FIVE YEAR AGREEMENT
BETWEEN
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(GROWER)
AND
AMERICAN CRYSTAL SUGAR COMPANY
(COMPANY)
1. Grower agrees to prepare land, plant, cultivate, harvest and deliver for
the seasons of 1993, 1994, 1995, 1996 and 1997, the number of acres of
sugarbeets equal to the number of preferred shares of Company owned by
Grower with respect to any crop year, unless under-plant is directed
by Company, in which event, Company shall be obligated to purchase
beets only from such reduced acreage. Grower agrees to destroy prior to
harvest all acres of sugarbeets planted in excess of that authorized
by Company. Land to be used for sugarbeet production, cultural and
harvest practice requirements, and other supplemental matters may be
specified by annual contract supplemental to this agreement.
2. DEFINITIONS:
(a) The "per hundredweight value of recovered sugar" shall be the "net
selling price per hundredweight of sugar", as hereinafter defined,
recovered from that year's crop, adjusted for the difference
between the opening inventory book value and its actual net selling
price and adjusted by valuing the closing inventory at its
estimated net realizable value.
(b) "Recovered sugar" contained in the beets delivered by Grower shall
be determined by Company deducting from gross sugar (i) sugar loss
to molasses on a fresh beet basis using the British Sugar
Corporation's Impurity Index Formula as modified by Company, and
(ii) Grower's share of other sugar losses incurred in the storage
and processing of the beets allocated on a per net ton of beets
delivered basis, and increased by (iii) Grower's share of
additional sugar recovered through the molasses desugarization
process on a per net ton of beets delivered basis.
(c) The "net selling price per hundredweight of sugar" sold shall be
determined by deducting from the gross sales price all such charges
and expenditures as are regularly and customarily deducted from
such gross sales price of sugar in accordance with Company's
system of accounting used to determine the "net selling price of
sugar" sold.
(d) "Agri-products revenue" shall be determined by using the net
selling price of feed pulp, molasses, and any other by-product
produced by the Company, of that crop year as determined in
accordance with the Company's system of accounting.
(e) "Operating costs" shall be net of beet seed and other miscellaneous
member business. Operating costs shall be calculated on the basis
of generally accepted accounting principles, and shall include all
costs and expenses not otherwise accounted for with respect to
business done with members.
3. Payment for beets delivered each crop year shall be as follows:
The Gross Beet Payment for beets delivered shall be the "per
hundredweight value of recovered sugar" multiplied by the number of
hundredweight of "recovered sugar" contained in the beets delivered
by Grower. Grower's share of "agri-products revenue" will be added
while Grower's share of "operating costs" will be subtracted, both
allocated on a per net ton of beets delivered basis. The following
allowances, costs and deductions, if applicable, will be used in
adjusting Grower's Gross Beet Payment to Grower's Net Beet Payment:
(a) FREIGHT AND HAULING ALLOWANCE PROGRAM AND FREIGHT AND
HAULING ALLOWANCE PROGRAM COSTS: Company reserves the right
to establish for each crop year covered by this agreement,
a freight and hauling allowance program and in connection
therewith to allocate the cost of the freight and hauling
allowance program among the growers.
(b) EARLY DELIVERY ALLOWANCE PROGRAM AND EARLY DELIVERY ALLOWANCE
PROGRAM COST: Company reserves the right to establish for
each crop year, an early delivery allowance program in partial
compensation to Growers for the delivery of beets prior to the
commencement of the piling campaign. The cost of this program
will be shared equally each crop year on a per net ton of beets
delivered basis by all members and non-members who have
delivered beets to Company.
(c) MINIMUM PAYMENT ALLOWANCE PROGRAM AND MINIMUM PAYMENT ALLOWANCE
PROGRAM COST: Company reserves the right to establish for each
crop year, a minimum payment allowance program. The cost of
this program will be shared equally each crop year on a per
net ton of beets delivered basis by all members who have
delivered beets to Company.
