United States v. Dairy Farmers of America, Inc.; Proposed Final Judgement and Competitive Impact Statement, 64984-65000 [06-8795]

Agencies

• Antitrust Division
• Department of Justice

[Federal Register Volume 71, Number 214 (Monday, November 6, 2006)]
[Notices]
[Pages 64984-65000]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 06-8795]


-----------------------------------------------------------------------

DEPARTMENT OF JUSTICE

Antitrust Division


United States v. Dairy Farmers of America, Inc.; Proposed Final 
Judgement and Competitive Impact Statement

    Notice is hereby given pursuant to the Antitrust Procedures and 
Penalties Act, 15 U.S.C. 16(b) through (h), that a proposed Final 
Judgement, Stipulation, and Competitive Impact Statement have been 
filed with the United States District Court for the Eastern District of 
Kentucky in United States of America and Commonwealth of Kentucky v. 
Dairy Farmers of America, Inc. and Southern Belle Dairy Co., LLC, No. 
6:03-cv-206. On April 24, 2003, the United States and Commonwealth of 
Kentucky filed a Complaint alleging that the acquisition by DFA of an 
ownership interest in Southern Belle Dairy Co., LLC (``Southern 
Belle''), violated Section 7 of the Clayton Act, 15 U.S.C. 18. An 
Amended Complaint was filed on May 6, 2004. The proposed Final 
Judgment, filed on October 2, 2006, requires DFA to divest its interest 
in Southern Belle and use its best efforts to cause its partner, the 
Allen Family Limited Partnership, to divest its interest in Southern 
Belle as well. Copies of the Amended Complaint, proposed Final 
Judgment, and Competitive Impact Statement are available for inspection 
at the Department of Justice in Washington, DC in Room 215, 325 Seventh 
Street, NW., and at the Office of the Clerk of the United States 
District Court for the Eastern District of Kentucky, London, Kentucky.
    Public comment is invited within 60 days of the date of this 
notice. Such comments, and responses thereto, will be published in the 
Federal Register and filed with the Court. Comments should be directed 
to Mark J. Botti, Chief, Litigation I Section, Antitrust Division, U.S. 
Department of Justice,

[[Page 64985]]

1401 H St., NW., Suite 4000, Washington, DC 20530 (202-307-0001).

J. Robert Kramer II,
Director of Operations, Antitrust Division.

United States District Court, Eastern District of Kentucky, London 
Division

United States of America, and Commonwealth of Kentucky, Plaintiffs, v. 
Dairy Farmers of America, Inc., and Southern Belle Dairy Co., LLC, 
Defendants

    Civil Action No.: 03-206-KSF
    Filed:

Amended Complaint

    The United States of America, acting under the direction of the 
Attorney General of the United States, and the Commonwealth of 
Kentucky, by and through its Attorney General, bring this civil action 
to obtain equitable relief against defendants, including compelling the 
Dairy Farmers of America, Inc. (``DFA'') to divest its interest in the 
Southern Belle dairy located in Somerset, Kentucky, and allege as 
follows:

I. Nature of the Action

    1. Up until February 2002, DFA, through its subsidiaries, operated 
the Flav-O-Rich dairy in London, Kentucky (``Flav-O-Rich'') and 
competed vigorously against the Southern Belle dairy, located thirty 
miles away in Somerset, Kentucky (``Southern Bell''), to supply milk to 
school districts located in Kentucky and Tennessee. That competition 
resulted in lower prices and better service for school districts that 
provide milk to students.
    2. In February 2002, DFA, through another subsidiary, acquired 
control of Southern Belle, eliminating that important competition. When 
it made that acquisition, DFA understood that the Department of Justice 
had in September 1998 successfully challenged a merger involving the 
very same dairies, under different ownership, because it would have 
substantially lessened competition in violation of Section 7 of the 
Clayton Act.
    3. Southern Belle and Flav-O-Rich are the only two dairies or two 
of only a few dairies that bid to supply school milk in many parts of 
Kentucky and Tennessee. In 45 school districts, the acquisition has 
created a monopoly. In 55 other districts, the number of bidders has 
effectively declined from three to two, reducing competition 
substantially.
    4. History in this region has demonstrated that less competition 
results in higher prices. Many school districts in this area previously 
had to pay higher prices as victims of a criminal bid-rigging 
conspiracy involving school milk. The former owners of Southern Belle 
and Flav-O-Rich engaged in that conspiracy and pled guilty to 
conspiring with each other for more than a decade to rig school milk 
bids.
    5. Because many of the affected school districts are small or rural 
districts, often in the mountains, it is unlikely that other dairies 
will enter or expand into these markets to eliminate the 
anticompetitive effects of the acquisition. Indeed, Southern Belle's 
former owner, in the course of debarment proceedings following the 
criminal conviction, explained that entry was unlikely in many of these 
very districts, and that the elimination of Southern Belle as a 
competitor would reduce competition and cause prices to rise.

II. Defendants

    6. Defendant Dairy Farmers of America, Inc. (``DFA'') is a Kansas 
corporation with its headquarters and principal place of business in 
Kansas City, Missouri. DFA is the largest dairy farmer cooperative in 
the world. In 2001, it had approximately 25,500 members in 48 states, 
and sold approximately 45.6 billion pounds of raw milk. DFA had over 
$7.9 billion in revenues in 2001.
    7. DFA owns a 50% common equity interest and approximately 92% 
preferred equity interest (around $500,000,000) in National Dairy 
Holdings, L.P. (``NDH''). It also has a 50% interest in Dairy 
Management LLC, which is the managing arm of NDH. Based on its 
financial interests in NDH, DFA has the rights to between 50% and 75% 
or more of NDH's profits. In forming NDH, DFA and its partners in NDH 
agreed, among other that DFA must approve any decision to commit NDH to 
any contracts or expenditures exceeding $50,000, to appoint new NDH 
officers, or change the compensation (e.g., increase the salary) of 
NDH's officers.
    8. DFA is the sole supplier of raw milk and is the contractually 
preferred supplier of raw milk to Flav-O-Rich and other NDH dairies. 
DFA also sells more raw, unprocessed milk to dairies in Kentucky and 
Tennessee than does any other entity.
    9. In addition to its controlling interests in Flav-O-Rich, DFA 
also owns financial interests in several other dairies that sell school 
milk in parts of Kentucky and Tennessee, including five additional NDH 
dairies, three Turner Holdings dairies, and one Ideal American dairy. 
Until February 2002, when the instant acquisition was consummated, 
Southern Belle competed with a number of these dairies in addition to 
NDH dairies such as Flav-O-Rich.
    10. In December 2001, DFA, through NDH, acquired control and 
influence over all significant business decisions of Flav-O-Rich and 
other NDH dairies. Flav-O-Rich processes approximately 30 million 
gallons of fluid milk per year and had annual revenues of approximately 
$70 million in 2001. Flav-O-Rich distributes and sells school milk 
primarily in the eastern two-thirds of Kentucky and Tennessee.
    11. In February 2002, DFA, through its partially owned subsidiary, 
Southern Belle Dairy Co., LLC, (``Southern Bell subsidiary''), acquired 
control and influence over all significant business decisions of 
Southern Belle. DFA and subsidiaries controlled in who or in part by 
DFA contributed approximately $18 million of the $19 million purchase 
price for Southern Belle. The Allen Family Limited Partnership 
(``AFLP'') contributed the remaining $1 million, which DFA guaranteed 
AFLP could recover any time after February 26, 2005. DFA and its 
subsidiaries own a 50% common equity interest and almost 100% preferred 
equity interest (around $4,000,000), and 100% credit interest (around 
$13,000,000) in Southern Belle.
    12. DFA formed its Southern Belle subsidiary to acquire the 
Southern Belle dairy after it became clear that its NDH subsidiary 
could not acquire the dairy based on the Department of Justice's 
September 1998 challenge.
    13. In planning how DFA would control the Southern Belle subsidiary 
after they formed it, DFA and AFLP agreed, among other things, that DFA 
must approve any decision to commit Southern Belle to any contracts or 
expenditures exceeding $150,000, as well as hiring and compensation 
decisions for Southern Belle's officers. DFA also gained the right to 
control the supply of raw milk to the dairy and, based on its debt and 
equity holdings, the rights to between 50% and 75% of the dairy's 
profits.
    14. Defendant Southern Belle Dairy Co., LLC, is a Delaware limited 
liability company with its headquarters and principal place of business 
in Somerset, Kentucky, where it owns and operates the Southern Belle 
dairy. Southern Belle processes approximately 25 million gallons of 
fluid milk per year and had annual revenues of approximately $65 
million in 2001. Southern Belle distributes and sells school milk 
primarily in the eastern two-thirds of Kentucky and Tennessee.

