Document:

MINN-DAK EXHIBIT 10(a) TO FORM 10-K

Exhibit 10(a)

(REVISED 2006)

GROWERS AGREEMENT

 

(Applicable to all Farmer-Grower-Stockholders

of  Minn-Dak Farmers Cooperative)

 

This agreement is entered into
between __________________________________________, a Farmer-Grower-Stockholder of Minn-Dak
Farmers Cooperative, Wahpeton, North Dakota, whose mailing address is
___________________________________________________, hereinafter referred to as the
“Grower”; and MINN-DAK FARMERS COOPERATIVE of 7525 Red River Road,
Wahpeton, North Dakota, hereinafter referred to as the “Cooperative”.

 

This Growers Agreement provides as follows:

 

1.            The
Grower agrees to prepare the land, plant, care for, harvest and deliver the product of
_______ Units of stock times the maximum acres per share authorized by the Board of
Directors each year for the farming year commencing on ______________ and continuing for a
period of one (1) year. (Each Unit consists of one share of the Company’s Class A
Preferred Stock, par value $105 per share, one share of the Company’s Class B
Preferred Stock, par value $75 per share and one share of the Company’s Class C
Preferred Stock, par value $76 per share). At the end of each “farming year” the
term of this agreement shall automatically be renewed for an additional period of one (1)
year so that at the commencement of each year of farming, there shall be a term of one (1)
year remaining, unless notice of termination shall have been given by the Cooperative to
the Grower prior to the beginning of any farming year with the termination effective as of
the end of that year. For purposes of this agreement, a “farming year”
shall commence on January 1 and run through December 31 of each year. 

 

	
             
 	
            (a)
 	
            The Grower agrees that in the planting of said sugarbeets the Grower will follow a crop rotation plan which will be established by the Cooperative from time to time. (See Addendum A for current crop rotation policy)
 

 

	
             
 	
            (b)
 	
            The Grower agrees that annually the Grower will furnish and enter into an annual requirement agreement with the Cooperative setting forth the description of the land on which said sugarbeets will be grown and including such other information as may be required by the Cooperative. Each current annual requirement shall become a part of this agreement and be binding upon the parties hereto. The Grower shall report all changes to the Annual Requirement to the Agricultural Staff by August 1 of each year.
 

 

	
             
 	
            (c)
 	
            The Grower agrees that the designations of acreage location shall be subject to approval of the Cooperative.
 

 

	
             
 	
            (d)
 	
            The Grower agrees to notify and receive written approval from two members of the Agricultural Staff and the Vice President of Agriculture before acreage is destroyed.
 

 

	
             
 	
            (e)
 	
            The Grower shall not plant sugarbeets on any land on which canola has been planted during any of the previous six years.
 

 

Any Grower who violates 1(d) will be required to pay the Cooperative a sum equal to 100% of the Cooperative’s direct overhead costs per acre on the maximum authorized acreage excluding the 2% measuring tolerance less .1 acres per share. [i.e. at a maximum authorized acreage of 1.60 plus 2% measuring tolerance, the direct overhead costs would be assessed using 1.60 less .1 acres = 1.50 acres/share]   (See Addendum A for calculation of direct overhead costs per acre) 

 

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Any Grower who violates 1 (a), (b), (c) or (e), and such violation is discovered prior to harvest, will not be issued harvest cards until the acreage in violation has been destroyed. If the violation is not discovered until after the acreage has been harvested, the Grower shall forfeit the crop raised on the acres determined to have been in violation. The forfeiture of the crop shall be implemented by reducing the Grower’s total pounds of sugar by the pounds of sugar produced on the number of acres determined by the Board of Directors to be in violation, using the total farm average/acre. This will adjust downward all future payments for this crop made to the Grower including the trucking payment. Any amount already paid for these pounds of sugar to the Grower shall be deducted from the next beet payment to be made. In addition, the Grower shall be required to sign a release
authorizing the FSA Office to provide to Minn-Dak all certification of acres records for a three-year period following the year of the violation. These records will be used by the Agriculturist for comparison with Minn-Dak records. If any discrepancy is found it will be brought to the attention of the Board of Directors.       

 

2.         The Grower agrees to furnish the Cooperative with such information as it may request from time to time regarding the crop or crops covered by this agreement. Representatives of the Cooperative shall also have the right to enter the Grower’s beet fields from time to time during the growing and harvesting seasons to inspect the crops thereon and to take samples for testing in ascertaining the quality of the beets.

 

3.         The Grower will harvest and deliver to the Cooperative all beets grown under this contract, said delivery to be made at such times and in such quantities and to such place or places as may be designated by the Cooperative. All beets delivered hereunder shall be properly topped as designated by the Cooperative’s Agricultural Department. All beets shall be subject to a proper deduction for tare. This shall be deducted from the gross weight of beets delivered hereunder, before net tons are determined, the Grower’s tare weight, as determined by the Cooperative’s method of sampling loads for tare and through the use of the Cooperative’s laboratory which measures each Grower’s beet sample for dirt, stones, trash, and other foreign substances. Each Grower’s daily average tare percentage, as determined by all
load samples of the Grower for that delivery day or delivery day by field, if field method is used by Grower, is used to determine the tare weight of all beets delivered by the Grower for that delivery day. The Cooperative has the option of rejecting any diseased, frozen, muddy, or damaged beets; beets with excessive weeds or which were improperly topped; beets which, in the Cooperative’s opinion, are not suitable for the manufacture of sugar; beets as to which in the Cooperative’s opinion, the terms and conditions of this contract have not been properly complied with or for any other bona fide reason.

 

4.         Any Grower who fails to plant by June 20 the maximum authorized acreage excluding the 2% measuring tolerance less .1 acres per share [i.e. at a maximum authorized acreage of 1.60 plus 2% measuring tolerance, the direct overhead costs would be assessed using 1.60 less .1 acres = 1.50 acres/share] of Cooperative stock owned by the Grower in any one year, may be subject to a minimum penalty in a sum equal to 100% of the Cooperative’s direct overhead costs per acre and a maximum penalty of $1,000 per acre found to be in violation following a hearing and a determination of such by the Board of Directors. (See Addendum A for calculation of direct overhead costs per acre) 

 

5.         Any Cooperative member Grower who does not replant acreage through June 20 which his Agriculturist determines necessary, may be required to pay the Cooperative a sum equal to 100% of the Cooperative’s direct overhead costs per acre in violation following a hearing and a determination of such by the Board of Directors. (See Addendum A for calculation of direct overhead costs per acre) 

 

Such penalty will be assessed on the maximum authorized acreage excluding the 2% measuring tolerance less .1 acres per share of stock owned, which such Grower fails to replant through June 20.

 

6.         The Cooperative may assess a penalty against any Grower who it determines, after a review by the Board of Directors and the Agricultural Staff, has not properly cared for the crop. The penalty shall be a sum up to 100% of the Cooperative’s direct overhead costs per acre. (See Addendum A for calculation of direct overhead costs per acre)

 

7.         Any Grower having acres unreported to the Cooperative over and above the Grower’s contracted acres plus the overplant permitted in that year after the August 1st deadline for destroying acres, will be penalized for such excess of unreported acres in the following manner. First, there shall be a hearing before the Board of Directors and a finding as the number of acres in violation. Second, the following overplant penalties shall be assessed.

 

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First Violation.

 

	
             
 	
            A.
 	
            If the unreported acres are discovered prior to harvest, the sugarbeets shall be destroyed and the Grower shall be assessed a penalty of $200 per acre found in violation.
 

 

	
             
 	
            B.
 	
            If the unreported acres are discovered after harvest, the Grower shall forfeit the crop raised on the acres determined to have been unreported. The forfeiture of the crop shall be implemented by reducing the Grower’s total pounds of sugar by the pounds of sugar produced on the number of acres determined by the Board of Directors to be unreported, using the total farm average/acre. This will adjust downward all future payments for this crop made to the Grower including the trucking payment. Any amount already paid for these pounds of sugar to the Grower shall be deducted from the next beet payment to be made.
 

 

	
             
 	
            C.
 	
            In addition to number A or B above, the Grower shall be required to sign a release authorizing the FSA Office to provide to Minn-Dak all certification of acres records for a three-year period following the year of the violation. These records will be used by the agriculturist for comparison with Minn-Dak records. If any discrepancy is found it will be brought to the attention of the Board of Directors.
 

 

Second Violation.

 

In addition to the penalties stated under First Violation, the Grower shall be subject to a maximum penalty of $1000 per acre found to be in violation following a hearing by the Board of Directors.

 

8.         It is understood and agreed that if any Governmental authority shall establish any restrictions, allotment or quota upon the growing, production or processing of beets, or the output, transportation or sale of beet sugar, then the Cooperative may reduce to the extent which it deems necessary the acreage of beets herein contracted for, and shall be obligated to purchase beets only from such reduced acreage.

 

________ Initial

9.         Grower agrees not to intentionally apply to the crop or land on which the crop is grown any pesticide chemical, or other substance, as defined in all applicable Federal and State laws, unless a regulation shall then be in effect, exempting such chemical from the necessity of a tolerance or establishing a tolerance for such chemical, in which event such chemical shall be applied to the crop or land only at such time and in such manner and quantities as shall be specified in the labeling of such chemical and so that any residue of such chemical on beets delivered hereunder shall be within the tolerance specified in such regulation. The Cooperative reserves the right to reject the delivery of any beets not complying with this provision. In addition, any Grower found to be in noncompliance with this provision, after a hearing before the
Board of Directors, at the discretion of the Board of Directors, the Grower may be: 

 

	
             
 	
            (a)
 	
            assessed all direct overhead costs (as defined in Addendum A – B)  incurred by the Cooperative in each incident. As the result of the rejection of noncompliant beets;
 

 

	
             
 	
            (b)
 	
            assessed all direct costs (as defined in Addendum A - C) incurred by the Cooperative in each incident as the result of the rejection of noncompliant beets;
 

 

	
             
 	
            (c)
 	
            held liable for consequential damages including but not limited to the value of a lost pile of sugarbeets in the event that any contaminated sugarbeets are deposited into a pile and the pile must then be destroyed.
 

 

In addition, pursuant to Article XVI of the Bylaws of Minn-Dak Farmers Cooperative, if the Board of Directors finds intentional or repeated violations or breach of contract, the Board of Directors shall in its discretion recall all common stock owned by such member, and the Cooperative shall refund to him the par value or the book value of the stock whichever is less. In the event the common stock is recalled, the cooperative shall have the right, at its option, (a) to purchase the preferred shares at its book or par value, whichever is less, as determined by the Board of Directors; or (b) to require the transfer of any such stock at such book or par value, to any person eligible to hold it.

 

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10.       The Grower agrees that, in connection with the growing and delivery of beets under this contract, he will comply with all applicable laws, including but not limited to child and migrant labor laws, and all regulations or rulings relating thereto issued by any duly authorized governmental authority.

 

________ Initial

11.       Sugarbeet seed varieties to be planted by Growers must be approved by the Cooperative’s Sugarbeet Seed Committee. All sugarbeet seed to be planted by the Grower must be purchased by the Grower from the Cooperative with the exception of sugarbeet seed used in field test plots; however, all such test plot sugarbeet seed must be approved by the Cooperative’s Agricultural Staff. No sugarbeets raised from Biotech sugarbeet seed shall be delivered to the Cooperative until authorized by the Board of Directors. The Cooperative agrees to use its best efforts to obtain its sugarbeet seed inventory at the best possible prices and terms and to resell such sugarbeet seed to the Grower at no profit to the Cooperative. The Cooperative makes no warranty of merchantability, fitness for a particular purpose, productiveness or any other warranty as to
any sugarbeet seed furnished by the Cooperative, except that sugarbeet seed furnished by the Cooperative is warranted, to the extent of the purchase price only, to be as described on the sugarbeet seed container within recognized tolerances. It is also expressly agreed that the Cooperative does not guarantee a crop. The Cooperative reserves the right to reject the delivery of any beets not complying with this provision and assess back to the Grower direct costs incurred by the Cooperative in each incident. (See Addendum A for calculation of direct costs.)

 

In addition to the penalties stated above, in the event of a second violation, the Grower shall be subject to a maximum penalty of $1,000 per acre found to be in violation following a hearing by the Board of Directors.

