Prepared by MERRILL CORPORATION









Exhibit 10.27




 




UNIFORM

MEMBER SUGAR MARKETING AGREEMENT




POOL

BASIS




 




                THIS AGREEMENT, made

effective as of the 1st day of September 2001, by and between UNITED

SUGARS CORPORATION, a cooperative association organized under the

laws of the State of Minnesota (hereinafter referred to as “UNITED”), and AMERICAN

CRYSTAL SUGAR COMPANY, a cooperative association organized under the

laws of the State of Minnesota (hereinafter referred to as “PROCESSOR”).




 




WITNESSETH




 




                WHEREAS, PROCESSOR is a

producer–owned and a producer-operated agricultural cooperative which is

organized and operated so as to adhere to the provisions of Section 15(a) of

the Agricultural Marketing Act (12 U.S.C., Sec. 1141j(a)), as amended, and the

Capper–Volstead Act of 1922 (7 U.S.C., Sec. 291, 292), and which is

engaged in the operation of one or more sugar processing plants for the purpose

of producing one or more forms of refined sugar; and




 




                WHEREAS, UNITED is organized

and operated so as to adhere to the provisions of Section 15(a) of the Agricultural

Marketing Act (12 U.S.C., Sec. 1141j(a)), as amended, and the Capper–Volstead

Act of 1922 (7 U.S.C., Sec. 291,292), for the mutual help and benefit of its

members (“Member” or “Members”) and for the purposes of acting as a marketing

agency for its Members and of engaging in the business of marketing the refined

sugar (whether sold in packages or in bulk) produced by its Members, including

but not limited to, granulated, liquid, blends, and specialty products; and




 




                WHEREAS, PROCESSOR is a

Member of UNITED and wishes to participate with other Members of UNITED in

developing and maintaining a dependable market for certain products produced by

PROCESSOR; and




 




                WHEREAS, UNITED and PROCESSOR

desire to enter into a membership marketing agreement on a pool basis.




 




                NOW, THEREFORE, in

consideration of the above, subject to the respective terms, conditions, and

obligations of PROCESSOR and UNITED herein, UNITED and PROCESSOR agree as

follows:




 




                1.             Definitions. 

As used in this Agreement, the following terms shall have the following

meanings:




 




                                “Allocation”

means the amount of sugar PROCESSOR is authorized to market if Allotments are

implemented pursuant to the Allotment Statute.




 




                                “Allotments”

means an overall allotment of sugar processed from domestically-produced

sugarcane and sugar beets, as defined and contemplated by the Allotment

Statute.




















                                “Allotment

Statute” means 7 USC § 1359aa, et. seq. (1991) and amendments

thereto, or subsequent statutes providing for marketing allotments.




 




                                “Assets

Costs” shall mean carrying costs of assets associated with Product

shipping, packaging, warehousing (including all costs historically included by

UNITED as warehousing costs), and storage functions, including depreciation and

interest.




 




                                “Beet

Processing Season” means the period of time generally from September

through August during which a Beet Producer processes beets, thick juice and

extract into refined sugar.




 




                                “Beet

Producer” means a Member that processes beets and thick juice into

refined sugar.




 




                                “Cane Processing

Season” means the period of time generally from mid-October through

March during which time a Cane Producer processes cane into feedstock for a

refinery.




 




                                “Cane

Producer” means a Member that processes cane into refined sugar.




“Crop Year” means

the crop year established by the Beet Producers for their own business

operations.




 




                                “Fiscal

Year” means the fiscal year of UNITED, which begins on September 1

and ends on August 31.




 




                                “Force

Majeure” means any (i) fire, freeze, accident, explosion, construction

delay, hurricane, flood, act of God, inability to obtain electric power or

fuel, inability to obtain any required permits or licenses, government law,

directive or regulation; or the effect of the application of any governmental

law, directive or regulation, or any like contingency, beyond a party’s

reasonable ability to control or avoid; and (ii) labor dispute or strike, from

whatever cause arising and regardless of whether the demands of the employees

involved are reasonable and within the affected party’s power to concede.




 




                                “Finished

Product” or “Finished Products” means those Products

that have been granulated or otherwise made ready for marketing to third

parties.




 




                                “Member”

means a member or shareholder of UNITED who is entitled to vote.