[[Page 64986]]

III. Jurisdiction and Venue

    15. This Complaint is filed under Section 15 of the Clayton Act, as 
amended, 15 U.S.C. 25, and by the Commonwealth of Kentucky under 15 
U.S.C. 26, to prevent and restrain defendants from continuing to 
violate Section 7 of the Clayton Act, as amended, 15 U.S.C. 18, and 
under the provisions of K.R.S. Sec.  367.110 et seq.
    16. Defendants, on their own or through their subsidiaries, 
transport and sell school and other milk in the flow of interstate 
commerce in Kentucky and Tennessee and are engaged in interstate 
commerce and in activities substantially affecting interstate commerce. 
Defendant DFA also buys and sells raw milk in interstate commerce. This 
Court has jurisdiction over the subject matter of this action and the 
parties pursuant to Section 12 of the Clayton Act, 15 U.S.C. 22, and 28 
U.S.C. 1331, 1337(a) and 1345.
    17. Both of the defendants transact business and are found in the 
Eastern District of Kentucky. Defendant Southern Belle's principal 
place of business is in this district. Venue is proper in this judicial 
district pursuant to 15 U.S.C. 22 and 28 U.S.C. 1391.

IV. History of Collusion on School Milk Sales in the Relevant Markets

    18. In late 1993, Southern Belle and Flav-O-Rich pled guilty to the 
felony of conspiring to raise the price of school milk by agreeing on 
which dairy would submit the lowest bid for which school district. The 
conspiracy existed from at least the late 1970s through July 1989, and 
resulted in substantial harm to over thirty school districts. Southern 
Belle paid a $375,000 criminal fine; Flav-O-Rich paid $1,000,000. No 
others were charged with participating in this conspiracy. The current 
acquisition recreates the effect of this conspiracy in many of those 
same school districts harmed by the conspiracy for over a decade. See 
United States v. Southern Belle Dairy Co., [1998-1996 Transfer Binder] 
Trade Reg. Rep. (CCH) ] 45,092, at 44,599 (E.D. Ky. Nov. 13, 19920; 
United States v. Flav-O-Rich, Inc., [1998-1996 Transfer Binder] Trade 
Reg. Rep. (CCH) ] 45,092, at 44,605 (N.D. Ga. Dec. 22, 1992).

V. The Manufacture, Distribution, and Sale of School Milk Is a Relevant 
Product Market

    19. Dairies purchase raw milk from dairy farmers and agricultural 
cooperatives, pasteurize and package the milk, and distribute and sell 
the processed product. Fluid milk (``fluid milk''P is raw milk that has 
been processed for human consumption, may be unflavored or flavored 
with chocolate or fruit flavorings, and does not include extended shelf 
life (ESL) milk or ultra high temperature (UHT) milk, which are 
produced by different manufacturing processes, generally cost 
significantly more than fluid milk, and have numerous significant 
physical differences compared with fluid milk, such as shelf stability, 
and a significantly different taste, among other attributes.
    20. School milk is fluid milk that is processed, distributed, and 
sold to school districts, usually in half pint containers, pursuant to 
contracts with school districts. While these contracts may also include 
other products, school milk accounts for the vast majority of the 
dollar value of these contracts.
    21. The U.S. Department of Agriculture (``USDA'') sponsors several 
programs to reimburse schools for meals and snacks served to students 
from lower income families. To qualify, schools must offer mild to 
every student, regardless of the income of that student's family. If 
schools want to receive the federal reimbursements, they cannot 
substitute other products for school milk, regardless of the milk's 
cost.
    22. Individual school districts generally solicit bids from dairies 
to supply them with school milk. Sometimes, groups of school districts 
solicit bids to supply school milk to some or all of the school 
districts in the group, but each individual school district usually 
chooses (even if it solicited bids as part of a group) the dairy to 
which it will award its business.
    23. Schools require many important services in connection with the 
supply of school milk. These services often include frequent delivery 
(usually every day or every other day because schools generally cannot 
store more than a limited amount of milk); delivery to all or almost 
all schools in a district; reordering of milk; stocking milk in the 
coolers; rotating products; retrieving spoiled and damaged products; 
providing quick emergency shipments (to guarantee a school has enough 
milk on hand so it will not lose school meal reimbursements); the 
return of milk before holidays; specific times of delivery (e.g., early 
morning so as not to conflict with times when students are present); 
specific access requirements (e.g., providing keys to drivers); 
allotting credit for retrieved products; cleaning and maintaining 
coolers; and other requirements.
    24. School districts would not switch to alternative products or 
delivery methods in the event of a small but significant increase in 
the price of school milk.
    25. The manufacture, distribution, and sale of school milk 
constitutes a relevant product market or line of commerce within the 
meaning of Section 7 of the Clayton Act.

