Document:

EXHIBIT 10.6

 

CERTAIN INFORMATION HAS BEEN DELETED FROM THIS EXHIBIT AND FILED
SEPERATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST
FOR CONFIDENTIAL TREATMENT UNDER RULE 406.

 

Litter
Handling Agreement

 

This Agreement (“Agreement”)
is effective as of March 31, 2003 by and between Coop Country Farmers
Elevator (“CCFE”), and Golden Oval Eggs (“GOE”).

 

WHEREAS, pullets and
layer hens owned by GOE generate litter which must be removed periodically; and

 

WHEREAS, CCFE
possesses certain tangible and intangible assets which can facilitate litter
removal; and

 

WHEREAS, GOE  requested that CCFE provide certain
services to assist GOE in removing and land apply this litter on the terms provided in this Agreement.

 

NOW, THEREFORE, the
parties agree as follows:

 

1.                                       Description
of Services.  During the term
of this Agreement, CCFE shall provide to GOE the following litter removal
services from the Renville site and related Pullet facilities:

 

a.                                       Soil
and litter testing;

 

b.                                      Record
keeping as outlined by the Minnesota Department of Agriculture;

 

c.                                       Billing
and collection;

 

d.                                      Sales
and marketing;

 

e.                                       Removal
of litter from barns;

 

f.                                         Transportation;
and

 

g.                                      Land
application of litter in accordance with Minnesota Department of Agriculture
regulations.

 

2.                                       Personnel.  CCFE
shall make available such of its personnel (either employees, and/or
contractors) and facilities as may be necessary to perform the services
outlined in Paragraph 1 above.

 

 

3.                                       Title To
Litter.  The title to and right to
immediate possession of the litter removed from GOE barns transfer to CCFE upon
removal and loading into transportation vehicles under CCFE’s control.

 

4.                                       Compensation
for Litter.  CCFE will pay GOE
a fee of [***] per ton of litter
removed and land applied. Such payment shall be made within thirty days of land
application.

 

5.             Regulatory
Compliance.  In performing the
services under this Agreement, CCFE and its employees shall comply with all
local, state and federal rules and regulations applicable to removal, transportation,
piling, and application of litter.  CCFE
shall indemnify GOE against any liability or loss suffered by GOE as a result
of CCFE failure to comply with these regulations while performing services
under this Agreement.

 

6.             Independent
Contractor Status.  Nothing
contained in this Agreement shall constitute making either party hereto the
agent of the other party for any purpose. 
CCFE and its employees shall be deemed to be independent contractors
with full control over the manner and method of performance hereunder, except
as otherwise provided herein.  During
the term of this Agreement, any of the employees of CCFE which are rendering
services on behalf of GOE under this Agreement, shall remain employees of CCFE and
shall continue to be paid by CCFE and to enjoy the benefits to which they are
entitled as employees of CCFE.

 

7.             Separate
Entities.  GOE and CCFE are separate
entities, and nothing in this Agreement or otherwise shall be construed to
create any rights or liabilities of either party hereto for any rights,
privileges, duties or liabilities of the other party to this Agreement, except
to the extent otherwise provided herein or in any other agreement between the
parties.

 

8.             Term.  The term of this Agreement shall be two (2)
years commencing on March 31, 2003, unless GOB or CCFE gives written notice of
termination.  Written notice of
termination shall be given no later than December 31, 2004.  At the end of the initial two (2) year term,
the Agreement shall automatically be renewed for successive two (2) year terms
unless either party gives a written notice of termination.  Each succeeding term shall be renewed in the
same manner so that unless notice of termination is given by December 31, there
will always be a two (2) year obligation for GOE and CCFE under this agreement.

 

9.             Other
Uses.  If GOB is able to market or
use the litter besides land application, then they shall have the first right
to the litter for such purpose.  Any
litter used for these purposes shall not apply to any part of this Agreement.  The remaining litter amount, if any, CCFE
has the exclusive right to during the term of this Agreement.

 

10.           Timing
of Removal.  GOB will review with
CCFE a timeline for starting and completion dates for removal.  GOE will give consideration to CCFE to allow
removal to start as early as possible. 
CCFE will re-clean the barns as may be necessary or perform any other
necessary functions to accommodate GOE Best Management Practices as it pertains
to pest control programs.

 

11.           Installing
Loading Pads.  GOE will construct at
its own cost loading pads needed to facilitate removal of litter.  If GOE builds additional barns on the
Renville site, then like

 

 

concrete pads will also be added. 
Each concrete pad will be mutually agreed upon for length, width and
thickness.  Consideration will be given
for litter containment, water runoff, and the ability to withstand the weight
of removal equipment.

 

12.           Miscellaneous.  No party may assign or transfer all or any
part of this Agreement without the prior written consent of the other, which
consent shall not be unreasonably withheld. 
This Agreement shall be governed by the laws of the State of
Minnesota.  This Agreement may only be
modified or amended by an instrument in writing duly executed and delivered by
the parties.  In the event of any
litigation or arbitration to enforce this Agreement, the prevailing party shall
be entitled to reasonable attorney’s fees and costs as fixed by the court or
arbitrator.  The terms and conditions
set forth above constitute the complete and exclusive statement of the
Agreement between the parties relating to the subject matter of this Agreement,
superseding all previous negotiations and understandings.

