**Exhibit 10.27**

** **

**UNIFORMMEMBER SUGAR MARKETING AGREEMENT**

**POOLBASIS**

 

                **THIS AGREEMENT,** madeeffective as of the 1st day of September 2001, by and between **UNITEDSUGARS CORPORATION**, a cooperative association organized under thelaws of the State of Minnesota (hereinafter referred to as **“UNITED”**), and **AMERICANCRYSTAL SUGAR COMPANY**, a cooperative association organized under thelaws of the State of Minnesota (hereinafter referred to as **“PROCESSOR”**).

 

**WITNESSETH**

 

                **WHEREAS,** PROCESSOR is aproducer–owned and a producer-operated agricultural cooperative which isorganized and operated so as to adhere to the provisions of Section 15(a) ofthe Agricultural Marketing Act (12 U.S.C., Sec. 1141j(a)), as amended, and theCapper–Volstead Act of 1922 (7 U.S.C., Sec. 291, 292), and which isengaged in the operation of one or more sugar processing plants for the purposeof producing one or more forms of refined sugar; and

 

                **WHEREAS,** UNITED is organizedand operated so as to adhere to the provisions of Section 15(a) of the AgriculturalMarketing Act (12 U.S.C., Sec. 1141j(a)), as amended, and the Capper–VolsteadAct of 1922 (7 U.S.C., Sec. 291,292), for the mutual help and benefit of itsmembers (“Member” or “Members”) and for the purposes of acting as a marketingagency for its Members and of engaging in the business of marketing the refinedsugar (whether sold in packages or in bulk) produced by its Members, includingbut not limited to, granulated, liquid, blends, and specialty products; and

 

                **WHEREAS,** PROCESSOR is aMember of UNITED and wishes to participate with other Members of UNITED indeveloping and maintaining a dependable market for certain products produced byPROCESSOR; and

 

                **WHEREAS,** UNITED and PROCESSORdesire to enter into a membership marketing agreement on a pool basis.

 

                **NOW, THEREFORE,** inconsideration of the above, subject to the respective terms, conditions, andobligations of PROCESSOR and UNITED herein, UNITED and PROCESSOR agree asfollows:

 

                1.             Definitions. As used in this Agreement, the following terms shall have the followingmeanings:

 

                                **“Allocation”**means the amount of sugar PROCESSOR is authorized to market if Allotments areimplemented pursuant to the Allotment Statute.

 

                                **“Allotments”**means an overall allotment of sugar processed from domestically-producedsugarcane and sugar beets, as defined and contemplated by the AllotmentStatute.

                                **“AllotmentStatute”** means 7 USC § 1359aa, et. seq. (1991) and amendmentsthereto, or subsequent statutes providing for marketing allotments.

 

                                **“AssetsCosts”** shall mean carrying costs of assets associated with Productshipping, packaging, warehousing (including all costs historically included byUNITED as warehousing costs), and storage functions, including depreciation andinterest.

 

                                **“BeetProcessing Season”** means the period of time generally from Septemberthrough August during which a Beet Producer processes beets, thick juice andextract into refined sugar.

 

                                **“BeetProducer”** means a Member that processes beets and thick juice intorefined sugar.

 

                                **“Cane ProcessingSeason”** means the period of time generally from mid-October throughMarch during which time a Cane Producer processes cane into feedstock for arefinery.

 

                                **“CaneProducer”** means a Member that processes cane into refined sugar.

“Crop Year” meansthe crop year established by the Beet Producers for their own businessoperations.

 

                                **“FiscalYear”** means the fiscal year of UNITED, which begins on September 1and ends on August 31.

 

                                **“ForceMajeure”** means any (i) fire, freeze, accident, explosion, constructiondelay, hurricane, flood, act of God, inability to obtain electric power orfuel, inability to obtain any required permits or licenses, government law,directive or regulation; or the effect of the application of any governmentallaw, directive or regulation, or any like contingency, beyond a party’sreasonable ability to control or avoid; and (ii) labor dispute or strike, fromwhatever cause arising and regardless of whether the demands of the employeesinvolved are reasonable and within the affected party’s power to concede.

 

                                **“FinishedProduct”** or **“Finished Products”** means those Productsthat have been granulated or otherwise made ready for marketing to thirdparties.

 

                                **“Member”**means a member or shareholder of UNITED who is entitled to vote.

 

                                **“Net SellingPrice”**means the gross proceeds realized by UNITED from sales ofProducts produced by PROCESSOR and the other Members in the Primary Pool, lessexpenses directly attributable to the Primary Pool, including all costs,charges or expenses attributable to the marketing and sale of pooled Products,including without limitation salaries, wages and other benefits of UNITED’semployees, office expense and appropriate consulting fees, and all costs oftransportation of the pooled Products.

 

                                **“Operating Costs”**means operating costs associated with Product shipping, packaging, warehousing(including all costs historically included by UNITED as warehousing costs) andstorage functions including, without limitation, labor (including direct andindirect costs, such as employee benefits, insurance, etc.), supplies, andutilities.