VI. The Relevant Geographic Markets

    26. Individual school districts generally solicit bids for school 
milk, although sometimes groups of school districts solicit bids for 
school milk for some or all of the school districts in the group. 
School districts usually decide which dairy to award with a school milk 
contract on an individual basis (regardless of whether they solicit 
bids individually or as part of a group). Several school districts 
belong to a group of school districts that (1) requires its members to 
solicit bids for school milk only through that group, and (2) requires 
bidders to submit a uniform bid for all of the districts in the group. 
Each school district typically requires its school milk supplies to 
deliver to each school within the school district. School districts 
vary with respect to how many schools must be served, the distance 
between the schools, the size of the schools in the school district, 
and other attributes. Each school district has its own requirements 
with respect to the frequency of deliveries (typically every day or 
every other day, because schools generally cannot store more than a 
limited amount of milk), the time of deliveries, the quantity of 
deliveries, products included, cooler requirements, and specific or 
individual service requirements.
    27. Due to the high level of service requirements of schools, the 
high frequency of delivery required, the small volume delivered at each 
stop, the seasonal nature of the business, and other factors, the 
viable suppliers of school milk are generally limited to those dairies 
that already have significant local distribution in the area. Dairies 
that do not currently have nearby routes are generally not viable 
suppliers of school milk to such school districts. These factors limit 
school districts' choice of suppliers.
    28. Dairies charge different prices to different school districts 
or groups of school districts (``price discriminate''), based on, among 
other things, the number of competing dairies in the area, the strength 
of competition in these localized school milk markets, and the unique 
service and other requirements of schools.
    29. Accordingly, each school district, or group of school districts 
that requires its members to use the school milk

[[Page 64987]]

supplier who submits a winning bid that is uniform for that entire 
group, constitutes a relevant geographic market or section of the 
country within the meaning of Section 7 of the Clayton Act. School 
districts harmed by the acquisition include those, among others, listed 
in Attachment A (``Merger-to-Monopoly Markets'') and Attachment B 
(``Merger-to-Duopoly Markets'').

VII. Harm to Consumers

    30. Competition between Southern Belle and Flav-O-Rich (or other 
dairies in which DFA has financial interests) resulted in lower prices 
and better service for many school milk customers in Kentucky and 
Tennessee. Southern Belle's competitive presence forced these other 
dairies to lower their respective bid prices for school milk contracts.
    31. Before DFA's acquisition of Southern Belle, school milk markets 
in Kentucky and Tennessee had very few competitors and thus were 
already highly concentrated. These markets have become much more 
concentrated as a result of the acquisition.
    32. In many of these markets, Southern Belle and Flav-O-Rich (or 
other dairies in which DFA has financial interests) are clearly the two 
dairies able to supply school milk most economically, and would benefit 
(at the expense of consumers) by acting together at DFA's direction to 
raise one or both of their bids. Because it shares each dairy's 
profits, DFA has a financial incentive to encourage, facilitate, or 
enforce such cooperation. And, with DFA's control or influence over 
critical business decisions of the dairies, the dairies are likely to 
cooperate. Reducing the number of independent bidders from two to one 
in these markets makes it very likely that prices will rise or the 
level of service will decrease for these districts.
    33. In a number of other school districts, Southern Belle and Flav-
O-Rich (or other dairies in which DFA has financial interests) are two 
of only three likely bidders. Reducing the number of independent 
bidders from three to two in these markets makes it very likely that 
prices will rise or the level of service will decrease for these 
districts.
    34. The effect of DFA's acquisition of control and influence over 
Southern Belle is to substantially lessen competition, or to tend to 
create a monopoly in violation of Section 7 of the Clayton Act.

VIII. Entry Is Difficult

    35. To maintain its ability to sell school milk, the former owner 
of Southern Belle told the USDA during debarment proceedings in 1998 
that competition would decrease and prices would rise if it could not 
bid. It said that Southern Belle was an ``important supplier to very 
small school districts in Kentucky and Tennessee,'' especially in the 
``rural districts in the mountains of eastern Kentucky.'' (Letter from 
Joseph L. Ruby, Wiley Rein & Fielding, to Yvette Jackson, Acting 
Administrator, Food and Consumer Service, USDA, Jan. 23, 1998, at 2, 
copy provided in Attachment C.) It also said that those school 
districts would be unlikely to find any new school milk entrants to 
replace the lost competition if it could not bid.
    36. Entry by new competitors or expansion by existing dairies in 
the manufacture, distribution, and sale of school milk will not be 
timely, likely, or sufficient to defeat any increase in prices or 
decrease in the level of service in the affected school milk markets. A 
dairy is unlikely to enter a school milk market, even after a small but 
significant price increase, unless it already services a substantial 
number of existing commercial fluid milk customers from its route 
trucks in the school district. This is true because school milk 
business is usually used to ``fill out'' a dairy's existing commercial 
fluid milk route truck business, as schools require the regular (e.g., 
every day or every other day) delivery of school milk along with a 
number of important labor-intensive and time-consuming services, which 
would not be economical but for the existing fluid milk customer 
accounts. Thus, only dairies with existing straight truck delivery 
routes in an area can compete efficiently for school milk business in 
that area. Entry or expansion into the school milk business also 
requires substantial investment in specialized manufacturing assets and 
infrastructure, including the high cost of installing a dedicated half 
pint filler.
    37. Neither entry nor expansion prevented Southern Belle and Flav-
O-Rich from successfully carrying a decade-long criminal bid rigging 
conspiracy against many of these same school milk districts. Such long-
lasting collusion would not have been possible if higher prices easily 
attracted new competitors.

IX. Violations Alleged

    38. DFA's acquisition of Southern Belle through its partially owner 
Southern Belle subsidiary will likely have the following effects, among 
others:
    a. Competition generally in the manufacture, distribution, and sale 
of school milk in the relevant geographic markets will be substantially 
lessened;
    b. Actual and potential competition between Southern Belle and 
Flav-O-Rich (or other dairies in which DFA has financial interests) in 
the manufacture, distribution, and sale of school milk in the relevant 
geographic markets will be substantially lessened; and
    c. Prices for school milk in the relevant geographic markets will 
likely increase.
    39. DFA's partial acquisition of Southern Belle violates Section 7 
of the Clayton Act, as amended, 15 U.S.C. 18, and K.R.S. Sec.  367.110 
et seq.

X. Relief Requested

    40. Plaintiffs request that this Court:
    a. Adjudge the acquisition of Southern Belle by defendant DFA to 
violate Section 7 of the Clayton Act, as amended, 15 U.S.C. 18, and 
K.R.S. Sec.  367.110 et seq.
    b. Compel DFA to divest all of its interests (including common 
equity, preferred equity, credit interests, raw milk procurement 
authority, etc.) in Southern Belle, and take any further actions needed 
to place Southern Belle in the same or comparable competitive position 
as existed prior to the acquisition;
    c. Permanently enjoin and restrain DFA, including any of its 
subsidiaries or joint ventures, and all persons acting on behalf of any 
of these entities, from acquiring or maintaining, in whole or part, any 
simultaneous legal or beneficial interests (including common equity, 
preferred equity, credit interests, or raw milk procurement authority) 
in both Southern Belle and Flaw-O-Rich;
    d. Compel DFA, including any of its subsidiaries or joint ventures, 
and all persons acting on behalf of any of these entities, to provide 
plaintiff United States of America with notification at least 30 
calendar days prior to any acquisition, in whole or in part, of any 
legal or beneficial interests (including common equity, preferred 
equity, credit interests, or raw milk procurement authority) in any 
fluid milk processing operation;
    e. Allow any school district or school purchasing cooperative to 
terminate or rescind any contract to supply school milk entered into 
with defendants on or after February 20, 2002, including but not 
limited to eliminating any restrictions on or disincentives to 
terminating or rescinding such contracts and otherwise refunding or 
returning consideration paid in advance pursuant to such contracts 
(i.e., making such contracts voidable in the sole discretion of the 
school districts or purchasing cooperatives);

[[Page 64988]]

    f. Award plaintiffs the costs of this action; and
    g. Award plaintiffs such other and further relief as is proper.

