Exhibit 10(b)
UNIFORM MEMBER SUGAR MARKETING AGREEMENT
POOL BASIS
THIS
AGREEMENT, made effective
as of the 1st day of September 2001, by and between UNITED
SUGARS CORPORATION , a cooperative association organized under
the laws of the State of Minnesota (hereinafter referred to as
“ UNITED ”), and MINN-DAK FARMERS
COOPERATIVE , a cooperative association organized under the
laws of the State of North Dakota (hereinafter referred to as
“ PROCESSOR ”).
WITNESSETH
WHEREAS,
PROCESSOR is a producer-owned and a
producer-operated agricultural cooperative which is organized and
operated so as to adhere to the provisions of Section 15(a) of the
Agricultural Marketing Act (12 U.S.C., Sec. 1141j(a)), as amended,
and the Capper-Volstead Act of 1922 (7 U.S.C., Sec. 291, 292), and
which is engaged in the operation of one or more sugar processing
plants for the purpose of producing one or more forms of refined
sugar; and
WHEREAS,
UNITED is organized and operated so
as to adhere to the provisions of Section 15(a) of the Agricultural
Marketing Act (12 U.S.C., Sec. 1141j(a)), as amended, and the
Capper-Volstead Act of 1922 (7 U.S.C., Sec. 291,292), for the
mutual help and benefit of its members (“Member” or
“Members”) and for the purposes of acting as a
marketing agency for its Members and of engaging in the business of
marketing the refined sugar (whether sold in packages or in bulk)
produced by its Members, including but not limited to, granulated,
liquid, blends, and specialty products; and
WHEREAS,
PROCESSOR is a Member of UNITED and
wishes to participate with other Members of UNITED in developing
and maintaining a dependable market for certain products produced
by PROCESSOR; and
WHEREAS,
UNITED and PROCESSOR desire to enter
into a membership marketing agreement on a pool basis.
NOW,
THEREFORE, in
consideration of the above, subject to the respective terms,
conditions, and obligations of PROCESSOR and UNITED herein, UNITED
and PROCESSOR agree as follows:
1.
Definitions . As used in this Agreement, the
following terms shall have the following meanings:
“Allocation”
means the amount of sugar PROCESSOR
is authorized to market if Allotments are implemented pursuant to
the Allotment Statute.
“Allotments”
means an overall allotment of sugar
processed from domestically produced sugarcane and sugar beets, as
defined and contemplated by the Allotment Statute.
“Allotment
Statute” means 7
USC § 1359aa, et. seq. (1991) and amendments thereto, or
subsequent statutes providing for marketing allotments.
“Assets
Costs” shall mean
carrying costs of assets associated with Product shipping,
packaging, warehousing (including all costs historically included
by UNITED as warehousing costs), and storage functions, including
depreciation and interest.
“Beet
Processing Season” means the period of time generally from
September through August during which a Beet Producer processes
beets, thick juice and extract into refined sugar.
“Beet
Producer” means a
Member that processes beets and thick juice into refined
sugar.
“Buyer”
is a third party purchaser of
Finished Product from UNITED.
“Co-Mingle”
means (i) Finished Product of
PROCESSOR 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 March during which time a Cane Producer
processes cane into feedstock for a refinery.
“Cane
Producer” means a
Member that processes cane into refined sugar. “Crop
Year” means the crop year established by the Beet Producers
for their own business operations.
“Fiscal
Year” means the
fiscal year of UNITED, which begins on September 1 and ends on
August 31.
“Force
Majeure” means any
(i) fire, freeze, accident, explosion, construction delay,
hurricane, flood, act of God, inability to obtain electric power or
fuel, inability to obtain any required permits or licenses,
government law, directive or regulation; or the effect of the
application of any governmental law, directive or regulation, or
any like contingency, beyond a party’s reasonable ability to
control or avoid; and (ii) labor dispute or strike, from whatever
cause arising and regardless of whether the demands of the
employees involved are reasonable and within the affected
party’s power to concede.