                                **“Pool Year”**means the pool year of the Primary Pool, which coincides with the Fiscal Yearof UNITED, which begins on September 1 and ends on August 31.

 

                                **“PrimaryPool”** means Product of each Member that is pooled for each FiscalYear with Products of other Members as agreed to in Section 6.1.

 

                                **“Product”**or **“Products”**means refined sugar produced by PROCESSOR during the term of this Agreement,including but not limited to, granulated, liquid, blends, specialty products,thick juice, extract and other forms of ungranulated sugar.

 

                                **“Pro RataShare”** shall be equal to a fraction, with PROCESSOR’s estimatedannual production of Product (on a sugar equivalent basis) included the PrimaryPool as the numerator and total estimated annual pool production of Product (ona sugar equivalent basis) for PROCESSOR and the Members included in the PrimaryPool as the denominator.

 

                                **“PurchasedSugar”** has the meaning set forth in Section 19.4.

 

                                **“Term”**has the meaning set forth in Section 17.

 

                2.             **Appointment of UNITED as Sales Agent.**

 

                2.1           United Appointed Sales Agent.  PROCESSOR appoints and designates UNITED toact as its sole worldwide agent in the sale and marketing of the Products.  UNITED accepts such appointment and agreesto act as the sales agent and pool administrator in accordance with the termsof this Agreement.  PROCESSOR agreesthat UNITED may employ all such persons and agencies as it determines to benecessary to carry out its obligations under this Agreement.  It is understood and agreed that UNITED maymarket Products under the various trademarks and trade names of PROCESSOR (ifany) pursuant to a royalty free license agreement with respect to suchtrademarks and trade names, the form of which agreement shall be mutuallyagreed upon by PROCESSOR and UNITED.

 

                2.2           United Authorized to Pass Title.  UNITED agrees, and is hereby empowered byPROCESSOR, to sell in its own name, and pass title on behalf of PROCESSOR, allProduct produced by PROCESSOR during the Term of this Agreement to suchpurchasers, at such time or times, at such place or places, in such manner andon such prices or terms as UNITED determines to be in the best interests ofPROCESSOR and other Members of UNITED.

 

                2.3           Products not included in this Agreement.  UNITED shall have no rights, and nothingherein contained shall be deemed to create rights in UNITED, in and to anyother products produced by PROCESSOR (other than refined sugar).

 

                2.4           Procurement of Additional Product.  It is understood and agreed that UNITED mayfrom time to time procure certain Products from third parties in order to meetthe requirements of sales contracts or as otherwise determined to be in thebest interest of PROCESSOR and the other Members of UNITED.  PROCESSOR and UNITED agree that UNITED shallact as an agent for PROCESSOR in connection with such purchases of Products andthat the costs of acquiring such Products and revenues received from the saleof such Products shall be allocated to PROCESSOR and other Members of UNITED onthe same basis as allocations from the pool for which the Products werepurchased.

                3.             **Packaging. **PROCESSOR intends to have the capacityto sell Product in bulk as well as in packages.  It is understood that production and packaging constraints willlimit the volume and mix of packages that can be produced at any one time, andaccordingly, UNITED agrees to coordinate orders for packaged Product takinginto consideration PROCESSOR’s production and packaging limitations.

 

                4.             **Production and Delivery.**

 

                4.1           Timing of Production.  It is anticipated that PROCESSOR will produce Finished Productsduring its campaign on an approximately even monthly schedule.  However, PROCESSOR acknowledges thatUNITED’s requirements may be greater in certain specified months and less inothers.  Accordingly, subject to mutualagreement of the parties, UNITED will endeavor to coordinate demands withPROCESSOR’s production and storage capacities. At UNITED’s request, PROCESSOR will attempt to maximize production inany month in order to accommodate customer demand.

 

                4.2           Product Production Schedules.  PROCESSOR shall provide to UNITED by June 1of each Fiscal Year during the Term a preliminary estimated production schedule(specifying volume and dates) of Product for the next following Fiscal Year andwill provide a revised estimated production schedule of Product by July 1 ofeach such year, reflecting any changes from the June preliminary estimate.  UNITED and PROCESSOR shall jointly develop aproduction and delivery schedule plan for each Fiscal Year that will attempt toaccommodate, as much as reasonably possible, the dual goals of maximizing theprice to be paid to PROCESSOR and maximizing production efficiencies, with theobjective of selling all of PROCESSOR’s production of Product each year.

 

                4.3           Weekly Delivery Amounts.  Estimated weekly delivery schedules of Finished Product,including quantities, and bulk and packaging requirements for each week of eachmonth, shall be agreed upon by the parties at least seven (7) days in advanceof the month to which they apply.  Theparties shall use reasonable efforts, recognizing customer demand, toaccommodate each other in setting such schedules.

 

                5.             **Billing and Collection.**  All sales made by UNITED shall be billed oninvoices of UNITED and all receipts shall be collected by UNITED.