 

Further, any Grower who knowingly jeopardizes the processibility or marketability of the crop or a portion of the crop through actions, including but not limited to, use of nonlabeled chemicals or planting of unapproved sugarbeet seed varieties, may be held liable for damages incurred by the Cooperative including consequential damages.

 

12.       The amount charged for all sugarbeet seed furnished by the Cooperative to the Grower hereunder, and all charges, penalties, costs and/or advances made to the Grower by the Cooperative shall constitute a debt from the Grower to the Cooperative which the Cooperative shall have the right to collect as in the case of any other contractual obligation. The Cooperative shall have the right, at its option, to treat any such amounts, advances or indebtedness as part payment for beets grown and delivered under this contract. Any such amounts, advances, or indebtedness which are due and payable or which hereafter may become due and payable from the Grower to the Cooperative shall be, become, and remain a first and prior lien on any payments from the Cooperative to the Grower which shall become due hereunder,
or under any prior or subsequent beet contract between the Cooperative and the Grower.

 

13.       The Cooperative will furnish all loading equipment at the loading stations, pay all freight charges from outside piling stations, and pay mileage on beets assigned to and delivered to all receiving stations in accordance with policies determined and amended by the Cooperative from time to time. (See Addendum A for current Receiving Station Regulation) Upon delivery to and acceptance by the Cooperative of the sugarbeets as provided for herein, title thereto shall be deemed to vest, and shall be vested, in the Cooperative.

 

Any Grower using an unauthorized truck(s) for the delivery of sugarbeets to a Cooperative piler will be subject to the following penalty:

 

First Violation:

 

	
             
 	
            A.
 	
            Upon determination by the Agriculturist and Vice President of Agriculture that a violation has occurred, the violator shall lose all unallocated trucks and one allocated truck, as determined by the Cooperative, for the remainder of the harvest.
 

 

	
             
 	
            B.
 	
            Notification of violation will be sent to all members of the hauling group including Shareholders and Growers. This notification will include the following language: “All members of a hauling group are responsible for the actions of another member of that hauling group in regard to the use of unauthorized trucks.
 

 

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            C.
 	
            For three subsequent harvests:
 

	
             
 	
            -
 	
            Special stickers will be issued to the hauling group in violation
 

	
             
 	
            -
 	
            The special stickers will not be issued until just before main harvest and may be replaced periodically during the harvest
 

	
             
 	
            -
 	
            The hauling group shall be subject to audit which may include, but is not limited to, spot checks of all stickers and trucks during harvest, and requiring the hauling group members to provide, and document to Minn-Dak, all license numbers of all trucks used by the hauling group.
 

 

Second Violation:

 

	
             
 	
            A.
 	
            All penalties listed above for 1st violation.
 

 

	
             
 	
            B.
 	
            After a hearing before the Board of Directors, a $2,500/unallocated truck penalty will be assessed against the hauling group.
 

 

First time violations by a hauling group shall always remain on the records of the cooperative making them subject to the penalties for a 2nd violation should further violations occur. 

 

14.          The Grower specifically acknowledges and agrees that the Grower may be required by the Cooperative to take back sugarbeets, dirt or other substances, if determined by the Board of Directors that hauling out is necessary and legally feasible.

 

15.          Each year of this agreement, the Cooperative will pay to the Grower for beets delivered and accepted at the time and in the manner hereinafter provided, a price per pound of extractable sugar, determined to be as follows:

 

	
             
 	
            (a)
 	
            Extractable pounds of sugar will be determined by the Cooperative in its laboratory from beet samples statistically taken from each Grower at its receiving stations. The beet samples will be tested for sugar content and purity, and said results used in a formula to determine extractable pounds of sugar delivered. (See Addendum A for calculation of extractable pounds of sugar.)
 

 

	
             
 	
            (b)
 	
            In addition, the Board of Directors, in its sole discretion, shall make a determination each year if an early harvest bonus shall be paid. If it is determined that an early harvest bonus will be paid, each Grower will be reviewed for eligibility for early harvest bonus extractable pounds of sugar. The bonus extractable pounds of sugar will be determined by a formula that takes into account the delivery date in early harvest, as well as the extractable pounds of sugar delivered on that same date. (See Addendum A for the current Bonus Sugar Formula and Early Harvest Delivery Policy.)
 

 

	
             
 	
            (c)
 	
            Payment to the Grower will be an amount equal to the individual Grower’s total delivered extractable pounds of sugar (as determined in 15a.) plus the calculated pounds of early harvest bonus sugar (as determined in 15b.), multiplied by the price to be paid per pound of extractable sugar to all Growers.
 

 

	
             
 	
            (d)
 	
            The price per pound of extractable sugar to all Growers will be determined by dividing the total Grower proceeds by the total pounds of extractable and bonus sugar delivered from all Growers. Grower’s proceeds are defined as the amount after deducting from gross sales, all costs, charges, expenses, and margins (including reserves but excluding payments to Growers) as are regularly and customarily deducted from gross sales in accordance with the Cooperative’s system of accounting heretofore established.
 

 

	
             
 	
            (e)
 	
            If in the opinion of the Board of Directors of the Cooperative, the working capital position of the Cooperative is at any time insufficient, the Cooperative may and shall retain from the price to be paid for beets such amount(s) as are deemed necessary by the Board of Directors, the deduction(s) to be made at such time(s) as the Board of Directors shall require; and such amounts(s) as may be retained shall be evidenced in the records of the Cooperative by equity credits in favor of the Shareholders.
 

 

5

	
             
 	
            16.
 	
            Settlements shall be made as follows:
 

 

For all beets delivered from the beginning of harvest up to and including October 31st, initial payments shall be made on or about November 15th of the year in which beets are delivered to the Cooperative; for all beets delivered after October 31st, initial payment shall be made no later than the 15th day of each month for beets delivered during the previous calendar month. Further, each Grower agrees to the following:

 

	
             
 	
            (a)
 	
            The first payment shall not exceed 65% of the estimated price to be paid per pound of extractable sugar to all Growers;
 

 

	
             
 	
            (b)
 	
            The second payment shall be paid on the first Friday in February, and shall bring the total of the first and second payments to an amount not to exceed 70% of the estimated price to be paid per pound of extractable sugar to all Growers;
 

 

	
             
 	
            (c)
 	
            The third payment shall be paid on the first Friday in April, and shall bring the total of the first, second and third payments to an amount not to exceed 80% of the estimated price to be paid per pound of extractable sugar to all Growers;
 

 

	
             
 	
            (d)
 	
            The fourth payment shall be paid on the first Friday in July, and shall bring the total of the first, second, third and fourth payments to an amount not to exceed 95% of the estimated price to be paid per pound of extractable sugar to all Growers;
 

 

	
             
 	
            (e)
 	
            The final payment shall be determined as of the end of the Cooperative’s fiscal year, after the Board of Directors has reviewed the final audited financial statements of the Cooperative; and shall bring the total of the payments to an amount equal to the price to be paid per pound of extractable sugar to all Growers.
 

 

17.          The Grower is an independent contractor. Agricultural or other advice may be offered the Grower by the Cooperative’s representatives, but the Grower’s status as an independent contractor shall not be thereby affected. In no event shall the Cooperative be responsible for any failures or partial failures of the crop or damage to the beets or actions of the Grower.

 

18.          In case of the bankruptcy of the Cooperative, the destruction of an integral part of the factory and the Cooperative’s failure or inability to rebuild or repair the same, or in the event of fire, strikes, accidents, acts of God and the public enemy, or other causes beyond the control of the parties which prevent the Grower from the performance of this contract or the Cooperative from utilizing the beets contracted for in the manufacture of sugar therefrom, shall excuse the respective parties hereto from the performance of this contract. Furthermore the Cooperative shall not be subject to any damage for failing to receive the sugarbeets of the Grower, the Grower hereby waiving and abandoning any rights or claims which the Grower may have for such damages, if any. However, in the event a Lendor shall through foreclosure or otherwise acquire
in whole or in part the assets of the Cooperative, the Growers shall remain obligated hereunder as though the contract were originally entered into between the Growers and the Lendor.

 

19.          The Grower acknowledges and agrees that the Grower may be liable to the Cooperative for damages in the event the Grower’s actions result in a loss to the Cooperative. Any Grower who knowingly jeopardizes the processibility or marketability of the crop or a portion of the crop through actions, including but not limited to, use of nonlabeled chemicals or planting of unapproved sugarbeet seed varieties, may be held liable for damages incurred by the Cooperative including consequential damages.

 

20.          It is mutually agreed that there are no other or different documents, representations, promises or agreements affecting this agreement, and that this agreement, the annual requirement, the Articles of Incorporation and By-Laws of the Cooperative, constitute the full, free and complete understanding of the parties.

 

21.          No agent of the Cooperative has any authority to change, waive, or modify any of the terms or provisions of this contract.

 

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22.          This agreement may be amended effective at the beginning of any calendar year by the Cooperative giving notice to the Grower of the amendment by November 1 of the prior year and providing a new agreement to the Grower/Shareholder for signature prior to the planting of the crop.

 

23.          This agreement shall be binding upon the Grower, the Grower’s heirs, legal representative, successors, and assigns, and upon the Cooperative, its successors and assigns, and shall not be transferable by the Grower without the written consent of the Cooperative, its successors and assigns; and shall apply equally to owned, rented or leased acres.

 

24.          By signing this Growers Agreement, the parties specifically agree that all prior Growers Agreements between the Grower and the Cooperative are hereby canceled effective on the first day of the year following the date this agreement is signed by both parties.

 

 

 

 

 

IN WITNESS WHERE OF, the Grower has hereunto executed this Growers Agreement on this _____ day of _______________, 20 _____.

 

	
             
 	
             
 	
             
 	
             
 
	
              
 	
             
 	
             
 	
              
 
	
            Farmer-Grower-Stockholder
 	
             
 	
             
 	
            Farmer-Grower-Stockholder
 

 

 

 

ACCEPTANCE BY COOPERATIVE

 

This Growers Agreement is hereby accepted by the Board of Directors of Minn-Dak Farmers Cooperative on this _____ day of ___________________, 20 _____.

 

 

	
             
 	
             
 	
            MINN-DAK FARMERS COOPERATIVE
 
	 
	 
	
              
 	
             
 	
            By 
 	
              
 
	
             
 	
             
 	
             
 	
             
 

 

 

 

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ADDENDUM A

2006

 

	
            A.
 	
            (G.A.-1a,) CROP ROTATION POLICY: The Board of Directors adopted a policy for a three-year rotation for all sugarbeets, including irrigated acres, unless authorized by the Board of Directors in an emergency situation only.
 

 

	
            B.
 	
            (G.A.-5,6) DIRECT OVERHEAD COST CALCULATION: Direct Overhead Cost Calculation is defined as a penalty equal to 100% of the Cooperative’s prior fiscal year’s actual fixed costs per acre for the number of acres involved. Overhead costs vary from year to year depending on the crop size. Total actual fixed costs for the prior fiscal year divided by the maximum authorized acreage per share of stock owned excluding the 2% measuring tolerance would equal the fixed cost per acre. The cost per acre times the number of acres involved equals the amount of the penalty. An example for 25 affected acres would be:
 

 

$20,553,380 FY2005 fixed costs/98,819 2005 crop (the maximum authorized acreage per share of stock owned excluding the 2% measuring tolerance) =  $207.99 fixed cost per acre

$207.99 fixed cost per acre X 25 acres = $5,199.75 penalty

 

	
            C.
 	
            (G.A.-9,11) DIRECT COSTS DEFINITION: Direct costs are defined as all direct and indirect costs incurred by the Cooperative to mitigate said violation of the Growers Agreement. These would include but not be limited to the following: director(s) fees, analysis and testing costs, travel expenses and attorney(s) fees.
 

 

	
            D.
 	
            (G.A.-13)
 	
            RECEIVING STATION REGULATIONS
 

	
             
 	
            (year)
 

 

	
             
 	
            1.
 	
            Grower shall pick up cards, stickers, letters and truck numbers at preharvest meetings.
 

 

	
             
 	
            2.
 	
            Designated sticker certification will be required on all trucks to be unloaded at factory.
 

 

	
             
 	
            3.
 	
