EXCLUSIVE OUTPUT AGREEMENT
Exclusive Output Agreement dated as of September 30, 1997 (herein
sometimes referred to as the "Agreement") by and between Ronnybrook Farms, a New
York partnership (the "Farm") and Ronnybrook Farm Dairy, Inc., a New York
corporation (the "Dairy").
WHEREAS, the Dairy has been purchasing, on an exclusive basis, raw milk
produced by the Farm since the Dairy commenced operations in 1991; and
WHEREAS, the Dairy and the Farm wish to continue this relationship and set
forth the specific terms thereof.
NOW, THEREFORE, the parties hereto agree as follows:
(1) The Farm hereby agrees to sell all of the raw milk it produces to the
Dairy.
(2) The Dairy hereby agrees to purchase from the Farm all of the raw milk
the Dairy requires for the manufacture of dairy products, subject to the
provisions of this Agreement.
(3) The Farm hereby agrees that it will continue to produce raw milk at
its current rate of production until such time as the Dairy notifies the Farm of
any change in its requirements for raw milk. The Dairy shall give the Farm at
least 30 days' notice of any material change (increase or decrease) in its raw
milk requirements and the Farm shall use its reasonable best efforts to adjust
its production levels to accommodate the Farm's raw milk requirements.
(4) The Dairy hereby agrees to pay the Farm $16 per hundredweight for raw
milk in 1997 and 1998, $18 per hundredweight in 1999 and $20 per hundredweight
for the remainder of the term of this Agreement. The parties further agree that
the price paid for raw milk by the Dairy commencing January, 1998, shall be
adjusted monthly by the amount of any increase or decrease in the $14.50 per
hundredweight monthly blend price for milk established in Federal Order No. 1
for milk sold in January, 1998; provided, however, that the price per
hundredweight paid by the Dairy for raw milk shall not be less than the greater
of (a) the applicable price set forth in the previous sentence, and (b) the fair
market value of raw milk based on the average price paid by the three largest
milk cooperatives to dairy farms in the northeast as determined by the Company's
auditors.
(5) The Dairy shall have the right to approve the farming, herding and
milking techniques employed by the Farm and shall have the right to supervise
the operations of the Farm and otherwise exercise the degree of control over the
Farm's operations as are reasonably required to insure the quality of the raw
milk supplied hereunder by the Farm. The Farm shall use its reasonable best
efforts to make any changes in such techniques the Dairy may request in order to
insure the quality of the raw milk.
(6) The Farm hereby covenants that the raw milk it sells to the Dairy
pursuant to this Agreement will meet the standards for raw milk established by
the New York State Department of Agriculture and Markets.
(7) The Dairy may, in its sole discretion, refuse to purchase any raw milk
which it believes does not meet its standards of taste and quality.
(8) The Farm hereby represents that it owns approximately 30 acres of land
located on Prospect Hill Road, Ancramdale, New York and the milking farm, dairy
production plant
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and other structures located thereon (collectively the "Assets"). Such Assets
are used to produce all of the milk produced by the Farm.
(9) The Farm hereby grants to the Dairy a right of first refusal to
purchase the Assets. Therefore, if the Farm intends to sell or assign any of the
Assets or any partnership interest in the Farm (except for the assignment of a
partnership interest to a member or members of the Xxxxxxx family) to a bona
fide third-party purchaser, the Farm shall first notify the Dairy and afford the
Dairy a reasonable opportunity to first acquire such Assets or partnership
interest at the same price and on the same terms as offered by the proposed
third-party purchaser.
10) The term of this Agreement shall be ten years and such term shall be
renewable, at the Dairy's election, for two additional 10-year terms.
11) This Agreement and the rights and obligations hereunder are binding
upon and shall inure to the benefit of the parties hereto and their successors
and assigns; provided, however, that neither this Agreement nor any rights of
the Farm hereunder are assignable by the Farm without the prior written consent
of the Dairy.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the day and year first above written.
RONNYBROOK FARM DAIRY, INC.
By: /s/ R. Xxxxxx Xxxxxxx
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R. Xxxxxx Xxxxxxx, Vice President
RONNYBROOK FARMS
By: /s/ Xxxxxx X. Xxxxxxx
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Xxxxxx X. Xxxxxxx, General Partner
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