    Respectfully submitted,

    For Plaintiff United States of America:

R. Hewitt Pate,
Assistant Attorney General.

J. Bruce McDonald,
Deputy Assistant Attorney General.

Mark J. Botti,
Chief, Litigation I Section.

    Dated: March 30, 2004.

    For Plaintiff Commonwealth of Kentucky:

David R. Vandeventer,
Assistant Attorney General, Kentucky Bar No. 72790, Office of the 
Attorney General of Kentucky, 1024 Capital Center Drive, Frankfort, 
KY 40601, 502-696-5385.

    Dated: March 30, 2004.

John R. Read,
Assistant Chief, Litigation I Section.

    J.D. Donaldson, Jody A. Boudreault, N. Christopher Hardee, 
Richard S. Martin, Richard D. Cooke, Ihan Kim,
U.S. Department of Justice, Antitrust Division, 1401 H Street, NW., 
Suite 4000, Washington, DC 20530, 202-307-0001.

ATTACHMENT A--Merger-to-Monopoly Markets

Adair County, KY
Ashland Independent, KY
Bell County, KY
Berea Independent, KY
Boyd County, KY
Boyle County, KY
Breathitt County, KY
Campbellsville Independent, KY
Casey County, KY
Clay County, KY
Clinton County, KY
Cumberland County, KY
East Bernstadt Independent, KY
Estill County, KY
Fairview Independent, KY
Garrard County, KY
Harlan Independent, KY
Harrodsburg Independent, KY
Hazard Independent, KY
Jackson County, KY
Jenkins Independent, KY
Jessamine County, KY
Laurel County, KY
Lee County, KY
Leslie County, KY
Letcher County, KY
Lincoln County, KY
Madison County, KY
McCreary County, KY
Mercer County, KY
Montgomery County, KY
Oneida Baptist, KY
Owsley County, KY
Perry County, KY
Pineville Independent, KY
Pulaski County, KY
Rockcastle County, KY
Russell County, KY
Science Hill Independent, KY
Somerset Independent, KY
Wayne County, KY
Whitley County, KY
Williamsburg Independent, KY
Wolfe County, KY
Clay County, TN

ATTACHMENT B--Merger-to-Duopoly Markets

Allen County, KY
Barbourville Independent, KY
Barren County, KY
Bath County, KY
Butler County, KY
Carter County, KY
Caverna Independent, KY
Corbin Independent, KY
Fayette County (Lexington), KY
Franklin County, KY
Glasgow Independent, KY
Green County, KY
Greenup County, KY
Hart County, KY
Knox County, KY
Larue County, KY
Lawrence County, KY
Logan County, KY
Menifee County, KY
Metcalfe County, KY
Middlesboro Independent, KY
Monticello Independent, KY
Morgan County, KY
Ohio County, KY
Owensboro Independent, KY
Rowan County, KY
Russell Independent, KY
Russellville Independent, KY
Simpson County, KY
Taylor County, KY
Alcoa City, TN
Anderson County, TN
Blount County, TN
Bristol City, TN
Campbell County, TN
Carter County, TN
Clinton City, TN
Cocke County, TN
Elizabethon Independent, TN
Green County, TN
Greenville City, TN
Hawkins County, TN
Hamblen County, TN
Johnson City, TN
Johnson County, TN
Knox County, TN
Macon County, TN
Maryville City, TN
Metro Davidson (Nashville), TN
Rogersville City, TN
Sevier County, TN
Sullivan County, TN
Unicoi County, TN
Union County, TN
Washington County, TN

ATTACHMENT C

WILEY, REIN & FIELDING

January 23, 1998

By Messenger

Ms. Yvette Jackson,
Acting Administrator, Food and Consumer Service, U.S. Department of 
Agriculture, 3101 Park Center Drive, Room 1008, Alexandria, VA 
22302.

Re: Southern Belle Dairy Company, Notice of Suspension and Debarment

    Dear Ms. Jackson: On behalf of the Southern Belle Dairy division 
of Broughton Foods, Inc. (``Southern Belle''), we would like to 
supplement the administrative record made at the meeting of January 
15, 1998, in connection with certain issues raised at the hearing, 
and also to propose certain actions to assure that a repeat of the 
alleged reporting violations will not occur in the future.
    Southern Belle desires to supplement the record with the 
following documentation, which is attached:

The Termination of Mr. Christian

    At our meeting, Mr. Hallberg expressed interest in reviewing 
documentation relating to Mr. Christian's probation as of May 1997, 
leading to his termination for performance reasons. The following 
documentation is enclosed:
    Exh. 1. A May 15, 1997 ``agenda'' for a meeting with Mr. 
Christian.
    Exh. 2. A May 15, 1997 memo by Mr. Christian's superior, Mike 
Chandler, summarizing a meeting with Mr. Christian at which he was 
informed of his need to improve performance or face termination, 
with a review to take place in two months.

Southern Belle's Contracts Under $100,000

    At our meeting, Ms. Landos sought information concerning the 
number of school milk contracts under $100,000 that were serviced by 
Southern Belle. Attached hereto as Exh. 3 are two lists, showing 
actual 1996-97 and projected 1997-98 sales by school districts.
    The lists show that, for 1996-97, Southern Belle serviced 46 
districts. Of those, 33 districts had sales under $100,000. Of the 
33 districts, 16 had sales under $50,000.
    Projected sales for 1997-98 show that Southern Belle is 
currently servicing 55 districts. Of these, 39 districts are 
projected to have sales under $100,000. Of the 39 districts, 20 are 
projected to have sales under $50,000.
    These figures reveal that Southern Belle is an important 
supplier to very small school districts in Kentucky and Tennessee. 
As the maps we provided show, many of these are rural districts in 
the mountains of eastern Kentucky. These districts would likely find 
it difficult to attract alternative suppliers from more distant 
locations.
    It is of equal interest that for two years in a row, Southern 
Belle has been the low bidder in the Fayatte County district (that 
is, Lexington, Ky.), which has sales of over $600,000, and attracts 
multiple bids from competing dairies.
    As mentioned above, in addition to supplementing the record with 
this additional documentation, Southern Belle would like to suggest 
that it undertake certain changes in its current procedures, which 
it hopes will prevent the recurrence of any reporting difficulties 
in the future.
    As a preface to doing so, we note that Southern Belle, having 
been on the verge of bankruptcy and liquidation, is now a strong 
competitor and often the low bidder for school milk and other 
government contracts. Southern Belle has been able to continue in 
business and to attract a merger partner in Broughton Foods, whose 
purchase of Southern Belle means the continuing presence of a 
competitive dairy in the