            Growers with 24-hour trucks shall haul the full 24 hours.
 

 

	
             
 	
            4.
 	
            In case of breakdowns, the Agriculturist must be contacted prior to any substitute truck being authorized.
 

 

	
             
 	
            5.
 	
            In the absence of the Agriculturist, the piler operator has the authority to enforce Minn-Dak Policy regarding harvest deliveries.
 

 

	
             
 	
            6.
 	
            The Grower is ultimately responsible for a driver’s conduct at the receiving station. Drivers suspected of operating trucks under the influence of drugs/alcohol will not be allowed to unload their trucks and will be reported to law enforcement officials. Growers will be notified if any of their drivers are driving unsafely at the receiving station. Any driver considered unfit to drive or who refuses to conform to receiving station rules will be dismissed by the Agriculturist. Any criminal conduct will be reported to law enforcement officials.
 

 

	
             
 	
            7.
 	
            Growers whose drivers block the scale intentionally, or act in any manner which causes delay in delivery of sugarbeets at the receiving station in any way, will not be allowed to deliver any beets for a minimum of 24 hours as determined by the Agriculturist.
 

 

	
             
 	
            8.
 	
            Drivers shall not drive over beets at the toe of the pile, miss their tare dirt or drive over an unprotected portion of the power cord.
 

 

	
            E.
 	
            (G.A.-15a) EXTRACTABLE SUGAR FORMULA: The formula for arriving at total pounds of extractable sugar delivered per Grower is as follows:
 

 

	
             
 	
            1.
 	
            Each day’s delivery of beets by each Grower is sampled for RDS (which is converted to purity), sugar content and net weight of beets.
 

 

8

	
             
 	
            2.
 	
            The samples are averaged for purity and sugar content, and those averages are plugged into a formula to determine pounds of extractable sugar per ton of beets delivered.
 

 

	
             
 	
            The formula is:
 

 [40.4(S)] - [2040(S)] - 12 = Pounds of Sugar Per Ton

Q

 

	
             
 	
            Where:
 	
            S = % sugar content
 

	
             
 	
            Q = Purity
 

 

	
             
 	
            3.
 	
            After determining the pounds of extractable sugar per ton for the Grower for that day’s delivery of beets, that resultant number is multiplied by the total net tons of beets delivered for that day, resulting in the total pounds of extractable sugar delivered for that day for each Grower. Each day’s deliveries are calculated and accumulated until the total pounds of extractable sugar delivered for the entire harvest, by Grower, has been determined.
 

 

	
            F.
 	
            (G.A.-15b) EARLY HARVEST DELIVERY POLICY (including Bonus Sugar Formula):
 

 

	
             
 	
            1.
 	
            The plan is based upon a premium payment for beet deliveries starting the first day of early harvest and continuing to the first day of stockpiling.
 

 

	
             
 	
            2.
 	
            Premium payment is on a daily declining percentage rate of 2%. The initial premium will be determined by the interval from the first day of early harvest, up to, but not including the first day of main harvest.
 

 

	
             
 	
            Example:
 	
            Early-harvest starts September
 	
            10
 

	
             
 	
            Main harvest starts October
 	
              5
 

	
             
 	
            25 day interval
 

 

All deliveries on September 10 will receive a 50% adjustment, on September 11, a 48% adjustment, and continue the adjustment decline at 2% per day until deliveries on October 4 would receive only a 2% adjustment.

 

	
             
 	
            3.
 	
            The actual pounds of extractable sugar delivered on any delivery day will be multiplied by the premium adjustment for that day. This “Bonus Sugar” will be added to the Grower final total extractable sugar delivery and paid for at the final average rate per pound for the crop.
 

 

	
             
 	
            4.
 	
            Growers will receive and be expected to deliver the assigned pre-harvest tonnage quotas on the specific scheduled receiving station operating days. The Agriculture Department must approve and be informed of any quota adjustments between Growers. All quotas are net tons.
 

 

	
             
 	
            5.
 	
            Unless specifically requested by the Agriculture Department, no premium payment will be paid on deliveries in excess of assigned quotas.
 

 

	
             
 	
            6.
 	
            Premium payment example:
 

 

September 10 = 50% premium adjustment

Grower delivers 100 tons with 20,000 pounds of extractable sugar

20,000 X 50% -  10,000 pounds of Bonus Sugar

 

September 20 = 30% premium adjustment

Grower delivers 100 tons with 20,000 pounds of extractable sugar

20,000 X 30% - 6,000 pounds Bonus Sugar

 

September 30 = 10% premium adjustment

Grower delivers 100 tons with 20,000 pounds of extractable sugar

20,000 X 10% - 2,000 pounds Bonus Sugar

 

 

9MINN-DAK EXHIBIT 10(b) TO FORM 10-K

Exhibit 10(b)

 

AMENDED AND RESTATED

UNIFORM MEMBER SUGAR MARKETING AGREEMENT

POOL BASIS

 

THIS AGREEMENT is made effective as of September 20, 2007 by and between UNITED SUGARS CORPORATION, a cooperative association organized under the laws of the State of Minnesota (“UNITED”), and MINN-DAK FARMERS COOPERATIVE, a cooperative association organized under the laws of the State of North Dakota (“MDFC”).

WITNESSETH

WHEREAS, MDFC is an association of agricultural producers or an agricultural producer organized and operated so as to adhere to the provisions of Section 15(a) of the Agricultural Marketing Act (12 U.S.C. § 1141j (a)), as amended, and the Capper-Volstead Act of 1922 (7 U.S.C. §§ 291, 292), and 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. § 1141j (a)), as amended, and the Capper-Volstead Act of 1922 (7 U.S.C. §§ 291,292), for the mutual help and benefit of its members (currently United States Sugar Corporation (“USSC”), American Crystal Sugar Company (“ACSC”), and MDFC, and all future members, each a “MEMBER” or collectively, “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, MDFC is a MEMBER of UNITED and wishes to participate with other MEMBERS in developing and maintaining a dependable market for certain products it produces; and

 

WHEREAS, UNITED and MDFC 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 MDFC and UNITED herein, UNITED and MDFC agree as follows:

 

Definitions.

 

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

 

“Allocation” means the amount of sugar a MEMBER is authorized to market as established by the United States Department of Agriculture under the Allotment Statute (defined below).

 

“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 the Agricultural Adjustment Act of 1938 (7 U.S.C. § 359aa et seq. (2007)), and amendments thereto, or subsequent statutes providing for sugar 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 sugar beets into refined sugar.

 

“Buyer” is a third party purchaser of Finished Product from UNITED.

 

“Commingle” means (i) Finished Product of a MEMBER that is stored by UNITED in a warehouse or stationary storage facility that is owned or leased by UNITED; or (ii) Product which has been further processed by UNITED.

 

“Cane Processing Season” means the period of time generally from mid-October through April during which time a Cane Producer processes sugarcane into feedstock for a refinery.

 

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“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.

 

“Excess Product” means that amount of Product exceeding a Beet Producer’s Allocation.

 

“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, presently ACSC, USSC, and MDFC.

 

“Net Selling Price” means the gross proceeds realized by UNITED from sales of Products produced by MEMBERS in the Primary Pool, less expenses directly attributable to the Primary Pool, including all Operating 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 a MEMBER, or purchased by a MEMBER or by UNITED on behalf of a MEMBER, during the term of this Agreement, including, but not limited to, granulated, liquid, blends, specialty products, standard liquor, thick juice, extract and other forms of ungranulated sugar.

 

“Pro Rata Share” shall be equal to a fraction, with each MEMBER’S annual production of Product (on a sugar equivalent basis) included in the Primary Pool as the numerator and total annual pool production of Product (on a sugar equivalent basis) for all MEMBERS included in the Primary Pool as the denominator.

 

“Purchased Sugar” means Product that is purchased by a MEMBER from a third party or from another MEMBER.

 

“Separate Pool” means Excess Product or other Product of a MEMBER that is not eligible for the Primary Pool that is separately handled by UNITED for each Fiscal Year as agreed to in Section 6.1.

 

“Sidney Storage Facility” means the approximately 1,910,000 CWT capacity sugar storage facilities that are owned or accessible by Sidney Sugars Incorporated, a wholly owned subsidiary of ACSC (“SSI”), in Sidney, Montana.

 

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

 

“Transgenic” or “Transgenic Variety” means a variety of sugar beet or sugarcane that contains a gene or genes that has or have been artificially inserted instead of the plant acquiring the gene or genes through pollination or standard sugarcane reproduction.

 

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Appointment of UNITED as Sales Agent.

 

UNITED Appointed Sales Agent. MDFC appoints and designates UNITED to act as its sole worldwide agent in the sale and marketing of MDFC Products. UNITED accepts such appointment and agrees to act as the sales agent and pool administrator in accordance with the terms of this Agreement, and subject to Section 19.2 hereof. MDFC 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 MDFC (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 MDFC and UNITED.

 

UNITED Authorized to Pass Title. UNITED agrees, and is hereby empowered by MDFC, to sell in its own name, and pass title on behalf of MDFC, all Product 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 MDFC.

 

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 MDFC other than Product or Products as herein defined.

 

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 the MEMBERS. MDFC and UNITED agree that UNITED shall act as an agent for MDFC 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 included in the Primary Pool. 

 

Packaging.

 

MDFC intends to have the capacity to sell Product in bulk as well as in packages. It is understood that production and packaging constraints may 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 MDFC’s production and packaging limitations.

 

Production and Delivery.

 

Timing of Production. It is anticipated that MDFC will produce Finished Products during its campaign on an approximately even monthly schedule. However, MDFC 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 MDFC’s production and storage capacities. At UNITED’s request, and for an agreed upon payment, MDFC may agree to maximize its production in any month in order to accommodate customer demand.

 

Product Production Schedules. MDFC 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 and each month thereafter of each such year, reflecting any changes from the June preliminary estimate. UNITED and MDFC shall jointly develop a production and delivery schedule plan for MDFC 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 MDFC and maximizing production efficiencies, with the objective of selling all of MDFC’s production of Product each year.

 

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 UNITED and MDFC 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.

 

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Billing and Collection.

 

All sales made by UNITED shall be billed on invoices of UNITED and all receipts shall be collected by UNITED.

 

Pooling of Product.

 

Agreement to Pool Product. UNITED and MDFC 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.

 

Adjustments for Beet Producers. The amount of Product to be included in the Primary Pool for a Beet Producer shall be the amount of Product produced by the Beet Producer during the applicable Crop Year, not to exceed the Beet Producer’s Allocation. Any Excess Product of a Beet Producer shall be marketed as provided in Section 19.2, below.

 

Adjustments for Cane Producers. In order to coordinate the Cane Processing Season with the Beet Processing Season, the amount of cane Product for a Cane Producer to be included in the Primary Pool for each Fiscal Year 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, with the difference multiplied by 1.141.

 

Price for Product.

 

Price. UNITED shall pay to MDFC its Pro Rata Share of the Net Selling Price for all Products sold by UNITED hereunder.

 

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 MDFC and each other Primary Pool participant on the basis of the estimated Pro Rata Share of the Finished Product, reduced by in-process inventories on hand at the beginning of the year (which are included in the prior year’s Primary Pool), to be produced by MDFC and each of the other participants in the Primary Pool during that Fiscal year. The formula set forth in Section 6.3 (Adjustments for Cane Producers) shall be utilized to adjust Cane Producer’s production during the Fiscal Year for the purpose of determining Cane Producer’s estimated Pro Rata Share, and the payment of gross cash receipts to Cane Producer shall be adjusted accordingly. Because gross cash
receipts are distributed daily, UNITED shall borrow from its line of credit in order to cover its monthly Operating Costs. Such monthly Operating Costs shall be promptly reimbursed to UNITED by each MEMBER on the same basis described above regarding daily cash distributions so that each MEMBER pays its Pro Rata Share of the expenses that are incurred by UNITED during the month.

 

Adjustments for Changes to Production Estimates. The determination of MDFC’s Pro Rata 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 Fiscal Year by MDFC 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 as published in the Wall Street Journal on the first business day of each month. As soon as exact information and production figures
are available, UNITED shall determine MDFC’s final Pro Rata Share of the gross cash receipts for the Primary Pool during the Fiscal Year, and appropriate adjustments, together with interest charges/credits 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.