 

                6.             **Pooling of Product.**

 

                6.1           Agreement to Pool Product.  UNITED and PROCESSOR agree that the Productsto be sold by UNITED hereunder shall be pooled for each Fiscal Year withProducts of the other Members of UNITED in the Primary Pool.  UNITED by action of its Executive Committeeshall have the discretion to create additional pools as deemed reasonablynecessary for the equitable treatment of all Members and to create accountingstandards for such additional pools.

                6.2           Adjustments for Beet Producers.  In order to include sales of carry-overProduct produced by a Beet Producer in a given Beet Processing Season in thePrimary Pool applicable to the Fiscal Year in which the Beet Processing Seasonoccurred, even though delivery may occur following August 31 of such year, theProduct to be included in calculating UNITED’s Primary Pool in each Fiscal Yearshall be the amount of Product (on a sugar equivalent basis) produced by theBeet Producer during the applicable Fiscal Year.

 

                6.3           Adjustments for Cane Producers.  In order to coordinate the Cane ProcessingSeason with the Beet Processing Season, the amount of cane Products to beincluded in calculating a Primary Pool shall be the amount of cane Product (ona sugar equivalent basis) produced by the Cane Producer during the applicableFiscal Year, less the cane Product (on a sugar equivalent basis) produced bythe Cane Producer that was allocated to the prior Fiscal Year, plus CaneProducer’s estimate as of August 31 of that Fiscal Year of the Product (on asugar equivalent basis) to be produced from and including September 1 throughOctober 15 of the next Fiscal Year; provided however, unless otherwise mutuallyagreed, in no event shall the estimated production from and including September1 through October 15 of the next Fiscal Year exceed 12% of the PROCESSOR’saverage actual production of Product during the previous three Fiscal Years ofUNITED.

 

                7.             **Price for Product.**

 

                7.1           Price. UNITED shall pay to PROCESSOR the PROCESSOR’s Pro Rata Share of the NetSelling Price for all Products sold by UNITED hereunder.

 

                7.2           Timing of Payment to Members.  As sales of Finished Product are made byUNITED from the Primary Pool, the gross cash receipts received by UNITED fromthe sale of such Finished Products shall be paid daily to PROCESSOR and theother Primary Pool participants on the basis of their estimated proportionateshare of the Finished Product to be produced by PROCESSOR and each of the otherparticipants in the Primary Pool during that Fiscal year.  Because gross cash receipts are distributeddaily, UNITED shall borrow from its line of credit in order to cover itsmonthly operating costs, subject to prompt reimbursement by PROCESSOR ofPROCESSOR’s Pro Rata Share of the expenses (such expenses are set forth in thedefinition of Net Selling Price) that are incurred by UNITED during the month.

 

                7.3           Adjustments for Changes to Production Estimates.  The determination of PROCESSOR’sproportionate share of gross cash receipts shall be based on UNITED’s bestestimate of the amount of Finished Products anticipated to be produced in suchyear by PROCESSOR and each other participant in the Primary Pool, and shall beadjusted by UNITED periodically as production figures are more preciselydetermined.  Such adjustments shallreflect an interest charge to be paid by any Primary Pool participant who hasreceived excess distributions based on the preliminary production estimates andsuch interest shall be paid to the Primary Pool participant(s) who receivedless than full distributions.  Forpurposes of this paragraph, interest charges shall be the prime rate charged byUNITED’s principal lender for thirty (30) day seasonal fixed rate financing forthe period in question.  As soon asexact information and production figures are available, UNITED shall determinePROCESSOR’s final proportionate share of the gross cash receipts for thePrimary Pool during the Fiscal Year, and appropriate adjustments, together withinterest charges as provided above, shall be made.  The final accounting for the Primary Pool shall be made no laterthan the ninetieth day following the last day of each Fiscal Year.

                7.4           Lien on PROCESSOR Assets.  PROCESSOR hereby agrees to grant UNITED asecurity interest in all Product inventory of PROCESSOR (and related proceedsthereof) to secure payment by PROCESSOR of all indebtedness of PROCESSOR toUNITED, including, but not limited to, any over advance of proceeds from thesale of Products.  Such securityinterest shall arise ten (10) business days following written notice fromUNITED to PROCESSOR indicating that PROCESSOR has received an over advance ofproceeds from the sale of Finished Products, and shall remain effective for theperiod that the over advance is outstanding. Such security interest shall be automatically subordinate to any prioror future security interests granted by PROCESSOR to the Commodity CreditCorporation, and to any prior security interests granted to other lenders.  PROCESSOR agrees to execute such financingstatements or other documents as may be reasonably requested by UNITED toevidence the security interest.

 

                8.             **UNITED’s Books and Records. **UNITED shall keep accurate records ofcosts, sales, and distributions of Primary Pool proceeds in accordance withsound and generally accepted accounting practices.  Said records shall be at all reasonable times fully available forinspection and copying by PROCESSOR or its certified public accountants.  All records of the Primary Pool and anyspecial pool that is created shall be audited annually by UNITED’s regularIndependent Certified Public Auditors and the audit report made available toPROCESSOR.