 

IN WITNESS WHEREOF, this
Agreement has been executed and delivered by the duly authorized officers or
representatives of each parties hereto, as of the date set forth above.

 

 

	
  COOP COUNTRY FARMERS ELEVATOR

  	
  GOLDEN OVAL EGGS

  
	
   

  	
   

  
	
  BY:

  	
   

  	
   

  	
  BY:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  ITS:

  	
   

  	
   

  	
  ITS:EXHIBIT
10.7

 

CERTAIN INFORMATION HAS BEEN DELETED FROM THIS EXHIBIT AND
FILED SEPERATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT UNDER RULE 406.

 

INDEPENDENT
CONTRACTOR AGREEMENT

FOR PULLET PRODUCTION

(“Agreement”)

 

This Agreement is made
this        day of
                     ,
2003 (“Commencement Date”) by and between Midwest Investors of Renville, Inc.,
a Minnesota cooperative, d/b/a Golden Oval Eggs (“Midwest”) and Pullet
Connection, Inc. and Barbara Frank, individually (“Grower”), Midwest and Grower
collectively referred to as the “parties” and either Midwest or Grower referred
to as a “party”) and is as follows:

 

RECITALS

 

1.                                       Midwest
desires to contract with Grower to utilize her experience and expertise to
raise Midwest’s baby chicks to pullets for delivery to Midwest’s layer farm.

 

2.                                       Grower
has experience and expertise in raising baby chicks to pullets and has
facilities for producing pullets.

 

3.                                       The
parties have had discussions with regard to entering into an agreement to
accomplish the foregoing, have reached agreement and wish to put their
understanding and agreements in writing.

 

NOW, THEREFORE, in
consideration of the mutual terms and conditions set forth herein, the parties
agree as follows:

 

SECTION 1.00
OBLIGATIONS OF GROWER.

 

Section 1.01  Regulatory Requirements.  Grower must obtain any and
all necessary governmental approvals or permits under environmental and/or
other regulatory requirements, including any county zoning requirements, Minnesota
Pollution Control Agency requirements, and any other environmental, zoning or
regulatory requirements that would be a condition for continued operation of
Grower’s facility.  Grower must provide
evidence of these governmental approvals within ten days after executing this
Agreement.

 

Section 1.02  Buildings and Facilities.  Grower agrees to make
available four barns according to the specifications agreed to by the parties
for purposes of a pullet growing operation for raising Midwest’s baby chicks to
pullets.  Grower must maintain the
facilities and equipment at her expense. 
The general location and capacity of the barns are described on Exhibit
A.

 

Section 1.03  Access and Utilities.  Grower shall provide at
her expense necessary utilities, water, permanent ingress and egress, and
manure storage.  Grower agrees that she
will

 

 

provide sufficient backup
water supply and electrical generating equipment as may be necessary to insure
continuous supply of water and electricity. 
Grower will install environmental equipment and controls to ensure that
flock health protection and security and management are in accordance with
industry practices.  If required by
Midwest, Grower agrees to install additional health protection and security
equipment beyond industry practices at Midwest’s expense and adopt flock health
protection and management practices. 
Utilities, access, and equipment under this section must be
provided and maintained at Grower’s expense.

 

Section 1.04  Labor and Supervision.  Grower shall provide all
labor and supervision as may be necessary to care for the flock in a good and
husbandrylike manner, including but not limited to, fly and rodent control of
the premises and flock health protection and security and biosecurity.

 

Section 1.05  Beak Trimming.  If
required, the Grower shall arrange for beak trimming at the Grower’s
facility for birds delivered to their premises by Midwest.

 

Section 1.06  Identification and Removal of
Cockerels.  Grower
shall identify and remove cockerels from Midwest’s flocks as soon as
possible.  Grower may dispose of
cockerels in any manner, but Grower shall not provide cockerels feed,
medications, facility space, or other goods or services provided by Midwest or
on Midwest’s behalf.

 

Section 1.07  Vaccinations and Medications.  Grower will be responsible
for ordering, maintaining an inventory of and administering all water and spray
vaccines and medications according to a schedule as provided by
Midwest.  Grower shall use only medication
approved by Midwest.

 

Section 1.08  Feed Orders.  Grower shall promptly order all feed deliveries
from Midwest in advance so that feeders will not become empty.  Grower shall use only feed provided by
Midwest.

 

Section 1.09  Load-Out and Delivery of Pullets to Layer
Farm.  Grower shall
provide and/or contract for all necessary labor and equipment with respect to
load-out of pullets and their delivery to Midwest’s Renville, Minnesota layer
farm.

 

Section 1.10  Cleaning and Disinfecting Facilities.  Grower shall properly
clean and disinfect facilities after removal of each flock so that the facility
is in a proper condition to receive the next delivery of chickens.

 

Section 1.11  Notice of Condition.  Grower shall immediately
notify Midwest of any condition, which may materially affect the performance of
the flock or of Grower’s financial ability to carry out the terms and
conditions of this Agreement.