(d) UNIT RETAIN: A unit retain may be declared by the board of
directors after completion and acceptance of the report of
Company's independent public accountants on the audit of
Company's financial statements as of its last fiscal year end,
and that amount will be deducted from the final payment. The
board of directors may estimate an amount of unit retain to be
declared prior to its declaration. Grower consents to the
provisions of Company's bylaws with respect to the tax
treatment to Grower of unit retains.
4. Settlement shall be made as follows:
(a) An initial payment shall be made on or about November 15. Such
payment shall be sixty percent of Company's then current estimate
of Grower's Net Beet Payment for that crop year.
(b) A March payment will be made on or about March 31. Such payment
shall be an amount which will bring that payment plus the November
payment to eighty-five percent of Company's then current estimate
of Grower's Net Beet Payment for that crop year.
(c) A September payment shall be made on or about September 30. Such
payment shall be an amount which will bring that payment plus
all previous payments to ninety-five percent of Company's then
current estimate of Grower's Net Beet Payment for that crop
year.
(d) The final payment shall be made no later than 15 days after the
completion and acceptance of the report of Company's independent
public accountants on the audit of Company's financial statements
as of its last fiscal year end.
THE PROVISIONS OF PARAGRAPH NO. 5 TO PARAGRAPH 15, BOTH INCLUSIVE, AS SHOWN ON
THE REVERSE HEREOF, ARE PART OF THIS CONTRACT.
Dated this day of 19
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Grower
AMERICAN CRYSTAL SUGAR COMPANY
By
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5. Seed to be planted by Grower may be purchased from Company. Company shall
use due care in endeavoring to supply Grower with pure seed of high
germinating quality, but it is expressly agreed that COMPANY DOES NOT
WARRANT EXPRESSLY OR IMPLIEDLY ITS FITNESS, MERCHANTABILITY, OR OTHER
QUALITY, and it is also expressly agreed that Company does not guarantee a
crop.
6. Grower agrees to abide by the articles of incorporation and bylaws of
Company, to comply with all applicable federal, state and local laws,
ordinances, regulations and rulings, as well as Company's operational
and agricultural regulations and policies. Grower acknowledges and
agrees Grower is required pursuant to this agreement and the bylaws
of Company to grow and deliver the crop to Company in each year as
provided by this agreement as supplemented from time to time, and that
failure of Grower to plant, grow and deliver said crop to Company will
constitute a breach of this contract which will result in economic loss
to Company and may subject Grower to the following penalties:
a. Expulsion as a member in the cooperative;
b. Forfeiture of Grower's common stock in Company and qualification to
be a preferred shareholder in Company;
c. Damages to the Company which are hereby declared and stated to be
liquidated in an amount equal to Grower's share of Company fixed
costs for processing of the crop.
7. Grower agrees that he shall use no pesticide chemical or other substances
in a manner which could result in any residue in or on beets grown for
Company under this agreement or in any sugar or by-products produced from
such beets beyond the limits permitted by law or governmental
regulations.
Grower acknowledges and agrees that Company shall have the right to
reject and refuse delivery of any beets to which have been applied, or
which have been grown on ground upon or to which, any unauthorized, non-
registered, non-approved or prohibited pesticide chemical or other
substance has been applied or which is prohibited by federal or state
law or regulations.
Grower further acknowledges and agrees that Company's right to reject
or refuse delivery of any of said beets may be invoked by Company at
its sole option, irregardless of whether or not use of or application of
an unauthorized, non-registered, non-approved, or prohibited pesticide
chemical or other substance results in or may result in a residue in
or on the beets grown, or sugar or sugar by-products produced from such
beets, which may be within tolerances or limits permitted by law or
governmental regulations of an unauthorized, non-registered, non-approved
or prohibited pesticide chemical or other substance, when the use of the
unauthorized, non-registered, non-approved or prohibited pesticide
chemical or other substance could result in the leaving of a residue in
or on the beets grown or in any sugar or by-products produced therefrom
which is beyond the tolerances or limits permitted by law or governmental
regulations.