 

                9.             **Budget of Marketing Costs. **UNITED shall prepare an annual budget orestimate of all direct and indirect marketing costs for the Primary Pool.  It is the intention of UNITED to secureindependent financing for costs associated with the marketing of Products asreflected in the budget.

 

                10.           **Product Specifications, Quality Standards, andHandling of Products of Substandard Quality.**

 

                10.1         Specifications. PROCESSOR agrees to comply with UNITED’s Specifications for Products,which specifications prescribe standards and procedures for quality control,storage, and shipment of Products, and which are attached hereto as ScheduleA.   In addition, PROCESSOR agrees tocomply with UNITED’s Quality Assurance Policy that is attached hereto asSchedule B.   Any changes to thespecifications or Quality Assurance Policy shall be mutually agreed upon byUNITED and the Members.

 

                10.2         State and Federal Regulations.  All Products delivered to or at the order ofUNITED shall conform to quality and other standards prescribed by applicablestate and federal rules and regulations.

 

                10.3         Substandard Product. Product that fails to meet the specifications or the Quality AssurancePolicy and which cannot be sold without discounting, shall be consideredsubstandard for purposes of this Agreement. Product of substandard quality shall be withheld from the Primary Pooland marketed by UNITED, with proceeds of the sale of such Product, less alldirect and indirect selling expenses, distributed to PROCESSOR; in thealternative, PROCESSOR and UNITED may mutually agree that Product of substandardquality may remain in the Primary Pool and be charged with the additional costsrelating to the substandard quality of the Product, including any necessarydiscounts.

                11.           **Storage of Product. **PROCESSOR shall store its Product as theparties shall mutually agree.  At theearliest reasonable time after processing commences in each Fiscal Year and assoon as Product has begun to be placed in storage, PROCESSOR shall deliverdaily Product inventory reports to UNITED. All Product included in the daily inventory shall be included in thePrimary Pool for the appropriate Fiscal Year even though the Product remains onthe premises of PROCESSOR.

 

                12.           **Risk of Loss and Insurance.**

 

                12.1         Risk of Loss. PROCESSOR covenants and agrees that it shall bear the risk of loss ofall Products produced by PROCESSOR or any portion thereof until earlier of thetime (i) the Products are delivered to the buyer of the same; or (ii) at thetime it is no longer possible to identify the Product as that of PROCESSOR(i.e., commingled or processed Product), at which time the risk of loss shallpass to UNITED; provided, however, that PROCESSOR shall continue to be theowner of the Product until the Product is sold to the buyer.  Whenever UNITED shall have possession orcontrol over the Product prior to sale to the buyer, UNITED shall act strictlyas custodian thereof in accordance with the provisions of this Agreement.

 

                12.2         Processor to Maintain Insurance.  PROCESSOR covenants and agrees, at its solecost and at all times during the Term of this Agreement, to maintain in forcean insurance policy or policies covering loss, theft or damage to the Productsfrom any cause whatsoever until the shipment of the same to the buyer, inamounts not less than the full insurable value thereof, and product liabilityinsurance in amounts required by UNITED from time to time, which productliability insurance shall name UNITED as an additional or a named insured.

 

                12.3         UNITED to Maintain Insurance.  UNITED covenants and agrees, at all timesduring the Term of this Agreement, to maintain in force during the period forwhich it bears the risk of loss, an insurance policy or policies covering loss,theft or damage to the Products from any cause whatsoever in amounts not lessthan the full insurable value thereof, and product liability insurance inamounts deemed reasonable by UNITED, which product liability insurance shallname PROCESSOR as an additional or named insured.

 

                12.4         Certificates of Insurance.  Insurance policies shall be taken out with responsible insurancecompanies licensed to write insurance in Minnesota, in the case of UNITED, andin the appropriate state, in the case of PROCESSOR, and each shall not becanceled or altered without ten days’ written notice to UNITED and PROCESSOR.  Each party shall furnish the other partywith certificates of insurance for policies required hereunder, together with asummary of the terms and conditions of the policy or policies, and the date onwhich the same expire.

 

                13.           **Orders.**  Regardless of factory or warehouse designation, the proceeds fromsales orders shall be credited to the Primary Pool for the appropriate FiscalYear.  UNITED shall consider carloadings, points of destination, capacity of tanks or warehouses, size ofinventories stored therein and other pertinent factors in selecting thefactory, warehouse or warehouses from which delivery shall be made.

 

                14.           **Logistics Function. **UNITED shall be responsible forperforming all normal logistics functions relating to the shipment of allProducts produced at PROCESSOR’s plant. Direct or indirect costs of UNITED associated with the performance ofthe logistics functions related to Products shall be a marketing expense of thePrimary Pool.