 

Section 1.12  Record Keeping.  Grower shall maintain accurate production,
feed, sanitation and mortality records that are reasonably requested by Midwest
and shall make regular reports to Midwest as requested by Midwest.  Grower shall prepare, execute and deliver a
receipt

 

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to Midwest for all baby
chicks delivered to Grower’s facility and for pullets shipped from Grower’s
facility during this Agreement.

 

Section 1.13  Exclusivity for Purposes of
Biosecurity.  Grower
agrees that during the term of this Agreement Grower will use reasonable care
to avoid contact with other avian species that could result in biosecurity
problems except those delivered by Midwest and under this Agreement.  If conditions in the industry warrant,
Midwest may require reasonable additional external biosecurity measures to be
put in place including but not limited to fencing and gating the facility,
which shall be installed at Grower’s cost.

 

Section 1.14  Execution of Documents Showing Midwest
Ownership.  Grower
agrees to execute any and all documents that may be necessary to properly make
of record and provide notice that Midwest and not Grower is the owner of the
flock and all other supplies, feed, medications or other items of Midwest’s
property.

 

Section 1.15  Comprehensive Liability Insurance.  Grower
agrees that it will obtain comprehensive liability insurance in a form
acceptable to Midwest for liability for injuries or property damage, which may
occur on the premises or on account of the performance of this Agreement. 
Grower will provide a certificate of insurance, which details acceptable
liability and workers compensation coverages. 
Any Grower liability for the birds ends when the pullets leave Grower’s
property.

 

Section 1.16  Performance Standards.  Grower shall utilize all
best efforts to utilize the management guide and other materials provided by the
breeding entity producing the baby chicks and to meet the performance standards
provided in Exhibit B.  Grower
understands that Midwest may change the supplier of baby chicks or the strain
of baby chicks and that the new baby chick strain standards or the new
supplier’s performance standards will replace those in Exhibit B upon 30 days
prior written notice.  For purposes of
this Agreement the performance standards in Exhibit B and other references to
Exhibit B refer to the performance standards in effect for the strain of chicks
being delivered to the Grower. 
Notwithstanding other provisions of this Section, Grower must not
allow:  (1) mortality to exceed 200% of
the applicable breeding entity’s performance mortality guide under Exhibit B;
(2) uniformity to fall below 85% of the applicable breeding entity’s
performance uniformity guide under Exhibit B; and (3) feed usage to exceed 115%
of the applicable performance feed consumption guide under Exhibit B.

 

SECTION 2.00
MIDWEST’S RESPONSIBILITIES.

 

Section 2.01  Delivery of Baby Chicks.  Midwest shall acquire and
provide baby chicks to Grower on a schedule provided to Grower.

 

Section 2.02  Beak Trimming.  Midwest shall pay for beak trimming.  The amount shall be mutually agreed to by
the parties, but in accordance with reasonable industry standards.

 

Section 2.03  Feed and Medications.  Midwest shall provide all
feed, feed ingredients, medications, vaccinations, vaccination schedules and
veterinary treatment necessary for all flocks.

 

3

 

Section 2.04  Load-Out and Delivery of Pullets to Layer
Farm.  Midwest shall
pay or reimburse Grower for the cost of load-out and delivery services and
equipment subsequent to each delivery to Midwest’s layer farm.  The amount shall be mutually agreed to by
the parties, but in accordance with reasonable industry standards.

 

Section 2.05  Title and Ownership.  Midwest shall retain
ownership of the flock, feed, medication, vaccines, and other supply items
purchased by Midwest at all times.

 

Section 2.06  Manure Removal From Grower Facility.  Midwest shall remove
manure at its expense from Grower’s manure storage area and take ownership of
the manure removed from the two Starter barns on the Grower’s premises.  The litter in Brooder barns remains the
responsibility of the Grower.

 

Section 2.07  Comprehensive Liability Insurance.  Midwest agrees that it
will obtain comprehensive liability insurance in a form acceptable to Grower
for liability for injuries or property damage, which may occur on the premises
or on account of the performance of this Agreement.

 

Section 2.08  Manure Management Plan.  Midwest shall provide
Grower and Grower shall provide Midwest with a manure management plan and make
available, yearly records on analysis, tonnage, spreading rates and locations.

 

SECTION 3.00
GROWER PAYMENTS.

 

Section 3.01  Acceptable Pullet.  All payments made to Grower shall be made on
the number of “acceptable pullets” delivered to Midwest’s laying farm.  “Acceptable pullet” shall mean a pullet that
is delivered to the layer farm in an uninjured mature state as determined by
Midwest; and is at least 16 weeks of age unless otherwise agreed upon by
Midwest and Grower.

 

Section 3.02  Management Fee.  Grower shall be entitled to receive a management
fee of [* * *] per acceptable pullet per completed full
day.  Midwest anticipates at least 11 1⁄2
new flocks consisting of approximately 127,000 chicks per flock to be raised to
pullets by Grower each year.

