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EXHIBIT 10.35
MILK SUPPLY AGREEMENT*
This Agreement is entered into as of the 17th day of February, 1998,
by and between Dairy Farmers of America, Inc. ("Seller") and Southern Foods
Group, L.P. ("Buyer"). Seller is in the business of marketing unprocessed Grade
A milk ("Milk"). [omitted pursuant to a request for confidential treatment]
1. Requirements.
[omitted pursuant to a request for confidential treatment]
2. Sources of Supply.
[omitted pursuant to a request for confidential treatment]
3. Prices.
[omitted pursuant to a request for confidential treatment]
* Portions of the Milk Supply Agreement have been omitted pursuant to a request
for confidential treatment. The omitted portions will be filed separately with
the Commission.
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4. Term.
(a) The initial term of this Agreement shall commence on
January 1, 1998, and shall, unless earlier terminated as provided herein,
continue through December 31, 1998. This Agreement shall continue on a yearly
basis thereafter, unless either party elects to terminate this Agreement by
giving twelve (12) months prior written notice to the other party specifying a
termination date.
5. Manner of Payment.
Buyer shall pay Seller for all Milk received during any calendar month
at Seller's address set forth in Section 26 below, or at such other location
designated by Seller from time to time. The payment dates and the other terms
of payment shall be governed by the applicable Federal Milk Marketing Order. If
such Federal Milk Marketing Order is terminated, payment due dates in this
Agreement will be the same as specified in the terminated Federal Milk
Marketing Order.
6. Transportation of Milk.
Seller shall be responsible for the transportation and delivery of
Milk purchased and sold hereunder to Buyer. Transportation and delivery of
Milk shall be at Seller's sole risk and expense, and Seller shall have full
control over the method of transportation.
7. Schedule of Deliveries.
(a) Buyer will order its weekly Milk requirements for the
Plant from Seller on Thursday for delivery the following Sunday through
Saturday. Buyer shall specify the schedule and times of delivery.
(b) The parties hereto recognize that due to normal but
unanticipated business occurrences, it may be necessary from time to time for
Buyer to increase or decrease the amount of Milk ordered during the week it is
to be delivered. Buyer agrees to minimize these occurrences as much as possible
under the circumstances, and Seller agrees on such occasions to accommodate
Buyer's needs as rapidly as possible under the circumstances.
(c) Seller will make all reasonable efforts to supply
Buyer's Milk every day with loads from the same producers.
8. Insufficient Milk Supply.
In the event that Seller does not, at any time during the term of this
Agreement or any extension hereof, have on hand sufficient supplies of milk to
meet all of its outstanding obligations, including Buyer's requirements of Milk
hereunder, Seller shall be obligated to
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acquire from other sources sufficient supplies of milk of the same quality as
contracted for hereunder to satisfy Buyer's requirements of Milk, and Seller's
failure to do so hereunder shall entitle Buyer, in its sole discretion, to (a)
terminate this Agreement in accordance with the provisions of Section 16
hereunder, or (b) purchase Milk from other suppliers, in which event (i)
Buyer's obligation to purchase its requirements of Milk from Seller as provided
in Section 1 hereof shall be reduced to the extent of any such purchases from
other suppliers, and (ii) Seller shall pay Buyer for the difference in price
(including, without limitation, the cost for hauling the Milk to the Plant from
up to 2,000 miles away) between what Buyer would have paid hereunder and what
Buyer has to pay such other suppliers.
9. Quality of Milk.
Seller represents, warrants and agrees that:
(a) Seller shall comply with all laws and governmental
rules and regulations applicable to the production, storage and delivery of
Milk to be delivered to Buyer hereunder, and shall use reasonable commercial
efforts to assure that the dairy farmers producing Seller's milk do likewise;
(b) all Milk purchased and sold hereunder shall, when
delivered, meet all standards for Grade A fluid milk as prescribed under the
applicable laws, as amended from time to time, of the United States and the
respective states in which the Plant to which such Milk is delivered hereunder
is located, and the laws or ordinances of any municipalities or other political
subdivisions in which the Milk is produced or sold;
(c) all Milk purchased and sold hereunder shall, when
delivered, be reasonably acceptable as to flavor, odor and appearance;
(d) Seller will make all reasonable efforts to insure
that all Milk purchased and sold hereunder shall be shipped directly by Seller
from dairy farmers; and
(e) all Milk, when delivered, shall meet the following
standards of Buyer in addition to those set forth in subparagraphs 9(a) - 9(c)
above;
(i) the temperature shall be no greater than 40
degrees F., but Buyer may allow exceptions to this requirement on a
reasonable number of loads when circumstances make it impossible to
meet this requirement;
(ii) The titratable acidity ("T.A.") shall not
exceed .16% (unless a T.A. variance has been granted by Buyer for a
particular area);
(iii) the sediment test shall be less than #3 pad;
(iv) the freezing point shall be lower than or
equal to -.530 degrees C.; and
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(v) the standard plate count ("SPC") shall be
less than 100,000 bacteria per milliliter;
(vi) the somatic cell count shall be less than
750,000 per milliliter.