[[Page 64989]]

southeastern Kentucky region. The proposed debarment for reporting 
violations would undermine much of the progress that Southern Belle 
has made, with FCS's assistance and under its compliance program, 
over the past few years. It would also unavoidably require the 
consolidation of routes and the layoffs of many Southern Belle 
employees. Debarment would therefore hurt the local Somerset, 
Kentucky economy and would reduce competition for government dairy 
contracts in the region.
    Going forward, to insure that timely and accurate reporting is 
carried out under the Compliance Agreement, all Southern Belle 
management will be informed that they are to report actual or 
suspected misconduct to an Ethics Committee member within 24 hours. 
Furthermore, the Ethics Committee (which now has two new members 
from Broughton Foods) will implement new procedures whereby, when a 
violation is reported, it will convene quickly using telephone and 
fax, conduct an investigation, and make a timely report.
    Finally, it appeared that there was a concern that the minutes 
of the September 26, 1997 Ethics Committee may not have captured the 
discussion at that meeting with complete accuracy. It has been the 
practice to have the minutes of each meeting kept by one member, and 
not reviewed as a matter of course until the next meeting. To 
eliminate accuracy concerns in the future, Southern Belle will 
undertake to have the minutes typed and distributed to all members 
by the business day following the meeting, so that any omissions can 
be corrected immediately.
    In closing, Southern Belle would like to point out that there 
are a number of Kentucky state government contracts which are 
traditionally bid in February, including contracts for parks, 
universities, state hospitals, and vocational schools. Southern 
Belle would appreciate the ability to bid on these contracts, and 
submits that it is in the government's interest to permit Southern 
Belle to compete for them. We therefore request that, if at all 
possible, this matter be resolved promptly so that Southern Belle 
may participate in the bidding for at least some of these contracts.

 Very truly yours,

/s/ Joseph L. Ruby

Joseph L. Ruby

cc: Philip Cline, Martin Shearer, Steven Diamond, Esquire.

Exhibit 1

Agenda
Meeting with Steve Christian

May 15, 1997

    Items to be discussed:
    Company expectations in the following areas,
    1. Call on new business:
    This should be done on a consistent basis and should be 
scheduled so that we are not wasting time.
    2. Call on existing business:
    We need to continue to see existing business but not spend all 
our time on this effort.
    3. Respond to call sheets by routemen:
    This need to be followed-up on and results put in writing to the 
routemen with a copy to Zone Sales Manager.
    4. Fill out a customer call sheet daily and send to the Zone 
Sales Manager.
    5. Oversee and have responsibility for Branch operations, this 
does not mean to stay in the office. Steve can get a daily report 
from Larry when he is in the office from 3:00-5:00 p.m.
    6. Will also be responsible for other duties assigned by the 
Zone Sales Manager, such as school bids, etc.
    Hours of work:

    8:00 a.m. to 3:00 p.m.--Mon. through Thurs.--In market
    3:00 p.m. to 5:00 p.m.--Mon. through Thurs.--Office
    8:00 a.m. to 12:00 p.m.--Friday--In market
    12:00 p.m. to 5:00 p.m.--Friday--Office

Exhibit 2

May 15, 1997

    Harold Soper and I met with Steve Christian at the Louisville 
Branch. We reviewed his job description and asked him if there was 
anything that he could not do, or was unwilling to do. Steve said 
that he did not want to make sales calls or call on existing 
business. We stressed that all Branch Managers did this and that it 
was an important part of his job.
    After reviewing the Job Description, we provided Steve with some 
basic forms to document sales calls and to be filled out by the 
routemen when they have prospect or need price information.
    We discussed with Steve the need to create a better work 
environment for the routemen as several had complained that they had 
been mistreated in some way. One routeperson reported that he was 
not receiving mail communication from Somerset, another said he was 
being used around the Branch for jobs that were not related to his 
route.
    We stressed to Steve that these matters, as well as others, must 
be improved. And that if he did not make some improvement during the 
next two months, he would be fired. I asked Steve if he understood 
what he was being asked to do, and he said he did.
    We made an agreement to meet within two months to review his 
progress.

 /s/ Mike Chandler
Exhibit 3

                    Projected From Actual 8/97-12/97
------------------------------------------------------------------------
           School system               Contract No.      1997-98 Sales
------------------------------------------------------------------------
Adair County Schools..............              21627          95,893.38
Barbourville City Schools.........              22238          17,608.30
Bath County Schools...............              29192          84,831.85
Berea Community Schools...........              21352          26,750.62
Bowling Green City Schools........              27981         122,667.00
Boyle County Schools..............              26130          37,890.91
Breathitt County Schools..........              33238         143,257.60
Bristol City (TN) Schools.........              34728          81,402.62
Burgin City Schools...............              26097          14,299.24
Campbell County Schools...........              29969         250,504.95
Clarksville Community (IN)........              34815          30,299.82
Corbin City Schools...............              24627          72,999.58
Cumberland County Schools.........              30004          41,371.73
Danville City Schools.............              25979          56,280.46
East Bernstadt School.............              21157          17,540.36
Estill County Schools.............              25799          89,665.39
Fayette County Schools............              21100         608,675.03
Green County Schools..............              26795          42,321.70
Greeneville City Schools..........              30007          44,520.96
Harrodsburg City Schools..........              33160          31,790.80
Hart County Schools...............              28389          66,226.97
Hazard Independent Schools........              34848          27,636.88
Jackson Independent Schools.......              34847          14,163.46
Knox County Schools (KY)..........              21278         183,628.12
Larue County Schools..............              29988          74,432.16
Lee County Schools................              24621          56,578.79
Lexington Private Schools.........              15121          35,552.81

[[Page 64990]]

 
Lincoln County Schools............              24191         164,317.71
Macon County Schools..............              23173          88,989.91
Madison County Schools............              25545         229,139.64
McCreary County Schools...........              24237         140,930.13
Meade County Schools..............              28454         153,510.34
Menifee County Schools............              24919          32,323.89
Mercer County Schools.............              21763          52,000.58
Metcalfe County Schools...........              28395          59,048.89
Monroe County Schools.............              26543          77,986.33
Monticello City Schools...........              21575          25,423.20
Montgomery County Schools.........              24157         132,973.99
Morgan County Schools.............              29503         103,785.66
Nashville Metro Schools...........              23505         335,067.84
Pickett County Schools............              26661          28,096.62
Pulaski County Schools............              19140         294,978.80
Putnam County Schools.............              27240         221,463.07
Rockcastle County Schools.........              21088          87,306.99
Rowan County Schools..............              28846          82,248.66
Russell County Schools............              26382         101,533.70
Science Hill School...............              29991          13,520.93
Simpson County Schools............              33154          70,436.38
Somerset City Schools.............              13449          45,378.31
Taylor County Schools.............              26781          74,838.52
Van Buren County Schools..........              27118          26,809.74
Wayne County Schools..............              26404          89,391.06
West Clark Community (IN).........              32001          60,298.90
Whitley County Schools............              32580         202,722.31
Williamsburg City Schools.........              20425          27,033.50
                                   -------------------------------------
    Total.........................  .................       5,390,347.09
------------------------------------------------------------------------