 




                                “Net Selling

Price” means the gross proceeds realized by UNITED from sales of

Products produced by PROCESSOR and the other Members in the Primary Pool, less

expenses 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’s

employees, office expense and appropriate consulting fees, and all costs of

transportation 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) and

storage functions including, without limitation, labor (including direct and

indirect costs, such as employee benefits, insurance, etc.), supplies, and

utilities.




















                                “Pool Year”

means the pool year of the Primary Pool, which coincides with the Fiscal Year

of UNITED, which begins on September 1 and ends on August 31.




 




                                “Primary

Pool” means Product of each Member that is pooled for each Fiscal

Year 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 Rata

Share” shall be equal to a fraction, with PROCESSOR’s estimated

annual production of Product (on a sugar equivalent basis) included the Primary

Pool as the numerator and total estimated annual pool production of Product (on

a sugar equivalent basis) for PROCESSOR and the Members included in the Primary

Pool as the denominator.




 




                                “Purchased

Sugar” 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 to

act as its sole worldwide agent in the sale and marketing of the Products.  UNITED accepts such appointment and agrees

to act as the sales agent and pool administrator in accordance with the terms

of this Agreement.  PROCESSOR agrees

that UNITED may employ all such persons and agencies as it determines to be

necessary to carry out its obligations under this Agreement.  It is understood and agreed that UNITED may

market Products under the various trademarks and trade names of PROCESSOR (if

any) pursuant to a royalty free license agreement with respect to such

trademarks and trade names, the form of which agreement shall be mutually

agreed upon by PROCESSOR and UNITED.




 




                2.2           United Authorized to Pass Title.  UNITED agrees, and is hereby empowered by

PROCESSOR, to sell in its own name, and pass title on behalf of PROCESSOR, all

Product produced by PROCESSOR during the Term of this Agreement to such

purchasers, at such time or times, at such place or places, in such manner and

on such prices or terms as UNITED determines to be in the best interests of

PROCESSOR and other Members of UNITED.




 




                2.3           Products not included in this Agreement.  UNITED shall have no rights, and nothing

herein contained shall be deemed to create rights in UNITED, in and to any

other products produced by PROCESSOR (other than refined sugar).




 




                2.4           Procurement of Additional Product.  It is understood and agreed that UNITED may

from time to time procure certain Products from third parties in order to meet

the requirements of sales contracts or as otherwise determined to be in the

best interest of PROCESSOR and the other Members of UNITED.  PROCESSOR and UNITED agree that UNITED shall

act as an agent for PROCESSOR in connection with such purchases of Products and

that the costs of acquiring such Products and revenues received from the sale

of such Products shall be allocated to PROCESSOR and other Members of UNITED on

the same basis as allocations from the pool for which the Products were

purchased.




















                3.             Packaging.  PROCESSOR intends to have the capacity

to sell Product in bulk as well as in packages.  It is understood that production and packaging constraints will

limit the volume and mix of packages that can be produced at any one time, and

accordingly, UNITED agrees to coordinate orders for packaged Product taking

into consideration PROCESSOR’s production and packaging limitations.




 




                4.             Production and Delivery.




 




                4.1           Timing of Production.  It is anticipated that PROCESSOR will produce Finished Products

during its campaign on an approximately even monthly schedule.  However, PROCESSOR acknowledges that

UNITED’s requirements may be greater in certain specified months and less in

others.  Accordingly, subject to mutual

agreement of the parties, UNITED will endeavor to coordinate demands with

PROCESSOR’s production and storage capacities. 

At UNITED’s request, PROCESSOR will attempt to maximize production in

any month in order to accommodate customer demand.




 




                4.2           Product Production Schedules.  PROCESSOR shall provide to UNITED by June 1

of each Fiscal Year during the Term a preliminary estimated production schedule

(specifying volume and dates) of Product for the next following Fiscal Year and

will provide a revised estimated production schedule of Product by July 1 of

each such year, reflecting any changes from the June preliminary estimate.  UNITED and PROCESSOR shall jointly develop a

production and delivery schedule plan for each Fiscal Year that will attempt to

accommodate, as much as reasonably possible, the dual goals of maximizing the

price to be paid to PROCESSOR and maximizing production efficiencies, with the

objective 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 each

month, shall be agreed upon by the parties at least seven (7) days in advance

of the month to which they apply.  The

parties shall use reasonable efforts, recognizing customer demand, to

accommodate each other in setting such schedules.