10. Indemnification.
(a) Seller agrees to defend, indemnify and hold harmless
Buyer, its subsidiaries and affiliates and its and their agents, officers,
directors, employees, representatives, successors and permitted assigns from
and against all obligations, liabilities, damages, penalties, fines,
violations, claims, causes of action, suits, judgments, costs and expenses
(including, without limitation, reasonable attorneys' fees) (together,
"Losses") that Buyer may suffer, arising out of, resulting from or connected
with (i) the negligent acts or omissions of Seller in the performance of this
Agreement, and/or (ii) Seller's breach of the representations, warranties and
agreements set forth in Section 9 hereof.
(b) Buyer agrees to defend, indemnify and hold harmless
Seller, its subsidiaries and its affiliates and its and their agents, officers,
directors, employees, representatives, successors and permitted assigns from
and against all Losses that Seller may suffer arising out of, resulting from or
connected with the negligent acts or omissions of Buyer in the production and
sale of products containing Milk to third parties.
(c) The obligations of Seller and Buyer in this Section
10 shall survive the termination or cancellation of this Agreement for any
reason whatsoever.
11. Testing and Rejection of Milk.
Before pumping Milk into Buyer's first receiving tank, Buyer shall (a)
test Milk for antibiotics using the Charm or Snap tests, and (b) sample Milk
for flavor, odor, appearance, aridity, temperature, freezing point and
sediment. Prior to title to the Milk passing to Buyer as provided in Section
12, Buyer shall have the right to reject any and all Milk which does not meet
the requirements of Section 9. Repeated tests of Milk from a dairy xxxxxx route
(such as, but not limited to, 3 out of 5 consecutive loads of Milk) exceeding
the specifications of Section 9(d)(v) for SPC shall constitute grounds for
Buyer's rejection of any future loads of Milk from such route until Buyer is
satisfied that such route's SPC has been improved to meet the standards set
forth in Section 9(d)(v). Buyer shall promptly give notice to Seller of any
rejection of Milk and the reasons for such rejection. Provided that (i) Seller
has supplied all of Buyer's requirements for Milk at a particular Plant for a
particular period and (ii) Buyer has not commingled such Milk with Milk
purchased from another supplier as permitted under the terms of this Agreement,
Buyer may, within a reasonable time after delivery, reject Milk which does not
comply with the requirements set forth in Section 9 ("Returned Milk") for which
title has passed to Buyer as provided in Section 12, and such Returned Milk
shall be disposed of by Buyer in accordance with timely instructions, if any,
from Seller. Seller agrees to pay Buyer for all reasonable costs actually
incurred by Buyer in storing, handling and disposing of Returned Milk. The
disposition of Returned Milk shall be under the control of Seller unless, within
12 hours after notice of
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rejection is given to Seller by Buyer, Seller fails to furnish Buyer with
instructions regarding the disposal of Returned Milk, in which event Buyer
shall dispose of the Returned Milk at Seller's expense without liability
therefor. The foregoing obligation of Buyer to dispose of Milk, however, shall
be subject to Buyer's right to reject immediately any tanker which contains
Milk that fails to meet the requirements of Section 9.
12. Title.
Title and risk of loss to all Milk delivered to Buyer hereunder shall
remain with Seller until such Milk is delivered to Buyer's Plant, Buyer's hose
is connected to the tanker, and the tanker valve has been opened, at which time
title shall pass to Buyer.