------------------------------------------------------------------------
                                                        Actual  1996-97
           School system               Contract No.          sales
------------------------------------------------------------------------
Adair County Schools..............              21627          95,893.38
Bath County Schools...............              29192          84,831.85
Berea Community Schools...........              21352          26,750.62
Bourbon County Schools............              23293          95,217.02
Boyle County Schools..............              26130          37,890.91
Burgin City Schools...............              26097          14,299.24
Campbell County Schools...........              29969         250,504.95
Caverna Independent Schools.......              28461          35,597.42
Clinton City Schools..............              23381          30,363.58
Clinton County Schools............              26260          57,222.29
Cumberland County Schools.........              30004          41,371.73
Danville City Schools.............              25979          56,280.46
East Bernstadt School.............              21157          17,540.36
Estill County Schools.............              25799          89,665.39
Fayette County Schools............              21100         608,675.03
Garrard County Schools............              24200          78,654.92
Greeneville City Schools..........              30007          44,520.96
Hardin County Schools.............              33249         367,140.54
Harrodsburg City Schools..........              33160          31,790.80
Hart County Schools...............              28389          66,226.97
Knox County Schools (KY)..........              21278         183,628.12
Lee County Schools................              24621          56,578.79
Lexington Private Schools.........              15121          35,552.81
Lincoln County Schools............              24191         164,317.71
Macon County Schools..............              23173          88,989.91
Madison County Schools............              25545         229,139.64
McCreary County Schools...........              24237         140,930.13
Menifee County Schools............              24919          32,323.89
Mercer County Schools.............              21763          52,000.58
Metcalfe County Schools...........              28395          59,048.89
Monroe County Schools.............              26543          77,986.33
Monticello City Schools...........              21575          25,423.20
Montgomery County Schools.........              24157         132,973.99
Morgan County Schools.............              29503         103,785.66
Pickett County Schools............              26661          28,096.62
Powell County Schools.............              31815          91,315.15
Pulaski County Schools............              19140         294,978.80

[[Page 64991]]

 
Putnam County Schools.............              27240         221,463.07
Rockcastle County Schools.........              21088          87,306.99
Russell County Schools............              26382         101,533.70
Science Hill School...............              29992          13,520.93
Simpson County Schools............              33154          70,436.38
Somerset City Schools.............              13449          45,378.31
Van Buren County Schools..........              27118          26,809.74
Wayne County Schools..............              26404          89,391.06
Whitley County Schools............              32580         202,722.31
�����������������������������������
    Total.........................  .................       4,786,071.13
------------------------------------------------------------------------

United States District Court, Eastern District of Kentucky, London 
Division

United States of America, et al., Plaintiffs, v. Dairy Farmers of 
America, Inc., Defendant

    Civil Action No.: 6:03-206-KSF

Final Judgment

    Whereas, plaintiffs, the United States of America and the 
Commonwealth of Kentucky, and defendant Dairy Farmers of America, Inc. 
(``DFA''), by their respective attorneys, have consented to the entry 
of this Final Judgment without this Final Judgment constituting any 
evidence against or admission by any party regarding any issue of fact 
or law;
    And whereas, the United States of American and the Commonwealth of 
Kentucky have concluded, after due investigation and careful 
consideration of the relevant circumstances, including the claims 
asserted in the Amended Complaint, and the legal and factual defenses 
thereto, that the public interest is served by entering into a 
Stipulation, to avoid the uncertainties of litigation and to assure 
that the benefits of this Final Judgment are obtained;
    And whereas, DFA agrees that venue and jurisdiction are proper in 
this Court;
    And whereas, DFA agrees to be bound by the provisions of this Final 
Judgment pending its approval by the Court;
    And whereas, the essence of this Final Judgment is the prompt and 
certain divestiture of the Divestiture Assets by DFA;
    And whereas, DFA, despite its belief that it has good defenses to 
the claims asserted against it in the Amended Complaint, has 
nevertheless agreed to enter into this Final Judgment to avoid further 
expense, inconvenience, the uncertainties of litigation, and the 
distraction of burdensome and protracted litigation, and thereby to put 
to rest this controversy with respect to the United States of America 
and the Commonwealth of Kentucky;
    And whereas, DFA, the United States of America, and the 
Commonwealth of Kentucky desire to resolve disputes between them 
concerning DFA's acquisition of a partial interest in Southern Belle 
Dairy Co., LLC, without further Court proceedings except as set out 
below;
    And whereas, DFA has entered into a written agreement with AFLP to 
facilitate the resolution of this matter;
    And whereas, DFA has represented to the United States that the 
divestitures required below can and will be made and that DFA will 
later raise no claim of hardship or difficulty as grounds for asking 
the Court to modify any of the divestiture provisions contained below;
    Now therefore, before any testimony is taken, without trail or 
adjudication of any issue of fact or law, and upon consent of the 
parties, it is ordered, adjudged and decreed:

I. Jurisdiction

    This Court has jurisdiction over the subject matter of and each of 
the parties to this action. The Complaint states a claim upon which 
relief may be granted against DFA under Section 7 of the Clayton Act, 
as amended (15 U.S.C. Sec.  18), and under the provisions of 
K.R.S.Sec.  367.110 et seq., but, by virtue of this Final Judgment, DFA 
has not and does not admit either the allegations set forth in the 
Complaint or any liability or wrongdoing.

II. Definitions

    As used in this Final Judgment:
    A. ``Acquirer'' means the entity or entities to whom DFA or the 
trustee divest the Divestiture Assets.
    B. ``AFLP'' means the Allen Family Limited Partnership, managed by 
Robert Allen.
    C. ``DFA'' means Dairy Farmers of America, Inc., a Kansas 
corporation with its headquarters in Kansas City, Missouri, its 
successors and assigns, its subsidiaries and divisions, and their 
directors, officers, managers, agents, and employees.
    D. ``Divestiture Assets'' means any and all of DFA's interests in 
the Southern Belle Dairy including DFA's Series A Preferred Capital 
Interest and Series B Preferred Capital Interest, and any and all lines 
of credit or other loans that Mid-Am has extended to the Southern Belle 
Dairy, and any interest in the Southern Belle Dairy acquired from AFLP.
    E. ``Mid-Am'' means Mid-Am Capital LLC, a subsidiary of DFA and a 
Delaware limited liability company with its headquarters in Kansas 
City, Missouri, its successors and assigns, its subsidiaries and 
divisions, and their directors, officers, managers, agents, and 
employees.
    F. ``Southern Belle Dairy'' means the Southern Belle Dairy Co., 
LLC, a Delaware limited liability company that owns and operates a milk 
processing plant located in Pulaski County, Kentucky, and all related 
assets, including all rights and interests in it, including all 
property and contract rights, all existing inventory, accounts 
receivable, pertinent correspondence and files, customer lists, all 
related customer information, advertising materials, contracts or other 
relationships with suppliers, customers and distributors, any rights, 
contracts and licenses involving intellectual property, trademarks, 
tradenames or brands, computers and other physical assets and equipment 
used for production at, distribution from, or associated with, that 
plant or any of its distribution branches and locations.
    G. ``Stipulation'' means the Stipulation signed by the United 
States, the Commonwealth of Kentucky, and DFA in this matter.