                15.           **Information from PROCESSOR.**  PROCESSOR shall, whenever requested byUNITED, furnish to UNITED production and related statistical data for Productsprepared on a daily basis, and shall make its books and records related theretoavailable at all reasonable times for inspection by UNITED.  PROCESSOR shall not be required to releaseinformation concerning PROCESSOR’s proprietary processes or costs (other thanreimbursable Asset Costs and Operating Costs) which costs shall be provided insufficient detail to satisfy UNITED’s reasonable requirements in connectionwith the reimbursements provided for in Section 16 hereof), or otherconfidential financial information. PROCESSOR further agrees, upon request of UNITED, to furnish UNITED withsamples of Products for grading or selling purposes.

 

                16.           **Pool Expenses Incurred By PROCESSOR.**

 

                16.1         PROCESSOR shall be reimbursed out of the Primary Pool forits Asset Costs and its Operating Costs; provided however, that storage costsof thick juice from beets or raw cane refinery feedstock shall only bereimbursable pursuant to the Storage Reimbursement Guidelines set forth inSchedule C.

 

                16.2         UNITED shall credit the PROCESSOR for Asset Costs andOperating Costs within thirty (30) days of submission of PROCESSOR’s writtencost breakdown.  In the event there is adispute regarding the amount of such reimbursement, UNITED shall credit theundisputed amount and if the parties are unable to resolve the disputed amountswithin thirty (30) days from the date payment is due, the controversy shall beresolved in the manner provided in Section 21 hereof.

 

                16.3         PROCESSOR shall, prior to the construction or installationof any new assets to be charged to the Primary Pool, obtain approval fromUNITED for such construction or installation.

 

                17.           **Term of Agreement: Termination.**

 

                17.1         Term.  The termof this Agreement shall commence on the date hereof and shall continue throughAugust 31, 2003 (the “Initial Term”) and from Fiscal Year to Fiscal Yearthereafter (the “Renewal Terms”) until terminated as provided herein.  “Term” shall mean the initial term and anyRenewal Terms, as provided herein.

 

                17.2         Termination by Producer by Reason of Dissent.  During the Term, PROCESSOR shall have theright to terminate this Agreement, without penalty, by Notice delivered toUNITED twelve months prior to the effective date of termination, if thePROCESSOR dissents from any of the following actions taken by UNITED:

 

                                17.2.1.             Changes in UNITED’s strategic plan;

 

                                17.2.2.             Merger of or acquisition by UNITED;

                                17.2.3.             Amendment to the Articles of Incorporation or By–Lawsof UNITED; or

 

                                17.2.4.             Admission of a new member intoUNITED.

 

                17.3         Termination by Either Party After the Initial Term.  Either party has the right to terminate thisAgreement at the end of the Initial Term and thereafter by giving written noticeby registered mail to the other party of such termination as follows:

 

                                17.3.1.             Notice of termination to beeffective at the conclusion of the Initial Term shall be given prior to May 1,2002.

 

                                17.3.2.             Notice of termination to beeffective at the conclusion of a Renewal Term shall be given prior to May 1 ofa given year to be effective on August 31 of the subsequent year (e.g., noticegiven on April 30, 2004 is effective August 31, 2005).

 

                17.4         Termination Pursuant to the By–Laws of the UNITED.  In the event membership in UNITED isterminated pursuant to the provisions of the By–Laws of UNITED, thisAgreement shall terminate effective the date of termination of membership;provided, however, that UNITED shall have the obligation to purchase fromPROCESSOR and the PROCESSOR shall have the obligation to sell Products in thequantities and under the payment terms provided in this Agreement for the nextsucceeding twelve (12) month period following termination; further provided,that in no event shall UNITED or PROCESSOR be required to take any actions thatcould jeopardize UNITED’s status as a common marketing agent under Capper–VolsteadAct.

 

                17.5         Performance Following Termination.

 

                                17.5.1.             Following termination of thisAgreement, as provided in Sections 17.1, 17.2, or 17.3 above, PROCESSOR shallhave the obligation to sell its Pro Rata Share of any Product for which UNITEDhas, as of the date of notice of termination, made commitment to deliver to athird party buyer under the payment terms provided for in this Agreement.

 

                                17.5.2.             The rights and obligations withrespect to the marketing of PROCESSOR’s Products shall continue in effect untilall of such pooled Products have been sold by UNITED and PROCESSOR’s pro–ratashare of the Net Selling Price from sales of Primary Pool Products produced byUNITED’s Members during such years and reimbursable costs and expenses havebeen distributed to PROCESSOR and UNITED’s Members.

 

                18.           **Representations, Warranties, and Indemnifications.**

 

                18.1         Representations By Processor.  PROCESSOR represents and warrants that it isnot under contract or obligation to sell, market, consign or deliver any of theProducts committed to the pools under this Agreement to any other person, firm,association, corporation or other entity. Further, PROCESSOR shall defend and hold harmless UNITED from any costs,claims, liabilities, suits or other proceedings or actions of any nature orkind whatsoever arising from or connected with any such prior agreement,contract or arrangement or the termination or cancellation of any prioragreements, contracts or arrangements.