 

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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 MDFC or its certified public accountants. All records of the Primary Pool and any Separate Pool that is created shall be audited annually by UNITED’s regular Independent Certified Public Auditors and the audit report made available to MDFC.

 

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.

 

Product Specifications, Quality Standards and Handling of Products of Substandard Quality.

 

Specifications. MDFC 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, MDFC 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.

 

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.

 

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 in a Separate Pool, with proceeds of the sale of such Product, less all direct and indirect selling expenses, distributed to the MEMBER that produced such Product; in the alternative, this MEMBER and UNITED may mutually agree that the Product of substandard quality may remain in the Primary Pool and the MEMBER will be charged with the additional costs relating to the substandard quality of the Product, including any necessary discounts.

 

Storage of Product.

 

MDFC shall store its Product as the parties shall mutually agree; provided, however, that with respect to storage by MEMBERS or UNITED, the parties shall utilize reasonably available storage methods that result in the lowest total cost to the Primary Pool. At the earliest reasonable time after processing commences in each Fiscal Year and as soon as Product has begun to be placed in storage, MDFC 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 MDFC.

 

Portion of Sidney Storage Facility Controlled by UNITED. UNITED will have the exclusive right to store 910,000 CWT of sugar in the Sidney Storage Facility (the “UNITED Controlled Storage”). UNITED shall be responsible for reimbursing ACSC for the Asset Costs and Operating Costs of the UNITED Controlled Storage pursuant to Section 16 hereof. The parties acknowledge that a portion of such reimbursable Asset Costs and Operating Costs may include costs charged to ACSC by a third party.

 

Portion of Sidney Storage Facility Controlled by ACSC. ACSC retains the exclusive rights with respect to that portion of the Sidney Storage Facility not constituting UNITED Controlled Storage (the “ACSC Controlled Storage”). In the event UNITED desires to utilize the ACSC Controlled Storage that is not otherwise being utilized by ACSC, it shall notify ACSC in writing at least thirty (30) days in advance of the date UNITED anticipates utilizing such storage. The notice shall state the volume of storage UNITED desires and the anticipated duration of the storage. ACSC shall provide a written response to UNITED within fifteen (15) days after receipt of the notice to confirm whether or not UNITED may utilize the requested portion of the ACSC Controlled Storage. UNITED’s use of the ACSC Controlled Storage shall at all times be subject to the continuing rights of ACSC as
provided in paragraph 11.2.2.

 

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In the event UNITED is utilizing the ACSC Controlled Storage and ACSC desires to exercise its rights to utilize such storage due to government imposed marketing restrictions or due to higher than anticipated production output of SSI or ACSC, ACSC shall provide UNITED with thirty (30) days advance written notice to vacate the portion of the ACSC Controlled Storage that ACSC desires to utilize and UNITED shall use its best efforts to vacate the portion of the ACSC Controlled Storage needed by ACSC. In the event that UNITED is unable to vacate all or a portion of the ACSC Controlled Storage during such thirty-day period due to load-out limitations at the facility, then, if such action would relieve ACSC’s shortage of storage, UNITED and ACSC will execute appropriate accounting transfers between UNITED and ACSC to provide that up to 1,000,0000 CWT of the sugar stored at the Sidney Storage Facility is being
stored for the account of ACSC rather than for the account of UNITED. If UNITED is unable to vacate sufficient storage as required by ACSC and if the above referenced accounting transfer would not relieve ACSC’s shortage of storage, then at the conclusion of the thirty-day period, UNITED shall (i) continue to be responsible for the reimbursement of costs provided in paragraph 11.2.3 of this Agreement; and (ii) shall be obligated to reimburse ACSC for all storage costs ACSC may incur as a result of not having the ACSC Controlled Storage available which is over and above the amount ACSC would have incurred if the storage had been made available to ACSC, including, but not limited to, packaging, shipping, handling, in and out charges, storage fees, reprocessing, and other costs associated with ACSC’s use of an outside storage facility.

 

Subject to the provisions set forth in this paragraph 11.2.3 regarding the calculation of utilization, UNITED shall reimburse ACSC for the Operating Costs of the ACSC Controlled Storage. The parties acknowledge that ACSC’s Operating Costs shall include actual Operating Costs billed to ACSC by SSI. The parties agree that UNITED shall reimburse ACSC for the Asset Costs of the ACSC Controlled Storage, but that the Asset Costs shall be based upon the fixed amount of $0.042 per CWT per month. With respect to reimbursement for Operating Costs and Assets Costs, the reimbursement for the ACSC Controlled Storage shall be based on UNITED’s average monthly utilization (in CWTs) of the ACSC Controlled Storage. The average monthly utilization shall be the sum of the number of CWTs in storage on the first day and the last day of the month divided by two. 

 

Risk of Loss and Insurance.

 

Risk of Loss. MDFC covenants and agrees that it shall bear the risk of loss of any Product produced by MDFC until the risk of loss for such Product passes to the Buyer; provided, however, that risk of loss shall pass to UNITED before delivery to the Buyer if the Product is Commingled. Regardless of which party bears the risk of loss, MDFC shall continue to be the owner of its Product until the Product is sold to the Buyer. Whenever UNITED shall have possession or control over such Product prior to sale to the Buyer, UNITED shall act strictly as custodian thereof in accordance with the provisions of this Agreement.

 

MDFC to Maintain Insurance. MDFC covenants and agrees, at its sole cost and at all times during the Term of this Agreement, to maintain in force during the period for which it bears the risk of loss, (i) an all risk property insurance policy or policies covering loss, theft or damage to the Products produced by MDFC in an amount not less than the full replacement cost thereof; and (ii)  product liability insurance in an amount required by UNITED from time to time naming UNITED as an additional insured.

 

UNITED to Maintain Insurance. UNITED covenants and agrees, at its sole cost and at all times during the Term of this Agreement, to maintain in force during the period for which it bears the risk of loss, (i) an all risk property insurance policy or policies covering loss, theft or damage to the Products in an amount not less than the full replacement cost thereof; and (ii)  product liability insurance in an amount approved by UNITED from time to time, naming MDFC as an additional insured on a primary and noncontributory basis.

 

Certificates of Insurance. Insurance policies shall be taken out with responsible insurance companies with a Best rating of no less than A-, and such policies shall not be canceled or materially altered without ten days’ written notice to UNITED and MDFC. 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.

 

Waiver of Subrogation. UNITED and MDFC hereby waive subrogation rights as to the other party with respect to all insurance coverages.

 

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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, costs and other pertinent factors in selecting the factory, warehouse or warehouses from which delivery shall be made.

 

Logistics Function.

 

UNITED shall be responsible for performing all normal logistics functions relating to the shipment of all Products produced at MDFC’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.

 

Information from MDFC.

 

MDFC 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. MDFC shall not be required to release information concerning MDFC’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. MDFC further agrees, upon request of UNITED, to furnish UNITED with samples of Products for grading or selling purposes.

 

Pool Expenses Incurred by MDFC.

 

MDFC shall be reimbursed out of the Primary Pool for its Assets Costs and Operating Costs; provided, however, that storage costs of thick juice or standard liquor from beets or raw cane sugar refinery feedstock shall only be reimbursable pursuant to the Storage Reimbursement Guidelines set forth in Schedule C.

 

UNITED shall credit MDFC for its Asset Costs and Operating Costs within thirty (30) days of submission of MDFC’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.

 

MDFC 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.

 

Term of Agreement; Termination.

 

Term. The term of this Agreement shall commence on the date hereof and shall continue through August 31, 2008 (the “Initial Term”) and from Fiscal Year to Fiscal Year thereafter (the “Renewal Terms”) until terminated as provided herein. “Term” means the Initial Term and any Renewal Terms.

 

Termination by UNITED or MDFC. After the end of the Initial Term, either UNITED or MDFC has the right to terminate this Agreement by giving written notice by registered mail to the other party of such termination. 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, 2008 is effective August 31, 2009).

 

Termination Pursuant to the Bylaws of UNITED. In the event membership in UNITED is terminated pursuant to the provisions of the Bylaws of UNITED, MDFC’s participation in this Agreement shall terminate effective the date of termination of membership; provided, however, that UNITED shall have the obligation to purchase from MDFC and MDFC 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 MDFC be required to take any actions that could jeopardize UNITED’s status as a common marketing agent under the Capper-Volstead Act.

 

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Performance Following Termination.

Following termination of MDFC’s participation in this Agreement, as provided in Sections 17.2 or 17.3 above, MDFC 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.

 

The rights and obligations with respect to the marketing of MDFC’s Products shall continue in effect until all of such pooled Products have been sold by UNITED and MDFC’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.

 

Representations, Warranties, and Indemnifications.

 

Representations By MDFC. MDFC 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, MDFC 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.

 

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 MDFC 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.

 

Indemnification By MDFC. MDFC 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 of MDFC’s Products which are marketed by UNITED pursuant to this Agreement.

 

Transgenic Variety. At such time as MDFC decides to grow or permit its members to grow Transgenic Varieties, written notice of same shall be delivered to UNITED and each of the MEMBERS. MDFC acknowledges that if it grows or its members grow Transgenic Varieties in a given Pool Year, then all of the Product produced by MDFC during that Pool Year will be considered to be Transgenic Product. (The preceding sentence notwithstanding, sugar produced at Sidney Sugars may, at the option of ACSC, be excluded from the requirement that all sugar produced by ACSC will be considered Transgenic Product if ACSC or its members grow Transgenic Varieties in a given Pool Year.)  MDFC further acknowledges that UNITED may sell and market both Product produced from Transgenic plants (“Transgenic Product”) and Product produced from non-Transgenic plants (“Non-Transgenic Product”). MDFC
and UNITED agree that should Non-Transgenic Product that is sold by UNITED cause the Net Selling Price of a MEMBER or MEMBERS  producing Non-Transgenic Product in any Pool Year to be more than 5% higher than such Net Selling Price would have been had Non-Transgenic Product not been sold by UNITED, then any MEMBER producing Non-Transgenic Product shall be compensated for such difference by receiving its pro rata share of the estimated premium realized on the sales of Non-Transgenic Product (the “Non-Transgenic Premium”), all as calculated by UNITED and approved by action of its Executive Committee. An illustration of this calculation is attached hereto as Schedule D. UNITED and MDFC agree that the other MEMBERS of UNITED are third party beneficiaries to the representations and warranties contained in this Section 18.4.

 

Indemnification By UNITED. UNITED hereby agrees to indemnify and hold harmless, MDFC 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 MDFC’s Product transfers.

 

Conformance with Articles and Bylaws. MDFC 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.

 

Non-Waiver of Rights. MDFC 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 MDFC of this Agreement.

 

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Marketing Allotments and Allocations.

 

Allocation is Property of MDFC. In the event Allotments and Allocations are implemented pursuant to the Allotment Statute, any Allocation attributable to MDFC shall be the property of MDFC.

 

Excess Product.

Excess Product of MDFC shall not be included in the Primary Pool, but will be marketed as follows:

 

By UNITED in the succeeding year’s Primary Pool, subject to the limit of MDFC’s Allocation for that succeeding year. Any such Excess Product shall be stored and otherwise handled at the expense of MDFC, although UNITED may provide storage and handling services. In the event MDFC has Excess Product that is being stored by UNITED, any direct costs incurred as a result of such storage shall be charged to MDFC and shall not be shared by other participants in the Primary Pool.

 

By MDFC, to a non-Member processor or to another MEMBER, but not to a domestic user or consumer of sugar for human consumption; provided, however, that UNITED shall be reimbursed for all direct costs relating to the storage or handling of any such Product by UNITED;

 

In the alternative, MDFC and UNITED may mutually agree that Excess Product shall be marketed by UNITED as part of a Separate Pool that is created for MDFC. If UNITED markets the Excess Product, MDFC may elect to have the Excess Product 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.

 

In the event MDFC 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 MDFC as part of the operation of the separate pool and shall not be shared by other participants in the Primary Pool.