13. Excuse for Nonperformance.
In the event that either Buyer or Seller is unable to perform
hereunder due to a strike, lockout, other labor trouble, riot, war, enemy act,
blackout, rebellion, quarantine of plant, fire, earthquake, or other Act of God
(a "Force Majeure Event"), such party shall not be liable hereunder for
nonperformance of this Agreement during the time or continuance of such Force
Majeure Event. The party who is unable to perform due to a Force Majeure Event
agrees to use reasonable efforts to mitigate any hardship suffered by the other
party during any period when performance is excused under the provisions of
this Section. Failure on the part of Seller to deliver or on the part of Buyer
to receive Milk for any of the reasons set forth in this Section 13 shall not
be deemed a ground for the termination or cancellation of this Agreement;
provided, however, if Seller is unable to deliver Milk due to a Force Majeure
Event, Buyer may purchase the same from other suppliers, in which event Buyer's
obligation to purchase its requirements of Milk from Seller as provided in
Section 1 above shall be temporarily reduced to the extent of any such
purchases from such other suppliers. Buyer's obligation to purchase its
requirement of Milk from Seller as provided in Section 1 above shall resume
upon Seller providing Buyer with written notice that the Force Majeure Event
which prevented Seller from delivering Milk to Buyer no longer exists.
14. Weights and Butterfat Tests.
Seller's invoices to Buyer shall, in support of payment by Buyer for
the prices charged therein, set forth for each delivery all weights and
butterfat tests of all Milk delivered. Seller's weights and butterfat tests
shall be used as the purchase weight and butterfat tests, subject to adjustment
by the Federal Milk Market Administrator.
15. Compliance With All Laws, Rules and Regulations.
Buyer and Seller each warrants that it will in every manner of its
business comply with and conform to all federal, state and local laws, rules
and regulations governing the subject matter of this Agreement. Any breach of
said warranty or claim of breach shall be the sole responsibility of the party
in breach, or claimed to be in breach, and said party shall, for said breach,
indemnify, defend and hold the other party free and harmless from and against
any loss
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or expense arising therefrom. The foregoing indemnity shall be in addition to
and not in limitation of the indemnities provided in Section 10 hereof and
shall survive the termination or cancellation of this Agreement for any reason
whatsoever.
16. Default or Breach.
Excepting out Section 3 and subject to Section 13 hereof, if either of
the parties hereto shall breach any of the provisions hereof or default in the
performance of any of the terms, conditions, covenants, obligations or
agreements herein made or agreed to be kept or performed under the terms of
this Agreement by said party, and such default or breach shall continue for a
period of thirty (30) consecutive days after written notice to said party
specifying the default or breach, then the party not in default may declare
this Agreement terminated and shall be under no further obligation hereunder,
and/or the party not in default may take such other action as may be available.
Notwithstanding the foregoing and subject to Section 13 hereof, in the event
that Seller does not deliver sufficient supplies of Milk to meet Buyer's
requirements hereunder, whether from Seller's own sources or from third parties
as required by Section 8 hereof, Buyer, in its sole discretion, may declare
Seller in default under this Agreement and may terminate this Agreement within
24 hours if such default is not remedied within such 24 hour period and/or
Buyer may take such other action as may be available to Buyer.
17. Sale of Plant.
Notwithstanding anything contained in this Agreement to the contrary,
upon the sale, exchange or closing of any Plant by Buyer during the term of
this Agreement or any extension hereof, Buyer and Seller shall have the option,
following thirty (30) days' notice to Seller, to either (a) terminate this
Agreement with respect to such Plant, or (b) subject to the prior written
approval of Seller, which approval will not be reasonably withheld, assign this
Agreement (as it relates to such Plant) to the purchaser of such Plant. In the
event that Buyer acquires a Plant or sells, replaces or exchanges a Plant for
another milk plant (individually "New Milk Plant", collectively "New Milk
Plants") in the same geographic area, Buyer shall substitute such New Milk
Plant for such Plant under the terms hereunder, and in such event this
Agreement shall continue in full force and effect and shall thereafter include
the New Milk Plant.
18. Arbitration.
Excepting out Section 3 and unless otherwise provided herein, should
any controversy arise between the parties relating to this Agreement, it shall
be settled by arbitration as provided herein. Each party will select and
appoint one arbitrator who is a person familiar with the subject of this
Agreement. The two arbitrators so appointed will select and appoint a third
arbitrator who possesses like qualifications within ten (10 days after the date
on which the last of these first two such arbitrators was appointed. If the
arbitrators fail to appoint a third, then such arbitrator shall be appointed in
accordance with Section 15 of the Commercial Arbitration Rules of the American
Arbitration Association ("AAA"). A decision in writing of any two of the
arbitrators will be binding and conclusive on both parties to this Agreement.