 




                5.             Billing and Collection.  All sales made by UNITED shall be billed on

invoices 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 Products

to be sold by UNITED hereunder shall be pooled for each Fiscal Year with

Products of the other Members of UNITED in the Primary Pool.  UNITED by action of its Executive Committee

shall have the discretion to create additional pools as deemed reasonably

necessary for the equitable treatment of all Members and to create accounting

standards for such additional pools.




















                6.2           Adjustments for Beet Producers.  In order to include sales of carry-over

Product produced by a Beet Producer in a given Beet Processing Season in the

Primary Pool applicable to the Fiscal Year in which the Beet Processing Season

occurred, even though delivery may occur following August 31 of such year, the

Product to be included in calculating UNITED’s Primary Pool in each Fiscal Year

shall be the amount of Product (on a sugar equivalent basis) produced by the

Beet Producer during the applicable Fiscal Year.




 




                6.3           Adjustments for Cane Producers.  In order to coordinate the Cane Processing

Season with the Beet Processing Season, the amount of cane Products to be

included in calculating a Primary Pool shall be the amount of cane Product (on

a sugar equivalent basis) produced by the Cane Producer during the applicable

Fiscal Year, less the cane Product (on a sugar equivalent basis) produced by

the Cane Producer that was allocated to the prior Fiscal Year, plus Cane

Producer’s estimate as of August 31 of that Fiscal Year of the Product (on a

sugar equivalent basis) to be produced from and including September 1 through

October 15 of the next Fiscal Year; provided however, unless otherwise mutually

agreed, in no event shall the estimated production from and including September

1 through October 15 of the next Fiscal Year exceed 12% of the PROCESSOR’s

average actual production of Product during the previous three Fiscal Years of

UNITED.




 




                7.             Price for Product.




 




                7.1           Price. 

UNITED shall pay to PROCESSOR the PROCESSOR’s Pro Rata Share of the Net

Selling Price for all Products sold by UNITED hereunder.




 




                7.2           Timing of Payment to Members.  As sales of Finished Product are made by

UNITED from the Primary Pool, the gross cash receipts received by UNITED from

the sale of such Finished Products shall be paid daily to PROCESSOR and the

other Primary Pool participants on the basis of their estimated proportionate

share of the Finished Product to be produced by PROCESSOR and each of the other

participants in the Primary Pool during that Fiscal year.  Because gross cash receipts are distributed

daily, UNITED shall borrow from its line of credit in order to cover its

monthly operating costs, subject to prompt reimbursement by PROCESSOR of

PROCESSOR’s Pro Rata Share of the expenses (such expenses are set forth in the

definition of Net Selling Price) that are incurred by UNITED during the month.




 




                7.3           Adjustments for Changes to Production Estimates.  The determination of PROCESSOR’s

proportionate share of gross cash receipts shall be based on UNITED’s best

estimate of the amount of Finished Products anticipated to be produced in such

year by PROCESSOR and each other participant in the Primary Pool, and shall be

adjusted by UNITED periodically as production figures are more precisely

determined.  Such adjustments shall

reflect an interest charge to be paid by any Primary Pool participant who has

received excess distributions based on the preliminary production estimates and

such interest shall be paid to the Primary Pool participant(s) who received

less than full distributions.  For

purposes of this paragraph, interest charges shall be the prime rate charged by

UNITED’s principal lender for thirty (30) day seasonal fixed rate financing for

the period in question.  As soon as

exact information and production figures are available, UNITED shall determine

PROCESSOR’s final proportionate share of the gross cash receipts for the

Primary Pool during the Fiscal Year, and appropriate adjustments, together with

interest charges as provided above, shall be made.  The final accounting for the Primary Pool shall be made no later

than the ninetieth day following the last day of each Fiscal Year.




















                7.4           Lien on PROCESSOR Assets.  PROCESSOR hereby agrees to grant UNITED a

security interest in all Product inventory of PROCESSOR (and related proceeds

thereof) to secure payment by PROCESSOR of all indebtedness of PROCESSOR to

UNITED, including, but not limited to, any over advance of proceeds from the

sale of Products.  Such security

interest shall arise ten (10) business days following written notice from

UNITED to PROCESSOR indicating that PROCESSOR has received an over advance of

proceeds from the sale of Finished Products, and shall remain effective for the

period that the over advance is outstanding. 

