudication of any issue of fact or law herein, and without admitting any
liability or fault, to the settlement of the Lawsuit and entry of this Consent
Judgment;



     NOW, THEREFORE, in consideration of the foregoing and for the undertakings
and covenants hereinafter designated, and in further consideration of the
payment of civil penalties as provided herein by Defendants to the State of
Missouri, it is ORDERED, ADJUDGED and DECREED that:



     1. The Court has read Plaintiff’s 2002 Petition and has been fully advised
of its premises. The Court is satisfied that the provisions of this Consent
Judgment amicably resolve the issues raised in the Petition, and the Court
finds that this Consent Judgment does protect the public interest and furthers
the purposes of the Federal Clean



 









 




Water Act, Missouri Clean Water Law, Federal Clean Air Act, and Missouri Air
Conservation Law.




     2. On August 3, 1999, this Court entered a Consent Judgment between the
parties that created a $25 million Capital Improvement Fund with oversight by a
court-appointed Management Advisory Team (“August 1999 Consent Judgment”). The
purpose of the Capital Improvement Fund and Management Advisory Team was to
design and implement Next Generation Technology at the companies’ pork
production facilities in Missouri. The August 1999 Consent Judgment was
modified by this Court’s Order dated May 29, 2002. It is the parties’ intent
that this Consent Judgment be harmonized with the August 1999 Consent Judgment,
as modified, to the fullest possible extent.



     3. For purposes of this Consent Judgment, this Court has jurisdiction over
the subject matter of this action and over the parties consenting hereto. The
provisions of this Consent Judgment shall apply and be binding upon the parties
executing this Consent Judgment, their officers, officials, employees, agents,
stockholders, successors, and assigns.



     4. Neither the execution of this Consent Judgment nor the payment of the
consideration herein specified shall constitute or be construed or represented
as an admission on the part of Defendants of any liability of any kind or
nature; nor shall the execution of this Consent Judgment constitute an
admission on the part of Defendants that they have caused any injury or damage
to public health or the environment whether or not alleged in the
above-described litigation.



 









 





     5. The State accepts the consideration set forth herein as a full, final
and complete settlement, release and waiver of any and all civil claims,
demands, rights, or causes of action in law or equity for damages, injuries,
civil penalties, injunctive or other equitable relief, or expenses of whatever
kind and nature pertaining to any Missouri environmental law, including the
Missouri Clean Water Law, Chapter 644 RSMo, and the Missouri Air Conservation
Law, Chapter 643 RSMo, and the Federal Water Pollution Control Act, 33 U.S.C. §
1251 et seq., or the Federal Clean Air Act, 42 U.S.C. § 7401 et seq., arising
on or before February 17, 2004, which have been or could be asserted against
Defendants or their officers, officials, employees, agents, stockholders,
successors and assigns or which arise out of or relate to: (1) the incidents
asserted against Defendants in the State’s Petition or (2) the incidents
described in any and all Notices of Violation and Letters of Warning issued to
Defendants by the State between August 3, 1999 and the date of execution of
this Consent Judgment.



     6. The State has thoroughly investigated the alleged incidents specified
in the State’s Petition and the alleged incidents described in the Notices of
Violation and Letters of Warning issued to Defendants between August 3, 1999
and the date of execution of this Consent Judgment and has concluded that the
penalties and other relief obtained by the State through this Consent Judgment
are reasonable and commensurate with the alleged violations.



 









 





IMPLEMENTATION OF NEXT GENERATION TECHNOLOGY




     7. PSF and CGC agree to implement Next Generation Technology (as
determined by the Management Advisory Team) at Defendants’ operating locations
commonly referred to as: Whitetail, Green Hills, Valley View, South Meadows,
Terre Haute, Badger/Wolf/Brantley, Somerset, Locust Ridge, Homan, Hedgewood,
and Ruckman. Next Generation Technology at the last operating location so
upgraded shall be operational by July 31, 2010. PSF and CGC further agree to
implement Next Generation Technology (as determined by the Management Advisory
Team) at any company-owned Class IA animal feeding operations acquired or
constructed prior to termination of this Consent Judgment.