 

Section 3.03  Empty Barn Payment.  Unless otherwise agreed by the parties, the Grower shall be paid [* * *]
per day by Midwest for each day that a barn is empty without birds if:  (1) the barn is empty through no fault of
Grower; (2) the barn has been empty for at least 10 prior days (the payment obligation
begins on the 11th day).  
Midwest will not pay this fee if barns are empty do to “Acts of God.”

 

Section 3.04  Livability Incentive.  Grower shall be entitled
to receive a livability incentive payment of [*
* *] per acceptable pullet
delivered to Midwest’s layer farm if the number of baby chicks in a flock
delivered to Grower that survive and are subsequently delivered as acceptable
pullets to Midwest’s layer farm exceeds the applicable livability

 

4

 

performance guide in
Exhibit B.  Cockerels shall not be
included in computation of the livability incentive.

 

Section 3.05  Uniformity Incentive.  Grower shall be entitled
to receive a uniformity incentive payment of [*
* *] per acceptable pullet delivered
to the layer farm if 88 percent or more of the acceptable pullets in a flock
delivered to Midwest’s layer farm are at or within 10 percent of the “average”
weight of the flock.

 

Section 3.06  Feed Incentive.  Grower shall be entitled to receive a feed incentive
payment of [* * *] per acceptable pullet delivered to
Midwest’s layer farm if the average weight of the acceptable pullets in a flock
are above 99% of the grams per bird target weight at 16 weeks of age and the
feed consumption for a flock delivered to the layer farm is less than the
cumulative feed consumption per bird under the applicable performance guide as
prescribed in Exhibit B.

 

SECTION 4.00  TIME OF PAYMENTS.

 

Section 4.01
Payment.  Payment for
the pullets and bonuses shall be paid on or before 10 days after the date of
delivery of pullets to Midwest’s layer farm.

 

SECTION 5.00  TERMS.

 

Section 5.01  Term of Agreement.  The term of this Agreement is five (5) years
and it starts on the Commencement Date.

 

Section 5.02  Extension. 
Absent default, this Agreement may be extended or
renewed but only upon the terms and conditions as may be mutually agreed by the
parties in writing.  If no renewal or
extension is agreed by the parties prior to the expiration of the term stated
in Section 5.01, then this Agreement shall be continued to be enforced
until a 365-day prior written notice is given by either party.

 

SECTION 6.00
INSPECTION, ACCESS AND BIOSECURITY.

 

Section 6.01  Right of Inspection and Access.  The parties agree that
Midwest or its designated agents or employees shall have the right to enter
Grower’s premises to inspect the flock and the facility with prior notice.  However, Grower reserves the right to refuse
access to any vehicles, personnel or crews who arrive on Grower’s premises if
Grower determines that the persons and/or their equipment may be in a condition
as to affect flock health.

 

Section 6.02  Biosecurity.  In all other respects, neither party shall
allow visitor traffic or other inspections of the premises without prior consent,
it being the understanding of the parties that this requirement is intended to
insure disease control with regard to Grower’s facility.

 

5

 

SECTION 7.00  DEFAULT.

 

Section 7.01  Event of Default.  An event of default shall be a material breach
of any term or condition of this Agreement.

 

Section 7.02  Grower Inability to Perform Services.  The parties specifically
acknowledge that an essential element of this Agreement is Grower’s ability to
perform the services required under this Agreement in the facilities described
in this Agreement.  Grower’s inability
to perform the services required in this Agreement and is anticipated under
Section 1.16 or the threatened loss of possession of the premises shall be
specific events of default. 
Specifically, Midwest shall be entitled to receive adequate assurance of
performance of this Agreement upon 72 hours prior written notice, provided,
however, if the health or welfare of the flock is at risk, or if Grower has partially
or completely abandoned the facilities or responsibilities under the Agreement,
Midwest, prior to termination and without further notice, may proceed under
Section 7.06.  Failure to provide
adequate assurance of performance is a condition of default for which no
further notice under Section 7.03 is required.

 

Section 7.03  Notice of Default.  In the event of a default, the non-defaulting
parties must provide no less than 30 days’ written notice of the default.  In the event that the default is not cured
within 30 days (or a longer period as may be required by law), then in addition
to the option of terminating this Agreement, the non-defaulting parties shall
have all remedies that may exist at law or in equity, including the remedy of
specific performance.  The remedies of
Midwest include, at the option of Midwest, those rights as more specifically
described at Sections 7.05 and 7.06.  In
addition, nothing herein shall be construed so as to prohibit a party from
seeking injunctive or other judicial relief to prevent the continuing
occurrence of a default during any period of time provided under the Agreement
or by law for an opportunity to cure the default.

 

Section 7.04  Additional Conditions of Default.  It is further understood
and agreed that an event of default by a party shall occur if the party shall
become bankrupt or insolvent, shall involuntarily be placed into the hands of a
receiver, assignee or trustee in bankruptcy, or the occurrence of events
causing Midwest to reasonably believe that Grower may lose possession of the
facility.

 

Section 7.05  Midwest May Cure Grower Default on
Mortgage.  Grower
shall obtain from any holder of a mortgage or security interest with regard to
the facility where the flock is located an acknowledgement, and in the event of
a default of that mortgage or security interest, the lender shall provide
Midwest with notice of the default and an opportunity at the option of Midwest
to cure the same.  Grower understands
that this notice is necessary so that Midwest may take appropriate action to
protect and/or remove the flock in the event of Grower’s loss of control of the
premises.