Such security interest shall be automatically subordinate to any prior

or future security interests granted by PROCESSOR to the Commodity Credit

Corporation, and to any prior security interests granted to other lenders.  PROCESSOR agrees to execute such financing

statements or other documents as may be reasonably requested by UNITED to

evidence the security interest.




 




                8.             UNITED’s Books and Records.  UNITED shall keep accurate records of

costs, sales, and distributions of Primary Pool proceeds in accordance with

sound and generally accepted accounting practices.  Said records shall be at all reasonable times fully available for

inspection and copying by PROCESSOR or its certified public accountants.  All records of the Primary Pool and any

special pool that is created shall be audited annually by UNITED’s regular

Independent Certified Public Auditors and the audit report made available to

PROCESSOR.




 




                9.             Budget of Marketing Costs.  UNITED shall prepare an annual budget or

estimate of all direct and indirect marketing costs for the Primary Pool.  It is the intention of UNITED to secure

independent financing for costs associated with the marketing of Products as

reflected in the budget.




 




                10.           Product Specifications, Quality Standards, and

Handling 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 Schedule

A.   In addition, PROCESSOR agrees to

comply with UNITED’s Quality Assurance Policy that is attached hereto as

Schedule B.   Any changes to the

specifications or Quality Assurance Policy shall be mutually agreed upon by

UNITED and the Members.




 




                10.2         State and Federal Regulations.  All Products delivered to or at the order of

UNITED shall conform to quality and other standards prescribed by applicable

state and federal rules and regulations.




 




                10.3         Substandard Product. 

Product that fails to meet the specifications or the Quality Assurance

Policy and which cannot be sold without discounting, shall be considered

substandard for purposes of this Agreement. 

Product of substandard quality shall be withheld from the Primary Pool

and marketed by UNITED, with proceeds of the sale of such Product, less all

direct and indirect selling expenses, distributed to PROCESSOR; in the

alternative, PROCESSOR and UNITED may mutually agree that Product of substandard

quality may remain in the Primary Pool and be charged with the additional costs

relating to the substandard quality of the Product, including any necessary

discounts.




















                11.           Storage of Product.  PROCESSOR shall store its Product as the

parties shall mutually agree.  At the

earliest reasonable time after processing commences in each Fiscal Year and as

soon as Product has begun to be placed in storage, PROCESSOR shall deliver

daily Product inventory reports to UNITED. 

All Product included in the daily inventory shall be included in the

Primary Pool for the appropriate Fiscal Year even though the Product remains on

the 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 of

all Products produced by PROCESSOR or any portion thereof until earlier of the

time (i) the Products are delivered to the buyer of the same; or (ii) at the

time 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 shall

pass to UNITED; provided, however, that PROCESSOR shall continue to be the

owner of the Product until the Product is sold to the buyer.  Whenever UNITED shall have possession or

control over the Product prior to sale to the buyer, UNITED shall act strictly

as custodian thereof in accordance with the provisions of this Agreement.




 




                12.2         Processor to Maintain Insurance.  PROCESSOR covenants and agrees, at its sole

cost and at all times during the Term of this Agreement, to maintain in force

an insurance policy or policies covering loss, theft or damage to the Products

from any cause whatsoever until the shipment of the same to the buyer, in

amounts not less than the full insurable value thereof, and product liability

insurance in amounts required by UNITED from time to time, which product

liability insurance shall name UNITED as an additional or a named insured.




 




                12.3         UNITED to Maintain Insurance.  UNITED covenants and agrees, at all times

during the Term of this Agreement, to maintain in force during the period for

which 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 less

than the full insurable value thereof, and product liability insurance in

amounts deemed reasonable by UNITED, which product liability insurance shall

name PROCESSOR as an additional or named insured.




 




                12.4         Certificates of Insurance.  Insurance policies shall be taken out with responsible insurance

companies licensed to write insurance in Minnesota, in the case of UNITED, and

in the appropriate state, in the case of PROCESSOR, and each shall not be

canceled or altered without ten days’ written notice to UNITED and PROCESSOR.  Each party shall furnish the other party

with certificates of insurance for policies required hereunder, together with a

summary of the terms and conditions of the policy or policies, and the date on

which the same expire.