CRYSTAL PEAK FERTILIZER PROJECT




     8. No later than 60 days from the date this Consent Judgment is fully
executed and approved by the Court, PSF shall submit an application for a
permit to construct a plant to recycle animal waste flushed from the barns at
one Class IA permitted facility utilizing internal recirculation, digestion,
thickening and drying to create a commercially-viable fertilizer product
(“Crystal Peak”), the specifications for which shall be consistent with the
process described in Exhibit 1 hereto. Within 365 days of receipt of a
construction permit, PSF shall complete construction. After completing
construction, and subject to the economic feasibility of the Crystal Peak plant
and fertilizer product, PSF shall operate and maintain the Crystal Peak plant
for the duration of this Consent Judgment. PSF shall use all reasonable
commercial efforts to operate the plant and develop markets for the Crystal
Peak product. PSF shall submit an annual marketing



 









 




report describing the progress and status of market development to the
Management Advisory Team. If the Crystal Peak plant cannot be operated in an
economically reasonable fashion and/or the fertilizer product cannot be sold in
an economically reasonable fashion, PSF may propose a substitute project to
replace the Crystal Peak project at the same facility to the Management
Advisory Team. Subject to approval of the Management Advisory Team, PSF shall
implement, operate, and maintain the substitute project for the duration of
this Consent Judgment.




ENVIRONMENTAL COMPLIANCE




     9. Defendants shall comply with applicable state environmental statutes
and implementing regulations.



CIVIL PENALTIES




     10. PSF and CGC agree to pay $332,200.00, without admitting liability or
fault, to resolve the State’s claims for civil penalties. Of the total amount
of $332,200.00, PSF agrees to pay the sum of $199,320.00 to the State of
Missouri, and CGC agrees to pay the sum of $132,880.00 to the State of
Missouri.



     CGC shall make said payment by delivering to William J. Bryan, Assistant
Attorney General, Attorney General’s Office, P.O. Box 899, Jefferson City,
Missouri, 65102, receipt of which will be acknowledged by reply letter, a check
in the amount of $66,440.00 made payable to the Daviess County Treasurer as
Trustee for the Daviess County School Fund within five (5) days of execution of
this Consent Judgment and approval by the Court. CGC shall make said payment
by delivering to William J. Bryan, Assistant Attorney General, Attorney
General’s Office, P.O. Box 899, Jefferson City,



 









 




Missouri 65102, receipt of which will be acknowledged by reply letter, a check
in the amount of $66,440.00 made payable to the Gentry County Treasurer as
Trustee for the Gentry County School Fund within five (5) days of execution of
this Consent Judgment and approval by the Court.




     PSF shall make said payment by delivering to William J. Bryan, Assistant
Attorney General, Attorney General’s Office, P.O. Box 899, Jefferson City,
Missouri, 65102, receipt of which will be acknowledged by reply letter, a check
in the amount of $66,440.00 made payable to the Mercer County Treasurer as
Trustee for the Mercer County School Fund within five (5) days of execution of
this Consent Judgment and approval by the Court. PSF shall make said payment
by delivering to William J. Bryan, Assistant Attorney General, Attorney
General’s Office, P.O. Box 899, Jefferson City, Missouri, 65102, receipt of
which will be acknowledged by reply letter, a check in the amount of $66,440.00
made payable to the Putnam County Treasurer as Trustee for the Putnam County
School Fund within five (5) days of execution of this Consent Judgment and
approval by the Court. PSF shall make said payment by delivering to William J.
Bryan, Assistant Attorney General, Attorney General’s Office, P.O. Box 899,
Jefferson City, Missouri, 65102, receipt of which will be acknowledged by reply
letter, a check in the amount of $66,440.00 made payable to the Sullivan County
Treasurer as Trustee for the Sullivan County School Fund within five (5) days
of execution of this Consent Judgment and approval by the Court.



 









 





CONTRACT PRODUCTION




     11. Effective immediately, and subject to the granting of appropriate
access, PSF agrees to offer such emergency response equipment and personnel as
it reasonably believes are needed to support a contract producer’s response to
any discharge or release of wastewater from any swine production unit,
including piping and land application equipment, located in Missouri and owned
by a third-party that is used to produce swine for PSF in Missouri. PSF shall
provide its response consistent with its own release containment procedures.
The parties agree that this provision shall not limit PSF’s rights at law or by
contract to recover its expenses from the responsible contract producer. The
parties agree that PSF’s efforts to comply with this paragraph of this Consent
Judgment are not intended to create third-party rights and shall not be used,
considered, or admitted as evidence that PSF has accepted liability or is
otherwise liable under any theory of liability for the discharge or release or
for the reporting of such discharge or release.



INDEPENDENT MONITORING PROGRAM




     12. PSF shall implement the following Independent Monitoring Program in
order to confirm, based on a statistically representative number of samples,
the integrity of its sampling system:




     a. PSF shall expend $25,000 per year for calendar years 2004 and
2005 to be used to fund the costs of monitoring its operations by an
independent party mutually agreed upon by PSF and the Missouri Department
of Natural Resources (“Department”). The Department shall also expend
$25,000 per year for calendar years 2004 and 2005 to support the
monitoring effort.