 

6

 

Section 7.06  Specific Right of Midwest in the Event of
Default.  The parties
hereto understand that this Agreement for caring for pullets is unique in
nature.  The parties further understand
that Midwest relies upon Grower’s specific experience and expertise to raise
baby chicks to pullets and upon the Grower’s facilities for proper care of the
flock.  Accordingly, in the event that
this Agreement is terminated by default or otherwise, Midwest, at its option,
shall specifically retain the right to:

 

(1)                                  take
possession of the Grower’s facility, to obtain substitute labor and to make
such payments as may be deemed reasonably necessary by Midwest so as to
continue to care for and produce pullets at Grower’s facility but under
Midwest’s exclusive direction and under its control for all or a remaining
portion of the contract term.

 

(2)                                  Grower
specifically understands and agrees that she will consent to Midwest taking
possession of said premises in the event of default or termination of this
Agreement, that she will not hinder or in any way interfere with Midwest’s use
of, possession and quiet enjoyment of the premises, that she will permit
Midwest to continue to maintain access to all water and utilities, ingress and
egress, and access to land for manure disposal necessary to properly operate
the facility, and to in all respects cooperate with Midwest taking possession
of and continuing to conduct pullet production operations at the facility.  To facilitate possession the Grower has
executed the Easement Agreement attached as Exhibit C which may be relied upon
by Midwest in the event of a default by the Grower and in the event that
Midwest takes to assert its rights under this section.

 

(3)                                  In
the event that Midwest, upon default of this Agreement, chooses to exercise
this option, Midwest shall pay an annual rental equal to barn loan payments,
real estate taxes, insurance and other operation expenses for the remaining
term of this Agreement or portion thereof during which Midwest utilizes
Grower’s premises.  Midwest reserves the
right to make such payments directly to the party to whom they are due.  Grower and Midwest agree that if default of
this Agreement occurs that an asset purchase of the entire complex may be the
best default resolution.  Midwest will
notify the Grower that it intends to exercise Buy/Sell Agreement under
Section 9.10 unless default of this Agreement is not corrected in 30 days.

 

(4)                                  It
is understood and agreed by the parties that Midwest has entered into this
Agreement with Grower due to her reputation and expertise and that this
Agreement is personal in nature as it relates to Grower and that the Grower’s
disability illness, or death, shall not be considered an event of default in
and of itself, provided that Grower’s agents or successors in interest continue
to adhere to the terms and conditions of this Agreement and provided that those
successors are acceptable to Midwest and execute an acknowledgement that they
will be bound by the terms and conditions of this Agreement as if they had been
original signatories to this Agreement.

 

(5)                                  Because
of the unique nature of the Agreement between the parties, Grower understands
and agrees that the rights and remedies granted in this Agreement, including in
this section shall be specifically enforceable and may be enforced by
injunctive relief or otherwise in the event the Grower fails or refuses to
cooperate with regard to surrender of possession of the facility upon
termination of this Agreement or upon their default.

 

7

 

SECTION 8.00  LIQUIDATED DAMAGES.

 

Section 8.01  Liquidated Damages.  Grower and Midwest
acknowledge that it is impossible to determine with any reasonable accuracy the
amount of prospective lost profits or consequential damages to either party
upon default by the other party of the terms and conditions of this Agreement.  Accordingly, in the event either party
defaults in performance of its obligations under this Agreement, the party in
default will pay the other party actual damages under this Agreement plus
liquidated damages of $50,000 per calendar year and partial calendar year for
the remaining term of the Agreement or $150,000, whichever is greater as
prospective damages.  Grower and Midwest
acknowledge that the damages set forth above are reasonable, and are not a
penalty, based upon the facts and circumstances of the parties at the time of
entering into this Agreement, and with due regard to future expectations.

 

SECTION 9.00  MISCELLANEOUS.

 

Section 9.01  Independent Contractor.  It is understood and
agreed that none of the parties hereto shall be deemed to be an employee of any
of the others and that each party is an independent contractor engaged by the
other to perform certain services under this Agreement.  Neither of the parties is authorized to act
as an agent for the other for any purpose whatsoever.

 

Section 9.02  Indemnification.  In connection with the indemnification and
insurance, each party (“Indemnifying Party”) agrees that it shall indemnify,
defend and hold the other party and their officers, directors, employees,
affiliates, successors and assigns harmless from and against any and all
claims, liabilities, actions, losses, damages and expenses (including costs and
counsel fees), which may be caused by that Indemnifying Party or which may
arise out of or relate to the Indemnifying Party’s breach of this Agreement.