                18.2         Representations By UNITED.  UNITED represents and warrants that it hasthe power and authority to enter into this Agreement, sell the Productscommitted to the pools and otherwise to fulfill its obligations under thisAgreement.  Further, UNITED shall defendand hold harmless PROCESSOR and its employees, agents and shareholders, fromany costs, claims, liabilities, suits or other proceedings or actions of anynature or kind whatsoever arising from or connected with any sales by UNITED ofProducts hereunder.

 

                18.3         Indemnification By PROCESSOR.  PROCESSOR hereby agrees to indemnify andhold harmless, UNITED, its Members, and their respective employees, from andagainst any claims, losses or liabilities arising out of, or resulting from,the production, on–site storage or loading of any Products which aremarketed by UNITED pursuant to this Agreement.

 

                18.4         GMO Product. PROCESSOR warrants and represents that it will not knowingly deliver,without the prior written consent of UNITED, any Product to UNITED that isproduced in whole or in part from transgenic seed or other genetically modifiedorganisms used by  PROCESSOR,PROCESSOR’s growers, or which is in any manner acquired by PROCESSOR fromanother party (“GMO Product”). PROCESSOR shall indemnify, defend and hold USC and each of its Membersand their respective directors, officers, employees, representatives and agents(each an “Indemnitee”) harmless from and against all liabilities, obligations,claims, damages, penalties, causes of action, costs and expenses (including,without limitation, attorneys' fees and expenses, product recall and/orre-routing expenses and other incidental, consequential, special and punitivedamages) (collectively, the “Liabilities”) imposed upon, incurred by orasserted against the Indemnitee that result directly from the supply byPROCESSOR of any GMO Product to UNITED pursuant to this Agreement.

 

                18.5         Indemnification By UNITED.  UNITED hereby agrees to indemnify and hold harmless, PROCESSOR,and its employees, agents and shareholders from and against any claims, lossesor liabilities arising out of, or resulting from, the actions or omissions ofUNITED, its employees or agents with respect to the Product, from and after thetime risk of loss of PROCESSOR’s Product transfers.

 

                18.6         Conformance with Articles and Bylaws.  PROCESSOR accepts and agrees to conform toand abide by the provisions of the Articles of Incorporation and Bylaws ofUNITED and all amendments thereto during the Term of this Agreement.

 

                18.7         Non-Waiver of Rights.  PROCESSOR agrees that UNITED shall have all rights and remediesprovided by law and in the Bylaws of UNITED in the event of a breach orthreatened breach by PROCESSOR of this Agreement.  UNITED represents that all other Members either have entered intoor will be required to enter into identical Member marketing agreements for themarketing of pooled Products produced by the other Members.

                19.           **Marketing Allotments and Allocations.**

 

                19.1         Allocation is Property of PROCESSOR.  In the event Allotments and Allocations areimplemented pursuant to the Allotment Statute, any Allocation attributable toPROCESSOR shall be the property of PROCESSOR.

 

                19.2         Product in Excess of Allocation.

 

                                19.2.1.             Products in excess of PROCESSOR’sAllocation shall not be included in the Primary Pool but will be marketed asfollows:

 

                                                        19.2.1.1.          By PROCESSOR, to a non-Memberprocessor, and not to a domestic user or consumer of sugar;  provided however, that UNITED shall bereimbursed for all direct costs relating to the storage or handling of any suchProduct by UNITED;

 

                                                        19.2.1.2           In the alternative, PROCESSOR andUNITED may mutually agree that Products in excess of PROCESSOR’s Allocation shallbe marketed by UNITED as part of an alternative or separate pool that iscreated for each affected PROCESSOR.  If UNITED markets the Product that is inexcess of the PROCESOR’s allocation, PROCESSOR may elect to have Productin excess of its Allocation marketed by UNITED in the current year (in theexport market or other markets that do not violate the Allotment Statute) orcarried over by UNITED to the next Fiscal Year;

 

                                                        19.2.1.3           Nothing in this Section 19.2.1 shallpreclude PROCESSOR from selling Product in excess of its Allocation to anotherMember.

 

                                19.2.2              In the event PROCESSOR has Productin excess of its Allocation that is being stored by UNITED, any additionalincremental costs incurred as a result of such storage shall be charged toPROCESSOR as part of the operation of the separate pool and shall not be sharedby other participants in the Primary Pool.

 

                19.3         Net Selling Price Based Upon Allocation Volume.  In the event of Allotments, Net SellingPrice of Primary Pool and net selling price of non–Primary Pool Productshall be determined in a manner consistent with the provisions of Section 7 ofthis Agreement, but shall be based upon the PROCESSOR’s Allocation volumerather than the volume of Product produced in the Fiscal Year.

