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.
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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 ½ 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 11
th 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
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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.
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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 here