 

Section 9.03  Dispute Resolution.  If there is any dispute or controversy between the parties arising out
of or relating to this Agreement, the parties agree that such dispute or
controversy will be arbitrated in accordance with proceedings under American
Arbitration Association rules, and such arbitration will be the exclusive
dispute resolution method under this Agreement.  Notwithstanding the foregoing, pursuant to Minn. Stat. §17.91,
Subdivision 1, either party may make a written request to the Minnesota
commissioner of agriculture for mediation or arbitration services under the
rules of the American Arbitration Association to facilitate resolution of the
dispute or controversy.  The decision
and award determined by such arbitration will be final and binding upon both
parties.  All costs and expenses,
including reasonable attorney’s fees and expert’s fees, of all parties incurred
in any dispute which is determined and/or settled by arbitration pursuant to this
Agreement will be borne by the party determined to be liable in respect of such
dispute; provided, however, that if complete liability is not assessed against
only one party, the parties will share the total costs in proportion to their
respective amounts of liability so determined. 
Except where clearly prevented by the area in dispute, both parties
agree to continue performing their respective obligations under this Agreement
until the dispute is resolved.

 

8

 

The right to mediate or
arbitration shall not, however, apply to a parties’ default of this Agreement
unless required by law and specifically the parties acknowledge that Midwest’s
right under Section 7.06 and the notice provisions under Section 7.03
are not subject to arbitration or mediation, however, if a party claims the
other party wrongfully revoked Section 7.03 or Section 7.06, a claim
for damages under this Agreement is subject to mediation or arbitration.

 

Section 9.04  Confidentiality.  All parties agree to maintain as strictly confidential
the details of this Agreement and will not share information regarding this
Agreement or any other information coming into their possession regarding the
procedures or operations of the parties with other grower or industry personnel
without the advance mutual written consent of the others.

 

Section 9.05  Force Majeure.  No party shall be liable in any respect to
failure, delay and fulfillment or performance of this Agreement when entered or
prevented directly or indirectly by fire, flood, storms or other acts of God.

 

Section 9.06  Assignment by Grower.  Grower understands and
acknowledges that any assignment of this Agreement shall require the consent of
Midwest and that such consent may be withheld or conditionally granted by
Midwest.  This Agreement may be assigned
to Grower’s child without consent by Midwest if the child has been actively
employed by Grower, actively engaged in bird rearing for one year at the
Grower’s location and has demonstrated an ability to manage the Grower complex
as to not cause default of this Agreement. 
The Assignee shall as a condition of the assignment agree to perform the
terms and conditions of this Agreement. 
Without written consent, Grower is not relieved of her obligations in
the event the assignee defaults on this Agreement.  Consent of assignment of the Agreement will not be unreasonably
withheld.

 

Section 9.07  Assignment By Midwest.  Midwest understands and
acknowledges that any assignment of this Agreement, other than an assignment
that takes place as part of a merger or joint venture of Midwest or its
operations to a person actively engaged or to be actively engaged in the
business of Midwest, shall require the consent of Grower and that such consent
may be withheld or conditionally granted by Grower.  The Assignee shall, as a condition of the assignment, agree to
perform the terms and conditions of this Agreement.  Without written consent, Midwest is not relieved of its
obligations in the event the assignee defaults on this Agreement.  Consent of assignment of this Agreement will
not be unreasonably withheld.

 

Section 9.08  Early Termination.  The parties agree that notwithstanding any
other term or condition hereof, either party may terminate this Agreement upon
a 365-day prior written notice to the other party.  Early termination shall not be a default by the terminating party
and the terminating party shall have no liability to the other party of any
kind or nature whatsoever solely due to the early termination.  However, the parties shall continue to perform
the obligations of this Agreement through the conclusion of the early
termination date.  The non-terminating
party shall execute all documents as deemed necessary by the terminating party
to evidence termination of this Agreement, including termination of any grant
of easement by Grower to Midwest.  If
Grower terminates this Agreement, Midwest has the right to purchase Grower’s
property under Section 9.09 of this Agreement.

 

9

 

Section 9.09  Buy/Sell Agreement.  In the event the Grower
desires to sell the facilities or exercise early termination under
Section 9.08, Midwest has the right to purchase the property necessary to
raise pullets under this Agreement including ingress and egress and access and
use to utilities, water supply and manure storage as provided in this
Agreement.  Purchase price will be
determined by the average value of the appraisals by independent appraisers
assigned by both Grower and Midwest; provided, however, no appraisal shall consider
the value accorded to having this Agreement to raise pullets in the
facilities.  In the event of a dispute
over valuation, Section 9.03 regarding Dispute Resolution shall govern.

 

Section 9.10   Acknowledgment
of Risk.  Grower
understands and agrees that while this Agreement is an “agricultural contract”
for purposes of the Producer Protection Act, Minn. Stat. § 17.90, et seq.,
Grower retained legal counsel to review this Agreement and to advise Grower of
risks associated with entering into this Agreement. Midwest and Grower (based
on review with Grower’s counsel) agree that this Agreement is for the sale and
purchase of a fixed amount of commodity for delivery at a set price pursuant to
Minn. Stat. §17.9442(1).

 

Section 9.11  Successors Bound.  The provisions of this Agreement will enure to
the benefit of and be binding upon the heirs, successors and assigns of the
parties.

 

Section 9.12  Entire Agreement.  The foregoing constitutes the entire agreement
between the parties and replaces any prior agreements, verbal or written,
between the parties.  No modification of
any of the terms or conditions contained herein may be made except by
subsequent written documents signed by all parties.