 

                19.4         Purchased Sugar. If Allotments and Allocations are implemented, Products that arepurchased (“Purchased Sugar”) by a Member from a third party or from anotherMember shall be included in the Pro Rata Share (subject to adjustment pursuant to Section 7.2) and, included in thePrimary Pool; provided however, that the quantity of Purchased Sugar shall notexceed the allocation of the purchasing Member.

                20.           **Force Majeure.**

 

                20.1         Notification and Efforts to Minimize.  Neither party shall be liable to the otherfor failure to perform any part of this Agreement if such failure results fromthe occurrence of an event of Force Majeure, provided that the party affectedby the event (i) notifies the other party of such event promptly upon learningof the occurrence of the event, such Notice (as hereinafter defined) to includethe anticipated effect of such event on the performance of such party underthis Agreement and (ii) uses its best efforts to minimize delays and/or non–performancecaused by such event.

 

                20.2         Release from Liability.  Each party shall be completely released from all liability to theother arising as a consequence of any excused performance caused by an event ofForce Majeure, including, but not limited to, all claims for incidental,special or consequential damages.

 

                21.           **Dispute Resolution.**

 

                21.1         Agreement to Arbitrate.  Any dispute, controversy or claim arising out of or relating tothis Agreement that cannot be resolved amicably between the parties shall befinally resolved by arbitration in Chicago, Illinois, or such other location asmay be mutually agreed upon, in accordance with the Commercial ArbitrationRules of the American Arbitration Association (“AAA”); provided however, thatthe plaintiff in any claim for damages exceeding $10,000,000 may seek judicialresolution in any court of competent jurisdiction and shall not be subject tothis Section.  Any arbitration shall beheld before a panel of three (3) arbitrators mutually agreed to between theparties, one of whom shall be familiar with the sugar industry.  If the parties are unable to agree upon theselection and appointment of arbitrators within thirty (30) days of a writtendemand for arbitration, then arbitrators shall be appointed by the AAA pursuantto its Commercial Arbitration Rules.

 

                21.2         Discovery.  Inconnection with any such arbitration, the parties further agree to participatein the exchange of information and documentation through discovery pursuant tothe rules established by the arbitrators.

 

                21.3         Authority of Arbitrators.  The arbitrators shall have full authority to render any form oflegal or equitable relief to address the parties’ dispute, including an awardof monetary damages and/or injunctive relief; provided, however, that in noevent shall the arbitrators have the power to include any element of punitiveor exemplary damages in the arbitration award. Judgment upon any award for any legal or equitable relief so rendered bythe arbitrators shall be considered final and binding and may be entered in anystate or federal court of competent jurisdiction.

 

                22.           **Complete Agreement.**  The parties agree that this Agreementconstitutes the complete agreement of the parties with respect to the subjectmatter hereto and there are no oral or other conditions, promises, representationsor inducements in addition to oral variance with any of the terms hereof, andthat this contract represents the voluntary and clear understanding of bothparties fully and completely.

                23.           **Assignment.**  Neither PROCESSOR nor UNITED may assign this Agreement withoutprior written consent of the other party and the other Members who have enteredinto identical pool marketing agreements with UNITED.

 

                24.           **Waiver of Breach.**  No waiver of a breach of any of theagreements or provisions contained in this Agreement shall be construed to be awaiver of any subsequent breach of the same or of any other provision of thisAgreement.

 

                25.           **Notices.**  Whenever notice is required by the terms hereof, it shall begiven in writing by delivery or by certified or registered mail addressed tothe other party at the following address or such other address as a party shalldesignate by appropriate notice:

 

If to UNITED:

 

                UNITED SUGARS CORPORATION

                7801E. Bush Lake Road

                Bloomington, Minnesota 55439

                Attn:  President

 

                With a copy to:

 

                Robert G. Hensley, Esq.

                Dorsey & Whitney LLP

                220 South 6th Street

                Minneapolis, Minnesota 55101

 

                If to PROCESSOR:

 

                AMERICAN CRYSTAL SUGAR COMPANY

                101 North Third Street

                Moorhead, MN 56560

                Attention:  CEO

 

If notice is givenby mail, it shall be effective two (2) days after mailing.

 

                26.           **Construction of Terms of Agreement:  Modification.**  The language in all parts of this Agreementshall be constructed as a whole according to its fair meaning and not strictlyfor or against any party hereto. Headings in this Agreement are for convenience only and are notconstrued as a part of this Agreement or in any defining, limiting oramplifying the provisions hereof.  ThisAgreement contains the entire agreement between the parties with respect to thesubject matter hereof and shall not be modified in any manner except by aninstrument in writing executed by the parties hereto.  In the event any term, covenant, or condition herein contained isheld to be invalid or void by any court of competent jurisdiction, theinvalidity of any such term, covenant or condition shall in no way affect anyother term, covenant or condition herein contained.

                27.           **Successors and Assigns.**  Subject to the other provisions of thisAgreement, all of the terms, covenants and conditions of this Agreement shallinure to the benefit of and shall bind the parties hereto and their successorsand assigns.