 




                13.           Orders.  Regardless of factory or warehouse designation, the proceeds from

sales orders shall be credited to the Primary Pool for the appropriate Fiscal

Year.  UNITED shall consider car

loadings, points of destination, capacity of tanks or warehouses, size of

inventories stored therein and other pertinent factors in selecting the

factory, warehouse or warehouses from which delivery shall be made.




 




                14.           Logistics Function.  UNITED shall be responsible for

performing all normal logistics functions relating to the shipment of all

Products produced at PROCESSOR’s plant. 

Direct or indirect costs of UNITED associated with the performance of

the logistics functions related to Products shall be a marketing expense of the

Primary Pool.




















                15.           Information from PROCESSOR.  PROCESSOR shall, whenever requested by

UNITED, furnish to UNITED production and related statistical data for Products

prepared on a daily basis, and shall make its books and records related thereto

available at all reasonable times for inspection by UNITED.  PROCESSOR shall not be required to release

information concerning PROCESSOR’s proprietary processes or costs (other than

reimbursable Asset Costs and Operating Costs) which costs shall be provided in

sufficient detail to satisfy UNITED’s reasonable requirements in connection

with the reimbursements provided for in Section 16 hereof), or other

confidential financial information. 

PROCESSOR further agrees, upon request of UNITED, to furnish UNITED with

samples of Products for grading or selling purposes.




 




                16.           Pool Expenses Incurred By PROCESSOR.




 




                16.1         PROCESSOR shall be reimbursed out of the Primary Pool for

its Asset Costs and its Operating Costs; provided however, that storage costs

of thick juice from beets or raw cane refinery feedstock shall only be

reimbursable pursuant to the Storage Reimbursement Guidelines set forth in

Schedule C.




 




                16.2         UNITED shall credit the PROCESSOR for Asset Costs and

Operating Costs within thirty (30) days of submission of PROCESSOR’s written

cost breakdown.  In the event there is a

dispute regarding the amount of such reimbursement, UNITED shall credit the

undisputed amount and if the parties are unable to resolve the disputed amounts

within thirty (30) days from the date payment is due, the controversy shall be

resolved in the manner provided in Section 21 hereof.




 




                16.3         PROCESSOR shall, prior to the construction or installation

of any new assets to be charged to the Primary Pool, obtain approval from

UNITED for such construction or installation.




 




                17.           Term of Agreement: 

Termination.




 




                17.1         Term.  The term

of this Agreement shall commence on the date hereof and shall continue through

August 31, 2003 (the “Initial Term”) and from Fiscal Year to Fiscal Year

thereafter (the “Renewal Terms”) until terminated as provided herein.  “Term” shall mean the initial term and any

Renewal Terms, as provided herein.




 




                17.2         Termination by Producer by Reason of Dissent.  During the Term, PROCESSOR shall have the

right to terminate this Agreement, without penalty, by Notice delivered to

UNITED twelve months prior to the effective date of termination, if the

PROCESSOR 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–Laws

of UNITED; or




 




                                17.2.4.             Admission of a new member into

UNITED.




 




                17.3         Termination by Either Party After the Initial Term.  Either party has the right to terminate this

Agreement at the end of the Initial Term and thereafter by giving written notice

by registered mail to the other party of such termination as follows:




 




                                17.3.1.             Notice of termination to be

effective at the conclusion of the Initial Term shall be given prior to May 1,

2002.




 




                                17.3.2.             Notice of termination to be

effective at the conclusion of a Renewal Term shall be given prior to May 1 of

a given year to be effective on August 31 of the subsequent year (e.g., notice

given 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 is

terminated pursuant to the provisions of the By–Laws of UNITED, this

Agreement shall terminate effective the date of termination of membership;

provided, however, that UNITED shall have the obligation to purchase from

PROCESSOR and the PROCESSOR shall have the obligation to sell Products in the

quantities and under the payment terms provided in this Agreement for the next

succeeding twelve (12) month period following termination; further provided,

that in no event shall UNITED or PROCESSOR be required to take any actions that

could jeopardize UNITED’s status as a common marketing agent under Capper–Volstead

Act.




 




                17.5         Performance Following Termination.




 




                                17.5.1.             Following termination of this

Agreement, as provided in Sections 17.1, 17.2, or 17.3 above, PROCESSOR shall

have the obligation to sell its Pro Rata Share of any Product for which UNITED

has, as of the date of notice of termination, made commitment to deliver to a

third party buyer under the payment terms provided for in this Agreement.