 

Section 9.13  Execution of Documents.  All parties agree to execute
any and all documents necessary to implement the full terms and conditions of
this Agreement.

 

IN WITNESS WHEREOF, this
Agreement has been executed on the day and year first above written.

 

	
   

  	
  Barbara Frank

  	
   

  
	
   

  	
  d/b/a Pullet
  Connection, Inc.

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Barbara Frank

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  MIDWEST
  INVESTORS OF RENVILLE, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
  d/b/a
  Golden Oval Eggs

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Its:

  	
   

  	
   

  
					

 

10

 

EXHIBIT
A

 

	
  Barn #1

  	
   

  	
  48’ x 470’ Housing
  approximately 128,000 pullets

  
	
   

  	
   

  	
   

  
	
  Barn #2

  	
   

  	
  48’ x 470’ Housing
  approximately 128,000 pullets

  
	
   

  	
   

  	
   

  
	
  Barn #3

  	
   

  	
  40’ x 308’ Housing
  approximately 130,000 pullets (remodeled facility)

  
	
   

  	
   

  	
   

  
	
  Barn #4

  	
   

  	
  40’ x 320’ Housing
  approximately 130,000 pullets

  

 

Together with all water,
gas, electric, manure storage and other utilities with the premises being
located in Renville County, Minnesota within Growers property in the Northwest
Quarter of the Northeast Quarter and the Northwest Quarter of the Northwest
Quarter of Section 31, Township 114 North, Range 35 West.

 

 

EXHIBIT
B

 

 

PERFORMANCE
STANDARDS

 

1.                                       Mortality.  Mortality
must not exceed 200% of the performance mortality guide.  The performance mortality guide states that
livability for the growing period 0-18 weeks is 97-98%.

 

The mortality performance
standard is 200% times 3% equals 6%.

 

Mortality
must not exceed 6% over an 18 week or shorter growing period.

 

2.                                       Uniformity.  Uniformity
must not fall below 85% of the performance uniformity guide.  The performance uniformity guide is for 80%
of the individual bird weights to occur within 10% of the flock average weight.

 

The uniformity
performance standard is 85% times 80% uniformity equals 68%.

 

The
uniformity performance standard requires 68% of the individual bird weights to
be within 10% of the flock benchmark average weight.

 

3.                                       Feed Consumption. 
Feed usage must not exceed 115% of the applicable performance
feed consumption guide.

 

The feed consumption
performance standard is 115% times the cumulative consumption at a given age in
week plus the daily consumption rate times the number of days the birds are
older than the given age in weeks.

 

The
average feed consumption per bird is required to be less than 115% of
cumulative feed consumption for flock ages determined in the table below:

 

4.                                       Breed and Variety Benchmark.  Each flock of birds received will be
benchmarked from the most recent publication by the breeder for the variety of
birds delivered.  Accumulative
measurements will be taken at 16 weeks of age and benchmarked against the 16
weeks of age published standards. 
Present standards being utilized are:

Hy-Line W98

Commercial Management Guide 2000-2001

Published by Hy-Line International Des Moines, IA

Present
Benchmark Standards:

1.               Body Weight- Average

Performance
Standard: 1230 grams per bird

 

 

Benchmark:
>(99%) 1218 grams per bird

2.               Uniformity Range

Performance
Standard: (90%) 1107 to 1353 (110%) grams per bird

Benchmark:
>(89%) 1095 to <(111%) 1365 grams per bird

3.               Accumulative Feed Consumption

Performance
Standard: 11.13lbs per bird, (100%)5049 grams per bird

Benchmark:
<(101%) 5099 grams per bird

4.               Livability

Performance
Standard: 97%

Benchmark:
>96.99%

 

 

INCENTIVE
PAYMENTS

 

The goal of incentive
payments is for Grower to deliver as many acceptable pullets to Midwest as
possible at the target weight with the efficient consumption of feed.

 

1.                                       Livability Incentive. 
Grower is entitled to a livability incentive payment of [* * *]
per acceptable pullet delivered to Midwest’s layer farm if the livability of
the baby chicks in a flock delivered to Grower that survive and are
subsequently delivered as acceptable pullets to Midwest’s laying farm exceeds
the livability performance guide as stated as benchmark range.

 

The livability
performance guide is 97-98% over 18 weeks.

 

Grower
is entitled to [*
* *]  per acceptable pullet delivered to Midwest’s laying farm if 97% or more
of the baby chicks in a flock delivered to Grower survive and are delivered as
acceptable pullets to Midwest’s laying farm.

 

2.                                       Uniformity Incentive.  Grower is entitled to receive a uniformity
incentive payment of [* * *] per acceptable pullet delivered to
Midwest’s layer farm if 88% or more of the acceptable pullets in a flock
delivered to the layer farm are greater than 89% and less than 111% of the
average target bird weight measured in grams per bird.

 

Grower
is entitled to a uniformity incentive of [* * *]
per acceptable pullet if 88% of the
acceptable pullets in a flock are greater than 89% and less than 111% of the
average target bird weight measured in grams per bird of the average target
bird weight of the flock at 16 weeks.