“Finished
Product” or
“Finished Products” means those Products that
have been granulated or otherwise made ready for marketing to third
parties.
“Member”
means a member or shareholder of
UNITED who is entitled to vote.
“Net
Selling Price” means the gross proceeds realized by UNITED from
sales of Products produced by PROCESSOR and the other Members in
the Primary Pool, less expenses directly attributable to the
Primary Pool, including all costs, charges or expenses attributable
to the marketing and sale of pooled Products, including without
limitation salaries, wages and other benefits of UNITED’s
employees, office expense and appropriate consulting fees, and all
costs of transportation of the pooled Products.
“Operating
Costs” means
operating costs associated with Product shipping, packaging,
warehousing (including all costs historically included by UNITED as
warehousing costs) and storage functions including, without
limitation, labor (including direct and indirect costs, such as
employee benefits, insurance, etc.), supplies, and
utilities.
“Pool
Year” means the
pool year of the Primary Pool, which coincides with the Fiscal Year
of UNITED, which begins on September 1 and ends on August
31.
“Primary
Pool” means Product
of each Member that is pooled for each Fiscal Year with Products of
other Members as agreed to in Section 6.1.
“Product”
or “Products”
means refined sugar produced by PROCESSOR during the term of this
Agreement, including but not limited to, granulated, liquid,
blends, specialty products, standard liquor, thick juice, extract
and other forms of ungranulated sugar.
“Pro Rata Share” shall be equal to a fraction,
with PROCESSOR’s estimated annual production of Product (on a
sugar equivalent basis) included in the Primary Pool as the
numerator and total estimated annual pool production of Product (on
a sugar equivalent basis) for PROCESSOR and the Members included in
the Primary Pool as the denominator.
“Purchased
Sugar” means
Product that is purchased by a Member from a third party or from
another Member.
“Term”
has the meaning set forth in Section
17.
“Transgenic
Variety” means a
variety of seed which will produce a plant that contains
a gene or genes that have been artificially inserted instead of the
plant acquiring the gene or genes through pollination.
2.
Appointment of UNITED as Sales Agent .
2.1
United Appointed Sales Agent . PROCESSOR appoints and
designates UNITED to act as its sole worldwide agent in the sale
and marketing of the Products. UNITED accepts such appointment and
agrees to act as the sales agent and pool administrator in
accordance with the terms of this Agreement. PROCESSOR agrees that
UNITED may employ all such persons and agencies as it determines to
be necessary to carry out its obligations under this Agreement. It
is understood and agreed that UNITED may market Products under the
various trademarks and trade names of PROCESSOR (if any) pursuant
to a
royalty free license agreement
with respect to such trademarks and trade names, the form of which
agreement shall be mutually agreed upon by PROCESSOR and
UNITED.
2.2
United Authorized to Pass Title . UNITED agrees, and is
hereby empowered by PROCESSOR, to sell in its own name, and pass
title on behalf of PROCESSOR, all Product produced by PROCESSOR
during the Term of this Agreement to such purchasers, at such time
or times, at such place or places, in such manner and on such
prices or terms as UNITED determines to be in the best interests of
PROCESSOR and other Members of UNITED.
2.3
Products not included in this Agreement . UNITED shall have
no rights, and nothing herein contained shall be deemed to create
rights in UNITED, in and to any other products produced by
PROCESSOR (other than refined sugar).
2.4
Procurement of Additional Product . It is understood and
agreed that UNITED may from time to time procure certain Products
from third parties in order to meet the requirements of sales
contracts or as otherwise determined to be in the best interest of
PROCESSOR and the other Members of UNITED. PROCESSOR and UNITED
agree that UNITED shall act as an agent for PROCESSOR in connection
with such purchases of Products and that the costs of acquiring
such Products and revenues received from the sale of such Products
shall be allocated to PROCESSOR and other Members of UNITED on the
same basis as allocations from the pool for which the Products were
purchased.