 




                                17.5.2.             The rights and obligations with

respect to the marketing of PROCESSOR’s Products shall continue in effect until

all of such pooled Products have been sold by UNITED and PROCESSOR’s pro–rata

share of the Net Selling Price from sales of Primary Pool Products produced by

UNITED’s Members during such years and reimbursable costs and expenses have

been distributed to PROCESSOR and UNITED’s Members.




 




                18.           Representations, Warranties, and Indemnifications.




 




                18.1         Representations By Processor.  PROCESSOR represents and warrants that it is

not under contract or obligation to sell, market, consign or deliver any of the

Products 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 or

kind whatsoever arising from or connected with any such prior agreement,

contract or arrangement or the termination or cancellation of any prior

agreements, contracts or arrangements.




















                18.2         Representations By UNITED.  UNITED represents and warrants that it has

the power and authority to enter into this Agreement, sell the Products

committed to the pools and otherwise to fulfill its obligations under this

Agreement.  Further, UNITED shall defend

and hold harmless PROCESSOR and its employees, agents and shareholders, from

any costs, claims, liabilities, suits or other proceedings or actions of any

nature or kind whatsoever arising from or connected with any sales by UNITED of

Products hereunder.




 




                18.3         Indemnification By PROCESSOR.  PROCESSOR hereby agrees to indemnify and

hold harmless, UNITED, its Members, and their respective employees, from and

against any claims, losses or liabilities arising out of, or resulting from,

the production, on–site storage or loading of any Products which are

marketed 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 is

produced in whole or in part from transgenic seed or other genetically modified

organisms used by  PROCESSOR,

PROCESSOR’s growers, or which is in any manner acquired by PROCESSOR from

another party (“GMO Product”). 

PROCESSOR shall indemnify, defend and hold USC and each of its Members

and 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/or

re-routing expenses and other incidental, consequential, special and punitive

damages) (collectively, the “Liabilities”) imposed upon, incurred by or

asserted against the Indemnitee that result directly from the supply by

PROCESSOR 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, losses

or liabilities arising out of, or resulting from, the actions or omissions of

UNITED, its employees or agents with respect to the Product, from and after the

time risk of loss of PROCESSOR’s Product transfers.




 




                18.6         Conformance with Articles and Bylaws.  PROCESSOR accepts and agrees to conform to

and abide by the provisions of the Articles of Incorporation and Bylaws of

UNITED 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 remedies

provided by law and in the Bylaws of UNITED in the event of a breach or

threatened breach by PROCESSOR of this Agreement.  UNITED represents that all other Members either have entered into

or will be required to enter into identical Member marketing agreements for the

marketing 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 are

implemented pursuant to the Allotment Statute, any Allocation attributable to

PROCESSOR shall be the property of PROCESSOR.




 




                19.2         Product in Excess of Allocation.




 




                                19.2.1.             Products in excess of PROCESSOR’s

Allocation shall not be included in the Primary Pool but will be marketed as

follows:




 




                                                        19.2.1.1.          By PROCESSOR, to a non-Member

processor, and not to a domestic user or consumer of sugar;  provided however, that UNITED shall be

reimbursed for all direct costs relating to the storage or handling of any such

Product by UNITED;




 




                                                        19.2.1.2           In the alternative, PROCESSOR and

UNITED may mutually agree that Products in excess of PROCESSOR’s Allocation shall

be marketed by UNITED as part of an alternative or separate pool that is

created for each affected PROCESSOR.  If UNITED markets the Product that is in

excess of the PROCESOR’s allocation, PROCESSOR may elect to have Product

in excess of its Allocation marketed by UNITED in the current year (in the

export market or other markets that do not violate the Allotment Statute) or

carried over by UNITED to the next Fiscal Year;




 




                                                        19.2.1.3           Nothing in this Section 19.2.1 shall

preclude PROCESSOR from selling Product in excess of its Allocation to another

Member.




 




                                19.2.2              In the event PROCESSOR has Product

in excess of its Allocation that is being stored by UNITED, any additional

incremental costs incurred as a result of such storage shall be charged to

PROCESSOR as part of the operation of the separate pool and shall not be shared

by other participants in the Primary Pool.




 




                19.3         Net Selling Price Based Upon Allocation Volume.  In the event of Allotments, Net Selling

Price of Primary Pool and net selling price of non–Primary Pool Product

shall be determined in a manner consistent with the provisions of Section 7 of

this Agreement, but shall be based upon the PROCESSOR’s Allocation volume

rather than the volume of Product produced in the Fiscal Year.