 

3.               Feed Incentive.  Grower shall be entitled to a feed incentive payment of [* * *]
per acceptable pullet delivered to Midwest’s layer farm if the average bird
weight of the acceptable pullets in a flock are greater than 99% grams/bird of
the target body weight average at 16 weeks and the accumulative feed
consumption per bird for 16 weeks is less than 101% of the target feed
consumption in grams per bird.

 

Grower
shall be entitled to a feed incentive payment amount of [* * *]
per acceptable pullet if the average bird
weight of the flock at 16 weeks is greater than 1218 grams and the cumulative
feed consumption is less than 5099 grams per bird.

 

 

EXHIBIT
C

 

GRANT OF EASEMENT

 

 

GRANT OF EASEMENT

 

THIS GRANT OF EASEMENT is
made as of this           
day of
              ,
2003 between Barbara Frank, an individual resident of Minnesota (“Grantor”) in
favor of Midwest Investors of Renville, Inc. d/b/a Golden Oval Eggs, a
Minnesota cooperative association and its successors and assigns (“Grantee”).

 

WHEREAS,
Grantor is the owner of certain property located in the County of Renville,
State of Minnesota;

 

WHEREAS,
Section 7.06 of an Independent Contractor Agreement for Pullet Production
by and between Grantor and Grantee requires that Grantor convey to Grantee an
easement for ingress and egress, access to all water, gas, and utilities,
manure storage, and possession and use of Grantor’s property to operate and
maintain the pullet production facility on Grantor’s property.

 

NOW,
THEREFORE, in consideration of the sum of One Dollar ($1.00)
and other good and valuable consideration paid to Grantor by Grantee, the
receipt and sufficiency of which is hereby acknowledged, Grantor hereby agrees
as follows:

 

1.                                      Grant
of Easement.  That Grantor does
hereby grant to Grantee, its successors and assigns, an easement over, under,
through, across and upon a portion of Grantor’s Real Property, legally
described as follows, to-wit (hereinafter the “Easement Area”):

 

Northwest Quarter of the
Northwest Quarter of Section 31, Township 114 North, Range 35 West; and
all that part of the Northwest Quarter of the Northeast Quarter and the
Southwest Quarter of the Northeast Quarter of Section 31, Township 114
North, Range 35 West, described as follows: 
Beginning at the Northwest corner of the Northeast Quarter of said
Section 31, and thence running East on the North Section line a
distance of 441 feet to the point of beginning, thence South parallel to the
North/South Quarter line of said Section, a distance of 763 feet,

 

 

thence West 441 feet to
the Quarter Section line, thence South on the Quarter Section line to
the center of the said Section 31, thence East on the East/West Quarter
line 660 feet, thence North parallel with the North/South Quarter line a
distance of 1320 feet, thence West a distance of 194 feet, thence North
parallel with the North/South Quarter line to the north line of said
Section 31, thence West on the North line of said Section 31, to the
point of beginning, being 10 acres more or less and located in Renville County,
Minnesota.

 

2.                                      Purpose
of Easement.  Grantor grants this
easement to Grantee for the purpose of providing the use, ingress and egress,
access to water, gas, and other utilities, and manure storage to operate and
maintain the pullet production facility on Grantor’s property.

 

3.                                      Maintenance
of Easement Area.  The Easement Area
shall be maintained by  Grantor.

 

4.                                      Grantor’s
Warranty of Title.  Grantor
covenants and warrants to Grantee that Grantor is the owner of the Easement
Area, that Grantor has a right to convey an easement in the manner and form set
forth in this Agreement, and that the Easement Area is free and clear of all
mortgages, liens or encumbrances, except for those disclosed in writing to
Grantee.

 

5.                                      Easement
to Run with the Land.  The easement
granted by this indenture shall run with the Easement Area and shall be binding
on Grantor, her representatives, successors and assigns.

 

6.                                      Paragraph
Headings.  Paragraph or other
headings contained in this Grant of Easement are for reference purposes only
and are not intended to affect in any way the meaning or interpretation of this
Grant of Easement.

 

7.                                      Governing
Law.  This Grant of Easement is made
in the State of Minnesota, and shall be interpreted and construed under the
internal laws of the State of Minnesota.

 

IN
WITNESS WHEREOF, the undersigned has executed this Grant of
Easement as of the day and year first above written.

 

	
   

  	
  BARBARA
  FRANK

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Barbara Frank

  

 

 

	
  STATE OF MINNESOTA

  	
  )

  	
   

  
	
   

  	
  ) ss.

  	
   

  
	
  COUNTY OF
                      

  	
  )

  	
   

  

 

The foregoing Grant of
Easement was acknowledged before me this
         day of
                           ,
2003 by Barbara Frank.

 

 

	
   

  	
   

  	
   

  
	
   

  	
  Notary Public

  

 

 

THIS INSTRUMENT DRAFTED
BY:

 

LINDQUIST & VENNUM
P.L.L.P.

Mark J. Hanson

4200 IDS Center

80 South Eighth Street

Minneapolis, MN 55402

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