 

Net Selling Price When Allocations Implemented. In the event of Allotments and Allocations, Net Selling Price of the Primary Pool and net selling price of the Separate Pool shall be determined in a manner consistent with the provisions of Section 7 of this Agreement; provided that (i) in the case of the Primary Pool, Net Selling Price shall be based upon the volume of MDFC’s actual production that is not in excess of MDFC’s Allocation, and (ii) in the case of a Separate Pool, net selling price shall be based upon the volume of MDFC’s Product that is in the Separate Pool. Purchased Sugar shall be included in the Pro Rata Share (subject to adjustment pursuant to Section 7.3) and included in the Primary Pool, but the sum of MDFC’s actual production and the quantity of Purchased Sugar shall not exceed the Allocation of MDFC.

 

Force Majeure.

 

Notification and Efforts to Minimize. Neither UNITED nor MDFC 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.

 

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.

 

Dispute Resolution.

 

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 (the “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.

 

9

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.

 

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.

 

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. Any prior marketing agreements and any amendments thereto between UNITED and MDFC are superseded by this Agreement.

 

Assignment.

 

Neither MDFC nor UNITED may assign this Agreement without prior written consent of the other party to this Agreement.

 

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.

 

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
 
	
            7401 Metro Boulevard, Suite 350
 
	
            Edina, MN  55439
 
	
            Attn:  President
 
	
             
 
	
            With a copy to:
 
	
             
 
	
            Timothy J. Pabst, Esq.
 
	
            Leonard, Street and Deinard, Professional Association
 
	
            150 South Fifth Street, Suite 2300
 
	
            Minneapolis, MN  55402
 
	
             
 
	
            If to MDFC:
 
	
             
 
	
            MINN-DAK FARMERS COOPERATIVE
 
	
            7525 Red River Road
 
	
            Wahpeton, ND  58075
 
	
            Attention:  CEO
 

 

If notice is given by mail, it will be effective two (2) days after mailing.

 

10

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.

 

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.

 

[Signatures follow on the next page]

 

 

 

 

11

IN WITNESS WHEREOF, UNITED and MDFC have executed this Agreement effective the day and year first above written.

 

	
            UNITED SUGARS CORPORATION
 	
             
 	
            MINN-DAK FARMERS COOPERATIVE
 
	
            By: 
 	
            
 /s/John R. Doxsie
 	
             
 	
            By: 
 	
            
 /s/ David H. Roche
 
	
            Its:
 	
            President
 	
             
 	
            Its:
 	
            President
 

 

 

 

 

12

Schedule A

{Section 10.1}

Specifications for Products

(Attached)

 

 

 

 

 

 

Coarse Granulated Sugar

Coarse Granulated Sugar is made by crystallizing purified and filtered thick syrup removed from sugar beets or sugar cane. It is then dried and screened to produce a granulated sugar with a grain size coarser than Fine Granulated Sugar. As a result, it is ideal for pneumatic handling. It provides greater resistance to caking in less than ideal storage conditions. Customers who pulverize sugar for use in their end product will find marked improvement in yield due to the sugar’s crystal surface area and flow characteristics. Also, due to the reduced surface area, Coarse Sugar is useful to minimize the use of expensive coating ingredients. It is white in color and has sucrose content of not less than 99.85 percent.

 

Uses

Powdered sugar, powdered drink mixes, candy, preserves, jams, jellies, condiments, dairy products, meats, canning, pickles, snack foods, and bakery products.

 

Packaging

Coarse Granulated Sugars is available in bulk rail cars and bulk trucks.

 

General Requirements

This material shall be manufactured in accordance with Current Good Manufacturing Practices and shall comply with all regulations under the Federal Food Drug and Cosmetic Act and with any applicable state statutes and regulations.

 

Typical Analysis

 

	
            Sucrose
 	
            NLT 99.85%
 
	
            Visual Speck Count
 	
            2 per 500 grams
 
	
            Invert
 	
            NMT 0.050%
 
	
            Ash
 	
            NMT 0.035%
 
	
            Moisture
 	
            NMT 0.035%
 
	
            Color
 	
            White, NMT 50 RBU
 
	
            SO2 
 	
            NMT 10 ppm
 
	
            Odor
 	
            Free of foreign odors
 

 

	
            Grain Size (cumulative percent retained)
 
	
            U.S. Sieve #
 	
            Maximum
 
	
            20
 	
            15
 
	
            40
 	
            100.0
 
	
            Passing 100
 	
            2.0
 

 

Microbiological Standards

	
            •
 	
            Product shall test negative for pathogenic microorganisms.
 

	
            •
 	
            May also be ordered to meet National Food Processors Association and National Soft Drink Association certification requirements.
 

Product Code

	
            Bulk
 	
            810052
 	
            
 

 

A-1

Fine/Extra Fine Granulated Sugar

Fine/Extra Fine Granulated Sugar, a food grade product, is made by crystallizing a purified and filtered thick juice syrup removed from sugar beets or sugar cane, which is then dried and screened to produce the most popular sugar grades. It is white in color and has sucrose content of not less than 99.85 percent. This product is either referred to as Fine Granulated Sugar or Extra Fine Granulated Sugar depending on market location.

 

Uses

Pharmaceuticals, jams, jellies, meats, chewing gum,
dairy products, condiments, pickles, bakery products, cereals, liquid sugar, powdered sugar, candies and powdered drink mixes.

 

Packaging

Fine Granulated Sugar is available in bulk rail and bulk trucks, as well as 5, 25, 50 and 100 pound bags, 2000 pound totes and 2100 pound supersacks.

 

General Requirements

This material shall be manufactured in accordance with Current Good Manufacturing Practices and shall comply with all regulations under the Federal Food Drug and Cosmetic Act and with any applicable state statutes and regulations.

 

Typical Analysis

 

	
            Sucrose  
 	
            NLT 99.85%
 
	
            Sediment (insoluble or suspended matter)
 	
            NMT 3 ppm visual
 
	
            Ash
 	
            NMT 0.025%
 
	
            Moisture 
 	
            NMT 0.035%
 
	
            Color
 	
            NMT 45 RBU
 
	
            Invert
 	
            NMT 0.050%
 
	
            SO2 
 	
            NMT 10 ppm
 
	
            Visual Speck Count
 	
            NMT 2 per 500 grams
 
	
            Odor
 	
            Free of foreign odors
 

 

	
            Grain Size — Cumulative Percent Retained
 
	
            U.S. Sieve#
 	
            Maximum
 
	
            20
 	
            2
 
	
            Passing 100
 	
            5
 

 

Microbiological Standards

	
            •
 	
            Product shall test negative for pathogenic microorganisms.
 

	
            •
 	
            May also be ordered to meet National Food Processors Association and National Soft Drink Association certification requirements.
 

 

Product Codes

	
            Bulk
 	
            810051
 

	
            100# United
 	
            811036
 

	
            100# United Slip
 	
            811035
 

	
            50# United
 	
            810079
 

	
            25# Crystal
 	
            810097
 

	
            52” Supersack
 	
            810106
 

 

A-2

Unigran Sugar

Unigran Sugar is a version of Fine Granulated Sugar with a very narrow granulation range. This sugar has a very uniform grain size and contains virtually no fines. It has a very low color, is free from floc, and is very stable when used in alcohol oils. It was developed primarily for use in hot drink dispensing machines to assure continuous operations even though the machine and sugar were subjected to severe changes in temperature and humidity. It is a food grade product and is made by crystallizing a purified and filtered thick juice syrup removed from sugar beets, which is then dried and screened to produce this unusually uniform granulated sugar.

 

Uses

Coffee and cocoa mixes dispensed from hot drink machines, powdered drink mixes/dry mixes and cereal products.

 

Packaging

Unigran Sugar is available in 100 pound bags.

 

General Requirements

This material shall be manufactured in accordance with Current Good Manufacturing Practices and shall comply with all regulations under the Federal Food Drug and Cosmetic Act and with any applicable state statutes and regulations.

 

Typical Analysis

 

	
            Color
 	
            White, NMT 45 RBU
 
	
            Visual Speck Count 
 	
            NMT 2 per 500 grams
 
	
            Sucrose    
 	
            NLT 99.95% 
 
	
            Invert NMT 0.050%
 	
             
 
	
            Sediment
 	
            NMT 3 ppm visual—white pad 
 
	
            (insoluble or suspended matter)
 	
            NMT 2 ppm visual—black pad
 
	
             
 	
            NMT 5 ppm visual—black and white 
 
	
            Ash 
 	
            NMT 0.015%
 
	
            Moisture
 	
            NMT 0.030% 
 
	
            SO2 
 	
            NMT 10 ppm
 
	
            Odor
 	
            Free of foreign odors
 

 

	
            Grain Size - Cumulative Percent Retained
 
	
            U.S. Sieve#
 	
            Minimum
 	
            Maximum
 
	
            30
 	
              4.0
 	
            20.0
 
	
            50
 	
            70.0
 	
            90.0
 
	
            Passing 50
 	
             
 	
            10.0
 

 

Microbiological Standards

	
            •
 	
            Product shall test negative for pathogenic microorganisms.
 

	
            •
 	
            May also be ordered to meet National Food Processors Association and National Soft Drink Association certification requirements.
 

Product Codes

	
            100# Bags on slip sheets
 	
            811054
 

	
            100# Bags on pallets
 	
            811053
 

 

 

A-3

Sanding Sugar

Sanding Sugar, a food grade product, has a very large grain size, which allows the crystal to reflect light, which gives the sugar a sparkle. Sanding sugar is frequently used in the manufacturing of products where physical appearance is critical.

Sanding Sugar is made by crystallizing purified and filtered thick juice syrup removed from sugar beets, which is then dried and screened to produce a sparkling large grain sugar.

 

Uses

Colored sanding sugar adds sparkle to cookies, jelly candies cotton candy, baked goods, and gums drops, and can be used in colored sugar crystals.

 

Packaging

Sanding Sugar is available in 50 and 100 pound bags, as well as, totes bins.

 

General Requirements

This material shall be manufactured in accordance with Current Good Manufacturing Practices and shall comply with all regulations under the Federal Food Drug and Cosmetic Act and with any applicable state statutes and regulations.

 

Typical Analysis

 

	
            Sucrose
 	
            NLT 99.95%
 
	
            Sediment (insoluble or suspended matter)
 	
            NMT 3 ppm visual—white pad
 
	
            
 	
            NMT 2 ppm visual—black pad
 
	
            
 	
            NMT 5 ppm visual—black and white
 
	
            Visual Speck Count
 	
            NMT 2 per 500 grams
 
	
            Ash
 	
            NMT 0.015%
 
	
            Moisture
 	
            NMT 0.030%
 
	
            Color
 	
            NMT 45 RBU
 
	
            Visual Speck Count
 	
            NMT 2 per 500 grams
 
	
            Odor
 	
            Free of foreign odors
 

 

	
            Grain Size - Cumulative Percent Retained
 
	
            U.S. Sieve #
 	
            Maximum
 
	
            20
 	
            20
 
	
            Passing 50
 	
            5.0
 

 

Microbiological Standards

	
            •
 	
            Product shall test negative for pathogenic microorganisms.
 

	
            •
 	
            May also be ordered to meet National Food Processors Association and National Soft Drink Association certification requirements.
 

 

Product Codes

	
            Tote Bins — Sanding
 	
            810108
 

	
            100# United Sanding
 	
            811051
 

	
            100# United Sanding Slip Sheet
 	
            811052
 

	
            50# United Sanding
 	
            810081
 

 

 

A-4

6X Powdered Sugar

6X Powdered Sugar, a food grade product, is made by grinding sugar with cornstarch to the desired grain size. The cornstarch prevents caking and increases shelf life. Small uniform particle size is perfect for a wide range of bakery and confectionery products. It creates smooth texture and easy-to-spread properties for icings.

 

Uses

6X powdered sugar is used for icing and dusting; candies and pharmaceuticals.

 

Packaging

6X Powdered Sugar is available in 25, 50, and 100 pound bags.

 

General Requirements

This material shall be manufactured in accordance with Current Good Manufacturing Practices and shall comply with all regulations under the Federal Food Drug and Cosmetic Act and with any applicable state statutes and regulations.