Grower further acknowledges and agrees should Grower use a pesticide
chemical or other substance which is unauthorized, non-registered, non-
approved or prohibited by law or regulations which causes or creates
any residue or which may cause or create any residue in or on beets, or
in any sugar or by-products produced from such beets, which may be beyond
the tolerances and limits which are permitted by law or governmental
regulations, that Grower shall hold harmless and indemnify Company and
all shareholders of Company for any and all loss or damages Company or
its shareholders may sustain as a result of a Grower delivering beets
to Company to which have been applied, or which have been grown on
ground upon or to which any unauthorized, non-registered, non-approved
or prohibited pesticide chemical or other substance has been applied or
which is prohibited by federal or state law or regulations.
8. DELIVERY OF BEETS SHALL BE MADE BY GROWER AT SUCH TIMES, IN SUCH
QUANTITIES, AND TO SUCH RECEIVING STATIONS AS MAY BE DESIGNATED BY
COMPANY. Title and all risk of loss to said beets shall be and remain
with Grower until title and risk of loss passes to Company when
Grower completes delivery. The beets shall be protected from sun and
frost after removal from ground, including beets that are loaded on
trucks. Company has the option of rejecting any diseased, frozen or
damaged beets, beets less than 12% sugar, or less than 80% purity,
beets which, in Company's opinion, are not suitable for storage or
for the manufacture of sugar, beets as to which, in Company's opinion,
the terms and conditions of this agreement have not been properly
complied with or for any other bona fide reason.
9. All beets delivered shall be properly topped and free from excess
dirt, stones, trash and other foreign substances of any kind which
might interfere with handling and processing at Company's factories.
All beets shall be subject to a deduction for tare. Tare determination,
sugar percentage, and sugar loss to molasses shall be determined at
quality laboratories operated by Company.
10. It is agreed that the amount charged for all beet seed purchased from
Company by Grower and any and all other indebtedness to Company by
Grower, whether due or not, shall constitute a debt which Company
shall have the right to collect as it would any other contractual
obligation. Company shall have the right, at its option, to treat
such amounts, or indebtedness as part payment for beets grown and
delivered under this agreement. Any such amounts, or indebtedness
which are due and payable or which hereafter may become due and
payable to Company from Grower shall be, become and remain a first
and prior lien on the crop of sugarbeets to be grown and may, if
not previously paid by Grower, be deducted by Company from any
payments from Company to Grower which shall become due or under
any subsequent beet contract between Company and Grower. Grower
agrees to repay Company at the time of Grower's initial beet
payment for each crop year all such amounts or indebtedness,
together with interest at a rate to Grower as may be set by
Company, but not to exceed the highest rate allowed by law.
11. In no event shall Company be liable to Grower for partial or
complete failure of crop or for any injury or damage to beets.
12. Fire, strikes, accidents, acts of God and the public enemy, or
other causes beyond the control of the parties which prevent
Grower from the performance of this agreement or Company utilizing
the beets contracted for in the manufacture of sugar shall
excuse the respective parties from the performance of this
agreement.
13. This agreement shall be binding upon Grower, his heirs, legal
representatives, and assigns, and upon Company, its successors
and assigns, and shall not be transferable by Grower without
written consent of Company or its successors and assigns. No
agent of Company has any authority to change, waive, or modify
any of the terms or provisions of this agreement.
14. Grower further agrees to undertake and conduct soil testing
on an annual basis on all land Grower utilizes for growing
of sugarbeets pursuant to this agreement. Grower further agrees
to report and make available the results of said soil tests to
the agricultural department of Company, together with information
as to the amounts and kinds of fertilizer applied to the soil
tested.
15. Company reserves the right to alter any provisions of this
agreement provided any such alteration is first approved at
any regular or special meeting at which a quorum is registered
as being present or represented by mail vote, by a majority of
the shareholders so present or represented by mail vote, where
the notice of such meeting contains a statement of the proposed
alteration.