If either party fails to appoint an arbitrator as required by this Section
within ten (10) days after receiving written notice from
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the other party to do so, then the arbitrator for such party shall be selected
by the AAA in the method designated for selecting a neutral arbitrator. Such
neutral arbitrator shall thereafter be considered the appointed arbitrator for
such party. The costs, expenses and fees of the arbitrators will be borne
equally by the parties. The arbitration proceedings shall be held in Dallas
County, Texas. This Section 18 shall constitute a written agreement to submit
to arbitration. Except as modified herein, arbitration shall be governed by
the provisions of the Commercial Arbitration Rules of the AAA.
19. Confidentiality.
Buyer and Seller agree to keep the terms and conditions of this
Agreement confidential. Nothing in this Agreement shall prevent either party
from disclosing the existence or terms and conditions of this Agreement to its
Board of Directors, officers and employees or to proper governmental regulatory
authorities, if requested to do so; however, such disclosure shall be made only
after notification to the other party and after notifying the Board of
Directors, officers and employees or to the governmental regulatory authority
that the document is to be treated as a confidential business record not to be
disclosed to competitors of Buyer or Seller.
20. Assignment.
Subject to Buyer's right to assign this Agreement as provided in
Section 17 hereof, neither party to this Agreement may transfer, assign or
otherwise convey any rights or delegate any duties or obligations hereunder
without the prior written consent of the other party.
21. No Waiver, Amendment.
The failure of any party hereto at any time or times to require
performance of any provision hereof will in no manner affect its right at any
later time to enforce such provision. No waiver by either party of any
condition or of any breach of any term, covenant or representation or warranty
contained in this Agreement will be effective unless given in writing, and no
waiver in any one or more instances will be deemed to be a further or
continuing waiver of any such condition or breach in other instances or waiver
of any other condition or breach of any other term, covenant, representation or
warranty. The remedies available hereunder are cumulative, and the exercise of
any one or more of the remedies provided herein or otherwise available in law
or in equity shall not be construed as a waiver of any of the other remedies
available. Except as otherwise specified in Section 3 hereof or elsewhere
herein, this Agreement can be amended only by a writing signed by both parties
hereto. If Buyer acquires or otherwise begins to operate one or more New Milk
Plant(s) after the date hereof, Buyer shall promptly give Seller notice of such
fact and the addresses of such New Milk Plant(s), and such New Milk Plant(s)
shall automatically be added to Schedule A hereto as plants to be covered by
this Agreement.
22. Governing Law.
This Agreement and its application shall be governed by the laws of
the State of Texas.
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23. Captions.
Any captions to or headings of the Sections of this Agreement are
solely for the convenience of the parties, are not a part of this Agreement,
and shall not be used for interpretation or determination of the validity of
this Agreement or any part thereof.
24. Severability.
All provisions of this Agreement, and all portions of such provisions,
are intended to be, and shall be, independent and severable, and in the event
that any provision or portion thereof is determined to be unlawful, invalid or
unenforceable, such determination shall not affect the validity or
enforceability of any other provision, or portion thereof, of this Agreement,
and all other provisions and portions thereof shall continue to be valid and
enforceable.
25. Counterparts.
This Agreement may be executed in one or more counterparts, each of
which when so executed shall be deemed an original, but all of which taken
together shall constitute but one and the same instrument.
26. Notice.
All notices, requests, demands and other communications hereunder
shall be in writing and shall be deemed to have been duly given if delivered by
hand, sent by telecopy, or sent by United States mail, first class, registered
or certified, return receipt requested, with proper postage prepaid, in each
case to the following addresses of the respective parties.
If to Buyer:
Southern Foods Group, L.P.
0000 Xxxxx Xxxxxxx
Xxxxxx, XX 00000
Attention: Xxxx Xxxxxxxx
Fax: (000) 000-0000
If to Seller:
Dairy Farmers of America, Inc.
0000 Xxxx Xxxxxxxx Xxxxxxxxxx
Xxxxxxxxxxx, Xxxxxxxx 00000
Attention: Xxxxx X. Xxxxxxx
Fax: (000) 000-0000
The parties agree that any notice required or permitted by this
Agreement may be made by a facsimile to be confirmed in writing within ten (10)
days to the fax numbers set forth above.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date and year first above written.
DAIRY FARMERS OF AMERICA, INC. SOUTHERN FOODS GROUP, L.P.
By: /s/ By: /s/ XXXX XXXXXXXX
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Its: President & CEO Its: President & CEO
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Date: February 11, 1998 Date: February 17, 1998
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SCHEDULE A
PLANTS
[omitted pursuant to a request for confidential treatment]
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SCHEDULE B
PLANTS
[omitted pursuant to a request for confidential treatment]
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SCHEDULE C
PLANTS
[omitted pursuant to a request for confidential treatment]
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