 

                IN WITNESS WHEREOF, UNITED andPROCESSOR have executed this Agreement effective the day and year first abovewritten.

 
| UNITED SUGARS CORPORATION      |
|--------------------------------|
|                           |
|                           |
| By:                            | /s/ Thomas M. McKenna |
| Its:                           | President |
|                           |
|                           |
| AMERICAN CRYSTAL SUGAR COMPANY |
|                           |
|                           |
| By:                            | /s/ James J. Horvath |
| Its:                           | President and CEO |

 

 

 

**Schedule A**

**{Section 10.1}**

 

**Specifications for Products**

**(Attached)**

 

 

**Schedule B**

**{Section 10.1}**

 

**Quality Assurance Policy**

 

 

PURPOSE:

 

The purpose of theQuality Assurance function at UNITED is to provide guidance and direction tooperational groups in the development, implementation and maintenance ofQuality Systems.  Quality Systems arethose systems designed to assure products and services of the Member companiesmeet the expectations of the targeted customer segments.

The QualityAssurance group will accomplish this through development, implementation andaudit of systems and standards that will be developed and implemented thatdefine customer expectations as well as documenting the performance of theMember companies against those standards.

 

STRATEGY:

 

The vehiclethrough which the above will be accomplished will be a system of documentedpolicies and procedures defining the activities that will occur within each ofthe operational groups providing product for sale.

 

The basis forthose policies and procedures will be a combination of FDA requirements as wellas standards communicated by UNITED’s primary customer segments.

 

Policies andprocedures that will be defined, include but are not limited to:

 

ProductSafety/Regulatory (FDA):

 

                                                        *      Good Manufacturing Practices (21 CFR Part110 of the Food Drug and Cosmetic Act).

 

                                                        *      HACCP (Hazards Analysis and CriticalControl Points)

 

                                                                (Thetwo systems noted above are made up of a number of audit and process managementactivities designed to assure the safety of the product that is produced,stored and distributed by internal facilities as well as outside agents of thecompany [i.e. copack facilities, facilities that produce and ship product underagreement with UNITED and Outside Distribution Facilities/Public Warehouses]).

 

ProductQuality/Functionality

 

                                                        *      Product Standards for each product soldand distributed through UNITED will be defined.  Standards (for product as shipped) will typically be defined byany or all of the following:

 

                                                                                *Flavor/Odor

                                                                                *Color

                                                                                *Moisture

                                                                                *Ash

                                                                                *Sediment

                                                                                *VisibleSpecks

                                                                                *Floc

                                                                                *Invert

                                                                                *SpecificRotation

                                                                                *Granulation

                                                                                *Density

                                                                                *Flowability

                                                                                *Pesticides/heavymetals

                                                                                *Specifictrace element analysis

                                                                                                Asdefined by the customer segment (i.e.

                                                                                                bottlingand National Formulary)

                                                                                *Microbiologystandards

 

                                                        *      Process Control Systems/Documentation

 

                                                                ProcessControl Systems are those control systems by which each producing facilitymanages their process to produce product which meet the approved productstandards as shipped.

 

                                                                EachMember facility will document, through a Standard Operating Procedures format,the methods utilized to assure processes are operated in a consistentcontrollable manner.

 

 

**Schedule C**

**{Section 16.1}**

 

**Parameters for Including Tanks as anExpense of the Primary Pool**

**UNITED SUGARS**

 

The PROCESSOR’sshall be reimbursed out of the Primary Pool for its storage costs of thickjuice from beets or raw cane refinery feedstock only if, in the judgment ofUNITED, there is a benefit to the Primary Pool.  The assets costs associated with the storage of thick juice intanks and the storage of raw sugar  willbe an expense of the Primary Pool when the use/increased use of these assets atUNITED's request will lower the overall costs to the Primary Pool.  Generally, this would happen anytime UNITEDforces increased use of the these tanks or raw storage over and above what isalready incorporated into the member's annual plant production schedule forthat campaign.

 

In the eventUNITED requests the use/increased use of assets for the storage of thick juicein tanks or the storage of raw sugar, the Primary Pool shall pay thePROCESSOR’s asset costs as follows:

 

                                For each month(regardless of the number of days of storage used by UNITED during such month)that UNITED requests use of tanks or raw storage, the PROCESSOR shall bereimbursed for 1/12th of its annual asset cost for the utilized storage.

 

                                The storagerequested by UNITED and the subsequent withdrawal from storage shall be on afirst-in, first-out basis with respect to PROCESSOR’s total storage.

 

                                The storage ratecharged by PROCESSOR for the use of tanks or raw storage shall be calculatedbased upon the percentage of storage utilized by UNITED multiplied byPROCESSOR’s average cost of all tanks or raw storage that are routinelyutilized by PROCESSOR for storage of thick juice or raw cane refineryfeedstock.

 

                                PROCESSOR shallbe reimbursed for incremental refining costs that directly result fromreimbursable storage covered by this Schedule C.