 




                19.4         Purchased Sugar. 

If Allotments and Allocations are implemented, Products that are

purchased (“Purchased Sugar”) by a Member from a third party or from another

Member shall be included in the Pro Rata Share 

(subject to adjustment pursuant to Section 7.2) and, included in the

Primary Pool; provided however, that the quantity of Purchased Sugar shall not

exceed the allocation of the purchasing Member.




















                20.           Force Majeure.




 




                20.1         Notification and Efforts to Minimize.  Neither party shall be liable to the other

for failure to perform any part of this Agreement if such failure results from

the occurrence of an event of Force Majeure, provided that the party affected

by the event (i) notifies the other party of such event promptly upon learning

of the occurrence of the event, such Notice (as hereinafter defined) to include

the anticipated effect of such event on the performance of such party under

this Agreement and (ii) uses its best efforts to minimize delays and/or non–performance

caused by such event.




 




                20.2         Release from Liability.  Each party shall be completely released from all liability to the

other arising as a consequence of any excused performance caused by an event of

Force 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 to

this Agreement that cannot be resolved amicably between the parties shall be

finally resolved by arbitration in Chicago, Illinois, or such other location as

may be mutually agreed upon, in accordance with the Commercial Arbitration

Rules of the American Arbitration Association (“AAA”); provided however, that

the plaintiff in any claim for damages exceeding $10,000,000 may seek judicial

resolution in any court of competent jurisdiction and shall not be subject to

this Section.  Any arbitration shall be

held before a panel of three (3) arbitrators mutually agreed to between the

parties, one of whom shall be familiar with the sugar industry.  If the parties are unable to agree upon the

selection and appointment of arbitrators within thirty (30) days of a written

demand for arbitration, then arbitrators shall be appointed by the AAA pursuant

to its Commercial Arbitration Rules.




 




                21.2         Discovery.  In

connection with any such arbitration, the parties further agree to participate

in the exchange of information and documentation through discovery pursuant to

the rules established by the arbitrators.




 




                21.3         Authority of Arbitrators.  The arbitrators shall have full authority to render any form of

legal or equitable relief to address the parties’ dispute, including an award

of monetary damages and/or injunctive relief; provided, however, that in no

event shall the arbitrators have the power to include any element of punitive

or exemplary damages in the arbitration award. 

Judgment upon any award for any legal or equitable relief so rendered by

the arbitrators shall be considered final and binding and may be entered in any

state or federal court of competent jurisdiction.




 




                22.           Complete Agreement.  The parties agree that this Agreement

constitutes the complete agreement of the parties with respect to the subject

matter hereto and there are no oral or other conditions, promises, representations

or inducements in addition to oral variance with any of the terms hereof, and

that this contract represents the voluntary and clear understanding of both

parties fully and completely.




















                23.           Assignment.  Neither PROCESSOR nor UNITED may assign this Agreement without

prior written consent of the other party and the other Members who have entered

into identical pool marketing agreements with UNITED.




 




                24.           Waiver of Breach.  No waiver of a breach of any of the

agreements or provisions contained in this Agreement shall be construed to be a

waiver of any subsequent breach of the same or of any other provision of this

Agreement.




 




                25.           Notices.  Whenever notice is required by the terms hereof, it shall be

given in writing by delivery or by certified or registered mail addressed to

the other party at the following address or such other address as a party shall

designate by appropriate notice:




 




If to UNITED:




 




                UNITED SUGARS CORPORATION




                7801

E. 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 given

by mail, it shall be effective two (2) days after mailing.




 




                26.           Construction of Terms of Agreement:  Modification.  The language in all parts of this Agreement

shall be constructed as a whole according to its fair meaning and not strictly

for or against any party hereto. 

Headings in this Agreement are for convenience only and are not

construed as a part of this Agreement or in any defining, limiting or

amplifying the provisions hereof.  This

Agreement contains the entire agreement between the parties with respect to the

subject matter hereof and shall not be modified in any manner except by an

instrument in writing executed by the parties hereto.  In the event any term, covenant, or condition herein contained is

held to be invalid or void by any court of competent jurisdiction, the

invalidity of any such term, covenant or condition shall in no way affect any

other term, covenant or condition herein contained.




