3.
Packaging . PROCESSOR intends to have the capacity to
sell Product in bulk as well as in packages. It is understood that
production and packaging constraints will limit the volume and mix
of packages that can be produced at any one time, and accordingly,
UNITED agrees to coordinate orders for packaged Product taking into
consideration PROCESSOR’s production and packaging
limitations.
4.
Production and Delivery .
4.1
Timing of Production . It is anticipated that PROCESSOR will
produce Finished Products during its campaign on an approximately
even monthly schedule. However, PROCESSOR acknowledges that
UNITED’s requirements may be greater in certain specified
months and less in others. Accordingly, subject to mutual agreement
of the parties, UNITED will endeavor to coordinate demands with
PROCESSOR’s production and storage capacities. At
UNITED’s request, PROCESSOR will attempt to maximize
production in any month in order to accommodate customer
demand.
4.2
Product Production Schedules . PROCESSOR shall provide to
UNITED by June 1 of each Fiscal Year during the Term a preliminary
estimated production schedule (specifying volume and dates) of
Product for the next following Fiscal Year and will provide a
revised estimated production schedule of Product by July 1 of each
such year, reflecting any changes from the June preliminary
estimate. UNITED and PROCESSOR shall jointly develop a production
and delivery schedule plan for each Fiscal Year that will attempt
to accommodate, as much as reasonably possible, the dual goals of
maximizing the price to be paid to
PROCESSOR and maximizing
production efficiencies, with the objective of selling all of
PROCESSOR’s production of Product each year.
4.3
Weekly Delivery Amounts . Estimated weekly delivery
schedules of Finished Product, including quantities, and bulk and
packaging requirements for each week of each month, shall be agreed
upon by the parties at least seven (7) days in advance of the month
to which they apply. The parties shall use reasonable efforts,
recognizing customer demand, to accommodate each other in setting
such schedules.
5.
Billing and Collection . All sales made by UNITED
shall be billed on invoices of UNITED and all receipts shall be
collected by UNITED.
6.
Pooling of Product .
6.1
Agreement to Pool Product . UNITED and PROCESSOR agree that
the Products to be sold by UNITED hereunder shall be pooled for
each Fiscal Year with Products of the other Members of UNITED in
the Primary Pool. UNITED by action of its Executive Committee shall
have the discretion to create additional pools as deemed reasonably
necessary for the equitable treatment of all Members and to create
accounting standards for such additional pools.
6.2
Adjustments for Beet Producers . In order to include sales
of carry-over Product produced by a Beet Producer in a given Beet
Processing Season in the Primary Pool applicable to the Fiscal Year
in which the Beet Processing Season occurred, even though delivery
may occur following August 31 of such year, the Product to be
included in calculating UNITED’s Primary Pool in each Fiscal
Year shall be the amount of Product (on a sugar equivalent basis)
produced by the Beet Producer during the applicable Fiscal
Year.
6.3
Adjustments for Cane Producers . In order to coordinate the
Cane Processing Season with the Beet Processing Season, the amount
of cane Product for a Cane Producer to be included in calculating
the Primary Pool for the Fiscal Year ending August 31, 2001 shall
be the amount of cane Product (on a sugar equivalent basis)
produced by the Cane Producer during the Fiscal Year ending August
31, 2001, 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. The amount of
cane Product for a Cane Producer to be included in calculating the
Primary Pool for each succeeding 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.
7.
Price for Product .
7.1
Price . UNITED shall pay to PROCESSOR the PROCESSOR’s
Pro Rata Share of the Net Selling Price for all Products sold by
UNITED hereunder.