III. Applicability

    A. This Final Judgment applies to DFA, as defined above, and to all 
other persons in active concert or participation with any of them who 
receive actual notice of this Final Judgment by personal service or 
otherwise.
    B. DFA shall require, as a condition of the sale or other 
disposition of all or substantially all of DFA's assets or of lesser 
business units that include the Divestiture Assets, that the purchaser

[[Page 64992]]

agrees to be bound by the provisions of this Final Judgment. DFA need 
not, however, obtain such an agreement from the Acquirer of the 
Divestiture Assets.

IV. Divestitures

    A. DFA is ordered and directed within five days after notice of the 
entry of this Final Judgment by the Court, to divest the Divestiture 
Assess in a manner consistent with this Final Judgment to an Acquirer 
acceptable to the United States in its sole discretion, after 
consultation with the Commonwealth of Kentucky. The United States, in 
its sole discretion, after consultation with the Commonwealth of 
Kentucky, may agree to an extension of this time period for any 
divestiture of up to thirty additional calendar days. DFA agrees to use 
its best efforts to divest the Divestiture Assets as expeditiously as 
possible.
    B. DFA shall also use commercially reasonable efforts to cause AFLP 
to divest its interests in the Southern Belle Dairy to an acquirer 
acceptable to the United States in its sole discretion, after 
consultation with the Commonwealth of Kentucky.
    C. In accomplishing the divestitures ordered by this Final 
Judgment, DFA promptly shall make known to one or more potential 
purchasers the availability of the Divestiture Assets. DFA shall inform 
any potentially qualified purchaser making inquiry regarding a possible 
purchase of the Divestiture Assets that such assets are being offered 
for sale.
    D. DFA shall use commercially reasonable efforts to cause to be 
furnished to all prospective Acquirers, subject to the customary 
confidentiality assurances, all information and documents relating to 
the Divestiture Assets and the Southern Belle Dairy customarily 
provided in a due diligence process except such information or 
documents subject to the attorney-client privilege or attorney work-
product doctrine. DFA shall make available such information to the 
United States and the Commonwealth of Kentucky at the same time that 
such information is made available to any other person.
    E. DFA shall use commercially reasonable efforts to obtain 
permission for prospective Acquirers of the Divestiture Assets to have 
reasonable access to personnel and to make inspections of the physical 
facilities of the Southern Belle Dairy; access to any and all 
environmental, zoning, and other permit documents and information; and 
access to any and all financial, operational, or other documents and 
information customarily provided as part of a due diligence process.
    F. DFA shall use commercially reasonable efforts to cause to be 
provided to the Acquirer and the United States information relating to 
the personnel involved in the operation of the Southern Belle Dairy to 
enable the Acquirer to make offers of employment. DFA shall not 
interfere with any negotiations by the Acquirer to employ any employee 
whose primary responsibility is the production, sale, marketing, or 
distribution of products from the Southern Belle Dairy.
    G. DFA shall not take any action that will impede in any way the 
operation of the Southern Belle Dairy of the divestiture of the 
Divestiture Assets.
    H. Unless the United States, in its sole discretion, after 
consultation with the Commonwealth of Kentucky, otherwise consents in 
writing, the divestiture pursuant to the Section IV, or by trustee 
appointed pursuant to Section V, of this Final Judgment, shall include 
the entire Divestiture Assets and shall be accomplished in such a way 
as to satisfy the United States, in its sole discretion, after 
consultation with the Commonwealth of Kentucky, that the Southern Belle 
Dairy will be a viable, ongoing dairy. The divestiture, whether 
pursuant to Section IV or Section V of this Final Judgment.

    (1) Shall be made to an Acquirer that, in the United States' sole 
judgment, after consultation with the Commonwealth of Kentucky, has the 
intent and capability (including the necessary managerial, operational, 
technical and financial capability) of competing effectively in school 
and fluid milk markets in Kentucky and Tennessee; and
    (2) Shall be accomplished so as to satisfy the United States, in 
its sole discretion, after consultation with the Commonwealth of 
Kentucky, that none of the terms of any agreement between an Acquirer 
and DFA give DFA the ability unreasonably to raise the Acquirer's 
costs, to lower the Acquirer's efficiency, or otherwise to interfere in 
the ability of the Acquirer to compete effectively.

V. Appointment of Trustee

    A. If DFA has not divested the Divestiture Assets within the time 
period specified in Section IV(A), DFA shall notify the United States 
of that fact in writing. Upon application of the United States, the 
Court shall appoint a trustee selected by the United States and 
approved by the Court to effect the divestiture of the Divestiture 
Assets.
    B. After the appointment of a trustee becomes effective, only the 
trustee shall have the right to sell the Divestiture Assets. The 
trustee shall have the power and authority to accomplish the 
divestiture to an Acquirer acceptable to the United States (after 
consultation with the Commonwealth of Kentucky) at such price and on 
such terms as are then obtainable upon reasonable effort by the 
trustee, subject to the provisions of Sections IV, V, and VI of this 
Final Judgment, and shall have such other powers as this Court deems 
appropriate. Subject to Section V(D) of this Final Judgment, the 
trustee may hire at the cost and expense of DFA any investment bankers, 
attorneys, or other agents, who shall be solely accountable to the 
trustee, reasonably necessary in the trustee's judgment to assist in 
the divestiture.
    C. DFA shall not object to a sale by the trustee on any ground 
other than the trustee's malfeasance. Any such objections by DFA must 
be conveyed in writing to the United States and the trustee within ten 
calendar days after the trustee has provided the notice required under 
Section VI.
    D. The trustee shall serve at the cost and expense of DFA, on such 
terms and conditions as the United States approves, after consultation 
with the Commonwealth of Kentucky, and shall account for all monies 
derived from the sale of the assets sold by the trustee and all costs 
and expenses so incurred. After approval by the Court of the trustee's 
accounting, including fees for its services and those of any 
professionals and agents retained by the trustee, all remaining money 
shall be paid to DFA and the trust shall then be terminated. The 
compensation of the trustee and any professionals and agents retained 
by the trustee shall be reasonable in light of the value of the 
Divestiture Assets and based on a fee arrangement providing the trustee 
with an incentive based on the price and terms of the divestiture and 
the speed with which it is accomplished, but timeliness is paramount.
    E. DFA shall use its best efforts to assist the trustee in 
accomplishing the required divestiture. While the trustee shall have 
the right to sell the Divestiture Assets, DFA shall use commercially 
reasonable efforts to cause AFLP to divest its interests in the 
Southern Belle Dairy to an acquirer acceptable to the United States in 
its sole discretion, after consultation with the commonwealth of 
Kentucky. The trustee and any consultants, accountants, attorneys, and 
other persons retained by the trustee shall have full and complete 
access to the personnel, books, records, and facilities of the business 
to be divested, and DFA shall develop financial and other information 
relevant to such business as the trustee may reasonably request, 
subject to reasonable protection for