 









 






     b. Sampling shall occur at PSF’s Class IA farms at sampling points
identified in the applicable Missouri State Operating Permits issued to
PSF arising out of the settlement of Permit Appeal No. 339 (“Permits”).
The sampling shall be conducted according to the protocols described in
the Permits. Prior to commencing sampling, the independent monitor shall
submit to PSF and the Department, for their review and approval, proposed
Standard Operating Procedures (“SOPs”) for sample collection and
analysis. The independent monitor shall have the discretion to determine
which of the outfalls identified in the Permits will be sampled and the
frequency of sampling. Some samples will be collected at the same times
as PSF collects samples at those sites; others may be taken at other
appropriate times, but would be collected at sampling points specified in
the Permits. The chemical constituents sampled will be those required to
be sampled pursuant to the Permits. The independent monitor shall
strictly comply with all company biosecurity restrictions.




     c. By the fifteenth day of each calendar month, the independent
monitor will provide PSF and the Department with any sampling results
received by the independent monitor during the preceding calendar month.
The independent monitor will compile all available results by November
First of each calendar year and submit these results to the Management
Advisory Team of experts established in the August 1999 Consent Judgment.



 









 






     d. If, after reviewing the sampling results from the first year, the
Management Advisory Team is not satisfied that PSF is correctly
completing the sampling required pursuant to the Permits, or the
Independent Monitoring Program, the Management Advisory Team has the
option of increasing the funding required to be paid by PSF up to a
maximum of $50,000 for the second year.




     e. After assessing two years of monitoring data, the Management
Advisory Team shall review the integrity of PSF’s monitoring. If the
Management Advisory Team determines that there is no substantial evidence
that PSF’s monitoring lacks integrity, the independent monitoring
commitment will cease. If the Management Advisory Team is not satisfied
with PSF’s monitoring, PSF may be required by the Team to provide up to
$50,000 per year to support independent monitoring until expiration of
the Permits. The Management Advisory Team may reach a decision between
these two alternatives such as focusing the monitoring on areas where
discrepancies exist between PSF’s data and independent data. PSF agrees
to this monitoring for a period of no longer than five years.




     f. For those samples collected concurrently, the relative percent
difference (RPD) approach will be used. RPD will be calculated as
defined in Standard Methods for the Examination of Water and Wastewater.
As a general guideline to the Management Advisory Team, it is expected
that 75% of the samples will generate results varying no more than 30%.
Within this general



 









 






guideline, it is recognized that for some constituents and under some
conditions, higher RPD values would be expected. These higher RPD values
will not necessarily indicate an issue with the integrity of PSF’s
monitoring.




     g. PSF’s costs associated with this Independent Monitoring Program
shall not be accounted for as expenses against the Capital Improvement
Fund established in the August 1999 Consent Judgment, as modified.



ESSENTIAL OILS PROGRAM




     13. PSF and CGC shall implement at 80 grow-finish barns an essential oils
misting technology approved by the Management Advisory Team or a substitute
project proposed by PSF and CGC and approved by the Management Advisory Team.
Defendants agree to operate the essential oil misting technology or a
substitute project for the duration of this Consent Judgment. The commitment in
this paragraph is over and above any commitment to install essential oil based
systems as part of a federal Supplemental Environmental Project (“SEP”). When
selecting barns for implementation, PSF and CGC should consider, among other
factors, topography, proximity to property lines and neighbors, and building
layout. Within 30 days of execution of this Consent Judgment and approval by
the Court, PSF and CGC shall identify the locations for implementation of the
essential oils misting technology for approval by the Management Advisory Team
(including the ex officio representative from the Department). PSF and CGC
shall begin implementation of the essential oils program within 60 days of such
approval and shall complete implementation of the essential oils program within
270 days of beginning implementation.



 









 





SOMERSET LAGOON COVERS




     14. No later than April 1, 2004, PSF shall install and maintain a floating
permeable cover approved by the Department at Somerset lagoons J and K to
reduce hydrogen sulfide emissions. To support the effectiveness of lagoon
covers to reduce hydrogen sulfide emissions, PSF and CGC shall submit to the
State of Missouri the final data and respective reports from the United States
Department of Agriculture – Agricultural Research Service (USDA-ARS), within 90
days of receipt of such data and reports.



ANNUAL MEETINGS




     15. Within 30 days from the date this Consent Judgment is fully executed,
Defendants shall submit for the State’s approval a plan for conducting the
future annual public meetings that are required by this Court’s August 1999
Consent Judgment.



     16. PSF is hereby assessed and ordered to pay the sum of One Thousand Six
Hundred Fifty-one Dollars and Twenty-six Cents ($1,651.26) to the State of
Missouri in connection with the Environmental Services Program’s August 2003
efforts in Sullivan County associated with PSF. PSF shall submit to William J.
Bryan, P.O. Box 899, Jefferson City, MO 65102, a certified check in the sum of
One Thousand Six Hundred Fifty-one Dollars and Twenty-six Cents ($1,651.26),
made payable to the State of Missouri, within five (5) days of execution of
this Consent Judgment and approval by the Court.