7.2
Timing of Payment to Members . As sales of Finished Product
are made by UNITED from the Primary Pool, the gross cash receipts
received by UNITED from the sale of such Finished Products shall be
paid daily to PROCESSOR and the other Primary Pool participants on
the basis of their estimated proportionate share of the Finished
Product to be produced by PROCESSOR and each of the other
participants in the Primary Pool during that Fiscal year. Because
gross cash receipts are distributed daily, UNITED shall borrow from
its line of credit in order to cover its monthly operating costs,
subject to prompt reimbursement by PROCESSOR of PROCESSOR’s
Pro Rata Share of the expenses (such expenses are set forth in the
definition of Net Selling Price) that are incurred by UNITED during
the month.
7.3
Adjustments for Changes to Production Estimates . The
determination of PROCESSOR’s proportionate share of gross
cash receipts shall be based on UNITED’s best estimate of the
amount of Finished Products anticipated to be produced in such year
by PROCESSOR and each other participant in the Primary Pool, and
shall be adjusted by UNITED periodically as production figures are
more precisely determined. Such adjustments shall reflect an
interest charge to be paid by any Primary Pool participant who has
received excess distributions based on the preliminary production
estimates and such interest shall be paid to the Primary Pool
participant(s) who received less than full distributions. For
purposes of this paragraph, interest charges shall be the prime
rate as published in the Wall Street Journal for the period in
question. As soon as exact information and production figures are
available, UNITED shall determine PROCESSOR’s final
proportionate share of the gross cash receipts for the Primary Pool
during the Fiscal Year, and appropriate adjustments, together with
interest charges as provided above, shall be made. The final
accounting for the Primary Pool shall be made no later than the
ninetieth day following the last day of each Fiscal
Year.
8.
UNITED’s Books and Records . UNITED shall keep
accurate records of costs, sales, and distributions of Primary Pool
proceeds in accordance with sound and generally accepted accounting
practices. Said records shall be at all reasonable times fully
available for inspection and copying by PROCESSOR or its certified
public accountants. All records of the Primary Pool and any special
pool that is created shall be audited annually by UNITED’s
regular Independent Certified Public Auditors and the audit report
made available to PROCESSOR.
9.
Budget of Marketing Costs . UNITED shall prepare an
annual budget or estimate of all direct and indirect marketing
costs for the Primary Pool. It is the intention of UNITED to secure
independent financing for costs associated with the marketing of
Products as reflected in the budget.
10.
Product Specifications, Quality Standards, and Handling of
Products of Substandard Quality .
10.1
Specifications . PROCESSOR agrees to comply with
UNITED’s Specifications for Products, which specifications
prescribe standards and procedures for quality control, storage,
and shipment of Products, and which are attached hereto as Schedule
A. In addition, PROCESSOR agrees to comply with UNITED’s
Quality Assurance Policy that is attached
hereto as Schedule B. Any changes
to the specifications or Quality Assurance Policy shall be mutually
agreed upon by UNITED and the Members.
10.2
State and Federal Regulations. All Products delivered to or
at the order of UNITED shall conform to quality and other standards
prescribed by applicable state and federal rules and
regulations.
10.3
Substandard Product . Product that fails to meet the
specifications or the Quality Assurance Policy and which cannot be
sold without discounting, shall be considered substandard for
purposes of this Agreement. Product of substandard quality shall be
withheld from the Primary Pool and marketed by UNITED, with
proceeds of the sale of such Product, less all direct and indirect
selling expenses, distributed to PROCESSOR; in the alternative,
PROCESSOR and UNITED may mutually agree that Product of substandard
quality may remain in the Primary Pool and be charged with the
additional costs relating to the substandard quality of the
Product, including any necessary discounts.
11.
Storage of Product . PROCESSOR shall store its
Product as the parties shall mutually agree; provided however, that
with respect to storage by either PROCESSOR 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, PROCESSOR
shall deliver daily Product inventory reports to UNITED. All
Product included in the daily inventory shall be included in the
Primary Pool for the appropriate Fiscal Year even though the
Product remains on the premises of PROCESSOR.
12.
Risk of Loss and Insurance .