 

Typical Analysis

 

	
            Color
 	
            White
 
	
            Odor
 	
            Free of foreign odors 
 
	
            Sucrose
 	
            NLT 95.5%
 
	
            Starch
 	
            3.0% +1- 1%
 
	
            Moisture
 	
            NMT 0.050%
 

 

	
            Grain Size - Cumulative Percent Retained
 
	
            U.S. Sieve#
 	
             
 
	
            100
 	
            No More than 1.0 %
 
	
            Passing 200
 	
            No Less than 93.5%
 

 

Microbiological Standards

	
            •
 	
            Product will test negative for pathogenic microorganisms.
 

	
            •
 	
            Mesophilic Bacteria--NMT 500 CFUs per 10 grams
 

	
            •
 	
            Yeast—NMT 100 CFUs per 10 grams
 

	
            •
 	
            Mold—NMT 100 CFUs per 10 grams
 

 

Product Codes

	
            100# 6X Powdered
 	
            810610
 

	
            50# 6X Powdered
 	
            810087
 

	
            50# 6X Powdered Slipsheets
 	
            810088
 

	
            25# 6X Powdered
 	
            810098
 

 

 

A-5

Fruit Sugar

Fruit Sugar, a food grade product, is a very fine and uniform sugar that lessens the stratification or separation of the final product. It has excellent dissolving qualities and does not settle, thereby maintaining proper headspace in jars and canisters. Fruit sugar is made by crystallizing a purified and filtered thick juice syrup removed from sugar beets or sugar cane, which is then dried and screened to produce a very fine granulated sugar.

 

Uses

Desserts, gelatin, pudding mixes, powdered drink mixes/dry mixes, candy and bakery products.

 

Packaging

Fruit Sugar is available in bulk rail and bulk rail and bulk trucks, as well as 50 and 100 pound bags, and 2000 pound totes.

 

General Requirements

This material shall be manufactured in accordance with Current Good Manufacturing Practices and shall comply with all regulations under the Federal Food Drug and Cosmetic Act and with any applicable state statutes and regulations.

 

Typical Analysis

	
            Sucrose
 	
            NLT 99.5% 
 
	
            Ash
 	
            NMT 0.025% 
 
	
            Moisture 
 	
            NMT 0.050% 
 
	
            Color
 	
            NMT 45 RBU
 
	
            Visual Speck Count
 	
            No visible extraneous material
 
	
            SO2 
 	
            NMT 10 ppm 
 
	
            Invert Odor
 	
            NMT 0.050%
 
	
            Free of foreign odors
 	
             
 

 

	
            Grain Size - Cumulative Percent Retained
 
	
            U.S. Sieve#
 	
            Maximum
 
	
            20
 	
            0.3
 
	
            Passing through 100
 	
            10
 

 

Microbiological Standards

	
            •
 	
            Product shall test negative for pathogenic microorganisms.
 

	
            •
 	
            May also be ordered to meet National Food Processors Association and National Soft Drink Association certification requirements.
 

 

Product Codes

	
            Bulk Fruit
 	
            810054
 
	
            Totes Fruit Sugar
 	
            810108
 
	
            29” Supersack Fruit
 	
            811190
 
	
            52” Supersack Fruit
 	
            811130
 
	
            100# United Fruit
 	
            811321
 
	
            50# United Fruit
 	
            811320
 

 

 

A-6

Cordial Sugar

Cordial Sugar is a low color, floc free version of Fine Granulated Sugar. It is a food grade product and is made by crystallizing a purified and filtered thick juice syrup removed from sugar beets or sugar cane, which is then dried and screened to produce a fine granulated sugar meeting our rigid Cordial standards

 

Uses

Pharmaceuticals, cordials, liquors, and specialty candies.

 

Packaging

Cordial Sugar is available in bulk rail cars and bulk trucks, 2,000 pound totes and 100 pound bags.

 

General Requirements

This material shall be manufactured in accordance with Current Good Manufacturing Practices and shall comply with all regulations under the Federal Food Drug and Cosmetic Act and with any applicable state statutes and regulations.

 

Typical Analysis

 

	
            Color
 	
            White, NMT 20 RBU
 
	
            Sediment
 	
            NMT 2 ppm (visual exam)
 
	
            (insoluble or suspended matter)
 	
             
 
	
            Ash
 	
            NMT 0.015% 
 
	
            Moisture 
 	
            NMT 0.035% 
 
	
            Floc
 	
            Negative
 
	
            Iron
 	
            NMT 0.05 ppm
 
	
            Turbidity
 	
            NLT 100% transmission at 720 nm
 
	
            Taste and Odor
 	
            Sugar shall not have a foreign taste or emit any objectionable odor in dry form or when a 10% solution is acidified to a pH 2.4 with U.S.P. phosphoric acid and allowed to stand for 72 hours.
 

 

	
            Grain Size - Cumulative Percent Retained
 
	
            U.S. Sieve#
 	
            Minimum
 	
            Maximum
 
	
            20
 	
            0
 	
            0.5
 
	
            Passing 100
 	
            0
 	
            5.0
 

 

Microbiological Standards

	
            •
 	
            Product shall test negative for pathogenic microorganisms.
 

	
            •
 	
            May also be ordered to meet National Food Processors Association and National Soft Drink Association certification requirements.
 

Product Codes

	
            100# Bags
 	
            811034
 

	
            Tote Boxes
 	
            810104
 

	
            Bulk
 	
            810410
 

 

 

A-7

10X Powdered Sugar

10X Powdered Sugar, a food grade product, is made by grinding granulated sugar with cornstarch to the desired grain size. The cornstarch prevents caking and increases shelf life. More finely milled than 6X and is ideal for dusting and icing a wide range of bakery and confectionery products.

 

Uses

It is used for Icing and dusting; candies and pharmaceuticals.

 

Packaging

10X Powdered Sugar is available in 50 and 100 pound bags.

 

General Requirements

This material shall be manufactured in accordance with Current Good Manufacturing Practices and shall comply with all regulations under the Federal Food Drug and Cosmetic Act and with any applicable state statutes and regulations.

 

Typical Analysis

 

	
            Color
 	
            White
 
	
            Odor
 	
            Free of foreign odors
 
	
            Sucrose
 	
            NLT 95.5% 
 
	
            Starch
 	
            3.0% +/- 1% 
 
	
            Moisture
 	
            NMT 0.50%
 

 

	
            Grain Size - Cumulative Percent Retained
 
	
            U.S. Sieve#
 	
            Maximum
 
	
            100
 	
            0.01
 
	
            Passing 325
 	
            100
 

 

Microbiological Standards

	
            •
 	
            Pathogenic Microorganisms: Negative
 

	
            •
 	
            Mesophilic Bacteria—NMT 500 CFUs per 10 grams
 

	
            •
 	
            Yeast—NMT 100 CFUs per 10 grams
 

	
            •
 	
            Molds—NMT 10 CFUs per 10 grams
 

Product Codes

	
            100# United 10X Powdered
 	
            811030
 

	
            100# United 10X Powdered Slip Sheet
 	
            811031
 

	
            50# United 10X Powdered
 	
            810096
 

 

 

A-8

Fondant and Icing Sugar

Fondant and Icing Sugar, a food grade product, is our finest milled powdered sugar. It provides excellent smoothness and spreadability. Fondant and Icing Sugar is made by grinding granulated sugar with cornstarch to the desired grain size to prevent caking and increase shelf life.

 

Uses

Icing and dusting, cream candy centers, and pharmaceuticals.

 

Packaging

Fondant and Icing Sugar is available in 50 pound bags.

 

General Requirements

This material shall be manufactured in accordance with Current Good Manufacturing Practices and shall comply with all regulations under the Federal Food Drug and Cosmetic Act and with any applicable state statutes and regulations.

 

Typical Analysis

	
            Color 
 	
            White
 
	
            Sucrose 
 	
            NLT 95.5%
 
	
            Starch 
 	
            3% -1-/- 1%
 
	
            Moisture 
 	
            NMT 0.50%
 
	
            Odor
 	
            Free of foreign odors
 

 

Grain Size - Cumulative Percent Retained

	
            U.S. Sieve #
 	
            Maximum
 
	
            325
 	
            2
 
	
            Passing 325
 	
            100
 

 

Microbiological Standards

	Product shall test negative for
pathogenic microorganisms.
	
            Yeast
 	
            NMT 100 CFUs per 10 grams
 
	
            Mold
 	
            NMT 100 CFUs per 10 grams
 
	
            Mesophilic Bacteria
 	
            NMT 500 CFUs per 10 grams
 

 

Product Codes

	
            50# United Fondant & Icing
 	
            810095
 

 

 

A-9

Light Brown Sugar

Light Brown Sugar, a food grade product, is made by coating a fine granulated beet sugar or cane sugar with a uniquely blended syrup to produce a brown sugar. This light brown sugar has a sweet/mild caramel flavor and color and is ideal for the baking industry. The exceptional flavor and aroma of finished goods is the result of the unique formulation of the brown sugar.

 

Uses

Bakery products, baked beans, cereals, icings, caramel corn, toppings, syrups, smoked meats.

 

Packaging

Light Brown Sugar is available in 25, 50 and 100 pound bags.

Typical Analysis

	
            Color Light Brown
 	
            2,500-5,000 RBUs
 
	
            Sucrose
 	
            91.0% - 95.0%
 
	
            Moisture
 	
            1.9% to 2.8%
 
	
            pH @ 20 degrees Centigrade
 	
            5.8-6.5
 

 

Microbiological Standards

	
            Yeast
 	
            NMT 10 CFU/gram
 
	
            Mold
 	
            NMT 10 CFU/gram
 
	
            Standard Plate Count
 	
            NMT 500 CFU/gram
 
	
            E. coli
 	
            Negative
 
	
            Coliforms
 	
            Negative
 
	
            Salmonella
 	
            Negative
 

 

 

Product Codes

	
            100# United Light Brown
 	
            810413
 

	
            100# United Light Brown Slip Sheet
 	
            810073
 

	
            50# United Light Brown
 	
            810090
 

	
            25# United Light Brown
 	
            810100
 

 

 

A-10

Dark Brown Sugar

Dark Brown Sugar, a food grade product, is made by coating a fine granulated beet or cane sugar with a uniquely blended syrup to produce a brown sugar. Dark brown sugar is uniquely formulated to provide a rich, full-bodied molasses flavor, aroma and color. This sugar is ideal for the canning and baking industries because of its exceptional texture and browning characteristics. Dark brown in color, this product has a content of not less than 92.0 percent sucrose.

 

Uses

Bakery products, baked beans, icings, confectionery products, and smoked meats.

 

Packaging

Dark Brown Sugar is available in 50 pound bags and 2000 totes.

Typical Analysis

	
            Color
 	
            7,500-11,000 RBUs
 
	
            Sucrose
 	
            90.0% -96.0%
 
	
            Moisture
 	
            1.9% to 2.8%
 
	
            pH @ 20 degrees Centigrade
 	
            5.8-6.7
 
	
            SO2 
 	
            NMT 10 ppm
 

 

Microbiological Standards

	
            Standard Plate Count
 	
            NMT 500 CFU/gram
 
	
            Yeast
 	
            NMT 10 CFU/gram
 
	
            Mold
 	
            NMT 10 CFU/gram
 
	
            E. coli
 	
            Negative
 
	
            Coliforms
 	
            Negative
 
	
            Salmonella
 	
            Negative
 

 

 

Product Codes

	
            50# United Dark Brown
 	
            810460
 

	
            50# United GM Dark Brown
 	
            810092
 

	
            50# United GM Dark Brown Slip Sheet
 	
            810091
 

 

 

A-11

Liquid Sugar Type O

Liquid Sugar Type O, a food grade product, is made by dissolving purified crystalline sucrose in heated water, which is then filtered, cooled, and stored.

 

Uses

Canned and bottled products, dairy products, soft drinks, processed foods, confectionery, and baking.

 

Packaging

Liquid sugar is available in approximately 5,000 gallon tank trucks.

 

General Requirements

This material shall be manufactured in accordance with Current Good Manufacturing Practices and shall comply with all regulations under the Federal Food Drug and Cosmetic Act and with any applicable state statutes and regulations.

 

Typical Analysis

	
            Color (solution ar 50 RDS)
 	
            Clear to slightly straw colored, NMT 45 RBU
 
	
            Sucrose 
 	
            NLT 99.8% (dry basis)
 
	
            Ash by conductivity
 	
            NMT 0.02%
 
	
            Sediment 
 	
            NMT 1ppm
 
	
            Total solids 
 	
            67.5 +/- 0.2 (% by refractometer @ 20° C)
 
	
            Invert 
 	
            NMT 0.1%
 
	
            pH @ 20° C
 	
            7.5 +/- 0.5 11.105 lbs.
 