[[Page 64993]]

trade secret or other confidential research, development, or commercial 
information. DFA shall take no action to interfere with or to impede 
the trustee's accomplishment of the divestiture.
    F. After its appointment, the trustee shall file monthly reports 
with the United States, the Commonwealth of Kentucky, DFA, and the 
court setting forth the trustee's efforts to accomplish the divestiture 
ordered under this final Judgment. To the extent such reports contain 
information that the trustee deems confidential, such reports shall not 
be filed in the public docket of the Court and DFA's copy of the 
reports shall have such confidential information redacted. Such reports 
shall include the name, address, and telephone number of each person 
who, during the preceding month, made an offer to acquire, expressed an 
interest in acquiring, entered into negotiations to acquire, or was 
contacted or made an inquiry about acquiring, any interest in the 
Divestiture Assets, and shall describe in detail each contact with any 
such person. The trustee shall maintain full records of all efforts 
made to divest the Divestiture Assets.
    G. If the trustee has not accomplished such divestiture within six 
months after its appointment, the trustee shall promptly file with the 
Court a report setting forth (1) the trustee's efforts to accomplish 
the required divestiture, (2) the reasons, in the trustee's judgment, 
why the required divestiture has not been accomplished, and (3) the 
trustee's recommendations. To the extent such reports contain 
information that the trustee deems confidential, such reports shall not 
be filed in the public docket of the Court. The trustee shall at the 
same time furnish such report to the United States and the Commonwealth 
of Kentucky who shall have the right to make additional recommendations 
consistent with the purpose of the trust. The trustee shall at the same 
time furnish the report to DFA, but with all confidential information 
redacted. The Court thereafter shall enter such orders as it shall deem 
appropriate to carry out the purpose of the Final Judgment, which may, 
if necessary, include extending the trust and the term of the trustee's 
appointment by a period required by the United States.
    H. If necessary in the trustee's judgment to divest the Divestiture 
Assets, DFA shall use its best efforts to assist the trustee in 
dissolving the Southern Belle Dairy under Delaware Statute 6 Del. C. 
Sec.  18-802, or such other applicable statutes and laws.

VI. Notice of Proposed Divestitures

    A. Within two business days following execution of definitive 
divestiture agreement, DFA or the trustee, whichever is then 
responsible for effecting the divestiture required herein, shall notify 
the United States and the Commonwealth of Kentucky of the proposed 
divestiture required by Sections IV or V of this Final Judgment. If the 
trustee is responsible, it shall similarly notify DFA. The notice shall 
set forth the details of the proposed divestiture and list the name, 
address, and telephone number of each person not previously identified 
who offered or expressed an interest in or desire to acquire any 
ownership interest in the Divestiture Assets, together with full 
details of the same.
    B. Within fifteen calendar days of receipt by the United States of 
such notice, the United States may request from DFA, the proposed 
Acquirer, any other third party, or the trustee if applicable 
additional information concerning the proposed divestiture, the 
proposed Acquirer, and any other potential Acquirer. DFA and the 
trustee shall furnish any additional information requested within 
fifteen calendar days of the receipt of the request, unless the parties 
shall otherwise agree.
    C. Within thirty calendar days after receipt of the notice or 
within twenty calendar days after the United States has been provided 
the additional information requested from DFA, the proposed Acquirer, 
and third party, and the trustee, whichever is later, the United States 
shall provide written notice to DFA and the trustee is one, stating 
whether or not it objects to the proposed divestiture. If the United 
States provides written notice that it does not object, the divestiture 
may be consummated, subject only to DFA's limited right to object to 
the sale under Section V(C) of this Final Judgment. Absent written 
notice that the United States does not object to the proposed Acquirer 
or upon objection by the United States, the divestiture proposed under 
Sections IV or Section V shall not be consummated. Upon objection by 
DFA under Section V(C), the divestiture proposed under Section V shall 
not be consummated unless approved by the Court.

VII. Financing

    DFA shall not finance all or any part of any purchase made pursuant 
to Section IV or V or this Final Judgment.

VIII. Supply Contracts

    DFA shall not require the Acquirer to enter into a supply contract 
for raw milk with DFA as a condition for the sale of the Divestiture 
Assets.

IX. Affidavits

    A. Within twenty calendar days of DFA's signing the Stipulation, 
and every thirty calendar days thereafter until the divestiture has 
been completed under Sections IV or V, DFA shall deliver to the United 
States an affidavit as to the fact and manner of its compliance with 
Section IV or V of this Final Judgment. Each such affidavit shall 
include the name, address, and telephone number of each person who, 
during the preceding thirty calendar days, made an offer to acquire, 
expressed an interest in acquiring, entered into negotiations to 
acquire, or was contacted or made an inquiry about acquiring, any 
interest in the Divestiture Assets, and shall describe in detail each 
contact with any such person during that period. Each such affidavit 
shall also include a description of the efforts DFA has taken to 
solicit buyers for the Divestiture Assets, and to provide required 
information to prospective purchasers, including the limitations, if 
any, on such information. Assuming the information set forth in the 
affidavit is true and complete, any objection by the United States to 
information provided by DFA, including limitation on information, shall 
be made within fourteen calendar days of receipt of such affidavit.
    B. Within twenty calendar days of DFA's signing the Stipulation, 
DFA shall deliver to the United States an affidavit that describes in 
reasonable detail all actions DFA has taken and all steps DFA has 
implemented on an ongoing basis to comply with the Stipulation. DFA 
shall deliver to the United States an affidavit describing any changes 
to the efforts and actions outlined in DFA's earlier affidavits filed 
pursuant to this section within fifteen calendar days after the change 
is implemented.
    C. DFA shall keep all records of all efforts made to preserve and 
divest the Divestiture Assets until one year after such divestiture has 
been completed.

X. Compliance Inspection

    A. For the purposes of determining or securing compliance with this 
Final Judgment, or of determining whether the Final Judgment should be 
modified or vacated, and subject to any legally recognized privilege, 
from time to time duly authorized representatives of the Untied States 
Department of Justice or the Commonwealth of Kentucky, including 
consultants and other persons retained by either of them, shall, upon 
written request of a duly authorized

[[Page 64994]]

representative of the Assistant Attorney General in charge of the 
Antitrust Division or the Attorney General for Kentucky, and on 
reasonable notice to DFA, be permitted:

    Access during DFA's office hours to inspect and copy, or at 
plaintiffs' option, to require DFA provide copies of, all books, 
ledgers, accounts, records and documents in the possession, custody, 
or control of DFA, relating to any matters contained in this Final 
Judgment; and
    To interview, either informally or on the record, DFA's 
off