12.1
Risk of Loss . PROCESSOR covenants and agrees that it shall
bear the risk of loss of any Product produced by PROCESSOR until
the Product is delivered to the Buyer; provided however, that risk
of loss shall pass to UNITED before delivery to the Buyer if the
Product is Co-Mingled. Regardless of which party bears the risk of
loss, the PROCESSOR shall continue to be the owner of the Product
until the Product is sold to the Buyer. Whenever UNITED shall have
possession or control over the Product prior to sale to the Buyer,
UNITED shall act strictly as custodian thereof in accordance with
the provisions of this Agreement.
12.2
Processor to Maintain Insurance . PROCESSOR covenants and
agrees, at its sole cost and at all times during the Term of this
Agreement, to maintain in force an insurance policy or policies
covering loss, theft or damage to the Products from any cause
whatsoever until the shipment of the same to the Buyer, in amounts
not less than the full insurable value thereof, and product
liability insurance in amounts required by UNITED from time to
time, which product liability insurance shall name UNITED as an
additional or a named insured.
12.3
UNITED to Maintain Insurance . UNITED covenants and agrees,
at all times during the Term of this Agreement, to maintain in
force during the period for which it bears the risk of loss, an
insurance policy or policies covering loss, theft or damage to the
Products from any cause whatsoever in amounts not less than the
full insurable value thereof, and product
liability insurance in amounts
deemed reasonable by UNITED, which product liability insurance
shall name PROCESSOR as an additional or named insured.
12.4
Certificates of Insurance . Insurance policies shall be
taken out with responsible insurance companies licensed to write
insurance in Minnesota, in the case of UNITED, and in the
appropriate state, in the case of PROCESSOR, and each shall not be
canceled or altered without ten days’ written notice to
UNITED and PROCESSOR. Each party shall furnish the other party with
certificates of insurance for policies required hereunder, together
with a summary of the terms and conditions of the policy or
policies, and the date on which the same expire.
13.
Orders . Regardless of factory or warehouse
designation, the proceeds from sales orders shall be credited to
the Primary Pool for the appropriate Fiscal Year. UNITED shall
consider car loadings, points of destination, capacity of tanks or
warehouses, size of inventories stored therein and other pertinent
factors in selecting the factory, warehouse or warehouses from
which delivery shall be made.
14.
Logistics Function . UNITED shall be responsible for
performing all normal logistics functions relating to the shipment
of all Products produced at PROCESSOR’s plant. Direct or
indirect costs of UNITED associated with the performance of the
logistics functions related to Products shall be a marketing
expense of the Primary Pool.
15.
Information from PROCESSOR . PROCESSOR shall,
whenever requested by UNITED, furnish to UNITED production and
related statistical data for Products prepared on a daily basis,
and shall make its books and records related thereto available at
all reasonable times for inspection by UNITED. PROCESSOR shall not
be required to release information concerning PROCESSOR’s
proprietary processes or costs (other than reimbursable Asset Costs
and Operating Costs) which costs shall be provided in sufficient
detail to satisfy UNITED’s reasonable requirements in
connection with the reimbursements provided for in Section 16
hereof), or other confidential financial information. PROCESSOR
further agrees, upon request of UNITED, to furnish UNITED with
samples of Products for grading or selling purposes.
16.
Pool Expenses Incurred By PROCESSOR .
16.1 PROCESSOR
shall be reimbursed out of the Primary Pool for its Asset Costs and
its Operating Costs; provided however, that storage costs of thick
juice from beets or raw cane refinery feedstock shall only be
reimbursable pursuant to the Storage Reimbursement Guidelines set
forth in Schedule C.
16.2 UNITED
shall credit the PROCESSOR for Asset Costs and Operating Costs
within thirty (30) days of submission of PROCESSOR’s written
cost breakdown. In the event there is a dispute regarding the
amount of such reimbursement, UNITED shall credit the undisputed
amount and if the parties are unable to resolve the disputed
amounts within thirty (30) days from the date payment is due, the
controversy shall be resolved in the manner provided in Section 21
hereof.