	
            Taste and Odor 
 	
            Sugar shall not have a foreign taste or emit any objectionable odor in dry form or when a 10% solution is acidified to a pH of 2.5 with USP Phosphoric Acid and allowed to stand for 72 hours.
 

 

Microbiological Standards

	
            •
 	
            Pathogens: Negative
 

	
            •
 	
            Can be ordered to meet National Foods Processors Association and National Soft Drink Association specifications.
 

 

Handling

Unloading conditions must be clean and sanitary.

 

Characteristics

The exacting chemical, physical, and microbiological standards of this sugar make it ideal for use in products whose formulation receives limited processing.

 

A-12

Canners Grade Sugars

United Sugars offers many of our granulated and
liquid sugars in a “Canners” grade. To qualify as “Canners” Sugar, Granulated and Liquid Sugars must meet the
bacterial standards of the National Food Processors Association in addition to other United Sugars Corporation specifications. Our
factory and research laboratories routinely sample and perform analytical and microbiological tests on grades of Granulated and
Liquid Sugars which include Sanding, Unigran, Coarse, Fine, and Liquid Type O.

 

National Food Processors Association Bacterial Standards for Sugar Total 

 

Thermophilic Spore Count:

For the five samples examined, there shall be a maximum of not more than 150 spores and an average of or more than 125 spores per 10 grams of sugar.

 

Flat Sour Spores:

For the five samples examined, there shall be a maximum of not more than 75 spores and an average of not more than 50 spores per 10 grams of sugar.

 

Thermophilic Anaerobic Spores:

These shall be present in not more than three (60%) of the five samples and in any one sample to the extent of not more than four (>65%) of six tubes inoculated by the standard procedures.

 

Sulfide Spoilage Spores:

These shall be present in not more than two (40%) of the five samples and in any one sample to the extent of not more than 5 spores per 10 grams. This would be equivalent to two colonies in the six inoculated tubes.

 

Bacterial standards from the National Food Processors Association were established in 1931 with subsequent updating.

 

Product Codes

810076 – 50# United Canners

811033 – 100# United Canners

810411 – Liquid

 

A-13

Bottlers Grade Sugars

To qualify as Bottlers Sugar, granulated sugar must meet the standards of the National Soft Drink Association in addition to other United Sugars Corporation specifications. Our factory and research laboratories routinely sample and perform analytical and microbiological tests on grades of granulated which include Sanding, Unigran, Coarse and Fine.

 

Packaging

Bottlers, granulated sugar is available in 50 and 100 pound bags, as well as, supersacks.

 

General Requirements

	
            1.
 	
            Containers: For protection of the product, Bottlers sugar shall not be packaged in cotton or fabric bags, but shall be packed in multi-wall paper bags or equivalent sanitary packages or bulk containers.
 

	
            2.
 	
            Container Identification: Each container shall be marked or coded to make it possible for the sugar producer to identify the place of production and date of packaging.
 

	
            3.
 	
            Designation of Type: Each container shall be marked Bottlers.
 

	
            4.
 	
            Ash: The ash content of Bottlers sugar shall not be more than 0.015%.
 

	
            5.
 	
            Color: The solution color of Bottlers sugar shall not be more than 35 RBU (reference base units).
 

	
            6.
 	
            Sediment: The sediment’ content of Bottlers sugar shall not be more than shown on a prepared sediment disk (approximately 2 ppm) available from the National Soft Drink Association, 1101 Sixteenth Street NW, Washington, DC 20036, upon request.
 

	
            7.
 	
            Taste and Odor: Bottlers sugar shall have no obviously objectionable taste or odor in either dry form or in a 10% sugar solution acidified to pH 2.5 with U.S.P. phosphoric acid.
 

	
            8.
 	
            Microbiological: Bottlers sugar shall not contain more than:
 

200 Mesophilic bacteria per 10 grams

10 Yeast per 10 grams

10 Mold per 10 grams

	
            9.
 	
            Floc Evaluation of Beet Sugars: Beet sugar shall be evaluated for floc-producing substances by the Spreckel’s Qualitative Floc Test Procedure. Sugars showing positive floc test results shall not be labeled and sold as Bottlers grade sugar.
 

	
            10.
 	
            Sampling: Bottlers sugar shall be adequately sampled by the producer immediately prior to packing to assure compliance with these standards.
 

 

Universally accepted methods of testing for turbidity in cane and beet sugars and floc-producing substances in cane sugar have not been developed. As soon as accepted test methods and tolerances have been established, they will be added to this standard.

 

Quality specifications for Granulated Sugar were established in 1953 from the National Soft Drink Association Standards.

* The word sediment” means the insoluble or suspended matter such as pan scale, rust particles, filter aid, dirt, calcium deposits and other insoluble material.

 

Product Codes

	
            100# Bottlers 24/pallet
 	
            811042
 
	
            100# Bottlers Slipsheets
 	
            811032
 
	
            50# Bottlers
 	
            810077
 
	
            52" Supersacks
 	
            811120
 

 

 

 

A-14

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.

 

B-1

Schedule C

{Section 16.1}

Storage Reimbursement Guidelines - 

Parameters for Including Sugar Juice Tank Assets and Raw Cane Sugar Storage Assets as an Expense of the Primary Pool

 

A MEMBER shall be reimbursed out of the Primary Pool for its storage costs of thick juice or standard liquor (collectively referred to as “sugar juice”) from beets or raw cane sugar 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 sugar juice in tanks and the storage of raw cane sugar refinery feedstock 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 these sugar juice tanks or raw cane sugar refinery feedstock 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 sugar juice in tanks or the storage of raw cane sugar refinery feedstock, the Primary Pool shall pay the MEMBER’S asset costs as follows:

 

The storage rate charged by the MEMBER for the use of sugar juice tanks or raw cane refinery feedstock storage shall be calculated based upon the percentage of storage utilized by UNITED multiplied by the MEMBER’S average cost of all sugar juice tanks or raw cane sugar refinery feedstock storage that are routinely utilized by the MEMBER for storage of sugar juice or raw cane sugar refinery feedstock. The storage costs charged by the MEMBER shall begin the day UNITED requests the MEMBER to start utilizing sugar juice or raw cane sugar refinery feedstock storage. The MEMBER shall be reimbursed for incremental refining costs that directly result from the reimbursable storage covered by Schedule C.

 

-Average costs shall be determined by summing the total of depreciation, asset costs, property insurance and taxes related to all tanks/buildings routinely utilized by the MEMBER for storage of sugar juice or raw cane sugar refinery feedstock. (All depreciation and net book values used for calculating asset use fees are based on the applicable UNITED depreciation guidelines.)  These total costs are then averaged over the total tank/building capacity for those applicable tanks/buildings. The percent utilization is determined by calculating what percent of the total tank/building capacity is being utilized each day. That average percent utilization calculated for the month is then multiplied times the total per month cost of the tanks/buildings.

 

 

C-1

Schedule D

{Section 18.4}

 

Should UNITED market both Transgenic Product and Non-Transgenic Product, then for each sale of Non-Transgenic Product UNITED will record:

	
             
 	
            •
 	
            the volume of Non-Transgenic Product sold,
 

	
             
 	
            •
 	
            an estimate of the Net Selling Price for each sale of Non-Transgenic Product,
 

	
             
 	
            •
 	
            an estimate of the amount by which the Net Selling Price on the Non-Transgenic Product sale exceeds the expected Net Selling Price on a similar sale of Transgenic Product (Non-Transgenic Premium), and
 

	
             
 	
            •
 	
            an estimate of the total amount of  Non-Transgenic Premium Revenue (volume of Non-Transgenic Product sales multiplied by the Estimated Non-Transgenic Premium).
 

 

UNITED will summarize these sales in a format similar to the following:

 

	
             

 
 	
            Non-Transgenic Sales Volume (cwt)
 	
            Estimated NSP ($/cwt)
 	
            Estimated Non-Transgenic Premium  ($/cwt)
 	
            Non-Transgenic
Premium Revenue($)
 	
	
	
            Sept
 	
            200,000
 	
            $26.00
 	
            $1.50
 	
            $300,000
 	
             

	
            Oct
 	
            400,000
 	
            $26.50
 	
            $1.00
 	
            $400,000
 	
             

	
            Nov
 	
            600,000
 	
            $28.00
 	
            $2.00
 	
            $1,200,000
 	
             

	
            Dec
 	
            400,000
 	
            $31.00
 	
            $3.00
 	
            $1,200,000
 	
             

	
            Jan
 	
            500,000
 	
            $25.00
 	
            $1.00
 	
            $500,000
 	
             

	
            Feb
 	
            300,000
 	
            $28.00
 	
            $4.00
 	
            $1,200,000
 	
             

	
            Mar
 	
            700,000
 	
            $23.00
 	
            $2.00
 	
            $1,400,000
 	
             

	
            April
 	
            500,000
 	
            $22.00
 	
            $1.00
 	
            $500,000
 	
             

	
            May
 	
            400,000
 	
            $27.00
 	
            $4.00
 	
            $1,600,000
 	
             

	
            June
 	
            1,200,000
 	
            $23.00
 	
            $1.00
 	
            $1,200,000
 	
             

	
            July
 	
            700,000
 	
            $24.00
 	
            $3.00
 	
            $2,100,000
 	
             

	
            August
 	
            200,000
 	
            $22.00
 	
            $0.25
 	
            $50,000
 	
             

	
            Annual Total
 	
            6,100,000
 	
            $25.02
 	
            $1.91
 	
            $11,651,000
 	
             

 

During each Fiscal Year, United will summarize all costs associated with segregating Non-Transgenic Product and Transgenic Product to avoid cross contamination of the two products (Segregation Costs). Segregation Costs may include, but are not limited to,  the cost to clean railcars to assure no cross contamination, the cost to isolate products in storage to avoid cross contamination, etc. 

 

Since Segregation Costs will have been accounted for in the calculation of the Net Selling Price each year, the Non-Transgenic producer’s(s’) pro rata share of Segregation Costs will be added to the Non-Transgenic Premium Revenue in order to determine what percentage the resulting Non-Transgenic Premium Revenue is of the Non-Transgenic producer’s(s’) Net Selling Price.

 

At the end of each Fiscal Year, UNITED will divide 1) the total amount of Non-Transgenic Premium Revenue by 2) the Non-Transgenic producer’s(s’) Net Selling Price less the total amount of the Non-Transgenic Premium Revenue. If the total value of the Non-Transgenic Premium Revenue is more than 5% of the Non-Transgenic producer’s(s’) Net Selling Price, then the Non-Transgenic Premium Revenue will be distributed on a pro rata basis to those MEMBERS who produced the Non-Transgenic Sugar. If the total value of the Non-Transgenic Premium Revenue is less than 5% of the Non-Transgenic producer’s(s’) Net Selling Price, then the Non-Transgenic Premium Revenue will not be redistributed. 