                27.           Successors and Assigns.  Subject to the other provisions of this

Agreement, all of the terms, covenants and conditions of this Agreement shall

inure to the benefit of and shall bind the parties hereto and their successors

and assigns.




 




                IN WITNESS WHEREOF, UNITED and

PROCESSOR have executed this Agreement effective the day and year first above

written.




 




	

  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 the

Quality Assurance function at UNITED is to provide guidance and direction to

operational groups in the development, implementation and maintenance of

Quality Systems.  Quality Systems are

those systems designed to assure products and services of the Member companies

meet the expectations of the targeted customer segments.




The Quality

Assurance group will accomplish this through development, implementation and

audit of systems and standards that will be developed and implemented that

define customer expectations as well as documenting the performance of the

Member companies against those standards.




 




STRATEGY:




 




The vehicle

through which the above will be accomplished will be a system of documented

policies and procedures defining the activities that will occur within each of

the operational groups providing product for sale.




 




The basis for

those policies and procedures will be a combination of FDA requirements as well

as standards communicated by UNITED’s primary customer segments.




 




Policies and

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




 




Product

Safety/Regulatory (FDA):




 




                                                        *      Good Manufacturing Practices (21 CFR Part

110 of the Food Drug and Cosmetic Act).




 




                                                        *      HACCP (Hazards Analysis and Critical

Control Points)




 




                                                                (The

two systems noted above are made up of a number of audit and process management

activities designed to assure the safety of the product that is produced,

stored and distributed by internal facilities as well as outside agents of the

company [i.e. copack facilities, facilities that produce and ship product under

agreement with UNITED and Outside Distribution Facilities/Public Warehouses]).




 




Product

Quality/Functionality




 




                                                        *      Product Standards for each product sold

and distributed through UNITED will be defined.  Standards (for product as shipped) will typically be defined by

any or all of the following:











 




                                                                                *Flavor/Odor




                                                                                *Color




                                                                                *Moisture




                                                                                *Ash




                                                                                *Sediment




                                                                                *Visible

Specks




                                                                                *Floc




                                                                                *Invert




                                                                                *Specific

Rotation




                                                                                *Granulation




                                                                                *Density




                                                                                *Flowability




                                                                                *Pesticides/heavy

metals




                                                                                *Specific

trace element analysis




                                                                                                As

defined by the customer segment (i.e.




                                                                                                bottling

and National Formulary)




                                                                                *Microbiology

standards




 




                                                        *      Process Control Systems/Documentation




 




                                                                Process

Control Systems are those control systems by which each producing facility

manages their process to produce product which meet the approved product

standards as shipped.




 




                                                                Each

Member facility will document, through a Standard Operating Procedures format,

the methods utilized to assure processes are operated in a consistent

controllable manner.




 




 











Schedule C




{Section 16.1}




 




Parameters for Including Tanks as an

Expense of the Primary Pool




UNITED SUGARS




 




The PROCESSOR’s

shall be reimbursed out of the Primary Pool for its storage costs of thick

juice from beets or raw cane refinery feedstock only if, in the judgment of

UNITED, there is a benefit to the Primary Pool.  The assets costs associated with the storage of thick juice in

tanks and the storage of raw sugar  will

be an expense of the Primary Pool when the use/increased use of these assets at

UNITED's request will lower the overall costs to the Primary Pool.  Generally, this would happen anytime UNITED

forces increased use of the these tanks or raw storage over and above what is

already incorporated into the member's annual plant production schedule for

that campaign.




 




In the event

UNITED requests the use/increased use of assets for the storage of thick juice

in tanks or the storage of raw sugar, the Primary Pool shall pay the

PROCESSOR’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 be

reimbursed for 1/12th of its annual asset cost for the utilized storage.




 




                                The storage

requested by UNITED and the subsequent withdrawal from storage shall be on a

first-in, first-out basis with respect to PROCESSOR’s total storage.




 




                                The storage rate

charged by PROCESSOR for the use of tanks or raw storage shall be calculated

based upon the percentage of storage utilized by UNITED multiplied by

PROCESSOR’s average cost of all tanks or raw storage that are routinely

utilized by PROCESSOR for storage of thick juice or raw cane refinery

feedstock.




 




                                PROCESSOR shall

be reimbursed for incremental refining costs that directly result from

reimbursable storage covered by this Schedule C.