MODIFICATION AND TERMINATION




     17. This Consent Judgment may be modified by mutual consent of the parties



 









 




or by the Court for good cause shown.




     18. So long as PSF and CGC are in compliance with its terms, this Consent
Judgment shall continue in full force and effect until July 31, 2010, at which
time it and all obligations set forth in this Consent Judgment shall terminate
by operation of law without further action required by the Court, unless good
cause is shown for terminating this Consent Judgment prior to that time.



     19. The parties agree that the design and construction of Next Generation
Technology at all the above-named operating locations will require more than
the initial $25 million Capital Improvement Fund commitment and take longer
than the five years contemplated in the August 1999 Consent Judgment. While
PSF and CGC have used their best efforts to design, develop and implement Next
Generation Technology, and the Team has approved the use of certain
technologies as Next Generation Technology, it is impractical and unwise to
expedite the construction of existing technologies that may not be the best
practicable treatment alternative. To ensure fully-informed decision-making,
and encourage the implementation of the most promising technologies, the
parties further agree that it is appropriate to provide additional time for
technology selection, implementation, and the capital expenditure requirements
under the August 1999 Consent Judgment, as modified. Accordingly, the State
does not object to the modified schedule approved by the Management Advisory
Team and the United States, attached and incorporated by reference as Exhibit
2, which extends the deadlines for construction and implementation of
technologies until July 31, 2010.



 









 





SO ORDERED, ADJUDGED and DECREED:




JACKSON COUNTY CIRCUIT COURT JUDGE




	 	 	 	 	 
	By:	 	
/s/ Preston Dean



	 	Date: February 17, 2004







SO AGREED:




PREMIUM STANDARD FARMS, INC.




	 	 	 	 	 
	By:	 	
/s/ John M. Meyer



	 	Date: February 12, 2004







CONTIGROUP COMPANIES, INC.




	 	 	 	 	 
	By:	 	
/s/ Gerard J. Schulte



	 	Date: February 12, 2004







JEREMIAH W. (JAY) NIXON

ATTORNEY GENERAL OF MISSOURI




	 	 	 	 	 
	By:	 	
/s/ Joseph P. Bindbeutel



   Chief Counsel
	 	Date: February 13, 2004







MISSOURI DEPARTMENT OF

NATURAL RESOURCES




	 	 	 	 	 
	By:	 	
/s/ Steve Mumford



   Director
	 	Date: February 13, 2004







 









 






Exhibit 1




Crystal Peak Project



This project will process all manure from the PSF Valley View farm to produce a
high quality fertilizer. Of the 14 traditional anaerobic lagoons currently on
the farm, three will be used as storage cells. The process has the capability
of processing sludge from traditional anaerobic lagoons. To the extent
reasonably practicable, the company will seek to integrate this capability into
its sludge management program.



Internal Recirculation Units (IRP) will be installed at each of 14 eight-barn
sites to concentrate and condition manure solids. Liquid flowing through each
IRP is pH adjusted and used to flush the barns and a concentrated slurry
equivalent to the hogs daily output is pumped to the digesters. The
concentrated solids from the IRP remain in the digesters approximately one
month. The digested solids, in slurry form, are then transferred to a settling
basin. Solids are pumped off the bottom of the settling basin to a centrifuge.
Liquids are pumped to three storage cells.



Solids go to the centrifuge where they spin at high RPM for further separation
of water and solids. The solids come out of the centrifuge as a cake. The
liquid off the centrifuge goes to the same storage ponds as the excess water
from the settling basin. The cake goes to a mixer to be blended with other
inputs before it moves to the dryer.



The liquids in the storage ponds are accumulated throughout the year. During
the winter the liquids are processed through a freeze/thaw system that allows
for separation of nutrients through the natural climate cycle in north Missouri. The concentrated brine from the process is stored in another of the
existing lagoons before being transferred to the mixer with the cake from solid
separation. The combined brine and cake solids are pelleted and dried to
produce a consistent high quality fertilizer. The anticipated analysis of the
fertilizer product produced by the Crystal Peak system is expected to be
approximately 12-8-8.



The water from the freeze thaw process goes to a new treated water storage cell
for either irrigation or further treatment to be fed back to the animals.



Gases generated during the digestion process will be collected and used to fuel
the dryer. The plant has been designed for minimal emissions by use of thermal
oxidation and wet scrubbing of exhaust gases. Dust emissions from the dryer
are controlled by a traditional bag house and cyclone.