 

D-1

Example 1

Annual sales of Non-Transgenic Product are as follows:

 

	
            Month
 	
            Non-Transgenic Sales Volume (cwt)
 	
            Estimated NSP ($/cwt)
 	
            Estimated Non-Transgenic Premium  ($/cwt)
 	
            Non-Transgenic Premium Revenue ($)
 	
	
	
            Sept
 	
            200,000
 	
            $26.00
 	
            $1.50
 	
            $300,000
 	
             

	
            Oct
 	
            400,000
 	
            $26.50
 	
            $1.00
 	
            $400,000
 	
             

	
            Nov
 	
            600,000
 	
            $28.00
 	
            $2.00
 	
            $1,200,000
 	
             

	
            Dec
 	
            400,000
 	
            $31.00
 	
            $3.00
 	
            $1,200,000
 	
             

	
            Jan
 	
            500,000
 	
            $25.00
 	
            $1.00
 	
            $500,000
 	
             

	
            Feb
 	
            300,000
 	
            $28.00
 	
            $4.00
 	
            $1,200,000
 	
             

	
            Mar
 	
            700,000
 	
            $23.00
 	
            $2.00
 	
            $1,400,000
 	
             

	
            April
 	
            500,000
 	
            $22.00
 	
            $1.00
 	
            $500,000
 	
             

	
            May
 	
            400,000
 	
            $27.00
 	
            $4.00
 	
            $1,600,000
 	
             

	
            June
 	
            1,200,000
 	
            $23.00
 	
            $1.00
 	
            $1,200,000
 	
             

	
            July
 	
            700,000
 	
            $24.00
 	
            $3.00
 	
            $2,100,000
 	
             

	
            August
 	
            200,000
 	
            $22.00
 	
            $0.25
 	
            $51,000
 	
             

	
            Totals
 	
            6,100,000
 	
            $25.02
 	
            $1.91
 	
            $11,651,000
 	
             

 

 

D-2

Member Sales  Volumes by Product Type

	
             
 	
             
 	
            Total Annual Volume (cwts)
 	
             
 	
            Member's Share
 of Total Volume
 	
             
 	
            Member's Share of Non-Transgenic Volume
 	
             
 
	
             
 	
             
 	
            Transgenic Volume
 	
             
 	
            Non-Transgenic Volume
 	
             
 	
            Total Volume
 	
             
 	
             
 	
             
 
	
            Member A
 	
             
 	
             
 	
            31,000,000
 	
             
 	
             
 	
            0
 	
             
 	
            31,000,000
 	
             
 	
            62.00
 	
            %
 	
            0.0000
 	
            %
 
	
            Member B
 	
             
 	
             
 	
            0
 	
             
 	
             
 	
            13,000,000
 	
             
 	
            13,000,000
 	
             
 	
            26.00
 	
            %
 	
            100.0000
 	
            %
 
	
            Member C
 	
             
 	
             
 	
            6,000,000
 	
             
 	
             
 	
            0
 	
             
 	
            6,000,000
 	
             
 	
            12.00
 	
            %
 	
            0.0000
 	
            %
 
	
            Total
 	
             
 	
             
 	
            37,000,000
 	
             
 	
             
 	
            13,000,000
 	
             
 	
            50,000,000
 	
             
 	
             
 	
             
 	
             
 	
             
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 
	
            Annual Sales of Customer-Required Non-Transgenic Sugar
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 
	
            Annual Volume (cwts)
 	
             
 	
             
 	
            6,100,000
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 
	
            Estimate Non-Transgenic Premium ($/cwt)
 	
             
 	
            $
 	
            1.91 
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 
	
            Non-Transgenic Premium Revenue
 	
             
 	
            $
 	
            11,651,000 
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 
	
            Average annual NSP for all volume ($/cwt)
 	
             
 	
            $
 	
            23.23 
 	
             
 	
             
 	
            Premium
 Included in NSP
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 
	
            Annual Net Selling Price (all volume times avg price)
 	
             
 	
            $
 	
            1,161,500,000 
 	
             
 	
            $
 	
            11,651,000
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 
	
            Member A's Net Selling Price
 	
             
 	
            $
 	
            720,130,000 
 	
             
 	
            $
 	
            7,223,620
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 
	
            Member B's Net Selling Price
 	
             
 	
            $
 	
            301,990,000 
 	
             
 	
            $
 	
            3,029,260
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 
	
            Member C's Net Selling Price
 	
             
 	
            $
 	
            139,380,000 
 	
             
 	
            $
 	
            1,398,120
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 
	
            Annual Segregation Costs
 	
             
 	
            $
 	
            900,000 
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 
	
            Pro Rata Share of Segregation Costs
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 
	
            Member A
 	
             
 	
            $
 	
            558,000 
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 
	
            Member B
 	
             
 	
            $
 	
            234,000 
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 
	
            Member C
 	
             
 	
            $
 	
            108,000 
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 
	
            Results
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 
	
            Non-Transgenic Premium Revenue % of Non-Transgenic Producer's(s') Net Selling Price
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
            3.9786
 	
            %
 	
             
 	
             
 	
             
 	
             
 

 

Result:  Since the Non-Transgenic Premium Revenue is less than 5% (Example 1 result is 3.9786%) of Non-Transgenic producer’s(s’) Net Selling Price, no separate distribution of Non-Transgenic Premium Revenue is made to Members supplying Non-Transgenic Product to UNITED.

 

Example 2

Annual sales of Non-Transgenic Product are as follows:

 

	
            Month
 	
            Non-Transgenic Sales Volume (cwt)
 	
            Estimated NSP ($/cwt)
 	
            Estimated Non-Transgenic Premium  ($/cwt)
 	
            Non-Transgenic Premium Revenue

($)
 	
	
	
            Sept
 	
            200,000
 	
            $26.00
 	
            $1.00
 	
            $200,000
 	
             

	
            Oct
 	
            400,000
 	
            $26.50
 	
            $3.00
 	
            $1,200,000
 	
             

	
            Nov
 	
            600,000
 	
            $28.00
 	
            $4.00
 	
            $2,400,000
 	
             

	
            Dec
 	
            400,000
 	
            $31.00
 	
            $2.00
 	
            $800,000
 	
             

	
            Jan
 	
            500,000
 	
            $25.00
 	
            $2.00
 	
            $1,000,000
 	
             

	
            Feb
 	
            300,000
 	
            $28.00
 	
            $1.00
 	
            $300,000
 	
             

	
            Mar
 	
            700,000
 	
            $23.00
 	
            $3.00
 	
            $2,100,000
 	
             

	
            April
 	
            500,000
 	
            $22.00
 	
            $2.00
 	
            $1,000,000
 	
             

	
            May
 	
            400,000
 	
            $27.00
 	
            $2.00
 	
            $800,000
 	
             

	
            June
 	
            1,200,000
 	
            $23.00
 	
            $4.00
 	
            $4,800,000
 	
             

	
            July
 	
            700,000
 	
            $24.00
 	
            $3.00
 	
            $2,100,000
 	
             

	
            August
 	
            200,000
 	
            $22.00
 	
            $2.81
 	
            $563,000
 	
             

	
            Totals
 	
            6,100,000
 	
            $25.02
 	
            $2.83
 	
            $17,263,000
 	
             

 

 

D-3

Member Sales  Volumes by Product Type 

	
             
 	
             
 	
            Total Annual Volume (cwts)
 	
             
 	
            Member’s Share of Total Volume
 	
             
 	
            Member’s
Share of Non-Transgenic Volume
 	
             
 
	
             
 	
             
 	
            Transgenic Volume
 	
             
 	
            Non-Transgenic Volume
 	
             
 	
            Total Volume
 	
             
 	
             
 	
             
 
	
            Member A
 	
             
 	
             
 	
            31,000,000
 	
             
 	
             
 	
            0
 	
             
 	
            31,000,000
 	
             
 	
            62.00
 	
            %
 	
            0.0000
 	
            %
 
	
            Member B
 	
             
 	
             
 	
            0
 	
             
 	
             
 	
            13,000,000
 	
             
 	
            13,000,000
 	
             
 	
            26.00
 	
            %
 	
            100.0000
 	
            %
 
	
            Member C
 	
             
 	
             
 	
            6,000,000
 	
             
 	
             
 	
            0
 	
             
 	
            6,000,000
 	
             
 	
            12.00
 	
            %
 	
            0.0000
 	
            %
 
	
            Total
 	
             
 	
             
 	
            37,000,000
 	
             
 	
             
 	
            13,000,000
 	
             
 	
            50,000,000
 	
             
 	
             
 	
             
 	
             
 	
             
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 
	
            Annual Sales of Customer-Required Non-Transgenic Sugar
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 
	
            Annual Volume (cwts)
 	
             
 	
             
 	
            6,100,000
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 
	
            Estimate Non-Transgenic Premium ($/cwt)
 	
             
 	
            $
 	
            2.83 
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 
	
            Non-Transgenic Premium Revenue
 	
             
 	
            $
 	
            17,263,000 
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 
	
            Average annual NSP for all volume ($/cwt)
 	
             
 	
            $
 	
            23.23 
 	
             
 	
             
 	
            Premium
Included in NSP
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 
	
            Annual Net Selling Price (all volume times avg price)
 	
             
 	
            $
 	
            1,161,500,000 
 	
             
 	
            $
 	
            17,263,000
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 
	
            Member A's Net Selling Price
 	
             
 	
            $
 	
            720,130,000 
 	
             
 	
            $
 	
            10,703,060
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 
	
            Member B's Net Selling Price
 	
             
 	
            $
 	
            301,990,000 
 	
             
 	
            $
 	
            4,488,380
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 
	
            Member C's Net Selling Price
 	
             
 	
            $
 	
            139,380,000 
 	
             
 	
            $
 	
            2,071,560
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 
	
            Annual Segregation Costs
 	
             
 	
            $
 	
            900,000 
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 
	
            Pro Rata Share of Segregation Costs
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 
	
            Member A
 	
             
 	
            $
 	
            558,000 
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 
	
            Member B
 	
             
 	
            $
 	
            234,000 
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 
	
            Member C
 	
             
 	
            $
 	
            108,000 
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 
	
            Results
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 
	
            Non-Transgenic Premium Revenue % of
 Non-Transgenic Producer(s)' Net Selling Price
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 	
            5.8859
 	
            %
 	
             
 	
             
 	
             
 	
             
 

 

Example 2 Result:  Since Non-Transgenic Premium Revenue is more than 5% (Example 2 result is 5.8859%) of Non-Transgenic producer’s(s’) Net Selling Price, the Non-Transgenic Premium Revenue ($17.263 million in this example) is distributed pro rata to MEMBERS supplying Non-Transgenic Product to UNITED as follows:

 

If, and only if, Non-Transgenic Premium is > 5% of Non Transgenic Producer(s)' NSP, then total Net Selling Price is redistributed as follows:  

 

	
             
 	
             
 	
            New Redistributed Share of NT Prem
 	
             
 	
            Share of NT Premium Revenue already in NSP
 	
             
 	
            NT Prem returned to NT Producer(s)
 	
             
 	
             
 	
            NT Prem to be added to NSP
 	
             
 	
            Return of share of Segregation Costs
 	
             
 	
            Added share of Segregation Costs
 	
             
 	
            NSP Before Adjustment
 	
             
 	
            New adjusted NSP
 	
             
 	
            New NSP per cwt
 	
             
 	
             
 
	
            Member A
 	
             
 	
            $
 	
            0 
 	
             
 	
            10,703,060
 	
             
 	
            $
 	
            -10,703,060
 	
             

 
 	
            $
 	
            0
 	
             
 	
            $
 	
            0
 	
             
 	
            $
 	
            -196,054
 	
             

 
 	
            $
 	
            720,130,000 
 	
             
 	
            709,230,886
 	
             
 	
            $
 	
            22.88
 	
             
 	
            Member A
 
	
            Member B
 	
             
 	
            $
 	
            17,263,000 
 	
             
 	
            4,488,380
 	
             
 	
            $
 	
            0
 	
             
 	
            $
 	
            12,774,620
 	
             
 	
            $
 	
            234,000
 	
             
 	
            $
 	
            0
 	
             
 	
            $
 	
            301,990,000 
 	
             
 	
            314,998,620
 	
             
 	
            $
 	
            24.23
 	
             
 	
            Member B
 
	
            Member C
 	
             
 	
            $
 	
            0 
 	
             
 	
            2,071,560
 	
             
 	
            $
 	
            -2,071,560
 	
             
 	
            $
 	
            0
 	
             
 	
            $
 	
            0
 	
             
 	
            $
 	
            -37,946
 	
             
 	
            $
 	
            139,380,000 
 	
             
 	
            137,270,494
 	
             
 	
            $
 	
            22.88
 	
             
 	
            Member C
 
	
            Total
 	
             
 	
            $
 	
            17,263,000 
 	
             
 	
            17,263,000
 	
             
 	
            $
 	
            -12,774,620
 	
             
 	
            $
 	
            12,774,620
 	
             
 	
            $
 	
            234,000
 	
             
 	
            $
 	
            -234,000
 	
             
 	
            $
 	
            1,161,500,000 
 	
             
 	
            1,161,500,000
 	
             
 	
            $
 	
            23.23
 	
             
 	
             
 

 

 

 

D-4

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00133-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00133-of-00352.parquet"}]]